Final Results

RNS Number : 7437S
Polar Cap Gbl Healthcare Growth&IT
05 December 2012
 



 

 

THIS ANNOUNCEMENT CONTAINS REGULATED INFORMATION

POLAR CAPITAL GLOBAL HEALTHCARE GROWTH AND INCOME TRUST PLC

ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED

30 SEPTEMBER 2011

5 DECEMBER 2012

Financial Highlights


As at  30 September 2012

 

As at  30 September 2011

% Change

Net asset value per ordinary share

Undiluted

123.33p

102.58p

 + 20.23%


Diluted

119.74p

102.18p

+ 17.18%

Share price





Ordinary shares


123.25p

106.25p

+ 16.00%

Subscription shares (note 1)


17.88p

12.25p

+ 45.96%

Shares in issue






Ordinary*

97,899,999

97,899,999



Subscription

17,800,000

17,800,000


*On 4 October 2012 a further 2,105,001 ordinary shares were issued bringing the total issued ordinary shares to 100,050,000 as at 4 December 2012

Benchmark Index





MSCI ACWI/Healthcare Index (total return in Sterling with dividends reinvested)


+ 21.45%

Net asset value (undiluted) per ordinary share (total return)


+ 23.55%

Ongoing Charges for the year ended 30 September 2012. (Note 2)

(Ongoing charges for the period 15 June 2010 to 30 September 2011: 1.28%)

1.14%

Dividends

The Company has paid the following dividends relating to the financial year ended 30 September 2012:

 

Pay date

Amount per ordinary share

Record date

Ex-date

Declared date

29 February 2012

0.46p

10 February 2012

08 February 2012

26 January 2012

31 May 2012

0.46p

18 May 2012

16 May 2012

09 May 2012

31 August 2012

1.80p

17 August 2012

15 August 2012

01 August 2012

30 November 2012

0.50p

09 November 2012

07 November 2012

31 October 2012

Note 1 - Subscription shares were issued free to investors on the 15 June 2010 on the basis of one subscription share for every five ordinary shares.

Note 2 - Ongoing charges represents the total expenses of the fund, excluding finance costs, expressed as a percentage of  the average daily net asset value, in accordance with AIC guidance issued in May 2012.

Chairman's Statement

I am delighted to present to you our second annual report which covers the year ended 30 September 2012

 

Performance

We have continued to make good progress, achieving a NAV total return of 23.55% during the period compared to 21.45% for our benchmark (the MSCI Healthcare Index). Our share price closed the year at 123.25p, almost identical to our undiluted NAV but a premium of 2.9% to our diluted NAV.

 

These returns have been achieved against the background of a strong sterling which has risen against all the major currencies, thereby depressing returns in sterling terms. This is an important factor for us given that we have 87.4% of our assets outside the United Kingdom. To be specific, sterling has risen by 3.7% against the US dollar, 4.6% against the Japanese Yen, 7.3% against the Swiss Franc and 8.1% against the Euro. Of these it is the US dollar which is much the most significant for us with the US accounting for over half of our total net assets.

 

Since inception in June 2010 we have seen a NAV total return of 33.32% compared to 29.56% for the benchmark and 9.72% for the MSCI World Index. This shows the extent to which the healthcare sector has outperformed the wider market and means that we have so far met our initial aim of achieving compounded total returns of around 10 -12% per annum with dividends reinvested.

 

Revenue

Total revenue for the year amounted to £4.581m. This was lower than the previous period's £5.259m but reflects the fact that the accounting period was a year compared to over 15 months last time. As before, the bulk came from investment income. There was again a useful contribution from option premium income, although at £406,000 it was considerably smaller than the amount earned in the previous period.

 

Costs

We have continued to keep tight control of our costs which together with the growth in our assets has resulted in the Company's Ongoing Charges falling to 1.14% from 1.28% in the prior period.

 

Share Capital

At our last AGM in January 2012 we obtained shareholder approval to allow us to expand our share capital by up to 10% through the issue of new shares. The past financial year saw no further issuance but, on 4 October 2012 we issued 2,150,001 shares at a small premium to their undiluted Net Asset Value which takes the total number of ordinary shares in issue to 100,050,000. We also have 17,800,000 subscription shares each of which carries the right to subscribe for one ordinary share at a price of 100p on 31 January 2014 and which, if exercised, will increase the size of the company   further.

 

Dividends

In respect of the financial year just ended we have paid four dividends which include the dividend paid on 30 November 2012 of 0.50p per ordinary share. These total 3.22p per ordinary share compared to 3.06p per ordinary share in the corresponding period, an increase of just over 5%.

Following the pattern set last year the dividends paid in February, May and November are likely to be smaller than the dividend paid in August.  The Board, when considering the dividend policy, is mindful of the current market consensus for dividend growth in the pharmaceutical sector and will look to this when considering the annual distributions to shareholders. 

 

The Company's policy remains to increase the dividend on an annual basis progressively, but there is no guarantee that this will be achieved.

 

Outlook

Lead indicators are signalling some improvement in economic activity over the next six months or so but, with many deep-rooted problems, the global economic outlook remains challenging. Excessive debt and deteriorating demographics are foremost amongst these problems. Debt is focused mainly on individuals and governments but is not a huge issue in the corporate sector where gearing levels remain comparatively modest. An ageing population is a problem for many developed nations but will also hit some emerging countries like China before too long.

 

62.1% of our portfolio consists of pharmaceutical stocks most of which enjoy healthy levels of free cash flow which enables significant levels of dividend payment. The healthcare sector is a major long term beneficiary of an ageing society and also of the trend towards increased healthcare spending in the emerging markets.  With most pharmaceutical stocks now almost through the much publicised patent cliff, it seems likely that these strong underlying themes will gain greater recognition and may lead to the healthcare sector trading at a premium to the stock market averages. That at least is the thesis we have held since the Trust's inception and in which we still firmly believe.

 

Having enjoyed such excellent returns in 2012 it would be unrealistic to expect a similar outcome in 2013. However, further gains from the steady rerating of the pharmaceutical sector combined with dividend payments should again produce a respectable total return for shareholders.

 

Annual General Meeting

The Company's second Annual General Meeting (AGM) which will be held on Wednesday 23 January 2013 at The Methodist Central Hall, Storey's Gate, London SW1H 9NH provides shareholders with an opportunity to meet the Board and to hear a presentation from the Investment Manager. Last year's AGM was rather sparsely attended and so we have decided to move this year's AGM back by an hour and a half to 12 noon with a buffet lunch being served afterwards. I look forward to meeting as many shareholders as possible at the AGM.

 

Articles of Association

The Company is proposing to adopt new Articles of Association at the forthcoming AGM. The only substantive change proposed to the current Articles of Association is to reflect recent changes in the provisions of the Companies Act 2006 applicable to investment companies, under which the restriction on distributions of capital profits has been removed. Article 122 of the Company's Articles of Association will be amended to remove that restriction from the Company's articles. While the Board does not have any immediate plans to utilise these powers, it considers that it is in shareholders' interests to have this flexibility in the future. A copy of the proposed new Articles of Association will be available for inspection at the Company's registered office from the date of this letter until the conclusion of the AGM and at the place of the AGM for at least 15 minutes before and during the AGM.

 

Thanks

I would like to thank our managers Daniel Mahony and Gareth Powell and our Company Secretary, Neil Taylor and their respective teams for their professionalism and help throughout the year.

 

James Robinson

Chairman

4 December 2012

 

Investment Manager's Report

 

Performance review

For the fiscal year to 30 September 2012, the Company delivered a total return of 23.55%, which was ahead of the benchmark (MSCI Healthcare Index) that recorded a total return of 21.45% over the same period.  While it has been a bumpy ride, global markets have fared reasonably well over the 12 months to 30 September 2012 despite the continued macroeconomic uncertainty. 

 

In the last quarter of calendar 2011, we kept our cautious stance on markets and maintained a defensive portfolio positioning with a relatively high cash position.  The healthcare sector significantly outperformed the broader stock markets during this period - especially during December - largely due to the strong performance of the pharmaceutical sector.  Given the large weighting in large-cap pharmaceuticals, the Company benefited from this renewed interest in drug stocks.

 

From the beginning of January 2012, we became more optimistic on the market outlook as there were signs that the US economy was beginning to improve and lead economic indicators were starting to turn positive.  In addition, the moves by the European Central Bank (ECB), while not a "solution" to Europe's problems, seemed to have alleviated the near-term concerns in the European financial sector.    Healthcare became an underperformer as global markets moved back into "risk on" mode, although certain sub-sectors of healthcare, particularly the biotechnology sector, performed extremely well.  While our biotechnology holdings benefited from this rally, the portfolio is underweight the biotechnology sector compared to the benchmark as the portfolio focuses on income-generating stocks.

 

As investor enthusiasm began to wane in late Spring, the market transitioned to another period of volatility driven by rising concerns of a global economic slowdown.  Large cap pharmaceutical stocks became a safe haven again for many investors and the Company produced good returns, both relative and absolute, through to the end of September.

 

Review of the portfolio

The Company's investment portfolio has for operational reasons continued to be divided into an income portfolio and a growth portfolio with approximately 80% of assets in the income portfolio.  The income portfolio is heavily weighted towards the major global pharmaceutical companies as large pharmaceutical companies continue to offer some of the best yields in healthcare.  We expect healthy dividend growth over the next 12 months from such companies.  The growth portfolio is composed of holdings in a range of biotechnology, medical device, pharmaceutical and healthcare service stocks. 

 

Towards the end of the first quarter of the fiscal year we adjusted the positioning of the portfolio to take advantage of the increase in risk appetite in the broader stock markets.  We began our fiscal year with a cash position of 6.6% and by the end of January 2012 the portfolio was fully invested.  In addition, over the course of the year we increased our weightings in the small/mid-cap names in the growth portfolio - the percentage of the entire portfolio invested in large capitalisation companies (greater than $5 billion) decreased from 84% to 75.5% over the fiscal year.  However, while we increased the beta of the portfolio our weighting in large-cap pharmaceuticals remained above 60% - we would expect to maintain at least a 60% weighting in large pharmaceutical companies over the life of the Company.

 

Income portfolio

 

Over the course of the year, we have made only minor changes to the sub-sector composition of the income portfolio.  The pharmaceutical sector remains the largest weighting and we continue to hold positions in medical technology and healthcare service companies with good dividend yields.  We also have investments in a number of US healthcare real estate investment trusts (REITs).

 

While we have maintained the significant weighting in pharmaceutical stocks, we have made changes in the size of individual holdings in the portfolio over the course of the fiscal year.  Following some very strong performance last year, we reduced the weightings in both GlaxoSmithKline and Bristol-Myers Squibb.  We also reduced our position in AstraZeneca following the resignation of the CEO in April 2012, we expect the new CEO to provide details on his business strategy at the beginning of next year.  We have increased our weightings in Merck & Co and Novartis - both companies are facing major patent expirations over the next 12 months, which we believe are priced in to the shares, and so we see the potential for relative outperformance.  We have also increased our holding in Abbott Labs - the company is in the process of spinning out its pharmaceutical business, into a company called Abbvie, leaving it as a pure-play medical technology and diagnostics business.  Finally, we also bought a new position in Takeda Pharmaceutical, the large Japanese pharmaceutical company.

 

On an absolute basis, the major contributors to performance have been from the largest positions in the portfolio - namely Merck & Co and Pfizer.  However, the entire pharmaceutical sector has performed well over the last 12 months and nearly all of our large pharmaceutical positions have made a positive contribution to performance.  The only pharmaceutical name to detract from performance was Bayer.  While we did have a position earlier in the fiscal year, we sold the shares in the early summer as we wanted to reduce exposure to cyclical parts of the economy and were worried about the company's chemicals business.   The stock has since rallied strongly as investors have become more confident on the company's drug pipeline.

 

Of the smaller names in the income portfolio, Consort Medical was again a good performer and we also benefited from strong returns from SABRA Health Care REIT.  On an absolute basis, only one of our smaller income names - Coltene Holding, a Swiss dental supply company - was a detractor to performance.  In addition, our holdings in Canadian diagnostics laboratory, CML HealthCare, and US healthcare REIT, Senior Housing Property Trust, were relative underperformers as they delivered a negative capital return over the year although the dividend income was as expected.

 

Growth portfolio

 

The growth portfolio is invested in a range of biotechnology, medical device, pharmaceutical and healthcare service companies.  Over the last year, the turnover in the growth portfolio has been much higher than in the income portfolio.  The number of positions in the growth portfolio has increased from 35 at the beginning of the year to 43 by the end of September 2012 with a shift in focus towards more small and mid-cap stocks.  At the end of the fiscal year, the sub-sector weightings in biotechnology, medical technology and healthcare services were similar, at approximately 30% each, with the remainder invested in pharmaceuticals.

 

Over the course of the year we have continued to build out a diversified portfolio of small companies (below £100 million market cap) within the growth portfolio.  We now have 13 positions where we have invested with a long-term (i.e. five year) investment horizon.  At the end of the fiscal year, these stocks comprised less than 4.5% of the entire investment portfolio. Given the fixed life of the Company, and the projected investment time-frame, it is unlikely that we will add new names to this part of the growth portfolio going forward.

 

Some of the major contributors to performance in the growth portfolio have been in the biotechnology sector - in particular, our positions in two US large-cap stocks, Celgene and Alexion Pharmaceuticals, have both performed well.  One of our UK small-cap biotechnology positions, Synairgen, also made a good contribution to performance following the release of positive Phase II data for a new treatment for asthma patients.  Our largest detractors were also in the biotechnology sector, which demonstrates the high risk/reward in this sub-sector of healthcare.  US biotechnology companies Targacept and Endocyte both reported disappointing clinical data during the year and we exited both positions with a significant loss.

 

The pharmaceutical industry is nearly through the peak of patent expirations

 

Our key investment thesis when the Company was launched in 2010 was that the pharmaceutical sector was undervalued and that there was potential for a sector re-rating as the industry passed through its period of drug patent expirations - the so-called "patent cliff".  Over the last two years, the concern that there would be a precipitous decline in earnings as drugs lost patent protection seems to have dissipated.  Most pharmaceutical companies have embarked on significant restructuring programmes ahead of their respective patent cliffs and so the earnings impact has not been as great as was feared five years ago.

 

Given the recent macroeconomic turmoil, pharmaceutical stocks have performed well over the last 12 months as they have provided investors with a reasonably safe haven and solid dividend yield.  There seems to have been recognition of the cost-cutting efforts across the sector and that large drug companies continue to generate solid cash flows with strong balance sheets. Moreover, with 2012 as the peak year for patent expirations, the patent cliff will soon be behind most of the companies in the sector.  The growing investor confidence is reflected in the sector's price to earnings (P/E) ratio that has expanded from nine times in 2010 to eleven times in 2012.  It is interesting to note that this is a rising tide that has lifted all boats - nearly all pharmaceutical stocks have performed well.

 

We believe that the next phase of performance will be driven by a realisation that large pharmaceutical companies can return to growth.  In the near- to mid-term, we think that large pharmaceutical companies will derive a greater proportion of their sales and profits from emerging markets - progress on this front has been a little lumpy over the last year, but most companies have reported double digit sales growth in these geographies. More importantly, as we describe below, we believe that we are on the verge of a new wave of drug discovery and the long-term growth driver for the sector will once again be new product pipelines.

 

Importantly, given the restructuring efforts across the industry to improve efficiency, we think that any company with top-line growth should be able to deliver operating margin expansion. Therefore, with pharmaceutical companies continuing to use cash to buy back stock, we think that mid single digit top-line growth could translate into earnings per share (EPS) growth in the high single digits.    However, going forward we think that there will be a far greater dispersion of returns as certain companies look better positioned than others.  Over the next five years, we believe that the companies with more promising drug pipelines are set to outperform their peers significantly. 

