Annual Financial Report

Bellevue Healthcare Trust plc

Annual Report and Accounts

For the year ended 30 November 2024

Bellevue Healthcare Trust plc (the "Company") hereby submits its annual report and financial statements for the year ended 30 November 2024 as required by the Financial Conduct Authority's Disclosure and Transparency Rule 4.1.

The Company's annual report and financial statements for the year ended 30 November 2024 is being published in hard copy format and an electronic copy will shortly be available to download from the Company website www.bellevuehealthcaretrust.com. It will also be made available to the public at the Company's registered office, 4th Floor, 46-48 James Street, London, W1U 1EZ.

The Company's annual report and financial statements will also be uploaded to the Financial Conduct Authority's National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism

LEGAL ENTITY IDENTIFIER ('LEI'): 213800HQ3J3H9YF2UI82

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 for the year ended 30 November 2024

3  Total returns in sterling for the year ended 30 November 2023

4  Including dividends reinvested in the year.

Source: Bellevue Healthcare Trust plc Factsheet November 2024

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 Annual Report.

Chairman's Statement

Dear Shareholders

This is the eighth Annual Report of your Company.

PERFORMANCE

Over the financial year to 30 November 2024, the share price (on a total return basis) returned 13.7%; the NAV total return was 11.1%. This compares with the MSCI World Healthcare index which produced a total return of 11.5%.

The returns are summarised in the following table:

Cumulative & annualised performance

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 2024.

It is encouraging to note that share price and NAV performance matched the index in the financial year to end November 2024. Nevertheless longer term performance has been disappointing in both relative and absolute terms. The portfolio focus is on a small number of high conviction ideas, mainly concentrated in Small or Mid-Cap stocks where the Investment Manager believes their research and investment expertise find added value. However, the index performance has been dominated by the rerating of a few very Large‑Cap stocks, similar to the 'Magnificent Seven' impact on the broader market.

I cannot emphasise enough the focus of the Board and Bellevue on improving performance and tightening risk management. Two areas of discussion are implementing a more rigorous sell discipline and increasing the number of portfolio positions which would reduce volatility. The latter is explained in the Investment Manager's Report and we will be seeking shareholder support via an AGM resolution.

BOARD COMPOSITION AND EVALUATION

Three of the current directors (Jo Dixon, Paul Southgate and myself) joined the Company ahead of its listing in December 2016 and hence would be expected to retire over the next year (i.e. nine years from appointment).

With an eye to succession planning, we recently announced the appointment of Sarah MacAulay as a non-executive director, and Clare Brady as non-executive director and audit chair-elect. Both Sarah and Clare are experienced investment trust directors (and in fact both currently chair investment trusts).

Paul Southgate and I will not be putting ourselves up for re-election at the forthcoming AGM. To ensure institutional continuity, Jo Dixon will remain as senior independent director until the AGM of 2026.

The Board unanimously support the proposal to appoint Kate Bolsover as Chairman to succeed me. She brings a wealth of investment trust experience and knowledge and is indeed an experienced chairman.

Shareholders will have the opportunity to meet Clare, Sarah and Kate at our next AGM in April 2025.

As per the AIC Code recommendations, this year we undertook an internal Board review at the end of the year. The review covered the overall performance of the Board, the committees, individual directors and the Chair. The overall results were good but as always it provides food for thought on how and where we might improve.

FEES AND CHARGES

The current Investment Management fee is 95 bps, based on market capitalisation (i.e. not AUM), which more closely aligns the Investment Manager's interests with that of Shareholders. Bellevue has absorbed a number of costs over the years that help reduce the Ongoing Charges Ratio ("OCR").

The OCR this year was 1.03% (2023: 1.02%) and the Board has worked hard over the year to ensure the OCR continues to stay relatively low. I would have liked to get this ratio below 1% before I retired from the Board but a decreasing market capitalisation has worked against that ambition.

PORTFOLIO POSITIONING

The portfolio is exposed to US stocks, especially in the Small / Mid-Cap area and has a high active share. This also inevitably exposes the portfolio to movements in the US dollar.

A new US presidency has macroeconomic, market specific and sector specific implications.

As with many things in life, some of these issues may be negative and others positive for healthcare; of course, the impact for different healthcare subsectors will vary dramatically. We remain confident that these choppy waters can be navigated by the Investment Managers.

GEARING

The Company has historically had a multi-currency revolving (unsecured) credit facility ("RCF") with The Bank of Nova Scotia. Changes brought about by Basel IV regulations have meant that some banks have withdrawn from the market. We are therefore fortunate that The Bank of Nova Scotia continues to provide a facility for the Company. Due to the Basel IV regulations, the new facility, which commenced in December 2024 is on a secured basis. As we have no unsecured debt, this has very limited practical impact on the Company.

SHARE CAPITAL AND ISSUANCE

The Company's issued share capital (excluding treasury shares of 31,782,418) was 283,369,891 Ordinary Shares (post redemptions) as of 30 November 2024; a decrease from 462,588,550 as of the end of the previous financial year.

We did not issue any shares during the year. In November we received redemption notices for 163,834,887 shares. In addition, we bought back 15,383,772 shares during the year.

At the AGM, we will be seeking authority to issue 24,180,403 new Ordinary Shares to meet potential investor demand, with share issuance only possible at a premium to NAV.

REDEMPTIONS, BUYBACKS AND DISCOUNT MANAGEMENT

There have been both Company specific (performance) and market factors (investment trust discounts have widened over the last few years) that have led to the Company trading at a discount.

Furthermore, as I mentioned in last year's annual report, due to the High Court process to reset our distributable reserves we temporarily paused share buybacks at the year end. At the close of business on 30 November 2023 we were trading at a discount to NAV of 10.3%. During the year the average discount for the shares of the Company was 7%, whilst for the healthcare investment trust peer group it was 9.8%.

Not surprisingly, this situation has led to increased levels of redemption requests - this year that equated to 36.6% of the shareholder base as of the Redemption Point.

It has become apparent that the redemption facility, whilst prima facie, laudable by giving Shareholders an annual opportunity to exit near to NAV, has unintended consequences. In particular it attracts Shareholders with a short-term focus to buy shares with no regard to the underlying investment proposition but rather to take advantage of the possibility of an unlimited redemption structure within a defined time horizon.

Hence your Board, following extensive shareholder consultation, in the latter months of 2024 called a General Meeting in December to address the redemption facility. The proposal was to replace the redemption facility with a performance-related tender offer to support the long-term nature of a closed‑ended investment structure and portfolio ethos, while still providing liquidity for Shareholders. For those who did not follow the detail of what happened at the time there was a need to pull back from that proposal due to a change in stance of one of our significant Shareholders and an increase in holdings by short-term focused Shareholders. It is worth recalling that to change the Company's Articles a special resolution is required, which to pass requires a majority of not less than 75%.

With increased confidence in the performance of the underlying portfolio, the Company has been active in share buybacks. Buying back shares at a discount is accretive to longer-term Shareholders. For those Shareholders seeking to exit, buybacks provide immediate liquidity rather than having to wait for an annual redemption.

Your Board is determined to try and steer a fair course between redemptions and buybacks whilst ensuring the long-term viability of the Company.

DIVIDEND

The Company targets an annual dividend of 3.5% of the preceding year-end NAV, paid out in two equal instalments. In May 2024, the Company paid out a final dividend of 2.995p in respect of the year 2023.

In August 2024, an interim dividend of 2.52p in respect of the financial year 2024 was paid. The Board has proposed a final dividend of 2.52p for the financial year 2024 and, if approved at the forthcoming Annual General Meeting, this will be paid to Shareholders in May 2025.

