249336 WWH cover spread 03/07/2018 14:48 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, Link Asset Services, 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 Revive 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 249336
Annual Report
for the year ended 31 March 2018
249336 WWH cover spread 03/07/2018 14:48 Page 86
Financial Highlights
Key Information
Company Performance
Chairman’s Statement
Investment Objective and Policy
Strategic Report
1
2
3
4-5
6-7
8-10 Portfolio
11
OrbiMed Capital LLC
12-14 Portfolio Manager’s Review
15
Contribution by Investment
16-19 Sector Outlook
20-25 Business Review
Financial Statements
52
53
54
55-70 Notes to the Financial Statements
Income Statement
Statement of Changes in Equity
Statement of Financial Position
Governance
26-27 Board of Directors
28-30 Report of the Directors
Statement of Directors’
31
Responsibilities
32-39 Corporate Governance
40-42 Audit Committee Report
43-45 Directors’ Remuneration Report
46-51 Independent Auditors’ Report
Shareholder Information
Further Information
71
72-74 Glossary
75-76 How to Invest
77-81 Notice of Annual General Meeting
82-83 Explanatory Notes to the Resolutions
84-85 Regulatory Disclosures
86
Company Information
Investor Disclosure Document
The Alternative Investment Fund Managers Directive requires certain information to be made available
to investors prior to their investment in the Company. The Company’s Investor Disclosure Document is
available for viewing on www.worldwidewh.com
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:
Investment Week, Investment Company of the
Year 2016,
Category: Specialist (including Hedge Funds)
249336 WWH pp01-pp25 03/07/2018 12:25 Page 01
Strategic Report/Financial Highlights
For the year to 31 March 2018
Net asset value
per share (total return)*^
Share price (total
return)*^
2.8%
2017: +28.9%
5.3%
2017: +35.5%
Benchmark*†^
(2.5%)
2017: +24.5%
Discount of share price
to net asset value
per share*^
Dividends per share
Ongoing Charges^
0.3%
2017: 2.7%
17.5p
2017: 22.5p
0.9%
2017: 0.9%
(excludes performance
fees crystallised
during the year)
*Source: Morningstar
† MSCI World Health Care Index on a net total return, sterling adjusted basis. Also see Glossary beginning on page 72.
^ Alternative Performance Measure (see Glossary beginning on page 72).
Total return performance for the year to 31 March 2018
%
115
110
105
100
95
M ar 17
A pr 17
M ay 17
Jun 17
Jul 17
A u g 17
Se p 17
O ct 17
N ov 17
D ec 17
Jan 18
Fe b 18
M ar 18
WWH Share Price (total return)
WWH NAV per Share (total return)
Benchmark (total return)
Rebased to 100 as at 31 March 2017
Source: Morningstar, Thomson Reuters & Bloomberg
Annual Report for the year ended 31 March 2018 01
Worldwide Healthcare Trust PLC
249336 WWH pp01-pp25 03/07/2018 12:25 Page 02
Strategic Report/Key Information
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 global and accessing this 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.
Worldwide Healthcare Trust PLC is able to participate in all aspects of healthcare, anywhere in the world because of its broad
investment mandate. These may include patented speciality 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 extensive with
investments in the U.S., Europe, Asia 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 enable both regular monthly investments and lump sum investments in the Company’s shares. There
are a number of investment platforms that offer these facilities. Further details can be found on pages 75 and 76.
Total return performance since launch to 31 March 2018
%
3500
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
M ar 16
M ar 17
M ar 18
WWH NAV per Share (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)
02 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2018
249336 WWH pp01-pp25 03/07/2018 12:25 Page 03
Strategic Report/Company Performance
Historic performance for the years ended 31 March
2013 2014 2015 2016 2017 2018
Net asset value per share (total return)*† 30.3% 25.9% 53.0% (9.0%) 28.9% 2.8%
Benchmark (total return)*† 31.4% 14.9% 35.9% (5.4%) 24.5% (2.5%)
Net asset value per share – basic 1110.2p 1374.3p 2039.3p 1850.9p 2,367.2p 2,411.1p
Net asset value per share – diluted** 1089.6p 1348.2p 2039.3p 1850.5p 2,367.2p 2,411.1p
Share price† 1009.0p 1301.0p 1930.0p 1715.0p 2,304.0p 2,405.0p
Discount of share price to diluted net
asset value per share† 7.4% 3.5% 5.4% 7.3% 2.7% 0.3%
Dividends per share 16.5p 15.0p 12.5p 16.5p 22.5p 17.5p
Leverage† 12.7% 13.9% 13.2% 14.0% 16.9% 16.4%
Ongoing charges† 1.0% 1.0% 1.0% 0.9% 0.9% 0.9%
Ongoing charges (including performance fees
paid or crystallised during the year)† 1.2% 1.1% 2.2% 2.1% 1.0% 1.2%
*Source: Morningstar
**Dilution to take account of the Company’s Subscription Shares (which expired on 31 July 2014) and any shares held in treasury.
†Alternative Performance Measure (see Glossary beginning on page 72).
Five year total return performance to 31 March 2018
%
300
260
220
180
140
100
60
M ar 13
M ar 14
M ar 15
M ar 16
M ar 17
M ar 18
WWH Share Price (total return)
WWH NAV per Share (total return)
Benchmark (total return)
Rebased to 100 as at 31 March 2013
Source: Morningstar, Thomson Reuters & Bloomberg
Annual Report for the year ended 31 March 2018 03
Worldwide Healthcare Trust PLC
249336 WWH pp01-pp25 03/07/2018 12:25 Page 04
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
Against a background of a modest decline in the global
healthcare sector, I am pleased to report that both the
Company’s share price and the net asset value per share
produced a positive total return which outperformed the
Company’s Benchmark, the MSCI World Health Care Index on
a net total return, sterling adjusted basis.
The Company’s net asset value per share total return was
+2.8% and the share price total return was +5.3%. The
Company’s Benchmark fell by 2.5% during the year. Both the
Company’s portfolio and the Benchmark have a high
exposure to companies denominated in U.S.$. As such, the
strengthening of sterling against the U.S.$ during the year, by
12.0%, acted as a headwind for the Company’s performance
in absolute terms.
The Company had, on average, leverage of 16.2% (2017: 16.3%)
during the year which contributed 0.9% to performance
(2017: the contribution to performance was 3.2%).
The long-term performance of the Company continues to be
strong and it is pleasing to note that from the Company’s
inception in 1995 to 31 March 2018, the total return of the
Company’s net asset value per share has been 2,812.7%,
equivalent to a compound annual return of 15.8%. This
compares to a cumulative blended Benchmark return of
1,143.9%, equivalent to a compound annual return of 11.6%
over the same period.
Further information on the healthcare sector and on the
Company’s investments can be found in the Portfolio
Manager’s Review.
Capital
The Company’s share price has traded at a premium to the
net asset value per share for much of the year. In accordance
with the Company’s share price premium management policy
3,355,000 new shares were issued during the year at a small
premium to the Company’s cum income net asset value per
share. This issuance gave rise to the receipt of £84.7m of new
funds by the Company which have been invested in line with
the Company’s investment objective. Since the end of the
year a further 107,500 new shares have been issued raising
£2.6m of new funds. No shares were repurchased by the
Company during the year and to the date of this report and no
shares were held in treasury.
The Company’s share issuance and share buy-back
authorities will as usual be proposed for renewal at the
Company’s Annual General Meeting to be held in
September 2018.
Revenue and dividend
Shareholders will be aware that it remains the Company’s
policy to pursue capital growth for shareholders and to pay
dividends at least to the extent required to maintain
investment trust status. A first interim dividend of 6.5p per
share, for the year ended 31 March 2018, was paid on
9 January 2018 to shareholders on the register on
24 November 2017. The Company’s net revenue return for the
year as a whole fell slightly to £9.0 million (2017: £10.7 m) due,
in part, to a fall in the level of income received, and also to the
strength of sterling against the U.S.$. Accordingly, the Board
has declared a slightly reduced second interim dividend of
11.0p per share which, together with the first interim dividend
already paid, makes a total dividend for the year of 17.5p
(2017: 22.5p per share). Based on the closing mid-market
share price of 2,680.0p on 14 June 2018, the total dividend
payment for the year represents a current yield of 0.7%.
The second interim dividend will be payable on 31 July 2018 to
shareholders on the register of members on 22 June 2018.
The associated ex-dividend date will be 21 June 2018.
Composition of the Board
In December 2017 Sam Isaly, the former Managing Partner at
OrbiMed and the Company’s lead portfolio manager,
announced his plans to step down as Managing Partner of
OrbiMed. He subsequently left the Board of the Company in
January 2018 and has recently completed his retirement
from OrbiMed. On behalf of the Board, and also
shareholders, I would like to thank him for the significant
contribution he has made to the affairs of the Company since
its inception. The portfolio remains very well positioned in the
very capable hands of Sven Borho (one of OrbiMed’s
Managing Partners) and Trevor Polischuk.
I am delighted that Sven Borho has joined the Board,
as announced on 7 June 2018. Sven is a founding Partner of
OrbiMed and has been part of the team that manages the
Company’s portfolio since the Company’s inception.
A resolution proposing Sven’s appointment to the Board will
be considered by shareholders at this year’s Annual General
Meeting.
04 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2018
249336 WWH pp01-pp25 03/07/2018 12:25 Page 05
Strategic Report/Chairman’s Statement
Key Information Document
Shareholders may be aware that new regulations, the
Packaged Retail and Insurance-based Investment Products
("PRIIPs") Regulation, came into effect from 1 January 2018.
Under these regulations, the Company is required to prepare
and publish a key information document ("KID") to help
potential investors understand the nature, risk and costs of
this product and to allow comparison with others.
Annual General Meeting
The Board is keen to welcome all shareholders to the
Company’s Annual General Meeting which offers an
opportunity to meet the Directors and also to hear the views
of our Portfolio Manager. The Annual General Meeting of the
Company will be held at Salters’ Hall, 4 Fore Street,
London EC2Y 5DE on Thursday, 20 September 2018 from
12 noon.
Following improvements in technology the Company will
cease, with effect from our 2019 Annual General Meeting, to
issue paper proxy forms to shareholders. Voting on
resolutions to be considered at the Company’s general
meetings (including the Annual General Meeting) will be able
to be made via our Registrar’s website at
www.signalshares.com. A paper proxy form, however, will be
available on request from our Registrar.
Sir Martin Smith
Chairman
15 June 2018
The KID contains information about the Company in a highly
prescribed format, both in terms of the calculation of the
numbers and also the narrative, with limited ability to add
additional context and explanations. The Board believes that
the KID should therefore be considered only in conjunction
with other material produced about the Company including
the annual report, the half year report and the monthly
factsheet which, inter alia, describe the Company’s
investment objective together with the investment philosophy
of our Portfolio Manager. All of these documents are
available at www.worldwidewh.com. The Board continues to
keep this matter under review.
Outlook
Our Portfolio Manager expects the outlook to continue to be
positive for the healthcare sector. In particular, they believe
that attractive valuations, merger & acquisition activity,
strong innovation, and a favourable regulatory environment
and a benign U.S. corporate tax environment will all be key
drivers.
Our Portfolio Manager’s focus remains on the selection of
stocks with strong prospects for capital enhancement and
your Board firmly believes that the long-term investor will
continue to be well rewarded.
Annual Report for the year ended 31 March 2018 05
Worldwide Healthcare Trust PLC
249336 WWH pp01-pp25 03/07/2018 12:25 Page 06
Strategic Report/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 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 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;
• 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.
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 12% of the gross assets of the Company at
the time of acquisition.
Further details on how derivatives are employed can be found
in note 16 beginning on page 64.
The Company does not currently hedge against foreign
currency exposure.
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.
06 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2018
249336 WWH pp01-pp25 03/07/2018 12:25 Page 07
Strategic Report/Investment Objective and Policy
Leverage limits
Under the AIFMD the Company is required to set maximum
leverage limits. Leverage under the AIFMD is defined as any
method by which the total exposure of an AIF is increased.
Dividend Policy
It is the Company’s policy to pay out dividends to shareholders
at least to the extent required to maintain investment trust
status for each financial year.
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 72.
Annual Report for the year ended 31 March 2018 07
Worldwide Healthcare Trust PLC
249336 WWH pp01-pp25 03/07/2018 12:25 Page 08
Strategic Report/Portfolio
Investments held as at 31 March 2018
Market
value % of
Investments Country/region £’000 investments
Alexion Pharmaceuticals USA 57,271 4.4
Merck USA 55,992 4.3
Boston Scientific USA 54,757 4.2
Regeneron Pharmaceuticals USA 51,477 4.0
Novo Nordisk* Denmark 48,094 3.7
Bristol-Myers Squibb USA 41,553 3.2
Vertex Pharmaceuticals USA 40,269 3.1
Biogen USA 38,370 3.0
Celgene USA 35,762 2.8
Chugai Pharmaceutical Japan 34,355 2.6
Top 10 investments 457,900 35.3
Edwards Lifesciences USA 32,419 2.5
Wright Medical Netherlands 32,277 2.5
Puma Biotechnology USA 28,214 2.2
Nevro USA 26,786 2.1
Eisai Japan 26,617 2.0
Jazz Pharmaceuticals Ireland 25,473 2.0
Alnylam Pharmaceuticals USA 25,386 2.0
Agilent Technologies USA 24,067 1.9
Allergan Ireland 23,946 1.8
AbbVie USA 21,778 1.7
Top 20 investments 724,863 56.0
Intuitive Surgical USA 20,541 1.6
Galapagos** Belgium 20,315 1.5
Stryker USA 18,274 1.4
Amicus Therapeutics USA 17,958 1.4
Novartis Switzerland 17,772 1.4
Tenet Healthcare USA 17,771 1.4
Amgen USA 16,908 1.3
Shire USA 16,773 1.3
Bayer Germany 16,488 1.3
DaVita USA 16,142 1.2
Top 30 investments 903,805 69.8
Clovis Oncology USA 15,504 1.2
Santen Pharmaceutical Japan 15,328 1.2
Illumina USA 15,269 1.2
Mylan Netherlands 14,930 1.2
Universal Health Services USA 14,754 1.2
Sino Biopharmaceuticals China 14,687 1.1
Thermo Fisher Scientific USA 13,290 1.0
Xencor USA 13,090 1.0
Array BioPharma USA 12,756 1.0
BeiGene Cayman Islands 11,701 0.9
Top 40 investments 1,045,114 80.8
Coherus Biosciences USA 11,502 0.9
Nippon Shinyaku Japan 11,155 0.9
ACADIA Pharmaceuticals USA 10,425 0.8
Aerie Pharmaceuticals USA 9,927 0.8
Cigna USA 8,968 0.7
Wright Medical Contingent Value Rights Netherlands 8,542 0.7
Radius Health USA 8,194 0.6
Takeda Pharmaceutical Japan 8,173 0.6
HCA USA 8,018 0.6
Magellan Health USA 7,909 0.6
Top 50 investments 1,137,927 88.0
* includes Novo Nordisk ADR equating to 0.9% of investments.
** includes Galapagos ADR equating to 0.9% of investments.
08 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2018
249336 WWH pp01-pp25 03/07/2018 12:25 Page 09
Strategic Report/Portfolio
Market
value % of
Investments Country/region £’000 investments
LifePoint Health USA 7,855 0.6
Genmab Denmark 7,548 0.6
Alliance Healthcare Services FRN 20/04/2024 (unquoted) USA 7,146 0.5
Insmed USA 6,603 0.5
Siemens Healthineers Germany 6,314 0.5
Teleflex USA 6,181 0.5
Abbott Laboratories USA 6,155 0.5
Insmed 1.75% 15/01/2025 (unquoted) USA 5,951 0.5
Genoa A QOL Healthcare FRN 28/10/2024 (unquoted) USA 5,665 0.4
Medical Depot Holdings FRN 21/12/2023 (unquoted) USA 5,639 0.4
Top 60 investments 1,202,984 93.0
Bioventus FRN 21/11/2021 (unquoted) USA 5,602 0.4
Sarepta Therapeutics USA 5,249 0.4
Ironwood Pharmaceuticals USA 4,931 0.4
China Medical System Cayman Islands 4,582 0.4
Bluebird Bio USA 4,538 0.4
IHH Healthcare Malaysia 4,423 0.3
Deciphera Pharmaceuticals USA 3,811 0.3
Fluidigm USA 3,490 0.3
K2M Group USA 3,329 0.3
Amedisys USA 3,216 0.2
Top 70 investments 1,246,155 96.4
Yestar Healthcare China 3,079 0.2
Wenzhou Kangning Hospital China 3,046 0.2
Dentsply Sirona USA 2,367 0.2
Aegerion Pharmaceuticals 2% 15/08/2019 (unquoted) USA 2,007 0.1
ImmunoGen USA 1,636 0.1
CRISPR Therapeutics Switzerland 817 0.1
Innoviva FRN 18/08/2022 (unquoted) USA 711 0.1
Novelion Therapeutics Canada 62 0.0
Alimera Sciences USA 46 0.0
Total equities and fixed interest investments 1,259,926 97.4
Emerging Markets Healthcare (Basket)^* Emerging Markets 21,418 1.7
Jiangsu Hengrui Medicine^ China 18,123 1.4
JP China HC A-Share (Basket)^* China 17,118 1.3
JPM Gene (Basket)^* USA 16,942 1.3
Aier Eye Hospital Group^ China 13,493 1.0
India Health Care (Basket)^* India 10,953 0.8
M&A (Basket)^* USA 9,594 0.7
Strides Shasun China 6,493 0.5
Shenzhen Salubris Pharmaceuticals^ China 5,162 0.5
Jiangsu Nhwa Pharmaceutical^ China 4,717 0.3
Ajanta Pharma India 2,112 0.2
Less: Gross exposure on financed swaps (92,020) (7.1)
Total OTC Swaps 34,105 2.6
Total investments including OTC Swaps 1,294,031 100.0
Put Options (Long) 161 0.0
Put Options (Short) (1,058) (0.1)
Call Options (Long) 426 0.1
Call Options (Short) (40) 0.0
Total investments including OTC Swaps and Options 1,293,520 100.0
^ Financed
* See Glossary beginning on page 72 and note 16 beginning on page 64 for further details in relation to the OTC Swaps and Options. Basket swaps may include
underlying holdings that are also held directly.
