Half-yearly Report
NEWS RELEASE
30 November 2011
London Stock Exchange Announcement
WORLDWIDE HEALTHCARE TRUST PLC
Unaudited Interim Report for the six months ended 30 September 2011
INVESTMENT OBJECTIVE
Worldwide Healthcare Trust PLC invests worldwide in pharmaceutical,
biotechnology and related companies in the healthcare sector with the objective
of achieving a high level of capital growth. In order to achieve its investment
objective, the Company invests in a diversified portfolio of shares in
pharmaceutical and biotechnology companies and related securities on a
worldwide basis. It uses gearing and derivative transactions to mitigate risk
and also enhance returns.
INVESTMENT POLICY
The Board seeks to manage the Company's risk by imposing various investment
limits and restrictions. The limits and restrictions remain unchanged from
those published in the annual report for the year ended 31 March 2011 and are
as follows:
* The Company will not invest more than 10% of its gross assets in other
listed investment companies (including listed investment trusts);
* The Company will not invest more than 15% of the portfolio in any one
individual stock at the time of acquisition;
* At least 60% of the portfolio will normally be invested in larger companies
(i.e. with a market capitalisation of at least US$5bn);
* At least 20% of the portfolio will normally be invested in smaller
companies (i.e. with a market capitalisation of less than US$5bn);
* 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 15% of the portfolio, at the time of acquisition, may be
invested in companies in each of the following sections:
* healthcare equipment
* healthcare technology
* providers of healthcare and related services
* Derivative transactions can be used to mitigate risk and/or enhance capital
returns and will be restricted to 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 is restricted to
5% of the portfolio.
The Company does not hedge its foreign currency exposure.
In accordance with the requirements of the UK Listing Authority, any material
change to the investment policy will only be made with the approval of
shareholders by ordinary resolution.
CAPITAL STRUCTURE
Shares
At 30 September 2011 the Company had in issue 43,486,450 shares of 25p each
(excluding treasury shares) (30 September 2010:43,385,916, 31 March 2011:
43,141,611).
During the half year, a total of 25,000 shares were bought back by the Company
for treasury. This equates to 0.1% of the issued share capital as at 31 March
2011. On 28 July 2011, a total of 358,607 shares held in treasury were
cancelled. The Board has confirmed that any shares held in treasury will be
cancelled on or as soon as practicable following the Annual General Meeting
each year. At 30 September 2011, 25,000 shares were held in treasury.
Subscription Shares
During the half year, 369,839 subscription shares were converted into ordinary
shares, at an exercise price of 638p per share raising £2.4m. As at 18 November
2011, the Company had 7,810,460 subscription shares in issue.
GEARING
The Company's gearing policy is that it may borrow up to the lower of £90m or
20% of the Company's net asset value. The Company's borrowing requirements are
met through the utilisation of a loan facility, repayable on demand, provided
by the Company's custodian, Goldman Sachs & Co. New York. At 30 September 2011,
the Company had borrowed £51 .2m under this facility, equating to 15.4% of the
Company's net assets.
CONTINUATION VOTE
The next continuation vote of the Company will be held at the Annual General
Meeting in 2014 and every five years thereafter.
Performance
Six months One year
to to
30 September 31 March
2011 2011
Share price (total return)# +3.1% -0.9%
Net asset value per share (total -0.9% +4.0%
return)#
Benchmark index (total return)* -0.3% +2.5%
30 31 March Six
September months %
2011 Change
2011
Shareholders' funds £332.3m £344.8m -3.6
Net asset value per share - 745.0p 773.5p -3.7
diluted (dilution for
subscription shares)
Share price 693.0p 686.0p +1.0
Discount of share price to 7.0% 11.3% -
diluted net asset value per share
Benchmark Index* 83.89 84.11 -0.3
Gearing^ 15.4% 13.3% -
Total expense ratio (excluding 1.1% 1.0% -
performance fees)
#Source - Morningstar. Net asset value diluted for subscription shares and
treasury shares.
* With effect from 1 October 2010, the performance of the Company is measured
against the MSCI World Health Care Index on a total return, sterling adjusted
basis. Prior to this date, performance was measured against the Datastream
World Pharmaceutical & Biotechnology Index (total return, sterling adjusted).
Historic data therefore consists of a blended figure containing both indices. ^
Calculated using the Association of Investment Companies' definition (prior
charges as a percentage of net assets).
Chairman's Statement
PERFORMANCE
Volatility was the primary characteristic of a difficult period for markets
that saw the MSCI World Index (measured in sterling terms on a total return
basis) fall by 13.7%. However, the defensive qualities of the Healthcare sector
helped it to achieve a substantial outperformance of the wider market with the
Company's benchmark, the MSCI World Healthcare Index (measured in sterling
terms on a total return basis) falling byjust 0.3% over the same period. I am
pleased to report that the Company's net asset value total return of -0.9% was
broadly in line with its benchmark with the Company's share price performing
significantly better with a total return of +3.1% over the same period. The
average discount of the Company's share price to the diluted net asset value
per share during the period was 6.0%, in line with the Board's stated target.
