Final Results

RNS Number : 2864J

Polar Capital Global Health Tst PLC

12 December 2022

 

POLAR CAPITAL GLOBAL HEALTHCARE TRUST PLC

Legal Entity Identifier: 549300YV7J2TWLE7PV84

AUDITED RESULTS ANNOUNCEMENT FOR THE YEAR ENDED

30 SEPTEMBER 2022

FINANCIAL HIGHLIGHTS

For the year to 30 September 2022

Performance
Net Asset Value per Ordinary Share (Total Return)*			5.59%
Benchmark index (MSCI ACWI Health Care Index (total return in sterling with dividends reinvested))			6.93%
Share Price Total Return*			10.11%
Since restructuring
Net asset value per Ordinary share (total return) since restructuring *~			60.79%
Benchmark index total return since restructuring			64.05%
Expenses	2022	2021
Ongoing charges*	0.84%	0.83%
Financials	As at 30 September 2022	As at 30 September 2021	Change %
Total net assets (Group and Company)	£404,833,000	£385,728,000	+5.0%
Net asset value per Ordinary share	333.83p	318.07p	+5.0%
Net asset value per ZDP share^	116.91p	113.50p	+3.0%
Price per Ordinary share	315.00p	288.00p	+9.4%
Discount per Ordinary share*	5.6%	9.5%
Price per ZDP share^	114.00p	113.50p	+0.4%
Net gearing*	7.41%	6.04%
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 2022:

Pay date	Amount per Ordinary share	Record Date	Ex-Date	Declared Date
First interim: 31 August 2022	1.00p	5 August 2022	4 August 2022	14 July 2022
Second interim: 28 February 2023	1.10p	3 February 2023	2 February 2023	9 December 2022
Total (2021: 2.00p)	2.10p

* 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 2022 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 2022 have not yet been delivered to the Registrar of Companies. The figures and financial information for the period ended 30 September 2021 are extracted from the published Annual Report and Financial Statements for the period ended 30 September 2021 and do not constitute the statutory accounts for that year.  The Annual Report and Financial Statements for the period ended 30 September 2021 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 have 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 2022.

CHAIR'S STATEMENT

Dear Shareholders,

On behalf of the Board I am pleased to provide to you the Company's Annual Report for the year ended 30 September 2022.

Performance

The portfolio performed well over the financial year delivering absolute returns of 5.59%, despite the challenging market and economic conditions, especially following Russia's invasion of Ukraine which commenced in late February 2022. Whilst ahead of the overall market and the peer group, performance did slightly lag the benchmark (MCSI Global Healthcare Index) by 1.3%. In the financial year, the share price total return increased by 10.1% as the discount narrowed. At the financial year end the discount was 5.6% compared to the prior year of 9.5%. Further detail is provided within the Investment Manager's Report.

Outlook

The industry fundamentals remain strong, valuations are still attractive, and with the macro and political background supportive, we remain very optimistic for the outlook for healthcare. Further information on the underlying themes and drivers for the sector are provided in the Investment Manager's report. The Board continues to monitor performance and remains confident that the Company is well placed to generate attractive returns for shareholders

Board

The Board is aware of the FCA's Diversity and Inclusion Policy published in April 2022 and, whilst the current Board composition does not currently meet the following target requirements, a minimum of 40% female Board members and at least one non-white ethnic minority Board member, it does meet the requirement to have a senior female Board role in the form of myself as Chair. We will continue to keep this under consideration as part of the Board's future succession plans and will provide full disclosures in next year's annual report as required under the FCA's policy. Further details are provided in the ESG Statement and the Report on Corporate Governance.

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 2022 the Company paid an interim dividend of 1.00p per ordinary share. The Board has declared a further interim dividend of 1.10p per ordinary share payable to shareholders on the register as at 3 February 2023. This will bring the total dividend paid for the financial year under review to 2.10p per ordinary share, a small increase on the previous financial year.

Environmental, Social and Governance

During the year under review, the Board continued its ESG journey and further extended its engagement with the Investment Manager on the progress that has been made in integrating ESG into their investment approach and processes. As stated previously the Board believes the Manager is best placed to integrate ESG factors into the decision making process, with the Board providing oversight and challenge, to gain assurance that the process is being executed as expected. This year, particular focus has been on how ESG has influenced our Manager's decision making and the methodology used to assess current and potential investee companies. Whilst there is still some way to go in terms of quality, comparable data for all companies, the Manager has recently introduced an ESG dashboard which allows us to review the ratings of investee companies within the portfolio and to inform discussions between the Board and Manager at Board meetings. As at 30 September 2022, based on MSCI ESG ratings, the portfolio and the benchmark were both AAA rated.

The Board also receives information on the progress that has been made at the corporate side of Polar Capital's business. Please refer to the ESG statement in the Annual Report which incorporates both the investment and corporate approaches.

Share Capital

The Company has 121,270,000 ordinary shares in issue as at the date of writing and no shares have been bought back or issued during the financial year under review. The Company's share price on 30 September 2022 was 315.00p (2021: 288.00p). The Company's market capitalisation at the financial year end was £382.0m (2021: £349.3m). The Company's share price traded in a discount range of 3.9% to 15.5% throughout the year, ending at a discount of 5.6% compared to 9.5% 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.

Subsidiary Undertaking

The Company is parent to a wholly owned subsidiary, PCGH ZDP Plc. The subsidiary was created as part of the Company's restructure in 2017; the purpose of the subsidiary is to issue zero dividend preference ("ZDP") shares and provide a loan to the parent in the form of structural gearing. The subsidiary has a fixed life whereby the loan will be repaid and the ZDP shares will be redeemed in June 2024 at which time the entity will be liquidated. Further information can be found on the Company's website www.polarcapitalglobalhealthcaretrust.co.uk .

Annual General Meeting

The Company's twelfth Annual General Meeting ("AGM") will be held at 16 Palace Street at 2pm on Thursday 9 February 2023. The notice of AGM has been provided to shareholders and will also be available on the Company's website. Detailed explanations on the formal business and the resolutions to be proposed at the AGM is contained within the Shareholder Information section of the Annual Report and in the Notice of AGM. We look forward to welcoming you to the Company's AGM on 9 February 2023 should you choose to attend.

 

Lisa Arnold

Chair

9 December 2022

INVESTMENT MANAGER'S REPORT - FOR THE YEAR ENDED 30 SEPTEMBER 2022

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 robust, medium-term growth outlooks, helps drive the positive risk/ return 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 that tend to be lower down the market-capitalisation and liquidity scales. This is a key advantage of the Company's structure as a closed-end company. Regardless of size, subsector 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, 30 companies in the portfolio were Growth investments (94.5% of net assets) and 11 were Innovative investments (12.8%). Structural debt, in the form of Zero Dividend Preference Shares, offers access to additional liquidity and the opportunity to enhance returns.

