Bellevue Healthcare Trust plc
LEGAL ENTITY IDENTIFIER ('LEI'):
213800HQ3J3H9YF2UI82
Annual Report and Accounts
For
the year ended 30 November 2023
Overview
INVESTMENT OBJECTIVE
The investment objective of Bellevue
Healthcare Trust plc ("the Company") is to provide Shareholders
with capital growth and income over the long term, through
investment in listed or quoted global healthcare companies. The
Company's specific return objectives are: (i) to beat the total
return of the MSCI World Healthcare Index (in sterling) on a
rolling 3 year period (the index total return including dividends
reinvested on a net basis); and (ii) to seek to generate a
double-digit total Shareholder return per annum over a rolling 3
year period.
FINANCIAL INFORMATION
|
As at 30
November
|
As at 30
November
|
|
2023
|
2022
|
Net asset value ("NAV") per Ordinary
Share (cum income)
|
143.87p
|
171.16p
|
Ordinary Share price
|
129.00p
|
158.20p
|
Ordinary Share price discount to
NAV1
|
10.3%
|
7.6%
|
Ongoing charges ratio
("OCR")1
|
1.02%
|
1.04%
|
PERFORMANCE SUMMARY
|
%
change2
|
%
change3
|
|
30 November
2023
|
30 November
2022
|
Share price total return per
Ordinary Share1,4
|
-15.1%
|
-11.9%
|
NAV total return per Ordinary
Share1,4
|
-12.7%
|
-4.1%
|
MSCI World Healthcare Index total
return (GBP)4
|
-7.1%
|
+14.1%
|
1
These are Alternative Performance
Measures.
2
Total returns in sterling terms for the year ended
30 November 2023.
3
Total returns in sterling terms for the year ended
30 November 2022.
4
Including dividends reinvested in the
year.
Source: Bellevue Healthcare Trust
Factsheet November 2023.
ALTERNATIVE PERFORMANCE MEASURES ("APMs")
The financial information and
performance summary data highlighted in the footnote to the above
tables represent APMs of the Company. In addition to these APMs
other performance measures have been used by the Company to assess
its performance; these can be found in the key performance
indicators section of the Annual Report. Definitions of these APMs together
with how these measures have been calculated can be found
in the APMs section below.
Chairman's Statement
Randeep Grewal
Chairman
Dear Shareholders
This is the seventh annual report of
your Company.
PERFORMANCE
Over the financial year, the share
price (on a total return basis, i.e. including reinvestment of
dividends) fell by 15.1%. The total NAV
return (i.e. including reinvestment of dividends) over the last
financial year was -12.7%. The comparator index (the MSCI World
Healthcare total return index in Sterling) produced a total return
of -7.1% over the same period; thus, we underperformed by -5.6%
over the year.
The returns are summarised in the
following table.
Cumulative & annualised performance
|
Cumulative
|
Annualised
|
|
1 Year
|
3 Years
|
5 Years
|
Since
inception
|
1 Year
|
3 Years
|
5 Years
|
Since
inception
|
Share Price
|
-15.1%
|
-16.7%
|
9.2%
|
60.0%
|
-15.1%
|
-5.9%
|
1.8%
|
6.9%
|
NAV (inc.dividend
reinvested)
|
-12.7%
|
-7.6%
|
22.7%
|
78.3%
|
-12.7%
|
-2.6%
|
4.2%
|
8.6%
|
MSCI World Healthcare Index
(GBP)
|
-7.1%
|
22.8%
|
46.4%
|
97.7%
|
-7.1%
|
7.1%
|
7.9%
|
10.2%
|
This is the third year that the
Company has failed to beat the comparator index and the second that
we have failed to generate double digit
total shareholder returns. We engage in regular dialogue with
Bellevue and discuss performance.
Clearly, when the Company was
founded, there was no expectations of Covid or the resultant impact
on various subsectors of healthcare; and perhaps, as pertinent, the
macro responses. Of course, I appreciate that all of these
'headwinds' have also applied to companies included in our
comparator index and in the portfolios of our peers. Each portfolio
however, is constructed for different 'wind conditions' and ours
has clearly suffered.
The picture in the above table
perhaps does not really show how performance progressed during the
year; in the first half the portfolio was ahead of the comparator
index.
It is also worth acknowledging that
post year end there was some improvement in performance.
BOARD COMPOSITION AND EVALUATION
The current Board composition, which
remains unchanged from last year complies with the recommendations
of the Hampton-Alexander and Parker reviews. Succession planning,
maintaining competencies and skills remain a priority and though
there are no immediate plans to recruit new Board members we are
clearly aware of the need for smooth transitions.
As per the AIC Code recommendations
(external review every three years), we undertook an external Board
review facilitated by Lintstock. This reviewed the overall
performance of the Board, its committees, individual Directors and
myself as Chair. Though the overall results were good, the
point of such a process is often the
discussions and insights it provides; and how the Board takes those
on board. Next year the review will be internal.
FEES AND CHARGES
The Board undertook its annual
review of fees and ongoing charges. The biggest single element of
cost is our payment to Bellevue (0.95% (per annum) of market
capitalisation, paid monthly).
As I have highlighted previously
there are a number of costs that the manager has absorbed on behalf
of the Company which helps improve our overall OCR. There is a
second related point that is worth explicitly highlighting - the
manager is paid based on market capitalisation (as opposed to
Assets Under Management ('AUM')).
The link to market cap in our fee
structure has a positive impact on our ongoing charge ratios in
years that we trade at a discount to NAV. Nonetheless, I repeat my
caution from last year, that a falling AUM may mean that the
ongoing charge ratio overall might increase in the forthcoming
year.
PORTFOLIO POSITIONING
The portfolio continues to be
exposed to US stocks, particularly in the small / mid-cap area and
has a high active share. As always, I will direct readers to the
investment manager report for more details.
As touched on above, this year has
not been smooth sailing. After a number of decades of falling
interest rates, and low inflation expectations, the change in
environment seen in the last year or so altered investor
preferences and valuations for smaller companies and for those that
have future promise or are waiting for inflexion points (whether
they be a regulatory approval, widespread adoption, a move
to profitability or another catalyst). Our
portfolio companies often sit at the intersection of these
different elements, so suffer disproportionately when there are
headwinds - but hopefully benefit substantially with even a modest
tailwind.
GEARING
The Company has access to a
multi-currency revolving credit facility ("RCF") with The Bank of
Nova Scotia, that allows it to borrow up to $280 million. The
facility is 'committed' through to December 2024; i.e. the
Investment Manager has guaranteed access to this borrowing (within
limits agreed by the Board) should it see attractive opportunities.
As of 30 November 2023, the Company's leverage ratio (under the
"gross method") was 5% and our aim is to run a mid-single digit
average over the lifetime of the product (the average gearing since
inception is 6.96%).
RESPONSIBLE INVESTING
Both the Company and the Appointed
Manager, Bellevue Asset Management (UK) Ltd are committed to
reflecting Environmental, Social & Governance issues (ESG)
within the capital allocation process. More details around this
topic can be found within
the Annual Report.
SHARE CAPITAL AND ISSUANCE
The Company's issued share capital
(excluding treasury shares of 16.4 million) was 462.6 million
Ordinary Shares (post redemptions) as of 30 November 2023; a
decrease from 586.8 million as of the end of the previous financial
year.
We did not issue any shares during
the year via placements or 'tap' issuance. 0.2 million shares were
issued under the scrip dividend programme. In November 2023 we
received redemption notices for 77.4 million shares.
The Company has the authority to
issue a further c.55 million Ordinary Shares ahead of the AGM on 26
April 2024. At the AGM, we will be seeking authority to issue
47,898,719 new Ordinary Shares to meet potential investor demands.
Any new tap issuance can only be done at (or at a premium to)
NAV.
REDEMPTIONS, BUYBACKS, DISCOUNT MANAGEMENT AND SHARE PREMIUM
ACCOUNT
Redemption process
Since inception, we have offered an
annual redemption option for shareholders.
This year we changed the record date
(which had historically been 2 November) to 2 September: this was
to allow the Company to undertake
appropriate checks to ensure compliance with the UK sanctions
regime.
Our shareholder register includes a
number of nominee accounts and under the sanctions regime we are
required to confirm that the 'underlying beneficial owners' (UBOs)
are not subject to the sanctions regime. In some cases, the
nominees or the UBOs are not in the UK which adds to the complexity
as some are not familiar with UK regulations.
To complete this endeavour, we
employed a specialist external agent and also benefitted from
support from our Company Secretary and our broker in communicating
with shareholders on our register. Despite this we only received
confirmation of sanctions regime compliance from the final
shareholder on the afternoon of 30 November - almost three months
from the record date.
Hopefully going forward greater
clarity on the extent of work required to ensure sanctions
compliance, and greater familiarity with it by some nominees / UBOs
should help make the process smoother. However, in the short term,
at least, it is likely that we will continue to have a record date
at some interval to the redemption election date to allow for the
necessary checks.
I should however alert shareholders
considering future redemptions that (a) the costs of any checks
(for instance the cost of third party service providers) are offset
against the redemption amount and that (b) if checks are not
completed in time, the Board may have to decide whether to delay
payments to some or all redeeming shareholders.
Redemptions scale
This year, 77,428,034 shares were
redeemed - this represented 14.3% of the outstanding immediately
prior to the redemption point of 30 November 2023.
Buybacks
The Company seeks authority at each
Annual General Meeting to buyback 14.99% of its then outstanding
shares. At the last AGM this represented an authority to purchase
82,516,203 shares. During the year we bought back 16.4 million
shares which are now held in treasury and will be cancelled in due
course.
It is perhaps worth reminding
investors that we only buyback shares at a discount to net asset
value - and as a result such purchases are accretive to continuing
investors.
Discount management
Both redemptions and buybacks can be
considered forms of 'discount management'. Clearly neither would be
substantively utilised if we were not trading at a
discount.
There are a number of elements that
contribute to a discount some of which we might influence (e.g.
performance) or impact at the margins (e.g. share buybacks and
marketing impact the balance of buyers versus sellers) but there
are many (e.g. interest rates, asset allocation decisions) that we
have no influence over.
Share premium account
On 3rd November 2023, we also
announced that the Company was calling a general meeting to seek
shareholder approval for a special resolution to cancel the
Company's share premium account.
UK companies have a nominal or par
value for every share that is issued; this is usually a very low
value (in the case of the Company it is one penny for ordinary
shares). At IPO we issued shares at 100 pence, and subsequently
even higher. The difference between par and issued value is
assigned to a section of our accounts known
as the 'share premium account'; technically this is a
'non-distributable reserve'.
Distributions (i.e. dividend
payments, buybacks and redemptions) utilise our 'distributable
reserves' - which generally comprise accumulated profits and
losses. Thus, it is perhaps self-evident that poor performance
might impact our distributable reserves.
Given the scale of the redemption
requests, on 3rd November 2023 the Board was
obliged to prepare for the worst, whilst clearly hoping for the
best. Given that payments for redemptions were to be made in early
December (and that the Board is also committed to our regular
dividends) we had to ensure that there would be sufficient
distributable
reserves under all circumstances in the foreseeable future.
I should emphasise that there were sufficient resources / liquidity
within the balance sheet to fulfil our redemption obligations, but
it was clear that access to the share premium account (i.e. a
non‑distributable reserve) mentioned
earlier would provide extra certainty.
Hence your Board took the decision
to seek shareholder permission to petition the High Court to
transfer amounts from our share premium account into our special
distributable reserves. This requirement to seek High Court
permission is the result of the Company
being a UK domiciled public listed company. Shareholders with
particularly long memories will recall we undertook a similar
exercise soon after IPO to ensure sufficient distributable reserves
at that time.
I should emphasise that moving
amounts between the share premium account and special distributable
reserve on our balance sheet has no impact on NAV or
performance.
The High Court hearing required
preparation of witness statements including various statements of
capital. During this time, in order to avoid ever changing numbers
(which would require additional filings, delays and cost) the Board
chose to suspend the buyback (as that might lead to a continuously
changing share count). Inadvertently we created an experiment where
we can see whether a pause on buybacks, albeit with better
performance in the underlying portfolio, impacts the discount. I am
sure this will lead to interesting conversations during forthcoming
board meetings and also with investors.
I should emphasise that calling a
general meeting, and seeking a court order to reduce the share
premium account is not an unusual event - particularly for a UK
company that pays regular dividends and undertakes regular capital
reduction exercises (ie buybacks or redemptions); though due to the
cost and effort required no board engages in this
lightly.
The formal reduction of the share
premium account (and matching increase in our special distributable
reserve) occurred after our November year end BUT before we paid
out the redemption funds in mid-December 2024. This move of amounts
between the accounting entries on our balance sheet, though
mentioned in the formal account section of this report, will be
clearer in the next fiscal years accounts.
DIVIDEND
The Company targets an annual
dividend of 3.5% of preceding year-end NAV, paid out in two equal
instalments. The Company paid out a final dividend of 3.235p in
respect of the year 2022, in May 2023 and an interim dividend of
2.995p in respect of the financial year 2023 in August
2023.
The Board has proposed a final
dividend of 2.995p per Ordinary Share in respect of the financial
year 2023 and, if approved at the
forthcoming Annual General Meeting, this will be paid to
Shareholders in May 2024.
For the financial year 2024, the
Board is proposing a total dividend of 5.04p per Ordinary Share,
composed of interim and final dividends of 2.52p per Ordinary
Share, to be paid in August/September 2024 and April/May 2025
respectively, subject to shareholder approval. The lower dividend
than last year reflects the fall in AUM.
The Company introduced a scrip
dividend alternative in 2019, allowing Shareholders to elect for
their cash dividend to be automatically subscribed on their behalf
for new Ordinary Shares. I mentioned in the last annual report that
the Board was monitoring the cost of the scrip dividend
alternative.
