Annual Report
Year ended 31 August 2016
International Biotechnology Trust plc
Why invest in International Biotechnology Trust plc?
(the Company)
Innovation in biotechnology continues apace, with another year of breakthroughs in areas like cancer immunotherapy, gene therapy and
gene editing. In the last twelve months alone, novel treatments were approved in multiple myeloma (Darzalex and Empliciti), Parkinson’s
disease psychosis (Nuplazid), chronic liver disease (Ocaliva), dry eye (Xiidra), pulmonary arterial hypertension (Uptravi), lung cancer
(Alectinib) and HIV (Genvoya). These drugs, among many others, are improving the quality of life for millions of patients around the world.
Demand is strong and increasing: The population of the world is ageing. The likelihood of suffering from illnesses, which are often
chronic in nature, increases with age. The proportion of the population aged over 65 years old is set to double from 7% to 14% between
2008 and 2040. This is the single most significant driver of growth in the biotechnology industry and there is little chance of the trend
being reversed. Heathcare expenditure is expected to accelerate in 2016 by 4% and rise over 6% per year in 2017 and 2018.
Supply is robust and improving: Expanding scientific knowledge and unmet medical needs continue to drive the search for new
and innovative treatments. The biotechnology industry strives to understand the highly complex human body and makes important
discoveries every year. But there are still many serious conditions without either treatments or cures, and many diseases where even
the cause is poorly understood.
The supply of new treatment options from the biotechnology industry to meet this need is improving. This is due to, first, advances in
science and discovery, especially the increasing use of biologics and, secondly, due to improvements in the regulation of drugs, leading
to faster development and approval times. FDA approvals between 2012 and 2015 averaged 38 per annum, compared to an average of
25 per annum in the previous four years.
New therapies that come to the market can generate multi-billion dollar revenues. For example, J&J’s multiple myeloma treatment,
Darzalex, is expected to record revenues of $450m in its first year of sales, with peak sales potentially reaching $10bn. The increasing
scientific knowledge in the biotechnology space continues to ensure that the number of new products that are found to be safe
and effective is growing year on year, which in turn reduces the risk of investing in the sector with fewer high profile drug failures
than previously.
Investment outlook is positive: The outlook for the sector from an investment perspective remains positive with strong growth drivers
on both the demand and the productivity sides. Furthermore, merger and acquisition transactions (M&A) in the sector are plentiful with
substantial premia being paid, which can produce significant value for investors. Big pharma companies that have matured and have
a wide reach to distribute and sell products, but lack the strength and depth in their drug development pipelines continue to acquire
smaller biotechnology companies where R&D productivity is increasing. There was an average of 320 M&A transactions announced per
annum in the sector over the past ten years, and over 450 announced in 2015 alone. Short term concerns over the pricing environment
in the US, fuelled by uncertainty over the US election, have had a dampening effect on the performance of biotechnology equities, but it
is felt among the sector experts that the innovative part of the market, in which International Biotechnology Trust invests, will not be the
target of any proposed changes to the pricing environment in the US.
International Biotechnology Trust is well placed to benefit: International Biotechnology Trust is managed by SV Life Sciences
Managers LLP (SV or the Investment Manager) whose experts are medically and/or scientifically trained, as well as having solid financial
and commercial experience. This background enables the investment managers to assess potential investment opportunities from a
position of technical expertise and experience and consider which companies are the most likely to succeed. They specialise both in
identifying the successful innovative drugs and medical devices that will serve unmet medical needs and which are in complex disease
areas such as diabetes and cancer, as well as the most credible treatments for orphan diseases where the number of patients may be
fewer but the path to approval may be smoother with less competition. The Investment Managers’ achievements have been recognised
with three industry awards won in the past year.
International Biotechnology Trust uniquely invests in both unquoted, usually earlier stage companies, as well as quoted equities.
Investors are able to gain exposure to value creating events across the whole pathway from early stage innovation, through M&A
situations and regulatory hurdles, through to regulatory approval and revenue generation. This broad spectrum of investments offers
investors diversification while still giving exposure to potentially exciting returns.
2
International Biotechnology Trust plc
Contents
Why invest in International Biotechnology Trust plc?
Inside Front Cover
Financial Summary
Strategic Report
Long-term Record
Chairman’s Statement
Investment Manager’s Review
Ten Largest Investments
Unquoted Investments
Classification of Investments (by Sector and Region)
Strategic Review
Directors’ Report and Financial Statement
Directors’ Biographies
Directors’ Report (incorporating the Corporate Governance Statement)
Report on Directors’ Remuneration
Management Report and Directors’ Responsibilities Statement
Independent Auditors’ Report
Statement of Comprehensive Income
Statement of Changes in Equity
Balance Sheet
Cash Flow Statement
Notes to the Financial Statements
Company Summary, Shareholder Information, Directors and Advisers
Alternative Investment Fund Manager’s Disclosure
Statement of the Depositary’s Responsibilities
Notice of Meeting
Location of Meeting
Pages 3 to 16 inclusive (together with the sections of the Annual Report incorporated by reference) comprise of a
Strategic Report that has been prepared in accordance with Section 414A of the Companies Act 2006 (the Act).
The Strategic Report contains a review of the Company’s strategy and business model as well as the principal
risks and challenges it faces, an analysis of its performance during the financial year and its future developments.
Further information on the Company may be found on the internet at www.ibtplc.com
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International Biotechnology Trust plc
Financial Summary
year ended 31 August 2016
Highlights in the year ended 31 August 2016
Net asset value (NAV) return
NASDAQ Biotechnology Index (NBI) return
Share price return
Performance
Net assets (£’000)
Ordinary shares in issue# (’000)
NAV per share
Share price
Share price discount
Ongoing charges*
Ongoing charges including performance fee
Index Returns
NBI (sterling-adjusted)
FTSE All-Share Index (Total Return)
(1.7)%
(3.8)%
(9.8)%
%
Change
(8.0)
(6.4)
(1.7)
(9.8)
Company**
31 August
2016
Company
31 August
2015
216,651
235,490
37,673
40,248
575.1p
585.1p
497.5p
551.5p
(13.5)%
(5.7)%
1.4%
1.7%
1.5%
2.0%
2,245.1
2,332.5
6,080.6
5,442.1
(3.8)
11.7
# Excludes those held in treasury (31 August 2016: 3,965,000; 31 August 2015: 4,215,000).
* Calculated in accordance with The Association of Investment Companies (the AIC) guidance. Based on total expenses excluding finance costs and performance fee and
expressed as a percentage of average daily net assets. The ratio including performance fee has also been provided, in line with the AIC recommendations.
**The trading subsidiary, IBT Securities Limited was dissolved and removed from the Companies House Register on 16 February 2016. As such, there is no longer a Group
in existence and therefore the Financial Statements, have been presented on a Company only basis. For a reconciliation of the Company and Group results in comparative
periods, and an explanation of the impact of the dissolution of IBT Securities Limited, refer to note 7 to the Financial Statements.