Market Cap at				30 September 2022			30 September 2021
Large (>US$10bn)				78.5%			78.9%
Medium (US$5bn - US$10bn)				16.0%			14.8%
Small (<US$5bn)				12.8%			12.2%
Other net liabilities				(7.3%)			(5.9%)
				100.0%			100.0%

Over the financial year to the end of 30 September 2022, the Company delivered a NAV per share total return of 5.59%, 1.34% behind its benchmark, the MSCI All Country World/ Healthcare Total Return Index. The absolute performance of the healthcare sector was positive, up 6.93% over the reporting period, with the sector comfortably outperforming the broader market, as tracked by the MSCI All Country World Net Total Return Index (all figures above are in sterling terms) which was down 4.04%. Despite being faced with a

cocktail of rising inflation, hawkish central banks and the war in Ukraine, equity markets were remarkably resilient during the first six months of the financial year. Unfortunately, that resilience faded heavily in the latter half of the period as inflationary and supply-chain pressures accelerated, economic activity started to slow and the markets started to digest the possibility of a recession.

Reflecting on performance, strong stock selection across the market-capitalisation spectrum was offset by the negative allocation effect of having a relative overweight position in small and mid-capitalisation stocks. Distributors, managed care, healthcare services and pharmaceuticals all performed strongly over the period. Pharmaceuticals had a relatively strong year, primarily driven by companies' resilience to inflationary pressure given their high gross and operating margins, coupled with the essential nature of their products.

At the other end of the scale, the past 12 months have been difficult for the healthcare supplies, life sciences tools and services, equipment and facilities subsectors. The US-based multinationals had the strain on their earnings of significant upward pressure from the appreciation of the US dollar. The struggles witnessed in the healthcare facilities subsector reflect rising wage inflation coupled with volumes that have been hampered by COVID-19-related staffing shortages.

As set out in last year's annual report, the focus was very much on three key investment themes that accelerated through the COVID-19 crisis; disrupting the delivery of healthcare, outsourcing and prevention, all of which remain relevant today. The dynamism within the healthcare market has, however, shifted our focus to areas we feel will be more relevant for the year ahead. More specifically, delivery disruption, accelerating utilisation and consolidation. Disrupting the delivery of healthcare continues to be a critical component when it comes to generating much-needed efficiencies, with recent momentum likely to continue in the near and medium term. Increased utilisation could be a significant revenue driver as the healthcare industry works its way through the ever-expanding backlog of patients who require medical attention. Last, but not least, we expect the recent wave of consolidation in the industry to

continue as management teams look to use generally strong company balance sheets to either expand their pipelines, access

innovative technologies and platforms or accelerate near-term revenue and earnings momentum.

After a period of relative calm, US healthcare reform came to prominence again in 2022 with a healthcare reconciliation package signed into law in August 2022. Included within the Inflation Reduction Act, the major healthcare provisions include price negotiations for certain Medicare drugs towards the end of the decade, mechanisms to control drug-pricing inflation and caps on out-of-pocket spend for US seniors. Encouragingly, the Act also extended premium subsidies to ensure ongoing access to healthcare cover, a positive not just for US citizens but for the pockets of the industry that benefit from either providing healthcare insurance plans or from sustained utilisation. With reform now very much in the rear-view mirror, investors can focus their attention on a healthcare sector that is highly innovative, possesses strong fundamentals, is attractively valued and defensive. These are all extremely appealing characteristics in the current, challenging macroeconomic environment.

PERFORMANCE REVIEW

Over the financial year to the end of September 2022, the overall healthcare sector comfortably outperformed the broader market, with the MSCI All Country World/Healthcare Total Return Index returning 6.93% in sterling terms, compared to a decline in the broader equity market of 4.04%, as represented by the MSCI All Country World Net Total Return Index. The Company achieved a return on net assets of 5.59%, which was 1.34% behind its benchmark, but significantly ahead of more volatile areas of healthcare such as smaller stocks and biotechnology. Global equity markets posted positive returns in the first three months of the financial year, but a sustained downtrend started in mid-January as investors grappled with a deteriorating macroeconomic environment characterised by persistent inflation, slowing growth and geopolitical tension.

The Company entered the financial year with approximately 6% net gearing and a large exposure to healthcare facilities, managed care, healthcare distributors and healthcare equipment and supplies, with the biggest underweight in the pharmaceuticals sector and a smaller underweight in life sciences tools and services. As the year progressed and the macroeconomic picture became more challenging, the portfolio was shifted to a more defensive position, with increased exposure to pharmaceuticals, biotechnology and healthcare facilities, and reduced allocation to healthcare equipment and supplies. Healthcare equipment was the biggest positive

contributor to performance thanks to strong stock selection. Biotechnology and managed care were also positive.

On the other hand, pharmaceuticals detracted the most due to negative allocation and stock-picking. Solid selection in healthcare facilities was not enough to offset the negative allocation effect, while distributors suffered due to poor stock selection. In summary, the underperformance relative to our benchmark during the financial year was caused by adverse allocation which marginally outstripped the positive contribution from stock selection.

From a market-capitalisation perspective, small and midsized healthcare companies experienced a sharp downward correction starting in early November 2021. For context, the Russell 2000 Healthcare Index underperformed the S&P 500 Healthcare index by over 30%, in dollar terms, during the financial year. Investors' risk appetite deteriorated significantly over the course of the period under review with inflation, high interest rates, a slowing global economy and geopolitical unrest the catalysts for a flight to safety. Consequently, given the Company's overexposure to small and mid-capitalisation stocks, the allocation effect was negative, although this was more than offset by strong stock selection. As for the larger-company investments, to which the Company was underweight relative to the benchmark, both allocation and selection were negatives.

On a geographical basis, the largest positive contributors were Asia Pacific ex-Japan, where both allocation and selection contributed positively, and Japan, where allocation was particularly favourable. Despite the good allocation effect, adverse selection and currency effects meant both Europe and North America detracted from performance.

The active management of gearing did not have a meaningful contribution to performance.

Top 10 Relative Contributors (%)

Top 10	Average Stock Weight	Active Weight	Stock Return	Stock Return vs BM	Total Attribution
Cytokinetics	2.72	2.72	63.37	56.44	1.33
Moderna	0.00	-0.86	-62.97	-69.90	1.19
Acadia Healthcare	2.44	2.44	47.72	40.79	0.92
Molina Healthcare	2.21	1.98	46.51	39.58	0.88
Daiichi Sankyo Co	1.20	0.62	26.49	19.56	0.83
arGEN-X BV	2.01	1.80	44.97	38.04	0.77
Intuitive Surgical	0.00	-1.28	-31.84	-38.77	0.60
Medtronic	0.00	-1.84	-22.37	-29.30	0.60
DexCom	0.64	0.09	-29.01	-35.94	0.56
Biohaven Pharmaceutical Holding	1.32	1.32	31.15	24.22	0.53

  Source: Polar Capital, as at 30 September 2022.

Positive contributors to performance for the financial year included Cytokinetics, Moderna, Acadia Healthcare, Molina Healthcare, and Daiichi Sankyo.

Cytokinetics is a biotechnology company focused on developing drugs for cardiovascular and neuromuscular diseases of impaired muscle function. The stock performed strongly, due to the potential for the company's differentiated and possibly commercially attractive assets. Following positive results from a Phase 3 clinical trial, Cytokinetics' mecamtiv mecarbil, a drug for heart failure with reduced ejection fraction (HFrEF), is undergoing FDA review. An FDA Advisory Committee is scheduled for early December and a decision on its approval is expected in the first quarter of 2023. Additionally, the company is continuing its trials for aficamten in patients with obstructive hypertrophic cardiomyopathies (oHCM); the approval of Bristol-Myer Squibb's Camzyos (mavacamten), which also targets the same disease, should bode well for the prospect of aficamten.