Annual Report for the year ended 31 March 2018 09
Worldwide Healthcare Trust PLC
249336 WWH pp01-pp25 03/07/2018 12:25 Page 10
Strategic Report/Portfolio
SUMMARY
Market value % of
Investments £’000 investments
Equities (including options & swaps) 1,260,799 97.5
Unquoted debt securities – variable rate 24,763 1.9
Unquoted debt securities – fixed rate 7,958 0.6
Total of all investments 1,293,520 100.0
Portfolio distribution
By sector
2018
Life Sciences
Tools & Services
4.0%
Debt Instruments
2.5%
2017
Life Sciences
Tools & Services
3.3%
Debt Instruments
2.6%
Swap Baskets*
5.4%
Healthcare Providers
& Services
7.5%
Health Care Equipment/
Supplies/Technology
15.2%
By geography
2018
Asia
6.8%
Emerging
Markets
11.4%
Biotechnology
35.9%
Swap Baskets*
4.6%
Healthcare Providers
Services
13.7%
Biotechnology
28.6%
Healthcare Equipment/
Supplies/Technology
16.5%
Pharmaceutical
29.5%
Pharmaceutical
30.7%
2017
Asia
6.5%
Emerging
Markets
12.1%
Europe 17.2%
Europe 15.4%
North America
64.6%
North America
66.0%
* See Glossary beginning on page 72.
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Strategic Report/OrbiMed Capital LLC
OrbiMed was founded in 1989 and has evolved over time to be
one of the largest dedicated healthcare investment firms 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.
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 (Israel), Shanghai, and Mumbai.
The lead managers with responsibility for the Company’s
portfolio are as follows:
Sven H. Borho, CFA, is a founder and
Managing Partner of OrbiMed. Sven heads
the public equity team and he is the
portfolio manager for OrbiMed’s public
equity and hedge funds. He has been a
portfolio manager for the firm’s funds since
1993 and 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. Sven 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 Partner at OrbiMed focused on
the global pharmaceutical industry. Trevor
joined OrbiMed in 2003 and became a
Partner in 2011. 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 Global
Marketing Planning team within Parke-Davis. Trevor holds a
Doctorate in Neuropharmacology & Gross Human Anatomy and
an M.B.A. from Queen's University, Canada.
OrbiMed had over U.S.$14 billion in assets under
management as of 31 March 2018, 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 fully 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 Investment Team continues to expand and now
has over 80 investment professionals that cover all aspects of
research, trading, finance, and compliance. This includes over
20 degree holders with MD and/or PhD credentials, healthcare
Annual Report for the year ended 31 March 2018 11
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Sven Borho
Trevor Polischuk
Performance Review
The financial year ended 31 March 2018 was defined by a
return of industry fundamentals driving share price returns;
although global currency moves did provide some notable
volatility. With the shock of “Brexit” and a Republican win in
the U.S. Presidential election in 2016 moved to the backburner,
investors refocused on more pertinent growth drivers
throughout the year. In the healthcare sector that meant
reported financials, new drug approvals, pipeline
advancements, and merger and acquisition (M&A) activity
represented the principal reasons for share price movements.
However, despite a solid first nine months, healthcare equities
were once again stumped by macro factors that clipped much
of the gains in the final quarter of the financial year.
Without question, the start of the Company’s financial year
began with renewed optimism due to the pro-business agenda
from U.S. President Donald Trump that the market embraced.
Whilst the President’s first year has not been without
controversy – in part due to his excessive use of his Twitter
account – the penultimate legislation of the year was the
passage of a major U.S. tax reform bill that positively impacted
corporates’ bottom line across industries.
Overall, volatility remained low throughout the year, until a late
year spike that was short lived. In fact, the VIX (the Chicago
Board Options Exchange measure of volatility of the S&P 500),
remained remarkably low and range bound in the first nine
months of the financial year, recording an all-time low in
November 2017 (8.56) before spiking in February 2018 and
reaching a multi-year high (50.30) in tandem with a broad
market sell off. The cause was multifold, including monetary
tightening by the U.S. Federal Reserve, regulatory
uncertainties around major technology companies, inflationary
fears, and continued opaqueness around U.S. policy. The result
was a spike in correlation that saw equity markets across
industry sectors and around the world swoon.
The net result was a modest decline in global healthcare
equities. The MSCI World Healthcare Index, measured on a net
total return, sterling adjusted basis, declined by 2.5% for the
year ended 31 March 2018. However, we are pleased to report
that the Company was able to outperform the Benchmark
result and post positive returns for this period. The net asset
value per share total return was +2.8% and the share price
total return was +5.3%.
Overall, since the Company’s inception in 1995 to 31 March
2018, the total return of the Company’s net asset value per
share is 2,812.7%, equivalent to a compound annual return of
15.8%. This compares to the blended benchmark rise of
1,143.9%, equivalent to a compound annual return of 11.6%.
Contributors to Performance
Overall, outperformance was generated by a mix of sub-sector
allocation and stock picking across emerging biotechnology,
healthcare services, emerging markets, and life science
tools/diagnostics. In emerging biotechnology, overweight
positioning and stock picking created approximately 3.5% of
both positive absolute contribution and alpha generation. In
healthcare services, astute stock picking and catalyst-driven
trading led to over 3.0% of positive contribution and an
additional 2.5% in alpha generation. In emerging markets,
overweight allocation resulted in approximately 1.5% of
positive absolute contribution and alpha generation. Finally, in
life science tools/diagnostics, stock picking also created
positive returns, with over 1.0% of contribution and nearly
0.5% of alpha generation.
The top contributor during the year was BeiGene, a
China-based, commercial-stage biopharmaceutical company
focused on the development of cancer therapies with
significant commercial exposure in the large Chinese market
as well as worldwide. The shares performed strongly during
the year following the announcement of a collaboration with
Celgene on the development and commercialisation of its solid
tumour treatment candidate, tislelizumab, an anti-PD-1
antibody, and the expansion of BeiGene’s commercial footprint
in the large Chinese market to include Celgene’s oncology
products Abraxane, Revlimid and Vidaza. BeiGene also
continued to progress its own oncology pipeline including the
BTK inhibitor, zanubrutinib, which has shown promising data
in B cell malignancies, and pamiparib, a PARP inhibitor in
development for the treatment of solid tumours.
Another top contributor was Intuitive Surgical. The company
develops robotic systems and associated instrument sets for
use in a broad array of surgical procedures. Robotic procedure
volumes accelerated in 2017 against a strong 2016 comparison.
Moreover, new system placements, a leading indicator for
procedure utilisation strongly outperformed analyst
expectations. Hospital adoption and enthusiasm for robotics
have dramatically increased in new general surgical categories,
notably hernia repair. Competition concerns have abated
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somewhat as launches have been further delayed and details
reveal less comprehensive solutions than expected. Further,
investor enthusiasm for the company’s flexible catheter system
(currently in development) has increased, leading to a strong
multi-year outlook for the company. The result was a steady
increase in the share price throughout the year.
Juno Therapeutics is a development-stage biotechnology
company focused on chimeric antigen receptor (CAR) T cells
which are genetically engineered to combat cancer. Juno’s
lead candidate, JCAR017, has shown a potentially
best-in-class profile with an impressive six-month complete
response rate of 50% in relapsed or refractory diffuse large B
cell lymphoma (DLBCL) and a substantially improved safety
and tolerability profile over other CAR T products. In January
2018, Celgene acquired Juno for a 91% premium to its
share price.
Jiangsu Hengrui Medicine is the largest drug innovator in
China in terms of research and development (R&D)
expenditure, spending nearly U.S.$300 million in 2017. The
company focuses on oncology and surgery drugs. Besides its
leadership in the Chinese pharmaceutical market, the
company has been expanding its footprint into the global
market. It has approximately ten generic drugs approved in the
U.S. and has licensed out many pipeline candidates to
overseas pharmaceutical companies. In 2017, the company
accomplished some significant milestones, leading to strong
share price appreciation. First, Hengrui became the first
among its Chinese peers to start a Phase III clinical trial in
immuno-oncology, notably for their anti-PD-1 monoclonal
antibody. The trial targeted over 400 patients with late-stage
non-small cell lung cancer. Second, the company filed for
conditional approval of pyrotinib, a novel, irreversible dual
tyrosine kinase inhibitor, based on strong survival data from a
Phase II study in metastatic breast cancer patients. Third,
Hengrui’s tyrosine kinase inhibitor for the treatment of gastric
cancer, apatinib, was added to the National Drug
Reimbursement List in China, resulting in a spike in patient
demand. The company’s dominant leadership in the Chinese
pharmaceutical market is likely sustainable, thanks to the
company’s strong in-house research, clinical development,
and commercialisation capabilities, coupled with continued
favourable government healthcare policies.
We believe China will continue to gain market share in the
global pharmaceutical market and become a driving force for
the innovation in the healthcare sector, such as biological
drugs, cell therapy, and healthcare artificial intelligence.
Therefore, we expect to maintain a healthy exposure in the
China market.
The California-based Edwards Lifesciences develops products
and services to treat late-stage cardiovascular disease,
including transcatheter heart valve replacements, surgical
heart valve repair products, and haemodynamic monitoring
systems for critical care settings. The company’s share price
rebounded strongly off of a weak beginning to 2017 with a
powerful cadence of earnings reports throughout the year
after investors were initially concerned over slowing market
growth. More recently, the company also held an investor day
event that highlighted continued runway for market
penetration and new opportunities in mitral heart valve
therapy. This combination of strong outperformance and
recovery in investor enthusiasm over the pipeline has resulted
in material stock price appreciation.
Detractors from Performance
As is typical in healthcare investing, detractors in the financial
year were largely idiosyncratic in nature, with individual stocks
from different sectors declining primarily due to unexpected
negative catalysts or news flow. A main culprit, often resulting
in acute share price declines, is the failure of a clinical trial.
That said, negative offsets to performance were limited. Of
most import was our overweight allocation to large
capitalisation biotechnology stocks. The group performed
poorly when measured in pound sterling terms in the financial
year and sold off during the market tumult in the last quarter
of the year. This resulted in an approximate 3.0% absolute loss
and 1.5% of negative alpha. Other detractors were more
modest. Alpha headwinds from medical devices due to stock
picking totalled 1.25%. For generic pharmaceuticals, our
performance was impeded by approximately 0.75%. Finally,
large capitalisation pharmaceuticals combined for less than
2.0% of negative contribution but the alpha impact was neutral
given our underweight positioning in the sector.
On a single stock basis, the largest detractor during the year
belongs to a different descriptor, such as “reversion to the
mean” or perhaps even “profit taking”. Wright Medical
develops joint replacement devices, primarily for shoulder, foot
and ankle, trauma and sports medicine procedures, as well as
orthobiologic products. In the previous financial year, our
investment in the company resulted in the largest contribution
to performance. Yet the company’s share price had a
challenging time in the current financial year, as the company
embarked on a sales force expansion plan, accelerated it, and
later experienced disruption and a lower ramp to productivity
than expected. Anticipated competition also increased as a key
competitor, Zimmer Holdings, launched a stemless shoulder
product to compete with Wright’s “Simpliciti” product, a key
high growth product for the company. Nevertheless, there are
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reasons for optimism for the company as the new sales force
matures, the company garners new product approvals, and
launches several key new products over the course of 2018
and beyond.
Celgene is a large capitalisation biotechnology company with a
global presence and a focus on the therapeutic categories of
haematology and immunology/inflammation. The stock
performed well during the first half of the Company’s financial
year but announced a number of negative developments in
October 2017 that led to a precipitous drop in investor
confidence and a corresponding drop in share price. First, the
company announced that a key pipeline asset under
development for the treatment of Crohn’s disease failed to
show sufficient efficacy in a Phase III trial. Second, the
company announced lower-than-expected sales for its
blockbuster psoriasis drug Otezla (apremilast) in the third
quarter. And finally, but not coincidentally, the company
lowered its long term 2020 financial guidance. This
combination of events led to more than a 30% drop in share
price (in local currency) over the course of a month.
Unfortunately, the share price in Celgene bore more weakness
when the company announced that their multiple sclerosis
late stage candidate, ozanimod, received a “refusal-to-file”
letter from the U.S. Food and Drug Administration (FDA),
effectively (and surprisingly) denying regulatory review for this
novel drug candidate. Moreover, the setbacks at Celgene
contributed to a broader selloff in large capitalisation
biotechnology stocks as whole. Whilst Celgene’s valuation
plummeted, a near correction did not happen to close the
financial year as investors put the stock in the “sin bin”.
As a leader in the revolution in the field of immuno-oncology,
investor expectations for Merck’s Keytruda (pembrolizumab)
were understandably high. Only Merck’s Keytruda, through an
accelerated process, has been able to obtain approval for the
treatment of frontline, advanced non-small cell lung cancer.
The share price had reflected this success for first half of the
financial year. However, when the company announced that
the confirmatory trial for Keytruda in frontline lung would be
delayed for over a year and the European filing for Keytruda
was being withdrawn, the company lost more than U.S.$25
billion in market capitalisation.
Incyte is a commercial-stage biopharmaceutical company
focused on novel therapeutics for unmet needs in the
treatment of cancer. Shares in Incyte declined as the company
faced multiple setbacks during the financial year, including an
unexpected delay in the U.S. regulatory filing of its rheumatoid
arthritis treatment Olumiant (baricitinib) with partner Eli Lilly.
Incyte had previously shown promising early data of its solid
14 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2018
tumour treatment candidate epacadostat, a IDO-1 enzyme
inhibitor, in combination with PD-1 inhibitors in metastatic
melanoma. However, investors grew increasingly skeptical
about this pipeline product prior to its pivotal phase III trial
readout.
Coherus Biosciences is a pure-play biosimilars company
working on developing biosimilar versions to a number of
blockbuster biotechnology products, including Neulasta,
Enbrel, and Humira. The company encountered several
setbacks in the financial year, two of which were of most
import. First, the company’s lead programme is the
development of a biosimilar version of Neulasta, a white blood
cell growth factor marketed by Amgen. The stock gapped
lower after the FDA rejected the filing and asked the company
to conduct further testing of its product using a more sensitive
assay prior to approval. The delay reduces Coherus’ time to
market advantage versus other biosimilar competitors. The
company suffered additional setbacks in their attempt to
overturn a key patent for Humira, Abbvie’s U.S.$18 billion
biologic drug for rheumatoid arthritis, psoriasis, and
inflammatory bowel disease. This likely delays the launch of
Coherus’ biosimilar version of the drug in the U.S. to the early
to mid-2020s.
Derivative Overlay Strategy
OrbiMed continues to employ a derivative overlay strategy to
glean market intelligence and offer additional
outperformance. While the strategy has generated meaningful
outperformance since 2006, the cumulative contribution over
the last several years has been modestly positive. The options
strategy is primarily used to create target effective entry prices
for favoured stocks, leverage specific catalysts and capture
special situation opportunities. Two derivative specialists
implement the strategy in careful consultation with the
portfolio management team. OrbiMed adheres to strictly
defined risk limits and in practice maintains a net exposure
well below the 5% restriction.
In addition to the derivative overlay strategy, we utilise
thematic over-the-counter basket swaps for both tactical and
strategic investment purposes. Swaps are an efficient and
effective way to gain exposure to a therapeutic category or to a
specific theme (for example oncology; M&A; geography).
Sven H. Borho and Trevor M. Polischuk
OrbiMed Capital LLC
Portfolio Manager
15 June 2018
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Strategic Report/Contribution by Investment
Contribution by Investment
Principal contributors to and detractors from net asset value performance
Contribution
Contribution per share*
Top five contributors £’000 £
BeiGene 21,178 0.44
Intuitive Surgical 15,777 0.33
Juno Therapeutics† 12,680 0.26
Jiangsu Hengrui Medicine 12,193 0.25
Edwards Lifesciences 9,306 0.19
71,134 1.47
Top five detractors
Coherus Biosciences (10,308) (0.22)
Incyte† (11,044) (0.23)
Merck (13,081) (0.27)
Celgene (16,609) (0.35)
Wright Medical (24,532) (0.51)
(75,574) (1.58)
*Calculation based on 47,849,849 shares being the weighted average number of shares in issue during the year ended
31 March 2018.
†Not held in the portfolio as at 31 March 2018.
* based on 46,695,120 being the weighted average number of shares in issue during the year ended 31 March 2017.
† not owned in the portfolio as at 31 March 2017.
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Strategic Report/Sector Outlook
Global Pharmaceuticals
For the most part, returns for global pharmaceutical stocks
mirrored that the of the MSCI World Healthcare Index, with
some negative divergence in the final quarter of the financial
year, owing mostly to market volatility and rising interest rates.
For comparison, net total returns, on a sterling adjusted basis,
were -5.2% for global pharmaceutical stocks (as measured by
the New York Stock Exchange ARCA Pharmaceutical Index)
compared to -2.5% for the MSCI World Healthcare Index.
Underwhelming performance in the subsector during the year
can be attributed to a variety of issues. Whilst valuation
remains undemanding, political rhetoric coming from the
Donald Trump presidency has created a modest but constant
overhang for drug stocks, mostly over fears of significant
changes to drug pricing legislation in the United States. This
has led, in our observation, to less generalist investor
participation in the sector. Further, only modest M&A efforts
and certainly a lack of transformative business development
deals kept many investors at bay.
Nonetheless, we view the overall political landscape as a net
positive for therapeutic stocks. A major macro policy overhang
for therapeutics stocks entering 2017 was the possible “repeal
and replace” of the Affordable Healthcare Act (ACA), or
“Obamacare”. The ACA was President Barack Obama’s
healthcare reform law that was designed to provide universal
healthcare insurance coverage in the U.S. However, despite
the Republican party being in control of both chambers of
Congress and the White House, the repeal of Obamacare failed
despite many attempts to do so. The removal of this
uncertainty was a positive for the sector.
Whilst President Trump failed at his attempts to repeal the
ACA, he was successful in getting a major tax reform bill
passed into law. Importantly for global biopharmaceutical
companies, the new law lowered corporate tax rates to 21%
(from 35%) and lowered repatriation taxes to 15.5% (or lower,
in some cases) from 35%. This has resulted in higher
earnings, increased share buy backs, and larger dividends for
large biopharmaceutical companies.
Moreover, the appointment of Dr. Scott Gottlieb as
commissioner of the FDA has been a positive for therapeutic
stocks, as we had anticipated last year. The calendar year 2017
ended with a record number of new FDA drug approvals with
46. Additionally, Dr. Gottlieb’s efforts to address the backlog of
generic drug approvals was also successful, with over 1,000
distinct approvals in 2017.
Finally, we view the appointment of Alex Azar as the United
States Secretary of Health and Human Services by President
Donald Trump as another de-risking event on the political
front. Mr. Azar is an ex-pharmaceutical industry executive
(from Eli Lilly & Co.) who will be able to walk the fine line
between lowering healthcare costs for patients while
preserving a market based drug pricing system in the
United States.
Overall, we view the fundamentals of the global
pharmaceutical companies as positive, albeit unevenly
distributed. Valuation, as mentioned, remains undemanding
with price to earnings ratios towards the low end of the
historical range for the group. Innovation remains strong with
a number of data read outs and new drug launches expected
in 2018. Earnings growth rates, however, are somewhat
disparate, ranging from low single digits to high teens as
patent expirations, pipelines, and new products are somewhat
dissimilar from company to company.
