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Polar Capital Global Healthcare Trust plc
Report and Financial Statements for the year ended 30 September 2020
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Polar Capital Global Healthcare Trust plc • Annual Report and Accounts 2020
Annual Report and Accounts 2020 • Polar Capital Global Healthcare Trust plc
Polar Capital Global Healthcare Trust plc • Annual Report and Accounts 2020
D
D
Strategic ReportStrategic Report
Investment Objective
Our 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.
See more at: polarcapitalhealthcaretrust.co.uk
Contents
Strategic Report
Your Company at a Glance
Highlights
Performance
Chair’s Statement
Board of Directors
Management Team
Investment Manager’s Report
Ten Largest Investments
Full Investment Portfolio
Strategic Report
Section 172 Statement
Corporate Governance
Report of the Directors
Report on Corporate Governance
Directors’ Remuneration Report
Audit Committee Report
Statement of Directors’ Responsibilities
Independent Auditors’ Report
Financial Statements and Notes
Statement of Comprehensive Income
Statement of Changes in Equity
Balance Sheets
Cash Flow Statement
Notes to the consolidated Financial Statements
Shareholder Information
Alternative Performance Measures (APMs)
Glossary of Terms
Investing
Warnings to Shareholders
Additional Information
Contact Information
1
2
3
4
6
8
11
23
24
25
34
38
41
49
54
60
61
72
73
74
75
76
98
100
102
103
105
107
Polar Capital Global Healthcare Trust plc
Meet the Manager & Board
In light of current restrictions in connection with COVID-19
the Annual General Meeting of the Company to be held on
26 January 2021 will be a closed meeting.
In order to give you the opportunity to engage with the
Management team and the Board you are invited to join
us for an informal Q&A session.
Questions can be submitted directly during the session
or in advance by email.
To register or to submit a question, please email your details
to marketing@polarcapital.co.uk with the subject line
‘PCGH Meet the Manager & Board’.
This document is printed on Galerie Satin,
a paper sourced from well managed,
responsible, FSC® certified forests and
other controlled sources. The pulp used in
this product is bleached using an elemental
chlorine free (ECF) process.
The session will be held via Zoom on 14 January 2021 at 2:00pm
Designed and printed by Perivan 259667
Your Company at a glance
Strategic Report
Who we are
The Group comprises the Company, Polar Capital Global Healthcare Trust Plc and
the subsidiary, PCGH ZDP Plc. The Group was formed on 30 March 2017 as part
of a reconstruction of the Company which included the change of the name on
20 June 2017 from Polar Capital Global Healthcare Growth and Income Trust plc.
The Company was originally launched on 15 June 2010.
Management
The Company is an investment trust led by an experienced
Board of independent non-executive Directors with a variety
of expertise in investment and healthcare matters and with
experience in the regulatory and legal framework within
which the Group operates. The role of the Board is to provide
oversight of the Company’s activities and to seek to ensure
that the appropriate controls are in place to manage the
fi nancial, risk and investment structure to enable delivery of
the Investment Objective.
The Investment Manager is Polar Capital LLP (“Polar Capital”)
and, with effect from 1 August 2019, the appointed Co-
Managers are Dr James Douglas and Mr Gareth Powell
supported by the wider Polar Capital Healthcare Team. Polar
Capital LLP is also the Alternative Investment Fund Manager for
the purposes of AIFM Regulations.
Life
In the absence of any prior alternative proposals, the articles
of association of the Company require the Directors to put
forward at the fi rst Annual General Meeting to be held
after 1 March 2025 a resolution to place the Company into
voluntary liquidation.
Benchmark
The benchmark since launch has been the MSCI ACWI Health
Care Index (total return in sterling with dividends reinvested).
Capital structure
At 30 September 2020 the Company had in issue
124,149,256 Ordinary shares of 25 pence each of which
2,879,256 were held in treasury (2019:124,149,256 Ordinary
shares of which 2,379,256 were held in treasury). During the
year ended 30 September 2020 the Company bought back
500,000 Ordinary shares into treasury and no shares were
issued out of treasury.
Dividend policy
Following the Company’s reconstruction, the adopted
dividend policy is that the Company aims for dividends to be
paid biannually in February and August. The policy results in
lower dividends being paid than historically to recognise the
focus on capital growth.
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.
The Company will not normally hedge currency exposure but
may do so exceptionally for the purposes of effi cient portfolio
management or when it is otherwise perceived to be in
shareholders’ interests.
Fees
With effect from 1 October 2020, the Investment Manager is
entitled to a management fee at the rate of 0.75% (previously
0.85%) per annum of the lower of the Group market
capitalisation and the Company’s adjusted net asset value . 80%
of the management fee is charged to the capital account and
20% is charged to income.
The Investment Manager is also entitled to a performance
fee paid in cash. The fee is equal to 10% of the excess total
return over the total return of the benchmark Index plus
1.5% per annum compounded annually. Any performance
fee shall accrue but shall only become payable at the end of
the Company’s life or earlier termination of the management
agreement. No performance fee has been accrued or is due
to be paid for the year ended 30 September 2020 (2019: nil).
Further details are included in the Strategic Report.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
1
Strategic Report
Highlights
Financial Highlights
Net Asset Value per Ordinary Share (Total Return)*
Net Asset Value per Ordinary Share
2020
2019
-1.24%
Benchmark Index
2020
2019
3.14%
14.14%
2020
2019
268.11p
236.88p
Price Per Ordinary Share
15.95%
2020
2019
233.00p
218.00p
Total Net Assets (Group and Company)
Share Price Total Return*
2020
2019
£325.1m
£288.4m
2020
2019
-1.35%
Highlights in detail for the year to 30 September 2020
Performance
Net asset value per Ordinary share (total return)*
Benchmark Index (MSCI ACWI Health Care Index (total return in sterling with dividends reinvested))
Since restructuring
Net asset value per Ordinary share (total return) since restructuring *~
Benchmark index total return since restructuring
Expenses
Ongoing charges*
2020
1.01%
Financials
Total net assets (Group and Company)
Net asset value per Ordinary share
Net asset value per ZDP share^
Price per Ordinary share
Discount per Ordinary share*
Price per ZDP share^
Net gearing*
Ordinary shares in issue (excluding those held in treasury)
Ordinary shares held in treasury
ZDP shares in issue^
Dividends
As at
30 September 2020
£325,133,000
268.11p
110.20p
233.00p
13.1%
107.50p
5.28%
121,270,000
2,879,256
32,128,437
As at
30 September 2019
£288,447,000
236.88p
106.99p
218.00p
8.0%
108.50p
7.21%
121,770,000
2,379,256
32,128,437
7.81%
14.14%
15.95%
27.48%
35.30%
2019
1.01%
Change
+12.7%
+13.2%
+3.0%
+6.9%
-
-0.9%
-
-0.4%
+21.0%
-
The Company has paid or declared the following dividends relating to the fi nancial year ended 30 September 2020:
Pay date
First interim: 28 August 2020
Second interim: 26 February 2021
Total (2019: 2.10p)
Amount per
Ordinary share
1.00p
1.00p
2.00p
Record Date
7 August 2020
5 February 2021
Ex-Date
6 August 2020
Declared Date
22 July 2020
4 February 2021 1 5 December 2020
* See Alternative Performance Measures on pages 98 and 99.
~ The Company’s portfolio was restructured on 20 June 2017. The total return NAV performance since restructuring is calculated by reinvesting the dividends in the assets of the Company
from the relevant payment date.
^ For information purposes.
2
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Performance
Performance since launch (15 June 2010)
Strategic Report
Company reconstruction 20 June 2017
500
400
300
200
100
0
Jun
2010
Sep
2010
Mar
2011
Sep
2011
Mar
2012
Sep
2012
Mar
2013
Sep
2013
Mar
2014
Sep
2014
Mar
2015
Sep
2015
Mar
2016
Sep
2016
Mar
2017
Sep
2017
Mar
2018
Sep
2018
Mar
2019
Sep
2019
Mar
2020
Sep
2020
MSCI ACWI Health Care Index in sterling with dividends reinvested (TR)
Ordinary Share Price (TR)
NAV per share (TR)
(TR: Total Return, rebased to 100 at launch on 15 June 2010)
Performance since reconstruction (20 June 2017)
150
120
90
60
Jun
2017
Sep
2017
Mar
2018
Sep
2018
Mar
2019
Sep
2019
Mar
2020
Sep
2020
Mar
2021
Sep
2021
Mar
2022
Sep
2022
Mar
2023
Sep
2023
Mar
2024
Sep
2024
Mar
2025
MSCI ACWI Health Care Index in sterling with dividends reinvested (TR)
Ordinary Share Price (TR)
NAV per share (TR)
(TR: Total Return, rebased to 100 at reconstruction on 20 June 2017)
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
3
Strategic Report
Chair ’s
Statement
Lisa Arnold
Chair
Dear Shareholders
On behalf of the Board I am pleased to provide to you the Company’s Annual
Report for the year ended 30 September 2020.
I wrote my fi rst statement to you as Chair of the Company
within the half-year report in May 2020, during a time of
national lock-down in connection with the government
restrictions in place due to the COVID-19 pandemic. At that time
there was much talk of easing the restrictions, but also fear of
a second wave in the autumn. I am writing to you again during
a period of widespread government restrictions, but also with
cautious optimism for 2021, as vaccines begin to be approved
across the globe . 2020 has been a year unlike any other in my
lifetime, and your Board and I hope that you and your families
continue to remain safe and well.
Performance
Performance of the portfolio has also been diffi cult over the
fi nancial year; the fi rst six months saw some steady performance
but this was dwarfed by the market crash in March, at the
height of the fi rst wave of the COVID-19 pandemic and the
start of more widespread national lock-downs. In particular, our
overweight exposure in healthcare equipment was the main
negative as we entered the crisis. Elective procedures were
effectively stopped overnight, to prioritise care for COVID-19
patients, with little visibility over when they would recommence,
let alone when they would reach pre-pandemic levels.
As with any market defi ning crisis, it was important for the
Managers to carry out a thorough re-evaluation of the portfolio,
not only to assess the impact of the crisis on their holdings, but
also to consider new and evolving opportunities. Despite a much
stronger second half, the falls experienced in March proved
diffi cult to pull back completely by the year end. Whilst showing
strong absolute returns, we have fi nished the year slightly behind
the benchmark. Full detail is given within the Managers’ Report
on pages 11 to 22.
Outlook
The Board have continued to monitor performance and have
met virtually with the Managers several times to discuss the
strategy and approach, both directly within the portfolio, but
more generally to the sector. Whilst 2020 was a challenging
year, we continue to be confi dent that healthcare remains a
sector offering superior growth opportunities. We believe these
opportunities will persist, driven by demographics, innovation,
and the need for greater effi ciency in the delivery of healthcare.
COVID-19 has caused challenges, but it has also provided some
positives for healthcare, not only highlighting the need for
effi ciency, but also for innovation, particularly where it is driven
by technological change. These are explained in more detail in
the Managers’ report.
Healthcare is a sector that has always been subject to high
levels of news fl ow, often resulting in sharp movements
at a stock level, causing valuations to become adrift from
fundamentals. During 20 20 COVID-19 and uncertainty over
the outcome of the US Presidential election, ha ve increased this
volatility, some of which is likely to persist in the months ahead.
We believe that having a specialist healthcare strategy, with a
fund management team which has wide experience across the
healthcare universe, is the right approach to identifying those
companies that will benefi t from long term trends and applying
rigour in the assessment of how news or events will impact on
individual company valuations.
To conclude, the Board believes investing in healthcare is
an exciting growth opportunity, and that view has been
strengthened by developments during 2020. The valuation
of the S&P healthcare sector relative to the overall market
looks very attractive, particularly now that the extreme
outcomes of the US election have been removed. The
Company offers a well diversifi ed approach to gain access to
growth and solid innovation ideas, without the need to take
risk in less developed areas, or on single product outcomes.
Fees
On 14 October 2020, the Board announced that following
discussions with Polar Capital in connection with the relative
under-performance of the Company, we agreed a reduction
in the management fee charged for managing the assets. The
management fee was reduced with effect from 1 October 2020
to 0.75% per annum (previously 0.85% per annum) based
on the lower of the market capitalisation and the adjusted net
4
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Strategic Report
asset value. All other terms within the Investment Management
Agreement remain the same.
in a more ad hoc manner with private director-only meetings
and also in one-to-one meetings.
Dividends
The Company’s focus remains on capital growth, and
consequently dividends are expected to represent a relatively small
part of Shareholders’ total return.
In August 2020 the Company paid an interim dividend of
1.00p per ordinary share. At that time the Board notifi ed
shareholders that, having considered the level of revenue
reserves available, it intended to continue paying dividends,
but at a reduced rate, utilising the revenue reserves available.
The Board has declared a further interim dividend of 1.00p per
ordinary share payable to shareholders on the register as at
5 February 2021. This will bring the total dividend paid for the
fi nancial year under review to 2.00p per ordinary share, a small
reduction to the previous fi nancial year .
Share Capital
The persistent and relatively high level of share price discount
continues to be a frustration and we as a Board proactively
monitor the situation with the Brokers and Managers,
considering any feedback received from Shareholders, market
news, liquidity and fl ow, size and life of the Company. We do,
and continue to, buy back shares on a selective basis when we
consider it is in the interests of Shareholders to do so. During the
year, the Company bought back 500,000 ordinary shares at a
price of 207.00p per ordinary share. These shares were placed
into the treasury account taking the balance held in treasury
to 2,879,256 ordinary shares. The Company has 121,270,000
ordinary shares in issue (excluding those held in treasury) as at
the date of writing.
The Company’s share price on 30 September 2020 was 233.00p
(2019: 218.00p). The Company’s market capitalisation at
the fi nancial year end was £282.6m (2019: £265.5m). The
Company’s share price traded at a discount throughout the year,
ending the year at a discount of 13.1% compared to 8.0% at
the start of the year.
Environmental, Social and Governance
The requirement to report on Environmental, Social and
Governance (ESG) matters is ever increasing. We have been
discussing ESG, and how it impacts the investment process
and outcomes, with the Managers and with the wider
Polar Capital team in relation to the Polar Capital policy
and approach across the entire business. We recognise the
importance of ESG but note that this is only one factor in the
investment process and should not be the sole consideration
when reviewing investments or actions. ESG is discussed
further in the Managers’ Report.
Board
I am very pleased to confi rm that the fully refreshed Board
has settled into a rhythm, despite having only managed to
meet in person as a full Board twice before we entered the
lockdown period. Since March we have successfully utilised
video conferencing facilities and have met many times both
as a full Board, with additional guests as required, but also
We appreciate the efforts made by all of the service providers
to the Company during the lockdown period, and are pleased
to confi rm that no service breaks or matters of concern
have arisen in the year either due to the remote working
environment or for any other reason.
Companies Act 2006, S172 – Directors’ Duties
Directors have a duty to promote the success of the Company
for the benefi t of its members . Our section 172 statement
is contained on pages 3 4 to 3 6. This details various actions
taken and considerations made during the year.
Annual General Meeting
The Company’s tenth Annual General Meeting (AGM) will
be held at 2 pm on Tuesday, 26 January 2021. It is diffi cult
to know where we will be in relation to COVID-19 in January
however, the health and welfare of our shareholders, advisers
and wider stakeholders is our primary concern. We have
therefore followed the current government guidelines in
relation to gatherings of individuals from multiple households.
This means that the AGM this year will a ‘closed meeting’
with only a quorum present . The quorum will be represented
by board member and adviser shareholders; all resolutions
will be voted on by a poll and we would therefore encourage
you to submit your votes by proxy in accordance with the
instructions included with the Notice of AGM.
We acknowledge that a closed meeting does not represent an
opportunity for shareholders to engage with either the Board
or the Managers and for this reason we are offering a ‘Meet
the Manager & Board’ session by webinar. At this session you
will have the opportunity to hear a brief introduction from the
Managers and myself and there will be an opportunity to ask
questions . We will also be happy to receive questions ahead
of the session by email to marketing@polarcapital.co.uk,
with the subject line PCGH Meet the Manager & Board. The
Webinar will be held at 2 pm on Thursday, 14 January 2021, full
details are provided at the front of this Annual Report and on the
Company’s website: www.polarcapitalglobalhealthcare.co.uk.
I look forward to welcoming you to the Meet the Manager
& Board session at which we will very much value your
questions and feedback.
Lisa Arnold
Chair
14 December 2020
Join us to
MEET THE
MANAGER
& BOARD
on
14 January
2021
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
5
Strategic Report
Board of Directors
Lisa Arnold Independent Non-Executive Chair
Appointed to the Board on 1 February 2018 and as Chair of the Board with effect from 26 February 2020,
a member of the Audit and Management Engagement Committees.
Skills and experience
Lisa was formerly a global pharmaceuticals and healthcare analyst for Natwest Markets from 1987 and continued her healthcare
career in roles with UBS Warburg, Commerzbank and Lehman Brothers. Lisa has held a number of independent adviser and
non-executive roles including nine years with the Medicines and Healthcare Products Regulatory Agency (MHRA) and eight years
as a non-executive Director of Futura Medical plc.
Other appointments
Lisa holds a number of pension trustee directorships and is the chair of the Allied Domecq Pension Fund. She is also a non-
executive Director and chair of the audit committee of PIMCO Europe Limited and chairs the investment committee of the
Sainsbury’s Pension Fund.
PCGH Share Interests
20,000 (0.02% of ISC)
Rationale for supporting re-election
Annual Remuneration
£ 39,000
In her earlier career, Lisa was a global pharmaceuticals and healthcare analyst and on joining in February 2018, Lisa brought
a wealth of investment and strategic experience to the Board. Lisa’s detailed and effective leadership skills made her the ideal
candidate to succeed James Robinson on his retirement as Chairman in February 2020. Since assuming the role of the Chair, Lisa
has actively sought to engage with shareholders to understand any concerns. Prior to the COVID-19 restrictions she met with some
of the larger shareholders and has continued dialogue with them where appropriate. Since the COVID-19 restrictions have been
in force, Lisa has actively participated in video conferences between the Managers and shareholders and has rallied the Board and
Managers to meet multiple times outside of formal Board meetings to ensure communication was effective and current.
Neal Ransome Independent Non-Executive Director and Audit Committee Chairman
Appointed to the Board on 13 December 2017 and, with effect from 28 February 2018, as Chairman of
the Audit and Management Engagement Committees.
Skills and experience
Neal is a chartered accountant with an MA in Modern History from Oxford University. Neal was a partner at PwC from 1996
to 2013. He led PwC’s Pharmaceutical and Healthcare M&A practice for 17 years and was also chief operating offi cer of PwC’s
Advisory Services business.
Other appointments
Neal is currently chairman of ProVen VCT plc and a non-executive Director and chairman of the audit committee of Octopus AIM
VCT Plc.
PCGH Share Interests
10,073 (0.01% of ISC)
Rationale for supporting re-election
Annual Remuneration
£3 3,500 (including Audit Committee Chairman supplement)
Neal has recent and relevant fi nancial expertise with a strong accounting background which enables him to perform in-depth
analyses of the Company’s performance and fi nancial statements. In addition to his fi nancial expertise, Neal has a wealth of
experience in evaluating pharmaceutical and healthcare companies having previously led PwC’s Pharmaceutical and Healthcare M & A
practice. Neal is Chairman of the Company’s Audit Committee, a role in which he has had extensive experience on other boards.
6
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Strategic Report
Andrew Fleming Independent Non- Executive Director
Appointed to the Board on 1 December 2019, also a member of the Audit and Management Engagement
Committees.
Skills and experience
Andrew 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. Andrew 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.
Other appointments
Andrew is a trustee of the Rank Foundation and chairs its Investment Committee.
PCGH Share Interests
10,000 (0.01% of ISC)
Rationale for supporting re-election
Annual Remuneration
£ 28,000
On appointment to the Board in December 2019, Andrew brought a wealth of investment and management experience
having previously held the position of Head of Equities at Gartmore Investment Management and has held positions as a CEO
and global CIO. Andrew has been a keen participant in meetings since joining the Board and has shown a clear alternative
perspective to understanding processes and delivering shareholder communications.
Jeremy Whitley Independent Non- Executive Director
Appointed to the Board on 1 December 2019, also a member of the Audit and Management Engagement
Committees.
Skills and experience
Jeremy was formerly Head of UK and European Equities at Aberdeen Asset Management, a position he held from 2009 to 2017.
Previous roles there included being a s enior i nvestment m anager on the Global equities team as well as the Asian equities team,
based in Singapore, where he was lead manager of the Edinburgh Dragon Trust. He began his investment career at SG Warburg
& Co in 1988.
Other appointments
Jeremy is currently a non-executive Director and chairman of the audit committee of The Scottish Oriental Smaller Companies
Trust plc and a non-executive Director of JP Morgan Indian Investment Trust plc.
PCGH Share Interests
20,000 (0.02% of ISC)
Rationale for supporting re-election
Annual Remuneration
£ 28,000
Jeremy also joined the Board in December 2019. Jeremy previously held positions as Head of Equities for UK and Europe and
was Senior Investment Manager for Global and Asian Equities based in Singapore. Jeremy’s experience has brought a global
perspective to the review of the portfolio and he has been a strong advocate for clear performance attribution analysis. Jeremy
also brings to the Board experience of other investment trust management.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
7
Strategic Report
Management Team
James Douglas, Ph D – Co-Manager
James joined Polar Capital in September 2015 as a senior analyst for the healthcare team. He has
21 years of industry experience and has been an integral part of the management team for the
Company since restructure.
Skills and experience
Prior to joining Polar Capital, he was in equity sales specialising in global healthcare at Morgan Stanley,
RBS and HSBC. James also has equity research experience garnered from his time at UBS, where he
worked as an analyst in the European pharmaceutical and biotechnology team. Before moving across
to the fi nancial sector, he worked as a consultant for Evaluate Pharma. James received both his PhD
and his fi rst class honours degree in Medicinal Chemistry from Newcastle University and holds an
ACCA diploma in Financial Management (DipFM).
COVID-19 has been a
catalyst for positive change
in the healthcare industry,
accelerating the adoption of
products and technologies
that yield effi ciencies and
improve access to care.
Gareth Powell, CFA – Co-Manager
Gareth joined Polar Capital to set up the healthcare team in 2007, he has over 22 years’ investment
experience in the healthcare sector with 16 years as a Portfolio Manager.
Skills and experience
Prior to joining Polar Capital Gareth worked at Framlington, where he began his career in investment
management in 1999; soon afterwards he joined the healthcare team in 2001 and helped launch the
Framlington Biotech Fund, which he managed from 2004 until his departure.
Gareth studied Biochemistry at Oxford and is a CFA charterholder.
The efforts of healthcare
companies in the fi ght against
COVID-19, whether it be those
focused on diagnostic tests
or vaccine development, ha ve
highlighted the importance of
this industry to society at large.
Daniel Mahony, PhD
Daniel joined Polar Capital to set up the healthcare team in 2007. He has 29 years of industry experience,
comprising more than 22 years’ investment experience in the healthcare sector.
Skills and experience
Prior to joining Polar Capital, he was head of the European healthcare research team at Morgan
Stanley. He also previously worked for ING Barings Furman Selz in New York following the US
biotechnology sector. Before working in the investment fi eld, Daniel worked as a research scientist
for seven years with the majority of his time at Schering Plough Corporation in California.
Daniel received his PhD from Cambridge University in 1995 and a fi rst class honours degree in
Biochemistry from Oxford University in 1991.
David Pinniger, CFA
David joined Polar Capital’s healthcare team in August 2013 and is the Lead Manager of the Polar
Capital Biotechnology Fund. He has over 20 years’ investment experience in the healthcare sector.
Skills and experience
Prior to joining Polar Capital, David spent fi ve years as a Portfolio Manager of the International
Biotechnology Trust at SV Life Sciences. He also previously spent three years working at venture
capital fi rm Abingworth as an analyst managing biotechnology investments held across the fi rm’s
venture and specialist funds, and four years at Morgan Stanley as an analyst covering the European
pharmaceuticals and biotechnology sector. David received a fi rst class honours degree in Human
Sciences from Oxford University in 1999 and is a CFA charterholder.
8
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Strategic Report
Deane Donnigan, PHARM D
Deane joined Polar Capital in June 2013 as a senior analyst for the healthcare team. She has 35 years’
industry experience of which over 20 are in healthcare asset management.
Skills and experience
She trained as a clinical pharmacist having graduated with a post baccalaureate Doctor of Pharmacy,
from the University of Georgia. In 1990, she accepted a position with Emory University Hospital in
Atlanta, Georgia as a clinical specialist in Drug Information and Adult Internal Medicine. In 1997,
Deane left the US to begin her career in fund management at Framlington in the UK. Having started
as an analyst, she spent 14 years at Framlington, eventually becoming Lead Portfolio Manager on both
the Framlington Healthcare and Biotechnology funds.
Damiano Soardo, CFA
Damiano joined the healthcare team in October 2020 as an Investment Analyst. Damiano is responsible
for supporting the fund managers by performing analysis of business models, industry trends and
fi nancials. Previously, Damiano worked in the Operations department when he joined Polar Capital in
February 2016 and subsequently moved to the Risk team in January 2019.
Skills and experience
Prior to joining Polar Capital, he worked as a technical consultant at a FinTech company. Damiano
has an MSc in Mathematics and Foundations of Computer Science from the University of Oxford and
is a CFA charterholder.
Audrey Stynes
Audrey joined the healthcare team in April 2019 as the team assistant. Aside from organising the
team’s administration and communication workload both internally and externally, she coordinates
presentations and marketing material in addition to generating bespoke reports that inform daily fund
management activities for the team at large. Previously, Audrey worked in the Product and Operations
department when she joined Polar Capital in March 2018.
Skills and experience
Audrey graduated with a BA (1st Class Hons) in Early Childhood Education from the Dublin Institute of
Technology and a MA in Early Childhood Education and Care from the Dublin Institute of Technology,
Oslo University College, University of Malta and the University of Gothenburg.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
9
Strategic Report
Expert
Knowledge
Track record and an
experienced team
10
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Strategic Report
Investment Manager’s
Report
Gareth Powell
Co-Manager
Dr James Douglas
Co-Manager
The objective of Polar Capital Global Healthcare Trust plc is to generate long-term
capital appreciation by investing in a globally diversifi ed portfolio of healthcare
companies, to include, but not limited to, pharmaceutical, biotechnology, medical
device and healthcare services companies.
The Company’s diversifi cation strategy, coupled with its
focus on large-capitalisation healthcare companies with
resilient, medium-term growth profi les, helps drive the
relatively lower risk-profi le of the underlying assets, relative
to the more volatile areas of healthcare. Further, the broad
investment remit affords the opportunity to invest in growth
areas regardless of the economic, political and regulatory
environment. Importantly, the Company also has the
opportunity to invest in earlier-stage, more innovative and
disruptive companies, companies that tend to be lower down
the market capitalisation and liquidity scale. This is a key
advantage of a closed-end company like an investment trust.
Regardless of size, sub-sector or geography, stock selection is
central to the process, looking to identify companies where
there is a disconnect between valuations and the near and
medium-term growth drivers.
In terms of structure, the majority of the Company’s assets
(calculated on a gross basis and referred to as the growth
portfolio) will be invested in companies with a market
capitalisation >$5bn at the time of investment, with the
balance invested in companies with a market capitalisation
<$5bn (a maximum of 20% of gross assets and referred to as
the innovation portfolio). At the end of the reporting period,
29 investments were in the growth portfolio, comprising
some 9 4.0% of net assets, and 14 investments were in
the innovation portfolio, comprising 11.3% of net assets.
Structural debt, in the form of Zero Dividend Preference Shares,
offers access to additional liquidity and the opportunity to
enhance returns.
Market Cap
Market Cap at
Large (>US$5bn)
Medium (US$1bn - US$5bn)
Small ($3bn from >$1bn
previously. Medley has been a signifi cant, positive contributor
and has been held since the company’s IPO in December 2019.
Medley runs one of Japan’s largest human resource recruitment
systems in the medical and healthcare fi eld but, perhaps more
interesting, is the medical platform business which houses
the largest telemedicine system in Japan known as CLINICS
Telemedicine. Very much in its infancy, and accelerated by
COVID-19, it is our view that the demand for telemedicine
services in Japan will continue to grow substantially. Life
sciences tools and services company, Bio-Rad Laboratories,
has continued to execute operationally, driven by top-line
momentum in the Life Science segment and steady operating
margin progress. The stock also benefi ted from exposure to
COVID-19 testing and from its 34.3% stake in German life
sciences tools and services company, Sartorius, which has
performed strongly in 2020. Sartorius’ success has stemmed
from exposure to the bio-processing market which not only has
strong, underlying fundamentals but has also received a short-
term boost from demand for COVID-19 related projects.
Align Technology’s strong performance can be attributed to
a better-than-expected post COVID-19 recovery as dental
practices re-opened, with demand for the company’s clear
aligners revitalised. Looking further forward, Align’s digital
approach to dental treatment could be a catalyst for market
share gains, offering customers the advantage of fewer in-
practice visits with their dentist. This is something that has
appeal in a COVID-19 world and should be sustainable once
COVID-19 related restrictions ease. Belgian biotechnology
company ArgenX also had a good year, with the biggest
infl ection coming after the company disclosed positive data
for its lead pipeline asset, efgartigimod. Being investigated
for the treatment of generalised Myasthenia Gravis (a
chronic and debilitating autoimmune disease that causes
severe muscle weakness), the product showed statistical
signifi cance with the primary endpoint and delivered fast and
deep responses. We expect the company to submit its BLA
(Biologics License Application) to the FDA in H2’20 followed
by a Japanese fi ling in early 2021.
14
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Strategic Report
Bottom 10 Relative Contributors (%)
Bottom 10
Quotient
UnitedHealth
Intuitive Surgical
Bristol Myers Squibb
Smith & Nephew
HCA Healthcare
PRA Health Sciences
Becton Dickinson
eHealth
Lundbeck
Average
Stock
Weight
Active
Weight
Stock
Return
Stock
Return
vs BM
Total
Attri-
bution
1.73
2.02
1.41
2.87
0.89
2.85
1.22
3.50
0.43
1.49
1.73
-37.03
-52.98
-2.51
36.56
20.61
0.28
0.63
25.09
13.17
9.14
-2.77
0.58
-22.59
-38.54
2.28
1.22
-1.44
-17.39
-2.69
-18.64
2.34
-12.44
-28.39
0.43
1.45
12.59
-3.36
-5.31
-21.26
-1.05
-0.99
-0.91
-0.83
-0.75
-0.70
-0.69
-0.68
-0.63
-0.61
the cancellation of elective or non-urgent procedures, freeing
up much-needed hospital capacity to care for COVID-19
patients. These cancellations impacted the medical device
companies, with demand for their products and services
materially impacted. Smith & Nephew manufactures hips and
knees and was therefore directly exposed. Intuitive Surgical,
a leading protagonist in the fi eld of robotic surgery, was
similarly affected by the downturn in patient volumes. Intuitive
Surgical’s challenges were further compounded as the market
started to question the strength of hospitals’ balance sheets
and hence their appetite to purchase capital equipment such
as Intuitive’s surgical robots. The portfolio was also under-
weight in Bristol Myers Squibb during the fi rst half of the
2020 fi nancial year, at a time when the company delivered a
steady stream of positive newsfl ow, primarily from its oncology
division, that positively re-rated the stock.
