TIDMPCGH TIDMPGHZ
RNS Number : 9565V
Polar Capital Global Health Tst PLC
17 December 2021
POLAR CAPITAL GLOBAL HEALTHCARE TRUST PLC
Legal Entity Identifier: 549300YV7J2TWLE7PV84
AUDITED RESULTS ANNOUNCEMENT FOR THE YEARED
30 SEPTEMBER 2021
FINANCIAL HIGHLIGHTS
For the year to 30 September 2021
Performance
Net asset value per Ordinary share (total return)* 19.46%
Benchmark index
(MSCI ACWI Health Care Index (total return in sterling
with dividends reinvested)) 13.40%
Share price total return* 24.55%
Since restructuring
Net asset value per Ordinary share (total return) since
restructuring * 52.28%
Benchmark index total return since restructuring 53.42%
Expenses 2021 2020
Ongoing charges* 0.83% 1.01%
------------------------------------------ ------------------ ------------------ ----------
Financials As at As at
30 September 30 September
2021 2020 Change
------------------------------------------ ------------------ ------------------ ----------
Total net assets (Group and
Company) GBP385,728,000 GBP325,133,000 +18.6%
Net asset value per Ordinary
share 318.07p 268.11p +18.6%
Net asset value per ZDP share^ 113.50p 110.20p +3.0%
Price per Ordinary share 288.00p 233.00p +23.6%
Discount per Ordinary share* 9.5% 13.1%
Price per ZDP share^ 113.50p 107.50p +5.6%
Net gearing* 6.04% 5.28%
Ordinary shares in issue
(excluding those held
in treasury) 121,270,000 121,270,000 -
Ordinary shares held in treasury 2,879,256 2,879,256 -
ZDP shares in issue^ 32,128,437 32,128,437 -
------------------------------------------ ------------------ ------------------ ----------
Dividends
The Company has paid or declared the following dividends
relating to the financial year ended 30 September 2021:
Amount
per
Ordinary
Pay date share Record Date Ex-Date Declared Date
------------------------------ ----------- ------------- --------------- ----------------
First interim: 31 August 1.00p 6 August 2021 5 August 2021 15 July 2021
2021
Second interim: 28 February 1.00p 4 February 3 February 16 December 2021
2022 2022 2022
Total (2020: 2.00p) 2.00p
------------------------------ ----------- ------------- --------------- ----------------
* See Alternative Performance Measures provided in the Annual
Report.
The Company's portfolio was restructured on 20 June 2017. The
total return NAV performance since restructuring is calculated by
reinvesting the dividends in the assets of the Company from the
relevant payment date.
^ For information purposes.
For further information please contact:
Ed Gascoigne-Pees Tracey Lago, FCG John Regnier-Wilson
Camarco Polar Capital Global Healthcare Polar Capital LLP
Tele. 020 3757 Trust Plc Tele. 020 7227 2725
4984 Tele. 020 7227 2742
STATUS OF ANNOUNCEMENT
The figures and financial information contained in this
announcement are extracted from the Audited Annual Report for the
year ended 30 September 2021 and do not constitute statutory
accounts for the period. The Annual Report and Financial Statements
include the Report of the Independent Auditors which is unqualified
and does not contain a statement under either section 498(2) or
Section 498(3) of the Companies Act 2006. The Annual Report and
Financial Statements for the year ended 30 September 2021 have not
yet been delivered to the Registrar of Companies. The figures and
financial information for the period ended 30 September 2020 are
extracted from the published Annual Report and Financial Statements
for the period ended 30 September 2020 and do not constitute the
statutory accounts for that year. The Annual Report and Financial
Statements for the period ended 30 September 2020 have been
delivered to the Registrar of Companies and included the Report of
the Independent Auditors which was unqualified and did not contain
a statement under either section 498(2) or Section 498(3) of the
Companies Act 2006.
The Directors' Remuneration Report and certain other helpful
Shareholder information has not been included in this announcement
but forms part of the Annual Report which will be available on the
Company's website and will be sent to Shareholders in December
2021.
CHAIR'S STATEMENT
When I wrote to you at this time last year the first COVID-19
vaccine had yet to be approved. It seems a lot has happened since
then, with multiple vaccines now available. The innovation and
collaboration across the globe to achieve this has been
unprecedented. For all its negatives, COVID-19 has proved to be a
positive catalyst in accelerating other trends, such as outsourcing
and efficient delivery of healthcare, which should persist and
create further opportunities for investment. The path through the
pandemic is still uncertain, but there is more cause for optimism
as we look to the year ahead.
Performance
The Board is pleased to report that the portfolio has performed
well over the financial year, delivering strong absolute returns of
19.46%, outperforming its benchmark by 6.06%. The second half of
the financial year showed a particularly strong period of relative
performance, as mid to larger capitalisation stocks moved back into
favour, supportive to the Company's strategy of seeking
opportunities across the healthcare spectrum, selecting stocks with
resilient, medium-term growth profiles. The discount also narrowed,
ending the year at 9.5%, from 13.1% the previous year. As at close
of 13 December 2021, the latest practicable date, the discount was
9.3%.
Further detail is provided within the Manager's Report.
Outlook
The Board continues to monitor performance and remains very
optimistic about the outlook for the healthcare sector and the
opportunities to generate returns for shareholders.
As the fund managers highlight in their report, the six key
investment themes, which underpinned individual stock selection in
2020, are still very much relevant today and likely to persist over
the medium-term. The COVID-19 pandemic has been extremely
challenging, but has also been a catalyst for positive change in
healthcare, highlighting the need for healthcare systems globally
to adopt new products, technologies and services, designed to drive
efficiencies without compromising quality of care.
The Company continues to offer a diversified approach to gain
access to growth opportunities and solid innovation ideas, but
without the need to take risk in less developed areas, or on single
product outcomes. We believe the healthcare industry fundamentals
remain strong and sector valuations look attractive. The Board
remains confident that the Company is well placed to generate
attractive returns for its shareholders.
Dividends
The Company's focus remains on capital growth and consequently
dividends are expected to represent a relatively small part of
Shareholders' total return. The Company has a policy to pay two
small dividends per year but it is recognised that these will not
necessarily be of equal amounts and may be reduced.
In August 2021 the Company paid an interim dividend of 1.00p per
ordinary share. The Board has declared a further interim dividend
of 1.00p per ordinary share payable to shareholders on the register
as at 4 February 2022. This will bring the total dividend paid for
the financial year under review to 2.00p per ordinary share, equal
to the previous financial year.
Environmental, Social and Governance
As detailed in my report last year, the Board recognises the
continued importance of ESG as this subject rises on all board
agendas. The Board continues to believe the Managers are best
placed to integrate ESG factors into its decision making process
and to engage with any poorly rated companies to change behaviour
and bring about genuine improvements.
During the year we have been actively engaged with our Managers
to better understand how ESG has been integrated more fully into
the decision-making process. We have also been keen to understand
the progress that has been made on the corporate side of Polar
Capital's business. Last year we initiated an ESG reporting process
and the Managers provided a high level ESG overview report. This
year, the process has progressed and the Managers have again
provided an overview but with more in depth information on the
investment processes including reporting, engagement and monitoring
of investee companies. We as a Board have considered in more depth
how we both integrate and monitor ESG factors into the running of
the Company, particularly in relation to governance. Please refer
to the ESG statement in the Manager's Report and in the full Annual
Report and Accounts which incorporates both the investment and
corporate approach.
Share Capital
The Company has 121,270,000 ordinary shares in issue as at the
date of writing and no other shares have been bought back or issued
during the financial year under review. The Company's share price
on 30 September 2021 was 288.00p (2020: 233.00p). The Company's
market capitalisation at the financial year end was GBP349.3m
(2020: GBP282.6m). The Company's share price traded in a discount
range of 8.0% to 15.5% throughout the year, ending at a discount of
9.5% compared to 13.1% at the start of the year. The Board has
reconfirmed the authority given to the Manager to use discretion to
purchase shares in the market when deemed appropriate to do so.
Companies Act 2006, S172 - Directors' Duties / Shareholder
Engagement
Shareholder and stakeholder engagement remains important to the
Board and throughout the year the Board continuously considers the
needs and priorities of the Company's stakeholders as part of the
decision-making process. Further information is provided in our
section 172 Statement in the full Annual Report and Accounts.
Annual General Meeting
The Company's eleventh Annual General Meeting (AGM) will be held
at 2pm on Friday 11 February 2022. The notice of AGM has been
provided to Shareholders and will also be available on the
Company's website. At the time of writing there were no government
restrictions in relation to COVID-19, and accordingly it is our
intention to hold the AGM at Polar Capital's offices at 16 Palace
Street, London SW1E 5JD, and to welcome our shareholders in person.
We will however, keep a watch on developments as we move through
winter and follow any restrictions which may be re-introduced.
Should we have to change our plans and move to a virtual meeting,
we will advise shareholders as early as possible with a notice on
the website and a regulatory news service announcement.
Lisa Arnold
Chair
16 December 2021
INVESTMENT MANAGER'S REPORT - FOR THE YEARED 30 SEPTEMBER
2021
The objective of Polar Capital Global Healthcare Trust plc ("the
Company") is to generate long-term capital appreciation by
investing in a globally diversified portfolio of healthcare
companies.
The Company's diversification strategy, coupled with its focus
on large-capitalisation healthcare companies with resilient,
medium-term growth profiles, helps drive the relatively lower
risk-profile of the underlying assets, relative to the more
volatile areas of healthcare. Further, the broad investment remit
affords the opportunity to invest in growth areas regardless of the
economic, political and regulatory environment. Importantly, the
Company also has the opportunity to invest in earlier-stage, more
innovative and disruptive companies, companies that tend to be
lower down the market capitalisation and liquidity scale. This is a
key advantage of a closed-end company like an investment trust.
Regardless of size, sub-sector or geography, stock selection is
central to the process, as we look to identify companies where
there is a disconnect between valuations and the near and
medium-term growth drivers.
In terms of structure, the majority of the Company's assets
(calculated on a gross basis and referred to as the Growth
portfolio) will be invested in companies with a market
capitalisation >$5bn at the time of investment, with the balance
invested in companies with a market capitalisation <$5bn (a
maximum of 20% of gross assets and referred to as the Innovation
portfolio). At the end of the reporting period, 33 investments were
in the Growth portfolio, comprising some 93.7% of net assets, and
13 investments were in the Innovation portfolio, comprising 12.2%
of net assets. Structural gearing, in the form of Zero Dividend
Preference Shares, offers access to additional liquidity and the
opportunity to enhance returns.
Market Cap 30 September 30 September
at 2021 2020
Large (>US$10bn) 78.9% 82.9%
Medium (US$5bn -
US$10bn) 14.8% 11.1%
Small (<US$5bn) 12.2% 11.3%
Other net liabilities (5.9%) (5.3%)
100.0% 100.0%
============= ===============
Over the financial year to the end of September 2021, the
Company achieved a strong result, with a NAV per share total return
of 19.46%, which was 6.06% ahead of its benchmark healthcare index
(MSCI All Country World Index/Healthcare (total return in
sterling)). The absolute performance of the healthcare sector was
also strong, up 13.40% over the reporting period, although the
sector did lag the broader market (as tracked by the MSCI All
Country World Net Total Return in pounds sterling) which was up
22.2%. Unprecedented monetary stimulus and successful COVID-19
vaccination programmes were amongst the key drivers behind the
buoyant market conditions. October 2020 aside, the global equity
markets enjoyed pretty consistent, upwards momentum throughout the
reporting period, with energy and financials leading the way.
Healthcare facilities, healthcare supplies and life sciences
tools and services all performed strongly over the period. The
facilities and supplies companies benefitted from returning patient
volumes, especially in regions with successful vaccination
programmes. The life sciences tools and services sub-sector has
been instrumental in not only delivering COVID-19 testing kits but
also contributing to the vaccine manufacturing processes. At the
other end of the scale, the last 12 months has been a difficult
period for the biotechnology and pharmaceuticals sub-sectors. For
biotechnology, it has been a challenging period driven by a number
of factors including excessive valuations in certain thematic
pockets, disappointing clinical data and regulatory setbacks. We
remain optimistic, however, given that the innovation cycle is
extremely strong, the sector is wellfunded and consolidation
remains a distinct possibility. The pharmaceutical sub-sector
continues to innovate and invest substantially in research designed
to address unmet medical needs, but short-term growth prospects
face the challenges of mature margins and patent expiries between
now and the end of the decade.
Reflecting on last year's annual report, the focus was very much
on six key investment themes, some of which accelerated through the
COVID-19 crisis. Disrupting the delivery of healthcare, outsourcing
and prevention are key investment themes for the Company, with all
three showing signs of gathering momentum. Healthcare systems
globally are looking to shift more and more patient volumes to
lowercost settings such as ambulatory surgery centres and the home.
Outsourcing is also enjoying a period of strong growth and
consolidation, with the clinical research organisations especially
well-positioned. Prevention, not just vaccination programmes, but
early and accurate diagnosis, is also an area that has flourished
and should continue to do so in a postpandemic world given the
increased investment in diagnostics infrastructure. The other key
themes discussed in last year's annual report, namely emerging
markets, innovation and consolidation are no less important, but
are perhaps less influenced by the COVID-19 pandemic. Crucially the
six themes discussed above will, we believe, continue to be growth
drivers for the healthcare industry and should be able to yield
some exciting investment opportunities.
US politics, always an important consideration, has been less
prominent this year than it was in 2020. Top congressional
Democrats are acknowledging for the first time that they will have
to scale back their drug pricing ambitions to gain muchneeded
centrist votes for President Joe Biden's social spending bill. As
such, direct drug price negotiation by the Federal government feels
less likely now, something that would be a big relief for the
bio-pharmaceuticals industry. There remains political will to
address high out-of-pocket costs for US seniors and to control drug
price inflation, but far-reaching legislation remains some way off.
With regards to access to healthcare, President Joe Biden continues
to be a staunch supporter of the Affordable
Care Act, signed in to law by President Barack Obama in early
2010. Indeed, the Administration introduced a special enrolment
period during the pandemic to ensure that US citizens that needed
access to care got it. Priorities from here could involve making
the expansion of the subsidies and eligibility permanent, expanding
Medicaid further and adding dental, vision and hearing coverage to
the Medicare fee-for-service program.
The key investment themes that the Company focused on in 2020
are very much relevant today and will continue to be so over the
medium-term. The COVID-19 pandemic has been hugely challenging for
everyone but has also shone a light on a couple of things: firstly,
the terrific levels of innovation that the healthcare industry can
deliver and, secondly, the acute need for structural change. It is
imperative, given the general ageing of populations and the rising
costs of healthcare, that patient volumes are directed into lower
cost settings, early and accurate diagnoses become routine and that
the industry focuses on sustainability, whether that be through
improving clinical outcomes, improving affordability and access or
improving efficiency. If the healthcare industry can deliver on
these objectives, the commercial and financial rewards should be
there for investors.
PERFORMANCE REVIEW
Over the financial year to the end of September 2021, the
Company achieved a strong result, with a NAV per share total return
of 19.46%, which was 6.06% ahead of its benchmark healthcare index.
The absolute performance of the overall healthcare sector was also
strong, with the index returning 13.40%, although it did
underperform the broader market. The Company was marginally ahead
of its benchmark in the first five months of the financial year and
started a strong period of relative performance in mid-March 2021,
when global markets began a steep rally which lasted until the end
of September 2021.
The Company entered the financial year with approximately 5% net
gearing and a large exposure to biotechnology, life sciences tools
and services and healthcare distributors, with the largest
underweight in the pharmaceuticals sector. As the COVID-19 crisis
began to decline in early spring 2021, the gearing was increased
and the underexposure in pharmaceuticals was further increased to
add to the medical technology sub-sector. In the last quarter of
the financial year, although the gearing was kept stable, the
portfolio was more defensively positioned with more exposure to
pharmaceuticals, distributors and healthcare facilities, with less
capital allocated to biotechnology and life sciences tools and
services. This sub-sector positioning through the financial year
meant that the allocation effect was positive with strong
contributions from life sciences tools and services,
pharmaceuticals and managed care outstripping lesser contributions
from biotechnology, healthcare services and medical technology.
Overall, allocation accounted for half of the Company's
outperformance, with the balance driven by stock selection in life
sciences tools and services, medical technology and
pharmaceuticals.
From a market capitalisation perspective, small capitalisation
healthcare companies enjoyed a period of outperformance relative to
the general healthcare sector in the first five months of the
financial year. However, this reversed abruptly as the prospects of
higher interest rates and of a less accommodative global monetary
environment caused investors to switch to larger and more
established businesses. With this backdrop, the Growth part of the
Company's portfolio contributed positively while the Innovation
book was a small drag to performance. In general, stock-picking
across all market capitalisation bands, but in particular large and
mid-capitalisation companies, was extremely positive and
overshadowed the negative allocation effects from smaller
capitalisation stocks.