Further information on investment performance and the outlook for the Company
is given in the Review of Investments beginning on page five of this Interim
Report.
CAPITAL
The Board regularly reviews its discount policy where it seeks to maintain the
discount to the net asset value per share at which the Company's shares are
quoted on the London Stock Exchange at no greater than 6% over the long-term,
subject to adverse market conditions. There can be no guarantee, however, that
the Board's discount policy will always be successful or capable of being
implemented. I am pleased to report that due to continued demand for the
Company's shares only 25,000 were repurchased for treasury
during the period and to the date of this report, at a cost of £174,000
(including expenses), compared to 358,607 shares, at a cost of c.£2,500,000, in
the previous six months. This perhaps reflects the performance of the
Healthcare sector relative to wider markets.
On 28 July 2011, a total of 358,607 shares held in treasury were cancelled. The
Board has confirmed that any shares held in treasury will be cancelled on or as
soon as practicable following the Annual General Meeting each year.
During the period and to the date of this report a total of 380,652
subscription shares were exercised at an exercise price of 638p per share
raising c.£2,400,000 of additional funds for the Company. The next subscription
date will be 31 January 2012 at a subscription price of 638p per share.
REVENUE AND DIVIDENDS
The revenue return for the period was £3,314,000 (six months ended 30 September
2010: return of £2,1 96,000) and no interim dividend is declared (six months
ended 30 September 2010: nil).
The Board expects that, on the basis of revenue estimates for the full year,
the Company's dividend will be greater than in the previous year. The Board
reminds shareholders that it remains the Company's policy to pursue capital
growth for shareholders and to pay dividends to the extent required to maintain
investment trust status. The amount of the dividend for the full year to 31
March 2012 is expected to be announced in May 2012.
Chairman's Statement (continued)
OUTLOOK
While previous falls in equity markets could be explained by overvaluation, the
issue this time appears to be the market's faith, or lack of it, in the
governments that underpin our economies. The Healthcare sector, however,
continues to play to its strengths as investors are increasingly looking for
high quality, defensive, and in some cases dividend yielding stocks.
On a global basis, China, India and Brazil are predicted to be the fastest
growing among developing countries. Also, an ageing population, the growth of
chronic diseases, increased levels of merger and acquisition activity and an
acceleration of new product approvals will continue to be major drivers for the
growth in the sector. Your Board believes that we are well positioned to take
advantage of this encouraging outlook for Healthcare.
Although we will continue to take advantage of high yielding securities, where
they can be purchased at attractive prices, our focus remains on the selection
of stocks with strong prospects for capital enhancement and we continue to
believe that the long term investor in our sector will be well rewarded.
Martin Smith
Chairman
18 November 2011
Interim Management Report
RISKS AND UNCERTAINTIES
A review of the half year, including reference to the risks and uncertainties
that existed during the period, and the outlook for the Company can be found in
the Chairman's Statement beginning on page two and the Review of Investments
beginning on page five. The principal risks facing the Company relate to the
Company's investment activities. These risks are objective and strategy risk;
market price and industry risk; currency risk; credit risk; liquidity risk;
portfolio performance and financial instruments risk. Other risks facing the
Company include the following: the risk associated with the Company's loan
facility; operational and regulatory risk; level of discount/premium risk. An
explanation of these risks and how they are managed is given in the Business
Review and also in note 18 within the Annual Report and Accounts for the year
ended 31 March 2011. In the view of the Board these principal risks and
uncertainties are applicable to the remaining six months of the financial year
as they were to the six months under review.
RELATED PARTY TRANSACTIONS
During the first six months of the current financial year, no transactions with
related parties have taken place which have affected the financial position or
the performance of the Company during the period.
DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the interim report in accordance
with applicable law and regulations. The Directors confirm that to the best of
their knowledge the condensed set of financial statements within the interim
report, have been prepared in accordance with the Accounting Standards Board's
Statement `Half Yearly Financial Reports' and that the Chairman's Statement and
the Interim Management Report include a fair review of the information required
by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules.
The interim report has not been reviewed by the Company's auditors.
The interim report was approved by the Board on 18 November2011 and the above
responsibility statement was signed on its behalf by:
Martin Smith
Chairman
Review of Investments
PERFORMANCE
During the half year global equity markets experienced extreme turmoil and
broad market performance in the period was characterised by an August sell off
as concerns over sovereign defaults and weak economic data swept across the
markets worldwide, and equity markets remained weak into the end of
September.The MSCI World Total Return Index was down 13.7% in sterling terms in
the period. Healthcare stocks performed significantly better than the broader
market, partly reflecting their defensive nature, as the MSCI World Healthcare
Total Return Index declined only 0.3%.
The Company outperformed the broader market and in line with the healthcare
specific index, with a share price total return of +3.1% and a net asset value
total return of -0.9%.The primary drivers of this outperformance included both
stock specific factors and healthcare sub-sector allocation decisions. The
central investment focus remains on biotechnology companies, selective exposure
to pharmaceutical firms, and diversification across other healthcare sectors
with compelling growth rates (such as generic drug companies), attractive
valuations (such as specialty pharmaceutical companies), or both (such as
managed care organisations).
