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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 O R T H E YE A R E N D E D 3 1 MA R C H 2 0 1 3
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The Company is a member of the Association of Investment Companies.
Worldwide Healthcare Trust PLC
25 Southampton Buildings, London WC2A 1AL
www.worldwidewh.com
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CO N T E N TS
ANNUAL REPORT
Financial Highlights
1
Chairman’s Statement
2-3
OrbiMed Capital LLC - Investment Manager
4
Review of Investments
5-10
Historic Performance
11
Champions of Innovation
12-13
Portfolio
14-16
Analysis of the Portfolio
17
Your Board
18
REPORT OF THE DIRECTORS AND FINANCIAL STATEMENTS
Report of the Directors
(Incorporating the Business Review)
Statement of Directors’ Responsibilities
Corporate Governance
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
GENERAL INFORMATION
Explanatory Notes of the Principal Changes to
the Company’s Articles of Association
Notice of Annual General Meeting
Notice of Separate Meeting of Subscription
Shareholders
How to Invest
Glossary
Company Information
19-28
29
30-35
36
37-38
39-40
41
42
43
44
45-60
61
62-67
68-69
70-71
72
73
ACC E S S I N G T H E G LO B A L MA R K E T
The healthcare sector is a global one and accessing this global
market as a UK investor can be difficult. Within the UK, there are
diminishing options for investment as the universe of
healthcare companies is shrinking through mergers and
acquisitions. Worldwide Healthcare Trust PLC offers an
opportunity
to pharmaceutical,
biotechnology and related companies in the healthcare sector
on a global scale.
to gain exposure
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 in the global
healthcare sector with the objective of achieving a high level
of capital growth. In order to achieve its investment objective,
the Company invests worldwide in a diversified portfolio of
shares in pharmaceutical and biotechnology companies and
related securities in the healthcare sector. It uses gearing and
derivative transactions to mitigate risk and also to enhance
returns. Performance is measured against the MSCI World
Health Care Index on a net total return, sterling adjusted basis.
Further details of the Company’s investment policy are set out
in the Report of the Directors beginning on page 19.
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
further
opportunities to vote on the continuation of the Company
shall be given to shareholders every five years thereafter.
in 2014, and
F I N A N C I A L C A L E N DA R
Financial Year End
Financial Results Announced
Half Year End
Half Year Results Announced
Interim Management
Statements Announced
Dividends payable
2013 Annual General Meeting
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 31 March 2013 £31.4m was
drawn down from this facility.
31 March
June
30 September
November
February/August
January/July
I S A S TAT U S
Wednesday, 17 July
to be held at,
the Carpenters’ Hall
Throgmorton Avenue, London
EC2N 2JJ
The Company’s shares are eligible for inclusion in Individual
Savings Accounts (‘ISAs’) and for Junior
ISAs. Further
information on how to invest in the Company can be found
beginning on page 70.
W E B S I T E
The Company’s internet address is www.worldwidewh.com
This report is printed on Revive Pure White Silk a totally recycled paper produced using 100% recycled
waste at a mill that has been awarded the ISO 14001 certificate for environmental management.
The pulp is bleached using a totally chlorine free (TCF) process.
Perivan Financial Print 228467
228467 Finsbury WWH pp01-pp18 18/06/2013 10:40 Page 01
Financial Highlights
Share price
Net asset value per share – diluted
(dilution for subscription shares)
Net asset value per share – basic
Discount of share price to the diluted
net asset value per share
Fi n a n c i a l H i g h l i g h t s
0 1
As at
31 March
2013
1009.0p
As at
31 March
2012
795.0p
%
Change
+26.9
1089.6p
1110.2p
871.0p
909.4p
+25.1
+22.1
7.4%
8.7%
n/a
Share price (total return)*^
Net asset value per share (total return)*+^
Benchmark index (total return)*
Dividends per share
*Source – Morningstar.
+The net asset value per share has been diluted for both subscription shares and treasury shares.
^Includes the 2012 interim dividend of 17.5p per share which had an ex dividend date of 6 June 2012 and also the 2013 first interim dividend of 7.0p per share which had
Year ended Year ended
31 March
2012
+18.2%
+14.4%
+13.4%
17.5p
31 March
2013
+30.9%
+30.3%
+31.4%
16.5p
an ex dividend date of 12 December 2012.
Details of the Company’s historic performance can be found on page 11.
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 3
1400
1200
1000
800
600
400
200
100
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
Mar
12
Mar
13
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 and Bloomberg.
**With effect from 1 October 2010, the performance of the Company is measured against the MSCI World Health Care Index on a net total return, sterling adjusted basis. Prior
to this date, performance was measured against the Datastream World Pharmaceutical & Biotechnology Index (total return, sterling adjusted).
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0 2
C h a i r m a n’s S t a t e m e n t
Chairman’s Statement
“I am delighted to report that during the year ended 31 March 2013,
the Company’s net asset value per share total return was 30.3% and the
share price total return was 30.9%...”
Sir Martin Smith
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
I am delighted to report that during
the year ended 31 March 2013, the
Company’s net asset value per share
total return was 30.3% and the
share price total return was 30.9%,
both closely tracking the Company’s
benchmark, the MSCI World Health
Care Index on a net total return, sterling adjusted basis, which
rose by 31.4%. I should point out that the share price and the
net asset value total return generated during the year were
enhanced by the change in the Company’s dividend payment
policy whereby a first interim dividend of 7.0p per share was
paid in January 2013. This “extra” dividend payment enhanced
performance in total return terms by approximately 1.0%. The
Company has continued to benefit from strong performance
from biopharmaceutical companies such as Gilead Sciences
and Onyx Pharmaceuticals, and also from large capitalisation
pharmaceutical companies such as Roche Holdings, Pfizer
and Sanofi. Further information on the Company’s investments
can be found in the Review of Investments beginning on page 5
of this Annual Report.
Since the Company’s inception in 1995, the total return of the
Company’s net asset value per share is 1,150.4%, equivalent to a
compound annual return of 15.1%. This compares to a
cumulative “blended” benchmark return of 593.8%, equivalent
to a compound annual return of 11.4%. During this period the
Company’s net asset value total return ranked second out of the
approximately 250 UK Listed
Investment Companies
(Source: Winterflood Securities Limited and Thomson Reuters).
At 31 March 2013, the discount of the Company’s share price to
the diluted net asset value was 7.4% (31 March 2012: 8.7%).
However, as a result of continued strong performance, at the
time of writing the discount has narrowed to 1.3%. The average
discount of the share price to the diluted net asset value per
share during the year was 6.0% which compares to 7.1% during
the previous year.
C A P I TA L
In implementing our policy of actively managing the share price
discount we repurchased a total of 2,411,340 ordinary shares for
treasury during the year, at a discount greater than 6.0% to the
prevailing diluted net asset value per share, at a cost of
£19.2 million (including expenses). In line with the Board’s policy, a
total of 2,941,518 shares held in treasury at 18 July 2012, the date
of last year’s Annual General Meeting, were cancelled. I am pleased
to report that, during the year and to the date of this report, we
have been able to reissue all of the 378,408 shares bought back
into treasury since the 2012 Annual General Meeting at prices
representing no more than a 4.9% discount to the prevailing fully
diluted cum income net asset value per share, raising £4.0 million
of new funds for the Company. Shareholder approval to renew the
authority to buy-back both ordinary shares and subscription
shares will be sought at the Annual General Meeting. The
execution and timing of any share buy-back will continue to be at
the absolute discretion of the Board.
I would like to remind shareholders that any shares held in
treasury on 17 July 2013, the date of this year’s Annual General
Meeting, will be cancelled.
The next exercise date for the Company’s subscription shares is
31 July 2013 and the exercise price is 699p, where it will remain
until the expiry date of the subscription shares on 31 July 2014.
As a result of holders of subscription shares exercising their
subscription rights during the year and to the date of this
report) a total of 4,764,682 new shares were issued, raising
£30.5 million of additional funds for the Company.
R E V E N U E A N D D I V I D E N D
I
reminded shareholders last year that it remained the
Company’s policy to pursue capital growth for shareholders and
to pay dividends to the extent required to maintain investment
trust status, I also confirmed that the Company would in future
declare two interim dividends per year. A first interim dividend
of 7.0p per share, for the year ended 31 March 2013, was paid on
11 January 2013 to ordinary shareholders on the register on
14 December 2012. The Company’s net revenue return for the
fallen slightly to £7.6 million
year as a whole has
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Chairman’s Statement (continued)
C h a i r m a n’s S t a t e m e n t
0 3
(2012: £9.5 million) due to a reduction in the overall yield from
portfolio investments. The Board has declared a second interim
dividend of 9.5p per share which, together with the first interim
dividend already paid, makes a total dividend for the year of
16.5p (2012: 17.5p per share) which is sufficient to ensure that
the Company maintains its investment trust status. Based on the
current mid-market share price of 1052.0p the total dividend
payment for the year represents a yield of 1.6%.
The second interim dividend will be payable on 5 July 2013 to
ordinary shareholders on the register of members on 7 June
2013. The associated ex-dividend date was 5 June 2013.
G E A R I N G
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. As at 31 March 2013 a total of £31.4 million of this facility
was drawn down, representing 6.2% of the Company’s net
assets. Your Company has utilised gearing over many 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 Company’s gearing policy is to borrow up to the
lower of £120 million or 20% of the Company’s net asset value.
T H E B OA R D
Anthony Townsend, who has been a Director of the Company
since its launch in 1995, will be retiring from the Board at the
conclusion of this year’s Annual General Meeting. Anthony was
instrumental in ensuring the launch of the Company and I would
like to thank him for his hard work during his time on the Board.
His experience and wise counsel will be greatly missed. Jo Dixon
will be succeeding him as the Senior Independent Director.
I am delighted to welcome Sarah Bates onto the Board. Sarah
brings with her a wealth of experience, both as a former
Chairman of the Association of Investment Companies and also
as a non-executive Director of a number of public companies
including JPMorgan American Investment Trust plc, where she is
Chairman, and also New India Investment Trust PLC, Polar Capital
Technology Trust plc and Witan Pacific Investment Trust plc.
T H E A LT E R N AT I V E I N V E S T M E N T
F U N D MA N AG E R S D I R E C T I V E
(A I FM D)
The AIFMD is European legislation which will create a European-
wide framework for regulating managers of ‘alternative
investment funds’, which includes investment trusts. It came
into force in July 2011 with the intention that it be implemented
into national legislation by July 2013. Your Board is currently in
the process of complying with this legislation and will keep
shareholders informed of developments.
O U T LO O K
While the prospects for global economic growth remain mixed,
with a further year of recession and continued political
uncertainty expected in the Eurozone, and the Chinese
economy struggling with high energy costs and a deteriorating
trade balance. However, there is better news in Japan and also
in the U.S. where, despite automatic budgetary cuts, the US
economy is still expected to grow at 2% this year. Our
Investment Manager continues to believe that the outlook for
the healthcare sector is positive and that there is potential for
continued outperformance of the wider market over the long
term. In particular, they believe that the portfolio is well
positioned to benefit from such factors as low valuations, a rise
in the prospects for emerging markets, attractive growth
potential
large capitalisation pharmaceutical and
biotechnology companies as a result of new product launches
and continued merger and acquisition activity.
for
Our focus continues to be on the selection of stocks with strong
prospects and we continue to believe that investors committed
to the sector will be well rewarded.
A N N UA L G E N E R A L M E E T I N G
This year, the Annual General Meeting of the Company will be
held at Carpenters’ Hall, Throgmorton Avenue, London
EC2N 2JJ on Wednesday, 17 July 2013 at 12 noon, and we hope
as many shareholders as possible will attend. This will be an
opportunity to meet the Board and to receive a presentation
from our Investment Manager.
Sir Martin Smith
Chairman
6 June 2013
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O r b i M e d C a p i t a l L LC – I nve s t m e n t M a n a g e r
OrbiMed Capital LLC – Investment Manager
OrbiMed had over U.S.$7 billion in assets under management as
of 31 March 2013, across a range of funds, including investment
trusts, hedge funds, mutual funds, and private equity funds.
The Team has a global focus with a universe of coverage that
covers the entire spectrum of companies, from early stage
companies with pre-clinical assets to full integrated bio-
pharmaceutical companies. The universe of actively covered
companies is approaching 1,000.
investments
in companies with
OrbiMed emphasises
underappreciated products
in the pipeline, high quality
management teams, and adequate financial resources. A
disciplined portfolio construction process is utilised to ensure the
portfolio is focused on high conviction positions. Finally, the
portfolio is subject to rigorous risk management process to
moderate portfolio volatility.
OrbiMed was born in 1989 and has evolved over time to be the
largest dedicated healthcare investment firm in the world.
OrbiMed has managed the portfolio since the Company’s
launch in 1995. Exceptional returns and recipient of many
investment awards signifies the aggregate talents of this
exceptional team.
T H E T E A M
The OrbiMed Public Equity Investment Team continues to
expand. Led by founding partner, Samuel D. Isaly, now over 60
investment professionals cover all aspects of research, trading,
finance, and compliance. This includes over 20 degree holders
with MD and/or PhD credentials, healthcare industry veterans,
and finance professionals with over 20 years of experience.
The firm has a global investment horizon and the OrbiMed
footprint now spans 3 continents with offices in New York, San
Francisco, Tel Aviv, Shanghai, and Mumbai.
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
The Team works constantly to identify sources of alpha generation
with a focus on fundamental research. In healthcare, there are
many primary sources of alpha generation, especially in
therapeutics. Clinical events such as the publication of new clinical
trial data is a prominent example and historically has been the
largest source of share price volatility. Regulatory events, such as
new drug approvals by U.S., European, or Japanese regulatory
authorities are also stock moving events. Subsequent new
product launches are carefully tracked and forecasted. Other
sources include legal events and, of course, M&A activity.
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R e v i e w o f I nve s t m e n t s
0 5
Review of Investments
“.... healthcare outperformance in the period was both
immediate and sustained.”
PERFORMANCE REVIEW
The year ended 31 March 2013 was
marked by periods of volatility, but
primarily was a bullish period for the
global equity markets. Early returns
were negative in the period, but a
turn in the markets in May 2012
marked the beginning of a bull run
that bore witness to a nearly 30%
swing in the MSCI World Index
measured in sterling terms on a net
total return basis. Ultimately the
MSCI World Index finished up an impressive 17.7% for the year.
Samuel D. Isaly
Despite such strong returns, global healthcare equities
outperformed the broader market during the year. Although
following a similar pattern, healthcare outperformance in the
period was both immediate and sustained. The MSCI World
Healthcare Index rose by 31.4% on a net total return, sterling
adjusted basis during the year. This compares to the Company’s
net asset value per share total return of 30.3% and the share
price total return of 30.9% in the same period.
While currency movements have been volatile in recent times,
including some precipitous swings in 2012 and early in 2013,
the currency impact was modest during the year. A significant
majority of the portfolio holdings are denominated in U.S.
dollars, but the net move in sterling versus the dollar was
approximately 5% in the period.
CONTRIBUTION TO PERFORMANCE
Large capitalisation therapeutic stocks were the hallmark of
2013 performance. Dusting off the doldrums with renewed
positive fundamentals, these stocks shook off historically low
valuations and re-rated to better reflect a new era of
productivity and growth. This led to the largest contributions
during the year.
Gilead Sciences, is a good example of this phenomenon.
Worldwide leaders in virology, the company maintained its
leadership in HIV and grabbed the mantle in hepatitis C, as well.