Biotechnology
After a difficult 2016, which was marked by election-related
political overhangs on drug pricing policy in the United States,
the biotechnology sector partially rebounded over the course
of the financial year, especially in U.S. dollar terms. For the
first half of the Company’s financial year, the biotechnology
recovery was characterised by broad participation by both the
large capitalisation and emerging capitalisation names in the
biotechnology industry. However, starting in the last quarter of
2017, a marked divergence in performance between the small
and large capitalisation members of the sector emerged, with
smaller capitalisation biotechnology significantly
outperforming their larger capitalisation counterparts.
Investor sentiment for large capitalisation biotechnology
soured considerably when Celgene, a bellwether stock for the
group, announced multiple negative surprises in the autumn
of 2017, including a high profile clinical trial failure, lower than
expected sales of a key growth driver, and ultimately a
lowering of their long-term guidance. The result was a sudden
loss of U.S.$30 billion in market capitalisation within a month
which spooked investors, resulting in a broader selloff in large
cap biotechnology stocks as generalist investors fled the
sector. Smaller capitalistion biotechnology companies did
comparatively better as investors believed that the larger
capitalisation names would need to acquire emerging
biotechnology companies to reaccelerate their growth and
deal with future patent expirations on their key products.
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Valuations among large capitalisation biotechnology
companies remain very attractive, with some companies’
trading at historically low double-digit price-to-earnings
multiples. While investors have been concerned about
declining earnings growth and the exclusivity of many of the
large capitalisation companies’ lead drugs, we believe many of
these concerns are well discounted into share prices.
Valuations are so low that we would not be surprised if some
of the large capitalisation biotechnology companies
themselves became M&A targets. Takeda Pharmaceutical’s
proposed acquisition of Shire indicates there may be such
M&A appetite.
Overall M&A transaction volumes in biotechnology were
somewhat muted during most of the financial year, likely due
to uncertainty about corporate tax reform in the U.S. We had
expected clarity on tax reform could spark an acceleration in
M&A activity in the sector, and there does appear to be
evidence for this thus far in 2018. Numerous M&A transactions
have been announced since passage of the tax reform bill,
including Celgene’s acquisition of CAR-T company Juno
Therapeutics for. U.S$9 billion, Sanofi’s acquisition of a
haematology company Bioverativ for U.S.$11.6 billion, and
Novartis’ acquisition of gene therapy company AveXis for
U.S.$8.7 billion.
Lastly, the level of innovation in the biotechnology sector
remains very strong. Completely new modalities of treatment
delivering significant clinical benefit emerged. The first two
CAR-T cellular therapies, a therapy that involves harvesting a
cancer patient’s own T-cells, modifying them externally to
attack the patient’s cancer, and then reinserting them back
into the patient, were approved in 2017: Novartis’ Kymriah for
leukemia and Kite Pharmaceuticals’ Yescarta for lymphoma.
These cellular therapies have shown dramatic reduction in
tumour burden in patients with advanced blood cancers.
Additionally, the very first gene therapy was approved in the
United States in late 2017: Spark Therapeutics’ Luxturna was
approved for the treatment of a rare genetic eye disorder
leading to progressive blindness. Other biotechnology
companies have also released promising results of gene
therapies for disorders such as haemophilia,
beta-thalassemia, and sickle cell disease.
Lastly, we saw positive developments in treatments involving
modifying the transcription and processing of ribonucleic acid
(RNA)*. Biogen continued the launch of their antisense drug
Spinraza, which helps restore muscle development in patients
with the genetic disease spinal muscular atrophy, and Alnylam
announced positive Phase III results for their RNA interference
* See Glossary beginning on page 72.
therapy, patisiran, for hereditary ATTR amyloidosis with
polyneuropathy. We expect the outlook for the biotechnology
sector for the Company’s next financial year to remain positive,
given low valuations, continued M&A activity, strong
innovation, and a favourable regulatory environment.
Specialty Pharmaceuticals
In the reported financial year, concerns over pricing for
branded drug franchises remained a notable overhang for
specialty pharmaceutical companies and has hampered
performance of a majority of sector participants. In addition,
U.S. political rhetoric, potential new U.S. government
policies/initiatives and aggressive formulary management by
third-party payors has not been helpful. That said, we continue
to believe that several companies in this sector are
well-positioned and primed for outperformance. For this
select group, current valuation reflects worst-case scenarios
with regards to franchise pricing power but ignores potential
contributions from meaningful proprietary pipeline
programmes/compounds poised to emerge as valuable growth
drivers in the not-to-distant future. As a result, in instances
where our due diligence and valuation analyses imply
favourable risk-reward profiles, we have increased exposure to
select companies with significant pipeline disclosures over the
next 12 months.
In Europe, we remain constructive on a select group of
companies benefiting from improving trends, new launch
cycles, and increased M&A. Some companies should benefit
from newly-installed management teams implementing fresh,
more effective strategies that enhance shareholder value over
time. We expect M&A to remain a dominant theme, as
companies continue to pursue creative business combinations
driven by potential revenue, operating and tax synergies.
Generic Pharmaceuticals
The all-important US generic market remains in the throes of a
systemic price erosion cycle, the result of consolidation of
pharmaceutical and wholesaler distribution channels and
exacerbated competitive dynamics, the latter stemming from an
uptick in the number of generic approvals by the FDA. Despite
this challenging backdrop, investors have warmed up to some of
the better-positioned companies in the sector in response to
initial indications that price declines are moderating. In general,
companies with broad, diversified product portfolios have fared
better than their more narrowly-focused peers. We anticipate
that significant consolidation of the U.S. generic market will
enable a more stable and favourable U.S. pricing environment,
however this could take considerable time as sector leverage
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remains high. Furthermore, we believe segments of the
industry have been permanently scarred, leaving acquisition
premiums impaired indefinitely.
As anticipated, players with greater geographic reach have
benefited from solid performance in key EU and Asian markets,
which has provided some offset to weaker US performance. In
these markets, pricing erosion remains moderate and in line
with expectations, in stark contrast to conditions observed by
many US-focused participants. Some sizable markets (Italy,
Spain) still offer solid growth potential as generic utilisation
continues to ramp up from modest levels. Throughout Asia,
economic expansion, favourable demographics, supportive
governmental policies, and other contributing factors continue
to drive robust generic utilisation.
Medical Devices
The reported financial year was a strong one for Medical
Device stocks and was marked by continued, stable growth
and further penetration into new high growth therapeutic
areas. The sector benefited from a favourable macro
environment and a strong U.S. economy, and remained
insulated from several political healthcare headwinds, notably
healthcare reform and drug pricing. M&A flow was also
healthy with Becton Dickinson’s acquisition of C.R. Bard and
many tuck-ins across the sector.
Looking ahead to the second half of calendar 2018, we expect
this positive fundamental backdrop to persist and for
companies to lay the groundwork for revenue growth
acceleration into 2019 and beyond, while also benefitting on
the bottom line from U.S. tax reform. M&A should continue at
a steady pace, with several large companies boasting ample
firepower for tuck-ins and others ripe for portfolio
optimisation and divestitures.
We continue to favour companies that can sustainably deliver
premium organic revenue growth through exposure to
underpenetrated high growth markets such as transcatheter
heart valves, surgical robotics, spinal cord stimulation devices,
extremities implants, and left atrial appendage closure
technologies. Our investments reflect a preference for
companies that have demonstrated strong growth and are
poised for further growth inflections with new product
launches and/or indication expansions in the second half of
2018 and 2019.
Healthcare Services
The financial year favoured “payers” over “providers”. In other
words, companies that paid for healthcare services such as U.S.
HMOs (Health Maintenance Organisations) significantly
outperformed companies that administered services to patients,
such as hospitals. This dynamic occurred for two main reasons:
utilization of healthcare services came in lower than expected
and corporate tax reform disproportionately benefited
companies with low financial leverage (due to new rules against
interest expense deductibility). Separately, scrutiny regarding
drug prices drove underperformance in drug supply chain
stocks that stand to profit from higher inflation.
We do not expect HMOs to duplicate their strong
outperformance in the coming year for a variety of reasons.
First, price competition may intensify driven by non-profit
competitors (like Blue Cross Blue Shield) that are motivated to
reinvest higher earnings. Second, tax reform benefits may be
difficult to retain in a competitive marketplace as payors may
give on price to capture share gains. Third, a strengthening
economy creates stable or increasing utilisation of healthcare
services, putting pressure on costs. Finally, we note valuations
are elevated when compared to historical norms. While
putative M&A activity may offer support to valuations, it is
unclear if regulators will approve pending deals.
We remain cautious on the drug supply chain because they
could be negatively impacted by news flow and rhetoric on
drug price reform legislation, ongoing opioid litigation,
decelerating drug price inflation, and increased competition
from new entrants (such as Amazon).
Life Science Tools/Diagnostics
The life sciences tools sector continued its momentum
throughout much of the Company’s previous financial year. The
subsector’s leadership position within healthcare diverged
more as political, macro, and strategic uncertainties were
largely avoided. The lack of a spotlight on the sector has paid
dividends in allowing the sector to enjoy an elevated valuation.
On a forward looking fundamental basis, bioprocessing, fueled
by increased manufacturing focus for biosimilars and the
buoyant capital markets for bio-pharma, continued to be the
main driver in organic growth. The sector remains well
positioned to capitalise on these secular trends in bio-pharma.
However, given the premium valuation ascribed to the sector,
headline noise around global tariffs, especially relating to
China, is a risk factor that should be taken into consideration.
Although impact of the proposed China tariff is difficult to
quantify, the noise created in the market is a material
downside event for the group given its relatively high exposure
into that geography.
18 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2018
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Overall, we contend that end markets for tools remain and will
continue to be attractive during 2018. Political insularity for the
most part, is also attractive given the market’s sensitivity on
difficult-to-assess twitter headlines. However, all things
factored in, elevated valuation is reflective of the said security
in the tools subsector.
Emerging Markets
Healthcare companies in emerging markets continue to grow
faster than their counterparts in the West, driven by rising
income levels, the increase in the proportion of GDP spent on
healthcare, and local governments’ policy support.
In China, our investment strategy focuses on innovation and
high-quality generics in the pharmaceutical sector. The
Chinese government has been undertaking various initiatives
and reforms to improve the robustness and efficiency of their
drug approval system and to increase the quality of generic
drugs sold in China. By the end of 2017, the Chinese FDA
granted priority review to over 350 drugs which fit into one of
the categories including innovative drugs, drugs addressing
urgent unmet clinical needs, and first-to-market generics.
During the same year, the Chinese FDA issued comprehensive
guidance for the mandating of bioequivalence testing, also
referred to as quality consistency evaluation, for many of the
generic drugs currently marketed in China, to confirm that
they truly have equivalent efficacy to the original brand. In
December, the Chinese FDA published the first batch of 17
generic drugs that have passed quality consistency evaluation.
We expect more batches and favourable policies for those
drugs to come in 2018.
The Chinese government also made significant progress
towards reimbursement of pharmaceutical products. The
long-anticipated new version National Drug Reimbursement
List (NRDL) consisting of 2,535 drugs was released in February
2017. The number of reimbursable drugs expanded from the
version in 2009 by 18% and we believe the expansion is positive
for the industry growth in the next few years. In July 2017,
another 36 high-priced drugs were enrolled into NRDL with a
range of price cuts after negotiation with the government; this
was the very first time that the price negation mechanism was
adopted for NDRL in China.
Meanwhile, capital markets are becoming more accessible to
Chinese biotechnology companies. The Hong Kong Stock
Exchange announced its decision to amend the Main Board
Listing Rules (Listing Rules) to allow New Economy
companies, including pre-revenue biotechnology companies,
to list on the Main Board. We believe this will help expand our
investment universe in the region.
In India, our stock selection process takes into account
geographic and product revenue/profit mix, pipeline quality
and vesting, manufacturing compliance status, and balance
sheet health. Manufacturing compliance violations remain a
notable risk and we continue to closely monitor dynamics in
the US generic market, which has been adversely impacted by
a severe pricing erosion cycle.
From an investment perspective, we prefer companies with
significant revenue diversity, including meaningful exposure to
higher-growth European markets, domestic (Indian) markets,
and other emerging markets, as this reduces dependence on
the currently challenged U.S. market. We also favour
companies with generic portfolios biased toward near-term
opportunities targeting difficult to formulate products,
including injectables, depots, patches, and certain orals and
topicals. We closely scrutinise companies’ compliance
histories and prefer those with manufacturing redundancies,
at least for key products in important markets. Lastly, we keep
a keen eye on leverage and are intensely focused on the cash
generating abilities of our portfolio companies.
Sven H. Borho and Trevor M. Polischuk
OrbiMed Capital LLC
Portfolio Manager
15 June 2018
Annual Report for the year ended 31 March 2018 19
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The aim of the Strategic Report (on pages 1 to 25) is to
provide shareholders with the ability to assess how the
Directors have performed their duty to promote the success
of the Company.
The Strategic Report contains certain forward-looking
statements. These statements are made by the Directors
based on the information available to them at the time of
their approval of this report and such statements should be
treated with caution due to the inherent uncertainties,
including both economic and business risk factors,
underlying any such forward-looking information.
Business Model
Worldwide Healthcare Trust PLC is an investment trust and
has a premium listing on the London Stock Exchange. Its
investment objective is set out on page 6. In seeking to
achieve this objective, the Company employs Frostrow Capital
LLP (Frostrow) as its Alternative Investment Fund Manager
(AIFM), OrbiMed Capital LLC (OrbiMed) as its Portfolio
Manager, J.P. Morgan Europe Limited as its Depositary and
J.P. Morgan Securities LLC as its Custodian and Prime
Broker. Further details about their appointments can be
found in the Report of the Directors on pages 28 and 29. The
Board has determined an investment objective, policy and
related guidelines and limits, as described on pages 6 and 7.
The Company is subject to UK and European legislation and
regulations including UK company law, UK GAAP, the
Alternative Investment Fund Managers Directive, the UK
Listing, Prospectus, Disclosure and Transparency Rules,
taxation law and the Company’s own Articles of Association.
The Company is an investment company within the meaning of
Section 833 of the Companies Act 2006 and has been approved
by HM Revenue & Customs as an investment trust (for the
purposes of Sections 1158 and 1159 of the Corporation Tax Act
2010). As a result the Company is not liable for taxation on
capital gains. The Directors have no reason to believe that
approval will not continue to be retained.
The Board
The Board of the Company comprises Sir Martin Smith
(Chairman), Sarah Bates, Dr David Holbrook, Doug
McCutcheon and Humphrey van der Klugt. All of these
Directors served throughout the year and are independent
non-executive Directors. Samuel D. Isaly left the Board on 12
January 2018. Mr Isaly was not considered by the Board to be
independent. Subsequent to the year-end, Sven Borho joined
the Board (on 7 June 2018). He is not considered by the Board
to be an independent Director.
Further information on the Directors can be found on
pages 26 and 27.
20 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2018
All Directors seek election or re-election by shareholders at
each Annual General Meeting.
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:
• the Investment Objective, Policy and Benchmark,
incorporating the investment and derivative guidelines and
limits, and changes to these;
• the maximum level of gearing and leverage the Company
may employ;
• a review of performance against the Company’s KPIs;
• a review of the performance and continuing appointment
of service providers; and
• the 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 and leverage levels allowed.
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.
The Corporate Governance report, on pages 32 to 39, includes
a statement of compliance with corporate governance codes
and best practice, and the Business Review (pages 22 to 24)
includes details of the internal control and risk management
framework within which the Board operates.
Key performance indicators (KPI)
The Board assesses the Company’s performance in meeting
its objectives against key performance indicators (also
referred to as Alternative Performance Measures) as follows:
• Net asset value (‘NAV’) per share total return against the
Benchmark;
• Discount/premium of share price to NAV per share; and
• Ongoing charges ratio.
Information on the Company’s performance is provided in the
Chairman’s Statement and the Portfolio Manager’s Review
and a record of these measures is shown on pages 1, 2 and 3.
Further information regarding these Alternative Performance
Measures can be found in the Glossary beginning on page 72.
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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
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
is contained in the Portfolio Manager’s Review beginning 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), the Custodian and Prime
Broker J.P. Morgan Securities LLC, and the Depositary,
J.P. Morgan Europe Limited. Details of their key
responsibilities follow and further information on their
contractual arrangements with the Company are included in
the Report of the Directors beginning on page 28.
Alternative Investment Fund Manager (AIFM)
Frostrow under the terms of its AIFM agreement with the
Company provides, inter alia, the following services:
• oversight of the portfolio management function delegated
to OrbiMed Capital LLC;
• investment portfolio administration and valuation;
• risk management services;
• marketing and shareholder services;
• share price discount and premium management;
• administrative and secretarial services;
• advice and guidance in respect of corporate governance
requirements;
• maintenance of the Company’s accounting records;
• maintenance of the Company’s website;
• preparation and dispatch of annual and half year reports
and monthly fact sheets; and
• ensuring compliance with applicable legal and regulatory
requirements.
During the year, under the terms of the AIFM Agreement,
Frostrow received a fee as follows:
On market capitalisation up to £150 million: 0.3%; in the
range £150 million to £500 million: 0.2%; in the range
£500 million to £1 billion: 0.15%; in the range £1 billion to
£1.5 billion: 0.125%; over £1.5 billion: 0.075%. In addition,
Frostrow receives a fixed fee per annum of £57,500.
Frostrow is no longer entitled to performance fees, however
it was entitled to receive any performance fee that
crystallised during the year ended 31 March 2018 in respect
of cumulative outperformance attained by 31 March 2017.
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 receives a base fee of 0.65% of NAV and a
performance fee of 15% of outperformance against the
Benchmark as detailed on page 28.
Depositary, Custodian and Prime Broker
J.P. Morgan Europe Limited acts as the Company’s Depositary
and J.P. Morgan Securities LLC as its Custodian and
Prime Broker.
Annual Report for the year ended 31 March 2018 21
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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.
The Depositary receives a variable fee based on the size of
the Company as set out on pages 28 and 29.
J.P. Morgan Europe Limited has discharged certain of its
liabilities as Depositary to J.P. Morgan Securities LLC. Further
details of this arrangement are set out on pages 28 and 29. J.P.
Morgan Securities LLC, as Custodian and Prime Broker, provides
the following services under its agreement with the Company:
• 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 long-term
performance of the portfolio in absolute terms and by
reference to the Benchmark.
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 and/or
mitigate these risks. The risks can be categorised under the
following broad headings:
• Investment (including leverage risks);
• Operational (including financial, corporate governance,
• safekeeping and custody of the Company’s investments
accounting, legal, cyber security and regulatory risks); and
and cash;
• processing of transactions;
• provision of an overdraft facility. Assets up 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.
