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W O R L D W I D E H E A LT H C A R E T R U S T P LC
A N N UA L R E P O R T & F I N A N C I A L S TAT E M E N TS
F O R T H E YE A R E N D E D 3 1 MA R C H 2 0 1 1
2011
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Worldwide Healthcare Trust PLC
25 Southampton Buildings, London WC2A 1AL
www.worldwidewh.com
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ACC E S S I N G T H E G LO B A L MA R K E T
The healthcare sector comprises worldwide industries. Accessing the global market as a UK investor can be difficult. Within the UK,
there are diminishing options for investment as the universe of companies is shrinking through mergers and acquisitions.
Worldwide Healthcare Trust PLC offers an opportunity to gain exposure to pharmaceutical, biotechnology and related companies
in the healthcare sector on a global scale.
I N V E S T M E N T O B J E C T I V E A N D P O L I C Y
Worldwide Healthcare Trust PLC invests worldwide in pharmaceutical, biotechnology and related companies in the healthcare
sector with the objective of achieving a high level of capital growth. In order to achieve its investment objective, the Company
invests in a diversified portfolio of shares in pharmaceutical and biotechnology companies and related securities on a worldwide
basis. It uses gearing and derivative transactions to mitigate risk and also to enhance returns. Further details of the Company’s
investment policy are set out in the Report of the Directors beginning on page 14.
CO N T I N UAT I O N V OT E
The next continuation vote of the Company shall be held at the Annual General Meeting in 2014, and further opportunities to
vote on the continuation of the Company shall be given to shareholders every five years thereafter.
G E A R I N G
The Company’s borrowing requirements are met through the utilisation of a loan facility, repayable on demand provided by
Goldman Sachs & Co. New York. At the date of this Annual Report £63.7m was drawn down from this facility.
A N N UA L G E N E R A L M E E T I N G
The Annual General Meeting of the Company will be held at the Barber-Surgeons’ Hall, Monkwell Square, Wood Street, London
EC2Y 5BL on Thursday, 7 July 2011 at 12 noon.
1
Performance Summary
2-3
Chairman’s Statement
4-5
Your Board
6
The Company’s Investment Manager
7-10
Review of Investments
11
Champions of Innovation
12
Portfolio
Analysis of the Portfolio
13
Report of the Directors Incorporating the Business Review 14-22
Statement of Directors’ Responsibilities
23
24-29
Corporate Governance
29
Shareholder Analysis
Directors’ Remuneration Report
Independent Auditors’ Report
Income Statement
Reconciliation of Movements in Shareholders’ Funds
Balance Sheet
Cash Flow Statement
Notes to the Financial Statements
Notice of Annual General Meeting
How to Invest
Glossary
Company Information
Disability Act
30-31
32-33
34
35
36
37
38-53
54-58
59
60
61
61
The Company is a member of the Association of Investment Companies.
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01
P E R F O R MA N C E S U M MA RY
Share price (total return)*
Net asset value per share (total return)*
Benchmark index (total return)**
Year ended
31 March
2011
Year ended
31 March
2010
-0.9%
+4.0%
+2.5%
+28.7%
+25.9%
+24.6%
31 March
2006
31 March
2007
31 March
2008
31 March
2009
31 March
2010
31 March
2011
% Change for
the year ended
31 March
2011
Shareholders’ funds
£334.8m £273.6m £224.8m £263.0m £346.2m £344.8m
-0.4
Net asset value per share – diluted
(dilution for warrants/subscription shares)
Net asset value per share – basic
Share price
Premium/(discount) of share price to diluted
net asset value per share at year end
Average month end premium/(discount) of
share price to diluted net asset value per share
Gearing ^
Total expense ratio (excluding performance fees)
Total expense ratio (including performance fees
accrued in the period)
564.1p
511.2p
482.4p
583.0p
520.9p
486.6p
575.0p
477.8p
457.0p
600.5p
635.9p
550.5p
752.7p
780.8p
701.5p
773.5p
799.2p
686.0p
1.9%
(6.5%)
(5.3%)
(8.3%)
(6.8%)
(11.3%)
1.9%
14.8%
1.4%
(3.1%)
(6.4%)
5.7%
1.3%
1.8%
1.3%
(7.5%)
15.3%
1.2%
(7.1%)
10.4%
1.0%
(7.6%)
13.3%
1.0%
1.4%
1.3%
1.3%
1.2%
1.9%
1.0%
+2.8
+2.4
-2.2
N/A
N/A
N/A
N/A
N/A
*Source – Morningstar. Net asset value diluted for subscription shares and treasury shares.
**With effect from 1 October 2010, the performance of the Company is measured against the MSCI World Health Care Index on a total return, sterling adjusted basis. Prior
to this date, performance was measured against the Datastream World Pharmeceutical & Biotechnology Index (total return, sterling adjusted). Historic data, therefore,
consists of a blended figure containing both indices.
^Calculated using the Association of Investment Companies definition (prior charges as a percentage of net assets).
P E R F O R MA N C E S I N C E L AU N C H TO 3 1 MA R C H 2 0 1 1
900
800
700
600
500
400
300
200
100
0
Apr
95
Mar
96
Mar
97
Mar
98
Mar
99
Mar
00
Mar
01
Mar
02
Mar
03
Mar
04
Mar
05
Mar
06
Mar
07
Mar
08
Mar
09
Mar
10
Mar
11
WWH Net Asset Value (total return)
WWH Share Price (total return)
Benchmark Index (total return)**
Rebased to 100 as at 28 April 1995
Source: Morningstar, Thomson Reuters & Bloomberg
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Chairman’s Statement
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt about any aspect of the proposal described in this document or as to the action you should take,
you should consult your stockbroker, bank manager, solicitor, accountant or other appropriate independent adviser.
If you have sold or otherwise transferred all your ordinary shares of 25p each in Finsbury Worldwide Pharmaceutical
Trust PLC (the “Company”), please forward this document to the purchaser or transferee, or to the bank, stockbroker
or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee.
R E V I E W O F T H E
YE A R A N D
P E R F O R MA N C E
The year ended 31 March 2011 was
a relatively difficult one for the
healthcare sector against a
background of stronger returns for
the market as a whole. This was
reflected in the performance of the
Company’s “blended” benchmark
Martin Smith
which rose 2.5% during the year. As I reported at the interim
stage, with effect from 1 October 2010, the Company’s
performance has been measured against the MSCI World Health
Care Index on a total return sterling adjusted basis. Prior to this
date, performance was measured against the Datastream World
Pharmaceutical & Biotechnology Index on a total return sterling
adjusted basis. The Company’s net asset value total return
outperformed the “blended” benchmark during the year
returning 4.0%. The Company benefitted from merger &
acquisition activity, the release of important positive product data
and a positive contribution from healthcare providers during the
year. However, the contribution from large capitalisation
pharmaceutical stocks was mixed with delays and non approvals
by the regulators adversely affecting some of our holdings. Since
the Company’s inception in 1995, the total return of the
Company’s net asset value per share is 738.9%, equivalent to a
compound annual return of 14.3%. This compares to a
cumulative “blended” benchmark return of 365.7%, equivalent to
a compound annual return of 10.1% over the same period.
During the year, the Company’s share price total return was -0.9%.
The average discount of the share price to the diluted net asset
value per share during the year was to 7.6% this compares to 7.1%
during the previous year.
Further information on the Company’s investments can be
found in the Review of Investments beginning on page 7.
C A P I TA L
In implementing our policy of actively managing the share price
discount we repurchased a total of 1,996,340 shares at a cost of
£13.4m (including expenses) during the year. As mentioned
above, the average discount during the year of the Company’s
share price to the diluted net asset value per share was 7.6%,
wider than the stated target of 6%. It remains possible for the
discount to be greater than 6% at times as the share price reflects
the overall balance between supply and demand for the
Company’s shares in the secondary market. The volatility of the
net asset value per share in an asset class such as healthcare is
another factor over which we have no control. The execution and
timing of any share buy-back will continue to be at the absolute
discretion of the Board. Shareholder approval to renew the
authority to buy-back shares will be sought at the Annual
General Meeting.
I would like to remind shareholders that the Board has resolved
that any shares held in treasury will be cancelled on the date of
the Annual General Meeting each year and consequently all
shares held in treasury on 7 July 2011 will be cancelled.
The next exercise date for the Company’s subscription shares is
1 August 2011 and the exercise price is 638p. During the year a
total of 801,195 new shares were issued, raising £4.9m of
additional funds for the Company, as a result of holders of
subscription shares exercising their subscription rights.
REVENUE AND DIVIDEND
During the year, the Company benefitted from a higher yield
from a number of stocks within the portfolio and the net
revenue return for the year was £7.2 million (2010: £4.2 million).
In order to maintain investment trust status the Board has
declared an interim dividend of 15.0p per share, compared to
last year’s interim dividend of 8.5p per share, an increase of
76.5%. Based on the current share price of 752.50p the interim
dividend represents a yield of 2.0%.
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The interim dividend will be payable on 30 June 2011 to
ordinary shareholders on the register of members on 10 June
2011. The associated ex-dividend date will be 8 June 2011.
GEARING
The Company’s borrowing requirements are met through a loan
facility, negotiated on competitive terms, which is repayable on
demand, provided by the custodian Goldman Sachs & Co New
York. At the time of writing a total of £63.7m of this facility was
drawn down, representing 17.7% of the Company’s net assets.
Your Company has used a modest level of gearing over a
number of years and the Board believes that the availability of a
meaningful gearing facility is very useful for a closed end
investment company such as ours.
THE BOARD
Paul Gaunt, who has been a Director of the Company since its
launch in 1995, will be retiring from the Board at the conclusion
of the Annual General Meeting. Paul was instrumental in
ensuring the launch of the Company and I would like to thank
Paul for his hard work during his time on the Board. His
experience and wise counsel will be greatly missed.
In May 2010 the Financial Reporting Council published the UK
Corporate Governance Code which replaced the Combined
Code on Corporate Governance. The Association of Investment
Companies subsequently amended its Code of Corporate
Governance and Corporate Governance Guide to bring it into
line with the UK Corporate Governance Code. One of the main
changes is that all directors of FTSE 350 companies are now
recommended to stand for annual re-election. Your Company’s
Directors have agreed, despite not being a FTSE 350 company,
to adopt this provision as they believe it will enhance the Board’s
accountability to shareholders. Accordingly, all Directors of the
Company will stand for re-election annually with effect from the
forthcoming Annual General Meeting. The Board recommends
the re-election of all Directors to shareholders.
DEVELOPMENTS IN THE INVESTMENT
TRUST SECTOR
HM Treasury’s review of the tax and company law rules affecting
investment trusts set out in its consultation document last
summer has now resulted in sensible and beneficial
amendments which should be advantageous to the whole
industry. Our trade association, the Association of Investment
Companies (AIC), played a leading role in reaching this
satisfactory conclusion of the review.
The Alternative Investment Fund Managers Directive was passed
into law by the European Parliament last summer, but there is
much detail still to emerge before this Directive takes effect in
2013. It is, however, clear that much of the over-bureaucratic
regulation first proposed has been abandoned in favour of more
pragmatic measures and the AIC again played a major role in
achieving this result.
OUTLOOK
In general, the outlook for markets has improved over the last
two years due, in part, to the actions taken by many central
banks. Such helpful policies will continue to be needed to
overcome problematic government finances – especially in
parts of Europe and also in the United States. The danger of
inflation in emerging markets in particular is a source of concern.
OrbiMed, our Investment Manager, remains confident of the
prospects for healthcare. With the sector’s recent
underperformance leaving valuations at historically attractive levels
they believe that the sector is well positioned to provide strong
performance in the years ahead. In addition, strong earnings
growth potential, continued merger and acquisition activity and a
number of anticipated high profile product approvals are all
positive indicators for the future. Despite the disappointing
performance in the year under review your Board believes that the
Company is well positioned to take advantage of this encouraging
picture. The Board would like to thank shareholders for their
continued support. I would also like to thank our Investment
Manager and our Manager for their hard work during the year.
Martin Smith
Chairman
1 June 2011
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Your Board
P R O F E S S O R
D U N C A N G E D D E S * +
Professor Geddes, aged 69, joined
the Board at launch in 1995 and
has been designated as the Senior
Independent Director. An author of
numerous publications on
respiratory medicine, Professor
Geddes is self-employed.
PAU L G AU N T +
Paul Gaunt, aged 62, joined the Board at launch in 1995. Paul is
self-employed and has 30 years’ experience in the investment
industry. He was formerly Senior Investment Manager and an
Assistant General Manager of The Equitable Life Assurance
Society and a Director of Brit Insurance Holdings PLC and Oasis
Healthcare PLC. Paul is a Director of RCM Technology Trust PLC
and also of The Biotech Growth Trust PLC; OrbiMed Capital LLC,
the Company’s Investment
Manager, also acts as Investment
Manager for The Biotech Growth
Trust PLC.
The Board of Directors, all of whom are non-executive,
supervise the management of Worldwide Healthcare Trust PLC
and look after the interests of shareholders.
MA R T I N S M I T H + (C H A I R MA N )
Martin Smith, aged 68, joined the
Board in 2007. He was a founder of
Phoenix Securities, a private
investment banking firm. Following
the acquisition of Phoenix in 1997
by Donaldson Lufkin and Jenrette
(DLJ), he chaired DLJ’s European
Investment Banking Group. He
subsequently founded and was a
non executive director of New Star Asset Management Group
PLC. He attended Oxford University and has an MBA from
Stanford University.
J O S E P H I N E D I XO N * +
Josephine (“Jo”) Dixon, aged 51, joined the Board in 2004. A
Chartered Accountant, having trained with Touche Ross in
London, Jo is Chairman of the Audit Committee. Jo is
self-employed and is also a non-executive director of Baring
Emerging Europe PLC and Standard Life Equity Income Trust
PLC. Until 2003 Jo held a number of
senior executive positions in
investment banking, leisure and
support services. She currently acts
as a consultant to a number of
companies.
*
Member of the Audit Committee
+
Member of the Nominations and Management Engagement and
Remuneration Committees
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A N T H O NY
TO W N S E N D * +
Anthony Townsend, aged 63,
joined the Board at launch in 1995.
Anthony has spent over 40 years
working in the City and was
Chairman of The Association of
Investment Companies from 2001
to 2003. Anthony is Chairman of
Baronsmead VCT 3 plc, British & American Investment Trust
PLC, F&C Global Smaller Companies PLC, Finsbury Growth &
Income Trust PLC and Miton Worldwide Growth Investment
Trust Plc.
D R DAV I D
H O L B R O O K * +
Dr David Holbrook, aged 51, joined
the Board in 2007. He is a qualified
physician and a Director of MTI
Partners Limited, a leading
technology venture capital investor.
He attended London and Oxford
Universities, and has an MBA from
Harvard Business School. He has held senior positions in a
number of blue chip biopharmaceutical organisations
including GlaxoSmithKline and Roche.
S A M U E L D I S A LY
Sam Isaly, aged 66, joined the Board at launch in 1995. Sam is
Managing Partner of OrbiMed Capital LLC, the Company’s
Investment Manager, and has been
an international pharmaceutical
investment specialist for more than
20 years having worked in New
York and Europe with Chase
Manhattan, Société Générale, Crédit
Suisse and UBS Warburg.
Other than those stated above, none of the Directors has any
other connections with the Investment Manager and is not
employed by any of the companies in which the Company
holds an investment.
*
Member of the Audit Committee
+
Member of the Nominations and Management Engagement and
Remuneration Committees
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06
OrbiMed Capital LLC – Investment Manager
OrbiMed has managed the portfolio since the Company’s
launch in 1995, and the many awards won by the Company
over the years are a testament to the strength and talent
harnessed by the OrbiMed team.
OrbiMed had approximately US$5.1 billion in assets under
management as at 31 March 2011, across a range of funds,
including investment trusts, hedge funds and private equity
funds. OrbiMed’s investment management activities were
founded in 1989 by Samuel D Isaly.
OrbiMed emphasises investments in companies with under-
appreciated products in the pipeline, high quality
management teams and adequate financial resources.
A disciplined portfolio construction process is utilised to
ensure that the portfolio is focused on 50 to 60 ‘high
conviction’ positions.
Finally, the portfolio is subject to a rigorous risk management
process to moderate portfolio volatility.
T H E T E A M
OrbiMed’s investment team, headed up by Samuel D Isaly,
includes over 30 experienced professionals with expertise in
science, medicine, finance and law, many of whom have
advanced degrees and broad experience in science and
medicine. Collectively, the team currently serves on the boards
of over 25 biotechnology and healthcare companies.
With a coverage universe of over 750 public companies,
OrbiMed’s professionals maintain an exceptional level of
research intensity. The team has a demonstrated record of
investing successfully across market cycles in both public and
private companies.
I N V E S T M E N T S T R AT E G Y A N D
P R O C E S S
‘Bottom-up’ fundamental research provides the investment thesis
for all positions. In addition to meeting frequently with industry
executives and healthcare practitioners, OrbiMed attends many
major medical conferences worldwide. Portfolio positions are
discussed and selected during daily portfolio management
meetings. OrbiMed invests with a worldwide perspective,
selecting ideas from across all major geographical markets.
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Review of Investments
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07
P E R F O R MA N C E
R E V I E W
The year ended 31 March, 2011 was
one of solid returns for the broader
market as the rebound off March
2009 lows continued through 2010
and early 2011. However, during
this same period, healthcare was
one of the worst performing
subsectors, as investor rotation into
other industries was significant. The Company’s returns during
the year reflect this difficult environment for healthcare.
Samuel D Isaly
The total return of the Company’s net asset value per share was
4.0% during the year. This figure compares to a “blended”
benchmark return of 2.5%. Shareholders will be aware that with
effect from 1 October 2010, the Company’s performance has
been measured against the MSCI World Health Care Index on a
total return sterling adjusted basis. Prior to this date, performance
was measured against the Datastream World Pharmaceutical &
Biotechnology Index on a total return sterling adjusted basis.
Since the Company’s inception in 1995, the total return of the
Company’s net asset value per share now measures 738.9%,
equivalent to a compound annual return of 14.3%, this compares
to a cumulative “blended” benchmark return of 365.7%, equivalent
to a compound annual return of 10.1% over the same period.
Over the past three years, volatility in major currencies has
been significant, sometimes to the benefit and other times to
the detriment of the Company. Unfortunately during the year,
the U.S. dollar weakened against sterling by 5.6%. A significant
majority of the portfolio holdings are denominated in U.S.
dollars, thus the falling U.S. dollar had a negative impact on the
Company’s absolute return during the year.
CO N T R I B U T I O N TO P E R F O R MA N C E
Not unexpectedly, mergers and acquisition activity (“M&A”) led
to the single largest positive contributor to performance
during the year. Specifically, the global biotechnology
company, Genzyme Corporation, was acquired by French drug
conglomerate, Sanofi-Aventis, for U.S.$20 billion. This
underscores our long-held investment strategy of proactively
investing in companies which are likely targets for M&A, in
particular biotechnology companies that we view as attractive
assets for other biopharmaceutical companies.
The next top contributor to performance was an emerging
biotechnology stock, NPS Pharmaceuticals (“NPS”). Strong stock
price performance for NPS was driven by positive phase III data
for Gattex, a drug for a rare disease called short bowel syndrome.
We believe the data supports the case for approval from
regulatory agencies, which is expected in early 2012.
Another strong performer, Illumina, has been able to execute
flawlessly the commercial launch of its new next-generation
sequencing platform, HiSeq 2000, across various academic and
research markets. The growth in the overall market for
sequencing has helped Illumina post revenue growth
throughout 2010 despite continued sluggishness in the U.S.
economy. Management has delivered top-line growth through
innovative new product development coupled with strong
demand for existing products, leading to notable
outperformance among its peer group.
Not to be overlooked was the positive contribution of Health
Maintenance Organisations (“HMOs”). We believe these
companies were oversold in 2008 and early 2009. The fear and
uncertainty about pending healthcare reform caused investors
to flee this subsector. We became bullish after the sell-off,
premised on four factors: the positive commercial
underwriting cycle, improving employment trends, the
removal of healthcare reform overhang to investor sentiment,
and attractive valuations. We believe that the commercial
premium pricing cycle is on the upswing after bottoming in
2009. The HMO subsector performed well and was a key
positive for the Company in 2010.