Source: Polar Capital, as at 30 September 2020. Past performance is not indicative or a
guarantee of future results.
Compelling opportunities lie-ahead
Negative contributors to performance for the fi nancial
year 2020 included Quotient, UnitedHealth Group, Intuitive
Surgical, Bristol Myers Squibb and Smith & Nephew. Before
the COVID-19 crisis the Quotient management team had
consistently delivered on stated timelines and objectives, but
two factors have adversely impacted performance in the last
12 months. Firstly, there have been fi nancing overhangs which
have been resolved for the time being. Secondly, COVID-19
related shutdowns delayed fi eld trials for the company’s
MosaiQ IH microarray, delays that have now been rectifi ed
as sites have re-opened and trials re-started. The Company’s
under-weight position in UnitedHealth Group detracted
from performance following the stock’s strong recovery
during the fi rst fi nancial quarter of the reporting period. The
managed healthcare sector was volatile during calendar 2019,
with the sector’s fortunes very much tied to the campaign
momentum of the more progressive Democratic nominees,
namely Elizabeth Warren and Bernie Sanders. As a reminder,
that positive campaign momentum compressed the valuation
multiples of the managed healthcare sector as it raised the
spectre of Medicare-For-All, a Government funded and run
insurance programm e that would potentially disintermediate
the healthcare insurance industry. Once the more moderate
Joe Biden started to gain momentum, that valuation pressure
eased and the sector started to recover.
Medical device companies Intuitive Surgical and Smith &
Nephew also detracted from performance during the reporting
period, with both stocks suffering quite markedly during
the March sell-off. One of the big challenges the healthcare
industry faced during the fi rst wave of the COVID-19 crisis was
There are a number of key themes and opportunities in
healthcare that are exciting and that we believe offer the
potential for signifi cant returns in the years ahead. In brief, the
major investment themes, which we discuss further below, are:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
Employing technology to disrupt healthcare delivery
and shift utilisation to lower cost settings; This will be
by far the most important structural shift in healthcare for
the next 10-20 years and the enablers of this shift should
enjoy signifi cant growth
Product and service innovation; Long-term product
or service development success dependent on ability to
lower healthcare costs
Consolidation on the rise again; Leaders that can
acquire high quality assets in fragmented markets at
attractive valuations can enjoy signifi cant outperformance
Growth in emerging market healthcare demand; Due
to move signifi cantly higher over the next 15-20 years –
investing in the long-term structural growth stories should
deliver handsome returns
Outsourcing; Not a new theme but growth is robust
across clinical trial outsourcing, manufacturing and early
stage research
Prevention; References diagnostics and vaccines, both
of which provide tremendous value to healthcare systems
as prevention is the most cost-effective way of delivering
care. The impact of COVID-19 has highlighted the value
of diagnostics and vaccines.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
15
Strategic Report
Investment Manager’s Report continued
Healthcare delivery disruption: Shifting utilisation to lower cost settings
(cid:8)(cid:14)(cid:19)(cid:21)(cid:25)(cid:14)(cid:1)
(cid:19)(cid:21)(cid:20)(cid:17)(cid:25)(cid:21)(cid:23)(cid:17)(cid:20)(cid:15)
(cid:6)(cid:21)(cid:19)(cid:14)(cid:1)(cid:16)(cid:14)(cid:11)(cid:18)(cid:25)(cid:16)(cid:1)
(cid:23)(cid:14)(cid:12)(cid:21)(cid:27)(cid:14)(cid:23)(cid:28)
(cid:7)(cid:20)(cid:3)(cid:18)(cid:17)(cid:20)(cid:14)(cid:1)
(cid:22)(cid:16)(cid:11)(cid:23)(cid:19)(cid:11)(cid:12)(cid:28)
(cid:4)(cid:9)(cid:5)(cid:2)(cid:1)(cid:27)(cid:24)(cid:1)
(cid:17)(cid:20)(cid:3)(cid:22)(cid:11)(cid:25)(cid:17)(cid:14)(cid:20)(cid:25)
(cid:10)(cid:23)(cid:11)(cid:13)(cid:17)(cid:25)(cid:17)(cid:21)(cid:20)(cid:11)(cid:18)(cid:1)
(cid:21)(cid:26)(cid:25)(cid:3)(cid:22)(cid:11)(cid:25)(cid:17)(cid:14)(cid:20)(cid:25)
(cid:10)(cid:14)(cid:18)(cid:14)(cid:16)(cid:14)(cid:11)(cid:18)(cid:25)(cid:16)
Source: Polar Capital.
*Ambulatory Service Centre
Healthcare systems globally are embracing new products
and technologies to drive effi ciencies without compromising
quality of care, and this mega-trend should yield compelling
investment opportunities that should generate attractive,
medium-term returns. Whilst one would never trivialise the
human suffering and practical implications of the COVID-19
crisis, it has been a real catalyst for positive change in the
healthcare industry. Telehealth and virtual interactions with
physicians and specialists are here to stay, as is the shift of
patient volumes from traditional in-patient hospital settings
to lower-cost out-patient facilities. All this at a time when
the biotechnology, pharmaceutical and medical device
industries are investing heavily in innovative medicines and
devices to target unmet medical needs. The structural growth
drivers for healthcare are reasonably well understood, i.e.
we are all getting older and we are all consuming more
and more healthcare products and services, it is the hidden
opportunities within structural change that are really exciting
and possibly under-appreciated.
The marriage between healthcare and technology has been
a consistent theme for Polar Capital’s healthcare team and
one that has signifi cantly accelerated during the COVID-19
crisis. The ability to virtually interact with physicians and
other healthcare professionals has proved to be invaluable .
US-based virtual care provider, Teladoc, for example, posted
a 92% increase in total visits in Q1’20. Importantly, whilst
volume growth eased over the course of April and May,
* Denotes a portfolio holding at the time of writing
utilisation stabilised in late May and throughout most of June
at a level of roughly 40% higher than prior to COVID-19.
Further, the US Department of Health & Human Services
(HHS) took steps to make it easier to access telehealth
services during the crisis, encouraging providers to adopt and
use the latest technologies. This was followed by the Centres
for Medicare & Medicaid Services (CMS) who have proposed
to permanently allow Medicare providers to use telehealth
to carry out home-visits. To quote Seema Verma, the CMS
administrator; “I think the genie’s out of the bottle on this
one,” “I think it’s fair to say that the advent of telehealth
has been just completely accelerated, that it’s taken this
crisis to push us to a new frontier, but there’s absolutely
no going back.” And it is not just the US that is embracing
telehealth services, with the Japanese company Medley*
the owner of the largest telemedicine system in the country
known as CLINICS Telemedicine. Very much in its infancy,
and accelerated by COVID-19, it is our view that the demand
for telemedicine services in Japan will continue to grow
substantially. COVID-19 is also expected to accelerate the
transition of care delivery out of hospital in-patient facilities to
alternative sites of care, such as Ambulatory Surgery Centres
(ASCs) or the home. Patients wanting to avoid hospitals due
to COVID-19 risks is short term, but it is the convenience
of shorter stays, and the cost advantages of ASCs, that will
drive a longer-term trend. Clearly not all procedures can be
performed in an ASC, but there could be an acceleration of
those that can. With reimbursement aligned, orthopaedics
16
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Strategic Report
is an area that could see an infl ection, especially now that
the use of robots can reduce the number of instrument trays
needed to perform the procedures. Ophthalmology is another
area that could see an acceleration, with the effi ciency of an
ASC appealing as the system attempts to clear its backlog.
The drive to generate effi ciencies and reduce costs should
also encourage more patient volume into the home, with the
industry bracing itself for a strong rebound in demand for its
services. AdaptHealth* appears to be especially well-positioned
as a leading provider of Home Medical Equipment (HME),
diabetes management products and medical supplies to the
home. Clearly home health can encompass a wide variety
of chronic illnesses but home dialysis is worth highlighting
following President Trump’s Executive Order (EO) the goals of
which include; 1) Reducing the number of Americans developing
end-stage renal disease by 25% by 2030; 2) Having 80% of new
end-stage renal disease patients in 2025 either receiving dialysis
at home or receiving a transplant; and 3) Doubling the number
of kidneys available for transplant by 2030. A clear positive for
patients, the EO has positive implications for medical device
providers such as Baxter International* and Fresenius Medical
Care*, and for dialysis providers themselves, such as DaVita and
Fresenius Medical Care*.
Another area of healthcare that could see a period of sustained
investment is diagnostics and high-throughput screening.
Companies within the diagnostics and life sciences tools and
services arena have been very quick to mobilise their resources
to develop and disseminate COVID-19 tests, not just for the
antigen, but also for the antibody. The sub-sectors that have
really driven this effort include a number of large capitalisation
life sciences tools and services and diagnostics companies such
as Abbott Laboratories, Thermo Fisher Scientifi c, PerkinElmer
and Hologic, as well as Quidel and Quotient* which are further
down the market capitalisation scale. One of the early bottle-
necks in some healthcare systems, however, was access to the
capital equipment and systems to perform the tests quickly
and at scale. Those jurisdictions that have invested in testing
infrastructure appeared to have a sizeable advantage over those
that have neglected to invest, including the UK. Looking further
out, once the infrastructure is in place, it is reasonable to surmise
that diagnostic testing rates will increase in many different areas
of medicine. Companies that could potentially benefi t from
signifi cant and sustained investment in infrastructure include
Roche Holdings* via its Diagnostics division, Becton Dickinson*
and European peers Biomerieux and Diasorin.
Politics and COVID-19 cannot be ignored
If one assumes that ballot recounts in Georgia fail to change the
course of the US election, then democrat Joe Biden will have
won the race, an outcome that prima facie sets a cautionary
tone for the healthcare industry. Importantly, however, the
balance of power in the Senate will be key to determining
* Denotes a portfolio holding at the time of writing
how far-reaching Biden’s healthcare reform can go. At the
time of writing, the Republicans hold 50 seats in the Senate,
the Democrats effectively hold 48 seats, with 2 seats yet to be
decided. Those 2 seats are in Georgia and are heading to run-off
elections to be held on the 5th January 2021. The outcome
of those run-offs will determine the make-up of the Senate, a
critical factor given it holds sway over judicial nominations and
legislative agenda. A 51:49 outcome favouring the Republicans
would make it very diffi cult for the Democratic party to pass
its more progressive healthcare policies, especially with senator
Mitch McConnell leading the Republicans in the Senate. Even if
the Senate gets split 50:50, with the President carrying the tie-
breaking vote, disruptive changes to law are unlikely given the
reliance on bi-partisan coordination and agreement.
Heading into the election Joe Biden’s focus was on building
on and investing in the current healthcare system, known as
the Affordable Care Act (ACA), and addressing the high cost
of prescription drugs. With regards the former, Joe Biden has
signalled he will consider a public insurance option and will
also consider lowering the eligibility age for Medicare from the
current 65 years of age. Investing in the ACA, and lowering the
eligibility age for Medicare, are both tailwinds for the insurance
industry given the positive volume implications. A public
insurance option, however, could present a challenge but only
if administered and under-written by the Federal government.
Head-line grabbing perhaps, but unlikely to present a material
challenge to the managed care industry.
With bi-partisan support, addressing the high out-of-pocket
costs for prescription drugs, especially for US seniors, is a
directive that will have traction . A divided Senate is unlikely to
support the more draconian policies such as direct negotiation
of drug prices by the Government, but we do believe that the
Administration will look at a number of plans including, but not
exhaustively; Using international pricing mechanisms to value
drugs ahead of US launch; Prohibiting drug manufacturers from
increasing prices above the general rate of infl ation; Allowing for
drug reimportation; Supporting the development of lower-cost
generics. Regardless of the potential changes, the message to the
bio-pharmaceutical industry is very clear – innovate and target
unmet medical needs because pricing pressure is here to stay.
On a more positive note, the fi rst Phase III COVID-19 vaccine
update was extremely encouraging. Early in November, Pfi zer
and BioNTech announced positive results from the fi rst interim
analysis of the Phase III study for their vaccine candidate,
BNT162b2. The vaccine was found to be >90% effective in
preventing COVID-19 in participants without evidence of prior
SARS-CoV-2 infection. Importantly, no serious adverse concerns
had been observed. A hugely uplifting update, and one that
should be widely applauded, it is important to check euphoria
by refl ecting on some of the yet unanswered questions. Whilst
there were no serious adverse events reported, we are yet to
fully understand the tolerability profi le of the vaccine (fever,
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
17
Strategic Report
Investment Manager’s Report continued
chills, nausea etc), nor do we know if the vaccine is effective
in the elderly or in high-risk groups. The vaccine’s ability to
prevent re-infection is also an unknown. When trying to
assess access and availability, capacity and distribution should
also be considered. A two-dose course, Pfi zer/BioNTech will
have approximately 50 million doses of BNT162b2 available
by the end of 2020, and up to 1.3 billion available in 2021.
It is also worth noting that the vaccine needs to be stored at
-70 degrees Celsius, so wide-spread distribution is not a trivial
matter and will require substantial investment. With multiple
COVID-19 vaccines in late-stage development, using a variety
of mechanisms and approaches, we fi rmly believe an optimistic
stance is the right one to adopt.
Positioning and process; Constructive on
biotechnology and life sciences tools and
services
As at 30 September 2020, the portfolio’s biggest relative over-
weight sub-sector was biotechnology, focusing on companies
that are developing and commercialising drugs that target high,
unmet medical needs. The constructive stance also refl ects
views on valuations, balance sheet strength and a supportive
regulatory backdrop. Lastly, and clearly impossible to predict
the timing and market participants, M&A is a theme that feels
especially relevant in the biotechnology sector as companies
look to bolster either their pipelines or fi nancial profi les or
both. We are increasingly positive on the life sciences tools
Geographical Exposure
and services sector given it is an area of the market that has
the benefi t of being insulated from political rhetoric, has fast-
growing end-markets such as bio-processing, and has potential
COVID-19 upside driven by the testing market and by supplying
consumables needed to manufacture COVID-19 therapeutics
and vaccines. Contract Research Organisations (CROs) are also
insulated from political pressure and have the added benefi t
of operating in an extremely well-funded environment, with
biotechnology fi nancing hitting record highs. For context, as at
the end of August 2020 biotechnology companies had raised
$100bn in 2020, a broad measure of the health of the industry
and the end-markets.
The portfolio continues to be under-weight pharmaceuticals,
refl ecting not just our concerns on drug pricing, but also the
lack of growth that the sub-sector offers versus other parts
of the healthcare ecosystem. To be clear, we do believe that
we can fi nd attractive stock specifi c opportunities within
pharmaceuticals, often driven by under-appreciated pipeline
assets or earnings upside from better-than-expected drug
launches. With regards to the managed healthcare sector, we
have a modest over-weight as we balance a constructive view
on industry fundamentals versus the near-term challenges of
a volatile US political environment as described previously. We
do not believe that the healthcare insurance industry will be
disintermediated, rather taking the view that the participants
will play a critical role in managing costs and driving
effi ciencies across the healthcare ecosystem.
Geographical Exposure at
30 September 2020
30 September 2019
2020
2019
United States
Denmark
Ireland
Netherlands
Germany
Switzerland
France
United Kingdom
Japan
Spain
Italy
Canada
Other net liabilities
Total
Source: Polar Capital, portfolio as at 30 September 2020.
18
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
68.0%
6.5%
5.5%
5.3%
5.2%
4.8%
3.9%
3.7%
2.4%
-
-
-
(5.3%)
100.0%
75.0%
8.5%
-
3.6%
-
2.5%
5.8%
5.4%
1.5%
3.3%
1.1%
0.4%
(7.1%)
100.0%
Strategic Report
Sector Exposure at
30 September 2020
30 September 2019
Sector Exposure
2020
2019
Pharmaceuticals
Biotechnology
Healthcare Equipment
Life Sciences Tools & Services
Managed Healthcare
Healthcare Distributors
Healthcare Supplies
Healthcare Technology
Healthcare Services
Healthcare Facilities
Other net liabilities
Total
Source: Polar Capital, portfolio as at 30 September 2020.
Whilst the above does focus on sub-sector weightings,
bottom-up stock selection is central to the team’s investment
process, adopting an agnostic approach to sub-sector and
geographic allocation. The healthcare industry is extremely
complicated and dynamic, and subject to varied newsfl ow,
often hyped, which lends itself to active management. We
look to take advantage of dislocations between near-term
valuations and medium-term returns. Our own in-house
idea generation is complemented with input from external
research, with conviction built through company meetings,
investor conferences and expert physician and consultant
networks. The team also has strong valuation discipline
looking at a number of metrics including sales and earnings
revisions, price-to-earnings, enterprise values, free-cash fl ow
and returns on invested capital.
25.1%
22.6%
21.3%
12.5%
8.2%
4.2%
3.8%
3.4%
2.7%
1.5%
(5.3%)
100.0%
27.0%
13.9%
36.8%
12.9%
4.1%
0.7%
1.7%
0.7%
5.7%
3.6%
(7.1%)
100.0%
Environmental, Social and Governance (ESG)
ESG considerations are increasingly an integral part of the
Company’s investment process. Material ESG controversies
that have been identifi ed by the team, or through use of
third-party research, are addressed and adjudicated on a
case-by-case basis. The team uses MSCI ESG data to monitor
the status of portfolio companies to identify outliers, or
those with positive or negative ratings momentum. Any
company that is rated CCC by MSCI ESG, for example,
is carefully reviewed by the team to assess the merits of
holding, investing or selling. Most importantly, the team will
use MSCI ESG ratings and research, where available, when
assessing the merits of potential new investments. Regular
contact with companies allows for ongoing dialogue with
respect to challenges that could impact long-term returns.
The team also reviews corporate governance frequently, using
professional third-party proxy voting services to complement
direct actions.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
19
Strategic Report
Investment Manager’s Report continued
ESG Process
Environmental
(cid:129) Climate change
-
Emissions, carbon footprint, raw
material sourcing
(cid:129) Natural resources
- Water stress, biodiversity
(cid:129) Pollution and waste
- Packaging material & waste
(cid:129) Environmental opportunities
- Renewable energy, green construction
Key Points
Fund rating vs the benchmark
target to be ahead of the benchmark
(MSCI ESG Fund Ratings)
“soft”
CCC ratings
investment justifi cation
Rating downgrades
rating momentum
analyse negative
Ratings assessment ahead of
investment
diligence
component of due
Source: Polar Capital and MSCI ESG Reporting.
For illustrative purposes only
Governance
(cid:129) Governance
- Board, compensation, accounting
(cid:129) Corporate behaviour
- Ethics, corruption, transparency
(cid:129) Shareholder rights
Social
(cid:129) Human capital
- Health & Safety, Labour management
(cid:129) Product liability
- Safety & Quality, data security
(cid:129) Stakeholder opposition
- Controversial sourcing
(cid:129) Social opportunities
-
Access to healthcare, support networks
Sources
Annual reports
SEC fi lings
Company websites
Investor relations
Management meetings
MSCI Issuer Rating
Portfolio %
Portfolio %
Cumulative
Bench %
Bench %
Cumulative
2.8 %
11.3 %
31.8 %
28.3 %
7.3 %
13.2 %
2.8 %
14.1 %
45.9 %
74.3 %
81.5 %
94.8 %
5.2 %
100 %
3.8 %
17.6 %
30.7 %
24.2 %
15 %
7.9 %
0.7 %
0 %
3.8 %
21.4 %
52.1 %
76.3 %
91.3 %
99.2 %
100 %
100 %
AAA
AA
A
BBB
BB
B
CCC
Unrated
MSCI ESG Coverage
Number of Securities
Number Rated
Number Unrated
Coverage %
Portfolio
Benchmark
44
36
8
81.8
268
267
1
99.6
Source: Polar Capital and MSCI ESG Reporting, as at 30 September 2020.
For illustrative purposes only
Benchmark
Weighted Rating
Portfolio
Weighted Rating
CCC
B
BB
BBB
A
AA
AAA
20
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Strategic Report
Healthcare delivery disruption: Shifting utilisation to lower cost settings
The portfolio is richly populated with companies that are
directly exposed to the delivery disruption investment theme,
i.e. companies that are developing products, technologies
and services to drive effi ciencies and reduce costs without
compromising quality of care. Within the growth portfolio
Fresenius Medical Care, Phillips, Roche Holdings and
UnitedHealth Group are all good examples of companies
looking to be part of the solution. AdaptHealth, Quotient and
Renalytix in the Innovation portfolio are also looking to disrupt
the status quo and deliver value to the system. It is important
to remember, however, that we do not divorce valuation and
potential returns from our process, rather we actively seek out
opportunities where we fi nd dislocation from underlying value.
That dynamism will inevitably lead to opportunities outside of
the core investment themes of the Company.
Fresenius Medical Care (FMC) is a vertically integrated
company involved in the delivery of products and services
to patients that need dialysis treatment. With more than
4,000 dialysis centres globally, FMC treats approximately
350,000 patients and performs more than 50 million dialysis
treatments every year. Whilst FMC’s extensive network and
scale is clearly an advantage when it comes to an effi ciency
drive, the company is also actively engaging in value-based
contracts, working with payors to generate savings. If
successful, the contracts are mutually benefi cial given that
any savings generated are shared between the company
and the payors. FMC is also very well-positioned to benefi t
from the shift of patient volume from traditional settings,
i.e. dialysis clinics, to the home. With aligned incentives and
backing from the US Government, the direction of travel is
clear. FMC has invested heavily in both products (dialysers)
and information technologies (connected care) to take
advantage of the growth opportunity. Potential advantages to
the patients of home dialysis are clear, but the payors are also
set to benefi t from reduced costs of care and FMC should
benefi t given potential savings in labour, i.e. reduced staffi ng
requirements, and capital investment, i.e. reduced investment
in new dialysis centres.
Healthcare equipment company Philips has three divisions;
Diagnosis and Treatment, Connected Care and Personal
Health. The benefi ts of precise diagnosis and co-ordinated
treatment planning are clear, but it is Philips’ Connected Care
division that is best positioned to benefi t from the effi ciency
mega-trend. Philips has invested in telehealth, patient
monitoring and analytics as they look to manage patient
workfl ow and coordinate the treatment of chronic diseases.
A near-term benefi ciary from the COVID-19 pandemic via
its ventilators business, it is on-going investment in hospital
and clinical informatics platforms that we believe has greater
durability. Swiss pharmaceutical giant Roche Holdings is not
only innovating in R&D but it is also innovating on pricing and
affordability. Hemlibra, for the treatment of haemophilia, and
lung cancer drug Rozlytrek, were both launched at ~50%
discounts to incumbent treatments that they were trying to
displace, despite having highly competitive clinical profi les.
Ocrevus, Roche’s novel treatment for multiple sclerosis,
was also launched at a material discount (~25%) to the list
price of existing treatments on the market. The company is
pursuing a similar strategy with Evrysdi for the treatment of
Spinal Muscular Atrophy, a rare disorder that primarily affects
boys. Roche is pricing the drug at <$100,000 / year in infants
and a maximum price of $340,000 / year in older children.
This is a ~25% discount over a 5-year treatment plan versus
the current treatment, Biogen’s Spinraza. Roche also has the
largest diagnostics business globally, offering a comprehensive
suite of platforms, software solutions and consumables.
More interestingly, perhaps, in close collaboration with its
pharmaceuticals division, Roche is a leader in personalised
healthcare. According to Roche, 60% of late-stage products
in development have an accompanying companion diagnostic
test as the industry looks to produce targeted therapeutics.
These targeted medicines are not only more effi cacious but
also reduce waste as they are administered in only those
patients that will respond to treatment.
Perhaps the best example of a business driving down costs is
UnitedHealth Group. The Group has a healthcare insurance
business, UnitedHealthcare, providing benefi ts to individuals,
employers, Medicare (for the over 65’s) and Medicaid (for
low income US citizens). The Group also has three ancillary
businesses that have one shared mission; to improve
performance, generate effi ciencies and bend healthcare’s
cost-curve. OptumHealth provides care directly through
localised networks of medical groups and ambulatory care
systems, including primary, specialty, urgent and surgical
care. The unit also provides products and services that help
consumers control their health needs and manage chronic
conditions. OptumInsight provides data, analytics, consulting
services, research and technologies that help healthcare
systems reduce costs, meet compliance mandates and
improve clinical outcomes. OptumRx is the Group’s PBM
that uses its scale to negotiate the best possible deals for its
members – low cost medications benefi t not just consumers
but also the sponsors and, ultimately, shareholders.
AdaptHealth is a leading provider of Home Medical
Equipment (HME) and is a direct play on home health.
Operating across most of the US, AdaptHealth offers a
broad range of products and services to help patients adapt
to life in the home. These include diabetes management,
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
21
Strategic Report
Investment Manager’s Report continued
sleep and respiratory therapies, mobility products, wound
care, non-invasive ventilation and nutrition supplies. A heavy
user of technology, AdaptHealth is very focused on tailored
solutions that empower patients to live and lead better
lives. AdaptHealth is a classic play on the consolidation
theme that is most relevant to healthcare services. The HME
market is very fragmented and thus a signifi cant opportunity
exists to acquire assets at attractive valuation levels. With
AdaptHealth’s use of technology, it can manage this
consolidation in a more effective manner at a much greater
pace than competitors.
Quotient is a commercial-stage diagnostics company looking
to reduce healthcare costs and improve patient care through
the development of innovative tests for blood grouping.
Blood grouping involves specifi c procedures performed at
donor or patient testing laboratories to characterise blood,
which includes antigen typing and antibody identifi cation.
The company’s MosaicQ platform is potentially disruptive
given that it signifi cantly reduces the cost of blood grouping,
is easy to use, and can be used for high throughput results.
The effi ciencies that the platform provides are key as the
economics in blood donation and testing are extremely
challenging. The technology should allow development in
other areas of diagnostics, with proof of this coming from
Quotient’s ability to produce a COVID-19 antibody test in
rapidly and with best-in-class accuracy.
With a clear focus on prevention rather than treatment,
Renalytix is an artifi cial intelligence-enabled in-vitro diagnostics
company, focused on optimising clinical management of
kidney disease to drive improved patient outcomes and lower
healthcare costs. The company’s KidneyIntelX platform uses
artifi cial intelligence to combine and analyse a broad range
of data inputs, including validated bio-markers, genetics
and personalised patient data, to generate unique patient
risk scores. These scores are then used to predict a patient’s
risk of deteriorating kidney function and progress towards
Chronic Kidney Disease (CKD). It is hoped that a powerful
prognostic tool can help slow the progression of kidney disease
and potentially prevent the occurrence of progressive kidney
function decline such as kidney failure and the need for long-
term dialysis or kidney transplant. According to the Centers
for Disease Control and Prevention CKD affects approximately
37 million people in the US alone, and the National Kidney
Foundation estimates that one third of adults in the US are at
risk of developing kidney disease. The revenue opportunity for
Renalytix is substantial, as is the potential to generate savings
for healthcare systems globally.
Top 10 Holdings Relative to Benchmark1
Avantor
Humana
Medtronic
IQVIA
Horizon Pharma
Bio-Rad Laboratories
INC Research Holdings
Incyte
Amgen
Vertex Pharmaceuticals
Relative
3.2%
2.9%
2.9%
2.9%
2.9%
2.9%
2.8%
2.6%
2.6%
2.5%
Source: Polar Capital, 30 September 2020. 1. Benchmark: MSCI AC World Daily TR Net
Health Care Index. It should not be assumed that recommendations made in future will
be profi table or will equal performance of the securities in this document. A list of all
recommendations made within the immediately preceding 12 months is available upon
request.
Conclusion
2020 will of course be remembered for the COVID-19
pandemic, the biggest economic, social and healthcare
crisis of our generation. Importantly, however, the crisis
has been a genuine catalyst for positive change in the
healthcare industry, accelerating the adoption of products,
technologies and services designed to make wide-scale access
to healthcare more effi cient and more affordable without
compromising quality. It is that structural shift that we believe
will yield some truly exciting investment opportunities,
opportunities that should generate highly attractive, near and
long-term returns.
James Douglas and Gareth Powell
Co-Managers
14 December 2020
I cannot say whether things will get better if we
change; what I can say is they must change if they are to
get better.
Attributed to Georg C. Lichtenberg
22
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Strategic Report
Strategic Report
Ten Largest Investments
As at 30 September
Ranking
Market Value £'000 % of total net assets
2020
2019
Stock
Sector
Country
2020
2019
2020
2019
1
(-)
Healthcare Equipment
United States*
16,519
-
5.1%
-
Medtronic is a global healthcare solutions company committed to improving lives through medical technologies, services, and solutions.
2
(-)
Biotechnology
United States
15,815
-
4.9%
-
Amgen is a biotchnology company committed to discovering, developing, manufacturing and delivering innovative human therapeutics using
tools like advanced human genetics to unravel the complexities of disease and understand the fundamentals of human biology.
3
(-)
Pharmaceuticals
Switzerland
15,491
-
4.8%
-
Roche Holding AG (Roche) is a research-based healthcare company who develops medicines for various disease areas, including oncology,
immunology, infectious diseases, ophthalmology and neuroscience.
4
(-)
Bristol Myers Squibb
Pharmaceuticals
United States
14,393
-
4.4%
-
Bristol Myers Squibb is a pharmaceutical company that manufactures prescription pharmaceuticals and biologics in several therapeutic areas,
including cancer, HIV/AIDS, cardiovascular disease, diabetes, hepatitis, rheumatoid arthritis and psychiatric disorders.
5
(2)
Pharmaceuticals
France
12,825
14,896
3.9%
5.2%
Sanofi is a diversifi ed healthcare company that manufactures and distributes pharmaceuticals, vaccines and also has a consumer health
division. Therapeutic areas of interest within the pharmaceutical division include diabetes, auto-immune disorders, multiple sclerosis and
oncology.
6
(5)
Eli Lilly
Pharmaceuticals
United States
12,337
10,606
3.8%
3.7%
Eli Lilly is a US-based pharmaceutical company that manufactures and distributes pharmaceuticals primarily in the areas of diabetes, oncology
and auto-immune disorders.
7
(32)
Managed Healthcare
United States
12,330
4,936
3.8%
1.7%
Humana engages in the provision of health insurance services and operates through the following segments: Retail, Group and Specialty and
Healthcare Services.
8
(-)
Biotechnology
United States
11,561
-
3.6%
-
Vertex is a global biotechnology company engaged in discovering, developing, manufacturing and commercialising medicines for serious
diseases. The Company is focused on developing and commercialising therapies for the treatment of cystic fi brosis (CF) and advancing its
research and development programs in other indications.