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 & 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 March 2018 with a
positive recommendation being made to the Board.
The Board believes the continuing appointment of the AIFM
and the Portfolio Manager, under the terms described on
page 21, 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 depth of
experience of the company management, company
secretarial, administrative and marketing team that the
AIFM allocates to the management of the Company; and
• Strategic (including shareholder relations and share price
performance).
Further information on the internal control and risk
management framework can be found below and information
on the use of financial instruments and their associated
risks, including exposures to market risk and counterparty
risk can be found in note 16 beginning on page 64.
The following section details the risks the Board consider to be
the most significant to the Company.
Market risks
By the nature of its activities and Investment Objective, the
Company’s portfolio is exposed to fluctuations in market
prices (from both individual security prices and foreign
exchange rates) and due to exposure to the global healthcare
sector, it is expected to have higher volatility than the wider
market. As such investors should be aware that by investing
in the Company they are exposing themselves to market
risks and those additional risks specific to the sectors in
which the Company invests, such as political interference in
drug pricing. In addition, the Company uses leverage (both
through derivatives and gearing) the effect of which is to
amplify the gains or losses the Company experiences.
To manage these risks the Board and the AIFM have
appointed OrbiMed to manage the investment portfolio within
the remit of the investment objective and policy, and imposed
various limits and guidelines, set out on pages 6 and 7. These
limits ensure that the portfolio is diversified, reducing the
risks associated with individual stocks, and that the
maximum exposure (through derivatives and an overdraft
facility) is limited. The compliance with those limits and
guidelines is monitored daily by Frostrow and OrbiMed and
reported to the Board monthly.
22 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2018
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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 16 beginning on page 64).
The Company does not currently hedge its currency exposure.
Investment management key person risk
There is a risk that the individuals responsible for managing
the Company’s portfolio may leave their employment or may
be prevented from undertaking their duties.
The Board manage this risk by:
• appointing OrbiMed, who operate a team environment
such that the loss of any individual should not impact on
service levels;
• receiving reports from OrbiMed at each Board meeting,
such report includes any significant changes in the
make-up of the team supporting the Company;
• meeting the wider team, outside the designated lead
managers, at OrbiMed’s offices and encouraging the
participation of the wider OrbiMed team in investor
updates; and
• delegating to the Management Engagement &
Remuneration Committee, responsibility to perform an
annual review of the service received from OrbiMed,
including, inter alia, the team supporting the lead
managers and succession planning.
Counterparty risk
In addition to market and foreign currency risks, discussed
above, the Company is exposed to risk arising from the use of
counterparties. If a counterparty were to fail, the 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 Securities LLC 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 Securities LLC 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 Securities
LLC, although the Company maintains the economic benefit
from the ownership of those assets it does not hold any of the
rights associated with those assets. Any of the Company’s
assets taken as collateral are not covered by the custody
arrangements provided by J.P. Morgan Securities LLC. The
Company is, however, afforded protection in accordance with
SEC rules and U.S. legislation equal to the value of the assets
that have been rehypothecated.
This risk is managed by the Board through:
• reviews of the arrangements with, and services provided
by, the Depositary and the Custodian 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. Also, the Board regularly monitors
the credit rating of the Company’s Custodian and
Prime Broker;
• monitoring of the assets taken as collateral (further
details can be found in note 16 beginning on page 64);
• 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;
(cid:129) 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; and
(cid:129) J.P. Morgan Securities LLC is subject to regular
monitoring by J.P. Morgan Europe Limited, the Company’s
Depositary, and the Board receives regular reports from
J.P. Morgan Europe Limited.
Service provider risk
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:
• 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
the 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.
Annual Report for the year ended 31 March 2018 23
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Shareholder relations and share price performance risk
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;
• discusses at each Board meeting 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.
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.
Company promotion
The Company has appointed Frostrow to provide marketing
and investor relations 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
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 videos and social media.
Disseminating key Company information: Frostrow performs
the Investor Relations function on behalf of the Company and
manages the investor database. Frostrow produces all key
corporate documents, distributes monthly Fact Sheets,
Annual Reports and updates from OrbiMed on portfolio and
market developments; and
24 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2018
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 beginning on page 72). 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 has the ability to issue new shares at a
small premium to the cum income NAV per share. This is an
effective share price premium management tool.
Details of share issuance are set out on page 30. No shares
were repurchased during the year and to the date of this
report.
Social, economic and environmental matters
The Directors, through the Company’s Portfolio Manager,
encourage companies in which investments are made to
adhere to best practice with regard to corporate governance.
In light of the nature of the Company’s business there are no
relevant human rights issues and the Company does not have
a human rights policy.
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The Company recognises that social and environmental
issues can have an effect on some of its investee companies.
The Company is an investment trust and so its own direct
environmental impact is minimal. The Board of Directors
consists of six Directors, four of whom are resident in the UK,
one in Canada and one in the U.S.. The Board holds the
majority of its regular meetings in the United Kingdom, with
one meeting held each year in New York, and has a policy
that travel, as far as possible, is minimal, thereby minimising
the Company’s greenhouse gas emissions. Further details
concerning greenhouse gas emissions can be found within
the Report of the Directors on page 30.
Board diversity
The Company supports the objectives of the Davies Report to
improve the performance of corporate boards by encouraging
the appointment of the best people from a range of differing
perspectives and backgrounds. The Company recognises the
benefits of diversity on the Board, including gender, and will
continue to take them into account in its Board appointments.
Brexit
The Board continues to consider the potential risks to the
Company as a result of the UK’s vote to leave the EU.
Currently, other than the impact of exchange rates on the
Company’s investment values (which is covered under Market
Risks), the Board does not consider that the Brexit vote has
significantly altered the risk profile of the Company as
substantially all the Company’s investments are based outside
the EU, and the majority of shareholders are UK based.
Long term viability
The Board has carried out a robust assessment of the
principal risks facing the Company including those that
would threaten its business model, future performance,
solvency or liquidity. The Board has drawn up a matrix of
risks facing the Company and has put in place a schedule of
investment limits and restrictions, appropriate to the
Company’s investment objective and policy, in order to
mitigate these risks as far as practicable. The principal risks
and uncertainties which have been identified, and the steps
taken by the Board to mitigate these as far as possible, are
shown on pages 22 to 24.
The Board believes it is appropriate to assess the Company’s
viability over a five year period. This period is also deemed
appropriate due to our Portfolio Manager’s long-term
investment horizon and also what we believe to be investors’
horizons, taking account of the Company’s current position
and the potential impact of the principal risks and
uncertainties as shown on page 22 to 24.
The Directors also took into account the liquidity of the
portfolio when considering the viability of the Company over
the next five years and its ability to meet liabilities as they fall
due. In addition, the Board noted that shareholders have an
opportunity to vote on the continuation of the Company every
five years; a resolution regarding the continuance of the
Company will next be put to shareholders at the Annual
General Meeting to be held in 2019.
The Directors do not expect there to be any significant
change in the principal risks that have been identified or the
adequacy of the mitigating controls in place, and do not
envisage any change in strategy or objectives or any events
that would prevent the Company from continuing to operate
over that period as the Company’s assets are liquid, its
commitments are limited and the Company intends to
continue to operate as an investment trust. The Directors
believe that only a substantial financial crisis affecting the
global economy could have an impact on this assessment.
Based on this assessment, the Directors have a reasonable
expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the next
five year period.
Alternative performance measures
The Financial Statements (on pages 52 to 70) set out the
required statutory reporting measures of the Company’s
financial performance. In addition, the Board assesses the
Company’s performance against a range of criteria which are
viewed as particularly relevant for investment trusts, which
are summarised on page 3 and explained in greater detail in
the Strategic Report, under the heading ‘Key Performance
Indicators’ on pages 20 and 21.
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 4
and 5 and the Portfolio Manager’s Review and Sector Outlook
on pages 12 to 19.
It is expected that the Company’s strategy will remain
unchanged in the coming year.
By order of the Board
Frostrow Capital LLP
Company Secretary
15 June 2018
Annual Report for the year ended 31 March 2018 25
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Governance/Board of Directors
Sir Martin Smith
Independent Non-Executive Chairman.
Sarah Bates
Independent Non-Executive Director.
Joined the Board in 2007 and became Chairman
in 2008. Remuneration: £47,700pa.
Joined the Board in 2013.
Remuneration: £30,130pa.
Sven Borho
Non-Executive Director.
Joined the Board in 2018.
Remuneration: £30,130pa.
Sir Martin Smith has been involved in the
financial services sector for more than 40 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 and business
interests, including being Chairman of GP
Bullhound, and a directorship with Oxford
Capital Partners.
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
Glyndebourne Arts Trust and also ClientEarth.
He has chaired the English National Opera and is
a Governor of the Ditchley Foundation.
Shareholding in the Company: 11,871 (Beneficial)
2,725 (Trustee)
Sarah is currently non-executive Chair of
St James’s Place plc. Sarah has announced her
intention to retire from her responsibilities at
St.James’s Place and it is expected that this will
take place in early July 2018. Sarah is also non-
executive Chair of Polar Capital Technology Trust
plc, and a former Chair of the Association of
Investment Companies. Sarah is a member of
the Investment Committee of the Universities
Superannuation Scheme and from 1 July 2018, of
the Investment Committee of the BBC Pension
Scheme. Sarah is Chair of Trustees of the
Diversity Group Charity and is a Trustee of the
Liver Group Charity. She also has a number of
voluntary appointments on charity investment
committees. Sarah attended Cambridge
University and has an MBA from London
Business School.
Shareholding in the Company: 7,200
Sven H. Borho, CFA, is a founder and Managing
Partner of OrbiMed. Sven heads the public equity
team and he is the portfolio manager for
OrbiMed’s public equity and hedge funds. He has
been a portfolio manager for the firm’s funds
since 1993 and 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. Sven
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.
Sven does not sit on any of the Company’s Board
Committees.
Shareholding in the Company: Nil
26 Worldwide Healthcare Trust PLC
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Governance/Board of Directors
Dr David Holbrook
Independent Non-Executive Director.
Humphrey van der Klugt, FCA
Independent Non-Executive Director.
Doug McCutcheon
Independent Non-Executive Director.
Joined the Board in 2007.
Remuneration: £32,320pa.
Joined the Board in 2016.
Remuneration £36,920pa.
Joined the Board in 2012.
Remuneration: £30,130pa.
A qualified physician, David manages the new
seed fund established by LifeArc (formerly
known as MRC Technology). David is also a
Trustee of the Liver Group Charity. He was
formerly Investment Director of the life science
activities of the seed fund of the University of
Cambridge. David 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.
David is Chairman of the Nominations
Committee and is the Senior Independent
Director.
Shareholding in the Company:
1,094
Humphrey is a Director of JPM Claverhouse
Investment Trust plc and Allianz Technology
Trust PLC. He was formerly Chairman of
Fidelity European Values PLC and a Director of
Murray Income Trust PLC and BlackRock
Commodities Income Investment Trust plc.
Prior to this Humphrey was a fund manager
and Director of Schroder Investment
Management Limited and in a 22 year career
was a member of their Group Investment and
Asset Allocation Committees. Prior to joining
Schroders, he was with Peat Marwick Mitchell
& Co (now KPMG) where he qualified as a
Chartered Accountant in 1979.
Humphrey is Chairman of the Audit
Committee.
Shareholding in the Company:
1,500
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.
Doug is Chairman of the Management
Engagement & Remuneration Committee.
Shareholding in the Company:
15,000
All Directors seek either appointment or re-appointment to the Board at the Annual General Meeting each year.
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 2017/18
Board
(4)
Audit Committee
(2)
Sir Martin Smith^
Sarah Bates
Dr David Holbrook
Samuel D. Isaly*
Humphrey van der Klugt
Doug McCutcheon
4
4
4
3
4
4
–
2
2
–
2
2
Nominations
Committee
(1)
1
1
1
–
1
1
*Left the Board on 12 January 2018. Mr Isaly was not a member of any of the Company’s Committees.
^ Sir Martin is not a member of the Audit Committee
Sven Borho joined the Board on 7 June 2018. He does not sit on any of the Company’s Committees.
All of the serving Directors attended the Annual General Meeting held on 14 September 2017.
Management
Engagement &
Remuneration
Committee
(1)
1
1
1
–
1
1
Annual Report for the year ended 31 March 2018 27
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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 2018.
Significant agreements
Details of the services provided under these agreements are
included in the Strategic Report on pages 21 to 22.
Alternative Investment Fund Management
agreement
As described on page 21, Frostrow is 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”).
The notice period on the AIFM Agreement with Frostrow is
12 months, termination can be initiated by either party.
During the year under review, Frostrow charged a variable
base fee, which was dependent on the size of the Company.
(Further details of this fee can be found on page 21).
Portfolio management agreement
Under the AIFM Agreement Frostrow has delegated the
portfolio management function to OrbiMed, under a portfolio
management agreement between it, the Company and
Frostrow (the “Portfolio Management Agreement”).
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 fee
Dependent on the level of long-term outperformance of the
Company, OrbiMed is 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 inside front cover for details of the
Benchmark).
The fee is calculated quarterly by comparing the cumulative
performance of the Company’s NAV with the cumulative
performance of the Benchmark since the launch of the
Company in 1995. The performance fee amounts to 15.0% of any
outperformance over the Benchmark. Provision is 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.
The performance fee charge for the year was £9.7m and is
represented by a provision for potential future performance
fee payments of £9.7m as at 31 March 2018. The 2017 charge
of £4.7m comprised of a £3.4m provision for potential future
performance fees as at 31 March 2017 and £1.3m of
performance fees that crystallised and became payable
during the year ended 31 March 2017.
The maximum amount that could become payable by 31 March
2019 is £9.7m if the current level of outperformance is
maintained. The £3.4m provided for as at 31 March 2017
crystallised during the year. £2.4m has been paid in
accordance with the performance fee provisions and £1.0m is
payable as at 31 March 2018.
Depositary agreement
The Company appointed J.P. Morgan Europe Limited (the
“Depositary”) as its Depositary in accordance with the
AIFMD on the terms and subject to the conditions of the
Depositary agreement between the Company, Frostrow and
the Depositary (the “Depositary Agreement”).
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 Securities LLC (the
“Custodian and Prime Broker”) pursuant to a delegation
agreement between the Company, Frostrow, the Depositary and
the Custodian and Prime Broker (the “Delegation Agreement”).
28 Worldwide Healthcare Trust PLC
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Governance/Report of the Directors
The Delegation Agreement transfers the Depositary’s liability
for the loss of the Company’s financial instruments held in
custody by the Custodian and Prime Broker to the Custodian
and Prime Broker in accordance with the AIFMD. The
Company has consented to the transfer and reuse of its
assets by the Custodian and Prime Broker (known as
“rehypothecation”) in accordance with the terms of an
institutional account agreement between the Company, the
Custodian and Prime Broker and certain other J.P. Morgan
entities (as defined therein). See page 23 for further details.
Prime brokerage agreement
The Company appointed J.P. Morgan Securities LLC 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
Custodian and Prime Broker receives interest on the drawn
overdraft as detailed in note 12 on page 63.
The Custodian and Prime Broker is a registered broker-dealer
and is regulated by the United States Securities and Exchange
Commission.
Substantial interests in share capital
Continuation of the Company
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.
The rules concerning the amendment of the Company’s
Articles of Association are contained in the Company’s
Articles of Association and in the Companies Act 2006.
Results and dividends
The results attributable to shareholders for the year and the
transfer to reserves are shown on pages 52 to 54. Details of
the Company’s dividend record can be found on page 3.
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, Link Asset Services, or to the Company directly.
Directors’ & officers’ liability insurance cover
Directors’ & officers’ liability insurance cover was
maintained by the Company during the year ended 31 March
2018. It is intended that this policy will continue for the year
ending 31 March 2019 and subsequent years.
The Company was aware of the following substantial interests in the voting rights of the Company as at 31 May 2018, the
latest practicable date before publication of the Annual Report:
Shareholder
Investec Wealth & Investment Limited
Alliance Trust Savings Limited
Rathbone Brothers plc
Hargreaves Lansdown plc
Charles Stanley & Co Limited
Speirs & Jeffrey Limited
Quilter Cheviot Investment Management
31 May 2018
31 March 2018
Number of
shares
% of issued
share capital
Number of
shares
% of issued
share capital
6,074,115
3,105,309
2,969,141
2,428,970
2,359,221
2,149,338
2,033,143
12.2
6.2
5.9
4.9
4.7
4.3
4.1
6,080,733
3,044,751
2,959,766
2,435,123
2,267,585
2,136,223
2,076,343
12.2
6.1
5.9
4.9
4.6
4.3
4.2
As at 31 March 2018 the Company had 49,861,278 shares in issue. As at 31 May 2018 there were 49,968,778 shares in issue.
Annual Report for the year ended 31 March 2018 29
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249336 WWH pp26-pp31.qxp 03/07/2018 12:26 Page 30
Governance/Report of the Directors
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.
Capital structure
The Company’s capital structure is composed solely of ordinary
shares.
During the year under review and to the date of this report, no
shares were bought back by the Company to be held in
treasury.
During the year, a total of 3,355,000 new shares were issued
at an average premium of 0.7% to the prevailing cum income
NAV per share.
Since the year end, to the date of this report, 107,500 new
shares have been issued at an average premium of 0.7% to the
prevailing cum income NAV per share.
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 80.
Political and charitable donations
The Company has not in the past and does not intend in the
future to make political or charitable donations.
Modern Slavery Act 2015
The Company does not provide goods or services in the
normal course of business, and as a financial investment
vehicle does not have customers. The Directors do not
therefore consider that the Company is required to make a
statement under the Modern Slavery Act 2015 in relation to
slavery or human trafficking.
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 ensures that its service providers apply the same
standards 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.
Criminal Finances Act 2017
The Company has a commitment to zero tolerance towards
the criminal facilitation of tax evasion.
Global 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 Large and
Medium sized Companies and Groups (Accounts and
Reports) Regulations 2008 (as amended), including those
within our underlying investment portfolio.
Common Reporting Standard (CRS)
CRS is a global standard for the automatic exchange of
information commissioned by the Organisation for Economic
Cooperation and Development and incorporated into UK law
by the International Tax Compliance Regulations 2015. CRS
requires the Company to provide certain additional details to
HMRC in relation to certain shareholders. The reporting
obligation began in 2016 and will be an annual requirement
going forward. The Registrars, Link Asset Services, have
been engaged to collate such information and file the
reports with HMRC on behalf of the Company.
Corporate governance
The Corporate Governance Statement is set out on pages 32
to 39.
Requirements of the Listing Rules
Listing Rule 9.8.4 requires the Company to include certain
information in a single identifiable section of the Annual
Report or a cross reference table indicating where the
information is set out. The Directors confirm that there are
no disclosures to be made under Listing Rule 9.8.4.
