LONDON STOCK EXCHANGE
ANNOUNCEMENT
Worldwide Healthcare Trust
PLC
Unaudited Half Year
Results for the six months
ended
30
September 2023
This Announcement is not
the Company’s Half Year Report & Accounts. It is an abridged
version of the Company’s full Half Year Report & Accounts for
the six months ended 30 September
2023. The full Half Year Report & Accounts, together
with a copy of this announcement, will also shortly be available on
the Company’s website: www.worldwidewh.com where up to date
information on the Company, including daily NAV, share prices and
fact sheets, can also be
found.
The Company's Half Year
Report & Accounts for the six months ended 30 September 2023 has been submitted to the UK
Listing Authority, and will shortly be available for inspection on
the National Storage Mechanism (NSM): https://data.fca.org.uk/#/nsm/nationalstoragemechanism
For further information
please contact: Mark Pope, Frostrow
Capital LLP 020 3008 4913.
PERFORMANCE
|
Six months
to |
One year
to |
|
30
September |
31
March |
|
2023 |
2023 |
Net asset value per share
(total return)*
# |
(0.6%) |
(0.1%) |
Share price (total
return)* # |
0.1% |
(4.1%) |
Benchmark (total return)^
# |
0.8% |
2.5% |
|
30
September |
31
March |
Six
months |
|
2023 |
2023 |
change |
Net asset value per
share1 |
339.3p |
343.5p |
(1.2%) |
Share
price1 |
309.5p |
311.5p |
(0.6%) |
Discount of share price to
the net asset value per
share* |
8.8% |
9.3% |
|
Leverage* |
14.6% |
10.5% |
|
Ongoing
charges* |
0.8% |
0.8% |
|
Ongoing charges (including
performance fees crystallised during
the period)* |
0.8% |
0.8% |
|
#
Source –
Morningstar.
^
Benchmark – MSCI World Health Care Index on a net total return,
sterling adjusted basis (see
Glossary).
*
Alternative Performance Measure. Leverage calculated under the
Commitment Method (see
Glossary).
1
Comparative figures
restated to reflect the ten for one share split during the
period.
STATEMENT FROM THE
CHAIR
DOUG
MCCUTCHEON
PERFORMANCE
The first half of the
Company’s financial year was a volatile period for markets, and the
Company was not immune to this. External events continued to exert
their influence, with geopolitics and macroeconomic conditions at
the forefront of investors’ minds. The MSCI World and the FTSE
All-Share Indices produced sterling based total returns of +4.5%
and +1.4%, respectively. The Company’s Benchmark,
the MSCI World Healthcare Index, measured on a net total return,
sterling adjusted basis rose by
0.8%.
Against this backdrop, the
Company’s net asset value per share total return was -0.6%,
underperforming the Benchmark during the period. The Company’s
share price total return was slightly better at +0.1%, which
reflected a narrowing of the discount of the Company’s share price
to its net asset value per share to 8.8% at the end of the half
year (from 9.3% at the beginning). During the period, in absolute
terms, net asset value performance was helped by the weakness of
sterling, as sterling depreciated by 1.3% against the U.S. dollar,
the currency in which the majority of the Company’s investments are
denominated.
The Company’s investment
performance has been disappointing in recent periods. The Board
continues to monitor our performance closely and will further
report on it in the full year
results.
Looking at specific names
in the portfolio, the largest contributions during the reporting
period came from the large capitalisation pharmaceutical companies
Novo Nordisk and Eli Lilly, both
of which benefitted from their exposure to the rapidly growing
GLP-1 agonist anti-obesity therapy market. The principal detractors
from performance were the large capitalisation pharmaceutical
company Bristol Myers Squibb and biotechnology company
UniQure. Further information regarding the
Company’s investments and performance can be found in the Review of
Investments.
The Company had, on
average, leverage of 14.7% during the period, which detracted 0.1%
from performance. As at the half year-end, leverage stood at 14.6%,
compared to 10.5% at the beginning of the period. Our Portfolio
Manager continues to adopt both a pragmatic and a tactical approach
to the use of leverage, which adds to performance in periods of
rising portfolio share prices and has benefitted the Company over
time.
The Company is able to
invest up to 10% of the portfolio, at the time of acquisition, in
unquoted securities. Our Portfolio Manager, through its extensive
private equity research capabilities, continues to identify
unquoted opportunities although, in the period under review, no new
unquoted investments were made. Exposure to unquoted equities
accounted for 6.5% of the total portfolio at the half year-end, and
these holdings made a negative contribution of -0.3% to the
Company’s performance during the period under
review.
SHARE
SPLIT
In the Company’s annual
report published on 6 June 2023, the Board set out its plans to
undertake a share split of each of the Company’s shares of 25p each
into 10 shares of 2.5p each. The share split proposal was approved
by shareholders at the Company’s Annual General Meeting held on
18 July 2023 and the new shares began
trading on 27 July 2023. For every
share held immediately prior to the transaction, shareholders
received nine additional shares. Shareholders should note that the
split did not affect the value of your investment in the Company,
nor your shareholder
rights.
PERFORMANCE
FEE
No performance fee was
accrued as at 30
September 2023 and no performance fee can become payable
within the next year. The performance fee arrangements are
described in detail in the Company’s Annual
Report.
CAPITAL
Challenging stock market
conditions and investor sentiment since the beginning of 2022 have
continued to have a negative impact on share price discounts across
the investment company sector, with the average level of discount
currently standing at
c.15.2%*.
*
Source: Winterflood Investment
Trusts
It is the Board’s policy
to buy back our shares if the Company’s share price discount to the
net asset value per share exceeds 6% on an ongoing basis.
Shareholders should note, however, that it remains possible for the
discount to be greater than 6%, particularly when sentiment towards
the Company, the sector and to
investment trusts generally remains poor. In such an environment,
buybacks may prove unable to prevent the discount from widening.
However, they enhance the net asset value per share for remaining
shareholders and go some way to dampening discount volatility,
which can adversely affect investors’ risk adjusted returns.
Therefore, the Company’s share buy-back policy remains
unchanged.
During the period under
review, the Company regularly repurchased shares. A total
of 42,028,574 shares were
repurchased for treasury at a cost of £133.4m and at an average
discount of 9.3%. The total number of shares shown to have been
repurchased during the period has been adjusted to reflect the
share split which took effect from 27 July
2023.
At the period end, there
were 584,179,056 shares in issue (excluding the 17,486,144 shares
held in treasury). Since the period end to 21 November 2023, a further 11,923,082 shares
have been bought back for treasury, at a cost of £35.8m and at the
time of writing, the share price discount stands at
10.7%.
In line with the Company’s
stated policy, I confirm that 4,892,258 shares held in treasury
following the date of the Company’s Annual General Meeting in
July 2022, were cancelled. The
cancellation took place prior to the share split. The Company
currently holds 29,409,226 shares in
treasury.
DIVIDENDS
The Board has declared an
interim dividend of 0.7p per share, for the year to 31 March 2024, which will be payable on
11 January 2024 to shareholders on the register of members on
24 November 2023. The associated ex
dividend date is 23 November 2023.
Last year the Company paid an interim dividend of 7.0p per share.
The level of this year’s interim dividend per share is the same
level as last year taking account of the share split which became
effective on 27 July
2023.
I remind shareholders that
it remains the Company’s policy to pay
out dividends at least to the extent required to
maintain investment trust status. These dividend payments are
paid out of the Company’s net revenue for the year and,
in accordance with investment trust rules, a maximum of 15% of
income can be retained by the Company in any
financial year.
It is the Board’s
continuing belief that it is in shareholders’ best interests to see
the Company’s capital deployed in its investment portfolio rather
than paid out as dividends to achieve a particular target
yield.
COMPOSITION OF THE
BOARD
Having joined the
Company’s Board in 2016, Humphrey van der Klugt has expressed his
intention to retire as a Director at the conclusion of next year’s
Annual General Meeting, to be held on 10
July 2024. Humphrey became Chair of the Audit & Risk
Committee in September 2016, handing
over this role to Tim Livett in
March of this year. Humphrey’s accounting and investment management
experience, as well as his leadership, wisdom and probing
questions, have been very valuable to the Board’s deliberations -
he will be missed. The process of finding a new Director has begun
and the Board will keep shareholders informed of the progress
made.
OUTLOOK
Macroeconomic conditions
continue to be difficult. Against a backdrop of high interest rates
and volatile markets, equity investment remains challenging. This
includes investing in the healthcare sector. However, the
fundamentals of the healthcare sector remain
strong.
As our Portfolio Manager
sets out in their report, they are positive about the outlook for
the healthcare sector. At some point, investment fundamentals will
again reassert themselves over the macro environment. Our Portfolio
Manager expects the currently elevated level of merger and
acquisition activity to continue, supported by attractive
valuations, healthy balance sheets and, within the larger
pharmaceutical and biotechnology sub-sectors, a need to address
future patent expirations. In addition, the pace of scientific and
technological development within the healthcare sector more broadly
will remain unchecked, with
clinical and technological catalysts providing a regular flow of
significant share price moving
events.
As an indication of the
continued strong demand for healthcare investment opportunities
amongst professional investors, it is encouraging that in recent
weeks our Portfolio Manager has been successful in raising three
new funds totalling in excess of U.S$4.3bn to invest in venture capital, royalties
and Asian healthcare
companies.
