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2020-09-30-accounts

Annual Report and Financial Statements 2020

Table of contents

Report from Chair 3
Report from Director 5
Trustee’s Report 7
What we do 8
Year at a glance 9
Review of Charitable Activities 11
Review of Investment Activities 24
Financial Review 34
Structure and Governance 39
Social Responsibility 45
Risk Management and Internal Control 47
Remuneration Report 51
Remuneration Committee Report 53
Nominations and Governance Committee Report 54
Investment Committee Report 55
Audit and Risk Committee Report 56
Independent Auditor’s Report 59
Financial Statements 68
Consolidated Statement of Financial Activities 69
Consolidated Balance Sheet 70
Statement of Financial Activities of the Trust 71
Balance Sheet of the Trust 72
Consolidated Cash Flow Statement 73
Alternative Performance Measures
and Key Performance Indicators 74
Glossary of Terms 75
Notes to the Financial Statements 76
Reference and Administrative Details 124

Table of Contents

Wellcome Trust Annual Report 2020 | 2

Report from Chair

Wellcome has played a key role in the global research response to the pandemic this year, while supporting research to improve health in a variety of ways, maintaining a consistent level of charitable spending, and increasing the value of our investments portfolio.

This has been an immensely challenging year. Covid-19 has tested governments to the limits as they have struggled to save lives and maintain livelihoods. The effects on the economy, people’s mental health, other diseases, and world politics have been profound.

Soon after I joined Wellcome, during a visit by the Board of Governors to a Wellcome-funded research centre in Vietnam, the scientist leading the centre arranged a lecture on the 1918 flu pandemic. I only later appreciated its significance: his concern that we were unprepared for another. That scientist was Jeremy Farrar, who became Director of Wellcome in 2013. Among other achievements, he soon ensured that Wellcome co-founded with the governments of Germany, Japan, India and Norway, the Bill and Melinda Gates Foundation and the World Economic Forum – the Coalition of Epidemic Preparedness Innovations (CEPI).

“The world needs strong, compassionate leadership”

So when we first heard of a novel disease in Wuhan at the end of 2019, Wellcome, with its investment in CEPI and with Vaccines one of our priorities, was better prepared than some for what lay ahead. And CEPI was able to start funding vaccine work as soon as researchers in China had published the genome of the virus in January.

Jeremy, with his experience of SARS, pandemic influenza and other epidemics, and having led Wellcome’s response to Ebola and Zika, has offered outstanding leadership, helping Wellcome and many others understand and address the pandemic. He has given Wellcome the means and the ambition to take an active role in a number of

international partnerships and initiatives. As one example (there are too many to list), Wellcome and UNITAID are convening the therapeutics pillar of the World Health Organization’s Access to Covid-19 Tools Accelerator.

Investments

Wellcome’s capacity to act is dependent on how well the organisation is run and the skill with which our investment team manages the portfolio that funds everything we do. During my time at Wellcome, the value of the investments portfolio has more than doubled, valued at £29 billion on 30 September 2020, allowing a substantial increase in charitable spending over the past decade. Wellcome is an active and long-term investor: decisions are based on the continuing ‘licence to operate’ of the businesses and funds in which we invest. This year, the Board agreed that extra weight should be placed on sustainability and energy transition when assessing licence to operate.

The Board has been immensely impressed by how the team has navigated with confidence the threat to the world economy caused by Covid-19 this year. Locking down major economies put huge strains on many businesses in which we invest and on financial markets, while accelerating important economic trends such as the shift to e-commerce. Equity markets endured one of the steepest declines and fastest recoveries in financial history. Despite this, the portfolio has not just survived, but prospered in this highly volatile environment, returning 12.3% in the year to 30 September 2020 (11.1% after inflation).

The macro environment of course remains challenging, not least because governments everywhere will need to find ways of reducing the enormous debt burdens taken on to combat the Covid-19 crisis. Market valuations are extremely stretched with interest rates at unprecedently low levels. The portfolio is likely to face more challenging times ahead, so the team is working hard to ensure that we are as well placed as possible to face more difficult times.

Report from Chair Wellcome Trust Annual Report 2020 | 3

Strategy

Over the course of this year, the Executive has developed and launched a new strategy for Wellcome. This was in gestation long before Covid-19 as we sought, in consultation with many, to plan how best to use Wellcome’s independence and resources for the greatest effect in improving human health. We chose three challenges, mental health, global heating, and escalating infectious diseases. This choice was reinforced by the pandemic, which also emphasised their linkages.

The pandemic has shown that solving these challenges, or perhaps more realistically, significantly reducing their damage, requires unprecedented international cooperation. And we shall never undervalue the vital role of discovery science, of backing scientists to explore our understanding of human health and how to improve it. Without their sometimes serendipitous discoveries, across a wide range of disciplines, often with new tools, progress would be slight.

But we are not just a funder, as our work on Covid-19, for example, shows where we have convened partners across the world, helped raise billions of pounds from public, private and philanthropic sectors to fund research, and argued for what we judge is important. I hope we will always continue to make our voice heard, including on the value of strong links between British science and Europe after Brexit.

Board of Governors

Covid-19 has meant a dramatic end to my time at Wellcome. My thanks go to the Board of Governors and the Executive Leadership Team for continuing to make bold decisions in a time of great uncertainty and online meetings. Bill Burns retired from the Board after four years and his wisdom and humour will be missed. In January 2020, Elhadj As Sy joined the Board, and we are already extremely grateful for his perspectives on health, policy and the pandemic response.

I am delighted that the Board has chosen Julia Gillard to replace me and I wish her and Wellcome further success in the years ahead. It has been an enormous privilege to be part of what is an extraordinary organisation. There are many challenges ahead, and the world needs strong, compassionate leadership. Wellcome has a role to play, supporting science and finding solutions to urgent worldwide health issues. I pay tribute to the people at Wellcome, the increasing professionalism of its culture, and the renewed sense of purpose that comes with a new vision and strategy.

Eliza Manningham-Buller Chair of Wellcome

Implementing the strategy will take some time as necessary changes are made to the internal organisational design and culture, as well as to funding mechanisms and other activities, over the coming year or two. As part of this work, we are continuing to develop performance indicators against which to judge future progress.

This process is making it easier for us to put diversity at the heart of everything we do, from the staff we employ to the research we fund and the goals we set. The resurgence of the Black Lives Matter movement this summer highlighted existing challenges for people of colour, including within the research community and within Wellcome. It was an opportunity to examine ourselves critically, strengthen Wellcome’s commitment to anti-racism, and take a more proactive approach to changing some of the systemic issues that hinder diversity and equity in health, in research culture, and in our own organisation.

Report from Chair Wellcome Trust Annual Report 2020 | 4

Report from Director

A difficult year has ended with fresh hopes for the future thanks to researchers across the world. Wellcome has a renewed commitment to supporting science and bringing people together to solve the urgent and truly global challenges to all our health.

On 30 September 2020, the end of Wellcome’s financial year, the number of confirmed deaths from Covid-19 had just passed 1 million worldwide – each life lost an individual tragedy caught up in one of the most momentous events of the last 100 years. Many millions more are now living with long-term effects on their health after infection, while all of us are grappling with restrictions on our normal ways of life.

Since then, however, trial results have indicated a strong likelihood that in 2021 we will have several safe, effective vaccines to help protect us from Covid-19, stop transmission of the virus, and bring this pandemic to an end. From the start, Wellcome has said that science would be the exit strategy – not only vaccines, but also new therapeutics and diagnostic tests alongside robust public health measures, all informed by vital insights from across biomedical and social research.

“ The environment in which we work remains uncertain and changeable”

The speed and rigour with which scientists around the world responded to Covid-19 this year, while also dealing with its impacts on their personal lives, has been incredible. When the pandemic threatened to exacerbate nationalism and geopolitical fracture, science has helped bring the world together, working across borders and disciplines to solve this truly global challenge.

I am hopeful that we are now seeing a renewed acceptance that good public health anywhere requires multilateral cooperation everywhere. And I am proud that Wellcome has played its part in leading, supporting and enabling efforts to make sure that science and society work together, that the necessary research happens, and that the solutions generated are made equitably available to all who need it, independent of their ability to pay.

Wellcome’s role in the global response to Covid-19 and the necessary closures of our buildings meant some of our more usual activities had to be delayed or cancelled this year. This allowed us to maintain day-to-day operations and a strong control environment while working remotely, and demonstrated a robust level of operational resilience, for which I thank all of my colleagues. Everyone had to adapt to a greater or lesser degree because of reprioritised work, available space, caring responsibilities, health or other reasons. Our position was clear: people’s first responsibility was to themselves and their family and friends. Work comes second at times like this.

The environment in which we operate remains uncertain and changeable. Local and national public health measures will continue to apply for a good while yet, in phases of tighter or looser restrictions, and we will respond accordingly. Other factors, such as the nature of any deal between the UK and the European Union after Brexit will also need to be taken into account. My priority remains the wellbeing of my colleagues and prioritising Wellcome’s work to ensure we can effectively support the research community and achieve our mission.

Focus

We decided during the pandemic to keep pushing forward a new vision and strategy for Wellcome, which will focus our work over the next 10 or 20 years. The pandemic might have been seen as a reason to avoid further change, but getting the right vision and strategy now will enable us to have a greater impact through our work on challenges like Covid-19, and in the future.

In October 2020, we published our new vision: Wellcome supports science to solve the urgent health challenges facing everyone. Our strategy for achieving this vision begins and ends with discovery – the potential of all kinds of science and research to change the way we think about the world and uncover new insights into life, health and wellbeing.

Report from Director Wellcome Trust Annual Report 2020 | 5

We also announced three big challenges that we will focus on using science to solve because they threaten to undermine our efforts to improve health for decades to come. They are mental health, global heating, and escalating infectious diseases. Discovery research will underpin the best solutions, though science alone is not enough. So we are developing long-term programmes spanning science, innovation and society to ensure new solutions work for those who most need them and are effectively implemented, whether today or over the next 30 years.

Internally, we have begun to review the organisational design needed for Wellcome to deliver against our new strategy, and we are exploring with staff at all levels how Wellcome’s culture will need to change as well. Most importantly, aligning the organisation behind a single vision and focused strategy should give every role at Wellcome a clear connection to the organisation’s shared goals and how they are contributing.

Although the health challenges we’re focusing on will affect everyone in the world, not everyone will be equally affected. The fact that Covid-19 has been more likely to affect people from Black, Asian and minoritised communities more severely than white people in countries like the UK and the US demonstrates once again that racism is a health issue. Our new strategy is an opportunity for Wellcome to redouble our efforts to promote diversity and inclusion in our organisation, the people we support, and the research we fund. We have committed to working in partnerships with the communities most affected by the three challenges, as well as continuing our long-term campaign to improve research culture so that it becomes more inclusive, more honest and more creative.

Executive Leadership Team (ELT)

A number of my colleagues on the ELT have left Wellcome this year, taking up a range of positions across international research, philanthropy and academia. I am extremely grateful for all the work, advice and support in recent years from Chonnettia Jones, now Vice President of Research at the Michael Smith Foundation for Health Research; Steve Caddick, who stepped down as Director of Innovations to explore new opportunities; and Simon Chaplin, now chief executive of Arcadia Fund. All of Wellcome wishes them well in their new roles.

As we embark on a period of change, I have appointed interim replacements for their roles, and have been delighted to welcome Katie AnastasiFrankovics, Tim Knott and Philomena Gibbons to the ELT. Jim Smith is now interim Director of Research Programmes, a new role to help establish the strategy across Wellcome, and his previous role as Director of Science has been covered by Mike Turner and more recently Michael Dunn.

Finally, I am grateful to Eliza Manningham-Buller for agreeing to stay on as Wellcome’s Chair until spring 2021, having originally planned to step down in 2020. Eliza has had a wonderfully positive influence on Wellcome over her 12 years as a Governor, five as Chair, and she will be greatly missed. I very much look forward to welcoming Julia Gillard as our new Chair in 2021, and working with her to keep Wellcome evolving in its mission to improve health through research.

Jeremy Farrar Director of Wellcome

Report from Director

Wellcome Trust Annual Report 2020 | 6

Trustee’s Report

Going Under Lagos, Nigeria, 2019 A resident sits with his feet on a paint bucket to avoid floodwater. Image from the Wellcome Photography Prize 2020.

What we do

Wellcome is an independent global charitable foundation dedicated to improving health. We are accountable to society for delivering our mission, while using our independence for public benefit.

Our mission

The objects of the Wellcome Trust, as set out in our Constitution, are:

To protect, preserve and advance all or any aspects of the health and welfare of humankind and to advance and promote knowledge and education by engaging in, encouraging and supporting:

To advance and promote knowledge and education by engaging in, encouraging and supporting:

Our work

In October 2020, Wellcome published a new vision and strategy (see page 16). In 2019/20, the year being reported on here, our work was in line with the previous strategic framework, as follows.

Wellcome exists to improve health by helping great ideas to thrive.

We campaign for better science

Through partnerships across the world, we advocate to ensure that good research is well supported, and that health is improved by changes to policies and practices based on evidence.

We help everyone get involved

We engage the public so that people are more aware of science and health research, and feel able to make the most of it in their own lives. Through our Culture and Society division, we offer grants to Wellcome-funded researchers and a range of other people and organisations for public engagement activities. We directly run a number of other activities including Wellcome Collection, our free museum and library.

Our spending

Since 2017, Wellcome has maintained an average funding level of around £900 million a year, rising with inflation, for our core activities: supporting researchers, campaigning and public engagement. This provides stability and predictability for our annual spending plans (see page 37).

When the investment portfolio performance has been sufficiently strong, we have released discretionary funding to support new priority areas and other ambitious, large-scale and high-impact activities tackling big health challenges. These activities are reported to and monitored by the Executive Leadership Team and the Board of Governors, who assess the overall use of this discretionary funding.

We support researchers

Wellcome directly funds thousands of scientists and researchers around the world addressing fundamental health challenges of our time, across biomedical science, population health, medical innovation, humanities and social sciences, and public engagement. We give grants through schemes run by our three funding divisions: Science, Innovations, and Culture and Society.

We take on big health challenges

We identify areas in which Wellcome can lead significant change within five or ten years. The aim is to transform the global response to some of today’s biggest health challenges, such as drug-resistant infections, global heating and mental health.

Our priority areas

Trustee’s Report | What we do

Wellcome Trust Annual Report 2020 | 8

Year at a glance

In November 2019, Wellcome began work on a new long-term vision and strategy. The aim was to improve health through research more quickly and more significantly by getting the very best out of the organisation’s distinctive strengths: our scale and independence, our perspective on health and how to improve it, and our relationships with stakeholder communities across science and society.

As the Covid-19 pandemic took hold in 2020, having identified these strengths helped focus Wellcome’s response on where we could make a difference that few or no others could. We funded urgent scientific research directly, and we used our expertise and independence to convene global partnerships that enabled rapid, effective, ethical and equitable research.

This has strengthened our commitment to our new strategy, published in October 2020, through which we will continue to play to our strengths and support science to solve the urgent health challenges facing everyone.

Strategic transition

Wellcome’s mission is to improve health through research. As a relatively small charity in the 20th century, it made sense to focus on supporting basic research, on the understanding that some of the resulting knowledge and tools would contribute to future improvements in health.

Wellcome in numbers

£1,099m

charitable expenditure, including research grants, 2019/20 (£1,131m 2018/19)

12.3%

annual return from Wellcome’s investments portfolio, 2019/20 (6.9% 2018/19)

£27,822m

total funds at 30 Sep 2020 (£25,214m 2018/19)

Today, Wellcome is a much bigger foundation and can have a more direct impact on human health, if we focus on a small number of challenges alongside our continuing support for basic research. Our new strategy will focus on supporting discovery research, and on generating solutions to the urgent health challenges facing everyone this century: mental health, global heating, and escalating infectious diseases.

Pandemic action

Wherever a pandemic starts, it is the world’s collective responsibility to end it. Wellcome’s position is that science is our exit strategy – we need vaccines to stop transmission, treatments to save lives and ease stress on health systems, and diagnostics to understand the disease and track the virus. But these all require global cooperation and coordination.

Wellcome took on a pivotal role in the response of the global research community. We brought science, governments, business and philanthropy together in partnerships to drive progress. We made the case for money and resources to be made available so that research could be implemented immediately, and we made sure the focus was not just on the next days and weeks but also on the impact of the pandemic on health in the coming months and years.

Investments

Despite the impact of the pandemic on the global economy, Wellcome’s investment portfolio performed well over the year to 30 September 2020, with annual returns up on last year at 12.3%.

Over the past decade, the return after inflation has averaged 9.9% a year in real terms, and Wellcome’s annual charitable spend has roughly doubled as a result. The continuing pandemic and its aftermath will involve difficult choices for policy makers, which may result in lower returns in the years ahead. We are taking nothing for granted.

Wellcome is an active, long-term investor, which means our decisions are based on anticipated returns over 10 years or more, and we work with the companies we invest in to challenge and support their plans. This year, we have continued to look at how climate change will affect our portfolio, and how our portfolio contributes to climate change.

Trustee’s Report | Year at a glance Wellcome Trust Annual Report 2020 | 9

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For 10 weeks, Wellcome’s headquarters in London became a respite centre for NHS workers. Many of our employees volunteered to staff the centre

When Covid-19 emerged, we engaged our investments partners in discussions of the likely public health consequences, based on experience and expert opinions within Wellcome, to help them prepare to take actions such as closing buildings.

Working at home

When our offices closed to help slow the spread of Covid-19, we shifted from developing a long-term wellbeing strategy to providing more immediate support for our people physically, mentally and financially. While employee advice and mental health helplines were already in place, we had to ensure that everyone who was able to keep working outside our buildings had the necessary equipment and support.

We began a phased reopening of our buildings in September 2020, giving priority to those whose work relies on being on site and those for whom working at home is most challenging. As the situation continues to change, we want to minimise disruption to people’s working patterns, which means taking a cautious approach to reopening our offices and our public venue, Wellcome Collection.

Reprioritising

Wellcome had over 3,500 active grants in 2019/20, representing £5 billion. There will be changes in our grant schemes as we transition to a new strategy – existing schemes will close over the course of 2021 and we will introduce new, simpler funding mechanisms by 2022.

Grant-making slowed when our offices closed in March 2020. Some decisions and start dates were delayed, but we continued to process applications. Research into Covid-19 was fast-tracked through a £22 million open call in February 2020. We introduced policies to guide our existing grantholders as they responded to the pandemic as well – extensions were supported, and many of the researchers we fund were seconded into Covid-19-related research or clinical activities. Despite the effect of this on operations, the impact on charitable expenditure has been marginal.

Most of Wellcome’s public-facing activities had to move online in 2020. While closed to visitors, Wellcome Collection kept up a flow of digital content on its website. Our campaign to reimagine research culture had to cancel a number of events, although many conversations continued online and progress will pick up again next year.

Trustee’s Report | Year at a glance

Wellcome Trust Annual Report 2020 | 10

Review of Charitable Activities

Summary

Covid-19 has been an extraordinary challenge for everyone this year. More than a million deaths worldwide, many more people infected and experiencing symptoms that can range from none to severe and long-term, with poor and minoritised groups disproportionately affected. Health systems have often struggled to cope with the scale of the crisis at a national level, and the public health response to the pandemic in most countries has involved severe restrictions on movement and economic activity.

Across academic and industry science, efforts to develop vaccines and treatments rapidly have been remarkable. Large international clinical trials relatively quickly showed the effects, if any, of a number of repurposed drugs, and we expect effective vaccines and targeted treatments to come out of trials early in 2021. Some countries managed to contain the spread of infection through stringent public health measures; many – notably the US and in Europe – are experiencing waves of infections as they try to balance public health and economic sustainability until effective vaccines are available.

As long as there are parts of the world where the infection is not under control, nowhere can feel entirely safe. Wellcome has funded urgent research into Covid-19 and the virus causing it (page 14). We have also forged new partnerships to advocate for the essential role of science in solving this crisis, raise funds for this research, and coordinate global efforts (page 13). This, of course, has been done against a backdrop of public health restrictions, uncertainty and disruption to people’s working and private lives.

While some of our ongoing work had to be paused or deprioritised to concentrate on the pandemic response, as described below, much of it has continued. The pandemic has exacerbated other health challenges. This year, Wellcome has pressed on with developing a new vision and strategy to guide our work for the decades to come. It will focus our efforts on supporting discovery research, and on finding equitable solutions to three urgent worldwide health challenges, including the risks of escalating infectious diseases like, but not limited to, Covid-19.

Overview

Wellcome’s new strategy draws together themes that have been developing in our work over recent years, and aligns them in pursuit of a common vision. These themes include principles of diversity and inclusion, promotion of a more positive research culture, and recognition of new roles Wellcome is now able to take on in policy and advocacy, while keeping science at the heart of everything we do.

We have been developing the vision and making the principal decisions for our new strategy throughout the year, based on research and consultation with many stakeholder groups, including employees, researchers and other health research funders. Internally, we have been preparing for significant changes in organisational design and our working culture, in order to get the best out of Wellcome and to achieve ambitious goals. The risks associated with this level of change are discussed in the Risk Management and Internal Control section on page 47.

Our funding divisions – Science, Innovations, and parts of Culture & Society – have been preparing to come together as one research programmes team. Much of the research Wellcome currently funds will continue to be relevant to our new strategy, and existing activities supporting research have not stopped despite national and local lockdowns.

We have seen many exciting outcomes from our support this year, including discoveries about the immune system from the Human Cell Atlas, a project to map every type of cell in our bodies (page 18). The Wellcome Sanger Institute is part of that project, as well as applying genomic sequencing to better understand and treat cancer and infectious diseases (page 16).

Elsewhere, an ambitious project to modify mosquitoes so they can no longer transmit dengue fever and other infections is proving effective in large-scale trials – in Indonesia, this approach decreased cases of dengue by 77% over two years (page 20).

Wellcome has announced new funding to support the Rosalind Franklin Institute, a centre for interdisciplinary science in the UK (page 19), and we renewed our support for a number of programmes and initiatives, including the Alliance

Trustee’s Report | Review of Charitable Activities Wellcome Trust Annual Report 2020 | 11

Charitable spending by area

Science

£771m

2019: £839m

Our aim is to catalyse excellent science and maximise its health impacts. A major part of our work is engaging with the research community, many of whom will apply to and be supported by our funding schemes.

Innovations

£104m

2019: £130m

We work with people and organisations across the world to transform great ideas, discoveries and inventions into treatments and products.

Culture & Society

£108m

2019: £96m

We maximise Wellcome’s impact on human health by understanding the social and cultural contexts of science and health. This includes supporting research in the humanities and social sciences, and public engagement with science.

Priority areas

£116m

2019: £66m

Wellcome chooses priority areas where we want to see significant change. We lead and are accountable for these activities, working with partners to achieve ambitious goals.

Spending on Covid-19 research and response is spread across all areas. More detail on Annual Charitable Expenditure and movements between the current and prior year is given in the Financial Review on page 34 and in note 6.

for Accelerating Excellence in Science in Africa (page 19), which we fund but is managed by the African Academy of Sciences. The best research comes when the scientific agenda is set and supported in regions where the health challenges being addressed are greatest.

The disproportionate impact of Covid-19 on people in Black, Asian and other minoritised ethnic communities added fuel to the Black Lives Matter movement, which went global this year. Initially a reaction to police violence and institutional racism in the US, protests and campaigns for fundamental social change were seen all over the world.

As an organisation, Wellcome knows it has a long way to go to become a truly inclusive employer and funder of health research. In line with our diversity and inclusion strategy (see pages 22 and 45), and further prompted by Black Lives Matter, we have adopted an explicitly anti-racist approach – not just trying to avoid being racist, but actively dismantling racist systems and structures in our work and in societies in which we work.

In an era of increasing political fragmentation at national and international levels, Wellcome has chosen to embed equality and inclusion in our future approach to improving health through science. The urgent challenges facing the world today demand cooperation across research disciplines, across social and political divides, and across geographical borders.

Outlook

Wellcome is extremely fortunate to have a portfolio of investments, managed in-house, that funds all of our work. The portfolio has performed well this year (see the Review of Investment Activities from page 24), and yet we cannot afford to be complacent about the months ahead. Even though it looks likely that scientific solutions such as vaccines will become available for widespread use in 2021, the world is still a long way from ending the Covid-19 crisis, and the impacts on individuals’ health, health service capacity, social and economic recovery, and international relations remain to be seen and fully understood.

The communities we work with – in research, policy, business, government, philanthropy – are all facing significant challenges, not only to maintain an effective response to the pandemic, but also to maintain their other vital activities. Wellcome has a fundamental responsibility to ensure its own sustainability, and yet we know our success depends on our partners, too. Our new strategy means change, but we will continue to be mindful of the effects of our decisions on those we support and work alongside.

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Covid-19

Wellcome’s role in the global research response to the pandemic spanned four interconnected activities:

Accelerating the scientific timeframe from decades to months relied on international coordination and expertise from the World Health Organisation (WHO), and from other mechanisms such as the Coalition for Epidemic Preparedness Innovations (CEPI), which Wellcome helped to found in 2017 with the governments of Germany, Japan, India and Norway, the Bill and Melinda Gates Foundation and the World Economic Forum. This year, CEPI drew on its existing work to fund nine candidate Covid-19 vaccines in the first three months of the pandemic. Eight were in clinical trials by October 2020, and several published trial data in November showing safety and effectiveness.

The pandemic required ways of working within Wellcome that were not entirely new but equally not the norm

Taking a similar approach to CEPI, the Covid-19 Therapeutics Accelerator (CTA) started in March 2020 with support from Wellcome, Mastercard and the Gates Foundation. It received further funding pledges from foundations, governments and others, totalling more than $300 million. So far, the CTA has committed over $90 million to clinical trials, therapeutic candidate discovery research, platforms to collect real-world evidence and data, and extra manufacturing capacity. This partnership, founded through charitable and corporate philanthropy is characteristic of the need for society to unite to beat Covid-19.

Funding Covid-19 research, clinical trials and product development at speed was always going to be expensive. The fastest way to find effective scientific tools would be to start working on lots of possible solutions in parallel, and commit to supporting them even though not all would be successful or even necessary in the end. Wellcome took a leading role in making the case for this approach, setting an initial funding goal of $8 billion

and supporting high-profile events for the business sector and governments to raise it, such as a European Commission pledging conference in May, which generated €7.5 billion in commitments.

This required ways of working within Wellcome that were not entirely new but equally not the norm. Teams across global policy in our UK and Germany offices, our Vaccines priority area, communications and many more worked together with shared goals, and with partners beyond Wellcome to deliver them. We clearly stated specific asks to leaders in government, business and philanthropy alike.

For example, our target was to raise $1 billion of the $8 billion goal from the private sector and philanthropy. By September, the world had raised $600 million from these sectors, including donations from Mastercard, Madonna, TikTok and Pepsico.

One mechanism for raising this money was Wellcome’s Covid-Zero initiative, aimed at making it simple for business leaders to donate to four organisations driving research into vaccines, medicines and tests for Covid-19 and the mechanisms to deliver them to the people who need them most. Persuading business leaders to contribute to Covid-Zero was challenging – many had already donated to charitable activities local to or directly relevant to their specific business, and it took time for Wellcome to build new relationships and close deals. The Covid-Zero campaign raised $27 million from 17 donors by the time it closed in September 2020, and we have learned many lessons for future campaigning work.

Wellcome’s lack of political agenda helped us build on our existing authority on issues relating to pandemic preparedness and response. We maintained our perspective integrating scientific, cultural and policy aspects within health challenges and solutions – every aspect of our response was founded on principles of ethics and equity. Wellcome’s voice was distinct, and heard by new audiences in different and important ways that influenced the research response to Covid-19.

Wellcome was a trusted source of information in the media and on social media channels. In the first six months of 2020, the Wellcome media office received almost 1,000 media requests in relation to the pandemic. A number of Wellcome spokespeople took part in interviews and press briefings, or authored statements, comment pieces, LinkedIn posts and Twitter threads, using these opportunities to support a coordinated communications strategy.

One of Wellcome’s strongest messages was that the world will not be safe from Covid-19 if it is out of control anywhere. We are part of the Access to Covid-19 Tools (ACT) Accelerator, which was set up

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by the WHO to ensure global equitable access to the best vaccines and treatments. Alongside UNITAID, Wellcome is convening the therapeutics pillar within ACT Accelerator, while CEPI is convening the vaccines pillar with Gavi, the vaccines alliance. The third pillar is for diagnostics, convened by the Foundation for Innovative New Diagnostics and the Global Fund. As with all the partnerships we have entered to respond to the pandemic, we have discussed governance with our funding partners and put in place the most appropriate mechanisms.

Wellcome supports science to solve the urgent health challenges facing everyone

Developing vaccines, therapeutics and diagnostics is only the start. The next phase of the response – global manufacturing and distribution – urgently needs support now, with a new funding target of $35 billion as we head into 2021. However large this figure seems, it is nothing in comparison to the economic costs of enduring the pandemic without these tools. A fundamental principle throughout is that allocation of diagnostics, therapeutics and vaccines must be fairly based on need rather than on ability to pay, otherwise the pandemic will continue to disrupt lives across the world.

Wellcome research

Wellcome directly supported research into the pandemic and potential solutions. Projects we funded included a diagnostic tool specifically designed to test for the virus in low- and middle- income countries; research into the ethics of Covid-19 vaccine research and development, including the participation of pregnant women in clinical trials; and mobilising community health, youth leadership and digital

technology to improve Covid-19 test, trace and isolation interventions in Kenya.

Wellcome coordinated opportunities across fields of research, such as adding a standardised questionnaire about people’s experiences of Covid-19 to a number of longitudinal population health studies around the world, and helping the UK’s major protein production resources to collaborate in providing proteins and peptides for Covid-19 research. Planned surveys of public attitudes to science and health funded by Wellcome – one in the UK and one worldwide – went ahead and included questions about the pandemic. Wellcome Monitor results from the UK were published in the summer of 2020; Wellcome Global Monitor will be published next year.

At the Wellcome Sanger Institute (part of Genome Research Ltd, see page 39), 200 staff volunteered to help sequence the viral genomes in 180,000 samples from Covid-19 infections. The institute helped fund the project, which was part of the Covid-19 Genomics UK Consortium. Sequencing data from the consortium was delivered to NHS centres and the UK government, in order to help guide public health policies, evaluate the effects of interventions on the spread of the virus, and track genetic changes associated with transmission or severity of illness.

Many other people and organisations supported by Wellcome quickly got involved in Covid-19 research partnerships or made facilities and data available to help research progress as quickly as possible. Rapid changes to Wellcome’s grant policies enabled researchers with existing Wellcome funding to redirect their efforts during the pandemic, whether to caring responsibilities or urgent research. Around 140 of our clinician researchers chose to be seconded to the clinical frontline, mostly in the UK, others in low- and middle-income countries.

Wellcome’s programme in Thailand mobilised the COPCOV trial in 25 sites around the world. Funded through the Covid-19 Therapeutics Accelerator (CTA), it tested whether hydrochloroquine was effective at preventing Covid-19 in healthcare workers.

Image © MORU 2020. Photographer: Supa-at (Ice) Asarath

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Across Malawi, Kenya and South Africa, Wellcome’s established research programmes bolstered national testing capacity to help track the virus’s spread and enable clinical research. In Malawi we awarded a grant to build an oxygen unit that can generate over a million litres of oxygen a day, essential for treating people with severe Covid-19 symptoms. In Uganda, we gave a grant for personal protection equipment (PPE) to a centre associated with the Wellcome programme in Kenya.

Our Director, Jeremy Farrar, has been an advisor to the UK Government from the start of the pandemic in his capacity as an expert in infectious diseases.

Operational response

While much of Wellcome’s response to the pandemic was about speed, other aspects of our work slowed or stopped because of either the pandemic or the local public health response. Many applications to our funding schemes were delayed to next year, as were the planned start dates of a number of Wellcome-funded clinical trials. We postponed decisions on how to align Wellcome Centres to our new strategy and awarded shorterterm funding in the meantime. Grant-making did continue, however, with appropriate changes to committee processes, reviewing applications and proposals remotely, and forgoing site visits.

Wellcome is mostly based in our London offices next door to Wellcome Collection, our free museum and library. Once it was clear that cases of Covid-19 would inevitably reach the UK, we began preparing for the closure of our buildings and equipping more than 700 members of staff to

continue their work from home as much as possible. This was an element of the pandemic response we fully supported and advocated for as early as possible.

After a rapid planned transition to home working, Wellcome’s office buildings closed in March 2020, and began a phased reopening in September. For 10 weeks during this closure, our main office building was used as a respite centre for NHS staff, mostly those working at the neighbouring University College Hospital.

Our digital and technology team brought forward planned moves to greater use of cloud products and services, and redesigned in-house IT services to meet the needs of colleagues working in dispersed locations.

Wellcome Collection also closed to the public in March 2020. The programme of events and temporary exhibitions was postponed, and other work in the building had to be cancelled. The impact of the pandemic on cultural venues all over the world is already hugely negative and is likely to get worse, but Wellcome Collection is in a unique position for two reasons.

First, Wellcome is able to sustain funding for Wellcome Collection staff and resources throughout the closures. Second, Wellcome Collection’s purpose is to challenge how we all think and feel about health: we have to give this enormous moment in the history of health and human experience its social, cultural and political context for current and future audiences. See page 20 for more about Wellcome Collection’s response and plans for 2021.

Wellcome Collection was closed to the public for most of 2020.

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The Wellcome Sanger Institute closed in March 2020 to all but essential work such as the Covid-19 genome sequencing mentioned above. Research programmes and projects were slowed or paused, a site visit scheduled for June 2020 for Wellcome to review the institute’s work was postponed, and all training and engagement activities were delivered online. The Campus has been converted into a ‘COVID secure’ workplace, our genome sequencing platforms are close to full capacity once again, and we hope that other data generation platforms will follow shortly.

Our innovations portfolio had over 60 products in clinical evaluation, touching the lives of more than 5 million people.

As the situation in the UK and other countries continues to change, with varying public health measures and restrictions in place, we will adapt our approach to opening or closing Wellcome’s buildings. When possible, we will provide a safe working environment, with priority given to people whose work depends on being on location and those who are unable to work remotely. To minimise disruption and uncertainty for staff, our approach will be measured and cautious – we do not expect most of our staff to be working in our offices until well into 2021 at the earliest. For some, working from home is a positive experience, but for others it can be isolating and difficult. We will continue to monitor and support our employees’ wellbeing.

Despite the ongoing uncertainties, Wellcome believes the robustness of our planning, the culture of collaboration and support essential to Wellcome’s

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Based at the Wellcome Sanger Institute, the Pan-Cancer Project published 23 papers on one day in February 2020, revealing the genetic fingerprints of different causes of cancer, such as smoking. Understanding more about how a particular cancer developed could help to inform prevention strategies and new directions for diagnosis and treatments.

ways of working, and the resilience of our investments and financial systems will ensure we continue to fulfil our charitable mission throughout this pandemic. With the prospect of effective Covid-19 vaccines coming through next year, and the potential for additional treatments and better tests, we look forward to pursuing our new strategy with equal conviction after the pandemic has ended.

Wellcome strategy

Last year, we conducted a review of how Wellcome funds science, taking account of how Wellcome and the world are changing. The review was led by Jim Smith, stepping back from his role as Director of Science, and included visits to a range of research centres in high- and low-income countries, interviews with senior members of the UK and international research communities, as well as an open survey for other researchers to contribute their views.

The results were presented to the Board of Governors in November 2019, and they agreed that this review should form the basis of a new organisational strategy to get the best out of Wellcome’s unique strengths as a whole. This was also an opportunity to act on consistent staff feedback that they would like Wellcome to be more aligned, with a clearer strategy and direction towards a common vision.

Staff were kept informed about the development of the strategy, and invited to contribute their views on the wording of our new vision, the choice of health challenges, and how our culture needs to change to deliver this strategy. Progress was delayed by the closure of our offices in response to the pandemic, but the Board agreed that the new strategy was still a priority and we prepared to inform key stakeholders about the coming changes. In particular, we needed to give researchers enough time to consider whether and when to apply to Wellcome for funding in the coming year.

In October 2020, we announced our new vision and the principal decisions in a new strategy for Wellcome’s future work. The vision is: Wellcome supports science to solve the urgent health challenges facing everyone. This now guides the work of every part of Wellcome except our Investments team, whose goal remains to maximise returns for Wellcome to spend on charitable activities, and Wellcome Collection, which has its own vision as a free museum and library.

To achieve Wellcome’s vision, we will support discovery research through open funding schemes and centres, giving researchers across a wide range of disciplines the freedom to make unanticipated discoveries that change the way we see the world. We have also identified three urgent health challenges facing the world today, for which we will

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use science to find solutions. They are mental health, global heating, and escalating infectious diseases, and we will dedicate an integrated programme of research, policy and advocacy to find and implement solutions for each of them. You can read more about our new approach at wellcome.org/strategy

Before work on the strategy began, the Wellcome Success Framework had been developed over several years to help monitor and evaluate progress. A report published in January 2020 summarised what we discovered from the process. We are now adapting the success framework along with other resources to modify the ways we track progress and measure success so that they work for the new strategy and help us make the best decisions.

Delivering the strategy has required a change in organisational design, starting at the Executive Leadership Team level and continuing throughout Wellcome. We are reorganising our funding divisions into one integrated research programmes team. Some priority areas will become important elements of our health challenge programmes, or support Wellcome’s new goals in other ways. This is to generate a more unified culture and aligned working, to ensure we can get the best out of the people at Wellcome to achieve a clearer, more ambitious strategy.

In this Annual Report, activities and achievements are presented according to the strategy and structure that were in place during 2019/20. Of course, many benefits from Wellcome’s work stem from activities and funding started (and even finished) under previous strategies, sometimes many years earlier.

Other activities

Last year, Wellcome began a long-term campaign to build a better research culture. If the way research is done were as valued as its outputs, research would be more creative, inclusive and honest. In January 2020, we published a survey of more than 4,000 researchers about their experiences in research careers. This supported anecdotal evidence that research culture can be exclusive and detrimental to people’s careers and to their lives.

The survey results were followed up by a series of meetings at universities in the UK to share stories of good practice as well as bad. Wellcome provided kits for people at other institutions and in other countries to run their own discussion events – around 450 kits were sent out between January and March. Covid-19 put an end to physical meetings and temporarily disrupted communication about the campaign. Almost 200 more kits were requested after the first lockdown began in the UK, and discussions continued online, often with the participation of Wellcome’s spokespeople on research culture.

Having had to postpone a summit planned for March 2020, the next phase of the campaign went online, with a series of blogs, videos and panels sharing what we’d heard from the community and positive solutions. Research culture is prominent on the UK government’s agenda, and we have partnered with the Government Office for Science, UK Research and Innovation, the National Institute for Health Research, Universities UK and Cancer Research UK to help turn views and suggestions into actions. Engagement from the research community has so far been enthusiastic, although we struggled to recruit Black voices in our survey – something we need to address before we can achieve our goal of a better research culture for all.