For the financial year 2025, the Board is proposing a total dividend of 5.40p per Ordinary Share (this being 3.5% of the NAV as of the close on 30 November 2024), composed of interim and final dividends of 2.70p per Ordinary Share each, to be paid in August 2025 and April/May 2026 respectively, subject to shareholder approval.

OUTLOOK

There have been periods in market history where the performance of the very largest companies wanes, and smaller, more agile competitors outperform. Over the last few months the outperformance of the 'Magnificent 7' in the wider market, and of the big 'weight-loss' linked companies in the healthcare sector have indeed seemed to be waning. The healthcare sector as a whole is currently trading at relative PE (price earnings (ratio)) multiples which are at a discount to the wider market (as discussed in the Investment Manager's section). Within the healthcare sector itself, the relative valuation of smaller and Mid-Cap companies, in comparison to the large companies, also looks particularly attractive. One hopes that this will lead to a rerating of the companies within the portfolio.

Moreover, the new leadership at the Federal Trade Commission in the US is expected to streamline the mergers and acquisitions process, bolstering smaller companies' valuations. This, combined with the more positive outlook for the sector as a whole provides reasons to be optimistic for the future growth in the value of the portfolio.

ANNUAL GENERAL MEETING AND SHAREHOLDER COMMUNICATION

The next AGM will be on 23 April 2025. The Investment Manager will make a short formal presentation before a question and answer session.

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 to [email protected] or to the Company Secretary [email protected]. 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.

The Board is proposing a modification of the Company's investment policy to increase the maximum number of holdings from the current 35 to 45 in order to adjust to a more volatile market environment - this will be the subject of a resolution at the forthcoming AGM and is discussed further in the Investment Manager's Report. We are also proposing a change to the Company's return objectives to provide one simple clear target to measure performance. Both these changes are discussed further in the Annual Report ('Amendments to the Investment Policy and Return Objectives'), are recommended by the Board and we believe should be non-controversial.

AND FINALLY…

As highlighted above, this will be my final AGM as Chairman of your Company. It has been a privilege to serve. I sincerely hope that the Company proceeds to greater heights in the future. I leave secure in the knowledge that both the Board and the Investment Manager are focused on improving performance and helping drive greater returns for investors; having both confidence in the investment thesis and a Manager who is well positioned to harvest this opportunity. As I discuss above, the wider backdrop also provides reasons to be optimistic.

On behalf of the whole 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

14 March 2025

Investment Manager's Report

OVERVIEW

The general market's and the healthcare sector's performance has been dominated by a few stocks in the last couple of years. We believe that as this performance widens our portfolio should benefit. Furthermore healthcare is well positioned at current levels and, combined with good stock selection, the backdrop should provide a helpful boost to performance over the coming years.

REVIEW

The Bellevue Healthcare Trust is now eight years old. As such, we thought it worth revisiting our views on the evolution of the healthcare industry at the time of the Company's launch, discussing what has and has not come to pass, and then provide an overview of how we see the industry's continuing evolution.

Before we delve into these details, what remains abundantly clear today is that the need for profound and fundamental reform of healthcare systems remains urgent. We seek to invest in innovative companies whose products, technologies and services are at the forefront of improving the standard of care and the means of delivery, driving efficiency across the healthcare system.

Groundbreaking advances in science are providing greater insights and understanding into the underlying biology of disease, allowing better treatments to be developed and helping an ever expanding number of patients. Over the coming years, the application of genomics and Artificial Intelligence will undoubtedly unleash benefits from the huge information datasets that healthcare systems have been gathering over many decades.

Given this undeniably compelling backdrop, it should puzzle us all that, despite all this opportunity and potential, the performance and valuations of healthcare companies relative to the broader global equity market are at near-decade lows as shown in Figures 1 and 2 below. Within this, Small and Mid-Cap healthcare stocks in which we typically invest have been treated even more harshly.

Figure 1 S&P 500 Healthcare Sector vs. S&P 500 Index - relative performance on annual basis (1990 - 2024)

Source: Bloomberg

Figure 2 in the Annual Report illustrates the consequence of this relative underperformance despite solid operational performance - a profound de-rating in the valuation multiples ascribed to the sector when compared to the wider market.

Why has this occurred? In part, it is due to the market's narrow focus in recent years on a small cohort of Tech-oriented Mega-Cap companies (the so-called 'Magnificent 7'). These have driven wider market performance and the focus upon them has been to the detriment of much else being crowded out of the narrative. We have even seen a microcosm of this within healthcare with the Eli Lilly/Novo Nordisk led 'GLP-1 winners and losers' narrative, starving other areas of healthcare of newsflow and investor attention.

Figure 2 PE-Ratio Healthcare vs. Global Equities 31 December 2014 - 31 December 2024

Source: Bellevue Asset Management AG, PE 2024/ EPS-Growth 2021-2026e

What we can also say with confidence is that it has not occurred because the companies within this ecosystem have not continued their relentless and often awe-inspiring progress, nor because regulatory or geopolitical issues have changed the outlook for the industry. Perhaps, given all the geopolitical turmoil and macro-economic uncertainty, it is time for investors to re-evaluate the investment proposition that healthcare provides?

THE ORIGINAL THESIS

Our original top-down view was, and remains, that developed-world healthcare systems need to undertake a fundamental reconsideration of the care delivery paradigm, in order to make them operationally and financially sustainable. Societies must balance the challenges of inexorable demand arising from a growing and ageing population, and the consequential proliferation of age-associated chronic conditions, with a rising dependency ratio. Healthcare expenditure cannot rise faster than GDP growth indefinitely.

The reality was, and still is, that healthcare delivery is wasteful, inefficient, over-reliant on a limited supply of skilled human capital and administratively burdensome. This combination offers considerable opportunities for enhanced productivity to slow spending growth and free up resources to deliver improved care. For these reasons, we saw these changes to the healthcare system as inevitable, as a society we simply could not carry on as we were.

In our early marketing materials, we sought to explain the 'shifting healthcare delivery paradigm', with an illustration of the types of products, technologies and services that could improve outcomes, and decision-making, and lower costs within the different stages of the patient journey. We also provided a list of the major changes that we anticipated the healthcare system would undertake over the coming decade. Both are reproduced below:

Figure 3 The Shifting Healthcare Delivery Paradigm

Source: Bellevue Asset Management (UK) Ltd.

Figure 4 List of Anticipated Changes in Healthcare

1. "Everything must change" - Western healthcare systems are broken and not fit for purpose in terms of serving the needs of an ageing population. The human skills deficit is already too far gone to bridge with simply adding more staff (if you can find them).

2. "Technology and healthcare will intersect as never before" - IT innovations such as AI & big data that can cope with noisy (i.e. incomplete) healthcare records data will increasingly drive insights and prevention plans.

3. "It's written in your genes" - genetic data will be at the forefront of diagnosis and population health (preventative interventions).

4. "Electronic first" - your first interaction with the healthcare system will be digital; creating a footprint that can be tracked and allow you to get the best care in the cheapest and most convenient manner possible.

5. "People are fallible" - we do not follow medical advice and do not behave rationally. People need to be nudged and prompted to do the right thing and making things easier is just as important as making treatments better.

6. "Knowledge is power" - the future consumer wants to be far more engaged in decision-making and future care models will need to be more patient-centric.

7. "Acuity must fall" - hospitals are expensive and full of sick people. No-one wants to be there and newer 'site of care' models will be increasingly used.

8. "Connected care and the internet of things" - the future treatment setting will be loaded with passive sensing technology that enhances physician decision-making.