With respect to biopharmaceutical companies, our most compelling investments
often involve a new product launch. If successful, a product launch can lead to
dramatic revenue and earnings growth, valuation expansion, and strong share
price performance. This is exemplified by the period's top contributor to the
Company's performance, the Japanese specialty pharmaceutical company,
Mitsubishi
Tanabe Pharma. The company is one year into the launch by its licensee of the
first ever oral therapy for the treatment of multiple sclerosis. The product,
known as Gilenya (fingolimod), was licensed to Novartis for U.S. and European
markets. Recently, Novartis management described the roll-out of Gilenya as
"one of the best specialty care launches ever in the industry". Mitsubishi
Tanabe Pharma enjoys a double-digit royalty on sales of Gilenya by Novartis, a
product we expect to reach mega-blockbuster status. The company has several
other new product opportunities, including a novel therapy for the treatment of
hepatitis C, for which the company owns the rights for both the Japanese and
Chinese markets (notable, because China has the largest prevalence of hepatitis
C in the world). Mitsubishi Tanabe Pharma also discovered a novel, oral
treatment for diabetes, called canagliflozin. This drug has been licensed to
Johnson & Johnson for global development. Depending on the outcome of ongoing
clinical trials, this drug may have a best-in-class profile and be the next
blockbuster to emerge from the company's pipeline. As these new compounds gain
additional visibility with investors and begin to generate revenues, we expect
strong share price performance to continue. This stock remains a core holding.
Another new product launch story comes from the company Pharmasset. This
company has developed a breakthrough therapy for the treatment of hepatitis C.
Recently, this company, based in New Jersey, unveiled additional clinical data
for their lead drug, known as PSI-7977, which is now considered to be the
best-in-class compared to all similar therapies. The successful 2011 launch of
a different drug in this disease area, Incivek from Vertex Pharmaceuticals, has
Review of Investments (continued)
validated the hepatitis C market as multi-billion dollar opportunity with low
barriers to both treatment and reimbursement for innovative new therapies. As
enthusiasm and visibility rises for PSI-7977, Pharmasset's share price
performance should remain strong. We also view Pharmasset as a high probability
acquisition target.The stock remains a core holding.
In the large capitalisation pharmaceutical sector, two top contributors to
performance this period exemplify the importance of stock selectivity in this
area. The first is Bristol-Myers Squibb, a company that we believe to possess
the best pipeline in the industry, as exemplified by their drug Yervoy
(ipilimumab), a novel "immuno-therapy" for melanoma that has seen a successful
commercial launch over the past six months. Development of this drug in other
tumor types continues. Nulojix (belatacept), a first-in-class therapy for
transplant rejection, was approved by the U.S. Food and Drug Administration
(FDA). Eliquis (apixaban), a drug for stroke prevention, was shown to have
superior efficacy and safety compared to the current gold standard of care, and
will be filed for approval later this year. Dapagliflozin, another drug from
Bristol-Myers Squibb, is a best-in-class treatment for diabetes already under
regulatory review at the FDA. This rich pipeline of new drug candidates is a
sign of unparalleled research and development productivity at Bristol-Myers
Squibb. While many investors are concerned over the company's "patent cliff" in
2012 and 2013 (i.e., a large number of drugs with patent expirations during
those years), we believe the new product growth potential will overwhelm losses
from the patent expirations. Despite
some opportunistic trimming, the stock remains a core holding.
The second large capitalisation pharmaceutical company that generated strong
performance is Roche, a company that experienced a plethora of disappointments
in 2010 and early 2011,
leading to a significant decline in stock price. At those levels we took a
contrarian perspective and viewed the stock as compelling due to its attractive
valuation, despite the setbacks. Subsequently, the stock rebounded off its lows
and became a top performance contributor in the period. Beyond its attractive
valuation, we view the pipeline as undervalued by investors, and we are also
less concerned than others about potential competition for Roche's impressive
portfolio of oncology drugs from "bio-similar" generic competitors. Thus, the
stock remains in the portfolio.
Rounding out the top five positive contributors is Sawai Pharmaceutical, a
Japanese generic drug maker. Our long-term investment thesis for Sawai remains
intact: government-backed legislation for increased generic drug usage in
Japan, the most underpenetrated generic drug market in the world, will lead to
accelerating revenues and earnings for Sawai and other generic drug companies
in Japan. Sawai has benefitted handsomely from this changing market dynamic in
recent years. While some of the "low hanging fruit" of generic drug growth has
now been picked, the remainder of 2011 should be full of news flow about the
next round of pro-generic drug government initiatives to be launched in the
coming years.
Performance detractors during the period were as diverse as the contributors.