 

Healthcare has begun a period of major structural change

 

While the pharmaceutical sector remains the key investment focus for the Company, it is only a part of what we see as a major investment opportunity in the broader healthcare sector.  We believe that we are at the beginning of a major innovation cycle that will foment the development of improved medical treatments and transform the way healthcare is managed and delivered to patients. The significant advances in IT and computer processing power are the catalysts - particularly the ability to collect, analyse and process huge amounts of data.

 

For drug discovery, the publication of the human genome sequence in 2000 was the starting point for a new field of biological research.  Since then, scientists have made enormous progress in elucidating biological processes at the molecular level and how these may have gone awry in disease.  It is worth noting that the publicly-funded Human Genome Mapping Project (HGMP) cost governments around the world in the order of US$1 billion. Advances in DNA sequencing technology and computer processing capabilities mean we are now close to the point where an individual's genome can be sequenced for US$1,000 - a cost point that makes these cutting-edge research tools commercially viable.

 

These advances in basic scientific research have already had an impact in drug discovery and development.  For investors, this is most visible in the biotechnology sector - the engine of innovation in drug discovery.  We are finding many more investment opportunities in biotechnology today than five years ago with novel therapies for rare genetic diseases, cancer and inflammatory disease already reaching the market.  Moreover, we have seen an acceleration in the number of drug candidates starting clinical trials - over 1,200 new Phase I clinical trials were started in 2010 compared to just under 500 in 2005.  A large number of these clinical trials have been initiated by smaller companies as the large pharmaceutical companies re-focus their R&D resources on the later stages of drug development and away from early research.  However, pipelines at big pharmaceutical companies are also improving, bolstered by licensing or acquiring drug candidates from smaller biotechnology firms.  On balance, we think clinical news flow over the last 12 months has been positive and there is growing evidence that R&D productivity in the drug industry has improved.

 

As part of this improvement in R&D productivity, nearly every drug development project now has a biomarker programme associated with it in an effort to increase the chances of commercial success.  Diagnostics based on biomarkers will be critical for early identification or management of disease and also for targeting medicines to the right patients - all of which will help reduce costs.  The era of "personalised medicine" is already here - the first companion diagnostics, which identify whether a colorectal cancer patient is eligible to receive an expensive therapy, were approved in the US within the last 12 months. 

 

Improvements in computer processing power are also having an impact in the medical device industry. Many modern medical devices, such as pacemakers, are based on chip designs that are, in some cases, more than 10 years old. Many of the medical device manufacturers we meet are exploring ways of using new chip sets, such as those used in the latest smart phones, to develop new products with considerably enhanced functionality.  This covers areas from robotic surgery to artificial heart pumps and continuous glucose monitors for diabetics.

 

Finally, and most importantly, the productivity enhancements of IT have barely been felt within medicine.  It was only in May of this year that the UK government promised all NHS patients that they would be able to book a GP appointment online by 2015.   However, healthcare IT is not just about online information and electronic medical records. Many companies are developing enhanced monitoring tools that enable medical staff to manage patients more effectively.  We believe that this will lead to what we refer to as the "consumerisation" of healthcare.  We expect a growth in monitors and mobile applications that can be used in the home to detect serious medical events before they happen.  Prevention is always better, and cheaper, than cure but most importantly we expect most of these tools to be paid for by patients themselves.  This will be a major step forward to a 21st century healthcare system.  The 20th century infrastructure seen in most developed countries is too focused on expensive acute care hospitals, in our view.  Politically, it is difficult to persuade people that hospitals should close down.  But through the use of technology it is possible to have an "electronic nurse" by the bed-side 24 hours a day. Technology will transform healthcare so that it can be delivered at the cheapest cost settings.

 

The final essential catalyst for structural change is the macroeconomic situation.  Governments face escalating healthcare expenditures as the baby boomer population begins to retire. There is an undeniable need to manage costs and make healthcare systems more efficient.  In our view, it is only when technological innovation meets economic necessity that you get a major structural change in an industry. 

 

 

Outlook

Our current view on stock markets is reasonably constructive, although we expect equities to remain volatile as the macroeconomic and political uncertainties are likely to persist.  In our view, the US economy is in decent shape as shown by the recovery in US housing data, which began earlier this year, and US consumer confidence at a four year high.  Our biggest concerns regarding a global economic recovery are the continued weakness in the Eurozone and the potential that inflation may rear its head given the amount of quantitative easing over the last three years.

 

With respect to healthcare, we think that governments around the world will continue to look for ways to make their healthcare systems more efficient.  It may seem counterintuitive, but austerity is probably a good thing for healthcare investors.  Companies with products and services that deliver improved healthcare for less money provide a solution for governments and are likely to grow because of austerity programmes.  As we outline above, we think we are at the beginning of a radical transformation of healthcare.  While this structural change should provide significant investment opportunities we also acknowledge that companies that fail to adapt to a 21st century healthcare system could be big losers. 

 

We remain optimistic on the outlook for the pharmaceutical sector but do not expect a repeat of the share price performance of the last 12 months.  There is a growing recognition that fundamentals are improving for the sector but there seems to be little value assigned to drug pipelines in current valuations.   We think we have seen the first signs of improving R&D productivity but the next two to three years will be critical in confirming whether the pharmaceutical sector is back to firing on all cylinders.  Certain companies seem better positioned than others in this respect and we believe that this will be reflected in valuations - our challenge is to ensure that we pick the right stocks to maximise returns.

 

Dr Daniel Mahony and Gareth Powell

4 December 2012

Portfolio as at 30 September 2012





Market Value

% of total net assets



Stock

Country

2012

£'000

2011

£'000

2012

2011

1

(3)

Pfizer

United States

10,383

8,228

    8.6%

       8.2%

2

(6)

Merck & Co

United States

9,773

5,353

    8.1%

       5.3%

3

(7)

Novartis

Switzerland

9,481

5,021

    7.9%

       5.0%

4

(1)

GlaxoSmithKline

United Kingdom

7,409

9,328

    6.1%

       9.3%

5

(4)

Roche Holding

Switzerland

6,368

7,792

    5.3%

       7.8%

6

(10)

Abbott Labs

United States

5,942

3,284

    4.9%

       3.3%

7

(5)

Eli Lilly

United States

5,871

5,479

    4.9%

       5.5%

8

(11)

Astellas Pharma

Japan

5,365

3,184

    4.4%

       3.2%

9

(8)

Sanofi

France

4,758

4,250

    3.9%

       4.2%

10

(2)

Bristol-Myers Squibb

United States

4,385

8,254

    3.6%

       8.2%

Top 10 investments


69,735


57.7%


11

(13)

Johnson & Johnson

United States

3,412

1,635

    2.8%

       1.6%

12

Takeda Pharmaceutical

Japan

2,862

-

    2.4%

        -  

13

(12)

Consort Medical

United Kingdom

2,485

1,820

    2.1%

       1.8%

14

(14)

Sonic Healthcare

Australia

1,913

1,593

    1.6%

       1.6%

15

(9)

AstraZeneca

United Kingdom

1,773

4,157

   1.5%

  4.1%

16

(22)

Health Care REIT

United States

1,430

901

    1.2%

       0.9%

17

Actelion

Switzerland

1,335

-

    1.1%

           -  

18

(16)

Celgene

United States

1,182

1,073

    1.0%

       1.1%

19

(24)

Covidien

Ireland

1,140

877

     0.9%

       0.9%

20

(26)

National Health Investors

United States

1,115

677

     0.9%

       0.7%

Top 20 investments


88,382


73.2%


21

(25)

Senior Housing Property Trust

United States

1,079

830

    0.9%

 0.8%

22

(21)

Alexion Pharmaceuticals

United States

1,062

925

     0.9%

  0.9%

23

(29)

Omega Healthcare

United States

1,055

613

    0.9%

      0.6%

24

HCA Holdings

United States

1,030

-

    0.9%

-

25

(20)

UnitedHealth

United States

1,029

1,035

   0.9%

1.0%

26

HMS Holdings

United States

932

-

  0.8%

-

27

(19)

Allergan

United States

907

1,058

   0.8%

1.1%

28

Medical Facilities

Canada

901

-

     0.7%

-

29

(31)

Cyberonics

United States

860

544

   0.7%

0.5%

30

(46)

Healthcare Reality Trust REIT

United States

856

324

     0.7%

      0.3%

Top 30 investments


98,093


81.4%


31

Agilent Technologies

United States

833

-

     0.7%

-

32

Novadaq Technologies

Canada

830

-

    0.7%

-

33

Biomarin Pharmaceutical

United States

748

-

    0.6%

-

34

(40)

Air Methods

United States

739

408

 0.6%

       0.4%

35

Perkinelmer

United States

737

-

    0.6%

-

36

(55)

Synairgen

United Kingdom

693

241

    0.6%

       0.2%

37

Edwards Lifesciences

United States

665

-

     0.6%

-

38

United Drug

Ireland

655

-

     0.5%

-

39

Affymax

United States

652

-

     0.5%

-

40

Medical Properties Trust

United States

647

-

     0.5%

-

Top 40 investments


105,292


87.3%


41

Wellcare Group

United States

630

-

    0.5%

-

42

(32)

SABRA Health Care REIT

United States

619

520

    0.5%

       0.5%

43

(36)

Optos

United Kingdom

613

447

     0.5%

      0.4%

44

(50)

Insulet

United States

601

293

     0.5%

       0.3%

45

Acadia Healthcare

United States

590

-

    0.5%

-

46

Jazz Pharmaceuticals

Ireland

587

-

    0.5%

-

47

Endologix

United States

577

-

     0.5%

-

48

Epistem

United Kingdom

564

-

    0.5%

-

49

Brookdale Senior Living

United States

559

-

    0.5%

-

50

(33)

Asahi Intecc

Japan

549

480

    0.5%

       0.5%

Top 50 investments


111,181


 92.3%


51

(42)

Healthcare Services Group

United States

543

397

    0.4%

       0.4%

52

(39)

NIB Holdings

Australia

540

428

    0.4%

       0.4%

53

Five Star Quality Care

United States

529

-

     0.4%

-

54

Trius Therapeutics

United States

489

-

     0.4%

-

55

Spectranetics

United States

482

-

     0.4%

-

56

(41)

Meridian Biosciences

United States

475

404

     0.4%

       0.4%

57

(28)

Coltene Holding

Switzerland

465

617

    0.4%

       0.6%

58

(52)

Hutchison China Meditech

China

462

288

     0.4%

       0.3%

59

(48)

Emeritus

United States

454

297

     0.4%

       0.3%

60

(45)

Futura Medical

United Kingdom

441

335

     0.4%

       0.3%

Top 60 investments


116,061


96.3%


61

(43)

Circle Holdings

United Kingdom

413

389

     0.3%

       0.4%

62

Sirona Dental Systems

United States

400

-

     0.3%

-

63

Basilea Pharmaceuticals

Switzerland

390

-

     0.3%

-

64

Oxford Pharmascience

United Kingdom

364

-

     0.3%

-

65

(49)

AmSurg

United States

358

294

     0.3%

       0.3%

66

Summit

United Kingdom

352

-

     0.3%

-

67

Photocure

Norway

335

-

    0.3%

-

68

(61)

Leisureworld Senior Care

Canada

309

128

     0.3%

       0.1%

69

(35)

HCP

United States

275

450

    0.2%

       0.4%

70

Newron Pharmaceuticals

Italy

263

-

     0.2%

-

Top 70 investments


119,520


99.1%


71

CML HealthCare

Canada

252

-

     0.2%

-

72

(47)

Stentys

France

220

298

     0.2%

       0.3%

73

EOS Imaging

France

176

-

     0.1%

-

74

(60)

Sul America

Brazil

116

133

    0.1%

       0.1%

75

(62)

Oxford Biomedica

United Kingdom

48

97

         -  

      0.1%

Total equities


120,332


   99.7%


Other net assets


406


     0.3%


Net assets


120,738


 100.0%


 

Geographical Exposure at

30 September 2012

30 September 2011

United States

                 53.8%

        48.7%

Switzerland

                 15.0%

        13.4%

United Kingdom

                 12.6%

        16.6%

Japan

                    7.3%

          3.9%

France

                    4.2%

          4.5%

Australia

                    2.0%

          2.0%

Ireland

                    1.9%

          0.9%

Canada

                    1.9%

          0.5%

China

                    0.4%

          0.3%

Norway

                    0.3%

               -  

Italy

0.2%

-

Brazil

                    0.1%

          0.1%

Germany

                           -  

          1.9%

Denmark

                           -  

          0.2%

Israel

                           -  

          0.2%

Sweden

                           -  

          0.2%

Cash

                    0.3%

          6.6%

Total

               100.0%

      100.0%

 

Sector Exposure at

30 September 2012

30 September 2011

Pharmaceuticals

                 62.1%

        65.9%

Healthcare Equipment

                 12.3%

        10.5%

Specialised REITs

                    5.8%

          4.6%

Biotechnology

                    5.4%

          4.2%

Healthcare Facilities

                    4.3%

          1.1%

Healthcare Services

                    3.6%

          3.4%

Life Sciences Tools & Services

                    2.1%

               -  

Healthcare Supplies

                    1.7%

          1.0%

Managed Healthcare

                    1.4%

          1.6%

Healthcare Distributors

                    0.5%

          0.6%

Life & Health Insurance

                    0.4%

          0.4%

Multi-line Insurance

                    0.1%

          0.1%

Cash

                    0.3%

          6.6%

Total

               100.0%

      100.0%

 

Market Cap at

30 September 2012

30 September 2011

Large (>$5bn)

                 75.5%

        84.0%

Medium ($1bn - $5bn)

                 10.0%

          5.5%

Small (<$1bn)

                 14.5%

        10.5%


               100.0%

      100.0%



Report of the Directors including the Business Review and the Report on Corporate Governance

 

The Directors present their Report including the Business Review and the Report on Corporate Governance together with the Audited Financial Statements for the Company and Group prepared under International Financial Reporting Standards as adopted by the European Union (IFRs) for the year ended 30 September 2012.

Principal Activities and Status

The Company is incorporated in England and Wales as a public limited company and is domiciled in the United Kingdom. It is an investment company as defined in section 833 of the Companies Act 2006 and its ordinary shares and subscription shares are listed and traded on the London Stock Exchange.

The close company provisions do not apply.

The business of the Company is to provide shareholders with access to a discretionary managed diversified global portfolio consisting primarily of listed equities issued by healthcare companies involved in pharmaceuticals, medical services, medical devices and biotechnology. The portfolio is diversified by geographic location and size of investee companies.

The Company's investment portfolio is a 'long-only' fund which means that it buys and holds shares to generate capital growth and income. The portfolio is managed within a framework of investment limits and restrictions determined by the Board which seeks to meet the investment objective while seeking to spread and mitigate risk.

The Company has no employees or premises and the Board is comprised of non-executive Directors. The day to day operations and functions of the Company have been delegated to third parties. The Company has one subsidiary, Polar Capital Global Healthcare Finance Limited a wholly owned dealing company whose results are consolidated with those of the Company. The subsidiary has not traded in the year.

Investment Trust Status

Investment Trust status permits the accumulation of capital within the portfolio without any liability to UK Capital Gains Tax.

 

Investment trust status for the period to 30 September 2011 was received from HM Revenue and Customs subject to matters that may arise from any subsequent enquiry into the Company's tax return.

