TIDMPCGH TIDMPGHZ
RNS Number : 5538W
Polar Capital Global Health Tst PLC
13 December 2023
POLAR CAPITAL GLOBAL HEALTHCARE TRUST PLC
Legal Entity Identifier: 549300YV7J2TWLE7PV84
AUDITED RESULTS ANNOUNCEMENT FOR THE YEARED
30 SEPTEMBER 2023
FINANCIAL HIGHLIGHTS
For the year to 30 September 2023
Performance
Net Asset Value per Ordinary Share (Total Return)* 4.21%
Benchmark index
(MSCI ACWI Health Care Index (total return in sterling
with dividends reinvested)) 1.19%
Share Price Total Return* 1.92%
Since restructuring
Net asset value per Ordinary share (total return)
since restructuring * 67.56%
Benchmark index total return since restructuring 66.01%
Expenses 2023 2022
Ongoing charges* 0.87% 0.84%
------------------------------------------------------------ ---------------------- ------------------ ------------
Financials As at
As at 30 September
30 September 2023 2022 Change %
------------------------------------------------------------ ---------------------- ------------------ ------------
Total net assets (Group and Company) GBP419,182,000 GBP404,833,000 3.5%
Net asset value per Ordinary share 345.66p 333.83p 3.5%
Net asset value per ZDP share^ 120.41p 116.91p 3.0%
Price per Ordinary share 319.00p 315.00p 1.3%
Discount per Ordinary share* 7.7% 5.6%
Price per ZDP share^ 116.00p 114.00p 1.8%
Net gearing* 9.37% 7.41%
Ordinary shares in issue (excluding those held in treasury) 121,270,000 121,270,000 -
Ordinary shares held in treasury 2,879,256 2,879,256 -
ZDP shares in issue^ 32,128,437 32,128,437 -
------------------------------------------------------------ ---------------------- ------------------ ------------
Dividends
The Company has paid or declared the following dividends
relating to the financial year ended 30 September 2023:
Amount
per
Ordinary
Pay date share Record Date Ex-Date Declared Date
------------------------------ ----------- ------------- --------------- ----------------
First interim: 31 August 1.00p 4 August 2023 3 August 2023 11 July 2023
2023
Second interim: 29 February 1.20p 2 February 1 February 12 December 2023
2024 2024 2024
Total (2022: 2.10p) 2.20p
------------------------------ ----------- ------------- --------------- ----------------
* See Alternative Performance Measures provided in the Annual
Report.
The Company's portfolio was restructured on 20 June 2017. The
total return NAV performance since restructuring is calculated by
reinvesting the dividends in the assets of the Company from the
relevant payment date.
^ For information purposes.
For further information please contact:
Ed Gascoigne-Pees Tracey Lago, FCG John Regnier-Wilson
Camarco Polar Capital Global Healthcare Polar Capital LLP
Tele. 020 3757 Trust Plc Tele. 020 7227 2725
4984 Tele. 020 7227 2742
STATUS OF ANNOUNCEMENT
The figures and financial information contained in this
announcement are extracted from the Audited Annual Report for the
year ended 30 September 2023 and do not constitute statutory
accounts for the period. The Annual Report and Financial Statements
include the Report of the Independent Auditors which is unqualified
and does not contain a statement under either section 498(2) or
Section 498(3) of the Companies Act 2006.
The Annual Report and Financial Statements for the year ended 30
September 2023 have not yet been delivered to the Registrar of
Companies. The figures and financial information for the period
ended 30 September 2022 are extracted from the published Annual
Report and Financial Statements for the period ended 30 September
2022 and do not constitute the statutory accounts for that year.
The Annual Report and Financial Statements for the period ended 30
September 2022 have been delivered to the Registrar of Companies
and included the Report of the Independent Auditors which was
unqualified and did not contain a statement under either section
498(2) or Section 498(3) of the Companies Act 2006.
The Directors' Remuneration Report and certain other helpful
Shareholder information have not been included in this announcement
but forms part of the Annual Report which will be available on the
Company's website and will be sent to Shareholders in December
2023.
CHAIR'S STATEMENT
Dear Shareholders,
On behalf of the Board, I am pleased to provide to you the
Company's Annual Report for the year ended 30 September 2023.
Performance
The Company has performed well this year, ending the year 3.02%
ahead of its benchmark (MSCI ACWI Healthcare Index, Total Return),
performing well against the peer group and returning a NAV per
share total return of 4.21%. This was despite the year under review
continuing to be a difficult period for markets with challenging
macro-economic conditions and geo-political events, which have
sadly continued into the current year.
Whilst we are now seeing inflation and interest rates somewhat
stabilising, the longer term effects of this continue to be felt
and we have seen discounts across the investment trust sector in
general widen considerably. At the financial year end the discount
was 7.7% compared to the prior year figure of 5.6%.
The outperformance was driven by strong stock selection, largely
out of the focus on the three key themes highlighted in last year's
Annual report and Financial Statements, namely: rising utilisation,
disrupting the delivery of healthcare and consolidation.
Further detail is provided within the Manager's Report.
Outlook
Whilst the healthcare sector has been somewhat out of favour
against the broader market, fundamentals remain extremely strong
with valuations still very attractive. There is much to be excited
about, as demonstrated during the year by the delivery and
announcement of ground-breaking medical developments e.g. in
Alzheimer's research and the introduction onto the market of highly
effective weight-loss medications.
The Managers believe that while the themes that generated
performance last year will still be relevant, there are three
further areas which may drive shorter term returns: innovation, the
growing use of technology, such as AI and robotics, and Emerging
Markets. Further detail is provided in the Manager's Report.
We believe all of these factors support our optimism for
continued strong performance for the Company during the current
financial year.
Dividends
The Company's focus continues to remain on capital growth and
consequently dividends are expected to represent a relatively small
part of Shareholders' total return. The Company has a policy to pay
two small dividends per year.
In August 2023 the Company paid an interim dividend of 1.00p per
ordinary share. The Board has declared a further interim dividend
of 1.20p per ordinary share payable to shareholders on the register
as at 2 February 2024. This will bring the total dividend paid for
the financial year under review to 2.20p per ordinary share, a
small increase on the previous financial year.
Share Capital
The Company has 121,270,000 ordinary shares in issue as at the
date of writing and no shares have been bought back or issued
during the financial year under review. The Company's share price
on 30 September 2023 was 319.00p (2022: 315.00p). The Company's
market capitalisation at the financial year end was GBP386.9m
(2022: GBP382.0m). The Board has reconfirmed the authority given to
the Manager to use discretion to purchase shares in the market when
deemed appropriate to do so.
Subsidiary Undertaking
The Company is parent to a wholly owned subsidiary, PCGH ZDP
Plc. The subsidiary was created as part of the Company's
restructure in 2017; the purpose of the subsidiary is to issue zero
dividend preference ("ZDP") shares and provide a loan to the parent
in the form of structural gearing. The subsidiary has a fixed life
whereby the loan will be repaid and the ZDP shares will be redeemed
in June 2024 at which time the entity will be liquidated. The
Company remains in a strong position to repay the outstanding loan
amount at the time of redemption. Options for repayment are either
through new alternative gearing facilities or by raising cash via
the sale of stock within the portfolio. The Company has no current
intention to refinance the loan. Further information on the
redemption process is provided on the Company's website
www.polarcapitalglobalhealthcaretrust.co.uk .
The Board
As referenced in my statement to Shareholders last year, the
Board is aware of the FCA's Diversity and Inclusion Policy and
notes that its current composition does not meet the recommended
gender or ethnicity requirements. Given the Company's fixed life
and the potential reconstruction in 2025, the Board (via the
Nomination Committee) has concluded that the appropriate time for
recruitment would be shortly before or after any reconstruction
plans. We have engaged with some of our major shareholders via our
Company Secretary and they are understanding of this timeframe. It
is a priority of the Board to be able to meet all aspects of the
FCA's Diversity policy as part of future succession plans. At the
appropriate time, the Board will ensure that diversity continues to
be considered throughout any recruitment process, especially when
compiling a shortlist of candidates and selecting individuals for
interview.
There have been no changes to the membership of the Board during
the year under review. The Directors' biographical details are
available on the Company's website and are provided in the Annual
Report.
As reported in the last interim report, we have been joined by a
board apprentice, Ei-Lene Heng. Ei-Lene will sit with us as a Board
for c.12 months to gain experience before continuing her career and
potential future director roles. An interview with Ei-Lene on her
experience as a Board apprentice is contained in the Annual Report
and Accounts.
Annual General Meeting
The Company's Annual General Meeting ("AGM") will be held at 16
Palace Street at 2:30pm on Thursday, 8 February 2024. The notice of
AGM has been provided to Shareholders and will also be available on
the Company's website. Detailed explanations of the formal business
and the resolutions to be proposed at the AGM are contained within
the Shareholder Information section and in the Notice of AGM. We
will once again upload a copy of the Manager's Investment
Presentation to the Company's website ahead of the AGM and will
hold the formal business of the meeting in person. We have provided
a zoom link in the Notice of AGM which will enable anyone
interested to view the formal business and ask questions via the
on-line chat function. The Managers will be available to answer
questions and meet shareholders present. All formal business
resolutions will be voted on by a poll and we therefore encourage
shareholders to submit their votes ahead of the meeting by proxy
card which is provided with the Notice of Meeting.
Lisa Arnold
Chair
12 December 2023
INVESTMENT MANAGER'S REPORT - FOR THE YEARED 30 SEPTEMBER
2023
The objective of Polar Capital Global Healthcare Trust plc (the
Company) is to generate long-term capital appreciation by investing
in a globally diversified portfolio of healthcare companies.
The Company's diversification strategy, coupled with its focus
on large-capitalisation healthcare companies with robust,
medium-term growth outlooks, helps drive the positive risk/ return
profile of the underlying assets, relative to the more volatile
areas of healthcare. Further, the broad investment remit affords
the opportunity to invest in growth areas regardless of the
economic, political and regulatory environment. Importantly, the
Company also has the opportunity to invest in earlier-stage, more
innovative and disruptive companies that tend to be lower down the
market-capitalisation and liquidity scales. This is a key advantage
of the Company's closed ended structure. Regardless of size,
subsector or geography, stock selection is central to the process,
as we look to identify companies where there is a disconnect
between valuations and the near and medium-term growth drivers.
In terms of structure, the majority of the Company's assets
(calculated on a gross basis and referred to as the Growth
portfolio) will be invested in companies with a market
capitalisation >$5bn at the time of investment, with the balance
invested in companies with a market capitalisation <$5bn (a
maximum of 20% of gross assets, and referred to as the Innovation
portfolio). At the end of the reporting period, 31 companies in the
portfolio were Growth investments (95.0% of net assets) and 11 were
Innovation investments (14.3%). Structural debt, in the form of
Zero Dividend Preference shares, currently offers access to
additional liquidity and the opportunity to enhance returns.
Market Cap 30 September 30 September
at 2023 2022
Large (>US$10bn) 80.4% 78.5%
Medium (US$5bn -
US$10bn) 14.6% 16.0%
Small (<US$5bn) 14.3% 12.8%
Other net liabilities (9.3%) (7.3%)
100.0% 100.0%
============= =============
Over the financial year to 30 September 2023, the Company
delivered a NAV per share total return of 4.2%, a 3.0%
outperformance of its benchmark, the MSCI All Country World Daily
Net Total Return Health Care Index. The absolute performance of the
healthcare sector was modestly positive, up 1.2% over the reporting
period, but it underperformed the broader market, as tracked by the
MSCI All Country World Net Total Return Index (all figures above
are in sterling terms) which was up 10.5%.
A cautious investing environment, very much apparent in the
first three months of the financial year with investors favouring
more defensive sectors, changed in early 2023 and was replaced with
a heightened sense of optimism. That optimism, driven by
better-than-expected economic growth and receding fears of a
recession, was evident in the outperformance of more economically
sensitive areas of the market such as communication services,
information technology and consumer discretionary. This trend,
while volatile, persisted until the end of July, when investors
reverted once again to safety on the back of higher interest rates
and worries of a deteriorating macroeconomic environment should
interest rates stay higher for longer.
Reflecting on the Company's performance, there was strong stock
selection across the entire market-capitalisation spectrum,
partially offset by negative allocation, with the Company's above
benchmark exposure to small and mid-capitalisation stocks the
biggest drag on performance. Within the benchmark, distributors,
healthcare supplies and healthcare facilities all performed
strongly over the period, reflecting an acceleration in utilisation
and consumption - a central investment theme for the Company in
2023.
At the other end of the scale, the past 12 months have been
difficult for the healthcare services, life sciences tools and
services, and managed healthcare subsectors. The healthcare
services and managed care subsectors both struggled thanks to the
fear of elevated medical costs, driven by increased utilisation and
patient volumes. The life sciences tools and services subsector
suffered from a variety of earnings headwinds including post-Covid
destocking, a dramatic slowdown in China and more conservative
spending from their biopharmaceutical customers.
As set out in last year's annual report, the focus was very much
on three key investment themes:
-- Rising utilisation: during the year, medical device
companies, healthcare facilities and distributors all pointed to an
increase in both utilisation (i.e. patient volumes), and the
consumption of healthcare products and services.
-- Disrupting the delivery of healthcare: comments from the
managed care industry also underpinned our view that more and more
healthcare procedures are being delivered in lower-cost, outpatient
settings, especially among US seniors.
-- Consolidation: we witnessed the completion of several mergers
and acquisitions during the financial year, despite greater
scrutiny from the US Federal Trade Commission.
The themes discussed above will continue to be relevant as we
look forward to the next financial year, but we have modified our
emphasis into areas where we see the most interesting and
underappreciated near-term investment opportunities, namely
innovation, artificial intelligence (AI) and emerging markets. We
explore these themes in more detail below, under 'Healthcare:
Fundamentals remain strong'.
PERFORMANCE REVIEW
Over the financial year to the end of September 2023, the
Company achieved a positive return on net assets of 4.2%, which was
3.0% ahead of its benchmark. This performance was delivered despite
a challenging backdrop whereby the overall healthcare sector
underperformed the broader market. In sterling terms, global equity
markets posted muted returns in the first three months of the
financial year with investors adopting a cautious approach which
saw more defensive areas of the market (and healthcare)
outperform.
The Company entered the financial year with a large exposure to
healthcare facilities and biotechnology along with a positive view
on managed care. The biggest underweights were in the
pharmaceuticals, healthcare equipment and supply sectors, alongside
a smaller underweight in life sciences tools and services and
healthcare services. During the second quarter of this reporting
period, consistent with our view that utilisation of healthcare
would start to pick up in 2023, we turned more positive on
healthcare equipment, healthcare supplies and pharmaceuticals,
added additional exposure to healthcare facilities but reduced our
positioning in managed care to an underweight. Also, the exposure
to life sciences tools and services was switched to an overweight.
However, as 2023 progressed, with fear over the macroeconomic
picture became more challenging due to persistent inflation, and a
high interest rate environment, we closed the underweight in
managed care and reduced the holdings in life sciences tools and
services and biotechnology. From a subsector point of view, the
largest positive contributors to performance were biotechnology,
healthcare equipment and facilities thanks to strong selection and
positive allocation. On the other hand, stock-picking and
allocation in life sciences tools and services were the most
significant detractors to performance, together with weak selection
effect in distributors.
From a market-capitalisation perspective, stock selection was
positive across the entire range. For the larger-capitalisation
investments, in which the Company was underweight relative to the
benchmark, allocation was slightly negative but stock-picking was
substantially stronger. By contrast, small and midsized healthcare
companies had a very challenging period, especially at the start of
the financial year and towards the end of it.
