Annual Financial Results

RNS Number : 5926Q

BB Healthcare Trust PLC

01 March 2021

 

BB HEALTHCARE TRUST PLC

LEGAL ENTITY IDENTIFIER ('LEI'): 213800HQ3J3H9YF2UI82

ANNUAL FINANCIAL REPORT ANNOUNCEMENT

For the year ended 30 November 2020

INVESTMENT OBJECTIVE, FINANCIAL INFORMATION, PERFORMANCE SUMMARY AND ALTERNATIVE PERFORMANCE MEASURES

Investment objective

The investment objective of BB Healthcare Trust plc ("the Company") is to provide Shareholders with capital growth and income over the long term, through investment in listed or quoted global healthcare companies. The Company's specific return objectives are: (i) to beat the total return of the MSCI World Healthcare Index (in sterling) on a rolling 3 year period (the index total return including dividends reinvested on a net basis); and (ii) to seek to generate a double-digit total Shareholder return per annum over a rolling 3 year period.

Financial information

As at	30 November 2020	30 November 2019
Net asset value ("NAV") per Ordinary Share (cum income)	172.51p	143.11p
Ordinary Share price	172.00p	145.00p
Ordinary Share price (discount)/premium to NAV1	(0.3)%	1.3%
Ongoing charges ratio ("OCR")1	1.10%	1.19%

Performance summary

	% change2	% change3
	30 November 2020	30 November 2019
Share price total return per Ordinary Share1,4	22.5%	6.9%
NAV total return per Ordinary Share1,4	24.6%	6.6%
MSCI World Healthcare Index total return (GBP)4	10.3%	8.6%

1 These are Alternative Performance Measures.

2 Total returns in sterling terms for the year ended 30 November 2020.

3 Total returns in sterling terms for the year ended 30 November 2019.

4 Including dividends reinvested in the year.

Source: Bloomberg.

Alternative Performance Measures ("APMs")

The financial information and performance summary data highlighted in the footnote to the above tables represent APMs of the Company. In addition to these APMs other performance measures have been used by the Company to assess its performance; these can be found in the key performance indicators section of the Annual Report.

CHAIRMAN'S STATEMENT

This is the fourth annual report of your Company.

COVID-19

The last year has been extraordinary. COVID-19 has had both a direct and indirect cost on lives, families and the global economy. There will inevitably be readers who have lost loved ones; we extend our deepest sympathies.

The pandemic has impacted the way all of us work, interact and engage. The Investment Managers' report details the impact on the portfolio. However, I am satisfied that, as both a Board and as a Company, we have continued to operate effectively over the past twelve months. I would like to thank our service providers, who have also continued to deliver their usual excellent service.

Performance

Over the financial year, the Company's Net Asset Value ("NAV") rose 20.5% to 172.51p. The total shareholder return (i.e. including reinvestment of dividends) over the last financial year was 22.5%. This was materially above our comparator index (the MSCI World Healthcare total return Index measured in GBP) which produced a total return of 10.3%.

Over the latest three-year period, the Company has delivered a total share price return of 59.3%, versus 42.9% for the comparator index.

The share price returns on an annualised basis over one year, three years and since inception are 22.5%, 16.8% and 97.6% respectively. Since inception, the total share price return is 97.6% versus 64.3% for the comparator index.

Your Board consider the two targets set at inception against a three year rolling period, to performing well against the index and provide a double digit total return per annum, are demonstrably achieved and we congratulate the Investment Managers on that performance.

The Company's performance and subsequent growth resulted in its inclusion in the FTSE 250 Index in June 2020. It is especially pleasing, in this environment, to report that within four years of launch your Company has achieved this accolade. As of 25 February 2021, BB Healthcare was the 294^th largest listed company on the LSE.

Board Composition and evaluation

On 23 September 2020, Professor Tony Young OBE joined the Board as Non-Executive Director. As well as being a clinician and successful healthcare entrepreneur, Tony is National Clinical Director for Innovation for NHS England. The appointment was delayed by Tony's involvement in various projects fast-tracked by the government in the early stages of the pandemic and we thank him for his contribution to managing the response.

My predecessor and fellow board member, Professor Justin Stebbing also deserves a special mention for his leadership of a team that used artificial intelligence to identify an already approved drug, Barcitinib as a potential treatment for COVID-19. Justin stepped back from being Chair to allow more time to focus on his research efforts and we should all be grateful that he did so! We are very lucky indeed to have such luminaries on our Board.

The Board recognises the importance of the AIC Code's recommendation in respect of evaluating the performance of the Board, its Committees, and individual Directors. During the year, an external consultant undertook such an evaluation of the Board and the Investment Manager. The conclusions of the performance evaluation were positive, confirming that the Board and Investment Manager were operating effectively and showed the necessary commitment to the effective fulfilment of their duties.

Portfolio Positioning

Clearly the positioning of the portfolio has necessarily evolved as the pandemic unfolded. Though the intent is to have long term holdings and low turnover, an unprecedented crisis which significantly changes the operating environment must clearly impact positioning (Keynes' oft attributed saying comes to mind).

Geographically, the investments remain centred on the US market which, leads to an inherent US Dollar exchange rate exposure, which is unhedged. The Investment Mandate has few constraints beyond liquidity, giving the Investment Manager free reign to pursue a 'best ideas' approach and optimise the risk/return potential of the Company's (intentionally) concentrated investment portfolio.

More details are provided in the Investment Managers' report, but I would recommend that investors avail themselves of the monthly reports from the Investment Manager which give their current thoughts and can be found on the Company's website.

Gearing, Portfolio Turnover, Expenses and Structure

The Company has a revolving credit facility ("RCF") with Scotiabank. This was renewed in January 2021 for a further year, but was substantially undrawn during the pandemic period. As of 30 November 2020, the Company's net cash position represented 10.9% of total assets.

As a result of COVID-19, the number of changes to the portfolio gave rise to a greater Portfolio average turnover (measured as traded value less capital inflows versus gross investment value) which was 14.0% at year end; this compares to a turnover of 6.0% in the financial year 2019.

The OCR was reduced to 1.1% for the 2020 financial year, as compared to 1.2% for financial year 2019. The Investment Manager receives no further fees in addition to the management fee. All other factors being equal, we would expect the OCR to decline further in 2021 as the assets under management have risen and the Board continually endeavours to minimise expense growth in other areas.

Responsible Investing

Both the Company and the Appointed Investment Manager, Bellevue Asset Management are committed to reflecting Environmental, Social & Governance issues ("ESG") as a core principle within the investment process. More details on the various processes and reporting around this topic can be found in the Annual Report.

Share Capital and issuance

The Company's issued share capital was 488.7 million Ordinary Shares as of the financial year end, versus 433.9 million Ordinary Shares as of fiscal year 2019, an increase of 12.6%. A further 18.6 million Ordinary Shares have been issued since the year end via the Company's block listing facility and the number of shares in issue stood at 507.3 million as of 25 February 2021.

The Company has the authority to issue a further c.22.3 million Ordinary Shares ahead of the AGM on 23 April 2021. At the AGM, we will be seeking authority to issue 50,734,545 new Ordinary Shares to meet potential investor demand and to fulfil the scrip dividend commitment.

I would remind readers, shares issued through placing and tap issues can only be issued at a premium to NAV and continued issuance has been possible because the Company's shares again traded at a premium to NAV over much of the year.

In my role as Chairman, I have the opportunity to meet with a number of investors across the year and the Board receives regular updates from the Investment Manager on feedback it receives on the Company. One of the questions that I am asked is why we continue to expand the size of the Company through further share issuance. The Board debates this topic continually, but I thought it worth summarising this.

Firstly, and most importantly, the Board is satisfied that the Investment Manager has demonstrated there is considerable headroom to grow the Company's assets without impacting its investment returns or liquidity position. This has been demonstrated by the continued meeting of the team's return objective as the Company has grown in size from £150 million to over £951 million as at 24 February 2021. We would not sanction issuance if we felt it could adversely impact our existing shareholders.

Secondly, there are the benefits of scale. The Company's enlarged size offers many benefits when negotiating with service providers, since not all costs scale with assets under management. This is reflected in the continued reduction of the ongoing charges ratio.

Thirdly these scale benefits are not limited to the Company itself, but also to the Investment Manager's role on behalf of the Company. This manifests in key areas such as management access (companies inevitably prioritise investors who can build large positions and keep them for a long time) and access to market liquidity (banks offer better pricing on 'block trades' to those who can partake regularly and in size). In the ESG section, later in this report, there is discussion of active engagement with companies - scale helps ensure the attention of company management to the Company's views in this area.

Fourthly, there is the benefit of improved liquidity for our shareholders. Although the Company offers an annual redemption option, which we see as a very valuable commitment, the reality is that the vast majority of investor inflows and outflows will come via daily trading on the London Stock Exchange.

The more shares that are traded, the more likely that liquidity will be available for any investor at any given time. The mechanics of trading in the UK are such that larger companies attract more 'market makers', who offer prices to buy and sell shares. As the Company has grown, the number of market makers has increased from 3 to 6 and the bid/offer spread (which reflects the frictional cost of buying and then selling via these market makers) has declined from a median 1.4% of the share price in the first year of the Company's life to 0.9% of the share price in 2020.

In conclusion, there are multiple benefits to shareholders from the continued expansion of the Company's share capital. As long as we are satisfied this can be accomplished without diminution of the projected future shareholder returns, the Board is happy to recommend further issuance and we hope that you will support us with your votes at the AGM to enable this.

Dividends

The Company targets an annual dividend of 3.5% of preceding year-end NAV, paid out in two equal instalments. The Company paid out a final dividend of 2.425p in respect of the year ended 30 November 2019, on 9 April 2020 and an interim dividend of 2.50p in respect of the financial year ended 30 November 2020 on 28 August 2020.

The Board has proposed a final dividend of 2.50p per Ordinary Share in respect of the financial year ended 30 November 2020 and, if approved at the forthcoming Annual General Meeting, this will be paid to Shareholders in April 2021.

Regarding the financial year ending 30 November 2021; the Board is proposing a total dividend of 6.03p per Ordinary Share, composed of interim and final dividends of 3.015p per Ordinary Share, to be paid in August 2021 and April 2022 respectively, subject to shareholder approval.

In July 2019, the Company introduced a scrip dividend alternative, allowing Shareholders to elect for their cash dividend to be automatically subscribed on their behalf for new Ordinary Shares. Certificated Shareholders who have already joined the scrip dividend scheme through the Registrar's website need take no further action to continue in the scheme.

Certificated Shareholders who wish to elect for the scrip dividend alternative for the first time can do so online or by contacting the Company's Registrar. Uncertificated Shareholders can make an election via the CREST system.

Outlook

This is the second year that in considering the outlook I have to mention both COVID-19 and the US Presidential election cycle.

The last twelve months have made extraordinary demands on healthcare systems and their staff, from top to bottom. It is humbling to see how dedicated frontline staff are, even at a risk to themselves. We owe them a debt of gratitude.

The focus on managing COVID-19 has inevitably created a backlog in other parts of medicine, particularly surgical procedures and cancer treatments. Hopefully, a stabilisation of the pandemic will mean that healthcare systems re-focus on these necessary, but more routine areas. This transition, which might take more than a year, will clearly influence the performance of different subsectors within healthcare.

That we can now successfully treat so many and vaccinate against a previously unknown pathogen stands as testament to humanity's innovation and collaboration capabilities. Amongst all the sorrow, there is much that we can be proud of, but it is also evident that the healthcare systems of the Western world must evolve and adapt to be fit for purpose moving forward.

For more detailed discussion on the 2021 outlook may I refer readers to the Investment Managers' discussion in this report? This year more than most it is dangerous to predict changes so I would emphasise, even more than usual, to read the monthly factsheets where our Investment Managers update you on their current thinking.

Previously I have stated on these pages my and the Board's longer term view that healthcare demand will continue, and that innovation and disruption will create investment opportunities. This remains true, although it is fair to say none of us expected disruption such as we have seen over the past year, nor the rate of innovation.

The single biggest driver of market sentiment in the next few months will be the success of mass vaccination programmes. The US, as the world's biggest economy clearly sets the pace in this context and hence the new President's focus in this area is so important. The UK has been an early leader in vaccine rollouts, a rare bright spot during the pandemic.

Annual General Meeting

The 2020 AGM took place just as COVID-19 restrictions were starting to be imposed and we were unable to allow investors to attend in person. We had intended to hold an in-person event for shareholders later in the year - little did we expect that the pandemic would have such a protracted impact on bringing people together.

As things stand, it seems very unlikely that we will be able to host an in-person event again this year. Our current plan is that the AGM will be held virtually via videoconference and shareholders will be able to attend the meeting virtually for a Q&A session, where questions from shareholders are encouraged. The Board welcomes full dialogue with shareholders. Should a shareholder have a question that they would like to raise at the AGM, either of the Board or the Investment Manager, the Board would ask that they either ask the question in advance of the AGM by sending it by email to [e-mail] or attend the AGM virtually and ask the question at the meeting at the appropriate time.

As the AGM will be virtual, shareholders should appoint the 'Chair of the meeting' to act as their proxy as

any other named person will not be permitted to attend the meeting. Further details on the appointment

of a proxy are included in the Notice of AGM. Shareholders should monitor London Stock Exchange announcements for arrangements regarding the virtual AGM.

Even when such events are permissible, we recognise it is not possible for many to attend an AGM hence I would encourage readers to make use of the dedicated email address to submit any enquiries or feedback they might have. In the meantime, we will continue to keep you informed on the Company's website providing updates from the Investment Manager of the portfolio's progress.

On behalf of the Board, may I wish you both a prosperous and healthy year ahead and thank you for your continued support of BB Healthcare Trust Plc.