Reluctantly in the interim accounts
we announced the suspension of the scrip dividend. This was because
the take-up had been falling, and the cost was hard to justify.
Additionally, we were trading at a discount to NAV whilst scrip
dividend shares are issued at NAV so economically it makes more
sense for investors to receive a cash dividend and buy shares in
the market.
Having made commentary on discount
management earlier, I should point out that
if the shares are trading below NAV then a dividend of 3.5% of NAV
means that the dividend yield on the stock is actually higher -
which may be attractive for some new investors. Of course, if the
share price subsequently rises then though the absolute level of
the dividend remains the same, and the shareholder benefits from
capital appreciation.
ANNUAL GENERAL MEETING & SHAREHOLDER
COMMUNICATION
The next AGM will be on 26 April
2024. There were a number of requests at the last AGM for the
managers to make a short formal presentation on the sector and the
portfolio before a question and answer session. We will endeavour
to accommodate that this year.
We recognise it is not possible for
everyone to attend an AGM hence may I remind readers that we have a
dedicated email address for investors to submit any enquiries or
feedback they might have: info@bellevuehealthcaretrust.com. I
encourage you to make use of this facility. In the meantime, we
will continue to post content from the Investment Manager onto the
Company's website to keep you informed of the Company's
progress.
On behalf of the Board, may I wish
you a prosperous year ahead and thank you for your continued
support of Bellevue Healthcare Trust Plc.
Randeep Grewal
Chairman of the Board of
Directors
1 March 2024
Investment Manager's Report
PERFORMANCE SUMMARY - MACRO THOUGHTS
Anyone familiar with our factsheets
will know that we find much joy in the boundless variety offered by
the English language. However, the seeking of superlatives to
describe the tendency of geopolitics and macroeconomics to throw
obstacles into the path of investors lost its lustre long
ago.
What we crave, more than anything
else, is a bottom-up stock-driven market environment where
operationally superior companies outperform poorer ones. Sadly, the
prior fiscal year (30 November 2022 - 30 November 2023) will go
down as yet another where external factors and extraneous
information served to pressure sentiment toward our holdings for
non-fundamental reasons.
If there is anything positive to say
about the overall macro backdrop during this period, it would be
that the year ended much more positively than it began
sentiment-wise. We can but hope for a more rational and
stock-driven performance during 2024, although geopolitical
concerns still represent a Damoclean overhang, even as the economic
picture looks to be stabilising somewhat.
Whilst interest rates, inflation and
the attendant risks of waning consumer sentiment and thus recession
remained the primary economic concerns, the dispersion of sector
level performance and overall market returns was largely opposite
to 2022, with most broad regional and global indices seeing
positive returns in dollar terms (see Figure 1 contained within the
Annual Report). Also, in contrast to 2022, and more in line with
recent history, growth led value.
See Annual Report for Figure 1 FY2023 Total Return Data - Key Broad
Indices
Within this, market leadership was
notably narrow during the period, and performance was driven mainly
by technology stocks (especially the US "magnificent seven" -
Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA and Tesla),
powered along by a frenzy for AI-related exposures.
As we have seen many times before,
the emergence of new technologies tends to play out more slowly
than people imagine, and in ways not initially foreseen. The
healthcare industry was an early adopter and integrator of machine
learning into all manner of products and processes, and we think it
has much to offer in terms of real-world examples of implementing
this technology.
As the year went on, we saw a
sentiment tussle regarding expectations for a hard or soft landing
(i.e. the fiscal tightening cycle will, or
will not, result in a recession). As we moved into November 2023,
expectations had pivoted back to where the year began; with a soft
landing in the United States being the predominant view, one aided
by an expectation of multiple interest rate cuts through
2024.
PERFORMANCE SUMMARY - HEALTHCARE HIGHLIGHTS
The US dollar total return of the
MSCI World Healthcare Index during the fiscal year was -1.8%, which
meant that it underperformed the parent
MSCI World Index by 14.8%, which is again almost a mirror image of
what happened in FY2022 and the worst relative annualised
performance over this period in the 23 years for which comparable
data is available.
Healthcare was very much out of
favour amongst generalist investors, despite classical defensive
attributes and a generally worrisome backdrop of economic news. We
can think of several reasons why the sector may have fallen out of
favour during this period.
Firstly, many larger companies did
not act as defensively as hoped; we saw material cuts to earnings
forecasts or the outlook from mega-cap "bellwethers" like Pfizer
and Sanofi. Indeed, the dynamic of market leadership being narrow
was equally true in the healthcare sector as for the wider market.
This was the year of Novo Nordisk and Eli Lilly around the
anti-obesity theme/meme.
Secondly, in a market where investor
money was flowing out of equities and into bonds in the early part
of the year, that incremental investment into Technology stocks had
to be funded from somewhere and bond-like healthcare stocks (i.e.
big pharma) seemed to be a source of funds.
Thirdly, there was a nebulous
perception of R&D disappointments and lack of M&A,
especially within therapeutics. As discussed in the factsheets, we
would not agree with this perception from our own vantage point,
but market sentiment is not what we think about.
Figure 2 (contained within the
Annual Report and below) illustrates the healthcare sector
performance contribution by sub-sector. If we would make any
observation about the table, it would be that the final figures
belie many a twist and turn and much volatility during the
period.
It speaks volumes that the best and
second-best sub-sectors could not share less in common in terms of
fundamental attributes and the worst performing sector is
ironically the one that is most likely to benefit from the
machine learning-based developments that so
influenced the wider market's behaviour during the year.
Figure 2 FY2023 MSCI World Healthcare Index sub-sector
performance data
|
Weighting
|
Perf (USD)
|
Perf (GBP)
|
Distributors
|
1.6%
|
21.6%
|
15.1%
|
Dental
|
0.4%
|
15.0%
|
8.8%
|
Other Healthcare/Animal
Health
|
1.3%
|
5.6%
|
4.9%
|
Medical Technology
|
12.6%
|
4.4%
|
-1.1%
|
Diversified Therapeutics
|
37.2%
|
4.4%
|
-1.2%
|
Facilities
|
1.0%
|
1.9%
|
-3.5%
|
Generics
|
0.4%
|
0.7%
|
-4.7%
|
Services
|
2.1%
|
-0.7%
|
-6.1%
|
Managed Care
|
12.0%
|
-3.7%
|
-8.8%
|
Focused Therapeutics
|
8.4%
|
-8.9%
|
-13.8%
|
Tools
|
8.3%
|
-11.8%
|
-16.5%
|
Healthcare Technology
|
0.9%
|
-12.0%
|
-16.7%
|
Conglomerate
|
11.9%
|
-12.7%
|
-17.4%
|
Diagnostics
|
1.5%
|
-16.1%
|
-20.6%
|
Healthcare IT
|
0.6%
|
-22.2%
|
-26.4%
|
Index performance
|
|
-1.8%
|
-7.1%
|
Regular followers will know that we
have repeatedly mentioned the outsized impact of the size factor
(i.e. relative outperformance or underperformance based on market
capitalisation grouping). In summary, the past few years have seen
investors hiding in the relative safe haven of larger, more liquid
and typically more diversified companies.
Such companies tend to be older and
more mature, so less at the mercy of debt and equity markets for
additional funding and thus less sensitive to interest rates. They
are also easier to exit if the market does look like it is going
down and investors wish to reduce equity exposures.
Figure 3 (contained within the Annual Report) illustrates the impact of size factor within US healthcare, by
comparing returns over the past two fiscal years from the
healthcare series of the S&P 500 (mega-cap dominated, $5.2trn
value), S&P 400 (mid-cap focused, $212bn value) and S&P 600
(small-cap dominated, $130bn value).
As the charts show, size factor
dispersion was less pronounced in FY2023 than it was in FY2022, but
there was still a material performance lag
for smaller-capitalisation stocks within the healthcare universe,
again illustrating the inherent
conservatism of investors during this period of macroeconomic
uncertainty. Most of this relative underperformance occurred in the
late summer months (when sentiment around a soft landing receded
somewhat, before reversing again into the calendar
year-end).
See Annual Report for
Figure 3 FY2022
and FY2023 Total Return Data - Selected Healthcare
Indices
Source: Bloomberg
Healthcare remains a stable sector
from a regulatory perspective, with very visible long-term demand
growth drivers and, whilst we all recognise that the cost of equity
has risen due to higher risk-free rates, it remains our view that
the multiple compression seen in small and mid-cap healthcare
equities went far beyond anything that could be justified by the
application of higher discount rates.
Neither could it be rationalised by
taking earnings downgrades or changes to the healthcare industry's
regulatory or operating environment into account, since in both
cases the impact has been limited (downgrades have been more at the upper end of the market cap scale). The
positive behaviour of these same SMID-focused indices in December
2023 and January 2024 surely attests to the
arbitrary and egregious nature of the devaluation that investors
have witnessed over the past two years.
PERFORMANCE SUMMARY - BELLEVUE HEALTHCARE
TRUST
We would reiterate that the
investment strategy we are following leads to a portfolio with
certain inherent characteristics and factor
exposures: dollar dominance, mid-cap focus and low benchmark
correlation. As was the case in FY2022, these factor
characteristics have been negatively correlated with wider market
performance over the past year, leading again to an
underperformance versus our key comparator index, the MSCI World
Healthcare Index (Figure 4 contained within the Annual Report and
below).
Figure 4 Bellevue Healthcare Trust - FY2023 Financial
Performance Summary
|
|
|
Rolling 3
Year
|
Since
Inception
|
Total Return (GBP)
|
Fiscal 2023
|
Rolling 3
Year
|
(annual
eq.)
|
(1-Dec-16)
|
BBH Share Price
|
-15.1%
|
-16.7%
|
-5.9%
|
+60.0%
|
BBH NAV
|
-12.7%
|
-7.6%
|
-2.6%
|
+78.3%
|
MSCI World Healthcare
Index
|
-7.1%
|
+22.8%
|
+7.1%
|
+97.7%
|
Relative to MSCI World Healthcare Index
|
|
|
|
|
BBH Share Price
|
-8.0%
|
-39.5%
|
-13.0%
|
-37.7%
|
BBH NAV
|
-5.6%
|
-30.4%
|
-9.7%
|
-19.4%
|
Performance of other comparator indices
|
|
|
|
|
MSCI World Total Return
Index
|
+7.5%
|
+30.9%
|
+8.1%
|
+106.1%
|
FTSE All Share Total Return
Index
|
+1.8%
|
+24.8%
|
+2.0%
|
+42.2%
|
Source: Bloomberg. All performance
figures are calculated as total return with dividends being
reinvested in the relevant security, calculated in GBP and with the
relevant period ending on 30 November 2023.
The poor investment return
performance during FY2023 pushed the Trust into underperformance
since inception when measured to the end of the fiscal year (Figure
5 contained within the Annual Report). When
considering the total shareholder return, the widening of the
discount rating on the Company's share price from -7.5% at the end
of FY2022 to -10.3% at the end of FY2023 further eroded the
performance.
See Annual Report for
Figure 5 Total
Return (NAV) since inception of Bellevue Healthcare Trust vs. UK
listed comparables
Source: Bloomberg. All performance
figures are calculated as total return with dividends being
reinvested in the relevant security, calculated in GBP and with the
relevant period ending on 30 November 2023. UK listed comparables
are (in no particular order) BIOG, IBT, PCGH and WWH.
PORTFOLIO SUMMARY
During fiscal 2023, the Company held
positions in 34 companies (compared to 37
in FY2021), beginning the year with 29 positions and ending the
year with 27 (five additions and seven exits). In keeping with
FY2022, this was again a lower turnover
year than the previous one; excluding redemption-related selling,
overall trading activity more than halved.
Two of the seven additions during
the year were reinvestments in companies that had been in the
portfolio previously (Dexcom and Centene). Of the seven exits, two
were due to M&A (Amedisys and Point Therapeutics).
Of the remaining five exits, two
were due to the companies reaching our fair values, resulting in
insufficient further upside to justify continued ownership. The
remainder were cases where the investment thesis failed, or the
company changed its strategic direction in a manner that we did not
find compelling.
The evolution of the portfolio at a
sub-sector level is illustrated in Figure 6 (contained within the
Annual Report and below). Investors can find detailed
commentary on the month-by-month evolution of the
sub-sector exposure in the monthly factsheets and these should be
investors' primary source of information on the portfolio and the
strategy.
Figure 6 Portfolio sub-sector evolution
Subsector Allocation (month end)
|
November
2022
|
May 2023
|
November
2023
|
Change (y-o-y,
%)
|
Conglomerates
|
0.0%
|
0.0%
|
0.0%
|
n/a
|
Dental
|
1.2%
|
0.9%
|
0.0%
|
-1.2%
|
Diagnostics
|
10.5%
|
11.4%
|
13.3%
|
+2.8%
|
Distributors
|
0.0%
|
0.0%
|
0.0%
|
n/a
|
Diversified Therapeutics
|
6.4%
|
4.0%
|
0.0%
|
-6.4%
|
Facilities
|
0.0%
|
0.0%
|
0.0%
|
n/a
|
Focused Therapeutics
|
24.3%
|
21.3%
|
22.2
|
-2.1%
|
Generics
|
0.0%
|
0.0%
|
0.0%
|
n/a
|
Healthcare IT
|
5.4%
|
8.8%
|
10.4%
|
+5.0%
|
Healthcare Technology
|
3.9%
|
3.0%
|
5.7%
|
+1.8%
|
Managed Care
|
7.0%
|
7.2%
|
7.8%
|
+0.8%
|
Medical Technology
|
19.3%
|
18.8%
|
19.1%
|
-0.2%
|
Services
|
15.3%
|
14.9%
|
11.7%
|
-3.6%
|
Tools
|
6.5%
|
9.6%
|
9.9%
|
+3.4%
|
Other Healthcare
|
0.0%
|
0.0%
|
0.0%
|
n/a
|
Total
|
100.0%
|
100.0%
|
100.0%
|
|
As noted previously, we feel that
the predominant driver of performance during the period in review
was sub-sector allocation or thematic exposure, rather than
individual stock selection. In the early part of the year, size
bias toward SMID healthcare was a positive
attribute, until the collapse of Silicon Valley Bank ('SVB') on
7th March 2023.