Brexit has long been seen as a risk to research culture in the UK, as leaving without a deal in place seemed likely to limit the number of international scientists and technicians working in UK-based labs, as well as reducing funding and collaboration opportunities from the European Union. Wellcome’s goal is to achieve the best possible outcome from Brexit for science in the UK and elsewhere. This year, we ran a simulated negotiation to explore possible routes to good outcomes. From this evidence, we believe UK participation in the EU’s Horizon Europe programme is reasonable, mutually beneficial, and vital to getting the best from science in the future. With negotiations precariously balanced in the approach to the end of the transition period on 31 December 2020, research is no longer part of the main deal – whether or not this will be advantageous for UK and EU science remains to be seen.

In 2019, Wellcome announced the first winners of the Wellcome Photography Prize, a new competition to help increase awareness of Wellcome’s mission and engagement from new audiences. In 2020, planned displays of this year’s winners were cancelled and had to move entirely online. This limited our use of the imagery to engage new audiences at conferences and events, but some of the images were used to support the launch of our new strategy and we enter the third year of the Wellcome Photography Prize hopeful that next year’s winning images will be able to be physically displayed.

Wellcome’s online magazine Mosaic produced high-quality and in-depth articles about science and health, attracting over 8 million unique views at mosaicscience.com since it launched in March 2014. Because almost every story was free to republish, Mosaic stories got at least a further 15 million unique views in 200 other publications and in 16 languages. Anticipating the sharper focus in activities that a new strategy would require, the decision was made to stop publishing new stories in December 2019 after almost six years of award-winning longform journalism.

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In 2018, we agreed to allocate £250 million to establish Wellcome Leap Fund, a new way to support health research that draws inspiration from the technology and venture capital sectors. It will develop portfolios of bold research, each with a highly ambitious five- to 10-year goal driven by the potential to improve health globally rather than by potential financial or commercial return.

In August 2020, Welcome’s Board of Governors approved the grant to set up Wellcome Leap Fund following the appointment of its first chief executive, Regina Dugan, a former Director of the US Defence Advanced Research Projects Agency (DARPA). She will work with chair Jay Flatley, a former chief executive and current Chair of Illumina, to develop Leap and push at the boundaries of modern science. Initial criteria for success include how much investment Leap attracts from additional funders in the next few years.

Mapping the body’s cells

The Human Cell Atlas is a major international collaboration to identify and characterise all the cells in the human body. Wellcome began funding the UK teams, based at the Wellcome Sanger Institute and five other UK research institutions, in 2018. This year, they produced two landmark cell maps that describe the origins of the human immune system and how immune cells acquire their function during development. The first, in October 2019, was of the fetal liver as the blood and immune systems change during the first and second trimesters of pregnancy. The second, in February 2020, was of cells in the thymus, which produces T cells, a key part of the human immune system.

Human Cell Atlas teams around the world have also contributed to the understanding of Covid-19 by studying which cell types are targeted by the virus and how genetic and cellular responses might contribute to the disease.

Lord Willetts stepped down as Chair of Genome Research Limited (GRL) Board in December 2019. We thank him for his contributions during his time as Chair. Given the strategic importance of the Wellcome Sanger Institute to Wellcome, and that we would soon be introducing a new strategy and beginning to expand the Wellcome Genome Campus, Wellcome’s Director Jeremy Farrar took over as GRL Chair from 1 January 2020. Wellcome’s Chief Operating Officer, Paul Schreier, and one of our Governors, Cilla Snowball, also joined the GRL Board this year.

Science

Wellcome’s Science division oversaw a portfolio of around 1,800 active grants totalling more than £3 billion, supporting a wide range of research from looking into how life works at the scale of single molecules to large-scale, multinational clinical trials testing new health interventions. The majority of this funding was through Fellowships and Investigator award schemes, and to Wellcome Centres and our Africa and Asia Programmes as well as ventures such as the Wellcome Sanger Institute, the Francis Crick Institute and Diamond Light Source. In this section, we can pick out only a small selection of achievements made by our grantholders, while on page 37, the Financial Review details some of the major spending commitments made in this year.

With a new strategy in development, it was a good time to review a number of funding schemes and build evidence for strategic decisions that would follow in due course. For example, we looked back at 10 years of the Joint Global Health Trials scheme, funded by Wellcome and three national UK funders – the Medical Research Council, the Department for International Development (as was) and the National Institute for Health Research. This was the first review of the scheme because most of the clinical trials funded by it are still in progress.

In total, the scheme has funded 81 trials and 67 pilot trials across 51 countries. Of those that are complete, about one-third have had a positive influence on policy, one-third have led to wide implementation of clinical treatments or methods and, just as important, three trials produced evidence against changing current practices. The trials that had most impact were in areas of large unmet need, such as in treatments for neglected tropical diseases, rather

Cheap drug, valuable medicine

In the past two years, we have reported on Wellcome-funded trials that showed the value of a low-cost drug for treating excessive bleeding during childbirth. Tranexamic acid is now on the World Health Organization’s list of essential medicines and, if accessible where it is most needed, will save thousands of mothers’ lives each year, particularly in low- and middleincome countries where maternal bleeding is a major cause of death.

This year, another large international trial that Wellcome helped to fund showed that tranexamic acid is also effective at stopping bleeding related to traumatic brain injuries. Using the drug as part of the treatment led to a 20 per cent reduction in deaths compared to standard treatment without it.

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than for diseases like malaria that attract significant funding from other sources.

Evaluating the impact of past funding decisions requires the ability to process large volumes of data such as grants, publications, patents and policy outputs. Manual classification of all this data has often led to inconsistent approaches across Wellcome, making cross-cutting analysis difficult and time-consuming. In-house data and subject-matter experts collaborated on a machine-learning tool for automatically classifying the Science grants portfolio. This resulted in consistent classification for over 120,000 grants in our system, allowing comparison across different funding schemes. The tool has been open-sourced to allow others to test and use it freely.

Following scheduled reviews, we renewed our funding for the Sainsbury-Wellcome Centre for Neural Circuits and Behaviour in the UK, and for the Mahidol Oxford Tropical Medicine Research Unit based in Thailand. We made another five-year commitment to the Alliance for Accelerating Excellence in Science in Africa (AESA), a scheme we fund that is managed by the African Academy of Sciences. It is expanding to cover the whole continent (previously limited to sub-Saharan Africa) with fundamental principles of supporting research that addresses the needs of the country where the research is being done, as well as excellence and equity, good financial practice, and diversity and inclusion.

Wellcome was a partner in a review of the UK Concordat to Support the Career Development of Researchers. This is the agreement between funders and employers of research staff to improve employment conditions and support for careers in UK higher education. A new version was published in September 2019 with a strong emphasis on research culture and the reciprocal obligations of researchers, institutions and funders.

Fighting antimalarial resistance

The parasites that cause malaria can become resistant to the drugs we use to treat the disease. This leads to drugs losing their effectiveness and they have to be taken out of use – assuming there are alternatives. The current first-line treatments for malaria are combinations of artemisinin-based drugs. A trial run by the Mahidol Oxford Tropical Medicine Research Unit – Wellcome’s programme in Thailand – showed this year that adding a third drug, which is not artemisinin-based, may be more effective at treating malaria and may also reduce the risk of the parasites developing resistance.

Rosalind Franklin Institute

In September 2020, Wellcome announced funding for a new centre of cryo-electron microscopy in the UK. Housed in the interdisciplinary Rosalind Franklin Institute, named after the scientist who made numerous discoveries about the structures of proteins and DNA in the middle of the 20th century, the centre will house state-of-the-art tools, available and accessible to a range of biomedical researchers.

Wellcome holds regular meetings for our funded researchers to learn about each other’s work and to talk to Wellcome staff about a range of issues. Before the lockdown began in the UK, we tried out some ways to make our researcher meetings more inclusive this year. Changes included a code of conduct and details of who to speak to about concerning behaviour, extra support for anyone experiencing any barrier to attending, and a quiet room available throughout the meeting. Researcher meetings were cancelled when Wellcome’s buildings closed in response to the pandemic. Feedback from participants earlier in the year, however, will help guide further small changes that can make a big difference to people’s involvement.

The research sector is facing a difficult time during and after the Covid-19 crisis. Universities will have to make difficult choices about where to put limited resources, medical research charities have seen a massive loss of income, and there are concerns for early-career researchers in particular. Wellcome will be mindful of these circumstances as we begin to implement our new strategy. There will be an impact on individual researchers and research institutions, especially in the UK, as we phase out our current funding schemes in 2021. However, details of the new and simpler set of discovery research funding schemes will be published in 2021 to help researchers plan applications in 2022.

Innovations

As of July 2020, our innovations portfolio had over 60 products in clinical evaluation, touching the lives of more than 5 million people. At least 40 per cent of Wellcome investigators are involved in translational activity and we have 82 interventions in clinical use. On page 37, the Finance Review details some of the major spending commitments made in this year.

We work with researchers and organisations around the world to transform ideas, discoveries and inventions into treatments, products and cures for disease, and to help develop transformational technologies that can make a meaningful impact on human health. One example of this is Wellcome’s support for the Rosalind Franklin Institute, which will develop new technologies

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A field assistant for the World Mosquito Program releases sterile mosquitoes in Fiji. Trials are underway in several countries and results from Indonesia this year showed a 77 per cent reduction in cases of dengue over two years as a result. Wellcome has funded the World Mosquito Program since 2014.

Image: Adrienne Surprenant / Collectif Item. © Wellcome

for structural biology (see above). Announced in September 2020, it has been funded jointly through our Science and Innovations divisions.

Another example of impact is through our Translational Partnerships with 16 universities in the UK, three universities in the EU and two of Wellcome’s Africa and Asia Programmes. These institutions are already networking and sharing best practice. For example, the University of Manchester has started a translational network and hub to support researchers in the region, while Imperial College London has developed a dedicated facility to support design and development of medical devices.

In 2020, the Innovations team continued to build and consolidate our four Flagship portfolios focusing on neglected tropical diseases, psychosis, innovation in low- and middle-income countries, and innovation to prevent enteric disease. New programmes we supported include determining the mode of action for molecular compounds for neglected tropical diseases; developing a rapidly active live-attenuated cholera vaccine; and identifying children with acute infections at risk for progressing to severe fever or sepsis in healthcare settings in low- and middle-income countries.

Schizophrenia treatment

Results from a phase 2 trial of a drug developed by Karuna Therapeutics have shown it was effective at improving acute psychosis in people with schizophrenia, and had fewer side-effects than drugs currently used. KarXT will now go into phase 3, the last stage before it can be licensed for doctors to prescribe. Part of our Psychosis Flagship portfolio in Innovations, KarXT has the potential to revolutionise the treatment of schizophrenia.

Culture & Society

Wellcome’s Culture & Society division has encompassed a number of diverse activities, including funding research in the humanities and social sciences, championing open access publishing, running Wellcome Collection, influencing science education in the UK, and supporting public engagement with research. On page 37, the Financial Review details some of the major spending commitments made in this year.

One thing these activities have in common is an overt emphasis on people, access and inclusion. In the development of Wellcome’s new strategy this year, this emphasis has become broader and more deeply embedded across all of Wellcome.

It can be seen in two new schemes to fund humanities and social science research: only half of our assessment of applications focuses on the research. Equally weighted is evidence of an inclusive leadership structure and a commitment to the career development of everyone in the team. That covers not just researchers, but also project managers, facilitators and artists, for example, who are often overlooked because they are on freelance or occasional contracts.

Wellcome Collection is not included in the scope of the new strategy. This gives its Director, Melanie Keen, who joined in October 2019, freedom to lead the team in reimagining the venue in the context of a much-changed cultural sector. Many other venues suffered from having to close from March 2020 onwards, for several months during the pandemic, and re-opening when possible only with reduced capacities and timed entry. Some never re-opened, while others laid off staff and froze pay. The focus has had to shift from international tourism to domestic visitors, and while online galleries and activities continued, audiences had

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fewer opportunities to access cultural activities. What it means to be a museum and gallery today needs to be reappraised.

For Wellcome Collection, whose focus is people’s experience of health and what it means to be human, this is both a moment in history to document and an opportunity to explore new approaches. It means addressing the context of the collection itself – amassed by our founder Sir Henry Wellcome, a wealthy, white, Western man, as part of a personal project to understand “the art and science of healing through the ages”, an understanding which frequently exploited and marginalised indigenous peoples and people of colour, disabled people, women and LGBTQ+ communities.

Wellcome Collection re-opened to the public in October 2020 with a reduced programme of exhibitions and events responding to the question, What does it mean to be human now? Ticketed entry was introduced to limit numbers, allow social distancing and support the UK’s Track and Trace system. Visitors were keen to return to the venue while public health restrictions allowed, but a second ‘lockdown’ in London in November meant another temporary closure. As the situation continues to change in 2021, our priority will be the safety and wellbeing of our staff, while making every effort to open whenever possible for visitors to connect with experiences of health in this historic moment.

Priority areas

A core principle for Wellcome Collection’s future approach is to confront this head on. We want to connect the objects we hold with people for whom they hold significance, and listen to previously silenced voices that may well challenge our assumptions and change our understanding. To do this, Wellcome Collection must be accessible to anyone who wishes to engage with us. Last year’s new permanent gallery, Being Human, took a big step towards access and inclusion. There is a dedicated Access Team, assistance animals are permitted, we reserve a limited number of tickets for each event for visitors with access requirements, the building is wheelchair accessible, there are braille and large print labels, screen reading software, induction loops and sensory areas. We have begun the process of redeveloping a second permanent gallery that will, in time, directly address the colonial roots of our collection and institution.

Wellcome introduced priority areas as part of our strategic framework in 2015. They each focused a single team’s efforts on one issue, with dedicated budget and the explicit goal of achieving transformational change that would lead to better health or better science.

The impact was immediate. In the past five years, our priority area teams have shown the power of focus and greater resource – their successes and challenges have profoundly influenced Wellcome’s new strategy. Instead of eight or nine priority areas, we are now narrowing the focus to three urgent health challenges. As a result, some priority areas will be brought to a close in 2021 while the work of others will be incorporated in our new programmes. The Snakebites priority area will continue outside the new strategy.

Medicine: The Wellcome Galleries opened at London’s Science Museum in autumn 2019. More than 3,000 objects, including many collected by Sir Henry Wellcome, are on display next to newly commissioned artworks.

Image © The Board of Trustees of the Science Museum, London

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Diversity & inclusion

The work of the Diversity and Inclusion (D&I) team has deeply influenced the new strategy and will continue to cut across all of Wellcome’s activities, underpinning what we do as an employer, a funder and a partner. This year, the team has developed a new strategy for D&I, aligned with Wellcome’s new overall strategy, aiming in the next 10 years to make Wellcome an inclusive employer and funder, and for the research we fund to be inclusive in design and practice.

Wellcome recognises that potential grantees and employees face many barriers based on race, disability and gender among others, and these are likely to have been made worse in the pandemic. Events over the last year have increased the urgency to tackle structural racism as a health issue and ensure that the most marginalised groups are included in decisions in global health. Anti-racism and anti-ableism in particular will drive Wellcome’s new D&I strategy.

Data for science and health

Tariq Khokhar joined Wellcome in December 2019 to lead this, our newest priority area. Covid-19 has only reinforced the importance of data-driven strategies in health, as well as the challenge of rapid, trustworthy use of health data to inform research, clinical practice and public health.

This year, Wellcome formed a partnership with the Financial Times, the Children’s Investment Fund Foundation and the Botnar Foundation to look at the future of digital health governance in low- and middle-income countries for children and young people. The Understanding Patient Data team published the “Foundations of Fairness” report which explored citizen’s views on how health data from the NHS should be used by researchers and industry. The priority area team also commissioned an analysis of open-source software used by clinical researchers across the world, and a study of data science capacity in Southern and East Africa, and scoped a series of Global Health Data challenges.

Mental health

The Mental health priority area’s strategy launched in January 2020, and is the basis for our new mental health challenge programme. Key to the approach is identifying the ‘active ingredients’ in the various therapies used to treat, manage or prevent mental health problems. At the moment, some treatments work for some people some of the time, but we have no idea why. Unpicking this challenge will require closer ties between research fields that currently mostly work in isolation from each other, despite looking at similar problems and conditions.

In approving this strategy, the Board of Governors appreciated the involvement of people with lived experience as key stakeholders in both its development and implementation and as participants in the programme. Also clear was the quality of engagement with the research community through social media and informal conversations.

The priority area limited its scope to depression and anxiety. As one of the three health challenge programmes within Wellcome’s new strategy, we will be able to include a much broader set of mental health issues, including psychosis. But the focus will shift from symptoms to solutions as we look to enable people experiencing problems with their mental health to access tools and techniques that are more likely to work for them in preventing, treating or managing their mental health.

Vaccines

The Vaccines team has been deeply involved in Wellcome’s response to Covid-19 this year, and their work setting up the Coalition for Epidemic Preparedness Innovations (CEPI) in 2017 made a huge difference to the world’s capacity for coordinating rapid, robust research into vaccines to stop the spread of the virus. CEPI was able to pivot its programmes early in January 2020 to rapidly start developing COVID vaccines, many of which are now in clinical trials and results so far have been very promising.

The priority area team has progressed programmes on the use of human infection studies, where healthy volunteers are exposed to infection to understand the body’s immune response or test the effectiveness of potential new vaccines and treatments. This year, the first of eight Wellcomefunded studies began recruiting volunteers – it is looking at pneumococcus in Malawi, a first step in testing potential vaccines for the disease this species of bacteria can cause.

The pandemic has not stopped other epidemics. In the Democratic Republic of the Congo, an outbreak of Ebola ended in June 2020 after almost two years of transmission in an area of active conflict in the east of the country. A separate outbreak was identified in a different province in the same month, the response to which has been complicated by Covid-19 but successfully ended the outbreak in November 2020. Some more good news this year was the regulatory approval of a second Ebola vaccine, greatly enhancing public health agencies’ capacity to stop Ebola epidemics faster.

Vaccines will be a vital element in our health challenge programme to solve escalating infectious diseases as part of Wellcome’s new strategy.

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Drug-resistant infections

Infections that become resistant to the drugs designed to kill them are a growing problem in the 21st century, and tackling them will be essential in solving the challenge of escalating infectious diseases.

The priority area team works through partnerships with a range of other organisations. This year that included the delivery of ACORN (A Clinically Oriented Research Network), a research collaboration based in Cambodia, Laos and Vietnam that has been looking at implementing and assessing enhanced surveillance of antimicrobial resistance as part of routine hospital care in low- and middle-income countries. Tools and training have been provided and the data capture was successfully completed in September 2020.

A new public-private partnership between Wellcome, the pharmaceutical company Pfizer, and the governments of Kenya, Ghana, Malawi and Uganda is using real-world data to track patterns of drugresistance and help patients get the best available treatments and improve information flow from hospitals to national governments and global bodies.

The priority area’s largest investment since it began is in CARB-X, a global non-profit partnership with a development pipeline that includes antibiotics, diagnostics, vaccines and other approaches to treating drug-resistant infections. To date, CARB-X has supported 67 products from 10 countries, and seven projects have already progressed beyond CARB-X’s support into phase 1 trials or, in the case of diagnostics, to launch.

Our Planet, Our Health

With the harmful effects of global heating being one of the three challenges Wellcome’s new strategy aims to solve, the Our Planet, Our Health team has contributed to the framing of the challenge and identifying options for how Wellcome could make a significant impact. The new programme will mark a shift in focus from the priority area, but builds on the team’s experience of funding planetary health research.

Research Ecosystems in Africa and Asia

Working with partners in Africa and Asia, this priority area has strengthened research ecosystems by supporting sustainable partnerships, strong leadership and effective research management. We supported the Research Management Programme in Africa (REMPRO), which is developing international research management standards, and the Coalition for Research and Innovation (CARI), which is encouraging African nations to invest in research and development and set research agendas. Working closely with the African Union, the African Education Science, Technology and Innovation Fund has been sent up to mobilise long-term investments.

In support of CARI, research funded by Wellcome and led by the London School of Economics showed how countries share common challenges such as a lack of clear coordination mechanisms, and that long-term advocacy by local champions using local data is critical to effective health research governance. After the priority area closes in May 2021, commissioned research will continue to be used to make policy and practice recommendations.

Science education

Explorify, a tool to support teachers in preparing primary school science lessons, was developed as part of our Science education priority area. In 2019/20, a survey of its users revealed that 84% of teachers agreed it had increased pupils’ science knowledge, increased their enjoyment of teaching science, and 95% said it helped them to encourage more discussion in the classroom. Explorify has reached 84% of UK primary schools.

In response to national lockdowns in the UK, we extended our partnership with the Education Endowment Foundation supporting a pilot of online tutoring, and worked with I’m a Scientist to increase opportunities for learners to connect with scientists. The primary science team pivoted their objectives to make sure science learning from home was informed and accessible, working with partners to deliver digital resources to support teachers and pupils through a range of media. A similar shift was taken to ensure Continuing Professional Development training remained available to teachers during school closures.

Wellcome’s new strategy marks the end of Science education as a priority area. The team has begun working with colleagues across Wellcome to explore new ways of involving young people in the research agenda and in Wellcome’s health challenge programmes in particular.

Snakebites

This year, the head of the Snakebites priority area, Nick Cammack, took on an additional role as Wellcome’s lead on the Covid-19 Therapeutics Accelerator (see page 13). The team continued to make good progress, however.

Activities included grants to global partner organisations to stimulate innovation in the sector, such as modernising the antivenom production process and trialling ways to automate it. The team has also worked with the World Health Organization to strengthen global cooperation in ensuring the most effective antivenom is produced. And they have explored how to develop research hubs in areas with high incidence of snakebites – these hubs would combine science expertise and innovation with local knowledge, policy and public engagement to inform decisions on how to tackle the problem in specific communities.

Trustee’s Report | Review of Charitable Activities Wellcome Trust Annual Report 2020 | 23

Review of Investment Activities

Figure 1

Total portfolio net returns (blended £/US$) Period to 30 September 2020

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Annualised return in £ (%) Cumulative return in £ (%)
Nominal UK CPI Real Nominal UK CPI Real
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||||||||| |---|---|---|---|---|---|---|---| |Trailing one year*|12.3|1.1|11.2|Trailing three years|36|6|30| |Trailing three years|10.8|1.9|8.9|Trailing five years|89|9|80| |Trailing five years|13.6|1.7|11.9|Trailing ten years|212|23|189| |Trailing ten years|12.1|2.1|10.0|Trailing twenty years|340|50|290| |Trailing twenty years|7.7|2.0|5.7|Since Oct 1985|8,762|153|8,609| |Since Oct 1985|13.7|2.7|11.0|

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----- Start of picture text -----
||||||||| |---|---|---|---|---|---|---|---| |Annualised return in US$ (%)|Annualised return in blended currency (%)| |Nominal|US CPI|Real|Nominal|UK/US CPI|Real| |Trailing one year|17.8|1.4|16.4|Trailing one year|15.2|1.3|13.9| |Trailing three years|9.5|1.9|7.6|Trailing three years|10.2|1.9|8.3| |Trailing five years|10.0|1.7|8.3|Trailing five years|11.9|1.7|10.2| |Trailing ten years|9.9|1.7|8.2|Trailing ten years|11.0|1.9|9.1| |Since Oct 2009|9.8|1.7|8.1|Since Oct 2009|11.0|1.9|9.1|

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The value of the endowment of £28.1 billion at 30 September 2020 is measured at fair value, as discussed in note 15(g) and net returns presented are consistent with this valuation. Net returns include impact of all external management fees/expenses. Performance fees are included for hedge funds, private equity and property but for public equity they are only included from FY 2018. This also applies to Figures 2, 3 & 7.

£ used to 30 September 2009. Blended £/US$ used from 1 October 2009. This recognises the global nature of our portfolio (see Figures 12 & 13) and the need to maintain global purchasing power. However, Wellcome’s functional currency remains Sterling.

*Prior year trailing one year nominal returns were 6.9% (£), 1.1% (US$), 4.0% (blended £/US$).

Summary

The 2019/2020 financial year covered an extraordinary period in the global economy and financial markets caused by measures taken to contain the spread of the Covid-19 virus. Many governments locked down their economies in a way unprecedented in peacetime, causing huge disruption to large swathes of economic activity. To mitigate the impact of these measures massive fiscal and monetary support was rolled out.

Financial markets took fright as the extent of the spread of the virus became clear, with global equities falling by a third in USD terms between mid-February and mid-March. However, a clear statement of intent to provide liquidity by the Federal Reserve and other central banks in March started a powerful rally, which recouped substantially all the losses and left global equities comfortably up over the financial year.

The portfolio fared well over the financial year, generating a return of +12.3% in Sterling (2019: +6.9%). After taking account of £0.9 billion in charitable cash expenditure over the year, this is equivalent to a gain of £3.3 billion gross of liabilities. Sterling returns were held back by currency strength – in USD terms the portfolio returned +17.8% (2019: +1.1%).

Over the past ten years, the portfolio has delivered a real return after inflation of +189% in Sterling (+10.0% a year in real terms or +12.1% a year in nominal terms). The whole of this period has seen extraordinarily low interest rates and strong support for asset markets from Central Banks. However, the post- Covid-19 world is likely to involve some tough choices for policy makers, which may well mean lower future returns for financial investors. We continue to focus on

Trustee’s Report | Review of Investment Activities Wellcome Trust Annual Report 2020 | 24

Figure 2

Total portfolio cumulative net returns since 1 October 1985 (%)

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8000
7000
6000
5000
4000
3000
2000
1000
0
Oct Sept Sept Sept Sept Sept Sept Sept
1985 1990 1995 2000 2005 2010 2015 2020
YEAR
CUMULATIVE RETURN %
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Wellcome

Global Equities UK/US CPI + 4%

£ used to 30 September 2009. Blended £/US$ used from 1 October 2009.

ensuring that Wellcome is well placed for more difficult times and has adequate liquidity for the foreseeable future. Our key risk control involves forecasting liquidity flows over the next five years and ensuring that projected cash levels do not fall below 2% of portfolio value over this period. This forms a key part of financial planning for charitable expenditure discussed in the Financial Review (refer to page 37).

Overview

The first quarter of our financial year (Q4 2019) was very positive for risk assets globally, supported by three cuts in US interest rates during 2019. Market strength continued into early 2020, despite increasing signs in China that Covid-19 was spreading fast and required aggressive and economically damaging action to contain it. However, after it became clear that the virus had begun to spread rapidly beyond China, markets fell in a disorderly fashion.

The market decline was arrested only when the Federal Reserve and other central banks announced massive, and effectively unlimited, monetary support through quantitative easing. Governments also attempted to provide a backstop to economies through large scale fiscal support programmes. This coordinated policy response allowed markets to recover, even though the worst of the economic impact was not felt until Q2.

Wide-ranging measures to prevent movement and contact led to an acceleration of pre-existing trends towards e-commerce and digital entertainment. As a result, there was a large divergence in performance between the beneficiaries of these trends, especially in the technology sector, and more traditional parts of the economy. Interest rates at, or below, zero had a severe impact on the banking sector’s profitability.

Despite some big winners, Q2 corporate earnings were down over 30% year over year in the US (S&P 500 Index) and over 60% in Europe (Eurostoxx Index), but markets still rallied strongly, and continued to do so in Q3, driven largely by ultra-loose monetary policy. Valuations have increased sharply and there have been some signs of highly speculative activity. One such sign has been the listing in the US of multiple Special Purpose Acquisition Companies (SPACs), vehicles that raise money on the promise that they will subsequently acquire other, undetermined, companies. These structures are reminiscent of one company that listed during the South Sea Bubble in 1720 “for carrying out an undertaking of great advantage, but nobody to know what it is”.

The +12.3% return from the portfolio was helped by good performances from most of our assets. The £14.6 billion portfolio of public equities had a notably strong year, returning +9.9% (2019: +6.8%), compared to a +5.8% gain for global equity markets. Performance was particularly strong among our outsourced managers and from internally managed stocks in Emerging Markets.

Our £3.7 billion hedge fund portfolio had another strong year, delivering a return of +17.1% (2019: +9.2%). As a group, our managers were able to avoid the worst of the market drawdowns but retained enough exposure to benefit from the market rally. Work to improve quality of the portfolio in recent years paid off as most managers contributed positively, with especially strong performance from the equity long short funds.

Private equity (PE) continues to be an important part of the portfolio, with a net asset value reaching a new high of £9.4 billion at financial year end. Performance overall was slightly more muted this year at +12.7% (2019: +15.6%),

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Figure 3

Volatility (standard deviation) of returns (%)

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25
Wellcome rolling 3 years
Global Equities rolling
20 3 years
£ used to
30 September 2009.
15 Blended £/US$
used from 1 October 2009.
10
5
0
Oct Sept Sept Sept Sept Sept
1996 2000 2005 2010 2015 2020
YEAR
ANNUALISED VOLATILITY %
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but our venture capital funds again delivered outstanding returns of +28.2% driven by investments in digital businesses. Cash flows in and out of the PE portfolio were broadly neutral.

The property portfolio has shrunk to just over £1.9 billion because of the successful sale of student housing business iQ to Blackstone, which completed in May and generated proceeds to us of £748m. The strong returns generated by this sale more than offset a more difficult period in the rest of the property portfolio, resulting in an overall return for the year of +9.6% (2019: +1.5%).

We were more than usually active in our overlay book this year. We raised cash levels and hedged around 20% of our public equity exposure before the market declines, using futures and options on US, European and Emerging Market indices. These hedges were removed during April and May as it became clear that the policy response had been sufficiently strong to avert a prolonged market decline.

The total profits on these equity index hedges and on our foreign exchange book for the year amounted to +£334m. However, these overlay gains were mostly offset by losses due to increases in the mark to market valuation of our bond liabilities as interest rates fell, which amounted to -£260m. These losses will eventually be reversed as the bonds approach maturity.

Outlook

The Covid-19 crisis has accelerated several societal and economic trends that will continue to affect our portfolio. China has emerged stronger in the short-term, which has increased the tension between it and the US among other

countries. The digital revolution has accelerated. Disinflationary forces have built up as demand destruction has led to excess supply in many economic sectors. Monetary policy has become ever more accommodative.

The crisis has also caused changes in the status quo ex ante. Governments in most Western countries have forgotten any vestiges of attachment to fiscal austerity and embraced deficits. Direct intervention in the economy has also become the norm, through guarantees for bank lending, labour support schemes and direct subsidies for key industries. It is unlikely that this will end quickly.

We expect the coming years to be characterised by higher taxation to recoup the fiscal deficits and continued government intervention. There may also be more regulation as the shift to the digital economy has created quasimonopolies while large swathes of the old economy suffer. Eventually we may see a return of meaningful inflation, which would be damaging to returns on most assets, but there is certainly no sign of it yet. Until that happens, interest rates will remain locked at close to (or below) zero, which will continue to favour assets with clear growth tailwinds.

We suspect that the rally may have simply borrowed returns from future years, fuelled by ultra-loose monetary policy. We therefore expect the coming years will be a more difficult environment and have therefore been positioning the portfolio to maximise our chances of capturing excess returns. In the equity portfolio this has involved concentrating on liquid stocks in regions and sectors of the global economy with decent growth tailwinds. In the broader portfolio we look to benefit from the illiquidity premium and from close partnerships with outstanding global investment managers.

Trustee’s Report | Review of Investment Activities Wellcome Trust Annual Report 2020 | 26

Figure 4 Evolution of asset allocation (%)

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100%
6.1 3.9 3.5 4.2
8.2 9.3 9.0
8.7 8.1
7.5 9.4 12.9 6.0
11.9
3.6 9.2 9.5
80% 11.8 11.2
11.5 16.6
23.3 24.2
27.7
60% 23.9 29.0
23.7
19.3
40% 69.2
54.4
50.5
44.5 48.0 44.8
20%
38.4
0%
Sept 05 Sept 08 Sept 10 Sept 15 Sept 17 Sept 19 Sept 20
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----- Start of picture text -----
Public markets
Private equity
Hedge funds
Property
Cash & Bonds
The percentages exclude
foreign exchange overlays and
derivatives. Public markets include
public equities, equity index and
commodity futures and options.
In addition to 1, 3, 5 and 10 year
comparatives shown left, 2005 and
2008 years are included to highlight
the evolution of the asset allocation
prior to the financial crisis.
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Figure 5 Evolution of asset allocation, in-house and externally managed (%)

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100%
5.4 6.1 3.9 3.5 4.2
9.3 9.0
80%
44.7 45.0
51.2
46.1
60% 82.5
86.7
82.5
40%
51.8 50.8
45.5 44.9
20%
26.5
10.5
6.9
0%
Sept 05 Sept 08 Sept 10 Sept 15 Sept 17 Sept 19 Sept 20
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In-house Externally managed Cash & Bonds

The percentages exclude foreign exchange overlays. In-house includes all assets owned directly other than cash & bonds. Externally managed includes assets managed by third parties, excluding cash and bonds. In addition to 1, 3, 5 and 10 year comparatives shown left, 2005 and 2008 years are included to highlight the evolution of the asset allocation prior to the financial crisis.

Trustee’s Report | Review of Investment Activities

Wellcome Trust Annual Report 2020 | 27

Figure 6

Investment asset allocation as at 30 September 2020

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One year One year
return to return to
2020 2019 2020 2019 Sept 2020 Sept 2019
£m £m % % % %
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|||||||| |---|---|---|---|---|---|---| |Total public equities|14,603|15,101|44.8|50.4|9.9|6.8| |Indirectly managed public equities|3,431|3,548|10.5|11.8| |Global|1,634|1,737|5.0|5.8| |Developed markets|1,115|1,106|3.4|3.6| |Growth markets|682|705|2.1|2.4| |Directly managed public equities|11,172|11,553|34.3|38.6| |Mega cap basket|7,185|7,455|22.1|24.9|5.0|10.2| |Optionality basket|916|1,852|2.8|6.2|2.8|0.6| |Growth basket|2,611|1,835|8.0|6.1|28.0|17.4| |Other|460|411|1.4|1.4| |Equity index futures and options|-|33|-|0.1| |Commodity futures and options|-|-|-|-| |Hedge funds|3,653|2,860|11.2|9.5|17.1|9.2| |Equity long/short|2,377|1,694|7.3|5.6|23.4|8.4| |Directional hedge funds|11|454|-|1.5|-33.4|11.9| |Non Directional hedge funds|1,265|712|3.9|2.4|7.4|9.7| |Cash & Bonds|2,915|1,250|9.0|4.2| |Private equity|9,449|8,309|29.0|27.7|12.7|15.6| |Large buyout funds|837|687|2.6|2.3|4.0|8.0| |Mid buyout funds|532|582|1.6|1.9|-0.5|8.7| |Specialist funds|1,342|1,429|4.1|4.8|-6.0|9.6| |Multi asset partnerships|877|869|2.7|2.9|-0.2|24.1| |Venture funds|4,342|3,524|13.3|11.8|28.2|27.0| |Direct Private|252|303|0.8|1.0|-5.1|-31.0| |Private co-investments|1,267|915|3.9|3.0|16.6|14.5| |Property|1,941|2,432|6.0|8.1|9.6|1.5| |-|-| |Net overlay assets*|(3)|(16)| |Total assets|32,558|29,969|13.0|8.5| |Bond liabilities|(3,471)|(3,211)| |Other liabilities|-|-| |Total liabilities|(3,471)|(3,211)| |Total assets net of all liabilities|29,087|26,758|12.3|6.9|

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Performance figures provided from custodian where available. Asset class performance figures are not additive. Includes realised gain from Index Futures and Options of £248.5m and Foreign Exchange Forward Contracts of £85.6m

*Since September 2017, the equity and commodity derivatives have been shown separately as notional exposures, with futures offsets included in other liabilities. Net overlay assets comprise foreign exchange overlays and the related cash collateral amounts due to counterparties.

A reconciliation of the ‘Total assets net of all liabilities’ to the amount as reported in the Consolidated Balance Sheet is included in note 15(g).

Trustee’s Report | Review of Investment Activities Wellcome Trust Annual Report 2020 | 28

Figure 7

Public equity net returns (%) Period to 30 September 2020

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Annualised return in £ (%)
1 year 3 years 5 years
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----- Start of picture text -----
||||| |---|---|---|---| |Global|8.0|8.8|15.0| |Developed world|2.8|6.9|12.6| |Growth markets|22.0|9.8|14.4| |Total public equities|9.9|8.9|14.7| |Direct public equities by strategy| |Mega cap basket|5.0|9.5|16.0| |Optionality basket|2.8|1.0|9.2| |Growth basket|28.0|11.4|17.1| |MSCI AC World|5.8|9.0|14.5|

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Figure 9

Top ten direct public equity holdings As at 30 September 2020

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||||||| |---|---|---|---|---|---| |Return on| |Total|Total|Cost GBP| |Rank|Rank|Value|Value|(Inception| |2020|2019|£m|US$m|dates differ)| |1|5|Alibaba|700|904|3.9x| |2|3|Vonovia|685|886|3.0x| |3|1|Microsoft|472|610|7.7x| |4|2|Apple|466|603|16.3x| |5|7|Syncona*|463|599|1.3x| |6|28|JD.com|451|582|2.6x| |7|9|Nestle|377|487|2.9x| |8|10|Siemens|372|481|1.8x| |9|32|Amazon|366|473|1.9x| |10|22|Tencent|358|462|1.6x|

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Internally calculated RoCs to September 2020.

*Return since transfer into investment portfolio in May 2018.

Figure 8

Direct public equities IRR by strategy (£) (%) Inception to 30 September 2020

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|||| |---|---|---| |2020| |Value|IRR| |£m|(%)| |Mega cap basket (inception Sept 2008)|7,185|13.6| |Optionality basket (inception July 2008)|916|6.8| |Growth basket (inception Dec 2009)|2,611|14.8| |Total public equities (including indirectly managed)|14,603|10.8|

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Returns are not adjusted for private purchases.

Public Equity

During the 2019/2020 financial year, global equity markets (MSCI AC World) delivered a return of +5.8% in Sterling. There was unusually wide divergence in returns between different regions and sectors, making it important to have exposure to the right parts of the global economy. The technology heavy NASDAQ index in the US was up +34.1%, while broad US equities (S&P 500) were up +9.8%. At the other end of the spectrum, the FTSE 100 index in the UK fell by -18.1% and the Eurostoxx 50 index in the Eurozone was down -5.7%. Japanese equities (TOPIX) were up +2.4%, and Emerging Markets stocks (MSCI EMF index) were up +5.7% (all return numbers in Sterling).

The return on our public equity portfolio was comfortably ahead of the global index at +9.9% (2019: +6.8%) (Figure 7), although our focus remains on absolute returns rather than relative performance. The internal rate of return (IRR) of our public equity portfolio since June 2008 (when we started owing stocks directly, rather than outsourcing the entire portfolio) has been +10.8% (Figure 8).

Heightened volatility in equity markets has pushed up the volatility of the whole portfolio (Figure 3). Our volatility remains much lower than that of equity markets, but this is largely a function of the fact that half our portfolio is invested in other asset classes, which are not marked to market daily. Stock prices in public markets reflect stresses on companies immediately, but we are under no illusions that similar stresses do not also exist in private companies.