Notably, the contribution from large capitalisation
pharmaceutical stocks was largely mixed in the year. Pfizer, in
particular, experienced the most profound rebound catalysed
by a low valuation and a shift in sentiment that was
punctuated by a CEO change in December. Pfizer was a top
contributor in the period.
For Johnson & Johnson (“JNJ”), our positive view stemmed
from two points: (1) the early exit from their “patent cliff” when
compared to their large capitalisation pharmaceutical peer
group and (2) a new product cycle to drive revenues and
earnings post-cliff. However, management missteps in the
consumer business (including product recalls), recessionary
reduction in demand in their device businesses, greater than
expected financial hits from the new U.S. healthcare reform,
and a deteriorating pricing environment in Europe all
conspired to sap the earnings recovery story. Additionally, JNJ’s
new product cycle was muted. Finally, a lack of management
urgency to alter the course did not materialise.
Roche was a negative contributor in the period, largely due to a
pipeline failure and a disappointing U.S. Food and Drug
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Review of Investments (continued)
Administration (“FDA”) decision, two risks that are unfortunately
embedded in healthcare investing. For the pipeline, Roche was
forced to stop development of new injectable diabetes drug,
called taspoglutide, due to unexpected hypersensitivity
reactions seen in some patients despite the fact clinical trials
were almost complete. On the regulatory front, the FDA asked
Roche to withdraw the marketing of Avastin for the treatment
of metastatic breast cancer, given Agency concerns over data in
this patient population.
Merck was also a victim of an unexpected pipeline failure.
Specifically, a novel anti-platelet drug called vorapaxar was
stopped in late stage development due to concerns over a
bleeding side effect. This compound was a high-profile
opportunity for the company. Additionally, Merck’s stock,
unlike Pfizer, failed to respond positively to the appointment of
a new CEO.
The emerging biotechnology company, Allos Therapeutics, was
a negative contributor in the year. The share price weakened
over the period as the launch of their drug Folotyn, for
peripheral T-cell lymphoma, came in below expectations.
Furthermore, they reported underwhelming data for Folotyn
for lung cancer, a key expansion indication. We continue to
hold the shares as we believe that the reset expectations for
Folotyn in 2011 are achievable.
An unexpected regulatory disappointment in the year came
from InterMune, a California-based emerging biotechnology
company. Despite an earlier favourable Advisory Committee
meeting, the FDA failed to approve the company’s novel
treatment, pirfenidone, for the treatment of a devastating disease
known as idiopathic pulmonary fibrosis. In response, the stock
declined more than 75% following the FDA’s negative decision.
Finally, a word on Japan. Despite the staggering earthquake and
tsunami that devastated the country in March 2011, the
contribution from exposure to Japanese equities was collectively
a net positive during the year. The largest driver to performance
in Japan continues to be our secular investment in local generic
drug manufacturers. In particular, Sawai Pharmaceutical was a
top five contributor to performance during the year.
U. S . H E A LT H C A R E R E F O R M –
A N U P DAT E
In March 2010, U.S. President Barack Obama signed into law “The
Patient Protection and Affordable Care Act”, a new law that
intends to increase the amount of healthcare coverage provided
to Americans, primarily the uninsured. After one year, we have
been better able to assess its impact, and thus far we believe the
legislation will be neutral for the healthcare industry.
The way the new law was structured, tax increases to help pay
for expanded coverage took effect as early as 1 January, 2010.
These offsets included an increase in Medicaid rebates, an
increase in drug coverage for Medicare “Part D” (a drug
coverage programme for the elderly), and an annual fee on
branded pharmaceutical sales. An excise tax was also placed
on medical device companies. However, expansion of the
population eligible for Medicaid will not occur until 2014 (up
to 30 million additional lives will go under coverage). Thus to
date, the new law has been a net negative for the majority of
the industry, since the cost saving offsets preceded the volume
increases from new patients. But the net impact has been
modest and we expect that by 2014 the patient volume
increases will more than offset the cost savings provisions.
Importantly, the law contained no provisions that would
impose price controls or install the federal government as a
major buyer of drugs. So the worst case scenario from
industry’s perspective was entirely avoided.
O U R S T R AT E G Y F O R 2 0 1 1 A N D
B E YO N D
Overall, we remain confident for the prospects of performance
in the coming year. With healthcare underperforming in 2010
and valuations now at historically attractive levels, we believe
the sector is poised for strong absolute and relative
performance in the years ahead.
H E A LT H C A R E R E F O R M –
W I N N E R S & LO S E R S
In our view, branded drug makers and the profitable
biotechnology companies emerged as winners due to the
absence of any draconian cost control measures in the new law.
Generic drug makers are clear winners. The commercial HMOs are
winners as early reform mandates are manageable, and the new
law will mandate the private sector to cover new lives. Losers in
this sector come primarily in the services areas, like imaging,
home health, dialysis, and hospitals (in which the Company has
no exposure). However, beginning in 2014, Medicaid HMOs
should benefit from the expansion of Medicaid, and hospitals will
get reimbursement for previously uncompensated care.
P H A R MAC E U T I C A L S
We remain cautious on large capitalisation pharmaceutical
stocks, given chronic industry burdens that are not shared
equally among the players. Thus, we are selective in this area,
preferring contrarian plays and/or companies with late stage
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Wo r l d w i d e H e a l t h c a re Tr u s t P LC > A n n u a l R e p o r t 2 0 1 1
Review of Investments (continued)
09
pipeline assets that will drive future growth. Dividends and
potential M&A are also considered.
The peak of the “patent cliff” is almost fully upon us, with three
mega-blockbusters set to lose patent expiration before the
end of 2011 (Plavix from Bristol-Myers Squibb, Zyprexa from Eli
Lilly, and Lipitor from Pfizer). Nevertheless, several companies
with healthy new product pipelines will manage to generate
attractive growth to manage through this “cliff”.
B I OT E C H N O LO G Y
The largest subset of catalyst-driven investment opportunities
that we are finding continues to be in the biotechnology sector,
in which we see a combination of high growth rates, attractive
valuations, clinical catalysts, product pipelines, new product
launches, and M&A activity. Most importantly, identifying
innovative therapies and the next product cycle is critical. The
most compelling innovation is often occurring among small-to-
mid-capitalisation companies. Several blockbuster drugs are
currently being developed by biotechnology companies and
are due to be introduced in the year ahead. As these products
are launched by smaller biotechnology companies the larger
industry players will be actively considering these new product
stories as acquisition candidates.
S P E C I A LT Y P H A R MAC E U T I C A L
CO M PA N I E S
Whereas large pharmaceutical companies are facing known
headwinds, many smaller and more focused pharmaceutical
companies possess unique opportunities for growth. Within this
subsector we focus on high quality companies that have stable
and enduring franchises, are catalyst laden, and are themselves
potential acquisition targets. Other opportunities in this sector
are contrarian plays with very attractive valuations that are
often misunderstood by the generalist investor.
G E N E R I C S
The macro environment for generic drug manufactures is
positive on a global basis. The first half of this decade will see
over U.S. $100 billion in branded sales go generic. In the U.S.,
pricing has largely stabilised and the new healthcare reform
laws should drive volume increases. Pathways for biosilimars
and/or follow-on-biologics are emerging, creating a new
opportunity for these companies. In Japan, the growth of
generics is at record highs and market penetration remains in
its infancy. Nonetheless, we remain selective in the generics
sector overall as the European pricing environment remains
unstable, some companies have dependency on branded
drugs with future patent expiry ahead, and the reimbursement
changes have created some uncertainty.
M E D I C A L D E V I C E S
Industry headwinds have been building as innovation in the
medical device subsector has been incremental at best,
preventing the ability to command price increases and drive
increased demand. Pricing pressure, coupled with an extended
approval process and a new excise tax creates headwinds for
the sector. But opportunity remains as recessionary concerns
ease, utilisation will pick up, driving new volume growth in
selected medical device categories.
H E A LT H C A R E S E R V I C E S
We remain bullish on HMOs. The impact of healthcare reform is
becoming more visible and better understood by the
investment community. The companies are cutting broker
commissions to offset rebates, thus profitability remains stable.
Pricing cycles remain on an upswing as HMOs have raised
premiums assuming an increase in utilisation in the future.
Current utilisation trends remain sluggish, which is positive for
this group. Most importantly, despite the rebound seen in these
stocks, valuations remain very attractive and thus we still see
considerable upside opportunities here.
E M E R G I N G MA R K E TS
We are finding significant opportunities to invest in healthcare
companies in several emerging markets as a result of their high
overall growth rates coupled with the fact that the healthcare
sector is a growing share of GDP in countries such as China and
India. As a result, we have positioned the portfolio with a small
yet increasing exposure to emerging markets at present. In
support of this effort we now have a designated public equity
analyst in each of our Shanghai and Mumbai offices.
Our geographic exposure continues to place significant emphasis
on our holdings in North America, with 63% of the portfolio in
that region. The balance of our exposure resides in Europe 22%,
with Asia and Israel representing 15% of the portfolio.
Samuel D Isaly
OrbiMed Capital LLC
Investment Manager
1 June 2011
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10
Wo r l d w i d e H e a l t h c a re Tr u s t P LC > A n n u a l R e p o r t 2 0 1 1
Review of Investments (continued)
CO N T R I B U T I O N BY I N V E S T M E N T – E XC LU D I N G D E R I VAT I V E S
Top and bottom five contributors to net asset value performance over the year to 31 March 2011
Top Five Contributors
Genzyme
NPS Pharmaceuticals
Illumina
Pfizer
Sawai Pharmaceutical
Bottom Five Contributors
Merck & Co
Roche
Johnson & Johnson
Allos
Intermune
Contribution
for the year to
31 March 2011
£’000
Contribution
per share
(pence)*
3,535
3,398
3,126
2,696
2,326
(3,564)
(3,259)
(3,224)
(2,772)
(2,646)
8.16
7.84
7.21
6.22
5.37
34.80
(8.22)
(7.52)
(7.44)
(6.40)
(6.10)
(35.68)
*based on the weighted average number of shares in issue during the year ended 31 March 2011 (43,342,727).
Source: Frostrow Capital LLP
221366 Finsbury WWP pp01-pp13 02/06/2011 16:27 Page 11
Wo r l d w i d e H e a l t h c a re Tr u s t P LC > A n n u a l R e p o r t 2 0 1 1
Champions of Innovation
I N D U S T RY L E A D I N G I N V E S T M E N TS I N T H E P O R T F O L I O
11
1) M I TS U B I S H I TA N A B E P H A R MA
Mitsubishi Tanabe Pharma is a mid-capitalisation specialty
pharmaceutical company based in Japan. The company sells a
mix of products in Japan, from primary care medicines to
specialty biologics. However, their robust pipeline contains
products for both the domestic Japanese market as well as
global opportunities. One key example is Gilenya, a novel drug
for the treatment of multiple sclerosis (MS). Licensed to and
developed by Novartis, the drug represents a sea change in the
treatment of MS, given its unmatched efficacy and the fact it is
the first oral therapy ever for MS patients. The drug is now
approved in the U.S. and Europe, from which the company will
collect an important royalty on sales. They will market the drug
themselves in Japan. Another product, called telaprevir, is a
novel add-on therapy for the treatment of Hepatitis C for which
the company owns exclusive rights to pan-Asia, including
Japan and China. We expect the drug to mark a new standard
of care for the treatment of this disease. These two examples
are representative of an impressive “multiple shots on goal”
pipeline possessed by Mitsubishi Tanabe.
2) W E L L P O I N T
WellPoint is the largest diversified insurer by membership in the
United States with commercial, Medicare Advantage, and
Medicaid business. As an independent licensee of the Blue Cross
Blue Shield Association (not for profit healthcare provider),
WellPoint has strong brand awareness and an extensive national
network with medical cost advantages. As such a provider itself,
WellPoint is also less exposed to competitive pricing from over-
capitalised non-for-profit Blues and can partner with over 30
other Blue plans for Medicaid. It could also potentially acquire
another Blue insurer. WellPoint is well positioned for the
eventual transformation of the employer-driven insurance
market to an individual-centered market. Upside to earnings
could come from continued lower than expected healthcare
utilisation, greater capital deployment and greater broker
commission work-arounds in 2012 and beyond.
3 ) N O VA R T I S
Novartis has become the leading diversified healthcare
company in the world. No single company can offer the
breadth that Novartis can – from primary to specialty care
products, from branded to generic drugs, from vaccines to
consumer products, and most recently can boast of the
preeminent ophthalmic care business with acquisition of
Alcon. That said, our conviction on Novartis is based on the
company’s new product cycle – recently launched products
and late stage pipeline opportunities. The company is not
immune to patent expirations, but the portfolio of offerings is
young and growing, layered on top of a diversified business
platform, should enable Novartis to withstand industry
headwinds and grow faster than their peer group. We applaud
the management changes across the senior executive level
over the past two years and believe the right people are in
place to lead the company over the rest of the decade.
4) SHANDONG WEIGAO GROUP
MEDICAL POLYMER CO.
Shandong Weigao is the leading manufacturer and distributor
of medical consumables in China. With its diversified product
portfolio comprising 1) single use medical consumables, 2)
pre-filled syringes, 3) medical needles, 4) orthopedic implants
through a JV with Medtronic, 5) drug eluting stents through a
joint venture with Biosensors, and 6) blood purification
consumables, Weigao is well positioned to benefit from the
rapidly growing demand for healthcare products and services
in China. The next key growth driver will be dialysis centres,
which will provide a platform for Weigao’s dialysis
consumables, dialyzers and dialysis machines from the joint
venture with Nikkiso. With a pipeline of new products and new
services opportunities, Weigao should deliver strong
sustainable sales and earnings growth.
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Wo r l d w i d e H e a l t h c a re Tr u s t P LC > A n n u a l R e p o r t 2 0 1 1
12
Portfolio
as at 31 March 2011
Investments
Pfizer
Roche
Novartis
Mitsubishi Tanabe Pharma
Johnson & Johnson
Bristol-Myers Squibb
Merck & Co.
Wellpoint
Sanofi-Aventis
Allergan
Top 10 investments
Sinopharm
Shire
GlaxoSmithKline
Hospira
Sawai Pharmaceutical
Abbott Laboratories
Medtronic
Elan ~
Nichi-Iko Pharmaceutical
Vertex Milestone Monetization (unquoted, CPEC) +
Top 20 investments
Gilead Sciences
Dendreon ^
United Health
Express Scripts
BioMarin Pharmaceutical
Incyte 4.75% 01/10/2015 (Conv)
Warner Chilcott
Shionogi
Volcano #
Towa Pharmaceutical
Top 30 investments
NPS Pharmaceuticals
Thermo Fisher Scientific
Baxter International
VWR Funding 10.25% 15/07/15
Given Imaging
Perrigo
Human Genome Science
Carefusion
Zimmer
Illumina
Top 40 investments
Pharma 10 Cinacalcet Royalty 15.5% 30/03/2017
CIGNA
Watson Pharmaceuticals
Align Technology
Humana
Lyrica Royalty 11% 01/05/19
Angiotech Pharmaceuticals FRN 01/12/2013
Hikma Pharmaceuticals
Aetna
K-V Pharmaceutical 12% 15/03/15
Top 50 Investments
Shandong Weigao Group
McKesson
Cardinal Health
Cubist Pharmaceuticals 2.5% 01/11/17
Allos Therapeutics (Conv)
Sequenom
QHP Royalty 10.25% 15/03/2015
Pacific Biosciences of California
HCA
Orexigen Therapeutics
Total equities and fixed interest investments
Options – (Put & Call)
Total investments
Country
USA
Switzerland
Switzerland
Japan
USA
USA
USA
USA
France
USA
China
Ireland
UK
USA
Japan
USA
USA
Ireland
Japan
USA
USA
USA
USA
USA
USA
USA
Ireland
Japan
USA
Japan
USA
USA
USA
USA
Israel
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
UK
USA
USA
China
USA
USA
USA
USA
USA
USA
USA
USA
USA
^
~
#
+
includes Dendreon 4.75% 15/06/2014 (Conv) equating to 0.6% of investments
includes Elan 8.75% 15/10/2016 equating to 0.7% of investments
includes Volcano 2.875% 01/09/2015 (Conv) equating to 0.3% of investments
Convertible Preferred Equity Certificates (CPEC)
Market value
£’000
% of
investments
24,074
23,228
17,836
15,746
15,715
14,955
13,653
10,406
10,249
9,967
155,829
9,943
8,365
8,148
7,438
7,266
7,252
6,919
6,810
6,663
6,640
231,273
6,515
6,511
6,485
6,418
6,318
6,213
6,170
6,120
5,994
5,677
293,694
5,127
5,095
5,030
4,428
4,162
3,966
3,936
3,780
3,776
3,759
336,753
3,653
3,508
3,494
3,382
3,184
3,135
3,116
3,068
3,034
2,963
369,290
2,453
2,367
2,308
2,031
1,798
1,580
1,561
1,400
993
88
385,869
2,223
388,092
6.2
6.0
4.6
4.1
4.0
3.9
3.5
2.7
2.6
2.6
40.2
2.6
2.1
2.1
1.9
1.9
1.9
1.8
1.7
1.7
1.7
59.6
1.7
1.7
1.7
1.7
1.6
1.6
1.6
1.6
1.5
1.4
75.7
1.3
1.3
1.3
1.1
1.1
1.0
1.0
1.0
1.0
1.0
86.8
0.9
0.9
0.9
0.9
0.8
0.8
0.8
0.8
0.8
0.8
95.2
0.6
0.6
0.6
0.5
0.5
0.4
0.4
0.4
0.2
0.0
99.4
0.6
100.0
221366 Finsbury WWP pp01-pp13 02/06/2011 14:56 Page 13
Analysis of the Portfolio
Wo r l d w i d e H e a l t h c a re Tr u s t P LC > A n n u a l R e p o r t 2 0 1 1
13
T H E P O R T F O L I O
as at 31 March 2011
Equities (including options)
Convertibles (Conv)
Fixed Interest Securities
Total of all investments
G E O G R A P H I C A L A N A LYS I S
as at 31 March
2 0 1 1
Market value
£’000
% of
investments
91.5
3.0
5.5
100.0
355,008
11,595
21,489
388,092
2 0 1 0
Europe 22%
Europe 19%
USA
63%
USA
70%
Far East
incl. Japan
14%
Israel
1%
A N A LYS I S BY MA R K E T C A P I TA L I S AT I O N
as at 31 March
2 0 1 1
Small Cap
Far East incl.
Japan 8%
Large Cap
Far East incl.
Japan 6%
Large Cap
Europe 18%
Small Cap
USA 32%
Far East
incl. Japan
8%
Israel
3%
2 0 1 0
Large Cap
Israel 3%
Large Cap
Far East incl.
Japan 8%
Large Cap
Europe 17%
Small Cap
Europe 4%
Small Cap
USA 20%
Large Cap
Israel 1%
Large Cap
USA 43%
Small Cap
Europe 2%
Large Cap USA
38%
Note:
A small capitalisation company is defined as being one with a market capitalisation of less than U.S.$5bn and a large capitalisation
company is one with a market capitalisation of more than U.S.$5bn.
221366 Finsbury WWP pp14-pp23 02/06/2011 14:58 Page 14
14
Wo r l d w i d e H e a l t h c a re Tr u s t P LC > A n n u a l R e p o r t 2 0 1 1
Report of the Directors
Incorporating the Business Review
The Directors present their report and the audited financial
statements for the year ended 31 March 2011.
I N T R O D U C T I O N
The Report of the Directors includes the Business Review and
Corporate Governance Statement. The Business Review contains
a review of the Company’s business, the principal risks and
uncertainties it faces and an analysis of its performance during
the financial period and the position at the period end and the
future business plans of the Company. To aid understanding of
these areas the Board has included an analysis using appropriate
Key Performance Indicators. The Business Review should be read
in conjunction with the Chairman’s Statement on pages 2 and 3,
the Investment Manager’s Review on pages 7 to 9 and the
analyses on pages 10 to 13.