By order of the Board
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
Frostrow Capital LLP
Company Secretary
15 June 2018
30 Worldwide Healthcare Trust PLC
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Governance/Statement of Directors’ Responsibilities
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 judgements 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.
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 26 and
27, 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 2018;
• 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
15 June 2018
Annual Report for the year ended 31 March 2018 31
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Governance/Corporate Governance
Corporate Governance Statement
The Corporate Governance Statement on pages 32 to 39, forms part of the Report of the Directors on pages 28 to 30.
The Board is committed to achieving and demonstrating high standards of Corporate Governance.
The Board has considered the principles and recommendations of the AIC Code of Corporate Governance (‘AIC Code’), and by
reference to the AIC Corporate Governance Guide for Investment Companies (‘AIC Guide’) (which incorporates the UK
Corporate Governance Code (‘UK Code’)), will provide better information to shareholders.
The Financial Reporting Council has confirmed that by following the AIC Code and the AIC Guide, boards of investment
companies will meet their obligations in relation to the UK Code and paragraph 9.8.6 of the UK Listing Rules.
The AIC Code and AIC Guide address the principles set out in the UK Code as well as additional principles and
recommendations on issues that are specific to investment trusts. The AIC Code can be viewed at www.theaic.co.uk.
The Principles of the AIC Code
The AIC Code is made up of 21 principles split into three sections covering:
• The Board
• Board Meetings and relations with OrbiMed and Frostrow
• Shareholder Communications
Statement of Compliance
The Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Corporate
Governance Code, except as follows:
The UK Code includes certain provisions relating to:
• 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, 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 the need for an internal audit function which is addressed further on
page 40, the Company has not reported further in respect of these provisions.
32 Worldwide Healthcare Trust PLC
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Governance/Corporate Governance
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.
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.
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. With the exception of Sven Borho,
all Directors are considered by the Board to be independent of the AIFM and the
Portfolio Manager. No member of the Board is a Director of another investment
company managed by Frostrow or OrbiMed, nor (with the exception of Samuel D. Isaly,
until 12 January 2018, the date he ceased to be a Director of the Company, and Sven
Borho) has any Board member been an employee of the Company, OrbiMed, Frostrow
or any of its service providers. Sir Martin Smith and Dr David Holbrook have both
served on the Board for more than nine years from the date of their first election. Given
the strongly independent mindsets of Sir Martin Smith and Dr Holbrook, the Board is
firmly of the view that they can be considered independent.
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.
Sven Borho joined the Board on 7 June 2018. Accordingly, a resolution proposing his
appointment as a Director of the Company will be considered by shareholders at the
Annual General Meeting to be held on 20 September 2018.
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
appointment which are available for inspection on request at the office of the
Company’s AIFM and at the Annual General Meeting.
Annual Report for the year ended 31 March 2018 33
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Governance/Corporate Governance
AIC Code Principle
Compliance Statement
5. There should be full
disclosure of information
about the Board.
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 Directors’ biographical details, set out on pages 26 and 27 demonstrate the wide
range of skills and experience that they bring to the Board.
Details of the Board’s Committees and their composition are set out on page 38 of this
annual report.
The Nominations Committee considers annually the skills possessed by the Board and
identifies any skill shortages to be filled by new Directors. Following a skills audit
carried out during the year it was agreed that the Board was equipped with the
necessary skills and experience required for the sound stewardship of the Company
and to enable the Directors to hold meaningful debates at its meetings. 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 26 and 27.
The Company’s policy on diversity is set out on page 25.
During the year an external independent review of the Board, its committees and
individual Directors was carried out by an independent third party, Lintstock.
The Board reviewed the report from Lintstock in June 2018 and the Chairman is
leading on implementing those changes recommended by the report that the Board
considered should be made. The review concluded that the Board worked in a
collegiate efficient and effective manner, and did not identify any material weaknesses
or concerns.
The Board is satisfied that the structure, mix of skills and operation of the Board
continue to be effective and relevant for the Company.
Further independent review will be commissioned in 2021.
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 43 to 45.
Individual Directors take no part in discussions regarding their 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.
Details of the Board’s commitment to diversity are set out on page 25.
The appointment of Sven Borho to the Board was considered and agreed by the
independent Directors. A specialist recruitment firm was not engaged as part of this
process.
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Governance/Corporate Governance
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 Frostrow and OrbiMed
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.
Annual Report for the year ended 31 March 2018 35
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Governance/Corporate Governance
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 40
to 42.
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 agreed detailed guidelines and limits with the AIFM
and the Portfolio Manager, which are considered at each Board meeting.
Representatives from the AIFM and the Portfolio Manager attend 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 Proxy Voting and Class Action Policy
which includes its Corporate Governance and Voting Guidelines.
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 24.
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, and also
regarding the prevention of the facilitation of tax evasion.
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Governance/Corporate Governance
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.
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.
Details of the Company activities undertaken to promote the Company and manage
relations with shareholders are set out on page 24. 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.
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 Company’s 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 20.
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 22 to 24 and in note 16 beginning on page 64.
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.
Annual Report for the year ended 31 March 2018 37
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Governance/Corporate Governance
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 – Dr David Holbrook
The Board
Four additional non-executive Directors, all considered independent, except for Sven Borho (and previously Samuel D.
Isaly) as noted on page 33.
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
Doug McCutcheon
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 Directors’
Remuneration Policy of the
Company.
Audit
Committee
Nominations
Committee
Chairman
Humphrey van der Klugt, FCA*
All Independent Directors
(excluding the Chairman,
Sir Martin Smith)
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.
Chairman
Dr David Holbrook
All Independent Directors
Key responsibilities:
– to review regularly the Board’s
structure and composition;
and
– to make recommendations for
any changes or new
appointments.
* The Directors believe that Humphrey van der Klugt has the necessary recent and relevant financial experience to Chair the Company’s Audit Committee.
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.
Relations with shareholders
Details of the Company’s activities undertaken to promote
the Company and manage relations with shareholders are
set out on page 24.
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.
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Governance/Corporate Governance
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 Securities LLC. 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 Securities LLC.
Annual General Meeting
THE FOLLOWING INFORMATION TO BE DISCUSSED AT THE
FORTHCOMING ANNUAL GENERAL MEETING IS
IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt about the action you should take, you
should seek advice from your stockbroker, bank manager,
solicitor, accountant or other financial adviser authorised
under the Financial Services and Markets Act 2000 (as
amended). If you have sold or transferred all of your
ordinary shares in the Company, you should pass this
document, together with any other accompanying
documents, including the form of proxy, at once to the
purchaser or transferee, or to the stockbroker, bank or
other agent through whom the sale or transfer was
effected, for onward transmission to the purchaser
or transferee.
Resolutions relating to the following items of special
business will be proposed at the forthcoming Annual
General Meeting.
Resolution 10 Authority to allot shares
Resolution 11 Authority to disapply pre-emption rights
Resolution 12 Authority to sell shares held in Treasury on a
non pre-emptive basis
Resolution 13 Authority to buy back shares
Resolution 14 Authority to hold General Meetings (other than
the Annual General Meeting) on at least 14
clear days’ notice.
The full text of the resolutions can be found in the Notice of
Annual General Meeting on pages 77 to 81. Explanatory
notes regarding the resolutions can be found on pages 82
and 83.
Nominee share code
Where shares are held in a nominee company name, the
Company undertakes:
(cid:129) to provide the nominee company with multiple copies of
shareholder communications, so long as an indication of
quantities has been provided in advance;
(cid:129) to allow investors holding shares through a nominee
company to attend general meetings, provided the
correct authority from the nominee company is available;
and
(cid:129) 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
15 June 2018
Annual Report for the year ended 31 March 2018 39
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Governance/Audit Committee Report
Introduction from the Chairman
I am pleased to present my formal report to shareholders as
Chairman of the Audit Committee, for the year ended
31 March 2018.
Composition and Meetings
The Committee comprises those Directors considered to be
independent by the Board. The Chairman of the Board is not
a member of the Committee but will attend meetings by
invitation. Attendance by each Director is shown in the table
on page 27. The Board has taken note of the requirements
that the Committee as a whole should have competence
relevant to the sector in which the Company operates and
that at least one member of the Committee should have
recent and relevant financial experience. The Committee is
satisfied that the Committee is properly constituted in both
respects. I was appointed Chairman of the Committee in
2016 and am a Fellow of the Institute of Chartered
Accountants in England and Wales, I am also the Chairman
of the Audit Committee of two other public companies; the
other Committee members have a combination of financial,
investment and other relevant experience gained throughout
their careers.
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 41.
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.
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.
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.
The Audit Committee’s terms of reference are available for
review on the Company’s website at www.worldwidewh.com.
Significant Issues Considered by the Audit
Committee during the year
Financial Statements
The Board has asked the Committee to confirm that in its
opinion the Board can make the required statement that the
Annual Report taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company’s financial position,
performance, business model and strategy. The Committee
has given this confirmation on the basis of its review of the
whole document, underpinned by involvement in the
planning for its preparation and review of the processes to
assure the accuracy of factual content.
Significant Reporting Matters
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.
Valuation and ownership of the Company’s
investments and derivatives
The Audit Committee dealt with this matter by:
(cid:129) ensuring that all investment holdings and cash/deposit
balances had been agreed to an independent
confirmation from the custodian or relevant counterparty;
(cid:129) reconfirming its understanding of the processes in place
to record investment transactions and income, and to
value the portfolio;
(cid:129) reviewing and amending, where necessary, the
Company’s register of key risks in light of changes to the
portfolio and the investment environment;
(cid:129) gaining an overall understanding of the performance of
the portfolio both in capital and revenue terms through
comparison to the Benchmark; and
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Governance/Audit Committee Report
(cid:129) conducting a review of how the Company’s derivative
positions were monitored.
considered the Company’s operations in the light of the
following factors:
Other Reporting Matters
Calculation of AIFM, Portfolio Management and
Performance fees
The AIFM, Portfolio Management and Performance fees are
calculated in accordance with the AIFM and Portfolio
Management Agreements. The Auditors independently
recalculate any performance fee prior to payment. The
Auditors also recalculate the AIFM and Portfolio
Management fee as part of the audit.
Taxation
The Committee approached and dealt with ensuring
compliance with Section 1158 of the Corporation Tax Act
2010, by seeking confirmation that the Company continues
to meet the eligibility conditions on a monthly basis.
Investment Performance
The Committee gained an overall understanding of the
performance of the investment portfolio both in capital and
revenue terms through ongoing discussions and analysis
with the Company’s Portfolio Manager and also with
comparison to suitable key performance indicators (see
pages 20 and 21).
Accounting Policies
During the year the Committee ensured that the accounting
policies were applied consistently throughout the year. In
light of there being no unusual transactions during the year
or other possible reasons, the Committee agreed that there
was no reason to change the policies.
Going Concern
Having reviewed the Company’s financial position and
liabilities, the Committee is satisfied that it is appropriate for
the Board to prepare the financial statements on the going
concern basis.
Internal controls and risk management
As set out on page 22 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
judgement of what risks the Company faces, the Board has
(cid:129) the nature of the Company, with all management
functions outsourced to third party service providers;
(cid:129) the nature and extent of risks which it regards as
acceptable for the Company to bear within its overall
investment objective;
(cid:129) the threat of such risks becoming a reality; and
(cid:129) 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
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.
Viability Statement
The Board is required to make a longer-term viability
statement in relation to the continuing operations of the
Company. The Committee reviewed papers produced in
support of the statement made by the Board which assesses
the viability of the Company over a period of five years. The
Company is a long-term investor and the Committee
believes that is appropriate to recommend to the Board that
the Company’s viability should be assessed over a five-year
period, also taking account of the Company’s current
position and the potential impact of the Company’s principal
risks and uncertainties as shown in the Strategic Report.
External Auditors
Meetings:
This year the nature and scope of the audit together with
PricewaterhouseCoopers LLP’s audit plan were considered
by the Committee on 8 November 2017. I, as Chairman of the
Committee, had a meeting with them specifically to discuss
the audit and any issues that arose (of which there were
none of any significance). The Committee then met
PricewaterhouseCoopers LLP on 24 May 2018 to formally
review the outcome of the audit and to discuss the limited
Annual Report for the year ended 31 March 2018 41
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Governance/Audit Committee Report
Auditors’ Reappointment
PricewaterhouseCoopers LLP have indicated their
willingness to continue to act as Auditors to the Company for
the forthcoming year and a resolution for their
re-appointment will be proposed at the Annual General
Meeting.
The Committee reviews the scope and effectiveness of the
audit process, including agreeing the Auditor’s assessment
of materiality and monitors the Auditor’s independence and
objectivity. It conducted a review of the performance of the
Auditors during the year and concluded that performance
was satisfactory and there were no grounds for change.
Audit Committee confirmation
The Audit Committee confirms that it has 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 15 June 2018.
This procedure is regularly reviewed by the Board; and
(b) It is responsible (on behalf of the Board) 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.
Humphrey van der Klugt, FCA
Chairman of the Audit Committee
15 June 2018
issues that arose. The Committee also discussed the
presentation of the Annual Report with the Auditors and
sought their perspective.
Independence and Effectiveness:
In order to fulfil the Committee’s responsibility regarding the
independence of the Auditors, the Committee reviewed:
(cid:129) the senior audit personnel in the audit plan for the year,
(cid:129) the Auditors’ arrangements concerning any conflicts of
interest,
(cid:129) the extent of any non-audit services, and
(cid:129) the statement by the Auditors that they remain
independent within the meaning of the regulations and
their professional standards.
Non-Audit Services
The Company operates on the basis whereby the provision of
all non-audit services by the Auditors has to be pre-
approved by the Audit Committee. Such services are only
permissible where no conflicts of interest arise, the service
is not expressly prohibited by audit legislation, where the
independence of the Auditors is not likely to be impinged by
undertaking the work and the quality and the objectivity of
both the non-audit work and audit work will not be
compromised.
Non-audit fees of £3,500 were payable to the Auditors during
the year for agreed upon procedures in relation to their
review of the Company’s performance fee payments.
The Audit Committee has considered the extent and nature
of non-audit work performed by the Auditors and is satisfied
that this did not impinge on their independence and is a cost
effective way for the Company to operate.
Audit Tendering
PricewaterhouseCoopers LLP have been the Auditors since
July 2014, which was the last occasion an audit tender was
held. Formal Audit tender guidelines have been adopted to
govern the Audit tender process.
As a public company listed on the London Stock Exchange,
the Company is subject to the mandatory Auditor rotation
requirements of the European Union. The Company will put
the external audit out to tender at least every 10 years and
change Auditors at least every 20 years.
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Governance/Directors’ Remuneration Report
Introduction from the Chairman
This report has been prepared in accordance with the
requirements of Section 421 of the Companies Act 2006 and the
Enterprise and Regulatory Reform Act 2013. A non-binding
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 46 to 51.
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 Directors’ 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 the adoption of
the Directors’ Remuneration Report was put to shareholders
at the Annual General Meeting of the Company held on
14 September 2017, and was passed with 98.5% of the votes
cast by shareholders voting in favour of 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 Directors’ 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 binding resolution to approve the Directors’ Remuneration
Policy was put to shareholders at the Annual General
Meeting held in 2017, and was passed with 98.4% of
shareholders voting in favour of the Resolution. The
aforementioned Directors’ Remuneration Policy provisions
apply until the next time that they are put to shareholders for
the renewal of that approval, which must be at intervals of
not more than three years, or if the Directors’ Remuneration
Policy is varied. As approval of this policy was last granted by
shareholders at the Annual General Meeting held in
September 2017, shareholder approval will again be sought
at the Annual General Meeting to be held in 2020.
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 6 March 2018 it was
agreed that the Directors’ fees would be, with effect from
1 April 2018, as follows:
The Chairman of the Company, and Humphrey van der Klugt,
as Chairman of the Audit Committee, receive an annual fee of
£47,700 and £36,920, respectively. Dr David Holbrook, as the
Senior Independent Director will receive an annual fee of
£32,320, Sarah Bates, Doug McCutcheon and Sven Borho
each receive an annual fee of £30,130.
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.
The Directors are entitled to be reimbursed for reasonable
expenses incurred by them in connection with the
performance of their duties and attendance at Board and
General Meetings.
Annual Report for the year ended 31 March 2018 43
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Governance/Directors’ Remuneration Report
Directors’ emoluments for the year (audited)
Sir Martin Smith
Humphrey Van Der Klugt
Sarah Bates
Dr David Holbrook
Samuel D. Isaly^
Doug McCutcheon
Jo Dixon*
Total
Date of Appointment
to the Board
8 November 2007
15 February 2016
22 May 2013
8 November 2007
14 February 1995
7 November 2012
25 February 2004
Fees (£)
2018
45,850
35,500
28,970
31,070
22,730
28,970
–
193,090
Taxable
Expenses†
2018
695
253
–
–
–
–
–
948
Total
2018
46,545
35,753
28,970
31,070
22,730
28,970
–
Fees (£)
2017
43,650
30,685
27,570
28,670
27,570
27,570
16,055
194,038
201,770
Taxable
Expenses†
2017
655
386
–
50
–
–
1,183
2,274
Total
2017
44,305
31,071
27,570
28,720
27,570
27,570
17,238
204,044
† Taxable expenses primarily comprise travel and associated expenses incurred by the Directors in attending Board and Committee meetings in London. These
are reimbursed by the Company and, under HMRC Rules, are subject to tax and National Insurance and therefore are treated as a benefit in kind within this
table.
Share price total return
The chart below 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.
Total shareholder return for the nine years to
31 March 2018
%
520
480
440
400
360
320
280
240
200
160
120
80
Mar-09 Mar-10 Mar-11 Mar-12 Mar-13
Mar-14
Mar-15
Mar-16
Mar-17 Mar-18
Worldwide Healthcare Share Price (total return)
Benchmark (total return)
Rebased to 100 as at March 2009
Source: Morningstar, Thomson Reuters and Bloomberg
* Retired from the Board on 21 September 2016.
^ Ceased to be a Director on 12 January 2018.
Sven Borho joined the Board on 7 June 2018.
In certain circumstances, under HMRC rules travel and
other out of pocket expenses reimbursed to the Directors
may be considered as taxable benefits. Where expenses are
classed as taxable under HMRC guidance, they are shown in
the taxable expenses column of the Directors’ remuneration
table along with the associated tax liability.
No communications have been received from shareholders
regarding Directors’ remuneration.
Sums paid to third parties
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.
Directors’ interests in the Company’s shares
(audited)
Sir Martin Smith
– Trustee
Sarah Bates
Dr David Holbrook
Samuel D. Isaly*
Humphrey van der Klugt
Doug McCutcheon
Ordinary
Shares of 25p each
31 March
2017
31 March
2018
11,871
2,725
7,200
1,094
n/a
1,500
15,000
39,390
11,871
2,725
7,200
1,094
3,600
1,500
15,000
42,990
*Ceased to be a Director on 12 January 2018
44 Worldwide Healthcare Trust PLC
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Governance/Directors’ Remuneration Report
The bar chart below shows the comparative cost of Directors’
fees compared with the level of dividend distribution and
ongoing charges for 2017 and 2018.
