LONDON STOCK EXCHANGE ANNOUNCEMENT
Worldwide
Healthcare Trust PLC (the “Company”)
Audited Results for the Year Ended
31 March 2022
The Company’s annual report will be posted to shareholders on
6 June 2022. Members of the public
may obtain copies from Frostrow Capital LLP, 25 Southampton
Buildings, London WC2A 1AL or from
the Company’s website at www.worldwidewh.com where up to date
information on the Company, including daily NAV, share prices and
fact sheets, can also be found.
The Company's annual report for the year ended 31 March 2022 has been submitted to the UK
Listing Authority, and will shortly be available for inspection on
the National Storage Mechanism (NSM):
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(Documents will usually be available for inspection within two
business days of this notice being given)
Mark Pope, Frostrow Capital LLP,
Company Secretary – 0203 008 4913
COMPANY PERFORMANCE
HISTORIC PERFORMANCE FOR THE YEARS ENDED 31
MARCH
|
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
|
Net asset value per share (total
return)*† |
28.9% |
2.8% |
13.7% |
6.5% |
30.0% |
(5.8%) |
|
Benchmark (total
return)*† |
24.5% |
(2.5%) |
21.1% |
5.7% |
16.0% |
20.4% |
|
Net asset value per share |
2,367.2p |
2,411.1p |
2,722.9p |
2,868.9p |
3,703.0p |
3,465.2p |
|
Share price |
2,304.0p |
2,405.0p |
2,730.0p |
2,920.0p |
3,695.0p |
3,275.0p |
|
(Discount)/Premium of share price to net asset value per
share† |
(2.7%) |
(0.3%) |
0.3% |
1.8% |
(0.2%) |
(5.5%) |
|
|
Dividends per share |
22.5p |
17.5p |
26.5p |
25.0p |
22.0p |
26.5p] |
|
Leverage† |
16.9% |
16.4% |
4.9% |
12.0% |
7.6% |
10.9% |
|
Ongoing charges† |
0.9% |
0.9% |
0.9% |
0.9% |
0.9% |
0.9% |
|
Ongoing charges (including
performance fees paid or crystallised during the
year)† |
1.0% |
1.2% |
1.1% |
0.9% |
0.9% |
1.4% |
|
* Source:
Morningstar
† Alternative
Performance Measure (see Glossary).
CHAIRMAN’S STATEMENT
SIR MARTIN
SMITH
INVESTMENT PERFORMANCE
Following last year’s strong returns, both on an absolute and on
a relative basis, the year under review has proved to be a
challenging one for the Company. The Company’s net asset value per
share total return was -5.8% (2021:+30.0%) and the share price
total return was -10.8% (2021: +27.4%), both significantly
underperforming the Company’s Benchmark, the MSCI World Health Care
Index measured on a net total return, sterling adjusted basis,
which rose by 20.4% during the year (2021: rose by 16.0%). The
disparity between the performance of the Company’s net asset value
per share and its share price is reflected in the widening of the
Company’s share price discount to its net asset value per share
from 0.2% at the start of the Company’s financial year to 5.5% at
31 March 2022.
The majority of the Company’s assets are denominated in U.S.
dollars, and it should be noted that the Company’s net asset value
performance was helped by the weakness of sterling over the year,
particularly against the dollar, where it depreciated by 4.6%.
The negative absolute return over the year to 31 March 2022 reflected a mildly positive first
half, where the net asset value per share total return was +0.4%
(2021:+23.1%) compared to a rise in the Benchmark of 13.0% (2021: a
rise of 15.3%) and a weaker second half where the net asset value
total return was -6.2% (2021-5.6%) compared to a rise in the
Benchmark of 7.4% (2021: 0.7%).
During the year the Company’s Portfolio Manager continued to
pursue a strategy of being underweight in large pharmaceutical
companies and overweight in both emerging markets and emerging
biotechnology companies; an approach which had served the
Company well during the previous year but was the principal reason
for the Company’s relative underperformance during the year under
review.
While the healthcare sector as a whole performed well during the
year, macro considerations rather than company fundamentals were
deemed to be most important by investors. In addition, the
“growth-to-value” rotation which has tended to favour
well-established companies despite their less-exciting growth
prospects also showed that investors have been less willing to take
on investment risk more generally. This risk aversion has hurt
those sectors where we have been strategically overweight,
including emerging biotechnology, China healthcare, and innovative tools.
Risk aversion has also resulted in further pressure on
performance as the value of the smaller capitalisation stocks we
own has lagged while large capitalisation pharmaceutical stocks
have outperformed the rest of the healthcare sector, particularly
during the last quarter of the financial year. It should be
emphasised, however, that this extraordinary fall in the valuation
of the biotechnology and other sectors reflects a change in
investor sentiment rather than any significant deterioration in the
performance of the underlying companies. It is for this reason that
we remain confident that these stocks will recover in due
course.
Our Portfolio Manager continues to adopt both a pragmatic and
tactical approach with regard to the use of leverage. Leverage
levels varied over the course of the year, with the net effect of a
detraction of 1.0% from performance.
The long-term performance of the Company, however, continues to
be strong, and it should be noted that from the Company’s inception
in 1995 to 31 March 2022, the total
return of the Company’s net asset value per share has been
+3,866.7%, equivalent to a compound annual return of +14.7%. This
compares to a cumulative blended Benchmark return of +2,133.6%,
equivalent to a compound annual return of +12.2% over the same
period.
Further information on the healthcare sector, the Company’s
investments and performance during the year can be found in the
Portfolio Manager’s Review.
CAPITAL
The Company’s share price traded close to the net asset value
per share for much of the year under review. In accordance
with the Company’s share price premium management policy 1,227,500
new shares were issued during the year at an average premium of
0.8% to the Company’s cum income net asset value per share. This
issuance gave rise to the receipt of £45.5m of new funds to the
Company, which have been invested in line with the investment
policy. The Company’s ongoing share issuance programme triggered
the requirement for the Company to publish a prospectus in
July 2021 which provided authority
for the issuance of 20 million new shares.
However, toward the end of the calendar year, the Company’s
share price fell to a discount to the net asset value
per share and 80,509 shares were repurchased during the
Company’s financial year for treasury, in accordance with the
Company’s share price discount management policy, at a discount of
8.4% to the Company’s cum income net asset value per share, at cost
of £2.5m.
At the year-end there were 65,457,246 shares in issue (excluding
the 80,509 shares held in treasury (2021: 64,310,255 with no shares
held in treasury)). Since the year-end, to 25 May 2022, the latest practicable date prior to
the publication of this report, a further 223,842 shares were
repurchased for treasury at a discount of 7.0% to the Company’s cum
income net asset value per share, at cost of £7.3m. At the time of
writing the share price discount stands at 4.6%.
REVENUE AND DIVIDEND
Shareholders will be aware that it remains the Company’s policy
to pursue capital growth for shareholders and to pay dividends at
least to the extent required to maintain investment trust status.
Therefore, the level of dividends declared can go down as well as
up. An increased interim dividend of 7.0p per share for the year
ended 31 March 2022, was paid on
11 January 2022 to shareholders on the register on
19 November 2021 (2021: 6.5p per
share). Due in large part to an increase in exposure to higher
yielding stocks in the portfolio and also to the weakness of
sterling, the Company’s revenue return per share for the year as a
whole increased to 26.8 pence
(2021: 24.1 pence). Accordingly, the Board is proposing an
increased final dividend of 19.5 p per share (2021:15.5p per share)
which, together with the interim dividend already paid, makes a
total dividend for the year of 26.5p (2021: 22.0p per share). Based
on the closing mid-market share price of 3040.0p on 25 May 2022, the total dividend payment for the
year represents a current yield of 0.9%.
The final dividend will be payable, subject to shareholder
approval, on 15 July 2022 to
shareholders on the register of members on 10 June 2022. The associated ex-dividend date
will be 9 June 2022.
The Company’s dividend policy will be proposed for approval at
the forthcoming Annual General Meeting.
THE BOARD
The process of Board refreshment continues and, as indicated in
my last year-end statement, following David Holbrook’s retirement
last year, I shall be stepping down from the Board on 6 July 2022, the date of this year’s Annual
General Meeting. It has been agreed that in the interests of
maintaining an orderly succession process, Doug McCutcheon will extend his term and assume
the Chairmanship following my retirement. I wish him every success
for the future. Bina Rawal will take
over as Chair of the Management Engagement & Remuneration
Committee at the same time.
I have served on the Board for 14 years, 13 of which as
Chairman, and have been fortunate to be supported by a group of
very loyal, professional and hard working colleagues during that
time. I would also like to pay tribute to the unswerving dedication
of both our Portfolio Manager, OrbiMed and our AIFM, Company
Secretary and Administrator, Frostrow Capital. Although recent
results have been disappointing, I believe that it will be only a
matter of time before the skills and experience of our Portfolio
Manager will enable the Company to resume its excellent long-term
record.
The process of recruiting a new Director is ongoing.
Shareholders will be kept informed of developments as they occur.
As new members are recruited, the Board will remain mindful of its
commitment to a policy of diversity.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
(ESG) MATTERS
ESG matters are an important priority for the Board and
Bina Rawal and I have been working
closely with our Portfolio Manager to identify an appropriate
set of policies to address them.
Our Portfolio Manager continues to develop tools for assessing
the sustainability of the Company’s portfolio including measuring
the net impacts that individual portfolio companies have on both
the environment and society, as much as is possible with the
availability and consistency of the reporting of non--financial
data pertaining to both ESG matters and also to climate change.
OrbiMed is committed to taking a leading role in the development of
meaningful ESG engagement practices in the healthcare sector. As
part of this they facilitate dialogue and an exchange of leading
practices among investors, companies and other relevant experts on
ESG in the large capitalisation pharmaceutical sector. They also
engage with a broad range of companies on a regular basis where
areas of improvement can be identified. Further information on both
ESG matters and climate change can be found in the Portfolio
Manager’s ESG report.
PERFORMANCE FEE
I mentioned last year that as a result of the continued
cumulative outperformance in the year, there was a provision in our
year-end accounts of £31.7 million for future performance fee
payments. However, only if outperformance was maintained to the
relevant quarterly calculation dates would this provision become
payable. During the year under review, a performance fee of £12.9
million crystallised and became payable on 30 June 2021. However, due to underperformance
against the Benchmark during the year, the remainder of the
performance fee accrual as at 31 March
2021 was reversed. No performance fees were accrued or
payable at the Company’s year-end as at 31
March 2022.
OUTLOOK
Global markets are currently experiencing unusually high levels
of uncertainty. In addition to the appalling human cost, Russia’s
invasion of Ukraine has created
near-term risks for markets as high energy prices, rising food
prices and disrupted supply chains threaten a substantial increase
in global inflation. It has also cast a shadow over the longer-term
outlook with the prospect of continued raised levels of
geopolitical risk and an increase in investor risk aversion, both
of which may affect markets and economic confidence for some
time.
This comes in addition to existing market and economic concerns
that troubled investors before the invasion, including the onset of
U.S. Federal Reserve tightening, the impact of COVID-19 lockdowns
on supply chains and inflation and also the outlook for
China where there are problems in
the real estate sector, as well as around its zero-tolerance
COVID-19 policy and heavy-handed regulation of technology
firms.
Against this challenging background, however, our Portfolio
Manager OrbiMed remains positive on the outlook for healthcare with
certain of the perceived risks associated with the sector such as
an inefficient drug approval process in the U.S. and also the
spectre of drug price reform having receded. Fundamentals, however,
remain strong, particularly given the amount of innovation that is
fuelling the industry’s growth. They further believe that the
sector’s defensive growth characteristics should continue to prove
attractive in times of global uncertainty.
Your Board continues to believe that long-term investors in this
sector will be rewarded.
ANNUAL GENERAL MEETING
After COVID restrictions prevented holding meetings in person,
the Board is pleased to welcome all shareholders back to the
Company’s Annual General Meeting which offers an opportunity to
meet the Directors and also to hear the views of our Portfolio
Manager. The meeting will be held at etc. venues 1-3 Bonhill
Street, London EC2A 4BX on
Wednesday, 6 July 2022 at 12.30pm. Of course, should circumstances change
and restrictions be reintroduced, we will keep shareholders
informed of the final arrangements for the meeting via the
Company’s website at www.worldwidewh.com.
For those investors who are not able to attend the meeting in
person, a video recording of the Portfolio Manager’s presentation
will be uploaded to the website after the meeting. Shareholders can
submit questions in advance by sending them to
wwh@frostrow.com.
I encourage all shareholders to exercise their right to vote at
the Annual General Meeting and to register your votes online in
advance of the meeting. Registering your vote in advance will not
restrict you from attending and voting at the meeting in person
should you wish to do so, subject of course to any government
guidance to the contrary. The votes on the resolutions to be
proposed at the Annual General Meeting will be conducted on a poll.
The results of the proxy votes will be published immediately
following the conclusion of the AGM by way of a stock exchange
announcement and will also be able to be viewed on the Company’s
website at www.worldwidewh.com.
Sir Martin
Smith
Chairman
26 May 2022
INVESTMENT OBJECTIVE AND POLICY
INVESTMENT OBJECTIVE
The Company invests in the global
healthcare sector with the objective of achieving a high level of
capital growth.
In order to achieve its investment objective, the Company
invests worldwide in a diversified portfolio of shares in
pharmaceutical and biotechnology companies and related securities
in the healthcare sector. It uses gearing, and derivative
transactions to enhance returns and mitigate risk. Performance is
measured against the MSCI World Health Care Index on a net total
return, sterling adjusted basis (“Benchmark”).
INVESTMENT STRATEGY
The implementation of the Company’s Investment Objective has
been delegated to OrbiMed by Frostrow (as AIFM) under the Board’s
and Frostrow’s supervision and guidance.
Details of OrbiMed’s investment strategy and approach are set
out in the Portfolio Manager’s Review.
While the Board’s strategy is to allow flexibility in managing
the investments, in order to manage investment risk it has imposed
various investment, gearing and derivative guidelines and limits,
within which Frostrow and OrbiMed are required to manage the
investments, as set out below.
Any material changes to the Investment Objective, Policy and
Benchmark or the investment, gearing and derivative guidelines and
limits require approval from shareholders.
INVESTMENT POLICY
INVESTMENT LIMITS
AND GUIDELINES
- The Company will not invest more than 15% of the portfolio in
any one individual stock at the time of acquisition;
- At least 50% of the portfolio will normally be invested in
larger companies (i.e. with a market capitalisation of at least
U.S.$10bn);
- At least 20% of the portfolio will normally be invested in
smaller companies (i.e. with a market capitalisation of less than
U.S.$10bn);
- Investment in unquoted securities will not exceed 10% of the
portfolio at the time of acquisition;
- A maximum of 5% of the portfolio, at the time of acquisition,
may be invested in each of debt instruments, convertibles and
royalty bonds issued by pharmaceutical and biotechnology
companies;
- A maximum of 30% of the portfolio, at the time of acquisition,
may be invested in companies in each of the following sectors:
- healthcare equipment and supplies
- healthcare providers and services;
- The Company will not invest more than 10% of its gross assets
in other closed ended investment companies (including investment
trusts) listed on the London Stock Exchange, except where the
investment companies themselves have stated investment policies to
invest no more than 15% of their gross assets in other closed ended
investment companies (including investment trusts) listed on the
London Stock Exchange, where such investments shall be limited to
15% of the Company’s gross assets at the time of acquisition.
DERIVATIVE
STRATEGY AND LIMITS
In line with the Investment Objective, derivatives are employed,
when appropriate, in an effort to enhance returns and to improve
the risk-return profile of the Company’s portfolio. Only Equity
Swaps were employed within the portfolio during the year.
The Board has set the following limits within which derivative
exposures are managed:
- Derivative transactions (excluding equity swaps) can be used to
mitigate risk and/or enhance capital returns and will be restricted
to a net exposure of 5% of the portfolio; and
- Equity Swaps may be used in order to meet the Company’s
investment objective of achieving a high level of capital growth,
and counterparty exposure through these is restricted to 12% of the
gross assets of the Company at the time of acquisition.
The Company does not currently hedge against foreign currency
exposure.
GEARING LIMIT
The Board has set a maximum gearing level, through borrowing, of
20% of the net assets.
LEVERAGE
LIMITS
Under the AIFMD the Company is required to set maximum leverage
limits. Leverage under the AIFMD is defined as any method by which
the total exposure of an AIF is increased.
The Company has two current sources of leverage: the overdraft
facility, which is subject to the gearing limit; and, derivatives,
which are subject to the separate derivative limits. The Board and
Frostrow have set a maximum leverage limit of 140% on both the
commitment and gross basis.
Further details on the gearing and leverage calculations, and
how total exposure through derivatives is calculated, are included
in the Glossary. Further details on how derivatives are employed
can be found in note 16.
PORTFOLIO
INVESTMENTS HELD AS AT 31 MARCH 2022
|
|
Market value |
% of |
Investments |
Country |
£’000 |
investments |
AstraZeneca |
UK |
135,292 |
5.7 |
Pfizer |
USA |
117,923 |
4.9 |
Roche Holding |
Switzerland |
113,899 |
4.8 |
Bristol-Myers Squibb |
USA |
112,460 |
4.7 |
Horizon Therapeutics |
USA |
105,462 |
4.4 |
AbbVie |
USA |
101,256 |
4.3 |
Boston Scientific |
USA |
100,010 |
4.2 |
Intuitive Surgical |
USA |
91,924 |
3.9 |
Humana |
USA |
88,067 |
3.7 |
UnitedHealth Group |
USA |
86,845 |
3.7 |
Top 10 investments |
|
1,053,138 |
44.3 |
Stryker |
USA |
77,630 |
3.3 |
Edwards Lifesciences |
USA |
71,813 |
3.0 |
BioMarin Pharmaceutical |
USA |
61,893 |
2.6 |
Mirati Therapeutics |
USA |
58,981 |
2.5 |
Vertex Pharmaceuticals |
USA |
58,174 |
2.5 |
Shanghai Bio-Heart Biological
Technology |
China |
46,558 |
2.0 |
DexCom |
USA |
42,742 |
1.8 |
Neurocrine Biosciences |
USA |
39,067 |
1.6 |
Thermo Fisher Scientific |
USA |
38,886 |
1.6 |
Guardant Health |
USA |
37,457 |
1.6 |
Top 20 investments |
|
1,586,339 |
66.8 |
Caris Life Science (unquoted) |
USA |
36,986 |
1.6 |
Daiichi Sankyo |
Japan |
36,600 |
1.5 |
Seagen |
USA |
34,969 |
1.5 |
Tenet Healthcare |
USA |
34,847 |
1.5 |
Natera |
USA |
31,523 |
1.3 |
SI-BONE |
USA |
31,479 |
1.3 |
Global Blood Therapeutics |
USA |
29,984 |
1.3 |
Argenx |
Netherlands |
27,097 |
1.1 |
Evolent Health |
USA |
25,873 |
1.1 |
Shionogi |
Japan |
25,202 |
1.1 |
Top 30 investments |
|
1,900,899 |
80.1 |
API Holdings (unquoted) |
India |
22,251 |
0.9 |
Joinn Laboratories China |
China |
21,669 |
0.9 |
NanoString Technologies |
USA |
21,594 |
0.9 |
Chugai Pharmaceutical |
Japan |
21,422 |
0.9 |
Arrail Group |
China |
18,581 |
0.8 |
Crossover Health (unquoted) |
USA |
17,499 |
0.7 |
EDDA (unquoted) |
USA |
16,128 |
0.7 |
Visen Pharmaceutical (unquoted) |
China |
15,731 |
0.7 |
MeiraGTx |
USA |
15,603 |
0.7 |
Iovance Biotherapeutics |
USA |
14,869 |
0.6 |
Top 40 investments |
|
2,086,246 |
87.9 |
Shanghai Fosun Pharmaceutical |
China |
14,838 |
0.6 |
Beijing Yuanxin Technology
(unquoted) |
China |
14,705 |
0.6 |
Arcutis Biotherapeutics |
USA |
13,224 |
0.5 |
Ruipeng Pet Group (unquoted) |
China |
13,101 |
0.5 |
Dingdang Health Technology
(unquoted) |
China |
12,491 |
0.5 |
RiMAG (unquoted) |
China |
12,208 |
0.5 |
Theravance Biopharma |
USA |
11,394 |
0.5 |
Shanghai Kindly Medical
Instruments |
China |
11,301 |
0.5 |
uniQure |
Netherlands |
11,289 |
0.5 |
CSPC Pharmaceutical |
China |
11,001 |
0.5 |
Top 50 investments |
|
2,211,798 |
93.1 |
Erasca |
USA |
10,868 |
0.5 |
Alphamab Oncology |
China |
10,794 |
0.5 |
RxSight |
USA |
9,950 |
0.4 |
Danaher |
USA |
9,600 |
0.4 |
Celldex Therapeutics |
USA |
9,206 |
0.4 |
Apollo Hospitals Enterprise |
India |
8,552 |
0.4 |
Shanghai Junshi Biosciences |
Hong Kong |
8,133 |
0.4 |
New Horizon Health |
China |
7,815 |
0.3 |
Ikena Oncology |
USA |
7,522 |
0.3 |
Turning Point Therapeutics |
USA |
7,373 |
0.3 |
Top 60 investments |
|
2,301,611 |
97.0 |
Galapagos |
Belgium |
7,217 |
0.3 |
Clover Biopharmaceuticals |
China |
6,420 |
0.3 |
Shenzhen Hepalink
Pharmaceutical |
China |
6,400 |
0.3 |
Simcere Pharmaceutical |
China |
6,092 |
0.3 |
MabPlex International
(unquoted) |
China |
5,874 |
0.2 |
China Medical System |
China |
5,662 |
0.2 |
Harpoon Therapeutics |
USA |
5,524 |
0.2 |
United Laboratories International
Holdings |
Hong Kong |
5,336 |
0.2 |
Burning Rock Biotech |
China |
5,290 |
0.2 |
Yidu Tech |
China |
5,081 |
0.2 |
Top 70 investments |
|
2,360,507 |
99.4 |
NanoString Technologies 2.63%
01/03/2025 (unquoted) |
USA |
5,024 |
0.2 |
Vor BioPharma |
USA |
3,779 |
0.2 |
Abbisko |
China |
3,735 |
0.2 |
Achilles Therapeutics |
USA |
3,108 |
0.1 |
Passage Bio |
USA |
2,376 |
0.1 |
MicroTech Medical Hangzhou |
China |
844 |
0.0 |
Peloton Interactive
(DCC*-unquoted) |
USA |
475 |
0.0 |
Total equities and fixed interest
investments |
|
2,379,848 |
100.2 |
OTC Equity Swaps –
Financed^ |
|
|
|
Healthcare M&A Target Swap |
USA |
99,898 |
4.2 |
Apollo Hospitals |
India |
35,120 |
1.5 |
Less: Gross exposure on financed
swaps |
|
(140,147) |
(5.9) |
Total OTC Swaps |
|
(5,129) |
(0.2) |
Total investments including OTC
Swaps |
|
2,374,719 |
100.0 |
* DCC =
deferred contingent consideration.
^ See Glossary
and note 16 for further details in relation to the OTC Swaps.
SUMMARY
|
|
Market
value |
% of |
Investments |
|
£’000 |
investments |
Quoted equities |
|
2,207,375 |
93.0 |
Unquoted equities |
|
167,449 |
7.0 |
Unquoted debt securities |
|
5,024 |
0.2 |
Equity swaps |
|
(5,129) |
(0.2) |
Total of all investments |
|
2,374,719 |
100.0 |
PORTFOLIO MANAGER’S REVIEW
MARKETS
2021 was another unprecedented year for the global equity
markets. After the COVID-induced volatility that characterised
2020, markets climbed higher in 2021 despite various headwinds
including inflationary fears and supply chain disruptions. The
market reached new highs by the calendar year-end, only to sell-off
in the face of rising interest rates and Russia’s invasion of
Ukraine in early 2022. Of course,
COVID-19 continued to cast a shadow over the year under review,
with Delta and Omicron variants inducing new waves of infections
across the globe.
Nevertheless, global equity markets produced solid double-digits
returns in the financial year. The MSCI World Index total return
was +16.2% (in sterling terms). The total return for the S&P
500 was +15.6% (in U.S. dollar terms), notching 70 all-time highs
throughout 2021 (source: Forbes). Meanwhile, the FTSE All-Share
Index total return was +13.0% (in sterling terms).
For the most part, healthcare stocks traded in-line with broader
indices throughout the financial year. However, with geopolitical
tensions increasing as the financial year drew to a close alongside
a rising interest rate environment, healthcare benefitted as
investors became decisively more defensive in the last five weeks
of the period. As such, the MSCI World Healthcare Index net total
return over the year was +20.4% (in sterling terms), with over half
of that move accruing in the last 27 trading days of the financial
year.
PERFORMANCE
After one of the best performance years in the Company’s history
in the year ended 31 March 2021,
generating excess returns over the benchmark in the current
financial year proved to be very difficult. Whilst healthcare
stocks mostly traded higher, trading dynamics for the Company were
broadly fuelled by macro factors, with industry and company
fundamentals firmly taking a backseat and going largely
unrecognised by investors. As a result, sub-sector moves within
healthcare were very disparate given the “growth-to-value” rotation
and the risk-off environment that characterised the reported
year.
This trading environment heavily favoured large capitalisation
companies over small capitalisation stocks, thus, overall
positioning within healthcare equities was far more critical than
stock selection. This was particularly true for the Company’s
portfolio, with our key long-term strategic overweight positions in
emerging biotechnology, China
healthcare, and innovative tools – typically all small
capitalisation stocks – materially underperforming. This included
in historic drawdowns and record setting underperformance in
emerging biotechnology stocks which severely impacted returns,
despite an otherwise healthy fundamental sector. This was
exacerbated by our long-term underweight positioning in
pharmaceuticals – typically all large capitalisation stocks – a
sector that outperformed the rest of healthcare, particularly
during the last quarter of the financial year.
Overall, our performance was heavily impacted by this relative
positioning as the preponderance of fundamentals across healthcare
failed to influence trading dynamics; a true mismatch to our
investment philosophy. Rather, this extraordinary market
perturbation created not only extreme volatility but also an
historic compression of valuations within certain components of
healthcare, a situation that would expectedly be damaging to our
relative portfolio positioning. As a result, relative and absolute
performance suffered with a net asset value total return of -5.8%,
and a share price total return of -10.8%, compared to the benchmark
index total return of +20.4%.
Despite the volatility in the reported period, we are pleased to
note that since the Company’s inception in 1995, the total return
of the Company’s net asset value per share is +3,866.7%, equivalent
to a compound annual return of +14.7%. This compares to the
blended benchmark rise of +2,133.6%, equivalent to a compound
annual return of +12.2%.
This 27-year track record demonstrates several important points.
First, it puts into context the recent drawdown. Previous periods
of underperformance by the Company have all been quickly followed
by a significant bounce back and material outperformance. Second,
the chart above shows outperformance for healthcare (the benchmark)
versus the broader markets (in this case, the FTSE All-Share
Index), particularly over the past seven years which coincides with
the real explosion of innovation within the industry. Finally, it
shows what an active manager or specialist investor can do in
healthcare, especially in the face of a highly idiosyncratic,
global sector that possesses many barriers to understanding the
scientific, clinical, regulatory, technological, and political
environment that envelops all of healthcare.
Finally, we would note that the fundamentals of healthcare
remain strong, especially in biotechnology, which we regard as the
cradle of innovation for clinical discovery.
The macro trading dynamics that impacted these stocks in the
reported period do not represent, in any way, a deterioration
of the elements that underpin the sector. Rather, it is simply a
product of extreme market conditions that we have never experienced
previously, culminating in a profound collapse in valuations, a
situation that should reverse in due time. With fundamentals
intact, we remain positioned for a material rebound in
biotechnology stocks.
CONTRIBUTION BY SUB-SECTOR
Looking at performance by sub-sector provides an understanding
of overall performance during the year. First, four areas which
contributed a significant absolute positive contribution were
Pharmaceuticals (benefitting from a macro defensive rotation),
Medical Devices/ Technology (a result of stock picking), Healthcare
Services (reflecting our sector positioning), and India.
Healthcare (again, as a result of stock picking). Second, four
sub-sectors that contributed a notable relative positive
contribution over the benchmark were Specialty Pharmaceuticals,
Medical Devices/Technology, India Healthcare (all reflecting the
results of stock-picking) and Japan Pharmaceuticals (reflecting our
sector positioning).
However, detractors from performance overwhelmed the positive
contributions. The following three sub-sectors were notable in
terms of both relative and absolute negative contribution -
emerging biotechnology (reflecting macro sector rotation),
China healthcare (a result of
fundamental investor concerns), and small/mid-capitalisation life
science tools/diagnostics (reflecting our overweight sector
positioning). Each of these sub-sectors experienced significant
drawdowns during the year creating a headwind to the Company’s
performance that became insurmountable during the reported 12-month
period.
The largest detractor by sub-sector was emerging biotechnology
stocks, which generated over 11% of negative contribution (both in
absolute and relative terms). A “perfect storm” of macro factors
led to this disappointing performance. The financial year began
with a rotation by investors from growth to value stocks, as
generalist investors repositioned portfolios to gain exposure to
economically sensitive sectors that would benefit most from a
post-COVID reopening of the economy. Biotechnology underperformed
during this period, as did many other growth sectors to which
investors had allocated capital during the COVID pandemic. Many of
the shorter-term investors who did not regularly invest in the
biotechnology sector, but who were temporarily attracted to the
industry’s defensive nature and COVID-related research, appeared to
exit the sector.
In the second half of the financial year, increasing concerns
about the U.S. Federal Reserve’s plans to raise interest rates to
combat inflation led to continued weakness in technology stocks,
especially those earlier-stage enterprises which are not expected
to realise earnings for many years. This trend was especially
damaging to small capitalisation biotechnology performance and
those stocks sold off even further. Overall, these macroeconomic
and related factors created the longest and largest drawdown in
biotechnology history, with the gap between the S&P
Biotechnology ETF (XBI) compared to the S&P 500 Index reaching
over 65% during the financial year.
Adding pressure to the Company’s performance was a significant
drawdown in the Chinese markets, including Hong Kong, in the second half of the financial
year. The sell-off was precipitated by regulatory tightening by the
Chinese government across a variety of sectors, including the
internet (and related technology industries) and the for-profit
education industry. Even though there were no new significant
regulations targeting Chinese healthcare companies, investor fears
were materially heightened that healthcare may be the government’s
next target. This broad market downturn in China that began in June 2021 adversely and indiscriminately impacted
many of our China healthcare
positions. Unfortunately, these macro pressures persisted through
to the end of the financial year, generating nearly 4% of negative
absolute and relative contribution in the reported period.
