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| Name | Symbol | Market | Type |
|---|---|---|---|
| Wellcome 4.625% | LSE:57MC | London | Bond |
| Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.55 | 0.57% | 97.00 | 95.30 | 98.70 | 0 | 16:35:14 |
From Dec 2019 to Dec 2024
TIDM57MC
RNS Number : 6169I
Wellcome Trust Finance plc
15 December 2020
Wellcome Trust Finance plc
Annual Report and Financial Statements
Wellcome Trust and Wellcome Trust Finance plc (a wholly owned subsidiary of The Wellcome Trust Limited as trustee of the Wellcome Trust) announce that they have each published their Annual Report and Financial Statements for the year to 30 September 2020 today. A copy of each document is available on the Wellcome Trust website .
Wellcome Trust has today issued the following press release in connection with the publication of its Annual Report and Financial Statements:
Covid-19 has been an extraordinary challenge for everyone this year and has highlighted that the charitable mission of the Wellcome Trust has never been more important. Wellcome has been at the heart of the global scientific response to the pandemic, generating, supporting, coordinating and funding vital research. The mission is entirely funded from our investment portfolio, so we are pleased to report that our investment portfolio recorded a total return of 12.3% per cent, or 11.2% after inflation, for the year to 30 September 2020. Charitable expenditure in support of our mission was GBP1.1 billion and the investment base rose to approximately GBP29.1 billion.
We have returned 212% per cent cumulative (12.1% per cent annualised) in the decade since September 2010, recording positive returns in each of these years. Returns have been 340% per cent cumulative (7.7% per cent annualised) over 20 years. Since the inception of our investment portfolio in 1985, it has provided a total return averaging 13.7% per cent a year.
We maintain a AAA/Aaa (stable) credit rating. Leverage(1) stood at 7.2% at 30(th) September. There were no new bond issues during the financial year.
On the back of this performance, we aim to maintain the real level of charitable spending for our core activities at current record levels at least until 2022. We will continue to review future allocations in the light of the performance of the endowment and the pipeline of projects suitable for funding.
We saw positive returns in each of the asset classes in which we invest (public equity, private equity, venture capital, hedge funds and property). We also saw meaningful realised gains from hedging activities over both equity indices and foreign exchange markets. All have maintained their strong long-term track records. Sterling strength was a slight headwind to returns this year. Our Sterling exposure remained slightly above our minimum 15% level throughout the period.
Baroness Manningham-Buller, Chair of the Wellcome Trust, said: "I am delighted to report a year of exceptionally strong gains, despite a tumultuous period of extreme disruption caused by the Covid-19 virus . The pandemic has shown that Wellcome's mission has never been more important. The strong long-term performance of the investment portfolio has provided Wellcome with the means to spend over GBP10 billion on our charitable activities since I joined the Board. We are grateful to the Investment Team for making this possible."
Nick Moakes, Chief Investment Officer and Managing Partner of the Investment Division at Wellcome, added: "The portfolio has performed extremely well in very challenging circumstances. Our focus has been, firstly on providing ample liquidity to fund the mission, and secondly on ensuring that the portfolio emerged from the crisis in even better shape. Previous sales of low conviction positions and selected portfolio hedges early in the year gave us plenty of liquidity and put us in an excellent place to benefit from the rebound in markets after the aggressive policy response in March. However, double digit real returns are the exception not the norm. We remain prepared for a more difficult environment in the future when extraordinary global economic support measures eventually get withdrawn."
Wellcome Trust Finance plc further announces that a copy of its Annual Report and Financial Statements for the year ended 30 September 2020 has been submitted to the National Storage Mechanism, and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
In accordance with the Disclosure and Transparency Rules, the following information is taken from the Annual Report and Financial Statements for Wellcome Trust Finance plc for the year ended 30 September 2020:
([1]) Leverage is an Alternative Performance Measure, defined and reconciled in the Wellcome Trust Annual Report and Financial Statements for the year to 30 September 2020
Wellcome Trust Finance plc
Annual Report and Financial Statements
Year ended 30 September 2020
Strategic Report
The directors of Wellcome Trust Finance plc (the "Company" and the "Directors") present their strategic report for the year ended 30 September 2020 (the "Strategic Report").
Strategy and objectives
The principal activity of the Company is to meet its obligations relating to the bonds that it has previously issued and admitted to trading on the London Stock Exchange and to continue to lend the proceeds to other group entities.
Review of the business and future developments
The Company issued two tranches of bonds: GBP550 million on 25 July 2006 of 4.625% Guaranteed Bonds due July 2036 and GBP275 million on 28 May 2009 of 4.750% Guaranteed Bonds due May 2021 (the "Bonds"). The Bonds are admitted to trading on the London Stock Exchange. The obligations of the Company in relation to the Bonds are governed by Trust Deeds between the Company, the Wellcome Trust Limited, as trustee of the Wellcome Trust, and Citicorp Trustee Company Limited, as the trustee for the holders of the Bonds. The payment of all amounts due in respect of the Bonds is unconditionally and irrevocably guaranteed pursuant to the terms of a guarantee given by The Wellcome Trust Limited, as corporate trustee of the Wellcome Trust; the guarantee is part of the Trust Deeds.