Few public companies had material
exposure to this entity and, in any event, the Federal Reserve
stepped in to guarantee deposits within days of its collapse.
Nonetheless, the Trust's NAV fell 7.5% in dollar terms over that
period, despite de minimis SVB exposure for portfolio companies.
From April to July, the sector broadly went sideways as the wider
market climbed higher on the rotation toward mega-cap technology
stocks around AI-related excitement.
In the later summer months, another
meme frenzy around the impact of widespread use of GLP-1 obesity
drugs gripped the market, dividing healthcare into a perceived
binary grouping of obesity "winners and losers".
We have devoted many pages in the
factsheets to debunking the ludicrous implications of the stock
moves that followed around these so-called "losers". We reiterate
again that we have not seen anything quite so kneejerk since the
tail end of the 1990s, and the similarly ludicrous 'old versus new
economy' debate over emerging tech companies. Change takes time and
is seldom so clear cut as Wall Street would have investors
believe.
Broadly speaking, we would
characterise our activity during the year as seeking to take
advantage of these repeated mispricing events to position the
portfolio as best we could to benefit from a recovery in sentiment,
which we felt was inevitably coming (and duly did in the last two
months of 2023 and into January 2024). This is most evident in our
increased allocations to Tools, Healthcare IT and Healthcare
Technology and the reduced exposure to Diversified
Therapeutics.
With regard to the portfolio
breakdown by market capitalisation, this activity saw a further
downward drift in the median company size. We had ~300bp less
exposure to Mega-Cap and Large-Cap companies, with offsetting
increases in both the Small-Cap and Mid-Cap categories. Despite
this shift, the Company's portfolio liquidity parameters are
unchanged. The portfolio remained highly liquid; we estimate 100%
of the portfolio could be liquidated within nine trading days at a
participation rate of 20%.
The already material geographic bias
to the United States increased, as we exited our exposures to
Europe and Rest of World and valuations in China continued to
experience significant pressure due to a lacklustre post-COVID
recovery and an overhang from an anti-corruption drive that has
caused physicians and hospital managers to somewhat shy away from
undertaking costly procedures or ordering expensive
equipment.
See Annual Report for
Figure 7 Market
capitalisation breakdown
See Annual Report for
Figure 8
Geographical breakdown (operational HQ)
Our top five and bottom five
contributors to the evolution of the NAV are summarised in Figure 9
(contained within the Annual Report and below), along with their
share price development in sterling over the fiscal year
(which does not necessarily correspond to
their performance for the Company, since the size and duration of
our holdings varies over the year).
Figure 9 FY2023 Top and Bottom performers
|
Top
5 Performers (total return)
|
|
Company
|
Sub-sector
|
Performance
(GBP)
|
Exact Sciences
|
Diagnostics
|
+34.7%
|
Apellis Pharmaceuticals
|
Focused Therapeutics
|
+2.1%
|
Insmed
|
Focused Therapeutics
|
+28.1%
|
Hutchmed
|
Focused Therapeutics
|
+50.4%
|
Point Therapeutics
|
Focused Therapeutics
|
+88.9%
|
|
Bottom 5 Performers (total return)
|
|
Company
|
Sub-sector
|
Performance
(GBP)
|
Silk Road Medical
|
Medical-Technology
|
-83.4%
|
Tandem Diabetes Care
|
Healthcare Technology
|
-54.5%
|
Outset Medical
|
Medical-Technology
|
-76.5%
|
Charles River
|
Services
|
-18.4%
|
Bio-Rad Laboratories
|
Tools
|
-30.4%
|
We would make the following comments
regarding the companies in Figure 9: only one of the top performers
(Point Therapeutics) was an M&A target; it was acquired by Eli
Lilly. As we go to press, we still have exposure to all of the
worst performers and see four of the five as materially undervalued
holdings that we expect to perform well in the future.
The standard 'boiler plate' comment
around performance not corresponding to the data in the table feels
particularly apposite in respect of Apellis Pharmaceuticals. The
shares reached our fair value and we materially reduced our
holdings mid-year. Shortly after, the stock fell >70% in July
2023 on concerns about side effects for their key drug Syfovre. We
felt this was an overreaction, so we scaled up the position and
rode the recovery to considerable profit. We have since been taking
profits again.
Hopefully this example serves as a
useful illustration of how the valuation discipline around share
price maximums works within the strategy. We are happy to exit even
good companies if the price is full and have no qualms about going
back into stocks again when circumstances are more propitious and
also demonstrates how the market is prone to overreactions on the
downside, something that we have seen a lot over the past two
years. For us, it has always been a question of the longer-term
fundamental outlook that drives decision-making, rather than
short-term market sentiment.
Full investment portfolio as of 30 November
2023
|
Company
|
Sub-sector classification
|
% Portfolio
|
1
|
OPTION CARE HEALTH
|
Services
|
6.9
|
2
|
INSMED
|
Focused Therapeutics
|
6.8
|
3
|
AXONICS
|
Medical Technology
|
6.8
|
4
|
EVOLENT HEALTH
|
Healthcare IT
|
6.6
|
5
|
EXACT SCIENCES
|
Diagnostics
|
6.4
|
6
|
INTUITIVE SURGICAL
|
Medical Technology
|
5.2
|
7
|
PACIFIC BIOSCIENCES
|
Tools
|
5.1
|
8
|
APELLIS PHARMACEUTICALS
|
Focused Therapeutics
|
4.8
|
9
|
BIO-RAD LABORATORIES
|
Tools
|
4.8
|
10
|
CHARLES RIVER
|
Services
|
4.8
|
Total Top 10
|
|
58.2
|
11
|
AXSOME THERAPEUTICS
|
Focused Therapeutics
|
4.7
|
12
|
TANDEM DIABETES CARE
|
Health Technology
|
4.5
|
13
|
CAREDX
|
Diagnostics
|
4.2
|
14
|
ACCOLADE
|
Healthcare IT
|
3.8
|
15
|
ATRICURE
|
Medical Technology
|
3.1
|
16
|
UNITEDHEALTH GROUP
|
Managed Care
|
3.1
|
17
|
CASTLE BIOSCIENCES
|
Diagnostics
|
2.7
|
18
|
ELEVANCE HEALTH
|
Managed Care
|
2.6
|
19
|
HUTCHMED
|
Focused Therapeutics
|
2.4
|
20
|
CENTENE
|
Managed Care
|
2.1
|
21
|
SAREPTA THERAPEUTICS
|
Focused Therapeutics
|
2.1
|
22
|
SILK ROAD MEDICAL
|
Medical Technology
|
1.5
|
23
|
INSPIRE MEDICAL
|
Medical Technology
|
1.5
|
24
|
VERONA PHARMACEUTICALS
|
Focused Therapeutics
|
1.4
|
25
|
DEXCOM
|
Health Technology
|
1.2
|
26
|
OUTSET MEDICAL
|
Medical Technology
|
0.7
|
27
|
VENUS MEDTECH
|
Medical Technology
|
0.2
|
Total portfolio
|
|
100.0
|
Gross exposure
|
|
£697.0
million
|
Net
value of assets
|
|
£665.5
million
|
Recent trading and outlook
In these fast moving and
macro-oriented times, we continue to recommend that investors rely
upon the detailed and discursive monthly factsheets for an
up-to-date view of the outlook. These can be found on the Company's
website1. We are pleased to report that the Company's performance in
the three months to the end of February 2024 has been positive on a
relative and absolute basis and the macroeconomic situation is
coalescing around a more constructive, narrower range of outcomes,
even if the geopolitical circumstances remain febrile.
It bears repeating that our strategy
of investing in `healthcare change' remains a powerful and
compelling one. Healthcare continues to be the secular growth story
of our age. Recession or not, there are ever more people and they
are ageing. More and more countries are becoming developed
economies and scientific progress continues to open up new avenues
to relieve the burden of human suffering, raising expectations of
what products and services will be available to this ever-greater
number of people.
1 https://www.bellevuehealthcaretrust.com/uk-en/private/insights/
However, society needs to pay for
all of this and the current model is neither easily scalable nor
financially sound. If we cannot bend the cost curve and change the
delivery paradigm, the services will need to be cut or the system
will go bankrupt. Ergo, healthcare must change. There is no
alternative. We have already seen profound changes implemented
since the pandemic. The tools, products and services that are
enabling the re-imagining of healthcare can be accessed through the
public equity realm, creating a persuasive investment opportunity.
The past few years may have been very challenging, but the
fundamentals remain very attractive.
Paul Major and Brett Darke
Bellevue Asset Management (UK)
Ltd
1 March 2024
Investment Policy, Results and Key Performance
Indicators
INVESTMENT POLICY
The Company invests in a
concentrated portfolio of listed or quoted equities in the global
healthcare industry. The Company may also invest in ADRs, or
convertible instruments issued by such companies and may invest in,
or underwrite, future equity issues by such companies. The Company
may utilise contracts for differences for investment purposes in
certain jurisdictions where taxation or other issues in those
jurisdictions may render direct investment in listed or quoted
equities less effective. Any use of derivatives for investment
purposes is made on the basis of the same principles of risk
spreading and diversification that apply to
the Company's direct investments, as described below, and such use
is not expected in the normal course to form a material part of the
Gross Assets.
The investable universe for the
Company is the global healthcare industry including companies
within industries such as pharmaceuticals, biotechnology, medical
devices and equipment, healthcare insurers and facility
operators, information technology (where
the product or service supports, supplies or services the delivery
of healthcare), drug retail, consumer healthcare and
distribution.
No single holding will represent
more than 10 per cent. of Gross Assets at the time of investment
and, when fully invested, the portfolio will have no more than 35
holdings. The Company will typically seek
to maintain a high degree of liquidity in its portfolio holdings
(such that 90 per cent of the portfolio may be liquidated in a
reasonable number of trading days) and as a consequence of the
concentrated approach, it is unlikely that a position will be taken
in a company unless a minimum holding of 1.0 per cent. of Gross
Assets at the time of investment can be achieved within an
acceptable level of liquidity.
There are no restrictions on the
constituents of the Company's portfolio by index benchmark,
geography, market capitalisation or healthcare industry sub-sector.
Whilst the MSCI World Healthcare Index (in sterling) will be used
to measure the performance of the Company, the Company does not
seek to replicate the index in constructing its portfolio. The
portfolio may, therefore, diverge substantially from the
constituents of this index (and, indeed, it is expected to do so).
However, the portfolio is expected to be well diversified in terms
of industry sub-sector exposures. Given the nature of the wider
healthcare industry and the geographic location of the investable
universe, it is expected that the portfolio will have a majority of
its exposure to stocks with their primary listing in the United
States and with a significant exposure to the US dollar in terms of
their revenues and profits. Although the base currency of the
Company is sterling which creates a potential currency exposure, this will not be hedged using any
sort of foreign currency transactions, forward transactions or
derivative instruments.
The Company will not invest in any
companies which are, at the time of investment, unquoted or
untraded companies and has no intention of investing in other
investment funds.
BORROWING POLICY
The Company may deploy borrowing to
enhance long‑term
capital growth. Gearing will be deployed flexibly up to 20 per
cent. of the Net Asset Value, at the time of borrowing, although
the Investment Manager expects that gearing will, over the longer
term, average between 5 and 10 per cent. of Net Asset Value. In the
event that the 20 per cent limit is breached as a result of market
movements, and the Board considers that borrowing should be
reduced, the Investment Manager shall be
permitted to realise investments in an orderly manner so as not to
prejudice shareholders.
No material change will be made to
the investment policy without the approval of shareholders by
ordinary resolution.
DIVIDEND POLICY
The Company will set a target
dividend each financial year equal to 3.5% of Net Asset Value as at
the last day of the Company's preceding financial year. The target
dividend will be announced at the start of each financial year.
This is a target only and not a profit forecast and there can be no
assurance that it will be met.
Dividends will be financed through
distributable reserves. In order to increase the distributable
reserves available to facilitate the payment of dividends, the
Company cancelled the amount of £146,412,136 standing to the credit
of its share premium account immediately following first admission
of its Ordinary Shares to trading on the London Stock Exchange in
order to create a special distributable reserve. With effect from
14 December 2023, a further amount of £617,709,517
standing to the credit of the Company's share
premium account was cancelled in order to increase the special
distributable reserve. The Company may, at the discretion of the
Board, pay all or part of any future dividends out of the special
distributable reserve, taking into account the Company's investment
objective.
The Company intends to pay dividends
on a semi-annual basis, by way of two equal dividends, with
dividends declared in July and February/March and paid in August
and March/ April in each year.
In accordance with regulation 19 of
the Investment Trust (Approved Company) (Tax) Regulations 2011, the
Company will not (except to the extent permitted by those
regulations) retain more than 15 per cent. of its income (as
calculated for UK tax purposes) in respect of an accounting
period.
RESULTS AND DIVIDEND
The Company's revenue return after
tax for the year amounted to a loss of £1,147,000 (2022: loss of
£1,655,000). The Company's capital return
after tax for the year amounted to a loss of £119,891,000 (2022:
loss of £36,769,000). Therefore, the total return after tax for the
Company was a loss of £121,038,000 (2022: loss of
£41,424,000).
The Company targeted a total
dividend for the year ended 30 November 2023 of 5.99p per Ordinary
Share.