On a geographical basis, the largest positive contributors were
North America thanks to strong allocation and stock-picking, and
Europe where selection was particularly favourable. Middle East
& Africa, where the Company had no exposure, were the only
regions that very marginally detracted from performance.
Given the Company maintained an average net gearing position of
4% through the financial year, and the healthcare market returned
13.4%, the active management of gearing added to the relative
outperformance in the financial year, with the additional returns
afforded by the gearing far out-weighing the cost of the debt.
Top 10 Relative Contributors (%)
Average Active Stock Stock Total
Stock Weight Return Return Attribution
Top 10 Weight vs BM
------------------------- -------- -------- -------- -------- -------------
Biohaven Pharmaceutical 1.86 1.86 104.94 91.55 1.53
------------------------- -------- -------- -------- -------- -------------
Avantor 2.50 2.28 74.43 61.03 1.22
------------------------- -------- -------- -------- -------- -------------
Syneos Health 2.47 2.47 57.84 44.44 1.21
------------------------- -------- -------- -------- -------- -------------
Align Technology 2.03 1.45 94.97 81.57 1.16
------------------------- -------- -------- -------- -------- -------------
Hill-Rom Holdings 2.46 2.46 72.28 58.88 1.02
------------------------- -------- -------- -------- -------- -------------
Sartorius 1.35 1.12 116.50 103.10 0.99
------------------------- -------- -------- -------- -------- -------------
Cytokinetics 1.01 1.01 58.34 44.94 0.88
------------------------- -------- -------- -------- -------- -------------
Bio-Rad Laboratories 3.37 3.18 38.80 25.41 0.84
------------------------- -------- -------- -------- -------- -------------
Chugai Pharmaceutical 0.62 0.22 -19.97 -33.37 0.79
------------------------- -------- -------- -------- -------- -------------
PRA Health
Sciences 0.45 0.45 29.53 16.13 0.77
------------------------- -------- -------- -------- -------- -------------
Source: Polar Capital, as at 30 September 2021. Past performance
is not indicative or a guarantee of future results.
Positive contributors to performance for the financial year
included Biohaven Pharmaceutical, Avantor, Syneos Health, Align
Technology and Hill-Rom Holdings.
Biohaven Pharmaceutical performed strongly during the reporting
period thanks to consistent, consensus-beating revenues for
migraine drug, Nurtec ODT. As a reminder, the FDA approved the drug
for the treatment of acute migraine back in March 2020. Enthusiasm
for the asset was boosted further in May 2021 when the FDA approved
an additional indication, the preventive treatment of migraine. The
approval was based on the results of a Phase III study that
revealed that Nurtec ODT reduced migraine days by 30% after just
one week of every-other-day treatment. Further, after three months
of treatment, approximately half of patients experienced at least a
50% reduction in moderate-to-severe migraine days.
Avantor, a life sciences tools and services company which
distributes chemicals, reagents, and laboratory supplies,
benefitted from the general strength of its sub-sector. In
addition, the Avantor team has consistently over-delivered on
consensus expectations throughout the financial year, leading
analysts to upgrade financial estimates with the shares following
suit. Further, Avantor announced the purchase of MasterFlex, a
business that allows Avantor to enter the fastgrowing bioprocessing
market. The deal was well received by investors who saw the
acquisition as accretive to the enlarged company's revenue growth
and operating margins. A final catalyst for the stock was its
inaugural analyst day, in which Avantor reiterated the guidance for
the financial year 2021 and provided attractive long-term
targets.
Syneos Health runs a contract research organisation, an industry
that saw an upsurge in demand due to the need to develop COVID-19
pharmaceuticals and vaccines, coupled with a generally buoyant
bio-pharmaceutical funding environment. The company's
outperformance was driven by positive momentum in the
non-COVID-19-related business, which reassured investors of the
sustainability of Syneos Health's growth trajectory. Finally, the
company also announced an acquisition (Synteract) which increases
its exposure to the fast-growing and well-capitalised small and
mid-capitalisation market. The global COVID-19 pandemic accelerated
some of the key drivers of performance for Align Technology, the
leading maker of clear aligners for dental treatments. Firstly,
consumers have developed a strong preference for fewer in-practice
dentist visits, something that is enabled by Align Technology's
digital workflow investments, and secondly, the "Zoom meetings"
effect has been a catalyst for consumers to invest in dental
aesthetics. The company delivered impressive quarterly financial
results throughout the period under review, with revenues often
coming in significantly ahead of consensus expectations.
Hill-Rom Holdings traded just slightly ahead of medical
technology peers from September 2020 to mid-July 2021 when
speculation started to emerge that Baxter International might be
interested in acquiring the company. Eventually the deal was
announced on 2nd September 2021, with Baxter International offering
a friendly all-cash offer of $156 per share, at a premium of more
than 30% to the average price over the previous 20 days.
Bottom 10 Relative Contributors (%)
Average Active Stock Stock Total
Stock Weight Return Return Attribution
Bottom 10 Weight vs BM
---------------- -------- -------- -------- -------- -------------
Moderna 0.00 -0.79 421.75 408.35 -1.39
---------------- -------- -------- -------- -------- -------------
Amedisys 0.53 0.53 -39.51 -52.91 -1.14
---------------- -------- -------- -------- -------- -------------
Quotient 1.18 1.18 -56.33 -69.73 -1.06
---------------- -------- -------- -------- -------- -------------
Incyte 1.94 1.73 -26.49 -39.98 -0.91
---------------- -------- -------- -------- -------- -------------
Amgen 3.28 1.37 -19.75 -33.15 -0.76
---------------- -------- -------- -------- -------- -------------
AptarGroup 1.54 1.54 1.44 -11.96 -0.71
---------------- -------- -------- -------- -------- -------------
Medley 1.50 1.50 -24.94 -38.33 -0.71
---------------- -------- -------- -------- -------- -------------
Zealand Pharma 1.21 1.21 -27.44 -40.84 -0.63
---------------- -------- -------- -------- -------- -------------
Exelixis 0.45 0.45 -17.07 -30.47 -0.59
---------------- -------- -------- -------- -------- -------------
Novo Nordisk 0.64 -1.21 34.02 20.62 -0.57
---------------- -------- -------- -------- -------- -------------
Source: Polar Capital, as at 30 September 2021. Past performance
is not indicative or a guarantee of future results.
Negative contributors to performance for the financial year 2021
included Moderna, Amedisys, Quotient, Incyte and Amgen.
The largest detractor to performance for the Company was its
lack of holdings in mRNA manufacturer Moderna, a decision driven by
what we perceived to be an excessive valuation relative to the
opportunity set ahead for the company. The meteoric share-price
ascent started in December 2020, when the FDA used emergency use
authorisation to allow access to Pfizer/BioNTech's COVID-19
vaccine, the first vaccine developed using mRNA technology. Using
similar technology, the market quickly put upwards pressure on
expectations for Moderna's mRNA vaccine candidate, mRNA-1273, which
positively impacted the share price performance.
Amedisys operates home health facilities and hospices.
Unfortunately, the company announced in their Q2'FY21 results that
they were facing some near-term challenges due to high levels of
staff turnover in the hospice business and to wage inflation for
nurses and carers. Although the issues can be attributed to the
COVID-19 pandemic, investors felt that the growth prospect and
trajectory for 2022 might also be impacted, causing the stock to
materially underperform the overall healthcare sector.
Quotient began to underperform in December 2020, after
announcing a regulatory delay in the US for MosaiQ, a fully
automated testing platform for blood grouping and
transfusion-transmitted infection screening of donated blood. As
COVID-19 continued to affect the timelines on its diagnostic
development programmes, analysts were prompted to reduce their
financial forecasts, which adversely impacted Quotient's equity
value. Although the biotechnology sector put up a strong
performance in the first four months of the Company's financial
year, it started to underperform the overall healthcare sector in
mid-February 2021, driven, in part, by the prospect of higher real
yields and reduced terminal values. Incyte was not immune to the
sector weakness, and it further struggled when the FDA approved
ruxolitinib cream (opzelura) in mild-tomoderate atopic dermatitis
(AD) with a so-called "black-box" warning. This update dampened
enthusiasm for the product's peak sales potential.
The catalyst for Amgen's underperformance in the early part of
the reporting period was the top-line data for heart failure agent
omecamtiv mecarbil. While the trial hit statistical significance
for the primary endpoint, that is reducing cardiovascular death or
heart failure events, the magnitude was underwhelming and there was
no reduction in the secondary endpoint of cardiovascular death.
Additionally, the company reported unimpressive financial data and
readouts/execution issues from other key trials.
Compelling opportunities lie-ahead
The 2020 annual report focused on six key themes that we
believed, and continue to believe, offer the potential for
significant returns in the years ahead. In brief, these themes
are:
-- Employing technology to disrupt healthcare delivery and shift
utilisation to lower cost settings ;
This will be by far the most important structural shift in
healthcare for the next 10-20 years and the enablers of this shift
should enjoy significant growth.
-- Outsourcing ; A continuing theme but growth is robust across
clinical trial outsourcing and contract manufacturing.
-- Prevention ; References diagnostics and vaccines, both of
which provide tremendous value to healthcare systems as prevention
is the most cost-effective way of delivering healthcare. The impact
of COVID-19 has highlighted the value of diagnostics and
vaccines.
-- Product and service innovation ; Long-term product or service
development success dependent on ability to lower healthcare
costs.
-- Consolidation on the rise again ; Leaders that can acquire
high quality assets in fragmented markets at attractive valuations
can enjoy significant outperformance.
-- Growth in emerging market healthcare demand ; Projected to
accelerate over the next 15-20 years - investing in the long-term
structural growth stories should deliver handsome returns.
Healthcare delivery disruption, outsourcing and prevention:
Starting to accelerate
The COVID-19 pandemic has been a real catalyst for positive
change, highlighting the need for healthcare systems globally to
adopt new products, technologies and services designed to drive
efficiencies without compromising quality of care. One critical
area is disrupting the healthcare delivery pathway to ensure
greater access to care. Virtual care platforms and remote
monitoring tools are excellent examples of enabling technologies
that can drive the agenda. Virtual care platforms are being used
not just to expand and improve access to mental health services,
for example, but also to connect patients to licensed behavioural
health providers. Sadly, these sorts of services will be in high
demand as we navigate our way through the COVID-19 pandemic. Remote
monitoring tools can be used to support patient care by providing
clinicians with patient data that allows for proactive health care
interventions that can ultimately lead to reduced hospital
readmissions.
Out-patient surgeries and services will also grow in importance
in the coming years. Medical care provided at alternative sites of
care that meet quality and cost-efficiency criteria can lead to
better outcomes at a lower cost for the consumer. Ambulatory
surgery centres and stand-alone imaging centres, for example, can
provide the same or higher quality care at a lower cost compared to
hospitals. UnitedHealth Group estimates that the average price for
routine diagnostic imaging at a hospital out-patient department can
be 165% more than the price of a test performed at a stand-alone
imaging centre or physician's office. UnitedHealth Group has also
calculated that conducting more joint replacement surgeries in
ambulatory surgery centres could save the US health systems $3
billion annually by achieving 500,000 fewer hospitalisations.
Outsourcing is also accelerating, with the COVID-19 pandemic
offering a substantial boost to both clinical trial activity and to
contract manufacturing. We anticipate that this rate of growth will
be sustained as the pace of innovation in the biotechnology and
pharmaceuticals industries gathers momentum. The biotechnology
industry is especially well capitalised at present and will look to
deploy that capital through clinical trial development and,
hopefully, through to commercialisation. The greatest, near-term
beneficiaries of this trend are the contract research organisations
which provide a multitude of services including pre-clinical
research, clinical research, clinical trial management and
pharmacovigilance. The sector has also experienced some
consolidation during the reporting period with life sciences tools
and services company Thermo Fisher looking to acquire PPD and Icon
looking to acquire PRA Health Sciences.
Whilst the benefits of safe and effective vaccination programmes
should never be understated, it is perhaps the potential impact of
effective diagnostics that could be more important for healthcare
systems in the long run. Advanced diagnostic solutions enable
clinicians to make critical decisions for their patients earlier,
more accurately, and with greater confidence. Improved
decision-making benefits not only individual patients but also
society as a whole. Healthcare systems, under increasing pressure
to control costs, can use limited resources more efficiently while,
at the same time, increasing access and driving better outcomes.
Encouragingly, COVID-19 has accelerated the investment in
diagnostics infrastructure, with labour-efficient automated
machines at the forefront. With greater infrastructure in place, it
is hoped that testing menus will expand and that we will see
broader adoption of diagnostics globally.
The remaining three themes of innovation, consolidation and
emerging markets are no less important than the three discussed
above, but possibly less influenced by the COVID-19 pandemic. The
healthcare industry is highly innovative, is well capitalised and
will continue to push scientific boundaries in the search for novel
solutions to meet unmet medical needs. The contribution to science
and society from the COVID-19 vaccines based on mRNA technology is
clear, the big question now becomes, "how widely can the technology
be used?". 2021 also witnessed two other potentially game-changing
breakthroughs: the first in the field of gene editing with US
company, Intellia Therapeutics, disclosing the first ever clinical
data supporting the safety and efficacy of in vivo CRISPR genome
editing in humans; the second in the field of obesity, with
NovoNordisk's Wegovy enjoying a phenomenal early launch. The drug
works by mimicking a hormone called glucagon-like peptide-1, or
GLP-1, which delays gastric emptying, increases gastric volumes and
suppresses appetite.
In a highly fragmented industry, with strong balance sheets and
low costs of debt, consolidation is likely to continue to be an
important theme for the healthcare industry. Management teams are
looking to augment their internal assets with complementary assets
and technologies. The Company has been the beneficiary of four
proposed acquisitions during the reporting period. In chronological
order, PRA Health Sciences was the subject of a bid from contract
research organisation peer, Icon. Contract research organisation
PPD is also in the process of being acquired by Thermo Fisher,
under-pinning our view that the contract research organisation
industry has a prolonged growth runway. Swedish Orphan Biovitrum
and Hill-Rom Holdings were also the subject of bids. In early
September, private equity firm Advent and Singapore wealth fund
GIC, offered an all-cash bid of 235 Swedish krona per share to
acquire Swedish Orphan Biovitrum, a company where we believe the
pipeline assets to be under-appreciated by the market. Baxter
International's decision to acquire HillRom Holdings accelerates
the company's connected care strategy, is accretive to top and
bottom-line growth and is expected to generate a high single-digit
ROIC by year five.
We expect emerging markets to continue to be an important source
of growth for a number of sub-sectors including biopharmaceuticals,
life sciences tools and services, medical devices and contract
research organisations. Many emerging markets are not just
investing heavily in ensuring widespread access to healthcare but
are also changing the way they think about regulatory approvals,
pricing and reimbursement. Innovation is critical, but so is local
manufacturing and a sales reach that can access volumes during
inevitable periods of pricing pressure.
Positioning and process; Constructive on facilities,
distributors and technology
As at 30th September 2021, the main overweight sub-sector
positionings are in healthcare facilities, managed care, healthcare
distributors, healthcare equipment and supplies and healthcare
technology. These correlate with three of the key investment
themes, namely disruption of healthcare delivery, outsourcing and
innovation, but are also consistent with the concept of
sustainability by improving the efficiency of healthcare delivery
and expanding access to care. From a healthcare facilities
perspective, the investments here are biased towards those
providing access to healthcare services in the lowest cost settings
such as home healthcare, hospital at home and hospice at home. The
managed care companies will also play a pivotal role in ensuring
that their members access care in the lowest-cost settings. The
Company also has exposure to behavioural health services, where we
have sadly seen a huge jump in demand due to the pandemic. On the
healthcare distribution side, this is effectively outsourcing of
delivery by manufacturers which has been commonplace for years with
therapeutics. More recently, this has been extended to distribution
including sales and marketing on the medical device side and also
to increased provision of services on specialty pharmaceuticals,
which are typically much more challenging to manage.
Healthcare equipment, whilst continuing to innovate in areas
such as minimally invasive surgery, robotics, remote monitoring and
connected care, should also benefit from patients returning to the
healthcare system to address their medical needs which have been
put on hold during the COVID-19 pandemic. Healthcare supplies
exposure has been increased and reflects innovation and volume
recovery in the ophthalmology and dental sectors. On the
ophthalmology side, the treatment of myopia is a new focus, with
new products being launched in the contact lens category. To
highlight the unmet need, more than 80% of children in China have
myopia. Lastly, healthcare technology is seeing extensive
innovation, which in the years to come will make healthcare more
sustainable and much more productive, a necessity considering the
current cost of running healthcare systems.
