Final Results

RNS Number : 5463X

Polar Capital Global Health Tst PLC

19 December 2019

 

POLAR CAPITAL GLOBAL HEALTHCARE TRUST PLC

Legal Entity Identifier: 549300YV7J2TWLE7PV84

AUDITED RESULTS ANNOUNCEMENT FOR THE YEAR ENDED

30 SEPTEMBER 2019

FINANCIAL HIGHLIGHTS

For the year to 30 September 2019

Performance
Net Asset Value ('NAV') per Ordinary share (total return) *			-1.24%
Benchmark index (MSCI ACWI Health Care Index (total return in sterling with dividends reinvested))			3.14%
Since restructuring
NAV per Ordinary share (total return) since restructuring*~			11.69%
Benchmark index total return since restructuring			16.69%
Expenses	2019	2018
Ongoing charges*	1.01%	1.08%
Financials	As at 30 September 2019	As at 30 September 2018	Change
Total net assets (Group and Company)	£288,447,000	£296,263,000	-2.6%
NAV per Ordinary share	236.88p	241.91p	-2.1%
NAV per ZDP share	106.99p	103.87p	3.0%
Price per Ordinary share	218.00p	223.00p	-2.2%
Discount per Ordinary share*	8.0%	7.8%
Price per ZDP share	108.50p	104.50p	3.8%
Net gearing*	7.21%	8.29%
Ordinary shares in issue (excluding those held in treasury)	121,770,000	122,470,000	-0.6%
Ordinary shares held in treasury	2,379,256	1,679,256	41.7%
ZDP shares in issue	32,128,437	32,128,437	-

      Dividends

The Company has paid or declared the following dividends relating to the financial year ended 30 September 2019:

Pay date	Amount per Ordinary share	Record date	Ex-date	Declared date
First interim: 30 August 2019	1.00p	2 August 2019	1 August 2019	23 July 2019
Second interim: 28 February 2020	1.10p	7 February 2020	6 February 2020	19 December 2019
Total (2018: 2.00p)	2.10p

* See Alternative Performance Measures below.

~ The Company's portfolio was restructured on 20 June 2017. The total return NAV performance since restructuring is calculated by reinvesting the dividends in the assets of the Company from the relevant payment date.

For further information please contact:
Ed Gascoigne-Pees Camarco Tele. 020 3757 4984	Tracey Lago, FCG Polar Capital Global Healthcare Trust Plc Tele. 020 7227 2742	John Regnier-Wilson Polar Capital LLP Tele. 020 7227 2725

STATUS OF ANNOUNCEMENT

The figures and financial information contained in this announcement are extracted from the Audited Annual Report for the year ended 30 September 2019 and do not constitute statutory accounts for the period. The Annual Report and Financial Statements include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or Section 498(3) of the Companies Act 2006.  The Annual Report and Financial Statements for the year ended 30 September 2019 have not yet been delivered to the Registrar of Companies. The figures and financial information for the period ended 30 September 2018 are extracted from the published Annual Report and Financial Statements for the period ended 30 September 2018 and do not constitute the statutory accounts for that year.  The Annual Report and Financial Statements for the period ended 30 September 2018 have been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or Section 498(3) of the Companies Act 2006.

The Directors' Remuneration Report and certain other helpful Shareholder information has not been included in this announcement but forms part of the Annual Report which will be available on the Company's website and will be sent to Shareholders in January 2020.

CHAIRMAN'S STATEMENT

PERFORMANCE

The Net Asset Value ('NAV') per share fell by 1.24% over the period on a total return basis. Although this was usefully ahead of the rest of our AIC peer group this was nevertheless behind the Company's benchmark, the MSCI ACWI Health Care Index (total return in sterling), which returned 3.14% over the same period. The discount to NAV at which our shares traded moved out from 7.8% to 8.0% which meant that the total return to Shareholders was -1.35%.

PORTFOLIO POSITIONING

Over the course of the year we significantly increased our exposure to healthcare equipment and also increased our weighting in life sciences tools and services. We did so at the expense of pharmaceuticals, biotechnology and managed healthcare, whose weightings were significantly reduced. At 75% of net assets, the US remains our largest geographic exposure both in absolute and relative terms. Over the year the US dollar appreciated by 5.5% against sterling which helped to boost our overall return in sterling terms. Our invested position fell slightly over the year from 108.3% to 107.2%. The Board has given the Managers a net borrowing range of between 90% and 111% invested. This gives our Managers the scope to gear up when they are positive and raise cash if they are more cautious.

FUND MANAGEMENT TEAM

At the beginning of August Dan Mahony stepped down as one of our three co-Managers. Dan has been directly involved with the management of your Company since its original inception in 2010 and the Board would like to thank him for his significant contribution throughout this period. Dan will now focus on strategy for the Healthcare team as a whole at Polar Capital, leaving Dr James Douglas and Gareth Powell as co-Managers of our portfolio.

DIVIDENDS

A first interim dividend of 1.0p for the year ended 30 September 2019 was paid on 30 August 2019. We are declaring a second interim dividend of 1.10p which will be payable in February 2020. Total dividends for the current financial year therefore amount to 2.10p compared with 2.00p last year, an increase of 5%.

Our dividend policy reflects the focus on capital growth which means that dividends will likely represent a relatively small part of Shareholders' total return over the medium term.

SHARE BUYBACKS

We continue to buy back shares on a selective basis when it is in the best interest of Shareholders. In the year under review we bought back a total of 700,000 shares which have been placed into treasury for re-issue when the opportunity arises. Since the end of the financial year we have bought back a further 500,000 shares which have also been placed into treasury.

BOARD SUCCESSION

As I have previously reported, our plan is to refresh the entire Board over a two year period and to do this in two phases. Phase one was completed in February 2018 and on 23 October 2019 we announced the appointment of Andrew Fleming and Jeremy Whitley as independent non-executive directors, both of whom joined the Board with effect from 1 December 2019.

Andrew Fleming was most recently chief executive of Waverton Investment Management. He started his career at Gartmore where he was a main board director and head of equities. He went on to hold senior positions at ABN Amro and was chief executive of Kames Capital for nine years. He was a director and chairman of JP Morgan Japanese Investment Trust plc retiring in December 2018.

Jeremy Whitley is currently a non-executive director of The Scottish Oriental Smaller Companies Trust plc. With effect from 1 February 2020, Jeremy will also join the board of JPMorgan Indian Investment Trust plc. He was formerly Head of UK and European Equities at Aberdeen Asset Management, a position he held from 2009 to 2017.

We are very pleased that both Andrew and Jeremy agreed to join the Board and we look forward to benefiting from their extensive investment experience. A resolution proposing their election as non-executive directors will be put to Shareholders at the forthcoming Annual General Meeting ('AGM') of the Company to be held on 26 February 2020.

As previously indicated Tony Brampton and I, the remaining original directors, will step down at the AGM in February. This will complete phase two of the Board refreshment. I would like to pay tribute to Tony who has been an excellent and supportive director since the inception of the Trust in 2010 and whose knowledge and insights will be much missed.

I have enjoyed being Chairman of your Company since its original inception in 2010 and I would like to thank all our Shareholders for their continued support, particularly at the time of our restructuring in 2017. I am delighted to confirm that Lisa Arnold has been invited by the Board, and has accepted, the role of Chairman when I retire at the forthcoming AGM.

The Board believes that Lisa will bring a fresh perspective to its proceedings and we all look forward to seeing the Company make further progress under her guidance.

OUTLOOK

The outlook going into 2020 appears to be supportive for large cap healthcare companies based on their defensive growth profile, strong balance sheets and commitment to innovation. With the economic cycle now quite mature, however, the outlook for smaller companies is more challenging and we have therefore reduced our exposure here to 10.2% awaiting better opportunities over the months ahead.

Sentiment for the healthcare sector has been poor, largely due to healthcare policy likely to be an increasingly important part of the debate ahead of the US presidential election in November 2020. With sentiment at extremes last seen in 2008 it seems likely that the fog will eventually clear. Fundamentals for the healthcare sector remain robust with good sales and earnings strength relative to other areas of the market. We expect these fundamentals to persist over the years ahead, generating attractive returns for investors.

It is quite likely we may see some currency headwinds this year. Until recently sterling has been weak against most of the overseas currencies in which we invest and this has helped boost returns to Shareholders. Assuming Brexit is finally accomplished it seems quite likely that sterling will see a further bounce from these levels. However, currency forecasting is fraught with difficulties and this together with the fact that our Shareholders expect us to have foreign currency exposure (and would be surprised if we didn't) means that the Board has not engaged in any currency hedging. This may of course change at some point in the future but our normal stance is to run unhedged currency positions.

ANNUAL GENERAL MEETING

The Company's ninth Annual General Meeting will take place at noon on Wednesday, 26 February 2020 at the offices of our Managers, Polar Capital, 16 Palace Street, London SW1E 5JD. The nearest tube and main line station is Victoria. A map of the location is contained in the separate Notice of Annual General Meeting. One of our co-managers, Dr James Douglas, will be giving a presentation to Shareholders reflecting on the year past and the year ahead. I would encourage as many as possible of you to attend and hear what he has to say. Attendance at this meeting also provides a good opportunity to meet members of the Board and to ask any questions you might have, either of us or the Investment Manager.

A buffet lunch will be served at the conclusion of the meeting.

 

James Robinson

Chairman

19 December 2019

INVESTMENT MANAGER'S REPORT - FOR THE YEAR ENDED 30 SEPTEMBER 2019

·      Fundamentals for the healthcare sector remain robust with good sales and earnings strength relative to other areas of the market

·      The US political environment could create some volatility and valuation pressure in 2020, pressure that we would view as a buying opportunity

·      We believe the uncertain economic outlook is supportive for large cap healthcare stocks based on their defensive growth profile, strong balance sheets and commitment to innovation

PERFORMANCE REVIEW

For the financial year to 30 September 2019, the Company delivered a total return of -1.24%, which was behind the benchmark (MSCI ACWI Health Care Index) that recorded a total return of 3.14% over the same period.

Over the course of the year, there have been some fluctuations in foreign exchange rates - which have had an impact on the Net Asset Value (NAV) of the portfolio, which is denominated in Sterling. Over the reporting period, the US dollar appreciated by 5.5% compared to Sterling and this had a positive impact on returns, given that the majority of the Company's portfolio (and its benchmark) are heavily weighted towards US dollar denominated stocks.

The beginning of the Company's financial year marked a difficult period for global stock markets, with the MSCI All-Country World Index declining in the mid-teens during the fourth quarter of calendar 2018. There were multiple reasons for the weakness including US/China trade tensions, US monetary policy transitioning to quantitative tightening  and eroding confidence in the EU. As we moved into 2019, however, the markets recovered from the late 2018 correction, with global growth concerns leading to a more dovish outlook from Central Banks.

Healthcare experienced similar volatility to the broader market over the reporting period, although the sector did underperform by 3.89% (MSCI ACWI Health Care Index vs MSCI ACWI Index (both daily total return)). The late 2018 correction was followed by a rebound during the first quarter of 2019, buoyed early in the year by biotechnology company acquisitions by large pharmaceutical companies. As the year progressed however, the  attention of markets pivoted away from fundamentals and started to focus more on the political environment in the US. That focus weighed heavily on sentiment, over-shadowing the industry's underlying operational progress.

The major political debates in the US were, and continue to be, drug pricing and the spectre of "Medicare For All". On the drug pricing side, there is bi-partisan support to address the issue, enhancing the odds of change. The precise details and mechanisms for change are yet to be determined, but the political will is undoubtedly there. In terms of "Medicare For All", the more progressive Democratic nominees are promoting a single-payer system in the US, something that could potentially disintermediate the US Managed Care industry.

There was a wide dispersion of returns from the healthcare sub-sectors. The life sciences and tools and medical equipment sub-sectors outperformed, but the managed healthcare and services sub-sectors had a difficult 12 months. Within  therapeutics,  pharmaceuticals were in modest positive territory, but the biotechnology sub-sector struggled.

REVIEW OF THE PORTFOLIO

The investment mandate for the Company is focused on capital growth by investing in a diversified global portfolio of healthcare companies with no restriction on sub-sector weighting. The Company's portfolio comprises a single pool of investments but for operational purposes we have divided these investments into a growth portfolio and an innovation portfolio.

The majority of the Company's assets are allocated to the growth portfolio and this comprised 34 large-cap healthcare stocks (some 96.9% of total net assets) at the end of the reporting period. All companies in the growth portfolio had a market capitalisation greater than $5bn at the time of investment.

The innovation portfolio provides exposure to healthcare companies with a market capitalisation less than $5bn and is invested in a range of medical devices, healthcare services and biotechnology companies. There were 13 investments in the innovation portfolio (which comprised some 10.2% of total net assets).

The Company has structural debt in the form of Zero Dividend Preference (ZDP) shares issued by the subsidiary company in June 2017. The net gearing level at the end of the period, as per the AIC methodology, was 7.2%.

PERFORMANCE ATTRIBUTION

In terms of sub-sector weightings, we had overweight positions in healthcare equipment (accelerating top-line growth) and life sciences and tools (buoyant end-markets) with an underweight position in pharmaceuticals (mature product portfolios) throughout most of the financial year. Positioning and stock selection in healthcare technology were positive contributors to performance, as was stock selection in pharmaceuticals. Over-weight positions in life sciences and tools and healthcare equipment was the correct decision but stock selection disappointed. The biggest drags on performance were healthcare services and biotechnology.

We decreased our weighting in managed care at the beginning of the calendar year due to concerns about valuations and political risk. We added to our exposure in healthcare equipment based on accelerating growth driven by new product cycles. At the end of the financial year our major over-weight sub-sectors were healthcare equipment and life sciences and tools. We decreased our exposure to biotechnology over the period and continue to have an under-weight position in pharmaceuticals.

SIGNIFICANT PERFORMANCE CONTRIBUTORS

On an absolute basis, the top three contributors in the portfolio were Renalytix AI, Merck & Co and Danaher with CVS Health Corp, Humana and Jazz Pharmaceuticals the biggest detractors. Renalytix AI, which is held in the innovation portfolio, is a developer of artificial intelligence enabled clinical diagnostic solutions for kidney disease, one of the most common and costly chronic medical conditions globally. During the reporting period Renalytix AI consistently delivered on regulatory and commercial milestones, the most recent of which was a reimbursement code for its diagnostics test in the US.

