Annual Financial Report

7 June 2023

Worldwide Healthcare Trust PLC

(the “Company”)

This announcement contains regulated information

Annual Financial Report for the year ended 31 March 2023

COMPANY PERFORMANCE

HISTORIC PERFORMANCE FOR THE YEARS ENDED 31 MARCH

	2018	2019	2020	2021	2022	2023
*Net asset value per share (total return)^**	2.8%	13.7%	6.5%	30.0%	(5.8%)	(0.1%)
*Benchmark (total return)^**	(2.5%)	21.1%	5.7%	16.0%	20.4%	2.5%
Net asset value per share	2,411.1p	2,722.9p	2,868.9p	3,703.0p	3,465.2p	3,434.5p
Share price	2,405.0p	2,730.0p	2,920.0p	3,695.0p	3,275.0p	3,115.0p
(Discount)/Premium of share price to net asset value per share^	(0.3%)	0.3%	1.8%	(0.2%)	(5.5%)	(9.3%)
Dividends per share	17.5p	26.5p	25.0p	22.0p	26.5p	31.0p
Leverage^	16.4%	4.9%	12.0%	7.6%	10.9%	10.5%
Ongoing charges^	0.9%	0.9%	0.9%	0.9%	0.9%	0.8%
Ongoing charges (including performance fees paid or crystallised during the year)^	1.2%	1.1%	0.9%	0.9%	1.4%	0.8%

* Source: Morningstar

^ Alternative Performance Measure (see Glossary).

STATEMENT FROM THE CHAIR

DOUG MCCUTCHEON

INVESTMENT PERFORMANCE

This is my first full year report, having succeeded Sir Martin Smith as Chair of the Board in July 2022.

I mentioned at the half-year stage that macro events, rather than industry fundamentals, had been dictating the performance of global equity markets. In the second half of the year, investors continued to be torn between the overall economic and political background, on the one hand, and company and industry developments on the other. As set out in our Portfolio Manager’s Review, during the year your Company performed well in periods when markets were being driven by sector fundamentals and struggled when macro factors were in control.

Overall, the financial year ended 31 March 2023 proved to be a challenging one for the Company, with market volatility much greater than year-end to year-end results suggest. The Company’s net asset value per share total return was -0.1% (2022: -5.8%) and the share price total return was -4.1% (2022: -10.8%). Our results underperformed the Company’s Benchmark, the MSCI World Health Care Index measured on a net total return, sterling adjusted basis, which returned +2.5% during the year (2022: +20.4%). The disparity between the performance of the Company’s net asset value per share and its share price was reflected in the widening of our share price discount to our net asset value per share from 5.5% as at 31 March 2022 to 9.3% at 31 March 2023.

The majority of the Company’s assets are denominated in U.S. dollars, and it should be noted that our absolute net asset value performance was helped by the weakness of sterling over the year, particularly compared to the dollar, against which it depreciated by 6.5%.

A principal contributor to performance in the year, both in relative and absolute terms, came from emerging biotechnology stocks (defined primarily as small-and mid-capitalisation stocks). A key part of our Portfolio Manager’s strategy is to be overweight the emerging biotechnology sector, reflecting the high levels of innovation and growth found in these companies. However, for some time, part of this strategy has included our overweight position in emerging market stocks, particularly in China, which was not successful during the past year.

More broadly, the Company’s results over the past two years have dragged down our medium-term performance. While our net asset value per share compound annual return over five years has been a respectable +8.2%, it was lower than that of our Benchmark (+12.9%). Nonetheless, the long-term performance of the Company continues to be strong. From the Company’s inception in 1995 to 31 March 2023, the total return of our net asset value per share has been +4,234.1%, equivalent to a compound annual return of +14.5%. This compares to a cumulative blended Benchmark return of +2,189.0% and a compound annual return of +11.9% over the same period.

Further information on the healthcare sector, the Company’s investments and performance during the year can be found in the Portfolio Manager’s Review.

CAPITAL

Challenging stock market conditions 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.14.9%*.

* 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% for extended periods of time, 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.

Over the year, the Company remained committed to its share buyback and issuance policy, regularly repurchasing shares. A total of 2,836,483 shares were repurchased for treasury at a cost of £91.6m and at an average discount of 8.8%.

On 31 March 2023, there were 62,620,763 shares in issue (excluding the 2,438,015 shares held in treasury). Since this date to 5 June 2023, a further 1,299,037 shares have been bought back for treasury, at a cost of £42.3m and at an average discount of 10.0%. At the time of writing, the share price discount stands at 9.4%. In line with the Company’s stated policy, I confirm that all shares held in treasury at the date of the Company’s Annual General Meeting to be held on 18 July 2023, will be cancelled.

REVENUE AND DIVIDEND

Shareholders will be aware that it remains the Company’s investment policy to pursue capital growth for shareholders and to pay dividends at least to the extent required to maintain investment trust status. Therefore, the level of dividends declared can go down as well as up. An unchanged interim dividend of 7.0p per share for the year ended 31 March 2023, was paid on 11 January 2023 to shareholders on the register on 25 November 2022.

Due, in large part, to an increase in exposure to higher yielding stocks in the portfolio and also to the continued weakness of sterling, the Company’s revenue return per share for the year as a whole increased to 30.6p (2022: 26.8p). Accordingly, the Board is proposing an increased final dividend of 24.0p per share (2022:19.5p per share) which, together with the interim dividend already paid, makes a total dividend for the year of 31.0p (2022: 26.5p per share). Due to the impact of share buybacks the total dividend for the year is higher than the reported return per share. Based on the closing mid market share price of 3,275.0p on 5 June 2023, the total dividend payment for the year represents a current yield of 0.9%.

The final dividend will be payable, subject to shareholder approval, on 26 July 2023, to shareholders on the register of members on 9 June 2023. The associated ex-dividend date will be 8 June 2023.

The Company’s dividend policy will be proposed for approval at the forthcoming Annual General Meeting.

BOARD OF DIRECTORS

The process of Board refreshment, which began a few years ago, continued during the year. As previously announced, Tim Livett and Jo Parfrey joined the Board in September 2022. Between them, they have a wealth of experience in the finance, investing, healthcare and governance fields, from which the Board will benefit for years to come. During the year, Tim took over from Humphrey van der Klugt as Chair of the Audit & Risk Committee, with Humphrey carrying on as a Director of the Company. In addition, Jo took over from Bina Rawal as Chair of the Management Engagement & Remuneration Committee.

Sarah Bates, the Company’s Senior Independent Director and the Chair of the Nominations Committee, having served on the Board since 2013, will retire at the conclusion of the Company’s Annual General Meeting on Tuesday, 18 July 2023. Sarah’s leadership, governance and investment industry experience, including her deep knowledge of the investment trust sector, have been invaluable to the Board. Her friendship and wise counsel will be greatly missed. Bina will take over from Sarah as the Senior Independent Director and Chair of the Nominations Committee.

SHARE SPLIT PROPOSAL

As a consequence of the Company’s strong investment returns over many years, its share price has risen steadily. While this has been good news for our shareholders, the Board believes that it may be unhelpful for those investors seeking to purchase smaller quantities of shares, as well as for regular savers. Accordingly, in order to address this and to increase market liquidity and marketability, we are proposing to split the shares on a 10-for-1 basis. Following the share split, each shareholder will receive nine additional Ordinary shares for each Ordinary share held immediately prior to the transaction. The net effect is that, following the split, you will have 10 times as many shares, but the Company’s share price should, in theory, be one-tenth of what it was previously. The share split will not affect the value of your overall investment in the Company, nor will it affect your shareholder rights. Shareholders will have the opportunity to vote on this proposal at the forthcoming Annual General Meeting and details can be found under Notice of Meeting that forms part of the Annual Report.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) MATTERS

ESG matters continue to be an important priority for the Board and our objective is to have full, transparent disclosure on the topic. Bina Rawal has been working closely with our Portfolio Manager on this matter.

Our Portfolio Manager remains committed to taking a leading role in the development of meaningful ESG engagement practices in the healthcare sector. As part of this, they facilitate dialogue and an exchange of leading practices among investors, companies and other relevant experts on ESG in the large capitalisation pharmaceutical sector. They also engage with a broad range of companies on a regular basis where areas of improvement can be identified. Further information on both ESG matters and climate change can be found in the Portfolio Manager’s ESG report

OUTLOOK

Global stock markets continue to experience higher than usual levels of uncertainty, with persistent inflation, central bank borrowing rates at much higher levels than they were one year ago, a developing ongoing economic downturn and several overhanging geopolitical issues. It is unsurprising, therefore, that investors remain relatively risk-averse for the moment, favouring more predictable businesses over the faster growing companies that make up much of our portfolio and sector.

Against this challenging short-term background, however, our Portfolio Manager OrbiMed continues to remain positive on the outlook for healthcare and our Company. They expect the current accelerated levels of mergers and acquisitions to continue, supported by attractive valuations, healthy balance sheets and, within the pharmaceutical sector, a need to address future patent expirations. Regardless of the market backdrop, the pace of scientific and technological development within the sector continues unabated while clinical and regulatory catalysts will continue to provide a regular flow of key share price moving events. They further believe that the sector’s defensive growth characteristics should continue to prove attractive in times of global uncertainty.

Your Board shares OrbiMed’s perspective. We believe that long-term investors in this sector will be rewarded and that the Company will continue to perform strongly over time. Thus far, in the current financial year, performance is off to a positive start, both in absolute and relative terms. From 1 April 2023 to the date of this letter, our net asset value per share has increased by +6.2%, compared to +0.9% for our Benchmark.

ANNUAL GENERAL MEETING (“AGM”)

The Company’s AGM will be held at Saddlers’ Hall, 40 Gutter Lane, London EC2V 6BR on Tuesday, 18 July 2023 at 12.30pm. As well as the formal proceedings, there will be an opportunity to meet the Board and the Portfolio Manager and to receive an update on the Company’s strategy.

For those investors who are not able to attend the meeting in person, a video recording of the Portfolio Manager’s presentation will be uploaded to the website after the meeting. Shareholders can submit questions in advance by sending them to wwh@frostrow.com.

I encourage all shareholders to exercise their right to vote at the AGM and to register your votes online in advance of the meeting. Registering your vote in advance will not restrict you from attending and voting at the meeting in person should you wish to do so, subject of course to the occurrence of any extraordinary events that might make attendance difficult or impossible. The votes on the resolutions to be proposed at the AGM will be conducted on a poll. The results of the proxy votes will be published immediately following the conclusion of the AGM by way of a stock exchange announcement and will also be able to be viewed on the Company’s website at www.worldwidewh.com.

Doug McCutcheon

Chair

6 June 2023

INVESTMENT OBJECTIVE AND POLICY

INVESTMENT OBJECTIVE

The Company invests in the global healthcare sector with the objective of achieving a high level of capital growth.

In order to achieve its investment objective, the Company invests worldwide in a diversified portfolio of shares in pharmaceutical and biotechnology companies and related securities in the healthcare sector. It uses gearing, and derivative transactions to enhance returns and mitigate risk. Performance is measured against the MSCI World Health Care Index on a net total return, sterling adjusted basis (“Benchmark”).

INVESTMENT STRATEGY

The implementation of the Company’s Investment Objective has been delegated to OrbiMed by Frostrow (as AIFM) under the Board’s and Frostrow’s supervision and guidance.

Details of OrbiMed’s investment strategy and approach are set out in the Portfolio Manager’s Review.

While the Board’s strategy is to allow flexibility in managing the investments, in order to manage investment risk it has imposed various investment, gearing and derivative guidelines and limits, within which Frostrow and OrbiMed are required to manage the investments, as set out below.

Any material changes to the Investment Objective, Policy and Benchmark or the investment, gearing and derivative guidelines and limits require approval from shareholders.

INVESTMENT POLICY

INVESTMENT LIMITS AND GUIDELINES

The Company will not invest more than 15% of the portfolio in any one individual stock at the time of acquisition;
At least 50% of the portfolio will normally be invested in larger companies (i.e. with a market capitalisation of at least U.S.$10bn);
At least 20% of the portfolio will normally be invested in smaller companies (i.e. with a market capitalisation of less than U.S.$10bn);
Investment in unquoted securities will not exceed 10% of the portfolio at the time of acquisition;
A maximum of 5% of the portfolio, at the time of acquisition, may be invested in each of debt instruments, convertibles and royalty bonds issued by pharmaceutical and biotechnology companies;
A maximum of 30% of the portfolio, at the time of acquisition, may be invested in companies in each of the following sectors:

– healthcare equipment and supplies;

– healthcare providers and services;

The Company will not invest more than 10% of its gross assets in other closed ended investment companies (including investment trusts) listed on the London Stock Exchange, except where the investment companies themselves have stated investment policies to invest no more than 15% of their gross assets in other closed ended investment companies (including investment trusts) listed on the London Stock Exchange, where such investments shall be limited to 15% of the Company’s gross assets at the time of acquisition.

DERIVATIVE STRATEGY AND LIMITS

In line with the Investment Objective, derivatives are employed, when appropriate, in an effort to enhance returns and to improve the risk-return profile of the Company’s portfolio. Only Equity Swaps were employed within the portfolio during the year.

The Board has set the following limits within which derivative exposures are managed:

Derivative transactions (excluding equity swaps) can be used to mitigate risk and/or enhance capital returns and will be restricted to a net exposure of 5% of the portfolio; and
Equity Swaps may be used in order to meet the Company’s investment objective of achieving a high level of capital growth, and counterparty exposure through these is restricted to 12% of the gross assets of the Company at the time of acquisition.

The Company does not currently hedge against foreign currency exposure.

GEARING LIMIT

The Board has set a maximum gearing level, through borrowing, of 20% of the net assets.

LEVERAGE LIMITS

Under the AIFMD the Company is required to set maximum leverage limits. Leverage under the AIFMD is defined as any method by which the total exposure of an AIF is increased.

The Company has two current sources of leverage: the overdraft facility, which is subject to the gearing limit; and, derivatives, which are subject to the separate derivative limits. The Board and Frostrow have set a maximum leverage limit of 140% on both the commitment and gross basis.

Further details on the gearing and leverage calculations, and how total exposure through derivatives is calculated, are included in the Glossary. Further details on how derivatives are employed can be found in note 16.

PORTFOLIO

INVESTMENTS HELD AS AT 31 MARCH 2023

Investments	Sector	Country	Market value £’000	% of investments
AstraZeneca	Pharmaceuticals	UK	139,838	6.5
Boston Scientific	Health Care Equipment & Supplies	United States	114,463	5.3
Bristol-Myers Squibb	Pharmaceuticals	United States	112,095	5.2
Humana	Health Care Providers & Services	United States	104,491	4.8
Intuitive Surgical	Health Care Equipment & Supplies	United States	103,710	4.8
Sanofi	Pharmaceuticals	France	99,259	4.6
UnitedHealth	Health Care Providers & Services	United States	91,691	4.2
Novo Nordisk	Pharmaceuticals	Denmark	88,871	4.1
Roche	Pharmaceuticals	Switzerland	84,999	3.9
Stryker	Health Care Equipment & Supplies	United States	76,834	3.6
Top 10 investments			1,016,251	47.1
Daiichi Sankyo	Pharmaceuticals	Japan	76,125	3.5
BioMarin Pharmaceutical	Biotechnology	United States	76,049	3.5
Eisai	Pharmaceuticals	Japan	59,273	2.7
Sarepta Therapeutics	Biotechnology	United States	55,344	2.6
Thermo Fisher Scientific	Life Sciences Tools & Services	United States	53,900	2.5
Biogen	Biotechnology	United States	53,740	2.5
Evolent Health	Health Care Providers & Services	United States	52,218	2.4
Tenet Healthcare	Health Care Providers & Services	United States	45,509	2.1
Eli Lilly & Co	Pharmaceuticals	United States	44,971	2.1
Baxter International	Health Care Equipment & Supplies	United States	44,832	2.1
Top 20 investments			1,578,212	73.1
Caris Life Sciences*	Life Sciences Tools & Services	United States	40,900	1.9
Ionis Pharmaceuticals	Biotechnology	United States	36,373	1.7
Edwards Lifesciences	Health Care Equipment & Supplies	United States	36,118	1.7
Apellis Pharmaceuticals	Biotechnology	United States	32,234	1.5
Neurocrine Biosciences	Biotechnology	United States	31,196	1.4
Natera	Life Sciences Tools & Services	United States	28,994	1.3
SI-BONE	Health Care Equipment & Supplies	United States	28,526	1.3
Wuxi Biologics Cayman	Life Sciences Tools & Services	China	28,512	1.3
Vertex Pharmaceuticals	Biotechnology	United States	28,253	1.3
WuXi AppTec	Life Sciences Tools & Services	China	22,443	1.0
Top 30 investments			1,891,761	87.6
uniQure NV	Biotechnology	Netherlands	21,955	1.0
Progyny	Health Care Providers & Services	United States	20,833	1.0
Shanghai Kindly Medical Instruments	Health Care Equipment & Supplies	China	19,475	0.9
Mirati Therapeutics	Biotechnology	United States	19,009	0.9
Crossover Health*	Health Care Providers & Services	United States	17,163	0.8
R1 RCM	Health Care Providers & Services	United States	16,620	0.8
New Horizon Health	Life Sciences Tools & Services	China	16,011	0.7
Beijing Yuanxin Technology*	Health Care Providers & Services	China	14,606	0.7
EDDA Healthcare & Technology*	Health Care Equipment & Supplies	China	14,550	0.7
VISEN Pharmaceuticals*	Biotechnology	China	14,281	0.7
Top 40 investments			2,066,264	95.7
Iovance Biotherapeutics	Biotechnology	United States	14,104	0.7
Joinn Laboratories China	Biotechnology	China	13,760	0.6
API Holdings*	Health Care Providers & Services	India	13,668	0.6
RxSight	Health Care Equipment & Supplies	United States	12,431	0.6
Ruipeng Pet Group*	Health Care Providers & Services	China	11,900	0.6
Jiangxi RiMAG*	Health Care Providers & Services	China	11,673	0.5
Vaxcyte	Biotechnology	United States	10,755	0.5
Xenon Pharmaceuticals	Biotechnology	Canada	10,392	0.5
MabPlex*	Health Care Providers & Services	China	5,944	0.3
Dingdang Health Technology	Health Care Providers & Services	China	4,736	0.2
Top 50 investments			2,175,627	100.7
Ikena Oncology	Pharmaceuticals	United States	4,445	0.2
Shanghai Bio-heart Biological Technology	Health Care Equipment & Supplies	China	4,233	0.2
Passage Bio	Biotechnology	United States	1,627	0.1
Peloton Therapeutics* - DCC	Biotechnology	United States	485	0.0
Total investments			2,186,417	101.2

OTC Equity Swaps – Financed^
Healthcare M&A Target Basket	Swap Baskets	United States	105,629	4.9
Apollo Hospitals Enterprise	Health Care Providers & Services	India	32,672	1.5
Healthcare Catalyst Basket	Swap Baskets	United States	24,216	1.1
Pharmaron Beijing	Life Sciences Tools & Services	China	16,989	0.8
Jiangsu Yuyue Medical Equipment & Supply	Health Care Equipment & Supplies	China	11,197	0.5
Less: Gross exposure on financed swaps			(217,596)	(10.1)
Total OTC Swaps			(26,892)	(1.2)
Total investments including OTC Swaps			2,159,525	100.0

* Unquoted holding

DCC = deferred contingent consideration.