B U S I N E S S A N D S TAT U S O F T H E CO M PA NY
The Company is registered as a public limited company and is
an investment company within the terms of Section 833 of the
Companies Act 2006. Its shares are listed on the Official List of
the UK Listing Authority and traded on the main market of the
London Stock Exchange. The Company has received approval
from HM Revenue & Customs as an authorised investment
trust under Section 842 of the Income and Corporation Taxes
Act 1988 (“ICTA 1988”) for the year ended 31 March 2010 and
all previous periods. This approval is subject to there being no
subsequent enquiry under corporation tax self-assessment. In
the opinion of the Directors, the Company continues to direct
its affairs so as to enable it to qualify for such approval and the
Company will continue to seek approval each year. With effect
from the year ended 31 March 2011, approval will be sought
under Sections 1158 and 1159 of the Corporation Tax Act 2010
(“CTA 2010”), formerly under Section 842 ICTA 1988.
CO N T I N UAT I O N O F T H E CO M PA NY
A resolution was passed at the Annual General Meeting held in
2009 that the Company continue as an investment trust for a
further five year period. In accordance with the Company’s
Articles of Association, shareholders will have an opportunity
to vote on the continuation of the Company at the Annual
General Meeting in 2014 and every five years thereafter.
I N V E S T M E N T O B J E C T I V E A N D B E N C H MA R K
The Company invests worldwide in pharmaceutical,
biotechnology and related companies in the healthcare sector
with the objective of achieving a high level of capital growth.
With effect from 1 October 2010, the Company’s performance
has been measured against the MSCI World Health Care Index
(total return, sterling adjusted). Prior to this date, performance
was measured against the Datastream World Pharmaceutical &
Biotechnology Index (total return, sterling adjusted).
I N V E S T M E N T P O L I C Y
In order to achieve its investment objective, the Company
invests in a diversified portfolio of shares in pharmaceutical,
biotechnology and related companies in the healthcare sector
with the objective of achieving a high level of capital growth. It
uses gearing and derivative transactions to mitigate risk and
also to enhance capital returns.
Investment Limitations and Guidelines
The Board seeks to manage the Company’s risk by imposing
various investment limits and restrictions:
•
•
•
•
•
•
•
The Company will not invest more than 10% of its gross
assets in other listed investment companies (including
listed investment trusts);
The Company will not invest more than 15% of the
portfolio in any one individual stock at the time of
acquisition;
At least 60% of the portfolio will normally be invested in
larger companies (i.e. with a market capitalisation of at
least US$5bn);
At least 20% of the portfolio will normally be invested in
smaller companies (i.e. with a market capitalisation of less
than US$5bn);
Investment in unquoted securities will not exceed 10% of
the portfolio at the time of acquisition;
A maximum of 5% of the portfolio, at the time of
acquisition, may be invested in each of debt instruments,
convertibles and royalty bonds issued by pharmaceutical
and biotechnology companies;
A maximum of 15% of the portfolio, at the time of
acquisition, may be invested in companies in each of the
following sections:
–
–
–
healthcare equipment
healthcare technology
providers of healthcare and related services
221366 Finsbury WWP pp14-pp23 02/06/2011 14:58 Page 15
Wo r l d w i d e H e a l t h c a re Tr u s t P LC > A n n u a l R e p o r t 2 0 1 1
Report of the Directors (continued)
Incorporating the Business Review
15
•
•
•
The Company’s gearing policy is to borrow up to the lower
of £70m or 20% of the Company’s net asset value;
Derivative transactions can be used to mitigate risk and/or
enhance capital returns and will be restricted to 5% of the
portfolio; and
Equity Swaps may be used in order to meet the Company’s
investment objective of achieving a high level of capital
growth and is restricted to 5% of the portfolio.
•
•
•
•
•
•
Share price total return (see pages 1 and 31)
Stock contribution analysis (see page 10)
Share price premium/discount to net asset value per share
(see page 1)
Total expense ratio (see page 1)
Benchmark and peer group performance (see pages 1 and 31)
Issue of new shares/repurchase of own shares (see page 17)
Compliance with the Board’s investment limitations and
guidelines is monitored continuously by Frostrow Capital LLP
(“Frostrow” or the “Manager”) and OrbiMed Capital LLC
(“OrbiMed” or the “Investment Manager”) and is reported to the
Board on a monthly basis.
P E R F O R MA N C E
In the year to 31 March 2011, the Company’s net asset value
total return was 4.0% compared to a rise of 2.5% in the
Company’s “blended” benchmark. With effect from 1 October
2010, the Company’s performance is measured against the
MSCI World Health Care Index (total return, sterling adjusted).
Prior to this date, performance was measured against the
Datastream World Pharmaceutical & Biotechnology Index (total
return, sterling adjusted). Historic data, therefore, consists of a
blended figure containing both indices. The Company’s share
price total return was -0.9% in the same period.
The Review of Investments on pages 7 to 10 includes a review
of the principal developments during the year, together with
information on investment activity within the Company’s
portfolio.
R E S U LTS A N D D I V I D E N D S
The results attributable to shareholders for the year and the
transfer to reserves are shown on page 34. In order to maintain
investment trust status the Directors have declared an interim
dividend for the year of 15.0p per share (2010: interim dividend
of 8.5p) payable on 30 June 2011.
K E Y P E R F O R MA N C E I N D I C ATO R S ( ‘ K P I s’ )
At each Board meeting the Board assesses the Company’s
performance in meeting its investment objective and against
the following key performance indicators:
•
Net asset value total return (see page 1)
The management of the portfolio is conducted by the
Investment Manager and the management of the Company’s
affairs, including marketing, administration and company
secretarial matters is conducted by the Manager. Each provider
is responsible to the Board which is ultimately responsible to
the shareholders for performing against, inter alia, the above
KPIs within the terms of their respective agreements by
utilising the capabilities of the experienced professionals
within each firm.
P R I N C I PA L R I S K S A N D T H E I R
M I T I G AT I O N
The Company’s assets consist principally of listed equities; its
main area of risk is therefore stockmarket-related. The specific
key risks faced by the Company, together with the Board’s
mitigation approach, are as follows:
Objective and Strategy – The Company and its investment
objective become unattractive to investors
The Board regularly reviews the investment mandate and the
long-term investment strategy in relation to market and
economic conditions, and the operation of the Company’s peers,
thereby monitoring whether the Company should continue in its
present form. A continuation vote was held at the Annual
General Meeting held in 2009 and will be held every five years
thereafter. Each month the Board receives a monthly review,
which monitors the Company’s investment performance (both
on an absolute basis and against the benchmark and peer
group) and its compliance with the investment guidelines.
Additional reports and presentations are regularly presented to
investors by the Company’s Manager, Investment Manager and
Corporate Stockbroker.
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16
Wo r l d w i d e H e a l t h c a re Tr u s t P LC > A n n u a l R e p o r t 2 0 1 1
Report of the Directors (continued)
Incorporating the Business Review
Level of discount/premium – Share price performance lags
NAV performance
The Board undertakes a regular review of the level of
discount/premium and consideration is given to ways in which
share price performance may be enhanced, including the
effectiveness of marketing and share buy-backs, where
appropriate. The Board has implemented a discount control
mechanism intended to establish a maximum level of 6%
discount of share price to the diluted net asset value per share.
Shareholders should note that it remains possible for the share
price discount to net asset value per share to be greater than
6% on any one day and is due to the fact that the share price
continues to be influenced by overall supply and demand for
the Company’s shares in the secondary market. The volatility of
the net asset value per share in an asset class such as
healthcare is another factor over which the Board has no
control. The average month end share price discount during
the year was 7.6%. The making and timing of any share buy-
backs is at the absolute discretion of the Board.
Market Price and Industry Risk
Market price risk arises mainly from uncertainty about future
prices of financial instruments held. It represents the potential
loss the Company might suffer through holding market
positions in the face of price movements.
Industry risk exists in all specialist industries. Risks are inherent
in pharmaceutical companies with, for example, the potential
for drug withdrawals from the market or failures after launch
and lack of expected profit growth.
The Board meets on a quarterly basis during the year and on
an ad hoc basis if necessary. At each meeting they consider
the asset allocation of the portfolio. The Investment Manager
has responsibility for selecting investments in accordance with
the Company’s investment objective and seeks to ensure that
individual stocks meet an acceptable risk-reward profile.
Liquidity Risk
The Company’s assets comprise mainly realisable securities,
which can be sold to meet funding requirements if necessary.
Portfolio Performance and Financial Instruments –
Investment performance may not be meeting the
Investment objective or shareholder requirements
The Board regularly reviews investment performance against the
benchmark and against peer group. The Board also receives
regular reports that show an analysis of performance compared
with other relevant indices. The Investment Manager provides
an explanation of stock selection decisions and an overall
rationale for the make-up of the portfolio. The Investment
Manager discusses current and potential investment holdings
with the Board on a regular basis in addition to new initiatives,
which may enhance shareholder returns.
Operational and Regulatory – Compliance with s1158 and
1159 of the Corporation Tax Act 2010 (formerly under
s842 of the Income and Corporation Taxes Act 1988)
A breach of s1158 and 1159 of the Corporation Taxes Act 2010
could lead to the Company being subject to tax on capital gains,
whilst a serious breach of other regulatory rules may lead to
suspension from the Stock Exchange or to a qualified Audit
Report. Other control failures, either by the Manager, the
Investment Manager or any other of the Company’s service
providers, may result in operational and/or reputational
problems, erroneous disclosures or loss of assets through fraud,
as well as breaches of regulations.
The Manager reviews the level of compliance with s1158 and
1159 and other financial regulatory requirements on a daily
basis. All investment transactions and income and expenditure
forecasts are reported to the Board. The Board regularly
considers all risks, the measures in place to control them and
the possibility of any other risks that could arise. The Board
ensures that satisfactory assurances are received from service
providers. The Compliance Officer of the Manager and the
Investment Manager produce regular reports for review by the
Company’s Audit Committee and are available to attend
meetings in person if required.
Currency Risk
A significant proportion of the Company’s assets are, and will
continue to be, invested in securities denominated in foreign
currencies, in particular U.S. dollars. As the Company’s shares
are denominated and traded in sterling, the return to
shareholders will be affected by changes in the value of
sterling relative to those foreign currencies. The Board has
made clear the Company’s position with regard to currency
fluctuation, which is that it does not currently hedge against
currency exposure.
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Report of the Directors (continued)
Incorporating the Business Review
17
Loan Facility Risk – The provider of the Company’s loan
facility may no longer be prepared to lend to the
Company
The Board, the Investment Manager and the Manager are kept
fully informed of any likelihood of the withdrawal of the loan
facility so that repayment can be effected in an orderly fashion.
Credit Risk
The Company’s assets can be held by Goldman Sachs & Co.
New York as collateral for the loan provided by them to the
Company. Such assets taken as collateral may be used, loaned,
sold, rehypothecated or transferred by Goldman Sachs & Co.
New York, although the Company maintains the economic
benefits from ownership of those assets. Goldman Sachs & Co.
New York may take up to 140% of the value of the outstanding
loan as collateral. The Company is protected, such protection
being equal to the net assets held by Goldman Sachs & Co.
New York, by SEC rules and U.S. legislation. (Also see Glossary
on page 60).
Assets held by Goldman Sachs & Co. New York, as custodian,
that are not used as collateral, are held in segregated client
accounts.
Further information on financial instruments and risk, as
required by FRS 29, can be found in note 18 to the financial
statements beginning on page 47.
LOA N FAC I L I T Y
The Company’s borrowing requirements are met through the
utilisation of a loan facility, repayable on demand, provided by
Goldman Sachs & Co. New York. Further details can be found in
note 11 on page 45 and in note 18 on page 51.
S H A R E C A P I TA L
On 4 September 2009, the Company made a bonus issue of
subscription shares on the basis of one subscription share for
every five ordinary shares held at that date. The subscription
shares have quarterly subscription dates and the following
shares were allotted by the Company as a result of holders of
the subscription shares exercising their subscription rights
during the year:
280,794 shares were allotted on 7 May 2010 raising £1,700,000;
406,099 shares were allotted on 4 August 2010 raising
£2,500,000; 31,016 shares were allotted on 2 November 2010
raising £194,000; and 83,286 shares were allotted on 1 February
2011 raising £531,000.
Subsequent to the year-end, 15,599 shares were allotted on
18 May 2011 raising £100,000.
At the Annual General Meeting held on 15 July 2010, authority
was granted for the repurchase of 6,442,675 shares of 25p,
representing 14.99% of the issued share capital at that time. In
the year under review, the Company bought back a total of
1,996,340 shares to be held in treasury, at a cost of £13,304,907
(including expenses). Since the year end and to 1 June 2011 no
shares have been repurchased by the Company. In aggregate,
to 1 June 2011, the shares bought back equate to a total of
4.5% of the issued share capital (excluding shares held in
treasury) at the beginning of the year. As indicated in the
Chairman’s Statement, the Board has agreed that any treasury
shares remaining on 7 July 2011, the date of the Annual
General Meeting, will be cancelled. A total of 7,877,149 shares
held in treasury were cancelled on 27 July 2010.
P R O S P E C TS
The Company’s Investment Manager is confident on the prospects
for healthcare. With the sector’s recent underperformance leaving
valuations at historically attractive levels, they believe that the sector
is well positioned to provide strong performance in the years
ahead. In addition, strong earnings growth potential, continued
merger and acquisition activity and a number of anticipated high
profile product approvals are all positive indicators for the future.
The AIFM Directive passed in to law by the European Parliament last
summer is due to take effect in 2013. The Association of Investment
Companies has played a key role in ensuring that a series of more
pragmatic measures have been adopted. The Board continues to
keep this situation under close review.
Further information on the Company’s performance can be
found in the Review of Investments provided by the
Company’s Investment Manager, that begins on page 7.
I N V E S T M E N T MA N AG E M E N T
Investment Management Agreement:
Investment Management Services are provided by the
Investment Manager. The Investment Manager is authorised and
regulated by the U.S. Securities and Exchange Commission. The
Investment Manager receives a periodic fee equal to 0.65% p.a. of
the Company’s net asset value. The Investment Management
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Report of the Directors (continued)
Incorporating the Business Review
Agreement may be terminated by either party giving notice of
not less than 12 months. The Investment Manager under the
terms of the agreement provides, inter alia, the following services:
•
•
•
•
•
seeking out and evaluating investment opportunities;
recommending the manner by which monies should be
invested, disinvested, retained or realised;
advising on how rights conferred by the investments
should be exercised;
analysing the performance of investments made; and
advising the Company in relation to trends, market
movements and other matters which may affect the
investment policy of the Company.
MA N AG E M E N T
Management, Administrative and Secretarial Services Agreement:
Management, Administrative, Secretarial and other services are
provided to the Company by the Manager. The Manager is
authorised and regulated by the Financial Services Authority.
Frostrow Capital LLP, as Manager, receives a periodic fee equal
to 0.30% per annum of the Company’s market capitalisation up
to £150m, 0.20% per annum of the market capitalisation in
excess of £150m and up to £500m, and 0.125% per annum of
the market capitalisation in excess of £500m, plus a fixed
amount equal to £57,500 per annum.
Performance Fee:
Dependent on the level of long term outperformance of the
Company, the Investment Manager and the Manager are entitled
to the payment of a performance fee. The performance fee is
calculated by reference to the amount by which the Company’s
net asset value (‘NAV’) performance has outperformed the
benchmark index. For the period to 30 September 2010 the
benchmark was the Datastream World Pharmaceutical &
Biotechnology Index (total return, sterling adjusted). With effect
from 1 October 2010 the benchmark was changed to the MSCI
World Health Care Index (total return, sterling adjusted).
The fee is calculated quarterly by comparing the cumulative
performance of the Company’s NAV with the cumulative
performance of the benchmark since the launch of the
Company in 1995. The performance fee amounts to 16.5% of
any outperformance over the benchmark, the investment
manager receiving 15% and the manager receiving 1.5%
respectively. Provision is also made within the daily NAV per
share calculation as required and in accordance with generally
accepted accounting standards.
In order to ensure that only sustained outperformance is
rewarded, at each quarterly calculation date any performance
fee is based on the lower of:
i)
The cumulative out-performance of the investment portfolio
over the benchmark as at the quarter end date; and
The notice period on the Management, Administration and
Company Secretarial Agreement with Frostrow is 12 months,
termination can be initiated by either party.
ii) The cumulative out-performance of the investment
portfolio over the benchmark as at the corresponding
quarter end date in the previous year.
The Manager, under the terms of the agreement provides, inter
alia, the following services:
• marketing and shareholder services;
•
•
administrative services;
advice and guidance in respect of corporate governance
requirements;
• maintaining the books of account and record in respect of
Company dealing, investments, transactions, dividends and
other income, the income account, balance sheet and cash
books and statements;
•
•
preparation and despatch of the audited annual and
unaudited interim report and accounts and interim
management statements; and
attending to general tax affairs where necessary.
In addition, a performance fee only becomes payable to the
extent that the cumulative outperformance gives rise to a total
fee greater than the total of all performance fees paid to date.
As at 31 March 2011 £2,624,000 is payable in relation to
maintained outperformance to 31 March 2010.
During the year a performance fee of £224,000 was paid (year
ended 31 March 2010: £Nil) in relation to maintained
outperformance to 31 March 2009.
CO N T I N U I N G A P P O I N T M E N T O F T H E
MA N AG E R A N D I N V E S T M E N T MA N AG E R
The Board has concluded that it is in shareholders’ interests that the
Manager and the Investment Manager continue in their roles. The
review undertaken by the Board considered the Company’s
investment performance over both the short and longer terms,
together with the quality and adequacy of other services provided.
The Board also reviewed the appropriateness of the terms of the
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Report of the Directors (continued)
Incorporating the Business Review
19
Investment Management and Management Agreements, in
particular the length of notice period and the fee structures.
G O I N G CO N C E R N
The Company’s business activities together with the factors likely
to affect its future development, performance and position are set
out in the Report of the Directors on pages 14 to 22. The financial
position of the Company, its liquidity position and its borrowing
facility are set out in the notes to the financial statements
beginning on page 38. In addition, the Corporate Governance
Report, the Financial Statements and the associated notes give
details of the Company’s objectives, policies and processes, its
financial risk management objectives and its exposure to risks. The
Company has considerable financial resources and a good spread
of investments across different geographical areas. The majority of
the Company’s investments are listed on stock exchanges and are
readily realisable. Having considered the Company’s prospects, the
Directors believe that it is appropriate to adopt the going concern
basis in preparing the financial statements as the assets of the
Company consist mainly of securities that are readily realisable and,
accordingly, the Company has adequate financial resources to
continue in operational existence for the foreseeable future.
C R E D I TO R S PAYM E N T P O L I C Y
Terms of payment are negotiated with suppliers when
agreeing settlement details for transactions. While the
Company does not follow a formal code, it is the Company’s
continuing policy to pay amounts due to creditors as and
when they become due. As at 31 March 2011, the Company
did not have any trade creditors (2010: Nil).
D I R E C TO R S’ I N T E R E S TS
C H A R I TA B L E A N D P O L I T I C A L D O N AT I O N S
The Company has not in the past and does not intend in
future to make any charitable or political donations.
E N V I R O N M E N TA L A N D E T H I C A L P O L I C Y
The Company’s primary objective is to achieve a high level of
capital growth by investment in pharmaceutical and
biotechnology companies and the Board recognises that this
should be done in an environmentally responsible way. The
Directors support the action being taken by the major
pharmaceutical companies to make products more affordable
to patients in developing countries. The Directors believe that
the Company would be in breach of its fiduciary duties to
shareholders if investment decisions were based solely on
ethical or environmental considerations. The Company
encourages a positive approach to corporate governance and
engagements with companies.
D I R E C TO R S
The Directors of the Company, who served throughout the
year, are all non-executive and are listed below. Their
biographies can be found on pages 4 and 5.