Investors Chronicle
and Financial Times
Investment and Wealth
Management Awards 2015
Winner
Best Specialist Fund
International
Biotechnology Trust
2
International Biotechnology Trust plc
Strategic Report –
Long-term Record
As at 31 August
Total
NAV
£’000
Number(ii)
of shares
in issue
NAV
per share
pence
Annual
Return
%
Share
price
pence
Annual
Return
%
FTSE
(Discount)
All-Share
/premium Total Return
%
%
2016*
216,651
37,672,663
575.1
(1.7)
497.5
(9.8)
(13.5)
11.7
2015
2014
2013
2012
2011
2010
2009
2008
2007(i)
2006
236,001
40,247,663
586.4
48.2
551.5
75.4
(6.0)
(2.3)
214,970
54,332,663
395.7
26.4
314.5
16.9
(20.5)
10.3
172,672
55,157,663
313.1
34.7
269.0
31.5
(14.1)
18.9
128,922
55,457,663
232.5
41.9
204.5
43.0
(12.0)
10.2
91,764
56,007,663
163.8
5.6
143.0
6.9
(12.7)
7.3
93,658
60,357,664
155.2
2.4
133.8
10.8
(13.8)
10.6
98,255
64,832,664
151.6
(5.8)
120.8
(12.7)
(20.3)
(8.2)
113,517
70,592,664
160.8
10.9
138.3
(0.9)
(14.0)
(8.7)
102,360
70,592,664
145.0
1.9
139.5
7.3
(3.8)
11.8
66,951
47,065,467
142.3
17.3
130.0
24.7
(8.6)
16.8
(i) Issue of 24,777,433 ‘C’ shares on 12 February 2007, converted into 22,577,197 Ordinary shares on 24 May 2007. In addition, 950,000 Ordinary shares were issued
on 12 July 2007.
(ii) Excludes treasury shares.
* Company only figures. Earlier years included the Group.
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International Biotechnology Trust plc
Strategic Report –
Chairman’s Statement
Total return to 31 August 2016
One year Three years Five years
NAV per share
(1.7)%
83.7% 249.0%
Share Price
NBI (sterling)
(9.8)%*
84.9% 247.9%
(3.8)%
72.6% 270.4%
FTSE All-Share Index
11.7%*
20.4%
57.8%
*UK markets were closed on 31 August 2015, 28 August 2015 has been used
for comparative purposes for IBT and FTSE All-Share
After a number of years of strong growth, returns for the Company
were lower in the year ended 31 August 2016 with the NAV per
share down 1.7%. This reflected a period of consolidation in the
biotechnology sector. Although 2016 was a challenging year for the
biotechnology market, our Investment Manager has outperformed
the NBI for the second consecutive year.
I am pleased to report outstanding three year performance numbers
on the third anniversary of the appointment of the Company’s lead
Fund Manager, Carl Harald Janson. The Company has returned
83.7% over this period, versus the benchmark gain of 72.6% and
the FTSE All-Share’s return of 20.4%. Since 2013, the Investment
Manager has outperformed the benchmark in both strong and
weak markets, illustrating the benefits of active investing. It is
also encouraging to see the unquoted portfolio continue in its
‘harvesting’ stage, with another year of positive returns uncorrelated
with the public markets.
The Company also recently announced two initiatives which I
believe will benefit our investors. Sustainable, predictable income is
important to investors in the current environment of low yields and
we are delighted to be offering a dividend to all Shareholders whilst
maintaining a strong focus on capital growth. We also made some
changes to the investment policy allowing investment into unquoted
funds which themselves invest in biotechnology companies.
Both of these proposals were overwhelmingly supported by our
Shareholders at the General Meeting held on 29 September 2016.
I believe our Company offers a compelling investment proposition.
With the potential for a 4% dividend on top of capital growth,
Shareholders have access to an outstandingly attractive investment
opportunity.
Performance fee
The outperformance by the Investment Manager across both the
unquoted and quoted pools of investments has given rise to a fee
of £575,000. This is predominantly due to the 9.5% return from
our unquoted investments, though our quoted investment portfolio
also outperformed.
The Board considers that SV provides the Company with
experienced fund management expertise, which enjoys an excellent
track record. The biotechnology sector is highly specialised and
requires in depth expert knowledge that the Investment Manager
possesses, being solely focused on the biotech sector.
Share buy backs & discount
Over the period, although the discount widened from 5.7% to
13.5%, the average discount for the period was broadly consistent
at 13.2% compared with 12.6% for the year ended 31 August 2015,
despite comparatively volatile market conditions. The Company’s
policy of strategic share buy backs has helped to maintain a stable
discount level throughout the year. A total of 2,575,000 Ordinary
shares were repurchased during the period (2015: 14,085,000),
representing 6.4% of the issued share capital at the beginning of the
year. Of the shares repurchased, 2,825,000 have been cancelled,
with 3,965,000 shares held in treasury at the end of the year. These
buybacks reduced the overall Company net assets but enhanced
the NAV per share by 4.7p because the shares were bought at a
discount to NAV that averaged 13.3%.
Since year end, a total of 125,000 further shares have been
repurchased, for a consideration of £0.6m. A total of 295,000
Ordinary shares previously held in treasury have been cancelled
since the year end.
Investment in unquoted companies
International Biotechnology Trust’s strategy of investing a minor
part of its assets in unquoted companies offers investors exposure
to a distinct investment area. The Company has not made any
new unquoted investments since December 2013 and the current
portfolio is maturing. As this is harvested, new investments will
need to be made in order to continue with our strategy of investing
in both unquoted and quoted shares.
An opportunity arose to make a commitment to invest in SV
Life Sciences Fund VI (SVLSF VI), a new venture fund recently
launched by SV, which will invest in unquoted companies using
SV’s diversified approach covering biotechnology, medical devices
and healthcare services and IT. Following Shareholder approval on
29 September 2016, the Board agreed to make a commitment of
$30m (£22m) into SVLSF VI. There will be no double charging of
investment management fees in relation to this commitment. We
expect the investment period for SVLSF VI to overlap with the exit
period for our existing investments, allowing our guideline of 10% -
15% investment in unquoted companies to be maintained.
This change in strategy for unquoted investments will help diversify
the Company’s investment opportunities, provide access to a wider
range of unquoted companies and most likely increase liquidity
due to the existence of a broader market for secondary sales of
unquoted fund interests than single company interests.
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International Biotechnology Trust plc
Strategic Report –
Chairman’s Statement
Results and Dividends
Shareholders approved at
the General Meeting held on
29 September 2016, the proposed introduction of an annual
dividend, equivalent to 4% of the Company’s NAV as at the last day
of the Company’s preceding financial year, being 31 August, to be
payable through two equal distributions in January and August of
each year, and which is expected to be paid out of capital reserves.
Board of Directors
In July 2016, Caroline Gulliver was appointed as Chair of the Audit
Committee, succeeding John Aston in this role. I would like to
welcome Caroline to her new role and to thank John for his valuable
contribution as Chair of the Audit Committee for the previous
4 years.
Prospects
Valuations in the sector are looking attractive compared to
the broader market and historical levels. Healthcare, including
biotechnology, is often in the spotlight, however, as a US election
approaches, given concerns about rising healthcare costs
including drug pricing. This undoubtedly can make investors
nervous but I am reassured by the Investment Manager that many
of these concerns are not justified. Drug pricing makes up only
a small fraction of overall US healthcare expenditure and recently
the democratic candidate, Hillary Clinton, stated she would not be
targeting innovation but hopes to clamp down on egregious price
hikes of old generic drugs. The Company’s strategy of choosing to
invest in innovative companies rather than those producing generic
drugs should allow us to continue to achieve good returns for our
Shareholders. I am confident that the outlook for the companies
in which International Biotechnology Trust invests remains both
positive and encouraging.