 

In respect of the year ended 30 September 2012 the Directors believe that the Company has met the requirements to be approved as an investment trust but as the process of confirmation by HM Revenue and Customs is on a retrospective basis, such confirmation is outstanding.

 

The Company has applied for and received confirmation from HM Revenue and Customs that on the basis of the information provided, the Company will be accepted as an approved investment trust for accounting periods commencing on or after 1 October 2012 subject to the Company continuing to meet the eligibility conditions of Section 1158 Corporation Tax Act 2010 and the ongoing requirements for approved companies in Chapter 3 of Part 2 Investment Trust (Approved Company) (Tax) Regulations 2011 (Statutory Instrument 2011/2999).

The Directors are of the opinion that the Company will continue to conduct its affairs so as to maintain its status as an investment trust.

The Company's ordinary and subscription shares are eligible for inclusion within the stocks and shares component of an ISA (save where acquired pursuant to the IPO placing).

Life of the Company

The Articles of Association require the Directors to put forward at the seventh Annual General Meeting a resolution to place the Company into liquidation. The voting on that resolution will be enhanced such that, provided any single vote is cast in favour, the resolution will be passed. The seventh AGM is expected to be held in January 2018.

Business Review

The Company is required by the Companies Act 2006 to set out a business review for shareholders to provide a fair review of the business of the Company and Group during the year ended 30 September 2012, the position of the Company and Group at the end of the year and a description of the principal risks and uncertainties.

Full details of the Investment Manager's activities and its views are given in the Investment Manager's Report. The Board considers that the Chairman's Statement and the Investment Manager's Report when read in conjunction with the information provided in the Report of the Directors fulfils the requirements of the business review and gives a comprehensive analysis of the development and performance of the business of the Company and Group and the position of both at the end of the year.

Future Developments

The Board remains positive on the longer-term outlook for healthcare and the Company will continue to pursue its investment objective in accordance with the stated investment policy and strategy. The outlook for the future performance is dependent to a significant degree on the world's financial markets and their reactions to economic events and other geo-political forces. The Chairman's Statement and the Investment Manager's Report comment on the outlook.

Investment Objective, Policy and Strategy

Objective

The Company's investment objective is to generate capital growth and income by investing in a global portfolio of healthcare stocks.

Policy

The Company will seek to achieve its objective by investing in a diversified global portfolio of companies consisting primarily of listed equities issued by healthcare companies involved in pharmaceuticals, medical services, medical devices and biotechnology, with an emphasis on pharmaceutical stocks. Stocks will be selected for inclusion in the portfolio after a due diligence process. The portfolio is diversified by geography, industry sub-sector and investment size with no single investment normally accounting for more than 10% of the portfolio at the time of investment.

The portfolio has a bias towards large-capitalisation companies, with a market capitalisation in excess of US$5 billion, and the balance in mid and smaller capitalisation companies. Exposure to companies with a market capitalisation below US$200 million is not expected to exceed 5% of gross assets at the time of investment. The Company does not expect to have any material exposure to unlisted companies and, in aggregate, any such investments will not exceed 5% of gross assets at the time of investment.

The portfolio composition is by reference to market capitalisation rather than number of companies.

The Company may invest through equities, index-linked, equity-linked and other debt securities, cash deposits, money market instruments, foreign currency exchange transactions, forward transactions, index options and other instruments including derivatives. Forward transactions and derivatives (including put and call options on individual positions or indices) may be used to gain exposure to the securities of companies falling within the Company's investment policy or to seek to generate income from the Company's position in such securities, as well as for efficient portfolio management. 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 in its investment policy. The Company may hedge exposure to foreign currencies if considered appropriate for efficient portfolio management.

Strategy

The Investment Manager's investment process is primarily based on bottom-up fundamental analysis. The Investment Manager uses a qualitative filter consisting of six key criteria to build up a watch-list of securities that is monitored on a regular basis. Due diligence is then carried out on the individual securities on the watch-list.

The Company's portfolio comprises a single pool of investments, but for operational purposes there is an income portfolio and a growth portfolio. The income portfolio comprises investments where the majority will have a market capitalisation in excess of US$5 billion and will be in the pharmaceutical sector. The growth portfolio comprises investments to give exposure to small capitalisation medical services, medical devices and biotechnology companies.

Each individual holding is assessed on its own merits in terms of risk/reward. While the Company expects normally to be fully or substantially invested, the Company may hold cash or money market instruments pending deployment in the investment portfolio. In addition it will have the flexibility, when the Investment Manager perceives there to be actual or expected adverse equity market conditions, to maintain cash holdings as it deems appropriate.

Gearing

It is not intended that the Company incur borrowings to provide long-term structural gearing. No borrowings have been made and no arrangements made for any bank loans. However the Articles of Association provide that the Company may borrow up to 15% of its Net Asset Value at the time of drawdown, for tactical deployment when the Board believes that gearing will enhance returns to shareholders.

Benchmark

The Company will measure the Investment Manager's performance against the MSCI ACWI/Health Care Index total return, in Sterling. This will be used to measure the performance of the Company, which will not seek to replicate the index in constructing its portfolio. The portfolio may, therefore, diverge substantially from the constituents of this index. Although the Company has a benchmark, this is neither a target nor an ideal investment strategy. The purpose of the Benchmark is to set a reasonable return for shareholders above which the Investment Manager is entitled to a share of the extra performance it has delivered.

Performance and Key Performance Objectives

The Board appraises the performance of the Company and the Investment Manager as the key supplier of services to the Company against key performance indicators (KPIs). The objectives comprise both specific financial and shareholder related measures.

KPI

Control process

Outcome

The provision of investment returns to ordinary shareholders measured by long-term NAV growth relative to the Benchmark Index and the achievement of the dividend policy

The Board reviews at each meeting the performance of the portfolio and considers the views of the Investment Manager.

 

Financial forecasts are reviewed to track income and distributions.

The Company's undiluted NAV has, over the year ended 30 September 2012 increased by 23.55% while the Benchmark Index over the same period increased by 21.45%.  The performance is explained in the Chairman's Report and the Investment Manager's Report.

 

A total of four dividends amounting to 3.22p per share have been paid in respect of the year ended 30 September 2012 representing an increase of over 5% over the dividends paid in respect of the year to 30 September 2011 of 3.06p per share.

Monitoring and reacting to issues created by the discount or premium of the ordinary share price to the NAV per ordinary share with the aim of reduced discount volatility for shareholders.

The Board receives regular information of the composition of the share register including trading patterns and discount/premium levels of the Company's ordinary shares. The Board discusses and authorises the issue or buy back of shares when appropriate.

 

A daily NAV per share, diluted when appropriate, calculated in accordance with the AIC guidelines is issued to the London Stock Exchange.

The discount/premium of the ordinary share price to the fully diluted NAV per ordinary share (when appropriate) over the year to 30 September 2012 has ranged from a maximum discount of 4.9% to a premium of 6.1%.

 

The Company has not bought back nor issued any shares in the year ended 30 September 2012. Since the year-end the Company has issued 2,150,001 ordinary shares for cash at 125.95p per share.

To qualify and meet the requirements for Sections 1158 and 1159 of the Corporation Tax Act 2010.

The Board receives regular financial information which discloses the current and projected financial position of the Company against each of the tests set out in Sections 1158 and 1159.

The Company has obtained investment trust status for the period ended 30 September 2011 and has applied for and received investment trust status from 1 October 2012 subject to the continued satisfying of the conditions of Section 1158 of the Corporation Tax Act 2010 and other associated on going requirements.

 

Application for investment trust status for the year ended 30 September will be submitted retrospectively and the Board expects to obtain HM Revenue and Customs confirmation that investment trust status has been granted.

Ongoing Charges

(previously Total Expense Ratio)

The Board receives regular financial information which discloses expenses against budget.

Ongoing charges for the financial year to 30 September 2012  was 1.14%

 

Financial Review

The performance of the Company's assets as measured by the change in the Net Asset Value per ordinary share, the level of dividends declared and paid and the change in the Benchmark Index are set out on page 01.

Assets

At 30 September 2012 the total net assets of the Group amounted to £120,738,000 compared with £100,424,000 at the previous period end. At 30 September 2012 there were 75 separate investments as detailed on pages 08 to 10.

Revenue and Expenses

The revenue and expenses for the year ended 30 September 2012 are shown in the Consolidated Statement of Comprehensive Income on page 38. The Notes to the Financial Statements on pages 42 to 63 provide an analysis of these items.

 

Dividends

The Company aims to increase the dividend (on an annual basis) progressively, but there is no guarantee that this will be achieved. Shareholders should recognise that circumstances may arise when it is necessary to reduce the level of dividend payment or equally there may be instances when the level of dividend must be increased in order to comply with Sections 1158 and 1159 of the Corporation Tax Act 2010. Where this would result in paying a dividend beyond the Board's aim a "special dividend" will be declared and paid.

The Company aims to pay four interim dividends in February, May, August and November each year. These interim dividends will not necessarily be of equal amounts.

Details of the dividends paid are set out on page 01.

Principal Risks and Uncertainties

In delivering long-term returns to shareholders the identification and monitoring of risk is crucial. In addition to the detailed internal controls set out in the corporate governance report the Board seeks to identify, assess and monitor risks to the business. The Board maintains a Risk Map and reporting structure with investment limits and restrictions appropriate to the investment objective to monitor and mitigate as far as practical such risks. The Board has identified two principal groups of risks.

The first group relate primarily to economic uncertainties and its particular sphere of activity of investing in worldwide stock markets.

§ The appropriateness of the investment mandate and strategy is considered as this may lead to a depressed share price as investors seek alternative investments or lower risk strategies.

§ The investment performance is monitored as underperformance against the Benchmark or peer group could adversely affect shareholders' returns.

§ As the Company's assets comprise mainly listed equities the principal risks to the performance of the business are associated with equity markets and foreign exchange rates. Both share prices and exchange rates may move rapidly and adversely impact the value of the Company's portfolio.

§ While the portfolio is diversified across a number of stock markets worldwide, the investment mandate is focused on a single sector and thus the portfolio may be more sensitive to investor sentiment than a general investment portfolio.

§ Healthcare companies are subject to many factors that could adversely affect their performance, profitability and share prices including regulatory approvals, the failure to comply with applicable regulations and legislative developments, the results of clinical trials, patent approvals for new drugs and the expiry of patent protection for existing drugs.

§ There is significant exposure to the economic cycles of the economies in which the underlying investments operate.

The Board mitigates this group of risks through the regular reporting and monitoring of the investment performance including financial information, analytical performance data and attribution presented by the Investment Manager at Board meetings. The composition and diversification of the portfolio including the sales and purchases of investments is also considered. The Board discusses individual investments with the Investment Manager as well as the Investment Manager's general views on the various markets and the healthcare sector in particular. The Board also considers the investment strategy and has regard to the degree of risk which the Investment Manager incurs in order to generate the investment returns.

The second group of business risks take the form of financial, operational, including accounting and taxation, and legal and regulatory requirements.

§ The financial risks which arise from the investment activities expose the Company to risks such as market price, credit, liquidity, foreign currency and interest rates.

§ The operational and accounting risks cover disruption to or failure of systems and processes provided by the Investment Manager including: any sub contractors to which the Investment Manager has delegated a task; the keeping of safe custody records and systems provided by the custodian or sub custodians and; the risk that suppliers may deliver sub standard services that may have an impact on the Company or its customers.

§ The taxation risks are that the Company may fail to obtain qualification as an investment trust and that the Company may fail to recover, as far as possible, withholding taxes levied on overseas investment income.

§ Legal and regulatory risks include compliance with the FSA's Prospectus Rules, Listing Rules and Transparency and Disclosure Rules; meeting the provisions of the Companies Act 2006 and other UK, European and overseas legislation affecting UK companies and compliance with accounting standards.

The Board seeks to manage this second group of risks by obtaining information from the Investment Manager or professional advisers and, where necessary, the commissioning of topical reports for discussion. The Board having considered the reports will take any remedial action or make such changes as it considers appropriate.

The policies for managing the risks posed by exposure to market prices, interest rates, foreign currency exchange rates, credit and liquidity are set out in note 25 to the financial statements.

Management Company and Management of the Portfolio

As the Company is an investment vehicle for shareholders, the Directors have sought to ensure that the business of the Company is managed by a leading specialist investment management team and that the investment strategy remains attractive to shareholders. The Directors believe that a strong working relationship with the Investment Manager will achieve the optimum return for shareholders.

The Company entered into an Investment Management Agreement dated 26 May 2010, with Polar Capital LLP (the Investment Manager) which is authorised and regulated by the Financial Services Authority to act as investment manager of the Company with sole responsibility for the discretionary management of the Company's assets (including uninvested cash) and to advise the Company on a day to day basis in accordance with the investment policy of the Company, all subject to the overall control and supervision of the Board.

The Investment Manager also agreed to procure or provide the day to day administration of the Company and general secretarial functions. The Investment Manager has, with the consent of the Directors, delegated the provision of certain of these administrative functions to HSBC Securities Services (UK) Limited and to Polar Capital Secretarial Services Limited.

The fees of HSBC Securities Services (UK) Limited and Polar Capital Secretarial Services Limited in providing such services will be for the account of the Company. However, to the extent that payment of HSBC Securities Services (UK) Limited fees by the Company would result in the Company being unable to pay aggregate dividends in the relevant period of at least 3 pence per ordinary share out of its net income such excess fees will be borne by the Investment Manager.

Investment team

The Investment Manager provides a team of healthcare specialists and the portfolio is managed jointly by Dr Daniel Mahony, the lead manager, and Mr Gareth Powell. The Investment Manager also has other specialist and geographically focused investment teams which may contribute to idea generation.

Termination arrangements

The Investment Management Agreement is terminable by either the Investment Manager or the Company giving to the other not less than 12 months' written notice.  The Investment Management Agreement may be terminated earlier by the Company with immediate effect on the occurrence of certain events, including: (i) if an order has been made or an effective resolution passed for the liquidation of the Investment Manager; (ii) if the Investment Manager ceases or threatens to cease to carry on its business; (iii) where the Company is required to do so by a relevant regulatory authority; (iv) on the liquidation of the Company; or (v) subject to certain conditions, where the Investment Manager commits a material breach of the Investment Management Agreement.

In the event the Investment Management Agreement is terminated before the expiry of the Company's fixed life then, except in the event of termination by the Company for certain specified causes, the base fee and the performance fee will be calculated pro rata for the period up to and including the date of termination.

Fee arrangements

          Management fee

Under the terms of the Investment Management Agreement, the Investment Manager will be entitled to a management fee together with reimbursement of reasonable expenses incurred by it in the performance of its duties. The management fee is payable monthly in arrears and will be at the rate of 0.85% per annum of the lower of the Company's market capitalisation and the Company's Net Asset Value on the relevant day.

In accordance with the Directors' policy on the allocation of expenses between income and capital, in each financial period 80% of the management fee payable is charged to capital and the remaining 20% to income.

          Performance fee

The Investment Manager may be entitled to a performance fee. The performance fee will be paid in cash at the end of the Company's expected life (except in the case of an earlier termination of the Investment Management Agreement) and will be an amount equal to 10% of the excess return (based on the Adjusted Net Asset Value per ordinary share at that time) over the performance fee hurdle.

The performance fee hurdle will be 100 pence, increased or decreased (as the case may be) by reference to the return on the Benchmark Index plus 15 pence, the 15 pence equating approximately to a simple 2% per annum return on the opening Net Asset Value per share over the period from 15 June 2010 to the expiry of the Company's expected life.

