Bellevue Health Regulatory News (BBH)

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

PERFORMANCE SUMMARY

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

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

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

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

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

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

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

* 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

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

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

for the year ended 30 November 2022

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

* 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.

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

(b) Movements in valuation

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

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:

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:

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

6. INVESTMENT MANAGEMENT FEE

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

8. FINANCE COSTS

9. TAXATION

(a) Analysis of charge:

(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:

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.

11. OTHER RECEIVABLES

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

As at 30 November 2022

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

* 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

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

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:

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:

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:

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.

Foreign currency risk profile