Martin Smith (Chairman)
Jo Dixon
Paul Gaunt
Professor Duncan Geddes
Dr David Holbrook
Samuel D Isaly
Anthony Townsend
The beneficial interests of the Directors and their families in the Company were as set out below:
Martin Smith
Josephine Dixon
Paul Gaunt
Professor Duncan Geddes
Dr David Holbrook
Samuel D Isaly
Anthony Townsend
Shares of 25p each
Subscription Shares
31 March 2011
1 April 2010
31 March 2011
1 April 2010
5,859
3,000
–
42,250
–
353,600
18,785
2,000
3,000
–
42,250
–
353,600
18,785
400
600
–
8,450
–
100,720
3,757
400
600
–
8,450
–
100,720
3,757
As at 1 June 2011 there had been no changes in the above details.
Samuel D Isaly is a partner in OrbiMed Capital LLC which is party to the Investment Management Agreement with the Company
and receives fees as described on pages 17 and 18. A number of the partners at OrbiMed Capital LLC have a minority financial
interest totalling 20% in Frostrow Capital LLP, the Company’s Manager.
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Report of the Directors (continued)
Incorporating the Business Review
D I R E C TO R S’ F E E S
A report on Directors’ Remuneration is set out on pages 30 and 31.
D I R E C TO R S’ & O F F I C E R S’ L I A B I L I T Y
I N S U R A N C E CO V E R
Directors’ & officers’ liability insurance cover was maintained by
the Board during the year ended 31 March 2011. It is intended
that this policy will continue for the year ending 31 March
2012 and subsequent years.
D I R E C TO R S’ I N D E M N I T I E S
As at the date of this report, indemnities are in force between the
Company and each of its Directors under which the Company
has agreed to indemnify each Director, to the extent permitted
S U B S TA N T I A L S H A R E H O L D I N G S
by law, in respect of certain liabilities incurred as a result of
carrying out his role as a Director of the Company. The Directors
are also indemnified against the costs of defending any criminal
or civil proceedings or any claim by the Company or a regulator
as they are incurred provided that where the defence is
unsuccessful the Director must repay those defence costs to the
Company. The indemnities are qualifying third party indemnity
provisions for the purposes of the Companies Act 2006.
A copy of each deed of indemnity is available for inspection at
the Company’s registered office during normal business hours
and will be available for inspection at the Annual General
Meeting.
As at 30 April 2011 the Company was aware of the following interests in the shares of the Company, which exceeded 3% of the
issued share capital (excluding treasury shares):
Beneficial
shareholder
East Riding of Yorkshire Council
Newton Investment Management
Rensburg Sheppards Investment Management
Henderson Global Investors
Alliance Trust Savings
Smith & Williamson
Legal & General Investment Management
Investec Asset Management
Deutsche Bank Private Wealth Management
Brewin Dophin
Speirs & Jeffrey, Stockbrokers
Registered holder
Nortrust Nominees
Various Nominees
Ferlim Nominees/Hero Nominees
Various Nominees
Alliance Trust Savings Nominees
Various Nominees
Various Nominees
Various Nominees
Pershing Nominees
Various Nominees
Various Nominees
Number of
shares
3,210,400
2,698,899
2,485,197
2,414,734
2,134,268
1,939,233
1,672,444
1,487,974
1,471,605
1,420,060
1,380,349
% of issued
share capital
7.38
6.20
5.71
5.55
4.91
4.46
3.84
3.44
3.38
3.26
3.17
I N D E P E N D E N T AU D I TO R S
Ernst & Young LLP have indicated their willingness to continue
to act as Auditors to the Company and a resolution for their
re-appointment, will be proposed at the forthcoming Annual
General Meeting.
AU D I T I N F O R MAT I O N
The Directors who held office at the date of approval of this
Directors’ Report confirm that, so far as they are aware, there is
no relevant audit information of which the Auditors are
unaware; and that each Director has taken all steps they ought
to have taken as a Director to make themselves aware of any
relevant audit information and to establish that the auditors
are aware of such information.
S E C T I O N 9 9 2 O F T H E CO M PA N I E S AC T 2 0 0 6
The following disclosures are made in accordance with Section
992 of the Companies Act 2006.
Capital Structure
The Company’s capital structure is summarised in note 13 on
page 45.
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Report of the Directors (continued)
Incorporating the Business Review
21
Voting Rights in the Company’s shares
Details of the voting rights in the Company’s shares at the date
of this Annual Report are given in note 9 to the Notice of
Annual General Meeting on page 57.
CO R P O R AT E G O V E R N A N C E
A formal statement on Corporate Governance, which forms
part of this Report of the Directors, is set out on pages 24
to 29.
B E N E F I C I A L O W N E R S O F S H A R E S –
I N F O R MAT I O N R I G H TS
Beneficial owners of shares who have been nominated by the
registered holder of those shares to receive information rights
under section 146 of the Companies Act 2006 are required to
direct all communications to the registered holder of their
shares rather than to the Company’s registrar, Capita Registrars,
or to the Company directly.
N OT I C E P E R I O D F O R G E N E R A L M E E T I N G S
Recent amendments made to the Company’s Articles of
Association included a provision allowing general meetings of
the Company to be called on the minimum notice period
provided for in the Companies Act 2006. For meetings other
than Annual General Meetings this is currently a period of 14
clear days.
A Special Resolution was passed by shareholders at last year’s
Annual General Meeting approving this. The Board is
proposing Resolution 14 as a Special Resolution to renew this
approval for a further year. The notice period for Annual
General Meetings will remain 21 clear days.
A N N UA L G E N E R A L M E E T I N G
The formal Notice of Annual General Meeting is set out on
pages 54 to 58 of this Annual Report.
Resolutions relating to the following items of special business
will be proposed at the forthcoming Annual General Meeting:
Issue of Shares
Ordinary Resolution 10 in the Notice of Annual General Meeting
gives authority to the Directors to allot the unissued share capital
up to an aggregate nominal amount of £1,078,930 (equivalent to
4,315,721 shares, or 10% of the Company’s existing issued share
capital on 1 June 2011, being the nearest practicable date prior to
the signing of this Report). Such authority will expire on the date
of the next Annual General Meeting or after a period of
15 months from the date of the passing of the resolution,
whichever is earlier. This means that the authority will have to be
renewed at the next Annual General Meeting.
When shares are to be allotted for cash, Section 551 of the
Companies Act 2006 (the “Act”) provides that existing
shareholders have pre-emption rights and that the new shares
must be offered first to such shareholders in proportion to
their existing holding of shares. However, shareholders can, by
special resolution, authorise the Directors to allot shares
otherwise than by a pro rata issue to existing shareholders.
Special Resolution 11 will, if passed, give the Directors power
to allot for cash equity securities up to 10% of the Company’s
existing share capital on 1 June 2011 (reduced by any treasury
shares sold by the Company pursuant to Special Resolution 12,
as described below), as if Section 551 of the Act does not
apply. This is the same nominal amount of share capital which
the Directors are seeking the authority to allot pursuant to
Resolution 10. This authority will also expire on the date of the
next Annual General Meeting or after a period of 15 months,
whichever is earlier. This authority will not be used in
connection with a rights issue by the Company.
Under the Companies (Acquisition of Own Shares) (Treasury
Shares) Regulations 2003 (as amended) (the “Treasury Share
Regulations”) the Company is permitted to buy back and hold
shares in treasury and then sell them at a later date for cash,
rather than cancelling them. The Treasury Share Regulations
require such sale to be on a pre-emptive, pro rata, basis to
existing shareholders unless shareholders agree by special
resolution to disapply such pre-emption rights. Accordingly, in
addition to giving the Directors power to allot unissued share
capital on a non pre-emptive basis pursuant to Resolution 11,
Resolution 12, if passed, will give the Directors authority to sell
shares held in treasury on a non pre-emptive basis. No dividends
may be paid on any shares held in treasury and no voting rights
will attach to such shares. The benefit of the ability to hold
treasury shares is that such shares may be resold. This should give
the Company greater flexibility in managing its share capital, and
improve liquidity in its shares. It is the intention of the Board that
any re-sale of treasury shares would only take place at a narrower
discount to the net asset value per share than that at which they
had been bought into treasury, and in any event at a discount no
greater than 5% to the prevailing net asset value per share, and
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Report of the Directors (continued)
Incorporating the Business Review
this is reflected in the text of Resolution 12. It is also the intention
of the Board that sales from treasury would only take place when
the Board believes that to do so would assist in the provision of
liquidity to the market. The number of treasury shares which may
be sold pursuant to this authority is limited to 10% of the
Company’s existing share capital on 1 June 2011 (reduced by any
equity securities allotted for cash on a non-pro rata basis
pursuant to Resolution 11, as described above). This authority will
also expire on the date of the next Annual General Meeting or
after a period of 15 months, whichever is earlier.
The Directors intend to use the authority given by Resolutions
11 and 12 to allot shares and disapply pre-emption rights only
in circumstances where this will be clearly beneficial to
shareholders as a whole. The issue proceeds would be
available for investment in line with the Company’s investment
policy. No issue of shares will be made which would effectively
alter the control of the Company without the prior approval of
shareholders in General Meeting.
Share Repurchases
independent bid on the trading venue where the purchase is
carried out. The minimum price which may be paid is 25p per
share. Shares which are purchased under this authority will
either be cancelled or held as treasury shares.
Special Resolution 13 in the Notice of Annual General Meeting
will renew the authority to purchase in the market a maximum
of 14.99% of shares in issue on 1 June 2011, being the nearest
practicable date prior to the signing of this Report, (amounting
to 6,469,266 shares). Such authority will expire on the date of
the next Annual General Meeting or after a period of 15
months from the date of passing of the resolution, whichever
is earlier. This means in effect that the authority will have to be
renewed at the next Annual General Meeting or earlier if the
authority has been exhausted.
General Meetings
Special Resolution 14 seeks shareholder approval for the
Company to hold General Meetings (other than Annual
General Meetings) at 14 clear days’ notice.
At the Annual General Meeting held on 15 July 2010,
shareholders approved the renewal of the authority permitting
the Company to repurchase its own shares.
The authorities being sought under Resolutions 10, 11, 12, 13
and 14 will last until the conclusion of the next Annual General
Meeting or, if less, a period of 15 months.
The Board considers that the resolutions set out above are, in
the Board’s opinion, in the best interests of shareholders as a
whole. Accordingly, the Board unanimously recommends to
shareholders that they vote in favour of the above resolutions
to be proposed at the forthcoming Annual General Meeting.
By order of the Board
Frostrow Capital LLP
Company Secretary
1 June 2011
The Directors wish to renew the authority given by
shareholders at last year’s Annual General Meeting. The
principal aim of a share buy-back facility is to enhance
shareholder value by acquiring shares at a discount to net asset
value, as and when the Directors consider this to be
appropriate. The purchase of shares, when they are trading at a
discount to net asset value per share, should result in an
increase in the net asset value per share for the remaining
shareholders. This authority, if conferred, will only be exercised if
to do so would result in an increase in the net asset value per
share for the remaining shareholders and if it is in the best
interests of shareholders generally. Any purchase of shares will
be made within guidelines established from time to time by
the Board. It is proposed to seek shareholder authority to renew
this facility for another year at the Annual General Meeting.
Under the current Listing Rules, the maximum price that may
be paid on the exercise of this authority must not exceed the
higher of (i) 105% of the average of the middle market
quotations for the shares over the five business days
immediately preceding the date of purchase and (ii) the higher
of the last independent trade and the highest current
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Statement of Directors’ Responsibilities
23
Wo r l d w i d e H e a l t h c a re Tr u s t P LC > A n n u a l R e p o r t 2 0 1 1
The Directors are responsible for preparing the annual report
and the financial statements in accordance with applicable
United Kingdom law and regulations.
Company law in the United Kingdom requires the Directors to
prepare financial statements for each financial year. Under this
law the Directors have elected to prepare the financial
statements in accordance with United Kingdom Generally
Accepted Accounting Practice, (United Kingdom standards and
applicable law). Under Company law the Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and the profit and loss of the Company for that
period.
In preparing these financial statements, the Directors are
required to:
•
select suitable accounting policies and applied them
consistently;
• make judgements and estimates that are reasonable and
prudent; and
•
state whether applicable UK Accounting Standards have
been followed, subject to any material departures
disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and which disclose with reasonable accuracy at any
time the financial position of the Company and enable them to
ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
Under applicable law and regulation, the Directors are also
responsible for preparing a Report of the Directors, including a
formal statement on Corporate Governance and a Directors’
Remuneration Report that comply with such law and
regulations.
The financial statements are published on the Company’s
website (website address: www.worldwidewh.com), which is a
website maintained by the Manager. The maintenance and
integrity of the website is, so far as it relates to the Company, the
responsibility of the Manager. The work carried out by the
Auditors does not involve consideration of the maintenance and
integrity of this website and accordingly, the Auditors accept no
responsibility for any changes that have occurred to the financial
statements since they were initially presented on the website.
Visitors to the website need to be aware that legislation in the
United Kingdom governing the preparation and dissemination of
the financial statements may differ from legislation in their
jurisdiction.
The Directors, whose details can be found on pages 4 and 5,
each confirm that to the best of their knowledge the financial
statements, within the Annual Report, have been prepared in
accordance with applicable accounting standards, give a true
and fair view of the assets, liabilities, financial position and the
profit for the year ended 31 March 2011, and that the Chairman’s
Statement, Review of Investments and the Report of the
Directors include a fair review of the information required by
4.1.8R to 4.2.11R of the FSAs Disclosure and Transparency Rules.
On behalf of the Board
Martin Smith
Chairman
1 June 2011
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Corporate Governance
This Corporate Governance Statement forms part of the Report of the Directors.
CO M P L I A N C E
The Board has considered the principles and
recommendations of the AIC Code of Corporate Governance
(“AIC Code”) by reference to the AIC Corporate Governance
Guide for Investment Companies (“AIC Guide”). The AIC Code,
as explained by the AIC Guide, addresses all the principles set
out in Section 1 of the Combined Code, as well as setting out
additional principles and recommendations on issues that are
of specific relevance to Worldwide Healthcare Trust PLC.
The Board considers that reporting against the principles and
recommendations of the AIC Code, and by reference to the AIC
Guide (which incorporates the Combined Code), will provide
better information to shareholders.
The Company has complied with the recommendations of the
AIC Code and the relevant provisions of Section 1 of the
Combined Code throughout the year ended 31 March 2011 and
up to the date of this report, except with regard to the fact that
the Chairman of the Company is Chairman of the Management
Engagement and Remuneration Committee and as set out below.
The Combined Code includes provision relating to:
•
•
•
the role of the chief executive (section A.2);
executive directors’ remuneration (section B.1); and
the need for an internal audit function (section C.3).
For the reasons set out in the AIC Guide, and in the preamble to
the AIC Code, the Board considers these provisions are not
relevant to the position of Worldwide Healthcare Trust PLC, being
an externally managed investment company. The Company has
therefore not reported further in respect of these provisions.
I N T E R N A L AU D I T
As the Company delegates to third parties its day-to-day
operations and has no employees, the Board has determined
that there are no requirements for an internal audit function.
The Board reviews annually whether a function equivalent to
an internal audit is needed and it will continue to monitor its
systems of internal controls in order to provide assurance that
they operate as intended.
B OA R D I N D E P E N D E N C E , CO M P O S I T I O N A N D
T E N U R E
The Board, chaired by Martin Smith, who is responsible for
leadership of the Board and for ensuring its effectiveness in all
aspects of its role, currently consists of seven non-executive
Directors. The Directors’ biographical details, set out on pages 4
and 5, demonstrate a breadth of investment, commercial and
professional experience. Professor Duncan Geddes has been
designated as the Senior Independent Director who can act as a
sounding board for the Chairman and also acts as an
intermediary for the other Directors when necessary. The
Directors review their independence annually.
On 28 May 2010 the Financial Reporting Council (“FRC”)
published the UK Corporate Code which replaced the
Combined Code on Corporate Governance and applies to
reporting periods beginning on or after 29 June 2010. In turn
the Association of Investment Companies updated the Code of
Corporate Governance and Corporate Governance Guide to
reflect the changes made to the UK Corporate Governance
Code. One of the main changes is that all directors of FTSE 350
companies are now recommended to stand for annual
re-election. The Directors of the Company have agreed, despite
not being a FTSE 350 company, to adopt this provision as they
believe it will enhance the Board’s accountability to
Shareholders. Accordingly with effect from the forthcoming
Annual General Meeting, all Directors of the Company will
stand for re-election annually. This decision will create a policy
whereby Directors are required to seek election more
frequently than as currently set out in the Company’s Articles
of Association.
Paul Gaunt is also a Director of The Biotech Growth Trust PLC for
which OrbiMed also acts as Investment Manager and he has
also served on the Board for over nine years. Despite being
considered by the Board to be independent in character and
judgement Mr Gaunt is not considered to be an Independent
Director. Mr Gaunt will not be seeking re-election at the
forthcoming Annual General Meeting. Samuel D Isaly is
Managing Partner of OrbiMed, the Company’s Investment
Manager, and has also served on the Board for over nine years.
Mr Isaly is therefore not considered to be an Independent
Director. Professor Geddes and Anthony Townsend have both
also served on the Board for over nine years. The Board
subscribes to the view expressed within the AIC Code that
long-serving Directors should not be prevented from forming
part of an independent majority. It does not consider that a
Director’s tenure necessarily reduces his or her ability to act
independently and, following formal performance evaluations,
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Corporate Governance (continued)
25
believes that each of the Directors is independent in character
and judgement and that there are no relationships or
circumstances which are likely to effect their judgement. Jo
Dixon joined the Board in 2004 and Martin Smith and Dr David
Holbrook joined the Board in 2007 and are all considered by the
Board to be independent. The Board has considered the
position of Ms Dixon and Messrs Isaly, Smith, Townsend,
Professor Geddes and Dr Holbrook as part of the evaluation
process, and believes that it would be in the Company’s best
interests to propose them for re-election at the forthcoming
Annual General Meeting. In line with the Company’s strong
commitment to its corporate governance responsibilities, the
Board regularly reviews its performance and composition to
ensure it has the correct mix of relevant skills and experience
for the good conduct of the Company’s business. As part of this
process the Board has agreed a programme of refreshment,
which will see its membership change as current Directors
retire in an orderly manner, and new Directors are appointed.
None of the Directors has a service contract with the
Company. New Directors are appointed with the expectation
that they will serve for a minimum period of three years. Any
Director may resign in writing to the Board at any time. The
terms of their appointment are detailed in a letter sent to them
when they join the Board. These letters are available for
inspection at the offices of the Company’s Manager and will be
available at the Annual General Meeting. When a new Director is
appointed to the Board, they are provided with all relevant
information regarding the Company and their duties and
responsibilities as a Director. In addition, a new Director will also
spend time with representatives of the Manager and Investment
Manager in order to learn more about their processes and
procedures. The Chairman also regularly reviews the training and
development needs of each Director. The Board receives regular
briefings from, amongst others, the Auditors and the Company
Secretary regarding any proposed developments or changes in
laws or regulations that could affect the Company and/or the
Directors.
T H E B OA R D ’S R E S P O N S I B I L I T I E S
The Board is responsible for efficient and effective leadership of
the Company and regularly reviews the schedule of matters
reserved for its decision. The Board meets at least on a
quarterly basis and at other times as necessary. The Board is
responsible for all aspects of the Company’s affairs, including
the setting of parameters for and the monitoring of investment
strategy, the review of investment performance (including
peer group performance) and investment policy. It also has
responsibility for all corporate strategy issues, dividend policy,
share buy-back policy, gearing, share price and
discount/premium monitoring and corporate governance
matters. To enable them to discharge their responsibilities,
prior to each meeting the Directors are provided, in a timely
manner, with a comprehensive set of papers giving detailed
information on the Company’s transactions, financial position
and performance. Representatives of the Manager and
Investment Manager attend each Board meeting, enabling the
Directors to seek clarification on specific issues or to probe
further on matters of concern; a full written report is also
received from the Manager and Investment Manager at each
quarterly meeting. In light of these reports, the Board gives
direction to the Investment Manager with regard to the
Company’s investment objectives and guidelines. Within these
established guidelines, the Investment Manager takes
decisions as to the purchase and sale of individual investments.