Importantly, we continue to believe fundamental innovation in the
China healthcare sector remains
strong.
The life science tools sector was also challenging for the
Company in the year under review. Mirroring the broader market,
large capitalisation diversified companies significantly
outperformed those with a small and mid-capitalisation innovative
growth profile, and our positioning in this regard was suboptimal,
resulting in over 5% of negative contribution relative to the
benchmark. Additionally, there were fundamental factors that drove
this large capitalisation outperformance – chief among which was
the continued durability of COVID-related revenues as well as a
normalisation of non-COVID “base business” performance which led to
positive earnings revisions throughout the 2021 calendar year. Our
view that the durability of COVID related earnings would come into
question amid record high valuations was clearly too early. Whilst
we did have modest exposure to Thermo Fisher Scientific and
Danaher Corporation, two companies which benefited from
these dynamics and offer best-in-class execution, we had lower
exposure than our benchmark which damaged our relative
performance.
Separately, our preferred small and mid-capitalisation companies
in the innovative tools space weighed on our performance. Whilst we
have a positive structural outlook on liquid biopsy and the
continued proliferation of clinically successful oncology
diagnostics, the sector fell out of favour against the backdrop of
demanding valuations and fundamental results that were strong but
were insufficient to drive shares higher against lofty near-term
expectations.
Finally, a word on the performance of large capitalisation
pharmaceutical stocks in the financial year. As articulated already
in this report, pharmaceutical stocks traded mostly in-line with
the benchmark throughout the period.
However, as we approached the turn of the calendar year, this
performance began to diverge materially as inflation, interest
rates, and geopolitical risks all rose and investors turned
defensive. As a result, large capitalisation pharmaceutical stocks
moved much higher heading into the financial year end, many of
which ended on 52-week highs on 31 March
2022. This created the single largest source of absolute
contribution for the Company at over 7%. However, as is our
historical norm, we were materially underweight in the
pharmaceutical sector in the period, thus creating over 5.0% of
negative relative contribution to the benchmark due to our
positioning.
KEY CONTRIBUTORS TO PERFORMANCE
There were a number of factors that underlay the key positive
contributors to absolute performance. These included the
beneficiaries of the macro factors described above, such as the
outperformance of large capitalisation stocks, alongside a mix of
positive fundamentals that also influenced share price moves.
OrbiMed prides itself on its expertise within clinical medicine and
how that capability helps shape good stock picking within the
healthcare sector.
A prototypical example of this combination of macro tailwinds
and good stock picking was AbbVie. Over the past two years,
the company has been in the midst of a transformation. Facing the
largest patent expiration in industry history –Humira, with peak
global sales of U.S.$20 billion – the
company has re-invented its immunology franchise with newer,
better, and safer drugs in Skyrizi (injectable risankizumab) and
Rinvoq (oral upadacitinib), two drugs approved to treat a variety
of immunological disorders.
Investor optimism hit a nadir in September 2021 when the U.S. Food and Drug
Administration (FDA) communicated their general concern over the
safety of all oral JAK inhibitors (Janus Kinase inhibitors, the
class of medicines included Rinvoq), certainly delaying and perhaps
denying future additional approvals for Rinvoq, largely considered
the “best-in-class” JAK inhibitor in the world. With the stock on
the low after falling further on the news, we added meaningfully to
our position. That risk paid off two-fold. First, despite a modest
delay, the FDA did ultimately approve Rinvoq for Psoriatic
Arthritis, Ulcerative Colitis, and Atopic Dermatitis (in addition
to the already approved Rheumatoid Arthritis), pushing the stock
higher. Second, the stock certainly caught the macro trend towards
the start of 2022 when large capitalisation pharmaceutical stocks
moved higher in the face of rising interest rates, record
inflation, and war in Europe.
Another pharmaceutical company that has re-invented itself is
AstraZeneca. After nearly a decade of declining revenues and
earnings, the company has turned itself around under the guidance
of CEO Pascal Soriot, creating one
the largest and fastest growing global, multinational
pharmaceutical companies in the world. With leadership in oncology,
cardiovascular, respiratory, and more recently, rare diseases, the
company is poised for sustainable, long-term growth. However, these
successes have not been without some angst, as a messy but
well-intended effort to develop a COVID vaccine created some share
price volatility as did the close of the acquisition of Alexion
Pharmaceuticals, which sparked investor fears that the company’s
stand-alone financials were going to disappoint.
However, after a robust fourth quarter report, better than
expected guidance for 2022, and a strong launch for the company’s
COVID-19 prophylaxis injection, Evusheld (tixagevimab co-packaged
with cilgavima), AstraZeneca’s share price closed at an all-time
high at the end of the Company’s financial year.
UnitedHealth Group is the largest health insurer in
the United States as well as one
of the largest healthcare services providers through its
subsidiary, Optum. This stock represents another example of a mix
of positive fundamentals and a macroeconomic environment that took
the share price to new highs in 2022. Heading into its third
quarter 2021 earnings, investors faced significant fears of whether
increasing medical costs and lingering COVID-related costs
(testing, treatment, vaccines) would impede the insurers’ ability
to grow earnings. Additionally, regulatory noise became louder with
prospects of Medicare Advantage, an insurer-run government
programme, would face reimbursement cuts or other challenges to pay
for other priorities in a large U.S. federal spending bill.
However, the company produced strong third and fourth quarter
results, along with better-than-expected earnings guidance for
2022. Meanwhile, political negotiations over a large spending bill
broke down in the U.S., removing another critical source of risk.
Finally, the shifting macroeconomic landscape, including higher
interest rates, rising inflation, and a shift out of growth stocks
into value stocks, all benefited UnitedHealth, which has since
become a “safe haven” in healthcare.
Shanghai Bio-heart Biological Technology is a
cardiovascular medical device startup in China. The company sells two product lines:
Renal Denervation (RDN) and Bioresorbable Vascular Scaffold System
(BVS). Together, these technologies address the unmet medical needs
of Chinese patients for the treatment of coronary and peripheral
artery diseases and uncontrolled hypertension.
Bio-heart’s line of RDN products is a “best-in-class” product in
China, with a unique catheter
design which is the only one that can be inserted by both radial
artery and femoral artery (unlike the competition). The company’s
RDN business is also backed by Terumo, the Japan-based global leader in medical
technology, in a technology-validating deal. The investment into
Bio-heart was an unquoted investment. The company listed on the
Hong Kong Exchange in December 2021
and the share price more than doubled during the remainder of the
Company’s financial year.
Before the turn of the decade, Bristol-Myers Squibb became one of the most, if not
the most, dominant cancer companies in the world. With pioneering
work in revolutionary field of immuno-oncology in the mid-2010s and
the U.S.$74 billion acquisition of Celgene in 2019, the
company possessed leadership in both the solid tumour and liquid
tumour fields of oncology. However, the company has also become
misunderstood. Investor anxiety over the company’s growth strategy
and increased concerns over imminent patent expirations for key
products saw the company’s valuation collapse to an all-time low,
with the shares trading with a price-to-earnings ratio of 7.0x
during the reported period.
However, an analyst meeting hosted by company management in
November 2021 in New York City proved to be a seminal moment in
the company’s recent history. Using that platform, the company
provided a deep dive on their pipeline, discussed growth
opportunities, and provided long term growth targets. That event,
combined with the defensive rotation into pharmaceuticals at the
Company’s financial year-end, was a boon to investor interest and
the stock re-rated over 30% (in local currency) over the last four
months of the reported period.
KEY DETRACTORS FROM PERFORMANCE
Mirati Therapeutics is an emerging biotechnology company
focused on the development of therapeutics for the treatment of
cancer. The company’s main pipeline asset, adagrasib, is highly
selective and potent oral small molecule inhibitor of KRAS G12C (a
mutation that underlies the formation of a number of tumours) that
is being developed for various cancers, including lung, colon, and
other solid tumours. Despite achieving many development milestones
for adagrasib in the year, including a successful new drug
application with the FDA, the share price was punished, perhaps
unduly, for a variety of reasons, including a stock offering and
multiple management changes. Most recently, the stock was under
pressure again after the FDA accepted the filing for adagrasib but
granted a regular review rather than the expected priority review,
pushing the potential approval and launch in 2023.
MIRATI THERAPEUTICS: KRAS
INHIBITION
In the diagnostics space, Natera is an industry leader
with a host of innovative offerings including non-invasive prenatal
testing (NIPT) and other genetic testing. While Natera’s commercial
execution was strong in the reported period, the company did not
benefit from COVID-testing tailwinds (unlike the
large-capitalisation diagnostic players) and share price declines
were further exacerbated by the growth-to-value rotation that
characterised the year under review. Additionally, the New York Times published an article in January 2022 denouncing the low accuracy of NIPT
in identifying rare genetic diseases, and in March 2022, a short seller published a report on
Natera alleging illegal billing practices relating to its NIPT
business, both of which created significant controversy. Whilst we
disagreed with both of these reports, these collective issues
created a significant disconnect between the company’s fundamentals
and most recent valuation.
NATERA: NIPT
Another innovative player in the diagnostics space is
Guardant Health, an oncology diagnostics company that has
emerged as the pre-eminent liquid biopsy provider. The company has
many offerings in the cancer diagnostics sector including therapy
selection, disease assays, and response monitoring. The company
also plans to enter the non-invasive screening market in 2022.
Unfortunately, the share price experienced a material pullback
through the course of the year despite generally strong financial
performance. Again, macro-market conditions were largely to blame,
but the stock was particularly weak following rumours that it was
considering a purchase of another oncology diagnostics company,
although the deal never materialised. Again, these collective
issues created a significant disconnect between the company’s
fundamentals and its most recent valuation.
Deciphera Pharmaceuticals, is a clinical stage, emerging
biotechnology company that is developing small molecule drugs to
treat various types of cancer. The company’s focus in recent years
has been the continued development of Qinlock (ripretinib), an
orally administered inhibitor of specific mutated kinases which
otherwise contribute to the development of certain cancers. In
2020, the FDA approved Qinlock for use as a fourth line therapy for
gastrointestinal stromal tumours (GIST). More recently, the company
conducted a trial to explore the use of Qinlock in earlier lines of
therapy. However, in November 2021,
that trial failed to show significantly superior results versus the
standard of care in second line GIST, Sutent (sunitinib). The stock
had traded down along with the broader biotechnology drawdown into
this update and subsequently gapped even lower after the failed
trial.
The “XBI” is an exchange-traded fund - SPDR S&P
Biotech ETF - incorporated in the U.S. that seeks to
replicate the performance of the S&P Biotechnology Index. The
Index is equal-weighted, has approximately 150 constituents, and
tracks all biotechnology single stocks that are listed on the NYSE,
American Stock Exchange, and the NASDAQ National Market and Small
Capitalisation exchanges. The XBI offers an opportunity to gain
tactical exposure to the biotechnology subsector quickly and
efficiently while not exposing the portfolio to unnecessary
idiosyncratic single stock risks. Given the extraordinary drawdown
in the biotechnology subsector since February 2021, the removal of key sector
overhangs, and anticipated mergers & acquisitions (M&A) by
large capitalisation pharmaceutical companies, we wanted to gain
exposure to a tactical rebound as we went through the year.
Unfortunately, our purchase was premature, and the XBI continued to
sell off right into the financial year-end. This holding was bought
and sold during the year.
CONTRIBUTION FROM UNQUOTEDS
During the financial year, the Company made four new investments
in unquoted companies. Another four portfolio companies – including
one of these new investments – completed their Initial Public
Offerings (IPOs) in the period. As of 31
March 2022, investments in unquoted companies (excluding
debt) accounted for 7.0% of the Company’s net assets versus 5.3% as
of 31 March 2021.
The four new investments this year were all healthcare services
companies in emerging markets (one in India and three in China). In the U.S., a challenging public
offering market for small and mid-capitalisation therapeutics
companies made pre-IPO crossover investments unattractive in the
year. Of the four companies that completed an Initial Public
Offering, three listed on the Hong Kong Stock Exchange in the
second half of the financial year and a biotechnology company
listed on the Nasdaq Stock Exchange in the U.S.
For the year ended 31 March 2022,
the Company’s unquoted holdings contributed gains of £21.8m,
(including both realised and unrealised gains) equivalent to a
return of 15% and those companies that went public contributed
gains of £20.7m, representing a return of 35%. While the gains in
unquoteds were spread among many companies, the gains for companies
that listed were dominated by Shanghai Bio-heart Biological
Technology. Overall, the unquoted strategy (excluding debt)
contributed £42.5m equivalent to 1.8% of the Company’s net asset
value return for the year.
GEARING STRATEGY
The Company employs gearing with a maximum level of 20% of the
Company’s net assets. Historically, the typical gearing level
employed by the Company is low-to-high teens but can range from low
single-digits to high teens. Considering the level of market
volatility during the past two financial years, the use of gearing
has evolved. First, the over level of gearing used – on average –
has declined from 9% (5 year average) to 6% (2 year average).
Second, month-over-month gearing levels have also varied more than
historical norms as we have attempted to utilise gearing in a more
tactical fashion and in response to various market conditions.
DERIVATIVES STRATEGY
The Company has the ability to use equity swaps and options, as
set out in the Company’s Investment Objective and Policy. During
the current financial year, the Company employed single stock
equity swaps to gain exposure to emerging market Chinese and Indian
stocks. In addition, the Company traded tactical security baskets
created to take advantage of depressed valuations in small and
mid-capitalisation companies that we felt were likely acquisition
targets for large capitalisation pharmaceutical companies. The
equity swaps detracted 0.9% from the Company’s return during the
year. An analysis of the Company’s investments in emerging markets
is included in the Strategic Report.
Further details on the use of swaps can be found in Note 16 and
in the Glossary.
SECTOR DEVELOPMENTS & OUTLOOK
Overall, we remain positive on the outlook for the healthcare
industry. Despite the mixed trading dynamics during the financial
year, many immediate overhangs have lifted and the tailwinds remain
strong, in particular the amount of innovation that is fuelling the
industry’s growth, both in therapeutic and non-therapeutic
stocks.
On the regulatory front, there has been a growing concern from
generalist investors that things have slowed significantly at the
FDA and that there is a vacuum of leadership at the Agency. This
view began to develop in 2020 with the absence of a Commissioner
(typically appointed when there is a change in U.S. Presidents) and
when agency resources where stretched given the COVID-19 pandemic.
However, we have a very different view.
First, the FDA response to COVID-19 has been an unprecedented
success with multiple vaccines approved, multiple antibody
treatments approved, and more recently, two oral anti-viral
therapies approved as well. We would also be remiss not to mention
the hundreds of diagnostic tests that have also been approved by
the agency. Second, we have not seen a material slowdown in new
drug approvals. In fact, the past five years have been the most
productive in the agency’s history, including this past year. This
included an Alzheimer’s drug that was approved in June 2021 – the first new treatment approved for
Alzheimer’s disease in over 20 years (albeit with some
controversy).
Finally, and perhaps most importantly, there was a growing
concern that the FDA was “rudderless” since the Agency has been
without a commissioner over that past two years (since President
Biden took office). Whilst this belief was mostly baseless,
nevertheless, a new commissioner was just recently confirmed. Dr.
Robert Calif, a world-renowned cardiologist from Duke University, was the previous Commissioner
under President Obama, and most importantly, is viewed as “industry
friendly.” Going forward, we think investor perception of the FDA
is going to improve immensely in 2022 and beyond.
Another dark cloud over the sector is the ongoing (and seemingly
endless) threat of prescription drug price reform in the U.S. This
fear has been an overhang on the Company since late 2020, when
President Biden took the White House and Democrats had total
control of Congress, setting off a new “wall-of-worry” for
investors. However, with war breaking out in Eastern Europe, the Biden Administration’s
attention has pivoted and is now completely focused on other
matters. Therefore, we believe that expectations for any drug price
reform have now appropriately faded, especially as we approach U.S.
midterm elections later in 2022.
Historically, the healthcare industry is one that sees a
significant amount of corporate activity, frequently in the form of
M&A and this M&A activity has been a notable source of
positive performance for the Company. Of course, there are always
ebbs and flows that impact the pace of M&A at any one time, but
the last two quarterly reporting periods have been notable for the
profound messaging from the large capitalisation pharmaceutical
executives about business development, particularly about M&A
being a “top priority”, the need to “do more”, and looking to add
“first-in-class and best-in-class” assets. Overall, this may be a
harbinger of things to come and could be a real rallying point,
especially in the biotechnology sector.
M&A: ACCELERATION EXPECTED
Given the historic volatility within the sector in the reported
period, it is imperative to note that this extreme sell-off was not
emblematic of any notable concerns about the fundamentals within
the small and mid-capitalisation universe of healthcare stocks.
Yes, the number of investable companies continues to increase. Yes,
the complexity of the clinical science and new technology continues
to increase. Yes, the political and regulatory landscape continue
to evolve. Collectively, however, these factors can become a
tailwind for the sector as new products, drugs, and services come
to market, driving top line growth and margins, respectively. The
by-product of the broad market conditions has culminated in a
profound collapse in valuations, a situation that invariably
reverses in due time, a particular attractive opportunity for an
active manager and specialist healthcare investor, and one on which
we will be in position to capitalise.
Ultimately, as with many modern industries, innovation is the
key value driver and healthcare is no different. We continue to
believe that the current pace of innovation is at an all-time high
and will continue to develop novel solutions to solve health and
ageing problems that are facing all of humanity. There are new
advances for small molecules, gene and cell therapy, gene editing,
monoclonal antibodies, and of course vaccines and RNA therapeutics.
Novel diagnostics continue to progress and are shaping treatment
choices, dictating drugs of intervention, and follow-up care.
Medical devices continue to evolve across new robotic platforms,
orthopedics, pain, and structural heart. Even managed care is
seeing a revolution in vertical integration that is unlocking
value. Innovation continues to be the number one growth driver for
all of healthcare and remains a key hallmark of the portfolio. As a
result of this view, we will continue to actively position the
portfolio to benefit from this incredible innovation, overweighting
innovation through small and mid-capitalisation stocks, which has
been the key pillar of our long-term and successful investment
strategy.
Sven H.
Borho and Trevor M.
Polischuk
OrbiMed Capital LLC
Portfolio Manager
26 May 2022
CONTRIBUTION BY INVESTMENT
ABSOLUTE CONTRIBUTION BY INVESTMENT
FOR THE YEAR ENDED 31 MARCH 2022
Principal contributors to and detractors from net asset value
performance
|
|
|
|
Contribution |
|
|
|
Contribution |
per share* |
Top five contributors |
Country |
Sector |
£’000 |
£ |
Abbvie |
USA |
Pharmaceuticals |
43,658 |
0.7 |
AstraZeneca |
UK |
Pharmaceuticals |
39,516 |
0.6 |
UnitedHealth Group |
USA |
Healthcare Providers
& Services |
29,254 |
0.4 |
Shanghai Bio-Heart Biological
Technology |
China |
Healthcare Equipment
& Supplies |
24,934 |
0.4 |
Bristol-Myers Squibb |
USA |
Pharmaceuticals |
24,633 |
0.4 |
Top five detractors |
|
|
|
|
SPDR S&P Biotech ETF ** |
USA |
Biotechnology |
(26,637) |
(0.4) |
Deciphera Pharmaceuticals ** |
USA |
Biotechnology |
(32,923) |
(0.5) |
Guardant Health |
USA |
Life Sciences Tools
& Services |
(34,062) |
(0.5) |
Natera |
USA |
Life Sciences Tools
& Services |
(35,122) |
(0.5) |
Mirati Therapeutics |
USA |
Biotechnology |
(45,742) |
(0.7) |
- Calculation based on 65,307,132 shares being the weighted
average number of shares in issue during the year ended
31 March 2022.
- Not held at 31 March 2022.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
AND CLIMATE CHANGE
EXTRACT FROM ORBIMED’S RESPONSIBLE
INVESTING POLICY
The Company’s Portfolio Manager, OrbiMed, believes that there is
a high congruence between companies that seek to act responsibly
and those that succeed in building long-term shareholder value.
OrbiMed seeks to integrate its Responsible Investing Policy into
its overall investment process for the Company in order to maximise
investment returns.
OrbiMed negatively screens potential investments and business
sectors that may objectively lead to negative impacts on public
health or well-being. OrbiMed makes investment decisions based on a
variety of financial and non-financial company factors, including
environmental, social and governance (ESG) information.
OrbiMed considers sector-specific guidance from the
Sustainability Accounting Standards Board (SASB) to determine
material ESG factors. Depending on the investment, all or a subset
of the ESG factors that are financially material and relevant are
considered in OrbiMed’s research. The evaluation of a company’s
performance on ESG issues provides guidance for investment
decisions and constitutes part of the investment analysis. ESG
factors, however, do not form the sole, or primary, set of
considerations for an investment decision.
ESG is a rapidly evolving field. ESG evaluation is not
standardised and faces limitations due to a lack of availability of
accurate, timely and uniform data. Presently, no known universally
accepted standards for ESG incorporation in investment decisions
exist. Therefore, ESG evaluation carries a significant degree of
subjectivity.
ESG MONITORING
OrbiMed has integrated ESG scores for public equity holdings
from third-party service providers onto its platform via
programming interface. ESG scores are assigned by third-party
service providers to each company based on the company’s disclosure
and practice on material environmental, social and governance
factors. Recognising the need to supplement the scores with
OrbiMed’s internal ESG research, OrbiMed has enabled enhancements
in its monitoring capability with a custom-built protocol for
updating these scores.
OrbiMed is taking the initiative in leading meaningful ESG
engagement in the healthcare sector. As part of these efforts,
OrbiMed facilitates dialogues and an exchange of leading practices
among investors, companies and other relevant experts on ESG in the
large capitalisation pharmaceutical sector.
CLIMATE CHANGE
As per the guidance from SASB, climate change in relation to the
Company’s own operations is not a material ESG consideration for
biotechnology and pharmaceutical, medical equipment and supplies,
and managed care sectors. However, Energy management is noted as a
material ESG concern for the healthcare delivery sector. To that
end, OrbiMed includes the scores on energy management for the
relevant sectors in its overall ESG monitoring.
OrbiMed engages with a number of companies, including one-on-one
meetings with management on ESG, analyst calls and other forums.
For example, OrbiMed held a meeting with Horizon Therapeutics on
leading ESG practices and provided feedback and recommendations on
specific ESG topics such as talent management, disclosure and
governance benchmarks to the company. Through these engagements,
OrbiMed was made aware of the ‘Energize’ programme – a
collaborative programme launched by 10 pharmaceutical companies –
including several OrbiMed portfolio companies – to increase access
to renewable electricity for global pharmaceutical supply chains,
and reduce greenhouse gas (GHG) emissions within the healthcare
supply chain.
OrbiMed generally follows the guidelines and recommendations of
Glass Lewis & Co LLC, a leading proxy voting services provider,
including on climate change matters.
Sven H.
Borho and Trevor M.
Polischuk
OrbiMed Capital LLC
Portfolio Manager
26 May 2022
BUSINESS REVIEW
The Strategic Report, contains a
review of the Company’s business model and strategy, an analysis of
its performance during the financial year and its future
developments and details of the principal risks and challenges it
faces.
Its purpose is to inform shareholders in the Company and help
them to assess how the Directors have performed their duty to
promote the success of the Company. Further information on how the
Directors have discharged their duty under s172 of the Companies
Act 2006 in promoting the success of the Company for the benefit of
the investors as a whole, and how they have taken wider
stakeholders’ needs into account can be found in the Strategic
Report. The Strategic Report contains certain forward-looking
statements. These statements are made by the Directors in good
faith based on the information available to them up to the date of
this report. Such statements should be treated with caution due to
the inherent uncertainties, including both economic and business
risk factors, underlying such forward-looking information.
BUSINESS MODEL
Worldwide Healthcare Trust PLC is an externally managed
investment trust and its shares are listed on the premium segment
of the Official List and traded on the main market of the London
Stock Exchange.
As an externally managed investment trust, all of the Company’s
day-to-day managements and administrative functions are outsourced
to service providers. As a result, the Company has no executive
directors, employees or internal operations. The Company employs
Frostrow Capital LLP (Frostrow) as its Alternative Investment Fund
Manager (AIFM), OrbiMed Capital LLC (OrbiMed) as its Portfolio
Manager, J.P. Morgan Europe Limited as its Depositary and J.P.
Morgan Securities LLC as its Custodian and Prime Broker. Further
details about their appointments can be found in the Business
Review. The Board has determined an investment policy and related
guidelines and limits, as described below.
The Company is an investment company within the meaning of
Section 833 of the Companies Act 2006 and has been approved by HM
Revenue & Customs as an investment trust (for the purposes of
Section 1158 of the Corporation Tax Act 2010). As a result the
Company is not liable for taxation on capital gains. The Directors
have no reason to believe that approval will not continue to be
retained. The Company is not a close company for taxation
purposes.
The Board is responsible for all aspects of the Company’s
affairs, including the setting of parameters for and the monitoring
of the investment strategy a s well as the review of investment
performance and policy. It also has responsibility for all
strategic issues, the dividend policy, the share issuance and
buy-back policy, gearing, share price and discount/premium
monitoring and corporate governance matters.
CONTINUATION OF THE COMPANY
A resolution was passed at the Annual General Meeting held in
2019 that the Company continues as an investment trust for a
further five year period. In accordance with the Company’s Articles
of Association, shareholders will have an opportunity to vote on
the continuation of the Company at the Annual General Meeting to be
held in 2024 and every five years thereafter.
THE BOARD
The Board of the Company comprises Sir Martin Smith (Chairman), Sarah Bates, Sven
Borho, Doug McCutcheon,
Dr Bina Rawal and Humphrey van der
Klugt. All of these Directors, served throughout the year.
All are independent non-executive Directors with the exception of
Mr Borho who is not considered to be independent by the Board.
All Directors, with the exception of Sir Martin Smith, are seeking re-election by
shareholders at this year’s Annual General Meeting.
DIVIDEND POLICY
It is the Company’s policy to pay out dividends to shareholders
at least to the extent required to maintain investment trust status
for each financial year. Such dividends will typically be paid
twice a year by means of an interim dividend and a final
dividend.
KEY PERFORMANCE INDICATORS (‘KPI’)
The Board assesses the Company’s performance in meeting its
objectives against key performance indicators as follows. The Key
Performance Indicators have not changed from the previous year:
- Net asset value (‘NAV’) per share total return against the
Benchmark;*
- Discount/premium of share price to NAV per share;* and
- Ongoing charges ratio.*
Information on the Company’s performance is provided in the
Chairman’s Statement and the Portfolio Manager’s Review. Further
information can be found in the Glossary.
*
Alternative Performance Measure (See Glossary)
NAV per share
total return against the benchmark
The Directors regard the Company’s NAV per share total return as
being the overall measure of value delivered to shareholders over
the long term. This reflects both net asset value growth of the
Company and dividends paid to shareholders.
The Board considers the most important comparator, against which
to assess the NAV per share total return performance, to be the
MSCI World Health Care Index measured on a net total return,
sterling adjusted basis (the ‘Benchmark’). OrbiMed has flexibility
in managing the investments and are not limited by the make up of
the Benchmark. As a result, investment decisions are made that
differentiate the Company from the Benchmark and therefore the
Company’s performance may also be different to that of the
Benchmark.
A full description of performance during the year under review
is contained in the Portfolio Manager’s Review.
Share price
discount/premium to nav per share
The share price discount/premium to NAV per share is considered
a key indicator of performance as it impacts the share price total
return of shareholders and can provide an indication of how
investors view the Company’s performance and its Investment
Objective.
Ongoing charges
ratio
The Board continues to be conscious of expenses and works hard
to maintain a balance between good quality service and costs.
PRINCIPAL SERVICE PROVIDERS
The principal service providers to the Company are the AIFM,
Frostrow Capital LLP (Frostrow), the Portfolio Manager, OrbiMed
Capital LLC (OrbiMed), the Custodian and Prime Broker J.P. Morgan
Securities LLC, and the Depositary, J.P. Morgan Europe Limited.
Details of their key responsibilities follow and further
information on their contractual arrangements with the Company are
included in the Report of the Directors.
Alternative
investment fund manager (AIFM)
Frostrow under the terms of its AIFM agreement with the Company
provides, inter alia, the following services:
- oversight of the portfolio management function delegated to
OrbiMed Capital LLC;
- investment portfolio administration and valuation;
- risk management services;
- marketing and shareholder services;
- share price discount and premium management;
- administrative and secretarial services;
- advice and guidance in respect of corporate governance
requirements;
- maintenance of the Company’s accounting records;
- maintenance of the Company’s website;
- preparation and dispatch of annual and half year reports (as
applicable) and monthly fact sheets; and
- ensuring compliance with applicable legal and regulatory
requirements.
During the year, under the terms of the AIFM Agreement, Frostrow
received a fee as follows:
On market capitalisation up to £150 million: 0.3%; in the range
£150 million to £500 million: 0.2%; in the range £500 million to £1
billion: 0.15%; in the range £1 billion to £1.5 billion: 0.125%;
over £1.5 billion: 0.075%. In addition, Frostrow receives a fixed
fee per annum of £57,500.
Portfolio
manager
OrbiMed under the terms of its portfolio management agreement
with the AIFM and the Company provides, inter alia, the
following services:
- the seeking out and evaluating of investment
opportunities;
- recommending the manner by which monies should be invested,
disinvested, retained or realised;
- advising on how rights conferred by the investments should be
exercised;
- analysing the performance of investments made; and
- advising the Company in relation to trends, market movements
and other matters which may affect the investment objective and
policy of the Company.
OrbiMed receives a base fee of 0.65% of NAV and a performance
fee of 15% of outperformance against the Benchmark.
Depositary,
custodian and prime broker
J.P. Morgan Europe Limited acts as the Company’s Depositary and
J.P. Morgan Securities LLC as its Custodian and Prime Broker.
J.P. Morgan Europe Limited, as Depositary, must take reasonable
care to ensure that the Company is managed in accordance with the
Financial Conduct Authority’s Investment Funds Sourcebook, the
AIFMD and the Company’s Articles of Association. The Depositary
must in the context of this role act honestly, fairly,
professionally, independently and in the interests of the Company
and its shareholders.
The Depositary receives a variable fee based on the size of the
Company.