Merck & Co's strong performance reflects two things. Firstly, the company's oncology franchise, led by its immuno-oncology drug Keytruda, continued to deliver not just positive clinical updates, but positive revenue momentum that has put upwards pressure on earnings forecasts. Secondly, and perhaps more importantly, the company's HPV vaccine, Gardasil, continues to beat consensus revenue expectations. Vaccines is a business with high barriers to entry and the global demand for Gardasil appears to be very healthy and sustainable.

Danaher, the life sciences and tools company, continues to deliver mid-single digit core growth, with the Life Sciences and Diagnostics divisions the primary growth drivers. Underlying operational excellence aside, performance was enhanced further by the acquisition of the leading bio-processing business, GE Biopharma. The deal was well received by the markets, with GE Biopharma a high-performing asset exposed to one of the fastest-growing areas of life sciences.

CVS Health Corp, the healthcare services business, had a difficult period following the acquisition of the healthcare insurer Aetna in January 2019. The company highlighted a number of headwinds to the legacy CVS pharmacy business that were not in consensus expectations. The magnitude of those headwinds was quantified at the FY'18 results when management's FY'19 guidance came in materially below expectations.

Jazz Pharmaceuticals' core sleep franchise has been in rude health over the last 12 months, but the share price has suffered from disappointing performance in the oncology franchise. In essence, commercial execution with leukaemia asset, Vyxeos, was left wanting with the company putting too much emphasis on safety as opposed to efficacy. That misjudgement led to a period of disappointing revenue updates for the asset. CVS and Jazz were sold out of the portfolio.

Humana's disappointing performance can be attributed, we believe, to the market starting to question the company's Medicaid strategy (low income US citizens) and consequently the achievability of 2020 consensus earnings.

POLITICAL RHETORIC CAN WEIGH ON SENTIMENT AND VALUATIONS, CREATING OPPORTUNITIES

The US is the most important end-market for global healthcare, so a watchful eye on the political environment is essential. The two key areas gaining most attention in the US are drug pricing and a potential move towards a single-payer, government-run healthcare system. Whilst the updates and posturing are in a constant state of flux, addressing the affordability of drugs is something that appears to have bi-partisan support. At the end of July 2019, a piece of legislation passed through the Senate Finance Committee with the basic premise of lowering out-of-pocket drug costs and controlling price inflation for US seniors. The timing of a potential resolution is hard to predict, but we do believe that clear progress could be a clearing event for the bio-pharmaceutical sector given the removal of uncertainty.

Importantly, if pharmaceutical and biotechnology companies can deliver high levels of innovation in areas such as oncology, rare diseases, gene therapy and blood disorders, the US market will remain an attractive one to generate returns. With drug pricing concerns affecting sentiment across bio-therapeutics, the opportunity for investors is to find those companies that are either insulated from the potential regulatory developments by nature of their product portfolios or which are developing innovative products to address hitherto unmet medical needs.

Rhetoric surrounding a single-payer system has been the key negative sentiment driver for healthcare. The impact has been quite marked on managed-care companies' valuations, yet the chances of a single-payer healthcare system in the US is very remote. Why? Disruption, complexity and cost. Switching to a single-payer system would be extremely complex due to a wide range of components and requirements. Yet to be answered questions might include eligibility and enrolment criteria, which services would be covered, what role the current system would play, what the payment rates would be and what role the Federal government would play. There are  also the cost implications to consider, with some estimating that government health spending would increase by $32.6 trillion over 10 years (Source: Mercatus Center at George Mason University in Virginia). Given the implications for taxes, choice, flexibility and access to care, it would come as a huge surprise if the US were to adopt a single-payer, government-run, healthcare system.

INNOVATION, TO DRIVE EFFICIENCIES, REMAINS CRITICAL TO COMMERCIAL SUCCESS

US healthcare spending was approximately $3.5 trillion in 2017, with an overall share of gross domestic product related to healthcare spending of 17.9%. Of that $3.5 trillion, 33% was spent on hospital care, 20% on physician and clinical services and just 10% was spent on retail prescription drugs. The desire to control the costs of prescription drugs is apparent, but to make the healthcare system truly more efficient we believe the system must align incentives, drive efficiencies without compromising quality of care and reduce, or avoid completely, the amount of time patients spend in hospital.

Some of the most tangible evidence for driving efficiencies in the system, we believe, can be found in the world of medical devices - devices that are minimally invasive, devices that yield faster recovery times with no compromise on quality or even devices that are designed to help patients manage their disease and avoid hospitalisation altogether.

Edwards Lifesciences is one of the leading companies in the treatment of aortic stenosis (the narrowing of the aortic valve) using a procedure called Transcatheter Aortic Valve Replacement or TAVR. Importantly, the procedure allows for patients to have a heart valve replaced via a catheter, thereby avoiding full open-heart surgery. That drives shorter recovery times - a clear benefit for patients - but can also reduce total costs via reduced length of hospital stays.

Late in 2017 Edwards Lifesciences released data from an economic study of its SAPIEN-3 valve in intermediate risk patients that highlighted lower costs as compared to standard surgical valve replacements. Results from the 2,000 patient trial showed total one-year average costs with the SAPIEN-3 valve to be at $80,977 versus standard surgical interventions at $96,489.

Avoiding hospital altogether makes obvious well-being and commercial sense, with diabetes an excellent example of how technology is being used to engage consumers and shift the disease-management paradigm. Dexcom's G6 Continuous Glucose Monitoring device has several appealing features including the elimination of fingersticks to measure blood glucose, a long-life sensor and alarms that alert patients to the potential for severe hypoglycaemic events.

In a similar vein, US medical device peer Medtronic and healthcare insurance company UnitedHealthcare published some interesting analysis based on the concept of value-based care. Results from an analysis of over 6,000 members with diabetes on Medtronic's MiniMed 630G and previous generation insulin pumps demonstrated 27% fewer preventable hospital admissions compared to plan participants who are on multiple daily injections of insulin. The MiniMed 630G system is an insulin pump that is fully integrated with a glucose sensor, with the aim of enhanced diabetes control.

21ST CENTURY CURES ACT HAS PROVIDED A CATALYST

One of the important provisions in the US 21st Century Cures Act, which was signed into law in December 2016, was the focus on using real-world evidence (RWE) to support regulatory decision making. In December 2018, the US Food & Drug Administration ('FDA') published the framework for its RWE program. This framework creates processes that will address some of the challenges with real-world data (RWD) - particularly the relevance, quality and reliability of certain datasets; the lack of standardisation; and engagement with all stakeholders. This is an important step towards a broad value-based reimbursement system that will affect all companies in the healthcare value chain - from drug companies, to device companies and to service providers.

WE SEE POTENTIAL FOR A MAJOR DISRUPTION OF THE PRODUCT DEVELOPMENT PROCESS

For many years, the FDA has had a responsibility to monitor the safety of products following approval - the existing adverse event reporting systems are in effect a source of RWD. However, once a product has been approved (based on the submission of clinical trial data by a company), there is no formal mechanism to determine its effectiveness post-approval. The use of RWE looks set to transform how products are evaluated post-approval and could also disrupt the entire product development process.

We believe that RWE has the potential to disrupt the entire concept of a discrete clinical trial programme. Controlled studies will still be required to show safety and efficacy of a novel therapy but a marketing approval will not be the end of the evaluation process. RWE could mean that companies will need to evaluate the effectiveness of a product on an ongoing basis with reimbursement linked to the associated demonstration of clinical value.

REAL WORLD DATA IS CHANGING THE LANDSCAPE

A critical aspect of our structural change thesis is the use of data and data analytics within healthcare systems to improve efficiency. Over the last year, we have seen a step-up in the pursuit of RWD and RWE by many participants in the healthcare industry.

RWD arise from a number of sources in the healthcare system - including electronic medical records, billing or claims data and patient registries - as well as non-traditional sources such as patient-generated data, health related apps, wearables and social media. RWE describes the use of such data to generate clinical evidence about the use and potential risk/benefits of a medical product.

The underlying driver is the move to a value-based system of reimbursement where any provider of a healthcare service or product will be evaluated and paid on the basis of how such products or services contribute to a clinical outcome.

HEALTHCARE COMPANIES ARE RESPONDING TO CHANGES AT THE FDA

Over the last year, we have noticed many more healthcare companies beginning to talk about how they expect to use RWE. The most interesting example in the last year was the FDA approval of Pfizer's breast cancer drug, Ibrance, as a first-line treatment for male breast cancer, that was based entirely on RWE. Pfizer used RWD from the Iqvia insurance database, Flatiron's Health Breast Cancer database and Pfizer's own global safety database. Historically, such an expansion of indication would have required a controlled clinical trial but in this case the FDA accepted the RWE to support the supplementary filing.

We expect the field of RWE to evolve quite rapidly now that the FDA is funding programmes to drive its use. Importantly, we have begun to change the way we think about the investment risk of product development companies. We used to focus more on the clinical risk of a new product candidate (i.e. would it get approved by the FDA?) but we now give greater weight to the potential commercialisation risk of a new product.

CLINICAL RESEARCH ORGANISATIONS WITH THE RIGHT CAPABILITIES LOOK TO BE THE NEAR-TERM WINNERS

From an investment perspective, we think that Clinical Research Organisations ('CROs') will be the biggest near-term beneficiaries of this burgeoning trend. While some pharmaceutical companies have made significant investments in this area - notably Roche with its acquisition of Flatiron last year - we think that most companies will look to out-source the analysis of RWD.

Companies such as Iqvia and PRA Health Sciences, which are both major suppliers of clinical research services to the pharmaceutical industry, have been building access and analytical tools over the last few years to enable their customers to generate RWE. In addition, the strategic rationale behind LabCorp's acquisition of Covance five years ago was initially to diversify into the CRO market but it is now using RWD from its diagnostic division to drive patient recruitment and design clinical trials. It is also worth noting that Dassault's $5.7 billion acquisition of Medidata was driven in large part by the historical clinical trial data-sets that Medidata had accumulated - especially in oncology.

The CROs that have been quietly building analytical capabilities and making significant investments in RWD look well set to exploit new revenue opportunities from this new market segment.

OUTLOOK

Fundamentals for the healthcare sector remain robust with good sales and earnings strength relative to other areas of the market (8% 2019 vs 2018 earnings growth in the MSCI ACWI Health Care Index vs 1% for MSCI ACWI Index (in local currency); Source: Citi Research and Factset Consensus Data, 29 November 2019. Please note these figures are estimates). Medical device companies continue to enjoy the benefits of a significant cycle of new products, whilst large capitalisation pharmaceutical companies are attractively valued, generating significant free cash flow and carrying high dividend yields. Life science tools and services companies are delivering strong growth, particularly those with exposure to biotechnology products as outsourcing trends continue. The biotechnology sector continues to innovate with new technologies such as gene and cell therapy creating exciting new platforms for growth. These fundamentals should persist over the years ahead, generating attractive returns for investors. M&A should also continue in an industry that remains highly fragmented and thus needs to consolidate to become more efficient.

The top-down outlook appears challenging for the global economy with leading indicators suggesting a negative short/mid-term outlook. Whilst trade wars have negatively impacted global growth, this economic cycle is now quite long in the tooth. The challenging data is likely to persist in the near term, with employment figures remaining key. The outlook for the end of 2019 and into 2020 is supportive for large cap healthcare stocks based on their defensive growth profile, strong balance sheets and commitment to innovation.

Smaller healthcare companies relevant to the innovation portfolio, are more sensitive to the difficult macroeconomic backdrop. With a relatively conservative outlook for markets heading into 2020, the portfolio exposure to these types of companies is mid-range, waiting for further opportunities which should present themselves over the months ahead.

Despite the sound fundamentals, sentiment for the healthcare sector remains cautious. Healthcare and biotech exchange traded funds ('ETFs') flows have been persistently negative which offers a strong contrarian buy signal, while valuations relative to the market are in line with lows of previous episodes of fear around the sector. The reason for such negativity is the political outlook in the US. This issue becomes significant every four years, but concern is only really magnified when healthcare policy is an important part of the electoral debate. When this happens, sentiment becomes extreme like it did in 2008 and like it is at present.

Having experienced many of these sentiment cycles around politics, one needs to recall how fearful behaviour from investors can be a buying opportunity. The greatest fears never come to pass but more likely lead to changes in the healthcare system that create an environment for winners and losers from an investor perspective. This will likely be the same again, with the market appearing to discount worst-case risks and fears ahead for 2020. Anything that goes the sector's way over the next year will likely justify a significant positive re-rating for stocks sitting at significant discounts. Further, history would suggest that investors in healthcare who are willing to invest when others are fearful, could be handsomely rewarded in the medium-term.