The £7.2 billion internally managed mega cap basket delivered a solid performance of +5.0% (2019: +10.2%). This portfolio of highly liquid multinational companies has served us well since inception in 2008 and has delivered an IRR of +13.6%. The £916m optionality basket was up +2.8% (2019: +0.6%). However, the standout performer among our internal portfolios was the £2.6 billion growth basket of Emerging Market equities, which delivered a return of +28.0% (2019: +17.4%), +22.3% ahead of the Emerging Markets index. This was driven by large positions in leading Chinese technology companies Alibaba, JD.com and Tencent.

Trustee’s Report | Review of Investment Activities Wellcome Trust Annual Report 2020 | 29

Our £3.4 billion book of outsourced equity mandates had a strong year overall. During the year we terminated the mandate of one global manager and one Emerging Markets manager and appointed a new global manager to be funded in the 2020/21 financial year. The remaining managers all outperformed their respective benchmarks by wide margins, except for our UK small cap value equity manager, where a combination of Covid-19, Brexit and underperformance by value stocks conspired to deliver a -33.5% return. Even in a strong year, not everything goes according to plan. However, what matters is portfolio balance – our best performing manager runs a concentrated global growth portfolio and

Figure 10a

Illiquid asset net returns (£) (%) Period to 30 September 2020

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Annualised return in £ (%)
1 year 3 years 5 years 10 years
----- End of picture text -----

----- Start of picture text -----
|||||| |---|---|---|---|---| |Directional|-33.4|-6.8|0.3|3.3| |Absolute return|7.4|8.3|9.0|7.4| |Equity long/short|23.4|14.4|14.0|12.2| |Total Hedge funds|17.1|12.2|12.4|10.3| |Large buyout funds|4.0|11.4|17.8|15.1| |Mid buyout funds|-0.5|7.8|12.2|11.4| |Specialist funds|-6.0|4.4|11.0|10.1| |Multi asset partnerships|-0.2|6.0|6.2| |Venture funds|28.2|29.0|21.7|22.5| |Direct Private|-5.1|-13.8| |Private co-investments|16.6|26.1|23.9| |Total Private equity funds|12.7|16.1|16.1| |Non-Residential property|18.7|12.8|9.7| |Residential property|-0.9|-2.0|-0.4|7.5| |Property|9.6|5.6|4.9|8.7| |MSCI AC World|5.8|9.0|14.5|11.3|

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delivered a +38.7% return, which more than compensated for weak performance in the UK.

Our overall exposure to public equities has been reduced (Figure 4) as we sold or reduced several of our lower conviction directly held positions, which also had the effect of reducing the directly managed portion of the overall portfolio (Figure 5). This was done primarily to raise cash before the worst of the market declines, which put us in a strong position to provide comfort that we will be able to meet our charitable commitments and take advantage of any further market dislocations.

Figure 10b

Illiquid asset net returns (US$) (%) Period to 30 September 2020

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|||||| |---|---|---|---|---| |Annualised return in US$ (%)| |1 year|3 years|5 years|10 years| |Directional|-30.1|-8.0|-2.8|1.3| |Absolute return|12.6|7.0|5.6|5.3| |Equity long/short|29.4|13.0|10.4|10.0| |Total Hedge funds|22.9|10.8|8.9|8.1| |Large buyout funds|9.1|10.0|14.1|12.8| |Mid buyout funds|4.4|6.5|8.7|9.2| |Specialist funds|-1.4|3.1|7.5|7.9| |Multi asset partnerships|4.7|4.7|2.9| |Venture funds|34.5|27.5|17.9|20.1| |Direct Private|-0.4|-14.9| |Private co-investments|22.4|24.6|20.1| |Total Private equity funds|18.2|14.7|12.5| |Non-Residential property|24.5|11.5|6.3| |Residential property|3.9|-3.2|-3.5|5.4| |Property|15.0|4.3|1.6|6.6| |MSCI AC World|11.0|7.7|10.9|9.1|

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Hedge Funds

Our £3.7 billion hedge fund portfolio had an excellent year, returning +17.1% (2019: +9.2%) (Figures 10a and 10b). Unlike most investors, hedge funds can position their portfolios to make positive returns in down markets. It was therefore gratifying that our managers protected capital effectively in February and March. However, they generally did not remain wedded to a bearish perspective and moved portfolios to benefit from the market recovery.

Equity long short hedge funds are active investment vehicles, whose aim is to beat returns from broad equity markets, taking advantage of opportunities to profit both from buying good stocks and selling short disadvantaged

companies. These funds struggled to beat broad indices during the long liquidity fuelled bull market after the Global Financial Crisis (GFC). However, the last two years have shown that great managers can still add real value – our £2.4 billion long short fund composite returned an impressive +23.4% (2019: +8.4%) over the financial year, well ahead of +5.8% from global equities.

Our absolute return hedge funds (£1.2 billion) play a different role in the portfolio, which is to provide steady, low volatility returns that are not too correlated to equity markets. These funds invest in a broad range of strategies and employ sophisticated risk models. A +7.4% return over the financial

Trustee’s Report | Review of Investment Activities Wellcome Trust Annual Report 2020 | 30

year (2019: +9.7%) continues the consistent track record from this group of funds. We have recently secured some extra capacity to deploy cash into this strategy, as in the current environment the return profile and downside protection looks increasingly attractive.

Our few remaining assets in directional hedge funds saw a sharp negative return of -33.4% (2019: +11.9%). This is now a tiny portfolio (£11m) consisting of illiquid stub positions in funds from which we have redeemed.

Private Equity

Our private equity (PE) portfolio comprises buyout funds, venture capital (VC) funds, multi-asset partnerships, coinvestments and direct private investments. This part of the portfolio had another good year (Figures 10a and 10b), returning +12.7% (2019: 15.6%), which took our total exposure up to £9.4 billion, or 29% of total assets, a new high for exposure to PE.

The largest part of this exposure is VC (£4.3 billion), which continues to benefit from rapid technological innovation and a structural shift to the digital economy. This year, these structural tailwinds were boosted by the impact of the Covid-19 virus, which has sharply increased e-commerce penetration and helped other digital businesses that have enabled many of us to work from home. While the pace of change will undoubtedly slow when we eventually return to a more normal environment, it seems likely that the gains made by digital native companies will persist.

We do not expect a repeat of this year’s +28% performance from our VC funds (2019: +27%), nor of the +22% per annum they have delivered over the past decade, but we remain confident that our managers will continue to back great companies and give us strong returns. The success of

our VC partners has been felt in our direct private portfolio, where a small number of co-investments have driven pleasing performance.

Our buyout funds had a less positive year, returning between -6.0% for specialist funds and +4.0% for large buyouts (2019: +4.4% and +11.4%). These funds have much more exposure to more traditional parts of the economy that have been put under severe stress by restrictions on economic activity globally. Over the longer term they have delivered solid multiples (Figure 11). In future we will simplify our reporting by combining large, mid and specialist buyout funds into a single group. This reflects the fact that differences between various managers in these groups have become less marked.

We made new commitments totalling £1.62 billion across all our PE strategies during the year. Of these, £659m were to buyout funds, £696m to VC funds and £264m to direct private investments and co-investments. PE cash flows were slightly negative during the year as capital calls exceeded distributions by £83m. Distributions exceeded calls for VC, while calls exceeded distributions in the rest of the PE portfolio because of recent commitments made to new funds. We take careful account of potential PE cash flows when forecasting liquidity to ensure we have enough cash to meet the needs of the charitable mission.

As valuations in public markets have risen, expected returns have fallen, leading many investors to seek out the excess returns that have historically been available from PE. We remain focused on top tier managers in both VC and buyouts, as in this asset class, strong returns tend to persist rather than revert to the mean. Wellcome can accept the illiquidity inherent in PE because our endowment structure means we do not have long dated liabilities like a pension fund or insurance company. The flood of new money into the asset class may not be as patient, which might create short-term disruption, but this can also create opportunities for the best managers.

Figure 11

Private equity fund net returns (multiples) Inception to 30 September 2020

----- Start of picture text -----
|||||| |---|---|---|---|---| |Net| |Asset|Total| |Drawn|Realised|Value|Value to| |(£m)|(£m)|(£m)|Drawn| |Buyouts|4,944|5,999|1,369|1.5x| |Specialist|3,015|3,001|1,342|1.4x| |Venture|4,623|5,466|4,342|2.1x| |All Private equity funds <=2014|10,140|14,199|3,778|1.8x| |All Private equity funds >=2015|2,442|267|3,275|1.5x| |All Private equity funds total|12,582|14,466|7,053|1.7x|

----- End of picture text -----

Total Value equals Realised plus Net Asset Value. Total Value to Drawn gives a measure of return on invested capital. Funds of vintage years 2014 and earlier have generally finished their investment period.

Property and Asset Backed Operating Companies

The disruption created by the Covid-19 virus and Brexit has produced significant challenges for our property portfolio, which is the only part of our asset base that is overwhelmingly in the United Kingdom. Despite this, the performance of the portfolio was strong this year, largely because of the sale of the iQ student accommodation business at a significant premium to NAV. The deal, which was signed in February and completed in May, produced a cash inflow of £748m to Wellcome and dominates the +9.6% (2019: 1.5%) return from property over the year (Figures 10a and 10b).

Excluding the impact of the iQ sale, the NAV of the portfolio fell by -£30m, which is a creditable performance in the circumstances. The main positive was an uplift in the valuation of the office building at 210 Euston Road, after an extensive renovation programme and a lease

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Figure 12 Currency allocation (net of currency forwards) (%) As of 30 September 2020

----- Start of picture text -----
0.5% 16.4%
1.2%
9.7%
57.2%
15.0%
----- End of picture text -----

----- Start of picture text -----
US Dollar & linked currencies Total Commodity
Total Asia Other
Total Europe Pound Sterling
----- End of picture text -----*

Figure 13

Public and private equity regional exposure (%)

As of 30 September 2020

----- Start of picture text -----
1%
1%
24%
48%
26%
----- End of picture text -----

----- Start of picture text -----
Americas Africa
Asia/Pacific Middle East & Other
Europe
----- End of picture text -----

agreement with an office space provider. The valuation of Premier Marinas, which saw a sharp rebound in business after the UK economy re-opened, was roughly flat, as was that of our agricultural estates.

On the negative side, there were small mark downs in our residential holdings in Kensington, London and the Southeast of England, reflecting market movements. There was a more substantial decline in value at our 50% owned budget hotel chain, Point A, which has seen dramatic declines in revenues. We are working closely with our partners to ensure viability of the business and to craft a recovery plan.

We continue to work on potentially attractive property opportunities. Notably, South Cambridgeshire District Council has resolved to grant outline planning permission for a significant expansion of the Wellcome Genome Campus at Hinxton, Cambridgeshire on agricultural land in our portfolio. This will include 150,000 sqm of additional research and translation floorspace, up to 1500 homes for campus workers and supporting community facilities and infrastructure. The current crisis has only served to underscore the importance of this world class facility.

Portfolio Overlays, Currency, Regional and Sectoral Overview

We have been more active than usual in the overlay book this year in the face of significant market volatility. We had some put option hedges on the S&P 500 Index in late 2019 on concerns over extended valuations. However, early in 2020, the Wellcome scientific network was sounding warnings about the potential seriousness of the Covid-19 virus, which at the time had not been reflected in equity prices. We therefore added more S&P 500 index put option hedges and then sold futures on the S&P 500, Eurostoxx 50 and MSCI Emerging Markets Indices, to hedge more of our considerable underlying exposure.

After the market declines in February and March, central banks, led by the US Federal Reserve, took effective action to stabilise sentiment and provide liquidity. As markets rallied, we took off the hedges, realising an overall profit for equity index hedging activity over the financial year of +£248m (footnote to Figure 6).

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Figure 14 Public and private equity sectoral exposure (%) As of 30 September 2020

----- Start of picture text -----
0%
3% [3%]
4%
6% 25%
7%
8%
19%
12%
13%
----- End of picture text -----

Information Technology Consumer Discretionary Financials Health Care Consumer Staples Communication services

Industrials Energy Real Estate Materials Utilities

In the foreign exchange overlay (FX) book, we continued to run hedges over various developed market currencies to meet our 15% minimum target in Sterling. Over the course of the year, we closed our remaining positions in emerging market currencies, realising meaningful profits in the process. Overall, our FX book realised gains contributed around +£86m for the year (footnote to Figure 6).

These gains were offset by the -£260m negative impact on our portfolio of an increase in the mark to market value of our bond liabilities, as interest rates fell across the yield curve. There is no cash impact from this loss, which will be recovered as the bonds mature. Our bond rating remains AAA/Aaa stable.

Our position in US Dollars and Sterling has changed little over the year (Figure 12). However, our exposure to Asian currencies (primarily Chinese Renminbi) has increased to 15.0% from 12.5%, largely balanced by a reduction of European currency exposure (primarily Euro) from 12.4% to 9.7%. Much of this reflected performance of underlying assets, although there were some net sales of European equities over the period.

For the first time, we now have more invested in the Asia Pacific region than Europe including the UK in our overall (public and private) equity book (Figure 13). The impact of the Covid-19 virus has exacerbated the economic growth differential between Asia and Europe, making it easy to find assets with tailwinds in Asia. The VC industry is also more developed in China and India than in Europe, which has led to our considerable private exposure there through our long-established network of managers.

The success of our VC partners and the performance of large public technology stocks has also been reflected in our sector positioning (Figure 14). Information technology has increased from 23% of overall equity exposure to 25%, while consumer discretionary (which includes e-commerce) has increased from 14% to 19%. Much of this has been financed by a reduction in our financials exposure from 19% to 13%, reflecting our concern that the persistence of zero and negative interest rates will damage the profitability of many financial institutions.

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Wellcome Trust Annual Report 2020 | 33

Financial Review

Overview

for the year ended 30 September 2020

----- Start of picture text -----
2020 2019 Change
£m £m £m
Investment activity
Income 323 408 (85)
Expenditure (166) (148) (18)
Investment gain 3,290 1,978 1,312
3,447 2,238 1,209
Charitable activity
Income 141 73 68
Expenditure before discounting and foreign exchange (1,099) (1,131) 32
Discounting of grant liability 46 (42) 88
Foreign exchange revaluation of grant liability 34 (10) 44
Expenditure on charitable activities (1,019) (1,183) 164
(878) (1,110) 232
Net income before tax 2,569 1,128 1,441
Taxation 13 45 (32)
Actuarial gains/(losses) on defined benefit pension schemes 26 (159) 185
Net movement in funds 2,608 1,014 1,594
----- End of picture text -----

Total Funds

at 30 September 2020

----- Start of picture text -----
2020 2019 Change
£m £m £m
Fixed assets 412 424 (12)
Investment assets 32,712 30,214 2,498
Net current liabilities (1,112) (1,058) (54)
Long term liabilities (4,190) (4,366) 176
Total funds 27,822 25,214 2,608
----- End of picture text -----

Charitable expenditure, Net Movement in funds and Total funds are key performance indicators, Wellcome’s alternative performance measures and key performance indicators are detailed on page 74.

Trustee’s Report | Financial Review Wellcome Trust Annual Report 2020 | 34

Reconciliation of Overview to Statement of Financial Activities

----- Start of picture text -----
2020 2019
£m £m
Management fees and other investment costs 87 69
Interest payable on bond liabilities 79 79
Investment expenditure 166 148
Grants receivable 19 21
Other charitable income 122 52
Charitable income 141 73
----- End of picture text -----

Reconciliation of Net Funds to Balance Sheet

----- Start of picture text -----
2020 2019
£m £m
Quoted investments 14,763 15,054
Unquoted investments 13,767 12,403
Investment properties 1,292 1,299
Derivative financial instruments 71 102
Investment cash and certificates of deposit 2,701 1,070
Other investment assets 91 268
Programme related investments 27 17
Investment assets 32,712 30,213
Creditors falling due after one year (3,676) (3,843)
Provision for liabilities and charges (148) (151)
Defined benefit pension schemes’ deficits (367) (372)
Long term liabilities (4,191) (4,366)
----- End of picture text -----

Total funds of the Charity (£m) as at 30 September

----- Start of picture text -----
29,000
27,822
27,000
25,214
25,000
24,200
23,000
21,877
21,000
19,562
19,000
2016 2017 2018 2019 2020
----- End of picture text -----

Investment Activity

Our investment activity generated net income of £3,447 million (2019: £2,238 million).

Our portfolio returns this year are 12.3% in Sterling (2019: 6.9%). Over the past 10 years, the portfolio has delivered a real return after inflation of 189% in Sterling (2019: 184%). A full commentary is provided on pages 24-33.

The total funds of the Wellcome Trust Group (the Group) increased by £2,608 million to £27,822 million (2019: £25,214 million).

Charitable Activity

Income from grants, programme related investment activity and Wellcome Collection was £141 million (2019: £73 million), including grant and contract income received by the Wellcome Sanger Institute.

Charitable expenditure of £1,099 million (2019: £1,131 million) is lower than the previous year; this principally reflects timing of grant awards and renewals (which typically cover funding for five years). Covid-19 did not have a significant impact on the overall spend.

Changes to our long-term funding strategy (see page 37) may lead to changes in annual expenditure, although at this point in time we do not anticipate any change to our policy that on average our total expenditure will exceed £1 billion a year for the next five years.

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Wellcome Trust Annual Report 2020 | 35

Annual Charitable Expenditure for the year ended 30 September 2020

----- Start of picture text -----
2020 2019 Change
£m £m £m
Science 771 839 (68)
Innovations 104 130 (26)
Culture & Society 108 96 12
Priority areas 116 66 50
Charitable expenditure 1,099 1,131 (32)
Discounting of grant liabilities (46) 42 (88)
Foreign exchange revaluation (34) 10 (44)
of grant liabilities
Expenditure on
1,019 1,183 (164)
charitable activities
----- End of picture text -----

The present value adjustment is explained in notes 2 and 8.

Total Charitable Expenditure (£m)

----- Start of picture text -----
1,400
1,221
1,200
1,131
162 66 1,099
995 96 116
1,000 112
80
116 130 108
110
104
800
82 723
47
96
600
35
832 839 771
400 723
545
200
0
2016 2017 2018 2019 2020
----- End of picture text -----

Science Innovations Culture & Society Strategy* Priority areas

An overview of the Charitable Activities is provided on pages 11-23.

Trustee’s Report | Financial Review Wellcome Trust Annual Report 2020 | 36

Across Wellcome, additional funding included £51 million, spread across the funding areas below, in response to the global Covid-19 pandemic. This expenditure included a £22m funding call for a rapid research response, and costs associated with extending existing grants due to disruption caused by the pandemic.

Science – expenditure of £771 million (2019: £839 million):

This included:

Expenditure is lower than in 2019 due to significant one-off commitments and renewals of five-year programmes in 2019 including Science PhD programmes (2020: £13 million, 2019: £134 million) and Whole Genome Sequencing (2020: £nil, 2019: £50 million).

Innovations – expenditure of £104 million (2019: £130 million):

This included:

There was some reallocation of budget between Priority Projects and Flagships compared to the prior year, as well as some decision-point timing changes that meant fewer awards were made in the current financial year.

Culture & Society – expenditure of £108 million (2019: £96 million), including:

Snakebites and Data for Science and Health are new programmes.

Financial Planning

Our objective when setting the annual budget is to preserve the value of Wellcome’s investment portfolio so that the purchasing power of our charitable expenditure is maintained over time. We also aim to ensure that we fund only excellent research and that this is achieved in an efficient manner, including careful consideration of operational costs.

‘Charitable Activities’ represent funding that we commit to, which is recognised in the year in which the grant is awarded. However, payment in cash of many of these commitments will be made over many years, so charitable cash payments in any one year will include amounts relating to grants awarded in prior years.

We plan to support the activities we deliver with a consistent level of funding in real terms.

We established a baseline expenditure level of £900 million in 2017/18 (when we implemented a revised methodology for defining our future charitable expenditure plans), and we expect this to grow in line with inflation on an annual basis, accepting that the phasing of some of our larger awards will mean that this growth is averaged over a five-year period.

We continue to review expected future investment returns and cashflows. Our baseline expenditure is not directly tied to the annual performance of our investment portfolio, which means we have reasonable stability and predictability in our future levels of support.

In addition, we occasionally fund Priority Areas and other large-scale, high-impact activities that have a time-limited duration. We add to this funding only when the investment portfolio performance is sufficiently strong, subject to annual review. This year, in light of the potential impact of Covid-19 on markets, the Board of Governors agreed not to allocate any additional funding to this budget.

This included:

Priority areas – expenditure of £116 million (2019: £66 million):

Wellcome’s new funding strategy may lead to changes in how we set our annual and medium-term budgets, although at this point in time we do not foresee any material change to the principles of having a minimum baseline of expenditure that grows in line with inflation and retaining the ability to occasionally draw upon additional funds arising from strong investments performance, when appropriate to do so.

This included:

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Pensions

The Group provides employees with the opportunity to participate in either defined benefit or defined contribution pension schemes. Since April 2016, new employees have not been enrolled in the defined benefit scheme but have joined the defined contribution scheme.

The combined accounting deficit for the Group’s two defined benefit pension schemes (the Wellcome Trust Pension Plan and the Genome Research Limited Pension Plan) at 30 September 2020 amounted to £367 million (2019: £372 million). The deficit has remained consistent with the prior year due to adverse movements on the discount rates being offset by decreases in other assumptions leading to overall actuarial gains in the year.

The defined benefit pension schemes are required to have triennial actuarial valuations, which are then updated in an interim valuation each year at the balance sheet date of the schemes. As at 31 December 2019, the Wellcome Trust Pension Plan had an estimated surplus of around £45 million according to the Annual Actuarial Report; the Genome Research Limited Pension Plan had an estimated surplus of around £24 million.

More detail on the pension schemes is given in note 11(e) Retirement benefits.

Reserves policy

The reserve balance at 30 September 2020 was £27,822 million (2019: £25,214 million). Wellcome does not define a minimum level of reserves. Our funding methodology defines a minimum level for the net investment portfolio of £20 billion (in real terms as at 30 September 2017) to be maintained over the medium term, equivalent to £21 billion as at 30 September 2020. This level is subject to annual review by the Board of Governors and the planning methodology is discussed under Financial Planning on page 37.

The reserves are almost all unrestricted but certain awards made by other funders to Wellcome’s subsidiary, GRL, are subject to specific conditions imposed by the donors and are therefore restricted in their use. These amounted to £71.7 million at the end of 2020 (2019: £25.1 million).

Investment policy

Our assets are invested in accordance with the wide investment powers set out in Wellcome’s Constitution and within our investment policy. The investment policy is reviewed periodically by the Investment Committee, who recommend it for approval of the Board of Governors. We invest globally and across a very broad range of assets and strategies. It is our policy not to invest directly in companies that derive material turnover or profit from tobacco or tobacco-related products.

Our response to the FRC UK Stewardship Code, with further details of our investment policy, is available at wellcome.org/investments. We support the investment

industry’s continued efforts to strengthen the role played by institutional investors in corporate governance, and we review our response and our investment policy regularly, updating them when necessary. Our approach to environmental issues is discussed under Climate change and energy transition on page 46.

Going concern and viability

The Board of Governors has assessed the viability of Wellcome and its subsidiaries over the five years to September 2025, and concluded that there is a reasonable expectation that there are adequate resources, including the strength to operate and sufficient liquidity to meet the liabilities of the Group as they fall due over the period of their assessment and for the foreseeable future.

In making this assessment, the Board considered the issues raised in the FRC’s Financial Reporting Lab Report “Risk and viability reporting” issued in November 2017, the additional guidance issued by the FRC and the Charity Commission on reporting in the Covid-19 environment issued in 2020, and the guidance from the Corporate Governance Code. Consideration was also given to the significant risks laid out in the Risk Management section (page 47), as well as the significant accounting estimates and judgements in note 2.

In accordance with FRC guidance, we have also considered reverse test scenarios that would lead to Wellcome being unable to continue to operate in its current form. These stress testing scenarios consider the risk of decline in value of our net investment portfolio below the value of Wellcome’s contractual liabilities of £3.9 billion comprising third party liabilities, provisions, pension deficits and commitments, combined with non contractual but expected grant commitments of £2.3 billion, the net investment portfolio exceeds these liabilities by £23 billion at the balance sheet date.

In addition, as noted in our Reserves policy, we define a minimum level for the net investment portfolio level to sustain our planned charitable expenditure, the net investment portfolio exceeds this threshold by £8 billion as at the balance sheet date.

The Board of Governors conducted a review of Wellcome’s funding approach in June 2020 and concluded that this is manageable over the medium to long term, supported by our investment portfolio.

The financial plan for 2020/21 reviewed by the Board of Governors provided details of the key objectives and financial plans for 2020/21 in line with the funding approach and considered an updated view of the investment outlook.

Under Moody’s and S&P’s annual assessments and in a May 2020 and October 2020 update from Moody’s, Wellcome maintained its triple-A rating.

Trustee’s Report | Financial Review Wellcome Trust Annual Report 2020 | 38

Structure and Governance

The Wellcome Trust (Wellcome) is an independent, global, charitable foundation created in 1936 by the will of Sir Henry Wellcome. It is now a registered charity, governed by its Constitution, established in February 2001 by a scheme of the Charity Commission and subsequently amended.

Wellcome is registered in England and Wales (registration number 210183) under the Charities Act 2011.

Principles of governance

As well as following charitable law and regulation, Wellcome considers the nature of its activities and its risk profile. We have regard to principles of good governance and best practice such as those set out in the UK Corporate Governance Code 2018 and the Charity Governance Code. Where appropriate, we engage with and adopt best practice from other relevant codes of practice.

The Trustee and the Board of Governors

The sole Trustee of Wellcome is The Wellcome Trust Limited (the Trustee), a company limited by guarantee (registration number 2711000), whose registered office is The Gibbs Building, 215 Euston Road, London NW1 2BE. The Trustee is governed by its memorandum and articles of association. The Trustee’s directors (known as Governors), the Company Secretary of the Trustee and other administrative details are shown on page 124.

Responsibilities

The Board of Governors guides and oversees Wellcome in achieving its mission to improve health through research. To do this, the Board:

Stakeholder engagement underpins the work of the Board and its Committees.

The Board of Governors is responsible for The Wellcome Trust Group which comprises Wellcome and its subsidiary undertakings. The Wellcome Sanger Institute is part of the Wellcome Genome Campus, and it operates under the auspices of Genome Research Limited, a wholly owned subsidiary of the Wellcome Trust. Subsidiaries support

Wellcome either through delivering against charitable objectives or as investment entities. The Board of Governors has delegated management of each entity to its Board of Directors with oversight through the Executive or direct representation on the Board.

Activities during the year

During 2019/20, the Board met seven times, including a two-day residential meeting sharing knowledge at the Max Planck Institute in Germany, and had eight private meetings without the Executive Leadership Team (ELT), some of which focused on the recruitment of our new Chair.

The Board engaged rapidly with the challenges of the pandemic, ensuring that Wellcome’s staff and financial and physical assets were protected, and that Wellcome effectively used its position as a leader in the global research response. Board and committee meetings moved online and Governors took the opportunity to add three strategic policy meetings to their regular business cycle. Topics included: discussion on investment policy and climate change; the opportunity to conquer fundamental health challenges and the implications for the structure of Wellcome; and the future of science in a changing geopolitical landscape. Governors received weekly pandemic briefings from the Director.

The Board received assurance from its committees and the ELT that adequate controls were in place during periods of remote working and that the Wellcome estate was secure. Governors also received assurance about the health and safety of staff working remotely, and that the return to the office environment – when possible – would be carried out with sensitivity to staff concerns and due regard to Wellcome’s legal and regulatory duties.

Board composition

Members of the Board of Governors are distinguished in the fields of medicine, science, business and not-for-profit leadership. The Board considers each of the Governors to be independent in character and judgement and manages any relationships or circumstances that are likely to affect, or could appear to affect, the Governors’ judgement. Governors are appointed for terms of four years, with an extension of up to three years following a successful review and by mutual agreement.

Wellcome selects new Governors (including the Chair) through an open recruitment process that includes international recruitment firms as well as online advertising. For more specialist roles, such as recruiting Governors with a science background, we also advertise in specialist publications and employ a researcher to support the search in the most diverse pool. All Governors undertake a

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Wellcome Trust Annual Report 2020 | 39

comprehensive induction programme, which was reviewed and updated during the year. Induction includes their legal, fiduciary and regulatory responsibilities, as well as relevant information about Wellcome. Ongoing learning for Governors is built into the annual Board agenda and training for individual Governors is available as required.

The Chair of the Board is Eliza Manningham-Buller, an independent, crossbench peer in the House of Lords. She joined Wellcome as a Governor in 2008 and was appointed Chair in 2015. This year, Wellcome carried out an international search for a successor Chair, supported by independent search consultants. Julia Gillard, former prime minister of Australia and current Chair of the Global Institute for Women’s Leadership has been appointed as Chair Elect and will take up her post in 2021.

One governor retired during the year: Bill Burns served on the Board for four years and as Chair of the Audit & Risk Committee provided a sharp focus on the key issues. The Board is grateful for his commitment to Wellcome and will miss his wisdom, good humour and camaraderie.

In January 2020, Elhadj As Sy joined the Board of Governors. He has been active in providing the Board with a perspective on policy, health and issues facing the global South. As Co-chair of the WHO/World Bank Global Pandemic Preparedness Monitoring Board, he has also been an integral part of Wellcome’s pandemic response.

An independent appraisal of the performance of the Board of Governors scheduled for 2020 has been delayed until 2021. Governors remain committed to self-evaluation, reflection and improvement but considered that the response to

Covid-19 and the development of the new strategy (discussed on page 16) took precedence. Governors also considered it appropriate for the incoming Chair to lead the review.

Committees of the Board of Governors

The Board of Governors is supported by its principal committees, each of which is chaired by and has at least one Governor as a member. The Board ensures that members have the skills, knowledge and experience to ensure that each committee is effective in discharging its responsibilities. The performance of each committee is reviewed on a regular basis with input from the members and key executives. The ELT assists the Board when addressing both external and internal culture – see page 17 for details of Wellcome’s approach to research culture, and Key Activities on page 41 for activities relating to our internal culture.

The membership of each committee is set out on page 124, and the terms of reference are published on our website: - wellcome.org/about us/governance

Committee reports for 2019/20:

Board Composition and Attendance during 2019/20

----- Start of picture text -----
Maximum
Attended
possible
Chair
7 7
Baroness Manningham-Buller
Deputy Chair
7 7
Professor Sir Michael Ferguson
Professor Tobias Bonhoeffer 7 7
William Burns 4 4
Dame Amelia Fawcett 7 7
Richard Gillingwater 7 7
Professor Bryan Grenfell 7 7
Professor Fiona Powrie 7 7
Dame Cilla Snowball 7 7
Elhadj As Sy 5 5
----- End of picture text -----

The Board of Governors has a number of additional committees that report to it on specific issues. In spring 2020, the Science Strategy Advisory Group was paused in order to enable consideration of how the governance of strategic science should be addressed to fulfil the aims and ambitions of Wellcome’s new strategy. The Innovations Advisory Group, which provides advice and support on the delivery of the Innovations strategy, remains in place but may be reviewed in 2021 in the light of the new strategy.

During the year, independent consultants Egon Zehnder, Eton Bridge, Korn Ferry and Spencer Stuart International assisted with recruitment to the Board of Governors and the senior leadership team.

Executive Leadership Team (ELT)

Responsibilities

The ELT is chaired by Wellcome’s Director, Jeremy Farrar, and reports directly to the Board of Governors. It provides leadership across the organisation in support of the Director. It is responsible for the day-to-day management of Wellcome’s operations and provides advice to the Governors with regard to strategy, planning, operational or policy matters, the delivery of objectives, and issues arising from the specific functional areas for which its members are responsible.

Other than for certain key governance areas and matters having a material impact, an Operational sub-committee of the ELT has the full delegated authority of ELT in relation to all operational matters affecting Wellcome, and implementing policy agreed by the Board of Governors or ELT in relation to them. An additional sub-committee, the Funding and Direct Activities group, manages day-to-day matters relating to grant funding and related activities.

An ELT subgroup was convened to oversee the new strategy, and met regularly to oversee and progress its development and implementation.

Trustee’s Report | Structure and Governance Wellcome Trust Annual Report 2020 | 40

In its grant-funding and direct charitable activities, the ELT is also supported by a number of advisory committees, which some Governors attend as observers. These committees assess, review and advise on which grant applications to fund, and also advise on policy issues in various fields.

In March 2020, the ELT convened an Incident Management Team to lead the internal response to lockdown, and to oversee Wellcome’s global leadership to advocate for funding, cross-sector partnerships and accelerated research.

Key activities during the year

ELT retained their original objectives for 2019/20, despite the additional pressure of the pandemic. Key activities included:

Composition of the ELT

There were a number of changes on the ELT during the year, with a conscious choice by the Director and the Board to appoint to interim posts as Wellcome transitions to the delivery of its new strategy.

Executive Leadership Team Composition and Attendance during 2019/20

----- Start of picture text -----
Maximum
Attended
possible
Jeremy Farrar 10 10
Katie Anastasi-Frankovics 5 5
Chris Bird 9 10
Steve Caddick 1 2
Karen Chadwick 10 10
Simon Chaplin 7 8
Alyson Fox 10 10
Philomena Gibbons 2 2
Mark Henderson 10 10
Chonnettia Jones 5 5
Tim Knott 3 3
Peter Pereira Gray 2 2
Kathy Poole 10 10
Paul Schreier 10 10
Jim Smith 4 4
James Thomas 9 10
Mike Turner 7 8
Ed Whiting 10 10
----- End of picture text -----

In July 2020 it was announced internally that, as part of the organisational design process for the new strategy, a new ELT would be established. The transition will commence in January 2021.The new ELT will include two employee members and a new functional role, the Director of Research Programmes.

Full details of the Executive Leadership Team are on page 124.

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Statement of the Trustee’s responsibilities

The Trustee is responsible for preparing the Trustee’s Annual Report and Financial Statements in accordance with applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice), including FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’. The law applicable to charities in England and Wales requires the Trustee to prepare Financial Statements for each financial year that give a true and fair view of the state of affairs of Wellcome and the Group, and of the incoming resources and application of resources of Wellcome and the Group for that period.

In preparing these Financial Statements, the Trustee is required to:

The Trustee is responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of Wellcome and enable them to ensure that the Financial Statements comply with the Charities Act 2011 and the Charity (Accounts and Reports) Regulations 2008. The Trustee is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the maintenance and integrity of the charity and financial information included on Wellcome’s website: wellcome.org.

UK legislation governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

Accountability, Public Benefit, and Stakeholder Engagement

Wellcome is accountable to society for delivering our mission, while using our independence for public benefit. The Board of Governors and the ELT benchmark decisions against this statement, particularly to ensure we use our independence for the public benefit, and that our strategic and operational plans are aligned to meet our mission. The “What we do” and the “Year at glance” section provide details of how the achievement of our aims furthers our legal purpose.

The Trustee has referred to the guidance contained in the Charity Commission’s general guidance on public benefit when reviewing Wellcome’s aims and objectives, in planning future activities, and in setting the grant-making policy.

Wellcome has referred to the Charity Commission information sheet with regard to applying s172 of the Companies Act in the context of a charity. Governors confirm that they have acted in good faith to promote the success of the charity to achieve its charitable purposes. This is shown through our commitment to environment and community matters (pages 45-46) and using insights from stakeholder engagement in the Board’s strategic decision making (page 43).

An example of this is the new Mental Health Priority Area strategy (see page 22) that the Board approved this year. In approving this programme, Governors were mindful that people with lived experience of mental health issues were integral to the design, implementation and monitoring, and in particular were able to test the outputs in real time through participation in the programme.

Governors are aware of the potentially isolating effects of remote working, so have moved their popular engagement ‘Meet the Governors’ on-line. They have also attended online meetings of staff teams to gain a better understanding of their work and the challenges of doing it in a virtual environment. The Director and the ELT have regularly updated staff about, for example, Covid-19 and Wellcome’s response to it, the development and implementation of our new strategy, and measures to secure staff health and safety while working remotely.

The Trustee has reviewed and considered the work and the recommendations of the Audit and Risk Committee, as detailed in the Audit and Risk Committee Report on pages 56-58, and considers that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary to assess the performance and strategy of Wellcome and the Group.

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Stakeholder engagement

The Board notes that, although stakeholder engagement is integral to the culture of Wellcome, it is on a journey to embed this into the corporate governance of the charity. Cilla Snowball has been appointed as Governor lead for engagement and, through the Nominations and Governance Committee, will work with the Board and the ELT on identifying where it is already embedded in Wellcome’s culture. For example, she will work closely with the two new staff representatives to be appointed to the ELT in 2021, and will lead on Governor oversight of developing metrics to measure the effectiveness of our engagement with key stakeholders, recognising that Wellcome’s stakeholders are diverse and international.

Our engagement with investments partners about the pandemic is discussed on page 10.

Wellcome’s Investment Policy and our response to the Stewardship code, discussed on page 38, takes into account our responsibility to ensure we can support our stakeholders.

Wellcome’s stakeholders include:

Given our accountability to society, as stated above, Wellcome has a coordinated communications strategy to engage public audiences through the media and social media. This has been especially important during the Covid-19 crisis (see page 13).

Examples of engagement with key stakeholders

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Stakeholders Ongoing engagement Specific engagement, 2019/20
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Employees Wellcome staff have a number of ways to engage
with the Board and ELT, and inform decision-making.
These include staff surveys, Wellcome Exchange
(an open staff forum), and staff networks (see page 45)
that provide information and different perspectives to
Wellcome’s leadership.		 Staff feedback infuenced many fundamental elements of
Wellcome’s new vision and strategy (page 16). The Board
was provided with relevant aggregated responses from staff
at every discussion of strategy, including the framework of
the strategy itself as well as the developing structures and
culture shifts required to support delivery.
Wellcome Exchange has actively sought feedback from
employees on their experiences during the pandemic,
helping to keep the Board and the ELT aware of staff
wellbeing and informing decisions relating to the timing
and prioritisation of Wellcome’s activities.
Funding partners Wellcome often works in partnership with other funders
and organisations. For example, most of the work in our
priority areas (pages 21-23) would not succeed without
partners. Arrangements are regularly discussed at ELT
and Board meetings, and inform decisions about whether
to enter such partnerships.		 Wellcome entered a number of vital new coalitions,
including Covid-Zero, as part of the pandemic response
(page 13). Some of these involved new partners, or
deeper relationships than we had before. Discussions
with partner organisations informed decisions about
how to set up these partnerships and what governance
mechanisms to put in place.
Grantholders and
the wider research
community		 Wellcome-funded researchers have regular opportunities
to meet each other and Wellcome staff at researcher
meetings (page 19). These stopped when public health
restrictions were introduced in the UK in response to the
pandemic. If advice continues to avoid large gatherings
of people, we will fnd alternative ways to engage our
grantholders on a regular basis.		 Wellcome’s new strategy has been developed with input
from the wider research community. Hearing different
perspectives from this engagement was an important
part of the Board’s considerations during the strategy’s
development, such as the decision to focus on supporting
early-career researchers in discovery research.
Before the strategy was published in October 2020,
senior leaders in the research community were engaged
individually to ensure our decisions were being clearly
communicated. Not all agreed with every part of the
strategy, but the Board is confdent that most understood
the reasons for choosing this approach and for starting to
transition to the new strategy now.
Bondholders/
Credit rating
agencies		 Wellcome presents highlights of its Annual Report and
Financial Statements to Bondholders at an annual call.
Moodys and S&P conduct annual reviews of Wellcome’s
credit rating with inputs from our Investments and
Finance teams. These ratings are reviewed periodically
during the year.		 In this fnancial year, the annual Bondholder call for
the 2019 results was held in December 2019 and the
annual reviews of both Moodys and S&P confrmed that
Wellcome retained its AAA rating. This was endorsed by
further updates by Moodys in May and October 2020
which took into account the Covid-19 environment.