The Company loaned the proceeds from the Bonds to Wellcome Trust group (the "Group") undertakings and receives interest on these loans.
On 15 May 2020 the GBP245.5 million loan made by the Company to Wellcome Trust Investment Limited Partnership was novated by Wellcome Trust Investment Limited Partnership to The Wellcome Trust Limited as trustee for the Wellcome Trust. As this was novated to another group entity, there has been no impact on Wellcome Trust Finance Plc's financial position.
In May 2021 the Company will receive repayment of the GBP275 million principal and accrued interest arising from the Loan to group undertakings called 'Loan (new bond)' and the Company will pay the bondholders the GBP275 million principal and accrued interest due on the May 2021 Bonds. The Company will continue to receive interest on the other loans to Group undertakings and pay interest on the July 2036 Bond liabilities for the foreseeable future. The Company has not issued any bonds during the year and does not expect to issue any bonds in the near future.
Results for the year
The Company made a profit of GBP3,434,938 (2019: GBP 3,404,231 ) during the year ended 30 September 2020. As at 30 September 2020 the Company had net assets of GBP137,500,000 (2019: GBP137,500,000).
Key performance indicators
Due to the nature of the Company's operations, the key performance measures are that the Company meets all its legal obligations to the Bond holders and that the Company achieves sufficient return on its assets to be profitable before any donations to the Wellcome Trust as Gift Aid. During the year the Company met all its legal obligations to the Bond holders and made a net profit before donations to Wellcome Trust as Gift Aid.
Financial risk management objectives and policies
The Directors of the Company implement policies to manage the inherent risks relating to the financial assets and liabilities of the Company.
The Directors have assessed for each financial asset and liability: the market risk, currency risk, interest rate risk, liquidity risk, and credit risk exposure. The Company is not exposed to significant market risk or interest rate risk
Financial risk management objectives and policies (continued)
because the Company's main financial assets have fixed redemption values, fixed interest rates and fixed maturity dates, which match those of its financial liabilities. The currency risk exposure is limited to the payment of one administrative expense amount per annum. The liquidity risk of the Company is mitigated by the matching of the cash flows from the Company's financial assets and liabilities. Credit risk exposure of the Company's loans is reduced by the Company only advancing loans to entities within the Group. Credit risk exposure of the Company's remaining financial assets is reduced by stringent selection procedures for any external counterparties with which the Company transacts.
The risks associated with Brexit are considered at a group level and documented within the Risk Management section of the Wellcome Trust Annual Report and Financial Statements 2020 which are available from Wellcome's website ( wellcome.org/what-we-do/reports ).
COVID 19 has not caused a material risk to the assets held, although the impact of COVID 19 has influenced the economic environment.
The Company's internal control and risk management is undertaken as part of the Wellcome Trust's processes, which are detailed in the Wellcome Trust Annual Report and Financial Statements, available at wellcome.org/what-we-do/reports . The key elements of this specifically applicable to the Company are:
-- delegation: there is a clear organisational structure with documented lines of authority and responsibility for control and documented procedures for reporting decisions, actions and issues; and
-- review: the Group Audit and Risk Committee reviews the effectiveness of the Company's internal control, its financial reporting process, the independence of its statutory auditors and its compliance with relevant statutory and finance regulations and advises the Directors of the Company of any relevant matters.
Section 172 statement
The Board of Directors, in line with their duties under s172 of the Companies Act 2006, act in a way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole, and in doing so have regard to a range of matters when making decisions for the long term.
The key stakeholders of the Company are considered to be Wellcome Trust (as the sole member), the other Wellcome Trust Group entities and the holders of the Bonds. We ensure that the requirements of s172(1) Companies Act 2006 are met and the interests of our stakeholder groups are considered through a combination of the following:
-- The Board sets the Company's purpose and strategy which considers the long-term sustainable success of the Company and our impact on key stakeholders. The key purpose is discussed under Key performance indicators above.
-- The Board's risks management procedures identify the principal risks facing the Company, and the mitigations in place to manage the impact of these risks. This is discussed under Financial risk management objectives and policies above.
-- The company has no employees and no carbon generating assets. The Wellcome Trust group's consideration of Social Responsibility, including Climate change and energy transition is discussed in their Annual Report and Financial Statements.
Corporate and social responsibility
Due to the nature of its activities the Company has a minimal environmental impact. The Group's approach to social responsibility is detailed in the Wellcome Trust Annual Report and Financial Statements, which are available at wellcome.org/what-we-do/reports .
This report was approved by the Board of Directors and signed on 14 December 2020 on its behalf by:
Karen Chadwick
Director
14 December 2020
Directors' Report
The Directors of Wellcome Trust Finance plc p resent their report and the audited Financial Statements for the year ended 30 September 2020.
