Final Results

RNS Number : 9565V

Polar Capital Global Health Tst PLC

17 December 2021

 

POLAR CAPITAL GLOBAL HEALTHCARE TRUST PLC

Legal Entity Identifier: 549300YV7J2TWLE7PV84

AUDITED RESULTS ANNOUNCEMENT FOR THE YEAR ENDED

30 SEPTEMBER 2021

FINANCIAL HIGHLIGHTS

For the year to 30 September 2021

Performance
Net asset value per Ordinary share (total return)*			19.46%
Benchmark index (MSCI ACWI Health Care Index (total return in sterling with dividends reinvested))			13.40%
Share price total return*			24.55%
Since restructuring
Net asset value per Ordinary share (total return) since restructuring *~			52.28%
Benchmark index total return since restructuring			53.42%
Expenses	2021	2020
Ongoing charges*	0.83%	1.01%
Financials	As at 30 September 2021	As at 30 September 2020	Change
Total net assets (Group and Company)	£385,728,000	£325,133,000	+18.6%
Net asset value per Ordinary share	318.07p	268.11p	+18.6%
Net asset value per ZDP share^	113.50p	110.20p	+3.0%
Price per Ordinary share	288.00p	233.00p	+23.6%
Discount per Ordinary share*	9.5%	13.1%
Price per ZDP share^	113.50p	107.50p	+5.6%
Net gearing*	6.04%	5.28%
Ordinary shares in issue (excluding those held      in treasury)	121,270,000	121,270,000	-
Ordinary shares held in treasury	2,879,256	2,879,256	-
ZDP shares in issue^	32,128,437	32,128,437	-

  Dividends

The Company has paid or declared the following dividends relating to the financial year ended 30 September 2021:

Pay date	Amount per Ordinary share	Record Date	Ex-Date	Declared Date
First interim: 31 August 2021	1.00p	6 August 2021	5 August 2021	15 July 2021
Second interim: 28 February 2022	1.00p	4 February 2022	3 February 2022	16 December 2021
Total (2020: 2.00p)	2.00p

* See Alternative Performance Measures provided in the Annual Report.

~ The Company's portfolio was restructured on 20 June 2017. The total return NAV performance since restructuring is calculated by reinvesting the dividends in the assets of the Company from the relevant payment date.

^ For information purposes.

For further information please contact:
Ed Gascoigne-Pees Camarco Tele. 020 3757 4984	Tracey Lago, FCG Polar Capital Global Healthcare Trust Plc Tele. 020 7227 2742	John Regnier-Wilson Polar Capital LLP Tele. 020 7227 2725

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 2021 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 Annual Report and Financial Statements for the year ended 30 September 2021 have not yet been delivered to the Registrar of Companies. The figures and financial information for the period ended 30 September 2020 are extracted from the published Annual Report and Financial Statements for the period ended 30 September 2020 and do not constitute the statutory accounts for that year.  The Annual Report and Financial Statements for the period ended 30 September 2020 have 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.

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 2021.

CHAIR'S STATEMENT

When I wrote to you at this time last year the first COVID-19 vaccine had yet to be approved. It seems a lot has happened since then, with multiple vaccines now available. The innovation and collaboration across the globe to achieve this has been unprecedented. For all its negatives, COVID-19 has proved to be a positive catalyst in accelerating other trends, such as outsourcing and efficient delivery of healthcare, which should persist and create further opportunities for investment. The path through the pandemic is still uncertain, but there is more cause for optimism as we look to the year ahead.

Performance

The Board is pleased to report that the portfolio has performed well over the financial year, delivering strong absolute returns of 19.46%, outperforming its benchmark by 6.06%. The second half of the financial year showed a particularly strong period of relative performance, as mid to larger capitalisation stocks moved back into favour, supportive to the Company's strategy of seeking opportunities across the healthcare spectrum, selecting stocks with resilient, medium-term growth profiles. The discount also narrowed, ending the year at 9.5%, from 13.1% the previous year. As at close of 13 December 2021, the latest practicable date, the discount was 9.3%.

Further detail is provided within the Manager's Report.

Outlook

The Board continues to monitor performance and remains very optimistic about the outlook for the healthcare sector and the opportunities to generate returns for shareholders.

As the fund managers highlight in their report, the six key investment themes, which underpinned individual stock selection in 2020, are still very much relevant today and likely to persist over the medium-term. The COVID-19 pandemic has been extremely challenging, but has also been a catalyst for positive change in healthcare, highlighting the need for healthcare systems globally to adopt new products, technologies and services, designed to drive efficiencies without compromising quality of care.

The Company continues to offer a diversified approach to gain access to growth opportunities and solid innovation ideas, but without the need to take risk in less developed areas, or on single product outcomes. We believe the healthcare industry fundamentals remain strong and sector valuations look attractive. The Board remains confident that the Company is well placed to generate attractive returns for its shareholders.

Dividends

The Company's focus remains on capital growth and consequently dividends are expected to represent a relatively small part of Shareholders' total return. The Company has a policy to pay two small dividends per year but it is recognised that these will not necessarily be of equal amounts and may be reduced.

In August 2021 the Company paid an interim dividend of 1.00p per ordinary share. The Board has declared a further interim dividend of 1.00p per ordinary share payable to shareholders on the register as at 4 February 2022. This will bring the total dividend paid for the financial year under review to 2.00p per ordinary share, equal to the previous financial year.

Environmental, Social and Governance

As detailed in my report last year, the Board recognises the continued importance of ESG as this subject rises on all board agendas. The Board continues to believe the Managers are best placed to integrate ESG factors into its decision making process and to engage with any poorly rated companies to change behaviour and bring about genuine improvements.

During the year we have been actively engaged with our Managers to better understand how ESG has been integrated more fully into the decision-making process. We have also been keen to understand the progress that has been made on the corporate side of Polar Capital's business. Last year we initiated an ESG reporting process and the Managers provided a high level ESG overview report. This year, the process has progressed and the Managers have again provided an overview but with more in depth information on the investment processes including reporting, engagement and monitoring of investee companies. We as a Board have considered in more depth how we both integrate and monitor ESG factors into the running of the Company, particularly in relation to governance. Please refer to the ESG statement in the Manager's Report and in the full Annual Report and Accounts which incorporates both the investment and corporate approach.

Share Capital

The Company has 121,270,000 ordinary shares in issue as at the date of writing and no other shares have been bought back or issued during the financial year under review. The Company's share price on 30 September 2021 was 288.00p (2020: 233.00p). The Company's market capitalisation at the financial year end was £349.3m (2020: £282.6m). The Company's share price traded in a discount range of 8.0% to 15.5% throughout the year, ending at a discount of 9.5% compared to 13.1% at the start of the year. The Board has reconfirmed the authority given to the Manager to use discretion to purchase shares in the market when deemed appropriate to do so.

Companies Act 2006, S172 - Directors' Duties / Shareholder Engagement

Shareholder and stakeholder engagement remains important to the Board and throughout the year the Board continuously considers the needs and priorities of the Company's stakeholders as part of the decision-making process. Further information is provided in our section 172 Statement in the full Annual Report and Accounts.

Annual General Meeting

The Company's eleventh Annual General Meeting (AGM) will be held at 2pm on Friday 11 February 2022. The notice of AGM has been provided to Shareholders and will also be available on the Company's website. At the time of writing there were no government restrictions in relation to COVID-19, and accordingly it is our intention to hold the AGM at Polar Capital's offices at 16 Palace Street, London SW1E 5JD, and to welcome our shareholders in person. We will however, keep a watch on developments as we move through winter and follow any restrictions which may be re-introduced. Should we have to change our plans and move to a virtual meeting, we will advise shareholders as early as possible with a notice on the website and a regulatory news service announcement. 

 

Lisa Arnold

Chair

16 December 2021

INVESTMENT MANAGER'S REPORT - FOR THE YEAR ENDED 30 SEPTEMBER 2021

The objective of Polar Capital Global Healthcare Trust plc ("the Company") is to generate long-term capital appreciation by investing in a globally diversified portfolio of healthcare companies.

The Company's diversification strategy, coupled with its focus on large-capitalisation healthcare companies with resilient, medium-term growth profiles, helps drive the relatively lower risk-profile of the underlying assets, relative to the more volatile areas of healthcare. Further, the broad investment remit affords the opportunity to invest in growth areas regardless of the economic, political and regulatory environment. Importantly, the Company also has the opportunity to invest in earlier-stage, more innovative and disruptive companies, companies that tend to be lower down the market capitalisation and liquidity scale. This is a key advantage of a closed-end company like an investment trust. Regardless of size, sub-sector or geography, stock selection is central to the process, as we look to identify companies where there is a disconnect between valuations and the near and medium-term growth drivers.

In terms of structure, the majority of the Company's assets (calculated on a gross basis and referred to as the Growth portfolio) will be invested in companies with a market capitalisation >$5bn at the time of investment, with the balance invested in companies with a market capitalisation <$5bn (a maximum of 20% of gross assets and referred to as the Innovation portfolio). At the end of the reporting period, 33 investments were in the Growth portfolio, comprising some 93.7% of net assets, and 13 investments were in the Innovation portfolio, comprising 12.2% of net assets. Structural gearing, in the form of Zero Dividend Preference Shares, offers access to additional liquidity and the opportunity to enhance returns.

Market Cap at				30 September 2021			30 September 2020
Large (>US$10bn)				78.9%			82.9%
Medium (US$5bn - US$10bn)				14.8%			11.1%
Small (<US$5bn)				12.2%			11.3%
Other net liabilities				(5.9%)			(5.3%)
				100.0%			100.0%

Over the financial year to the end of September 2021, the Company achieved a strong result, with a NAV per share total return of 19.46%, which was 6.06% ahead of its benchmark healthcare index (MSCI All Country World Index/Healthcare (total return in sterling)). The absolute performance of the healthcare sector was also strong, up 13.40% over the reporting period, although the sector did lag the broader market (as tracked by the MSCI All Country World Net Total Return in pounds sterling) which was up 22.2%. Unprecedented monetary stimulus and successful COVID-19 vaccination programmes were amongst the key drivers behind the buoyant market conditions. October 2020 aside, the global equity markets enjoyed pretty consistent, upwards momentum throughout the reporting period, with energy and financials leading the way.

Healthcare facilities, healthcare supplies and life sciences tools and services all performed strongly over the period. The facilities and supplies companies benefitted from returning patient volumes, especially in regions with successful vaccination programmes. The life sciences tools and services sub-sector has been instrumental in not only delivering COVID-19 testing kits but also contributing to the vaccine manufacturing processes. At the other end of the scale, the last 12 months has been a difficult period for the biotechnology and pharmaceuticals sub-sectors. For biotechnology, it has been a challenging period driven by a number of factors including excessive valuations in certain thematic pockets, disappointing clinical data and regulatory setbacks. We remain optimistic, however, given that the innovation cycle is extremely strong, the sector is wellfunded and consolidation remains a distinct possibility. The pharmaceutical sub-sector continues to innovate and invest substantially in research designed to address unmet medical needs, but short-term growth prospects face the challenges of mature margins and patent expiries between now and the end of the decade.

Reflecting on last year's annual report, the focus was very much on six key investment themes, some of which accelerated through the COVID-19 crisis. Disrupting the delivery of healthcare, outsourcing and prevention are key investment themes for the Company, with all three showing signs of gathering momentum. Healthcare systems globally are looking to shift more and more patient volumes to lowercost settings such as ambulatory surgery centres and the home. Outsourcing is also enjoying a period of strong growth and consolidation, with the clinical research organisations especially well-positioned. Prevention, not just vaccination programmes, but early and accurate diagnosis, is also an area that has flourished and should continue to do so in a postpandemic world given the increased investment in diagnostics infrastructure. The other key themes discussed in last year's annual report, namely emerging markets, innovation and consolidation are no less important, but are perhaps less influenced by the COVID-19 pandemic. Crucially the six themes discussed above will, we believe, continue to be growth drivers for the healthcare industry and should be able to yield some exciting investment opportunities.

US politics, always an important consideration, has been less prominent this year than it was in 2020. Top congressional Democrats are acknowledging for the first time that they will have to scale back their drug pricing ambitions to gain muchneeded centrist votes for President Joe Biden's social spending bill. As such, direct drug price negotiation by the Federal government feels less likely now, something that would be a big relief for the bio-pharmaceuticals industry. There remains political will to address high out-of-pocket costs for US seniors and to control drug price inflation, but far-reaching legislation remains some way off. With regards to access to healthcare, President Joe Biden continues to be a staunch supporter of the Affordable

Care Act, signed in to law by President Barack Obama in early 2010. Indeed, the Administration introduced a special enrolment period during the pandemic to ensure that US citizens that needed access to care got it. Priorities from here could involve making the expansion of the subsidies and eligibility permanent, expanding Medicaid further and adding dental, vision and hearing coverage to the Medicare fee-for-service program.

The key investment themes that the Company focused on in 2020 are very much relevant today and will continue to be so over the medium-term. The COVID-19 pandemic has been hugely challenging for everyone but has also shone a light on a couple of things: firstly, the terrific levels of innovation that the healthcare industry can deliver and, secondly, the acute need for structural change. It is imperative, given the general ageing of populations and the rising costs of healthcare, that patient volumes are directed into lower cost settings, early and accurate diagnoses become routine and that the industry focuses on sustainability, whether that be through improving clinical outcomes, improving affordability and access or improving efficiency. If the healthcare industry can deliver on these objectives, the commercial and financial rewards should be there for investors.