9. The "democratisation of innovation" - the future favours those with the best ideas in drugs and med tech being able to bring projects to middle stages of development using outsourced models of R&D and production, tilting the balance in favour of disrupters over incumbency.

10. Related to the point above, legacy infrastructure in the pharma/biotech and hospital space has less value than it did historically.

Source: Bellevue Asset Management (UK) Ltd.

PROGRESS TO DATE

It is worth considering how the healthcare system has evolved since the Company's inception. During the five years to the end of 2022 (which is the last year for which complete data is currently available; comprehensive data sets take time to put together), the World Health Organisation estimates that global spending on healthcare rose from $7.1trn in 2015 to $9.8trn by 2022; a compound growth rate of 4.6%, or a 37% increase over five years. Within the OECD sub-set of developed countries, spending rose from $5.9trn to $7.9trn over the same period, a compound growth rate of 4.2%. These numbers serve to highlight the dependable nature of the sector's demand-led growth.

Within the OECD, the unweighted average increase in healthcare spending as a proportion of GDP between 2015 and 2022 was 0.4%, which was also the median increase, amply illustrating the challenges described previously: public finances cannot cope with healthcare expenditures consuming an ever greater proportion of our marginal wealth creation indefinitely.

The table below discusses a few of the key opportunities/ thematics highlighted previously and the progress we have witnessed over the past eight years in terms of these becoming mainstream elements of healthcare provision:

Looking at the table above, it is encouraging to see that many of the improvement areas we identified have made significant progress over the past eight years, driving strong financial performance in the companies we have invested in.

However, remote patient monitoring has been a notable disappointment, especially given the clear benefits that readily available products, technologies, and services could provide. We underestimated patient concerns regarding data security, which were amplified by high-profile data breaches at large corporations and social media companies, but it is pleasing to see more traction being gained now (cf. NHS Virtual Wards pilot).

The number of people willing to work in adult social care is a huge problem, with 1 in 10 positions currently unfilled and a lack of social care resources being the primary cause of 'bed blocking' in hospitals. Something is going to have to change.

Progress on the uptake/penetration of these thematics/ opportunities has largely been linear over the past eight years (apart from the peak COVID times in 2020/21). Throughout the entirety of the Company's history, we have sought to exploit these emerging and growing trends through the companies in which we invest.

LONGER TERM PERFORMANCE

The first five years of the Company's history yielded very strong absolute and relative performance of the Company's NAV, delivering a NAV total return of +16.1%, compared to +13.2% for the MSCI World Healthcare Index. In the subsequent period to date, despite following the same strategy and approach, the performance of the Company's NAV has been disappointing, with 2022 being most significantly impacted.

Our fundamental research and analysis leads us to a bias toward US Mid-Cap growth stocks. In recent times these have been out of favour with investors by comparison to the Large/Mega-Cap companies that dominate our benchmark. Nonetheless, we remain confident that we are continuing to focus on the correct underlying themes within the healthcare ecosystem.

With all the current global challenges, it is easy to be overwhelmed by the noise and lose sight of the bigger picture. The Company's performance since inception is summarised in Figure 5 below. Despite operating in a difficult environment, the Company outperformed meaningfully in its first five years and has delivered a positive absolute NAV return in six of its eight calendar years.

The Company has only meaningfully underperformed the MSCI World Healthcare Index in three of the past eight years (i.e. excluding 2018's underperformance, which was only a modest 17 basis points on an NAV basis). In each of those years of notable relative underperformance, short, sharp shocks hindered our ability to regain sufficient momentum before the end of the respective year.

We are not alone in facing these challenges. Among the six healthcare-focused actively managed investment companies with a similar track record, only one has outperformed its benchmark during our timeframe (and it focuses on biotech, with some private investments). These have indeed been exceptionally tough times for healthcare investors.

Figure 5 Relative and absolute return since inception (calendar year basis)

Source: Bloomberg

WHAT'S NEXT?

Healthcare has struggled to capture wider investor attention - dominated as it currently is by a narrow group of technology companies - it is important to emphasise that healthcare is far from broken as a business. Demand for services remains robust, and the need for greater efficiency is undeniable. Few sectors can offer as much confidence in the long-term demand outlook as healthcare does, underpinned as it is by insurmountable demographic trends. The current situation vis-a-vis equity returns reflects a shift in investor sentiment, despite the industry fundamentals remaining solid. Investors have simply chosen to direct their focus - and capital - elsewhere.

The silver lining is that the sector now appears significantly more attractive on a relative value basis (Figure 2). Early signs in 2025 suggest that this may be starting to attract renewed interest from generalist investors, even if it remains skewed at the moment to Mega-Cap names. Lest one forget, around one in three newly launched products from 'big pharma' comes from external innovation (in-licensing or M&A), and the marked under-performance of Small and Mid-Cap healthcare and biotechnology in particular may yet kick off a wave of M&A as larger companies see relative value in acquiring their benighted biotech brethren.

Growth stocks, by their nature, do not need a re-rating to generate alpha; the growth itself should drive that. However, if investor interest in healthcare becomes more positive and broadens out to the growth names, a meaningful re-rating of depressed valuations should be on the horizon.

We are still in the early stages of what is likely to be a decades-long transformation. The good news is that the momentum for change is already heading in the right direction. We are enthusiastic about the industry's future.

Terms like 'cost-effectiveness' and 'value-based care' are no longer taboo. The pandemic underscored the challenges of recruiting and retaining talent, highlighting the need to reduce the sector's over-reliance on human capital. We can no longer expect frontline workers to "do more"; we must equip them with the tools to be more productive with their valuable time.

Despite these advances, many healthcare systems face even greater challenges than they did eight years ago due to the pandemic. Record waiting lists and widespread dissatisfaction with the quality or cost of care, or both, have created even higher barriers to overcome. The need for urgent reform has never been clearer. As such, we expect to see an acceleration in the adoption of products, technologies, and services that improve outcomes, reduce costs, and empower carers to make better decisions for patients.

Emerging patient-centric treatment approaches promise new, personalised, and targeted ways of delivering care, far beyond what was possible in the past. Our growing understanding of genomics offers the potential to not only better understand disease drivers, but also to more effectively treat or even prevent them. It is an exciting time to invest in healthcare.

FY2024 PERFORMANCE SUMMARY

A narrowing of the discount compared to the end of fiscal 2023 meant that the total shareholder return performance was indeed positive versus the comparator, +213bp ahead for the fiscal year.

Unfortunately, the fiscal 2024 performance fell just short of generating a relative NAV outperformance for the year, versus our key comparator index, the MSCI World Healthcare Index. However, it is pleasing that performance in the second half of the fiscal year was positive (GBP NAV total return +4.6%, vs +1.7% for the MSCI World Healthcare Index).

Figure 6 The Company's returns for the fiscal year

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 29 November 2024.

Alongside our ongoing analysis of the sector's fundamentals, we also undertook a comprehensive review of our investment process in 2024, identifying areas for improvement in risk-adjusted returns. We observed that stock-level volatility around news flow has increased over the past two years. This led to two key conclusions: first, it may be more effective to focus on selecting the best two or three ideas from a given strategy to gain exposure to a desired theme, rather than seeking a single "winner." In order to support this revised approach, the Company's Board is proposing an increase in the maximum number of active holdings from 35 to 45. The Company will still retain its differentiated and concentrated investment approach, but we believe this additional flexibility will improve risk-adjusted returns. Second, we need to carefully consider our tolerance for binary event risks on a case-by-case basis. Where possible, it may make sense to reduce exposure before such events, especially since they often result in higher trading volumes in the immediate aftermath. It is always possible to buy back positions after trimming.