Randeep Grewal

Chairman of the Board of Directors

26 February 2021

INVESTMENT MANAGER'S RePORT

Performance summary

We are pleased to report the Company meaningfully outperformed its comparator Index (the MSCI World Healthcare Index measured in GBP terms) during the financial year 2020 (Figure 1). In some ways, this financial year was ever more challenging than 2019; beset as it was by a rapid and aggressive market correction, baleful levels of volatility and a persistently pernicious and yet ever changing macro narrative: COVID-19. As if this wasn't enough, we also had to contend with a US Presidential election cycle and Brexit. Any hopes of a calm sea after the tumults of the prior year were long forgotten by January 2020 and a distant fantasy by March 2020.

Figure 1 below illustrates that the positive performance in 2020 modestly improved our rolling 3-year total return, on both a relative and absolute basis. This is our preferred metric for assessing the performance of the Company, as we aim to have a 3 to 5 year holding period for our investments.

So much has happened during this year that what follows is a somewhat more expansive review of sentiment for both healthcare and the wider market than we have compiled in previous annual reports. We feel this backdrop will be important in allowing readers to assess our thoughts on the outlook for 2021.

Figure 1

Total Return (GBP)	Financial Year 2020	Rolling 3 Year	Rolling 3 Year (annual equivalent)	Since Inception (from 2 December 2016)
BBH Share Price	+22.5%	+59.3%	+16.8%	+97.6%
BBH NAV	+24.6%	+64.7%	+18.1%	+97.6%
MSCI World Healthcare Index	+10.3%	+42.9%	+12.6%	+64.3%
Relative to MSCI World Healthcare Index
BBH Share Price	+12.2%	+16.4%	+4.2%	+33.3%
BBH NAV	+14.3%	+21.8%	+5.5%	+33.3%
Performance of other comparator indices
MSCI World Total Return Index	+10.9%	+32.9%	+12.0%	+56.6%
FTSE All Share Total Return Index	-10.2%	-1.9%	-0.6%	+17.0%

Source: Bloomberg. All performance figures are calculated as total return with dividends being reinvested in the relevant security, calculated in GBP and with the relevant year ended 30 November 2020.

Healthcare very modestly underperformed the wider market (we use the MSCI World Total Return Index measured in GBP as a comparator for overall market sentiment) over the financial year (approximately 0.6%). True to its defensive growth attributes, the sector outperformed during the March 2020 sell-off and April 2020 recovery, but lost ground over the summer and underperformed in the October to November 2020 're-opening' trade, when investors eschewed defensives for more cyclical exposure ahead of the first approvals of SARS-CoV-2 vaccines.

Nonetheless, as Figure 1 illustrates, it is still the case that healthcare has materially outperformed the wider MSCI World Total Return Index and the UK market (FTSE All Share Index) on a three-year basis and since the Company's inception.

We remain firmly of the view that the demographic factors which underpin healthcare demand growth have not been adversely impacted by the SARS-CoV-2 pandemic. If anything, the attendant economic and social crises have served to highlight the structural challenges in the healthcare marketplace and the need for increased investment and new approaches to care delivery to make the system fit for purpose.

At the same time, healthcare providers have demonstrated their ability to cope with quite significant operational change over a short period of time, which is arguably a boon to those clamouring for reform but met with resistance from frontline staff. We think these factors may, in time, become additional medium-term positive growth drivers for our strategy and we continue to believe that healthcare will continue to outperform the wider market over the longer-term.

Macro environment

The Company's investment strategy leads to a portfolio with certain inherent characteristics: dollar domination, mid-cap focus and low benchmark correlation. In ordinary times, these mere peccadillos are of no consequence, and more than offset by the superior returns on offer versus a benchmark dominated by backwardly successful behemoths.

However, these have not been ordinary times. The MSCI World Healthcare Index plunged 18.5% between 20 February and 23 March 2020. Although we had already begun to mitigate risk in the portfolio (through grossing down and re-allocating) from late January 2020 as the pandemic took hold, it was not enough.

This was a disorderly sell-off and the general trend in these volatile periods is for investors to pivot toward liquidity (i.e. they move up the market cap curve), which softens the blow for large-cap companies and also major indices as they are generally capitalisation-weighted. Given the inherent characteristics of our portfolio and prior periods with disorderly market conditions (e.g. Q4 2018), it is no surprise that we struggled on a relative basis during this period.

The short-term impact on investor returns (in both relative and absolute terms) was compounded by the Company briefly moving to trade at a discount to NAV. In the twelve months to 20 February 2020, the average premium to NAV was 0.86%. However, the Company's shares traded at a discount to NAV of approximately 14% on 19 March 2020. Fortunately, this was short-lived.

Although share prices were extremely volatile during this year, healthcare is not an economically sensitive industry; people get sick in recessions and booms alike. As such, we felt strongly that the medium-to-long term growth outlook was not adversely impacted by the unfolding pandemic and thus it was clear that the market dislocation offered a compelling opportunity for capital deployment. Again, prior experience gave us confidence that there is usually an over-reaction on the downside in the short-term and this creates a window to acquire assets at discounted valuations. We published a shareholder update to this effect on 20 March 2020 (this can be viewed on the BB Healthcare website).

The impact of increased gross market exposure (through the use of our debt facility) and the judicious addition to the portfolio of some long-watched and now beaten up medical device companies undoubtedly contributed to the rapid recovery in the NAV. The Company's Board did discuss share buybacks when BB Healthcare shares traded at a meaningful discount to NAV, but the Investment Manager proposed that higher returns would be made from investing more capital into the portfolio companies than buying back shares in the Company itself.

Whilst we were confident in the magnitude of the opportunity for positive returns in late March 2020, we did not expect such a mercurial market; the Company recovered to its pre-crisis NAV level (approximately 156p) by 11 May 2020 and this positive momentum continued throughout that month. The relentless onward march of the pandemic and wider rollover of almost every leading economic indicator militated against such a rapid recovery, and this made us rather nervous.

One can make various (perfectly reasonable) arguments why equities should continue to do well in the pandemic environment, the most powerful of which is a Hobsonian lack of compelling alternative asset pools:

Real-rates are close to zero, even for lower-rated sovereign bonds. For example, Italian 10-year bonds yielded only 0.62% at the end of November 2020, even though the country sat one notch above "non-investment grade" on the majority of credit ratings (wither credit spreads?).

Gold rallied 18.3% in 2019 and a further 17.1% to the end of November 2020, thus looking less compelling as a safe haven. Moreover, the now enshrined normal of home working plays havoc with commercial property values (roughly $33 trillion of invested value pre-crisis, or just over a third of the combined value of the global equity market).

All this at a time when COVID-related fiscal stimulus is likely to keep money flowing into the system and thus ultimately into equities as an asset class. A combination of the factors cited above and innate human optimism that the SARS-CoV-2 pandemic would be overcome sooner rather than later has meant that the market continued to push on since the initial recovery in sentiment during April 2020, with the MSCI World Index making new all-time highs in September, November, December 2020 and again in January 2021.

Index-level data is all well and good as a measure of wider sentiment to equities, but one should not under-estimate the extent to which this lurch higher has been led by the technology sector, as the data for the US market illustrates below.

Index	Absolute return in US dollars*
S&P 500 excluding technology shares	+22.2%
S&P 500	+25.7%
S&P 500 Technology sub-sector (GICS L1)	+35.8%
NASDAQ Composite	+38.0%

Source: Bloomberg. *Data from 30-4-20 to 30-11-20.

This stellar performance leaves us in an interesting situation. As of the end of November 2020, the outperformance of the MSCI World Index has become very narrow. The top 5 companies were all technology stocks (Apple, Microsoft, Amazon, Facebook and Alphabet (Google)) and they accounted for more than 14.0% of the value of this near 1,600 stock global index. To put this in context, the top five companies accounted for 9.1% of the Index a year earlier and only four of them were 'Tech' (the fifth was JP Morgan, subsequently relegated to 11^th spot).

The Software and Services plus Technology Hardware sub-sectors account for 17.7% of the MSCI World Index but this does not include Amazon (Retail), Facebook (Media) or Netflix (Media). These three stocks add a further 4.9% to the group most people would understand as "Tech", making the broadly defined group account for 22.6% of the most widely used global benchmark. We can also argue for Snap, Twitter, Pinterest etc. to be included and one can soon easily get north of 25.0% being "Tech".

Why is this important? History is not so much the best guide to markets, as the only one we have available, but seismic change can render it of little use as a datum. The more bearish investment commentator could rightly argue that absolute forward valuation metrics for the market as a whole are at all-time highs and a number of longer-term metrics for pricing equity market growth and risk (e.g. Tobin's Q, CAPE) are flashing 'red'.

On the other hand, one cannot divorce the distorting impact of this technology leadership from any analysis of market-level data. For instance, the forward (i.e. 2021) price/earnings ratio of the MSCI World Index stood at circa 45x at our year end, but the weighted average price earnings (PE) of 17.7% accounted for by the Software and Services and Technology Hardware sub-sectors is over 80x.

Thus, the "non Tech" Index P/E is a more reasonable sounding 37x for 2021, bearing in mind that the year 2021 will again have a degree of SARS-CoV-2 impact. Again, 37x is not 'cheap' in a historical context, but the lack of historical context for the times we are living in is also food for thought.

When looking forward into 2021, the investor must ponder two important questions. Firstly, is the market really as expensive as it looks, or is the picture severely distorted by the narrow 'Tech' leadership issue? Secondly, when assessing the impact of these technology stocks on the wider market, how relevant are traditional metrics? It is unarguable that the acquisition cost of new revenues and the cash conversion rates for these intangible entities is unlike anything that has previously happened. The only certainty is that the rules are different now. Is this, in fact, the 'new normal' about which we all heard so much in the early phase of the pandemic?

Even if one were to presume that valuations are aberrant, how long could this continue for? Many a Cassandra went bust shorting the 'imminent' tech crash in the late 1990s. It did finally come, but much later than many expected, and it was a far messier and protracted affair than previous corrections. We are very mindful of the adage: 'the trend is your friend until it comes to an end'.

Even within healthcare, we have seen valuation bubbles driven by thematic investing. This has not been limited to SARS-CoV-2 related themes such as testing or vaccines, which have both experienced bouts of dizzying revaluation (and devaluation as well), but to a wider trend toward thematic buckets, especially in the exchange traded fund ('ETF') category.

And where did the fiscal year end? For healthcare specifically, the market's vicissitudes have tended to return to the belief that all will be well sooner rather than later; the physical and temporal spacing necessitated during the pandemic will either cease to be an issue for doctors and patients alike, or that it will cease to be needed. 2021 will thus be a banner year and, in many cases little worse than what was expected for that year back in late 2019. In terms of revenue and profit forecasts, it is almost as if the pandemic never happened.

Simply put, anyone investing in the market today is playing economic recovery and social normalisation in the short-to-medium term. Getting comfortable with this premise, or rather remaining comfortable with it, whilst simultaneously absorbing the valuation consequences of a technology-led market in a zero yield world, will be the key to sentiment and thus to investor returns moving forward. This is a much easier thing to write about than to conclude upon at a personal level. It is even more of a conundrum for a portfolio manager, where managing risk is equally as important as seeking returns. Sailing through uncharted waters requires ever more vigilance.

With regard to the impact of foreign exchange ('FX') on the overall returns, this was not a significant factor for much of the year. SARS-CoV-2 does not discriminate and every economy suffered in its wake. The impact on the UK's service and leisure-oriented economy was arguably more significant than on the United States during 'wave one' and there was something of a tailwind from sterling weakening over the spring.

This fell away over summer, as 'wave two' was less well managed in the United States and, as the world's reserve currency, the greenback suffered as Asian economies recovered faster and alternative assets such as gold become more popular as a store of value. In addition, the Federal Reserve indicated that, as part of its stimulus programme, it would tolerate higher levels of inflation before considering interest rates rises.

The market thus moved to price in structurally lower longer-term US interest rates. In the final weeks of our fiscal year, the pound sterling began to strengthen again on positive Brexit-related sentiment, which looked premature. It will be sometime yet before we can really know if the EU/UK trade deal is all the Government hoped (and hyped) it to be. In aggregate, we estimate that foreign currency movements reduced the cumulative shareholder return by around 4% over the course of the fiscal year.

In conclusion, we have successfully navigated another period of almost unprecedented volatility and macro-driven sentiment (can anyone remember what a 'normal' market feels like? 2017 seems a lifetime ago), but we are by no means complacent that the difficult times are now behind us.

Portfolio evolution

During the financial year 2020, the Company held positions in 41 companies (versus 35 in the prior period), one of which was the non-fungible Contingent Value Right ("CVR") that was issued as part consideration when Alder was acquired by Lundbeck in October 2019.

We began the year with 30 active positions (plus the Alder CVR) and ended the fiscal year with 29 active positions (plus the Alder CVR and our holding in NMC Health, the latter being valued at nil and no longer classed as an active holding).

The average across the year was 30 active positions, with eight additions and eight exits (plus the removal of NMC Health from the active category). Three of those exits were M&A related, with two portfolio companies acquired (Akcea, and Wright Medical) and one deal that had not yet closed (Fitbit) at our year end, but where we exited shortly after the announcement of the transaction given concerns on potential anti-Trust issues. Of the eight additions, two were securities of previously held companies.

As noted earlier, the rapid recovery in valuations during April and May 2020 reduced our level of comfort with the market in general, and certain areas of healthcare in particular; notably the ones that were more geared toward elective surgical procedures (namely lower acuity interventions that can easily be postponed without risk to the patient) and those companies that were deemed beneficiaries of the unfolding pandemic (e.g. telemedicine, testing).

Our discomfort was not solely due to valuations, but also to the general positive sentiment around 'normalisation' of activity levels in the overall healthcare system by Q4 2020, with 2021 being a 'normal' to even 'better than normal' year. With the inevitability of multiple waves of SARS-CoV-2 and the reality that winter respiratory diseases peak in January/February, this seemed faintly ridiculous to us.