Annual General Meeting (AGM)
This year’s AGM will be held at 12.30 pm on Tuesday, 13 December
2016 at BNP Paribas Fortis, 5 Aldermanbury Square, London
EC2V 7BP. In addition to the formal process of voting on various
resolutions, the AGM is an opportunity for Shareholders to meet
the Board and representatives of the Investment Manager.
As in previous years, there will be a presentation from the Investment
Manager. If you have any detailed or technical questions, it would be
helpful if you could raise these in advance of the meeting by emailing
the Company Secretary at secretarialservice@uk.bnpparibas.
com or in writing to BNP Paribas Secretarial Services Limited,
10 Harewood Avenue, London NW1 6AA. Shareholders who are
unable to attend the AGM are encouraged to use their proxy votes.
I look forward to welcoming as many of you as possible to the
meeting.
Alan Clifton
Chairman
3 November 2016
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International Biotechnology Trust plc
Strategic Report –
Investment Manager’s Review
Best performing investments
Worst performing investments
Contribution
to NAV
Medivation
£7.9m
Chimerix
(Reduction)
in NAV
£(5.1m)
GenMab
£4.3m
Endo International
£(4.6m)
Ophthotech
£4.3m
Gilead
Exelixis
Amgen
£3.6m
Regeneron
£3.3m
Radius Pharma
£(1.5m)
£(3.0m)
£(1.8m)
Summary
In the year under review, the Company’s NAV fell by 1.7%. Both
parts of the portfolio outperformed the Company’s benchmark, the
NBI, which was down 3.8% (sterling denominated), with the quoted
part of the portfolio falling by 2.6%, and the unquoted portfolio
increasing by 9.5%. The FTSE All-Share Index rose 11.7%. This
achievement builds upon two previous years of good performance
since Carl Harald Janson joined as Lead investment manager and,
over the past three years, the Company’s NAV per share has risen
by 83.7% versus the NBI return of 72.6%.
Overview and performance
Total portfolio companies*
Quoted
Unquoted
NAV
Quoted
Unquoted
Other assets/(liabilities)
Legal commitments to
investments in unquoted
Reserved for further
investment in unquoted
2016
75
58
17
£216.7m
£199.6m
£22.2m
£(5.1m)
£0.0m
2015†
101
81
20
£235.5m
£219.1m
£27.8m
£(11.4m)
£0.6m
£2.4m
£2.2m
† The trading subsidiary, IBT Securities Limited was dissolved and removed from
the Companies House Register on 16 February 2016. As such, there is no
longer a Group in existence and therefore the Financial Statements, including
comparatives, have been presented on a Company only basis. For a reconciliation
of the Company and Group results in comparative periods, and an explanation
of the impact of the dissolution of IBT Securities Limited, refer to note 7 to the
Financial Statements.
* Excluding unquoted companies fully written off (2016: 6; 2015: 7).
Quoted and Unquoted performance
For the purposes of performance measurement, some companies
in which investments were first made in the unquoted pool and have
now become quoted, continue to be managed by the unquoted
portfolio team and are considered as part of the unquoted portfolio.
Performance is adjusted to mirror the incentive fee arrangements
and the responsibilities of the investment managers at SV regarding
the two portfolios. The table above reflects this analysis. At the
year end the difference in analysis to the Financial Statements
comprises investments in Entellus and Transenterix, representing
£6.7m or 3.1% of NAV. From a liquidity perspective, quoted and
unquoted portfolio companies make up £199.6m and £22.6m of
the NAV, respectively.
Quoted portfolio
The quoted portfolio outperformed the NBI by 1.1% in the period
under review.
Medivation, Genmab, Ophthotech, Exelixis and Amgen were
the largest contributors to relative performance in the period.
Medivation was acquired by Pfizer for approximately $14.0bn after
a period of competitive bidding initiated by Sanofi’s proposed bid in
April of $52.50 a share. Over the four months since April, multiple
parties entered the bidding process for Medivation culminating
in the offer from Pfizer for $81.5 per share on 22 August 2016.
Genmab (alongside its partner Janssen Biotech) executed an
impressive launch of its multiple myeloma drug Darzalex. Initial sales
have been strong and further positive studies have been reported
in earlier stages of the disease, all helping to boost the share price
during the period under review. Ophthotech shares moved higher
in anticipation of the phase 3 data announcement expected at the
end of 2016. Exelixis sales of their recently launched cabozanatib
for advanced renal cell cancer have been strong with the company
reporting $17.6m in sales for the first nine weeks on the market
following the FDA approval on 25 April 2016.
The main negative impact to absolute performance came in
December when Chimerix announced negative data for their phase
3 trials investigating Brincidofovir as an anti-viral agent in stem cell
transplant patients. Endo International shares sold off after the
company reported disappointing quarterly results and lowered
guidance. Gilead shares were under pressure after sales of their
hepatitis C virus franchise slowed at a faster rate than expected
and investors grew tired of waiting for a transformative deal to
materialise. Regeneron shares were weak on the news that it lost
the first ruling of an intellectual property battle with Amgen.
During the year, four of International Biotechnology Trust’s
holdings were acquired. ZS Pharma was bought in November by
AstraZeneca for $2.7bn. Dyax was acquired in the same month
by Shire for $5.9bn. Anacor was taken over in May of this year for
$5.2bn and finally Medivation was acquired by Pfizer for $14.0bn in
August as noted above.
6
International Biotechnology Trust plc
Strategic Report –
Investment Manager’s Review
Unquoted portfolio
Unquoted investments increased by 9.5% over the year, positively
contributing to the NAV for a third consecutive period. As the
unquoted portfolio has matured, many of the earlier investments
have begun to be harvested, with cash received in respect of
contingent milestones for previous exits in the year totalling £2.3m,
or 1.1% of NAV. The receipt of cash in respect of the remaining
milestones from ESBATech, which was sold to Alcon in 2006, was
the largest contributor.
The value of the remaining contingent milestones decreased by
£0.2m as a result of cash received in relation to Oncoethix and
delays in expected receipts of milestones from Ikano Therapeutics
(decrease of £0.8m). The value of Convergence milestones
increased by £0.5m following the presentation of data at the Biogen
R&D day in January 2016.
Transenterix decreased by £0.6m over the year. In April 2016,
Transenterix received a response on its 510(k) submission for
substantial equivalence stating that the FDA has determined that
the SurgiBotTM System did not meet the criteria. Whilst the FDA’s
decision was disappointing the company has continued to move
forward and announced the first sale of the ALF-X Surgical Robotic
system in Europe in August 2016.
Current investments rose in value by £2.2m in the period, with
uplifts in the valuations of Reshape (£0.9m) and Karus Therapeutics
(£0.5m) based on increased values of later funding rounds and NCP
Holdings (£0.6m) based on higher EBITDA. These were partially
offset by a write down in the value of Atopix/Oxagen due to a lack
of clinical efficacy in the Phase 2 trials for CRTH2 in moderate to
severe atopic dermatitis. Phase 2 trials are ongoing for CRTH2
in asthma. Novartis released Phase II data of a similar CRTH2
antagonist, showing significant reduction of sputum in eosinophilia,
following which the Company invested a further £200k in Atopix.