Future developments
These are discussed in the Strategic Report.
Going Concern and Viability
The Directors have assessed the viability of the Company and have a reasonable expectation that the Company has adequate resources to continue in operational existence and to meet any commitments as they fall due for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the annual financial statements. This assessment has considered the significant risks laid out in the Risk Management section in the Strategic Report, as well as the significant accounting estimates and judgements in note 2. The Directors have considered the impact of Covid-19 on the Company and have concluded that there are no material uncertainties related to these events or conditions that may cast doubt upon the Company's ability to continue as a going concern.
The Board of Governors of Wellcome Trust assess the viability of the group as a whole and this is laid out in the Going Concern and Viability statement in the Financial Review section of the Wellcome Trust Annual Report and Financial Statements 2020 which are available from Wellcome's website ( wellcome.org/what-we-do/reports )
Employees
There are no employees of the Company (2019: nil).
The administration of the Company is undertaken by staff from the Wellcome Trust. The Wellcome Trust has not incurred any incremental staff costs due to the administration of this Company.
Dividends
The Directors do not propose the payment of a dividend (2019: GBPnil). The Company has a policy to donate its taxable profits as Gift Aid to the Wellcome Trust.
Financial risk management objectives and policies
These are discussed in the Strategic Report.
Corporate Governance
The Company is limited by shares. Its governing documents are its articles of association. The shareholder of the company is The Wellcome Trust Limited, as trustee of the Wellcome Trust. The Company is a wholly owned subsidiary of the Wellcome Trust through its corporate trustee, The Wellcome Trust Limited. The Company is not subject to the requirements of the UK Corporate Governance Code. The governance policies of the Group and of the Wellcome Trust are included in the Wellcome Trust's Annual Report and Financial Statements for the year ended 30 September 2020.
The Group Audit and Risk Committee, the Investment Committee and the internal audit function of the Wellcome Trust oversee all group entities. The Company complies with all applicable filing and information requirements of the Financial Conduct Authority.
Directors and their interests
The Directors of the Company who were in office during the year and up to the date of signing the Financial Statements were:
Karen Chadwick
Nicholas Moakes
Peter Pereira Gray
Fabian Thehos
None of the Directors held any beneficial interest in the shares of the Company or any interest in its parent undertaking the Wellcome Trust through its corporate trustee, The Wellcome Trust Limited.
Each of the Directors is an employee of the Group and receives remuneration from the Group as an employee. No remuneration is paid to any Director for their services as a Director.
Directors' indemnity policy
The Company is party to a Group-wide directors' and officers' liability insurance policy which provides cover to all the current Directors. There are no qualifying indemnity provisions (as defined in the Companies Act 2006) that benefit the Directors of the Company.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Strategic Report, Directors' Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have prepared the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS 102 the Financial Reporting Standards applicable in U.K. and Republic of Ireland. 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 and of the profit or loss of the Company for that period. In preparing these Financial Statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Financial Statements;
-- prepare the Financial Statements on the 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 disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the Financial Statements 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 Directors are responsible for the maintenance and integrity of the company's information on its parent undertaking's (the Wellcome Trust's) website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
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.
Each of the Directors, whose names are listed in the Directors' Report confirm that, to the best of their knowledge:
-- the Financial Statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS 102 the Financial Reporting Standards applicable in U.K. and Republic of Ireland, give a true and fair view of the assets, liabilities, financial position and result of the Company; and
-- the Directors' Report contained in this section of the Annual Report includes a fair review of the development and performance of the business and the position of the company, together with a description of the principal risks and uncertainties that it faces.
Statement of disclosure of information to auditor
Each Director in office at the date of approving this report confirms that so far as the Director is aware, there is no relevant audit information of which the Company's auditor is unaware and each Director has taken all the steps that ought to have been taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's auditors is aware of that information.
Independent auditors
In accordance with Section 485 of the Companies Act 2006, a resolution dated 14 December 2020 was passed by the members re-appointing Deloitte LLP as auditors of the Company.
Events after the end of the reporting period
There have been no subsequent events requiring disclosure.
This report was approved by the Board of Directors and signed on its behalf on 14 December 2020 by:
Karen Chadwick
Director
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF WELLCOME TRUST FINANCE PLC
Report on the audit of the financial statements
1. Opinion
In our opinion the financial statements of Wellcome Trust Finance plc (the 'company'):
-- give a true and fair view of the state of the company's affairs as at 30 September 2020 and of the its profit for the year then ended;
-- have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland"; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
-- the statement of income and retained earnings; -- the balance sheet; and -- the statement of accounting policies; and -- the related notes 1 to 16.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" (United Kingdom Generally Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report.
We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council's (the 'FRC's') Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services prohibited by the FRC's Ethical Standard were not provided to the company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Hot Features
Premium
Key audit matters The key audit matter that we identified in the current
year was:
* The amortisation of bond liabilities and
collectability of intercompany loans which is
consistent with the prior year.