Relative cost of Directors’ remuneration
£
11000
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
Directors’
Fees
2018
Dividends
2018
Ongoing
Charges*
2018
Directors’
Fees
2017
Dividends
2017
Ongoing
Charges*
2017
* See Glossary beginning on page 72.
Annual statement
On behalf of the Board, I confirm that the Directors’
Remuneration Policy, set out on page 43 of this Annual
Report, and Directors’ Remuneration Report summarise, as
applicable, for the year to 31 March 2018:
(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.
Doug McCutcheon
Chairman of the Management Engagement &
Remuneration Committee
15 June 2018
Annual Report for the year ended 31 March 2018 45
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Governance/Independent Auditors’ Report to the Members
of Worldwide Healthcare Trust PLC
Report on the financial statements
Our opinion
In our opinion, Worldwide Healthcare Trust PLC’s financial statements:
(cid:129) give a true and fair view of the state of the Company’s affairs as at 31 March 2018 and of its net return for the year then
ended;
(cid:129) have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of
Ireland”, and applicable law); and
(cid:129) have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise: the statement of financial
position as at 31 March 2018; the income statement, the statement of changes in equity for the year then ended; and the notes
to the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remained independent of the Company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not
provided to the Company.
Other than those disclosed in note 4 to the financial statements, we have provided no non-audit services to the company in
the period from 1 April 2017 to 31 March 2018.
Our audit approach
Overview
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
Overall materiality: £12.0 million (2017: £11.0 million), based on 1% of net assets.
The Company is a standalone Investment Trust Company and engages Frostrow Capital LLP
(the “AIFM”) to manage its assets.
We conducted our audit of the financial statements using information from the AIFM and
J.P. Morgan Europe Limited with whom the AIFM has engaged to provide certain
administrative functions.
We tailored the scope of our audit taking into account the types of investments within the
Company, the involvement of the third parties referred to above, the accounting processes
and controls, and the industry in which the Company operates.
Income from investments.
Valuation and existence of investments.
Performance fee.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the Directors made subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
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Governance/Independent Auditors’ Report to the Members
of Worldwide Healthcare Trust PLC
We gained an understanding of the legal and regulatory framework applicable to the company and the industry in which it
operates, and considered the risk of acts by the company which were contrary to applicable laws and regulations, including fraud.
We designed audit procedures to respond to the risk, recognising that the risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion. We focused on laws and regulations that could give rise
to a material misstatement in the Company's financial statements, including, but not limited to the Companies Act 2006 and
section 1158 of the Corporation Tax Act 2010. Our tests included, but were not limited to, review of the financial statement
disclosures to underlying supporting documentation, enquiries with management and testing the Company’s compliance with
section 1158 in the current year. We also tested the tax disclosures in Note 6. There are inherent limitations in the audit
procedures described above and the further removed non-compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely we would become aware of it.
We did not identify any key audit matters relating to irregularities, including fraud. As in all of our audits we also addressed the
risk of management override of internal controls, including testing journals and evaluating whether there was evidence of bias by
the Directors that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of
the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This
is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the area of focus
Income from investments
Refer to page 55 and 56 (Accounting Policies) and page 58
and 62 (Notes to the Accounts).
ISAs (UK) presume there is a risk of fraud in income
recognition. We considered this risk to specifically relate to
the risk of overstating investment gains and the
misclassification of dividend income as either income or
capital if one is particularly underperforming in line with the
total return objective of the Company.
We focused on the accuracy and completeness of dividend
income amounting to £12,204,000 for the year 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’).
We also focused on the calculation of realised and
unrealised gains and losses on investments amounting to a
gain of £30,702,000 for the year.
This is because incomplete or inaccurate income (both
revenue and capital) 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 tested the accuracy of dividend receipts by agreeing the
dividend rates from investments to independent market
data. No material misstatements were identified which
required reporting to those charged with governance.
To test for completeness, we tested all investment holdings
in the portfolio, to ensure that all dividends declared in the
market by investment holdings had been recorded.
We tested occurrence by testing that all dividends recorded
in the year had been declared in the market by investment
holdings, and we traced a sample of dividends received to
bank statements.
We tested the allocation and presentation of dividend
income between the revenue and capital return columns of
the Statement of Comprehensive Income in line with the
requirements set out in the AIC SORP by determining
reasons behind dividend distributions. Our procedures did
not identify any material misstatements which required
reporting to those charged with governance.
Annual Report for the year ended 31 March 2018 47
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Governance/Independent Auditors’ Report to the Members
of Worldwide Healthcare Trust PLC
Key audit matter
Income from investments
Valuation and existence of investments
Refer to pages 40 and 41 (Audit Committee Report), page 55
and 56 (Accounting Policies) and pages 62 (Notes to the
Financial Statements).
The investment portfolio at 31 March 2018 principally
comprised listed equity investments, OTC swaps, options
and unquoted debt investments and totalled £1,293,520,000.
We focused on the valuation and existence of investments
because investments represent the principal element of the
net asset value as disclosed on the Statement of Financial
Position in the financial statements.
How our audit addressed the area of focus
We also checked that the gains or losses on investments held
at fair value comprised realised and unrealised gains or
losses, we tested a sample of disposal proceeds to bank
statements. For unrealised gains or losses, we tested the
valuation of the portfolio at the year-end, and also tested the
reconciliation of opening and closing investments.
Our testing did not identify any material misstatements which
required reporting to those charged with governance.
(cid:129) Quoted investments:
We tested the valuation of quoted investments by agreeing
the prices used to third party sources.
We tested the existence of the quoted investment portfolio by
agreeing the holdings to an independent custodian
confirmation from J.P. Morgan Securities LLC as at
31 March 2018.
No material differences were identified which required
reporting to those charged with governance.
(cid:129) Unquoted debt investments:
We tested the valuation of unquoted debt investments by
agreeing the prices used to third party sources.
We tested the existence of the unquoted debt investments by
agreeing the holdings to independent confirmations from the
administrative agents for each investment at 31 March 2018.
No material differences were identified which required
reporting to those charged with governance.
(cid:129) OTC derivative financial instruments (swaps):
We tested the valuation of the OTC derivatives by agreeing
the prices used for a sample in the valuation to independent
third party sources as at 31 March 2018.
We tested the existence of the OTC derivatives by agreeing
the holdings to an independent confirmation from J.P.
Morgan Securities LLC and the Broker, Goldman Sachs
International.
No material differences were identified which required
reporting to those charged with governance.
48 Worldwide Healthcare Trust PLC
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Governance/Independent Auditors’ Report to the Members
of Worldwide Healthcare Trust PLC
Performance Fee
Refer to page 41 (Audit Committee Report), page 56
(Accounting Policies) and page 58 (Notes to the Financial
Statements).
The performance fee charge for the year was £9.7m.
As at 31 March 2018, there was a performance fee accrual of
£10.7m. £9.7m of which was recognised as a provision for
potential future payments and £1m was payable, relating to
outperformance achieved as at that date.
Performance fees totalling £3.4m were paid or payable
relating to outperformance achieved during the year
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 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 material misstatements were identified by our testing
which required reporting to those charged with governance.
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 structure of the Company, the accounting processes and controls, and the
industry in which it operates.
The Company’s accounting is delegated to the Administrator who maintains the Company’s accounting records and who has
implemented controls over those accounting records.
We obtained our audit evidence from substantive tests. However, as part of our risk assessment, we understood and
assessed the internal controls in place at the Administrator to the extent relevant to our audit. Following this assessment, we
applied professional judgement to determine the extent of testing required over each balance in the financial statements.
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 on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate 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 – £12.0 million (2017: £11.0 million).
How we determined it – 1% of net assets.
Rationale for benchmark applied – We applied this benchmark, which is a generally accepted auditing practice for
investment trust audits.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £601,000
(2017: £550,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
We are required to report if we have anything material to add or draw attention to in respect of the Directors’ statement in the
financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting in
preparing the financial statements and the Directors’ identification of any material uncertainties to the Company’s ability to
continue as a going concern over a period of at least twelve months from the date of approval of the financial statements.
We are required to report if the Directors’ statement relating to Going Concern in accordance with Listing Rule 9.8.6R(3) is
materially inconsistent with our knowledge obtained in the audit.
Outcome
We have nothing material to add or to draw attention to. However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Company’s ability to continue as a going concern.
We have nothing to report.
Annual Report for the year ended 31 March 2018 49
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Governance/Independent Auditors’ Report to the Members
of Worldwide Healthcare Trust PLC
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The Directors are responsible for the other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006,
(CA06), ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and
matters as described below (required by ISAs (UK) unless otherwise stated).
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and
Directors’ Report for the year ended 31 March 2018 is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
The Directors’ assessment of the prospects of the Company and of the principal risks that would threaten the solvency
or liquidity of the Company
We have nothing material to add or draw attention to regarding:
• The Directors’ confirmation on page 22 of the Annual Report that they have carried out a robust assessment of the
principal risks facing the Company, including those that would threaten its business model, future performance, solvency
or liquidity.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The Directors’ explanation on page 25 of the Annual Report as to how they have assessed the prospects of the Company, over
what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have
a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the
period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the Directors’ statement that they have carried out a robust
assessment of the principal risks facing the Company and statement in relation to the longer-term viability of the Company.
Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors’
process supporting their statements; checking that the statements are in alignment with the relevant provisions of the UK
Corporate Governance Code (the “Code”); and considering whether the statements are consistent with the knowledge and
understanding of the Company and its environment obtained in the course of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the Directors, on page 31, that they consider the Annual Report taken as a whole to be fair,
balanced and understandable, and provides the information necessary for the members to assess the Company’s position
and performance, business model and strategy is materially inconsistent with our knowledge of the Company obtained in
the course of performing our audit.
• The section of the Annual Report on page 40 describing the work of the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee.
• The Directors’ statement relating to the Company’s compliance with the Code does not properly disclose a departure from
a relevant provision of the Code specified, under the Listing Rules, for review by the auditors.
50 Worldwide Healthcare Trust PLC
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Governance/Independent Auditors’ Report to the Members
of Worldwide Healthcare Trust PLC
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006. (CA06)
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 31, the Directors are responsible for
the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give
a true and fair view. The Directors are also responsible for such internal control as they determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received
from branches not visited by us; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 14 July 2014 to audit the
financial statements for the year ended 31 March 2015 and subsequent financial periods. The period of total uninterrupted
engagement is 4 years, covering the years ended 31 March 2015 to 31 March 2018.
Sandra Dowling (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London 15 June 2018
Annual Report for the year ended 31 March 2018 51
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249336 WWH pp52-pp54 03/07/2018 12:28 Page 52
Financial Statements /Income Statement
For the year ended 31 March 2018
2018 2017
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Gains on investments 9 – 30,702 30,702 – 260,256 260,256
Exchange gains/(losses) on
currency balances – 7,942 7,942 – (9,113) (9,113)
Income from investments 2 12,204 – 12,204 13,098 – 13,098
AIFM, Portfolio management
and performance fees 3 (493) (19,099) (19,592) (423) (12,751) (13,174)
Other expenses 4 (908) – (908) (718) – (718)
Net return before finance
charges and taxation 10,803 19,545 30,348 11,957 238,392 250,349
Finance costs 5 (82) (1,552) (1,634) (43) (785) (828)
Net return before taxation 10,721 17,993 28,714 11,914 237,607 249,521
Taxation on net return 6 (1,764) 229 (1,535) (1,231) 79 (1,152)
Net return after taxation 8,957 18,222 27,179 10,683 237,686 248,369
Return per share 7 18.7p 38.1p 56.8p 22.9p 509.0p 531.9p
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 shown above and therefore no separate Statement of Total
Comprehensive Income has been presented.
The accompanying notes are an integral part of these statements.
52 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2018
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Financial Statements /Statement of Changes in Equity
For the year ended 31 March 2018
Share Capital Total
Share premium Capital redemption Revenue shareholders’
capital account reserve reserve reserve funds
£'000 £'000 £'000 £'000 £'000 £'000
At 31 March 2017 11,627 233,539 833,484 8,221 14,032 1,100,903
Net return after taxation – – 18,222 – 8,957 27,179
Dividend paid in respect of
year ended 31 March 2017 – – – – (7,447) (7,447)
First interim dividend paid in respect
of year ended 31 March 2018 – – – – (3,153) (3,153)
New shares issued 839 83,867 – – – 84,706
At 31 March 2018 12,466 317,406 851,706 8,221 12,389 1,202,188
For the year ended 31 March 2017
Share Capital Total
Share premium Capital redemption Revenue shareholders’
capital account reserve reserve reserve funds
£'000 £'000 £'000 £'000 £'000 £'000
At 31 March 2016 11,960 233,537 617,314 7,888 11,059 881,758
Net return after taxation – – 237,686 – 10,683 248,369
Dividend paid in respect of
year ended 31 March 2016 – – – – (4,702) (4,702)
First interim dividend paid in respect
of year ended 31 March 2017 – – – – (3,008) (3,008)
Shares purchased for treasury – – (27,533) – – (27,533)
Shares issued from treasury – 2 6,017 – – 6,019
Shares cancelled from treasury (333) – – 333 – –
At 31 March 2017 11,627 233,539 833,484 8,221 14,032 1,100,903
The accompanying notes are an integral part of these statements.
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Financial Statements/Statement of Financial Position
As at 31 March 2018
2018 2017
Notes £’000 £’000
Fixed assets
Investments 9 1,259,926 1,157,562
Derivative – OTC swaps 9 & 10 34,105 34,410
1,294,031 1,191,972
Current assets
Debtors 11 6,601 5,865
Derivative – put and call options 9 & 10 587 1,191
Cash 9,932 10,780
17,120 17,836
Current liabilities
Creditors: amounts falling due within one year 12 (107,865) (108,623)
Derivatives – put and call options 9 & 10 (1,098) (282)
(108,963) (108,905)
Net current liabilities (91,843) (91,069)
Total net assets 1,202,188 1,100,903
Capital and reserves
Share capital 13 12,466 11,627
Share premium account 317,406 233,539
Capital reserve 17 851,706 833,484
Capital redemption reserve 8,221 8,221
Revenue reserve 12,389 14,032
Total shareholders’ funds 1,202,188 1,100,903
Net asset value per share 14 2,411.1p 2,367.2p
The financial statements on pages 52 to 70 were approved by the Board of Directors and authorised for issue on 15 June 2018
and were signed on its behalf by:
Sir Martin Smith
Chairman
The accompanying notes are an integral part of this statement.
Worldwide Healthcare Trust PLC – Company Registration Number 3023689 (Registered in England)
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Financial Statements /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
These financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 ‘The Financial
Reporting Standard applicable in the UK and Ireland’ (‘UK GAAP’) and the guidelines set out in the Statement of
Recommended Practice (‘SORP’), updated in January 2017, for Investment Trust Companies and Venture Capital
Trusts issued by the Association of Investment Companies (‘AIC’), the historical cost convention, as modified by the
valuation of investments and derivatives at fair value and on a going concern basis, as set out on page 31.
The Company has taken advantage of the exemption from preparing a Cash Flow Statement under FRS 102, as it is an
investment fund and its investments are substantially all highly liquid and carried at fair (market) value.
The Company’s financial statements are presented in sterling, being the functional and presentational currency of the
Company. All values are rounded to the nearest thousand pounds (£’000) except where otherwise indicated.
In addition, investments and derivatives held at fair value are categorised into a fair value hierarchy based on the
degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as follows:
•
•
•
Level 1 – Quoted prices in active markets.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using
market data), either directly or indirectly.
Level 3 – Inputs are unobservable (i.e. for which market data is unavailable).
Presentation of the Income Statement
In order to reflect better the activities of an investment trust company and in accordance with the SORP,
supplementary information which analyses the Income Statement between items of a revenue and capital nature has
been presented alongside the Income Statement. The net revenue return is the measure the Directors believe
appropriate in assessing the Company’s compliance with certain requirements set out in Sections 1158 and 1159 of
the Corporation Tax Act 2010.
(b) Investments
Investments are measured initially, and at subsequent reporting dates, at fair value, and are recognised and
de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the
time frame established by the market concerned. For quoted securities fair value is either bid price or last traded
price, depending on the convention of the exchange on which the investment is listed. Unquoted debt investments are
fair valued using prices from independent market sources. Changes in fair value and gains or losses on disposal are
included in the Income Statement as a capital item.
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Financial Statements /Notes to the Financial Statements
1.
ACCOUNTING POLICIES continued
(c) Derivative financial instruments
The Company uses derivative financial instruments (namely put and call options and equity swaps).
All derivative instruments are valued initially, and at subsequent reporting dates, at fair value in the Statement of
Financial Position.
The equity swaps are accounted for as Fixed Assets and Options are accounted for as Current Assets or Current
Liabilities.
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 current and comparative year were capital in nature.
All gains and losses on over-the-counter (OTC) equity swaps are accounted for as gains or losses on investments.
Where there has been a re-positioning of the swap, gains and losses are accounted for on a realised basis. All such
gains and losses have been debited or credited to the capital column of the Income Statement.
Cash collateral held by counterparties is included within cash, except where there is a right of offset against the
overdraft facility.
(d) Investment income
Dividends receivable 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. 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 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 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.
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Financial Statements /Notes to the Financial Statements
(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 Statement of
Financial Position 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 rate of tax enacted or
substantially enacted.
(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 Statement of Financial Position date
are translated into sterling at the exchange rates ruling at that date.
Exchange gains/losses on foreign currency balances
Any gains or losses on the translation of foreign currency balances, including the foreign currency overdraft, 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.
(i) Capital reserve
The following are transferred to this reserve:
•
•
•
•
gains and losses on the disposal of investments;
exchange differences of a capital nature, including the effects of changes in exchange rates on foreign currency
borrowings;
expenses, together with the related taxation effect, in accordance with the above policies; and
changes in the fair value of investments and derivatives.
This reserve can be used to distribute realised capital profits by way of dividend. Any gains in the fair value of
investments that are not readily convertible to cash are treated as unrealised gains in the capital reserve.
(j) Capital redemption reserve
This reserve arose when ordinary shares were redeemed by the Company and subsequently cancelled. When ordinary
shares are redeemed by the Company and subsequently cancelled, an amount equal to the par value of the ordinary
share capital is transferred from the ordinary share capital to the capital redemption reserve.
(k) Revenue reserve
The revenue reserve is distributable by way of dividend.
(l) 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 Statement of Changes in Equity.
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Financial Statements /Notes to the Financial Statements
2.