J.P. Morgan Europe Limited has discharged certain of its
liabilities as Depositary to J.P. Morgan Securities LLC. Further
details of this arrangement are set out in the Report of the
Directors. J.P. Morgan Securities LLC, as Custodian and Prime
Broker, provides the following services under its agreement with
the Company:
- safekeeping and custody of the Company’s investments and
cash;
- processing of transactions;
- provision of an overdraft facility. Assets up to 140% of the
value of the outstanding overdraft can be taken as collateral;
and
- foreign exchange services.
AIFM AND PORTFOLIO MANAGER EVALUATION
AND RE-APPOINTMENT
The performance of the AIFM and the Portfolio Manager is
reviewed continuously by the Board and the Management Engagement
& Remuneration Committee (the “Committee”) with a formal
evaluation being undertaken each year. As part of this process, the
Committee monitors the services provided by the AIFM and the
Portfolio Manager and receives regular reports and views from them.
The Committee also receives comprehensive performance measurement
reports to enable it to determine whether or not the performance
objectives set by the Board have been met. The Committee reviewed
the appropriateness of the appointment of the AIFM and the
Portfolio Manager in February 2022
with a positive recommendation being made to the Board.
The Board believes the continuing appointment of the AIFM and
the Portfolio Manager, is in the interests of shareholders as a
whole. In coming to this decision, it took into consideration,
inter alia, the following:
- the quality of the service provided and the depth of experience
of the company management, company secretarial, administrative and
marketing team that the AIFM allocates to the management of the
Company; and
- the quality of the service provided and the quality and depth
of experience allocated by the Portfolio Manager to the management
of the portfolio and the long-term performance of the portfolio in
absolute terms and by reference to the Benchmark.
RISK MANAGEMENT
The Board is responsible for the management of risks faced by
the Company. Through delegation to the Audit & Risk Committee,
the Board has established procedures to manage risk, to review the
Company’s internal control framework and establish the level and
nature of the principal risks the Company is prepared to accept in
order to achieve its long-term strategic objective. At least twice
a year the Audit Committee carries out a robust assessment of the
principal risks and uncertainties with the assistance of Frostrow
(the Company’s AIFM) identifying the principal risks faced by the
Company. These principal risks and the ways they are managed or
mitigated are detailed on the following pages.
Principal risks and uncertainties |
Mitigation |
Market risks |
|
By the nature of its activities and
Investment Objective, the Company’s portfolio is exposed to
fluctuations in market prices (from both individual security prices
and foreign exchange rates) and due to exposure to the global
healthcare sector, it is expected to have higher volatility than
the wider market. As such investors should be aware that by
investing in the Company they are exposing themselves to market
risks and those additional risks specific to the sectors in which
the Company invests, such as political interference in drug
pricing. In addition, the Company uses leverage (both through
derivatives and gearing) the effect of which is to amplify the
gains or losses the Company experiences. |
To manage these risks
the Board and the AIFM have appointed OrbiMed to manage the
investment portfolio within the remit of the investment objective
and policy, and imposed various limits and guidelines. These limits
ensure that the portfolio is diversified, reducing the risks
associated with individual stocks, and that the maximum exposure
(through derivatives and an overdraft facility) is limited. The
compliance with those limits and guidelines is monitored daily by
Frostrow and OrbiMed and reported to the Board monthly.
In addition, OrbiMed reports at each Board meeting on the
performance of the Company’s portfolio, which encompasses the
rationale for stock selection decisions, the make-up of the
portfolio, potential new holdings and, derivative activity and
strategy (further details on derivatives can be found in note
16).
The Company does not currently hedge its currency exposure. |
Geo-political/regulatory and
macro economic risk |
|
Macro events may have an adverse
impact on the Company’s performance by causing exchange rate
volatility, changes in tax or regulatory environments, and/or a
fall in market prices. Emerging markets, which a portion of the
portfolio is exposed to, can be subject to greater political
uncertainty and price volatility than developed markets. |
While such events are
outside the control of the Company the Board reviews regularly, and
discusses with the Portfolio Manager, the wider economic and
political environment, along with the portfolio exposure and the
execution of the investment policy against the long-term objectives
of the Company. The Portfolio Manager’s risk team perform
systematic risk analysis, including country and industry specific
risk monitoring.
The Board monitors regulatory developments but relies on the
services of its external advisers to ensure compliance with
applicable law and regulations.
The Board has appointed a specialist investment trust AIFM and
Company Secretary who provides industry and regulatory updates at
each Board meeting.
With regard to Brexit, the Board does not believe that it poses a
unique risk to the Company or that it will affect the Company’s
share price or how its shares are sold. |
Unquoted investment
risk |
|
The Company’s risk could be
increased by its investment in unquoted companies. These
investments may be more difficult to buy, sell or value, so changes
in their valuations may be greater than for listed assets. The
valuation of unquoted investments requires considerable judgement
as explained in Note1(a) and as such realisations may be materially
lower than the value as estimated by the Company. Particular
events, outside the control of the Company, may also have a
significant impact on the valuation and considerable uncertainty
may exist around the potential future outcomes for each
investment. |
To mitigate this risk the Board and
AIFM have set a limit of 10% of the portfolio, calculated at the
time of investment, that can be held in unquoted investments and
have established a robust and consistent valuation policy and
process as set out in Note 1(b), which is in line with UK GAAP
requirements and the International Private Equity and Venture
Capital (IPEV) Guidelines. The Board also monitors the performance
of these investments compared to the additional risks
involved. |
Investment management key person
risk |
|
There is a risk that the individuals
responsible for managing the Company’s portfolio may leave their
employment or may be prevented from undertaking their duties. |
The Board manage this risk by: |
Counterparty risk |
|
In addition to market
and foreign currency risks, discussed above, the Company is exposed
to risk arising from the use of counterparties. If a counterparty
were to fail, the Company could be adversely affected through
either delay in settlement or loss of assets.
The most significant counterparty the Company is exposed to is J.P.
Morgan Securities LLC which is responsible for the safekeeping of
the Company’s assets and provides the overdraft facility to the
Company. As part of the arrangements with J.P. Morgan Securities
LLC they may take assets, up to 140% of the value of the drawn
overdraft, as collateral and have first priority security interest
or lien over all of the Company’s assets. Such assets taken as
collateral may be used, loaned, sold, rehypothecated or transferred
by J.P. Morgan Securities LLC. Although the Company maintains the
economic benefit from the ownership of those assets it does not
hold any of the rights associated with those assets. Any of the
Company’s assets taken as collateral are not covered by the custody
arrangements provided by J.P. Morgan Securities LLC. The Company
is, however, afforded protection in accordance with SEC rules and
U.S. legislation equal to the value of the assets that have been
rehypothecated. |
This risk is managed by the Board
through: |
Service provider risk |
|
The Board is reliant on
the systems of the Company’s service providers and as such
disruption to, or a failure of, those systems could lead to a
failure to comply with law and regulations leading to reputational
damage and/ or financial loss to the Company.
The spread of an infectious disease, such as has been seen as a
result of the COVID-19 pandemic, may again force governments to
introduce rules to restrict meetings and movements of people and
take other measures to prevent its spread, which may cause
disruption to the Company’s operations. |
To manage these risks the
Board: |
ESG related risks |
|
Both the Board and the Portfolio
Manager recognise the importance of having a coherent ESG policy.
There is a risk that investing in companies that disregard ESG
factors will have a negative impact on investment returns and also
that the Company itself may become unattractive to investors if ESG
is not appropriately considered in the Portfolio Manager’s decision
making process. In light of this, the Board has asked OrbiMed to
provide ESG reports at each Board meeting, highlighting examples
where ESG issues influenced investment decisions and/or led to
engagement with an investee company. |
The Board ensures that the Portfolio
Manager’s ESG approach is in line with standards elsewhere and the
Board’s expectations. A summary of the Portfolio Manager’s approach
to Responsible Investing can be found in the Strategic
Report.. |
Shareholder relations and share
price performance risk |
|
The Company is also exposed to the
risk, particularly if the investment strategy and approach are
unsuccessful, that the Company may underperform resulting in the
Company becoming unattractive to investors and a widening of the
share price discount to NAV per share. Also, falls in stock
markets, such as those experienced as a consequence of the COVID-19
pandemic, and the risk of a global recession, are likely to
adversely affect the performance of the Company’s investments. |
In managing this risk
the Board:
The operation of the discount/premium control mechanism and Company
promotional activities have been delegated to Frostrow, who report
to the Board at each Board meeting on these activities. |
Emerging risks
The Company has carried out a robust assessment of the Company’s
emerging and principal risks and the procedures in place to
identify emerging risks are described below. The International Risk
Governance Council definition of an ‘emerging’ risk is one that is
new, or is a familiar risk in a new or unfamiliar context or under
new context conditions (re-emerging). Failure to identify emerging
risks may cause reactive actions rather than being proactive and,
in worst case, could cause the Company to become unviable or
otherwise fail or force the Company to change its structure,
objective or strategy.
The Audit and Risk Committee reviews a risk map at its
half-yearly meetings. Emerging risks are discussed in detail as
part of this process and also throughout the year to try to ensure
that emerging (as well as known) risks are identified and, so far
as practicable, mitigated.
COVID-19
The Board recognises that the spread of new coronavirus
(COVID-19) strains represents an area of continuing risk, both to
the Company’s investments, investment performance and to its
operations. The Portfolio Manager has continued its dialogue with
investee companies and the Board has stayed in close contact with
both the AIFM and the Portfolio Manager and has been regularly
monitoring portfolio and share price developments. The Board has
also received assurances from all of the Company’s service
providers in respect of:
- their business continuity plans and the steps being taken to
guarantee the ongoing efficiency of their operations while ensuring
the safety and well-being of their employees;
- their cyber security measures including improved user-access
controls, safe remote working and evading malicious attacks;
and
- any increased risks of fraud resulting from weaknesses in
systems user access controls.
As the rate of vaccinations increases across the world, the
outlook is cautiously positive, but the Board will continue to
monitor developments as they occur.
COMPANY PROMOTION
The Company has appointed Frostrow to provide marketing and
investor relations services, in the belief that a well-marketed
investment company is more likely to grow over time, have a more
diverse and stable shareholder register and will trade at a
superior rating to its peers.
Frostrow actively promotes the Company in the following
ways:
Engaging regularly with institutional investors,
discretionary wealth managers and a range of execution-only
platforms: Frostrow regularly talks and meets with
institutional investors, discretionary wealth managers and
execution-only platform providers to discuss the Company’s strategy
and to understand any issues and concerns, covering both investment
and corporate governance matters. Such meetings have been conducted
on a virtual basis during the COVID-19 pandemic;
Making Company information more accessible: Frostrow
works to raise the profile of the Company by targeting key groups
within the investment community, holding annual investment
seminars, overseeing PR output and managing the Company’s website
and wider digital offering, including Portfolio Manager videos and
social media;
Disseminating key Company information: Frostrow performs
the Investor Relations function on behalf of the Company and
manages the investor database. Frostrow produces all key corporate
documents, distributes monthly Fact Sheets, Annual Reports and
updates from OrbiMed on portfolio and market developments; and
Monitoring market activity, acting as a link between the
Company, shareholders and other stakeholders: Frostrow
maintains regular contact with sector broker analysts and other
research and data providers, and conducts periodic investor
perception surveys, liaising with the Board to provide up-to-date
and accurate information on the latest shareholder and market
developments.
DISCOUNT CONTROL MECHANISM (DCM)
The Board undertakes a regular review of the level of
discount/premium and consideration is given to ways in which share
price performance may be enhanced, including the effectiveness of
marketing, share issuance and share buy-backs, where
appropriate.
The Board implemented the DCM in 2004. This established a target
level of no more than a 6% share price discount to the cum-income
NAV per share.
Under the DCM, when the discount reaches a level of 6% or more,
the Company’s shares may be bought back and held as treasury shares
(See Glossary).
Treasury shares can be sold back to the market at a later date
at a premium to the cum-income net asset value per share.
Shareholders should note, however, that it remains possible for
the share price discount to the NAV per share to be greater than 6%
on any one day. This is due to the fact that the share price
continues to be influenced by overall supply and demand for the
Company’s shares in the secondary market. The volatility of the NAV
per share in an asset class such as healthcare is another factor
over which the Board has no control.
In recent years the Company’s successful performance has
generated substantial investor interest. Whenever there are
unsatisfied buying orders for the Company’s shares in the market,
the Company has the ability to issue new shares at a small premium
to the cum income NAV per share. This is an effective share price
premium management tool.
Details of share issuance and share buy-backs are set out in the
Report of the Directors.
SOCIAL, ECONOMIC AND ENVIRONMENTAL
MATTERS
The Directors, through the Company’s Portfolio Manager,
encourage companies in which investments are made to adhere to best
practice with regard to corporate governance. In light of the
nature of the Company’s business there are no relevant human rights
issues and the Company does not have a human rights policy.
The Company recognises that social and environmental issues can
have an effect on some of its investee companies.
The Company is an investment trust and so its own direct
environmental impact is minimal. As an externally- managed
investment trust, the Company does not have any employees or
maintain any premises, nor does it undertake any manufacturing or
other physical operations itself. All its operational functions are
outsourced to third party service providers. Therefore, the Company
has no material, direct impact on the environment or any particular
community and the Company itself has no environmental, human
rights, social or community policies. The Board of Directors
consists of six Directors, four of whom are resident in the UK, one
in Canada and one in the U.S. The
Board holds the majority of its regular meetings in the U.K., with
usually one meeting held each year in New
York, and has a policy that travel, as far as possible, is
minimal, thereby minimising the Company’s greenhouse gas emissions.
Further details concerning greenhouse gas emissions can be found
within the Report of the Directors. During the Pandemic all of the
Board and Committee meetings were held via video conference. Video
conferencing has proved to be a very effective way of holding
meetings, and this medium will continue to be used alongside in
person meetings.
The Portfolio Manager engages with the Company’s underlying
investee companies in relation to their corporate governance
practices and the development of their policies on social,
community and environmental matters. The Portfolio Manager’s
Responsible Investing Policy can be seen below.
TASKFORCE FOR CLIMATE-RELATED
FINANCIAL DISCLOSURES (“TCFD”)
The Company notes the TCFD recommendations on climate-related
financial disclosures. The Company is an investment trust with no
employees, internal operations or property and, as such, it is
exempt from the Listing Rules requirement to report against the
TCFD framework.
LONG TERM VIABILITY
The Board has carried out a robust assessment of the principal
risks facing the Company including those that would threaten its
business model, future performance, solvency or liquidity. The
Board has drawn up a matrix of risks facing the Company and has put
in place a schedule of investment limits and restrictions,
appropriate to the Company’s investment objective and policy, in
order to mitigate these risks as far as practicable. The principal
risks and uncertainties which have been identified, and the steps
taken by the Board to mitigate these as far as possible, are shown
in the Strategic Report.
The Board believes it is appropriate to assess the Company’s
viability over a five year period. This period is also deemed
appropriate due to our Portfolio Manager’s long-term investment
horizon and also what it believes to be investors’ horizons, taking
account of the Company’s current position and the potential impact
of the principal risks and uncertainties as shown in the Strategic
Report. The Directors also took into account the liquidity of the
portfolio and the expectation that the Company will pass the next
continuation vote in 2024 when considering the viability of the
Company over the next five years and its ability to meet
liabilities as they fall due.
The Directors do not expect there to be any significant change
in the principal risks that have been identified or the adequacy of
the mitigating controls in place, and do not envisage any change in
strategy or objectives or any events that would prevent the Company
from continuing to operate over that period as the Company’s assets
are liquid, its commitments are limited and the Company intends to
continue to operate as an investment trust.
Based on this assessment, the Directors have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the next five-year
period.
STAKEHOLDER INTERESTS AND BOARD
DECISION-MAKING (SECTION 172 OF THE COMPANIES ACT 2006)
The Directors are required to explain more fully how they have
discharged their duty under s172 of the Companies Act 2006 in
promoting the success of the Company for the benefit of the members
as a whole. This includes the likely consequences of the Directors’
decisions in the long-term and how they have taken wider
stakeholders’ needs into account.
The Directors aim to act fairly between the Company’s
stakeholders. The Board’s approach to shareholder relations is
summarised in the Corporate Governance Report. The Chairman’s
Statement provides an explanation of actions taken by the Directors
during the year to achieve the Board’s long-term aim of ensuring
that the Company’s shares trade at a price close to the NAV per
share.
As an externally managed investment trust, the Company has no
employees, customers, operations or premises. Therefore, the
Company’s key stakeholders (other than its shareholders) are
considered to be its service providers. The need to foster business
relationships with the service providers and maintain a reputation
for high standards of business conduct are central to the
Directors’ decision-making as the Board of an externally managed
investment trust. The Directors believe that fostering constructive
and collaborative relationships with the Company’s service
providers will assist in their promotion of the success of the
Company for the benefit of all shareholders.
The Board engages with representatives from its service
providers throughout the year. Representatives from OrbiMed and
Frostrow are in attendance at each Board meeting. As the Portfolio
Manager and the AIFM respectively, the services they provide are
fundamental to the long-term success and smooth running of the
Company. The Chairman’s Statement and the Business Review, describe
relevant decisions taken during the year relating to OrbiMed and
Frostrow. Further details about the matters discussed in Board
meetings and the relationship between OrbiMed and the Board are set
out in the Corporate Governance Report.
Representatives from other service providers are asked to attend
Board meetings when deemed appropriate.
Further details are set out overleaf.
Who? |
Why? |
How? |
Stakeholder
group |
The benefits of engagement with the
company's stakeholders |
How the board, the portfolio manager
and the AIFM have engaged with the
company’s stakeholders |
Investors |
Clear communication of
the Company’s strategy and the performance against the Company’s
objective can help the share price trade at a narrower discount or
a premium to its net asset value per share which benefits
shareholders.
New shares can be issued to meet demand without net asset value per
share dilution to existing shareholders. Increasing the size of the
Company can benefit liquidity as well as spread costs.
Share buy backs are undertaken at the discretion of the
Directors. |
The Portfolio Manager
and Frostrow, on behalf of the Board, complete a programme of
investor relations throughout the year. While such meetings were
conducted on a virtual basis during the COVID-19 pandemic, meetings
in person are now being held again. In addition, the Chairman has
been available to engage with the Company’s larger shareholders
where required.
An analysis of the Company’s shareholder register is provided to
the Directors at each Board meeting along with marketing reports
from Frostrow. The Board reviews and considers the marketing plans
on a regular basis. Reports from the Company’s broker are submitted
to the Board on investor sentiment and industry issues.
Key mechanisms of engagement include: |
What? |
|
Outcomes and actions |
What were the key areas of
engagement? |
|
What actions were taken, including main
decisions? |
Key areas of
engagement with investors |
|
Frostrow and the Portfolio Manager
engage with retail investors through a number of different
channels: |
Who? |
Why? |
How? |
Stakeholder group |
The benefits of engagement with
the company's stakeholders |
How the board, the portfolio
manager
and the AIFM have engaged with the
company’s stakeholders |
Portfolio Manager |
Engagement with the
Company’s Portfolio Manager is necessary to evaluate their
performance against the Company’s stated strategy and to understand
any risks or opportunities this may present. The Board ensures that
the Portfolio Manager’s environmental, social and governance
(“ESG”) approach is in line with standards elsewhere and the
Board’s expectations.
Engagement also helps ensure that the Portfolio Manager’s fees are
closely monitored and remain competitive.
Gaining a deeper understanding of the portfolio companies and their
strategies as well as incorporating consideration of ESG factors
into the investment process assists in understanding and mitigating
risks of an investment as well as identifying future potential
opportunities. |
The Board met regularly
with the Company’s Portfolio Manager throughout the year. The Board
also receives monthly performance and compliance reporting.
The Portfolio Manager’s attendance at each Board meeting provides
the opportunity for the Portfolio Manager and Board to further
reinforce their mutual understanding of what is expected from both
parties.
The Board encourages the Company’s Portfolio Manager to engage with
companies and in doing so expects ESG issues to be an important
consideration.
The Board receives an update on Frostrow’s engagement activities by
way of a dedicated report at Board meetings and at other times
during the year as required. |
Service Providers |
The Company contracts
with third parties for other services including: custody, company
secretarial, accounting & administration and registrar. The
Company ensures that the third parties to whom the services have
been outsourced complete their roles in line with their service
level agreements thereby supporting the Company in its success and
ensuring compliance with its obligations.
The COVID-19 pandemic has meant that it was vital to make certain
there were adequate procedures in place at the Company’s principal
service providers to ensure safety of their employees and the
continued high quality service to the Company. |
The Board and Frostrow,
acting in its capacity as AIFM, engage regularly with other service
providers both in one-to-one meetings and via regular written
reporting. This regular interaction provides an environment where
topics, issues and business development needs can be dealt with
efficiently and collegiately.
The Board together with Frostrow have maintained regular contact
with the Company’s principal service providers during the pandemic,
as well as carrying out a review of the service providers’ business
continuity plans and additional cyber security provisions.
The review of the performance of the Portfolio Manager and Frostrow
is a continuous process carried out by the Board and the
Remuneration and Management Engagement Committee with a formal
evaluation being undertaken annually. |
What? |
|
Outcomes and actions |
What were the key areas of
engagement? |
|
What actions were taken, including main
decisions? |
Key areas of
engagement with the Portfolio Manager on an ongoing basis are
portfolio composition, performance, outlook and business
updates. |
- The ongoing impact of the pandemic upon their business and how
components in the portfolio dealt with the pandemic.
- Regular review of the make up of the investment portfolio.
- The integration of ESG factors into the Portfolio Manager’s
investment processes.
|
|
- The Board has received
regular updates from the Portfolio Manager throughout the pandemic
and its impact on investment decision making. In addition, the
impact of new working practices adopted by the Portfolio Manager as
a consequence of the pandemic have been reviewed by the Board.
- The Portfolio Manager reports
on ESG issues at each Board meeting. |
Key areas of engagement with
Service Providers |
|
|
- The Directors have frequent engagement with the Company’s other
service providers through the annual cycle of reporting. This
engagement is completed with the aim of maintaining an effective
working relationship and oversight of the services provided.
- The Board sought and received assurances from all of the
Company’s service providers that steps had been taken to maintain
the ongoing efficiency of their operations while ensuring the
safety and well-being of their employees.
|
|
- No specific action required
as 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 Board agreed to continue
to monitor the position closely. |
Key areas of engagement with the
broker |
|
|
- The Board is cognisant that
the trading of the Company‘s shares at a persistent and significant
discount or premium to the prevailing NAV per share is not in the
interests of shareholders. |
|
- Throughout the year the Board closely monitored the Company’s
discount/premium to NAV per share and received regular updates from
the broker. 80,509 shares were bought back during the year, and a
further 223,842 shares were bought back since the year-end to 25
May 2022. 1,227,500 new shares were issued during the year, no
shares issued following the year-end to 25 May 2022. (Please see
the Chairman’s Statement for further information.)
|
INTEGRITY AND BUSINESS ETHICS
The Company is committed to carrying out business in an honest
and fair manner with a zero-tolerance approach to bribery, tax
evasion and corruption. As such, policies and procedures are in
place to prevent this. In carrying out its activities, the Company
aims to conduct itself responsibly, ethically and fairly, including
in relation to social and human rights issues.
The Company believes that high standards of ESG make good
business sense and have the potential to protect and enhance
investment returns. The Portfolio Manager’s investment criteria
provide that ESG and ethical issues are taken into account and best
practice is encouraged by the Board. The Board’s expectations are
that its principal service providers have appropriate governance
policies in place.
PERFORMANCE AND FUTURE
DEVELOPMENTS
A review of the Company’s year, its performance and the outlook
for the Company can be found in the Chairman’s Statement and in the
Portfolio Manager’s Review.
The Company’s overall strategy remains unchanged.
LOOKING TO THE FUTURE
The Board concentrates its attention on the Company’s investment
performance and OrbiMed’s investment approach and on factors that
may have an effect on this approach. Marketing reports are given to
the Board at each board meeting by the AIFM which include how the
Company will be promoted and details of planned communications with
existing and potential shareholders. The Board is regularly updated
by the AIFM on wider investment trust industry issues and
discussions are held at each Board meeting concerning the Company’s
future development and strategy.
A review of the Company’s year, its performance since the
year-end and the outlook for the Company can be found in the
Chairman’s Statement and in the Portfolio Manager’s Review. It is
expected that the Company’s Strategy will remain unchanged in the
coming year.
ALTERNATIVE PERFORMANCE MEASURES
The Financial Statements set out the required statutory
reporting measures of the Company’s financial performance. In
addition, the Board assesses the Company’s performance against a
range of criteria which are viewed as particularly relevant for
investment trusts, which are explained in greater detail in the
Strategic Report, under the heading ‘Key Performance
Indicators’.
By order of the Board
Frostrow Capital LLP
Company Secretary
26 May 2022
BOARD OF DIRECTORS
SIR MARTIN
SMITH
Independent Non-Executive Chairman
Joined the Board in 2007 and became Chairman in 2008
Annual remuneration year-end 2022: £53,150pa
Committee Membership
Sir Martin attends the Audit & Risk Committee by invitation
and is a member of the Nominations and Management Engagement &
Remuneration Committees.
Shareholding in the Company
11,871 (Beneficial) 2,725 (Trustee)
Skills and Experience
Sir Martin Smith has been
involved in the financial services sector for almost 50 years. He
was a founder and senior partner of Phoenix Securities, becoming
Chairman of European Investment Banking for Donaldson, Lufkin &
Jenrette (DLJ) following the acquisition of Phoenix by DLJ. He was subsequently a founder
of New Star Asset Management Ltd.
Other Appointments
Sir Martin has a number of other directorships and business
interests, including acting as Chairman Emeritus of GP Bullhound,
the technology investment banking firm. He is also a member of the
Advisory Board of Cerno Capital Partners LLP.
Sir Martin’s pro-bono interests include being a founder of the
Orchestra of the Age of Enlightenment of which he is Life
President, and he has served on the boards of a number of other
arts organisations including English National Opera, the
Glyndebourne Arts Trust and the Royal Academy of Music and the
Ashmolean Museum. He is a Trustee of ClientEarth. In 2008 Sir
Martin with his family were founding benefactors of the Smith
School of Enterprise and the Environment at Oxford University.
Standing for re-election: No
SARAH
BATES
Independent Non-Executive Director
Joined the Board in 2013
Annual remuneration year-end 2022: £36,007pa
Committee Membership
Sarah is Chair of the Nominations Committee and is the Senior
Independent Director. Sarah is also a member of the Audit &
Risk and Management Engagement & Remuneration Committees.
Shareholding in the Company
7,200
Skills and Experience
Sarah is a past Chair of the Association of Investment Companies
and has been involved in the UK savings and investment industry in
different roles for over 35 years.
Sarah is a fellow of CFA UK.
Other Appointments
Sarah is non-executive Chair of Polar Capital Technology Trust
plc and a non-executive Director of Alliance Trust PLC. Sarah is
also Chair of The John Lewis Partnership Pensions Trust of BBC
Pension Investments Limited and of the Universities Superannuation
Fund Investment Management Limited. Sarah is a member of the BBC
Pension Scheme Investment Committee and is an Ambassador for
Chapter Zero and a mentor for Chairmen Mentors International.
Standing for re-election: Yes
SVEN
BORHO
Non-Executive Director
Joined the Board in 2018
Annual remuneration year-end 2022: Nil
Committee Membership
Sven is not a member of any of the Company’s Committees.
Shareholding in the Company
10,000
Skills and Experience
Sven H. Borho, CFA, is a founder
and Managing Partner of OrbiMed. Sven heads the public equity team
and he is the
portfolio manager for OrbiMed’s public equity and hedge funds.
He has been a portfolio manager for the firm’s funds
since 1993 and has played an integral role in the growth of
OrbiMed’s asset management activities.
He started his career in 1991 when he joined OrbiMed’s
predecessor firm as a Senior Analyst covering European
pharmaceutical firms and biotechnology companies worldwide. Sven
studied business administration at
Bayreuth University in Germany
and received a M.Sc.(Econs.), Accounting and Finance, from The
London School
of Economics.
Other Appointments
Sven is a Managing Partner of OrbiMed and does not have any
other appointments.
Standing for re-election: Yes
HUMPHREY VAN
DER KLUGT, FCA
Independent Non-Executive Director
Joined the Board in 2016
Annual remuneration year-end 2022: £41,133pa
Committee Membership
A Chartered Accountant, Humphrey is Chairman of the Audit &
Risk Committee. Humphrey is also a member of the Management
Engagement & Remuneration and the Nominations Committees.
Shareholding in the Company
3,000
Skills and Experience
Humphrey was formerly Chairman of Fidelity European Values PLC
and a Director of Murray Income Trust PLC, BlackRock Commodities
Income Investment Trust plc and J P Morgan Claverhouse Investment
Trust plc. Prior to this Humphrey was a fund manager and Director
of Schroder Investment Management Limited and in a 22 year career
was a member of their Group Investment and Asset Allocation
Committees. Prior to joining Schroders, he was with Peat Marwick
Mitchell & Co (now KPMG) where he qualified as a Chartered
Accountant in 1979.
Other Appointments
Humphrey is a non-executive Director of Allianz Technology Trust
PLC.
Standing for re-election: Yes
DOUG
MCCUTCHEON
Independent Non-Executive Director
Joined the Board in 2012
Annual remuneration year-end 2022: £33,573pa
Committee Membership
Doug is Chairman of the Management Engagement & Remuneration
Committee. Doug is also a member of the Audit & Risk and
Nominations Committees.
Shareholding in the Company
20,000
Skills and Experience
Doug is the President of Longview Asset Management Ltd., an
independent investment firm that manages the capital of families,
charities and endowments. Prior to this, Doug was an investment
banker for 25 years at UBS and its predecessor firm, S.G. Warburg,
where, most recently, he was the head of Healthcare Investment
Banking for Europe, the
Middle East, Africa and Asia-
Pacific. Doug is involved in philanthropic organisations
with a focus on healthcare and education. He attended Queen’s
University, Canada.
Other Appointments
Doug is a non-executive Director of Labrador Iron Ore Royalty
Corporation listed on the Toronto Stock Exchange.
Standing for re-election: Yes
DR BINA
RAWAL
Independent Non-Executive Director
Joined the Board in 2019
Annual remuneration year-end 2021: £33,573pa
Committee Membership
Dr Rawal is a member of the Audit & Risk, Management
Engagement & Remuneration and Nominations Committees.
Shareholding in the Company
1,810
Skills and Experience
Dr Rawal, a physician scientist with 25 years’ experience in
Research and Development, has held senior executive roles in drug
development and scientific evaluation in four global pharmaceutical
companies. She has also worked in senior roles with two medical
research funding organisations: Wellcome Trust and Cancer Research
UK.