·
Interim dividend of 2.995p paid on 25 August
2023
·
Final dividend of 2.995p to be paid on 31 May 2024
(to Shareholders on the register at the close of business on 10 May
2024), subject to Shareholder approval at the AGM to be held on
26 April 2024.
TARGET TOTAL DIVIDEND FOR THE YEAR ENDING 30 NOVEMBER
2024
As announced by the Company on 12
January 2024, for the financial year ending 30 November 2024, the
target total dividend will be 5.04p per Ordinary Share, this being
3.5% of the audited net asset value per Ordinary Share of 143.87p
(including current financial year revenue items) as at
30 November 2023. The Board intends to declare an interim
dividend of 2.52p per Ordinary Share, being half of the target
total dividend for the financial year ending 30 November 2024, in
July 2024 and intends to pay this dividend in August/September
2024. The Board intends to propose a final dividend of 2.52p per
Ordinary Share for the financial year ending 30 November 2024,
in February/March 2025 and intends to pay this dividend in
March/April 2025.
FIVE YEAR DIVIDEND PERFORMANCE
|
Interim
dividend
|
Final
dividend
|
Total
dividend
|
Dividends paid/payable
|
|
|
|
Year ended 30 Nov 2019
|
2.425p
|
2.425p
|
4.85p
|
Year ended 30 Nov 2020
|
2.500p
|
2.500p
|
5.00p
|
Year ended 30 Nov 2021
|
3.015p
|
3.015p
|
6.03p
|
Year ended 30 Nov 2022
|
3.235p
|
3.235p
|
6.47p
|
Year ending 30 Nov 2023
|
2.995p
|
2.995p
|
5.99p
|
Target dividend*
|
|
|
|
Year ending 30 Nov 2024
|
2.520p
|
2.520p
|
5.04p
|
* This is a target and should not be
taken to imply a profit forecast.
KEY
PERFORMANCE INDICATORS ("KPIs")
The Board measures the Company's
success in attaining its investment objective by reference to the
following KPIs:
(i)
To beat the total return of the MSCI World Healthcare Index (in
Sterling) on a rolling three year period
The NAV total return from 1 December
2020 to 30 November 2023 was -7.6%. The total return of the MSCI
World Healthcare Index (in sterling terms) over the same period was
+22.8%.
The Investment Manager's report
incorporates a review of the highlights during the financial year
ended 30 November 2023. The Investment Manager's report gives
details on investments made during the year and how performance has
been achieved.
(ii) To seek to generate a double-digit total Shareholder
return per annum over a rolling three year period
The NAV total returns from 1
December 2020 to 30 November 2023 was -7.6%.
(iii) To meet its target total dividend in each financial
year
The Company targeted a total
dividend of 5.99p per Ordinary Share for the year ended 30 November
2023. The Company paid an interim dividend of 2.995p per Ordinary
Share in August 2023 and proposes a final dividend in respect of
the year to 30 November 2023 of 2.995p per Ordinary
Share.
(iv) Discount/premium to NAV
The discount/premium relative to the
NAV per Ordinary Share represented by the share price is monitored
by the Board. The share price closed at a 10.3% discount to the NAV
as at 30 November 2023 (2022: 7.6%
discount).
(v)
Maintenance of reasonable level of ongoing
charges
The Board monitors the Company's
operating costs. Based on the Company's average net assets during
the year ended 30 November 2023 the Company's ongoing charges
figure calculated in accordance with the Association of Investment
Companies ("AIC") methodology was 1.02% (2022: 1.04%).
Risk
and Risk Management
PRINCIPAL AND EMERGING RISKS AND
UNCERTAINTIES
The Board is responsible for the
management of risks faced by the Company and delegates the review
process of this to the Audit and Risk Committee (the "Committee").
The Committee carries out, at least annually, a robust assessment
of principal and emerging risks and uncertainties and monitors the
risks on an ongoing basis. The Committee has a dynamic risk
assessment programme in place to help identify key risks in the
business and oversee the effectiveness of internal controls and
processes, providing a visual reflection of the Company's
identified principal and emerging risks. The Committee considers
both the impact and the probability of each risk occurring and
ensures appropriate controls are in place to reduce risk to an
acceptable level.
During the year under review, the
Committee considered the continued weak investment performance from
the perspective of risk management. In that review, it considered
whether the investment process adopted at the prospectus to achieve
the Company's return objective had been consistently applied. The
conclusion was there has been consistency of approach which had
been very adversely affected by macro-economic reaction to
geopolitical uncertainties that have arisen. The concentrated high
conviction portfolio selected from bottom‑up research results in a tendency to
a selection of smaller mid-sized companies which has adversely
impacted the resulting performance. The inability to mitigate for
market risk led the committee, from a risk perspective conclude
that the investment Manager is "doing what it says on the tin" and
so from a risk perspective, ensure the key risks are communicated
well to Shareholders.
The principal and emerging risks,
together with a summary of the processes and internal controls used
to manage and mitigate risks where possible are outlined
below.
(I)
MARKET RISKS
Economic conditions
Changes in general economic and
market conditions including, for example, impact of pandemics on
global economies and national responses to ameliorate such
challenges, interest rates, rates of inflation, industry
conditions, competition, political events and trends, tax laws,
national and international conflicts and other factors could
substantially and adversely affect the Company's prospects and
thereby the performance of its Ordinary Shares.
Healthcare companies
The Company invests in global
healthcare equities. This sector may be affected by a number of
particular risks including changes in government regulations and
government healthcare programs, increases or decreases in the cost
of medical products and services and product liability claims.
Healthcare companies in particular, have patent protection, very
competitive forces on pricing and susceptibility to product
obsolescence. In addition, successful
development of healthcare products may be highly uncertain. The
market prices for securities of companies in the healthcare sector
can reflect this by being highly volatile.
Sub-sectoral diversification
The Company has no limits on the
amount it may invest in the healthcare sector and is not subject to
any sub-sector investment restrictions.
Although the portfolio is expected to be well diversified in terms
of industry sub-sector exposures, the Company may have significant
exposure to portfolio companies from certain sub-sectors from
time-to-time.
Concentrated Portfolio
One of the key aspects to the
investment proposition is selection of core high conviction
portfolio driven by the Investment manager's fundamental analysis.
The maximum number of stocks being held at any one time will be 35.
This Investment approach does not propose to follow a benchmark and
as such cannot be expected to reflect the benchmark
performance.
Changes of Risk during the year
The particular investment approach
has not been altered during the year though the market risk
headwinds have continued to adversely affect
performance.
Management of risk
The Directors acknowledge that
market risk is inherent in the investment process. The Company is
invested in a concentrated, sector specific
portfolio of investments and has a well-defined investment policy
that states that no single holding will represent more than 10 per
cent. of gross assets at the time of investment.
The Investment Manager also has a
well-defined investment objective and process which is regularly
and rigorously reviewed by the independent Board of Directors and
performance is reviewed at quarterly Board meetings. The Investment
Manager is experienced and employs its expertise in selecting the
stocks in which the Company invests.
The Board closely monitors the
Company's share price relative to NAV and the Company's discount /
premium relative to their peer group. A discount management policy
including buy backs and redemption facility is operated. Extensive
marketing is carried out by the Company's Investment Manager,
Broker and a specialist PR company and regular communication via
the Company's factsheets aims to inform shareholders. An investment
research consultant is engaged to provide independent research for
retail shareholders.
In addition to regular market
updates from the Investment Manager and reports at Board meetings,
the Board convenes more often as required.
(II) FINANCIAL RISKS
The Company's investment activities
expose it to a variety of financial risks which include liquidity,
currency, leverage, interest rate and credit risks.
The Company invests in equities,
with equities subject to strong price fluctuations and specifically
healthcare equities, which can be subject to sudden substantial
price movements owing to market, sector or company factors. There
is therefore a risk that the Company's holdings may not be able to
be realised at reasonable prices in a reasonable timeframe.
Although the Company's performance is measured in sterling, a high
proportion of the Company's assets may be either denominated in
other currencies or be in investments with currency exposure. The
Company pays interest on its borrowings and as such, the Company is
exposed to interest rate risk due to fluctuations
in the prevailing market rates. The Company may
take on leverage, which may lead to higher price movements compared
to the underlying market.
Financial risks in the year under review
Significantly, the $/£ movement
negatively impacted the results. The Board policy is not to hedge
currencies as that is not within the remit of an equity proposition
however some mitigation comes from the utilisation of
multi-currency debt to recognise the underlying investment
currency.
Management of risk
The Company typically maintains a
high degree of liquidity in its portfolio holdings.
Further details on the management of
financial risks can be found in note 19 to the financial
statements.
(III) CORPORATE GOVERNANCE AND INTERNAL CONTROL
RISKS
The Board has contractually
delegated to external service providers the management of the
investment portfolio, custodial services (which include the
safeguarding of the assets), registration services, and accounting
and company secretarial requirements. The major external service
providers are outlined within the Directors' Report contained
within the Annual Report.
The main risk areas arising from the
above contracts relate to allocation of the Company's assets by the
Investment Manager, and the professional execution of their duties
of performance of administrative, registration and custodial
services. These could lead to various consequences including the
loss of the Company's assets, inadequate
returns to Shareholders and loss of investment trust status. Cyber
security risks could lead to breaches of confidentiality, loss of
data records and inability to make investment decisions.
Management of risk
The Board has appointed experienced
service providers. Each of the contracts were entered into after
full and proper consideration of the quality and cost of services
offered, including the financial control systems in operation in so
far as they relate to the affairs of the Company.
All of the above services are
subject to ongoing oversight of the Board and the performance of
the principal service providers is reviewed on a regular basis.
During the year, there have been significant changes to senior
management of a number of service providers including at the
Bellevue Asset Management Board level in Switzerland and in the UK
within the management of the Administrator. The latter has been
undergoing a series of changes as consolidation in that
industry is apparent. The Board ensure that all
these factors are considered in ensuring service provision is
maintained at the highest level.
All key service providers produce
annual internal control reports for review by the Audit and Risk
Committee. These reviews include consideration of their business
continuity plans and the associated cyber security risks. The
Company's key service providers report on cyber risk mitigation and
management on a quarterly basis. This includes confirmation of
business continuity capability in the event of a cyber-attack and
each service provider is reminded of their duty to disclose any
cyber security breaches to the Company Secretary at least
annually.
(IV) REGULATORY RISKS
Breaches of Section 1158 of the
Corporation Tax Act could result in loss of investment trust
status. Loss of investment trust status would lead to the Company
being subject to tax on any gains on the disposal of its
investments. Breaches of the FCA's rules applicable to listed
entities could result in financial penalties or suspension of
trading of the Company's shares on the London Stock Exchange.
Breaches of the Companies Act 2006, The Alternative Investment Fund
Managers' Directive, accounting standards, the Listing Rules,
Disclosure Guidance and Transparency Rules, and Prospectus Rules
could result in financial penalties or legal proceedings against
the Company or its Directors.
Management of risk
The Company has contracted out
relevant services to appropriately qualified professionals. The
Investment Manager, Depositary and Administrator provide regular
reports to the Audit and Risk Committee on their monitoring
programmes. The Investment Manager monitors investment positions
and the Investment Manager and Administrator monitor the level
of forecast income and expenditure. Major
regulatory change could impose disproportionate compliance burdens
on the Company. In such circumstances representations would be made
to seek to ensure that the special circumstances of investment
trusts are recognised.
During the year there were no
material changes to the risk level.
(V)
KEY PERSON RISK
The Company depends on the
diligence, skill and judgement of the Investment Manager's
investment professionals and the information and ideas they
generate during the normal course of their activities. The
Company's future success depends on the continued service of key
personnel. The departure of any of these individuals without
adequate replacement may have a material adverse effect on the
Company's business prospects and results of operations.
Management of risk
The strength and depth of the
investment management team provides comfort that there is not
over-reliance on one person with alternative investment managers
available to act if needed. The Board meets regularly with other
members of the wider team employed by the Investment
Manager.
(VI) BUSINESS INTERRUPTION
Failure in services provided by key
service providers, meaning information is not processed correctly
or in a timely manner, resulting in regulatory investigation or
financial loss, failure of trade settlement, or potential loss of
investment trust status.
The failure or breach of information
security could potentially lead to breaches of confidentiality,
data records being compromised and the inability to make investment
decisions. The failure or breach of physical security could lead to
damage or loss of equipment, with consequential negative
results.
Management of risk
Each service provider has
comprehensive business continuity policies and procedures in place
which facilitate continued operation of the business in the event
of a service disruption or a major disruption event. Breaches of
any nature are reported to the Board.
The Committee receives the
Administrator's report on internal controls and the reports by
other key third-party providers are reviewed by the Investment
Manager and Company Secretary on behalf of the Committee. The
Depositary reports on custody matters, including the continued safe
custody of the Company's assets.
Cyber security risks are considered
and continually monitored by the Investment Manager as these
threats evolve and become increasingly sophisticated. The integrity
of the Company's information security is closely monitored by the
Board, with each of the key service providers providing a regular
report through its internal audit function which covers information
technology security and provides comfort to the Board that
appropriate safeguards are in place.
The failure or breach of information
security could potentially lead to breaches of confidentiality,
data records being compromised and the inability to make investment
decisions. The failure or breach of physical security could lead to
damage or loss of equipment, with consequential negative
results.
(VII) ESG AND CLIMATE CHANGE RISK
The financial risks from climate
change are typically classified as physical or transitional risks.
Physical risks are those arising from specific weather events and
transitional risks are those arising from the changes to
regulations, such as the move to net‑zero carbon. The Company could suffer
potential reputational damage from non-compliance with regulations
or incorrect disclosures or as a result of increased investor
demand for products which promote ESG investments. The impact of
climate change could affect the Company's investments and
their valuations and potentially shareholder
returns. Further information on this can be found in the principal
and emerging risks and uncertainties section and Note 2 of this
report.