We began implementing these adjustments in the second half of 2024 and are already seeing positive results, including reduced drawdowns and an improved internal rate of return (IRR).

Portfolio summary

During fiscal 2024, the Company held active positions in 44 companies (compared to 34 in FY2023), beginning the year with 27 active positions and ending the year with 33 active positions (18 additions, 11 exits and the write-down to zero of the Venus Medtech holding, which only represented 0.3% of Net Asset Value at the end of FY2023).

Two of the exits were due to M&A (Axonics and Silk Road Medical) and three of the additions were prior holdings for the Company (Humana, Neogenomics, and Lundbeck). We would describe seven of the 18 additions as being due to the revised approach of splitting thematic exposures over more than one holding, as discussed previously.

In each of these cases, the percentage of gross exposure attributed to the new holding was offset by an equal amount being sold down from an existing holding, offering complimentary end market/customer/thematic exposure. As noted previously, we believe this will smooth returns over time by reducing exposure to stock-specific downside risk.

Of the remaining exits, the overwhelming rationale reflects the previously outlined change in approach to managing binary risk - in an era of heightened volatility and all too frequent over-reactions to even modestly negative newsflow, we must have a much lower appetite for any perceived downside risk or reduction in confidence in management.

The evolution of the portfolio at the sub-sector level is illustrated in Figure 7 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 7: Portfolio sub-sector evolution

With regard to the portfolio breakdown by market capitalisation, this has intentionally become more balanced over the year. We are still significantly more skewed toward Mid-Cap versus our key comparator index (which was 98.5% Mega-Cap and Large-Cap at the fiscal year end), but there is greater balance across the portfolio compared to the past few years. The already material geographic bias to the United States increased slightly, as Chinese capital markets continued to experience significant challenges.

Figure 8: Market capitalisation breakdown of portfolio

Our top five and bottom five contributors to the NAV are summarised in Figure 10 below, along with their share price performance in sterling over the fiscal year (which does not necessarily correspond to their performance for the Company, as the size and duration of our holdings varies over the year).

Figure 9: Geographic breakdown of portfolio (operational HQ)

Figure 10

We would make the following comments regarding the companies in Figure 10: only one of the top performers, Silk Road Medical, was an M&A target; it was acquired by Boston Scientific in September 2024. The majority of the Top Performing holdings have been in the portfolio for multiple years.

As one might expect based on the previous comments regarding lower risk tolerance, we have exited our positions in three of the worst performers (Pacific Biosciences, Accolade and Atricure) and materially reduced exposure to the other two. We would be open to increasing our holdings in Dexcom and Evolent Health again in the future, but only when we have tangible evidence that the risks weighing on sentiment have been fully addressed.

Full investment portfolio as of 30 November 2024

Inevitably, the portfolio will have evolved over the four months since the fiscal year end. Investors can find additional commentary on the development of the portfolio in the monthly factsheets and these should be investors' source of up-to-date information.

The Company's portfolio liquidity parameters remain very high. We estimate 95% of the portfolio could be liquidated within nine trading days at a participation rate of 25%.

Top 10 summary

UnitedHealth Group (7.8%)

Sub-sector: Managed Care

United Health Group ('UNH') is a diversified and vertically integrated healthcare care provider focused on two distinct business platforms: (1) health benefits and insurance under the United Healthcare brand and (2) health services operating under the Optum brand. The health benefits are designed for multiple customers (both private and public) and Optum offers its services to the broad healthcare market (payers, providers, employers, governments, life science companies) through its Optum Health, Optum Insight and OptumRx businesses, which cover PBM services, analytics and the physical delivery of services.

CareDx (6.8%)

Sub-sector: Diagnostics

CareDx ('CDNA') is a specialist diagnostics company and the leading provider of non-invasive surveillance testing to organ transplant recipients. These tests evaluate the effectiveness of anti-rejection drug cocktails, so that changes can be made if early signs of organ rejection appear. In this way, it should be possible to extend the viable life of transplanted organs, improving patient quality of life and saving money. CDNA also offers advanced genetic matching tools for recipient selection, and various software tools and services to help transplant recipients manage their care.

Exact Sciences (4.8%)

Sub-sector: Diagnostics

Exact Sciences is a leading cancer diagnostic company. Its main product is Cologuard, a stool-based DNA screening test for the detection of colorectal cancer, which launched in 2014. Exact's Oncotype gene expression tests (covering breast and colon cancer) allow more accurate diagnosis and subsequent treatment pathway decisions and it is moving into minimal residual disease (MRD) surveillance testing. Additionally, EXAS is also looking to expand its menu of patient-centric early cancer diagnostics via Thrive, a company focused on "liquid biopsy" for early cancer detection and also has a blood-based colorectal test ready to launch.

Sarepta Therapeutics (4.7%)

Sub-sector: Focused Therapeutics

Sarepta ('SRPT') is focused on the treatment of rare genetic diseases, especially muscular conditions. It was a pioneer of exon skipping RNA therapy for Duchenne Muscular Dystrophy (DMD), a serious degenerative disease. More recently, it pioneered a gene therapy (i.e. aiming to be a one-time treatment) for DMD that now has a broad approval covering the majority of patients. It is following this up with further gene therapies for other dystrophies and is also moving into RNA therapies for genetic diseases of the central nervous system and lungs, via a collaboration with Arrowhead Pharma.

Intuitive Surgical (4.6%)

Sub-sector: Medical Technology

Intuitive Surgical ('ISRG') is the global leader in robotic surgical systems. These systems integrate software, hardware, and sensors to allow doctors to perform robotically aided surgery from a remote console. Alongside the system itself, ISRG also provides the accompanying consumables necessary for use in each procedure, and these provide a recurring revenue stream alongside the servicing contracts for the systems themselves. A fifth-generation system, "Dv5", with a number of improvements in capabilities and workflows, was launched in the US in mid-2024 to widespread acclaim from customers.

Tandem Diabetes Care (4.5%)

Sub-sector: Healthcare Technology

Tandem Diabetes Care ('TNDM') manufactures insulin pumps and was a pioneer of 'closed loop' systems where algorithms automate insulin delivery, thereby increasing the time that diabetic patients' blood sugar remains within a normal range. New standards for inter-operability of pumps, software and sugar measurement should make such technology the standard of care. TNDM's newest durable form factor, Mobi, was launched in 2024 and will be followed soon by a tubeless version, with a more advanced patch pump called Sigi following later. Alongside its best-in-class delivery algorithm ('ControlIQ'), TNDM should be well positioned for market share gains in the coming years.

Castle Biosciences (4.2%)

Sub-sector: Diagnostics

Castle Biosciences ('CSTL') is a specialist diagnostics company that is currently focused on the differential diagnosis of Melanoma by type. Through an asset acquisition from Myriad Genetics, it is also offering a risk stratification test for patients with cutaneous melanocytic lesions. More recently, through the Cernostics acquisition, the Company is branching out into GI oncologic diagnostics, launching a new test for Barrett's oesophagus. Beyond this the Company is hoping to roll out further tests, particular in the GI space in order to achieve scale in this area.

Inspire Medical Systems (4.2%)

Sub-sector: Medical Technology

Inspire ('INSP') is a medical device company that has developed and commercialised a minimally invasive implantable device for the treatment of chronic Obstructive Sleep Apnoea (OSA), which is characterised by interrupted breathing due to a blockage of air flow. This is a serious condition associated with increased cardiovascular disease risk and mortality. The standard of care for many years has been 'CPAP'; patients wear a positive pressure face mask during sleep that pushes air into the body. This is obtrusive and noisy. In contrast, Inspire is an electrical stimulator that senses inward breath and painlessly spasms muscles to ensure the airway remains open.