There is an agreed procedure for Directors, in the furtherance
of their duties, to take independent professional advice, if
necessary, at the Company’s expense. The Directors have
access to the advice and services of the Company Secretary,
through its appointed representative, who is responsible to the
Board for ensuring that Board procedures are followed.
P E R F O R MA N C E E VA LUAT I O N
The Board has carried out an evaluation process for the year
ended 31 March 2011, independently managed by Professor
Geddes, the Senior Independent Director. This took the form of
a questionnaire followed by discussions to identify how the
effectiveness of its activities, including the performance of
investment, Directors and the Company’s committees,
together with the Company’s policies and processes, might be
improved. The results of the evaluation process were presented
to and discussed by the Board and, as a result, it was agreed
that the current Directors contributed effectively and that all
had the skills and experience which are relevant to the
leadership and direction of the Company.
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Corporate Governance (continued)
CO N F L I C T O F I N T E R E S T
On 1 October 2008 it became a statutory requirement that a
Director must avoid a situation in which he or she has, or can
have, a direct or indirect interest that conflicts, or possibly may
conflict, with the Company’s interests (a “situational conflict”).
The Company’s Articles of Association were amended at the
last Annual General Meeting to give the Directors authority to
approve such situations, where appropriate.
It is the responsibility of each individual Director to avoid an
unauthorised conflict situation arising. He or she must request
authorisation from the Board as soon as he or she becomes
aware of the possibility of a situational conflict arising.
The Board is responsible for considering Directors’ requests for
authorisation of situational conflicts and for deciding whether
they should be authorised. The factors to be considered will
include whether the situational conflict could prevent the
Director from performing his or her duties, whether it has, or
could have, any impact on the Company and whether it could
be regarded as likely to affect the judgment and/or actions of
the Director in question. When the Board is deciding whether
to authorise a conflict or potential conflict, only Directors who
have no interest in the matter being considered are able to take
the relevant decision, and in taking the decision the Directors
must act in a way they consider, in good faith, will be most
likely to promote the Company’s success. The Directors are able
to impose limits or conditions when giving authorisation if they
think this is appropriate in the circumstances.
A register of conflicts is maintained by the Company Secretary
and is reviewed at quarterly Board meetings, to ensure that
any authorised conflicts remain appropriate. Directors are
required to confirm at these meetings whether there has been
any change to their position.
The Directors must also comply with the statutory rules
requiring company directors to declare any interest in an actual
or proposed transaction or arrangement with the Company.
CO M M I T T E E S O F T H E B OA R D
During the year the Board delegated certain responsibilities and
functions to committees. Copies of the full terms of reference,
which clearly define the responsibilities of each Committee, can
be obtained from the Company Secretary, will be available for
inspection at the Annual General Meeting, and can be found at
the Company’s website at www.worldwidewh.com. Following a
review by the Board in 2008, it was agreed that due to the size
of the Board, the membership of the Management
Engagement and Remuneration and Nominations Committees
should comprise the whole Board, under the chairmanship of
the Chairman of the Company and Professor Geddes
respectively (provided that a majority of the Directors present
are independent). It was further agreed at a Board Meeting held
in March 2011 that Mr Isaly, due to his role at OrbiMed, the
Company’s Investment Manager, should cease to be a member
of the Management Engagement and Remuneration and
Nominations Committees. The membership of the Audit
Committee comprises the following independent Directors: Jo
Dixon (Chairman), Dr David Holbrook, Professor Duncan Geddes
and Anthony Townsend. Directors who are not members of the
Company’s committees may attend at the invitation of the
Chairman of the committee. Details of the membership of the
Committees as at 31 March 2011 are shown with the Directors’
biographies on pages 4 and 5.
The table overleaf details the number of Board and Committee
meetings attended by each Director. During the year there
were four Board meetings, two Audit Committee meetings,
one meeting of the Nominations Committee and one meeting
of the Management Engagement and Remuneration
Committee.
N O M I N AT I O N S CO M M I T T E E
The Nominations Committee is responsible for the Board
appraisal process and for making recommendations to the
Board on the appointment of new Directors. Where
appropriate, each Director is invited to submit nominations and
external advisers may be used to identify potential candidates.
MA N AG E M E N T E N G AG E M E N T A N D
R E M U N E R AT I O N CO M M I T T E E
The level of Directors’ fees is reviewed on a regular basis
relative to other comparable investment companies and in the
light of Directors’ responsibilities. Neither the Chairman nor
individual Directors participate in discussions involving
personal remuneration. Details of the fees paid to the Directors
in the year under review are detailed in the Directors’
Remuneration Report on pages 30 and 31.
This committee also reviews the terms of engagement of the
Investment Manager, the Manager and the Company’s other
service providers.
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Corporate Governance (continued)
27
M E E T I N G AT T E N DA N C E
The number of meetings held during the year of the Board and its Committees, and each Director’s attendance level, is shown below:
Type and number of meetings
held in 2010/11
Martin Smith
Jo Dixon
Paul Gaunt
Professor Duncan Geddes
Dr David Holbrook
Samuel D Isaly
Anthony Townsend
Board
(4)
Audit
Committee
(2)
Nominations
Committee
(1)
Management
Engagement and
Remuneration
Committee
(1)
4
4
4
4
4
4
4
N/A
2
N/A
2
2
N/A
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
All of the Directors attended the Annual General Meeting held on 15 July 2010.
AUDIT COMMITTEE
INTERNAL CONTROLS
The Audit Committee meets at least twice a year and is
responsible for the review of the interim and annual financial
statements, the nature and scope of the external audit and the
findings therefrom and the terms of appointment of the
Auditors, including their remuneration and the provision of any
non-audit services by them.
The Audit Committee meets representatives of the Manager and
Investment Manager and their Compliance Officers who report
as to the proper conduct of business in accordance with the
regulatory environment in which the Company, Manager and
Investment Manager operate. The Company’s external Auditors
also attend meetings of this Committee at its request and report
on their work procedures and their findings in relation to the
Company’s statutory audit. They also have the opportunity to
meet with the Committee without representatives of the
Manager or the Investment Manager being present. The Audit
Committee reviews the need for non-audit services and
authorises such on a case by case basis, having consideration to
the cost effectiveness of the services and the independence and
objectivity of the Auditors. Non-audit fees of £4,000 were paid to
Ernst & Young LLP during the year for agreed upon procedures in
relation to the Company’s options position. The Board has
concluded, on the recommendation of the Audit Committee,
that the Auditors continued to be independent and that their
reappointment be proposed at the Annual General Meeting.
The Directors are responsible for the Company’s system of internal
control which is designed to safeguard the Company’s assets,
maintain proper accounting records and ensure that financial
information used within the business, or published, is reliable.
However, such a system can only be designed to manage rather
than eliminate the risk of failure to achieve business objectives
and therefore can only provide reasonable, but not absolute,
assurance against fraud, material misstatement or loss.
Risk assessment and the review of internal controls are
undertaken by the Board in the context of the Company’s overall
investment objective. The review covers the key business,
operational, compliance and financial risks facing the Company.
In arriving at its judgement of what risks the Company faces, the
Board has considered the Company’s operations in the light of
the following factors:
•
•
•
the nature and extent of risks which it regards as
acceptable for the Company to bear within its overall
business objective;
the threat of such risks becoming a reality; and
the Company’s ability to reduce the incidence and impact
of risk on its performance.
Against this background, the Board has split the review of risk
and associated controls into five sections reflecting the nature
of the risks being addressed. These sections are as follows:
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Corporate Governance (continued)
•
•
•
•
•
corporate strategy;
investment activity;
published information, compliance with laws and
regulations;
service providers; and
financial activity.
The Company has appointed Frostrow Capital LLP to provide
administrative services to the Company. The Company has
obtained from its various service providers assurances and
information relating to their internal systems and controls to
enable the Board to make an appropriate risk and control
assessment, including the following:
•
•
•
•
details of the control environment in operation;
identification and evaluation of risks and control objectives;
review of communication methods and procedures; and
assessment of the control procedures.
The key procedures which have been established to provide
internal financial controls are as follows:
•
•
•
•
investment management is provided by OrbiMed Capital
LLC. The Board is responsible for setting the overall
investment policy and monitors the actions of the
Investment Manager at regular Board meeting;
administration, company secretarial and marketing duties for
the Company are performed by Frostrow Capital LLP;
custody of assets is undertaken by Goldman Sachs & Co.
New York;
the Board clearly defines the duties and responsibilities of
their agents and advisers. The appointment of agents and
advisers to the Company is conducted by the Board after
consideration of the quality of the parties involved; the Board
monitors their ongoing performance and contractual
arrangements;
All of the Company’s management functions are performed by
third parties whose internal controls are reviewed by the Board or
on its behalf by Frostrow Capital LLP.
In accordance with guidance issued to directors of listed
companies, (“the Turnbull Guidance”) the Directors confirm that
they have carried out a review of the effectiveness of the system
of internal financial control during the year and up to the date of
approval of the financial statements, as set out above.
RELATIONS WITH SHAREHOLDERS
The Board reviews the shareholder register at each Board
meeting. The Company has regular contact with its institutional
shareholders particularly through the Manager. The Board
supports the principle that the Annual General Meeting be used
to communicate with private investors. The full Board attends the
Annual General Meeting under the Chairmanship of the
Chairman of the Board. Details of proxy votes received in respect
of each resolution are made available to shareholders at the
meeting and are also published on the Company’s website at
www.worldwidewh.com. Representatives from the Investment
Manager attend the Annual General Meeting and give a
presentation on investment matters to those present. The
Company has adopted a nominee share code which is set out
on page 29.
The Board receives marketing and public relations reports from
the Manager to whom the marketing function has been
delegated. The Board reviews and considers the marketing plans
of the Manager on a regular basis.
The annual and interim financial reports, the interim
management statements and a monthly fact sheet are available
to all shareholders. The Board considers the format of the annual
and interim financial reports so as to ensure they are useful to all
shareholders and others taking an interest in the Company. In
accordance with best practice, the annual report, including the
Notice of the Annual General Meeting, is sent to shareholders at
least 20 working days before the meeting. Separate resolutions
are proposed for substantive issues.
• mandates for authorisation of investment transactions and
expense payments are set by the Board; and
•
the Board reviews financial information produced by the
Investment Manager and the Manager in detail on a regular
basis.
EXERCISE OF VOTING POWERS
The Board has delegated authority to the Investment Manager to
vote the shares owned by the Company that are held on its
behalf by its custodian, Goldman Sachs & Co. New York. The
Board has instructed that the Investment Manager submit votes
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Corporate Governance (continued)
29
for such shares wherever possible. This accords with current best
practice whilst maintaining a primary focus on financial returns.
The Investment Manager may refer to the Board on any matters
of a contentious nature. The Company does not retain voting
rights on any shares that are subject to rehypothecation in
connection with the loan facility provided by Goldman Sachs &
Co. New York.
ACCOUNTABILITY AND AUDIT
The Statement of Directors’ Responsibilities in respect of the
financial statements is set out on page 23. The report of the
Auditors is set out on pages 32 and 33. The Board has delegated
contractually to external agencies, including the Manager and
the Investment Manager, the management of the portfolio,
custodial services (which includes the safeguarding of the
Company’s assets), the day to day marketing, accounting
administration, company secretarial requirements and
registration services. Each of these contracts was 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.
The Board receives and considers regular reports from the
Manager and the Investment Manager and ad hocreports and
information are supplied to the Board as required.
NOMINEE SHARE CODE
Where shares are held in a nominee company name, the
Company undertakes:
•
•
•
to provide the nominee company with multiple copies of
shareholder communications, so long as an indication of
quantities has been provided in advance;
to allow investors holding shares through a nominee
company to attend general meetings, provided the correct
authority from the nominee company is available; and
that investors in the Alliance Trust Savings Scheme or ISA are
automatically sent shareholder communications, including
details of general meetings, together with a form of direction
to facilitate voting and to seek authority to attend.
Nominee companies are encouraged to provide the necessary
authority to underlying shareholders to attend the Company’s
general meetings.
Shareholder Analysis
% of shares held at 31 March 2011
Institutional and
Corporate Holders
23.9%
Mutual Funds
(including Investment
Trusts)
19.9%
Retail Holders
(including private client
stockbrokers and
the Alliance Trust
Savings and ISA Clients)
56.2%
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30
Directors’ Remuneration Report
The Board has prepared this report in accordance with the
requirements of Section 420 to 422 of the Companies
Act 2006. An ordinary resolution for the approval of this report
will be put to the members at the forthcoming Annual General
Meeting.
The law requires the Company’s auditors to audit certain of the
disclosures provided. Where disclosures have been audited,
they are indicated as such. The Auditors’ opinion is included in
their report on pages 32 and 33.
M A N A G E M E N T E N G A G E M E N T A N D
R E M U N E R A T I O N C O M M I T T E E
The Company has seven non-executive Directors, five of
whom are considered by the Board to be independent. The
whole Board, with the exception of Sam Isaly, fulfils the
function of the Management Engagement and Remuneration
Committee (provided that a majority of the Directors present
are independent). The Board may utilise the services of the
Company Secretary or external advisers to provide advice
when the Directors consider the level of Directors’ fees.
The Directors’ fees are reviewed annually by the Management
Engagement and Remuneration Committee and such review
will not necessarily result in a change to the rates paid. During
the year, the Management Engagement and Remuneration
Committee carried out a review of the level of Directors’ fees in
relation both to fees paid to the boards of other investment
trust companies and also to the Board’s corporate governance
obligations. The Board decided, on the advice of the
Management Engagement and Remuneration Committee,
that the fees paid to the Directors should be increased with
effect from 1 April 2011. The revised fee levels are set out on
page 31.
P O L I C Y O N D I R E C T O R S ’ F E E S
The Board’s policy is that the remuneration of Directors should
reflect the experience of the Board as a whole, be fair and
comparable to that of other investment trusts that are similar
in size, have a similar capital structure (Ordinary shares), and
have a similar investment objective. It is intended that this
policy will continue for the year ending 31 March 2012 and
subsequent years.
The fees for the Directors are determined within the limits set
out in the Company’s Articles of Association, the maximum
aggregate amount currently being £200,000. Directors are not
eligible for bonuses, pension benefits, share options, long-term
incentive schemes or other benefits. The policy is for the
Chairman of the Board, Chairman of the Audit Committee and
the Senior Independent Director to be paid higher fees than
the other Directors to reflect their additional responsibilities.
D I R E C T O R S ’ S E R V I C E C O N T R A C T S
It is the Board’s policy that none of the Directors has a service
contract. The terms of their appointment provide that
Directors shall retire and be subject to election at the first
Annual General Meeting after their appointment and
re-election annually thereafter. The terms also provide that a
Director may resign by notice in writing to the Board at any
time and may be removed without notice and that
compensation will not be due on leaving office. The
Company’s policy is for the Directors to be remunerated in the
form of fees payable quarterly in arrears, to the Director
personally or to a specified third party.
Y O U R C O M P A N Y ’ S P E R F O R M A N C E
The Regulations require a line graph be included in the
Directors’ Remuneration Report comparing, for a period of five
years, on a cumulative basis, the total share price return
(assuming all dividends are reinvested) to shareholders and the
total shareholder return on a notional investment made up of
shares of the same kind and number as those by reference to
the Company’s stated benchmark. With effect from 1 October
2010, the performance of the Company has been measured
against the MSCI World Health Care Index on a total return,
sterling adjusted basis. Prior to this date, performance was
measured against the Datastream World Pharmaceutical &
Biotechnology Index (total return, sterling adjusted). Therefore,
the benchmark represented in the graph overleaf consists of a
blended figure containing both indices.
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Directors’ Remuneration Report (continued)
31
D I R E C T O R S ’ E M O L U M E N T S F O R T H E Y E A R ( A U D I T E D )
The Directors who served in the year received the following emoluments in the form of fees:
Level of fees
with effect from Fees Fees
1 April 2011 2011 2010
£’000 £’000 £’000
Martin Smith (Chairmanof the Board) 36.5 35.0 30.0
Jo Dixon (Chairman of the Audit Committee) 26.0 25.0 21.0
Paul Gaunt 23.0 22.0 19.0
Professor Duncan Geddes (Senior Independent Director) 23.5 22.0 19.0
Dr David Holbrook 23.0 22.0 19.0
Samuel D Isaly 23.0 22.0 19.0
Anthony Townsend 23.0 22.0 19.0
178.0 170.0 146.0
S H A R E H O L D E R T O T A L R E T U R N F O R T H E F I V E Y E A R S T O 3 1 M A R C H 2 0 1 1
140
130
120
110
100
90
80
70
60
Mar
06
Mar
07
Mar
08
Benchmark index (blended)
Rebased to 100 as at 31 March 2006
Source: Morningstar, Thomson Reuters and Bloomberg
A P P R O V A L
Mar
09
Mar
10
Worldwide Healthcare Share price (total return)
Mar
11
The Directors’ Remuneration Report on pages 30 and 31 was approved by the Board of Directors on 1 June 2011 and signed on
its behalf by:
Martin Smith (Chairman)
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Independent Auditors’ Report
to the Members of Worldwide Healthcare Trust PLC
We have audited the financial statements of Worldwide
Healthcare Trust PLC for the year ended 31 March 2011 which
comprise the Income Statement, Reconciliation of Movements
in Shareholders’ Funds, Balance Sheet, Cash Flow Statement
and the related notes 1 to 19. The financial reporting
framework that has been applied in their preparation is
applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the Company’s members those matters
we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than
the Company and the Company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
R E S P E C T I V E R E S P O N S I B I L I T I E S O F
D I R E C T O R S A N D A U D I T O R S
As explained more fully in the Statement of Directors’
Responsibilities set out on page 23, the Directors are
responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices
Board’s (APB’s) Ethical Standards for Auditors.
S C O P E O F T H E A U D I T O F T H E F I N A N C I A L
S T A T E M E N T S
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting
policies are appropriate to the Company’s circumstances and
have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by
the Directors; and the overall presentation of the financial
statements. In addition, we read all the financial and
non-financial information in the Report of the Directors to
identify material inconsistencies with the audited financial
statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications
for our report.
O P I N I O N O N F I N A N C I A L S T A T E M E N T S
In our opinion the financial statements:
• give a true and fair view of the state of the Company’s
affairs as at 31 March 2011 and of its profit for the year
then ended;
• have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements
of the Companies Act 2006.
O P I N I O N O N O T H E R M A T T E R S P R E S C R I B E D
B Y T H E C O M P A N I E S A C T 2 0 0 6
In our opinion:
• the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with
the Companies Act 2006;
• the information given in the Directors’ Report for the
financial year for which the financial statements are
prepared is consistent with the financial statements.
M A T T E R S O N W H I C H W E A R E R E Q U I R E D T O
R E P O R T B Y E X C E P T I O N
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
• adequate accounting records have not been kept, or
returns adequate for our audit have not been received
from branches not visited by us; or
• the financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by
law are not made; or
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Independent Auditors’ Report (continued)
33
• we have not received all the information and explanations
we require for our audit;
Under the Listing Rules we are required to review:
• the Directors’ statement, set out on pages 18 and 19, in
relation to going concern;
• the part of the Corporate Governance Statement on pages
24 to 29 of the financial statements relating to the
Company’s compliance with the nine provisions of the
June 2008 Combined Code specified for our review; and
• certain elements of the report to shareholders by the
Board on Directors’ remuneration.
Amarjit Singh, (Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
1 June 2011
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34
Income Statement
for the year ended 31 March 2011
2011 2011 2011 2010 2010 2010
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Gains on investments held at fair
value through profit or loss 9 – 5,477 5,477 – 76,180 76,180
Exchange gains on currency balances – 710 710 – 3,946 3,946
Income from investments held at fair value
through profit or loss 2 9,125 – 9,125 5,825 – 5,825
Investment management, management and
and performance fees 3 (147) (2,658) (2,805) (133) (5,025) (5,158)
Other expenses 4 (586) – (586) (506) – (506)
Net return before
finance charges and taxation 8,392 3,529 11,921 5,186 75,101 80,287
Finance costs 5 (13) (247) (260) (11) (212) (223)
Net return before taxation 8,379 3,282 11,661 5,175 74,889 80,064
Taxation on net return on ordinary
activities 6 (1,224) 239 (985) (965) 303 (662)
Net return after taxation 7,155 3,521 10,676 4,210 75,192 79,402
Return per share – basic 7 16.5p 8.1p 24.6p 9.5p 170.5p 180.0p
Return per share – diluted 7 16.3p 8.1p 24.4p 9.5p 170.5p 180.0p
The “Total” column of this statement is the Income Statement of the Company. The “Revenue” and “Capital” columns are
supplementary to this and are prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations.