To put this into perspective, the Russell 2000 Healthcare Index
underperformed the S&P 500 Healthcare index by over 32%, in
dollar terms, over the course of the year. Consequently, given the
Company's overexposure to small and mid-capitalisation stocks, the
allocation effect was negative.
On a geographical basis, all regions contributed positively
except the Middle East and Africa. The largest contributors were
Asia Pacific ex-Japan, where selection was productive; Europe,
where allocation was particularly favourable; and North America,
which benefitted from both good selection and allocation.
The active management of gearing did not have a meaningful
contribution to performance after accounting for foreign exchange
moves.
Top 10 Relative Contributors (%)
Average Active Stock Stock Total
Stock Weight Return Return Attribution
Top 10 Weight vs BM
----------------- -------- -------- -------- -------- -------------
Zealand Pharma
A/S 3.45 3.45 73.33 72.14 2.13
----------------- -------- -------- -------- -------- -------------
Pfizer 0.00 -3.15 -27.80 -28.99 1.13
----------------- -------- -------- -------- -------- -------------
Roche Holding
AG 0.00 -3.07 -20.71 -21.90 0.87
----------------- -------- -------- -------- -------- -------------
Legend Biotech
Corp 1.52 1.47 50.75 49.55 0.72
----------------- -------- -------- -------- -------- -------------
Seagen 1.14 0.82 41.97 40.77 0.67
----------------- -------- -------- -------- -------- -------------
CVS Health Corp 0.00 -1.42 -32.97 -34.16 0.62
----------------- -------- -------- -------- -------- -------------
Max Healthcare
Institute 1.60 1.58 25.05 23.86 0.61
----------------- -------- -------- -------- -------- -------------
AstraZeneca 4.48 1.64 11.65 10.45 0.60
----------------- -------- -------- -------- -------- -------------
HCA Healthcare 3.09 2.34 22.55 21.35 0.59
----------------- -------- -------- -------- -------- -------------
Bristol Myers
Squibb 0.00 -1.97 -25.24 -26.44 0.57
----------------- -------- -------- -------- -------- -------------
Source: Polar Capital, as at 30 September 2023.
Positive relative contributors to performance for the financial
year included Zealand Pharma, Pfizer, Roche Holding, Legend
Biotech, and Seagen.
Zealand Pharma is a Danish biotechnology company focused on
developing drugs for metabolic and gastrointestinal diseases.
During the period, the company reported encouraging clinical data
for its pipeline assets targeting short bowel syndrome and, more
importantly, obesity. The stock's strong performance reflects the
euphoria that surrounds obesity assets as witnessed with those of
Eli Lilly and Novo Nordisk (note the Company did not own Novo
Nordisk, during the reporting period).
The lack of exposure to Pfizer, a company that benefitted
significantly from the Covid pandemic by producing vaccines and
other therapeutics, was a positive contributor. The company's
relatively poor performance was mainly due to management's failure
to set the right expectations for sales of Covid-related products,
driving negative earnings revisions, and dramatically increased
spend on R&D for its non-Covid pipeline.
Also, not holding Roche Holding was beneficial to the
portfolio's performance. The Swiss pharmaceutical giant, like
Pfizer, saw its earnings estimates being cut throughout the
financial year as revenue for its Covid diagnostics portfolio
decreased faster than initially anticipated and other areas of its
portfolio also delivered sales below consensus. Additionally, the
company suffered from pipeline disappointments for important assets
in Alzheimer's disease and oncology.
Legend Biotech, a biotechnology company with a focus on tumour
treatment, released extremely compelling clinical data for a drug
called Carvykti. Used for the treatment of multiple myeloma, a bone
marrow cancer, the trial in question met its primary endpoint of a
significant improvement in progression-free survival. The stock was
further buoyed when partner Johnson & Johnson reported better
than expected sales for Carvykti.
Seagen, delivered a strong end to their 2022 financial year,
reported 2023 guidance that was well received by the market and
also highlighted significant progress and opportunities in the
pipeline. In February 2023, shares came under further upwards
pressure due to rumours that Pfizer was in discussion to acquire
Seagen. These rumours were confirmed in early March, when Pfizer
announced its intention to buy Seagen for a deal worth nearly
$43bn.
Bottom 10 Relative Contributors (%)
Average Active Stock Stock Total
Stock Weight Return Return Attribution
Bottom 10 Weight vs BM
---------------------- -------- -------- -------- -------- -------------
Novo Nordisk
A/S 0.00 -3.31 64.63 63.43 -1.71
---------------------- -------- -------- -------- -------- -------------
Cytokinetics 2.55 2.55 -44.32 -45.52 -1.66
---------------------- -------- -------- -------- -------- -------------
Revance Therapeutics 1.80 1.80 -61.10 -62.30 -1.01
---------------------- -------- -------- -------- -------- -------------
Bio-Rad Laboratories 2.07 1.95 -21.32 -22.51 -0.74
---------------------- -------- -------- -------- -------- -------------
Inspire Medical
Systems 1.24 1.24 2.44 1.25 -0.59
---------------------- -------- -------- -------- -------- -------------
Option Care
Health 1.33 1.33 -5.87 -7.07 -0.55
---------------------- -------- -------- -------- -------- -------------
Agilent Technologies 1.02 0.48 -15.19 -16.39 -0.48
---------------------- -------- -------- -------- -------- -------------
Acadia Healthcare 2.37 2.37 -17.65 -18.85 -0.42
---------------------- -------- -------- -------- -------- -------------
Merck KGaA 1.57 1.25 -5.60 -6.79 -0.40
---------------------- -------- -------- -------- -------- -------------
Novartis 1.17 -1.49 27.92 26.72 -0.38
---------------------- -------- -------- -------- -------- -------------
Source: Polar Capital, as at 30 September 2023. Past performance
is not indicative or a guarantee of future results.
Negative relative contributors to performance for the financial
year 2023 included Novo Nordisk, Cytokinetics, Revance
Therapeutics, Bio-Rad Laboratories, and Inspire Medical
Systems.
The lack of exposure to Novo Nordisk, a Danish pharmaceutical
business with the only commercialised latest-generation
Glucagon-Like Peptide-1 (GLP-1) drug to target obesity, was the
largest detractor during the financial year.
As mentioned earlier, and discussed in more detail below,
investors' appreciation for the market opportunity for Novo
Nordisk's weight-loss drug Wegovy and similar assets skyrocketed on
the back of exceptional commercial success and compelling new
clinical results.
Cytokinetics, a US biotechnology company developing drugs that
modulate muscle function to treat principally cardiovascular
diseases, was caught in the selloff of early-stage biotechnology
stocks after the collapse in March of Silicon Valley Bank, an
important institution that at the time financed over half the US
venture capital-backed healthcare and technology companies. In
addition, investors started to question the market opportunity for
Cytokinetics' key asset aficamten following a slow launch of
Bristol-Myers Squibb's Camzyos, a drug with a similar mechanism of
action and target indication as aficamten, although this is the
typical pattern for newly launched cardiovascular medicines.
Revance Therapeutics commercialises Daxxify, a toxin approved
for the treatment of frown lines and in development for
therapeutics use (cervical dystonia in adults, migraine etc).
Despite extremely encouraging sales from the very first month of
Daxxify's launch, subsequent quarters did not see such a rapid pace
of sales and sentiment soured on the product. Investors were
additionally disappointed when, during the capital market day in
September 2023, management announced their intention to pivot away
from its premium-pricing model for Daxxify, a decision that led the
market to question the differentiation of the product versus
Abbvie's market-leading product Botox.
Life sciences tools and services company Bio-Rad Laboratories
reported a series of downgrades to both their fiscal year 2023 and
medium-term expectations. Like many other businesses in the
industry, Bio-Rad Laboratories faced a number of challenges which
included customers' inventory destocking, biopharmaceutical funding
constraints and tighter sanctions in Russia.
Inspire Medical Systems is a medical technology company whose
sole focus is the treatment of obstructive sleep apnoea (OSA)
through hypoglossal-nerve stimulation. Despite delivering excellent
revenue growth and guidance upgrades in the first two quarters of
the calendar year, the stock lost over 35% of its value in August
and September 2023. The company's future growth was seen as being
negatively impacted by the significant potential growth in use of
the latest weight-loss drugs which could significantly shrink the
funnel of new patients with OSA, a condition which is often
associated with obesity.
Healthcare: Fundamentals remain strong
The 2022 Annual Report focused on three key themes we believed
were accelerating:
-- Healthcare delivery disruption accelerating including the
shift to value-based care: Not just driving patient volumes through
lower-cost settings but coordinating care to drive better
outcomes.
-- Utilisation: Working through the ever-growing backlog of
patients as healthcare systems globally learn to live with
Covid.
-- Consolidation: Healthcare is highly fragmented and heavily
populated with companies that have robust cashflows and strong
balance sheets. M&A activity has increased of late and is
highly likely to continue on the same path.
We continue to believe the above themes will be important for
some time, however in a rapidly evolving environment the following
themes are not only topical but also have significant commercial
relevance:
-- Innovation: 2023 has witnessed a number of highly significant
medical breakthroughs in a broad range of therapeutic
categories.
-- Artificial intelligence and machine learning: Advancements in
machine learning algorithms, greater access to data and the
availability of more powerful mobile networks could materially
accelerate the pace of change in the healthcare industry.
-- Emerging markets: After a challenging period, especially in
China, emerging markets should be a source of growth driven by an
ever-increasing demand for healthcare products and services.
Innovation: Reaching new heights
It is stating the obvious that the biopharmaceutical sector, and
indeed the broader healthcare industry, is highly innovative as
scientists attempt to tackle difficult to treat diseases with novel
ground-breaking treatment modalities. This innovation has shifted
to a new level in 2023 where we have seen positive clinical data in
areas of high unmet medical need such as early-stage breast cancer,
late-stage lung cancer, chronic obstructive pulmonary disease
(smoker's cough), Alzheimer's disease and obesity. Focussing on
just one disease area as an example, with more than one billion
(Source: Obesity Statistics in 2023, Forbes Health) people
suffering from obesity worldwide, the societal challenge and
commercial opportunity is simply enormous.
GLP-1s and obesity: Weighing up pros and cons
One of the biopharmaceutical industry's most significant
breakthroughs in recent times has been in the field of obesity,
with the field led by Eli Lilly and Novo Nordisk, the former being
the largest holding in the Company at the end of the financial
year. In terms of development of this category, Eli Lilly has
developed tirzepatide which contains a GLP-1 that has utility in
both the treatment of diabetes and obesity. The drug has
multi-factorial mechanisms of action, all of which contribute to
the drug's efficacy. Not only do GLP-1s stimulate insulin synthesis
and secretion from the pancreas, they also increase insulin
sensitivity, reduce the pace of gastric emptying and appear to work
with the brain to reduce food intake. In terms of efficacy,
tirzepatide has demonstrated weight loss >20% over a 72-week
period. Novo Nodisk's drug, Wegovy, has demonstrated high-teens
percentage weight loss over a 68-week period.
The impact GLP-1s are having on weight loss is hugely
impressive, but there is just as much excitement with some of the
secondary benefits of the drug class. Novo Nordisk released the
top-line results of a cardiovascular outcomes study called SELECT
which revealed that Wegovy reduces the risk of major adverse
cardiovascular events by 20% in adults with obesity and established
cardiovascular disease. So not only does the drug help patients
lose weight, but it also reduces their risk of further serious
cardiovascular events, such as myocardial infarction (heart attack)
and stroke. Further, Novo Nordisk and Eli Lilly are also looking at
how these drugs could help patients with disorders such as
obstructive sleep apnoea (a disorder where breathing stops and
starts while you sleep), pain associated with osteoarthritis, heart
failure, non-alcoholic steatohepatitis (fatty liver disease) and
diabetes prevention. Clearly we need to see the final data from the
ongoing clinical trials, but it is easy to understand why the
scientific community, and indeed the investment community, is so
excited by the potential of these drugs. For context, by 2030 the
combined estimated sales of Eli Lilly' tirzepatide and Novo
Nordisk's Wegovy is c$40bn in obesity alone (Source: Bloomberg), a
figure that only represents modest penetration of the global
pandemic that is obesity.
The euphoria surrounding the positive implications of the
obesity drugs is easy to understand, but it is the potentially
negative long-term implications for other healthcare subsectors
that needs more careful consideration. Continuous glucose
monitoring, for example, is an area where the market is starting to
question the total addressable market given the GLP-1s' positive
effect on controlling blood sugar levels and, potentially, delaying
the need for diabetics to move on to insulin. An even bigger
concern for medical device companies that have exposure to diabetes
is the potential for GLP-1s to prevent diabetes. Obstructive sleep
apnoea is another area where GLP-1s could prove effective, as
illustrated by the pressure being seen on the valuations of
companies that manufacture continuous positive airway pressure
devices and implants that are used to open airways. Another
concern, albeit a bit more tenuous, is the impact that obesity
drugs could have on the demand for large joints such as hips and
knees. Novo Nordisk is running a clinical trial that is looking at
not just weight loss, but also at how much knee pain participants
suffer from and how this affects participants' daily life. With
osteoarthritis the most common cause of joint replacements, there
is some concern that the demand for large joint replacements will
wane over time.
In conclusion, obesity medications could have a hugely positive
impact on the health of millions of patients globally and could be
of financial benefit to healthcare systems spending huge amounts of
money to treat effects of the disease. In terms of investment
opportunities, the companies developing the drugs are
understandably attracting lots of attention, but it is also the
supply chain in areas like manufacturing and distribution that
should benefit from the huge demand for the therapies. Relevant
Company investments included Zealand Pharma, Aptar Group and
Beckton Dickinson, in addition to the holding in Eli Lilly.
However, it is important to remain measured given we are a very
long way from solving the world's obesity pandemic. Not because the
drugs aren't effective, but because access to care will remain a
challenge for many, and not just in emerging markets.
Artificial intelligence: Adding value today
Another hot topic of conversation in 2023 has been artificial
intelligence (AI) and machine learning (ML) and how they can be
used to make healthcare more productive. AI and ML technologies can
sift through enormous volumes of health data and analyse it much
faster than humans can. For example, AI can assist physicians with
note taking and content summaries that can help ensure that medical
records are as accurate and as thorough as possible. AI could also
automate coding in hospitals and the sharing of information between
departments and billing. Fraud prevention is another area where AI
and ML can be used to help identify unusual or suspicious patterns
in insurance claims, diagnostic procedures and billing. In essence,
the opportunities for AI and ML to add value in a very heavily
regulated industry are endless but it makes sense to focus on areas
where there is tangible evidence of progress and where we can
invest today.
Diagnostics is a field of medicine where AI and ML are starting
to have a material impact on accuracy and, more importantly,
patient outcomes. Take colonoscopy for example, a technique that
remains the gold standard in detecting and preventing colorectal
cancer. The current procedure does have limitations with some
studies suggesting that more than half of post-colonoscopy colon
cancer cases arise from lesions missed at patients' previous
colonoscopies. Researchers at the Mayo Clinic are investigating how
AI can be used to improve polyp detection. In the case of colon
cancer, the AI system works alongside the physician in real time,
scanning the colonoscopy video feed and drawing small, red boxes
around polyps that might otherwise get overlooked.
AI-based real-time image analysis software is also being used in
ultrasound machines to enhance sonographers' ability to interpret
images. Obstetrics has embraced the technology given its impact on
efficiency and workflow but more importantly its ability to reduce
omissions and errors. A good example is Intelligent Ultrasound's
SCANNAV Assist software that has been incorporated into GE
Healthcare's Volusion SWIFT ultrasound machines.