Axsome Therapeutics (4.2%)

Sub-sector: Focused Therapeutics

Axsome Therapeutics ('AXSM') is a US-based specialty pharma company focused on developing novel, improved formulations of already established oral products for the treatment of various central nervous system and neurological conditions. Its scientific focus is on improved pharmaco-kinetics to enhance therapeutic index, using approaches such as competitive or molecular inhibition, single isomers and drug formulations with enhanced bioavailability. Its key products (Auvelity & pipeline drug AXS-07) are focused on refractory patients in the fields of major depressive disorder (MDD) and migraine treatment.

Verona Pharma (4.1%)

Sub-sector: Focused Therapeutics

Verona Pharmaceuticals ('VRNA') is a therapeutics company focused on innovative treatments for chronic obstructive pulmonary disease (COPD). Their lead product Ohtuvayre (ensifentrine) was approved in the US for the treatment and maintenance of COPD in mid-2024. The molecule offers a differentiated mechanism of action in so far as combining bronchodilator and anti-inflammatory activity in a twice daily compound that is delivered via a nebuliser. Compared to other COPD agents, the initial launch trajectory of Ohtuvayre has been impressive and the drug has blockbuster potential.

Conclusion

As discussed previously, healthcare as an industry sector and Mid-Cap growth stocks as an asset class have been significantly challenged in recent years, for a number of reasons that are not directly related to the intrinsic quality of the businesses themselves. This has adversely impacted the Company's relative and absolute returns for its investors. It feels especially ironic that the sector has been so overlooked when it is surely a poster-child for learnings from big data and artificial intelligence; few industries are so data-driven in formulating new products and technologies or were so early to embed AI into core products and services.

Although the new administration in the United States is upending longstanding conventions around trade and international co-operation in ways that make its ultimate conclusions unclear, we can take some comfort from the inescapable fundamentals that underpin healthcare demand, alongside a pledge from the administration not to interfere with certain social welfare programs. It should ultimately prove to be a safe port in a storm.

Beyond this, we continue to see boundless opportunities for incremental innovations to continue to improve the healthcare delivery paradigm, and remain convinced that investing into these trends will deliver positive returns for investors.

Paul Major and Brett Darke

Bellevue Asset Management (UK) Ltd

14 March 2025

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.

AMENDMENTS TO THE INVESTMENT POLICY AND RETURN OBJECTIVES

The Board is seeking shareholder approval at the AGM to change the Company's investment policy to raise the upper limit of the number of holdings in the Company's portfolio from 35 to 45, to reduce volatility, and in addition proposes to simplify the Company's specific return objectives that form part of the Company's investment objective. 

Investment policy

At present, the maximum number of stocks that may be held in the Company's portfolio at any one time is 35. The Board proposes changing the investment policy so the portfolio can comprise up to 45 stocks at any one time, to reduce volatility of the portfolio.

One of the key aspects to the investment proposition is the selection of a core, high conviction portfolio driven by the Investment Manager's fundamental analysis. The fundamental strategy remains unchanged, and the Company will continue to invest in a relatively concentrated portfolio of listed or quoted equities in the global healthcare industry. This strategy has tended to result in a portfolio of small and mid-cap healthcare companies, and eschewed ownership of the mega-cap companies that dominate the weightings within major healthcare benchmark indices. The Board agrees with the Investment Manager that such an approach continues to be the most attractive option on a fundamental basis.

However, there has been a widespread dislocation in financial markets since the world exited the COVID-19 pandemic, which has led to a significant concentration of investor returns in a limited number of mega-cap companies, and healthcare is no exception to this. One consequence of this has been a material increase in volatility for small and mid-cap stocks versus large and mega-cap stocks. Over the past year, the Investment Manager has been seeking to mitigate the impact of this trend through a different approach to the concentration of the positions held by the Company, and this has been successful in reducing volatility.

Following discussions with the Investment Manager, the Board considers it beneficial for the Company's portfolio to be able to consist of up to 45 stocks at any one time to enable this approach to be taken further. The limit of 45 will not include any stocks that are inactive, meaning that the stock is in a company which (i) has either had its primary listing cancelled or suspended for a continuous period of at least 90 days and/or (ii) is subject to insolvency or winding-up proceedings or any proceedings having an analagous effect.

The actual number of investments in the Company's portfolio may vary from time to time depending on the availability of opportunities in the market.

Subject to shareholder approval of the proposed changes to the investment policy at the AGM, the Company's investment policy will be amended as follows (with the proposed new wording shown as underlined text and the proposed deletions shown as struck through text):

"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 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 45 holdings. The Company typically seeks 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 Health Care Index (in sterling) is 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.

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."

Return objectives

Since its launch in 2016, the investment objective of the Company has been to provide shareholders with capital growth and income over the long term, through investment in listed or quoted global healthcare companies.

The Company's current specific return objectives are:

(i) to beat the total return of the MSCI World Health Care 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.

The Board is proposing an amendment to update and simplify these to one simple, clear target against which to measure performance.

The Company's return objectives (which form part of its investment objective) will be amended as follows (with the proposed new wording shown as underlined text and the proposed deletions shown as struck through text):

"The investment objective of 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 objective shall be for its NAV per share (on a total return basis): (i) to beat the total return of the MSCI World Health Care 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."

The amendments to the investment policy are subject to shareholder approval at the AGM but the proposed change to the return objectives is not conditional on shareholder approval and will take effect from 17 March 2025.

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 gain of £160,000 (2023: loss of £1,147,000). The Company's capital return after tax for the year amounted to a gain of £73,574,000 (2023: loss of £119,891,000). Therefore, the total return after tax for the Company was a gain of £73,734,000 (2023: loss of £121,038,000).

The Company targeted a total dividend for the year ended 30 November 2024 of 5.04p per Ordinary Share.

· Interim dividend of 2.52p paid on 29 August 2024

· Final dividend of 2.52p to be paid on 30 May 2025

(to Shareholders on the register at the close of business on 2 May 2025), subject to Shareholder approval at the AGM to be held on 23 April 2025.

TARGET TOTAL DIVIDEND FOR THE YEAR ENDING 30 NOVEMBER 2025

For the financial year ending 30 November 2025, the target total dividend will be 5.40p per Ordinary Share, this being 3.5% of the audited net asset value per Ordinary Share of 154.32p (including current financial year revenue items) as at 30 November 2024. The Board intends to declare an interim dividend of 2.70p per Ordinary Share, being half of the target total dividend for the financial year ending 30 November 2025, in July 2025 and intends to pay this dividend in August/September 2025. The Board intends to propose a final dividend of 2.70p per Ordinary Share for the financial year ending 30 November 2025, in February/March 2026 and intends to pay this dividend in March/April 2026.

FIVE YEAR DIVIDEND PERFORMANCE

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 2021 to 30 November 2024 was -7.0%. The total return of the MSCI World Healthcare Index (in sterling terms) over the same period was 18.3%.

The Investment Manager's report incorporates a review of the highlights during the financial year ended 30 November 2024. 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 2021 to 30 November 2024 was -7.0%.

(iii) To meet its target total dividend in each financial year

The Company targeted a total dividend of 5.04p per Ordinary Share for the year ended 30 November 2024. The Company paid an interim dividend of 2.520p per Ordinary Share in August 2024 and proposes a final dividend in respect of the year to 30 November 2024 of 2.520p 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 8.5% discount to the NAV as at 30 November 2024 (2023: 10.3% 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 2024 the Company's ongoing charges figure calculated in accordance with the Association of Investment Companies ("AIC") methodology was 1.03% (2023: 1.02%).

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.