Delenex Therapeutics AG was sold in the year to Cell Medica in a
share-for-share exchange, leading to a new holding. Cell Medica is
a UK company which applies innovative technologies with the aim
of improving the treatment of cancer and immune reconstitution in
the exciting field of immuno-oncology.
Outlook
The biotechnology equity market has consolidated and sector
valuations now look attractive.
In the aftermath of the global financial market collapse in 2008, the
valuation of the whole equity market, as well as the biotechnology
sector, retreated to a level that could be characterised as
inexpensive, bearing in mind its earnings growth prospects. In
the subsequent years the valuation of the equity market has
returned to a level closer to its long-term average, supported by
easier monetary policy globally. Part of the strong performance of
the biotechnology sector in the years up to 2015 could thus be
characterised as regression to the mean phenomena. In the last
twelve months the biotechnology sector has moved down from its
peak and has underperformed broader equity markets. Based on
the current valuation of the sector and taking into consideration
its near-term earnings growth potential and the long-term growth
drivers, we have a positive view on the outlook for the sector.
forward pricing/earnings multiples of
larger US
The
biotechnology companies are at a discount to the market as a
whole, notwithstanding their superior earning growth prospects.
The headwinds represented by uncertainties around market
volatility and the imminent US election should substantially ease.
the
regulations. This
(patents) and government
How worried should we be about the drug pricing debate?
The biotechnology business model is simple. New innovative
products (drugs) are “protected” by a combination of intellectual
limits
property
competition and companies can charge high prices until this
protection ends, usually 7-15 years later. After this period,
government agencies regulating drug approvals will make original
trial results available for generic/specialty pharma drug producers
to market inexpensive copies of the original drug. The price gouging
which has sparked political outrage in the US is related to the non-
innovative end of the market. Some manufacturers have increased
the prices of cheap off-patent drugs to the level of innovative drugs
(e.g. Daraprim) and others have implemented excessive price hikes
for drugs unrelated to any improvement or innovation in the product
(e.g. EpiPen), drawing fire from both politicians and the patients
who rely upon these medicines. We believe these practices amount
to an abuse of the business model and we agree that this ought to
be tackled.
International Biotechnology Trust currently invests predominantly
in “biotech” – highly profitable innovative drug companies – and
not in the low margin generic/specialty pharma companies, some
of which have been responsible for employing these tactics.
Unfortunately the well-known NBI for reasons that we do not
understand, also includes generic/specialty pharma companies,
thus confusing investors. It is our firm belief that the fundamental
business model will remain intact and that potential future changes
from law makers will improve the model, both at the innovative end
but, more importantly, also at the generic end of the market. Hillary
Clinton was outraged by price gouging by generic/specialty pharma
companies but she also presented an initiative on Technology and
Innovation, defended intellectual property rights and proclaimed
the importance of innovative industries for the US economy.
What are the future drivers for the sector?
Our view remains unchanged. The biotechnology sector continues
to be a growth sector. The growth drivers remain intact. On the
demand side we continue to have a growing and ageing population
and an expanding middle class in parts of the world outside the
G20 countries. On the output side we are experiencing an era of
unprecedented scientific discovery and advancement, including
7
International Biotechnology Trust plc
Strategic Report –
Investment Manager’s Review
in the life sciences. With the increased knowledge about the
underlying causes of human diseases, a whole new range of
drugs can be developed. This can clearly be seen in the number
of development projects in the biotechnology industry, which is
constantly increasing. This will undoubtedly lead to future sales
growth and strong earnings progression for the sector.
Conclusion
The biotechnology sector has recently been out of favour, largely
due to concerns that there may be policy changes in the US that
could negatively impact drug pricing. We believe these fears have
provided a buying opportunity for the sector as investors gain
comfort in the knowledge that truly innovative companies will
not be targeted and returns from successful drug discovery and
development will continue to be attractive.
SV Life Sciences Managers LLP
Investment Manager
3 November 2016
8
International Biotechnology Trust plc
Strategic Report –
Ten Largest Investments
as at 31 August 2016
Investment
Region
Sector classification
Fair value of asset
£’000
2016
% of total equity
2015
% of total equity
1
Biogen
USA
Biotechnology
16,617
7.7
5.1
A company developing, manufacturing and commercialising biologic drugs primarily for inflammatory and autoimmune diseases as well
as cancer. The company’s major marketed products include Avonex, Tecfidera and Tysabri for the treatment of multiple sclerosis; and
Rituxan for the treatment of blood-based cancers and rheumatoid arthritis. Total revenues were $10.8bn in 2015.
2
Celgene
USA
Biotechnology
15,216
7.0
9.1
A company engaged in the discovery, development and commercialisation of innovative therapies designed to treat cancer and
immunological diseases. The company has six main marketed products: Revlimid, Pomalyst, Otezla, Thalomid, Vidaza, Abraxane and
a full pipeline of drug candidates in clinical development. Total revenues were $9.2bn in 2015.
3
Regeneron
USA
Biotechnology
13,557
6.3
7.2
A company with two significant marketed drugs. Eylea is indicated to treat age-related macular degeneration and Praluent is for patients
with elevated cholesterol. Total revenues were $4.1bn in 2015.
4
Incyte
USA
Biotechnology
11,324
5.2
3.0
A company focused on oncology and inflammation. The company’s lead product, Jakafi, is approved in the USA for the treatment of
myeloflbrosis and polycythemia vera. Total revenues were $754m in 2015.
5
Alexion
USA
Biotechnology
10,267
4.7
4.6
A company whose main drug product Soliris was approved for the treatment of PNH and Ahus, both rare “orphan” disease indications.
The Company recently embarked on two global launches for two additional rare disease medicines, Kanuma and Stensiq which the
company gained from its recent acquisition of Synageva. Total revenues were $2.6bn in 2015.
6
Actelion
Europe
Biotechnology
9,865
4.6
0.9
A company focused on pulmonary arterial hypertension (PAH) therapy. Their focus on G-Protein Coupled Receptors led to the discovery
of Opsumit, which was launched in the US in November 2013, the EU in 2014 and is now commercially available in 35 markets. They are
currently running four Phase III studies, two for the expansion of Opsumit into other indications. Total revenues were CHF 2.0bn in 2015.
7
Amgen
USA
Biotechnology
8,324
3.8
4.9
A company that pioneered the development of novel products based on advances in molecular biology. Amgen markets products
which are used to treat oncology/haematology, cardiovascular, inflammation, bone health and nephrology. The Company also has an
advanced pipeline of biosimilars in late stage development. Total revenues were $21.7bn in 2015.
8
Vertex
USA
Biotechnology
7,866
3.6
4.0
A Company engaged in the discovery and development of small molecule drugs for serious diseases. Vertex’s pipeline is focused on
viral diseases, cystic fibrosis, inflammation and cancer. The key value driver is Kalydeco which was launched in 2012 for the treatment of
cystic fibrosis. Total revenues were $9.0bn in 2015.
9
Biomarin
USA
Biotechnology
7,167
3.3
3.0
A company developing and commercialising drugs for rare genetic diseases of growth and metabolism. The company’s product
portfolio comprises four approved products - Naglazyme, Aldurazyme, Kuvan and Firdapse, and multiple clinical and preclinical drug
candidates. Total revenues were $890m in 2015.