^ See Glossary and note 16 for further details in relation to the OTC Swaps.

SUMMARY

Investments	Market value £’000	% of investments
Quoted equities	2,041,247	94.5
Unquoted equities	145,170	6.7
Equity swaps	(26,892)	(1.2)
Total of all investments	2,159,525	100.0

PORTFOLIO MANAGER’S REVIEW

MARKETS

The reported financial year was up and down for the global equity markets. Whilst the pandemic eased as a global healthcare crisis, its lingering economic impact still reverberated across the world. Inflation, rising interest rates and the war in Ukraine all played major parts in shaping equity returns. Overall, global inflation and the ensuing central bank responses led to an array of conflicting crosscurrents between currency values, gross margin pressures, and higher financing costs that all shaped the market. The year was a product of many things, with perhaps the only constant being the unyielding battle between macro factors and industry fundamentals – forcing investors to grapple with the “yin and yang” of these two disparate market forces.

The net result, amazingly, was rather modest, with a global market total return of -0.5% as measured by the MSCI World Index (in sterling terms). This despite the significant volatility in between the start and end of the year with several material drawdowns. Even local geographies were not in agreement with the various market forces, with the FTSE All-Share Index finishing notably up 2.8% whilst the S&P 500 finished down 1.8% (both figures in sterling measured on a total return basis). Even healthcare stocks did not fare as expected, partially eschewing their defensive characteristics to post a +2.5% total return (sterling) in the year, obviously lagging the UK market but outpacing others.

PERFORMANCE

Overall, for the year ended 31 March 2023, the Company generated a net asset value total return of -0.1% whilst the share price total return was -4.1%. This performance lagged the Benchmark return of +2.5%. Performance – both absolute and relative – came intermittently throughout the year, largely reflecting the aforementioned struggle between fundamental industry drivers and macroeconomic factors that heavily influenced equity markets.

Certainly, the start of calendar year 2022 was dominated by the macro and global markets came under intense pressure as investors focused on tightening monetary policies, continued geopolitical tensions, and concerns about COVID-induced lockdowns in China. Preference for “value-over-growth” continued as a macro theme for investors, as did healthcare being relatively defensive. This set-up was not conducive to performance given our preference for innovative growth companies and as a result the Company’s returns materially lagged the Benchmark to start the financial year in April and May.

However, as we had been expecting, mergers and acquisitions (M&A) in the therapeutics space finally inflected in June and this phenomenon carried on well into early October. This coincided with a host of important – and positive – clinical catalysts which helped to move biotechnology stocks higher during this period. Investor interest picked up and fund flows followed. The Company recorded a +11.0% return during this period, which was nearly 9.0% better than the Benchmark.

As the calendar-year-end approached, investor focus shifted yet again and stock markets rounded off a tumultuous year with gains, including healthcare, only to stumble in December as recessionary fears spiked. This environment again favoured larger capitalisation stocks and value names, impacting the Company’s relative returns in this three-month period.

Finally, the fourth quarter of the financial year was similarly volatile. Healthcare stocks were clear laggards in January as investors pivoted from fears of a looming recession, to the view that a softer landing may be possible given decelerating inflation, a stronger European outlook, and the swift re-opening in China. Defensive healthcare sectors – like large capitalisation pharmaceutical stocks and managed care – therefore saw investor outflows and this continued into February as healthcare stocks continued to underperform the broader markets. This set-up favoured our portfolio positioning and despite some modest declines in this segment, the Company returned over 2.0% more than Benchmark.

We are pleased to report that this performance to start the calendar year has continued in the first 6 weeks of the new financial year. M&A activity has remained elevated thus far, a number of key catalysts have been positive, and this has buoyed the Company’s performance as strong fundamentals are consistent with our bullish positioning. Specifically, from the start of the current financial year to the date of this report, the NAV has advanced 6.2% compared to the Benchmark return of +0.9%.

Despite the volatility that marked the reported financial year, we are pleased to report that the long-term performance of the Company is strong. Overall, the Company’s net asset value performance since inception to 31 March 2023 (from 28 April 1995), is a return of +4,234.1%, an average of +14.5% per annum, to 31 March 2023. This compares to a cumulative blended Benchmark return of +2,189.0%, an average of +11.9% per annum, over the same investment horizon. This compares to the FTSE All-Share Index return of +579% and +7.1%. As we enter our 29th year of managing the Company, the multiple since inception of 42x represents both the strength of the healthcare industry and the unyielding global demand for healthcare related goods and services. It also shows what an active manager or specialist investor can do in healthcare, especially in the face of a highly idiosyncratic, global sector that possesses many barriers to understanding the scientific, clinical, regulatory, technological, and political environment that envelops all of healthcare.

KEY SOURCES OF CONTRIBUTION

The key contributor to performance in the year was from emerging biotechnology stocks (defined primarily as small - and mid-capitalisation stocks). Positive contribution here was due to both allocation effect and individual stock picking, contributing both absolute (over 4.5%) and relative (over 4.0%) performance. Recall that our positioning in this sub-sector has been a key strategic overweight for us and will remain so given the impressive innovation cycle that continues to date. This contribution was partially offset due to allocation effect within large capitalisation biotechnology stocks, where we were not materially invested, which detracted approximately 1.0% relative to the Benchmark.

The second largest contributor on a sub-sector basis was large capitalisation pharmaceuticals. The group experienced similar volatility to the broad market throughout the financial year, but finished higher on a relative basis. Our exposure here contributed nearly 1.2% to performance. This was offset by allocation, as we were materially underweight this sub-sector, creating nearly 1.6% of relative underperformance. However, we do note that we consider large capitalisation pharmaceuticals as a funding source for biotechnology, so this positioning overall was a net positive.

The final subsector with absolute contribution of over 1.0% was from Japan pharmaceuticals. Here the contribution was completely due to stock picking. Overall weighting was mostly in-line with the Benchmark, creating over 0.7% of relative performance.

Lastly, another subsector of note was medical technology. Whilst we were fully invested in this space, overall performance for these stocks was negative in the financial year, down on average 7.5% in the Benchmark. The subsector was adversely impacted by a mix of macro factors and fundamental headwinds, namely hospital staffing shortages, semiconductor shortages, elevated oil and resin prices, shipping bottlenecks and a dearth of meaningful new product cycles. However, many of these issues have abated and even reversed, leading to a tailwind for the sector going forward. Due to stock picking in the reported period, our average returns were superior, down on average 0.3% in the portfolio. This added over 1.1% of relative performance.

In terms of subsectors that materially detracted from performance, we highlight two. First, specialty pharmaceuticals detracted more than 1.0% in both absolute and relative performance, due to a single stock pick (Horizon Therapeutics – discussed below). Second, emerging market stocks, particularly China healthcare (a key strategic overweight) was particularly volatile in the financial year. That said, China detracted over 1.6% in both absolute and relative performance, due to a single stock pick (Shanghai Bio-heart Biologics – discussed below).

UNQUOTEDS

During the financial year ended on 31 March 2023, the Company strategically refrained from making new investments in unquoted companies, as we cautiously navigated the challenging public offering market for small and mid-capitalisation therapeutic firms. Encouragingly, however, one of the existing unquoted investments, DingDang Health Technology Group, completed its initial public offering (IPO) in mid-September, despite a subsequent share price decline (described below). With the recent encouraging signs of improvement in the capital market funding landscape, we are optimistic about the potential for more unquoted investments to achieve listings in the current financial year.

As of 31 March 2023, unquoted company investments made up 6.7% of the Company’s net assets, only slightly down from 7.1% on 31 March 2022. The existing unquoted portfolio demonstrates a diverse and forward-looking approach. Geographically, around 60% is exposed to emerging markets and the remainder is invested in North American companies. On a sector basis, half of the unquoted investments are in healthcare services, with additional allocations to life sciences tools, biotechnology, and medtech.

For the year ended 31 March 2023, the Company’s unquoted strategy encountered a few challenges, resulting in a loss of £17.3 million and an implied return of -10.3%, which somewhat offset the substantial gain of £42.5 million in the financial year ended 31 March 2022. The decline was primarily driven by a post-listing decrease in DingDang Health Technology Group (£7.5 million) and net write-downs in the remaining unquoted portfolio of £9.8 million. Nevertheless, given the emerging positive trends in the market and our strategic approach, we remain confident in the future performance of our unquoted investments, echoing the successes of prior years.

MAJOR CONTRIBUTORS TO PEFORMANCE

The top six contributors to absolute performance were a combination of therapeutic and nontherapeutic stocks, but the impact of M&A in the biopharmaceutical sector on performance was the distinguishing feature of positive performance in the year.

The largest contributor in the period was Global Blood Therapeutics. The California based small-mid-capitalisation biotechnology company focuses on clinical medicines used to treat blood-based disorders, such as sickle cell disease (SCD). The company was acquired by Pfizer in an announced transaction in August 2022. The agreed upon price was for a total enterprise value of U.S.$5.4 billion, a 100% premium to the unaffected share price. In addition to an already marketed product for the treatment of SCD, Oxbryta (voxelotor), Pfizer also gained important pipeline assets, including GBT601, an oral, once-daily, next-generation sickle haemoglobin (HbS) polymerization inhibitor in the Phase 2 portion of a Phase 2/3 clinical study. GBT601 has the potential to be a best-in-class agent targeting improvement in both haemolysis and frequency of vaso-occlusive crisis (VOC). Another promising pipeline asset is inclacumab, a fully human monoclonal antibody targeting P-selectin which is being evaluated in two Phase 3 clinical trials as a potential quarterly treatment to reduce the frequency of VOCs and to reduce hospital readmission rates due to VOCs. The transaction officially closed in early October 2022.

In addition to the above, Pfizer also executed on the largest M&A healthcare transaction of the year, acquiring Seattle-based oncology player, Seagen. Pfizer announced its intention in March 2023. In a U.S.$43 billion deal “to battle cancer”, the two companies entered into a definitive agreement that will see Pfizer acquire the company for $229 per share, a premium of more than 100% to the company’s 52-week low. Seagen is a pioneer in “antibody drug conjugate” (ADC) technology, with four of the twelve total U.S. Food & Drug Administration (FDA)-approved and marketed ADCs using its technology industry-wide. ADCs are a transformative modality that is emerging as a powerful tool across a broad range of cancers designed to preferentially kill cancer cells and limit off-target toxicities.

The Japanese pharmaceutical interest, Daiichi-Sankyo, has emerged as the other leader in ADC technology and is a pioneer in creating “3rd generation” ADCs that are more potent and safer than ever before. Their first offering, Enhertu (trastuzumab deruxtecan), for the treatment of specific forms of metastatic breast cancer, has already become a blockbuster product. The share price re-rated multiple times in the fiscal year as the company disclosed new data sets (low HER2+ expression), new approvals (high HER2+ expression), and sales above expectations consistently through the year (sales >$1 billion in the first nine months). One of the most interesting data disclosures occurred in June 2022 at the American Society of Clinical Oncology meeting in Chicago where Enhertu was shown to double the length of survival in women with “low HER2+” expression. The data was so impressive, the thousands of oncologists in attendance collectively rose in a standing ovation. The stock has also appreciated ahead of the first pivotal data for the company’s next ADC offering, datopotamab deruxtecan (Dato-DXd) for the treatment of specific lung cancer, which “could be bigger than Enhertu”, as per the company’s partner, AstraZeneca.

BioMarin Pharmaceutical is another California based small-mid-capitalisation biotechnology company that was a material contributor to performance. The company is well known for developing and commercialising therapeutic enzyme products but has more recently added efforts in gene therapy. Their lead asset, Roctavian (valoctocogene roxaparvovec), is the first gene therapy for the treatment of severe haemophilia A. An approval for Roctavian in Europe (August 2022) and an imminent approval by the FDA (expected in June 2023) helped push the share price higher in the reported period, despite some profit taking late in the year. Additionally, the company’s new product launch for achondroplasia, Voxzogo (vosoritide), has been very successful. Multiple upward sales revisions for Voxzogo through 2022 were also an important tailwind for the share price.

The Cambridge, Massachusetts biotechnology company, Sarepta Therapeutics, has evolved into a rare disease company with expertise in the treatment of Duchenne Muscular Dystrophy (DMD), a severe type of muscle wasting found in young males. More recently, the company has acquired and developed a platform technology in gene therapy which they have applied to DMD patients. This development programme had moved into pivotal stages and the data had looked promising as a potential cure for these patients. The stock moved higher as a result, and moved higher still after the company was granted an accelerated approval path by the FDA for their lead gene therapy asset (delandistrogene moxeparvovec). Some share price volatility of note closed the end of the financial year due to some internal disagreement within the FDA about the approvability of delandistrogene, which was ultimately resolved with a positive recommendation for approval by an external advisory committee meeting in May 2023.

Finally, yet another California based small-mid-capitalisation biotechnology company was a significant contributor to performance via its acquisition during the fiscal year. Turning Point Therapeutics was acquired by Bristol-Myers Squibb for a total equity value of U.S.$4.1 billion, representing a +125% premium to the previous closing share price. The deal was announced in June 2022 and closed August 2022. Turning Point Therapeutics is a clinical-stage precision oncology company with a pipeline of investigational medicines designed to target the most common mutations associated with oncogenesis.

Their lead asset, repotrectinib, is a next generation, potential best-in-class tyrosine kinase inhibitor, targeting the ROS1 and NTRK oncogenic drivers of non-small cell lung cancer (NSCLC) and other advanced solid tumours. Repotrectinib is expected to be approved in the U.S. in the second half of 2023 and become a new standard of care for patients with ROS1-positive NSCLC in the first-line setting.

MAJOR DETRACTORS FROM PERFORMANCE

Investments that experienced negative returns were very diverse in nature, whether it be geographically (U.S., Europe, and China) or sector (biotechnology, pharmaceuticals, and medical technology). The one common thread each of the stocks faced was a unique individual event, such as a clinical trial failure, a commercial sales slowdown, or even de-risking ahead of a catalyst, which subsequently triggered a fall in share price.

The main detractor in the year was Shanghai Bio-heart Biological Technology the China-based medical technology company is a leader in interventional cardiovascular devices. The company has enjoyed enormous success since its IPO in late 2021, with returns in excess of 250% of its original listing price. However, the stock inexplicably began to sell off, even falling in November on no obvious news. We speculated that some profit taking took place ahead of an important data disclosure for the company’s novel renal denervation device for uncontrolled hypertension, expected early in 2023. This was partially confirmed when the competitor data (from Medtronic) failed to prove that its renal denervation system reduced patients’ ambulatory systolic blood pressure. Additionally, the share price was pressured as some investors may have sold ahead of the lock-up expiration for private investors in December 2022.

Mirati Therapeutics is a California-based biotechnology company developing novel small molecule drugs to treat cancer. In particular, their lead program is a targeted oncology therapy intended to treat patients with lung cancer that harbours a specific mutation in the KRAS gene. Shares rose in late 2022 amid rumours that the company might be acquired; however, they ultimately fell in December 2022 following the presentation of disappointing clinical trial data. The data suggested that their lead programme might not be superior to the standard of care therapy in first line lung cancers harbouring a KRAS mutation. Instead, the drug may be used in more advanced lung cancer patients where the market opportunity is smaller.

Horizon Therapeutics is a U.S. based specialty pharmaceutical company that presided over one of the most successful drug launches ever in 2020. Tepezza (teprotumumab) was developed by the company to treat “TED” or thyroid eye disease, a painful, disfiguring, and debilitating disorder of the musculature of the eye. Launched in January 2020, the drug was well on its way to blockbuster status despite the commercial headwinds of the COVID-19 pandemic. Despite a temporary government-mandated shutdown in the manufacturing of Tepezza due to the prioritisation of COVID-19 vaccine production in early 2021, the re-launch of the product in April 2021 exceeded expectations. Whilst this success continued into early 2022, the sales growth for Tepezza then began to unexpectedly flatten, and the company reported second quarter sales that were disappointing and full year sales guidance was lowered. Additionally, investors learned that a key study (Tepezza usage in chronic patients) was delayed into 2023. As a result, the stock fell. We exited the position as the company pondered new marketing initiatives and increased spend to reinvigorate Tepezza sales in 2023, whilst awaiting trial results for the chronic indication. We were no longer invested in the company when Amgen announced its intention to acquire the company in December 2022.

Investing in healthcare necessarily brings with it clinical risk. For Swiss pharmaceutical giant, Roche, the bad news came in threes during 2022. First, the company started the financial year off on the wrong foot when in April 2022 they confirmed that their investigative oral hormonal therapy, giredestrant, a “SERD” (selective estrogen receptor degrader), failed to show a benefit in advanced breast cancer. Then in May 2022, Roche confirmed that their “anti-TIGIT” antibody, tiragolumab, failed on an interim look in the treatment of lung cancer. And finally in November 2022, Roche confirmed that their high risk / high reward antibody, gantenerumab, failed delaying the progression in mild-to-moderate Alzheimer’s patients. This string of unfortunate clinical trial failures coupled with declines in profits due to the dwindling effects of COVID-related sales (particularly in the company’s diagnostics unit), led to share price declines in the period.

The medical technology company, Edwards Lifesciences, is a developer of tissue replacement heart valves, and more specifically transcatheter heart valves (THV). The company’s current valve portfolio is largely comprised of transcatheter aortic heart valves (TAVR), a market which has been growing solidly in the double-digit range but experienced some disruption in the second half of 2022 due to hospital staffing shortages across the U.S. This has fuelled investor concerns that the market is maturing and is one of the primary reasons for prolonged weakness in the share price during the reported period. Other headwinds facing the stock were mostly macro in nature, including the negative sentiment for growth stocks and rising interest rates. However, there is evidence that staffing shortages and other hospital difficulties have eased so far in 2023, which should benefit all medtech companies and especially those most exposed to inpatient procedure volumes, such as Edwards. Moreover, the company is the process of launching a key new product cycle in the transcatheter mitral heart valve (TMVR) market, which has the potential to accelerate top line growth in 2023 and more fully in 2024.

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. Despite detracting £22.8 million from performance in the financial year ended 31 March 2023, 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 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.

LEVERAGE STRATEGY

Historically, the typical range of leverage level employed by the Company has been between high single digits to mid-teens. Considering the market conditions over the past three financial years, we have, more recently, used leverage in a more tactical fashion. Examples include the volatility around the original emergence of the pandemic in March 2020 and the U.S. Presidential election in November 2020 and the subsequent U.S. Senate run-off in January 2021.

More recently, we increased leverage back into the low-to-double digits, a reflection of our overall bullishness on the portfolio, a 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 volatile and uncertain macro backdrop, either economic in nature or even further geopolitical unsettlement in the east.