Management of risk
The portfolio is well diversified to
mitigate against physical risks. Changes in climate change focused
regulation, governing both the Company and investee companies, will
create some uncertainty. In comparison to the broader economy, the
portfolio has a relatively low carbon footprint and the Investment
Manager's parent company is currently deploying a
CO2 reduction strategy. This strategy encompasses measures such as
an independent audit of its CO2 footprint according to
ISO14064-1 and GHG protocols, implementation of corporate
CO2 reduction and offsetting of excess emissions with high-quality
climate projects. Bellevue Group is targeting a reduction in
CO2 emissions per FTE of at least 30% by 2030. Moreover, the
Bellevue Group was certified as carbon neutral by Swiss Climate in
late 2021.
The Board encourages the Investment
Manager to consider ESG factors when selecting and retaining
investments and this has been a major topic of discussion in the
past year. The Investment Manager's formal ESG guidelines cover
areas such as compliance with global norms
(UN Global Compact, Guiding Principles for Business and Human
Rights, ILO standards), value-based exclusions, controversies,
climate change factors and active ownership (management engagement,
voting policies, etc.).
The Company's ESG statement is
updated annually and is available on the AIC website and contained
within the Annual Report. Investment trusts are currently exempt
from TCFD disclosure, but the Board will continue to monitor the
situation.
Statement of Directors' Responsibilities
The Directors are responsible for
preparing the Annual Report and the financial statements in
accordance with applicable laws and regulations.
Company law requires the Directors
to prepare accounts for each financial year. Under that law the
Directors have elected to prepare the financial statements under UK
adopted International Accounting Standards ("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 Company as at the
end of the year and of the net return for the year. In preparing
these accounts, the Directors are required to:
·
select suitable accounting
policies in accordance with IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors and then apply them
consistently;
·
present information, including accounting
policies, in a manner that provides relevant, reliable, comparable
and understandable information;
·
make judgements and estimates which are reasonable
and prudent;
·
state whether UK adopted IAS have been followed,
subject to any material departures disclosed and explained in the
accounts; and
·
prepare the financial
statements on a going concern basis unless it is inappropriate to
presume that the Company will continue in business.
The Directors are responsible for
keeping adequate accounting records that are sufficient to show and
explain the Company's transactions and which disclose with
reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the accounts comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other
irregularities.
The accounts are published on the
Company's website at www.bellevuehealthcaretrust.com, which
is maintained by the Company's Investment Manager. The work carried
out by the auditor does not involve consideration of the
maintenance and integrity of these websites and, accordingly, the
auditor accepts no responsibility for any changes that have
occurred to the accounts since being initially presented on the
website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
DIRECTORS' CONFIRMATION STATEMENT
The Directors each confirm to the
best of their knowledge that:
·
the accounts, prepared in accordance with UK
adopted IAS, give a true and fair view of the assets,
liabilities, financial position and profit
of the Company; and
·
this Annual Report includes a fair review of the
development and performance of the business and position
of the Company, together with a description
of the principal risks and uncertainties that it faces.
Having taken advice from the Audit
and Risk Committee, the Directors consider that the Annual Report
and financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for
Shareholders to assess the Company's performance,
business model and strategy. For and on behalf of
the Board.
Randeep Grewal
Chairman
1 March 2024
Financial Statements
Statement of Comprehensive Income
for
the year ended 30 November 2023
|
|
Year ended
30 November 2023
|
Year ended
30 November 2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
Note
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Losses on investments
|
4
|
-
|
(109,626)
|
(109,626)
|
-
|
(19,980)
|
(19,980)
|
Losses on currency
movements
|
|
-
|
(789)
|
(789)
|
-
|
(9,839)
|
(9,839)
|
Net
investment losses
|
|
-
|
(110,415)
|
(110,415)
|
-
|
(29,819)
|
(29,819)
|
Income
|
5
|
2,469
|
-
|
2,469
|
2,186
|
-
|
2,186
|
Total income
|
|
2,469
|
(110,415)
|
(107,946)
|
2,186
|
(29,819)
|
(27,633)
|
Investment management
fees
|
6
|
(1,559)
|
(6,236)
|
(7,795)
|
(1,877)
|
(7,510)
|
(9,387)
|
Other operating expenses
|
7
|
(1,090)
|
-
|
(1,090)
|
(1,069)
|
-
|
(1,069)
|
Loss before finance costs and taxation
|
|
(180)
|
(116,651)
|
(116,831)
|
(760)
|
(37,329)
|
(38,089)
|
Finance costs
|
8
|
(810)
|
(3,240)
|
(4,050)
|
(610)
|
(2,440)
|
(3,050)
|
Operating loss before taxation
|
|
(990)
|
(119,891)
|
(120,881)
|
(1,370)
|
(39,769)
|
(41,139)
|
Taxation
|
9
|
(157)
|
-
|
(157)
|
(285)
|
-
|
(285)
|
Loss for the year
|
|
(1,147)
|
(119,891)
|
(121,038)
|
(1,655)
|
(39,769)
|
(41,424)
|
Return per Ordinary Share
|
10
|
(0.21)p
|
(21.85)p
|
(22.06)p
|
(0.28)p
|
(6.84)p
|
(7.12)p
|
There is no other comprehensive
income and therefore the 'Loss for the year' is the total
comprehensive income for the year.
The total column of the above
statement is the statement of comprehensive income of the Company.
The supplementary revenue and capital columns, including the
earnings per Ordinary Shares, are prepared under guidance from the
Association of Investment Companies.
All revenue and capital items in the
above statement derive from continuing operations.
The notes form and integral part of
these financial statements.
Statement of Financial Position
as
at 30 November 2023
|
|
30 November
2023
|
30 November
2022
|
|
Note
|
£'000
|
£'000
|
Non-current assets
|
|
|
|
Investments held at fair value
through profit or loss
|
4
|
696,916
|
1,043,349
|
Current assets
|
|
|
|
Cash and cash equivalents
|
|
110,954
|
46,368
|
Sales for future
settlement
|
|
22
|
855
|
Other receivables
|
11
|
111
|
392
|
|
|
111,087
|
47,615
|
Total assets
|
|
808,003
|
1,090,964
|
Current liabilities
|
|
|
|
Purchases for future
settlement
|
|
-
|
(1,395)
|
Bank loans payable
|
12
|
(31,696)
|
(83,731)
|
Other payables
|
13
|
(110,770)
|
(1,512)
|
Total liabilities
|
|
(142,466)
|
(86,638)
|
Net
assets
|
|
665,537
|
1,004,326
|
Equity
|
|
|
|
Share capital
|
14
|
4,803
|
5,881
|
Share premium account
|
|
617,709
|
617,371
|
Special distributable
reserve
|
|
-
|
28,347
|
Capital reserve
|
|
45,462
|
354,017
|
Revenue reserve
|
|
(2,437)
|
(1,290)
|
Total equity
|
|
665,537
|
1,004,326
|
Net
asset value per Ordinary Share
|
16
|
143.87p
|
171.16p
|
Approved by the Board of Directors
and authorised for issue on 1 March 2024 and signed on their behalf
by:
Randeep Grewal
Chairman
Registered in England and Wales with
registered number 10415235.
The notes form and integral part of
these financial statements.
Statement of Changes in Equity
for
the year ended 30 November 2023
|
|
|
Share
|
Special
|
|
|
|
|
|
Share
|
premium
|
distributable
|
Capital
|
Revenue
|
|
|
|
Capital
|
account
|
reserve
|
reserve
|
reserve
|
Total
|
|
Notes
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Opening balance as at
01 December 2022
|
|
5,881
|
617,371
|
28,347
|
354,017
|
(1,290)
|
1,004,326
|
Loss for the year
|
|
-
|
-
|
-
|
(119,891)
|
(1,147)
|
(121,038)
|
Issue of Ordinary Shares
|
14
|
2
|
340
|
-
|
-
|
-
|
342
|
Redemption of Ordinary
Shares
|
14
|
(1,080)
|
-
|
(10,491)
|
(148,688)
|
-
|
(160,259)
|
Buybacks of Ordinary
Shares
|
|
-
|
-
|
-
|
(23,439)
|
-
|
(23,439)
|
Ordinary Share issues, Buybacks
and
|
|
|
|
|
|
|
|
Redemption costs
|
|
-
|
(2)
|
(81)
|
(102)
|
-
|
(185)
|
Dividends paid
|
15
|
-
|
-
|
(17,775)
|
(16,435)
|
-
|
(34,210)
|
Closing balance as at 30 November 2023
|
|
4,803
|
617,709
|
-
|
45,462
|
(2,437)
|
665,537
|
for
the year ended 30 November 2022
|
|
|
Share
|
Special
|
|
|
|
|
|
Share
|
premium
|
distributable
|
Capital
|
Revenue
|
|
|
|
Capital
|
account
|
reserve
|
reserve
|
reserve
|
Total
|
|
Notes
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Opening balance as at
01 December 2021
|
|
5,602
|
568,910
|
64,804
|
393,786
|
365
|
1,033,467
|
Loss for the year
|
|
-
|
-
|
-
|
(39,769)
|
(1,655)
|
(41,424)
|
Issue of Ordinary Shares
|
14
|
279
|
48,887
|
-
|
-
|
-
|
49,166
|
Ordinary Share issue
costs
|
|
-
|
(426)
|
-
|
-
|
-
|
(426)
|
Dividends paid
|
15
|
-
|
-
|
(36,457)
|
-
|
-
|
(36,457)
|
Closing balance as at 30 November 2022
|
|
5,881
|
617,371
|
28,347
|
354,017
|
(1,290)
|
1,004,326
|
The Company's distributable reserves
consist of the special distributable reserve and revenue reserve as
disclosed above; and capital reserve attributable to realised
profit of £45,462,000 (30 November 2022: £354,017,000).
The Company can use its
distributable reserves to fund dividends, redemptions of Ordinary
Shares and share buy backs.
The notes form and integral part of
these financial statements.
Statement of Cash Flows
for
the year ending 30 November 2023
|
Year ended
|
Year ended
|
|
30 November
2023
|
30 November
2022
|
|
£'000
|
£'000
|
Operating activities Cash flows
|
|
|
Income*
|
2,469
|
2,186
|
Operating expenses
|
(8,852)
|
(10,794)
|
Taxation
|
(157)
|
(285)
|
Net
cash flow used in operating activities
|
(6,540)
|
(8,893)
|
Investing activities Cash flows
|
|
|
Purchase of investments
|
(303,144)
|
(599,039)
|
Sale of investments
|
533,774
|
610,527
|
Net
cash flow from investing activities
|
230,630
|
11,488
|
Financing activities Cash flows
|
|
|
Bank loans drawn
|
15,722
|
45,174
|
Bank loans repaid
|
(63,121)
|
(44,885)
|
Loan interest and other charges
paid
|
(4,552)
|
(2,546)
|
Dividends paid
|
(34,210)
|
(36,457)
|
Proceeds from issue of Ordinary
Shares
|
342
|
49,166
|
Annual Redemption of Ordinary
Shares
|
(50,251)
|
-
|
Buybacks of ordinary shares held in
treasury
|
(23,439)
|
-
|
Ordinary Share issues, Buybacks and
Redemption costs
|
(185)
|
(426)
|
Net
cash flow (used in)/from financing activities
|
(159,694)
|
10,026
|
Increase in cash and cash equivalents
|
64,396
|
12,621
|
Cash and cash equivalents at start
of year
|
46,368
|
27,994
|
Effect of foreign currency
revaluations
|
190
|
5,753
|
Cash and cash equivalents at end of year
|
110,954
|
46,368
|
* Cash inflow from dividends for the
financial year was £765,000 (2022: £1,618,000). Bank deposits
interest income received during the year was £1,547,000 (2022:
£283,000).
The table below shows the movement
in financing activities during the year.
|
Year ended
|
Year ended
|
|
30 November
2023
|
30 November
2022
|
|
£'000
|
£'000
|
Opening balance
|
83,731
|
67,850
|
Repayment of bank loans
|
(63,121)
|
(44,885)
|
Proceeds from bank loans
|
15,722
|
45,174
|
Foreign exchange
movements
|
(4,636)
|
15,592
|
Closing balance
|
31,696
|
83,731
|
The notes form and integral part of
these financial statements.
Notes to the Financial Statements
1.
REPORTING ENTITY
Bellevue Healthcare Trust plc is a
closed-ended investment company, registered in England and Wales on
7 October 2016. The Company's registered office is 6th Floor, 125
London Wall, London, EC2Y 5AS. Business operations commenced on 2
December 2016 when the Company's Ordinary Shares were admitted to
trading on the London Stock Exchange. The financial statements of
the Company are presented for the year from 1 December 2022 to 30
November 2023.
The Company invests in a
concentrated portfolio of listed or quoted equities in the global
healthcare industry. The Company may also invest in American
Depositary Receipts (ADRs), or convertible instruments issued by
such companies and may invest in, or underwrite, future equity
issues by such companies. The Company may utilise contracts for
differences for investment purposes in certain jurisdictions where
taxation or other issues in those jurisdictions may render direct
investment in listed or quoted equities less effective.
2.
BASIS OF PREPARATION
Statement of compliance
These financial statements have been
prepared in accordance with UK adopted International Accounting
Standards ("IAS").
In preparing these financial
statements the directors have considered the impact of climate
change as a risk as set out within the Annual Report and have
concluded that there was no further impact of climate change to be
taken into account. In line with IAS investments are valued at fair
value, which for the Company is quoted bid prices for investments
in active markets at the Statement of Financial Position date and
therefore reflect market participants' view of climate change risk
on the investments we hold.
When presentational guidance set out
in the Statement of Recommended Practice ('SORP') for Investment
Companies issued by the Association of Investment Companies ('the
AIC') in 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.
Going concern
The Directors have adopted the going
concern basis in preparing the financial statements.
In forming this opinion, the
Directors have considered the adequacy of the Company's operational
resources, liquidity of the investment portfolio, debt covenants
and any potential impact of the ongoing war in Ukraine may have on
the going concern and viability of the Company. In making their
assessment, the Directors have reviewed income and expense
projections and the liquidity of the
investment portfolio, and considered the mitigation measures which
key service providers, including the Investment Manager, have in
place to maintain operational resilience.