10
USA
Exelixis
0.0
A company focused on developing and commercialising small molecule therapies with the potential to improve the treatment of cancer.
In April 2016 the FDA approved Cabometyx for patients with Advanced Renal Cell Carcinoma. Cabometyx was also approved by the
European Commission in September 2016. Total revenues were $37m in 2015.
Biotechnology
6,805
3.1
Total
107,008
49.3
At 31 August 2015, the ten largest investments represented 51.5% of the NAV.
All of the above investments are in quoted companies.
9
International Biotechnology Trust plc
Strategic Report –
Unquoted Investments
as at 31 August 2016
Fair value of asset
Investment
Region
Sector classification
£’000 % of total equity
1
2
3
Sutro Biopharma
USA
Biotechnology
2,923
1.3
A company developing the production of low-cost, high quality rapidly developed products, such as antibody drug conjugates and
technology for manufacturing protein pharmaceuticals and innovative vaccines.
Kalvista Pharmaceuticals
Europe
Biotechnology
2,827
1.3
An ophthalmology company developing Plasma Kallikrein inhibitors for the intra vitreal and oral treatment of Diabetic Macular Edema,
which has been spun out of Vantia.
ReShape Medical
USA
Medical Devices
2,629
1.2
A revenue growth company in the US that has developed an endoscopically placed balloon in the stomach without surgery to stimulate
the sensation of being full and so modulate appetite. The device is designed to be easily implantable and removable to facilitate
temporary, as well as long-term, use.
4
NCP Holdings
USA
Medical Research Services
2,167
1.0
Trading as Nordic Consultancy Partners. A company focused on providing Epic-only consulting within the US - implementation support
and optimisation. Epic makes software for mid-size and large medical groups, hospitals and integrated healthcare organisations -
working with customers that include community hospitals, academic facilities, children’s organisations, safety net providers and multi-
hospital systems.
5
6
7
8
9
10
EBR Systems
USA
Medical Devices
1,376
0.6
A company developing the first wireless cardiac stimulation device. The existing market for CRT devices exceeds $3bn in annual sales
and is expected to experience significant growth of 8% CAGR 2016 - 2020.
Karus Therapeutics
Europe
Biotechnology
1,165
0.5
A drug discovery and development company focused on the delivery of novel compounds for the treatment of inflammatory disorders
and oncology indications.
Atopix Therapeutics
Europe
Biotechnology
1,028
0.5
An early-stage biotechnology company developing a pipeline of novel drugs to treat inflammatory diseases. The company’s portfolio
includes a lead drug programme with the potential to treat asthma and other respiratory and inflammatory conditions with a once daily pill.
0.5
TopiVert
A company developing small, novel molecule medicines as topical treatments for inflammatory diseases of the gut and eye. Founded
in 2011 as a spin out of RespiVert, following its acquisition by Centocor Ortho BioTech (now Janssen BioTech).
Biotechnology
Europe
1,000
0.4
Autifony Therapeutics
A company focused on delivering drugs for hearing disorders by targeting specific ion channels which regulate the neuronal activity
within the auditory system.
Biotechnology
Europe
773
USA
Spinal Kinetics
0.2
A company pioneering a new generation of artificial discs for treating degenerative disc disease in the cervical and lumbar spine. The
company’s unique technology is designed to replicate a natural vertebral disc in its structure and physiologic range of motion in all
planes, including axial compression and rotation. This “natural” artificial disc has been designed to enable patients to move freely while
enjoying a sustained quality of life.
Medical Devices
493
11
Cell Medica
Europe
Biotechnology
228
0.1
A company which applies innovative technologies with the aim of improving the treatment of cancer and immune reconstitution following
hematopoietic stem cell transplant. The company is developing a pipeline of naturally occurring and gene-modified immune cell products.
Cell Medica acquired Delenex AG, an International Biotechnology Trust investment, in July 2016 in a share-for-share exchange.
Total
16,609
7.6
1. Entellus Medical and Transenterix are included in the unquoted portfolio from a performance and reporting perspective, but are quoted on the NASDAQ and
NYSE MKT LLC respectively. Information regarding these companies is publicly available.
2. Investments in unquoted companies that have previously been written down to nil net book value, but where ownership in the company is retained are not
disclosed in this table. 2016: 6 companies (2015: 7 companies).
10
International Biotechnology Trust plc
Strategic Report –
Unquoted Investments
as at 31 August 2016
Exited unquoted companies for which the Company retains rights to receive future contingent performance-based payments are shown below.
Fair value of asset
Investment
Region
Sector classification
£’000 % of total equity
1
Convergence Pharmaceuticals
Europe
Biotechnology
2,655
1.2
A company, spun out from GSK, focused on developing novel analgesic/pain relieving drugs that was sold to Biogen in 2015. The
terms of the deal provide for an upfront payment and a series of milestones. Previous proceeds received in respect of this investment
were £2.0m.
2
Ikano Therapeutics
USA
Biotechnology
1,427
0.8
A company focused on nasally delivered pharmaceutical products that was sold to Upsher Smith Laboratories in 2010. The terms
of the deal provide for an upfront payment and a series of milestones. Previous proceeds received in respect of this investment were
£0.2m.
3
Oncoethix
Europe
Biotechnology
1,152
0.6
A company, acquired by Merck in December 2014, focused on developing a portfolio of three promising new drugs for cancer
treatment. The terms of the deal provide for an upfront payment and a series of milestones. Previous proceeds received in respect of
this investment were £2.4m.
4
5
6
Archemix
USA
Biotechnology
284
0.1
A company that was sold to Baxter in 2010 and focused on the development of haemophilia therapy. The terms of the deal provide for
an upfront payment and series of milestones. Previous proceeds received in respect of this investment were £0.8m.
ESBATech
Europe
Biotechnology
41
0.0
Valuation represents amounts due from Escrow. ESBATech had a technological platform that allows the development of human single-
chain antibody fragments. Previous proceeds received in respect of this investment were £5.2m.
Itero Holdings LLC
USA
Biotechnology
28
0.0
A company that was sold to Watson in 2010. Valuation represents amounts due from escrow. Itero Holdings LLC was developing a
Recombinant Follicle Stimulating Hormone (rFSH). Previous proceeds received in respect of this investment were £0.4m.
Total
5,587
2.7
11
International Biotechnology Trust plc
Strategic Report –
Classification of Investments
Classification of investments by sector
as at 31 August
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
(10%)
90%
88%
9%
4%
6%
5%
3%
3%
2016
2015
Biotechnology
Specialty
pharmaceuticals
Medical
devices
(3%)
(5%)
Life sciences,
tools, diagnostics
and services
Net current
liabilities including
cash
Classification of investments by region
as at 31 August
95%
87%
110%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
(10%)
16%
10%
USA and Canada
Europe
The figures stated above are expressed as a percentage of NAV.
12
2016
2015
(3%)
(5%)
Net current
liabilities including cash
International Biotechnology Trust plc
Strategic Report –
Strategic Review
The Directors present their Strategic Review for the Company for
the year ended 31 August 2016.
Business model
The Company is an investment company as defined in Section 833
of the Act and its Ordinary shares are listed and traded on the
London Stock Exchange. The Company is incorporated in England
and Wales as a public limited company and domiciled in the UK.