SECTOR DEVELOPMENTS AND OUTLOOK

Whilst healthcare stocks in general may have struggled this year given the see-saw of macro headwinds, there were a number of positive sector developments to highlight. First, some investors expressed angst over a slowdown of new drug approvals at the FDA. However, entering 2023, disrupted work schedules because of the coronavirus have dwindled and most recently, FDA inspectors returned to China for the first time in years which is encouraging (source: Washington Analysis).

A significant number of complete response letters and extended user fee dates had been issued by the agency due to the inability to complete the inspections, so this is a welcome relief for the industry. More importantly, despite some delays, the past six years have been the most productive in industry history, with almost 300 new product approvals during that span. The FDA has kept pace so far in 2023, with 13 additional approvals in the first three months of the calendar year (source: fda.gov).

Perhaps the largest sector development that has occurred during this period is new legislation that was approved by the U.S. Senate and signed into law in July 2022 – the Inflation Reduction Act of 2022 (“IRA”) – which settled concerns about prescription drug price reform. The threat of drug price reform in the U.S. has been a persistent source of uncertainty and negative sentiment, an overhang for the biopharmaceutical sector for decades, but particularly over the past two years since President Biden took office. The IRA was modest in scope and included a mix of positive and negative factors for the biopharmaceutical industry. Overall, we view the IRA as very manageable for the biopharmaceutical sector, with limited impact on profits into the end of the decade, and perhaps the issue of drug price reform can now begin to dissipate as an overhang on the sector.

The Company has taken advantage of accelerating M&A activity within the biotechnology space and we expect that trend to continue. With the insatiable need for large capitalisation companies to continue to fill their pipelines and replace revenues lost to patent expirations, this is a logical view. In fact, the pharmaceutical industry appears to be facing another “patent cliff”, starting in 2023 and inflecting in 2025. A number of major blockbusters will be losing their exclusivity and sales will erode substantially, leaving major gaps in revenues and earnings for a number of companies. With the historic small-mid-capitalisation biotechnology stock sell-off and large capitalisation executives talking up the need to execute deals, a plethora of transactions began in earnest, inflecting in June 2022. The result for the financial year was a near doubling in the number of biotechnology transactions to 30 and near quadrupling of the value of deals, to U.S.$113 billion. This has been a real rallying point for the industry, especially in biotechnology, and as we have seen in the past, M&A can move the entire sector higher and we have finally seen these stocks move off the bottom after experiencing the largest and longest drawdown in the history of the “XBI” (the biotech ETF).

BIOTECH M&A: YEAR-OVER-YEAR ACCELERATION

	# of Deals	$ Value of Deals
FY 2024	17	$31 billion
FY 2022	30	$113 billion
YOY	+76%	+265%

Periods ending March 31. SOURCE: FactSet, Company Websites

We expect this accelerated M&A pace to continue. Why? The pace of innovation within the biotechnology industry remains impressive and is the number one value driver in the industry. The patent cliff keeps the appetite of large capitalisation companies for additional new pipelines and products very high. Additionally, historically low biotechnology valuations will continue to fuel biotechnology acquisitions. Over 200 life sciences companies continue to trade at negative enterprise values (i.e., market capitalisations below net cash).

Another important phenomenon that typically follows an acceleration of M&A is the rekindling of clinical and regulatory catalysts as key stock moving events. After an inflection of M&A, typically there is a renewed appreciation of the catalyst strategy as investors are reminded of why companies are being bought for 100 to 200% premiums – innovation. And in 2023, we expect investor focus to return to such catalysts, across such examples as gene therapy, a highly scrutinised new therapeutic technology that was left for dead in 2022 due to emerging safety concerns, but is now on the precipice of three new product launches. And there are many more, across oncology, nephrology, neurology, and so on. The commercial opportunities that are eventually created are significant. The top 15 new product opportunities in biotechnology today could create over U.S.$60 billion in cumulative sales by the next decade (source: Jefferies).

Finally, a word on emerging markets. China’s re-emergence from its zero-COVID policy provides an important new growth driver for global healthcare companies. Major Chinese cities have gone from lockdowns to traffic jams in just a few months. The principle here is simple – as China re-opens from its zero-COVID policy, the economy and the local equity market should follow. The Hong Kong healthcare index hit all-time lows in October 2022, after ill-founded investor fears about government and political interference - both from China and the U.S. - created a market dislocation. A rebound into calendar year-end ensued in anticipation of an economic re-opening. And whilst geopolitical tensions created some volatility early in 2023, we are optimistic about China going forward as this oversold situation should reverse.

Sven H. Borho and Trevor M. Polischuk

OrbiMed Capital LLC

Portfolio Manager

6 June 2023

CONTRIBUTION BY INVESTMENT

ABSOLUTE CONTRIBUTION BY INVESTMENT FOR THE YEAR ENDED 31 MARCH 2023

Principal contributors to and detractors from net asset value performance

				Contribution
			Contribution	per share*
Top five contributors	Country	Sector	£’000	£
Global Blood Therapeutics**	USA	Biotechnology	30,805	0.5
Seagen**	USA	Biotechnology	28,289	0.4
Daiichi Sankyo	Japan	Pharmaceutical	23,488	0.4
BioMarin Pharmaceutical	USA	Biotechnology	21,598	0.3
Sarepta Therapeutics	USA	Biotechnology	20,665	0.3

Top five detractors
Edwards Lifesciences	USA	Healthcare Equipment & Supplies	(18,551)	(0.3)
Roche	Switzerland	Pharmaceutical	(24,481)	(0.4)
Horizon Therapeutics**	USA	Biotechnology	(29,324)	(0.5)
Mirati Therapeutics	USA	Biotechnology	(33,332)	(0.5)
Shanghai Bio-heart Biological Technology	China	Healthcare Equipment & Supplies	(42,324)	(0.7)

* Calculation based on 64,474,422 shares being the weighted average number of shares in issue during the year ended 31 March 2023

** Not held at 31 March 2023

ENVIRONMENTAL, SOCIAL AND GOVERNANCE AND CLIMATE CHANGE

The Company’s Portfolio Manager, OrbiMed, is guided by its Responsible Investing Policy in its approach to ESG (Environmental, Social and Governance). They seek to invest in innovative healthcare companies that are working towards addressing significant unmet medical needs, across biopharmaceuticals, medical devices, diagnostics, and healthcare services sectors, globally.

OrbiMed believes that there is a high congruence between companies that seek to act responsibly and those that succeed in building long-term shareholder value. They seek to integrate ESG into the overall investment process, with the objective of maximising investment returns. OrbiMed has recruited a senior executive who has the responsibility of overseeing this project. Investment decisions are based on a variety of financial and non-financial company factors, including environmental, social, and governance information.

As a responsible investor, OrbiMed negatively screens potential investments and business sectors that may objectively lead to negative impacts on public health or well-being. They consider healthcare sector-specific guidance from the Sustainability Accounting Standards Board (SASB) to determine material ESG factors as part of their investment research. Social factors such as affordability, pricing, access, and safety dominate the financially material ESG issues for the pharmaceutical, biotechnology, and medical devices sub-sectors, followed by governance factors. Environmental factors such as greenhouse gas (GHG) emissions are not featured as material. Energy and waste management appear as material factors for healthcare delivery, and drug retailer sub-sectors, where the physical footprint of the companies is large. The healthcare and life sciences sector is highly regulated, globally. Environmental regulation, along with quality-related regulation is well-established across both developed and emerging markets. To that end, OrbiMed considers compliance with local laws and regulations as one of the factors in its investment evaluation. Depending on the investment, all or a subset of the ESG factors that are financially material and relevant are considered in OrbiMed’s research.

MONITORING AND ENGAGEMENT

OrbiMed utilises ESG scores for public equity holdings from third-party service providers. To supplement the information from these providers, OrbiMed also conducts proprietary analysis of ESG performance. The scores from the third-party service providers are integrated with OrbiMed’s own analysis onto a proprietary business intelligence platform for regular monitoring.

OrbiMed also generally engages on a regular basis with its portfolio companies through meetings with management, proxy voting, and in some cases, through board representation.

OrbiMed’s analysts regularly track ESG information on safety of clinical trials, drug/product safety, ethical marketing, call-backs and other materially relevant factors. In addition, OrbiMed is taking the initiative in leading meaningful ESG engagement in the healthcare sector. As part of these efforts, OrbiMed engages with companies directly or through brokers, and facilitates dialogue and an exchange of best practice among investors, companies, and other relevant experts on ESG in the healthcare sector. Some examples of engagement include:

Engagement with large capitalisation pharmaceutical companies on reporting, environmental sustainability, access, product pricing, supplier engagement and targets on ESG through an investor conference and broker-led ESG road shows;
Participation in an ESG conference where a mid-capitalisation biotechnology company disclosed its ESG governance, and discussed key programmes including increasing diversity in clinical trials, employee diversity and talent-building initiatives, and other community initiatives; and
As part of the ‘Industry Investor Connect’, OrbiMed participated in an ESG roundtable discussion with a large capitalisation medical devices company and a pharmaceutical company, alongside 10 other investors. Topics discussed included drugs and product safety, litigation, and access to medicines.

OrbiMed also participated in the Goldman Sachs Sustainability Conference in September 2022 and the Jefferies London Healthcare Conference in November 2022, alongside several healthcare companies and investors, to allow further dissemination and discussion of leading ESG practices in the healthcare sector.

Between April 1, 2022, and March 31, 2023, a total of 776 proposals came to vote within the Company’s portfolio. Of these, 759 were management proposals and 17 were shareholder proposals.

					Number of votes
					against
					management’s
	Total number		Voted	Votes	proposed
Proposed by	of proposals	Voted for	against	abstained	response
Management	759	667	92	0	88
Shareholder	17	2	15	0	2

There was one management proposal referring to an ESG report and two shareholder proposals regarding product pricing. ‘Affordability and pricing’ is one of the material ESG topics listed in the Sustainability Accounting Standards Board guidance for the Biotechnology and Pharmaceuticals sub-sector.

OrbiMed provides a quarterly update on ESG to the Board of the Company. This provides updates on the evolving regulatory landscape as well as details of monitoring, engagement and its proxy voting activity. ESG reporting by companies within the portfolio is also examined in the quarterly report.

CLIMATE CHANGE

As per the guidance from SASB, climate change in relation to the Company’s own operations is not a material ESG consideration for the biotechnology and pharmaceutical, medical equipment and supplies, and managed care sectors. However, Energy management is noted as a material ESG concern for the healthcare delivery sector. To that end, OrbiMed includes the scores on energy management for the relevant sectors in its overall ESG monitoring.

REGULATORY UPDATE ON ESG

In October 2022, the UK Financial Conduct Authority (FCA) published the Consultation Paper on UK-specific Sustainability Disclosure Requirements (SDR). The proposed SDR is focused on asset managers and their UK-based fund products and portfolio management services. The Consultation Paper’s core elements are labelling and classification; disclosure; and naming and marketing rules. The FCA has concluded the Consultation on the draft Rules. The final rules which were expected to be published in June 2023, are now expected to be published in the third quarter of 2023. Upon the release of the Final Rules, anti-greenwashing rules will take effect immediately and will be applicable to all regulated firms in the UK. Labelling and classification rules come into effect a year later, and the disclosure rules will follow after a further year.

In May 2022, the U.S. Securities and Exchange Commission (SEC) proposed amendments to rules and reporting forms to promote disclosures for investors concerning funds’ and advisers’ incorporation of ESG. Following this, in 2023, the Division of Examinations of the SEC announced the publication of its 2023 examination priorities, which include a focus on ESG-related advisory services and fund offerings, to evaluate labelling and practices with respect to stated policies and processes, in the United States.

International coherence on ESG between regimes is yet to be achieved. The changing regulatory landscape is continuously being monitored by OrbiMed.

Sven H. Borho and Trevor M. Polischuk

OrbiMed Capital LLC

Portfolio Manager

6 June 2023

BUSINESS REVIEW

The Strategic Report contains a review of the Company’s business model and strategy, an analysis of its performance during the financial year and its future developments and details of the principal risks and challenges it faces. Its purpose is to inform shareholders in the Company and help them to assess how the Directors have performed their duty to promote the success of the Company.

The Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the date of this report. Such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information.

BUSINESS MODEL

Worldwide Healthcare Trust PLC is an externally managed investment trust and its shares are listed on the premium segment of the Official List and traded on the main market of the London Stock Exchange.

The purpose of the Company is to achieve a high level of capital growth for its shareholders by providing a vehicle for investors to gain, through a single investment, exposure to the global healthcare sector through a diversified portfolio of shares in pharmaceutical and biotechnology companies and related securities.

The Company’s strategy is to create value for shareholders by addressing its investment objective.

As an externally managed investment trust, all of the Company’s day-to-day managements and administrative functions are outsourced to service providers. As a result, the Company has no executive directors, employees or internal operations. The Company employs Frostrow Capital LLP (Frostrow) as its Alternative Investment Fund Manager (AIFM), OrbiMed Capital LLC (OrbiMed) as its Portfolio Manager, J.P. Morgan Europe Limited as its Depositary and J.P. Morgan Securities LLC as its Custodian and Prime Broker. Further details about their appointments can be found in the Business Review.

The Company is an investment company within the meaning of Section 833 of the Companies Act 2006 and has been approved by HM Revenue & Customs as an investment trust (for the purposes of Section 1158 of the Corporation Tax Act 2010). As a result the Company is not liable for taxation on capital gains. The Directors have no reason to believe that approval will not continue to be retained. The Company is not a close company for taxation purposes.

The Board is responsible for all aspects of the Company’s affairs, including the setting of parameters for and the monitoring of the investment strategy a s well as the review of investment performance and policy. It also has responsibility for all strategic issues, the dividend policy, the share issuance and buy-back policy, gearing, share price and discount/premium monitoring and corporate governance matters.

CONTINUATION OF THE COMPANY

A resolution was passed at the Annual General Meeting held in 2019 that the Company continues as an investment trust for a further five year period. In accordance with the Company’s Articles of Association, shareholders will have an opportunity to vote on the continuation of the Company at the Annual General Meeting to be held in 2024 and every five years thereafter.

THE BOARD

The Board of the Company comprises Doug McCutcheon (Chair), Sarah Bates, Sven Borho, Dr Bina Rawal, Humphrey van der Klugt, Tim Livett and Jo Parfrey. All of these Directors, with the exception of Tim Livett and Jo Parfrey served throughout the year. All are independent non-executive Directors with the exception of Sven Borho who is not considered to be independent by the Board.

All Directors, with the exception of Sarah Bates, are seeking election or re-election by shareholders at this year’s Annual General Meeting.

DIVIDEND POLICY

It is the Company’s policy to pay out dividends to shareholders at least to the extent required to maintain investment trust status for each financial year. Such dividends will typically be paid twice a year by means of an interim dividend and a final dividend.

KEY PERFORMANCE INDICATORS (‘KPIs’)

The Board assesses the Company’s performance in meeting its objectives against KPI’s as follows. The KPI’s have not changed from the previous year:

Net asset value (‘NAV’) per share total return against the Benchmark;*

Discount/premium of share price to NAV per share;* and
Ongoing charges ratio.*

* Alternative Performance Measure (See Glossary)

Information on the Company’s performance is provided in the Statement from the Chair and the Portfolio Manager’s Review and a record of these measures is shown in the Strategic Report. Further information can be found in the Glossary.

NAV per share total return against the Benchmark

The Directors regard the Company’s NAV per share total return as being the overall measure of value delivered to shareholders over the long term. This reflects both net asset value growth of the Company and dividends paid to shareholders.

The Board considers the most important comparator, against which to assess the NAV per share total return performance, to be the MSCI World Health Care Index measured on a net total return, sterling adjusted basis (the ‘Benchmark’). As noted in the Strategic Report, OrbiMed has flexibility in managing the investments and are not limited by the make up of the Benchmark. As a result, investment decisions are made that differentiate the Company from the Benchmark and therefore the Company’s performance may also be different to that of the Benchmark.

A full description of performance during the year under review is contained in the Portfolio Manager’s Review.

Share price discount/premium to NAV per share

The share price discount/premium to the NAV per share is considered a key indicator of performance as it impacts the share price total return of shareholders and can provide an indication of how investors view the Company’s performance and its Investment Objective.

Ongoing charges ratio

The Board continues to be conscious of expenses and works hard to maintain a balance between good quality service and costs.

PRINCIPAL SERVICE PROVIDERS

The principal service providers to the Company are the AIFM, Frostrow, the Portfolio Manager, OrbiMed, the Custodian and Prime Broker J.P. Morgan Securities LLC, and the Depositary, J.P. Morgan Europe Limited. Details of their key responsibilities follow and further information on their contractual arrangements with the Company are included in the Report of the Directors contained within the Annual Report.

Alternative investment fund manager (‘AIFM’)

Frostrow under the terms of its AIFM agreement with the Company provides, inter alia, the following services:

oversight of the portfolio management function delegated to OrbiMed Capital LLC;
portfolio administration and valuation;
risk management services;
marketing and shareholder services;
share price discount and premium management;
administrative and secretarial services;
advice and guidance in respect of corporate governance requirements;
maintenance of the Company’s accounting records;
maintenance of the Company’s website;
preparation and dispatch of annual and half-year reports (as applicable) and monthly fact sheets; and
ensuring compliance with applicable legal and regulatory requirements.

During the year, under the terms of the AIFM Agreement, Frostrow received a fee as follows:

On market capitalisation up to £150 million: 0.3%; in the range £150 million to £500 million: 0.2%; in the range £500 million to £1 billion: 0.15%; in the range £1 billion to £1.5 billion: 0.125%; over £1.5 billion: 0.075%. In addition, Frostrow receives a fixed fee per annum of £57,500.

Portfolio manager

OrbiMed under the terms of its portfolio management agreement with the AIFM and the Company provides, inter alia, the following services:

the seeking out and evaluating of investment opportunities;
recommending the manner by which monies should be invested, disinvested, retained or realised;
advising on how rights conferred by the investments should be exercised;
analysing the performance of investments made; and
advising the Company in relation to trends, market movements and other matters which may affect the investment objective and policy of the Company.

OrbiMed receives a base fee of 0.65% of NAV and a performance fee of 15% of outperformance against the Benchmark as detailed in the Report of the Directors which can be found in the Annual Report.

Depositary, custodian and prime broker

J.P. Morgan Europe Limited acts as the Company’s Depositary and J.P. Morgan Securities LLC as its Custodian and Prime Broker.

J.P. Morgan Europe Limited, as Depositary, must take reasonable care to ensure that the Company is managed in accordance with the Financial Conduct Authority’s Investment Funds Sourcebook, the AIFMD and the Company’s Articles of Association. The Depositary must in the context of this role act honestly, fairly, professionally, independently and in the interests of the Company and its shareholders.

The Depositary receives a variable fee based on the size of the Company as set out in the Report of the Directors which forms part of the Annual Report.

J.P. Morgan Europe Limited has discharged certain of its liabilities as Depositary to J.P. Morgan Securities LLC. Further details of this arrangement are set out in the Report of the Directors. J.P. Morgan Securities LLC, as Custodian and Prime Broker, provides the following services under its agreement with the Company:

safekeeping and custody of the Company’s investments and cash;
processing of transactions;
provision of an overdraft facility. Assets up to 140% of the value of the outstanding overdraft can be taken as collateral. See note 16 to the Financial Statements for further details; and
foreign exchange services.