We thus re-oriented the portfolio away from these areas toward essential medicines and services provided under long-term contracts over the May to July 2020 period. The evolution of the portfolio over the year is illustrated below, with a general pattern of more Tools, Services and Therapeutics and less Dental, Med-Tech and Health Technology.

Subsector Allocation as of 30 November	November 2020	May 2020	November 2019	% Change year on year
Dental	0.0%	0.9%	7.0%	-7.0%
Diagnostics	10.6%	12.4%	16.9%	-6.3%
Diversified Therapeutics	15.9%	14.0%	9.9%	+6.0%
Facilities	0.0%	0.0%	2.6%	-2.6%
Focused Therapeutics	37.0%	34.1%	24.2%	+12.8%
Healthcare IT	2.2%	5.5%	8.9%	-6.7%
Healthcare Technology	0.0%	0.0%	1.0%	-1.0%
Managed Care	12.9%	15.2%	14.4%	-1.5%
Medical Technology	12.6%	9.2%	10.2%	+2.4%
Services	5.4%	4.9%	2.9%	+2.5%
Tools	3.4%	3.8%	2.0%	+1.4%
Total	100.0%	100.0%	100.0%

In addition to the re-orientation of the portfolio's sub-sector exposures, we took the decision to run a higher level of cash than would ordinarily be the case. Whilst we remain of the view that deploying leverage is a compelling way to enhance returns, this is only the case when one is confident that the overall direction of the market is positive. Following such a rapid recovery, we were worried that there may be another correction and that, at best, the wider sector would go sideways for some time; the latter prognostication proving prescient.

The portfolio's gearing versus the progression of the MSCI World Healthcare Index value across the year is illustrated below. As the chart shows, we rapidly moved from modest leverage to net cash in January 2020, as the risks posed by the epidemic in Wuhan became clear. As noted above, we re-deployed gearing toward the end of March 2020 to take advantage of the opportunity created by the market correction but then adopted a cautious stance, returning to a modest net cash position. As the sector continued to make material upward progress, we further scaled back our gross exposure.

We are now some six months on from the decision to re-orient the portfolio and, generally speaking, the positioning has remained the same. We have a little bit more Medical-Technology exposure, but very much focused on the higher acuity/emergency end of the spectrum. Exposure to Tools and Diagnostics has come down, due mainly to profit taking amidst higher valuations, likewise Managed Care.

Our top five and bottom five performers in terms of contribution to the evolution of the NAV are summarised below, along with their share price evolution in local currency and sterling over the fiscal year (which does not necessarily correspond to their performance for the Company, since the size and duration of our holding may differ).

==== Top 5 Performers ====			==== Bottom 5 Performers====
Company	Performance (LCY)	Performance (GBP)	Company	Performance (LCY)	Performance (GBP)
CareDx	+178.6%	+169.8%	NMC Health	-100.0%	-100.0%
Teladoc	+137.4%	+129.9%	Esperion	-44.9%	-46.6%
Pacific Biosciences	+207.6%	+197.9%	Align Technology	+73.5%	+68.1%
Insmed	+69.2%	+63.9%	H Lundbeck	-26.5%	-22.5%
Evolent Health	+101.5%	+95.2%	Intuitive Surgical	+22.5%	+18.6%

The valuations of both Teladoc and Pacific Biosciences appreciated to levels that we were no longer comfortable with and we exited our holdings. Our decision to exit our positions in both Align Technology and Intuitive Surgical might, in hindsight, seem premature given their subsequent share price performance. However, this capital was deployed into other names and those contributed to our overall positive performance. Moreover, the doubts that we had regarding the consensus outlook for these companies' growth is still there.

Indeed, it is worth highlighting the increased impact of risk management related trading during this period. As noted previously, we view SARS-CoV-2 as a transient issue and, when all is said and done, there is little reason to change our expectations around the long-term growth expectations for the various sub-sectors of healthcare. Whilst we have gradually reflected the reality of risk-free rates being close to zero in our discount rates, this observation means that our overall long-term valuation parameters have not changed significantly either.

We have thus engaged in a much higher level of "topping and tailing" positions during the high levels of price volatility we witnessed during the year: taking profits at the higher edges of our acceptable valuation envelope and recycling that capital into positions at the lower end of that scale. Overall turnover (expressed as the percentage of gross value traded in a given month) has run at about 14% during fiscal 2020, versus 8% in the period from inception to the end of fiscal 2019. One should not underestimate the value of such activity in generating incremental alpha and also making sure that overall risk levels remain within our comfort level.

Esperion and Lundbeck share the dubious accolade of failing to manage a new product launch in SARS-CoV-2 times. Admittedly, this is a challenging backdrop, but some companies have overcome managed this and the situation is what it is. Regardless of the reason, the result is cuts to revenues and earnings and shares rarely perform during periods of negative estimates momentum. In both instances, we traded around these positions quite actively during the year and our losses were significantly smaller than the percentages above might otherwise suggest.

As many readers will be aware, NMC Health was subject to fraud and embezzlement on a grand scale (the group's indebtedness was grossly understated to the tune of $4.5 billion). Multiple criminal and civil probes are ongoing. We are obviously frustrated to have suffered losses, but the central tenet of any due diligence process begins with a company's audited regulatory filings, which contain a statement from the auditor attesting that they reflect a "true and fair view" of the entity. Unfortunately, this turned out not to be the case here. We have recommended to the Board a total write down of the value of the investment in the portfolio due to the uncertainty of ever receiving any value from the resolution of the sorry tale; a recommendation we would never have expected and one we hope we never have to make again.

The Company held a position in NMC since May 2019. We were aware of questions about governance and accounting then, and subsequently, but we felt these concerns were reflected in NMC's share price, making it a well-positioned play on expansion of developing market healthcare provision. We spent significant time on due diligence and with management, including its board members. The pertinent questions were asked but, alas, the information we received turned out to be very wrong. The extent to which any of the individuals concerned were complicit in this remains to be seen.

Our top 10 holdings as of the end of the financial year and other relevant portfolio metrics are illustrated below. We have continued to operate a strategy with a very high active share versus the MSCI World Healthcare Index: our Active share was 92.9% at year end (versus 92.9% at end FY19).

TOP TEN HOLDINGS	% of net
As at 30 November 2020	asset
Bristol-Myers Squibb	6.7
GW Pharmaceuticals	6.0
Hill-Rom Holdings	5.4
Anthem	5.3
Insmed	4.7
Vertex Pharmaceuticals	4.6
Jazz Pharmaceuticals	4.3
CareDx	4.3
Alnylam Pharmaceuticals	4.0
Humana	3.6
Top ten holdings	48.9
Other net assets	51.1
Total	100.0

	2020	2019	% Change
SUB SECTOR BREAKDOWN	%	%
Focused Therapeutics	37.0	-	+37.0
Diversified Therapeutics	15.9	-	+15.9
Managed Care	12.9	14.4	-1.5
Medical Technology	12.6	10.2	+2.4
Diagnostics	10.6	17.0	-6.4
Services	5.4	2.9	+2.5
Tools	3.4	2.0	+1.4
Healthcare IT	2.2	8.9	-6.7
Specialty Pharma	-	16.8	-16.8
Biotechnology	-	10.7	-10.7
Dental	-	7.0	-7.0
Pharmaceuticals	-	6.4	-6.4
Facilities	-	2.7	-2.7
Healthcare Technology	-	1.0	-1.0
Total	100.0	100.0

Recent trading and sector outlook

The macro picture

At the time of writing (mid-February, 2021), the broad macro narrative continues to be dominated by waxing and waning views of the impact of the global pandemic, and various iterations of the potential consequences. Although the world is just beginning to feel the effect of a number of more transmissible variants on case growth that seemed to trigger a rapid escalation in infection rates here in the UK and elsewhere, the current viewpoint (from both a healthcare and broad economic perspective) seems to be that the US will ride this out much better than Europe.

As noted previously, the emerging macro narrative of late 2020 was "post vaccination re-opening" and we expect this to continue to be the case over the early part of 2021. Make no mistake, the next few weeks will still be challenging; the peak of the western hemisphere winter respiratory season is generally between December and February, making it reasonable to conclude that the current pressure on healthcare systems that has been exacerbated by COVID-19  is not yet over, even before any impact from these new variants is taken into account.

Vaccine rollouts are underway in many countries and, after a slowish start for the UK and the US, the pace has picked up to the extent that it may well be reasonable to think that large swathes of the most clinically vulnerable (the elderly and those with certain pre-existing conditions) will have received at least one shot by early Q2 and thus have a reasonable degree of protection. Nonetheless, the logistical challenges are significant; ramping up supply to meet demand will be almost impossible in the short-to-medium term and it looks like the EU will lag the US and UK in vaccinations over H1 2021

The key economic question of course is when the overall balance of infections and vaccinations allows governments to relax restrictions and, more importantly, not to feel that they may once again need to be re-imposed in short order. From an economic point of view, the world has split into three regional pillars:

Asia is largely open, can it remain so? China's recovery from the initial pandemic, the attendant domestic economic recovery and its export growth are undeniably impressive and many other Asian nations (Taiwan, Singapore, Thailand, Vietnam etc.) have seen little population-level impacts from the crisis. This affords some luxury with slower vaccination rollouts whilst allowing Government to keep the economy open.

Despite the serious morbidity impact on a per-capita basis, the US economy has coped well and looks set to avoid a double-dip recession, in part due to the cultural wariness of government-level restrictions (which looks to be the case under the Biden Administration as well) and massive fiscal stimulus delivered at the both the corporate and individual level. State-by-State actions will have an economic impact, especially on the coasts, but the consensus view is that economic momentum will continue to build steadily.

Europe is much more challenging. The culture is more interventionist and the major role of Government in front-line health provision tends toward national and supranational-level decision-making. A double-dip recession appears difficult to avoid and open borders within the EU make containment all but impossible, with the new variant driving infections higher. At the margin, Brexit will not help the economic picture and political tensions between Eastern and Western EU members have slowed stimulus efforts until recently. The co-ordinated vaccine procurement programme has also fallen short of expectations. Can Europe avoid tripping over itself again?

Assuming that one accepts the premise that the approved vaccines prevent transmission to the same degree that they prevent symptomatic COVID-19 (and, as we went to press, the evidence here was still preliminary), the return to normality will depend on reaching a penetration of vaccination within the population that is sufficient to reduce hospitalisations and deaths to a level that society is willing to live with. Given the propensity of the media to conflate infection levels with morbidity risk for the wider population, this "acceptable level" could end up being quite a low number.

The reality that the majority of hospitalisations and deaths are amongst the very elderly and those with complex or serious medical conditions seems long ago lost, even if this demographic reality has actually become more stark in recent months rather than broadened: we have yet to see any robust data to support the premise these new variants increase morbidity in younger age groups.

Here in the UK, the inoculation of the very old and the vulnerable, frontline workers in health and social care and then everyone over 50 amounts to some 25 million people. Since these groups account for the vast majority of hospitalisations and deaths due to COVID-19, completion of this programme could allow the majority of restrictions to be eased.

However, that would still leave some 23 million adults and 19 million children still susceptible to infection. Whilst the attendant morbidity is likely to be mild and self-limiting, testing, tracing and isolation requirements will probably need to remain in place for many months. Disruption will thus continue, as might the possibility of localised lockdowns if there are high caseloads in certain areas. Beyond the initial programmes, there is the question of the durability of protection and need for re-vaccination. One way or the other, we will be living with COVID-19 for quite some time to come.

Tying this all together, we think it can be summarised thus: if you are investing in equities today, you are exposed to this re-opening trade. Is this to a greater or a lesser extent? Is the risk to the widely accepted consensus on the upside or the downside? The picture changes constantly; the UK was behind schedule on vaccinations in late December, but is looking more on track since mid-January.

If one accepts the re-opening narrative at face value (that restrictions will begin to be banished from Q2 21), it should usher a broad-based economic recovery and potential tsunami of leisure-related spending as consumers exercise their pent up need to socialise and travel beyond the local supermarket; who doesn't want to visit Barnard Castle?

Within healthcare, the re-opening narrative would also suggest that consumer-centric areas like dental and elective surgical procedure exposures (medical equipment suppliers and hospital operators who make more money from planned minor procedures than managing overflowing ICUs) would do well, with more defensive areas such as Tools, Conglomerates, Services and Diversified Therapeutics underperforming these areas, as their 'safe haven' elements and tailwinds from testing services become less attractive and investors rotate away from them. If the re-opening narrative fades, then testing exposures, Tools and Services should once again come to the fore.

We have said little above with respect to vaccines. Our view on this subject is unchanged. In as much as we commend the rapidity of success in this area, we expect these products to become commoditised over time as other major vaccine suppliers such as J&J, Glaxo and Sanofi ultimately join the fray and the market is already assuming that annual booster vaccinations will be the reality. Efficacy of 95% vs 90% or even 80% is technological tour de force, but is it worth paying a premium for? We doubt it. For logistical reasons, a combined Influenza +SARS-CoV-2 seasonal booster is the holy grail and these are in early development.

Your Manager's base case view

Little has changed for us since 30 November 2020. We continue to adopt a 'plan for the worst, hope for the best' approach to capital allocation within healthcare. Despite the pervasive re-opening narrative versus our more cautious stance and significant holding of cash. Thus far in fiscal 2021, the Company has delivered a total return of +11.7%, some 910bp more than the comparator MSCI World Healthcare Index (data as of 15 February 2021).

As things stand today, we are more concerned than relaxed. As noted above, the logistical/execution risks around a return to normal are not insignificant. It serves us all well to remember that science is the embracing of uncertainty: there are no absolute truths, only hypotheses that serve as received wisdom in respect of the available data unless or until a better hypothesis comes along or new data upends things. The dispassionate questioning of everything is the most important tenet of scientific progress.