9
(-)
Life Sciences Tools & Services United States
10,948
-
3.4%
-
Avantor is a leading global provider of mission critical products and services. Its products include materials and consumables, equipment and
instrumentation, and services and specialty procurement.
10
(25)
Life Sciences Tools & Services United States
10,897
6,624
3.4%
2.3%
IQVIA is a world leader in using data, technology, advanced analytics and expertise to help customers drive healthcare and human health
forward.
Total – 10 Largest Investments
*Irish-domiciled
133,116
-
41.1%
-
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
23
23
Strategic Report
Full Investment Portfolio
As at 30 September
Ranking
Market Value £’000 % of total net assets
2020
2019
Stock
Sector
(-)
(-)
(-)
(-)
(2)
(5)
Medtronic
Amgen
Roche
Bristol Myers Squibb
Sanofi
Eli Lilly
Healthcare Equipment
Biotechnology
Pharmaceuticals
Pharmaceuticals
Pharmaceuticals
Pharmaceuticals
(32)
Humana
Managed Healthcare
Vertex Pharmaceuticals
Biotechnology
1
2
3
4
5
6
7
8
9
(-)
(-)
Avantor
10
(25)
IQVIA
Top 10 investments
Life Sciences Tools & Services
Life Sciences Tools & Services
Becton Dickinson
Koninklijke Philips
Healthcare Equipment
Healthcare Equipment
Bio-Rad Laboratories
Life Sciences Tools & Services
United States
Novo Nordisk
Pharmaceuticals
Baxter International
Healthcare Equipment
Incyte
Horizon Pharma
Syneos Health
Biotechnology
Pharmaceuticals
Fresenius Medical Care
Healthcare Services
Zimmer Biomet
Healthcare Equipment
Life Sciences Tools & Services
United States
Top 20 investments
Amerisourcebergen
Healthcare Distributors
Centene
Sartorius
Align Technology
ArgenX
Neurocrine Biosciences
Exelixis
Acadia Pharmaceuticals
Lundbeck
Medley
UnitedHealth
Quotient
Zealand Pharma
HCA Healthcare
Managed Healthcare
Healthcare Equipment
Healthcare Supplies
Biotechnology
Biotechnology
Biotechnology
Biotechnology
Pharmaceuticals
Healthcare Technology
Managed Healthcare
Healthcare Supplies
Biotechnology
Healthcare Facilities
11
12
13
14
15
16
17
18
19
20
(18)
(6)
(10)
(3)
(22)
(15)
(20)
(-)
(-)
(-)
21
22
23
24
25
26
27
28
29
30
(-)
(-)
(-)
(-)
(-)
(-)
(-)
(-)
(-)
(-)
31
32
33
34
35
36
37
38
39
40
(-)
(33)
(38)
(12)
(41)
(-)
(-)
(-)
(42)
(37)
Top 30 investments
Intelligent Ultrasound
Healthcare Technology
United Kingdom
Axonics Modulation Technologies
Healthcare Equipment
Biohaven Pharmaceutical
Biotechnology
AdaptHealth
Ship Healthcare
Oxford Immunotec
Healthcare Distributors
Healthcare Distributors
Healthcare Equipment
United States
United States
United States
Japan
United Kingdom
Top 40 investments
41
42
43
(40)
Renalytix AI
Healthcare Technology
United Kingdom
(-)
(-)
Avadel Pharmaceuticals
Pharmaceuticals
Uniphar
Healthcare Distributors
Ireland
Ireland
Total equities
Other net liabilities
Net assets
Note - Sectors are from the GICS (Global Industry Classifi cation Standard).
24
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Country
Ireland
United States
Switzerland
United States
France
United States
United States
United States
United States
United States
United States
Netherlands
Denmark
United States
United States
United States
Germany
United States
United States
United States
Germany
United States
Netherlands
United States
United States
United States
Denmark
Japan
United States
United Kingdom
Denmark
United States
2020
16,519
15,815
15,491
14,393
12,825
12,337
12,330
11,561
10,948
10,897
133,116
10,258
10,071
9,867
9,731
9,696
9,431
9,335
8,948
8,815
8,631
227,899
8,545
8,526
8,254
7,615
7,216
7,076
6,980
6,581
6,508
5,905
301,105
5,898
4,874
4,742
4,726
4,062
3,896
3,821
2,804
1,850
1,805
339,583
1,523
1,105
193
342,404
(17,271)
325,133
2019
-
-
-
-
14,896
10,606
4,936
-
-
6,624
7,961
10,518
8,977
13,763
7,022
8,193
7,375
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,767
2,678
8,758
2,043
-
-
-
1,878
2,694
2,405
-
-
2020
5.1%
4.9%
4.8%
4.4%
3.9%
3.8%
3.8%
3.6%
3.4%
3.4%
41.1%
3.2%
3.1%
3.0%
3.0%
3.0%
2.9%
2.9%
2.7%
2.7%
2.6%
70.2%
2.6%
2.6%
2.5%
2.3%
2.2%
2.2%
2.1%
2.0%
2.0%
1.8%
92.5%
1.8%
1.5%
1.5%
1.5%
1.2%
1.2%
1.2%
0.9%
0.6%
0.6%
104.5%
0.4%
0.3%
0.1%
105.3%
(5.3%)
100.0%
2019
-
-
-
-
5.2%
3.7%
1.7%
-
-
2.3%
2.8%
3.6%
3.1%
4.8%
2.4%
2.8%
2.6%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.7%
0.9%
3.0%
0.7%
-
-
-
0.7%
0.9%
0.8%
-
-
Strategic Report
Investment Objective and Policy
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.
The Company will seek to achieve its objective by investing
in a diversifi ed global portfolio consisting primarily of listed
equities. The portfolio is diversifi ed by geography, industry
sub-sector and investment size.
The portfolio will comprise a single pool of investments,
but for operational purposes, the Investment Manager will
maintain a growth portfolio and an innovation portfolio.
Innovation companies are broadly defi ned by the Investment
Manager as small/mid cap innovators that are driving
disruptive change, giving rise not only to new drugs and
surgical treatments but also to a transformation in the
management and delivery of healthcare. The growth
portfolio is expected to comprise a majority of the Company’s
assets; for this purpose, once an innovation stock’s market
capitalisation has risen above US $5bn, it will ordinarily then
be treated as a growth stock.
The relative ratio between the two portfolios may vary
over the life of the Company due to factors such as asset
growth and the Investment Manager’s views as to the risks
and opportunities offered by investments in each pool and
across the combined portfolio. The original make up of the
combined portfolio was of up to 50 stocks, with growth
stocks being primarily US listed. In 201 8, the Board authorised
an increase to the number of stocks able to be held to 65 and
confi rmed there is no restriction on geographical exposure.
The combined portfolio will therefore be made up of interests
in up to 65 companies, with no single investment accounting
for more than 10% (or 15% in the case of an investment
in another fund managed by the Investment Manager) of
the Gross Assets at the time of investment. The innovation
portfolio may include stocks which are neither quoted nor
listed on any stock exchange but the exposure to such stocks,
in aggregate, will not exceed 5% of Gross Assets at the time
of investment. In the event that the Investment Manager
launches a dedicated healthcare innovation fund, the
Company’s exposure to innovation stocks may be achieved
in whole or in part by an investment in that fund. In any
event, the Company will not, without the prior consent of
the Board, acquire more than 15% of any such healthcare
innovation fund’s issued share capital.
Strategic Report
The Strategic Report section of this Annual Report comprises the
Chair ’s Statement, the Investment Manager’s Report, including
information on the portfolio, and this Strategic Report.
This Report has been prepared to provide information to
shareholders on the Company’s strategy and the potential for
this strategy to succeed, including a fair review of the Company’s
performance during the year ended 30 September 2020, the
position of the Company at the year end and a description of
the principal risks and uncertainties. Throughout the Strategic
Report there are certain forward-looking statements 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.
History
In June 2017 a reconstruction of the Company, change in
investment mandate and change of name was implemented
having been approved by shareholders. Further information is
provided within the Shareholder Information on page 105 and
on the Company’s website www.polarcapitalhealthcaretrust.
co.uk
Following the reconstruction and in the absence of any prior
proposals, the Articles of Association require the Directors to put
forward at the fi rst 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
suffi cient votes, irrespective of number, to pass the resolution.
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 signifi cant degree on the
world’s fi nancial markets and their reactions to economic events
and other geo-political forces. The Chair ’s Statement and the
Investment Manager’s Report comment on the development
and performance of the business during the fi nancial year, the
outlook and potential risks to the performance of the portfolio.
Introduction and Business Model
The Company’s business model follows that of an externally
managed investment trust providing Shareholders with access
to a global portfolio of healthcare stocks.
The Company is designated an Alternative Investment Fund
(‘AIF’) under the Alternative Investment Fund Management
Directive (‘AIFMD’) and, as required by the Directive, has
contracted with Polar Capital LLP to act as the Alternative
Investment Fund Manager (‘AIFM’) and HSBC Bank Plc to act
as the Depositary.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
25
Strategic Report
Strategic Report continued
Strategy
As the day to day management of the Company is
outsourced to service providers the Board’s 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.
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. Further details of the loan
provided by the subsidiary are given on page 77 and 78 .
The Investment Manager’s investment process is primarily
based on bottom-up fundamental analysis. The Investment
Manager uses a qualitative fi lter consisting of key criteria
to build up a watch-list of securities that is monitored on
a regular basis. Due diligence is then carried out on the
individual securities on the watch-list.
Each individual holding is assessed on its own merits in
terms of risk:reward including various ESG factors. 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 fl exibility, 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 (‘Alternative Investment Fund Manager’)
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, including:
(cid:129) Panmure Gordon & Co as Corporate Broker;
(cid:129) Herbert Smith Freehills LLP as Solicitors;
(cid:129) HSBC Securities Services as Custodian and Depositary;
(cid:129) Equiniti Limited as the Registrar;
(cid:129)
PricewaterhouseCoopers LLP as independent Auditors ;
(cid:129)
(cid:129)
Emperor as internet service provider for website design
and internet hosting services; and
Perivan Limited as designers and printers for shareholder
communications.
Gearing
Following the restructure of the Company in June 2017,
the Company maintains long-term structural gearing in the
Benchmark
The Company will measure the Investment Manager’s
performance against the MSCI ACWI Healthcare Index total
return, in sterling with dividends reinvested. Although the
Company has a benchmark, this is neither a target nor
an ideal investment strategy. The portfolio may diverge
substantially from the constituents of this index. 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.
Regulatory Arrangements
Both the AIFM (‘Alternative Investment Fund Managers
Directive’) and the Depositary have responsibilities under
AIFMD for ensuring that the assets of the Company are
managed in accordance with the investment policy and
are held in safe custody. The Board remains responsible for
setting the investment strategy and operational guidelines as
well as meeting the requirements of the Financial Conduct
Authority (‘FCA’) Listing Rules and the Companies Act 2006.
The AIFMD requires certain information to be made available
to investors in AIFs (“Alternative Investment Funds”) before
they invest and requires that material changes to this
information be disclosed in the Annual Report of each AIF.
Investor Disclosure Documents, which set out information on
the Company’s investment strategy and policies, leverage,
risk, liquidity, administration, management, fees, confl icts of
interest and other Shareholder information are available on
the Company’s website.
There have been no material changes to the information
requiring disclosure. Any information requiring immediate
disclosure pursuant to the AIFMD will be disclosed to the
London Stock Exchange through a primary information
provider. Statements from the Depositary and the AIFM 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
qualifi cation permits the accumulation of capital within the
portfolio without any liability to UK Capital Gains Tax. Further
information is provided in the Directors’ Report.
26
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Strategic Report
Performance and Key Performance Objectives
The Board appraises the performance of the Company and the Investment Manager as the key supplier of services to the
Company against key performance indicators (‘KPIs’). The objectives of the KPIs comprise both specifi c fi nancial and Shareholder
related measures .
KPI
Control Process
Outcome
The provision of investment
returns to shareholders
measured by long- term
NAV growth and relative
performance against the
Benchmark.
The Board reviews the performance of the portfolio in
detail and hears the views of the Investment Manager at
each meeting.
The Board also considers the value delivered to
shareholders through NAV growth and dividends paid.
The achievement of the
dividend policy.
Financial forecasts are reviewed to track income
and distributions.
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.
To qualify and continue to
meet the requirements for
Sections 1158 and 1159 of
the Corporation Tax Act
2010 (‘investment trust
status’).
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.
The Board is aware of the vulnerability of a sector
specialist investment trust to a change in investor
sentiment to that sector. While there is no formal
discount policy the Board discusses the market factors
giving rise to any discount or premium, the long or
short-term nature of those factors and the overall benefi t
to Shareholders of any actions. The market liquidity is
also considered when authorising the issue or buy back
of shares when appropriate market conditions prevail.
A daily NAV per share, calculated in accordance with the
AIC guidelines is issued to the London Stock Exchange.
The Board receives regular fi nancial information which
discloses the current and projected fi nancial position
of the Company against each of the tests set out in
Sections 1158 and 1159.
As at 30 September 2020, the total net assets of the
Company amounted to £325,133,000. The Company’s
NAV total return, over the year ended 30 September
2020, was 14.14% while the Benchmark Index over
the same period increased by 15.95%. The Company’s
performance is explained further in the Investment
Manager’s Report.
Since restructuring on 20 June 2017, the total return of
the NAV was 27.48% and the benchmark was 35.30%.
Investment performance is explained in the Chair ’s
Statement and the Investment Manager’s Report.
Two dividends have been paid or are payable in respect
of the year ended 30 September 2020 totalling 2.00 p
per share (2019: two dividends totalling 2.10p per share).
The discount of the ordinary share price to the NAV per
ordinary share at the year ended 30 September 2020
was 13.1% (2019: 8.0%).
During the year ended 30 September 2020, the Company
bought back 500,000 ordinary shares into treasury, and no
new shares or treasury shares were issued.
The number of shares in issue, at the year end was
124,149,256 of which 2,879,256 were held in treasury.
The total voting rights of the Company are 121,270,000
shares.
The Company was granted investment trust status
annually up to 1 October 2014 and is deemed to be
granted such status 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.
The Directors confi rm that the tests have been met in the
fi nancial year ended 30 September 2020 and believe that
they will continue to be met.
To ensure the effi cient
operation of the Company
by monitoring the services
provided by third party
suppliers, including the
Investment Manager, and
controlling ongoing charges .
The Board considers annually the services provided by the
Investment Manager, both investment and administrative,
and reviews on a cycle the provision of services from third
parties including the costs of their services.
The annual operating expenses are reviewed and any
non-recurring project related expenditure approved by
the Board.
The Board has received, and considered satisfactory,
the internal controls report of the Investment Manager
and other key suppliers including the contingency
arrangements to facilitate the ongoing operations of the
Company in the event of withdrawal or failure of services.
The ongoing charges for the year ended 30 September
2020 were 1.01%, compared to 1.01% the previous year.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
27
Strategic Report
Strategic Report continued
Principal Risks and Uncertainties
The Board is responsible for the management of risks faced by the Company and, through delegation to the Audit Committee,
has established procedures to manage risk, oversee the internal control framework and determine the nature and extent of the
principal risks the Company is willing to take in order to achieve its long-term strategic objectives.
The Audit Committee carries out, at least annually, a robust assessment of the principal risks and uncertainties with the
assistance of the Investment Manager, continually monitors identifi ed risks and meets to discuss both long-term and emerging
risks outside of the normal cycle of Audit Committee meetings.
A Risk management process has been established to identify and assess various risks, their likelihood and the possible severity
of impact then, considering both internal and external controls and factors that could provide mitigation, a post mitigation
risk impact score is determined. The Audit Committee has identifi ed the key risks faced by the Company. During the year the
Audit Committee, in conjunction with the Board and the Investment Managers undertook a full review of the Company’s
Risk Map including the mitigating factors and controls to reduce the impact of the risks, and made a number of amendments
including the introduction of a Heat Map providing a visual refl ection of the Company’s identifi ed risks. The key risks which
are those classifi ed as having the highest risk impact score post mitigation are detailed below with a high-level summary of the
management through mitigation and status arrows to indicate any change in assessment over the past fi nancial year.
The Audit Committee has also considered the risks posed by COVID-19, which have been considered as a Black Swan event.
Further information on how the Committee has considered COVID-19 when assessing its effect on the Company’s ability to
operate as a going concern and the Company’s longer-term viability can be found on pages 58 and 59 of the Report of the
Audit Committee.
Identify Risk
Monitoring
and Review
Analyse Risk
Risk Cycle
Manage Risks
Build Risk
Strategy
28
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Strategic Report
Portfolio Management
Investment Performance
Description
Investment Manager unable to deliver the Investment Objective
leading to poor performance against the benchmark or market/
industry average.
Assessment
Risk is elevated from 2019 to refl ect the market and
portfolio performance associated with the COVID-19
pandemic .
Mitigation
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. A detailed annual review of the
investment strategy is undertaken by the Investment Manager with
the Board including analysis of investment markets and sector trends.
At each meeting the Board discusses developments in healthcare
and drug pipelines with the Investment Manager in addition to
the composition and diversifi cation of the portfolio with sales
and purchases of investments and the degree of risk which the
Investment Manager incurs to generate investment returns.
Individual investments are discussed with the Investment Manager
as well as the Investment Manager’s general views on the various
investment markets and the healthcare sector in particular. Analytical
performance data and attribution analysis is presented by the
Investment Manager.
The Board is committed to a clear communication program to ensure
Shareholders understand the investment strategy. This is maintained
through the use of monthly factsheets which have a market
commentary from the Investment Manager as well as portfolio data,
an informative website as well as annual and half year reports.
Gearing
Description
Inability to repay ZDP loan and or inappropriate use of derivatives.
Assessment
Unchanged from previous year.
Mitigation
The Board considered the benefi ts 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
benefi cial to investment returns, the Board remains of the same belief.
The asset cover necessary to repay the ZDP shares is a minimum of
1.8x . T he asset cover at the year end of 30 September 2020 was
9.1x. If any fl exible 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.
Discount/Premium
Trading
Description
Persistent discount in excess of Board or Shareholder acceptable
levels.
Description
Execution of unauthorised trade/dealing error. Error or breach may
cause regulatory investigation leading to fi nes, reputational damage
and risk to investment trust status.
Assessment
Risk is elevated from 2019 to refl ect the continued
double-digit discount level.
Assessment
Unchanged from previous year.
Mitigation
The Board regularly considers, in comparison to the sector and peers,
the level of premium and discount of the share price to the NAV and
ways to enhance Shareholder value including share issuance and buy
backs.
Mitigation
Investment limits and restrictions are encoded into the dealing and
operations systems of the Investment Manager and various oversight
functions are undertaken to ensure there is early warning of any
potential issue of compliance or regulatory matters.
The Board has carefully monitored the discount level and market
movements during the COVID-19 pandemic and has discussed
performance with the Managers and advisers. The Chair has also
met with key shareholders to understand any concerns and views as
detailed in the Chair ’s Statement and within the s172 Report. The
Board and the Managers continue to work together in an aim to
improve performance to mitigate the discount level and will report
to shareholders in due course should it be deemed necessary. Further
detail on the performance and the impact of COVID-19 on the
Company is given in the Investment Manager’s Report.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
29
Strategic Report
Strategic Report continued
Principal Risks and Uncertainties continued
Operational Risk
Service Failure
Cyber Risk
Description
Failure in services provided by the Investment Manager, Custodian,
Depositary or other service providers; Accounting, Financial or Custody
Errors resulting in regulatory investigation or fi nancial loss, failure of
trade settlement, potential loss of Shareholder assets and investment
trust status.
Description
Cyber-attack causing disruption to or failure of operational and
accounting systems and processes provided by the Investment Manager
creating an unexpected event and/or adverse impact on personnel or
the portfolio.
Assessment
Unchanged from previous year.
Assessment
Unchanged from previous year.
Mitigation
The Board carries out an annual review of internal control reports from
suppliers which includes the Investment Manager’s cyber protocols
and disaster recovery procedures. Due diligence and service reviews are
undertaken with third-party service providers including the Custodian and
Deposit ary.
A full review of the internal control framework is carried out at least
annually. Regular reporting is received by the Investment Manager on
behalf of the Board from the Depositary on the safe custody of the
Company’s assets. The Board undertakes independent reviews of the
Depositary and external Administrator services and additional resources
have been put in place by the Investment Manager. Management
accounts are produced and reviewed monthly, statutory reporting and
daily NAV calculations are produced by the external Administrator and
verifi ed by the Investment Manager. Accounting records are tested,
and valuations verifi ed independently as part of the year-end fi nancial
reporting process.
Mitigation
The number, severity and success rate of cyber-attacks have increased
considerably over recent years, controls are however in place and the
Board proactively seeks to keep abreast of developments through
a series of meetings with relevant service providers. In light of the
COVID-19 pandemic and the lockdown measures introduced by the
UK Government, the Audit Committee sought assurance from each
of the Company’s service providers on the resilience of their business
continuity arrangements whilst the majority of their employees
worked remotely. These assurances and the subsequent detailed
updates that were given to the Committee provided a satisfactory
level of assurance that there had not been, and there was no
anticipation of any disruption in the ability of each service provider to
fulfi l their duties as would typically be expected.
Key Man
Shareholder Communications
Description
Loss of Investment Manager or other key management professionals.
Impact on investor confi dence leading to widening of the discount
and/or poor performance creating a period of uncertainty and
potential termination of the Investment Management Agreement.
Description
Failure to effectively communicate signifi cant events to the
shareholder and investor base.
Assessment
Unchanged from previous year.
Assessment
Unchanged from previous year.
Mitigation
The strength and depth of investment team provides comfort that
there is not over-reliance on one person with alternative portfolio
managers available to act if needed. For each key business process
roles, responsibilities and reporting lines are clear and unambiguous.
The Investment Manager has implemented business continuity
planning arrangements as a result of COVID-19 with staff working
remotely with no loss of service.
Mitigation
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.
30
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Strategic Report
Regulatory Risk
Economic And Market Risk
Description
Non-compliance with statutes, regulations and disclosure
requirements, including FCA listed company regime and Companies
Act 2006; s1158/1159 of the Corporation Tax Act 2010, the
Companies Act 2006 and other UK, European and overseas
legislation affecting UK companies including MiFID II and the GDPR.
Not complying with accounting standards could result in a
suspension of listing or loss of investment trust status, reputational
damage and Shareholder activism.
Further risks arise from not keeping abreast of changes in legislation
and regulations which have in recent years been substantial.
Assessment
Unchanged from previous year.
Description
Financial loss due to unexpected natural disaster or other unpredictable
event disrupting the ability to operate or signifi cant 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.
Uncertainty in the regulatory environment and impact on London
Financial Services industry due to UK vote to leave the EU (“Brexit”) and
the potential for the exit arrangements to adversely impact portfolio
investee companies.
Fluctuations in stock markets and currency exchange rates could
be advantageous or disadvantageous to the Company and its
performance.
Disruption to trading platforms and support services.
Assessment
Risk is elevated from 2019 to refl ect the market
and portfolio performance associated with the
COVID-19 pandemic and to refl ect the continued
double-digit discount level.
Mitigation
The Board monitors regulatory change with the assistance of the
Investment Manager, Company Secretary and external professional
suppliers and implements necessary changes should they be
required.
The Board receives regulatory reports for discussion and, if required,
considers the need for any remedial action. In addition, as an
investment company, the Company is required to comply with a
framework of tax laws, regulation (both UK and EU) and company
law.
The Board keeps abreast of third party service provider internal
controls processes to ensure requirements are met in accordance
with regulatory requirements.
Mitigation
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
monitored through existing control systems and discussed regularly
by the Board. While it is diffi cult 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. The longer term effects of COVID-19 on this risk,
for example the unprecedented levels of fi scal stimulus and travel
restrictions will continue to be assessed by the Audit Committee .
The Company has a disaster recovery plan in place.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
31
Strategic Report
Strategic Report continued
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.
Investment Team
The Investment Manager is Polar Capital LLP (‘Polar Capital’),
which is authorised and regulated by the Financial Conduct
Authority.
Under the terms of the investment management agreement
Polar Capital provides investment management, and
provides or procures accounting, company secretarial and
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.
Polar Capital provides a team of healthcare specialists and
the portfolio is co-managed by Dr James Douglas and Mr
Gareth Powell.
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, 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.
Termination Arrangements
The IMA may be terminated by either party giving 12 months’
notice. The IMA may be terminated earlier by the Company
with immediate effect on the occurrence of certain events,
including: (i) 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 fi xed life then, except in the event of termination
by the Company for certain specifi ed 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, was, for the year under review and prior years, charged
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 October 2020, following
discussion with Polar Capital, a reduction in the base
management fee to 0.75% per annum based on the lower
of the market capitalisation and adjusted net asset value was
agreed and became effective from 1 October 2020.
In accordance with the Directors’ policy on the allocation of
expenses between income and capital, in each fi nancial year
80% of the management fee payable is charged to capital
and the remaining 20% to income.
32
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Strategic Report
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.
In May 2020, the Board and Investment Manager agreed an
amendment to the Performance fee arrangements, to take
immediate effect, whereby a cap was added to refl ect that,
in the event of a performance fee becoming payable on the
future portfolio realisation date, such fee would be subject to
a maximum amount of 3.5% of the terminal NAV.
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 2020.
Corporate Responsibility
Environmental, Social and Governance (ESG)
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 Investment Manager has a corporate ESG policy and
wherever possible and appropriate the parameters of such are
considered and adopted by the investment team in relation
to the Company’s management and portfolio construction.
As detailed further within the Investment Manager’s Report
the Investment Managers are required to have consideration
to ESG factors when reviewing new, continuing or exiting
investments but they are not required to take an investment
decision solely on the basis of ESG factors. The Board
monitors the Investment Manager’s approach to ESG and they
themselves take into account ESG factors in the management
of the Company.
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 fi nancial 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 is comprised of one female and three male
Independent non-executive Directors.
When compiling a shortlist of candidates and selecting
individuals for interview, the Board has regard to the benefi ts
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 skill-sets both with each other and the
remaining 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
traffi cking 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 Board
uses the principles formulated and implemented by the
Investment Manager and expects the same standard of zero-
tolerance to be adopted by third party service providers.
The Company has implemented a Confl icts 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 at all times.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
33
Strategic Report
Section 172 of the
Companies Act 2006
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 benefi t of its members (our Shareholders) as a whole and in doing so have regard
to the consequences of any decision in the long term, as well as having regard to the Company’s stakeholders amongst other
considerations. The fulfi lment of this duty not only helps the Company achieve its Investment Objective but ensures decisions are
made in a responsible and sustainable way for Shareholders.
To ensure that the Directors are aware of, and understand, their duties, they are provided with an induction when they fi rst join
the Board, including details of all relevant regulatory and legal duties as a Director and continue to receive regular and ongoing
updates on relevant legislative and regulatory developments. They also have continued access to the advice and services of the
Company Secretary and, when deemed necessary, the Directors can seek independent professional advice. The Schedule of
Matters Reserved for the Board, as well as the Terms of Reference of its committees, are reviewed annually and further describe
Directors’ responsibilities and obligations and include any statutory and regulatory duties.
The Board seeks to understand the needs and priorities of the Company’s stakeholders and these are taken into account during
discussions and as part of the decision-making process. As an externally managed investment company, the Company does not
have any employees or customers, however the key stakeholders and a summary of the Board’s consideration and actions where
possible in relation to each group of stakeholders are described in the table below.
Stakeholder Group
How we engage with them
Shareholders
The Directors have considered this duty when making the strategic decisions during the year that affect Shareholders,
including the continued appointment of the Investment Manager and the recommendation that Shareholders vote
in favour of the resolutions for the Company to continue and to renew the allotment and buy back authorities at the
AGM. The Directors have also engaged with and taken account of Shareholders’ interests during the year.
Given the continued measures in place in relation to social distancing and COVID-19, the Directors have carefully
considered the viability of an open forum AGM. The safety and wellbeing of shareholders is of the highest priority and
it has therefore been decided that a closed AGM will be held this year. The Board believes that shareholder engagement
remains important, especially under the current market conditions, and to facilitate shareholder engagement, the Board
will be holding a ‘Meet the Manager and Board’ session by webinar on 14 January 2021, at 2 pm . Shareholders will have
the opportunity to hear a brief introduction from the Managers and the Chair and will be provided with an opportunity
to ask questions. The Board and Managers also welcome questions being submitted ahead of the session by email to
marketing@polarcapital.co.uk with the subject line PCGH Meet the Manager & Board . The Board will endeavour
to respond to all questions received during the session.
Should any signifi cant votes be cast against a resolution, the Board will engage with Shareholders and explain in its
announcement of the results of the AGM the actions it intends to take to consult Shareholders in order to understand
the reasons behind the votes against. Following the consultation, an update will be published no later than six months
after the AGM and the Annual Report will detail the impact the Shareholder feedback has had on any decisions the
Board has taken and any actions or resolutions proposed.
Relations with Shareholders
The Board and the Manager consider maintaining good communications and engaging with Shareholders through
meetings and presentations a key priority. The Board regularly considers the share register of the Company and receives
regular reports from the Manager and the Corporate Broker on meetings attended with Shareholders and any concerns
that are raised in those meetings. The Board also reviews correspondence from Shareholders and may attend investor
presentations. Since taking on the chairmanship in February 2020, Ms Arnold has met with the larger shareholders and
has attended various on-line meetings with shareholders.
Shareholders are able to raise any concerns directly with the Board without using the Manager or Company Secretary
as a conduit. The Chair or other Directors are available to Shareholders who wish to raise matters either in person or in
writing. The Chair and Directors may be contacted through the registered offi ce of the Company.
Shareholders are kept informed by the publication of annual and half year reports, monthly fact sheets, access
to commentary from the Investment Manager on the Company’s website and attendance at events in which the
Investment Manager presents.
The Company, through the sales and marketing efforts of the Investment Manager, encourages retail investment
platforms to engage with underlying Shareholders in relation to Company communications and enabling those
Shareholders to cast their votes on Shareholder resolutions; the Company however has no responsibility over such
platforms. The Board therefore encourage Shareholders invested via the platforms to regularly visit the Company’s
website or to make contact with the Company directly to obtain copies of Shareholder communications.
The Company has also made arrangements with its registrar for Shareholders, who own their shares directly rather
than through a nominee or share scheme, to view their account online at www.shareview.co.uk. Other services are also
available via this service.
34
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Strategic Report
Stakeholder Group
How we engage with them
Investment
Manager
Through the Board meeting cycle, regular updates and the work of the Management Engagement Committee
reviewing the services of the Investment Manager annually, the Board is able to safeguard Shareholder interests by:
(cid:129) Ensuring adherence to the Investment Policy;
(cid:129) Ensuring excessive risk is not undertaken in the pursuit of investment performance;
(cid:129) Ensuring adherence to the Investment Management Policy and reviewing the agreed management and performance
fees; and
(cid:129) Reviewing the Investment Manager’s decision making and consistency in investment process.
