Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
235876 Finsbury WWH Cover spread 03/07/2015 13:56 Page 1
Disability Act
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.
A member of the Association of Investment Companies
This report is printed on Amadeus 100% 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.
This report has been produced using vegetable based inks.
Worldwide Healthcare Trust PLC
25 Southampton Buildings, London WC2A 1AL
www.worldwidewh.com
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235876 Finsbury WWH Cover spread 03/07/2015 13:56 Page 86
Worldwide Healthcare Trust PLC
Investment Objective and Policy
Worldwide Healthcare Trust PLC is a specialist investment trust that 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 enhance returns and mitigate risk. Performance is measured against
the MSCI World Health Care Index on a net total return, sterling adjusted basis (Benchmark). Further details of the
Company’s investment policy are set out in the Strategic Report on pages 6 and 7.
Accessing the Global Market
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 merger and acquisition
activity. The Company offers an opportunity to gain exposure to pharmaceutical, biotechnology and related companies in the
healthcare sector on a global scale.
Among healthcare funds, Worldwide Healthcare Trust PLC is unique due to its broad investment mandate to participate in all
aspects of healthcare, anywhere in the world. These may include patented specialty medicines for small patient populations
and unpatented generic drugs, in both developed countries and emerging markets. In addition, the Company invests in
medical device technologies, life science tools and healthcare services. The overall geographic spread of Worldwide
Healthcare Trust PLC is also unique among healthcare funds with investments in the U.S., Europe, Japan and emerging
markets.
How to invest
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 number of investment platforms that offer these facilities. Further details can be found on pages 72 and 73.
Performance since launch to 31 March 2015
%
3000
2500
2000
1500
1000
500
0
A pr 95
M ar 96
M ar 97
M ar 98
M ar 99
M ar 00
M ar 01
M ar 02
M ar 03
M ar 04
M ar 05
M ar 06
M ar 07
M ar 08
M ar 09
M ar 10
M ar 11
M ar 12
M ar 13
M ar 14
M ar 15
WWH Net Asset Value (total return)
WWH Share Price (total return)
Benchmark (total return)*
*
Rebased to 100 as at 28 April 1995
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).
Company Information
Directors
Sir Martin Smith (Chairman)
Sarah Bates
Jo Dixon
Dr David Holbrook
Samuel D. Isaly
Doug McCutcheon
Company Registration Number
3023689 (Registered in England)
The Company is an investment company as defined under
Section 833 of the Companies Act 2006
The Company was incorporated in England and Wales on
14 February 1995. The Company was incorporated as
Finsbury Worldwide Pharmaceutical Trust PLC.
Website
Website: www.worldwidewh.com
Registered Office
One Wood Street
London EC2V 7WS
Alternative Investment Fund Manager,
Company Secretary and Administrator
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.
Portfolio Manager
OrbiMed Capital LLC
601 Lexington Avenue, 54th Floor
New York NY 10022
Website: www.orbimed.com
Registered under the U.S. Securities & Exchange Commission
Depositary
J.P. Morgan Europe Limited
25 Bank Street
London E14 5JP
Auditors
PricewaterhouseCoopers LLP
More London Riverside
London SE1 2RT
Prime Broker
J.P. Morgan Clearing Corp
Suite 1, Metro Tech Roadway
Brooklyn, NY 11201
USA
Registrars
Capita Asset Services
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: shareholderenquiries@capita.co.uk
Website: www.capitaassetservices.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.
Stockbroker
Winterflood Securities Limited
The Atrium Building
Cannon Bridge, 25 Dowgate Hill
London EC4R 2GA
Share Price Listings
The price of your 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.
Identification Codes
Shares: SEDOL : 0338530
ISIN : GB0003385308
BLOOMBERG : WWH LN
EPIC : WWH
Foreign Account Tax Compliance Act (“FATCA)
IRS Registration Number (GIIN) : FIZWRN.99999.SL.826
Annual Report for the year ended 31 March 2015 86
Worldwide Healthcare Trust PLC
235876 Finsbury WWH pp01-pp22new 03/07/2015 12:31 Page 1
1Strategic Report
Company Performance
Chairman’s Statement
Investment Objective and Policy
1-2
3-5
6-7
8-10 Portfolio
11
OrbiMed Capital LLC
12-14 Portfolio Manager’s Review
14
Contribution by Investment
15-17 Portfolio Focus
18-22 Business Review
2Governance
Statement of Directors’ Responsibilities
23-24 Board of Directors
25-28 Report of the Directors
29
30-37 Corporate Governance
38-39 Audit Committee Report
40-41 Directors’ Remuneration Report
42-47 Independent Auditors’ Report
3Financial Statements
4Further Information
48
49
Income Statement
Reconciliation of Movements in
Shareholders’ Funds
Balance Sheet
Cash Flow Statement
50
51
52-68 Notes to the Financial Statements
Shareholder Information
69
70-71 Glossary of Terms
72-73 How to Invest
74-78 Notice of Annual General Meeting
79-80 Explanatory Notes to the Resolutions
81
Explanatory Notes of the Principal
Changes to the Company’s
Articles of Association
82-85 AIFMD Related Disclosures
Company Information
86
Keep up to date with
Worldwide Healthcare Trust PLC
For more information about
Worldwide Healthcare Trust PLC
visit the website at
www.worldwidewh.com
Follow us on Twitter
@worldwidewh
Winner:
Best Sector Specialist Investment Trust –
What Investment Trust Awards 2014
Highly Commended:
Money Observer Trust Awards 2014 and 2015,
Category:
Best Large Trust
235876 Finsbury WWH pp01-pp22new 03/07/2015 12:31 Page 01
1
Strategic Report
Company Performance
As at As at
31 March 31 March %
2015 2014 Change
Ordinary share price 1930.0p 1301.0p 48.3%
Net asset value per share – basic 2039.3p 1374.3p 48.4%
Net asset value per share – diluted† 2039.3p 1348.2p 51.3%
Discount of ordinary share price to the diluted
net asset value per share 5.4% 3.5% n/a
Year ended Year ended
31 March 31 March
2015 2014
Ordinary share price (total return)* 49.8% 30.8%
Net asset value per share – (total return)* 53.0% 25.9%
Benchmark (total return)* 35.9% 14.9%
Dividends per ordinary share 12.5p 15.0p
†
*
The Company’s Subscription Shares were allotted on 4 September 2009 and expired on 31 July 2014. See page 25 for further information.
Source – Morningstar.
Total Return Performance for the year to 31 March 2015
%
160
150
140
130
120
110
100
90
80
M ar 14
A pr 14
M ay 14
Jun 14
Jul 14
A u g 14
Se p 14
O ct 14
N ov 14
D ec 14
Jan 15
Fe b 15
M ar 15
WWH Net Asset Value (total return)
WWH Share Price (total return)
Benchmark (total return)
Rebased to 100 as at 31 March 2014
Source: Morningstar, Thomson Reuters & Bloomberg
01 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
235876 Finsbury WWH pp01-pp22new 03/07/2015 12:31 Page 02
Historic Performance for the years ended 31 March
2010 2011 2012 2013 2014 2015
Net asset value per share (total return)* 25.9% 4.0% 14.4% 30.3% 25.9% 53.0%
Benchmark^ (total return)* 24.6% 2.5% 13.4% 31.4% 14.9% 35.9%
Net asset value per share – basic 780.8p 799.2p 909.4p 1110.2p 1374.3p 2039.3p
Net asset value per share – diluted** 752.7p 773.5p 871.0p 1089.6p 1348.2p 2039.3p
Ordinary share price 701.5p 686.0p 795.0p 1009.0p 1301.0p 1930.0p
Discount of share price to diluted net
asset value per share 6.8% 11.3% 8.7% 7.4% 3.5% 5.4%
Dividends per ordinary share 8.5p 15.0p 17.5p 16.5p 15.0p 12.5p
Gearing† 10.4% 13.3% 16.4% 9.8% 12.0% 11.2%
Ongoing charges† 1.0% 1.0% 1.1% 1.0% 1.0% 1.0%
Ongoing charges (including performance fees
paid or crystallised during the year)† 1.0% 1.8% 1.3% 1.2% 1.1% 2.2%
*Source: Morningstar.
^See below for further information regarding the Company’s Benchmark.
**The Company’s Subscription Shares were allotted on 4 September 2009 and expired on 31 July 2014. See page 25 for further information.
†See pages 7 and 19 and also the Glossary beginning on page 70.
Five Year Performance to 31 March 2015
%
320
300
280
260
240
220
200
180
160
140
120
100
80
M ar 10
M ar 11
M ar 12
M ar 13
M ar 14
M ar 15
WWH Share Price (total return)
WWH Net Asset Value (total return)
Benchmark (total return)*
*
Rebased to 100 as at 31 March 2010
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).
Annual Report for the year ended 31 March 2015 02
Worldwide Healthcare Trust PLC
235876 Finsbury WWH pp01-pp22new 03/07/2015 12:31 Page 03
1
Strategic Report
Chairman’s Statement
Sir Martin Smith
“I am delighted to report that your Company
has continued to perform strongly both in
absolute terms and also compared to its
Benchmark.”
Review of the Year and Performance
I am delighted to report that your Company has continued to
perform strongly both in absolute terms and also compared
to the Benchmark. The Company’s net asset value per share
total return was 53.0% and the share price total return was
49.8%, both significantly outperforming the Company’s
benchmark, the MSCI World Health Care Index on a net total
return, sterling adjusted basis, which rose by 35.9%. At
31 March 2015 the discount of share price to the Company’s
net asset value per share stood at 5.4% compared to 3.5% a
year ago.
The positive contributions to performance were varied
reflecting the strong fundamentals of the healthcare sector.
The Company benefitted in particular from strong
performance from U.S. based specialty pharmaceutical
company Actavis, biotechnology companies Medivation,
Intermune and Regeneron, and healthcare provider HCA. The
principal detractor from performance was medical device
company Insulet, following the identification of certain
reporting irregularities.
The Company was, on average, 12% (2014: 14%) geared
during the year which again proved to be beneficial. This
enabled the Company to take advantage of strong market
performance and contributed c.3.7% (2014: 2.5%) to the
Company’s performance. In addition, the Company’s
derivative strategy also contributed c.3.7% (2014: 2.0%) to
returns.
Further information on the Company’s investments can be
found in the Portfolio Manager’s Review beginning on page 12
of this Annual Report.
On 28 April 2015 the Company celebrated a significant
milestone, its twentieth birthday! Over its twenty year life the
total return of the Company’s net asset value per share has
been 2,103.8%, equivalent to a compound annual return of
16.5%. This compares to a cumulative “blended” benchmark*
return of 947.7%, equivalent to a compound annual return of
11.9% over the same period. On behalf of the Board and
shareholders I would like to pay tribute to and congratulate
OrbiMed on the excellent returns they have generated over
this period.
*See inside front cover for further information
03 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
Shareholders have benefited from having OrbiMed as our
Portfolio Manager. They are the world’s largest specialist
healthcare fund manager with an exceptional performance
record and an experienced team of over 80 people that has
expertise in all healthcare sub-sectors across a wide range
of geographies.
Performance Fee
The continued strong performance of the Company when
compared to the Benchmark has given rise to performance
fees payable during the year ended 31 March 2015 of £8.8m
(shared between Frostrow and OrbiMed as set out on
page 27). I remind shareholders that under the provisions of
our performance fee arrangements, actual performance is
compared to the benchmark return since the launch of the
Company in 1995 and only when incremental outperformance
has been generated does a performance fee become payable.
To prevent a fee being paid with respect to a ‘spike’ in
performance, due to the volatile nature of the sector, a fee is
only paid once the outperformance has been maintained for a
12 month period.
In addition to the payments referred to above, a further
provision has been made as at 31 March 2015 which relates
to outperformance generated at that date but which will only
become payable at future performance fee calculation dates
in the event that the outperformance is maintained. This total
provision amounts to £16.7m and reflects not only the
significant outperformance achieved during the year but also
the sustained outperformance since the beginning of 2013.
Capital
The Company’s subscription shares expired on 31 July 2014
and a total of 1,860,969 new shares were issued as a result of
holders of subscription shares exercising their subscription
rights. As part of the Board’s discount control management
policy, a total of 723,427 ordinary shares were repurchased by
the Company during the year up until the date of this report,
to be held in treasury, at an average discount of 6.9% to the
prevailing diluted ex income net asset value per share.
318,596 of these shares were, however, reissued from
treasury at share prices that equated to an average discount
2.5% to the prevailing diluted cum income net asset value per
share. There are currently 404,831 shares held in treasury.
235876 Finsbury WWH pp01-pp22new 03/07/2015 12:31 Page 04
Shareholder approval to renew the authority to buy-back
ordinary 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.
Any ordinary shares held in treasury on 24 September 2015,
the date of this year’s Annual General Meeting, will be
cancelled.
25,000 new ordinary shares were also issued during the year
at a 0.7% premium to the prevailing cum income net asset
value per share at the time of issue to satisfy demand in the
market.
Revenue and Dividend
Shareholders will be aware that it remains the Company’s
policy to pursue capital growth for shareholders and to pay
dividends to the extent required to maintain investment trust
status and therefore the level of dividends declared can go
down as well as up. A first interim dividend of 6.0p per share,
for the year ended 31 March 2015, was paid on 9 January
2015 to ordinary shareholders on the register on 5 December
2014. The Company’s net revenue return for the year as a
whole has fallen slightly to £6.2 million (2014: £7.2 million).
In order to maintain investment trust status, the Board has
declared a second interim dividend of 6.5p per share which,
together with the first interim dividend already paid, makes a
total dividend for the year of 12.5p (2014: 15.0p per share).
Based on the current mid-market share price of 1897p as on
23 June 2015, the total dividend payment for the year
represents a current yield of 0.7%.
The second interim dividend will be payable on 14 July 2015
to ordinary shareholders on the register of members on
12 June 2015. The associated ex-dividend date was
11 June 2015.
Alternative Investment Fund Managers
Directive and Service Providers
During the year the Alternative Investment Fund Managers
Directive (‘AIFMD’) took effect and your Board made a
number of changes to its service provider arrangements in
order to achieve compliance with this regulation. I am
pleased to report that Frostrow Capital LLP successfully
varied its permissions with the FCA in order to take on the
role of ‘Alternative Investment Fund Manager’. Under the
provisions of the AIFMD Frostrow has delegated the portfolio
management function to OrbiMed Capital LLC. The fees
payable to both Frostrow and OrbiMed have remained
unchanged and your Board is delighted that compliance with
the new regulations has been achieved.
Until July 2014 the Company employed Goldman Sachs as its
Custodian and Prime Broker. In order to comply with the
AIFMD the Company was required to appoint a Depositary
which was a service that Goldman Sachs were not able to
offer the Company. I would like to thank Goldman Sachs for
the excellent service they provided to the Company over their
tenure. I am pleased to report that the Board have appointed
JP Morgan as its Depositary and Prime Broker and that these
arrangements are working well.
Achieving compliance with the AIFMD has been a significant
piece of work not only for the Board but also for our service
providers. I would like to thank my Board colleagues for the
significant contribution they made during the year, in
particular Jo Dixon our Audit Committee Chairman.
Proposed Changes to the Company’s
Articles of Association
It is proposed that the Company adopts new Articles of
Association to enable it, inter alia, to comply with its
obligations under various international tax regulations. A
Special Resolution will be proposed at the Annual General
Meeting which will, if approved, ratify the adoption of new
amended Articles of Association. The material differences
between the current and the proposed amended Articles of
Association are summarised on page 81 of the Annual
Report.
Investment Policy
Shareholder approval to amend the Company’s Investment
Policy was obtained at a General Meeting of the Company
held in April 2015. The Company’s borrowing policy,
contained within the old Investment Policy, limited the
Company’s borrowing to the lower of £120 million or 20% of
the Company’s net asset value. Given the significant growth
in the Company, the monetary limit was potentially restrictive
Annual Report for the year ended 31 March 2015 04
Worldwide Healthcare Trust PLC
235876 Finsbury WWH pp01-pp22new 03/07/2015 12:31 Page 05
1
Strategic Report
Chairman’s Statement
continued
Annual General Meeting
The Company offers the U.K. based investor an excellent
opportunity to gain exposure to the global healthcare sector,
and the Board is pleased to note the increasing presence of
retail shareholders on the Company’s share register. The
Board is keen to welcome all shareholders and the
Company’s Annual General Meeting offers an opportunity to
meet the Directors and also to hear the views of our Portfolio
Manager. This year, the Annual General Meeting of the
Company will be held at Skinners’ Hall, 8 Dowgate Hill,
London EC4R 2SP on Thursday, 24 September 2015 at
12 noon, and we hope as many shareholders as possible will
attend.
Sir Martin Smith
Chairman
24 June 2015
to the Company’s ability to deploy borrowing effectively. The
Directors therefore sought and obtained shareholder
approval to delete the monetary amount such that the
Company’s borrowing limit is now set simply at a maximum
of 20% of the Company’s net asset value.
In addition, the Company’s ability to invest in certain
healthcare sectors was limited to 15% of the portfolio, at the
time of acquisition. This limit was also considered to be
restrictive given the opportunities available in the global
healthcare market and has been increased to 20% of the
portfolio, at the time of acquisition.
The Company’s Investment Policy can be found on pages 6
and 7 of this Annual Report.
Outlook
Following a sustained period of outperformance from the
healthcare sector, our Portfolio Manager continues to believe
in the sector’s strong fundamentals namely: continued
merger and acquisition activity; new product launches;
strong product pipelines; and the net positive impact of the
Affordable Care Act in the U.S.
Our Portfolio Manager’s focus continues to be on the
selection of stocks with strong prospects and your Board
reiterates its belief that the long-term investor in the sector
will be well rewarded.
05 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
235876 Finsbury WWH pp01-pp22new 03/07/2015 12:31 Page 06
Investment Objective and Policy
The Company 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
enhance returns and mitigate risk. Performance is measured against the MSCI World Health Care Index on a net total return,
sterling adjusted basis (Benchmark).
Investment Strategy
The implementation of the Company’s Investment Objective
has been delegated to OrbiMed by Frostrow (as AIFM) under
the Board’s and Frostrow’s supervision and guidance.
Details of OrbiMed’s investment strategy and approach are
set out in the Portfolio Manager’s review on pages 12 to 14.
While performance is measured against the Company’s
Benchmark, Frostrow and OrbiMed have been given the
ability to manage the portfolio without regard to the
Benchmark and its make-up.
While the Board’s strategy is to allow flexibility in managing
the investments, in order to manage investment risk it has
imposed various investment, gearing and derivative
guidelines and limits, within which Frostrow and OrbiMed are
required to manage the investments, as set out below.
Any material changes to the Investment Objective, Policy and
Benchmark or the investment, gearing and derivative
guidelines and limits require approval from shareholders.
Investment limits and guidelines
• 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 royalty bonds issued by pharmaceutical
and biotechnology companies;
• A maximum of 20% of the portfolio, at the time of
acquisition, may be invested in companies in each of the
following sectors:
– healthcare equipment and supplies
– healthcare technology
– healthcare providers and services.
Derivative strategy and limits
In line with the Investment Objective, derivatives are
employed, when appropriate, in an effort to enhance returns
and to improve the risk-return profile of the Company’s
portfolio. There are two types of derivatives currently
employed within the portfolio: Options and Equity Swaps;
The Board has set the following limits within which derivative
exposures are managed:
• Derivative transactions (excluding equity swaps) can be
used to mitigate risk and/or enhance capital returns and
will be restricted to a net exposure of 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 counterparty exposure through these is
restricted to 8% of the gross assets of the Company at the
time of acquisition.
Further details on how derivatives are employed can be found
in note 18 beginning on page 63.
The Company does not currently hedge against foreign
currency exposure.
Annual Report for the year ended 31 March 2015 06
Worldwide Healthcare Trust PLC
235876 Finsbury WWH pp01-pp22new 03/07/2015 12:31 Page 07
1
Strategic Report
Investment Objective and Policy
continued
Gearing limits
The Board and Frostrow believe that shareholder returns can
be enhanced through the use of borrowings at appropriate
times for the purpose of investment. The Board has set a
maximum gearing level, through borrowing, of 20% of the net
assets. OrbiMed are responsible for deciding on the
appropriate level of gearing at any one time, subject to acting
within the 20% limit.
The Company has two current sources of leverage: the
overdraft facility, which is subject to the gearing limit; and,
derivatives, which are subject to the separate derivative
limits. The Board and Frostrow have set a maximum leverage
limit of 140% on both the commitment and gross basis.
Further details on the gearing and leverage calculations, and
how total exposure through derivatives is calculated, is
included in the Glossary beginning on page 70.
Leverage limits
Under the AIFMD new rules have been introduced that
require the Company to set maximum leverage limits.
Leverage under the AIFMD is defined as any method by which
the total exposure of an AIF is increased.
07 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
235876 Finsbury WWH pp01-pp22new 03/07/2015 12:31 Page 08
Portfolio
Investments held as at 31 March 2015
Fair
value % of
Investment Country/region £’000 investments
Bristol-Myers Squibb USA 57,083 5.2
Regeneron Pharmaceuticals USA 46,897 4.3
Amgen USA 39,701 3.6
HCA USA 39,325 3.6
Actavis* Ireland 38,265 3.5
Biogen Idec USA 36,975 3.4
Novartis Switzerland 35,789 3.3
Medivation USA 29,987 2.7
Shire Ireland 29,013 2.7
Intuitive Surgical USA 26,092 2.4
Top 10 investments 379,127 34.7
Ono Pharmaceutical Japan 25,787 2.4
AbbVie USA 23,447 2.1
Celgene USA 22,903 2.1
Fluidigm + USA 22,350 2.0
Molina Healthcare USA 22,339 2.0
Health Net USA 21,854 2.0
Incyte □ USA 21,603 2.0
Actelion Switzerland 21,475 2.0
Impax Laboratories USA 20,025 1.8
Thermo Fisher Scientific USA 19,181 1.8
Top 20 investments 600,091 54.9
Astellas Pharma Japan 18,788 1.7
Chugai Pharmaceutical Japan 18,497 1.7
Roche Holdings Switzerland 18,448 1.7
Gilead Sciences USA 17,919 1.6
Illumina USA 17,132 1.6
Boston Scientific USA 16,611 1.5
Luye Pharma China 16,539 1.5
Perrigo Ireland 16,265 1.5
Ironwood Pharmaceuticals USA 15,910 1.5
Cooper Cos Ireland 14,981 1.4
Top 30 investments 771,181 70.6
Nuvasive USA 14,963 1.4
Tornier Netherlands 14,114 1.3
Express Scripts USA 12,976 1.2
Agilent Technologies USA 12,788 1.2
Neurocrine Biosciences USA 11,732 1.1
Osstem Implant Korea 9,924 0.9
Portola Pharmaceuticals USA 9,589 0.9
Insulet USA 9,487 0.9
Stryker USA 9,322 0.8
Smith & Nephew UK 9,281 0.8
Top 40 investments 885,357 81.1
* includes Actavis 5.5% 01/03/18 (Conv) equating to 1.8% of investments
+ includes Fluidigm 2.75% 01/02/34 (Conv) equating to 0.7% of investments
□ includes Incyte 4.75% 01/10/15 (Conv) equating to 1.8% of investments
Annual Report for the year ended 31 March 2015 08
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235876 Finsbury WWH pp01-pp22new 03/07/2015 12:31 Page 09
1
Strategic Report
Portfolio
continued
Investments held as at 31 March 2015 – continued
Fair
value % of
Investment Country/region £’000 investments
Santen Pharmaceutical Japan 9,127 0.8
Creganna-Tactx Medical Second Lien
Loan FRN 20/11/22 (unquoted) Ireland 8,713 0.8
Ophthotech USA 8,641 0.8
Sawai Pharmaceutical Japan 8,387 0.8
Zimmer USA 8,142 0.7
Shandong Weigao Group China 7,748 0.7
Sino Biopharmaceuticals China 7,625 0.7
Ikaria Second Lien Loan
8.75% 04/02/22 (unquoted) USA 7,349 0.7
Mckesson USA 7,163 0.7
Towa Pharmaceutical Japan 6,946 0.6
Top 50 investments 965,198 88.4
Wright Medical USA 6,934 0.6
Nichi-Iko Pharmaceutical Japan 6,062 0.6
Xencor USA 5,428 0.5
Supernus Pharmaceuticals USA 4,720 0.4
Infinity Pharmaceuticals USA 4,592 0.4
Exact Sciences USA 4,450 0.4
IHH Healthcare Malaysia 4,365 0.4
Forward Pharma Denmark 2,587 0.2
Celltrion Korea 2,547 0.2
Teva Pharmaceutical Israel 2,014 0.2
Top 60 investments 1,008,897 92.3
Shanghai Fosun Pharmaceutical China 1,707 0.2
Curis USA 1,166 0.1
Mitra Keluarga Karyasehat Indonesia 855 0.1
Total equities and debt investments 1,012,625 92.7
Emerging Markets HC Basket with India^ Various 24,768 2.3
China HC A Share Basket China 22,079 2.0
Jiangsu Hengrui Medical China 17,513 1.6
Strides Arcolab India 16,510 1.5
Aurobindo India 12,002 1.1
Aier Eye Hospital Group^ China 7,834 0.7
Jiangsu NHWA Pharmaceutical^ China 7,571 0.7
Lupin India 6,696 0.6
Less: Gross exposure on financed swaps (36,285) (3.3)
Total OTC Swaps 78,688
Total investments including OTC Swaps 1,091,313 99.9
Total Long Put and Call Options 2,654 0.2
Total Short Put and Call Options (1,120) (0.1)
Total investments including OTC Swaps and Options 1,092,847 100.0
See note 18 beginning on page 63 for further details in relation to the OTC Swaps and Options.