PERFORMANCE REVIEW

Over the financial year to the end of September 2021, the Company achieved a strong result, with a NAV per share total return of 19.46%, which was 6.06% ahead of its benchmark healthcare index. The absolute performance of the overall healthcare sector was also strong, with the index returning 13.40%, although it did underperform the broader market. The Company was marginally ahead of its benchmark in the first five months of the financial year and started a strong period of relative performance in mid-March 2021, when global markets began a steep rally which lasted until the end of September 2021.

The Company entered the financial year with approximately 5% net gearing and a large exposure to biotechnology, life sciences tools and services and healthcare distributors, with the largest underweight in the pharmaceuticals sector. As the COVID-19 crisis began to decline in early spring 2021, the gearing was increased and the underexposure in pharmaceuticals was further increased to add to the medical technology sub-sector. In the last quarter of the financial year, although the gearing was kept stable, the portfolio was more defensively positioned with more exposure to pharmaceuticals, distributors and healthcare facilities, with less capital allocated to biotechnology and life sciences tools and services. This sub-sector positioning through the financial year meant that the allocation effect was positive with strong contributions from life sciences tools and services, pharmaceuticals and managed care outstripping lesser contributions from biotechnology, healthcare services and medical technology. Overall, allocation accounted for half of the Company's outperformance, with the balance driven by stock selection in life sciences tools and services, medical technology and pharmaceuticals.

From a market capitalisation perspective, small capitalisation healthcare companies enjoyed a period of outperformance relative to the general healthcare sector in the first five months of the financial year. However, this reversed abruptly as the prospects of higher interest rates and of a less accommodative global monetary environment caused investors to switch to larger and more established businesses. With this backdrop, the Growth part of the Company's portfolio contributed positively while the Innovation book was a small drag to performance. In general, stock-picking across all market capitalisation bands, but in particular large and mid-capitalisation companies, was extremely positive and overshadowed the negative allocation effects from smaller capitalisation stocks.

On a geographical basis, the largest positive contributors were North America thanks to strong allocation and stock-picking, and Europe where selection was particularly favourable. Middle East & Africa, where the Company had no exposure, were the only regions that very marginally detracted from performance.

Given the Company maintained an average net gearing position of 4% through the financial year, and the healthcare market returned 13.4%, the active management of gearing added to the relative outperformance in the financial year, with the additional returns afforded by the gearing far out-weighing the cost of the debt.

Top 10 Relative Contributors (%)

Top 10	Average Stock Weight		Active Weight	Stock Return	Stock Return vs BM	Total Attribution
Biohaven Pharmaceutical	1.86		1.86	104.94	91.55	1.53
Avantor	2.50		2.28	74.43	61.03	1.22
Syneos Health		2.47	2.47	57.84	44.44	1.21
Align Technology	2.03		1.45	94.97	81.57	1.16
Hill-Rom Holdings	2.46		2.46	72.28	58.88	1.02
Sartorius	1.35		1.12	116.50	103.10	0.99
Cytokinetics	1.01		1.01	58.34	44.94	0.88
Bio-Rad Laboratories	3.37		3.18	38.80	25.41	0.84
Chugai Pharmaceutical	0.62		0.22	-19.97	-33.37	0.79
PRA Health Sciences	0.45		0.45	29.53	16.13	0.77

  Source: Polar Capital, as at 30 September 2021. Past performance is not indicative or a guarantee of future results.

Positive contributors to performance for the financial year included Biohaven Pharmaceutical, Avantor, Syneos Health, Align Technology and Hill-Rom Holdings.

Biohaven Pharmaceutical performed strongly during the reporting period thanks to consistent, consensus-beating revenues for migraine drug, Nurtec ODT. As a reminder, the FDA approved the drug for the treatment of acute migraine back in March 2020. Enthusiasm for the asset was boosted further in May 2021 when the FDA approved an additional indication, the preventive treatment of migraine. The approval was based on the results of a Phase III study that revealed that Nurtec ODT reduced migraine days by 30% after just one week of every-other-day treatment. Further, after three months of treatment, approximately half of patients experienced at least a 50% reduction in moderate-to-severe migraine days.

Avantor, a life sciences tools and services company which distributes chemicals, reagents, and laboratory supplies, benefitted from the general strength of its sub-sector. In addition, the Avantor team has consistently over-delivered on consensus expectations throughout the financial year, leading analysts to upgrade financial estimates with the shares following suit. Further, Avantor announced the purchase of MasterFlex, a business that allows Avantor to enter the fastgrowing bioprocessing market. The deal was well received by investors who saw the acquisition as accretive to the enlarged company's revenue growth and operating margins. A final catalyst for the stock was its inaugural analyst day, in which Avantor reiterated the guidance for the financial year 2021 and provided attractive long-term targets.

Syneos Health runs a contract research organisation, an industry that saw an upsurge in demand due to the need to develop COVID-19 pharmaceuticals and vaccines, coupled with a generally buoyant bio-pharmaceutical funding environment. The company's outperformance was driven by positive momentum in the non-COVID-19-related business, which reassured investors of the sustainability of Syneos Health's growth trajectory. Finally, the company also announced an acquisition (Synteract) which increases its exposure to the fast-growing and well-capitalised small and mid-capitalisation market. The global COVID-19 pandemic accelerated some of the key drivers of performance for Align Technology, the leading maker of clear aligners for dental treatments. Firstly, consumers have developed a strong preference for fewer in-practice dentist visits, something that is enabled by Align Technology's digital workflow investments, and secondly, the "Zoom meetings" effect has been a catalyst for consumers to invest in dental aesthetics. The company delivered impressive quarterly financial results throughout the period under review, with revenues often coming in significantly ahead of consensus expectations.

Hill-Rom Holdings traded just slightly ahead of medical technology peers from September 2020 to mid-July 2021 when speculation started to emerge that Baxter International might be interested in acquiring the company. Eventually the deal was announced on 2nd September 2021, with Baxter International offering a friendly all-cash offer of $156 per share, at a premium of more than 30% to the average price over the previous 20 days.

  Bottom 10 Relative Contributors (%)

Bottom 10	Average Stock Weight		Active Weight	Stock Return	Stock Return vs BM	Total Attribution
Moderna	0.00		-0.79	421.75	408.35	-1.39
Amedisys	0.53		0.53	-39.51	-52.91	-1.14
Quotient		1.18	1.18	-56.33	-69.73	-1.06
Incyte	1.94		1.73	-26.49	-39.98	-0.91
Amgen	3.28		1.37	-19.75	-33.15	-0.76
AptarGroup	1.54		1.54	1.44	-11.96	-0.71
Medley	1.50		1.50	-24.94	-38.33	-0.71
Zealand Pharma	1.21		1.21	-27.44	-40.84	-0.63
Exelixis	0.45		0.45	-17.07	-30.47	-0.59
Novo Nordisk	0.64		-1.21	34.02	20.62	-0.57

  Source: Polar Capital, as at 30 September 2021. Past performance is not indicative or a guarantee of future results.

Negative contributors to performance for the financial year 2021 included Moderna, Amedisys, Quotient, Incyte and Amgen.

The largest detractor to performance for the Company was its lack of holdings in mRNA manufacturer Moderna, a decision driven by what we perceived to be an excessive valuation relative to the opportunity set ahead for the company. The meteoric share-price ascent started in December 2020, when the FDA used emergency use authorisation to allow access to Pfizer/BioNTech's COVID-19 vaccine, the first vaccine developed using mRNA technology. Using similar technology, the market quickly put upwards pressure on expectations for Moderna's mRNA vaccine candidate, mRNA-1273, which positively impacted the share price performance.

Amedisys operates home health facilities and hospices. Unfortunately, the company announced in their Q2'FY21 results that they were facing some near-term challenges due to high levels of staff turnover in the hospice business and to wage inflation for nurses and carers. Although the issues can be attributed to the COVID-19 pandemic, investors felt that the growth prospect and trajectory for 2022 might also be impacted, causing the stock to materially underperform the overall healthcare sector.

Quotient began to underperform in December 2020, after announcing a regulatory delay in the US for MosaiQ, a fully automated testing platform for blood grouping and transfusion-transmitted infection screening of donated blood. As COVID-19 continued to affect the timelines on its diagnostic development programmes, analysts were prompted to reduce their financial forecasts, which adversely impacted Quotient's equity value. Although the biotechnology sector put up a strong performance in the first four months of the Company's financial year, it started to underperform the overall healthcare sector in mid-February 2021, driven, in part, by the prospect of higher real yields and reduced terminal values. Incyte was not immune to the sector weakness, and it further struggled when the FDA approved ruxolitinib cream (opzelura) in mild-tomoderate atopic dermatitis (AD) with a so-called "black-box" warning. This update dampened enthusiasm for the product's peak sales potential.

The catalyst for Amgen's underperformance in the early part of the reporting period was the top-line data for heart failure agent omecamtiv mecarbil. While the trial hit statistical significance for the primary endpoint, that is reducing cardiovascular death or heart failure events, the magnitude was underwhelming and there was no reduction in the secondary endpoint of cardiovascular death. Additionally, the company reported unimpressive financial data and readouts/execution issues from other key trials.

Compelling opportunities lie-ahead

The 2020 annual report focused on six key themes that we believed, and continue to believe, offer the potential for significant returns in the years ahead. In brief, these themes are:

· Employing technology to disrupt healthcare delivery and shift utilisation to lower cost settings ;

This will be by far the most important structural shift in healthcare for the next 10-20 years and the enablers of this shift should enjoy significant growth.

· Outsourcing ; A continuing theme but growth is robust across clinical trial outsourcing and contract manufacturing.

· Prevention ; References diagnostics and vaccines, both of which provide tremendous value to healthcare systems as prevention is the most cost-effective way of delivering healthcare. The impact of COVID-19 has highlighted the value of diagnostics and vaccines.

· Product and service innovation ; Long-term product or service development success dependent on ability to lower healthcare costs.

· Consolidation on the rise again ; Leaders that can acquire high quality assets in fragmented markets at attractive valuations can enjoy significant outperformance.

· Growth in emerging market healthcare demand ; Projected to accelerate over the next 15-20 years - investing in the long-term structural growth stories should deliver handsome returns.

Healthcare delivery disruption, outsourcing and prevention: Starting to accelerate

The COVID-19 pandemic has been a real catalyst for positive change, highlighting the need for healthcare systems globally to adopt new products, technologies and services designed to drive efficiencies without compromising quality of care. One critical area is disrupting the healthcare delivery pathway to ensure greater access to care. Virtual care platforms and remote monitoring tools are excellent examples of enabling technologies that can drive the agenda. Virtual care platforms are being used not just to expand and improve access to mental health services, for example, but also to connect patients to licensed behavioural health providers. Sadly, these sorts of services will be in high demand as we navigate our way through the COVID-19 pandemic. Remote monitoring tools can be used to support patient care by providing clinicians with patient data that allows for proactive health care interventions that can ultimately lead to reduced hospital readmissions.

Out-patient surgeries and services will also grow in importance in the coming years. Medical care provided at alternative sites of care that meet quality and cost-efficiency criteria can lead to better outcomes at a lower cost for the consumer. Ambulatory surgery centres and stand-alone imaging centres, for example, can provide the same or higher quality care at a lower cost compared to hospitals. UnitedHealth Group estimates that the average price for routine diagnostic imaging at a hospital out-patient department can be 165% more than the price of a test performed at a stand-alone imaging centre or physician's office. UnitedHealth Group has also calculated that conducting more joint replacement surgeries in ambulatory surgery centres could save the US health systems $3 billion annually by achieving 500,000 fewer hospitalisations.

Outsourcing is also accelerating, with the COVID-19 pandemic offering a substantial boost to both clinical trial activity and to contract manufacturing. We anticipate that this rate of growth will be sustained as the pace of innovation in the biotechnology and pharmaceuticals industries gathers momentum. The biotechnology industry is especially well capitalised at present and will look to deploy that capital through clinical trial development and, hopefully, through to commercialisation. The greatest, near-term beneficiaries of this trend are the contract research organisations which provide a multitude of services including pre-clinical research, clinical research, clinical trial management and pharmacovigilance. The sector has also experienced some consolidation during the reporting period with life sciences tools and services company Thermo Fisher looking to acquire PPD and Icon looking to acquire PRA Health Sciences.

Whilst the benefits of safe and effective vaccination programmes should never be understated, it is perhaps the potential impact of effective diagnostics that could be more important for healthcare systems in the long run. Advanced diagnostic solutions enable clinicians to make critical decisions for their patients earlier, more accurately, and with greater confidence. Improved decision-making benefits not only individual patients but also society as a whole. Healthcare systems, under increasing pressure to control costs, can use limited resources more efficiently while, at the same time, increasing access and driving better outcomes. Encouragingly, COVID-19 has accelerated the investment in diagnostics infrastructure, with labour-efficient automated machines at the forefront. With greater infrastructure in place, it is hoped that testing menus will expand and that we will see broader adoption of diagnostics globally.

The remaining three themes of innovation, consolidation and emerging markets are no less important than the three discussed above, but possibly less influenced by the COVID-19 pandemic. The healthcare industry is highly innovative, is well capitalised and will continue to push scientific boundaries in the search for novel solutions to meet unmet medical needs. The contribution to science and society from the COVID-19 vaccines based on mRNA technology is clear, the big question now becomes, "how widely can the technology be used?". 2021 also witnessed two other potentially game-changing breakthroughs: the first in the field of gene editing with US company, Intellia Therapeutics, disclosing the first ever clinical data supporting the safety and efficacy of in vivo CRISPR genome editing in humans; the second in the field of obesity, with NovoNordisk's Wegovy enjoying a phenomenal early launch. The drug works by mimicking a hormone called glucagon-like peptide-1, or GLP-1, which delays gastric emptying, increases gastric volumes and suppresses appetite.