INCOME FROM INVESTMENTS
-- 2018 2017
£’000 £’000
Income from investments
Overseas dividends 9,600 10,735
Fixed interest income 2,250 2,023
11,850 12,758
Other income
Derivatives 233 290
Deposit interest 121 50
Total income from investments 12,204 13,098
Total income comprises:
Dividends 9,600 10,735
Interest 2,604 2,363
12,204 13,098
3.
AIFM, PORTFOLIO MANAGEMENT AND PERFORMANCE FEES
2018 2017
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
AIFM fee 109 2,076 2,185 89 1,693 1,782
Portfolio management fee 384 7,293 7,677 334 6,340 6,674
Performance fee – 9,730 9,730 – 4,718 4,718
493 19,099 19,592 423 12,751 13,174
Further Details on the above fees are set out in the Strategic Report on page 21 and in the Report of the Directors on
page 28.
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Financial Statements /Notes to the Financial Statements
OTHER EXPENSES
4.
2018 2017
Revenue Revenue
£’000 £’000
Directors’ remuneration 193 202
Auditors’ remuneration for the audit of the Company’s financial statements 30 27
Auditors’ remuneration for non-audit services 3 4
Marketing expenses 50 58
Registrar fees 55 63
Broker fees 30 14
Legal and professional costs 7 18
Stock Exchange listing fees 151* 23
Depositary and custody fees 132 139
Other costs 257 170
908 718
Details of the amounts paid to Directors are included in the Directors’ Remuneration Report on page 44.
* Includes £124,000 (2017: Nil) in respect of Stock Exchange Block Listing fees required as a result of the issuance of
new shares by the Company during the year.
FINANCE COSTS
5.
2018 2017
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Finance costs 82 1,552 1,634 43 785 828
6.
TAXATION ON NET RETURN
(a) Analysis of charge in year
2018 2017
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Corporation tax at 19%
(2017: 20%)
Tax relief to capital 229 (229) – 79 (79) –
Overseas taxation 1,535 – 1,535 1,152 – 1,152
1,764 (229) 1,535 1,231 (79) 1,152
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Financial Statements /Notes to the Financial Statements
6.
TAXATION ON NET RETURN continued
(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 (2017: lower) than the standard rate of corporation tax of 19% (2017: 20%).
The difference is explained below.
2018 2017
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Net return before taxation 10,721 17,993 28,714 11,914 237,607 249,521
Corporation tax at 19%
(2017: 20%) 2,037 3,419 5,456 2,383 47,522 49,905
Non-taxable gains on
investments – (7,342) (7,342) – (50,229) (50,229)
Overseas withholding taxation 1,535 – 1,535 1,152 – 1,152
Non taxable overseas dividends (1,748) – (1,748) (2,103) – (2,103)
Excess management expenses (278) 3,923 3,645 (280) 2,707 2,427
Tax relief to capital 229 (229) – 79 (79) –
Double taxation relief expensed (11) – (11) – – –
Total tax charge 1,764 (229) 1,535 1,231 (79) 1,152
(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 £18,995,000 (17% tax rate) (2017: £15,813,000 (17% 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.
RETURN PER SHARE
7.
2018 2017
£’000 £’000
The return per share is based on the following figures:
Revenue return 8,957 10,683
Capital return 18,222 237,686
27,179 248,369
Weighted average number of ordinary shares in issue during the year 47,849,849 46,695,120
Revenue return per ordinary share 18.7p 22.9p
Capital return per ordinary share 38.1p 509.0p
56.8p 531.9p
The calculation of the total, revenue and capital return per ordinary share is carried out in accordance with IAS 33,
“Earnings per Share”.
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Financial Statements /Notes to the Financial Statements
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
in these financial statements were as follows:
2018 2017
£’000 £’000
Second interim dividend in respect of the year ended 31 March 2016 – 4,702
First interim dividend in respect of the year ended 31 March 2017 – 3,008
Second interim dividend in respect of the year ended 31 March 2017 7,447 –
First interim dividend in respect of the year ended 31 March 2018 3,153 –
10,600 7,710
In respect of the year ended 31 March 2018, the first interim dividend of 6.5p per share was paid on 9 January 2018.
A second interim dividend of 11.0p is payable on 31 July 2018, the associated ex dividend date will be 21 June 2018.
The total dividends payable in respect of the year ended 31 March 2018 amount to 17.5p per share (2017: 22.5p per
share). The aggregate cost of the second interim dividend, based on the number of shares in issue at 15 June 2018,
will be £5,497,000. In accordance with FRS 102 the second interim dividend will be reflected in the financial
statements for the year ending 31 March 2019. 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:
2018 2017
£’000 £’000
Revenue available for distribution by way of dividend for the year 8,957 10,683
First interim dividend in respect of the year ended 31 March 2018 (3,153) –
Second interim dividend in respect of the year ended 31 March 2018* (5,497) –
First interim dividend in respect of the year ended 31 March 2017 – (3,008)
Second interim dividend in respect of the year ended 31 March 2017 – (7,447)
Net retained revenue 307 228
*based on 49,968,778 shares in issue as at 15 June 2018.
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Financial Statements /Notes to the Financial Statements
INVESTMENTS
9.
Unquoted Derivative
Quoted Debt Financial
Investments Investments Instruments Total
£’000 £’000 £’000 £’000
Cost at 1 April 2017 924,045 28,137 28,037 980,219
Investment holding gains at 1 April 2017 203,042 2,338 7,282 212,662
Valuation at 1 April 2017 1,127,087 30,475 35,319 1,192,881
Movement in the year:
Purchases at cost 1,072,461 15,413 1,206 1,089,080
Sales – proceeds (980,261) (10,333) (28,937) (1,019,531)
– realised gains on sales 186,517 2,065 12,750 201,332
Net movement in investment holding gains (178,599) (4,899) 13,256 (170,242)
Valuation at 31 March 2018 1,227,205 32,721 33,594 1,293,520
Cost at 31 March 2018 1,202,762 35,282 13,056 1,251,100
Investment holding gains/(losses) at 31 March 2018 24,443 (2,561) 20,538 42,420
Valuation at 31 March 2018 1,227,205 32,721 33,594 1,293,520
–
2018 2017
£’000 £’000
Gains on investments
Gains on disposal 201,332 180,694
Effective interest rate amortisation (388) (90)
Less: amounts recognised as investment holding gains in previous years (128,450) (81,728)
Gains based on carrying value at previous Statement
of Financial Position date 72,494 98,876
Movement in investment holding gains in the year (41,792) 161,380
Gains on investments 30,702 260,256
Purchase transaction costs for the year to 31 March 2018 were £836,000 (year ended 31 March 2017: £713,000). Sales
transaction costs for the year to 31 March 2018 were £804,000 (year ended 31 March 2017: £587,000). These comprise
mainly commission.
10. DERIVATIVE FINANCIAL INSTRUMENTS
2018 2017
£’000 £’000
Fair value of OTC equity swaps 34,105 34,410
Fair value of put and call options (long) 587 1,191
Fair value of put and call options (short) (1,098) (282)
33,594 35,319
See note 9 above for movements during the year.
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Financial Statements /Notes to the Financial Statements
11. DEBTORS
2018 2017
£’000 £’000
Amounts due from brokers 3,415 2,751
Withholding taxation recoverable 1,762 1,575
VAT recoverable 25 15
Prepayments and accrued income 1,399 1,524
6,601 5,865
12. CREDITORS Amounts falling due within one year
2018 2017
£’000 £’000
Amounts due to brokers 3,545 4,783
Overdraft drawn* 91,351 98,337
Performance fee provision 9,731 3,387
Performance fee payable 959 –
Other creditors and accruals 2,279 2,116
107,865 108,623
*The Company’s borrowing requirements are met through the utilisation of an overdraft facility provided by J.P. Morgan
Securities LLC. The overdraft is drawn down in U.S. dollars. Interest on the drawn overdraft is charged at the United
States Overnight Bank Funding Rate plus 45 basis points.
As at 31 March 2017, the overdraft of £98.3m is net of £6.3 million of cash held as collateral against certain derivative
positions. No cash was offset at 31 March 2018. See page 68 for further details. As described on page 23, J.P. Morgan
Securities LLC may take investments 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. (See page 68 under credit risk for additional
details).
SHARE CAPITAL
13.
Total
Treasury shares
Shares shares in issue
number number number
Issued and fully paid at 1 April 2017 46,506,278 – 46,506,278
New shares issued 3,355,000 – 3,355,000
At 31 March 2018 49,861,278 – 49,861,278
2018 2017
£’000 £’000
Issued and fully paid:
Shares of 25p 12,466 11,627
During the year ended 31 March 2018 3,355,000 shares were issued raising £84,706,000. During the year ended
31 March 2017 1,425,062 shares were bought back at cost of £27,533,000 and 291,295 shares were issued from
treasury raising proceeds of £6,019,000.
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Financial Statements /Notes to the Financial Statements
14. NET ASSET VALUE PER SHARE
2018 2017
Net asset value per share 2,411.1p 2,367.2p
The net asset value per share is based on the assets attributable to equity shareholders of £1,202,188,000
(2017: £1,100,903,000) and on the number of Ordinary Shares in issue at the year end of 49,861,278 (2017: 46,506,278).
15. RELATED PARTIES
The following are considered to be related parties:
•
•
•
Frostrow Capital LLP (under the Listing Rules only)
OrbiMed Capital LLC
The Directors of the Company
Details of the relationship between the Company and Frostrow Capital LLP, the Company’s AIFM, and OrbiMed Capital
LLC, the Company’s Portfolio Manager, are disclosed on page 21. Samuel D. Isaly was until 12 January 2018 a Director
of the Company. He was also formerly the Managing Partner at OrbiMed Capital LLC. Sven Borho, who joined the
Board on 7 June 2018, is a Managing Partner at OrbiMed. Details of fees paid to OrbiMed by the Company can be
found in note 3 on page 58. All material related party transactions have been disclosed in notes 3 and 4 on pages 58
and 59.
Details of the remuneration of all Directors can be found on page 44. Details of the Directors’ interests in the capital
of the Company can be found on page 44.
Three current and two former 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
note 3 on page 58.
16.
FINANCIAL INSTRUMENTS
Risk management policies and procedures
The Company’s financial instruments comprise securities and other investments, derivative instruments, cash
balances, loans and 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 22 to 24 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 beginning on page 72.
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Financial Statements /Notes to the Financial Statements
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 the Indian and Chinese markets, because the
Company is not locally registered to trade in either market, and to gain exposure to thematic baskets of stocks.
Details of funded and financed swap positions* are noted in the Portfolio on pages 8 to 10.
Cash of £9.9 million (2017: £17.1 million) was held as collateral against the financed swap positions, of which nil
(2017: £6.3 million) was offset against the overdraft position.
Offsetting disclosure
Swap trades and OTC derivatives are traded under ISDA† Master Agreements. The Company currently has such
agreements in place with Goldman Sachs and JP Morgan.
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 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 22 to 24.
†International Swap Dealers Association Inc.
*See Glossary beginning on page 72 for a description of funded and financed swaps.
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Financial Statements /Notes to the Financial Statements
16.
FINANCIAL INSTRUMENTS continued
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.
2018 2017
Notional* Notional
Assets Liabilities exposure Assets Liabilities exposure
£’000 £’000 £’000 £’000 £’000 £’000
Investments 1,259,926 – 1,259,926 1,157,562 – 1,157,562
Put and call options 587 (1,098) 22,584 1,191 (282) 11,590
OTC equity swaps 34,105 – 126,125 34,410 – 116,926
1,294,618 (1,098) 1,408,635 1,193,163 (282) 1,286,078
*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 Statement of Financial
Position date had been 25% higher or lower (2017: 25% higher or lower) while all other variables remained constant:
the revenue return would have decreased/increased by £1,343,000 (2017: £123,000); the capital return would have
increased by £346,181,000 (2017: £318,300,000)/decreased by £346,882,000 (2017: £317,372,000); and, the return on
equity would have increased by £344,838,000 (2017: £318,177,000)/decreased by £345,539,000 (2017: £317,249,000).
The calculations are based on the portfolio as at the respective Statement of Financial Position 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:
2018 2017
Current Current Current Current
assets liabilities Investments assets liabilities Investments
£’000 £’000 £’000 £’000 £’000 £’000
U.S. dollar 11,236 (94,894) 1,075,131 14,886 (103,492) 998,352
Swiss franc 1,032 – 17,772 969 (168) 41,448
Japanese yen 3,988 – 95,628 659 – 76,385
Other 217 – 104,989 525 (147) 76,697
16,473 (94,894) 1,293,520 17,039 (103,807) 1,192,881
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Financial Statements /Notes to the Financial Statements
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 (2017: 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 Statement of
Financial Position date.
2018 2017
USD YEN CHF USD YEN CHF
£’000 £’000 £’000 £’000 £’000 £’000
Sterling depreciates 120,388 11,068 2,089 110,251 8,560 4,694
Sterling appreciates (98,499) (9,056) (1,709) (90,206) (7,004) (3,841)
(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 Securities LLC,
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 2018, the Company held 2.5% of the portfolio in convertible bonds and securitised debt (2017: 3.8% of the
portfolio). The exposure is shown in the table below:
Weighted Weighted Weighted Weighted
2018 2017
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
Convertible
securities
Unquoted debt
investments
Cash
Overdraft facility
Financed swap
positions
– – –
– 1.3 6.2 15,403 –
5.4 1.8 7,958
24,763 5.1 9.7 12,085 18,390
–
9,932 – 10,780
–
(91,351) – (98,337)
(92,020) – (82,516)
–
7,958 (148,676) 27,488 (151,683)
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 2018 and the net assets would increase/decrease by £1,487,000 (2017: increase/decrease by
£1,517,000).
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Financial Statements /Notes to the Financial Statements
16.
FINANCIAL INSTRUMENTS continued
(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 2018, based on the earliest date on which
payment can be required, are as follows:
2018 2017
3 months 3 months
or less or less
£’000 £’000
Overdraft facility 91,351 98,337
Amounts due to brokers and accruals 3,545 4,783
Derivatives – Put options (short) 1,058 282
Derivatives – Call options (short) 40 –
95,994 103,402
(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 Statement of Financial
Position date. The Company’s quoted securities are held on its behalf by J.P. Morgan Securities LLC acting as the
Company’s Custodian and Prime Broker.
As noted on page 63, certain of the Company’s assets can be held by J.P. Morgan Securities LLC as collateral against
the overdraft provided by them to the Company. As at 31 March 2018, assets with a total market value of
£129.3 million (2017: £146.1 million) were available to J.P. Morgan Securities LLC to be used as collateral against the
overdraft facility which equates to 140% (2017: 140%) of the overdrawn position (calculated on a settled basis) of
£92.3 million (2017: £104.6 million). Such assets held by J.P. Morgan Securities LLC are available for rehypothecation
(see Glossary on page 74 for further information).
Credit risk exposure
2018 2017
£’000 £’000
Convertible securities and unquoted debt investments 32,721 45,878
Derivative – OTC equity swaps 34,105 34,410
Current assets:
Other receivables (amounts due from brokers, dividends
and interest receivable) 6,601 5,865
Derivative – Put options (long) 161 –
Derivative – Call options (long) 426 1,191
Cash 9,932 10,780
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Financial Statements /Notes to the Financial Statements
(vi) Fair value of financial assets and financial liabilities
Financial assets and financial liabilities are either carried in the Statement of Financial Position at their fair value
(investments and derivatives) or the Statement of Financial Position 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).
(vii) 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 31 March 2018 £’000 £’000 £’000 £’000
Investments held at fair value through profit or loss 1,227,205 – 32,721 1,259,926
Derivatives: put and call options (short) – (1,098) – (1,098)
Derivatives: put and call options (long) – 587 – 587
Derivatives: OTC swaps – 34,105 – 34,105
Financial instruments measured at fair value 1,227,205 33,594 32,721 1,293,520
As at 31 March 2018, the put and call options and equity swaps have been classified as Level 2.
As at 31 March 2018, the seven debt investments (included in the portfolio on pages 8 and 9) have been classified as
Level 3. All level 3 positions have been valued using the estimated fair values as provided by independent market
sources.
Level 1 Level 2 Level 3 Total
As of 31 March 2017 £’000 £’000 £’000 £’000
Investments held at fair value through profit or loss 1,127,087 – 30,475 1,157,562
Derivatives: put and call options (short) – (282) – (282)
Derivatives: put and call options (long) – 1,191 – 1,191
Derivatives: OTC swaps – 34,410 – 34,410
Financial instruments measured at fair value 1,127,087 35,319 30,475 1,192,881
As at 31 March 2017, the put and call options and equity swaps have been classified as Level 2.
As at 31 March 2017, the five debt investments were classified as Level 3. All level 3 positions were valued using the
estimated fair values as provided by independent market sources.
(viii) 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 or leverage.
The Board’s policy on gearing and leverage is set out on page 7.
As at 31 March 2018, the Company had a leverage percentage of 16.4% (2017: 16.9%).
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Financial Statements /Notes to the Financial Statements
16.
FINANCIAL INSTRUMENTS continued
The capital structure of the Company consists of the equity share capital, retained earnings and other reserves as
shown in the Statement of Financial Position on page 54.
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.
17. CAPITAL RESERVE
Capital Reserves*
Investment
Holding
Other Gains Total
£’000 £’000 £’000
At 31 March 2017 620,822 212,662 833,484
Net gains on investments 72,494 (41,792) 30,702
Expenses charged to capital less tax relief thereon (20,422) – (20,422)
Exchange gain on currency balances 7,942 – 7,942
At 31 March 2018 680,836 170,870 851,706
*Investment holding gains relate to the revaluation of investments and derivatives held at the reporting date. (See note 9 on page 62 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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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 Salters’ Hall, 4 Fore Street, London EC2Y 5DE
on Thursday, 20 September 2018 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, Link Asset Services, on request.
Share prices
The Company’s 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, Link 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.
2018
■ Private Wealth
Managers
■ Shares held via
investment
platforms
■ Mutual Funds
■ Retail
■ Pensions
■ Insurance
■ Charities
■ Corporate
■ Inv Trusts
■ Fund of Funds
■ Directors
56.4
22.3
7.5
4.5
3.3
2.5
1.1
0.8
0.8
0.7
0.1
2017
■ Private Wealth
Managers
■ Shares held via
investment
platforms
■ Mutual Funds
■ Retail
■ Pensions
■ Insurance
■ Charities
■ Fund of Funds
■ Corporate
■ Inv Trusts
■ Directors
57.4
20.3
7.1
4.8
3.1
2.9
1.3
1.3
0.9
0.7
0.2
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Further Information/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 a 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.
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 where one party (counterparty) transfers the total return of an underlying equity position to
the other party (swap holder) in exchange for a payment of the principal, and interest for financed swaps, 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.
The 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.