Other Appointments
Dr Rawal is a non-executive Director of the Central London
Community Healthcare NHS Trust and of Vann Limited. Dr Rawal is
also a Trustee on the Board of the Social Mobility Foundation.
Standing for re-election: Yes
REPORT OF THE DIRECTORS
The Directors present their Annual
Report on the affairs of the Company together with the audited
financial statements and the Independent Auditors’ Report for the
year ended 31 March 2022.
SIGNIFICANT AGREEMENTS
Details of the services provided under these agreements are
included in the Strategic Report.
Alternative
investment fund management agreement
Frostrow is the designated AIFM for the Company on the terms and
subject to the conditions of the alternative investment fund
management agreement between the Company and Frostrow (the “AIFM
Agreement”).
The notice period on the AIFM Agreement with Frostrow is 12
months, termination can be initiated by either party.
Portfolio
management agreement
Under the AIFM Agreement Frostrow has delegated the portfolio
management function to OrbiMed, under a portfolio management
agreement between it, the Company and Frostrow (the “Portfolio
Management Agreement”).
OrbiMed receives a periodic fee equal to 0.65% p.a. of the
Company’s NAV and a performance fee as set out in the Performance
Fee section below. Its agreement with the Company may be terminated
by either party giving notice of not less than 12 months.
Performance
fee
Dependent on the level of long-term outperformance of the
Company, OrbiMed is entitled to a performance fee. The performance
fee is calculated by reference to the amount by which the Company’s
NAV performance has outperformed the Benchmark (see inside front
cover for details of the Benchmark).
The fee is calculated quarterly by comparing the cumulative
performance of the Company’s NAV with the cumulative performance of
the Benchmark since the launch of the Company in 1995. The
performance fee amounts to 15.0% of any outperformance over the
Benchmark. Provision is made within the daily NAV per share
calculation as required and in accordance with generally accepted
accounting standards.
In order to ensure that only sustained outperformance is
rewarded, at each quarterly calculation date any performance fee
payable is based on the lower of:
- The cumulative outperformance of the portfolio over the
Benchmark as at the quarter end date; and
- The cumulative outperformance of the portfolio over the
Benchmark as at the corresponding quarter end date in the previous
year
less any cumulative outperformance on which a performance fee
has already been paid.
The effect of this is that outperformance has to be maintained
for a twelve month period before it is paid.
Due to underperformance against the Benchmark during the year, a
reversal of prior period performance fee provisions totalling £18.9
million occurred (2021: charge of £31.7 million).
As at 31 March 2022 no performance
fees were accrued or payable (31 March
2021: £31.7 million). Of the 31 March
2021 accrual £12.9 million was paid and became payable as at
30 June 2021 and £18.9 million was
reversed due to underperformance, as noted above. The performance
fee paid related to outperformance generated as at 30 June 2020 that was maintained to 30 June 2021.
Depositary
agreement
The Company appointed J.P. Morgan Europe Limited (the
“Depositary”) as its Depositary in accordance with the AIFMD on the
terms and subject to the conditions of the Depositary agreement
between the Company, Frostrow and the Depositary (the “Depositary
Agreement”).
Under the terms of the Depositary Agreement the Company has
agreed to pay the Depositary a fee calculated at 1.75bp on net
assets up to £150 million, 1.50 bps on net assets between £150
million and £300 million, 1.00bps on net assets between £300
million and £500 million and 0.50bps on net assets above £500
million.
The Depositary has delegated the custody and safekeeping of the
Company’s assets to J.P. Morgan Securities LLC (the “Custodian and
Prime Broker”) pursuant to a delegation agreement between the
Company, Frostrow, the Depositary and the Custodian and Prime
Broker (the “Delegation Agreement”).
The Delegation Agreement transfers the Depositary’s liability
for the loss of the Company’s financial instruments held in custody
by the Custodian and Prime Broker to the Custodian and Prime Broker
in accordance with the AIFMD. The Company has consented to the
transfer and reuse of its assets by the Custodian and Prime Broker
(known as “rehypothecation”) in accordance with the terms of an
institutional account agreement between the Company, the Custodian
and Prime Broker and certain other J.P. Morgan entities (as defined
therein).
Prime brokerage agreement
The Company appointed J.P. Morgan Securities LLC on the terms
and subject to the conditions of the prime brokerage agreement
between the Company, Frostrow and the Depositary (the “Prime
Brokerage Agreement”). The Custodian and Prime Broker receives
interest on the drawn overdraft as detailed in note 12.
The Custodian and Prime Broker is a registered broker-dealer and
is regulated by the United States Securities and Exchange
Commission.
RESULTS AND DIVIDENDS
The results attributable to shareholders for the year and the
transfer to reserves are shown in the financial statements .
Details of the Company’s dividend record can be found in the
Strategic Report.
Substantial
interests in share capital
The Company was aware of the following substantial interests in
the voting rights of the Company as at 30
April 2022, the latest practicable date before publication
of the Annual Report:
|
30
April 2022 |
31
March 2022 |
|
|
|
% of issued |
|
% of issued |
|
Shareholder |
Number of |
share |
Number of |
share |
|
shares |
capital |
shares |
capital |
|
Rathbone Brothers plc |
5,962,688 |
9.1 |
5,956,447 |
9.1 |
|
Investec Wealth & Investment
Limited |
4,784,176 |
7.3 |
4,763,731 |
7.3 |
|
Interactive Investor |
4,066,312 |
6.2 |
4,043,547 |
6.2 |
|
Hargreaves Lansdown plc |
3,865,715 |
5.9 |
3,812,568 |
5.8 |
|
Forsyth Barr |
3,370,420 |
5.2 |
3,303,660 |
5.1 |
|
Charles Stanley & Co
Limited |
2,900,353 |
4.5 |
2,889,422 |
4.4 |
|
Brewin Dolphin |
2,421,278 |
3.7 |
2,430,556 |
3.7 |
|
Quilter Cheviot Investment
Management |
2,396,904 |
3.7 |
2,346,563 |
3.6 |
|
Craigs Investment Partners |
2,083,678 |
3.2 |
2,067,121 |
3.2 |
|
Embark Investment Services |
2,008,353 |
3.1 |
2,031,031 |
3.1 |
|
BlackRock |
2,003,967 |
3.1 |
2,003,967 |
3.1 |
|
As at 31 March 2022 the Company
had 65,457,246 shares in issue (excluding 80,509 shares held in
treasury). As at 30 April 2022 there
were 65,233,404 shares in issue (excluding 304,351 shares held in
treasury).
DIRECTORS’ & OFFICERS’ LIABILITY
INSURANCE COVER
Directors’ & officers’ liability insurance cover was
maintained by the Company during the year ended 31 March 2022 and to the date of this report. It
is intended that this policy will continue for the year ending
31 March 2023 and subsequent
years.
DIRECTORS’ INDEMNITIES
During the year under review and to the date of this report,
indemnities were in force between the Company and each of its
Directors under which the Company has agreed to indemnify each
Director, to the extent permitted by law, in respect of certain
liabilities incurred as a result of carrying out his or her role as
a Director of the Company. The Directors are also indemnified
against the costs of defending any criminal or civil proceedings or
any claim by the Company or a regulator as they are incurred
provided that where the defence is unsuccessful the Director must
repay those defence costs to the Company. The indemnities are
qualifying third party indemnity provisions for the purposes of the
Companies Act 2006.
A copy of each deed of indemnity is available for inspection at
the Company’s registered office during normal business hours and
will be available for inspection at the Annual General Meeting.
Please refer to the Chairman’s Statement for details of this year’s
Annual General Meeting arrangements.
CAPITAL STRUCTURE
The Company’s capital structure is composed solely of ordinary
shares.
During the year, a total of 1,227,500 new shares were issued at
an average premium of 0.8% to the prevailing cum income NAV per
share. Also, 80,509 shares were repurchased during the year at a
discount of 8.4% to the prevailing cum income NAV per share. These
shares are held in treasury. Following the year-end, to
25 May 2022, the latest practicable
date prior to the publication of this Annual Report, a further
223,842 shares were repurchased at a discount of 7.0% to the cum
income NAV per share. These shares are also held in treasury. As of
25 May 2022 304,351 shares were held
in treasury (2021: Nil).
Since the year end, to 25 May
2022, no new shares have been issued.
Voting rights in
the company’s shares
Details of the voting rights in the Company’s shares at the date
of this Annual Report are given in note 9 to the Notice of Annual
General Meeting.
POLITICAL AND CHARITABLE DONATIONS
The Company has not in the past and does not intend in the
future to make political or charitable donations.
MODERN SLAVERY ACT 2015
The Company does not provide goods or services in the normal
course of business, and as a financial investment vehicle does not
have customers. The Directors do not therefore consider that the
Company is required to make a statement under the Modern Slavery
Act 2015 in relation to slavery or human trafficking.
ANTI-BRIBERY AND CORRUPTION POLICY
The Board has adopted a zero tolerance approach to instances of
bribery and corruption. Accordingly it expressly prohibits any
Director or associated persons when acting on behalf of the
Company, from accepting, soliciting, paying, offering or promising
to pay or authorise any payment, public or private in the UK or
abroad to secure any improper benefit for themselves or for the
Company.
The Board ensures that its service providers apply the same
standards in their activities for the Company.
A copy of the Company’s Anti Bribery and Corruption Policy can
be found on its website at www.worldwidewh.com. The policy is
reviewed regularly by the Audit Committee.
CRIMINAL FINANCES ACT 2017
The Company has a commitment to zero tolerance towards the
criminal facilitation of tax evasion.
GLOBAL GREENHOUSE GAS EMISSIONS
The Company has no greenhouse gas emissions to report from its
operations, nor does it have responsibility for any other emissions
producing sources under the Companies Act 2006 (Strategic Reports
and Directors’ Reports) Regulations 2013 or the Companies
(Directors’ Report) and Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018, including those within the
Company’s underlying investment portfolio. Consequently, the
Company consumed less than 40,000 kWh of energy during the year in
respect of which the Report of the Directors is prepared and
therefore is exempt from the disclosures required under the
Streamlined Energy and Carbon Reporting criteria.
COMMON REPORTING STANDARD (‘CRS’)
CRS is a global standard for the automatic exchange of
information commissioned by the Organisation for Economic
Cooperation and Development and incorporated into UK law by the
International Tax Compliance Regulations 2015. CRS requires the
Company to provide certain additional details to HMRC in relation
to certain shareholders. The reporting obligation began in 2016 and
is an annual requirement. The Registrars, Link Group, have been
engaged to collate such information and file the reports with HMRC
on behalf of the Company.
GOING CONCERN
The financial statements have been prepared on a going concern
basis. The Directors consider this is the appropriate basis as the
Company has adequate resources to continue in operational existence
for the foreseeable future, being taken as 12 months after approval
of the financial statements. The Company’s shareholders are asked
every five years to vote for the continuation of the Company, this
will next be put to shareholders at the Annual General Meeting to
be held in 2024. The content of the Company’s portfolio, trading
activity, the Company’s cash balances and revenue forecasts, and
the trends and factors likely to affect the Company’s performance
are reviewed and discussed at each Board meeting. The Board has
considered a detailed assessment of the Company’s ability to meet
its liabilities as they fall due, including stress and liquidity
tests which modelled the effects of substantial falls in markets
and significant reductions in market liquidity, on the Company’s
net asset value, its cash flows and its expenses. Further
information is provided in the Audit & Risk Committee
report.
Based on the information available to the Directors at the date
of this report, including the results of these stress tests, the
conclusions drawn in the Viability Statement, the Company’s cash
balances, and the liquidity of the Company’s listed investments,
the Directors are satisfied that the Company has adequate financial
resources to continue in operation for at least the next 12 months
and that, accordingly, it is appropriate to continue to adopt the
going concern basis in preparing the financial statements.
ARTICLES OF ASSOCIATION
Amendments of the Company’s Articles of Association requires a
special resolution to be passed by shareholders.
REQUIREMENTS OF THE LISTING RULES
Listing Rule 9.8.4 requires the Company to include certain
information in a single identifiable section of the Annual Report
or a cross reference table indicating where the information is set
out. The Directors confirm that there are no disclosures to be made
under Listing Rule 9.8.4.
By order of the Board
Frostrow Capital LLP
Company Secretary
26 May 2022
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable law and
regulations. In preparing these financial statements, the
Directors are required to:
- select suitable accounting policies and apply them
consistently;
- make judgements and estimates that are reasonable and
prudent;
- follow applicable UK accounting standards comprising FRS 102;
and
- prepare the financial statements on a going concern basis
unless it is inappropriate that the 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 Company and enable them to ensure that
the financial statements and the Directors’ Remuneration Report
comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for ensuring that the Report of
the Directors and other information included in the Annual Report
is prepared in accordance with company law in the United Kingdom. They are also responsible for
ensuring that the Annual Report includes information required by
the Listing Rules of the FCA.
The Directors are also responsible for ensuring that the Annual
Report and the Financial Statements are made available on a
website. The Annual Report and the Financial Statements are
published on the Company’s website at www.worldwidewh.com and via
Frostrow’s website at www.frostrow.com. The maintenance and
integrity of these websites, so far as it relates to the Company,
is the responsibility of Frostrow. The work carried out by the
Auditors does not involve consideration of the maintenance and
integrity of these websites and, accordingly, the Auditors accept
no responsibility for any changes that have occurred to the
financial statements since they were initially presented on these
websites. Visitors to the websites need to be aware that
legislation in the United Kingdom
governing the preparation and dissemination of the financial
statements may differ from legislation in their jurisdiction.
DISCLOSURE OF INFORMATION TO THE
AUDITORS
So far as the Directors are aware, there is no relevant
information of which the Auditors are unaware. The Directors have
taken all steps they ought to have taken to make themselves aware
of any relevant audit information and to establish that the
Auditors are aware of such information.
RESPONSIBILITY STATEMENT OF THE
DIRECTORS IN RESPECT OF THE ANNUAL FINANCIAL REPORT
The Directors confirm to the best of their knowledge that:
- the Annual Report and the Financial Statements have been
prepared in accordance with applicable accounting standards, give a
true and fair view of the assets, liabilities, financial position
and the return for the year ended 31 March 2022;
- the Chairman’s Statement, Strategic Report and the Report of
the Directors include a fair review of the information required by
4.1.8R to 4.1.11R of the FCA’s Disclosure Guidance and Transparency
Rules; and
- the Annual Report and the Financial Statements taken as a whole
are fair, balanced and understandable and provide the information
necessary to assess the Company’s performance, business model and
strategy.
On behalf of the Board
Sir Martin
Smith
Chairman
26 May 2022
CORPORATE GOVERNANCE
THE BOARD AND COMMITTEES
Responsibility for effective governance lies with the Board. The
governance framework of the Company reflects the fact that as an
investment company it has no employees and outsources portfolio
management to OrbiMed and risk management, company management,
company secretarial, administrative and marketing services to
Frostrow Capital LLP.
THE BOARD
Chairman – Sir Martin Smith
Senior Independent Director – Sarah Bates
Four additional non-executive Directors, all considered
independent, except for Sven Borho.
Key responsibilities:
- to provide leadership and set
strategy, values and standards within a framework of prudent
effective controls which enable risk to be assessed and
managed;
- to ensure that a robust
corporate governance framework is implemented; and
- to challenge constructively
and scrutinise performance of all outsourced activities. |
Management
Engagement & Remuneration Committee
Chairman
Doug McCutcheon
All Independent Directors
Key responsibilities:
- to review regularly the
contracts, the performance and remuneration of the Company’s
principal service providers; and
- to set the Directors’
Remuneration Policy of the Company. |
|
Audit & Risk
Committee
Chairman
Humphrey van der Klugt, FCA*
All Independent Directors (excluding the Chairman, Sir Martin
Smith)
Key responsibilities:
- to review the Company’s
financial reports;
- to oversee the risk and
control environment and financial reporting; and
- to review the performance of
the Company’s external Auditors. |
|
Nominations
Committee
Chair
Sarah Bates
All Independent Directors
Key responsibilities:
- to review regularly the
Board’s structure and composition; and
- to make recommendations for
any changes or new appointments. |
- The Directors believe that Humphrey van
der Klugt has the necessary recent and relevant financial
experience to Chair the Company’s Audit & Risk Committee.
Copies of the full terms of reference, which clearly define the
responsibilities of each Committee, can be obtained from the
Company Secretary and can be found at the Company’s website at
www.worldwidewh.com. Copies will also be available for inspection
on the day of the Annual General Meeting.
CORPORATE GOVERNANCE STATEMENT
The Board is committed to maintaining and demonstrating high
standards of corporate governance. The Board has considered the
principles and recommendations of the AIC Code of Corporate
Governance published in February 2019
(‘AIC Code’). The AIC Code addresses all the principles set out in
the UK Corporate Governance Code (the ‘UK Code’), as well as
setting out additional provisions on issues that are of specific
relevance to the Company.
The Financial Reporting Council has confirmed that by following
the AIC Code boards of investment companies will meet their
obligations in relation to the UK Code and paragraph 9.8.6 of the
UK Listing Rules.
The Board considers that reporting in accordance with the
principles and recommendations of the AIC Code (which has been
endorsed by the Financial Reporting Council) provides more relevant
and comprehensive information to shareholders. By reporting against
the AIC Code, the Company meets its obligations under the UK Code
(and associated disclosure requirements under paragraph 9.8.6 of
the Listing Rules) and as such does not need to report further on
issues contained in the UK Code which are irrelevant to the Company
as an externally-managed investment company, including the
provisions relating to the role of the chief executive, executive
directors’ remuneration and the internal audit function.
The Company has complied with the principles and recommendations
of the AIC Code.
The AIC Code can be viewed at www.theaic.co.uk and the UK Code
can be viewed on the Financial Reporting Council website at
www.frc.org.uk. The Corporate Governance Report, forms part of the
Report of the Directors.
BOARD LEADERSHIP AND PURPOSE
Purpose and
strategy
The purpose and strategy of the Company are described in the
Strategic Report.
THE BOARD
The Board is responsible for the effective Stewardship of the
Company’s affairs. Strategy issues and all operational matters of a
material nature are considered at its meetings.
The Board consists of six non-executive Directors, each of whom,
with the exception of Sven Borho, is
independent of OrbiMed and the Company’s other service providers.
No member of the Board is a Director of another investment company
managed by OrbiMed, nor has any Board member (with the exception of
Sven Borho) been an employee of
OrbiMed or any of the Company’s service providers.
The Board carefully considers the various guidelines for
determining the independence of non-executive Directors, placing
particular weight on the view that independence is evidenced by an
individual being independent of mind, character and judgement. All
Directors retire at the AGM each year and, if appropriate, seek
election or re-election. Each Director has signed a letter of
appointment to formalise the terms of their engagement as a
non-executive Director, copies of which are available on request at
the office of Frostrow Capital LLP.
BOARD CULTURE
The Board aims to consider and discuss differences of opinion,
unique vantage points and to exploit fully areas of expertise. The
Chairman encourages open debate to foster a supportive and
co-operative approach for all participants. Strategic decisions are
discussed openly and constructively. The Board aims to be open and
transparent with shareholders and other stakeholders and for the
Company to conduct itself responsibly, ethically and fairly in its
relationships with service providers.
The Board has gained assurance on whistleblowing procedures at
the Company’s principal service providers to ensure employees at
those companies are supported in speaking up and raising concerns.
No concerns relating to the Company were raised during the
year.
Shareholder
relations
The Company has appointed Frostrow to provide marketing and
investor relations services, in the belief that a well marketed
investment company is more likely to grow over time, have a more
diverse, stable list of shareholders and its shares will trade at
close to net asset value per share over the long run. Frostrow
actively promotes the Company.
Shareholder
communications
The Board, the AIFM and the Portfolio Manager consider
maintaining good communications with shareholders and engaging with
larger shareholders through meetings and presentations a key
priority. Shareholders are being informed by the publication of
annual and half-year reports which include financial statements.
These reports are supplemented by the daily release of the net
asset value per share to the London Stock Exchange and the
publication of monthly fact sheets. All this information, including
interviews with the Portfolio Manager, is available on the
Company’s website at www.worldwidewh.com.
The Board supports the principle that the Annual General Meeting
be used to communicate with private investors, in particular. While
the COVID-19 pandemic has necessitated different arrangements for
the past two years, shareholders are usually encouraged to attend
the Annual General Meeting, where they are given the opportunity to
question the Chairman, the Board and representatives of the
Portfolio Manager. In addition, the Portfolio Manager makes a
presentation to shareholders covering the investment performance
and strategy of the Company at the Annual General Meeting. Voting
at the Annual General Meeting is conducted on a poll and details of
the proxy votes received in respect of each resolution will be made
available on the Company’s website.
The Board monitors the share register of the Company; it also
reviews correspondence from shareholders at each meeting and
maintains regular contact with major shareholders. Shareholders who
wish to raise matters with a Director may do so by writing to them
at the registered office of the Company.
Significant
holdings and voting rights
Details of the shareholders with substantial interests in the
Company’s shares, the Directors’ authorities to issue and
repurchase the Company’s shares, and the voting rights of the
shares are set out in the Directors’ Report.
BOARD MEETINGS
The Board meets formally at least four times each year. A
representative of OrbiMed attends all meetings; representatives
from Frostrow Capital LLP are also in attendance at each Board
meeting. The Chairman encourages open debate to foster a supportive
and co-operative approach for all participants.
The Board has agreed a schedule of matters specifically reserved
for decision by the Board. This includes establishing the
investment objectives, strategy and the Benchmark, the permitted
types or categories of investments, the markets in which
transactions may be undertaken, the amount or proportion of the
assets that may be invested in any geography or category of
investment or in any one investment, and the Company’s share
issuance and share buyback policies.
The Board, at its regular meetings, undertakes reviews of key
investment and financial data, revenue projections and expenses,
analyses of asset allocation, transactions and performance
comparisons, share price and net asset value performance, marketing
and shareholder communication strategies, the risks associated with
pursuing the investment strategy, peer group information and
industry issues.
The Chairman is responsible for ensuring that the Board receives
accurate, timely and clear information. Representatives of OrbiMed
and Frostrow Capital LLP report regularly to the Board on issues
affecting the Company.
The Board is responsible for strategy and has established an
annual programme of agenda items under which it reviews the
objectives and strategy for the Company at each meeting.
CONFLICTS OF INTEREST
Company Directors have a statutory obligation to avoid a
situation in which they (and connected persons) have, or can have,
a direct or indirect interest that conflicts, or may possibly
conflict, with the interests of the Company. The Board has in place
procedures for managing any actual or potential conflicts of
interest. No conflicts of interest arose during the year under
review.
BOARD FOCUS AND RESPONSIBILITIES
With the day to day management of the Company outsourced to
service providers the Board’s primary focus at each Board meeting
is reviewing the investment performance and associated matters,
such as, inter alia, future outlook and strategy, gearing,
asset allocation, investor relations, marketing, and industry
issues.
In line with its primary focus, the Board retains responsibility
for all the key elements of the Company’s strategy and business
model, including:
- the Investment Objective, Policy and Benchmark, incorporating
the investment and derivative guidelines and limits, and changes to
these;
- the maximum level of gearing and leverage the Company may
employ;
- a review of performance against the Company’s KPIs;
- a review of the performance and continuing appointment of
service providers; and
- the maintenance of an effective system of oversight, risk
management and corporate governance.
The Investment Objective, Policy, and Benchmark, including the
related limits and guidelines, are set out in the Strategic Report,
along with details of the gearing and leverage levels allowed.
Details of the principal KPIs and further information on the
principal service providers, their performance and continuing
appointment, along with details of the principal risks, and how
they are managed, are set out in the Strategic Report.
The Corporate Governance Report includes a statement of
compliance with corporate governance codes and best practice, and
the Business Review includes details of the internal control and
risk management framework within which the Board operates.
BOARD COMPOSITION AND SUCCESSION
Succession
planning
The Board regularly considers its structure and recognises the
need for progressive refreshment. (Please see the Chairman’s
Statement for further information).
The Board has an approved succession planning policy to ensure
that (i) there is a formal, rigorous and transparent procedure for
the appointment of new Directors; and (ii) the Board is comprised
of members who collectively display the necessary balance of
professional skills, experience, length of service and
industry/Company knowledge.
During the year, the Board reviewed the policy on Directors’
tenure and considered the overall length of service of the Board as
a whole.
Policy on the
tenure of the chairman and other non-executive directors
The tenure of each non-executive Director, including the
Chairman, is not ordinarily expected to exceed nine years. However,
the Board has agreed that the tenure of the Chairman may be
extended for an agreed time provided such an extension is conducive
to the Board’s overall orderly succession. The Board believes that
this more flexible approach to the tenure of the Chairman is
appropriate in the context of the regulatory rules that apply to
investment companies, which ensure that the chair remains
independent after appointment, while being consistent with the need
for regular refreshment and diversity.
The Board is, however, continuing the process of refreshing its
membership which will mean that certain Directors will serve for
longer than nine years to ensure that the changes to be implemented
are made in an orderly and structured manner. Further details of
this process can be found in the Chairman’s Statement.
The Board subscribes to the view that long serving Directors
should not necessarily be prevented from forming part of an
independent majority. The Board considers that a Director’s tenure
does not necessarily reduce his or her ability to act independently
and will continue to assess each Director’s independence annually,
through a formal performance evaluation.
Appointments to
the board
The Nominations Committee considers annually the skills
possessed by the Board and identifies any skill shortages to be
filled by new Directors.
The rules governing the appointment and replacement of Directors
are set out in the Company’s articles of association and the
aforementioned succession planning policy. Where the Board appoints
a new Director during the year, that Director will stand for
election by shareholders at the next AGM. Subject to there being no
conflict of interest, all Directors are entitled to vote on
candidates for the appointment of new Directors and on the
recommendation for shareholders’ approval for the Directors seeking
re-election at the AGM. When considering new appointments, the
Board endeavours to ensure that it has the capabilities required to
be effective and oversee the Company’s strategic priorities. This
will include an appropriate range, balance and diversity of skills,
experience and knowledge. The Company is committed to ensuring that
any vacancies arising are filled by the most qualified
candidates.
Diversity
policy
The Company supports the objectives of improving the performance
of corporate boards by encouraging the appointment of the best
people from a range of differing perspectives and backgrounds. The
Company recognises the benefits of diversity (of which gender is
one aspect) on the Board and takes this into account in its Board
appointments. The Company is committed to ensuring that its
director search processes actively seek men and women with the
right qualifications so that appointments can be made, on the basis
of merit, against objective criteria from a diverse selection of
candidates. The Board actively considers diversity during director
searches.
The Board is continuing with the process of refreshing its
membership. Its intention is for there to continue to be not less
than one-third of its membership as women and for there to be at
least one Director from an ethnic minority background.
MEETING ATTENDANCE
The number of meetings held during the year of the Board and its
Committees, and each Director’s attendance level, is shown
below:
|
|
|
|
Management |
|
|
|
|
Engagement
& |
|
|
Audit &
Risk |
Nominations |
Remuneration |
Type and number of
meetings held in 2021/22 |
Board |
Committee |
Committee |
Committee |
(4) |
(2) |
(1) |
(1) |
Sir Martin Smith^ |
4 |
– |
1 |
1 |
Sarah Bates |
4 |
2 |
1 |
1 |
Sven Borho* |
4 |
– |
– |
– |
Dr David Holbrook+ |
1 |
1 |
– |
– |
Humphrey van der Klugt |
4 |
2 |
1 |
1 |
Doug McCutcheon |
4 |
2 |
1 |
1 |
Dr Bina Rawal |
4 |
2 |
1 |
1 |
^ Sir
Martin Smith is not a member of the
Audit & Risk Committee
*
Sven Borho does not sit on any of
the Company’s Committees
+ Dr.
Holbrook retired from the Board on
8 July 2021
All of the serving Directors attended the Annual General Meeting
held on 8 July 2021.
BOARD EVALUATION
During the year the performance of the Board, its committees and
individual Directors (including each Director’s independence) was
evaluated through a formal assessment led by the Senior Independent
Director. The performance of the Chairman was also evaluated by the
Senior Independent Director. The review concluded that the Board
was working well. The Board is satisfied that the structure, mix of
skills and operation of the Board continue to be effective and
relevant for the Company.
As an independent external review of the Board was undertaken in
2021 the next such review will be held in 2024.
The Board pays close attention to the capacity of individual
Directors to carry out their work on behalf of the Company. In
recommending individual Directors to shareholders for re-election,
it considered their other Board positions and their time
commitments and is satisfied that each Director has the capacity to
be fully engaged with the Company’s business. The Board has
considered the position of all of the Directors as part of the
evaluation process, and believes that it would be in the Company’s
best interests to propose them for re-election (with the exception
of Sir Martin Smith who will be
retiring from the Board at the conclusion of this year’s AGM) at
the forthcoming AGM for the following reasons:
Sarah Bates has been a Director
since May 2013. Sarah is a past Chair
of the Association of Investment Companies and has a wealth of
experience of the investment trust sector. She has been involved in
the UK savings and investment industry in different roles for over
35 years. Sarah is the Chair of the Nominations Committee and the
Senior Independent Director.
Sven Borho joined the Board in
June 2018. Sven is a founder and
Managing Partner of OrbiMed and heads their public Equity team and
is the portfolio Manager for OrbiMed’s public equity and hedge
funds.
Humphrey van der Klugt joined the
Board in February 2016. A former fund
manager and Director of Schroder Investment Management Limited,
Humphrey has extensive experience of the investment trust sector.
He is a Chartered Accountant, and Chairman of the Audit
Committee.
Doug McCutcheon joined the Board
in November 2012. Doug was an
investment banker at S.G Warburg and then UBS for 25 years, most
recently as the head of Healthcare Investment Banking for
Europe, the Middle East, Africa and Asia-Pacific. He is Chairman of the Management
Engagement & Remuneration Committee. Doug will become Chairman
of the Company following the retirement of Sir Martin Smith.
Dr Bina Rawal joined the Board on
November 2019. A physician with 25
years’ experience in life sciences research and development, she
has held senior executive roles in drug development and scientific
evaluation in four global pharmaceutical companies. Bina will
become chair of the Management Engagement & Remuneration
Committee when Doug McCutcheon
becomes Chairman of the Company.
The Chairman is pleased to report that following a formal
performance evaluation, the Directors’ performance continues to be
effective and they continue to demonstrate commitment to the
role.
TRAINING AND ADVICE
New appointees to the Board are provided with a full induction
programme. The programme covers the Company’s investment strategy,
policies and practices. The Directors are also given key
information on the Company’s regulatory and statutory requirements
as they arise including information on the role of the Board,
matters reserved for its decision, the terms of reference of the
Board Committees, the Company’s corporate governance practices and
procedures and the latest financial information. It is the
Chairman’s responsibility to ensure that the Directors have
sufficient knowledge to fulfil their role and Directors are
encouraged to participate in training courses where
appropriate.