As part of the risk review, the Board considered the challenging global economic and geopolitical environment including: the continuing effects of the Russia/Ukraine war; the Israel/Hamas conflict with resultant Middle East effects; tensions between China/Taiwan and China/USA, with attendant global supply chain issues; the increased probability of imposition of trade tariffs; and the risks from climate change. Inflation and interest rates were also discussed.

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 interest rates, inflation, exchange rates, recession, taxes and changes in supply and demand can all pose a threat to 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 the selection of a high conviction portfolio driven by the Investment manager's fundamental analysis. The maximum number of stocks being held at any one time is 35 (currently). This Investment approach does not propose to follow a benchmark and as such cannot be expected to reflect the benchmark 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.

During the year under review, the Committee considered the Company's investment performance from the perspective of risk management. The Company's concentrated high conviction portfolio is selected from bottom-up research resulting in a tendency to select smaller mid-sized companies which has adversely impacted the resulting performance. Another factor impacting investment performance has been the Company's long-term focus.

Nonetheless, the Committee, in conjunction with the Investment Manager have reviewed their approach, reflecting on potential changes that would improve performance, without deviating from the mandate to invest into healthcare transformation that the Company has followed since inception. In conjunction with Bellevue Group, the Investment Management team reviewed a wide range of metrics relating to trading, timing, risk management and fundamental approach. Whilst the investment mandate has not changed, this analysis revealed a few aspects in the investment process where small alterations may lead to improved performance.

The analysis suggested that, whilst identification of themes and trends was very robust, the Investment Manager tended to be rather early to buy into these and, where they narrowed down the list of highly operationally-geared assets into such trends, one might be better picking the best two or three ideas, rather than trying to select a single holding. The Investment Manager has gradually been implementing this revised approach across the second half of 2024 and the Committee believe that it has helped recent performance.

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 a 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 and website 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 on an ad hoc basis if required.

(II) FINANCIAL RISKS

The Company's investment activities expose it to a variety of financial risks which include liquidity, currency, leverage, interest rate, credit risks and country-specific withholding tax rates.

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 US dollar vs sterling 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 18 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 in the Directors' 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, data records being compromised and 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

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 changes to service providers, with NSM Funds (UK) Limited appointed as Company Secretary and Fund Administrator on 10 April 2024. There have also been recent changes to the senior management of a number of service providers including at the Bellevue Asset Management Board level in Switzerland. 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, covering information technology security, which provides comfort to the Board that appropriate safeguards are in place. 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. All physical locations have security in place and all third-party service providers have disaster recovery plans.

(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 risk has reduced over time as the Investment Manager's team grows in experience and resources expand in both the investment management and administration teams. This risk rating remains unchanged from the previous year. The Board meets regularly with other members of the wider team employed by the Investment Manager.

(VI) BUSINESS INTERRUPTION

Disruption or failure in services provided by key service providers, could mean information is not processed correctly or in a timely manner, resulting in misappropriation of assets, 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 Investment Manager, Administrator and Company Secretary each have comprehensive business continuity plans which facilitate continued operation of the business in the event of a service disruption or a major disruption event. The Audit and Risk 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 Audit and Risk Committee. The Depositary reports regularly 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.

(VII) ESG AND CLIMATE CHANGE RISK

The Company does not opt for a UK SDR investment label since it does not pursue distinct sustainability objectives in accordance with the four UK SDR categories. However, it considers ESG factors in its investment process.

The financial risks from climate change are typically classified as physical or transitional risks. Physical risks are those arising from specific weather events (such as wildfires) and transitional risks are those arising from the changes to regulations (such as the move to net-zero carbon emissions). 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 has deployed 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 is certified as carbon neutral by Swiss Climate.

In 2022, Bellevue introduced a minimum threshold of 50% "Investments with Sustainable Characteristics" for the Company portfolio. This is defined by sufficient ESG research coverage, a minimum ESG Rating of BB or higher, and compliance with global norms. In addition, the Company must have a minimum of 25% of the portfolio qualifying as "Sustainable Investments", of which more information can be found in the Annual Report. As of 30 November 2024, 76% of the investment portfolio met the definition of "Sustainable Investments", well above the 25% minimum threshold and reflects an improvement over the prior period, which is likely influenced by the market capitalisation characteristics of the portfolio.

The Company's ESG statement is updated annually and is available on the AIC website and in the Annual Report. Investment trusts are currently exempt from TCFD disclosure, but the Board will continue to monitor the situation.

(VIII) COMPANY STRUCTURE

The Company structure is such that it has a redemption facility through which Shareholders may request the redemption of all or part of their holding of Ordinary Shares on an annual basis. The Board has considered the possibility that Shareholders holding a significant percentage of the Company's shares continue to request redemption and therefore consider the structure of the Company to be a principal risk.

Management of risk

As outlined in the Company's Prospectus, the Directors have absolute discretion to accept or decline in whole or part any redemption request. While the Board does not generally expect to exercise this discretion, reliance cannot be placed on the Directors exercising their discretion to permit redemption requests, should Shareholders continue to redeem.

Viability Statement

The Directors have assessed the viability of the Company for the five years to 30 November 2029 (the "Period"), which the Directors consider to be an appropriate time horizon, taking into account the long-term nature of the Company's investment objective and recommendation by the Financial Reporting Council.

In reaching this conclusion, the Directors have considered each of the principal and emerging risks, including climate change and the liquidity and solvency of the Company over the next five years. The Directors do not expect there to be any significant change in the current principal risks and adequacy of the mitigants in place over the Period.

The Directors have considered the Company's income and expenditure projections and the fact that the Company's investments comprise readily realisable securities, which could, if necessary, be sold to meet the Company's funding requirements. The expenses of the Company are predictable and modest in comparison with the assets in the portfolio. Portfolio changes and market developments are discussed at quarterly Board meetings. The internal control framework of the Company is subject to a formal review on at least an annual basis.

The Directors do not expect there to be a material increase in the annual ongoing charges ratio of the Company over the Period. The Company's income from investments and cash realisable from the sale of its investments provide substantial cover to the Company's operating expenses under all stress test scenarios reviewed by the Directors.

The Company has a redemption facility through which Shareholders are entitled to request the redemption of all or part of their holding of Ordinary Shares on an annual basis. At the last redemption point of 30 November 2024, redemption requests in respect of 163,834,887 Ordinary Shares were received, all of these Ordinary Shares were redeemed and cancelled by the Company. All shareholders who validly applied to have shares redeemed received a Redemption Price of 154.76 pence per share.

The Board has considered the possibility that Shareholders holding a significant percentage of the Company's shares continue to request redemption. The Board, however, has absolute discretion over the redemption facility to accept or decline in whole or in part any redemption request, and decisions are subject to Board approval, which must have regard to the overall operation of the Company in this situation.

As previously outlined, the Board consider the Company to be viable for the next five years and have given consideration to the asset base of the Company, the Company structure and market opportunities. It is the view that the Company is currently viable and the viability is not threatened by the structure, as the directors have absolute discretion over the redemption procedures including whether to offer a redemption facility at all. Additionally, the portfolio continues to be able to be liquidated to meet funding requirements as they fall due. The Directors' assessment assumes that the redemption facility does not threaten the existence or viability of the Company, it can be managed or changed at the absolute discretion of the Board.

In addition to considering the emerging and principal risks as outlined on in the Annual Report and the financial position of the Company as described above, the Board has also has regard to the following assumptions in considering the Company's longer term viability:

· The continuing relevance of the Company's investment objective and policy in the current environment;

· That healthcare will continue to be an investable sector and investors will still wish to have an exposure to such investments;

· The level of demand for the Company's shares, and that since launch the Company has been able to issue further shares;

· That closed ended investment trusts will continue to be wanted by investors;

· The gearing policy of the Company;

· That regulation will not increase to such an extent that makes the running of the Company uneconomical in comparison to other competitor products

Based on their assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due in the Period.