Life of the Company
The Company’s Articles of Association provide for Directors to
put forward a proposal for the continuation of the Company at the
AGM at two-yearly intervals. The last continuation vote was held
at the AGM on 9 December 2015 and was passed on a show of
hands. Proxy votes cast in respect of the last continuation vote
were 22,470,125 (99.99%) in favour, 2,000 (0.01%) against and nil
withheld. The next continuation vote will be put to Shareholders at
the 2017 AGM.
Change to investment objective and policy
Shareholders approved an amendment
the Company’s
to
investment objective and policy at a General Meeting held on
29 September 2016 to allow the Company to invest in unquoted
funds which themselves invest in biotechnology companies.
Investment objective and policy
The Company’s investment objective is to achieve long-term
capital growth by investing in biotechnology and other life sciences
companies.
The Company will seek to achieve its objective by investing
in a diversified portfolio of companies which may be quoted or
unquoted and whose shares are considered to have good growth
prospects, with experienced management and strong potential
upside through the development and/or commercialisation of a
product, device or enabling technology. Investments may also be
made in related sectors such as medical devices and healthcare
services. While the Company’s portfolio is held as one pool of
assets, for operational purposes there is a quoted portfolio and
an unquoted portfolio. The portfolio is diversified by geography,
industry sub-sector and investment size with no single investment
in a company normally accounting for more than 15% of the
portfolio at the time of investment.
The portfolio is split between large, mid and small-capitalisation
companies, primarily quoted on stock exchanges in North America,
where the most established and commercial biotech and other life
sciences companies and companies operating in related sectors
are based, though investments will also be made in Europe, Asia
and Australia. Investments may also be made into unquoted
companies and into funds not quoted on a stock exchange,
including venture capital funds. This may include funds managed
by the Investment Manager and/or members of its group. The
primary purpose of investment in unquoted funds will be to gain
exposure to unquoted companies.
The Company may invest through equities, index-linked securities
and debt securities, cash deposits, money market instruments
and foreign currency exchange transactions. Forward or derivative
transactions are not used by the Company.
The Company may borrow from time to time to exploit specific
investment opportunities, rather than to apply long-term structural
gearing to the Company’s portfolio of investments.
Investment restrictions
The Company observes the following investment restrictions:
• The Company will invest primarily in biotechnology and other life
science companies that are either quoted or unquoted.
• The Company will not invest more than 15% in aggregate, of the
value of its gross assets in any one individual company at the time
of acquisition.
• The great majority of the Company’s assets will be invested in
the quoted biotechnology sector with a global mandate across
the entire spectrum of quoted companies. The weighting of
investment in unquoted companies will vary according to the
attractiveness of the opportunities identified.
• Gearing is restricted to 30% of NAV.
• The Company will not invest more than 15% in aggregate, of
the value of its gross assets in other closed-ended investment
companies quoted on the London Stock Exchange or any other
stock exchanges.
No material change will be made to the investment objective or
policy without the approval of Shareholders by ordinary resolution.
responsibility
Investment strategy
The Company has delegated
for day-to-day
investment of its assets to the Alternative Investment Fund Manager
(AIFM), SV. Consistent with the Company’s investment policy SV
makes the majority of its investments in biotechnology companies
focused on drug discovery and development. Investments are also
made in related sectors such as medical devices or healthcare
services.
SV uses a bottom up approach to selection focused on assessing
the fundamentals of each investment. The universe of possible
investments is assessed and reduced to take into account a
number of key criteria such as disease area target and market,
unmet medical need, management team, stock liquidity, market
capitalisation, product portfolio and competition. The risk/reward
of each investment is assessed on its own merits.
13
International Biotechnology Trust plc
Strategic Report –
Strategic Review
The Company has a £35.0m overdraft facility in place with
HSBC Bank plc which provides the Company with funds to take
advantage of investment opportunities that occur from time to time
on occasions when the portfolio is otherwise fully invested. It is the
intention of the Board that borrowings are made to exploit specific
investment opportunities, rather than to apply long-term structural
gearing to the Company’s portfolio of investments.
Performance
An outline of performance, market background, investment activity
and portfolio strategy during the year under review, as well as the
outlook, is provided in the Chairman’s Statement on pages 4 and 5
and the Investment Manager’s Review on pages 6 to 8.
Measuring performance – key performance indicators
(KPIs)
The Board uses the following KPIs to help assess progress against
the Company’s investment objective, further details of which can
be seen in the Financial Summary on page 2.
Absolute investment returns
The Company’s stated investment objective is to achieve long-term
capital growth and therefore the Board considers the progress of
the NAV per share to be the principal measure of the Company’s
success in meeting its objective.
Relative investment returns
The Board continues to compare its own returns against the NBI
(sterling-adjusted) and the FTSE All-Share Index as well as other
biotechnology funds over the longer-term.
Discount to the NAV
The Board routinely monitors the level of share price to NAV and
acts to limit its volatility and extent.
Ongoing charges (OC)
The Company’s OC are used as a further KPI to demonstrate
the Company’s ability to control costs to maximise Shareholder
returns.
Principal risks and uncertainties
The Board uses a framework of key risks which affect its business,
and related internal controls designed to enable the Directors to
take steps to mitigate these risks as appropriate. The Directors
have carried out a robust assessment of the principal risks facing
the Company, including those that would threaten its business
model, future performance, solvency or liquidity. A full analysis of
the Directors’ review of internal control is set out in the Corporate
Governance Statement on page 25.
The Company’s key risks include:
Strategic/Performance Risk
The Company’s returns are affected by changes in economic,
financial and corporate conditions which can cause market
fluctuations; a significant fall in equity markets is likely to affect
adversely the value of the Company’s portfolio. SV provides the
Board with information on the market at each Board meeting and
the Board discusses appropriate strategies to manage the impact
of any significant change in circumstances. The biotechnology
sector has its own specific risks leading to higher volatility than
broad equity market indices. While the Company seeks to maintain
a diversified portfolio within the confines of the current investment
policy, biotechnology sector-specific or equity market risks cannot
be eliminated by a diversified exposure to global biotechnology.
Discount to NAV: Failure to meet investment objectives and/or
poor sector-specific or general equity sentiment can affect the
Company’s share price, resulting in shares trading at a relatively
large discount to the underlying NAV. The Board continually reviews
the Company’s investment performance, taking into account
changes in the market, and regularly reviews the position of the
NAV per share compared to the share price. Further information on
the Company’s discount is provided in the Chairman’s Statement
on page 4.
Investment-related risks
investment strategy with the Company’s
Alignment of the
investment objective is essential and an inappropriate approach by
SV towards stock selection and asset allocation may lead to loss
and/or underperformance and failure to achieve the Company’s
objective of long-term capital growth, resulting in a widening of the
discount. The Board manages these risks through its framework of
investment restrictions and regular monitoring of SV’s adherence to
the agreed investment strategy.
SV provides regular reports to the Board on portfolio activity,
strategy and performance, as well as risk monitoring. The reports
are discussed in detail at Board meetings, which are all attended
by the Investment Manager, to allow the Board to monitor the
implementation of investment strategy and process.
Currency Risk: The Financial Statements and performance of the
Company are denominated in sterling because it is the currency
of most relevance to the Company’s investors. However, the
majority of the Company’s assets are denominated in US dollars.