Biotechnology exposure was reduced to reflect the challenges
that large capitalisation companies face in this sub-sector with
anaemic growth, limited pipelines and upcoming patent expiries.
Exposure has been maintained in mid capitalisation and small
capitalisation through the Innovation portfolio.
M&A, which was predicted to have been a feature for the
healthcare sector over the last 12 months, has been extremely
quiet, especially in the biotechnology sphere, but we expect that
trend to reverse at some point and continue to believe that
consolidation will be an important investment theme. Life sciences
tools and services exposure has been reduced, largely because
outperformance has led to higher valuations which are harder to
justify. The fundamentals in biotechnology are in rude health, and
as a collective they continue to be very committed to R&D and
sustainability, which we acknowledge is an increasing area of focus
for investors.
Pharmaceuticals remain a significant underweight in the
portfolio although greater exposure to these stocks could be
justified in a more defensive market later in the economic cycle.
The pharmaceutical sector continues to invest heavily in R&D,
and continues to contribute significantly to key scientific
breakthroughs, but is challenged with mature margins, anaemic
growth profiles and a raft of upcoming patent expiries.
http://www.rns-pdf.londonstockexchange.com/rns/9565V_1-2021-12-16.pdf
From a geographical perspective, changes to the portfolio in the
period were limited, with a reduction in Denmark and an
increase
in the UK driven by a change in selection of two pharmaceutical
stocks at the higher end of the market capitalisation scale.
Geographical Exposure 30 September 2021 30 September 2020
at
----------------------- ------------------ ------------------
United States 69.0% 68.0%
United Kingdom 7.3% 3.7%
France 6.2% 3.9%
Netherlands 5.2% 5.3%
Denmark 4.6% 6.5%
Germany 2.7% 5.2%
Switzerland 2.5% 4.8%
Australia 2.4% -
Belgium 2.3% -
Ireland 1.9% 5.5%
Japan 1.8% 2.4%
Canada - -
Other net liabilities (5.9%) (5.3%)
------------------ ------------------
Total 100.0% 100.0%
------------------ ------------------
Source: Polar Capital, portfolio as at 30 September 2021.
Sector Exposure at 30 September 2021 30 September 2020
-------------------------- ------------------ ------------------
Healthcare Equipment 23.4% 21.3%
Pharmaceuticals 23.0% 25.1%
Biotechnology 14.8% 22.6%
Managed Healthcare 11.8% 8.2%
Healthcare Facilities 7.2% 1.5%
Healthcare Supplies 6.3% 3.8%
Life Sciences Tools
& Services 5.4% 12.5%
Healthcare Distributors 4.9% 4.2%
Apparel, Accessories 2.7% -
& Luxury Goods
Healthcare Technology 2.3% 3.4%
Metal & Glass Containers 2.3% -
Healthcare Services 1.8% 2.7%
Other net liabilities (5.9%) (5.3%)
------------------ ------------------
Total 100.0% 100.0%
------------------ ------------------
Source: Polar Capital, portfolio as at 30 September 2021.
Whilst the previous charts focus on sub-sector and geographical
weightings, bottom-up stock selection is central to the team's
investment process. The healthcare industry is extremely
complicated and dynamic, and subject to varied newsflow, often
hyped, which lends itself to active management. We look to take
advantage of dislocations between near-term valuations and
medium-term returns. Our own in-house idea generation is
complemented by input from external research, with conviction built
through company meetings, investor conferences and dialogue with
expert physician and consultant networks. The team also has strong
valuation discipline looking at a large number of metrics including
sales and earnings revisions, price-to-earnings, enterprise values,
free-cash flow and returns on invested capital.
Zero Dividend Preference shares; A vehicle for enhancing
returns
In terms of top-down strategy for the Company's portfolio, the
team does allocate time to the macro-outlook, which feeds into
positioning in terms of gearing, market capitalisation, sub-sector
and geographical exposure. Third party research is utilised to aid
this work, alongside many key risk indicators that are monitored on
a regular basis.
The gearing afforded to the Company by its ZDPs is used to
enhance risk-adjusted returns. Throughout the last 12 months,
gearing has been changed according to the risk outlook. Net gearing
was reduced from just north of 5% at the start of the financial
year to approximately 2% by the calendar year-end, due to concerns
of over-exuberance in the small and mid-capitalisation stocks,
which put the performance of the Innovation portfolio at risk.
Since the start of 2021 gearing was increased mainly to a range of
between 5-6% due to a more bullish outlook for established
large-capitalisation healthcare companies, especially those at the
higher-end of the quality scale. As we exited the 2021 financial
year gearing was 6.04%, a figure that reflects not just our
constructive view on the healthcare sector, but also the balance of
tailwinds and headwinds as we move through the mid-phase of the
market cycle.
Environmental, Social and Governance; Focus on
sustainability
Sustainability is central to the team's ESG philosophy.
Healthcare is a long-term, secular growth industry as an ageing
population around the world drives the demand and the need for
increased healthcare provision. In 2018, global healthcare spending
was $8.3 trillion, accounting for 10% of GDP (World Health
Organization, 2020). Sustainable healthcare delivery for growing
and ageing populations is an important part of the United Nations
("UN") 2030 Agenda for Sustainable Development; specifically, Goal
3 is to "ensure healthy lives and promoting well-being for all at
all ages."
We believe that a sustainable healthcare system is one that
delivers better healthcare to more people for less money.
Healthcare companies with products, technologies and/or services
that deliver demonstrable value to drive improvements in efficiency
are not only well-placed for growth but are also likely to play a
role in creating a sustainable healthcare system. Indeed,
sustainable healthcare delivery has been one of the dominant
underlying investment themes for the Company for some time now.
Specifically, we focus on three characteristics of sustainable
healthcare delivery:
1) Improvement in clinical outcomes for patients through innovation,
2) Improvement in the affordability and accessibility of healthcare services; and
3) Improvement in the efficiency of the delivery of healthcare services.
The Company has a well-defined and disciplined process to ensure
our investments are aligned with our core sustainability
characteristics. After the initial screenings of the investment
universe against norms based standards such as the UN Global
Compact, the UN Guiding Principles on Business and Human Rights and
the International Labour Organisation's conventions, we use
in-house research and third-party reports to continuously monitor
the ESG profiles of the Company's holdings, and their alignment
with the core sustainability characteristics. Particular attention
is paid to businesses that fail to meet certain standards and are
involved in practices that could contradict the Company's ESG
philosophy, and to businesses that positively align with the
Company's core sustainability characteristics.
Although our ongoing ESG analysis is an important part of our
process, we believe that engaging directly with companies on
sustainability, using internal and third-party reports such as MSCI
and ISS, is the most productive course of action we can take and
that engagement produces the highest quality outcomes on
sustainability. Interactions are systematically logged in an
internal database as a matter of record. The Managers also have
regular interactions with Polar Capital's Head of
Sustainability.
Outlook for healthcare in a post COVID-pandemic world
The impact of the COVID-19 pandemic on healthcare will be felt
for many years, on top of the fact that the virus is likely to
become endemic. In terms of structural changes, there has been a
big pick-up in R&D in pharmaceutical and biotech companies, not
just on infectious diseases, but across other areas in response to
the innovation and progress that has been witnessed over the last
five years. The enormous amount of money that has moved into life
sciences venture capital over the last two years is evidence of the
enthusiasm around the industry and the benefits that it can bring
through the discovery of new drugs that can dramatically change
patients' lives. The impact of vaccine development against COVID-19
has been the accelerant for greater R&D spend and there will be
many companies that benefit, particularly those focused in life
sciences tools and services, clinical research organisations and
contract manufacturers.
In the shorter term, the impact on supply chains is an issue as
much for the healthcare sector as it is for other industries, with
costs having jumped considerably since before the pandemic. Also on
the labour side, the pandemic has driven a sea change in what
employees want and expect from their jobs, which is having a
significant impact on healthcare. A recently published survey
highlighted that 18% of US healthcare workers quit their jobs
during the pandemic, with 79% of healthcare professionals saying
that the national employee shortage has affected them and their
place of work. Not only are positions being left vacant, but
providers are also seeing a significant spike in wages. This is
likely to remain a challenge for many organisations for the next 12
to 18 months.
The disruption in healthcare delivery that started several years
ago has been another area that has seen an acceleration driven by
the pandemic. The shift of care to lower cost settings and away
from the large in-patient hospitals is a must if healthcare systems
are to become more efficient. With hospitals being at the centre of
managing patients affected by COVID-19, care for other conditions
has naturally moved away from the hospital with other providers
such as ambulatory care, outpatient and home healthcare
experiencing a significant boost in demand. This trend will
continue, but many of the companies in these areas are being
impacted by the wage inflation and employee shortages, a situation
that needs to improve if they are to cope with the acceleration in
demand.
Backlogs have increased dramatically due to the pressure of the
pandemic on healthcare system, most visibly on the elective side
for procedures such as hips and knees. Here in the UK, for example,
the British Medical Association estimates that between April 2020
and July 2021, there were 3.79 million fewer elective procedures
and 26.02 million fewer outpatient attendances. Further, the total
waiting list currently sits at an alarming, record high of 5.61
million, and continues to grow. The "invisible" backlog is perhaps
more concerning, and is the consequence of the lack of screening
and testing for diseases such as cancer during the last 18 months
which,
sadly, will likely cause an increase in more serious and later
stage disease in the months and years ahead. An article published
in the Journal of Clinical Pathology referenced that cancer
diagnoses fell by 39% in 2020 compared with the average number
recorded in 2018 and 2019. Prostate cancer (-75%), bladder cancer
(-66%), and colorectal cancer (-62%) had the greatest decreases.
This is of course very concerning for the patients involved, but
will effectively lead to high levels of demand for healthcare
services for many years to come.
Conclusion
Whilst we do have some sympathy with the view that the near-term
outlook for healthcare, and indeed the broader markets, is carrying
some uncertainty due to the COVID-19 virus, we have a high level of
conviction that the healthcare industry will continue to find
innovative solutions, will continue to work on improving access to
care and will look to drive efficiencies across the healthcare
continuum. If successful, an optimistic stance about the
medium-term prospects for the sector is the right one. In terms of
timing, we believe that now could be an interesting time to engage
for the following reasons:
-- The healthcare industry's fundamentals are in rude health,
with many sub-sectors having even stronger foundations now than
before the COVID-19 pandemic.
-- The sector remains under-owned and underappreciated, with
allocations to the sector near decade-lows.
-- Relative and absolute valuations in the US are attractive and supportive, respectively.
James Douglas & Gareth Powell
Co-Managers
16 December 2021
PORTFOLIO REVIEW
Full Investment Portfolio
As at 30 September 2021
Ranking Stock Sector Country Market Value % of total
GBP'000 net assets
2021 2020 2021 2020 2021 2020
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
1 (-) Johnson & Johnson Pharmaceuticals States 29,093 - 7.5% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
2 (31) UnitedHealth Managed Healthcare States 24,053 5,898 6.2% 1.8%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
3 (-) AstraZeneca Pharmaceuticals Kingdom 19,954 - 5.2% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Bristol Myers United
4 (4) Squibb Pharmaceuticals States 15,580 14,393 4.0% 4.4%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
5 (5) Sanofi Pharmaceuticals France 13,629 12,825 3.5% 3.9%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
6 (15) Baxter International Healthcare Equipment States 13,582 9,696 3.5% 3.0%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
7 (22) Centene Managed Healthcare States 11,618 8,526 3.0% 2.6%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
8 (-) Steris Healthcare Equipment States 10,912 - 2.8% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
9 (17) Horizon Pharma Biotechnology States 10,910 9,335 2.8% 2.9%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
10 (-) Boston Scientific Healthcare Equipment States 10,810 - 2.8% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Top 10 investments 160,141 41.3%
------------------------ ------------ ----------- -------- -------- -----
United
11 (21) Amerisourcebergen Healthcare Distributors States 10,721 8,545 2.8% 2.6%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
12 (-) Siemens Healthineers Healthcare Equipment Germany 10,450 - 2.7% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
13 (-) Hologic Healthcare Equipment States 10,401 - 2.7% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Koninklijke
14 (12) Philips Healthcare Equipment Netherlands 10,277 10,071 2.7% 3.1%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Apparel, Accessories
15 (-) Essilor International & Luxury Goods France 10,241 - 2.7% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
16 (-) Molina Healthcare Managed Healthcare States 9,961 - 2.6% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
17 (25) ArgenX Biotechnology Netherlands 9,703 7,216 2.5% 2.2%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
18 (-) Envista Healthcare Equipment States 9,619 - 2.5% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
19 (-) Acadia Healthcare Healthcare Facilities States 9,595 - 2.5% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Alnylam United
20 (-) Pharmaceuticals Biotechnology States 9,312 - 2.5% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Top 20 investments 260,421 67.5%
------------------------ ------------ ----------- -------- -------- -----
Ramsay Health
21 (-) Care Healthcare Facilities Australia 9,158 - 2.4% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
22 (-) Cytokinetics Biotechnology States 8,974 - 2.3% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
23 (-) Encompass Health Healthcare Facilities States 8,893 - 2.3% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Metal & Glass United
24 (-) AptarGroup Containers States 8,852 - 2.3% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
25 (-) UCB Pharmaceuticals Belgium 8,799 - 2.3% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
26 (-) CooperCompanies Healthcare Supplies States 8,776 - 2.3% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Life Sciences United
27 (9) Avantor Tools & Services States 8,637 10,948 2.2% 3.4%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Life Sciences United
28 (13) Bio-Rad Laboratories Tools & Services States 8,439 9,867 2.2% 3.0%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Biohaven United
29 (37) Pharmaceutical Biotechnology States 8,411 3,821 2.2% 1.2%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
30 (-) GN Store Nord Healthcare Equipment Denmark 7,991 - 2.1% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Top 30 investments 347,351 90.1%
------------------------ ------------ ----------- -------- -------- -----
31 (-) Alcon Healthcare Supplies Switzerland 7,678 - 2.0% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
32 (-) Amedisys Healthcare Services States 6,856 - 1.8% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
33 (24) Align Technology Healthcare Supplies States 5,922 7,615 1.5% 2.3%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
34 (-) Genmab Biotechnology Denmark 5,712 - 1.5% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
35 (43) Uniphar Healthcare Distributors Ireland 5,438 193 1.4% 0.1%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
36 (30) Medley Healthcare Technology Japan 4,404 5,905 1.1% 1.8%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Life Sciences United
37 (18) Syneos Health Tools & Services States 3,879 8,948 1.0% 2.8%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Intelligent United
38 (35) Ultrasound Healthcare Technology Kingdom 3,811 4,062 1.0% 1.2%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
39 (-) LivaNova Healthcare Equipment Kingdom 3,810 - 1.0% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
40 (33) Zealand Pharma Biotechnology Denmark 3,807 4,742 1.0% 1.5%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Top 40 investments 398,668 103.4%
------------------------ ------------ ----------- -------- -------- -----
41 (39) Ship Healthcare Healthcare Distributors Japan 2,882 1,850 0.7% 0.6%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Axonics Modulation United
42 (36) Technologies Healthcare Equipment States 2,180 3,896 0.6% 1.2%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
43 (32) Quotient Healthcare Supplies Switzerland 2,123 4,874 0.5% 1.5%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
44 (42) Avadel Pharmaceuticals Pharmaceuticals Ireland 2,018 1,105 0.5% 0.3%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
45 (41) Renalytix AI Healthcare Technology States 460 1,523 0.1% 0.4%
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
United
46 (-) Verici DX Healthcare Technology Kingdom 230 - 0.1% -
----- ----------------------- ------------------------ ------------ ----------- -------- -------- -----
Total equities 408,561 105.9%
------------------------ ------------ ----------- -------- -------- -----
Other net liabilities (22,833) (5.9%)
------------------------ ------------ ----------- -------- -------- -----
Net assets 385,728 100.0%
----------------------- ------------------------ ------------ ----------- -------- -------- -----
Note - Sectors are from the GICS (Global Industry Classification
Standard).
STRATEGIC REPORT
The Strategic Report section of this Annual Report comprises the
Chair's Statement, the Investment Manager's Report, including
information on the portfolio, and this Strategic Report. This
Report has been prepared to provide information to shareholders on
the Company's strategy and the potential for this strategy to
succeed, including a fair review of the Company's performance
during the year ended 30 September 2021, the position of the
Company at the year end and a description of the principal risks
and uncertainties. Throughout the Strategic Report there are
certain forward-looking statements made by the Directors in good
faith based on the information available to them at the time of
their approval of this Report. Such statements should be treated
with caution due to inherent uncertainties, including both economic
and business risk factors, underlying any such forward-looking
information.