In a highly fragmented industry, with strong balance sheets and low costs of debt, consolidation is likely to continue to be an important theme for the healthcare industry. Management teams are looking to augment their internal assets with complementary assets and technologies. The Company has been the beneficiary of four proposed acquisitions during the reporting period. In chronological order, PRA Health Sciences was the subject of a bid from contract research organisation peer, Icon. Contract research organisation PPD is also in the process of being acquired by Thermo Fisher, under-pinning our view that the contract research organisation industry has a prolonged growth runway. Swedish Orphan Biovitrum and Hill-Rom Holdings were also the subject of bids. In early September, private equity firm Advent and Singapore wealth fund GIC, offered an all-cash bid of 235 Swedish krona per share to acquire Swedish Orphan Biovitrum, a company where we believe the pipeline assets to be under-appreciated by the market. Baxter International's decision to acquire HillRom Holdings accelerates the company's connected care strategy, is accretive to top and bottom-line growth and is expected to generate a high single-digit ROIC by year five.

We expect emerging markets to continue to be an important source of growth for a number of sub-sectors including biopharmaceuticals, life sciences tools and services, medical devices and contract research organisations. Many emerging markets are not just investing heavily in ensuring widespread access to healthcare but are also changing the way they think about regulatory approvals, pricing and reimbursement. Innovation is critical, but so is local manufacturing and a sales reach that can access volumes during inevitable periods of pricing pressure.

Positioning and process; Constructive on facilities, distributors and technology

As at 30th September 2021, the main overweight sub-sector positionings are in healthcare facilities, managed care, healthcare distributors, healthcare equipment and supplies and healthcare technology. These correlate with three of the key investment themes, namely disruption of healthcare delivery, outsourcing and innovation, but are also consistent with the concept of sustainability by improving the efficiency of healthcare delivery and expanding access to care. From a healthcare facilities perspective, the investments here are biased towards those providing access to healthcare services in the lowest cost settings such as home healthcare, hospital at home and hospice at home. The managed care companies will also play a pivotal role in ensuring that their members access care in the lowest-cost settings. The Company also has exposure to behavioural health services, where we have sadly seen a huge jump in demand due to the pandemic. On the healthcare distribution side, this is effectively outsourcing of delivery by manufacturers which has been commonplace for years with therapeutics. More recently, this has been extended to distribution including sales and marketing on the medical device side and also to increased provision of services on specialty pharmaceuticals, which are typically much more challenging to manage.

Healthcare equipment, whilst continuing to innovate in areas such as minimally invasive surgery, robotics, remote monitoring and connected care, should also benefit from patients returning to the healthcare system to address their medical needs which have been put on hold during the COVID-19 pandemic. Healthcare supplies exposure has been increased and reflects innovation and volume recovery in the ophthalmology and dental sectors. On the ophthalmology side, the treatment of myopia is a new focus, with new products being launched in the contact lens category. To highlight the unmet need, more than 80% of children in China have myopia. Lastly, healthcare technology is seeing extensive innovation, which in the years to come will make healthcare more sustainable and much more productive, a necessity considering the current cost of running healthcare systems.

Biotechnology exposure was reduced to reflect the challenges that large capitalisation companies face in this sub-sector with anaemic growth, limited pipelines and upcoming patent expiries. Exposure has been maintained in mid capitalisation and small capitalisation through the Innovation portfolio.

M&A, which was predicted to have been a feature for the healthcare sector over the last 12 months, has been extremely quiet, especially in the biotechnology sphere, but we expect that trend to reverse at some point and continue to believe that consolidation will be an important investment theme. Life sciences tools and services exposure has been reduced, largely because outperformance has led to higher valuations which are harder to justify. The fundamentals in biotechnology are in rude health, and as a collective they continue to be very committed to R&D and sustainability, which we acknowledge is an increasing area of focus for investors.

Pharmaceuticals remain a significant underweight in the portfolio although greater exposure to these stocks could be justified in a more defensive market later in the economic cycle. The pharmaceutical sector continues to invest heavily in R&D, and continues to contribute significantly to key scientific breakthroughs, but is challenged with mature margins, anaemic growth profiles and a raft of upcoming patent expiries.

http://www.rns-pdf.londonstockexchange.com/rns/9565V_1-2021-12-16.pdf

From a geographical perspective, changes to the portfolio in the period were limited, with a reduction in Denmark and an increase

in the UK driven by a change in selection of two pharmaceutical stocks at the higher end of the market capitalisation scale.

Geographical Exposure at	30 September 2021		30 September 2020
United States	69.0%		68.0%
United Kingdom	7.3%		3.7%
France		6.2%	3.9%
Netherlands	5.2%		5.3%
Denmark	4.6%		6.5%
Germany	2.7%		5.2%
Switzerland	2.5%		4.8%
Australia	2.4%		-
Belgium	2.3%		-
Ireland	1.9%		5.5%
Japan	1.8%		2.4%
Canada	-		-
Other net liabilities	(5.9%)		(5.3%)
Total	100.0%		100.0%

Source: Polar Capital, portfolio as at 30 September 2021.

Sector Exposure at	30 September 2021		30 September 2020
Healthcare Equipment	23.4%		21.3%
Pharmaceuticals	23.0%		25.1%
Biotechnology		14.8%	22.6%
Managed Healthcare	11.8%		8.2%
Healthcare Facilities	7.2%		1.5%
Healthcare Supplies	6.3%		3.8%
Life Sciences Tools & Services	5.4%		12.5%
Healthcare Distributors	4.9%		4.2%
Apparel, Accessories & Luxury Goods	2.7%		-
Healthcare Technology	2.3%		3.4%
Metal & Glass Containers	2.3%		-
Healthcare Services	1.8%		2.7%
Other net liabilities	(5.9%)		(5.3%)
Total	100.0%		100.0%

Source: Polar Capital, portfolio as at 30 September 2021.

Whilst the previous charts focus on sub-sector and geographical weightings, bottom-up stock selection is central to the team's investment process. The healthcare industry is extremely complicated and dynamic, and subject to varied newsflow, often hyped, which lends itself to active management. We look to take advantage of dislocations between near-term valuations and medium-term returns. Our own in-house idea generation is complemented by input from external research, with conviction built through company meetings, investor conferences and dialogue with expert physician and consultant networks. The team also has strong valuation discipline looking at a large number of metrics including sales and earnings revisions, price-to-earnings, enterprise values, free-cash flow and returns on invested capital.

Zero Dividend Preference shares; A vehicle for enhancing returns

In terms of top-down strategy for the Company's portfolio, the team does allocate time to the macro-outlook, which feeds into positioning in terms of gearing, market capitalisation, sub-sector and geographical exposure. Third party research is utilised to aid this work, alongside many key risk indicators that are monitored on a regular basis.

The gearing afforded to the Company by its ZDPs is used to enhance risk-adjusted returns. Throughout the last 12 months, gearing has been changed according to the risk outlook. Net gearing was reduced from just north of 5% at the start of the financial year to approximately 2% by the calendar year-end, due to concerns of over-exuberance in the small and mid-capitalisation stocks, which put the performance of the Innovation portfolio at risk. Since the start of 2021 gearing was increased mainly to a range of between 5-6% due to a more bullish outlook for established large-capitalisation healthcare companies, especially those at the higher-end of the quality scale. As we exited the 2021 financial year gearing was 6.04%, a figure that reflects not just our constructive view on the healthcare sector, but also the balance of tailwinds and headwinds as we move through the mid-phase of the market cycle.

Environmental, Social and Governance; Focus on sustainability

Sustainability is central to the team's ESG philosophy. Healthcare is a long-term, secular growth industry as an ageing population around the world drives the demand and the need for increased healthcare provision. In 2018, global healthcare spending was $8.3 trillion, accounting for 10% of GDP (World Health Organization, 2020). Sustainable healthcare delivery for growing and ageing populations is an important part of the United Nations ("UN") 2030 Agenda for Sustainable Development; specifically, Goal 3 is to "ensure healthy lives and promoting well-being for all at all ages."

We believe that a sustainable healthcare system is one that delivers better healthcare to more people for less money. Healthcare companies with products, technologies and/or services that deliver demonstrable value to drive improvements in efficiency are not only well-placed for growth but are also likely to play a role in creating a sustainable healthcare system. Indeed, sustainable healthcare delivery has been one of the dominant underlying investment themes for the Company for some time now. Specifically, we focus on three characteristics of sustainable healthcare delivery:

1)  Improvement in clinical outcomes for patients through innovation,

2)  Improvement in the affordability and accessibility of healthcare services; and

3)  Improvement in the efficiency of the delivery of healthcare services.

The Company has a well-defined and disciplined process to ensure our investments are aligned with our core sustainability characteristics. After the initial  screenings of the investment universe against norms based standards such as the UN Global Compact, the UN Guiding Principles on Business and Human Rights and the International Labour Organisation's conventions, we use in-house research and third-party reports to continuously monitor the ESG profiles of the Company's holdings, and their alignment with the core sustainability characteristics. Particular attention is paid to businesses that fail to meet certain standards and are involved in practices that could contradict the Company's ESG philosophy, and to businesses that positively align with the Company's core sustainability characteristics.

Although our ongoing ESG analysis is an important part of our process, we believe that engaging directly with companies on sustainability, using internal and third-party reports such as MSCI and ISS, is the most productive course of action we can take and that engagement produces the highest quality outcomes on sustainability. Interactions are systematically logged in an internal database as a matter of record. The Managers also have regular interactions with Polar Capital's Head of Sustainability.

Outlook for healthcare in a post COVID-pandemic world

The impact of the COVID-19 pandemic on healthcare will be felt for many years, on top of the fact that the virus is likely to become endemic.  In terms of structural changes, there has been a big pick-up in R&D in pharmaceutical and biotech companies, not just on infectious diseases, but across other areas in response to the innovation and progress that has been witnessed over the last five years.  The enormous amount of money that has moved into life sciences venture capital over the last two years is evidence of the enthusiasm around the industry and the benefits that it can bring through the discovery of new drugs that can dramatically change patients' lives.  The impact of vaccine development against COVID-19 has been the accelerant for greater R&D spend and there will be many companies that benefit, particularly those focused in life sciences tools and services, clinical research organisations and contract manufacturers.

In the shorter term, the impact on supply chains is an issue as much for the healthcare sector as it is for other industries, with costs having jumped considerably since before the pandemic.  Also on the labour side, the pandemic has driven a sea change in what employees want and expect from their jobs, which is having a significant impact on healthcare. A recently published survey highlighted that 18% of US healthcare workers quit their jobs during the pandemic, with 79% of healthcare professionals saying that the national employee shortage has affected them and their place of work. Not only are positions being left vacant, but providers are also seeing a significant spike in wages.  This is likely to remain a challenge for many organisations for the next 12 to 18 months.

The disruption in healthcare delivery that started several years ago has been another area that has seen an acceleration driven by the pandemic.  The shift of care to lower cost settings and away from the large in-patient hospitals is a must if healthcare systems are to become more efficient.  With hospitals being at the centre of managing patients affected by COVID-19, care for other conditions has naturally moved away from the hospital with other providers such as ambulatory care, outpatient and home healthcare experiencing a significant boost in demand.  This trend will continue, but many of the companies in these areas are being impacted by the wage inflation and employee shortages, a situation that needs to improve if they are to cope with the acceleration in demand.

Backlogs have increased dramatically due to the pressure of the pandemic on healthcare system, most visibly on the elective side for procedures such as hips and knees. Here in the UK, for example, the British Medical Association estimates that between April 2020 and July 2021, there were 3.79 million fewer elective procedures and 26.02 million fewer outpatient attendances. Further, the total waiting list currently sits at an alarming, record high of 5.61 million, and continues to grow. The "invisible" backlog is perhaps more concerning, and is the consequence of the lack of screening and testing for diseases such as cancer during the last 18 months which,

sadly, will likely cause an increase in more serious and later stage disease in the months and years ahead. An article published in the Journal of Clinical Pathology referenced that cancer diagnoses fell by 39% in 2020 compared with the average number recorded in 2018 and 2019. Prostate cancer (-75%), bladder cancer (-66%), and colorectal cancer (-62%) had the greatest decreases. This is of course very concerning for the patients involved, but will effectively lead to high levels of demand for healthcare services for many years to come.

Conclusion

Whilst we do have some sympathy with the view that the near-term outlook for healthcare, and indeed the broader markets, is carrying some uncertainty due to the COVID-19 virus, we have a high level of conviction that the healthcare industry will continue to find innovative solutions, will continue to work on improving access to care and will look to drive efficiencies across the healthcare continuum. If successful, an optimistic stance about the medium-term prospects for the sector is the right one. In terms of timing, we believe that now could be an interesting time to engage for the following reasons:

· The healthcare industry's fundamentals are in rude health, with many sub-sectors having even stronger foundations now than before the COVID-19 pandemic.

· The sector remains under-owned and underappreciated, with allocations to the sector near decade-lows.

· Relative and absolute valuations in the US are attractive and supportive, respectively.