Doug
McCutcheon
Chair
22
November
2023
PORTFOLIO
AS AT 30 SEPTEMBER
2023
|
|
|
Market
value |
%
of |
Investments |
Sector |
Country |
£’000 |
investments |
Novo
Nordisk |
Pharmaceuticals |
Denmark |
133,917 |
6.3 |
AstraZeneca |
Pharmaceuticals |
Britain |
124,043 |
5.9 |
Boston
Scientific |
Health Care Equipment
&
Supplies |
United
States |
111,522 |
5.3 |
Humana |
Health Care Providers
&
Services |
United
States |
103,638 |
4.9 |
Intuitive
Surgical |
Health Care Equipment
&
Supplies |
United
States |
93,422 |
4.4 |
Merck |
Pharmaceuticals |
United
States |
72,989 |
3.4 |
Eli
Lilly |
Pharmaceuticals |
United
States |
71,276 |
3.4 |
BioMarin
Pharmaceutical |
Biotechnology |
United
States |
70,085 |
3.3 |
Daiichi
Sankyo |
Pharmaceuticals |
Japan |
70,032 |
3.3 |
Sanofi |
Pharmaceuticals |
France |
69,665 |
3.3 |
Top 10
investments |
|
|
920,588 |
43.4 |
Roche |
Pharmaceuticals |
Switzerland |
66,336 |
3.1 |
Eisai |
Pharmaceuticals |
Japan |
60,173 |
2.8 |
Biogen |
Biotechnology |
United
States |
59,855 |
2.8 |
Tenet
Healthcare |
Health Care Providers
&
Services |
United
States |
51,933 |
2.4 |
Stryker |
Health Care Equipment
&
Supplies |
United
States |
49,959 |
2.4 |
Baxter
International |
Health Care Equipment
&
Supplies |
United
States |
48,558 |
2.3 |
Thermo Fisher
Scientific |
Life Sciences Tools &
Services |
United
States |
46,882 |
2.2 |
Ionis
Pharmaceuticals |
Biotechnology |
United
States |
46,721 |
2.2 |
Caris Life
Sciences* |
Life Sciences Tools &
Services |
United
States |
45,531 |
2.1 |
Evolent
Health |
Health Care Providers
&
Services |
United
States |
44,400 |
2.1 |
Top 20
investments |
|
|
1,440,937 |
68.0 |
Mirati
Therapeutics |
Biotechnology |
United
States |
43,372 |
2.0 |
United
Therapeutics |
Biotechnology |
United
States |
41,366 |
2.0 |
Cigna
Group |
Health Care Providers
&
Services |
United
States |
39,846 |
1.9 |
Sarepta
Therapeutics |
Biotechnology |
United
States |
31,865 |
1.5 |
Vertex
Pharmaceuticals |
Biotechnology |
United
States |
31,624 |
1.5 |
AbbVie |
Pharmaceuticals |
United
States |
31,150 |
1.5 |
R1
RCM |
Health Care Providers
&
Services |
United
States |
31,052 |
1.5 |
Neurocrine
Biosciences |
Biotechnology |
United
States |
30,173 |
1.4 |
UnitedHealth |
Health Care Providers
&
Services |
United
States |
28,919 |
1.4 |
SI-BONE |
Health Care Equipment
&
Supplies |
United
States |
26,138 |
1.2 |
Top 30
investments |
|
|
1,776,443 |
83.8 |
Apellis
Pharmaceuticals |
Biotechnology |
United
States |
24,767 |
1.2 |
Natera |
Life Sciences Tools &
Services |
United
States |
23,398 |
1.1 |
GSK |
Pharmaceuticals |
Britain |
22,869 |
1.1 |
Shanghai Kindly Medical
Instruments |
Health Care Equipment
&
Supplies |
China |
21,364 |
1.0 |
ICON |
Life Sciences Tools &
Services |
United
States |
20,960 |
1.0 |
WuXi
AppTec |
Life Sciences Tools &
Services |
China |
20,434 |
1.0 |
Vaxcyte |
Biotechnology |
United
States |
20,025 |
0.9 |
Madrigal
Pharmaceuticals |
Biotechnology |
United
States |
19,384 |
0.9 |
Crossover
Health* |
Health Care Providers
&
Services |
United
States |
17,407 |
0.8 |
New Horizon
Health |
Life Sciences Tools &
Services |
China |
15,300 |
0.7 |
Top 40
investments |
|
|
1,982,351 |
93.5 |
Beijing Yuanxin
Technology* |
Health Care Providers
&
Services |
China |
15,207 |
0.7 |
EDDA Healthcare &
Technology* |
Health Care Equipment
&
Supplies |
China |
14,838 |
0.7 |
Wuxi
Biologics |
Life Sciences Tools &
Services |
China |
14,072 |
0.7 |
VISEN
Pharmaceuticals* |
Biotechnology |
China |
13,621 |
0.6 |
Jiangxi
RiMAG* |
Health Care Providers
&
Services |
China |
11,692 |
0.6 |
Ruipeng Pet
Group* |
Health Care Providers
&
Services |
China |
11,015 |
0.5 |
Iovance
Biotherapeutics |
Biotechnology |
United
States |
10,657 |
0.5 |
Xenon
Pharmaceuticals |
Biotechnology |
Canada |
10,038 |
0.5 |
uniQure |
Biotechnology |
Netherlands |
7,410 |
0.3 |
Akero
Therapeutics |
Biotechnology |
United
States |
7,252 |
0.3 |
Top 50
investments |
|
|
2,098,155 |
99.0 |
MabPlex* |
Health Care Providers
&
Services |
China |
6,021 |
0.3 |
Innovent
Biologics |
Biotechnology |
China |
5,962 |
0.3 |
Ikena
Oncology |
Biotechnology |
United
States |
5,769 |
0.3 |
Shanghai Bio-heart
Biological
Technology |
Health Care Equipment
&
Supplies |
China |
3,640 |
0.2 |
Dingdang Health
Technology |
Health Care Providers
&
Services |
China |
2,658 |
0.1 |
API
Holdings* |
Health Care Providers
&
Services |
India |
1,976 |
0.1 |
Passage
Bio |
Biotechnology |
United
States |
1,121 |
0.1 |
Peloton Therapeutics -
Milestone* |
Biotechnology |
United
States |
512 |
0.0 |
Total
equities |
|
|
2,125,814 |
100.3 |
Equity
Swaps |
|
|
|
|
Healthcare M&A Target
Swap |
Basket
Swaps |
United
States |
101,053 |
4.8 |
Catalyst
Swap |
Basket
Swaps |
United
States |
12,736 |
0.6 |
Apollo Hospitals
Enterprise |
Health Care Providers
&
Services |
India |
13,467 |
0.6 |
WuXi
AppTec |
Life Sciences Tools &
Services |
China |
18,543 |
0.9 |
Less: Gross exposure on
financed
swaps |
|
|
(151,571) |
(7.1) |
Total Equity
Swaps |
|
|
(5,772) |
(0.3) |
Total investments
including OTC
Swaps |
|
|
2,120,042 |
100.0 |
*
Unquoted
holding.
SUMMARY
|
Market
value |
%
of |
Investments |
£’000 |
investments |
Listed
Equities |
1,987,993 |
93.8 |
Unquoted
Equities |
137,821 |
6.5 |
Equity
Swaps |
(5,772) |
(0.3) |
Total of all
investments |
2,120,042 |
100.0 |
PORTFOLIO MANAGER’S
REVIEW
MARKETS
In the post-pandemic era,
major macro factors have clearly been the largest influencers
shaping global equity returns. Extreme inflationary pressures, the
invasion of Ukraine, supply chain
issues, and recessionary fears all helped push equity markets lower
in 2022. So far in 2023, declining recessionary fears and a soft
landing for the economy, despite continued upward pressure for
interest rates, has the broad market rebounding. To note, the total
returns in sterling terms for the MSCI World Index for the calendar
year to the end of September was +11.6%, the S&P 500 was
+12.0%, and the FTSE All-Share was +4.3% (source:
Bloomberg).
However, 2023 has been
difficult for healthcare stocks. In fact, relative performance
versus the S&P has been the worst
in over 20 years, with a -18% spread of share price
underperformance for healthcare (in sterling terms) since the start
of the calendar year. The primary issue – again
– was macro in nature.
Specifically, a recession did not materialise in 2023, the economy
has been more robust than anticipated, and investors have chased
growth, mostly in technology and communication stocks. Interest
rates being “higher for longer” exacerbated this situation. This
has neutralised the defensive aspects of healthcare stocks and
marginalised absolute performance this
year.
PERFORMANCE
For the period under
review, the Company produced a net asset value total return of
-0.6% whilst the share price total return was +0.1%. This
performance lagged the Benchmark total return of +0.8% (MSCI World
Healthcare Index). Multiple factors weighed on both absolute and
relative
performance.
First and foremost,
absolute returns were impacted by a lagging healthcare sector, as
discussed on the prior page. With a more robust-than-expected
economy, healthcare share price returns were mostly flat to down in
the period (save for large capitalisation stocks, up modestly on
average). The macro impact on performance can better be identified
by breaking down the six-month period into individual segments. The
only segment where healthcare stocks enjoyed a respite from the
macro overhangs was predominantly in April and May 2023. During this period, the fate of the
economy was still being debated and markets were stable and moved
higher as did healthcare stocks. Stock picking mattered, positive
catalysts were rewarded, and the Company’s performance was strong
at over a 7% return, more than 5% ahead of the
Benchmark.
However, the macro
environment reversed at the end of May and into June and July.
Investor confidence in the economy inflected, technology stocks
rallied, and the S&P 500 hit an all-time high at the end of
July. During this period, healthcare stocks lagged materially,
fundamentals of the sector were muted, and catalysts were punished.
Biotechnology stocks were particularly out-of-favour,
indiscriminately falling nearly 15% (in U.S.$ terms). This was
reflected in the Company’s absolute and relative
performance.
The final two-months of
the period were a mix of both macro and fundamental influences. On
the macro front, a downgrade of the U.S. credit rating and
messaging that interest rates would be “higher for longer” paused
the broad market rally. Fundamentally, interest in healthcare
stocks re-ignited with the better-than-expected disclosure of the
cardiovascular benefits of Novo Nordisk’s
weight-loss drug, Wegovy (semaglutide), in August, although it was
partially offset by a sell-off in medical technology stocks as a
result.