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Statement of disclosure

of information to auditors

So far as the Trustee is aware, there is no relevant audit information of which Wellcome’s auditors are unaware. The Trustee has taken all the steps that it believes it ought to have taken to make itself aware of any relevant audit information and to establish that Wellcome’s auditors are aware of that information.

Grant-making policy

Wellcome’s grant-making policy supports its status as a public benefit entity.

Wellcome awards a large number of grants, organised within established funding schemes with specific criteria, to fund research across a broad remit in the biomedical sciences, population health, translation and implementation science, humanities and social science, and public engagement. In addition, we award bespoke grants within our Priority Areas, where Wellcome aims to lead significant change within five or 10 years, aiming to transform the global response to some of today’s biggest health challenges.

All grant applications undergo due diligence by Wellcome staff to ensure that the resources requested are appropriate for the proposed activities. Awards are made following the advice of expert peer reviewers and are subject to specific terms and conditions. Grantholders submit annual reports and an end-of-grant report which we use to assess progress against our ambitions and to compare our data with that of other funders.

Our terms and conditions require that institutions receiving our funding have formal procedures in place preventing bullying and harassment, fraud, tax evasion, bribery or any other corrupt practices, and that expenditure is controlled in accordance with these arrangements.

Details of how to apply for grants, together with the relevant forms, are available on wellcome.org.

Code of Conduct and Speak Up

To achieve Wellcome’s mission, we must all uphold the highest standards of conduct and integrity. We will succeed only if we work together, enhance public trust and earn the respect of our external partners.

In November 2019, Wellcome introduced a Code of Conduct for all staff – its underlying policies outline the standards of behaviour that we should expect of ourselves and each other. We ran a highly visible launch campaign and developed an e learning module, which is mandatory for all staff.

Linked to the Code of Conduct is our Speak Up framework, rooted in our new Speak Up Policy (replacing our Whistleblowing Policy). The framework is designed to provide staff with the tools and psychological safety to be able to raise concerns of wrongdoing and know they will be listened to and responded to appropriately. This works alongside our Bullying and Harassment Policy.

To build on our culture of trust and accountability, Wellcome uses the Protect benchmark to assess the effectiveness of our arrangements and to give an independent measure of progress. The Chair of the Audit and Risk Committee – currently Amelia Fawcett – is the Board Speak Up Champion, who is responsible for ensuring that arrangements are operating effectively across Wellcome and that the integrity of the Speak Up process is maintained.

Wellcome’s statement required by the Modern Slavery Act 2015 is available on our website.

Conflicts of interest

Wellcome’s policy on conflicts of interest applies to Governors, employees and committee members. It sets out principles for identifying and managing actual and potential conflicts of interest to ensure decisions are free from any undue external influence. Where a potential conflict is identified it will be managed according to its materiality, with actions ranging from someone not participating at all or being involved in discussions but not voting, to being fully involved if the conflict is immaterial. The periodic review of the policy has been deferred to 2020/21, in light of reprioritisation due to Covid-19.

Note 7 to the Financial Statements includes a list of those Governors who have paid appointments with or supervise grantholders within institutions that are in receipt of grants from Wellcome.

Wellcome’s investment policy ensures that any potential conflict between investment and charitable activities is managed appropriately.

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Social Responsibility

Employment and inclusion

Work has continued this year on making Wellcome an inclusive employer that contributes positively to our local community. Activities to improve our fundamental structures and policies were delayed but not stopped by remote working. For example, a major project this year was the introduction of a new pay structure (page 53).

The development of a new strategy was not least a response to consistent staff survey results showing a desire for clearer direction and decision-making. Our staff forum – Wellcome Exchange – has been revitalised to help everyone play a role in making Wellcome a better place to work. And following changes in organisational design to support Wellcome’s new strategy, our new Executive Leadership Team will have two staff members appointed for a fixed term.

Alongside activities to engage staff in the development of the strategy, our staff networks provided important lenses for giving feedback and considering the inclusiveness of different options for the strategy.

Wellcome Collection continues to address inclusion, access and diversity through exhibitions such as Being Human and Inclusive Futures. The Hub space in Wellcome Collection was awarded to Heart ‘n’ Soul, a learning disabilities charity, for two years from 2018 to research mutual wellbeing, human value and difference. Their residency has been extended to make up for lost opportunities during lockdowns.

There has been a renewed focus on volunteering to support local charities and schools this year. A highlight was our partnership with University College London Hospital Trust to support NHS workers during the pandemic.

Genome Research Limited (GRL) launched a culture development programme to integrate and embed inclusive values into the work of the Wellcome Sanger Institute. GRL also runs a series of training interventions, the Good Research Practice programme, to keep its scientific community focused on the high standards expected of them with respect to scientific processes and protocols.

Health and environment

Wellcome’s six staff networks – the Disability Interest Group, Interfaith at Wellcome, Parents and Carers Network, LGBTQ+ at Wellcome, Wellcome Race Equity Network (WREN, formerly the BAME network), and Women of Wellcome – have been encouraged as a way for everyone working at Wellcome to support each other. They have also started to contribute significantly to our mission and culture.

The LGBTQ+ network supported the development of Wellcome’s first trans-inclusion policy, introduced in June 2020. WREN contributed to anti-racism statements from Wellcome and Wellcome Collection, endorsed by the Board, in response to the resurgence of the Black Lives Matter movement this summer.

The Board of Governors continues to focus on diversity and inclusion and fully endorses the anti-racism and anti-ableism approach in Wellcome’s new D&I strategy.

A new Human Resources system is helping us better understand and anticipate organisational needs. In line with UK legislation for organisations with more than 250 employees, we calculated our gender pay gap data for 2020, and for the second year our ethnicity pay gap data as well. The latest reports of Wellcome’s pay gaps are available on our website. As we gain more insight into these pay gaps, we are targeting actions to make Wellcome fundamentally and sustainably more inclusive.

Wellcome has a combined Health and Safety and Environment policy. The British Safety Council Five Star Occupational Health and Safety Audit is conducted every two years. Higher risk departments and divisions are audited internally annually, and no significant actions have been raised.

Wellbeing has been a major theme this year. While work has been done to explore what a long-term wellbeing strategy at Wellcome could look like, the pandemic brought a more immediate challenge. Our focus had to be supporting colleagues physically, mentally and financially as our offices closed. As an organisation, Wellcome was clear to staff that their family, friends and caring responsibilities took precedence over work, and that all employees would continue to receive their usual pay while lockdown measures were in place.

We have staff trained in both physical and mental health first aid through recognised, certified training. The Health and Safety teams at Wellcome and the Wellcome Sanger Institute worked closely with the Covid-19 Incident Management Teams to ensure that this support was maintained and the teams maintained contact with all employees working at home or in Wellcome’s buildings when possible.

A significant improvement in facilities and construction health and safety has been introduced at Sanger, including prioritising capital projects required for improving health and safety, an intensive training programme for the team members on construction safety, and a focus on fire safety measures.

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Climate change and energy transition

We aim to minimise the environmental impact of new and existing operations and investments and we engage with local communities and non-governmental organisations to understand and respond to any concerns.

Wellcome fully supports the goal to keep the rising global average temperature this century to less than 2°C above pre-industrial levels, and to limit the increase to 1.5°C if possible. We welcome efforts such as those led by the Task Force on Climate-related Financial Disclosures (TCFD) to increase transparency and promote our stakeholders’ understanding of Wellcome’s strategies to respond to the risks and opportunities presented by climate change. We are working towards meeting the government’s expectations of large asset owners to meet TCFD reporting requirements by 2022.

The Board of Governors oversees Wellcome’s approach to climate change risk, and the Director is the most senior individual with accountability for it. The Board Committees assist with governance and management:

A key factor in our evaluation of investments is whether companies and fund managers can maintain a strong social licence to operate and generate sustainable long term, risk-adjusted returns. We focus our coverage and engagement on priority areas relevant for each investment (such as global environment, data privacy, health and society, governance). Climate change and energy transition will have a financial impact on multiple sectors over the very long term. Our Investments team has been increasing efforts to analyse this impact on our portfolio over different time horizons and scenarios. Engagement with our investments partners is an important tool to drive high quality decisionmaking and portfolio management.

The Environment Manager at the Wellcome Sanger Institute is responsible for the strategic direction and management of the environmental impacts of the Wellcome Genome Campus. These include the Campus Environmental Management System ISO 14001:2015 and Campus Environmental Sustainability Strategy, as well as operational areas in conjunction with colleagues who manage direct environmental impacts. In 2019, the Campus became ISO 50001:2018 certified, having met the latest Energy Management Standard.

In October 2019 we started to offset Wellcome’s own business travel carbon emissions. Alongside this, we introduced a new grants policy in February 2020 to support grantholders offset travel-related carbon emissions as well.

As of 1 October 2019, electricity for our offices and Wellcome Collection is 100% renewably sourced. With our service partners, we continue to reduce the impact our operations have on the environment through energy efficiency measures, reduction of waste and use of natural resources. We will extend our collaborative approach to other significant suppliers during the next financial year, as well as working to ensure a more sustainable supply chain.

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Risk Management and Internal Control

Risk management and Internal control provide the framework within which Wellcome can successfully deliver its strategic priorities.

In practice, Wellcome operates a “three lines of defence” framework.

Risk Management

Wellcome’s risk management policy sets out our risk management objectives and principles and attitude to risk. This policy summarises the responsibilities of key roles for risk management, including the role of the Board of Governors, the Executive Leadership Team (ELT), the Audit and Risk Committee and the Investment Committee.

Wellcome is risk averse with respect to liquidity risk and to health and safety risk, and receptive (taking risk within accepted limits) with respect to investment portfolio risk and certain charitable activities. It is bold with respect to other charitable activities, for example, where Wellcome supports research and development in priority areas such as drugresistant infections and vaccines.

The Corporate Risk Register contains the key corporate risks owned and managed by the ELT and the Board of Governors. Risks considered are both immediate and emerging that might impair the organisation to achieve our objectives. The register is updated and reviewed on a regular basis by the Head of Risk, the Chief Operating

Officer, the Finance Director, the General Counsel and then by the ELT. It is also reviewed quarterly by the Audit and Risk Committee and by the Board of Governors.

The Corporate Risk Register includes Wellcome’s Corporate Risk Matrix, against which the risks are scored, and a description of each corporate risk and treatment plan. For each of the risks included, the Corporate Risk Register gives:

The current risk assessment ranking estimates the level of risk that is currently faced, taking into account the effectiveness of existing preventative and mitigating controls. The target risk assessment ranking estimates the level of risk that will be faced once all planned actions are completed. The target risk ranking does not estimate the desired level of risk – just the level of risk that will be faced once the planned actions are completed. The target risk ranking is often used to determine whether sufficient actions are being implemented for significant risks.

The risk categories are:

Any single risk will have elements of impact in more than one risk category.

There is also an Operational Risk Register, which is reviewed quarterly by the Operational Sub-Committee of the ELT. Risks may be moved from the Operational Risk Register to the Corporate Risk Register if they are considered to have increased in likelihood or impact.

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Wellcome’s wholly owned operating investment subsidiaries take responsibility for risk management within their respective operating companies. The Board of each operating company includes appropriate representation from Wellcome and is responsible for ensuring that the operating company has an appropriate balance between risk and reward, and an appropriate risk management culture.

The Audit Committee or Audit and Risk Committee for each operating company and Genome Research Limited (GRL) is responsible for carrying out the roles delegated to it by its Board. This includes reviewing the adequacy and effectiveness of the company’s internal financial controls, internal control systems and risk management processes. A representative of Wellcome attends each of these committees and a report is submitted to the group Audit and Risk Committee.

The Directors of GRL operate an established formal risk management process to assess financial and business risk and to implement risk management strategies for the Wellcome Genome Campus. Wellcome’s Internal Audit team conduct regular audits. The Wellcome Sanger Institute Risk

Register is reviewed by the GRL Audit and Risk Committee at each meeting and by the GRL Board. The Risk Policy is reviewed by the GRL Audit and Risk Committee when revised.

In March, the organisation proactively moved to working from home in a planned transition; once completed, the Wellcome risk function immediately started to assess COVID-19 risks more comprehensively. Particular areas of focus were the engagement and wellbeing of employees, activities being prioritised, risks to delivery of priorities, activities being deprioritised and specific COVID related work being undertaken. The assessment enabled the risk function to establish key themes across the organisation, where significant risks have subsequently been assessed and included in the corporate risk register. Overall, the findings were that the impact of the global pandemic did not expose the organisation to unduly high levels of risk. The risk function continues to closely monitor developments across the organisation as the situation evolves.

Specific risks that the Board of Governors considers to be the most serious are shown in the Key risks table:

Key risks

----- Start of picture text -----
Nature of risk Management and oversight of risk
Investment Failure to support Wellcome’s ability to The Investment Executive manages this risk by: global diversification across
Risk maintain the real level of charitable spend assets and asset classes to limit the potential for value loss, diversification of
in the future, due to one or more of: cash flow sources and the regular review of forecast cash flows to manage
catastrophic loss of one or more assets the portfolio’s liquidity profile, and regular consideration of inflation protection
----- End of picture text -----

Nature of risk Management and oversight of risk
Investment
Risk		 Failure to support Wellcome’s ability to
maintain the real level of charitable spend
in the future, due to one or more of:
catastrophic loss of one or more assets		 The Investment Executive manages this risk by: global diversifcation across
assets and asset classes to limit the potential for value loss, diversifcation of
cash fow sources and the regular review of forecast cash fows to manage
the portfolio’s liquidity profle, and regular consideration of infation protection
within the portfolio, inadequate liquidity,
or lack of protection against the impact
of infation.		 within the portfolio with a focus on equities and property holdings. There is an
independent Investment Risk function reporting to the Chief Operating Offcer.
Oversight is provided by the Investment Committee (focusing on investment
risks), the Audit and Risk Committee (focusing on valuation risks) and the
Board of Governors.
Digital
Resilience and
Cyber Security		 External risks include: increasingly
sophisticated cyber-attacks,
either directly targeted or opportunistic.
Internal risks include: changes within the
Digital & Technology (D&T) function in terms
of moving to a cloud-enabled delivery
model and team resourcing and restructure.		 There were no phishing events reportable to the Information
Commissioner’s Offce; we reported one minor data loss to the
Information Commissioner’s Offce.
Management have completed a number of mitigating actions with respect to
cyber threats and an ongoing programme is being reviewed and delivered:
awareness and education for all employees, expanding the use of a managed
security service provider providing 24-hour event collection, monitoring and
escalation services, D&T is developing a future technology roadmap that will
articulate the technology and required external service providers to ensure
appropriate digital provision and resilience for its evolving business needs.
Oversight is being provided by the D&T Audit and Governance Group,
the Operations Sub-Committee of the Executive Leadership Team,
the Audit and Risk Committee and bythe Board of Governors.
Reputational
Risk		 The key role played by Wellcome in the
pandemic response means that decisions
we make and advice we give during the
crisis may have direct or indirect impacts
upon Wellcome’s mission and reputation.		 A number of mitigation actions are either in place or are being developed
including; an audit trail of decisions and advice given to governments and
intergovernmental organisations by individuals and by Wellcome; media and
social media monitoring, with risks fagged and escalated as required; proactive
engagement with media and social media as required to ensure Wellcome’s
story is told as transparently and contemporaneously as possible; monitoring
communications and assessing possible threats.
Oversight is being provided by the Communication team, Executive Leadership
Team, the Audit and Risk Committee and by the Board of Governors.

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Key risks continued

----- Start of picture text -----
Nature of risk Management and oversight of risk
----- End of picture text -----
Organisational
Change		 Wellcome is developing and implementing
a change programme following on from
the Strategy review. This may lead to
signifcant internal change and a different
approach to external funding and
stakeholder interaction at a time when
the world will be still responding to a
disruptiveglobalpandemic.		 A Strategy Review ELT Sub-Group, lead by the COO, has been formed
to lead and manage the change programme whilst continuing to maintain
business as usual activities. The programme includes organisational redesign
(including diversity & inclusion considerations), risk and change management
arrangements, internal and external communications plans.
Oversight is being provided by the Executive Leadership Team, Audit and
Risk Committee and Board of Governors.
GDPR Wellcome’s ability to demonstrate
compliance with UK data protection
regulations.		 A number of improvements have been made in policies and procedures
for continued compliance with data protection legislation at Wellcome.
A comprehensive schedule of work was outlined, and management have
made signifcant progress in completing mitigating actions, including the
implementation of mandatory training for all staff.
Oversight is being provided by the Executive Leadership Team, Audit and
Risk Committee and Board of Governors.
Staff
Wellbeing		 Signifcant internal and external
factors have the potential to impact
on the wellbeing of Staff. (Signifcant
organisational change and a global
pandemic).		 The defnitive message from management continues to be the prioritisation
of the wellbeing of all staff and their families. Practical proactive approaches
to staff being able to do this include; prioritisation of workloads by ELT and
line managers, the option of bringing on temporary resource where it helps
and insisting that staff take at least 15 days of annual leave in the year. In
addition, a number of resources are in place to support individuals to manage
their wellbeing including an employee assistance programme, mental health
resources and wellbeing champions. Additionally, a comprehensive COVID
policy has been introduced and regular staff surveys on how people are
coping with working from home have been done. Follow up actions have
been taken by the Health and Safety team.
Oversight is being provided by the Executive Leadership Team, Audit and
Risk Committee and Board of Governors.
Grant
Assurance		 Inadequate or insuffcient awareness of
Wellcome’s funding policies may lead to
a lack of compliance within our funded
institutions.		 Wellcome has a comprehensive governance process in place for all grant
funding activities. A number of improvements have been identifed and
actions are being undertaken by management which include the articulation
of key policies for funded institutions and the drafting of ‘Fit to Fund’ set of
criteria for all funded institutions.
Oversight is being provided by the Funding and Direct Activities the Sub-
Committee of the Executive Leadership Team, Audit and Risk Committee and
Board of Governors.

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Wellcome Trust Annual Report 2020 | 49

Internal controls

While some controls are designed to provide assurance against material misstatement or loss due to fraud or error, it is not always possible to make a clear distinction between these and general operational controls. Those controls that are specifically focused on financial reporting are highlighted blue in the text below.

No system of internal control can provide absolute assurance against material misstatement or loss due to fraud or error. Wellcome’s systems are designed to provide the Board of Governors with reasonable assurance that proper procedures are in place and that these procedures are operating effectively.

Control Environment

The policies include Procurement, Agreements, Bullying and Harassment, External Complaints, and Fraud and Corruption. The Delegated Authority Policy was revised in March 2020 to take account of remote working and is subject to ongoing review. The Code of Conduct and Speak-up policy is discussed on page 44, as is the Conflicts of Interest policy. Wellcome’s grant conditions and policies set out the standard terms on which grants are awarded. The grant-making policy is discussed on page 44.

Reporting

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Remuneration report

Wellcome develops and maintains remuneration strategies and policies in line with the strategy, culture and objectives of the organisation. Our aim is to attract, retain, motivate and effectively reward our people and recognise their contribution to Wellcome’s overall mission.

Our key principles are that remuneration should be:

During the year, Willis Towers Watson, QCG, UCEA and Equilar provided us with salary benchmarking data. McLagan provided data and independent advice on the remuneration of the Investments team. PwC advised us on the production of our gender and ethnicity pay gap data and validated our results. We used Innecto for advice on the Pay Structure project and job evaluation.

Elements of remuneration

Long-term incentive plans

In order to ensure that remuneration of the Investments team remains competitive and to encourage a long-term view, certain employees participate in a long-term incentive plan. Awards to employees are made annually based on investment returns and individual performance over a period of three to five years.

Pension

The Group sponsors two approved funded defined benefit schemes: the Wellcome Trust Pension Plan and the Genome Research Limited Pension Plan. Pensions payable are related to length of service, salary and level of personal contribution. The Group also provides a defined contribution Group Personal Pension plan, into which both employee and employer contributions are paid. Since April 2016, new employees are auto-enrolled into the defined contribution scheme.

Governors’ remuneration

In accordance with the will of Sir Henry Wellcome, Governors are entitled to receive remuneration from the Trustee, The Wellcome Trust Limited, of which they are directors.

Under Wellcome’s Constitution, Governors are entitled to receive a set amount of annual remuneration, adjusted with effect from 1 April each year by an amount equal to the percentage increase recommended by the Review Body on Senior Salaries in respect of the salary pay bands of the Senior Civil Service. No increase was awarded in 2019/20.

Base salary

Salaries are regularly benchmarked against the market using appropriate specialist surveys or independent consultants.

Benefits

A competitive benefits package is available to all employees, including private medical insurance, medical assessments, group income protection, an on-site gym (classes and wellbeing support have continued virtually for staff working remotely), enhanced maternity and paternity pay, a cycle-to-work scheme, shopping and entertainment discounts and season ticket loans.

Bonuses

All employees are included in a bonus scheme based on individual achievements. The ELT and the Board of Governors have decided that for 2019/20 it would be unfair to allocate bonuses on individual achievement, as remote working and asymmetrical workloads because of reprioritisation in the light of Covid-19 makes assessment difficult. Instead, bonuses for this year have been distributed at a flat rate, ensuring that no employee is disadvantaged due to the impacts of Covid-19 on their work. The Investments team has a separate bonus element in their remuneration, which is discussed below. Other individual and project-based recognition awards are made at management’s discretion.

Following approval by the Charity Commission of a scheme in October 2011, the levels of remuneration of Chairs and Deputy Chairs can be set by the Board of Governors at up to 2 and 1.5 times the level of a Governor respectively.

The Remuneration Committee

The Board of Governors appoints the Remuneration Committee, chaired by Amelia Fawcett. The members are all Governors, all of whom are excluded from any discussion which affects their own pay. The Committee ensures that remuneration practices and policies facilitate the employment and retention of talented people.

The core responsibilities of the committee are to approve key remuneration principles, the reward strategy and policies for remuneration of employees, including incentive and benefit plans, and to determine individual remuneration packages and terms and conditions of employment for members of the ELT (see page 40) and other senior staff. In addition, the Committee exercises any powers, and approves any decisions required by Wellcome, in respect of the Wellcome Trust pension arrangements.

The Report of the Remuneration Committee is on page 53.

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Key Management Personnel

The key management personnel of the Wellcome Trust Group and Wellcome have been defined as the Board of Governors and the ELT (including the Investment Executive, who are responsible for decision-making in respect of the investment portfolio). The roles and responsibilities of the Board of Governors and the ELT are discussed in the Structure and Governance section on pages 39-41.

The total consideration includes salaries, benefits in kind, bonuses, amounts accrued under long-term incentive plans, termination payments, employer pension contributions and Governors’ remuneration. The determination of the remuneration of the Governors is discussed above. The remuneration of members of the ELT is determined in accordance with the key principles for all staff laid out in the introduction to this report. The remuneration of the Investment Executive is discussed below.

Details of the number of employees working on the charitable activities of the Group whose total benefits (excluding employer pension contributions) fall within specific £10,000 bandings, where benefits exceed £60,000, are shown within the Financial Statements under note 11.

Investments Team

Wellcome manages the investment portfolio that underpins our charitable activities. The internal Investments Team, including the Investment Executive, manages a large proportion of Wellcome’s investments directly rather than through external fund managers. Due to the size, breadth and long-term nature of our portfolio, Wellcome can attract and retain a highly skilled group of investment professionals. With the right leadership and approach, this group has been able to generate superior returns and incur lower costs than would be the case if this activity were outsourced to traditional asset management organisations. The performance of the portfolio supports this approach.

Members of the Investments Team are remunerated through their base salary, supported by significant variable elements based directly on the performance of the portfolio. These variable elements are either in the form of an annual bonus or, more significantly, long-term incentive plans, as detailed above. The structure and quantum of remuneration is benchmarked on an ongoing basis using market data and external consultants. Details of the number of employees working on the investment activities of the Group whose total benefits (excluding employer pension contributions) fall within specific £10,000 bandings, where benefits exceed £60,000, are shown within the Financial Statements under note 5.

McLagan provided an asset management sector overview to benchmark pay and reward proposals for the Investment Team to provide assurance that the pay and reward package was appropriate to attract and retain excellent staff, while also recognising Wellcome’s charitable status.

Governors’ Remuneration Year to 30 September

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2020 2019
£ £
Baroness Manningham-Buller (Chair) 142,108 142,108
Professor Sir Michael Ferguson (Deputy Chair) 106,581 106,581
Professor Tobias Bonhoeffer 71,054 71,054
Alan Brown - 41,448
William Burns 41,448 71,054
Dame Amelia Fawcett 71,054 5,921
Richard Gillingwater 71,054 5,921
Professor Bryan Grenfell 71,054 71,054
Professor Dame Anne Johnson - 17,764
Naguib Kheraj - 17,764
Professor Fiona Powrie 71,054 71,054
Dame Cilla Snowball 71,054 5,921
Elhadj As Sy 53,291 -
Total remuneration 769,752 627,644
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Expenses in respect of travel, subsistence, telephone and sundries incurred by the Governors in the course of their duties amounted to £84,502 (2019: £129,023), of which £76,455 (2019: £119,960) was paid directly by Wellcome, and £8,047 (2019: £9,334) was paid by the Governors and directly reimbursed to them.

The decrease in the expenses paid this year is driven by a reduction in travel costs. No pension contributions were paid in respect of the Governors. The Governors were included in the Directors’ and Officers’ liability insurance in the year to 30 September 2020.

Consideration of Key Management Personnel

Year to 30 September

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2020 2019
£ £
Governors’ remuneration 769,752 627,644
Director of Wellcome Trust 483,788 524,537
Executive Leadership Team
3,111,691 2,412,989
(excluding Investment Executive)
Investment executive 9,166,052 7,597,257
Employer pension contributions
478,921 532,593
(for relevant staff)
Employer National Insurance
811,968 2,116,041
Contributions (for relevant staff)
14,822,172 13,811,061
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Employer NI decreased due to the exercise in the year of a lower number of units from long term incentive plans (LTIPs) by the Investment Executive. There is a timing difference between recognition of LTIPs as consideration, and related NI falling due upon the exercise and payment of units.

Trustee’s Report | Remuneration Report Wellcome Trust Annual Report 2020 | 52

Remuneration Committee Report

As the Chair of the Remuneration Committee, I am pleased to present our report for the year ended 30 September 2020. This report summarises the work of the Committee over the past year in fulfilling our responsibilities to provide effective governance over the remuneration of our employees.

Effective Committee Governance

The membership of the Remuneration Committee is set out on page 124. Although not members of the Committee, the Director and the Director of People attend each meeting but absent themselves for discussions on their own pay. After each Committee meeting, the Board of Governors receives a report on the key issues discussed.

Remuneration Committee Composition and Attendance during 2019/20

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3 3
Dame Amelia Fawcett
Members
1 1
Alan Brown
Professor Sir Michael Ferguson 3 3
Richard Gillingwater 2 2
Baroness Manningham-Buller 3 3
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During the year the Committee’s focus was on:

Pay and reward

Pay at Wellcome had not been changed systematically for a number of years, which had led to inconsistency and a lack of transparency. Following a review and a comprehensive effort to benchmark every role in Wellcome against the relevant market median salary, a new structure has been implemented. No one’s pay will be reduced as a result, but employees whose pay was below the benchmark for their role have had their pay increased as of January 2020.

Working closely with the current Investment Executive, the Committee laid the foundations for an appropriate approach to remuneration that reflects both market benchmarks and Wellcome’s charitable status.

The Committee welcomed Richard Gillingwater as a member in December 2019. Richard brings important insight and expertise on Investment Team remuneration.

Amelia Fawcett

Chair of the Remuneration Committee 14 December 2020

Overview of senior pay proposals

In line with its Terms of Reference, the Committee had oversight of the remuneration packages for new senior staff.

Discussion of the gender and ethnicity pay gaps

The Remuneration Committee has monitored closely Wellcome’s progress in reducing the gender and ethnicity pay gaps, recognising that some of the issues are sectoral and can be resolved only through actions that go beyond pay and reward.

Covid-19

Committee members were concerned at the effect of lockdown on staff and the implications for remuneration projects. The Committee had regular updates, receiving assurance that projects were being rescheduled and, in some cases, adapted to take account of distanced working.

Remuneration Committee Report

Wellcome Trust Annual Report 2020 | 53

Nominations and Governance Committee Report

I am pleased to present our report for the year ended 30 September 2020. New Terms of Reference and a change of name were approved in December 2019, signalling our intent to work with the Board of Governors to go beyond what law and regulation require and improve the quality of governance at Wellcome.

The most significant achievement of the Committee (I was not involved) has been the successful search for the next Chair of Wellcome. A rigorous international search was undertaken for someone who could deliver our new bold strategic ambition. We had an excellent field, and in Julia Gillard the Committee is certain that we have chosen an outstanding candidate.

Nominations Committee Composition and Attendance during 2019/20

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Chair
4 4
Baroness Manningham-Buller
Members
4 4
Professor Sir Michael Ferguson
Professor Bryan Grenfell 4 4
Dame Cilla Snowball 4 4
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We are also recruiting for Governors with a science background to replace individuals who are leaving us. We realise that we need people from a wide background and with an outlook that reaches beyond their specialty – as well as being excellent scientists. I am grateful for Julia’s involvement in this process, as they will be members of her future Board.

Covid-19 inevitably meant changes and delays to Wellcome’s work. As a Committee we adjusted to virtual meetings rapidly but delayed the recruitment of new Governors for three months. In the light of this we are delighted that Tobias Bonhoeffer has agreed to remain on the Board for a further year. I also agreed to stay as Chair of Wellcome until Julia Gillard takes up her post in spring 2021.

The UK Corporate Code of Governance has been the impetus for the Committee to explore staff and stakeholder engagement at Wellcome. Engagement is an integral part of our ways of working. Cilla Snowball has taken the lead in developing staff and stakeholder links with the Board, so we can further integrate their valuable insights into Board decision-making.

Committee meetings during the year

The Committee formally met four times during the year and held several informal meetings to progress recruitment issues.

Eliza Manningham-Buller Chair of the Nominations Committee 14 December 2020

Nominations and Governance Committee Report

Wellcome Trust Annual Report 2020 | 54

Investment Committee Report

As the Chairman of the Investment Committee, I am pleased to present our report for the year ended 30 September 2020. The Investment Committee’s role is to act as an advisory and oversight body of the Board of Governors on investment matters. This report summarises the work the Committee has done over the past year in fulfilling our responsibilities.

We welcomed Girish Reddy to the Committee in December 2019 as our fifth external member. He joins Tracy Blackwell, Cressida Hogg, Stefan Dunatov and Martin Halusa. The Committee has an impressive depth and breadth of experience, which has enriched our discussions and been of great value during a tumultuous year.

Activities during the year

The Investment Committee met in December 2019 and in February, June and September 2020. At each meeting, it reviewed the positioning and performance of the investment portfolio in the context of prevailing investment market conditions and the evolving macro-economic and geopolitical environment. The June and September meetings were held virtually given the extraordinary circumstances of the Covid-19 pandemic and the closure of Wellcome’s headquarters, the Gibbs Building.

At the December 2019 meeting the Committee made its annual consideration of the outlook for long-term returns. In its oversight role, the Committee has examined correlations and performance attribution; Internal Audit’s review of internal controls and third-party oversight in Investments; adherence to risk limits; resourcing of the investment team; counterparty limits; arrangements for safekeeping of assets; and costs and fees incurred in managing the portfolio.

Other topics of discussion during the year have included the investment executive’s approach to ESG based on an assessment of companies’ and managers’ “licence to operate”; a climate change portfolio impact assessment; a review of the residential property exposure in the portfolio; a deep dive into our venture capital exposure, focusing on our largest manager; and a discussion of the arrangements for the management of the internal equity portfolios. The Committee provided constructive challenge to the Investment Executive at each meeting.

Investment Committee Composition and Attendance during 2019/20

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Chair
Richard Gillingwater 5 5
External members
Tracey Blackwell 4 5
Stefan Dunatov 5 5
Martin Halusa 5 5
Cressida Hogg 5 5
Girish Reddy 5 5
Internal members
Sir Jeremy Farrar 5 5
Professor Sir Mike Ferguson 4 5
Baroness Manningham-Buller 5 5
Nicholas Moakes 5 5
Peter Pereira Gray 5 5
Paul Schreier 5 5
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In addition to these regular meetings, there was an extra call in March 2020, at the height of the market turmoil brought on by the pandemic and policy response, to discuss portfolio positioning and risk controls. This was followed by a broad discussion of the implications of the Covid-19 crisis for the future shape of the portfolio at the June meeting. There were also special calls in September and November to discuss Wellcome’s bid for Urban & Civic PLC. Throughout the year, Committee members have been generous with their time and advice on an individual and collective basis.

Richard Gillingwater Chair of the Investment Committee 14 December 2020

Investment Committee Report Wellcome Trust Annual Report 2020 | 55

Audit and Risk Committee Report

As Chair of the Audit and Risk Committee, I am pleased to present our report for the year ended 30 September 2020. I would also like to take this opportunity to thank Bill Burns for his valuable contribution as Chair of the Committee until April.

Overview of the year

In 2020, the main activities of the Committee included reviewing:

Significant financial reporting issues and judgements

The use of assumptions or estimates and the application of management judgement is an essential part of financial reporting. In 2020, we focused on the following significant reporting matters in relation to financial accounting and disclosures:

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Issue, judgement or estimate Action taken by the Committee Outcome
Unquoted investment Review of the Audit approach adopted by Deloitte as The Committee concluded that the valuation
valuations summarised in their Report. methodology and the valuations approved by
Consideration of the sensitivity analysis performed by the Valuations Group were appropriate, noting
management for any valuations subject to significant that there were 6 holdings where Wellcome had
estimation uncertainty; Review of the Valuation Group no reliable co-investors on which to base the
papers and attendance at the Valuation Group meetings valuation and that these were not material in the
by a member of the Committee. context of this asset class.
Investment property Review of the Audit approach adopted by Deloitte as The Committee concluded that the valuation
valuations summarised in their Report. methodology and the valuations approved by the
Consideration of the sensitivity analysis performed by Valuations Group were appropriate, noting the use
management for any valuations subject to significant of the several external valuers for the elements of
estimation uncertainty; Review of the Valuation Group the portfolio rather than relying on one.
papers and attendance at the Valuation Group meetings
by a member of the Committee.
Grant Liabilities Review of management’s recommendation to discount The Committee noted the additional sensitivity
the grant liabilities using the expectation of the long- analysis that had been done this year to cover the
term return of Wellcome’s investment portfolio and the various elements that impact the calculation and
appropriateness of the rate used. concluded that these were reasonable and provided
a fair indication of the possible range of outcomes.
Defined benefit pension Review of the assumptions provided by Mercers and The Committee concluded that the assumptions
liabilities reviewed by management. were reasonable and appropriate to the group’s risk
and member profile within the context of FRS 102.
Non-charitable investment Review of management’s judgement in assessing The Committee noted that these entities are
subsidiary undertakings, which subsidiary undertakings, associates and joint valued at fair value using external valuer reports
associates and joint ventures are held as part of the investment portfolio. supported by reviews by the Wellcome Finance
ventures held as part of team and that whilst Wellcome has Board
the investment portfolio representation in these entities, their operations
were managed independently from Wellcome.
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Audit and Risk Committee Report

Wellcome Trust Annual Report 2020 | 56

How the responsibilities of the Audit and Risk Committee have been addressed

At the December 2020 meeting members of the Committee formally reviewed their activities during the year and were satisfied that they had taken adequate consideration of their responsibilities as laid out in the Terms of Reference.

External audit

Oversight

At the June meeting each year, the Committee discusses with the auditors the scope of their audit and makes recommendations to the Board before the audit commences. The significant risks, which are in line with those listed in the table above, are considered by the Committee to be:

In addition to the points noted under the review of significant activities during the year, our interactions with Deloitte LLP included:

This is in line with 2019 and the approach has been discussed with Deloitte LLP.

Independence

The Committee seeks to ensure the continued independence and objectivity of Wellcome’s external auditors. At the April meeting each year, it reviews the performance of the external auditors, discusses this with management and recommends their reappointment if appropriate.

Non-audit services

Wellcome management has a policy on any non-audit services provided by our External Auditors, which takes into account the relevant EU Regulations and Directives, the FRC “Guidance on Audit Committees” and the “Revised Ethical Standard” and which has been approved by the Committee.

Non-audit services were under review throughout the year to determine that they were permitted by reference to their nature, assessing potential threats and safeguards to auditor independence as well as the overall ratio of audit to nonaudit fees.

The Committee is satisfied that Deloitte remain independent and that the level and nature of any non-audit services is appropriate.

Financial reporting

At the December meeting each year, in line with its Terms of Reference the Committee reviews the Annual Report and Financial Statements and related announcements for statutory and regulatory compliance. In particular, it reviews the integrity of the disclosures in the Financial Statements and considers the minutes of the Valuation Group meetings. The Valuation Group is responsible for reviewing investment valuations and reports its views to the Committee to assist in its approval of such documents.

On the basis of the work done, the Committee recommended to the Board of Governors that the Annual Report taken as a whole is fair, balanced and understandable. In justifying this statement, the Committee has considered the robust process in place, which includes the following:

At the April, June, September and December meetings each year, the Committee reviews the Auditor’s report about independence of its staff, its policies for maintaining staff independence and monitoring compliance with relevant requirements.

Audit and Risk Committee Report Wellcome Trust Annual Report 2020 | 57

Internal audit

Wellcome has an in-house internal audit function that is supplemented through the use of a co-source partner providing external expertise where relevant. The Head of Internal Audit reports functionally into the Audit and Risk Committee, which evaluates her performance annually and considers the work done by the team as a whole. Internal audits are performed based on a risk-based internal audit plan. The plan is reviewed and approved by the Audit and Risk Committee prior to implementation. The 2020/21 plan was endorsed by the Committee during the September 2020 Audit and Risk Committee meeting. The plan outlines how each audit will be resourced to provide assurance that it has the right expertise for execution. The plan is regularly reviewed and updated taking into account Wellcome’s risks.

At each meeting, the Committee receives an update on audit reports completed and observations identified, progress on completion of actions arising from the audits and performance of the internal audit function. In 2020 this included both full scope and limited scope reviews identified in line with risk profiling on the Corporate risk register and covered areas across Wellcome, including:

The 2019/20 plan was reconsidered in the context of the Covid-19 environment and proposed changes were approved at the April 2020 Committee meeting. These included:

Audit and Risk Committee Composition and Attendance during 2019/20

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Chair
William Burns (Chair to 31 March 2020) 2 2
Dame Amelia Fawcett
4 4
(Chair from 1 April 2020)
Members
Adele Anderson (external) 4 4
Chris Jones (external) 4 4
Professor Fiona Powrie 4 4
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Additional areas of focus

In addition to the reviews of external audit, financial reporting, internal audit and risk management discussed above, key governance areas considered by the Committee during the year included the new Corporate Governance code and the Charity Governance code.