^ Financed
09 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
235876 Finsbury WWH pp01-pp22new 03/07/2015 12:31 Page 10
SUMMARY
Fair value % of
Investment £’000 investments
Equities (including options & swaps) 1,030,621 94.2
Convertible Securities 46,164 4.3
Unquoted debt investments 16,062 1.5
Total of all investments 1,092,847 100.0
Portfolio Distribution
as at 31 March 2015
By Sector
2015
Emerging Market
basket swaps*
2.1%
Life Sciences
Tools and Services
6.5%
Fixed Income 1.5%
2014
Emerging Market
basket swaps*
2.5%
Healthcare Providers/
Services
8.1%
Fixed Income
1.8%
Healthcare Providers/
Services
10.1%
Healthcare Equipment/
Supplies/Technology
13.5%
Biotechnology
27.6%
By Geography
2015
Asia
9.2%
Emerging
Markets
11.3%
Europe 17.1%
* see page 63 for further details regarding swaps
Life Sciences
Tools and Services
8.7%
Healthcare Equipment/
Supplies/Technology
9.7%
Pharmaceutical
38.7%
Biotechnology
28.0%
Pharmaceutical
41.2%
2014
Asia
6.5%
Emerging
Markets
8.6%
Europe
13.8%
North America
62.4%
North America
71.1%
Annual Report for the year ended 31 March 2015 10
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1
Strategic Report
OrbiMed Capital LLC
OrbiMed was founded in 1989 and has evolved over time to be
the largest dedicated healthcare investment firm in the
world. OrbiMed has managed the Company’s portfolio since
its launch in 1995. Strong returns and many investment
awards signify the aggregate talents of this exceptional team.
OrbiMed had over U.S.$14 billion in assets under
management as of 31 March 2015, across a range of funds,
including investment trusts, hedge funds, mutual funds,
and private equity funds.
Investment Strategy and Process
Within the guidelines set by the Board, the OrbiMed team
work constantly to identify sources of outperformance, or
alpha, 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, merger and acquisition activity.
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
biopharmaceutical companies. The universe of actively
covered companies is approaching 1,000.
OrbiMed emphasises investments in companies with
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 a rigorous risk management
process to moderate portfolio volatility.
The Team
The OrbiMed Public Equity Investment Team continues to
expand. Led by founding partner, Samuel D. Isaly, now over
80 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 three continents with offices in New York,
San Francisco, Herzliya, Shanghai, and Mumbai.
The team that manages the Company’s
portfolio is as follows:
Samuel D. Isaly, is the Managing Partner at
OrbiMed and also a Director of the Company.
Mr Islay’s biographical details can be found on
page 24 of this Annual Report.
Sven H. Borho, CFA, is a founding Partner of
OrbiMed. He heads the public equity team
and he is the portfolio manager for OrbiMed's
public equity and hedge funds. Sven has
played an integral role in the growth of OrbiMed's asset
management activities. He started his career in 1991 when
he joined OrbiMed's predecessor firm as a Senior Analyst
covering European pharmaceutical firms and biotechnology
companies worldwide. In 1993, Sven was promoted to
portfolio manager. He studied business administration at
Bayreuth University in Germany and received a M.Sc.
(Econs.), Accounting and Finance, from The London School
of Economics; he is a citizen of both Germany
and Sweden.
Trevor M. Polischuk, Ph.D., is a Public Equity
Partner focused on the global pharmaceutical
industry. Previously, he worked at Lehman
Brothers as a Senior Research Analyst
covering the U.S. pharmaceutical industry. Trevor began his
career at Warner Lambert as a member of the
Pharmaceutical Global Marketing Planning team. In this role,
he coordinated marketing activities for the second generation
gabapentinoid product, Pregabalin. Trevor holds a Doctorate
in Neuropharmacology & Gross Human Anatomy and an
M.B.A. from Queen's University, Canada.
11 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
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Portfolio Manager’s
Review
Samuel D. Isaly
“All of the healthcare sub-sectors in
which the Company invests were
positive contributors to performance.”
Review of Investments
Performance Review
Despite some fears of share price retracement, or even a stock
market crash, global equity markets moved higher over the
year ended 31 March 2015. That said, increased volatility was
evident during the year as market jitters over a host of macro
concerns were observed. Geopolitical unrest, uncertain
economic growth, oil prices, and central bank policy all
created headwinds over the period. However, none of these
issues were able to fully derail global equity markets and
major indices were all able to post record highs during the
year. The MSCI World Index had a total return of c.20% in
sterling terms (c.6.7% in U.S. dollar terms).
With regard to the healthcare sector, equity returns continued
their multi-year trends of outperformance versus the broader
markets. Historically, a defensive sector, it is unusual for
healthcare to outperform during periods in which the broad
market is posting positive returns, let alone for multiple years
in a row. However, the fundamentals of this sector are
undeniably positive as an unprecedented run of innovation has
fostered an environment of new product flow, in particular new
drugs, which has not been seen in decades. The Company’s
benchmark, the MSCI World Healthcare Index, measured on a
net total return, sterling adjusted basis, was 35.9% (20.9% in
U.S. dollar terms) during the year.
The Company performed even better, with a net asset value
per share total return of 53.0% and a share price total return
of 49.8% during the year.
Since the Company’s inception in 1995 to 28 April 2015, its 20th
anniversary, the total return of the Company’s net asset value
per share is 2,103.8%, equivalent to a compound annual return
of 16.5%. This compares to the blended benchmark* rise of
947.7%, equivalent to a compound annual return of 11.9%.
*See page 2 for further information
Contribution to Performance
Sources of positive contribution in 2015 were emblematic of
the positive fundamentals of the group – merger and
acquisition (“M&A”), new product launches, strong product
pipelines, and the net positive impact of the Affordable Care
Act in the U.S.
All of the healthcare sub-sectors in which the Company
invests were positive contributors to performance. Leading the
way was biotechnology, owing to a mix of sector allocation –
specifically overweight – and stock picking. This sector
contributed nearly 24% of positive returns during the year
through a roughly equal combination of both large
capitalisation companies, profitably biotechnology companies
and emerging, speculative biotechnology companies.
Pharmaceutical companies were second, contributing nearly
20%, from a mix of large capitalisation companies, specialty
pharmaceutical companies and generic pharmaceutical
companies. Rounding out the top three in terms of sub-sector
contribution was healthcare services with almost 7%. Here,
the mix was equal from both healthcare facilities and
managed care.
Geographically speaking, over 75% of the Company’s returns
over the past 12 months were from U.S. domiciled securities
while 17 other countries represented the remainder, with
India, China, and Japan making the most notable impact.
The top contributor in 2015 was the specialty pharmaceutical
company Actavis PLC. The company’s operations are based in
the U.S. but the corporation is domiciled in Ireland, allowing for
a lower than normal corporate tax rate. Smart management
used this leverage to execute numerous accretive acquisitions
during the year, including the mega-acquisitions of Forest
Laboratories, Inc. for U.S$25 billion and Allergan, Inc. for
U.S.$70.5 billion. Combined with operational excellence and
deft succession at the CEO level, the company’s share price
climbed over 60% (in sterling terms) over the year.
Medivation Inc., a California-based biotechnology company, has
become a global leader in the treatment of prostate cancer. The
stock was a close second in terms of contribution in the year.
First launched in 2012, Xtandi (enzalutamide) has become the
standard of care in the treatment of prostate cancer. During
2015, the company was able to expand the original indication
for the drug to earlier lines of therapy and also demonstrate
proof-of-concept efficacy in breast cancer as well as superiority
over an incumbent therapy. Most importantly, the company has
been able to post quarterly Xtandi sales that continue to meet
or exceed investor expectations. This combination of positive
data and outstanding sales yielded a stock that more than
doubled in the year.
Annual Report for the year ended 31 March 2015 12
Worldwide Healthcare Trust PLC
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1
Strategic Report
Portfolio Manager’s Review
continued
Another growing biotechnology company, Regeneron
Pharmaceuticals, Inc., was a top contributor to performance
for the year. Led by the blockbuster sales of the injectable
blindness treatment, Eyelea (aflibercept), the New York-based
company did not rest on its laurels. Rather, investments in
Research and Development (R&D) have created one of the
industry’s best pipelines with late stage product candidates for
the treatment of high cholesterol, rheumatoid arthritis, and
atopic dermatitis, each with blockbuster potential. The result
was an increase of nearly 70% (in sterling terms) in the
company’s share price in the year.
The acquisition of InterMune Inc., by Swiss-pharma giant,
Roche Holding AG, represents another top contributor in the
period. InterMune was the leader in the treatment of a severe
lung disease known as pulmonary fibrosis, a chronic condition
that typically results in the need for a lung transplant and/or
death. The company’s lead product, Esbriet (pirfenidone), has
shown impressive efficacy and survival data for this serious
disease. Roche was clearly attracted by Esbriet: a high margin,
best-in-class, specialty care product, with survival data and
blockbuster potential. In August 2014, Roche acquired
InterMune for nearly U.S.$8 billion, representing greater than
a 50% premium to the share price.
HCA Holdings Inc. is the largest public hospital operator in the
U.S. Company fundamentals strengthened significantly
throughout the year, benefiting from accelerating admissions
growth as more individuals gain health insurance coverage
under the Affordable Care Act. Additionally, bad debt expense
is improving as fewer uninsured patients are being treated and
thus fewer patient bills go unpaid. Finally, the stock was added
to the S&P 500 Index in January 2015. The combination of
stronger revenue and profitability propelled HCA’s shares over
60% (in sterling terms) during the year.
Detractors from performance were modest, especially relative
to positive contributors. Medical devices and emerging
markets were most noteworthy. Stock picking, rather than
allocation, was the main reason for the negative contribution.
Insulet manufactures the OmniPod insulin pump system,
which is a wireless, tubing-free alternative to traditional pump
therapy, primarily targeting Type I diabetics. Last autumn,
Insulet announced a CEO change which was viewed favourably
by investors. However, after a thorough review of the business
the new CEO announced that the prior management team had
been misleading investors. Prior management claimed that
the increase in the number of new OmniPod patients was
growing in double digits, when in fact it was declining. In
13 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
addition, the new CEO presented initial 2015 guidance well
below expectations. The stock fell sharply in January and was
down 20% (in sterling terms) in the year. Given the sell-off in
the stock, with expectations reset, and new management on
board, we held our position.
Vocera Communications Inc. is a provider of voice
communication systems, secure messaging applications, and
care transition solutions for hospitals and healthcare facilities.
Importantly, system purchases are typically considered part of
a facility’s capital budget. As a result, when U.S. hospital
budgets tightened in early 2014 and available capital dollars
were allocated toward other healthcare information
technology initiatives such as electronic health records, Vocera
posted a sizable sales miss and reduced its annual guidance.
Shares declined materially post-announcement, down over
30% (in sterling terms) over the fiscal year.
Shandong Weigao Group Medical Polymer Company Ltd., or
simply “Weigao”, is a leading medical technology company in
China, with the largest market share in single-use medical
consumables, orthopaedic and dialysis products. Weigao
experienced a volatile 2014, as a result of sales channel
restructuring and increasing competition in single-use
medical consumables. As a result, revenues and earnings fell
short of expectations with company management cutting
guidance for two consecutive quarters during the year. The
stock ended the year down 13% (in sterling terms).
Biosensors International Group Ltd. is a Singapore-based
drug-eluting stent company, with sales footprints in China,
Europe, and Japan. Biosensors experienced significant decline
in profits in 2014, as a result of new competitive product
entrance in Japan and rising operating costs. New executives
have been employed – including a replacement for the CEO –
in an effort to turn around the operation. The stock closed
down 16% (in sterling terms) over the year.
Ophthotech is an emerging biotechnology company that
focuses on developing novel therapies for indications in the
eye. The company’s lead drug, Fovista (anti-PDGF therapy), is
being tested for the treatment for a type of blindness called
age-related macula edema. The negative contribution from the
stock was due to timing. The original purchase of the stock
coincided with a short-term broad sell off in biotechnology
stocks. There was no company specific news that led to the
weakness in the stock. The stock sold off 10% (in sterling
terms) from our purchase price.
235876 Finsbury WWH pp01-pp22new 03/07/2015 12:31 Page 14
Outlook
The macro environment for the healthcare sector remains
quite positive. The Affordable Care Act in the U.S. continues to
provide increased healthcare coverage to uninsured
Americans and the utilisation of services and the consumption
of pharmaceuticals has increased commensurately.
Importantly, the increased size of the population now covered
is proving profitable for healthcare companies despite some
concerns to the contrary. Innovation has re-entered the
medical device arena, particularly in the cardiovascular space,
which has rekindled investor interest in an otherwise dormant
sector. Overall, pricing for medical devices has stabilised and
M&A in the orthopaedics sector is accelerating. Most
noteworthy, however, is therapeutics where pharmaceutical
and biotechnology companies have been in an unprecedented
novel innovation cycle over the past three years. One
particularly exciting area of the therapeutic field is
immuno-oncology. We have discussed this further in the
Portfolio Focus section beginning on page 15. New drugs are
being approved at record rates and review times for new drugs
that are saving lives are the shortest they have even been.
While valuations have risen, growth rates have accelerated
more, thus we view the healthcare sector as attractive from a
valuation perspective. Finally, we expect continued M&A
activity as the smaller biotechnology companies remain prime
engines of innovation.
Samuel D. Isaly
OrbiMed Capital LLC
Portfolio Manager
24 June 2015
Contribution by Investment
Principal contributors to and detractors from net asset value performance
Contribution Contribution
for the year to per share
31 March 2015 (pence) *
Top five contributors £'000
Actavis 17,539 36.87
Medivation 17,280 36.32
Regeneron Pharmaceuticals 17,224 36.21
Intermune 15,992 33.62
HCA 15,614 32.82
83,649 175.84
Top five detractors
Insulet (2,514) (5.29)
Vocera Communications (1,210) (2.54)
Shandong Weigo Group (1,160) (2.44)
Biosensors International (1,135) (2.39)
Opthotech (938) (1.97)
(6,957) (14.63)
* based on 47,572,148 being the weighted average number of shares in issue during the year ended 31 March 2015.
Annual Report for the year ended 31 March 2015 14
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1
Strategic Report
Portfolio Focus – Immuno-oncology
We are in the midst of a revolution in the treatment of cancer.
An “old” oncology target, the human immune system, has
been resurrected from the scrap heap of drug development
disappointments. The immune system has been of interest to
researchers for decades and the notion of coercing it to fight
disease was spectacular in its simplicity: boost a person’s
own innate immunity to destroy foreign tumour cells.
However, multiple attempts in manipulating or drugging the
body’s own immune system to ward off invading cancer all
shared the same result: abject failure.
Things changed during the last decade, however, when
investigators from a New Jersey-based biotechnology
company, Medarex, first showed that targeting a specific
receptor on T-cells (part of the immune system) could in fact
destroy cancer cells. Normally functioning T-cells are critical
in recognising and destroying tumour cells. In a patient with
cancer, however, a “stopping mechanism” in the T-cell may be
turned “on”, compromising the immune system, thereby
allowing tumour cells to divide and proliferate. Medarex
showed that by inhibiting that stopping mechanism by
targeting the CTLA-4 receptor, through a so called
“checkpoint inhibitor”, one could restore normal function.
Yervoy (ipilimumab) is a CTLA-4 inhibitor discovered and
developed by Medarex. The antibody turns off this inhibitory
mechanism and allows T-cells to continue to destroy cancer
cells. Bristol-Myers Squibb acquired the company in 2009 and
Yervoy was approved in 2011 by the U.S. Food and Drug
Administration (“FDA”) for the treatment of metastatic
melanoma – a deadly form of skin cancer – after pivotal clinical
trial data showed unprecedented durability of efficacy in the
patients who responded to therapy. In other words, the drug
proved to be a putative “cure”, at least in some patients. The
data showed that nearly 25% of patients were alive after 2 years.
PD-1 receptor, rendering the T-cell inactive and keep them
from attacking the tumor. A PD-1 inhibitor blocks that
interaction, preventing the signal from transferring from the
tumour cell, allowing the T-cell to do its job, namely
destroying the cancer.
Source: www.opdivo.com
The lead antibody that targets PD-1, now known as
Opdivo (nivolumab), was discovered by Japan-based
Ono Pharmaceutical Co. Ltd. and was licensed to Medarex in
2005. Opdivo has pushed the efficacy bar even higher, in terms
of both the number of patients who respond to treatment as
well as the durability of that response. Data in the treatment of
metastatic melanoma showed that the level of patients alive
after 2 years of therapy was approximately 40%. Moreover, the
same data set showed, incredibly, that after 3 years, 40% of
patients were still alive (source: CHECKMATE-003 ASCO 2014).
This “flattening of the curve” is further evidence of the curative
nature of this therapy. Opdivo received its first global approval
in 2014 in Japan and U.S. for the treatment of melanoma.
The revolution will likely not end with the single agent therapy
described above. Rather, proof-of-concept data has been
generated in combination therapy in a host of cancers,
including melanoma. Specifically, when taken together, the
combination of Yervoy and Opdivo increased the percentage of
patients alive after 2 years to 88% (source: CHECKMATE-004
ASCO 2014). This type of long term survival, essentially a
doubling of single agent therapy, is truly ground breaking and
will set a new standard of care in the treatment of melanoma.
Source: www.yervoy.com
Today, this therapeutic field is known as “immuno-oncology”
(or “IO”) and researchers are using immunotherapies to treat
and potentially cure many types of cancers. The next
checkpoint inhibitor is proving to be more provocative than the
first. “PD-1” or “programmed death-1” is another receptor
found on T-cells in the human body. Some cancer cells have
the ability to produce a ligand or molecule that binds to the
Source: Merck
15 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
235876 Finsbury WWH pp01-pp22new 03/07/2015 12:32 Page 16
In addition to melanoma, Opdivo is now approved for the
treatment of specific types of lung cancer. Pivotal data for this
indication was so provocative, that the clinical trial was
stopped early due to overwhelming positive efficacy. The FDA
was so impressed with the survival benefit generated by
Opdivo that within a two-month span, the trial results were
disclosed to the FDA and reviewed and approved. This is an
unprecedented timeline for a drug approval, which is typically
at least 6 months even for the most important lifesaving drugs.
The list of potential cancer types in which Opdivo may provide
increased survival benefit is long, including but not limited to
kidney, ovarian, gastric, head & neck, breast, brain,
pancreatic, colon, and bladder. The efficacy of checkpoint
inhibitors is not likely to be just for solid tumours. In fact,
early data has been generated for haematological tumours, or
“blood cancers”, such as Hodgkin’s Lymphoma.
Bristol-Myers Squibb
Bristol-Myers Squibb is at the forefront of this
immunotherapy revolution. Thanks to their prescient
acquisition of Medarex, the company possesses rights to
Yervoy, Opdivo, and a host of “next generation” antibodies
targeting a host of other immune cell receptors.
The market opportunity for these drugs is immense. Yervoy
for example, which launched in 2011, reached blockbuster
status in only two years with sales of nearly U.S.$1 billion in
2013. If Yervoy becomes a staple of combination therapy in
other tumour types, the sales potential rises to U.S.$5 billion
and above.
The implications for the company’s financials from Opdivo are
even more significant. Opdivo could be become the
“backbone” of immunotherapy for a dozen tumour types. If so,
the sales potential could eclipse U.S.$10 billion.
To put the opportunity into better perspective, the sales base
for Bristol-Myers Squibb is estimated to be U.S.$15 billion.
Thus, the company has the potential to double its revenues by
the end of the decade. This cannot be said of any other large
capitalisation pharmaceutical company on the planet.
Opdivo and Yervoy are the present opportunity for the
company. But the immuno-oncology revolution will likely not
end there. Rather, we see additional immuno-oncology
targets which may offer additional efficacy and/or safety
advantages, likely in combination with already approved
immuno-oncology therapies. Critically, Bristol-Myers Squibb
is at the forefront of these efforts, as well as Medarex which
continues to be the engine of discovery in immunotherapy,
now within the walls of its acquirer. Novel immuno-oncology
targets such as “LAG3”, “TIM3”, “KIR” and others are likely to
be the checkpoint inhibitors of the future and Bristol-Myers
Squibb has already commenced early phase clinical trials to
explore their potential.
Source: Five Prime
Ono Pharmaceutical Co. Ltd. (“Ono”)
Antibodies against PD-1 are in fact, a distinctly Japanese
invention. Collaboration between scientists from both Ono
and Kyoto University leveraged the work of Dr. Tasuko Honjo
who has been credited in discovering Opdivo.
Source: Kyoto University
In May 2005, Ono entered into a collaborative research
agreement with Medarex (acquired by Bristol-Myers Squibb in
2009) to research and develop a fully human anti-PD-1 antibody
drug with a novel mechanism of action with promising potential
for the treatment of cancer. The companies have conducted
successful clinical trials with Opdivo on malignant tumours in
the U.S. and Japan, respectively, which culminated in the first
ever approval of a PD-1 inhibitor. Fittingly, Japan regulatory
authorities were the first to approve the drug in July 2014.
Annual Report for the year ended 31 March 2015 16
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1
Strategic Report
Portfolio Focus
continued
Source: Ono Pharmaceutical Co.Ltd.
Source: www.quantumbooks.com
In order to accelerate the global development of Opdivo, the
companies entered into an agreement in September 2011 to
expand the territory of Bristol-Myers Squibb for development
and marketing into the world except Japan, Korea and Taiwan.
Ono retained the right to exclusively develop and market
Opdivo in Japan, Korea and Taiwan. Thus, the opportunity for
Ono is twofold: a highly profitable, double-digit royalty stream
from ex-Asia end user sales from Bristol-Myers Squibb and
domestic sales generated from the second largest
pharmaceutical market in the world.
Samuel D. Isaly
OrbiMed Capital LLC
Portfolio Manager
24 June 2015
17 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
235876 Finsbury WWH pp01-pp22new 03/07/2015 12:32 Page 18
Business Review
The Directors present their Strategic Report for the Company
for the year ended 31 March 2015. The Strategic Report, set
out on pages 1 to 22, contains a review of the Company’s
business model and strategy, an analysis of its performance
during the financial year and its future developments and
details of the principal risks and challenges it faces. Its
purpose is to inform the shareholders in the Company and
help them to assess how the Directors have performed their
duty to promote the success of the Company.
Business Model
The Company is an externally managed investment trust and
its shares are premium listed on the Official List and traded
on the main market of the London Stock Exchange.
• Investment Objective, Policy and Benchmark,
incorporating the investment and derivative guidelines and
limits, and changes to these;
• maximum level of gearing the Company may employ;
• review of performance against the Company’s KPIs;
• review of the performance and continuing appointment of
service providers; and
• maintenance of an effective system of oversight, risk
management and corporate governance.
The Investment Objective, Policy, and Benchmark, including
the related limits and guidelines, are set out on pages 6 and
7, along with details of the gearing levels allowed.
The Company is an Alternative Investment Fund (‘AIF’) under
the European Union’s Alternative Investment Fund Manager
Directive (‘AIFMD’) and has appointed Frostrow Capital LLP
as its Alternative Investment Fund Manager.
Details of the principal KPIs and further information on the
principal service providers, their performance and continuing
appointment, along with details of the principal risks, and
how they are managed, follow within this Business Review.