Accordingly, the total return and capital value of the Company’s
investments can be significantly affected by movements in foreign
exchange rates. It is not the Board’s policy to hedge against foreign
currency movements.
Operational risks
As the Company’s main functions are delegated to third party
service providers, operational risk arises from insufficient processes
14
International Biotechnology Trust plc
Strategic Report –
Strategic Review
of internal control which would include compliance with statutes
and regulations governing the functions of the Company.
Tax, legal and regulatory risks
To qualify as an investment trust, the Company must comply with
Section 1158 Corporation Tax Act 2010 (CTA). Further details of
the Company’s approval under Section 1158 CTA are set out in the
Directors’ Report in “Principal activities”.
A breach of Section 1158 CTA could result in the Company
being subject to Capital Gains Tax on the sale of investments.
Consequently, pre-trade compliance checks are embedded into the
investment procedures of SV. Reports confirming the Company’s
compliance with the provisions of Section 1158 CTA are submitted
by SV to each Board meeting together with relevant portfolio and
financial information.
The Company is also subject to other laws and regulations, including
the Act, Financial Conduct Authority (FCA) Listing, Prospectus and
Disclosure Guidance and Transparency Rules and the Alternative
Investment Fund Manager’s Directive (AIFMD). Breaches of these
laws and regulations could lead to criminal action being taken
against Directors or suspension of the Company’s shares from
trading. SV and the Company Secretary provide regular reports
to the Board on compliance with relevant provisions and report
breaches without delay. The Board also relies on the services of its
other professional advisers to minimise these risks.
Such risks are assessed by the Audit Committee, which receives
regular reports from its main service providers as to the internal
control processes in place within those organisations.
Viability Statement
In accordance with provision C.2.2 of the UK Corporate Governance
Code, published by the Financial Reporting Council in September
2014, the Audit Committee has assessed the prospects of the
Company over a five year period. This is considered to be an
appropriate period given the long-term nature of investment and
the expected maturity period of the unquoted portfolio.
In its assessment of the viability of the Company, the Audit
Committee have considered each of the Company’s principal risks
and uncertainties and how these are managed. These risks and
uncertainties are detailed in the Strategic Review on pages 14
and 15 and the effectiveness of the Company’s risk management
and internal control systems are detailed on page 25. The Audit
Committee has also considered the following assumptions in
relation to the longer-term viability of the Company:
• the Articles of Association require the Company to seek approval
from Shareholders on the continuation of the Company at the
every second Annual General Meeting. In December 2015,
99.9% of the votes cast were in favour of the continuation of
the Company. The next continuation vote will be proposed in
December 2017.
15
• healthcare will continue to be an investable sector of the
international stock markets and that investors will still wish to
have an exposure to such investments;
• closed ended investment trusts will continue to be wanted by
investors;
• regulation will not increase to a level that makes the running of
the Company uneconomical in comparison to other competitive
products;
• the performance of the Company will continue to be satisfactory
and should performance be less than the Board deems acceptable
it has the appropriate powers to replace the Investment Manager;
and
• there are no material or significant changes in the principal risks.
The Audit Committee has also considered the income and
expenditure projections and the fact that the majority of the
Company’s investments comprise readily realisable securities
which can be sold to meet funding requirements if necessary.
In light of the considerations and based upon the Company’s
processes for considering the composition of the investment
portfolio, monitoring the ongoing costs of the Company, the
discount to the NAV, the level of gearing, and taking into account the
Company’s current position and principal risks and uncertainties,
the Board, based on a recommendation by the Audit Committee,
considers that there is a reasonable expectation that the Company
will continue to operate and meet its liabilities, as they fall due, over
the next five years.
Social, community, environmental and human rights policy
The Board recognises the requirement under Section 414C(7) of
the Act to detail information about environmental matters (including
the impact of the Company’s business on the environment), any
Company employees and social and community issues; including
information about any policies it has in relation to these matters
and effectiveness of these policies.
As an investment company, the Company has no direct social,
community, employee or environmental
responsibilities and
delegates all its functions to third party services providers. Details
of the Investment Management Agreement and arrangements with
other advisers, are provided in the Directors’ Report on page 19.
SV takes into account these considerations when making investment
decisions and determines its voting instructions at investee company
meetings accordingly. Full details around the application of the UK
Stewardship Code can be found in the Directors’ Report on page 24.
Further, the Company has not adopted a policy on Human Rights.
International Biotechnology Trust plc
Strategic Report –
Strategic Review
Modern Slavery Act 2015
The Company does not fall within the scope of the Modern Slavery
Act 2015 and the Directors also consider the Company’s supply
chain to be low risk as its suppliers are typically professional
advisers.
Accordingly, a slavery and human trafficking statement has not
been included.
Global greenhouse gas emissions
All of the Company’s activities are outsourced to third parties. As
such, it does not have any greenhouse gas emissions to report
from its operations, nor does it have responsibility for any other
emissions producing sources under the Act (Strategic Report and
Directors’ Report) Regulations 2013.
Gender representation on the Board
As at the date of this Report, there were three male Directors and
two female Directors on the Board.
Current and future developments
Details of the Company’s developments during the year ended
31 August 2016, along with its prospects for the future are set out
in the Chairman’s Statement on pages 4 and 5 and the Investment
Manager’s Review on pages 6 to 8. These are not intended to be
detailed forecasts.
By order of the Board
BNP Paribas Secretarial Services Limited
Company Secretary
3 November 2016
16
International Biotechnology Trust plc
Directors’ Biographies
Alan Clifton (Chairman)
Alan Clifton was appointed as a non-executive Director of the
Company on 21 February 2001 and subsequently as Chairman on
13 April 2012. He was previously the managing director of Morley
Fund Management (now Aviva Investors), the asset management
arm of Aviva plc, the UK’s largest insurance group. He is currently
chairman of JPMorgan Japan Smaller Companies Trust plc and a
director of several other investment companies.
John Aston, OBE
John Aston was appointed as a non-executive Director of the
Company on 23 February 2011 and served as Chairman of the
Audit Committee from April 2011 to July 2016. He was chief financial
officer of Astex Therapeutics Limited between January 2007 and
May 2010, and was chief financial officer of Cambridge Antibody
Technology for ten years to 2006. Prior to this he was a director
in investment banking with Schroders in London and previously
worked for British Technology Group and Price Waterhouse. He
is a Chartered Accountant and has a degree in Mathematics from
Cambridge University. He is currently a director of Polar Capital
Global Healthcare Growth and Income Trust plc and a member of
the Advisory Board of the CRT Pioneer Fund.
Dr Véronique Bouchet (Senior Independent Director)
Véronique Bouchet was appointed as a non-executive Director of
the Company on 1 September 2009. She is the founder director of
Novudel Associates, a lifesciences consultancy company. She has
previously held a variety of senior international roles in the healthcare
industry across several therapeutic areas and functions. She is a
non-executive director of Stevenage Bioscience Catalyst, a trustee
of Breast Cancer Now and a member of the Council and Finance
and Investment Committee of Queen Mary, University of London.
She has an MB BS from St Bartholomew’s Hospital Medical School
and holds a BSc in Psychology from University College London. She
has an MBA from INSEAD, and has been awarded the Institute of
Directors’ Diploma in Company Direction (Distinction).