The Company has no recognised gains and losses other than those disclosed in the Income Statement and Reconciliation of
Movements in Shareholders’ Funds. Accordingly no separate Statement of Total Recognised Gains and Losses has been
presented.
No operations were acquired or discontinued in the year.
The accompanying notes are an integral part of this statement.
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Reconciliation of Movements
in Shareholders’ Funds
35
For the year ended 31 March 2011
Ordinary Subscription Share Capital
share share premium Capital redemption Revenue
capital capital account reserve reserve reserve Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000
At 31 March 2010 12,644 90 176,648 145,160 5,009 6,630 346,181
Net return from ordinary activities
after taxation – – – 3,521 – 7,155 10,676
Dividend paid in respect of year
ended 31 March 2010 – – – – – (3,653) (3,653)
Subscription shares exercised for
ordinary shares 200 (8) 4,747 8 – – 4,947
Shares purchased to be held in treasury
and treasury shares cancelled (1,969) – – (13,370) 1,969 – (13,370)
At 31 March 2011 10,875 82 181,395 135,319 6,978 10,132 344,781
For the year ended 31 March 2010
Ordinary Subscription Share Capital
share share premium Warrant Capital redemption Revenue
capital capital account reserve reserve reserve reserve Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
At 31 March 2009 11,105 – 117,706 7,417 118,709 3,678 4,402 263,017
Net return from ordinary activities
after taxation – – – – 75,192 – 4,210 79,402
Dividend paid in respect of year
ended 31 March 2009 – – – – – – (1,982) (1,982)
Proceeds from warrant exercise 2,686 – 47,174 – – – – 49,860
Transfer from warrant reserve
following exercise of warrants – – 7,417 (7,417) – – – –
Subscription shares issued less
issue costs – 97 – – (295) – – (198)
Subscription shares exercised for
ordinary shares 184 (7) 4,351 – 7 – – 4,535
Shares purchased to be held in
treasury and treasury and
ordinary shares cancelled (1,331) – – – (48,453) 1,331 – (48,453)
At 31 March 2010 12,644 90 176,648 – 145,160 5,009 6,630 346,181
The accompanying notes are an integral part of this statement.
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36
Balance Sheet
as at 31 March 2011
2011 2010
Notes £’000 £’000
Fixed assets
Investments held at fair value through profit or loss 9 385,869 383,599
385,869 383,599
Current assets
Debtors 10 6,138 1,757
Derivative – financial instruments 9 & 12 2,223 628
8,361 2,385
Current liabilities
Creditors: amounts falling due within one year 11 (49,449) (39,803)
(49,449) (39,803)
Net current liabilities (41,088) (37,418)
Total net assets 344,781 346,181
Capital and reserves
Ordinary share capital 13 10,875 12,644
Subscription share capital 13 82 90
Share premium account 181,395 176,648
Capital reserve 19 135,319 145,160
Capital redemption reserve 6,978 5,009
Revenue reserve 10,132 6,630
Total shareholders’ funds 344,781 346,181
Net asset value per share – basic 14 799.2p 780.8p
Net asset value per share – diluted for subscription shares 14 773.5p 752.7p
The financial statements on pages 34 to 53 were approved by the Board of Directors and authorised for issue on 1 June 2011 and
were signed on its behalf by:
Martin Smith
Chairman
The accompanying notes are an integral part of this statement.
Worldwide Healthcare Trust PLC – Company Registration Number 3023689 (Registered in England)
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37
Cash Flow Statement
for the year ended 31 March 2011
2011 2010
Notes £’000 £’000
Net cash inflow from operating activities 15 3,268 2,108
Servicing of finance
Interest paid (260) (223)
Taxation
Taxation (suffered)/recovered (202) 93
Financial investments
Purchases of investments and derivatives (274,348) (265,795)
Sales of investments and derivatives 273,089 250,859
Net cash outflow from financial investment (1,259) (14,936)
Equity dividends paid (3,653) (1,982)
Net cash outflow before financing (2,106) (14,940)
Financing
Proceeds from exercise of warrants – 49,860
Subscription share issue costs – (198)
Purchase of own shares (13,374) (49,061)
Subscription shares exercised for ordinary shares 4,947 4,535
Net cash (outflow)/inflow from financing (8,427) 5,136
Decrease in cash 16 (10,533) (9,804)
The accompanying notes are an integral part of this statement.
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38
Notes to the Financial Statements
1 . ACCO U N T I N G P O L I C I E S
The principal accounting policies, all of which have been applied consistently throughout the year in the preparation of these
financial statements, are set out below:
(a) Basis of Preparation
The financial statements have been prepared in accordance with United Kingdom generally accepted accounting standards (UK
GAAP) and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture
Capital Trusts’ dated January 2009 (the ‘SORP’).
The Company’s financial statements are presented in sterling. All values are rounded to the nearest thousand pounds (£’000)
except where otherwise indicated.
(b) Investments held at fair value through profit or loss
Listed investments have been designated by the Board as held at fair value through profit or loss and accordingly are valued at
fair value, deemed to be bid market prices.
Unquoted investments have also been designated by the Board as held at fair value through profit or loss, and are valued by the
Directors using primary valuation techniques such as earnings multiples, option pricing models, discounted cash flow analysis
and recent transactions.
Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are recognised
in the Income Statement as ‘gains or losses on investments held at fair value through profit or loss’. Also included within this
caption are transaction costs in relation to the purchase or sale of investments, including the difference between the purchase
price of an investment and its bid price at the date of purchase. All purchases and sales are accounted for on a trade date basis.
The Company has classified its financial assets designated at fair value through profit or loss and the fair value of derivative
financial instruments using a fair value hierarchy that reflects the significance of the inputs used in making the fair value
measurements. The hierarchy has the following levels:
● Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
● Level 2 – inputs other than quoted prices included with Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
● Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Investment Income
(c)
Dividends receivable on equity shares are recognised on the ex-dividend date. Where no ex-dividend date is quoted, dividends
are recognised when the Company’s right to receive payment is established. UK dividends are shown net of tax credits and
foreign dividends are grossed up at the appropriate rate of withholding tax.
Income from fixed interest securities is recognised on a time apportionment basis so as to reflect the effective interest rate.
Deposit interest is accounted for on an accruals basis.
(d) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged through the revenue column of the Income Statement
except as follows:
(i) expenses which are incidental to the acquisition or disposal of an investment, categorised as fixed assets held at fair value
through profit or loss are charged to the capital column of the Income Statement; and
(ii) expenses are charged to the capital column of the Income Statement where a connection with the maintenance or
enhancement of the value of the investments can be demonstrated. In this respect the investment management and
management fees have been charged to the Income Statement in line with the Board’s expected long-term split of returns, in
the form of capital gains and income, from the Company’s portfolio. As a result 5% of the investment management and
management fees are charged to the revenue column of the Income Statement and 95% are charged to the capital column
of the Income Statement.
Any performance fee accrued or paid is charged in full to the capital column of the Income Statement.
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Notes to the Financial Statements (continued)
39
1 . ACCO U N T I N G P O L I C I E S (CO N T I N U E D)
(e) Finance costs
Finance costs are accounted for on an accruals basis. Finance costs are charged to the Income Statement in line with the Board’s
expected long-term split of returns, in the form of capital gains and income, from the Company’s portfolio. As a result 5% of the
finance costs are charged to the revenue column of the Income Statement and 95% are charged to the capital column of the
Income Statement. Finance charges, if applicable, including interest payable and premiums on settlement or redemption, are
accounted for on an accruals basis in the Income Statement using the effective interest rate method and are added to the
carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
(f) Taxation
The tax effect of different items of expenditure is allocated between capital and revenue using the marginal basis.
Deferred taxation is provided on all timing differences that have originated but not been reversed by the Balance Sheet date
other than those differences regarded as permanent. This is subject to deferred tax assets only being recognised if it is considered
more likely than not that there will be suitable profits from which the reversal of timing differences can be deducted. Any liability
to deferred tax is provided for at the average rate of tax expected to apply. Deferred tax assets and liabilities are not discounted to
reflect the time value of money.
(g) Foreign Currency
The results and financial position of the Company are expressed in sterling, which is the functional and presentational currency of
the Company. Sterling is the functional currency because it is the currency of the primary economic environment in which the
Company operates.
Transactions recorded in overseas currencies during the year are translated into sterling at the appropriate daily exchange rates.
Assets and liabilities denominated in overseas currencies at the Balance Sheet date are translated into sterling at the exchange
rates ruling at the date.
Any gains or losses on the translation of foreign currency balances, whether realised or unrealised, are taken to the capital or the
revenue column of the Income Statement, depending on whether the gain or loss is of a capital or revenue nature.
(h) Functional and presentational currency
The financial information is shown in sterling, being the Company’s presentational currency. In arriving at the functional currency
the Directors have considered the following:
(i)
the primary economic environment of the Company;
(ii) the currency in which the original capital was raised;
(iii) the currency in which distributions are made;
(iv) the currency in which performance is evaluated; and
(v) the currency in which the capital would be returned to Shareholders on a break up basis.
The Directors are of the opinion that sterling best represents the Company’s functional currency.
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40
Notes to the Financial Statements (continued)
(i) Derivative Financial Instruments
The Company uses derivative financial instruments (namely put and call options). The merits and rationale behind such strategies
are to enhance the capital return of the portfolio, facilitate management of the portfolio volatility and improve the risk-return
profile of the Company relative to its benchmark.
All derivative instruments are valued at fair value in the Balance Sheet in accordance with FRS 26: ‘Financial instruments:
measurement’.
Each investment in options is reviewed on a case-by-case basis and are all deemed to be capital in nature. As such, all gains and
losses on the above strategies have been debited or credited to the capital column of the Income Statement.
All gains and losses on over-the-counter (OTC) equity swaps, during the swap term, are accounted for as investment holding
gains or losses on investments. Where there has been a re-positioning of the swap, gains and losses are accounted for on a
realised basis. All such gains and losses have been debited or credited to the capital column of the Income Statement.
(j) Capital Reserves
The following are transferred to this reserve:
– gains and losses on the realisation of investments;
–
–
–
–
realised and unrealised exchange differences of a capital nature;
expenses, together with the related taxation effect, in accordance with the above policies;
increases and decreases in the valuation of investments held at the year end; and
unrealised exchange differences of a capital nature.
2 .
I N CO M E F R O M I N V E S T M E N TS H E L D AT FA I R VA LU E T H R O U G H P R O F I T O R LO S S
Income from investments
UK listed dividends
Overseas dividends
Fixed interest income
Other income
Deposit interest
Interest received from VAT recovery
Total income from investments held at fair value through profit or loss
Total income comprises:
Dividends
Interest
2011
£’000
343
7,226
1,549
9,118
7
–
9,125
7,569
1,556
9,125
2010
£’000
–
4,612
1,151
5,763
5
57
5,825
4,612
1,213
5,825
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Notes to the Financial Statements (continued)
41
3 .
I N V E S T M E N T MA N AG E M E N T, MA N AG E M E N T A N D P E R F O R MA N C E F E E S
Investment Management fee
Management fee
Refund of VAT previously paid on management fees
Performance fee
2011
Revenue
£’000
107
40
–
–
147
2011
Capital
£’000
2,030
763
–
(135)
2,658
2011
Total
£’000
2,137
803
––
(135)
2,805
2010
Revenue
£’000
96
37
(255)
–
133
2010
Capital
£’000
1,828
693
(255)
2,759
5,025
2010
Total
£’000
1,924
730
2,759
5,158
Further details of the performance fee basis can be found in the Report of the Directors on page 18 under the heading
‘Performance Fee’.
4 . OT H E R E X P E N S E S
Directors’ remuneration
Auditors’ remuneration for the audit of the Company’s financial statements
Auditors’ remuneration for other services
Marketing costs
Registrar
Broker retainer
Legal and professional
Printing
Stock exchange listing fees
Custody
Other
2011
Revenue
£’000
2010
Revenue
£’000
170
24
4
38
51
27
16
43
41
6
166
586
146
23
15
32
56
25
4
45
15
13
132
506
Details of the amounts paid to Directors are included in the Directors’ Remuneration Report on page 31.
5 . F I N A N C E C H A R G E S
Finance charges
2011
Revenue
£’000
13
2011
Capital
£’000
247
2011
Total
£’000
260
2010
Revenue
£’000
11
2010
Capital
£’000
212
2010
Total
£’000
223
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42
Notes to the Financial Statements (continued)
6 . TAXAT I O N O N O R D I N A RY AC T I V I T I E S
(a) Analysis of charge in year:
UK corporation tax at 28% (2010: 28%)
Tax relief to capital
Overseas taxation
2011
Revenue
£’000
2011
Capital
£’000
239
985
1,224
(239)
–
(239)
2011
Total
£’000
–
985
985
2010
Revenue
£’000
2010
Capital
£’000
303
662
965
(303)
–
(303)
2010
Total
£’000
–
662
662
(b) Factors affecting current tax charge for the year
The tax charged for the year is lower than the standard rate of corporation tax in the UK for a large company 28% (2010: 28%).
The difference is explained below.
Total return before taxation
Corporation tax at 28% (2010: 28%)
Non-taxable gains on investments held at fair value
through profit and loss
Overseas withholding tax not recoverable
Non taxable overseas dividends
Non taxable UK dividend
Expenses charged to capital available to be utilised
Timing differences on overseas dividends
Disallowed expenses
Current tax charge
2011
Revenue
£’000
8,379
2,346
–
985
(1,725)
(96)
–
(291)
5
1,224
2011
Capital
£’000
3,282
919
(1,620)
–
–
–
462
–
–
(239)
2011
Total
£’000
11,661
3,265
(1,620)
985
(1,725)
(96)
462
(291)
5
985
2010
Revenue
£’000
5,175
1,449
–
662
(1,100)
–
(122)
75
1
965
2010
Capital
£’000
74,889
20,969
(22,435)
–
–
–
1,163
–
–
(303)
2010
Total
£’000
80,064
22,418
(22,435)
662
(1,100)
–
1,041
75
1
662
(c) Provision for deferred tax
Legislation was introduced in Finance (No. 2) Act 2010 to reduce the main rate of corporation tax from 28% to 27% with effect
from 1 April 2011. The UK government has announced its intent to reduce the rate further by an additional 1% to 26% for the year
commencing 1 April 2011 and then by 1% per annum, falling to 23% with effect by 1 April 2014.
As at 31 March 2011 the Company has not recognised a deferred tax asset of £9,830,000 (26% tax rate) (2010: £10,324,000 (28%
tax rate) as a result of unutilised management expenses and non-trade loan relationship. It is not anticipated that this asset will
be utilised in the foreseeable future.
Deferred tax has not been provided for in these financial statements, because the Company meets and intends to continue
meeting the conditions for approval as an investment trust.
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Notes to the Financial Statements (continued)
43
7 . R E T U R N P E R S H A R E
The return per share is based in the following figures:
Revenue return
Capital return
Total return
2011
£’000
7,155
3,521
10,676
2010
£’000
4,210
75,192
79,402
Weighted average number of ordinary shares in issue during the year – basic
43,342,727
44,122,846
Revenue return per share
Capital return per share
Total return per share – basic
16.5p
8.1p
24.6p
9.5p
170.5p
180.0p
Weighted average number of shares in issue during the year – diluted
43,776,264
44,122,846
Revenue return per share
Capital return per share
Total return per share – diluted
*dilution not applicable
8 .
I N T E R I M D I V I D E N D
16.3p
8.1p
24.4p
9.5p*
170.5p*
180.0p*
Under UK GAAP, final dividends are not recognised until they are approved by shareholders and interim dividends are not
recognised until they are paid. They are also debited directly from reserves. Amounts recognised as distributable to ordinary
shareholders for the year ended 31 March 2011 were as follows:
Interim dividend in respect of the year ended 31 March 2010
Interim dividend in respect of the year ended 31 March 2009
2011
£’000
3,653
–
3,653
2010
£’000
–
1,982
1,982
In respect of the year ended 31 March 2011, an interim dividend of 15.0p per share (2010: 8.5p per share) has been declared. The
aggregate cost of this dividend based on the number of shares in issue at 1 June 2011 is estimated to be £6,474,000. In
accordance with FRS 21 this dividend will be reflected in the interim accounts for the period ending 30 September 2011. Total
dividends in respect of the financial year, which is the basis on which the requirements of s1158 of the Corporation Tax Act 2010
are considered, are set out below:
Revenue available for distribution by way of dividend for the year
Dividends for the year ended 31 March
based on 43,157,210 shares in issue as at 1 June 2011.
2011
£’000
7,155
(6,474)
681
2010
£’000
4,210
(3,653)
557
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44
Notes to the Financial Statements (continued)
9 .
I N V E S T M E N TS
Cost at 1 April 2010
Investment holdings gains
at 1 April 2010
Valuation at 1 April 2010
Movement in the year:
Purchases at cost
Sales – proceeds
– realised gains on sales
Net movement in investment holding
(losses)/gains
Valuation at 31 March 2011
Cost at 31 March 2011
Investment holding gains
at 31 March 2011
Valuation at 31 March 2011
Gains on investment
Listed
investments
£’000
Unlisted
investments
£’000
Derivatives
Options
£’000
307,015
69,270
376,285
256,736
(257,603)
40,772
(36,961)
379,229
346,920
32,309
379,229
6,318
996
7,314
–
(1,211)
–
537
6,640
5,107
1,533
6,640
378
250
628
17,803
(17,337)
642
487
2,223
1,486
737
2,223
2011
£’000
41,414
(30,857)
10,557
(5,080)
5,477
Total
£’000
313,711
70,516
384,227
274,539
(276,151)
41,414
(35,937)
388,092
353,513
34,579
388,092
2010
£’000
46,827
(40,817)
6,010
70,170
76,180
Realised gains based on historical cost – sales
Less: amounts recognised as investment holding gains in previous years
Realised gains based on carrying value at previous Balance Sheet date
Movement in investment holding gains in the year
Gains on investments
Purchase transaction costs for the year to 31 March 2011 were £507,000 (year ended 31 March 2010: £467,000). These comprise
mainly stamp duty and commission.
Sales transaction costs for the year to 31 March 2011 were £467,000 (year ended 31 March 2010: £372,000). These comprise
mainly commission.
1 0 . D E BTO R S
Amounts due from brokers
Withholding taxation recoverable
VAT recoverable
Prepayments and accrued income
2011
£’000
3,597
525
49
1,967
6,138
2010
£’000
535
323
37
862
1,757
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Notes to the Financial Statements (continued)
45
1 1 . C R E D I TO R S
Amounts falling due within one year
Amounts due to brokers
Stamp duty due on purchase of own shares
Bank loan facility*
Performance fee
Other creditors and accruals
2011
£’000
191
–
45,885
2,624
749
49,449
2010
£’000
–
4
36,062
2,983
754
39,803
*The Company’s borrowing requirements are met through the utilisation of a loan facility, repayable on demand, provided by
Goldman Sachs & Co. New York (“Goldman Sachs”). Interest on the facility is charged at the Federal effective rate plus 1 week OIS†
Spread plus 45 basis points. As at 31 March 2011 assets to the value of approximately 140% of the the Company’s debt were held
by Goldman Sachs as collateral.
+See Glossary on page 60
1 2 . D E R I VAT I V E F I N A N C I A L I N S T R U M E N TS
Fair value of call and put options
See note 9 on page 44 for movements in the year.
1 3 . S H A R E C A P I TA L
2011
£’000
2,223
2,223
2010
£’000
628
628
Ordinary
shares
number
44,336,756
(1,996,340)
–
801,195
43,141,611
Treasury
shares
number
6,239,416
1,996,340
(7,877,149)
–
358,607
Total
Ordinary
shares
in issue
number
50,576,172
–
(7,877,149)
801,195
43,500,218
Issued and fully paid:
At 1 April 2010
Ordinary shares bought back and held in treasury
Treasury shares cancelled following 2010 AGM
Subscription shares converted to Ordinary shares
At 31 March 2011
Issued and fully paid:
43,500,218 Ordinary shares of 25p (including 358,607 ordinary shares held in treasury)
8,191,112 Subscription shares of 1p
Total
Subscription
shares
in issue
number
8,992,307
–
–
(801,195)
8,191,112
£’000
10,875
82
During the year ended 31 March 2011 a total of 1,996,340 shares were bought back by the Company (2010: 8,508,938) at a cost of
£13,305,000 and expenses of £65,000 (2010: £48,790,000). 358,607 shares were held in treasury at 31 March 2011 (2010: 6,239,416).
801,195 new shares were issued during the year as a result of holders of subscription shares exercising their subscription rights,
raising £4,947,000
At the year end there were 8,191,112 subscription shares in issue (2010: 8,992,307).
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46
Notes to the Financial Statements (continued)
1 4 . N E T A S S E T VA LU E P E R S H A R E
Net asset value per share – basic
Net asset value per share – diluted for subscription shares
Net asset value per share – fully diluted for subscription shares and treasury shares
2011
£’000
799.2p
773.5p
772.8p
2010
£’000
780.8p
752.7p
747.3p
The net asset value per share is based on the assets attributable to equity shareholders of £344,781,000 (2010: £346,181,000) and
on the number of shares in issue at the year end of 43,141,611 (excluding shares held in treasury) (2010: 44,336,756). As at
31 March 2011, there were 8,191,112 subscription shares in issue (2010: 8,992,307).
The net asset value per share diluted assumes all outstanding subscription shares were exercised at 638p resulting in assets
attributable to equity shareholders of £397,040,000 and on 51,332,723 shares (2010: assumed all outstanding subscription shares
were exercised at 614p resulting in assets attributable to shareholders of £401,394,000 and on 53,329,063 shares).
The net asset value per share fully diluted for subscription shares and treasury shares assumes that all outstanding subscription
shares were exercised at 638p and the treasury shares were sold back to the market at 686p resulting in assets attributable to
equity shareholders of £399,482,000 (2010: £445,164,000) and on 51,691,330 shares (2010: 59,568,479).
As the share price at 31 March 2011 (686p) stood at a discount greater than 5% to the net asset value per share, the treasury
shares are not dilutive (2010: not dilutive).
1 5 . R E CO N C I L I AT I O N O F O P E R AT I N G R E T U R N TO N E T C A S H O U T F LO W F R O M
O P E R AT I N G AC T I V I T I E S
Gains before finance costs and taxation
Less: capital gain before finance costs and taxation
Revenue return before finance costs and taxation
Expenses charged to capital
Increase in accrued income
Increase in other debtors
(Decrease)/increase in creditors and accruals
Net taxation suffered on investment income
Net cash inflow from operating activities
2011
£’000
11,921
(3,529)
8,392
(2,658)
(1,105)
(12)
(364)
(985)
3,268
1 6 . R E CO N C I L I AT I O N O F N E T C A S H F LO W M O V E M E N T TO M O V E M E N T I N N E T D E BT
2010
£’000
80,287
(75,101)
5,186
(5,025)
(249)
(4)
2,862
(662)
2,108
2010
£’000
(9,804)
3,946
(5,858)
(30,204)
(36,062)
2011
£’000
(10,533)
710
(9,823)
(36,062)
(45,885)
Increase in net debt resulting from cashflows
Exchange movements
Movement in net debt in the year
Net debt at start of year
Net debt at end of year
Represented by:
Net bank overdraft
At 1 April
2010
£’000
(36,062)
Cash flows
£’000
(10,533)
Exchange
movements
£’000
710
At 31 March
2011
£’000
(45,885)
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Notes to the Financial Statements (continued)
47
1 7 . R E L AT E D PA R T I E S
Details of the relationship between the Company and OrbiMed Capital LLC are disclosed in the Report of the Directors on page
19. Samuel D Isaly is a Director of the Company, as well as Managing Partner of the Company’s Investment Manager, OrbiMed
Capital LLC. During the year ended 31 March 2011, OrbiMed Capital LLC earned £2,137,000 in respect of Investment Management
fees, of which £540,000 was outstanding at the year end. In addition performance fees of £204,000 were paid during the year and
£2,385,000 was payable at 31 March 2011.
1 8 . F I N A N C I A L I N S T R U M E N TS’ E X P O S U R E TO R I S K A N D R I S K MA N AG E M E N T P O L I C I E S
The Company’s financial instruments comprise securities and other investments, derivative instruments, cash balances, loans,
debtors and creditors that arise directly from its operations.
As an investment trust, the Company invests in equities and other investments for the long term so as to secure its investment
objective as stated on pages 14 and 15. In pursuing its investment objective, the Company is exposed to a variety of risks that
could result in a reduction in the Company’s net assets.
The main risks that the Company faces arising from its financial instruments are:
(i) market risk (including foreign currency risk, interest rate risk and other price risk)
(ii)
liquidity risk
(iii) credit risk
These risks and the Directors’ approach to the management of them, are set out in the Report of Directors on pages 15 and 16
and have not changed from the previous accounting period. The Investment Manager, in close co-operation with the Board of
Directors, co-ordinates the Company’s risk management.
(i) Market risk:
The Company’s portfolio is exposed to market price fluctuations which are monitored by the Investment Manager in pursuance
of the investment objective. Further information on the portfolio is set out on page 12.
Management of risk:
Derivative instruments are used to mitigate market price risk, the following option strategies or a combination of such have been
used during the financial year:
● Buy calls: provides leveraged long exposure, facilitates exposure while minimising capital at risk.
● Buy puts: provides leveraged protection, facilitates exposure while minimising capital at risk.
● Sell calls: against an existing position, provides partial protection from a decline in stock price; facilitates commitment to an
exit strategy and exit price that is consistent with fundamental analysis.
● Sell puts: provides an effective entry price at which to add to an existing position, or provides an effective entry price at which
to initiate a new position.
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48
Notes to the Financial Statements (continued)
18. FINANCIAL INSTRUMENTS’ EXPOSURE TO RISK AND RISK MANAGEMENT POLICIES (CONTINUED)
(a) Foreign Currency risk
A significant proportion of the Company’s portfolio is denominated in currencies other than sterling (the Company’s functional
currency, and the currency in which it reports its results). As a result, movements in exchange rates can significantly affect the
sterling value of those items.
Rate of exchange against sterling at 31 March
U.S. dollar
Japanese yen
Swiss franc
Euro/Danish kroner
2011
1.60295
132.8525
1.4665
1.12955
2010
1.5169
141.7392
1.5967
1.1211
Foreign currency exposure and sensitivity
The fair values of the Company’s monetary items that are denominated in foreign currency as at 31 March 2011 are shown below:
U.S. dollar
Swiss franc
Japanese yen
Euro/Danish kroner
Hong Kong dollar
2011
Current
assets
£’000
1,490
–
319
–
–
1,809
2011
Current
liabilities
£’000
(45,992)
–
–
–
(191)
2011
Investments
£’000
271,695
41,064
41,472
10,249
12,396
(46,183)
376,876
2010
Current
assets
£’000
2,004
323
–
–
–
2,327
2010
Current
liabilities
£’000
2010
Investments
£’000
(35,990)
–
–
–
–
(35,990)
305,223
45,731
22,347
1,324
9,602
384,227
Management of risk:
The Investment Manager and Manager monitor the Company’s exposure to foreign currencies on a daily basis and report to the
Board on a regular basis. The Investment Manager does not hedge against foreign currency movements, but takes account of the
risk when making investment decisions.
Foreign currency borrowing facilities are available and are currently being utilised, to limit the Company’s exposure to anticipated
future changes in exchange rates, which might otherwise adversely affect the value of portfolio investments.
Income denominated in foreign currencies is converted into sterling on receipt. The Company does not use financial instruments
to mitigate the currency exposure in the period between the time that the income is included in the financial statements and its
receipt.
Foreign currency sensitivity
The following table details the sensitivity of the Company’s profit or loss after taxation for the year and shareholders’ funds to a
10% increase and decrease in sterling against the U.S. dollar (2010: 10% increase and decrease), a 10% increase and decrease in
sterling against the Japanese yen (2010: 5% increase and decrease), and a 10% increase and decrease in sterling against the Swiss
franc (2010: 5% increase and decrease).
These percentages have been determined based on market volatility in exchange rates over the previous 12 months. The
sensitivity analysis is based on the Company’s foreign currency financial instruments held at each Balance Sheet date.
Sterling depreciates
Sterling appreciates
2011
USD
£’000
25,107
(20,786)
2011
YEN
£’000
4,609
(3,771)
2011
CHF
£’000
4,692
(3,839)
2010
USD
£’000
29,910
(24,471)
2010
YEN
£’000
1,180
(1,069)
2010
CHF
£’000
2,456
(2,228)
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Notes to the Financial Statements (continued)
49
18. FINANCIAL INSTRUMENTS’ EXPOSURE TO RISK AND RISK MANAGEMENT POLICIES (CONTINUED)
(b) Interest rate risk
Interest rate movement may affect:
–
–
–
the interest payable on the Company’s variable rate borrowings;
the level of income receivable from floating rate securities and cash at bank and on deposit;
the fair value of investments of fixed interest securities.
Management of the risk
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account
when making investment decisions and borrowing under the multicurrency loan facility.
The Company, generally, does not hold significant cash balances (except when required for collateral against the Company’s
derivative positions), with short term borrowing being used when required.
Interest rate exposure
The Company has a loan facility with Goldman Sachs which is repayable on demand. £45,885,000 was drawn down under this
facility at 31 March 2011. The exposure of financial assets and liabilities to floating interest rates, giving cash flow interest rate risk
when rates are re-set, is shown below.
Floating rate
The floating interest rate exposure of the financial assets and financial liabilities to interest rate risk at 31 March 2011 in respect of
cash was nil (2010: nil). At 31 March 2011 there was an overdraft position at Goldman Sachs of £45,885,000 (2010: £35,992,000).
Fixed rate
In the year to 31 March 2011, the Company held 8.5% of the portfolio in fixed interest securities. This percentage is deemed not
to be material and accordingly no sensitivity analysis has been presented.
(c) Other price risk
Other price risk may affect the value of the Company’s investments. If market prices at the Balance Sheet date had been 25%
higher or lower (2010: 25% higher or lower) while all other variables remained constant, the revenue return would have
decreased/increased by £43,000 (2010: £43,000), and the capital return would have increased/decreased by £96,144,000
(2010: £95,187,000) and the return on equity would have increased/decreased by £96,101,000. The calculations are based on the
portfolio valuations as at the respective balance sheet dates and are not representative of the year as a whole.
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50
Notes to the Financial Statements (continued)
18. FINANCIAL INSTRUMENTS’ EXPOSURE TO RISK AND RISK MANAGEMENT POLICIES (CONTINUED)
(ii) Liquidity risk
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
Management of the risk
Liquidity risk is not significant as the majority of the Company’s assets are investments in quoted equities and other quoted
securities that are readily realisable. The Company has a loan facility repayable on demand with Goldman Sachs.
Interest on the facility is charged at the Federal effective rate plus 1 week OIS Spread plus 45 basis points.
In order to ensure diversification within the portfolio, the Board gives guidance to the Investment Manager concerning exposure
limits to individual companies. Geographical and sectoral exposure are also reviewed regularly by the Directors.
Liquidity exposure
Contractual maturities of the financial liabilities as at 31 March 2011, based on the earliest date on which payment can be
required are as follows:
31 March 2011
Current liabilities:
Borrowings under the loan facility
Amounts due to brokers and accruals
31 March 2010
Current liabilities:
Borrowings under the loan facility
Amounts due to brokers and accruals
3 months
or less
£’000
45,885
3,564
49,449
3 months
or less
£’000
36,062
982
37,044
2011
Not more than
one year
£’000
–
–
–
2010
Not more
than one year
£’000
–
2,759
2,759
Total
£’000
45,885
3,564
49,449
Total
£’000
36,062
3,741
39,803
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Notes to the Financial Statements (continued)
51
18. FINANCIAL INSTRUMENTS’ EXPOSURE TO RISK AND RISK MANAGEMENT POLICIES (CONTINUED)
(iii) Credit risk
The failure of the counterparty to a transaction to discharge its obligations under that transaction could result in the Company
suffering a loss.
The carrying amounts of financial assets best represent the maximum credit risk at the Balance Sheet date. The Company’s listed
investments are held on its behalf by Goldman Sachs acting as the Company’s custodian.
Bankruptcy or insolvency of a custodian may cause the Company’s rights with respect to securities held by that custodian to be
delayed, however, the Board monitors the Company’s risk to its custodians by reviewing continuously their internal control reports
and their credit ratings.
Certain of the Company’s assets are held by Goldman Sachs as collateral for the loan provided by them to the Company. Such
assets held by Goldman Sachs are available for rehypothecation†. As at 31 March 2011, assets with a total market value of £64.4m
were held as collateral.
Management of the risk
The risk is not significant, and is managed as follows:
● by only dealing with brokers which have been approved by OrbiMed Capital LLC and banks with high credit ratings;
● by setting limits to the maximum exposure to any one counterparty at any time; and
● by monitoring the assets subject to rehypothecation†.
† See Glossary on page 60.
Credit risk exposure
Fixed interest securities and convertibles
Current assets:
Other receivables (amounts due from brokers, dividends
and interest receivable and derivative financial instruments)
2011
Balance
Sheet
£’000
29,968
2010
Balance
Sheet
£’000
31,785
8,361
2,385
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52
Notes to the Financial Statements (continued)
18. FINANCIAL INSTRUMENTS’ EXPOSURE TO RISK AND RISK MANAGEMENT POLICIES (CONTINUED)
Company’s hierarchy as quoted in note 1b on page 38.
As of 31 March 2011
Assets
Financial investments designated at
fair value through profit or loss
Fair value of derivative financial instruments
Assets measured at fair value
Level 1
£’000
379,229
–
379,229
Level 2
£’000
–
2,223
2,223
Level 3
£’000
6,640
–
6,640
Total
£’000
385,869
2,223
388,092
As at 31 March 2011, the put and call options have been classified as level two and the investment in the unquoted Convertible
Preferred Equity Certificates (CPEC) has been classed as level three. All of the remaining investments have been classified as
level one.
As of 31 March 2010
Assets
Financial investments designated at
fair value through profit or loss
Fair value of derivative financial instruments
Assets measured at fair value
Level 1
£’000
376,285
–
376,285
Level 2
£’000
–
628
628
Level 3
£’000
7,314
–
7,314
Level 3 Reconciliation
At 31 March 2011
Opening fair value
Total gains included in gains on investments in the income statement:
– on assets held at the end of the year
Repayment of principal
Closing balance
Total
£’000
383,599
628
384,227
2011
Equity
investments
£’000
7,314
537
(1,211)
6,640
Level 3 valuation techniques used by the Company are explained in the accounting policies in note 1b.
Fair value of financial assets and financial liabilities
The fair value of the financial assets and financial liabilities are either carried in the Balance Sheet at their fair value (investments
and derivatives) or the Balance Sheet amount is a reasonable approximation of fair value (due from brokers, dividends and
interest receivable, due to brokers, accrual, cash at bank, bank overdraft and amounts due under the loan facility).
Capital management policies and procedures
The Company’s capital management objectives are to ensure that it will be able to continue as a going concern and to maximise
the income and capital return to its equity shareholders through an appropriate level of gearing.
The Board’s policy is to limit gearing to the lower of £70m or 20% of the Company’s net assets.
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Notes to the Financial Statements (continued)
53
18. FINANCIAL INSTRUMENTS’ EXPOSURE TO RISK AND RISK MANAGEMENT POLICIES (CONTINUED)
The capital structure of the Company consists of the equity share capital, retained earnings and other reserves as disclosed on the
Balance Sheet on page 36.
Gearing for this purpose is defined as net debt as a percentage of total net assets. As at 31 March 2011 the gearing percentage of
the Company was 13.3% (2010: 10.4%).
The Board with the assistance of the Investment Manager monitors and reviews the broad structure of the Company’s capital on
an ongoing basis. This includes a review of:
–
–
–
–
the planned level of gearing, which takes into account the Investment Manager’s view of the market;
the need to buy back equity shares, either for cancellation or to hold in treasury, in light of any share price discount to net
asset value per share in accordance with the Company’s share buyback policy;
the need for new issues of equity shares, including issues from treasury; and
the extent to which revenue in excess of that which is required to be distributed should be retained.
The Company’s objectives, policies and processes for managing capital are unchanged from the preceding accounting period.
The Company is also subject to several externally imposed capital requirements and are as follows:
–
–
as a public company, the Company has a minimum share capital of £50,000; and
in order to be able to pay dividends out of profits available for distribution, the Company has to be able to meet one of the
two capital restriction tests imposed on investment companies by company law.
These requirements are unchanged since last year and the Company has complied with them.
1 9 . C A P I TA L R E S E R V E
At 31 March 2010
Transfer on disposal of investments
Net gains/(losses) on investments
Expenses charged to capital less tax relief thereon
Subscription shares exercised
Shares purchased including expenses
Exchange gain on currency balances
At 31 March 2011
Capital Reserve –
Other
£’000
Capital Reserve* –
Investment
Holding Gains
£’000
74,644
30,857
10,557
(2,666)
8
(13,370)
710
100,740
70,516
(30,857)
(5,080)
–
–
–
–
34,579
Total
£’000
145,160
–
5,477
(2,666)
8
(13,370)
710
135,319
* Investment holding gains relate to the revaluation of investments held at the reporting date. (See note 9 on page 44 for further
details).
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54
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of Worldwide Healthcare Trust PLC will be held at the Barber-Surgeons’ Hall,
Monkwell Square, Wood Street, London, EC2Y 5BL on Thursday, 7 July 2011 from 12 noon for the following purposes:
O R D I N A RY B U S I N E S S
1.
To receive and, if thought fit, to accept the Audited Accounts and the Report of the Directors for the year ended 31 March 2011
2.
3.
4.
5.
6.
7.
8.
9.
To re-elect Ms Jo Dixon as a Director of the Company
To re-elect Professor Duncan Geddes as a Director of the Company
To re-elect Dr David Holbrook as a Director of the Company
To re-elect Mr Samuel D Isaly as a Director of the Company
To re-elect Mr Martin Smith as a Director of the Company
To re-elect Mr Anthony Townsend as a Director of the Company
To re-appoint Ernst & Young LLP as the Company’s Auditors and to authorise the Directors to determine their remuneration
To approve the Directors’ Remuneration Report for the year ended 31 March 2011
S P E C I A L B U S I N E S S
To consider, and if thought fit, pass the following resolutions of which resolutions 11, 12, 13 and 14 will be proposed as special
resolutions:
Authority to Allot Shares
10. THAT in substitution for all existing authorities the Directors be and are hereby generally and unconditionally authorised in
accordance with section 551 of the Companies Act 2006 (the “Act”) to exercise all powers of the Company to allot relevant
securities (within the meaning of section 551 of the Act) up to a maximum aggregate nominal amount of £1,078,930 (being
10% of the issued share capital of the Company at 1 June 2011) and representing 4,315,721 shares of 25 pence each (or, if less,
the number representing 10% of the issued share capital of the Company at the date at which this resolution is passed),
provided that this authority shall expire at the conclusion of the Annual General Meeting of the Company to be held in 2012 or
15 months from the date of passing this resolution, whichever is the earlier, unless previously revoked, varied or renewed, by the
Company in General Meeting and provided that the Company shall be entitled to make, prior to the expiry of such authority, an
offer or agreement which would or might require relevant securities to be allotted after such expiry and the Directors may allot
relevant securities pursuant to such offer or agreement as if the authority conferred hereby had not expired.