In the six-month period,
the largest contribution came from investments in large
capitalisation pharmaceutical stocks, most notably Novo
Nordisk and Eli Lilly. The phenomenon
that the “obesity drugs” have
become is real, given the outstanding weight loss efficacy and now
the objective disclosure that these drugs can significantly lower
the possibility of overweight patients experiencing heart attack,
stroke, or death due to a cardiovascular event. This buoyed
investor (and patient) enthusiasm and share prices reflected this
accordingly. On a relative basis, attribution from large
capitalisation pharmaceutical stocks was modestly negative due to
allocation, as this sector remains a strategic underweight in the
portfolio.
Another important source
of contribution came from medical technology stocks in the
period. A number of fundamental
tailwinds attracted investor flows, including increased procedural
volumes due to a clear inflection in demand and utilisation of
healthcare services (post the pandemic), a positive pricing
environment, and easy year-over-year comparisons. Relative
contribution was even more impressive given positive stock picking
in the period. Total contribution was partially clipped after the
cardiovascular benefit of the aforementioned weight loss drugs was
disclosed, as investors feared lowered future demand from the
medical technology industry and much of the sector sold
off.
The Company’s net
underperformance was primarily due to allocation in biotechnology
stocks, particularly small and mid-capitalisation biotechnology.
This sub-sector was down by 3% (in sterling total return terms) in
the reported period and down 13% in the calendar year (as measured
by the SPDR S&P Biotech ETF (XBI)). The sub-sector continued to
be out of favour with investors, especially in this prolonged high
interest rate environment. In fact, the performance of the XBI made
new records as it continued its drawdown, now the longest ever at
over 31 months since the peak and the largest as well, now -76%
relative to the S&P (as of 29 September
2023). The negative contribution from biotechnology was
partially exacerbated by stock picking, with some notable
idiosyncratic negative catalysts that occurred during the six-month
period.
Another sub-sector of
import that contributed to the negative performance was the
investment in Japanese pharmaceutical stocks, predominantly due to
stock picking. Also of note were unquoted (private) holdings which
detracted
0.3%.
UNQUOTED
HOLDINGS
During the half year, the
Company strategically refrained from making new investments in
unquoted (private) companies, as we continued to cautiously
navigate the challenging public offering market for small and
mid-capitalisation therapeutic firms. The capital market funding
landscape has been improving and we are optimistic about the
ability of some of our unquoted investments to achieve listings
within the next
year.
As of the half year end,
unquoted company investments made up 6.5% of the Company’s
portfolio, a slight decrease from 6.7% on 31
March 2023. The existing unquoted portfolio demonstrates a
diverse and forward-looking approach. Geographically, exposure is
evenly distributed among emerging markets and North American
companies. On a sub-sector basis, the exposure is concentrated in
services and life science tools, with small exposures to
biotechnology and medical
technology.
During the period under
review, the Company’s unquoted investments returned a loss of £7.3
million, from an opening market value of £145.2 million across 11
positions, an implied return of -5.1% which detracted -0.3% from
performance. Unfortunately, this negative return was exclusively
driven by a single investment in India, API Holdings (better
known as PharmEasy), that experienced a material write-down in its
valuation. The company was compelled to accept a capital infusion
at a distressed valuation after a planned IPO was delayed due to
adverse market conditions, leading to a funding shortfall,
including a potential breach of a debt covenant. Otherwise, eight
out of 11 investments posted small positive returns in the period,
including North American unquoted holdings returning a gain of £4.3
million. Given the emerging positive trends in the market and our
strategic approach, we remain confident in the future performance
of our unquoted
investments.
Overall, we remain proud
of performance since inception over 28-plus years. Since its
inception as of 28 April 1995, the
Company’s net asset value has posted a +4,189% return, a 42x
multiple for an average of +14.1% per annum through to the end of
the half year. This compares to a benchmark return of +2,206% and
+11.7% per annum over the same investment horizon, and a FTSE All
Share Index return of +588% and
+7.5%.
MAJOR CONTRIBUTORS TO
PERFORMANCE
The pursuit of innovation
is a longtime hallmark of the Company. In 2023, the cardiometabolic
therapeutic category reached a new level of innovation with
semaglutide, a best-in-class “GLP-1”
agonist approved for the
treatment of diabetes (Ozempic) and obesity (Wegovy), a medication
from the leader in this space, Novo Nordisk.
Whilst Ozempic was first approved in 2017, and reformulated as
Wegovy in 2021, landmark data was announced in August 2023, in the form of the “SELECT”
trial. This was a global study in nearly 18,000 patients over five
years that unequivocally showed a -20% drop in the risk of an obese
patient suffering a “MACE” event (heart attack, stroke,
or cardiovascular related
death) by taking a once-weekly injection of Wegovy. This data
surpassed all investor expectations and moved this drug from a
lifestyle intervention into a chronic care medicine that can
prolong a patient’s life. So far, the demand for Wegovy in the U.S.
has been insatiable, and the company is literally selling
everything they can make. Despite the supply constraints, sales of
the semaglutide franchise are annualising at U.S.$10 billion per annum. These sales could reach
U.S.$50 billion or more, as the
company is developing the drug in a host of additional indications,
including heart failure, fatty liver disease, sleep apnea, kidney
disease, peripheral arterial disease, and even Alzheimer’s disease.
With additional manufacturing coming online into 2024, we expect a
potential doubling of Wegovy sales next year. In the nine months to
29 September 2023, the stock
appreciated nearly 40% (in local currency terms) to become the
largest company in Europe by
market capitalisation (source:
Bloomberg).
Another top contributor in
2023, also an undisputed leader in innovation, is Eli
Lilly. The U.S.-based pharmaceutical company, like
Novo Nordisk, has a long history in the diabetes
and GLP-1 space. The company’s most recent offering is Mounjaro
(tirzepatide), a dual GLP-1 and “GIP” agonist. Whilst approved for
diabetes in 2022, the company presented additional data in obesity
in 2023, showing weight loss eclipsing 20% and even approaching 25%
in some cases. This dual-agonist therapy has pushed weight loss to
new levels and the company benefitted materially from
the SELECT trial, with
investors (and the company) assuming that “more is better”: the
cardiovascular benefits shown by Wegovy should extend to Mounjaro,
if not moreso, given the superior weight loss profile. Sales of
Mounjaro have already reached U.S.$1
billion per quarter, with the obesity indication still
pending approval by the U.S. Food and Drug Administration (FDA) by
year-end.
Another driver of share
price in 2023 for Eli Lilly was their efforts in
Alzheimer’s disease. Specifically, the company announced in May
that their antibody for removing amyloid plaque from the
brain (donenemab) significantly
slowed cognitive and functional decline in a phase III study in
early Alzheimer’s disease
patients by 35%. This was an impressive result, becoming only the
second molecule to demonstrate disease modifying effects. The drug
is still pending approval by the FDA by year end. During the period
under review, the stock appreciated over 50% (in U.S.$ terms) to
become one of the ten largest companies in the world by market
capitalisation (source:
Bloomberg).
One of the true pioneers
of robotic-assisted surgery is Intuitive Surgical,
a medical equipment company based in California that developed the da Vinci
Surgical System – a combination of software, hardware, and optics
that allows doctors to perform robotically aided surgery from a
remote console. In the quarter proceeding the current financial
year, the company’s share price came under pressure due to concerns
around a slowdown in the hospital capital equipment spending cycle
and a delay to their next generation surgical robot. However, in
the reported period, the company drove a material inflection in
procedure volume growth rates given a combination of rebounding
U.S. surgical volumes, further adoption of Intuitive technology in
international markets such as China, and uptake of new robotic instruments
that allow for new procedure indication expansion. Moreover,
elevated procedure volumes led to increased robotic system
purchases as hospitals become
capacity constrained and needed to add new robots. Looking forward,
the combination of heightened research & development levels
over the past several years and historical system launch timelines
suggest the company is on the verge of another new system launch,
an event that would be a strong catalyst for their
shares.
Mirati
Therapeutics is a clinical stage
precision oncology company located in San
Diego, California. The company’s lead asset, adagrasib
(MRTX849), is an investigational, highly selective and potent oral
small molecule inhibitor of KRAS, a critical target to treat
KRAS-mutated cancers commonly found in lung, colorectal and
pancreatic cancers. The development programme over the past three
plus years has been mixed. However, in August of 2023, the company
concurrently announced several updates, including the return of
their well-regarded former CEO, positive clinical updates from two
ongoing development programs focused on lung cancer, and a
U.S.$345 million financing. Shares
responded positively as these updates renewed investors’ interest
in the company. We would also note that shortly after the reported
period, Bristol-Myers Squibb announced its intention to acquire
Mirati Therapeutics for an equity value of
U.S.$4.5 billion and a total
consideration of up to U.S.$5.8 billion, representing a 52% premium to the
30-day volume-weighted average price (VWAP) as of the unaffected
4 October 2023
close.
Ionis
Pharmaceuticals is a leader in
RNA-targeted therapeutics, with a focus on neuro, orphan, and
cardiometabolic diseases. Its antisense platform works by binding
and destroying a messenger RNA (mRNA) in a highly specific manner,
such that the amount of disease-causing protein is significantly
decreased. The technology can also be used to treat disease by
increasing protein production; this led to the
development of one the most successful medicines on the market
today, Spinraza (nusinersen), for spinal muscular atrophy (SMA).