During the period, the company was able to gain regulatory
approval for the next generation of anti-viral combination
therapy for HIV. Known as Stribild (elvitegravir, cobicistat,
launch was solid.
emtricitabine, tenofovir), the product
Moreover, Gilead’s next generation anti-viral combination
therapy for hepatitis C began to usher in a new era for the
treatment of this chronic liver disease. The novel, all-oral therapy
will likely set a new standard in efficacy, safety, and tolerability
for this unmet medical need. The regimen is in late stage clinical
trials and we expect it to be available to patients in 2015. In
recognition of such impressive productivity, the stock doubled
during the year. This performance led to Gilead being the top
contributor to performance in the period.
Roche Holdings is another example of a large capitalisation
bio-pharmaceutical company that demonstrated continued
leadership in product development, in this case, in cancer.
Roche is the worldwide leader in oncology and sells the three
largest cancer drugs in the world (Avastin, Rituxan, Herceptin).
Over the past twelve months, the company made important
strides in maintaining that leadership with extensive life cycle
management and pipeline developments to protect
its
oncology franchise. Two drugs were approved for breast cancer,
Perjeta (pertuzumab) and Kadcyla (ado-trastuzumab), raising
the efficacy and safety bar first established by Herceptin. Most
notably was the approval of Kadcyla, the first antibody-drug
conjugate (ADC) for the treatment of metastatic breast cancer.
This type of therapy, pioneered by Roche, helped the stock
outpace the NYSE Arca Pharmaceutical Index by over 50% in the
period.
Shares of the specialty biotechnology company, Onyx
Pharmaceuticals, increased sharply due to the approval and
launch of Kyprolis (carfilzomib) for treatment of multiple
myeloma (a type of bone marrow cancer). Entering 2012, there
was significant doubt that the regulatory package submitted to
the U.S. Food and Drug Administration (“FDA”) would be
sufficient for approval, as it was based on a phase II trial rather
than a large, randomised phase III trial. However, because of the
high unmet medical need represented by refractory myeloma,
the drug received a positive review by an advisory committee
and accelerated approval from the FDA. The initial launch of the
product has gone well, providing further support for the stock.
Future approval in Europe is expected. Additionally during the
year under review, approval was received for Stivarga
(regorafenib) for the treatment of colorectal cancer by Bayer,
from which Onyx receives a meaningful royalty.
Another large capitalisation stock, Pfizer, utilised a host of levers
to produce outperformance in the period. The company
successfully divested its Infant Nutritionals business to Nestlé for
U.S.$11.9 billion. The company also successfully spun off (partially)
its Animal Health business in a U.S.$2.2 billion initial-public-
offering. The company continued to return this cash to
shareholders in the forms of increasing dividends and an industry
leading share buyback programme. Moreover, the company
participated in two of the most important drug approvals in
recent memory. First, Pfizer was able to obtain U.S. FDA approval
for Xeljanz (tofacitinib), the first ever oral, disease modifying
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R e v i e w o f I nve s t m e n t s
Review of Investments (continued)
agent for the treatment of rheumatoid arthritis. Second, the
company, along with partner Bristol-Myers Squibb, launched
what we believe is the most important therapy ever approved
for the prevention of stroke in patients with atrial fibrillation.
Known globally as Eliquis (apixaban), this drug has shown to be
more efficacious at reducing strokes with less bleeding than the
long time gold standard, Coumadin (warfarin). We expect both
Xeljanz and Eliquis to reach “mega-blockbuster” status.
The Paris-based bio-pharmaceutical giant, Sanofi, entered the
year in the midst of one of the largest patent cliffs in the
industry. However, while revenues and earnings suffered with
the loss of patent protection for its U.S.$10 billion franchise for
blood thinner Plavix (clopidogrel), the company was able to
align a host of additional growth platforms to drive above
average growth in the future. Sanofi has shown leadership in
diabetes, vaccines, and consumer healthcare. The acquisition of
Genzyme in 2011 also puts Sanofi in the forefront of the
biotechnology space, in particular for rare orphan diseases and
multiple sclerosis. The market was able to look past the
headwind of generics and the stock outpaced the NYSE Arca
Pharmaceutical Index by over 50% in the period. Thus, Sanofi
was another top contributor to performance.
For stocks that were the largest detractors in the period, a
common thread is more difficult to identify but one recurring
theme that hurt many stocks in the portfolio was disappointing
new product
launches for small and mid-capitalisation
companies. Dendreon is a typical example. The company
received approval in 2010 for their novel vaccine for the
treatment of prostate cancer. While expectations did reset lower,
the combination of high price, difficult procurement logistics
(for both the patient and physician), and new competitor entries
continued a long string of quarterly sales disappointments.
Further exacerbating the move down was decreasing likelihood
of the company being acquired and thus the valuation
compressed further. Overall, the stock fell over 50% in the
period.
OraSure Technologies is a leading diagnostics company that
significantly underperformed the broader market during the
year. The stock lagged due to a muted over-the-counter HIV test
launch coupled with deteriorating legacy diagnostics business
caused by a difficult public health funding environment.
OraSure’s over-the-counter HIV test received its FDA approval in
July 2012 on the heels of a unanimous recommendation from
the FDA advisory panel in May 2012. The initial enthusiasm of
the first FDA cleared over-the-counter HIV test became short-
lived soon after initial data tracking the launch started coming
in below stock market expectations. Public health funding
environment also provided a difficult backdrop for OraSure’s
core diagnostics business causing the company to provide
lacklustre future guidance for two consecutive quarters putting
additional downward pressure on the stock.
VIVUS, is a specialty pharmaceutical player that was the first
company in the U.S. to launch a new drug for the treatment of
obesity in over a decade. The drug, known as Qsymia
(phentermine and topiramate), was approved in July 2012 and
the company’s share price reached a 10-year high shortly
thereafter. However, the small company with less than 150
employees took a “go-it-alone” alone strategy and launched the
product without the marketing know-how of an established
partner. The result was woeful physician and patient awareness
about the new weight loss drug. An FDA mandated Risk
Evaluation and Mitigation Strategy turned into another obstacle
for patients trying to get on therapy. The net result was a
spectacularly failed launch and a precipitous decline in share
price. This stock is no longer held in the portfolio.
Humana is a managed care company in the United States. The
company reported poor quarters in the first half of 2012 when it
became apparent they had underpriced premiums for the core
“Medicare Advantage” product, a privately offered health
insurance programme that provides an eligible person with the
U.S. Medicare benefits. The shares partially rebounded later in
the year as the prospects improved for the Romney Presidential
candidacy on the hopes that a Republican administration
would provide a more favourable operating environment for
managed care companies and Medicare Advantage plans. This
enthusiasm was reversed on Election Day when President
Obama was re-elected. More recently, there has been more
volatility in Humana shares due to pressures on Medicare rates.
Questcor Pharmaceuticals, a specialty pharmaceuticals
company based in California, was a notable detractor during the
year. The position was initially predicated on our belief that
robust utilisation of their key drug Acthar (corticotrophin) –
particularly
in the nephrology setting – could drive
exceptionally strong revenue and earnings growth for the
company for several years. In addition, we viewed the stock as
attractively valued in light of anticipated growth. Questcor was
a solid performer during the first half of the calendar year 2012,
underpinned by strong prescription demand for Acthar.
However, in September, a broker’s “short report” highlighted a
reimbursement policy change at an insurance carrier and the
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Review of Investments (continued)
R e v i e w o f I nve s t m e n t s
0 7
company disclosed a government investigation into marketing
practices for Acthar. The back-to-back events triggered a
massive sell-off with the stock falling more than 60% in only four
trading days. Although a sell-off of that magnitude was
unwarranted, we exited our Questcor position as the stock no
longer traded on fundamentals. Questcor Pharmaceuticals is no
longer held in the portfolio.
Finally, a comment on derivatives and impact on performance.
The Company uses derivatives to enhance the capital return of
the portfolio, facilitate the management of portfolio volatility
and improve the risk-return profile of the Company relative to
the benchmark. For year ended 31 March 2013, the option
overlay strategy added 1.1% to performance.
SECTOR UPDATE
The calendar year of 2012 represented a clear inflection point in
the pharmaceutical and biotechnology industries. Evidence of
resurgence in research and development (“R&D”) productivity
was the key. More positive late stage clinical trial read outs and
product approvals were the hallmark metrics. A total of 40 new
products were approved by the FDA in 2012, 10 more than in
2011. This is the most new approvals since 2004.
Certainly, the FDA has continued its upswing in “industry
friendliness” that commenced in 2010. Tellingly, many of the
new product reviews were completed on the “first cycle”, or
without delay. This represents a dramatic improvement over as
little as two years ago when “complete response letters”
(implicit rejections) were as common as approvals. Additionally,
2012 was witness to multiple approvals that occurred before the
mandated-by-law action dates for the FDA. This phenomenon
was previously unheard of. Finally, the FDA has commenced a
new “breakthrough therapy” designation for investigational
compounds in early stage development. This enables sponsor
companies to gain better access to FDA staffers to obtain
important input in designing and expediting pivotal trial
programmes. A significant number of compounds received this
designation in the first four months of 2013.
On the political front, a plethora of uncertainty existed in the
first half of the year with the constitutionality of “Obamacare”
(The Affordable Care Act or ACA) debated at the Supreme Court
of the United States (SCOTUS), followed by the U.S. Presidential
Election later in the year. June brought resolution to the ACA as
SCOTUS upheld the law in a close 5-4 vote. Thus, there will be no
repeal of the new Medical Device tax that commenced in 2013
and, moreover, we will see Health Insurance Market reforms
beginning in 2014 as the rate of health insurance for Americans
will increase significantly. Specifically, Medicaid eligibility will be
expanded effective 1 January 2014. Health insurance exchanges
will be established on a state level for people to participate, with
subsides for insurance premiums available to individuals who
buy a plan from an exchange and have a household income
between 133% and 400% of the poverty line.
PHARMACEUTICALS
for
found bullishness
Our new
large capitalisation
pharmaceutical stocks continued this year. Despite the well-
chronicled “patent cliff” reaching its nadir in 2012, the overall
fundamentals of the group have improved dramatically. A
number of metrics have impacted the group, but none more
important than increased R&D productivity and new product
launches. The “new normal” for pharmaceutical companies is
that pipelines are delivering new and innovative medicines that
are being approved by the FDA. While valuations have moved
up to reflect this thinking, the re-rating of the sector is far from
complete given that the stocks still trade in the bottom quartile
of their historical range and only at a modest premium to the
S&P 500. The outlook for the group is one of accelerating sales
and earnings, in particular off of the patent cliff trough, fueled
by new product launches.
Emerging markets reached critical mass from a global sales
perspective earlier this decade. Now, for many companies,
emerging markets are a critical growth driver going forward.
Visibility into these markets has grown as well, and we are better
able to assess this component of a company’s sales and income
statements.
While our enthusiasm for the group has increased, we remain
cautious on some companies that comprise the universe. Patent
expirations will prove to be cyclical over time, and while the
majority of them for the industry have passed, some companies
still have significant generic headwinds in front of them. Further,
R&D productivity is not created equal amongst this peer group.
We have highlighted some companies as leaders in bringing
new drugs to market, but some are relatively thin on late stage
pipeline opportunities.
Finally, we remain very much focused on catalysts, in particular
clinical and regulatory catalysts. Short term shifts in sentiment can
follow unexpected positive or negative events. Fundamentals are
most critical, but we are mindful of trading opportunities.
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0 8
R e v i e w o f I nve s t m e n t s
Review of Investments (continued)
BIOTECHNOLOGY
Our bullishness for the outlook of the biotechnology sector is
perhaps at an all-time high, in particular for large capitalisation
stocks. These stocks are trading at multiples that are comparable
to their pharmaceutical counterparts despite superior growth
profiles. The combination of robust, future growth and still
depressed valuations has created a rare investment opportunity
in this space.
Once again, R&D is a key component of the strategy. The
number of drugs in clinical development has been increasing
over the past decade. With decreased attrition and higher
approval rates, more drugs are being approved now than
previously observed. Moreover, six of the top ten current best-
selling drugs worldwide were originally developed by
biotechnology companies and a host of recently launched or
soon-to-launch biotechnology drugs have “blockbuster”
potential.
Biotechnology companies are also incrementally more astute at
targeting “hot” therapeutic categories – ones in which there is a
high unmet medical need, in specialist categories which do not
require large sales and marketing infrastructures, and pricing
flexibility remains high. Such categories include immunology,
oncology and orphan diseases.
The topic of “biosimilars” (generic alternatives to large molecule
drugs) has been a hotly debated one for most of this century.
However, most recent observations suggest that generic
companies attempting to develop, manufacture, and sell
biosimilars are finding the regulatory and cost barriers much
higher than originally expected. Compared to small molecule
generics, we expect fewer entrants, smaller share gains, lower
pricing discounts, lower prospects for interchangeability, and
higher manufacturing hurdles. We continue to believe that
biosimilars of some sort are inevitable, but do not believe that
they will materially effect the biotechnology industry. Therefore
for biotechnology versus
the patent cliff outlook
the
pharmaceutical
biotechnology industry.
remains decidedly
in favour of
GLOBAL GENERICS
Market conditions for generic drug manufacturers are
improving across the globe. In the U.S., pricing stability and a
favourable patent cycle make the world’s largest generic market
amongst the most attractive. In Europe, austerity measures have
Wo r l d w i d e H e a l t h c a r e Tr u s t P LC > A n n u a l R e p o r t 2 0 1 3
nudged generic utilisation markedly higher, overwhelming
pricing erosion in many major markets. Throughout Asia,
economic expansion, favourable demographics, supportive
governmental policies and other contributing factors have
boosted generic utilisation in some regions to unprecedented
levels.
Although we are encouraged by these positive dynamics,
increased regulatory scrutiny, especially manufacturing-related,
and reimbursement uncertainties have become global issues
worth monitoring. In-line with our positive views, we favour
many of the mid-sized and large global generic players,
especially those with emerging branded franchises. We believe
these companies are best positioned to realise both near-term
and longer-term growth opportunities. Japan possesses the
fastest growing generic drug market in the world and 2013
promises to be the most dynamic in history. In India, we favour
companies with geographic and product diversification with
strong management teams in place.
SPECIALTY PHARMACEUTICALS
We look at this sub-sector on a number of levels. On one hand,
we continually search for high-growth companies with
attractive, growth-adjusted valuations. On the other, we seek
out “contrarian” stocks with underappreciated businesses often
trading at depressed valuations.
In Europe, we remain very
selective, as we find conditions in several major markets to be
unfavourable for many specialty pharmaceutical companies.
Finally, merger and acquisition activity is always a consideration
and we continually look for companies that could become
acquisition targets.
MEDICAL DEVICES
We remain cautious on the Medical Device sector, an industry
that has underperformed due to multi-year head winds.
Innovation and pricing go hand-in-hand and this sector has
been devoid of both. Uncertain economic times have led to
lower utilisation and decreased demand, clearly a headwind for
these companies. An inflection is possible if not inevitable, so
we continuously monitor utilisation trends across the healthcare
sector. These metrics are critical in considering the large
capitalisation medical device stocks. For small and mid-
capitalisation companies, we look for undervalued quality and
misunderstood product cycles that allow for opportunistic buys.
228467 Finsbury WWH pp01-pp18 18/06/2013 10:40 Page 09
Review of Investments (continued)
R e v i e w o f I nve s t m e n t s
0 9
HEALTHCARE SERVICES
EMERGING MARKETS
It remains a dynamic time in history for the hospitals and
managed care companies in the U.S., the so-called “HMOs” or
Health Maintenance Organisations. For the next several years,
the key variable for the services sector is the implementation of
healthcare reform emanating from the ACA. The expansion of
insurance coverage should improve the profitability of hospitals
which previously were uncompensated for care provided to
uninsured patients.