As an externally managed investment trust all of the Company’s
day to day management and administrative functions are
outsourced to service providers. As a result, the Company has
no executive Directors, employees or internal operations.
The Board
The Board of the Company comprises Sir Martin Smith
(Chairman), Sarah Bates, Jo Dixon, Dr David Holbrook,
Samuel D. Isaly and Doug McCutcheon. All of these Directors
served throughout the year and are non-executive
independent Directors, except for Samuel D. Isaly who is
deemed not to be independent due to his role at OrbiMed.
Further information on the Directors can be found on
pages 23 and 24.
The Corporate Governance report, on pages 30 to 37,
includes a statement of compliance with corporate
governance codes and best practice, together with the
outline of the internal control and risk management
framework within which the Board operates.
Key Performance Indicators (KPI)
To ensure an attractive share price total return the Board
monitors the following KPIs. Further details of the KPIs,
including a five year history, can be seen in the Company
Performance section on pages 1 and 2.
• Net asset value (‘NAV’) per share total return against the
Benchmark;
• Discount/premium of share price to NAV per share; and
All Directors seek election or re-election by shareholders at
each Annual General Meeting.
• Ongoing charges ratio.
Board Focus and Responsibilities
With the day to day management of the Company outsourced
to service providers the Board’s primary focus at each Board
meeting is reviewing the investment performance and
associated matters, such as, inter alia, future outlook and
strategy, gearing, asset allocation, investor relations,
marketing, and industry issues.
In line with its primary focus, the Board retains responsibility
for all the key elements of the Company’s strategy and
business model, including:
NAV per share total return against the Benchmark
The Directors regard the Company’s NAV per share total
return as being the overall measure of value delivered to
shareholders over the long term. This reflects both net asset
value growth of the Company and dividends paid
to shareholders.
The Board considers the most important comparator, against
which to assess the NAV per share total return performance,
to be the MSCI World Health Care Index measured on a net
total return, sterling adjusted basis. As noted on page 6
Frostrow and OrbiMed have flexibility in managing the
investments and are not limited by the constraints of the
Benchmark. As a result, investment decisions may be made
Annual Report for the year ended 31 March 2015 18
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Strategic Report
Business Review
continued
that differentiate the Company from the Benchmark and
therefore the Company’s performance may also be different
to that of the Benchmark.
A full description of performance during the year under
review and the portfolio is contained in the Portfolio Manager’s
Review commencing on page 12 of this annual report.
Share price discount/premium to NAV per share
The share price discount/premium to NAV per share is
considered a key indicator of performance as it impacts the
share price total return of shareholders and can provide an
indication of how investors view the Company’s performance
and its Investment Objective.
Ongoing charges ratio
The Board continues to be conscious of expenses and works
hard to maintain a balance between good quality service and
costs.
Principal Service Providers
The principal service providers to the Company are the AIFM,
Frostrow Capital LLP (Frostrow), the Portfolio Manager,
OrbiMed Capital LLC (OrbiMed), and the Prime Broker
J.P. Morgan Chase Clearing Corp. Details of their key
responsibilities follow and further information on their
contractual arrangements with the Company are included in
the Report of the Directors commencing on page 25.
Alternative Investment Fund Manager (AIFM)
As reported in the half year report the Company has
appointed Frostrow as its AIFM. Frostrow under the terms of
its AIFM agreement with the Company provides, inter alia, the
following services:
Portfolio Manager
OrbiMed under the terms of its portfolio management
agreement with the AIFM and the Company provides, inter
alia, the following services:
• the seeking out and evaluating of investment
opportunities;
• recommending the manner by which monies should be
invested, disinvested, retained or realised;
• advising on how rights conferred by the investments
should be exercised;
• analysing the performance of investments made; and
• advising the Company in relation to trends, market
movements and other matters which may affect the
investment objective and policy of the Company.
OrbiMed receive a base fee of 0.65% of NAV and a
performance fee of 15% of outperformance against the
Benchmark as detailed on pages 26 and 27.
Depositary and Prime Broker
During the year the Company appointed J.P. Morgan Europe
Limited as its Depositary and J.P. Morgan Clearing Corp as
Prime Broker. These new arrangements replaced the
Company’s existing custody and prime brokerage
arrangements with Goldman Sachs & Co.
J.P. Morgan Europe Limited has discharged certain of its
liabilities as Depositary to J.P. Morgan Clearing Corp. Further
details of this arrangement are set out on page 27.
J.P. Morgan Clearing Corp, as Prime Broker, provides the
following services under its agreement with the Company:
• safekeeping and custody of the Company’s investments
and cash;
• risk management services;
• processing of transactions;
• marketing and shareholder services;
• administrative and secretarial services;
• advice and guidance in respect of corporate governance
requirements;
• maintains the Company’s accounting records;
• prepares and dispatches the annual and half year reports
and monthly factsheets; and
• ensures compliance with applicable tax, legal and
regulatory requirements.
Frostrow charge a variable base fee, which is dependent on
the size of the Company (as described on page 26) and a
performance fee of 1.5% of outperformance against the
Benchmark as set out on pages 26 and 27.
• provision of an overdraft facility. Assets to 140% of the
value of the outstanding overdraft can be taken as
collateral. Such assets may be used by the Prime Broker
and such use may include being loaned, sold,
rehypothecated or transferred by the Prime Broker; and
• foreign exchange services.
J.P. Morgan Europe Limited, as Depositary, must take
reasonable care to ensure that the Company is managed in
accordance with the Financial Conduct Authority’s Investment
Funds Sourcebook, the AIFMD and the Company’s Articles of
Association. The Depositary must in the context of this role
act honestly, fairly, professionally, independently and in the
interests of the Company and its shareholders.
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The Depositary receives a variable fee based on the size of
the Company as set out on page 27.
Performance and Future Developments
An outline of performance, investment activity and strategy,
and market background during the year, as well as the future
outlook, is provided in the Chairman’s Statement on pages 3
to 5 and the Portfolio Manager’s Review on pages 12 to 14.
It is expected that the Company’s strategy will remain
unchanged in the coming year.
The continuation vote proposed to shareholders at the 2014
AGM was passed. The next continuation vote will be put to
shareholders at the AGM to be held in 2019.
AIFM and Portfolio Manager Evaluation and
Re-Appointment
The performance of the AIFM and the Portfolio Manager is
reviewed continuously by the Board and the Company’s
Management Engagement and Remuneration Committee (the
“Committee”) with a formal evaluation being undertaken each
year. As part of this process, the Committee monitors the
services provided by the AIFM and the Portfolio Manager and
receives regular reports and views from them. The Committee
also receives comprehensive performance measurement
reports to enable it to determine whether or not the
performance objectives set by the Board have been met. The
Committee reviewed the appropriateness of the appointment
of the AIFM and the Portfolio Manager in February 2015 with a
recommendation being made to the Board.
The Board believes the continuing appointment of the AIFM
and the Portfolio Manager, under the terms described in the
Report of the Directors on pages 26 and 27, is in the interests
of shareholders as a whole. In coming to this decision, it took
into consideration, inter alia, the following:
• the quality of the service provided and the quality depth
of experience of the company management, company
secretarial, administrative and marketing team that the
AIFM allocates to the management of the Company; and
• the quality of the service provided and the quality and
depth of experience allocated by the Portfolio Manager to
the management of the portfolio and the level of
performance of the portfolio in absolute terms and by
reference to the benchmark index.
Principal Risks
In fulfilling its oversight and risk management
responsibilities the Board maintains a framework of key risks
which affect the Company and the related internal controls
designed to enable the Directors to manage/mitigate these
risks as appropriate. The principal risks can be categorised
under the following broad headings:
• Investment (including leverage risks);
• Financial;
• Operational (including corporate governance, accounting,
legal, cyber security and regulatory risks); and
• Shareholder relations and share price performance.
Further information on the internal control and the risk
management framework can be found below. The following
section details the risks the Board consider to be the most
significant to the Company under these headings.
Investment Risks
The Company is invested in market securities, as a result of
which it has exposure to the risk of changes in market prices.
A significant proportion of the Company’s assets is, 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 use of leverage by the Company will amplify any gains or
losses on positions financed through leverage.
To manage these risks, the Board has imposed various
limits and guidelines, set out on pages 6 and 7. The
compliance with those limits and guidelines is monitored
daily by Frostrow and OrbiMed and reported to the Board
monthly. In addition OrbiMed reports at each Board
meeting on the performance of the Company’s portfolio,
which encompasses the rationale for stock selection
decisions, the make-up of the portfolio, potential new
holdings and, derivative activity and strategy (further
details on derivatives can be found in note 18 on page 63).
The Company does not currently hedge against currency
exposure.
Financial Risks
In addition to market and foreign currency risks, discussed
above, the Company is exposed to credit risk arising from the
use of counterparties. If a counterparty were to fail, the
Annual Report for the year ended 31 March 2015 20
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1
Strategic Report
Business Review
continued
Company could be adversely affected through either delay in
settlement or loss of assets.
The most significant counterparty the Company is exposed to is
J.P. Morgan Clearing Corp which is responsible for the
safekeeping of the Company’s assets and provides the overdraft
facility to the Company. As part of the arrangements with J.P.
Morgan Clearing Corp they may take assets, up to 140% of the
value of the drawn overdraft, as collateral and have first priority
security interest or lien over all of the Company’s assets. Such
assets taken as collateral may be used, loaned, sold,
rehypothecated or transferred by J.P. Morgan Clearing Corp,
although the Company maintains the economic benefits from
the ownership of those assets it does not hold any of the rights
associated with those assets. The Company is afforded
protection under both the SEC rules and U.S. legislation equal
to the value of the assets held by J.P. Morgan Clearing Corp.
Credit risk is managed by the Board through:
• reviews of the arrangements with, and services provided
by, the Depositary and Prime Broker to ensure that the
security of the Company’s assets is being maintained.
Legal opinions are sought, where appropriate, as part of
this review;
• monitoring of the assets taken as collateral (further
details can be found in note 18 on page 66);
• reviews of OrbiMed’s approved list of counterparties, the
Company’s use of those counterparties and OrbiMed’s
process for monitoring, and adding to, the approved
counterparty list;
• monitoring of counterparties, including reviews of internal
control reports and credit ratings, as appropriate; and
• receives a monthly compliance report from Frostrow,
which includes, inter alia, details of compliance with
applicable laws and regulations;
• reviews internal control reports, key policies, including
measures taken to combat cyber security issues, and also
disaster recovery procedures of its service providers;
• maintains a risk matrix with details of risks the Company
is exposed to, the controls relied on to manage those risks
and the frequency of the controls operation; and
• receives updates on pending changes to the regulatory
and legal environment and progress towards the
Company’s compliance with these.
Shareholder Relations and Share Price Performance Risks
The Company is also exposed to the risk, particularly if the
investment strategy and approach are unsuccessful, that the
Company may underperform resulting in the Company
becoming unattractive to investors and a widening of the
share price discount to NAV per share.
In managing this risk the Board:
• reviews the Company’s Investment Objective in relation to
market, and economic, conditions and the operation of the
Company’s peers;
• discussions are held at each Board meeting concerning
the Company’s future development and strategy;
• reviews the shareholder register at each Board meeting;
• actively seeks to promote the Company to current and
potential investors; and,
• has implemented a discount control mechanism.
• by only investing in markets that operate DVP (Delivery
Versus Payment) settlement. The process of DVP
mitigates the risk of losing the principal of a trade during
the settlement process.
The operation of the discount control mechanism and
Company promotional activities have been delegated to
Frostrow, who report to the Board at each Board meeting on
these activities.
Further information on the use of financial instruments and
their risks, including credit risk, can be found in note 18
beginning on page 63.
Operational Risks
The Board is reliant on the systems of the Company’s service
providers and as such disruption to, or a failure of, those
systems could lead to a failure to comply with law and
regulations leading to reputational damage and/or financial
loss to the Company.
To manage these risks the Board:
Company Promotion
The aim of the Company’s promotional activities is to
encourage demand for the Company’s shares. The Company
has appointed Frostrow to provide marketing services, in the
belief that a well-marketed investment company is more likely
to grow over time, have a more diverse and stable shareholder
register and will trade at a superior rating to its peers.
Frostrow actively promotes the Company in the following ways:
Engaging regularly with institutional investors, discretionary
wealth managers and a range of execution-only platforms:
Frostrow regularly talks and meets with institutional
21 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
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investors, discretionary wealth managers and execution-only
platform providers to discuss the Company’s strategy and to
understand any issues and concerns, covering both
investment and corporate governance matters;
Making Company information more accessible: Frostrow
works to raise the profile of the Company by targeting key
groups within the investment community, holding annual
investment seminars, overseeing PR output and managing
the Company’s website and wider digital offering, including
Portfolio Manager webcasts and social media. Frostrow also
manages the investor database and produces all key
corporate documents, distributes Monthly Factsheets,
Annual Reports and updates from OrbiMed on portfolio and
market developments; and
Monitoring market activity, acting as a link between the
Company, shareholders and other stakeholders: Frostrow
maintains regular contact with sector Broker Analysts and
other research and data providers, and conducts periodic
investor perception surveys, liaising with the Board to provide
up-to-date and accurate information on the latest
shareholder and market developments.
Discount Control Mechanism (DCM)
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, share issuance and share
buy-backs, where appropriate.
The Board implemented the DCM in 2004. This established a
target level of no more than a 6% share price discount to the
ex-income NAV per share.
Under the DCM, the Company’s shares being offered on the
stock market, when the discount reaches a level of 6% or
more, may be bought back and held as treasury shares (See
Glossary on page 71). Treasury shares can be sold back to
the market at a later date at a discount narrower than that at
which they were bought and no greater than a 5% discount to
the cum income NAV per share.
Shareholders should note, however, that it remains possible
for the share price discount to the NAV per share to be
greater than 6% on any one day. This 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 NAV per share in an asset class
such as healthcare is another factor over which the Board
has no control.
In recent years the Company’s successful performance has
generated substantial investor interest. Whenever there are
unsatisfied buying orders for the Company’s shares in the
market, the Company is able to issue new shares at a small
premium to the cum income NAV per share. This ensures
that there is no asset dilution to existing shareholders and
stops the market price going to a significant and possibly
unsustainable premium.
Details of share buy-backs and issuance are set out on
page 25.
Investment Trends and Outlook – the Viability
of the Company
OrbiMed continues to believe that the fundamentals of the
healthcare sector, namely: new product launches; strong
product pipelines; continued levels of innovation; the net
positive impact of the Affordable Care Act in the U.S.; and
continued merger and acquisition activity will be key drivers
for growth in the years to come.
The Directors continue to believe that the healthcare sector
together with OrbiMed’s investment strategy will provide
good returns for the long-term investor and therefore that
the Company and it’s Investment Objective and Policy will
continue to be viable for the foreseeable future.
Board Diversity
The Company is supportive of the recommendations of Lord
Davies’ Report that the performance of corporate boards can
be improved 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 process
actively seeks 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 consider diversity during any Director
search process. There are currently four male and two female
Directors on the Board.
This Strategic Report on pages 1 to 22 has been signed for
and on behalf of the Board
Sir Martin Smith
Chairman
24 June 2015
Annual Report for the year ended 31 March 2015 22
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2
Governance
Board of Directors
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.
Sir Martin Smith*+
Chairman
Sir Martin Smith joined the Board in 2007. He
has been involved in the financial services
sector for more than 30 years. He was a
founder and senior partner of Phoenix
Securities, becoming Chairman of European
Investment Banking for Donaldson, Lufkin &
Jenrette (DLJ) following the acquisition of
Phoenix by DLJ. He was subsequently a
founder of New Star Asset Management Ltd.
and has a number of other directorships with
and business interests, including Chairman of
GP Bullhound, and directorships with Oxford
Capital Partners and Episode 1.
His pro-bono interests include serving as
Chairman of the Orchestra of the Age of
Enlightenment and serving on the boards of a
number of other arts organisations including
the Royal Academy of Music and the
Glyndebourne Arts Trust. He chaired the
English National Opera. He is a Governor of
the Ditchley Foundation.
Sarah Bates*+
Sarah Bates joined the Board in 2013. She is
currently Chairman of JPMorgan American
Investment Trust plc, St James’s Place plc and
of Witan Pacific Investment Trust plc. She is
also a non-executive Director of Polar Capital
Technology Trust plc and Development
Securities plc and is a former Chairman of the
Association of Investment Companies. She is
a member of the Universities Superannuation
Fund Investment Committee and an adviser to
the East Riding Pension Fund and has a
number of voluntary appointments on charity
or pension fund investment committees
including that of the Cancer Research UK
Pension Fund. She attended Cambridge
University and has an MBA from London
Business School.
Jo Dixon*+
Jo Dixon joined the Board in 2004. She is
Chairman of the Audit and Nominations
Committees and also the Senior Independent
Director. Jo is currently a non-executive
Director and Chairman of the Audit Committee
of Standard Life Equity Income Trust PLC. She
is also a non-executive Director of JPMorgan
European Investment Trust plc, Strategic
Equity Capital plc, F&C Global Smaller
Companies PLC and Plutus Resources 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, Serco Group plc and Newcastle United
PLC and also within the Investment Bank and
main group of NatWest.
*Member of the Audit Committee
+Member of the Nominations and Management Engagement & Remuneration Committees
Meeting Attendance
The number of scheduled 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 2014/15
Board
(4)
Audit Committee
(2)
Sir Martin Smith
Sarah Bates
Jo Dixon
Dr David Holbrook
Samuel D. Isaly
Doug McCutcheon
4
4
4
4
3
4
2
2
2
2
–
2
Nominations
Committee
(1)
Management
Engagement &
Remuneration
Committee
(1)
1
1
1
1
–
1
1
1
1
1
–
1
All of the serving Directors attended the Annual General Meeting held on 14 July 2014.
In addition to the above, a number of ad hoc special purpose Board and committee meetings were held during the year for
the approval of documents, the allotment of new shares and the approval of regulatory announcements.
23 Worldwide Healthcare Trust PLC
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235876 Finsbury WWH pp23-pp29new 03/07/2015 12:33 Page 24
Dr David Holbrook*+
Dr David Holbrook 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.
Samuel D. Isaly
Sam Isaly joined the Board at launch in
1995. Sam is Managing Partner of OrbiMed
Capital LLC, the Company’s Portfolio
Manager, and has been a worldwide
healthcare investment specialist for more
than 30 years having worked in New York
and Europe with Chase Manhattan, Société
Générale, Crédit Suisse and UBS Warburg.
Doug McCutcheon*+
Doug McCutcheon joined the Board in 2012.
Based in Toronto, Canada, Doug is the
President of Longview Asset Management
Ltd. and Gormley Limited, independent
investment firms. Until 2012, Doug was an
investment banker at S.G. Warburg and then
UBS for 25 years, most recently as the head
of Healthcare Investment Banking for
Europe, the Middle East, Africa and
Asia-Pacific. Doug is involved in several
philanthropic organisations with a focus on
healthcare and education. He attended
Queen’s University, Canada.
* Member of the Audit Committee
+ Member of the Nominations and Management Engagement & Remuneration Committees
DIRECTORS’ REMUNERATION AND INTERESTS
The Directors remuneration, their beneficial interests and those of their families are set out below.
Remuneration Ordinary Shares of Subscription Shares
25p each of 1p each
2015 2014
£ £ 2015 2014 2015 2014
Sir Martin Smith 41,100 39,150 11,871 5,859 – 400
– Trustee – – 2,725 – – –
Jo Dixon 39,800 27,850 3,859 3,000 – 600
Sarah Bates* 26,000 21,275 7,200 7,200 – –
Dr David Holbrook 26,000 24,750 1,094 1,094 – –
Samuel D. Isaly 26,000 24,750 3,600 353,600 – 720
Doug McCutcheon 26,000 24,750 15,000 15,000 – –
*
There had been no changes in the above Directors’ interests as at 24 June 2015.
Appointed on 22 May 2013.
Further information on the remuneration received by the Directors can be found on pages 40 and 41.
Samuel D. Isaly is a partner in OrbiMed Capital LLC which is party to the Portfolio Management Agreement with the Company
and receives fees as described on pages 26 and 27. A number of the partners at OrbiMed Capital LLC have a minority
financial interest totalling 20% in Frostrow Capital LLP, the Company’s AIFM.
Annual Report for the year ended 31 March 2015 24
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2
Governance
Report of the Directors
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 2015.
Business and Status of the Company
The Company is registered as a public limited company in
England (Registered Number 3023689) and is an investment
company within the terms of Section 833 of the Companies
Act 2006 (the ‘Act’). Its shares are premium 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”)
effective for all years commencing after 1 April 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.
Continuation of the Company
A resolution was passed at the Annual General Meeting held
in 2014 that the Company should continue as an investment
trust for a further five year period. In accordance with the
Company’s Articles of Association, shareholders will have an
opportunity to vote on the continuation of the Company at the
2019 Annual General Meeting and every five years thereafter.
Results and Dividends
The results attributable to shareholders for the year and the
transfer to reserves are shown on page 48. Details of the
Company’s dividend record can be found on page 2.
Capital Structure
The Company’s capital structure is composed solely of Ordinary
Shares. The Company’s Subscription Shares expired on 31 July
2014.
Ordinary Shares
During the year 1,860,969 Ordinary Shares were allotted by
the Company as a result of holders of the Subscription Shares
exercising their subscription rights raising £13,008,000.
During the year under review, 286,096 Ordinary Shares were
bought back by the Company to be held in treasury at an
average discount of 7.6% to the prevailing ex income NAV per
share. These shares were then reissued from treasury during
the year at an average discount of 2.5% to the prevailing
25 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
ex income NAV per share at the time of issue, resulting in a
net gain to the Company of £160,000.
In addition, 25,000 new Ordinary Shares were issued at a
premium of 0.7% to the prevailing cum income NAV per share
at the time of issue.
Since the year end 437,331 Ordinary Shares were bought back
into treasury at an average discount of 6.4% to the prevailing
ex income NAV per share. 32,500 of these shares were
subsequently reissued from treasury at an average discount of
2.8% to the prevailing cum income NAV per share at the time
of issue, resulting in a net gain to the Company of £20,000.
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 77.
Subscription Shares
The Company’s Subscription Shares were allotted on
4 September 2009 to Ordinary Shareholders on the register at
5.00 p.m. on 3 September 2009, by way of a bonus issue on
the basis of one Subscription Share for every five Ordinary
Shares held at that date. This resulted in the issue of
9,730,960 Subscription Shares.
As each Subscription Share conferred the right, but not the
obligation, to subscribe for one Ordinary Share, the Directors
considered that this met the criteria for the Subscription
Shares to be classified as equity in accordance with FRS 25.
The subscription right conferred by each Subscription Share
could be exercised on each of 31 October, 31 January,
30 April and 31 July (or if such date was not a business day,
on the next following business day) between (and including)
31 October 2009 and 31 July 2014.
Over the life of the Subscription Shares the subscription price
stepped up from 614 pence per share from 31 October 2009 to
31 July 2010, to 638 pence per share from 1 August 2010 to
31 July 2012 and finally to the final price of 699 pence per
share that applied until 31 July 2014, the date of expiry of the
Subscription Shares.
These subscription prices represented premia of 1%, 5% and
15% respectively to the published unaudited net asset value
per Ordinary Share as at 5.00 p.m. on 3 September 2009
(including revenue), which was 607.44 pence per share.
A full description of the Subscription Shares and their terms
was publicised via a prospectus issued to existing Ordinary
Shareholders on 11 August 2009, available on the Company’s
website.
235876 Finsbury WWH pp23-pp29new 03/07/2015 15:04 Page 26
Substantial Interests in Share Capital
The Company was aware of the following substantial interests in the voting rights of the Company as at 24 June 2015, the
latest practicable date before publication of the Annual Report:
Shareholder
Investec Wealth & Investment
Alliance Trust Savings
Rathbones
Charles Stanley, Stockbrokers
Brewin Dolphin, Stockbrokers
Spiers & Jeffrey, Stockbrokers
Hargreaves Lansdown
Smith & Williamson
24 June 2015
31 March 2015
Number of
shares
% of issued
share capital
Number of
shares
% of issued
share capital
5,552,472
2,378,965
2,330,783
1,921,609
1,796,717
1,788,697
1,779,499
1,447,725
11.6
5.0
4.9
4.0
3.8
3.7
3.7
3.0
5,509,664
2,388,583
2,493,253
1,997,390
1,887,022
1,784,582
1,779,435
1,484,841
11.4
5.0
5.2
4.2
3.9
3.7
3.7
3.1
As at 31 March 2015 the Company had 48,178,080 shares in issue. As at 24 June 2015 the Company had 47,773,249 shares in
issue (excluding treasury shares).