Revenue cycle management is also benefitting from intelligent
automation, with US company R1 RCM one of the leading protagonists.
Hospitals, health systems and physician groups can all benefit from
technologies and services that improve financial performance and
promote patient satisfaction. Patient scheduling, pre-registration
and clearance, coding and processes to deal with denials can all
benefit enormously from predictive, technology-driven solutions. As
for the patients, efficient and organised scheduling, registration,
admissions and payment can lead to high levels of satisfaction, and
importantly, high levels of retention.
Relevant Company investments included Intuitive Surgical, Iqvia,
Intelligent Ultrasound and R1 RCM.
Emerging markets: Is China on the road to recovery?
The lifting of the Covid lockdowns was the catalyst for a strong
rebound in economic activity in China in early 2023. However,
growth stalled, with falling consumer spending, a real estate
crisis and slumping exports all contributing factors. This macro
slowdown adversely affected a number of industries, including the
life sciences tools and services sector. There are also some
healthcare-specific challenges that have been weighing on the
sector in recent months, primarily an anti-corruption campaign that
is looking to "resolutely punish corruption" in the medical sector
"with a zero-tolerance attitude".
Promoting systematic governance throughout the entire healthcare
sector, the anti-corruption campaign seeks to uncover questionable
links between hospital managers, doctors and medical
representatives. If successful, the campaign could significantly
advance China's healthcare industry, making it more affordable and
freeing much-needed resources for innovative medicines, devices,
technologies and services. However, the initiative has resulted in
a slowdown in activity with doctors reluctant to participate in
academic conferences or prescribe imported drugs. There has also
been a marked decline in orthopaedic and ophthalmic surgeries as
clinicians and surgeons temporarily reduce activity. Further,
medical device companies have highlighted a modest impact on
capital placements in the short term with hospital procurement
processes also under the microscope.
As soon as the Chinese healthcare system has successfully
navigated its way through the anti-corruption campaign, investors
can once again focus on the strong, underlying fundamentals of the
region. Government policy is supportive for healthcare, encouraging
investment in research and development to satisfy the desire for
best-in-class medicines. Further, volume-based procurement (VBP),
which has weighed on the biopharmaceutical and medical device
industries for the past five years, appears to be stabilising. The
government is comfortable with the price adjustments VBP has put in
place and is easing up on its policies, seeking a greater balance
between cost control and innovation. With a more supportive
regulatory backdrop, coupled with a recovery in the economy,
companies with significant exposure to China could be interesting
as we look into 2024, with life sciences tools and services,
medical devices and biopharmaceuticals the most likely
beneficiaries stocks.
Positioning and process: Constructive on biotechnology,
healthcare facilities, healthcare supplies and equipment
We remain constructive on the healthcare sector as a whole, in
particular on biotechnology, healthcare facilities, healthcare
supplies and equipment, which were three of our largest overweight
subsector positions as at 29 September 2023. Despite the
challenging environment for early-stage biotechnology investing, we
remain constructive on the broader subsector, which continues to be
innovative and highly productive with many of the Company's
investments in businesses with either late-stage assets or
commercialised drugs or both. Consolidation was a key theme
highlighted in last year's report and we were pleased to see that
the pace of M&A activity picked up in 2023, with many large
biopharmaceutical companies announcing their intention to acquire
biotechnology assets in order to reinvigorate revenue growth and
strengthen their pipelines.
From a geographical perspective, the Company continues to have
an overweight stance in Europe and Japan. The biggest change to the
portfolio was moving North America from being an overweight to an
underweight, which does not reflect a less positive perspective on
the region but was an effect of stock selection and changes in the
allocation to subsectors.
We entered the year with an underweight in healthcare supplies
and equipment given the challenges the industry faced (supply-chain
constraints, low hospital volumes due to staffing shortages, a
strengthening US dollar). However, our stance turned more positive
towards the start of 2023 with the view that utilisation of
healthcare would start to reaccelerate after a period of low
hospital and procedural volumes during the pandemic. This thesis
proved accurate and we believe utilisation will continue to stay
elevated at least for the short term, hence our overweight in the
sector as at the end of the financial year. Additionally, the
medical technology sector is ripe to take advantage of the
opportunities afforded by AI which is already being deployed, for
instance to assist medical imaging reading (Intelligent Ultrasound
Group) and in robotic surgery (Intuitive Surgical).
Increased utilisation should also be beneficial for healthcare
facilities, therefore our overweight in the sector has not changed
significantly over the period under review. As delivery disruption
is an important secular trend in healthcare, our holdings in the
sector are in businesses providing access to healthcare services in
the lowest-cost settings such as the home and outpatient facilities
or Ambulatory Surgery Centres (ASC) and businesses involved in
behavioural health services.
As in the past, the pharmaceuticals sector remains a significant
underweight relative to the benchmark for the Company. We take the
view that, collectively, pharmaceutical companies have fairly
uninspiring revenue and earnings growth profiles. However, there
are therapeutic areas which are very attractive and could lead to
significant revenue and earnings growth. Such an area of interest
is metabolic health which covers diseases such as diabetes and
obesity. Over the year we increased our exposure to this theme by
adding to our holdings in Eli Lilly which, together with Zealand
Pharma (a biotechnology company), is the most direct expression of
our positive view on weight-loss therapies.
Geographical Exposure 30 September 2023 30 September 2022
at
----------------------- ------------------ ------------------
United States 65.1 % 72.3%
United Kingdom 10.6 % 6.4%
Denmark 8.3% 4.3%
Japan 7.6 % 6.9 %
Switzerland 7.1 % 6.4 %
France 3.9 % 2.6 %
Sweden 2.8 % 2.9 %
Germany 2.3% 2.2 %
India 0.8 % -
Ireland 0.8 % 1.0 %
Netherlands - 2.3 %
Other net liabilities (9.3%) (7.3%)
------------------ ------------------
Total 100% 100.0%
------------------ ------------------
Source: Polar Capital
Sector Exposure 30 September 2023 30 September 2022
at
-------------------------- ------------------ ------------------
Pharmaceuticals 30.8% 31.3%
Biotechnology 20.2% 28.3%
Healthcare Equipment 15.4% 12.1%
Managed Healthcare 11.1% 13.1%
Healthcare Facilities 9.7% 7.4%
Healthcare Supplies 7.6% 2.9%
Life Sciences Tools
& Services 6.8% 4.3%
Metal & Glass Containers 2.5% 2.4%
Healthcare Services 2.4% 2.1%
Healthcare Technology 2.0% 1.5%
Healthcare Distributors 0.8% 1.9%
Other net liabilities (9.3%) (7.3%)
------------------ ------------------
Total 100% 100%
------------------ ------------------
Source: Polar Capital
While the previous tables focus on subsector and geographical
weightings, bottom-up stock selection is central to the team's
investment process. The healthcare industry is extremely
complicated and dynamic, and subject to varied news flow which
lends itself to active management. We look to take advantage of
dislocations between near-term valuations and medium-term
fundamentals. Our own in-house idea generation is complemented by
input from external research, with conviction built through company
meetings, investor conferences and dialogue with expert physician
and consultant networks. The team also has a strong valuation
discipline, looking at a large number of metrics including sales
and earnings revisions, price-to-earnings, enterprise values and
free cashflow.
Zero Dividend Preference shares
In terms of a top-down strategy for the Company's portfolio,
active decisions are made on market capitalisation, subsector and
geographical exposure, depending on the current macro outlook of
the team which is formulated with the help of third-party research
and monitoring many key risk indicators. The debt raised through
the original issuance of Zero Dividend Preference (ZDP) shares
allows the ability to take on gearing with the aim of enhancing
returns. As a reminder, the PCGH ZDP plc was incorporated with a
limited life of seven years, ending on 19 June 2024, on which date
the ZDP Shares will be repaid and the PCGH ZDP plc Board will
convene a general meeting to propose a resolution to voluntarily
wind up the operations of the Company.
Net Gearing
During the financial year, gearing averaged 7.5%, but it has
been adjusted to reflect the risk/reward outlook throughout the
past 12 months. In the first eight months, gearing was kept at an
average of c7% in order to strike a balance between our
constructive outlook on the healthcare sector and more cautious
posturing with regards to broader equity markets and the
macroeconomic environment. However, as the year progressed and the
underperformance of the healthcare sector relative to the broader
market widened, gearing was increased to take advantage of the
opportunities this dislocation offered. We therefore exited the
2023 financial year with net gearing at 9.4%.
Outlook for healthcare: Primed for a change in fortunes
one for healthcare with investors favouring more economically
sensitive sectors as they ponder the idea of avoiding a recession
and enjoying a so-called soft landing. With sentiment weak, and
exchange-traded fund (ETF) outflows pointing to diminished appetite
for the healthcare sector, the classic contrarian indicators are
pointing to a more constructive stance. More importantly,
healthcare's fundamentals remain strong, as illustrated by the
delivery of ground-breaking medical breakthroughs, a material
pickup in utilisation and patient volumes plus much-needed progress
in shifting the site of care out of inpatient hospital settings and
in to lower-cost, more efficient outpatient settings such as
surgery day centres and ASCs.
As we look forward to the next financial year, there is much to
engage and excite. The introduction of highly effective weight-loss
medications has created huge amounts of interest, and is driving
significant dispersions in returns for the so-called GLP-1 winners
(the drug developers, device manufacturers and distributors) versus
the GLP-1 losers (medical device companies with exposure to areas
such as sleep apnoea, diabetes and orthopaedics). However, once the
market has all the relevant clinical data and the euphoria dies
down, there will likely be a wide range of interesting investment
opportunities driven by the recent dislocation.
The adoption of AI platforms machine and ML software could
revolutionise select diagnostic procedures, improving clinician
workflow and driving superior outcomes for patients. In a highly
complex and data-intensive industry, AI and ML are also being used
to drive efficiencies for healthcare systems in areas such as
revenue collection, patient scheduling and insurance claims.
Emerging markets, especially China, are another area of interest
which could see a renaissance in the coming months and years as the
healthcare system finds the right balance between cost control,
compliance and attracting innovative, best-in-class therapies,
devices and capital equipment.
In conclusion, the healthcare sector is heavily out of favour
but attractively valued, is delivering high levels of innovation
and has consistently shown the ability to deliver strong revenue
and earnings growth, regardless of the economic, political and
regulatory environment. It is these characteristics that fuel our
optimism for the year ahead.
James Douglas and Gareth Powell
Co-Managers of the Polar Capital Global Healthcare Trust plc
12 December 2023
PORTFOLIO REVIEW
Full Investment Portfolio
As at 30 September
Ranking Stock Sector Country Market Value % of total
GBP'000 net assets
2023 2022 2023 2022 2023 2022
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
1 (5) Eli Lilly Pharmaceuticals States 28,037 16,997 6.7% 4.2%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
2 (1) Johnson & Johnson Pharmaceuticals States 26,228 35,964 6.2% 8.9%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
3 (4) AstraZeneca Pharmaceuticals Kingdom 25,937 19,761 6.2% 4.9%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
4 (3) Abbvie Biotechnology States 25,463 24,932 6.1% 6.2%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
5 (-) Elevance Health Managed Healthcare States 21,404 - 5.1% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
6 (33) Zealand Pharma Biotechnology Denmark 19,655 7,437 4.7% 1.8%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
7 (-) Intuitive Surgical Healthcare Equipment States 17,482 - 4.2% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
8 (9) Humana Managed Healthcare States 14,748 13,908 3.5% 3.4%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
9 (10) Alcon Healthcare Supplies Switzerland 14,397 12,040 3.4% 3.0%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
10 (13) HCA Healthcare Healthcare Facilities States 13,830 10,872 3.3% 2.7%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
Top 10 investments 207,181 49.4%
------------------------ ------------ ----------- -------- ------- -----
United
11 (-) Becton Dickinson Healthcare Equipment States 12,453 - 3.0% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
12 (20) Astellas Pharma Pharmaceuticals Japan 12,333 9,701 2.9% 2.4%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
13 (-) Takeda Pharmaceutical Pharmaceuticals Japan 12,312 - 2.9% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
14 (-) Zimmer Biomet Healthcare Equipment States 12,304 - 2.9% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
15 (16) Acadia Healthcare Healthcare Facilities States 10,787 10,082 2.6% 2.5%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
16 (23) Molina Healthcare Managed Healthcare States 10,611 9,603 2.5% 2.4%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
17 (18) DexCom Healthcare Equipment States 10,560 9,812 2.5% 2.4%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
Metal & Glass United
18 (22) Aptargroup Containers States 10,480 9,623 2.5% 2.4%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
Swedish Orphan
19 (11) Biovitrum Biotechnology Sweden 10,400 11,758 2.5% 2.9%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
Life Sciences
20 (-) Lonza Tools & Services Switzerland 10,358 - 2.5% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
Top 20 investments 319,779 76.2%
------------------------ ------------ ----------- -------- ------- -----
21 (-) Coloplast Healthcare Supplies Denmark 10,077 - 2.4% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
22 (32) Tenet Healthcare Healthcare Facilities States 10,069 7,582 2.4% 1.9%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
Life Sciences United
23 (-) IQVIA Tools & Services States 9,993 - 2.4% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
24 (-) R1 RCM Healthcare Services States 9,878 - 2.4% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
25 (-) Merck KGaA Pharmaceuticals Germany 9,758 - 2.3% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
26 (-) Legend Biotech Biotechnology States 9,565 - 2.3% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
27 (-) BioMerieux Healthcare Equipment France 8,777 - 2.1% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
28 (6) Cytokinetics Biotechnology States 8,172 14,673 1.9% 3.6%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
Life Sciences United
29 (30) Bio-Rad Laboratories Tools & Services States 8,099 7,879 1.9% 1.9%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
30 (-) Hikma Pharmaceuticals Pharmaceuticals Kingdom 8,026 - 1.9% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
Top 30 investments 412,193 98.2%
------------------------ ------------ ----------- -------- ------- -----
31 (-) EssilorLuxottica Healthcare Supplies France 7,447 - 1.8% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
32 (15) Genmab Biotechnology Denmark 5,125 10,197 1.2% 2.5%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
MoonLake
33 (-) Immunotherapeutics Biotechnology Switzerland 5,022 - 1.2% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
34 (39) Medley Healthcare Technology Japan 4,953 2,901 1.2% 0.7%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
35 (-) Indivior Pharmaceuticals Kingdom 4,142 - 1.0% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
36 (-) Global Health/India Healthcare Facilities India 3,562 - 0.8% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
Intelligent United
37 (37) Ultrasound Healthcare Technology Kingdom 3,272 3,049 0.8% 0.8%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
38 (34) Uniphar Healthcare Distributors Ireland 3,196 4,171 0.8% 1.0%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
39 (31) Revance Therapeutic Pharmaceuticals States 2,914 7,647 0.7% 1.9%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
United
40 (38) LivaNova Healthcare Equipment Kingdom 2,808 2,950 0.7% 0.7%
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
Top 40 investments 454,634 108.4%
------------------------ ------------ ----------- -------- ------- -----
41 (-) Amvis Healthcare Facilities Japan 2,350 - 0.6% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
Swedish Orphan
Biovitrum rights
42 (-) Issue Biotechnology Sweden 1,271 - 0.3% -
----- ------------------------ ------------------------ ------------ ----------- -------- ------- -----
Total equities 458,255 109.3%
------------------------ ------------ ----------- -------- ------- -----
Other net liabilities (39,073) (9.3%)
------------------------ ------------ ----------- -------- ------- -----
Net assets 419,182 100.0%
------------------------ ------------------------ ------------ ----------- -------- ------- -----
Note - Sectors are from the GICS (Global Industry Classification
Standard).