Amelia Fawcett

Chair of the Audit and Risk Committee 14 December 2020

Internal audit is also provided for Genome Research Ltd (GRL), and reports into the GRL Audit and Risk Committee. Reviews at GRL included a review of the Biobank Sequencing Programme.

Risk Management

At each meeting, the Committee monitors and reviews risk management processes and the standards of risk management and internal control, including the processes and procedures for ensuring that material business risks are properly identified and managed. In 2020, specific areas addressed in addition to those covered under the Overview of the year included:

Audit and Risk Committee Report

Wellcome Trust Annual Report 2020 | 58

Independent Auditor’s Report to the Trustee of the Wellcome Trust

Opinion

In our opinion the financial statements of Wellcome Trust (the ‘Trust’) and its subsidiaries (the ‘Group’):

We have audited the financial statements which comprise:

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 Group and the Trust 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 Group or the Trust.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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).

Independent Auditor’s Report to the Trustee of the Wellcome Trust

Wellcome Trust Annual Report 2020 | 59

Summary of our audit approach

Key Audit Matters The key audit matters that we identifed in the current year were:
• Valuation of unquoted investments relating to controlled unconsolidated investments (Premier Marinas and
Farmcare) and farm assets (Agricultural Estates) including unrealised gains/losses related to these investments
• Valuation of unquoted investments relating to direct investments, including unrealised gains/losses related to
these investments
• Risk of the grant liability being misstated due to an inappropriate discount rate being applied.
Within this report, key audit matters are identifed as follows:
Newly identifed
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality The materiality that we used for the Group fnancial statements was £278m which was determined on the basis
of 1% of net assets.
Scoping Our Group audit scope included the audit of all subsidiaries that accounted for more than 1% of the Group’s net assets
as well as any subsidiary that required a statutory audit. This meant that 99% of the Group’s net assets were subject to
a full scope audit for the year ended 30 September 2020. The Trust and all subsidiaries are based in the UK.
Signifcant
changes in our
approach		 In the current year, we have amended our key audit matter ‘Valuation of unquoted investments’ to include farm
assets (Agricultural Estates) and have removed the investment in iQ following its disposal. There have been no
other signifcant changes in our approach.

Conclusions relating to going concern

We are required by ISAs (UK) to report in respect of the following matters where:

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.

We have nothing to report in respect of these matters.

Independent Auditor’s Report to the Trustee of the Wellcome Trust Wellcome Trust Annual Report 2020 | 60

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Valuation of unquoted investments relating to controlled unconsolidated investments (Premier Marinas and Farmcare)
and farm assets (Agricultural Estates) including unrealised gains/losses related to these investments
Key audit matter The valuation of Premier Marinas, Farmcare and Agricultural Estates involves significant judgement when
description determining the valuation approach and the estimation of key inputs and assumptions. As a result of this
judgement, there is more potential for fraud or error in this area. Management engage with external experts to
produce valuation reports for these assets. For Premier Marinas, the primary input into the external valuation is the
growth rate assumptions which drive future cashflows. For Farmcare and Agricultural Estates, the primary input
into the external valuation is comparable market data. There are few comparable transactions for alternative real
estate assets such as farm land and therefore this increases the degree of estimation in determining the fair value
of those assets. There is a risk that the application of an inappropriate valuation methodology and/or the use
of inappropriate assumptions could result in the valuation of unquoted investments being materially misstated.
This would subsequently drive the changes in gains and losses.
The valuation of Premier Marinas, Farmcare and Agricultural Estates accommodation amount to £539 million
(2019: £541 million), which is 3.9% (2019: 4.4%) of the Group’s unquoted investments, and 1.9% (2019: 2.1%)
of the Group’s net assets.
The Audit and Risk Committee Report on page 53 identifies the valuation of real estate assets as a main area of
risk. The significant accounting judgements with respect to the Group’s fair value measurement and valuation
policies are described in notes 2 and 15.
How the scope In responding to the key audit matter arising when determining the fair value of Premier Marinas, Farmcare and
of our audit Agricultural Estates, we performed the following procedures:
responded to
the key matter Controls Assessment
• We obtained an understanding of the relevant controls and tested the operating effectiveness of those controls.
• In performing this work, we obtained and reviewed policies and processes by which the investments are valued,
reviewed and attended Valuation Group meetings to understand how ongoing monitoring and reassessment of
valuations was performed.
Substantive testing
• We obtained and reviewed 30 September 2020 and 30 September 2019 external valuation reports and
assessed whether the valuation approach for each was in accordance with the Royal Institution of Chartered
Surveyors (‘RICS’) Valuation – Professional Standards. We assessed the competence, qualifications, capabilities
and independence of the third party valuers. We compared 2019 and 2020 reports to assess any changes in
methodology or approach year on year;
• We involved internal real estate specialists as part of our audit team to review the third party valuation reports.
We challenged the key estimates made in management’s valuation against our expectations, our own market
intelligence and external information (e.g. growth assumptions used to drive future cashflows in Premier
Marinas, and comparable data in Farmcare and Agricultural Estates). We considered the possible effect of
Covid-19 and Brexit on market assumptions and stress tested key assumptions to understand their effect on
the overall valuation.
• Specifically for Premier Marinas: we determined whether data used to derive future cashflows was appropriate
given our understanding of the business; and
• Specifically for Farmcare and Agricultural Estates: for a sample of assets we obtained relevant third party data
to support acreage and other inputs that drive the valuation.
• We performed testing over the accuracy of underlying inputs into the valuation models and back tested
previous estimates made by management to assess the accuracy of their previous estimates. We also
performed market analysis for contradictory evidence to challenge management on the conclusions reached.
Key observations As a result of our procedures, we concluded that each of the assumptions used by management to estimate the
valuation of Premier Marinas, Farmcare and Agricultural Estates are within a reasonable range, noting that Premier
Marinas is at the upper end of the range, and that Farmcare and Agricultural Estates sit between the mid-point
and the upper end of the range.
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Independent Auditor’s Report to the Trustee of the Wellcome Trust Wellcome Trust Annual Report 2020 | 61

Valuation of unquoted investments relating to direct investments including unrealised gains/losses
related to these investments		 Valuation of unquoted investments relating to direct investments including unrealised gains/losses
related to these investments
Key audit matter
description		 The valuation of unquoted direct investments requires signifcant estimation as the values are derived from
unobservable inputs and assumptions. As a result of these estimates, there is more potential for fraud in this area.
The values are obtained from co-investors or are valued based on internal models. As these underlying valuations
are sensitive to these unobservable inputs and assumptions, there is a risk that the application of an inappropriate
valuation methodology and/or the use of inappropriate market assumptions could result in the valuation of
unquoted investments being materially misstated, this includes appropriately refecting the impact of COVID-19
on company performance and evaluating any discounts applied to businesses as a result. These estimates and
assumptions over investments subsequently drive the changes in gains and losses.
The valuation of the Group’s investments in unquoted direct investments amount to £1.39 billion (2019: £1.22
billion) which is 10.1% (2019: 9.8%) of the Group’s unquoted investments, and 5.0% (2019: 4.8%) of the Group’s
net assets.
The signifcant accounting estimate with respect to the Group’s fair value measurement and valuation policies are
described in notes 2 and note 15.
How the scope
of our audit
responded to
the key matter		 We assessed Management’s valuation methodology and considered whether it was in accordance with the
accounting policies of the Trust, applicable accounting standards and industry practice.
Controls Assessment
• We obtained an understanding of the relevant controls and tested them. This included gaining an understanding
of the procedures performed by Management during the year related to the ongoing monitoring of co-investors
and the processes by which valuation approaches are continually re-assessed and challenged by the Valuation
Group.
• We reperformed Management’s review for a sample of investment assets by inspecting documentation to
determine whether valuations were challenged based on recent knowledge of the investments, as gained
through calls with key management personnel of the co-investors;
• We inspected documentation and attended the July and November 2020 Valuation Group meetings to evidence
that the Valuation Group has reviewed and reasonably challenged the valuation of investments at year end, as
presented by Management and as recorded in the fnancial statements.
Substantive procedures
• For selected samples, we independently obtained and reviewed the unquoted direct investments valuation
statements to determine whether the value recorded by the Group was appropriate.
• We challenged Management’s assessment of the valuation assumptions and appropriateness of valuation
methodologies used by the co-investors to determine the fair value by:
- We have either assessed recent transactions in the market or used a market comparable approach to inform
our challenge of management. This includes determining if any discounts applied by co-investors to the
valuation are appropriate;
- We have examined the previous period’s audited fnancial statement for the co-investment vehicle that
houses a direct investment and the fnancial statements of the direct investment itself, to inform us of any
subsequent events and going concern issues;
- We have also obtained an understanding of current year performance and whether any events have occurred
that may have an impact on the valuation. We have also assessed any effect of COVID-19 on company
performance and long term outlook, and ensured that these have been appropriately refected in the valuation
as at 30 September 2020;
- We have assessed the co-investor where used, to determine if they are reputable and reliable partners.
This includes testing the accuracy of the co-investors’ valuations in previous periods, by comparing the
30 September 2019 and 31 December 2019 valuation statement to the valuation as per the audited accounts
which is usually at 31 December 2019.
- We have assessed contradictory evidence to challenge the appropriateness of valuation adopted.
• We sampled purchases and sales during the period and traced these to supporting documentation,
based on this procedure and the above procedures we recalculated the gains and losses associated
to assess the accuracy thereof.
Key observations As a result of our procedures we found the valuations of these investments are at the most prudent end of an
acceptable range, and this is largely driven by the valuation of one investment as a result of the discount applied
to a recent funding round.

Key observations As a result of our procedures we found the valuations of these investments are at the most prudent end of an acceptable range, and this is largely driven by the valuation of one investment as a result of the discount applied to a recent funding round.

Independent Auditor’s Report to the Trustee of the Wellcome Trust Wellcome Trust Annual Report 2020 | 62

Risk of the grant liability being misstated due to an inappropriate discount rate being applied

Key audit matter
description		 The discount rate used is identifed as a signifcant estimate in Note 2 of the annual report. The discounted portion
of the grant liabilities is sensitive to changes in the discount rate applied.
The non-current grant liabilities £1,614 million (2019: £1,517 million) are discounted, as per the requirements of
FRS 102 and Charities SORP. The discount rate selected and applied by Management is based on Management’s
expectation of the long-term return of the Trust’s portfolio of 6.1% (2019: 6.1%).
The discount rate used should refect the opportunity cost to the Trust of not earning an investment return on
funds granted and its current assessment of the time value of money. The appropriate discount rate depends on
the circumstances of the charity and determining this discount rate requires signifcant estimation concerning
future expectations of investment performance and is subjective.
The signifcant accounting estimate with respect to the discount rate is described in note 15 and on page 49
within the Audit and Risk Committee Report.
How the scope
of our audit
responded to
the key matter		 Controls Assessment
We obtained an understanding of the relevant controls in relation to the selection of an appropriate discount
rate. This included gaining an understanding of the procedures related to the Board of Governors review of
Management’s papers on the selection of an appropriate discount rate and expected rates of long-term return
used in fnancial planning and budgeting considerations.
Substantive procedures
• Reviewed Management’s grant discounting methodology paper and compiled a complete list of assumptions
involved in the process. We assessed the assumptions for reasonableness by comparing to underlying data (eg.
‘stretch’ assumptions were re-calculated using historic data and payment assumptions were agreed to historic
payment data).
We reviewed Management’s paper to the Investment Committee and challenged any year on year changes in
approach and the assertions made by Management by:
• testing the split of investments stated in the paper and the associated expected investment return of each category;
• assessing the stated ranges of nominal rates of return with reference to third party forecasts; and
• performing benchmarking on the rate of return by using third party market data in the calculation of the discount
rate and determining if variances were material.
We tested the arithmetical accuracy of the grant liabilities discounting workings to determine whether the grant
liability was materially accurate, and used Deloitte’s Analytics tools to challenge the integrity of these spreadsheets.
Key observations We have concluded that Management’s discount rate methodology is appropriate and in accordance with the
requirements of FRS 102 and the Charities SORP. Based on the work performed, we conclude that the rates applied
are at the lower end of our reasonable range.

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Wellcome Trust Annual Report 2020 | 63

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:

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Group financial statements Trust’s financial statements
Materiality £278.0 million (2019: £252.1 million) £264.0 million (2019: £239.5 million)
Basis for determining 1% (2019: 1%) of net assets 1% of net assets (2019: 1%)
materiality
Rationale for the The Group is an asset based charity making returns The Trust is an asset based charity making returns
benchmark applied on its investment portfolio to support the charitable on its investment portfolio to support the charitable
activities. activities.
The basis of Group materiality is 1% of net assets The basis of Trust materiality is 1% of net assets
which aligns our methodology with industry practice (limited to 95% of Group materiality) which aligns our
for comparable asset–based organisations. methodology with industry practice for comparable
asset–based organisations.
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----- Start of picture text -----
Component Audit Committee
materiality range reporting threshold
£264m to £111m £13.9m
£27,822m
Net assets Group materiality
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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. Group performance materiality was set at 60% of Group materiality for the 2020 audit (2019: 70%). In determining performance materiality, we considered the following factors:

Error reporting threshold

We agreed with the Audit and Risk Committee that we would report to the Committee all audit differences in excess of £13.9 million (2019: £12.6 million), 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.

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Wellcome Trust Annual Report 2020 | 64

An overview of the scope of our audit

Identification and scoping of components

Our Group audit was scoped by gaining an understanding of the Group and its environment, and assessing the risks of material misstatement at the Group level.

We determined that each entity forms its own component and our component audit scope was therefore determined by considering which entities:

Any entity that required an audit (Scope A and Scope B) within the Group has been audited by the Group audit team in the UK. These two categories combined provide coverage of 99% of the Group’s net assets. This approach is in line with the prior year.

Our consideration of the control environment

The Group’s IT landscape contains a number of IT systems, applications and tools used to support business processes and for financial reporting. We perform a risk assessment of the systems, applications and tools to determine those which are of greatest relevance to the Group’s financial reporting. We utilised our IT specialists to assess relevant controls and perform General IT Controls testing (“GITCs”) for the period 1 October 2019 to 30 September 2020 over in-scope systems. Our testing typically covered controls surrounding user access management and change management, as well as controls over key reports generated from the IT systems and their supporting infrastructure.

From our walkthroughs and understanding of the entity and controls at the business cycle and account balance levels, we took a controls reliance approach over the following business cycles:

Other information

The Trustees 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.

Responsibilities of Trustee’s

As explained more fully in the Trustee’s responsibilities statement, the Trustees 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 Trustees 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 Trustees are responsible for assessing the Group’s and the Trust’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 Trustee’s either intend to liquidate the Group or the Trust or to cease operations, or have no realistic alternative but to do so.

Independent Auditor’s Report to the Trustee of the Wellcome Trust

Wellcome Trust Annual Report 2020 | 65

Auditor’s responsibilities for the audit of the financial statements

We have been appointed as auditor under section 151 of the Charities Act 2011 and report in accordance with the Act and relevant regulations made or having effect thereunder.

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.

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.

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:

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas: valuation of unquoted investments relating to controlled, unconsolidated subsidiary investments (Premier Marinas, Farmcare) and farm assets (Agricultural Estates) including unrealised gains/losses related to these investments) and valuation of unquoted investments relating to unquoted direct investments, including unrealised gains/losses related to these investments. In common with all audits under ISAs (UK), we are also 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 Group 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 Charities Act 2011 and listing rules for the Trust’s listed bonds. In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty.

Audit response to risks identified

As a result of performing the above, we identified two key audit matters related to the potential risk of fraud:

The key audit matters section of our report explains the matters in more detail and also describes the specific procedures we performed in response to those key audit matters.

In addition to the above, our procedures to respond to risks identified included the following:

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Wellcome Trust Annual Report 2020 | 66

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

Matters on which we are required to report by exception

Adequacy of explanations received and

accounting records

Under the Charities (Accounts and Reports) Regulations 2008 we are required to report in respect of the following matters if, in our opinion:

We have nothing to report in respect of these matters.

Consistency of the Trustee’s Report with the Financial Statements

Under the Charities (Accounts and Reports) Regulations 2008 we are required to report to you if, in our opinion the information given in the Trustee’s Report is inconsistent in any material respect with the Financial Statements.

Other matters

Auditor tenure

Following the recommendation of the audit and risk committee, we were appointed by the Trust at its Board of Governor’s meeting on 14 December 2015 to audit the financial statements for the year ending 30 September 2016 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 5 years, covering the years ending 30 September 2016 to 30 September 2020.

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 committee we are required to provide in accordance with ISAs (UK).

Use of our report

This report is made solely to the charity’s trustee, as a body, in accordance with Part 4 of the Charities (Accounts and Reports) Regulations 2008. Our audit work has been undertaken so that we might state to the charity’s trustees 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 charity and the charity’s members as a body, for our audit work, for this report, or for the opinions we have formed.

The engagement partner on the audit resulting in this independent auditor’s report is Terri Fielding.

Deloitte LLP (Senior statutory auditor)

Statutory Auditor London, United Kingdom 14 December 2020

We have nothing to report in respect of this matter.

Independent Auditor’s Report to the Trustee of the Wellcome Trust

Wellcome Trust Annual Report 2020 | 67

Financial statements

Tomorrow’s Echo Lira district, Uganda, 2019

Agness listens to the heartbeat of a fetus. Using her well-trained ear and Pinard horn, she can tell how the baby is doing. Image from the Wellcome Photography Prize 2020.

Consolidated Statement of Financial Activities

for the year ended 30 September 2020

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Restricted Unrestricted Restricted Unrestricted
funds funds 2020 funds funds 2019
Note £m £m £m £m £m £m
Income from investments
Dividends and interest 3 - 287.9 287.9 - 372.7 372.7
Rental income - 35.4 35.4 - 35.6 35.6
- 323.3 323.3 - 408.3 408.3
Charitable income
Grants receivable 4(a) 18.5 - 18.5 20.9 - 20.9
Other charitable income 4(b) 28.1 93.7 121.8 25.3 26.5 51.8
Total income 46.6 417.0 463.6 46.2 434.8 481.0
Expenditure on raising funds
- -
Management fees and other investment costs 5(a) (86.7) (86.7) (69.5) (69.5)
- -
Interest payable on bond liabilities (79.0) (79.0) (78.7) (78.7)
Expenditure on charitable activities 6 (52.3) (966.3) (1,018.6) (53.2) (1,129.9) (1,183.1)
Total expenditure (52.3) (1,132.0) (1,184.3) (53.2) (1,278.1) (1,331.3)
- -
Net realised and unrealised gains on investments 15(f) 3,289.6 3,289.6 1,978.2 1,978.2
Net income before taxation (5.7) 2,574.6 2,568.9 (7.0) 1,134.9 1,127.9
Taxation 13 - 12.6 12.6 - 44.6 44.6
Net income after taxation (5.7) 2,587.2 2,581.5 (7.0) 1,179.5 1,172.5
Actuarial gains/(losses) on defined benefit 11(e)(iii) - 25.9 25.9 - (158.2) (158.2)
pension schemes
Net movement in funds (5.7) 2,613.1 2,607.4 (7.0) 1,021.3 1,014.3
Funds at start of year 25.2 25,189.2 25,214.4 32.2 24,167.9 24,200.1
Funds at end of year 20 19.5 27,802.3 27,821.8 25.2 25,189.2 25,214.4
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There are no gains or losses apart from those recognised above. All income is derived from continuing activities.

An analysis of the movement of funds in 2020 is shown in note 20.

Consolidated Statement of Financial Activities Wellcome Trust Annual Report 2020 | 69

Consolidated Balance Sheet

as at 30 September 2020

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2020 2019
Note £m £m
Tangible fixed assets 14(a) 411.8 424.3
Investment assets
Quoted investments 15(a) 14,762.7 15,053.9
Unquoted investments 15(a) 13,766.8 12,402.8
Investment properties 15(a) 1,292.1 1,298.9
Derivative financial instruments 15(b) 71.3 102.3
Investment cash and certificates of deposit 15(c) 2,701.4 1,070.4
Other investment assets 15(c) 91.3 268.3
Social investments
Programme related investments 15(d) 26.8 17.4
Total Fixed Assets 33,124.2 30,638.3
Current assets
Stock 11.0 9.5
Debtors 16 29.5 27.1
Cash at bank and in hand 25.1 33.2
Total Current Assets 65.6 69.8
Creditors falling due within one year 17 (1,177.6) (1,127.8)
Net current liabilities (1,112.0) (1,058.0)
Total assets less current liabilities 32,012.2 29,580.3
Creditors falling due after one year 17 (3,675.8) (3,843.3)
Provision for liabilities and charges 18 (148.0) (151.0)
Net assets excluding pension deficits 28,188.4 25,586.0
Defined benefit pension schemes’ deficits 11(e)(iv) (366.6) (371.6)
Net assets including pension deficits 27,821.8 25,214.4
Funds of the charity
Restricted Funds 20 19.4 25.1
Unrestricted Funds 20 27,802.4 25,189.3
Total Funds 27,821.8 25,214.4
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The Financial Statements on pages 69-123 were approved and authorised for issue by The Wellcome Trust Limited, as Trustee, on 14 December 2020 and signed on its behalf by:

Baroness Manningham-Buller Chair

Professor Sir Michael Ferguson Deputy Chair

Consolidated Balance Sheet Wellcome Trust Annual Report 2020 | 70

Statement of Financial Activities of the Trust

for the year ended 30 September 2020

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2020 2019
Note £m £m
Income from investments
Dividends and interest 3 260.7 333.2
Rental income 34.6 34.8
295.3 368.0
Charitable income
Other charitable income 4(b) 448.4 91.1
Total income 743.7 459.1
Expenditure on raising funds
Management fees and other investment costs 5(a) (81.7) (66.7)
Interest payable to group undertakings (31.9) (31.0)
Interest payable on bond liabilities (39.5) (39.4)
Expenditure on charitable activities 6 (1,153.1) (1,109.0)
Total expenditure (1,306.2) (1,246.1)
Net realised and unrealised gains on investments 15(f) 2,795.4 1,995.7
Net income 2,232.9 1,208.7
Actuarial gains/(losses) on defined benefit pension schemes 11(e)(iii) 9.6 (77.5)
Net movement in funds 2,242.5 1,131.2
Funds at start of year 25,161.3 24,030.1
Funds at end of year 27,403.8 25,161.3
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There are no gains or losses apart from those recognised above. All income is derived from continuing activities. All funds are unrestricted.

Statement of Financial Activities of the Trust Wellcome Trust Annual Report 2020 | 71

Balance Sheet of the Trust

as at 30 September 2020

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2020 2019
Note £m £m
Tangible fixed assets 14(b) 214.3 220.1
Investment assets
Quoted investments 15(a) 13,883.5 13,292.2
Unquoted investments 15(a) 12,775.0 11,050.7
Investment properties 15(a) 1,164.3 1,157.0
Derivative financial instruments 15(b) 71.3 102.3
Investment cash and certificates of deposit 15(c) 2,697.0 1,069.4
Other investment assets 15(c) 85.1 254.6
Subsidiary and other undertakings 2,639.4 3,323.4
Social investments
Programme related investments 15(d) 26.8 17.4
Total Fixed Assets 33,556.7 30,487.1
Current assets
Debtors 16 16.4 8.2
Cash at bank and in hand 5.9 5.0
Total Current Assets 22.3 13.2
Creditors falling due within one year 17 (2,670.2) (2,102.7)
Net current liabilities (2,647.9) (2,089.5)
Total assets less current liabilities 30,908.8 28,397.6
Creditors falling due after one year 17 (3,265.1) (3,007.0)
Provision for liabilities and charges 18 (72.1) (60.7)
Net assets excluding pension deficit 27,571.6 25,329.9
Defined benefit pension scheme’s deficit 11(e)(iv) (167.8) (168.6)
Net assets including pension deficit 27,403.8 25,161.3
Funds of the charity
Unrestricted Funds 27,403.8 25,161.3
Total Funds 27,403.8 25,161.3
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The Financial Statements on pages 69-123 were approved and authorised for issue by The Wellcome Trust Limited, as Trustee, on 14 December 2020 and signed on its behalf by:

Baroness Manningham-Buller Chair

Professor Sir Michael Ferguson Deputy Chair

Balance Sheet of the Trust Wellcome Trust Annual Report 2020 | 72

Consolidated Cash Flow Statement

for the year ended 30 September 2020

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2020 2019
Note £m £m
Net income for the year (as per the Statement of financial activities) 2,607.4 1,014.2
Adjustments to exclude non-cash items and investment income and expenditure
Decrease in debtors 16 (2.4) 0.2
Increase in stock (1.5) (3.3)
Increase/(Decrease) in grant commitments 8 (12.4) 273.9
Increase/(Decrease) in creditors and provisions (1.1) 155.1
Less unrealised gains on sale of Programme Related Investments 15(d) (13.9) (2.1)
Increase in Net Write Down for Programme Related Investments 15(d) 16.4 10.4
(Decrease)/Increase in other investment debtors 15(c) (0.4) (2.4)
Depreciation and Disposals of Fixed Assets 24.9 23.7
Investment income (323.3) (408.3)
Bond interest 79.0 78.7
Net realised and unrealised gains on investments (3,289.6) (1,978.2)
Net cash flows from operating activities (916.9) (838.0)
Cash flows from investing activities:
Investment income received 22(a) 318.9 405.9
Proceeds from sales of investment assets 22(c) 9,014.3 4,962.7
Purchase of investment assets 22(c) (7,033.8) (4,444.5)
Purchase of tangible fixed assets 14(a) (12.4) (17.4)
Net cash inflow/(outflow) upon settlement of derivative financial instruments 22(c) 331.2 (81.9)
Net cash flows from investing activities 2,618.2 824.8
Cash flows from financing activities:
Cash outflow for servicing of finance 22(b) (77.2) (77.3)
Net cash flows from financing activities (77.2) (77.3)
Change in cash and cash equivalents during the year 1,624.1 (90.5)
Cash and cash equivalents at the beginning of the year 1,103.7 1,180.2
Change in cash and cash equivalents due to exchange rate movements (1.3) 14.0
Cash and cash equivalents at the end of the year 2,726.5 1,103.7
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Cash and cash equivalents include cash at bank and in hand, and investment cash and certificates of deposits. A statement of net debt is included in note 22(d).

Consolidated Cash Flow Statement Wellcome Trust Annual Report 2020 | 73

Alternative Performance Measures and Key Performance Indicators

Alternative Performance Measures (APMs) are a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.

KPIs include APMs where they provide additional insight into performance from the perspective of stakeholders.

The key measures used by the group are explained below:

Key Performance Indicators (KPIs) are a measure by reference to which the development, performance or position of the Group can be measured effectively.

APMs
Explanation		 APMs
Explanation
Total assets net of all liabilities This is a summation of all the investment assets less all the investment liabilities and the bond
liabilities (refer to Investment Asset Allocation, Figure 6, Review of Investment Activities)
Net debt This reconciles transactions that do not require the use of cash or cash equivalents to the
Statement of cashfows (see note 22(d))
Leverage The amount of Total interest-bearing liabilities as a percentage of the amount of Total Investment
Assets (refer to note 15(g))
Key KPIs
Explanation
Charitable expenditure This is detailed in the Financial Review on page 34 and summarises the charitable spend, including
allocated support costs by activity and is reported before the application of the discounting and
foreign exchange accounting adjustments made in accordance with FRS 102
Blended returns This is a measure of investment portfolio performance which averages the net returns (see below)
calculated in £ and US $. The target return is UK/US CPI + 4%
IRR This is the internal rate of return, a measure of investment performance
Total funds This is detailed in the Financial Review on page 34 and presents an overview of the net assets
available to fund future charitable and investment activity
Net movement in funds This is detailed in the Financial Review on page 34 and presents an overview of the sources funding
and the application of these funds
Net returns This is a measure of investment portfolio performance. This is calculated using the ‘Modifed Dietz
method’ as follows: change in the period of Total assets net of all liabilities less charitable cash
expenditure for the period, divided by the opening Total assets net of all liabilities for the period
plus charitable cash expenditure weighted by the time to the close of the period that the cash
expenditure occurred. The target return is UK/US CPI + 4%

Alternative Performance Measures and Key Performance Indicators Wellcome Trust Annual Report 2020 | 74

Glossary of Terms

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Glossary of terms Explanation
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Active grants Grants which have been activated and are still being utilised. The value of active grants is the
undiscounted total amount awarded, before deducting any amounts paid to date
Buy-out funds This is a portion of the Investment portfolio invested in private funds which adopt a strategy of buying
out companies and transforming their operations
Cash & Bonds This is the portion of the investment portfolio which is invested in cash, cash equivalents (liquidity
funds, term deposits and certifcates of deposit) and fxed income assets (i.e. corporate bonds and
government gilts)
Charitable cash expenditure This is cash spent in year on charitable activities and comprises Net cash fows from operating
activities and cash fows from purchase of tangible fxed assets (see Consolidated Cash Flow
Statement, page 73)
Directional hedge funds A directional hedge fund maintains some exposure to the market without placing much emphasis on
hedging market risk
Directly managed public equity This is the portion of the investment portfolio which is invested in public equity and managed by the
internal investment division
Equity long/short hedge funds Investment hedge funds, that involves buying equities that are expected to increase in value and
selling short equities that are expected to decrease in value (rather than buying a call option and
selling a put option)
Indirectly managed public
equity		 This is the portion of the investment portfolio which is invested in public equity and managed by third
party external investment managers
Growth markets These are economies of countries traditionally classifed as emerging markets, which often feature high
annual GDP growth
Mega cap basket This is a directly held portion of the Investment portfolio invested in public companies with a market
capitalisation in excess of $50bn
Net overlay assets Foreign exchange overlays and the related cash collateral amounts due to third parties
Non Directional hedge funds A non-directional hedge fund (absolute return fund) is a hedge fund that aims to generate a stable
return regardless of market performance (with low volatility)
Optionality basket This is a directly held portfolio within the Investment portfolio invested in public companies with
characteristics expected to beneft from long term trends

Glossary of Terms Wellcome Trust Annual Report 2020 | 75

Notes to the Financial Statements

1. Accounting policies

The numbers shown in the financial statements are in millions, rounded to one decimal point.

(a) Statement of compliance

The Financial Statements of the Wellcome Trust (the “Trust”) and the consolidated Financial Statements of the Trust and its subsidiary undertakings (the “Group”) have been prepared on a going concern basis and 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”). In particular, they comply with the Charities Act 2011, the Charities (Accounts and Reports) Regulations 2008 and the Statement of Recommended Practice ‘Accounting and Reporting by Charities’ published in 2019 (the “SORP”) in all material respects with the exception of the valuation of certain joint ventures and associates as detailed under the Basis of Consolidation below.

Wellcome Trust meets the definition of a public benefit entity under FRS 102. The Financial Statements have been prepared under the historical cost convention, as modified by the valuation of investments on a basis consistent with prior years.

The functional currency of the Trust is considered to be Pounds Sterling because that is the currency of the primary economic environment in which the Trust operates. The consolidated Financial Statements are also presented in Pounds Sterling.

Wellcome Trust meets the definition of a qualifying entity under the SORP and has therefore taken advantage of the disclosure exemptions available to it in respect of its separate Financial Statements, which are presented alongside the consolidated Financial Statements. Exemptions have been taken in relation to financial instruments and the presentation of a Cash Flow Statement.

(b) Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated and separate Financial Statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

Basis of preparation

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 Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements are disclosed in note 2.

Basis of consolidation

The consolidated Financial Statements include the Financial Statements of the Trust and its subsidiary undertakings. Associates and joint ventures are included as part of the investment portfolio and are discussed below. Subsidiary undertakings are entities over which the Trust has control. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. When the Group owns less than 50% of the voting powers of an entity, but controls the entity by virtue of an agreement with other investors that gives it control of the financial and operating policies, it accounts for these as subsidiaries. The Financial Statements of subsidiaries are included from the date that control commences until the date that it ceases.

The Trust consolidates four types of subsidiary undertakings:

Consolidation comprises combining the assets, liabilities, the income and expenditure of those subsidiary undertakings with the Trust’s balances on a line by line basis. A subsidiary is excluded from consolidation where the interest in the subsidiary is held as part of the investment portfolio and its value to the Group is through fair value rather than as the medium through which the Group carries out business and where it has not previously been consolidated in the consolidated Financial Statements under FRS 102.

Notes to the Financial Statements | Accounting Policies Wellcome Trust Annual Report 2020 | 76

These subsidiaries are included at fair value within investments in accordance with 9.9C(a) of FRS 102.

Further detail on the Trust’s significant subsidiary undertakings is provided in note 21.

A joint venture is a contractual arrangement whereby the Group and one or more parties undertake an economic activity that is subject to joint control. The Group considers that it has joint control where there is contractually agreed sharing of control over an economic activity, and exists only when the strategic, financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control. The results of the joint ventures are accounted for using the equity method of accounting unless the entity is held as part of the investment portfolio or as a Social Investment as discussed below.

An associate is an entity, being neither a subsidiary nor a joint venture, in which the Group holds a long-term interest and has significant influence. The Group considers it has significant influence where it has the power to participate in the financial and operating decisions of the associate. The results of the associates are accounted for using the equity method of accounting unless the entity is held as part of the investment portfolio or as a Social Investment as discussed on page 80.

Where an associate or joint venture is held as part of the investment portfolio or as a Social Investment and its value to the Group is through fair value rather than as medium through which the Group carries out business, the associate or joint venture is measured at fair value with changes in fair value recognised in profit or loss (Statement of Financial Activities) in the consolidated Financial Statements in accordance with 14.4B or 15.9B of FRS 102. The fair value is determined in accordance with the accounting policies for Financial Assets and Liabilities detailed on page 79. This is a departure from the SORP which requires that all such investments are accounted for using the equity method of accounting. The fair value of the associates and joint ventures held in the investment portfolio is included in Unquoted investments in note 15(a).

All intra-group transactions, balances, income and expenses are eliminated on consolidation of subsidiaries. Adjustments are made to eliminate the profit or loss arising on transactions with joint ventures or associates to the extent of the Group’s interest in the entity. Where subsidiaries, joint ventures and associates are held as part of the investment portfolio or as a Social Investment and measured at fair value, no elimination of intra-group items is undertaken.

Income

The Group recognises income at the fair value of the consideration received or receivable when the significant risks and rewards of ownership have been transferred, the amount of revenue can be measured reliably, it is probable that future economic benefits will flow to the Group and when the specific criteria relating to the each of Group’s income channels have been met, as described below.

All amounts are net of discounts and rebates allowed and value added taxes if applicable.

Dividend income including any recoverable tax is recognised from the ex-dividend date when it becomes receivable.

Rental income is recognised on an accruals basis, and is recognised on a straight line basis.

Interest income is recognised using the effective rate of interest.

Charitable income for performance-related agreements is recognised when the expenditure is incurred as this reflects the service levels. Income for non-performance-related agreements is recognised when awarded as this represents entitlement. Capital grants with no performance related conditions are recognised when the charity is entitled, the receipt is probable and the amount is measurable which is when the award letter is received. Any receipts that do not meet these criteria are held as deferred income.

Gift aid income is recognised on an accruals basis when the receipt is both probable and measurable.

Expenditure

Expenditure and liabilities are recognised as soon as there is a legal or constructive obligation committing the Group to that expenditure, it is probable that settlement will be required and the amount of the obligation can be measured reliably. All expenditure is recognised on an accruals basis, with the exception of grants as noted below.

Expenditure on raising funds relates to the management of the investment portfolio and includes the allocation of support costs relating to this activity.

Expenditure on charitable activities is analysed between grant funding and the cost of activities performed directly by the Trust and the Group together with the associated support costs, including governance costs. Governance costs are the costs of governance arrangements that relate to the general running of the Group as opposed to those costs associated with investments or charitable activities. These costs include such items as internal and external audit, legal advice for Governors and costs associated with constitutional and statutory requirements.

Where possible, expenditure incurred that relates to more than one activity is apportioned. The method of apportionment uses the most appropriate basis for each cost type.

Grants awarded to institutions outside the Group are recognised as expenditure in the year in which the grant is formally approved by the Trust and has been communicated to the recipient, except to the extent that it is subject to conditions that enable the Trust to revoke the award.

The provision for multi-year grants is recognised at its present value where settlement is due over more than one year from the date of the award, there are no unfulfilled performance conditions under the control of the Trust that would permit it to avoid making the future payments, settlement is probable and the effect of the discounting is

Notes to the Financial Statements | Accounting Policies Wellcome Trust Annual Report 2020 | 77

material. The discount rate used is regarded by the Board of Governors as the most current available estimate of the opportunity cost of money and is based on the expected real rate of return on the investment portfolio. The impact of the discount rate is discussed in note 2 (significant accounting estimates and assumptions).

Research expenditure is written off in the Statement of Financial Activities in the year in which it is incurred and is included in Expenditure on Charitable Activities.

Net realised and unrealised gains and losses on investments

Net realised and unrealised gains and losses on investments are recognised within the Statement of Financial Activities. Gains and losses are realised when an investment is disposed of in the year. Unrealised gains and losses arise on the revaluation of investments to fair value at the balance sheet date.

Employee benefits

The Group provides a range of benefits to employees, including annual bonus arrangements, long-term incentive plans, paid holiday arrangements and defined benefit and defined contribution pension plan. These are detailed in the Remuneration Report on page 51.

Short term benefits

Short term benefits, including private medical insurance, medical assessments and group income protection are recognised as an expense in the period in which the service is received.

Pension schemes

The Group pension arrangements are detailed in note 11(e).

The contributions to defined contribution plans are recognised as an expense when they are due. Amounts not paid are shown in accruals in the balance sheet. The assets of the plan are held separately from the Group in independently administered funds.

The liability recognised in the balance sheet in respect of a defined benefit plan is the present value of the defined benefit obligation at the end of the reporting date less the fair value of plan assets at the reporting date. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to “Actuarial gains and losses on defined benefit pension schemes” in the Statement of Financial Activities.

The cost of the defined benefit plans, recognised in charitable expenditure as employee costs comprises:

curtailments, settlements, and administration expenses.

Other retirement benefits are included within provisions and are valued at the present value of the defined benefit obligation at the end of the reporting date.

Annual bonus plan

An expense is recognised in the Statement of Financial Activities when the Group has a legal or constructive obligation to make payments under the plan as a result of past events and a reliable estimate of the obligation can be made.

Long-term incentive plans

The cost is recognised in the Statement of Financial Activities over the period of service to which the plan relates. Where amounts are left in the plan after vesting date, any adjustment in value between the date of vesting and the date of payment is recognised in the Statement of Financial Activities.

Termination benefits

Termination benefits are payable when employment is terminated by the Group, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either (i) terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or (ii) providing termination benefits as a result of an offer of voluntary redundancy.