The company has made tremendous progress in the last 12 months on
both wholly owned and partnered programmes, creating significant
value for shareholders. Late last year, the company reported
positive Phase II data from open label extension study of
donidalorsen, a key pipeline asset, in patients with hereditary
angioedema (HAE). The 95%+ reduction in HAE-attacks in the monthly
dosing arm was unprecedented, suggesting its potential to be a new
standard of care in HAE. In April, Ionis
Pharmaceuticals together with
Biogen, announced the approval of Qalsody
(tofersen), marking a major scientific advance in treatment of a
specific form of amyotrophic lateral sclerosis (ALS). Following a
very successful Phase 3 study in transthyretin polyneuropathy, we
expect eplontersen (developed with partner
AstraZeneca) to be approved on 22 December 2023. In September, the company
announced positive olezarsen topline data from Phase III study in
patients with familial chylomicronemia syndrome (FCS);
impressively, the drug eradicated acute pancreatitis events versus
placebo, making this another important medical
breakthrough.
MAJOR DETRACTORS FROM
PERFORMANCE
In Japan, Daiichi-Sankyo has
emerged as the global leader in next generation antibody-drug
conjugates (ADCs). Unlike conventional chemotherapy treatments,
which can damage healthy cells, ADCs are a construct of a targeted
medicine linked to chemotherapy agents that only attack cancer
cells. Daiichi-Sankyo has created new
breakthroughs in this technology that has led to new levels of
efficacy and survival in cancer patients across a host of tumour
types. Their first commercial offering, Enhertu (fam-trastuzumab
deruxtecan-nxki) has already achieved blockbuster status, becoming
the new standard of care in metastatic breast cancer (with HER2+
expression). Hence, investor enthusiasm increased for their second
ADC offering, Dato-DXd (datopotamab deruxtecan), and its role in
treating lung cancer. Rising expectations pushed the stock to an
all-time high in June 2023. However,
a press release in July 2023,
confirmed that the first Phase III trial for Dato-DXd in lung
cancer met its primary endpoint of progression free survival,
whilst the final overall survival metric was not yet reached.
Coupled with equivocal qualitative language about
clinical significance of this
finding, plus potentially worse than expected safety, pushed the
stock price lower, falling over 25% (local currency) from its high
over the subsequent month. We believe this reaction was overdone
due to a misinterpretation of the company’s press release. We held
the stock in anticipation of further data
disclosures.
Nonalcoholic
steatohepatitis, or NASH, is a severe form of fatty liver disease,
a condition in which the liver builds up excessive fat deposits.
Over time, inflammation, fibrosis, and cirrhosis can occur, leading
to liver failure. With few options to treat this deadly condition
and a huge prevalence globally, the commercial opportunity is
large. Madrigal Pharmaceuticals is a
clinical-stage biopharmaceutical company based in Pennsylvania, pursuing novel therapeutics for
the treatment of NASH. Their primary pipeline asset, resmetirom, is
a thyroid hormone β-receptor agonist which is believed to play a
role in liver health. It has shown promising data in late stage,
pivotal trials for this disease. However, the emergence of data for
the GLP-1 class of drugs (for the treatment of diabetes and obesity
from Eli Lilly and Novo Nordisk)
have shown significant ability to reduce liver fat accumulation,
decrease inflammation, and prevent the progression of fibrosis in
patients with NASH. This finding dramatically hurt investor
sentiment for all NASH players, including
Madrigal. Pharmaceuticals
Share price declines were
exacerbated by a change in the CEO chair and a subsequent
financing, which removed the takeout premium in the
stock.
Massachusetts-based Apellis
Pharmaceuticals is developing treatments for diseases
driven by overactivation of the “complement system”, a complex
ecosystem of plasma proteins in the blood that work together to
fight infection. The company has two commercial products which are
different formulations of pegcetacoplan, an inhibitor of the
complement protein “C3”. The first, Empaveli, a systemic
formulation for the treatment of a rare blood disease called
paroxysmal nocturnal haemoglobinuria, a disease that involves the
destruction of red blood cells and can present as anaemia, blood
clots, bone marrow failure, and can be lethal. The second is
Syfovre, an “in the eye” formulation for the treatment of an
age-related macular degeneration called geographic atrophy (GA)
which leads to blindness. Approved by the FDA in February 2023, Syfovre was the first marketed
therapy for the treatment of GA. Apellis
Pharmaceuticals shares rose in mid-2023 as
the commercial launch of
Syfovre was very successful with rapid adoption. However, in
July 2023, shares fell sharply on an
unexpected report of severe safety events, called retinal
vasculitis, that worsened vision in a handful of patients following
treatment with Syfovre. Nevertheless, sales of Syfovre have
continued to increase quarter-over-quarter despite the risk of
retinal vasculitis. We held the stock as we believe the share price
overly discounted the risk of this rare adverse event compared to
its important
benefit.
The Netherlands-based gene therapy player,
UniQure, is a clinical-stage company that focuses
on neurological disorders. Gene therapy, whilst still somewhat
nascent, represents an incredible leap in innovation that has
curative properties. Thecompany’s lead asset is a
novel gene therapy, AMT-130, for Huntington’s disease, an inherited
disorder that causes cells in parts of the brain to gradually
degenerate and die, progressively impacting a person’s functional
abilities and results in movement, cognitive, and psychiatric
disorders. However, in June 2023 the
company provided a mixed interim update from its Phase I/II trial
for AMT-130, which raised investor concern over target engagement
of the gene therapy. That said, we were encouraged by the totality
of the data, including the early indication of function benefit
across
multiple measures.
The global pharmaceutical
company, Bristol-Myers Squibb, is well known for its leadership in
oncology, with major cancer franchises in both immuno-oncology and
multiple myeloma. However, both franchises are aged and have
reached or are nearing expiration of exclusivity. With a declining
topline, the company’s price-to-earnings multiple has compressed to
below 10x, creating the most heavily discounted stock in the large
cap pharmaceutical space. However, this “value play” turned into a
“value trap” in 2023. The company has had one of the most
productive pipelines in the industry over the past three years,
with new approvals in immunology, haematology, oncology, and
cardiovascular disease. However, commercial execution of the many
new product launches has underwhelmed, and a top line renaissance
has so far failed to materialise. The share price has
subsequently fallen
further as has the multiple. We exited the stock during the period
but will look to revisit the investment opportunity in 2024 where
perhaps utilisation and reimbursement of their new drug portfolio
may
inflect.
DERIVATIVE
STRATEGY
The Company has the
ability to utilise equity swaps and options as part of its
financial strategy. Throughout the financial year, the Company
leveraged single stock equity swaps to access Chinese and Indian
investments in emerging markets, which would otherwise be
inaccessible through more traditional investment methods. During
the period under review, single stock equity swaps contributed £7.1
million to performance, and we remain confident in the long-term
prospects of emerging market securities, particularly those trading
locally in mainland China.
Additionally, the Company
strategically invested in two customised tactical basket swaps,
targeting growth opportunities in undervalued small and
mid-capitalisation therapeutic companies. These baskets were
constructed to capitalise on two prevailing themes that we
anticipate will deliver strong returns in the current financial
year: 1) investment opportunities possessing considerable potential
as attractive acquisition targets for larger corporations, and 2)
those exhibiting a favourable risk/reward profile in light of
upcoming clinical
catalysts.
During the period under
review, the basket swaps detracted £8.0 million from performance,
primarily due to their direct exposure within the emerging
biotechnology space, which remained under
pressure.
LEVERAGE
STRATEGY
Historically, the typical
leverage level employed by the Company has been in the mid-to-high
teens range. Considering the market volatility during the past
three plus financial years, we have, more recently, used leverage
in a more tactical fashion. For example, around the beginning of
the COVID-19 pandemic in March 2020
after the dramatic “V”-shape market recovery of April 2020, leverage was significantly reduced by
over 10% month-over-month, to 3% and ultimately to 1% in
May 2020. Another example includes
lowered leverage ahead of and into the U.S. Presidential election,
under the threat of a Democratic “sweep” of the U.S,
Congress.
In 2023, we have flexed
leverage modestly in response to the economic climate, including in
consideration of a putative recession and interest rate
fluctuations and speculation. Most recently, we increased leverage
back into the low-to-mid-teens, a reflection of our overall
bullishness on the portfolio, a hopeful turn in biotechnology
stocks, and the relative outlook for healthcare ahead of a
potential recession. One caveat that keeps us from extending
leverage even further, is the continued volatile and uncertain
macro backdrop, either economic in nature or even further
geopolitical risk
factors.
SECTOR
DEVELOPMENTS
The plethora of innovation
that underpins our positive investment stance in healthcare has
certainly continued in 2023. Whilst not a perfect scorecard, the
number of new drug approvals by the FDA in 2023 is once again at a
record pace. With 51 new drug approvals through the end of
September and at least another 14 novel applications with user fee
deadlines by the end of the year (source: Washington Analysis), the
potential to eclipse recent highs is almost a certainty in
2023.
Interestingly, the
contribution of new vaccines, cell therapy, and gene therapy to the
new product approvals (from the Center for Biologics Evaluation and
Research – CBER) has clearly inflected over the past three plus
years, representing a paradigm shift in technological advancement
of novel medications and platforms. Over the past three and a half
years, there have been 31 approvals compared to eight in the
previous four years – yet another key metric in the accelerating
innovation engine in bio-pharmaceuticals. Moreover, after a down
year in 2022, the past six plus years have been the most productive
in industry history, with nearly 350 new product approvals
during that
span.
Despite a continued – if
not accelerated – innovation stemming from the biotechnology
industry, valuations have lagged in historical fashion. According
to the annual IQVIA audit of therapeutic company pipelines, the
number of clinical assets in development has increased more than
70% since 2016 across more than15 categories. We note that these
numbers exclude COVID-related programs. This has pushed the
cumulative number of product pipelines in the industry to all-time
highs.
Of this incredible
productivity, we note that effectively two-thirds of this
innovation comes from emerging biotechnology companies, which
represent a core holding in the portfolio and have been a strategic
investment target of ours, historically. However, in this more
recent macro-driven environment, the industry has not been rewarded
and valuations are so depressed, that the net return of the XBI is
below June 2015 levels by 12%,
compared to returns of the healthcare sector of 80%; the S&P
500 which returned 142%; and the NASDAQ which returned 189% over
this same period. We expect this valuation gap to
close.