Maintaining a close and constructive working relationship with the Manager is crucial as the Board and the Investment
Manager both aim to continue to achieve consistent, long-term returns in line with the Investment Objective. The
culture which the Board maintains to ensure this involves encouraging open discussion with the Investment Manager;
recognising that the interests of Shareholders and the Investment Manager are aligned, providing constructive challenge
and making Directors’ experience available to support the Investment Manager. This culture is aligned with the
collegiate and meritocratic culture which Polar Capital has developed and maintains.
Outcomes and strategic decisions during the year
As detailed earlier in the Strategic Report, in the year under review the Board agreed with the Investment Manager the
introduction of a cap on any performance fee that may become payable and a reduction in the base management fee
charged to the Company from 0.85% to 0.75% of the lower of adjusted net asset value and market capitalisation;
the reduction became effective on 1 October 2020. The Board in their capacity as the Management Engagement
Committee has recommended the continued appointment of the Investment Manager on the terms agreed within the
Investment Management Agreement.
The Board has instructed the Investment Manager to take into account the published corporate governance policies of
the companies in which they invest.
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 ISS policy. However, in
exceptional cases, where the Investment Manager believes that a resolution would be detrimental to the interests of
shareholders or the fi nancial performance of the Company, appropriate notifi cation will be given and abstentions or a
vote against will be lodged. This Policy changed during the fi nancial 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 43 company meetings over the year ended 30 September 2020, with 6% of all
votes being against management and 29.8% of meetings having at least one against or withheld vote.
The Investment Manager reports to the Board, when requested, on the application of the Stewardship Code and Voting
Policy. The Investment Manager’s Stewardship Code and Voting Policy can be found on the Investment Manager’s
website in the Corporate Governance section (www.polarcapital.co.uk).
Further information on how the Investment Manager considers ESG in its engagement with investee companies can be
found in the Investment Manager’s report on pages 19 to 20.
Outcomes and strategic decisions during the year
During the year, the Board discussed the impact of ESG and how the Investment Manager incorporated ESG into their
strategy and investment process.
Investee
Companies
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
35
Strategic Report
Section 172 of the Companies Act 2006 continued
Stakeholder Group
How we engage with them
Service
Providers
Proxy Advisors
The Directors have frequent engagement with the Company’s other service providers through the annual cycle of
reporting and due diligence meetings or site visits. This engagement is completed with the aim of having effective
oversight of delegated services, seeking to improve the processes for the benefi t of the Company and to understand
the needs and views of the Company’s service providers, as stakeholders in the Company. Further information on the
Board’s engagement with service providers is included in the Corporate Governance Statement and the Report of the
Audit Committee.
Outcomes and strategic decisions during the year
The reviews of the Company’s service providers have been positive and the Directors believe their continued
appointment is in the best interests of the Company. The accounting and administration services of HSBC Securities
Services (HSS) are contracted through Polar Capital and provided to the Company under the terms of the IMA. The
Board however continue to conduct due diligence service reviews in conjunction with the Company Secretary and is
satisfi ed that the service received continues to be of a high standard.
The support of the major institutional investors and proxy adviser agencies are important to the Directors, as the
Company seeks to retain a reputation for high standards of corporate governance, which the Directors believe
contributes to the long-term sustainable success of the Company. The Directors consider the recommendations of these
various proxy voting agencies when contemplating decisions that will affect Shareholders and also when reporting to
Shareholders through the Half Year and Annual Reports.
Recognising the principles of stewardship, as promoted by the UK Stewardship Code, the Board welcomes engagement
with all of its investors. The Board recognises that the views, questions from, and recommendations of many
institutional investors and proxy adviser agencies provide a valuable feedback mechanism and play a part in highlighting
evolving Shareholders’ expectations and concerns.
Prior to AGMs, the Company engages with these agencies to fact check their advisory reports and clarify any areas
or topics that the agency requests. This ensures that whilst the proxy advisory reports provided to Shareholders are
objective and independent, the Company’s actions and intentions are represented as clearly as possible to assist with
Shareholders’ decision making when considering the resolutions proposed at the AGM.
Outcomes and strategic decisions during the year
The Nomination Committee considers the time commitment required of Directors and the Board considers each
Director’s independence on an ongoing basis. The Board have confi rmed that all Directors remain independent and able
to commit suffi cient time in fulfi lling their duties, including those listed on s172 of the Companies Act. Accordingly, all
Directors are standing for re-election at the Company’s AGM.
The AIC
The Company is a member of the AIC and has also supported lobbying activities such as the consultation on the 2019
AIC Code. The Directors also cast votes in the AIC Board Elections each year and regularly attend AIC events.
Approved by the Board on 14 December 2020
By order of the Board
Tracey Lago, FCG
Polar Capital Secretarial Services Limited
Company Secretary
36
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
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Corporate
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Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
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3737373737
Corporate Governance
Report of the Directors
The Directors who are listed on pages 6 and 7, present
their Directors’ Report including the Report on Corporate
Governance together with the Group and Company’s Audited
Financial Statements prepared under International Financial
Reporting Standards as adopted by the European Union
(‘IFRS’) for the year ended 30 September 2020.
The attention of Shareholders is drawn to the Strategic Report
Section (Chair ’s Statement, the Investment Manager’s Report
and the Strategic Report) which provide further commentary
on the activities and outlook for the Group and Company,
including future developments and dividends.
Introduction and Status
The Company is incorporated in England and Wales as
a public limited company and is domiciled in the United
Kingdom. It is an investment company as defi ned in section
833 of the Companies Act 2006 and has a premium listing on
the London Stock Exchange.
The Company seeks to continue to operate as an investment
trust in accordance with sections 1158 and 1159 of the
Corporation Tax Act 2010 (as amended by section 42(2) of
the Finance Act 2011). As an approved investment trust the
close company provisions do not apply. The Directors, under
advice, expect the affairs of the Company to continue to
satisfy the conditions of an investment trust.
As an investment trust the Company’s ordinary shares are
excluded from the FCA’s restrictions which apply to non-
mainstream investment products. The Company conducts its
affairs and intends to do so for the foreseeable future so that
the exclusion continues to apply. The Company’s ordinary
shares are eligible for inclusion in a stocks and shares ISA.
Purpose
The business of the Group, comprising the Company and
the wholly owned subsidiary PCGH ZDP Plc, is to provide
shareholders with access to a discretionarily managed
diversifi ed global portfolio of healthcare stocks across all
four healthcare sub-sectors; pharmaceuticals, biotechnology,
medical technology and healthcare services. The portfolio
is diversifi ed by geographic location, industry sub-sector
and investment size. The portfolio comprises a single pool
of investments but for operational purposes the Investment
Manager will maintain both a growth and an innovation
portfolio. The purpose of the subsidiary is to provide fi xed life
structural gearing to the Group.
The portfolio is managed within a framework of investment
limits and guidelines determined by the Board which seek
to meet the investment objective while seeking to spread
and mitigate risk. The Group has no employees or premises
and the Board of both the Company and the subsidiary is
comprised of Independent non-executive Directors. The day
to day operations and functions of the Group have been
delegated to third parties.
The Company is registered under the United States’ FATCA
legislation and its Global Intermediary Identifi cation Number
(GIIN) is ID3ME4.99999.SL.826. The Company’s Legal Entity
Identifi er (LEI) code is 549300YV7J2TWLE7PV84.
Life of the Company
In the absence of any prior proposals, the Articles of
Association of the Company require the Directors to put
forward at the fi rst Annual General Meeting following
1 March 2025 a special resolution to place the Company into
voluntary liquidation. The voting on that resolution will be
enhanced such that, provided any single vote is cast in favour,
the resolution will be passed.
The subsidiary has a fi xed life and the Directors of the subsidiary
are required to convene a general meeting on or before
19 June 2024 (unless varied by the holders of the Zero Dividend
Preference shares) to propose a resolution to wind up the
subsidiary.
CAPITAL STRUCTURE
Issued Share Capital
The Company’s share capital is divided into ordinary shares of
25p each. At the year end there were 124,149,256 ordinary
shares in issue (2019: 124,149,256 ordinary shares), of which
2,879,256 (2019: 2,379,256) were held in treasury by the
Company.
Changes during the year
During the year to 30 September 2020, the Company bought
back 500,000 shares into treasury, and no new shares or
treasury shares were issued.
Voting Rights
Ordinary shares carry voting rights which are exercised on a
show of hands at a meeting, where each shareholder has one
vote, or on a poll, where each share has one vote. Details for
the lodging of proxy votes are given when a notice of meeting
is issued. Ordinary shares held in treasury carry no voting rights.
Transferability
Any shares in the Company may be held in uncertifi cated
form and, subject to the Articles, title to uncertifi cated shares
may be transferred by means of a relevant system.
Subject to the Articles, any member may transfer all or any
of his certifi cated shares by an instrument of transfer in
any usual form or in any other form which the Board may
approve. The instrument of transfer must be executed by or
on behalf of the transferor and (in the case of a partly-paid
share) the transferee.
The Board may, in its absolute discretion and without giving
any reason, decline to register any transfer of any share which
is not a fully paid share. The Board may also decline to register
38
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Corporate Governance
a transfer of a certifi cated share unless the instrument of
transfer: (i) is duly stamped or certifi ed or otherwise shown to
the satisfaction of the Board to be exempt from stamp duty and
is accompanied by the relevant share certifi cate and such other
evidence of the right to transfer as the Board may reasonably
require; (ii) is in respect of only one class of share; and (iii) if joint
transferees, are in favour of not more than four such transferees.
The Board may decline to register a transfer of any of the
Company’s certifi cated shares by a person with a 0.25%
interest (as defi ned in the Articles) if such a person has been
served with a restriction notice (as defi ned in the Articles)
after failure to provide the Company with information
concerning interests in those shares required to be provided
under the Companies Act 2006, unless the transfer is shown
to the Board to be pursuant to an arm’s length sale (as
defi ned in the Articles).
The Company is not aware of arrangements to restrict the
votes or transferability of its shares.
Powers to Issue Ordinary Shares and
Make Market Purchases of Ordinary
Shares
The Board was granted authority by Shareholders at the AGM
in February 2020 to allot equity securities up to a nominal
value of £3,031,750 and to issue those shares for cash
without offering those shares to Shareholders in accordance
with their statutory pre-emption rights.
New ordinary shares will not be allotted and issued at below
the Net Asset Value per share after taking into account the
costs of issue. Any re-issue of shares from treasury will follow
institutional guidelines , it is not anticipated that such shares
would be re-issued below NAV .
The Board also obtained Shareholder authority at the
AGM in February 2020 to make market purchases of up to
18,178,373 ordinary shares of the Company for cancellation
or holding as treasury shares in accordance with the terms
and conditions set out in the shareholder resolution.
These authorities will expire at the AGM to be held in January
2021. R enewal of these authorities will be sought at that AGM.
Dividends
The Company changed its dividend policy following the
change in strategy and reconstruction of the portfolio
approved in June 2017. The Company’s policy is an aim
to pay two interim dividends in February and August each
year. These interim dividends will not necessarily be of equal
amounts. Details of the dividends paid and proposed are set
out in Note 11 on page 85.
Shareholders should recognise that circumstances may arise
when it is necessary to reduce the level of dividend payment
or equally there may be instances when the level of dividend
must be increased in order to comply with Sections 1158 and
1159 of the Corporation Tax Act 2010. Where this would
result in paying a dividend beyond the Board’s intended policy
a ‘special dividend’ will be declared and paid.
In accordance with best practice, the Directors will be
proposing a resolution to approve the Company’s dividend
policy at the AGM to be held in January 2021.
Directors
In accordance with the Company’s adopted practices detailed
on page 46 of the Report on Corporate Governance, all
Directors will retire and offer themselves for re-election at the
AGM of the Company to be held in January 2021. Having
undertaken a Board Evaluation process and discussed the
areas of expertise required to run the Company, the Board
confi rm their support below for each Directors’ re-election.
As a whole the Board believes they have a balance of
experience, expertise and diversity and have proven, through
a diffi cult year that they work well as a whole and each
bring multiple qualities to the Board. The Board rationale for
re-appointment of each Director is given on page 6 to 7 and
in the letter accompanying the Notice of AGM.
Annual General Meeting (‘AGM’)
The Company’s AGM will be held at 2 pm on Tuesday,
26 January 2021 at the offi ces of Polar Capital, 16 Palace
Street, London SW1E 5JD. Due to the social distancing
measures and restrictions currently in place prohibiting public
gatherings as a result of COVID-19, the Board has decided to
hold the AGM as a closed meeting with only the necessary
quorum present to conduct the formal business. Shareholders
are encouraged to vote on the resolutions by proxy ahead of
the deadline and by close of business on 22 January 2021.
The Board believes that shareholder engagement remains
important, especially under the current market conditions,
and to facilitate such, the Board will be holding a ‘Meet the
Manager & Board’ session by webinar on 14 January 2021, at
2 pm. Shareholders will have the opportunity to hear a brief
introduction from the Managers and the Chair and will be
provided with an opportunity to ask questions. The Board and
Managers also welcome questions being submitted ahead of
the session by email to marketing@polarcapital.co.uk with
the subject line PCGH Meet the Manager & Board and
there will be a method to submit questions directly into the
meeting. The Board will endeavour to respond to all questions
received during the session.
The separate Notice of Meeting contains the usual resolutions
to receive the Financial Statements, approve the Directors’
Remuneration Implementation Report, re-elect Directors,
re-appoint the Auditors and empower the Directors to set
their fees. As in previous years the Directors are also seeking
powers to allot shares and issue shares for cash, and to
make market purchases. The full text of the resolutions and
explanation of each is set out in the Notice of Meeting.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
39
Corporate Governance
Report of the Directors continued
Major Interests in Ordinary Shares
As at the year end of 30 September 2020, the Company had received notifi cations from the following shareholders in respect of
their own and their clients’ interests in the voting rights of the Company:
Shareholder
Investec Wealth & Investment Ltd
Rathbone Brothers plc
Brewin Dolphin Limited
Schroders plc
1607 Capital Partners
Charles Stanley
Canaccord Genuity Group
Cheviot Asset Management Limited
Type of Holding
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Number of Shares
16,800,575
16,004,530
11,345,884
6,828,416
6,350,000
6,106,096
5,872,733
4,805,275
Since the year end and up to the date of this report, the Company has been notifi ed of the following:
Shareholder
Schroders plc
Rathbone Brothers plc
1607 Capital Partners
Type of Holding
Indirect
Indirect
Indirect
Number of Shares
–
15,762,295
14,259,099
% of Voting
Rights*
13.85
13.20
9.36
5.63
5.24
5.04
4.84
3.96
% of Voting
Rights*
Below 5%
13.00
11.76
* The above percentages are calculated by applying the ordinary shareholdings as notifi ed to the Total Voting Rights of the issued ordinary share capital at 14 December 2020 of 121,270,000
being all the issued ordinary shares except for those held in treasury where voting rights are suspended.
Listing Rule 9.8.4
Listing Rule 9.8.4 requires the Company to include certain
further information in relation to the Group and Company
which is not otherwise disclosed. The Directors confi rm there
are no additional disclosures to be made pursuant to this rule.
By order of the Board
Tracey Lago, FCG
Polar Capital Secretarial Services Limited
14 December 2020
40
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Corporate Governance
Report on Corporate Governance
Year ended 30 September 2020
Corporate Governance Framework
The following diagram demonstrates the governance framework within which the Group is managed. The Directors are
ultimately accountable to Shareholders for the Group’s affairs and are therefore responsible for the good governance of the
Group. As the Group and Company have no employees they rely on third parties to administer the Group and Company and to
provide investment management services.
Shareholders
Board of Directors
Chair : Lisa Arnold
Investment Manager
and AIFM
Third Party
Service Providers
Audit
Committee
Management
Engagement Committee
Nomination
Committee
Remuneration
Committee
Chairman: Neal Ransome
Members: all independent
NEDs.
Chairman: Neal Ransome
Members: all independent
NEDs
Functions of the
Nomination Committee
are carried out by the
Board as a whole.
Functions of the
Remuneration Committee
are carried out by the
Board as a whole.
The Financial Reporting Council (FRC) has endorsed the Association of Investment Companies (‘AIC’) Code of Corporate
Governance (the ‘AIC Code’) for AIC Member Companies to report against in relation to their corporate governance provisions.
The AIC Code addresses the relevant principles set out in the FRC UK Code as well as additional principles and recommendations
on issues that are specifi c to investment trust companies. The Annual Report for the year ended 30 September 2020 is the fi rst
year for which the Company reports under the 2019 version of the AIC Code.
The FRC has confi rmed that by following the AIC Code, boards of investment companies will meet their obligations under
FCA Listing Rule 9.8.6. As an externally managed investment company many provisions of the FRC UK Code are not relevant,
including those relating to the roles of chief executive, executive directors’ remuneration, statement of gas emissions and the
requirement to have an internal audit function.
Statement of Compliance and Application of the AIC Code’s Principles
The Board has considered the Principles and Provisions of the AIC Code of Corporate Governance (AIC Code). The AIC Code
addresses the Principles and Provisions set out in the UK Corporate Governance Code (the UK Code), as well as setting out
additional Provisions on issues that are of specifi c relevance to investment companies. The Board considers that reporting against
the Principles and Provisions of the AIC Code, which has been endorsed by the Financial Reporting Council, provides more
relevant information to Shareholders.
The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adapts the
Principles and Provisions set out in the UK Code to make them relevant for investment companies.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
41
Corporate Governance
Report on Corporate Governance continued
Year ended 30 September 2020
The Board believes that the Company’s current practices are consistent in all material respects in applying the principles and
complying with the provisions of the AIC Code. The Board will continue to observe the principles and recommendations set out
in the AIC Code.
The AIC Code’s principles and provisions are structured into fi ve sections: Board leadership and purpose; division of
responsibilities; composition, succession and evaluation; audit, risk and internal control; and remuneration. The Company’s
application of the principles and compliance with the provisions of each section is detailed on pages 42 to 48.
BOARD LEADERSHIP AND PURPOSE (Principles A-E, Provisions 1-7)
Purpose
The Company’s purpose is encapsulated in its Investment Objective and the Company’s strategy is to achieve this objective through
successful application of the Investment Policy. The Investment Policy seeks 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. The Company will seek to achieve its objective by investing in a diversifi ed global portfolio consisting primarily
of listed equities. The portfolio is diversifi ed by geography, industry sub-sector and investment size. As an externally managed
investment trust, the culture of the Company is a consequence of the Board’s composition , decisions and behaviours which are
aligned with the values and behaviours of the Investment Manager, interaction between the two and engagement with the
Company’s stakeholders. The Board monitors this culture, including the policies and practices it implements to maintain it.
Board Leadership
In promoting the long-term sustainable success of the Company, the performance of the Company’s portfolio is constantly
reviewed in pursuit of value generation for shareholders by achievement of the investment objective. I nvestment management
fees are reviewed periodically, with the last change in occurring in October 2020 which resulted in a reduction in the
management fee from 0.85% to 0.75% per annum based on the lower of market capitalisation and the adjusted net
asset value. The Company’s performance over the previous ten years can be found on page 3 and how the Board views its
contribution to wider society is considered in the s172 statement on pages 34 to 36. The Board’s engagement with shareholders
and stakeholders and how it contributes to strategic decision making is also discussed within the s172 statement. Participation
from both groups is encouraged and the Board can be contacted through the Company Secretary. The Company’s service
providers are also subject to periodic site visits and attend meetings throughout year, ensuring effective engagement. Fulfi lling
the Investment Objective and the Company’s performance is the primary focus of the Board’s discussions .
The Board’s effectiveness, including how it promotes the long-term sustainable success of the Company, is reviewed annually.
The process and outcomes of the Board evaluation are detailed on pages 46 and 47 .
Role, Responsibilities and Committees of the Board
The Board has delegated to the Audit Committee and the Management Engagement Committee specifi c remits for
consideration and recommendation but the fi nal responsibility in these areas remains with the Board. The Board determined
that due to its size, and the fact that all the Directors are non-executive and independent, the functions of the nomination
committee and remuneration committee would be carried out by the full Board. The Board creates ad hoc committees from
time to time to enact policies or actions agreed in principle by the whole Board.
The number of formal meetings of the Board and its Committees held during the year ended 30 September 2020 and the
attendance of individual Directors are shown below:
Number of Meetings
Lisa Arnold
Andrew Fleming*
Neal Ransome
Jeremy Whitley*
* appointed 1 December 2019
Board
Audit
Committee
Management
Engagement
2020 AGM
7
7
6
7
6
4
4
3
4
3
1
1
–
1
–
1
1
1
1
1
42
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Corporate Governance
BOARD LEADERSHIP AND PURPOSE (Principles A-E, Provisions 1-7) continued
Service Provider Performance Evaluation Process
Investment Manager
The Board has contractually delegated the management of the portfolio to the Manager. It is the Manager’s sole responsibility
to take decisions as to the purchase and sale of individual investments other than unquoted investments where the Board
is consulted. The Manager has responsibility for asset allocation and sector selection within the guidelines established and
regularly reviewed by the Board.
The Manager is responsible for providing or procuring accountancy services, company secretarial and administrative services
including the monitoring of third party suppliers who are directly appointed by the Company. The Manager also ensures that
all Directors receive in a timely manner all relevant management, regulatory and fi nancial information. Representatives of the
Investment Manager attend all Board meetings in a variety of capacities including investment management, compliance, risk
and marketing, enabling the Directors to probe further on matters of concern or seek clarifi cation on certain issues.
The whole Board reviews the performance of the Investment Manager and, at each Board meeting, the Company’s performance
against the market and a peer group of funds with similar investment objectives is reviewed. The investment team provided
by the Investment Manager has long experience of investment in the healthcare sector. In addition, the Investment Manager
has other investment resources who support the investment team and have experience in managing and administering other
investment trust companies.
The Board and Investment Manager work in a collaborative manner and the Chair encourages open discussion and debate.
Report of the Management Engagement Committee
The Management Engagement Committee comprises all the independent non-executive Directors under the chairmanship
of Neal Ransome, and will usually meet once a year and at such other times as may be necessary. The Management
Engagement Committee reviews the performance and activities of the Investment Manager and considers the terms of the
investment management agreement and other services and resources supplied by the Investment Manager, prior to making its
recommendation to the Board on whether the retention of the Investment Manager is in the interests of shareholders.
During the year ended 30 September 2020 the Management Engagement Committee met once to carry out the review of the
Investment Manager and consider its continued appointment for the next fi nancial year ending 30 September 2021. During
the year, the Board reviewed its fee arrangements with the Manager taking into consideration the performance of the Manager
in managing the assets of the Company, the performance of the Company in both absolute and relative terms against its
benchmark since launch and since reconstruction in June 2017. In May 2020, the Board and the Investment Manager agreed
an immediate amendment to the Performance fee arrangements, whereby a cap was added to refl ect that in the event of a
performance fee becoming payable on the future portfolio realisation date, such would be subject to a maximum amount of
3.5% of the terminal NAV. In October 2020, following discussion with Polar Capital, a reduction in the base management fee
from 0.85% to 0.75% per annum based on the lower of the market capitalisation and adjusted net asset value was agreed with
effect from 1 October 2020. All other terms within the Investment Management Agreement remain unchanged.
The review of the Investment Manager also considered the strength of the investment team, depth of other resources provided
by the Manager and quality of the services provided or procured by the Manager including shareholder communications.
The Board, through the work of the Management Engagement Committee, has concluded that it is in the best interests of
shareholders as a whole that the appointment of Polar Capital LLP as Investment Manager is continued .
The Company uses a variety of performance measures when monitoring the performance of the portfolio managed by the
Investment Manager. T hese measures are considered to be alternative performance measures under the ESMA guidelines and
are described further on pages 98 and 99 .
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
43
Corporate Governance
Report on Corporate Governance continued
Year ended 30 September 2020
BOARD LEADERSHIP AND PURPOSE (Principles A-E, Provisions 1-7) continued
Other Suppliers
The Board also monitors directly or through the Manager the performance of its other key service providers.
(cid:129)
(cid:129)
(cid:129)
The Board has directly appointed HSBC Bank Plc as Depositary and Panmure Gordon as Corporate Broker. The Depositary
reports quarterly and makes an annual presentation to the Board. The Corporate Broker provides reports to each Board
meeting and joins the Board on request, and at least every six months, to discuss markets and other issues.
The Registrars, Equiniti Limited, are directly appointed by the Board and the performance of their duties is monitored and
reported on by the Company Secretary.
Other suppliers such as printers, website services and PR agents are monitored by the Company Secretary and each supplier
reports to the Board as and when deemed necessary.
Report of the Audit Committee
The Audit Committee comprises all the independent non-executive Directors under the chairmanship of Neal Ransome. The
Committee has formal terms of reference which clearly defi ne its responsibilities and duties. A separate report of the work of
the Audit Committee over the year is set out on pages 54 to 59.
Report of the Remuneration Committee
As mentioned above, the role of the Remuneration Committee is undertaken by the full Board. The Directors’ Remuneration
Report including the processes undertaken when reviewing remuneration can be found on pages 49 to 53.
DIVISION OF RESPONSIBILITIES (Principles F-I, Provisions 8-21)
Chair
The Chair is responsible for the leadership of the Board and works with the Company Secretary for setting the Board’s
meeting agendas and for balancing the issues presented to each meeting. Open and honest debate is encouraged at each
Board meeting and the Chair keeps in touch with both the Company Secretary and other Directors between Board meetings.
Lisa Arnold was appointed to the Board in 2018 and appointed as Chair in February 2020. The Chair was independent on
appointment and continues to meet the criteria for independence. The Board considers the competence and independence of
the Directors on an annual basis.
Senior Independent Director
Due to the size and structure of the Board it was considered unnecessary to identify a senior independent non-executive
director. The Board considers that all Directors have different qualities and areas of expertise on which they may lead where
issues arise and to whom concerns may be conveyed.
Board Responsibilities
The Board currently comprises four non-executive Directors who are all considered to be independent in character and judgement.
No Director has any former or present connection with the Investment Manager. A formal schedule of matters specifi cally reserved
for decision by the full Board has been defi ned and a procedure has been adopted for Directors, in the furtherance of their duties,
to take independent professional advice at the expense of the Company. No professional advice has been independently sought
during the year. The Directors have access to the advice and services of the corporate Company Secretary through its appointed
representative who is responsible to the Board for ensuring that Board procedures are followed, and that applicable rules and
regulations are complied with. The Board and Investment Manager operate in a supportive, co-operative and open environment.
The Board has a schedule of regular meetings through the year and meets at additional times as required. During the year,
Board and Committee meetings were held to deal with the ongoing stewardship of the Company and other matters including
the setting and monitoring of investment strategy and performance, review of the fi nancial statements and shareholder issues
including investor relations. The level of the ordinary share price discount or premium to the Net Asset Value together with
policies for re-purchase or issuance (or re-issuance) of shares, are kept under review along with matters affecting the industry
and the evaluation of third party service providers. The Board is also responsible for considering, reviewing and implementing
appropriate policies in respect of regulatory changes that impacted the Company.
44
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Corporate Governance
DIVISION OF RESPONSIBILITIES (Principles F-I, Provisions 8-21) continued
Board Responsibilities continued
The full investment strategy was revised during the reconstruction exercise undertaken in early 2017 which re-launched the
Company with a revised investment strategy in June 2017. The Board continues to consider the Company’s strategy and its
relevance to the market and Shareholders as a whole at each Board meeting and at least one Board meeting per year includes
an in-depth focus on strategy. Through this process the Board supervises the management of the investment portfolio, the work
of the Investment Manager, the risks to which the Company is exposed and their mitigation, and the quality of services received
by the Company.
As refl ected in the table above the Board formally met seven times during the year. In addition to the formal meetings, in
connection with the market pressures and the remote working environment caused by the COVID-19 pandemic, the Board met
on an informal ad-hoc basis as and when deemed necessary to discuss these matters and put in place any responses deemed
appropriate.
Delegated Responsibilities
The Board has delegated to each of the Audit and Management Engagement Committees specifi c remits for consideration
and recommendation, as detailed within the terms of reference which are available on the Company’s website, but the fi nal
responsibility in these areas remains with the Board. The Chair of the Audit Committee attends the AGM to deal with questions
relating to the Annual Report and Financial Statements. Attendance at each of these meetings is disclosed in the table above on
page 42.
Directors’ Professional Development
When a new Director is appointed, they are offered an induction course provided by the Investment Manager. Directors are also
provided on a regular basis with key information on the Company’s policies, regulatory and statutory obligations and internal
controls. Changes affecting Directors’ responsibilities are advised to the Board as they arise. Directors may also participate in
professional and industry seminars and may use the Manager’s online compliance training resources to ensure they maintain
their knowledge.
Confl icts of Interest
Directors have a duty to avoid a situation in which they have a confl ict of interest or a possible confl ict with the interest of the
Company. The Company’s Articles contain provisions to permit the Board to authorise confl icts or potential confl icts.
The Board has always had in place a policy to govern situations where a potential confl ict of interest may arise, for example
where a Director is also a Director of a company in which the Company invests or may invest. Where a confl ict situation arises,
the confl icted Director is excluded from any discussions or decisions relating to the matter of confl ict.
Each Director has provided the Company with a statement of all confl icts of interest and potential confl icts of interest, which
have been approved by the Board and recorded in a register. The Confl icts Register is reviewed at every Board meeting and the
Directors are reminded of their obligations for disclosure.
No Director has declared receipt of any benefi ts other than their emoluments and associated expenses in their capacity as a
Director of the Company.
The Board as part of its year-end review has considered the register of confl icts, any conditions imposed on such confl icts or
potential confl icts and the operation of the notifi cation and authorisation process. It concluded that the process has operated
effectively since its introduction. There were no contracts subsisting during or at the end of the year in which a Director is or
was interested and which is or was signifi cant in relation to the Company’s business or to the Director .
The Directors’ interests in the ordinary shares of the Company are set out on page 52 of the Directors’ Remuneration Report.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
45
Corporate Governance
Report on Corporate Governance continued
Year ended 30 September 2020
COMPOSITION, SUCCESSION AND EVALUATION (Principles J-L, Provisions 22- 28)
Composition
The Board is responsible to shareholders for the overall management of the Company’s affairs. For the full year under review
there were four non-executive Directors. Each Director has different qualities and areas of expertise on which they may lead
where issues arise. The Board as the Nomination Committee considered the contribution and performance of each Director
as part of the Director and Board performance evaluation. The Board believes that the Directors demonstrate a breadth of
experience across the investment and fi nancial services industry and exposure to the healthcare sector. Each Director effectively
contributes to the operation of the Board and demonstrates independent views on a range of subjects.
All the Directors were considered independent of the Investment Manager and had no relationship or confl icts which were likely
to affect their judgement.
Succession
The Board has determined that due to the limited life of the Company there is no need for a formal policy on the length
of service for Directors. In 2017, when the reconstruction approved by shareholders in June 2017 extended the life of the
Company for a further seven years, the original Board determined that the entire Board should be refreshed in two phases .
Phase one of the refresh concluded in early 2018 with the appointment of Neal Ransome and Lisa Arnold to the Board and the
retirement of Antony Milford and John Aston, and phase two saw Andrew Fleming and Jeremy Whitley appointed to the Board
in December 2019 followed by the retirement of James Robinson and Anthony Brampton in February 2020, when Lisa Arnold
became Chair . Following the completion of this process the Board considers that its overall composition is well placed for the
effective governance of the Company.
Performance a nd Re-Election
The Board formally reviews the performance of the Directors each year as part of the annual evaluation process. Directors are
required to stand for election by Shareholders at the fi rst AGM following their appointment to the Board and each Director will
stand for re-election annually. The rationale for re-election of each Director is included in the Board of Directors information
on pages 6 and 7 and the Chair ’s letter which accompanies the Notice of Annual General Meeting at which the re-election
resolutions are being put to shareholders.
Chair Tenure Policy
The Board considers that in the circumstances of an investment company, where corporate knowledge and continuity can
add value, there may be merit in appointing one of its members to the Chair. In addition, there may be circumstances where
succession plans are disrupted such that an internal candidate with some years’ existing experience is the most appropriate
candidate for the Chair. In other circumstances an external candidate may be more appropriate.
As per provision 22, the Board’s policy is that the maximum Board tenure for its Chair is up to 12 years (where up to 9 years of this
could be served as a non-executive Director). The Board has determined that due to the limited seven-year life of the Company
there is no requirement for a formal policy on Directors’ tenure.
Evaluation
The evaluation of the Board, its Committees and individual Directors is carried out annually. The process involves the use of
a written questionnaire to assess the balance of skills, experience, knowledge, independence and effectiveness of the Board,
including how the Directors interact as a unit on the Board. The responses to the questionnaire are reviewed and discussed
by the full Board and, should it be deemed necessary, additional reporting measures or operations would be put in place. The
review of the Chair ’s performance is conducted by the Board led by the Chairman of the Audit Committee. The Chair of the
Board did not participate in this discussion.
46
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Corporate Governance
COMPOSITION, SUCCESSION AND EVALUATION (Principles J-L, Provisions 22- 28) continued
Evaluation continued
In carrying out these evaluations, each Director is assessed on their relevant experience, their strengths and weaknesses in
relation to the overall requirements of the Board and their commitment to the Company in terms of time by regular attendance
and participation at Board meetings. The process is constructed to assess the contribution of individual Directors to the overall
operation of the Board and its Committees. The Board, through the work of the Nomination Committee, has determined that
each Director standing for re-election continues to offer relevant experience, effectively contributes to the operation of the
Board and has demonstrated independent views on a range of subjects. The Committee is satisfi ed that the structure, mix of
skills and operation of the Board continue to be effective and relevant for the Company.
AUDIT, RISK AND INTERNAL CONTROL (Principles M-O, Provisions 29-36)
Internal Controls
The Board has overall responsibility for the Group and Company’s system of internal control, for reviewing its effectiveness and
ensuring that risk management and control processes are embedded in the Company’s day- to -day operations .
The Investment Manager has an internal control framework to provide assurance on the effectiveness of the internal controls
operated on behalf of its clients. The Manager is authorised and regulated by the Financial Conduct Authority and its
compliance department monitors the Company’s compliance with the various rules and regulations applicable to it, including
the FCA’s rules, AIFMD, MiFID II and GDPR, for example.
The Board, through the Audit Committee, has established a process for identifying, evaluating, monitoring and managing any
principle risks faced by the Company. This is documented through the use of a Risk Map which is subject to regular review by
the Audit Committee and accords with the Guidance on Risk Management, Internal Control and Related Financial and Business
Reporting issued in September 2014 by the Financial Reporting Council. The controls are embedded within the business and aim
to ensure that identifi ed risks are managed and systems are in place to report on such risks. The internal controls seek to ensure
the assets of the Group and Company are safeguarded, proper accounting records are maintained, and the fi nancial information
used by the Group and Company and for publication is reliable. Controls covering the risks identifi ed, including fi nancial,
operational, compliance and risk management controls, are monitored by a series of regular reports covering investment
performance, attribution analysis, reports from various third parties and from the Investment Manager .
As the Company has no employees and its operational functions are carried out by third parties, the Audit Committee does not
consider it necessary for the Company to establish its own internal audit function.
Contracts with suppliers are entered into after full and proper consideration by the Board of the quality and cost of the services
offered, including the control systems in operation in so far as they relate to the affairs of the Company.
Operation of Internal Controls
The process was active throughout the year and up to the date of approval of this Annual Report. However, such a system is
designed to manage rather than eliminate risks of failure to achieve the Company’s business objectives and can only provide
reasonable and not absolute assurance against material misstatement or loss.
The Board, in assessing the effectiveness of the Group and the Company’s internal controls has, through the Audit Committee,
received formal reports on the policies and procedures in operation. These reports from the Investment Manager include results of
tests for the year ended 30 September 2020 on the policies and procedures in operation with details of any known internal control
failures. The Manager has subsequently provided confi rmation that there has been no material change to the control environment up
to the date of signing these Financial Statements.
The Board also considers ad hoc reports from the Investment Manager and third party suppliers and information is supplied
to the Board as required. In addition to the regular internal controls reports provided by the Investment Manager and various
third party suppliers, the Board has this year received COVID-19 Business Continuity Reports from the Investment Manager and
certain other third party suppliers including assurances on the status of the business and operational functions.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
47
Corporate Governance
Report on Corporate Governance continued
Year ended 30 September 2020
AUDIT, RISK AND INTERNAL CONTROL (Principles M-O, Provisions 29-36) continued
Operation of Internal Controls continued
The Manager has delegated the provision of accounting, portfolio valuation and trade processing to HSBC Securities Services
but remains responsible to the Company for these functions and provides the Board with information on these services.
The Board undertakes an in-depth annual review of the Group and Company’s system of internal controls where the risk map is
reviewed and control processes considered. The Board, assisted by the Investment Manager, has conducted the annual review
of the risk map and the effectiveness of the system of internal controls taking into account any issues, none of which were
considered signifi cant, which arose during the course of the year ended 30 September 2020 and up to the date of this report.
The principal risks and uncertainties to which the Company is subject are detailed in the Strategic Report . These risks are
monitored by the Audit Committee through the Company’s risk map and the implementation of internal controls, which are
reported on further on pages 28 to 31.
Based on the work of the Audit Committee and the reviews of the reports received by the Audit Committee on behalf of the
Board, the Board has concluded that there were no material control failures during the year and up to the date of this report.
REMUNERATION (Principles P-R, Provisions 37 – 42)
Due to the fully independent non-executive Board comprising four Directors, the Board has deemed it appropriate for the full
Board to fulfi l the role of the Remuneration Committee. The Board, acting as the Committee, meets at least annually and is
responsible for consideration and recommendations in relation to D irectors’ remuneration.
The remuneration of the Directors is reviewed on an annual basis but will not necessarily lead to a change in remuneration
level awarded. Industry guidance, peer investment trust companies’ remuneration, the work undertaken by the Board in the
prior year along with plans for the current year and the overall regulatory environment are all considered when reviewing
remuneration.
Remuneration levels are set to attract candidates of high calibre to the Board. The Company’s remuneration policy was put
to shareholders for approval at the AGM on 26 February 2020 and is detailed within the Directors’ Remuneration Report on
page 50.
Principle E and Provision 6 from UK Code have been deleted with agreement of the FRC as they are not relevant for externally managed investment companies.
Tracey Lago, FCG
Polar Capital Secretarial Services Limited
Company Secretary
14 December 2020
48
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Directors’ Remuneration Report
Corporate Governance
Introduction
This report is submitted in accordance with the Large and Medium-Sized Companies and Groups (Accounts and Reports)
Regulations 2008 (as amended) (the ‘Regulations’) and the Listing Rules of the Financial Conduct Authority in respect of the year
ended 30 September 2020. It has been audited where indicated.
Chair ’s Report
The Board has determined that due to its size, and the fact that all the Directors are non-executive and independent, the
functions normally carried out by a remuneration committee will be performed by the full Board.
Shareholders approved the current Directors’ Remuneration Policy by way of an ordinary resolution passed at the AGM held on
26 February 2020. S uch policy came into effect on 1 October 2020 and shall remain in force until 30 September 2023:
Company’s Policy on Directors’ Remuneration effective 1 October 2020
How policy supports strategy and promotes
long-term sustainable success
Operation
The Board consists entirely of non-executive Directors, who
meet regularly to deal with the Company’s affairs.
The intention is that fees payable refl ect the time spent by
them individually and collectively, be of a level appropriate
to their responsibilities and be in line with market practice,
suffi cient to enable candidates of high calibre to be recruited
and retained.
The Company’s policy in relation to fees is to offer only a
fi xed basic fee in line with equivalent roles within the sector
with additional fees for the roles of Chair of the Company
and Chairman of the Audit Committee. As the Company is
an investment trust and all the Directors are non-executive, it
is considered inappropriate to have any long-term incentive
schemes or benefi ts.
In accordance with article 98(2) of the Company’s Articles
of Association, any Director who performs, or undertakes
to perform, services which the Directors consider go beyond
the ordinary duties of a Director may be paid such additional
remuneration (whether by way of fi xed sum, bonus,
commission, participation in profi ts or otherwise) as the
Directors may determine.
Non-executive Directors have formal letters of appointment
which contain the responsibilities and obligations of the
directors in relation to undertaking their role and managing
confl icts of interest; their remuneration is determined by the
Board within the limits set by the Articles of Association.
Directors are not entitled to payment for loss of offi ce and do
not receive any bonus, nor do they participate in any long-
term incentive schemes or pension schemes. All fees are paid
in cash, monthly in arrears, to the Director concerned.
Rates are reviewed annually but the review will not necessarily
result in any change to rates. non-executive Directors are
subject to annual re-election by shareholders.
There are no performance conditions relating to non-
executive Directors fees.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
49
Corporate Governance
Directors’ Remuneration Report continued
The Company’s Policy on Directors’ Remuneration in force for the year ended 30 September 2020 was:
Policy and how the policy supports
the strategy
Operation
Opportunity
The Board consists entirely of non-
executive Directors, who meet regularly
to deal with the Company’s affairs.
The intention is that fees payable refl ect
the time spent by them individually and
collectively, be of a level appropriate
to their responsibilities and be in line
with market practice, suffi cient to
enable candidates of high calibre to be
recruited and retained.
As the Company is an investment trust
and all the Directors are non-executive,
it is considered inappropriate to have
any long- term incentive schemes or
benefi ts.
Non-executive Directors have formal
letters of appointment which contain
the responsibilities and obligations of
the directors in relation to undertaking
their role and managing confl icts
of interest; their remuneration is
determined by the Board within the
limits set by the Articles of Association.
Directors are not entitled to payment
for loss of offi ce and do not receive
any bonus, nor do they participate in
any long-term incentive schemes or
pension schemes. All fees are paid in
cash, monthly in arrears, to the Director
concerned.
Rates are reviewed annually but the
review will not necessarily result in any
change to rates. Non-executive Directors
are subject to annual re-election by
shareholders.
There are no performance conditions
relating to non-executive Directors fees.
Non-executive Directors do not receive
any bonus, nor do they participate in
any long-term incentive schemes or
pension schemes.
The Company’s policy in relation to fees
is to offer only a fi xed basic fee in line
with equivalent roles within the sector
with additional fees for the roles of
Chair of the Company and Chair of the
Committees.
There are no performance conditions
relating to non-executive Directors fees.
As per previous AGM resolutions, Shareholders will be asked to consider a non-binding vote for the approval of the following
Directors’ Remuneration Implementation Report, which reports on how the Remuneration Policy has operated during the year
ended 30 September 2020.
The result of the shareholder votes on the Directors’ Remuneration Policy and the latest Implementation Report were as follows:
Votes for
Votes against
Votes abstained
Remuneration Policy
Implementation Report
for the year ended
30 September 2019
Approved at AGM on
26 February 2020
Approved at AGM on
26 February 2020
99.99%
0%
0.01%
99.99%
0%
0.01%
The Board considers this level of support from shareholders a positive endorsement of both its Remuneration Policy and the policy
implementation. There has been no communication from shareholders regarding any aspect of the Directors’ remuneration.
50
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Corporate Governance
Implementation Report
Directors’ Remuneration Paid for the Year Ended 30 September 2020
Annual Fees Review
The Board undertook the annual review of the fees paid to the Directors in October 2020 and agreed that no change would
be made to fees for the year commencing 1 October 2020. The previous change to Directors’ fees had been made in 2019
(effective from 1 October 2019).
In accordance with the Shareholder Rights Directive. The Board confi rms that there were no variable pay awards made to the
Directors and there were no deferral periods or share based pay equivalents. T he annual percentage change in remuneration in
respect of the fi ve fi nancial years prior to the current year in respect of each Director role is as follows:
Financial year to:
Chair
Non- executive Director
Chairman of the Audit Committee Supplement
30 Sept
2015
30 Sept
2016
30 Sept
2017
30 Sept
2018
30 Sept
2019
–
–
–
–
–
–
–
–
–
5.7%
6.0%
–
–
–
–
30 Sept
2020
5.4%
5.7%
10.0%
The review of Directors’ fees is carried out on an annual basis and involves consideration of the time and commitment required
of the Directors, including any signifi cant increase in requirements due to regulatory or other changes. For comparative purposes
the remuneration awarded to directors of similar companies and general market data is also considered. While such a review will
not necessarily result in any change to the rates the Committee believes that it is important that these reviews happen annually.
The appointment of an external remuneration consultant was considered unnecessary. No Director is involved in deciding their
own remuneration and all Directors exercise independent judgement and discretion when considering fees.
Expenses
The Directors are entitled to be reimbursed for reasonable expenses incurred by them in connection with the performance of
their duties and attendance at Board and General Meetings. In certain circumstances, under HMRC rules travel and other out
of pocket expenses reimbursed to the Directors may be considered as taxable benefi ts. Where expenses are classifi ed as taxable
under HMRC guidance, they are paid gross and shown in the taxable column of the Directors remuneration table. The taxable
expenses comprise of travel and associated expenses incurred by the Directors attending the Board meetings held in London.
The policy for claiming such expenses was not changed during the year.
Letters of Appointment
In accordance with recommended practice, each Director has received a letter setting out the terms of their appointment. None
of the Directors have a contract of service or a contract for services and a Director may resign by giving notice in writing to the
Board at any time. The Directors are not entitled to payment for loss of offi ce.
New Directors are appointed and elected with the expectation that they will serve for a period of at least three years. In
accordance with the Articles of Association any new Director is required to stand for election at the fi rst AGM following their
appointment, and in accordance with good corporate governance practice all directors shall stand for re-election every year
following their fi rst election by shareholders. There is no requirement for Directors to hold shares in the Company or Group.
Directors’ and Offi cers’ Liability Insurance
Directors’ and Offi cers’ liability insurance cover is held by the Company in respect of the Directors. The Company has, to the
extent permitted by law and the Company’s Articles of Association, provided each Director with a Deed of Indemnity which,
subject to the provisions of the Articles of Association and s234 of the Companies Act 2006, qualifying third party indemnity
provisions , indemnifi es the Director in respect of costs which they may incur relating to the defence of any proceedings brought
against them arising out of their position as Directors (excluding criminal and regulatory penalties). Directors’ legal costs may be
funded up-front provided they reimburse the Company if the individual is convicted or, in an action brought by the Company,
judgment is given against them. These provisions were in force during the year and remain in force at the date of this report.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
51
Corporate Governance
Directors’ Remuneration Report continued
Remuneration (Audited)
In the year under review the Directors’ fees were paid at the following annual rates, the Chair £39,000; other Directors £28,000
with the Chairman of the Audit Committee receiving an extra £5,500 supplement for performing that additional role.
Year ended 30 September 2020
Year ended 30 September 2019
Director
Lisa Arnold
(appointed Chair on 26 February 2020)
Neal Ransome
(Chairman of the Audit and Management
Engagement Committees)
Andrew Fleming
(appointed on 1 December 2019)
Jeremy Whitley
(appointed on 1 December 2019)
James Robinson
(Chairman, retired on 26 February 2020
Anthony Brampton
(retired on 26 February 2020)
TOTAL*
*See note 8 on page 83
Fixed fee
£34,417
£33,500
£23,333
Taxable
expenses
Total
remuneration
Fixed fee
Taxable
expenses
Total
remuneration
–
–
–
£34,417
£26,500
£33,500
£31,500
£23,333
–
–
–
–
–
–
£26,500
£31,500
–
–
£23,333
£296
£23,629
£16,250
£124
£16,374
£37,000
£102
£37,102
£11,667
–
£11,667
£26,500
–
£26,500
£142,500
£420
£142,920
£121,500
£102
£121,602
No pension or other contributions were paid by the Company during the year to any of the Directors. Consequently, the fi gures
shown above comprise the single total remuneration fi gure for each Director.
Directors’ Share Interests (Audited)
The interests of Directors in the ordinary shares of the Company on 30 September 2020 (and 2019):
Lisa Arnold
Andrew Fleming
Neal Ransome
Jeremy Whitley
2020
20,000
10,000
10,073
20,000
2019
10,000
–
10,073
–
There have been no changes in these interests between the end of the fi nancial year and 14 December 2020.
52
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Corporate Governance
Performance
The Regulations require a line graph to be included in the Directors’ Remuneration Report showing the total shareholder return
for each of the fi nancial years in the relevant period. The Company was incorporated on 12 May 2010 and commenced trading
on 15 June 2010, the performance comparison is therefore shown for the period from 15 June 2010. Each subsequent annual
graph is required to increase by one year until the maximum relevant period of ten years is reached; thereafter the relevant
period will continue to be ten years.
500
400
300
200
100
0
Jun
2010
Company reconstruction 20 June 2017
Sep
2010
Mar
2011
Sep
2011
Mar
2012
Sep
2012
Mar
2013
Sep
2013
Mar
2014
Sep
2014
Mar
2015
Sep
2015
Mar
2016
Sep
2016
Mar
2017
Sep
2017
Mar
2018
Sep
2018
Mar
2019
Sep
2019
Mar
2020
Sep
2020
MSCI ACWI Health Care Index in sterling with dividends reinvested (TR)
Ordinary Share Price (TR)
(TR: Total Return, rebased to 100 at June 2010)
The MSCI ACWI Healthcare Index (total return in sterling with dividends reinvested) is used as the comparator because, as a
market capitalisation weighted index, the Board considers that it is the most appropriate single market index.
Relative Importance of Spend on Pay
Under the Regulations, the Directors’ Remuneration Report must set out in a graphical or tabular form that shows in respect
of the relevant fi nancial year and the immediately preceding fi nancial year the actual expenditure of the company, and the
difference in spend between those years, on remuneration paid to or receivable by all employees of the group; and distributions
to shareholders by way of dividend and share buyback; and any other signifi cant distributions and payments or other uses of
profi t or cash-fl ow deemed by the directors to assist in understanding the relative importance of spend on pay.
The Company has no employees and the Directors do not consider that the comparison of Directors’ remuneration with
distributions to shareholders is a meaningful measure of the Company’s overall performance having regard to the Company’s
objective of capital growth.
Approved by the Board on 14 December 2020
Lisa Arnold
Chair
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
53
Corporate Governance
Audit Committee
Report
Neal Ransome
Chairman of the Audit Committee
I am pleased to present my third Report to you as Chairman of the Audit
Committee. The Committee has written terms of reference which are available to
view on the Company’s website, www.polarcapitalhealthcaretrust.co.uk.
The Committee comprises all the Directors and the Board
is satisfi ed that the Committee has suffi cient recent
and relevant fi nancial experience and, as a whole, has
competence relevant to the sector in which the Company
operates to discharge its functions effectively. The experience
of the members of the Committee can be assessed from
the Directors’ biographies set out on pages 6 and 7. I am
a chartered accountant and a former partner and head
of the pharmaceutical and healthcare M&A practice of
PricewaterhouseCoopers LLP (‘PwC’). I hold the ICAEW’s FCA,
BFP and CF qualifi cations and am therefore deemed to have
appropriate experience and expertise to carry out the role of
Chairman of the Audit Committee.
PwC (or the ‘Auditor’) has been Auditor of the Company
since 2010 and has completed ten years of engagement. The
audit partner who led our statutory audit for the year under
review was Catrin Thomas, who has completed her third
audit of the Company.
During the year the Audit Committee met four times, with
all members of the Committee attending each meeting.
Meetings held since March 2020 have changed somewhat
due to the restrictions in place in relation to the COVID-19
pandemic. Work has been completed remotely using
technology, such as zoom video-conferencing and online
Diligent Boardbooks. I am pleased to confi rm that this has
worked well, with Committee members able to operate
as effectively as before and with no break in service from
external providers.
Matters C onsidered in C onnection with
the F inancial Y ear E nded 30 September
2020:
During the year the Audit Committee considered a variety of
matters, including:
Audit Regulation
(cid:129)
In a change to the previous two years, the Audit
Committee has not this year had to consider any new
audit regulations. It does, however, continually review
guidance and determine how to apply any relevant best
practice to the Company. The Committee also reviews the
outcomes of the FRC’s annual Audit Quality Reviews and
discusses the fi ndings with our Auditor.
Annual External Audit
(cid:129)
the scope of the annual audit and agreement with the
Auditor of the key areas of focus;
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
the reports from the Auditor concerning their audit of the
annual fi nancial statements of the Company;
the performance of the Auditor and the level of fees
charged for their services;
the independence and objectivity of the Auditor;
the appointment of the Auditor;
the policy for non-audit services which may be provided
by the Auditor in line with the FRC guidance; and
the extent of the non-audit services, the quality of such
work and the fees.
54
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Corporate Governance
Internal Audit
(cid:129)
the potential need for an internal audit function, which
we continue to conclude is unnecessary for an externally
managed investment trust.
Internal Controls and Risk
(cid:129)
the risk map covering the identifi cation of new risks,
adjustments to existing risks and the mitigation and
controls in place to manage those risks; and
Accounting Matters
(cid:129)
the appropriateness and any changes to the accounting
policies of the Company including any judgements
required by such policies and the reasonableness of such.
The Committee confi rmed there have been no changes to
any accounting policies in the year under review;
(cid:129)
(cid:129)
the fi nancial disclosures contained in the Annual Report
and Half Year Report to shareholders; and
the going concern statement, longer-term viability
statement and the requirement that the Annual Report
and Financial Statements when taken as a whole are fair,
balanced and understandable.
The Company’s Subsidiary, PCGH ZDP Plc
The Audit Committee also considers the fi nancial
(cid:129)
statements and audit requirements of the Company’s
wholly owned subsidiary, PCGH ZDP Plc. IFRS9 became
effective for annual periods beginning on or after
1 January 2018. This accounting standard specifi es how
an entity should classify and measure fi nancial assets,
liabilities and some contracts. PCGH ZDP Plc has advanced
a loan to the Company which falls within the scope of this
accounting standard. As required by IFRS9, an impairment
review has been conducted to assess the possibility of
the Company defaulting on its liability to PCGH ZDP Plc.
It has been concluded that the possibility of default is
negligible, and that accordingly no adjustment is required
to the carrying value of the loan in the accounts of
PCGH ZDP Plc. A note on this matter has been included
in the fi nancial statements of PCGH ZDP Plc. The liability
to PCGH ZDP Plc is the equivalent of the redemption
value of the ZDP Shares being 122.99p per ZDP Share
and becomes payable on 19 June 2024. The Company’s
minimum asset cover required to fulfi l the loan covenant
is 1.8x. During the year under review the lowest asset
cover available at month end was 7.69 and the highest
was 9.35.
Investment Matters
(cid:129)
the investment management process, including
confi rmation of the existence and ownership of
investments through the review of quarterly Depositary
Reports and meeting with the Depositary in relation to the
safeguarding of the Company’s assets.
(cid:129)
reports from the Investment Manager and the Investment
Manager’s external Auditor on the effectiveness of the
system of internal fi nancial controls including the risk
map.
Dividend Policy
(cid:129)
the Committee considered the Company’s Dividend
Policy as approved by Shareholders at the Annual General
Meeting held in February 2020 and recommended to the
Board that it continue in force. The Dividend Policy will be
proposed for approval by Shareholders at the Company’s
AGM to be held in January 2021.
Consideration of the Half Year Report and
Financial Statements
Prior to publication, the Committee considered and reviewed
the Half Year Report and Financial Statements, which
were not audited, to ensure that they were prepared on a
basis consistent with the accounting policies used in the
Annual Report and Financial Statements for the year ended
30 September 2019.
Consideration o f the Annual Report a nd
Financial Statements
The Committee performed this role through monitoring the
integrity of the fi nancial statements of the Company and
the system of accounting to ensure compliance with the
relevant and appropriate accounting standards. The scope
of the audit was agreed in advance with a focus on areas
of audit risk and the appropriate level of audit materiality.
The Auditor reported on the results of the audit work to the
Committee and highlighted any issues which the audit work
had discovered, or the Committee had previously identifi ed
as signifi cant or material in the context of the fi nancial
statements. Following a comprehensive review process the
Audit Committee presented its conclusions to the Board.
Signifi cant Matters in Relation to the Financial
Statements for the Year Ended 30 September
2020
In addition to the matters considered by the Committee
informing its opinions on going concern and longer-term
viability (described below) and in concluding that the Annual
Report and Financial Statements when taken as a whole
are fair, balanced and understandable, the Committee also
considered the following matters in relation to the fi nancial
statements:
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
55
Corporate Governance
Audit Committee Report continued
Signifi cant Matter
How the Issue was Addressed
Valuation, existence and ownership of
investments
The valuation is carried out in accordance with the accounting policies of the
Company as described in note 2. The Depositary has reported on its work and safe
keeping of the Company’s investments and a report from the Depositary is provided
on the Company’s website www.polarcapitalhealthcaretrust.co.uk
Compliance with S1158 of the
Corporation Tax Act 2010
Consideration of compliance with the requirements of investment trust status is
carried out at each Board meeting throughout the year.
Stability and fi nancial sustainability of
the subsidiary in relation to structural
gearing provided to the parent company
The ZDP shares issued by the subsidiary are traded and maintain a standard listing
on the London Stock Exchange. The valuation of the subsidiary is monitored
regularly by the Board and the subsidiary is subject to an independent audit by
PwC.
There were no adverse matters brought to the Audit
Committee’s attention in respect of the 2020 audit which
were material or signifi cant, or which should be brought to
Shareholders’ attention.
Conclusions in Respect of the Annual Report
and Financial Statements
The production and audit of the Company’s Annual Report
and Financial Statements is a comprehensive process
requiring input from different contributors. In order to
reach the conclusion that the Annual Report and Financial
Statements when taken as a whole are fair, balanced and
understandable, the Board has requested that the Committee
advise on whether it considers these criteria satisfi ed. In so
doing the Committee has considered the following:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
the comprehensive control framework around the
production of the Annual Report, including the
verifi cation processes in place to deal with the factual
content;
the extensive levels of review undertaken in the
production process, by the Investment Manager and the
Committee;
the internal control environment as operated by the
Investment Manager and other suppliers including any
checks and balances within those systems; and
the unqualifi ed audit report from the Auditor confi rming
their work based on substantive testing of the fi nancial
statements.
As a result of the work performed, the Committee has
concluded that the Annual Report and Financial Statements
for the year ended 30 September 2020, taken as a whole,
are fair, balanced and understandable and provide the
information necessary for shareholders to assess the
Company’s performance, business model and strategy, and it
has reported on these fi ndings and provided such conclusion
to the Board.
External Audit – Year Ended
30 September 2020
Effectiveness of Audit Process
The Audit Committee monitored and evaluated the
effectiveness of the Auditor and any changes in the terms
of their appointment based on an assessment of their
performance, qualifi cation, knowledge, expertise and
resources. The Auditor’s independence was also considered
along with other factors such as audit planning and
interpretations of accounting standards. This evaluation has
been carried out throughout the year by meetings held with
the Auditor, by review of the audit process and by comments
from the Investment Manager and others involved in the
audit process. Based on its review the Audit Committee
concluded that the Auditor remained independent and
continued to act in an independent manner.
The Auditor is provided with an opportunity to address the
Committee without the Investment Manager present to raise
any concerns or discuss any matters relating to the audit work
and the cooperation of the Investment Manager and others
in providing information and the quality of that information
including the timeliness in responding to audit requests.
Appointment of Auditors; Fees and Tenure
The Committee considers by way of meetings and reports,
the appointment, remuneration and work of the Auditor.
PwC have provided audit services to the Company from its
incorporation in 2010 and to the Group since 2017.
The fees paid to PwC in respect of the audit of the annual
Financial Statements amounted to £3 8,000 (2019: £26,325).
The fees paid to PwC in respect of the audit of the fi nancial
statements of the Company’s wholly owned subsidiary, PCGH
ZDP Plc, were £6,000 (2019: £5,175). These fees represent
a signifi cant increase over the prior year. The increase,
whilst unwelcome, is in line with increases experienced
across the investment trust sector in the current year. Audit
fi rms generally have increased the fees that they charge
to investment trusts in order to refl ect the increased level
56
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Corporate Governance
of work that they have been required to perform, and the
increased risk that they bear, in the context of more rigorous
levels of audit scrutiny and regulation.
Non-audit Work
The Audit Committee’s policy on the provision of non-
audit services by the Auditor is to ensure that there is a
clear separation of audit work and non-audit work and
that the cost of any non-audit work is justifi ed and is not
disproportionate to the audit fees, to the extent that the
independence of the Auditor would be compromised. In
line with the FRC ethical standards issued in April 2016, the
nature of any non-audit services is considered in respect of
their permissibility and any such services must be
pre-approved by the Audit Committee. The FRC revised the
Ethical Standards, with effect from 15 March 2020, to contain
a more concise list of non-audit services that the Company’s
statutory auditor is permitted to complete, replacing the long
list of excluded services which had been introduced with the
EU Audit Directive in 2016.
A copy of the Company’s Non-Audit Services Policy is
available on the Company’s website. When non-audit services
are proposed, the Committee undertakes a review of the
services to satisfy itself that these are proposed within the
terms of the policy and in an effi cient and cost-effective way.
In both the year under review and the prior year, no non-
audit services were provided by the Auditor.
Other Signifi cant Issues Considered by
the Audit Committee During the Year
The Impact of COVID-19
The COVID-19 pandemic has dominated the 2020 calendar
year and the Committee continues to consider its effects on
the Company and the portfolio. The pandemic has affected
the global economy with widespread market disruption and
volatility which is likely to continue for some time. Further
detail on the direct impact the market disruption has had on
the portfolio is given in the Investment Managers’ Report on
pages 11 to 22.
The Committee has also reviewed the operational resilience
of its various service providers in connection with mitigation
of the business risks posed by COVID-19. The external service
providers have, without exception, demonstrated their ability
to continue to provide services to the expected level, whilst
doing so remotely. The Committee was assured by the level
of detail and transparency offered by the service providers
in reporting how they had committed resources in adapting
their businesses to operate remotely for a longer period than
many business continuity plans expect to be in operation
for. We were greatly assured by the confi rmation of no
operational failures being experienced.
External Audit Tender
In accordance with current legislation, the Company is
required to instigate an audit tender process at least every
10 years and will have to change its auditor after a maximum
of 20 years’ engagement. The Committee announced its
intention in last year’s report to undertake a tender process
as a result of PwC’s ten-year anniversary as auditors of the
Company. The Committee led a full tender process through
the latter half of 2020 which completed in November 2020
in compliance with legislation and having regard to the FRC
guidance on audit tenders.
As part of the tender process, three potential fi rms plus the
incumbent were approached to submit proposals, receipt of
the proposals was followed by virtual presentations to the
audit committee from three fi rms. Firms were assessed on
a range of criteria including independence, proposed audit
approach, sector experience, fee level and quality of team.
Following the conclusion of the audit tender process,
the Committee recommended to the Board that PwC be
re-appointed as independent auditor of both the Company
and the subsidiary for the fi nancial year ending 30 September
2021 subject to shareholder approval at the AGM in
January 2021, and following the Board’s acceptance of such
recommendation this was announced to the market on
1 December 2020.
PwC have confi rmed their continued independence and have
expressed their willingness to be appointed , in accordance
with s487 of the Companies Act 2006. A resolution
proposing their re-appointment and to authorise the Directors
to determine their remuneration will therefore be proposed at
the AGM.
The Accounting Implications of Brexit
The Committee has noted the FRC’s Letter on Accounting
& Corporate Reporting during the Brexit transition period,
which outlines that:
(cid:129)
(cid:129)
During the transition period there will be no changes to
the UK’s accounting and corporate reporting framework
and the Company can continue to prepare the Financial
Statements under EU adopted International Accounting
Standards (“IASs”) up to 30 September 2021.
In connection with any new or amended standards that
are adopted by the UK after the transition period but
before the Company fi les accounts for the year ending
30 September 2021, the Company can either continue
to use EU-adopted IASs or choose to apply the new
UK-adopted IASs.
(cid:129)
From the fi nancial year ending 30 September 2022 the
Company will be required to prepare fi nancial statements
using UK-adopted IASs.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
57
Corporate Governance
Audit Committee Report continued
The Government is in the process of establishing the UK
Endorsement Board (UK EB) to undertake the work of
assessing, endorsing, and adopting any new or amended
IASs published. The FRC will provide communication on any
changes that come into effect after the end of the transition
period and we will report this to our shareholders in the
Annual Report in which this takes effect.
European Single Electronic Format (ESEF)
The Committee has noted ESEF Regulations which will
now come into force for accounting years starting on or
after 1 January 2021. The ESEF regulations will require
the Company, and all issuers of consolidated accounts
prepared in accordance with IFRS and trading on a regulated
market, to publish their annual fi nancial statements in
a common electronic format. The regulations will fi rst
apply to the Company for the accounting year ending
30 September 2022.
Overview of Risk and Internal Controls
The Board has ultimate responsibility for the management
of risk throughout the Company and has asked the Audit
Committee to assist in maintaining an effective internal
control environment. The Company maintains a Risk Map
which seeks to identify, monitor and control principal risks as
well as identifying emerging risks. This Risk Map is regularly
reviewed by the Audit Committee.
During the year the Audit Committee, in conjunction with
the Board and the Investment Manager undertook a full
review of the Company’s Risk Map including the mitigating
factors and controls to reduce the impact of the risks, and
made a number of amendments including the introduction
of a Heat Map providing a visual refl ection of the Company’s
identifi ed risks. This review, and the content of the Risk Map,
is described in more detail within the Strategic Report on
pages 28 to 31.
The Audit Committee will actively continue to monitor the
system of internal controls through the regular review of the
Risk Map and the internal control environment in order to
provide assurance that they continue to operate as intended.
As part of the year end processes the Audit Committee also
undertook a review of the effectiveness of the system of
internal controls considering any issues that had arisen during
the course of the year.
The Committee acknowledges that the Company is reliant
on the systems utilised by external suppliers. Representatives
of the Investment Manager reported to the Committee
on the system of internal controls that is in place for the
performance of the Investment Manager’s duties under the
IMA. The Committee also received presentations and internal
control reports from other key suppliers on the quality and
effectiveness of the services provided to the Company.
Employees of the Manager also conducted a virtual due
diligence site visit with HSBC where they received thorough
presentations from representatives covering the work of the
Operations, Risk Administration and Accounting Teams, in
addition to the Custodian and Depositary. No matters of
concern with any areas of service were raised during the
meetings with HSBC.
The Audit Committee has also discussed with the Investment
Manager their policies on whistleblowing, cyber security, anti-
bribery and the Modern Slavery Act and is satisfi ed that the
Investment Manager has controls and monitoring processes
to implement their policies across the main contractors which
supply goods and services to the Investment Manager and
indirectly to the Company.
The Audit Committee also considered the policy and controls
used by the Investment Manager surrounding the use of
brokerage commissions generated from transactions in the
Company’s portfolio and the obtaining of best execution on
all transactions.
There were no signifi cant issues of concern arising from the
reviews of or within the internal controls environment the
Company relied upon during the course of the year ended 30
September 2020 and up to the date of this report.
Going Concern and Longer-term Viability
Going Concern
At the request of the Board the Audit Committee has
considered the ability of the Company to adopt the going
concern basis for the preparation of the Financial Statements.
The Committee has considered the fi nancial position of
the Company, its cashfl ows and its liquidity position. The
Committee has also considered any material uncertainties and
events that might cast signifi cant doubt upon the Company’s
ability to continue as a going concern. The Audit Committee
has considered:
(cid:129)
(cid:129)
(cid:129)
the ability of the Company to liquidate its portfolio to
meet any liabilities as they fall due;
the level of budgeted expenses and the exposure to
currency and credit risk; and
the factors impacting the forthcoming year as set out
in the Strategic Report Section and comprising the
Chair ’s Statemnt, the Investment Manager’s Report and
the Strategic Review. These factors include the effects
and possible impact of the COVID-19 pandemic on the
Company and the investment portfolio.
58
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Corporate Governance
The fi nancial position of the Company and its cash fl ows and
liquidity position are described in the Strategic Report and
the Financial Statements. Note 26 to the Financial Statements
includes the Company’s policies and process for managing
its capital; its fi nancial risk management objectives; details
of fi nancial instruments and hedging activities. Exposure to
credit risk and liquidity risk are also disclosed.
In considering the effects of COVID-19, the Committee has
continually monitored the Company’s fi nancial performance
during the period of market volatility and economic
uncertainty since the outset of the pandemic.
Based on the information provided to the Committee and
its assessment of the fi nancial position of the Company, the
Committee has recommended that a going concern basis
should be adopted by the Board for the preparation of the
Financial Statements for the year ended 30 September 2020.
Longer- term Viability
The Board has also asked the Audit Committee to address
the requirement that a longer-term viability statement be
provided to Shareholders.
This statement should take account of the Company’s current
position and the principal risks as set out on pages 2 8 to 31
so that the Board may state that they have a reasonable
expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the
period of their assessment.
To provide this assessment, the Audit Committee has
considered the Company’s fi nancial position as described
above including its ability to liquidate its portfolio and meet
its expenses as they fall due:
(cid:129)
the portfolio comprises investments traded on
major international stock exchanges, and there is
a spread of investments by market capitalisation of
company. Approximately 96.6% of the portfolio as at
30 September 2020 could be liquidated within seven
trading days and there is no expectation that the nature
of the investments held within the portfolio will be
materially different in future;
(cid:129)
the expenses of the Company are predictable and modest
in comparison with the assets of the Company and there
are no capital commitments foreseen which would alter
that position; and
(cid:129)
the Company has no employees and consequently has no
employment-related liabilities or responsibilities.
Committee has also had regard to the following assumptions
in considering the Company’s longer-term viability:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
healthcare will continue to be an investable sector of the
international stock markets and investors will still wish to
have an exposure to such investments;
closed ended investment trusts will continue to be wanted
by investors;
regulation will not increase to a level that makes the
running of the Company uneconomical in comparison to
other competitor products;
should the performance of the Company be less than
the Board deems acceptable it has appropriate powers to
replace the Investment Manager; and
there will be no material or signifi cant changes in the
principal risks and uncertainties.
In addition to the above, the Company carried out stress
testing in connection with the Company’s principal risks.
Where a material value could be placed and evaluated, the
effect of this on the Company’s viability was assessed. The
results of the testing demonstrated the impact on the NAV
and confi rmed the Company’s ability to meet its liabilities as
they fall due.
The Audit Committee also notes that, in the absence of any
prior proposals, the Company’s Articles of Association require
the Directors to put forward at the fi rst AGM following
1 March 2025 a resolution to place the Company into
liquidation. The voting on that resolution will be enhanced
such that, provided any single vote is cast in favour, the
resolution will be passed.
Based on these considerations the Audit Committee has
recommended to the Board that a statement may be made
on the Company’s longer-term viability to continue its
operations and meet its expenses and liabilities as they fall
due until the liquidation vote at the fi rst AGM following
1 March 2025.
Effectiveness of the Audit Committee
The services provided to the Board by the Audit Committee
are reviewed within the Annual Board Evaluation, including
consideration of actions undertaken by the Audit Committee
with the Investment Manager and Auditor to ensure an
appropriate audit process is undertaken. I am pleased to
confi rm that the evaluation result was positive and no matters
of concern or requirements for change were highlighted.
As well as considering the principal risks and uncertainties
on pages 2 8 to 31, together with the mitigating factors
which are assumed to operate appropriately, and the
fi nancial position of the Company as set out above, the Audit
Neal Ransome
Chairman of the Audit Committee
14 December 2020
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
59
Corporate Governance
Statement of Directors’ Responsibilities
Statement of directors’ responsibilities in
respect of the fi nancial statements
The directors are responsible for preparing the Annual Report
and the fi nancial statements in accordance with applicable
law and regulation.
Company law requires the directors to prepare fi nancial
statements for each fi nancial year. Under that law the directors
have prepared the group fi nancial statements in accordance
with International Financial Reporting Standards (IFRSs) as
adopted by the European Union. Under company law the
directors must not approve the fi nancial statements unless they
are satisfi ed that they give a true and fair view of the state
of affairs of the group and company and of the profi t or loss
of the group and company for that period. In preparing the
fi nancial statements, the directors are required to:
select suitable accounting policies and then apply them
consistently;
state whether applicable IFRSs as adopted by the
European Union have been followed for the group
fi nancial statements and IFRSs as adopted by the
European Union have been followed for the company
fi nancial statements, subject to any material departures
disclosed and explained in the fi nancial statements;
Directors’ confi rmations
The directors consider that the annual report and accounts,
taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess
the group and company’s position and performance, business
model and strategy.
Each of the directors, whose names and functions are listed
in the Strategic Report confi rm that, to the best of their
knowledge:
(cid:129)
(cid:129)
(cid:129)
the company fi nancial statements, which have been
prepared in accordance with IFRSs as adopted by the
European Union, give a true and fair view of the assets,
liabilities, fi nancial position and profi t of the company;
the group fi nancial statements, which have been prepared
in accordance with IFRSs as adopted by the European
Union, give a true and fair view of the assets, liabilities,
fi nancial position and profi t of the group; and
the Strategic Report includes a fair review of the
development and performance of the business and the
position of the group and company, together with a
description of the principal risks and uncertainties that it
faces.
make judgements and accounting estimates that are
reasonable and prudent; and
In the case of each director in offi ce at the date the Directors’
Report is approved:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
so far as the director is aware, there is no relevant audit
information of which the group and company’s auditors
are unaware; and
they have taken all the steps that they ought to have
taken as a director in order to make themselves aware
of any relevant audit information and to establish that
the group and company’s auditors are aware of that
information.
Lisa Arnold
Chair
14 December 2020
prepare the fi nancial statements on the going concern
basis unless it is inappropriate to presume that the group
and company will continue in business.
The directors 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 keeping adequate
accounting records that are suffi cient to show and explain
the group and company’s transactions and disclose with
reasonable accuracy at any time the fi nancial position of the
group and company and enable them to ensure that the
fi nancial statements and the Directors’ Remuneration Report
comply with the Companies Act 2006 and, as regards the
group fi nancial statements, Article 4 of the IAS Regulation.
The directors are responsible for the maintenance and
integrity of the company’s website. Legislation in the United
Kingdom governing the preparation and dissemination of
fi nancial statements may differ from legislation in other
jurisdictions.
60
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Corporate Governance
Independent auditors’ report to the
members of Polar Capital Global
Healthcare Trust plc
Report on the audit of the fi nancial statements
Opinion
In our opinion, Polar Capital Global Healthcare Trust plc’s Group fi nancial statements and Company fi nancial statements (the
“fi nancial statements”):
(cid:129)
(cid:129)
give a true and fair view of the state of the Group’s and of the Company’s affairs as at 30 September 2020 and of the
Group’s profi t and the Group’s and the Company’s cash fl ows for the year then ended;
have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union and, as regards the Company’s fi nancial statements, as applied in accordance with the provisions of the
Companies Act 2006; and
(cid:129)
have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group fi nancial
statements, Article 4 of the IAS Regulation.
We have audited the fi nancial statements, included within the Report and Financial Statements (the “Annual Report”), which
comprise: the Group and Company Balance Sheets as at 30 September 2020; the Group Statement of Comprehensive Income,
the Group and Company Cash fl ow Statement, and the Group and Company Statement of Changes in Equity for the year then
ended; and the notes to the fi nancial statements, which include a description of the signifi cant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the fi nancial statements
section of our report. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for
our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the
fi nancial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we
have fulfi lled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not
provided to the Group or the Company.
We have provided no non-audit services to the Group or the Company in the period from 1 October 2019 to 30 September
2020.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
61
Corporate Governance
Independent Auditors’ Report continued
Our audit approach
Overview
(cid:129) Overall Group materiality: £3.25 million (2019: £2.88 million), based on 1% of net assets.
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
Overall Company materiality: £3. 25 million (2019: £2.88 million), based on 1% of net
assets.
The Group is an Investment Trust Company and engages Polar Capital LLP (the “Manager”)
to manage its assets.
We conducted our audit of the fi nancial statements using information from HSBC Securities
Services (the “Administrator”) to whom the Manager has, with the consent of the Directors,
delegated the provision of certain administrative functions.
We tailored the scope of our audit taking into account the types of investments within the
Company, the involvement of the third parties referred to above, the accounting processes
and controls, and the industry in which the Company operates.
We obtained an understanding of the control environment in place at both the Manager
and the Administrator and adopted a fully substantive testing approach using reports
obtained from the Administrator.
(cid:129) Valuation and existence of investments (Group and Company).
(cid:129)
Income from investments (Group and Company).
(cid:129) Consideration of the impact of COVID-19 (Group and Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the fi nancial
statements. In particular, we looked at where the Directors made subjective judgements, for example in respect of signifi cant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group and industry, we identifi ed that the principal risks of non-compliance with laws and
regulations related to breaches of section 1158 of the Corporation Tax Act 2010 (see page 56 of the Annual Report), and we
considered the extent to which non-compliance might have a material effect on the fi nancial statements. We also considered
those laws and regulations that have a direct impact on the preparation of the fi nancial statements such as the Companies
Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the fi nancial statements
(including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal
entries to increase revenue (investment income and capital gains) or to increase net asset value, and management bias in
accounting estimates. The Group engagement team shared this risk assessment with the component auditors so that they
could include appropriate audit procedures in response to such risks in their work. Audit procedures performed by the Group
engagement team and/or component auditors included:
(cid:129)
discussions with the manager and the audit committee, including consideration of known or suspected instances of non-
compliance with laws and regulation and fraud;
(cid:129)
reviewing relevant meeting minutes, including those of the Audit Committee;
62
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Corporate Governance
(cid:129) evaluation of the controls implemented by the Company and the Administrator designed to prevent and detect irregularities;
(cid:129)
(cid:129)
assessment of the Company’s compliance with the requirements of section 1158 of the Corporation Tax Act 2010, including
recalculation of numerical aspects of the eligibility conditions;
identifying and testing journal entries, in particular year end journal entries posted by the administrator during the
preparation of the fi nancial statements and any journals with unusual account combinations; and
(cid:129) designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and
regulations is from the events and transactions refl ected in the fi nancial statements, the less likely we would become aware
of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through
collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most signifi cance in the audit of the
fi nancial statements of the current period and include the most signifi cant assessed risks of material misstatement (whether
or not due to fraud) identifi ed by the auditors, including those which had the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments
we make on the results of our procedures thereon, were addressed in the context of our audit of the fi nancial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete
list of all risks identifi ed by our audit.
Key audit matter
Valuation and existence of investments
Refer to the Audit Committee Report (page 56), the
Accounting Policies (pages 78 and 79) and the Notes to the
fi nancial statements (page 86).
The investment portfolio at the year-end comprised listed
equity investments valued at £ 342.40m.
We focused on the valuation and existence of investments
because investments represent the principal element of the
net asset value as disclosed in the Balance Sheets in the
fi nancial statements.
This key audit matter relates to both the Group and the
Company.
How our audit addressed the key audit matter
We tested the valuation of the listed equity investments by
agreeing the prices used in the valuation to independent third
party sources.
No material misstatements were identifi ed by our testing.
We tested the existence of the investment portfolio by
agreeing investment holdings to an independent confi rmation
obtained from the custodian, HSBC Bank plc.
No differences were identifi ed.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
63
Corporate Governance
Independent Auditors’ Report continued
Key audit matter
Income from investments
Refer to the Accounting Policies (pages 77 to 79) and the
Notes to the fi nancial statements (pages 82 and 86).
We focused on the accuracy, occurrence and completeness
both of net capital gains on investments and of dividend
income recognition. We assessed the presentation of
income in the Group Statement of Comprehensive Income
in accordance with the requirements of The Association of
Investment Companies’ Statement of Recommended Practice
(the “AIC SORP”).
ISAs (UK) presume there is a risk of fraud in income
recognition. We considered this risk to relate to the risk
of overstating investment gains and the misclassifi cation
of dividend income as either capital or revenue due to the
pressure management may feel to achieve a certain level of
capital or income growth in line with the objective of the
Company and in order to maintain the level of dividends paid
to shareholders in line with the dividend policy.
This key audit matter relates to both the Group and the
Company.
How our audit addressed the key audit matter
We assessed the accounting policy for income recognition for
compliance with accounting standards and the AIC SORP and
performed testing to check that income had been accounted
for in accordance with this stated accounting policy.
We found that the accounting policies implemented were in
accordance with accounting standards and the AIC SORP, and
that income has been accounted for in accordance with the
stated accounting policy.
We tested the accuracy of dividend receipts by agreeing the
dividend rates from investments to independent market data.
No material misstatements were identifi ed.
We tested occurrence by testing that all dividends recorded
in the year had been declared in the market by investment
holdings, and we traced a sample of dividends received to
bank statements. Our testing did not identify any material
misstatements.
To test for completeness, we tested that the appropriate
dividends had been received in the year by reference to
independent data of dividends declared for all dividends
during the year. Our testing did not identify any unrecorded
dividends.
We also tested the allocation and presentation of dividend
income between the revenue and capital return columns of
the Income Statement in line with the requirements set out
in the AIC SORP by determining reasons behind dividend
distributions. Our procedures did not identify any material
misstatements.
The gains/losses on investments held at fair value comprise
realised and unrealised gains/losses. For unrealised gains
and losses, we tested the valuation of the portfolio at the
year-end, together with testing the reconciliation of opening
and closing investments. For realised gains/losses, we tested
a sample of disposals by agreeing the proceeds to bank
statements and we re-performed the calculation of a sample
of realised gains/losses.
No misstatements were identifi ed by our testing.
64
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Corporate Governance
Key audit matter
Consideration of the impact of COVID-19
Refer to the Chair ’s Statement (page 4), Principal Risks and
Uncertainties (pages 2 8 to 31), Audit Committee Report
(page 57), Viability Statement (page 59), and the Going
Concern Statement (pages 58 and 59), which disclose the
impact of the COVID-19 coronavirus pandemic.
From a small number of cases of an unknown virus in 2019,
the COVID-19 viral infection has become a global pandemic.
It has caused disruption to supply chains and travel, slowed
global growth and caused volatility in global markets and in
exchange rates during the fi rst quarter of 2020 and to date.
The coronavirus impacted global capital markets signifi cantly
in March 2020. The net assets of the Group and the
Company were £325.13 million at 30 September 2020.
The Directors have prepared the fi nancial statements of
the Company on a going concern basis, and believe this
assumption remains appropriate. This conclusion is based
on the assessment that notwithstanding the signifi cant
market fall and the related uncertainties, they are satisfi ed
that the Company has adequate resources to continue in
operational existence for the foreseeable future and that the
Company and its key third party service providers have in
place appropriate business continuity plans and will be able to
maintain service levels through the coronavirus pandemic.
This key audit matter relates to both the Group and the
Company.
How our audit addressed the key audit matter
We evaluated the Directors’ assessment of the impact of the
COVID-19 pandemic on the Company by:
(cid:129)
(cid:129)
evaluating the Company’s updated risk assessment and
considering whether it addresses the relevant threats
presented by COVID-19; and
evaluating management’s assessment of operational
impacts, considering their consistency with other available
information and our understanding of the business and
assessing the potential impact on the fi nancial statements.
We obtained and evaluated the Directors’ going concern
assessment which refl ects conditions up to the point of
approval of the Annual Report.
We obtained evidence to support the key assumptions and
forecasts driving the Directors’ assessment. This included
reviewing the Directors’ assessment of the Company’s
fi nancial position and forecasts, their assessment of liquidity
and loan covenant compliance as well as their review of the
operational resilience of the Company and oversight of key
third party service providers.
We assessed the disclosures presented in the Annual Report
in relation to COVID-19 by reading the other information,
including the Principal Risks and Uncertainties and Viability
Statement set out in the Strategic Report, and assessing its
consistency with the fi nancial statements and the evidence
we obtained in our audit.
Our conclusions relating to other information are set out in
the ‘Reporting on other information’ section of our report.
Our conclusions relating to going concern are set out in the
‘Going concern’ section below.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
65
Corporate Governance
Independent Auditors’ Report continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the fi nancial
statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls,
and the industry in which they operate.
The Company’s accounting is delegated to the Administrator who maintains the Company’s accounting records and who has
implemented controls over those accounting records.
We obtained our audit evidence from substantive tests. However, as part of our risk assessment, we understood and assessed
the internal controls in place at both the Manager and the Administrator to the extent relevant to our audit. This assessment
of the operating and accounting structure in place at both organisations involved obtaining and analysing the relevant control
reports issued by the independent service auditor of the Manager and the Administrator in accordance with generally accepted
assurance standards for such work. Following this assessment, we applied professional judgement to determine the extent of
testing required over each balance in the fi nancial statements.
Materiality
The scope of our audit was infl uenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual fi nancial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the fi nancial statements as a whole.
Based on our professional judgement, we determined materiality for the fi nancial statements as a whole as follows:
Overall materiality
£3.25 million (2019: £2.88 million).
£3. 25 million (2019: £2.88 million).
How we determined it
1% of net assets.
1% of net assets .
Group fi nancial statements
Company fi nancial statements
Rationale for benchmark applied
We have applied this benchmark, a
generally accepted auditing practice
for investment trust audits, in the
absence of indicators that an alternative
benchmark would be appropriate and
because we believe this provides an
appropriate and consistent year-on-year
basis for our audit.
We have applied this benchmark, a
generally accepted auditing practice
for investment trust audits, in the
absence of indicators that an alternative
benchmark would be appropriate and
because we believe this provides an
appropriate and consistent year-on-year
basis for our audit. While performing
our work, we applied the lower
threshold of £3.08 million, being the
component materiality level allocated to
the Company for the purposes of the
audit of the Group fi nancial statements.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality.
The range of materiality allocated across components was between £354,000 and £3,080,000. Certain components were
audited to a local statutory audit materiality that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identifi ed during our audit above £162,000
(Group audit) (2019: £144,000) and £162,000 (Company audit) (2019: £144,000) as well as misstatements below those
amounts that, in our view, warranted reporting for qualitative reasons.
66
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Corporate Governance
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add
or draw attention to in respect of the Directors’ statement
in the fi nancial statements about whether the Directors
considered it appropriate to adopt the going concern basis
of accounting in preparing the fi nancial statements and the
Directors’ identifi cation of any material uncertainties to the
Group’s and the Company’s ability to continue as a going
concern over a period of at least twelve months from the date
of approval of the fi nancial statements.
We are required to report if the Directors’ statement relating
to Going Concern in accordance with Listing Rule 9.8.6R(3)
is materially inconsistent with our knowledge obtained in the
audit.
We have nothing material to add or to draw attention to.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Group’s
and Company’s ability to continue as a going concern.
We have nothing to report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the fi nancial statements and our
auditors’ report thereon. The Directors are responsible for the other information. Our opinion on the fi nancial statements does
not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly
stated in this report, any form of assurance thereon.
In connection with our audit of the fi nancial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the fi nancial statements or our knowledge obtained
in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the fi nancial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based
on these responsibilities.
With respect to the Strategic Report and Report of the Directors, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006
(CA06), ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and
matters as described below (required by ISAs (UK) unless otherwise stated).
Strategic Report and Report of the Directors
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and
Report of the Directors for the year ended 30 September 2020 is consistent with the fi nancial statements and has been
prepared in accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the Strategic Report and Report of the Directors. (CA06)
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
67
Corporate Governance
Independent Auditors’ Report continued
The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the
solvency or liquidity of the Group
We have nothing material to add or draw attention to regarding:
(cid:129)
The Directors’ confi rmation on page 28 of the Annual Report that they have carried out a robust assessment of the
principal risks facing the Group, including those that would threaten its business model, future performance, solvency or
liquidity.
(cid:129) The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
(cid:129)
The Directors’ explanation on page 59 of the Annual Report as to how they have assessed the prospects of the Group,
over what period they have done so and why they consider that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities
as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary
qualifi cations or assumptions.
We have nothing to report having performed a review of the Directors’ statement that they have carried out a robust
assessment of the principal risks facing the Group and statement in relation to the longer-term viability of the Group. Our
review was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors’
process supporting their statements; checking that the statements are in alignment with the relevant provisions of the UK
Corporate Governance Code (the “Code”); and considering whether the statements are consistent with the knowledge and
understanding of the Group and Company and their environment obtained in the course of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
(cid:129)
(cid:129)
(cid:129)
The statement given by the Directors, on page 60, that they consider the Annual Report taken as a whole to be fair,
balanced and understandable, and provides the information necessary for the members to assess the Group’s and
Company’s position and performance, business model and strategy is materially inconsistent with our knowledge of the
Group and Company obtained in the course of performing our audit.
The section of the Annual Report on page 44 and 54 to 59 describing the work of the Audit Committee does not
appropriately address matters communicated by us to the Audit Committee.
The Directors’ statement relating to the Company’s compliance with the Code does not properly disclose a departure from
a relevant provision of the Code specifi ed, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006. (CA06)
68
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Corporate Governance
Responsibilities for the fi nancial statements and the audit
Responsibilities of the Directors for the fi nancial statements
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the
fi nancial statements in accordance with the applicable framework and for being satisfi ed that they give a true and fair view.
The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of fi nancial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the fi nancial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic
alternative but to do so.
Auditors’ responsibilities for the audit of the fi nancial statements
Our objectives are to obtain reasonable assurance about whether the fi nancial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to infl uence the economic decisions of users taken on the basis of these
fi nancial statements.
A further description of our responsibilities for the audit of the fi nancial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
(cid:129) we have not received all the information and explanations we require for our audit; or
(cid:129)
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received
from branches not visited by us; or
(cid:129) certain disclosures of Directors’ remuneration specifi ed by law are not made; or
(cid:129)
the Company fi nancial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
69
Corporate Governance
Independent Auditors’ Report continued
Appointment
Following the recommendation of the audit committee, we were appointed by the Directors on 12 May 2010 to audit the
fi nancial statements for the year ended 30 September 2011 and subsequent fi nancial periods. The period of total uninterrupted
engagement is 10 years, covering the years ended 30 September 2011 to 30 September 2020.
Catrin Thomas (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh
14 December 2020
70
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Financial Statements
Financial
Statements
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
71
71
Financial Statements
Statement of Comprehensive Income
For the year ended 30 September 2020
Group
Group
Year ended 30 September 2020
Year ended 30 September 2019
Investment income
Other operating income
Gains/(losses) on investments held at fair value
Other currency (losses)/gains
Total income
Expenses
Investment management fee
Other administrative expenses
Total expenses
Profi t/(loss) before fi nance costs and tax
Finance costs
Profi t/(loss) before tax
Tax
Net profi t/(loss) for the year and total
comprehensive income
Earnings/(loss) per Ordinary share (pence)
Note
3
4
5
6
7
8
9
10
12
Revenue
return
£’000
3,446
17
–
–
Capital
return
£’000
–
–
Total
return
£’000
3,446
17
42,435
42,435
(647)
(647)
Revenue
return
£’000
4,131
79
–
–
Capital
return
£’000
–
–
Total
return
£’000
4,131
79
(3,337)
(3,337)
43
3,463
41,788
45,251
4,210
(3,294)
(535)
(685)
(1,220)
2,243
(1)
2,242
(472)
(2,140)
(107)
(2,247)
39,541
(1,038)
38,503
–
(2,675)
(792)
(3,467)
41,784
(1,039)
40,745
(472)
(503)
(610)
(1,113)
3,097
(9)
3,088
(535)
(2,013)
(69)
(2,082)
(5,376)
(1,037)
(6,413)
–
43
916
(2,516)
(679)
(3,195)
(2,279)
(1,046)
(3,325)
(535)
1,770
38,503
40,273
2,553
(6,413)
(3,860)
1.46
31.74
33.20
2.09
(5.25)
(3.16)
The total column of this statement represents 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 profi t for the year. The net profi t for the year
disclosed above represents the Group’s total comprehensive income.
There are no dilutive securities and therefore the Earnings per Share and the Diluted Earnings per share are the same.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or
discontinued in the year.
The notes on pages 76 to 97 form part of these fi nancial statements.