The Directors have access to the advice and services of a
Company Secretary through its appointed representative which is
responsible to the Board for ensuring that Board procedures are
followed and that applicable rules and regulations are complied
with. The Company Secretary is also responsible for ensuring good
information flows between all parties.
There is an agreed procedure for Directors, in the furtherance
of their duties, to take independent professional advice if
necessary at the Company’s expense.
RISK MANAGEMENT AND INTERNAL
CONTROLS
The Board has overall responsibility for the Company’s risk
management and internal control systems and for reviewing their
effectiveness. The Company applies the guidance published by the
Financial Reporting Council on internal controls. Internal control
systems are designed to manage, rather than eliminate, the risk of
failure to achieve the business objective and can provide only
reasonable and not absolute assurance against material misstatement
or loss. These controls aim to ensure that the assets of the
Company are safeguarded, that proper accounting records are
maintained and that the Company’s financial information is
reliable. The Directors have a robust process for identifying,
evaluating and managing the significant risks faced by the Company,
which are recorded in a risk matrix. The Audit Committee, on behalf
of the Board, considers each risk as well as reviewing the
mitigating controls in place. Each risk is rated for its
“likelihood” and “impact” and the resultant numerical rating
determines its ranking into ‘Principal/Key’, ‘Significant’ or
’Minor’. This process was in operation during the year and
continues in place up to the date of this report. The process also
involves the Audit Committee receiving and examining regular
reports from the Company’s principal service providers. The Board
then receives a detailed report from the Audit Committee on its
findings. The Directors have not identified any significant
failures or weaknesses in respect of the Company’s internal control
systems.
BENEFICIAL OWNERS OF SHARES –
INFORMATION RIGHTS
Beneficial owners of shares who have been nominated by the
registered holder of those shares to receive information rights
under section 146 of the Companies Act 2006 are required to direct
all communications to the registered holder of their shares rather
than to the Company’s registrar, Link Group, or to the Company
directly.
The Company has adopted a nominee share code which is set out on
the following page.
The annual and half-year financial reports, and a monthly fact
sheet are available to all shareholders. The Board, with the advice
of Frostrow, reviews the format of the annual and half-year
financial reports so as to ensure they are useful to all
shareholders and others taking an interest in the Company. In
accordance with best practice, the annual report, including the
Notice of the Annual General Meeting, is sent to shareholders at
least 20 working days before the meeting. Separate resolutions are
proposed for substantive issues.
ANNUAL GENERAL MEETING
The following information to be
considered at the forthcoming annual general meeting is important
and requires your immediate attention.
If you are in any doubt about the
action you should take, you should seek advice from your stock
broker, bank manager, solicitor, accountant or other financial
adviser authorised under the Financial Services and Markets Act
2000 (as amended). If you have sold or transferred all of your
ordinary shares in the Company, you should pass this document,
together with any other accompanying documents, including the form
of proxy, at once to the purchaser or transferee, or to the stock
broker, bank or other agent through whom the sale or transfer was
effected, for onward transmission to the purchaser or
transferee.
The Company’s Annual General Meeting will be held at etc.Venues,
1-3 Bonhill Street, London EC2A
4BY on Wednesday, 6 July 2022 from
12.30 p.m. Please refer to the
Chairman’s Statement for details of this year’s arrangements.
Resolutions relating to the following items of special business
will be proposed at the forthcoming Annual General Meeting.
Resolution 11 |
Authority to allot shares |
Resolution 12 |
Authority to disapply pre-emption
rights |
Resolution 13 |
Authority to sell shares held in
Treasury on a non pre-emptive basis |
Resolution 14 |
Authority to buy-back shares |
Resolution 15 |
Authority to hold General Meetings
(other than the Annual General Meeting) on at least 14 clear days’
notice |
The full text of the resolutions can be found in the Notice of
Annual General Meeting.
EXERCISE OF VOTING POWERS
The Board and the AIFM have delegated authority to OrbiMed to
vote the shares owned by the Company. The Board has instructed that
OrbiMed submit votes for such shares wherever possible. This
accords with current best practice whilst maintaining a primary
focus on financial returns. OrbiMed may refer to the Board on any
matters of a contentious nature. The Board has reviewed OrbiMed’s
Voting Guidelines and is satisfied with their approach.
The Company does not retain voting rights on any shares that are
held as collateral in connection with the overdraft facility
provided by J.P. Morgan Securities LLC.
NOMINEE SHARE CODE
Where shares are held in a nominee company name, the Company
undertakes:
- to provide the nominee company with multiple copies of
shareholder communications, so long as an indication of quantities
has been provided in advance; and
- to allow investors holding shares through a nominee company to
attend general meetings, provided the correct authority from the
nominee company is available.
Nominee companies are encouraged to provide the necessary
authority to underlying shareholders to attend the Company’s
general meetings.
By order of the Board
Frostrow Capital LLP
Company Secretary
26 May 2022
AUDIT & RISK COMMITTEE REPORT
INTRODUCTION FROM THE CHAIRMAN
I am pleased to present my formal report to shareholders as
Chairman of the Audit & Risk Committee, for the year ended
31 March 2022. During the year under
review, a decision was made to rename the Audit Committee as the
Audit & Risk Committee. The change was made because the
Committee carries out a full and thorough review of the risks
associated with the Company and the Board agreed that this should
better be reflected in the name of the Committee.
COMPOSITION AND MEETINGS
The Committee comprises those Directors considered to be
independent by the Board. The Chairman of the Board is not a member
of the Committee but attends meetings by invitation. The Committee
met twice during the year. The Board has taken note of the
requirements that the Committee as a whole should have competence
relevant to the sector in which the Company operates and that at
least one member of the Committee should have recent and relevant
financial experience. The Committee is satisfied that it is
properly constituted in both respects. I was appointed Chairman of
the Committee in 2016 and am a Fellow of the Institute of Chartered
Accountants in England and
Wales, I am also the Chairman of
the Audit & Risk Committee of one other public company; the
other Committee members have a combination of financial, investment
and other relevant experience gained throughout their careers.
RESPONSIBILITIES
The Committee’s main responsibilities during the year were:
- To review the Company’s Half-Year and Annual Report. In
particular, the Committee considered and advised the Board on
whether the Annual Report and the Financial Statements, taken as a
whole, is fair, balanced and understandable, allowing shareholders
to more easily assess the Company’s strategy, investment policy,
business model and financial performance.
- To review the risk management and internal control processes of
the Company and its key service providers. Further details of the
Committee’s review are included in the Principal Risks
section..
- To develop and implement a policy for the engagement of the
external Auditors and agreeing the scope of its work and its
remuneration. Also, to be responsible for the selection process of
the external Auditors (including the leadership of an audit tender
process) and to have primary responsibility for the Company’s
relationship with the external Auditors.
- To review the effectiveness of the external audit and the
process.
- To review the independence and objectivity of the external
Auditors.
- To consider any non-audit work to be carried out by the
Auditors. The Committee reviews the need for non-audit services to
be provided by the Auditors and authorises such on a case by case
basis, having consideration to the cost effectiveness of the
services and the independence and objectivity of the Auditors.
- To consider the need for an internal audit function. Since the
Company delegates its day-to-day operations to third parties and
has no employees, the Committee has determined there is no
requirement for such a function.
- To assess the going concern and viability of the Company,
including the assumptions used.
- To report its findings to the Board.
A comprehensive description of the Committee’s role, its duties
and responsibilities, can be found in its terms of reference which
are available for review on the Company’s website at
www.worldwidewh.com.
SIGNIFICANT ISSUES CONSIDERED BY THE
AUDIT & RISK COMMITTEE DURING THE YEAR
Financial
Statements
The production of the Company’s Annual Report (including the
audit by the Company’s external Auditors) is a thorough process
involving input from a number of different areas. In order to be
able to confirm that the Annual Report is fair, balanced and
understandable, the Board has requested that the Committee advise
on whether it considers these criteria have been satisfied. As part
of this process the Committee has considered the following:
- the procedures followed in the production of the Annual Report,
including the processes in place to assure the accuracy of the
factual content;
- the extensive levels of review that were undertaken in the
production process, by the Company’s AIFM and the Committee;
and
- the internal control environment as operated by the Portfolio
Manager, AIFM and other service providers.
As a result of the work undertaken by the Committee, it has
confirmed to the Board that the Annual Report and the Financial
Statements for the year ended 31 March
2022, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Company’s financial position, performance, business model and
strategy.
Audit
Regulation
While the Committee has not had to consider any new audit
regulations in the past year, there have been a number of
initiatives to consider including with regard to the roles,
responsibilities and accountability of Directors, Audit Committees,
Auditors and the Regulator itself, with reports published by
Kingman, Brydon and the CMA. The
Business Enterprise, Industry and Skills (BEIS) Select Committee
has also published a report containing its views on the future of
audit. The Committee will continue to keep a close review of
developments.
In addition to this, the Committee also reviews the outcomes of
the FRC’s annual Audit Quality Reviews and discusses the findings
with our Auditors.
SIGNIFICANT REPORTING MATTERS
Overall accuracy
of the annual report
The Committee dealt with this matter by considering the draft
Annual Report, a letter from Frostrow in support of the letter of
representation made by the Board to the Auditors and the Auditors’
Report to the Committee.
Valuation and
ownership of the company’s investments and derivatives
The Committee dealt with this matter by:
- ensuring that all investment holdings and cash/ deposit
balances had been agreed to an independent confirmation from the
Custodian and Prime Broker or relevant counterparty. In addition,
receiving and reviewing details of the internal control procedures
in place at the Portfolio Manager, the AIFM and the Custodian and
Prime Broker and also regular reports from both the Custodian and
Prime Broker and also the Depositary (whose role it is to ensure
that the Company’s assets are safeguarded and to verify their
valuation);
- reconfirming its understanding of the processes in place to
record investment transactions and income, and to value both the
quoted and unquoted holdings in the portfolio;
- reviewing and amending, where necessary, the Company’s register
of key risks in light of changes to the portfolio and the
investment environment;
- gaining an overall understanding of the performance of the
portfolio both in capital and revenue terms through comparison to
the Benchmark; and
- conducting a review of how the Company’s derivative positions
were monitored.
Valuation of
unquoted investments
The Company has the ability to make unquoted investments within
its investment portfolio, up to a limit of 10% of the portfolio at
the time of acquisition. Both the Company’s Directors and the AIFM
need to ensure that an appropriate value is placed on such
investments within the Company’s net asset value. The Committee has
worked with the Company’s Portfolio Manager and the AIFM to
establish clear guidelines for the valuation of unquoted
investments, including the use of valuations produced by
independent external valuers, where appropriate.
OTHER REPORTING MATTERS
COVID-19
The Committee continued to pay particular attention to the
effects and potential effects on the Company of the COVID-19
pandemic. The long-term effect of the pandemic on the global
economy is becoming clearer and the Committee will continue to
monitor the impact of COVID-19, which is also captured in the
Company’s risk register.
In order to mitigate the business risks caused by the pandemic,
the Committee continues to review the operational resilience of its
various service providers, who have continued to demonstrate their
ability to provide services to the expected level, whilst doing so
remotely.
Calculation of
AIFM, portfolio management and performance fees
The AIFM, Portfolio Management and Performance fees are
calculated in accordance with the AIFM and Portfolio Management
Agreements. The Auditors perform agreed upon procedures over any
performance fee prior to payment. The Auditors also recalculate the
AIFM and Portfolio Management fee as part of the audit.
Investment trust
status
The Committee approached and dealt with ensuring compliance with
Section 1158 of the Corporation Tax Act 2010, by seeking
confirmation from Frostrow that the Company continues to meet the
eligibility conditions on a monthly basis.
Investment
performance
The Committee gained an overall understanding of the performance
of the investment portfolio both in capital and revenue terms
through ongoing discussions and analysis with the Company’s
Portfolio Manager and also with comparison to suitable key
performance indicators.
Accounting policies
During the year the Committee ensured that the accounting
policies were applied consistently throughout the year. In light of
there being no unusual transactions during the year or other
possible reasons, the Committee agreed that there was no reason to
change the policies.
Going concern
Having reviewed the Company’s financial position and
liabilities, the Committee is satisfied that it is appropriate for
the Board to prepare the financial statements on the going concern
basis. The Committee’s review of the Company’s financial position
included consideration of the cash and cash equivalent position of
the Company; the diversification of the portfolio; and the analysis
of portfolio liquidity, which estimated a liquidation of c.92% of
the portfolio within 10 trading days (based on current market
volumes).
Viability
statement
The Committee also considered the longer-term viability of the
Company in connection with the Board’s statement in the Strategic
Report. The Committee reviewed the Company’s financial position
(including its cash flows and liquidity position), the principal
risks and uncertainties, the expectation that the Company will pass
the next continuation vote in 2024, and the results of stress tests
and scenarios which considered the impact of severe stock market
volatility on shareholders’ funds. This included modelling
substantial market falls, and significantly reduced market
liquidity. The scenarios assumed that there would be no recovery in
asset prices and that listed portfolio companies which have cut or
cancelled any dividends due since the coronavirus outbreak would
not reinstate them.
The results demonstrated the impact on the Company’s NAV, its
expenses, its cash flows and its ability to meet its liabilities.
In even the most stressed scenario, the Company was shown to have
sufficient cash, or to be able to liquidate a sufficient portion of
its listed holdings, in order to be able to meet its liabilities as
they fall due. Based on the information available to the Directors
at the time, the Committee therefore concluded it was reasonable
for the Board to expect that the Company will be able to continue
in operation and meet its liabilities as they fall due over the
next five financial years. The Committee expects that the Company
will continue to exist for the foreseeable future and at least for
the period of the assessment.
INTERNAL CONTROLS AND RISK
MANAGEMENT
The Board is responsible for the risk assessment and review of
internal controls of the Company, undertaken in the context of the
overall investment objective.
The review covers the key business, operational, compliance and
financial risks facing the Company. In arriving at its judgement of
what risks the Company faces, the Board has considered the
Company’s operations in the light of the following factors:
- the nature of the Company, with all management functions
outsourced to third party service providers;
- the nature and extent of risks which it regards as acceptable
for the Company to bear within its overall investment
objective;
- the threat of such risks becoming a reality; and
- the Company’s ability to reduce the incidence and impact of
risk on its performance.
Against this background, a risk matrix has been developed which
covers all key risks the Company faces, the likelihood of their
occurrence and their potential impact, how these risks are
monitored and mitigating controls in place. The Board has delegated
to the Committee the responsibility for the review and maintenance
of the risk matrix and it reviews, in detail, the risk matrix each
time it meets, bearing in mind any changes to the Company, its
environment or service providers since the last review. Any
significant changes to the risk matrix are discussed with the whole
Board.
Principal service
providers
In addition to reviewing the systems of internal control in
place at the Company’s principal service providers, the Committee
also reviewed the cyber security strategies adopted by them.
Half year report
and financial statements
The Committee reviewed the Half Year Report and Financial
Statements, which are not audited or reviewed by the external
Auditors, to ensure that the accounting policies used in the Annual
Financial Statements were also used at the half-year stage and that
they portrayed a fair balanced and understandable picture of the
period in question.
INTERNAL AUDIT
The Committee considered whether there was a need for the
Company to have an internal audit function. As the Company
delegates its day-to-day operations to third parties and has no
employees, the Committee concluded that there was no such need.
EXTERNAL AUDITORS
Meetings
This year the nature and scope of the audit together with
PricewaterhouseCoopers LLP’s audit plan were considered by the
Committee on 3 November 2021. I, as
Chairman of the Committee, had a separate meeting with them
specifically to discuss the audit and any issues that arose. The
Committee then met PricewaterhouseCoopers LLP on 23 May 2022 via video conference to review
formally the outcome of the audit and to discuss the limited issues
that arose. The Committee also discussed the presentation of the
Annual Report with the Auditors and sought their perspective.
Independence and
effectiveness
In order to fulfil the Committee’s responsibility regarding the
independence of the Auditors, the Committee reviewed:
- the senior audit personnel in the audit plan for the year,
- the Auditors’ arrangements concerning any conflicts of
interest,
- the extent of any non-audit services, and
- the statement by the Auditors that they remain independent
within the meaning of the regulations and their professional
standards.
REMUNERATION
The Committee approved a fee of £46,725 for the audit for the
year ended 31 March 2022 (2021:
£44,500). While this represents an increase on the previous year’s
fee, the Committee believes that the fee is in line with general
audit fees payable for the quoted investment trust sector and is
reflective of the level of work required to audit a listed
company.
Non-audit services
policy
The Company operates on the basis whereby the provision of all
non-audit services by the Auditors has to be pre-approved by the
Committee. Such services are only permissible where no conflicts of
interest arise, the service is not expressly prohibited by audit
legislation, where the independence of the Auditors is not likely
to be impinged by undertaking the work and the quality and the
objectivity of both the non-audit work and audit work will not be
compromised. The Committee will monitor the need for non-audit work
to be performed by the Auditors, if any, in accordance with the
Company’s non-audit services policy. A copy of the Company’s
non-audit services policy can be found on the Company’s website at
www.worldwidewh.com
Non-audit fees of £5,000 (2021: nil) were payable to the
Auditors during the year for agreed upon procedures in relation
to their review of the Company’s performance fee payment.
The Committee has considered the extent and nature of non-audit
work performed by the Auditors and is satisfied that this did not
impinge on their independence and is a cost effective way for the
Company to operate.
Appointment and
tenure
PricewaterhouseCoopers LLP were appointed on 14 July 2014 following a formal tender process
and this appointment has been renewed at each subsequent AGM.
As a public company listed on the London Stock Exchange, the
Company is subject to mandatory auditor rotation requirements. The
Company will put the external audit out to tender at least every 10
years, and change auditor at least every 20 years. The Committee
will, however, continue to consider annually the need to go to
tender for audit quality, remuneration or independence reasons.
Unless any such grounds for change arise in the interim, it is
expected that the next audit tender will take place in the autumn
of 2023, in order that the successful candidate’s appointment or
re-appointment can be approved by shareholders at the AGM to be
held in 2024. A range of audit firms will be considered not just
those who are considered to be part of the “Big Four” group of
audit firms. The Committee will be mindful of any potential
conflicts of interest. Any firms providing services to the Company
within a two-year period of the date of the audit tender will be
unable to participate.
The Committee has adopted formal audit tender guidelines to
govern the audit tender process.
Auditors’
reappointment
PricewaterhouseCoopers LLP have indicated their willingness to
continue to act as Auditors to the Company for the forthcoming year
and a resolution for their re-appointment will be proposed at the
AGM.
The Committee reviews the scope and effectiveness of the audit
process, including agreeing the Auditors’ assessment of materiality
and monitors the Auditors’ independence and objectivity. It
conducted a review of the performance of the Auditors during the
year and concluded that performance was satisfactory and there were
no grounds for change.
PERFORMANCE EVALUATION
The Committee’s performance over the past year was reviewed and
discussed as part of the annual Board evaluation. The evaluation
considered the composition of the Committee and the efficacy of
Committee meetings, as well as assessing the Committee’s role in
monitoring and overseeing the Company’s financial reporting and
accounting, risk management and internal controls, compliance with
corporate governance regulations and also the assessment of the
external audit.
This year, an internal evaluation was completed and I am pleased
to confirm that the evaluation result was positive and no matters
of concern or requirements for change were highlighted.
AUDIT & RISK COMMITTEE
CONFIRMATION
The Audit & Risk Committee confirms that it has carried out
a review of the effectiveness of the system of internal financial
control and risk management during the year, as set out above and
that:
- An ongoing procedure for identifying, evaluating and managing
significant risks faced by the Company was in place for the year
under review and up to 27 May 2022.
This procedure is regularly reviewed by the Board; and
- It is responsible (on behalf of the Board) for the Company’s
system of internal controls and for reviewing its effectiveness and
that it is designed to manage the risk of failure to achieve
business objectives. This can only provide reasonable not absolute
assurance against material misstatement or loss.
Humphrey van
der Klugt, FCA
Chairman of the Audit & Risk Committee
26 May 2022
DIRECTORS’ REMUNERATION REPORT
INTRODUCTION FROM THE CHAIR
This report has been prepared in accordance with Schedule 8 of
the Large and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulation 2013, the requirements of Section
421 of the Companies Act 2006 and the Enterprise and Regulatory
Reform Act 2013. A non-binding Ordinary Resolution for the approval
of this report will be put to shareholders at the Company’s
forthcoming AGM. The law requires the Company’s Auditors to audit
certain of the disclosures provided in this report. Where
disclosures have been audited, they are indicated as such and the
Auditors’ audit opinion is included in its report to
shareholders.
The Management Engagement & Remuneration Committee considers
the framework for the remuneration of the Directors on an annual
basis. It reviews the ongoing appropriateness of the Directors’
Remuneration Policy and the individual remuneration of Directors by
reference to the activities and particular complexities of the
Company and comparison with other companies of a similar structure
and size. This is in-line with the AIC Code.
A non-binding Ordinary Resolution proposing the adoption of the
Directors’ Remuneration Report was put to shareholders at the
Annual General Meeting of the Company held on 8 July 2021, and was passed with 99.9% of the
votes cast by shareholders voting in favour of the Resolution.
As noted in the Strategic Report, all of the Directors are
non-executive and therefore there is no Chief Executive Officer.
The Company does not have any employees. There is therefore no
Chief Executive Officer or employee information to disclose.
Directors’
remuneration policy
The Directors’ Remuneration Policy provides that fees payable to
the Directors should reflect the time spent by the Board on the
Company’s affairs and the responsibilities borne by the Directors
and should be sufficient to enable candidates of high calibre to be
recruited. Directors are remunerated in the form of fees payable
monthly in arrears, paid to the Director personally or to a
specified third party. There are no long-term incentive schemes,
share option schemes, pension arrangements, bonuses, or other
benefits in place and fees are not specifically related to the
Directors’ performance, either individually or collectively.
The remuneration for the non-executive Directors is determined
within the limits set out in the Company’s Articles of Association.
The present limit is £350,000 in aggregate per annum. The amount
paid in aggregate to the Directors in 2022 is set out in the table
on the following page.
A binding resolution to approve the Directors’ Remuneration
Policy was put to shareholders at the Annual General Meeting held
in 2020, and was passed with 99.8% of shareholders voting in favour
of the Resolution. The aforementioned Directors’ Remuneration
Policy provisions apply until the next time that they are put to
shareholders for the renewal of that approval, which must be at
intervals of not more than three years, or if the Directors’
Remuneration Policy is varied. As approval of this policy was last
granted by shareholders at the Annual General Meeting held in
July 2020, shareholder approval will
again be sought at the Annual General Meeting to be held in
2023.
Directors’
appointment
None of the Directors has a service contract. The terms of their
appointment provide that Directors shall retire and be subject to
election at the first Annual General Meeting after their
appointment and to re-election annually thereafter. The terms also
provide that a Director may be removed without notice and that
compensation will not be due on leaving office.
Directors’
fees
Following a review by the Management Engagement &
Remuneration Committee it was agreed that the Directors’ fees would
not be increased with effect from 1 April
2022.
All of the Directors, as at the date of this report, served
throughout the year. The table overleaf excludes any employer’s
national insurance contributions, if applicable.
The Directors are entitled to be reimbursed for reasonable
expenses incurred by them in connection with the performance of
their duties and attendance at Board and General Meetings.
|
Year
Ending |
|
Year Ended |
|
|
31 March
2023 |
|
31 March
2022 |
|
|
Fee Level |
2023
% |
Fee Level |
2022 % |
Director |
(per
annum) |
Change |
(per
annum) |
Change |
Chairman |
£53,150 |
– |
£53,150 |
4.0 |
Audit & Risk Committee
Chair |
£41,133 |
– |
£41,133 |
4.0 |
Senior Independent Director |
£35,389 |
– |
£35,389 |
4.0 |
Director |
£33,573 |
– |
£33,573 |
4.0 |
|
|
|
|
|
|
Sums paid to third parties
None of the fees referred to in the below table were paid to any
third party in respect of the services provided by any of the
Directors.
Directors’ emoluments for the year
(audited)
|
|
|
Taxable |
|
|
Taxable |
|
|
Date of |
Fixed fees |
Expenses |
|
Fixed fees |
Expenses |
|
|
Appointment |
(£) |
(£)† |
Total (£) |
(£) |
(£)† |
Total (£) |
|
to the
Board |
2022 |
2022 |
2022 |
2021 |
2021 |
2021 |
Sir Martin Smith |
8 November 2007 |
53,150 |
865 |
54,015 |
51,106 |
– |
51,106 |
Humphrey Van Der Klugt |
15 February 2016 |
41,133 |
– |
41,133 |
39,551 |
– |
39,551 |
Sarah Bates# |
22 May 2013 |
35,389 |
– |
35,389 |
32,282 |
– |
32,282 |
Dr David Holbrook^ |
8 November 2007 |
9,833 |
– |
9,833 |
34,622 |
– |
34,622 |
Doug McCutcheon |
7 November 2012 |
33,573 |
– |
33,573 |
32,282 |
– |
32,282 |
Sven Borho* |
7 June 2018 |
– |
– |
– |
– |
– |
– |
Dr Bina Rawal |
1 November 2019 |
33,573 |
– |
33,573 |
32,282 |
– |
32,282 |
Total |
|
206,651 |
865 |
207,516 |
222,125 |
– |
222,125 |
- Taxable expenses primarily comprise travel and associated
expenses incurred by the Directors in attending Board and Committee
meetings in London. These are
reimbursed by the Company and, under HMRC Rules, are subject to tax
and National Insurance and therefore are treated as a benefit in
kind within this table.
* Mr Borho
has waived his Director’s fee.
^ Dr
Holbrook retired from the Board on 8 July
2021.
# Sarah Bates was appointed as the Senior
Independent Director with effect from 8 July
2021.
In certain circumstances, under HMRC rules travel and other out
of pocket expenses reimbursed to the Directors may be considered as
taxable benefits. Where expenses are classed as taxable under HMRC
guidance, they are shown in the taxable expenses column of the
Directors’ remuneration table along with the associated tax
liability.
No communications have been received from shareholders regarding
Directors’ remuneration.
Directors’
interests in the company’s shares (audited)
|
|
Ordinary |
|
Shares
of 25p each |
|
31 March |
31 March |
|
2022 |
2021 |
Sir Martin Smith |
11,871 |
11,871 |
– Trustee |
2,725 |
2,725 |
Sarah Bates |
7,200 |
7,200 |
Dr David Holbrook* |
– |
1,094 |
Sven Borho |
10,000 |
10,000 |
Humphrey van der Klugt |
3,000 |
3,000 |
Doug McCutcheon |
20,000 |
15,000 |
Dr Bina Rawal |
1,810 |
1,000 |
|
56,606 |
51,890 |
* Dr
Holbrook retired from the Board on 8 July
2021.
Share price total
return
The chart below illustrates the total shareholder return for a
holding in the Company’s shares as compared to the Benchmark, which
the Board has adopted as the key measure of the Company’s
performance.
TOTAL SHAREHOLDER RETURN FOR THE TEN
YEARS TO 31 MARCH 2022
Relative cost of directors’
remuneration
The bar chart below shows the comparative cost of Directors’
fees compared with the level of dividend distribution and ongoing
charges for 2021 and 2022.
Annual
statement
On behalf of the Board, I confirm that the Directors’
Remuneration Policy, and Directors’ Remuneration Report summarise,
as applicable, for the year to 31 March
2022:
- the major decisions on Directors’ remuneration;
- any substantial changes relating to Directors’ remuneration
made during the year; and
- the context in which the changes occurred and decisions have
been taken.
Doug
McCutcheon
Chair of the Management Engagement & Remuneration
Committee
26 May 2022
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF WORLDWIDE HEALTHCARE TRUST PLC
REPORT ON THE AUDIT OF THE FINANCIAL
STATEMENTS
OPINION
In our opinion, Worldwide Healthcare Trust PLC’s financial
statements:
- give a true and fair view of the state of the Company’s affairs
as at 31 March 2022 and of its loss
and cash flows for the year then ended;
- have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 102 “The Financial Reporting
Standard applicable in the UK and Republic of Ireland”, and
applicable law); and
- have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements, included within the
Annual Report, which comprise: the Statement of Financial Position
as at 31 March 2022; the Income
Statement, the Statement of Changes in Equity and the Statement of
Cash Flows for the year then ended; and the notes to the financial
statements, which include a description of the significant
accounting policies.
Our opinion is consistent with our reporting to the Audit &
Risk Committee.
BASIS FOR
OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remained independent of the Company in accordance with the
ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical
Standard, as applicable to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC’s Ethical Standard were
not provided.
Other than those disclosed in the Audit & Risk Committee
Report, we have provided no non-audit services to the Company in
the period under audit.
OUR AUDIT
APPROACH
Overview
Audit scope
- The Company is a standalone Investment Trust Company and
engages Frostrow Capital LLP (the “AIFM”) to manage its
assets.
- We conducted our audit of the financial statements using
information from the AIFM and J.P. Morgan Europe Limited with whom
the AIFM have engaged to provide certain administrative
functions.
- We tailored the scope of our audit taking into account the
types of investments within the Company, the involvement of the
third parties referred to above, the accounting processes and
controls, and the industry in which the Company operates.
- We obtained an understanding of the control environment in
place at the AIFM and adopted a fully substantive testing approach
using reports obtained from the AIFM and service providers.
Key audit matters
- Income from Investments
- Valuation and existence of investments
Materiality
- Overall materiality: £22,682,000 (2021: £23,600,000) based on
approximately 1% of net assets.
- Performance materiality: £17,011,000 (2021: £17,700,000).
The scope of our
audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements.
In planning our audit, we made enquiries of management to
understand the extent of the potential impact of climate change
risk on the Company’s financial statements.
The Directors and the AIFM concluded that there was no material
impact on the financial statements. Our
evaluation of this included assessing how the Directors had
incorporated climate risk factors into the key area of judgement
and estimation in the financial statements, being in relation to
the process of valuation of unlisted investments. We also
considered the consistency of the climate change disclosures
included in the Strategic Report with the financial statements and
our knowledge from our audit.
Key audit
matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the audit of
the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, including those which had
the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the
engagement team. These matters, and any comments we make on the
results of our procedures thereon, were addressed in the context of
our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters.
This is not a complete list of all risks identified by our
audit.