The largest detractor to performance in the period was Human Genome Sciences,
an emerging
Review of Investments (continued)
biotechnology company in the midst of a new product launch. In March of 2011,
the company, with partner GlaxoSmithKline, launched Benlysta (belimumab), a new
biologic for the treatment of Lupus, a long-term autoimmune disorder that
affects the skin, joints, kidneys, brain, and other organs. Expectations for
the product were high at approval at the company given that it had been decades
since a new therapy had approved for this indication. When early uptake was
sluggish, the stock fell in sympathy when another biotechnology company with a
new product launch (albeit in a totally different therapeutic category)
reported disappointing sales in August. The market was suddenly wary of new
biological launches. We view the stock as attractively priced.
Pfizer, like most of its pharmaceutical peers, was an underperformer during the
period. The stock had enjoyed tremendous momentum beginning with the
appointment of a new CEO, Ian Read, at the end of 2010. His vision for a "new
Pfizer" involved breaking up the company, which resonated well with investors
through the first half of 2011. However, when he began to backtrack on this
reorganisation, investor sentiment turned decidedly negative and the stock
began to decline, ultimately selling off further during the market turmoil of
August/September. While a negative contributor to absolute performance during
the period, the Company was actually underweight relative to its benchmark.
Thus this position contributed to positive relative returns versus the
benchmark.
SECTOR DEVELOPMENTS
In 2010, the Obama Administration oversaw the passage of the Patient Protection
and Affordable Care Act (PPACA) into law, changing multiple aspects of the
private and public health insurance systems in the U.S. The principal goal of
the legislation is to provide additional healthcare coverage to individuals who
currently do not have access to or the ability to afford health insurance. We
hailed the passage of the law as a positive for the healthcare industry for two
reasons. First, it removed an uncertainty from the sector. Second, it will
provide coverage for an additional 30 million people, primarily through the
private sector, which we expect to increase consumption of drugs and services
in the future.
However, the new coverage will not be available until 2014 but monies to
partially offset the cost were required immediately. Thus, industry players
have been negatively impacted, primarily large drug and biotechnology
companies, as a result of required increased rebates to Medicaid, expanded drug
coverage for Medicare, and through an annual industry fee. Medical device
companies have been similarly affected by an excise tax. Without any
incremental revenues to offset these new costs, the net immediate impact of
healthcare reform has created a roughly 1-3% headwind to earnings for 2011.
The PPACA has also created, unexpectedly and unintentionally, a new overhang on
parts of the healthcare industry, primarily the private health insurers.
Specifically, the PPACA has been besieged with constitutional challenges. It is
uncertain if the law or parts of the law will
Review of Investments (continued)
remain in effect. The crux of the argument against the reform is the belief by
some that fining individuals for failing to buy insurance is not within the
scope of Congress's taxing powers and is thus unconstitutional. We expect the
Supreme Court of the United States to rule on the matter in 2012. Ultimately,
we believe the law will be upheld in its entirety and repeal is unlikely, but
the froth of uncertainty could be troublesome for the sector.
Additional pricing pressures across Europe relating to the sovereign debt
crisis have created another headwind. The companies most exposed are
multi-national players and regional drug makers. In the U.S., the debt crisis
and general economic malaise has generated uncertainty for the healthcare
sector due to the formation of the "Joint Select Committee on Deficit
Reduction" or the so-called "Super committee". The group of 12 consists equally
of House and Senate members and Democrats and Republicans and is charged with
finding additional cost reductions aimed at reducing the U.S. federal deficit.
Most concerning is the potential of the committee to not fully agree on
reductions and hit gridlock, which will trigger a sequestration of $1.2
trillion, starting on January 2, 2013, unless Congress changes the law. Thus,
if the committee fails to agree on a package or the full Congress fails to pass
it, this "trigger mechanism" of automatic spending cuts, would result in a risk
of new discounts and/or rebates for drugs and devices sold to Medicare and
Medicaid. This would be a blow to the industry.
With respect to the FDA, there has been a welcome acceleration in the pace of
new product approvals. So far this year, 21 so-called "New Chemical Entities"
have been approved, compared to just 15 for all of calendar year 2010. New
Chemical Entities are innovative
pharmaceutical drugs (i.e., not generic drugs, biologics, or re-formulations).
We expect another half-dozen or so such approvals, for a full year total of 26,
an increase of over 70% compared to the prior year. Similarly, with respect to
new biological therapies, the FDA has already approved six, equaling the total
from all of last year. The FDA has even turned more constructive on
cardiovascular, diabetes and obesity drugs, which have been difficult areas in
recent years to garner approvals.
The period experienced a lower than anticipated amount of mergers and
acquisition ("M&A") activity in the healthcare sector. We do not think this a
break in trend; rather, it is likely a product of a turbulent market. But one
positive outcome from the market declines is that M&A activity is likely to
reaccelerate. Acquisition targets have become dramatically more affordable for
large companies, and our conversations with business development teams and
intermediaries suggest a significant increase in active M&A projects
STRATEGY REVIEW
The Company's investment mandate remains to invest broadly in the most
compelling opportunities across all areas of healthcare, from pharmaceuticals
to biotechnology, medical device and healthcare services companies. We believe
this broad mandate allows the Company to seek attractive returns while
potentially lowering volatility relative to more concentrated investment
approaches.