James Douglas & Gareth Powell

Co-Managers

16 December 2021

 

PORTFOLIO REVIEW

Full Investment Portfolio

As at 30 September 2021

Ranking		Stock	Sector	Country	Market Value £'000		% of total net assets
2021	2020				2021	2020	2021	2020
1	(-)	Johnson & Johnson	Pharmaceuticals	United States	29,093	-	7.5%	-
2	(31)	UnitedHealth	Managed Healthcare	United States	24,053	5,898	6.2%	1.8%
3	(-)	AstraZeneca	Pharmaceuticals	United Kingdom	19,954	-	5.2%	-
4	(4)	Bristol Myers Squibb	Pharmaceuticals	United States	15,580	14,393	4.0%	4.4%
5	(5)	Sanofi	Pharmaceuticals	France	13,629	12,825	3.5%	3.9%
6	(15)	Baxter International	Healthcare Equipment	United States	13,582	9,696	3.5%	3.0%
7	(22)	Centene	Managed Healthcare	United States	11,618	8,526	3.0%	2.6%
8	(-)	Steris	Healthcare Equipment	United States	10,912	-	2.8%	-
9	(17)	Horizon Pharma	Biotechnology	United States	10,910	9,335	2.8%	2.9%
10	(-)	Boston Scientific	Healthcare Equipment	United States	10,810	-	2.8%	-
Top 10 investments					160,141		41.3%
11	(21)	Amerisourcebergen	Healthcare Distributors	United States	10,721	8,545	2.8%	2.6%
12	(-)	Siemens Healthineers	Healthcare Equipment	Germany	10,450	-	2.7%	-
13	(-)	Hologic	Healthcare Equipment	United States	10,401	-	2.7%	-
14	(12)	Koninklijke Philips	Healthcare Equipment	Netherlands	10,277	10,071	2.7%	3.1%
15	(-)	Essilor International	Apparel, Accessories & Luxury Goods	France	10,241	-	2.7%	-
16	(-)	Molina Healthcare	Managed Healthcare	United States	9,961	-	2.6%	-
17	(25)	ArgenX	Biotechnology	Netherlands	9,703	7,216	2.5%	2.2%
18	(-)	Envista	Healthcare Equipment	United States	9,619	-	2.5%	-
19	(-)	Acadia Healthcare	Healthcare Facilities	United States	9,595	-	2.5%	-
20	(-)	Alnylam Pharmaceuticals	Biotechnology	United States	9,312	-	2.5%	-
Top 20 investments					260,421		67.5%
21	(-)	Ramsay Health Care	Healthcare Facilities	Australia	9,158	-	2.4%	-
22	(-)	Cytokinetics	Biotechnology	United States	8,974	-	2.3%	-
23	(-)	Encompass Health	Healthcare Facilities	United States	8,893	-	2.3%	-
24	(-)	AptarGroup	Metal & Glass Containers	United States	8,852	-	2.3%	-
25	(-)	UCB	Pharmaceuticals	Belgium	8,799	-	2.3%	-
26	(-)	CooperCompanies	Healthcare Supplies	United States	8,776	-	2.3%	-
27	(9)	Avantor	Life Sciences Tools & Services	United States	8,637	10,948	2.2%	3.4%
28	(13)	Bio-Rad Laboratories	Life Sciences Tools & Services	United States	8,439	9,867	2.2%	3.0%
29	(37)	Biohaven Pharmaceutical	Biotechnology	United States	8,411	3,821	2.2%	1.2%
30	(-)	GN Store Nord	Healthcare Equipment	Denmark	7,991	-	2.1%	-
Top 30 investments					347,351		90.1%
31	(-)	Alcon	Healthcare Supplies	Switzerland	7,678	-	2.0%	-
32	(-)	Amedisys	Healthcare Services	United States	6,856	-	1.8%	-
33	(24)	Align Technology	Healthcare Supplies	United States	5,922	7,615	1.5%	2.3%
34	(-)	Genmab	Biotechnology	Denmark	5,712	-	1.5%	-
35	(43)	Uniphar	Healthcare Distributors	Ireland	5,438	193	1.4%	0.1%
36	(30)	Medley	Healthcare Technology	Japan	4,404	5,905	1.1%	1.8%
37	(18)	Syneos Health	Life Sciences Tools & Services	United States	3,879	8,948	1.0%	2.8%
38	(35)	Intelligent Ultrasound	Healthcare Technology	United Kingdom	3,811	4,062	1.0%	1.2%
39	(-)	LivaNova	Healthcare Equipment	United Kingdom	3,810	-	1.0%	-
40	(33)	Zealand Pharma	Biotechnology	Denmark	3,807	4,742	1.0%	1.5%
Top 40 investments					398,668		103.4%
41	(39)	Ship Healthcare	Healthcare Distributors	Japan	2,882	1,850	0.7%	0.6%
42	(36)	Axonics Modulation Technologies	Healthcare Equipment	United States	2,180	3,896	0.6%	1.2%
43	(32)	Quotient	Healthcare Supplies	Switzerland	2,123	4,874	0.5%	1.5%
44	(42)	Avadel Pharmaceuticals	Pharmaceuticals	Ireland	2,018	1,105	0.5%	0.3%
45	(41)	Renalytix AI	Healthcare Technology	United States	460	1,523	0.1%	0.4%
46	(-)	Verici DX	Healthcare Technology	United Kingdom	230	-	0.1%	-
Total equities					408,561		105.9%
Other net liabilities					(22,833)		(5.9%)
Net assets					385,728		100.0%

Note - Sectors are from the GICS (Global Industry Classification Standard).

STRATEGIC REPORT

The Strategic Report section of this Annual Report comprises the Chair's Statement, the Investment Manager's Report, including information on the portfolio, and this Strategic Report. This Report has been prepared to provide information to shareholders on the Company's strategy and the potential for this strategy to succeed, including a fair review of the Company's performance during the year ended 30 September 2021, the position of the Company at the year end and a description of the principal risks and uncertainties. Throughout the Strategic Report there are certain forward-looking statements made by the Directors in good faith based on the information available to them at the time of their approval of this Report. Such statements should be treated with caution due to inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

HISTORY

In June 2017 a reconstruction of the Company, change in investment mandate and change of name was implemented having been approved by shareholders. Further information is provided within the Shareholder Information section in the full Annual Report and Accounts and on the Company's website www. polarcapitalglobalhealthcaretrust.co.uk. Following the reconstruction and in the absence of any prior proposals, the Articles of Association require the Directors to put forward at the first Annual General Meeting to be held after 1 March 2025, a resolution for the voluntary winding up of the Company and the appointment of a liquidator. Members voting in favour, whether in person or by proxy, shall collectively have sufficient votes, irrespective of number, to pass the resolution.

The Board remains positive on the outlook for healthcare and the Company will continue to pursue its Investment Objective in accordance with the stated investment policy and strategy. 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 Chair's Statement and the Investment Manager's Report comment on the development and performance of the business during the financial year, the outlook and potential risks to the performance of the portfolio.

BUSINESS MODEL AND REGULATORY ARRANGEMENTS

The Company's business model follows that of an externally managed investment trust providing Shareholders with access to a global portfolio of healthcare stocks.

The Company is designated an Alternative Investment Fund ('AIF') under the Alternative Investment Fund Management Directive ('AIFMD') and, as required by the Directive, has contracted with Polar Capital LLP to act as the Alternative Investment Fund Manager ('AIFM') and HSBC Bank Plc to act as the Depositary.

Both the AIFM and the Depositary have responsibilities under AIFMD for ensuring that the assets of the Company are managed in accordance with the investment policy and are held in safe custody. The Board remains responsible for setting the investment strategy and operational guidelines as well as meeting the requirements of the Financial Conduct Authority ('FCA') Listing Rules and the Companies Act 2006.

The AIFMD requires certain information to be made available to investors in AIFs before they invest and requires that material changes to this information be disclosed in the Annual Report of each AIF. Investor Disclosure Documents, which set out information on the Company's investment strategy and policies, gearing, risk, liquidity, administration, management, fees, conflicts of interest and other Shareholder information are available on the Company's website.

There have been no material changes to the information requiring disclosure. Any information requiring immediate disclosure pursuant to the AIFMD will be disclosed to the London Stock Exchange. Statements from the Depositary and the AIFM can be found on the Company's website.

The Company seeks to manage its portfolio in such a way as to meet the tests in section 1158 and 1159 of the Corporation Tax Act 2010 (as amended by Section 49(2) of the Finance Act 2011) and continue to qualify as an investment trust. This qualification permits the accumulation of capital within the portfolio without any liability to UK Capital Gains Tax. Further information is provided in the Directors' Report in the Annual Report and Accounts.

INVESTMENT OBJECTIVE AND POLICY

The Company's Investment Objective is to generate capital growth through investments in a global portfolio of healthcare stocks.

The Company will seek to achieve its objective by investing in a diversified global portfolio consisting primarily of listed equities. The portfolio is diversified by geography, industry sub-sector and investment size.

The portfolio will comprise a single pool of investments, but for operational purposes, the Investment Manager will maintain a Growth portfolio and an Innovation portfolio. Innovation companies are broadly defined by the Investment Manager as small/mid cap innovators that are driving disruptive change, giving rise not only to new drugs and surgical treatments but also to a transformation in the management and delivery of healthcare. The Growth portfolio is expected to comprise a majority of the Company's assets. For this purpose, once an innovation stock's market capitalisation has risen above US $5bn, it will ordinarily then be treated as a growth stock.

The relative ratio between the two portfolios may vary over the life of the Company due to factors such as asset growth and the Investment Manager's views as to the risks and opportunities offered by investments in each pool and across the combined portfolio. The original make-up of the combined portfolio was of up to 50 stocks, with growth stocks being primarily US listed. In 2018, the Board authorised an increase to the number of stocks able to be held to 65 and confirmed there is no restriction on geographical exposure.

The combined portfolio will therefore be made up of interests in up to 65 companies, with no single investment accounting for more than 10% (or 15% in the case of an investment in another fund managed by the Investment Manager) of the Gross Assets at the time of investment. The innovation portfolio may include stocks which are neither quoted nor listed on any stock exchange but the exposure to such stocks, in aggregate, will not exceed 5% of Gross Assets at the time of investment. In the event that the Investment Manager launches a dedicated healthcare innovation fund, the Company's exposure to innovation stocks may be achieved in whole or in part by an investment in that fund. In any event, the Company will not, without the prior consent of the Board, acquire more than 15% of any such healthcare innovation fund's issued share capital.

THE BOARD

As the day to day management of the Company is outsourced to service providers the Board's focus at each meeting is on investment performance, including the outlook and strategy. The Board also considers the management and provision of services received from third-party service providers and the risks inherent in the various matters reviewed and discussed.

STRATEGY AND INVESTMENT APPROACH

The Investment Manager's investment process is primarily based on bottom-up fundamental analysis. The Investment Manager uses a qualitative filter consisting of 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. Each individual holding is assessed on its own merits in terms of risk: reward including ESG criteria. While the Company expects normally to be fully or substantially invested, the Company may hold cash or money market instruments pending deployment in the 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.

SERVICE PROVIDERS

Polar Capital LLP has been appointed to act as the Investment Manager and AIFM as well as to provide or procure company secretarial services, marketing and administrative services, including accounting, portfolio valuation and trade settlement which it has arranged to deliver through HSBC Securities Services ("HSS").

The Company also contracts directly, on terms agreed periodically, with a number of third parties for the provision of specialist services, including:

· Panmure Gordon & Co as Corporate Broker;

· Herbert Smith Freehills LLP as solicitors;

· HSBC Securities Services as Custodian and Depositary;

· Equiniti Limited as the Share Registrars;

· PricewaterhouseCoopers LLP as independent Auditors;

· Huguenot Limited for website designers and internet hosting services; and

· Perivan Limited as designers and printers for shareholder Communications.

GEARING

Following the restructure of the Company in June 2017, the Company maintains long-term structural gearing in the form of a loan from the wholly owned subsidiary PCGH ZDP Plc. No short-term borrowings have been made and there are no arrangements made for any bank loans. 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. Further details of the loan provided by the subsidiary are given in the full Annual Report and Accounts.

BENCHMARK

The Company will measure the Investment Manager's performance against the MSCI ACWI Healthcare Index total return, in sterling with dividends reinvested. Although the Company has a benchmark, this is neither a target nor determinant of investment strategy. The portfolio may diverge substantially from the constituents of this index. The purpose of the Benchmark is to set a reasonable measure of performance for shareholders above which the Investment Manager earns a share for any outperformance 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 of the KPIs comprise both specific financial and Shareholder related measures. These KPI's have not differed from the prior year.

KPI	CONTROL PROCESS	OUTCOME
The provision of investment returns to shareholders measured by long- term NAV growth and relative performance against the Benchmark.	The Board reviews the performance of the portfolio in detail and hears the views of the Investment Manager at each meeting. The Board also considers the value delivered to shareholders through NAV growth and dividends paid	As at 30 September 2021, the total net assets of the Company amounted to £385,728,000. The Company's NAV total return, over the year ended 30 September 2021, was 19.46% while the Benchmark Index over the same period increased by 13.40%. The Company's performance is explained further in the Investment Manager's Report. Since restructuring on 20 June 2017, the total return of the NAV was 52.28% and the benchmark was 53.42%. Investment performance is explained in the Chair 's Statement and the Investment Manager's Report.
The achievement of the dividend policy.	Financial forecasts are reviewed to track income and distributions.	Two dividends have been paid or are payable in respect of the year ended 30 September 2021 totalling 2.00 p per share (2020: two dividends totalling 2.00p per share). The Company's focus remains on capital growth. While the Company continues to aim to pay two dividends per year these are expected to be a small part of a shareholder total return.
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 on 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. The Board is aware of the vulnerability of a sector specialist investment trust to a change in investor sentiment to that sector. While there is no formal discount policy the Board discusses the market factors giving rise to any discount or premium, the long or short-term nature of those factors and the overall benefit to Shareholders of any actions. The market liquidity is also considered when authorising the issue or buy back of shares when appropriate market conditions prevail. A daily NAV per share, calculated in accordance with the AIC guidelines is issued to the London Stock Exchange.	The discount of the ordinary share price to the NAV per ordinary share at the year ended 30 September 2021 was 9.5% (2020: 13.1%). During the year ended 30 September 2021, no new shares were issued or bought back. The number of shares in issue, as at the year end was 124,149,256 of which 2,879,256 were held in treasury. The total voting rights of the Company are 121,270,000 shares.
To qualify and continue to meet the requirements for sections 1158 and 1159 of the Corporation Tax Act 2010 ('investment trust status').	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 was granted investment trust status annually up to 1 October 2014 and is deemed to be granted such status for each subsequent year subject to the Company continuing to satisfy the conditions of section 1158 of the Corporation Tax Act 2010 and other associated ongoing requirements. The Directors confirm that the tests have been met in the financial year ended 30 September 2021 and believe that they will continue to be met.
To ensure the efficient operation of the Company by monitoring the services provided by third party suppliers, including the Investment Manager, and controlling ongoing charges.	The Board considers annually the services provided by the Investment Manager, both investment and administrative, and reviews on a cycle the provision of services from third parties including the costs of their services. The annual operating expenses are reviewed and any non-recurring project related expenditure approved by the Board.	The Board has received, and considered satisfactory, the internal controls report of the Investment Manager and other key suppliers including the contingency arrangements to facilitate the ongoing operations of the Company in the event of withdrawal or failure of services. The ongoing charges for the year ended 30 September 2021 were 0.83%, compared to 1.01% the previous year.