For the purposes of calculating the performance fee, the Company's Adjusted Net Asset Value will be based on the Net Asset Value adjusted as follows:

(A)  the amount of any dividends paid by the Company shall be deemed to have been reinvested on the date of payment in ordinary shares at their Net Asset Value (on such date) and the resulting amount added to the Company's Net Asset Value; and

(B)  any dilutive effect caused by the exercise by shareholders of subscription rights in relation to subscription shares shall be deemed to have been added back to the Company's Net Asset Value at the time of issue of the ordinary shares resulting from such exercise, so as to negate the effect of the dilution,

provided, for the avoidance of doubt, that no adjustment to the Company's Net Asset Value per ordinary share will be made in respect of;

(i)   any repurchase of ordinary shares at a discount to the Net Asset Value per ordinary share prevailing at the time of such repurchase or

(ii)  any issue of ordinary shares at a premium to the Net Asset Value per ordinary share prevailing at the time of such issue.

If at the end of the Company's expected life the amount available for distribution to shareholders is less than 100 pence per ordinary share, no performance fee will be payable. If the amount is more than 100 pence per ordinary share but payment of the performance fee in full would reduce it below that level, then the performance fee will be reduced such that shareholders receive exactly 100 pence per share.

No performance fee has been accrued for the year ended 30 September 2012.

 

Capital Structure and voting interests

Issued

The Company's share capital is divided into ordinary shares of 25p each and subscription shares of 1p each. At 30 September 2012 there were 97,899,999 ordinary shares in issue and 17,800,000 subscription shares.  

Changes during the period

Since the year end the Company issued 2,150,001 ordinary shares at 125.95p per share on 4 October 2012. Ordinary shares may be issued when the issue price is in excess of the diluted NAV and after costs there is a benefit to existing shareholders.

There have been no changes to the number of subscription shares in issue during the period.

Voting rights

Ordinary shares carry voting rights which are exercised on a show of hands at a meeting, or on a poll, where each share has one vote.

Subscription shares do not carry any rights to attend or vote at meetings of shareholders of the Company but the rights attached to the subscription shares may only be altered or abrogated with the sanction of the subscription shareholders.

Details for the lodging of proxy votes are given when a notice of meeting is issued.

Transferability

Any shares in the Company may be held in uncertificated form and, subject to the Articles, title to uncertificated shares may be transferred by means of a relevant system.

Subject to the Articles, any member may transfer all or any of his certificated shares by an instrument of transfer in any usual form or in any other form which the Board may approve. The instrument of transfer must be executed by or on behalf of the transferor and (in the case of a partly-paid share) the transferee.

The Board may, in its absolute discretion and without giving any reason, decline to register any transfer of any share which is not a fully paid share. The Board may also decline to register a transfer of a certificated share unless the instrument of transfer: (i) is duly stamped or certified or otherwise shown to the satisfaction of the Board to be exempt from stamp duty and is accompanied by the relevant share certificate and such other evidence of the right to transfer as the Board may reasonably require; (ii) is in respect of only one class of share; and (iii) if joint transferees, is in favour of not more than four such transferees.

The Board may decline to register a transfer of any of the Company's certificated shares by a person with a 0.25% interest (as defined in the Articles) if such a person has been served with a restriction notice (as defined in the Articles) after failure to provide the Company with information concerning interests in those shares required to be provided under the Companies Act 2006, unless the transfer is shown to the Board to be pursuant to an arm's length sale (as defined in the Articles).

Powers to issue ordinary shares and make market purchases of ordinary and subscription shares

At the AGM in 2012 the Board was granted by shareholders the power to allot equity securities up to a nominal value of £2,447,499, being 10% of the Company's issued ordinary share capital at that date, and to issue those shares for cash without offering those shares to shareholders in accordance with their statutory pre-emption rights.

These powers will expire at the AGM in 2013. These powers have been used as described above and renewal of the authorities will be sought at the AGM in 2013. New ordinary shares will not be allotted and issued at below the Net Asset Value.

The Board obtained shareholder authorities at the AGM in 2012 to make market purchases of up to 14,675,200 ordinary shares and 2,668,220 subscription shares of the Company for cancellation in accordance with the terms and conditions set out in the two shareholder resolutions. Both of these authorities expire at the AGM in 2013 and renewal of the authorities will be sought at the AGM in 2013.

During the financial year ended 30 September 2012 no ordinary shares were purchased and no subscription shares were purchased for cancellation.

Details of the resolutions and the Directors' policies for the issue and purchase of shares are set out in the separate formal Notice of the Annual General Meeting.

Major interests in ordinary shares

As at 30 September 2012, notices for the purposes of part 5 of the FSA's Disclosure and Transparency Rules had been received of the following major interests in the voting rights of the Company.


Number of

ordinary shares

Number of Subscription shares

Percentage of voting rights*

Brewin Dolphin Limited

20,033,895

2,105,084

19.60% Indirect

Investec Wealth and Investment Limited

13,020,997

-

13.30% Indirect

Cazenove Capital Management Limited

7,789,270

1,465,174

7.79% Indirect

Rathbone Brothers PLC

7,312,600

-

7.31% Indirect

Charles Stanley

4,899,580

-

4.90% Indirect

Cheviot Asset Management Limited

4,805,275

-

4.80%   Direct

Each subscription share carries the right to subscribe for one ordinary share at 100p per ordinary share on 31 January 2014.

 

Directors' share interests

The interests of Directors in the ordinary and subscription shares of the Company on 30 September 2012 and at 30 September 2011

Ordinary Shares

Subscription Shares


30 September 2012

30 September 2011

30 September 2012

30 September 2011

James Robinson

35,000

25,000

5,000

5,000

John Aston

10,000

10,000

2,000

2,000

Anthony Brampton

20,000

20,000

4,000

4,000

Antony Milford

10,000

10,000

2,000

2,000

 

All holdings are beneficially held and there have been no changes in these interests between the end of the financial year and 4 December 2012.

The Payment of Creditors

It has been and will remain the Company's policy for the forthcoming financial year to obtain the best terms for all business and therefore there is no single policy as to the terms used. The Company and its subsidiary's policy is to settle all investment transactions in accordance with the terms and conditions of the relevant market in which it operates. In general the Company agrees with its other suppliers the terms on which business will take place and it is the Company's policy to abide by such terms. There were no trade creditors at 30 September 2012 (2011:nil).

Service Providers

Apart from the arrangements with Polar Capital LLP to provide investment, company secretarial and administrative services including accounting, portfolio valuation and trade settlement, the Company also contracts directly with HSBC Bank plc which acts as global custodian for all the Company's investments. The Company also used the services of Matrix Corporate Capital LLP during the year as corporate broker. The Company also retains Equiniti Limited as registrars and PricewaterhouseCoopers LLP as tax advisers and independent auditors. Each of these contracts was entered into after full and proper consideration of the quality and cost of the services offered, including the control systems in operation in so far as they relate to the affairs of the Company.

HSBC Securities Services (UK) Limited has been retained by the Investment Manager to provide accounting, valuation and trade settlement services.

Independent Auditors

PricewaterhouseCoopers LLP have expressed their willingness to continue in office as the Company's independent auditors. A resolution to re-appoint PricewaterhouseCoopers LLP as independent auditors to the Company will be proposed at the forthcoming AGM.

The fee in respect of the audit of the 2012 annual financial statements has been agreed at £20,000. In the period from incorporation to 30 September 2011 audit fees of £51,500 were paid to cover initial accounts, required to support dividend payments and the annual financial statements.

The Company also uses PricewaterhouseCoopers LLP to give advice on tax and other accounting matters when necessary.  No advice has been sought in the year to 30 September 2012.  The non-audit fees for the current financial year have amounted to £3,000 which covers the administrative work required in preparing the Group financial statements for submission to HM Revenue and Customs. In the previous period from incorporation to 30 September 2011 non-audit fees of £8,000 were incurred related to advice on accounting and presentational matters.

The Directors do not consider the provision of this non-audit work to the Company affects the independence of the auditors.

Annual General Meeting ("AGM")

The Annual General Meeting will be held on Wednesday 23 January 2013 at 12 noon at The Methodist Central Hall, Storey's Gate, London SW1H 9NH. Shareholders are encouraged to attend the AGM as it provides an opportunity for them to hear a presentation from the Investment Manager and meet the Directors.

The separate Notice of Annual General Meeting contains resolutions to receive the financial statements, approve the Directors' remuneration report, re-appoint the auditors and empower the Directors to set their fees. The Directors are also seeking powers to allot ordinary shares for cash and to buy back ordinary and subscription shares for cancellation. The full text of the resolutions and an explanation of each is contained in the separate Notice of Annual General Meeting.

As set out in the Notice of Annual General Meeting the Company is proposing a special resolution at the AGM to adopt new Articles of Association. The only substantive change proposed to the current Articles of Association is to reflect recent changes in the provisions of the Companies Act 2006 applicable to investment companies, under which the restriction on distributions of capital profits has been removed. Article 122 of the Company's Articles of Association will be amended to remove that restriction from the Company's articles. 

 

A copy of the proposed new Articles of Association will be available for inspection at the Company's registered office from the date of this letter until the conclusion of the AGM and at the place of the AGM for at least 15 minutes before and during the AGM.

 

Report on Corporate Governance

The Directors are accountable to shareholders for the governance of the Company's affairs. The UK Listing Rules require all listed companies to disclose how they have applied the principles and complied with the provisions of the UK Corporate Governance Code (the "UK Code") issued by the Financial Reporting Council which has replaced the 2008 Combined Code for accounting periods commencing on or after 29 June 2010.  This is the first report under the UK Code which was effective throughout the financial year.  The UK Code can be viewed at www.frc.org.uk

As an investment company most of the day to day responsibilities are delegated to outside parties as the Company has no employees and all the Directors are non-executive. Many of the provisions of the UK Code are not directly applicable to the Company and the Board has determined that reporting against the AIC Code of Corporate Governance ("AIC Code"), which incorporates the UK Code, provides the most appropriate information to shareholders.

The Financial Reporting Council confirmed in 2010 that by following the AIC Code and the Corporate Governance Guide for Investment Companies produced by the AIC, boards of investment companies should fully meet their obligations in relation to the UK Code and the UK Listing Rules.

Copies of these codes can be obtained from the relevant organisations. The Company's policies on corporate governance can be found on its website.

The corporate governance report describes how the principles of the AIC Code have been applied.

Background and development

The Board has considered the principles and recommendations of the AIC Code by reference to the AIC Corporate Governance Guide for Investment Companies ("AIC Guide"). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company.

Application of the AIC Code's principles

The Board believes that the Company's current practices are consistent in all material respects with the principles of the AIC Code and where non compliance occurs, an explanation has been provided. The Board will continue to observe the principles and recommendations set out in the AIC Code in future.

It should be noted that, as an investment company where the Directors are non-executive, most of the Company's day to day duties are delegated to third parties. The Company has agreed policies and operating procedures with the suppliers of these services.

Directors and Board; independence and composition

The Board is responsible to shareholders for the overall management of the Company's affairs and currently consists of four non-executive Directors.

All Directors stood for election in accordance with the Articles of Association at the AGM in 2012 and were elected.  They have been in office throughout the year to 30 September 2012.  The appointment date for each Director is given on page 12.

Each Director has different qualities and areas of expertise on which they may lead where issues arise. The Directors' biographies, set out on page 12, demonstrate the breadth of investment, commercial and professional experience relevant to their positions as Directors of the Company. The Directors' Remuneration Report is set out on pages 32 to 33.

The Board believes that retaining Directors with sufficient experience of the Company, industry and the markets is of benefit to shareholders. While the Board recognises the value of progressive refreshing of and succession planning for company's boards, given the expected seven year life of the Company, the Board has determined that there is no need for a policy on the length of service for Directors.

The Board has considered the contribution and performance of each Director as part of the Director and Board performance evaluation. It determined that each Director has relevant experience, effectively contributed to the operation of the Board and has demonstrated independent views on a range of subjects. All the Directors were considered independent of the Investment Manager and had no relationship or conflicts which were likely to affect their judgement.

Election of Directors at the AGM

No Director is required to offer himself for re-election at the AGM in 2013.  All Directors were elected at the AGM in 2012 and under the Articles of Association they are required to offer themselves for re-election at every third AGM after their last election.

Directors' interests and Conflicts of interests

The Chairman of the Company is a non-executive Director and has no conflicting relationships.

The share interests of the Directors in the ordinary and subscription shares of the Company are set out in the table on page 22.

Directors have a duty to avoid a situation in which they have or could have a conflict of interest or possible conflict with the interests of the Company. Under the Companies Act 2006 public companies may authorise conflicts or potential conflicts if the Articles of Association contain provisions to this effect and the Company's Articles of Association contain such provisions.

Each Director has provided the Company with a statement of all conflicts of interest and potential conflicts of interest. These have been approved by the Board and recorded in a register. The Board may impose conditions on authorising any conflict or potential conflict situations. Each Director has agreed to notify the Chairman and the Company Secretary of any changes to his circumstances which would impact on the notified conflicts or potential conflicts and obtain approval before entering into any situation which might give rise to a conflict or potential conflict with the interests of the Company.

Directors are reminded at each Board meeting of their obligations to notify any changes in their statement of conflicts and also to declare any benefits from third parties in their capacity as a Director of the Company which might give rise to a conflict or potential conflict with the Company's interests. No Director has declared receipt of any benefits other than his emoluments in his capacity as a Director of the Company.

Only Directors not involved in the conflict or potential conflict participate in the authorisation process. Directors in deciding whether to authorise a situation take into account their duty to promote the Company's success.

The Board as part of its year-end review has considered the register of conflicts, any conditions imposed on such conflicts or potential conflicts and the operation of the notification and authorisation process. It concluded that the process has operated effectively since its introduction.

No Director has any links with the Investment Manager and there were no contracts during or at the end of the period in which a Director of the Company is or was materially interested and which is or was significant in relation to the Company's business or to the Director.

Role and responsibilities

The Board

The Board meets regularly and as required. During the period six Board and Board Committee meetings were held to deal with the on-going stewardship of the Company and other matters including the setting and monitoring of investment strategy and performance, review of financial statements, and shareholder issues including investor relations. The level of share price discount or premium to the Net Asset Value together with policies for re-purchase or issuance of new shares are kept under review along with matters affecting the industry and the evaluation of third party service providers.

A formal schedule of matters specifically reserved for decision by the full Board has been defined and a procedure has been adopted for Directors, in the furtherance of their duties, to take independent professional advice at the expense of the Company. No such advice has been sought during the period.

The number of formal meetings of the Board and its Committees held during the year and the attendance of individual Directors are shown below.

Year ended 30 September 2012

Board

Audit

Committee

Management
Engagement Committee

Number of Meetings*

6

4

1

James Robinson

6

4

1

John Aston

6

4

1

Anthony Brampton

5

4

1

Antony Milford

6

4

1

* A number of ad hoc special purpose Board and committee meetings were held during the period for the approval of documents, the issue of new shares and approval of regulatory announcements.

 

Investment Manager

The Board has delegated to external suppliers many of the day to day administrative functions of the Company. The key supplier is the Investment Manager and the Board has contractually delegated the management of the portfolio to the Investment Manager, Polar Capital LLP. It is the Investment Manager's sole responsibility to take decisions as to the purchase and sale of individual investments. The Investment Manager has responsibility for asset allocation and sector selection within the limits established and regularly reviewed by the Board. The Board has directly appointed the custodian and the registrars, both of which the Investment Manager monitors and the Investment Manager provides or procures the provision of accountancy services, company secretarial and administrative services.