Overall, we have continued our strategy of being highly selective in large
capitalisation pharmaceutical stocks as the headwinds for this sub-sector
remain challenging for most, however a few exceptional companies with
Review of Investments (continued)
new product flow and contrarian deep value opportunities do exist. While our
enthusiasm for biotechnology stocks in general remains high, we have become
less sanguine about several of the large capitalisation biotechnology stocks,
preferring smaller biotechnology stocks in many cases. Our relative positioning
in these sub-sectors reflects this view.
Additionally, we see resurgent growth in generic drug companies as a result of
patent expirations on a number of drugs and also opportunities in emerging
markets. Specialty pharmaceutical
companies are an important segment for the Company where low valuations,
quality companies, fewer headwinds and niche therapeutic opportunities form the
basis of our excess allocation.
We also perceive managed care companies as attractive, in particular health
maintenance organisations (HMOs), which are trading at historically low
valuations. These stocks are not riskless given political uncertainty, but we
believe the medium-term landscape for them will remain positive.
The medical device sector also offers low valuations, but negative utilisation
trends and poor pricing power constrains our enthusiasm for this sector, which
is also suffering from a dearth of innovation. We remain underweight the
medical device sector in general.
Overall, uncertainty appears to be the outlook for the markets for the
remainder of 2011. Macro concerns over global economies persist and the
domestic employment situation in the US continues to be debated. We are
optimistic that healthcare will remain defensive in such an environment. And
while uncertainty is an overhang for healthcare, it is so but to a much lesser
extent. Moreover, as the Republican Party continues to make gains in the House
and Senate, a potential tailwind looms for healthcare as we enter a new
election cycle in the U.S. in the coming year.
Samuel D Isaly
OrbiMed Capital LLC Investment Manager 18 November 2011
Review of Investments (continued)
CONTRIBUTION BY INVESTMENT - EXCLUDING OPTIONS
Top and bottom five contributors to net asset value performance over the six
months to 30 September 2011
Top Five Contributors Contribution for Contribution
the six months per share (p)*
£'000
Mitsubishi Tanabe Pharma 2,894 6.7
Pharmasset 2,534 5.9
Bristol-Myers Squibb 2,509 5.8
Roche 2,501 5.8
Sawai Pharmaceutical 2,111 4.9
12,549 29.1
Bottom Five Contributors
Human Genome Sciences (2,655) (6.1)
Pfizer (2,446) (5.7)
Warner Chilcott (2,340) (5.4)
Sinopharm (2,276) (5.3)
Express Scripts (2,016) (4.7)
(11,733) (27.2)
*based on the weighted average number of shares in issue during the six months
ended 30 September 2011 (43,265,414) Source: Frostrow Capital LLP
Portfolio
as at 30 September 2011
Investments Country Market value % of
£'000 investments
Novartis Switzerland 24,615 6.3
Roche Switzerland 20,861 5.4
Pfizer USA 20,122 5.2
Mitsubishi Tanabe Pharma Japan 18,640 4.8
Merck & Co. USA 13,644 3.5
Allergan USA 11,899 3.1
Gilead Sciences USA 10,959 2.8
United Health USA 10,351 2.7
Bristol-Myers Squibb USA 10,267 2.6
Wellpoint USA 10,014 2.6
Top 10 investments 151,372 39.0
Sawai Pharmaceutical Japan 9,377 2.4
GlaxoSmithKline UK 9,131 2.4
Medivation USA 8,165 2.1
Nichi-Iko Pharmaceutical Japan 7,137 1.9
Shire Ireland 7,000 1.8
Vertex Milestone Monetization (unquoted, 6,833 1.8
CPEC) + USA
Incyte ^ USA 6,802 1.7
Elan ~ Ireland 6,685 1.7
Medtronic USA 6,523 1.7
Watson Pharmaceuticals USA 6,459 1.7
Top 20 investments 225,484 58.2
Sanofi France 6,418 1.7
Aetna USA 6,367 1.6
Humana USA 6,300 1.6
CIGNA USA 6,194 1.6
Dendreon 2.875% 15/01/2016 (Conv) USA 6,050 1.6
Thermo Fisher Scientific USA 5,911 1.5
Shandong Weigao Group China 5,803 1.5
Pharmasset USA 5,610 1.4
Baxter Int. USA 5,408 1.4
Towa Pharmaceutical Japan 5,337 1.4
Top 30 investments 284,882 73.5
+ Convertible Preferred Equity Certificates (CPEC).
^ includes Incyte 4.75% 01/10/2015 (Conv) equating to 1.5% of investments. ~
includes Elan 8.75% 15/10/2016 equating to 0.7% of investments.
# includes Volcano 2.875% 01/09/2015 (Conv) equating to 0.3% of investments.
†includes K-V Pharmaceutical 12% 15/03/2015 equating to 0.6% of investments.