Within this report, the key audit matter is identified
as follows: Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
------------------- -----------------------------------------------------------
Materiality The materiality that we used for the financial statements
was GBP19.30m which was determined on the basis of
2% of total assets.
------------------- -----------------------------------------------------------
Scoping Audit work to respond to the risks of material misstatement
was performed directly by the audit engagement team.
------------------- -----------------------------------------------------------
Significant changes There are no significant changes in our approach
in our approach
------------------- -----------------------------------------------------------
4. Conclusions relating to going concern
We are required by ISAs (UK) to report in respect of the We have nothing to report in respect of these matters.
following matters where:
* the directors' use of the going concern basis of
accounting in preparation of the financial statements
is not appropriate; or
* the directors have not disclosed in the financial
statements any identified material uncertainties that
may cast significant doubt about the company's
ability to continue to adopt the going concern basis
of accounting for a period of at least twelve months
from the date when the financial statements are
authorised for issue.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
5.1. Amortisation of bond liabilities and collectability of intercompany loans
Key audit matter The company has external debt (bonds listed on the
description London Stock Exchange) of GBP825m as at 30 September
2020. This comprises two bond issues with the following
terms:
GBP550m which is repayable on 24 July 2036 at an
interest rate of 4.625% per annum; and
GBP275m which is repayable on 28 May 2021 at an interest
of 4.75% per annum.
The company also has receivables totalling GBP951m
due from its parent.
These bonds and intercompany loans are highly material
to the company as they account for 99.9% of total
liabilities and 99.9% of total assets of the company
respectively.
The bond liabilities are stated at amortised cost
using the effective interest method and requires
the calculation of the effective interest rate for
their measurement on the balance sheet as at 30 September
2020. This is performed in an amortisation schedule
prepared by management. This calculation has a material
impact on the carrying value of the bond liabilities.
In addition, the ability of the company to repay
the external debt when it matures and pay the interest
to the bond holders is dependent on the future financial
performance of the parent and their ability to repay
the intercompany loans to the company. The basis
for this collectability relies on accurate assumptions
in the future forecasts of the parent and a liquidity
position which does not indicate the need for impairment.
Loans to group undertakings are disclosed in note
8 and bond liabilities in note 9, as well as the
accounting policies note.
----------------------- ------------------------------------------------------------
How the scope With regards to the bond liabilities, we:
of our audit responded * reviewed the amortisation schedule prepared by
to the key audit management in regards to amortisation of the bonds;
matter
* obtained the original bond prospectuses to assess
whether the terms of the bonds agree to the inputs
used by management to calculate the effective
interest rate;
* recalculated the period to period effective interest
and the carried forward balance of the bond
liabilities until maturity;
* reviewed the disclosures in the financial statements
relating to bond liabilities as at 30 September 2020.
With regards to the collectability of the loans given
to the parent, we:
* performed a credit risk analysis by assessing the
current net asset and liquidity position of the
parent;
* obtained the cash flow forecast of the parent and
assessed whether the assumptions in the forecast were
reasonable;
* assessed whether the cash flow forecast and the
liquidity position of the parent suggested any
indicators of impairment.
----------------------- ------------------------------------------------------------
Key observations As a result of our procedures, we concluded that
the amortisation of bond liabilities and collectability
of intercompany loans are appropriately stated.
----------------------- ------------------------------------------------------------
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements
----------------------------------- ---------------------------------------------------------------------------------
Materiality GBP19.30m (2019: GBP19.28m)
----------------------------------- ---------------------------------------------------------------------------------
Basis for determining materiality 2% of total assets (2019: 2% of total assets)
----------------------------------- ---------------------------------------------------------------------------------
Rationale for the benchmark applied Total assets is considered as an appropriate benchmark as the principal activity
of the entity
is to issue bonds on the London Stock Exchange to provide financing to the
Wellcome Trust
Group and therefore it is the key area of interest for the users of the financial
statements.
----------------------------------- ---------------------------------------------------------------------------------
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Performance materiality was set at 70% of materiality for the 2020 audit (2019: 70%).
In determining performance materiality, we considered the following factors:
-- our risk assessment, including our assessment of the overall control environment; and
-- our past experience of the audit, which has indicated a low number of corrected and uncorrected misstatements identified in prior periods
6.3. Error reporting threshold
We agreed with the Audit and Risk Committee of the Wellcome Trust, which oversees the group entities that we would report to them all audit differences in excess of GBP965k (2019: GBP964k), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit and Risk Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
7. An overview of the scope of our audit
We have performed an audit of the company only and the company is located in the UK. The audit work to respond to the risks of material misstatement was performed directly by the audit engagement team. Our audit was scoped by obtaining an understanding of the entity and its environment, including internal control, and assessing the risks of material misstatement. Based on our scoping, we have not relied upon IT controls or taken controls reliance in performing our work.
8. Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in respect of these matters.
9. Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
10. Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Details of the extent to which the audit was considered capable of detecting irregularities, including fraud and non-compliance with laws and regulations are set out below.
A further description of our responsibilities for the audit of the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities . This description forms part of our auditor's report.
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:
-- the nature of the industry and sector, control environment and business performance
-- results of our enquiries of management and the Audit and Risk Committee, about their own identification and assessment of the risks of irregularities;
-- Any matters we identified having obtained and reviewed the company's documentation of its policies and procedures relating to:
o identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
o detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
o the internal controls established to mitigate risks related to risks of fraud or non-compliance with laws and regulations;
-- the matters discussed among the engagement team and involving relevant internal specialists, including IT specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud. In common with all audits under ISAs (UK), we are required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory framework that the company operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act and listing rules for the company's listed bonds.
11.2. Audit response to risks identified
As a result of performing the above, we did not identify any key audit matters related to the potential risk of fraud or non-compliance with laws and regulations.
Our procedures to respond to risks identified included the following:
-- reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;
-- enquiring of management, the Audit and Risk Committee and in-house legal counsel concerning actual and potential litigation and claims;
-- performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
-- reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with HMRC; and
-- in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal specialists, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
-- the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
-- the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors' report.
13. Matters on which we are required to report by exception 13.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
-- we have not received all the information and explanations we require for our audit; or
-- adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
-- the financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
13.2. Directors' remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors' remuneration have not been made.
We have nothing to report in respect of this matter.
14. Other matters 14.1. Auditor tenure
Following the recommendation of the Audit and Risk Committee we were appointed by the Company at its annual general meeting on 14 December 2015 to audit the financial statements of the Company for the period ending 30 September 2016 and subsequent financial periods.
Our total uninterrupted period of engagement is 5 years, covering periods from our appointment through to the period ending 30 September 2020.
14.2. Consistency of the audit report with the additional report to the audit and risk committee
Our audit opinion is consistent with the additional report to the Audit and Risk Committee we are required to provide in accordance with ISAs (UK).
15. Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Terri Fielding, ACA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
14 December 2020
Wellcome Trust Finance plc
Statement of Income and Retained Earnings
For the year ended 30 September 2020
Year ended Year ended
30 September 30 September
Note 2020 2019
GBP GBP
------------------------------------------- ----- ------------- -------------
Turnover 3 42,841,010 42,715,934
Operating income 42,841,010 42,715,934
Cost of sales (39,381,085) (39,236,456)
Administrative expenses 4 (24,987) (75,247)
Operating profit 3,434,938 3,404,231
Taxation - -
Profit after taxation 3,434,938 3,404,231
Charitable donation - relating to current
year (3,434,938) (3,404,231)
Retained profit/(loss) for the financial
year - -
------------------------------------------- ----- ------------- -------------
Opening shareholder's funds 137,500,000 137,500,000
Retained earnings - -
Retained profit/(loss) for the financial
year - -
Dividends declared and paid or payable
during the year - -
Closing shareholder's funds 137,500,000 137,500,000
------------------------------------------- ----- ------------- -------------
All results are derived from continuing activities.
The Company has no gains or losses other than the results for the financial year as set out above, and therefore no separate Statement of comprehensive income or Statement of changes in equity have been presented.
The notes form part of these Financial Statements.
Wellcome Trust Finance plc
Balance Sheet
As at 30 September 2020
30 September 30 September
Note 2020 2019
GBP GBP
--------------------------------------- ----- -------------- --------------
Non current assets
Loans to Group undertakings 8 430,500,000 430,500,000
Current assets
Loans to Group undertakings 8 520,180,890 519,674,474
Amounts owed by Group undertakings 4,561,107 4,001,414
Accrued interest on loans 9,936,096 9,936,096
Prepayments 17,265 26,932
Cash at bank and in hand 5 989
534,695,363 533,639,905
Total assets 965,195,363 964,139,905
--------------------------------------- ----- -------------- --------------
Creditors: amounts falling due within
one year 9 (285,373,965) (10,519,665)
--------------------------------------- ----- -------------- --------------
Net current assets 249,321,398 248,945,766
---------------------------------------
Total assets less current liabilities 679,821,398 953,620,240
--------------------------------------- ----- -------------- --------------
Creditors: amounts falling due after
more than one year 9 (542,321,398) (816,120,240)
Net assets 137,500,000 137,500,000
--------------------------------------- ----- -------------- --------------
Capital reserves
Called up share capital 11 137,500,000 137,500,000
Profit and loss account - -
Total shareholders' funds 10 137,500,000 137,500,000
--------------------------------------- ----- -------------- --------------
The Company has no changes in equity during the year as set out above and therefore no separate statement of changes in equity has been presented.