Applying this to the COVID-19 pandemic, we can be certain there are several things that we do not know with any confidence: how quickly vaccinations will be rolled out on a globally relevant basis, how long protection will last, how quickly the virus might mutate to escape current vaccines or become more or less serious in terms of symptomatic disease. Nor do we know how low case numbers, morbidity or mortality need to fall in any given region for consumers to feel safe enough to behave as they did before, or how long such a drop needs to last to induce people to re-engage. If science is the embracing of uncertainty, then active fund management is the embodiment of educated guesswork.

Why are we concerned? The mantra of "don't worry about H1 21, it will all come good in H2" is rampant and seductive, but markets have a habit of looking through bad news, right up until the point that they don't. These singular changes in mood are notoriously difficult to pin down with any confidence and usually arise when several small factors coalesce. The backdrop we observe is one where equity valuations are high in relative and absolute terms for many sub-sectors and consensus numbers imply some sort of a 'catch-up' in 2021 that is unprecedented in nature. Looking at some forecasts and comparing 2021 projections to 2019 actuals, it is almost as if this whole pandemic never happened. That does not feel right to us.

On the positive side, the sector's classical defensive characteristics remain intact. COVID-19 may continue to transiently suppress procedure volumes and patient visits to some extent, but overall demand levels do not vary in the same way as discretionary or cyclical sectors, so we still see solid medium and long-term absolute returns from our investments irrespective of the wider economic outlook. In the following pages, we summarise our initial thoughts on the outlook at a sub-sector level, in order to provide shareholders with some additional insights into our current thinking.

The artificer may argue that healthcare valuations on a relative basis have never looked more attractive, and we could certainly inflate the page count with multiple charts supporting this contention. Instead, we will offer an alternative viewpoint. Could it rather be that the rest of the market is very expensive relative to history, due to tech leadership and record low interest rates?

From an asset allocation perspective, the previous point is arguably moot. You could choose to allocate capital to healthcare because you think it is 'cheap' versus the rest of the market or because you think the rest of the market is too expensive or risky and you like the defensive growth attributes of the sector. Whichever camp you are in, we concur that allocating capital to healthcare despite the broader pro-cyclical narrative makes a lot of sense. However, that valuation question comes right back into focus when one starts to think about where within the broad church that is healthcare one should sit.

Sub-sector outlook

We classify healthcare investments into 15 different categories. Note: these are not the same as the GICS classification system used by MSCI and, sometimes, we re-classify stocks into different categories based on payor dynamics or similarity to peers. We exclude Animal Health from the review below, as the Company's focus is on human health. All weightings are as of 31 December 2020 and performance data relates to the calendar year (for reference, the MSCI World Healthcare Index delivered a value return of 8.7% in sterling terms during 2020):

· Conglomerates and Diversified Therapeutics (MSCI weighting: 11.8% for Conglomerates, 34.2% for Diversified Therapeutics, 2020 performance: +5.2% for Conglomerates, +1.8% for Diversified Therapeutics): We typically combine our comments on these two categories since investing in these sorts of companies is generally antithetical to our strategy. Nonetheless, they account for close to half of the MSCI World Healthcare Index and their performance is thus critical to sentiment for the sector overall. In addition, our largest single position at year end (the diversified therapeutics company Bristol-Myers Squibb) sits in this category.

2020 was a challenging year as the pandemic pressured routine physician visits, limiting new patient starts and curtailing refill rates on non-essential medicines (e.g. statins). In addition, it was a Presidential election year in the United States and few things find common cause along the political spectrum than bashing the pharma industry. The spectre of drug pricing reform lingers wraith-like in the halls of Congress, but it was ever thus. As the principle store of value in the sector, it is an obvious place to source funds for capital redeployment and we expect another year of lagging performance versus the overall index. There are better places to be invested, from both a return potential and a regulatory risk perspective.

The above having been said, we continue to see Bristol-Myers Squibb as a bright spot. Although the stock did not really work in 2020 (lagging the Index by around 1300bp on a total return basis), it is beguilingly inexpensive on both a relative and absolute basis and well positioned to exceed the markets modest expectations over the coming 2-3 years in terms of pipeline execution.

· Dental (MSCI weighting: 0.7%, 2020 performance: +68.4%): To paraphrase the "Chairman of the Board" himself, we have only a few regrets from 2020, but not foreseeing the rapidity of the recovery in the dental sector was one of them. We correctly foresaw the procedure decline in the early stages of the pandemic (hence our exit) but not the rapidity of the recovery.

We offer no excuses: one of our children was receiving Invisalign treatment at the height of the pandemic and the uninterrupted delivery of (very expensive) aligners, allied to video consults was a clue, as was the "Zoomification" of business life - those twisted tombstones have never been so obvious as when one is staring into Apple's virtual mirror for most hours of the working day.

Having loved the Align story for so long, why then are we now zero weighted in Dental? A recurring theme of this section will probably be the observation that almost any stock that has the word technology in its name or can be reasonably be argued to be a "tech stock" enjoyed a vertiginous ascent during 2020 driven by a material re-rating. We continue to love many things about Align, but not its current valuation (70x forward earnings!).

· Diagnostics (MSCI weighting: 2.2%, 2020 performance: +27.9%): A strong contender for the Marmite award in 2021. Many companies have enjoyed windfall returns from the emergence of COVID testing. Whilst this will continue for some time, the need should fade significantly on a multi-year view, begging the question of what the correct forward P/E should be for such earnings. As logical as this debate seems, there is a more pressing structural change going on that we have long anticipated and now expect to reap rewards from.

That trend is the shifting of diagnostic capabilities closer to the patient; in the physician's office or at the ward level in the hospital/clinic setting. The desire to ramp COVID testing capabilities has led to record placements of highly capable multiplex "boxes" during 2020. Even as COVID fades, these powerful tools have many other uses and the pull-though revenue opportunities are significant in our view.

Rather like the all-powerful smartphone, you find these devices are not always used as initially intended by their purchasers but this does not matter to the likes of Apple. As long as these boxes are extant, they will drive some degree of consumables pull through. We continue to see increased usage of diagnostics as one of the key 'mega-trends' in the rapidly changing healthcare paradigm.

· Distributors (MSCI weighting: 1.2%, 2020 performance: +8.8%): The US distributors have battled multiple headwinds in recent years; the perception that they make margins on drug rebates (which Trump had been trying to curtail), their culpability in failing to police opioid over-use and the Damoclean risk of Amazon disintermediating them. These risks have all receded to a large extent and two of the "big three" (McKesson and AmerisourceBergen) have enjoyed a material re-rating.

2021 should be a positive year, with volumes picking up as the pandemic recedes and renewed options to improve margins through further pivoting to more biologic and "specialty" drugs, which attract higher fees. However, this feels mostly priced in to us, but this sub-sector offers an interesting balance of optionality to normalisation and structural barriers to entry that creates defensive attributes (which is why we do not accept the "tech disintermediation" risk hypothesis). Overall though, there isn't enough here to pique our interest currently.

· Facilities (MSCI weighting: 1.1%, 2020 performance: +2.4%): Hospital operators are at the forefront of the pandemic and it has impacted their operations in an almost unprecedented manner. In the US, we have seen a gradual improvement in elective procedure capacity that has not been mirrored in Europe. These organisations should be commended for that.

This is arguably the sub-sector most operationally geared to the normalisation theme, being as hospitals generally have low operating margins and high levels of fixed costs and financial indebtedness. Any improvement in the acuity mix toward more ambulatory care (literally 'walk-ins') would be positive for margins. However, consensus assumptions already factor in capacity utilisation at close to 2019 levels and the group overall looks fully valued in a historical context. We could only be more constructive on these companies at significantly lower valuation levels.

· Focused Therapeutics (MSCI weighting: 9.0%, 2020 performance: 40.1%): This broad church covers all manner of specialist drug providers and currently accounts for the largest proportion of the Company's portfolio. Our focus is very much toward 'essential medicines', i.e. those which are critical to maintaining a patient's wellbeing and where the drive to procure repeat prescriptions is obvious. These facets are attractive well beyond the pandemic ceasing to be the dominant macro narrative.

Looking beyond the short-term narrative, we continue to see multitudinous opportunities to own R&D innovators whose products have the potential to improve or expand the therapeutic options for a wide range of serious diseases. Therapeutics continues to be one of the most obvious areas for dramatic improvements in the standard of care over the medium-term. Within this, we will maintain our selective approach but also expect active allocations toward other sub-sector opportunities to reduce our exposure to this area over the coming year.

· Generics (MSCI weighting: 0.6%, 2020 performance: -2.2%): this has been a tricky sub-sector to navigate for a number of years and, once again, we do not see that changing in 2021. A confluence of factors (negative pricing, litigation, over-capacity, pro-domestic policy in China) weigh on the growth outlook for multi-nationals. Consolidation is likely to continue, but the market structure is so fragmented that it will take many years before it can make a material difference to the business outlook. This still feels like somewhere to avoid to us.

· Healthcare IT (MSCI weighting: 1.9%, 2020 performance: +117.5%): Technology, in all its forms, was the place to be in 2020 and healthcare proved no exception. The opportunity for software to transform our staid industry cannot be overstated and we see this as a fertile ground for future holdings.

However, one must remain grounded from a business model and valuation perspective and this is likely to be the major challenge to further progress in 2021. Revenue growth is all well and good, but at some point it must translate into real returns for investors. We continue to like this sub-sector and are actively seeking opportunities within it.

· Healthcare Technology (MSCI weighting: 0.7%, 2020 performance: +57.3%): In many ways, these innovative Medical Device companies are similarly caught between the positives of an attractive visible growth runway and truly staggering valuations.

Rare is it that we have a list of companies that meet all of our broader investment criteria but would need to fall by more than half to create anything like a reasonable entry point on a PEG basis. In this sub-sector, such a situation is commonplace.

This is intensely frustrating, but we will not yield to struthious tendencies and ignore fundamentals to fit a compelling narrative. That is the road to ruin. Inasmuch as our concerns are valid, this broader tech leadership narrative may yet continue, with these companies benefitting from support for their lofty ratings.

· Managed Care (MSCI weighting: 9.0%, 2020 performance: +10.6%): The US health insurers are another apparently controversial sector for investors moving into 2021. The ever-present risk of negative reform continues to worry some; especially with a Democrat in the White House who has control of both legislative branches. In addition, the 'windfall' from COVID-related treatment delays is expected to reverse as things normalise, offering a potentially challenging setup.

We would offer an alternative perspective. The Democrats won the election but the nation is scarred and almost half of the country did not support their agenda. In addition, the balance in Congress is a fine one. Simply put, the appetite for  far-reaching leftist reform is limited. Expanding Medicare and Medicaid is popular. Shoring up the ACA is popular. The "public option" (which the markets are wary of) is not.

We therefore see a modest and overall positive legislative backdrop for the Managed Care stocks and a slower than consensus return to normality, which makes for a positive overall setup given the very attractive valuations. We think this could be a surprise bright spot in 2021.

· Medical Technology (MSCI weighting: 15.7%, 2020 performance: +14.7%): Med-Tech currently is our most challenging sector from an intellectual and quantitative perspective. We are wrestling with a backdrop of an uncertain outlook for elective procedure volumes, valuations that are high in both relative and absolute terms and relative to any historical context.

Consensus numbers are often higher than we would like and trading updates are mixed; with some companies much more positive than others, even within similar market segments such as orthopaedics or interventional cardiology. It is a Curate's egg.

We would like to be more constructive on this group and continue to evaluate a number of opportunities to broaden the portfolio and increase our exposure. However, we are trying to balance the three pillars of personal clarity on the demand outlook, comfort with consensus expectations and valuation. We will not act unless all three are sufficiently positive in our view. We prefer higher acuity consumables and general equipment over more specialist 'big ticket' items and minor procedure consumables. Predicting the overall performance for 2021 feels very challenging.

· Services (MSCI weighting: 2.5%, 2020 performance: +48.6%): Many an investor has appreciated the attributes of this sector throughout the pandemic, and we are no exception. The compelling backdrop of predictable, contract-backed revenues during such broad uncertainty was obvious and worked very well. That has led to a backdrop of full valuations in a relative historical perspective.

At their core, these attributes of dependable revenues and steady growth are attractive in any market scenario, as long as the price is right. We are more than happy to run our existing services exposures to some degree through 2021 but our watchlist stocks in this area again are trading at valuation levels that are too high for us to take any action. These high valuations and lack of consumer upswing exposure may mitigate outperformance in the coming year.

· Tools (MSCI weighting: 8.0%, 2020 performance: +45.7%): Much of the commentary for Services applies equally to Tools. Although revenues are less 'guaranteed' in the contractual sense, these companies enjoy high barriers to entry (both competitive and regulatory) and financially strong customers, being as they serve the research and development sector.

Many companies have benefitted from the bolus of COVID-19 testing over the past year and accelerating research efforts and grants in various areas (e.g. massive vaccine manufacturing scale-up). This tailwind will fade in the coming years, but other customer areas that have been weaker through the pandemic (e.g. academia) will recover, offering some mitigation. There is scope for continued strong performance, but probably not on the same scale as in 2020.

Paul Major and Brett Darke

Bellevue Asset Management (UK) Ltd

26 February 2021

INVESTMENT POLICY, RESULTS AND KEY PERFORMANCE INDICATORS

Investment policy

The Company invests in a concentrated portfolio of listed or quoted equities in the global healthcare industry. The Company may also invest in ADRs, or convertible instruments issued by such companies and may invest in, or underwrite, future equity issues by such companies. The Company may utilise contracts for differences for investment purposes in certain jurisdictions where taxation or other issues in those jurisdictions may render direct investment in listed or quoted equities less effective. Any use of derivatives for investment purposes is made on the basis of the same principles of risk spreading and diversification that apply to the Company's direct investments, as described below, and such use is not expected in the normal course to form a material part of the Gross Assets.