Portfolio (continued)
as at 30 September 2011
Investments Country Market % of
value
investments
£'000
Zimmer USA 4,807 1.2
Volcano # USA 4,686 1.2
VIVUS USA 4,483 1.2
Express Scripts USA 4,402 1.1
VWR Funding 10.25% 15/07/15 USA 4,310 1.1
Warner Chilcott Ireland 4,102 1.1
Life Technologies USA 4,095 1.0
BioMarin Pharmaceutical USA 3,869 1.0
Hospira USA 3,798 1.0
Sinopharm China 3,372 0.9
Top 40 investments 326,806 84.3
Carefusion USA 3,307 0.9
Angiotech Pharmaceuticals FRN USA 3,264 0.8
01/12/2013
K-V Pharmaceutical †USA 3,133 0.8
Forest Laboratories USA 2,964 0.8
Lyrica Royalty 11% 01/05/19 USA 2,878 0.7
Valeant Pharmaceuticals Int. Canada 2,620 0.7
Sequenom USA 2,614 0.7
Align Technology USA 2,577 0.7
Pharmacyclics USA 2,524 0.6
NPS Pharmaceuticals USA 2,495 0.6
Top 50 investments 355,182 91.6
Cardinal Health USA 2,420 0.6
Fluidigm USA 2,388 0.6
Human Genome Sciences USA 2,279 0.6
Illumina USA 2,259 0.6
McKesson USA 2,239 0.6
HCA USA 2,197 0.6
Given Imaging Israel 2,083 0.5
Teva Pharmaceutical Industries Israel 1,928 0.5
3SBio China 1,853 0.5
OraSure Technologies USA 1,791 0.5
Top 60 investments 376,619 97.2
MExact Sciences USA 1,697 0.4
Hikma Pharmaceuticals UK 1,039 0.3
QHP Royalty 10.25% 15/03/2015 USA 1,006 0.3
Pacific Biosciences of USA 579 0.1
California
Medivir Sweden 38 -
Total equities and fixed 380,978 98.3
interest investments
Options (Put & Call) (424) -0.1
Derivative (OTC Swaps) 7,141 1.8
Total Investments 387,695 100.0
+ Convertible Preferred Equity Certificates (CPEC).
^ includes Incyte 4.75% 01/10/2015 (Conv) equating to 1.5% of investments. ~
includes Elan 8.75% 15/10/2016 equating to 0.7% of investments.
# includes Volcano 2.875% 01/09/2015 (Conv) equating to 0.3% of investments. â€
includes K-V Pharmaceutical 12% 15/03/2015 equating to 0.6% of investments.
Income Statement
for the six months ended 30 September 2011
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 September 2011 30 September 2010 31 March 2011
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Return Return £'000 Return Return £'000 Return Return £'000
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on - (6,980) (6,980) - (3,790) (3,790) - 5,477 5,477
investments held
at fair value
through profit or
loss
Exchange (losses) - (2,164) (2,164) - (40) (40) - 710 710
/gains on
currency balances
Income from 4,274 - 4,274 3,059 - 3,059 9,125 - 9,125
investments held
at fair value
through profit or
loss (note 2)
Investment (78) (2,398) (2,476) (72) (3,264) (3,336) (147) (2,658) (2,805)
management,
management and
performance fees
(note 3)
Other expenses (262) - (262) (304) - (304) (586) - (586)
Net return/(loss) 3,934 (11,542) (7,608) 2,683 (7,094) (4,411) 8,392 3,529 11,921
before finance
charges and
taxation
Finance charges (9) (166) (175) (4) (78) (82) (13) (247) (260)
Net return/(loss) 3,925 (11,708) (7,783) 2,679 (7,172) (4,493) 8,379 3,282 11,661
before taxation
Taxation on (611) 235 (376) (483) 166 (317) (1,224) 239 (985)
ordinary
activities
Net return/(loss) 3,314 (11,473) (8,159) 2,196 (7,006) (4,810) 7,155 3,521 10,676
after taxation
Return/(loss) per 7.7p (26.6)p (18.9)p 5.0p (16.1)p (11.1)p 16.5p 8.1p 24.6p
share - basic
(note 4)
Return/(loss) per 7.5p (25.9)p (18.4)p 5.0p (16.1)p (11.1)p 16.3p 8.1p 24.4p
share - diluted
(note 4)
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 recognised gains and losses has been
presented.
No operations were acquired or discontinued during the period.