AIFM AND PORTFOLIO MANAGER EVALUATION AND RE-APPOINTMENT

The performance of the AIFM and the Portfolio Manager is reviewed continuously by the Board and the Management Engagement & Remuneration Committee (the “Committee”) with a formal evaluation being undertaken each year. As part of this process, the Committee monitors the services provided by the AIFM and the Portfolio Manager and receives regular reports and views from them.

The Committee also receives comprehensive performance measurement reports to enable it to determine whether or not the performance objectives set by the Board have been met. The Committee reviewed the appropriateness of the appointment of the AIFM and the Portfolio Manager in March 2023 with a positive recommendation being made to the Board.

The Board believes the continuing appointment of the AIFM and the Portfolio Manager is in the interests of shareholders as a whole. In coming to this decision, it took into consideration, inter alia, the following:

the quality of the service provided and the depth of experience of the company management, company secretarial, administrative and marketing team that the AIFM allocates to the management of the Company; and
the quality of the service provided and the quality and depth of experience allocated by the Portfolio Manager to the management of the portfolio and the long-term performance of the portfolio in absolute terms and by reference to the Benchmark.

RISK MANAGEMENT

The Board is responsible for the management of risks faced by the Company. Through delegation to the Audit & Risk Committee, the Board has established procedures to manage risk, to review the Company’s internal control framework and establish the level and nature of the principal risks the Company is prepared to accept in order to achieve its long-term strategic objective. At least twice a year the Audit & Risk Committee carries out a robust assessment of the principal risks and uncertainties with the assistance of Frostrow (the Company’s AIFM) identifying the principal risks faced by the Company. These principal risks and the ways they are managed or mitigated are detailed below.

Principal risks and uncertainties	Mitigation
Market risks
By the nature of its activities and Investment Objective, the Company’s portfolio is exposed to fluctuations in market prices (from both individual security prices and foreign exchange rates) and due to exposure to the global healthcare sector, it is expected to have higher volatility than the wider market. As such investors should be aware that by investing in the Company they are exposing themselves to market risks and those additional risks specific to the sectors in which the Company invests, such as political interference in drug pricing. In addition, OrbiMed’s approach is expected to lead to performance that will deviate from that of comparators, including both market indices and other investment companies investing in healthcare. The Company also uses leverage (both through derivatives and gearing) the effect of which is to amplify the gains or losses the Company experiences.	To manage these risks the Board and the AIFM have appointed OrbiMed to manage the portfolio within the remit of the investment objective and policy, and imposed various limits and guidelines. These limits ensure that the portfolio is diversified, reducing the risks associated with individual stocks, and that the maximum exposure (through derivatives and an overdraft facility) is limited. The compliance with those limits and guidelines is monitored daily by Frostrow and OrbiMed and reported to the Board monthly. In addition, OrbiMed reports at each Board meeting on the performance of the Company’s portfolio, which encompasses the rationale for stock selection decisions, the make-up of the portfolio, potential new holdings and, derivative activity and strategy (further details on derivatives can be found in note 16 to the Financial Statements). The Company does not currently hedge its currency exposure.
Geopolitical/regulatory and macro economic risk
Macro events may have an adverse impact on the Company’s performance by causing exchange rate volatility, changes in tax or regulatory environments, and/or a fall in market prices. Emerging markets, which a portion of the portfolio is exposed to, can be subject to greater political uncertainty and price volatility than developed markets.	While such events are outside the control of the Company the Board reviews regularly, and discusses with the Portfolio Manager, the wider economic and political environment, along with the portfolio exposure and the execution of the investment policy against the long-term objectives of the Company. The ongoing tensions in the Asia Pacific Region and also the instability caused by the war in the Ukraine have featured in these discussions. The Portfolio Manager’s risk team perform systematic risk analysis, including country and industry specific risk monitoring. The Board monitors regulatory developments but relies on the services of its external advisers to ensure compliance with applicable law and regulations. The Board has appointed a specialist investment trust AIFM and Company Secretary who provides industry and regulatory updates at each Board meeting.
Unquoted investment risk
The Company’s risk could be increased by its investment in unquoted companies. These investments may be more difficult to buy, sell or value, so changes in their valuations may be greater than for listed assets. The valuation of unquoted investments requires considerable judgement as explained in Note1(a) to the Financial Statements and as such realisations may be materially lower than the value as estimated by the Company. Particular events, outside the control of the Company, may also have a significant impact on the valuation and considerable uncertainty may exist around the potential future outcomes for each investment.	To mitigate this risk the Board and AIFM have set a limit of 10% of the portfolio, calculated at the time of investment, that can be held in unquoted investments and have established a robust and consistent valuation policy and process as set out in Note 1(b), which is in line with UK GAAP requirements and the International Private Equity and Venture Capital (IPEV) Guidelines. The Board also monitors the performance of these investments compared to the additional risks involved.
Investment management key person risk
There is a risk that the individuals responsible for managing the Company’s portfolio may leave their employment or may be prevented from undertaking their duties.	The Board manage this risk by: appointing OrbiMed, who operate a team environment such that the loss of any individual should not impact on service levels; receiving reports from OrbiMed at each Board meeting, such report includes any significant changes in the make-up of the team supporting the Company; meeting the wider team, outside the designated lead managers, at OrbiMed’s offices and encouraging the participation of the wider OrbiMed team in investor updates; and delegating to the Management Engagement & Remuneration Committee, responsibility to perform an annual review of the service received from OrbiMed, including, inter alia, the team supporting the lead managers and succession planning.
Counterparty risk
In addition to market and foreign currency risks, discussed above, the Company is exposed to risk arising from the use of counterparties. If a counterparty were to fail, the Company could be adversely affected through either delay in settlement or loss of assets. The most significant counterparty the Company is exposed to is J.P. Morgan Securities LLC which is responsible for the safekeeping of the Company’s assets and provides the overdraft facility to the Company. As part of the arrangements with J.P. Morgan Securities LLC they may take assets, up to 140% of the value of the drawn overdraft, as collateral and have first priority security interest or lien over all of the Company’s assets. Such assets taken as collateral may be used, loaned, sold, rehypothecated or transferred by J.P. Morgan Securities LLC. Although the Company maintains the economic benefit from the ownership of those assets it does not hold any of the rights associated with those assets. Any of the Company’s assets taken as collateral are not covered by the custody arrangements provided by J.P. Morgan Securities LLC.	This risk is managed by the Board through: reviews of the arrangements with, and services provided by, the Depositary and the Custodian and Prime Broker to ensure that the security of the Company’s assets is being maintained. Legal opinions are sought, where appropriate, as part of this review. Also, the Board regularly monitors the credit rating of the Company’s Custodian and Prime Broker; monitoring of the assets taken as collateral (further details can be found in note 16 to the Financial Statements); reviews of OrbiMed’s approved list of counterparties, the Company’s use of those counterparties and OrbiMed’s process for monitoring, and adding to, the approved counterparty list; monitoring of counterparties, including reviews of internal control reports and credit ratings, as appropriate;
The Company is, however, afforded protection in accordance with SEC rules and U.S. legislation equal to the value of the assets that have been rehypothecated.	by primarily investing in markets that operate DVP (Delivery Versus Payment) settlement. The process of DVP mitigates the risk of losing the principal of a trade during the settlement process; and J.P. Morgan Securities LLC is subject to regular monitoring by J.P. Morgan Europe Limited, the Company’s Depositary, and the Board receives regular reports from J.P. Morgan Europe Limited.
Service provider risk
The Company is reliant on the systems of the its service providers and as such disruption to, or a failure of, those systems (including, for example, as a result of cyber-crime or a ‘black-swan’ event) could lead to a failure to comply with law and regulations leading to reputational damage and/ or financial loss.	To manage these risks the Board: receives a monthly compliance report from Frostrow, which includes, inter alia, details of compliance with applicable laws and regulations; reviews internal control reports, key policies, including measures taken to combat cyber security issues, and also the disaster recovery procedures of its service providers; maintains a risk matrix with details of risks the Company is exposed to, the controls relied on to manage those risks and the frequency of the controls operation; receives updates on pending changes to the regulatory and legal environment and progress towards the Company’s compliance with these; and has considered the increased risk of cyber-attacks and received reports and assurance at meetings with its service providers where the information security controls in place were reviewed.
ESG related risks
Both the Board and the Portfolio Manager recognise the importance of having a coherent ESG policy. There is a risk that investing in companies that disregard ESG factors will have a negative impact on investment returns and also that the Company itself may become unattractive to investors if ESG is not appropriately considered in the Portfolio Manager’s decision making process.	The Portfolio Manager provides ESG reports at each Board meeting, highlighting examples where ESG issues influenced investment decisions and/ or led to engagement with an investee company. The Portfolio Manager also produces a quarterly ESG update. The Board ensures that the Portfolio Manager’s ESG approach is in line with standards elsewhere and the Board’s expectations. A summary of the Portfolio Manager’s approach to Responsible Investing can be found in the Strategic Report.
Shareholder relations and share price performance risk
The Company is also exposed to the risk, particularly if the investment strategy and approach are unsuccessful, that the Company may underperform resulting in the Company becoming unattractive to investors and a widening of the share price discount to NAV per share. Also, falls in stock markets and the risk of a global recession, are likely to adversely affect the performance of the Company’s shares.	In managing this risk the Board: reviews the Company’s Investment Objective in relation to market, and economic, conditions and the operation of the Company’s peers; discusses at each Board meeting the Company’s future development and strategy; reviews the shareholder register at each Board meeting; actively seeks to promote the Company to current and potential investors; and has implemented a discount/premium control mechanism. The Board undertakes a regular review of the Company’s share price compared to the NAV per share. Company promotional activities have been delegated to Frostrow, who report to the Board at each Board meeting on these activities.

Emerging risks

The Company has carried out a robust assessment of the Company’s emerging and principal risks and the procedures in place to identify emerging risks are described below. The International Risk Governance Council definition of an ‘emerging’ risk is one that is new, or is a familiar risk in a new or unfamiliar context or under new context conditions (re-emerging). Failure to identify emerging risks may cause reactive actions rather than being proactive and, in worst case, could cause the Company to become unviable or otherwise fail or force the Company to change its structure, objective or strategy.

The Audit & Risk Committee reviews a risk map at its half-yearly meetings. Emerging risks are discussed in detail as part of this process and also throughout the year to try to ensure that emerging (as well as known) risks are identified and, so far as practicable, mitigated. There are currently no emerging risks being monitored by the Audit & Risk Committee.

COMPANY PROMOTION

The Company has appointed Frostrow to provide marketing and investor relations services, in the belief that a well-marketed investment company is more likely to grow over time, have a more diverse and stable shareholder register and will trade at a superior rating to its peers.

Frostrow actively promotes the Company in the following ways:

Engaging regularly with institutional investors, discretionary wealth managers and a range of execution-only platforms: Frostrow regularly talks and meets with institutional investors, discretionary wealth managers and execution-only platform providers to discuss the Company’s strategy and to understand any issues and concerns, covering both investment and corporate governance matters;

Making Company information more accessible: Frostrow works to raise the profile of the Company by targeting key groups within the investment community, holding annual investment seminars, overseeing PR output and managing the Company’s website and wider digital offering, including Portfolio Manager videos and social media;

Disseminating key Company information: Frostrow performs the Investor Relations function on behalf of the Company and manages the investor database. Frostrow produces all key corporate documents, distributes monthly Fact Sheets, Annual Reports and updates from OrbiMed on portfolio and market developments; and

Monitoring market activity, acting as a link between the Company, shareholders and other stakeholders: Frostrow maintains regular contact with sector broker analysts and other research and data providers, and conducts periodic investor perception surveys, liaising with the Board to provide up-to-date and accurate information on the latest shareholder and market developments.

DISCOUNT/PREMIUM CONTROL

The Board undertakes a regular review of the level of discount/premium and consideration is given to ways in which share price performance may be enhanced, including the effectiveness of marketing, share issuance and share buybacks, where appropriate.

It is the Board’s policy to buy back its shares if the Company’s share price discount to the net asset value per share exceeds 6% on an ongoing basis. Shares repurchased are held as treasury shares. Treasury shares can be sold back to the market at a later date at a premium to the cum-income net asset value per share (See Glossary). Shareholders should note, however, that it remains very possible for the discount to be greater than 6% for extended periods of time particularly when sentiment towards the Company, the sector and to investment trusts generally remains poor.

While buybacks may prove unable to prevent the discount from widening, they also 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.

At times when there are unsatisfied buying orders for the Company’s shares in the market, the Company has the ability to issue new shares at a small premium to the cum income net asset value per share. This acts as an effective share price premium management tool.

SOCIAL, HUMAN RIGHTS AND ENVIRONMENTAL MATTERS

The Directors, through the Company’s Portfolio Manager, encourage companies in which investments are made to adhere to best practice with regard to corporate governance. In light of the nature of the Company’s business there are no relevant human rights issues and the Company does not have a human rights policy.

The Company recognises that social and environmental issues can have an effect on some of its investee companies.

The Company is an investment trust and so its own direct environmental impact is minimal. As an externally- managed investment trust, the Company does not have any employees or maintain any premises, nor does it undertake any manufacturing or other physical operations itself. All its operational functions are outsourced to third party service providers. Therefore, the Company has no material, direct impact on the environment or any particular community and the Company itself has no environmental, human rights, social or community policies. The Board of Directors consists of seven Directors, five of whom are resident in the UK, one in Canada and one in the U.S.

The Board holds the majority of its regular meetings in the U.K., with usually one meeting held each year in New York, and has a policy that travel, as far as possible, is minimal, thereby minimising the Company’s greenhouse gas emissions. Further details concerning greenhouse gas emissions can be found within the Report of the Directors contained in the Annual Report. Video conferencing has proved to be a very effective way of holding meetings, and this medium continues to be used alongside in person meetings.

The Portfolio Manager engages with the Company’s underlying investee companies in relation to their corporate governance practices and the development of their policies on social, community and environmental matters.

INTEGRITY AND BUSINESS ETHICS

The Company is committed to carrying out business in an honest and fair manner with a zero-tolerance approach to bribery, tax evasion and corruption. As such, policies and procedures are in place to prevent this. In carrying out its activities, the Company aims to conduct itself responsibly, ethically and fairly, including in relation to social and human rights issues.

The Company believes that high standards of ESG make good business sense and have the potential to protect and enhance investment returns. The Portfolio Manager’s investment criteria provide that ESG and ethical issues are taken into account and best practice is encouraged by the Board. The Board’s expectations are that its principal service providers have appropriate governance policies in place.

TASKFORCE FOR CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”)

The Company notes the TCFD recommendations on climate-related financial disclosures. The Company is an investment trust with no employees, internal operations or property and, as such, it is exempt from the Listing Rules requirement to report against the TCFD framework.

LONGER TERM VIABILITY

The Board has carried out a robust assessment of the principal risks facing the Company including those that would threaten its business model, future performance, solvency or liquidity. The Board has drawn up a matrix of risks facing the Company and has put in place a schedule of investment limits and restrictions, appropriate to the Company’s investment objective and policy, in order to mitigate these risks as far as practicable. The principal risks and uncertainties which have been identified, and the steps taken by the Board to mitigate these as far as possible.

The Board believes it is appropriate to assess the Company’s viability over a five year period. This period is also deemed appropriate due to our Portfolio Manager’s long-term investment horizon and also what it believes to be investors’ horizons, taking account of the Company’s current position and the potential impact of the principal risks and uncertainties. The Directors also took into account the liquidity of the portfolio and the expectation that the Company will pass the next continuation vote in 2024 when considering the viability of the Company over the next five years and its ability to meet liabilities as they fall due.

The Directors do not expect there to be any significant change in the principal risks that have been identified or the adequacy of the mitigating controls in place, and do not envisage any change in strategy or objectives or any events that would prevent the Company from continuing to operate over that period as the Company’s assets are liquid, its commitments are limited and the Company intends to continue to operate as an investment trust.

Based on this assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five-year period.

STAKEHOLDER INTERESTS AND BOARD DECISION-MAKING (SECTION 172 OF THE COMPANIES ACT 2006)

The Directors are required to explain more fully how they have discharged their duty under s172 of the Companies Act 2006 in promoting the success of the Company for the benefit of the members as a whole. This includes the likely consequences of the Directors’ decisions in the long-term and how they have taken wider stakeholders’ needs into account.

The Directors aim to act fairly between the Company’s stakeholders. The Board’s approach to shareholder relations is summarised in the Corporate Governance Report. The Statement from the Chair provides an explanation of actions taken by the Directors during the year to achieve the Board’s long-term aim of ensuring that the Company’s shares trade at a price close to the NAV per share.

As an externally managed investment trust, the Company has no employees, customers, operations or premises. Therefore, the Company’s key stakeholders (other than its shareholders) are considered to be its service providers. The need to foster business relationships with the service providers and maintain a reputation for high standards of business conduct are central to the Directors’ decision-making as the Board of an externally managed investment trust. The Directors believe that fostering constructive and collaborative relationships with the Company’s service providers will assist in their promotion of the success of the Company for the benefit of all shareholders.

The Board engages with representatives from its service providers throughout the year. Representatives from OrbiMed and Frostrow are in attendance at each Board meeting. As the Portfolio Manager and the AIFM respectively, the services they provide are fundamental to the long-term success and smooth running of the Company. The Statement from the Chair and the Business Review describe relevant decisions taken during the year relating to OrbiMed and Frostrow. Further details about the matters discussed in Board meetings and the relationship between OrbiMed and the Board are set out in the Corporate Governance Report.

Representatives from other service providers are asked to attend Board meetings when deemed appropriate.

Further details are set out overleaf.

Who?	Why?	How?
Stakeholder group	The benefits of engagement with the company's stakeholders	How the board, the portfolio manager and the AIFM have engaged with the company’s stakeholders
Investors	Clear communication of the Company’s strategy and the performance against the Company’s objective can help the share price trade at a narrower discount or a premium to its net asset value per share which benefits shareholders. New shares can be issued to meet demand without net asset value per share dilution to existing shareholders. Increasing the size of the Company can benefit liquidity as well as spread costs. Share buy backs are undertaken at the discretion of the Directors.	The Portfolio Manager and Frostrow, on behalf of the Board, complete a programme of investor relations throughout the year. In addition, the Chairman met with a number of the Company’s larger shareholders during the year. An analysis of the Company’s shareholder register is provided to the Directors at each Board meeting along with marketing reports from Frostrow. The Board reviews and considers the marketing plans on a regular basis. Reports from the Company’s broker are submitted to the Board on investor sentiment and industry issues. Key mechanisms of engagement include: The Annual General Meeting, where the Portfolio Manager provides an update on the Company’s performance and strategy. This is followed by a question and answer section.
		The Company’s website which hosts reports, articles and insights, and monthly fact sheets. One-on-one and group investor meetings. Should any significant votes be cast against a resolution proposed at the Annual General Meeting the Board will engage with shareholders. The Board will explain in its announcement of the results of the Annual General Meeting any actions it intends to take to consult shareholders in order to understand the reasons behind significant votes against. Following any consultation, an update would be published no later than six months after the Annual General Meeting and the Annual Report will detail the impact shareholder feedback has had on any decisions the Board has taken and any actions or resolutions proposed.