The Investment Manager also ensures that all Directors receive in a timely manner all relevant management, regulatory and financial information. Representatives of the Investment Manager attend each Board meeting enabling the Directors to probe further on matters of concern or seek clarification on certain issues.

The Directors have access to the advice and services of the corporate company secretary through its appointed representative who is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. The Board and Investment Manager operate in a supportive, co-operative and open environment.

Senior Independent Director

Due to the structure of the Board it was considered unnecessary to identify a senior non-executive. The Board considers that all Directors have different qualities and areas of expertise on which they may lead where issues arise and to whom concerns may be conveyed.

Board Committees

The Board has delegated to the Audit Committee and the Management Engagement Committee specific remits for consideration and recommendation but the final responsibility in these areas remains with the Board. The Board determined that due to its size, and the fact that all the Directors are non-executive and independent, the functions of the Nomination Committee and Remuneration Committee would be carried out by the full Board.

The Board acting as the Nomination Committee will, when considering new or further appointment of directors, consider the balance of skills, knowledge and experience as well as gender diversity of the whole Board and also consider the use of external consultants when drawing up a list of candidates.

The Board also creates ad hoc committees from time to time to enact policies or actions agreed in principle by the whole Board. Copies of the terms of reference for each of the standing committees are available on the Company's website.

Audit Committee

The Audit Committee comprises all the independent non-executive Directors under the chairmanship of John Aston and would usually meet three times a year. The Board is satisfied that at least one of the Committee's members has recent and relevant financial experience.

None of the members of the Committee has any involvement in the preparation of the financial statements of the Company, as this has been contracted to the Investment Manager. The Chairman of the Committee will be present at the AGM to answer questions relating to the financial statements.

The Audit Committee is responsible for reviewing the scope of the annual audit, the annual financial statements and the interim report, including significant accounting policies and any changes thereto, the terms of appointment of the auditors and their remuneration. The Audit Committee considers annually all services provided by the auditors to ensure that there is clear separation of audit and non-audit work and the cost of non-audit work is justified and not disproportionate to fees for the audit services to the extent that the independence of the auditors would be compromised. It meets with representatives of the Investment Manager and receives reports on the quality and effectiveness of the accounting records and management information maintained on behalf of the Company. The Committee also considers the internal controls and risk management systems applicable to the Company.

The Audit Committee has direct access to the auditors and to the key senior staff of the Investment Manager and it reports its findings and recommendations to the Board which retains the ultimate responsibility for the financial statements of the Company.

The Audit Committee's policy on the provision of non-audit services is to ensure that there is a clear separation of audit work and non-audit work and that the cost of any non-audit work is justified and not disproportionate to the audit fees to the extent that the independence of the auditors would be compromised.

 

 

Audit Committee meetings

During the year ended 30 September 2012 the Audit Committee has met four times.

During the course of these meetings the Committee discussed with the auditors the scope of the annual audit work, the results of the annual audit including the findings of the auditors. The auditors had the opportunity to speak to the Committee without the representatives of the Investment Manager being present.

 

The Audit Committee as part of its work has reviewed the Company's Internal financial controls and those of the Investment Manager that relate to the services provided to the Company.

The Audit Committee considered the independence, effectiveness and performance of PricewaterhouseCoopers LLP, the Company's external auditor throughout the year and the provision of non-audit services provided by the auditors has been kept under review. Details of fees paid to the auditors are given in note 9 on page 49.  The independence and effectiveness of the auditors and the nature of the services provided have therefore been assessed throughout the year.

 

The Audit Committee remains satisfied with the auditor's effectiveness and does not consider it necessary to require the external auditors to tender for the audit work. There are no contractual obligations restricting the choice of external auditor. Under Company Law the reappointment of the external auditor is subject to shareholder approval at the Annual General Meeting and the Audit Committee has recommended that the Board supports the reappointment of the auditors at the AGM. 

There has been nothing brought to the Audit Committee's attention in respect of the 2012 audit which was material or significant or that they felt should be brought to shareholders' attention.

 

Management Engagement Committee

The Management Engagement Committee comprises all the independent non-executive Directors under the chairmanship of John Aston and will usually meet once a year and at such other times as may be necessary.

The Management Engagement Committee is responsible for the review of the relationship with the Investment Manager including the annual review of the Investment Management and other services and resources supplied by the Investment Manager, prior to making its recommendation to the Board, whether the retention of the Investment Manager is in the interests of shareholders.

Management Engagement Committee meetings

During the year ended 30 September 2012 the Management Engagement Committee has met once to carry out the review of the Investment Manager and consider their continued appointment.

The Board, through the Management Engagement Committee, has reviewed the performance of the Investment Manager in managing the portfolio over the period since launch. The review also considered the quality of the other services provided by the Investment Manager. It has concluded that it is in the best interests of shareholders as a whole that the appointment of Polar Capital LLP as Investment Manager is continued on the existing terms.

 

Directors' professional development

When a new Director is appointed he or she is offered an induction course provided by the Investment Manager. Directors are also provided on a regular basis with key information on the Company's policies, regulatory and statutory obligations and internal controls. Changes affecting Directors' responsibilities are advised to the Board as they arise. Directors also participate in the Investment Manager's online training as well as attending professional and industry seminars.

Performance Evaluation

The Board

The evaluation of the Board, its Committees and individual Directors is carried out annually. The process involves the use of a written questionnaire and the Chairman seeking the views of each Director.  The responses to the questionnaire are reviewed by the full Board.

The review of the Chairman's performance was conducted by the full Board led by the Chairman of the Audit Committee.

In carrying out these evaluations each Director is assessed on their relevant experience, their strengths and weaknesses in relation to the overall requirements of the Board and their commitment to the Company in terms of time by regular attendance at Board meetings. The process is constructed to assess the contribution of individual Directors to the overall operation of the Board and its Committees.

The Board has considered the size and structure of the Board as well as succession planning bearing in mind the balance of skills, knowledge and experience existing on the Board and the Company's expected seven year life.

Reappointment as a Director is not automatic and follows a process of evaluation of each Director's performance. The Board acknowledges the rationale of the UK Code for the rigorous review of Directors serving over six years and annual re-appointment after nine years. Nevertheless the Board shares the view of the AIC that length of service will not necessarily compromise the independence or contribution of directors of investment trusts where continuity and experience can significantly strengthen a board.

The Company does not have a policy on length of service for Directors due to the expected seven year life. All Directors are appointed for an initial term of three years, subject to reappointment and Companies Act provisions.

The Investment Manager

The Board reviews the performance of the Investment Manager at each Board meeting and the Company's performance against the Benchmark and a peer group of investment companies and funds with similar investment objectives.

The investment team provided by the Investment Manager, led by Dr Daniel Mahony, has experience of investing in the healthcare sector. In addition, the Investment Manager has other investment resources which support the investment team and has experience in managing and administering other investment trust companies.

The Management Engagement Committee reviews the terms of the contract with the Investment Manager.

The Board also monitors through the Investment Manager the performance of its other service providers including the custodian and registrar.

Accountability and audit

The Statement of Directors' Responsibilities in respect of the financial statements is set out on pages 34 and 35 and the Independent Auditors' Report is on pages 36and 37.

Internal controls

The Board has overall responsibility for the Company's system of internal control and for reviewing its effectiveness. The Company has no employees as its operational functions are carried out by third parties as described on page 22.

The Audit Committee does not consider it necessary for the Company to establish its own internal audit function as the Investment Manager, overseen by the Board, is responsible for monitoring all accounting and internal control operations.

The Investment Manager is responsible for the day to day investment management decisions on behalf of the Group and for the provision of accounting and administrative services including company secretarial services. The Investment Manager has an internal control framework to provide reasonable but not absolute assurance on the effectiveness of the internal controls operated on behalf of its clients. The Investment Manager is authorised and regulated by the Financial Services Authority and its compliance department monitors compliance with the FSA rules.

The Board has established a process for identifying, evaluating and managing any major risks faced by the Company. The process is documented through the use of a Risk Map which is subject to regular review by the Board and accords with the Revised Guidance for Directors on the Combined Code published in October 2005 by the Financial Reporting Council.

The controls are embedded within the business and aim to ensure that identified risks are managed and systems are in place to report on such risks. The internal controls seek to ensure the assets of the Company are safeguarded, proper accounting records are maintained and the financial information used in the Group and for publication is reliable. Controls covering the risks identified, including financial, operational, compliance and risk management are monitored by a series of regular reports covering investment performance, attribution analysis, reports from various third parties and from the Investment Manager including risks not directly the responsibility of the Investment Manager.

The Board has received a formal report from the Investment Manager with details of any known internal control failures and has also considered reports on the Investment Manager's internal controls and systems operated by other third party suppliers. The Board considers ad hoc reports from the Investment Manager and information is supplied to the Board as required.

The process was active throughout the period and up to the date of approval of this annual report. However, such a system is designed to manage rather than eliminate risks of failure to achieve the Company's business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Board will continue to monitor the system of internal controls in order to provide assurance that they operate as intended.

The Investment Manager has delegated the provision of accounting, portfolio valuation and trade processing to HSBC Securities Services (UK) Limited but remains responsible to the Company for these functions and provides the Board with information on these services.

The Board undertakes an annual review of the Company's system of internal control where the Risk Map is reviewed and control processes considered. The Board, assisted by the Investment Manager, has conducted the annual review of the risk map and the effectiveness of the system of internal controls taking into account any issues, none of which were considered significant, which arose during the course of the year ended 30 September 2012 and up to the date of this report.

The Board has adopted a zero tolerance to bribery and corruption in its business activities and uses the anti-bribery policy formulated and implemented by Polar Capital LLP which was sent to all suppliers of both Polar Capital LLP and the Company.

Relations with shareholders

The Board and the Investment Manager consider maintaining good communications with shareholders and engaging with larger shareholders through meetings and presentations a key priority. Shareholders are kept informed by the publication of annual and interim reports which include financial statements. These reports are supplemented by interim management statements, the daily release of the net asset value per share to the London Stock Exchange and the publication by the Investment Manager of a monthly factsheet.

All this information together with the Investment Manager's presentations is available from the Company's website at www.polarcapitalhealthcaretrust.co.uk

The Board is also keen that the AGM be a participative event for all shareholders who attend. The Investment Manager will make a presentation and shareholders are encouraged to attend. The Chairmen of the Board and of the Committees attend the AGM and are available to respond to queries and concerns from shareholders. At least twenty working days notice of the AGM is given to shareholders and separate resolutions are proposed in relation to each substantive issue.

Where the vote is decided on a show of hands, the proxy votes received are relayed to the meeting and subsequently published on the Company's website. Proxy forms have a 'vote withheld' option. The Notice of Meeting sets out the business of the AGM together with the full text of any special resolutions.

 

Shareholders may submit questions for the AGM in advance of the meeting or make general enquiries of the Company via the company secretary at the Registered Office of the Company.

 

The Board monitors the share register of the Company; it also reviews correspondence from shareholders and maintains regular contact with major shareholders. Shareholders who wish to raise matters with a Director may do so by writing to them at the Registered Office of the Company.

Corporate Responsibility

Socially responsible investing and exercise of voting powers

The Board has instructed the Investment Manager to take into account the published corporate governance of the companies in which they invest.

The Company has also considered the Investment Manager's Stewardship Code and Proxy Voting Policy. The Voting Policy is for the Investment Manager to vote at all general meetings of companies in favour of resolutions proposed by the management where it believes that the proposals are in the interests of shareholders. However, in exceptional cases, where it believes that a resolution could be detrimental to the interests of shareholders or the financial performance of the company, appropriate notification will be given and abstentions or a vote against will be lodged.

 

The Investment Manager has voted at 53 company meetings over the year ended 30 September 2012 in each case following the recommendations of the management of that company on the casting of votes.

 

The Investment Manager reports to the Board, when requested, on the application of the Stewardship Code and Voting Policy. The Investment Manager's Stewardship Code and Voting Policy can be found on the Company's website in the Corporate Governance section.

Environment

The Company's core activities are undertaken by its Investment Manager which seeks to limit the use of non-renewable resources and reducing waste where possible.

Statement of Compliance

The AIC Code comprises 21 principles. The Board consider that for the year under review the Directors, Board and Company have complied with the recommendations of the AIC Code in so far as they apply to the Company's business.  For the reasons set out in the AIC Guide the Board considers these provisions are not relevant to the position of the Company, being an externally managed investment company;

§ As all Directors are non executive and day to day management has been contracted to third parties the Company does not have a separate role for a Chief Executive from that of Chairman of the Board

§ As there are no executive Directors it does not comply with the UK Code in respect of executive directors' remuneration

§ The Company does not have an internal audit function as it relies on the systems of control operated by third party suppliers in particular those of the Investment Manager

§ Due to the structure of the Board it was considered unnecessary to identify a senior independent non-executive. The Board considers that all Directors have different qualities and areas of expertise on which they may lead where issues arise and to whom concerns may be conveyed.

By order of the Board

N P Taylor FCIS

Polar Capital Secretarial Services Limited

Company Secretary

4 December 2012

 

Statement of Directors' Responsibilities in respect of the Annual Report, Directors' Remuneration Report and Financial Statements

The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year/period. Under that law the Directors have elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

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 Group and the Company and of the profit or loss of the Group for that year. In preparing these financial statements, the Directors are required to:

§ select suitable accounting policies and then apply them consistently;

§ make judgements and accounting estimates that are reasonable and prudent;

§ state whether applicable IFRS as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;

§ prepare the financial statements on the 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 disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group's financial statements, Article 4 of the IAS Regulations. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Disclosure of Information to the Auditors

As far as the Directors are aware and to the best of their knowledge, having made enquiries, there is no relevant audit information of which the Auditors are unaware and the Directors have taken steps to make themselves aware of any relevant audit information and to establish that the Auditors are aware of such information.

Going Concern

The Board's assessment of the Group's position as at 30 September 2012 and the factors impacting the forthcoming year are set out in the Chairman's Statement and the Investment Manager's Report on pages 02 to 07 and in the Report of the Directors which incorporates the business review and corporate governance statements.

The financial position of the Group, its cash flows, and its liquidity position is described in the Business Review on pages 14 to 19. Note 25 to the financial statements includes the Group's policies and process for managing its capital; its financial risk management objectives; details of financial instruments and hedging activities. Exposure to credit risk and liquidity risk are also disclosed.

The Group has a portfolio of investments listed and traded on stock exchanges around the world, the majority of which can be sold within five working days, providing considerable financial resources, and after making enquiries the Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future despite the continued uncertain economic outlook. Accordingly, the Directors continue to adopt the going concern basis in preparing the annual report and financial statements.

Responsibility Statement under the Disclosure and Transparency Rules

The Directors of Polar Capital Global Healthcare Growth and Income Trust plc, who are listed on page 12, confirm to the best of their knowledge:

§ The financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union, and give a true and fair view of the assets, liabilities, financial position and profit of the Group and the undertakings included in the consolidation taken as a whole; and

§ The Chairman's Statement, Investment Manager's Report and Report of the Directors (together constituting the Management Report) include a fair review of the development and performance of the business and financial position of the Company and undertakings included in the consolidation taken as a whole, and include a description of the principal risks and uncertainties.

The financial statements were approved by the Board on 4 December 2012 and the responsibility statement was signed on its behalf by James Robinson, Chairman of the Board.