Beneficial Owners of Shares – Information Rights
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 Asset Services, or to the Company directly.
Significant Agreements
Details of the services provided under these agreements are
included in the Strategic Report on page 19.
Alternative Investment Fund Management
Agreement
The Board announced in 2014 that the Company had adjusted its
operational arrangements in order to comply with the AIFMD
and had appointed Frostrow as the designated AIFM for the
Company on the terms and subject to the conditions of the
alternative investment fund management agreement between
the Company and Frostrow (the “AIFM Agreement”). This
agreement terminated and replaced the then existing
management, administrative and secretarial services agreement
between the Company and Frostrow (the “Existing Management
Agreement”). The AIFM Agreement is based on the Existing
Management Agreement and differs only to the extent necessary
to ensure that the relationship between the Company and
Frostrow is compliant with the requirements of AIFMD.
Under the terms of the AIFM Agreement Frostrow 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 £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, and a performance fee as set
out in the Performance Fee section below.
The notice period on the AIFM Agreement with Frostrow is
12 months, termination can be initiated by either party.
Portfolio Management Agreement
Under the AIFM Agreement Frostrow has delegated the
portfolio management function to OrbiMed, under a new
portfolio management agreement between it, the Company
and Frostrow (the “Portfolio Management Agreement”). The
Portfolio Management Agreement terminated and replaced
the then existing investment management agreement
between the Company and OrbiMed (the “Existing IMA”). The
Portfolio Management Agreement is based on the Existing
IMA and differs only to the extent necessary to ensure that
the relationship between the Company, OrbiMed and
Frostrow is compliant with the requirements of the AIFMD.
OrbiMed receives a periodic fee equal to 0.65% p.a. of the
Company’s NAV and a performance fee as set out in the
Performance Fee section below. Its agreement with the
Company may be terminated by either party giving notice of
not less than 12 months.
Performance Fees
Dependent on the level of long-term outperformance of the
Company, OrbiMed and Frostrow are entitled to a
performance fee. The performance fee is calculated by
reference to the amount by which the Company’s NAV
performance has outperformed the Benchmark (see page 2
for details of the Benchmark).
Annual Report for the year ended 31 March 2015 26
Worldwide Healthcare Trust PLC
235876 Finsbury WWH pp23-pp29new 03/07/2015 12:33 Page 27
2
Governance
Report of the Directors
continued
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, OrbiMed receiving 15%
and Frostrow 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 payable is based on the lower of:
(i) The cumulative outperformance of the portfolio over the
Benchmark as at the quarter end date; and
(ii) The cumulative outperformance of the portfolio over the
Benchmark as at the corresponding quarter end date in the
previous year.
The effect of this is that outperformance has to be maintained
for a twelve month period before it is paid.
In addition, a performance fee only becomes payable to the
extent that the cumulative outperformance gives rise to a total
fee greater than the total of all performance fees paid to date.
As described in the Chairman’s statement, on page 3, a
provision for potential future performance fee payments
amounting to £16.7m has been included in the performance
fee accrual of £18.9m as detailed in note 11 on page 60. This
compares to a corresponding provision as at 31 March 2014
of £8.8m which, as a result of the continued outperformance
in the periods up to 31 March 2015, became payable in full
during this year.
The reason for the significant increase in this provision when
compared to prior years is the continued substantial
outperformance that has been generated for the Company
when compared to the Benchmark, coupled with the
consistency of, and length of time over which, the
outperformance has been achieved. The amount of the
£16.7m provision that may become payable is dependent on
the performance that is actually achieved in the year ending
31 March 2016. The maximum amount payable by 31 March
2016, in the event that the outperformance achieved as at
31 March 2015 is maintained, is £16.7m.
Depositary Agreement
The Company appointed J.P. Morgan Europe Limited (the
“Depositary”) as its Depositary in accordance with AIFMD on
the terms and subject to the conditions of the Depositary
agreement between the Company, Frostrow and the
Depositary (the “Depositary Agreement”). The previous
27 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
custody agreement between the Company and Goldman
Sachs & Co. was terminated.
Under the terms of the Depositary Agreement the Company
has agreed to pay the Depositary a fee calculated at 1.75bp
on net assets up to £150 million, 1.50 bps on net assets
between £150 million and £300 million 1.00bps on net assets
between £300 million and £500 million and 0.50bps on net
assets above £500 million. The Depositary has delegated the
custody and safekeeping of the Company’s assets to J.P.
Morgan Clearing Corp (the “Prime Broker”) pursuant to a
delegation agreement between the Company, Frostrow, the
Depositary and the Prime Broker (the “Delegation
Agreement”).
The Delegation Agreement transfers the Depositary’s liability
for the loss of the Company’s financial instruments held in
custody by the Prime Broker to the Prime Broker in
accordance with the AIFMD. The Company has consented to
the transfer and reuse of its assets by the Prime Broker
(known as “rehypothecation”) in accordance with the terms of
an institutional account agreement between the Company,
the Prime Broker and certain other J.P. Morgan entities (as
defined therein). See page 21 for further details.
Prime Brokerage Agreement
The Company appointed J.P. Morgan Clearing Corp (the
“Prime Broker”) on the terms and subject to the conditions
of the prime brokerage agreement between the Company,
Frostrow and the Depositary (the “Prime Brokerage
Agreement”). The Prime Broker receives interest on the
drawn overdraft as detailed in note 11 on page 60.
The Prime Broker is a registered broker-dealer and is
regulated by the United States Securities and Exchange
Commission.
Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report
from its operations, nor does it have responsibility for any
other emissions producing sources under the Companies
Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013.
Audit Tender
As reported in the Company’s 2014 annual report, following
a tender process held in April 2014 PricewaterhouseCoopers
LLP (‘PwC’) were recommended by the Audit Committee to
be appointed as Auditors to the Company with effect from
the conclusion of the Company’s Annual General Meeting
held on 14 July 2014.
235876 Finsbury WWH pp23-pp29new 03/07/2015 12:33 Page 28
Directors’ & Officers’ Liability Insurance
Cover
Directors’ & officers’ liability insurance cover was
maintained by the Company during the year ended 31 March
2015. It is intended that this policy will continue for the year
ending 31 March 2016 and subsequent years.
Directors’ Indemnities
During the year under review and to the date of this report,
indemnities were 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.
By order of the Board
Frostrow Capital LLP
Company Secretary
24 June 2015
Annual Report for the year ended 31 March 2015 28
Worldwide Healthcare Trust PLC
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2
Governance
Statement of Directors’ Responsibilities
Company law in the United Kingdom requires the Directors
to prepare financial statements for each financial year. The
Directors are responsible for preparing the Financial
Statements in accordance with applicable law and
regulations. In preparing these financial statements, the
Directors have:
• selected suitable accounting policies and applied them
consistently;
• made judgments and estimates that are reasonable and
prudent;
• followed applicable UK accounting standards; and
• prepared the financial statements on a going concern
basis.
The Directors are responsible for keeping adequate
accounting records 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.
The Directors are responsible for ensuring that the Report of
the Directors and other information included in the Annual
Report is prepared in accordance with company law in the
United Kingdom. They are also responsible for ensuring that
the Annual Report includes information required by the
Listing Rules of the FCA.
The financial statements are published on the Company’s
website www.worldwidewh.com and via Frostrow’s website
www.frostrow.com. The maintenance and integrity of these
websites, so far as it relates to the Company, is the
responsibility of Frostrow. The work carried out by the
Auditors does not involve consideration of the maintenance
and integrity of these websites and, accordingly, the Auditors
accept no responsibility for any changes that have occurred
to the financial statements since they were initially
presented on these websites. Visitors to the websites 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.
29 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
Going Concern
The financial statements have been prepared on a going
concern basis. The Directors consider this is the appropriate
basis as the Company has adequate resources to continue in
operational existence for the foreseeable future, being taken
as 12 months after approval of the financial statements. In
considering this, the Directors took into account the
diversified portfolio of readily realisable securities which can
be used to meet funding commitments and the ability of the
Company to meet all of its liabilities, including the overdraft
and ongoing expenses from its assets.
Disclosure of Information to the Auditors
So far as the Directors are aware, there is no relevant
information of which the Auditors are unaware. The
Directors have taken all steps they ought to have taken to
make themselves aware of any relevant audit information
and to establish that the Auditors are aware of such
information.
Responsibility Statement of the Directors in
respect of the Annual Financial Report
The Directors, whose details can be found on pages 23 and
24, confirm to the best of their knowledge that:
• the Financial Statements, within this 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 return for the
year ended 31 March 2015;
• the Chairman’s Statement, Strategic Report and the
Report of the Directors include a fair review of the
information required by 4.1.8R to 4.1.11R of the FCA’s
Disclosure and Transparency Rules; and
• the annual report and financial statements taken as a
whole are fair, balanced and understandable and provide
the information necessary to assess the Company’s
performance, business model and strategy.
On behalf of the Board
Sir Martin Smith
Chairman
24 June 2015
235876 Finsbury WWH pp30-pp37new 03/07/2015 12:36 Page 30
Corporate Governance
This Corporate Governance statement, on pages 30 to 37, forms part of the Report of the Directors.
The Board has considered the principles and recommendations of the AIC Code of Corporate Governance (AIC Code) by
reference to the AIC Corporate Governance Guide for Investment Companies (AIC Guide). The AIC Code, as explained by the
AIC Guide, addresses all the principles set out in the UK Corporate Governance Code, as well as setting out additional
principles and recommendations on issues that are of specific relevance to Investment Companies.
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 Corporate Governance Code), will provide better information to shareholders.
The Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Corporate
Governance Code, except as set out below.
The UK Corporate Governance Code includes provisions relating to:
• directors
• tenure
• the role of the chief executive
• executive directors’ remuneration
• the need for an internal audit function
For the reasons set out in the AIC Guide, and as explained in the UK Corporate governance Code, the Board considers these
provisions are not relevant to the position of the Company, being an externally managed investment company. In particular,
all of the Company’s day-to-day management and administrative functions are outsourced to third parties. As a result, the
Company has no executive directors, employees or internal operations. Therefore with the exception of Director tenure,
which is addressed further on page 31, and the need for an internal audit function which is addressed further on page 38, the
Company has not reported further in respect of these provisions.
The Principles of the AIC Code
The AIC Code is made up of twenty-one principles split into three sections covering:
- The Board
- Board Meetings and relations with Frostrow (as AIFM) and OrbiMed (as Portfolio Manager)
- Shareholder Communications
The Board
AIC Code Principle
Compliance Statement
1. The Chairman should be
independent.
2. A majority of the Board should
be independent of the
manager.
The Chairman, Sir Martin Smith, continues to be independent of the AIFM and the
Portfolio Manager. There is a clear division of responsibility between the Chairman, the
Directors, the AIFM, the Portfolio Manager and the Company’s other third party service
providers. The Chairman is responsible for the leadership of the Board and for
ensuring its effectiveness in all aspects of its role.
The Board consists of six non-executive Directors, each of whom (with the exception of
Samuel D. Isaly who is the Managing Partner at OrbiMed, the Company’s Portfolio Manager)
is independent of the AIFM and the Portfolio Manager. No other member of the Board is a
Director of another investment company managed by Frostrow or OrbiMed, nor has any
Board member been an employee of the Company, OrbiMed, Frostrow or any of its service
providers.
Annual Report for the year ended 31 March 2015 30
Worldwide Healthcare Trust PLC
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2
Governance
Corporate Governance
continued
AIC Code Principle
Compliance Statement
3. Directors should be submitted for
re-election at regular intervals.
Nomination for re-election
should not be assumed but be
based on disclosed procedures
and continued satisfactory
performance.
4. The Board should have a policy
on tenure, which is disclosed in
the annual report.
All Directors submit themselves for annual election or re-election by shareholders.
The individual performance of each Director standing for election or re-election is
evaluated annually by the remaining members of the Board and, if considered
appropriate, a recommendation is made that shareholders vote in favour of their
election or re-election at the Annual General Meeting.
The Nominations Committee considers the structure of the Board and recognises the
need for progressive refreshment.
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 their ability to act
independently and, following formal performance evaluations, believes that each of the
independent Directors is independent in character and judgment and that there are no
relationships or circumstances which are likely to affect their judgment.
The Board’s policy on tenure is that continuity and experience are considered to add
significantly to the strength of the Board and, as such, no limit on the overall length of
service of any of the Company’s Directors, including the Chairman, has been imposed.
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, although new Directors are appointed
with the expectation that they will serve for a minimum period of three years subject to
shareholder approval.
The terms and conditions of the Directors’ appointments are set out in letters of
engagement which are available for inspection on request at the office of the
Company’s AIFM and at the Annual General Meeting.
5. There should be full
disclosure of information
about the Board.
The Directors’ biographical details, set out on pages 23 and 24 demonstrate the wide
range of skills and experience that they bring to the Board.
Details of the length of service of each Director are set out below:
Length of service as at 24 June 2015
Sir Martin Smith
Sarah Bates
Jo Dixon
Dr David Holbrook
Samuel D. Isaly
Doug McCutcheon
7 years
2 years
11 years
7 years
20 years
2 years
Details of the Board’s Committees and their composition are set out on page 36.
The Chairman of the Company is a member of the Audit Committee, but does not chair
it. His membership is considered appropriate given the Chairman’s extensive
knowledge of the financial services industry.
31 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
235876 Finsbury WWH pp30-pp37new 03/07/2015 12:36 Page 32
AIC Code Principle
Compliance Statement
6. The Board should aim to
have a balance of skills,
experience, length of
service and knowledge of
the company.
7. The Board should
undertake a formal and
rigorous annual evaluation
of its own performance and
that of its committees and
individual directors.
8. Director remuneration
should reflect their duties,
responsibilities and the
value of their time spent.
The Nominations Committee considers annually the skills possessed by the Board and
identifies any skill shortages to be filled by new Directors. When considering new
appointments, the Committee reviews the skills of the Directors and seeks to add
persons with complementary skills or who possess the skills and experience which fill
any gaps in the Board’s knowledge or experience and who can devote sufficient time to
the Company to carry out their duties effectively.
The experience of the current Directors is detailed in their biographies set out on
pages 23 and 24.
The Company’s policy on diversity is set out on page 22.
During the year the performance of the Board and its committees was evaluated by
BoardAlpha, an independent external firm. BoardAlpha concluded that the Board and
its committees had continued to perform strongly on shareholders’ behalf since their
last review in 2012. A further independent external review will be carried out in 2018.
While the Board is satisfied that its structure, mix of skills and operation continue to be
effective and relevant for the Company, the Directors, with the assistance of specialist
independent advisers, have begun the process of reviewing the Board’s needs and
requirements over the long term.
The Management Engagement & Remuneration Committee reviews the fees paid to
the Directors and compares these with the fees paid by the Company’s peer group and
the investment trust industry generally, taking into account the level of commitment
and responsibility of each Board member. Details on the remuneration arrangements
for the Directors of the Company can be found in the Directors’ Remuneration Report
on pages 40 and 41.
As all of the Directors are non-executive, the Board considers that it is acceptable for
the Chairman of the Company to chair meetings when discussing Directors’ fees. The
Chairman takes no part in discussions regarding his own remuneration. The Board
periodically takes advice from external independent advisers on Directors’
remuneration.
9. The Independent Directors
should take the lead in the
appointment of new Directors
and the process should be
disclosed in the annual report.
Subject to there being no conflicts of interest, all members of the Nominations
Committee are entitled to vote on candidates for the appointment of new Directors and
on the recommendation for shareholders’ approval of the Directors seeking election or
re-election at the Annual General Meeting. The membership of the Committee
comprises solely those Directors considered to be independent by the Board.
Annual Report for the year ended 31 March 2015 32
Worldwide Healthcare Trust PLC
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2
Governance
Corporate Governance
continued
AIC Code Principle
Compliance Statement
10. Directors should be
offered relevant training
and induction.
11. The Chairman (and the
Board) should be brought
into the process of
structuring a new launch
at an early stage.
New appointees to the Board are provided with a full induction programme. The
programme covers the Company’s investment strategy, policies and practices. The
Directors are also given key information on the Company’s regulatory and statutory
requirements as they arise including information on the role of the Board, matters
reserved for its decision, the terms of reference for the Board Committees, the
Company’s corporate governance practices and procedures and the latest financial
information. It is the Chairman’s responsibility to ensure that the Directors have
sufficient knowledge to fulfil their role and Directors are encouraged to participate in
training courses where appropriate.
The Directors have access to the advice and services of a Company Secretary, through
Frostrow, who is responsible to the Board for ensuring that Board procedures are
followed and that applicable rules and regulations are complied with. The Company
Secretary is also responsible for ensuring good information flows between all parties.
Principle 11 applies to the launch of new investment companies and is not applicable to
the Company.
Board Meetings and relations with the AIFM and the Portfolio Manager
12. Boards and managers
should operate in a
supportive, co-operative
and open environment.
The Board meets regularly throughout the year and a representative of the AIFM and
the Portfolio Manager is in attendance at each Board meeting. The Chairman
encourages open debate to foster a supportive and co-operative approach for all
participants.
13. The primary focus at
regular board meetings
should be a review of
investment performance
and associated matters,
such as gearing, asset
allocation, marketing/
investor relations, peer
group information and
industry issues.
The Board has agreed a schedule of matters specifically reserved for decision by the
Board. This includes establishing the investment objectives, strategy and benchmarks,
the permitted types or categories of investments, the markets in which transactions
may be undertaken, the amount or proportion of the assets that may be invested in any
category of investment or in any one investment, and the Company’s share issuance
and share buy-back policies.
The Board, at its regular meetings, undertakes reviews of key investment and financial
data, revenue projections and expenses, analyses of asset allocation, transactions and
performance comparisons, share price and net asset value performance, marketing and
shareholder communication strategies, the risks associated with pursuing the
investment strategy, peer group information and industry issues.
14. Boards should give
sufficient attention to
overall strategy.
The Board is responsible for strategy and has established an annual programme of
agenda items under which it reviews the objectives and strategy for the Company at
each meeting.
33 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
235876 Finsbury WWH pp30-pp37new 03/07/2015 12:36 Page 34
AIC Code Principle
Compliance Statement
15. The Board should
regularly review both the
performance of, and
contractual arrangements
with, the AIFM and the
Portfolio manager (or
executives of a
self-managed company).
16. The Board should agree
policies with the AIFM and
the Portfolio Manager
covering key operational
issues.
17. Boards should monitor the
level of the share price
discount or premium (if
any) and, if desirable, take
action to reduce it.
18. The Board should monitor
and evaluate other service
providers.
The Board has delegated the following activities to its committees:
The Management Engagement & Remuneration Committee meets at least once a year
and reviews the performance of the AIFM and the Portfolio Manager. This Committee
considers the quality, cost and remuneration method (including the performance fee) of
the service provided by the AIFM and the Portfolio Manager against their contractual
obligations. It also considers the performance analysis provided by the AIFM and the
Portfolio Manager.
The Audit Committee reviews the risk matrix and oversees the risk and control
environment of the Company, including monitoring the internal control system in
operation at its principal service providers. Further details can be found on pages 38 to
40.
The Portfolio Management Agreement between the Company, the AIFM and the
Portfolio Manager sets out the limits of the Portfolio Manager’s authority, beyond which
Board approval is required. The Board has also agreed detailed guidelines and limits
with the AIFM and the Portfolio Manager, which are considered at each Board meeting.
A representative from the AIFM and the Portfolio Manager attends each meeting of the
Board to address questions on specific matters and to seek approval for specific
transactions which the Portfolio Manager is required to refer to the Board.
The AIFM has delegated the management of the Company’s portfolio and also the
voting powers relating to the securities held therein to the Portfolio Manager.
Contentious or sensitive matters are referred to the Board for consideration.
The Board has reviewed the Portfolio Manager’s Stewardship Policy, which includes its
Corporate Governance and Voting Guidelines, and which is published on its website:
www.orbimed.co.uk
Reports on commissions paid by the Portfolio Manager are submitted to the Board
regularly.
The Board considers any imbalances in the supply of and the demand for the
Company’s shares in the market and has put in place a Discount Control Mechanism
as described on page 22.
The Management Engagement & Remuneration Committee reviews, the performance
of all the Company’s third party service providers, including the level and structure of
fees payable and the length of the notice period, to ensure that they remain competitive
and in the best interests of shareholders.
The Audit Committee reviews reports from the principal service providers on
compliance and the internal and financial control systems in operation and relevant
independent audit reports thereon, as well as reviewing service providers’ anti-bribery
and corruption policies to address the provisions of the Bribery Act 2010.
Annual Report for the year ended 31 March 2015 34
Worldwide Healthcare Trust PLC
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2
Governance
Corporate Governance
continued
Shareholder Communications
AIC Code Principle
Compliance Statement
19. The Board should regularly
monitor the shareholder
profile of the company and
put in place a system for
canvassing shareholder
views and for communicating
the Board’s views to
shareholders.
Details of the Company activities undertaken to promote the Company and manage
relations with shareholders are set out on pages 21 and 22. In addition, all
shareholders are encouraged to attend the Annual General Meeting, where they are
given the opportunity to question the Chairman, the Board and representatives of
OrbiMed.
Shareholders wishing to communicate with the Chairman, or any other member of the
Board, may do so by writing to the Company, for the attention of the Company
Secretary at the Offices of Frostrow.
20. The Board should normally
take responsibility for, and
have a direct involvement in,
the content of communications
regarding major corporate
issues even if the manager is
asked to act as spokesman.
21. The Board should ensure
that shareholders are
provided with sufficient
information for them to
understand the risk/reward
balance to which they are
exposed by holding the
shares.
The Directors welcome the views of all shareholders and place considerable
importance on communications with them.
All substantive communications regarding any major corporate issues are discussed by
the Board taking into account representations from the AIFM and the Portfolio
Manager, the Auditors, legal advisers and the Corporate Stockbroker.
The Company places great importance on communication with shareholders and aims
to provide them with a full understanding of the Company’s investment objective, policy
and activities, its performance and the principal investment risks by means of
informative Annual and Half Year reports. This is supplemented by the daily publication,
through the London Stock Exchange, of the net asset value of the Company’s shares.
In line with its primary focus, the Board retains responsibility for all key elements of
the Company’s strategy and business model. Further details can be found in the
Business Review on page 18.
The annual report provides information on the Portfolio Manager’s investment
performance, portfolio risk and, operational and compliance issues. Further details on
the risk/reward balance are set out in the Strategic Report under Principal Risks on
pages 20 and 22 and in note 18 beginning on page 63.
The Portfolio is listed on pages 8 to 10.
The Company’s website, www.worldwidewh.com, is regularly updated with monthly
factsheets and provides useful information about the Company including the
Company’s financial reports and announcements.
35 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
235876 Finsbury WWH pp30-pp37new 03/07/2015 12:36 Page 36
The Board and Committees
Responsibility for effective governance lies with the Board. The governance framework of the Company reflects the fact that
as an Investment Company it has no employees and outsources portfolio management to OrbiMed and risk management,
company management, company secretarial, administrative and marketing services to Frostrow.
Chairman – Sir Martin Smith
Senior Independent Director – Jo Dixon
The Board
Four additional non-executive Directors, all considered independent except for Samuel D. Isaly, as noted on page 24.
Key responsibilities:
– to provide leadership and set strategy, values and standards within a framework of prudent effective controls which
enable risk to be assessed and managed;
– to ensure that a robust corporate governance framework is implemented; and
– to challenge constructively and scrutinise performance of all outsourced activities.
Management
Engagement &
Remuneration
Committee
Chairman
Sir Martin Smith
All Independent Directors
Key responsibilities:
– to review regularly the
contracts, the performance
and remuneration of the
Company’s principal service
providers; and
– to set the remuneration policy
of the Company.
Audit
Committee
Chairman
Jo Dixon
Nominations
Committee
Chairman
Jo Dixon
All Independent Directors
All Independent Directors
Key responsibilities:
Key responsibilities:
– to review the Company’s
financial reports;
– to oversee the risk and control
environment and financial
reporting; and
– to review the performance of
the Company’s external
Auditors.
– to review regularly the Board’s
structure and composition;
and
– to make recommendations for
any changes or new
appointments.
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.