Specific examples of
innovation are plentiful. In 2022, we focused on some specific
development opportunities that we believed could deliver “The Next
Big Thing” in healthcare, including oncology, obesity, and
Alzheimer’s disease. In 2023, the industry
delivered.
First in oncology, the
leaders in antibody drug conjugate (ADC) technology,
Daiichi-Sankyo (and partner
AstraZeneca), have achieved blockbuster status
with Enhertu (fam-trastuzumab deruxtecan-nxki), the
breast cancer drug for patients with metastatic disease who express
any level of the protein called HER2+. Data for the company’s
latest ADC offerings, Dato-DXd and HER3-DXd, were also presented in
the period and we expect regulatory filings as soon as this
year.
In immuno-oncology,
Roche (unintentionally) disclosed data for their
next generation agent, tiragolumab (an anti-TIGIT agent), showing a
20% benefit on top of the standard of care in progression free
survival in lung cancer patients. We are eagerly awaiting more
mature data sets in this setting in 2024.
AstraZeneca also announced two critically
important data sets for their best-in-class targeted therapy
Tagrisso (Osimertinib), which is used to treat lung cancer patients
with a specific EGFR mutation. These data sets included usage in
early stages of the disease (showed a 51% reduction in death)
and in combination with chemotherapy (38% reduction in progression
free survival or death) compared to simply taking Tagrisso alone.
These new indications for Tagrisso will put upward pressure on
sales estimates and/or aid in fending off incoming
competition.
Without question, obesity
has become the “hot” space in therapeutics in 2023. The advancement
of the GLP-1 drugs beyond diabetes and into weight loss has caught
the attention of investors and the public alike. In 2023, we
learned of best-in-class weight loss, at more than 20%, for
Eli Lilly’s Mounjaro (tirzepatide) in obese
patients. We expect Eli Lilly to launch
tirzepatide for obesity early in 2024. Not to be outdone,
Novo Nordisk confirmed unprecedented
cardiovascular benefit of Wegovy (semaglutide) in obese patients in
a five-year landmark trial called SELECT. Competition rushing to
this space has been significant, but 2023 also demonstrated the
stranglehold that both Eli Lilly and
Novo
Nordisk have
here.
The opportunity for GLP-1
drugs is immense, and it does not stop with just diabetes and
weight loss. Rather, the impact of these “incretins” may have
beneficial effects across multiple organs and disease states. The
list of conditions and co-morbidities, for example, that
Novo Nordisk is pursuing includes heart failure,
kidney disease, sleep apnea, peripheral arterial disease, and even
Alzheimer’s disease. Phase III data is already presented or
in-house at the company for heart failure and kidney
failure. We look forward to
additional data sets from both Novo Nordisk and
Eli Lilly for years to
come.
Finally, a word on
Alzheimer’s disease. We have previously described this category as
the “Holy Grail” of new drug development, owing to the huge unmet
medical need, large global prevalence, and potential for lucrative
price flexibility. Whilst now overshadowed by the obesity category,
Alzheimer’s disease still represents a huge opportunity with
mega-blockbuster prospects, where individual medicines could reach
over U.S.$10 billion per product per
annum. 2023 bore witness to the first ever full FDA approval for a
novel, disease modifying drug, in this case, Leqembi (lecanemab)
from Eisai of Japan and their U.S. partner,
Biogen. The drug launched in March 2023 and we await key sales milestone in
2024 and
beyond.
Eli
Lilly was the second company to
announce positive Phase III data for yet another disease modifying
agent, donanemab, for Alzheimer’s disease. Acting on the same
target, beta-amyloid, as Leqembi, donanemab may be
more efficacious at slowing cognitive decline but perhaps with some
increased side effect concerns (transient brain swelling). The
company expects approval before the end of 2023. We expect a
meaningful launch in
2024.
Another key investment
theme we have been monitoring is the pace of mergers and
acquisitions in the therapeutics space, fuelled by distressed
biotechnology valuations, and a looming wave of drug patent
expirations for the large cap pharmaceutical companies. This has
created a very positive environment for deal making as high
interest and a quiet initial public offering market has created
some barriers to access for capital. 2023 is on pace for a record
year, with 21 deals so far in the financial year, including four
deals alone in the first three weeks of October. We certainly
expect the number of transactions this year to eclipse the previous
financial year (29) with total deal value potentially surpassing
U.S.$100
billion.
A new emerging regulatory
theme is a more activist Federal Trade Commission (“FTC”), which
has increasingly opposed mergers & acquisitions. Within
healthcare, the FTC has opposed the Amgen/Horizon Therapeutics
acquisition and is reviewing the Pfizer/Seagen transaction. In some
cases, the FTC is relying on novel and unproven theories, for
example that a merger could hamper innovation and slow the pace of
drug development. Our focus (and a key return driver) is on smaller
biotechnology companies that are acquired by larger pharmaceutical
companies, transactions that remain largely uncontested by the FTC.
That said, in September 2023 the FTC
relented and has allowed the Horizon transaction to move forward to
completion. The Seagen acquisition appears to have been less
acrimonious and we expect that to also conclude favourably before
the end of the
year.
The Inflation Reduction
Act (IRA) of 2022 has further advanced in 2023, with the most
recent development being the disclosure by the Centers for Medicare
& Medicaid Services (CMS) its list of 10 drugs up for the first
price negotiations under the IRA. The list contained a mix of
expected drugs, such as Eliquis and Xarelto for cardiovascular
disease, and unexpected drugs, like Jardiance, Farxiga, and Fiasp
for diabetes. We conclude that it was mostly benign. The majority
of drugs are facing imminent patent expirations and or generics
anyhow, including Eliquis, Xarelto, Januvia, Entresto, Enbrel,
Imbruvica, Farxiga, and Stelara. This blunts much of the impact
that a lower
Medicare price will bring to the financials of these companies. As
we have postulated before, the net impact of the IRA is negative,
but mostly manageable by the industry. That said, the mix of drugs
listed for the first cycle of negotiation does raise some
questions, including: How were they selected by CMS? How were total
sales calculated? Were there any political motivations? Were new
formulations protected? Some of these answers may become more
transparent in
2024.
The industry is not
accepting the immediate consequences of the IRA. We note that
several companies have sued the Biden administration on the IRA
including Bristol-Myers Squibb, Johnson & Johnson,
Merck, AstraZeneca,
Novartis, and Boehringer Ingelheim. In addition,
the lobby group Pharmaceutical Research Manufactures of America and
the U.S. Chamber of Commerce sued as well. We do note that Astellas
withdrew their suit after their cancer drug, Xtandi, unexpectedly
did not make the
list.
There are a host of
arguments that are being made by the industry that are questioning
the constitutionality of IRA, whilst AstraZeneca
has claimed the IRA contravenes the Orphan Drug Act. Tactically,
the industry is taking a “shots on goal” approach. In other words,
any judge from any district from any court in any of these cases
could rule in favour of the industry on any argument. Even a SINGLE
ruling against the government could halt the drug price
negotiations portion of the IRA. Ultimately the
Supreme Court will have the final say. We do not expect these legal
proceedings to result in any near-term victory by the industry, and
any potential preliminary injunction, whilst possible, would be an
upside surprise. Nevertheless, this accumulation of legal
proceedings allows the industry to maintain optionality to quash
price negotiations anytime ahead of the 2026 enactment of the drug
price negotiation clause of the
IRA.
OUTLOOK
Whilst the investment
backdrop for healthcare has been challenging, the state of the
industry is strong. The long-term growth potential of healthcare
remains, underpinned by global demographics, aging populations, and
constant, persistent demand. Innovation, the true hallmark of the
Company, continues to advance in unparalleled fashion. Innovation
is not just in the domain of biotechnology, but across
therapeutics, medical technology, patient services, analytics, and
platform technologies. Together, they are improving patient care,
advancing medical knowledge, and creating new medicines, with many
that now can offer a cure. The productivity in the therapeutics
space continues to be exceptional, with pipelines the fullest they
have ever been, and the number of new drug approvals at all-time
highs. The inflection in M&A in the space is just one testimony
to this productivity, one that we believe will continue in 2024. We
look forward to what next year brings, across the entirety of the
healthcare spectrum, as the growth of this industry continues to
create a multitude of exciting investment
opportunities.
Sven H. Borho and Trevor
M. Polischuk
OrbiMed Capital
LLC
Portfolio
Manager
22
November
2023
CONTRIBUTION BY
INVESTMENT
PRINCIPAL STOCK
CONTRIBUTORS TO AND DETRACTORS FROM ABSOLUTE NET ASSET VALUE
PERFORMANCE
FOR THE SIX MONTHS ENDED
30 SEPTEMBER
2023
|
|
|
|
Contribution |
|
|
|
Contribution |
per
share* |
Top Five
Contributors |
Sector |
Country |
£’000 |
p |
Novo
Nordisk |
Pharmaceuticals |
Denmark |
27,228 |
4.5 |
Eli
Lilly |
Pharmaceuticals |
United
States |
26,553 |
4.4 |
Intuitive
Surgical |
Health Care Equipment
& Supplies |
United
States |
19,329 |
3.2 |
Mirati
Therapeutics |
Biotechnology |
United
States |
10,817 |
1.8 |
Ionis
Pharmaceuticals |
Biotechnology |
United
States |
10,348 |
1.7 |
Top Five
Detractors |
|
|
|
|
Bristol-Myers Squibb
** |
Pharmaceuticals |
United
States |
12,246 |
(2.0) |
UniQure |
Biotechnology |
Netherlands |
14,545 |
(2.4) |
Apellis
Pharmaceuticals |
Biotechnology |
United
States |
14,617 |
(2.4) |
Madrigal
Pharmaceuticals |
Biotechnology |
United
States |
14,797 |
(2.4) |
Daiichi
Sankyo |
Pharmaceuticals |
Japan |
17,996 |
(3.0) |
* Based on 606,004,086
shares being the weighted average number in issue during the
period.