Consideration of the impacts of COVID-19 and calculation of the
performance fee accrual, which were key audit matters last year,
are no longer included because of the reduced uncertainty of the
impact of COVID-19 and the absence of a performance fee in the
current year. Otherwise, the key audit matters below are consistent
with last year.
KEY AUDIT MATTER |
|
HOW OUR AUDIT ADDRESSED THE KEY AUDIT
MATTER |
Income from
investments |
|
|
Refer to
the Audit & Risk Committee Report), the Principal Accounting
Policies and the Notes to the Financial Statements).
ISAs (UK) presume there is a risk of fraud in income recognition
because of the pressure management may feel to achieve a certain
objective. In this instance, we consider that ‘income’ refers to
all the Company’s income streams, both revenue and capital
(including gains and losses on investments).
As the Company has a capital objective, there might be an incentive
to overstate income in that category if capital is particularly
underperforming. As such, we focussed this risk on the
existence/occurrence of gains/losses on investments and
completeness of dividend income recognition and its presentation in
the Income Statement as set out in the requirements of The
Association of Investment Companies’ Statement of Recommended
Practice (the “AIC SORP”). |
|
We
assessed the accounting policy for income recognition for
compliance with accounting standards and the AIC SORP and performed
testing to confirm that income had been accounted for in accordance
with this stated accounting policy.
We found that the accounting policies implemented were in
accordance with accounting standards and the AIC SORP, and that
income has been accounted for in accordance with the stated
accounting policy.
We understood and assessed the design and implementation of key
controls surrounding income recognition.
The gains/losses on investments held at fair value comprise
realised and unrealised gains/losses. For unrealised gains and
losses, we sample tested the valuation of the portfolio at the
year-end (see below), together with testing the reconciliation of
opening and closing investments. For realised gains/losses, we
tested a sample of disposal proceeds by agreeing the proceeds to
bank statements and we re-performed the calculation of a sample of
realised gains/losses.
In addition, we tested a sample of dividend receipts by agreeing
the dividend rates from all investments to independent third party
sources.
To test for completeness, we tested that the appropriate dividends
had been received in the year by reference to independent data of
dividends declared for all listed investments during the year. Our
testing did not identify any unrecorded dividends.
We tested the allocation and presentation of dividend income
between the revenue and capital return columns of the Income
Statement in line with the requirements set out in the AIC SORP. We
did not find any special dividends that were not treated in
accordance with the AIC SORP.
No material misstatements were identified from this testing. |
Valuation and
existence of investments |
|
|
Refer to
the Audit & Risk Committee Report), the Accounting Policies)
and the Notes to the Financial Statements).
The investment portfolio at 31 March 2022 principally comprised
listed equity investments and unquoted debt and equity investments
totalled £2,379,848,000.
We focused on the valuation and existence of investments because
investments represent the principal element of the net asset value
as disclosed in the Statement of Financial Position in the
financial statements. |
|
We tested
the valuation of all listed investments by agreeing the prices used
in the valuation to independent third party sources.
We tested the existence of all listed investments by agreeing the
holdings of each investment to an independent confirmation from the
Custodian and Prime Broker, J.P. Morgan Securities LLC, as at 31
March 2022.
For unquoted investments we understood and evaluated the valuation
methodology applied, by reference to the International Private
Equity and Venture Capital Valuation guidelines (IPEV), and tested
the techniques used by the Directors in determining the fair value
of unquoted investments. Our testing, performed on a sample basis,
included:
We found that the Directors’ valuations of unquoted investments
were materially consistent with the IPEV guidelines and that the
assumptions used to derive the valuations within the financial
statements were reasonable based on the investee’s circumstances or
consistent with appropriate third party sources. No material
misstatements were identified from this testing.
We tested the existence of the unquoted investment portfolio by
agreeing a sample of the holdings to independently obtained third
party confirmations as at 31 March 2022. No variances were
identified from this testing. |
How we tailored
the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
Company, the accounting processes and controls, and the industry in
which it operates.
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the Directors made
subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Overall Company
materiality |
£22,682,000 (2021:
£23,600,000). |
How we determined
it |
approximately 1% of
net assets |
Rationale for
benchmark applied |
We have applied this
benchmark, a generally accepted auditing practice for investment
trust audits, in the absence of indicators that an alternative
benchmark would be appropriate and because we believe this provides
an appropriate and consistent year- on-year basis for our
audit. |
We use performance materiality to reduce to an appropriately low
level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically,
we use performance materiality in determining the scope of our
audit and the nature and extent of our testing of account balances,
classes of transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 75% (2021: 75%) of
overall materiality, amounting to £17,011,000 (2021: £17,700,000)
for the Company financial statements.
In determining the performance materiality, we considered a
number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and
concluded that an amount at the upper end of our normal range was
appropriate.
We agreed with the Audit & Risk Committee that we would
report to them misstatements identified during our audit above
£1,134,000 (2021: £1,180,000) as well as misstatements below that
amount that, in our view, warranted reporting for qualitative
reasons.
Conclusions
relating to going concern
Our evaluation of the Directors’ assessment of the Company’s
ability to continue to adopt the going concern basis of accounting
included:
- evaluating the Directors’ updated risk assessment and
considering whether it addressed relevant threats, including the
ongoing impact of Covid-19 and the heightened economic uncertainty
as a result of recent global events;
- evaluating the Directors’ assessment of potential operational
impacts, considering their consistency with other available
information and our understanding of the business and assessed the
potential impact on the financial statements;
- reviewing the Directors’ assessment of the Company’s financial
position in the context of its ability to meet future expected
operating expenses and debt repayments, their assessment of
liquidity as well as their review of the operational resilience of
the Company and oversight of key third-party service providers;
and
- assessing the implications of reductions in NAV as a result of
market performance on the ongoing ability of the Company to
operate.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are
authorised for issue.
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the Company’s
ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied
the UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the directors’ statement in the
financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Reporting on other
information
The other information comprises all of the information in the
Annual Report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other
information. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or, except to the extent otherwise explicitly stated in
this report, any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we
identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to
report that fact. We have nothing to report based on these
responsibilities.
With respect to the Strategic report and the Report of the
Directors, we also considered whether the disclosures required by
the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic report
and the Report of the Directors
In our opinion, based on the work undertaken in the course of
the audit, the information given in the Strategic report and the
Report of the Directors for the year ended 31 March 2022 is consistent with the financial
statements and has been prepared in accordance with applicable
legal requirements.
In light of the knowledge and understanding of the Company and
its environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic report and the
Report of the Directors.
Directors’
Remuneration
In our opinion, the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with the
Companies Act 2006.
Corporate
governance statement
The Listing Rules require us to review the directors’ statements
in relation to going concern, longer-term viability and that part
of the corporate governance statement relating to the Company’s
compliance with the provisions of the UK Corporate Governance Code
specified for our review. Our additional responsibilities with
respect to the corporate governance statement as other information
are described in the Reporting on other information section of this
report.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit, and we have
nothing material to add or draw attention to in relation to:
- The Directors’ confirmation that they have carried out a robust
assessment of the emerging and principal risks;
- The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify emerging
risks and an explanation of how these are being managed or
mitigated;
- The Directors’ statement in the financial statements about
whether they considered it appropriate to adopt the going concern
basis of accounting in preparing them, and their identification of
any material uncertainties to the Company’s ability to continue to
do so over a period of at least twelve months from the date of
approval of the financial statements;
- The Directors’ explanation as to their assessment of the
Company’s prospects, the period this assessment covers and why the
period is appropriate; and
- The Directors’ statement as to whether they have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the period of its
assessment, including any related disclosures drawing attention to
any necessary qualifications or assumptions.
Our review of the Directors’ statement regarding the longer-term
viability of the group was substantially less in scope than an
audit and only consisted of making inquiries and considering the
Directors’ process supporting their statement; checking that the
statement is in alignment with the relevant provisions of the UK
Corporate Governance Code; and considering whether the statement is
consistent with the financial statements and our knowledge and
understanding of the Company and its environment obtained in the
course of the audit.
In addition, based on the work undertaken as part of our audit,
we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the
financial statements and our knowledge obtained during the
audit:
- The Directors’ statement that they consider the Annual Report,
taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess the
Company’s position, performance, business model and strategy;
- The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems;
and
- The section of the Annual Report describing the work of the
Audit & Risk Committee.
We have nothing to report in respect of our responsibility to
report when the directors’ statement relating to the Company’s
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified under the Listing
Rules for review by the auditors.
Responsibilities
for the financial statements and the audit
Responsibilities of the directors for
the financial statements
As explained more fully in the Statement of Directors’
Responsibilities, the directors are responsible for the preparation
of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair
view. The directors are also 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.
In preparing the financial statements, the directors are
responsible for assessing the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud, is detailed below.
Based on our understanding of the Company and industry, we
identified that the principal risks of non-compliance with laws and
regulations related to breaches of section 1158 of the Corporation
Tax Act 2010, and we considered the extent to which non-compliance
might have a material effect on the financial statements. We also
considered those laws and regulations that have a direct impact on
the financial statements such as the Companies act 2006. We
evaluated management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of
override of controls), and determined that the principal risks were
related to posting inappropriate journal entries to increase
revenue (investment income and capital gains) or to increase net
asset value, and management bias in accounting estimates. Audit
procedures performed by the engagement team included:
- discussions with the AIFM and the Audit & Risk Committee,
including consideration of known or suspected instances of
non-compliance with laws and regulation and fraud;
- reviewing relevant meeting minutes, including those of the
Audit & Risk Committee;
- assessment of the Company’s compliance with the requirements of
section 1158 of the Corporation Tax Act 2010, including
recalculation of numerical aspects of the eligibility
conditions;
- challenging assumptions and judgements made by management in
their significant accounting estimates, in particular in relation
to the valuation of unquoted investments (see related key audit
matter above);
- identifying and testing journal entries, in particular any
material or revenue-impacting manual journal entries posted as part
of the Annual Report preparation process; and
- designing audit procedures to incorporate unpredictability
around the nature, timing or extent of our testing.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely
related to events and transactions reflected in the financial
statements. Also, the risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through
collusion.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited
number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other
cases, we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and
only for the Company’s members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose. We
do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
OTHER REQUIRED REPORTING
Companies Act 2006
exception reporting
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
- we have not obtained all the information and explanations we
require for our audit; or
- adequate accounting records have not been kept by the Company,
or returns adequate for our audit have not been received from
branches not visited by us; or
- certain disclosures of directors’ remuneration specified by law
are not made; or
- the financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this
responsibility.
Appointment
Following the recommendation of the Audit & Risk Committee,
we were appointed by the members on 14 July
2014 to audit the financial statements for the year ended
31 March 2015 and subsequent
financial periods. The period of total uninterrupted engagement is
8 years, covering the years ended 31 March
2015 to 31 March 2022.
Allan McGrath (Senior
Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh
26 May 2022
INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH
2022
|
|
|
2022 |
|
|
2021 |
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Notes |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
(Losses)/gains on investments |
9 |
– |
(152,475) |
(152,475) |
– |
517,267 |
517,267 |
Exchange losses on currency
balances |
|
– |
(6,342) |
(6,342) |
– |
(6,076) |
(6,076) |
Income from investments |
2 |
23,471 |
– |
23,471 |
19,247 |
– |
19,247 |
AIFM, portfolio management and
performance fees |
3 |
(938) |
1,061 |
123 |
(853) |
(47,963) |
(48,816) |
Other expenses |
4 |
(1,305) |
(529) |
(1,834) |
(1,338) |
(155) |
(1,493) |
Net return/(loss) before finance
charges and taxation |
|
21,228 |
(158,285) |
(137,057) |
17,056 |
463,073 |
480,129 |
Finance costs |
5 |
(40) |
(761) |
(801) |
(20) |
(379) |
(399) |
Net return/(loss) before
taxation |
|
21,188 |
(159,046) |
(137,858) |
17,036 |
462,694 |
479,730 |
Taxation on net return |
6 |
(3,668) |
– |
(3,668) |
(2,712) |
– |
(2,712) |
Net return/(loss) after
taxation |
|
17,520 |
(159,046) |
(141,526) |
14,324 |
462,694 |
477,018 |
Return/(loss) per share |
7 |
26.8p |
(243.5) |
(216.7) |
24.1p |
777.8p |
801.9p |
The “Total” column of this statement is the Income Statement of
the Company. The “Revenue” and “Capital” columns are supplementary
to this and are prepared under guidance published by The
Association of Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations.
The Company has no recognised gains and losses other than those
shown above and therefore no separate Statement of Total
Comprehensive Income has been presented.
The accompanying notes are an integral part of these
statements.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH
2022
|
|
Capital |
Share |
|
|
Total |
|
Share |
redemption |
premium |
Capital |
Revenue |
shareholders’ |
|
capital |
reserve |
account |
reserve |
reserve |
funds |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
At 1 April
2021 |
16,078 |
8,221 |
796,357 |
1,542,628 |
18,141 |
2,381,425 |
Net (loss)/return
after taxation |
– |
– |
– |
(159,046) |
17,520 |
(141,526) |
Final dividend paid in
respect of year ended 31 March 2021 |
– |
– |
– |
– |
(10,085) |
(10,085) |
Interim dividend paid
in respect of year ended 31 March 2022 |
– |
– |
– |
– |
(4,586) |
(4,586) |
New shares issued |
307 |
– |
45,242 |
– |
– |
45,549 |
Shares purchased for
treasury |
– |
– |
– |
(2,544) |
– |
(2,544) |
At 31 March
2022 |
16,385 |
8,221 |
841,599 |
1,381,038 |
20,990 |
2,268,233 |
FOR THE YEAR ENDED 31 MARCH
2021
|
|
Capital |
Share |
|
|
Total |
|
Share |
redemption |
premium |
Capital |
Revenue |
shareholders’ |
|
capital |
reserve |
account |
reserve |
reserve |
funds |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
At 1 April
2020 |
13,406 |
8,221 |
418,441 |
1,079,934 |
18,296 |
1,538,298 |
Net return after
taxation |
– |
– |
– |
462,694 |
14,324 |
477,018 |
Second interim
dividend paid in respect of year ended 31 March 2020 |
– |
– |
– |
– |
(10,512) |
(10,512) |
Interim dividend paid
in respect of year ended 31 March 2021 |
– |
– |
– |
– |
(3,967) |
(3,967) |
New shares issued |
2,672 |
– |
377,916 |
– |
– |
380,588 |
At 31 March
2021 |
16,078 |
8,221 |
796,357 |
1,542,628 |
18,141 |
2,381,425 |
STATEMENT OF FINANCIAL POSITION
As at 31 March 2022
|
|
2022 |
2021 |
|
Notes |
£’000 |
£’000 |
Fixed assets |
|
|
|
Investments |
9 |
2,379,848 |
2,416,038 |
Derivative – OTC swaps |
9 & 10 |
283 |
18,864 |
|
|
2,380,131 |
2,434,902 |
Current assets |
|
|
|
Debtors |
11 |
14,724 |
18,172 |
Cash |
|
26,594 |
29,595 |
|
|
41,318 |
47,767 |
Current liabilities |
|
|
|
Creditors: amounts falling due
within one year |
12 |
(147,804) |
(92,932) |
Derivative – OTC swaps |
9 & 10 |
(5,412) |
(8,312) |
|
|
(153,216) |
(101,244) |
Net current liabilities |
|
(111,898) |
(53,477) |
Total net assets |
|
2,268,233 |
2,381,425 |
Capital and reserves |
|
|
|
Share capital |
13 |
16,385 |
16,078 |
Capital redemption reserve |
|
8,221 |
8,221 |
Share premium account |
|
841,599 |
796,357 |
Capital reserve |
17 |
1,381,038 |
1,542,628 |
Revenue reserve |
|
20,990 |
18,141 |
Total shareholders'
funds |
|
2,268,233 |
2,381,425 |
Net asset value per
share |
14 |
3,465.2p |
3,703.0p |
The financial statements were approved by the Board of Directors
and authorised for issue on 26 May
2022 and were signed on its behalf by:
Sir Martin
Smith
Chairman
The accompanying notes are an integral part of this
statement.
Worldwide Healthcare Trust PLC – Company Registration Number
3023689 (Registered in England)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH
2022
|
|
2022 |
2021 |
|
Notes |
£’000 |
£’000 |
Net cash (outflow)/inflow from
operating activities |
18 |
(13,329) |
931 |
Purchases of investments and
derivatives |
|
(1,330,279) |
(1,709,998) |
Sales of investments and
derivatives |
|
1,253,138 |
1,481,508 |
Realised (loss)/gain on foreign
exchange transactions |
|
(5,541) |
3,205 |
Net cash outflow from investing
activities |
|
(82,682) |
(225,285) |
Issue of shares |
13 |
48,126 |
378,728 |
Shares repurchased |
13 |
(2,544) |
– |
Equity dividends paid |
|
(14,671) |
(14,479) |
Interest paid |
|
(801) |
(399) |
Net cash inflow from financing
activities |
|
30,110 |
363,850 |
(Increase)/decrease in net
debt |
|
(65,901) |
139,496 |
Cash flows from operating activities include interest received
of £968,000 (2021: £1,265,000) and dividends received of
£23,853,000 (2021: £18,907,000).
RECONCILIATION OF NET CASH FLOW
MOVEMENT TO MOVEMENT IN NET DEBT
|
2022 |
2021 |
|
£’000 |
£’000 |
(Increase)/decrease in net debt
resulting from cashflows |
(65,901) |
139,496 |
Losses on foreign currency cash and
cash equivalents |
(801) |
(9,281) |
Movement in net debt in the
year |
(66,702) |
130,215 |
Net debt at 1 April |
(20,301) |
(150,516) |
Net debt at 31 March |
(87,003) |
(20,301) |
Net debt includes the bank overdraft of £113,597,000 (2021:
£49,896,000) (see note 12) and cash as per the balance sheet of
£26,594,000 (2021: £29,595,000).
The accompanying notes are an integral part of this
statement.
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The principal accounting policies, all of which have been
applied consistently throughout the year in the preparation of
these financial statements, are set out below:
(A) Basis of preparation
These financial statements have been prepared in accordance with
the Companies Act 2006, FRS 102 ‘The Financial Reporting Standard
applicable in the UK and Ireland’ (‘UK GAAP’) and the guidelines
set out in the Statement of Recommended Practice (‘SORP’),
published in February 2021, for
Investment Trust Companies and Venture Capital Trusts issued by the
Association of Investment Companies (‘AIC’), the historical cost
convention, as modified by the valuation of investments and
derivatives at fair value. The Board has considered a detailed
assessment of the Company’s ability to meet its liabilities as they
fall due, including stress and liquidity tests which modelled the
effects of substantial falls in markets and significant reductions
in market liquidity (including further stressing the current
economic conditions caused by the coronavirus pandemic) on the
Company’s financial position and cash flows. Further information on
the assumptions used in the stress scenarios is provided in the
Audit & Risk Committee report. The results of the tests showed
that the Company would have sufficient cash, or the ability to
liquidate a sufficient proportion of its listed holdings, to meet
its liabilities as they fall due. Based on the information
available to the Directors at the time of this report, including
the results of the stress tests, the Company’s cash balances, and
the liquidity of the Company’s listed investments, the Directors
are satisfied that the Company has adequate financial resources to
continue in operation for at least the next 12 months from the date
of approval of these financial statements and that, accordingly, it
is appropriate to adopt the going concern basis in preparing these
financial statements.
The Company’s financial statements are presented in sterling,
being the functional and presentational currency of the Company.
All values are rounded to the nearest thousand pounds (£’000)
except where otherwise indicated.
In addition, investments and derivatives held at fair value are
categorised into a fair value hierarchy based on the degree to
which the inputs to the fair value measurements are observable and
the significance of the inputs to the fair value measurement in its
entirety, which are described as follows:
- Level 1 – Quoted prices in active markets.
- Level 2 – Inputs other than quoted prices included within Level
1 that are observable (i.e. developed using market data), either
directly or indirectly.
- Level 3 – Inputs are unobservable (i.e. for which market data
is unavailable).
Presentation of the Income
Statement
In order to reflect better the activities of an investment trust
company and in accordance with the SORP, supplementary information
which analyses the Income Statement between items of a revenue and
capital nature has been presented alongside the Income Statement.
The net revenue return is the measure the Directors believe
appropriate in assessing the Company’s compliance with certain
requirements set out in Sections 1158 and 1159 of the Corporation
Tax Act 2010.
Critical Accounting Judgements and Key
Sources of Estimation Uncertainty
Critical accounting judgements and key sources of estimation
uncertainty used in preparing the financial information are
continually evaluated and are based on historical experience and
other factors, including expectations of future events that are
believed to be reasonable. The resulting estimates will, by
definition, seldom equal the related actual results.
In the course of preparing the financial statements, the only
key source of estimation uncertainty in the process of applying the
Company’s accounting policies, is in relation to the valuation of
the unquoted (Level 3) investments. The nature of estimation means
that the actual outcomes could differ from those estimates,
possibly significantly. The estimates relate to the investments
where there is no appropriate market price i.e. the private
investments. Whilst the board considers the methodologies and
assumptions adopted in the valuation are supportable, reasonable
and robust, because of the inherent uncertainty of valuation, those
estimated values may differ significantly from the values that
would have been used had a ready market for the investment existed.
As at 31 March 2022, there is no
single key assumption used in the valuation of the unquoted
investments, or other key source of estimation uncertainty, that,
in the Directors’ opinion has a significant risk of causing a
material adjustment to the carrying values of assets and
liabilities within the next financial year.
Unquoted investments are all valued in line with the accounting
policy set out below.
(B) Investments
Investments are measured under FRS 102 and are measured
initially, and at subsequent reporting dates, at fair value.
Investments are recognised and de-recognised at trade date where a
purchase or sale is under a contract whose terms require delivery
within the time frame established by the market concerned. Changes
in fair value and gains or losses on disposal are included in the
Income Statement as a capital item.
For quoted securities fair value is either bid price or last
traded price, depending on the convention of the exchange on which
the investment is listed.
Fair value is the price for which an asset could be exchanged
between knowledgeable, willing parties in an arm’s length
transaction. In estimating the fair value of unquoted investments,
the AIFM and Board apply valuation techniques which are appropriate
in light of the nature, facts and circumstances of the investment,
and use reasonable current market data and inputs combined with
judgement and assumptions and apply these consistently. The
following principles used in determining the valuation of unquoted
investments, are consistent with the International Private Equity
and Venture Capital Valuation (“IPEV”) Guidelines. The assumptions
and estimates made in determining the fair value of each unquoted
investment are considered at least each six months or sooner if
there is a triggering event. An example of where a valuation would
be considered out of the six-month cycle is the success or failure
of a drug under development to meet an anticipated outcome of its
trial, announcement of the company undergoing an initial public
offering, or other performance against tangible development
milestones.
The primary valuation method applied in the valuation of the
unquoted investments is the probability-weighted expected return
method (PWERM), which considers on a probability weighted basis the
future outcomes for the investment. When using the PWERM method
significant judgements are made in estimating the various inputs
into the model and recognising the sensitivity of such estimates.
Examples of the factors where significant judgement is made
include, but are not limited to, the probability assigned to
potential future outcomes; discount rates; and, the likely exit
scenarios for the investor company, for example, IPO or trade
sale.
Where the investment being valued was itself made recently, or
there has been a third party transaction in the investment, the
price of the transaction may provide a good indication of fair
value. Using the Price of Recent Investment technique is not a
default and at each reporting date the fair value of recent
investments is estimated to assess whether changes or events
subsequent to the relevant transaction would imply a material
change in the investment’s fair value.
When using the price of a recent transaction in the valuations
the Company looks to ‘re-calibrate’ this price at each valuation
point by reviewing progress within the investment, comparing
against the initial investment thesis, assessing if there are any
significant events or milestones that would indicate the value of
the investment value has changed materially and considering whether
an alternative methodology would be more appropriate.
(C) Derivative financial
instruments
The Company uses derivative financial instruments (namely put
and call options and equity swaps).
All derivative instruments are valued initially, and at
subsequent reporting dates, at fair value in the Statement of
Financial Position.
The equity swaps are accounted for as Fixed Assets or Current
Liabilities.
All gains and losses on over-the-counter (OTC) equity swaps are
accounted for as gains or losses on investments. Where there has
been a re-positioning of the swap, gains and losses are accounted
for on a realised basis. All such gains and losses have been
debited or credited to the capital column of the Income
Statement.
Cash collateral held by counterparties is included within cash,
except where there is a right of offset against the
overdraft-facility.
(D) Investment income
Dividends receivable are recognised on the ex-dividend date.
Where no ex-dividend date is quoted, dividends are recognised when
the Company’s right to receive payment is established. Foreign
dividends are grossed up at the appropriate rate of withholding
tax, with the withholding tax recognised in the taxation
charge.
Income from fixed interest securities is recognised on a time
apportionment basis so as to reflect the effective interest rate.
Deposit interest is accounted for on an accruals basis.
(E) Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged through the revenue column of the Income Statement
except as follows:
- expenses which are incidental to the acquisition or disposal of
an investment are charged to the capital column of the Income
Statement; and
- expenses are charged to the capital column of the Income
Statement where a connection with the maintenance or enhancement of
the value of the investments can be demonstrated. In this respect
the portfolio management and AIFM fees have been charged to the
Income Statement in line with the Board’s expected long-term split
of returns, in the form of capital gains and income, from the
Company’s portfolio. As a result 5% of the portfolio management and
AIFM fees are charged to the revenue column of the Income Statement
and 95% are charged to the capital column of the Income
Statement.
Any performance fee is charged in full to the capital column of
the Income Statement.
(F) Finance costs
Finance costs are accounted for on an accruals basis. Finance
costs are charged to the Income Statement in line with the Board’s
expected long-term split of returns, in the form of capital gains
and income, from the Company’s portfolio. As a result 5% of the
finance costs are charged to the revenue column of the Income
Statement and 95% are charged to the capital column of the Income
Statement. Finance charges are accounted for on an accruals basis
in the Income Statement using the effective interest rate method
and are added to the carrying amount of the instrument to the
extent that they are not settled in the period in which they
arise.
(G) Taxation
The tax effect of different items of expenditure is allocated
between capital and revenue using the marginal basis.
Deferred taxation is provided on all timing differences that
have originated but not been reversed by the Statement of Financial
Position date other than those differences regarded as permanent.
This is subject to deferred tax assets only being recognised when
it is probable that there will be suitable profits from which the
reversal of timing differences can be deducted. Any liability to
deferred tax is provided for at the rate of tax enacted or
substantially enacted.
(H) Foreign currency
Transactions recorded in overseas currencies during the year are
translated into sterling at the appropriate daily exchange rates.
Assets and liabilities denominated in overseas currencies at the
Statement of Financial Position date are translated into sterling
at the exchange rates ruling at that date.
Exchange
gains/losses on foreign currency balances
Any gains or losses on the translation of foreign currency
balances, including the foreign currency overdraft, whether
realised or unrealised, are taken to the capital or the revenue
column of the Income Statement, depending on whether the gain or
loss is of a capital or revenue nature.
(I) Capital redemption reserve
This reserve arose when ordinary shares were redeemed by the
Company and subsequently cancelled. When ordinary shares are
redeemed by the Company and subsequently cancelled, an amount equal
to the par value of the ordinary share capital is transferred from
the ordinary share capital to the capital redemption reserve.
(J) Capital reserve
The following are transferred to this reserve:
- gains and losses on the disposal of investments;
- exchange differences of a capital nature, including the effects
of changes in exchange rates on foreign currency borrowings;
- expenses, together with the related taxation effect, in
accordance with the above policies; and
- changes in the fair value of investments and derivatives.
This reserve can be used to distribute realised capital profits
by way of dividend or share buy backs. Any gains in the fair value
of investments that are not readily convertible to cash are treated
as unrealised gains in the capital reserve. Distributions are only
payable out of the capital reserve if capital reserves are greater
than the proposed distribution and positive on the date of
distribution.
(K) Revenue reserve
The revenue reserve is distributable by way of dividend.
Dividends are only payable out of the revenue reserve if revenue
reserves are greater than the proposed dividend and positive on the
date of distribution.
(L) Dividend payments
Dividends paid by the Company on its shares are recognised in
the financial statements in the year in which they become payable
and are shown in the Statement of Changes in Equity.
(M) Cash and cash equivalents
Cash comprises cash at bank and cash equivalents are short-term,
highly liquid investments that are readily convertible to known
amounts of cash and are subject to an insignificant risk of changes
in value.
Bank overdrafts are considered as a component of cash and cash
equivalents as they are repayable on demand and form an integral
part of the Company’s cash management.
2. INCOME FROM INVESTMENTS
|
2022 |
2021 |
|
£’000 |
£’000 |
Income from investments |
|
|
Overseas dividends |
19,678 |
16,730 |
Fixed interest income |
772 |
999 |
UK dividends |
2,825 |
1,449 |
|
23,275 |
19,178 |
Other income |
|
|
Derivatives |
151 |
– |
Deposit interest |
45 |
24 |
Income from liquidity stocks |
– |
45 |
Total income from
investments |
23,471 |
19,247 |
Total income comprises: |
|
|
Dividends |
22,503 |
18,179 |
Interest |
968 |
1,068 |
|
23,471 |
19,247 |
3. AIFM, PORTFOLIO MANAGEMENT AND
PERFORMANCE FEES
|
|
|
2022 |
|
|
2021 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
AIFM fee |
160 |
3,046 |
3,206 |
152 |
2,892 |
3,044 |
Portfolio management fee |
778 |
14,781 |
15,559 |
701 |
13,323 |
14,024 |
Performance fee
(reversal)/charge* |
– |
(18,888) |
(18,888) |
– |
31,748 |
31,748 |
|
938 |
(1,061) |
(123) |
853 |
47,963 |
48,816 |
* During
the year ended 31 March 2022, due to
underperformance against the Benchmark, a reversal of prior period
performance fee provisions totalling £18,888,000 occurred (2021:
charge of £31,748,000).
Further details on the above fees are set out in the Strategic
Report and the Report of the Directors.
4. OTHER EXPENSES
|
2022 |
2021 |
|
£’000 |
£’000 |
Directors’ remuneration |
207 |
222 |
Employer’s NIC on Directors’
remuneration |
20 |
20 |
Auditors’ remuneration for the audit
of the Company’s financial statements |
47 |
49 |
Auditors’ remuneration for non-audit
services |
5 |
– |
Depositary and custody fees |
213 |
177 |
Listing fees* |
77 |
461 |
Registrar fees |
63 |
48 |
Legal and professional costs |
255 |
78 |
Broker fees |
117 |
30 |
Other costs |
301 |
253 |
|
1,305 |
1,338 |
Professional fees (Capital)^ |
529 |
155 |
|
1,834 |
1,493 |
Details of the amounts paid to Directors are included in the
Directors’ Remuneration Report.