Risk Management

The Board is responsible for the management of risks faced by the Company and, through delegation to the Audit Committee, has established procedures to manage risk, oversee the internal control framework and determine the nature and extent of the principal risks the Company is willing to take in order to achieve its long-term strategic objectives.

The Audit Committee carries out, at least annually, a robust assessment of the principal risks and uncertainties with the assistance of the Investment Manager, continually monitors identified risks and meets to discuss both long-term and emerging risks outside of the normal cycle of Audit Committee meetings.

A Risk management process has been established to identify and assess various risks, their likelihood and the possible severity of impact then, considering both internal and external controls and factors that could provide mitigation, a post mitigation risk impact score is determined. The Audit Committee has identified the key risks faced by the Company. During the year the Audit Committee, in conjunction with the Board and the Investment Managers undertook a full review of the Company's Risk Map including the mitigating factors and controls to reduce the impact of the risks. The Committee continues to closely monitor these risks along with any other emerging risks as they develop and implements mitigating actions as necessary. The key risks which are those classified as having the highest risk impact score post mitigation are detailed below with a high-level summary of the management through mitigation and status arrows to indicate any change in assessment over the past financial year.

The Principal risks are detailed in the full Annual Report along with a high-level summary of their management through mitigation

and status arrows to indicate any change in assessment over the past financial year.

The Committee continues to monitor the continuing risks posed by COVID-19, which was classified as a Black Swan event in 2020. Further information on how the Committee has considered COVID-19 along with the other risks faced by the Company when assessing the effect on the Company's ability to operate as a going concern and the Company's longer-term viability can be found in the full Annual Report and Accounts.

Portfolio Management
	Description	Assessment	Mitigation
Investment Performance	Breach of Investment policy, Investment Manager unable to deliver the Investment Objective leading to poor performance against the benchmark or market/industry average.	Unchanged from previous year.	The Board seeks to mitigate the impact of such risks through the regular reporting and monitoring of the Company's investment performance against its peer group, benchmark and other agreed indicators of relative performance. A detailed annual review of the investment strategy is undertaken by the Investment Manager with the Board including analysis of investment markets and sector trends. At each meeting the Board discusses developments in healthcare and drug pipelines with the Investment Manager in addition to the composition and diversification of the portfolio with sales and purchases of investments and the degree of risk which the Investment Manager incurs to generate investment returns. Individual investments are discussed with the Investment Manager as well as the Investment Manager's general views on the various investment markets and the healthcare sector in particular. Analytical performance data and attribution analysis is presented by the Investment Manager. The Board is committed to a clear communication program to ensure Shareholders understand the investment strategy. This is maintained through the use of monthly factsheets which have a market commentary from the Investment Manager as well as portfolio data, an informative website as well as annual and half year reports.
Gearing	Inability to repay ZDP loan and or inappropriate use of derivatives.	Unchanged from previous year.	The Board considered the benefits and drawbacks of the structural debt at the time of restructuring and concluded that the ability to lock-in an effective interest rate of 3% pa for the 7-year life would be beneficial to investment returns, the Board remains of the same belief. The asset cover necessary to repay the ZDP shares is reviewed at each Board meeting. If any flexible gearing is contemplated the Board would agree the overall levels of gearing with the AIFM. The arrangement of bank facilities and drawing of funds under such arrangements are controlled by the Board. Derivatives are considered as being a form of gearing and a policy for their use has been agreed by the Board. The deployment of any borrowed funds is based on the Investment Manager's assessment of risk and reward.
Discount/Premium	Persistent discount in excess of Board or Shareholder acceptable levels.	Unchanged from previous year.	The Board regularly considers, in comparison to the sector and peers, the level of premium and discount of the share price to the NAV and ways to enhance Shareholder value including share issuance and buy backs. The Board has carefully monitored the discount level and market movements during the COVID-19 pandemic and has discussed performance with the Managers and advisers. The discount of the Company narrowed during the year under review and as at 30 September 2021, the discount of the ordinary share price to the NAV per ordinary share was 9.5% (2020: 13.1%). The Chair has also met (virtually) with key shareholders to understand any concerns and views as detailed in the Chair's Statement and within the s172 Report. Further detail on the performance and the impact of COVID-19 and market movements on the Company is given in the Investment Manager's Report.
Trading	Execution of unauthorised trade/dealing error. Error or breach may cause regulatory investigation leading to fines, reputational damage and risk to investment trust status.	Unchanged from previous year.	Investment limits and restrictions are encoded into the dealing and operations systems of the Investment Manager and various oversight functions are undertaken to ensure there is early warning of any potential issue of compliance or regulatory matters.

Operational Risk
	Description	Assessment	Mitigation
Service Failure	Failure in services provided by the Investment Manager, Custodian, Depositary or other service providers; Accounting, Financial or Custody Errors resulting in regulatory investigation or financial loss, failure of trade settlement, potential loss of Shareholder assets and investment trust status.	Unchanged from previous year.	The Board carries out an annual review of internal control reports from suppliers which includes cyber protocols and disaster recovery procedures. Due diligence and service reviews are undertaken with third-party service providers including the Custodian and Depository. A full review of the internal control framework is carried out at least annually. Regular reporting is received by the Investment Manager on behalf of the Board from the Depositary on the safe custody of the Company's assets. The Board undertakes independent reviews of the Depositary and external Administrator services and additional resources have been put in place by the Investment Manager. Management accounts are produced and reviewed monthly, statutory reporting and daily NAV calculations are produced by the external Administrator and verified by the Investment Manager. Accounting records are tested, and valuations verified independently as part of the year-end financial reporting process.
Cyber Risk	Cyber-attack causing disruption to or failure of operational and accounting systems and processes provided by the Investment Manager creating an unexpected event and/or adverse impact on personnel or the portfolio.	Unchanged from previous year.	The number, severity and success rate of cyber-attacks have increased considerably over recent years, controls are however in place and the Board proactively seeks to keep abreast of developments through updates from representatives of the Investment Manger who undertakes meetings with the relevant service providers. In light of the COVID-19 pandemic and the lockdown measures introduced by the UK Government, the Audit Committee once again sought assurance from each of the Company's service providers on the resilience of their business continuity arrangements whilst the majority of their employees worked remotely. These assurances and the subsequent detailed updates that were given to the Committee provided a satisfactory level of assurance that there had not been, and there was no anticipation of any disruption in the ability of each service provider to fulfil their duties as would typically be expected.
Key Man	Loss of Investment Manager or other key management professionals. Impact on investor confidence leading to widening of the discount and/or poor performance creating a period of uncertainty and potential termination of the Investment Management Agreement.	Unchanged from previous year.	The strength and depth of investment team provides comfort that there is not over-reliance on one person with alternative portfolio managers available to act if needed. For each key business process roles, responsibilities and reporting lines are clear and unambiguous. During the year, the healthcare team was strengthened further with the addition of two new team members. Further details are provided in the Management team biographies in the full Annual Report. The Investment Manager has implemented BCP arrangements as a result of COVID-19 with staff working remotely with no loss of service.
Shareholder Communications	Failure to effectively communicate significant events to the shareholder and investor base.	Unchanged from previous year.	The Board is committed to a clear communication programme to ensure Shareholders understand the investment strategy. This is maintained through the use of monthly factsheets which have a market commentary from the Investment Manager as well as portfolio data, an informative website as well as annual and half year reports.

Regulatory Risk
	Description	Assessment	Mitigation
	Non-compliance with statutes, regulations and disclosure requirements, including FCA listed company regime and Companies Act 2006; s1158/1159 of the Corporation Tax Act 2010, the Companies Act 2006 and other UK, European and overseas legislation affecting UK companies including MiFID II and the GDPR. Not complying with accounting standards could result is a suspension of listing or loss of investment trust status, reputational damage and Shareholder activism. Further risks arise from not keeping abreast of changes in legislation and regulations which have in recent years been substantial.	Unchanged from previous year.	The Board monitors regulatory change with the assistance of the Investment Manager, Company Secretary and external professional suppliers and implements necessary changes should they be required. The Board receives regulatory reports for discussion and, if required, considers the need for any remedial action. In addition, as an investment company, the Company is required to comply with a framework of tax laws, regulation and company law. The Board keeps abreast of third party service provider internal controls processes to ensure requirements are met in accordance with regulatory requirements.

Economic and Market Risk
	Description		Assessment	Mitigation
	Financial loss due to unexpected natural disaster or other unpredictable event disrupting the ability to operate or significant exposure to the economic cycles of the markets in which the underlying investments conduct their business operations as well as the economic impact on investment markets where such investments are listed. Fluctuations in stock markets and currency exchange rates could be advantageous or disadvantageous to the Company and its performance. Disruption to trading platforms and support services.	Unchanged from previous year.			The Board regularly discusses the general economic conditions and developments. The impact on the portfolio from other geopolitical changes including, as an example, tensions between the US and China are monitored through existing control systems and discussed regularly by the Board. While it is difficult to quantify the impact of such changes, it is not anticipated that they will fundamentally affect the business of the Company or make healthcare investing any less desirable. The longer term effects of COVID-19 on this risk will continue to be assessed by the Audit Committee in light of how they will impact the Company's portfolio and the overall economic and geopolitical environment in which the Company operates. The Company through the Investment Manager, has a disaster recovery plan in place.

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 Polar Capital LLP (the Investment Manager) will achieve the optimum return for shareholders and the Board and Investment Manager operate in a supportive, co-operative and open environment.

The Investment Manager is Polar Capital LLP ('Polar Capital'), which is authorised and regulated by the Financial Conduct Authority, to act as Investment Manager and AIFM of the Company with sole responsibility for the discretionary management of the Company's assets (including uninvested cash) and sole responsibility to take decisions as to the purchase and sale of individual investments. The Investment Manager also has responsibility for asset allocation within the limits of the investment policy and guidelines established and regularly reviewed by the Board, all subject to the overall control and supervision of the Board.

Under the terms of the IMA, the Investment Manager also provides or procures accountancy services, company secretarial, marketing and day-to-day administrative services, including the monitoring of third-party suppliers, which are directly appointed by the Company. The Investment Manager has, with the consent of the Directors, delegated the provision of certain of these administrative functions to HSBC Securities Services and to Polar Capital Secretarial Services Limited.

Polar Capital provides a team of healthcare specialists and the portfolio is co-managed by Dr James Douglas and Mr Gareth Powell. The Investment Manager has other resources which support the investment team and has experience in managing and administering other investment trust companies.

TERMINATION ARRANGEMENTS

The IMA may be terminated by either party giving 12 months' notice. The IMA 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 IMA. In the event the IMA 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 IMA, 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, with effect from 1 October 2020, was charged at the rate of 0.75% (previously: 0.85%) per annum based on the lower of the market capitalisation and adjusted net asset value. In accordance with the Directors' policy on the allocation of expenses between income and capital, in each financial year 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 was reset at the date of reconstruction of the Company and will be paid in cash at the end of the Company's expected life (except in the case of an earlier termination of the IMA). The performance fee will be an amount equal to 10% of the excess total return (based on the Adjusted Net Asset Value per ordinary share at that time) over the total return of the benchmark plus 1.5% compounded annually on each anniversary of share admission and adjusted for periods of less than 12 months. In the event of a performance fee becoming payable on the future portfolio realisation date, such fee would be subject to a maximum amount of 3.5% of the terminal NAV. For the purposes of calculating the performance fee, the Company's Adjusted Net Asset Value will be based on the Net Asset Value adjusted by the amount of any dividends paid by the Company 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. If at the end of the Company's expected life the amount available for distribution to shareholders is less than 215.9p per ordinary share, no performance fee will be payable. If the amount is more than 215.9p 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 215.9p per share. No performance fee has been paid or accrued since inception and up to 30 September 2021.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)

CORPORATE RESPONSIBILITY

The Company's core investment and administrative activities are undertaken by its Investment Manager which seeks to limit the use of non renewable resources and reduce waste where possible. The Investment Manager has a corporate ESG policy, which is available in the document library of the Company's website, and wherever possible and appropriate the parameters of such are considered and adopted by the investment team in relation to the Company's management and portfolio construction. As detailed further within the Investment Manager's Report the Investment Managers are required to have consideration of ESG factors when reviewing new, continuing or exiting investments but they are not required to take an investment decision solely on the basis of ESG factors. The Board monitors the Investment Manager's approach to ESG including policies for improvement of impact on the environment, and they themselves take into account ESG factors in the management of the Company. The Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013 require companies listed on the Main Market of the London Stock Exchange to report on the greenhouse gas ('GHG') emissions for which they are responsible. The Company is an investment trust, with neither employees nor premises, nor has it any financial or operational control of the assets which it owns. Consequently, it has no GHG emissions to report from its operations nor does it have responsibility for any other emissions.