STRATEGIC REPORT
The Strategic Report section of this Annual Report comprises the
Chair's Statement, the Investment Manager's Report, including
information on the portfolio, and this Strategic Report. This
Report has been prepared to provide information to shareholders on
the Company's strategy and the potential for this strategy to
succeed, including a fair review of the Company's performance
during the year ended 30 September 2023, the position of the
Company at the year end and a description of the principal risks
and uncertainties, including both economic and business risk
factors underlying any such forward-looking information.
BUSINESS MODEL AND REGULATORY ARRANGEMENTS
The Company's business model follows that of an externally
managed investment trust providing Shareholders with access to a
global portfolio of healthcare stocks.
The Company is designated an Alternative Investment Fund ('AIF')
under the Alternative Investment Fund Management Directive
('AIFMD') and, as required by the Directive, has contracted with
Polar Capital LLP to act as the Alternative Investment Fund Manager
('AIFM') and HSBC Bank Plc to act as the Depositary.
Both the AIFM and the Depositary have responsibilities under
AIFMD for ensuring that the assets of the Company are managed in
accordance with the investment policy and are held in safe custody.
The Board remains responsible for setting the investment strategy
and operational guidelines as well as meeting the requirements of
the Financial Conduct Authority ('FCA') Listing Rules and the
Companies Act 2006.
The AIFMD requires certain information to be made available to
investors in AIFs before they invest and requires that material
changes to this information be disclosed in the Annual Report of
each AIF. Investor Disclosure Documents, which set out information
on the Company's investment strategy and policies, gearing, risk,
liquidity, administration, management, fees, conflicts of interest
and other Shareholder information are available on the Company's
website.
There have been no material changes to the information requiring
disclosure. Any information requiring immediate disclosure pursuant
to the AIFMD will be disclosed to the London Stock Exchange.
Statements from the Depositary and the AIFM can be found on the
Company's website.
INVESTMENT OBJECTIVE AND POLICY
The Company's Investment Objective is to generate capital growth
through investments in a global portfolio of healthcare stocks.
he Company will seek to achieve its objective by investing in a
diversified global portfolio consisting primarily of listed
equities. The portfolio is diversified by geography, industry
sub-sector and investment size.
The portfolio will comprise a single pool of investments, but
for operational purposes, the Investment Manager will maintain a
Growth portfolio and an Innovation portfolio. Innovation companies
are broadly defined by the Investment Manager as small/mid cap
innovators that are driving disruptive change, giving rise not only
to new drugs and surgical treatments but also to a transformation
in the management and delivery of healthcare. The Growth portfolio
is expected to comprise a majority of the Company's assets. For
this purpose, once an innovation stock's market capitalisation has
risen above US $5bn, it will ordinarily then be treated as a growth
stock.
The relative ratio between the two portfolios may vary over the
life of the Company due to factors such as asset growth and the
Investment Manager's views as to the risks and opportunities
offered by investments in each pool and across the combined
portfolio. The original make-up of the combined portfolio was of up
to 50 stocks, with growth stocks being primarily US listed. In
2018, the Board authorised an increase to the number of stocks able
to be held to 65 and confirmed there is no restriction on
geographical exposure.
The combined portfolio will therefore be made up of interests in
up to 65 companies, with no single investment accounting for more
than 10% (or 15% in the case of an investment in another fund
managed by the Investment Manager) of the Gross Assets at the time
of investment. The innovation portfolio may include stocks which
are neither quoted nor listed on any stock exchange but the
exposure to such stocks, in aggregate, will not exceed 5% of Gross
Assets at the time of investment. In the event that the Investment
Manager launches a dedicated healthcare innovation fund, the
Company's exposure to innovation stocks may be achieved in whole or
in part by an investment in that fund. In any event, the Company
will not, without the prior consent of the Board, acquire more than
15% of any such healthcare innovation fund's issued share
capital.
The Board remains positive on the outlook for healthcare and the
Company will continue to pursue its Investment Objective in
accordance with the stated investment policy and strategy. Future
performance is dependent to a significant degree on the world's
financial markets and their reactions to economic events and other
geo-political forces. The Chair's Statement and the Investment
Manager's Report comment on the development and performance of the
business during the financial year, the outlook and potential risks
to the performance of the portfolio.
STRATEGY AND INVESTMENT APPROACH
The Investment Manager's investment process is primarily based
on bottom-up fundamental analysis. The Investment Manager uses a
qualitative filter consisting of key criteria to build up a
watch-list of securities that is monitored on a regular basis. Due
diligence is then carried out on the individual securities on the
watch-list. Each individual holding is assessed on its own merits
in terms of risk: reward including ESG criteria. While the Company
expects normally to be fully or substantially invested, the Company
may hold cash or money market instruments pending deployment in the
portfolio. In addition, it will have the flexibility, when the
Investment Manager perceives there to be actual or expected adverse
equity market conditions, to maintain cash holdings as it deems
appropriate.
SERVICE PROVIDERS
Polar Capital LLP has been appointed to act as the Investment
Manager and AIFM as well as to provide or procure company
secretarial services, marketing and administrative services,
including accounting, portfolio valuation and trade settlement
which it has arranged to deliver through HSBC Securities Services
("HSS").
The Company also contracts directly, on terms agreed
periodically, with a number of third parties for the provision of
specialist services, namely:
-- Panmure Gordon & Co as Corporate Broker;
-- Herbert Smith Freehills LLP as Solicitors;
-- HSBC Securities Services as Custodian and Depositary;
-- Equiniti Limited as Share Registrars;
-- RD:IR for Investor Relations and Shareholder Analysis;
-- Camarco as PR advisors;
-- PricewaterhouseCoopers LLP as Independent Auditors;
-- Huguenot Limited as website designers and internet hosting services; and
-- Perivan Limited as designers and printers for shareholder communications.
GEARING
Following the restructure of the Company in June 2017, the
Company maintains long-term structural gearing in the form of a
loan from the wholly owned subsidiary PCGH ZDP Plc. No short-term
borrowings have been made and there are no arrangements made for
any bank loans. The Articles of Association provide that the
Company may borrow up to 15% of its Net Asset Value at the time of
drawdown, for tactical deployment when the Board believes that
gearing will enhance returns to shareholders.
In accordance with the Articles of Association of the subsidiary
company, PCGH ZDP Plc, and the loan agreement between the Company
as parent and subsidiary, the Board intends that the subsidiary
company will be put into voluntarily liquidation through a General
Meeting on 19 June 2024. The Company has no current intention to
refinance the loan made by the subsidiary company and remains in a
strong position to repay the outstanding amount at the time of
redemption of the ZDP shares.
Further details of the loan provided by the subsidiary are given
in the Annual Report and Accounts.
BENCHMARK
The Company will measure the Investment Manager's performance
against the MSCI ACWI Healthcare Index total return, in sterling
with dividends reinvested. Although the Company has a benchmark,
this is neither a target nor determinant of investment strategy.
The portfolio may diverge substantially from the constituents of
this index. The purpose of the Benchmark is to set a reasonable
measure of performance for shareholders above which the Investment
Manager earns a share for any outperformance it has delivered.
INVESTMENT MANAGEMENT COMPANY AND MANAGEMENT OF THE
PORTFOLIO
Directors have sought to ensure that the business of the Company
is managed by a leading specialist investment management team and
that the investment strategy remains attractive to shareholders.
The Directors believe that a strong working relationship with Polar
Capital LLP (the Investment Manager) will achieve the optimum
return for shareholders. As such, the Board and the Investment
Manager operate in a supportive, co-operative and open
environment.
The Investment Manager is Polar Capital LLP ('Polar Capital'),
which is authorised and regulated by the Financial Conduct
Authority, to act as Investment Manager and AIFM of the Company
with sole responsibility for the discretionary management of the
Company's assets (including uninvested cash) and sole
responsibility to take decisions as to the purchase and sale of
individual investments. The Investment Manager also has
responsibility for asset allocation within the limits of the
investment policy and guidelines established and regularly reviewed
by the Board, all subject to the overall control and supervision of
the Board. Polar Capital provides a team of healthcare specialists
and the portfolio is co-managed by Mr James Douglas and Mr Gareth
Powell. The Investment Manager has other resources which support
the investment team and has experience in managing and
administering other investment trust companies.
Under the terms of the IMA, the Investment Manager also provides
or procures accountancy services, company secretarial, marketing
and day-to-day administrative services, including the monitoring of
third-party suppliers, which are directly appointed by the Company.
The Investment Manager has, with the consent of the Directors,
delegated the provision of certain of these administrative
functions to HSBC Securities Services and to Polar Capital
Secretarial Services Limited .
Fee Arrangements
Management Fee
Under the terms of the IMA, the Investment Manager will be
entitled to a management fee together with reimbursement of
reasonable expenses incurred by it in the performance of its
duties. The management fee is payable monthly in arrears and is
charged at the rate of 0.75% (prior to 1 October 2020: 0.85%) per
annum based on the lower of the market capitalisation and adjusted
net asset value. In accordance with the Directors' policy on the
allocation of expenses between income and capital, in each
financial year 80% of the management fee payable is charged to
capital and the remaining 20% to income.
Performance Fee
The Investment Manager may receive a performance fee paid in
cash when various performance parameters are met. No performance
fee has been accrued or is due to be paid for the year ended 30
September 2023 (2022: nil). Further details on the termination
arrangements and performance fee methodology and calculation are
provided within the Shareholder Information in the Annual
Report.
PERFORMANCE AND KEY PERFORMANCE OBJECTIVES
The Board appraises the performance of the Company and the
Investment Manager as the key supplier of services to the Company
against key performance indicators ('KPIs'). The objectives of the
KPIs comprise both specific financial and Shareholder related
measures. These KPI's have not differed from the prior year.
KPI CONTROL PROCESS OUTCOME
The provision of investment The Board reviews As at 30 September 2023,
returns to shareholders the performance of the total net assets of
measured by long- the portfolio in detail the Company amounted to
term and hears the views GBP419,182,000 (2022:
NAV growth and relative of the Investment GBP404,833,000).
performance against Manager at each meeting.
the Benchmark. The Company's NAV total
The Board also considers return, over the year
the value delivered ended 30 September 2023,
to shareholders through was 4.21% while the Benchmark
NAV growth and dividends Index over the same period
paid. was 1.19%. The Company's
performance is explained
further in the Investment
Manager's Report.
Since restructuring on
20 June 2017, the total
return of the NAV was
67.56% and the benchmark
was 66.01%. Investment
performance is explained
in the Chair's Statement
and the Investment Manager's
Report.
------------------------------- ----------------------------------
The achievement of Financial forecasts Two dividends have been
the dividend policy. are reviewed to track paid or are payable in
income and distributions. respect of the year ended
30 September 2023 totalling
2.20p per share (2022:
two dividends totalling
2.10p per share).
The Company's focus remains
on capital growth. While
the Company continues
to aim to pay two dividends
per year these are expected
to be a small part of
a shareholder total return.
------------------------------- ----------------------------------
Monitoring and reacting The Board receives The discount of the ordinary
to issues created regular information share price to the NAV
by the discount or on the composition per ordinary share at
premium of of the share register the year ended 30 September
the ordinary share including trading 2023 was 7.7% (2022: 5.6%).
price to the NAV per patterns and discount/premium
ordinary share with levels of the Company's During the year ended
the aim of reduced ordinary shares. The 30 September 2023, no
discount volatility Board discusses and new shares were issued
for shareholders. authorises the issue or bought back.
or buy back of shares
when appropriate. The number of shares in
issue, as at the year
The Board is aware end was 124,149,256 of
of the vulnerability which 2,879,256 were held
of a sector specialist in treasury. The total
investment trust to voting rights of the Company
a change in investor are 121,270,000 shares.
sentiment to that
sector. While there
is no formal discount
policy the Board discusses
the market factors
giving rise to any
discount or premium,
the long or short-term
nature of those factors
and the overall benefit
to shareholders of
any actions. The market
liquidity is also
considered when authorising
the issue or buy back
of shares when appropriate
market conditions
prevail.
A daily NAV per share,
calculated in accordance
with the AIC guidelines
is issued to the London
Stock Exchange.
------------------------------- ----------------------------------
To qualify and continue The Board receives The Company was granted
to meet the requirements regular financial investment trust status
for sections 1158 information which annually up to 1 October
and 1159 of the Corporation discloses the current 2014 and is deemed to
Tax Act 2010 ('investment and projected financial be granted such status
trust status'). position of the Company for each subsequent year
against each of the subject to the Company
tests set out in sections continuing to satisfy
1158 and 1159. the conditions of section
1158 of the Corporation
Tax Act 2010 and other
associated ongoing requirements.
The Directors confirm
that the tests have been
met in the financial year
ended 30 September 2023
and believe that they
will continue to be met.
------------------------------- ----------------------------------
To ensure the efficient The Board considers The Board has received,
operation of the Company annually the services and considered satisfactory,
by monitoring the provided by the Investment the internal controls
services provided Manager, both investment report of the Investment
by third party suppliers, and administrative, Manager and other key
including the Investment and reviews on a cycle suppliers including the
Manager, and controlling the provision of services contingency arrangements
ongoing charges. from third parties to facilitate the ongoing
including the costs operations of the Company
of their services. in the event of withdrawal
or failure of services.
The annual operating
expenses are reviewed The ongoing charges for
and any non-recurring the year ended 30 September
project related expenditure 2023 were 0.87%, compared
approved by the Board. to 0.84% the previous
year.
------------------------------- ----------------------------------
Risk Management
The Board is responsible for the management of risks faced by
the Company and, through delegation to the Audit Committee, has
established procedures to manage risk, oversee the internal control
framework and determine the nature and extent of the principal
risks the Company is willing to take in order to achieve its
long-term strategic objectives.
The established risk management process the Company follows
identifies and assesses various risks, their likelihood, and
possible severity of impact, considering both internal and external
controls and factors that could provide mitigation. A post
mitigation risk impact score is then determined for each principal
risk.
The Audit Committee carries out, at least annually, a robust
assessment of the principal risks and uncertainties with the
assistance of the Investment Manager, continually monitors
identified risks and meets to discuss both long-term and emerging
risks outside of the normal cycle of Audit Committee meetings.
During the year the Audit Committee, in conjunction with the
Board and the Investment Managers undertook a full review of the
Company's Risk Map including the mitigating factors and controls to
reduce the impact of the risks. The Committee continues to closely
monitor these risks along with any other emerging risks as they
develop and implements mitigating actions as necessary.
The Committee is mindful of the continued impact of geopolitical
events as well as the effects of inflation and rising interest
rates. Whilst we are seeing signs of inflation slowing and energy
prices reducing, the continuation of the Russian war on Ukraine,
and also the Middle East crisis has created further market
volatility and continues to impact supply chains whilst high
interest rates continue to be felt by consumers. Geopolitical
events such as these can have a significant impact on global
financial markets, and the global economy. The impact of this is
discussed further in the Chair's Statement and Investment Manager's
Report. Further information on how the Committee has assessed the
Company's ability to operate as a going concern and the Company's
longer-term viability can be found in the Report of the Audit
Committee and in the Annual Report.
The key risks, which are those classified as having the highest
risk impact score post mitigation, are detailed below with a
high-level summary of the management through mitigation and status
arrows to indicate any change in assessment over the past year.