** Not held at 30 September
2023.
INTERIM MANAGEMENT
REPORT
PRINCIPAL RISKS AND
UNCERTAINTIES
The Directors continue to
review the Company’s key risk register, which identifies the risks
and uncertainties that the Company is exposed to, and the controls
in place and the actions being taken to mitigate
them.
A review of the half year
and the outlook for the Company can be found in the Chair of the
Board’s Statement and the
Portfolio Manager’s Review. The principal risks and uncertainties
faced by the Company include the
following:
-
Exposure to market risks and those additional risks specific to the
sectors in which the Company invests, such as political
interference in drug
pricing.
-
The Company uses leverage (both through derivatives and gearing)
the effect of which is to amplify the gains or losses the Company
experiences.
-
Macro
events may have an adverse impact on the Company’s performance by
causing exchange rate volatility, changes in tax or regulatory
environments, and/or a fall in market prices. Emerging markets,
which a portion of the portfolio is exposed to, can be subject to
greater political uncertainty and price volatility than developed
markets.
-
Unquoted investments are more difficult to buy, sell or value and
so changes in their valuations may be greater than for listed
assets.
-
The risk that the individuals responsible for managing the
Company’s portfolio may leave their employment or may be prevented
from undertaking their
duties.
-
The
risk that, following the failure of a counterparty, the Company
could be adversely affected through either delay in settlement or
loss of
assets.
-
The Board is reliant on the systems of the Company’s service
providers and as such disruption to, or a failure of, those systems
could lead to a failure to comply with law and regulations leading
to reputational damage and/or financial loss to the
Company.
-
The
risk that investing in companies that disregard Environmental,
Social and Governance (ESG) factors will have a negative impact on
investment returns and also that the Company itself may become
unattractive to investors if ESG is not appropriately considered in
the Portfolio Manager’s decision making
process.
-
The risk, particularly if the investment strategy and approach are
unsuccessful, that the Company may underperform, resulting in the
Company becoming unattractive to investors and a widening of the
share price discount to NAV per share. Also, falls in stock
markets, and the risk of a global recession, are likely to
adversely affect the performance of the Company’s
investments.
Further information on
these risks is given in the Annual Report for the year ended
31 March 2023.
The Board has noted that
global markets are continuing to experience unusually high levels
of uncertainty and heightened geopolitical risks. Against a
background of rising interest rates and slowing economic growth,
risks associated with leverage and illiquid assets, especially in
combination, have become more elevated. The Board has investment
guidelines in place to mitigate these
risks.
RELATED PARTY
TRANSACTIONS
During the first six
months of the current financial year no material transactions with
related parties have taken place which have affected the financial
position or the performance of the Company during the
period.
GOING
CONCERN
The Directors believe,
having considered the Company’s investment objectives, risk
management policies, capital management policies and procedures,
the nature of the portfolio and expenditure projections, that the
Company has adequate resources, an appropriate financial structure
and suitable management arrangements in place to continue in
operational existence for the foreseeable future and, more
specifically, that there are no material uncertainties relating to
the Company that would prevent its ability to continue in such
operational existence for at least 12 months from the date of the
approval of this half yearly financial report. For these reasons,
they consider there is reasonable evidence to continue to adopt the
going concern basis in preparing the accounts. In reviewing the
position as at the date of this report, the Board has considered
the guidance issued by the Financial Reporting
Council.
As part of their
assessment, the Directors have given careful consideration to the
next continuation vote to be held in 2024. As previously reported,
stress testing was carried out in May
2023, which modelled the effects of substantial falls in
markets and significant reductions in market liquidity, on the
Company’s net asset value, its cash flows and its
expenses.
DIRECTORS’
RESPONSIBILITIES
The Board of Directors
confirms that, to the best of its
knowledge:
-
the condensed set of
financial statements contained within the Half Year Report have
been prepared in accordance with Financial Reporting Standard 104
(Interim Financial Reporting);
and
-
the interim management
report includes a true and fair review of the information required
by:
-
DTR 4.2.7R of the
Disclosure Guidance and Transparency Rules, being an indication of
important events that have occurred during the first six months of
the financial year and their impact on the condensed set of
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year;
and
-
DTR 4.2.8R of the
Disclosure Guidance and Transparency Rules, being related party
transactions that have taken place in the first six months of the
current financial year and that have materially affected the
financial position or performance of the entity during that period;
and any changes in the related party transactions described in the
last annual report that could do
so.
The Half Year Report has
not been reviewed or audited by the Company’s
auditors.
This Half Year Report
contains certain forward-looking statements. These statements are
made by the Directors in good faith based on the information
available to them up to the date of this report and such statements
should be treated with caution due to the inherent uncertainties,
including both economic and business risk factors, underlying any
such forward-looking
information.
For and on behalf of the
Board
Doug
McCutcheon
Chair
22
November
2023
INCOME
STATEMENT
FOR THE SIX MONTHS ENDED
30 SEPTEMBER
2023
|
(Unaudited) |
(Unaudited) |
|
Six months
ended |
Six months
ended |
|
30 September
2023 |
30 September
2022 |
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|
Return |
Return |
Total |
Return |
Return |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
(Losses)/Gains on
investments |
– |
(11,111) |
(11,111) |
– |
82,697 |
82,697 |
Foreign exchange
losses |
– |
(6,791) |
(6,791) |
– |
(15,052) |
(15,052) |
Income from investments
(note 2) |
12,481 |
– |
12,481 |
9,295 |
– |
9,295 |
AIFM, portfolio
management, and performance fees (note
3) |
(411) |
(7,803) |
(8,214) |
(444) |
(8,430) |
(8,874) |
Other
expenses |
(686) |
– |
(686) |
(579) |
(22) |
(601) |
Net return/(loss) before
finance charges and
taxation |
11,384 |
(25,705) |
(14,321) |
8,272 |
59,193 |
67,465 |
Finance
charges |
(246) |
(4,673) |
(4,919) |
(61) |
(1,157) |
(1,218) |
Net return/(loss) before
finance |
11,138 |
(30,378) |
(19,240) |
8,211 |
58,036 |
66,247 |
Taxation |
(1,486) |
– |
(1,486) |
(323) |
– |
(323) |
Net return/(loss) after
taxation |
9,652 |
(30,378) |
(20,726) |
7,888 |
58,036 |
65,924 |
Return/(loss) per share
(note
4)* |
1.6p |
(5.0)p |
(3.4)p |
1.2p |
8.9p |
10.1p |
The “Total” column of this
statement is the Income Statement of the Company. The “Revenue” and
“Capital” columns are supplementary to this and are prepared under
guidance published by the Association of Investment
Companies.
All revenue and capital
items in the above statement derive from continuing
operations.
The Company has no
recognised gains and losses other than those shown above and
therefore no separate Statement of Total Comprehensive Income has
been
presented.
The accompanying notes are
an integral part of these
statements.
* The
comparative return per share figures have been restated to reflect
the ten for one share split. For weighted average purposes, the
share split has been treated as happening on the first day of the
accounting
periods.
STATEMENT OF CHANGES IN
EQUITY
FOR THE SIX MONTHS ENDED
30 SEPTEMBER
2023
|
(Unaudited) |
(Unaudited) |
|
Six months
ended |
Six months
ended |
|
30
September |
30
September |
|
2023 |
2022 |
|
£’000 |
£’000 |
Opening shareholders’
funds |
2,150,721 |
2,268,233 |
Shares purchased for
treasury |
(133,365) |
(36,086) |
(Loss)/Return for the
period |
(20,726) |
65,924 |
Dividends paid –
revenue |
(14,709) |
(12,721) |
Closing shareholders’
funds |
1,981,921 |
2,285,350 |
STATEMENT OF FINANCIAL
POSITION
AS AT 30 SEPTEMBER
2023
|
(Unaudited) |
(Audited) |
|
30
September |
31
March |
|
2023 |
2023 |
|
£’000 |
£’000 |
Fixed
assets |
|
|
Investments |
2,125,814 |
2,186,417 |
Derivatives – OTC
swaps |
5,499 |
209 |
|
2,131,313 |
2,186,626 |
Current
assets |
|
|
Debtors |
16,734 |
4,376 |
Cash and cash
equivalents |
43,642 |
58,925 |
|
60,376 |
63,301 |
Current
liabilities |
|
|
Creditors: amounts falling
due within one
year |
(198,497) |
(72,105) |
Derivative – OTC
Swaps |
(11,271) |
(27,101) |
|
(209,768) |
(99,206) |
Net current
liabilities |
(149,392) |
(35,905) |
Total net
assets |
1,981,921 |
2,150,721 |
Capital and
reserves |
|
|
Ordinary share capital –
(note 5) |
15,042 |
16,265 |
Capital redemption
reserve |
9,564 |
8,341 |
Share premium
account |
841,599 |
841,599 |
Capital
reserve |
1,097,282 |
1,261,025 |
Revenue
reserve |
18,434 |
23,491 |
Total shareholders’
funds |
1,981,921 |
2,150,721 |
Net asset value per share
– (note
6)* |
339.3p |
343.5p |
* The
comparative Net asset value per share figures have been restated to
reflect the ten for one share split. See notes 5 and 6 for further
details.