The investable universe for the Company is the global healthcare industry including companies within industries such as pharmaceuticals, biotechnology, medical devices and equipment, healthcare insurers and facility operators, information technology (where the product or service supports, supplies or services the delivery of healthcare), drug retail, consumer healthcare and distribution.

No single holding will represent more than 10 per cent. of Gross Assets at the time of investment and, when fully invested, the portfolio will have no more than 35 holdings. The Company will typically seek to maintain a high degree of liquidity in its portfolio holdings (such that 90 per cent of the portfolio may be liquidated in a reasonable number of trading days) and as a consequence of the concentrated approach, it is unlikely that a position will be taken in a company unless a minimum holding of 1.0 per cent. of Gross Assets at the time of investment can be achieved within an acceptable level of liquidity.

There are no restrictions on the constituents of the Company's portfolio by index benchmark, geography, market capitalisation or healthcare industry sub-sector. Whilst the MSCI World Healthcare Index (in sterling) will be used to measure the performance of the Company, the Company does not seek to replicate the index in constructing its portfolio. The portfolio may, therefore, diverge substantially from the constituents of this index (and, indeed, it is expected to do so). However, the portfolio is expected to be well diversified in terms of industry sub-sector exposures. Given the nature of the wider healthcare industry and the geographic location of the investable universe, it is expected that the portfolio will have a majority of its exposure to stocks with their primary listing in the United States and with a significant exposure to the US dollar in terms of their revenues and profits. Although the base currency of the Company is sterling which creates a potential currency exposure, this will not be hedged using any sort of foreign currency transactions, forward transactions or derivative instruments.

The Company will not invest in any companies which are, at the time of investment, unquoted or untraded companies and has no intention of investing in other investment funds.

Borrowing policy

The Company may deploy borrowing to enhance long-term capital growth. Gearing will be deployed flexibly up to 20 per cent. of the Net Asset Value, at the time of borrowing, although the Portfolio Manager expects that gearing will, over the longer term, average between 5 and 10 per cent. of Net Asset Value. In the event that the 20 per cent. limit is breached as a result of market movements, and the Board considers that borrowing should be reduced, the Portfolio Manager shall be permitted to realise investments in an orderly manner so as not to prejudice shareholders.

No material change will be made to the investment policy without the approval of shareholders by ordinary resolution.

Dividend policy

The Company will set a target dividend each financial year equal to 3.5% of Net Asset Value as at the last day of the Company's preceding financial year. The target dividend will be announced at the start of each financial year. This is a target only and not a profit forecast and there can be no assurance that it will be met.

Dividends will be financed through a combination of available net income in each financial year and other reserves. It is currently expected that most of the total annual dividend will be financed from other reserves. In order to increase the distributable reserves available to facilitate the payment of dividends, the Company cancelled the amount of £146,412,136 standing to the credit of its share premium account immediately following first admission of its Ordinary Shares to trading on the London Stock Exchange in order to create a special distributable reserve. The Company may, at the discretion of the Board, pay all or part of any future dividends out of this special distributable reserve, taking into account the Company's investment objective.

The Company intends to pay dividends on a semi-annual basis, by way of two equal dividends, with dividends declared in July and February/March and paid in August and March/April in each year.

In accordance with regulation 19 of the Investment Trust (Approved Company) (Tax) Regulations 2011, the Company will not (except to the extent permitted by those regulations) retain more than 15 per cent. of its income (as calculated for UK tax purposes) in respect of an accounting period.

Results and dividend

The Company's revenue return after tax for the year amounted to a profit of £615,000 (2019: loss of £2,000). The Company made a capital return after tax of £157,348,000 (2019: £42,793,000). Therefore, the total return after tax for the Company was £157,963,000 (2019: £42,791,000).

The Company targeted a total dividend for the year ended 30 November 2020 of 5.0p per Ordinary Share.

· Interim dividend of 2.5p paid on 28 August 2020

· Final dividend of 2.5p to be paid on 30 April 2021 (to shareholders on the register at the close of business on 26 March 2021)

Target total dividend for the year ending 30 November 2021

As announced by the Company on 2 December 2020, for the financial year ending 30 November 2021, the target total dividend will be 6.03p per Ordinary Share, this being 3.5% of the audited net asset value per Ordinary Share of 172.51p (including current financial year revenue items) as at 30 November 2020. The Board intends to declare an interim dividend of 3.015p per Ordinary Share, being half of the target total dividend for the financial year ending 30 November 2021, in July 2021 and intends to pay this dividend in August 2021. The Board intends to propose a final dividend of 3.015p per Ordinary Share for the financial year ending 30 November 2021, in February/March 2022 and intends to pay this dividend in March/April 2022. At the Company's AGM in March 2019, a resolution was passed allowing shareholders the right to elect to receive their entitlement to the interim dividend in new Ordinary Shares instead of cash in respect of the whole or part of any dividend. The resolution was passed with 99.99% of the proxy votes cast (including discretionary votes) being in favour of the resolution. Shareholders can elect to receive their entitlement to the interim dividend in new Ordinary Shares instead of cash in respect of the whole or part of any dividend.

	Interim dividend	Final dividend	Total dividend
Dividends paid/payable
Year ended 30 Nov 2019	2.425p	2.425p	4.85p
Year ended 30 Nov 2020	2.50p	2.50p	5.00p
Target dividend*
Year ending 30 Nov 2021	3.015p	3.015p	6.03p

* This is a target and should not be taken to imply a profit forecast.

Key performance indicators ("KPIs")

The Board measures the Company's success in attaining its investment objective by reference to the following KPIs:

(i) To beat the total return of the MSCI World Healthcare Index (in Sterling) on a rolling 3 year period

The NAV total return from 1 December 2017 to 30 November 2020 was 18.1%. The total return of the MSCI World Healthcare Index (in sterling terms) over the same period was 12.6%.

The Chairman's statement incorporates a review of the highlights during the financial year ended 30 November 2020. The Investment Manager's report gives details on investments made during the year and how performance has been achieved.

(ii) To seek to generate a double-digit total shareholder return per annum over a rolling 3 year period

The NAV total returns from 1 December 2017 to 30 November 2020 was 18.1% annualised.

(iii) To meet its target total dividend in each financial year

The Company targeted a total dividend of 5.0p per Ordinary Share for the year ended 30 November 2020. The Company paid an interim dividend of 2.5p per Ordinary Share in August 2020 and proposes a final dividend in respect of the year to 30 November 2020 of 2.5p per Ordinary Share.

(iv) Discount/premium to NAV

The discount/premium relative to the NAV per Ordinary Share represented by the share price is monitored by the Board. The share price closed at a 0.3% discount to the NAV as at 30 November 2020 (2019: 1.3% premium). Due largely to the market dislocation in March 2020, the average premium during the fiscal year was 0.6%, compared to 1.6% in fiscal 2019.

(v) Maintenance of reasonable level of ongoing charges

The Board monitors the Company's operating costs. Based on the Company's average net assets during the year ended 30 November 2020, the Company's ongoing charges figure calculated in accordance with the Association of Investment Companies ("AIC") methodology was 1.10% (2019: 1.19%). The Board expects the ongoing charges figure to reduce slightly as the Company grows in size.

RISK AND RISK MANAGEMENT

Principal and emerging risks and uncertainties

The Board is responsible for the management of risks faced by the Company and delegates this role to the Audit and Risk Committee. The Audit and Risk Committee carries out, at least annually, a robust assessment of principal and emerging risks and uncertainties and monitors the risks on an ongoing basis. The Committee has a dynamic risk assessment programme in place to help identify key risks in the business and oversee the effectiveness of internal controls and processes, providing a visual reflection of the Company's identified principal and emerging risks.

During the year, the Audit and Risk Committee were particularly concerned with the risks posed by the COVID-19 pandemic which has had a significant impact in all risk categories. In addition to implementing more regular reviews of investment performance with the Investment Manager, the Audit and Risk Committee requested and received assurances from its key service providers that they would be able to maintain high standards of service whilst working remotely. Further information on how the Audit and Risk Committee has considered COVID-19 when assessing its effect on the Company's ability to operate as a going concern and the Company's longer-term viability in the Annual Report.

The principal and emerging risks, together with a summary of the processes and internal controls used to manage and mitigate risks where possible are outlined below.

(i) Market risks

 Economic conditions

Changes in general economic and market conditions including, for example, impact of pandemics on global economies and national responses to ameliorate such challenges, interest rates, rates of inflation, industry conditions, competition, political events and trends, tax laws, national and international conflicts and other factors could substantially and adversely affect the Company's prospects and thereby the performance of its Ordinary Shares.

Healthcare companies

The Company invests in global healthcare equities. There are many factors that could adversely affect the performance of investee companies. The healthcare sector may be affected by government regulations and government healthcare programs, increases or decreases in the cost of medical products and services and product liability claims, among other factors. Many healthcare companies are heavily dependent on patent protection, and while this is a manageable risk, the expiration of a company's patent may adversely affect that company's profitability. Healthcare companies are subject to competitive forces that may result in price discounting and may be thinly capitalised and susceptible to product obsolescence. The market prices for securities of companies in the healthcare sector may be highly volatile.

Sectoral diversification

The Company has no limits on the amount it may invest in the healthcare sector and is not subject to any sub-sector investment restrictions. Although the portfolio is expected to be well diversified in terms of industry sub-sector exposures, the Company may have significant exposure to portfolio companies from certain sub-sectors from time-to-time. Greater concentration of investments in any one sub-sector may result in greater volatility in the value of the Company's investments and consequently its NAV and may materially and adversely affect the performance of the Company and returns to shareholders.

The impact on the portfolio from Brexit and other geopolitical changes including the trade war between the US and China are monitored and discussed regularly at Board meetings. While it is difficult to quantify the impact of such changes, it is not anticipated that they will fundamentally affect the business of the Company or make the Company's investment case any less desirable.

Management of risks

The Investment Manager has a well-defined investment objective and process which is regularly and rigorously reviewed by the independent Board of Directors and performance is reviewed at quarterly Board meetings. The Investment Manager is experienced and employs its expertise in selecting the stocks in which the Company invests.

The Company is invested in a diversified portfolio of investments.

The Company's investment policy states that no single holding will represent more than 10 per cent. of gross assets at the time of investment and, when fully invested, the portfolio will have no more than 35 holdings.

(ii) Financial risks

The Company's investment activities expose it to a variety of financial risks which include liquidity, currency, leverage, interest rate and credit risks.

There is a risk that the Company's holdings may not be able to be realised at reasonable prices in a reasonable timeframe. Although the Company's performance is measured in sterling, a high proportion of the Company's assets may be either denominated in other currencies or be in investments with currency exposure. The Company pays interest on its borrowings and as such, the Company is exposed to interest rate risk due to fluctuations in the prevailing market rates.

Further details on financial risks can be found in the notes to the financial statements.

Management of risks

The Company will typically seek to maintain a high degree of liquidity in its portfolio holdings. The Company's Investment Manager monitors the currency risk of the Company's portfolio on a regular basis. Prevailing interest rates are taken into account when deciding on borrowings. Further details on the management of financial risks can be found in note 19 to the financial statements.

(iii) Corporate governance and internal control risks (including cyber security)

The Board has contractually delegated to external agencies the management of the investment portfolio, the custodial services (which include the safeguarding of the assets), the registration services and the accounting and company secretarial requirements.

The main risk areas arising from the above contracts relate to allocation of the Company's assets by the Investment Manager, and the professional execution of their duties of performance of administrative, registration and custodial services. These could lead to various consequences including the loss of the Company's assets, inadequate returns to shareholders and loss of investment trust status. Cyber security risks could lead to breaches of confidentiality, loss of data records and inability to make investment decision.

Management of risks

Each of the contracts were entered into after full and proper consideration of the quality and cost of services offered, including the financial control systems in operation in so far as they relate to the affairs of the Company. All of the above services are subject to ongoing oversight of the Board and the performance of the principal service providers is reviewed on a regular basis. The Company's key service providers report periodically to the Board on their procedures to mitigate cyber security risks.

(iv) Regulatory risks

Breaches of Section 1158 of the Corporation Tax Act could result in loss of investment trust status. Loss of investment trust status would lead to the Company being subject to tax on any gains on the disposal of its investments. Breaches of the FCA's rules applicable to listed entities could result in financial penalties or suspension of trading of the Company's shares on the London Stock Exchange. Breaches of the Companies Act 2006, The Alternative Investment Fund Managers' Directive, accounting standards, the Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules could result in financial penalties or legal proceedings against the Company or its Directors.

Management of risks

The Company has contracted out relevant services to appropriately qualified professionals. The Secretary, AIFM and Depositary report on regulatory matters to the Board on a quarterly basis. The assessment of regulatory risks forms part of the Board's risk assessment programme.

(v) Key person risk

The Company depends on the diligence, skill and judgment of the Investment Manager's investment professionals and the information and ideas they generate during the normal course of their activities. The Company's future success depends on the continued service of key personnel. The departure of any of these individuals without adequate replacement may have a material adverse effect on the Company's business prospects and results of operations.

Management of risks

The Board meets regularly with other members of the wider team employed by the Investment Manager. The strength and depth of investment management team provides comfort that there is not over-reliance on one person with alternative investment managers available to act if needed.

(vi) Business interruption

Failure in services provided by key service providers, meaning information is not processed correctly or in a timely manner, resulting in regulatory investigation or financial loss, failure of trade settlement, or potential loss of investment trust status.

Management of risks

Each service provider has business continuity policies and procedures in place to ensure that they are able to meet the Company's needs and all breaches of any nature are reported to the Board.

Due to the COVID-19 pandemic and the restrictions on gatherings and travel introduced by the UK Government, the Audit and Risk Committee requested assurances from the Company's key service providers that business continuity plans had been enacted where necessary, with the majority of service providers enabling remote working arrangements. This provided a satisfactory level of assurance that there had not been, and there was no anticipation of any disruption to service quality.