Fund accounting

The Group’s charitable funds consist of restricted funds, held in Genome Research Limited, and unrestricted funds.

Tangible fixed assets

Tangible fixed assets, excluding land and investment properties, held by the Group and the Trust are stated at cost less accumulated depreciation and any accumulated impairment losses. Land is stated at cost less any accumulated impairment losses. Cost includes the original purchase price and costs directly attributable to bringing the asset to its working condition for its intended use. Fixed assets are subject to review for impairment when there is an indication of a reduction in their carrying value. They are reviewed annually and any impairment is recognised in the year in which it occurs.

Assets in the course of construction are stated at cost and are not depreciated until available for use.

Depreciation is calculated using the straight-line method to allocate the cost of each asset less its residual value over its estimated useful life. Residual value represents the estimated amount that would currently be obtained from disposal of an asset, after deducting estimated costs of disposal if the asset were already of the age and in the condition expected at the end of its useful life. Depreciation commences from the date an asset is brought into service when the charge is reflected in the SOFA.

The useful lives for depreciation purposes for the principal categories of assets are shown in Table 1.

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Wellcome Trust Annual Report 2020 | 78

Table 1

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Years
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Buildings 50
Leasehold Land and Buildings Over the term of the lease
Other Plant and Equipment. Fixtures and fttings 3 to 15
Computer Equipment 3 to 5

Heritage assets

The Trustee does not consider that reliable cost or valuation information can be obtained for the vast majority of heritage assets held by the Trust. This is because of the diverse and specialist nature of the assets held, the number of assets held and the lack of comparable market values. The cost of valuing the entire collection would be onerous compared with the benefit derived by users of the Financial Statements in assessing the Trustee’s stewardship of the assets. Assets are recognised on the Balance Sheet if they meet the definition of a heritage asset, their value can be reliably measured and they are considered to be material. Further details are provided in note 14.

Financial assets and liabilities

The Group 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 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.

Other financial assets, including investments, are subsequently valued at fair value.

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), except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value (normally the transaction price excluding transaction costs), unless the arrangement constitutes a financing transaction. If an arrangement constitutes a financing transaction, the financial asset or financial liability is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.

Financial assets and liabilities are only offset in the Balance Sheet when there exists a legally enforceable right 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 only when (a) the contractual rights to the cash flows from the financial asset expire or are settled, (b) the Group transfers to another party substantially all of the risks and rewards of ownership of the financial asset, or (c) the Group, 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.

Investment valuation policies and procedures are reviewed by the Valuation Group which is responsible for reviewing valuations. Specific policies are detailed below and the detail of the application of these policies is disclosed in the relevant note to the accounts where appropriate.

(i) Quoted investments

Quoted investments comprise publicly quoted, listed securities including shares, bonds and units. Quoted investments are stated at fair value at the balance sheet date. The basis of fair value for quoted investments is equivalent to the market value, using the bid-price. Asset sales and purchases are recognised at the date of trade.

(ii) Unquoted investments

Unquoted investments are valued at management’s best estimate of fair value and comprise:

Notes to the Financial Statements | Accounting Policies

Wellcome Trust Annual Report 2020 | 79

(iii) Derivative financial instruments

Derivative financial instruments are used as part of the Group’s portfolio risk management and as part of the Group’s portfolio management and investment return seeking strategy. The Group’s use of derivative financial instruments includes equity index-linked futures and options, commodities futures and options, options on individual equities, warrants and currency forwards.

The Group’s exchange traded options are stated at fair value, equivalent to the market value, using the bid price, on the relevant exchange. Long-term linked currency forwards are stated at management’s estimate of fair value, using the market value of a transactions with equivalent cash flows and market observable forward rates.

The Group’s warrants are held at the fair value determined by management. These will generally reflect the valuations used by the Group’s co-invest partners where these exist and where there is confidence in their approach. Valuations will generally be intrinsic value, as the best estimate of fair value, but for some warrant holdings the use of a Black-Scholes valuation methodology will be used by management.

The fair value of contract positions is recognised in the Balance Sheet and gains and losses on the contracts are recognised in the Statement of Financial Activities.

(iv) Investment cash and certificates of deposit, other investment assets and other investment liabilities

Investment cash and certificates of deposit, and debtors and creditors arising as part of the investment portfolio are stated at their fair value.

(v) Bond liabilities

Bond liabilities are measured at amortised cost using the effective interest rate method. Initial amortised cost is equal to the proceeds of issue net of transaction costs directly attributable. Transaction costs form part of the effective interest rate and are recognised in the Statement of Financial Activities over the term of the Bonds. The fair value of the Bonds disclosed within the notes to the Financial Statements is the market value of the Bonds at the year end date. The Group is not required to, and therefore does not, recognise any adjustment to fair value in the Balance Sheet and the Statement of Financial Activities.

Investments in subsidiaries

Subsidiary undertakings established purely to hold investments are included in the Trust’s Balance Sheet at fair value which is represented by their net asset value.

Securities lending programme

The Group undertakes securities lending arrangements whereby securities are loaned to external counterparties for a set period of time (“the loan period”). The Group receives cash collateral of greater value than the securities loaned from each counterparty for the duration of the loan period and receives a share of the interest earned on the cash collateral held. Under the terms of the securities lending agreements, the Group retains substantially all the risks and rewards of ownership of the loaned securities, and the contractual rights to any cash flows relating to the securities. The loaned securities are not derecognised on the Group’s and Trust’s Balance Sheets. The cash collateral and the obligation to return the cash collateral to the lender are recognised in the Group’s and Trust’s Balance Sheets.

Social investments

Programme related investments

Programme related investments are held at fair value, if this can be measured reliably; or if fair value cannot be measured reliably, at cost less impairment. Where a decision is taken that a programme related investment should be held to generate a financial return and that the primary motivation for holding it is no longer to further the objects of the charity, it will be transferred to the main investment portfolio and measured accordingly. These are discussed in note 15(d).

Stock

Stock consists of consumables and goods for sale and is stated at the lower of cost and estimated selling price less costs to complete and sell, which is equivalent to the net realisable value. Cost is determined on a first-in-first-out basis. Where necessary, provision is made for obsolete, slow moving and defective stock.

Investment properties

Investment properties for which fair value can be measured reliably on an ongoing basis are measured at fair value annually with any change recognised in the Statement of Financial Activities. The fair values are based on valuations estimated by third party professional valuers; however, where properties are acquired close to the balance sheet date, valuations are not obtained because the acquired properties are recorded at open market value upon initial recognition, which management considers to be a reasonable estimate of open market value at the balance sheet date. Property transactions are recognised on the date of completion.

Notes to the Financial Statements | Accounting Policies

Wellcome Trust Annual Report 2020 | 80

Provisions and contingencies

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are discounted to present value where the effect is material.

Contingencies

Contingent liabilities are potential future cash outflows, where the likelihood of payment is considered more than remote, but is not considered probable or cannot be measured reliably. These are not recognised but are disclosed in the Financial Statements.

Contingent assets are not recognised. Contingent assets are potential future inflows of economic benefits where the likelihood of receipt is considered more than remote, but is not considered probable or cannot be measured reliably. These are not recognised but are disclosed in the Financial Statements.

Foreign currencies

Transactions denominated in foreign currencies are translated into Pounds Sterling at the exchange rates ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated into Pounds Sterling at the rate ruling at the balance sheet date. All foreign exchange gains and losses, realised and unrealised, are recognised in the Statement of Financial Activities.

Taxation

The charitable members of the Group are exempt from taxation on their income and gains falling within Part 11 of the Corporation Tax Act 2010 or section 256 of the Taxation of Chargeable Gains Act 1992 to the extent that they are applied to their charitable purposes.

The non-charitable subsidiaries, although subject to taxation, do not pay UK Corporation Tax because their policy is to donate taxable profits as Gift Aid to the Wellcome Trust. Foreign tax incurred on overseas investments is charged as it is incurred. In common with many other charities, the charitable members of the Group are unable to recover the majority of Value Added Tax (“VAT”) incurred on expenditure. The amount of VAT that cannot be recovered is included within the underlying cost to which it relates.

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.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date. Timing differences are differences between the taxable profits and results as stated in the Financial Statements.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

Deferred tax is recognised on fair market value adjustments of investment subsidiaries even though the subsidiaries will be able to donate the profits from the future realisation of the underlying assets so that no current tax charge will arise.

Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date that are expected to apply to the reversal of the timing difference.

Notes to the Financial Statements | Accounting Policies

Wellcome Trust Annual Report 2020 | 81

2. Key sources of estimation and uncertainty and significant judgements made in applying the accounting policies

The preparation of the financial statements requires the application of certain estimates and judgements. The material areas of either estimation or judgement are set out below. 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.

Each of these areas are considered by the Audit and Risk Committee based on information prepared by Finance.

Key sources of estimation and uncertainty made in applying the Group’s accounting policies

Unquoted investments

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Investment asset category Value £m Valuation methodology Estimations and assumptions
Investment Operating 587.6 As noted in the Basis of Consolidation on pages 76-77 The fair value of the property
Subsidiaries and Joint Ventures certain subsidiaries and joint ventures and associates held within these investments is
(which are included within are excluded from consolidation where the interest in estimated noting there is difficulty
Property in the investments the entity is held as part of the investment portfolio. in predicting the outlook for certain
allocation refer to Figure 6 on Rather than holding these entities to carry out business, parts of the UK property market
page 28). they are held and measured on a fair value basis. where there are a lower number of
Fair value is based on external valuers employing comparable transactions.
RICS valuation methodology for property held within A sensitivity analysis is provided for
these investments adjusting for other net assets. The this below.
property held is valued using methodologies specific
to the nature of the property including discounted
cashflows (discount rates and exit yields estimated)
and comparable land values.
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----- Start of picture text -----
Estimate Change in estimate Impact on unquoted investments
Discount rates & Exit yield Increase of 1.0% Decrease by £71.8m (0.5%)
Decrease of 1.0% Increase by £73.5m (0.5%)
Land values Increase/decrease of 10% Increase/decrease by £13.6m (0.1%)
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As noted in the Accounting Policies on page 79, Direct investments (which are reported within Direct Private and Private co-investments in the Investment allocation, refer to Figure 6 on page 28) are valued at management’s best estimate of fair value. For these investments fair value is estimated using a range of methodologies including price of recent investment

and public comparables. The fair value of these direct investments is estimated noting there is uncertainty arising from Covid-19 impacts on their future financial performance. If the fair value of these investments increased or decreased by 10% this would increase or decrease unquoted investment balances by £151.9 million respectively.

Notes to the Financial Statements | Key sources of estimation and uncertainty and significant judgements made in applying the accounting policies Wellcome Trust Annual Report 2020 | 82

Grant liabilities

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Accounting methodology Value £m Estimations and assumptions
The initial liability recognised is 2,272 The expected future nominal rate of investment returns. This is considered by management
based on actual amounts awarded, to be the most current available estimate of the opportunity cost of money to Wellcome.
but as the awards are paid out over The timings of the calling down and payments of the liabilities:
a number of years, non-current
• The start delay of a grant – this is the delay between the date the grant was approved to
liabilities (refer to notes 6 and 8)
the date the payments can start to be made
are discounted based on expected
future cash outflows. • The retention delay – this is the delay between the official grant end date, and the date
the final payment is made
Internal estimation is required in:
• calculating the appropriate • The weighted stretch delay – this is cash flow profiling methodology to calculate the delay
discount rate and; between when payments are due and no cost extensions are granted to grantees which
• determining when the liability will delays the end date further. This is weighted so the profile of grants of higher value weigh
be called down and paid. proportionally more than grants of lower value in the model used to profile the cash as
they have a more significant impact on cash flows.
A sensitivity analysis is provided for this below.
Estimate Change in estimate Impact on grant liabilities
Increase of 3.0% p.a. Decrease by £128.6 million (-5.0%)
Rate used to discount grant liabilities
Decrease of 3.0% p.a. Increase by £147.7 million (5.7%)
Start delay (4 months) Decrease -2 months Increase by £1.4 million (0.1%)
Increase +2 months Decrease by £5.8 million (-0.2%)
Retention delay (6 months) Decrease -3 months Increase by £14.5 million (0.6%)
Increase +3 months Decrease by £19.2 million (-0.7%)
Weighted stretch delay (23%) Decrease -5% Increase by £13.5 million (0.5%)
Increase +5% Decrease by £20.3 million (-0.8%)
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Start delay – average over the last 5 years, calculated using the start delay for grants started over the last 5 years (2016-2020). There will always be a start delay and +/- of 2 months is used for the analysis.

Retention delay – 6 months – average over the last 4 years. There is only 4 years worth of retention data. Using this data the average came out as 6 months. The lowest average

retention delay was 3 months so the +/- 3 months was used for the sensitivity analysis.

Weighted stretch delay – 23% – average over the last 5 years (excluding outliers). If all grants including outliers are included in the calculation then it gives a range of +/- 5% which is what is used for the sensitivity analysis.

Defined benefit pension schemes’ liabilities

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Valuation methodology Value £m Estimations and assumptions
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The actuaries provide a summary of the actuarial assumptions proposed based 1,005 The rate of future salary increases
on FRS 102 requirements and their knowledge as administrators of the plan.
The Finance team, the Chief Investment Offcer and the People team review
these assumptions and challenge them if required.		 The discount rate
The rate of infation
A sensitivity analysis is provided below

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Estimate Change in estimate Impact on pension schemes’ liabilities
Discount rate Increase/decrease of 0.5% p.a. Decrease/increase by £141.3 million (14.4%)
Rate of inflation Increase/decrease of 0.5% p.a. Increase/decrease by £114.8 million (11.7%)
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Significant judgements in applying the Group’s accounting policies

Non-charitable investment subsidiary undertakings, associates and joint ventures held as part of the investment portfolio

The Group applies judgement to assess which subsidiary undertakings, associates and joint ventures are held as part of the investment portfolio and therefore their value to the Group

is through fair value rather than a medium through which the Group carries out business (refer Basis of consolidation, pages 76-77). This judgement relies on the Group’s assessment of the purpose of the investment and ongoing management of these entities, this has been applied to the investment operating subsidiaries and joint ventures referenced in the Unquoted investments section of this note above.

Notes to the Financial Statements | Key sources of estimation and uncertainty and significant judgements made in applying the accounting policies

Wellcome Trust Annual Report 2020 | 83

3. Dividends and interest

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Group Trust
2020 2019 2020 2019
£m £m £m £m
Dividends from UK equities 65.9 106.4 65.9 99.1
Dividends and interest from subsidiaries - - - 0.3
Dividends from overseas equities 189.4 224.0 162.4 191.6
Income from unquoted investments 26.9 36.0 26.9 36.0
Interest from quoted investments 3.3 3.6 3.3 3.6
Interest on cash and cash deposits 0.5 1.9 0.3 1.8
Securities lending income 1.9 0.8 1.9 0.8
287.9 372.7 260.7 333.2
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Interest from quoted investments relates to the funds held for the purposes of repaying the 2021 bonds detailed in note 15(a).

4. Other income

(a) Grants receivable

----- Start of picture text -----
Group Trust
2020 2019 2020 2019
£m £m £m £m
18.5 20.9 - -
----- End of picture text -----

Grants receivable mainly represents awards to the Trust’s subsidiary undertaking Genome Research Limited by other funders, notably government grants of £4.0 million

(2019: £5.6 million). Income on these grants is recognised on the performance model in line with the accounting policy for charitable income.

(b) Other charitable income

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Group Trust
2020 2019 2020 2019
£m £m £m £m
121.8 51.8 448.4 91.1
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Included in other charitable income for the Group is £16.0 million (2019: £25.6 million) received by Genome Research Limited in relation to the Whole Genome Sequencing Project discussed in note 6. Included in other charitable income for the Group is £63.1 million (2019: £2.1 million) of proceeds arising from the sale during the year of Programme Related Investments, details of which are given in Note 15 (d)

Included in other charitable income for the Trust are Gift Aid donations, which are equal to the estimated taxable profit of each subsidiary undertaking, totalling £376.8 million (2019: £79.1 million). The level of these donations is driven by the gains and losses generated in each individual entity. Details of significant group undertakings are given in note 21.

The gift aid for Wellcome Trust Investments 1 Unlimited has increased during the year due to the realisation in the year of its investments held generating realised profits for donation to Wellcome.

Notes to the Financial Statements | Dividends and interest | Other income Wellcome Trust Annual Report 2020 | 84

5. Management fees and other investment costs

(a) Total investment costs

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Group Trust
2020 2019 2020 2019
£m £m £m £m
External investment management fees 54.0 38.1 49.3 35.8
Internal investment administration 27.3 26.4 27.1 26.0
Investment support cost allocation 5.4 5.0 5.3 4.9
86.7 69.5 81.7 66.7
----- End of picture text -----

The amount accrued for Long Term Incentive Plans included in the internal investments administration costs above was £14.0 million (2019: £9.6 million). Senior staff in the Investments team receive performance-based remuneration, as noted on page 52, which can give rise to variations in the amount charged to internal investment administration year on year.

External investment management fees includes performance fees paid to external investment managers for

outperformance against their respective benchmarks. The outperformance varies year on year and the current year had higher levels of outperformance than in the prior year (refer Public Equities section of the Review of Investment Activities page 29 for further details).

The methodology behind the support cost allocation is detailed in note 9.

The bandings disclosures in note 5(b) show employees working on the investment activities of the Group.

Notes to the Financial Statements | Management fees and other investment costs Wellcome Trust Annual Report 2020 | 85

(b) Benefits of Investment team employees (salary, bonus, long term incentive plans and allowances)

----- Start of picture text -----
Group and Trust
2020 2019
£60,000-£69,999 - 4
£70,000-£79,999 2 3
£80,000-£89,999 4 2
£90,000-£99,999 3 1
£110,000-£119,999 - 2
£120,000-£129,999 3 -
£130,000-£139,999 2 5
£140,000-£149,999 3 1
£160,000-£169,999 1 -
£180,000-£189,999 1 -
£200,000-£209,999 1 -
£210,000-£219,999 1 1
£220,000-£229,999 - 1
£230,000-£239,999 - 3
£240,000-£249,999 1 2
£270,000-£279,999 - 1
£290,000-£299,999 1 -
£310,000-£319,999 - 1
£320,000-£329,999 - 1
£330,000-£339,999 1 -
£350,000-£359,999 1 -
£370,000-£379,999 - 1
£390,000-£399,999 1 -
£460,000-£469,999 1 -
£510,000-£519,999 1 -
£690,000-£699,999 - 1
£920,000-£929,999 - 1
£1,040,000-£1,049,999 - 1
£1,070,000-£1,079,999 - 1
£1,080,000-£1,089,999 - 1
£1,090,000-£1,099,999 - 1
£1,250,000-£1,259,999 1 -
£1,360,000-£1,369,999 1 -
£1,560,000-£1,569,999 1 -
£1,760,000-£1,769,999 1 -
£1,910,000-£1,919,999 1 -
£3,250,000-£3,259,999 - 1
£3,290,000-£3,299,999 - 1
£4,510,000-£4,519,999 1 -
£4,640,000-£4,649,999 1 -
35 37
----- End of picture text -----

Notes to the Financial Statements | Management fees and other investment costs Wellcome Trust Annual Report 2020 | 86

The number of employees working within the Investment team whose total benefits (excluding employer pension contributions and employer National Insurance Contributions) fell within the bands as shown in the table above.

Long Term Incentive Plans reflect rolling 3 and 5 year performance periods. Long term incentive plan amounts included in the benefits table above are awarded to eligible individuals by the Remuneration Committee and are reported in the year in which the decision is made.

During the year there was a change to the timing of the Remuneration Committee decision on the awards for the most recent 3 year scheme, which has brought forward the recognition of amounts under that scheme, however this did not amend the overall cost of the scheme or the timing of the deferred payments.

Amounts included in the table in each year therefore relate to both investment performance in current and prior years. These amounts include awards for which payment is deferred and subject to future investment performance.

6. Charitable activities

----- Start of picture text -----
Allocated Total
Grant funding Direct support 2020
Group £m £m £m £m
Science 548.3 169.2 54.0 771.5
Innovations 79.1 16.4 8.3 103.8
Culture & Society 49.2 33.6 24.7 107.5
Priority Areas 82.9 17.3 15.7 115.9
759.5 236.5 102.7 1,098.7
- -
Discounting of grant liabilities (45.6) (45.6)
Foreign exchange revaluation of grant liabilities (34.5) - - (34.5)
Total 679.4 236.5 102.7 1,018.6
----- End of picture text -----

Grant funding and direct charitable activities totalled £1,002.0 million. Support costs related to the grant funding activities of the Group included in the total allocated support costs above are; Science £36.2 million, Innovations £6.9 million, Culture & Society £14.2 million and Priority Areas £12.8 million.

In 2019 the ‘discounting of grant liabilities’ was impacted by a change in the payment profile of the grant liability which resulted in unwinding the discount value and creating an additional charge to the Statement of Financial Activities in that year. In the current year the grant liability payment profile has been updated with the latest profile assumptions refer to note 2 for further details.

----- Start of picture text -----
Allocated Total
Grant funding Direct support 2019
Group £m £m £m £m
Science 621.6 163.7 53.5 838.8
Innovations 107.7 14.1 8.7 130.5
Culture & Society 35.8 37.3 22.4 95.5
Priority Areas 46.4 12.1 7.2 65.7
811.5 227.2 91.8 1,130.5
Discounting of grant liabilities 42.9 - - 42.9
Foreign exchange revaluation of grant liabilities 9.7 - - 9.7
Total 864.1 227.2 91.8 1,183.1
----- End of picture text -----

Grant funding and direct charitable activities totalled £1,038.7 million. Support costs related to the grant funding activities of the Group included in the total allocated support costs above are; Science £42.4 million, Innovations £7.7 million, Culture & Society £11.0 million and Priority Areas £5.7 million.

Notes to the Financial Statements | Management fees and other investment costs | Charitable activities Wellcome Trust Annual Report 2020 | 87

----- Start of picture text -----
Allocated Total
Grant funding Direct support 2020
Trust £m £m £m £m
Science 644.0 12.5 32.4 688.9
Innovations 79.1 16.4 8.3 103.8
Culture & Society 49.2 32.7 24.7 106.6
Priority Areas 332.3 16.3 15.7 364.3
1,104.6 77.9 81.1 1,263.6
- -
Discounting of grant liabilities (76.0) (76.0)
Foreign exchange revaluation of grant liabilities (34.5) - - (34.5)
Total 994.1 77.9 81.1 1,153.1
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Grant funding is higher in the Trust due to grants awarded to subsidiaries (see note 7), this included a grant within the Priority Areas of £249.5 million to Wellcome Leap, a subsidiary of the Trust, discussed within the Review of Charitable Activities (see page 18).

Grant funding and direct charitable activities totalled £1,182.5 million. Support costs related to the grant funding activities of the Trust included in the total allocated support costs above are; Science £31.6 million, Innovations £6.8 million, Culture & Society £14.3 million and Priority Areas £14.7 million.

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Allocated Total
Grant funding Direct support 2019
Trust £m £m £m £m
Science 719.7 13.0 33.4 766.1
Innovations 107.7 14.1 8.7 130.5
Culture & Society 35.8 35.9 22.4 94.1
Priority Areas 46.4 12.1 7.2 65.7
909.6 75.1 71.7 1,056.4
Discounting of grant liabilities 42.9 - - 42.9
Foreign exchange revaluation of grant liabilities 9.7 - - 9.7
Total 962.2 75.1 71.7 1,109.0
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Grant funding and direct charitable activities totalled £984.7 million. Support costs related to the grant funding activities of the Trust included in the total allocated support

costs above are; Science £32.8 million, Innovations £7.7 million, Culture & Society £11.2 million and Priority Areas £5.7 million.

7. Grants awarded

Grants are generally awarded to a particular individual, although the actual award is made to the host institution. Small grants may be awarded directly to individuals for the purpose of travel and for public engagement with science. Grants no longer required relates to unspent amounts of grants awarded in previous years. Supplementations relate to agreed additional research costs for existing grants.

Please refer to the Financial Review on pages 34-38 for an explanation of the movement in grant expenditure. Expenditure per institution can fluctuate considerably from year to year depending on, for example, specific initiatives. The grants included within ‘Grants to other organisations’ for 2020 totalled less than £7.0 million in value for each organisation. The institutions listed in the 2019 table are those institutions that received grants in excess of £8.0 million in 2019.

Notes to the Financial Statements | Charitable activities | Grants awarded Wellcome Trust Annual Report 2020 | 88

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Culture &
Science Innovations Society Priority Areas 2020
Group £m £m £m £m £m
University of Oxford 103.8 3.8 6.8 13.7 128.1
University College London 67.6 0.8 2.2 1.2 71.8
University of Cambridge 66.5 2.7 1.6 0.1 70.9
African Academy of Sciences, Kenya 60.8 - - - 60.8
Boston University, United States of America - - - 38.4 38.4
University of Edinburgh 30.7 3.2 2.2 0.8 36.9
Imperial College London 21.0 1.6 0.2 - 22.8
Rosalind Franklin Institute 10.6 9.6 - - 20.2
University of Manchester 10.4 4.4 2.3 0.4 17.5
King's College London 13.5 2.0 1.2 - 16.7
Medical Research Council 15.9 0.9 - - 16.8
Novartis AG, Switzerland - 15.2 - - 15.2
Diamond Light Source Ltd 11.2 2.0 - - 13.2
University of Glasgow 12.0 - 0.7 - 12.7
London School of Hygiene & Tropical Medicine 9.8 0.5 1.2 1.2 12.7
European Molecular Biology Laboratory 10.0 - - - 10.0
Liverpool School of Tropical Medicine 5.7 0.1 0.4 3.8 10.0
Newcastle University 8.7 0.2 0.9 - 9.8
University of Bristol 7.5 1.8 0.5 - 9.8
The Francis Crick Institute 9.3 - - - 9.3
European Bioinformatics Institute 8.1 - - - 8.1
University of Dundee 7.6 0.4 0.1 - 8.1
Cardiff University 5.6 1.5 - - 7.1
University of Sheffield 5.1 0.1 1.9 0.2 7.3
Grants to other organisations 56.7 32.2 28.0 23.4 140.3
Total grants (excluding grants no longer required) 558.1 83.0 50.2 83.2 774.5
Less: grants awarded in previous years no longer required (9.8) (3.9) (1.0) (0.3) (15.0)
548.3 79.1 49.2 82.9 759.5
Culture &
Science Innovations Society Priority Areas 2020
Group £m £m £m £m £m
Grants awarded of which:
United Kingdom 458.5 38.5 45.7 28.0 570.7
Directly funded international 89.8 40.6 3.5 54.9 188.8
Grants awarded by the Group 548.3 79.1 49.2 82.9 759.5
Culture &
Science Innovations Society Priority Areas 2020
Trust £m £m £m £m £m
Grants awarded by the Group 548.3 79.1 49.2 82.9 759.5
Plus: Grants awarded to subsidiary undertakings
– Wellcome Sanger Institute 95.7 - - - 95.7
– Wellcome Leap Fund, United States of America - - - 249.4 249.4
Grants awarded by the Trust 644.0 79.1 49.2 332.3 1,104.6
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Notes to the Financial Statements | Grants awarded Wellcome Trust Annual Report 2020 | 89

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Culture &
Science Innovations Society Priority Areas 2019
Group £m £m £m £m £m
University of Oxford 69.7 16.5 1.9 5.3 93.4
University College London 77.9 2.5 1.8 - 82.2
King's College London 31.5 26.2 3.9 - 61.6
University of Cambridge 53.9 2.5 1.4 - 57.8
University of Edinburgh 41.9 - 1.0 - 42.9
University of Bristol 24.4 0.3 0.4 - 25.1
The Francis Crick Institute 24.8 - - - 24.8
University of Dundee 17.2 5.7 0.4 - 23.3
University of Glasgow 18.9 1.4 0.9 - 21.2
Imperial College London 19.2 1.5 - - 20.7
UK Biobank Ltd 20.2 - - - 20.2
Boston University, United States of America - - - 18.7 18.7
Scripps Research Institute, United States of America - 17.6 - - 17.6
Medical Research Council 12.5 - - - 12.5
London School of Hygiene & Tropical Medicine 9.4 - 0.4 2.5 12.3
University of Sheffield 9.2 0.6 0.5 - 10.3
Liverpool School of Tropical Medicine 9.8 - 0.3 - 10.1
University of Liverpool 9.1 0.6 0.3 - 10.0
University of Manchester 8.5 1.2 - 0.2 9.9
Newcastle University 9.1 - 0.4 - 9.5
Diamond Light Source Ltd 9.1 - - - 9.1
Academy of Medical Sciences 8.3 - 0.2 - 8.5
University of Birmingham 7.0 - 1.1 - 8.1
Grants to other organisations 139.9 34.4 24.5 19.8 218.6
Total grants (excluding grants no longer required) 631.5 111.0 39.4 46.5 828.4
Less: grants awarded in previous years no longer required (9.9) (3.3) (3.6) (0.1) (16.9)
621.6 107.7 35.8 46.4 811.5
Culture &
Science Innovations Society Priority Areas 2019
Group £m £m £m £m £m
Grants awarded of which:
United Kingdom 582.5 61.6 32.3 1.8 678.2
Directly funded international 39.1 46.1 3.5 44.6 133.3
Grants awarded by the Group 621.6 107.7 35.8 46.4 811.5
Culture &
Science Innovations Society Priority Areas 2019
Trust £m £m £m £m £m
Grants awarded by the Group 621.6 107.7 35.8 46.4 811.5
Plus: Grants awarded to subsidiary undertakings
– Wellcome Sanger Institute 98.1 - - - 98.1
Grants awarded by the Trust 719.7 107.7 35.8 46.4 909.6
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Further details of grants awarded by the Trust are published on the Trust’s website, at the address given on the back cover. The following Governors had appointments with or supervised individuals within organisations which were in receipt of grant funding during the year:

Professor Fiona Powrie – University of Oxford Professor Sir Michael Ferguson – University of Dundee Professor Bryan Grenfell – Princeton University

Notes to the Financial Statements | Grants awarded Wellcome Trust Annual Report 2020 | 90

8. Grants awarded but not yet paid

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Group Trust
2020 2019 2020 2019
£m £m £m £m
Liabilities at 1 October 2,283.9 2,010.0 2,283.9 2,011.4
Grants awarded during the year 759.5 811.5 1,104.6 909.6
Grants paid during the year (691.8) (590.2) (793.5) (689.7)
Discounting of grant liabilities (45.6) 42.9 (76.0) 42.9
Foreign exchange revaluation of grant liabilities (34.5) 9.7 (34.5) 9.7
Liabilities as at 30 September 2,271.5 2,283.9 2,484.5 2,283.9
Of which:
- falling due within one year (note 17) 657.5 767.2 719.2 767.2
- falling due after one year (note 17) 1,614.0 1,516.7 1,765.3 1,516.7
Liabilities as at 30 September 2,271.5 2,283.9 2,484.5 2,283.9
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The total value of the grant liabilities discount for the year ended 30 September 2020 is £324.8 million (2019: £279.2 million) applying an expected nominal rate of investment return of 6.1% (2019: 6.1%).

Notes to the Financial Statements | Grants awarded but not yet paid Wellcome Trust Annual Report 2020 | 91

9. Support costs

Support costs are those costs that, while necessary to deliver an activity, do not themselves produce or constitute the output of the charitable activity. Support costs are allocated to the activities shown in the table below.

Funding administration costs are those costs that can be directly attributed to an activity.

Operations comprise an allocation of costs of the following departments; Internal Communications, People, Facilities and Workplace, Finance, Legal, and Digital and Technology.

The remaining support costs have been apportioned using the allocation methods indicated and include governance costs.

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Costs of
generating Culture & Priority Total
funds Science Innovations Society Areas 2020
Group £m £m £m £m £m £m Allocation method
Funding administration - 11.3 4.1 1.3 2.6 19.3 Expenditure/Directly attributed
Support of scientific research - 21.3 - - - 21.3 Directly attributed
Operations 4.5 16.1 3.5 22.7 10.4 57.2 Headcount/Expenditure
Other 0.4 3.7 0.5 0.5 1.9 7.0 Expenditure
Governance costs 0.5 1.6 0.2 0.2 0.8 3.3 Expenditure/Directly attributed
5.4 54.0 8.3 24.7 15.7 108.1
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Costs of
generating Culture & Priority Total
funds Science Innovations Society Areas 2019
Group £m £m £m £m £m £m Allocation method
Funding administration - 13.8 4.4 1.5 1.1 20.8 Expenditure/Directly attributed
Support of scientific research - 19.9 - - - 19.9 Directly attributed
Operations 4.3 14.3 3.4 20.3 5.7 48.0 Headcount/Expenditure
Other 0.3 3.8 0.6 0.4 0.3 5.4 Expenditure
Governance costs 0.4 1.7 0.3 0.2 0.1 2.7 Expenditure/Directly attributed
5.0 53.5 8.7 22.4 7.2 96.8
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Costs of
generating Culture & Priority Total
funds Science Innovations Society Areas 2020
Trust £m £m £m £m £m £m Allocation method
Funding administration - 11.3 4.1 1.3 2.6 19.3 Expenditure/Directly attributed
Operations 4.5 16.1 3.5 22.7 10.4 57.2 Headcount/Expenditure
Other 0.4 3.7 0.5 0.5 1.9 7.0 Expenditure
Governance costs 0.4 1.3 0.2 0.2 0.8 2.9 Expenditure/Directly attributed
5.3 32.4 8.3 24.7 15.7 86.4
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Costs of
generating Culture & Priority Total
funds Science Innovations Society Areas 2019
Trust £m £m £m £m £m £m Allocation method
Funding administration - 13.8 4.4 1.5 1.1 20.8 Expenditure/Directly attributed
Operations 4.3 14.3 3.4 20.3 5.7 48.0 Headcount/Expenditure
Other 0.3 3.8 0.6 0.4 0.3 5.4 Expenditure
Governance costs 0.3 1.5 0.3 0.2 0.1 2.4 Expenditure/Directly attributed
4.9 33.4 8.7 22.4 7.2 76.6
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Notes to the Financial Statements | Support costs Wellcome Trust Annual Report 2020 | 92

10. Governance costs

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Group Trust
2020 2019 2020 2019
£m £m £m £m
Governors’ fees and expenses 0.9 0.6 0.9 0.6
Auditor’s remuneration
- parent company and consolidation 0.6 0.5 0.6 0.5
- audits of subsidiary undertakings 0.3 0.2 - -
Internal audit 1.2 1.0 1.0 0.8
Other costs 0.3 0.4 0.3 0.4
3.3 2.7 2.8 2.3
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The internal audit services of £1.1 million (2019: £1.0 million) are those provided by the in-house internal audit team, together with the cost of specialist services provided by PricewaterhouseCoopers LLP.

The figures for auditor’s remuneration shown above include irrecoverable VAT of £0.1 million (2019: £0.1 million). In addition the audit of subsidiary undertakings excludes fees of £0.2 million (2019: £0.1 million) excluding VAT to Premier Marinas Limited and Farmcare Limited as these entities are

held as part of the investment portfolio. These fees are taken into account for the purposes of monitoring the cap on the level of non-audit fees as required by legislation.

In addition to the auditor’s remuneration above, total fees of £nil (2019: £0.2 million) excluding VAT were payable to the Group’s auditors Deloitte LLP or associated firms for non-audit services. The Audit and Risk Committee and Deloitte LLP are satisfied that these additional fees did not represent a threat to the independence of the external auditors.

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Group Trust
2020 2019 2020 2019
Non-audit services split (excluding VAT) £m £m £m £m
Leadership development programmes - 0.2 - 0.2
- 0.2 - 0.2
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Notes to the Financial Statements | Governance costs Wellcome Trust Annual Report 2020 | 93

11. Employee information

(a) Employee benefits

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Group Trust
2020 2019 2020 2019
£m £m £m £m
Remuneration and salary benefits 124.8 114.9 73.1 63.4
Social Security costs 11.5 11.7 6.7 7.4
Pension costs and other benefits 47.7 42.9 25.6 21.6
184.0 169.5 105.4 92.4
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Pension costs and other benefits includes the current service cost of the pension fund which is disclosed in note 11(e)(iii).

(b) Termination payments

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Group Trust
2020 2019 2020 2019
£m £m £m £m
Redundancy 1.8 1.1 1.9 0.8
Other compensation 0.5 0.3 0.3 0.2
2.3 1.4 2.2 1.0
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(c) Average numbers of employees who served during the year

These numbers exclude employees of the investment subsidiaries held as part of the investment portfolio.

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Average
2020 2019
Trust 908 835
Subsidiary undertakings 1,061 1,022
Total for the Group 1,969 1,857
Analysed by
Investments 43 44
Direct activities 1,250 1,178
Support 677 635
Total for the Group 1,969 1,857
Analysed by
Investments 43 44
Direct activities 373 322
Support 493 469
Total for the Trust 908 835
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53 PhD students (2019: 51) at Genome Research Limited do not have a contract of employment with the Group but provide a significant contribution to the scientific research

and have an agreement of support to carry out their own PhD thesis. Previously, PhD students were included within Direct Activities.

Notes to the Financial Statements | Employee information Wellcome Trust Annual Report 2020 | 94

(d) Benefits of employees (salary, bonus and allowances)

The number of employees working on charitable activities of the Trust and its subsidiary undertakings whose benefits (salaries, bonuses, allowances and termination payments, but excluding employer pension contributions and employer National Insurance Contributions), fell within the following bands is shown in the table below.

The emoluments of the Director included in the table below totalled £483,788 (2019: £524,537).

As noted in the Remuneration Report on page 52, information relating to the Investment team staff are not included in this table but are shown separately in note 5(b).

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Group Trust
2020 2019 2020 2019
£60,000-£69,999 140 112 92 76
£70,000-£79,999 59 54 37 38
£80,000-£89,999 40 35 29 24
£90,000-£99,999 27 26 18 16
£100,000-£109,999 12 15 9 11
£110,000-£119,999 19 10 16 8
£120,000-£129,999 10 9 7 8
£130,000-£139,999 8 9 7 6
£140,000-£149,999 7 4 3 2
£150,000-£159,999 5 4 4 3
£160,000-£169,999 4 - 4 -
£170,000-£179,999 1 3 1 2
£180,000-£189,999 3 6 2 5
£190,000-£199,999 5 2 2 2
£200,000-£209,999 1 2 1 1
£210,000-£219,999 2 - 2 -
£220,000-£229,999 2 - 2 -
£230,000-£239,999 - 1 - 1
£270,000-£279,999 1 - 1 -
£290,000-£299,999 - 1 - 1
£320,000-£329,999 - 1 - 1
£350,000-£359,999 - 1 - 1
£360,000-£369,999 1 1 1 -
£370,000-£379,999 2 - 1 -
£380,000-£389,999 1 - 1 -
£480,000-£489,999 1 - 1 -
£520,000-£529,999 - 1 - 1
351 297 241 207
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Further information in respect of employees’ and Governors’ remuneration is included within the Remuneration Report on pages 51-53.

The tables on the Remuneration Report on pages 52-53, together with the accompanying notes, form part of the audited Financial Statements.