Portfolio Management
Description Assessment Mitigation
------------------------------- ---------------- -----------------------------------
Investment Breach of Investment Unchanged from The Board seeks
Performance policy, Investment previous year. to mitigate the
Manager unable to impact of such risks
deliver the Investment through the regular
Objective leading reporting and monitoring
to poor performance of the Company's
against the benchmark investment performance
or market/industry against its peer
average. group, benchmark
and other agreed
indicators of relative
performance. A detailed
annual review of
the investment strategy
is undertaken by
the Investment Manager
with the Board including
analysis of investment
markets and sector
trends.
At each meeting
the Board discusses
developments in
healthcare and drug
pipelines with the
Investment Manager
in addition to the
composition and
diversification
of the portfolio
with sales and purchases
of investments and
the degree of risk
which the Investment
Manager incurs to
generate investment
returns. Individual
investments are
discussed with the
Investment Manager
as well as the Investment
Manager's general
views on the various
investment markets
and the healthcare
sector in particular.
Analytical performance
data and attribution
analysis is presented
by the Investment
Manager.
The Board is committed
to a clear communication
program to ensure
shareholders understand
the investment strategy.
This is maintained
through the use
of monthly factsheets
which have a market
commentary from
the Investment Manager
as well as portfolio
data, an informative
website as well
as annual and half
year reports.
------------------------------- ---------------- -----------------------------------
Gearing Inability to repay Decreased from The Board considered
ZDP loan and or previous year. the benefits and
inappropriate use drawbacks of the
of derivatives. structural debt
at the time of restructuring
and concluded that
the ability to lock-in
an effective interest
rate of 3% pa for
the 7-year life
would be beneficial
to investment returns,
the Board remains
of the same belief.
The asset cover
necessary to repay
the ZDP shares is
reviewed at each
Board meeting. If
any flexible gearing
is contemplated
the Board would
agree the overall
levels of gearing
with the AIFM. The
arrangement of bank
facilities and drawing
of funds under such
arrangements are
controlled by the
Board. Derivatives
are considered as
being a form of
gearing and a policy
for their use has
been agreed by the
Board. The deployment
of any borrowed
funds is based on
the Investment Manager's
assessment of risk
and reward.
The Board intends
that the subsidiary
company will be
put into voluntarily
liquidation through
a General Meeting
on 19 June 2024.
The Company has
no current intention
to refinance the
loan made by the
subsidiary company
and remains in a
strong position
to repay the outstanding
amount at the time
of redemption of
the ZDP shares.
------------------------------- ---------------- -----------------------------------
Discount/Premium Persistent discount Unchanged from The Board regularly
in excess of Board previous year. considers, in comparison
or Shareholder acceptable to the sector and
levels. peers, the level
of premium and discount
of the share price
to the NAV and ways
to enhance Shareholder
value including
share issuance and
buy backs.
The Board has carefully
monitored the discount
level and market
movements and has
discussed performance
with the Managers
and advisers. The
discount of the
Company widened
during the year
under review and
as at 30 September
2023, the discount
of the ordinary
share price to the
NAV per ordinary
share was 7.7% (2022:
5.6%). The Chair
also meets regularly
with key shareholders
to understand any
concerns and views
as detailed in the
Chair's Statement
and within the s172
Report. Further
detail on the performance
and the impact of
market movements
on the Company is
given in the Investment
Manager's Report.
------------------------------- ---------------- -----------------------------------
Trading Execution of unauthorised Unchanged from Investment limits
trade/dealing error. previous year. and restrictions
Error or breach are encoded into
may cause regulatory the dealing and
investigation leading operations systems
to fines, reputational of the Investment
damage and risk Manager and various
to investment trust oversight functions
status. are undertaken to
ensure there is
early warning of
any potential issue
of compliance or
regulatory matters.
------------------------------- ---------------- -----------------------------------
Operational Risk
Description Assessment Mitigation
------------------------------- ---------------- -----------------------------------
Service Failure Failure in services Unchanged from The Board carries
provided by the previous year. out an annual review
Investment Manager, of internal control
Custodian, reports from suppliers
Depositary or other which includes cyber
service providers; protocols and disaster
Accounting, Financial recovery procedures.
or Custody Errors Due diligence and
resulting in regulatory service reviews
investigation or are undertaken with
financial loss, third-party service
failure of trade providers including
settlement, potential the Custodian and
loss of Shareholder Depositary.
assets and investment
trust status. A full review of
the internal control
framework is carried
out at least annually.
Regular reporting
is received by the
Investment Manager
on behalf of the
Board from the Depositary
on the safe custody
of the Company's
assets. The Board
undertakes independent
reviews of the Depositary
and external Administrator
services and additional
resources have been
put in place by
the Investment Manager.
Management accounts
are produced and
reviewed monthly,
statutory reporting
and daily NAV calculations
are produced by
the external Administrator
and verified by
the Investment Manager.
Accounting records
are tested, and
valuations verified
independently as
part of the year-end
financial reporting
process.
------------------------------- ---------------- -----------------------------------
Cyber Risk Cyber-attack causing Unchanged from The number, severity
disruption to or previous year. and success rate
failure of operational of cyberattacks
and accounting systems have increased considerably
and processes provided over recent years.
by the Investment However, controls
Manager creating are in place and
an unexpected event the Board proactively
and/or adverse impact seeks to keep abreast
on personnel or of developments
the portfolio. through updates
with representatives
of the Investment
Manager who undertakes
meetings with relevant
service providers.
The Audit Committee
once again sought
assurance via the
Investment Manager,
from each of the
Company's service
providers on the
resilience of their
business continuity
arrangements. These
assurances and the
subsequent detailed
updates that were
given to the Committee
provided a satisfactory
level of assurance
that there had not
been, and there
was no anticipation
of any disruption
in the ability of
each service provider
to fulfil their
duties as would
typically be expected.
------------------------------- ---------------- -----------------------------------
Key Person Loss of Investment Unchanged from The strength and
Manager or other previous year. depth of investment
key management professionals. team provides comfort
Impact on investor that there is not
confidence leading over-reliance on
to widening of the one person with
discount and/or alternative portfolio
poor performance managers available
creating a period to act if needed.
of uncertainty and For each key business
potential termination process roles, responsibilities
of the Investment and reporting lines
Management Agreement. are clear and unambiguous.
Key personnel are
incentivised by
equity participation
in the investment
management company.
------------------------------- ---------------- -----------------------------------
Shareholder Failure to effectively Unchanged from Polar Capital Sales
Communications communicate significant previous year. Team and the Corporate
events to the shareholder Broker provide periodic
and investor base. reports to the Board
on communications
with shareholders
and feedback received.
The Board is committed
to a clear communication
programme to ensure
Shareholders understand
the investment strategy.
This is maintained
through the use
of monthly factsheets
which have a market
commentary from
the Investment Manager
as well as portfolio
data, an informative
website as well
as annual and half
year reports.
Contact details
and how to contact
the Board are provided
in regulatory announcements
and the Board are
present at the AGM
to speak to shareholders.
------------------------------- ---------------- -----------------------------------
Regulatory Risk
Description Assessment Mitigation
------------------------------- ---------------- -----------------------------------
Non-compliance with Unchanged from The Board monitors
statutes, regulations previous year. regulatory change
and disclosure requirements, with the assistance
including FCA listed of the
company regime and Investment Manager,
Companies Act 2006; Company Secretary
s1158/1159 of the and external professional
Corporation Tax suppliers and implements
Act 2010, the Companies necessary changes
Act 2006 and other should they be required.
UK, European and
overseas legislation The Board receives
affecting UK companies regulatory reports
including MiFID for discussion and,
II and the GDPR. if required, considers
the need for any
Not complying with remedial action.
accounting standards In addition, as
could result is an investment company,
a suspension of the Company is required
listing or loss to comply with a
of investment trust framework of tax
status, reputational laws, regulation
damage and Shareholder and company law.
activism.
Further risks arise
from not keeping
abreast of changes
in legislation and
regulations which
have in recent years
been substantial.
------------------------------- ---------------- -----------------------------------
Economic and Market Risk
Description Assessment Mitigation
------------------------------- ---------------- -----------------------------------
Financial loss due Unchanged from The Board regularly
to unexpected natural previous year. discusses global
disaster or other geopolitical issues
unpredictable event and general economic
disrupting the ability conditions and
to operate or significant developments.
exposure to the
economic cycles The impact on the
of the markets in portfolio from
which the underlying other geopolitical
investments conduct changes are monitored
their business operations through existing
as well as the economic control systems
impact on and discussed regularly
investment markets by the Board. While
where such investments it is difficult
are listed. to quantify the
impact of such
Fluctuations in changes, it is
stock markets and not anticipated
currency exchange that they will
rates could be advantageous fundamentally affect
or disadvantageous the business of
to the Company and the Company or
its performance. make healthcare
investing any less
Disruption to trading desirable. The
platforms and support longer term effects
services. of inflation, recession,
the war in Ukraine
and the Middle
East crisis will
continue to be
assessed by the
Audit Committee
in light of how
they will impact
the Company's portfolio
and the overall
economic and geopolitical
environment in
which the Company
operates.
The Company through
the Investment
Manager, has a
disaster recovery
plan in place.
------------------------------- ------------------ ---------------------------------
SECTION 172 OF THE COMPANIES ACT 2006
The statutory duties of the Directors are listed in s171-177 of
the Companies Act 2006. The Board recognises that under s172,
Directors have a duty to promote the success of the Company for the
benefit of its members (our shareholders) as a whole and in doing
so have regard to the consequences of any decision in the long
term, as well as having regard to the Company's wider stakeholders
amongst other considerations. The fulfilment of this duty not only
helps the Company achieve its Investment Objective but ensures
decisions are made in a responsible and sustainable way for
shareholders.
To ensure that the Directors are aware of, and understand, their
duties, they are provided with an induction when they first join
the Board, including details of all relevant regulatory and legal
duties as a Director and continue to receive regular and ongoing
updates on relevant legislative and regulatory developments. They
also have continued access to the advice and services of the
Company Secretary and, when deemed necessary, the Directors can
seek independent professional advice. The Schedule of Matters
Reserved for the Board, as well as the Terms of Reference of its
committees, are reviewed annually and further describe Directors'
responsibilities and obligations and include any statutory and
regulatory duties.
The Board seeks to understand the needs and priorities of the
Company's stakeholders and these are taken into account during
discussions and as part of the decision-making process. As an
externally managed investment company, the Company does not have
any employees or customers, however the key stakeholders and a
summary of the Board's consideration and actions where possible in
relation to each group of stakeholders are described in the table
below.
STAKEHOLDER HOW WE ENGAGE WITH THEM
GROUP
SHAREHOLDERS The Directors have considered this duty when making
the strategic decisions during the year that affect
shareholders, including the continued appointment
of the Investment Manager and the recommendation
that shareholders vote in favour of the resolutions
for the Company to continue and to renew the allotment
and buy back authorities at the AGM. The Directors
have also engaged with and taken account of shareholders'
interests during the year.
The Company's AGM will be held at 2:30pm on Thursday
8 February 2024 at the offices of Polar Capital,
16 Palace Street, London SW1E 5JD. The Board recognises
that the AGM is an important event for shareholders
and the Company and is keen to ensure that shareholders
are able to exercise their right to vote and participate.
Any changes to these arrangements will be communicated
through the Company's website and via a Regulatory
Information Service announcement.
The Board believes that shareholder engagement
remains important, especially in the current market
conditions and is keen that the AGM be a participative
event for all. As was the case in 2023, shareholders
will once again have the opportunity to hear the
Managers' pre-recorded presentation, reviewing
the Company's performance in the year and the outlook
for 2023-2024, in advance of the AGM. The presentation
will be uploaded to the Company's website ahead
of the AGM. In addition, Shareholders will also
be able to watch the proceedings of the AGM live
via Zoom Conference. Details of how to access the
online link are provided in the Notice of AGM.
The AGM in-person meeting will comprise the formal
business and questions only. Shareholders are encouraged
to send any questions ahead of the AGM to the Board
via the Company Secretary at cosec@polarcapital.co.uk
stating the subject matter as PCGH-AGM. The Chairs
of the Board and of the Committees, along with
the Managers, will be in attendance at the AGM
and will be available to respond to questions and
concerns from shareholders.
Should any significant votes be cast against a
resolution, the Board will engage with shareholders
and explain in its announcement of the results
of the AGM the actions it intends to take to consult
shareholders in order to understand the reasons
behind the votes against. Following the consultation,
an update will be published no later than six months
after the AGM and the Annual Report will detail
the impact the Shareholder feedback has had on
any decisions the Board has taken and any actions
or resolutions proposed.
Relations with shareholders
The Board and the Manager consider maintaining
good communications and engaging with shareholders
through meetings and presentations a key priority.
The Board regularly considers the share register
of the Company and receives regular reports from
the Manager and the Corporate Broker on meetings
attended with shareholders and any concerns that
are raised in those meetings. The Board also reviews
correspondence from shareholders and may attend
investor presentations.
Shareholders are kept informed by the publication
of annual and half year reports, monthly fact sheets,
access to commentary from the Investment Manager
via the Company's website and attendance at events
at which the Investment Manager presents.
Shareholders are able to raise any concerns directly
with the Chair or the Board without intervention
of the Manager or Company Secretary, they may do
this either in person at the AGM or at other events,
or in writing either via the registered office
of the Company or to the Chair's specific email
address Chair.PCGH@polarcapital.co.uk .
The Company, through the sales and marketing efforts
of the Investment Manager, encourages retail investment
platforms to engage with underlying shareholders
in relation to Company communications and enable
those shareholders to cast their votes on Shareholder
resolutions; the Company however has no responsibility
over such platforms. The Board therefore encourage
shareholders invested via the platforms to regularly
visit the Company's website or to make contact
with the Company directly to obtain copies of Shareholder
communications.
The Company has also made arrangements with its
registrar for shareholders, who own their shares
directly rather than through a nominee or share
scheme, to view their account online at www.shareview.co.uk.
Other services are also available via this service.
Outcomes and strategic decisions during the year
AGM
To enable more shareholders the opportunity to
hear the Investment Manager's AGM presentation,
the Board has opted to pre-record and upload this
to the website ahead of the voting deadline and
in-person formal business AGM. In addition, shareholders
will also have the opportunity to watch the proceedings
of the AGM live via Zoom Conference. Details of
how to access the online link are provided in the
Notice of AGM.
----------------------------------------------------------------
INVESTMENT MANAGER Through the Board meeting cycle, regular updates
and the work of the Management Engagement Committee
reviewing the services of the Investment Manager
annually, the Board is able to safeguard Shareholder
interests by:
* Ensuring adherence to the Investment Policy;
* Ensuring excessive risk is not undertaken in the
pursuit of investment performance;
* Ensuring adherence to the Investment Management
Policy and reviewing the agreed management and
performance fees; and
* Reviewing the Investment Manager's decision making
and consistency in investment process.
Maintaining a close and constructive working relationship
with the Manager is crucial as the Board and the
Investment Manager both aim to continue to achieve
consistent, long-term returns in line with the
Investment Objective. The culture which the Board
maintains to ensure this involves encouraging open
discussion with the Investment Manager; recognising
that the interests of Shareholders and the Investment
Manager are aligned, providing constructive challenge
and making Directors' experience available to support
the Investment Manager. This culture is aligned
with the collegiate and meritocratic culture which
Polar Capital has developed and maintains.