VIABILITY STATEMENT

The Directors have assessed the viability of the Company for the five years to 30 November 2025 (the "Period"), which the Directors consider to be an appropriate time horizon, taking into account the long-term nature of the Company's investment objective and recommended by the Financial Reporting Council.

In reaching this conclusion, the Directors have considered each of the principal and emerging risks, uncertainties and the liquidity and solvency of the Company over the next five years. The Directors have considered the Company's income and expenditure projections and the fact that the Company's investments comprise readily realisable securities, which could, if necessary, be sold to meet the Company's funding requirements. Portfolio changes and market developments are discussed at quarterly Board meetings. The internal control framework of the Company is subject to a formal review on at least an annual basis.

The Directors do not expect there to be a material increase in the annual ongoing charges ratio of the Company over the Period. The Company's income from investments and cash realisable from the sale of its investments provide substantial cover to the Company's operating expenses under all stress test scenarios reviewed by the Directors.

The Company has a redemption facility through which shareholders are entitled to request the redemption of all or part of their holding of Ordinary Shares on an annual basis. The redemption point is the last business day of November. The Directors' assessment assumes that the number of shares redeemed will not affect the Company's ability to continue in operational existence. At the last redemption point of 30 November 2020, redemption requests in respect of 565,413 Ordinary Shares were received. All of the 565,413 Ordinary Shares, representing 0.12% of the issued share capital at that date, were matched with buyers and there was no change to the Company's share capital. The Company's redemption facility is subject to approval by the board.

The detailed review of the issues arising from the COVID-19 pandemic as discussed in the Chairman's Statement, the Investment Manager's Report and in the principal and emerging risks section.

Based on their 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 in the Period.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable laws and regulations.

Company law requires the Directors to prepare accounts for each financial year. Under that law the Directors have elected to prepare the financial statements under International Financial Reporting Standards in conformity with the Companies Act 2006. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company as at the end of the year and of the net return for the year. In preparing these accounts, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates which are reasonable and prudent;

· state whether IFRS in conformity with the Companies Act 2006 have been followed, subject to any material departures disclosed and explained in the accounts; and

· prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the accounts 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 accounts are published on the Company's website at www.bbhealthcaretrust.com, which is maintained by the Company's Investment Manager. The work carried out by the auditor does not involve consideration of the maintenance and integrity of these websites and, accordingly, the auditor accepts no responsibility for any changes that have occurred to the accounts since being initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' confirmation statement

The Directors each confirm to the best of their knowledge that:

(a) the accounts, prepared in accordance with IFRS in conformity with the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

(b) this Annual Report includes a fair review of the development and performance of the business and position of the Company, together with a description of the principal risks and uncertainties that it faces.

Having taken advice from the Audit and Risk Committee, the Directors consider that the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

For and on behalf of the Board

Randeep Grewal

Director

26 February 2021

 FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME

			Year ended 30 November 2020						Year ended 30 November 2019
			Revenue		Capital		Total		Revenue	Capital		Total
	Note		£'000		£'000		£'000		£'000	£'000		£'000
Gains on investments	4		-		163,630		163,630		-	50,660		50,660
Losses on currency movements			-		(62)		(62)		-	(2,114)		(2,114)
Net investment gains			-		163,568		163,568		-	48,546		48,546
Income	5		3,664		-		3,664		2,669	-		2,669
Total income			3,664		163,568		167,232		2,669	48,546		51,215
Investment management fees	6		(1,342)		(5,368)		(6,710)		(1,009)	(4,036)		(5,045)
Other expenses	7		(962)		-		(962)		(921)	-		(921)
Profit before finance costs and taxation			1,360		158,200		159,560		739	44,510		45,249
Finance costs	8		(216)		(852)		(1,068)		(429)	(1,717)		(2,146)
Operating profit before taxation			1,144		157,348		158,492		310	42,793		43,103
Taxation	9		(529)		-		(529)		(312)	-		(312)
Profit for the year			615		157,348		157,963		(2)	42,793		42,791
Return per Ordinary Share	10		0.14p		34.60p		34.74p		0.00p	10.79p		10.79p
There is no other comprehensive income and therefore the 'Profit for the year' is the total comprehensive income for the year.
The total column of the above statement is the statement of comprehensive income of the Company. The supplementary revenue and capital columns, including the earnings per Ordinary Shares, are prepared under guidance from the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations.

STATEMENT OF FINANCIAL POSITION

		30 November 2020	30 November 2019
	Note	£'000	£'000
Non-current assets
Investments held at fair value through profit or loss	4	753,375	626,383
Current assets
Cash and cash equivalents		92,789	59,654
Sales of investments for future settlement		2,040	-
Dividends receivable		158	-
Other receivables	11	107	551
		95,094	60,205
Total assets		848,469	686,588
Current liabilities
Purchases of investments for future settlement		4,554	6,028
Bank loans payable	12	-	58,393
Other payables	13	813	1,131
Total liabilities		5,367	65,552
Net assets		843,102	621,036
Equity
Share capital	14	4,900	4,352
Share premium account		437,213	351,331
Special distributable reserve		93,676	116,003
Capital reserve		306,893	149,545
Revenue reserve		420	(195)
Total equity		843,102	621,036
Net asset value per Ordinary Share	16	172.51p	143.11p

Approved by the Board of Directors on 26 February 2021 and signed on their behalf by:
Randeep Grewal
Director
Registered in England and Wales with registered number 10415235.

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 NOVEMBER 2020

			Share	Special
		Share	premium	distributable	Capital	Revenue
		Capital	account	reserve	reserve	reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Opening balance as at 01 December 2019		4,352	351,331	116,003	149,545	(195)	621,036
Profit for the year		-	-	-	157,348	615	157,963
Issue of Ordinary Shares	14	548	86,538	-	-	-	87,086
Dividend paid	15	-	-	(22,327)	-	-	(22,327)
Ordinary Share issue costs		-	(656)	-	-	-	(656)
Closing balance as at 30 November 2020		4,900	437,213	93,676	306,893	420	843,102
FOR THE YEAR ENDED 30 NOVEMBER 2019
			Share	Special
		Share	premium	distributable	Capital	Revenue
		Capital	account	reserve	reserve	reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Opening balance as at 01 December 2018		3,204	199,625	133,293	106,752	(193)	442,681
Profit/(loss) for the year		-	-	-	42,793	(2)	42,791
Issue of Ordinary Shares	14	1,148	153,745	-	-	-	154,893
Dividend paid	15	-	-	(17,290)	-	-	(17,290)
Ordinary Share issue costs		-	(2,039)	-	-	-	(2,039)
Closing balance as at 30 November 2019		4,352	351,331	116,003	149,545	(195)	621,036
The Company's distributable reserves consist of the special distributable reserve, capital reserve attributable to realised profit and revenue reserve.
The Company may use its distributable reserves to fund dividends, redemptions of Ordinary Shares and share buy backs.

STATEMENT OF CASH FLOWS
		Year ended 30 November 2020			Year ended 30 November 2019
	Note	£'000			£'000
Cash flow from operating activities
Income*		3,468			2,806
Management expenses		(6,986)			(6,287)
Foreign exchange gains/(losses)		1,231			(2,577)
Taxation		(529)			(312)
Net cash flow used in operating activities		(2,816)			(6,370)
Cash flows from investing activities
Purchase of investments		(571,632)			(408,929)
Sale of investments		604,753			326,864
Net cash flow from/(used in) investing activities		33,121			(82,065)
Cash flows from financing activities
Bank loans (repaid)/drawn		(59,686)			10,718
Finance costs paid		(1,587)			(1,995)
Dividend paid		(22,327)			(17,290)
Proceeds from issue of Ordinary Shares	14	87,086			154,893
Ordinary Shares issue costs		(656)			(2,039)
Net cash flow from financing activities		2,830			144,287
Increase in cash and cash equivalents		33,135			55,852
Cash and cash equivalents at start of year		59,654			3,802
Cash and cash equivalents at end of year		92,789			59,654
* Cash inflow from dividends for the financial year was £2,843,000 (2019: £2,571,000). Bank deposits interest income received during the year was £134,000 (2019: £235,000)
Year ended 30 November 2020 Year ended 30 November 2019 £'000 £'000 Opening  balance 58,393 48,138 Repayment of bank loans (59,686) - Proceeds from bank loans - 10,718 Foreign exchange movements 1,293 (463) Closing balance - 58,393

NOTES TO THE FINANCIAL STATEMENTS

1. Reporting entity

BB Healthcare Trust plc is a closed-ended investment company, registered in England and Wales on 7 October 2016. The Company's registered office is 1st Floor, Senator House, 85 Queen Victoria Street, London, EC4V 4AB. Business operations commenced on 2 December 2016 when the Company's Ordinary Shares were admitted to trading on the London Stock Exchange. The financial statements of the Company are presented for the year from 1 December 2019 to 30 November 2020.

The Company invests in a concentrated portfolio of listed or quoted equities in the global healthcare industry. The Company may also invest in American Depositary Receipts (ADRs), or convertible instruments issued by such companies and may invest in, or underwrite, future equity issues by such companies. The Company may utilise contracts for differences for investment purposes in certain jurisdictions where taxation or other issues in those jurisdictions may render direct investment in listed or quoted equities less effective.

2. Basis of preparation

Statement of compliance

These financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirement of Companies Act 2006.

When presentational guidance set out in the Statement of Recommended Practice ("SORP") for Investment Companies issued by the Association of Investment Companies ("the AIC") in October 2019 is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

Going concern

The Directors have adopted the going concern basis in preparing the financial statements.

Details of the Directors assessment of the going concern status of the Company, which considered the adequacy of the Company's operational resources to continue in operational existence for at least twelve months from the date of approval of these financial statements and the impacts of the COVID-19 pandemic.

Use of estimates and judgements

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the year in which the estimates are revised and in any future periods affected. Except Company's investment in contingent variable right, there have been no estimates, judgements or assumptions, which have had a significant impact on the financial statements for the year.

Basis of measurement

The financial statements have been prepared on the historical cost basis except for financial instruments at fair value through profit or loss, which are measured at fair value.

Functional and presentation currency

The financial statements are presented in sterling, which is the Company's functional currency. The Company's investments are denominated in multiple currencies. However, the Company's shares are issued in sterling and the majority of its investors are UK based. In addition, all expenses are paid in GBP sterling as are dividends. All financial information presented in sterling have been rounded to the nearest thousand pounds.

3. Accounting policies

(a) Investments

Upon initial recognition investments are classified by the Company "at fair value through profit or loss". They are accounted for on the date they are traded and are included initially at fair value which is taken to be their cost. Subsequently quoted investments are valued at fair value, which is the bid market price, or if bid price is unavailable, last traded price on the relevant exchange. Unquoted investments are valued at fair value by the Board which is established with regard to the International Private Equity and Venture Capital Valuation Guidelines by using, where appropriate, latest dealing prices, valuations from reliable sources and other relevant factors. The valuation of Company's holding in a contingent variable right is detailed in note 4.

Changes in the fair value of investments held at fair value through profit or loss and gains or losses on disposal are included in the capital column of the Statement of Comprehensive Income within "gains on investments".

Investments are derecognised on the trade date of their disposal, which is the point where the Company transfers substantially all the risks and rewards of the ownership of the financial asset.

(b) Foreign currency

Transactions denominated in foreign currencies are translated into sterling at actual exchange rates as at the date of the transaction. Monetary assets and liabilities, and non-monetary assets held at fair value denominated in foreign currencies are translated into sterling using London closing foreign exchange rates at the year end. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss to capital or revenue in the Statement of Comprehensive Income as appropriate. Foreign exchange movements on investments are included in the Statement of Comprehensive Income within "Gains on investments".

(c) Income from investments

Dividend income from shares is accounted for on the basis of ex-dividend dates. Overseas income is grossed up at the appropriate rate of tax.

Special dividends are assessed on their individual merits and may be credited to the Statement of Comprehensive Income as a capital item if considered to be closely linked to reconstructions of the investee company or other capital transactions. All other investment income is credited to the Statement of Comprehensive Income as a revenue item. Interest receivable is accrued on a time apportionment basis.

(d) Reserves

Capital reserves

Profits achieved in cash by selling investments and changes in fair value arising upon the revaluation of investments that remain in the portfolio are all charged to the capital column of the Statement of Comprehensive Income and allocated to the capital reserve.

Special distributable reserve

Following admission of the Company's Ordinary Shares to trading on the London Stock Exchange, the Directors applied to the Court to cancel the share premium account at the time to create a new special distributable reserve which may be treated as distributable reserves and out of which tender offers and share buybacks may be funded. This reserve may also be used to fund dividend payments. The Company's distributable reserve consists of the special distributable reserve, the capital reserve and the revenue reserve. Share premium The share premium account arose from the net proceeds of sale of new shares. The excess of the issue price of a share over its nominal value Revenue reserves The revenue reserve reflects all income and expenditure recognised in the revenue column of the income statement and is distributable by way of dividends.

(e) Expenses

All expenses are accounted for on an accruals basis. Expenses directly related to the acquisition or disposal of an investment (transaction costs) are taken to the income statement as a capital item. Expenses are recognised through the Statement of Comprehensive Income as revenue items except as follows:

Investment management fees

In accordance with the Company's stated policy and the Directors' expectation of the split of future returns, 80% of investment management fees are charged as a capital item in the Statement of Comprehensive Income.

Finance costs

Finance costs include interest payable and direct loan costs. In accordance with Directors' expectation of the split of future returns, 80% of finance costs are charged as capital items in the Statement of Comprehensive Income. Loan arrangement costs are amortised over the term of the loan.

(f) Cash and cash equivalents

Cash comprises cash at hand and on demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash, are subject to insignificant risks of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

(g) Taxation

Irrecoverable taxation on dividends is recognised on an accruals basis in the Statement of Comprehensive Income.