HISTORY
In June 2017 a reconstruction of the Company, change in
investment mandate and change of name was implemented having been
approved by shareholders. Further information is provided within
the Shareholder Information section in the full Annual Report and
Accounts and on the Company's website www.
polarcapitalglobalhealthcaretrust.co.uk. Following the
reconstruction and in the absence of any prior proposals, the
Articles of Association require the Directors to put forward at the
first Annual General Meeting to be held after 1 March 2025, a
resolution for the voluntary winding up of the Company and the
appointment of a liquidator. Members voting in favour, whether in
person or by proxy, shall collectively have sufficient votes,
irrespective of number, to pass the resolution.
The Board remains positive on the outlook for healthcare and the
Company will continue to pursue its Investment Objective in
accordance with the stated investment policy and strategy. Future
performance is dependent to a significant degree on the world's
financial markets and their reactions to economic events and other
geo-political forces. The Chair's Statement and the Investment
Manager's Report comment on the development and performance of the
business during the financial year, the outlook and potential risks
to the performance of the portfolio.
BUSINESS MODEL AND REGULATORY ARRANGEMENTS
The Company's business model follows that of an externally
managed investment trust providing Shareholders with access to a
global portfolio of healthcare stocks.
The Company is designated an Alternative Investment Fund ('AIF')
under the Alternative Investment Fund Management Directive
('AIFMD') and, as required by the Directive, has contracted with
Polar Capital LLP to act as the Alternative Investment Fund Manager
('AIFM') and HSBC Bank Plc to act as the Depositary.
Both the AIFM and the Depositary have responsibilities under
AIFMD for ensuring that the assets of the Company are managed in
accordance with the investment policy and are held in safe custody.
The Board remains responsible for setting the investment strategy
and operational guidelines as well as meeting the requirements of
the Financial Conduct Authority ('FCA') Listing Rules and the
Companies Act 2006.
The AIFMD requires certain information to be made available to
investors in AIFs before they invest and requires that material
changes to this information be disclosed in the Annual Report of
each AIF. Investor Disclosure Documents, which set out information
on the Company's investment strategy and policies, gearing, risk,
liquidity, administration, management, fees, conflicts of interest
and other Shareholder information are available on the Company's
website.
There have been no material changes to the information requiring
disclosure. Any information requiring immediate disclosure pursuant
to the AIFMD will be disclosed to the London Stock Exchange.
Statements from the Depositary and the AIFM can be found on the
Company's website.
The Company seeks to manage its portfolio in such a way as to
meet the tests in section 1158 and 1159 of the Corporation Tax Act
2010 (as amended by Section 49(2) of the Finance Act 2011) and
continue to qualify as an investment trust. This qualification
permits the accumulation of capital within the portfolio without
any liability to UK Capital Gains Tax. Further information is
provided in the Directors' Report in the Annual Report and
Accounts.
INVESTMENT OBJECTIVE AND POLICY
The Company's Investment Objective is to generate capital growth
through investments in a global portfolio of healthcare stocks.
The Company will seek to achieve its objective by investing in a
diversified global portfolio consisting primarily of listed
equities. The portfolio is diversified by geography, industry
sub-sector and investment size.
The portfolio will comprise a single pool of investments, but
for operational purposes, the Investment Manager will maintain a
Growth portfolio and an Innovation portfolio. Innovation companies
are broadly defined by the Investment Manager as small/mid cap
innovators that are driving disruptive change, giving rise not only
to new drugs and surgical treatments but also to a transformation
in the management and delivery of healthcare. The Growth portfolio
is expected to comprise a majority of the Company's assets. For
this purpose, once an innovation stock's market capitalisation has
risen above US $5bn, it will ordinarily then be treated as a growth
stock.
The relative ratio between the two portfolios may vary over the
life of the Company due to factors such as asset growth and the
Investment Manager's views as to the risks and opportunities
offered by investments in each pool and across the combined
portfolio. The original make-up of the combined portfolio was of up
to 50 stocks, with growth stocks being primarily US listed. In
2018, the Board authorised an increase to the number of stocks able
to be held to 65 and confirmed there is no restriction on
geographical exposure.
The combined portfolio will therefore be made up of interests in
up to 65 companies, with no single investment accounting for more
than 10% (or 15% in the case of an investment in another fund
managed by the Investment Manager) of the Gross Assets at the time
of investment. The innovation portfolio may include stocks which
are neither quoted nor listed on any stock exchange but the
exposure to such stocks, in aggregate, will not exceed 5% of Gross
Assets at the time of investment. In the event that the Investment
Manager launches a dedicated healthcare innovation fund, the
Company's exposure to innovation stocks may be achieved in whole or
in part by an investment in that fund. In any event, the Company
will not, without the prior consent of the Board, acquire more than
15% of any such healthcare innovation fund's issued share
capital.
THE BOARD
As the day to day management of the Company is outsourced to
service providers the Board's focus at each meeting is on
investment performance, including the outlook and strategy. The
Board also considers the management and provision of services
received from third-party service providers and the risks inherent
in the various matters reviewed and discussed.
STRATEGY AND INVESTMENT APPROACH
The Investment Manager's investment process is primarily based
on bottom-up fundamental analysis. The Investment Manager uses a
qualitative filter consisting of key criteria to build up a
watch-list of securities that is monitored on a regular basis. Due
diligence is then carried out on the individual securities on the
watch-list. Each individual holding is assessed on its own merits
in terms of risk: reward including ESG criteria. While the Company
expects normally to be fully or substantially invested, the Company
may hold cash or money market instruments pending deployment in the
portfolio. In addition, it will have the flexibility, when the
Investment Manager perceives there to be actual or expected adverse
equity market conditions, to maintain cash holdings as it deems
appropriate.
SERVICE PROVIDERS
Polar Capital LLP has been appointed to act as the Investment
Manager and AIFM as well as to provide or procure company
secretarial services, marketing and administrative services,
including accounting, portfolio valuation and trade settlement
which it has arranged to deliver through HSBC Securities Services
("HSS").
The Company also contracts directly, on terms agreed
periodically, with a number of third parties for the provision of
specialist services, including:
-- Panmure Gordon & Co as Corporate Broker;
-- Herbert Smith Freehills LLP as solicitors;
-- HSBC Securities Services as Custodian and Depositary;
-- Equiniti Limited as the Share Registrars;
-- PricewaterhouseCoopers LLP as independent Auditors;
-- Huguenot Limited for website designers and internet hosting services; and
-- Perivan Limited as designers and printers for shareholder Communications.
GEARING
Following the restructure of the Company in June 2017, the
Company maintains long-term structural gearing in the form of a
loan from the wholly owned subsidiary PCGH ZDP Plc. No short-term
borrowings have been made and there are no arrangements made for
any bank loans. The Articles of Association provide that the
Company may borrow up to 15% of its Net Asset Value at the time of
drawdown, for tactical deployment when the Board believes that
gearing will enhance returns to shareholders. Further details of
the loan provided by the subsidiary are given in the full Annual
Report and Accounts.
BENCHMARK
The Company will measure the Investment Manager's performance
against the MSCI ACWI Healthcare Index total return, in sterling
with dividends reinvested. Although the Company has a benchmark,
this is neither a target nor determinant of investment strategy.
The portfolio may diverge substantially from the constituents of
this index. The purpose of the Benchmark is to set a reasonable
measure of performance for shareholders above which the Investment
Manager earns a share for any outperformance it has delivered.
PERFORMANCE AND KEY PERFORMANCE OBJECTIVES
The Board appraises the performance of the Company and the
Investment Manager as the key supplier of services to the Company
against key performance indicators ('KPIs'). The objectives of the
KPIs comprise both specific financial and Shareholder related
measures. These KPI's have not differed from the prior year.
KPI CONTROL PROCESS OUTCOME
The provision of investment The Board reviews As at 30 September 2021,
returns to shareholders the performance of the total net assets of
measured by long- the portfolio in detail the Company amounted to
term and hears the views GBP385,728,000. The Company's
NAV growth and relative of the Investment NAV total return, over
performance against Manager at the year ended 30 September
the Benchmark. each meeting. 2021, was 19.46% while
the Benchmark Index over
The Board also considers the same period increased
the value delivered by 13.40%. The Company's
to shareholders through performance is explained
NAV growth and dividends further in the Investment
paid Manager's Report. Since
restructuring on 20 June
2017, the total return
of the NAV was 52.28%
and the benchmark was
53.42%. Investment performance
is explained in the Chair
's Statement and the Investment
Manager's Report.
------------------------------- ----------------------------------
The achievement of Financial forecasts Two dividends have been
the dividend policy. are reviewed to track paid or are payable in
income and distributions. respect of the year ended
30 September 2021 totalling
2.00 p per share (2020:
two dividends totalling
2.00p per share). The
Company's focus remains
on capital growth. While
the Company continues
to aim to pay two dividends
per year these are expected
to be a small part of
a shareholder total return.
------------------------------- ----------------------------------
Monitoring and reacting The Board receives The discount of the ordinary
to issues created regular information share price to the NAV
by the discount or on the composition per ordinary share at
premium of of the share register the year ended 30 September
the ordinary share including trading 2021 was 9.5% (2020: 13.1%).
price to the NAV per patterns and discount/premium
ordinary share with levels of the Company's During the year ended
the aim of reduced ordinary shares. The 30 September 2021, no
discount volatility Board discusses and new shares were issued
for shareholders. authorises the issue or bought back.
or buy back of shares
when appropriate. The number of shares in
issue, as at the year
The Board is aware end was 124,149,256 of
of the vulnerability which 2,879,256 were held
of a sector specialist in treasury. The total
investment trust to voting rights of the Company
a change in investor are 121,270,000 shares.
sentiment to that
sector. While there
is no formal discount
policy the Board discusses
the market factors
giving rise to any
discount or premium,
the long or short-term
nature of those factors
and the overall benefit
to Shareholders of
any actions. The market
liquidity is
also considered when
authorising the issue
or buy back of shares
when appropriate market
conditions prevail.
A daily NAV per share,
calculated in accordance
with the AIC guidelines
is issued to the London
Stock Exchange.
------------------------------- ----------------------------------
To qualify and continue The Board receives The Company was granted
to meet the requirements regular financial investment trust status
for sections 1158 information which annually up to 1 October
and 1159 of the Corporation discloses the current 2014 and is deemed to
Tax Act 2010 ('investment and projected financial be granted such status
trust status'). position of the Company for each subsequent year
against each of the subject to the Company
tests set out in sections continuing to satisfy
1158 and 1159. the conditions of section
1158 of the Corporation
Tax Act 2010 and other
associated ongoing requirements.
The Directors confirm
that the tests have been
met in the financial year
ended 30 September 2021
and believe that they
will continue to be met.
------------------------------- ----------------------------------
To ensure the efficient The Board considers The Board has received,
operation of the Company annually the services and considered satisfactory,
by monitoring the provided by the Investment the internal controls
services provided Manager, both investment report of the Investment
by third party suppliers, and administrative, Manager and other key
including the Investment and reviews on a cycle suppliers including the
Manager, and controlling the provision of services contingency arrangements
ongoing charges. from third parties to facilitate the ongoing
including the costs operations of the Company
of their services. in the event of withdrawal
or failure of services.
The annual operating
expenses are reviewed The ongoing charges for
and any non-recurring the year ended 30 September
project related expenditure 2021 were 0.83%, compared
approved by the Board. to 1.01% the previous
year.
------------------------------- ----------------------------------
Risk Management
The Board is responsible for the management of risks faced by
the Company and, through delegation to the Audit Committee, has
established procedures to manage risk, oversee the internal control
framework and determine the nature and extent of the principal
risks the Company is willing to take in order to achieve its
long-term strategic objectives.
The Audit Committee carries out, at least annually, a robust
assessment of the principal risks and uncertainties with the
assistance of the Investment Manager, continually monitors
identified risks and meets to discuss both long-term and emerging
risks outside of the normal cycle of Audit Committee meetings.
A Risk management process has been established to identify and
assess various risks, their likelihood and the possible severity of
impact then, considering both internal and external controls and
factors that could provide mitigation, a post mitigation risk
impact score is determined. The Audit Committee has identified the
key risks faced by the Company. During the year the Audit
Committee, in conjunction with the Board and the Investment
Managers undertook a full review of the Company's Risk Map
including the mitigating factors and controls to reduce the impact
of the risks. The Committee continues to closely monitor these
risks along with any other emerging risks as they develop and
implements mitigating actions as necessary. The key risks which are
those classified as having the highest risk impact score post
mitigation are detailed below with a high-level summary of the
management through mitigation and status arrows to indicate any
change in assessment over the past financial year.
The Principal risks are detailed in the full Annual Report along
with a high-level summary of their management through
mitigation
and status arrows to indicate any change in assessment over the
past financial year.
The Committee continues to monitor the continuing risks posed by
COVID-19, which was classified as a Black Swan event in 2020.
Further information on how the Committee has considered COVID-19
along with the other risks faced by the Company when assessing the
effect on the Company's ability to operate as a going concern and
the Company's longer-term viability can be found in the full Annual
Report and Accounts.
Portfolio Management
Description Assessment Mitigation
--------------------------- ---------------- ------------------------------
Investment Performance Breach of Investment Unchanged from The Board seeks
policy, Investment previous year. to mitigate the
Manager unable to impact of such risks
deliver the Investment through the regular
Objective leading reporting and monitoring
to poor performance of the Company's
against the benchmark investment performance
or market/industry against its peer
average. group, benchmark
and other agreed
indicators of relative
performance. A detailed
annual review of
the investment strategy
is undertaken by
the Investment Manager
with the Board including
analysis of investment
markets and sector
trends.
At each meeting
the Board discusses
developments in
healthcare and drug
pipelines with the
Investment Manager
in addition to the
composition and
diversification
of the portfolio
with sales and purchases
of investments and
the degree of risk
which the Investment
Manager incurs to
generate investment
returns. Individual
investments are
discussed with the
Investment Manager
as well as the Investment
Manager's general
views on the various
investment markets
and the healthcare
sector in particular.
Analytical performance
data and attribution
analysis is presented
by the Investment
Manager.
The Board is committed
to a clear communication
program to ensure
Shareholders understand
the investment strategy.
This is maintained
through the use
of monthly factsheets
which have a market
commentary from
the Investment Manager
as well as portfolio
data, an informative
website as well
as annual and half
year reports.
--------------------------- ---------------- ------------------------------
Gearing Inability to repay Unchanged from The Board considered
ZDP loan and or previous year. the benefits and
inappropriate use drawbacks of the
of derivatives. structural debt
at the time of restructuring
and concluded that
the ability to lock-in
an effective interest
rate of 3% pa for
the 7-year life
would be beneficial
to investment returns,
the Board remains
of the same belief.
The asset cover
necessary to repay
the ZDP shares is
reviewed at each
Board meeting. If
any flexible gearing
is contemplated
the Board would
agree the overall
levels of gearing
with the AIFM. The
arrangement of bank
facilities and drawing
of funds under such
arrangements are
controlled by the
Board. Derivatives
are considered as
being a form of
gearing and a policy
for their use has
been agreed by the
Board.
The deployment of
any borrowed funds
is based on the
Investment
Manager's assessment
of risk and reward.
--------------------------- ---------------- ------------------------------
Discount/Premium Persistent discount Unchanged from The Board regularly
in excess of Board previous year. considers, in comparison
or Shareholder acceptable to the sector and
levels. peers, the level
of premium and discount
of the share price
to the NAV and ways
to enhance Shareholder
value including
share issuance and
buy backs.
The Board has carefully
monitored the discount
level and market
movements during
the COVID-19 pandemic
and has discussed
performance with
the Managers and
advisers. The discount
of the Company narrowed
during the year
under review and
as at 30 September
2021, the discount
of the ordinary
share price to the
NAV per ordinary
share was 9.5% (2020:
13.1%). The Chair
has also met (virtually)
with key shareholders
to understand any
concerns and views
as detailed in the
Chair's Statement
and within
the s172 Report.
Further detail on
the performance
and the impact of
COVID-19 and market
movements on the
Company is given
in the Investment
Manager's Report.
--------------------------- ---------------- ------------------------------
Trading Execution of unauthorised Unchanged from Investment limits
trade/dealing error. previous year. and restrictions
Error or breach are encoded into
may cause regulatory the dealing and
investigation leading operations systems
to fines, reputational of the Investment
damage and risk Manager and various
to investment trust oversight functions
status. are undertaken to
ensure there is
early warning of
any potential issue
of compliance or
regulatory matters.
--------------------------- ---------------- ------------------------------
Operational Risk
Description Assessment Mitigation
------------------------------- ---------------- ---------------------------------
Service Failure Failure in services Unchanged from The Board carries
provided by the previous year. out an annual review
Investment Manager, of internal control
Custodian, reports
Depositary or other from suppliers which
service providers; includes cyber protocols
Accounting, Financial and disaster recovery
or Custody Errors procedures. Due
resulting in regulatory diligence and service
investigation or reviews are undertaken
financial loss, with third-party
failure of trade service providers
settlement, potential including the Custodian
loss of Shareholder and Depository.
assets and investment
trust status. A full review of
the internal control
framework is carried
out at least annually.