CASH FLOW
STATEMENT
FOR THE SIX MONTHS ENDED
30 SEPTEMBER
2023
|
|
(Unaudited) |
(Unaudited) |
|
|
Six months
ended |
Six months
ended |
|
|
30
September |
30
September |
|
|
2023 |
2022 |
|
Note |
£’000 |
£’000 |
Net cash inflow/(outflow)
from operating
activities |
8 |
5,174 |
3,678 |
Purchases of investments
and
derivatives |
|
(554,711) |
(460,385) |
Sales of investments and
derivatives |
|
560,892 |
580,399 |
Realised losses on foreign
exchange |
|
(2,218) |
(14,343) |
Net cash inflow/(outflow)
from investing
activities |
|
3,963 |
105,671 |
Issue of
shares |
|
– |
– |
Shares
repurchased |
|
(133,365) |
(36,086) |
Equity dividends
paid |
|
(14,709) |
(12,721) |
Interest
paid |
|
(4,919) |
(1,218) |
Net cash (outflow)/inflow
from financing
activities |
|
(152,993) |
(50,025) |
Decrease/(increase) in net
debt |
|
(143,856) |
59,324 |
Cash flows from operating
activities includes interest received of £1,885,000 (2022:
£592,000) and dividends received of £10,135,000 (2022:
£9,235,000).
RECONCILIATION OF NET CASH
FLOW MOVEMENT TO MOVEMENT IN NET
DEBT
|
(Unaudited) |
(Unaudited) |
|
Six months
ended |
Six months
ended |
|
30
September |
30
September |
|
2023 |
2022 |
|
£’000 |
£’000 |
(Increase)/decrease in net
debt resulting from
cashflows |
(143,856) |
59,324 |
Losses on foreign currency
cash and cash
equivalents |
(4,574) |
(709) |
Movement in net debt in
the
period |
(148,430) |
58,615 |
Net debt at 1
April |
2,997 |
(87,003) |
Net debt at 30
September |
(145,433) |
(28,388) |
NOTES TO THE FINANCIAL
STATEMENTS
1. ACCOUNTING
POLICIES
The condensed Financial
Statements for the six months to 30
September 2023 comprise the Income Statement, the Statement
of Changes in Equity, the Statement of Financial Position, the Cash
Flow Statement and the Reconciliation of Net Cash Flow Movement to
Movement in Net Debt together with the related notes below. They
have been prepared in accordance with FRS 104 ‘Interim Financial
Reporting’, the AIC’s Statement of Recommended Practice published
in February 2021 (‘SORP’) and using
the same accounting policies as set out in the Company’s Annual
Report and Financial Statements at 31 March
2023.
GOING
CONCERN
After making enquiries,
and having reviewed the Investments, Statement of Financial
Position and projected income and expenditure for the next 12
months, the Directors have a reasonable expectation that the
Company has adequate resources to continue in operation for the
foreseeable future. The Directors have therefore adopted the going
concern basis in preparing these condensed financial
statements.
FAIR
VALUE
Under FRS 102 and FRS 104
investments have been classified using the following fair value
hierarchy:
Level
1 – Quoted market
prices in active
markets
Level
2 – Prices of a recent
transaction for identical instruments
Level
3 – Valuation techniques
that
use:
(i) observable market
data; or
(ii) non-observable
data
|
Level
1 |
Level
2 |
Level
3 |
Total |
|
AS AT 30 SEPTEMBER
2023 |
£’000 |
£’000 |
£’000 |
£’000 |
|
Investments held at fair
value through profit or
loss |
1,987,993 |
– |
137,821 |
2,125,814 |
|
Derivatives: OTC swaps
(assets) |
– |
5,499 |
– |
5,499 |
|
Derivatives: OTC swaps
(liabilities) |
– |
(11,271) |
– |
(11,271) |
|
Financial instruments
measured at fair
value |
1,987,993 |
(5,772) |
137,821 |
2,120,042 |
|
|
Level
1 |
Level
2 |
Level
3 |
Total |
|
AS AT 31 MARCH
2023 |
£’000 |
£’000 |
£’000 |
£’000 |
|
Investments held at fair
value through profit or
loss |
2,041,247 |
– |
145,170 |
2,186,417 |
|
Derivatives: OTC swaps
(assets) |
– |
209 |
– |
209 |
|
Derivatives: OTC swaps
(liabilities) |
– |
(27,101) |
– |
(27,101) |
|
Financial instruments
measured at fair
value |
2,041,247 |
(26,892) |
145,170 |
2,159,525 |
|
2.
INCOME
|
(Unaudited) |
(Unaudited) |
|
Six months
ended |
Six months
ended |
|
30
September |
30
September |
|
2023 |
2022 |
|
£’000 |
£’000 |
Investment
income |
10,596 |
8,713 |
Interest
Income |
1,885 |
582 |
Total |
12,481 |
9,295 |
3. AIFM, PORTFOLIO
MANAGEMENT AND PERFORMANCE
FEES
|
(Unaudited) |
(Unaudited) |
|
Six months
ended |
Six months
ended |
|
30 September
2023 |
30 September
2022 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
AIFM
fee |
72 |
1,369 |
1,441 |
76 |
1,444 |
1,520 |
Portfolio management
fee |
339 |
6,434 |
6,773 |
368 |
6,986 |
7,354 |
Performance fee charge for
the period* |
– |
– |
– |
– |
– |
– |
|
411 |
7,803 |
8,214 |
444 |
8,430 |
8,874 |
As at 30 September 2023 no performance fees were
accrued or payable (31 March 2023:
nil accrued).
No performance fee could
become payable by 30 September
2024.
See Glossary for further
information on the performance
fee.
4. RETURN/(LOSS) PER
SHARE
|
(Unaudited) |
(Unaudited) |
|
Six months
ended |
Six months
ended |
|
30
September |
30
September |
|
2023 |
2022 |
|
£’000 |
£’000 |
The return per share is
based on the following
figures: |
|
|
Revenue
return |
9,652 |
7,888 |
Capital
return/(loss) |
(30,378) |
58,036 |
Total
return |
(20,726) |
65,924 |
Weighted average number of
shares in issue for the
period |
606,004,086 |
650,534,570 |
Revenue return per
share |
1.6p |
1.2p |
Capital return/(loss) per
share |
(5.0)p |
8.9p |
Total return per
share |
(3.4)p |
10.1p |
The calculation of the
total, revenue and capital returns per ordinary share is carried
out in accordance with IAS 33, “Earnings per Share (as adopted in
the
EU)”.
The comparative return per
ordinary share figures have been restated to reflect the ten for
one share split on 27 July 2023. For
weighted average purposes, the share split has been treated as
happening on the first day of the accounting
period.
5. SHARE
CAPITAL
|
|
|
Total |
|
|
Treasury |
shares |
|
Shares |
shares |
in
issue |
|
number |
number |
number |
As at 1 April
2023 |
62,620,763 |
2,438,015 |
65,058,778 |
Purchase of shares into
treasury – pre-share
split |
(2,507,439) |
2,507,439 |
– |
Shares cancelled from
Treasury |
– |
(4,892,258) |
(4,892,258) |
Issue of shares following
ten for one share
split |
541,019,916 |
478,764 |
541,498,680 |
Purchase of shares into
treasury – post-share
split |
(16,954,184) |
16,954,184 |
– |
As at 30 September
2023 |
584,179,056 |
17,486,144 |
601,665,200 |
|
|
(Unaudited) |
(Audited) |
|
|
30
September |
31
March |
|
|
2023 |
2023 |
|
|
£’000 |
£’000 |
Issued and fully
paid: |
|
|
|
Nominal value of ordinary
shares of
2.5p |
|
14,604 |
16,265 |
During the period ended
30 September 2023 the Company bought
back ordinary shares into treasury at a cost of £133,365,000 (Year
ended 31 March 2023:
£91,514,000).
At the AGM of the Company
held in July 2023, shareholders
approved a resolution for a ten for one share split such that each
shareholder would receive ten shares with a nominal value of
2.5 pence each for every one share
held. 541,498,680 additional shares (541,019,916 to shareholders
and 478,764 in relation to shares held in treasury) were created on
27 July 2023 following this
approval.
6. NET ASSET VALUE PER
SHARE
The net asset value per
share is based on the assets attributable to equity shareholders
of £1,981,921,000
(31 March 2023: £2,150,721,000) and
on the number of shares in issue at the period end of 584,179,056
(31 March 2023:
626,207,630*).
* restated
to reflect the ten for one share
split.
7. TRANSACTION
COSTS
Purchase transaction costs
for the six months ended 30 September
2023 were £499,000 (six months ended 30 September 2022:
£705,000).
Sales transaction costs
for the six months ended 30 September
2023 were £528,000 (six months ended 30 September 2022:
£592,000).
8. RECONCILIATION OF
OPERATING RETURN TO NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES
|
(Unaudited) |
(Unaudited) |
|
Six months
ended |
Six months
ended |
|
30
September |
30
September |
|
2023 |
2022 |
|
£’000 |
£’000 |
(Loss)/Gains before
finance costs and
taxation |
(14,321) |
67,465 |
Add: capital loss/(Less:
capital gain)/before finance charges and
taxation |
25,705 |
(59,193) |
Revenue return before
finance charges and
taxation |
11,384 |
8,272 |
Expenses charged to
capital |
(7,803) |
(8,452) |
(Increase)/Decrease in
other debtors |
(474) |
525 |
Increase in other
creditors and
accruals |
2,678 |
3,422 |
Net taxation suffered on
investment
income |
(611) |
19 |
Amortisation |
– |
(108) |
Net cash inflow from
operating
activities |
5,174 |
3,678 |
9. PRINCIPAL RISKS AND
UNCERTAINTIES
The principal risks facing
the Company are listed in the Interim Management Report. An
explanation of these risks and how they are managed is contained in
the Strategic Report and note 16 of the Company’s Annual Report
& Accounts for the year ended 31 March
2023.
10. COMPARATIVE
INFORMATION
The condensed financial
statements contained in this half year report do not constitute
statutory accounts as defined in section 434 of the Companies Act
2006. The financial information for the half years ended
30 September 2023 and
30 September 2022 has not been audited or reviewed by the
Company’s
auditor.