Notes to the Financial Statements | Employee information Wellcome Trust Annual Report 2020 | 95

(e) Retirement benefits

(i) Defined contribution Group Personal Pension plan

The Group provides a defined contribution Group Personal Pension plan into which both employee and employer contributions are paid. The employer contributions amounted to £6.8 million (2019: £5.0 million) and are included within Pension costs and other benefits in note 11(a). No amounts were unpaid at the end of the year (2019: £ nil).

(ii) Defined benefit pension plan and Unfunded Unapproved Retirement benefit scheme

The Group sponsors two approved funded defined benefit schemes, the Wellcome Trust Pension Plan and the Genome Research Limited Pension Plan. The day-to-day management of the Plans’ investments has been delegated by the Trustees to the investment manager Legal & General Assurance (Pensions Management) Limited. The investment strategy of the Plan, adopted and regularly reviewed in consultation with the Group, is to be 100% in passive equities. In addition certain Wellcome Trust senior employees are members of an Unfunded Unapproved Retirement Benefit scheme ’UURBs’.

The FRS102 “Retirement benefits” actuarial valuation of the Wellcome Trust and Genome Research Limited defined benefit pension plans at 30 September 2020 showed a combined surplus of £69 million (2019: £371.6 million).

This surplus represents the difference between an assessment of the liabilities of the pension funds and the current value of their underlying assets. The amount of the surplus or deficit is subject to considerable variability because it depends on a valuation of assets at the year-end date and a range of actuarial assumptions impacting the liabilities.

FRS102 requires discount rates to be based on corporate bond yields of an appropriate duration, regardless of actual investment strategy and actual investment returns expected. This leads to a difference between the accounting deficit and the funding position under the triennial actuarial valuations.

The defined benefit pension schemes are required to have triennial actuarial valuations, which are then updated in an interim valuation each year at the balance sheet date of the schemes.

A full actuarial valuation of the Wellcome Trust Pension Plan was carried out at 31 December 2019; the valuation showed that the plan is fully funded.

A full actuarial valuation of the Genome Research Limited Pension Plan was carried out at 31 December 2018; the valuation showed that the plan is 98% funded.

During the year, total deficit funding contributions of £nil million (2019: £7.8 million) were made into the Genome Research Limited Pension Plan and £4.6 million (2019: £4.6 million) into the Wellcome Trust Pension Plan as required by the schedule of contributions during the year.

The liability values within the UURBs are calculated at individual member level. The cost of accrual contributes to the charge to the Statement of Financial Activities. As these benefits are unfunded, there is no corresponding asset value. The UURBs liability values represent the present value of providing top-ups to the benefits accrued to date within the approved Wellcome Trust Pension Plan, without restrictions imposed by the approved Plan rules. The assumptions used to value the benefits are as per those stated within the FRS102 disclosures.

The liabilities and the provision for other retirement benefits have been calculated using the following actuarial assumptions:

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2020 2019 2018
Trust % per annum % per annum % per annum
Inflation 3.10% 3.25% 3.40%
Salary increases 3.60% 3.75% 3.90%
Rate of discount 1.75% 1.85% 2.85%
Allowance for pension in payment increase of RPI or 5% p.a. if less 3.00% 3.10% 3.25%
Allowance for revaluation of deferred pensions of RPI or 5% p.a. if less 3.10% 3.25% 3.40%
90% of 90% of 90% of
Allowance for commutation of pension for cash at retirement
Post A-Day Post A-Day Post A-Day
Rate of increase of healthcare costs 6.00% 6.00% 6.00%
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Notes to the Financial Statements | Employee information Wellcome Trust Annual Report 2020 | 96

(e) Retirement benefits (continued)

(ii) Defined benefit pension plan and Unfunded Unapproved Retirement benefit scheme (continued)

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2020 2019 2018
Genome Research Limited % per annum % per annum % per annum
Inflation RPI 3.05 3.15% 3.40%
Inflation CPI 2.70 2.15% 2.40%
Salary increases 3.55 3.65% 3.90%
Rate of discount 1.75 1.85% 2.85%
Allowance for pension in payment increase of RPI or 5% p.a. if less 3.05 3.05% 3.25%
Allowance for pension in payment increase of CPI or 3% p.a. if less 2.95 1.90% 2.00%
Allowance for revaluation of deferred pensions of RPI or 5% p.a. if less 2.15 3.15% 3.40%
90% of 90% of 90% of
Allowance for commutation of pension for cash at retirement
Post A-Day Post A-Day Post A-Day
Rate of increase of healthcare costs 6.00% 6.00% 6.00%
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Announcements by HM Treasury and the UK Statistics Authority on 4 September 2019 propose changes to the calculation of the Retail Prices Index (RPI) to match the Consumer Price Index including Housing (CPIH) at some time from 2025 to 2030. This could reduce RPI-linked pension benefits by as much as 1% p.a. if or when CPIH is used instead of RPI, which would lead to a reduction in RPI-linked pension liabilities, or Defined Benefit Obligation. The formal consultation on the proposed changes to RPI was launched on 11 March 2020 and the outcome of this was announced on 25 November 2020. This announcement confirmed that RPI will increase

in line with CPIH from 2030. The assumptions adopted to calculate the Defined Benefit Obligation as at 30 September 2020 included were derived based on the expectation that RPI will increase in line with CPIH from 2030 and therefore, although the exact impact on Wellcome’s scheme will depend on how markets settle after this announcement, no adjustments have been made for this proposed change within the assumption for RPI used to calculate the Defined Benefit Obligation as at 30 September 2020 or 2019. Further consideration will be given to this during the course of the 2020/21 financial year.

The Wellcome Trust and Genome Research Limited defined benefit pension plans have actuarial assumptions based on their respective durations of 26 and 29 years respectively.

The mortality assumptions adopted at 30 September 2020 imply the following life expectancies in years:

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2020 2019
Male retiring at age 60 in 2020 26.5 27.4
Female retiring at age 60 in 2020 28.4 28.4
Male retiring at age 60 in 2040 28.0 28.5
Female retiring at age 60 in 2040 30.0 29.7
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The mortality assumptions used in the valuation of the defined benefit pension liabilities of both schemes and the provision for other retirement benefits are based on the base mortality table of S3 PMA (male) and S3 PFA (female) together with an allowance for mortality improvement in line with CMI 2019 projections and a 1.0% per annum minimum long-term rate of improvement.

Notes to the Financial Statements | Employee information Wellcome Trust Annual Report 2020 | 97

(e) Retirement benefits (continued)

(iii) Charge to the Statement of Financial Activities – Pension and other retirement benefits

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Unfunded,
unapproved Post-retirement
Pension funds scheme liabilities medical benefits Total
2020 2019 2020 2019 2020 2019 2020 2019
Group £m £m £m £m £m £m £m £m
Current service cost 30.2 27.8 0.5 0.6 - - 30.7 28.4
Expenses 1.2 1.2 - - - - 1.2 1.2
Losses due to benefit changes - 0.4 - - - - - 0.4
Interest on pension schemes’ liabilities 7.1 5.8 0.4 0.3 - - 7.5 6.1
Actuarial (gains)/losses (25.9) 158.2 2.0 2.7 (23.9) 160.9
Total charge to the 12.6 193.4 2.9 3.6 - - 15.5 197.0
Statement of Financial Activities
----- End of picture text -----

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Unfunded,
unapproved Post-retirement
Pension fund scheme liabilities medical benefits Total
2020 2019 2020 2019 2020 2019 2020 2019
Trust £m £m £m £m £m £m £m £m
Current service cost 14.2 11.8 0.5 0.6 - - 14.7 12.4
Expenses 0.8 0.7 - - - - 0.8 0.7
Losses due to benefit changes - 0.2 - - - - - 0.2
Interest on pension schemes’ liabilities 3.2 2.5 0.4 0.3 - - 3.6 2.8
Actuarial (gains)/losses (9.6) 77.5 2.0 2.7 - - (7.6) 80.2
Total charge to the 8.6 92.7 2.9 3.6 - - 11.5 96.3
Statement of Financial Activities
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(iv) Present values of pension schemes’ liabilities, fair value of assets and deficit

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Assets Liabilities Deficit
2020 2019 2020 2019 2020 2019
£m £m £m £m £m £m
Wellcome Trust Pension Plan 339.7 316.7 (507.7) (485.5) (168.0) (168.8)
Genome Research Limited Pension Plan 274.7 252.9 (473.5) (455.9) (198.8) (203.0)
Total pension plans 614.4 569.6 (981.2) (941.4) (366.8) (371.8)
Wellcome Trust unfunded, - -
(23.3) (20.9) (23.3) (20.9)
unapproved scheme liabilities
- -
Wellcome Trust Post-retirement medical benefits (0.9) (0.9) (0.9) (0.9)
- -
Total other retirement benefits (24.2) (21.8) (24.2) (21.8)
Total pension liabilities 614.4 569.6 (1,005.4) (963.2) (391.0) (393.6)
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Notes to the Financial Statements | Employee information Wellcome Trust Annual Report 2020 | 98

(e) Retirement benefits (continued)

(v) Reconciliation of opening and closing balances of the present value of the pension plans’ liabilities as at 30 September

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Group Trust
2020 2019 2020 2019
£m £m £m £m
Plans’ liabilities at start of year 941.4 728.2 485.5 383.3
Current service cost 30.2 27.8 14.2 11.8
Expenses 1.2 1.2 0.8 0.7
Interest cost 17.7 21.0 9.1 11.0
Actuarial (gains)/losses (0.8) 171.9 4.5 85.2
Benefits paid and death-in-service insurance premiums (8.5) (9.1) (6.4) (6.7)
Losses due to benefit changes - 0.4 - 0.2
Plans’ liabilities at end of year 981.2 941.4 507.7 485.5
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2020 analysis of the sensitivity to the principal assumptions of the value of the plans’ liabilities.

----- Start of picture text -----
Group
Assumption Change in assumption Impact on liabilities
Discount rate Increase/decrease of 0.5% p.a. Decrease/increase by £141.3m (14.4%)
Rate of salary growth Increase/decrease of 0.5% p.a. Increase/decrease by £19.6m (2%)
Rate of inflation Increase/decrease of 0.5% p.a. Increase/decrease by £114.8m (11.7%)
Probability of death in any year after retirement Increase/decrease of 10.0% p.a. Increase/decrease by £26.5m (2.7%)
Long-term rate of mortality improvement Increase/decrease of 0.25% p.a. Increase/decrease by £12.8m (1.3%)
----- End of picture text -----

----- Start of picture text -----
Trust
Assumption Change in assumption Impact on liabilities
Discount rate Increase/decrease of 0.5% p.a. Decrease/increase by £73.1m (14.4%)
Rate of salary growth Increase/decrease of 0.5% p.a. Increase/decrease by £10.2m (2%)
Rate of inflation Increase/decrease of 0.5% p.a. Increase/decrease by £59.4m (11.7%)
Probability of death in any year after retirement Increase/decrease of 10.0% p.a. Increase/decrease by £13.7m (2.7%)
Long-term rate of mortality improvement Increase/decrease of 0.25% p.a. Increase/decrease by £6.6m (1.3%)
----- End of picture text -----

2019 analysis of the sensitivity to the principal assumptions of the value of the plans’ liabilities.

----- Start of picture text -----
Group
Assumption Change in assumption Impact on liabilities
Discount rate Increase/decrease of 0.5% p.a. Decrease/increase by £130.9m (13.9%)
Rate of salary growth Increase/decrease of 0.5% p.a. Increase/decrease by £20.7m (2.2%)
Rate of inflation Increase/decrease of 0.5% p.a. Increase/decrease by £100.7m (10.7%)
Probability of death in any year after retirement Increase/decrease of 10.0% p.a. Increase/decrease by £25.4m (2.7%)
Long-term rate of mortality improvement Increase/decrease of 0.25% p.a. Increase/decrease by £12.2m (1.3%)
----- End of picture text -----

----- Start of picture text -----
Trust
Assumption Change in assumption Impact on liabilities
Discount rate Increase/decrease of 0.5% p.a. Decrease/increase by £67.5m (13.9%)
Rate of salary growth Increase/decrease of 0.5% p.a. Increase/decrease by £10.7m (2.2%)
Rate of inflation Increase/decrease of 0.5% p.a. Increase/decrease by £51.9m (10.7%)
Probability of death in any year after retirement Increase/decrease of 10.0% p.a. Increase/decrease by £13.1m (2.7%)
Long-term rate of mortality improvement Increase/decrease of 0.25% p.a. Increase/decrease by £6.3m (1.3%)
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Notes to the Financial Statements | Employee information Wellcome Trust Annual Report 2020 | 99

(e) Retirement benefits (continued)

(vi) Reconciliation of opening and closing balances of the fair value of the plans’ assets as at 30 September

----- Start of picture text -----
Group Trust
2020 2019 2020 2019
£m £m £m £m
Fair value of plan assets at start of year 569.6 526.0 316.7 295.0
Expected return on plan assets 10.6 15.2 5.9 8.5
Actuarial gains 25.1 13.7 14.1 7.7
Contributions by the Group employers 17.6 23.8 9.4 12.2
Benefits paid and death-in-service insurance premiums (8.5) (9.1) (6.4) (6.7)
Fair value of plan assets at end of year 614.4 569.6 339.7 316.7
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These figures are for the pension schemes and exclude the other retirement benefits which are included in table 11(e)(iv) above.

None of the fair values of the assets shown above include any of the Group’s own financial instruments or any property occupied by, or other assets used by, the Group.

(vii) Amounts for the current and previous four years as at 30 September

----- Start of picture text -----
2020 2019 2018 2017 2016
Group £m £m £m £m £m
Fair value of plans’ assets 614.4 569.6 526.0 458.5 361.2
Present value of plans’ liabilities (981.2) (941.4) (728.2) (706.4) (740.0)
Deficit in plans (366.8) (371.8) (202.2) (247.9) (378.8)
Experience adjustment on plans’ assets 25.1 13.7 34.9 69.1 75.8
Experience adjustment on plans’ liabilities (1.8) (0.9) (1.3) (9.4) (6.8)
Effects of changes in the demographic and financial assumptions underlying the present value of the plan’s liabilities 2.6 (171.0) 22.4 93.7 (226.1)
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----- Start of picture text -----
2020 2019 2018 2017 2016
Trust £m £m £m £m £m
Fair value of plans’ assets 339.7 316.7 295.0 260.9 208.8
Present value of plans’ liabilities (507.7) (485.5) (383.3) (373.8) (384.6)
Deficit in plan (168.0) (168.8) (88.3) (112.9) (175.8)
Experience adjustment on plans’ assets 14.1 7.7 19.7 39.7 44.0
Experience adjustment on plans’ liabilities (3.3) (0.2) (0.8) (10.0) 1.5
Effects of changes in the demographic and financial assumptions underlying the present value of the plan’s liabilities (1.2) (85.0) 10.7 45.0 (104.8)
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(viii) Estimate of contributions to be paid to scheme

The best estimate of contributions to be paid by the employer to the Wellcome Trust scheme for the period beginning 1 October 2020 is £7.1 million (2019: £12.5 million), which includes £nil (2019: £4.6 million) of deficit funding.

The best estimate of the contributions to be paid by the employer to the Genome Research Limited scheme for the period beginning 1 October 2020 is £7.9 million (2019: £8.2 million), which includes £nil (2019: £1.9 million) of deficit funding.

12. Remuneration of Governors

Information on Governors’ remuneration is included in the Remuneration Report on page 51.

Notes to the Financial Statements | Employee information | Remuneration of Governors Wellcome Trust Annual Report 2020 | 100

13. Taxation

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2020 2019
Group £m £m
(a) Current Tax
UK Corporation Tax on profits for the year 0.1 0.1
Effect of Gift Aid distribution - -
Reversal of prior year charge 0.2 (1.9)
UK corporation tax on CFC deemed income 0.2 -
Total current tax 0.5 (1.8)
(b) Deferred Tax
Origination and reversal of timing differences (23.0) (36.3)
Effect of change in UK tax rate 9.9 (6.5)
Total deferred tax (13.1) (42.8)
Taxation (12.6) (44.6)
----- End of picture text -----

----- Start of picture text -----
2020 2019
Group £m £m
(c) Reconciliation of Tax Charge
Profit/(loss) before taxation on subsidiaries subject to taxation 274.1 (99.4)
Profit/(loss) before tax multiplied by average rate of corporation tax of 19% (2019: 19%) 52.1 (18.9)
Effects of:
Income not subject to tax (62.5) (21.0)
Expenses not deductible for tax purposes 4.7 40.3
Gift aid donation paid (70.9) (12.1)
Temporary differences:
Difference in timing of recognition of gains and income - (0.6)
Chargeable gains/(losses) 50.2 (22.5)
Adjust opening deferred tax to average rate 19% (2.2) (0.6)
Deferred tax not recognised 1.3 -
Adjust closing deferred tax to average rate of 19% - (9.2)
Remeasurement of deferred tax for changes in tax rates 8.9 -
Expenses not deductible for tax purposes 5.6 -
Adjustments to tax charge in respect of previous periods 0.2 -
Taxation (12.6) (44.6)
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The UK headline corporation tax rate for the period was 19%.

For the purposes of reporting under FRS102 the investment subsidiaries must provide for deferred tax on temporary timing differences. These temporary timing differences arise due to increases or decreases in the fair value of the

investments held in these subsidiaries, which will not be taxable until these investments are sold.

The estimated cost of irrecoverable Value added tax suffered by the Group in the year was £16.1 million (2019: £15.6 million).

Notes to the Financial Statements | Taxation Wellcome Trust Annual Report 2020 | 101

14. Tangible fixed assets

(a) Group

----- Start of picture text -----
Long Other plant,
Freehold leasehold equipment, Assets in
land and land and fixtures and course of
buildings buildings fittings construction Total
£m £m £m £m £m
Cost as at 1 October 2019 476.2 1.5 268.4 3.6 749.7
Additions 1.8 - 7.8 2.8 12.4
Transfers - - 2.0 (2.0) -
- - -
Disposals (2.7) (2.7)
Cost as at 30 September 2020 478.0 1.5 275.5 4.4 759.4
Accumulated depreciation as at 1 October 2019 129.4 1.5 194.5 - 325.4
Charge for the year 9.0 - 15.9 - 24.9
Transfers - - - - -
- - -
Disposals (2.7) (2.7)
Accumulated depreciation as at 30 September 2020 138.4 1.5 207.7 - 347.6
Net Book Value as at 30 September 2020 339.6 - 67.8 4.4 411.8
Net Book Value as at 30 September 2019 346.8 - 73.9 3.6 424.3
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(b) Trust

----- Start of picture text -----
Long Other plant,
Freehold leasehold equipment, Assets in
land and land and fixtures and course of
buildings buildings fittings construction Total
£m £m £m £m £m
Cost as at 1 October 2019 232.7 1.5 128.7 1.8 364.7
Additions - - 1.6 2.0 3.6
Transfers - - 1.4 (1.4) -
- - -
Disposals (0.7) (0.7)
Cost as at 30 September 2020 232.7 1.5 131.0 2.4 367.6
Accumulated depreciation as at 1 October 2019 67.4 1.5 75.6 - 144.5
Charge for the year 3.8 - 5.6 - 9.4
Transfers - - - - -
- - -
Disposals (0.6) (0.6)
Accumulated depreciation as at 30 September 2020 71.2 1.5 80.6 - 153.3
Net Book Value as at 30 September 2020 161.5 - 50.4 2.4 214.3
Net Book Value as at 30 September 2019 165.3 - 53.0 1.8 220.1
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Notes to the Financial Statements | Tangible fixed assets Wellcome Trust Annual Report 2020 | 102

Heritage assets

No heritage assets have been capitalised in the current financial year and the Trust did not capitalise any assets in previous years.

Nature of the assets

The Trust has several collections of heritage assets comprising substantial core collections of visual items and material objects, printed and published rare materials, archives, and manuscripts, which are retained and developed in accordance with museum, archive and library best practice. It also holds support collections of objects, artworks, printed, published and digital materials, which are in current use for exhibition, reference, research or other similar purposes. Both core and support collections are held in support of one of the Trust’s main objectives of advancing and promoting knowledge and education.

The core collection includes Sir Henry Wellcome’s Museum Collection of mainly three-dimensional objects. The most significant part of this collection has been on long-term loan to the Science Museum since 1976 with smaller elements on long-term loan at other institutions. Most of the remaining core and support collection is held at the premises in Euston Road but there are also off-site storage facilities situated in London and Cheshire.

Policy for acquisition

Materials selected for acquisition must be in service of Wellcome Collection’s overall mission to challenge the way we think and feel about health by exploring the connections between science, medicine, life and art. They must also comply with our published collections development policy, including with regard to ethical and legal considerations.

Conservation and Collections Care

The Trust recognises its responsibility to conserve and care for the core collections, to ensure that their documentation, storage, location control, treatment and use all adheres to appropriate national and international guidelines, accreditation standards and code of ethics.

Wellcome Collection is an Arts Council England accredited museum, having been awarded full accreditation under the Museums Accreditation scheme administered by the Arts Council England.

The Trust continually develops repository and management systems for digital materials and monitors the digital environment for risk factors such as software or hardware obsolescence and the impact of new technologies.

Disposal

The Trust operates a rolling programme of collections review across its core and support collections. Material may be removed from the collections for the reasons as set out in our published collections development policy. We only take the decision to dispose of material from our core collections following careful consideration of the public benefit and seeking both expert advice and the views of stakeholders, such as donors, researchers, local and source communities. The Trust follows disposal procedures in accordance with the standards set out by the Collections Trust, The National Archives and Chartered Institute of Library and Information Professionals.

Security and insurance

In order to assure security and safety of the collections, various procedures are in place including: registration of users; request of proof of identity prior to access; explanation of handling of materials; video surveillance; limits to amounts of closed access material in reading room; checking of returned material and security tagging; material risk assessments for fire, flood and theft; compliance with appropriate British Standards; fire precaution, fire detection and extinguishing systems; flood warning and egress of water systems; intruder alarms; locking up and opening procedures; monitoring of storage areas; maintenance checklist; and procedures for evacuation of premises.

As part of the Trust’s Business Continuity Plan, Wellcome Collection has a disaster and salvage plan in place. Wellcome Collection also has a contract with Harwell which provides support for the majority of the disaster and salvage issues that may arise. Wellcome Collection materials are insured against damage or loss due to fire, flood, or terrorist activity at named locations, unnamed locations and while in transit. The collections are not insured for full replacement value as it is not possible to quantify this and the nature of the items held means that they are often irreplaceable.

We are bound by the Code of Conduct and Professional Standards from the Institute of Conservation, Museums Association and the British Standards relating to ‘Conservation of Cultural Heritage’ and ‘Conservation and care of archive and library collections’. We use the Publicly Available Specifications (PAS) 197:2009 ‘Code of practice for cultural collections management’ and 198:2012 ‘Managing environmental conditions for cultural collections’ to ensure the collections are stored and displayed in a safe, secure and sustainable way in line with best practice without compromising their physical, historical or structural integrity.

Notes to the Financial Statements | Tangible fixed assets

Wellcome Trust Annual Report 2020 | 103

15. Investments

(a) Quoted investments, Unquoted investments and Investment properties

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Fair value Sales Total gains/ Fair value
1 October 2019 Purchases proceeds (losses) 30 September 2020
Group £m £m £m £m £m
Total quoted investments 15,053.9 4,553.9 (6,117.6) 1,272.5 14,762.7
Total unquoted investments 12,402.8 2,431.7 (2,810.9) 1,743.2 13,766.8
Total investment properties 1,298.9 23.6 (18.0) (12.4) 1,292.1
Total 28,755.6 7,009.2 (8,946.5) 3,003.3 29,821.6
Fair value Sales Total gains/ Fair value
1 October 2019 Purchases proceeds (losses) 30 September 2020
Trust £m £m £m £m £m
Total quoted investments 13,292.2 4,511.1 (5,172.8) 1,253.0 13,883.5
Total unquoted investments 11,050.7 2,414.7 (2,174.3) 1,483.9 12,775.0
Total investment properties 1,157.0 12.8 (18.0) 12.5 1,164.3
Total 25,499.9 6,938.6 (7,365.1) 2,749.4 27,822.8
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The significance of and the exposure associated with the investment assets are discussed in the Review of Investment Activities section of the Trustee’s Report.

During the year, the maximum aggregate fair value of quoted investment securities on loan was £511.0 million (2019: £458.3 million) and the Group held £533.2 million (2019: £475.0 million) as collateral in respect of these securities. The income receivable due to securities lending activities is disclosed in note 3. No loaned securities were recalled but not obtained during the year and therefore no collateral was retained.

The unquoted investment balance shown above includes investments in associates and joint ventures held at fair value of £118.8 million (2019: £738.5 million). As their value to the Group is through fair value rather than as a medium through which the Group carries out business, the Trustee considers this the most appropriate accounting policy. This is a departure from the SORP, which requires that all such investments are accounted for using the equity method of accounting. In a further departure from the SORP, the impact of accounting for such investments on an equity accounting basis has not been quantified. Due to the number of investments made, often over a number of years, the cost to our associates and joint ventures of providing the required additional historic reporting is considered to be disproportionate to the value that would be added by the disclosure.

During 2018, Wellcome Trust issued £750.0 million 2.517% Guaranteed Bonds due 2118 (‘2118 bonds’). The liability is included in note 17. As part of the consideration of the issuance of the Bonds it was decided that we would start to plan for the upcoming maturity of its 4.75% Guaranteed Bonds due May 2021 (‘2021 bonds’). As such, prior to the 2118 bonds issue, the Wellcome Trust placed a sum of £275.0 million, being the principal amount of the 2021 bonds, into a segregated account with the custodian, to be held for the purposes of repaying the principal amount of such 2021 bonds at their scheduled maturity in 2021. This sum has been invested prudently under specific conservative constraints and in line with the risk management and investment strategy. The segregated assets amounting to £270.6 million (2019: £279.7 million) are included in Quoted investments above.

During the year the Group had the following transactions with associates, joint ventures or subsidiaries held as part of the investment portfolio and not consolidated, which are related party entities:

Investment properties in the Group and the Trust have been valued at market value generally in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. The valuations were carried out by CBRE, Cluttons, Gerald Eve, Jones Lang Lasalle, and Strutt & Parker.

Notes to the Financial Statements | Investments Wellcome Trust Annual Report 2020 | 104

b) Derivative financial instruments

----- Start of picture text -----
Group Trust
2020 2019 2020 2019
£m £m £m £m
Derivative financial instrument asset positions 71.3 102.3 71.3 102.3
----- End of picture text -----

Derivative financial instrument liabilities for the Group and Trust are included within creditors, disclosed in note 17.

The Group’s use of derivative financial instruments comprises:

Forward currency contracts and currency options

Forward currency contracts and currency options are used to hedge investment assets denominated in foreign currency into Pounds Sterling and as part of the investment strategy to have a globally diversified currency exposure.

Financial futures, options and warrants

The use of futures, options and warrants constitutes part of the Trust’s portfolio management including: a substitution for investing in physical assets, a part of the Trust’s long-term investment return strategy entered into with the expectation of realising gains, and adjusting asset exposures within the parameters set in the Trust’s investment policy.

(c) Investment cash and certificates of deposit and other investment assets

----- Start of picture text -----
Group Trust
2020 2019 2020 20198
£m £m £m £m
Investment cash and certificates of deposit 2,701.4 1,070.4 2,697.0 1,069.4
Cash collateral held 33.1 156.2 33.1 156.2
Accrued income from investments 7.3 12.6 5.2 5.2
Income receivable 35.0 25.2 35.1 19.8
Proceeds receivable on sale of investments 3.7 62.5 3.7 62.5
Other investment debtors 12.2 11.8 8.0 10.9
Other investments assets 91.3 268.3 85.1 254.6
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Notes to the Financial Statements | Investments Wellcome Trust Annual Report 2020 | 105

(d) Programme related investments

----- Start of picture text -----
Book value Net Book value 30
1 October 2019 Purchases Disposals write-downs Unrealised September 2020
Group £m £m £m £m Gains £m
Loans – other - 1.8 (1.5) (0.3) - -
Loans - 1.8 (1.5) (0.3) - -
Equities – Diamond Light Source - 2.6 - (2.6) - -
Equities – MSD-Wellcome Trust - 1.8 - (1.8) - -
Hilleman Laboratories
Equities – other 17.4 3.1 (7.4) (0.2) 13.9 26.8
Equities 17.4 7.5 (7.4) (4.6) 13.9 26.8
Revenue share – other - 11.6 (0.1) (11.5) - -
Revenue share - 11.6 (0.1) (11.5) - -
Total 17.4 20.9 (9.0) (16.4) 13.9 26.8
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Programme related investments form a portfolio managed separately from the Trust’s other investments. These investments are held primarily to further the charitable aims of the Trust rather than to provide a financial return. They are held at fair value, if this can be measured reliably; or if fair value cannot be measured reliably, at cost less impairment.

Commitments to Programme Related Investments are detailed in note 19.

Diamond Light Source Limited

Equities include a 14% equity interest in Diamond Light Source Limited, a company established to construct and operate a synchrotron in Oxfordshire. Under the shareholding agreement, there is no intrinsic value in the equity and the cost has therefore been fully written down and included within Science direct expenditure.

MSD-Wellcome Trust Hilleman Laboratories

Equities include a 50% equity interest in SCS Pharma Research and Development Private Limited (known as MSD-Wellcome Trust Hilleman Laboratories), a company established in India to develop affordable vaccines to prevent diseases that commonly affect low and middleincome countries. Under the shareholding agreement, there is no intrinsic value in the equity and the cost has therefore been fully written down and reflected within Innovations direct expenditure.

Other

As part of its Innovations activities, the Trust has provided funding to 94 (2019: 88) often early-stage companies to carry out biomedical research projects with potential to deliver health benefits.

It is the Trust’s policy to write off the cost of the investment in these often early-stage companies as it is not anticipated that this cost will be recovered. At each year end, a review of the programme related investment portfolio is performed, to assess if any individual assets have value. Where the assets have value, any impairment on such assets is reversed.

The unrealised gains reflect the additional fair value uplift where the value of an asset has increased above the cost.

Any income received or gains realised are included in the Statement of Financial Activities within other charitable income (and are therefore not in the table above).

Notes to the Financial Statements | Investments Wellcome Trust Annual Report 2020 | 106

(e) Fair value of financial assets and liabilities

The fair values and book values of the Group’s financial assets and liabilities shown on the Balance Sheet are the same with the exception of the bond liabilities which are measured at amortised cost.

The value of the bond liabilities presented in the Trustee’s Report (Figure 6 on page 28) £3,470.8 million (2019: £3,211.2 million) is the sum of the fair value of the bond liabilities and the accrued interest on these liabilities.

The following table categorises the fair values of the Group’s financial assets and liabilities based on the inputs to the fair value. Categorisation within the hierarchy has been determined on the basis of the lowest level input that is

significant to the fair value measurement of the relevant asset as follows:

Assets at fair value as at 30 September 2020

----- Start of picture text -----
Level 1 Level 2 Level 3 Total
£m £m £m £m
Quoted investments 14,617.6 145.1 - 14,762.7
-
Unquoted investments 4,497.0 9,269.8 13,766.8
Derivative financial instruments asset positions - 71.3 - 71.3
Programme related investments 26.8 - - 26.8
14,644.4 4,713.4 9,269.8 28,627.6
----- End of picture text -----

Assets at fair value as at 30 September 2019

----- Start of picture text -----
Level 1 Level 2 Level 3 Total
£m £m £m £m
Quoted investments 14,905.0 148.9 - 15,053.9
-
Unquoted investments 3,413.7 8,989.1 12,402.8
Derivative financial instruments asset positions 32.8 69.5 - 102.3
Programme related investments 17.4 - - 17.4
14,955.2 3,632.1 8,989.1 27,576.4
----- End of picture text -----

Notes to the Financial Statements | Investments Wellcome Trust Annual Report 2020 | 107

(e) Fair value of financial assets and liabilities (continued)

Liabilities at fair value as at 30 September 2020

Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Derivative fnancial instruments liabilities
-
43.4
-
43.4

Liabilities at fair value as at 30 September 2019

Level 1
£m		 Level 2
£m		 Level 3
£m		 Total
£m
Derivative fnancial instruments liabilities - 36.3 - 36.3

Unquoted investments include investments in hedge funds, private equity funds, property funds, direct investments and investment operating subsidiaries. For the funds the Group categorises the investments based on the fair value classification of the underlying assets and liabilities of the funds.

Derivative financial instruments comprise:

For Level 3 investments:

(f) Realised and unrealised gains/(losses) on investments

----- Start of picture text -----
Group Trust
2020 2019 2020 2019
Note £m £m £m £m
Quoted investments 15(a) 1,272.5 674.6 1,253.0 648.6
Unquoted investments 15(a) 1,743.2 1,363.0 1,483.9 1,308.2
Investment properties 15(a) (12.4) (51.7) 12.5 (36.5)
Derivative financial instruments
Currency overlay 12.1 3.0 12.1 3.0
Other derivative financial instruments 281.0 (27.3) 281.0 (27.3)
Shares in subsidiary undertakings - - (242.3) 90.0
Short term investments 3.3 0.2 3.3 0.2
Foreign exchange losses on monetary assets (1.3) 14.0 0.7 7.1
Foreign exchange losses on bond liabilities (8.8) 2.4 (8.8) 2.4
3,289.6 1,978.2 2,795.4 1,995.7
----- End of picture text -----

Notes to the Financial Statements | Investments Wellcome Trust Annual Report 2020 | 108

(g) Reconciliation to Trustee’s Report

The presentation of investment balances in notes 15 and 17 is in accordance with the statutory asset and liability classifications. However, the investment portfolio is reported by investment strategy for management purposes and for the Trustee’s Report. The distinct classes of assets used and reported on within the Trustee’s Report are: public equity; private equity; hedge funds; property; and cash.

This note reconciles the net investment asset fair value at the balance sheet date as presented within the Trustee’s

Report to the presentation within the Financial Statements. The market value of each asset class presented in the Trustee’s Report is equal to the net investment assets and liabilities, held within portfolios with that applicable investment strategy.

The assets and liabilities presented in the Consolidated Balance Sheet and notes reconcile to Figure 6 in the Trustee’s Report as follows:

----- Start of picture text -----
2020 2019
Note £m £m
Quoted investments 15(a) 14,762.7 15,053.9
Unquoted investments 15(a) 13,766.8 12,402.8
Investment property 15(a) 1,292.1 1,298.9
Derivative financial instrument asset positions 15(b) 71.3 102.3
Investment cash and certificates of deposit 15(c) 2,701.4 1,070.4
Other investment assets 15(c) 91.3 268.3
Programme related investments 15(d) 26.8 17.4
Investment assets as presented in the Financial Review 32,712.4 30,214.0
Derivative financial instrument liabilities 17 (43.4) (36.3)
Amount payable on acquisition of investments 17 (1.1) (4.8)
Cash collateral creditor 17 (33.1) (156.2)
Deferred income from investments 17 (4.1) (4.1)
Other investment liabilities 17 (36.1) (17.4)
Total investment assets 32,594.6 29,995.2
Bond liabilities at amortised cost falling due within one year 17 (305.2) (30.4)
Bond liabilities at amortised cost falling due between one and five years 17 - (274.2)
Bond liabilities at amortised cost falling due after five years 17 (2,042.1) (2,032.3)
Total interest bearing liabilities (2,347.3) (2,336.9)
Total investment assets 32,594.6 29,995.2
Total interest bearing liabilities (2,347.3) (2,336.9)
Adjusted for:
Restatement of bond liabilities to fair value (1,123.5) (874.3)
Programme related investments not in investment asset allocation 15(d) (26.8) (17.4)
Other investments not in asset allocation (10.3) (8.3)
Total assets net of Bond liabilities per Figure 6 29,086.7 26,758.3
----- End of picture text -----

Other investments not in asset allocation relate to quoted investments managed by Innovations unquoted investments held by Genome Research Limited.

2020 2019
Leverage (Total interest bearing liabilities / Total investment assets) 7.2% 7.8%

Notes to the Financial Statements | Investments Wellcome Trust Annual Report 2020 | 109

16. Debtors

----- Start of picture text -----
Group Trust
2020 2019 2020 2019
£m £m £m £m
Amounts owed by subsidiary undertakings - - 9.1 2.7
Other debtors 18.0 16.1 2.9 2.2
Prepayments 11.6 11.0 4.4 3.3
29.5 27.1 16.4 8.2
----- End of picture text -----

17. Creditors

----- Start of picture text -----
Group Trust
2020 2019 2020 2019
Note £m £m £m £m
Falling due within one year
Amounts owed to subsidiary undertakings - - 1,771.5 1,043.4
Grant liabilities 8 657.5 767.2 719.2 767.2
Bond liabilities 305.2 30.4 21.3 21.2
Amount payable on acquisition of investments 1.1 4.8 1.1 4.8
Cash collateral creditor 33.1 156.2 33.1 156.2
Deferred income from investments 4.1 4.1 3.7 3.8
Derivative financial instrument liabilities 43.4 36.3 43.4 36.3
Other investment liabilities 36.1 17.4 35.5 16.5
Trade creditors 8.2 23.9 3.8 8.0
Other creditors 29.5 35.5 27.3 33.1
Accruals and deferred income 58.4 51.4 10.3 12.2
Corporation tax 1.0 0.6 - -
Total falling due within one year 1,177.6 1,127.8 2,670.2 2,102.7
Falling due between one and five years
Grant liabilities 8 1,429.3 1,404.6 1,563.2 1,404.6
Other creditors 2.6 4.0 - -
Lease premium creditor 2.1 0.6 - -
Bond liabilities - 274.2 - -
1,434.0 1,683.4 1,563.2 1,404.6
Falling due after five years
Grant liabilities 8 184.7 112.1 202.1 112.1
Lease premium creditor 15.0 15.5 - -
Bond liabilities 2,042.1 2,032.3 1,499.8 1,490.3
2,241.8 2,159.9 1,701.9 1,602.4
Total falling due after one year 3,675.8 3,843.3 3,265.1 3,007.0
----- End of picture text -----

Included in accruals and deferred income above is £16.0 million (2019: £20.3 million) in relation to Genome Research Limited’s contract with GlaxoSmithKline Research & Development Limited part of the Whole Genome Sequencing Project.

Bond liabilities falling due within one year above includes the 2021 Bonds (£275 million 4.75% Guaranteed Bonds due in May 2021) refer to note 15(a) for the Group’s plan for the upcoming maturity. All liabilities are unsecured.

Notes to the Financial Statements | Debtors | Creditors Wellcome Trust Annual Report 2020 | 110

18. Provisions for liabilities and charges

----- Start of picture text -----
Deferred Employment Other
tax related provisions provisions Total
Group £m £m £m £m
As at 1 October 2019 86.0 60.5 4.5 151.0
Charge for the year 11.1 19.1 0.1 30.3
-
Utilised in year (8.3) (0.8) (9.1)
- -
Foreign exchange revaluations (24.2) (24.2)
As at 30 September 2020 72.9 71.3 3.8 148.0
----- End of picture text -----

----- Start of picture text -----
Employment Other
related provisions provisions Total
Trust £m £m £m
As at 1 October 2019 56.2 4.5 60.7
Charge for the year 18.5 - 18.5
-
Utilised in year (7.1) (7.1)
As at 30 September 2020 67.6 4.5 72.1
----- End of picture text -----

The employment-related provisions relates to long-term incentive plans for certain employees in the Investment Division (refer note 5(a)) and unfunded unapproved retirement benefit schemes (refer to note 11(e)(ii)).