Regular reporting
is received by the
Investment Manager
on behalf of the
Board from the Depositary
on the safe custody
of the Company's
assets. The Board
undertakes independent
reviews
of the Depositary
and external Administrator
services and additional
resources have been
put in place by
the Investment Manager.
Management accounts
are produced and
reviewed monthly,
statutory reporting
and daily NAV calculations
are produced by
the external Administrator
and verified by
the Investment Manager.
Accounting records
are tested, and
valuations verified
independently as
part of the year-end
financial reporting
process.
------------------------------- ---------------- ---------------------------------
Cyber Risk Cyber-attack causing Unchanged from The number, severity
disruption to or previous year. and success rate
failure of operational of cyber-attacks
and accounting systems have increased considerably
and processes provided over recent years,
by the Investment controls are however
Manager creating in place and the
an unexpected event Board proactively
and/or adverse impact seeks to keep abreast
on personnel or of developments
the portfolio. through updates
from representatives
of the Investment
Manger who undertakes
meetings with the
relevant service
providers. In light
of the COVID-19
pandemic and the
lockdown measures
introduced by the
UK Government, the
Audit Committee
once again sought
assurance from each
of the Company's
service providers
on the resilience
of their business
continuity arrangements
whilst the majority
of their employees
worked remotely.
These assurances
and the subsequent
detailed updates
that were given
to the Committee
provided a satisfactory
level of assurance
that there had not
been, and there
was no anticipation
of any disruption
in the ability of
each service provider
to fulfil their
duties as would
typically be expected.
------------------------------- ---------------- ---------------------------------
Key Man Loss of Investment Unchanged from The strength and
Manager or other previous year. depth of investment
key management professionals. team provides comfort
Impact on investor that there is not
confidence leading over-reliance on
to widening of the one person with
discount and/or alternative portfolio
poor performance managers available
creating a period to act if needed.
of uncertainty and For each key business
potential termination process roles, responsibilities
of the Investment and reporting lines
Management Agreement. are clear and unambiguous.
During the year,
the healthcare team
was strengthened
further with the
addition of two
new team members.
Further details
are provided in
the Management team
biographies in the
full Annual Report.
The Investment Manager
has implemented
BCP arrangements
as a result of COVID-19
with staff working
remotely with no
loss of service.
------------------------------- ---------------- ---------------------------------
Shareholder Failure to effectively Unchanged from The Board is committed
Communications communicate significant previous year. to a clear communication
events to the shareholder programme to ensure
and investor base. Shareholders understand
the investment strategy.
This is maintained
through the use
of monthly factsheets
which have a market
commentary from
the Investment Manager
as well as portfolio
data, an informative
website as well
as annual and half
year reports.
------------------------------- ---------------- ---------------------------------
Regulatory Risk
Description Assessment Mitigation
------------------------------ ---------------- ---------------------------
Non-compliance with Unchanged from The Board monitors
statutes, regulations previous year. regulatory change
and disclosure requirements, with the assistance
including FCA listed of the
company regime and Investment Manager,
Companies Act 2006; Company Secretary
s1158/1159 of the and external professional
Corporation Tax suppliers and implements
Act 2010, the Companies necessary changes
Act 2006 and other should they be required.
UK, European and
overseas legislation The Board receives
affecting UK companies regulatory reports
including MiFID for discussion and,
II and the GDPR. if required, considers
the need for any
Not complying with remedial action.
accounting standards In addition, as
could result is an investment company,
a suspension of the Company is required
listing or loss to comply with a
of investment trust framework of tax
status, reputational laws, regulation
damage and Shareholder and company law.
activism.
Further risks arise The Board keeps
from not keeping abreast of third
abreast of changes party service provider
in legislation and internal controls
regulations which processes to ensure
have in recent years requirements are
been substantial. met in accordance
with regulatory
requirements.
------------------------------ ---------------- ---------------------------
Economic and Market Risk
Description Assessment Mitigation
------------------------------- ---------------- -----------------------------
Financial loss due Unchanged from The Board regularly
to unexpected natural previous year. discusses the general
disaster or other economic conditions
unpredictable event and developments.
disrupting the ability
to operate or significant The impact on the
exposure to the portfolio from
economic cycles other geopolitical
of the markets in changes
which the underlying including, as an
investments example, tensions
conduct their business between the US
operations as well and China are monitored
as the economic through existing
impact on control systems
investment markets and discussed regularly
where such investments by the Board. While
are listed. it is difficult
to quantify the
Fluctuations in impact of such
stock markets and changes, it is
currency exchange not anticipated
rates could be advantageous that they will
or disadvantageous fundamentally affect
to the Company and the business of
its performance. the Company or
make healthcare
Disruption to trading investing any less
platforms and support desirable. The
services. longer term effects
of COVID-19 on
this risk will
continue to be
assessed by the
Audit Committee
in light of how
they
will impact the
Company's portfolio
and the overall
economic and geopolitical
environment in
which the Company
operates.
The Company through
the Investment
Manager, has a
disaster recovery
plan in place.
----------------------------- -------------------- ---------------------------
MANAGEMENT COMPANY AND MANAGEMENT OF THE PORTFOLIO
As the Company is an investment vehicle for shareholders, the
Directors have sought to ensure that the business of the Company is
managed by a leading specialist investment management team and that
the investment strategy remains attractive to shareholders. The
Directors believe that a strong working relationship with Polar
Capital LLP (the Investment Manager) will achieve the optimum
return for shareholders and the Board and Investment Manager
operate in a supportive, co-operative and open environment.
The Investment Manager is Polar Capital LLP ('Polar Capital'),
which is authorised and regulated by the Financial Conduct
Authority, to act as Investment Manager and AIFM of the Company
with sole responsibility for the discretionary management of the
Company's assets (including uninvested cash) and sole
responsibility to take decisions as to the purchase and sale of
individual investments. The Investment Manager also has
responsibility for asset allocation within the limits of the
investment policy and guidelines established and regularly reviewed
by the Board, all subject to the overall control and supervision of
the Board.
Under the terms of the IMA, the Investment Manager also provides
or procures accountancy services, company secretarial, marketing
and day-to-day administrative services, including the monitoring of
third-party suppliers, which are directly appointed by the Company.
The Investment Manager has, with the consent of the Directors,
delegated the provision of certain of these administrative
functions to HSBC Securities Services and to Polar Capital
Secretarial Services Limited.
Polar Capital provides a team of healthcare specialists and the
portfolio is co-managed by Dr James Douglas and Mr Gareth Powell.
The Investment Manager has other resources which support the
investment team and has experience in managing and administering
other investment trust companies.
TERMINATION ARRANGEMENTS
The IMA may be terminated by either party giving 12 months'
notice. The IMA may be terminated earlier by the Company with
immediate effect on the occurrence of certain events, including:
(i) if an order has been made or an effective resolution passed for
the liquidation of the Investment Manager; (ii) if the Investment
Manager ceases or threatens to cease to carry on its business;
(iii) where the Company is required to do so by a relevant
regulatory authority; (iv) on the liquidation of the Company; or
(v) subject to certain conditions, where the Investment Manager
commits a material breach of the IMA. In the event the IMA is
terminated before the expiry of the Company's fixed life then,
except in the event of termination by the Company for certain
specified causes, the base fee and the performance fee will be
calculated pro rata for the period up to and including the date of
termination.
FEE ARRANGEMENTS
MANAGEMENT FEE
Under the terms of the IMA, the Investment Manager will be
entitled to a management fee together with reimbursement of
reasonable expenses incurred by it in the performance of its
duties. The management fee is payable monthly in arrears and, with
effect from 1 October 2020, was charged at the rate of 0.75%
(previously: 0.85%) per annum based on the lower of the market
capitalisation and adjusted net asset value. In accordance with the
Directors' policy on the allocation of expenses between income and
capital, in each financial year 80% of the management fee payable
is charged to capital and the remaining 20% to income.
PERFORMANCE FEE
The Investment Manager may be entitled to a performance fee. The
performance fee was reset at the date of reconstruction of the
Company and will be paid in cash at the end of the Company's
expected life (except in the case of an earlier termination of the
IMA). The performance fee will be an amount equal to 10% of the
excess total return (based on the Adjusted Net Asset Value per
ordinary share at that time) over the total return of the benchmark
plus 1.5% compounded annually on each anniversary of share
admission and adjusted for periods of less than 12 months. In the
event of a performance fee becoming payable on the future portfolio
realisation date, such fee would be subject to a maximum amount of
3.5% of the terminal NAV. For the purposes of calculating the
performance fee, the Company's Adjusted Net Asset Value will be
based on the Net Asset Value adjusted by the amount of any
dividends paid by the Company deemed to have been reinvested on the
date of payment in ordinary shares at their Net Asset Value (on
such date) and the resulting amount added to the Company's Net
Asset Value. If at the end of the Company's expected life the
amount available for distribution to shareholders is less than
215.9p per ordinary share, no performance fee will be payable. If
the amount is more than 215.9p per ordinary share but payment of
the performance fee in full would reduce it below that level, then
the performance fee will be reduced such that shareholders receive
exactly 215.9p per share. No performance fee has been paid or
accrued since inception and up to 30 September 2021.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
CORPORATE RESPONSIBILITY
The Company's core investment and administrative activities are
undertaken by its Investment Manager which seeks to limit the use
of non renewable resources and reduce waste where possible. The
Investment Manager has a corporate ESG policy, which is available
in the document library of the Company's website, and wherever
possible and appropriate the parameters of such are considered and
adopted by the investment team in relation to the Company's
management and portfolio construction. As detailed further within
the Investment Manager's Report the Investment Managers are
required to have consideration of ESG factors when reviewing new,
continuing or exiting investments but they are not required to take
an investment decision solely on the basis of ESG factors. The
Board monitors the Investment Manager's approach to ESG including
policies for improvement of impact on the environment, and they
themselves take into account ESG factors in the management of the
Company. The Companies Act 2006 (Strategic Report and Directors'
Reports) Regulations 2013 require companies listed on the Main
Market of the London Stock Exchange to report on the greenhouse gas
('GHG') emissions for which they are responsible. The Company is an
investment trust, with neither employees nor premises, nor has it
any financial or operational control of the assets which it owns.
Consequently, it has no GHG emissions to report from its operations
nor does it have responsibility for any other emissions.
DIVERSITY AND GER REPORTING
The Company has no employees and the Board is comprised of one
female and three male Independent non-executive Directors. The
Board is cognisant of the Hampton Alexander Review which set a
target for all FTSE350 companies to have a board with a 33% female
representation by the end of 2020. The Company falls outside of the
FTSE350 and currently has 25% female representation but notes that
the most senior Board role of Chair is held by the female
director.
The FCA issued a consultation document in July 2021 on Diversity
and Inclusion which proposes various changes to the Listing Rules
including the expansion of reporting beyond gender diversity. If
approved, the revised rules are expected to come into force for
financial years commencing on or after 1 January 2022. The Board
will review and take any necessary action in due course and will
continue to have regard to the benefits of diversity throughout any
recruitment process, especially when compiling a shortlist of
candidates and selecting individuals for interview, but will
ultimately seek to ensure directors appointed to the Board are
chosen on merit.
The Company has not adopted a policy on human rights as it has
no employees or operational control of its assets.
MODERN SLAVERY ACT
As an investment company, the Company does not provide goods or
services in the normal course of business and does not have any
customers. Accordingly, the Company does not consider that it falls
within the scope of the Modern Slavery Act 2015 and therefore does
not meet the criteria requiring it to produce a statement under
such Act.
ANTI-BRIBERY, CORRUPTION AND TAX EVASION
The Board has adopted a zero-tolerance policy (available on the
Company's website) to bribery, corruption and the facilitation of
tax evasion in its business activities. The Board uses the
principles formulated and implemented by the Investment Manager and
expects the same standard of zero tolerance to be adopted by third
party service providers. The Company has implemented a Conflicts of
Interest policy to which the Directors must adhere, in the event of
divergence between the Investment Manager's policy and the
Company's policy the Company's policy shall prevail. The Company is
committed to acting with integrity and in the interests of
shareholders at all times.
TASKFORCE FOR CLIMATE-RELATED FINANCIAL DISCLOSURES ("TCFD")
The Company notes the TCFD recommendations on climate-related
financial disclosures. As stated above, the Company is an
investment trust with no employees, internal operations or
property. However, it is an asset owner and therefore we will work
to develop appropriate disclosures about our portfolio. Information
sources are developing and consultations on reporting requirements
are underway, we will continue to work alongside our Investment
Manager to provide more information as it becomes available. Polar
Capital supports TCFD's recommendations and is in the process of
assessing the guidance to ensure compliance going forward.
ESG AND THIRD PARTY SERVICE PROVIDERS
The Investment Manager on behalf of all clients receives
assurance on an annual basis that, where required, third party
service providers comply with the requirements of the Modern
Slavery Act and adhere to a zero-tolerance policy to bribery and
corruption. In light of the growing requirements surrounding ESG,
including TCFD, third party service providers have been engaged in
providing copies of their ESG, Diversity and Inclusion, Stewardship
and other related policies to the Company. The Board will continue
to monitor the practices of service providers and seek to assure
shareholders where appropriate that suitable policies and
procedures are in place to effect positive change.
SECTION 172 OF THE COMPANIES ACT 2006
The statutory duties of the Directors are listed in s171-177 of
the Companies Act 2006. Under s172, Directors have a duty to
promote the success of the Company for the benefit of its members
(our Shareholders) as a whole and in doing so have regard to the
consequences of any decision in the long term, as well as having
regard to the Company's stakeholders amongst other considerations.
The fulfilment of this duty not only helps the Company achieve its
Investment Objective but ensures decisions are made in a
responsible and sustainable way for Shareholders.
To ensure that the Directors are aware of, and understand, their
duties, they are provided with an induction when they first join
the Board, including details of all relevant regulatory and legal
duties as a Director and continue to receive regular and ongoing
updates on relevant legislative and regulatory developments. They
also have continued access to the advice and services of the
Company Secretary and, when deemed necessary, the Directors can
seek independent professional advice. The Schedule of Matters
Reserved for the Board, as well as the Terms of Reference of its
committees, are reviewed annually and further describe Directors'
responsibilities and obligations and include any statutory and
regulatory duties.
The Board seeks to understand the needs and priorities of the
Company's stakeholders and these are taken into account during
discussions and as part of the decision-making process. As an
externally managed investment company, the Company does not have
any employees or customers, however the key stakeholders and a
summary of the Board's consideration and actions where possible in
relation to each group of stakeholders are described in the table
below:
STAKEHOLDER GROUP HOW WE ENGAGE WITH THEM
SHAREHOLDERS The Directors have considered this duty when making
the strategic decisions during the year that affect
Shareholders, including the continued appointment
of the Investment Manager and the recommendation
that Shareholders vote in favour of the resolutions
for the Company to continue and to renew the allotment
and buy back authorities at the AGM. The Directors
have also engaged with and taken account of Shareholders'
interests during the year.
The Directors were unable to have the usual face-to-face
interactions with Shareholders this year due to
the guidance from the UK government in respect
of gatherings of people. Instead, the Board held
a "Meet the Manager and Board" session where shareholders
had the opportunity to hear a brief introduction
from the Managers and the Chair and were provided
with an opportunity to ask questions.
The Company's AGM will be held at 2pm on Wednesday
11 February 2022. The Board has been considering
how best to deal with the continued uncertainties
posed by the COVID-19 pandemic and possible future
outbreaks which may impact the holding of the AGM.
The health and wellbeing of our employees, shareholders
and the wider community in which we operate is
of importance to the Board. The Board also recognises
that the AGM is an important event for Shareholders
and the Company and is keen to ensure that Shareholders
are able to exercise
their right to vote and participate. Unless circumstances
change, and they may do so at any time between
now and the AGM, the meeting will be held at the
offices of Polar Capital, 16 Palace Street, London
SW1E 5JD. Any changes to these arrangements will
be communicated through the Company's website and
via a Regulatory Information Service announcement.
The Board believes that shareholder engagement
remains important, especially in the current market
conditions and is keen that the AGM be a participative
event for all Shareholders who attend. Shareholders
are encouraged to send any questions ahead of the
AGM to the Board via the Company Secretary at cosec@polarcapital.co.uk
stating the subject matter as PCGH-AGM. The investment
manager gives a presentation and the Chairs of
the Board and of the Committees attend and are
available to respond to questions and concerns
from Shareholders.