James Robinson

Chairman

 

Consolidated Statement of Comprehensive Income for the year ended 30 September 2012

 


Year ended

30 September 2012

15 month period ended

30 September 2011



Revenue

Capital

Total

Revenue

Capital

Total



return

return

return

return

return

return


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Investment income

3

4,174

149

4,323

4,512

281

4,793

Other operating income

4

407

-

407

747

-

747

Gains on investments held at fair value

5

-

20,512

20,512

-

3,636

3,636

Other movements on written options

6

-

74

74

-

(89)

(89)

Other currency losses

7

-

(162)

(162)

-

(610)

(610)









Total income


4,581

20,573

25,154

5,259

3,218

8,477









Expenses








Investment management fee

8

(188)

(752)

(940)

(204)

(814)

(1,018)

Other administrative expenses

9

(310)

-

(310)

(510)

-

(510)









Total expenses


(498)

(752)

(1,250)

(714)

(814)

(1,528)









Profit before finance costs








and tax


4,083

19,821

23,904

4,545

2,404

6,949









Finance costs

10

-

-

-

-

(1)

(1)









Profit before tax


4,083

19,821

23,904

4,545

2,403

6,948









Taxation

11

(481)

8

(473)

(549)

46

(503)









Net profit for the year and total comprehensive income


3,602

19,829

23,431

3,996

2,449

6,445









Earnings per ordinary share (basic) (pence)

13

3.68

20.25

23.93

4.37

2.68

7.05









Earnings per ordinary share (diluted) (pence)

13

3.61

19.85

23.46

4.34

2.66

7.00


The total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by the European Union. 

The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. 

The net profit for the year for the Company was £23,431,000 (2011:£6,445,000).

The Group does not have any other Comprehensive Income and hence the net profit, as disclosed above, is the same as the Group's total Comprehensive Income.

The notes on pages 42 to 63 form part of these financial statements.

 

Consolidated and Company Statement of Changes in Equity for the year ended 30 September 2012

 


Year ended 30 September 2012



Called up share capital

Share premium reserve

Special distributable reserve

Capital reserves

Revenue reserve

Total

equity


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Group and Company








Total equity at 1 October 2011


     24,653

    7,365

           64,792

       2,449

       1,165

  100,424









Total comprehensive income:








Profit for the year ended 30 September 2012


             -  

          -  

                  -  

     19,829

       3,602

    23,431

Transactions with owners, recorded directly to equity:








Share issue costs


             -  

(5)

                  -  

             -  

             -  

(5)

Equity dividends paid

12

             -  

          -  

                  -  

             -  

(3,112)

(3,112)









Total equity at 30 September 2012


     24,653

    7,360

           64,792

     22,278

       1,655

  120,738



















15 Month period ended 30 September 2011



Called up share capital

Share premium reserve

Special distributable reserve

Capital reserves

Revenue reserve

Total

equity


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Group and Company
















Total equity at 12 May 2010


            -  

          -  

                  -  

             -  

             -  

            -  









Total comprehensive income:








Profit for the period to 30 September 2011


            -  

          -  

                  -  

       2,449

       3,996

      6,445

Transactions with owners, recorded directly to equity:








Issue of 97,899,999 ordinary shares


     24,475

  74,133

                  -  

             -  

             -  

    98,608

Issue of 17,800,00 subscription shares


          178

(178)

                  -  

             -  

             -  

            -  

Share issue costs


            -  

(1,798)

                  -  

             -  

             -  

(1,798)

Transfer of Share Premium to Special Distributable Reserve


-

(64,792)

           64,792

             -  

             -  

            -  

Equity dividends paid

12

            -  

          -  

                  -  

             -  

(2,831)

(2,831)









Total equity at 30 September 2011


     24,653

    7,365

           64,792

       2,449

       1,165

  100,424

















The notes on pages 42 to 63 form part of these financial statements.

 

Consolidated and Company Balance Sheet as at 30 September 2012

 







30 September 2012


30 September 2011


Notes

£'000


£'000

Non current assets





Investments held at fair value

14

120,332


93,903






Current assets





Receivables

15

482


319

Overseas tax recoverable


130


136

Cash and cash equivalents

23

112


6,839



724


7,294






Total assets


121,056


101,197






Current liabilities





Payables

16

(291)


(638)

Fair value of open derivative contracts

14

-


(135)

Bank overdraft

23

(27)


-



(318)


(773)











Net assets


120,738


100,424






Equity attributable to equity shareholders










Called up share capital

17

24,653


24,653

Share premium reserve

18

7,360


7,365

Special distributable reserve

19

64,792


64,792

Capital reserves

20

22,278


2,449

Revenue reserve

21

1,655


1,165

Total equity


120,738


100,424






Net asset value per ordinary share (pence)

22

123.33


102.58






Net asset value per ordinary share (diluted) (pence)

22

119.74


102.18







The financial statements on pages 38 to 41 were approved and authorised for issue by the Board of Directors on 4 December 2012 and signed on its behalf.

 

 





 

James Robinson

Chairman





 

The notes on pages 42 to 63 form part of these financial statements.

Company registered number 7251471


Consolidated and Company Cash Flow Statement for the year ended 30 September 2012

 


Year ended


15 Month period ended



30 September 2012


30 September 2011


Notes

£'000


£'000

Cash flows from operating activities





Profit before finance costs and tax


23,904


6,949

Adjustment for non-cash items:





Gain on investments held at fair value through profit or loss


(20,512)


(3,636)

Adjusted profit before finance costs and tax


3,392


3,313






Adjustments for:





Purchases of investments, including transaction costs


(59,915)


(144,999)

Sales of investments, including transaction costs


53,759


54,971

Increase in receivables


(163)


(319)

(Decrease)/increase in payables


(243)


534

Overseas tax deducted at source


(467)


(639)






Net cash used in operating activities


(3,637)


(87,139)






Cash flows from financing activities





Proceeds from issue of share capital (net of issue costs)


(5)


96,810

Equity dividends paid

12

(3,112)


(2,831)

Finance costs paid


-


(1)

Net cash (used in)/generated from financing activities


(3,171)


93,978






Net (decrease)/increase in cash and cash equivalents


(6,754)


6,839






Cash and cash equivalents at the beginning of the year


6,839


-






Cash and cash equivalents at the end of the year

23

85


6,839






The notes on pages 42 to 63 form part of these financial statements






 

Notes to the Financial Statements for the year ended 30 September 2012

1.

General Information

 


The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs), which comprise standards and interpretations approved by the International Accounting Standards Board (IASB) and International Accounting Standards Committee (IASC), as adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies under IFRS.

 


The Group and Company's presentational currency is pounds sterling. Pounds sterling is also the functional currency because it is the currency which is most relevant to the majority of the Company's shareholders and creditors and the currency in which the majority of the Company's operating expenses are paid.

 



 

2.

Accounting Policies

 


The principal accounting policies followed, which have been applied consistently, are set out below:

 

(a)

Basis of Preparation

 


The consolidated financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments and derivative financial instruments at fair value through profit or loss.

 


Where presentational guidance set out in the Statement of Recommended Practice (SORP) for investment trusts issued by the Association of Investment Companies (AIC) in January 2009 is consistent with the requirements of IFRS, in so far as those requirements are applicable to the consolidated financial statements, the Directors have sought to prepare the consolidated financial statements on a basis compliant with the recommendations of the SORP.

 



 

(b)

Basis of Consolidation

 


The Group financial statements consolidate the financial statements of the Company and entities controlled by the Company (its wholly owned non trading subsidiary undertaking) made up to 30 September each year. In the financial statements of the parent company, investment in the subsidiary is recognised at fair value.  Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

The Statement of Comprehensive Income is only presented in consolidated form, as provided by Section 408 of the Companies Act 2006.

 



 


The financial position of the Group and Company at 30 September 2012 is shown in the balance sheet on page 40.  The assets of the Company consist of securities that are readily realisable.  The Directors consider that the Company has adequate financial resources to enable it to continue in operational existence for the foreseeable future.  Accordingly, the Directors believe that it is appropriate to adopt the going concern basis in preparing the consolidated financial statements.

 



 

(c)

Presentation of the Statement of Comprehensive Income

 


In order to better reflect the activities of an investment trust company and in accordance with the guidance set out by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income.

 


The net revenue is the measure the directors believe appropriate in assessing the Company's compliance with certain requirements set out in section 1158 Corporation Tax Act 2010.

 



 

(d)

Income

 


Dividends receivable from equity shares are taken to the revenue return column of the Statement of Comprehensive Income on an ex-dividend basis. 

 


Special dividends are recognised on an ex-dividend basis and may be considered to be either revenue or capital items.

 


The facts and circumstances are considered on a case by case basis before a conclusion on appropriate allocation is reached.

 


Income from US/Canadian REITs is initially taken to the revenue return column of the Statement of Comprehensive Income on an ex-dividend basis.  An adjustment may then be made to reallocate a proportion of this income to capital, depending on the information announced by the REITs.

 


Where the Company has received dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised in the revenue return column of the Statement of Comprehensive Income. Any excess in value of shares received over the amount of the cash dividend foregone is recognised in the capital return column of the Statement of Comprehensive Income.

 


The fixed returns on debt securities and non-equity shares are recognised under the effective interest rate method.

 


Bank interest and other income receivable are accounted for on an accruals basis and are recognised when amounts fall due.

 


Stock lending fees, net of agent's fees and commissions, are accounted for on an accruals basis and recognised in the revenue return column of the Statement of Comprehensive Income.

 


Underwriting commission is recognised when the issue takes place and is credited to the revenue return column of the Statement of Comprehensive Income in so far as it relates to the shares the Company is not required to take up.

 


Where the Company is required to take up a proportion of the shares underwritten, an equal proportion of the commission is credited to the capital return column of the Statement of Comprehensive Income.

 



 

(e)

Written Options

 


The Company may write exchange-traded options with a view to generating income. This involves writing short-dated covered-call options and put options. The use of financial derivatives is governed by the Company's policies, as approved by the Board.

 


These options are recorded initially at fair value, based on the premium income received, and are then measured at subsequent reporting dates at fair value. Changes in the fair value of the options are recognised in the capital return for the period.

 


The option premiums are recognised evenly over the life of the option and shown in the revenue return, with an appropriate amount shown in the capital return to ensure the total return reflects the overall change in the fair value of the options.

 


Where an option is exercised, any balance of the premium is recognised immediately in the revenue return with a corresponding adjustment in the capital return based on the amount of the loss arising on exercise of the option.

 



 

(f)

Expenses and Finance Costs

 


All expenses, including the management fee, are accounted for on an accruals basis.

 


All expenses have been presented as revenue items except as follows:

 


Expenses are charged to the capital column of the Statement of Comprehensive Income where a connection with the maintenance or enhancement of the value of investments can be demonstrated. In this respect the investment management fees have been charged to the Statement of Comprehensive Income in line with the Board's expected long-term split of returns, in the form of capital gains and income from the Company's portfolio. As a result 20% of the investment management fees are charged to the revenue account and 80% charged to the capital account of the Statement of Comprehensive Income.

 


Finance costs are calculated using the effective interest rate method and are accounted for on an accruals basis and, in line with the management fee expense, are charged 20% to the revenue account and 80% to the capital account of the Statement of Comprehensive Income.

 


The performance fee (when payable) is charged entirely to capital as the fee is based on the out-performance of the Benchmark and is expected to be attributable largely, if not wholly, to capital performance.

 



 

(g)

Taxation

 


The tax expense represents the sum of the overseas withholding tax deducted from investment income, tax currently payable and deferred tax.

 


The tax currently payable is based on the taxable profits for the year ended 30 September 2012. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

 


In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Statement of Comprehensive Income is the "marginal basis". Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital return column.

 


Deferred tax is the tax expected to be payable or recoverable on temporary 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 balance sheet 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.

 


The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 


Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax rates that have been enacted or substantively enacted at the balance sheet date.

 


Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

 



 

(h)

Investments Held at Fair Value Through Profit or Loss

 


When a purchase or sale is made under contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date and are initially measured at fair value.

 


On initial recognition the Company has designated all of its investments as held at fair value through profit or loss as defined by IFRS.

 


All investments are measured at subsequent reporting dates at fair value, which is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. 

 


All investments, classified as fair value through profit or loss, are further categorised into the following fair value hierarchy:

 


Level 1: Unadjusted prices quoted in active markets for identical assets and liabilities.

 


Level 2:Having inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

 


Level 3: Having inputs for the asset or liability that are not based on observable market data. Changes in fair value of all investments held at fair value and realised gains and losses on disposal are recognised in the capital return column of the Statement of Comprehensive Income.

 



 

(i)

Receivables

 


Other receivables do not carry any interest and are short-term in nature and are accordingly initially valued at fair value and subsequently stated at their nominal value (amortised cost) as reduced by appropriate allowances for estimated irrecoverable amounts.

 



 

(j)

Cash and Cash Equivalents

 


Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash.

 



 

(k)

Dividends Payable

 


Dividends payable to shareholders are recognised in the financial statements when they are paid or, in the case of final dividends, when they are approved by the shareholders.

 



 

(l)

Payables

 


Other payables are not interest-bearing and are initially valued at fair value and subsequently stated at their nominal value (amortised cost).

 



 

(m)

Foreign Currency Translation

 


Transactions in foreign currencies are translated into sterling at the rate of exchange ruling on the date

 


of each transaction. Monetary assets, monetary liabilities and equity investments in foreign currencies at the balance sheet date are translated into sterling at the rates of exchange ruling on that date. Realised profits or losses on exchange, together with differences arising on the translation of foreign currency assets or liabilities, are taken to the capital return column of the Statement of Comprehensive Income.

 


Foreign exchange gains and losses arising on investments held at fair value are included within changes in fair value.

 



 

(n)

Capital Reserves

 


Capital reserve arising on investments sold includes:

 


- gains/losses on disposal of investments

 


- exchange differences on currency balances

 


- other capital charges and credits charged to this account in accordance with the accounting policies above

 


Capital reserve arising on investments held includes:

 


- increases and decreases in the valuation of investments held at the balance sheet date.

 


All of the above are accounted for in the Statement of Comprehensive Income.

 



 

(o)

Accounting Standards

 

(i) Standards, amendments and interpretations becoming effective in the year to 30 September 2012:

 

*

IFRS 1 (Amendment), 'First Time Adoption of International Financial Reporting Standards'.  Amendments resulting from 2010 annual improvement review.

 

*

IFRS 7 (Amendment), 'Financial Instruments - Disclosures'.  Amendments resulting from the 2010 annual improvement review.

 

*

IAS 1 (Amendment), 'Presentation of Financial Statements' - amendments resulting from the 2010 annual improvement review.

 

*

IAS 24 (Revised), 'Related Party Disclosures'.  Revised definition of related parties. 

 


None of the above has an impact on the financial statements.

 



 

(ii) Standards, amendments and interpretations to existing standards become effective in future accounting periods and have not been adopted early by the Group or Company:

 

*

IFRS 7 (Amendment), 'Financial Instruments - Disclosures' (effective for periods beginning on or after 1 January 2013). Amendments enhancing disclosures about offsetting financial assets and financial liabilities.

 

*

IFRS 7 (Amendment), 'Financial Instruments - Disclosures' (effective for periods beginning on or after 1 January 2015, or otherwise when IFRS 9 first applied). Amendments requiring disclosures about the initial application of IFRS 9.

 

*

IFRS 9, 'Financial Instruments' (effective for financial periods beginning on or after 1 January 2015). Replaces IAS 39. Simplifies accounting for financial assets, replacing the current multiple measurement categories with a single principle-based approach to classification. All financial assets to be measured at either amortised cost or fair value. The Group will apply IFRS 9 from 1 October 2015, subject to endorsement by the EU.

 

*

IFRS 10, 'Consolidated Financial Statements' (effective for periods beginning on or after 1 January 2013).