The Financial Statements were approved by the Board of Directors and authorised for issue on 14 December 2020 and signed on its behalf by:
Karen Chadwick
Director
Wellcome Trust Finance plc
Notes to the Financial Statements
For the year ended 30 September 2020
1. ACCOUNTING POLICIES
The Financial Statements are prepared in accordance with applicable United Kingdom law and United Kingdom accounting standards. The accounting policies which have been adopted consistently in the current and prior year are described below.
(a) Statement of compliance
The Company, a public limited company, is incorporated in England and Wales, United Kingdom under the Companies Act. The address of the registered office is given in the Administrative Details. The nature of the Company's operations and its principal activities are set out in the Strategic Report.
The Company is a wholly owned subsidiary undertaking of the Wellcome Trust through its corporate trustee, The Wellcome Trust Limited, and is included in the Consolidated Financial Statements of the Wellcome Trust, which are publicly available.
The Financial Statements have been prepared on a going concern basis as well as in accordance with applicable UK accounting standards (UK Generally Accepted Accounting Practice), including Financial Reporting Standard 102 the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland ("FRS 102"). Refer to the Directors' report for more information.
The functional and presentational currency of the Company is pounds Sterling. Most of transactions undertaken by the Company are denominated in pounds Sterling.
The Company meets the definition of a qualifying entity under FRS 102 and has therefore taken advantage of the disclosure exemptions available to it. Exemptions have been taken in relation to financial instruments, the presentation of a Statement of Cash Flows and the Related Party disclosures. The equivalent disclosures relating to the exemptions have been included in the Consolidated Financial Statements of the Wellcome Trust.
(b) Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.
Basis of preparation
The financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with FRS 102 requires the use of certain significant accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. The areas involving more judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 2.
(i) Turnover
Turnover is interest derived from loans to Wellcome Trust Investment Limited Partnership, an undertaking in the Group, and the Wellcome Trust. Income is calculated using the effective interest rate method and is recognised on an accruals basis.
(ii) Cost of sales
Expenditure is the effective interest on the Bond liabilities (as described in Bond Liabilities section below) and is recognised on an accruals basis.
(iii) Gift Aid
The amount of Gift Aid donation recognised for each period is equal to the estimated taxable profits of the Company for that period at the time of the approval of the financial statements. Gift Aid donation payments made within nine months after the balance sheet date are equal to the estimated taxable profits of the Company for the period at the time of payment less any interim donations made in the year. Any difference between the Gift Aid donation accrued and Gift Aid donations paid is recognised at the time of payment.
(iv) Taxation
Although subject to taxation, the Company does not pay UK Corporation Tax because its policy is to donate taxable profits as Gift Aid to the Wellcome Trust.
Subject to the above, current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
(v) Financial assets and liabilities
The Company has chosen to adopt Sections 11 and 12 of FRS 102 in respect of financial instruments. Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. All financial assets and liabilities are initially measured at transaction price (including transaction costs), and subsequently at amortised cost.
Financial assets which qualify as basic financial instruments as laid out in FRS 102 paragraph 11.8, including trade and other receivables and cash and bank balances, are subsequently valued at amortised cost and assessed for impairment at the end of each reporting period. Financial assets and liabilities are only offset in the Balance Sheet when, and only when, a legally enforceable right exists to set off the recognised amounts and the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Financial assets are derecognised when and only when (a) the contractual rights to the cash flows from the financial asset expire or are settled, (b) the Company transfers to another party substantially all of the risks and rewards of ownership of the financial asset, or (c) the Company, despite having retained some, but not all, significant risks and rewards of ownership, has transferred control of the asset to another party .
Financial liabilities are derecognised only when the obligation specified in the contract is discharged, cancelled or expires.
Loans to Group undertakings
The loans are not quoted in an active market. The loans were recognised initially at fair value and after initial recognition are measured at amortised cost using the effective interest method.
Bond Liabilities
The initial measurement of the liability is equal to the proceeds of issue less all transaction costs directly attributable to the issue for each Bond. After initial recognition the liability is measured at amortised cost using the effective interest method. The Company is not required to, and therefore does not, recognise any adjustment to fair value in the Balance Sheet and Statement of Income and Retained Earnings.
(vi) Foreign Currencies
Transactions in currencies other than Sterling are recorded at the rate of exchange prevailing on the dates of the transactions. At each balance sheet date, recorded monetary assets and liabilities and balances carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. All realised and unrealised profits and losses arising on exchange are included in net profit or loss for the period.
2. SIGNIFICANT ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Accounting judgements
The Company has made no significant accounting judgements in the application of the Company's accounting policies that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
Significant accounting estimates and assumptions
The Company makes estimates and assumptions to produce the Financial Statements. The resulting accounting estimates will seldom equal the related actual results.