Outcomes and strategic decisions during the year
ESG
The Board continued to engage with the Investment
Manager to understand how ESG has been integrated
into the overall house style, the healthcare team
investment approach and decision making as well
as the methodology behind this. The Board also
receives information on how ESG affects Polar Capital
as a business and the healthcare team in particular.
Consumer Duty
The Board has worked with the Investment Manager
to ensure the obligations of the new Consumer Duty
regulations are appropriately applied to the Company.
In light of the obligations, all communications
including the website, fact sheets and other published
documentation, have been reviewed to ensure they
are appropriate for all end users. A 'value for
money' assessment has also been undertaken and
is made available to distributors on request for
their due diligence processes.
Management
The Management Engagement Committee has recommended
and the Board has approved the continued appointment
of the Investment Manager on the terms set out
within the Investment Management Agreement.
----------------------------------------------------------------
INVESTEE COMPANIES The Board has instructed the Investment Manager
to take into account the published corporate governance
policies of the companies in which it invests.
The Board has also considered the Investment Manager's
Stewardship Code and Proxy Voting Policy. The Voting
Policy is for the Investment Manager to vote at
all general meetings of companies in favour of
resolutions proposed by the management where it
believes that the proposals are in the interests
of shareholders. However, in exceptional cases,
where the Investment Manager believes that a resolution
would be detrimental to the interests of shareholders
or the financial performance of the Company, appropriate
notification will be given and abstentions or a
vote against will be lodged.
The Investment Manager has voted at 49 company
meetings over the year ended 30 September 2023,
with 5.4% of all votes being against management
and 37% of meetings having at least one against
or withheld vote.
The Investment Manager reports to the Board, when
requested, on the application of the Stewardship
Code and Voting Policy. The Investment Manager's
Stewardship Code and Voting Policy can be found
on the Investment Manager's website in the Corporate
Governance section (www.polarcapital.co.uk). Further
information on how the Investment Manager considers
ESG in its engagement with investee companies can
be found in the ESG report in the Annual Report
and Accounts.
Outcomes and strategic decisions during the year
The Board receives information on the ratings of
investee companies and is able to use this as a
tool to inform discussions with the Manager during
Board meetings.
----------------------------------------------------------------
SERVICE PROVIDERS The Directors have frequent engagement with the
Company's other service providers through the annual
cycle of reporting and due diligence meetings or
site visits. This engagement is completed with
the aim of having effective oversight of delegated
services, seeking to improve the processes for
the benefit of the Company and to understand the
needs and views of the Company's service providers,
as stakeholders in the Company. Further information
on the Board's engagement with service providers
is included in the Corporate Governance Statement
and the Report of the Audit Committee. During the
year under review, due diligence meetings have
been undertaken by the Investment Manager and where
possible, service providers have joined meetings
to present their reports directly to the Board
or the Audit Committee as appropriate.
Outcomes and strategic decisions during the year
The reviews of the Company's service providers
have been positive and the Directors believe their
continued appointment is in the best interests
of the Company. The accounting and administration
services of HSBC Securities Services (HSS) are
contracted through Polar Capital and provided to
the Company under the terms of the IMA. The Board
continue to monitor service levels and due diligence
reviews conducted by the Company Secretary and
is satisfied that the service received continues
to be of a high standard.
----------------------------------------------------------------
PROXY ADVISORS The support of proxy adviser agencies is important
to the Directors, as the Company seeks to retain
a reputation for high standards of corporate governance,
which the Directors believe contributes to the
long-term sustainable success of the Company. The
Directors consider the recommendations of these
various proxy voting agencies when contemplating
decisions that will affect shareholders and also
when reporting to shareholders through the Half
Year and Annual Reports.
Recognising the principles of stewardship, as promoted
by the UK Stewardship Code, the Board welcomes
engagement with all of its investors. The Board
recognises that the views, questions from, and
recommendations of many institutional investors
and proxy adviser agencies provide a valuable feedback
mechanism and play a part in highlighting evolving
shareholders' expectations and concerns.
Outcomes and strategic decisions during the year
Where possible the Chair and other representatives
of the Company have engaged with the stewardship
teams of some larger investors to understand and
address their expectations in terms of board governance,
recruitment and diversity. Prior to AGMs, the Company
engages with these agencies to fact check their
advisory reports and clarify any areas or topics
contained within the report. This ensures that
whilst the proxy advisory reports provided to shareholders
are objective and independent, the Company's actions
and intentions are represented as clearly as possible
to assist with shareholders' decision making when
considering the resolutions proposed at the AGM.
----------------------------------------------------------------
Approved by the Board on 12 December 2023
By order of the Board
TRACEY LAGO, FCG
Polar Capital Secretarial Services Limited
Company Secretary
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law the Directors
have prepared the Group and Company's Financial Statements in
accordance with UK-adopted IAS and applicable law. Additionally,
the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules require the directors to prepare the Financial
Statements in accordance with UK-adopted IAS.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the Group and Company for that period. In
preparing the financial statements, the directors are required
to:
-- select suitable accounting policies and then apply them consistently;
-- state whether they have been prepared in accordance with
UK-adopted IAS, subject to any material departures disclosed and
explained in the Financial Statements;
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and enable them to ensure that its
Financial Statements and the Directors' Remuneration Report comply
with the Companies Act 2006. They are responsible for such internal
control as they determine is necessary to enable the preparation of
Financial Statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to safeguard the
assets of the Group and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and Corporate Governance Statement
that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors' confirmations
The Directors consider that the annual report and financial
statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the group and company's position and performance, business model
and strategy.
Each of the directors, whose names and functions are listed in
the Strategic Report confirm that, to the best of their
knowledge:
-- the Company Financial Statements, which have been prepared in
accordance with the applicable set of accounting standards, give a
true and fair view of the assets, liabilities, financial position
and profit of the company;
-- the Group Financial Statements, which have been prepared in
accordance with the applicable set of accounting standards, give a
true and fair view of the assets, liabilities, financial position
and profit of the group; and
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
group and company, together with a description of the principal
risks and uncertainties that it faces.
In the case of each Director in office at the date the
Directors' Report is approved:
-- so far as the director is aware, there is no relevant audit
information of which the Group and Company's auditors are unaware;
and
-- they have taken all the steps that they ought to have taken
as a director in order to make themselves aware of any relevant
audit information and to establish that the group and company's
auditors are aware of that information.
Lisa Arnold
Chair
12 December 2023
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2023
Group Group
------------------------------ ---- ---------------------------- ----------------------------
Year ended Year ended
30 September 2023 30 September 2022
---------------------------- ----------------------------
Revenue Capital Total Revenue Capital Total
return return return return return return
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---- -------- -------- -------- -------- -------- --------
Investment income 3 4,804 - 4,804 4,427 - 4,427
------------------------------ ---- -------- -------- -------- -------- -------- --------
Other operating income 4 104 - 104 26 - 26
------------------------------ ---- -------- -------- -------- -------- -------- --------
Gains on investments
held at fair value 5 - 19,574 19,574 - 22,985 22,985
------------------------------ ---- -------- -------- -------- -------- -------- --------
Other currency losses 6 - (1,130) (1,130) - (610) (610)
------------------------------ ---- -------- -------- -------- -------- -------- --------
Total income 4,908 18,444 23,352 4,453 22,375 26,828
------------------------------ ---- -------- -------- -------- -------- -------- --------
Expenses
------------------------------ ---- -------- -------- -------- -------- -------- --------
Investment management
fee 7 (650) (2,598) (3,248) (602) (2,406) (3,008)
------------------------------ ---- -------- -------- -------- -------- -------- --------
Other administrative
expenses 8 (712) (13) (725) (599) (59) (658)
------------------------------ ---- -------- -------- -------- -------- -------- --------
Total expenses (1,362) (2,611) (3,973) (1,201) (2,465) (3,666)
------------------------------ ---- -------- -------- -------- -------- -------- --------
Profit before finance
costs and tax 3,546 15,833 19,379 3,252 19,910 23,162
------------------------------ ---- -------- -------- -------- -------- -------- --------
Finance costs 9 (9) (1,161) (1,170) - (1,096) (1,096)
------------------------------ ---- -------- -------- -------- -------- -------- --------
Profit before tax 3,537 14,672 18,209 3,252 18,814 22,066
------------------------------ ---- -------- -------- -------- -------- -------- --------
Tax 10 (598) (715) (1,313) (535) - (535)
------------------------------ ---- -------- -------- -------- -------- -------- --------
Net profit for the
year and total comprehensive
income 2,939 13,957 16,896 2,717 18,814 21,531
------------------------------ ---- -------- -------- -------- -------- -------- --------
Earnings per Ordinary
share (pence) 12 2.42 11.51 13.93 2.24 15.51 17.75
------------------------------ ---- -------- -------- -------- -------- -------- --------
The total column of this statement represents Group's Statement
of Comprehensive Income, prepared in accordance with UK -- adopted
International Accounting Standards.
The revenue return and capital return columns are supplementary
to this and are prepared under guidance published by the
Association of Investment Companies.
The Group does not have any other income or expense that is not
included in net profit for the year. The net profit for the year
disclosed above represents the Group's total comprehensive
income.
There are no dilutive securities and therefore the Earnings per
Share and the Diluted Earnings per share are the same.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
in the year.
The notes below form part of these Financial Statements.
STATEMENTS OF CHANGES IN EQUITY
For the year ended 30 September 2023
Group and Company
Year ended 30 September 2023
--------------------- ---- -------------------------------------------------------------------------------
Called Capital Share Special
up share redemption premium distributable Capital Revenue Total
capital reserve reserve reserve reserves reserve Equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---- --------- ----------- -------- -------------- --------- -------- --------
Total equity at
1 October 2022 31,037 6,575 80,685 3,672 280,791 2,073 404,833
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total comprehensive
income:
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Profit for the
year ended 30 September
2023 - - - - 13,957 2,939 16,896
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Transactions with
owners, recorded
directly to equity:
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Equity dividends
paid 11 - - - - - (2,547) (2,547)
--------------------- ---- --------- ----------- -------- -------------- --------- -------- --------
Total equity at
30 September 2023 31,037 6,575 80,685 3,672 294,748 2,465 419,182
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Group and Company
Year ended 30 September 2022
--------------------- ---- -------------------------------------------------------------------------------
Called Capital Share Special
up share redemption premium distributable Capital Revenue Total
capital reserve reserve reserve reserves reserve Equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---- --------- ----------- -------- -------------- --------- -------- --------
Total equity at
1 October 2021 31,037 6,575 80,685 3,672 261,977 1,782 385,728
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Total comprehensive
income:
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Profit for the
year ended 30 September
2022 - - - - 18,814 2,717 21,531
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Transactions with
owners, recorded
directly to equity:
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
Equity dividends
paid 11 - - - - - (2,426) (2,426)
--------------------- ---- --------- ----------- -------- -------------- --------- -------- --------
Total equity at
30 September 2022 31,037 6,575 80,685 3,672 280,791 2,073 404,833
--------------------------- --------- ----------- -------- -------------- --------- -------- --------
The notes below form part of these Financial Statements.
BALANCE SHEETS
As at 30 September 2023
Group Company
----- ------------------------------------ ------------------------------------
30 September 2023 30 September 2022 30 September 2023 30 September 2022
Notes GBP'000 GBP'000 GBP'000 GBP'000
----- ----------------- ----------------- ----------------- -----------------
Non-current assets
Investments held at fair value 13 458,255 434,419 458,255 434,419
Investment in subsidiary 13 - - 50 50
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Current assets
Cash and cash equivalents 24 4,680 7,546 4,630 7,496
Receivables 14 505 233 505 233
Overseas tax recoverable 678 666 678 666
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
5,863 8,445 5,813 8,395
Total assets 464,118 442,864 464,118 442,864
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Current liabilities
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Bank overdraft 24 (2,014) - (2,014) -
Payables 15 (3,981) (470) (3,981) (470)
Zero dividend preference shares 16 (38,687) - - -
Loan from subsidiary - - (38,687) -
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
(44,682) (470) (44,682) (470)
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Non-current liabilities
Zero Dividend Preference shares 16 - (37,561) - -
Loan from subsidiary - - - (37,561)
Indian capital gains tax provision (254) - (254) -
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Total liabilities (44,936) (38,031) (44,936) (38,031)
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Net assets 419,182 404,833 419,182 404,833
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Equity attributable to equity
Shareholders
Called up share capital 17 31,037 31,037 31,037 31,037
Share premium reserve 19 80,685 80,685 80,685 80,685
Capital Redemption reserve 18 6,575 6,575 6,575 6,575
Special distributable reserve 20 3,672 3,672 3,672 3,672
Capital reserves 21 294,748 280,791 294,748 280,791
Revenue reserve 2,465 2,073 2,465 2,073
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Total equity 419,182 404,833 419,182 404,833
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
Net asset value per Ordinary share
(pence) 23 345.66 333.83 345.66 333.83
Net asset value per ZDP share
(pence) 23 120.41 116.91 - -
----------------------------------- ----- ----------------- ----------------- ----------------- -----------------
The parent company has taken advantage of section 408 of the
Companies Act 2006 and has not included its own income statement in
the Financial Statements. The parent company's profit for the year
was GBP16,896 (2022: GBP21,531,000).
The Financial Statements were approved and authorised for issue
by the Board of Directors on 12 December 2023 and signed on its
behalf by
Lisa Arnold
Chair
Registered number 7251471
The notes below form part of these Financial Statements.
CASH FLOW STATEMENTS
For the year ended 30 September 2023
Group and Company
--------------------------------------
Year ended Year ended
30 September 2023 30 September 2022
Note GBP'000 GBP'000
--------------------------------------------------------------- ---- ------------------ ------------------
Cash flows from operating activities
Profit before finance costs and tax 19,379 23,162
Adjustment for non-cash items:
Gains on investments held at fair value through profit or loss (19,574) (22,985)
Adjusted (profit)/loss before tax (195) 177
Adjustments for:
Purchases of investments, including transaction costs (503,002) (480,136)
Sales of investments, including transaction costs 501,992 476,716
(Increase)/decrease in receivables (272) 27
Increase in payables 259 101
Indian capital gains tax (461) -
Overseas tax deducted at source (610) (629)
Net cash used in operating activities (2,289) (3,744)
--------------------------------------------------------------- ---- ------------------ ------------------
Cash flows from financing activities
Interest paid (44) (2)
Equity dividends paid 11 (2,547) (2,426)
Net cash used in financing activities (2,591) (2,428)
--------------------------------------------------------------- ---- ------------------ ------------------
Net decrease in cash and cash equivalents (4,880) (6,172)
--------------------------------------------------------------- ---- ------------------ ------------------
Cash and cash equivalents at the beginning of the year 7,546 13,718
Cash and cash equivalents at the end of the year 24 2,666 7,546
--------------------------------------------------------------- ---- ------------------ ------------------
The notes below form part of these Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 September 2023
1. General Information
The consolidated Financial Statements for the year ended 30
September 2023 comprise the Financial Statements of the Company and
its wholly-owned subsidiary PCGH ZDP plc (together referred to as
the 'Group').
The principal activity of the Group is that of an investment
trust company within the meaning of Section 1158/1159 of the
Corporation Tax Act 2010 and its investment approach is detailed in
the Strategic Report.
The Group and Company's presentational currency is pounds
sterling (rounded to the nearest GBP'000). Pounds sterling is also
the functional currency of the Group and Company because it is the
currency which is most relevant to the majority of the Group and
Company's shareholders and creditors and the currency in which the
majority of the Group and Company's operating expenses are
paid.