What?

Outcomes and actions

What were the key areas of engagement?

What actions were taken, including main decisions?

Key areas of engagement with investors

Ongoing dialogue with shareholders concerning the strategy of the Company, performance and the portfolio.

The Portfolio Manager and Frostrow meet regularly with shareholders and potential investors to discuss the Company’s strategy, performance and portfolio. The Chairman also met with key shareholders during the year to discuss the Company’s investment strategy including ESG.

Frostrow and the Portfolio Manager engage with retail investors through a number of different channels:

(i) The Company’s website, which is maintained by Frostrow, contains articles, webinars and quarterly updates;

(ii) A distribution list of shareholders (retail and professional) which is maintained by Frostrow and is used to communicate with investors on a regular basis;

(iii) The Portfolio Manager provides annual presentations online – (webcasts) and offline (Annual General Meeting), which shareholders are able to attend and participate in; and

(iv) Frostrow ensures that the Company is available through a wide range of leading execution only platforms.

Who?	Why?	How?
Stakeholder group	The benefits of engagement with the company's stakeholders	How the board, the portfolio manager and the AIFM have engaged with the company’s stakeholders
Portfolio Manager	Engagement with the Company’s Portfolio Manager is necessary to evaluate their performance against the Company’s stated strategy and to understand any risks or opportunities this may present. The Board ensures that the Portfolio Manager’s environmental, social and governance (“ESG”) approach is in line with standards elsewhere and the Board’s expectations. Engagement also helps ensure that the Portfolio Manager’s fees are closely monitored and remain competitive. Gaining a deeper understanding of the portfolio companies and their strategies as well as incorporating consideration of ESG factors into the investment process assists in understanding and mitigating risks of an investment as well as identifying future potential opportunities.	The Board met regularly with the Company’s Portfolio Manager throughout the year. The Board also receives monthly performance and compliance reporting. The Portfolio Manager’s attendance at each Board meeting provides the opportunity for the Portfolio Manager and Board to further reinforce their mutual understanding of what is expected from both parties. The Board encourages the Company’s Portfolio Manager to engage with companies and in doing so expects ESG issues to be an important consideration. The Board receives an update on Frostrow’s engagement activities by way of a dedicated report at Board meetings and at other times during the year as required.
Service Providers	The Company contracts with third parties for other services including: custody, company secretarial, accounting & administration and registrar. The Company ensures that the third parties to whom the services have been outsourced complete their roles in line with their service level agreements thereby supporting the Company in its success and ensuring compliance with its obligations.	The Board and Frostrow, acting in its capacity as AIFM, engage regularly with other service providers both in one-to-one meetings and via regular written reporting. This regular interaction provides an environment where topics, issues and business development needs can be dealt with efficiently and collegiately. The Board together with Frostrow also carried out a review of the service providers’ business continuity plans and additional cyber security provisions. The review of the performance of the Portfolio Manager and Frostrow is a continuous process carried out by the Board and the Management Engagement & Remuneration Committee with a formal evaluation being undertaken annually.

What?		Outcomes and actions
What were the key areas of engagement?		What actions were taken, including main decisions?
Key areas of engagement with the Portfolio Manager on an ongoing basis are portfolio composition, performance, outlook and business updates.
Regular review of the performance and make up of the investment portfolio. The integration of ESG factors into the Portfolio Manager’s investment processes.		The Board engaged with the Portfolio Management team to discuss the Company’s overall performance as well as developments in individual portfolio companies and wider macroeconomic developments. The Portfolio Manager reports on ESG issues at each Board meeting.
Key areas of engagement with Service Providers
The Directors have frequent engagement with the Company’s other service providers through the annual cycle of reporting. This engagement is completed with the aim of maintaining an effective working relationship and oversight of the services provided.		No specific action required as the reviews of the Company’s service providers, have been positive and the Directors believe their continued appointment is in the best interests of the Company.
Key areas of engagement with the broker
The Board is cognisant that the trading of the Company‘s shares at a persistent and significant discount or premium to the prevailing NAV per share is not in the interests of shareholders.		Throughout the year the Board closely monitored the Company’s discount/premium to NAV per share and received regular updates from the broker. 2,836,483 shares were bought back during the year, and a further 1,299,037 shares were bought back since the year-end to 5 June 2023. No new shares were issued during the year, nor following the year-end to 5 June 2023. (Please see the Statement from the Chair for further information.)

PERFORMANCE AND FUTURE DEVELOPMENTS

A review of the Company’s year, its performance and the outlook for the Company can be found in the Chair’s Statement and in the Portfolio Manager’s Review.

The Company’s overall strategy remains unchanged.

LOOKING TO THE FUTURE

The Board concentrates its attention on the Company’s investment performance and OrbiMed’s investment approach and on factors that may have an effect on this approach. Marketing reports are given to the Board at each board meeting by the AIFM which include how the Company will be promoted and details of planned communications with existing and potential shareholders. The Board is regularly updated by the AIFM on wider investment trust industry issues and discussions are held at each Board meeting concerning the Company’s future development and strategy.

A review of the Company’s year, its performance since the year-end and the outlook for the Company can be found in the Chair’s Statement and in the Portfolio Manager’s Review. It is expected that the Company’s Strategy will remain unchanged in the coming year.

ALTERNATIVE PERFORMANCE MEASURES

The Financial Statements set out the required statutory reporting measures of the Company’s financial performance. In addition, the Board assesses the Company’s performance against a range of criteria which are viewed as particularly relevant for investment trusts, which are explained in greater detail in the Strategic Report, under the heading ‘Key Performance Indicators’.

By order of the Board

Frostrow Capital LLP

Company Secretary

6 June 2023

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations. In preparing these financial statements, the Directors are required to:

select suitable accounting policies and apply them consistently;
make judgements and estimates that are reasonable and prudent;
follow applicable UK accounting standards comprising FRS 102;
prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business; and
prepare a director’s report, a strategic report and a director’s remuneration report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for ensuring that the Report of the Directors and other information included in the Annual Report is prepared in accordance with company law in the United Kingdom. They are also responsible for ensuring that the Annual Report includes information required by the Listing Rules of the FCA.

The Directors are also responsible for ensuring that the Annual Report and the Financial Statements are made available on a website. The Annual Report and the Financial Statements are published on the Company’s website at www.worldwidewh.com and via Frostrow’s website at www.frostrow.com. The maintenance and integrity of these websites, so far as it relates to the Company, is the responsibility of Frostrow. The work carried out by the Auditors does not involve consideration of the maintenance and integrity of these websites and, accordingly, the Auditors accept no responsibility for any changes that have occurred to the financial statements since they were initially presented on these websites. Visitors to the websites need to be aware that legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in their jurisdiction.

DISCLOSURE OF INFORMATION TO THE AUDITORS

So far as the Directors are aware, there is no relevant information of which the Auditors are unaware. The Directors have taken all steps they ought to have taken to make themselves aware of any relevant audit information and to establish that the Auditors are aware of such information.

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL FINANCIAL REPORT

The Directors confirm to the best of their knowledge that:

the Annual Report and the Financial Statements have been prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and the return for the year ended 31 March 2023;
the Statement from the Chair, Strategic Report and the Report of the Directors include a fair review of the information required by 4.1.8R to 4.1.11R of the FCA’s Disclosure Guidance and Transparency Rules; and
the Annual Report and the Financial Statements, includes a fair review of the development and performance of the Company and of its financial position, together with a description of the principal risks and uncertainties it faces. Also, that taken as a whole they are fair, balanced and understandable and provide the information necessary to assess the Company’s performance, business model and strategy.

On behalf of the Board

Doug McCutcheon

Chair

6 June 2023

CORPORATE GOVERNANCE

THE BOARD AND COMMITTEES

Responsibility for effective governance lies with the Board. The governance framework of the Company reflects the fact that as an investment company it has no employees and outsources portfolio management to OrbiMed and risk management, company management, company secretarial, administrative and marketing services to Frostrow.

THE BOARD

Chair – Doug McCutcheon

Senior Independent Director – Sarah Bates

Five additional non-executive Directors, all considered independent, except for Sven Borho.

Key responsibilities:

to provide leadership and set strategy, values and standards within a framework of prudent effective controls which enable risk to be assessed and managed;
to ensure that a robust corporate governance framework is implemented; and
to challenge constructively and scrutinise performance of all outsourced activities.

Management Engagement & Remuneration Committee

Chair

Jo Parfrey

All Independent Directors

Key responsibilities:

to review regularly the contracts, the performance and remuneration of the Company’s principal service providers;
to set the Directors’ Remuneration Policy; and
to review the terms and conditions of the Directors’ appointments.

Audit & Risk Committee

Chair

Tim Livett*
All Independent Directors (excluding the Chair, Doug McCutcheon)

Key responsibilities:

to review the Company’s financial reports;
to oversee the risk and control environment and financial reporting; and
to have primary responsibility for the relationship with the Company’s external Auditors, to review their independence and performance, and to determine their remuneration.

Nominations Committee

Chair

Sarah Bates

All Independent Directors

Key responsibilities:

to review regularly the Board’s structure and composition; and
to make recommendations for any changes or new appointments.

* The Board believes that Tim Livett has the necessary recent and relevant financial experience to Chair the Company’s Audit & Risk Committee.

Copies of the full terms of reference, which clearly define the responsibilities of each Committee, can be obtained from the Company Secretary and can be found at the Company’s website at www.worldwidewh.com. Copies will also be available for inspection on the day of the Annual General Meeting.

CORPORATE GOVERNANCE STATEMENT

The Board is committed to maintaining and demonstrating high standards of corporate governance. The Board has considered the principles and recommendations of the AIC Code of Corporate Governance published in February 2019 (‘AIC Code’). The AIC Code addresses all the principles set out in the UK Corporate Governance Code (the ‘UK Code’), as well as setting out additional provisions on issues that are of specific relevance to the Company.

The Financial Reporting Council has confirmed that by following the AIC Code boards of investment companies will meet their obligations in relation to the UK Code and paragraph 9.8.6 of the UK Listing Rules.

The Board considers that reporting in accordance with the principles and recommendations of the AIC Code (which has been endorsed by the Financial Reporting Council) provides more relevant and comprehensive information to shareholders. By reporting against the AIC Code, the Company meets its obligations under the UK Code (and associated disclosure requirements under paragraph 9.8.6 of the Listing Rules) and as such does not need to report further on issues contained in the UK Code which are irrelevant to the Company as an externally-managed investment company, including the provisions relating to the role of the chief executive, executive directors’ remuneration and the internal audit function.

The Company has complied with the principles and recommendations of the AIC Code.

The AIC Code can be viewed at www.theaic.co.uk and the UK Code can be viewed on the Financial Reporting Council website at www.frc.org.uk. The Corporate Governance Report forms part of the Report of the Directors.

BOARD LEADERSHIP AND PURPOSE

Purpose and strategy

The purpose and strategy of the Company are described in the Strategic Report.

THE BOARD

The Board is responsible for the effective Stewardship of the Company’s affairs. Strategy issues and all operational matters of a material nature are considered at its meetings.

The Board consists of seven non-executive Directors, each of whom, with the exception of Sven Borho, is independent of OrbiMed and the Company’s other service providers. No member of the Board is a Director of another investment company managed by OrbiMed, nor has any Board member (with the exception of Sven Borho) been an employee of OrbiMed or any of the Company’s service providers.

The Board carefully considers the various guidelines for determining the independence of non-executive Directors, placing particular weight on the view that independence is evidenced by an individual being independent of mind, character and judgement. All Directors retire at the AGM each year and, if appropriate, seek election or re-election. Each Director has signed a letter of appointment to formalise the terms of their engagement as a non-executive Director, copies of which are available on request at Frostrow’s offices.

BOARD CULTURE

The Board aims to consider and discuss differences of opinion, unique vantage points and to exploit fully areas of expertise. The Chair encourages open debate to foster a supportive and co-operative approach for all participants. Strategic decisions are discussed openly and constructively. The Board aims to be open and transparent with shareholders and other stakeholders and for the Company to conduct itself responsibly, ethically and fairly in its relationships with service providers.

The Board has gained assurance on whistleblowing procedures at the Company’s principal service providers to ensure employees at those companies are supported in speaking up and raising concerns. No concerns relating to the Company were raised during the year.

Shareholder relations

The Company has appointed Frostrow to provide marketing and investor relations services, in the belief that a well marketed investment company is more likely to grow over time, have a more diverse, stable list of shareholders and its shares will trade at close to net asset value per share over the long run. Frostrow actively promotes the Company.

Shareholder communications

The Board, the AIFM and the Portfolio Manager consider maintaining good communications with shareholders and engaging with larger shareholders through meetings and presentations a key priority. Shareholders are being informed by the publication of annual and half-year reports which include financial statements. These reports are supplemented by the daily release of the net asset value per share to the London Stock Exchange and the publication of monthly fact sheets. All this information, including interviews with the Portfolio Manager, is available on the Company’s website at www.worldwidewh.com.

The Board monitors the share register of the Company; it also reviews correspondence from shareholders at each meeting and maintains regular contact with major shareholders. Shareholders who wish to raise matters with a Director may do so by writing to them at the registered office of the Company.

The Board supports the principle that the Annual General Meeting be used to communicate with private investors, in particular. Shareholders are encouraged to attend the AGM, where they are given the opportunity to question the Chair, the Board and representatives of the Portfolio Manager. In addition, the Portfolio Manager makes a presentation to shareholders covering the investment performance and strategy of the Company at the AGM. Voting at the AGM is conducted on a poll and details of the proxy votes received in respect of each resolution will be made available on the Company’s website.

Significant holdings and voting rights

Details of the shareholders with substantial interests in the Company’s shares, the Directors’ authorities to issue and repurchase the Company’s shares, and the voting rights of the shares are set out in the Directors’ Report.

BOARD MEETINGS

The Board meets formally at least four times each year. A representative of OrbiMed attends all meetings; representatives from Frostrow are also in attendance at each Board meeting. The Independent Directors also meet before each formal Board meeting without representatives from Frostrow and OrbiMed being present. The Chair encourages open debate to foster a supportive and co-operative approach for all participants.

The Board has agreed a schedule of matters specifically reserved for decision by the Board. This includes establishing the investment objectives, strategy and the Benchmark, the permitted types or categories of investments, the markets in which transactions may be undertaken, the amount or proportion of the assets that may be invested in any geography or category of investment or in any one investment, and the Company’s share issuance and share buyback policies.

The Board, at its regular meetings, undertakes reviews of key investment and financial data, revenue projections and expenses, analyses of asset allocation, transactions and performance comparisons, share price and net asset value performance, marketing and shareholder communication strategies, the risks associated with pursuing the investment strategy, peer group information and industry issues.

The Chair is responsible for ensuring that the Board receives accurate, timely and clear information. Representatives of OrbiMed and Frostrow Capital LLP report regularly to the Board on issues affecting the Company.

The Board is responsible for strategy and has established an annual programme of agenda items under which it reviews the objectives and strategy for the Company at each meeting.

CONFLICTS OF INTEREST

Company Directors have a statutory obligation to avoid a situation in which they (and connected persons) have, or can have, a direct or indirect interest that conflicts, or may possibly conflict, with the interests of the Company. The Board has in place procedures for managing any actual or potential conflicts of interest. No conflicts of interest arose during the year under review.

BOARD FOCUS AND RESPONSIBILITIES

With the day to day management of the Company outsourced to service providers the Board’s primary focus at each Board meeting is reviewing the investment performance and associated matters, such as, inter alia, future outlook and strategy, gearing, asset allocation, investor relations, marketing, and industry issues.

In line with its primary focus, the Board retains responsibility for all the key elements of the Company’s strategy and business model, including:

the Investment Objective, Policy and Benchmark, incorporating the investment and derivative guidelines and limits, and changes to these;
the maximum level of gearing and leverage the Company may employ;
a review of performance against the Company’s KPIs;
a review of the performance and continuing appointment of service providers; and
the maintenance of an effective system of oversight, risk management and corporate governance.

The Investment Objective, Policy, and Benchmark, including the related limits and guidelines, are set out in the Strategic Report, along with details of the gearing and leverage levels allowed.

Details of the principal KPIs and further information on the principal service providers, their performance and continuing appointment, along with details of the principal risks, and how they are managed, are set out in the Strategic Report.

The Corporate Governance Report includes a statement of compliance with corporate governance codes and best practice, and the Business Review includes details of the internal control and risk management framework within which the Board operates.

BOARD COMPOSITION AND SUCCESSION

Succession planning

The Board regularly considers its structure and recognises the need for progressive refreshment. (Please see the Statement from the Chair for further information).

The Board has an approved succession planning policy to ensure that (i) there is a formal, rigorous and transparent procedure for the appointment of new Directors; and (ii) the Board is comprised of members who collectively display the necessary balance of professional skills, experience, length of service and industry/Company knowledge.

During the year, the Board reviewed the policy on Directors’ tenure and considered the overall length of service of the Board as a whole.

Policy on the tenure of the chair and other non-executive directors

The tenure of each non-executive Director, including the Chair, is not ordinarily expected to exceed nine years. However, the Board has agreed that the tenure of the Chair may be extended for an agreed time provided such an extension is conducive to the Board’s overall orderly succession. The Board believes that this more flexible approach to the tenure of the Chair is appropriate in the context of the regulatory rules that apply to investment companies, which ensure that the Chair remains independent after appointment, while being consistent with the need for regular refreshment and diversity.

The Board has been refreshing its membership and will continue to do so over time. It may be the case that Directors serve for longer than nine years to ensure that any changes made are done so in an orderly and structured manner. All Directors seek election or re-election every year. Further details regarding the refreshment process can be found in the Chair’s Statement.

The Board subscribes to the view that long serving Directors should not necessarily be prevented from forming part of an independent majority. The Board considers that a Director’s tenure does not necessarily reduce his or her ability to act independently and will continue to assess each Director’s independence annually, through a formal performance evaluation.

Appointments to the board

The Nominations Committee considers annually the skills possessed by the Board and identifies any skill shortages to be filled by new Directors.

The rules governing the appointment and replacement of Directors are set out in the Company’s articles of association and the aforementioned succession planning policy. Where the Board appoints a new Director during the year, that Director will stand for election by shareholders at the next AGM. Subject to there being no conflict of interest, all Directors are entitled to vote on candidates for the appointment of new Directors and on the recommendation for shareholders’ approval for the Directors seeking re-election at the AGM. When considering new appointments, the Board endeavours to ensure that it has the capabilities required to be effective and oversee the Company’s strategic priorities. This will include an appropriate range, balance and diversity of skills, experience and knowledge. The Company is committed to ensuring that any vacancies arising are filled by the most qualified candidates.

Diversity policy

The Board supports the principle of Boardroom diversity, of which gender and ethnicity are two important aspects. The Company’s policy is that the Board and its committees should be comprised of directors with a diverse range of skills, knowledge and experience and that appointments should be made on merit against objective criteria, including diversity in its broadest sense.