James Douglas & Gareth Powell

Co-Managers

19 December 2019

PORTFOLIO REVIEW

Full Portfolio as at 30 September 2019

Ranking		Stock	Sector	Country	Market Value £'000		% of total net assets
2019	2018				2019	2018	2019	2018
1	(5)	Merck & Co	Pharmaceuticals	United States	18,235	13,677	6.3%	4.6%
2	(-)	Sanofi	Pharmaceuticals	France	14,896	-	5.2%	-
3	(16)	Novo Nordisk	Pharmaceuticals	Denmark	13,763	9,093	4.8%	3.1%
4	(17)	Abbott Laboratories	Healthcare Equipment	United States	10,863	9,001	3.8%	3.0%
5	(27)	Eli Lilly	Pharmaceuticals	United States	10,606	5,430	3.7%	1.8%
6	(-)	Koninklijke Philips	Healthcare Equipment	Netherlands	10,518	-	3.6%	-
7	(23)	Danaher	Healthcare Equipment	United States	10,211	6,615	3.5%	2.2%
8	(-)	Cigna	Healthcare Services	United States	9,612	-	3.3%	-
9	(13)	Grifols	Biotechnology	Spain	9,611	9,505	3.3%	3.2%
10	(24)	Bio-Rad	Life Sciences Tools & Services	United States	8,977	6,359	3.1%	2.1%
Top 10 investments					117,292		40.6%
11	(-)	Intuitive Surgical	Healthcare Equipment	United States	8,957	-	3.1%	-
12	(8)	HCA Healthcare	Healthcare Facilities	United States	8,758	11,419	3.0%	3.9%
13	(-)	Abbvie	Biotechnology	United States	8,602	-	3.0%	-
14	(-)	Boston Scientific	Healthcare Equipment	United States	8,598	-	3.0%	-
15	(22)	Incyte	Biotechnology	United States	8,193	7,010	2.8%	2.3%
16	(-)	Genmab	Biotechnology	Denmark	8,184	-	2.8%	-
17	(19)	PRA Health Sciences	Life Sciences Tools & Services	United States	8,081	8,409	2.8%	2.8%
18	(20)	Becton Dickinson	Healthcare Equipment	United States	7,961	8,208	2.8%	2.8%
19	(7)	Agilent Technologies	Life Sciences Tools & Services	United States	7,462	12,331	2.6%	4.2%
20	(-)	Horizon Pharma	Pharmaceuticals	United States	7,375	-	2.6%	-
Top 20 investments					199,463		69.1%
21	(4)	Novartis	Pharmaceuticals	Switzerland	7,314	14,728	2.5%	5.0%
22	(-)	Baxter International	Healthcare Equipment	United States	7,022	-	2.4%	-
23	(-)	Anthem	Managed Healthcare	United States	6,802	-	2.4%	-
24	(-)	Laboratory	Healthcare Services	United States	6,796	-	2.4%	-
25	(-)	IQVIA	Life Sciences Tools & Services	United States	6,624	-	2.3%	-
26	(-)	Varian Medical Systems	Healthcare Equipment	United States	6,202	-	2.2%	-
27	(-)	Edwards Lifesciences	Healthcare Equipment	United States	6,170	-	2.1%	-
28	(-)	Perkinelmer	Life Sciences Tools & Services	United States	6,078	-	2.1%	-
29	(-)	Hill-Rom	Healthcare Equipment	United States	5,888	-	2.0%	-
30	(-)	Teleflex	Healthcare Equipment	United States	5,765		2.0%	-
Top 30 investments					264,124		91.5%
31	(-)	DexCom	Healthcare Equipment	United States	5,211	-	1.8%	-
32	(15)	Humana	Managed Healthcare	United States	4,936	9,446	1.7%	3.1%
33	(29)	Quotient	Healthcare Supplies	United Kingdom	4,767	5,823	1.7%	1.9%
34	(26)	Consort Medical	Healthcare Equipment	United Kingdom	3,567	5,555	1.3%	1.9%
35	(-)	Recordati	Pharmaceuticals	Italy	3,046	-	1.1%	-
36	(-)	Tandem Diabetes Care	Healthcare Equipment	United States	2,834	-	1.0%	-
37	(32)	Oxford Immunotec	Healthcare Equipment	United Kingdom	2,694	2,483	0.9%	0.8%
38	(-)	Zealand Pharma	Biotechnology	Denmark	2,678	-	0.9%	-
39	(-)	Otsuka	Pharmaceuticals	Japan	2,423	-	0.8%	-
40	(-)	Renalytix AI	Healthcare Equipment	United Kingdom	2,405	-	0.8%	-
Top 40 investments					298,685		103.5%
41	(45)	Intelligent Ultrasound (previously MedaPhor)	Healthcare Technology	United Kingdom	2,043	827	0.7%	0.3%
42	(-)	Ship Healthcare	Healthcare Distributors	Japan	1,878	-	0.7%	-
43	(-)	Korian Medica	Healthcare Facilities	France	1,838	-	0.6%	-
44	(-)	Penumbra	Healthcare Equipment	United States	1,380	-	0.5%	-
45	(-)	Ra Pharmaceuticals	Biotechnology	United States	1,375	-	0.5%	-
46	(-)	BELLUS Health	Biotechnology	Canada	1,116	-	0.4%	-
47	(-)	Kalvista Pharmaceuticals	Biotechnology	United States	678	-	0.2%	-
Total Equities					308,993		107.1%
Other Net Liabilities					(20,546)		(7.1%)
Net Assets					288,447		100.0%

Note - Sectors are from the GICS (Global Industry Classification Standard).

Geographical Exposure at	30 September 2019	30 September 2018
United States	75.0%	69.5%
Denmark	8.5%	3.1%
France	5.8%	-
United Kingdom	5.4%	11.6%
Netherlands	3.6%	-
Spain	3.3%	3.2%
Switzerland	2.5%	5.0%
Japan	1.5%	4.8%
Italy	1.1%	0.6%
Canada	0.4%	-
Ireland	-	9.1%
Sweden	-	0.8%
Norway	-	0.4%
Other net liabilities	(7.1%)	(8.1%)
Total	100.0%	100.0%
Sector Exposure at	30 September 2019	30 September 2018
Healthcare Equipment	36.8%	20.3%
Pharmaceuticals	27.0%	33.2%
Biotechnology	13.9%	22.8%
Life Sciences Tools & Services	12.9%	9.9%
Healthcare Services	5.7%	3.4%
Managed Healthcare	4.1%	11.4%
Healthcare Facilities	3.6%	3.9%
Healthcare Supplies	1.7%	2.0%
Healthcare Technology	0.7%	0.9%
Healthcare Distributors	0.7%	-
Education Services	-	0.3%
Other net liabilities	(7.1%)	(8.1%)
Total	100.0%	100.0%

Market Cap at	30 September 2019	30 September 2018
Large (>US$5bn)	96.9%	95.1%
Medium (US$1bn - US$5bn)	3.3%	3.2%
Small (<US$1bn)	6.9%	9.8%
Other net liabilities	(7.1%)	(8.1%)
	100.0%	100.0%

STRATEGIC REPORT

The information provided in the Chairman's Statement, the Investment Manager's Report, including information on the portfolio, and this report comprise the Strategic Report.

The Strategic Report has been prepared to provide information to Shareholders on the Company's strategies and potential for those strategies to succeed, including a fair review of the performance of the Company during the year ended 30 September 2019, and a description of the principal risks and uncertainties faced by the Company. Throughout the Strategic Report there are certain forward looking statements; these statements are made by the Directors in good faith based on the information available to them at the time of their approval of this Report. Such statements should be treated with caution due to inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

The Board remains positive on the outlook for healthcare and the Company will continue to pursue its Investment Objective in accordance with the stated investment policy and strategy. Future performance is dependent to a significant degree on the world's financial markets and their reactions to economic events and other geo-political forces. The Chairman's Statement and the Investment Manager's Report comment on the development and performance of the business during the financial year, the outlook and potential risks to the performance of the portfolio.

HISTORY

In June 2017 a reconstruction of the Company and change in investment mandate was implemented having been approved by Shareholders. Further information is provided within the Additional Information in the full Annual Report and Financial Statements and on the Company's website www.polarcapitalhealthcaretrust.co.uk 

Following the reconstruction, the Articles of Association require the Directors to put forward at the first Annual General Meeting to be held after 1 March 2025, a resolution for the voluntary winding up of the Company and the appointment of a liquidator. Members voting in favour, whether in person or by proxy, shall collectively have sufficient votes, irrespective of number, to pass the resolution.

BUSINESS MODEL AND REGULATORY ARRANGEMENTS

The business model of the Company follows that of an externally managed, London Stock Exchange listed investment trust. The Company is designated an Alternative Investment Fund ('AIF') under the Alternative Investment Fund Management Directive ('AIFMD') and, as required by the Directive, has contracted with Polar Capital LLP to act as the Alternative Investment Fund Manager ('AIFM') and HSBC Bank Plc to act as the Depositary.

Both the AIFM and the Depositary have responsibilities under AIFMD for ensuring that the assets of the Company are managed in accordance with the investment policy and are held in safe custody. The Board remains responsible for setting the investment strategy and operational guidelines as well as meeting the requirements of the applicable UK and European legislation including the Financial Conduct Authority ('FCA') Listing Rules. Statements from the AIFM and the Depositary can be found on the Company's website.

The Company seeks to manage its portfolio in such a way as to meet the tests in Section 1158 and 1159 of the Corporation Tax Act 2010 (as amended by Section 49(2) of the Finance Act 2011) and continue to qualify as an investment trust. This qualification permits the accumulation of capital within the portfolio without any liability to UK Capital Gains Tax. Further information is provided in the Directors' Report. The Company has no employees or premises and the Board is comprised of non-executive directors. The day to day operations and functions of the Group and Company have been delegated to third parties.

INVESTMENT OBJECTIVE

The Company's Investment Objective is to generate capital growth by investing in a global portfolio of healthcare stocks across all four healthcare sub-sectors, being pharmaceuticals, biotechnology, medical technology and healthcare services.

INVESTMENT POLICY

The Company will seek to achieve its objective by investing in a diversified global portfolio consisting primarily of listed equities. The portfolio is diversified by geography, industry sub-sector and investment size.

The portfolio will comprise a single pool of investments, but for operational purposes, the Investment Manager will maintain a growth portfolio and an innovation portfolio. The growth portfolio is expected to comprise the majority of the Company's assets; for this purpose, once an innovation stock's market capitalisation has risen above US $5bn, it will ordinarily then be treated as a growth stock. Innovation companies are broadly defined by the Investment Manager as small/mid cap innovators that are driving disruptive change, giving rise not only to new drugs and surgical treatments but also to a transformation in the management and delivery of healthcare.

The relative ratio between the two portfolios may vary over the life of the Company due to factors such as asset growth and the Investment Manager's views as to the risks and opportunities offered by investments in each pool and across the combined portfolio. While there is no restriction on geographical exposure, the majority of the companies in the growth portfolio will be US listed or traded and/or headquartered in the US, although this may also change over the life of the Company.

It was originally anticipated that the number of investments would be limited to 50 however, to enhance fund management flexibility, in 2018, the Board authorised an increase to a maximum of 65 investments.

The combined portfolio will therefore be made up of interests in up to 65 companies, with no single investment accounting for more than 10% (or 15% in the case of an investment in another fund managed by the Investment Manager) of the Gross Assets at the time of investment. The innovation portfolio may include stocks which are neither quoted nor listed on any stock exchange but the exposure to such stocks, in aggregate, will not exceed 5% of Gross Assets at the time of investment. In the event that the Investment Manager launches a dedicated healthcare innovation fund, the Company's exposure to innovation stocks may be achieved, subject to Board approval and a limit of 15% in whole or in part by an investment in that fund.

STRATEGY

As the day to day management of the Company is outsourced to external service providers the Board's primary focus at each meeting is on investment performance, including the outlook and strategy. The Board also considers the management and provision of services received from third-party service providers and the risks inherent in the various matters reviewed and discussed.

The Investment Manager's investment process is primarily based on bottom-up fundamental analysis. The Investment Manager uses a qualitative filter consisting of six key criteria to build up a watch-list of securities that is monitored on a regular basis. Due diligence is then carried out on the individual securities on the watch-list. Each individual holding is assessed on its own merits in terms of risk:reward. While the Company expects normally to be fully or substantially invested, the Company may hold cash or money market instruments pending deployment in the portfolio. In addition, it will have the flexibility, when the Investment Manager perceives there to be actual or expected adverse equity market conditions, to maintain cash holdings as it deems appropriate.

SERVICE PROVIDERS

Polar Capital LLP has been appointed to act as the Investment Manager and AIFM as well as to provide or procure company secretarial services and administrative services, including accounting, portfolio valuation and trade settlement which it has arranged to deliver through HSBC Securities Services.

The Company also contracts directly, on terms agreed periodically, with a number of third parties for the provision of specialist services:

• Panmure Gordon & Co as corporate broker;

• Herbert Smith Freehills LLP as solicitors;

• Equiniti Limited as the share registrar;

• PricewaterhouseCoopers LLP as independent Auditors; and

• Emperor as internet service provider including website design, designers and printers for Shareholder communications.

GEARING

Following the restructure of the Company in June 2017, the Company maintains long-term structural gearing in the form of a loan from the wholly owned subsidiary PCGH ZDP Plc. No short-term borrowings have been made and there are no arrangements made for any bank loans. The Articles of Association provide that the Company may borrow up to 15% of its Net Asset Value at the time of drawdown, for tactical deployment when the Board believes that gearing will enhance returns to Shareholders.

BENCHMARK

The Company measures the Investment Manager's performance against the MSCI ACWI Health Care Index total return, in sterling with dividends reinvested. The portfolio may diverge substantially from the constituents of this index. Although the Company has a benchmark, this is neither a target nor an ideal investment strategy. The purpose of the Benchmark is to set a reasonable return for Shareholders above which the Investment Manager is entitled to a share of the extra performance it has delivered.

PERFORMANCE AND KEY PERFORMANCE OBJECTIVES

The Board appraises the performance of the Company and the Investment Manager as the key supplier of services to the Company against key performance indicators ('KPIs'). The objectives comprise both specific financial and Shareholder related measures including:

OBJECTIVE	CONTROL PROCESS	KPI/OUTCOME
THE PROVISION OF INVESTMENT RETURNS TO SHAREHOLDERS MEASURED BY LONG- TERM NAV TOTAL RETURN RELATIVE TO THE BENCHMARK INDEX.	At each meeting the Board reviews the performance of the portfolio and considers the views of the Investment Manager. The Board also considers the value delivered to Shareholders through NAV growth and dividends paid.	The Company's NAV total return, over the year ended 30 September 2019, was -1.24% while the benchmark index over the same period increased by 3.14%. The Company's performance is explained in the Investment Manager's Report. Since restructuring on 20 June 2017, the total return of the NAV was 11.69% and the benchmark was 16.69%.
THE ACHIEVEMENT OF THE DIVIDEND POLICY.	Financial forecasts are reviewed to track income and distributions.	Two dividends have been paid or are payable in respect of the year ended 30 September 2019 totalling 2.10p per share (2018: two dividends totalling 2.0p per share) an increase of 5% over the prior year.  Payments were in line with the dividend policy.
MONITORING AND REACTING TO ISSUES CREATED BY THE DISCOUNT OR PREMIUM OF THE ORDINARY SHARE PRICE TO THE NAV PER ORDINARY SHARE WITH THE AIM OF REDUCED DISCOUNT VOLATILITY FOR SHAREHOLDERS.	The Board receives regular information on the composition of the share register including trading patterns and discount/premium levels of the Company's Ordinary shares. The Board discusses and authorises the issue or buy back of shares when appropriate. A daily NAV per share, calculated in accordance with the AIC guidelines is issued to the London Stock Exchange.	The discount of the Ordinary share price to the NAV per Ordinary share at the year ended 30 September 2019 was 8.0% (2018: 7.8%). During the year ended 30 September 2019, the Company bought back 700,000 Ordinary shares into treasury, no shares were issued. The number of shares in issue, at the year end was 124,149,256 of which 2,379,256 were held in treasury. Since the year end, a further 500,000 shares have been bought back and placed in treasury.
TO CONTINUE TO MEET THE REQUIREMENTS FOR SECTIONS 1158 AND 1159 OF THE CORPORATION TAX ACT 2010.	The Board receives regular financial information which discloses the current and projected financial position of the Company against each of the tests set out in Sections 1158 and 1159.	The Company was granted investment trust status annually up to 1 October 2014 and is deemed to be granted such status by for each subsequent year subject to the Company continuing to satisfy the conditions of Section 1158 of the Corporation Tax Act 2010 and other associated ongoing requirements.
TO CONTROL AND MONITOR ONGOING CHARGES.	The Board receives regular financial information which discloses expenses against budget.	Ongoing charges for the year ended 30 September 2019 were 1.01%, compared to 1.08% the previous year.