Deferred taxation

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the statement of financial position liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Investment trusts which have approval as such under Section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains.

(h) Financial liabilities

Bank loans and overdrafts are classified as financial liabilities at amortised cost. They are initially recorded at the proceeds received, net of direct issue costs, and subsequently recorded at amortised cost using the effective interest method.

(i) Adoption of new IFRS standards

A number of new standards, amendments to standards and interpretations are effective for the annual periods beginning after 1 January 2020 and have not been applied in preparing these financial statements as detailed below. None of these are expected to have a significant effect on the measurement of the amounts recognised in the financial statements of the Company. IFRS 17 - Insurance contracts In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. IFRS 17 is effective for reporting periods beginning on or after 1 January 2023, with comparative figures required.  This standard is not applicable to the Company. IFRS 9 Financial Instruments - Fees in the '10 per cent' test for derecognition of financial liabilities As part of its 2018-2020 Annual Improvements to IFRS standards process, the IASB issued an amendment to IFRS 9. The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. The amendment is effective for annual reporting periods beginning on or after 1 January 2022 with earlier adoption permitted. This amendment is unlikely to have any impact on the financial statements of the Company. Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement provide a number of reliefs, which apply to all hedging relationships that are directly affected by interest rate benchmark reform. These amendments have no impact on the financial statements of the Company.

(j) Equity shares

The Company has treated the Ordinary Shares and Management Shares as equity in accordance with IAS 32 Financial Instruments: Presentation, which classifies financial instruments into financial assets, financial liabilities and equity instruments. Both share classes have an entitlement to the residual interest in the assets of the Company after deducting liabilities, suffice that the Management Shares have no participation in any surplus beyond their paid up capital. The Management Shares are not redeemable but the Ordinary Shares are subject to an annual redemption option at the discretion of the Directors. Ordinary Shares participate in dividends and any other profits of the Company.

4. Investment held at fair value through profit or loss
					30 November 2020			30 November 2019
As at					£'000			£'000
Investments held at fair value through profit or loss
- Quoted in UK					-			26,176
- Quoted overseas					753,375			600,207
Closing valuation					753,375			626,383
(b) Movements in valuation
					£'000			£'000
Opening valuation					626,383			487,630
Opening unrealised gains on investments					(58,177)			(59,142)
Opening book cost					568,206			428,488
Additions, at cost					569,881			414,700
Disposals, at cost					(444,282)			(274,982)
Closing book cost					693,805			568,206
Revaluation of investments					59,570			58,177
Closing valuation					753,375			626,383
Transaction costs on investment purchases for the year ended 30 November 2020 amounted to £276,000 (30 November 2019: £257,000) and on investment sales for the year ended 30 November 2020 amounted to £227,000 (30 November 2019: £139,000).
(c) Gains on investments
				£'000			£'000
Realised gains on disposal of investments				162,237			51,625
Movement in unrealised gains/(losses) on investments held				1,393			(965)
Total gains on investments				163,630			50,660
Under IFRS 13 'Fair Value Measurement', an entity is required to classify investments using a fair value hierarchy that reflects the significance of the inputs used in making the measurement decision.
The following shows the analysis of financial assets recognised at fair value based on:
Level 1 The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.
Level 2 Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.
Level 3 Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.
The classification of the Company's investments held at fair value is detailed in the table below:
	30 November 2020
	Level 1		Level 2	Level 3			Total
	£'000		£'000	£'000			£'000
Investments at fair value through profit and loss - Quoted	752,780		-	595			753,375
The level 3 investment comprises a contingent variable right ("CVR") received as a partial consideration when the Company's investment in Alder Biopharmaceuticals was acquired by Lundbeck in 2019, which offered to buy the holdings in Alder Biopharmaceuticals for a cash bid of $18 and $2 cash contingent value rights. The Investment Manager valued the CVR at a price of $0.92 per share as at 30 November 2020 (2019: $0.92 per share). The total value of the CVR as at 30 November 2020 was £595,000 (30 November 2019: £614,000).
	30 November 2019
	Level 1		Level 2	Level 3			Total
	£'000		£'000	£'000			£'000
Investments at fair value through profit and loss - Quoted	625,769		-	614			626,383
The movement on the Level 3 unquoted investments during the year is shown below: 30 November 2020 £'000 30 November 2019 £'000 Opening balance 614 - Additions during the year - 614 Foreign exchange movements (19) - Closing balance 595 614
There were no transfers between levels during the year ended 30 November 2020 (30 November 2019: nil).
Fair values of financial assets and financial liabilities
All financial assets and liabilities are recognised in the financial statements at fair value, with the exception of short-term assets and liabilities, which are held at nominal value that approximates to fair value, and loans that are initially recognised at the fair value of the consideration received, less directly attributable costs, and subsequently recognised at amortised cost. The carrying value of the loans approximates to the fair value of the loans.
5. Income
		2020				2019
		£'000				£'000
Income from investments
Overseas dividends*		3,530				2,375
UK dividends		-				59
Bank interest on deposits		134				235
Total income		3,664				2,669

*No special dividend included within dividend income.

6. Investment management fees
	2020			2019
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment Management fee	1,342	5,368	6,710	1,009	4,036	5,045
The Investment Manager is entitled to receive a management fee payable monthly in arrears and calculated at the rate of one-twelfth of 0.95% per calendar month of market capitalisation. Market capitalisation means the average of the mid-market prices for an Ordinary Share, as derived from the daily official list of the London Stock Exchange on each business day in the relevant calendar month multiplied by the number of Ordinary Shares, in issue on the last business day of the relevant calendar month excluding any Ordinary Shares held in treasury.
7. Other expenses
			2020		2019
			£'000		£'000
Administration & secretarial fees			254		223
AIFM fees			39		102
Audit fees			40		33
Broker fees			30		30
Consultancy fees			40		29
Custody services			163		176
Directors' fees			148		162
Printing			20		24
Public relations			36		32
Registrar fees			65		56
Other expenses			127		164
VAT recoverable*			-		(110)
Total			962		921

*This is in relation to the partial VAT recoverable on the Company's expenses since inception to 30 November 2018.

All expenses are exclusive of VAT where applicable and irrecoverable VAT included in 'Other expenses'.

8. Finance costs
	2020			2019
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Loan interest	189	754	943	400	1,599	1,999
Other finance costs	27	98	125	29	118	147
Total	216	852	1,068	429	1,717	2,146

9. Taxation
(a) Analysis of charge:
	2020			2019
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Withholding tax expense	529	-	529	312	-	312
Total tax charge for the year	529	-	529	312	-	312
(b) Factors affecting the tax charge for the year:
The effective UK corporation tax rate for the year is 19.00% (2019: 19.00%). The tax charge differs from the charge resulting from applying the standard rate of UK corporation tax for an investment trust company. The differences are explained below:
					2020	2019
					Total	Total
					£'000	£'000
Operating profit before taxation					158,492	43,103
UK Corporation tax at 19.00% (2019: 19.00%)					30,113	8,190
Effects of:
Gains on investments not taxable					(31,078)	(9,224)
UK dividends not taxable					-	(11)
Overseas dividends not taxable					(671)	(451)
Withholding tax expense					529	312
Unutilised excess expenses					1,636	1,496
Total tax charge					529	312
The Company is not liable to tax on capital gains due to its status as an investment trust. The Company has an unrecognised deferred tax asset of £4,651,000 (2019: £2,699,000) based on the prospective UK corporation tax rate of 19%. This asset has accumulated because deductible expenses exceeded taxable income for the year ended 30 November 2020. No asset has been recognised in the accounts because, given the composition of the Company's portfolio, it is not likely that this asset will be utilised in the foreseeable future.
10. Return per Ordinary Share
Return per Ordinary Share is based on the weighted average number of Ordinary Shares in issue during the year ended 30 November 2020 of 454,706,111 (30 November 2019: 396,695,325).
	As at 30 November 2020			As at 30 November 2019
	Revenue	Capital	Total	Revenue	Capital	Total
Profit for the year (£'000)	615	157,348	157,963	(2)	42,793	42,791
Return per Ordinary Share	0.14p	34.60p	34.74p	0.00p	10.79p	10.79p

11. Other receivables

As at 30 November 2020

As at 30 November 2019

'000

'000

Prepayments

34

179

VAT receivables

35

372

Reclaimable tax on dividend

38

-

Total

107

551

12. Bank loans

The Company agreed a multi-currency revolving credit facility (RCF) with Scotiabank (Ireland) Designated Activity Company on 23 February 2017. Under the terms of the facility, the Company may draw down up to an aggregate of £50 million (2019: £50 million). A replacement facility was agreed with Scotiabank in January 2019 under which the Company may draw down loans up to an aggregate value of USD $100 million. The facility also has an uncommitted accordion option which, subject to the agreement of Scotiabank, provides the Company with the flexibility to increase the facility by a further USD $50 million. Subsequent to the year end, the Company announced that it has renewed and amended its mutli-currency revolving credit facility. The lender has been novated from Scotiabank (Ireland) Designated Activity Company to The Bank of Nova Scotia, London Branch. The Company's borrowing policy is unchanged. Under the terms of the amended RCF, the Company may draw down loans up to an aggregate value of USD 150 million. The new facility will expire in January 2022.

As at 30 November 2020, the aggregate of loans draw down was nil (2019: £58,393,000, comprising £6,700,000 and USD $66,850,000 equivalent of £51,693,000). The table below shows the breakdown of the loans.

As at 30 November 2020

Interest rate

Currency of

Local currency

per annum

loans

amount

£'000

(%)

Maturity date

n/a

Nil

Nil

n/a

n/a

Total loans in GBP

Nil

As at 30 November 2019

Interest rate

Currency of

Local currency

per annum

loans

amount

£'000

(%)

Maturity date

GBP loan

£500,000

500

1.89888

24 Feb. 2020

GBP loan

£1,700,000

1,700

1.89888

24 Feb. 2020

GBP loan

£4,500,000

4,500

1.89888

24 Feb. 2020

USD loan

$4,700,000

3,634

3.32688

5Feb. 2020

USD loan

$48,150,000

37,233

3.12363

24 Feb. 2020

USD loan

$14,000,000

10,826

3.30488

30 Jan. 2020

Total loans in GBP

58,393

A commitment fee is calculated at 0.35 per cent per annum, if the unutilised amount equals or exceeds 50 per cent of the total commitment; or 0.45 per cent per annum if the unutilised amount is less than 50 per cent of the total commitment.

In the opinion of the Directors, the fair value of the bank loans is not materially different to their amortised costs. Unamortised arrangement fees as at 30 November 2020 is nil (30 November 2019: £31,000).

13. Other payables

As at 30 November 2020

As at 30 November 2019

'000

'000

Loan interest payable

-

519

Accrued expenses

813

612

813

1,131

14. Share capital

As at 30 November 2020

As at 30 November 2019

No. of shares

£'000

No. of shares

£'000

Allotted, issued and fully paid:

Redeemable Ordinary Shares of 1p each ('Ordinary Shares')

488,719,689

4,887

433,957,062

4,339

Management Shares of £1 each

50,001

13

50,001

13

Total

488,769,690

4,900

434,007,063

4,352

The Company has a redemption facility through which shareholders are entitled to request the redemption of all or part of their holding of Ordinary Shares on an annual basis. This redemption is entirely at the discretion of the Directors.

Share Movement

During the year to 30 November 2020, 54,762,627 Ordinary Shares (30 November 2019:  114,849,268) were issued with gross aggregate proceeds of £87,086,000 (30 November 2019:  £154,893,000).

Since 30 November 2020, a further 18,625,366 Ordinary Shares have been issued with aggregate proceeds of £ 34.3 million.

During the year Ordinary Shares issues includes, the Company's scrip dividend issue of 952,263 Ordinary Shares. These Ordinary Shares were allotted and issued with aggregate proceeds of £1,312,000.