2. Accounting Policies
The principal accounting policies which have been applied
consistently for all years presented are set out below:
(a) Basis of Preparation
The Group and Company's Financial Statements have been prepared
and approved by the Directors in accordance with UK- adopted
international accounting standards ("UK-adopted IAS") and with the
requirements of the Companies Act 2006.
The Financial Statements have been prepared on a going concern
basis under the historical cost convention, as modified by the
revaluation of investments and derivative financial instruments at
fair value through profit or loss.
Where presentational guidance set out in the Statement of
Recommended Practice (SORP) for investment trusts issued by the
Association of Investment Companies (AIC) in July 2022 is
consistent with the requirements of UK-adopted IAS, the Directors
have sought to prepare the Financial Statements on a basis
compliant with the recommendations of the SORP.
Basis of consolidation - The Group Financial Statements
consolidate the Financial Statements of the Company and its wholly
owned subsidiary, PCGH ZDP plc, drawn up to the same accounting
date. The subsidiary is consolidated from the date of its
incorporation.
The Company has taken advantage of the exemption under section
408 of the Companies Act 2006 and accordingly has not presented a
separate parent company income statement.
The financial position of the Group and Company as at 30
September 2023 are shown in the balance sheet as above. As at 30
September 2023 the Group and Company's total assets exceeded its
total liabilities by a multiple of over 9. The assets of the Group
and Company consist mainly of securities that are held in
accordance with the Group and Company's Investment Policy, as set
out above and these securities are readily realisable. The
Directors have considered a detailed assessment of the Group and
Company's ability to meet their liabilities as they fall due. The
assessment took account of the Group and Company's current
financial positions, their cash flows and their liquidity positions
and the loan due for repayment to PCGH ZDP plc in June 2024. In
addition to the assessment, the Group and Company carried out
stress testing which used a variety of falling parameters to
demonstrate the effects on the Group and Company's share prices and
net asset values. In light of the results of these tests, the Group
and Company's cash balances, and the liquidity positions, the
Directors consider that the Group and Company have adequate
financial resources to enable them to continue in operational
existence for at least 12 months. Accordingly, the Directors
believe that it is appropriate to continue to adopt the going
concern basis in preparing the Group and Company's Financial
Statements.
(b) Presentation of the Statement of Comprehensive Income
In order to better reflect the activities of an investment trust
company and in accordance with the guidance set out by the AIC,
supplementary information which analyses the Statement of
Comprehensive Income between items of a revenue and capital nature
has been presented alongside the Statement of Comprehensive Income.
The results presented in the revenue return column is the measure
the Directors believe appropriate in assessing the Group and
Company's compliance with certain requirements set out in section
1158 of the Corporation Tax Act 2010.
(c) Income
Dividends receivable from equity shares are recognised and taken
to the revenue return column of the Statement of Comprehensive
Income on an ex-dividend basis.
Special dividends are recognised on an ex-dividend basis and may
be considered to be either revenue or capital items. The facts and
circumstances are considered on a case-by-case basis before a
conclusion on appropriate allocation is reached.
Where the Group and Company has received dividends in the form
of additional shares rather than in cash, the amount of the cash
dividend foregone is recognised in the revenue return column of the
Statement of Comprehensive Income. Any excess
in value of shares received over the amount of the cash dividend
foregone is recognised in the capital return column of the
Statement of Comprehensive Income.
Bank interest is accounted for on an accruals basis. Interest
outstanding at the year end is calculated on a time apportionment
basis using market rates of interest.
(d) Written Options
The Group and Company may write exchange-traded options with a
view to generating income. This involves writing short-dated
covered-call options and put options. The use of financial
derivatives is governed by the Group and Company's policies, as
approved by the Board.
These options are recorded initially at fair value, based on the
premium income received, and are then measured at subsequent
reporting dates at fair value. Changes in the fair value of the
options are recognised in the capital return for the period.
The option premiums are recognised evenly over the life of the
option and shown in the revenue return, with an appropriate amount
shown in the capital return to ensure the total return reflects the
overall change in the fair value of the options.
Where an option is exercised, any balance of the premium is
recognised immediately in the revenue return with a corresponding
adjustment in the capital return based on the amount of the loss
arising on exercise of the option.
(e) Expenses
All expenses, including the management fee, are accounted for on
an accruals basis and are recognised when they fall due.
All expenses have been presented as revenue items except as
follows:
Expenses are charged to the capital column of the Statement of
Comprehensive Income where a connection with the maintenance or
enhancement of the value of investments can be demonstrated. In
this respect the investment management fees have been charged to
the Statement of Comprehensive Income in line with the Board's
expected long-term split of returns, in the form of capital gains
and income from the Group and Company's portfolio. As a result 20%
of the investment management fees are charged to the revenue
account and 80% charged to the capital account of the Statement of
Comprehensive Income.
The performance fee (when payable) is charged entirely to
capital as the fee is based on the out-performance of the Benchmark
and is expected to be attributable largely, if not wholly, to
capital performance.
The research costs relate solely to specialist healthcare
research and are accounted for on an accrual basis and, are
allocated 20% to revenue and 80% capital. This is in line with the
Board's expected long-term split of revenue and capital return from
the Company's investment portfolio.
Finance costs
The ZDP shares are designed to provide a pre-determined capital
growth from their original issue price of 100p on 20 June 2017 to a
final capital repayment of 122.99p on 19 June 2024. The initial
capital will increase at a compound interest rate of 3% per
annum.
No dividends are payable on the ZDP shares. The provision for
the capital growth entitlement of the ZDP shares is included as a
finance cost and charged 100% to capital within the Statement of
Comprehensive Income (AIC SORP paragraph 53 - issued July
2022).
Overdraft interest costs are allocated 20% to revenue and 80% to
capital in line with the Board's expected long-term split of
revenue and capital return from the Company's investment
portfolio.
Share issue costs
Costs incurred directly in relation to the issue of shares in
the subsidiary are borne by the Company and taken 100% to capital.
Share issue costs relating to ordinary share issues by the Company
are taken 100% to the share premium account.
Zero Dividend Preference (ZDP) shares
Shares issued by the subsidiary are treated as a liability of
the Group, and are shown in the Balance Sheet at their redemption
value at the Balance Sheet date. The appropriations in respect of
the ZDP shares necessary to increase the subsidiary's liabilities
to the redemption values are allocated to capital in the Statement
of Comprehensive Income. This treatment reflects the Board's
long-term expectations that the entitlements of the ZDP
shareholders will be satisfied out of gains arising on investments
held primarily for capital growth.
(f) Taxation
The tax expense represents the sum of the overseas withholding
tax deducted from investment income, tax currently payable and
deferred tax.
The tax currently payable is based on the taxable profits for
the year ended 30 September 2023. Taxable profit differs from
net
profit as reported in the Statement of Comprehensive Income
because it excludes items of income or expense that are taxable
or deductible in other years and it further excludes items that
are never taxable or deductible. The Group and Company's liability
for current tax is calculated using tax rates that have been
enacted or substantively enacted at the balance sheet date.
In line with the recommendations of the SORP, the allocation
method used to calculate tax relief on expenses presented against
capital returns in the supplementary information in the Statement
of Comprehensive Income is the "marginal basis". Under this basis,
if taxable income is capable of being offset entirely by expenses
presented in the revenue return column of the Statement of
Comprehensive Income, then no tax relief is transferred to the
capital return column.
Deferred tax is the tax expected to be payable or recoverable on
temporary differences between the carrying amounts of assets and
liabilities in the Financial Statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted
for using the balance sheet liability method. Deferred tax
liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Investment trusts which have approval as such under section 1158
of the Corporation Taxes Act 2010 are not liable for taxation on
capital gains.
The company is liable to Indian capital gains tax under Section
115 AD of the Indian Income Tax Act 1961. The Indian capital gains
tax provision represents an estimate of the amount of tax payable
by the Company. Tax amounts payable may differ from this provision
depending on when the Company disposes of its investments. The
current provision for Indian capital gains tax is calculated based
on the long term (securities held more than one year) or short term
(securities held less than one year) nature of the investments and
the applicable tax rate at the year end. Currently, the short-term
tax rate is 15% and the long-term tax rate is 10%. The estimated
tax charge is subject to regular review including a consideration
of the likely period of ownership, tax rates and market valuation
movements. The provision at the year end is recognised in the
Balance Sheet and the year-on-year movement in the provision is
recognised in the Statement of Comprehensive Income.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax rates that have been enacted or substantively
enacted at the balance sheet date.
Deferred tax is charged or credited in the Statement of
Comprehensive Income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
(g) Investments Held at Fair Value Through Profit or Loss
When a purchase or sale is made under contract, the terms of
which require delivery within the timeframe of the relevant market,
the investments concerned are recognised or derecognised on the
trade date and are initially measured at fair value.
On initial recognition the Group and Company has designated all
of its investments as held at fair value through profit or loss as
defined by UK-adopted IAS. All investments are measured at
subsequent reporting dates at fair value, which is either the bid
price or the last traded price, depending on the convention of the
exchange on which the investment is quoted.
All investments, classified as fair value through profit or
loss, are further categorised into the following fair value
hierarchy:
Level 1: Unadjusted prices quoted in active markets for
identical assets and liabilities.
Level 2: Having inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices).
Level 3: Having inputs for the asset or liability that are not
based on observable market data.
Changes in fair value of all investments held at fair value and
realised gains and losses on disposal are recognised in the capital
return column of the Statement of Comprehensive Income.
In the event a security held within the portfolio is suspended
then judgement is applied in the valuation of that security.
(h) Receivables
Receivables are initially recognised at fair value and
subsequently measured at amortised cost. Receivables do not carry
any interest and are short-term in nature and are accordingly
stated at their nominal value (amortised cost) as reduced by
appropriate allowances for estimated irrecoverable amounts.
(i) Cash and Cash Equivalents
Cash comprises cash on hand and demand deposits. Cash
equivalents are short-term, maturity of three months or less,
highly liquid investments that are readily convertible to known
amounts of cash.
(j) Dividends Payable
Dividends payable to shareholders are recognised in the
Financial Statements when they are paid or, in the case of final
dividends, when they are approved by the shareholders.
(k) Payables
Other payables are not interest-bearing and are initially valued
at fair value and subsequently stated at their nominal value
(amortised cost).
(l) Foreign Currency Translation
Transactions in foreign currencies are translated into sterling
at the rate of exchange ruling on the date of each transaction.
Monetary assets, monetary liabilities and equity investments in
foreign currencies at the balance sheet date are translated into
sterling at the rates of exchange ruling on that date. Realised
profits or losses on exchange, together with differences arising on
the translation of foreign currency assets or liabilities, are
taken to the capital return column of the Statement of
Comprehensive Income.
Foreign exchange gains and losses arising on investments held at
fair value are included within changes in fair value.
(m) Capital Reserves
Capital reserve arising on investments sold includes:
-- gains/losses on disposal of investments
-- exchange differences on currency balances
-- transfer to subsidiary in relation to ZDP funding requirement
-- other capital charges and credits charged to this account in
accordance with the accounting policies above.
Capital reserve arising on investments held includes:
-- increases and decreases in the valuation of investments held at the balance sheet date.
All of the above are accounted for in the Statement of
Comprehensive Income.
When making a distribution to shareholders, the Directors
determining the profits available for distribution by reference to
the 'Guidance on realised and distributable profits under the
Companies Act 2006' issued by the Institute of Chartered
Accountants of England & Wales and the Institute of Chartered
Accountants of Scotland in April 2017. The availability of
distributable reserves in the Company is dependent on those
dividends meeting the definition of qualifying consideration within
the guidance and on the available cash resources of the Company and
other accessible sources of funds. The distributable reserves are
therefore subject to any future restrictions or limitations at the
time such distribution is made.
(n) Repurchase of Ordinary Shares (Including Those Held in Treasury)
The costs of repurchasing Ordinary shares including related
stamp duty and transaction costs are taken directly to equity and
reported through the Statement of Changes in Equity as a charge on
the special distributable reserve. Share repurchase transactions
are accounted for on a trade date basis.
The nominal value of Ordinary share capital repurchased and
cancelled is transferred out of called up share capital and into
the capital redemption reserve.
Where shares are repurchased and held in treasury, the transfer
to capital redemption reserve is made if and when such shares are
subsequently cancelled.
(o) Segmental Reporting
Under IFRS 8, 'Operating Segments', operating segments are
considered to be the components of an entity about which separate
financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate
resources and in assessing performance. The chief operating
decision maker has been identified as the Investment Manager (with
oversight from the board).
The Directors are of the opinion that the Group and Company has
only one operating segment and as such no distinct segmental
reporting is required.
(p) Key Estimates and judgements
Estimates and assumptions used in preparing the Financial
Statements are reviewed on an ongoing basis and are based on
historical experience and various other factors that are believed
to be reasonable under the circumstances. The results of these
estimates and assumptions form the basis of making judgements about
carrying values of assets and liabilities that are not readily
apparent from other sources. The Group and Company do not consider
that there have been any significant estimates or assumptions in
the current financial year.
(q) New and revised accounting Standards
There were no new UK-adopted IAS or amendments to UK-adopted IAS
applicable to the current year which had any significant impact on
the Group and Company's Financial Statements.
i) There were no relevant standards effective for the current
annual reporting period that potentially impact the Group and
Company in issue.
ii) At the date of authorisation of the Group and Company's
Financial Statements, the following relevant standards that
potentially impact the Group and Company are in issue but are not
yet effective and have not been applied in the
Financial Statements.
Standards & Interpretations Effective
for periods
commencing
on or after
---------------------------- ---------------------------------------- -------------
Disclosure of Accounting Requirement amended to disclose 1 January
Policies (Amendments material accounting policies instead 2023
to IAS 1 of significant accounting policies
and IFRS Practice and provided guidance in making
Statement 2) materiality judgements to accounting
policy disclosure.
---------------------------- ---------------------------------------- -------------
Definition of Accounting The amendment introduced the definition 1 January
Estimates (amendments of accounting estimates and included 2023
to other amendments to IAS 8 to help
IAS 8) entities distinguish changes in
accounting estimates from changes
in accounting policy.
---------------------------- ---------------------------------------- -------------
The Directors expect that the adoption of the standards listed
above will have either no impact or that any impact will not be
material on the Financial Statements of the Group and Company in
future periods.
3. Investment Income
Year ended Year ended
30 September 30 September
2023 2022
GBP'000 GBP'000
------------------------------------- ------------- -------------
Revenue:
UK Dividend income 591 472
------------------------------------- ------------- -------------
Overseas Dividend income 4,213 3,955
------------------------------------- ------------- -------------
Total investment income allocated to
revenue 4,804 4,427
------------------------------------- ------------- -------------
4. Other Operating Income
Year ended Year ended
30 September 30 September
2023 2022
GBP'000 GBP'000
----------------------------- ------------- -------------
Bank interest 104 26
----------------------------- ------------- -------------
Total other operating income 104 26
----------------------------- ------------- -------------
5. Gains on Investments Held at Fair Value
Year ended Year ended
30 September 30 September
2023 2022
GBP'000 GBP'000
------------------------------------------- ------------- -------------
Net gains on disposal of investments
at historic cost 33,182 18,524
Less fair value adjustments in earlier
years (14,297) (11,626)
------------------------------------------- ------------- -------------
Gains based on carrying value at previous
balance sheet date 18,885 6,898
Valuation gains on investments held during
the year 689 16,087
------------------------------------------- ------------- -------------
19,574 22,985
------------------------------------------- ------------- -------------
6. Other Currency losses
Year ended Year ended
30 September 30 September
2023 2022
GBP'000 GBP'000
------------------------------------- ------------- -------------
Exchange losses on currency balances (1,130 (610)
------------------------------------- ------------- -------------
7. Investment Management Fee
Year ended Year ended
30 September 30 September
2023 2022
GBP'000 GBP'000
------------------------------------- ------------- -------------
Management fee
- charged to revenue 650 602
- charged to capital 2,598 2,406
------------------------------------- ------------- -------------
Investment management fee payable to
Polar Capital LLP 3,248 3,008
------------------------------------- ------------- -------------
Management fees are allocated 20% to revenue and 80% to capital.