Stakeholder Engagement

This section of the Annual Report covers the Board's considerations and activities in discharging their duties under s.172(1) of the Companies Act 2006, in promoting the success of the Company for the benefit of its members as a whole.

This statement includes consideration of the likely consequences of the decisions of the Board in the longer term, how the Board has taken wider stakeholders' needs into account and the impact of the Company's operations on the environment.

The Board is ultimately responsible for all stakeholder engagement. As an externally managed investment company, the Company does not have any employees; rather it employs external suppliers to fulfil a range of functions, including investment management, secretarial, administration, public relations, corporate brokering, depositary and banking services. All of these service providers who are stakeholders in the Company themselves help the Board to fulfil its responsibility to engage with the Shareholders and other stakeholders.

The Board has identified the major stakeholders in the Company's business. On an ongoing basis the Board monitors both potential and actual impacts of the decisions it makes in respect of the Company upon those major stakeholders identified.

In summary, the Directors are cognisant of their duties enshrined in Section 172 of the Companies Act 2006 to make decisions taking into account the long-term consequences of all the Company's key stakeholders and reflect the Board's belief that the long-term sustainable success of the Company is linked directly to its key stakeholders.

Environmental, Social and Governance ("ESG") Policy

OVERVIEW

This section summarises the incorporation of ESG factors from both a company perspective, i.e. Bellevue Healthcare Trust ('the Company' or 'the Trust') and from the Bellevue Asset Management ("Bellevue") perspective, as the appointed investment manager. "We" and "Our" refer to employees of the Bellevue Group of companies. Both Bellevue Asset Management (UK) Ltd. and the Trust remain out of scope for both the UK climate-related reporting requirements and the EU Corporate Sustainability Reporting Directive.

MANAGEMENT OF ESG FACTORS WITHIN THE BELLEVUE HEALTHCARE TRUST INVESTMENT PORTFOLIO

The Bellevue Healthcare Trust does not opt for an UK SDR investment label since it does not pursue distinct sustainability objectives in accordance with the four UK SDR categories. However, ESG considerations are embedded in the fundamental investment process across Bellevue's diverse range of managed products and the Trust is no exception.

Formal ESG guidelines cover areas such as compliance with global norms, value-based exclusions, controversies, climate change factors and active ownership. These also preclude investments into Companies involved in serious violations of internationally recognised norms regarding the environment, human rights and business ethics, as well as those engaging in controversial business activities that exceed Bellevue's stated revenue thresholds.

The Trust's healthcare focus makes it very unlikely that any excluded companies would ever come into scope in the first place. However, there have been a number of investment opportunities since the Trust's inception that were rejected because the companies did not comply with our broader ESG principles. The most common reasons for negative screen-outs continue to be governance structure and/or reporting quality.

The assessment of ESG considerations is often over-simplified to the level of significant controversies or an aggregated ESG score provided by third party agencies. We remain firmly of the view that the process must avoid the pitfalls of an over-simplified "one size fits all" approach.

Bellevue continues to use MSCI ESG reports for qualitative and quantitative external data. The scope and quality of external ESG assessments remain variable, although the situation continues to improve. Where MSCI ESG data is not comprehensive, we utilise other third-party data providers alongside our internal evaluations.

Bellevue encourages investee companies to interact with these third-party agencies to clarify any misunderstandings in their reports. We have seen further progress in this area, with some portfolio companies that were previously viewed as ESG laggards - often unjustly, in our opinion - experiencing significant enhancements in their ratings through direct engagement.

External ESG reports are only part of the process; we have our own qualitative criteria that form the basis of decision-making. We do not apply specific scoring criteria for exclusion from our portfolio because we feel such an approach has significant limitations. Rather, we see scores as tools to consider within a much more comprehensive and holistic framework.

THIRD PARTY DATA METRICS

Portfolio-level data and comparables for the reference Index are summarised in Figure 1 below.

As noted previously, assessments of quantitative ESG parameters require careful consideration due to various issues present in third-party data that can complicate comparisons.

ESG Rating and Quality Scores for the reference MSCI World Healthcare Index have again declined slightly when compared to the prior period. MSCI altered its ESG rating methodology in May 2023 by removing the so-called adjustment factors from the calculation of the ESG Quality Score, which was inadvertently favouring the larger companies that dominate such benchmarks.

The Governance Score of the portfolio remains high. The individual components within the table are outputs from MSCI ESG; we do not target any specific thresholds for these individual items in our ESG assessment process.

Figure 1 ESG ratings of portfolio and index

We are hopeful that scoring methodologies will continue to be adjusted to better aid comparability across the company size spectrum.

RESPONSIBLE STEWARDSHIP

Responsible investing does not end with due diligence; the importance of ongoing engagement with management teams cannot be overstated. Active fund management arguably derives a material proportion of its longer-term alpha generation opportunities through the ability to proactively consider, debate and influence (via the exercising of voting powers) potential issues at investee companies.

Bellevue takes voting obligations seriously and there are multiple structures in place to ensure that we vote in all shareholder meetings. While we evaluate external proxy agency reports when considering how we might vote, we do not outsource our voting to a third party and are happy to go against both their recommendations and the wishes of management, when we consider it important to do so. Over the period in review, we participated in 35 votable meetings (covering 297 resolutions) and Figures 2 and 3 below summarise how we voted in these meetings:

Figure 2 Overall voting statistics

Meeting Overview

Ballot Overview

Figure 3 Detailed voting breakdown

Proposal Overview

Engagement with voting is only part of the process. Pragmatically, we are but one of many voices and it may be the case that even after a multi-year engagement with management and exercising our voting power we have not been able to elicit change. In such a situation, we would consider divesting our holding, depending on the materiality of the issues.

We have yet to divest a holding due to ESG considerations, which attests to the robustness of the initial screening approach in avoiding controversies. We are quite happy to exit positions when we lose confidence in management or strategy and there are several historical examples of such situations during the Company's lifetime.

TRUST-SPECIFIC EXCLUSION CRITERIA AND TOLERANCE THRESHOLDS

It would be very easy to claim that one has a blanket ban on investing in everything that's bad or that all one's investments are sustainable. However, some points of view are subjective and some things are what they are: for instance, every human healthcare company is involved in supporting animal testing to some degree.

Finally, one must recognise that rarely are matters so clear cut as to be able to definitively state a company has zero involvement or exposure to a controversial area; one can easily take exposures off the balance sheet via outsourcing; animal testing is often outsourced, for example.

With these realities in mind, it makes more sense to operate by a set of guiding principles based on data that can be simply ascertained from management and that are realistically achievable for the portfolio overall.

Bellevue agreed an expansive list of thresholds with the Board of the Company that came into effect from 1 January 2022 and set revenue threshold exposure levels to specific criteria. More information can be found on the Bellevue Group website www.bellevue.ch/ch-en/private/about-us/sustainability

With respect to the EU Sustainable Finance Disclosure Regulation (SFDR), the Bellevue Healthcare Trust is an Article 8 product. It does not include any sustainability claims in its investment objectives, but does take ESG factors and thresholds into account when making investment decisions. All related disclosure documents (incl. ESG disclosure report, pre-contractual disclosure, periodic disclosure and corporate ESG report) are published on the Company's website.

Both Bellevue Asset Management (UK) Ltd. and the Trust remain out of scope for both the UK climate-related reporting requirements and the EU Corporate Sustainability Reporting Directive.