Disapplication of Pre-emption Rights
11. THAT in substitution of all existing powers (but in addition to any power conferred on them by resolution 12 set out in the
notice convening the Annual General Meeting at which this resolution is proposed (“Notice of Annual General Meeting”)) the
Directors be and are hereby generally empowered pursuant to Section 570 of the Companies Act 2006 (the “Act”) to allot equity
securities (within the meaning of Section 560 of the Act) for cash pursuant to the authority conferred on them by resolution 10
set out in the Notice of Annual General Meeting or otherwise as if Section 561(1) of the Act did not apply to any such allotment:
(a) pursuant to an offer of equity securities open for acceptance for a period fixed by the Directors where the equity
securities respectively attributable to the interests of holders of shares of 25p each in the Company (“Shares”) are
proportionate (as nearly as may be) to the respective numbers of Shares held by them but subject to such exclusions or
other arrangements in connection with the issue as the Directors may consider necessary, appropriate or expedient to
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Notice of Annual General Meeting (continued)
55
deal with equity securities representing fractional entitlements or to deal with legal or practical problems arising in any
overseas territory, the requirements of any regulatory body or stock exchange, or any other matter whatsoever; and
(b) provided that (otherwise than pursuant to sub-paragraph (a) above) this power shall be limited to the allotment of
equity securities up to an aggregate nominal value of £1,078,930, being 10% of the issued share capital of the Company
as at 1 June 2011 and representing 4,315,721 Shares or, if changed, the number representing 10% of the issued share
capital of the Company at the date of the meeting at which this resolution is passed, and provided further that (i) the
number of equity securities to which this power applies shall be reduced from time to time by the number of treasury
shares which are sold pursuant to any power conferred on the Directors by resolution 12 set out in the Notice of Annual
General Meeting and (ii) no allotment of equity securities shall be made under this power which would result in Shares
being issued at a price which is less than the net asset value per Share as at the latest practicable date before such
allotment of equity securities as determined by the Directors in their reasonable discretion,
and such power shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of this
resolution or 15 months from the date of passing this resolution, whichever is earlier, unless previously revoked, varied or renewed
by the Company in general meeting and provided that the Company shall be entitled to make, prior to the expiry of such
authority, an offer or agreement which would or might otherwise require equity securities to be allotted after such expiry and the
Directors may allot equity securities pursuant to such offer or agreement as if the power conferred hereby had not expired.
12. THAT in substitution of all existing powers (but in addition to any power conferred on them by resolution 11 set out in the
Notice of Annual General Meeting) the Directors be and are hereby generally empowered pursuant to Section 570 of the
Companies Act 2006 (the “Act”) to sell relevant shares (within the meaning of Section 560 of the Act) if, immediately before
the sale, such shares are held by the Company as treasury shares (as defined in Section 724 of the Act (“treasury shares”)), for
cash as if Section 561(1) of the Act did not apply to any such sale provided that:
(a) where any treasury shares are sold pursuant to this power at a discount to the then prevailing net asset value of
ordinary shares of 25p each in the Company (“Shares”), such discount must be (i) lower than the discount to the net
asset value per Share at which the Company acquired the Shares which it then holds in treasury and (ii) not greater than
5% to the prevailing net asset value per Share at the latest practicable time before such sale (and for this purpose the
Directors shall be entitled to determine in their reasonable discretion the discount to their net asset value at which such
Shares were acquired by the Company and the net asset value per Share at the latest practicable time before such
Shares are sold pursuant to this power); and
(b)
this power shall be limited to the sale of relevant shares having an aggregate nominal value of £1,078,930, being 10% of
the issued share capital of the Company as at 1 June 2011 and representing 4,315,721 Shares or, if changed, the number
representing 10% of the issued share capital of the Company at the date of the meeting at which this resolution is
passed, and provided further that the number of relevant shares to which power applies shall be reduced from time to
time by the number of Shares which are allotted for cash as if Section 561(1) of the Act did not apply pursuant to the
power conferred on the Directors by resolution 11 set out in the Notice of Annual General Meeting,
and such power shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of this
resolution or 15 months from the date of passing this resolution, whichever is earlier, unless previously revoked, varied or
renewed by the Company in General Meeting and provided that the Company shall be entitled to make, prior to the expiry of
such authority, an offer or agreement which would or might otherwise require treasury shares to be sold after such expiry and
the Directors may sell treasury shares pursuant to such offer or agreement as if the power conferred hereby had not expired.
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Notice of Annual General Meeting (continued)
Authority to Repurchase Ordinary Shares
13. THAT the Company be and is hereby generally and unconditionally authorised in accordance with section 701 of the
Companies Act 2006 (the “Act”) to make one or more market purchases (within the meaning of section 693(4) of the Act) of
ordinary shares of 25 pence each in the capital of the Company (“Shares”) (either for retention as treasury shares for future
reissue, resale, transfer or cancellation), provided that:
(a)
the maximum aggregate number of Shares authorised to be purchased is 6,469,266 (representing approximately 14.99% of
the issued share capital of the Company at the date of the notice convening the meeting at which this resolution is
proposed);
(b)
the minimum price (exclusive of expenses) which may be paid for a Share is 25 pence;
(c)
(d)
(e)
the maximum price (exclusive of expenses) which may be paid for a Share is an amount equal to the greater of (i) 105%
of the average of the middle market quotations for a Share as derived from the Daily Official List of the London Stock
Exchange for the five business days immediately preceding the day on which that Share is purchased and (ii) the higher
of the price of the last independent trade in shares and the highest then current independent bid for shares on the
London Stock Exchange as stipulated in Article 5(1) of Regulation No. 2233/2003 of the European Commission
(Commission Regulation of 22 December 2003 implementing the Market Abuse Directive as regards exemptions for
buyback programmes and stabilisation of financial instruments);
the authority hereby conferred shall expire at the conclusion of the Annual General Meeting of the Company to be held
in 2012 or, if earlier, on the expiry of 15 months from the date of the passing of this resolution unless such authority is
renewed prior to such time; and
the Company may make a contract to purchase Shares under this authority before the expiry of such authority which
will or may be executed wholly or partly after the expiration of such authority, and may make a purchase of Shares in
pursuance of any such contract.
General Meetings
14. THAT as permitted by the EU Shareholders’ Rights Directive (2007/36/EC) any General Meeting of the Company (other than
the Annual General Meeting of the Company) shall be called by notice of at least 14 clear days in accordance with the
provisions of the Articles of Association of the Company provided that the authority shall expire on the conclusion of the
next Annual General Meeting of the Company, or, if earlier, on the expiry 15 months from the date of the passing of the
resolution.
By order of the Board
Frostrow Capital LLP
Company Secretary
1 June 2011
Registered Office:
One Wood Street
London EC2V 7WS
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Notice of Annual General Meeting (continued)
57
Notes
1. Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the meeting.
A shareholder may appoint more than one proxy in relation to the meeting provided that each proxy is appointed to exercise the rights
attached to a different share or shares held by that shareholder. A proxy need not be a shareholder of the Company. A proxy form which
may be used to make such appointment and give proxy instructions accompanies this notice.
2.
3.
4.
5.
6.
7.
8.
9.
A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolutions.
If no voting indication is given, a proxy may vote or abstain from voting at his/her discretion. A proxy may vote (or abstain from voting) as he
or she thinks fit in relation to any other matter which is put before the meeting.
To be valid any proxy form or other instrument appointing a proxy must be completed and signed and received by post or (during normal
business hours only) by hand at Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU no later than 12 noon on 5 July 2011.
In the case of a member which is a company, the instrument appointing a proxy must be executed under its seal or signed on its behalf by a
duly authorised officer or attorney or other person authorised to sign. Any power of attorney or other authority under which the instrument
is signed (or a certified copy of it) must be included with the instrument.
The return of a completed proxy form, other such instrument or any CREST Proxy Instruction (as described below) will not prevent a
shareholder attending the meeting and voting in person if he/she wishes to do so.
Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights (a
“Nominated Person”) may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be
appointed (or have someone else appointed) as a proxy for the meeting. If a Nominated Person has no such proxy appointment right or does not
wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights.
The statement of the rights of shareholders in relation to the appointment of proxies in paragraphs 1 and 3 above does not apply to
Nominated Persons. The rights described in these paragraphs can only be exercised by shareholders of the Company.
Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001, only shareholders registered on the register of members of the
Company (the “Register of Members”) at 5.30 p.m. on 5 July 2011 (or, in the event of any adjournment, on the date which is two days before
the time of the adjourned meeting) will be entitled to attend and vote or be represented at the meeting in respect of shares registered in
their name at that time. Changes to the Register of Members after that time will be disregarded in determining the rights of any person to
attend and vote at the meeting.
As at 1 June 2011 (being the last business day prior to the publication of this notice) the Company’s issued share capital consists of
43,157,210 ordinary shares, carrying one vote each. Therefore, the total voting rights in the Company as at 1 June 2011 are 43,157,210.
10. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the
procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who
have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the
appropriate action on their behalf.
11.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy
Instruction”) must be properly authenticated in accordance with the specifications of Euroclear UK and Ireland Limited (“CRESTCo”), and must
contain the information required for such instruction, as described in the CREST Manual. The message, regardless of whether it constitutes
the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be
transmitted so as to be received by the issuer’s agent (ID RA10) no later than 48 hours before the time appointed for holding the meeting.
For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST
Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After
this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
12. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that CRESTCo does not make available
special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of
CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal
member, or sponsored member, or has appointed a voting service provider, to procure that his CREST sponsor or voting service provider(s)
take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In
this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those
sections of the CREST Manual concerning practical limitations of the CREST system and timings.
13.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
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58
Notice of Annual General Meeting (continued)
14.
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the
most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Register of
Members in respect of the joint holding (the first named being the most senior).
15. Members who wish to change their proxy instructions should submit a new proxy appointment using the methods set out above. Note that
the cut-off time for receipt of proxy appointments (see above) also applies in relation to amended instructions; any amended proxy
appointment received after the relevant cut-off time will be disregarded.
16. Members who have appointed a proxy using the hard-copy proxy form and who wish to change the instructions using another hard-copy
form, should contact Capita Registrars on 0871 664 0300 (calls cost 10p per minute plus network extras). Lines are open 8.30 a.m. to
5.30 p.m. Monday to Friday.
17.
18.
19.
If a member submits more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies
will take precedence.
In order to revoke a proxy instruction, members will need to inform the Company. Members should send a signed hard copy notice clearly
stating their intention to revoke a proxy appointment to Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU.
In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an
officer of the company or an attorney for the company. Any power of attorney or any other authority under which the revocation notice is
signed (or a duly certified copy of such power of attorney) must be included with the revocation notice. If a member attempts to revoke
their proxy appointment but the revocation is received after the time for receipt of proxy appointments (see above) then, subject to
paragraph 4, the proxy appointment will remain valid.
LO C AT I O N O F T H E A N N UA L G E N E R A L M E E T I N G
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How to Invest
Alliance Trust Savings Limited
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The Company’s shares are available through savings plans (including investment Dealing Accounts, ISAs and SIPPs) operated by
Alliance Trust Savings Limited, which facilitates both regular monthly investments and lump sum investments in the Company’s
shares. Shareholders who would like information on the savings plans should call Alliance Trust Savings Limited on 01382 573737
or log on to www.alliancetrustsavings.co.uk or email contact@alliancetrust.co.uk. Calls to this number may be recorded for
monitoring purposes.
An Individual Savings Account (‘ISA’) is a tax efficient method of investment for an individual which gives the opportunity to
invest in the Company up to £10,680 in the year 2011/2012 also in subsequent tax years when they subscribe to a Stocks and
Shares ISA.
The preceding two paragraphs have been issued and approved by Alliance Trust Savings Limited. Alliance Trust Savings Limited of
PO Box 164, 8 West Marketgait, Dundee DD1 9YP is registered in Scotland with number SC98767. Alliance Trust Savings Limited
provides investment products and services and is authorised and regulated by the Finance Services Authority. It does not provide
investment advice.
Capita Registrars – Share Dealing Service
A quick and easy share dealing service is available to existing shareholders through the Company’s Registrar, Capita Registrars, to
either buy or sell shares. An online and telephone dealing facility provides an easy to access and simple to use service.
Type of trade
Share certificates
Online
1% of the value of the deal
(Minimum £20.00, max £75.00)
Telephone
1.5% of the value of the deal
(Minimum £25.00, max £102.50)
There is no need to pre-register and there are no complicated forms to fill in. The online and telephone dealing service allows you
to trade ‘real time’ at a known price which will be given to you at the time you give your instruction.
To deal online or by telephone all you need is your surname, shareholder reference number, full postcode and your date of birth.
Your shareholder reference number can be found on your latest statement or certificate where it will appear as either a ‘folio
number’ or ‘investor code’. Please have the appropriate documents to hand when you log on or call, as this information will be
needed before you can buy or sell shares.
For further information on this service please contact:
www.capitadeal.com (online dealing) or 0871 664 0445† (telephone dealing)
†Calls cost 10p per minute plus network extras and may be recorded for training purposes. Lines are open from 8.00 a.m. to 4.30 p.m. Monday to Friday.
The Share Dealing Service is provided by Capita IRG Trustees Limited which has issued and approved the preceding paragraphs.
Capita IRG Trustees Limited, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU is registered in England and Wales with
number 2729260. Capita IRG Trustees Limited is authorised and regulated by the Financial Services Authority.
R I S K WA R N I N G S
–
–
Past performance is no guarantee of future performance.
The value of your investment and any income from it may go down as well as up and you may not get back the amount
invested. This is because the share price is determined by the changing conditions in the relevant stockmarkets in which the
Company invests and by the supply and demand for the Company’s shares.
– As the shares in an investment trust are traded on a stockmarket, the share price will fluctuate in accordance with supply and
demand and may not reflect 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 financial 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.
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Glossary
I N V E S T M E N T T R U S T T E R M S
NAV Total Return
Diluted Net Asset Value
This is a method of calculating the net asset value (“NAV”) of a
company that has issued, and has outstanding, convertible
loan stocks, warrants, subscription shares or options. The
calculation assumes that the holders have exercised their right
to convert or subscribe, thus increasing the number of shares
among which the assets are divided.
The theoretical total return on shareholders’ funds per share,
including the assumed £100 original investment at the
beginning of the period specified, reflecting the change in
NAV assuming that dividends paid to shareholders were
reinvested at NAV at the time the shares were quoted ex-
dividend. A way of measuring investment management
performance of investment trusts which is not affected by
movements in discounts/premiums.
Discount or Premium
OIS (Overnight Indexed Swap)
A description of the situation when the share price is lower or
higher than the NAV per share. The size of the discount or
premium is calculated by subtracting the share price from the
NAV per share and is usually expressed as a percentage (%) of
the NAV per share. If the share price is higher than the NAV per
share, this situation is called a premium.
Gearing
Overnight indexed swap is an interest rate swap where the
periodic floating rate of the swap is equal to the geometric
average of an overnight index over every day of the payment
period.
Rehypothecation
The pledging to banks by securities brokers of the assets in a
customer’s margin account used as collateral for a loan.
Also known as leverage, particularly, in the USA. The term used
to describe the process of borrowing money for investment
purposes in the expectation that the returns on the
investments purchased using the borrowings exceed the costs
of those borrowings.
Total Assets
Total assets less current liabilities before deducting prior
charges. Prior charges include all loans for investment
purposes.
Hypothecation
Total Expense Ratio
The pledging of securities or other assets as collateral to secure
a loan such as a debit balance in a margin account.
NAV per share (pence)
Net asset value per share is shareholders’ funds expressed as an
amount per share. Shareholders’ funds are the total value of all
of the Company’s assets, at current fair value, having deducted
all prior charges.
The total expense ratio is calculated by taking the Company’s
expenses and dividing by the average net asset value of the
Company over the year.
Treasury Shares
Shares previously issued by a company that have been bought
back from shareholders to be held by the company for
potential sale or cancellation at a later date.
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Company Information
D I R E C TO R S
Martin Smith (Chairman)
Jo Dixon
Paul Gaunt
Professor Duncan Geddes
Dr David Holbrook
Samuel D Isaly
Anthony Townsend
CO M PA NY R E G I S T R AT I O N N U M B E R
3023689 (Registered in England)
The Company is an investment company as defined under
Section 833 of the Companies Act 2006
The Company was incorporated in England and Wales on
14 February 1995. The Company was incorporated as
Finsbury Worldwide Pharmaceutical Trust PLC.
W E B S I T E
Website: www.worldwidewh.com
R E G I S T E R E D O F F I C E
One Wood Street
London EC2V 7WS
I N V E S T M E N T MA N AG E R
OrbiMed Capital LLC
767 Third Avenue, 30th Floor
New York NY10017 - 2023
Website: www.orbimed.com
Registered under the U.S. Securities & Exchange Commission
MA N AG E R , A D M I N I S T R ATO R A N D CO M PA NY
S E C R E TA RY
Frostrow Capital LLP
25 Southampton Buildings, London WC2A 1AL
Telephone: 0203 008 4910
E-mail: info@frostrow.com
Website: www.frostrow.com
Authorised and regulated by the Financial Services Authority
If you have an enquiry about the Company or if you would like to
receive a copy of the Company’s monthly fact sheet by e-mail,
please contact Frostrow Capital using the above e-mail address.
C U S TO D I A N A N D B A N K E R
Goldman Sachs & Co.
200 West Street, Third Floor
New York, NY10282
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AU D I TO R S
Ernst & Young LLP
1 More London Place
London SE1 2AF
R E G I S T R A R S
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone (in UK): 0871 664 0300†
Telephone (from overseas): + 44 208 639 3399
Facsimile: + 44 (0) 1484 600911
E-mail: ssd@capitaregistrars.com
Website: www.capitaregistrars.com
Please contact the Registrars if you have a query about a
certificated holding in the Company’s shares.
†calls cost 10p per minute plus network charges and may be recorded for
training purposes. Lines are open from 8.30 a.m. to 5.30 p.m. Monday to
Friday.
S TO C K B R O K E R
Winterflood Securities Limited
The Atrium Building
Cannon Bridge, 25 Dowgate Hill
London EC4R 2GA
S H A R E A N D S U B S C R I P T I O N S H A R E P R I C E
L I S T I N G S
The price of your shares and subscription shares can be found
in various publications including the Financial Times, The Daily
Telegraph, The Times and The Scotsman.
The Company’s net asset value per share is announced daily
and is available, together with the share price, on the TrustNet
website at www.trustnet.com.
I D E N T I F I C AT I O N CO D E S
Shares:
0338530
GB0003385308
:
:
SEDOL
ISIN
BLOOMBERG : WWH LN
: WWH
EPIC
:
SEDOL
ISIN
:
BLOOMBERG : WWHS LN
B3VMCB0
GB00B3VMCB07
Subscription Shares:
L I S T E D
P R E M I U M
D I S A B I L I T Y AC T
Copies of this annual report and other documents issued by the Company are available from the Company Secretary. If needed,
copies can be made available in a variety of formats, including Braille, audio tape or larger type as appropriate. You can contact
the Registrar to the Company, Capita Registrars, which has installed telephones to allow speech and hearing impaired people
who have their own telephone to contact them directly, without the need for an intermediate operator, for this service please call
0800 731 1888. 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 RNID) you should dial 18001 followed by the
number you wish to dial.
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This report is printed on Revive 75 Silk. The paper consists of 50% de-inked post consumer waste, 25% pre-consumer waste and 25% virgin wood
fibre. The pulp used is a combination of Elemental Chlorine Free (ECF) and Totally Chlorine Free (TCF). The mill is certified to environmental
management standard ISO 14001. This product has been awarded the NAPM 75% Recycled Mark. This report has been printed using vegetable
based inks.
Perivan Financial Print 221366
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W O R L D W I D E H E A LT H C A R E T R U S T P LC
A N N UA L R E P O R T & F I N A N C I A L S TAT E M E N TS
F O R T H E YE A R E N D E D 3 1 MA R C H 2 0 1 1
2011
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Worldwide Healthcare Trust PLC
25 Southampton Buildings, London WC2A 1AL
www.worldwidewh.com