72
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Statement of Changes in Equity
For the year ended 30 September 2020
Financial Statements
Group and Company
Year ended 30 September 2020
Called
up share
capital
£’000
31,037
Capital
redemp-
tion
reserve
£’000
6,575
Share
premium
reserve
£’000
80,685
Special
distri-
butable
reserve
£’000
4,712
Capital
reserves
Revenue
reserve
£’000
162,646
£’000
2,792
Total
Equity
£’000
288,447
–
–
–
–
–
–
–
–
–
–
38,503
1,770
40,273
(1,040)
–
–
–
–
(1,040)
(2,547)
(2,547)
Total equity at 1 October 2019
Total comprehensive income:
Profi t for the year ended
30 September 2020
Transactions with owners,
recorded directly to equity:
Shares bought back and held in
treasury
Equity dividends paid
Note
20
11
Total equity at 30 September 2020
31,037
6,575
80,685
3,672
201,149
2,015
325,133
Group and Company
Year ended 30 September 2019
Called
up share
capital
£’000
31,037
Capital
redemp-
tion
reserve
£’000
6,575
Share
premium
reserve
£’000
80,685
Special
distri-
butable
reserve
Capital
reserves
Revenue
reserve
£’000
£’000
£’000
Total
Equity
£’000
6,225
169,059
2,682
296,263
–
–
–
–
–
–
–
–
–
–
(6,413)
2,553
(3,860)
(1,513)
–
–
–
–
(1,513)
(2,443)
(2,443)
Total equity at 1 October 2018
Total comprehensive
(expense)/income:
(Loss)/profi t for the year ended
30 September 2019
Transactions with owners,
recorded directly to equity:
Shares bought back and held in
treasury
Equity dividends paid
Note
20
11
Total equity at 30 September 2019
31,037
6,575
80,685
4,712
162,646
2,792
288,447
The notes on pages 76 to 97 form part of these fi nancial statements.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
73
Financial Statements
Balance Sheets
As at 30 September 2020
Non-current assets
Investments held at fair value
Investment in subsidiary
Current assets
Receivables
Overseas tax recoverable
Cash and cash equivalents
Total assets
Current liabilities
Payables
Bank overdraft
Non-current liabilities
Loan from subsidiary
Total liabilities
Net assets
Equity attributable to equity Shareholders
Called up share capital
Share premium reserve
Capital redemption reserve
Special distributable reserve
Capital reserves
Revenue reserve
Total equity
Net asset value per Ordinary share (pence)
Net asset value per ZDP share (pence)
13
13
14
24
15
24
Group
Company
30 September
2020
£’000
30 September
2019
£’000
30 September
2020
£’000
30 September
2019
£’000
Note
342,404
308,993
342,404
308,993
–
–
50
50
3,082
589
17,845
21,516
363,920
(3,382)
–
(3,382)
17,237
693
6,862
24,792
333,785
(10,961)
(4)
(10,965)
–
–
(38,787)
(45,338)
3,082
589
17,795
21,466
363,920
(3,382)
–
(3,382)
–
(35,405)
(38,787)
17,237
693
6,812
24,742
333,785
(10,961)
(4)
(10,965)
–
(34,373)
(45,338)
325,133
288,447
325,133
288,447
17
19
18
20
21
22
23
23
31,037
80,685
6,575
3,672
201,149
2,015
325,133
268.11
110.20
31,037
80,685
6,575
4,712
162,646
2,792
288,447
236.88
106.99
31,037
80,685
6,575
3,672
201,149
2,015
325,133
268.11
–
31,037
80,685
6,575
4,712
162,646
2,792
288,447
236.88
–
Zero Dividend Preference shares
16
(35,405)
(34,373)
The parent company has taken advantage of section 408 of the Companies Act 2006 and has not included its own income
statement in the fi nancial statements. The parent company’s profi t for the year was £40,273,000 (2019: loss of £3,860,000).
The fi nancial statements on pages 72 to 97 were approved and authorised for issue by the Board of Directors on 14 December
2020 and signed on its behalf by
Lisa Arnold
Chair
The notes on pages 7 6 to 97 form part of these fi nancial statements.
Registered number 7251471
74
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Cashfl ow Statement
For the year ended 30 September 2020
Cash fl ows from operating activities
Profi t/(loss) before fi nance costs and tax
Adjustment for non-cash items:
(Gain)/loss on investments held at fair value through profi t or loss
Scrip dividends received
Adjusted (loss)/profi t before tax
Adjustments for:
Purchases of investments, including transaction costs
Sales of investments, including transaction costs
Decrease in receivables
Increase in payables
Overseas tax deducted at source
Net cash generated from/(used in) operating activities
Cash fl ows from fi nancing activities
Cost of shares repurchased
Interest paid
Equity dividends paid
Net cash used in fi nancing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
The notes on pages 76 to 97 form part of these fi nancial statements
Financial Statements
Group and Company
Year ended
30 September
2020
£’000
Year ended
30 September
2019
£’000
Note
41,784
(2,279)
(42,435)
(204)
(855)
(952,341)
967,884
85
176
(368)
14,581
(1,040)
(7)
(2,547)
(3,594)
3,337
–
1,058
(532,121)
530,063
222
169
(671)
(1,280)
(1,513)
(45)
(2,443)
(4,001)
10,987
(5,281)
6,858
17,845
12,139
6,858
11
24
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
75
Financial Statements
Notes to the Consolidated Financial Statements
For the year ended 30 September 2020
1. GENERAL INFORMATION
The consolidated fi nancial statements for the year ended 30 September 2020 comprise the fi nancial statements of the Company
and it s wholly-owned subsidiary PCGH ZDP plc (together referred to as the ‘Group’).
The Group and Company fi nancial 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 fi nancial statements have been prepared on a going concern basis under the historical cost convention, as modifi ed by the
revaluation of investments and derivative fi nancial instruments at fair value through profi t 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 October 2019 is consistent with the requirements of IFRS, in so far as those
requirements are applicable to the fi nancial statements, the Directors have sought to prepare the fi nancial statements on a basis
compliant with the recommendations of the SORP.
Following the guidance of the revised SORP, issued in October 2019, the presentation of gains and losses arising from disposals
of investments and gains and losses on revaluation of investments have now been combined, as shown in Note 13 with
no impact to the net asset value or profi t/(loss) reported for both the current or prior year. No other accounting policies or
disclosures have changed as a result of the revised SORP.
Basis of consolidation – The Group fi nancial statements consolidate the Financial Statements of the Company and its wholly
owned subsidiary, PCGH ZDP plc, drawn up to the same accounting date. The subsidiary is consolidated from the date of its
incorporation.
The Company has taken advantage of the exemption under section 408 of the Companies Act 2006 and accordingly has not
presented a separate parent company income statement.
The fi nancial position of the Group and Company as at 30 September 2020 is shown in the balance sheet on page 74 . As at
30 September 2020 the Group and Company’s total assets exceeded its total liabilities by a multiple of over 9. The assets of
the Group and Company consist mainly of securities that are held in accordance with the Group and Company’s Investment
Policy, as set out on page 25 and these securities are readily realisable. The Directors have considered a detailed assessment of
the Group and Company’s ability to meets its liabilities as they fall due. The assessment took account of the Company’s current
fi nancial position, its cash fl ows and its liquidity position. In addition to the assessment the Group and Company carried out
stress testing, including for the impact of COVID-19, which used a variety of falling parameters to demonstrate the effects on
the Company’s share price and net asset value. In light of the results of these tests, the Group and Company’s cash balances,
and the liquidity position, the Directors consider that the Group and Company has adequate fi nancial resources to enable it to
continue in operational existence. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern
basis in preparing the Group and Company’s fi nancial statements.
(b) PRESENTATION OF THE STATEMENT OF COMPREHENSIVE INCOME
In order to better refl ect 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.
76
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Financial Statements
(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 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 fi nancial 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 refl ects the overall change in the fair value of the options.
Where an option is exercised, any balance of the premium is recognised immediately in the revenue return with a corresponding
adjustment in the capital return based on the amount of the loss arising on exercise of the option.
(e) EXPENSES
All expenses, including the management fee, are accounted for on an accruals basis and are recognised when they fall due.
All expenses have been presented as revenue items except as follows:
Expenses are charged to the capital column of the Statement of Comprehensive Income where a connection with the
maintenance or enhancement of the value of investments can be demonstrated. In this respect the investment management
fees have been charged to the Statement of Comprehensive Income in line with the Board’s expected long-term split of
returns, in the form of capital gains and income from the Group and Company’s portfolio. As a result 20% of the investment
management fees are charged to the revenue account and 80% charged to the capital account of the Statement of
Comprehensive Income.
The performance fee (when payable) is charged entirely to capital as the fee is based on the out-performance of the Benchmark
and is expected to be attributable largely, if not wholly, to capital performance.
The research costs relate solely to specialist healthcare research and are accounted for on an accrual basis and, are allocated
20% to revenue and 80% capital. This is in line with the Board’s expected long-term split of revenue and capital return from the
Company’s investment portfolio.
FINANCE COSTS
The ZDP shares are designed to provide a pre-determined capital growth from their original issue price of 100p on 20 June 2017 to a
fi nal capital repayment of 122.99p on 19 June 2024. The initial capital will increase at a compound interest rate of 3% per annum.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
77
Financial Statements
Notes to the Consolidated Financial Statements continued
For the year ended 30 September 2020
2. ACCOUNTING POLICIES continued
No dividends are payable on the ZDP shares. The provision for the capital growth entitlement of the ZDP shares is included as
a fi nance cost and charged 100% to capital within the Statement of Comprehensive Income (AIC SORP paragraph 53 – issued
October 2019).
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 Group 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 refl ects the Board’s long-term expectations that the entitlements of the ZDP shareholders will be satisfi ed 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 profi ts for the year ended 30 September 2020. Taxable profi t differs from net
profi t 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 fi nancial statements and the corresponding tax bases used in the computation of taxable profi t,
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 profi ts will be available against
which deductible temporary differences can be utilised.
Investment trusts which have approval as such under section 1158 of the Corporation Taxes Act 2010 are not liable for taxation
on capital gains.
The 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 suffi cient taxable profi ts 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.
78
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Financial Statements
On initial recognition the Group and Company has designated all of its investments as held at fair value through profi t or loss as
defi ned 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, classifi ed as fair value through profi t 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 fi nancial statements when they are paid or, in the case of fi nal
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 profi ts 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.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
79
Financial Statements
Notes to the Consolidated Financial Statements continued
For the year ended 30 September 2020
2. ACCOUNTING POLICIES continued
(n) REPURCHASE OF ORDINARY SHARES (INCLUDING THOSE HELD IN TREASURY)
The costs of repurchasing Ordinary shares including related stamp duty and transaction costs are taken directly to equity
and reported through the Statement of Changes in Equity as a charge on the special distributable reserve. Share repurchase
transactions are accounted for on a trade date basis.
The nominal value of Ordinary share capital repurchased and cancelled is transferred out of called up share capital and into the
capital redemption reserve.
Where shares are repurchased and held in treasury, the transfer to capital redemption reserve is made if and when such shares
are subsequently cancelled.
(o) SEGMENTAL REPORTING
Under IFRS 8, ‘Operating Segments’, operating segments are considered to be the components of an entity about which
separate fi nancial 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 identifi ed as the Investment
Manager (with oversight from the board).
The Directors are of the opinion that the Group and Company has only one operating segment and as such no distinct
segmental reporting is required.
(p) KEY ESTIMATES AND JUDGEMENTS
Estimates and assumptions used in preparing the fi nancial statements are reviewed on an ongoing basis and are based on
historical experience and various other factors that are believed to be reasonable under the circumstances. The results of these
estimates and assumptions form the basis of making judgements about carrying values of assets and liabilities that are not
readily apparent from other sources. The Group and Company do not consider that there have been any signifi cant estimates or
assumptions in the current fi nancial year.
( q) NEW AND REVISED ACCOUNTING STANDARDS
There were no new IFRSs or amendments to IFRSs applicable to the current year which had any signifi cant impact on the Group
and Company’s fi nancial statements.
The following standards became effective on 1 January 2019 and the adoption of the standards and interpretations have not
had a material impact on the fi nancial statements of the Group and Company.
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 fi nancial statements.
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 it s loan agreements in place and the amendments are not expected to have any impact on the fi nancial statements.
IFRIC 23 Uncertainty over Income Tax Treatments
The interpretation provides guidance on considering uncertain tax treatments in relation to taxable profi t 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 fi nancial statements.
IAS 19 (amended) Employee Benefi ts
As the Group and Company have no employees, the amendments to this standard are not expected to have any impact on the
fi nancial statements.
IAS 28 (amended) Investments in Associates and Joint Ventures
As the Group and Company have no investments in associates or joint ventures, the amendments to this standard are not
expected to have any impact on the fi nancial statements.
80
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Financial Statements
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
fi nancial statements.
At the date of authorisation of the Group and Company’s fi nancial statements, the following new IFRSs that potentially impact
the Group and Company are in issue but are not yet effective and have not been applied in the fi nancial statements:
Effective for periods commencing on or after 1 January 2020:
IFRS 3 Business Combinations (amended)
The IASB has made narrow-scope amendments to improve the defi nition of a business in order to help companies determine
whether an acquisition made is of a business or a group of assets. These amendments are not expected to have any impact on
the fi nancial statements.
IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform (amended)
The IASB has issued amendments to IFRS 9, IAS 39 and IFRS 7 that provide certain reliefs in connection with interest rate
benchmark reform. The reliefs relate to hedge accounting and have the effect that IBOR reform should not generally cause
hedge accounting to terminate. These amendments are not expected to have any impact on the fi nancial statements.
IAS 1 and IAS 8 Defi nition of Material (amended)
The defi nition of material has been amended to state that “information is material if omitting, misstating or obscuring it could
reasonably be expected to infl uence decisions that the primary users of general purpose fi nancial statements make on the basis
of those fi nancial statements, which provide fi nancial information about a specifi c reporting entity.” This new defi nition is not
expected to change how materiality judgements are currently made by the Group and Company nor have any impact on the
material information included in the Annual Report.
References to the Conceptual Framework in IFRS Standards (amended)
The amendments to References to the Conceptual Framework in IFRS Standards was issued to support transition to the revised
Conceptual Framework for companies that develop accounting policies using the Conceptual Framework when no IFRS
Standard applies to a particular transaction. These amendments are not expected to have any impact to the fi nancial statements.
Effective for periods commencing on or after 1 January 2021:
IFRS 4 Insurance Contracts – temporary exemption from IFRS 9 (amended)
The temporary exemption permits companies whose activities are predominantly connected with insurance to defer the
application of IFRS 9.
IFRS 9, IAS 39, IFRS 7, IFRS 16 and IFRS 4: Interest Rate Benchmark Reform – phase 2 (amended)
Interest Rate Benchmark Reform—Phase 2, address issues that might affect fi nancial reporting during the reform of an
interest rate benchmark, including the effects of changes to contractual cash fl ows or hedging relationships arising from the
replacement of an interest rate benchmark with an alternative benchmark rate.
Effective for periods commencing on or after 1 January 2023:
IFRS 17 Insurance Contracts
The standard establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts.
This information gives a basis for users of fi nancial statements to assess the effect that contracts have on the fi nancial position,
fi nancial performance and cash fl ows of a company.
The Directors expect that the adoption of the standards listed above will have either no impact or that any impact will not be
material on the Financial Statements of the Company in future periods.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
81
Financial Statements
Notes to the Consolidated Financial Statements continued
For the year ended 30 September 2020
3
INVESTMENT INCOME
Revenue:
Franked: Listed investments
Dividend income
Unfranked: Listed investments
Dividend income
Scrip dividends
Total investment income allocated to revenue
4 OTHER OPERATING INCOME
Other income
Bank interest
Total other operating income
Year ended
30 September 2020
£’000
Year ended
30 September 2019
£’000
63
3,179
204
3,446
377
3,754
–
4,131
Year ended
30 September 2020
£’000
Year ended
30 September 2019
£’000
–
17
17
30
49
79
5 GAINS/(LOSSES) ON INVESTMENTS HELD AT FAIR VALUE
Net gains on disposal of investments at historic cost
Less fair value adjustments in earlier years
Gains/(losses) based on carrying value at previous balance sheet date
Valuation gains on investments held during the year
6 OTHER CURRENCY (LOSSES)/GAINS
Exchange (losses)/gains on currency balances
Year ended
30 September 2020
£’000
Year ended
30 September 2019
£’000
39,352
(11,710)
27,642
14,793
42,435
22,892
(33,931)
(11,039)
7,702
(3,337)
Year ended
30 September 2020
£’000
Year ended
30 September 2019
£’000
(647)
43
82
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Financial Statements
7
INVESTMENT MANAGEMENT FEE
Management fee
– charged to revenue
– charged to capital
Investment management fee payable to Polar Capital LLP
Year ended
30 September 2020
£’000
Year ended
30 September 2019
£’000
535
2,140
2,675
503
2,013
2,516
Management fees are allocated 20% to revenue and 80% to capital. Details of the fee arrangements are given in the Strategic
Report on pages 32 and 33 .
8 OTHER ADMINSTRATIVE EXPENSES (INCLUDING VAT WHERE APPROPRIATE)
Directors’ fees1
Directors’ NIC
Auditors’ remuneration2: For audit of the Group and Company fi nancial statements
Depositary fee
Registrar fee
Custody and other bank charges
UKLA and LSE listing fees
Legal & professional fee
AIC fees
Directors’ and offi cers’ liability insurance
Corporate broker’s fee
Marketing expenses3
Research cost – allocated to revenue4
Shareholder communications
HSBC administration fee
Other expenses5
Total other administrative expenses allocated to revenue
Research cost – allocated to capital4
Total other administrative expenses
Year ended
30 September 2020
£’000
Year ended
30 September 2019
£’000
143
122
14
44
23
31
39
46
6
21
9
24
42
27
30
182
4
685
107
792
12
32
24
34
30
44
–
20
8
30
17
17
34
150
36
610
69
679
1 Full disclosure is given in the Directors’ Remuneration Report on page 52 .
2 2020 includes £6,000 (2019: £5,175) paid to the Auditor for the audit of PCGH ZDP Plc.
3 Includes marketing expenses payable to Polar Capital LLP of £22,500 (2019: £7,500).
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 (£180,000) (2019: US $232,994
(£189,000)) with the cost of general non-specialist research and any amounts exceeding the agreed cap being absorbed by Polar Capital. Any adjustments to the prior year’s budget versus
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 included costs in relation to non-executive Director search fee.
Ongoing charges represents the total expenses of the Company, excluding fi nance 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 2020 was 1.01% (2019: 1.01%). See Alternative Performance
Measures on page 99 .
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
83
Financial Statements
Notes to the Consolidated Financial Statements continued
For the year ended 30 September 2020
9 FINANCE COSTS
Interest on overdrafts
Appropriation to ZDP shares
Total fi nance costs
10 TAXATION
Year ended 30 September 2020
Year ended 30 September 2019
Revenue
return
£’000
1
–
1
Capital
return
£’000
6
1,032
1,038
Total
return
£’000
7
1,032
1,039
Revenue
return
£’000
9
–
9
Capital
return
£’000
36
1,001
1,037
Total
return
£’000
45
1,001
1,046
Year ended 30 September 2020
Year ended 30 September 2019
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
Total tax for the year (see note 10b)
472
472
–
–
472
472
535
535
–
–
535
535
b) Factors affecting tax charge for the year:
The charge for the year can be reconciled to the profi t per the Statement of Comprehensive Income as follows:
Profi t/(loss) before tax
Tax at the UK corporation tax rate of 19% (2019: 19%)
Tax effect of non-taxable dividends
(Gains)/loss on investments that are not taxable
Unrelieved current period expenses and defi cits
Overseas tax suffered
Expenses not allowable
Total tax for the year (see note 10a)
2,242
426
(655)
–
229
472
–
472
38,503
7,316
40,745
7,742
–
(655)
(7,940)
(7,940)
427
–
197
–
656
472
197
472
3,088
587
(785)
–
198
535
–
535
(6,413)
(1,218)
–
626
402
–
190
–
(3,325)
(631)
(785)
626
600
535
190
535
c) Factors that may affect future tax charges:
The Company has an unrecognised deferred tax asset of £3,513,000 (2019: £2,555,000) based on a prospective corporation tax
rate of 19% (2019: 17%). At Budget 2020, the government announced that the main rate of corporation tax would remain at
19% for fi scal years beginning on 1 April 2020 and 2021.
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.
84
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Financial Statements
11 AMOUNTS RECOGNISED AS DISTRIBUTIONS TO ORDINARY SHAREHOLDERS IN THE YEAR
Dividends paid in the year ended 30 September 2020
Payment date
28 February 2020
28 August 2020
No of shares
Pence per share
121,270,000
121,270,000
1.10p
1.00p
Year ended
30 September
2020
£’000
1,334
1,213
2,547
The revenue available for distribution by way of dividend for the year is £1,770,000 (2019: £2,553,000).
The total dividends payable in respect of the fi nancial year ended 30 September 2020, which is the basis on which the
requirements of Section 1158 Corporation Tax Act 2010 are considered, is set out below:
Payment date
28 August 2020
26 February 2021
No of shares
Pence per share
121,270,000
121,270,000
1.00p
1.00p
Dividends paid in the year ended 30 September 2019
Payment date
28 February 2019
30 August 2019
No of shares
Pence per share
122,470,000
121,770,000
1.00p
1.00p
Year ended
30 September
2020
£’000
1,213
1,213
2,426
Year ended
30 September
2019
£’000
1,225
1,218
2,443
The total dividends payable in respect of the fi nancial year ended 30 September 2019, which is the basis on which the
requirements of Section 1158 Corporation Tax Act 2010 are considered, is set out below:
Payment date
30 August 2019
28 February 2020
No of shares
Pence per share
121,770,000
121,270,000
1.00p
1.10p
Year ended
30 September
2019
£’000
1,218
1,334
2,552
All dividends are paid as interim dividends, and all have been charged to revenue, where necessary utilising the revenue reserves.
The dividends paid in February each year relate to a dividend declared in respect of the previous fi nancial year but paid in the
current accounting year.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
85
Financial Statements
Notes to the Consolidated Financial Statements continued
For the year ended 30 September 2020
12 EARNINGS/(LOSSES) PER ORDINARY SHARE
Year ended 30 September 2020
Year ended 30 September 2019
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 profi t/(loss) for the year (£’000)
1,770
38,503
40,273
2,553
(6,413)
(3,860)
Weighted average ordinary shares in issue during
the year
121,291,858 121,291,858 121,291,858 122,123,685 122,123,685 122,123,685
Basic – ordinary shares (pence)
1.46
31.74
33.20
2.09
(5.25)
(3.16)
As at 30 September 2020 there were no potentially dilutive shares in issue.
13 INVESTMENTS HELD AT FAIR VALUE
(a) Investments held at fair value through profi t or loss*
Opening book cost
Opening investment holding gains
Opening fair value
Analysis of transactions made during the year
Purchases at cost
Sales proceeds received
Gains/(losses) on investments held at fair value
Closing fair value
Closing book cost
Closing investment holding gains
Closing fair value
30 September 2020
£’000
30 September 2019
£’000
291,648
17,345
308,993
944,790
(953,814)
42,435
342,404
321,976
20,428
342,404
276,747
43,574
320,321
539,072
(547,063)
(3,337)
308,993
291,648
17,345
308,993
The Company received £953,814,000 (2019: £547,063,000) from disposal of investments in the year. The book cost of these
investments when they were purchased were £914,462,000 (2019: £524,171,000). These investments have been revalued over
time and until they were sold any unrealised gains/losses were included in the fair value of the investments.
* Note13(a), including the prior year, has been updated in accordance with the presentational guidance set out in the Statement of Recommended Practice (SORP) for Investment Trusts issued
by the Association of Investment Companies (AIC) in October 2019.
The following transaction costs, including stamp duty and broker commissions were incurred during the year:
On acquisition
On disposal
(b) FAIR VALUE HIERARCHY
Level 1 assets
Valuation at 30 September
All Level 1 assets are traded on a recognised Stock Exchange.
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Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
30 September 2020
£’000
30 September 2019
£’000
606
350
956
363
237
600
30 September 2020
£’000
30 September 2019
£’000
342,404
342,404
308,993
308,993
Financial Statements
(c) SUBSIDIARY UNDERTAKING
Company and business
Country of registration,
incorporation and operation
Number and class of shares held by
the Company
PCGH ZDP Plc
England and Wales
50,000 Ordinary shares of £1
Holding
100%
The Company is a public limited company with the sole purpose of issuing Zero Dividend Preference (ZDP) shares. The registered
offi ce 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
Sales for future settlement
Accrued income
Prepayments
15 PAYABLES
Purchases for future settlement
Accruals
16 ZERO DIVIDEND PREFERENCE SHARES (‘ZDP SHARES’)
At 1 October
Capital growth of ZDP shares
At 30 September
30 September 2020
£’000
30 September 2019
£’000
2,930
147
5
3,082
17,000
222
15
17,237
30 September 2020
£’000
30 September 2019
£’000
2,534
848
3,382
10,289
672
10,961
30 September 2020
£’000
30 September 2019
£’000
34,373
1,032
35,405
33,372
1,001
34,373
Further details on the ZDP shares are set out in the Additional Information on page 105 .
17 CALLED UP SHARE CAPITAL
(i) Ordinary shares – Allotted, Called up and Fully paid:
Ordinary shares of nominal value 25p each:
Opening balance of 121,770,000 (2019: 122,470,000)
Repurchase of 500,000 (2019: 700,000) Ordinary shares, into treasury
Allotted, Called up and Fully paid: 121,270,000 (2019: 121,770,000)
Ordinary shares of 25p
2,879,256 (2019: 2,379,256) Ordinary shares, held in treasury
At 30 September
30 September 2020
£’000
30 September 2019
£’000
30,442
(125)
30,317
720
31,037
30,617
(175)
30,442
595
31,037
500,000 Ordinary shares were repurchased into treasury at a total cost of £1,040,000 (2019: £1,513,000).
The Ordinary shares held in treasury have no voting rights and are not entitled to dividends.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
87
Financial Statements
Notes to the Consolidated Financial Statements continued
For the year ended 30 September 2020
17 CALLED UP SHARE CAPITAL continued
(ii) SUBSIDIARY COMPANY (FOR INFORMATION PURPOSES)
ZDP shares – Allotted, Called up and Fully paid:
ZDP shares of nominal value 1p each:
Opening balance of 32,128,437 ZDP shares (2019: 32,128,437)
Allotted, Called up and Fully paid: 32,128,437 (2019: 32,128,437) ZDP shares of 1p
At 30 September
18 CAPITAL REDEMPTION RESERVE
At 1 October
At 30 September
30 September 2020
£’000
30 September 2019
£’000
32,128
32,128
32,128
32,128
32,128
32,128
30 September 2020
£’000
30 September 2019
£’000
6,575
6,575
6,575
6,575
The capital redemption reserve was created following the Company’s reconstruction tender offer shares were repurchased and
cancelled in 2017. This reserve is not distributable.
19 SHARE PREMIUM RESERVE
At 1 October
At 30 September
This reserve is not distributable.
20 SPECIAL DISTRIBUTABLE RESERVE
At 1 October
Repurchase of 500,000 (2019: 700,000) ordinary shares into treasury
At 30 September
30 September 2020
£’000
30 September 2019
£’000
80,685
80,685
80,685
80,685
30 September 2020
£’000
30 September 2019
£’000
4,712
(1,040)
3,672
6,225
(1,513)
4,712
The special distributable reserve was created following approval from the Court, received on 18 August 2010, to cancel the
share premium account from initial share offering.
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.
88
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Financial Statements
30 September 2020
£’000
30 September 2019
£’000
162,646
27,642
14,793
(647)
(6)
(107)
(2,140)
(182)
(850)
169,059
(11,039)
7,702
43
(36)
(69)
(2,013)
(172)
(829)
201,149
162,646
21 CAPITAL RESERVES
At 1 October
Net gains/(losses) on disposal of investments
Valuation gains on investments held during the year
Exchange (losses)/gains on currency balances
Overdraft interest allocated to capital
Research costs to capital
Investment management fee allocated to capital
Capital contribution to ZDP entitlement
ZDP appropriation
At 30 September
The balance on the capital reserve represents a profi t of £20,428,000 (2019: £17,345,000) on investments held and a profi t of
£180,721,000 (2019: £145,301,000) 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
At 1 October
Revenue profi t
Interim dividends paid
At 30 September
30 September 2020
£’000
30 September 2019
£’000
2,792
1,770
(2,547)
2,015
2,682
2,553
(2,443)
2,792
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
Net assets attributable to Ordinary Shareholders (£’000)
Ordinary shares in issue at end of year
Net asset value per ordinary share (pence)
Total issued Ordinary shares
Ordinary shares held in treasury
Ordinary shares in issue
As at 30 September 2020 there were no potentially dilutive shares in issue.
30 September 2020
30 September 2019
325,133
288,447
121,270,000
121,770,000
268.11
236.88
124,149,256
124,149,256
2,879,256
2,379,256
121,270,000
121,770,000
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
89
Financial Statements
Notes to the Consolidated Financial Statements continued
For the year ended 30 September 2020
23 NET ASSET VALUE PER SHARE continued
(ii) SUBSIDIARY COMPANY (FOR INFORMATION PURPOSES)
ZDP shares
Calculated entitlement of ZDP shareholders
ZDP shares in issue at the end of the year
Net asset value per ZDP share (pence)
24 CASH AND CASH EQUIVALENTS
Cash at bank
Cash held at derivative clearing houses
Bank overdraft
Company cash and cash equivalents
Cash held at subsidiary
Group cash and cash equivalents
30 September 2020
30 September 2019
£35,404,821
£34,372,824
32,128,437
32,128,437
110.20
106.99
30 September 2020
£’000
30 September 2019
£’000
17,795
–
–
17,795
50
17,845
5,706
1,106
(4)
6,808
50
6,858
25 TRANSACTIONS WITH THE INVESTMENT MANGER 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 2020 were £2,675,000 (2019: £2,516,000) of which £457,000 (2019: £433,000) was outstanding at the year-end.
In addition, the total research cost in respect of the year ended 30 September 2020 was £170,000 (2019: £184,000) of which
£35,000 relates to 1 October 2019 to 31 December 2019 and £135,000 relates to 1 January 2020 to 30 September 2020. As at
the year end, £90,000 (2019: £95,000) was outstanding. Refer to note 8 on page 83 for more details.
(b) RELATED PARTY TRANSACTIONS
The Group and Company has no employees and therefore no key management personnel other than the Directors. The
Group and Company paid £143,000 (2019: £122,000) to the Directors and the Remuneration Report, including Directors’
shareholdings and movements within the year is set out on page 52 .
90
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Financial Statements
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 fi nancial instruments for the long term to further the investment objective
set out on page 25 . This exposes the Group and Company to a range of fi nancial 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 fi nancial instruments can comprise:
–
–
–
–
Equity and non-equity shares and fi xed 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 fi nance 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 enter 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 identifi ed 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 signifi cant risk that the Group and Company faces.