Reconciliation of Movements in
Shareholders' Funds
(Unaudited) Ordinary Subscription Share Capital Capital Revenue Total
share share premium reserve redemption reserve £'000
Six months ended capital capital account £'000 reserve £'000
30 September 2011 £'000 £'000
£'000 £'000
At 31 March 2011 10,875 82 181,395 135,319 6,978 10,132 344,781
Net (loss)/return - - - (11,473) - 3,314 (8,159)
from ordinary
activities after
taxation
Dividends paid in - - - - - (6,473) (6,473)
respect of year
ended 31 March
2011
Subscription 93 (4) 2,267 4 - - 2,360
shares exercised
for ordinary
shares
Shares purchased (90) - - (174) 90 - (174)
to be held in
treasury and
treasury shares
cancelled
At 30 September 10,878 78 183,662 123,676 7,068 6,973 332,335
2011
(Unaudited) Ordinary Subscription Share Capital Capital Revenue Total
share share premium reserve redemption reserve £'000
Six months ended capital capital account £'000 reserve £'000
30 September 2010 £'000 £'000
£'000 £'000
At 31 March 2010 12,644 90 176,648 145,160 5,009 6,630 346,181
Net (loss)/return - - - (7,006) - 2,196 (4,810)
from ordinary
activities after
taxation
Dividends paid in - - - - - (3,653) (3,653)
respect of year
ended 31 March
2010
Subscription 172 (7) 4,045 7 - - 4,217
shares exercised
for ordinary
shares
Purchase of (1,969) - - (10,906) 1,969 - (10,906)
Company's own
shares including
expenses
At 30 September 10,847 83 180,693 127,255 6,978 5,173 331,029
2010
(Audited) Ordinary Subscription Share Capital Capital Revenue Total
share share premium reserve redemption reserve £'000
Year ended 31 March capital capital account £'000 reserve £'000
2011 £'000 £'000
£'000 £'000
At 31 March 2010 12,644 90 176,648 145,160 5,009 6,630 346,181
Net return from - - - 3,521 - 7,155 10,676
ordinary activities
after taxation
Dividends paid in - - - - - (3,653) (3,653)
respect of year ended
31 March 2010
Subscription shares 200 (8) 4,747 8 - - 4,947
exercised for ordinary
shares
Shares purchased to be (1,969) - - (13,370) 1,969 - (13,370)
held in treasury and
treasury shares
cancelled
At 31 March 2011 10,875 82 181,395 135,319 6,978 10,132 344,781
Balance Sheet
as at 30 September 2011
(Unaudited) (Unaudited) (Audited)
30 30 31 March
September September 2011
2011 2010 £'000
£'000 £'000
Fixed assets 380,978 398,645 385,869
7,141
Investments held at fair - -
value through profit or loss
Derivative - OTC swaps
388,119 398,645 385,869
Current assets
Debtors 6,041 1,251 6,138
Derivative - financial - 994 2,223
instruments
6,041 2,245 8,361
Current liabilities
Creditors: amounts falling (10,231) (31,320) (1,341)
due within one year
Derivative - financial (424) - (2,223)
instruments
Bank overdraft (51,170) (38,541) (45,885)
(61,825) (69,861) (49,449)
Net current liabilities (55,784) (67,616) (41,088)
Total net assets 332,335 331,029 344,781
Capital and reserves
Ordinary share capital 10,878 10,847 10,875
Subscription share capital 78 83 82
Share premium account 183,662 180,693 181,395
Capital reserve 123,676 127,255 135,319
Capital redemption reserve 7,068 6,978 6,978
Revenue reserve 6,973 5,173 10,132
Total shareholders' funds 332,335 331,029 344,781
Net asset value per share - 764.2p 763.0p 799.2p
basic (note 5)
Net asset value per share - 745.0p 742.9p 773.5p
diluted (note 5)
Net asset value per share - 745.0p 742.9p 772.8p
fully diluted (note 5)
Cash Flow Statement
for the six months ended 30 September 2011
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 30 September 31 March
September 2010 2011
£'000 £'000
2011
£'000
Net cash (outflow)/inflow from (654) 533 3,268
operating activities
Servicing of finance
Interest paid (175) (82) (260)
Taxation
Taxation (suffered)/recovered (69) 182 (202)
Financial investment
Purchases of investments and (171,355) (116,763) (274,348)
derivatives
Sales of investments and 173,419 124,037 273,089
derivatives
Net cash inflow/(outflow) from 2,064 7,274 (1,259)
financial investment
Equity dividends paid (6,473) (3,653) (3,653)
Net cash (outflow)/inflow (5,307) 4,254 (2,106)
before financing
Financing
Repurchase of own shares (174) (10,910) (13,374)
Subscription shares exercised 2,360 4,217 4,947
for ordinary shares
Net cash inflow/(outflow) from 2,186 (6,693) (8,427)
financing
Decrease in cash (3,121) (2,439) (10,533)
Reconciliation of net cash flow
movements to net debt
Increase in net debt resulting (3,121) (2,439) (10,533)
from cash flows
Exchange movements (2,164) (40) 710
Movement in net debt in the (5,285) (2,479) (9,823)
period
Net debt at beginning of period (45,885) (36,062) (36,062)
Net debt at period end (51,170) (38,541) (45,885)
Notes to the Financial Statements
1. ACCOUNTING POLICIES
The condensed financial statements have been prepared under the historical cost
convention, modified to include the valuation of investments at fair value and
in accordance with United Kingdom Generally Accepted Accounting Practice and
with the Statement of Recommended Practice `Financial Statements of Investment
Trust Companies and Venture Capital Trusts' dated January 2009. All of the
Company's operations are of a continuing nature.
The same accounting policies used for the year ended 31 March 2011 have been
applied.