For the HMOs, privatisation of Medicare/Medicaid/Dual eligibles
is an area of growth as stretched government budgets
encourage shifting these individuals to a managed care
platform. The HMOs have been able to maintain premiums by
assuming a recovery in utilisation; however utilisation is unlikely
to recover until the broader macro and employment
environment improves. With attractive valuations, we are
positive on the group.
LIFE SCIENCES TOOLS AND DIAGNOSTICS
We continue to favour the Life Sciences Tools & Diagnostics sub-
sectors as we enter 2013. The sector is beginning to rebound
from depressed multiples of the last few years as visibility in
organic growth improves, fueled by innovations in genomic
research. The industry consolidation theme has been driving
sector-wide multiples expansion as
large bell-weather
conglomerates begin to show explicit interests in acquiring
smaller companies in growth areas. Recovery in the macro
economy, coupled with foreseeable resolution to sequestration
in the U.S., should continue to support outperformance in the
group especially as we head into second half of 2013.
Within the sub-sectors of Life Sciences Tools & Diagnostics, we
favour companies with new innovative products in genomic
research over the traditional life sciences names with more
cyclical industrial markets exposures. We continue to believe in
the large market potential of next-generation sequencing, as it
moves from research markets into clinical applications still in
nascent stages.
We substantially increased our exposure to emerging market
stocks after the 2011 sell-off. The increased exposure was
through a combination of either direct holdings of companies
in the local geographies such as China and India, and indirectly
through our global large capitalisation holdings.
The size of our direct holdings in individual stocks in countries
such as China and India, further increased from more than 8% at
the end of fiscal year 2011 to roughly 11% through 2012. In
particular, it is noteworthy that we have ventured into the
Chinese “A” share market via the Qualified Foreign Institutional
Investor (QFII) programme which allows licensed foreign
investors to buy and sell yuan-denominated "A" shares in China's
mainland stock exchanges.
for
revenues
capitalisation
Emerging market
pharmaceutical stocks range up to 34% of total sales for these
companies. For the period ending with the 2013 fiscal year, we
estimate that this contributed an additional 10% of exposure to
emerging markets.
large
Samuel D. Isaly
OrbiMed Capital LLC
Investment Manager
6 June 2013
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1 0
R e v i e w o f I nve s t m e n t s
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
Principal contributors to and detractors from net asset value performance over the year to 31 March 2013
Top Five Contributors
Gilead Sciences
Roche Holdings
Onyx Pharmaceuticals
Pfizer
Sanofi
Top Five Detractors
Dendreon
Orsure Technologies
VIVUS
Humana
Questcor Pharmaceuticals
Contribution
for the year to
31 March 2013
£’000
Contribution
per share
(pence)*
13,923
13,405
8,249
6,573
6,139
(2,688)
(2,446)
(2,285)
(1,846)
(1,750)
31.07
29.91
18.41
14.67
13.70
107.76
(6.00)
(5.46)
(5.10)
(4.12)
(3.90)
(24.58)
*based on 44,819,199 being the weighted average number of shares in issue during the year ended 31 March 2013.
Source: Frostrow Capital LLP
Wo r l d w i d e H e a l t h c a r e Tr u s t P LC > A n n u a l R e p o r t 2 0 1 3
228467 Finsbury WWH pp01-pp18 18/06/2013 10:40 Page 11
Historic Performance
H i s t o r i c Pe r f o r m a n c e
1 1
Net asset value per share –
diluted (dilution for
warrants/subscription shares)
31 March
2008
31 March
2009
31 March 31 March
2011
2010
31 March
2012
31 March
2013
482.4p
600.5p
752.7p 773.5p
871.0p 1089.6p
Net asset value per share – basic
486.6p
635.9p
780.8p 799.2p
909.4p 1110.2p
Share price
457.0p
550.5p
701.5p 686.0p
795.0p 1009.0p
% Change
for the
year ended
31 March
2013
+25.1
+22.1
+26.9
Warrant/subscription share price
27.5p
62.0p
98.0p
84.5p
133.5p
307.5p
+130.3
Discount of share price to diluted
net asset value per share
Average month end discount of
share price to diluted net
asset value per share
Gearing †
Ongoing charges †
Ongoing charges (including
performance fees crystallised
during the period)†
†See glossary on page 72.
(5.3%)
(8.3%)
(6.8%)
(11.3%)
(8.7%)
(7.4%)
n/a
(6.4%)
1.8%
1.3%
(7.5%)
15.3%
1.2%
(7.1%)
(7.6%)
10.4% 13.3%
1.0%
1.0%
(7.1%)
16.4%
1.1%
(6.0%)
9.8%
1.0%
n/a
n/a
n/a
1.3%
1.2%
1.0%
1.8%
1.3%
1.2%
n/a
5 YE A R P E R F O R MA N C E TO 3 1 MA R C H 2 0 1 3
260
240
220
200
180
160
140
120
100
80
Mar
08
Mar
09
Mar
10
Mar
11
Mar
12
Mar
13
WWH Net Asset Value (total return)
WWH Share Price (total return)
Benchmark Index (total return)*
Rebased to 100 as at 31 March 2008
Source: Morningstar, Thomson Reuters & Bloomberg
*With effect from 1 October 2010, the performance of the Company is measured against the MSCI World Health Care Index on a net total return, sterling adjusted basis. Prior
to this date, performance was measured against the Datastream World Pharmaceutical & Biotechnology Index (total return, sterling adjusted).
Wo r l d w i d e H e a l t h c a r e Tr u s t P LC > A n n u a l R e p o r t 2 0 1 3
228467 Finsbury WWH pp01-pp18 18/06/2013 10:40 Page 12
1 2
C h a m p i o n s o f I n n o v a t i o n
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 D U R I N G T H E YE A R
ROCHE HOLDINGS (Large Capitalisation
Bio -pharmaceutical)
The worldwide leaders in oncology, Roche Holdings, are not
resting on their past laurels. Rather, the company continues to
push the frontiers of science in developing novel therapies for the
treatment of cancer. Antibody Drug Conjugates (or ADC’s) are a
new type of targeted therapy which consist of antibody linked to
a cytotoxic drug (chemotherapy). The antibody will seek and bind
to the specific tumor cells, be internalised, and release the
cytotoxin to kill the host cell. Roche was the first company to get
FDA approval for an ADC. Known as Kadcyla (ado-trastuzumab),
adding the drug to current treatment regimens has increased the
survival of metastatic breast cancer patients (who are HER2+) by
almost 300% over chemotherapy alone. Roche also has a follow-
on drug to the “mega-blockbuster” cancer product, Rituxan
(rituximab), for blood cancers. Referred to as obinutuzumab (GA-
101), filing with regulatory authorities should occur late 2013.
Roche is also involved in a new class of cancer therapies –
immunotherapy – with first data available later in 2013. But Roche
is not only a cancer company, with important pipeline projects in
neuroscience, Alzheimer’s, and cardiovascular that could further
their reputation as leaders in innovative medicines.
Wo r l d w i d e H e a l t h c a r e Tr u s t P LC > A n n u a l R e p o r t 2 0 1 3
GILEAD SCIENCES (Large Capitalisation
Biotechnology)
Founded in 1987, the biotechnology company Gilead Sciences,
has become a category leader in virology, in particular the
treatment of human immunodeficiency virus (HIV). In 2012, the
company posted global sales of U.S.$8 billion for HIV therapies
alone. In 2013, the company launched is what will probably be the
next gold standard therapy for HIV, the four drug combination
product known as Stribild (elvitegravir, cobicistat, emtricitabine,
tenofovir). We expect Stribild to reach well over U.S.$3 billion in
peak global sales. Gilead has also attempted to become category
leaders in another virology category, specifically hepatitis C. Once
again through astute R&D and M&A, Gilead is on the cusp of
redefining the treatment of hepatitis C with a 2-3 month all-oral
therapy (versus the current gold standard treatment regimen
which includes weekly injections for a minimum of 6 months). The
Gilead approach not only simplifies the regimen into a single, once
daily pill, but also avoids the very difficult side effects of today’s
regimen which causes many patients to discontinue therapy. But
most noteworthy is that Gilead’s therapy will also lead to a cure in
the vast majority of patients with hepatitis C. We expect the drug
cocktail to be available to patients in 2015 and take the majority
share of what we expect to be a U.S.$10 billion market.
228467 Finsbury WWH pp01-pp18 18/06/2013 10:40 Page 13
Champions of Innovation (continued)
C h a m p i o n s o f I n n o v a t i o n
1 3
I N S U L E T CO R P O R AT I O N
(Medical Devices)
Insulet Corporation develops, manufactures, and markets a
tubeless insulin patch pump, called the OmniPod, to treat
people with insulin-dependent diabetes. The patch pump offers
the patient freedom from tubes, ease of training and a more
payer-friendly pay-as-you-go plan. The company has recently
launched a next generation pump that is smaller and lighter
with lower cost of manufacture. Insulet should benefit from
greater demand and higher gross margins. Going forward,
Insulet may also eventually incorporate a continuous glucose
monitoring capability and is working with pharmaceutical
partners to use the patch pump technology to deliver other
drugs.
JIANGSU HENGRUI MEDICINE
(Chinese Pharmaceutical)
We view Jiangsu Hengrui Medicine as the most established
innovative pharmaceutical company in China. While we
acknowledge that drug development in China has very much
lagged behind the developed countries, we
like the
tremendous market potential and growth trajectory the market
offers. Jiangsu Hengrui is the largest oncology drug developer
and marketer in China, and is rapidly expanding its franchise
into surgical anesthetic, autoimmune, and diabetes drugs.
Hengrui has one of the most solid drug pipelines among all
Chinese pharmaceutical companies. Among 60 plus drug
applications filed with the State Food and Drug Administration,
some noteworthy examples include apatinib (a VEGFR 2
tyrosine kinase inhibitor for gastric cancer), sunitinib (inhibitor
for multiple receptor tyrosine kinases for renal cell cancer),
long-lasting G-CSF (for neutropenia), and a DDP-4 inhibitor (for
diabetes), among others. In addition, Jiangsu Hengrui also has
one of the most established and best managed sales and
marketing channels in China.
Wo r l d w i d e H e a l t h c a r e Tr u s t P LC > A n n u a l R e p o r t 2 0 1 3
228467 Finsbury WWH pp01-pp18 18/06/2013 10:40 Page 14
1 4
Po r t f o l i o
Portfolio
as at 31 March 2013
Investments
Roche Holdings
Gilead Sciences
Pfizer
Sanofi
HCA
Bristol-Myers Squibb
Amgen
Mylan
Merck & Co.
Incyte Corp +
Top 10 Investments
Ono Pharmaceutical
AbbVie
Celgene
GlaxoSmithKline
Express Scripts
Novartis
Abbott Laboratories
Actavis
Mitsubishi Tanabe Pharma
Onyx Pharmaceuticals
Top 20 Investments
Illumina
Sawai Pharmaceutical
Infinity Pharmaceuticals
Insulet
Actelion
Wellpoint
Biogen Idec
Mako
UnitedHealth
Zimmer
Country
Switzerland
USA
USA
France
USA
USA
USA
USA
USA
USA
Japan
USA
USA
UK
USA
Switzerland
USA
USA
Japan
USA
USA
Japan
USA
USA
Switzerland
USA
USA
USA
USA
USA
Market value
£’000
% of
investments
49,995
25,579
24,786
23,456
20,769
18,274
16,741
16,652
15,049
13,649
9.0
4.6
4.5
4.2
3.8
3.3
3.0
3.0
2.7
2.5
224,950
40.6
12,491
11,317
10,796
10,539
10,206
9,844
9,808
9,581
9,562
9,066
2.3
2.0
1.9
1.9
1.8
1.8
1.8
1.7
1.7
1.6
328,160
59.1
8,537
8,237
8,218
7,754
7,207
7,190
6,987
6,525
6,476
6,437
1.5
1.5
1.5
1.4
1.3
1.3
1.3
1.2
1.2
1.2
Top 30 Investments
401,728
72.5
+includes Incyte 4.75% 01/10/15 (Conv) equating to 1.6% of investments
Wo r l d w i d e H e a l t h c a r e Tr u s t P LC > A n n u a l R e p o r t 2 0 1 3
228467 Finsbury WWH pp01-pp18 18/06/2013 10:40 Page 15
Portfolio (continued)
as at 31 March 2013
Po r t f o l i o
1 5
Investments
Country
Market value
£’000
% of
investments
Towa Pharmaceutical
Nichi-Iko Pharmaceutical
Dendreon Λ
Allergan
Life Technologies
Vocera Communications
Baxter International
Medivation
BioMarin Pharmaceutical
Biosensors International
Top 40 Investments
Fluidigm
Thermo Fisher Scientific
Shandong Weigao Group
Impax Laboratories
3SBio
Aetna
Exact Sciences
Elan
Neurocrine Biosciences
China Shineway Pharmaceutical
Top 50 Investments
Japan
Japan
USA
USA
USA
USA
USA
USA
USA
Singapore
USA
USA
China
USA
China
USA
USA
Ireland
USA
China
^includes Dendreon 2.875% 15/01/16 (Conv) equating to 0.6% of investments
6,285
6,218
6,132
5,807
5,787
5,680
5,549
5,544
5,494
5,088
1.1
1.1
1.1
1.0
1.0
1.0
1.0
1.0
1.0
0.9
459,312
82.7
4,956
4,835
4,573
3,741
3,654
3,367
3,333
3,232
3,138
3,066
0.9
0.9
0.8
0.7
0.7
0.6
0.6
0.6
0.6
0.6
497,207
89.7
Wo r l d w i d e H e a l t h c a r e Tr u s t P LC > A n n u a l R e p o r t 2 0 1 3
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1 6
Po r t f o l i o
Portfolio (continued)
as at 31 March 2013
Investments
Country
Market value
£’000
% of
investments
Affymetrix 4% 01/07/19 (Conv)
CIGNA
Given Imaging
Orasure Technologies
Curis
Sequenom
Humana
Sino Biopharmaceuticals
InterMune
USA
USA
Israel
USA
USA
USA
USA
China
USA
2,833
2,546
2,529
2,520
2,444
2,069
1,502
934
745
Total equities and fixed interest investments
515,329
OrbiMed Emerging Markets Basket
Jiangsu Hengrui
Lupin
Strides Arcolab
China Resources
Aurobindo
Total OTC Swaps
Options – (Put & Call)
Total investments including OTC Swaps and Options
18,031
6,411
4,760
2,642
2,526
1,618
35,988
2,442
553,759
0.5
0.5
0.5
0.5
0.4
0.4
0.3
0.2
0.1
93.1
3.2
1.2
0.9
0.5
0.4
0.3
6.5
0.4
100.0
S U M M A RY
as at 31 March 2013
Equities (including options & swaps)
Convertibles
Total of all investments
Market value
£’000
538,744
15,015
553,759
% of
investments
97.3
2.7
100.0
Wo r l d w i d e H e a l t h c a r e Tr u s t P LC > A n n u a l R e p o r t 2 0 1 3
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A n a l ys i s o f t h e Po r t f o l i o
1 7
Analysis of the Portfolio
as at 31 March 2013
BY G E O G R A P HY
2 0 1 3
Europe
19.3%
Emerging
Markets
9.7%
Asia 7.7%
BY S E C TO R
2 0 1 2
Europe 21.0%
Emerging
Markets
6.6%
Asia 7.8%
North America
63.3%
North America
64.6%
2 0 1 3
Healthcare
Distributors/
Services/
Facilities 6.7%
Managed
Healthcare
4.2%
Fixed Income 1.1%
Healthcare
Equipment/
Supplies/
Technology
10.1%
Life Sciences
Tools and
Services 5.9%
Biotechnology
22.1%
Pharmaceutical
49.9%
Healthcare
Distributors/
Services/
Facilities 4.4%
Healthcare
Equipment/
Supplies/
Technology
13.0%
Life Sciences
Tools and
Services 5.9%
2 0 1 2
Managed
Healthcare
8.9%
Royalty interests and
Fixed Income 5.2%
Biotechnology
16.5%
Pharmaceutical
46.1%
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.