* 2021
includes £405,000 in respect of London Stock Exchange block listing
fees required as a result of the issuance of new shares by the
Company during the year.
^ Professional
fees in respect of acquisition of unquoted investments. These fees
do not form part of the ongoing charge ratio. See Glossary.
5. FINANCE COSTS
|
|
|
2022 |
|
|
2021 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Finance costs |
40 |
761 |
801 |
20 |
379 |
399 |
6. TAXATION ON NET RETURN
(A) Analysis of charge in year
|
|
|
2022 |
|
|
2021 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Corporation tax at 19% (2020:
19%) |
– |
– |
– |
– |
– |
– |
Overseas taxation |
3,668 |
– |
3,668 |
2,712 |
– |
2,712 |
|
3,668 |
– |
3,668 |
2,712 |
– |
2,712 |
(B) Factors affecting the tax charge
for the year
Approved investment trusts are exempt from tax on capital gains
made within the Company.
The tax charged for the year is lower (2021: lower) than the
standard rate of corporation tax of 19% (2021: 19%).
The difference is explained below.
|
|
|
2022 |
|
|
2021 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Net return before taxation |
21,188 |
(159,046) |
(137,858) |
17,036 |
462,694 |
479,730 |
Corporation tax at 19% (2021:
19%) |
4,026 |
(30,219) |
(26,193) |
3,237 |
87,912 |
91,149 |
Non-taxable gains on
investments |
– |
30,175 |
30,175 |
– |
(97,126) |
(97,126) |
Overseas withholding taxation |
3,668 |
– |
3,668 |
2,712 |
– |
2,712 |
Non taxable dividends |
(4,276) |
– |
(4,276) |
(3,468) |
– |
(3,468) |
Excess management expenses |
250 |
44 |
294 |
231 |
9,214 |
9,445 |
Total tax charge |
3,668 |
– |
3,668 |
2,712 |
– |
2,712 |
(C) Provision for deferred tax
No provision for deferred taxation has been made in the current
or prior year. The Company has not provided for deferred tax on
capital profits and losses arising on the revaluation or disposal
of investments, as it is exempt from tax on these items because of
its status as an investment trust company.
The Company has not recognised a deferred tax asset of
£45,055,000 (25% tax rate) (2021: £33,851,000 (19% tax rate)) as a
result of excess management expenses and loan expenses. It is not
anticipated that these excess expenses will be utilised in the
foreseeable future.
7. RETURN PER SHARE
|
2022 |
2021 |
|
£’000 |
£’000 |
The return per share is based on the
following figures: |
|
|
Revenue return |
17,520 |
14,324 |
Capital (loss)/return |
(159,046) |
462,694 |
|
(141,526) |
477,018 |
Weighted average number of ordinary
shares in issue during the year |
65,307,132 |
59,487,545 |
Revenue return per ordinary
share |
26.8p |
24.1p |
Capital (loss)/return per ordinary
share |
(243.5p) |
777.8p |
|
(216.7p) |
801.9p |
The calculation of the total, revenue and capital (loss)/return
per ordinary share is carried out in accordance with IAS 33,
“Earnings per Share”, in accordance with the requirements of FRS
102.
8. DIVIDENDS
Under UK Company Law, final dividends are not recognised until
they are approved by shareholders and interim dividends are not
recognised until they are paid. They are also debited directly from
reserves. Amounts recognised as distributable in these financial
statements were as follows:
|
2022 |
2021 |
|
£’000 |
£’000 |
Second interim dividend in respect
of the year ended 31 March 2020 |
– |
10,512 |
Interim dividend in respect of the
year ended 31 March 2021 |
– |
3,967 |
Final dividend in respect of the
year ended 31 March 2021 |
10,085 |
– |
Interim dividend in respect of the
year ended 31 March 2022 |
4,586 |
– |
|
14,671 |
14,479 |
In respect of the year ended 31 March
2022, an interim dividend of 7.0p per share was paid on
11 January 2022. A final dividend of
19.5p will be payable, subject to shareholder approval, on
13 July 2022, the associated ex
dividend date will be 1 June 2022.
The total dividends payable in respect of the year ended
31 March 2022 amount to 26.5p per
share (2021: 22.0p per share). The aggregate cost of the final
dividend, based on the number of shares in issue at 25 May 2022, will be £12,721,000. In accordance
with FRS 102 dividends will be reflected in the financial
statements for the year in which they become payable. Total
dividends in respect of the financial year, which is the basis on
which the requirements of s1158 of the Corporation Tax Act 2010 are
considered, are set out below.
|
2022 |
2021 |
|
£’000 |
£’000 |
Revenue available for distribution
by way of dividend for the year |
17,520 |
14,324 |
Interim dividend in respect of the
year ended 31 March 2022 |
(4,586) |
– |
Final dividend in respect of the
year ended 31 March 2022* |
(12,721) |
– |
Interim dividend in respect of the
year ended 31 March 2021 |
– |
(3,967) |
Final dividend in respect of the
year ended 31 March 2021 |
– |
(10,085) |
Net retained revenue |
213 |
272 |
* based on
65,233,404 shares in issue as at 25 May
2022.
9. INVESTMENTS AND DERIVATIVE
FINANCIAL INSTRUMENTS
|
|
|
Derivative |
|
|
|
|
Financial |
|
|
Quoted |
Unquoted |
Instruments
- |
|
|
Investments |
Investments |
Net |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
Cost at 1 April 2021 |
1,887,379 |
126,577 |
– |
2,013,956 |
Investment holdings gains at 1 April
2021 |
388,030 |
14,052 |
10,552 |
412,634 |
Valuation at 1 April
2021 |
2,275,409 |
140,629 |
10,552 |
2,426,590 |
Movement in the year: |
|
|
|
|
Purchases at cost |
1,284,504 |
69,066 |
– |
1,353,570 |
Sales - proceeds |
(1,243,999) |
(15,622) |
6,304 |
(1,253,317) |
Transfer between levels* |
44,424 |
(44,424) |
– |
– |
Net movement in investment holding
gains |
(152,963) |
22,824 |
(21,985) |
(152,124) |
Valuation at 31 March
2022 |
2,207,375 |
172,473 |
(5,129) |
2,374,719 |
Cost at 31 March 2022 |
1,952,701 |
136,760 |
– |
2,089,461 |
Investment holding gains/(losses) at
31 March 2022 |
254,674 |
35,713 |
(5,129) |
285,258 |
Valuation at 31 March
2022 |
2,207,375 |
172,473 |
(5,129) |
2,374,719 |
* See Note
16.
The Company received £1,253,317,000 (2021: £1,484,698,000) from
investments and derivatives sold in the year. The book cost of
these was £1,278,065,000 (2021: £1,217,151,000). These investments
and derivatives have been revalued over time and until they were
sold any unrealised gains/losses were included in the fair value of
the investments.
|
2022 |
2021 |
|
£’000 |
£’000 |
Net movement in investment holding
(losses)/gains in the year |
(130,139) |
483,612 |
Net movement in derivative holding
(losses)/gains in the year |
(21,985) |
33,760 |
Effective interest rate
amortisation |
(351) |
(105) |
(Losses)/gains on
investments |
(152,475) |
517,267 |
Purchase transaction costs were £1,668,000 (2021: £2,808,000).
Sales transaction costs were £1,244,000 (2021: £1,352,000). These
comprise mainly commission and stamp duty.
10. DERIVATIVE FINANCIAL
INSTRUMENTS
|
2022 |
2021 |
|
£’000 |
£’000 |
Fair value of OTC equity swaps
(asset) |
283 |
18,864 |
Fair value of OTC equity swaps
(liability) |
(5,412) |
(8,312) |
|
(5,129) |
10,552 |
See note 9 above for movements during the year.
11. DEBTORS
|
2022 |
2021 |
|
£’000 |
£’000 |
Amounts due from brokers |
10,581 |
10,402 |
Issue of own shares awaiting
settlement |
– |
2,577 |
Withholding taxation
recoverable |
2,587 |
2,295 |
VAT recoverable |
– |
66 |
Prepayments and accrued income |
1,556 |
2,832 |
|
14,724 |
18,172 |
12. CREDITORS AMOUNTS FALLING DUE
WITHIN ONE YEAR
|
2022 |
2021 |
|
£’000 |
£’000 |
Amounts due to brokers |
30,131 |
6,840 |
Overdraft drawn* |
113,597 |
49,896 |
Performance fee provision** |
– |
31,748 |
Other creditors and accruals |
4,076 |
4,448 |
|
147,804 |
92,932 |
- The Company’s borrowing requirements are met through the
utilisation of an overdraft facility provided by J.P. Morgan
Securities LLC. The overdraft is drawn down in U.S. dollars.
Interest on the drawn overdraft is charged at the United States
Overnight Bank Funding Rate plus 45 basis points.
J.P. Morgan Securities LLC may take investments up to 140% of
the value of the overdrawn balance as collateral and has been
granted a first priority security interest or lien over the
Company’s assets.
- As at 31 March 2022 no
performance fees were accrued or payable (31
March 2021: £31.7 million). Of the 31
March 2021 accrual, £12.9 million crystallised and became
payable as at 30 June 2021 and £18.9
million reversed due to underperformance, as set out in note 3. The
performance fee paid related to outperformance generated as at
30 June 2020 that was maintained to
30 June 2021.
13. SHARE CAPITAL
|
|
|
Total |
|
|
Treasury |
shares |
|
Shares |
shares |
in issue |
|
number |
number |
number |
Issued and fully paid at 1 April
2021 |
64,310,255 |
– |
64,310,255 |
New shares issued |
1,227,500 |
– |
1,227,500 |
Shares purchased for treasury |
(80,509) |
80,509 |
– |
At 31 March 2022 |
65,457,246 |
80,509 |
65,537,755 |
|
|
2022 |
2021 |
|
|
£’000 |
£’000 |
Issued and fully paid: |
|
|
|
Ordinary Shares of 25p |
|
16,385 |
16,078 |
During the year ended 31 March
2022 1,227,500 shares were issued raising £45,549,000 and
80,509 shares were repurchased into Treasury at a cost of
£2,544,000 (2021: 10,690,977 shares were issued raising
£380,588,000 and no shares were repurchased).
14. NET ASSET VALUE PER SHARE
|
2022 |
2021 |
Net asset value per share |
3,465.2p |
3,703.0p |
The net asset value per share is based on the assets
attributable to equity shareholders of £2,268,233,000 (2021:
£2,381,425,000) and on the number of shares in issue at the year
end of 65,457,246 (2021: 64,310,255).
15. RELATED PARTIES
The following are considered to be related parties:
- Frostrow Capital LLP (under the Listing Rules only)
- OrbiMed Capital LLC
- The Directors of the Company
Details of the relationship between the Company and Frostrow
Capital LLP, the Company’s AIFM, and OrbiMed Capital LLC, the
Company’s Portfolio Manager, are disclosed in the Business Review
and in the Report of the Directors. Sven
Borho, who joined the Board on 7 June
2018, is a Managing Partner at OrbiMed. Sven Borho has waived his Director’s fee of
£33,573 (2021: £32,282). Details of fees paid to OrbiMed by the
Company can be found in note 3. All material related party
transactions have been disclosed in notes 3 and 4.
Three current and two former partners at OrbiMed Capital LLC
have a minority financial interest totalling 20% in Frostrow
Capital LLP, the Company’s AIFM. Details of the fees paid to
Frostrow Capital LLP by the Company can be found in note 3.
16. FINANCIAL INSTRUMENTS
Risk management policies and
procedures
The Company’s financial instruments comprise securities and
other investments, derivative instruments, cash balances, loans and
debtors and creditors that arise directly from its operations.
As an investment trust, the Company invests in equities and
other investments for the long term so as to secure its investment
objective. In pursuing its investment objective, the Company is
exposed to a variety of risks that could result in a reduction in
the Company’s net assets.
The main risks that the Company faces arising from its financial
instruments are:
- market risk (including foreign currency risk, interest rate
risk and other price risk)
- liquidity risk
- credit risk
These risks, with the exception of liquidity risk, and the
Directors’ approach to the management of them, are set out in the
Strategic Report and have not changed from the previous accounting
year. The AIFM, in close co-operation with the Board and the
Portfolio Manager, co-ordinates the Company’s risk management.
Use of derivatives
As noted in the Strategic Report, equity swaps are used within
the Company’s portfolio.
More details on swaps can be found in the Glossary.
OTC equity swaps
The Company uses OTC equity swap positions to gain access to the
Indian and Chinese markets either when it is more cost effective to
gain access via swaps or to gain exposure to thematic baskets of
stocks.
Details of financed swap positions* are noted in the
Portfolio.
* See
glossary.
Offsetting disclosure
Swap trades and OTC derivatives are traded under ISDA† Master
Agreements. The Company currently has such agreements in place with
Goldman Sachs and JP Morgan.
These agreements create a right of set-off that becomes
enforceable only following a specified event of default, or in
other circumstances not expected to arise in the normal course of
business. As the right of set-off is not unconditional, for
financial reporting purposes, the Company does not offset
derivative assets and derivative liabilities.
† International
Swap Dealers Association Inc.
(i) Other price risk
In pursuance of the Company’s Investment Objective the Company’s
portfolio, including its derivatives, is exposed to the risk of
fluctuations in market prices and foreign exchange rates.
The Board manage these risks through the use of limits and
guidelines, monthly compliance reports from Frostrow and reports
from Frostrow and OrbiMed presented at each Board meeting.
Other price risk exposure
The Company’s gross exposure to other price risk is represented
by the fair value of the investments and the underlying exposure
through the derivative investments held at the year end as shown in
the table below.
|
|
|
2022 |
|
|
2021 |
|
|
|
Notional* |
|
|
Notional* |
|
Assets |
Liabilities |
exposure |
Assets |
Liabilities |
exposure |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Investments |
2,379,848 |
– |
2,379,848 |
2,416,038 |
– |
2,416,038 |
OTC equity swaps |
283 |
(5,412) |
135,018 |
18,864 |
(8,312) |
145,636 |
|
2,380,131 |
(5,412) |
2,514,866 |
2,434,902 |
(8,312) |
2,561,674 |
* The
notional exposure is calculated in accordance with the AIFMD
requirements for calculating exposure via derivatives. See
glossary.
Other price risk sensitivity
If market prices of all of the Company’s financial instruments
including the derivatives at the Statement of Financial Position
date had been 25% higher or lower (2021: 25% higher or lower) while
all other variables remained constant: the revenue return would
have decreased/increased by £0.2 million (2021: £0.2 million); the
capital return would have increased by £608.4 million (2021: £540.4
million)/decreased by £625.4 million (2021: £604.0 million); and,
the return on equity would have increased by £608.2 million (2021:
£540.1 million)/decreased by £625.2 million (2021: £603.8 million).
The calculations are based on the portfolio as at the respective
Statement of Financial Position dates and are not representative of
the year as a whole.
(ii) Foreign currency risk
A significant proportion of the Company’s portfolio and
derivative positions are denominated in currencies other than
sterling (the Company’s functional currency, and the currency in
which it reports its results). As a result, movements in exchange
rates can significantly affect the sterling value of those
items.
Foreign currency exposure
The fair values of the Company’s monetary assets and liabilities
that are denominated in foreign currencies are shown below.
|
|
|
2022 |
|
|
2021 |
|
Current |
Current |
|
Current |
Current |
|
|
assets |
liabilities |
Investments |
assets |
liabilities |
Investments |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
U.S. dollar |
64,264 |
(169,551) |
1,821,239 |
72,352 |
(99,943) |
2,034,533 |
Swiss franc |
2,202 |
– |
113,899 |
1,513 |
– |
47,411 |
Japanese yen |
332 |
114 |
83,225 |
858 |
– |
42,203 |
Hong Kong dollar |
851 |
(851) |
190,260 |
– |
– |
179,407 |
Other |
155 |
– |
30,803 |
489 |
– |
17,642 |
|
67,804 |
(170,288) |
2,239,426 |
75,212 |
(99,943) |
2,321,196 |
Foreign currency sensitivity
The following table details the sensitivity of the Company’s net
return for the year and shareholders’ funds to a 10% increase and
decrease in sterling against the relevant currency (2021: 10%
increase and decrease).
These percentages have been determined based on market
volatility in exchange rates over the previous 12 months. The
sensitivity analysis is based on the Company’s significant foreign
currency exposures at each Statement of Financial Position
date.
|
|
|
|
2022 |
|
|
|
2021 |
|
USD |
YEN |
CHF |
HKD |
USD |
YEN |
CHF |
HKD |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Sterling depreciates |
206,233 |
9,297 |
12,900 |
21,140 |
238,003 |
4,785 |
5,436 |
19,934 |
Sterling appreciates |
(168,736) |
(7,606) |
(10,555) |
(17,296) |
(194,730) |
(3,915) |
(4,448) |
(16,310) |
(iii) Interest rate risk
Interest rate changes may affect:
- the interest payable on the Company’s variable rate
borrowings;
- the level of income receivable from floating and fixed rate
securities and cash at bank and on deposit;
- the fair value of investments in fixed interest
securities.
Interest rate exposure
The Company’s main exposure to interest rate risks is through
its overdraft facility with J.P. Morgan Securities LLC, which is
repayable on demand, and its holding in fixed interest securities.
The exposure of financial assets and liabilities to fixed and
floating interest rates, is shown below.
At 31 March 2022, the Company held
0.4% of the portfolio in securitised debt (2021: 0.7% of the
portfolio). The exposure is shown in the table below.
|
|
|
|
2022 |
|
|
|
2021 |
|
Weighted
average
period
for which
rate is
fixed
Years |
Weighted
average
fixed
interest
rate
% |
Fixed
rate
£’000 |
Floating
rate
£’000 |
Weighted
average
period
for which
rate is
fixed
Years |
Weighted
average
fixed
interest
rate
% |
Fixed
rate
£’000 |
Floating
rate
£’000 |
Unquoted debt investments |
2.9 |
2.6 |
5,024 |
– |
3.9 |
2.6 |
6,945 |
4,486 |
Cash |
|
|
– |
56,336 |
|
|
– |
40,858 |
Overdraft facility |
|
|
– |
(143,339) |
|
|
– |
(61,159) |
Financed swap positions |
|
|
– |
(140,147) |
|
|
– |
(135,084) |
|
|
|
5,024 |
(227,150) |
|
|
6,945 |
(150,899) |
All interest rate exposures are held in U.S. dollars.
Cash of £56.3 million (2021: £40.9 million) was held as
collateral against the financed swap positions, of which
£29.7 million (2021: £11.3 million) was offset against the
overdraft position.
Interest rate sensitivity
If interest rates had been 1% higher or lower and all other
variables were held constant, the Company’s net return for the year
ended 31 March 2022 and the net
assets would increase/decrease by £2.3 million (2021:
increase/decrease by £1.5 million).
(iv) Liquidity risk
This is the risk that the Company will encounter difficulty in
meeting obligations associated with financial liabilities.
Management of the risk
Liquidity risk is not considered significant as the majority of
the Company’s assets are investments in quoted securities that are
readily realisable within one week, in normal market conditions.
There maybe circumstances where market liquidity is lower than
normal. Stress tests have been performed to understand how long the
portfolio would take to realise in such situations. The Board is
comfortable that in such a situation the Company would be able to
meet its liabilities as they fall due.
Liquidity exposure and maturity
Contractual maturities of the financial liability exposures as
at 31 March 2022, based on the
earliest date on which payment can be required, are as follows:
|
|
2022 |
|
2021 |
|
3 to 12 |
3 months |
3 to 12 |
3 months |
|
months |
or less |
months |
or less |
|
£’000 |
£’000 |
£’000 |
£’000 |
Overdraft facility |
– |
143,339 |
– |
61,159 |
Amounts due to brokers and
accruals |
– |
30,131 |
– |
6,840 |
OTC equity swaps |
5,412 |
– |
8,312 |
– |
|
5,412 |
173,470 |
8,312 |
67,999 |
£56.3 million of cash held as collateral is offset against the
overdraft facility in the Statement of Financial Position, as set
out in Note 16(iii) above.
(v) Credit risk
Credit risk is the risk of failure of a counterparty to
discharge its obligations resulting in the Company suffering a
financial loss.
The carrying amounts of financial assets best represent the
maximum credit risk at the Statement of Financial Position date.
The Company’s quoted securities are held on its behalf by J.P.
Morgan Securities LLC acting as the Company’s Custodian and Prime
Broker.
Certain of the Company’s assets can be held by J.P. Morgan
Securities LLC as collateral against the overdraft provided by them
to the Company. As at 31 March 2022
such assets held by J.P. Morgan Securities LLC are available for
rehypothecation (see Glossary for further information). As at
31 March 2022, assets with a total
market value of £203.1 million (2021: £106.9 million) were
available to J.P. Morgan Securities LLC to be used as collateral
against the overdraft facility which equates to 140% of the
overdrawn position (calculated on a settled basis).
CREDIT RISK EXPOSURE
|
2022 |
2021 |
|
£’000 |
£’000 |
Unquoted debt investments |
5,024 |
11,430 |
Derivative – OTC equity swaps |
283 |
18,864 |
Current assets: |
|
|
Other receivables (amounts due from
brokers, dividends and interest receivable) |
14,724 |
18,172 |
Cash |
26,594 |
29,595 |
(vi) Fair value of financial assets
and financial liabilities
Financial assets and financial liabilities are either carried in
the Statement of Financial Position at their fair value
(investments and derivatives) or the Statement of Financial
Position amount is a reasonable approximation of fair value (due
from brokers, dividends and interest receivable, due to brokers,
accrual, cash at bank, bank overdraft and amounts due under the
loan facility).
(vii) Hierarchy of investments
The Company has classified its financial assets designated at
fair value through profit or loss and the fair value of derivative
financial instruments using a fair value hierarchy that reflects
the significance of the inputs used in making the fair value
measurements. The hierarchy has the following levels:
- Level 1 – quoted prices (unadjusted) in active markets for
identical assets or liabilities;
- Level 2 – inputs other than quoted prices included with Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
- Level 3 – inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
As of 31 March
2022 |
Level
1
£’000 |
Level
2
£’000 |
Level
3
£’000 |
Total
£’000 |
Investments held at fair value
through profit or loss |
2,207,375 |
– |
172,473 |
2,379,848 |
Derivatives: OTC swaps (assets) |
– |
283 |
– |
283 |
Derivatives: OTC swaps
(liabilities) |
– |
(5,412) |
– |
(5,412) |
Financial instruments measured at
fair value |
2,207,375 |
(5,129) |
172,473 |
2,374,719 |
As at 31 March 2022, one debt,
twelve equity and a deferred consideration investment (included in
the portfolio) have been classified as level 3. All level 3
positions have been valued in accordance with the accounting policy
set out in Note 1(b).
During 2022 four unquoted investments were transferred to Level
1 following their initial public offerings.
As of
31 March 2021 |
Level
1 |
Level
2 |
Level
3 |
Total |
£’000 |
£’000 |
£’000 |
£’000 |
Investments held at
fair value through profit or loss |
2,275,409 |
– |
140,629 |
2,416,038 |
Derivatives: OTC swaps
(assets) |
– |
18,864 |
– |
18,864 |
Derivatives: OTC swaps
(liabilities) |
– |
(8,312) |
– |
(8,312) |
Financial instruments
measured at fair value |
2,275,409 |
10,552 |
140,629 |
2,426,590 |
As at 31 March 2021, three debt,
eleven equity and a deferred consideration investment have been
classified as Level 3. All level 3 positions have been valued using
an independent third party pricing source or using the price of a
recent transaction.
During 2021 three unquoted investments were acquired and
subsequently transferred to Level 1 following their initial public
offerings.
(viii) Capital management policies and
procedures
The Company’s capital management objectives are to ensure that
it will be able to continue as a going concern and to maximise the
income and capital return to its equity shareholders through an
appropriate level of gearing or leverage.
The Board’s policy on gearing and leverage is set out in the
Strategic Report.
As at 31 March 2022, the Company
had a net leverage percentage of 10.9% (2021: 7.6%).
The capital structure of the Company consists of the equity
share capital, retained earnings and other reserves as shown in the
Statement of Financial Position.
The Board, with the assistance of the AIFM and the Portfolio
Manager, monitors and reviews the broad structure of the Company’s
capital on an ongoing basis. This includes a review of:
- the planned level of gearing, which takes into account the
Portfolio Manager’s view of the market;
- the need to buy back equity shares, either for cancellation or
to hold in treasury, in light of any share price discount to net
asset value per share in accordance with the Company’s share
buy-back policy;
- the need for new issues of equity shares, including issues from
treasury; and
- the extent to which revenue in excess of that which is required
to be distributed should be retained.
The Company’s objectives, policies and processes for managing
capital are unchanged from the preceding accounting year.
17. CAPITAL RESERVE
|
Capital Reserves |
|
|
Investment |
|
|
|
Holding |
|
|
Other |
Gains* |
Total |
|
£’000 |
£’000 |
£’000 |
At 31 March 2021 |
966,717 |
575,911 |
1,542,628 |
Net losses on
investments |
(25,105) |
(127,370) |
(152,475) |
Expenses charged to
capital |
(229) |
– |
(229) |
Exchange loss on
currency balances |
(6,342) |
– |
(6,342) |
Shares repurchased for
Treasury |
(2,544) |
– |
(2,544) |
At 31 March
2022 |
932,497 |
448,541 |
1,381,038 |
* Investment
holding gains relate to the revaluation of investments and
derivatives held at the reporting date. (See note 9 for further
details).
Under the Company’s Articles of Association, sums within
“capital reserves – other” are also available for distribution.
18. RECONCILIATION OF OPERATING
(LOSS)/RETURN TO NET CASH INFLOW FROM OPERATING ACTIVITIES
|
2022 |
2021 |
|
£’000 |
£’000 |
(Loss)/returns before
finance charges and taxation |
(137,057) |
480,129 |
Add: capital
loss/(less: capital gain) before finance charges and taxation |
158,285 |
(463,073) |
Revenue return
before finance charges and taxation |
21,228 |
17,056 |
Expenses charged to
capital |
532 |
(48,118) |
Decrease in other
debtors |
1,342 |
934 |
(Decrease)/increase in
provisions, and other creditors and accruals |
(32,120) |
33,302 |
Net taxation suffered
on investment income |
(3,960) |
(2,138) |
Amortisation |
(351) |
(105) |
Net cash
(outflow)/inflow from operating activities |
(13,329) |
931 |
GLOSSARY OF TERMS AND ALTERNATIVE
PERFORMANCE MEASURES (‘APMS’)
ALTERNATIVE INVESTMENT FUND MANAGERS
DIRECTIVE (AIFMD)
Agreed by the European Parliament and the Council of the
European Union and transported into UK legislation, the AIFMD
classifies certain investment vehicles, including investment
companies, as Alternative Investment Funds (AIFs) and requires them
to appoint an Alternative Investment Fund Manager (AIFM) and a
depositary to manage and oversee the operations of the investment
vehicle. The Board of the Company retains responsibility for
strategy, operations and compliance and the Directors retain a
fiduciary duty to shareholders.
ALTERNATIVE PERFORMANCE MEASURE
(‘APM’)
An APM is a numerical measure of the Company’s current,
historical or future financial performance, financial position or
cash flows, other than a financial measure defined or specified in
the applicable financial framework. In selecting these Alternative
Performance Measures, the Directors considered the key objectives
and expectations of typical investors in an investment trust such
as the Company.
DISCOUNT OR PREMIUM*
A description of the difference between the share price and the
net asset value per share. The size of the discount or premium is
calculated by subtracting the share price from the net asset value
per share and is usually expressed as a percentage (%) of the net
asset value per share. If the share price is higher than the net
asset value per share the result is a premium. If the share price
is lower than the net asset value per share, the shares are trading
at a discount.
EQUITY SWAPS
An equity swap is an agreement where one party (counterparty)
transfers the total return of an underlying equity position to the
other party (swap holder) in exchange for a payment of the
principal, and interest for financed swaps, at a set date. Total
return includes dividend income and gains or losses from market
movements. The exposure of the holder is the market value of the
underlying equity position.
The company uses two types of equity swap:
- funded, where payment is made on acquisition. They are
equivalent to holding the underlying equity position with the
exception of additional counterparty risk and not possessing voting
rights in the underlying; and,
- financed, where payment is made on maturity. Financed swaps
increase exposure by the value of the underlying equity position,
with no initial outlay and no increase in the investment
portfolio’s value – there is therefore embedded leverage within a
financed swap due to the deferral of payment to maturity.
The Company employs swaps for two purposes:
- To gain access to individual stocks in the Indian, Chinese and
other emerging markets, where the Company is not locally registered
to trade or is able to gain in a more cost efficient manner than
holding the stocks directly; and,
- To gain exposure to thematic baskets of stocks (a Basket Swap).
Basket Swaps are used to build exposure to themes, or ideas, that
the Portfolio Manager believes the Company will benefit from and
where holding a Basket Swap is more cost effective and
operationally efficient than holding the underlying stocks or
individual swaps.
GEARING*
Gearing is calculated as the overdraft drawn, less net current
assets (excluding dividends), divided by Net Assets, expressed as a
percentage. For years prior to 2013, the calculation was based on
borrowings as a percentage of Net Assets.
* Alternative
Performance Measure
INTERNATIONAL SWAPS AND DERIVATIVES
ASSOCIATION (‘ISDA’)
ISDA has created a standardised contract (the ISDA Master
Agreement) which sets out the basic trading terms between the
counterparties to derivative contracts.
LEVERAGE*
Leverage is defined in the AIFMD as any method by which the AIFM
increases the exposure of an AIF. In addition to the gearing limit
the Company also has to comply with the AIFMD leverage
requirements. For these purposes the Board has set a maximum
leverage limit of 140% for both methods. This limit is expressed as
a % with 100% representing no leverage or gearing in the Company.
There are two methods of calculating leverage as follows:
The Gross Method is calculated as total exposure divided by
Shareholders’ Funds. Total exposure is calculated as net assets,
less cash and cash equivalents, adding back cash borrowing plus
derivatives converted into the equivalent position in their
underlying assets.
The Commitment Method is calculated as total exposure divided by
Shareholders Funds. In this instance total exposure is calculated
as net assets, less cash and cash equivalents, adding back cash
borrowing plus derivatives converted into the equivalent position
in their underlying assets, adjusted for netting and hedging
arrangements.