The Company has made no significant accounting estimates and assumptions in the application of the Company's accounting policies that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
3. TURNOVER
2020 2019
GBP GBP
Interest receivable on loans to Group
undertakings 42,841,005 42,714,862
Interest receivable on cash
deposits 5 1,072
42,841,010 42,715,934
--------------------------------------- ----------- -----------
Interest receivable on loans to Group undertakings in the UK (see note 8) is the effective interest on:
-- Loan A (to Wellcome Trust Investment Limited Partnership to 15 May 2020, Wellcome Trust from 15 May 2020 onwards) at a fixed rate of 4.75%;
-- Loan (new bond) to Wellcome Trust at fixed rate of 4.80%; and -- Loan C to Wellcome Trust at fixed rate of 4.00%; -- Loan D to Wellcome Trust at fixed rate of 4.125%.
4. ADMINISTRATIVE EXPENSES
2020 2019
GBP GBP
Auditors' remuneration 23,652 17,688
Rating agency
fees (6,556) 50,462
Tax compliance 3,086 2,297
Other 4,805 4,800
24,987 75,247
------------------------ -------- -------
Auditor's remuneration is solely in relation to the statutory audit of the Financial Statements.
5. EMPLOYEE INFORMATION
The Company has no employees (2019: nil). Employees of The Wellcome Trust Limited (acting as trustee of the Wellcome Trust) undertake the administration of the Company at no incremental cost to the Wellcome Trust.
6. REMUNERATION OF DIRECTORS
The Directors of the Company received no remuneration from the Company for their services. There were no Directors for whom retirement benefits provided by the Company are accruing under a money purchase or defined benefit scheme. The Company does not issue share options or offer any long-term incentive schemes, so there were no Directors who exercised share options during the year or became entitled to shares under a long-term incentive scheme.
7. TAX ON RESULT
The profits of the Company for the year will be paid under Gift Aid to the Wellcome Trust, a charity registered in England under the UK Charities Act 2011 (registered charity number 210183). There is no difference between retained profit/(loss) and taxable profits, so there is no provision required for deferred tax.
2020 2019
GBP GBP
Profit before tax 3,434,938 3,404,231
Current tax charge
for the year:
Profit multiplied by standard rate 652,638 646,804
of corporation tax in the UK of 19% (2019:
19%)
Tax relief on gift aid donations (652,638) (646,804)
Total current tax - -
--------------------------------------------- ---------- ----------
8. LOANS TO GROUP UNDERTAKINGS
Amortised cost Amortised cost
Interest
rate
Principal per Loan anniversary
amount annum date 2020 2019
GBP % GBP GBP
Current Assets
Loan
A 245,500,000 4.750 25 July 245,500,000 245,500,000
Loan (new
bond) 275,000,000 4.800 28 May 274,680,890 274,174,474
520,500,000 520,180,890 519,674,474
---------------- ------------ --------- ----------------- --------------- ---------------
Non Current Assets
Loan
C 280,500,000 4.000 25 July 280,500,000 280,500,000
Loan
D 150,000,000 4.125 25 July 150,000,000 150,000,000
430,500,000 430,500,000 430,500,000
---------------- ------------ --------- ----------------- --------------- ---------------
Loans to Group undertakings are loans (the "Loans") to Wellcome Trust (Loan C, Loan D and Loan (new bond)) and to Investment Limited Partnership (Loan A) to 15 May 2020 and to Wellcome Trust from 15 May 2020 onwards, due to the novation of Loan A by Wellcome Trust Investment Limited Partnership to The Wellcome Trust Limited as trustee for the Wellcome Trust . The principal under Loan A is repayable on demand by the Company. The principal under Loan C, Loan D and Loan (new bond) is repayable on agreement between the Company and Wellcome Trust. The Loans have an agreed repayment date in 17 years (Loan A, Loan C and Loan D) and 1 year (Loan (new bond)). Each Loan has a fixed redemption value equal to the principal amount and a fixed interest rate.
9. CREDITORS
2020 2019
GBP GBP
Accruals and deferred
income 28,504 73,035
Gift Aid due to the
Wellcome Trust 1,453,034 1,234,130
Bond liabilities 283,892,427 9,212,500
Total creditors: amounts falling
due within one year 285,373,965 10,519,665
----------------------------------------- ------------ ------------
Bond liabilities - 274,172,297
Falling due between one
and five years - 274,172,297
--------------------------------------- ------------ ------------
Bond liabilities 542,321,398 541,947,943
Falling due after
five years 542,321,398 541,947,943
-------------------------------------- ------------ ------------
Total creditors: amounts falling
due after one year 542,321,398 816,120,240
----------------------------------------- ------------ ------------
The Bond liabilities are stated at the amortised cost using the effective interest method for the GBP550 million 4.625% Guaranteed Bonds due July 2036 ("GBP550 million Bonds"), issued by the Company on 25 July 2006, and the GBP275 million 4.750% Guaranteed Bonds due May 2021 ("GBP275 million Bonds"), issued by the Company on 28 May 2009. The Bond liabilities falling due within one year are the unpaid coupon interest accrued for the year to 30 September 2020 for each Bond. The interest payment to the Bond holders is at a fixed rate of 4.625% per annum (GBP550 million Bonds) and 4.750% per annum (GBP275 million Bonds) and is paid in arrears on 25 July or 28 May respectively each year until repayment of the Bond principals. The bond repayments and amounts receivable from group companies are aligned in timing for liquidity management. Effective interest on bond liabilities is shown as Cost of Sales in the Statement of Income and Retained Earnings.