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1 8
Yo u r B o a r d
Your Board
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.
S I R MA R T I N S M I T H * + (C H A I R MA N )
Sir Martin Smith, aged 70, joined the Board in 2007. After acting
as Head of Corporate Finance for Citibank in Europe, and
Chairman of Bankers Trust International, he became 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 became a founder and Vice Chairman
of New Star Asset Management Group PLC. He is a Director of a
number of private companies. He attended Oxford University
and has an MBA from Stanford University.
S A R A H B AT E S * +
Sarah Bates, aged 54, joined the Board in May 2013. A former
Chairman of the Association of Investment Companies, she is
currently Chairman of JPMorgan American Investment Trust plc
and a non-executive Director of New India Investment Trust PLC,
Polar Capital Technology Trust plc, St James’s Place plc, Witan
Pacific Investment Trust plc and Development Securities plc. She
is also Chairman of Rutley Russia Property Fund Limited and of
Stena Line (UK) Pension Scheme Trustees Limited. In addition,
she is Chairman of, or a member of Charitable and pension fund
investment committees including that of the East Riding Pension
Fund and is Chairman of the Kings Corner Project. She attended
Cambridge University and has an MBA from London Business
School.
J O D I XO N * +
Jo Dixon, aged 53, joined the Board in 2004 and is Chairman of
the Audit Committee. She is currently a non-executive Director
and Chairman of the Audit Committee of Standard Life Equity
Income Trust PLC and Baring Emerging Europe PLC. Jo is a
graduate Chartered Accountant having trained with Touche
Ross in London. Her career has spanned strategic development,
finance and commercial management at a number of
companies including The Eden Project, Cornwall, Serco Group
plc and Newcastle United PLC and also within the Investment
Bank and main group of NatWest.
D R DAV I D H O L B R O O K * +
Dr David Holbrook, aged 53, 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 68, 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.
D O U G M c C U TC H E O N * +
Doug McCutcheon, aged 48, joined the Board in 2012. Based in
Toronto, Canada, Doug is both a Canadian and UK citizen. Doug
is the President of Gormley Limited, an investment company
focused on investing in private companies, and is also on the
Board of Longview Asset Management. Doug is involved in
several philanthropic organisations, with a focus on healthcare
and education. Until 2012, Doug was at UBS, where he was the
former head of UBS Healthcare Investment Banking for Europe,
the Middle East, Africa and Asia-Pacific. He has over 25 years’
experience as an investment banker.
A N T H O NY TO W N S E N D * +
Anthony Townsend, aged 65, 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.
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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Report of the Directors
Incorporating the Business Review
R e p o r t o f t h e D i r e c t o r s
1 9
In accordance with the requirements of the Companies Act 2006
(the ‘Act’) and the UK Listing and Transparency Rules, the Directors
present their annual report on the affairs of the Company together
with the audited financial statements and the Independent
Auditors’ Report for the year ended 31 March 2013.
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 Review of Investments on pages 5 to 10 and the analyses on
pages 11 to 17.
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 (the ‘Act’).
Its shares are listed on the
Official List of the UK Listing Authority and traded on the main
market of the London Stock Exchange, which is a regulated
market as defined in Section 1173 of the Act.
The Company has received approval from HM Revenue &
Customs as an authorised investment trust under Sections 1158
and 1159 of the Corporation Tax Act 2010 (“CTA 2010”) for the
year ended 31 March 2012. 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. In accordance with recent changes to CTA 2010, the
Company has obtained ongoing approval from HM Revenue &
Customs for all accounting periods commencing on 1 April
2012.
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 continues as an investment trust for a
further five year period. In accordance with the Company’s
Articles of Association, shareholders will have an opportunity to
vote on the continuation of the Company at the Annual General
Meeting 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 and
biotechnology companies and related securities
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 (net 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 and
biotechnology companies and related securities
in the
healthcare sector on a worldwide basis. 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 closed ended investment companies
(including investment trusts) listed on the London Stock
Exchange, except where the
investment companies
themselves have stated investment policies to invest no
more than 15% of their gross assets in other closed ended
investment companies (including investment trusts) listed
on the London Stock Exchange.
•
•
•
•
•
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
U.S.$5bn);
At least 20% of the portfolio will normally be invested in
smaller companies (i.e. with a market capitalisation of less
than U.S.$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
issued by pharmaceutical and
royalty bonds
biotechnology companies;
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2 0
R e p o r t o f t h e D i r e c t o r s
Report of the Directors (continued)
Incorporating the Business Review
•
A maximum of 15% of the portfolio, at the time of
acquisition, may be invested in companies in each of the
following sectors:
–
–
–
healthcare equipment
healthcare technology
providers of healthcare and related services
•
The Company’s gearing policy is to borrow up to the lower
of £120 million 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 8% of the gross assets of the
Company at the time of acquisition.
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 2013, the Company’s net asset value total
return was 30.3% compared to a rise of 31.4% in the Company’s
benchmark, the MSCI World Health Care Index (net total return,
sterling adjusted). The Company’s share price total return was
30.9% during the year. Both the share price and the net asset
value total return generated during the year were enhanced by
virtue of the change in the Company’s dividend payment policy
whereby a first interim dividend of 7.0p per share was paid in
January 2013. This “extra” dividend payment enhanced
performance in total return terms by approximately 1.0%.
The Review of Investments on pages 5 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
The results attributable to shareholders for the year and the
transfer to reserves are shown on page 41. In order to maintain
investment trust status the Directors have declared two interim
dividends for the year totaling 16.5p per share (2012: a single
interim dividend of 17.5p) the second of which will be payable on
5 July 2013.
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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 pages 1 and 11)
•
Share price total return (see pages 1, 11 and 38)
•
•
Share price premium/discount to net asset value per share
(see page 11)
Stock contribution analysis (see page 10)
• Ongoing charges (see page 11)
•
•
Benchmark performance (see pages 1, 11 and 38)
Issue of new shares/repurchase of own shares (see page 22
and 52)
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:
Investment Activity and Strategy
The Board regularly reviews the Company’s investment mandate
and its 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. An inappropriate investment strategy, for example
lead to
asset allocation or the
underperformance against the Company’s benchmark index and
peer companies, resulting in the Company’s shares trading on a
wider discount. The Board manages these risks by diversification of
investments through its investment restrictions and guidelines
which are monitored and reported on by the Manager. Each
month the Board receives a monthly review report which
monitors the Company’s investment performance (both on an
absolute basis and against the benchmark and peer group) and its
level of gearing, may
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R e p o r t o f t h e D i r e c t o r s
2 1
Report of the Directors (continued)
Incorporating the Business Review
compliance with the investment guidelines. Additional reports
and presentations are regularly presented to investors by the
Company’s Manager,
Investment Manager and also by
Winterflood Securities, the Company’s Corporate Stockbroker.
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 target level of no more than
a 6% discount of share price to the diluted net asset value per
share. Shareholders should note, however, 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 6%. The making and timing of any share buy-backs is
at the absolute discretion of the Board.
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.
Shareholder Relations and Corporate Governance
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
Disruption to, or failure of accounting, dealing or payments
systems or the custodian’s records could prevent accurate
reporting and monitoring of the Company’s financial position.
The Board reviews both the internal control and the disaster
recovery procedures put in place by its principal service providers
on a regular basis.
Financial
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.
The Company’s assets comprise mainly readily realisable liquid
securities, which can be sold to meet funding requirements if
necessary.
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 afforded protection under both the
SEC rules and U.S. legislation equal to the value of the net assets
held by Goldman Sachs & Co. New York (also see glossary on
page 72).
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 54.
The Company is also exposed to the risk that the custodian
and/or counterparties may fail and that title to stocks does not
survive an ensuing liquidation. The Company’s Investment
Manager is responsible for undertaking reviews of the credit
worthiness of the counterparties that it uses. The Board regularly
list of
the
reviews
counterparties.
Investment Manager’s approved
Accounting, Legal and Regulatory
In order to qualify as an investment trust, the Company must
comply with Section 1158 of the Corporation Tax Act 2010
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2 2
R e p o r t o f t h e D i r e c t o r s
Report of the Directors (continued)
Incorporating the Business Review
(“Section 1158”). Were the Company to breach Section 1158, it
might lose investment trust status and, as a consequence, gains
within the Company’s portfolio could be subject to Capital
Gains Tax. The Section 1158 qualification criteria are continually
monitored by the Manager and the results reported to the
Board each month. The Company must also comply with the
provisions of the London Stock Exchange, the UKLA Listing
Rules and Disclosure & Transparency Rules (‘DTRs’). A breach of
the Companies Act could result in the Company and/or the
Directors being fined or subject to criminal proceedings. Breach
of the UKLA Listing Rules or DTRs could result in the Company’s
shares being suspended in listing which in turn would breach
Section 1158. The Board relies on the services of its Manager to
ensure compliance with The Companies Act and The UKLA
Listing Rules.
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. At the year end total
borrowings amounted to the equivalent of £31.4 million
representing 6.2% of net assets. Further details can be found in
note 11 on page 52 and in note 18 beginning on page 54.
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:
2,213,584 shares were allotted on 2 May 2012 raising £14,123,000.
2,457,096 shares were allotted on 1 August 2012 raising
£15,676,000.
960 shares were allotted on 14 August 2012 raising £6,000.
9,946 shares were allotted on 1 November 2012 raising £70,000.
33,336 shares were allotted on 1 February 2013 raising £233,000.
aggregate, to 6 June 2013, the shares re-purchased equate to a
total of 5.6% 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 17 July 2013, the date of the Annual General
Meeting, will be cancelled. A total of 2,941,518 shares held in
treasury were cancelled on 17 July 2012. During the year to date
all of the 378,408 shares bought back into treasury since the 2012
Annual General Meeting were reissued at prices representing no
more than a 4.9% discount to the prevailing fully diluted cum
income net asset value per share, raising £4,000,000 of new funds
for the Company.
No Subscription Shares were re-purchased for cancellation
during the year.
P R O S P E C TS
The Company’s Investment Manager continues to believe that
the outlook for the healthcare sector is positive and that there is
potential for continued outperformance of the wider markets
over the long term.
I N V E S T M E N T MA N AG E M E N T
Investment Management Agreement:
The Investment Manager receives a periodic fee equal to
0.65% p.a. of the Company’s net asset value. The Investment
Management 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:
•
•
recommending the manner by which monies should be
invested, disinvested, retained or realised;
seeking out and evaluating investment opportunities;
•
•
•
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.
Subsequent to the year-end 49,760 shares were allotted on
2 May 2013 raising £348,000.
During the year under review the Company re-purchased a total
of 2,411,340 shares to be held in treasury, at a cost of £19.2 million
(including expenses). Since the year end and to 6 June 2013 no
further shares have been repurchased by the Company. In
MA N AG E M E N T
Company Management, Company Secretarial and
Administrative Services Agreement:
The Manager, receives a periodic fee equal to 0.30% per annum
of the Company’s market capitalisation up to £150 million,
0.20% per annum of the market capitalisation in excess of
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R e p o r t o f t h e D i r e c t o r s
2 3
Report of the Directors (continued)
Incorporating the Business Review
£150 million and up to £500 million, and 0.125% per annum of
the market capitalisation in excess of £500 million, plus a fixed
amount equal to £57,500 per annum.
The notice period on the Company Management, Company
Secretarial and Administration Agreement with Frostrow is
12 months, termination can be initiated by either party.
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.
•
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. (See page 1 for details of the benchmark).
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
ii) The cumulative out-performance of the
investment
portfolio over the benchmark as at the corresponding
quarter end date in the previous year.
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.
During the year performance fees totaling £643,000 crystallised
(year ended 31 March 2012: £909,000) in relation to maintained
outperformance of which £268,000 was payable at 31 March
2013 (see note 3 on page 48 for further details).
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
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 19 to 28. 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 45. 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 recognised 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 2013, the Company did not have any trade creditors
(2012: nil).
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2 4
R e p o r t o f t h e D i r e c t o r s
Report of the Directors (continued)
Incorporating the Business Review
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.
investment
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
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 investee companies.
I N D I V I D UA L S AV I N G S ACCO U N TS
The Company’s shares are eligible to be held in the stocks and
shares component of an ISA or Junior ISA, subject to applicable
annual subscription limits (£11,520 for an ISA and £3,600 for a
Junior ISA for the 2013/2014 tax year). Investments held in ISAs
or Junior ISAs will be free of UK tax on both capital gains and
income. The opportunity to invest in Ordinary Shares through
an ISA is restricted to certain UK resident individuals aged 18 or
over. Junior ISAs are available for UK resident children aged
under 18 and born before 1 September 2002 or after 2 January
2011. Sums received by a shareholder on a disposal of Ordinary
Shares held within an ISA or Junior ISA will not count towards
the shareholder’s annual limit. Individuals wishing to invest in
ISA should contact their
Ordinary Shares through an
professional advisers regarding their eligibility as should
individuals wishing to invest through a Junior ISA for children
under 18 years old.
D I R E C TO R S
The Directors of the Company, all of whom served throughout
the year, except as noted, are all non-executive and are listed
below. Their biographies can be found on page 18.
Sir Martin Smith (Chairman)
Sarah Bates (appointed on 22 May 2013)
Jo Dixon
Professor Duncan Geddes (retired on 17 July 2012)
Dr David Holbrook
Samuel D. Isaly
Doug McCutcheon (appointed on 7 November 2012)
Anthony Townsend
D I R E C TO R S’ I N T E R E S TS
The beneficial interests of the Directors and their families in the Company were as set out below:
Shares of 25p each
Subscription Shares
31 March 2013
1 April 2012
31 March 2013
1 April 2012
Sir Martin Smith
Sarah Bates (appointed 22 May 2013)
Jo Dixon
Dr David Holbrook
Samuel D. Isaly
Doug McCutcheon (appointed 7 November 2012)
Anthony Townsend
5,859
7,200
3,000
1,094
353,600
15,000
21,619
5,859
–
3,000
–
353,600
–
21,619
400
–
600
–
720
–
25,793
400
–
600
–
100,720
–
25,793
As at 6 June 2013 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 22 and 23. 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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R e p o r t o f t h e D i r e c t o r s
2 5
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 37 and 38.
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 Company during the year ended 31 March 2013. It is
intended that this policy will continue for the year ending
31 March 2014 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 by law,
in respect of certain liabilities incurred as a result of carrying out his
or her 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.
S U B S TA N T I A L S H A R E I N T E R E S TS
The Company was aware of the following substantial interests in the voting rights of the Company:
Beneficial
shareholder
Investec Wealth & Investment
Alliance Trust Savings
Smith & Williamson
Brewin Dolphin
Henderson Global Investors
Charles Stanley, Stockbrokers
Newton Investment Management
Speirs & Jeffrey, Stockbrokers
Legal & General Investment Management
30 April 2013*
31 March 2013
Number of
shares
4,315,131
2,401,636
2,069,159
2,020,827
1,944,188
1,820,180
1,728,842
1,507,516
1,446,387
% of issued
share capital
9.43
5.25
4.52
4.42
4.25
3.98
3.78
3.39
3.16
Number of
shares
4,216,604
2,370,495
2,113,833
2,058,011
2,149,188
1,783,132
1,764,947
1,537,031
1,446,387
% of issued
share capital
9.21
5.18
4.62
4.49
4.70
3.90
3.86
3.36
3.16
As at 31 March 2013 the Company had 45,434,746 shares in issue. As at 30 April 2013 the Company had 45,504,746 shares in issue.