In addition to the above performance objectives the Investment Manager and Directors use a variety of financial alternative performance measures ('APMs') to assess the performance of the Company. See below.

Principal Risks and Uncertainties

The Board is responsible for the management of risks to the Company in delivering long-term returns to Shareholders. The identification, monitoring and appraisal of the risks, any mitigating factors and control systems is crucial.

The Board has carried out a robust assessment of the risks faced by the Company and maintains a risk map which separates the principal risks into four main risk categories, business, portfolio management, infrastructure and external. The risk map details each identified risk and any factors, both internal and external, that could provide mitigation, as well as outlining a reporting structure to monitor the risks as far as practical.

The risk map is regularly considered to monitor existing principal risks and identify new or emerging risks and any developments or additions to the controls and reporting environment.

PRINCIPAL RISKS AND UNCERTAINTIES	MANAGEMENT OF RISKS THROUGH MITIGATION & CONTROLS
BUSINESS
·      Failure to achieve Investment Objective. ·      Investment performance below agreed benchmark objective or market/industry average. ·      Possible loss of liquidity in shares and shrinkage in assets. ·      Loss of portfolio manager or other key staff. ·      Persistent excessive share price discount to NAV.	The Board seeks to mitigate the impact of such risks through the regular reporting and monitoring of the Company's investment performance against its peer group, benchmark and other agreed indicators of relative performance. For months when the Board is not scheduled to meet they receive a monthly report containing financial information on the Company including gearing and cash balances. Performance and strategy are reviewed throughout the year at regular Board meetings where the Board can challenge the Investment Manager. They also receive a monthly commentary from the Investment Manager published in the factsheets for all the Polar Capital managed healthcare funds. The Management Engagement Committee undertakes the year-end consideration of the suitability of the Investment Manager on the basis of performance and other services provided. In consultation with its advisors, including the corporate stockbroker, the Board regularly considers the level of premium and discount of the share price to the NAV and the Board reviews ways to enhance Shareholder value including share issuance and buy backs. The windup date in 2025 should help to limit discount volatility. The Board is committed to a clear communication programme to ensure Shareholders understand the investment strategy. This is maintained through the use of monthly factsheets which have a market commentary from the Investment Manager as well as portfolio data, an informative website as well as annual and half year reports. The Chairman regularly engages with the senior management of the Investment Manager.
Portfolio Management
·      While the portfolio is diversified across a number of stock markets worldwide, the investment mandate is focused on healthcare and thus the portfolio will be more sensitive to investor sentiment and the commercial acceptance of healthcare developments than a general investment portfolio. ·      As the Company's assets comprise mainly listed equities the portfolio is exposed to risks such as market price, credit, liquidity, foreign currency and interest rates. ·      The portfolio is actively managed. The Investment Manager's style focuses primarily on the investment opportunity of individual stocks and, accordingly, may not follow the makeup of the benchmark. This may result in returns which are not in line with the benchmark. ·      Execution of unauthorised trade / dealing error. ·      Gearing, either structural gearing through the issue of ZDP shares by the wholly owned subsidiary, PCGH ZDP Plc, or through bank debt or the use of derivatives may be utilised from time to time. Whilst the use of gearing is intended to enhance the NAV total return, it will have the opposite effect when the return on the Company's investment portfolio is negative. ·      The ability to fund dividends is impaired due to currency risk exposure. ·      Income is less than expected due to currency exposure underlying the portfolio. ·      Level of dividend is lower than intended.	The Board has set appropriate guidelines and monitors the position of the portfolio against exposures to certain investment markets and sectors. At each meeting the Board discusses developments in healthcare and drug pipelines with the Investment Manager. At each meeting the composition and diversification of the portfolio by geographies, sectors and capitalisation are considered along with sales and purchases of investments. Individual investments are discussed with the Investment Manager as well as the Investment Manager's general views on the various investment markets and the healthcare sector in particular. Analytical performance data and attribution analysis is presented by the Investment Manager. The policies for managing the risks posed by exposure to market prices, interest rates, foreign currency exchange rates, credit and liquidity are set out in Note 26 to the financial statements. The Investment Policy and Board guidelines are encoded into Polar Capital's dealing system and trades are monitored by Polar Capital's compliance department. Each trade is matched electronically between the transacting broker and the Company's administrator, before settlement at the custodian. Polar Capital also has a policy to compensate clients for any losses, and to pass on any profit, incurred by Polar Capital as a result of dealing errors or unauthorised trades. The Board considered the benefits and drawbacks of the structural debt at the time of restructuring and concluded that the ability to lock-in an effective interest rate of 3% pa for the 7-year life would be beneficial to investment returns, the Board remains of the same belief. The asset cover necessary to repay the ZDP shares is reviewed at each Board meeting. If any flexible gearing is contemplated the Board would agree the overall levels of gearing with the AIFM. The arrangement of bank facilities and drawing of funds under such arrangements are controlled by the Board. Derivatives are considered as being a form of gearing and a policy for their use has been agreed by the Board. The deployment of any borrowed funds is based on the Investment Manager's assessment of risk and reward. The Board monitors currency exposure through monthly management accounts and discussion and currency hedging takes place if appropriate. Investors have sight of the entire portfolio and geographic exposure to investments.
Infrastructure
·      There are risks, including those stemming from breaches of cyber security, resulting in the failure of, or disruption to, operational and accounting systems and processes provided by the Investment Manager including any subcontractors to which the Investment Manager has delegated a task as well as directly appointed suppliers. ·      The misvaluation of investments or the loss of assets from the custodian or sub custodians which impact the NAV per share or lead to a loss of Shareholder value. ·      The Company may fail to continue as an investment trust and suffer capital gains tax or fail to recover as fully as possible withholding taxes on overseas investments. ·      The legal and regulatory risks include failure to comply with the FCA's Prospectus Rules, Listing Rules and Disclosure Guidance and Transparency Rules; not meeting the provisions of the Companies Act 2006 and other UK, European and overseas legislation affecting UK companies and not complying with accounting standards. Further risks arise from not keeping abreast of changes in legislation and regulations which have in recent years been substantial. ·      As an investment company, the Company is dependent on a framework of tax laws, regulation (both UK and EU) and company law.	At each Board meeting there is an administration report which provides details on general corporate matters including legislative and regulatory developments and changes in substantial shareholdings. There is an annual review of suppliers and their internal control reports which includes the disaster recovery procedures of the Investment Manager. The Investment Manager reports on cyber security for its own systems and comments where appropriate on third party suppliers. Regular reporting from the Depositary on the safe custody of the Company's assets and the operation of control systems related to the portfolio reconciliation are monitored. Specialist advice is sought on taxation issues as and when required. The Audit Committee has oversight on such work. Information and guidance on legal and regulatory risks is managed by using the Investment Manager or professional advisers where necessary and the submission of reports to the Board for discussion and, if required, any remedial action or changes considered necessary. The Board monitors new developments and changes in the regulatory environment and seeks to ensure that both their impact on the Company is understood and their requirements are complied with.
External
·      There is significant exposure to the economic cycles of the markets in which the underlying investments conduct their business operations as well as the economic impact on investment markets where such investments are listed.	The Board regularly discusses the general economic conditions and developments. The impact on the portfolio from Brexit and other geopolitical changes including the trade war between the US and China are reviewed and discussed. While it is difficult to quantify the impact of such changes, it is not anticipated that they will fundamentally affect the business of the Company or make healthcare investing any less desirable.

MANAGEMENT COMPANY AND MANAGEMENT OF THE PORTFOLIO

As the Company is an investment vehicle for Shareholders, the Directors have sought to ensure that the business of the Company is managed by a leading specialist investment management team and that the investment strategy remains attractive to Shareholders. The Directors believe that a strong working relationship with Polar Capital LLP (the Investment Manager) will achieve the optimum return for Shareholders and the Board and Investment Manager operate in a supportive, co-operative and open environment.

The Company has an investment management agreement ('IMA') with the Investment Manager to act as Investment Manager and AIFM of the Company. The Investment Manager has responsibility for the discretionary management of the Company's assets (including uninvested cash) and sole responsibility to take decisions as to the purchase and sale of individual investments. The Investment Manager also has responsibility for asset allocation and sector selection within the limits of both the investment policy and the guidelines established and regularly reviewed by the Board. The activities of the Investment Manager are subject to the overall control and supervision of the Board.

The Investment Manager has other resources which support the investment team and has experience in managing and administering other investment trust companies. The Investment Manager also provides or procures accountancy services, company secretarial support and day to day administrative services including the monitoring of third-party suppliers which are directly appointed by the Company. The Investment Manager has, with the consent of the Directors, delegated the provision of certain of these administrative

functions to HSBC Securities Services and to Polar Capital Secretarial Services Limited.

Information is provided to the Directors in a timely manner covering all relevant management, regulatory and financial information. The Board has a report from the investment team at each meeting and representatives of the Investment Manager attend Board meetings, enabling the Directors to probe further on matters of interest or seek clarification where necessary.

While the Board reviews the performance of the Investment Manager at each Board meeting and the Company's performance against the benchmark and the Investment Objective, the Management Engagement Committee formally carries out the annual review of the IMA and the continued appointment of the Investment Manager.

INVESTMENT TEAM

The Investment Manager provides a team of healthcare specialists and the portfolio is managed by Dr James Douglas and Mr Gareth Powell.

TERMINATION ARRANGEMENTS

The IMA is terminable by either the Investment Manager or the Company giving to the other not less than 12 months' written notice. The IMA may be terminated earlier by the Company with immediate effect on the occurrence of certain events, including: if an order has been made or an effective resolution passed for the liquidation of the Investment Manager; (ii) if the Investment Manager ceases or threatens to cease to carry on its business; (iii) where the Company is required to do so by a relevant regulatory authority; (iv) on the liquidation of the Company; or (v) subject to certain conditions, where the Investment Manager commits a material breach of the IMA.

In the event the IMA is terminated before the expiry of the Company's fixed life then, except in the event of termination by the Company for certain specified causes, the base fee and the performance fee will be calculated pro rata for the period up to and  including the date of termination.

FEE ARRANGEMENTS

MANAGEMENT FEE

Under the terms of the IMA, the Investment Manager will be entitled to a management fee together with reimbursement of reasonable expenses incurred by it in the performance of its duties. The management fee is payable monthly in arrears and will be at the rate of 0.85% per annum of the lower of the Group's market capitalisation and the Company's adjusted Net Asset Value on the relevant day.

In accordance with the Directors' policy on the allocation of expenses between income and capital, in each financial year 80% of the management fee payable is charged to capital and the remaining 20% to income.

PERFORMANCE FEE

The Investment Manager may be entitled to a performance fee. The performance fee was reset at the date of reconstruction of the Company and will be paid in cash at the end of the Company's expected life (except in the case of an earlier termination of the IMA). The performance fee will be an amount equal to 10% of the excess total return (based on the Adjusted Net Asset Value per Ordinary share at that time) over the total return of the benchmark plus 1.5% compounded annually on each anniversary of share admission and adjusted for periods of less than 12 months.

For the purposes of calculating the performance fee, the Company's Adjusted Net Asset Value will be based on the Net Asset Value adjusted by the amount of any dividends paid by the Company deemed to have been reinvested on the date of payment in Ordinary shares at their Net Asset Value (on such date) and the resulting amount added to the Company's Net Asset Value.

If at the end of the Company's expected life the amount available for distribution to Shareholders is less than 215.9p per Ordinary share, no performance fee will be payable. If the amount is more than 215.9p per Ordinary share but payment of the performance fee in full would reduce it below that level, then the performance fee will be reduced such that Shareholders receive exactly 215.9p per share.

No performance fee has been paid or accrued since inception and up to 30 September 2019.

CORPORATE RESPONSIBILITY - ENVIRONMENTAL, SOCIAL, GOVERNANCE (ESG)

SOCIALLY RESPONSIBLE INVESTING AND EXERCISING OF VOTING POWERS

The Board requires the Investment Manager to have regard to underlying ESG issues when selecting stocks in which to invest. The Investment Manager has an ESG policy (which is available on the Polar Capital website); the Investment Manager utilises agency rating reports along with industry intelligence, team expertise and research when considering whether to invest in a company. The Board has also considered the Investment Manager's Stewardship Code and Proxy Voting Policy. The Proxy Voting Policy directs the Investment Manager to vote at all general meetings of companies in line with Institutional Shareholder Services ('ISS') policy. However, in exceptional cases, where the Investment Manager believes that the ISS policy would be detrimental to the interests of Shareholders or the financial performance of the Company, the Investment Manager has discretion to vote contrary to the ISS policy. This Policy changed during the financial year, as the prior default instruction had been for the Investment Manager to vote at all general meetings of companies in favour of management's recommendation.

The Investment Manager has voted at 48 company meetings over the year ended 30 September 2019, with 11.5% of all votes being against management and 46% of meetings having at least one against or withheld vote. The Investment Manager reports to the Board, when requested, on the application of the Stewardship Code and Proxy Voting Policy, both of which can be found on Polar

Capital's website (www.polarcapital.co.uk).

The Company's core activities are undertaken by its Investment Manager which seeks to limit the use of non-renewable resources and reduce waste where possible.

The Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013 require companies listed on the Main Market of the London Stock Exchange to report on the greenhouse gas ('GHG') emissions for which they are responsible. The Company is an investment trust, with neither employees nor premises, nor has it any financial or operational control of the assets which it owns. Consequently, it has no GHG emissions to report from its operations nor does it have responsibility for any other emissions.

DIVERSITY AND GENDER REPORTING

The Company has no employees and at the year end the Board comprised one female and three male non-executive directors.