The objective of the policy is to have a broad range of approaches, backgrounds, skills, knowledge and experience represented on the Board. To this end, achieving a diversity of perspectives and backgrounds on the Board will be a key consideration in any director search process. The Board encourages any recruitment agencies it engages to find a diverse range of candidates that meet the criteria agreed for each appointment and, from the shortlist, aims to ensure that a diverse range of candidates is brought forward for interview.

The Board will continue to give due regard to the new diversity targets in the Listing Rules as follows:

a) At least 40% of individuals on the board are women;

b) At least one of the senior board positions is held by a woman; and

c) At least one individual on the board is from a minority ethnic background.

In accordance with the Listing Rules, the Board has provided the following information in relation to its diversity as at the year end.

	Number of Board Members	Percentage of the Board	Number of senior positions on the Board (CEO, CFO, SID and Chair)
Men	4	57%	2
Women	3	43%	1
Not specified/prefer not to say	–	–	–

	Number of Board Members	Percentage of the Board	Number of senior positions on the Board (CEO, CFO, SID and Chair)
White British or other White (including minority-white groups)	6	86%	3
Mixed/Multiple Ethnic Groups	–	–	–
Asian/Asian British	1	14%	–
Black/African/Caribbean/Black British	–	–	–
Other ethnic group, including Arab	–	–	–
Not specified/ prefer not to say	–	–	–

* The format of the above tables is prescribed in the Listing Rules. However, as an externally managed investment trust, the Company has no executive management functions, including the roles of CEO and CFO, and the Company has therefore excluded columns relating to executive management. In the absence of the aforementioned roles, the Board considers the Chair of the Audit Committee to be a senior position and therefore the Company has defined the ‘senior positions on the Board’ as Chairman, Senior Independent Director and Chair of the Audit & Risk Committee.

The information above was obtained by asking the Directors to indicate on an anonymous form, how they should be categorised for the purposes of the Listing Rules disclosures.

MEETING ATTENDANCE

The number of meetings held during the year of the Board and its Committees, and each Director’s attendance level, is shown below:

Type and number of meetings held in 2022/23	Board (6)	Audit & Risk Committee (2)	Nominations Committee (1)	Management Engagement & Remuneration Committee (1)
Sir Martin Smith^	3	–	0	0
Sarah Bates	6	2	1	1
Sven Borho*	5	–	–	–
Tim Livett+	2	1	1	1
Humphrey van der Klugt	5	2	1	1
Doug McCutcheon~	6	1	1	1
Jo Parfrey**	2	1	1	1
Dr Bina Rawal	6	2	1	1

^ Sir Martin Smith was not a member of the Audit & Risk Committee. He retired from the Board on 6 July 2022

* Sven Borho does not sit on any of the Company’s Committees + Tim Livett joined the Board on 1 September 2022

~ Doug McCutcheon become the Chair of the Company on 6 July 2022. He ceased to be a member of the Audit & Risk Committee on that day

** Jo Parfrey joined the Board on 1 September 2022

All of the serving Directors with the exception of Humphrey van der Klugt, attended the Annual General Meeting held on 6 July 2022. Humphrey was unable to attend the Annual General Meeting and also a Board Meeting as he was unwell.

BOARD EVALUATION

During the year the performance of the Board, its committees and individual Directors (including each Director’s independence) was evaluated through a formal assessment led by the Senior Independent Director. The performance of the Chair was also evaluated by the Senior Independent Director. The review concluded that the Board was working well. The Board is satisfied that the structure, mix of skills and operation of the Board continue to be effective and relevant for the Company.

As an independent external review of the Board was undertaken in 2021 the next such review will be held in 2024.

The Board pays close attention to the capacity of individual Directors to carry out their work on behalf of the Company. In recommending individual Directors to shareholders for re-election, it considered their other Board positions and their time commitments and is satisfied that each Director has the capacity to be fully engaged with the Company’s business. The Board has considered the position of all of the Directors as part of the evaluation process, and believes that it would be in the Company’s best interests to propose them for election and/or re-election (with the exception of Sarah Bates who will be retiring from the Board on the date of this year’s AGM) at the forthcoming AGM for the following reasons:

Doug McCutcheon joined the Board in November 2012 and became Chair in July 2022. Doug was an investment banker at S.G. Warburg and then UBS for 25 years, most recently as the head of Healthcare Investment Banking for Europe, the Middle East, Africa and Asia-Pacific. It is noted that Doug has been a Director of the Company for more than nine years. The Board has agreed to this period of longer service to ensure an orderly succession. The Senior Independent Director conducted a preliminary evaluation of the Chair shortly after his appointment with no issues being raised. The Board continues to believe that Doug remains independent in thought and judgement.

Sven Borho joined the Board in June 2018. Sven is a founder and Managing Partner of OrbiMed and heads their public Equity team and is the portfolio Manager for OrbiMed’s public equity and hedge funds.

Humphrey van der Klugt joined the Board in February 2016. A former fund manager and Director of Schroder Investment Management Limited, Humphrey has extensive experience of the investment trust sector. He is a Chartered Accountant.

Tim Livett joined the Board on 1 September 2022.

A qualified accountant, Tim is Chair of the Audit & Risk Committee.

Tim is the Chief Financial Officer at Caledonia Investments PLC, and is also a member of the Valuation and Audit & Risk Committees at Oxford University Endowment Management. He was formerly Chief Financial Officer at Wellcome Trust, the global charitable foundation focused on health research. He has an extensive and broad financial background.

Tim studied chemistry at Oxford University.

Jo Parfrey joined the Board on 1 September 2022.

Jo is Chair of the Management Engagement & Remuneration Committee. She is a non-executive Director and Chair of the Audit Committee of Henderson International Income Trust plc, and a nonexecutive Director of Octopus AIM VCT. She is also a non-executive Director and Chair of the Audit Committee of Start Codon Limited and IESO Digital Health Limited and the non-executive Chair of Babraham Research Campus Limited. A Chartered Accountant, Jo has extensive experience of both global investment trusts and healthcare, including life services.

Jo studied chemistry at Oxford University.

Dr Bina Rawal joined the Board on November 2019. A physician with 25 years’ experience in life sciences research and development, she has held senior executive roles in drug development and scientific evaluation in four global pharmaceutical companies.

The Chair is pleased to report that following a formal performance evaluation, the Directors’ performance continues to be effective and they continue to demonstrate commitment to the role.

TRAINING AND ADVICE

New appointees to the Board are provided with a full induction programme. The programme covers the Company’s investment strategy, policies and practices. The Directors are also given key information on the Company’s regulatory and statutory requirements as they arise including information on the role of the Board, matters reserved for its decision, the terms of reference of the Board Committees, the Company’s corporate governance practices and procedures and the latest financial information. It is the Chair’s responsibility to ensure that the Directors have sufficient knowledge to fulfil their role and Directors are encouraged to participate in training courses where appropriate.

The Directors have access to the advice and services of a Company Secretary through its appointed representative which is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. The Company Secretary is also responsible for ensuring good information flows between all parties.

There is an agreed procedure for Directors, in the furtherance of their duties, to take independent professional advice if necessary at the Company’s expense.

RISK MANAGEMENT AND INTERNAL CONTROLS

The Board has overall responsibility for the Company’s risk management and internal control systems and for reviewing their effectiveness. The Company applies the guidance published by the Financial Reporting Council on internal controls. Internal control systems are designed to manage, rather than eliminate, the risk of failure to achieve the business objective and can provide only reasonable and not absolute assurance against material misstatement or loss. These controls aim to ensure that the assets of the Company are safeguarded, that proper accounting records are maintained and that the Company’s financial information is reliable. The Directors have a robust process for identifying, evaluating and managing the significant risks faced by the Company, which are recorded in a risk matrix. The Audit & Risk Committee, on behalf of the Board, considers each risk as well as reviewing the mitigating controls in place. Each risk is rated for its “likelihood” and “impact” and the resultant numerical rating determines its ranking into ‘Principal/Key’, ‘Significant’ or ’Minor’. This process was in operation during the year and continues in place up to the date of this report. The process also involves the Audit & Risk Committee receiving and examining regular reports from the Company’s principal service providers. The Board then receives a detailed report from the Audit & Risk Committee on its findings. The Directors have not identified any significant failures or weaknesses in respect of the Company’s internal control systems.

BENEFICIAL OWNERS OF SHARES – INFORMATION RIGHTS

Beneficial owners of shares who have been nominated by the registered holder of those shares to receive information rights under section 146 of the Companies Act 2006 are required to direct all communications to the registered holder of their shares rather than to the Company’s registrar, Link Group, or to the Company directly.

The Company has adopted a nominee share code.

The annual and half-year financial reports, and a monthly fact sheet are available to all shareholders. The Board, with the advice of Frostrow, reviews the format of the annual and half-year financial reports so as to ensure they are useful to all shareholders and others taking an interest in the Company. In accordance with best practice, the annual report, including the Notice of the Annual General Meeting, is sent to shareholders at least 20 working days before the meeting. Separate resolutions are proposed for substantive issues.

ANNUAL GENERAL MEETING

The following information to be considered at the forthcoming annual general meeting is important and requires your immediate attention.

If you are in any doubt about the action you should take, you should seek advice from your stock broker, bank manager, solicitor, accountant or other financial adviser authorised under the Financial Services and Markets Act 2000 (as amended). If you have sold or transferred all of your ordinary shares in the Company, you should pass this document, together with any other accompanying documents, including the form of proxy, at once to the purchaser or transferee, or to the stock broker, bank or other agent through whom the sale or transfer was effected, for onward transmission to the purchaser or transferee

The Company’s Annual General Meeting will be held at Saddlers’ Hall, 40 Gutter Lane, London EC2V 6BR on Tuesday, 18 July 2023 from 12.30 p.m. Please refer to the Chair’s Statement for details of this year’s arrangements.

In particular, resolutions relating to the following items will be proposed at the forthcoming Annual General Meeting.

Resolution 13	Proposed share split
Resolution 14	Authority to allot shares
Resolution 15	Authority to disapply pre-emption rights
Resolution 16	Authority to sell shares held in Treasury on a non pre-emptive basis
Resolution 17	Authority to buy-back shares
Resolution 18	Authority to hold General Meetings (other than the Annual General Meeting) on at least 14 clear days’ notice

Resolutions 13 and 14 will be proposed as Ordinary Resolutions and resolutions 15 to 18 will be proposed as Special Resolutions,

The full text of the resolutions can be found in the Notice of Annual General Meeting.

EXERCISE OF VOTING POWERS

The Board and the AIFM have delegated authority to OrbiMed to vote the shares owned by the Company. The Board has instructed that OrbiMed submit votes for such shares wherever possible. This accords with current best practice whilst maintaining a primary focus on financial returns. OrbiMed may refer to the Board on any matters of a contentious nature. The Board has reviewed OrbiMed’s Voting Guidelines and is satisfied with their approach.

The Company does not retain voting rights on any shares that are held as collateral in connection with the overdraft facility provided by J.P. Morgan Securities LLC.

NOMINEE SHARE CODE

Where shares are held in a nominee company name, the Company undertakes:

to provide the nominee company with multiple copies of shareholder communications, so long as an indication of quantities has been provided in advance; and
to allow investors holding shares through a nominee company to attend general meetings, provided the correct authority from the nominee company is available.

Nominee companies are encouraged to provide the necessary authority to underlying shareholders to attend the Company’s general meetings.

By order of the Board

Frostrow Capital LLP

Company Secretary

6 June 2023

INCOME STATEMENT

FOR THE YEAR ENDED 31 MARCH 2023

				2023			2022
	Notes	Revenue £’000	Capital £’000	Total £’000	Revenue £’000	Capital £’000	Total £’000
Gains/(Losses) on investments	9	–	10,388	10,388	–	(152,475)	(152,475)
Exchange losses on currency balances		–	(18,302)	(18,302)	–	(6,342)	(6,342)
Income from investments	2	23,945	–	23,945	23,471	–	23,471
AIFM, portfolio management and performance fees	3	(877)	(16,657)	(17,534)	(938)	1,061	123
Other expenses	4	(1,142)	(22)	(1,164)	(1,305)	(529)	(1,834)
Net return/(loss) before finance charges and taxation		21,926	(24,593)	(2,667)	21,228	(158,285)	(137,057)
Finance costs	5	(193)	(3,658)	(3,851)	(40)	(761)	(801)
Net return/(loss) before taxation		21,733	(28,251)	(6,518)	21,188	(159,046)	(137,858)
Taxation	6	(2,021)	(248)	(2,269)	(3,668)	–	(3,668)
Net return/(loss) after taxation		19,712	(28,499)	(8,787)	17,520	(159,046)	(141,526)
Return/(loss) per share	7	30.6p	(44.2)	(13.6)	26.8p	(243.5)	(216.7)

The “Total” column of this statement is the Income Statement of the Company. The “Revenue” and “Capital” columns are supplementary to this and are prepared under guidance published by The Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations.

The Company has no recognised gains and losses other than those shown above and therefore no separate Statement of Total Comprehensive Income has been presented.

The accompanying notes are an integral part of these statements.

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2023

	Share capital £’000	Capital redemption reserve £’000	Share premium account £’000	Capital reserve £’000	Revenue reserve £’000	Total shareholders’ funds £’000
At 1 April 2022	16,385	8,221	841,599	1,381,038	20,990	2,268,233
Net (loss)/return after taxation	–	–	–	(28,499)	19,712	(8,787)
Final dividend paid in respect of year ended 31 March 2022	–	–	–	–	(12,721)	(12,721)
Interim dividend paid in respect of year ended 31 March 2023	–	–	–	–	(4,490)	(4,490)
Shares purchased for treasury	–	–	–	(91,514)	–	(91,514)
Shares cancelled from treasury	(120)	120	–	–	–	–
At 31 March 2023	16,265	8,341	841,599	1,261,025	23,491	2,150,721

FOR THE YEAR ENDED 31 MARCH 2022

	Share capital £’000	Capital redemption reserve £’000	Share premium account £’000	Capital reserve £’000	Revenue reserve £’000	Total shareholders’ funds £’000
At 1 April 2021	16,078	8,221	796,357	1,542,628	18,141	2,381,425
Net (loss)/return after taxation	–	–	–	(159,046)	17,520	(141,526)
Final dividend paid in respect of year ended 31 March 2021	–	–	–	–	(10,085)	(10,085)
Interim dividend paid in respect of year ended 31 March 2022	–	–	–	–	(4,586)	(4,586)
New shares issued	307	–	45,242	–	–	45,549
Shares purchased for treasury	–	–	–	(2,544)	–	(2,544)
At 31 March 2022	16,385	8,221	841,599	1,381,038	20,990	2,268,233

STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2023

		2023	2022
	Notes	£’000	£’000
Fixed assets
Investments	9	2,186,417	2,379,848
Derivative – OTC swaps	9 & 10	209	283
		2,186,626	2,380,131
Current assets
Debtors	11	4,376	14,724
Cash		58,925	26,594
		63,301	41,318
Current liabilities
Creditors: amounts falling due within one year	12	(72,105)	(147,804)
Derivative – OTC swaps	9 & 10	(27,101)	(5,412)
		(99,206)	(153,216)
Net current liabilities		(35,905)	(111,898)
Total net assets		2,150,721	2,268,233
Capital and reserves
Share capital	13	16,265	16,385
Capital redemption reserve		8,341	8,221
Share premium account		841,599	841,599
Capital reserve	17	1,261,025	1,381,038
Revenue reserve		23,491	20,990
Total shareholders' funds		2,150,721	2,268,233
Net asset value per share	14	3,434.5p	3,465.2p

The financial statements were approved by the Board of Directors and authorised for issue on 6 June 2023 and were signed on its behalf by:

Doug McCutcheon

Chair

The accompanying notes are an integral part of this statement.

Worldwide Healthcare Trust PLC – Company Registration Number 3023689 (Registered in England)

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2023

		2023	2022
	Notes	£’000	£’000
Net cash inflow/(outflow) from operating activities	18	5,394	(13,329)
Purchases of investments and derivatives		(1,189,133)	(1,330,279)
Sales of investments and derivatives		1,404,617	1,253,138
Realised (loss)/gain on foreign exchange transactions		(18,240)	(5,541)
Net cash inflow/(outflow) from investing activities		197,244	(82,682)
Issue of shares	13	–	48,126
Shares repurchased	13	(91,514)	(2,544)
Equity dividends paid		(17,211)	(14,671)
Interest paid		(3,851)	(801)
Net cash (outflow)/inflow from financing activities		(112,576)	30,110
Decrease/(Increase) in net cash/(debt)		90,062	(65,901)

Cash flows from operating activities include interest received of £2,301,000 (2022: £968,000) and dividends received of £20,507,000 (2022: £23,853,000).

RECONCILIATION OF NET CASH FLOW MOVEMENT TO MOVEMENT IN NET CASH/(DEBT)

	2023	2022
	£’000	£’000
Decrease/(Increase) in net cash/(debt) resulting from cashflows	90,062	(65,901)
Losses on foreign currency cash and cash equivalents	(62)	(801)
Movement in net cash/(debt) in the year	90,000	(66,702)
Net debt at 1 April	(87,003)	(20,301)
Net cash/(debt) at 31 March	2,997	(87,003)

Net cash/(debt) includes the bank overdraft of £55,928,000 (2022: £113,597,000) (see note 12) and cash as per the balance sheet of £58,925,000 (2022: £26,594,000).

The accompanying notes are an integral part of this statement.

NOTES TO THE FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

The principal accounting policies, all of which have been applied consistently throughout the year in the preparation of these financial statements, are set out below:

(A) Basis of preparation

These financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 ‘The Financial Reporting Standard applicable in the UK and Ireland’ (‘UK GAAP’) and the guidelines set out in the Statement of Recommended Practice (‘SORP’), published in February 2021, for Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies (‘AIC’), the historical cost convention, as modified by the valuation of investments and derivatives at fair value. The Board has considered a detailed assessment of the Company’s ability to meet its liabilities as they fall due, including stress and liquidity tests which modelled the effects of substantial falls in markets and significant reductions in market liquidity (including further stressing the current economic conditions) on the Company’s financial position and cash flows. The results of the tests showed that the Company would have sufficient cash, or the ability to liquidate a sufficient proportion of its listed holdings, to meet its liabilities as they fall due. Based on the information available to the Directors at the time of this report, including the results of the stress tests, the Company’s cash balances, and the liquidity of the Company’s listed investments, the Directors are satisfied that the Company has adequate financial resources to continue in operation for at least the next 12 months from the date of approval of these financial statements and that, accordingly, it is appropriate to adopt the going concern basis in preparing these financial statements.

The Company’s financial statements are presented in sterling, being the functional and presentational currency of the Company. All values are rounded to the nearest thousand pounds (£’000) except where otherwise indicated.

In addition, investments and derivatives held at fair value are categorised into a fair value hierarchy based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 – Quoted prices in active markets.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data), either directly or indirectly.
Level 3 – Inputs are unobservable (i.e. for which market data is unavailable).

Presentation of the Income Statement

In order to reflect better the activities of an investment trust company and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The net revenue return is the measure the Directors believe appropriate in assessing the Company’s compliance with certain requirements set out in Sections 1158 and 1159 of the Corporation Tax Act 2010.