The Company employs swaps for two purposes:
• To gain access to individual stocks in the Indian, Chinese and emerging markets, where the Company is not locally
registered to trade; and,
• To gain exposure to thematic baskets of stocks (a Basket Swap). Basket Swaps are used to build exposure to themes, or
ideas, that the Portfolio Manager believes the Company will benefit from and where holding a Basket Swap is more cost
effective and operationally efficient than holding the underlying stocks or individual swaps.
Gearing
Gearing is calculated as the overdraft drawn, less net current assets (excluding dividends), divided by Net Assets, expressed as
a percentage. For years prior to 2013, the calculation was based on borrowings as a percentage of Net Assets.
Health Maintenance Organisation (HMO)
In the United States an HMO is a medical insurance group that provides health services for a fixed fee.
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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Further Information/Glossary
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.
Investments
OTC equity swaps
Put + Call options
Shareholders’ funds
Leverage %
31 March 2018
£
31 March 2017
£
Fair Value
Exposure*
Fair Value
Exposure*
1,259,926
34,105
(511)
1,293,520
1,259,926
126,125
13,098
1,399,149
1,202,188
16.4
1,157,562
34,410
909
1,192,881
1,157,562
116,926
13,151
1,287,339
1,100,903
16.9
*Calculated in accordance with AIFMD requirements using the Commitment Method
MSCI World Health Care Index (the Company’s Benchmark)
The MSCI World Health Care Index is designed to capture the large and mid capitalisation segments across 23 developed markets
countries: All securities in the index are classified as healthcare as per the Global Industry Classification Standard (GICS).
Developed Markets countries include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong,
Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland 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, 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.
31 March 31 March
2018 2017
NAV Total Return p p
Opening NAV 2,367.2 1,850.9
Increase in NAV 43.9 516.3
Closing NAV 2,411.1 2,367.2
% increase in NAV 1.9% 27.9%
Impact of reinvested dividends 0.9% 1.0%
NAV Total Return 2.8% 28.9%
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Further Information/Glossary
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.
31 March 31 March
2018 2017
£’000 £’000
AIFM & Portfolio Management fees (Note 3) 9,862 8,456
Other Expenses (Note 4) 908 718
Total Ongoing Charges 10,770 9,174
Performance fees paid/crystallised 3,387 1,331
Total 14,157 10,505
Average net assets 1,183,992 1,006,812
Ongoing Charges 0.9% 0.9%
Ongoing Charges (including performance fees paid or crystallised during the year) 1.2% 1.0%
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 16 beginning 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
Rehypothecation is the practice by banks and brokers of using, for their own purposes, assets that have been posted as
collateral by clients.
Ribonucleic Acid
Ribonucleic Acid, or RNA is one of the three major macromolecules that are essential for all known life (along with DNA and
proteins).
Share Price Total Return
Return to the investor on mid-market prices assuming that all dividends paid were reinvested.
31 March 31 March
2018 2017
Share price Total Return p p
Opening share price 2,304.0 1,715.0
Increase in share price 101.0 589.0
Closing share price 2,405.0 2,304.0
% increase in share price 4.4% 34.3%
Impact of reinvested dividends 0.9% 1.2%
Share price Total Return 5.3% 35.5%
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.
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Further Information/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
www.youinvest.co.uk/
Alliance Trust Savings
www.alliancetrustsavings.co.uk/
Barclays Stockbrokers
www.smartinvestor.barclays.co.uk/
Bestinvest
www.bestinvest.co.uk/
Charles Stanley Direct
www.charles-stanley-direct.co.uk/
Club Finance
Fidelity
www.clubfinance.co.uk/
www.fidelity.co.uk/
Halifax Share Dealing
www.halifax.co.uk/Sharedealing/
Hargreave Hale
www.hargreave-hale.co.uk/
Hargreaves Lansdown
www.hl.co.uk/
HSBC
iDealing
IG Index
investments.hsbc.co.uk/
www.idealing.com/
www.igindex.co.uk/
Interactive Investor
www.iii.co.uk/
IWEB
James Brearley
James Hay
Saga Share Direct
Selftrade
www.iweb-sharedealing.co.uk/share-dealing-home.asp
www.jbrearley.co.uk/Marketing/index.aspx
www.jameshay.co.uk/
www.sagasharedirect.co.uk/
www.selftrade.co.uk/
The Share Centre
www.share.com/
Saxo Capital Markets
uk.saxomarkets.com/
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Further Information/How to invest
Link Asset Services – share dealing service
A share dealing service is available to existing shareholders through the Company’s Registrar, Link Asset Services, to either buy
or sell shares. An online and telephone dealing facility provides an easy to access and simple to use service.
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, investor code, full postcode and your date of birth. Your investor
code can be found on your tax voucher or certificate. Please have the appropriate documents to hand when you log on or call,
as this information will be needed before you can buy or sell shares.
For further information on this service, please contact: www.linksharedeal.com (online dealing).
Telephone: 0371 664 0445 (Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United
Kingdom are charged at the applicable international rate. Lines are open between 8.00 am – 4.30 pm, Monday to Friday excluding
public holidays in England and Wales).
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.
Be ScamSmart
Avoid investment fraud
1 Reject cold calls
If you’ve received unsolicited contact about
an investment opportunity, chances are
it’s a high risk investment or a scam. You
should treat the call with extreme caution.
The safest thing to do is to hang up.
2 Check the FCA Warning List
The FCA Warning List is a list of firms and
individuals we know are operating without
our authorisation.
3 Get impartial advice
Think about getting impartial financial
advice before you hand over any money.
Seek advice from someone unconnected to
the firm that has approached you.
Report a Scam
If you suspect that you have been
approached by fraudsters please tell the
FCA using the reporting form at
www.fca.org.uk/consumers/report-
scam-unauthorised-firm. You can also call
the FCA Consumer Helpline on
0800 111 6768
If you have lost money to investment fraud,
you should report it to Action Fraud on
0300 123 2040 or online at
www.actionfraud.police.uk
Find out more at
www.fca.org.uk/scamsmart
Remember: if it sounds too
good to be true, it probably is!
Investment scams are
designed to look like
genuine investments
Spot the warning signs
Have you been:
• contacted out of the blue
• promised tempting returns
and told the investment is safe
• called repeatedly, or
• told the offer is only available
for a limited time?
If so, you might have been
contacted by fraudsters.
76 Worldwide Healthcare Trust PLC
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Further Information/Notice of the Annual General Meeting
Notice is hereby given that the Annual General Meeting of Worldwide Healthcare Trust PLC will be held at Salters’ Hall,
4 Fore Street, London EC2Y 5DE on Thursday, 20 September 2018 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 2018
2. To re-elect Dr David Holbrook as a Director of the Company
3. To re-elect Sir Martin Smith as a Director of the Company
4. To re-elect Mrs Sarah Bates as a Director of the Company
5. To re-elect Mr Humphrey van der Klugt as a Director of the Company
6. To re-elect Mr Doug McCutcheon as a Director of the Company
7. To elect Mr Sven Borho 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 approve the Directors’ Remuneration Report for the year ended 31 March 2018
Special business
To consider and, if thought fit, pass the following resolutions of which resolutions 11, 12, 13 and 14 will be proposed as special
resolutions:
Authority to allot shares
10. THAT in substitution for all existing authorities the Directors be and are hereby generally and unconditionally authorised in
accordance with section 551 of the Companies Act 2006 (the “Act”) to exercise all powers of the Company to allot relevant
securities (within the meaning of section 551 of the Act) up to a maximum aggregate nominal amount of £1,249,219 (being
10% of the issued share capital of the Company at 15 June 2018) and representing 4,996,877 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 2019 or 15 months from the date of passing this resolution, whichever is the earlier, unless previously revoked,
varied or renewed, by the Company in General Meeting and provided that the Company shall be entitled to make, prior to
the expiry of such authority, an offer or agreement which would or might require relevant securities to be allotted after
such expiry and the Directors may allot relevant securities pursuant to such offer or agreement as if the authority
conferred hereby had not expired.
Disapplication of pre-emption rights
11. THAT in substitution of all existing powers (but in addition to any power conferred on them by resolution 12 set out in the
notice convening the Annual General Meeting at which this resolution is proposed (“Notice of Annual General Meeting”))
the Directors be and are hereby generally empowered pursuant to Section 570 of the Companies Act 2006 (the “Act”) to
allot equity securities (within the meaning of Section 560 of the Act) for cash pursuant to the authority conferred on them
by resolution 10 set out in the Notice of Annual General Meeting or otherwise as if Section 561(1) of the Act did not apply to
any such allotment:
(a) pursuant to an offer of equity securities open for acceptance for a period fixed by the Directors where the equity
securities respectively attributable to the interests of holders of shares of 25p each in the capital of the Company
(“Shares”) are proportionate (as nearly as may be) to the respective numbers of Shares held by them but subject to
such exclusions or other arrangements in connection with the issue as the Directors may consider necessary,
appropriate or expedient to deal with equity securities representing fractional entitlements or to deal with legal or
Annual Report for the year ended 31 March 2018 77
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Further Information/Notice of the Annual General Meeting
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 £1,249,219, being 10% of the issued share capital of the Company
as at 15 June 2018 and representing 4,996,877 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 10 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 £1,249,219 being 10% of
the issued share capital of the Company as at 15 June 2018 and representing 4,996,877 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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Further Information/Notice of the Annual General Meeting
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 shall be that number of shares which is equal
to 14.99% of the issued share capital of the Company as at the date of the passing of this resolution;
(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 2019 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.
General meetings
14. THAT the Directors be authorised to call general meetings (other than the Annual General Meeting of the Company) on not
less that 14 clear 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
15 June 2018
Registered Office:
One Wood Street
London EC2V 7WS
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Further Information/Notice of the Annual General Meeting
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 Link Asset Services, PXS1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF no later than 12 noon Tuesday, 18 September 2018.
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 the close of business on Tuesday, 18 September 2018 (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 15 June 2018 (being the last business day prior to the publication of this notice) the Company’s issued share capital consists of 49,968,778 ordinary
shares, carrying one vote each. Therefore, the total voting rights in the Company as at 15 June 2018 are 49,968,778.
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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Further Information/Notice of the Annual General Meeting
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
Link Asset Services on 0871 664 0300 or +44 371 664 0300 if calling from outside the United Kingdom. Calls cost 12p per minute plus your phone company’s
access charge. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open 09.00 to 17.30 Monday to Friday excluding
public holidays in England and Wales.
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 Link 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 81) then, subject to paragraph 4, the proxy appointment will remain valid.
Location of the Annual General Meeting
Salters’ Hall, 4 Fore Street, London EC2Y 5DE
Annual Report for the year ended 31 March 2018 81
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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 2018 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 and election of Directors
Resolutions 2 to 7 deal with the re-election and election of
each Director. Biographies of each of the Directors can be
found on pages 26 and 27 of the annual report.
The Board has confirmed, following a performance review,
that the Directors standing for re-election and 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.
Resolution 9 – Remuneration Report
The Directors’ Remuneration Report is set out in full in the
annual report on pages 43 to 45.
Resolutions 10, 11 and 12 – Issue of Shares
Ordinary Resolution 10 in the Notice of AGM will renew the
authority to allot the unissued share capital up to an
aggregate nominal amount of £1,249,219 (equivalent to
4,996,877 shares, or 10% of the Company’s existing issued
share capital on 15 June 2018, being the nearest practicable
date prior to the signing of this Report (or if changed, the
number representing 10% of the issued share capital of the
Company at the date at which the resolution is passed). 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
shareholders have pre-emption rights and that the new
shares must be offered first to such shareholders in
proportion to their existing holding of shares. However,
shareholders can, by special resolution, authorise the
Directors to allot shares otherwise than by a pro rata issue to
existing shareholders. Special Resolution 11 will, if passed,
give the Directors power to allot for cash equity securities up
to 10% of the Company’s existing share capital on
15 June 2018 (or if changed, the number representing 10% of
the issued share capital of the Company at the date at which
the resolution is passed), as if Section 551 of the Act does not
apply. This is the same nominal amount of share capital
which the Directors are seeking the authority to allot
pursuant to Resolution 10. This authority will also expire on
the date of the next Annual General Meeting or after a period
of 15 months, whichever is earlier. This authority will not be
used in connection with a rights issue by the Company.
Under the Companies (Acquisition of Own Shares) (Treasury
Shares) Regulations 2003 (as amended) (the “Treasury Share
Regulations”) the Company is permitted to buy-back and
hold shares in treasury and then sell them at a later date for
cash, rather than cancelling them. The Treasury Share
Regulations require such sale to be on a pre-emptive, pro
rata, basis to existing shareholders unless shareholders
agree by special resolution to disapply such pre-emption
rights. Accordingly, in addition to giving the Directors power
to allot unissued share capital on a non pre-emptive basis
pursuant to Resolution 11, Resolution 12, if passed, will give
the Directors authority to sell shares held in treasury on a
non pre-emptive basis. No dividends may be paid on any
shares held in treasury and no voting rights will attach to
such shares. The benefit of the ability to hold treasury shares
is that such shares may be resold. This should give the
Company greater flexibility in managing its share capital, and
improve liquidity in its shares. It is the intention of the Board
that any re-sale of treasury shares would only take place at a
narrower discount to the net asset value per share than that
at which they had been bought into treasury, and in any event
at a discount no greater than 5% to the prevailing 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 15 June 2018 (or if
changed, the number representing 10% of the issued share
capital of the Company at the date at which the resolution is
passed) (reduced by any equity securities allotted for cash on
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Further Information/Explanatory Notes to the Resolutions
a non-pro rata basis pursuant to Resolution 10, as described
above). This authority will also expire on the date of the next
Annual General Meeting or after a period of 15 months,
whichever is earlier.
The Directors intend to use the authority given by
Resolutions 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.
New Shares will only be issued at a premium to the
Company’s Cum income net asset value per share at the time
of issue.
Resolution 13 – Share Repurchases
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 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
independent bid on the trading venue where the purchase is
carried out. The minimum price which may be paid is 25p per
Share. Existing shares which are purchased under this
authority will either be cancelled or held as Treasury Shares.
Special Resolution 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 as at the date of the passing of the
resolution. 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 – General Meetings
Special Resolution 14 seeks shareholder approval for the
Company to hold General Meetings (other than the AGM) at
14 clear days’ notice. The Board confirms that the shorter
notice period would only be used where it was merited by the
purpose of the meeting.
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 36,665 shares.
Annual Report for the year ended 31 March 2018 83
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Further Information/Regulatory Disclosures (unaudited)
Alternative Investment Fund Managers Directive
(AIFMD) Disclosures
Global Data
Amount of assets engaged in TRS
The following table represents the total value of assets
engaged in TRS:
TRS
Concentration Data
Counterparties
£’000
34,105
% of AUM
2.6
The following table provides details of the counterparties and
their country of incorporation (based on gross volume of
outstanding transactions with exposure on a gross basis) in
respect of TRS as at the balance sheet date:
Country of
Incorporation
U.S.A.
U.S.A.
£’000
78,572
47,553
Goldman Sachs
JPMorgan
Aggregate transaction data
Type, quality, maturity, tenor and currency of collateral
No collateral was received by the Company in respect of TRS
during the year to 31 March 2018. The collateral provided by
the Company to the above counterparties is set out below.
Type
Cash
Currency Maturity
Quality
£’000
USD
less than
1 day
n/a
9,932
Maturity tenor of TRS
The following table provides an analysis of the maturity tenor
of open TRS positions (with exposure on a gross basis) as at
the balance sheet date:
Maturity
1 to 3 months
3 to 12 months
TRS
Value
£’000
44,939
81,186
126,125
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
Gross Commitment
Method
Method
140.0%
117.4%
140.0%
116.4%
Maximum level of leverage
Actual level at 31 March 2018
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.
Further disclosures required under the AIFM Rules can be
found within the Investor Disclosure Document on the
Company’s website: www.worldwidewh.com.
Security Financing Transactions Disclosures
As defined in Article 3 of Regulation (EU) 2015/2365,
securities financing transactions (SFT) include repurchase
transactions, securities or commodities lending and
securities or commodities borrowing, buy-sell back
transactions or sell-buy back transactions and margin
lending transactions. Whilst the Company does not engage in
such SFT’s, it does engage in Total Return Swaps (TRS)
therefore, in accordance with Article 13 of the Regulation, the
Company’s involvement in and exposure to Total Return
Swaps for the accounting year ended 31 March 2018 are
detailed below.
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Further Information/Regulatory Disclosures (unaudited)
Settlement and clearing
OTC derivative transactions (including TRS) are entered into
by the Company under an International Swaps and
Derivatives Associations, Inc. Master Agreement (“ISDA
Master Agreement”). An ISDA Master Agreement is a
bilateral agreement between the Company and a
counterparty that governs OTC derivative transactions
(including TRS) entered into by the parties. All OTC derivative
transactions entered under an ISDA Master Agreement are
netted together for collateral purposes, therefore any
collateral disclosures provided are in respect of all OTC
derivative transactions entered into by the Company under
the ISDA Master agreement, not just total return swaps.
Safekeeping of collateral
There was no non-cash collateral provided by the Company
in respect of OTC derivatives (including TRS) with the
counterparties noted above as at the statement of financial
position date.
Return and cost
All returns from TRS transactions will accrue to the Company
and are not subject to any returns sharing arrangements with
the Company’s AIFM, Portfolio Manager or any other third
parties. Returns from those instruments are disclosed in
Note 9 to the Company’s financial statements.
Annual Report for the year ended 31 March 2018 85
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Further Information/Company Information
Directors
Sir Martin Smith (Chairman)
Sarah Bates
Sven Borho
Dr David Holbrook
Humphrey van der Klugt, FCA
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
7 More London Riverside
London SE1 2RT
Custodian and Prime Broker
J.P. Morgan Securities LLC
Suite 1, Metro Tech Roadway
Brooklyn, NY 11201
USA
Registrars
Link Asset Services (formerly Capita Asset Services)
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone (in UK): 0871 664 0300†
Telephone (from overseas): + 44 371 664 0300†
E-mail: enquiries@linkgroup.co.uk
Website: www.linkassetservices.com
Please contact the Registrars if you have a query about a
certificated holding in the Company’s shares.
†Calls cost 12p per minute plus your phone company’s access charge and may
be recorded for training purposes. Calls outside the UK will be charged at the
applicable international rate. Lines are open between 09.00 and 17.30 Monday
to Friday excluding public holidays in England and Wales.
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)
Global Intermediary Identification
Number (GIIN) : FIZWRN.99999.SL.826
Legal Entity Identifier (LEI) : 5493003YBCY4W1IMJU04
86 Worldwide Healthcare Trust PLC
Annual Report for the year ended 31 March 2018
249336 WWH cover spread 03/07/2018 14:48 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, Link Asset Services, 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 Revive 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 249336
Annual Report
for the year ended 31 March 2018