In the recruitment process for non-executive directors, when compiling a shortlist of candidates and selecting individuals for interview, the Board had regard to the benefits of diversity, including gender, but will ultimately seek to ensure directors appointed to the Board are chosen on merit. Both Andrew Fleming and Jeremy Whitley, appointed 1 December 2019, were chosen as the most appropriate candidates for the Board based on their experience and complementary skillsets with each other and the current Board.

The Company has not adopted a policy on human rights as it has no employees or operational control of its assets.

MODERN SLAVERY ACT

As an investment company, the Company does not provide goods or services in the normal course of business and does not have any customers. Accordingly, it is considered that the Company is not required to make any slavery or human trafficking statements under the Modern Slavery Act 2015.

ANTI-BRIBERY, CORRUPTION AND TAX EVASION

The Board has adopted a zero-tolerance policy (available on the Company's website) to bribery, corruption and the facilitation of tax evasion in its business activities. The policy uses the principles of the policies formulated and implemented by the Investment Manager and expects the same standard of zero-tolerance to be adopted by third party service providers with which the Company conducts business.

The Company has implemented a conflicts of interest policy to which the Directors must adhere, in the event of divergence between the Investment Manager's policy and the Company's policy the Company's policy shall prevail. The Company is committed to acting with integrity and in the interests of Shareholders.

DIRECTORS' DUTIES - s172 STATEMENT

The statutory duties of the Directors are listed in s171-177 of the Companies Act 2006. Under s172, directors have a duty to promote the success of the Company for the benefit of its Shareholders as a whole, and in doing so to have regard to the consequences of any decision in the long term, as well as having regard to the Company's stakeholders amongst other considerations.

The fulfilment of this duty not only helps the Company achieve its investment objective but ensures decisions are made in a responsible and sustainable way for Shareholders. The Directors have considered this duty when making the strategic decisions during the year that affect Shareholders, including monitoring the Investment Manager's use of gearing, buying back the Company's shares when appropriate and completing the second phase of the Board refresh. The Board has also sought to better understand the views of both Shareholders and stakeholders.

Accordingly, the Directors have attended several industry events to meet with Shareholders and prospective investors, as well as meeting the Company's service providers. For the first time, Shareholders will also have the opportunity to consider the Company's dividend policy, approval of which will be sought by way of ordinary resolution at the Company's AGM on 26 February 2020 (further details can be found in the Directors' Report). The Board views the understanding of Shareholder's views as essential in fulfilling its duty under s172 and welcomes the opportunity to meet and speak with Shareholders. Shareholders are therefore encouraged to attend the Company's AGM or contact the Directors via the Company Secretary.

Approved by the Board on 19 December 2019

By order of the Board

TRACEY LAGO, FCG

POLAR CAPITAL SECRETARIAL SERVICES LIMITED

COMPANY SECRETARY

19 December 2019

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the Group and Company Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare the Group and Company Financial Statements for each financial year. Under that law the Directors have prepared the Group and Company Financial Statements in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union.

Under company law, the Directors must not approve the Group and Company Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group and Company for that period. In preparing these financial statements, the Directors are required to:

-       select suitable accounting policies and then apply them consistently;

-       make judgements and accounting estimates that are reasonable and prudent;

-       state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the Financial Statements;

-       assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

-       prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the Group and Company Financial Statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group and Company Financial Statements, Article 4 of the IAS Regulations. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for such internal control as they determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

The Directors consider that the Annual Report including the Group and Company Financial Statements taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Group and Company's performance, business model and strategy. Under applicable law and regulations, the Directors are responsible for preparing a Strategic Report, Report of the Directors, Directors' Remuneration Report and a Corporate Governance Statement that are each compliant with the associated laws and regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website although day to day maintenance has been delegated to Polar Capital LLP. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

The work carried out by the Auditor does not involve consideration of these matters and, accordingly, the Auditor accept no responsibility for any changes that may have occurred to the Financial Statements since they were initially presented on the Company's website.

Disclosure of Information to the Auditor

As far as the Directors are aware and to the best of their knowledge, having made enquiries, there is no relevant audit information of which the Auditor is unaware and the Directors have taken steps to make themselves aware of any relevant audit information and to establish that the Auditor is aware of such information.

Going Concern

The Board has, through the Audit Committee, considered the Group and Company's position as at 30 September 2019 and the factors impacting the forthcoming year are set out in the Chairman's Statement, the Investment Manager's Report, Strategic Review and in the Report of the Directors which incorporates the Corporate Governance Statement.

The financial position of the Group and Company, their cash flows, and their liquidity position are described in the Strategic Report and the Financial Statements. Note 26 to the Financial Statements includes the Group and Company's policies and process for managing their capital; their financial risk management objectives and details of financial instruments and hedging activities. Exposure to credit risk and liquidity risk are also disclosed.

The Group has a portfolio of investments listed and traded on stock exchanges around the world, the great majority of which can be sold within seven working days, providing considerable financial resources. After making enquiries, the Directors have a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the Annual Report and Financial Statements.

Longer-Term Viability

The Board, through the Audit Committee, considered and addressed the ability of the Company to continue to operate over a longer period. The work of the Audit Committee in looking at the longer-term viability is described within the Annual Report.

As an investment company with a liquid portfolio, the majority of which can be sold within seven working days, limited expenses which are modest in relation to the asset base of the Company and no employees, the Directors are of the opinion that the Company can continue in operation up to its wind-up date expected to be in March 2025.

Responsibility Statement Under the Disclosure and Transparency Rules

Each of the Directors in office for the period under review of Polar Capital Global Healthcare Trust plc, confirm that, to the best of their knowledge:

-       the Financial Statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

-       the Chairman's Statement, Investment Manager's Report, Strategic Review and Report of the Directors (together constituting the Management Report) include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

The Financial Statements and the Responsibility Statement were approved by the Board on 19 December 2019 and James Robinson was authorised to sign them on behalf of the Board.

James Robinson

Chairman

 

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 September 2019

	Note	Group			Group
		Year ended 30 September 2019			Year ended 30 September 2018
		Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
Investment income	3	4,131	-	4,131	3,877	102	3,979
Other operating income	4	79	-	79	459	-	459
(Losses)/gains on investments held at fair value	5	-	(3,337)	(3,337)	-	49,559	49,559
(Losses) on derivatives		-	-	-	-	(19)	(19)
Other currency gains/(losses)	6	-	43	43	-	(259)	(259)
Total income		4,210	(3,294)	916	4,336	49,383	53,719
Expenses
Investment management fee	7	(503)	(2,013)	(2,516)	(478)	(1,910)	(2,388)
Other administrative expenses	8	(610)	(69)	(679)	(607)	(182)	(789)
Total expenses		(1,113)	(2,082)	(3,195)	(1,085)	(2,092)	(3,177)
(Loss)/profit before finance costs and tax		3,097	(5,376)	(2,279)	3,251	47,291	50,542
Finance costs	9	(9)	(1,037)	(1,046)	(3)	(983)	(986)
(Loss)/profit before tax		3,088	(6,413)	(3,325)	3,248	46,308	49,556
Tax	10	(535)	-	(535)	(437)	(3)	(440)
Net (loss)/profit for the year and total comprehensive income		2,553	(6,413)	(3,860)	2,811	46,305	49,116
(Loss)/earnings per Ordinary share (pence)	12	2.09	(5.25)	(3.16)	2.29	37.77	40.06

The total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by the European Union.

The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

The Group does not have any other income or expense that is not included in net profit/(loss) for the year.  The net profit/(loss) for the year disclosed above represents the Group's total comprehensive income/(expense).

There are no dilutive securities and therefore the Earnings per Share and the Diluted Earnings per Share are the same.

All revenue and capital items in the above statement derive from continuing operations.  No operations were acquired or discontinued in the year.

The notes below form part of these financial statements.

 

STATEMENT OF CHANGES IN EQUITY

For the year ended 30 September 2019

	Note	Group and Company Year ended 30 September 2019
		Called up share capital £'000	Capital redemption reserve £'000	Share premium reserve £'000	Special distributable reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total Equity £'000
Total equity at 1 October 2018		31,037	6,575	80,685	6,225	169,059	2,682	296,263
Total comprehensive (expense)/income:
(Loss)/Profit for the year ended 30 September 2019		-	-	-	-	(6,413)	2,553	(3,860)
Transactions with owners, recorded directly to equity:
Shares bought back and held in treasury	20	-	-	-	(1,513)	-	-	(1,513)
Equity dividends paid	11	-	-	-	-	-	(2,443)	(2,443)
Total equity at 30 September 2019		31,037	6,575	80,685	4,712	162,646	2,792	288,447

	Note	Group and Company Year ended 30 September 2018
		Called up share capital £'000	Capital redemption reserve £'000	Share premium reserve £'000	Special distributable reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total Equity £'000
Total equity at 1 October 2017		31,037	6,575	80,685	6,754	122,754	2,324	250,129
Total comprehensive income:
Profit for the year ended 30 September 2018		-	-	-	-	46,305	2,811	49,116
Transactions with owners, recorded directly to equity:
Shares bought back and held in treasury	20	-	-	-	(529)	-	-	(529)
Equity dividends paid	11	-	-	-	-	-	(2,453)	(2,453)
Total equity at 30 September 2018		31,037	6,575	80,685	6,225	169,059	2,682	296,263

The notes below form part of these financial statements.

 

BALANCE SHEETS

As at 30 September 2019

	Notes	Group		Company
		30 September 2019 £'000	30 September 2018 £'000	30 September 2019 £'000	30 September 2018 £'000
Non-current assets
Investments held at fair value	13	308,993	320,321	308,993	320,321
Investment in subsidiary	13	-	-	50	50
Current assets
Receivables	14	17,237	459	17,237	459
Overseas tax recoverable		693	557	693	557
Cash and cash equivalents	24	6,862	13,851	6,812	13,801
		24,792	14,867	24,742	14,817
Total assets		333,785	335,188	333,785	335,188
Current liabilities
Payables	15	(10,961)	(3,841)	(10,961)	(3,841)
Bank overdraft	24	(4)	(1,712)	(4)	(1,712)
		(10,965)	(5,553)	(10,965)	(5,553)
Non-current liabilities
Zero dividend preference shares	16	(34,373)	(33,372)	-	-
Loan from subsidiary		-	-	(34,373)	(33,372)
Total liabilities		(45,338)	(38,925)	(45,338)	(38,925)
Net assets		288,447	296,263	288,447	296,263
Equity attributable to equity Shareholders
Called up share capital	17	31,037	31,037	31,037	31,037
Share premium reserve	19	80,685	80,685	80,685	80,685
Capital Redemption reserve	18	6,575	6,575	6,575	6,575
Special distributable reserve	20	4,712	6,225	4,712	6,225
Capital reserves	21	162,646	169,059	162,646	169,059
Revenue reserve	22	2,792	2,682	2,792	2,682
Total equity		288,447	296,263	288,447	296,263
Net asset value per Ordinary share (pence)	23	236.88	241.91	236.88	241.91
Net asset value per ZDP share (pence)	23	106.99	103.87	--	-

The parent company has taken advantage of section 408 of the Companies Act 2006 and has not included its own income statement in the financial statements. The parent company's loss for the year was £3,860,000 (2018: return of £49,116,000).

The financial statements were approved and authorised for issue by the Board of Directors on 19 December 2019 and signed on its behalf by

James Robinson

Chairman

Registered number 7251471

The notes below form part of these financial statements.

CASH FLOW STATEMENT

For the year ended 30 September 2019

		Group and Company
	Note	Year ended 30 September 2019 £'000	Year ended 30 September 2018 £'000
Cash flows from operating activities
(Loss)/profit before finance costs and tax		(2,279)	50,542
Adjustment for non-cash items:
Loss/(gain) on investments held at fair value through profit or loss		3,337	(49,559)
Adjusted profit before tax		1,058	983
Adjustments for:
Purchases of investments, including transaction costs		(532,121)	(329,500)
Sales of investments, including transaction costs		530,063	343,187
Decrease/(increase) in receivables		222	(4)
Increase in payables		169	202
Overseas tax deducted at source		(671)	(564)
Net cash (used in)/generated from operating activities		(1,280)	14,304
Cash flows from financing activities
Cost of shares repurchased		(1,513)	(529)
Interest paid		(45)	(14)
Equity dividends paid	11	(2,443)	(2,453)
Net cash used in financing activities		(4,001)	(2,996)
Net (decrease)/increase in cash and cash equivalents		(5,281)	11,308
Cash and cash equivalents at the beginning of the year		12,139	831
Cash and cash equivalents at the end of the year	24	6,858	12,139

The notes below form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 September 2019

1.     General Information

The consolidated financial statements for the year ended 30 September 2019 comprise the financial statements of the Company and its wholly-owned subsidiary PCGH ZDP plc (together referred to as the 'Group').

The Group and Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), which comprise standards and interpretations approved by the International Accounting Standards Board (IASB) and International Accounting Standards Committee (IASC), as adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies under IFRS.

The Group and Company's presentational currency is pounds sterling (rounded to the nearest £'000). Pounds sterling is also the functional currency of the Group and Company because it is the currency which is most relevant to the majority of the Group and Company's Shareholders and creditors and the currency in which the majority of the Group and Company's operating expenses are paid.

2.     Accounting Policies

The principal accounting policies which have been applied consistently for all years presented are set out below:

(a)   Basis of Preparation

The financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments and derivative financial instruments at fair value through profit or loss.

Where presentational guidance set out in the Statement of Recommended Practice (SORP) for investment trusts issued by the Association of Investment Companies (AIC) in November 2014 and updated in February 2018, is consistent with the requirements of IFRS, in so far as those requirements are applicable to the financial statements, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

Basis of consolidation - The Group financial statements consolidate the Financial Statements of the Company and its wholly owned subsidiary, PCGH ZDP plc, drawn up to the same accounting date. The subsidiary is consolidated from the date of its incorporation.

The Company has taken advantage of the exemption under section 408 of the Companies Act 2006 and accordingly has not presented a separate parent company income statement.

(b)   Presentation of the Statement of Comprehensive Income

In order to better reflect the activities of an investment trust company and in accordance with the guidance set out by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. The results presented in the revenue return column is the measure the Directors believe appropriate in assessing the Group and Company's compliance with certain requirements set out in section 1158 of the Corporation Tax Act 2010.