Critical Accounting Judgements and Key Sources of Estimation Uncertainty

Critical accounting judgements and key sources of estimation uncertainty used in preparing the financial information are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable. The resulting estimates will, by definition, seldom equal the related actual results.

In the course of preparing the financial statements, the only key source of estimation uncertainty in the process of applying the Company’s accounting policies, is in relation to the valuation of the unquoted (Level 3) investments. The nature of estimation means that the actual outcomes could differ from those estimates, possibly significantly. The estimates relate to the investments where there is no appropriate market price i.e. the private investments. Whilst the board considers the methodologies and assumptions adopted in the valuation are supportable, reasonable and robust, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investment existed. As at 31 March 2023, there is no single key assumption used in the valuation of the unquoted investments, or other key source of estimation uncertainty, that, in the Directors’ opinion has a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year.

Unquoted investments are all valued in line with the accounting policy set out below.

(B) Investments

Investments are measured under FRS 102 and are measured initially, and at subsequent reporting dates, at fair value. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time frame established by the market concerned. Changes in fair value and gains or losses on disposal are included in the Income Statement as a capital item.

For quoted securities fair value is either bid price or last traded price, depending on the convention of the exchange on which the investment is listed.

Fair value is the price for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction. In estimating the fair value of unquoted investments, the AIFM and Board apply valuation techniques which are appropriate in light of the nature, facts and circumstances of the investment, and use reasonable current market data and inputs combined with judgement and assumptions and apply these consistently. The following principles used in determining the valuation of unquoted investments, are consistent with the International Private Equity and Venture Capital Valuation (“IPEV”) Guidelines. The assumptions and estimates made in determining the fair value of each unquoted investment are considered at least each six months or sooner if there is a triggering event. An example of where a valuation would be considered out of the six-month cycle is the success or failure of a drug under development to meet an anticipated outcome of its trial, announcement of the company undergoing an initial public offering, or other performance against tangible development milestones.

The primary valuation method applied in the valuation of the unquoted investments is the probability-weighted expected return method (PWERM), which considers on a probability weighted basis the future outcomes for the investment. When using the PWERM method significant judgements are made in estimating the various inputs into the model and recognising the sensitivity of such estimates. Examples of the factors where significant judgement is made include, but are not limited to, the probability assigned to potential future outcomes; discount rates; and, the likely exit scenarios for the investor company, for example, IPO or trade sale.

Where the investment being valued was itself made recently, or there has been a third party transaction in the investment, the price of the transaction may provide a good indication of fair value. Using the Price of Recent Investment technique is not a default and at each reporting date the fair value of recent investments is estimated to assess whether changes or events subsequent to the relevant transaction would imply a material change in the investment’s fair value.

When using the price of a recent transaction in the valuations the Company looks to ‘re-calibrate’ this price at each valuation point by reviewing progress within the investment, comparing against the initial investment thesis, assessing if there are any significant events or milestones that would indicate the value of the investment value has changed materially and considering whether an alternative methodology would be more appropriate.

(C) Derivative financial instruments

The Company uses derivative financial instruments (namely put and call options and equity swaps).

All derivative instruments are valued initially, and at subsequent reporting dates, at fair value in the Statement of Financial Position.

The equity swaps are accounted for as Fixed Assets or Current Liabilities.

All gains and losses on over-the-counter (OTC) equity swaps are accounted for as gains or losses on investments. Where there has been a re-positioning of the swap, gains and losses are accounted for on a realised basis. All such gains and losses have been debited or credited to the capital column of the Income Statement.

Cash collateral held by counterparties is included within cash, except where there is a right of offset against the overdraft facility.

(D) Investment income

Dividends receivable are recognised on the ex-dividend date. Where no ex-dividend date is quoted, dividends are recognised when the Company’s right to receive payment is established. Foreign dividends are grossed up at the appropriate rate of withholding tax, with the withholding tax recognised in the taxation charge.

Income from fixed interest securities is recognised on a time apportionment basis so as to reflect the effective interest rate. Deposit interest is accounted for on an accruals basis.

(E) Expenses

All expenses are accounted for on an accruals basis. Expenses are charged through the revenue column of the Income Statement except as follows:

expenses which are incidental to the acquisition or disposal of an investment are charged to the capital column of the Income Statement; and
expenses are charged to the capital column of the Income Statement where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect the portfolio management and AIFM fees have been charged to the Income Statement in line with the Board’s expected long-term split of returns, in the form of capital gains and income, from the Company’s portfolio. As a result 5% of the portfolio management and AIFM fees are charged to the revenue column of the Income Statement and 95% are charged to the capital column of the Income Statement.

Any performance fee is charged in full to the capital column of the Income Statement.

(F) Finance costs

Finance costs are accounted for on an accruals basis. Finance costs are charged to the Income Statement in line with the Board’s expected long-term split of returns, in the form of capital gains and income, from the Company’s portfolio. As a result 5% of the finance costs are charged to the revenue column of the Income Statement and 95% are charged to the capital column of the Income Statement. Finance charges are accounted for on an accruals basis in the Income Statement using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

(G) Taxation

The tax effect of different items of expenditure is allocated between capital and revenue using the marginal basis.

Deferred taxation is provided on all timing differences that have originated but not been reversed by the Statement of Financial Position date other than those differences regarded as permanent. This is subject to deferred tax assets only being recognised when it is probable that there will be suitable profits from which the reversal of timing differences can be deducted. Any liability to deferred tax is provided for at the rate of tax enacted or substantially enacted.

(H) Foreign currency

Transactions recorded in overseas currencies during the year are translated into sterling at the appropriate daily exchange rates. Assets and liabilities denominated in overseas currencies at the Statement of Financial Position date are translated into sterling at the exchange rates ruling at that date.

Exchange gains/losses on foreign currency balances

Any gains or losses on the translation of foreign currency balances, including the foreign currency overdraft, whether realised or unrealised, are taken to the capital or the revenue column of the Income Statement, depending on whether the gain or loss is of a capital or revenue nature.

(I) Capital redemption reserve

This reserve arose when ordinary shares were redeemed by the Company and subsequently cancelled. When ordinary shares are redeemed by the Company and subsequently cancelled, an amount equal to the par value of the ordinary share capital is transferred from the ordinary share capital to the capital redemption reserve.

(J) Capital reserve

The following are transferred to this reserve:

gains and losses on the disposal of investments;
exchange differences of a capital nature, including the effects of changes in exchange rates on foreign currency borrowings;
expenses, together with the related taxation effect, in accordance with the above policies; and
changes in the fair value of investments and derivatives.

This reserve can be used to distribute realised capital profits by way of dividend or share buy backs. Any gains in the fair value of investments that are not readily convertible to cash are treated as unrealised gains in the capital reserve. Distributions are only payable out of the capital reserve if capital reserves are greater than the proposed distribution and positive on the date of distribution.

(K) Revenue reserve

The revenue reserve is distributable by way of dividend. Dividends are only payable out of the revenue reserve if revenue reserves are greater than the proposed dividend and positive on the date of distribution.

(L) Dividend payments

Dividends paid by the Company on its shares are recognised in the financial statements in the year in which they become payable and are shown in the Statement of Changes in Equity.

(M) Cash and cash equivalents

Cash comprises cash at bank and cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

Bank overdrafts are considered as a component of cash and cash equivalents as they are repayable on demand and form an integral part of the Company’s cash management.

2. INCOME FROM INVESTMENTS

	2023	2022
	£’000	£’000
Income from investments
Overseas dividends	18,431	19,678
Fixed interest income	184	772
UK dividends	3,212	2,825
	21,827	23,275
Other income
Derivatives	79	151
Deposit interest	2,039	45
Total income from investments	23,945	23,471
Total income comprises:
Dividends	21,643	22,503
Interest	2,302	968
	23,945	23,471

3. AIFM, PORTFOLIO MANAGEMENT AND PERFORMANCE FEES

			2023			2022
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
AIFM fee	151	2,862	3,013	160	3,046	3,206
Portfolio management fee	726	13,795	14,521	778	14,781	15,559
Performance fee (reversal)	–	–	–	–	(18,888)	(18,888)
	877	16,657	17,534	938	(1,061)	(123)

* During the year ended 31 March 2022, due to underperformance against the Benchmark, a reversal of prior period performance fee provisions totalling £18,888,000 occurred.

Further details on the above fees are set out in the Strategic Report and in the Report of the Directors.

4. OTHER EXPENSES

	2023	2022
	£’000	£’000
Directors’ remuneration	212	207
Employer’s NIC on Directors’ remuneration	18	20
Auditors’ remuneration for the audit of the Company’s financial statements	54	47
Auditors’ remuneration for non-audit services	–	5
Depositary and custody fees	208	213
Listing fees	85	77
Registrar fees	45	63
Legal and professional costs	181	255
Broker fees	(15)	117
Other costs	354	301
	1,142	1,305
Professional fees (Capital)^	22	529
	1,164	1,834

Details of the amounts paid to Directors are included in the Directors’ Remuneration Report.

^ Professional fees in respect of acquisition of unquoted investments. These fees do not form part of the ongoing charge ratio.

5. FINANCE COSTS

			2023			2022
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Finance costs	193	3,658	3,851	40	761	801

6. TAXATION

(A) Analysis of charge in year

			2023			2022
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Corporation tax at 19% (2022: 19%)	–	–	–	–	–	–
Overseas taxation	2,021	248	2,021	3,668	–	3,668
	2,021	248	2,269	3,668	–	3,668

(B) Factors affecting the tax charge for the year

Approved investment trusts are exempt from tax on capital gains made within the Company.

The tax charged for the year is higher (2022: higher) than the standard rate of corporation tax of 19% (2022: 19%).

The difference is explained below.

			2023			2022
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Net return before taxation	21,733	(28,251)	(6,518)	21,188	(159,046)	(137,858)
Corporation tax at 19% (2022: 19%)	4,129	(5,415)	(1,286)	4,026	(30,219)	(26,193)
Non-taxable gains on investments	–	1,551	1,551	–	30,175	30,175
Overseas withholding taxation	2,021	–	2,021	3,668	–	3,668
Overseas capital gains tax	–	248	248	–	–	–
Non taxable dividends	(4,112)	–	(4,112)	(4,276)	–	(4,276)
Excess management expenses	(17)	3,864	3,847	250	44	294
Total tax charge	2,021	248	2,269	3,668	–	3,668

(C) Provision for deferred tax

No provision for deferred taxation has been made in the current or prior year. The Company has not provided for deferred tax on capital profits and losses arising on the revaluation or disposal of investments, as it is exempt from tax on these items because of its status as an investment trust company.

The Company has not recognised a deferred tax asset of £49,985,000 (25% tax rate) (2022: £45,055,000 (25% tax rate)) as a result of excess management expenses and overdraft expenses. It is not anticipated that these excess expenses will be utilised in the foreseeable future.

7. RETURN/(LOSS) PER SHARE

	2023	2022
	£’000	£’000
The return/(loss) per share is based on the following figures:
Revenue return	19,712	17,520
Capital (loss)	(28,499)	(159,046)
	(8,787)	(141,526)
Weighted average number of ordinary shares in issue during the year	64,474,422	65,307,132
Revenue return per ordinary share	30.6p	26.8p
Capital (loss) per ordinary share	(44.2p)	(243.5p)
	(13.6p)	(216.7p)

The calculation of the total, revenue and capital (loss)/return per ordinary share is carried out in accordance with IAS 33, “Earnings per Share”, in accordance with the requirements of FRS 102.

8. DIVIDENDS

Under UK Company Law, final dividends are not recognised until they are approved by shareholders and interim dividends are not recognised until they are paid. They are also debited directly from reserves. Amounts recognised as distributable in these financial statements were as follows:

	2023	2022
	£’000	£’000
Final dividend in respect of the year ended 31 March 2022	12,721	–
Interim dividend in respect of the year ended 31 March 2023	4,490	–
Final dividend in respect of the year ended 31 March 2021	–	10,085
Interim dividend in respect of the year ended 31 March 2022	–	4,586
	17,211	14,671

In respect of the year ended 31 March 2023, an interim dividend of 7.0p per share was paid on 11 January 2023. A final dividend of 24.0p will be payable, subject to shareholder approval, on 26 July 2023, the associated ex dividend date will be 8 June 2023. The total dividends payable in respect of the year ended 31 March 2023 amount to 31.0p per share (2022: 26.5p per share). The aggregate cost of the final dividend, based on the number of shares in issue (excluding shares held in treasury) at 5 June 2023, will be £14,717,000. In accordance with FRS 102 dividends will be reflected in the financial statements for the year in which they become payable. Total dividends in respect of the financial year, which is the basis on which the requirements of s1158 of the Corporation Tax Act 2010 are considered, are set out below.

	2023	2022
	£’000	£’000
Revenue available for distribution by way of dividend for the year	19,712	17,520
Interim dividend in respect of the year ended 31 March 2022	–	(4,586)
Final dividend in respect of the year ended 31 March 2022	–	(12,721)
Interim dividend in respect of the year ended 31 March 2023	(4,490)	–
Final dividend in respect of the year ended 31 March 2023*	(14,717)	–
Net retained revenue	505	213

* based on 61,321,726 shares in issue as at 5 June 2023.

9. INVESTMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS

			Derivative
			Financial
	Quoted	Unquoted	Instruments -
	Investments	Investments	Net	Total
	£’000	£’000	£’000	£’000
Cost at 1 April 2022	1,952,701	136,760	–	2,089,461
Investment holdings gains/(losses) at 1 April 2022	254,674	35,713	(5,129)	285,258
Valuation at 1 April 2022	2,207,375	172,473	(5,129)	2,374,719
Movement in the year:
Purchases at cost	1,168,434	–	–	1,168,434
Sales - proceeds	(1,390,864)	(4,332)	1,072	(1,394,124)
Transfer between levels*	14,019	(14,019)	–	–
Net movement in investment holding gains/(losses)	42,283	(8,952)	(22,835)	10,496
Valuation at 31 March 2023	2,041,247	145,170	(26,892)	2,159,525
Cost at 31 March 2023	1,828,139	122,597	–	1,950,736
Investment holding gains/(losses) at 31 March 2023	213,108	22,573	(26,892)	208,789
Valuation at 31 March 2023	2,041,247	145,170	(26,892)	2,159,525

* See Note 16.

The Company received £1,393,875,000 (2022: £1,253,317,000) from investments and derivatives sold in the year. The book cost of these was £1,307,159,000 (2022: £1,278,065,000). These investments and derivatives have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.

	2023	2022
	£’000	£’000
Net movement in investment holding gains/(losses) in the year	33,331	(130,139)
Net movement in derivative holding (losses)/gains in the year	(22,835)	(21,985)
Effective interest rate amortisation	(108)	(351)
Gains/(Losses) on investments	10,388	(152,475)

Purchase transaction costs were £1,660,000 (2022: £1,668,000). Sales transaction costs were £1,266,000 (2022: £1,244,000). These comprise mainly commission and stamp duty.

10. DERIVATIVE FINANCIAL INSTRUMENTS

	2023	2022
	£’000	£’000
Fair value of OTC equity swaps (asset)	209	283
Fair value of OTC equity swaps (liability)	(27,101)	(5,412)
	(26,892)	(5,129)

See note 9 above for movements during the year.

11. DEBTORS

	2023	2022
	£’000	£’000
Amounts due from brokers	88	10,581
Withholding taxation recoverable	2,882	2,587
VAT recoverable	–	–
Prepayments and accrued income	1,406	1,556
	4,376	14,724

12. CREDITORS AMOUNTS FALLING DUE WITHIN ONE YEAR

	2023	2022
	£’000	£’000
Amounts due to brokers	9,432	30,131
Overdraft drawn*	55,928	113,597
Other creditors and accruals	6,745	4,076
	72,105	147,804

* The Company’s borrowing requirements are met through the utilisation of an overdraft facility provided by J.P. Morgan Securities LLC. The overdraft is drawn down in U.S. dollars. Interest on the drawn overdraft is charged at the United States Overnight Bank Funding Rate plus 45 basis points.

J.P. Morgan Securities LLC may take investments up to 140% of the value of the overdrawn balance as collateral and has been granted a first priority security interest or lien over the Company’s assets.

13. SHARE CAPITAL

			Total
		Treasury	shares
	Shares	shares	in issue
	number	number	number
Issued and fully paid at 1 April 2022	65,457,246	80,509	65,537,755
Shares purchased for treasury	(2,836,483)	2,836,483	–
Shares cancelled from treasury	–	(478,977)	(478,977)
At 31 March 2023	62,620,763	2,438,015	65,058,778

	2023	2022
	£’000	£’000
Issued and fully paid:
Ordinary Shares of 25p	16,265	16,385

During the year ended 31 March 2023 no new shares were issued, 2,836,483 shares were repurchased into Treasury at a cost of £91,514,000 (2022: 1,227,500 shares were issued raising £45,549,000 and 80,509 shares were repurchased for treasury at a cost of £2,544,000).

14. NET ASSET VALUE PER SHARE

	2023	2022
Net asset value per share	3,434.5p	3,465.2p

The net asset value per share is based on the assets attributable to equity shareholders of £2,150,721,000 (2022: £2,268,233,000) and on the number of shares in issue at the year end (excluding those shares held in treasury) of 62,620,763 (2022: 65,457,246).

15. RELATED PARTIES

The following are considered to be related parties:

• Frostrow Capital LLP (the Company’s AIFM, a related party under the Listing Rules only)

• OrbiMed Capital LLC (the Company’s Portfolio Manager)

• The Directors of the Company

Sven Borho is a Managing Partner at OrbiMed and has waived his Director’s fee of £33,573 (2022: £33,573). Details of fees paid to OrbiMed by the Company can be found in note 3 to the Financial Statements. All material related party transactions have been disclosed in notes 3 and 4 to the Financial Statements.

Details of the remuneration of all Directors can be found in the Remuneration Report. Details of the Directors’ interests in the capital of the Company can also be found in the Remuneration Report.

Three current and two former partners at OrbiMed have a minority financial interest totalling 20% in Frostrow, the Company’s AIFM. Details of the fees paid to Frostrow by the Company can be found in note 3 to the Financial Statements.

16. FINANCIAL INSTRUMENTS

Risk management policies and procedures

The Company’s financial instruments comprise securities and other investments, derivative instruments, cash balances, overdrafts and debtors and creditors that arise directly from its operations.

As an investment trust, the Company invests in equities and other investments for the long term so as to secure its investment objective. In pursuing its investment objective, the Company is exposed to a variety of risks that could result in a reduction in the Company’s net assets.

The main risks that the Company faces arising from its financial instruments are:

(i) market risk (including foreign currency risk, interest rate risk and other price risk)

(ii) liquidity risk

(iii) credit risk

These risks, with the exception of liquidity risk, and the Directors’ approach to the management of them have not changed from the previous accounting year. The AIFM, in close co-operation with the Board and the Portfolio Manager, co-ordinates the Company’s risk management.

Use of derivatives

Equity swaps are used within the Company’s portfolio.