The lack of exposure to Moderna, an mRNA vaccine manufacturer that benefitted significantly from the COVID-19 pandemic, was a positive contributor. The stock dropped considerably over the financial year as investors shifted their focus to the broader utility of the mRNA technology beyond COVID-19. Additionally, the stock was caught up in a widespread sell-off of high-growth biotechnology names whose terminal values have been eroded by rising interest rates and a slowing funding environment.

Although Acadia Healthcare struggled in the first few months of the financial year in the wake of the Omicron variant and a tightening labour market, the company posted a solid set of FY21 results coupled with FY22 guidance that provided a strong sense of relief for investors. Strong execution continued in the new year, with 1Q22 and 2Q22 results ahead of expectations.

Molina Healthcare , a managed care organisation, performed extremely well on the back of strong execution and favourable micro and macroeconomic factors. On the company-specific side, utilisation remained subdued despite the drop in COVID-19 cases, which meant the medical loss ratio (a measure of revenue spent to provide care for members) was tightly managed. Additionally, full financial-year outlook was raised during the first two earnings releases in 2022 and the company also gave a better than expected guidance for 2023. We believe the share performance also reflected a generally advantageous backdrop for managed care organisations, which tend to benefit from higher interest rates and are less affected by inflationary and supply-chain pressures.

Daiichi Sankyo , a Japanese pharmaceutical company with a focus on oncology, experienced a strong upward rerating, which reflected both increasing enthusiasm for recently launched Enhertu, an antibody drug conjugate (ADC) for the treatment of metastatic breast cancer, but also the rapid pace of development into additional indications for the drug. Further, the company had been subject to a litigation brought forward by Seagen, alleging that Daiichi Sankyo's ADCs infringed a series of patents. When the ruling came out in

favour of the Japanese company, the overhang on the stock was removed and the share price rose rapidly.

  Bottom 10 Relative Contributors (%)

Bottom 10	Average Stock Weight	Active Weight	Stock Return	Stock Return vs BM	Total Attribution
AbbVie	1.54	-1.75	49.94	43.01	-1.46
Avantor	2.51	2.26	-42.25	-49.18	-1.44
Eli Lilly & Co	0.09	-2.96	68.65	61.72	-1.34
Bio-Rad Laboratories	3.03	2.85	-32.61	-39.54	-1.24
Siemens Healthineers AG	2.44	2.22	-19.35	-26.28	-1.00
Merck & Co	0.00	-2.83	41.88	34.95	-0.86
UCB	2.05	1.88	-25.00	-31.93	-0.83
Horizon Therapeutics	2.78	2.52	-31.91	-38.84	-0.74
Medley	0.79	0.79	-44.42	-51.35	-0.63
Tenet Healthcare Corp	1.48	1.48	-6.44	-13.37	-0.60

  Source: Polar Capital, as at 30 September 2022. Past performance is not indicative or a guarantee of future results.

Negative contributors to performance for the financial year 2022 included AbbVie, Avantor, Eli Lilly, Bio-Rad Laboratories, and Siemens Healthineers.

For the majority of the financial year, the Company had no holdings in either AbbVie or Eli Lilly. Both companies benefitted from a market rotation away from high-growth, smaller-capitalisation stocks, riskier assets towards more stable, larger-capitalisation stocks with an ability to weather an economic recession. The pharmaceutical majors fit squarely into this camp. There were also stock ‑ specific aspects that explain the positive performance of AbbVie and Eli Lilly. The former produced a series of solid sets of financial results that were well received by the market, thanks to strong uptake for rheumatology and dermatology drugs Skyrizi and Rinvoq. Eli Lilly's performance was a reflection of good execution and increased interest for the potential of its diabetes and obesity franchises given the exceptional results of Mounjaro (tirzepatide) in decreasing blood sugar levels and body weight.

Avantor , a life sciences tools and services business, sold off heavily on a disappointing 2Q22 update. The company cited COVID-19 revenues rolling off, foreign exchange headwinds and lower than expected contributions from recent acquisitions MasterFlex and Ritter GmbH as the reasons for the weak set of numbers. The strong derating was also a sign of investors' lack of confidence in management's ability to execute on deals and manage investors' expectations. On a more positive note, the end markets for the life sciences tools and services industry remain buoyant, especially in areas such as bioprocessing.

Like many other life sciences tools and services companies, Bio-Rad Laboratories was dragged down by the general market switch to less highly-rated companies. Despite the subsector's ability to pass higher input costs to end customers, companies still had to contend with supply-chain disruption, inflation and fears that the challenging environment for access to capital for early-stage biopharmaceuticals will impact drug development timelines. The stock also suffered from the decline in value of its investment in Sartorius which was rumoured to be on the lookout for M&A deals, a prospect investors did not support.

Siemens Healthineers , a European medical technology company with a strong presence in imaging, radiation oncology and diagnostics, experienced a turbulent period of performance following downgrades to its margin guidance for FY2022. The company also pointed to lower margins for its diagnostics division in the year ahead, making it even more ambitious to reach its long-range targets. Supply ‑ chain challenges, the rising costs of materials and labour, and lockdowns in China were the main explanations for the revised outlook. The market also grew progressively more nervous about hospitals' ability to invest in large capital equipment projects, such as imaging or radiation ‑ oncology machines, during an economic downturn.

Healthcare: Momentum and conviction building

The 2021 Annual Report focused on three key themes that we believed were accelerating in a COVID-19 endemic world:

· Disrupting healthcare delivery and shifting 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 with robust growth 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.

We continue to believe the above themes will be relevant for some time, but in a rapidly evolving environment the following trends may have more relevance and momentum in the near term:

· Healthcare delivery disruption accelerating including the shift to value-based care: Not just driving patient volumes through lower-cost settings, but coordinating care to drive better outcomes.

· Utilisation: Working through the ever-growing backlog of patients as healthcare systems globally learn to live with COVID-19.

· Consolidation: Healthcare is highly fragmented and heavily populated with companies that have robust cashflows and strong balance sheets. M&A activity has increased of late and is highly likely to continue on the same path.

Accelerating healthcare delivery disruption, utilisation and consolidation:

Key themes for the year ahead

Shifting patient volumes away from hospitals to lower-cost outpatient settings such as ambulatory surgical centres (ASCs) and the home are central cogs when it comes to generating much-needed efficiencies in healthcare systems. ASCs are outpatient healthcare facilities that offer same-day surgical services, including diagnostic and preventive services. These facilities offer cost-effective services and are more convenient for consumers than more traditional hospital settings. The number of procedures offered in ASCs is expanding and already includes orthopaedics, ophthalmology, dermatology, urology, gastroenterology and pain management. For context, ASCs perform more than half of all US outpatient surgical procedures and they can expect to see greater volumes as the

number of outpatient procedures is expected to increase by an estimated 15% by 2028. Further, over the next 10 years, surgeries are projected to grow 25% at ASCs and 18% at both hospital outpatient departments and physicians' offices, according to a report published by Sg2, a US-based healthcare and hospital system consultancy. The combination of material cost savings (an average gallbladder surgery costs $12,000 when done at a hospital while the same procedure costs $2,200 at an ASC) and patient convenience underpins the medium-term future for an already accelerating trend.