(c)    Income

Dividends receivable from equity shares are recognised and taken to the revenue return column of the Statement of Comprehensive Income on an ex-dividend basis.

Special dividends are recognised on an ex-dividend basis and may be considered to be either revenue or capital items. The facts and circumstances are considered on a case by case basis before a conclusion on appropriate allocation is reached.

Income from US/Canadian Real Estate Investment Trusts ('REITs') is initially taken to the revenue return column of the Statement of Comprehensive Income on an ex-dividend basis. An adjustment may then be made to reallocate a proportion of this income to capital, depending on the information announced by the REITs.

Where the Group and Company has received dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised in the revenue return column of the Statement of Comprehensive Income. Any excess in value of shares received over the amount of the cash dividend foregone is recognised in the capital return column of the Statement of Comprehensive Income.

Bank interest is accounted for on an accruals basis. Interest outstanding at the year end is calculated on a time apportionment basis using market rates of interest.

(d)   Written Options

The Group and Company may write exchange-traded options with a view to generating income. This involves writing short-dated covered-call options and put options. The use of financial derivatives is governed by the Group and Company's policies, as approved by the Board.

These options are recorded initially at fair value, based on the premium income received, and are then measured at subsequent reporting dates at fair value. Changes in the fair value of the options are recognised in the capital return for the period.

The option premiums are recognised evenly over the life of the option and shown in the revenue return, with an appropriate amount shown in the capital return to ensure the total return reflects the overall change in the fair value of the options.

Where an option is exercised, any balance of the premium is recognised immediately in the revenue return with a corresponding adjustment in the capital return based on the amount of the loss arising on exercise of the option.

(e)   Expenses

All expenses, including the management fee, are accounted for on an accruals basis and are recognised when they fall due.

All expenses have been presented as revenue items except as follows:

Expenses are charged to the capital column of the Statement of Comprehensive Income where a connection with the maintenance or enhancement of the value of investments can be demonstrated. In this respect the investment management fees have been charged to the Statement of Comprehensive Income in line with the Board's expected long-term split of returns, in the form of capital gains and income from the Group and Company's portfolio. As a result 20% of the investment management fees are charged to the revenue account and 80% charged to the capital account of the Statement of Comprehensive Income.

The performance fee (when payable) is charged entirely to capital as the fee is based on the out-performance of the benchmark and is expected to be attributable largely, if not wholly, to capital performance.

The research costs relate solely to specialist healthcare research and are accounted for on an accrual basis and, are allocated 20% to revenue and 80% capital. This is in line with the Board's expected long-term split of revenue and capital return from the Company's investment portfolio.

Finance costs

The ZDP shares are designed to provide a pre-determined capital growth from their original issue price of 100p on 16 June 2017 to a final capital repayment of 122.99p on 19 June 2024. The initial capital will increase at a compound interest rate of 3% per annum.

No dividends are payable on the ZDP shares. The provision for the capital growth entitlement of the ZDP shares is included as a finance cost and charged 100% to capital within the Statement of Comprehensive Income (AIC SORP paragraph 53 issued in November 2014 and updated in February 2018).

Overdraft interest costs are allocated 20% to revenue and 80% to capital in line with the Board's expected long-term split of revenue and capital return from the Company's investment portfolio.

Share issue costs

Costs incurred directly in relation to the issue of shares in the subsidiary are borne by the Company and taken 100% to capital. Share issue costs relating to Ordinary share issues by the Company are taken 100% to the share premium account.

Zero Dividend Preference (ZDP) shares

Shares issued by the subsidiary are treated as a liability of the Group, and are shown in the Balance Sheet at their redemption value at the Balance Sheet date. The appropriations in respect of the ZDP shares necessary to increase the subsidiary's liabilities to the redemption values are allocated to capital in the Statement of Comprehensive Income. This treatment reflects the Board's long-term expectations that the entitlements of the ZDP Shareholders will be satisfied out of gains arising on investments held primarily for capital growth.

(f)    Taxation

The tax expense represents the sum of the overseas withholding tax deducted from investment income, tax currently payable and deferred tax.

The tax currently payable is based on the taxable profits for the year ended 30 September 2019. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group and Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Statement of Comprehensive Income is the "marginal basis". Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital return column.

Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Investment trusts which have approval as such under section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

(g)   Investments Held at Fair Value Through Profit or Loss

When a purchase or sale is made under contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date and are initially measured at fair value.

On initial recognition the Group and Company has designated all of its investments as held at fair value through profit or loss as defined by IFRS. All investments are measured at subsequent reporting dates at fair value, which is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted.

All investments, classified as fair value through profit or loss, are further categorised into the following fair value hierarchy:

Level 1 : Unadjusted prices quoted in active markets for identical assets and liabilities.

Level 2: Having inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Having inputs for the asset or liability that are not based on observable market data.

Changes in fair value of all investments held at fair value and realised gains and losses on disposal are recognised in the capital return column of the Statement of Comprehensive Income.

In the event a security held within the portfolio is suspended then judgement is applied in the valuation of that security.

(h)   Receivables

Receivables are initially recognised at fair value and subsequently measured at amortised cost. Receivables do not carry any interest and are short-term in nature and are accordingly stated at their nominal value (amortised cost) as reduced by appropriate allowances for estimated irrecoverable amounts.

(i)    Cash and Cash Equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, maturity of three months or less, highly liquid investments that are readily convertible to known amounts of cash.

(j)    Dividends Payable

Dividends payable to Shareholders are recognised in the financial statements when they are paid or, in the case of final dividends, when they are approved by the Shareholders.

(k)   Payables

Other payables are not interest-bearing and are initially valued at fair value and subsequently stated at their nominal value (amortised cost).

(l)    Foreign Currency Translation

Transactions in foreign currencies are translated into sterling at the rate of exchange ruling on the date of each transaction. Monetary assets, monetary liabilities and equity investments in foreign currencies at the balance sheet date are translated into sterling at the rates of exchange ruling on that date. Realised profits or losses on exchange, together with differences arising on the translation of foreign currency assets or liabilities, are taken to the capital return column of the Statement of Comprehensive Income.

Foreign exchange gains and losses arising on investments held at fair value are included within changes in fair value.

(m)  Capital Reserves

Capital reserve arising on investments sold includes:

·      gains/losses on disposal of investments

·      exchange differences on currency balances

·      transfer to subsidiary in relation to ZDP funding requirement

·      other capital charges and credits charged to this account in accordance with the accounting policies above.

Capital reserve arising on investments held includes:

·      increases and decreases in the valuation of investments held at the balance sheet date.

All of the above are accounted for in the Statement of Comprehensive Income.

(n)   Repurchase of Ordinary Shares (Including Those Held in Treasury)

The costs of repurchasing Ordinary shares including related stamp duty and transaction costs are taken directly to equity and reported through the Statement of Changes in Equity as a charge on the special distributable reserve. Share repurchase transactions are accounted for on a trade date basis.

The nominal value of Ordinary share capital repurchased and cancelled is transferred out of called up share capital and into the capital redemption reserve.

Where shares are repurchased and held in treasury, the transfer to capital redemption reserve is made if and when such shares are subsequently cancelled.

(o)   New and revised accounting Standards

There were no new IFRSs or amendments to IFRSs applicable to the current year which had any significant impact on the Group and Company's accounts.

The following standards became effective on 1 January 2018 and the adoption of the standards and interpretations have not had a material impact on the financial statements of the Group and Company.

IFRS 9 (2014) Financial Instruments.

The requirement of IFRS 9 and its application to the assets and liabilities held by the Group and Company were considered ahead of its adoption on 1 January 2018. The classification of all assets and liabilities remains unchanged under IFRS 9 and all figures will be directly comparable to the existing basis of valuation.

IFRS 15, Revenue with Contracts with Customers.

IFRS 15 sets out the requirements for revenue recognition. The Company's only revenue streams are dividend income and gains and losses from sale of investments. Given the nature of the Company's revenue streams from financial instruments, the provisions of this standard are not expected to have a material impact.

At the date of authorisation of these financial statements, the following new IFRSs and amendments that potentially impact the Group and Company are in issue but are not yet effective and have not been applied in these accounts:

Effective for periods commencing on or after 1 January 2019:

IFRS 16 Leases

As the Group and Company neither holds, trades or has any lease obligations of any type, the provisions of this standard are not expected to have a material impact on the accounts.

IFRIC 23 Uncertainty over Income Tax Treatments

The interpretation provides guidance on considering uncertain tax treatments in relation to taxable profit or loss and does not add any new disclosures. The Company complies with all relevant tax laws where applicable and the provisions of this interpretation are not expected to have a material impact on the accounts.

IAS 19 (amended) Employee Benefits

As the Group and Company has no employees, the amendments to this standard are not expected to have any impact on the accounts.

IAS 28 (amended) Investments in Associates and Joint Ventures

As the Group and Company has no investment in associates or joint ventures, the amendments to this standard are not expected to have any impact on the accounts.

IFRS 9 (Amended) Prepayment Features with Negative Compensation

Negative compensation arises where the contractual terms permit a borrower to prepay the instrument before its contractual maturity, but the prepayment amount could be less than unpaid amounts of principal and interest. The Company has no such terms in any of its loan agreements in place and the amendments are not expected to have any impact on the accounts.

Annual Improvement Cycles 2015-2017 (Amendments)

This makes narrow-scope amendments to four IFRS Standards: IFRS 3 Business Combinations, IFRS 11 Joint Arrangements, IAS 12 Incomes Taxes and IAS 23 Borrowing costs. These limited amendments are not expected to have any impact on the accounts.

Effective for periods commencing on or after 1 January 2020:

IFRS 3 Business combinations (amended)

IAS 1 and IAS 8 Definition of Material (amended)

References to the conceptual Framework in IFRS Standards (amended)

The Directors expect that the adoption of the standards listed above will have either no impact or that any impact will not be

material on the Financial Statement of the Company in future periods.

(p)   Segmental Reporting

Under IFRS 8, 'Operating Segments', operating segments are considered to be the components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The chief operating decision maker has been identified as the Investment Manager (with oversight from the Board).

The Directors are of the opinion that the Group and Company has only one operating segment and as such no distinct segmental reporting is required.

3.     Investment Income

	Year ended 30 September 2019 £'000	Year ended 30 September 2018 £'000
Revenue:
Franked: Listed investments
Dividend income	377	491
Unfranked: Listed investments
Dividend income	3,754	3,386
Total investment income allocated to revenue	4,131	3,877
Capital:
Dividends from REITs allocated to capital	-	102
Total investment income allocated to capital	-	102

4.     Other Operating Income

	Year ended 30 September 2019 £'000	Year ended 30 September 2018 £'000
Option premium income	-	437
Other income	30	-
Bank interest	49	22
Total other operating income	79	459

Option premium income arises from writing short-dated covered-call options and put options in the expectation that the options will not be exercised or, in overall terms, any losses that may arise following exercise will be outweighed by the premiums received.

There was no option premium income received for the current year.

5.     (Losses)/Gains on Investments Held at Fair Value

	Year ended 30 September 2019 £'000	Year ended 30 September 2018 £'000
Net gains on disposal of investments at historic cost	22,892	30,676
Less fair value adjustments in earlier years	(33,931)	(13,268)
(Losses)/gains based on carrying value at previous balance sheet date	(11,039)	17,408
Valuation gains on investments held during the year	7,702	32,151
	(3,337)	49,559

6.     Other Currency Gains/(Losses)

	Year ended 30 September 2019 £'000	Year ended 30 September 2018 £'000
Exchange gains/(losses) on currency balances	43	(259)

7.     Investment Management Fee

	Year ended 30 September 2019 £'000	Year ended 30 September 2018 £'000
Management fee
- charged to revenue	503	478
- charged to capital	2,013	1,910
Investment management fee payable to Polar Capital LLP	2,516	2,388

Management fees are allocated 20% to revenue and 80% to capital.

8.     Other Administrative Expenses (Including VAT where appropriate)

	Year ended 30 September 2019 £'000	Year ended 30 September 2018 £'000
Directors' fees1	122	130
Directors' NIC	12	13
Auditors' remuneration2:
For audit of the Group and Company financial statements	32	30
Depositary fee	24	23
Registrar fee	34	20
Custody and other bank charges	30	28
UKLA and LSE listing fees	44	48
Legal & professional fees	-	4
AIC fees	20	19
Directors' and officers' liability insurance	8	9
Corporate broker's fee	30	29
Marketing expenses3	17	28
Research costs4	17	45
Shareholder communications	34	31
HSBC administration fee	150	143
Other expenses5	36	7
	610	607
Transaction charges - allocated to capital	-	1
Research cost - allocated to capital4	69	181
	679	789

1 Full disclosure is given in the Directors' Remuneration Report within the Annual Report.

2 2019 includes £5,175 (2018: £4,600) paid to the Auditor for the audit of PCGH ZDP plc.

3 Includes marketing expenses payable to Polar Capital LLP of £7,500 (2018: £22,500).

4 Research costs (which applied from 3 January 2018) payable by the Company relate solely to specialist healthcare research and are capped at US $232,994 (£189,000) (2018: US $394,867 (£303,000)) with the cost of general non-specialist research and any amounts exceeding the agreed cap being absorbed by Polar Capital. Any adjustment to the prior year's budget versus the actual spend is included in the current period. These costs are allocated 20% to revenue and 80% to capital and are included in the ongoing charges calculation.

5 2019 includes costs in relation to non-executive director search fee.

Ongoing charges represents the total expenses of the fund, excluding finance costs and tax, expressed as a percentage of the average daily net asset value, in accordance with AIC guidance issued in May 2012.

The ongoing charges ratio for the year ended 30 September 2019 was 1.01% (2018: 1.08%). See Alternative Performance Measures below.