DIVERSITY AND GENDER REPORTING

The Company has no employees and the Board is comprised of one female and three male Independent non-executive Directors. The Board is cognisant of the Hampton Alexander Review which set a target for all FTSE350 companies to have a board with a 33% female representation by the end of 2020. The Company falls outside of the FTSE350 and currently has 25% female representation but notes that the most senior Board role of Chair is held by the female director.

The FCA issued a consultation document in July 2021 on Diversity and Inclusion which proposes various changes to the Listing Rules including the expansion of reporting beyond gender diversity. If approved, the revised rules are expected to come into force for financial years commencing on or after 1 January 2022. The Board will review and take any necessary action in due course and will continue to have regard to the benefits of diversity throughout any recruitment process, especially when compiling a shortlist of candidates and selecting individuals for interview, but will ultimately seek to ensure directors appointed to the Board are chosen on merit.

The Company has not adopted a policy on human rights as it has no employees or operational control of its assets.

MODERN SLAVERY ACT

As an investment company, the Company does not provide goods or services in the normal course of business and does not have any customers. Accordingly, the Company does not consider that it falls within the scope of the Modern Slavery Act 2015 and therefore does not meet the criteria requiring it to produce a statement under such Act.

ANTI-BRIBERY, CORRUPTION AND TAX EVASION

The Board has adopted a zero-tolerance policy (available on the Company's website) to bribery, corruption and the facilitation of tax evasion in its business activities. The Board uses the principles formulated and implemented by the Investment Manager and expects the same standard of zero tolerance to be adopted by third party service providers. The Company has implemented a Conflicts of Interest policy to which the Directors must adhere, in the event of divergence between the Investment Manager's policy and the Company's policy the Company's policy shall prevail. The Company is committed to acting with integrity and in the interests of shareholders at all times.

TASKFORCE FOR CLIMATE-RELATED FINANCIAL DISCLOSURES ("TCFD")

The Company notes the TCFD recommendations on climate-related financial disclosures. As stated above, the Company is an investment trust with no employees, internal operations or property. However, it is an asset owner and therefore we will work to develop appropriate disclosures about our portfolio. Information sources are developing and consultations on reporting requirements are underway, we will continue to work alongside our Investment Manager to provide more information as it becomes available. Polar Capital supports TCFD's recommendations and is in the process of assessing the guidance to ensure compliance going forward.

ESG AND THIRD PARTY SERVICE PROVIDERS

The Investment Manager on behalf of all clients receives assurance on an annual basis that, where required, third party service providers comply with the requirements of the Modern Slavery Act and adhere to a zero-tolerance policy to bribery and corruption. In light of the growing requirements surrounding ESG, including TCFD, third party service providers have been engaged in providing copies of their ESG, Diversity and Inclusion, Stewardship and other related policies to the Company. The Board will continue to monitor the practices of service providers and seek to assure shareholders where appropriate that suitable policies and procedures are in place to effect positive change.

SECTION 172 OF THE COMPANIES ACT 2006

The statutory duties of the Directors are listed in s171-177 of the Companies Act 2006. Under s172, Directors have a duty to promote the success of the Company for the benefit of its members (our Shareholders) as a whole and in doing so have regard to the consequences of any decision in the long term, as well as having regard to the Company's stakeholders amongst other considerations. The fulfilment of this duty not only helps the Company achieve its Investment Objective but ensures decisions are made in a responsible and sustainable way for Shareholders.

To ensure that the Directors are aware of, and understand, their duties, they are provided with an induction when they first join the Board, including details of all relevant regulatory and legal duties as a Director and continue to receive regular and ongoing updates on relevant legislative and regulatory developments. They also have continued access to the advice and services of the Company Secretary and, when deemed necessary, the Directors can seek independent professional advice. The Schedule of Matters Reserved for the Board, as well as the Terms of Reference of its committees, are reviewed annually and further describe Directors' responsibilities and obligations and include any statutory and regulatory duties.

The Board seeks to understand the needs and priorities of the Company's stakeholders and these are taken into account during discussions and as part of the decision-making process. As an externally managed investment company, the Company does not have any employees or customers, however the key stakeholders and a summary of the Board's consideration and actions where possible in relation to each group of stakeholders are described in the table below:

STAKEHOLDER GROUP	HOW WE ENGAGE WITH THEM
SHAREHOLDERS	The Directors have considered this duty when making the strategic decisions during the year that affect Shareholders, including the continued appointment of the Investment Manager and the recommendation that Shareholders vote in favour of the resolutions for the Company to continue and to renew the allotment and buy back authorities at the AGM. The Directors have also engaged with and taken account of Shareholders' interests during the year. The Directors were unable to have the usual face-to-face interactions with Shareholders this year due to the guidance from the UK government in respect of gatherings of people. Instead, the Board held a "Meet the Manager and Board" session where shareholders had the opportunity to hear a brief introduction from the Managers and the Chair and were provided with an opportunity to ask questions. The Company's AGM will be held at 2pm on Wednesday 11 February 2022. The Board has been considering how best to deal with the continued uncertainties posed by the COVID-19 pandemic and possible future outbreaks which may impact the holding of the AGM. The health and wellbeing of our employees, shareholders and the wider community in which we operate is of importance to the Board. The Board also recognises that the AGM is an important event for Shareholders and the Company and is keen to ensure that Shareholders are able to exercise their right to vote and participate. Unless circumstances change, and they may do so at any time between now and the AGM, the meeting will be held at the offices of Polar Capital, 16 Palace Street, London SW1E 5JD. Any changes to these arrangements will be communicated through the Company's website and via a Regulatory Information Service announcement. The Board believes that shareholder engagement remains important, especially in the current market conditions and is keen that the AGM be a participative event for all Shareholders who attend. Shareholders are encouraged to send any questions ahead of the AGM to the Board via the Company Secretary at [e-mail] stating the subject matter as PCGH-AGM. The investment manager gives a presentation and the Chairs of the Board and of the Committees attend and are available to respond to questions and concerns from Shareholders. Should any significant votes be cast against a resolution, the Board will engage with Shareholders and explain in its announcement of the results of the AGM the actions it intends to take to consult Shareholders in order to understand the reasons behind the votes against. Following the consultation, an update will be published no later than six months after the AGM and the Annual Report will detail the impact the Shareholder feedback has had on any decisions the Board has taken and any actions or resolutions proposed. Relations with Shareholders The Board and the Manager consider maintaining good communications and engaging with Shareholders through meetings and presentations a key priority. The Board regularly considers the share register of the Company and receives regular reports from the Manager and the Corporate Broker on meetings attended with Shareholders and any concerns that are raised in those meetings. The Board also reviews correspondence from Shareholders and may attend investor presentations. Shareholders are kept informed by the publication of annual and half year reports, monthly fact sheets, access to commentary from the Investment Manager via the Company's website and attendance at events at which the Investment Manager presents. Shareholders are able to raise any concerns directly with the Board without using the Manager or Company Secretary as a conduit. The Chair or other Directors are available to Shareholders who wish to raise matters either in person or in writing. The Chair and Directors may be contacted through the registered office of the Company. Shareholders are able to raise any concerns directly with the Board without using the Manager or Company Secretary as a conduit. The Chair or other Directors are available to Shareholders who wish to raise matters either in person or in writing. The Chair and Directors may be contacted through the registered office of the Company. The Company, through the sales and marketing efforts of the Investment Manager, encourages retail investment platforms to engage with underlying Shareholders in relation to Company communications and enabling those Shareholders to cast their votes on Shareholder resolutions. The Company however has no responsibility over such platforms. The Board therefore encourage Shareholders invested via the platforms to regularly visit the Company's website or to make contact with the Company directly to obtain copies of Shareholder communications. The Company has also made arrangements with its registrar for Shareholders, who own their shares directly rather than through a nominee or share scheme, to view their account online at www.shareview.co.uk. Other services are also available via this service.
INVESTMENT MANAGER	Through the Board meeting cycle, regular updates and the work of the Management Engagement Committee reviewing the services of the Investment Manager annually, the Board is able to safeguard Shareholder interests by: · Ensuring adherence to the Investment Policy; · Ensuring excessive risk is not undertaken in the pursuit of investment performance; · Ensuring adherence to the Investment Management Policy and reviewing the agreed management and performance fees; and · Reviewing the Investment Manager's decision making and consistency in investment process. Maintaining a close and constructive working relationship with the Manager is crucial as the Board and the Investment Manager both aim to continue to achieve consistent, long-term returns in line with the Investment Objective. The culture which the Board maintains to ensure this involves encouraging open discussion with the Investment Manager; recognising that the interests of Shareholders and the Investment Manager are aligned, providing constructive challenge and making Directors' experience available to support the Investment Manager. This culture is aligned with the collegiate and meritocratic culture which Polar Capital has developed and maintains. Outcomes and strategic decisions during the year The Board in their capacity as the Management Engagement Committee has recommended the continued appointment of the Investment Manager on the terms agreed within the Investment Management Agreement.
INVESTEE COMPANIES	The Board has instructed the Investment Manager to take into account the published corporate governance policies of the companies in which they invest. The Board has also considered the Investment Manager's Stewardship Code and Proxy Voting Policy. The Proxy Voting Policy directs the Investment Manager to vote at all general meetings of companies in line with ISS policy. However, in exceptional cases, where the Investment Manager believes that a resolution would 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. This Policy changed during the financial year, as the prior default instruction had been for the Investment Manager to vote at all general meetings of companies in favour of management's recommendation. The Investment Manager has voted at 45 company meetings over the year ended 30 September 2021, with 5.8% of all votes being against management and 34% of meetings having at least one against or withheld vote. 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 Investment Manager's website in the Corporate Governance section (www.polarcapital.co.uk). Further information on how the Investment Manager considers ESG in its engagement with investee companies can be found in the Investment Manager's report. Outcomes and strategic decisions during the year During the year, the Board discussed the impact of ESG and how the Investment Manager incorporated ESG into their strategy and investment process.
SERVICE PROVIDERS	The Directors have frequent engagement with the Company's other service providers through the annual cycle of reporting and due diligence meetings or site visits. This engagement is completed with the aim of having effective oversight of delegated services, seeking to improve the processes for the benefit of the Company and to understand the needs and views of the Company's service providers, as stakeholders in the Company. Further information on the Board's engagement with service providers is included in the Corporate Governance Statement and the Report of the Audit Committee in the full Annual Report. Outcomes and strategic decisions during the year The reviews of the Company's service providers have been positive and the Directors believe their continued appointment is in the best interests of the Company. The accounting and administration services of HSBC Securities Services (HSS) are contracted through Polar Capital and provided to the Company under the terms of the IMA. The Board however continue to conduct due diligence service reviews in conjunction with the Company Secretary and is satisfied that the service received continues to be of a high standard.
PROXY ADVISORS	The support of proxy adviser agencies is important to the Directors, as the Company seeks to retain a reputation for high standards of corporate governance, which the Directors believe contributes to the long-term sustainable success of the Company. The Directors consider the recommendations of these various proxy voting agencies when contemplating decisions that will affect Shareholders and also when reporting to Shareholders through the Half Year and Annual Reports. Recognising the principles of stewardship, as promoted by the UK Stewardship Code, the Board welcomes engagement with all of its investors. The Board recognises that the views, questions from, and recommendations of many institutional investors and proxy adviser agencies provide a valuable feedback mechanism and play a part in highlighting evolving Shareholders' expectations and concerns. Prior to AGMs, the Company engages with these agencies to fact check their advisory reports and clarify any areas or topics that the agency requests. This ensures that whilst the proxy advisory reports provided to Shareholders are objective and independent, the Company's actions and intentions are represented as clearly as possible to assist with Shareholders' decision making when considering the resolutions proposed at the AGM. Outcomes and strategic decisions during the year The Nomination Committee considers the time commitment required of Directors and the Board considers each Director's independence on an ongoing basis. The Board have confirmed that all Directors remain independent and able to commit sufficient time in fulfilling their duties, including those listed on s172 of the Companies Act.  Accordingly, all Directors are standing for re-election at the Company's AGM.
THE AIC	The Company is a member of the AIC and has also supported lobbying activities such as the consultations on the 2019 AIC Code, the 2021 BEIS Restoring Trust in Audit and Corporate Governance and the FCA's 2021 consultation on Diversity and Inclusion on Company Boards. The Directors also cast votes in the AIC Board Elections each year and regularly attend AIC events.

Approved by the Board on 16 December 2021

By order of the Board

TRACEY LAGO, FCG

POLAR CAPITAL SECRETARIAL SERVICES LIMITED

COMPANY SECRETARY

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual 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. Under that law the Directors have prepared the group and company Financial Statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. Additionally, the Financial Conduct Authority's Disclosure Guidance and Transparency Rules require the directors to prepare the group Financial Statements in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in 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 company and of the profit or loss of the group and company for that period. In preparing the Financial Statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· state whether, for the group and company, international accounting standards in conformity with the requirements of the Companies Act 2006 and, for the group, international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union have been followed, subject to any material departures disclosed and explained in the Financial Statements;

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

· prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the group and 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 Group and enable them to ensure that its Financial Statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to

prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the UK governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

Directors' confirmations

The Directors consider that the annual report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the group and company's position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the Strategic Report, confirm that, to the best of their knowledge:

· the company Financial Statements, which have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the company;

· the group Financial Statements, which have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the group; and

· the Strategic Report includes a fair review of the development and performance of the business and the position of the group and company, together with a description of the principal risks and uncertainties that it faces.