Market price risk arises mainly from uncertainty about future prices of fi nancial 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 on page 24 . 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 (2019: nil).
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
91
Financial Statements
Notes to the Consolidated Financial Statements continued
For the year ended 30 September 2020
26 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS continued
(a) Market Risk (continued)
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 specifi c 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:
Non-current asset investments at fair value through profi t or loss
Year ended
30 September 2020
£’000
Year ended
30 September 2019
£’000
342,404
342,404
308,993
308,993
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.
Statement of Comprehensive Income – profi t after tax
Revenue return
Capital return
Change to the profi t after tax for the year
Change to equity attributable to Shareholders
Year ended
30 September 2020
Year ended
30 September 2019
Increase in
fair value
£’000
Decrease in
fair value
£’000
Increase in
fair value
£’000
Decrease in
fair value
£’000
(87)
51,012
50,925
50,925
87
(51,012)
(50,925)
(50,925)
(78)
46,034
45,956
45,956
78
(46,034)
(45,956)
(45,956)
(ii) Currency Risk
The Group and Company’s total return and net assets can be signifi cantly 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.
92
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Financial Statements
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 2020
£’000
Year ended
30 September 2019
£’000
Monetary Assets:
Cash and short term receivables
Swiss Francs
US Dollars
Euros
Danish Krone
Japanese Yen
Monetary Liabilities:
Other payables
Swiss Francs
US Dollars
Japanese Yen
Foreign currency exposure on net monetary items
Non-Monetary Items:
Investments at fair value through profi t or loss that are equities
US Dollars
Euros
Danish Krone
Swiss Francs
Japanese Yen
Total net foreign currency exposure
3,145
1,857
201
103
–
(2,727)
(2,534)
–
45
245,218
47,374
20,981
15,491
7,755
336,864
852
13,617
146
60
4,241
–
(12,337)
(4,241)
2,338
234,441
30,299
24,625
7,314
4,300
303,317
During the fi nancial year, movements against sterling in the four major currencies noted above were:
US Dollar depreciated by 4.9% (2019: appreciated by 5.5%),
Euro appreciated by 2.5% (2019: depreciated by 0.7%),
Danish Krone appreciated by 2.8% (2019: depreciated by 0.8%),
Swiss Franc appreciated by 3.3% (2019: appreciated by 3.5%).
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
93
Financial Statements
Notes to the Consolidated Financial Statements continued
For the year ended 30 September 2020
26 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS continued
(a) Market Risk (continued)
Foreign currency sensitivity
The following table illustrates the sensitivity of the profi t after tax for the year and the value of equity attributable to
Shareholders in regard to the fi nancial assets and fi nancial 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% (2019 : 15%) against the currencies shown, this
would have the following effect:
Year ended
30 September 2020
£’000
Statement of Comprehensive Income – profi t after tax
Revenue return
Capital return
Change to the profi t after tax for the year and to equity
attributable to Shareholders
US Dollars
Euro
Danish Krone
Swiss Francs
43
43,112
43,155
35
8,360
8,395
18
3,703
3,721
74
2,734
2,808
Year ended
30 September 2019
£’000
Statement of Comprehensive Income – profi t after tax
Revenue return
Capital return
Change to the profi t after tax for the year and to equity
attributable to Shareholders
US Dollars
Euro
Danish Krone
Swiss Francs
182
41,416
41,598
26
5,347
5,373
11
4,346
4,357
150
1,291
1,441
Based on the year end position, if sterling had appreciated by a further 15% (2019: 15%) against the currencies shown, this
would have the following effect:
Year ended
30 September 2020
£’000
Statement of Comprehensive Income – profi t after tax
Revenue return
Capital return
US Dollars
Euro
Danish Krone
Swiss Francs
(32)
(31,865)
(26)
(6,179)
(13)
(2,737)
(55)
(2,020)
Change to the profi t after tax for the year and to equity
attributable to Shareholders
(31,897)
(6,205)
(2,750)
(2,075)
94
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Financial Statements
Foreign currency sensitivity (continued)
Year ended
30 September 2019
£’000
Statement of Comprehensive Income – profi t after tax
Revenue return
Capital return
US Dollars
Euro
Danish Krone
Swiss Francs
(134)
(30,612)
(19)
(3,952)
(8)
(3,212)
(111)
(954)
Change to the profi t after tax for the year and to equity
attributable to Shareholders
(30,746)
(3,971)
(3,220)
(1,065)
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 fi nancial 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 signifi cant 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 fl ows 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, fi nancial assets and liabilities exposed to fl oating interest rates were as follows:
Cash at bank and derivative clearing houses
Cash held at subsidiary
Bank overdraft
30 September 2020
£’000
30 September 2019
£’000
17,795
50
–
17,845
6,812
50
(4)
6,858
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 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 suffi cient assets to meet its fi nancial 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.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
95
Financial Statements
Notes to the Consolidated Financial Statements continued
For the year ended 30 September 2020
26 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS continued
(b) Liquidity Risk continued
Liquidity risk exposure
At 30 September the fi nancial liabilities comprised:
Due within 1 month:
Other creditors and accruals
Bank overdraft
Due in more than 1 year
ZDP’s entitlement
30 September 2020
£’000
30 September 2019
£’000
3,382
–
35,405
38,787
10,961
4
34,373
45,338
The ZDP shares have a planned repayment date of 19 June 2024 in the 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 2020 was £17,992,000 (2019: £7,084,000) comprising:
Accrued Income
Cash at bank and derivative clearing houses
30 September 2020
£’000
30 September 2019
£’000
147
17,845
17,992
222
6,862
7,084
All of the above fi nancial 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.
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Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Financial Statements
(d) Capital Management Policies and Procedures
The Group and Company’s capital, or equity, is represented by its net assets which amounted to £325,133,000 as at
30 September 2020 (2019: £288,447,000), which are managed to achieve the Group’s and Company’s investment objective set
out on page 25 .
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 profi ts 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 and no
breaches have taken place during year under review.
27 POST BALANCE SHEET EVENTS
There are no signifi cant events that have occurred after the end of the reporting period to the date of this report which require
disclosure.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
97
Shareholder Information
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 2020, the Group’s total equity was £325,133,000 and there were
121,270,000 ordinary shares in issue. The Group’s NAV per share was therefore 268.11p
(£325,133,000/121,270,000).
At of 30 September 2020, the value of the ZDP shares was £35,405,000 (note 16 of the notes to the
fi nancial statements on page 87 ) and the number of ZDP shares in issue was 32,128,437. The NAV per
ZDP share was therefore 110.20p (£35,405,000/32,128,437).
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 2020, the total assets were £363,920,000 and the total liabilities were £38,787,000,
the total net assets therefore were £325,133,000 (£363,920,000 – £38,787,000).
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 NAV at the start of the period was 241.08p.
As at 30 September 2020, the Group’s NAV per share was 268.11p, the impact of the dividend
reinvestment in NAV was 7.05p and the adjusted NAV per share was therefore 275.16p
(268.11p+7.05p). The NAV total return over the year was 14.14% ((275.16p-241.08p)/241.08p).
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 2020, the Group’s adjusted NAV per share was 275.16p, the NAV total return
since reconstruction was 27.48% ((275.16p-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 2020, the Company’s share price was 233.00p and the opening share price as
at 30 September 2019 was 218.00p; a reinvestment factor of 1.008701, 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 235.03p. The share
price total return is 7.81% ((235.03p-218.00p)/218.00p).
98
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Shareholder Information
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 2020 was 233.00p and NAV was 268.11p, the discount was
therefore 13.1%, ((233.00p-268.11p)/268.11p).
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,
fi nance costs, tax and non-recurring expenses. Costs in relation to share issues and share buybacks are
excluded from the calculation.
At 30 September 2020, the total operating expenses including management fees were £3,467,000,
fi nance costs were £1,039,000 and taxes were £472,000; the total expenses therefore were
£4,978,000 (£3,467,000 + £1,039,000 + £472,000).
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 £2,675,000 plus other operating expenses
of £792,000 divided by the Group’s average NAV in the period. (£3,467,000/£343,020,000=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 defi ned 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 2020 the net assets were £325,133,000, ZDP value was £35,405,000 and cash
and cash equivalents (including amounts for future settlement) were £18,241,000, and the net
gearing was therefore 5.28%, (((£325,133,000+£35,405,000-£18,241,000)/£325,133,000)-1).
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc
99
Shareholder Information
Glossary of Terms
AAF Report
A report prepared in accordance with Audit and Assurance Faculty guidance issued by the Institute of
Chartered Accountants in England and Wales. Utilised within the review of internal controls.
AGM
AIC
The Annual General Meeting, to be held at 2pm on Tuesday, 26 January 2021 at the offi ce of the manager,
Polar Capital, 16 Palace Street, London SW1E 5JD. The meeting will be a closed-door meeting.
Association of Investment Companies, the industry body for closed ended investment companies.
AIFM
Alternative Investment Fund Manager – Polar Capital LLP.
AIFMD
Alternative Investment Fund Managers Directive. Issued by the European Parliament in 2012 and 2013,
the Directive requires that, while the Board of Directors of an Investment Trust remains fully responsible
for all aspects of the Company’s strategy, operations and compliance with regulations, all alternative
investment Funds (‘AIFs’) in the European Union, must appoint a Depositary and an Alternative
Investment Fund Manager (‘AIFM’). The Company’s AIFM is Polar Capital LLP.
Benchmark
The Benchmark is the MSCI ACWI/Healthcare Index (total return in sterling with dividends reinvested).
BREXIT
The advisory public referendum which was held on 23 June 2016 in the United Kingdom to indicate
whether voters wanted to remain or withdraw from membership of the European Union (EU). The
referendum vote was cast in favour of leaving the EU. The process of actually leaving is termed BREXIT.
Closed-ended
Investment
Company
An Investment Company with a fi xed issued ordinary share capital, the shares of which are traded on
an exchange at a price not necessarily related to the net asset value of the company and which can
only be issued or bought back by the company in certain circumstances.
Custodian
Depositary
Derivative
ESEF
The Custodian is HSBC Bank plc, a fi nancial institution responsible for safeguarding, worldwide, the
listed securities and certain cash assets of the Group and Company, as well as the income arising
therefrom, through provision of custodial, settlement and associated services.
The Depositary is also HSBC Bank plc. Under AIFMD rules the Company must appoint a Depositary
whose duties in respect of investments, cash and similar assets include: safekeeping; verifi cation of
ownership and valuation; and cash monitoring. Under the AIFMD rules, the Depositary has strict
liability for the loss of the Group and Company’s fi nancial assets in respect of which it has safe-keeping
duties. The Depositary’s oversight duties will include but are not limited to share buybacks, dividend
payments and adherence to investment limits.
A contract between two or more parties, the value of which fl uctuates in accordance with the value of
an underlying security. Examples of derivatives are Put and Call Options, Swap contracts, Futures and
Contracts for Difference. A derivative can be an asset or a liability and is a form of gearing because it
can increase the economic exposure to shareholders.
European Single Electronic Format is the single electronic reporting format which will apply with effect
from 1 January 2021 to consolidated annual accounts prepared in accordance with IFRS and traded on
a regulated market.
Investment
Manager/Manager
Polar Capital LLP is the Investment Manager. Mr Gareth Powell and Dr James Douglas have delegated
responsibility for the creation of the portfolio of investments subject to various parameters set by the
Board of Directors. The responsibilities of the Investment Manager and the fees payable are set out in
the Directors’ Report.
100
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Shareholder Information
IFRS
International Financial Reporting Standards as adopted by the European Union. They comprise
standards and interpretations approved by the International Accounting Standards Board (IASB)
and International Financial Reporting Committee, including interpretations issued by the IFRS
Interpretations Committee and interpretations issued by the International Accounting Standard
Committee (IASC).
Investment
Company
Section 833 of the Companies Act 2006. An Investment Company is defi ned as a company which
invests its funds in shares, land or other assets with the aim of spreading investment risk.
Investment Trust
taxation status
Section 1158 of the Corporation Tax Act 2010. UK Corporation Tax law allows an Investment
Company (referred to in Tax law as an Investment Trust) to be exempted from tax on its profi ts realised
on investment transactions, provided it complies with certain rules. These are similar to Section 833
above but further require that the Company must be listed on a regulated stock exchange and that it
cannot retain more than 15% of income received. The Directors’ Report contains confi rmation of the
Company’s compliance with this law and its consequent exemption from taxation on capital gains.
PwC
Leverage
The Group and Company’s Auditor is PricewaterhouseCoopers LLP, represented by Catrin Thomas,
Partner.
As defi ned under AIFMD rules, leverage is any method by which the exposure of an AIF is increased
through borrowing of cash or securities or leverage embedded in derivative positions. Leverage is
broadly equivalent to gearing but is expressed as a ratio between the assets (excluding borrowings)
and the net assets (after taking account of borrowings).
Non-executive
Director
The Group and Company are managed by a Board of Directors who are appointed by letter rather
than a contract of employment. Neither the Group nor Company has any executive Directors.
Remuneration of the non-executive Directors is set out in the Directors’ Remuneration Report while the
duties of the Board and the various Committees are set out in the Corporate Governance Statement.
An example of the letter of appointment is available on the Company’s website.
PRIIPS
SORP
ZDP
The Packaged Retail and Insurance-based Investment Products regulations which came into force on
1 January 2018 in the UK and EU. The regulations require generic pre-sale disclosure of investment
‘product’ costs, risks and certain other matters.
The Statement of Recommended Practice. The fi nancial statements of the Group and Company are
drawn up in accordance with the Investment Trust SORP issued by the AIC.
Zero Dividend P reference shares are preference shares which carry no entitlement to dividends, but
which carry the right, on a fi xed date, to the repayment of capital and a fi xed rate of return in priority
to any capital payment to the holders of ordinary shares.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc 101
Shareholder Information
Investing
Market Purchases
The ordinary shares of Polar Capital Global Healthcare Trust
plc are listed and traded on the London Stock Exchange.
Investors may purchase shares through their stockbroker,
bank or other fi nancial intermediary.
Share Dealing Services
The Company has arranged for Shareview Dealing, a
telephone and Internet share sale service offered by Equiniti
to be made available.
For telephone sales call 0345 603 7037
(or +44 121 415 7560 ) between 8.30am and 4.30pm for
dealing and up to 6.00pm for enquiries, Monday to Friday.
For Internet sales log on to www.shareview.co.uk/dealing
There are a variety of ways to invest in the Company however
this will largely depend upon whether you would like fi nancial
advice or are happy to make your own investment decisions.
For those investors who would like advice:
Private Client Stockbrokers
Investors with a large lump sum to invest may want to
contact a private client stockbroker. They will manage a
portfolio of shares on behalf of a private investor and will
offer a personalised service to meet an individual’s particular
needs. A list of private client stockbrokers is available from
the Wealth Management Association at www.thewma.co.uk
Financial Advisers
For investors looking to fi nd a fi nancial adviser, please visit
www.unbiased.co.uk
Financial Advisers who wish to purchase shares for their
clients can also do so via a growing number of platforms that
offer investment trusts including AJ Bell, Interactive Investor,
Ascentric, Embark, Nucleus, Raymond James, Seven IM and
Transact.
For those investors who are happy to make their own
investment decisions:
Online Stockbroking Services
There are a number of real time execution only stockbroker
services which allow private investors to trade online for
themselves, manage a portfolio and buy UK listed shares.
Online stockbroking services include AJ Bell, Interactive
Investor , Barclays Stockbrokers, Halifax Share Dealing,
Hargreaves Lansdown and EQI.
Investing Risks
Please remember that any investment in the shares of Polar
Capital Global Healthcare Trust plc either directly or through
a savings scheme or ISA carries the risk that the value of your
investment and any income from them may go down as well
as up due to the fl uctuations of the share price, the market
and interest rates. This risk may result in an investor not
getting back their original amount invested. Past performance
is not a guide to future performance.
Polar Capital Global Healthcare Trust plc is allowed to borrow
against its assets and this may increase losses triggered by
a falling market . The Company may increase or decrease its
borrowing levels to suit market conditions.
If you are in any doubt as to the suitability of a plan or any
investment available within a plan, please take professional
advice.
Polar Capital Global Healthcare Trust plc is an investment
trust and as such its ordinary shares are excluded from the
FCA’s restrictions which apply to non-mainstream investment
products. The Company conducts its affairs and intends
to continue to do so for the foreseeable future so that the
exclusion continues to apply.
Please also see the additional disclosures on page 103 .
102
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Warnings to Shareholders
Shareholder Information
As the shares in an investment trust are traded on a stock
market, the share price will fl uctuate in accordance with
supply and demand and may not refl ect the underlying net
asset value of the shares; where the share price is less than
the underlying value of the assets, the difference is known as
the ‘discount’. For these reasons, investors may not get back
the original amount invested.
Although the Company’s fi nancial statements are
denominated in sterling, it may invest in stocks and shares
that are denominated in currencies other than sterling and to
the extent they do so, they may be affected by movements in
exchange rates. As a result, the value of your investment may
rise or fall with movements in exchange rates.
Investors should note that tax rates and reliefs may change
at any time in the future. The value of ISA tax advantages
will depend on personal circumstances. The favourable tax
treatment of ISAs may not be maintained.
Boiler Room Scams
Shareholders of the Polar Capital Global Healthcare Trust
plc may receive unsolicited phone calls or correspondence
concerning investment matters. These are typically from
overseas based ‘brokers’ who target UK shareholders,
offering to sell them what often turn out to be worthless or
high risk shares in U.S. or UK investments or offering to act
on the shareholder’s behalf on the payment of a retainer or
similar in a spurious corporate event. These operations are
commonly known as ‘boiler rooms’. These ‘brokers’ can be
very persistent and extremely persuasive.
It is not just the novice investor that has been duped in this
way; many of the victims had been successfully investing for
several years. Shareholders are advised to be very wary of any
unsolicited advice, offers to buy shares at a discount or offers
of free company reports.
If you have been contacted by an unauthorised fi rm regarding
your shares the FCA would like to hear from you. You can
report an unauthorised fi rm using the FCA helpline on 0845
606 1234 or 0800 111 6768 or by visiting their website,
which also has other useful information, at www.fca.org.uk
If you receive any unsolicited investment advice:
(cid:129)
Make sure you get the correct name of the person and
organisation
(cid:129)
If the calls persist, hang up
If you deal with an unauthorised fi rm, you will not be
eligible to receive payment under the Financial Services
Compensation Scheme.
More detailed information on this or similar activity can be
found on the FCA website.
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc 103
Shareholder Information
Warnings to Shareholders continued
Forward-looking Statements
Certain statements included in this Annual Report and
Financial Statements contain forward-looking information
concerning the Company’s strategy, operations, fi nancial
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
refl ected 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, fi nancial performance
or results of operations, we urge you to look at the principal
risks and uncertainties included in the Strategic Report
Section on pages 2 8 to 31 of this 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 any
investment decision.
The Company undertakes no obligation to update any
forward-looking statements.
Investment and pension scams are
(cid:242)(cid:233)(cid:247)(cid:232)(cid:241)(cid:3)(cid:246)(cid:242)(cid:243)(cid:235)(cid:236)(cid:246)(cid:247)(cid:236)(cid:230)(cid:228)(cid:247)(cid:232)(cid:231)(cid:3)(cid:228)(cid:241)(cid:231)(cid:3)(cid:231)(cid:236)(cid:294)(cid:230)(cid:248)(cid:239)(cid:247)(cid:3)(cid:247)(cid:242)(cid:3)(cid:246)(cid:243)(cid:242)(cid:247)
Be a ScamSmart investor and spot the warning signs
Fraudsters will often:
• contact you out of the blue
• apply pressure to invest quickly
• downplay the risks to your money
• promise tempting returns that sound too good to be true
• (cid:246)(cid:228)(cid:252)(cid:3)(cid:247)(cid:235)(cid:228)(cid:247)(cid:3)(cid:247)(cid:235)(cid:232)(cid:252)(cid:273)(cid:245)(cid:232)(cid:3)(cid:242)(cid:241)(cid:239)(cid:252)(cid:3)(cid:240)(cid:228)(cid:238)(cid:236)(cid:241)(cid:234)(cid:3)(cid:247)(cid:235)(cid:232)(cid:3)(cid:242)(cid:291)(cid:232)(cid:245)(cid:3)(cid:228)(cid:249)(cid:228)(cid:236)(cid:239)(cid:228)(cid:229)(cid:239)(cid:232)(cid:3)(cid:247)(cid:242)(cid:3)(cid:252)(cid:242)(cid:248)(cid:3)(cid:242)(cid:245)
even ask you to not tell anyone else about it
104
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Additional Information
Shareholder Information
History
The Company was incorporated as Polar Capital Global
Healthcare Growth and Income Trust plc on 12 May 2010.
On 15 June 2010 the Company issued 89,000,000 ordinary
shares of 25p each and 17,800,000 subscription shares of
1p each which were admitted to trading on the Main Market
of the London Stock Exchange. The original subscription
price for each ordinary share was £1 and the Net Asset Value
(NAV) per share on 15 June 2010 was 98p (after launch
costs). The subscription share rights expired on 31 January
2014, following the issue of 17,800,000 ordinary shares. The
subscription shares were subsequently cancelled.
On 20 June 2017 the Company was reconstructed and the
name was changed to Polar Capital Global Healthcare Trust
plc. As part of the reconstruction, a 100% tender offer
was made to shareholders of which 21.8% was accepted
resulting in 26,299,042 ordinary shares being bought back
by the Company; the Company also offered new ordinary
shares in the form of an issue and placing which resulted in
27,798,298 new ordinary shares being created. As part of
the reconstruction and change of investment strategy, the
Company created a wholly owned subsidiary, PCGH ZDP Plc
(the ‘subsidiary’) (together with the Company, the ‘Group’)
which was created to provide structural gearing to the
Company through the placing of Z ero D ividend P reference
shares (‘ZDP shares’). The subsidiary was incorporated on
30 March 2017 and issued 50,000 ordinary shares of £1 each
which were subscribed by the Company and fully paid up. On
19 June 2017 the subsidiary issued 32,128,437 ZDP shares at
100p each. These ZDP shares have a standard listing on the
London Stock Exchange.
Each ZDP share is entitled to 122.99p on 19 June 2024 on
the winding up of the subsidiary. The proceeds of the ZDP
Share issue were advanced to the Company under the terms
of a loan agreement for investment by the Company in
accordance with its Investment Policy.
Portfolio Details
Portfolio information is provided to the AIC for its monthly
statistical information service (www.theaic.co.uk). The
portfolio is also published to the Company’s website.
Company Website
www.polarcapitalhealthcaretrust.co.uk
The Company maintains a website which provides a
wide range of information on the Company, monthly
factsheets issued by the Investment Manager and copies of
announcements, including the annual and half year reports
when issued.
Information on the Company can also be obtained from
various different sources including:
(cid:129) www.theaic.co.uk
(cid:129) www.ft.com/markets
(cid:129) www.londonstockexchange.co.uk
Share Prices and Net Asset Value
The Company’s Net Asset Value (NAV) is normally released
daily, on the next working day, following the calculation
date, to the London Stock Exchange. The mid-market price
of the ordinary shares is published daily in the Financial Times
in the Companies and Markets section under the heading
‘Investment Companies’. Share price information is also
available from The London Stock Exchange website:
www.londonstockexchange.co.uk
Electronic Communications
If you hold your shares in your own name you can choose
to receive communications from the Company in electronic
format. This method reduces costs, is environmentally friendly
and, for many, is convenient.
If you would like to take advantage of Electronic
Communications please visit our registrar’s website at
www.shareview.co.uk and register. You will need your
shareholder reference number. If you agree to the terms and
conditions, in future, on the day that documents are sent to
shareholders by post you will receive an e-mail providing the
website address where the documents can be viewed and
downloaded. Paper copies will still be available on request.
Nominee Shareholders
Where notifi cation has been provided in advance
the Company will arrange for copies of shareholder
communications to be provided to the operators of nominee
accounts. Nominee service providers are encouraged to advise
investors that they may attend general meetings when invited
by the Chair .
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc 105
Shareholder Information
Additional Information continued
Disability Act
Copies of this Annual Report and Financial Statements or
other documents issued by the Company are available from
the Company Secretary. If needed, copies can be made
available in a variety of formats, either Braille or on audio
tape or larger type as appropriate.
You can contact our Registrars, Equiniti Limited, who have
installed textphones to allow speech and hearing impaired
people who have their own textphone to contact them
directly by ringing 0870 600 3950 without the need for
an intermediate operator. Specially trained operators are
available during normal business hours to answer queries
via this service. Alternatively, if you prefer to go through a
‘typetalk’ operator (provided by the Royal National Institute
for the Deaf), you should dial 18001 followed by the number
you wish to dial.
AIC
The Company is a member of the Association of Investment
Companies (‘AIC’) and the AIC website www.theaic.co.uk
contains detailed information about investment trusts
including guides and statistics.
Calendar
Year End
Half Year End
Dividend Payments
30 September
31 March
end August
end February
Meet the Manager & Board
14 January 2021 @ 2pm
Annual General Meeting
26 January 2021 @ 2pm
Capital Gains Tax
Information on Capital Gains Tax is available on the HM Revenue
& Customs website – www.hmrc.gov.uk/cgt/ index.htm
When shares are disposed of a capital gain may result if the
disposal proceeds exceed the sum of the base cost of the
shares disposed and any other allowable deductions such as
share dealing costs. The exercise of a right of a subscription
share holder to subscribe for ordinary shares should not give
rise to a capital gain, however a capital gain may arise on the
eventual disposal of those shares.
The calculations required to compute capital gains may be
complex and depend on personal circumstances.
Shareholders are advised to consult their personal fi nancial
advisor for further information regarding a possible tax
liability in respect of their shareholdings.
Further information on the subscription shares is provided in
the subscription share section below.
The Company was launched on 15 June 2010 with the issue
of ordinary shares at £1 per share with subscription shares
attached (on a one for fi ve basis).
Subscription Shares Tax Implications
The base ‘cost’ for UK tax purposes of the subscription
shares is a proportion of the issue price paid for the ordinary
shares to which the subscription shares were attached. The
apportionment is made by reference to the respective market
values of the ordinary shares and subscription shares at the
close of business on 15 June 2010, the day the ordinary and
subscription shares were admitted to trading. The market
value for UK tax purposes of the Company’s ordinary shares
and subscription shares on such date were as follows:
Ordinary Shares 101.0p Subscription Shares 14.875p
If you have exercised the subscription rights attaching to
your subscription shares, the resulting ordinary shares are
treated for UK tax purposes as the ‘same’ asset as the
subscription shares in respect of which the subscription rights
are exercised. The base ‘cost’ for UK tax purposes of the
resulting ordinary shares will be the base cost attributed to
the exercised subscription shares, increased by the amount of
subscription monies paid.
106
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Shareholder Information
Contact Information
Company Registration Number
Independent Auditors
7251471 (Registered in England)
The Company is an investment company as defi ned under
Section 833 of the Companies Act 2006.
Directors
Lisa Arnold (appointed Chair 26 February 2020)
Neal Ransome (Chairman of the Audit Committee)
Andrew Fleming
Jeremy Whitley
Registered Offi ce and Contact Address
for Directors
16 Palace Street
London
SW1E 5JD
Investment Manager and AIFM
Polar Capital LLP
16 Palace Street
London
SW1E 5JD
Authorised and regulated by the Financial Conduct Authority.
Telephone: 020 7227 2700
Website: www.polarcapital.co.uk
Portfolio Co-Managers
Dr. James Douglas
Mr. Gareth Powell
Company Secretary
Polar Capital Secretarial Services Limited
Represented by Tracey Lago, FCG
Depositary, Bankers and Custodian
HSBC Bank Plc
8 Canada Square
London
E14 5HQ
PricewaterhouseCoopers LLP
Atria One
144 Morrison Street
Edinburgh
EH3 8EX
Solicitors
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London
EC2A 2HS
Stockbrokers
Panmure Gordon & Co
One New Change
London
EC4M 9AF
Identifi cation Codes
Ordinary shares
SEDOL: B6832P1
ISIN: GB00B6832P16
TICKER: PCGH
GIIN: ID3ME4.99999.SL.826
LEI: 549300YV7J2TWLE7PV84
Registrar
Shareholders who have their shares registered in their own
name, not through a share savings scheme or ISA, can
contact the registrars with any queries on their holding. Post,
telephone and Internet contact details are given below.
In correspondence you should refer to Polar Capital Global
Healthcare Trust plc, stating clearly the registered name and
address and, if available, the full account number.
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Shareholder helpline: 0800 313 4922
(or +44 121 415 0804 from overseas)
Annual Report and Financial Statements 2020 (cid:129) Polar Capital Global Healthcare Trust plc 107
Shareholder Information
Notes
108
Polar Capital Global Healthcare Trust plc (cid:129) Annual Report and Financial Statements 2020
Investment Objective
Our 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.
See more at: polarcapitalhealthcaretrust.co.uk
Contents
Strategic Report
Your Company at a Glance
Highlights
Performance
Chair’s Statement
Board of Directors
Management Team
Investment Manager’s Report
Ten Largest Investments
Full Investment Portfolio
Strategic Report
Section 172 Statement
Corporate Governance
Report of the Directors
Report on Corporate Governance
Directors’ Remuneration Report
Audit Committee Report
Statement of Directors’ Responsibilities
Independent Auditors’ Report
Financial Statements and Notes
Statement of Comprehensive Income
Statement of Changes in Equity
Balance Sheets
Cash Flow Statement
Notes to the consolidated Financial Statements
Shareholder Information
Alternative Performance Measures (APMs)
Glossary of Terms
Investing
Warnings to Shareholders
Additional Information
Contact Information
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Polar Capital Global Healthcare Trust plc
Meet the Manager & Board
In light of current restrictions in connection with COVID-19
the Annual General Meeting of the Company to be held on
26 January 2021 will be a closed meeting.
In order to give you the opportunity to engage with the
Management team and the Board you are invited to join
us for an informal Q&A session.
Questions can be submitted directly during the session
or in advance by email.
To register or to submit a question, please email your details
to marketing@polarcapital.co.uk with the subject line
‘PCGH Meet the Manager & Board’.
This document is printed on Galerie Satin,
a paper sourced from well managed,
responsible, FSC® certified forests and
other controlled sources. The pulp used in
this product is bleached using an elemental
chlorine free (ECF) process.
The session will be held via Zoom on 14 January 2021 at 2:00pm
Designed and printed by Perivan 259667
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Polar Capital Global Healthcare Trust plc
Report and Financial Statements for the year ended 30 September 2020
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Polar Capital Global Healthcare Trust plc • Annual Report and Accounts 2020
Annual Report and Accounts 2020 • Polar Capital Global Healthcare Trust plc
Polar Capital Global Healthcare Trust plc • Annual Report and Accounts 2020
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Strategic ReportStrategic Report