The Company's ability to continue as
a going concern for the period assessed by the Directors, being the
period to 30 November 2025, which is at least 18 months from the
date the financial statements were authorised for issue.
Significant accounting estimates, judgements and
assumptions
The preparation of the financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions
are reviewed on an on-going basis. Revisions to accounting
estimates are recognised in the year in which the estimates are
revised and in any future periods affected. There have been no
material estimates, judgements or assumptions, which have had a
significant impact on the financial statements for the
year.
Basis of measurement
The financial statements have been
prepared on the historical cost basis except for financial
instruments at fair value through profit or loss, which are
measured at fair value.
Functional and presentation currency
The financial statements are
presented in sterling, which is the Company's functional currency.
The Company's investments are denominated in multiple currencies.
However, the Company's shares are issued in sterling and the
majority of its investors are UK based. In addition, all expenses
are paid in GBP as are dividends. All financial information
presented in sterling have been rounded to the nearest thousand
pounds.
3.
ACCOUNTING POLICIES
(a)
Investments
Upon initial recognition investments
are classified by the Company "at fair value through profit or
loss". They are accounted for on the date they are traded and are
included initially at fair value which is taken to be their cost.
Subsequently, quoted investments are valued at fair value, which is
the bid market price, or if bid price is unavailable, the last
traded price on the relevant exchange. Unquoted investments are
valued at fair value by the Board which is established with regard
to the International Private Equity and Venture Capital Valuation
Guidelines by using, where appropriate, latest dealing prices,
valuations from reliable sources and other relevant
factors.
Changes in the fair value of
investments held at fair value through profit or loss and gains or
losses on disposal are included in the capital column of the
Statement of Comprehensive Income within gains/(losses) on
investments.
Investments are derecognised on the
trade date of their disposal, which is the point where the Company
transfers substantially all the risks and rewards of the ownership
of the financial asset.
(b)
Foreign currency
Transactions denominated in foreign
currencies are translated into sterling at actual exchange rates as
at the date of the transaction. Monetary assets and liabilities,
and non-monetary assets held at fair value denominated in foreign
currencies are translated into sterling using London closing
foreign exchange rates at the year end. Any gain or loss arising
from a change in exchange rates subsequent to the date of the
transaction is included as an exchange gain or loss to capital or
revenue in the Statement of Comprehensive Income as
appropriate.
(c)
Income from investments
Dividend income from shares is
recognised on ex-dividend dates. Overseas income is grossed up
at the appropriate rate of tax.
Special dividends are assessed on
their individual merits and may be credited to the Statement of
Comprehensive Income as a capital item if considered to be closely
linked to reconstructions of the investee company or other capital
transactions. All other investment income is credited to the
Statement of Comprehensive Income as a revenue item. Interest
receivable is accrued on a time apportionment basis.
(d)
Reserves
Capital reserves
Profits achieved in cash by selling
investments and changes in fair value arising upon the revaluation
of investments that remain in the portfolio are all charged to the
capital column of the Statement of Comprehensive Income and
allocated to the capital reserve.
Special distributable reserve
Following admission of the Company's
Ordinary Shares to trading on the London Stock Exchange, the
Directors applied to the Court to cancel the share premium account
at the time to create a special distributable reserve which may be
treated as distributable reserves and out of which redemptions,
tender offers and share buybacks may be funded. This reserve may
also be used to fund dividend payments.
The Company's distributable reserves
consist of the special distributable reserve, revenue reserve and
capital reserve attributable to realised profit.
Share premium
The share premium account arose from
the net proceeds of issuing new shares. The excess of the issue
price of a share over its nominal value is the share
premium.
The Board seeks Shareholder approval
to petition the High Court to transfer amounts standing to the
credit of the share premium account into the Company's
distributable reserves, whenever it seems appropriate to do
so.
Revenue reserves
The revenue reserve reflects all
income and expenditure recognised in the revenue column of the
income statement and is distributable by way of
dividends.
(e)
Expenses
All expenses are accounted for on an
accrual basis. Expenses directly related to the acquisition
or disposal of an investment (transaction costs) are taken to
the income statement as a capital item.
Expenses are recognised through the
Statement of Comprehensive Income as revenue items except as
follows:
Investment management fees
In accordance with the Company's
stated policy and the Directors expectation of the split of future
returns, 80% of investment management fees are charged as a capital
item in the Statement of Comprehensive Income.
Finance costs
Finance costs include interest
payable and direct loan costs. In accordance with Directors'
expectation of the split of future returns, 80% of finance costs
are charged as capital items in the Statement of Comprehensive
Income. Loan arrangement costs are amortised over the term of
the loan.
(f)
Cash and cash equivalents
Cash comprises cash at hand and
on-demand deposits. Cash equivalents are short term (three months
or less), highly liquid investments that are readily convertible to
known amounts of cash, are subject to insignificant risks of
changes in value, and are held for the purpose of meeting
short-term cash commitments rather than for investment or other
purposes.
(g)
Taxation
Irrecoverable taxation on dividends
is recognised on an accrual basis in the Statement
of Comprehensive Income.
Deferred taxation
Deferred tax is the tax expected to
be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit and is accounted for using the statement of financial
position liability method. Deferred tax liabilities are recognised
for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Investment trusts which have approval as such
under Section 1158 of the Corporation Tax Act 2010 are not liable
for taxation on capital gains in UK.
(h)
Financial liabilities
Bank loans and overdrafts are
classified as financial liabilities at amortised cost. They are
initially measured at the proceeds received, net of direct issue
costs, and subsequently measured at amortised cost using the
effective interest method.
(i)
Future Developments in IFRS standards
A number of new standards and/or
amendments to standards are effective for the annual periods
beginning after 1 January 2023. None of these are expected to have
a significant effect on the measurement of the amounts
recognised in the financial statements of the Company.
Amendments to IAS 1
Presentation of Financial Statements-Classification of Liabilities
as Current or Non-current
The amendments to IAS 1 clarify that
the classification of liabilities as current or non-current is
based on rights that are in existence at the end of the reporting
period, specify that classification is unaffected by expectations
about whether an entity will exercise its right to defer settlement
of a liability, explain that rights are in existence if covenants
are complied with at the end of the reporting period, and introduce
a definition of 'settlement' to make clear that settlement refers
to the transfer to the counterparty of cash, equity instruments,
other assets or services. The amendments are applied
retrospectively for annual periods beginning on or after 1 January
2024, with early application permitted.
Amendments to IAS 1
Presentation of Financial Statements-Non‑current Liabilities
with Covenants
The amendments specify that only
covenants that an entity is required to comply with on or before
the end of the reporting period affect the entity's right to defer
settlement of a liability for at least twelve months after the
reporting date (and therefore must be considered in assessing the
classification of the liability as current or noncurrent). Such
covenants affect whether the right exists at the end of the
reporting period, even if compliance with the covenant is assessed
only after the reporting date (e.g. a covenant based on the
entity's financial position at the reporting date that is assessed
for compliance only after the reporting date). The amendments are
applied retrospectively for annual reporting periods beginning on
or after 1 January 2024. Earlier application of the amendments is
permitted.
Amendments to IAS 7 Statement
of Cash Flows and IFRS 7 Financial Instruments:
Disclosures-Supplier Finance Arrangements
The amendments add a disclosure
objective to IAS 7 stating that an entity is required to disclose
information about its supplier finance arrangements that enables
users of financial statements to assess the effects of those
arrangements on the entity's liabilities and cash flows. In
addition, IFRS 7 was amended to add supplier finance arrangements
as an example within the requirements to disclose information about
an entity's exposure to concentration of liquidity risk. The
amendments, which contain specific transition reliefs for the first
annual reporting period in which an entity applies the amendments,
are applicable for annual reporting periods beginning on or after 1
January 2024. Earlier application is permitted.
(j)
Equity shares
The Company has treated the Ordinary
Shares and Management Shares as equity in accordance with IAS 32
Financial Instruments: Presentation, which classifies financial
instruments into financial assets, financial liabilities and equity
instruments. Both share classes have an entitlement to the residual
interest in the assets of the Company after deducting liabilities,
suffice that the Management Shares have no participation in any
surplus beyond their paid-up capital. The Management Shares are not
redeemable, but the Ordinary Shares are subject to an annual
redemption option at the discretion of the Directors. Redemption
requests are matched with buyers in the market or cancelled by the
Company. Ordinary Shares participate in dividends and any other
profits of the Company.
Segmental reporting
The Board has considered the
requirements of IFRS 8 - "Operating Segments". The Company has
entered into an Investment Management Agreement with the Investment
Manager under which the Investment Manager is responsible for the
management of the Company's investment portfolio, subject to the
overall supervision of the Board of Directors. Accordingly, the
Board is deemed to be the "Chief Operating Decision Maker" of the
Company.
The Directors are of the opinion
that the Company is engaged in a single segment of business being
that of an investment trust, as disclosed in note 1.
4.
INVESTMENT HELD AT FAIR VALUE THROUGH PROFIT OR
LOSS
(a)
Summary of valuation
|
30 November
2023
|
30 November
2022
|
As
at
|
£'000
|
£'000
|
Investments held at fair value
through profit or loss
|
|
|
- Overseas
|
696,916
|
1,043,349
|
Closing valuation
|
696,916
|
1,043,349
|
(b)
Movements in valuation
|
£'000
|
£'000
|
Opening valuation
|
1,043,349
|
1,083,590
|
Opening unrealised gains on
investments
|
131,376
|
7,839
|
Opening book cost
|
1,174,725
|
1,091,429
|
Additions, at cost
|
301,659
|
590,922
|
Disposals, at cost
|
(491,871)
|
(507,626)
|
Closing book cost
|
984,513
|
1,174,725
|
Revaluation of
investments
|
(287,597)
|
(131,376)
|
Closing valuation
|
696,916
|
1,043,349
|
In respect of the investments sold
during the year, they have been revalued over time and until they
were sold any unrealised gains/losses were included in the fair
value of the investments.
Transaction costs on investment
purchases for the year ended 30 November 2023 amounted to £90,000
(30 November 2022: £186,000) and on investment sales for the
financial year to 30 November 2023 amounted to £167,000 (30
November 2022: £198,000).
(c)
Gains on investments
|
£'000
|
£'000
|
Realised gains on disposal of
investments
|
40,980
|
103,557
|
Movement in unrealised
gains/(losses) on investments held
|
(150,606)
|
(123,537)
|
Total losses on investments
|
(109,626)
|
(19,980)
|
Under IFRS 13 'Fair Value
Measurement', an entity is required to classify investments using a
fair value hierarchy that reflects the significance of the inputs
used in making the measurement decision.
The following shows the analysis of
financial assets recognised at fair value based on:
Level 1
The unadjusted quoted price in an
active market for identical assets or liabilities that the entity
can access at the measurement date.
Level 2
Inputs other than quoted prices
included within Level 1 that are observable (i.e. developed using
market data) for the asset or liability, either directly or
indirectly.
Level 3
Inputs are unobservable (i.e. for
which market data is unavailable) for the asset or
liability.
The classification of the Company's
investments held at fair value is detailed in the table
below:
|
30 November
2023
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Investments at fair value through
profit and loss
|
694,884
|
-
|
2,032
|
696,916
|
|
30 November
2022
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Investments at fair value through
profit and loss
|
1,043,349
|
-
|
-
|
1,043,349
|
The level 3 investment comprises the
Company's holding in Venus MedTech, which was suspended from
trading during the year. As a result of the suspension, the Board,
in consultation with the AIFM's Valuation Committee decided to
apply a discount to the price of the holding with the effect of its
reclassification from level 1 to level 3 (2022: No level 3
investment). The discount applied took into account the projected
impact of the suspension on the price movement of Venus MedTech, as
well as that of its peers in the sector. Other factors directly
related to Venus MedTech were also taken into consideration when
deciding on the appropriate discount to be applied.
The movement in the Level 3 unquoted
investments during the year is shown below:
|
30 November
2023
|
30 November
2022
|
As
at
|
£'000
|
£'000
|
Opening balance
|
-
|
599
|
Transfers to level 3 during the
year
|
9,724
|
-
|
Disposals during the year
|
-
|
(1,305)
|
Foreign exchange gains on
disposals
|
-
|
66
|
Realised gains on
disposal
|
-
|
640
|
Revaluation losses on level 3
investment held
|
(7,692)
|
-
|
Closing valuation
|
2,032
|
-
|
There was one transfer between
levels during the year ended 30 November 2023 (30 November 2022:
nil). The Board approves and determines the effective date of
transfers between levels.
Fair values of financial assets and financial
liabilities
All financial assets and liabilities
are recognised in the financial statements at fair value, with the
exception of short-term assets and liabilities, which are held at
cost that approximates to fair value, and loans that are initially
recognised at the fair value of the consideration received, less
directly attributable costs, and subsequently recognised at
amortised cost. The carrying value of the loans approximates to the
fair value of the loans.
5.
INCOME
|
Year ended
|
Year ended
|
|
30 November
|
30 November
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Income from investments:
|
|
|
Overseas dividends
|
922
|
1,903
|
Other income:
|
|
|
Bank interest on deposits
|
1,547
|
283
|
Total income
|
2,469
|
2,186
|
6.
INVESTMENT MANAGEMENT FEE
|
2023
|
2022
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Management fee
|
1,559
|
6,236
|
7,795
|
1,877
|
7,510
|
9,387
|
The Company's Investment Manager is
Bellevue Asset Management (UK) Ltd (the 'Investment Manager'). The
Investment Manager is entitled to receive a management fee payable
monthly in arrears and calculated at the rate of one-twelfth of
0.95% per calendar month of market capitalisation. Market
capitalisation means the average of the mid-market prices for an
Ordinary Share, as derived from the daily official list of the
London Stock Exchange on each business day in the relevant calendar
month multiplied by the number of Ordinary Shares, in issue on the
last business day of the relevant calendar month excluding any
Ordinary Shares held in treasury.