In the case of each Director in office at the date the Directors' Report is approved:

· so far as the Director is aware, there is no relevant audit information of which the group and company's Auditors are unaware; and

· they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the group and company's Auditors are aware of that information.

Lisa Arnold

Chair

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 September 2021

	Note	Group			Group
		Year ended 30 September 2021			Year ended 30 September 2020
		Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
Investment income	3	3,685	-	3,685	3,446	-	3,446
Other operating income	4	-	-	-	17	-	17
Gains on investments held at fair value	5	-	64,165	64,165	-	42,435	42,435
Other currency losses	6	-	(144)	(144)	-	(647)	(647)
Total income		3,685	64,021	67,706	3,463	41,788	45,251
Expenses
Investment management fee	7	(518)	(2,070)	(2,588)	(535)	(2,140)	(2,675)
Other administrative expenses	8	(553)	(59)	(612)	(685)	(107)	(792)
Total expenses		(1,071)	(2,129)	(3,200)	(1,220)	(2,247)	(3,467)
Profit before finance costs and tax		2,614	61,892	64,506	2,243	39,541	41,784
Finance costs	9	-	(1,064)	(1,064)	(1)	(1,038)	(1,039)
Profit before tax		2,614	60,828	63,442	2,242	38,503	40,745
Tax	10	(421)	-	(421)	(472)	-	(472)
Net profit for the year and total comprehensive income		2,193	60,828	63,021	1,770	38,503	40,273
Earnings per Ordinary share (pence)	12	1.81	50.16	51.97	1.46	31.74	33.20

The total column of this statement represents Group's Statement of Comprehensive Income, prepared in accordance with IFRS.

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

The Group does not have any other income or expense that is not included in net profit for the year. The net profit for the year disclosed above represents the Group's total comprehensive income.

There are no dilutive securities and therefore the Earnings per Share and the Diluted Earnings per share are the same.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.

The notes below form part of these Financial Statements.

 

STATEMENTS OF CHANGES IN EQUITY

For the year ended 30 September 2021

	Note	Group and Company Year ended 30 September 2021
		Called up share capital £'000	Capital redemption reserve £'000	Share premium reserve £'000	Special distributable reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total Equity £'000
Total equity at 1 October 2020		31,037	6,575	80,685	3,672	201,149	2,015	325,133
Total comprehensive income:
Profit for the year ended 30 September 2021		-	-	-	-	60,828	2,193	63,021
Transactions with owners, recorded directly to equity:
Equity dividends paid	11	-	-	-	-	-	(2,426)	(2,426)
Total equity at 30 September 2021		31,037	6,575	80,685	3,672	261,977	1,782	385,728

	Note	Group and Company Year ended 30 September 2020
		Called up share capital £'000	Capital redemption reserve £'000	Share premium reserve £'000	Special distributable reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total Equity £'000
Total equity at 1 October 2019		31,037	6,575	80,685	4,712	162,646	2,792	288,447
Total comprehensive income:
Profit for the year ended 30 September 2020		-	-	-	-	38,503	1,770	40,273
Transactions with owners, recorded directly to equity:
Shares bought back and held in treasury	-	-	-	-	(1,040)	-	-	(1,040)
Equity dividends paid	11	-	-	-	-	-	(2,547)	(2,547)
Total equity at 30 September 2020		31,037	6,575	80,685	3,672	201,149	2,015	325,133

The notes below form part of these Financial Statements.

 

BALANCE SHEETS

As at 30 September 2021

	Notes	Group		Company
		30 September 2021 £'000	30 September 2020 £'000	30 September 2021 £'000	30 September 2020 £'000
Non-current assets
Investments held at fair value	13	408,561	342,404	408,561	342,404
Investment in subsidiary	13	-	-	50	50
Current assets
Receivables		2,300	3,082	2,300	3,082
Overseas tax recoverable		572	589	572	589
Cash and cash equivalents	16	13,718	17,845	13,668	17,795
		16,590	21,516	16,540	21,466
Total assets		425,151	363,920	425,151	363,920
Current liabilities
Payables		(2,956)	(3,382)	(2,956)	(3,382)
		(2,956)	(3,382)	(2,956)	(3,382)
Non-current liabilities
Zero Dividend Preference shares		(36,467)	(35,405)	-	-
Loan from subsidiary		-	-	(36,467)	(35,405)
Total liabilities		(39,423)	(38,787)	(39,423)	(38,787)
Net assets		385,728	325,133	385,728	325,133
Equity attributable to equity Shareholders
Called up share capital	14	31,037	31,037	31,037	31,037
Share premium reserve		80,685	80,685	80,685	80,685
Capital Redemption reserve		6,575	6,575	6,575	6,575
Special distributable reserve		3,672	3,672	3,672	3,672
Capital reserves		261,977	201,149	261,977	201,149
Revenue reserve		1,782	2,015	1,782	2,015
Total equity		385,728	325,133	385,728	325,133
Net asset value per Ordinary share (pence)	15	318.07	268.11	318.07	268.11
Net asset value per ZDP share (pence)		113.50	110.20	-	-

The parent company has taken advantage of section 408 of the Companies Act 2006 and has not included its own income statement in the Financial Statements. The parent company's profit for the year was £63,021,000 (2020: £40,273,000).

The Financial Statements were approved and authorised for issue by the Board of Directors on 16 December 2021 and signed on its behalf by

Lisa Arnold

Chair

Registered number 7251471

The notes below form part of these Financial Statements.

CASH FLOW STATEMENTS

For the year ended 30 September 2021

		Group and Company
	Note	Year ended 30 September 2021 £'000	Year ended 30 September 2020 £'000
Cash flows from operating activities
Profit before finance costs and tax		64,506	41,784
Adjustment for non-cash items:
Gains on investments held at fair value through profit or loss		(64,165)	(42,435)
Scrip dividends received		-	(204)
Adjusted profit/(loss) before tax		341	(855)
Adjustments for:
Purchases of investments, including transaction costs		(626,164)	(952,341)
Sales of investments, including transaction costs		625,115	967,884
(Increase)/decrease in receivables		(108)	85
(Decrease)/increase in payables		(479)	176
Overseas tax deducted at source		(404)	(368)
Net cash (used in)/generated from operating activities		(1,699)	14,581
Cash flows from financing activities
Cost of shares repurchased		-	(1,040)
Interest paid		(2)	(7)
Equity dividends paid	11	(2,426)	(2,547)
Net cash used in financing activities		(2,428)	(3,594)
Net (decrease)/increase in cash and cash equivalents		(4,127)	10,987
Cash and cash equivalents at the beginning of the year		17,845	6,858
Cash and cash equivalents at the end of the year	16	13,718	17,845

The notes below form part of these Financial Statements.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 September 2021

1.  General Information

The consolidated Financial Statements for the year ended 30 September 2021 comprise the Financial Statements of the Company and it's wholly-owned subsidiary PCGH ZDP plc (together referred to as the 'Group').

The Group and Company's presentational currency is pounds sterling (rounded to the nearest £'000). Pounds sterling is also the functional currency of the Group and Company because it is the currency which is most relevant to the majority of the Group and Company's shareholders and creditors and the currency in which the majority of the Group and Company's operating expenses are paid.

2.  Accounting Policies

The principal accounting policies which have been applied consistently for all years presented are set out below:

(a)  Basis of Preparation

The Group and Company Financial Statements have been prepared in accordance with International Accounting Standards in

conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRS) adopted

pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. See Director's Report in the Annual Report and Accounts for further details.

The 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 April 2021 is consistent with the requirements of IFRS, in so far as those

requirements are applicable to the Financial Statements, the Directors have sought to prepare the Financial Statements on a basis compliant with the recommendations of the SORP.

Basis of consolidation - The Group Financial Statements consolidate the Financial Statements of the Company and its wholly owned subsidiary, PCGH ZDP plc, drawn up to the same accounting date. The subsidiary is consolidated from the date of its incorporation.

The Company has taken advantage of the exemption under section 408 of the Companies Act 2006 and accordingly has not presented a separate parent company income statement.

The financial position of the Group and Company as at 30 September 2021 are shown in the balance sheet above. As at 30 September 2021 the Group and Company's total assets exceeded its total liabilities by a multiple of over 10. The assets of the Group and Company consist mainly of securities that are held in accordance with the Company's Investment Policy, as set out above and these securities are readily realisable. The Directors have considered a detailed assessment of the Group and Company's ability to meets their liabilities as they fall due. The assessment took account of the Group and Company's current financial positions, their cash flows and their liquidity positions. In addition to the assessment, the Group and Company carried out stress testing, including assessment of the continuing risks arising from COVID-19, which used a variety of falling parameters to demonstrate the effects on the Group and Company's share prices and net asset values. In light of the results of these tests, the Group and Company's cash balances, and the liquidity positions, the Directors consider that the Group and Company has adequate financial resources to enable them to continue in operational existence for at least 12 months. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Group and Company's Financial Statements.

(b)  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 results presented in the revenue return column is the measure the Directors believe appropriate in assessing the Group and Company's compliance with certain requirements set out in section 1158 of the Corporation Tax Act 2010.

(c)  Income

Dividends receivable from equity shares are recognised and 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.

Where the Group and 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.

Bank interest is accounted for on an accruals basis. Interest outstanding at the year-end is calculated on a time apportionment basis using market rates of interest.

(d)  Written Options

The Group and 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 Group and 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.

(e)  Expenses

All expenses, including the management fee, are accounted for on an accruals basis and are recognised when they fall due.

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 Group and 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.

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.

The research costs relate solely to specialist healthcare research and are accounted for on an accrual basis and, are allocated 20% to revenue and 80% capital. This in in line with the Board's expected long-term split of revenue and capital return from the Company's investment portfolio.

Finance costs

The ZDP shares are designed to provide a pre-determined capital growth from their original issue price of 100p on 20 June 2017 to a final capital repayment of 122.99p on 19 June 2024. The initial capital will increase at a compound interest rate of 3% per annum.

No dividends are payable on the ZDP shares. The provision for the capital growth entitlement of the ZDP shares is included as a finance cost and charged 100% to capital within the Statement of Comprehensive Income (AIC SORP paragraph 53 - issued April 2021).

Overdraft interest costs are allocated 20% to revenue and 80% to capital in line with the Board's expected long-term split of revenue and capital return from the Company's investment portfolio.

Share issue costs

Costs incurred directly in relation to the issue of shares in the subsidiary are borne by the Company and taken 100% to capital. Share issue costs relating to ordinary share issues by the Company are taken 100% to the share premium account.

Zero Dividend Preference (ZDP) shares

Shares issued by the subsidiary are treated as a liability of the Group, and are shown in the Balance Sheet at their redemption value at the Balance Sheet date. The appropriations in respect of the ZDP shares necessary to increase the subsidiary's liabilities to the redemption values are allocated to capital in the Statement of Comprehensive Income. This treatment reflects the Board's long-term expectations that the entitlements of the ZDP shareholders will be satisfied out of gains arising on investments held primarily for capital growth.

(f)  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 2021. 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 Group and 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 Taxes 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.

(g)  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 Group and 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.

In the event a security held within the portfolio is suspended then judgement is applied in the valuation of that security.

(h)  Receivables

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

(i)  Cash and Cash Equivalents

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

(j)  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.

(k)  Payables

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

(l)  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.

(m)  Capital Reserves

Capital reserve arising on investments sold includes:

· gains/losses on disposal of investments

· exchange differences on currency balances

· transfer to subsidiary in relation to ZDP funding requirement

· 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.

When making a distribution to shareholders, the Directors determine the profits available for distribution by reference to the 'Guidance on realised and distributable profits under the Companies Act 2006' issued by the Institute of Chartered Accountants in England and Wales and the Institute of Chartered Accountants of Scotland in April 2017. The availability of distributable reserves in the Company is dependent on those dividends meeting the definition of qualifying consideration within the guidance and on the available cash resources of the Company and other accessible sources of funds. The distributable reserves are therefore subject to any future restrictions or limitations at the time such distribution is made.

(n)  Repurchase of Ordinary Shares (Including Those Held in Treasury)

The costs of repurchasing Ordinary shares including related stamp duty and transaction costs are taken directly to equity and reported through the Statement of Changes in Equity as a charge on the special distributable reserve. Share repurchase transactions are accounted for on a trade date basis.

The nominal value of Ordinary share capital repurchased and cancelled is transferred out of called up share capital and into the capital redemption reserve.

Where shares are repurchased and held in treasury, the transfer to capital redemption reserve is made if and when such shares are subsequently cancelled.

(o)  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 chief operating decision maker has been identified as the Investment Manager (with oversight from the board). 

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

(p)  Key Estimates and judgements

Estimates and assumptions used in preparing the Financial Statements are reviewed on an ongoing basis and are based on historical experience and various other factors that are believed to be reasonable under the circumstances. The results of these estimates and assumptions form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. The Group and Company do not consider that there have been any significant estimates or assumptions in the current financial year.