Details of the fee arrangements are given in the Strategic
Report above.
8. Other Administrative Expenses (Including VAT where appropriate)
Year ended Year ended
30 September 30 September
2023 2022
GBP'000 GBP'000
----------------------------------------------- ------------- -------------
Directors' fees and expenses(1) 143 136
Directors' NIC 14 14
Auditors' remuneration(2) : For audit
of the Group and Company Financial Statements 60 48
Depositary fee 30 23
Registrar fee 37 30
Custody and other bank charges 42 37
UKLA and LSE listing fees(3) 40 3
Legal & professional fee 5 6
AIC fees 21 21
Directors' and officers liability insurance 18 16
Corporate brokers fee 25 25
Marketing expenses(4) 47 43
Research costs - allocated to revenue(5) 3 15
Shareholder communications 17 22
HSBC administration fee 208 158
Other expenses 2 2
----------------------------------------------- ------------- -------------
Total other administrative expenses allocated
to revenue 712 599
----------------------------------------------- ------------- -------------
Research cost - allocated to capital(5) 13 59
----------------------------------------------- ------------- -------------
Total other administrative expenses 725 658
----------------------------------------------- ------------- -------------
1 Full disclosure is given in the Directors' Remuneration Report
in the Annual Report.
2 2023 includes GBP8,000 (2022: GBP6,875) paid to the Auditors
for the audit of PCGH ZDP Plc.
3 Prior year reflects write off of PCCH ZDP FCA fee accrual
which no longer applies.
4 Includes marketing expenses payable to Polar Capital LLP of
GBP15,500 ( 2022: GBP22,500).
5 Research costs payable by the Company amounted to GBP16,000,
and cover the 3 months to 31 December 2022. (GBP74,000 - full
year). These costs are allocated 20% to revenue and 80% to capital
and are included in the ongoing charges calculation. With effect
from 1 January 2023, specialist research costs are absorbed by
Polar Capital.
Ongoing charges represents the total expenses of the fund,
excluding finance costs and tax, expressed as a percentage of the
average daily net asset value, in accordance with AIC guidance
issued in May 2012.
The ongoing charges ratio for the year ended 30 September 2023
was 0.87% (2022: 0.84%). See Alternative Performance Measures
provided in the annual report.
9. Finance Costs
Year ended 30 September Year ended 30 September
2023 2022
---------------------------- ---------------------------
Revenue Capital Total Revenue Capital Total
return return return return return return
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- -------- ------- -------- -------- -------
Interest on overdrafts 9 35 44 - 2 2
Appropriation to
ZDP shares - 1,126 1,126 - 1,094 1,094
----------------------- --------- -------- ------- -------- -------- -------
Total finance
costs 9 1,161 1,170 - 1,096 1,096
----------------------- --------- -------- ------- -------- -------- -------
10. Taxation
Year ended Year ended
30 September 2023 30 September 2022
---------------------------- ----------------------------
Revenue Capital Total Revenue Capital Total
return return return return return return
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------- -------- --------
a) Analysis of tax charge
for the year:
Overseas tax 598 - 598 535 - 535
Indian capital gains tax - 715 715 - - -
-------------------------- -------- -------- -------- -------- -------- --------
Total tax for the year
(see note 10b) 598 715 1,313 535 - 535
-------------------------- -------- -------- -------- -------- -------- --------
b) Factors affecting tax
charge for the year:
The charge for the year can be reconciled to the profit
per the Statement of Comprehensive Income as follows:
Profit before tax 3,537 14,672 18,209 3,252 18,814 22,066
-------------------------- -------- -------- -------- -------- -------- --------
Tax at the UK corporation
tax rate of 22% (2022:
19%) 778 3,228 4,006 617 3,575 4,192
Tax effect of non-taxable
dividends (1,057) - (1,057) (841) - (841)
Gains on investments that
are not taxable - (4,058) (4,058) - (4,251) (4,251)
Non taxable expenses not
utillised in the year 279 582 861 224 468 692
Overseas tax suffered 598 - 598 535 - 535
Indian capital gains tax - 715 715 - - -
Expenses not allowable - 248 248 - 208 208
Total tax for the year
(see note 10a) 598 715 1,313 535 - 535
-------------------------- -------- -------- -------- -------- -------- --------
c) Factors that may affect future tax charges:
The Company has an unrecognised deferred tax asset of
GBP7,312,000 (2022: GBP6,334,000). The deferred tax asset is based
on the
current corporation tax rate of 25% (2022: 25%).
It is unlikely that the Company will generate sufficient taxable
profits in the future to utilise these expenses and deficits and
therefore no deferred tax asset has been recognised.
Due to the Company's tax status as an investment trust and the
intention to continue meeting the conditions required to obtain
approval of such status in the foreseeable future, the Company has
not provided tax on any capital gains arising on the revaluation or
disposal of investments held by the Company.
The Company is liable to Indian capital gains tax under Section
115 AD of the Indian Income Tax Act 1961. A tax provision on Indian
capital gains is calculated based on the long term (securities held
more than one year) or short term (securities held less than one
year) nature of the investments and the applicable tax rate at the
year end. The current rates of short-term tax rates are 15% and the
long term tax rates are 10% respectively. At the year ended 30
September 2023, the Company has a deferred tax liability of
GBP254,000 (2022: GBPnil) on capital gains which may arise if
Indian investments are sold.
11. Amounts Recognised as Distributions to Ordinary Shareholders in the Year
Dividends paid in the year ended 30 September 20 23
Year ended
30 September
Pence per 2023
Payment date No of shares share GBP'000
----------------- ------------ --------- -------------
28 February 2023 121,270,000 1.10p 1,334
31 August 2023 121,270,000 1.00p 1,213
-------------
2,547
-------------
The revenue available for distribution by way of dividend for
the year is GBP2,939,000 (2022: GBP2,717,000).
The total dividends payable in respect of the financial year
ended 30 September 2023 which is the basis on which the
requirements of Section 1158 Corporation Tax Act 2010 are
considered, is set out below:
Year ended
30 September
Pence per 2023
Payment date No of shares share GBP'000
----------------- ------------ --------- -------------
31 August 2023 121,270,000 1.00p 1,213
29 February 2024 121,270,000 1.20p 1,455
2,668
-------------
Dividends paid in the year ended 30 September 20 22
Year ended
30 September
Pence per 2022
Payment date No of shares share GBP'000
----------------- ------------ --------- -------------
28 February 2022 121,270,000 1.00p 1,213
31 August 2022 121,270,000 1.00p 1,213
2,426
-------------
The total dividends payable in respect of the financial year
ended 30 September 2022,which is the basis on which the
requirements of Section 1158 Corporation Tax Act 2010 are
considered, is set out below:
Year ended
30 September
Pence per 2022
Payment date No of shares share GBP'000
----------------- ------------ --------- -------------
31 August 2022 121,270,000 1.00p 1,213
28 February 2023 121,270,000 1.10p 1,334
2,547
-------------
All dividends are paid as interim dividends, and all have been
charged to revenue, where necessary utilising the revenue
reserves.
The dividends paid in February each year relate to a dividend
declared in respect of the previous financial year but paid in
the
current accounting year.
12. Earnings per Ordinary Share
Year ended Year ended
30 September 2023 30 September 2022
------------------------------------- -------------------------------------
Revenue Capital Total Revenue Capital Total
return return return return return return
----------- ----------- ----------- ----------- ----------- -----------
The calculation of
basic earnings per
share is based
on the following
data:
Net profit for the
year (GBP'000) 2,939 13,957 16,896 2,717 18,814 21,531
Weighted average
Ordinary
shares in issue
during the year 121,270,000 121,270,000 121,270,000 121,270,000 121,270,000 121,270,000
Basic - Ordinary
shares (pence) 2.42 11.51 13.93 2.24 15.51 17.75
-------------------- ----------- ----------- ----------- ----------- ----------- -----------
As at 30 September 2023 there were no potentially dilutive
shares in issue.
13. Investments held at fair value
a) Investments held at far value through profit or loss
30 September 30 September
2023 2022
GBP '000 GBP '000
---------------------------------------- ------------------------------ ------------------------------
Opening book cost 401,521 380,123
Opening investment holding gains 32,898 28,438
Opening fair value 434,419 408,561
Analysis of transactions made during
the year
Purchases at cost 506,254 477,549
Sales proceeds received (501,992) (474,676)
Gains on investments held at fair value 19,574 22,985
---------------------------------------- ------------------------------ ------------------------------
Closing fair value 458,255 434,419
---------------------------------------- ------------------------------ ------------------------------
Closing book cost 438,965 401,521
Closing investment holding gains 19,290 32,898
---------------------------------------- ------------------------------ ------------------------------
Closing fair value 458,255 434,419
---------------------------------------- ------------------------------ ------------------------------
The Company received GBP501,992,000 (2022: GBP474,676,000) from
disposal of investments in the year. The book cost of these
investments when they were purchased were GBP468,810,000 (2022:
GBP456,152,000). These investments have been revalued over time and
until they were sold, any unrealised gains/losses were included in
the fair value of the investments.
The following transaction costs, including stamp duty and broker
commissions were incurred during the year:
30 September 30 September
2023 2022
GBP'000 GBP'000
--------------- ------------ ------------
On acquisition 481 310
On disposal 257 224
--------------- ------------ ------------
738 534
--------------- ------------ ------------
b) Fair value hierarchy
30 September 30 September
2023 2022
GBP'000 GBP'000
--------------------------------- ------------ ------------
Level 1 assets 458,255 434,419
Valuation at the end of the year 458,255 434,419
--------------------------------- ------------ ------------
All Level 1 assets are traded on a recognised Stock
Exchange.
c) Subsidiary undertaking
Country of registration, Number and class
Company and incorporation and of shares held by
business operation the Company Holding
------------- ------------------------- ----------------------- -------
50,000 Ordinary shares
PCGH ZDP Plc England and Wales of GBP1 100%
------------- ------------------------- ----------------------- -------
The Company is a public limited company with the sole purpose of
issuing Zero Dividend Preference (ZDP) shares. The registered
office is at Polar Capital, 16 Palace Street, London SW1E 5JD.
The investment is stated in the Company's Financial Statements
at cost, which is considered by the Directors to equate to fair
value.
The subsidiary is non-trading and the value of the net assets
have not changed since the acquisition of the Ordinary share
capital by the Company. The cost is therefore considered to equate
to the fair value of the shares held.
14. Called up Share Capital
30 September 30 September
Ordinary shares - Allotted, Called 2023 2022
up and Fully paid: GBP'000 GBP'000
------------------------------------------ ------------ ------------
Ordinary shares of nominal value 25p
each:
Opening balance of 121,270,000 (2022:
121,770,000) 30,317 30,317
Allotted, Called up and Fully paid:
121,270,000 (2022: 121,270,000) Ordinary
shares of 25p 30,317 30,317
2,879,256 (2022: 2,879,256) Ordinary
shares, held in treasury 720 720
------------------------------------------ ------------ ------------
At 30 September 2023 31,037 31,037
------------------------------------------ ------------ ------------
No Ordinary shares were repurchased or issued during the year
(2022: nil).
The Ordinary shares held in treasury have no voting rights and
are not entitled to dividends.
15. Net Asset Value Per Share
30 September 30 September
Ordinary shares 2023 2022
------------------------------------------------- ------------ ------------
Net assets attributable to Ordinary Shareholders
(GBP'000) 419,182 404,833
Ordinary shares in issue at end of year 121,270,000 121,270,000
Net asset value per Ordinary share (pence) 345.66 333.83
------------------------------------------------- ------------ ------------
Total issued Ordinary shares 124,149,256 124,149,256
Ordinary shares held in treasury 2,879,256 2,879,256
Ordinary shares in issue 121,270,000 121,270,000
------------------------------------------------- ------------ ------------
As at 30 September 2023 there were no potentially dilutive
shares in issue.
16. Cash and Cash Equivalents
30 September 30 September
2023 2022
GBP'000 GBP'000
---------------------------------- ------------ ------------
Cash at bank 4,630 7,496
Bank Overdraft (2,014) -
---------------------------------- ------------ ------------
Company cash and cash equivalents 2,616 7,496
Cash held at subsidiary 50 50
---------------------------------- ------------ ------------
Group cash and cash equivalents 2,666 7,546
---------------------------------- ------------ ------------
17. Transactions with the Investment Manager and Related Party Transactions
(a) Transactions with the Manager
Under the terms of an agreement dated 26 May 2010 the Group has
appointed Polar Capital [[P ("Polar Capital") to provide investment
management, accounting, secretarial and administrative services.
Details of the fee arrangement for these services are given in the
Strategic Report. The total fees, paid under this agreement to
Polar Capital in respect of the year ended 30 September 2023 were
GBP3,248,000 (2022: GBP3,008,000) of which GBP537,000 (2022:
GBP259,000) was outstanding at the year-end.
In addition, the total research cost in respect of the year
ended 30 September 2023 was GBP16,000 (2022: GBP74,000). As at the
year end, GBPnil (2022: GBP54,800) was outstanding. From 1 January
2023 all research costs are payable by Polar Capital. Refer to note
8 above for more details.
(b) Related party transactions
The Group and Company has no employees and therefore no key
management personnel other than the Directors. The Group and
Company paid GBP143,000 (2022: GBP136,000) to the Directors and the
Remuneration Report including Directors' shareholdings and
movements within the year is set out within the full Annual
Report.
Refer to note 13(c) for details of the subsidiary
undertaking.
18. Post Balance Sheet Events
There are no significant events that have occurred after the end
of the reporting period to the date of this report which require
disclosure.
AGM
The Annual Report and separate Notice for the Annual General
Meeting will be posted to Shareholders in December 2023 and is
available from the Company Secretary at the Company's Registered
Office, (16 Palace Street London SW1E 5JD) or from the Company's
website. The AGM will be held at the Company's Registered Office at
2:30pm on 8 February 2024.
FORWARD LOOKING STATEMENTS
Certain statements included in the Annual Report and Financial
Statements contain forward-looking information concerning the
Company's strategy, operations, financial performance or condition,
outlook, growth opportunities or circumstances in the countries,
sectors or markets in which the Company operates. By their nature,
forward-looking statements involve uncertainty because they depend
on future circumstances, and relate to events, not all of which are
within the Company's control or can be predicted by the Company.
Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, no assurance can be
given that such expectations will prove to have been correct.
Actual results could differ materially from those set out in the
forward-looking statements. For a detailed analysis of the factors
that may affect our business, financial performance or results of
operations, we urge you to look at the principal risks and
uncertainties included in the Strategic Report Section the Annual
Report and Financial Statements.
No part of these results constitutes, or shall be taken to
constitute, an invitation or inducement to invest in Polar Capital
Global Healthcare Trust plc or any other entity, and must not be
relied upon in any way in connection with an investment decision.
The Company undertakes no obligation to update any forward-looking
statements.
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
-END-
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END
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