There is no performance fee payable
to the Investment Manager.
7.
OTHER EXPENSES
|
2023
|
2022
|
|
£'000
|
£'000
|
Administration & secretarial
fees
|
259
|
257
|
Auditor's remuneration - statutory
audit
|
53
|
50
|
Broker fees
|
6
|
4
|
Consultancy fees
|
-
|
26
|
Custody services
|
202
|
203
|
Directors' fees
|
236
|
231
|
Printing
|
23
|
28
|
Public relations
|
-
|
2
|
Registrar fees
|
85
|
72
|
Other operating expenses
|
226
|
196
|
Total
|
1,090
|
1,069
|
8.
FINANCE COSTS
|
Year ended 30 November
2023
|
|
Revenue
|
Capital
|
Total
|
|
£'000
|
£'000
|
£'000
|
Loan interest
|
703
|
2,810
|
3,513
|
Other finance costs
|
107
|
430
|
537
|
Total
|
810
|
3,240
|
4,050
|
|
Year ended 30 November
2022
|
|
Revenue
|
Capital
|
Total
|
|
£'000
|
£'000
|
£'000
|
Loan interest
|
597
|
2,389
|
2,986
|
Other finance costs
|
13
|
51
|
64
|
Total
|
610
|
2,440
|
3,050
|
9.
TAXATION
(a)
Analysis of charge:
|
2023
|
2022
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Withholding tax expense
|
157
|
-
|
157
|
285
|
-
|
285
|
Total tax charge for the year
|
157
|
-
|
157
|
285
|
-
|
285
|
(b)
Factors affecting the tax charge for the year:
The effective UK corporation tax
rate for the year is 23% (2022: 19%). The tax charge differs from
the charge resulting from applying the standard rate of UK
corporation tax for an investment trust company. The differences
are explained below:
|
2023
|
2022
|
|
Total
|
Total
|
|
£'000
|
£'000
|
Operating loss before
taxation
|
(120,881)
|
(41,139)
|
Effective UK Corporation tax at 23%
(2022: 19%)
|
(27,803)
|
(7,816)
|
Effects of:
|
|
|
Losses on investments not
taxable
|
25,395
|
5,666
|
Overseas dividends not
taxable
|
(212)
|
(362)
|
Withholding tax expense
|
157
|
285
|
Unutilised excess
expenses
|
2,620
|
2,512
|
Total tax charge for the year
|
157
|
285
|
The Company is not liable to tax on
capital gains due to its status as an investment trust. The Company
has an unrecognised deferred tax asset of £13,350,000 (2022:
£11,190,000) based on the prospective UK corporation tax rate of
25%. This asset has accumulated because deductible expenses
exceeded taxable income for the year ended 30 November 2023. No
asset has been recognised in the accounts because, given the
composition of the Company's portfolio, it is not likely that this
asset will be utilised in the foreseeable future.
10.
RETURN PER SHARE
Return per share is based on the
weighted average number of Ordinary Shares in issue during the year
ended 30 November 2023 of 548,691,353 (30 November 2022:
581,357,335). Management Shares do not participate in the profit or
loss of the Company, hence they are not included in the calculation
below.
|
Year ended 30 November
2023
|
|
Revenue
|
Capital
|
Total
|
Loss for the year (£'000)
|
(1,147)
|
(119,891)
|
(121,038)
|
Loss per Ordinary Share (basic &
diluted)
|
(0.21)p
|
(21.85)p
|
(22.06)p
|
|
Year ended 30 November
2022
|
|
Revenue
|
Capital
|
Total
|
Loss for the year (£'000)
|
(1,655)
|
(39,769)
|
(41,424)
|
Loss per Ordinary Share (basic &
diluted)
|
(0.28)p
|
(6.84)p
|
(7.12)p
|
11.
OTHER RECEIVABLES
|
As at
|
As at
|
|
30 November
2023
|
30 November
2022
|
|
£'000
|
£'000
|
Prepayments
|
46
|
124
|
VAT recoverable
|
28
|
231
|
Recoverable tax on
dividend
|
37
|
37
|
Total
|
111
|
392
|
12.
BANK LOANS
The Company has a multi-currency
revolving credit facility RCF with The Bank of Nova Scotia, London
Branch. On 16 June 2022, the Company renewed and amended its RCF.
Under the terms of the amended RCF, the Company may draw down loans
up to an aggregate value of USD 280 million. The increased facility
will expire in December 2024.
As at 30 November 2023, the
aggregate of loans draw down was £31,696,000 (2022:
£83,731,000).
The table below shows the breakdown
of the loans.
As
at 30 November 2023
|
Local
|
GBP
|
Interest
rate
|
|
|
currency
|
equivalent
|
per annum
|
|
Currency of loans
|
amount
|
£'000
|
(%)
|
Maturity
date
|
USD loan
|
$20,000,000
|
15,848
|
Daily SOFR
+ 1.31%
|
26 Feb.
2024
|
USD loan
|
$20,000,000
|
15,848
|
Daily SOFR
+ 1.31%
|
29 Feb.
2024
|
Total loans in GBP
|
|
31,696
|
|
|
As
at 30 November 2022
|
Local
|
GBP
|
Interest
rate
|
|
|
currency
|
equivalent
|
per annum
|
|
Currency of loans
|
amount
|
£'000
|
(%)
|
Maturity
date
|
USD loan
|
$20,000,000
|
16,746
|
3.8
|
28 Dec.
2022
|
USD loan
|
$20,000,000
|
16,746
|
2.26
|
27 Jan.
2023
|
USD loan
|
$20,000,000
|
16,746
|
2.26
|
27 Mar.
2023
|
USD loan
|
$20,000,000
|
16,746
|
2.26
|
30 May.
2023
|
USD loan
|
$20,000,000
|
16,747
|
2.26
|
27 Jul.
2023
|
Total loans in GBP
|
|
83,731
|
|
|
A commitment fee is calculated at
0.35 per cent per annum, if the unutilised amount equals or exceeds
50 per cent of the total commitment; or 0.45 per cent per annum if
the unutilised amount is less than 50 per cent of the total
commitment.
In the opinion of the Directors, the
fair value of the bank loans is not materially different to their
amortised costs.
13.
OTHER PAYABLES
|
As at
|
As at
|
|
30 November
2023
|
30 November
2022
|
|
£'000
|
£'000
|
Loan interest payable
|
26
|
528
|
Accrued expenses
|
736
|
984
|
2023 Annual Redemption
payable*
|
110,008
|
-
|
Total
|
110,770
|
1,512
|
* This is in relation to the
Company's announcement on 3 November 2023 that valid redemption
requests in respect of 77,428,034 Ordinary Shares had been received
for the 30 November 2023 redemption point. All of these shares were
redeemed and cancelled by the Company. The calculated redemption
price is 142.07718 pence per share.
14.
SHARE CAPITAL
|
As at 30 November
2023
|
As at 30 November
2022
|
|
No. of
shares
|
£'000
|
No. of
shares
|
£'000
|
Allotted, issued and fully paid:
|
|
|
|
|
Redeemable Ordinary Shares of 1p
each ('Ordinary Shares')
|
462,588,550
|
4,626
|
586,783,083
|
5,868
|
Shares held in treasury
|
16,398,646
|
164
|
-
|
-
|
Management Shares of £1
each
|
50,001
|
13
|
50,001
|
13
|
Total
|
479,037,197
|
4,803
|
586,833,084
|
5,881
|
Share Movement
During the year ended 30 November
2023, 16,398,646 Ordinary Shares (30 November 2022: Nil) were
bought back into treasury through the Company's share buyback
programme.
The annual redemption point is the
last business day of November and redemption price is announced the
following day. For the 2023 annual redemption, 77,428,034 (30
November 2022: 30,577,550) Ordinary Shares were redeemed and
cancelled by the Company, in line with the Company's annual
redemption programme.
On 5 May 2023, in line with the
Company's Scrip Dividend Scheme, 209,697 Ordinary Shares were
allotted and issued to Shareholders who elected for their final
dividend to be automatically subscribed on their behalf for new
Ordinary Shares.
Since 30 November 2023,
no Ordinary Shares were
bought back into treasury through the Company's share buyback
programme.
15.
DIVIDEND
|
Year ended 30 November
2023
|
Year ended 30 November
2022
|
|
Pence per
|
Special
|
Revenue
|
|
Pence per
|
Special
|
Revenue
|
|
|
Ordinary
|
reserve
|
reserve
|
Total
|
Ordinary
|
reserve
|
reserve
|
Total
|
|
Share
|
£'000
|
£'000
|
£'000
|
Share
|
£'000
|
£'000
|
£'000
|
Final dividend - 2021
|
-
|
-
|
-
|
-
|
3.015p
|
17,480
|
-
|
17,480
|
Interim dividend - 2022
|
-
|
-
|
-
|
-
|
3.235p
|
18,977
|
-
|
18,977
|
Final dividend - 2022
|
3.235p
|
17,775
|
-
|
17,775
|
-
|
-
|
-
|
-
|
Interim dividend - 2023
|
2.995p
|
16,435
|
-
|
16,435
|
-
|
-
|
-
|
-
|
Total
|
6.230p
|
34,210
|
-
|
34,210
|
6.250p
|
36,457
|
-
|
36,457
|
The dividend relating to the year
ended 30 November 2023, which is the basis on which the
requirements of Section 1159 of the Corporation Tax Act 2010 are
considered is detailed below:
|
Year ended 30 November
2023
|
Year ended 30 November
2022
|
|
Pence per
|
Special
|
Revenue
|
|
Pence per
|
Special
|
Revenue
|
|
|
Ordinary
|
reserve
|
reserve
|
Total
|
Ordinary
|
reserve
|
reserve
|
Total
|
|
Share
|
£'000
|
£'000
|
£'000
|
Share
|
£'000
|
£'000
|
£'000
|
Interim dividend - paid
|
2.995p
|
16,435
|
-
|
16,435
|
3.235p
|
18,977
|
-
|
18,977
|
Final dividend -
payable/paid
|
2.995p
|
13,855
|
-
|
13,855
|
3.235p
|
17,803
|
-
|
17,803
|
Total
|
5.990p
|
30,290
|
-
|
30,290
|
6.470p
|
36,780
|
-
|
36,780
|
The Directors recommend the payment
of a final dividend for the year of 2.995p per share. Subject to
approval at the Company's Annual General Meeting, the dividend will
have an ex-dividend date of 09 May 2024 and will be paid on 31
May 2024 to shareholders on the register at 10 May 2024.
The dividend will be funded from the Company's distributable
reserves as per the table above.
16.
NET ASSETS PER ORDINARY SHARE
Net assets per Ordinary Share as at
30 November 2023 is based on £665,537,000 of net assets of the
Company attributable to the 462,588,550 Ordinary Shares in issue
(excluding treasury shares) as at 30 November 2023. £12,500 of net
assets as at 30 November 2023 is attributable to the Management
Shares.
17.
RELATED PARTY TRANSACTIONS
Fees payable to the Investment
Manager are shown in the Statement of Comprehensive Income.
As at 30 November 2023, the fee outstanding to the Investment
Manager was £461,000 (2022: £744,000).
Directors' fees paid during the year
are disclosed within the Directors' Remuneration Report on
contained within the Annual Report. Fees payable as at 30 November
2023 were £39,383 (2022: £37,667). The Directors' shareholdings are
disclosed in the Directors' Remuneration Implementation Report
contained within the Annual Report.
18.
POST BALANCE SHEET EVENTS
There are no post balance sheet
events, other than those disclosed in this report.
On 1 December 2023, the Company
announced that 77,428,034 Ordinary Shares would be redeemed and
Shareholders receiving a Redemption Price of 142.07718 pence per
share for the 30 November 2023 Redemption Point. As at 30
November 2023, the Company had an accrual of £110million payable to
redeeming Shareholders on the 14 December 2023.
With effect from 14 December 2023,
an amount of £617,709,517 standing to the credit of the Company's
share premium account was cancelled in order to increase the
special distributable reserve.
19.
FINANCIAL INSTRUMENTS AND CAPITAL DISCLOSURE
(i)
Market risks
The Company is subject to a number
of market risks in relation to economic conditions and healthcare
companies. Further details on these risks and the management of
these risks are included in the Directors' report.
The Company's financial assets and
liabilities at 30 November 2023 comprised:
|
2023
|
2022
|
|
Interest
|
Non-interest
|
|
Interest
|
Non-interest
|
|
|
bearing
|
bearing
|
Total
|
bearing
|
bearing
|
Total
|
Investments
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Swiss franc
|
-
|
-
|
-
|
-
|
12,269
|
12,269
|
Hong Kong
|
-
|
2,032
|
2,032
|
-
|
9,724
|
9,724
|
US dollar
|
-
|
694,884
|
694,884
|
-
|
1,021,356
|
1,021,356
|
Total investment
|
-
|
696,916
|
696,916
|
-
|
1,043,349
|
1,043,349
|
Cash at bank
|
110,954
|
-
|
110,954
|
46,368
|
-
|
46,368
|
Short term debtors
|
-
|
133
|
133
|
-
|
1,247
|
1,247
|
Bank loans payable-US
dollar
|
(31,696)
|
-
|
(31,696)
|
(83,731)
|
-
|
(83,731)
|
Short term creditors
|
-
|
(110,770)
|
(110,770)
|
-
|
(2,907)
|
(2,907)
|
Total
|
79,258
|
(110,637)
|
(31,379)
|
(37,363)
|
(1,660)
|
(39,023)
|
Market price risk sensitivity
The effect on the portfolio of a
10.0% increase or decrease in market prices would have resulted in
an increase or decrease of £69,692,000 (2022: £104,335,000) in the
investments held at fair value through profit or loss at the period
end, which is equivalent to 10.5% (2022: 10.4%) in the net assets
attributable to equity holders. This analysis assumes that all
other variables remain constant.