Anti-Bribery and Corruption Policy
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. The
policy is reviewed regularly by the Audit Committee.
Relations with Shareholders
Details of the Company’s activities undertaken to promote
the Company and manage relations with shareholders are
set out on pages 21 and 22.
Annual Report for the year ended 31 March 2015 36
Worldwide Healthcare Trust PLC
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2
Governance
Corporate Governance
continued
The Board supports the principle that the Annual General
Meeting be used to communicate with investors, with all
Directors attending the Annual General Meeting, under the
Chairmanship of the Chairman of the Board. Details of proxy
votes received in respect of each resolution are made
available to shareholders at the meeting and are also
published on the Company’s website at
www.worldwidewh.com.
Representatives from the Portfolio 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 later on this page.
The annual and half-year financial reports, and a monthly fact
sheet are available to all shareholders. The Board, with the
advice of Frostrow, reviews the format of the annual and
half-year 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 and the AIFM have delegated authority to
OrbiMed to vote the shares owned by the Company that are
held on its behalf by J.P. Morgan Clearing Corp. The Board
has instructed that OrbiMed submit votes for such shares
wherever possible. This accords with current best practice
whilst maintaining a primary focus on financial returns.
OrbiMed may refer to the Board on any matters of a
contentious nature. The Company does not retain voting
rights on any shares that are held as collateral in connection
with the overdraft facility provided by J.P. Morgan Clearing
Corp.
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.
By order of the Board
Frostrow Capital LLP
Company Secretary
24 June 2015
37 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
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Audit Committee Report
The Audit Committee, which comprises those Directors
considered to be independent by the Board, met three times
during the course of the year and up to the date of this
Annual Report. Attendance by each Director is shown in the
table on page 23.
5. To consider the need for an internal audit function.
Since the Company delegates its day-to-day operations
to third parties and has no employees, the Audit
Committee has determined there is no requirement for
such a function.
Responsibilities
The Audit Committee’s main responsibilities during the year
were:
1. To review the Company’s half-year and annual report. In
particular, the Audit Committee considered whether the
annual report is fair, balanced and understandable,
allowing shareholders to more easily assess the
Company’s strategy, investment policy, business model
and financial performance.
2. To review the risk management and internal control
processes of the Company and its key service providers.
Further details of the Audit Committee’s review are
included in the Internal Controls and Risk Management
section on page 39.
3. To recommend the appointment of external Auditors,
agreeing the scope of its work and its remuneration,
reviewing its independence and the effectiveness of the
audit process.
During the year the nature and scope of the audit
together with PricewaterhouseCoopers LLP’s (PwC’s)
audit plan were considered by the Audit Committee
without PwC being present. The Chairman of the Audit
Committee met with PwC and Frostrow to discuss in
detail the outcome of the audit and the draft Annual
Report. The Audit Committee then met PwC, without
Frostrow or OrbiMed, to review and discuss the outcome
of the audit and the draft Annual Report.
4. To consider any non-audit work to be carried out by the
Auditors. The Audit Committee reviews the need for
non-audit services to be provided by the Auditors 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 £15,700 were payable to the Auditors,
PwC during the year for agreed upon procedures in
relation to the Company’s performance fee review and
other audit related assurance services.
The Audit Committee has considered the extent and
nature of non-audit work performed by PwC and is
satisfied that this did not impinge on their independence
and is a cost effective way for the Company to operate.
The Audit Committee’s terms of reference are available for
review on the Company’s website at www.worldwidewh.com.
Principal Activities and Business
In addition to fulfilling its main responsibilities as described
previously, the Audit Committee undertook the following:
• held a tender process as a result of which a
recommendation was made to the Board that PwC be
appointed as Auditors to the Company with effect from
the conclusion of the Company’s Annual General Meeting
held on 14 July 2014;
• reviewed the new arrangements with Frostrow and
OrbiMed and the appointment of the Depositary and
Prime Broker following the implementation of the AIFMD,
including:
– review of assurance reports on controls and also
consideration of the control environment at Frostrow,
OrbiMed and J.P. Morgan;
– meetings with, review and consideration of the Prime
Broker J.P. Morgan Clearing Corp;
– obtaining a legal opinion on the responsibilities and
liability of each service provider; and,
– Consideration of the performance of Frostrow and
OrbiMed in discharging their existing responsibilities.
• Dealt with the significant reporting matters arising as
described below.
Overall accuracy of the Annual Report
The Audit Committee dealt with this matter by considering
the draft Annual Report, a letter from Frostrow in support of
the letter of representation made by the Board to the
Auditors and the Auditors’ Report to the Audit Committee.
Investments and Derivatives
The Audit Committee dealt with this matter by:
• ensuring that all investment holdings and cash/deposit
balances had been agreed to an independent
confirmation from the custodian or relevant counterparty;
• reconfirming its understanding of the processes in place
to record investment transactions and income, and to
value the portfolio;
Annual Report for the year ended 31 March 2015 38
Worldwide Healthcare Trust PLC
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2
Governance
Audit Committee Report
continued
• reviewing and amending, where necessary, the
Company’s register of key risks in light of changes to the
portfolio and the investment environment;
• gaining an overall understanding of the performance of
the portfolio both in capital and revenue terms through
comparison to the benchmark; and
• Conducting a review of how the Company’s derivative
risks are monitored and mitigating controls in place. The
Board has delegated to the Audit Committee the
responsibility for the review and maintenance of the risk
matrix and it reviews, in detail, the risk matrix each time it
meets, bearing in mind any changes to the Company, its
environment or service providers since the last review. Any
significant changes to the risk matrix are discussed with the
whole Board.
positions were monitored.
Performance Fees
The Audit Committee approached and dealt with this matter
by noting that the Auditors, as a separate engagement, had
been requested to report to the Board on the accuracy of the
performance fee calculation, and inputs to that calculation,
prior to the payment of all performance fees.
Internal Controls and Risk Management
As set out on page 18 the Board is responsible for the risk
assessment and review of internal controls of the Company,
undertaken in the context of the 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:
Directors Confirmation
The Directors confirm that they have carried out a review of
the effectiveness of the system of internal financial control
and risk management during the year, as set out above and
that:
(a) An ongoing procedure for identifying, evaluating and
managing significant risks faced by the Company was in
place for the year under review and up to 24 June 2015.
This procedure is regularly reviewed by the Board; and
(b) They are responsible for the Company’s system of
internal controls and for reviewing its effectiveness and
that it is designed to manage the risk of failure to achieve
business objectives. This can only provide reasonable not
absolute assurance against material misstatement or
loss.
• the nature of the Company, with all management
functions outsourced to third party service providers;
Jo Dixon
Chairman of the Audit Committee
24 June 2015
• the nature and extent of risks which it regards as
acceptable for the Company to bear within its overall
investment 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, a risk matrix has been developed
which covers all key risks the Company faces, the likelihood
of their occurrence and their potential impact, how these
39 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
235876 Finsbury WWH pp38-pp47new 03/07/2015 12:37 Page 40
Directors’ Remuneration Report
Statement from the Chairman
This report has been prepared in accordance with Schedule 8 of
the large and medium-sized Companies and Groups (Accounts
and Reports) (Amendment) Regulations 2013 and in
accordance with Listing Rules of the Financial Conduct
Authority. An Ordinary Resolution for the approval of this report
will be put to shareholders at the Company’s forthcoming
Annual General Meeting. The law requires the Company’s
Auditors to audit certain of the disclosures provided in this
report. Where disclosures have been audited, they are indicated
as such and the Auditors’ audit opinion is included in its report
to shareholders on pages 42 to 47.
The Management Engagement & Remuneration Committee
considers the framework for the remuneration of the
Directors on an annual basis. It reviews the ongoing
appropriateness of the Company’s remuneration policy and
the individual remuneration of Directors by reference to the
activities and particular complexities of the Company and
comparison with other companies of a similar structure and
size. This is in-line with the AIC Code.
A non-binding Ordinary Resolution proposing adoption of the
Remuneration Report was put to shareholders at the Annual
General Meeting of the Company held on 14 July 2014, and was
passed by 98.3% of the votes cast by shareholders voting on the
Resolution.
As noted in the Strategic Report, all of the Directors are
non-executive and therefore there is no Chief Executive Officer.
The Company does not have any employees. There is therefore
no Chief Executive Officer or employee information to disclose.
Directors’ Remuneration Policy
The Company’s Remuneration Policy provides that fees
payable to the Directors should reflect the time spent by the
Board on the Company’s affairs and the responsibilities
borne by the Directors and should be sufficient to enable
candidates of high calibre to be recruited. Directors are
remunerated in the form of fees payable monthly in arrears,
paid to the Director personally or to a specified third party.
There are no long-term incentive schemes, share option
schemes, pension arrangements, bonuses, or other benefits
in place and fees are not specifically related to the Directors’
performance, either individually or collectively.
The remuneration for the non-executive Directors is
determined within the limits set out in the Company’s
Articles of Association. The present limit is £250,000 in
aggregate per annum.
A resolution to approve the Remuneration Policy was also
put to shareholders at the last Annual General Meeting, and
was passed by 97.1% of shareholders voting on the
resolution. The aforementioned Remuneration Policy
provisions will apply until they are next put to shareholders
for renewal of that approval, which must be at intervals of
not more than three years, or if the Remuneration Policy is
varied in which case shareholder approval for the new
Remuneration Policy will be sought.
Directors’ Appointment
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 to re-election annually thereafter. The
terms also provide that a Director may be removed without
notice and that compensation will not be due on leaving
office.
Directors’ Fees
At the most recent Management Engagement &
Remuneration Committee held on 24 February 2015 it was
agreed to increase the Directors’ fees, with effect from
1 April 2015 as follows:
The Chairman of the Company, and Jo Dixon, as Chairman of
the Audit Committee and Senior Independent Director, will
receive an annual fee of £43,200 and £33,450, respectively.
Sarah Bates, Dr David Holbrook, Samuel D. Isaly and Doug
McCutcheon will each receive an annual fee of £27,300.
Having obtained external advice, it was agreed by the Board
that Jo Dixon (in addition to her base fee), would receive a
special one-off payment of £10,000 for the very considerable
additional work performed in regard to the AIFMD. This is
included in the table overleaf.
The Directors, as at the date of this report, all served
throughout the year. The table overleaf excludes any
employer’s national insurance contributions, if applicable.
No other forms of remuneration were received by the
Directors and so the fees represent the total remuneration
of each Director.
Annual Report for the year ended 31 March 2015 40
Worldwide Healthcare Trust PLC
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2
Governance
Directors’ Remuneration Report
continued
Directors’ Emoluments for the Year (Audited)
Date of
Appointment
to the Board
2015
Fees (£)
2014
8 November 2007
Sir Martin Smith
25 February 2004
Jo Dixon
22 May 2013
Sarah Bates
8 November 2007
Dr David Holbrook
14 February 1995
Samuel D. Isaly
7 November 2012
Doug McCutcheon
Anthony Townsend* 14 February 1995
41,100
39,800
26,000
26,000
26,000
26,000
–
39,150
27,850
21,275
24,750
24,750
24,750
7,489
184,900 170,014
*Anthony Townsend retired from the Board on 17 July 2013.
No communications have been received from shareholders
regarding Directors’ remuneration.
Total Shareholder Return for the Six Years to
31 March 2015
%
320
300
280
260
240
220
200
180
160
140
120
100
80
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Worldwide Healthcare Share Price (total return)
Benchmark Index
Rebased to 100 as at 31 March 2009
Source: Morningstar, Thomson Reuters and Bloomberg
Sums paid to Third Parties
Fees due to Dr Holbrook were paid to MTI Managers
Limited, his employer, otherwise none of the fees referred to
in the above table were paid to any third party in respect of
the services provided by any of the Directors.
The bar chart below shows the comparative cost of Directors’
fees compared with the level of dividend distribution and
ongoing charges for 2014 and 2015.
Relative Cost of Directors’ Remuneration
Directors’ Interests in the Company’s Shares
(Audited)
Ordinary
Subscription
Shares of 25p each Shares of 1p each
2014
2014
2015
2015
Sir Martin Smith
– Trustee
Jo Dixon
Sarah Bates
Dr David Holbrook
Samuel D. Isaly
Doug McCutcheon
5,859
11,871
–
2,725
3,000
3,859
7,200
7,200
1,094
1,094
3,600 353,600
15,000
15,000
45,349 385,753
–
–
–
–
–
–
–
–
400
–
600
–
–
720
–
1,720
Share Price Total Return
The chart above illustrates the total shareholder return for a
holding in the Company’s shares as compared to the
Benchmark, which the Board has adopted as the key
measure of the Company’s performance.
41 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
£m
8
7
6
5
4
3
2
1
0
Directors’
Fees
2015
Dividends
2015
Directors’
Fees
2014
Dividends
2014
Annual Statement
On behalf of the Board, I confirm that the Remuneration
Policy, set out on pages 40 and 41 of this Annual Report, and
Remuneration Report summarise, as applicable, for the year
to 31 March 2015:
(a) the major decisions on Directors’ remuneration;
(b) any substantial changes relating to Directors’
remuneration made during the year; and
(c) the context in which the changes occurred and decisions
have been taken.
Sir Martin Smith
Chairman
24 June 2015
235876 Finsbury WWH pp38-pp47new 03/07/2015 12:37 Page 42
Independent Auditors’ Report to the Members
of Worldwide Healthcare Trust PLC
Report on the financial statements
• We conducted our audit of the financial statements at the
Our opinion
In our opinion, Worldwide Healthcare Trust PLC’s financial
statements (the “financial statements”):
• give a true and fair view of the state of the Company’s
affairs as at 31 March 2015 and of its net return and cash
flows 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.
What we have audited
Worldwide Healthcare Trust PLC’s financial statements
comprise:
• the Balance Sheet as at 31 March 2015;
• the Income Statement for the year then ended;
• the Cash Flow Statement for the year then ended;
• the Reconciliation of Movements in Shareholders' Funds
for the year then ended; and
• the notes to the financial statements, which include the
significant accounting policies and other explanatory
information.
Certain required disclosures have been presented elsewhere
in the Annual Report, rather than in the notes to the
financial statements. These are cross-referenced from the
financial statements and are identified as audited.
The financial reporting framework that has been applied in
the preparation of the financial statements is applicable law
and United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice).
Our audit approach
Overview
Materiality
• Overall materiality: £9,825,000 which represents 1% of
net assets.
Audit scope
• The Company is a standalone Investment Trust Company
and engages Frostrow Capital LLP (the ‘AIFM’) to manage
its assets.
offices of the AIFM and JPMorgan Corporate &
Investment Bank (‘JPM CIB’) who the AIFM has engaged
to provide certain accounting, administrative and
valuation functions.
• We tailored the scope of our audit taking into account the
types of investments within the company, the involvement
of the third parties referred to above, the accounting
processes and controls, and the industry in which the
company operates.
Areas of focus
• Income from investments
• Valuation and existence of investments
• Performance fees
The scope of our audit and our areas of focus
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) (“ISAs (UK &
Ireland)”).
We designed our audit by determining materiality and
assessing the risks of material misstatement in the financial
statements. In particular, we looked at where the Directors
made subjective judgments, for example in respect of
significant accounting estimates that involved making
assumptions and considering future events that are
inherently uncertain. As in all of our audits, we also
addressed the risk of management override of internal
controls, including evaluating whether there was evidence of
bias by the directors that represented a risk of material
misstatement due to fraud.
The risks of material misstatement that had the greatest
effect on our audit, including the allocation of our resources
and effort, are identified as “areas of focus” in the table
below. We have also set out how we tailored our audit to
address these specific areas in order to provide an opinion
on the financial statements as a whole, and any comments
we make on the results of our procedures should be read in
this context. This is not a complete list of all risks identified
by our audit.
Annual Report for the year ended 31 March 2015 42
Worldwide Healthcare Trust PLC
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2
Governance
Independent Auditors’ Report to the Members
of Worldwide Healthcare Trust PLC continued
Area of focus
How our audit addressed the area of focus
Income from Investments
Refer to page 38 (Audit Committee Report), page 53
(Accounting Policies) and page 55 (Notes to the Accounts).
ISAs (UK & Ireland) presume there is a risk of fraud in
income recognition because of the pressure management
may feel to achieve capital growth in line with the objective
of the company.
We focused on the accuracy and completeness of dividend
income recognition and its presentation in the Income
Statement as set out in the requirements of The Association
of Investment Companies Statement of Recommended
Practice (the ‘AIC SORP’).
This is because incomplete or inaccurate income could have
a material impact on the company’s net asset value.
We assessed the accounting policy for income recognition for
compliance with accounting standards and the AIC SORP and
performed testing to check that income had been accounted
for in accordance with this stated accounting policy.
We found that the accounting policies implemented were in
accordance with accounting standards and the AIC SORP,
and that income has been accounted for in accordance with
the stated accounting policy.
We understood and assessed the design and implementation
of key controls surrounding income recognition. We then
tested those key controls using a combination of
re-performance, inspection and observation, as appropriate,
to obtain evidence that the controls had operated effectively
throughout the year.
In addition, we tested dividend receipts by agreeing the
dividend rates from a sample of investments to independent
third party sources.
No misstatements were identified by our testing which
required reporting to those charged with governance.
To test for completeness, we tested that the appropriate
dividends had been received in the year by reference to
independent data of dividends declared for a sample of
investment holdings in the portfolio.
Our testing did not identify any unrecorded dividends.
We tested the allocation and presentation of dividend income
between the revenue and capital return columns of the
Income Statement in line with the requirements set out in
the AIC SORP.
We then tested the validity of income and capital special
dividends to independent third party sources.
We did not find any special dividends that were not treated in
accordance with the AIC SORP.
43 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
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Area of focus
How our audit addressed the area of focus
Valuation and existence investments
Refer to page 38 (Audit Committee Report), page 52
(Accounting Policies) and pages 59 and 60 (Notes to the
Accounts).
The investment portfolio at 31 March 2015 principally
comprised listed equity investments, OTC swaps and
unquoted debt investments and totalled £1,093,000,000.
We focused on the valuation and existence of investments
because investments represent the principal element of the
net asset value as disclosed on the Balance Sheet in the
financial statements.
Performance fees
Refer to page 38 (Audit Committee Report), page 53
(Accounting Policies) and page 55 (Notes to the Accounts).
A performance fee of £18,889,000 is accrued at 31 March
2015.
We focused on this area because the performance fee is
calculated using a complex methodology as set out in the
AIFM Agreement and Portfolio Management Agreement.
We tested the valuation of the listed investments by agreeing
the prices used in the valuation to independent third party
sources.
No misstatements were identified by our testing which
required reporting to those charged with governance.
For OTC swaps and unquoted debt investments we
understood and evaluated the valuation methodology
applied, by reference to industry practice, and tested the
techniques used by the AIFM in determining their fair value,
and agreed to third party sources where applicable.
We also read the valuation reports and meeting minutes
where the valuations were discussed and agreed.
No misstatements were identified by our testing which
required reporting to those charged with governance.
We agreed the existence of investments to independent third
party sources:
• We obtained an independent confirmation from the
custodian, JPMorgan Chase Bank N.A, which confirmed
all listed investments.
• For derivatives not held by the custodian, we obtained an
independent confirmation from the broker, Goldman
Sachs International.
• The unquoted debt investments were agreed to
confirmations obtained directly from the relevant
counterparties.
No differences were identified.
We independently recalculated the performance fee using
the methodology set out in the AIFM Agreement and
Portfolio Management Agreement and agreed the inputs to
the calculation, including the benchmark data, to
independent third party sources, where applicable.
No misstatements were identified by our testing which
required reporting to those charged with governance.
Annual Report for the year ended 31 March 2015 44
Worldwide Healthcare Trust PLC
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2
Governance
Independent Auditors’ Report to the Members
of Worldwide Healthcare Trust PLC continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion on the
financial statements as a whole, taking into account the
types of investments within the company, the involvement of
the AIFM and JPM CIB, the accounting processes and
controls, and the industry in which the company operates.
The AIFM outsources certain accounting, administrative and
valuation functions to JPM CIB.
As part of our risk assessment, we assessed the control
environment in place at both the AIFM and JPM CIB to the
extent relevant to our audit. This assessment of the
operating and accounting structure in place at both
organisations involved obtaining and reading the relevant
control reports issued by the independent auditor of the
AIFM and JPM CIB in accordance with generally accepted
assurance standards for such work. We then identified those
key controls at JPM CIB on which we could place reliance to
provide audit evidence. We also assessed the gap period of
6 months between the period covered by the JPMorgan
controls report and the year-end of the Company. Following
this assessment, we applied professional judgment to
determine the extent of testing required over each balance
in the financial statements, including whether we needed to
perform additional testing in respect of those key controls to
support our substantive work. For the purposes of our audit,
we determined that additional testing of controls in place at
JPM CIB was not required because additional substantive
testing was performed.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to
evaluate the effect of misstatements, both individually and
on the financial statements as a whole.
Based on our professional judgement, we determined
materiality for the financial statements as a whole as
follows:
• Overall materiality – £9,825,000.
• How we determined it – 1% of net assets.
• Rationale for benchmark applied – We have applied this
benchmark, a generally accepted auditing practice for
investment trust audits, in the absence of indicators that
an alternative benchmark would be appropriate and
because we believe this provides an appropriate and
consistent year-on-year basis for our audit.
We agreed with the Audit Committee that we would report to
them misstatements identified during our audit above
£491,000 as well as misstatements below that amount that,
in our view, warranted reporting for qualitative reasons.
Going concern
Under the Listing Rules we are required to review the
Directors’ statement, set out on page 29, in relation to going
concern. We have nothing to report having performed our
review.
As noted in the Directors’ statement, the Directors have
concluded that it is appropriate to prepare the Company’s
financial statements using the going concern basis of
accounting. The going concern basis presumes that the
company has adequate resources to remain in operation,
and that the Directors intend it to do so, for at least one year
from the date the financial statements were signed. As part
of our audit we have concluded that the directors’ use of the
going concern basis is appropriate.
However, because not all future events or conditions can be
predicted, these statements are not a guarantee as to the
company’s ability to continue as a going concern.
45 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
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Other required reporting
Consistency of other information
Companies Act 2006 opinion
In our opinion:
Adequacy of accounting records and information and
explanations received
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
• we have not received all the information and explanations
• the information given in the Strategic Report and the
we require for our audit; or
Report of the Directors for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and
• 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 information given in the Corporate Governance
Statement set out on pages 30 to 37 with respect to
internal control and risk management systems and about
share capital structures is consistent with the financial
statements.
• the financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from this
responsibility.
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if,
in our opinion:
• information in the Annual Report is:
− materially inconsistent with the information in the
audited financial statements; or
− apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the company
acquired in the course of performing our audit; or
− otherwise misleading.
We have no exceptions to report arising from this
responsibility.
• the statement given by the Directors on page 29, in
accordance with provision C.1.1 of the UK Corporate
Governance Code (“the Code”), that they consider the
Annual Report taken as a whole to be fair, balanced and
understandable and provides the information necessary
for members to assess the Company’s performance,
business model and strategy is materially inconsistent
with our knowledge of the company acquired in the
course of performing our audit.
We have no exceptions to report arising from this
responsibility.
• the section of the Annual Report on pages 38 and 39, as
required by provision C.3.8 of the Code, describing the work
of the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee.
We have no exceptions to report arising from this
responsibility.
Directors’ remuneration
Directors’ Remuneration Report – Companies Act 2006
opinion
In our opinion, the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report to
you if, in our opinion, certain disclosures of Directors’
remuneration specified by law are not made. We have no
exceptions to report arising from this responsibility.
Corporate governance statement
Under the Listing Rules we are required to review the part of
the Corporate Governance Statement relating to the
company’s compliance with ten provisions of the UK
Corporate Governance Code. We have nothing to report
having performed our review.
Responsibilities for the financial statements and
the audit
Our responsibilities and those of the Directors
As explained more fully in the Statement of Directors’
Responsibilities 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
ISAs (UK & Ireland). Those standards require us to comply
with the Auditing Practices Board’s Ethical Standards for
Auditors.
Annual Report for the year ended 31 March 2015 46
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2
Governance
Independent Auditors’ Report to the Members
of Worldwide Healthcare Trust PLC continued
This report, including the opinions, has been prepared for
and only for the company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies Act
2006 and for no other purpose. We do not, in giving these
opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown
or into whose hands it may come save where expressly
agreed by our prior consent in writing.