The obligation of the Company on the Bonds is governed by a Trust Deed dated 25 July 2006 (GBP550 million Bonds) or 28 May 2009 (GBP275 million Bonds) between the Company, The Wellcome Trust Limited, as trustee of the Wellcome Trust, and Citicorp Trustee Company Limited, as the trustee for the holders of the Bonds (the "Trust Deed" and the "new Trust Deed" respectively). The payment of all amounts due in respect of the Bonds is unconditionally and irrevocably guaranteed pursuant to the terms of a guarantee given by The Wellcome Trust Limited, as corporate trustee of the Wellcome Trust; the guarantee is part of the Trust Deed and the new Trust Deed.
10. RECONCILIATION OF MOVEMENTS IN SHAREHOLDER'S FUNDS
Shareholder's
Funds
GBP
As at 30 September
2019 137,500,000
As at 30 September
2020 137,500,000
------------------------ --------------
11. CALLED UP SHARE CAPITAL
2020 2019
Number GBP GBP
Issued and fully paid
ordinary
shares of GBP1 each 137,500,000 137,500,000 137,500,000
-------------------------- ------------ ------------------------------ ------------------------------
12. RELATED PARTY TRANSACTIONS
The Company has taken advantage of the exemption contained in FRS 102 Section 33 paragraph 33.1A3 "Related Party Disclosures", which exempts it from disclosing details of transactions with the Wellcome Trust and its subsidiary undertakings, as the Company and its related undertakings with whom it may have transactions are wholly owned subsidiaries of the Wellcome Trust through its corporate trustee, The Wellcome Trust Limited. There are no other related party transactions requiring disclosure.
13. FINANCIAL INSTRUMENTS
The Company's financial instruments comprise the loans to Group undertakings and the liability arising from the issue of the Bonds. The Company's loans are non-derivative financial assets with fixed payments which are not available for sale. The Bond liability is a non-derivative financial liability with a fixed redemption value, fixed interest rate and fixed maturity date. The Company has not undertaken any trading in financial instruments during the year.
The financial instruments issued by, or held by, the Company are Sterling denominated and at fixed interest rates and carry no foreign exchange risk or interest rate risk.
The key risks relating to the financial instruments held by the Company are the credit risk and liquidity risk of the counterparty Wellcome Trust in relation to the loans to Group undertakings. These risks are in respect of the Wellcome Trust's ability to meet the interest and principal payments as they fall due. The total value exposed to credit risk as at 30 September 2020 is GBP963.8 million (2019: GBP964.1 million), which comprises the value of the loans to Group undertakings, amounts owed by Group undertakings, accrued interest on loans and cash at bank and in hand. The liquidity risk of the Company is mitigated by the exact matching of the cash flows from the Company's loans to Group undertakings to those arising on the Bond Liabilities.
Credit risk exposure of the Company's loans is reduced by the Company only advancing loans to entities within the Group. Credit risk exposure of the Company's remaining financial assets is reduced by stringent selection procedures for any external counterparties with which the Company transacts.
14. COMMITMENTS
The Company has no outstanding commitments to make further investments at 30 September 2020 (2019: GBPnil).
15. ULTIMATE PARENT UNDERTAKING AND CONTROLLING PARTY
The Company is a company limited by shares. Its sole shareholder is the Wellcome Trust through its corporate trustee The Wellcome Trust Limited, whose place of business is Gibbs Building, 215 Euston Road, London, United Kingdom. The Company is considered a wholly owned subsidiary undertaking of the Wellcome Trust for accounting purposes and its assets and liabilities have been consolidated with those of the Wellcome Trust as required by section 9 of FRS 102.
The ultimate parent undertaking and controlling party of the Company is the Wellcome Trust, which is the parent undertaking of the smallest and largest group to consolidate these Financial Statements.
Copies of the Wellcome Trust Annual Report and Financial Statements 2020 are available from Wellcome's website ( wellcome.org/what-we-do/reports ) or from the Company Secretary.
16. EVENTS AFTER THE OF THE REPORTING PERIOD
There have been no subsequent events requiring disclosure.
Wellcome Trust Finance plc
Administrative Details
As at 30 September 2020
Directors
Karen Chadwick
Nicholas Moakes
Peter Pereira Gray
Fabian Thehos
Company Secretary
Christopher Bird
Registered Company Number
5857955
Registered Office
Gibbs Building
215 Euston Road
London
NW1 2BE
Independent Auditor
Deloitte LLP
Statutory Auditor
1 New Street Square
London
EC4A 3HQ
Banker
HSBC Bank plc
31 Holborn Circus
Holborn
London
EC1N 2HR
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