See the definition of Options and Equity Swaps for more details
on how exposure through derivatives is calculated.
|
2022 |
2021 |
|
£’000 |
£’000 |
|
Fair
Value |
Exposure* |
Fair
Value |
Exposure* |
Investments |
2,379,848 |
2,379,848 |
2,416,038 |
2,416,038 |
OTC equity swaps |
(5,129) |
135,018 |
10,552 |
145,636 |
|
2,374,719 |
2,514,866 |
2,426,590 |
2,561,674 |
Shareholders’
funds |
|
2,268,233 |
|
2,381,425 |
Leverage % |
|
10.9% |
|
7.6% |
*
Calculated in accordance with AIFMD requirements using the
Commitment Method
MSCI WORLD HEALTH CARE INDEX (THE
COMPANY’S BENCHMARK)
The MSCI World Health Care Index is designed to capture the
large and mid capitalisation segments across 23 developed markets
countries: All securities in the index are classified as healthcare
as per the Global Industry Classification Standard (GICS).
Developed Markets countries include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Ireland, Israel, Italy, Japan,
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland the UK and the U.S. The net total
return of the Index is used which assumes the reinvestment of any
dividends paid by its constituents after the deduction of relevant
withholding taxes. The performance of the Index is calculated in
U.S.$ terms. Because the Company’s reporting currency is £ the
prevailing U.S.$/£ exchange rate is applied to obtain a £ based
return.
NAV PER SHARE (PENCE)
The value of the Company’s assets, principally investments made
in other companies and cash being held, minus any liabilities. The
NAV is also described as ‘shareholders’ funds’ per share. The NAV
is often expressed in pence per share after being divided by the
number of shares which have been issued. The NAV per share is
unlikely to be the same as the share price which is the price at
which the Company’s shares can be bought or sold by an investor.
The share price is determined by the relationship between the
demand and supply of the shares.
* Alternative
Performance Measure
NET ASSET VALUE (NAV) PER SHARE TOTAL
RETURN*
The theoretical total return on shareholders’ funds per share,
reflecting the change in NAV assuming that dividends paid to
shareholders were reinvested at NAV at the time the shares were
quoted ex-dividend. A way of measuring investment management
performance of investment trusts which is not affected by movements
in discounts/premiums.
|
2022 |
2021 |
NAV Total
Return |
p |
p |
Opening NAV |
3,703.0 |
2,868.9 |
(Decrease)/increase in
NAV |
(237.8) |
834.1 |
Closing
NAV |
3,465.2 |
3,703.0 |
% (decrease)/increase
in NAV |
(6.4%) |
29.1% |
Impact of reinvested
dividends |
0.6% |
0.9% |
NAV Total
Return |
(5.8%) |
30.0% |
ONGOING CHARGES*
Ongoing charges are calculated by taking the Company’s
annualised ongoing charges, excluding finance costs, taxation,
performance fees and exceptional items, and expressing them as a
percentage of the average daily net asset value of the Company over
the year.
|
2022 |
2021 |
|
£’000 |
£’000 |
AIFM & Portfolio
Management fees (Note 3) |
18,765 |
17,068 |
Other Expenses –
Revenue (Note 4) |
1,305 |
1,338 |
Total Ongoing
Charges |
20,070 |
18,406 |
Performance fees
paid/crystallised |
12,861 |
– |
Total |
32,931 |
18,406 |
Average net
assets |
2,356,131 |
2,112,164 |
Ongoing
Charges |
0.9% |
0.9% |
Ongoing Charges
(including performance fees paid or crystallised during the
year) |
1.4% |
0.9% |
Rehypothecation
Rehypothecation is the practice by banks and brokers of using,
for their own purposes, assets that have been posted as collateral
by clients.
SHARE PRICE TOTAL RETURN*
Return to the investor on mid-market prices assuming that all
dividends paid were reinvested.
|
2022 |
2021 |
Share Price Total
Return |
p |
p |
Opening share
price |
3,695.0 |
2,920.0 |
(Decrease)/increase in
share price |
(420.0) |
775.0 |
Closing share
price |
3,275.0 |
3,695.0 |
% (decrease)/increase
in share price |
(11.4%) |
26.5% |
Impact of reinvested
dividends |
0.6% |
0.9% |
Share Price Total
Return |
(10.8%) |
27.4% |
* Alternative
Performance Measure
NOTICE OF THE ANNUAL GENERAL
MEETING
Notice is hereby given that the Annual General Meeting of
Worldwide Healthcare Trust PLC will be held at etc. Venues 1-3
Bonhill Street, London EC2A 4BY on
Wednesday, 6 July 2022 from
12.30 p.m. for the following
purposes:
ORDINARY BUSINESS
To consider and, if thought fit, pass the following as ordinary
resolutions:
- To receive and, if thought fit, to accept the Audited Accounts
and the Report of the Directors for the year ended 31 March 2022
- To approve the payment of a final dividend of 19.5p per
ordinary share for the year ended 31 March
2022
- To approve the Company’s dividend policy for the year ended
31 March 2022
- To re-elect Mrs Sarah Bates as a
Director of the Company
- To re-elect Mr Humphrey van der
Klugt as a Director of the Company
- To re-elect Mr Doug McCutcheon
as a Director of the Company
- To re-elect Mr Sven Borho as a
Director of the Company
- To re-elect Dr Bina Rawal as a
Director of the Company
- To re-appoint PricewaterhouseCoopers LLP as the Company’s
Auditors and to authorise the Audit & Risk Committee to
determine their remuneration
- To approve the Directors’ Remuneration Report for the year
ended 31 March 2022
SPECIAL BUSINESS
To consider and, if thought fit, pass the following resolutions
of which resolutions 12, 13, 14 and 15 will be proposed as special
resolutions:
Authority to allot shares
11. THAT in substitution for all existing authorities the
Directors be and are hereby generally and unconditionally
authorised in accordance with section 551 of the Companies Act 2006
(the “Act”) to exercise all powers of the Company to allot relevant
securities (within the meaning of section 551 of the Act) up to a
maximum aggregate nominal amount of £1,630,835 (being 10% of the
issued share capital of the Company at 25
May 2022) and representing 6,523,340 shares of 25 pence each (or, if changed, the number
representing 10% of the issued share capital of the Company at the
date at which this resolution is passed), provided that this
authority shall expire at the conclusion of the Annual General
Meeting of the Company to be held in 2023 or 15 months from the
date of passing this resolution, whichever is the earlier, unless
previously revoked, varied or renewed, by the Company in General
Meeting and provided that the Company shall be entitled to make,
prior to the expiry of such authority, an offer or agreement which
would or might require relevant securities to be allotted after
such expiry and the Directors may allot relevant securities
pursuant to such offer or agreement as if the authority conferred
hereby had not expired.
Disapplication of pre-emption
rights
12. THAT in substitution for all existing powers (and in
addition to any power conferred on them by resolution 13 set out in
the notice convening the Annual General Meeting at which this
resolution is proposed (“Notice of Annual General Meeting”)) the
Directors be and are hereby generally empowered pursuant to Section
570 of the Companies Act 2006 (the “Act”) to allot equity
securities (within the meaning of Section 560 of the Act) for cash
pursuant to the authority conferred on them by resolution 11 set
out in the Notice of Annual General Meeting or otherwise as if
Section 561(1) of the Act did not apply to any such allotment:
- pursuant to an offer of equity securities open for acceptance
for a period fixed by the Directors where the equity securities
respectively attributable to the interests of holders of shares of
25p each in the capital of the Company (“Shares”) are proportionate
(as nearly as may be) to the respective numbers of Shares held by
them but subject to such exclusions or other arrangements in
connection with the issue as the Directors may consider necessary,
appropriate or expedient to deal with equity securities
representing fractional entitlements or to deal with legal or
practical problems arising in any overseas territory, the
requirements of any regulatory body or stock exchange, or any other
matter whatsoever;
- provided that (otherwise than pursuant to sub-paragraph (a)
above) this power shall be limited to the allotment of equity
securities up to an aggregate nominal value of £1,630,835, being
10% of the issued share capital of the Company as at 25 May 2022 and representing 6,523,340 Shares or,
if changed, the number representing 10% of the issued share capital
of the Company at the date of the meeting at which this resolution
is passed, and provided further that (i) the number of equity
securities to which this power applies shall be reduced from time
to time by the number of treasury shares which are sold pursuant to
any power conferred on the Directors by resolution 13 set out in
the Notice of Annual General Meeting and (ii) no allotment of
equity securities shall be made under this power which would result
in Shares being issued at a price which is less than the net asset
value per Share as at the latest practicable date before such
allotment of equity securities as determined by the Directors in
their reasonable discretion; and
and such power shall expire at the conclusion of the next Annual
General Meeting of the Company after the passing of this resolution
or 15 months from the date of passing this resolution, whichever is
earlier, unless previously revoked, varied or renewed by the
Company in General Meeting and provided that the Company shall be
entitled to make, prior to the expiry of such authority, an offer
or agreement which would or might otherwise require equity
securities to be allotted after such expiry and the Directors may
allot equity securities pursuant to such offer or agreement as if
the power conferred hereby had not expired.
13. THAT in substitution for all existing powers (and in
addition to any power conferred on them by resolution 12 set out in
the Notice of Annual General Meeting) the Directors be and are
hereby generally empowered pursuant to Section 570 of the Companies
Act 2006 (the “Act”) to sell relevant shares (within the meaning of
Section 560 of the Act) if, immediately before the sale, such
shares are held by the Company as treasury shares (as defined in
Section 724 of the Act (“treasury shares”)), for cash as if Section
561(1) of the Act did not apply to any such sale provided that:
(a) this power shall be limited to the sale of
relevant shares having an aggregate nominal value of £1,630,835
being 10% of the issued share capital of the Company as at
25 May 2022 and representing
1,630,835 Shares or, if changed, the number representing 10% of the
issued share capital of the Company at the date of the meeting at
which this resolution is passed, and provided further that the
number of relevant shares to which power applies shall be reduced
from time to time by the number of Shares which are allotted for
cash as if Section 561(1) of the Act did not apply pursuant to the
power conferred on the Directors by resolution 12 set out in the
Notice of Annual General Meeting, and such power shall expire at
the conclusion of the next Annual General Meeting of the Company
after the passing of this resolution or 15 months from the date of
passing this resolution, whichever is earlier, unless previously
revoked, varied or renewed by the Company in General Meeting and
provided that the Company shall be entitled to make, prior to the
expiry of such authority, an offer or agreement which would or
might otherwise require treasury shares to be sold after such
expiry and the Directors may sell treasury shares pursuant to such
offer or agreement as if the power conferred hereby had not
expired.
Authority to repurchase ordinary
shares
14. THAT the Company be and is hereby generally and
unconditionally authorised in accordance with section 701 of the
Companies Act 2006 (the “Act”) to make one or more market purchases
(within the meaning of section 693(4) of the Act) of ordinary
shares of 25 pence each in the
capital of the Company (“Shares”) (either for retention as treasury
shares for future reissue, resale, transfer or cancellation),
provided that:
- the maximum aggregate number of Shares authorised to be
purchased shall be that number of shares which is equal to 14.99%
of the issued share capital of the Company as at the date of the
passing of this resolution;
- the minimum price (exclusive of expenses) which may be paid for
a Share is 25 pence;
- the maximum price (exclusive of expenses) which may be paid for
a Share is an amount equal to the greater of (i) 105% of the
average of the middle market quotations for a Share as derived from
the Daily Official List of the London Stock Exchange for the five
business days immediately preceding the day on which that Share is
purchased and (ii) the higher of the price of the last independent
trade and the highest then current independent bid on the London
Stock Exchange as stipulated in Article 5(1) of Regulation No.
2233/2003 of the European Commission (Commission Regulation of
22 December 2003 implementing the
Market Abuse Directive as regards exemptions for buy-back
programmes and stabilisation of financial instruments);
- the authority hereby conferred shall expire at the conclusion
of the Annual General Meeting of the Company to be held in 2023 or,
if earlier, on the expiry of 15 months from the date of the passing
of this resolution unless such authority is renewed prior to such
time; and
- the Company may make a contract to purchase Shares under this
authority before the expiry of such authority which will or may be
executed wholly or partly after the expiration of such authority,
and may make a purchase of Shares in pursuance of any such
contract.
General meetings
15. THAT the Directors be authorised to call general meetings
(other than the Annual General Meeting of the Company) on not less
than 14 clear days’ notice, such authority to expire on the
conclusion of the next Annual General Meeting of the Company, or,
if earlier, on the expiry 15 months from the date of the passing of
the resolution.
By order of the
Board |
Registered
Office: |
|
One Wood Street |
Frostrow Capital
LLP |
London EC2V 7WS |
Company Secretary |
|
26 May 2022 |
|
NOTES
- Members are entitled to appoint a proxy to exercise all or any
of their rights to attend and to speak and vote on their behalf at
the meeting. A shareholder may appoint more than one proxy in
relation to the meeting provided that each proxy is appointed to
exercise the rights attached to a different share or shares held by
that shareholder. A proxy need not be a shareholder of the
Company.
- A vote withheld is not a vote in law, which means that the vote
will not be counted in the calculation of votes for or against the
resolutions. If no voting indication is given, a proxy may vote or
abstain from voting at his/her discretion. A proxy may vote (or
abstain from voting) as he or she thinks fit in relation to any
other matter which is put before the meeting.
- This year, hard copy forms of proxy have not been included with
this notice. Members can vote by: logging onto www.signalshares.com
and following instructions; requesting a hard copy form of proxy
directly from the registrars, Link Group at
enquiries@linkgroup.co.uk or in the case of CREST members,
utilising the CREST electronic proxy appointment service in
accordance with the procedures set out below. To be valid any proxy
form or other instrument appointing a proxy must be completed and
signed and received by post or (during normal business hours only)
by hand at Link Group, PXS1, 29 Wellington Street, 10th Floor,
Central Square, Leeds LS1 4DL no later than 1.00 p.m. on Monday, 4
July 2022.
- In the case of a member which is a company, the instrument
appointing a proxy must be executed under its seal or signed on its
behalf by a duly authorised officer or attorney or other person
authorised to sign. Any power of attorney or other authority under
which the instrument is signed (or a certified copy of it) must be
included with the instrument.
- The return of a completed proxy form, other such instrument or
any CREST Proxy Instruction (as described below) will not prevent a
shareholder attending the meeting and voting in person if he/she
wishes to do so.
- Any person to whom this notice is sent who is a person
nominated under section 146 of the Companies Act 2006 to enjoy
information rights (a “Nominated Person”) may, under an agreement
between him/her and the shareholder by whom he/she was nominated,
have a right to be appointed (or have someone else appointed) as a
proxy for the meeting. If a Nominated Person has no such proxy
appointment right or does not wish to exercise it, he/she may,
under any such agreement, have a right to give instructions to the
shareholder as to the exercise of voting rights.
- The statement of the rights of shareholders in relation to the
appointment of proxies in paragraphs 1 and 3 above does not apply
to Nominated Persons. The rights described in these paragraphs can
only be exercised by shareholders of the Company.
- Pursuant to regulation 41 of the Uncertificated Securities
Regulations 2001, only shareholders registered on the register of
members of the Company (the “Register of Members”) at the close of
business on Monday, 4 July 2022 (or,
in the event of any adjournment, on the date which is two days
before the time of the adjourned meeting) will be entitled to
attend and vote or be represented at the meeting in respect of
shares registered in their name at that time. Changes to the
Register of Members after that time will be disregarded in
determining the rights of any person to attend and vote at the
meeting.
- As at 25 May 2022 (being the last
business day prior to the publication of this notice) the Company’s
issued share capital consists of 65,537,755 ordinary shares,
carrying one vote each. The Company holds 304,351 shares in
treasury. Therefore, the total voting rights in the Company as at
25 May 2022 are 65,233,404.
- CREST members who wish to appoint a proxy or proxies through
the CREST electronic proxy appointment service may do so by using
the procedures described in the CREST Manual. CREST Personal
Members or other CREST sponsored members, and those CREST members
who have appointed a service provider(s), should refer to their
CREST sponsor or voting service provider(s), who will be able to
take the appropriate action on their behalf.
- In order for a proxy appointment or instruction made using the
CREST service to be valid, the appropriate CREST message (a “CREST
Proxy Instruction”) must be properly authenticated in accordance
with the specifications of Euroclear UK and Ireland Limited
(“CRESTCo”), and must contain the information required for such
instruction, as described in the CREST Manual. The message,
regardless of whether it constitutes the appointment of a proxy or
is an amendment to the instruction given to a previously appointed
proxy must, in order to be valid, be transmitted so as to be
received by the issuer’s agent (ID RA10) no later than 48 hours
before the time appointed for holding the meeting. For this
purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the message by the CREST
Application Host) from which the issuer’s agent is able to retrieve
the message by enquiry to CREST in the manner prescribed by CREST.
After this time any change of instructions to proxies appointed
through CREST should be communicated to the appointee through other
means.
- CREST members and, where applicable, their CREST sponsors, or
voting service providers should note that CRESTCo does not make
available special procedures in CREST for any particular message.
Normal system timings and limitations will, therefore, apply in
relation to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to take (or, if the
CREST member is a CREST personal member, or sponsored member, or
has appointed a voting service provider, to procure that his CREST
sponsor or voting service provider(s) take(s)) such action as shall
be necessary to ensure that a message is transmitted by means of
the CREST system by any particular time. In this connection, CREST
members and, where applicable, their CREST sponsors or voting
system providers are referred, in particular, to those sections of
the CREST Manual concerning practical limitations of the CREST
system and timings.
- The Company may treat as invalid a CREST Proxy Instruction in
the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations-2001.
- In the case of joint holders, where more than one of the joint
holders purports to appoint a proxy, only the appointment submitted
by the most senior holder will be accepted. Seniority is determined
by the order in which the names of the joint holders appear in the
Register of Members in respect of the joint holding (the first
named being the most senior).
- Members who wish to change their proxy instructions should
submit a new proxy appointment using the methods set out above.
Note that the cut-off time for receipt of proxy appointments (see
above) also applies in relation to amended instructions; any
amended proxy appointment received after the relevant cut-off time
will be disregarded.
- Members who have appointed a proxy using the hard-copy proxy
form and who wish to change the instructions using another
hard-copy form, should contact Link Group on 0371 600 0300 or +44
371 600 0300. Calls are charged at the standard geographic rate and
will vary by provider. Calls outside the United Kingdom are charged at the applicable
international rate. Lines are open 09.00 to 17.30 Monday to Friday
excluding public holidays in England and Wales.
- If a member submits more than one valid proxy appointment, the
appointment received last before the latest time for the receipt of
proxies will take-precedence.
- In order to revoke a proxy instruction, members will need to
inform the Company. Members should send a signed hard copy notice
clearly stating their intention to revoke a proxy appointment to
Link Group, PXS1, 29 Wellington Street, 10th Floor, Central Square, Leeds LS1 4DL. In the case of a member which
is a company, the revocation notice must be executed under its
common seal or signed on its behalf by an officer of the company or
an attorney for the company. Any power of attorney or any other
authority under which the revocation notice is signed (or a duly
certified copy of such power of attorney) must be included with the
revocation notice. If a member attempts to revoke their proxy
appointment but the revocation is received after the time for
receipt of proxy appointments (see above) then, subject to
paragraph 4, the proxy appointment will remain valid.
How To Vote
If you hold your shares directly you can:
- Log on to https://www.signalshares.com and follow the
instructions; or
- Request a hard copy form of proxy from the Company’s
registrars, Link Group, by emailing enquiries@linkgroup.co.uk or by
calling +44 (0)371 664 0321 and returning the completed form to
Link Group, PXS1, 10th Floor, Central Square, 29 Wellington
Street, Leeds LS1 4DL, no later
than 12.30 pm on 4 July 2022.
If you hold your shares via an investment platform (e.g.
Hargreaves Lansdown) or a nominee, you should contact them to
enquire about arrangements to vote.
EXPLANATORY NOTES TO THE
RESOLUTIONS
Resolution 1 – To receive the Annual
Report and Accounts
The Annual Report and Accounts for the year ended 31 March 2022 will be presented to the Annual
General Meeting (AGM). These accounts accompany this Notice of
Meeting.
Resolution 2 – To approve a Final
Dividend
The rationale for the payment of a final dividend is set out in
the Chairman’s Statement and the Report of the Directors.
Resolution 3 – Approval of the Company’s Dividend
Policy
Resolution 3 seeks shareholder approval of the Company’s
dividend policy.
Resolutions 4 to 8 – Re-election of
Directors
Resolutions 4 to 8 deal with the re-election of each
Director.
The Board has confirmed, following a performance review, that
the Directors standing for re-election and election continue to
perform effectively.
Resolution 9 – Re-appointment of
Auditors and the determination of their remuneration
Resolution 9 relates to the re-appointment of
PricewaterhouseCoopers LLP as the Company’s independent Auditors to
hold office until the next AGM of the Company and also authorises
the Audit & Risk Committee to set their remuneration.
Resolutions 10 – Remuneration
Report
The Directors’ Remuneration Report is set out in full in the
annual report.
Resolutions 11, 12 and 13 – Issue of
Shares
Ordinary Resolution 11 in the Notice of AGM will renew the
authority to allot the unissued share capital up to an aggregate
nominal amount of £1,630,835 (equivalent to 6,523,340 shares, or
10% of the Company’s existing issued share capital on 25 May 2022, being the nearest practicable date
prior to the signing of this Report (or if changed, the number
representing 10% of the issued share capital of the Company at the
date at which the resolution is passed). Such authority will expire
on the date of the next AGM or after a period of 15 months from the
date of the passing of the resolution, whichever is earlier. This
means that the authority will have to be renewed at the next
AGM.
When shares are to be allotted for cash, Section 551 of the
Companies Act 2006 (the “Act”) provides that existing shareholders
have pre-emption rights and that the new shares must be offered
first to such shareholders in proportion to their existing holding
of shares. However, shareholders can, by special resolution,
authorise the Directors to allot shares otherwise than by a pro
rata issue to existing shareholders. Special Resolution 12 will, if
passed, give the Directors power to allot for cash equity
securities up to 10% of the Company’s existing share capital on
25 May 2022 (or if changed, the
number representing 10% of the issued share capital of the Company
at the date at which the resolution is passed), as if Section 551
of the Act does not apply. This is the same nominal amount of share
capital which the Directors are seeking the authority to allot
pursuant to Resolution 11. This authority will also expire on the
date of the next Annual General Meeting or after a period of 15
months, whichever is earlier. This authority will not be used in
connection with a rights issue by the Company.
Under the Companies (Acquisition of Own Shares) (Treasury
Shares) Regulations 2003 (as amended) (the “Treasury Share
Regulations”) the Company is permitted to buy-back and hold shares
in treasury and then sell them at a later date for cash, rather
than cancelling them. The Treasury Share Regulations require such
sale to be on a pre-emptive, pro rata, basis to existing
shareholders unless shareholders agree by special resolution to
disapply such pre-emption rights. Accordingly, in addition to
giving the Directors power to allot unissued share capital on a non
pre-emptive basis pursuant to Resolution 12, Resolution 13, if
passed, will give the Directors authority to sell shares held in
treasury on a non pre-emptive basis. No dividends may be paid on
any shares held in treasury and no voting rights will attach to
such shares. The benefit of the ability to hold treasury shares is
that such shares may be resold. This should give the Company
greater flexibility in managing its share capital, and improve
liquidity in its shares. It is the intention of the Board that any
re-sale of treasury shares would only take place at a premium to
the cum income net asset value per share. It is also the intention
of the Board that sales from treasury would only take place when
the Board believes that to do so would assist in the provision of
liquidity to the market. The number of treasury shares which may be
sold pursuant to this authority is limited to 10% of the Company’s
existing share capital on 25 May 2022
(or if changed, the number representing 10% of the issued share
capital of the Company at the date at which the resolution is
passed) (reduced by any equity securities allotted for cash on a
non-pro rata basis pursuant to Resolution 12, as described above).
This authority will also expire on the date of the next Annual
General Meeting or after a period of 15 months, whichever is
earlier.
The Directors intend to use the authority given by Resolutions
11, 12 and 13 to allot shares and disapply pre-emption rights only
in circumstances where this will be clearly beneficial to
shareholders as a whole. The issue proceeds would be available for
investment in line with the Company’s investment policy. No issue
of shares will be made which would effectively alter the control of
the Company without the prior approval of shareholders in general
meeting.
New Shares will only be issued at a premium to the Company’s cum
income net asset value per share at the time of issue.
Resolution 14 – Share Repurchases
The Directors wish to renew the authority given by shareholders
at the previous AGM. The principal aim of a share buy-back facility
is to enhance shareholder value by acquiring shares at a discount
to net asset value, as and when the Directors consider this to be
appropriate. The purchase of Shares, when they are trading at a
discount to net asset value per share should result in an increase
in the net asset value per share for the remaining shareholders.
This authority, if conferred, will only be exercised if to do so
would result in an increase in the net asset value per share for
the remaining shareholders and if it is in the best interests of
shareholders generally. Any purchase of shares will be made within
guidelines established from time to time by the Board. It is
proposed to seek shareholder authority to renew this facility for
another year at the AGM.
Under the current Listing Rules, the maximum price that may be
paid on the exercise of this authority must not exceed the higher
of (i) 105% of the average of the middle market quotations for the
shares over the five business days immediately preceding the date
of purchase and (ii) the higher of the last independent trade and
the highest current independent bid on the trading venue where the
purchase is carried out. The minimum price which may be paid is 25p
per Share. Existing shares which are purchased under this authority
will either be cancelled or held as Treasury Shares.
Special Resolution 14 in the Notice of AGM will renew the
authority to purchase in the market a maximum of 14.99% of Ordinary
Shares in issue as at the date of the passing of the resolution.
Such authority will expire on the date of the next AGM or after a
period of 15 months from the date of passing of the resolution,
whichever is earlier. This means in effect that the authority will
have to be renewed at the next AGM or earlier if the authority has
been exhausted.
Resolution 15 – General Meetings
Special Resolution 15 seeks shareholder approval for the Company
to hold General Meetings (other than the AGM) at 14 clear days’
notice. The Board confirms that the shorter notice period would
only be used where it was merited by the purpose of the
meeting.
Recommendation
The Board considers that the resolutions relating to the above
items are in the best interests of shareholders as a whole.
Accordingly, the Board unanimously recommends to the shareholders
that they vote in favour of the above resolutions to be proposed at
the forthcoming AGM as the Directors intend to do in respect of
their own beneficial holdings totalling 53,881 shares.
REGULATORY DISCLOSURES (UNAUDITED)
ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (AIFMD)
DISCLOSURES
INVESTMENT OBJECTIVE AND LEVERAGE
A description of the investment strategy and objectives of the
Company, the types of assets in which the Company may invest, the
techniques it may employ, any applicable investment restrictions,
the circumstances in which it may use leverage, the types and
sources of leverage permitted and the associated risks, any
restrictions on the use of leverage and the maximum level of
leverage which the AIFM and Portfolio Manager are entitled to
employ on behalf of the Company and the procedures by which the
Company may change its investment strategy and/or the investment
policy can be found in the Strategic Report under the heading
“Investment Strategy”.
The table below sets out the current maximum permitted limit and
actual level of leverages for the Company: as a percentage of net
assets
|
Gross |
Commitment |
|
Method |
Method |
Maximum level of
leverage |
140.0% |
140.0% |
Actual level at 31
March 2022 |
113.4% |
110.9% |
REMUNERATION OF AIFM STAFF
Following completion of an assessment of the application of the
proportionality principle to the FCA’s AIFM Remuneration Code, the
AIFM has disapplied the pay-out process rules with respect to it
and any of its delegates. This is because the AIFM considers that
it carries out non--complex activities and is operating on a small
scale.
Further disclosures required under the AIFM Rules can be found
within the Investor Disclosure Document on the Company’s website:
www.worldwidewh.com.
SECURITY FINANCING TRANSACTIONS
DISCLOSURES
As defined in Article 3 of Regulation (EU) 2015/2365, securities
financing transactions (SFT) include repurchase transactions,
securities or commodities lending and securities or commodities
borrowing, buy-sell back transactions or sell-buy back transactions
and margin lending transactions. Whilst the Company does not engage
in such SFT’s, it does engage in Total Return Swaps (TRS)
therefore, in accordance with Article 13 of the Regulation, the
Company’s involvement in and exposure to Total Return Swaps for the
accounting year ended 31 March 2022
are detailed below.
GLOBAL DATA
Amount of assets engaged in TRS
The following table represents the total value of assets engaged
in TRS:
|
£’000 |
% of
AUM |
TRS |
(5,129) |
(0.2) |
CONCENTRATION DATA
Counterparties
The following table provides details of the counterparties and
their country of incorporation (based on gross volume of
outstanding transactions with exposure on a gross basis) in respect
of TRS as at the balance sheet date:
|
Country of |
|
|
Incorporation |
£’000 |
Goldman Sachs |
U.S.A. |
99,898 |
JPMorgan |
U.S.A. |
35,120 |
AGGREGATE TRANSACTION DATA
Type, quality, maturity, tenor and
currency of collateral
No collateral was received by the Company in respect of TRS
during the year to 31 March 2022. The
collateral provided by the Company to the above counterparties is
set out below.
Type |
Currency |
Maturity |
Quality |
£’000 |
Cash |
USD |
less than 1 day |
n/a |
56,336 |
Maturity tenor of TRS
The following table provides an analysis of the maturity tenor
of open TRS positions (with exposure on a gross basis) as at the
balance sheet date:
|
TRS |
|
Value |
Maturity |
£’000 |
1 to 3 months |
– |
3 to 12 months |
135,018 |
Settlement and clearing
OTC derivative transactions (including TRS) are entered into by
the Company under an International Swaps and Derivatives
Associations, Inc. Master Agreement (“ISDA Master Agreement”). An
ISDA Master Agreement is a bilateral agreement between the Company
and a counterparty that governs OTC derivative transactions
(including TRS) entered into by the parties. All OTC derivative
transactions entered under an ISDA Master Agreement are netted
together for collateral purposes, therefore any collateral
disclosures provided are in respect of all OTC derivative
transactions entered into by the Company under the ISDA Master
agreement, not just total return swaps.
Safekeeping of collateral
There was no non-cash collateral provided by the Company in
respect of OTC derivatives (including TRS) with the counterparties
noted above as at the statement of financial position date.
Return and cost
All returns from TRS transactions will accrue to the Company and
are not subject to any returns sharing arrangements with the
Company’s AIFM, Portfolio Manager or any other third parties.
Returns from those instruments are disclosed in Note 9 to the
Company’s financial statements.
Frostrow Capital LLP,
Company Secretary
26 May 2022
ANNOUNCEMENT ENDS