 


Provides additional guidance to assist in the determination of control where this is difficult to assess. The Group will apply IFRS 10 from 1 October 2013.

 

*

IFRS 12, 'Disclosure of Interests in Other Entities' (effective for periods beginning on or after 1 January 2013).

 


Includes the disclosure requirement for all forms of interest in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The Group will apply IFRS 12 from 1 October 2013.

 

*

IFRS 13, 'Fair Value Measurement' (effective for periods beginning on or after 1 January 2013). Aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across all IFRSs. The Group will apply IFRS 10 from 1 October 2013.

 

*

IAS 1, 'Presentation of Financial Statements' (effective for periods beginning on or after 1 July 2012). Amendments to revise the way other comprehensive income is presented. The Group will apply this amendment from 1 October 2012.

 



 

(iii) The following standards, amendments and interpretations to existing standards become effective in future accounting periods, but are not relevant for the Group's operations:

 

*

IFRS 11, 'Joint Arrangements' (effective for periods beginning on or after 1 January 2013).

 

*

IAS 12 (amendment), 'Income Taxes' (effective for periods beginning on or after 1 January 2012).

 

*

IAS 27 (revised 2011), 'Separate Financial Statements' (effective for periods beginning on or after 1 January 2013).

 

*

IAS 28 (revised 2011), 'Associates and joint ventures' (effective for periods beginning on or after 1 January 2013).

 



 

(p)

Segmental Reporting

 


Under IFRS 8, 'Operating Segments', operating segments are considered to be the components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

 


The Directors are of the opinion that the Group has only one operating segment and as such no distinct segmental reporting is required.

 

 

3

Investment income





Year ended

15 Month period ended

 







30 September 2012

30 September 2011

 







£'000

£'000

 


Revenue:







 


Franked: Listed investments







 


  Dividend income





757

958

 


Unfranked: Listed investments







 


  Dividend income





3,417

3,554

 


Total investment income allocated to revenue




4,174

4,512

 


Capital:







 


Special dividends allocated to capital




31

225

 


Dividends from REITs allocated to capital




118

56

 


Total investment income allocated to capital




149

281

 









 

4

Other operating income





Year ended

15 Month period ended

 







30 September 2012

30 September 2011

 







£'000

£'000

 


Option premium income





406

744

 


Bank interest





1

3

 


Total other operating income





407

747

 









 


Option premium income for the year arises from writing short-dated covered-call options and put options in the expectation that the options will not be exercised or, in overall terms, any losses that may arise following exercise will be outweighed by the premiums received. As shown in note 6, a gain of £74,000 (2011:  loss of £89,000) has been recognised in the capital return for the year in respect of these options.

 









 

5

Gains on investments held at fair value




Year ended

15 Month period ended

 







30 September 2012

30 September 2011

 







£'000

£'000

 


Net gains/(losses) on disposal of investments at historic cost

3,317

(355)

 


Transfer on disposal of investments

(1,161)

-

 


Gains/(losses) based on carrying value at previous balance sheet date

2,156

(355)

 


Valuation gains on investments held during the year

18,356

3,991

 



20,512

3,636

 









 

6

Other movements on written options




Year ended

15 Month period ended

 







30 September 2012

30 September 2011

 







£'000

£'000

 


Other movements on written options





74

(89)

 









 


This movement arises from differences between the change in fair value of written options and the amount of premium income recognised in the revenue return, in accordance with the policy explained in note 2(e).

 









 

7

Other currency losses





Year ended

15 Month period ended

 







30 September 2012

30 September 2011

 







£'000

£'000

 


Exchange losses on currency balances





(162)

(610)

 









 

8

Investment management fee





Year ended

15 Month period ended

 







30 September 2012

30 September 2011

 







£'000

£'000

 


Management fee







 


- charged to revenue





188

204

 


- charged to capital





752

814

 


Investment management fee payable to Polar Capital LLP.


940

1,018

 









 


Management fees are allocated 20% to revenue and 80% to capital.

 









 

9

Other administrative expenses (including VAT where appropriate)




Year ended

15 Month period ended

 







30 September 2012

30 September 2011

 







£'000

£'000

 


Directors' fees





95

131

 


Auditors' remuneration:

For audit services



20

52

 



For other Services



3

8

 


Other expenses





192

319

 







310

510

 









 


Ongoing charges represents the total expenses of the fund, excluding finance costs, expressed as a percentage of the average daily net asset value, in accordance with AIC guidance issued in May 2012.

 


The ongoing charges for the year ended 30 September 2012 was 1.14% and for the period 15 June 2010 to 30 September 2011 was 1.28%.

 









 

10

Finance costs





Year ended

15 Month period ended

 







30 September 2012

30 September 2011

 







£'000

£'000

 


Interest on overdraft






                            

 


- charged to revenue





-

-

 


- charged to capital





-

1

 







-

1

 


Finance costs are allocated 20% to revenue and 80% to capital.

 



 

11

Taxation

Year ended

30 September 2012

15 Month period ended

30 September 2011

 



Revenue

Capital

Total

Revenue

Capital

Total

 



return

return

return

return

return

return

 



£'000

£'000

£'000

£'000

£'000

£'000

 


a) Analysis of tax charge for the period:







 


Overseas tax

              470

3

                            473

                            498

5

                        503

 


Tax relief in capital

                11

(11)

                               -  

                              51

(51)

                           -  

 


Total tax for the period

(see note 11b)

              481

(8)

                            473

                            549

(46)

                        503

 









 


b) Factors affecting tax charge for the period:

 


The charge for the period can be reconciled to the profit per the Company Statement of Comprehensive Income as follows:

 


Profit before tax

4,083

19,821

23,904

4,545

2,403

6,948

 









 


Tax at the UK corporation tax rate of 24%* (2011:  26%)*

490

2,379

2,869

415

219

634

 


Tax at the UK corporation tax rate of 26%* (2011:  28%)*

531

2,577

3,108

826

437

1,263

 


Tax effect of non-taxable dividends

(960)

(37)

(997)

(1,130)

(77)

(1,207)

 


Gains on investments that are not taxable

-

(5,107)

(5,107)

-

(801)

(801)

 


Unrelieved current period expenses and deficits

-

140

140

-

125

125

 


Expenses and finance costs not deductible for tax purposes

-

-

-

1

-

1

 


Overseas tax suffered

470

3

473

498

5

503

 


Tax relief on overseas tax suffered

(50)

37

(13)

(61)

46

(15)

 


Total tax for the period (see note 11a)

481

(8)

473

549

(46)

503

 









 


*  In addition to the changes in rates of Corporation tax disclosed above a number of further changes in the UK Corporation tax system were announced in the March 2012 UK Budget Statement.  Legislation to reduce the main rate of corporation tax from 24% to 23% from 1 April 2013 was subsequently enacted on 6 July 2012.  As such the unrecognised deferred tax asset has been revalued using the tax rate of 23%.  Further reductions to the main rate are proposed to reduce the rate by 1% to 22% by 1 April 2014.  These further changes have not been subsequently enacted at the balance sheet date and, therefore, are not included in these financial statements.

 









 







Year ended

15 Month period ended

 







30 September 2012

30 September 2011

 


c) Factors that may affect future tax charges:




£'000

£'000

 


There is an unrecognised deferred tax asset comprising:

 


Unrelieved management expenses





                            235

                        119

 







                            235

                        119

 









 


It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these expenses and deficits and therefore no deferred tax asset has been recognised. 

 


Due to the Company's tax status as an investment trust and the intention to continue meeting the conditions required to obtain approval of such status in the foreseeable future, the Company has not provided tax on any capital gains arising on the revaluation or disposal of investments held by the Company.

 





12

Dividends on the Ordinary Shares




Amounts recognised as distributions to Ordinary shareholders in the year:




Dividends paid in the year ended 30 September 2012





Year ended






30 September 2012



Payment date

No of shares

Pence per share

£'000



30 November 2011

97,899,999

0.46p

450



29 February 2012

97,899,999

0.46p

450






3,112









The revenue available for distribution for the year ended 30 September 2012 is £3,602,000 (2011:£3,996,000)


The total dividends in respect of the financial year ended 30 September 2012 which is the basis on which the requirements of Section 1158 Corporation Tax Act 2010 are considered is set out below:






Year ended







30 September 2012



Payment date

No of shares

Pence per share

£'000



29 February 2012

97,899,999

0.40p

450



31 May 2012

97,899,999

0.46p

450



31 August 2012

97,899,999

1.80p

1,762



30 November 2012

100,050,000

0.50p

501







3,163










The total dividends in respect of the 15 month financial period ended 30 September 2011 which is the basis which the requirements of Section 1158 Corporation Tax Act 2010 are considered is set out below:





15 month period ended






30 September 2011



Payment date

No of shares

Pence per share

£'000



30 November 2010

89,000,000

0.40p

                                           356



28 February 2011

89,000,000

0.40p

                                           356



31 May 2011

91,000,000

0.40p

                                           364



31 August 2011

97,475,000

1.80p

                                        1,755



30 November 2011

97,899,999

0.46p

                                           450






3,163









All dividends are paid as interim dividends.  Five interim dividends were paid in the period ended 30 September 2011 due to this being a 15 month accounting period.


The dividends paid in November each year relate to a dividend declared in respect of the previous financial period but paid in the current accounting period.

 

13

Earnings per ordinary share






 



Year ended

30 September 2012

15 Month period ended

 30 September 2011

 



Revenue

Capital

Total

Revenue

Capital

Total

 



return

return

return

return

return

return

 


The calculation of basic earnings per share is based on the following data:







 


Net profit for the period (£'000)

3,602

19,829

23,431

3,996

2,449

6,445

 


Weighted average ordinary shares in issue during the year (period from 15 June 2010 to 30 September 2011)

97,899,999

97,899,999

97,899,999

91,406,144

91,406,144

91,406,144

 


Basic - ordinary shares (pence)

3.68

20.25

23.93

4.37

2.68

7.05

 


The calculation of diluted earnings per share is based on the following data:


 


Net profit for the period (£'000)

3,602

19,829

23,431

3,996

2,449

6,445

 


Diluted number of shares in issue during the period

99,906,976

99,906,976

99,906,976

92,029,651

92,029,651

92,029,651

 









 


Diluted - ordinary shares (pence)

3.61

19.85

23.46

4.34

2.66

7.00

 



 


The calculation of the diluted total, revenue and capital returns per ordinary share are carried out in accordance with IAS 33"Earnings per Share". For the purposes of calculating diluted returns per ordinary share, the number of ordinary shares is the weighted average used in the basic calculation plus the number of ordinary shares deemed to be issued for no consideration on exercise of all subscription shares by reference to the average share price of the ordinary shares during the year.

 








 

14

Investments and derivatives



Group and Company

 


(a) Investments





30 September 2012

30 September 2011

 







£'000

£'000

 


Valuation at 30 September





93,903

-

 


Less: Valuation gains





(3,991)

-

 


Cost at 30 September





89,912

-

 


Additions at cost





59,676

145,238

 


Proceeds on disposal





(53,759)

(54,971)

 


Gains/(losses) on disposal





3,317

(355)

 


Cost at 30 September





99,146

89,912

 


Add: Valuation gains





21,186

3,991

 


Valuation at 30 September





120,332

93,903

 









 


The following transaction costs, including stamp duty and broker commissions were incurred during the year:

Group and Company

 







30 September 2012

30 September 2011

 







£'000

£'000

 


On acquisition





123

256

 


On disposal





98

105

 







221

361

 









 


(b) Fair value of open derivative contracts




Group and Company

 







30 September 2012

30 September 2011

 







£'000

£'000

 


Health Care REIT Call Option 50 closing 22 October 2011

-

(4)

 


GlaxoSmithKline Call Option 1350 closing 21 October 2011

-

(7)

 


HCP Call Option 35 closing 22 October 2011

-

(14)

 


Abbott Laboratories Call Option 52.5 closing 19 November 2011

-

(16)

 


GlaxoSmithKline Call Option 1350 closing 18 November 2011

-

(16)

 


Bristol Myers Squibb Call Option 41 closing 19 November 2011

-

(23)

 


Bayer AG Call option 41 closing 21 October 2011

-

(55)

 


Fair value at 30 September

-

(135)

 









 


(c) Fair value hierarchy





Group and Company

 







30 September 2012

30 September 2011

 







£'000

£'000

 


Level 1 assets





120,332

93,768

 


Valuation at 30 September





120,332

93,768

 









 


All Level 1 assets are traded on a recognised Stock Exchange.





 









 


(d) Subsidiary companies







 


The company owns the entire share capital consisting of 2 ordinary shares of £1 of Polar Capital Global Healthcare Finance Limited, which is registered in England and Wales and operates in the United Kingdom.  This subsidiary is currently dormant.

 


The cost of the investment in the subsidiary was £2

 


The investment is stated in the Company's Financial Statements at cost, which is considered by the Directors to equate to fair value.

 


 

 







 

15

Receivables





Group and Company

 







30 September 2012

30 September 2011

 







£'000

£'000

 


Accrued Income





452

289

 


Prepayments





30

30

 









 


The carrying values of other receivables approximate their fair value.

 









 

16

Payables





Group and Company

 







30 September 2012

30 September 2011

 







£'000

£'000

 


Purchases for future settlement





-

239

 


Accruals





291

399

 







291

638

 


The carrying values of other payables approximate their fair value.



 









 

17

Called up share capital





Group and Company

 







30 September 2012

30 September 2011

 







£'000

£'000

 


97,899,999 ordinary shares at 25p each




24,475

24,475

 


17,800,000 subscription shares at 1p each




178

178

 


At 30 September 2012





24,653

24,653

 









 


The subscription shares were issued as a bonus issue to ordinary shareholders at a rate of one bonus subscription share for every five ordinary shares held on 15 June 2010.

 


A subscription share carries the right to subscribe in cash for one ordinary share at a price of 100p on 31 January 2014. 

 









 

18

Share premium reserve





Group and Company

 







30 September 2012

30 September 2011

 







£'000

£'000

 


As at 1 October 2011





7,365

-

 


Issue of 89,000,000 ordinary shares at 100p each




-

66,750

 


Bonus issue of 17,800,000 subscription shares at 1p each


-

(178)

 


Transfer to special distributable reserve




-

(64,792)

 


Issue of 2,000,000 ordinary shares at 102.25p each



-

1,545

 


Issue of 4,275,000 ordinary shares at 110.55p each



-

3,657

 


Issue of 2,200,000 ordinary shares at 109.75p each



-

1,865

 


Issue of 424,999 ordinary shares at 99.375p each



-

316

 


Issue costs





(5)

(1,798)

 


At 30 September 2012





7,360

7,365

 









 

19

Special distributable reserve





Group and Company

 







30 September 2012

30 September 2011

 







£'000

£'000

 


As at 1 October 2011





64,792

-

 


Transfer from share premium reserve





64,792

 


At 30 September 2012





64,792

64,792

 









 


Surpluses to the credit of the special distributable reserve can be used to purchase the Company's own shares.

 









 

20

Capital reserves





Group and Company

 







30 September 2012

30 September 2011

 







£'000

£'000

 


As at 1 October 2011





2,449

-

 


Net gains/(losses) on disposal of investments




2,156

(355)

 


Valuation gains on investments held during the year



18,356

3,991

 


Other movements on derivatives held during the year

74

(89)

 


Exchange losses on currency balances




(162)

(610)

 


Capital dividends




149

281

 


Irrecoverable tax on special capital dividends




(3)

(5)

 


Tax relief due from revenue




11

51

 


Investment management fee allocated to capital




(752)

(814)

 


Finance costs allocated to capital




-

(1)

 


At 30 September 2012




22,278

2,449

 









 


The balance on the capital reserve represents a profit of £21,186,000 (2011:  £3,991,000) on investments held and a profit of £1,092,000 (2011:  loss of £1,542,000) on investments sold.