The information for the
year ended 31 March 2023 has been
extracted from the latest published audited financial statements of
the Company. Those financial statements have been filed with the
Registrar of Companies. The report of the auditor on those
financial statements was unqualified, did not include a reference
to any matters to which the auditors drew attention by way of
emphasis without qualifying the report, and did not contain
statements under either section 498 (2) or 498 (3) of the Companies
Act
2006.
Earnings for the first six
months should not be taken as a guide to the results for the full
year.
GLOSSARY OF TERMS AND
ALTERNATIVE PERFORMANCE MEASURES
(“APMs”)
ALTERNATIVE INVESTMENT
FUND MANAGERS DIRECTIVE
(“AIFMD”)
Agreed by the European
Parliament and the Council of the European Union and transposed
into UK legislation, the AIFMD classifies certain investment
vehicles, including investment companies, as Alternative Investment
Funds (“AIFs”) and requires them to appoint an Alternative
Investment Fund Manager (“AIFM”) and depositary to manage and
oversee the operations of the investment vehicle. The Board of the
Company retains responsibility for strategy, operations and
compliance and the Directors retain a
fiduciary duty to
shareholders.
BENCHMARK
The performance of the
Company is measured against the MSCI World Health Care Index on a
net total return, sterling adjusted
basis.
The net total return is
calculated by reinvesting dividends after the deduction of
withholding
taxes.
DISCOUNT OR PREMIUM
(“APM”)
A description of the
difference between the share price and the net asset value per
share. The size of the discount or premium is calculated by
subtracting the share price from the net asset value per share and
is usually expressed as a percentage (%) of the net asset value per
share. If the share price is higher than the net
asset value per share the result is a premium. If the share price
is lower than the net asset value per share, the shares are trading
at a
discount.
EMERGING
BIOTECHNOLOGY
Biotechnology companies
with a market capitalisation less than U.S.$10
billion.
EQUITY
SWAPS
An equity swap is an
agreement in which one party (counterparty) transfers the total
return of an underlying equity position to the other party (swap
holder) in exchange for a one-off payment at a set date. Total
return includes dividend income and gains or losses from market
movements. The exposure of the holder is the market value of the
underlying equity
position.
Your Company uses two
types of equity
swap:
-
funded, where payment is
made on acquisition. They are equivalent to holding the underlying
equity position with the exception of additional counterparty risk
and not possessing voting rights in the underlying;
and,
-
financed, where payment is made on maturity. As there is no initial
outlay, financed swaps increase economic exposure by the value of
the underlying equity position with no initial increase in the
investments value – there is therefore embedded leverage within a
financed swap due to the deferral of payment to
maturity.
The Company employs swaps
for two purposes:
-
To
gain access to individual stocks in the Indian, Chinese and other
emerging markets, where the Company is not locally
registered to trade or is able to gain in a more cost efficient
manner than holding the stocks directly;
and,
-
To
gain exposure to thematic baskets of stocks (a Basket Swap). Basket
Swaps are used to build exposure to themes, or ideas, that the
Portfolio Manager believes the Company will benefit from and where
holding a Basket Swap is more cost effective and operationally
efficient than holding the underlying stocks or individual
swaps.
LEVERAGE
(“APM”)
Leverage is defined in the
AIFMD as any method by which the AIFM increases the exposure of an
AIF. In addition to the gearing
limit the Company also has to comply with the AIFMD leverage
requirements. For these purposes the Board has set a maximum
leverage limit of 140% for both methods. This limit is expressed as
a percentage with 100% representing no leverage or gearing in the
Company. There are two methods of calculating leverage as
follows:
The Gross Method is
calculated as total exposure divided by Shareholders’ Funds. Total
exposure is calculated as net assets, less cash and cash
equivalents, adding back cash borrowing plus derivatives converted
into the equivalent position in their underlying
assets.
The Commitment Method is
calculated as total exposure divided by Shareholders’ Funds. In
this instance total exposure is calculated as net assets, less cash
and cash equivalents, adding back cash borrowing plus derivatives
converted into the equivalent position in their underlying assets,
adjusted for netting and hedging
arrangements.
|
As
at |
As
at |
|
30 September
2023 |
31 March
2023 |
|
Fair
Value |
Exposure* |
Fair
Value |
Exposure* |
|
£’000 |
£’000 |
£’000 |
£’000 |
Investments |
2,125,814 |
2,125,814 |
2,186,417 |
2,186,417 |
OTC equity
swaps |
(5,772) |
145,799 |
(26,892) |
190,704 |
|
2,120,042 |
2,271,613 |
2,159,525 |
2,377,121 |
Shareholders’
funds |
|
1,981,921 |
|
2,150,721 |
Leverage
% |
|
14.6% |
|
10.5% |
*
Calculated in accordance with AIFMD requirements using the
Commitment Method
MSCI WORLD HEALTH CARE
INDEX (THE COMPANY’S
BENCHMARK)
The MSCI information
(relating to the Benchmark) may only be used for your internal use,
may not be reproduced or redisseminated in any form and may not be
used as a basis for or a component of any financial instruments or
products or indices. None of the MSCI information is intended
to constitute investment advice or a recommendation to make
(or refrain from making) any kind of investment decision and
may not be relied on as such. Historical data and analysis should
not be taken as an indication or guarantee of any future
performance analysis, forecast or prediction. The MSCI information
is provided on an “as is” basis and the user of this information
assumes the entire risk of any use made of this information. MSCI,
each of its affiliates and each other person involved in or related
to compiling, computing or creating any MSCI information
(collectively, the “MSCI Parties”) expressly disclaims all
warranties (including, without limitation, any warranties of
originality, accuracy, completeness, timeliness, non-infringement,
merchantability and fitness for a particular purpose) with respect
to this information. Without limiting any of
the foregoing, in no event shall any MSCI Party have any liability
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consequential (including, without limitation lost profits) or any
other damages.
(www.msci.com)
NET ASSET VALUE (NAV)
TOTAL RETURN
(“APM”)
The theoretical total
return on shareholders’ funds per share, reflecting the change in
NAV assuming that dividends paid to shareholders were reinvested at
NAV at the time the shares were quoted ex-dividend. A way of
measuring investment management performance of investment trusts
which is not affected by movements in
discounts/premiums.
|
Six months
to |
Year
to |
|
30
September |
31
March |
|
2023 |
2023* |
|
(p) |
(p) |
Opening NAV per
share |
343.5 |
346.5 |
Decrease in NAV per
share |
(4.2) |
(3.0) |
Closing NAV per
share |
339.3 |
343.5 |
% Change in NAV per
share |
(1.2%) |
(0.9%) |
Impact of reinvested
dividends |
0.6% |
0.8% |
NAV per share Total
Return |
(0.6%) |
(0.1%) |
*
The comparative NAV per share
figures have been restated to reflect the ten for one share split.
See notes 4 to 6 for further
details.
ONGOING CHARGES
(“APM”)
Ongoing charges are
calculated by taking the Company’s annualised ongoing charges,
excluding finance costs, taxation, performance fees and exceptional
items, and expressing them as a percentage of the average daily net
asset value of the Company over the
year.
|
Six months
to |
One year
to |
|
30
September |
31
March |
|
2023 |
2023 |
|
£’000 |
£’000 |
AIFM & Portfolio
Management
fees |
8,214 |
17,534 |
Other
Expenses |
686 |
1,142 |
Total Ongoing
Charges |
8,900 |
18,676 |
Performance fees
paid/crystallised |
– |
– |
Total |
8,900 |
18,676 |
Average net
assets |
2,111,076 |
2,247,296 |
Ongoing Charges
(annualised) |
0.8% |
0.8% |
Ongoing Charges
(annualised, including performance fees paid or crystallised during
the
period) |
0.8% |
0.8% |
PERFORMANCE
FEE
Dependent on the level of
long-term outperformance of the Company, a performance fee can
become payable. The performance fee is calculated by reference
to the amount by which the Company’s net asset value (‘NAV’)
performance has outperformed the
Benchmark.
The fee is calculated
quarterly by comparing the cumulative performance of the Company’s
NAV with the cumulative performance of the Benchmark since the
launch of the Company in 1995. Provision is also made within the
daily NAV per share calculation as required and in accordance
with generally accepted accounting standards. The performance fee
amounts to 15.0% of any outperformance over the Benchmark (see
Company’s Annual Report & Accounts for the year ended
31 March 2023 for further
information).
In order to ensure that
only sustained outperformance is rewarded, at each quarterly
calculation date any performance fee payable is based on the lower
of:
-
The cumulative
outperformance of the investment portfolio over the Benchmark as at
the quarter end date;
and
-
The cumulative
outperformance of the investment portfolio over the Benchmark as at
the corresponding quarter end date in the previous
year.
The effect of this is that
outperformance has to be maintained for a 12 month period before
the related fee is
paid.
In addition, a performance
fee only becomes payable to the extent that the cumulative
outperformance gives rise to a total fee greater than the total of
all performance fees paid to
date.
SHARE PRICE TOTAL RETURN
(“APM”)
Return to the investor on
mid-market prices assuming that all dividends paid were
reinvested.
|
Six months
to |
One year
to |
|
30
September |
31
March |
|
2023 |
2023* |
Opening share
price |
311.5 |
327.5 |
Decrease in share
price |
(2.0) |
(16.0) |
Closing share
price |
309.5 |
311.5 |
% Change in share
price |
(0.6%) |
(4.8%) |
Impact of reinvested
dividends |
0.7% |
0.7% |
Share price Total
Return |
0.1% |
(4.1%) |
*
The comparative share price figures have been restated to reflect
the ten for one share split. See notes 4 to 6 for further
details.
For and on behalf
of
Frostrow Capital LLP,
Secretary
22
November
2023
- ENDS
-