Home health also adds a critical dimension to the idea that the delivery of healthcare is being disrupted. Home health is usually less expensive, more comfortable for patients and can be just as effective as the care offered by hospitals and skilled nursing facilities. If managed appropriately, home health can also accelerate independence and self-sufficiency. In the US, for example, Medicare covers a number of services including skilled nursing care, physical therapy, social services and medical supplies. Based on a survey of physicians who serve predominantly Medicare fee-for-service (FFS) and Medicare Advantage (MA) patients, it is estimated that up to $265bn of care services for Medicare FFS and MA beneficiaries could shift from traditional facilities to the home by 2025 without

a reduction in quality or access. That represents a three to fourfold increase in the quantity of care being delivered at home today for this population.

Value-based care (VBC) rewards healthcare providers for quality of care via payment systems that incentivise high quality of care from clinicians and healthcare organisations alike. The potential benefit to patients comes via improved coordination of care and engagement which in turn can drive more essential diagnostics, reduced hospital readmissions and better outcomes. If successful, the benefits to patients are obvious but there are also benefits to the healthcare systems. An effective VBC model could reduce costly hospital readmissions, improve preventative care and bolster the health of the general population. It all sounds sensible and effective but it is the alignment of incentives that really makes VBC work. Risk ‑ sharing arrangements are key to ensuring providers reduce

waste and work hard to drive better outcomes. Recent deal activity in the US adds even more conviction to this idea that VBC will be an important growth engine for the healthcare industry. In September 2022, UnitedHealth Group agreed a 10-year partnership with Walmart with the specific aim of driving VBC adoption for Walmart's clinicians. Through the partnership, UnitedHealth Group's Optum division will assist Walmart clinicians in delivering comprehensive VBC through data analytics and decision support tools. Not only will the initiative improve the provision of care, it will also go some way to addressing the key issue of affordability.

Across the world there is a consensus that there is a growing backlog of patients requiring medical attention, but it is the size of the backlog, for example, and the precise shape of the recovery curve that is tough to predict. The latest NHS figures point to a record 6.84 million people waiting for treatment, with 2.67 million of those having waited more than 18 weeks. Perhaps even more worrying is the hidden backlog with cancer targets continuing to be missed. Looking at the US, according to a study published in the Annals of Surgery, hospitals lost an estimated $22.3bn in revenue between March and May 2020, some of which we believe will likely be, or has already been, recaptured. On a more optimistic note, there is strong evidence to suggest healthcare systems have learnt to adapt and have been able to self-regulate, maintaining surgical procedure volumes even during the COVID-19 surges. That evidence is based on the observation that, despite a 48% drop in surgical procedure volumes in the US immediately after the March 2020 lockdowns, surgical volumes returned to 2019 rates in the vast majority of specialties, a rate maintained during the COVID-19 winter surges.

The healthcare sector operates in the most fragmented of all industries, with consolidation a major long-term driver of efficiencies for companies that operate in different parts of healthcare. Unlike other industries, few subsectors see a small number of companies dominating markets, but the benefits of such scale do matter in healthcare. Consolidation typically drives margin enhancement and often revenue growth, both of which are drivers of shareholder value. The most fragmented part of healthcare is on the services side, particularly within health insurance and all the different types of healthcare provider.

Most recently, M&A activity has been picking up between large-capitalisation pharmaceutical and small/mid-capitalisation biotechnology companies, with the former typically offering significant premiums to acquire the latter. There are several reasons for a pick-up in acquisitions. In 2020-21, following the wider market lows in March 2020, the biotechnology subsector enjoyed a strong run of outperformance and access to capital was easy through IPOs and secondary offerings. As such, small/mid-capitalisation biotechnology companies did not need an exit strategy as they could easily access capital to fund their research programmes. However, with the bursting of the bubble in unprofitable companies, access to funds has become much more challenging, particularly with the market selloff in 2022. The resulting collapse in prices for small/mid capitalisation biotechnology stocks has created a much more attractive environment for the larger companies to consider M&A. Further, large pharmaceutical companies are looking to bolster revenues in the years 2025-30 with patent expiries set to impact growth. Pfizer, for example, has been explicit in saying they want to acquire $25bn in revenues by the end of the decade. In summary, there appears to be a clear rationale for an acceleration in M&A. If this comes to fruition, the innovation part of the Company's portfolio should be the prime beneficiary of potential deal flow.

Inflation Reduction Act: Is peak policy risk behind us?

On 16 August 2022, the Inflation Reduction Act was signed into law in the US. With regards to healthcare, there were two main areas of focus: drug pricing reform and access to care. As regards drug pricing, the Act includes several provisions to lower prescription drug costs for those with Medicare and reduce drug spending by the federal government:

· Selective drug price negotiation authority for the US Department of Health & Human Services.

· Rebates on drug price increases greater than inflation.

· A $2,000 out-of-pocket cap for Medicare beneficiaries.

The Act also includes a provision to extend health insurance subsidies to reduce monthly premium expenses for the next three years. These subsidies, expanded via the American Rescue Plan Act of 2021, were set to expire at the end of 2022.

So, what are the implications? This Act deals mainly with Medicare, i.e. health insurance for the over 65's. With regards to drug pricing for Medicare, the planned negotiation beginning in 2026 for a small number of products is only a small negative for the industry as it will impact the value of these products very close to their patent expiry. A positive is the $2,000 out-of-pocket cap which will be a significant tailwind for both patients and the industry given the implications for enhanced affordability and increased volumes.

Focusing on access to care, had the subsidies to reduce monthly insurance premium expenses expired, the Kaiser Family Foundation estimated that 13 million people receiving assistance for their marketplace insurance would have faced significant increases in their monthly premiums. For people who enrolled in the federal marketplace, Healthcare.gov, premiums could have gone up by more than 50%. The decision to extend the subsidies by an additional three years is a clear positive for the healthcare insurance industry plus the facilities and providers.

In summary, the Act is a modest positive for the broader healthcare industry, especially if the drug pricing reforms remain isolated to Medicare and there is no contagion into the wider commercial setting. Further, and potentially more importantly, we believe further legislation is unlikely. In essence, the Act is a clearing event for the sector, potentially removing a significant overhang.

Positioning and process: Constructive on biotechnology, facilities and managed care

The sharp market correction towards the end of the financial year, while frustrating, presented an opportunity to engage with a number of really exciting investments which are a direct play on the key themes of disruption and utilisation. Asat 30 September 2022, three of the largest overweightsubsector positionings were in biotechnology, healthcarefacilities and managed healthcare. Despite what feels like an extremely challenging environment for early-stage biotechnology investing, we remain constructive on the

sector. The industry continues to be innovative and highly productive with many of the Company's investments in businesses with either late-stage assets or commercialised drugs or both. Drilling down into therapeutic categories, oncology is a key area of focus and an area that has seen an incredible amount of investment, innovation and, most importantly, success. While not an exhaustive list, other areas of interest include cardiovascular diseases, haemophilia, respiratory disorders and obesity.

From a healthcare facilities perspective, the investments here are biased towards businesses providing access to healthcare services in the lowest-cost settings such as the home and outpatient facilities or ASCs. The Company also has exposure to behavioural health services, where we have sadly seen a huge jump in demand due to the pandemic. The constructive stance on managed care is based on a number of factors including healthy, growing end markets (with Medicare Advantage at the forefront), good earnings visibility and an earnings tailwind from rising Treasury yields. As insurance companies, managed care companies have large investment portfolios that benefit from rising rates, creating a potential tailwind to EPS growth.