9.     Finance Costs

	Year ended 30 September 2019			Year ended 30 September 2018
	Revenue return	Capital return	Total return	Revenue return	Capital return	Total return
	£'000	£'000	£'000	£'000	£'000	£'000
Interest on overdrafts	9	36	45	3	11	14
Appropriation to ZDP shares	-	1,001	1,001	-	972	972
Total finance costs	9	1,037	1,046	3	983	986

10.   Taxation

	Year ended 30 September 2019			Year ended 30 September 2018
	Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
a) Analysis of tax charge for the year:
Overseas tax	535	-	535	437	3	440
Total tax for the year (see note 10b)	535	-	535	437	3	440
b) Factors affecting tax charge for the year:
The charge for the year can be reconciled to the profit per the Statement of Comprehensive Income as follows:
Profit/(loss) before tax	3,088	(6,413)	(3,325)	3,248	46,308	49,556
Tax at the UK corporation tax rate of 19% (2018: 19%)	587	(1,218)	(631)	617	8,799	9,416
Tax effect of non-taxable dividends	(785)	-	(785)	(756)	(20)	(776)
Losses/(gains) investments that are not taxable	-	626	626	-	(9,363)	(9,363)
Unrelieved current period expenses and deficits	198	402	600	139	399	538
Overseas tax suffered	535	-	535	437	3	440
Expenses not allowable	-	190	190	-	185	185
Total tax for the year (see note 10a)	535	-	535	437	3	440

c) Factors that may affect future tax charges:

The Company has an unrecognised deferred tax asset of £2,555,000 (2018: £2,018,000) based on a prospective corporation tax rate of 17% (2018: 17%).

The deferred tax asset has arisen due to the cumulative excess of deductible expenses over taxable income. Given the composition of the Company's portfolio, it is not likely that this asset will be utilised in the foreseeable future and therefore no asset has been recognised in the accounts.

Given the Company's intention to meet the conditions required to retain its status as an Investment Trust Company, no provision has been made for deferred tax on any capital gains or losses arising on the revaluation or disposal of investments.

11.   Amounts Recognised as Distributions to Ordinary Shareholders in the Year

Dividends paid in the year ended 30 September 2019

Payment date	No of shares	Pence per share	Year ended 30 September 2019 £'000
28 February 2019	122,470,000	1.00p	1,225
30 August 2019	121,770,000	1.00p	1,218
			2,443

The revenue available for distribution by way of dividend for the year is £2,553,000 (2018: £2,811,000).

The total dividends payable in respect of the financial year ended 30 September 2019, which is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are considered, are set out below:

Payment date	No of shares	Pence per share	Year ended 30 September 2019 £'000
30 August 2019	121,770,000	1.00p	1,218
28 February 2020	121,270,000*	1.10p	1,334
			2,552

*Number of shares in issue at the date of this report.

Dividends paid in the year ended 30 September 2018

Payment date	No of shares	Pence per share	Year ended 30 September 2018 £'000
28 February 2018	122,750,000	1.00p	1,228
31 August 2018	122,470,000	1.00p	1,225
			2,453

The total dividends payable in respect of the financial year ended 30 September 2018 which is the basis on which the requirements of Section 1158 Corporation Tax Act 2010 are considered, is set out below:

Payment date	No of shares	Pence per share	Year ended 30 September 2018 £'000
31 August 2018	122,470,000	1.00p	1,225
28 February 2019	122,470,000	1.00p	1,225
			2,450

All dividends are paid as interim dividends.

The dividends paid in February each year relate to a dividend declared in respect of the previous financial year but paid in the current accounting year.

12.   (Loss)/earnings per Ordinary Share

	Year ended 30 September 2019				Year ended 30 September 2018
	Revenue return	Capital return	Total return	Revenue return		Capital return	Total return
The calculation of basic earnings per share is based on the following data:
Net (loss)/profit for the year (£'000)	2,553	(6,413)	(3,860)	2,811		46,305	49,116
Weighted average Ordinary shares in issue during the year	122,123,685	122,123,685	122,123,685	122,602,712		122,602,712	120,602,712
Basic - Ordinary shares (pence)	2.09	(5.25)	(3.16)	2.29		37.77	40.06

As at 30 September 2019 there were no potentially dilutive shares in issue.

13.   Investments Held at Fair Value

(a) Movements on investments

	30 September 2019 £'000	30 September 2018 £'000
Cost brought forward	276,747	249,824
Valuation gains	43,574	24,692
Valuation brought forward	320,321	274,516
Additions at cost	539,072	330,921
Proceeds on disposal	(547,063)	(334,675)
(Losses)/gains on disposal	(11,039)	17,408
Valuation gains	7,702	32,151
Valuation at 30 September	308,993	320,321
Cost at 30 September	291,648	276,747
Closing fair value adjustment	17,345	43,574
Valuation at 30 September	308,993	320,321

The following transaction costs, including stamp duty and broker commissions were incurred during the year:

	30 September 2019 £'000	30 September 2018 £'000
On acquisition	363	197
On disposal	237	151
	600	348

               (b) Fair value hierarchy

	30 September 2019 £'000	30 September 2018 £'000
Level 1 assets	308,993	320,321
Valuation at 30 September	308,993	320,321

All Level 1 assets are traded on a recognised Stock Exchange.

(c) Subsidiary undertaking

Company and business	Country of registration, incorporation and operation	Number and class of shares held by the Company	Holding
PCGH ZDP Plc	England and Wales	50,000 Ordinary shares of £1	100%

The Company is a public limited company with the sole purpose of issuing Zero Dividend Preference (ZDP) shares. The registered office is at Polar Capital, 16 Palace Street, London SW1E 5JD.

The investment is stated in the Company's Financial Statements at cost, which is considered by the Directors to equate to fair value.

The subsidiary is non-trading and the value of the net assets have not changed since the acquisition of the Ordinary share capital by the Company. The cost is therefore considered to equate to the fair value of the shares held.

14.   Receivables

	30 September 2019 £'000	30 September 2018 £'000
Sales for future settlement	17,000	-
Accrued income	222	436
Prepayments	15	23
	17,237	459

15.   Payables

	30 September 2019 £'000	30 September 2018 £'000
Purchases for future settlement	10,289	3,338
Accruals	672	503
	10,961	3,841

16.   Zero Dividend Preference Shares ('ZDP Shares')

	30 September 2019 £'000	30 September 2018 £'000
At 1 October	33,372	32,400
Capital growth of ZDP shares	1,001	972
At 30 September	34,373	33,372

17.   Called up Share Capital

(i) Ordinary shares - Allotted, Called up and Fully paid:	30 September 2019 £'000	30 September 2018 £'000
Ordinary shares of nominal value 25p each:
Opening balance of 122,470,000 (30 September 2018: 122,750,000)	30,617	30,687
Repurchase of 700,000 (2018: 280,000) Ordinary shares, into treasury	(175)	(70)
Allotted, Called up and Fully paid: 121,770,000 (2018: 122,470,000) Ordinary shares of 25p	30,442	30,617
2,379,256 (2018: 1,679,256) Ordinary shares, held in treasury	595	420
At 30 September	31,037	31,037

700,000 Ordinary shares were repurchased into treasury at a total cost of £1,513,000 (2018: £529,000).

Subsequent to the year end 500,000 Ordinary shares were repurchased at a price of 207.00p per share and held in treasury.

The Ordinary shares held in treasury have no voting rights and are not entitled to dividends.

(ii) Subsidiary Company (for information purposes) ZDP shares - Allotted, Called up and Fully paid:	30 September 2019 £'000	30 September 2018 £'000
ZDP shares of nominal value 1p each:
Opening balance of 32,128,437 ZDP shares (2018: 32,128,437)	32,128	32,128
Allotted, Called up and Fully paid: 32,128,437 (2018: 32,128,437) ZDP shares of 1p	32,128	32,128
At 30 September	32,128	32,128

18.   Capital Redemption Reserve

	30 September 2019 £'000	30 September 2018 £'000
At 1 October	6,575	6,575
At 30 September	6,575	6,575

This reserve is not distributable.

19.   Share Premium Reserve

	30 September 2019 £'000	30 September 2018 £'000
At 1 October	80,685	80,685
At 30 September	80,685	80,685

This reserve is not distributable.

20.   Special Distributable Reserve

	30 September 2019 £'000	30 September 2018 £'000
At 1 October	6,225	6,754
Repurchase of 700,000 (2018: 280,000) Ordinary shares into treasury	(1,513)	(529)
At 30 September	4,712	6,225

Surpluses to the credit of the special distributable reserve can be used to purchase the Group and Company's own shares. In addition, the Group and Company may use this reserve for the payment of dividends.

21.   Capital Reserves

	30 September 2019 £'000	30 September 2018 £'000
At 1 October	169,059	122,754
Net (losses)/gains on disposal of investments	(11,039)	17,408
Valuation gains on investments held during the year	7,702	32,151
Exchange gains/(losses) on currency balances	43	(259)
Derivatives realised loss	-	(19)
Capital dividends	-	102
Irrecoverable tax on special capital dividends	-	(3)
Overdraft interest allocated to capital	(36)	(11)
Transaction charges allocated to capital	-	(1)
Research costs to capital	(69)	(181)
Investment management fee allocated to capital	(2,013)	(1,910)
Capital contribution to ZDP entitlement	(172)	(163)
ZDP appropriation	(829)	(809)
At 30 September	162,646	169,059

The balance on the capital reserve represents a profit of £17,345,000 (2018: £43,574,000) on investments held and a profit of £145,301,000 (2018: £125,485,000) on investments sold.

The balance on investments held comprises holding gains on investments (which may be deemed to be realised and other amounts, which are unrealised. An analysis has not been made between the amounts that are realised (and may be distributed or used to repurchase the Group and Company's shares) and those that are unrealised.

The balance on investments sold are realised distributable capital reserves which may be used to repurchase the Group and Company's shares or be distributed as dividends.

22.   Revenue Reserve

	30 September 2019 £'000	30 September 2018 £'000
At 1 October	2,682	2,324
Revenue profit	2,553	2,811
Interim dividends paid	(2,443)	(2,453)
At 30 September	2,792	2,682

The revenue reserve may be distributed or used to repurchase the Group and Company's shares (subject to being a positive balance).

23.   Net Asset Value Per Share

(i) Ordinary shares	30 September 2019	30 September 2018
Net assets attributable to Ordinary Shareholders (£'000)	288,447	296,263
Ordinary shares in issue at end of year	121,770,000	122,470,000
Net asset value per Ordinary share (pence)	236.88	241.91
Total issued Ordinary shares	124,149,256	124,149,256
Ordinary shares held in treasury	2,379,256	1,679,256
Ordinary shares in issue	121,770,000	122,470,000

As at 30 September 2019 there were no potentially dilutive shares in issue.

(ii) Subsidiary Company (for information purposes) ZDP shares	30 September 2019	30 September 2018
Calculated entitlement of ZDP Shareholders (£)	£34,372,824	£33,372,440
ZDP shares in issue at the end of the year	32,128,437	32,128,437
Net asset value per ZDP share (pence)	106.99	103.87

24.   Cash and Cash Equivalents

	30 September 2019 £'000	30 September 2018 £'000
Cash at bank	5,706	12,777
Cash held at derivative clearing houses	1,106	1,024
Bank overdraft	(4)	(1,712)
Company cash and cash equivalents	6,808	12,089
Cash held at subsidiary	50	50
Group cash and cash equivalents	6,858	12,139

25.   Transactions with the Investment Manager and Related Party Transactions

(a) Transactions with the Manager

Under the terms of an agreement dated 26 May 2010 the Group has appointed Polar Capital LLP ("Polar Capital") to provide investment management, accounting, secretarial and administrative services. Details of the fee arrangement for these services are given in the Strategic Report. The total fees, paid under this agreement to Polar Capital in respect of the year ended 30 September 2019 were £2,516,000 (2018: £2,388,000) of which £433,000 (2018: £212,000) was outstanding at the year-end.

In addition, the total research costs in respect of the year ended 30 September 2019 was £184,000 (2018: £226,000) of which £43,000 relates to the period 1 October 3018 to 31 December 2018 and £141,000 relates to the period from 1 January 2019 to 30 September 2019. As at the year end, £95,000 (2018: £168,000) was outstanding. Refer to note 8 for more details.

(b) Related party transactions

The Group and Company have no employees and therefore no key management personnel other than the Directors. The Group and Company paid £122,000 (2018: £130,000) to the Directors and the Remuneration Report, including Directors' shareholdings and movements within the year is provided within the full Annual Report.

26.   Derivatives and Other Financial Instruments

RISK MANAGEMENT POLICIES AND PROCEDURES FOR THE GROUP AND COMPANY

The Group and Company invests in equities and other financial instruments for the long term to further the investment objective set out above. This exposes the Group and Company to a range of financial risks that could impact on the assets or performance of the Group and Company.

The main risks arising from the Group and Company's pursuit of its Investment Objective are market risk, liquidity risk and credit risk and the Directors' approach to the management of them is set out below.

The Group and Company's exposure to financial instruments can comprise:

·      Equity and non-equity shares and fixed interest securities which may be held in the investment portfolio in accordance with the Investment Objective.

·      Bank overdrafts, the main purpose of which is to raise finance for the Group and Company's operations.

·      Cash, liquid resources and short-term receivables and payables that arise directly from the Group and Company's operations.

·      Derivative transactions which the Group and Company enters into may include equity or index options, index futures contracts, and forward foreign exchange contracts.

The purpose of these is to manage the market price risks and foreign exchange risks arising from the Group and Company's investment activities.

The overall management of the risks is determined by the Board and its approach to each risk identified is set out below. The Board and the Investment Manager co-ordinate the risk management and the Investment Manager assesses the exposure to market risk when making each investment decision.

(a) Market Risk

Market risk comprises three types of risk: market price risk (see note 26(a)(i)), currency risk (see note 26(a)(ii)), and interest rate risk (see note 26(a)(iii)).

(i) Market Price Risk

The Group and Company is an investment company and as such its performance is dependent on its valuation of its investments. Consequently, market price risk is the most significant risk that the Group and Company faces.

Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Group and Company's operations.

It represents the potential loss the Group and Company might suffer through holding market positions in the face of price

movements.

A detailed breakdown of the investment portfolio is given above. Investments are valued in accordance with the

accounting policies as stated in Note 2(g).

At the year end, the Group and Company did not hold any derivative instruments (2018: nil).

Management of the risk

In order to manage this risk it is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce both the statistical risk and the risk arising from factors specific to a particular healthcare sub sector. The allocation of assets to international markets, together with stock selection covering small, medium and large companies, and the use of index options, are other factors which act to reduce price risk. The Investment Manager actively monitors market prices throughout the year and reports to the Board which meets regularly in order to consider investment strategy.

Market price risks exposure

The Group and Company's exposure to changes in market prices at 30 September on its investments was as follows:

	Year ended 30 September 2019 £'000	Year ended 30 September 2018 £'000
Non-current asset investments at fair value through profit or loss	308,993	320,321
	308,993	320,321

Market price risk sensitivity

The following table illustrates the sensitivity of the return after taxation for the year and the value of Shareholders' funds to an increase or decrease of 15% in the fair values of the Group and Company's investments. This level of change is considered to be reasonably possible based on observation of current market conditions and historic trends.