(q)  New and revised accounting Standards

There were no new IFRSs or amendments to IFRSs applicable to the current year which had any significant impact on the Company's Financial Statements.

i) The following new or amended standards became effective for the current annual reporting period and the adoption of the standards and interpretations has not had a material impact on the Financial Statements of the Company:

Standards & Interpretations		Effective for periods commencing on or after
IFRS 3 Business Combinations (amended)	Amendments to improve the definition of a business in order to help companies determine whether an acquisition made is of a business or a group of assets.	1 January 2020
IFRS 9, IAS 39 and IFRS17: Interest Rate Benchmark Reform (amended)	Amendments that provide certain reliefs which relate to hedge accounting and have the effect that IBOR reform should not generally cause hedge accounting to terminate.	1 January 2020
IAS 1 and IAS 8 Definition of Material (amended)	Amendments to clarify the definition of 'material' and to align the definition used in the Conceptual Framework and the Standards themselves	1 January 2020
References to the Conceptual Framework in IFRS Standards (amended)	The Amendments to References to the Conceptual Framework in IFRS Standards were issued to support transition to the revised Conceptual Framework for companies that develop accounting policies using the Conceptual Framework when no IFRS Standard applies to a particular transaction	1 January 2020

ii) At the date of authorisation of the Company's Financial Statements, the following new or amended IFRSs that potentially impact the Company are in issue but are not yet effective and have not been applied in the Financial Statements:

Standards & Interpretations		Effective for periods commencing on or after
IFRS 4 Insurance Contracts - temporary exemption from IFRS 9 (amended)	The temporary exemption permits companies whose activities are predominantly connected with insurance to defer the application of IFRS 9 to annual periods beginning on or after 1 January 2023.	1 January 2021
IFRS 9, IAS 39, IFRS 7, IFRS 16 and IFRS 4: Interest Rate Benchmark Reform - phase 2 (amended)	IBOR Reform - Phase 2 addresses issues that might affect financial reporting during the reform of an interest rate benchmark, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative benchmark rate.	1 January 2021

  The Directors expect that the adoption of the standards listed above will have either no impact or that any impact will not be material on the Financial Statements of the Company in future periods.

3.  Investment Income

	Year ended 30 September 2021 £'000	Year ended 30 September 2020 £'000
Revenue:
UK Dividend income	430	63
Overseas Dividend income	3,255	3,179
Scrip dividends	-	204
Total investment income allocated to revenue	3,685	3,446

4.  Other Operating Income

	Year ended 30 September 2021 £'000	Year ended 30 September 2020 £'000
Other income	-	-
Bank interest	-	17
Total other operating income	-	17

5.  Gains on Investments Held at Fair Value

	Year ended 30 September 2021 £'000	Year ended 30 September 2020 £'000
Net gains on disposal of investments at historic cost	56,156	39,352
Less fair value adjustments in earlier years	(10,661)	(11,710)
Gains based on carrying value at previous balance sheet date	45,495	27,642
Valuation gains on investments held during the year	18,670	14,793
	64,165	42,435

6.  Other Currency losses

	Year ended 30 September 2021 £'000	Year ended 30 September 2020 £'000
Exchange losses on currency balances	(144)	(647)

7.  Investment Management Fee

	Year ended 30 September 2021 £'000	Year ended 30 September 2020 £'000
Management fee
- charged to revenue	518	535
- charged to capital	2,070	2,140
Investment management fee payable to Polar Capital LLP	2,588	2,675

    Management fees are allocated 20% to revenue and 80% to capital. Details of the fee arrangements are given in the Strategic  

    Report above.

8.  Other Administrative Expenses (Including VAT where appropriate)

	Year ended 30 September 2021 £'000	Year ended 30 September 2020 £'000
Directors' fees1	129	143
Directors' NIC	12	14
Auditors' remuneration2:
For audit of the Group and Company Financial Statements	44	44
Depositary fee	24	23
Registrar fee	30	31
Custody and other bank charges	35	39
UKLA and LSE listing fees	50	46
Legal & professional fee3	(7)	6
AIC fees	19	21
Directors' and officers' liability insurance	12	9
Corporate broker's fee	25	24
Marketing expenses4	18	42
Research costs - allocated to revenue5	15	27
Shareholder communications	14	30
HSBC administration fee	131	182
Other expenses	2	4
Total other administrative expenses allocation to revenue	553	685
Research cost - allocated to capital5	59	107
Total other administrative expenses	612	792

1 Full disclosure is given in the Directors' Remuneration Report within the Annual Report.

2 2021 includes £6,250 (2020: £6,000) paid to the Auditors for the audit of PCGH ZDP Plc.

3 Legal and professional fee includes the reversal of unused prior year accruals.

4 Includes marketing expenses payable to Polar Capital LLP of £12,600 (2020: £22,500).

5 Research costs (which applied from 3 January 2018) payable by the Company relate solely to specialist healthcare research and are capped at US $147,721 (£110,000) (2020: US $232,994 (£180,000)) with the cost of general non-specialist research and any amounts exceeding the agreed cap being absorbed by Polar Capital. Any adjustments to the prior year's budget versus actual spend is included in the current period. These costs are allocated 20% to revenue and 80% to capital and are included in the ongoing charges calculation.

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

The ongoing charges ratio for the year ended 30 September 2021 was 0.83% (2020: 1.01%). See Alternative Performance Measures provided in the Annual Report.

9.  Finance Costs

	Year ended 30 September 2021			Year ended 30 September 2020
	Revenue return	Capital return	Total return	Revenue return	Capital return	Total return
	£'000	£'000	£'000	£'000	£'000	£'000
Interest on overdrafts	-	2	2	1	6	7
Appropriation to ZDP shares	-	1,062	1,062	-	1,032	1,032
Total finance costs	-	1,064	1,064	1	1,038	1,039

10.  Taxation

	Year ended 30 September 2021			Year ended 30 September 2020
	Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
a) Analysis of tax charge for the year:
Overseas tax	421	-	421	472	-	472
Total tax for the year (see note 10b)	421	-	421	472	-	472
b) Factors affecting tax charge for the year:
The charge for the year can be reconciled to the profit per the Statement of Comprehensive Income as follows:
Profit before tax	2,614	60,828	63,442	2,242	38,503	40,745
Tax at the UK corporation tax rate of 19% (2020: 19%)	496	11,557	12,053	426	7,316	7,742
Tax effect of non-taxable dividends	(700)	-	(700)	(655)	-	(655)
Gains investments that are not taxable	-	(12,164)	(12,164)	-	(7,940)	(7,940)
Unrelieved current period expenses and deficits	204	405	609	229	427	656
Overseas tax suffered	421	-	421	472	-	472
Expenses not allowable	-	202	202	-	197	197
Total tax for the year (see note 10a)	421	-	421	472	-	472

c) Factors that may affect future tax charges:

The Company has an unrecognised deferred tax asset of £5,423,000 (2020: £3,513,000). The deferred tax asset is based on a prospective corporation tax rate of 25% (2020: 19%). The Finance Act 2021 received Royal Assent on 10 June 2021 and the rate of Corporation Tax of 25% effective from 1 April 2023 has been used to calculate the potential deferred tax asset.

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.

11.  Amounts Recognised as Distributions to Ordinary Shareholders in the Year

Dividends paid in the year ended 30 September 2021

Payment date	No of shares	Pence per share	Year ended 30 September 2021 £'000
26 February 2021	121,270,000	1.00p	1,213
31 August 2021	121,270,000	1.00p	1,213
			2,426

The revenue available for distribution by way of dividend for the year is £2,193,000 (2020: £1,770,000).

The total dividends payable in respect of the financial year ended 30 September 2021, which is the basis on which the requirements of section 1158 Corporation Tax Act 2010 are considered, is set out below:

Payment date	No of shares	Pence per share	Year ended 30 September 2021 £'000
31 August 2021	121,270,000	1.00p	1,213
28 February 2022	121,270,000	1.00p	1,213
			2,426

Dividends paid in the year ended 30 September 2020

Payment date	No of shares	Pence per share	Year ended 30 September 2020 £'000
28 February 2020	121,270,000	1.10p	1,334
28 August 2020	121,270,000	1.00p	1,213
			2,547

The total dividends payable in respect of the financial year ended 30 September 2020, which is the basis on which the requirements of section 1158 Corporation Tax Act 2010 are considered, is set out below:

Payment date	No of shares	Pence per share	Year ended 30 September 2020 £'000
28 August 2020	121,270,000	1.00p	1,213
26 February 2021	121,270,000	1.00p	1,213
			2,426

All dividends are paid as interim dividends, and all have been charged to revenue, where necessary utilising the revenue reserves.

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

12.  Earnings per Ordinary Share

	Year ended 30 September 2021				Year ended 30 September 2020
	Revenue return	Capital return	Total return	Revenue return		Capital return	Total return
The calculation of basic earnings per share is based on the following data:
Net profit for the year (£'000)	2,193	60,828	63,021	1,770		38,503	40,273
Weighted average Ordinary shares in issue during the year	121,270,000	121,270,000	121,270,000	121,291,858		121,291,858	121,291,858
Basic - Ordinary shares (pence)	1.81	50.16	51.97	1.46		31.74	33.20

As at 30 September 2021 there were no potentially dilutive shares in issue.

13.  Investment held at fair value

a)  Investments held at far value through profit or loss

	30 September 2021 £'000	30 September 2020 £'000
Opening book cost	321,976	291,648
Opening investment holding gains	20,428	17,345
Opening fair value	342,404	308,993
Analysis of transactions made during the year
Purchases at cost	626,217	944,790
Sales proceeds received	(624,225)	(953,814)
Gains on investments held at fair value	64,165	42,435
Closing fair value	408,561	342,404
Closing book cost	380,123	321,976
Closing investment holding gains	28,438	20,428
Closing fair value	408,561	342,404

The Company received £624,225,000 (2020: £953,814,000) from disposal of investments in the year. The book cost of these investments when they were purchased were £568,069,000 (2020: £914,462,000). These investments have been revalued over time and until they were sold, any unrealised gains/losses were included in the fair value of the investments.

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

	30 September 2021 £'000	30 September 2020 £'000
On acquisition	442	606
On disposal	256	350
	698	956

b)  Fair value hierarchy

	30 September 2021 £'000	30 September 2020 £'000
Level 1 assets	408,561	342,404
Valuation at 30 September 2021	408,561	342,404

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

c)  Subsidiary undertaking

Company and business	Country of registration, incorporation and operation	Number and class of shares held by the Company	Holding
PCGH ZDP Plc	England and Wales	50,000 Ordinary shares of £1	100%

The Company is a public limited company with the sole purpose of issuing Zero Dividend Preference (ZDP) shares. The registered office is at Polar Capital, 16 Palace Street, London SW1E 5JD.

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

The subsidiary is non-trading and the value of the net assets have not changed since the acquisition of the Ordinary share capital by the Company. The cost is therefore considered to equate to the fair value of the shares held.

14.  Called up Share Capital

Ordinary shares - Allotted, Called up and Fully paid:	30 September 2021 £'000	30 September 2020 £'000
Ordinary shares of nominal value 25p each:
Opening balance of 121,270,000 (2020: 121,770,000)	30,317	30,442
Repurchase of nil (2020: 500,000) Ordinary shares, into treasury	-	(125)
Allotted, Called up and Fully paid: 121,270,000 (2020: 121,270,000) Ordinary shares of 25p	30,317	30,317
2,879,256 (2020: 2,879,256) Ordinary shares, held in treasury	720	720
At 30 September 2021	31,037	31,037

  No Ordinary shares were repurchased into treasury (2020: 500,000 shares were repurchased at a total cost of £1,040,000).

  The Ordinary shares held in treasury have no voting rights and are not entitled to dividends.

15.  Net Asset Value Per Share

Ordinary shares	30 September 2021	30 September 2020
Net assets attributable to Ordinary Shareholders (£'000)	385,728	325,133
Ordinary shares in issue at end of year	121,270,000	121,270,000
Net asset value per Ordinary share (pence)	318.07	268.11
Total issued Ordinary shares	124,149,256	124,149,256
Ordinary shares held in treasury	2,879,256	2,879,256
Ordinary shares in issue	121,270,000	121,270,000

As at 30 September 2021 there were no potentially dilutive shares in issue.

16.  Cash and Cash Equivalents

	30 September 2021 £'000	30 September 2020 £'000
Cash at bank	13,668	17,795
Company cash and cash equivalents	13,668	17,795
Cash held at subsidiary	50	50
Group cash and cash equivalents	13,718	17,845

17.  Transactions with the Investment Manager and Related Party Transactions

(a) Transactions with the Manager

Under the terms of an agreement dated 26 May 2010 the Group 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 Strategic Report. The total fees, paid under this agreement to Polar Capital in respect of the year ended

30 September 2021 were £2,588,000 (2020: £2,675,000) of which £239,000 (2020: £457,000) was outstanding at the year-end.

In addition, the total research cost in respect of the year ended 30 September 2021 was £114,000 (2020: £170,000). As at the year end, £18,700 (2020: £90,000) was outstanding. Refer to note 8 for more details.

(b) Related party transactions

The Group and Company has no employees and therefore no key management personnel other than the Directors. The Group and Company paid £129,000 (2020: £143,000) to the Directors and the Remuneration Report, including Directors' shareholdings and movements within the year is provided within the full Annual Report.

18.  Post Balance Sheet Events

There are no significant events that have occurred after the end of the reporting period to the date of this report which require disclosure.

AGM

The Annual Report and separate Notice for the Annual General Meeting will be posted to Shareholders in December 2021 and is available from the Company Secretary at the Company's Registered Office, (16 Palace Street London SW1E 5JD) or from the Company's website. The AGM will be held at the Company's Registered Office at 2pm on 11 February 2022.

FORWARD LOOKING STATEMENTS

Certain statements included in the Annual Report and Financial Statements 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 Strategic Report Section the Annual Report and Financial Statements.

No part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in Polar Capital Global Healthcare Trust plc or any other entity, and must not be relied upon in any way in connection with an 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 hyperlinks on the company's website (or any other website) is incorporated into, or forms part of, this announcement.

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