(ii) Liquidity risks
Liquidity risk is the risk that the
Company will not be able to meet its obligations when due. There is
a risk that the Company's holdings may not be able to be
realised at reasonable prices in a reasonable
timeframe.
Financial liabilities by maturity at
the year-end are shown below:
|
30 November
|
30 November
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Within one month-purchases due for
settlement and other payables
|
(110,770)
|
(2,907)
|
Between one and three months - Bank
loans payable
|
(31,696)
|
(83,731)
|
Total
|
(142,466)
|
(86,638)
|
Management of liquidity risks
The Company will typically seek to
maintain a high degree of liquidity in its portfolio holdings,
which mainly consist of securities that are listed on a recognised
exchange (such that a position could typically be exited within 1
to 5 trading days, with minimal price impact) and as a consequence
of the concentrated approach, it is unlikely that a position will
be taken in a company unless a minimum holding of 1.0 per cent of
gross assets at the time of investment can be achieved within an
acceptable level of liquidity.
The Company's Investment Manager
monitors the liquidity of the Company's portfolio on a regular
basis. See note 12 for the maturity profiles of the loans. Other
payables are typically settled within a month.
(iii) Currency risks
Although the Company's performance
is measured in sterling, a high proportion of the Company's assets
may be either denominated in other currencies or be in investments
with currency exposure.
Currency sensitivity
The below table shows the
strengthening/(weakening) of sterling against the local currencies
over the financial year for the Company's financial assets and
liabilities held at 30 November 2023.
|
30 November
|
30 November
|
|
2023
|
2022
|
|
% change
|
% change
|
Danish kroner
|
-0.93
|
-0.07
|
Euro
|
-1.20
|
-0.03
|
Swiss franc
|
-2.84
|
-7.00
|
Hong Kong Dollar
|
+5.67
|
-9.84
|
US dollar
|
+5.67
|
-10.20
|
Foreign currency risk profile
|
30 November
2023
|
30 November
2022
|
|
|
|
Total
|
|
|
Total
|
|
Investment
|
Net
monetary
|
currency
|
Investment
|
Net
monetary
|
currency
|
|
exposure
|
exposure
|
exposure
|
exposure
|
exposure
|
exposure
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Swiss franc
|
-
|
6
|
6
|
12,269
|
-
|
12,269
|
Hong Kong Dollar
|
2,032
|
-
|
2,032
|
9,724
|
-
|
9,724
|
US dollar
|
694,884
|
35,888
|
730,772
|
1,021,356
|
35,637
|
1,056,993
|
Total
|
696,916
|
35,894
|
732,810
|
1,043,349
|
35,637
|
1,078,986
|
Based on the financial assets and
liabilities at 30 November 2023 and all other things being equal,
if sterling had weakened against the local currencies by 10%, the
impact on the Company's net assets at 30 November 2023 would have
been as follows:
|
30 November
|
30 November
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Swiss franc
|
1
|
1,227
|
Hong Kong Dollar
|
203
|
972
|
US dollar
|
73,077
|
105,699
|
Management of currency risks
The Company's Investment Manager
monitors the currency risk of the Company's portfolio on
a regular basis. Foreign currency exposure is regularly
reported to the Board by the Investment Manager.
Currency risk will not be hedged
using any sort of foreign currency transactions, forward
transactions or derivative instruments.
(iv) Leverage risks
The Company may use borrowings to
seek to enhance investment returns. While the use of borrowings
should enhance the total return on the Ordinary Shares where the
return on the Company's underlying assets is rising and exceeds the
cost of borrowing, it will have the opposite effect where the
return on the Company's underlying assets is rising at a lower rate
than the cost of borrowing or falling, further reducing the total
return on the Ordinary Shares. As a result, the use of borrowings
by the Company may increase the volatility of the Net Asset Value
per Ordinary Share.
Any reduction in the value of the
Company's investments may lead to a correspondingly greater
percentage reduction in its Net Asset Value (which is likely to
adversely affect the price of an Ordinary Share). Any reduction in
the number of Ordinary Shares in issue (for example, as a result of
buy backs or redemptions) will, in the absence of a corresponding
reduction in borrowings, result in an increase in the Company's
level of gearing.
To the extent that a fall in the
value of the Company's investments causes gearing to rise to a
level that is not consistent with the Company's gearing policy or
borrowing limits, the Company may have to sell investments in order
to reduce borrowings, which may give rise to a significant loss of
value compared to the book value of the investments, as well as a
reduction in income from investments.
The Company will pay interest on its
borrowings. As such, the Company is exposed to interest rate risk
due to fluctuations in the prevailing market rates.
As at the year end, the Company's
gearing ratio was 4.7% (2022: 4.0%), based on the drawn down loans
as a percentage of gross asset value.
As at the year end, the Company did
not hold any derivative instruments.
Management of leverage risks
Gearing will be deployed flexibly up
to 20% of the Net Asset Value, at the time of borrowing, although
the Investment Manager expects that gearing will, over the longer
term, average between 5 and 10 per cent of the Net Asset
Value. In the event the 20 per cent limit
is breached as a result of market movements, and the Board
considers that borrowing should be reduced, the Investment Manager
shall be permitted to realise investments in an orderly manner so
as not to prejudice Shareholders.
Further details of the Company's
bank loans is disclosed in note 12.
(v)
Interest rate risks
The Company pays interest on its
borrowings. As such, the Company is exposed to interest rate risk
due to fluctuations in the prevailing market rates.
As at 30 November 2023, the Company
held cash balance of £111million of which £110million were payable
to Redeeming Shareholders on or around 14 December 2023,
consequently the Company considers it to bear no significant
interest rate risk exposure.
Management of interest rate risks
Prevailing interest rates are taken
into account when deciding on borrowings.
The Company had bank loans
denominated in GBP and USD in place during the year. The loan
interest is based on a variable rate. Based on the loans
outstanding at the year end a change of 1.00% (2022: 1.00%) in
interest rates would increase/(decrease) annual profit or loss by
the amounts shown below. The analysis assumes that all other
variables remain constant:
|
Loans at
|
Profit or
loss
|
Profit or
loss
|
Loans at
|
Profit or
loss
|
Profit or
loss
|
|
30 November
|
1.00%
|
1.00%
|
30 November
|
1.00%
|
1.00%
|
|
2023
|
decrease
|
increase
|
2022
|
decrease
|
increase
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
USD loan
|
31,696
|
317
|
(317)
|
83,731
|
837
|
(837)
|
Total
|
31,696
|
317
|
(317)
|
83,731
|
837
|
(837)
|
(vi) Credit risks
Credit risk is the potential of a
counterparty failing to meet its obligations in accordance with the
agreed terms. Cash and other assets that are required to be held in
custody will be held by the depositary or its sub-custodians. Where
the Company utilises derivative instruments, it is likely to take a
credit risk with regard to the parties with whom it trades and may
also bear the risk of settlement default.
Management of credit risks
The Company has appointed CACEIS
Bank as its depositary. The Standard & Poor's credit rating of
CACEIS is A+ (2022: A+). The credit rating of CACEIS was reviewed
at the time of appointment and is reviewed on a regular basis by
the Investment Manager and/or the Board.
The Investment Manager monitors the
Company's exposure to its counterparties on a regular basis and
trades in equities are performed on a delivery versus payment
basis.
The Company's assets are segregated
from those of the Depositary or any of its
sub-custodians.
At 30 November 2023, the Depository
held £696,916,000 (2022: £1,043,349,000) in respect
of investments and £110,954,000 (2022: £46,368,000) in respect
of cash on behalf of the Company.
(vii) Capital management policies and
procedures
The Company considers its capital to
consist of its share capital of Ordinary Shares of 1p each,
Management Shares of £1 each, and reserves totalling £665,537,000
(2022: £1,004,326,000) and bank loans payable £31,696,000 (2022:
£83,731,000).
The Company has a redemption
facility through which Shareholders will be entitled to request the
redemption of all or part of their holding of Ordinary Shares on an
annual basis. The redemption point for the Ordinary Shares was 30
November 2023 and will be annual thereafter. The Redemption
facility is entirely at the discretion of the Directors.
The Investment Manager and the
Company's broker monitor the demand for the Company's shares and
the Directors review the position at Board meetings.
Use of distributable reserves is
disclosed in the footnote on the Statement of changes in equity
contained within this Report.
The principal compliance required by
the loan convenants are;
1. the borrower will not
permit the adjusted asset coverage to be less than 3.50 to 1.00;
and
2. the borrower will not
permit the net asset value to be less than GBP 400,000,000 at any
time.
Other Information
Alternative Performance Measures
DISCOUNT
The amount, expressed as a
percentage, by which the share price is less than the Net Asset
Value per Ordinary Share.
As
at 30 November 2023
|
|
|
£'000
|
NAV per Ordinary Share
(pence)
|
a
|
|
143.87
|
Share price (pence)
|
b
|
|
129.00
|
Discount
|
(b÷a)-1
|
|
-10.3%
|
GEARING
A way to magnify income and capital
returns, but which can also magnify losses. A bank loan is
a common method of gearing.
As
at 30 November 2023
|
|
|
£'000
|
Total assets less cash/cash
equivalents
|
a
|
|
697,049
|
Net assets
|
b
|
|
665,537
|
Gearing (net)
|
(a÷b)-1
|
|
4.7%
|
LEVERAGE
An alternative word for
"Gearing".
(See gearing for
calculations).
Under AIFMD, leverage is any method
by which the exposure of an AIF is increased through borrowing of
cash or securities or leverage embedded in derivative
positions.
Under AIFMD, leverage is broadly
similar to gearing, but is expressed as a ratio between the assets
(excluding borrowings) and the net assets (after taking account of
borrowing). Under the gross method, exposure represents the sum of
the Company's positions after deduction of cash balances, without
taking account of any hedging or netting arrangements. Under the
commitment method, exposure is calculated without the deduction of
cash balances and after certain hedging and netting positions are
offset against each other.
ONGOING CHARGES
A measure, expressed as a percentage
of average net assets, of the regular, recurring annual costs of
running an investment company.
Year ended 30 November 2023
|
|
|
£
|
Average NAV
|
a
|
|
870,662,248
|
Annualised expenses
|
b
|
|
8,885,000
|
Ongoing charges
|
(b÷a)
|
|
1.02%
|
TOTAL RETURN
A measure of performance that
includes both income and capital returns. This takes into account
capital gains and reinvestment of dividends paid out by the Company
into the Ordinary Shares of the Company on the ex-dividend
date.
Year ended 30 November 2023
|
|
|
Share price
|
NAV
|
Opening at 1 December 2022
(p)
|
a
|
|
158.20
|
171.16
|
Closing at 30 November 2023
(p)
|
b
|
|
129.00
|
143.87
|
Price movement (b÷a)-1
|
c
|
|
-18.5%
|
-15.9%
|
Dividend reinvestment
|
d
|
|
3.4%
|
3.3%
|
Total return
|
(c+d)
|
|
-15.1%
|
-12.7%
|
n/a = not applicable.
FINANCIAL INFORMATION
This announcement does not
constitute the Company's statutory accounts. The financial
information is derived from the statutory accounts, which will be
delivered to the registrar of companies and will be put forward for
approval at the Company's Annual General Meeting. The auditors have
reported on the accounts for the year ended 30 November 2022 and
the year ended 30 November 2023, their reports were unqualified and
did not include a statement under Section 498(2) or (3) of the
Companies Act 2006.
The Annual Report for the year ended
30 November 2023 was approved on 1 March 2024.
The report will be available in
electronic format on the Company's website:
https://www.bellevuehealthcaretrust.com
The Annual Report will be submitted
to the National Storage Mechanism and will shortly be available for
inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
This announcement contains regulated
information under the Disclosure Guidance and Transparency Rules of
the FCA.
ANNUAL GENERAL MEETING
The Annual General Meeting will be
held on 26 April 2024 at 12 noon at the
offices of Stephenson Harwood LLP, 1 Finsbury Circus, London EC2M
7SH, United Kingdom
For
further information contact:
Apex Listed Companies Services (UK)
Limited
6th Floor, 125 London
Wall
Barbican
London
EC2Y 5AS
Tel: 020 3327 9720
DIRECTORS, INVESTMENT MANAGER AND ADVISERS
DIRECTORS
Randeep Grewal (Chairman)
Josephine Dixon
Paul Southgate
Professor Tony Young OBE
Kate Bolsover
CORPORATE BROKER
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
E14 5JP
DEPOSITARY
CACEIS Bank, UK Branch
Broadwalk House
5 Appold Street
London
EC2A 2DA
REGISTRAR
Link Group
Central Square
29 Wellington Street
Leeds
LS1 4DL
INVESTMENT MANAGER ("AIFM")
Bellevue Asset Management (UK)
Ltd
32 London Bridge Street
24th Floor London
SE1 9SG
SECRETARY & ADMINISTRATOR
Apex Listed Companies Services (UK)
Limited
6th Floor
125 London Wall
London
EC2Y 5AS
AUDITORS
Ernst & Young LLP
25 Churchill Place
Canary Wharf
London
E14 5EY
REGISTERED OFFICE
6th Floor
125 London Wall
London
EC2Y 5AS
LEGAL ADVISER
Stephenson Harwood LLP
1 Finsbury Circus
London
EC2M 7SH
COMPANY SECURITY INFORMATION AND IDENTIFICATION
CODES
WEBSITE
www.bellevuehealthcaretrust.com
ISIN
GB00BZCNLL95
SEDOL
BZCNLL9
BLOOMBERG TICKER
BBH LDN
LEGAL ENTITY IDENTIFIER (LEI)
213800HQ3J3H9YF2UI82
GLOBAL INTERMEDIARY IDENTIFICATION NUMBER
(GIIN)
VL68MY.99999.SL.826