The sensitivity analysis is based on the Group and Company's investments at each balance sheet date, with all other variables held constant.

	Year ended 30 September 2019		Year ended 30 September 2018
	Increase in fair value £'000	Decrease in fair value £'000	Increase in fair value £'000	Decrease in fair value £'000
Statement of Comprehensive Income - profit after tax
Revenue return	(78)	78	(81)	81
Capital return	46,034	(46,034)	47,721	(47,721)
Change to the profit after tax for the year	45,956	(45,956)	47,640	(47,640)
Change to equity attributable to Shareholders	45,956	(45,956)	47,640	(47,640)

(ii) Currency Risk

The Group and Company's total return and net assets can be significantly affected by currency translation movements as the majority of the Group and Company's assets and revenue are denominated in currencies other than sterling.

Management of the risk

The Investment Manager mitigates risks through an international spread of investments.

Settlement risk on investment trades is managed through short term hedging.

Foreign currency exposure

The table below shows, by currency, the split of the Group and Company's monetary assets, liabilities and investments that are priced in currencies other than sterling.

	Year ended 30 September 2019 £'000	Year ended 30 September 2018 £'000
Monetary Assets:
Cash and short term receivables
US Dollars	13,617	69
Japanese Yen	4,241	166
Swiss Francs	852	725
Euros	146	135
Danish Krone	60	448
Monetary Liabilities:
Other payables
US Dollars	(12,337)	(733)
Japanese Yen	(4,241)	-
Danish Krone	-	(422)
Foreign currency exposure on net monetary items	2,338	388
Non-Monetary Items:
Investments at fair value through profit or loss that are equities
US dollars	234,441	252,232
Euros	30,299	-
Danish Krone	24,625	9,093
Swiss Francs	7,314	16,730
Japanese Yen	4,300	14,206
Swedish Krona	-	2,227
Norwegian Krona	-	1,347
Total net foreign currency exposure	303,317	296,223

During the financial year, movements against sterling in the four major currencies noted above were:

US Dollar appreciated by 5.5% (2018: appreciated by 2.8%),

Euros depreciated by 0.7% (2018: appreciated by 1.1%),

Danish Krone depreciated by 0.8% (2018: appreciated by 0.9%), and

Swiss Franc appreciated by 3.5% (2018: appreciated by 1.9%).

Foreign currency sensitivity

The following table illustrates the sensitivity of the profit after tax for the year and the value of equity attributable to Shareholders in regard to the financial assets and financial liabilities and the exchange rates for the £/US Dollar, £/Euros, £/Danish Krone and £/ Swiss Francs.

Based on the year end position, if sterling had depreciated by a further 15% (2018: 15%) against the currencies shown, this would have the following effect:

	Year ended 30 September 2019 £'000
	US Dollars	Euros	Danish Krone	Swiss Francs
Statement of Comprehensive Income - profit after tax
Revenue return	226	26	11	150
Capital return	41,372	5,347	4,346	1,291
Change to the profit after tax for the year and to equity attributable to Shareholders	41,598	5,373	4,357	1,441

	Year ended 30 September 2018 £'000
	US  Dollars	Swiss  Francs	Japanese Yen	Danish Krone
Statement of Comprehensive Income - profit after tax
Revenue return	12	128	29	79
Capital return	44,512	2,952	2,507	1,605
Change to the profit after tax for the year and to equity attributable to Shareholders	44,524	3,080	2,536	1,684

Based on the year end position, if sterling had appreciated by a further 15% (2017: 15%) against the currencies shown, this would have the following effect:

	Year ended 30 September 2019 £'000
	US Dollars	Euros	Danish Krone	Swiss Francs
Statement of Comprehensive Income - profit after tax
Revenue return	(167)	(19)	(8)	(111)
Capital return	(30,579)	(3,952)	(3,212)	(954)
Change to the profit after tax for the year and to equity attributable to Shareholders	(30,746)	(3,971)	(3,220)	(1,065)

	Year ended 30 September 2018 £'000
	US Dollars	Swiss Francs	Japanese Yen	Danish Krone
Statement of Comprehensive Income - profit after tax
Revenue return	(9)	(95)	(22)	(58)
Capital return	(32,900)	(2,182)	(1,853)	(1,186)
Change to the profit after tax for the year and to equity attributable to Shareholders	(32,909)	(2,277)	(1,875)	(1,244)

In the opinion of the Directors, while these are regarded as reasonable estimates, neither of the above sensitivity analyses are representative of the year as a whole since the level of exposure changes frequently as part of the currency risk management process used to meet the Group's objectives.

(iii) Interest Rate Risk

Although the majority of the Group and Company's financial assets are equity shares which pay dividends, not interest, the Group and Company will be affected by interest rate changes as interest is earned on any cash balances and paid on any overdrawn balances.

Given the interest rate risk exposure noted below, the impact of any interest rate change is not considered to be significant and as such, no sensitivity analysis has been provided. Interest rate changes will also have an impact on the valuation of equities, although this forms part of price risk, which has already been considered separately above.

Management of the risk

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions.

Derivative contracts are not used to hedge against the exposure to interest rate risk.

Interest rate exposure

At the year-end, financial assets and liabilities exposed to floating interest rates were as follows:

	Year ended 30 September 2019 £'000	Year ended 30 September 2018 £'000
Cash at bank and at derivative clearing houses	6,812	13,801
Cash held at subsidiary	50	50
Bank overdraft	(4)	(1,712)
	6,858	12,139

The above year-end amounts may not be representative of the exposure to interest rates in the year ahead since the level of cash held during the year will be affected by the strategy being followed in response to the Board's and Investment Manager's perception of market prospects and the investment opportunities available at any particular time.

(b) Liquidity Risk

Liquidity risk is the possibility of failure of the Group and Company to realise sufficient assets to meet its financial liabilities.

Management of the risk

The Group and Company's assets mainly comprise readily realisable securities which may be sold to meet funding requirements as necessary.

Liquidity risk exposure

At 30 September the financial liabilities comprised:

	30 September 2019 £'000	30 September 2018 £'000
Due within 1 month:
Other creditors and accruals	10,961	3,841
Bank overdraft	4	1,712
Due in more than 1 year
ZDP's entitlement	34,373	33,372
	45,338	38,925

The ZDP shares have a planned repayment date of 19 June 2024 at an amount of £39,514,000.

(c) Credit Risk

Credit risk is the exposure to loss from failure of a counterparty to deliver securities or cash for acquisitions or disposals of investments or to repay deposits.

Management of the risk

The Group and Company manages credit risk by using brokers from a database of approved brokers and by dealing through Polar Capital. All cash balances are held with approved counterparties.

HSBC Bank plc is the custodian of the Group and Company's assets. The Group and Company's assets are segregated from HSBC's own trading assets and are therefore protected in the event that HSBC were to cease trading.

These arrangements were in place throughout the current and prior year.

Credit risk exposure

The maximum exposure to credit risk at 30 September 2019 was £7,084,000 (2018: £14,287,000) comprising:

	30 September 2019 £'000	30 September 2018 £'000
Accrued Income	222	436
Cash at bank and at derivative clearing houses	6,862	13,851
	7,084	14,287

All of the above financial assets are current, their fair values are considered to be the same as the values shown and the likelihood of a material credit default is considered low. None of the Group and Company's assets are past due or impaired. All deposits were placed with banks that had a rating of A or higher.

(d) Capital Management Policies and Procedures

The Group and Company's capital, or equity, is represented by its net assets which amounted to £288,447,000 for the year ended 30 September 2019 (2018: £296,263,000), which are managed to achieve the Group's and Company's Investment Objective set out in the Annual Report.

The Board monitors and reviews the broad structure of the Group's and Company's capital on an ongoing basis. This review includes:

i.      the need to issue or buy back equity shares for cancellation, which takes account of the difference between the net asset value per share and the share price (i.e. the level of share price discount or premium); and

ii.    the determination of dividend payments.

The Group and Company is subject to externally imposed capital requirements through the Companies Act with respect to its status as a public company. In addition, in order to pay dividends out of profits available for distribution by way of dividend, the Group and Company has to be able to meet one of two capital restriction tests imposed on investments by company law.

These requirements are unchanged since the previous year end and the Group and Company has complied with them.

27.   Post Balance Sheet Events

After the year end, a further 500,000 Ordinary shares were bought back and held in treasury. Following these share buybacks, the total number of shares in issue was 124,149,256 of which 2,879,256 shares were held in treasury. No other significant events occurred after the end of the reporting period to the date of this report requiring disclosure.

ALTERNATIVE PERFORMANCE MEASURES (APMS)

In assessing the performance of the Company and Group the Investment Manager and the Directors use the following APMs which are considered to be known industry metrics:

Net Asset Value (NAV)

The NAV is the value attributed to the underlying assets of the Company less the liabilities, presented either on a per share or total basis.

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.

As at 30 September 2019, the Group's total equity was £288,447,000 and there were 121,770,000 Ordinary shares in issue. The Group's NAV per share was therefore 236.88p (£288,447,000/121,770,000).

At 30 September 2019, the value of the ZDP shares was £34,373,000 (note 16 of the notes to the financial statements above) and the number of ZDP shares in issue was 32,128,437. The NAV per ZDP share was therefore 106.99p (£34,373,000/32,128,437).

Total Net Assets (Group and Company)

The value of the Group's and Company's assets, principally investments made in other companies and cash being held, minus any liabilities.

At 30 September 2019, the total assets were £333,785,000 and the total liabilities were £45,338,000, the total net assets therefore were £288,447,000 (£333,785,000 - £45,338,000).

NAV Total Return

The NAV total return shows how the net asset value has performed over a period of time taking into account both capital returns and dividends paid to Shareholders.

NAV total return is calculated as the change in NAV from the start of the period, assuming that dividends paid to Shareholders are reinvested on the payment date in Ordinary shares at their net asset value. The adjusted NAV at the start of the period was 244.12p.

As at 30 September 2019, the Group's NAV per share was 236.88p, the impact of the dividend reinvestment in NAV was 4.20p and the adjusted NAV per share was therefore 241.08p (236.88p+4.20p). The NAV total return over the year was -1.24% ((241.08p-244.12p)/244.12p).

NAV total return since restructuring is calculated as the change in NAV from the date of reconstruction on 20 June 2017, assuming that dividends paid to Shareholders are reinvested on the payment date in Ordinary shares at their net asset value. The NAV at reconstruction was 215.85p.

As at 30 September 2019, the Group's adjusted NAV per share was 241.08p, the NAV total return since reconstruction was 11.69% ((241.08p-215.85p)/215.85p).

Share Price Total Return

Share price total return shows how the share price has performed over a period of time. It assumes that dividends paid to Shareholders are reinvested in the shares at the time the shares are quoted ex dividend.

As at 30 September 2019, the Company's share price was 218.00p and the opening share price as at 30 September 2018 was 223.00p; a reinvestment factor of 1.009104, relating to the impact of the reinvested dividends during the year, was applied to reach a closing adjusted share price for the purposes of the calculation of share price performance with income reinvested of 219.98p. The share price total return is -1.35% ((219.98p-223.00p)/223.00p).

Discount /Premium

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

The share price at 30 September 2019 was 218.00p and NAV was 236.88p, the discount was therefore 8.0%, ((218.00p-236.88p)/236.88p).

Total Expenses (Group and Company)

Comprising all the operating expenses, which includes research costs, of the Group and Company plus those expenses which are excluded from the ongoing charges calculation, including transaction costs, finance costs, tax and non-recurring expenses. Costs in relation to share issues and share buybacks are excluded from the calculation.

At 30 September 2019, the total operating expenses including management fees were £3,195,000, finance costs were £1,046,000 and taxes were £535,000; the total expenses therefore were £4,776,000 (£3,195,000 + £1,046,000 + £535,000).

Ongoing Charges

Ongoing charges are calculated in accordance with AIC guidance by taking the Company's annual ongoing charges, excluding performance fees and exceptional items, if any, and expressing them as a percentage of the average daily net asset value of the Company over the year.

Ongoing charges include all regular operating expenses of the Company. Transaction costs, interest payments, tax and non-recurring expenses are excluded from the calculation as are the costs incurred in relation to share issues and share buybacks.

Where a performance fee is paid or is payable, a second ongoing charge is provided, calculated on the same basis as the above but incorporating the amount of performance fee due or paid.

Ongoing charges for the year equal the management fee of £2,516,000 plus other operating expenses of £679,000 divided by the Group's average NAV in the period. (£3,195,000/£316,065,695=1.01%)

Since there was no performance fee paid or payable for the year the ongoing charges including performance fee is the same as the ongoing charges.

Net Gearing

Gearing is calculated in line with AIC guidelines and represents net gearing. This is defined as total assets less cash and cash equivalents divided by net assets. The total assets are calculated by adding back the structural gearing which is the ZDP value. Cash and cash equivalents are cash and purchases and sales for future settlement outstanding at the year end.

As at 30 September 2019 the net assets were £288,447,000, ZDP value was £34,373,000 and cash and cash equivalents (including amounts for future settlement) were £13,569,000, and the net gearing was therefore 7.21%, (((£288,447,000+£34,373,000-£13,569,000)/£288,447,000) -1).

AGM

The Annual Report and separate Notice for the Annual General Meeting will be posted to Shareholders in January 2020 and is available from the Company Secretary at the Company's Registered Office, (16 Palace Street London SW1E 5JD) or from the Company's website. The AGM will be held at the Company's Registered Office at 12 noon on 26 February 2020.

FORWARD LOOKING STATEMENTS

Certain statements included in the Annual Report and Financial Statements contain forward-looking information concerning the Company's strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors or markets in which the Company operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within the Company's control or can be predicted by the Company. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results could differ materially from those set out in the forward-looking statements. For a detailed analysis of the factors that may affect our business, financial performance or results of operations, we urge you to look at the principal risks and uncertainties included in the Strategic Report Section the Annual Report and Financial Statements.

No part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in Polar Capital Global Healthcare Trust plc or any other entity, and must not be relied upon in any way in connection with an investment decision. The Company undertakes no obligation to update any forward-looking statements.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the company's website (or any other website) is incorporated into, or forms part of, this announcement.

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