What an audit of financial statements involves
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
provide a reasonable basis for us to draw conclusions. We
obtain audit evidence through testing the effectiveness of
controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial
information in the Annual Report to identify material
inconsistencies with the audited financial statements and to
identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the
implications for our report.
Sandra Dowling (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
• the overall presentation of the financial statements.
24 June 2015
We primarily focus our work in these areas by assessing the
Directors’ judgments against available evidence, forming our
own judgements, and evaluating the disclosures in the
financial statements.
We test and examine information, using sampling and other
auditing techniques, to the extent we consider necessary to
47 Worldwide Healthcare Trust PLC
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3
Financial Statements
Income Statement
For the year ended 31 March 2015
2015 2014
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 – 349,804 349,804 – 130,246 130,246
Exchange gains on currency balances – 6,302 6,302 – 10,039 10,039
Income from investments held at fair
value through profit or loss 2 8,474 – 8,474 9,048 – 9,048
AIFM, Portfolio management
and performance fees 3 (338) (23,149) (23,487) (249) (14,758) (15,007)
Other expenses 4 (825) – (825) (753) – (753)
Net return before finance
charges and taxation 7,311 332,957 340,268 8,046 125,527 133,573
Finance costs 5 (24) (449) (473) (20) (376) (396)
Net return before taxation 7,287 332,508 339,795 8,026 125,151 133,177
Taxation on net return on ordinary
activities 6 (1,090) (18) (1,108) (821) (233) (1,054)
Net return after taxation 6,197 332,490 338,687 7,205 124,918 132,123
Return per share – basic 7 13.0p 698.9p 711.9p 15.7p 271.9p 287.6p
Return per share – diluted 7 n/a n/a n/a 15.4p 267.5p 282.9p
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 these statements.
Annual Report for the year ended 31 March 2015 48
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3
Financial Statements
Reconciliation of Movements in Shareholders’ Funds
For the year ended 31 March 2015
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 2014 11,573 19 219,604 387,661 7,803 9,526 636,186
Net return from ordinary activities
after taxation – – – 332,490 – 6,197 338,687
Dividend paid in respect of
year ended 31 March 2014 – – – – – (3,733) (3,733)
First interim dividend paid in respect
of year ended 31 March 2015 – – – – – (2,891) (2,891)
Subscription shares exercised for
ordinary shares 466 (19) 12,542 19 – – 13,008
Shares purchased for treasury – – – (3,868) – – (3,868)
Shares issued from treasury – – 815 3,868 – – 4,683
Issue of new shares 6 – 435 – – – 441
At 31 March 2015 12,045 – 233,396 720,170 7,803 9,099 982,513
For the year ended 31 March 2014
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 2013 11,441 24 215,237 260,010 7,803 9,900 504,415
Net return from ordinary activities
after taxation – – – 124,918 – 7,205 132,123
Dividend paid in respect of
year ended 31 March 2013 – – – – – (4,352) (4,352)
First interim dividend paid in respect
of year ended 31 March 2014 – – – – – (3,227) (3,227)
Subscription shares exercised for
ordinary shares 132 (5) 3,565 5 – – 3,697
Shares issued from treasury – – 802 2,728 – – 3,530
At 31 March 2014 11,573 19 219,604 387,661 7,803 9,526 636,186
The accompanying notes are an integral part of these statements.
49 Worldwide Healthcare Trust PLC
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Balance Sheet
As at 31 March 2015
2015 2014
Notes £’000 £’000
Fixed assets
Investments held at fair value through profit or loss 9 1,012,625 673,138
Derivative – OTC swaps 9 & 12 78,688 40,325
1,091,313 713,463
Current assets
Debtors 10 1,548 24,243
Derivative – put and call options 9 & 12 2,654 1,067
Cash 7,579 –
11,781 25,310
Current liabilities
Creditors: amounts falling due within one year 11 (119,461) (101,536)
Derivatives – put and call options 9 & 12 (1,120) (1,051)
(120,581) (102,587)
Net current liabilities (108,800) (77,277)
Total net assets 982,513 636,186
Capital and reserves
Ordinary share capital 13 12,045 11,573
Subscription share capital 13 – 19
Share premium account 233,396 219,604
Capital reserve 19 720,170 387,661
Capital redemption reserve 7,803 7,803
Revenue reserve 9,099 9,526
Total shareholders’ funds 982,513 636,186
Net asset value per share – basic 14 2039.3p 1374.3p
Net asset value per share – fully diluted for
subscription shares and treasury shares 14 2039.3p 1348.2p
The financial statements on pages 48 to 68 were approved by the Board of Directors and authorised for issue on 24 June 2015
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)
Annual Report for the year ended 31 March 2015 50
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3
Financial Statements
Cash Flow Statement
For the year ended 31 March 2015
2015 2014
Notes £’000 £’000
Net cash (outflow)/inflow from operating activities 15 (6,283) 1,163
Servicing of finance
Interest paid (473) (396)
Taxation
Taxation reimbursed/(suffered) 933 (288)
Financial investments
Purchases of investments and derivatives (561,741) (501,915)
Sales of investments and derivatives 527,114 460,445
Net cash outflow from financial investment (34,627) (41,470)
Equity dividends paid 8 (6,624) (7,579)
Net cash outflow before financing (47,074) (48,570)
Financing
Issue of shares 441 –
Repurchase of own shares for treasury 13 (3,868) –
Issue of shares from treasury 13 4,683 3,530
Subscription shares exercised for ordinary shares 13 13,008 3,697
Net cash inflow from financing 14,264 7,227
Increase in net debt 16 (32,810) (41,343)
The accompanying notes are an integral part of this statement.
51 Worldwide Healthcare Trust PLC
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Notes to the Financial Statements
1.
ACCOUNTING POLICIES
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 company law, generally accepted
accounting standards (UK GAAP), the Statement of Recommended Practice ‘Financial Statements of Investment Trust
Companies and Venture Capital Trusts’ dated January 2009 (the ‘SORP’) and on a going concern basis, as set out on
page 29, in accordance with the Companies Act 2006 and under the historical cost convention, as modified by the
valuation of investments at fair value through profit or loss.
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
Quoted 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, or last trade, price depending on the convention of the exchange on which it is
quoted.
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, recent transactions and in accordance with International Private Equity and Venture Capital Association
(IPEVCA) valuation guidelines.
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 price at the time of purchase. All purchases and sales
are accounted for on a trade date basis.
(c) Derivative Financial Instruments
The Company uses derivative financial instruments (namely put and call options and equity swaps) to enhance
returns and mitigate risk.
All derivative instruments are valued at fair value in the Balance Sheet in accordance with FRS 26: ‘Financial
instruments: Recognition and Measurement’.
The equity swaps are accounted for as Fixed Assets in the Balance Sheet and Options are accounted for as Current
Assets or Current Liabilities in the Balance Sheet.
Options are reviewed on a case-by-case basis and gains and losses are charged to the capital column of the Income
Statement, where the option has been entered into to generate or protect capital returns. All of the put and call
options bought and sold during the year have been capital in nature.
All gains and losses on over-the-counter (OTC) equity swaps are accounted for as gains or losses on investments held
at fair value through profit or loss. 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.
Cash collateral held by counterparties is included within cash, except where there is a right of offset against the
overdraft facility.
Annual Report for the year ended 31 March 2015 52
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3
Financial Statements
Notes to the Financial Statements
continued
1.
ACCOUNTING POLICIES continued
(d) 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.
(e) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged through the revenue column of the
Income Statement except as follows:
•
•
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
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 portfolio management
and AIFM 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 portfolio
management and AIFM 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.
(f) 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.
(g) 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.
(h) Foreign Currency
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.
53 Worldwide Healthcare Trust PLC
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(i) Functional and Presentational Currency
The results and financial position of the Company are expressed in sterling, being the Company’s functional and
presentational currency. In arriving at the functional currency the Directors have considered the following:
•
•
•
•
•
the primary economic environment of the Company;
the currency in which the original capital was raised;
the currency in which distributions are made;
the currency in which performance is evaluated; and
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.
(j) Cash and Cash Equivalents
Cash in hand and in banks and short-term deposits which are held to maturity are carried at cost. Cash and cash
equivalents are defined as cash in hand, demand deposits and short-term, highly liquid investments readily
convertible to known amounts of cash and subject to insignificant risk of changes in value. Bank overdrafts that are
repayable on demand, which form an integral part of the Company’s cash management, are included as a component
of cash and cash equivalents for the purpose of the statement of cash flows.
(k) 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.
•
(l) Repurchase of Share Capital
When share capital is repurchased, the amount of consideration paid, including directly attributable costs,
is recognised as a deduction from equity. Repurchased shares which are not cancelled are classified as treasury
shares and presented as a deduction from equity.
(m) Dividend Payments
Dividends paid by the Company on its shares are recognised in the financial statements in the year in which they are
paid and are shown in the Reconciliation of Movements in Shareholders’ Funds.
Annual Report for the year ended 31 March 2015 54
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3
Financial Statements
Notes to the Financial Statements
continued
2.
INCOME FROM INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
-- 2015 2014
£’000 £’000
Income from investments
UK listed dividends – 247
Overseas dividends 7,206 7,645
Fixed interest income 1,129 1,151
8,335 9,043
Other income
Derivatives 139 –
Deposit interest – 5
Total income from investments held at fair value through profit or loss 8,474 9,048
Total income comprises:
Dividends 7,206 7,892
Interest 1,268 1,156
8,474 9,048
3.
AIFM, PORTFOLIO MANAGEMENT, AND PERFORMANCE FEES
2015 2014
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
AIFM fee 77 1,461 1,538 64 1,211 1,275
Portfolio management fee 261 4,962 5,223 185 3,529 3,714
Performance fee – 16,726 16,726 – 10,018 10,018
338 23,149 23,487 249 14,758 15,007
Further details of the performance fee amounts and basis can be found in the Report of the Directors on pages 26
and 27 under the heading ‘Performance Fee’ and in note 11 on page 60.
55 Worldwide Healthcare Trust PLC
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OTHER EXPENSES
4.
2015 2014
Revenue Revenue
£’000 £’000
Directors’ remuneration 185 170
Auditors’ remuneration for the audit of the Company’s financial statements 26 27
Auditors’ remuneration for non-audit services 16 28
Marketing expenses 43 46
Registrar fees 81 74
Broker fees 40 30
Legal and professional costs 44 109
Stock Exchange listing fees 33 23
Depositary and custody fees 85 4
Other costs 272 242
825 753
Details of the amounts paid to Directors are included in the Directors’ Remuneration Report on page 41.
Details of the amounts paid to the Auditors are included in the Audit Committee Report on page 38.
FINANCE COSTS
5.
2015 2014
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Finance costs 24 449 473 20 376 396
Annual Report for the year ended 31 March 2015 56
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3
Financial Statements
Notes to the Financial Statements
continued
6.
TAXATION ON NET RETURN ON ORDINARY ACTIVITIES
(a) Analysis of charge in year
2015 2014
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Corporation tax at 21%
(2014: 23%)
Tax relief to capital (18) 18 – – – –
Tax on capital dividend – – – – 233 233
Overseas taxation 1,108 – 1,108 821 – 821
1,090 18 1,108 821 233 1,054
(b) Factors affecting current tax charge for the year
Approved investment trusts are exempt from tax on capital gains made within the Company.
The tax charged for the year is lower than the standard rate of corporation tax in the UK for a large company 21%
(2014: 23%).
The difference is explained below.
2015 2014
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Net return before taxation 7,287 332,508 339,795 8,026 125,151 133,177
Corporation tax at 21%
(2014: 23%) 1,530 69,826 71,356 1,846 28,785 30,631
Non-taxable gains on
investments held at fair value
through profit or loss – (74,782) (74,782) – (32,266) (32,266)
Overseas withholding taxation 1,108 – 1,108 821 – 821
Non taxable overseas dividends (1,511) – (1,511) (1,792) – (1,792)
Non taxable UK dividends – – – (57) – (57)
Excess management expenses (19) 4,956 4,937 3 3,481 3,484
Overseas tax suffered on
dividend charged to capital – – – – 233 233
Tax relief to capital (18) 18 – – – –
Current tax charge 1,090 18 1,108 821 233 1,054
(c) Provision for deferred tax
No provision for deferred taxation has been made in the current or prior year. The Company has not provided for
deferred tax on capital profits and losses arising on the revaluation or disposal of investments, as it is exempt from
tax on these items because of its status as an investment trust company.
The Company has not recognised a deferred tax asset of £14,141,000 (20% tax rate) (2014: £10,982,000 (20% tax rate))
as a result of excess management expenses and loan expenses. It is not anticipated that these excess expenses will
be utilised in the foreseeable future.
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RETURN PER SHARE
7.
2015 2014
£’000 £’000
Basic
The return per share is based on the following figures:
Revenue return 6,197 7,205
Capital return 332,490 124,918
338,687 132,123
Weighted average number of ordinary shares in issue during the year 47,572,148 45,940,093
Revenue return per ordinary share 13.0p 15.7p
Capital return per ordinary share 698.9p 271.9p
711.9p 287.6p
Diluted
Revenue return n/a 7,205
Capital return n/a 124,918
n/a 132,123
Revenue return per ordinary share n/a 15.4p
Capital return per ordinary share n/a 267.5p
n/a 282.9p
Basic weighted average number of shares in issue during the year 47,572,148 45,940,093
Number of dilutive shares* n/a 753,640
Diluted shares in issue for the year n/a 46,693,733
The calculation of the diluted total, revenue and capital returns per Ordinary Share is carried out in accordance with
FRS 22, “Earnings per Share”. For the purposes of calculating diluted total return, the diluted shares in issue for the
year is the weighted average used in the basic calculation plus the number of shares deemed to be issued for no
consideration on the exercise of all Subscription Shares calculated by reference to the average share price of the
Ordinary Shares during the year.
2015 2014
* Subscription shares outstanding – A – 1,860,969
Exercise price – 699p
Total consideration on exercise – £13.0m
Average share price during the year – £11.75
Theoretical number of shares on exercise – B – 1,107,329
Dilutive shares A-B – 753,640
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3
Financial Statements
Notes to the Financial Statements
continued
8.
INTERIM DIVIDEND
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 2015 were as follows:
2015 2014
£’000 £’000
Interim dividend in respect of the year ended 31 March 2013 – 4,352
First interim dividend in respect of the year ended 31 March 2014 – 3,227
Second interim dividend in respect of the year ended 31 March 2014 3,733 –
First interim dividend in respect of the year ended 31 March 2015 2,891 –
6,624 7,579
In respect of the year ended 31 March 2015, the first interim dividend of 6.0p per share was paid on 9 January 2015. A
second interim dividend of 6.5p is payable on 14 July 2015, the associated ex dividend date was 11 June 2015. The
total dividends payable in respect of the year ended 31 March 2015 amount to 12.5p per share (2014: 15.00p per
share). The aggregate cost of the second interim dividend, based on the number of shares in issue at 24 June 2015,
will be £3,105,000. In accordance with FRS 21 the second interim dividend will be reflected in the financial statements
for the year ending 31 March 2016. 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:
2015 2014
£’000 £’000
Revenue available for distribution by way of dividend for the year 6,197 7,205
First interim dividend in respect of the year ended 31 March 2014 – (3,227)
Second interim dividend in respect of the year ended 31 March 2014 – (3,733)
First interim dividend in respect of the year ended 31 March 2015 (2,891) –
Second interim dividend in respect of the year ended 31 March 2015* (3,105) –
Net retained revenue 201 245
*based on 47,773,249 shares in issue as at 24 June 2015.
INVESTMENTS
9.
Unquoted Derivative
Quoted Debt Financial
Investments Investments Instruments Total
£’000 £’000 £’000 £’000
Cost at 1 April 2014 509,033 7,935 41,288 558,256
Investment holding gains/(losses) at 1 April 2014 156,101 69 (947) 155,223
Valuation at 1 April 2014 665,134 8,004 40,341 713,479
Movement in the year:
Purchases at cost 497,562 8,436 28,898 534,896
Sales – proceeds (487,012) (1,412) (17,024) (505,448)
– realised gains/(losses) on sales 142,826 (20) 13,925 156,731
Net movement in investment holding gains 178,053 1,054 14,082 193,189
Valuation at 31 March 2015 996,563 16,062 80,222 1,092,847
Cost at 31 March 2015 662,409 14,939 67,087 744,435
Investment holding gains at 31 March 2015 334,154 1,123 13,135 348,412
Valuation at 31 March 2015 996,563 16,062 80,222 1,092,847
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2015 2014
£’000 £’000
Gains on investments
Realised gains based on historical cost – sales 156,731 104,503
Less: amounts recognised as investment holding gains in previous years (71,744) (61,164)
Realised gains based on carrying value at previous Balance Sheet date 84,987 43,339
Movement in investment holding gains in the year 264,817 86,907
Gains on investments 349,804 130,246
Purchase transaction costs for the year to 31 March 2015 were £553,000 (year ended 31 March 2014: £718,000). These
comprise mainly commission and stamp duty.
Sales transaction costs for the year to 31 March 2015 were £340,000 (year ended 31 March 2014: £643,000). These
comprise mainly commission.
10. DEBTORS
2015 2014
£’000 £’000
Amounts due from brokers – 21,666
Withholding taxation recoverable 733 1,666
VAT recoverable 20 82
Prepayments and accrued income 795 829
1,548 24,243
11. CREDITORS
2015 2014
£’000 £’000
Amounts falling due within one year
Amounts due to Prime Broker 1,789 28,634
Overdraft facility* 96,810 62,723
Performance fee accrued^ 18,889 8,829
Other creditors and accruals 1,973 1,350
119,461 101,536
*The Company’s borrowing requirements are met through the utilisation of an overdraft facility provided by J.P. Morgan
Clearing Corp.
As at 31 March 2015, the overdraft facility of £96.8 million is net of £1.4 million of cash held as collateral against
certain derivative positions. See page 66 for further details. As described on page 21, J.P. Morgan Clearing Corp may
take up to 140% of the value of the overdrawn balance as collateral and has been granted a first priority security
interest or lien over the Company’s assets. At 31 March 2015, 140% (2014:138%) of the overdraft was taken as
collateral (see page 66 under credit risk for further details).
Interest on the drawn overdraft is charged at the Federal Funds effective rate plus 45 basis points.
^This amount consists of £2,163,000 that has crystallised and is payable, and a provision of £16,726,000 which represents
the maximum amount which could become payable at performance fee calculation dates during the year ending
31 March 2016 if outperformance is maintained to those dates. (See pages 26 and 27 of the Report of Directors and
note 3 on page 55 for further details).
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3
Financial Statements
Notes to the Financial Statements
continued
12. DERIVATIVE FINANCIAL INSTRUMENTS
2015 2014
£’000 £’000
Fair value of OTC equity swaps 78,688 40,325
Fair value of put and call options (long) 2,654 1,067
Fair value of put and call options (short) (1,120) (1,051)
80,222 40,341
See note 9 on pages 59 and 60 for movements during the year.
SHARE CAPITAL
13.
Total Total
ordinary subscription
Ordinary Treasury shares shares
shares shares in issue in issue
number number number number
Issued and fully paid at 1 April 2014 46,292,111 – 46,292,111 1,860,969
Subscription shares converted to ordinary shares 1,860,969 – 1,860,969 (1,860,969)
Ordinary shares purchased for treasury (286,096) 286,096 – –
Ordinary shares re-issued from treasury 286,096 (286,096) – –
Issue of new shares 25,000 – 25,000 –
At 31 March 2015 48,178,080 – 48,178,080 –
2015 2014
£’000 £’000
Issued and fully paid:
Ordinary shares of 25p 12,045 11,573
Subscription shares of 1p – 19
During the year ended 31 March 2015 286,096 Ordinary Shares were bought back by the Company into treasury at a
cost of £3,868,000 (2014: No shares bought back). In 2015 286,096 (2014: 328,408) Ordinary Shares were issued from
treasury, raising proceeds of £4,683,000 (2014: £3,530,000). No Ordinary Shares were held in treasury at 31 March
2015 (2014: nil). 1,860,969 new Ordinary Shares were issued during the year as a result of holders of Subscription
Shares exercising their subscription rights, raising £13,008,000 (2014: 528,957, raising £3,697,000). 25,000 new shares
were issued raising £441,000 (2014: no new shares issued). There were no Subscription Shares bought back for
cancellation during the year (2014: nil).
14. NET ASSET VALUE PER SHARE
2015 2014
Net asset value per share – basic 2039.3p 1,374.3p
Net asset value per share – diluted for subscription shares n/a 1,348.2p
Net asset value per share – basic
The net asset value per share is based on the assets attributable to equity shareholders of £982,513,000 (2014:
£636,186,000) and on the number of Ordinary Shares in issue at the year end of 48,178,080 (2014: 46,292,111). As at
31 March 2015, there were no Subscription Shares in issue (2014: 1,860,969).
Net asset value per share – diluted
As at 31 March 2015 there were no Subscription Shares in issue and no Ordinary Shares held in treasury, as such there
is no diluted NAV per share for 2015. The 2014 diluted NAV per share assumed all outstanding Subscription Shares
were exercised at 699p resulting in assets attributable to shareholders of £649,194,000 and on 48,153,080 Shares.
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15. RECONCILIATION OF OPERATING RETURN TO NET CASH INFLOW FROM OPERATING ACTIVITIES
2015 2014
£’000 £’000
Gains before finance costs and taxation 340,268 133,573
Less: capital gain before finance costs and taxation (332,957) (125,527)
Revenue return before finance costs and taxation 7,311 8,046
Expenses charged to capital (23,149) (14,758)
Decrease in prepayments and accrued income 34 96
Decrease/(increase) in other debtors 62 (16)
Increase in creditors and accruals 10,683 8,849
Net taxation suffered on investment income (1,108) (1,054)
Amortisation (116) –
Net cash (outflow)/inflow from operating activities (6,283) 1,163
16. RECONCILIATION OF NET CASH FLOW MOVEMENT TO MOVEMENT IN NET DEBT
2015 2014
£’000 £’000
Increase in net debt resulting from cashflows (32,810) (41,343)
Exchange movements 6,302 10,039
Movement in net debt in the year (26,508) (31,304)
Net debt at start of year (62,723) (31,419)
Net debt at end of year (89,231) (62,723)
Net debt includes the bank overdraft of £96,810,000 (see note 11) and cash as per the balance sheet of £7,579,000.
17. RELATED PARTIES
The following are considered to be related parties:
•
•
OrbiMed Capital LLC
The Directors of the Company
Details of the relationship between the Company and OrbiMed Capital LLC, the Company’s Portfolio Manager, is
disclosed in the Board of Directors section on page 24. Samuel D. Isaly is a Director of the Company, and also the
Managing Partner at OrbiMed Capital LLC. Details of fees paid to OrbiMed by the Company can be found in note 3 on
page 55. All material related party transactions have been disclosed in notes 3 and 4 on pages 55 and 56. Details of
the remuneration of all Directors can be found on pages 40 and 41. Details of the Directors’ interests in the capital of
the Company can be found on page 41.
A number of the partners at OrbiMed Capital LLC have a minority financial interest totalling 20% in Frostrow Capital
LLP, the Company’s AIFM. Details of the fees paid to Frostrow Capital LLP by the Company can be found in the note 3
on page 55.
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3
Financial Statements
Notes to the Financial Statements
continued
18.
FINANCIAL INSTRUMENTS
Risk management policies and procedures
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 6 and 7. 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, with the exception of liquidity risk, and the Directors’ approach to the management of them, are set out
in the Strategic Report on pages 20 and 21 and have not changed from the previous accounting year. The AIFM, in
close co-operation with the Board and the Portfolio Manager co-ordinate the Company’s risk management.
Use of derivatives
As noted in the Strategic Report, on pages 6 and 7, options and equity swaps are used within the Company’s portfolio.
More details on options and swaps can be found in the Glossary on pages 70 and 71.
Put and call options
OrbiMed employs, when appropriate, options strategies in an effort to enhance returns and to improve the risk-return
profile of the Company’s portfolio.
The Board monitor the use of options through a monthly report, summarising the options activity and strategic intent,
provided by OrbiMed.
OrbiMed employs the following option strategies, or a combination of such:
•
•
•
•
Buy calls: provides leveraged long exposure while minimising capital at risk;
Buy puts: provides leveraged protection, against price falls while minimising capital at risk;
Sell calls: against an existing position, provides partial protection from a decline in stock price, facilitates
commitment to an exit strategy and exit price that is consistent with fundamental analysis;
Sell puts: provides an effective entry price at which to add to an existing position, or provides an effective entry
price at which to initiate a new position.