*30 April being the latest practicable date before publication of the Annual Report.
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 Independent Auditors to the Company and a
resolution for their re-appointment will be proposed at the
forthcoming Annual General Meeting.
Ernst & Young LLP have been in post for over 18 years and the
Board, after consideration, has agreed that a tender process for
the post of Auditor to the Company should take place in early
2014. As part of its deliberations, the Board has noted that the
audit partners responsible for the audit are rotated at least every
five years, in accordance with professional and regulatory
standards, in order to protect independence and objectivity and
also to provide fresh challenge to the business, but the Board
still believes that the holding of a tender process is appropriate.
The results of the tender will be published in next year’s Annual
Report and Accounts and will be voted on by shareholders at
next year’s 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.
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R e p o r t o f t h e D i r e c t o r s
Report of the Directors (continued)
Incorporating the Business Review
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 52.
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 66.
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 30 to 35.
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 15 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 62 to 67 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 £1,145,323 (equivalent to
4,581,291 shares, or 10% of the Company’s existing issued share
capital on 6 June 2013, 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 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
issue to existing shareholders. Special
by a pro rata
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 6 June 2013 (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 11. 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
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R e p o r t o f t h e D i r e c t o r s
2 7
Report of the Directors (continued)
Incorporating the Business Review
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 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 6 June 2013 (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.
intend
to use
The Directors
the authority given by
Resolutions 10, 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.
Authority for the Company to purchase its own shares
The Company’s Articles of Association permit the purchase by
the Company of its own Ordinary and Subscription shares
subject to shareholders’ prior approval being obtained.
Resolutions 13 and 14, if passed, would authorise the Company
to buy back up to 6,867,356 Ordinary shares and 350,791
Subscription shares, which represents approximately 14.99% of
the Company’s issued ordinary share capital (excluding shares
held in treasury) and 14.99% of the Company’s Subscription
shares as at 6 June 2013 respectively. If given, these authorities
will expire at the conclusion of the next Annual General Meeting
of the Company after the passing of the resolution or, if earlier,
15 months from the date of the passing of the resolution. The
Directors intend to seek a renewal of such powers at each
Annual General Meeting.
only be made on the London Stock Exchange.
Any purchases of Ordinary shares will be made within
guidelines established from time to time by the Directors, but
they will only exercise the authority if, in their opinion, it would
be in the interests of the Company to do so and would result in
an increase in net asset value per Ordinary share for the
remaining shareholders and if it is in the best interests of
shareholders generally. Such purchases will only be made at
prices below the prevailing net asset value per Ordinary share
and within the price constraints set out in paragraphs (b) and (c)
of the resolution.
Under the Companies Act 2006, the Company is allowed to hold
its own Ordinary shares in treasury following a buy back, instead
of cancelling them. This gives the Company the ability to re-
issue treasury shares quickly and cost-effectively and provides
the Company with additional flexibility in the management of
its capital base. Shares held in treasury may be resold for cash
but all rights attaching to them including voting rights and any
right to receive dividends, are suspended while they are held in
treasury. If the Directors exercise the authority conferred by
resolution 13, the Company will have the option of either
holding in treasury or of cancelling any of its own shares
purchased pursuant to the authority and will decide at the time
of purchase which option to pursue. The Directors will have
regard to any guidelines issued by investor groups at the time of
any such purchase, holding or re-sale of treasury shares.
Purchases of Subscription shares will only be made through the
market at prices where the Directors believe such purchases will
enhance Ordinary shareholder value and within the price
constraints set out in paragraphs (b) and (c) of the resolution.
Any Subscription shares repurchased by the Company will be
cancelled and will not be held in treasury for reissue or resale.
General Meetings
Special Resolution 15 seeks shareholder approval for the
Company to hold General Meetings (other than Annual General
Meetings) at 14 clear days’ notice.
The authorities being sought under Resolutions 10, 11, 12, 13, 14
and 15 will last until the conclusion of the next Annual General
Meeting or, if less, a period of 15 months.
The resolutions specify the maximum and minimum prices at
which shares may be bought, reflecting the requirements of the
Companies Act 2006 and the Listing Rules. Any buy back would
Amendment to Articles of Association
It is proposed to make certain changes to the Company’s
Articles of Association in order to (i) take advantage of HM
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2 8
R e p o r t o f t h e D i r e c t o r s
Report of the Directors (continued)
Incorporating the Business Review
Recommendation
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 as the
Directors intend to do in respect of their own beneficial
holdings totaling 407,372 Shares.
By order of the Board
Frostrow Capital LLP
Company Secretary
6 June 2013
Government’s reform of the tax and company law rules
affecting investment trusts by removing the prohibition on
distributing capital profits, which the Company is no longer
required to include (the Board is, however, not currently
proposing any change to the Company’s dividend policy); (ii)
remove the upper limit of the Company’s share capital, which is
no longer required pursuant to the Companies Act 2006; (iii)
delete provisions that were formerly contained within the
Company’s memorandum of association; (iv) clarify the
procedure for dealing with Subscription Shares, once the
Subscription Share Rights attaching to them have lapsed; and
(v) make other technical amendments so that the Articles of
Association conform to the Companies Act 2006 and other
legislation applicable to companies in its current form and
current best practice. Accordingly, Special Resolution 16 will be
put to the Annual General Meeting to be held on 17 July 2013.
Details of the changes are set out on page 61 of this Annual
Report.
Subscription Shareholder Class Meeting
As the proposed amendments to the Company’s Articles of
Association vary the rights attached to the Subscription Shares,
the passing of Special Resolution 16 at the Annual General
Meeting is conditional on the approval of the Subscription
Shareholders in a separate class meeting. If adopted, the new
Articles of Association will not affect the rights attached to the
Ordinary Shares, and therefore a separate class meeting of the
Ordinary Shareholders is not necessary and will not be held.
Only Subscription Shareholders are entitled to attend and vote
at this class meeting. The notice of the Subscription Shareholder
class meeting, which will be held at 12.20pm on 17 July 2013 or
as soon as the Annual General Meeting of the Company
convened for 12 noon on the same day has concluded or been
adjourned, may be found on pages 68 and 69.
The quorum for the Class Meeting is not less than two persons
present (in person or by proxy) holding at least one-third of the
nominal amount paid up on the Subscription Shares in issue. If
a quorum is not present at the time and place for which the
class Meeting has been convened, the Class Meeting will be
adjourned until Monday, 29 July 2013 when one person holding
Subscription Shares (whatever the number of shares held) who
is present in person or by proxy will constitute a quorum.
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S t a t e m e n t o f D i r e c t o r s’ R e s p o n s i b i l i t i e s
2 9
Statement of Directors’ Responsibilities
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 page 18, 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 2013, 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 4.1.11R of the
FSAs Disclosure and Transparency Rules.
On behalf of the Board
Sir Martin Smith
Chairman
6 June 2013
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 judgments 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
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3 0
Co r p o ra t e G o ve r n a n ce
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 Association of Investment Companies (“AIC”) Code of
Corporate Governance (“AIC Code”) by reference to the AIC
Corporate Governance Guide for Investment Companies (“AIC
Guide”), both of which can be found on the AIC website
www.theaic.co.uk. The AIC Code, as explained by the AIC Guide,
addresses all the principles set out in the UK Corporate Governance
Code (the “UK Governance Code”) as well as setting out additional
principles and recommendations on issues that are of specific
relevance to the Company. The Board considers that reporting
against the principles and recommendations of the AIC Code, and
by reference to the AIC Guide (which incorporates the UK
Governance Code), provides better information to shareholders. A
copy of the UK Governance Code can be found at www.frc.org.uk.
The Board has noted the recommendations of the UK Corporate
Governance Code published in October 2012 (applicable for
financial years beginning after 1 October 2012) and will duly
report on these recommendations in the Company’s 2014
Annual Report.
The Board considers that it has managed its affairs throughout
the year ended 31 March 2013 in compliance with the
recommendations of the AIC Code and the relevant provisions
of the UK Governance Code, except as set out below:
•
•
•
•
the role of the chief executive;
executive directors’ remuneration;
the need for an internal audit function; and
the Chairman of the Company acting as Chairman of the
Management Engagement and Remuneration Committee.
For the reasons set out in the AIC Guide, and in the preamble to
the AIC Code, the Board considers the first three provisions
mentioned above are not relevant to the position of the
Company, being an externally managed investment trust. The
Company has therefore not reported further in respect of these
provisions. With regard to the Chairman of the Company acting
as the Chairman of the Management Engagement and
Remuneration Committee, the Board considers this to be
appropriate in light of the remit of the Committee. Further
details covering the Committee can be found on page 32.
In view of its non-executive nature, the Board considers that it is
not appropriate for the Directors to be appointed for a specified
term as recommended by provision B.7.1 of the UK Corporate
Governance Code and principle 3 of the AIC Code. The Board
has agreed that all Directors of the Company will seek
re-election annually. Mr Anthony Townsend, however, will not
be seeking re-election at this years’ Annual General Meeting.
I N T E R N A L AU D I T
As the Company delegates its day-to-day operations to third
parties 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
Sir Martin Smith as Chairman 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 page 18, demonstrate a breadth
of
investment, commercial and professional experience.
Mr Anthony Townsend 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. Mr Townsend will not be seeking re-election at
this year’s Annual General Meeting. He will be succeeded as the
Senior Independent Director by Jo Dixon. The Directors review
their independence annually.
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. Ms Jo Dixon and Mr Townsend have also
served on the Board for 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, believes that, with the exception
of Samuel D. Isaly, each of the Directors is independent in
character and judgment and that there are no relationships or
circumstances which are likely to effect their judgment. Sir Martin
Smith and Dr David Holbrook joined the Board in 2007 and are
both considered by the Board to be independent. The Board has
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Corporate Governance (continued)
Co r p o ra t e G o ve r n a n c e
3 1
considered the position of Ms Dixon, Sir Martin Smith, Mr Isaly 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. Mrs Sarah
Bates and Mr Doug McCutcheon were appointed directors with
effect from 22 May 2013 and 7 November 2012 respectively and
they will be seeking election at this year’s Annual General Meeting.
They are both considered to be independent by the Board. 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 issuance and 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.
BOARD EVALUATION
During the year under review, the performance of the Board,
Committees and individual Directors was evaluated through a
formal assessment process led by Mr Anthony Townsend, as the
Senior Independent Director. The review concluded that the
Board worked in a collegiate, efficient and effective manner. The
results of the external independent evaluation process,
conducted by Board Alpha, were presented to and discussed by
the Board in March 2012 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. It has been agreed that an external
independent evaluation of the Board will be held every three
years.
CO N F L I C T O F I N T E R E S T
It is 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
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3 2
Co r p o ra t e G o ve r n a n ce
Corporate Governance (continued)
Company’s interests (a “situational conflict”). The Company’s
Articles of Association have been amended 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 Chairman of the Company, Sir Martin Smith, and the Audit
Committee by Jo Dixon.
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
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 37 and 38.
in discussions
This committee also reviews the terms of engagement of the
Investment Manager, the Manager and the Company’s other
service providers.
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. The
membership of the Company’s committees comprises those
Directors considered
independent by the Board. The
Nominations Committee is chaired by Anthony Townsend, the
Management Engagement and Remuneration Committee by
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Corporate Governance (continued)
Co r p o ra t e G o ve r n a n c e
3 3
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 2012/13
Sir Martin Smith†
Sarah Bates (appointed on 22 May 2013)
Jo Dixon
Professor Duncan Geddes (retired on 17 July 2012)
Dr David Holbrook
Samuel D. Isaly*
Doug McCutcheon (appointed on 7 November 2012)
Anthony Townsend
Board
(4)
Audit
Committee
(2)
Nominations
Committee
(1)
Management
Engagement and
Remuneration
Committee
(1)
4
–
4
1
4
4
2
4
2
–
2
0
2
–
1
2
1
–
1
–
1
–
1
1
1
–
1
–
1
–
1
1
All of the serving Directors attended the Annual General Meeting held on 17 July 2012.
†Sir Martin Smith was appointed as a member of the Audit Committee on 17 July 2012.
*Mr Isaly is not a member of the Audit, Management Engagement & Remuneration and Nominations Committees.
AUDIT COMMITTEE
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 to be provided by the
auditor 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
£8,000 were paid to Ernst & Young LLP during the year for agreed
upon procedures in relation to the Company’s option positions,
performance fee review and tax services. 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 BRIBERY ACT 2010
The Board has adopted a zero tolerance approach to instances of
bribery and corruption. Accordingly it expressly prohibits any
Director or associated persons when acting on behalf of the
Company, from accepting, soliciting, paying, offering or promising
to pay or authorise any payment, public or private in the UK or
abroad to secure any improper benefit for themselves or for the
Company.
The Board applies the same Standards to its service providers in
their activities for the Company.
A copy of the Company’s Anti Bribery and Corruption Policy can
be found on its website at www.worldwidewh.com.
BOARD DIVERSITY
The Company welcomes the objectives of the Davies Report to
improve the performance of Corporate boards by encouraging the
appointment of the best people from a range of differing
perspectives and backgrounds. The Company recognises the
benefits of diversity on the board, including gender, and takes this
into account in its board appointments. The Company is committed
to ensuring that any Director search processes actively seek persons
with the right qualifications so that appointments can be made, on
the basis of merit, against objective criteria from a diverse selection
of candidates. To this end the Board will continue to dedicate time
to consider diversity during any director search process.
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Co r p o ra t e G o ve r n a n ce
Corporate Governance (continued)
INTERNAL CONTROLS
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
judgment 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:
•
•
•
information, compliance with
investment activity;
corporate strategy;
laws and
published
regulations;
•
•
service providers; and
financial activity.
The Company has appointed Frostrow Capital LLP to provide
Company management, Company secretarial and 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:
•
•
identification and evaluation of risks and control objectives;
details of the control environment in operation;
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•
•
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;
• 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.
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.
institutional
The Company has regular contact with
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
its
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Corporate Governance (continued)
Co r p o ra t e G o ve r n a n c e
3 5
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
below.
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.
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 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 29. The report of the
Auditors is set out on pages 39 and 40. The Board has delegated 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
hoc reports 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.
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3 6
S h a r e h o l d e r A n a l ys i s
Shareholder Analysis
% of shares held on 31 March
2 0 1 3
Retail Holders
(including private client,
Stockbrokers & the
Alliance Trust Savings
& ISA Clients)
65.7%
Institutional &
Corporate Holders
19.5%
Mutual Funds
(including Investment
Trusts)
14.8%
Retail Holders
(including private client,
Stockbrokers & the
Alliance Trust Savings
& ISA Clients)
60.6%
2 0 1 2
Institutional &
Corporate Holders
19.5%
Mutual Funds
(including Investment
Trusts)
19.9%
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D i r e c t o r s ’ R e m u n e r a t i o n R e p o r t
3 7
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.
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. Up until 31 March 2013 the Company’s policy was
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. With effect from 1 April 2013 Directors will be paid
monthly in arrears in accordance with new legislation by HMRC.
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 net 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 return for the year ended 31 March 2013
represented in the graph overleaf consists of a blended figure
containing both indices.
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 39 and 40.
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, six of whom
are considered by the Board to be independent. The whole
Board, with the exception of Mr Isaly, fulfills the function of the
Management Engagement and Remuneration Committee. 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 2013. The revised fee levels are set out on page 38.
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 and have a similar
investment objective. It is intended that this policy will continue
for the year ending 31 March 2014 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
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3 8
D i r e c t o r s ’ R e m u n e r a t i o n R e p o r t
Directors’ Remuneration Report (continued)
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 1 April 2013 Fees Fees
(unaudited) 2013 2012
£’000 £’000 £’000
Martin Smith (Chairman of the Board) 39.2 38.0 36.5
Sarah Bates (appointed 22 May 2013) 24.8 – –
Jo Dixon (Chairman of the Audit Committee) 27.9 27.0 26.0
Paul Gaunt (retired on 7 July 2011) – – 8.0
Professor Duncan Geddes (retired on 17 July 2012) – 7.0 23.5
Dr David Holbrook 24.8 24.0 23.0
Samuel D. Isaly 24.8 24.0 23.0
Doug McCutcheon (appointed on 7 November 2012) 24.8 10.0 –
Anthony Townsend (Senior Independent Director) 25.3 24.0 23.0
154.0 163.0
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 3
260
240
220
200
180
160
140
120
100
80
60
Mar
08
Mar
09
Worldwide Healthcare Share price
Mar
10
Rebased to 100 as at 31 March 2008
Source: Morningstar, Thomson Reuters and Bloomberg
Mar
11
Mar
12
Benchmark index
Mar
13
A P P R O V A L
The Directors’ Remuneration Report on pages 37 and 38 was approved by the Board of Directors on 6 June 2013 and signed on its
behalf by:
Sir Martin Smith
Chairman
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I n d e p e n d e n t A u d i t o r s ’ R e p o r t
3 9
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 2013 which
comprise the
Income Statement, the Reconciliation of
Movements in Shareholders’ Funds, the Balance Sheet, the 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 Directors’ Responsibilities
Statement set out on page 29, 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 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
In addition, we read all the financial and
statements.
non-financial information in the Annual Report 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 2013 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; and
• the information given in the Report of the Directors 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
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4 0
I n d e p e n d e n t A u d i t o r s ’ R e p o r t
Independent Auditors’ Report (continued)
• certain disclosures of Directors’ remuneration specified by
law are not made; or
• 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 page 23, in relation to
going concern;
• the parts of the Corporate Governance Statement relating
to the Company’s Compliance with the nine provisions of
the UK Corporate Governance Code specified for our
review; and
• certain elements of the report of the shareholders by the
Board on Directors’ remuneration.
Amarjit Singh (Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
6 June 2013
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Income Statement
for the year ended 31 March 2013
I n c o m e S t a t e m e n t
4 1
2013 2013 2013 2012 2012 2012
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 – 109,322 109,322 – 52,193 52,193
Exchange losses on currency balances – (2,322) (2,322) – (535) (535)
Income from investments held at fair value
through profit or loss 2 9,614 – 9,614 11,653 – 11,653
Investment management, management
and performance fees 3 (190) (2,284) (2,474) (162) (5,953) (6,115)
Other expenses 4 (595) – (595) (548) – (548)
Net return before
finance charges and taxation 8,829 104,716 113,545 10,943 45,705 56,648
Finance costs 5 (9) (177) (186) (14) (272) (286)
Net return before taxation 8,820 104,539 113,359 10,929 45,433 56,362
Taxation on net return on ordinary
activities 6 (1,171) 18 (1,153) (1,456) 406 (1,050)
Net return after taxation 7,649 104,557 112,206 9,473 45,839 55,312
Return per share – basic 7 17.1p 233.3p 250.4p 21.8p 105.7p 127.5p
Return per share – diluted 7 16.9p 231.1p 248.0p 21.4p 103.7p 125.1p
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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4 2
R e c o n c i l i a t i o n o f M o v e m e n t s i n S h a r e h o l d e r s ’ F u n d s
Reconciliation of Movements
in Shareholders’ Funds
For the year ended 31 March 2013
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 2012 10,997 71 186,300 174,230 7,068 13,131 391,797
Net return from ordinary activities
after taxation – – – 104,557 – 7,649 112,206
Dividend paid in respect of year
ended 31 March 2012 – – – – – (7,705) (7,705)
First interim dividend paid in respect
of year ended 31 March 2013 – – – – – (3,175) (3,175)
Subscription shares exercised for
ordinary shares 1,179 (47) 28,929 47 – – 30,108
Shares purchased to be held in treasury
and treasury shares cancelled (735) – – (19,239) 735 – (19,239)
Shares issued from treasury – – 8 415 – – 423
At 31 March 2013 11,441 24 215,237 260,010 7,803 9,900 504,415
For the year ended 31 March 2012
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 2011 10,875 82 181,395 135,319 6,978 10,132 344,781
Net return from ordinary activities
after taxation – – – 45,839 – 9,473 55,312
Dividend paid in respect of year
ended 31 March 2011 – – – – – (6,474) (6,474)
Subscription shares exercised for
ordinary shares 212 (9) 5,199 9 – – 5,411
Shares purchased to be held in treasury
and treasury shares cancelled (90) – – (6,939) 90 – (6,939)
Subscription shares repurchased for cancellation – (2) (294) 2 – – (294)
At 31 March 2012 10,997 71 186,300 174,230 7,068 13,131 391,797
The accompanying notes are an integral part of this statement.
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Balance Sheet
as at 31 March 2013
B a l a n c e S h e e t
4 3
2013 2012
Notes £’000 £’000
Fixed assets
Investments held at fair value through profit or loss 9 515,329 454,301
Derivative – OTC swaps 9 & 12 35,988 13,691
551,317 467,992
Current assets
Debtors 10 9,010 2,512
Derivative – financial instruments 9 & 12 2,442 940
11,452 3,452
Current liabilities
Creditors: amounts falling due within one year 11 (58,354) (79,647)
(58,354) (79,647)
Net current liabilities (46,902) (76,195)
Total net assets 504,415 391,797
Capital and reserves
Ordinary share capital 13 11,441 10,997
Subscription share capital 13 24 71
Share premium account 215,237 186,300
Capital reserve 19 260,010 174,230
Capital redemption reserve 7,803 7,068
Revenue reserve 9,900 13,131
Total shareholders’ funds 504,415 391,797
Net asset value per share – basic 14 1110.2p 909.4p
Net asset value per share – diluted for subscription shares 14 1089.6p 871.0p
Net asset value per share – fully diluted for subscription shares
and treasury shares 14 1089.1p 869.7p
The financial statements on pages 41 to 60 were approved by the Board of Directors and authorised for issue on 6 June 2013 and
were signed on its behalf by:
Sir 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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4 4
C a s h F l o w S t a t e m e n t
Cash Flow Statement
for the year ended 31 March 2013
2013 2012
Notes £’000 £’000
Net cash inflow from operating activities 15 4,202 4,112
Servicing of finance
Interest paid (186) (286)
Taxation
Taxation suffered (431) (422)
Financial investments
Purchases of investments and derivatives (349,759) (301,803)
Sales of investments and derivatives 381,024 288,756
Net cash inflow/(outflow) from financial investment 31,265 (13,047)
Equity dividends paid 8 (10,880) (6,474)
Net cash inflow/(outflow) before financing 23,970 (16,117)
Financing
Repurchase of own shares 13 (19,239) (7,233)
Issue of shares from treasury 13 423 –
Subscription shares exercised for ordinary shares 13 30,108 5,411
Net cash inflow/(outflow) from financing 11,292 (1,822)
Decrease/(increase) in net debt 16 35,262 (17,939)
The accompanying notes are an integral part of this statement.
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N o t e s t o t h e Fi n a n c i a l S t a t e m e n t s
4 5
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 are 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).
(c) Investment Income
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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4 6
N o t e s t o t h e Fi n a n c i a l S t a t e m e n t s
Notes to the Financial Statements (continued)
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 that 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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4 7
Notes to the Financial Statements (continued)
1 . ACCO U N T I N G P O L I C I E S (CO N T I N U E D)
(i) Derivative Financial Instruments
The Company uses derivative financial instruments (namely put and call options and equity swaps). The merits and rationale behind
such strategies are to enhance the capital return of the portfolio, facilitate management of 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’.
The equity swaps are accounted for as Fixed Assets in the Balance Sheet and Options are accounted for as Current Assets and/or
Current Liabilities in the Balance Sheet.
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; and
increases and decreases in the valuation of investments held at the year end.
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
Total income from investments held at fair value through profit or loss
Total income comprises:
Dividends
Interest
2013
£’000
507
8,124
977
9,608
6
9,614
8,631
983
9,614
2012
£’000
505
8,863
2,283
11,651
2
11,653
9,368
2,285
11,653
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4 8
N o t e s t o t h e Fi n a n c i a l S t a t e m e n t s
Notes to the Financial Statements (continued)
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
Performance fee (write back)/accrual
2013
Revenue
£’000
141
49
–
190
2013
Capital
£’000
2,674
943
(1,333)
2,284
2013
Total
£’000
2,815
992
(1,333)
2,474
2012
Revenue
£’000
119
43
–
162
2012
Capital
£’000
2,251
817
2,885
5,953
During the year, performance fees totaling £643,000 crystallised (year ended 31 March 2012: £909,000).
The fees crystallised at the following quarterly calculation dates:
30 June 2012
30 September 2012
31 December 2012
31 March 2013 (see note 11 on page 52)
Fees crystallised during year ended 31 March 2013
2012
Total
£’000
2,370
860
2,885
6,115
£’000
375
–
–
268
643
The performance fee amount of £1,333,000 which was written back as at 31 March 2013 represents outperformance generated as
at 31 March 2012 which was not maintained for the twelve month period. In accordance with the performance fee arrangements
this amount was written back as at 31 March 2013.
Further details of the performance fee basis can be found in the Report of the Directors on page 23 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 audit related assurance services
Marketing costs
Registrar fees
Broker retainer
Legal and professional costs
Printing
Stock exchange listing fees
Custody fees
Other costs
2013
Revenue
£’000
2012
Revenue
£’000
154
26
8
42
63
30
36
41
35
2
158
595
163
26
11
44
54
30
13
35
17
3
152
548
Details of the amounts paid to Directors are included in the Directors’ Remuneration Report on page 38.
5 . F I N A N C E C H A R G E S
Finance charges
2013
Revenue
£’000
9
2013
Capital
£’000
177
2013
Total
£’000
186
2012
Revenue
£’000
14
2012
Capital
£’000
272
2012
Total
£’000
286
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N o t e s t o t h e Fi n a n c i a l S t a t e m e n t s
4 9
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 24% (2012: 26%)
Tax relief to capital
Overseas taxation
2013
Revenue
£’000
2013
Capital
£’000
18
1,153
1,171
(18)
–
(18)
2013
Total
£’000
–
1,153
1,153
2012
Revenue
£’000
2012
Capital
£’000
406
1,050
1,456
(406)
–
(406)
2012
Total
£’000
–
1,050
1,050
(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 24% (2012: 26%).
The difference is explained below.
Total return before taxation
Corporation tax at 24% (2012: 26%)
Non-taxable gains on investments held at fair value
through profit or loss
Overseas withholding taxation
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
(c) Provision for deferred tax
2013
Revenue
£’000
8,820
2,117
2013
Capital
£’000
2013
Total
£’000
104,539
113,359
25,089
27,206
2012
Revenue
£’000
10,929
2,842
–
1,153
(1,977)
(122)
–
–
–
1,171
(25,680)
–
–
–
573
–
–
(25,680)
1,153
(1,977)
(122)
573
–
–
(18)
1,153
–
1,050
(2,535)
(131)
(6)
231
5
1,456
2012
Capital
£’000
45,433
11,813
(13,431)
–
–
–
1,212
–
–
2012
Total
£’000
56,362
14,655
(13,431)
1,050
(2,535)
(131)
1,206
231
5
(406)
1,050
As at 31 March 2013, the Company has not recognised a deferred tax asset of £9,146,000 (23% tax rate) (2012: £8,805,000 (24% tax
rate)) as a result of unutilised management expenses and a 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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5 0
N o t e s t o t h e Fi n a n c i a l S t a t e m e n t s
Notes to the Financial Statements (continued)
7 . R E T U R N P E R S H A R E
The return per share is based on the following figures:
Revenue return
Capital return
Total return
2013
£’000
7,649
104,557
112,206
2012
£’000
9,473
45,839
55,312
Weighted average number of ordinary shares in issue during the year – basic
44,819,199
43,362,962
Revenue return per share
Capital return per share
Total return per share – basic
17.1p
233.3p
250.4p
21.8p
105.7p
127.5p
Weighted average number of shares in issue during the year – diluted
45,243,785
44,223,263
Revenue return per share
Capital return per share
Total return per share – diluted
8 .
I N T E R I M D I V I D E N D
16.9p
231.1p
248.0p
21.4p
103.7p
125.1p
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 2013 were as follows:
Interim dividend in respect of the year ended 31 March 2011
Interim dividend in respect of the year ended 31 March 2012
First interim dividend in respect of the year ended 31 March 2013
2013
£’000
–
7,705
3,175
10,880
2012
£’000
6,474
–
–
6,474
In respect of the year ended 31 March 2013, an interim dividend of 7.0p per share was paid on 11 January 2013, with a second interim
dividend of 9.5p payable on 5 July 2013 the associated ex dividend date was 5 June 2013. The total dividends payable in respect of
the year ended 31 March 2013 is 16.5p per share (2012: 17.5p per share). The aggregate cost of the second interim dividend based
on the number of shares in issue at 5 June 2013 will be £4,352,000. In accordance with FRS 21 the second interim dividend will be
reflected in the interim accounts for the period ending 30 September 2013. 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
Interim dividend in respect of year ended 31 March 2012
First interim dividend in respect of the year ended 31 March 2013
Second interim dividend in respect of the year ended 31 March 2013*
*based on 45,812,914 shares in issue as at 5 June 2013.
Wo r l d w i d e H e a l t h c a r e Tr u s t P LC > A n n u a l R e p o r t 2 0 1 3
2013
£’000
7,649
–
(3,175)
(4,352)
122
2012
£’000
9,473
(7,740)
–
–
1,733
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N o t e s t o t h e Fi n a n c i a l S t a t e m e n t s
5 1
Notes to the Financial Statements (continued)
9 .
I N V E S T M E N TS
Cost at 1 April 2012
Investment holdings gains at 1 April 2012
Valuation at 1 April 2012
Movement in the year:
Purchases at cost
Sales – proceeds
– realised gains on sales
Net movement in investment holding gains
Valuation at 31 March 2013
Cost at 31 March 2013
Investment holding gains at 31 March 2013
Valuation at 31 March 2013
Gains on investment
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
Listed
investments
£’000
401,933
52,368
454,301
280,877
(318,815)
28,188
70,778
515,329
392,183
123,146
515,329
Derivative
financial
instruments
£’000
13,960
671
14,631
82,039
(68,596)
4,693
5,663
38,430
32,096
6,334
38,430
2013
£’000
32,881
(27,881)
5,000
104,322
109,322
Total
£’000
415,893
53,039
468,932
362,916
(387,411)
32,881
76,441
553,759
424,279
129,480
553,759
2012
£’000
33,733
(13,237)
20,496
31,697
52,193
Purchase transaction costs for the year to 31 March 2013 were £819,000 (year ended 31 March 2012: £575,000). These comprise
mainly commission and stamp duty.
Sales transaction costs for the year to 31 March 2013 were £733,000 (year ended 31 March 2012: £504,000). These comprise mainly
commission.
1 0 . D E BTO R S
Amounts due from brokers
Withholding taxation recoverable
VAT recoverable
Prepayments and accrued income
2013
£’000
6,641
1,378
66
925
9,010
2012
£’000
254
947
47
1,264
2,512
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5 2
N o t e s t o t h e Fi n a n c i a l S t a t e m e n t s
Notes to the Financial Statements (continued)
1 1 . C R E D I TO R S
Amounts falling due within one year
Amounts due to brokers
Stamp duty due on repurchase of own shares
Bank loan facility*
Performance fee accrued
Other creditors and accruals
2013
£’000
25,605
–
31,419
268
1,062
58,354
2012
£’000
12,448
5
64,359
1,976
859
79,647
*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 Funds effective rate plus 1 week
LIBOR-OIS Spread† plus 35 basis points. As at 31 March 2013, assets to the value of approximately 140% of the Company’s debt were
held by Goldman Sachs as collateral.
†See glossary on page 72
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 OTC equity swaps
Fair value of call and put options
See note 9 on page 51 for movements during the year.
1 3 . S H A R E C A P I TA L
Issued and fully paid
At 1 April 2012
Ordinary shares bought back and held in treasury
Ordinary shares re-issued from treasury
Treasury shares cancelled following 2012 AGM
Subscription shares converted to Ordinary shares
At 31 March 2013
Ordinary
shares
number
43,081,164
(2,411,340)
50,000
–
4,714,922
45,434,746
Treasury
shares
number
908,586
2,411,340
(50,000)
(2,941,518)
–
328,408
Issued and fully paid:
45,763,154 Ordinary shares of 25p (including 328,408 ordinary shares held in treasury)
2,389,926 Subscription shares of 1p
2013
£’000
35,988
2,442
38,430
Total
Ordinary
shares
in issue
number
43,989,750
–
–
(2,941,518)
4,714,922
45,763,154
2012
£’000
13,691
940
14,631
Total
Subscription
shares
in issue
number
7,104,848
–
–
–
(4,714,922)
2,389,926
£’000
11,441
24
During the year ended 31 March 2013 a total of 2,411,340 shares were bought back by the Company (2012: 908,586) at a cost of
£19,143,000 and expenses of £96,000 (2012: 6,908,000 and £31,000). 328,408 shares were held in treasury at 31 March 2013
(2012: 908,586). There were 50,000 shares issued from treasury raising proceeds of £423,000 (2012: nil). 4,714,922 new shares were
issued during the year as a result of holders of subscription shares exercising their subscription rights, raising £30,108,000 (2012:
848,139, raising £5,411,000). There were no subscription shares bought back for cancellation during the year (2012: 238,125 shares,
at a cost of £292,000 and expenses of £2,000).
At the year end there were 2,389,926 subscription shares in issue (2012: 7,104,848).
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5 3
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
2013
1,110.2p
1,089.6p
1,089.1p
2012
909.4p
871.0p
869.7p
The net asset value per share is based on the assets attributable to equity shareholders of £504,415,000 (2012: £391,797,000) and on
the number of shares in issue at the year end of 45,434,746 (excluding shares held in treasury) (2012: 43,081,164). As at 31 March
2013, there were 2,389,926 subscription shares in issue (2012: 7,104,848).
The net asset value per share diluted assumes all outstanding subscription shares were exercised at 699p resulting in assets
attributable to equity shareholders of £521,121,000 and on 47,824,672 shares (2012: assumed all outstanding subscription shares
were exercised at 638p resulting in assets attributable to shareholders of £437,126,000 and on 50,186,012 shares).
The net asset value per share fully diluted for subscription shares and treasury shares assumes that all outstanding subscription
shares were exercised at 699p and the treasury shares were sold back to the market at 1,009p resulting in assets attributable to
equity shareholders of £524,435,000 (2012: £444,349,000) and on 48,153,080 shares (2012: 51,094,598).
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 I N 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
Decrease in prepayments and accrued income
(Increase)/decrease in other debtors
Decrease in creditors and accruals
Net taxation suffered on investment income
Net cash inflow from operating activities
2013
£’000
113,545
(104,716)
8,829
(2,284)
339
(19)
(1,510)
(1,153)
4,202
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
2012
£’000
56,648
(45,705)
10,943
(5,953)
703
2
(533)
(1,050)
4,112
2012
£’000
(17,939)
(535)
(18,474)
(45,885)
(64,359)
2013
£’000
35,262
(2,322)
32,940
(64,359)
(31,419)
Decrease/(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
2012
£’000
(64,359)
Cash flows
£’000
35,262
Exchange
movements
£’000
At 31 March
2013
£’000
(2,322)
(31,419)
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5 4
N o t e s t o t h e Fi n a n c i a l S t a t e m e n t s
Notes to the Financial Statements (continued)
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, the Company’s Investment Manager, are disclosed in
the Report of the Directors on page 22. Samuel D. Isaly is a Director of the Company, as well as Managing Partner at OrbiMed Capital
LLC. During the year ended 31 March 2013, OrbiMed Capital LLC earned £2,815,000 in respect of Investment Management fees, of
which £807,000 was outstanding at the year end. In addition, performance fees of £341,000 were paid to OrbiMed Capital LLC
during the year and £244,000 was payable at 31 March 2013.
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 19 and 20. 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 20 to 22
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 pages 14 to 16.
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 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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5 5
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
2013
1.518
142.765
1.438
1.183
2012
1.598
131.487
1.444
1.120
Foreign currency exposure and sensitivity
The fair values of the Company’s monetary items that are denominated in foreign currency as at 31 March 2013 are shown below:
U.S. dollar
Swiss franc
Japanese yen
Euro
Hong Kong dollar
Singapore dollar
2013
Current
assets
£’000
2013
Current
liabilities
£’000
2013
Investments
£’000
2012
Current
assets
£’000
2012
Current
liabilities
£’000
2012
Investments
£’000
6,980
1,238
441
117
–
–
8,776
(56,689)
–
(545)
–
–
–
(57,234)
396,264
67,045
42,793
23,457
8,573
5,088
543,220
575
–
351
–
23
–
949
(74,797)
(596)
–
–
(128)
(647)
(76,168)
345,222
45,774
36,508
17,712
11,215
2,901
459,332
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 (2012: 10% increase and decrease), a 10% increase and decrease in sterling
against the Japanese yen (2012: 10% increase and decrease), and a 10% increase and decrease in sterling against the Swiss franc
(2012: 10% increase and decrease).
These percentages have been determined based on market volatility in exchange rates over the previous 12 months. The sensitivity
analysis is based on the Company’s foreign currency financial instruments held at each Balance Sheet date.
Sterling depreciates
Sterling appreciates
2013
USD
£’000
41,788
(32,259)
2013
YEN
£’000
4,831
(3,953)
2013
CHF
£’000
7,857
(6,207)
2012
USD
£’000
31,662
(25,906)
2012
YEN
£’000
4,102
(3,356)
2012
CHF
£’000
5,213
(4,265)
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N o t e s t o t h e Fi n a n c i a l S t a t e m e n t s
Notes to the Financial Statements (continued)
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 and fixed 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. £31.4 million was drawn down under this
facility at 31 March 2013. 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 2013 in respect of
cash was nil (2012: nil). At 31 March 2013 there was an overdraft position at Goldman Sachs of £31,419,000 (2012: £64,359,000).
Fixed rate
At 31 March, the Company held 2.7% of the portfolio in convertible bonds (2012: 3.3% of the portfolio). 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 (2012: 25% higher or lower) while all other variables remained constant, the revenue return would have
decreased/increased by £66,000 (2012: £49,000), and the capital return would have increased/decreased by £137,191,000
(2012: £116,168,000) and the return on equity would have increased/decreased by £137,125,000. 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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5 7
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 Funds effective rate plus 1 week LIBOR-OIS Spread† plus 35 basis points.
† See glossary on page 72.
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 2013, based on the earliest date on which payment can be required
are as follows:
31 March 2013
Current liabilities:
Borrowings under the loan facility
Amounts due to brokers and accruals
31 March 2012
Current liabilities:
Borrowings under the loan facility
Amounts due to brokers and accruals
3 months
or less
£’000
31,419
26,935
58,354
3 months
or less
£’000
64,359
15,288
79,647
2013
Not more than
one year
£’000
–
–
–
2012
Not more
than one year
£’000
–
–
–
Total
£’000
31,419
26,935
58,354
Total
£’000
64,359
15,288
79,647
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5 8
N o t e s t o t h e Fi n a n c i a l S t a t e m e n t s
Notes to the Financial Statements (continued)
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 2013, assets with a total market value of £50.1 million
(31 March 2012: £93.9 million) were held as collateral. In addition £4.5 million cash was held as collateral at Goldman Sachs (31 March
2012: £2.7 million).
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 72.
Credit risk exposure
Fixed interest and convertible securities
Derivative – OTC equity swaps
Current assets:
Other receivables (amounts due from brokers, dividends
and interest receivable and derivative financial instruments)
2013
Balance
Sheet
£’000
15,015
35,988
2012
Balance
Sheet
£’000
31,574
13,691
11,452
3,452
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5 9
Notes to the Financial Statements (continued)
18. FINANCIAL INSTRUMENTS’ EXPOSURE TO RISK AND RISK MANAGEMENT POLICIES (CONTINUED)
As of 31 March 2013
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
506,475
–
506,475
Level 2
£’000
8,854
38,430
47,284
Level 3
£’000
Total
£’000
–
–
–
515,329
38,430
553,759
As at 31 March 2013, the put and call options, the equity swaps, and Incyte Corporation 4.75% 01/10/15 convertible bond, have
been classified as level two. All of the remaining investments have been classified as level one.
As of 31 March 2012
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
454,301
–
454,301
Level 2
£’000
–
14,631
14,631
Level 3
£’000
Total
£’000
–
–
–
454,301
14,631
468,932
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 £120 million or 20% of the Company’s net assets.
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 43.
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6 0
N o t e s t o t h e Fi n a n c i a l S t a t e m e n t s
Notes to the Financial Statements (continued)
18. FINANCIAL INSTRUMENTS’ EXPOSURE TO RISK AND RISK MANAGEMENT POLICIES (CONTINUED)
Gearing for this purpose is defined as net debt as a percentage of shareholders’ funds. As at 31 March 2013 the gearing percentage
of the Company was 9.8% (2012: 16.4%).
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 2012
Transfer on disposal of investments
Net gains on investments
Expenses charged to capital less tax relief thereon
Subscription shares exercised
Shares issued from treasury
Shares purchased including expenses
Exchange loss on currency balances
At 31 March 2013
Capital Reserve –
Other
£’000
Capital Reserve* –
Investment
Holding Gains
£’000
121,191
27,881
5,000
(2,443)
47
415
(19,239)
(2,322)
130,530
53,039
(27,881)
104,322
–
–
–
–
–
129,480
Total
£’000
174,230
–
109,322
(2,443)
47
415
(19,239)
(2,322)
260,010
* Investment holding gains relate to the revaluation of investments held at the reporting date. (See note 9 on page 51 for further
details).
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E x p l a n a t o r y N o t e s o f P r i n c i p a l C h a n g e s t o t h e Co m p a ny ’s A r t i c l e s o f A s s o c i a t i o n
6 1
Explanatory Notes of Principal Changes to the
Company’s Articles of Association
Set out below is a summary of the main differences between the current and the proposed new Articles of Association
(the “Articles”). The principal changes in the new Articles to be adopted at the Annual General Meeting to be held on
17 July 2013 relate to:
Distribution of Capital Profits
The Company is no longer required to include a prohibition on distributing capital profits in its Articles, following
HM Government’s reform of the tax and company law rules affecting investment trusts. This prohibition has been
removed in the proposed new Articles. Please note that the Board is not currently proposing any change to the
Company’s dividend policy.
Authorised Share Capital
The Companies Act 2006 abolished the requirement for Companies to have an authorised share capital, with effect from
1 October 2009. The Company is therefore taking the opportunity to remove the upper limit of the Company’s share
capital included in its current Articles.
Deletion of Provisions Formerly in the Memorandum of Association
Most of the provisions of the memorandum of association of a company incorporated before 1 October 2009 are now
deemed to form part of its articles of association. Of these the Company is only required to retain in its articles the
statements that the liability of members is limited and that the company’s registered office is situated in England and
Wales. The Company is therefore taking this opportunity to remove from its Articles of Association all those provisions
formerly in its Memorandum of Association which it is not required to retain. In particular the clause setting out the
objects of the Company is to be removed so that the Company’s objects will in future be wholly unrestricted.
Subscription Shares
The Company is proposing to amend the provisions of the Articles that relate to the Subscription Shares issued in 2009.
The Directors understand that HM Revenue & Customs has recently indicated that where the Subscription Rights
attached to the Subscription Shares have lapsed such shares must remain admitted to trading on a regulated market.
While the Company already has authority to redeem or transfer such shares without further authorisation, the Board is
proposing an amendment to clarify the Articles so that on the date that the rights attaching to the Subscription Shares
lapse, such Subscription Shares will be converted into Deferred Shares and the Company may then transfer such
Deferred Shares to its nominee without making any payment to the holders thereof. Following the transfer of Deferred
Shares to its nominee, the Company may cancel and/or purchase the Deferred Shares without making any payment to
or obtaining the sanction of such nominee or any holder of Deferred Shares or for such consideration as the Directors
may determine. Following the cancellation or repurchase of such shares, they will cease to exist.
Other Changes
Other technical changes have been made so that the Articles of Association conform to the Companies Act 2006 and
other legislation applicable to companies, as currently in force and current best practice.
A copy of the current Articles and of the proposed new Articles marked up to show the proposed amendments will be
available for inspection at the offices of Frostrow Capital LLP during normal business hours and will be available for
inspection at the Annual General Meeting, in each case until conclusion of the meeting.
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6 2
N o t i ce o f A n n u a l G e n e ra l M e e t i n g
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of Worldwide Healthcare Trust PLC will be held at Carpenters’ Hall,
Throgmorton Avenue, London EC2W 2JJ on Wednesday, 17 July 2013 from 12 noon for the following purposes:
O R D I N A RY B U S I N E S S
To consider and, if thought fit, pass the following as ordinary resolutions:
1.
To receive and, if thought fit, to accept the Audited Accounts and the Report of the Directors for the year ended 31 March 2013
2.
3.
4.
5.
6.
7.
8.
9.
To re-elect Ms Jo Dixon 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 Sir Martin Smith as a Director of the Company
To elect Mrs Sarah Bates as a Director of the Company
To elect Mr Doug McCutcheon 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 2013
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, 14, 15 and 16 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 £1,145,323 (being 10%
of the issued share capital of the Company at 6 June 2013) and representing 4,581,291 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 2014 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 capital of 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
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
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6 3
Notice of Annual General Meeting (continued)
(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 £1,145,323, being 10% of the issued share capital of the Company as at
6 June 2013 and representing 4,581,291 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 capital of 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 £1,145,323 being 10% of
the issued share capital of the Company as at 6 June 2013 and representing 4,581,291 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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N o t i ce o f A n n u a l G e n e ra l M e e t i n g
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)
(b)
(c)
(d)
(e)
the maximum aggregate number of Shares authorised to be purchased is 6,867,356 (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);
the minimum price (exclusive of expenses) which may be paid for a Share is 25 pence;
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 and the highest then current independent bid 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 2014 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.
Authority to Repurchase Subscription Shares
14. 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
subscription shares of 1p each in the capital of the Company (“Subscription Shares”) for cancellation provided that:
(a)
(b)
(c)
(d)
(e)
the maximum aggregate number of Subscription Shares authorised to be purchased is 350,791 (representing approximately
14.99% of the issued Subscription Share capital of the Company at the date of the notice convening the meeting at which
this resolution is proposed;
the minimum price (exclusive of expenses) which may be paid for a Subscription Share is 1p;
the maximum price (exclusive of expenses) which may be paid for a Subscription Share is an amount equal to the greater
of (i) 105% of the average of the middle market quotations for a Subscription 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 Subscription Share
is purchased and (ii) the higher of the price of the last independent trade and the highest then current independent bid
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 2014 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 Subscription 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 Subscription Shares in pursuance of any such contract.
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6 5
Notice of Annual General Meeting (continued)
General Meetings
15. 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.
Adoption of New Articles of Association
16. THAT, subject to and conditional upon the passing of the special resolution set out in the notice dated 6 June 2013 convening
a meeting of the holders of the subscription shares of 1p each in the capital of the Company:
(i)
(ii)
the Articles of Association of the Company be and are hereby amended by deleting all the provisions of the Company’s
Memorandum of Association which, by virtue of section 28 Companies Act 2006, are to be treated as provisions of the
Company’s Articles of Association; and
the Articles of Association set out in the document produced to this meeting and signed by the Chairman of the meeting
for the purposes of identification be and are hereby approved and adopted as the Articles of Association of the Company
in substitution for and to the exclusion of the existing Articles of Association of the Company.
Full explanatory notes of principal changes to the Articles of Association are set out on page 61 of this Annual Report.
By order of the Board
Frostrow Capital LLP
Company Secretary
6 June 2013
Registered Office:
One Wood Street
London EC2V 7WS
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.
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 Monday, 15 July 2013.
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.
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N o t i ce o f A n n u a l G e n e ra l M e e t i n g
Notice of Annual General Meeting (continued)
7.
8.
9.
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 Monday, 15 July 2013 (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 6 June 2013 (being the last business day prior to the publication of this notice) the Company’s issued share capital consists of 45,812,914
ordinary shares, carrying one vote each. Therefore, the total voting rights in the Company as at 6 June 2013 are 45,812,914.
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.
14.
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.
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 page 65) then, subject to paragraph 4,
the proxy appointment will remain valid.
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.
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6 7
Notice of Annual General Meeting (continued)
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
Carpenters’ Hall, Throgmorton Avenue, London EC2V 2JJ
UNDERGROUND
MOORGATE
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L E AD ENH A L L S T R E E T
FENCHURCH STREET
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UPPER THAMES STREET
F E N C H U R C H
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EAST CHEAP
LOWER THAMES STREET
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N o t i ce o f S e p a ra t e M e e t i n g o f S u b s c r i p t i o n S h a r e h o l d e r s
Notice of Separate Meeting of Subscription
Shareholders
Notice is hereby given that a separate general meeting of holders of subscription shares of 1p each in the capital of the Company (the
“Subscription Shares”) will be held at Carpenters’ Hall, Throgmorton Avenue, London EC2W 2JJ on Wednesday, 17 July 2013 at
12.20 p.m. or as soon as the Annual General Meeting of the Company convened for 12 noon on the same day has concluded or been
adjourned, and if this separate class meeting is adjourned due to a lack of quorum notice is hereby given that any such adjourned
meeting shall be held on 29 July 2013 at 11.00 a.m. at 25 Southampton Buildings, London WC2A 1AL, for the purpose of considering
and, if though fit, passing the following resolution, which will be proposed as a special resolution namely:
Adoption of New Articles of Association
THAT the meeting of the holders of Subscription Shares hereby sanctions and consent to every alteration, modification, variation or
abrogation of the special rights, privileges and restrictions attaching to the Subscription Shares to be effected by the passing and
implementation of the special resolution of the Company numbered 16 in the notice of the Annual General Meeting of the Company
contained in the annual report and accounts of the Company dated 6 June 2013, a copy of which has been initialled by the chairman
of the meeting for the purpose of identification and produced to the meeting.
By order of the Board
Frostrow Capital LLP
Company Secretary
6 June 2013
Registered Office:
One Wood Street
London EC2V 7WS
Notes
1.
Only holders of Subscription Shares are entitled to attend and vote at the meeting. Holders of Ordinary Shares are not entitled to attend and
vote at the meeting unless they also hold Subscription Shares. A Subscription Shareholder may appoint one or more proxies to exercise all or
any of the rights of the Subscription Shareholder to attend and speak and vote in his place. A proxy need not be a member of the Company.
A Subscription Shareholder may appoint more than one proxy provided that each proxy is appointed to exercise the rights attached to a
different share or shares held by that member. If a Subscription Shareholder wishes to appoint more than one proxy and so requires additional
proxy forms, the shareholder should contact the Company’s Registrars, Capita Registrars.
2.
3.
4.
A form of proxy is enclosed for use by Subscription Shareholders. To be valid, the form of proxy and any power of attorney or other authority
(if any) under which it is signed (or a notarially certified copy thereof ) must be deposited with the Company’s Registrars, Capita Registrars or
(by hand during normal business hours only) to the same address not later than 12.20 a.m. on Monday, 15 July 2013 or, if the meeting
is adjourned, 48 hours before the time of the adjourned meeting. Alternatively, a proxy may be appointed online at
www.capitashareportal.com by that time. Completion and return of a form of proxy (including online) will not preclude a Subscription
Shareholder from attending and voting at the meeting if he or she wishes to do so.
The Company has specified that only those Subscription Shareholders entered on the register of members of the Company as at 5.30 p.m. on
15 July 2013 or, if the meeting is adjourned, on the register of members 48 hours before the time of the adjourned meeting shall be entitled
to attend and vote at the meeting in respect of the number of Subscription Shares registered in their name at that time. Changes to the register
of members after 5.30 p.m. on 15 July 2013 or, if the meeting is adjourned, after 48 hours before the time of the adjourned meeting will be
disregarded in determining the rights of any person to attend and vote at the meeting or adjourned meeting (as the case may be).
Any person receiving a copy of this Notice as a person nominated by a member to enjoy information rights under section 146 Companies Act
2006 (a Nominated Person) should note that the provisions in Notes 1 and 2 above concerning the appointment of a proxy or proxies to attend
the meeting in place of a member, do not apply to a Nominated Person, as only shareholders have the right to appoint a proxy. However, a
Nominated Person may have a right under an agreement between the Nominated Person and the member by whom he or she was nominated
to be appointed, or to 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 have a right under such an agreement to give instructions to the member as to the exercise of
voting rights at the meeting.
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6 9
Notice of Separate Meeting of Subscription
Shareholders (continued)
5.
6.
Terms used in this notice shall have the same meaning as in the annual report and accounts for the year ended 31 March 2013 unless
otherwise defined.
As at 6 June 2013 (the latest practicable date before the printing of this document) the Company’s total subscription share capital consisted
of 2,340,166 Subscription Shares of 1p each in the capital of the Company with voting rights for this meeting. On a poll, each Subscription
Shareholder shall be entitled to one vote for every subscription share held by them.
7.
Subscription Shareholders have the right to ask questions at the meeting in accordance with Section 319A of the Companies Act 2006.
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7 0
H o w t o I nve s t
How to Invest
Investment Platforms
The Company’s shares are traded openly on the London Stock Exchange and can be purchased through a stock broker or other
financial intermediary. The shares are available through savings plans (including Investment Dealing Accounts, ISAs, Junior ISAs and
SIPPs) which facilitate both regular monthly investments and lump sum investments in the Company’s shares. There are a number
of investment platforms that offer these facilities. A list of some of them, that is not comprehensive nor constitutes any form of
recommendation, can be found below:
Alliance Trust Savings
Barclays Stockbrokers
Club Finance
Fast Trade
FundsDirect
Halifax Share Dealing
Hargreaves Lansdown
HSBC
iDealing
IG Index
Interactive Investor
IWEB
James Brearley
Natwest Stockbrokers
Saga Share Direct
Selftrade
The Share Centre
Sippdeal
Saxo Capital Markets
TD Direct Investing
http://www.alliancetrustsavings.co.uk/
https://www.barclaysstockbrokers.co.uk/Pages/index.aspx
http://www.clubfinance.co.uk/
http://www.fastrade.co.uk/wps/portal
http://www.fundsdirect.co.uk/Default.asp
http://www.halifax.co.uk/Sharedealing/
http://www.hl.co.uk/
https://investments.hsbc.co.uk/
http://www.idealing.com/
http://www.igindex.co.uk/
http://www.iii.co.uk/
http://www.iweb-sharedealing.co.uk/share-dealing-home.asp
http://www.jbrearley.co.uk/Marketing/index.aspx
http://www.natweststockbrokers.com/nw/products-and-services/share-dealing.ashx
https://www.sagasharedirect.co.uk/
http://www.selftrade.co.uk/
https://www.share.com/
http://www.sippdeal.co.uk/
http://uk.saxomarkets.com/
http://www.tddirectinvesting.co.uk/
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 £21.00, max £125.00)
Telephone
1.5% of the value of the deal
(Minimum £28.50, max £175.00)
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 0364† (telephone dealing)
If calling from outside of the UK please dial +44 (0) 203 367 2686
† 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.
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How to Invest (continued)
H o w t o I nve s t
7 1
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
Conduct Authority and is also authorised to conduct cross-border business in the EEA under the provisions of the EU
Markets in Financial Investments Directive.
RISK WARNINGS
–
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 and Junior ISA tax advantages will depend on personal circumstances. The favourable tax treatment of ISAs and
Junior ISAs may not be maintained.
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7 2
G l o s s a r y
Glossary
sold by an investor. The share price is determined by the
relationship between the demand and supply of the shares.
NAV Total Return
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.
Ongoing Charges
Ongoing charges are calculated by taking the Company’s
annualised ongoing charges, excluding performance fees and
exceptional items, and dividing by the average month end net
asset value of the Company over the year.
The publishing of ongoing charges information rather than a
total expense ratio (TER) is advocated by the Association of
Investment Companies who believe that using a single
methodology to calculate ongoing charges will help reduce
inconsistencies and allow investors and advisers to compare
investment companies more easily with open-ended funds.
Overnight Indexed Swap (OIS)
An interest rate swap that serves as a measure of investor
expectations of an average effective overnight rate over the
term of the swap.
Rehypothecation
The pledging to banks by securities brokers of the assets in a
customer’s margin account used as collateral for a loan.
Total Assets
Total assets less current liabilities before deducting prior
charges. Prior charges include all loans for investment purposes.
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. Such shares are not capable
of being voted and carry no rights to dividends.
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.
Discount or Premium
A description of the difference between the share price and the
net asset value per share. The size of the discount or premium is
calculated by subtracting the share price from the net asset
value per share and is usually expressed as a percentage (%) of
the net asset value per share. If the share price is higher than the
net asset value per share the result is a premium. If the share
price is lower than the net asset value per share, the shares are
trading at a discount.
Gearing
Calculated using the Association of Investment Companies
definition.
Total assets, less current liabilities (before deducting any prior
charges) minus cash/cash equivalents divided by Shareholders’
funds, expressed as a percentage.
For years prior to 2013, the calculation was based on prior
charges as a percentage of average net assets.
LIBOR-OIS Spread
This is the difference between LIBOR and the Overnight Indexed
Swap (OIS) rates. The spread between the two rates is considered
to be a measurement of health of the banking system.
London Interbank Offered Rate (LIBOR)
The interest rate at which banks can borrow unsecured funds
from other banks in London wholesale money markets, as
measured by daily surveys of the British Bankers’ Association.
The published rate is a trimmed average of the rates obtained in
the survey.
NAV per share (pence)
The value of the Company’s assets, principally investments
made in other companies and cash being held, minus any
liabilities. The NAV is also described as ‘shareholders’ funds’ per
share. The NAV is often expressed in pence per share after being
divided by the number of shares which have been issued. The
NAV per share is unlikely to be the same as the share price which
is the price at which the Company’s shares can be bought or
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Co m p a ny I n f o r m a t i o n
7 3
Company Information
D I R E C TO R S
Sir Martin Smith (Chairman)
Sarah Bates
Jo Dixon
Dr David Holbrook
Samuel D. Isaly
Doug McCutcheon
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
incorporated as
14 February 1995. The Company was
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
601 Lexington Avenue, 54th Floor
New York NY 10022
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 Conduct 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.
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
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
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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228467 Finsbury WWH Cover 18/06/2013 07:19 Page 1
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 O R T H E YE A R E N D E D 3 1 MA R C H 2 0 1 3
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The Company is a member of the Association of Investment Companies.
Worldwide Healthcare Trust PLC
25 Southampton Buildings, London WC2A 1AL
www.worldwidewh.com
228467 Finsbury WWH Cover 18/06/2013 07:19 Page 2
CO N T E N TS
ANNUAL REPORT
Financial Highlights
1
Chairman’s Statement
2-3
OrbiMed Capital LLC - Investment Manager
4
Review of Investments
5-10
Historic Performance
11
Champions of Innovation
12-13
Portfolio
14-16
Analysis of the Portfolio
17
Your Board
18
REPORT OF THE DIRECTORS AND FINANCIAL STATEMENTS
Report of the Directors
(Incorporating the Business Review)
Statement of Directors’ Responsibilities
Corporate Governance
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
GENERAL INFORMATION
Explanatory Notes of the Principal Changes to
the Company’s Articles of Association
Notice of Annual General Meeting
Notice of Separate Meeting of Subscription
Shareholders
How to Invest
Glossary
Company Information
19-28
29
30-35
36
37-38
39-40
41
42
43
44
45-60
61
62-67
68-69
70-71
72
73
ACC E S S I N G T H E G LO B A L MA R K E T
The healthcare sector is a global one and accessing this global
market as a UK investor can be difficult. Within the UK, there are
diminishing options for investment as the universe of
healthcare companies is shrinking through mergers and
acquisitions. Worldwide Healthcare Trust PLC offers an
opportunity
to pharmaceutical,
biotechnology and related companies in the healthcare sector
on a global scale.
to gain exposure
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 in the global
healthcare sector with the objective of achieving a high level
of capital growth. In order to achieve its investment objective,
the Company invests worldwide in a diversified portfolio of
shares in pharmaceutical and biotechnology companies and
related securities in the healthcare sector. It uses gearing and
derivative transactions to mitigate risk and also to enhance
returns. Performance is measured against the MSCI World
Health Care Index on a net total return, sterling adjusted basis.
Further details of the Company’s investment policy are set out
in the Report of the Directors beginning on page 19.
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
further
opportunities to vote on the continuation of the Company
shall be given to shareholders every five years thereafter.
in 2014, and
F I N A N C I A L C A L E N DA R
Financial Year End
Financial Results Announced
Half Year End
Half Year Results Announced
Interim Management
Statements Announced
Dividends payable
2013 Annual General Meeting
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 31 March 2013 £31.4m was
drawn down from this facility.
31 March
June
30 September
November
February/August
January/July
I S A S TAT U S
Wednesday, 17 July
to be held at,
the Carpenters’ Hall
Throgmorton Avenue, London
EC2N 2JJ
The Company’s shares are eligible for inclusion in Individual
Savings Accounts (‘ISAs’) and for Junior
ISAs. Further
information on how to invest in the Company can be found
beginning on page 70.
W E B S I T E
The Company’s internet address is www.worldwidewh.com
This report is printed on Revive Pure White Silk a totally recycled paper produced using 100% recycled
waste at a mill that has been awarded the ISO 14001 certificate for environmental management.
The pulp is bleached using a totally chlorine free (TCF) process.
Perivan Financial Print 228467