Healthcare equipment is a subsector we have been constructive on historically given the current innovation wave, the rising demand for their products and services, and attractive valuations relative to the anticipated growth opportunities. As at the end of September, however, we were muchmore cautious on healthcare equipment given thedifficult macroeconomic climate. Supply-chain challenges coupled with rising input and freight costs have put pressure on operating margins, plus the strength of the dollar has created a material headwind for the near-term earnings profiles of US companies with exposure to ex-US markets. Looking ahead, however, we are optimistic that some of the supply-chain constraints will ease and the ever-growing backlog of patients will create a platform for accelerating top and bottom-line growth.

Healthcare supplies is another subsector where we have adopted a more cautious stance during the reporting period. Much of the input pressure being experienced in the equipment subsector is relevant for supplies but the consumer is also a critical factor. Certain dental and ophthalmology end markets have a material discretionary component, an uncomfortable backdrop given the current macroeconomic climate.

Our shifting stance on pharmaceuticals is also worth noting. Historically, we have adopted a material underweight in pharmaceuticals relative to the benchmark, taking the view that, collectively, they have fairly unexciting revenue and earnings growth profiles. However, the essential nature of their products coupled with relatively high gross and operating margins, makes them very attractive investments at a time when inflation is high, economic activity is slowing and unemployment is rising. As such, we have reduced our relative underweight versus the benchmark.

From a geographical perspective, the Company continues to have an overweight stance in Europe as well as North America. The biggest change to the portfolio was moving Japan from being an underweight to an overweight via the addition of pharmaceutical stocks.

Geographical Exposure at	30 September 2022	30 September 2021
United States	72.2%	69.0%
United Kingdom	6.8%	7.3%
France	6.5%	6.2%
Netherlands	6.4%	5.2%
Denmark	4.4%	4.6%
Germany	2.9%	2.7%
Switzerland	2.6%	2.5%
Australia	2.3%	2.4%
Belgium	2.2%	2.3%
Ireland	1.0%	1.9%
Japan	-	1.8%
Canada	-	-
Other net liabilities	(7.3%)	(5.9%)
Total	100%	100.0%

Source: Polar Capital, portfolio as at 30 September 2022.

Sector Exposure at	30 September 2022	30 September 2021
Pharmaceuticals	31.3%	23.0%
Biotechnology	28.3%	14.8%
Managed Healthcare	13.1%	11.8%
Healthcare Equipment	12.1%	23.4%
Healthcare Facilities	7.4%	7.2%
Life Sciences Tools & Services	4.3%	5.4%
Healthcare Supplies	2.9%	6.3%
Metal & Glass Containers	2.4%	2.3%
Healthcare Services	2.1%	1.8%
Healthcare Distributors	1.9%	4.9%
Healthcare Technology	1.5%	2.3%
Apparel, Accessories & Luxury Goods	-	2.7%
Other net liabilities	(7.3%)	(5.9%)
Total	100%	100%

Source: Polar Capital, portfolio as at 30 September 2022.

While the previous charts focus on subsector 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 news flow 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 a strong valuation discipline looking at a large number of metrics including sales and earnings revisions, price-to-earnings, enterprise values and free cash flow.

Zero Dividend Preference shares; A vehicle for enhancing returns

In terms of a top-down strategy for the Company's portfolio, active decisions are made on market capitalisation, subsector and geographical exposure, dependent on the current macro-outlook of the team which is formulated with the aid of third-party research and the monitoring of many key risk indicators. The debt raised through the original issuance of Zero Dividend Preference (ZDP) shares allows the ability to take on gearing with the aim of enhancing returns.

Net Gearing

During the financial year, gearing has averaged 6%, but it has been adjusted to reflect the risk outlook throughout the past 12 months. Net gearing was brought down from around 6% to 4.5% in the first four months of the reporting period, on the back of macroeconomic concerns. Over the remainder of the year, gearing was increased as a more defensive positioning of the portfolio was achieved with higher exposure to large-capitalisation stocks. However, the sharp correction among the small and mid-capitalisation universe offered an opportunity to add new positions to the Innovation portfolio. We exited the 2022 financial year with net gearing at 7.41%, a figure that reflects a balance between our constructive stance on the healthcare sector with more cautious posturing with regards broader equity markets.

Outlook for healthcare: Macro and micro stars are aligning

The healthcare industry continues to undergo material, structural changes as it looks to use innovative products, technologies and services to meet the ever-growing demands of an ageing global population. It is those structural changes that are creating some exciting and robust growth opportunities. In the near-term, a substantial increase in utilisation could be the catalyst for positive revenue and earnings revisions as healthcare systems globally work their way through ever-growing surgery backlogs. Another positive, near-term dynamic is the disruption of the delivery of healthcare as systems globally look to treat in more cost-effective settings. The adoption of innovative technologies is facilitating the shift of patient volumes from the more traditional and more expensive hospital settings to lower-cost facilities such as ASCs and the home. A trend that inflected during the COVID-19 pandemic, we believe that the momentum will continue for many years to come. Last, but not least, we expect the recent wave of M&A activity to continue as companies look to use their free cashflow and balance sheets to inorganically complement internal assets.

Not only are the industry fundamentals in good health but the macroeconomic and political environments are also very supportive, not just for defensive stocks but also for those that sit higher up the market-capitalisation scale, a scenario that very much suits the larger-capitalisation focus of the Company. A combination of rising inflation, slowing economic activity and growing unemployment is creating a constructive backdrop for defensive sectors, none more so than healthcare. Importantly, if inflation persists and we enter a more stagflationary environment, healthcare has shown an ability, historically, to outperform the broader market given the low earnings and share-price beta to economic indicators, the essential nature of its products and services and a relatively broad ability to absorb inflationary pressures given the sector's high gross and operating margins. Last, but not least, we think the introduction of the Inflation Reduction Act in the US has removed some, if not all, healthcare reform uncertainty offering investors greater clarity on the near and medium-term investment landscape.

Against a background of continued global economic challenges, the outlook for the healthcare sector remains robust. The demand for products and services is growing significantly, innovation continues at a rapid pace and valuations are attractive. The positive fundamental investment drivers are currently matched with a macroeconomic backdrop which is extremely supportive for the sector. The healthcare sector has outperformed the broader market over the last 12 months and with the recent healthcare reform

update having passed in the US as part of the Inflation Reduction Act, we are anticipating a period of sustained outperformance for the sector.