Other Information

ENVIRONMENTAL MATTERS

The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

Investment trusts are currently exempt from TCFD disclosure, but the Board will continue to monitor the situation.

EMPLOYEES

The Company has no employees. As at 30 November 2024 the Company had five Directors, three of whom were male (60%) and two of whom were female (40%). The Board's policy on diversity is contained in the Corporate Governance Report.

SOCIAL, COMMUNITY AND HUMAN RIGHTS ISSUES

Having no employees, the Company, as an investment company, has no direct impact on social, community, environmental or human rights matters.

MODERN SLAVERY DISCLOSURE

Due to the nature of the Company's business, being a company that does not offer goods or services to consumers, the Board considers that it is not within the scope of modern slavery.

The Board considers the Company's supply chains, dealing predominantly with professional advisers and service providers in the financial service industry, to be low risk in relation to this matter.

CONSUMER DUTY

The Company and Investment Manager are fully cognisant of the rules which came into force on 31 July 2023 and have taken the necessary steps to ensure compliance.

OUTLOOK

The outlook for the Company is discussed in the Investment Manager's Report.

STRATEGIC REPORT

The Strategic Report set out on in the Annual Report was approved by the Board of Directors on 14 March 2025.

For and on behalf of the Board

Randeep Grewal

Chairman

14 March 2025

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

14 March 2025

Financial Statements

Statement of Comprehensive Income

for the year ended 30 November 2024

There is no other comprehensive income and therefore the 'Profit for the year' is the total comprehensive income for the year.

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 in the Annual Report form and integral part of these financial statements.

Statement of Financial Position

as at 30 November 2024

Approved by the Board of Directors on and authorised for issue on 14 March 2025 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 2024

For the year ended 30 November 2023

The Company's distributable reserves consist of the special distributable reserve, revenue reserve and capital reserve attributable to realised profit totalling £431,417,000 (30 November 2023: £43,025,000). The capital redemption reserve is non-distributable.

The Company can use its distributable reserves to fund dividends, redemptions of Ordinary Shares and share buy backs.

Statement of Cash Flows

for the year ending 30 November 2024

* Cash inflow from dividends for the financial year was £756,000 (2023: £765,000). Bank deposits interest income received during the year was £2,275,000 (2023: £1,547,000).

The table below shows the movement in liabilities arising from 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, formerly BB Healthcare Trust plc, is a closed-ended investment company, registered in England and Wales on 7 October 2016. The Company's registered office is 4th Floor 46-48 James Street, London, W1U 1WEZ. 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 2023 to 30 November 2024.

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 in 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 International Accounting Standards, 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 wars in Ukraine and the Middle East 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 2026, which is at least 12 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.

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 so as to create a new special distributable reserve which may be treated as distributable reserves and out of which tender offers and share buybacks may be funded. This reserve may also be used to fund dividend payments. In December 2023 the Board obtained approval from the High Court to transfer a further £617,709,000 from the share premium account into the special distributable reserve.

The Company's distributable reserves consist of the special distributable reserve, revenue reserve and capital reserve attributable to realised profit.

Capital redemption reserve

The capital redemption reserve reflects the nominal value of redeemed Ordinary Shares.

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.

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 accruals 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 accruals 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 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 bank loans payable that are initially recognised at the fair value of the consideration received, net of directly attributable costs, and subsequently recognised at amortised cost.

(i) Adoption of new IFRS standards

A number of new standards and amendments are effective for the annual periods beginning on or after 1 January 2023. None of these have a material impact on the measurement of the amounts recognised in the financial statements of the Company.

(j) 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 2024. None of these are expected to have a significant effect on the measurement of the amounts recognised in the financial statements of the Company.

(k) 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. Ordinary Shares participate in dividends and any other profits of the Company.

Redeemed Ordinary Shares are derecognised, and a liability recognised, once the redemption process has been completed, and there is a legal obligation to cancel the shares. The nominal value of the redeemed Ordinary Shares is transferred to the capital redemption reserve.

(l) 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. Total investments sold during the year ended 30 November 2024 amounted to £949,527,000 (30 November 2023: £533,108,000).

Transaction costs on investment purchases for the year ended 30 November 2024 amounted to £189,000 (30 November 2023: £90,000) and on investment sales for the financial year to 30 November 2024 amounted to £311,000 (30 November 2023: £167,000).

(c) Gains / (losses) 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 prior year. For 2023, the board applied a discount taking into account the projected impact of the suspension on the price movement, as well as other factors directly related to Venus MedTech. As at the 30 November 2024 year end the Board in consultation with the AIFM's Valuation Committee has decided to write down the investment to a nil valuation.

The movement in the Level 3 unquoted investments during the year is shown below:

There were no transfers between levels during the year ended 30 November 2024 (30 November 2023: one)

5. INVESTMENT AND INTEREST 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

The audit fee for the current year comprises an additional non-recurring fee for procedures performed for the change of administrator of £2,000 and £6,000 in relation to the additional procedures on the calculation of the Redemption Pool, this has been recognised as a redemption costs in the special distributable reserve.

8. FINANCE COSTS

9. TAXATION

(a) Analysis of tax charge for the year:

(b) Factors affecting the tax charge for the year:

The effective UK corporation tax rate for the year is 25% (2023: 23.00%). 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 a total gross tax loss of £64,058,267 (2023: £53,398,267) and as a result an unrealised deferred tax asset of £16,014,567 (2023: 13,350,000) 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 2024. 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 2024 of 458,515,182 (30 November 2023: 548,691,353). Management Shares and shares held in treasury 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. Under the terms of the RCF, the Company could draw down loans up to an aggregate value of USD 280 million. On 24 October 2024 the Company amended the RCF, under the terms of the amended RCF, the Company could draw down loans up to an aggregate value of USD 100 million. The RCF was renewed in December 2024 and the Company amended the terms so that it could draw down loans up to an aggregate value of USD 125 million. The facility will expire in December 2025.

As at 30 November 2024, the aggregate of loans draw down was £Nil (2023: £31,696,000).

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.

13. OTHER PAYABLES

Redemption payable

On 14 October 2024 the Company announced that 163,834,887 Ordinary Share redemption requests had been received for the 2024 redemption point (the "2024 Redemption"). The Board resolved to effect the 2024 Redemption using a redemption pool to which the Company notionally divided its assets and liabilities into two pools, the redemption pool and continuing pool. The value to be returned was determined to be the realisation value of the redemption pool assets, after deducting the costs of the redemption, and a pro-rata share of the costs and expenses of the Company not attributable to a particular pool. On 29 November 2024 the calculated redemption price was 154.76 pence per share (including dividends and bank interest received) and the 163,834,887 redeeming Ordinary Shares were cancelled with effect from 29 November 2024. As per IAS 32 and relevant accounting standards the redemption liability crystalised when the shares were cancelled and the former holders of Redemption Shares are now creditors of the Company.

The 2023 redemption payable 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 was 142.07718 pence per share.

14. SHARE CAPITAL

Share Movement

During the year to 30 November 2024, 15,383,772 Ordinary Shares (30 November 2023: 16,398,646) were bought back into treasury through the Company's share buyback programme.

2024 Redemption

The Company received redemption requests for 163,834,887 Ordinary shares in respect of the 2024 redemption offer which represented 36.34% of the issued capital, see note 13 for further details. The 163,834,887 Ordinary Shares redeemed were cancelled with effect from 29 November 2024.

15. DIVIDEND

The dividend relating to the year ending 30 November 2024, which is the basis on which the requirements of Section 1159 of the Corporation Tax Act 2010 are considered is detailed below: