Affinity Healthcare Worldwide Growth Trust

Affinity

Background

The fund was introduced by Calan HealthCare in 1999 to give NZ investors an exposure to worldwide developments in health care technology. AXA Framlington sub-manage the fund through a wholesale investment in a UK domiciled Health Fund. The fund is not currency hedged which has been a major head wind over the last five years. This combined with the biotechnology boom and bust cycle have created tax loss of over $NZ 4 million to carry forward and offset against future taxable income.

Investments are in the producers of pharmaceuticals, biotechnology firms, medical device and instrument manufacturers, distributors of healthcare products, care providers and healthcare services companies. 78% of the fund is exposed to companies based in the US. The fund favours the small to medium cap companies that will be the focus of M&A activity from large pharmaceutical companies that have patent expiration issues and a lack of new product pipeline.

Where to from here

We continue to be optimistic because of attractive valuations and likely further consolidation as larger companies search for innovative new products. The sector has suffered a very difficult time over the last few years, coming close to the bottom of relative performance for the major indices. The persistent strength of the NZ dollar has made the situation more difficult for NZ investors. However, We believe the macroeconomic backdrop is more supportive of the sector and expect a strong recovery over the next couple of years. Now is the time to weigh further into a sector which has been undervalued for sometime. This will be satisfying for investors as the assets revert to historical valuations, not to mention a tax and currency bonus to boot!

Best Regards

Chris

Objective

Affinity Healthcare Worldwide Growth Trust has been designed to give New Zealand investors access to the fast-growing, worldwide health care sector.

The Trust aims to achieve long-term capital growth for investors through investment in companies at the leading edge of research and development, and/or production and distribution of health and medical-related products and services.

There is no guarantee that Affinity Healthcare Worldwide Growth Trust will achieve its growth objective.

Structure

Affinity Healthcare Worldwide Growth Trust is structured as a Unit Trust to ensure that the integrity of the management of the Trust is maintained.

The Unit Trust is constituted under a Master Trust Deed and a Unit Trust Establishment Deed as amended. Both deeds are made between The Trustees Executors and Agency Company of New Zealand Limited (trading as TOWER Trust) as Trustee and Affinity Funds Management Limited as Manager.

Under the Unit Trust structure the Trustee is the legal owner of all the assets of the Trust. The Trustee is also responsible for monitoring compliance by the Manager with the terms of the Master Trust Deed and the Unit Trust Establishment Deed as amended.

Taxation of Distributions

Distribuitons may include Imputation Credits which represent tax paid by the Trust on profits distributed.

As a Unit Holder, if you are a New Zealand resident you should include as taxable income the Gross distribution amount when completing your tax return. You are able to claim the Imputation Credit, Withholding Payment Credit and Resident Withholding Tax against your New Zealand tax payable.

As a Non-resident Unit Holder in general, you are not entitle to claim any benefit of the Inputation Credit which is available to New Zealand residents. You may however be entitle to claim a credit for Non-resident Withholding Tax against tax payable in your country of residence. Your accountant should be able to elaborate on this in greater detail.