James Douglas & Gareth Powell

Co-Managers

9 December 2022

PORTFOLIO REVIEW

Full Investment Portfolio

As at 30 September

Ranking		Stock	Sector	Country	Market Value £'000		% of total net assets
2022	2021				2022	2021	2022	2021
1	(1)	Johnson & Johnson	Pharmaceuticals	United States	35,964	29,093	8.9%	7.5%
2	(2)	UnitedHealth	Managed Healthcare	United States	29,655	24,053	7.3%	6.2%
3	(-)	Abbvie	Biotechnology	United States	24,932	-	6.2%	-
4	(3)	AstraZeneca	Pharmaceuticals	United Kingdom	19,761	19,954	4.9%	5.2%
5	(-)	Eli Lilly	Pharmaceuticals	United States	16,997	-	4.2%	-
6	(22)	Cytokinetics	Biotechnology	United States	14,673	8,974	3.6%	2.3%
7	(10)	Boston Scientific	Healthcare Equipment	United States	14,092	10,810	3.5%	2.8%
8	(-)	Novartis	Pharmaceuticals	Switzerland	14,091	-	3.5%	-
9	(-)	Humana	Managed Healthcare	United States	13,908	-	3.4%	-
10	(31)	Alcon	Healthcare Supplies	Switzerland	12,040	7,678	2.9%	2.0%
Top 10 investments					196,113		48.4%
11	(-)	Biovitrum	Biotechnology	Sweden	11,758	-	2.9%	-
12	(-)	Daiichi Sankyo	Pharmaceuticals	Japan	11,459	-	2.9%	-
13	(-)	HCA	Healthcare Facilities	United States	10,872	-	2.7%	-
14	(5)	Sanofi	Pharmaceuticals	France	10,513	13,629	2.6%	3.5%
15	(34)	Genmab	Biotechnology	Denmark	10,197	5,712	2.5%	1.5%
16	(19)	Acadia Healthcare	Healthcare Facilities	United States	10,082	9,595	2.5%	2.5%
17	(27)	Avantor	Life Sciences Tools & Services	United States	9,824	8,637	2.4%	2.2%
18	(-)	DexCom	Healthcare Equipment	United States	9,812	-	2.4%	-
19	(9)	Horizon Therapeutics	Biotechnology	United States	9,723	10,910	2.4%	2.8%
20	(-)	Astellas Pharma	Pharmaceuticals	Japan	9,701	-	2.4%	-
Top 20 investments					300,054		74.1%
21	(-)	Incyte Genomics	Biotechnology	United States	9,662	-	2.4%	-
22	(24)	AptarGroup	Metal & Glass Containers	United States	9,623	8,852	2.4%	2.3%
23	(16)	Molina Healthcare	Managed Healthcare	United States	9,603	9,961	2.4%	2.6%
24	(17)	ArgenX	Biotechnology	Netherlands	9,210	9,703	2.3%	2.5%
25	(-)	Penumbra	Healthcare Equipment	United States	9,172	-	2.3%	-
26	(-)	Sartorius	Healthcare Equipment	Germany	9,070	-	2.2%	-
27	(-)	Seagen	Biotechnology	United States	8,886	-	2.2%	-
28	(-)	Option Care Health	Healthcare Services	United States	8,452	-	2.1%	-
29	(-)	United Therapeutics	Biotechnology	United States	8,060	-	2.0%	-
30	(28)	Bio-Rad Laboratories	Life Sciences Tools & Services	United States	7,879	8,439	1.9%	2.2%
Top 30 investments					389,671		96.3%
31	(-)	Revance Therapeutics	Pharmaceuticals	United States	7,647	-	1.9%	-
32	(-)	Tenet Healthcare	Healthcare Facilities	United States	7,582	-	1.9%	-
33	(40)	Zealand Pharma	Biotechnology	Denmark	7,437	3,807	1.8%	1.0%
34	(35)	Uniphar	Healthcare Distributors	Ireland	4,171	5,438	1.0%	1.4%
35	(42)	Axonics	Healthcare Equipment	United States	4,018	2,180	1.0%	0.6%
36	(41)	Ship Healthcare	Healthcare Distributors	Japan	3,503	2,882	0.9%	0.7%
37	(38)	Intelligent Ultrasound	Healthcare Technology	United Kingdom	3,049	3,811	0.8%	1.0%
38	(39)	LivaNova	Healthcare Equipment	United Kingdom	2,950	3,810	0.7%	1.0%
39	(36)	Medley	Healthcare Technology	Japan	2,901	4,404	0.7%	1.1%
40	(-)	Surgery Partners	Healthcare Facilities	United States	1,326	-	0.3%	-
Top 40 investments					434,255		107.3%
41	(43)	Quotient	Healthcare Supplies	Switzerland	164	2,123	-	0.5%
Total equities					434,419		107.3%
Other net liabilities					(29,586)		(7.3%)
Net assets					404,833		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 2022, 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.

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.

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 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.

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. Further information on the composition of the Board can be found in the Corporate Governance Report in the full Annual Report and Accounts.

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:

· 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;

· RD: IR for Investor Relations and Shareholder Analysis;

· Camarco as PR advisors;

· 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.

INVESTMENT 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. As such, the Board and the 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. 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 is charged at the rate of 0.75% 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 2022.

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 2022, the total net assets of the Company amounted to £404,833,000 2021: £385,728,000). The Company's NAV total return, over the year ended 30 September 2022, was 5.59% while the Benchmark Index over the same period decreased by 6.93%. 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 60.79% and the benchmark was 64.05%. 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 2022 totalling 2.10 p per share (2021: 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 2022 was 5.6% (2021: 9.5%). During the year ended 30 September 2022, 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 2022 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 2022 were 0.84%, compared to 0.83% 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 established risk management process the Company follows identifies and assesses various risks, their likelihood, and possible severity of impact, considering both internal and external controls and factors that could provide mitigation. A post mitigation risk impact score is then determined for each principal risk.

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.

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 Committee is mindful of the uncertainty surrounding inflation, recession and rising interest rates coupled with the invasion of Ukraine by Russia and the longer term impact this may have on the market and global economy. The impact of this is discussed further in the Chair's Statement and Investment Manager's Report. Further information on how the Committee has assessed 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.

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 year.

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.	Decreased 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 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 2022, the discount of the ordinary share price to the NAV per ordinary share was 5.6% (2020: 9.5%). The Chair also meets regularly 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 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 Depositary. 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. However, controls are in place and the Board proactively seeks to keep abreast of developments through updates from representatives of the Investment Manager who undertakes meetings with the relevant service providers.  The Audit Committee sought assurance via the Investment Manager, from each of the Company's service providers on the resilience of their business continuity arrangements. 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. Key personnel are incentivised by equity participation in the investment management company.
Shareholder Communications	Failure to effectively communicate significant events to the shareholder and investor base.	Unchanged from previous year.	Polar Capital Sales Team and the Corporate Broker provide periodic reports to the Board on communications with shareholders and feedback received. 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. Contact details and how to contact the Board are provided in regulatory announcements and the Board are present at the AGM to speak to shareholders.

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 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 inflation, recession and the war in Ukraine 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.

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 Company's AGM will be held at 2pm on Thursday 9 February 2023 at the offices of Polar Capital, 16 Palace Street, London SW1E 5JD. The Board 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. 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. To enable all shareholders to hear the Managers' presentation, this year a pre-recorded presentation reviewing the year past and the outlook for 2022-2023 will be uploaded to the Company's website ahead of the AGM. The AGM in-person meeting will comprise the formal business and questions only. 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, along with the Managers, will be in attendance at the AGM and will be 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. 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. Outcomes and strategic decisions during the year AGM To enable more shareholders the opportunity to hear the Investment Manager's AGM presentation, the Board has opted to pre-record and upload this to the website ahead of the voting deadline and in-person formal business AGM.
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 ESG During the year under review, the Board continued to develop its approach to ESG and engages with the Investment manager to better understand how ESG has been further integrated into the investment and decision-making process. The Board also receives information on how ESG affects Polar Capital as a business and the healthcare team in particular. Please see the ESG Report in the full Annual Report for further information. The Management Engagement Committee has recommended and the Board has approved the continued appointment of the Investment Manager on the terms set out 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 Voting Policy is for the Investment Manager to vote at all general meetings of companies in favour of resolutions proposed by the management where it believes that the proposals are in the interests of shareholders. However, in exceptional cases, where 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. The Investment Manager has voted at 47 company meetings over the year ended 30 September 2022, with 5.8% of all votes being against management and 31% 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 ESG Report in the full Annual Report.
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. During the year under review, due diligence meetings have been undertaken by the Investment Manager and where possible, service providers have joined meetings to present their reports directly to the Board or the Audit Committee as appropriate. 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 continue to monitor service levels and due diligence reviews conducted by 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 Directors are aware of the voting policies of proxy adviser agencies. 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. Further information has been provided where appropriate in each directors biography in the Full Annual Report.
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 9 December 2022

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 Financial Statements in accordance with UK-adopted IAS and applicable law. Additionally, the Financial Conduct Authority's Disclosure Guidance and Transparency Rules require the directors to prepare the Financial Statements in accordance with

UK ‑ adopted IAS.