Notes to the Financial Statements | Provisions for liabilities and charges Wellcome Trust Annual Report 2020 | 111

19. Commitments and contingent liabilities

(a) Investments

The Trust has entered into commitments to invest in private equity and property funds. At the balance sheet date, outstanding commitments amounted to £2,937.8 million (2019: £3,103.3 million). The Trust models its expected cash flows based on the year of the original commitment and historic trends. The Trust expects to invest £981.9 million (34%) of the outstanding commitments in one year, £1,562.9 million, (53%) in between one and five years and £393 million (13%) after five years.

(b) Pensions

Wellcome has previously agreed with the GRL Pension Plan Trustee to put in place a Deed of Guarantee. The obligations of the Deed, guaranteed by Wellcome, are that GRL pays the necessary contribution as agreed with the Trustee and the Plan Actuary and that any deficit in the funding identified by a full actuarial valuation will be repaid over a period of five years or less. Further details of the funding of the GRL Pension Plan are provided in note 11(e)(ii).

(c) Programme related investments

Programme related convertible loans and equity funding have been made over a series of years, of which £5.2 million (2019: £9.1 million) remains yet to be drawn down and is contingent upon specific milestones being achieved.

The Trust has committed to fund 14% of the operating capital of Diamond Light Source Limited. The outstanding commitment as at 30 September 2020 was £2.9 million (2019: £2.4 million).

During the year, the Trust incurred £2.1 million (2019: £2.2 million) in expenditure relating to an entity in India, MSD- Wellcome Trust Hilleman Laboratories. The outstanding commitment as at 30 September 2020 was £18.7 million (2019: £20.8 million).

(d) Grant funding activities

In prior years, the Innovations division has made Seeding Drug Discovery grants of £172.9 million, of which £171.3 million has been included in grant expenditure in current and prior financial years. The remaining £1.6 million is contingent upon specific funding-related milestones being met and has therefore not been included within grant liabilities.

To date the Trust has incurred £68.1 million for expenditure relating to Wellcome Trust-DBT India Alliance. Subject to appropriate approval, the Trust will contribute up to £24 million over the next four years.

During the year, Wellcome incurred £4.5 million in expenditure relating to a partnership between Wellcome, the UK Medical Research Council, the UK Department for International Development and the UK Department of Health to fund clinical trials in low and middle-income countries. Subject to review and approval of appropriate applications, Wellcome will contribute up to a further £5.3 million over the next year.

Wellcome has incurred £2.0 million in expenditure relating to a joint initiative between Wellcome, the UK Department for International Development, the Economic and Social Research Council and the UK Medical Research Council to fund health systems research in low and middle-income countries. Subject to review and approval of appropriate applications, Wellcome will contribute up to £4.0 million over the next two years.

During the year the Trust has incurred £0.1 million in expenditure relating to a partnership with the British Heart Foundation, Cancer Research UK, Scottish Ministers acting through their Chief Scientist Office of the Scottish Government Health and Social Care Directorates, Engineering and Physical Sciences Research Council, Medical Research Council, Natural Environment Research Council, Department of Health and Social Care acting through its National Institute for Health Research, Health and Social Care Research and Development Division, Welsh Government, Public health Agency and The Health Foundation to fund research into population-level strategies that will prevent non-communicable diseases and reduce inequalities in health. Wellcome will contribute up to £3.7 million over the next two years.

In 2017, the Trust entered into a partnership with the US Government’s Biomedical Advanced Research and Development Authority (BARDA), Germany’s Federal Ministry of Education and Research (BMBF), the UK Government’s Department of Health and Social Care (DHSC), through its Global Antimicrobial Resistance Innovation Fund (GAMRIF), the Bill & Melinda Gates Foundation and Boston University to create the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator (CARB-X) to support preclinical product development of new antibiotics. £38.4 million was committed during the year, subject to review and approval of appropriate applications. The Trust will contribute up to £36.8 million over the next three years.

During the year, the Trust has incurred £12.2 million in expenditure relating to a joint initiative between Wellcome and the UK Department for International Development to fund research in epidemic preparedness and response. Subject to review and approval of appropriate applications, Wellcome will contribute up to £5.0 million over the next two years.

During the year the Trust approved a two year extension to its grant to its subsidiary Genome Research Limited of £232.8 million.

(e) Capital Commitments

As at 30 September 2020, Wellcome and Genome Research Limited had commitments contracted and not provided for of £36.6 million (2019: 15.8 million) and £0.8 million (2019: £2.7 million) respectively. These relate to refurbishment of investment properties and Sanger Campus redevelopment. It is probable that this work will be completed but as it has not commenced, the timings and final amounts are uncertain.

Notes to the Financial Statements | Commitments and contingent liabilities

Wellcome Trust Annual Report 2020 | 112

20. Movement in Charity Funds

----- Start of picture text -----
Balance as at Net investment Balance as at
1 October 2019 Income Expenditure gains 30 September 2020
Group £m £m £m £m £m
Restricted Funds 25.1 46.6 (52.3) - 19.4
Unrestricted Funds 25,189.3 417.0 (1,093.5) 3,289.6 27,802.4
Total Charity Funds 25,214.4 463.6 (1,145.8) 3,289.6 27,821.8
----- End of picture text -----

----- Start of picture text -----
Balance as at Net investment Balance as at
1 October 2018 Income Expenditure gains 30 September 2019
Group £m £m £m £m £m
Restricted Funds 32.2 46.2 (53.3) - 25.1
Unrestricted Funds 24,167.9 434.8 (1,391.6) 1,978.2 25,189.3
Total Charity Funds 24,200.1 481.0 (1,444.9) 1,978.2 25,214.4
----- End of picture text -----

All restricted funds arise in Genome Research Limited.

Notes to the Financial Statements | Movement in Charity Funds Wellcome Trust Annual Report 2020 | 113

21. Group undertakings

a) Summary of activities of significant subsidiary undertakings

----- Start of picture text -----
Registered Country of
Company % Holding Number incorporation Legal relationship
----- End of picture text -----

Genome Research 100% 2742969 England The Wellcome Trust Limited and Wellcome
Limited Trust Nominees Limited are equal members
Wellcome Leap Inc. 100% N/A United States The Wellcome Trust Limited and Wellcome
of America Trust Nominees Limited are equal members
Gower Place • Ordinary shares – 100% 08594660 England The Wellcome Trust Limited is the
Investments
Limited		 • Class A preference shares – 0%
• Class B preference shares – 100%		 shareholder
North London • Ordinary shares – 100% 08226374 England The Wellcome Trust Limited is the
Ventures Limited • Class A preference shares – 0% shareholder
• Class B preference shares – 100%
Wellcome Trust 100% 5857955 England The Wellcome Trust Limited is the sole
Finance plc shareholder
Wellcome Trust 100% 06483238 England The Wellcome Trust Limited is the sole
Investments 1 shareholder
Unlimited
Wellcome Trust 100% 6576220 England The Wellcome Trust Limited is the sole
Investments 2 shareholder
Unlimited
Wellcome Trust 100%* LP011456 England The Wellcome Trust Limited is the limited
Investment Limited partner and Wellcome Trust GP Limited is
Partnership the general partner

*On 29 July 2020, Wellcome Trust Investment Limited Partnership was dissolved

These significant subsidiaries are:

All subsidiaries are registered at 215 Euston Road, London, NW1 2BE.

The table below details the subsidiaries that are held as part of the investment portfolio. They are not included in the consolidation and therefore do not appear in the analysis in note 21(b).

----- Start of picture text -----
Registered Country of
Company % Holding Number incorporation Legal relationship
----- End of picture text -----

Farmcare Trading
Limited		 100% (indirect through Gower
Place Investments Limited)		 09152445 England The Wellcome Trust Limited is the indirect
shareholder through Gower Place Investments
Limited
Premier Marinas
Holdings Limited		 100% (indirect through Gower
Place Investments Limited)		 05524490 England The Wellcome Trust Limited is the indirect
shareholder through Gower Place Investments
Limited

Notes to the Financial Statements | Group undertakings Wellcome Trust Annual Report 2020 | 114

a) Summary of activities of significant subsidiary undertakings (continued)

The Trust has taken advantage of an exemption from audit available under 479A to 479C of the Companies Act 2006 for the following subsidiaries which are all registered in England:

Wellcome Trust Investments 1 Unlimited

Wellcome Trust Investments 2 Unlimited

Wellcome Trust Investments 3 Unlimited

The Wellcome Trust Limited has provided the appropriate guarantee for all liabilities of these entities.

The Trust has taken advantage of an exemption from audit available under Regulation 7 of the Partnership (Accounts) Regulations 2008 for the following partnerships:

Wellcome Trust Investment Limited Partnership – registered in England.

Wellcome Trust Scottish Limited Partnership – registered in Scotland.

(b) Summary financial information

The expenditure figures below include the impact of gift aid distributions and tax.

(i) Charitable subsidiary undertaking

----- Start of picture text -----
Genome Research Limited
2020 2019
£m £m
Income 156.4 150.8
Expenditure (171.9) (164.3)
Actuarial gains/(losses) on defined benefit pension scheme 16.3 (80.7)
Net movements in funds 0.8 (94.2)
Total assets 233.1 243.8
Liabilities (72.2) (79.5)
Defined benefit pension scheme deficit (198.8) (203.0)
Net liabilities (37.9) (38.7)
----- End of picture text -----

All restricted funds arise in Genome Research Limited.

(ii) Non-charitable investment holding subsidiary undertakings

----- Start of picture text -----
Gower Place North London Wellcome Trust Investment
Investments Limited Ventures Limited Limited Partnership
2020 2019 2020 2019 2020 2019
£m £m £m £m £m £m
Turnover - 3.0 - 4.7 17.2 18.8
Expenditure 3.4 4.8 (12.9) 41.7 (7.3) (11.7)
Gains/(losses) on
(22.5) (32.5) 49.3 (139.1) (93.3) 132.1
investments
Total profit (19.1) (24.7) 36.4 (92.7) (83.4) 139.2
Investment assets 546.9 558.5 460.4 411.1 - 809.6
Current assets 1.5 2.6 97.8 97.6 - 51.9
Total assets 548.4 561.1 558.2 508.7 - 861.5
Liabilities (2.0) (5.5) (42.1) (28.9) - (247.7)
Net assets 546.4 555.6 516.1 479.8 - 613.8
----- End of picture text -----

During the year, following the novation of its Loan from Wellcome Trust Finance plc to its parent the Wellcome Trust, Wellcome Trust Investment Limited Partnership was dissolved and its net assets distributed to its partners (the Wellcome Trust and Wellcome Trust GP Limited).

Notes to the Financial Statements | Group undertakings

Wellcome Trust Annual Report 2020 | 115

(b) Summary financial information (continued)

(ii) Non-charitable investment holding subsidiary undertakings (continued)

----- Start of picture text -----
Wellcome Trust Investments Wellcome Trust Investments
1 Unlimited 2 Unlimited
2020 2019 2020 2019
£m £m £m £m
Turnover - - 9.7 13.7
Expenditure (346.3) (3.9) (8.7) (12.0)
Gains/(losses) on
233.5 38.1 (24.6) 92.3
investments
Total profit (112.8) 34.2 (23.6) 94.0
Investment assets - 364.1 819.0 939.3
Current assets 252.3 28.0 264.3 99.4
Total assets 252.3 392.1 1,083.3 1,038.7
Liabilities - (27.1) (33.7) (24.3)
Net assets 252.3 365.0 1,049.6 1,014.4
----- End of picture text -----

The functional currency of Wellcome Trust Investments 2 Unlimited is the US Dollar because the majority of the Company’s transactions are denominated in US Dollars.

(iii) Non-charitable investment financing subsidiary undertaking

----- Start of picture text -----
Wellcome Trust Finance plc
2020 2019
£m £m
Turnover 42.8 42.7
Expenditure (42.8) (42.7)
Total profit - -
Assets 965.2 962.9
Liabilities (827.7) (825.4)
Net assets 137.5 137.5
----- End of picture text -----

Notes to the Financial Statements | Group undertakings Wellcome Trust Annual Report 2020 | 116

22. Consolidated cash flow

(a) Investment income received

----- Start of picture text -----
2020 2019
£m £m
Dividends and interest 287.9 372.7
Rental income 35.4 35.6
Decrease in income receivable from investments (9.9) (4.5)
Increase in accrued income from investments 5.5 1.9
Decrease/(increase) in deferred income from investments - 0.2
Investment income received 318.9 405.9
----- End of picture text -----

(b) Servicing of finance

----- Start of picture text -----
2020 2019
£m £m
Interest payable (79.0) (78.7)
Foreign exchange (losses)/gains on revaluation of interest bearing liabilities (8.8) 2.4
Increase/(decrease) in interest bearing liabilities 10.6 (1.0)
Cash (outflow) for servicing of finance (77.2) (77.3)
----- End of picture text -----

(c) Reconciliation of investment sales and purchases

----- Start of picture text -----
2020 2019
£m £m
Proceeds on sale of quoted investments 6,117.6 2,848.5
Proceeds on sale of unquoted investments 2,810.9 2,035.1
Proceeds on sale of investment property 18.0 23.9
Decrease in proceeds receivable on sale of investments 58.8 41.5
Proceeds on sale of Programme Related Investments 9.0 13.7
Proceeds from sales of investments 9,014.3 4,962.7
Purchases of quoted investments 4,553.9 2,308.1
Purchases of unquoted investments 2,431.7 2,086.3
Purchases of investment property 23.6 22.2
Increase in amounts payable on acquisition of investments 3.7 6.0
Purchase of Programme Related Investments 20.9 21.9
Purchases of investments 7,033.8 4,444.5
Gain/(loss) on derivative financial instruments 293.1 (24.3)
Decrease/(increase) in derivative financial asset positions 31.0 (56.7)
Increase/(decrease) in derivative financial liabilities 7.1 (0.9)
Net cash inflow/(outflow) upon settlement of derivative financial instruments 331.2 (81.9)
----- End of picture text -----

Notes to the Financial Statements | Consolidated cash flow Wellcome Trust Annual Report 2020 | 117

(d) Statement of net debt

----- Start of picture text -----
Effective interest
& Foreign At 30 September
At 1 October 2019 Cash flow Change in Exchange 2020
£m £m Maturities £m £m
Cash in hand and at bank 33.2 (8.1) - - 25.1
Debt due after one year
- bond liabilities (2,306.4) - 274.5 (10.2) (2,042.1)
Debt due within one year
- bond liabilities (30.4) 77.2 (274.5) (77.5) (305.2)
Liquid resources:
- investment cash and certificates of deposit 1,070.4 1,631.0 - - 2,701.4
Net (debt)/cash (1,233.2) 1,700.1 - (87.7) 379.2
----- End of picture text -----

In accordance with FRS 102 7.18, an entity shall exclude from the statement of cash flows investing and financing transactions that do not require the use of cash or cash equivalents.

The exclusion of non-cash transactions from the statement of cash flows is consistent with the objective of a statement of cash flows because these items do not involve cash flows in the current period. These non-cash transactions are included in the table above.

Notes to the Financial Statements | Consolidated cash flow Wellcome Trust Annual Report 2020 | 118

23. Financial risk management

In the ordinary course of its activities, the Group actively manages a variety of financial risks including credit risk, liquidity risk and market risk. The Group identifies measures and monitors risk through various control mechanisms as detailed in the following sections, including maximum approved counterparty exposure and diversifying exposures and activities across a variety of instruments, markets and counterparties.

(a) Credit risk

Credit risk is the risk that the Group would incur a financial loss if a counterparty failed to discharge its obligations to the Group.

Credit risk exposure

The Group is subject to credit risk from its financial assets held by counterparties and the risk is particularly concentrated on its investment cash balances and certificates of deposit due to the significant value of these balances. The following table details the Group’s maximum exposure to credit risk as at 30 September:

----- Start of picture text -----
2020 2019
£m £m
Derivative financial instruments 71.3 102.3
assets positions
Investment cash balances and
certificates of deposit 2,701.4 1,070.4
Cash collateral held 33.1 156.2
Accrued income from investments 7.3 12.6
Income Receivable 35.0 25.2
Proceeds receivable on sale
3.7 62.5
of investments
Other investment debtor balances 12.2 11.8
- -
Programme related investment loans
Other debtors 18.0 16.1
Term deposits and cash 25.1 33.2
2,907.1 1,490.3
----- End of picture text -----

Risk management policies and procedures

The objective of managing credit risk is to minimise counterparty default on the Group’s financial assets causing financial loss to the Group. The Group aims to mitigate its counterparty credit risk exposure by monitoring the size of its credit exposure to and the creditworthiness of counterparties, including setting appropriate exposure limits and maturities. Counterparties are selected based on their financial ratings, regulatory environments and specific circumstances.

The following details the risk management policies applied to the financial assets exposed to credit risk:

At the balance sheet date, in addition to the securities on loan discussed in note 15(a), forward currency contract assets which are secured by cash collateral discussed in note 15(b). There were no other credit enhancements.

None of the Group’s financial assets subject to credit risk (other than the Programme related investments which are discussed in note 15(d)) are past their due date or were impaired during the year.

Notes to the Financial Statements | Financial risk management Wellcome Trust Annual Report 2020 | 119

(b) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulties raising cash to meet its obligations when they fall due.

Liquidity risk exposure

This is a risk to the Group, given the value of the Group’s commitments to charitable and investment activities.

Risk management policies and procedures

The Group monitors its exposure to liquidity risk by regularly monitoring the liquidity of its investment portfolio and

holding appropriate levels of liquid assets. Cash held within the Group’s cash mandate (refer to Cash reported in Figure 6 of the Review of Investment Activities section of the Trustee’s report) and the liquidity forecast is reviewed: weekly by investments management; monthly by the Executive Leadership Team; and quarterly by the Investment Committee and Board of Governors.

The following table details the maturity of the Group’s undiscounted contractual payments and grant liabilities as at 30 September:

----- Start of picture text -----
2020 2019
Three No more Three No more
months than one More than months than one More than
or less year one year Total or less year one year Total
Group £m £m £m £m £m £m £m £m
Payments falling due within one year
Bond liabilities - 352.5 - 352.5 - 77.4 - 77.4
Derivative financial instruments liabilities 43.4 - - 43.4 36.3 - - 36.3
Collateral liability 33.1 - - 33.1 156.2 - - 156.2
Amount payable on acquisition of investments 1.1 - - 1.1 4.8 - - 4.8
Other investment liabilities 36.1 - - 36.1 17.4 - - 17.4
Trade creditors 8.2 - - 8.2 23.9 - - 23.9
Other creditors 29.5 - - 29.5 35.5 - - 35.5
Accruals and deferred income 58.4 - - 58.4 51.4 - - 51.4
Corporation Tax - 1.0 - 1.0 - 0.6 - 0.6
Contractual payments 209.8 353.5 - 563.3 325.5 78.0 - 403.5
Grant liabilities 164.4 493.1 - 657.5 191.8 575.4 - 767.2
374.2 846.6 - 1,220.8 517.3 653.4 - 1,170.7
Payments falling due between
one and five years
Bond liabilities - - 257.6 257.6 - - 545.2 545.2
Other creditors - - 2.6 2.6 - - 4.0 4.0
Contractual payments - - 260.2 260.2 - - 549.2 549.2
Grant liabilities - - 1,667.8 1,667.8 - - 1,632.3 1,632.3
- - - -
1,928.0 1,928.0 2,181.5 2,181.5
Payments falling due after five years
Bond liabilities - - 4,650.4 4,650.4 - - 4,705.6 4,705.6
- - - -
Contractual payments 4,650.4 4,650.4 4,705.6 4,705.6
Grant liabilities - - 271.0 271.0 - - 163.6 163.6
- - - -
4,921.4 4,921.4 4,869.2 4,869.2
Total 374.2 846.6 6,849.4 8,070.2 517.3 653.4 7,050.7 8,221.4
----- End of picture text -----

Grant liabilities are non-contractual.

Notes to the Financial Statements | Financial risk management Wellcome Trust Annual Report 2020 | 120

(c) Market risk – price, currency and interest rate risks

Market risk is the risk of potential loss the Group may incur as a result of adverse changes to the fair value of the Group’s financial instruments. Market risk comprises three types of risks: price risk, currency risk and interest rate risk.

The Group measures returns and monitors portfolio risks in a 50/50 blend of Sterling and US Dollars and monitored Sterling and US Dollar currency exposures. This reflects the globally diversified nature of the Group’s assets, liabilities and commitments.

The Group uses a number of investment risk metrics, of which the following are key; the expected ability of the portfolio to generate cash flows growing in real terms; currency exposures; expected likelihood of catastrophic failures of one or more assets held within the portfolio; and the assessed level of inflation protection within the portfolio.

(i) Price risk

Price risk is the risk that the value of an asset or liability will fluctuate due to changes in market price, caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. This is a risk for the Group because its ability to fund research over the long term is dependent on maintaining the purchasing power of the asset base. The Group’s expenditure is predominantly discretionary and the Board of Governors monitor cash expenditure, commitments and the endowment performance throughout the year to manage the balance between funding charitable activities and maintaining the purchasing power of the asset base.

Price risk exposure

The maximum asset and liability value exposed to other price risk at 30 September is the value of the traded investment assets and liabilities as detailed in the following table:

----- Start of picture text -----
2020 2019
£m £m
Quoted investments 14,762.7 15,053.9
Unquoted investments 13,766.8 12,402.8
Investments properties 1,292.1 1,298.9
Derivative financial instruments assets positions 71.3 102.3
Assets exposed to risk 29,892.9 28,857.9
Derivative financial instruments liability positions 43.4 36.3
Liabilities exposed to risk 43.4 36.3
----- End of picture text -----

Notes to the Financial Statements | Financial risk management

Wellcome Trust Annual Report 2020 | 121

(ii) Currency risk

Currency risk is the risk that the value of an asset or liability will fluctuate due to changes to foreign currency exchange rates. The currency of the majority of the Group’s expenditure and the functional currency of the Group is Sterling. However, the Group has investment assets denominated

in currencies other than Sterling and is impacted by fluctuations in foreign currency exchange rates.

The following table details the asset value exposed to currency risk as at 30 September:

----- Start of picture text -----
Value as at Value as at Value as at Value as at
30 September 30 September 30 September 30 September
2020 2020 2019 2019
Group (currency, m) £m (currency, m) £m
Traded investments assets
US $ $20,781.3 16,074.7 $17,644.2 14,318.1
Euro €3,156.8 2,863.4 €3,315.4 2,933.1
CNY ¥26,673.3 3,029.4 ¥19,833.1 2,254.6
Other 3,391.3 3,238.5
Other investment debtors balances
US $ $501.9 388.2 $358.8 291.2
Euro €28.3 25.7 €44.1 39.0
CNY - - - -
Other 27.1 29.6
Other investment creditors balances
US $ ($0.1) (0.1) ($0.3) (0.3)
Euro (€399.4) (362.3) (€398.6) (352.6)
CNY - - - -
Other (1.6) (7.6)
Forward currency contracts
US $ ($300.0) (231.2) ($350.9) (286.5)
Euro (€914.2) (850.6) (€396.3) (361.1)
CNY - - - -
Other 0.3 117.1
Total exposed to currency risk 24,354.3 22,213.1
----- End of picture text -----

----- Start of picture text -----
Impact on gain for the Impact on gain for the
financial year 2020 financial year 2019
£m £m
10% US Dollar appreciation 1,623.2 1,432.3
10% Euro appreciation 167.6 225.8
10% CNY appreciation 302.9 225.5
----- End of picture text -----

A 10% depreciation in currencies would have an equal but opposite impact.

Risk management policies and procedures

The investment team monitor the Group’s exposure to foreign currencies on a daily basis and report to the Investment Committee on at least a quarterly basis.

Foreign currency contracts are used to limit the Group’s exposure to future changes in exchange rates which might otherwise adversely affect the value of the portfolio of investments. Where appropriate, they are also used to achieve the portfolio characteristics that assist the Group in meeting its investment objectives.

Notes to the Financial Statements | Financial risk management Wellcome Trust Annual Report 2020 | 122

(iii) Interest rate risk

Interest rate risk arises from the risk that the value of an asset or liability will fluctuate due to changes in interest rates (i.e. for fixed interest rate assets or liabilities) or that future cash flows will fluctuate due to changes in interest rates (i.e. for variable rate assets or liabilities).

Interest rate exposure and sensitivity

The Group holds investment cash and certificates of deposit and overnight term deposits and cash, as detailed on the Balance Sheet. These are floating rate interest bearing assets, the future cash flows from these assets will fluctuate with changes in market interest rates. However, as these are liquid assets with no fixed maturity dates, the fair value would not fluctuate significantly with changes in market interest rates.

The Group has invested in government and corporate debt securities as part of planning for the upcoming maturity 2021 bonds (refer note 15(a)). These are fixed rate interest bearing assets with fixed maturities, the future cash flows from these assets will not fluctuate with changes in market interest rates, however their fair value will.

The interest-bearing liabilities shown below are the bond liabilities which are fixed rate liabilities which are held at amortised cost. The bond assets value detailed in the table below is the fair value, the bond and variable rate liabilities value detailed in the table below is the book value.

----- Start of picture text -----
2020 2019
Weighted Value as at Value as at
average 30 September Weighted average 30 September
interest rate £m interest rate £m
Interest bearing assets:
Maturing within one year
Fixed rate 1.61% 141.3 n/a -
Floating rate 3 month GBP Libor 130.0 n/a -
+ 22-26bps
Maturing between one and five years
Fixed rate n/a - 1.61% 142.6
Floating rate n/a - 3 month GBP Libor + 22-26bps 129.9
Total interest bearing assets 271.3 272.5
Interest-bearing financial liabilities:
Maturing within one year
Fixed rate – bond liabilities 4.75% (279.2)
Maturing between one and five years
Fixed rate – bond liabilities n/a - 4.75% (278.6)
Maturing after five years
Fixed rate – bond liabilities 3.13% (2,068.1) 3.13% (2,058.2)
Total interest-bearing liabilities (2,347.3) (2,336.8)
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Risk management policies and procedures

The Group takes into account the possible effects of a change in interest rates on the fair value and cash flows of the interest-bearing financial assets and liabilities when

making investment decisions. The Investment Committee monitors the Group’s exposure to interest-bearing assets, the bond liability and the related finance costs regularly.

24. Events after the end of the reporting period

On 6 November 2020 the Group announced a recommended cash offer of £506.0 million for the entire issued and to be issued share capital of Urban&Civic PLC. The offer was approved on the 14 December 2020 by a majority of Urban&Civic shareholders.

On 13 November 2020 one of the Group’s direct unquoted investments, Doordash, announced an initial public offering (IPO) of Class A common stock and applied to List on the

New York Stock Exchange. On 8 December 2020 the IPO was priced at US $102/share, increasing the value of the Group’s investment in Doordash to US $1.3 billion or £1.0 billion and giving rise to an unrealised gain in value of £0.7 billion. The price of Doordash shares has increased further following the IPO and the most recent closing price as at 11 December 2020 was $175/share, valuing the Group’s investment at $2.3 billion or £1.7 billion.

Notes to the Financial Statements | Financial risk management | Events after the end of the reporting period Wellcome Trust Annual Report 2020 | 123

Reference and Administrative Details

Board of Governors

Baroness Manningham-Buller, LG, DCB, FMedSci (Chair) Professor Sir Michael Ferguson, CBE, FRS, FRSE, FMedSci (Deputy Chair) Professor Tobias Bonhoeffer, PhD Mr William Burns (to 30 April 2020) Dame Amelia Fawcett, DBE, CVO Mr Richard Gillingwater, CBE Professor Bryan Grenfell, OBE, FRS Professor Fiona Powrie, FRS FMedSci Dame Cilla Snowball, DBE, CBE Mr Elhadji As Sy (from 1 January 2020)

Brief biographies are included on pages 125.

Company Secretary

Mr Chris Bird

Executive Leadership Team

Sir Jeremy Farrar, FRS, FMedSci, OBE (Director)

Mrs Katie Anastasi-Frankovics (Director of Innovations from 1 January 2020, on maternity leave from 18 June 2020) Mr Chris Bird (General Counsel and Company Secretary) Professor Stephen Caddick (Director of Innovations to 30 April 2020) Ms Karen Chadwick (Acting Chief Financial Officer, confirmed as Finance Director from 1 January 2020)

Dr Simon Chaplin, FDSRCS (Director of Culture & Society to 31 August 2020) Dr Alyson Fox (Director of Grants Management) Ms Philomena Gibbons (Interim Director of Culture & Society from 1 August 2020) Mr Mark Henderson (Director of Communications) Dr Chonnettia Jones (Director of Insight and Analysis to 31 March 2020)

Dr Tim Knott (Acting Director of Innovations from 1 June 2020)

Ms Kathy Poole (Director of People) Dr Paul Schreier (Chief Operating Officer) Sir Jim Smith, FRS, FMedSci (Director of Science to 1 May 2020, then Interim Director of Research Programmes from 1 July 2020)

Mr James Thomas (Chief Technology Officer) Professor Mike Turner (Director of Science from 29 June 2020) Mr Ed Whiting (Director of Strategy)

Audit and Risk Committee

Mr William Burns (Chair to 31 March 2020) Dame Amelia Fawcett (Chair from 1 April 2020) Ms Adèle Anderson Mr Chris Jones Professor Fiona Powrie

Remuneration Committee

Dame Amelia Fawcett (Chair) Professor Sir Michael Ferguson Mr Richard Gillingwater (from 17 December 2019) Baroness Manningham-Buller

Nominations Committee

Baroness Manningham-Buller (Chair) Professor Sir Michael Ferguson Professor Bryan Grenfell Dame Cilla Snowball

Investment Committee

Mr Richard Gillingwater (Chair) Ms Tracy Blackwell Mr Stefan Dunatov Sir Jeremy Farrar Professor Sir Michael Ferguson Dr Martin Halusa Ms Cressida Hogg Baroness Manningham-Buller Mr Nicholas Moakes Mr Peter Pereira Gray Dr Paul Schreier

Reference and Administrative Details

Wellcome Trust Annual Report 2020 | 124

Biographies of the Governors

Baroness Manningham-Buller

Eliza Manningham-Buller has been Chair of Wellcome since 2015, having served as a Governor since 2008.

In 2015, Eliza became the Co-President of Chatham House, Royal Institute of International Affairs. She served on the Council of Imperial College from 2009 and was Chair of Council from 2011 to 2015. She is a Fellow of the Academy of Medical Sciences.

She was appointed an independent, crossbench peer in the House of Lords in 2008, and has been a member of the Privileges and Conduct Committee, the Joint Committee on the National Security Strategy, and currently sits on the Science and Technology Committee.

Previously, Eliza had a career with MI5 for more than 30 years, including a posting to the British Embassy in Washington. She served as Director General from 2002 to 2007 and before that was Deputy Director General, with responsibility for operations.

Eliza was educated at Benenden School and Lady Margaret Hall, Oxford. She taught for three years before joining MI5 in 1974.

Professor Sir Michael A J Ferguson

Mike Ferguson is Regius Professor of Life Sciences and academic lead for Research Strategy in the School of Life Sciences at the University of Dundee. His personal research takes a multidisciplinary approach to understanding the biochemistry of protozoan parasites that cause tropical diseases. He believes in the fundamental importance of working across the biology-chemistry interface and in interdisciplinary research in general.

He is particularly interested in translational research and, together with his colleagues, established the Drug Discovery Unit at the University of Dundee and led the construction of the Discovery Centre (for Translational and Interdisciplinary Research).

He co-directs a proteomics facility that supports much of the work of his colleagues in the Schools of Life Sciences and Medicine. He is also a Board member of Amphista Therapeutics Ltd. Mike was knighted in 2019 for his services to science.

Professor Tobias Bonhoeffer

Tobias Bonhoeffer is Director at the Max Planck Institute of Neurobiology and Professor at the Ludwig Maximilians University in Munich.

He is one of the world’s foremost researchers in systems neuroscience. He studies synaptic plasticity in the brain focusing on learning, memory and how the brain adapts to its environment.

Tobias served for more than 20 years as department head at the Max Planck Institute of Neurobiology and later also as Chair of the Biomedical Section of the Max Planck Society. He has been a member of the scientific advisory boards of numerous leading Institutions, including the Chan Zuckerberg Initiative, the ETH Zurich, the Janelia Farm Research Campus of the Howard Hughes Medical Institute and the Chinese Academy of Sciences.

Tobias is a member of the German National Academy of Sciences, Leopoldina, the Academia Europaea, the European Molecular Biology Organization, and the US National Academy of Sciences. He has been awarded the Ernst-Jung Prize for Medicine.

Mr William Burns

William “Bill” Burns is Chair of Vestergaard and Molecular Partners, and Vice-Chair of Mesoblast. He also serves as a trustee of the Institute of Cancer Research.

Bill has over 40 years’ experience in the pharmaceutical and life sciences industry. He was a senior independent director of Shire Pharmaceuticals until April 2018 and was CEO of the global pharmaceuticals division of Roche Holdings from 2001 to 2009.

He previously chaired the funding committee of the Health Innovation Challenge Fund, a partnership between Wellcome and the Department of Health.

Dame Amelia Fawcett

Amelia Fawcett, a former investment banker and lawyer, has a career spanning financial services, media and telecommunications, investment management and government. In addition to 20 years at Morgan Stanley, she has extensive board experience including at the Standards Board for Alternative Investments, the Guardian Media Group, The Prince of Wales’s Charitable Foundation, the UK Treasury, the Court of the Bank of England and the London Business School.

Currently, she is the lead director of State Street Corporation in the USA, Chair of Kinnevik AB in Sweden and Chair of Royal Botanic Gardens Kew.

Reference and Administrative Details Wellcome Trust Annual Report 2020 | 125

Richard Gillingwater

Richard Gillingwater is currently the Chair of SSE, the renewable energy and networks group, and Janus Henderson, a global asset manager. After a career in finance, he set up and ran UK Government Investments, created to manage the Government’s state-owned businesses, and chaired the UK’s development finance business, CDC, investing in Africa and Asia. He has also served as Dean of Cass Business School and as Chair of the Open University and has wide board experience.

Professor Bryan Grenfell

Bryan Grenfell is the Kathryn Briger and Sarah Fenton Professor of Ecology, Evolution and Public Affairs at Princeton University. He is jointly appointed at the Department of Ecology and Evolutionary Biology and the School of Public and International Affairs.

With over 30 years’ experience researching the population dynamics of infectious diseases, his research focuses on the epidemiology, evolution and vaccination control of infections such as measles and influenza. He has advised the UK Government and the World Health Organization on the mathematical modelling and control of a variety of infectious diseases.

He is a Fellow of the Royal Society, the American Academy of Arts and Sciences, and the American Association for the Advancement of Science. He has also been awarded the T H Huxley Medal from Imperial College and the Scientific Medal of the Zoological Society of London.

Professor Fiona Powrie

Dame Cilla Snowball

Cilla Snowball has had a long career in advertising, including 26 years at the creative agency AMV BBDO, where she was Group CEO and Group Chairman, and pivotal in making it one of the most successful advertising agencies in the UK.

She has chaired the Women’s Business Council, the GREAT Private Sector Council, acted as a trustee of Comic Relief, and is a Non-Executive Director at the property investment and development company Derwent London plc.

Elhadj As Sy (known as As Sy)

As Sy is the Chair of the Kofi Annan Foundation Board, and Co-chair of the WHO/World Bank Global Pandemic Preparedness Monitoring Board (GPMB). In addition to these functions, Mr. Sy is also a Commissioner for the Global Commission on Climate Adaptation, a member of the Governing Board of Interpeace and serves on numerous other boards and organizations.

Mr. Sy has over 30 years’ experience of leadership the humanitarian, health, environment, development sectors, and has previously served as the Secretary General of the International Federation of Red Cross and Red Crescent Societies (IFRC)‐the world’s largest humanitarian network.

Prior to this appointment, Mr. Sy was UNICEF’s Director of Partnerships and Resource Development in New York. He has also served as UNICEF Regional Director for Eastern and Southern Africa, Global Emergency Coordinator for the Horn of Africa, and at senior levels of other agencies including UNAIDS, and the Global Fund to Fight AIDS, Tuberculosis and Malaria.

Fiona Powrie is Director of the Kennedy Institute of Rheumatology, University of Oxford. She gained a PhD in immunology from the University of Oxford and then moved to the DNAX Research Institute in Palo Alto. She returned to the University of Oxford in 1996 where she was the Sidney Truelove Professor of Gastroenterology and Head of the Translational Gastroenterology Unit from 2009-2014.

Fiona’s research is focused on interactions between the intestinal microbiome and the immune system. She identified the role of regulatory T cells in controlling intestinal inflammation and established the cytokine IL-23 as a therapeutic target in inflammatory bowel disease. She is particularly interested in translating basic research into clinical application. She leads the Oxford Biomedical Research Centre’s Gastroenterology and Mucosal Immunology theme and recently established the Accelerated Therapy for Arthritis Programme, a clinical research network designed to increase the testing of novel therapies in the clinic.

She serves on a number of scientific advisory boards including the Lister Institute, the Imagine Institute in Paris and the Evergrande Centre in Boston. She received the Louis Jeantet Prize for Medicine in 2012 and was elected a Fellow of the Royal Society in 2011, EMBO in 2013, the Academy of Medical Sciences in 2014 and the US National Academy of Sciences in 2020.

Reference and Administrative Details

Wellcome Trust Annual Report 2020 | 126

Independent Auditor

Deloitte LLP Statutory Auditor 1 New Street Square London EC4A 3HQ United Kingdom

Banker

HSBC Bank plc 31 Holborn Circus Holborn London EC1N 2HR United Kingdom

Solicitors

CMS Cameron McKenna Nabarro Olswang LLP Cannon Place 78 Cannon Street London EC4N 6AF United Kingdom

Global custodian bank

JP Morgan Chase Bank NA 125 London Wall London EC2Y 5AJ United Kingdom

Reference and Administrative Details

Wellcome Trust Annual Report 2020 | 127

Wellcome supports science to solve the urgent health challenges facing everyone. We support discovery research into life, health and wellbeing, and we’re taking on three worldwide health challenges: mental health, global heating and infectious diseases.

The Wellcome Trust Annual Report and Financial Statements 2020 is © the Wellcome Trust and is licensed under Creative Commons Attribution 2.0 UK.

Further copies of this Annual Report and Financial Statements 2020 are available from the Trust’s website or upon request though emailing contact@wellcome.org

Wellcome Trust, 215 Euston Road, London NW1 2BE, United Kingdom T +44 (0)20 7611 8888, E contact@wellcome.org, wellcome.org

The Wellcome Trust is a charity registered in England and Wales, no. 210183. Its sole trustee is The Wellcome Trust Limited, a company registered in England and Wales, no. 2711000 (whose registered office is at 215 Euston Road, London NW1 2BE, UK). FI-7305/12-2020/RK