 









 

21

Revenue reserve





Group and Company

 







30 September 2012

30 September 2011

 







£'000

£'000

 


As at 1 October 2011





1,165

-

 


Revenue profit





3,602

3,996

 


Interim dividends paid





(3,112)

(2,831)

 


At 30 September 2012





1,655

1,165

 









 

22

Net asset value per ordinary share




Group and Company

 







30 September 2012

30 September 2011

 


Undiluted:







 


Net assets attributable to ordinary shareholders (£'000)


120,738

100,424

 


Ordinary shares in issue at end of period




97,899,999

97,899,999

 


Net asset value per ordinary share (pence)




123.33

102.58

 









 


Diluted:







 


Net assets attributable to ordinary shareholders (£'000)


138,538

118,224

 


Ordinary shares in issue at end of period if subscription shares converted

115,699,999

115,699,999

 


Net asset value per ordinary share (pence)




119.74

102.18

 









 


The diluted net asset value per ordinary share has been calculated on the assumption that 17,800,000 subscription shares in issue were converted at 100 pence per share, resulting in a total number of shares in issue of 115,699,999.

 









 

23

Cash and cash equivalents






 


Cash and cash equivalents include the following for the purposes of the Cash Flow Statement:

Group and Company

 






30 September 2012

30 September 2011

 







£'000

£'000

 


Cash at bank





-

6,795

 


Cash held at derivative clearing houses




112

44

 


Bank overdraft





(27)

-

 







85

6,839

 









 

24

Related party transactions







 


Under the terms of an agreement dated 26 May 2010 the Company has appointed Polar Capital LLP ("Polar Capital") to provide investment management, accounting, secretarial and administrative services.  Details of the fee arrangement for these services are given in the Report of the Directors.  The total fees, paid under this agreement to Polar Capital in respect of the year ended 30 September 2012 were £940,000 (2011:  £1,018,000)  of which £169,000 (2011:  £70,000) was outstanding at the year-end.

 

 


The Company has no employees.  The Company paid £95,000 to the Directors and the Remuneration Report is set out on pages 32 and 33.

 









 

25

Derivatives and other financial instruments

 


Risk management policies and procedures for the Group and Company

 


The Group comprises of an investment trust and a wholly owned subsidiary ("the Group").  The Group invests in equities and other financial instruments for the long term to further the investment objective set out on page 15.  This exposes the Group to a range of financial risks that could impact on the assets or performance of the Group.

 

 


The main risks arising from the Group's pursuit of its investment objective are market risk, liquidity risk and credit risk and the Directors' approach to the management of them is set out below.

 


The Group's exposure to financial instruments can comprise:

 


- Equity and non-equity shares and fixed interest securities which may be held in the investment portfolio in accordance with the investment objective

 


-       - Bank overdrafts, the main purpose of which is to raise finance for the Group's operations

 


- Cash, liquid resources and short-term receivables and payables that arise directly from the Group's operations

 


- Derivative transactions which the Group enters into may include equity or index options, index futures contracts, and forward foreign exchange contracts. The purpose of these is to manage the market price risks and foreign exchange risks arising from the investment activities.

 


The overall management of the risks is determined by the Board and its approach to each risk identified is set out below.  The Board and the Investment Manager co-ordinate the risk management and the Investment Manager assesses the exposure to market risk when making each investment decision.

 









 


(a) Market Risk







 


Market risk comprises three types of risk: market price risk (see note 25(a) (i)), currency risk (see note 25(a) (ii)), and interest rate risk (see note 25(a) (iii)).

 


(i) Market Price Risk







 


The Company is an investment company and as such its performance is dependent on its valuation of its investments.

 


Consequently market price risk is the most significant risk that the Group and Company face.

 


Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Company's operations.

 


It represents the potential loss the Group and Company might suffer through holding market positions in the face of price movements.

 


A detailed breakdown of the investment portfolio is given on pages 8 to 11. Investments are valued in accordance with the accounting policies as stated in Note 2(h).

 


At the year end, the Group did not hold any derivative instruments. 

 


Management of the risk







 


In order to manage this risk it is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce both the statistical risk and the risk arising from factors specific to a particular healthcare sub sector. The allocation of assets to international markets, together with stock selection covering small, medium and large companies, and the use of index options, are other factors which act to reduce price risk. The Investment Manager actively monitors market prices throughout the year and reports to the Board which meets regularly in order to consider investment strategy.

 


Market price risks exposure







 


The Group and Company's exposure to changes in market prices at 30 September on its investments was as follows:

Year ended

15 Month period ended

 







30 September 2012

30 September 2011

 







£'000

£'000

 


Non-current asset investments at fair value through profit or loss



120,332

93,903

 


Current liability investments at fair value




-

(135)

 







120,332

93,768

 









 


Market price risk sensitivity







 


The following table illustrates the sensitivity of the return after taxation for the year and the value of shareholders' equity to an increase or decrease of 15% in the fair values of the Group and Company's investments. This level of change is considered to be reasonably based on observation of current market conditions and historic trends. The sensitivity analysis is based on the Group and Company's investments at each balance sheet date, with all other variables held constant.

 





Year ended

15 Month period ended

 




30 September 2012

30 September 2011

 





Increase in

Decrease in

Increase in

Decrease in

 





fair value

fair value

fair value

fair value

 


Group and Company



£'000

£'000

£'000

£'000

 


Income statement - profit after tax







 


Revenue return



(30)

30

(24)

24

 


Capital return



17,926

(17,926)

13,969

(13,969)

 


Change to the profit after tax for the year


17,896

(17,896)

13,945

(13,945)

 


Change to equity attributable to shareholders


17,896

(17,896)

13,945

(13,945)

 









 


The Group's total return and net assets can be significantly affected by currency translation movements as the majority of the Group's assets and revenue are denominated in currencies other than sterling.

 


Management of the risk







 


The Investment Manager mitigates risks through an international spread of investments.

 


Settlement risk on investment trades is managed through short term hedging.

 


Foreign currency exposure







 


The table below shows, by currency, the split of the Group and Company's monetary assets, liabilities and investments that are priced in currencies other than sterling.

 









 







Year ended

15 Month period ended

 







30 September 2012

30 September 2011

 


Group and Company





£'000

£'000

 


Monetary Assets:







 


Cash and short term receivables







 


US dollars





160

72

 


Japanese yen





148

60

 


Swiss francs





137

127

 


Australian dollars





63

-

 


Canadian dollars





8

4

 


Euros





5

19

 


Monetary Liabilities:







 


Other payables







 


US dollars





-

(221)

 


Foreign currency exposure on net monetary items



521

61

 


Non-Monetary Items:







 


Investments at fair value through profit or loss that are equities




 


US dollars





67,462

49,583

 


Swiss francs





18,302

13,654

 


Japanese yen





8,776

3,846

 


Euros





5,809

6,489

 


Australian dollars





2,453

2,021

 


Canadian dollars





1,462

559

 


Norwegian krona





335

-

 


Brazilian real





116

133

 


Swedish kroner





-

211

 


Danish krona





-

193

 


Total net foreign currency exposure





105,236

76,750

 









 


During the financial year sterling appreciated by 3.7% against the US dollar (2011:   appreciated by 5.2%), appreciated by 4.6% against the Japanese yen (2011:  depreciated by 11.3%), appreciated by 8.1% against the Euro (2011:  depreciated by 3.1%), and appreciated by 7.3% against the Swiss franc (2011:  depreciated by 15.5%).

 









 


Foreign currency sensitivity







 


The following table illustrates the sensitivity of the profit after tax for the year and the value of equity attributable to shareholders in regard to the financial assets and financial liabilities and the exchange rates for the £/US dollar, £/Euro, £/Japanese yen and £/Swiss francs.

 

 


Based on the year end position, if sterling had depreciated by a further 10% against the currencies shown, this would have the following effect:

 





Year ended 30 September 2012

 


Group and Company



£'000

 





US dollar

Euro

Yen

Swiss Francs

 


Statement of Comprehensive Income - profit after tax



 


Revenue return



12

1

16

14

 


Capital return



7,502

645

975

2,035

 


Change to the profit after tax for the year and to equity attributable to shareholders


7,514

646

991

2,049

 









 





15 Month period ended 30 September 2011

£'000

 


Group and Company



 





US dollar

Euro

Yen

Swiss Francs

 


Statement of Comprehensive Income - profit after tax






 


Revenue return



8

1

7

14

 


Capital return



5,485

722

427

1,517

 


Change to the profit after tax for the year and to equity attributable to shareholders


5,493

723

434

1,531

 









 


Based on the year end position, if sterling had appreciated by a further 10% against the currencies shown, this would have the following effect:

 





Year ended 30 September 2012

 


Group and Company



£'000

 





US dollar

Euro

Yen

Swiss Francs

 


Statement of Comprehensive Income - profit after tax






 


Revenue return



(9)

-

(13)

(11)

 


Capital return



(6,138)

(528)

(798)

(1,665)

 


Change to the profit after tax for the year and to equity attributable to shareholders


(6,147)

(528)

(811)

(1,676)

 









 





15 Month period ended 30 September 2011

 


Group and Company



£'000

 





US dollar

Euro

Yen

Swiss Francs

 


Statement of Comprehensive Income - profit after tax






 


Revenue return



(7)

(1)

(5)

(12)

 


Capital return



(4,487)

(591)

(350)

(1,241)

 


Change to the profit after tax for the year and to equity attributable to shareholders


(4,494)

(592)

(355)

(1,253)

 









 


In the opinion of the Directors, while these are regarded as reasonable estimates, neither of the above sensitivity analyses are representative of the year as a whole since the level of exposure changes frequently as part of the currency risk management process used to meet the Group's objectives.

 









 


(iii) Interest Rate Risk







 


Although the majority of the Group's financial assets are equity shares, which pay dividends, not interest, the Group will be affected by interest rate changes as interest is earned on any cash balances and paid on any overdrawn balances.

 


Given the interest rate risk exposure noted below, the impact of any interest rate change is not considered to be significant and as such, no sensitivity analysis has been provided. Interest rate changes will also have an impact on the valuation of equities, although this forms part of price risk, which has already been considered separately, above.

 


Management of the risk







 


The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions.

 


Derivative contracts are not used to hedge against the exposure to interest rate risk.

 


Interest rate exposure







 


At the year-end, financial assets and liabilities exposed to floating interest rates were as follows:

Year ended

15 Month period ended

 







30 September 2012

30 September 2011

 


Group and Company





£'000

£'000

 


Financial Assets:







 


Cash at bank





112

6,839

 


Bank overdraft





(27)

-

 







85

6,839

 









 


The above year-end amounts may not be representative of the exposure to interest rates in the year ahead since the level of cash held during the year will be affected by the strategy being followed in response to the Board's and Investment Manager's perception of market prospects and the investment opportunities available at any particular time.

 









 


(b) Liquidity Risk







 


Liquidity risk is the possibility of failure of the Group to realise sufficient assets to meet its financial liabilities.

 


Management of the risk







 


The Group's assets mainly comprise readily realisable securities which may be sold to meet funding requirements as necessary.

 


Liquidity risk exposure







 


At 30 September the financial liabilities comprised:

Year ended

15 Month period ended

 







30 September 2012

30 September 2011

 


Group and Company





£'000

£'000

 


Due within 1 month:







 


Balances due to brokers





-

239

 


Accruals





291

399

 


Bank overdraft





27

-

 


Liability for derivative financial instruments




-

80

 


Due after 1 month but within 3 months:






 


Liability for derivative financial instruments




-

55

 







318

773

 









 


(c) Credit Risk







 


Credit risk is the exposure to loss from failure of a counterparty to deliver securities or cash for acquisitions or disposals of investments or to repay deposits.

 


Management of the risk







 


The Group manages credit risk by using brokers from a database of approved brokers and by dealing through Polar Capital. All cash balances are held with approved counterparties. These arrangements were in place throughout the current year and the prior period.

 


Credit risk exposure







 


The maximum exposure to credit risk at 30 September 2012 was £564,000 (2011:  £7,128,000) comprising:

Year ended

15 Month period ended

 







30 September 2012

30 September 2011

 


Group and Company





£'000

£'000

 


Accrued Income





452

289

 


Cash at bank





112

6,839

 







564

7,128

 


All of the above financial assets are current, their fair values are considered to be the same as the values shown and the likelihood of material credit default is considered to be low.

 



 


(d) Capital Management Policies and Procedures



 


The Company's capital management objectives are:

 


The Company's capital, or equity, is represented by its net assets which amounted to £120,738,000 for the year ended 30 September 2012 (2011: £100,424,000) which are managed to achieve the Company's investment objective set out on page 15.

 


The Board monitors and reviews the broad structure of the Group and Company's capital on an ongoing basis. This review includes:

 


(i)  the need to issue or buy back equity shares for cancellation, which takes account of the difference between the net asset value per share and the share price (i.e. the level of share price discount or premium) and

 


(ii) the determination of dividend payments.

 


The Company is subject to externally imposed capital requirements through the Companies Act with respect to its status as a public company. In addition in order to pay dividends out of profits available for distribution by way of dividend, the Company has to be able to meet one of the two capital restriction tests imposed on investment companies by company law.

 



 

 

Status of announcement 

The figures and financial information contained in this announcement are extracted from the Audited Annual Report for the year ended 30 September 2012 and do not constitute statutory accounts for the period. The Annual Report and Financial Statements include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or Section 498(3) of the Companies Act 2006.  

 

The Directors Remuneration Report and certain other helpful shareholder information has not been included in this announcement but  forms part of the Annual Report which will be available on the Company's website and will be sent to shareholders in December . (www.polarcapitalglobalhealthcaretrust.co.uk )

 

The Annual Report and Financial Statements for the year ended 30 September 2012 have not yet been delivered to the Registrar of Companies.

 

The figures and financial information for the period ended 30 September 2011 are extracted from the published Annual Report and Financial Statements for the period ended 30 September 2011 and do not constitute the statutory accounts for that year.  The Annual Report and Financial Statements for the period ended 30 September 2011 has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or Section 498(3) of the Companies Act 2006

 

AGM 

The Annual Report and separate Notice of Meeting for the Annual General Meeting  will be posted to shareholders in December 2012 and will be available thereafter the company secretary at the Registered Office, 4 Matthew Parker Street London SW1H 9NP or from the Company's website.

 

The AGM will be held on Wednesday 23 January 2013 at 12 noon at The Methodist Central Hall, Storey's Gate, London SW1H 9NH.

 

 

Forward Looking Statements

Certain statements included in this announcement contain forward-looking information concerning the Company's strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors or markets in which the Company operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within the Company's control or can be predicted by the Company. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results could differ materially from those set out in the forward-looking statements. For a detailed analysis of the factors that may affect our business, financial performance or results of operations, we urge you to look at the principal risks and uncertainties included in the Business Review on pages 18 to 19 of this Annual Report and Accounts. No part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in Polar Capital Global Healthcare Growth and Income Trust plc or any other entity, and must not be relied upon in any way in connection with any investment decision. The Company undertakes no obligation to update any forward-looking statements.

 

Neither the contents of the Company's website nor the contents of any website accessible from the hyperlinks on the Company's website (or any other website) is incorporated into or forms part of this announcement

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR FSEFWLFESEDE

Companies

Polar Capital Global Healthcare Trust (PCGH)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today