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 they have been prepared in accordance with UK-adopted IAS, 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 and the Directors' Remuneration Report 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 provides 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 2022

	Note	Group			Group
		Year ended 30 September 2022			Year ended 30 September 2021
		Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
Investment income	3	4,427	-	4,427	3,685	-	3,685
Other operating income	4	26	-	26	-	-	-
Gains on investments held at fair value	5	-	22,985	22,985	-	64,165	64,165
Other currency losses	6	-	(610)	(610)	-	(144)	(144)
Total income		4,453	22,375	26,828	3,685	64,021	67,706
Expenses
Investment management fee	7	(602)	(2,406)	(3,008)	(518)	(2,070)	(2,588)
Other administrative expenses	8	(599)	(59)	(658)	(553)	(59)	(612)
Total expenses		(1,201)	(2,465)	(3,666)	(1,071)	(2,129)	(3,200)
Profit before finance costs and tax		3,252	19,910	23,162	2,614	61,892	64,506
Finance costs	9	-	(1,096)	(1,096)	-	(1,064)	(1,064)
Profit before tax		3,252	18,814	22,066	2,614	60,828	63,442
Tax	10	(535)	-	(535)	(421)	-	(421)
Net profit for the year and total comprehensive income		2,717	18,814	21,531	2,193	60,828	63,021
Earnings per Ordinary share (pence)	12	2.24	15.51	17.75	1.81	50.16	51.97

The total column of this statement represents Group's Statement of Comprehensive Income, prepared in accordance with UK ‑ adopted International Accounting Standards.

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 2022

	Note	Group and Company Year ended 30 September 2022
		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 2021		31,037	6,575	80,685	3,672	261,977	1,782	385,728
Total comprehensive income:
Profit for the year ended 30 September 2022		-	-	-	-	18,814	2,717	21,531
Transactions with owners, recorded directly to equity:
Equity dividends paid	11	-	-	-	-	-	(2,426)	(2,426)
Total equity at 30 September 2022		31,037	6,575	80,685	3,672	280,791	2,073	404,833

	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

The notes below form part of these Financial Statements.

BALANCE SHEETS

As at 30 September 2022

	Notes	Group		Company
		30 September 2022 £'000	30 September 2021 £'000	30 September 2022 £'000	30 September 2021 £'000
Non-current assets
Investments held at fair value	13	434,419	408,561	434,419	408,561
Investment in subsidiary	13	-	-	50	50
Current assets
Receivables		233	2,300	233	2,300
Overseas tax recoverable		666	572	666	572
Cash and cash equivalents	16	7,546	13,718	7,496	13,668
		8,445	16,590	8,395	16,540
Total assets		442,864	425,151	442,864	425,151
Current liabilities
Payables		(470)	(2,956)	(470)	(2,956)
		(470)	(2,956)	(470)	(2,956)
Non-current liabilities
Zero Dividend Preference shares		(37,561)	(36,467)	-	-
Loan from subsidiary		-	-	(37,561)	(36,467)
Total liabilities		(38,031)	(39,423)	(38,031)	(39,423)
Net assets		404,833	385,728	404,833	385,728
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		280,791	261,977	280,791	261,977
Revenue reserve		2,073	1,782	2,073	1,782
Total equity		404,833	385,728	404,833	385,728
Net asset value per Ordinary share (pence)	15	333.83	318.07	333.83	318.07
Net asset value per ZDP share (pence)		116.91	113.50	-	-

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 £21,531,000 (2021: £63,021,000).

The Financial Statements were approved and authorised for issue by the Board of Directors on 9 December 2022 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 2022

		Group and Company
	Note	Year ended 30 September 2022 £'000	Year ended 30 September 2021 £'000
Cash flows from operating activities
Profit before finance costs and tax		23,162	64,506
Adjustment for non-cash items:
Gains on investments held at fair value through profit or loss		(22,985)	(64,165)
Adjusted profit before tax		177	341
Adjustments for:
Purchases of investments, including transaction costs		(480,136)	(626,164)
Sales of investments, including transaction costs		476,716	625,115
Decrease/(increase) in receivables		27	(108)
Increase/(decrease) in payables		101	(479)
Overseas tax deducted at source		(629)	(404)
Net cash used in operating activities		(3,744)	(1,699)
Cash flows from financing activities
Interest paid		(2)	(2)
Equity dividends paid	11	(2,426)	(2,426)
Net cash used in financing activities		(2,428)	(2,428)
Net decrease in cash and cash equivalents		(6,172)	(4,127)
Cash and cash equivalents at the beginning of the year		13,718	17,845
Cash and cash equivalents at the end of the year	16	7,546	13,718

The notes below form part of these Financial Statements.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 September 2022

1.  General Information

The consolidated Financial Statements for the year ended 30 September 2022 comprise the Financial Statements of the Company and it's wholly-owned subsidiary PCGH ZDP plc (together referred to as the 'Group').

The principal activity of the Group is that of an investment trust company within the meaning of Section 1158/1159 of the Corporation Tax Act 2010 and its investment approach is detailed in the Strategic Report.

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's Financial Statements have been prepared and approved by the Directors in accordance with UK- adopted international accounting standards ("UK-adopted IAS").

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 July 2022 is consistent with the requirements of UK-adopted IAS, 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 2022 are shown in the balance sheet above. As at 30 September 2022 the Group and Company's total assets exceeded its total liabilities by a multiple of over 11. The assets of the Group and Company consist mainly of securities that are held in accordance with the Group and 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 which used a variety of falling parameters to demonstrate the effects of 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 accounts.

(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 is 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 July 2022).

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 2022. 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 UK-adopted IAS. 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 determining 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 of England & 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 UK-adopted IAS or amendments to UK-adopted IAS applicable to the current year which had any significant impact on the Group and 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 have not had a material impact on the Financial Statements of the Group and Company:

Standards & Interpretations		Effective for periods commencing on or after
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. The Phase 2 amendments apply only to changes required by the interest rate benchmark reform to financial instruments and hedging relationships.	1 January 2021

  ii)  At the date of authorisation of the Group and Company's Financial Statements, there were no relevant standards that potentially impact the Group and Company are in issue but are not yet effective and have not been applied in the Financial Statements.

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 Group and Company in future periods.