OTC equity swaps

The Company uses OTC equity swap positions to gain access to the Indian and Chinese markets when it is more cost effective to gain access via swaps or to gain exposure to thematic baskets of stocks.

Offsetting disclosure

Swap trades and OTC derivatives are traded under ISDA† Master Agreements. The Company currently has such agreements in place with Goldman Sachs and JP Morgan.

These agreements create a right of set-off that becomes enforceable only following a specified event of default, or in other circumstances not expected to arise in the normal course of business. As the right of set-off is not unconditional, for financial reporting purposes, the Company does not offset derivative assets and derivative liabilities.

† International Swap Dealers Association Inc.

(i) Other price risk

In pursuance of the Company’s Investment Objective the Company’s portfolio, including its derivatives, is exposed to the risk of fluctuations in market prices and foreign exchange rates.

The Board manage these risks through the use of limits and guidelines, monthly compliance reports from Frostrow and reports from Frostrow and OrbiMed presented at each Board meeting.

Other price risk exposure

The Company’s gross exposure to other price risk is represented by the fair value of the investments and the underlying exposure through the derivative investments held at the year end as shown in the table below.

			2023			2022
			Notional*			Notional*
	Assets	Liabilities	exposure	Assets	Liabilities	exposure
	£’000	£’000	£’000	£’000	£’000	£’000
Investments	2,186,417	–	2,186,417	2,379,848	–	2,379,848
OTC equity swaps	209	(27,101)	190,704	283	(5,412)	135,018
	2,186,626	(27,101)	2,377,121	2,380,131	(5,412)	2,514,866

* The notional exposure is calculated in accordance with the AIFMD requirements for calculating exposure via derivatives. See glossary.

Other price risk sensitivity

If market prices of all of the Company’s financial instruments including the derivatives at the Statement of Financial Position date had been 25% higher or lower (2022: 25% higher or lower) while all other variables remained constant: the revenue return would have decreased/increased by £0.2 million (2022: £0.2 million); the capital return would have increased/decreased by £596.6 million (2022: £625.4 million); and, the return on equity would have increased/decreased by £594.6 million (2022: £625.2 million). The calculations are based on the portfolio as at the respective Statement of Financial Position dates and are not representative of the year as a whole.

(ii) Foreign currency risk

A significant proportion of the Company’s portfolio and derivative positions are denominated in currencies other than sterling (the Company’s functional currency, and the currency in which it reports its results). As a result, movements in exchange rates can significantly affect the sterling value of those items.

Foreign currency exposure

The fair values of the Company’s monetary assets and liabilities that are denominated in foreign currencies are shown below.

			2023			2022
	Current	Current		Current	Current
	assets	liabilities	Investments	assets	liabilities	Investments
	£’000	£’000	£’000	£’000	£’000	£’000
U.S. dollar	115,823	(124,286)	1,488,321	64,264	(169,551)	1,821,239
Swiss franc	2,466	–	84,999	2,202	–	113,899
Japanese yen	793	–	135,398	332	114	83,225
Hong Kong dollar	–	–	109,170	851	(851)	190,260
Other	194	–	201,798	155	–	30,803
	119,276	(124,286)	2,019,686	67,804	(170,288)	2,239,426

Foreign currency sensitivity

The following table details the sensitivity of the Company’s net return for the year and shareholders’ funds to a 10% increase and decrease in sterling against the relevant currency (2022: 10% increase and decrease).

These percentages have been determined based on market volatility in exchange rates over the previous 12 months. The sensitivity analysis is based on the Company’s significant foreign currency exposures at each Statement of Financial Position date.

				2023				2022
	USD	YEN	CHF	HKD	USD	YEN	CHF	HKD
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Sterling depreciates	188,606	15,132	9,718	12,130	206,233	9,297	12,900	21,140
Sterling appreciates	(154,314)	(12,381)	(7,951)	(9,925)	(168,736)	(7,606)	(10,555)	(17,296)

(iii) Interest rate risk

Interest rate changes may affect:

– the interest payable on the Company’s variable rate borrowings;

– the level of income receivable from floating and fixed rate securities and cash at bank and on deposit;

– the fair value of investments in fixed interest securities.

Interest rate exposure

The Company’s main exposure to interest rate risks is through its overdraft facility with J.P. Morgan Securities LLC, which is repayable on demand, and its holding in fixed interest securities. The exposure of financial assets and liabilities to fixed and floating interest rates, is shown below.

At 31 March 2023, the Company held no investments in securitised debt (2022: 0.4% of the portfolio). The exposure is shown in the table below.

				2023				2022
	Weighted average period for which rate is fixed Years	Weighted average fixed interest rate %	Fixed rate £’000	Floating rate £’000	Weighted average period for which rate is fixed Years	Weighted average fixed interest rate %	Fixed rate £’000	Floating rate £’000
Unquoted debt investments	–	–	–	–	2.9	2.6	5,024	–
Cash	–	–	–	100,366			–	56,336
Overdraft facility	–	–	–	(97,369)			–	(143,339)
Financed swap positions	–	–	–	(217,596)			–	(140,147)
			–	(214,599)			5,024	(227,150)

All interest rate exposures are held in U.S. dollars.

Cash of £100.4 million (2022: £56.3 million) was held as collateral against the financed swap positions, of which £41.4 million (2022: £29.7 million) was offset against the overdraft position.

Interest rate sensitivity

If interest rates had been 1% higher or lower and all other variables were held constant, the Company’s net return for the year ended 31 March 2023 and the net assets would increase/decrease by £2.1 million (2022: increase/decrease by £2.3 million).

(iv) Liquidity risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

Management of the risk

Liquidity risk is not considered significant as the majority of the Company’s assets are investments in quoted securities that are readily realisable within one week, in normal market conditions. There maybe circumstances where market liquidity is lower than normal. Stress tests have been performed to understand how long the portfolio would take to realise in such situations. The Board is comfortable that in such a situation the Company would be able to meet its liabilities as they fall due.

Liquidity exposure and maturity

Contractual maturities of the financial liability exposures as at 31 March 2023, based on the earliest date on which payment can be required, are as follows:

		2023		2022
	3 to 12	3 months	3 to 12	3 months
	months	or less	months	or less
	£’000	£’000	£’000	£’000
Overdraft facility	–	97,369	–	143,339
Amounts due to brokers and accruals	–	16,177	–	30,131
OTC equity swaps	27,101	–	5,412	–
	27,101	113,546	5,412	173,470

£41.4 million of cash held as collateral is offset against the overdraft facility in the Statement of Financial Position, as set out in Note 16(iii) above.

(v) Credit risk

Credit risk is the risk of failure of a counterparty to discharge its obligations resulting in the Company suffering a financial loss.

The carrying amounts of financial assets best represent the maximum credit risk at the Statement of Financial Position date. The Company’s quoted securities are held on its behalf by J.P. Morgan Securities LLC acting as the Company’s Custodian and Prime Broker.

Certain of the Company’s assets can be held by J.P. Morgan Securities LLC as collateral against the overdraft provided by them to the Company. As at 31 March 2023 such assets held by J.P. Morgan Securities LLC are available for rehypothecation (see Glossary). As at 31 March 2023, assets with a total market value of £134.7 million (2022: £203.1 million) were available to J.P. Morgan Securities LLC to be used as collateral against the overdraft facility which equates to 140% of the overdrawn position (calculated on a settled basis).

CREDIT RISK EXPOSURE

	2023	2022
	£’000	£’000
Unquoted debt investments	–	5,024
Derivative – OTC equity swaps	209	283
Current assets:
Other receivables (amounts due from brokers, dividends and interest receivable)	4,376	14,724
Cash	58,925	26,594

(vi) Fair value of financial assets and financial liabilities

Financial assets and financial liabilities are either carried in the Statement of Financial Position at their fair value (investments and derivatives) or the Statement of Financial Position amount is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accrual, cash at bank, and the overdraft).

(vii) Hierarchy of investments

The Company has classified its financial assets designated at fair value through profit or loss and the fair value of derivative financial instruments using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurements. The hierarchy has the following levels:

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – inputs other than quoted prices included with Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

As of 31 March 2023	Level 1	Level 2	Level 3	Total
As of 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

As at 31 March 2023, ten equity investments and a deferred consideration investment have been classified as level 3. All level 3 positions have been valued in accordance with the accounting policy set out in Note 1(b).

During 2023 one unquoted investment was transferred to Level 1 following their initial public offerings.

As of 31 March 2022	Level 1	Level 2	Level 3	Total
As of 31 March 2022	£’000	£’000	£’000	£’000
Investments held at fair value through profit or loss	2,207,375	–	172,473	2,379,848
Derivatives: OTC swaps (assets)	–	283	–	283
Derivatives: OTC swaps (liabilities)	–	(5,412)	–	(5,412)
Financial instruments measured at fair value	2,207,375	(5,129)	172,473	2,374,719

As at 31 March 2022, one debt, twelve equity and a deferred consideration investment have been classified as Level 3. All level 3 positions have been valued using an independent third party pricing source or using the price of a recent transaction.

During 2022 four unquoted investments were transferred to Level 1 following their initial public offerings.

(viii) Capital management policies and procedures

The Company’s capital management objectives are to ensure that it will be able to continue as a going concern and to maximise the income and capital return to its equity shareholders through an appropriate level of gearing or leverage.

As at 31 March 2023, the Company had a net leverage percentage of 10.5% (2022: 10.9%).

The capital structure of the Company consists of the equity share capital, retained earnings and other reserves as shown in the Statement of Financial Position.

The Board, with the assistance of the AIFM and the Portfolio Manager, monitors and reviews the broad structure of the Company’s capital on an ongoing basis. This includes a review of:

– the planned level of gearing, which takes into account the Portfolio Manager’s view of the market;

– the need to buy back equity shares, either for cancellation or to hold in treasury, in light of any share price discount to net asset value per share in accordance with the Company’s share buy-back policy;

– the need for new issues of equity shares, including issues from treasury; and

– the extent to which revenue in excess of that which is required to be distributed should be retained.

The Company’s objectives, policies and processes for managing capital are unchanged from the preceding accounting year.

17. CAPITAL RESERVE

	Capital Reserves
		Investment
		Holding
	Other	Gains*	Total
	£’000	£’000	£’000
At 1 April 2022	932,497	448,541	1,381,038
Net gains/(losses) on investments	86,857	(76,469)	10,388
Expenses and taxation charged to capital	(20,585)	–	(20,585)
Exchange loss on currency balances	(18,302)	–	(18,302)
Shares repurchased for Treasury	(91,514)	–	(91,514)
At 31 March 2023	888,953	372,072	1,261,025

* Investment holding gains relate to the revaluation of investments and derivatives held at the reporting date. (See note 9 to the Financial Statements for further details).

Under the Company’s Articles of Association, sums within “capital reserves – other” are also available for distribution.

18. RECONCILIATION OF OPERATING (LOSS)/RETURN TO NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES

	2023	2022
	£’000	£’000
Loss before finance charges and taxation	(2,667)	(137,057)
Add: capital loss before finance charges and taxation	24,593	158,285
Revenue return before finance charges and taxation	21,926	21,228
Expenses charged to capital	(16,679)	532
Decrease in other debtors	150	1,342
Increase/(Decrease) in provisions, and other creditors and accruals	2,669	(32,120)
Net taxation suffered on investment income	(2,564)	(3,960)
Amortisation	(108)	(351)
Net cash inflow/(outflow) from operating activities	5,394	(13,329)

GLOSSARY OF TERMS AND ALTERNATIVE PERFORMANCE MEASURES (‘APMS’)

ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (AIFMD)

Agreed by the European Parliament and the Council of the European Union and transported into UK legislation, the AIFMD classifies certain investment vehicles, including investment companies, as Alternative Investment Funds (AIFs) and requires them to appoint an Alternative Investment Fund Manager (AIFM) and a depositary to manage and oversee the operations of the investment vehicle. The Board of the Company retains responsibility for strategy, operations and compliance and the Directors retain a fiduciary duty to shareholders.

Alternative performance measure (‘APM’)

An APM is a numerical measure of the Company’s current, historical or future financial performance, financial position or cash flows, other than a financial measure defined or specified in the applicable financial framework. In selecting these Alternative Performance Measures, the Directors considered the key objectives and expectations of typical investors in an investment trust such as the Company.

Discount or premium*

A description of the difference between the share price and the net asset value per share. The size of the discount or premium is calculated by subtracting the share price from the net asset value per share and is usually expressed as a percentage (%) of the net asset value per share. If the share price is higher than the net asset value per share the result is a premium. If the share price is lower than the net asset value per share, the shares are trading at a discount.

Equity swaps

An equity swap is an agreement where one party (counterparty) transfers the total return of an underlying equity position to the other party (swap holder) in exchange for a payment of the principal, and interest for financed swaps, at a set date. Total return includes dividend income and gains or losses from market movements. The exposure of the holder is the market value of the underlying equity position.

The Company uses two types of equity swap:

funded, where payment is made on acquisition. They are equivalent to holding the underlying equity position with the exception of additional counterparty risk and not possessing voting rights in the underlying; and,
financed, where payment is made on maturity. Financed swaps increase exposure by the value of the underlying equity position, with no initial outlay and no increase in the investment portfolio’s value – there is therefore embedded leverage within a financed swap due to the deferral of payment to maturity.

The Company employs swaps for two purposes:

To gain access to individual stocks in the Indian, Chinese and other emerging markets, where the Company is not locally registered to trade or is able to gain in a more cost efficient manner than holding the stocks directly; and,
To gain exposure to thematic baskets of stocks (a Basket Swap). Basket Swaps are used to build exposure to themes, or ideas, that the Portfolio Manager believes the Company will benefit from and where holding a Basket Swap is more cost effective and operationally efficient than holding the underlying stocks or individual swaps.

Gearing*

Gearing is calculated as the overdraft drawn, less net current assets (excluding dividends), divided by Net Assets, expressed as a percentage. For years prior to 2013, the calculation was based on borrowings as a percentage of Net Assets.

* Alternative Performance Measure

International swaps and derivatives association (‘ISDA’)

ISDA has created a standardised contract (the ISDA Master Agreement) which sets out the basic trading terms between the counterparties to derivative contracts.

Leverage*

Leverage is defined in the AIFMD as any method by which the AIFM increases the exposure of an AIF. In addition to the gearing limit the Company also has to comply with the AIFMD leverage requirements. For these purposes the Board has set a maximum leverage limit of 140% for both methods. This limit is expressed as a % with 100% representing no leverage or gearing in the Company. There are two methods of calculating leverage as follows:

The Gross Method is calculated as total exposure divided by Shareholders’ Funds. Total exposure is calculated as net assets, less cash and cash equivalents, adding back cash borrowing plus derivatives converted into the equivalent position in their underlying assets.

The Commitment Method is calculated as total exposure divided by Shareholders Funds. In this instance total exposure is calculated as net assets, less cash and cash equivalents, adding back cash borrowing plus derivatives converted into the equivalent position in their underlying assets, adjusted for netting and hedging arrangements.

See the definition of Equity Swaps for more details on how exposure through these instruments is calculated.

		2023		2022
		£’000		£’000
	Fair Value	Exposure*	Fair Value	Exposure*
Investments	2,186,417	2,186,417	2,379,848	2,379,848
OTC equity swaps	(26,892)	190,704	(5,129)	135,018
	2,159,525	2,377,121	2,374,719	2,514,866
Shareholders’ funds		2,150,721		2,268,233
Leverage %		10.5%		10.9%

* Calculated in accordance with AIFMD requirements using the Commitment Method

MSCI World Health Care Index (the company’s Benchmark)

The MSCI World Health Care Index is designed to capture the large and mid capitalisation segments across 23 developed markets countries: All securities in the index are classified as healthcare as per the Global Industry Classification Standard (GICS). Developed Markets countries include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland the UK and the U.S. The net total return of the Index is used which assumes the reinvestment of any dividends paid by its constituents after the deduction of relevant withholding taxes. The performance of the Index is calculated in U.S.$ terms. Because the Company’s reporting currency is £ the prevailing U.S.$/£ exchange rate is applied to obtain a £ based return.

NAV per share (pence)

The value of the Company’s assets, principally investments made in other companies and cash being held, minus any liabilities. The NAV is also described as ‘shareholders’ funds’ per share. The NAV is often expressed in pence per share after being divided by the number of shares which have been issued. The NAV per share is unlikely to be the same as the share price which is the price at which the Company’s shares can be bought or sold by an investor. The share price is determined by the relationship between the demand and supply of the shares.

* Alternative Performance Measure

Net asset value (NAV) per share total return*

The theoretical total return on shareholders’ funds per share, reflecting the change in NAV assuming that dividends paid to shareholders were reinvested at NAV at the time the shares were quoted ex-dividend. A way of measuring investment management performance of investment trusts which is not affected by movements in discounts/premiums.

	2023	2022
NAV Total Return	p	p
Opening NAV	3,465.2	3,703.0
(Decrease) in NAV	(30.7)	(237.8)
Closing NAV	3,434.5	3,465.2
% (decrease) in NAV	(0.9%)	(6.4%)
Impact of reinvested dividends	0.8%	0.6%
NAV Total Return	(0.1%)	(5.8%)

Ongoing Charges*

Ongoing charges are calculated by taking the Company’s annualised ongoing charges, excluding finance costs, taxation, performance fees and exceptional items, and expressing them as a percentage of the average daily net asset value of the Company over the year.

	2023	2022
	£’000	£’000
AIFM & Portfolio Management fees (Note 3)	17,534	18,765
Other Expenses – Revenue (Note 4)	1,142	1,305
Total Ongoing Charges	18,676	20,070
Performance fees paid/crystallised	–	12,861
Total	18,676	32,931
Average net assets	2,247,296	2,356,131
Ongoing Charges	0.8%	0.9%
Ongoing Charges (including performance fees paid or crystallised during the year)	0.8%	1.4%

Rehypothecation

Rehypothecation is the practice by banks and brokers of using, for their own purposes, assets that have been posted as collateral by clients.

Share Price Total Return*

Return to the investor on mid-market prices assuming that all dividends paid were reinvested.

	2023	2022
Share Price Total Return	p	p
Opening share price	3,275.0	3,695.0
(Decrease)/increase in share price	(160.0)	(420.0)
Closing share price	3,115.0	3,275.0
% (decrease)/increase in share price	(4.8%)	(11.4%)
Impact of reinvested dividends	0.7%	0.6%
Share Price Total Return	(4.1%)	(10.8%)

* Alternative Performance Measure

Annual Report and Financial Statements

Copies of the Annual Report and financial statements will be posted to shareholders on 15 June 2023 and will be available on the Company’s website (www.worldwidewh.com) or in hard copy format from the Company Secretary.

The Company's Annual Report for the year ended 31 March 2023 has been submitted to the Financial Conduct Authority and will shortly be available for inspection on the National Storage Mechanism (NSM) via https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

The Annual General Meeting will be held on Tuesday, 18 July 2023.

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.

-ENDS-

For further information please contact

Mark Pope

For and on behalf of Frostrow Capital LLP

Company Secretary

0203 008 4913

Companies

Worldwide Healthcare Trust (WWH)

Thursday, 9th May 2024

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