Should any significant votes be cast against a
resolution, the Board will engage with Shareholders
and explain in its announcement of the results
of the AGM the actions it intends to take to consult
Shareholders in order to understand the reasons
behind the votes against. Following the consultation,
an update will be published no later than six months
after the AGM and the Annual Report will detail
the impact the Shareholder feedback has had on
any decisions the Board has taken and any actions
or resolutions proposed.
Relations with Shareholders
The Board and the Manager consider maintaining
good communications and engaging with Shareholders
through meetings and presentations a key priority.
The Board regularly considers the share register
of the Company and receives regular reports from
the Manager and the Corporate Broker on meetings
attended with Shareholders and any concerns that
are raised in those meetings. The Board also reviews
correspondence from Shareholders and may attend
investor presentations.
Shareholders are kept informed by the publication
of annual and half year reports, monthly fact sheets,
access to commentary from the Investment Manager
via the Company's website and attendance at events
at which the Investment Manager presents. Shareholders
are able to raise any concerns directly with the
Board without using the Manager or Company Secretary
as a conduit. The Chair or other Directors are
available to Shareholders who wish to raise matters
either in person or in writing. The Chair and Directors
may be contacted through the registered office
of the Company.
Shareholders are able to raise any concerns directly
with the Board without using the Manager or Company
Secretary as a conduit. The Chair or other Directors
are available to Shareholders who wish to raise
matters either in person or in writing. The Chair
and Directors may be contacted through the registered
office of the Company.
The Company, through the sales and marketing efforts
of the Investment Manager, encourages retail investment
platforms to engage with underlying Shareholders
in relation to Company communications and enabling
those Shareholders to cast their votes on Shareholder
resolutions. The Company however has no responsibility
over such platforms. The Board therefore encourage
Shareholders invested via the platforms to regularly
visit the Company's website or to make contact
with the Company directly to obtain copies of Shareholder
communications.
The Company has also made arrangements with its
registrar for Shareholders, who own their shares
directly rather than through a nominee or share
scheme, to view their account online at www.shareview.co.uk.
Other services are also available via this service.
------------------------------------------------------------------------
INVESTMENT MANAGER Through the Board meeting cycle, regular updates
and the work of the Management Engagement Committee
reviewing the services of the Investment Manager
annually, the Board is able to safeguard Shareholder
interests by:
* Ensuring adherence to the Investment Policy;
* Ensuring excessive risk is not undertaken in the
pursuit of investment performance;
* Ensuring adherence to the Investment Management
Policy and reviewing the agreed management and
performance fees; and
* Reviewing the Investment Manager's decision making
and consistency in investment process.
Maintaining a close and constructive working relationship
with the Manager is crucial as the Board and the
Investment Manager both aim to continue to achieve
consistent, long-term returns in line with the
Investment Objective. The culture which the Board
maintains to ensure this involves encouraging open
discussion with the Investment Manager; recognising
that the interests of Shareholders and the Investment
Manager are aligned, providing constructive challenge
and making Directors' experience available to support
the Investment Manager. This culture is aligned
with the collegiate and meritocratic culture which
Polar Capital has developed and maintains.
Outcomes and strategic decisions during the year
The Board in their capacity as the Management Engagement
Committee has recommended the continued appointment
of the Investment Manager on the terms agreed within
the Investment Management Agreement.
------------------------------------------------------------------------
INVESTEE COMPANIES The Board has instructed the Investment Manager
to take into account the published corporate governance
policies of the companies in which they invest.
The Board has also considered the Investment Manager's
Stewardship Code and Proxy Voting Policy. The Proxy
Voting Policy directs the Investment Manager to
vote at all general meetings of companies in line
with ISS policy. However, in exceptional cases,
where the Investment Manager believes that a resolution
would be detrimental to the interests of shareholders
or the financial performance of the Company, appropriate
notification will be given and abstentions or a
vote against will be lodged. This Policy changed
during the financial year, as the prior default
instruction had been for the Investment Manager
to vote at all general meetings of companies in
favour of management's recommendation.
The Investment Manager has voted at 45 company
meetings over the year ended 30 September 2021,
with 5.8% of all votes being against management
and 34% of meetings having at least one against
or withheld vote.
The Investment Manager reports to the Board, when
requested, on the application of the Stewardship
Code and Voting Policy. The Investment Manager's
Stewardship Code and Voting Policy can be found
on the Investment Manager's website in the Corporate
Governance section (www.polarcapital.co.uk). Further
information on how the Investment Manager considers
ESG in its engagement with investee companies can
be found in the Investment Manager's report.
Outcomes and strategic decisions during the year
During the year, the Board discussed the impact
of ESG and how the Investment Manager incorporated
ESG into their strategy and investment process.
------------------------------------------------------------------------
SERVICE PROVIDERS The Directors have frequent engagement with the
Company's other service providers through the annual
cycle of reporting and due diligence meetings or
site visits. This engagement is completed with
the aim of having effective oversight of delegated
services, seeking to improve the processes for
the benefit of the Company and to understand the
needs and views of the Company's service providers,
as stakeholders in the Company. Further information
on the Board's engagement with service providers
is included in the Corporate Governance Statement
and the Report of the Audit Committee in the full
Annual Report.
Outcomes and strategic decisions during the year
The reviews of the Company's service providers
have been positive and the Directors believe their
continued appointment is in the best interests
of the Company. The accounting and administration
services of HSBC Securities Services (HSS) are
contracted through Polar Capital and provided to
the Company under the terms of the IMA. The Board
however continue to conduct due diligence service
reviews in conjunction with the Company Secretary
and is satisfied that the service received continues
to be of a high standard.
------------------------------------------------------------------------
PROXY ADVISORS The support of proxy adviser agencies is important
to the Directors, as the Company seeks to retain
a reputation for high standards of corporate governance,
which the Directors believe contributes to the
long-term sustainable success of the Company. The
Directors consider the recommendations of these
various proxy voting agencies when contemplating
decisions that will affect Shareholders and also
when reporting to Shareholders through the Half
Year and Annual Reports.
Recognising the principles of stewardship, as promoted
by the UK Stewardship Code, the Board welcomes
engagement with all of its investors. The Board
recognises that the views, questions from, and
recommendations of many institutional investors
and proxy adviser agencies provide a valuable feedback
mechanism and play a part in highlighting evolving
Shareholders' expectations and concerns.
Prior to AGMs, the Company engages with these agencies
to fact check their advisory reports and clarify
any areas or topics that the agency requests. This
ensures that whilst the proxy advisory reports
provided to Shareholders are objective and independent,
the Company's actions and intentions are represented
as clearly as possible to assist with Shareholders'
decision making when considering the resolutions
proposed at the AGM.
Outcomes and strategic decisions during the year
The Nomination Committee considers the time commitment
required of Directors and the Board considers each
Director's independence on an ongoing basis. The
Board have confirmed that all Directors remain
independent and able to commit sufficient time
in fulfilling their duties, including those listed
on s172 of the Companies Act. Accordingly, all
Directors are standing for re-election at the Company's
AGM.
------------------------------------------------------------------------
THE AIC The Company is a member of the AIC and has also
supported lobbying activities such as the consultations
on the 2019 AIC Code, the 2021 BEIS Restoring Trust
in Audit and Corporate Governance and the FCA's
2021 consultation on Diversity and Inclusion on
Company Boards. The Directors also cast votes in
the AIC Board Elections each year and regularly
attend AIC events.
------------------------------------------------------------------------
Approved by the Board on 16 December 2021
By order of the Board
TRACEY LAGO, FCG
POLAR CAPITAL SECRETARIAL SERVICES LIMITED
COMPANY SECRETARY
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare Financial
Statements for each financial year. Under that law the Directors
have prepared the group and company Financial Statements in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006. Additionally, the
Financial Conduct Authority's Disclosure Guidance and Transparency
Rules require the directors to prepare the group Financial
Statements in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union.
Under company law the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and company and of the
profit or loss of the group and company for that period. In
preparing the Financial Statements, the Directors are required
to:
-- select suitable accounting policies and then apply them consistently;
-- state whether, for the group and company, international
accounting standards in conformity with the requirements of the
Companies Act 2006 and, for the group, international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union have been followed,
subject to any material departures disclosed and explained in the
Financial Statements;
-- make judgements and accounting 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 and company
will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and enable them to ensure that its
Financial Statements comply with the Companies Act 2006. They are
responsible for such internal control as they determine is
necessary to enable the preparation of Financial Statements that
are free from material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and
to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and Corporate Governance Statement
that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in the UK governing the preparation
and dissemination of Financial Statements may differ from
legislation in other jurisdictions.
Directors' confirmations
The Directors consider that the annual report and Financial
Statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess
the group and company's position and performance, business model
and strategy.
Each of the Directors, whose names and functions are listed in
the Strategic Report, confirm that, to the best of their
knowledge:
-- the company Financial Statements, which have been prepared in
accordance with the applicable set of accounting standards, give a
true and fair view of the assets, liabilities, financial position
and profit of the company;
-- the group Financial Statements, which have been prepared in
accordance with the applicable set of accounting standards, give a
true and fair view of the assets, liabilities, financial position
and profit of the group; and
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
group and company, together with a description of the principal
risks and uncertainties that it faces.
In the case of each Director in office at the date the
Directors' Report is approved:
-- so far as the Director is aware, there is no relevant audit
information of which the group and company's Auditors are unaware;
and
-- they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any relevant
audit information and to establish that the group and company's
Auditors are aware of that information.
Lisa Arnold
Chair
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2021
Group Group
------------------------- ---- ---------------------------- ----------------------------
Year ended Year ended
30 September 2021 30 September 2020
---------------------------- ----------------------------
Revenue Capital Total Revenue Capital Total
return return return return return return
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ---- -------- -------- -------- -------- -------- --------
Investment income 3 3,685 - 3,685 3,446 - 3,446
------------------------- ---- -------- -------- -------- -------- -------- --------
Other operating income 4 - - - 17 - 17
------------------------- ---- -------- -------- -------- -------- -------- --------
Gains on investments
held at fair value 5 - 64,165 64,165 - 42,435 42,435
------------------------- ---- -------- -------- -------- -------- -------- --------
Other currency losses 6 - (144) (144) - (647) (647)
------------------------- ---- -------- -------- -------- -------- -------- --------
Total income 3,685 64,021 67,706 3,463 41,788 45,251
------------------------- ---- -------- -------- -------- -------- -------- --------
Expenses
------------------------- ---- -------- -------- -------- -------- -------- --------
Investment management
fee 7 (518) (2,070) (2,588) (535) (2,140) (2,675)
------------------------- ---- -------- -------- -------- -------- -------- --------
Other administrative
expenses 8 (553) (59) (612) (685) (107) (792)
------------------------- ---- -------- -------- -------- -------- -------- --------
Total expenses (1,071) (2,129) (3,200) (1,220) (2,247) (3,467)
------------------------- ---- -------- -------- -------- -------- -------- --------
Profit before finance
costs and tax 2,614 61,892 64,506 2,243 39,541 41,784
------------------------- ---- -------- -------- -------- -------- -------- --------
Finance costs 9 - (1,064) (1,064) (1) (1,038) (1,039)
------------------------- ---- -------- -------- -------- -------- -------- --------
Profit before tax 2,614 60,828 63,442 2,242 38,503 40,745
------------------------- ---- -------- -------- -------- -------- -------- --------
Tax 10 (421) - (421) (472) - (472)
------------------------- ---- -------- -------- -------- -------- -------- --------
Net profit for the year
and total comprehensive
income 2,193 60,828 63,021 1,770 38,503 40,273
------------------------- ---- -------- -------- -------- -------- -------- --------
Earnings per Ordinary
share (pence) 12 1.81 50.16 51.97 1.46 31.74 33.20
------------------------- ---- -------- -------- -------- -------- -------- --------
The total column of this statement represents Group's Statement
of Comprehensive Income, prepared in accordance with IFRS.
The revenue return and capital return columns are supplementary
to this and are prepared under guidance published by the
Association of Investment Companies.
The Group does not have any other income or expense that is not
included in net profit for the year. The net profit for the year
disclosed above represents the Group's total comprehensive
income.
There are no dilutive securities and therefore the Earnings per
Share and the Diluted Earnings per share are the same.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
in the year.
The notes below form part of these Financial Statements.
STATEMENTS OF CHANGES IN EQUITY
For the year ended 30 September 2021
Group and Company
Year ended 30 September 2021
--------------------- ---- ----------------------------------------------------------------------------------------
Called Capital Special
up share redemption Share premium distributable Capital Revenue
capital reserve reserve reserve reserves reserve Total Equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---- --------- ----------- ------------- -------------- --------- -------- ------------
Total equity at
1 October 2020 31,037 6,575 80,685 3,672 201,149 2,015 325,133
--------------------------- --------- ----------- ------------- -------------- --------- -------- ------------
Total comprehensive
income:
--------------------------- --------- ----------- ------------- -------------- --------- -------- ------------
Profit for the
year ended 30 September
2021 - - - - 60,828 2,193 63,021
--------------------------- --------- ----------- ------------- -------------- --------- -------- ------------
Transactions with
owners, recorded
directly to equity:
--------------------------- --------- ----------- ------------- -------------- --------- -------- ------------
Equity dividends
paid 11 - - - - - (2,426) (2,426)
--------------------- ---- --------- ----------- ------------- -------------- --------- -------- ------------
Total equity at
30 September 2021 31,037 6,575 80,685 3,672 261,977 1,782 385,728
--------------------------- --------- ----------- ------------- -------------- --------- -------- ------------
Group and Company
Year ended 30 September 2020
--------------------- ---- ----------------------------------------------------------------------------------------
Called Capital Special
up share redemption Share premium distributable Capital Revenue
capital reserve reserve reserve reserves reserve Total Equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---- --------- ----------- ------------- -------------- --------- -------- ------------
Total equity at
1 October 2019 31,037 6,575 80,685 4,712 162,646 2,792 288,447
--------------------------- --------- ----------- ------------- -------------- --------- -------- ------------
Total comprehensive
income:
--------------------------- --------- ----------- ------------- -------------- --------- -------- ------------
Profit for the
year ended 30 September
2020 - - - - 38,503 1,770 40,273
--------------------------- --------- ----------- ------------- -------------- --------- -------- ------------
Transactions with
owners, recorded
directly to equity:
--------------------------- --------- ----------- ------------- -------------- --------- -------- ------------
Shares bought
back and held
in treasury - - - - (1,040) - - (1,040)
--------------------- ---- --------- ----------- ------------- -------------- --------- -------- ------------
Equity dividends
paid 11 - - - - - (2,547) (2,547)
--------------------- ---- --------- ----------- ------------- -------------- --------- -------- ------------
Total equity at
30 September 2020 31,037 6,575 80,685 3,672 201,149 2,015 325,133
--------------------------- --------- ----------- ------------- -------------- --------- -------- ------------
The notes below form part of these Financial Statements.
BALANCE SHEETS
As at 30 September 2021
Group Company
----- ------------------------------------ ------------------------------------
30 September 2021 30 September 2020 30 September 2021 30 September 2020
Notes GBP'000 GBP'000 GBP'000 GBP'000
----- ----------------- ----------------- ----------------- -----------------
Non-current assets
Investments held at fair value 13 408,561 342,404 408,561 342,404
Investment in subsidiary 13 - - 50 50
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Current assets
Receivables 2,300 3,082 2,300 3,082
Overseas tax recoverable 572 589 572 589
Cash and cash equivalents 16 13,718 17,845 13,668 17,795
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
16,590 21,516 16,540 21,466
Total assets 425,151 363,920 425,151 363,920
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Current liabilities
Payables (2,956) (3,382) (2,956) (3,382)
(2,956) (3,382) (2,956) (3,382)
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Non-current liabilities
Zero Dividend Preference shares (36,467) (35,405) - -
Loan from subsidiary - - (36,467) (35,405)
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Total liabilities (39,423) (38,787) (39,423) (38,787)
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Net assets 385,728 325,133 385,728 325,133
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Equity attributable to equity
Shareholders
Called up share capital 14 31,037 31,037 31,037 31,037
Share premium reserve 80,685 80,685 80,685 80,685
Capital Redemption reserve 6,575 6,575 6,575 6,575
Special distributable reserve 3,672 3,672 3,672 3,672
Capital reserves 261,977 201,149 261,977 201,149
Revenue reserve 1,782 2,015 1,782 2,015
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Total equity 385,728 325,133 385,728 325,133
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Net asset value per Ordinary share
(pence) 15 318.07 268.11 318.07 268.11
Net asset value per ZDP share
(pence) 113.50 110.20 - -
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
The parent company has taken advantage of section 408 of the
Companies Act 2006 and has not included its own income statement in
the Financial Statements. The parent company's profit for the year
was GBP63,021,000 (2020: GBP40,273,000).