2. INCOME
(Unaudited) (Unaudited) (Audited)
Year
Six months ended Six months ended
ended 31 March
30 September 30 2011
2011 September £'000
£'000 2010
£'000
Investment income 4,273 3,059 9,118
Interest receivable 1 - 7
Total 4,274 3,059 9,125
3. INVESTMENT MANAGEMENT, MANAGEMENT AND PERFORMANCE FEES
(Unaudited) (Unaudited) (Audited) Total
£'000
Six months ended Six months ended Year ended
30 September 2011 30 September 31 March
Revenue Capital 2010 2011
Total Revenue Capital Revenue
Total Capital
£'000 £'000 £'000
£'000 £'000 £ £'000 £'000 £'000
Investment 57 1,081 1,138 52 992 1,044 107 2,030 2,137
management fee
Management fee 21 408 429 20 377 397 40 763 803
Performance fee - 909 909 - 1,895 1,895 - (135) (135)
charged/
(written back)
in the period/
year*
78 2,398 2,476 72 3,264 3,336 147 2,658 2,805
*In accordance with the performance fee arrangements described on page 18 of
the 2011 annual report, a performance fee of £nil was accrued at 30 September
2011(2010: £4,654,000).
During the period, £3,533,000 was paid which related to a performance fee which
crystallised and became payable at 31 March and 30 June 2011.
Notes to the Financial Statements
(continued)
4. RETURN/(LOSS) PER SHARE
(Unaudited) (Unaudited)
(Audited)
Six months ended Six months ended Year ended
30 September 31 March
30 September 2010 2011
2011 £'000
£'000 £'000
The return/(loss) per share is 3,314 2,196 7,155
based on the following figures: (11,473) (7,006) 3,521
Revenue return
Capital (loss)/return
Total (loss)/return (8,159) (4,810) 10,676
Weighted average number of shares 43,265,414 43,497,098 43,342,727
in issue for the period - basic
Revenue return per share 7.7p 5.0p 16.5p
Capital (loss)/return per share (26.6)p (16.1)p 8.1p
Total (loss)/return per share (18.9)p (11.1)p 24.6p
Weighted average number of shares 44,253,028 43,497,098 43,776,264
in issue for the period - diluted
Revenue return per share 7.5p *5.0p 16.3p
Capital (loss)/return per share (25.9)p *(16.1)p 8.1p
Total (loss)/return per share - (18.4)p *(11.1)p 24.4p
diluted
*dilution not applicable
5. NET ASSET VALUE PER SHARE
The net asset value per share is based on the assets attributable to equity
shareholders of £332,335,000 (30 September 2010: £331,029,000: 31 March 2011: £
344,781,000) and on the number of shares in issue at the period end of
43,486,450 (excluding 25,000 shares held in treasury) (30 September 2010:
43,385,916: 31 March 2011: 43,141,611).
The diluted net asset value per share assumes that the 7,821,273 Subscription
shares were exercised at 638p resulting in assets attributable to ordinary
shareholders of £382,235,000 and on 51,307,723 shares (30 September 2010: £
384,018,000 and 51,691,330 shares: 31 March 2011: £397,040,000 and 51,332,723
shares).
The fully diluted net asset value per share for subscription shares and
treasury shares assumes that 7,821,273 subscription shares were exercised at
638p and 25,000 treasury shares were sold back to the market at 693p (the
prevailing share price as at 30 September 2011) resulting in assets
attributable to ordinary shareholders of £382,408,000 (30 September 2010: £
384,018,000: 31 March 2011: £399,482,000) and on 51,332,723 shares (30
September 2010: 51,691,330 shares: 31 March 2011: 51,691,330 shares)
Notes to the Financial Statements
(continued)
6. TRANSACTION COSTS
Purchase transaction costs for the six months ended 30 September 2011 were £
282,000 (six months ended 30 September 2010: £319,000; year ended 31 March
2011: £507,000).
Sales transaction costs for the six months ended 30 September 2011 were £
291,000 (six months ended 30 September 2010: £229,000; year ended 31 March
2011: £467,000).
These costs comprise mainly commission.
6. SUBSCRIPTION SHARES
During the period ended 30 September 2011 a total of 369,839 subscription
shares were exercised for a total consideration of £2,359,573. At the period
end the Company's share capital included 7,821,273 subscription shares, which
are currently exercisable at 638p per share.
7. PUBLICATION OF NON STATUTORY ACCOUNTS
The financial information contained in this interim report does not constitute
statutory accounts as defined in sections 434-436 of the Companies Act 2006.
The financial information for the half years ended 30 September 2011 and 30
September 2010 has not been audited, or reviewed by the auditors.
The information for the year ended 31 March 2011 has been extracted from the
latest published audited financial statements. The audited financial statements
for the year ended 31 March 2011 have been filed with the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did
not include a reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report, and did not contain statements
under section 498 of the Companies Act 2006.
Earnings for the first six months should not be taken as a guide to the results
for the full year.
Frostrow Capital LLP
Company Secretary
30 November 2011
0203 008 4913
www.frostrow.com
A copy of the interim report has been submitted to the National Storage
Mechanism and will shortly be available for inspection at www.hemscott.com/
nsm.do
The interim report is available on the Company's website at www.worldwidewh.com
where up to date information on the Company, including daily NAV, share prices
and fact sheets, can also be found.
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