OTC equity swaps
The Company uses OTC equity swap positions to gain access to Indian markets and Chinese markets because the
Company is not locally registered to trade in either market and gain exposure to thematic baskets of stocks.
Details of funded and financed* swap positions are noted in the Portfolio on page 9.
Collateral cash of £9.0 million was held against the financed swap positions, of which £1.4 million was offset against
the overdraft position. The equivalent amount in 2014 was £4.8 million which as part of the arrangements in place at
the time was offset against the overdraft.
Offsetting disclosure
Swap basket trades and OTC derivatives are traded under ISDA† Master Agreements. The Company currently has
such agreements in place with Goldman Sachs and JP Morgan.
†International Swap Dealers Association Inc.
*See Glossary on page 70 for description of funded and financed swaps.
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These agreements create a right of set-off that becomes enforceable only following a specified event of default, or in
other circumstances not expected to arise in the normal course of business. As a result, as the right of set-off is not
unconditional, for financial reporting purposes, the Company does not offset derivative assets and derivative liabilities.
(i) Other price risk
In pursuance of the Company’s Investment Objective the Company’s portfolio, including its derivatives, is exposed to
the risk of fluctuations in market prices and foreign exchange rates.
The Board manage these risks through the use of limits and guidelines, monthly compliance reports from Frostrow
and reports from Frostrow and OrbiMed presented at each Board meeting, as set out on pages 20 to 22.
Other price risk exposure
The Company’s gross exposure to other price risk is represented by the fair value of the investments and the
underlying exposure through the derivative investments held at the year end as shown in the table below.
2015 2014
Notional* Notional
Assets Liabilities exposure Assets Liabilities exposure
£’000 £’000 £’000 £’000 £’000 £’000
Investments 1,012,625 – 1,012,625 673,138 – 673,138
Put and call options 2,654 (1,120) 15,090 1,067 (1,051) 21,369
OTC equity swaps 78,688 – 114,973 40,325 – 58,305
1,093,967 (1,120) 1,142,688 714,530 (1,051) 752,812
*The notional exposure is calculated as the maximum loss the Company could experience.
Other price risk sensitivity
If market prices of all of the Company’s financial instruments including the derivatives at the Balance Sheet date had
been 25% higher or lower (2014: 25% higher or lower) while all other variables remained constant: the revenue return
would have decreased/increased by £102,000 (2014: £68,000); the capital return would have increased by £281,352,000
(2014: £183,196,000)/decreased by £283,432,000 (2014: £183,417,000); and, the return on equity would have increased
by £281,250,000 (2014: £183,128,000)/decreased by £283,330,000 (2014: £183,349,000). The calculations are based on
the portfolio as at the respective Balance Sheet dates and are not representative of the year as a whole.
(ii) Foreign currency risk
A significant proportion of the Company’s portfolio and derivative positions are 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.
Foreign currency exposure
The fair values of the Company’s monetary assets and liabilities that are denominated in foreign currencies are
shown below:
2015 2014
Current Current Current Current
assets liabilities Investments assets liabilities Investments
£’000 £’000 £’000 £’000 £’000 £’000
U.S. dollar 316 (90,215) 862,949 19,019 (91,501) 568,891
Swiss franc 618 – 75,712 3,380 – 64,285
Japanese yen 1,453 (1,789) 93,593 396 – 46,120
Other 110 – 51,312 1,349 – 34,183
2,497 (92,004) 1,083,566 24,144 (91,501) 713,479
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3
Financial Statements
Notes to the Financial Statements
continued
Foreign currency sensitivity
The following table details the sensitivity of the Company’s net return for the year and shareholders’ funds to a 10%
increase and decrease in sterling against the relevant currency (2014: 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 significant foreign currency exposures at each Balance Sheet date.
2015 2014
USD YEN CHF USD YEN CHF
£’000 £’000 £’000 £’000 £’000 £’000
Sterling depreciates 89,947 10,362 8,481 61,835 5,185 7,234
Sterling appreciates (73,593) (8,478) (6,939) (46,859) (4,243) (5,919)
(iii) Interest rate risk
Interest rate changes 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 in fixed interest securities.
Interest rate exposure
The Company’s main exposure to interest rate risks is through its overdraft facility with J.P. Morgan Clearing Corp,
which is repayable on demand, and, its holding in fixed interest securities. The exposure of financial assets and
liabilities to fixed and floating interest rates, is shown below.
At 31 March 2015, the Company held 5.8% of the portfolio in convertible bonds and securitised debt (2014: 4.4% of the
portfolio). The exposure is shown in the table below:
Weighted Weighted Weighted Weighted
2015 2014
average
period
for which
rate is fixed
Years
average average average
fixed period fixed
interest Fixed Floating for which interest Fixed Floating
rate rate rate rate is fixed rate rate rate
% £’000 £’000 Years % £’000 £’000
4.96 4.76 46,164
– 3.62 0.95 23,635 –
6.92 8.75 7,349
8,713 1.98 2.16 8,004 –
– – –
7,579 – – – –
– – –
(96,810) – – – (62,723)
– – –
(36,285) – – – (17,979)
53,513 (116,803) 31,639 (80,702)
Convertible
securities
Unquoted debt
investments
Cash
Overdraft facility
Unfunded swap
positions
All interest rate exposures are held in U.S. Dollars.
Interest rate sensitivity
If interest rates had been 1% higher or lower and all other variables were held constant, the Company’s net return for
the year ended 31 March 2015 and the net assets would increase/decrease by £1,257,000 (2014: increase/decrease by
£807,000).
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(iv) 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 considered significant as the majority of the Company’s assets are investments in quoted
securities that are readily realisable within one week, in normal market conditions.
Liquidity exposure and maturity
Contractual maturities of the financial liability exposures as at 31 March 2015, based on the earliest date on which
payment can be required, are as follows:
2015 2014
3 months 3 months
or less or less
£’000 £’000
Overdraft facility 89,231 62,723
Amounts due to brokers and accruals 1,789 20,834
Derivatives – Put options (short) 488 979
Derivatives – Call options (short) 480 72
91,988 84,608
(v) Credit risk
Credit risk is the risk of failure of a counterparty to discharge its obligations resulting in the Company suffering a
financial loss.
The carrying amounts of financial assets best represent the maximum credit risk at the Balance Sheet date. The
Company’s quoted securities are held on its behalf by J.P. Morgan Clearing Corp acting as the Company’s Prime
Broker.
As noted on page 21, certain of the Company’s assets can be held by J.P. Morgan Clearing Corp as collateral against
the overdraft provided by them to the Company. As at 31 March 2015, assets with a total market value of
£139.8 million (31 March 2014: £93.1 million held by Goldman Sachs) were held as collateral against the overdraft
facility which equates to 140% (2014: 138%) of the overdrawn position (including amounts due to J.P. Morgan Clearing
Corp) of £100.0 million.
Credit risk exposure
2015 2014
£’000 £’000
Convertible securities and unquoted debt investments 46,164 31,638
Derivative – OTC equity swaps 78,688 40,325
Current assets:
Other receivables (amounts due from brokers, dividends
and interest receivable) 1,548 24,243
Derivative – Put options (long) 170 420
Derivative – Call options (long) 2,484 647
Cash 7,579 –
(vii) Fair value of financial assets and financial liabilities
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).
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3
Financial Statements
Notes to the Financial Statements
continued
(viii) Hierarchy of investments
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).
Level 1 Level 2 Level 3 Total
As of March 2015 £’000 £’000 £’000 £’000
Investments held at fair value through profit or loss 977,306 19,257 16,062 1,012,625
Derivatives: put and call options (short) – (1,120) – (1,120)
Derivatives: put and call options (long) – 2,654 – 2,654
Derivatives: OTC swaps – 78,688 – 78,688
Financial instruments measured at fair value 977,306 99,479 16,062 1,092,847
As at 31 March 2015, the put and call options, the equity swaps, and, the Incyte Corporation 4.75% 01/10/15
convertible bond have been classified as Level 2.
Level 1 Level 2 Level 3 Total
As of March 2014 £’000 £’000 £’000 £’000
Investments held at fair value through profit or loss 649,096 16,038 8,004 673,138
Derivatives: put and call options (short) – (1,051) – (1,051)
Derivatives: put and call options (long) – 1,067 – 1,067
Derivatives: OTC swaps – 40,325 – 40,325
Financial instruments measured at fair value 649,096 56,379 8,004 713,479
As at 31 March 2014, the put and call options, the equity swaps, and the convertible bond positions in the Incyte
Corporation and Endologix, were classified as level 2.
Level 3 Reconciliation
Please see below a reconciliation disclosing the changes during the year for the financial assets and liabilities
designated as fair through profit or loss classified as being Level 3.
2015 2014
£’000 £’000
Assets as at 1 April 8,004 –
Purchases 8,436 15,877
Sales (1,412) (7,306)
Realised losses (20) (636)
Investment holding gains 1,054 69
Assets as at 31 March 16,062 8,004
As at 31 March 2015, the two securitised debt investments, Ikaria Second Lien Loan 8.75% 04/02/22 and Creganna-
Tactx Medical Second Lien Loan FRN 20/11/22 have been classified as level 3. Both positions have been valued using
the estimated fair values as provided by counterparties.
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(ix) 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 a maximum of 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 50.
Gearing for this purpose is defined as total assets less current liabilities (before deducting any prior charges
including the overdraft), minus cash and cash equivalents divided by Shareholders’ funds, expressed as a percentage.
As at 31 March 2015, the Company had a gearing percentage of 11.2% (2014: 12.0%).
The Board, with the assistance of the AIFM and the Portfolio 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 Portfolio 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 buy-back 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 year.
19. CAPITAL RESERVE
Capital Reserves*
Investment
Holding
Other Gains Total
£’000 £’000 £’000
At 31 March 2014 232,438 155,223 387,661
Transfer on disposal of investments 71,628 (71,628) –
Net gains on investments 84,987 264,817 349,804
Expenses charged to capital less tax relief thereon (23,616) – (23,616)
Subscription shares exercised 19 – 19
Shares purchased for treasury (3,868) – (3,868)
Shares re-issued from treasury 3,868 – 3,868
Exchange gain on currency balances 6,302 – 6,302
At 31 March 2015 371,758 348,412 720,170
*Investment holding gains relate to the revaluation of investments and derivatives held at the reporting date. (See note 9 on pages 59 and 60 for
further details).
Under the terms of the revisions made to the Company’s Articles of Association in 2013, sums within “capital
reserves – other” are also available for distribution.
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4
Further Information
Shareholder Information
Financial Calendar
31 March Financial Year End
June Final Results Announced
September Annual General Meeting
30 September Half Year End
November Half Year Results Announced
January/July Dividends Payable
Annual General Meeting
The Annual General Meeting of Worldwide Healthcare Trust PLC will be held at Skinners’ Hall, 8 Dowgate Hill, London
EC4R 2SP on Thursday, 24 September 2015 from 12 noon.
Dividends
The Company pays two interim dividends in January and July each year. Shareholders who wish to have dividends paid directly
into a bank account, rather than by cheque to their registered address, can complete a mandate form for the purpose.
Mandates may be obtained from the Company’s Registrars, Capita Asset Services, on request.
Share Prices
The Company’s Ordinary Shares are listed on the London Stock Exchange under ‘Investment Companies’. The price is given
daily in the Financial Times and other newspapers.
Change of Address
Communications with shareholders are mailed to the address held on the share register. In the event of a change of address or
other amendment this should be notified to the Company’s Registrars, Capita Asset Services, under the signature of the
registered holder.
Daily Net Asset Value
The daily net asset value of the Company’s shares can be obtained on the Company’s website at www.worldwidewh.com and is
published daily via the London Stock Exchange.
Profile of the Company’s Ownership
% of Ordinary Shares held at 31 March
2015
■ Retail
■ Mutual Funds
■ Insurance
■ Pensions
■ Charities
■ Corporate
■ Fund of Funds
■ Inv Trusts
■ Directors
77.1
9.4
5.7
3.0
1.9
1.7
0.7
0.3
0.2
2014
■ Retail
■ Mutual Funds
■ Insurance
■ Pensions
■ Charities
■ Corporate
■ Fund of Funds
■ Directors
■ Inv Trusts
73.6
11.4
5.3
3.2
1.9
1.6
1.4
1.0
0.6
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Glossary
Alternative Investment Fund Managers Directive (AIFMD)
Agreed by the European Parliament and the Council of the European Union and transported into UK legislation, the AIFMD
classifies certain investment vehicles, including investment companies, as Alternative Investment Funds (AIFs) and requires
them to appoint an Alternative Investment Fund Manager (AIFM) and depositary to manage and oversee the operations of the
investment vehicle. The Board of the Company retains responsibility for strategy, operations and compliance and the Directors
retain a fiduciary duty to shareholders.
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.
Equity Swaps
An equity swap is an agreement in which one party (counterparty) transfers the total return of an underlying equity position to
the other party (swap holder) in exchange for a one off payment at a set date. Total return includes dividend income and gains
or losses from market movements. The exposure of the holder is the market value of the underlying equity position.
Your company uses two types of equity swap:
• funded, where payment is made on acquisition. They are equivalent to holding the underlying equity position with the
exception of additional counterparty risk and not possessing voting rights in the underlying; and,
• financed, where payment is made on maturity. As there is no initial outlay, financed swaps increase exposure by the value of
the underlying equity position with no initial increase in the investments value – there is therefore embedded leverage
within a financed swap due to the deferral of payment to maturity.
Gearing
Gearing is calculated as borrowings, less net current assets, divided by Shareholders’ Funds, expressed as a percentage. For
years prior to 2013, the calculation was based on borrowings as a percentage of Net Assets.
International Swaps and Derivatives Association (ISDA)
ISDA has created a standardised contract (the ISDA Master Agreement) which sets out the basic trading terms between the
counterparties to derivative contracts.
Leverage
Leverage is defined in the AIFMD as any method by which the AIFM increases the exposure of an AIF. In addition to the gearing
limit the Company also has to comply with the AIFMD leverage requirements. For these purposes the Board has set a
maximum leverage limit of 140% for both methods. This limit is expressed as a % with 100% representing no leverage or
gearing in the Company. There are two methods of calculating leverage as follows:
The Gross Method is calculated as total exposure divided by Shareholders Funds. Total exposure is calculated as net assets,
less cash and cash equivalents, adding back cash borrowing plus derivatives converted into the equivalent position in their
underlying assets.
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4
Further Information
Glossary
continued
The Commitment Method is calculated as total exposure divided by Shareholders Funds. In this instance total exposure is
calculated as net assets, less cash and cash equivalents, adding back cash borrowing plus derivatives converted into the
equivalent position in their underlying assets, adjusted for netting and hedging arrangements.
See the definition of Options and Equity Swaps for more details on how exposure through derivatives is calculated.
MSCI World Health Care Index
The MSCI World Health Care Index is comprised of large and mid capitalisation healthcare companies across the following 23
developed markets countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, the UK and the U.S. The net total
return of the Index is used which assumes the reinvestment of any dividends paid by its constituents after the deduction of relevant
withholding taxes. The performance of the Index is calculated in U.S.$ terms. Because the Company’s reporting currency is £ the
prevailing U.S.$/£ exchange rate is applied to obtain a £ based return.
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 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 finance costs, taxation,
performance fees and exceptional items, and expressing them as a percentage of the average daily net asset value of the
Company over the year.
Options
An option is an agreement that gives the buyer, who pays a fee (premium), the right – but not the obligation – to buy or sell a
specified amount of an underlying asset at an agreed price (strike or exercise price) on or until the expiration of the contract
(expiry). A call option is an option to buy, and a put option an option to sell.
The potential loss of the buyer is limited to the higher of the premium paid or the market value of the bought option. On the other
side for the seller of a covered call option (your company does not sell uncovered options) any loss would be offset by gains in the
covering position, and for sold puts the potential loss is the strike price times the number of option contracts held. For the
purposes of calculating exposure to risk in note 18 on page 64, the potential loss is used. The exposure, used in calculating the
AIFMD leverage limits, between these two b ounds is determined as the delta (an options delta measures the sensitivity of an
option’s price solely to a change in the price of the underlying asset) adjusted equivalent of the underlying position.
Rehypothecation
The pledging of securities in customer accounts as collateral for a loan.
Share Price Total Return
Return to the investor on mid-market prices assuming that all dividends paid were reinvested.
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.
71 Worldwide Healthcare Trust PLC
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How to Invest
Retail Investors Advised by IFAs
The Company currently conducts its affairs so that its shares can be recommended by Independent Financial Advisers (IFAs)
in the UK to ordinary retail investors in accordance with the Financial Conduct Authority (FCA) rules in relationship to
non-mainstream investment procedures and intends to continue to do so. The shares are excluded from the FCA’s restrictions
which apply to non-mainstream investment products because they are shares in an investment trust.
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:
AJ Bell Youinvest http://www.youinvest.co.uk/
Alliance Trust Savings http://www.alliancetrustsavings.co.uk/
Barclays Stockbrokers https://www.barclaysstockbrokers.co.uk/Pages/index.aspx
Charles Stanley Direct https://www.charles-stanley-direct.co.uk/
Club Finance http://www.clubfinance.co.uk/
Fast Trade http://www.fastrade.co.uk/wps/portal
FundsDirect http://www.fundsdirect.co.uk/Default.asp?
Halifax Share Dealing http://www.halifax.co.uk/Sharedealing/
Hargreaves Lansdown http://www.hl.co.uk/
HSBC https://investments.hsbc.co.uk/
iDealing http://www.idealing.com/
IG Index http://www.igindex.co.uk/
Interactive Investor http://www.iii.co.uk/
IWEB http://www.iweb-sharedealing.co.uk/share-dealing-home.asp
James Brearley http://www.jbrearley.co.uk/Marketing/index.aspx
Natwest Stockbrokers http://www.natweststockbrokers.com/nw/products-and-services/share-dealing.ashx
Saga Share Direct https://www.sagasharedirect.co.uk/
Selftrade http://www.selftrade.co.uk/
The Share Centre https://www.share.com/
Saxo Capital Markets http://uk.saxomarkets.com/
TD Direct Investing http://www.tddirectinvesting.co.uk/
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4
Further Information
How to Invest
continued
Capita Asset Services – Share Dealing Service
A quick and easy share dealing service is available to existing shareholders through the Company’s Registrars, Capita Asset
Services, to either buy or sell shares. An online and telephone dealing facility provides an easy to access and simple to use
service.
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. The maximum deal size for online trades is £25,000. Deals in excess of this
amount can be transacted by telephone. Charges will be confirmed at the time of dealing.
For further information on this service please contact: www.capitadeal.com (online dealing) or +44 (0) 371 664 0445 (telephone
dealing).
Calls are charged at the standard geographical rate and will vary by provider. Calls outside the UK will be charged at the applicable
international rate. Lines are open 8.00 am to 4.30 pm Monday to Friday.
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.
73 Worldwide Healthcare Trust PLC
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Notice of the Annual General Meeting
Notice is hereby given that the Annual General Meeting of Worldwide Healthcare Trust PLC will be held at Skinners’ Hall,
8 Dowgate Hill, London EC4R 2SP on Thursday, 24 September 2015 from 12 noon for the following purposes:
Ordinary Business
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 2015
2. To re-elect Ms Jo Dixon as a Director of the Company
3. To re-elect Dr David Holbrook as a Director of the Company
4. To re-elect Mr Samuel D. Isaly as a Director of the Company
5. To re-elect Sir Martin Smith as a Director of the Company
6. To re-elect Mrs Sarah Bates as a Director of the Company
7. To re-elect Mr Doug McCutcheon as a Director of the Company
8. To re-appoint PricewaterhouseCoopers LLP as the Company’s Auditors and to authorise the Audit Committee to determine
their remuneration
9. To receive and approve the Directors’ Remuneration Report for the year ended 31 March 2015
Special Business
To consider and, if thought fit, pass the following resolutions of which resolutions 11, 12, 13, 14 and 15 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 £1,194,331 (being
10% of the issued share capital of the Company at 24 June 2015) and representing 4,777,324 shares of 25 pence each (or, if
changed, 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 2016 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,
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4
Further Information
Notice of the Annual General Meeting
continued
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;
(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 £1,194,331, being 10% of the issued share capital of the Company
as at 24 June 2015 and representing 4,777,324 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
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 diluted cum income 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 £1,194,331 being 10% of
the issued share capital of the Company as at 24 June 2015 and representing 4,777,324 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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Authority to Repurchase Ordinary Shares
13. THAT the Company be and is hereby generally and unconditionally authorised in accordance with section 701 of the
Companies Act 2006 (the “Act”) to make one or more market purchases (within the meaning of section 693(4) of the Act) of
ordinary shares of 25 pence each in the capital of the Company (“Shares”) (either for retention as treasury shares for
future reissue, resale, transfer or cancellation), provided that:
(a) the maximum aggregate number of Shares authorised to be purchased is 7,161,210 (representing approximately
14.99% of the issued share capital of the Company at the date of the notice convening the meeting at which this
resolution is proposed);
(b) the minimum price (exclusive of expenses) which may be paid for a Share is 25 pence;
(c) 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 buy-back programmes and
stabilisation of financial instruments);
(d) the authority hereby conferred shall expire at the conclusion of the Annual General Meeting of the Company to be held
in 2016 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
(e) 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.
Adoption of New Articles of Association
14. THAT the Articles of Association set out in the document produced to the 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 Articles of Association of the Company.
Full explanatory notes of the principal changes to the Articles of Association are set out on page 81 of this annual report.
General Meetings
15. THAT the Directors be authorised to call general meetings (other than the Annual General Meeting of the Company) on not
less that 14 working days notice, such authority to expire on the conclusion of the next Annual General Meeting of the
Company, or, if earlier, on the expiry 15 months from the date of the passing of the resolution.
By order of the Board
Frostrow Capital LLP
Company Secretary
24 June 2015
Registered Office:
One Wood Street
London EC2V 7WS
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4
Further Information
Notice of the Annual General Meeting
continued
Notes
1. Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the meeting. A shareholder may
appoint more than one proxy in relation to the meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held
by that shareholder. A proxy need not be a shareholder of the Company. A proxy form which may be used to make such appointment and give proxy
instructions accompanies this notice.
2.
3.
4.
5.
6.
7.
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 Asset Services, PXS1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF no later than 12 noon Tuesday, 22 September 2015.
In the case of a member which is a company, the instrument appointing a proxy must be executed under its seal or signed on its behalf by a duly authorised
officer or attorney or other person authorised to sign. Any power of attorney or other authority under which the instrument is signed (or a certified copy of it)
must be included with the instrument.
The return of a completed proxy form, other such instrument or any CREST Proxy Instruction (as described below) will not prevent a shareholder attending the
meeting and voting in person if he/she wishes to do so.
Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights (a “Nominated
Person”) may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be appointed (or have someone
else appointed) as a proxy for the meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may, under any
such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights.
The statement of the rights of shareholders in relation to the appointment of proxies in paragraphs 1 and 3 above does not apply to Nominated Persons. The
rights described in these paragraphs can only be exercised by shareholders of the Company.
8. 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 Tuesday, 22 September 2015 (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.
9.
As at 24 June 2015 (being the last business day prior to the publication of this notice) the Company’s issued share capital consists of 47,773,249 ordinary
shares, carrying one vote each. Therefore, the total voting rights in the Company as at 24 June 2015 are 47,773,249.
10. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures
described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a service
provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
11.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must
be properly authenticated in accordance with the specifications of Euroclear UK and Ireland Limited (“CRESTCo”), and must contain the information required
for such instruction, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to
the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID RA10) no later than
48 hours before the time appointed for holding the meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp
applied to the message by the CREST Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner
prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other
means.
12. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that CRESTCo does not make available special
procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or
has appointed a voting service provider, to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST
sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system
and timings.
13. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001.
14.
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder
will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Register of Members in respect of the joint holding
(the first named being the most senior).
15. Members who wish to change their proxy instructions should submit a new proxy appointment using the methods set out above. Note that the cut-off time for
receipt of proxy appointments (see above) also applies in relation to amended instructions; any amended proxy appointment received after the relevant cut-off
time will be disregarded.
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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 Asset Services 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.
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 Asset Services, PXS1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF.
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 77) then, subject to paragraph 4, the proxy appointment will remain valid.