15. Dividend
	Year ended 30 November 2020								Year ended 30 November 2019
	Pence per Ordinary Share		Special reserve		Revenue reserve	Total			Pence per Ordinary Share		Special reserve		Revenue reserve				Total
			£'000		£'000	£'000					£'000		£'000				£'000
Final dividend - 2018	-		-		-	-			2.000p		7,264		-				7,264
Interim dividend - 2019	-		-		-	-			2.425p		10,026		-				10,026
Final dividend - 2019	2.425p		10,662		-	10,662			-		-		-				-
Interim dividend - 2020	2.500p		11,665		-	11,665			-		-		-				-
Total	4.925p		22,327		-	22,327			4.425p		17,290		-				17,290
The dividend relating to the year ended 30 November 2020, which is the basis on which the requirements of Section 1159 of the Corporation Tax Act 2010 are considered is detailed below:
	Year ended 30 November 2020								Year ended 30 November 2019
	Pence per Ordinary Share		Special reserve		Revenue reserve	Total			Pence per Ordinary Share		Special reserve		Revenue reserve				Total
			£'000		£'000	£'000					£'000		£'000				£'000
Interim dividend - paid	2.500p		11,665		-	11,665			2.425p		10,026		-				10,026
Final dividend - payable/paid	2.500p		12,684		-	12,684			2.425p		10,574		-				10,574
Total	5.000p		24,349		-	24,349			4.850p		20,600		-				20,600
The Directors recommend the payment of a final dividend for the year of 2.50p per Ordinary Share. Subject to approval at the Company's Annual General Meeting, the dividend will have an ex-dividend date of 25 March 2021 and will be paid on 30 April 2021 to shareholders on the register at 26 March 2021. The dividend will be funded from the Company's distributable reserves.
16. Net assets per Ordinary Share
Net assets per Ordinary Share as at 30 November 2020 is based on £843,089,500 (2019: £621,023,500) of net assets of the Company attributable to the 488,719,689 (2019: 433,957,062) Ordinary Shares in issue as at 30 November 2020. At 30 November 2020 £12,500 (2019: £12,500) of net assets was attributable to the Management Shares.
17. Related party transactions
Fees payable to the Investment Manager are shown in the Statement of Comprehensive Income. As at 30 November 2020, the fee outstanding to the Investment Manager was £670,000 (2019: £450,000).
Directors' fees paid during the year are disclosed within the Directors Remuneration Report in the Annual Report. Fees payable as at 30 November 2020 were £29,340 (2019: £26,950). The Directors' shareholdings are disclosed in the Director's Remuneration Implementation Report in the Annual Report.
18. Post balance sheet events
On 1 January 2021, the Bristol Myers Squibb CVR Agreement was terminated automatically and the Bristol Myers Squibb CVRs are no longer eligible for payment. Subsequently, the Company sold Bristol Myers Squibb CVR at a realised value of $0.5.
19. Financial instruments and capital disclosures
(i) Market risks
The Company is subject to a number of market risks in relation to economic conditions and healthcare companies. Further details on these risks and the management of these risks are included in the Directors' report.
The Company's financial assets and liabilities at 30 November 2020 comprised:
		2020						2019
				Non-							Non-
Investments		Interest bearing		interest bearing		Total		Interest bearing			interest bearing			Total
		£'000		£'000		£'000		£'000			£'000			£'000
Sterling		-		-		-		-			16,623			16,623
Swiss franc		-		-		-		-			11,418			11,418
Danish krone		-		15,782		15,782		-			-			-
US dollar		-		737,593		737,593		-			598,342			598,342
Total investment		-		753,375		753,375		-			626,383			626,383
Floating rate
Cash at bank		92,789		-		92,789		59,654			-			59,654
Short term debtors		-		2,305		2,305		-			551			551
Bank loans payable-US dollar		-		-		-		(51,693)			-			(51,693)
Bank loans payable-sterling		-		-		-		(6,700)						(6,700)
Short term creditors		-		(5,367)		(5,367)		-			(7,159)			(7,159)
Total		92,789		(3,062)		89,727		1,261			(6,608)			(5,347)
Market price risk sensitivity
The effect on the portfolio of a 10.0% increase or decrease in market prices would have resulted in an increase or decrease of £75,338,000 (2019: £62,638,000) in the investments held at fair value through profit or loss at the period end, which is equivalent to 8.9% (2019: 10.1%) in the net assets attributable to equity holders. This analysis assumes that all other variables remain constant.
(ii) Liquidity risks
There is a risk that the Company's holdings may not be able to be realised at reasonable prices in a reasonable timeframe.
Financial liabilities by maturity at the year end are shown below:
								30 November 2020						30 November 2019
								£'000						£'000
Within one month								5,367						7,159
Between one and three months								-						58,393
Total								5,367						65,552
Management of liquidity risks
The Company will typically seek to maintain a high degree of liquidity in its portfolio holdings (such that a position could typically be exited within 1 to 5 trading days, with minimal price impact) and as a consequence of the concentrated approach, it is unlikely that a position will be taken in a company unless a minimum holding of 1.0 per cent of gross assets at the time of investment can be achieved within an acceptable level of liquidity.
The Company's Investment Manager monitors the liquidity of the Company's portfolio on a regular basis. See note 12 for the maturity profiles of the loans. Other payables are typically settled within a month.
(iii) Currency risks
Although the Company's performance is measured in sterling, a high proportion of the Company's assets may be either denominated in other currencies or be in investments with currency exposure.
Currency sensitivity
The below table shows the strengthening/(weakening) of sterling against the local currencies over the financial year for the Company's financial assets and liabilities held at 30 November 2020.
								30 November 2020						30 November 2019
								% change						% change
Danish kroner								(5.2)						4.2
Euro								(4.8)						4.1
Swiss franc								(6.4)						1.5
US dollar								3.1						1.3
Foreign currency risk profile
		30 November 2020						30 November 2019
Investments		Investment exposure		Net monetary exposure		Total currency exposure		Investment exposure			Net monetary exposure			Total currency exposure
		£'000		£'000		£'000		£'000			£'000			£'000
Danish kroner		15,782		59		15,841		11,418			54			11,472
Euro		-		4		4		-			3			3
Swiss franc		-		1		1		-			304			304
US dollar		737,593		262		737,855		598,342			54,002			652,344
Total investment		753,375		326		753,701		609,760			54,363			664,123
Based on the financial assets and liabilities at 30 November 2020 and all other things being equal, if sterling had weakened against the local currencies by 10%, the impact on the Company's net assets at 30 November 2020 would have been as follows:
								30 November 2020						30 November 2019
								£'000						£'000
Danish kroner								1,584						1,147
Swiss franc								-						30
US dollar								73,786						65,234
Management of currency risks
The Company's Investment Manager monitors the currency risk of the Company's portfolio on a regular basis. Foreign currency exposure is regularly reported to the Board by the Investment Manager.
Currency risk will not be hedged using any sort of foreign currency transactions, forward transactions or derivative instruments.
(iv) Leverage risks
The Company may use borrowings to seek to enhance investment returns. While the use of borrowings should enhance the total return on the Ordinary Shares where the return on the Company's underlying assets is rising and exceeds the cost of borrowing, it will have the opposite effect where the return on the Company's underlying assets is rising at a lower rate than the cost of borrowing or falling, further reducing the total return on the Ordinary Shares. As a result, the use of borrowings by the Company may increase the volatility of the Net Asset Value per Ordinary Share.
Any reduction in the value of the Company's investments may lead to a correspondingly greater percentage reduction in its Net Asset Value (which is likely to adversely affect the price of an Ordinary Share). Any reduction in the number of Ordinary Shares in issue (for example, as a result of buy backs or redemptions) will, in the absence of a corresponding reduction in borrowings, result in an increase in the Company's level of gearing.
To the extent that a fall in the value of the Company's investments causes gearing to rise to a level that is not consistent with the Company's gearing policy or borrowing limits, the Company may have to sell investments in order to reduce borrowings, which may give rise to a significant loss of value compared to the book value of the investments, as well as a reduction in income from investments.
The Company will pay interest on its borrowings. As such, the Company is exposed to interest rate risk due to fluctuations in the prevailing market rates.
As at the year end, the Company's gearing ratio was 0.0% (2019:0.9%), based on the drawn down loans as a percentage of gross asset value.
As at the year end, the Company did not hold any derivative instruments.
Management of leverage risks
Gearing will be deployed flexibly up to 20 per cent of the Net Asset Value, at the time of borrowing, although the Investment Manager expects that gearing will, over the longer term, average between 5 and 10 per cent of the Net Asset Value. In the event the 20 per cent limit is breached as a result of market movements, and the Board considers that borrowing should be reduced, the Investment Manager shall be permitted to realise investments in an orderly manner so as not to prejudice Shareholders.
Further details of the Company's bank loans is disclosed in note 12.
(v) Interest rate risks
Interest is accrued on cash balances at a rate linked to the UK base rate. The Company pays interest on its borrowings. As such, the Company is exposed to interest rate risk due to fluctuations in the prevailing market rates.
Management of interest rate risks
The benchmark rate which determines the interest payments received on cash balances is the Bank of England base rate. The interest earned from cash balances are not significant as such no sensitivity is required.
Prevailing interest rates are taken into account when deciding on borrowings. The Company had bank loans denominated in GBP and USD in place during the year. The loan interest is based on a variable rate. Based on the loans outstanding at the year end a change of 0.25% in interest rates would increase/(decrease) annual profit or loss by the amounts shown below. The analysis assumes that all other variables remain constant:

	Loans at 30 November 2020	Profit or loss 0.25% decrease	Profit or loss 0.25% increase	Loans at 30 November 2019	Profit or loss 0.25% decrease	Profit or loss 0.25% increase
	£'000	£'000	£'000	£'000	£'000	£'000
USD loan	-	-	-	51,693	129	(129)
GBP loan	-	-	-	6,700	17	(17)
Total	-	-	-	58,393	146	(146)
(vi) Credit risks
Cash and other assets that are required to be held in custody will be held by the depositary or its sub-custodians. Where the Company utilises derivative instruments, it is likely to take a credit risk with regard to the parties with whom it trades and may also bear the risk of settlement default.
Management of credit risks
The Company has appointed CACEIS Bank as its depositary. The credit rating of CACEIS Bank was reviewed at the time of appointment and will be reviewed on a regular basis by the Investment Manager and/or the Board.
The Investment Manager monitors the Company's exposure to its counterparties on a regular basis and trades in equities are performed on a delivery versus payment basis.
The Company's assets are segregated from those of the Depositary or any of its sub-custodians.
At 30 November 2020, the Depository held £753,375,000 (2019: £626,383,000) in respect of quoted investments and £92,789,000 (2019: £59,654,000) in respect of cash on behalf of the Company.
(vii) Capital management policies and procedures
The Company considers its capital to consist of its share capital of Ordinary Shares of 1p each, Management Shares of £1 each, and reserves totalling £843,102,000 (2019: £621,036,000) and bank loans payable £nil (2019: £58,393,000).
The Company has a redemption facility through which Shareholders will be entitled to request the redemption of all or part of their holding of Ordinary Shares on an annual basis. The first redemption point for the Ordinary Shares was 30 November 2020 and will be annual thereafter. The Redemption facility is entirely at the discretion of the Directors.
The Investment Manager and the Company's broker monitor the demand for the Company's shares and the Directors review the position at Board meetings.
The Company's policy on borrowings is detailed in the Director's Report in the Annual Report.
Use of distributable reserves is disclosed in the footnote on the Statement of changes in equity.
The Company regularly monitors, and has complied, with the externally imposed capital requirements arising from the borrowing facility.

ALTERNATIVE PERFORMANCE MEASURES

Gearing

A way to magnify income and capital returns, but which can also magnify losses. A bank loan is a common method of gearing.

As at 30 November 2020			£'000
Total assets less cash/cash equivalents	a		755,680
Net assets	b		843,102
Gearing (net)*	(a÷b)-1		0.0%

* Net assets are higher than total assets less cash/cash equivalents as such net gearing, which is not be disclosed as a negative figure is nil. 

As at 30 November 2019				£'000
Total assets less cash/cash equivalents	a			626,934
Net assets	b			621,036
Gearing(net)	(a÷b)-1			0.9%

Leverage

An alternative word for "Gearing". (See gearing for calculations).

Under AIFMD, leverage is any method by which the exposure of an AIF is increased through borrowing of cash or securities or leverage embedded in derivative positions.

Under AIFMD, leverage is broadly similar to gearing, but is expressed as a ratio between the assets (excluding borrowings) and the net assets (after taking account of borrowing). Under the gross method, exposure represents the sum of the Company's positions after deduction of cash balances, without taking account of any hedging or netting arrangements. Under the commitment method, exposure is calculated without the deduction of cash balances and after certain hedging and netting positions are offset against each other.

Ongoing charges

A measure, expressed as a percentage of average net assets, of the regular, recurring annual costs of running an investment company.

Year ended 30 November 2020 (Audited)			£'000
Average NAV	a		697,788,448
Annualised expenses	b		7,672,000
Ongoing charges	(b÷a)		1.10%

Year ended 30 November 2019 (Audited)			£'000
Average NAV	a		520,823,165
Annualised expenses*	b		6,174,000
Ongoing charges	(b÷a)		1.19%

*Annualised expenses excluding non-recurring VAT recovered amount of £208,000, which is the revenue element of the total VAT recoverable of £372,000.

(Discount)/premium

The amount, expressed as a percentage, by which the share price is less/more than the Net Asset Value per Ordinary Share.

As at 30 November 2020(Audited)
NAV per Ordinary Share (pence)	a		172.51
Share price (pence)	b		172.00
Discount	(b÷a)-1		(0.3%)

As at 30 November 2019(Audited)
NAV per Ordinary Share (pence)	a		143.11
Share price (pence)	b		145.00
Premium	(b÷a)-1		1.3%

Total return

A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment of dividends paid out by the Company into the Ordinary Shares of the Company on the ex-dividend date.

Year ended 30 November 2020 (Audited)			Share price	NAV
Opening at 1 December 2019 (p)	a		145.00	143.11
Closing at 30 November 2020 (p)	b		172.00	172.51
Price movement (b÷a)-1	c		18.6%	20.5%
Dividend reinvestment	d		3.9%	4.1%
Total return	(c+d)		22.5%	24.6%

Year ended 30 November 2019 (Audited)			Share price	NAV
Opening at 1 December 2018 (p)	a		140.00	138.70
Closing at 30 November 2019 (p)	b		145.00	143.11
Price movement (b÷a)-1	c		3.6%	3.2%
Dividend reinvestment	d		3.3%	3.4%
Total return	(c+d)		6.9%	6.6%

n/a = not applicable.

20. Financial information

This announcement does not constitute the Company's statutory accounts.  The financial information is derived from the statutory accounts, which will be delivered to the registrar of companies and will be put forward for approval at the Company's Annual General Meeting. The auditors have reported on the accounts for the  year ended 30 November 2019 and the year ended 30 November 2020, their reports were unqualified and did not include a statement under Section 498(2) or (3) of the Companies Act 2006.

The Annual Report for the year ended 30 November 2020 was approved on 26 February 2021. 

The report will be available in electronic format on the Company's website:

http://www.bbhealthcaretrust.com.

The Annual Report will be submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism

This announcement contains regulated information under the Disclosure Guidance and Transparency Rules of the FCA.

21. Annual General Meeting

The Annual General Meeting will be held on 23 April 2021 at 12 noon.

Secretary and registered office:

PraxisIFM Fund Services (UK) Limited

1st Floor, Senator House

85 Queen Victoria Street

London

EC4V 4AB

For further information contact:

PraxisIFM Fund Services (UK) Limited

Tel: [phone]

 

END

 

 

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