The Financial Statements were approved and authorised for issue
by the Board of Directors on 16 December 2021 and signed on its
behalf by
Lisa Arnold
Chair
Registered number 7251471
The notes below form part of these Financial Statements.
CASH FLOW STATEMENTS
For the year ended 30 September 2021
Group and Company
--------------------------------------
Year ended Year ended
30 September 2021 30 September 2020
Note GBP'000 GBP'000
--------------------------------------------------------------- ---- ------------------ ------------------
Cash flows from operating activities
Profit before finance costs and tax 64,506 41,784
Adjustment for non-cash items:
Gains on investments held at fair value through profit or loss (64,165) (42,435)
Scrip dividends received - (204)
--------------------------------------------------------------- ---- ------------------ ------------------
Adjusted profit/(loss) before tax 341 (855)
Adjustments for:
Purchases of investments, including transaction costs (626,164) (952,341)
Sales of investments, including transaction costs 625,115 967,884
(Increase)/decrease in receivables (108) 85
(Decrease)/increase in payables (479) 176
Overseas tax deducted at source (404) (368)
Net cash (used in)/generated from operating activities (1,699) 14,581
--------------------------------------------------------------- ---- ------------------ ------------------
Cash flows from financing activities
Cost of shares repurchased - (1,040)
Interest paid (2) (7)
Equity dividends paid 11 (2,426) (2,547)
Net cash used in financing activities (2,428) (3,594)
--------------------------------------------------------------- ---- ------------------ ------------------
Net (decrease)/increase in cash and cash equivalents (4,127) 10,987
--------------------------------------------------------------- ---- ------------------ ------------------
Cash and cash equivalents at the beginning of the year 17,845 6,858
Cash and cash equivalents at the end of the year 16 13,718 17,845
--------------------------------------------------------------- ---- ------------------ ------------------
The notes below form part of these Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 September 2021
1. General Information
The consolidated Financial Statements for the year ended 30
September 2021 comprise the Financial Statements of the Company and
it's wholly-owned subsidiary PCGH ZDP plc (together referred to as
the 'Group').
The Group and Company's presentational currency is pounds
sterling (rounded to the nearest GBP'000). Pounds sterling is also
the functional currency of the Group and Company because it is the
currency which is most relevant to the majority of the Group and
Company's shareholders and creditors and the currency in which the
majority of the Group and Company's operating expenses are
paid.
2. Accounting Policies
The principal accounting policies which have been applied
consistently for all years presented are set out below:
(a) Basis of Preparation
The Group and Company Financial Statements have been prepared in
accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and
International Financial Reporting Standards (IFRS) adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union. See Director's Report in the Annual Report and
Accounts for further details.
The Financial Statements have been prepared on a going concern
basis under the historical cost convention, as modified by the
revaluation of investments and derivative financial instruments at
fair value through profit or loss.
Where presentational guidance set out in the Statement of
Recommended Practice (SORP) for investment trusts issued by the
Association of Investment Companies (AIC) in April 2021 is
consistent with the requirements of IFRS, in so far as those
requirements are applicable to the Financial Statements, the
Directors have sought to prepare the Financial Statements on a
basis compliant with the recommendations of the SORP.
Basis of consolidation - The Group Financial Statements
consolidate the Financial Statements of the Company and its wholly
owned subsidiary, PCGH ZDP plc, drawn up to the same accounting
date. The subsidiary is consolidated from the date of its
incorporation.
The Company has taken advantage of the exemption under section
408 of the Companies Act 2006 and accordingly has not presented a
separate parent company income statement.
The financial position of the Group and Company as at 30
September 2021 are shown in the balance sheet above. As at 30
September 2021 the Group and Company's total assets exceeded its
total liabilities by a multiple of over 10. The assets of the Group
and Company consist mainly of securities that are held in
accordance with the Company's Investment Policy, as set out above
and these securities are readily realisable. The Directors have
considered a detailed assessment of the Group and Company's ability
to meets their liabilities as they fall due. The assessment took
account of the Group and Company's current financial positions,
their cash flows and their liquidity positions. In addition to the
assessment, the Group and Company carried out stress testing,
including assessment of the continuing risks arising from COVID-19,
which used a variety of falling parameters to demonstrate the
effects on the Group and Company's share prices and net asset
values. In light of the results of these tests, the Group and
Company's cash balances, and the liquidity positions, the Directors
consider that the Group and Company has adequate financial
resources to enable them to continue in operational existence for
at least 12 months. Accordingly, the Directors believe that it is
appropriate to continue to adopt the going concern basis in
preparing the Group and Company's Financial Statements.
(b) Presentation of the Statement of Comprehensive Income
In order to better reflect the activities of an investment trust
company and in accordance with the guidance set out by the AIC,
supplementary information which analyses the Statement of
Comprehensive Income between items of a revenue and capital nature
has been presented alongside the Statement of Comprehensive Income.
The results presented in the revenue return column is the measure
the Directors believe appropriate in assessing the Group and
Company's compliance with certain requirements set out in section
1158 of the Corporation Tax Act 2010.
(c) Income
Dividends receivable from equity shares are recognised and taken
to the revenue return column of the Statement of Comprehensive
Income on an ex-dividend basis.
Special dividends are recognised on an ex-dividend basis and may
be considered to be either revenue or capital items. The facts and
circumstances are considered on a case-by-case basis before a
conclusion on appropriate allocation is reached.
Where the Group and Company has received dividends in the form
of additional shares rather than in cash, the amount of the cash
dividend foregone is recognised in the revenue return column of the
Statement of Comprehensive Income. Any excess
in value of shares received over the amount of the cash dividend
foregone is recognised in the capital return column of the
Statement of Comprehensive Income.
Bank interest is accounted for on an accruals basis. Interest
outstanding at the year-end is calculated on a time apportionment
basis using market rates of interest.
(d) Written Options
The Group and Company may write exchange-traded options with a
view to generating income. This involves writing short- dated
covered-call options and put options. The use of financial
derivatives is governed by the Group and Company's policies, as
approved by the Board.
These options are recorded initially at fair value, based on the
premium income received, and are then measured at subsequent
reporting dates at fair value. Changes in the fair value of the
options are recognised in the capital return for the period.
The option premiums are recognised evenly over the life of the
option and shown in the revenue return, with an appropriate amount
shown in the capital return to ensure the total return reflects the
overall change in the fair value of the options.
Where an option is exercised, any balance of the premium is
recognised immediately in the revenue return with a corresponding
adjustment in the capital return based on the amount of the loss
arising on exercise of the option.
(e) Expenses
All expenses, including the management fee, are accounted for on
an accruals basis and are recognised when they fall due.
All expenses have been presented as revenue items except as
follows:
Expenses are charged to the capital column of the Statement of
Comprehensive Income where a connection with the maintenance or
enhancement of the value of investments can be demonstrated. In
this respect the investment management fees have been charged to
the Statement of Comprehensive Income in line with the Board's
expected long-term split of returns, in the form of capital gains
and income from the Group and Company's portfolio. As a result 20%
of the investment management fees are charged to the revenue
account and 80% charged to the capital account of the Statement of
Comprehensive Income.
The performance fee (when payable) is charged entirely to
capital as the fee is based on the out-performance of the Benchmark
and is expected to be attributable largely, if not wholly, to
capital performance.
The research costs relate solely to specialist healthcare
research and are accounted for on an accrual basis and, are
allocated 20% to revenue and 80% capital. This in in line with the
Board's expected long-term split of revenue and capital return from
the Company's investment portfolio.
Finance costs
The ZDP shares are designed to provide a pre-determined capital
growth from their original issue price of 100p on 20 June 2017 to a
final capital repayment of 122.99p on 19 June 2024. The initial
capital will increase at a compound interest rate of 3% per
annum.
No dividends are payable on the ZDP shares. The provision for
the capital growth entitlement of the ZDP shares is included as a
finance cost and charged 100% to capital within the Statement of
Comprehensive Income (AIC SORP paragraph 53 - issued April
2021).
Overdraft interest costs are allocated 20% to revenue and 80% to
capital in line with the Board's expected long-term split of
revenue and capital return from the Company's investment
portfolio.
Share issue costs
Costs incurred directly in relation to the issue of shares in
the subsidiary are borne by the Company and taken 100% to capital.
Share issue costs relating to ordinary share issues by the Company
are taken 100% to the share premium account.
Zero Dividend Preference (ZDP) shares
Shares issued by the subsidiary are treated as a liability of
the Group, and are shown in the Balance Sheet at their redemption
value at the Balance Sheet date. The appropriations in respect of
the ZDP shares necessary to increase the subsidiary's liabilities
to the redemption values are allocated to capital in the Statement
of Comprehensive Income. This treatment reflects the Board's
long-term expectations that the entitlements of the ZDP
shareholders will be satisfied out of gains arising on investments
held primarily for capital growth.
(f) Taxation
The tax expense represents the sum of the overseas withholding
tax deducted from investment income, tax currently payable and
deferred tax.
The tax currently payable is based on the taxable profits for
the year ended 30 September 2021. Taxable profit differs from net
profit as reported in the Statement of Comprehensive Income because
it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are
never taxable or deductible. The Group and Company's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted at the balance sheet date.
In line with the recommendations of the SORP, the allocation
method used to calculate tax relief on expenses presented against
capital returns in the supplementary information in the Statement
of Comprehensive Income is the "marginal basis". Under this basis,
if taxable income is capable of being offset entirely by expenses
presented in the revenue return column of the Statement of
Comprehensive Income, then no tax relief is transferred to the
capital return column.
Deferred tax is the tax expected to be payable or recoverable on
temporary differences between the carrying amounts of assets and
liabilities in the Financial Statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted
for using the balance sheet liability method. Deferred tax
liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Investment trusts which have approval as such under section 1158
of the Corporation Taxes Act 2010 are not liable for taxation on
capital gains.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax rates that have been enacted or substantively
enacted at the balance sheet date.
Deferred tax is charged or credited in the Statement of
Comprehensive Income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
(g) Investments Held at Fair Value Through Profit or Loss
When a purchase or sale is made under contract, the terms of
which require delivery within the timeframe of the relevant market,
the investments concerned are recognised or derecognised on the
trade date and are initially measured at fair value.
On initial recognition the Group and Company has designated all
of its investments as held at fair value through profit or loss as
defined by IFRS. All investments are measured at subsequent
reporting dates at fair value, which is either the bid price or the
last traded price, depending on the convention of the exchange on
which the investment is quoted.
All investments, classified as fair value through profit or
loss, are further categorised into the following fair value
hierarchy:
Level 1: Unadjusted prices quoted in active markets for
identical assets and liabilities.
Level 2: Having inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices).
Level 3: Having inputs for the asset or liability that are not
based on observable market data.
Changes in fair value of all investments held at fair value and
realised gains and losses on disposal are recognised in the capital
return column of the Statement of Comprehensive Income.
In the event a security held within the portfolio is suspended
then judgement is applied in the valuation of that security.
(h) Receivables
Receivables are initially recognised at fair value and
subsequently measured at amortised cost. Receivables do not carry
any interest and are short-term in nature and are accordingly
stated at their nominal value (amortised cost) as reduced by
appropriate allowances for estimated irrecoverable amounts.
(i) Cash and Cash Equivalents
Cash comprises cash on hand and demand deposits. Cash
equivalents are short-term, maturity of three months or less,
highly liquid investments that are readily convertible to known
amounts of cash.
(j) Dividends Payable
Dividends payable to shareholders are recognised in the
Financial Statements when they are paid or, in the case of final
dividends, when they are approved by the shareholders.
(k) Payables
Other payables are not interest-bearing and are initially valued
at fair value and subsequently stated at their nominal value
(amortised cost).
(l) Foreign Currency Translation
Transactions in foreign currencies are translated into sterling
at the rate of exchange ruling on the date of each transaction.
Monetary assets, monetary liabilities and equity investments in
foreign currencies at the balance sheet date are translated into
sterling at the rates of exchange ruling on that date. Realised
profits or losses on exchange, together with differences arising on
the translation of foreign currency assets or liabilities, are
taken to the capital return column of the Statement of
Comprehensive Income.
Foreign exchange gains and losses arising on investments held at
fair value are included within changes in fair value.
(m) Capital Reserves
Capital reserve arising on investments sold includes:
-- gains/losses on disposal of investments
-- exchange differences on currency balances
-- transfer to subsidiary in relation to ZDP funding requirement
-- other capital charges and credits charged to this account in
accordance with the accounting policies above.
Capital reserve arising on investments held includes:
-- increases and decreases in the valuation of investments held at the balance sheet date.
All of the above are accounted for in the Statement of
Comprehensive Income.
When making a distribution to shareholders, the Directors
determine the profits available for distribution by reference to
the 'Guidance on realised and distributable profits under the
Companies Act 2006' issued by the Institute of Chartered
Accountants in England and Wales and the Institute of Chartered
Accountants of Scotland in April 2017. The availability of
distributable reserves in the Company is dependent on those
dividends meeting the definition of qualifying consideration within
the guidance and on the available cash resources of the Company and
other accessible sources of funds. The distributable reserves are
therefore subject to any future restrictions or limitations at the
time such distribution is made.
(n) Repurchase of Ordinary Shares (Including Those Held in Treasury)
The costs of repurchasing Ordinary shares including related
stamp duty and transaction costs are taken directly to equity and
reported through the Statement of Changes in Equity as a charge on
the special distributable reserve. Share repurchase transactions
are accounted for on a trade date basis.
The nominal value of Ordinary share capital repurchased and
cancelled is transferred out of called up share capital and into
the capital redemption reserve.
Where shares are repurchased and held in treasury, the transfer
to capital redemption reserve is made if and when such shares are
subsequently cancelled.
(o) Segmental Reporting
Under IFRS 8, 'Operating Segments', operating segments are
considered to be the components of an entity about which separate
financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate
resources and in assessing performance. The chief operating
decision maker has been identified as the Investment Manager (with
oversight from the board).
The Directors are of the opinion that the Group and Company has
only one operating segment and as such no distinct segmental
reporting is required.
(p) Key Estimates and judgements
Estimates and assumptions used in preparing the Financial
Statements are reviewed on an ongoing basis and are based on
historical experience and various other factors that are believed
to be reasonable under the circumstances. The results of these
estimates and assumptions form the basis of making judgements about
carrying values of assets and liabilities that are not readily
apparent from other sources. The Group and Company do not consider
that there have been any significant estimates or assumptions in
the current financial year.
(q) New and revised accounting Standards
There were no new IFRSs or amendments to IFRSs applicable to the
current year which had any significant impact on the Company's
Financial Statements.
i) The following new or amended standards became effective for
the current annual reporting period and the adoption of the
standards and interpretations has not had a material impact on the
Financial Statements of the Company:
Standards & Interpretations Effective
for periods
commencing
on or after
---------------------------- ------------------------------------------ -------------
IFRS 3 Business Amendments to improve the definition 1 January
Combinations (amended) of a business in order to help 2020
companies determine whether an
acquisition made is of a business
or a group of assets.
---------------------------- ------------------------------------------ -------------
IFRS 9, IAS 39 and Amendments that provide certain 1 January
IFRS17: reliefs which relate to hedge accounting 2020
Interest Rate Benchmark and have the effect that IBOR reform
Reform (amended) should not generally cause hedge
accounting to terminate.
---------------------------- ------------------------------------------ -------------
IAS 1 and IAS 8 Amendments to clarify the definition 1 January
Definition of Material of 'material' and to align the 2020
(amended) definition used in the Conceptual
Framework and the Standards themselves
---------------------------- ------------------------------------------ -------------
References to the The Amendments to References to 1 January
Conceptual Framework the Conceptual Framework in IFRS 2020
in IFRS Standards Standards were issued to support
(amended) transition to the revised Conceptual
Framework for companies that develop
accounting policies using the Conceptual
Framework when no IFRS Standard
applies to a particular transaction
---------------------------- ------------------------------------------ -------------
ii) At the date of authorisation of the Company's Financial
Statements, the following new or amended IFRSs that potentially
impact the Company are in issue but are not yet effective and have
not been applied in the Financial Statements:
Standards & Interpretations Effective
for periods
commencing
on or after
---------------------------- ---------------------------------------- -------------
IFRS 4 Insurance The temporary exemption permits 1 January
Contracts - temporary companies whose activities are 2021
exemption from IFRS predominantly connected with insurance
9 (amended) to defer the application of IFRS
9 to annual periods beginning on
or after 1 January 2023.
---------------------------- ---------------------------------------- -------------
IFRS 9, IAS 39, IBOR Reform - Phase 2 addresses 1 January
IFRS 7, IFRS issues that might affect financial 2021
16 and IFRS 4: Interest reporting during the reform of
Rate Benchmark Reform an interest rate benchmark, including
- phase 2 (amended) the effects of changes to contractual
cash flows or hedging relationships
arising from the replacement of
an interest rate benchmark with
an alternative benchmark rate.