Location of the Annual General Meeting
Skinners’ Hall, 8 Dowgate Hill, London EC4R 2SP
ST PAUL’S
CATHEDRAL
CHEAPSIDE
BANK OF
ENGLAND
POULTRY
BANK
T
E
T R E
V I C T O R I A S
SKINNERS’
HALL
Q U E E N
UPPER THAMES
MANSION
HOUSE
STREET
RIVER THAMES
CANNON
STREET
CANNON
STREET
Annual Report for the year ended 31 March 2015 78
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4
Further Information
Explanatory Notes to the Resolutions
Resolution 1 – To receive the Annual Report and Accounts
The Annual Report and Accounts for the year ended 31 March
2015 will be presented to the Annual General Meeting (AGM).
These accounts accompany this Notice of Meeting and
shareholders will be given an opportunity at the meeting to
ask questions.
Resolutions 2 to 7 – Re-election of Directors
Resolutions 2 to 7 deal with the re-election of each Director.
Biographies of each of the Directors can be found on
pages 23 and 24 of the annual report.
The Board has confirmed, following a performance review,
that the Directors standing for re-election continue to
perform effectively.
Resolution 8 – Re-appointment of Auditors and the
determination of their remuneration
Resolution 8 relates to the re-appointment of
PricewaterhouseCoopers LLP as the Company’s independent
Auditors to hold office until the next AGM of the Company and
also authorises the Audit Committee to set their
remuneration. Following the implementation of the
Competition and Markets Authority order on Statutory Audit
Services, which is effective for the Company from 1 January
2015, only the Audit Committee may negotiate and agree the
terms of the Auditors’ service agreement.
Resolution 9
The Directors’ Remuneration Report is set out in full in the
annual report on pages 40 and 41.
Resolutions 10, 11 and 12
Ordinary Resolution No. 10 in the Notice of AGM will renew
the authority to allot the unissued share capital up to an
aggregate nominal amount of £1,194,331 (equivalent to
4,777,324 shares, or 10% of the Company’s existing issued
share capital on 24 June 2015, being the nearest practicable
date prior to the signing of this Report). Such authority will
expire on the date of the next AGM or after a period of
15 months from the date of the passing of the resolution,
whichever is earlier. This means that the authority will have
to be renewed at the next AGM.
When shares are to be allotted for cash, Section 551 of the
Companies Act 2006 (the “Act”) provides that existing
79 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
shareholders have pre-emption rights and that the new
shares must be offered first to such shareholders in
proportion to their existing holding of shares. However,
shareholders can, by special resolution, authorise the
Directors to allot shares otherwise than by a pro rata issue to
existing shareholders. Special Resolution No. 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 24 June 2015, 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 No. 10. This authority will also expire on the date
of the next Annual General Meeting or after a period of
15 months, whichever is earlier. This authority will not be
used in connection with a rights issue by the Company.
Under the Companies (Acquisition of Own Shares) (Treasury
Shares) Regulations 2003 (as amended) (the “Treasury Share
Regulations”) the Company is permitted to buy-back and
hold shares in treasury and then sell them at a later date for
cash, rather than cancelling them. The Treasury Share
Regulations require such sale to be on a pre-emptive, pro
rata, basis to existing shareholders unless shareholders
agree by special resolution to disapply such pre-emption
rights. Accordingly, in addition to giving the Directors power
to allot unissued share capital on a non pre-emptive basis
pursuant to Resolution 11, Resolution 12, if passed, will give
the Directors authority to sell shares held in treasury on a
non pre-emptive basis. No dividends may be paid on any
shares held in treasury and no voting rights will attach to
such shares. The benefit of the ability to hold treasury shares
is that such shares may be resold. This should give the
Company greater flexibility in managing its share capital, and
improve liquidity in its shares. It is the intention of the Board
that any re-sale of treasury shares would only take place at a
narrower discount to the net asset value per share than that
at which they had been bought into treasury, and in any event
at a discount no greater than 5% to the prevailing diluted
cum income 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 24 June 2015 (reduced
235876 Finsbury WWH pp69-pp86new 03/07/2015 12:41 Page 80
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.
independent bid on the trading venue where the purchase is
carried out. The minimum price which may be paid is 25p per
Ordinary Share. Existing shares which are purchased under
this authority will either be cancelled or held as
Treasury Shares.
The Directors intend to use the authority given by
Resolutions Nos. 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.
Resolution 13
The Directors wish to renew the authority given by
shareholders at the previous AGM. The principal aim of a
share buy-back facility is to enhance shareholder value by
acquiring shares at a discount to net asset value, as and
when the Directors consider this to be appropriate. The
purchase of Ordinary Shares, when they are trading at a
discount to net asset value per share should result in an
increase in the net asset value per share for the remaining
shareholders. This authority, if conferred, will only be
exercised if to do so would result in an increase in the net
asset value per share for the remaining shareholders and if it
is in the best interests of shareholders generally. Any
purchase of shares will be made within guidelines
established from time to time by the Board. It is proposed to
seek shareholder authority to renew this facility for another
year at the AGM.
Under the current Listing Rules, the maximum price that
may be paid on the exercise of this authority must not exceed
the higher of (i) 105% of the average of the middle market
quotations for the shares over the five business days
immediately preceding the date of purchase and (ii) the
higher of the last independent trade and the highest current
Special Resolution No. 13 in the Notice of AGM will renew the
authority to purchase in the market a maximum of 14.99% of
Ordinary Shares in issue on 24 June 2015, being the nearest
practicable date prior to the signing of this Report,
(amounting to 7,161,210 Ordinary Shares). Such authority will
expire on the date of the next AGM or after a period of
15 months from the date of passing of the resolution,
whichever is earlier. This means in effect that the authority
will have to be renewed at the next AGM or earlier if the
authority has been exhausted.
Resolution 14
Special Resolution No. 14 seeks shareholder approval to
make certain changes to the Company’s Articles of
Association inter alia to enable the Company to comply with
its obligations under various international tax regulations,
and also the removal of references to Subscription Shares
and Special Deferred Shares which are now obsolete. Full
explanatory notes of the principal changes to the Articles of
Association are set out on page 81 of this annual report.
Resolution 15
Special Resolution No. 15 seeks shareholder approval for the
Company to hold General Meetings (other than the AGM) at
14 working days’ notice.
Recommendation
The Board considers that the resolutions relating to the
above items are in the best interests of shareholders as a
whole. Accordingly, the Board unanimously recommends to
the shareholders that they vote in favour of the above
resolutions to be proposed at the forthcoming AGM as the
Directors intend to do in respect of their own beneficial
holdings totalling 42,624 shares.
Annual Report for the year ended 31 March 2015 80
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4
Further Information
Explanatory Notes of the Principal Changes to the Company’s Articles
of Association
Set out below is a summary of the principal differences
between the current and the proposed new Articles of
Association (the “Articles”). These changes to the new
Articles, to be adopted at the Annual General Meeting to be
held on Thursday, 24 September 2015 relate to:
FATCA
The Hiring Incentives to Restore Employment Act 2010 of the
United States of America commonly known as the Foreign
Account Tax Compliance Act and all associated regulations
and official guidance (“FATCA”) imposes a system of
information reporting on certain entities including foreign
financial institutions such as the Company following the
enactment of the UK International Tax Compliance (United
States of America) Regulations 2013 on 1 September 2013.
These regulations have now been replaced by the
International Tax Compliance Regulations 2015 which also
include the automatic exchange of information regimes being
brought in under the auspices of the Organisation for
Economic Co-operation and Development and the European
Union. The Articles of Association have therefore been
amended in order to provide the Company with the ability to
require shareholders to co-operate in respect of these
broader obligations and not just with its obligations under
FATCA as is currently the case.
Subscription Shares and Special Deferred
Shares
The other changes to the Articles of Association are being
made to remove references to Subscription Shares and
Special Deferred Shares and to the rights attached to those
classes of shares which are now obsolete following the
exercise in full of the Subscription Shares.
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.
81 Worldwide Healthcare Trust PLC
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AIFMD Related Disclosures (unaudited)
The AIFM is required to make certain disclosures to
prospective investors prior to their investment in the Company,
in accordance with Article 23 AIFMD and 3.2.2R and 3.2.3R of
the FUND Sourcebook to the FCA Handbook. Each of these
disclosures or an explanation of where they may be found in
this Annual Report or elsewhere is set out in this disclosure. In
the period from 22 July 2014 to the date of this report, there
have been no material changes to this information, with the
exception of the change in the gearing limit which is disclosed
in the Strategic Report on pages 4 and 5.
Investment Objective and Leverage
A description of the investment strategy and objectives of the
Company, the types of assets in which the Company may
invest, the techniques it may employ, any applicable
investment restrictions, the circumstances in which it may use
leverage, the types and sources of leverage permitted and the
associated risks, any restrictions on the use of leverage and
the maximum level of leverage which the AIFM and Portfolio
Manager are entitled to employ on behalf of the Company and
the procedures by which the Company may change its
investment strategy and/or the investment policy can be found
on page 6 under the heading “Investment Strategy”.
The table below sets out the current maximum permitted
limit and actual level of leverages for the Company: As a
percentage of net assets
Maximum level of leverage
Actual level at 31 March 2015
Gross Commitment
Method
Method
140%
115%
140%
113%
Risks
The principal risks associated with the investment strategy,
objectives and techniques of the Company and with the use of
leverage by the Company are contained in the Strategic Report
on pages 20 to 22 under the heading “Principal Risks”.
Shareholders and prospective investors should note that the
risks summarised under “Principal Risks” are the risks that
the Board believes to be the most essential to an assessment
of whether to invest in the Company. Shareholders may lose
the value of their investment in the Company for reasons other
than those set out therein, for reasons not currently
considered by the Board or based on circumstances or facts of
which the Board is not currently aware.
Contractual Relationship with the Company
A description of the main legal implications of the
contractual relationship entered into for the purpose of
investment in the Company, including information on
jurisdiction and applicable law, is contained in the Investor
Disclosure Document (a copy of which can be viewed on the
Company’s website www.worldwidewh.com).
The articles between the Company’s shareholders and the
Company are governed by English law and, by purchasing
shares, investors agree that the Courts of England have
exclusive jurisdiction to settle any disputes. All
communications in connection with the purchase of the
Company’s shares will be in English. Certain judgments
obtained in EU member states (excluding Denmark at this
time) in proceedings commenced on or after 10 January
2015, can be enforced in England and Wales under the
Recast Brussels Regulation by obtaining a certificate from
the court of origin certifying that the judgment is enforceable,
serving the certificate and judgment on the judgment debtor
and, when seeking enforcement, providing the courts of
England and Wales with an authenticated copy of the
judgment and certificate and certifying compliance with the
requirements as to service on the debtor. The judgment
debtor can apply for the enforcement of the judgment to be
refused on limited grounds. Further, certain judgments
obtained in EU member states (including Denmark) in
proceedings commenced before 10 January 2015, or in
Iceland, Norway and Switzerland can be enforced in England
and Wales under the 2001 Brussels Regulation or the 2007
Lugano Convention and certain judgments obtained from a
country to which any of the Administration of Justice Act
1920, the Foreign Judgments (Reciprocal Enforcement) Act
1933 or the Civil Jurisdiction and Judgments Act 1982 applies
can also be enforced in England and Wales by making an
application to the High Court for an order for registration of
the judgment for enforcement. The judgment debtor may
appeal/challenge registration on limited grounds. It may also
be possible to enforce a judgment obtained in a country to
which none of the above regimes apply in England and Wales
if such judgment is: (1) final and conclusive on the merits;
(2) given by a court regarded by English law as competent to
do so; and (3) for a fixed sum of money.
Annual Report for the year ended 31 March 2015 82
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4
Further Information
AIFMD Related Disclosures (unaudited)
continued
Details of Service Providers
Details of the AIFM, Portfolio Manager, Depositary, Prime
Broker, Auditors and other service providers to the Company
and their duties to the Company can be found in the Strategic
Report on page 19 and in the Report of the Directors on
pages 26 and 27. No shareholder, in their capacity as such,
will generally have any direct contractual claim against any
service provider to the Company with respect to such service
provider’s default of any of their duties towards the Company.
Professional Liability Risk
To comply with its obligations under the AIFMD rules and
regulations (the “AIFM Rules”), relating to professional liability
risk, the AIFM has taken out professional indemnity insurance
against liability arising from professional negligence.
Management Functions Delegated by AIFM
A description of safe-keeping functions delegated by the
Depositary, management functions delegated by the AIFM
and the identity of such delegates can be found in the
Strategic Report on page 19 and in the Report of the
Directors on pages 26 and 27. The AIFM does not consider
that any conflicts of interest arise from the delegation of its
portfolio management function to OrbiMed, or from the
delegation of the Depositary’s safekeeping function to the
Prime Broker or any further sub-custodians.
Valuation Policy
The Company’s portfolio of assets will be valued on each
Dealing Day (a day on which the London Stock Exchange and
banks in England and Wales are normally open for business).
All instructions to issue or buy-back ordinary shares given
for a prior Dealing Day shall be assumed to have been
carried out (and any cash paid or received).
The valuation will be based on the following:
(a) Cash and amounts held in current and deposit accounts
and in other time-related deposits will be valued at their
nominal value.
(b) All transferable securities will be valued at fair value:
(i)
fair value for quoted investments is deemed to be
bid market prices, or last traded price, depending on
the convention of the exchange on which they are
quoted; and
(ii) unquoted investments are valued by the Directors
using primary valuation techniques such as
discounted multiple of revenue.
(c) All other property contained within the Company’s
portfolio of assets will be priced at a value which, in the
opinion of the AIFM, represents a fair and reasonable
price (see below).
(d) If there are any outstanding agreements to purchase or
sell any of the Company’s portfolio of assets which are
incomplete, then the valuation will assume completion of
the agreement.
(e) Added to the valuation will be:
(i)
(ii)
any accrued and anticipated tax repayments of the
Company;
any money due to the Company because of ordinary
shares issued prior to the relevant Dealing Day;
(iii)
income due and attributed to the Company but not
received; and
(iv) any other credit of the Company due to be received
by the Company.
Amounts which are de minimis may be omitted from the
valuation.
(f) Deducted from the valuation will be:
(i)
(ii)
any anticipated tax liabilities of the Company;
any money due to be paid out by the Company
because of ordinary shares bought back by the
Company prior to the valuation;
(iii)
the principal amount and any accrued but unpaid
interest on any borrowings; and
(iv) any other liabilities of the Company, with periodic
items accruing on a daily basis.
Amounts which are de minimis may be omitted from the
valuation.
Where the Company trades in investments where prices are
not available on an exchange, quotations from brokers are
utilised as follows:
(i) where possible at least two quotations will be
obtained; and
(ii)
the quotations should come from active participants
in the market.
83 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
235876 Finsbury WWH pp69-pp86new 03/07/2015 12:41 Page 84
Where only one quotation can be obtained the valuation will
be considered in conjunction with other market-based
observations such as comparable sources.
Valuations of net asset value per ordinary share will be
suspended only in any circumstances in which the underlying
data necessary to value the investments of the Company
cannot readily or without undue expenditure be obtained. Any
such suspension will be announced to a Regulatory
Information Service.
Liquidity Risk Management
The AIFM maintains a liquidity management policy to
monitor the liquidity risk of the Company. Shareholders have
no right to redeem their ordinary shares from the Company
but may trade their ordinary shares on the secondary
market. However, there is no guarantee that there is a liquid
market in the ordinary shares.
Further details regarding the risk management process and
liquidity management are available from the AIFM, on request.
Fees
A description of certain of the fees, charges and expenses
and of the maximum amounts thereof (to the extent that this
can be assessed) which are borne by the Company and thus
indirectly by investors can be found on pages 26 and 27 under
the heading “Significant Agreements”. In addition to these
management, administration and secretarial fees, the
Company will pay all other fees, charges and expenses
incurred in the operation of its business including, without
limitation:
• brokerage and other transaction charges and taxes;
• Directors’ fees and expenses;
• costs of printing the Company’s financial reports and
posting them to shareholders.
Such fees and expenses are not subject to a maximum unit.
Shareholders do not bear any fees, charges and expenses
directly, other than any fees, charges and expenses incurred
as a consequence of acquiring, transferring, redeeming or
otherwise selling ordinary shares.
Remuneration of AIFM Staff
Following completion of an assessment of the application of
the proportionality principle to the FCA’s AIFM Remuneration
Code, the AIFM has disapplied the pay-out process rules with
respect to it and any of its delegates. This is because the
AIFM considers that it carries out non-complex activities and
is operating on a small scale.
Fair Treatment of Investors
The AIFM has procedures, arrangements and policies in
place to ensure compliance with the principles more
particularly described in the AIFM Rules relating to the fair
treatment of investors. The principles of treating investors
fairly include, but are not limited to:
• acting in the best interests of the Company and of the
shareholders;
• ensuring that the investment decisions taken for the
account of the Company are executed in accordance with
the Company’s investment policy and objective and risk
profile;
• ensuring that the interests of any group of shareholders
are not placed above the interests of any other group of
shareholders;
• fees and expenses for custodial, registrar, legal, auditing
• ensuring that fair, correct and transparent pricing models
and other professional services;
and valuation systems are used for the Company;
• any borrowing costs;
• preventing undue costs being charged to the Company
• the ongoing costs of maintaining the listing of the
and shareholders;
ordinary shares and their continued admission to trading
on the London Stock Exchange;
• Directors’ and Officers’ insurance premiums;
• promotional expenses (including membership of any
industry bodies, including the AIC, and marketing
initiatives approved by the Board); and
• taking all reasonable steps to avoid conflicts of interests
and, when they cannot be avoided, identifying, managing,
monitoring and, where applicable, disclosing those
conflicts of interest to prevent them from adversely
affecting the interests of shareholders; and
• recognising and dealing with complaints fairly.
Annual Report for the year ended 31 March 2015 84
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4
Further Information
AIFMD Related Disclosures (unaudited)
continued
The AIFM maintains and operates organisational, procedural
and administrative arrangements and implements policies and
procedures designed to manage actual and potential conflicts
of interest. In addition, as its shares are premium listed on the
Official List of the UK Listing Authority and traded on the main
market of the London Stock Exchange, the Company is
required to comply with, among other things, the FCA’s Listing
Rules and Disclosure and Transparency Rules and the
Takeover Code, all of which operate to ensure a fair treatment
of investors. As at the date of this annual report, no investor
has obtained preferential treatment or the right to obtain
preferential treatment.
Procedure and Conditions for the Issuance of
Ordinary Shares
The Company’s shares may be purchased and sold on the
main market of the London Stock Exchange.
While the Company has shareholder authority to buy-back
shares, shareholders do not have the right to have their
shares purchased by the Company.
Net Asset Value
The net asset value of the Company’s shares is published
daily by the AIFM via a Regulatory Information Service
announcement.
Historical Performance
Historical financial information demonstrating the
Company’s historical performance can be found on page 2.
Copies of the Company’s audited accounts for the three
financial years ended 31 March 2015 are available for
inspection at the address of Frostrow and can be viewed on
the Company’s website at www.worldwidewh.com.
The Prime Broker
The services provided by J.P. Morgan Clearing Corp as Prime
Broker to the Company include:
(a) safe-keeping of the assets of the Company that can be
held in custody (including book entry securities);
(b) the processing of transactions on behalf of the Company;
and
(c) the provision to the Company of an overdraft facility which
is repayable on demand. Up to 140% of the value of the
outstanding overdraft can be taken as collateral by the
Prime Broker. Such assets may be used by the Prime
Broker and such use may include their being loaned,
sold, rehypothecated or transferred by the Prime Broker.
The AIFM does not consider that any conflicts of interest
arise from the appointment of the Prime Broker.
The Prime Broker is liable for the loss of the Company’s
financial instruments, the custody of which has been
delegated to it by the Depositary.
Transfer and Reuse of the Company’s Assets
As noted above the Prime Broker may take up to 140% of the
value of the outstanding overdraft to use for its own account.
Discharge of Depositary Liability
J.P. Morgan Europe Limited has discharged its liability under
article 21(12) of the AIFMD in respect of its obligation under the
first and second paragraphs of that article, regarding its liability
for loss of financial instruments held by the prime broker.
Periodic Disclosures
None of the Company’s assets are subject to special
arrangements arising from their illiquid nature.
No new arrangements have been implemented in order to
manage the liquidity of the Company in the period running
from 22 July 2014 to 31 March 2015.
The maximum level of gearing which the AIFM is entitled to
employ on behalf of the Company is 20% of net assets. Prior
to 9 April 2015 the maximum gearing was the lower of
£120 million and 20% of net assets. The Company provided
the requisite notice to the FCA.
Further disclosures required under the AIFM Rules can be
found within the Investor Disclosure Document on the
Company’s website: www.worldwidewh.com.
Frostrow Capital LLP
Alternative Investment Fund Manager
24 June 2015
85 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
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Worldwide Healthcare Trust PLC
Investment Objective and Policy
Worldwide Healthcare Trust PLC is a specialist investment trust that 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 enhance returns and mitigate risk. Performance is measured against
the MSCI World Health Care Index on a net total return, sterling adjusted basis (Benchmark). Further details of the
Company’s investment policy are set out in the Strategic Report on pages 6 and 7.
Accessing the Global Market
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 merger and acquisition
activity. The Company offers an opportunity to gain exposure to pharmaceutical, biotechnology and related companies in the
healthcare sector on a global scale.
Among healthcare funds, Worldwide Healthcare Trust PLC is unique due to its broad investment mandate to participate in all
aspects of healthcare, anywhere in the world. These may include patented specialty medicines for small patient populations
and unpatented generic drugs, in both developed countries and emerging markets. In addition, the Company invests in
medical device technologies, life science tools and healthcare services. The overall geographic spread of Worldwide
Healthcare Trust PLC is also unique among healthcare funds with investments in the U.S., Europe, Japan and emerging
markets.
How to invest
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 number of investment platforms that offer these facilities. Further details can be found on pages 72 and 73.
Performance since launch to 31 March 2015
%
3000
2500
2000
1500
1000
500
0
A pr 95
M ar 96
M ar 97
M ar 98
M ar 99
M ar 00
M ar 01
M ar 02
M ar 03
M ar 04
M ar 05
M ar 06
M ar 07
M ar 08
M ar 09
M ar 10
M ar 11
M ar 12
M ar 13
M ar 14
M ar 15
WWH Net Asset Value (total return)
WWH Share Price (total return)
Benchmark (total return)*
*
Rebased to 100 as at 28 April 1995
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).
Company Information
Directors
Sir Martin Smith (Chairman)
Sarah Bates
Jo Dixon
Dr David Holbrook
Samuel D. Isaly
Doug McCutcheon
Company Registration Number
3023689 (Registered in England)
The Company is an investment company as defined under
Section 833 of the Companies Act 2006
The Company was incorporated in England and Wales on
14 February 1995. The Company was incorporated as
Finsbury Worldwide Pharmaceutical Trust PLC.
Website
Website: www.worldwidewh.com
Registered Office
One Wood Street
London EC2V 7WS
Alternative Investment Fund Manager,
Company Secretary and Administrator
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.
Portfolio Manager
OrbiMed Capital LLC
601 Lexington Avenue, 54th Floor
New York NY 10022
Website: www.orbimed.com
Registered under the U.S. Securities & Exchange Commission
Depositary
J.P. Morgan Europe Limited
25 Bank Street
London E14 5JP
Auditors
PricewaterhouseCoopers LLP
More London Riverside
London SE1 2RT
Prime Broker
J.P. Morgan Clearing Corp
Suite 1, Metro Tech Roadway
Brooklyn, NY 11201
USA
Registrars
Capita Asset Services
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: shareholderenquiries@capita.co.uk
Website: www.capitaassetservices.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.
Stockbroker
Winterflood Securities Limited
The Atrium Building
Cannon Bridge, 25 Dowgate Hill
London EC4R 2GA
Share Price Listings
The price of your 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.
Identification Codes
Shares: SEDOL : 0338530
ISIN : GB0003385308
BLOOMBERG : WWH LN
EPIC : WWH
Foreign Account Tax Compliance Act (“FATCA)
IRS Registration Number (GIIN) : FIZWRN.99999.SL.826
Annual Report for the year ended 31 March 2015 86
Worldwide Healthcare Trust PLC
Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2015
235876 Finsbury WWH Cover spread 03/07/2015 13:56 Page 1
Disability Act
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.
A member of the Association of Investment Companies
This report is printed on Amadeus 100% 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.
This report has been produced using vegetable based inks.
Worldwide Healthcare Trust PLC
25 Southampton Buildings, London WC2A 1AL
www.worldwidewh.com
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Perivan Financial Print 235876