3.  Investment Income

	Year ended 30 September 2022 £'000	Year ended 30 September 2021 £'000
Revenue:
UK Dividend income	472	430
Overseas Dividend income	3,955	3,255
Total investment income allocated to revenue	4,427	3,685

4.  Other Operating Income

	Year ended 30 September 2022 £'000	Year ended 30 September 2021 £'000
Bank interest	26	-
Total other operating income	26	-

5.  Gains on Investments Held at Fair Value

	Year ended 30 September 2022 £'000	Year ended 30 September 2021 £'000
Net gains on disposal of investments at historic cost	18,524	56,156
Less fair value adjustments in earlier years	(11,626)	(10,661)
Gains based on carrying value at previous balance sheet date	6,898	45,495
Valuation gains on investments held during the year	16,087	18,670
	22,985	64,165

6.  Other Currency losses

	Year ended 30 September 2022 £'000	Year ended 30 September 2021 £'000
Exchange losses on currency balances	(610)	(144)

7.  Investment Management Fee

	Year ended 30 September 2022 £'000	Year ended 30 September 2021 £'000
Management fee
- charged to revenue	602	518
- charged to capital	2,406	2,070
Investment management fee payable to Polar Capital LLP	3,008	2,588

    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 2022 £'000	Year ended 30 September 2021 £'000
Directors' fees1	136	129
Directors' NIC	14	12
Auditors' remuneration2:
For audit of the Group and Company Financial Statements	48	44
Depositary fee	23	24
Registrar fee	30	30
Custody and other bank charges	37	35
UKLA and LSE listing fees3	3	50
Legal & professional fee4	6	(7)
AIC fees	21	19
Directors' and officers' liability insurance	16	12
Corporate broker's fee	25	25
Marketing expenses5	43	18
Research costs - allocated to revenue6	15	15
Shareholder communications	22	14
HSBC administration fee	158	131
Other expenses	2	2
Total other administrative expenses allocated to revenue	599	553
Research cost - allocated to capital6	59	59
Total other administrative expenses	658	612

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

2 2022 includes £6,875 (2021: £6,250) paid to the Auditor for the audit of PCGH ZDP Plc.

3 Reflects write off of PCCH ZDP FCA fee accrual which no longer applies.

4 2021 includes the reversal of unused prior year accruals.

5 Includes marketing expenses payable to Polar Capital LLP of £22,500 (2021: £12,600).

6 Research costs (which applied from 3 January 2018) payable by the Company relate solely to specialist healthcare research and are capped at US $81,772 (£74,000) (2021: US $147,721 (£110,000)) 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 2022 was 0.84% (2021: 0.83%). See Alternative Performance Measures provided in the Annual Report.

9.  Finance Costs

	Year ended 30 September 2022			Year ended 30 September 2021
	Revenue return	Capital return	Total return	Revenue return	Capital return	Total return
	£'000	£'000	£'000	£'000	£'000	£'000
Interest on overdrafts	-	2	2	-	2	2
Appropriation to ZDP shares	-	1,094	1,094	-	1,062	1,062
Total finance costs	-	1,096	1,096	-	1,064	1,064

10.  Taxation

	Year ended 30 September 2022			Year ended 30 September 2021
	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	535	-	535	421	-	421
Total tax for the year (see note 10b)	535	-	535	421	-	421
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	3,252	18,814	22,066	2,614	60,828	63,442
Tax at the UK corporation tax rate of 19% (2021: 19%)	617	3,575	4,192	496	11,557	12,053
Tax effect of non-taxable dividends	(841)	-	(841)	(700)	-	(700)
Gains on investments that are not taxable	-	(4,251)	(4,251)	-	(12,164)	(12,164)
Unrelieved current period expenses and deficits	224	468	692	204	405	609
Overseas tax suffered	535	-	535	421	-	421
Expenses not allowable	-	208	208	-	202	202
Total tax for the year (see note 10a)	535	-	535	421	-	421

c) Factors that may affect future tax charges:

The Company has an unrecognised deferred tax asset of £6,334,000 (2021: £5,423,000). The deferred tax asset is based on a prospective corporation tax rate of 25% (2021: 25%). 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 20 22

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

The revenue available for distribution by way of dividend for the year is £2,717,000 (2021: £2,193,000).

The total dividends payable in respect of the financial year ended 30 September 2022, 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 2022 £'000
31 August 2022	121,270,000	1.00p	1,213
28 February 2023	121,270,000	1.10p	1,334
			2,547

Dividends paid in the year ended 30 September 20 21

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 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

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 2022				Year ended 30 September 2021
	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)	2,717	18,814	21,531	2,193		60,828	63,021
Weighted average Ordinary shares in issue during the year	121,270,000	121,270,000	121,270,000	121,270,000		121,270,000	121,270,000
Basic - Ordinary shares (pence)	2.24	15.51	17.75	1.81		50.16	51.97

As at 30 September 2022 there were no potentially dilutive shares in issue.

13.  Investments held at fair value

a)  Investments held at far value through profit or loss

	30 September 2022 £ '000	30 September 2021 £ '000
Opening book cost	380,123	321,976
Opening investment holding gains	28,438	20,428
Opening fair value	408,561	342,404
Analysis of transactions made during the year
Purchases at cost	477,549	626,217
Sales proceeds received	(474,676)	(624,225)
Gains on investments held at fair value	22,985	64,165
Closing fair value	434,419	408,561
Closing book cost	401,521	380,123
Closing investment holding gains	32,898	28,438
Closing fair value	434,419	408,561

The Company received £474,676,000 (2021: £624,225,000) from disposal of investments in the year. The book cost of these investments when they were purchased were £456,152,000 (2021: £568,069,000). 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 2022 £'000	30 September 2021 £'000
On acquisition	310	442
On disposal	224	256
	534	698

b)  Fair value hierarchy

	30 September 2022 £'000	30 September 2021 £'000
Level 1 assets	434,419	408,561
Valuation at the end of the year	434,419	408,561

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 2022 £'000	30 September 2021 £'000
Ordinary shares of nominal value 25p each:
Opening balance of 121,270,000 (2021: 121,770,000)	30,317	30,317
Allotted, Called up and Fully paid: 121,270,000 (2021: 121,270,000) Ordinary shares of 25p	30,317	30,317
2,879,256 (2021: 2,879,256) Ordinary shares, held in treasury	720	720
At 30 September 2022	31,037	31,037

  No Ordinary shares were repurchased or issued during the year (2021: nil).

  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 2022	30 September 2021
Net assets attributable to Ordinary Shareholders (£'000)	404,833	385,728
Ordinary shares in issue at end of year	121,270,000	121,270,000
Net asset value per Ordinary share (pence)	333.83	318.07
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 2022 there were no potentially dilutive shares in issue.

16.  Cash and Cash Equivalents

	30 September 2022 £'000	30 September 2021 £'000
Cash at bank	7,496	13,668
Company cash and cash equivalents	7,496	13,668
Cash held at subsidiary	50	50
Group cash and cash equivalents	7,546	13,718

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 2022 were £3,008,000 (2021: £2,588,000) of which £259,000 (2021: £239,000) was outstanding at the year-end.

In addition, the total research cost in respect of the year ended 30 September 2022 was £74,000 (2021: £114,000). As at the year end, £54,800 (2021: £18,700) was outstanding. Refer to note 8 above 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 £136,000 (2021: £129,000) to the Directors and the Remuneration Report including Directors' shareholdings and movements within the year is set out 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 2022 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 9 February 2023.

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.

-END-

 

END

 

 

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