---------------------------- ---------------------------------------- -------------
The Directors expect that the adoption of the standards listed
above will have either no impact or that any impact will not be
material on the Financial Statements of the Company in future
periods.
3. Investment Income
Year ended Year ended
30 September 30 September
2021 2020
GBP'000 GBP'000
------------------------------------- ------------- -------------
Revenue:
UK Dividend income 430 63
------------------------------------- ------------- -------------
Overseas Dividend income 3,255 3,179
------------------------------------- ------------- -------------
Scrip dividends - 204
------------------------------------- ------------- -------------
Total investment income allocated to
revenue 3,685 3,446
------------------------------------- ------------- -------------
4. Other Operating Income
Year ended Year ended
30 September 30 September
2021 2020
GBP'000 GBP'000
----------------------------- ------------- -------------
Other income - -
Bank interest - 17
----------------------------- ------------- -------------
Total other operating income - 17
----------------------------- ------------- -------------
5. Gains on Investments Held at Fair Value
Year ended Year ended
30 September 30 September
2021 2020
GBP'000 GBP'000
------------------------------------------- ------------- -------------
Net gains on disposal of investments
at historic cost 56,156 39,352
Less fair value adjustments in earlier
years (10,661) (11,710)
------------------------------------------- ------------- -------------
Gains based on carrying value at previous
balance sheet date 45,495 27,642
Valuation gains on investments held during
the year 18,670 14,793
------------------------------------------- ------------- -------------
64,165 42,435
------------------------------------------- ------------- -------------
6. Other Currency losses
Year ended Year ended
30 September 30 September
2021 2020
GBP'000 GBP'000
---------------------------- ------------- -------------
Exchange losses on currency
balances (144) (647)
---------------------------- ------------- -------------
7. Investment Management Fee
Year ended Year ended
30 September 30 September
2021 2020
GBP'000 GBP'000
---------------------------------- ------------- -------------
Management fee
- charged to revenue 518 535
- charged to capital 2,070 2,140
---------------------------------- ------------- -------------
Investment management fee payable
to Polar Capital LLP 2,588 2,675
---------------------------------- ------------- -------------
Management fees are allocated 20% to revenue and 80% to capital.
Details of the fee arrangements are given in the Strategic
Report above.
8. Other Administrative Expenses (Including VAT where appropriate)
Year ended Year ended
30 September 30 September
2021 2020
GBP'000 GBP'000
----------------------------------------------- ------------- -------------
Directors' fees(1) 129 143
Directors' NIC 12 14
Auditors' remuneration(2) :
For audit of the Group and Company Financial
Statements 44 44
Depositary fee 24 23
Registrar fee 30 31
Custody and other bank charges 35 39
UKLA and LSE listing fees 50 46
Legal & professional fee(3) (7) 6
AIC fees 19 21
Directors' and officers' liability insurance 12 9
Corporate broker's fee 25 24
Marketing expenses(4) 18 42
Research costs - allocated to revenue(5) 15 27
Shareholder communications 14 30
HSBC administration fee 131 182
Other expenses 2 4
----------------------------------------------- ------------- -------------
Total other administrative expenses allocation
to revenue 553 685
----------------------------------------------- ------------- -------------
Research cost - allocated to capital(5) 59 107
----------------------------------------------- ------------- -------------
Total other administrative expenses 612 792
----------------------------------------------- ------------- -------------
1 Full disclosure is given in the Directors' Remuneration Report
within the Annual Report.
2 2021 includes GBP6,250 (2020: GBP6,000) paid to the Auditors
for the audit of PCGH ZDP Plc.
3 Legal and professional fee includes the reversal of unused
prior year accruals.
4 Includes marketing expenses payable to Polar Capital LLP of
GBP12,600 (2020: GBP22,500).
5 Research costs (which applied from 3 January 2018) payable by
the Company relate solely to specialist healthcare research and are
capped at US $147,721 (GBP110,000) (2020: US $232,994 (GBP180,000))
with the cost of general non-specialist research and any amounts
exceeding the agreed cap being absorbed by Polar Capital. Any
adjustments to the prior year's budget versus actual spend is
included in the current period. These costs are allocated 20% to
revenue and 80% to capital and are included in the ongoing charges
calculation.
Ongoing charges represents the total expenses of the fund,
excluding finance costs and tax, expressed as a percentage of the
average daily net asset value, in accordance with AIC guidance
issued in May 2012.
The ongoing charges ratio for the year ended 30 September 2021
was 0.83% (2020: 1.01%). See Alternative Performance Measures
provided in the Annual Report.
9. Finance Costs
Year ended 30 September Year ended 30 September
2021 2020
--------------------------- ---------------------------
Revenue Capital Total Revenue Capital Total
return return return return return return
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- ------- -------- -------- -------
Interest on overdrafts - 2 2 1 6 7
Appropriation to
ZDP shares - 1,062 1,062 - 1,032 1,032
----------------------- -------- -------- ------- -------- -------- -------
Total finance costs - 1,064 1,064 1 1,038 1,039
----------------------- -------- -------- ------- -------- -------- -------
10. Taxation
Year ended Year ended
30 September 2021 30 September 2020
---------------------------- ----------------------------
Revenue Capital Total Revenue Capital Total
return return return return return return
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------- -------- --------
a) Analysis of tax charge
for the year:
Overseas tax 421 - 421 472 - 472
-------------------------- -------- -------- -------- -------- -------- --------
Total tax for the year
(see note 10b) 421 - 421 472 - 472
-------------------------- -------- -------- -------- -------- -------- --------
b) Factors affecting tax
charge for the year:
The charge for the year
can be reconciled to the
profit per the Statement
of Comprehensive Income
as follows:
Profit before tax 2,614 60,828 63,442 2,242 38,503 40,745
-------------------------- -------- -------- -------- -------- -------- --------
Tax at the UK corporation
tax rate of 19% (2020:
19%) 496 11,557 12,053 426 7,316 7,742
Tax effect of non-taxable
dividends (700) - (700) (655) - (655)
Gains investments that
are not taxable - (12,164) (12,164) - (7,940) (7,940)
Unrelieved current period
expenses
and deficits 204 405 609 229 427 656
Overseas tax suffered 421 - 421 472 - 472
Expenses not allowable - 202 202 - 197 197
Total tax for the year
(see note 10a) 421 - 421 472 - 472
-------------------------- -------- -------- -------- -------- -------- --------
c) Factors that may affect future tax charges:
The Company has an unrecognised deferred tax asset of
GBP5,423,000 (2020: GBP3,513,000). The deferred tax asset is based
on a prospective corporation tax rate of 25% (2020: 19%). The
Finance Act 2021 received Royal Assent on 10 June 2021 and the rate
of Corporation Tax of 25% effective from 1 April 2023 has been used
to calculate the potential deferred tax asset.
It is unlikely that the Company will generate sufficient taxable
profits in the future to utilise these expenses and deficits and
therefore no deferred tax asset has been recognised.
Due to the Company's tax status as an investment trust and the
intention to continue meeting the conditions required to obtain
approval of such status in the foreseeable future, the Company has
not provided tax on any capital gains arising on the revaluation or
disposal of investments held by the Company.
11. Amounts Recognised as Distributions to Ordinary Shareholders in the Year
Dividends paid in the year ended 30 September 20 21
Year ended
30 September
Pence per 2021
Payment date No of shares share GBP'000
----------------- ------------ --------- -------------
26 February 2021 121,270,000 1.00p 1,213
31 August 2021 121,270,000 1.00p 1,213
-------------
2,426
-------------
The revenue available for distribution by way of dividend for
the year is GBP2,193,000 (2020: GBP1,770,000).
The total dividends payable in respect of the financial year
ended 30 September 2021, which is the basis on which the
requirements of section 1158 Corporation Tax Act 2010 are
considered, is set out below:
Year ended
30 September
Pence per 2021
Payment date No of shares share GBP'000
----------------- ------------ --------- -------------
31 August 2021 121,270,000 1.00p 1,213
28 February 2022 121,270,000 1.00p 1,213
2,426
-------------
Dividends paid in the year ended 30 September 20 20
Year ended
30 September
Pence per 2020
Payment date No of shares share GBP'000
----------------- ------------ --------- -------------
28 February 2020 121,270,000 1.10p 1,334
28 August 2020 121,270,000 1.00p 1,213
-------------
2,547
-------------
The total dividends payable in respect of the financial year
ended 30 September 2020, which is the basis on which the
requirements of section 1158 Corporation Tax Act 2010 are
considered, is set out below:
Year ended
30 September
Pence per 2020
Payment date No of shares share GBP'000
----------------- ------------ --------- -------------
28 August 2020 121,270,000 1.00p 1,213
26 February 2021 121,270,000 1.00p 1,213
2,426
-------------
All dividends are paid as interim dividends, and all have been
charged to revenue, where necessary utilising the revenue
reserves.
The dividends paid in February each year relate to a dividend
declared in respect of the previous financial year but paid in the
current accounting year.
12. Earnings per Ordinary Share
Year ended Year ended
30 September 2021 30 September 2020
----------------------------------------- -------------------------------------------
Capital Capital
Revenue return return Total return Revenue return return Total return
-------------- ----------- ------------ -------------- ----------- ------------
The calculation of
basic earnings per
share is based
on the following
data:
Net profit for the
year (GBP'000) 2,193 60,828 63,021 1,770 38,503 40,273
Weighted average
Ordinary
shares in issue
during the year 121,270,000 121,270,000 121,270,000 121,291,858 121,291,858 121,291,858
Basic - Ordinary
shares (pence) 1.81 50.16 51.97 1.46 31.74 33.20
-------------------- -------------- ----------- ------------ -------------- ----------- ------------
As at 30 September 2021 there were no potentially dilutive
shares in issue.
13. Investment held at fair value
a) Investments held at far value through profit or loss
30 September 30 September
2021 2020
GBP '000 GBP '000
----------------------------------------- ------------------------------ ------------------------------
Opening book cost 321,976 291,648
Opening investment holding gains 20,428 17,345
Opening fair value 342,404 308,993
Analysis of transactions made during the
year
Purchases at cost 626,217 944,790
Sales proceeds received (624,225) (953,814)
Gains on investments held at fair value 64,165 42,435
----------------------------------------- ------------------------------ ------------------------------
Closing fair value 408,561 342,404
----------------------------------------- ------------------------------ ------------------------------
Closing book cost 380,123 321,976
Closing investment holding gains 28,438 20,428
----------------------------------------- ------------------------------ ------------------------------
Closing fair value 408,561 342,404
----------------------------------------- ------------------------------ ------------------------------
The Company received GBP624,225,000 (2020: GBP953,814,000) from
disposal of investments in the year. The book cost of these
investments when they were purchased were GBP568,069,000 (2020:
GBP914,462,000). These investments have been revalued over time and
until they were sold, any unrealised gains/losses were included in
the fair value of the investments.
The following transaction costs, including stamp duty and broker
commissions were incurred during the year:
30 September 30 September
2021 2020
GBP'000 GBP'000
--------------- ------------ ------------
On acquisition 442 606
On disposal 256 350
--------------- ------------ ------------
698 956
--------------- ------------ ------------
b) Fair value hierarchy
30 September 30 September
2021 2020
GBP'000 GBP'000
------------------------------- ------------ ------------
Level 1 assets 408,561 342,404
Valuation at 30 September 2021 408,561 342,404
------------------------------- ------------ ------------
All Level 1 assets are traded on a recognised Stock
Exchange.
c) Subsidiary undertaking
Country of registration, Number and class
incorporation and of shares held by
Company and business operation the Company Holding
--------------------- ------------------------- ----------------------- -------
50,000 Ordinary shares
PCGH ZDP Plc England and Wales of GBP1 100%
--------------------- ------------------------- ----------------------- -------
The Company is a public limited company with the sole purpose of
issuing Zero Dividend Preference (ZDP) shares. The registered
office is at Polar Capital, 16 Palace Street, London SW1E 5JD.
The investment is stated in the Company's Financial Statements
at cost, which is considered by the Directors to equate to fair
value.
The subsidiary is non-trading and the value of the net assets
have not changed since the acquisition of the Ordinary share
capital by the Company. The cost is therefore considered to equate
to the fair value of the shares held.
14. Called up Share Capital
30 September 30 September
Ordinary shares - Allotted, Called up 2021 2020
and Fully paid: GBP'000 GBP'000
------------------------------------------- ------------ ------------
Ordinary shares of nominal value 25p
each:
Opening balance of 121,270,000 (2020:
121,770,000) 30,317 30,442
Repurchase of nil (2020: 500,000) Ordinary
shares, into treasury - (125)
------------------------------------------- ------------ ------------
Allotted, Called up and Fully paid:
121,270,000 (2020: 121,270,000) Ordinary
shares of 25p 30,317 30,317
2,879,256 (2020: 2,879,256) Ordinary
shares, held in treasury 720 720
------------------------------------------- ------------ ------------
At 30 September 2021 31,037 31,037
------------------------------------------- ------------ ------------
No Ordinary shares were repurchased into treasury (2020: 500,000
shares were repurchased at a total cost of GBP1,040,000).
The Ordinary shares held in treasury have no voting rights and
are not entitled to dividends.
15. Net Asset Value Per Share
30 September 30 September
Ordinary shares 2021 2020
------------------------------------------------- ------------ ------------
Net assets attributable to Ordinary Shareholders
(GBP'000) 385,728 325,133
Ordinary shares in issue at end of year 121,270,000 121,270,000
Net asset value per Ordinary share (pence) 318.07 268.11
------------------------------------------------- ------------ ------------
Total issued Ordinary shares 124,149,256 124,149,256
Ordinary shares held in treasury 2,879,256 2,879,256
Ordinary shares in issue 121,270,000 121,270,000
------------------------------------------------- ------------ ------------
As at 30 September 2021 there were no potentially dilutive
shares in issue.
16. Cash and Cash Equivalents
30 September 30 September
2021 2020
GBP'000 GBP'000
---------------------------------- ------------ ------------
Cash at bank 13,668 17,795
Company cash and cash equivalents 13,668 17,795
Cash held at subsidiary 50 50
---------------------------------- ------------ ------------
Group cash and cash equivalents 13,718 17,845
---------------------------------- ------------ ------------
17. Transactions with the Investment Manager and Related Party Transactions
(a) Transactions with the Manager
Under the terms of an agreement dated 26 May 2010 the Group has
appointed Polar Capital LLP ("Polar Capital") to provide investment
management, accounting, secretarial and administrative services.
Details of the fee arrangement for these services are given in the
Strategic Report. The total fees, paid under this agreement to
Polar Capital in respect of the year ended
30 September 2021 were GBP2,588,000 (2020: GBP2,675,000) of
which GBP239,000 (2020: GBP457,000) was outstanding at the
year-end.
In addition, the total research cost in respect of the year
ended 30 September 2021 was GBP114,000 (2020: GBP170,000). As at
the year end, GBP18,700 (2020: GBP90,000) was outstanding. Refer to
note 8 for more details.
(b) Related party transactions
The Group and Company has no employees and therefore no key
management personnel other than the Directors. The Group and
Company paid GBP129,000 (2020: GBP143,000) to the Directors and the
Remuneration Report, including Directors' shareholdings and
movements within the year is provided within the full Annual
Report.
18. Post Balance Sheet Events
There are no significant events that have occurred after the end
of the reporting period to the date of this report which require
disclosure.
AGM
The Annual Report and separate Notice for the Annual General
Meeting will be posted to Shareholders in December 2021 and is
available from the Company Secretary at the Company's Registered
Office, (16 Palace Street London SW1E 5JD) or from the Company's
website. The AGM will be held at the Company's Registered Office at
2pm on 11 February 2022.
FORWARD LOOKING STATEMENTS
Certain statements included in the Annual Report and Financial
Statements contain forward-looking information concerning the
Company's strategy, operations, financial performance or condition,
outlook, growth opportunities or circumstances in the countries,
sectors or markets in which the Company operates. By their nature,
forward-looking statements involve uncertainty because they depend
on future circumstances, and relate to events, not all of which are
within the Company's control or can be predicted by the Company.
Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, no assurance can be
given that such expectations will prove to have been correct.
Actual results could differ materially from those set out in the
forward-looking statements. For a detailed analysis of the factors
that may affect our business, financial performance or results of
operations, we urge you to look at the principal risks and
uncertainties included in the Strategic Report Section the Annual
Report and Financial Statements.
No part of these results constitutes, or shall be taken to
constitute, an invitation or inducement to invest in Polar Capital
Global Healthcare Trust plc or any other entity, and must not be
relied upon in any way in connection with an investment decision.
The Company undertakes no obligation to update any forward-looking
statements.
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
-END-
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