Caroline Gulliver (Chair of the Audit Committee)
Caroline Gulliver was appointed as a non-executive Director of the
Company on 1 April 2015 and as Chair of the Audit Committee on
13 July 2016. She spent a 25 year career with Ernst & Young LLP,
from where she retired in 2012 to pursue other interests including
non-executive directorship positions. She is a Chartered Accountant
with a background in the provision of audit and advisory services
to the asset management industry, with a particular focus on
investment trusts. She is also a non-executive director of JPMorgan
Global Emerging Markets Income Trust plc.
Jim Horsburgh
Jim Horsburgh was appointed as a non-executive Director of
the Company on 1 February 2013. He commenced his career in
1977, joining Hill Samuel Investment Management as a graduate
trainee. He moved to the ICI Pension Fund in 1979 and Abbey Life
Assurance Company in 1982, where he managed the company’s
flagship life and pension equity funds. In 1984 he joined Schroder
Investment Management as a UK pension fund manager becoming
an account director, a director and in 1998 UK managing director.
He left Schroders in 2001 and, following a career break, was chief
executive of Witan Investment Trust plc from February 2004 to
October 2008.
All Directors are independent.
All Directors are members of the Audit, Management Engagement and
Nomination Committees.
Mr Clifton is Chairman of the Management Engagement and Nomination
Committees as well as the main Board.
17
International Biotechnology Trust plc
Directors’ Report
(incorporating the Corporate Governance Statement)
The Directors present their Report and the audited Financial
Statements of the Company for the year ended 31 August 2016.
Information disclosed in the Strategic Report
The following matters required to be disclosed in this Report under
the Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008 are covered in the Strategic Report
on pages 3 to 16: the Company’s status, investment objective
and policy, investment strategy, investment restrictions, financial
risk management, the Company’s exposure to risks, a statement
regarding the Company’s greenhouse gas emissions and the
current and future developments as well as important events
effecting the Company since the year end.
Principal activities
The principal activity of the Company is the making of investments
in accordance with the investment objective and policy set out
on page 13. The Board delegates investment management of the
Company’s portfolio to SV. A description of the Company’s activities
and strategy during the year, as well as the outlook, is given in
the Chairman’s Statement on pages 4 and 5 and the Investment
Manager’s Review on pages 6 to 8.
The Company conducts itself as an approved investment trust for
the purposes of Section 1158 CTA which allows exemption from
Capital Gains Tax. Such approval has been granted from HM
Revenue & Customs (HMRC) and the Directors expect the affairs
of the Company to continue to satisfy the conditions for exemption.
The current portfolio of the Company is such that its shares are
eligible for inclusion in an ISA, and the Directors expect this eligibility
to be maintained.
The Company currently conducts its affairs so that its shares can
be recommended by Independent Financial Advisers in the UK to
ordinary retail investors in accordance with the FCA rules in relation
to non-mainstream investment products and intends to continue to
do so. The shares are excluded from the FCA’s restrictions which
apply to non-mainstream investment products because they are
shares in an authorised investment trust.
Results and dividends
The results for the year are shown in the Statement of Comprehensive
Income on page 36. Shareholders approved at the General Meeting
held on 29 September 2016, the proposed introduction of an annual
dividend, equivalent to 4% of the Company’s NAV as at the last day
of the Company’s preceding financial year, being 31 August, to be
payable through two equal distributions in January and August of
each year, which is expected to be paid out of capital reserves.
The Company has not declared a dividend in 2016 (2015: £nil).
Share capital
At the AGM on 9 December 2015, Shareholders gave approval for
the Company to purchase up to 5,956,675 Ordinary shares of its
own capital for cash, being 14.99% of the share capital in issue as
at the date of the Notice of Meeting. During the year under review
the Company repurchased 2,575,000 Ordinary shares into treasury
representing 6.4% of the issued share capital at the start of the year
(excluding shares held in treasury). The Company also cancelled
2,825,000 Ordinary shares previously held in treasury. Subsequent
to the year end, the Company repurchased 125,000 Ordinary shares
for holding in treasury and cancelled 295,000 Ordinary shares
previously held in treasury. The issued share capital of the Company
is detailed in note 15 to the Financial Statements. The total number
of Ordinary shares at the date of this report is 41,342,663 of which
3,795,000 Ordinary shares are held in treasury.
Directors
The biographies of the Directors of the Company are set out on
page 17, all of whom were in office during the year and up to the
date of the signing of the Financial Statements. Since 2009, the
Board has been regularly refreshed with the appointment of a new
Director replacing a resigning Director every two years. The Board
will continue to refresh the Board where necessary, taking into
consideration the Company’s agreed strategic priorities, to ensure
the right balance of skills and experience is achieved to enable them
to discharge their respective duties and responsibilities effectively.
The Board has agreed a formalised policy on tenure as outlined in
the Corporate Governance Statement on page 22. In accordance
with the Company’s policy on tenure, Alan Clifton, having served
as a non-executive Director for more than nine years, will retire
at the forthcoming AGM and, being eligible, offer himself for re-
election. In addition, in accordance with the Company’s Articles
of Association, Jim Horsburgh offers himself for re-election at the
forthcoming AGM.
Alan Clifton and Jim Horsburgh are both deemed by the Board
to be independent in both character and judgement, as indicated
on page 22 and have performed their duties in an independent
manner at all times.
The Board supports the re-elections of the above mentioned
Directors and considers that they continue to demonstrate
commitment to their roles and provide a valuable contribution to
the deliberations of the Board. Furthermore, Alan Clifton, in his
role as Chairman, provides the Board with sound leadership and
demonstrates strong independence in the manner in which he
discharges this responsibility. The Board therefore recommends
that Shareholders vote in favour of the re-election of Alan Clifton
and Jim Horsburgh.
18
International Biotechnology Trust plc
Directors’ Report
(incorporating the Corporate Governance Statement)
Directors’ and Officers’ liability insurance and Directors’
indemnities
Directors’ and Officers’ Liability Insurance cover was purchased
and maintained by the Company for the financial year in respect of
the Directors and will be due for renewal in April 2017.
The Company had a Deed Poll in place during the year under review
to indemnify the Directors against any liability suffered or incurred in
his or her capacity as a Director of the Company.
Investment Manager’s performance and contractual
arrangements
The Investment Manager is SV Life Sciences Managers LLP
(SV). The performance of the Investment Manager is reviewed
continuously by the Board with a formal evaluation being undertaken
by the Management Engagement Committee at least annually. As
part of this process, the Committee reviewed the key terms of the
Company’s agreement with SV, the terms of their remuneration as
set out below and a comparison with their peers. The Committee
reviewed the appropriateness of the appointment of the AIFM in
February 2016 with a recommendation being made to the Board.
The Board believes the continued appointment of SV is in the
interests of Shareholders as a whole. In coming to this decision,
it also took into consideration the quality and depth of experience
allocated to the management of the portfolio and the level of
performance of the portfolio in absolute terms and also by reference
to the benchmark index.
SV is entitled to a management fee payable monthly at the rate of
0.9% per annum of the Company’s NAV. In addition, SV is entitled
to an annual performance fee. During the year under review the
Board and the Investment Manager agreed amendments to the
performance fee effective from 1 September 2015 (subsequently
updated on 29 September 2016 to reflect the change in the
Investment Objective and Policy). The revised fee is calculated
as follows:
• The portfolio consists of two pools: quoted and unquoted.
• The fee on the quoted pool is 10% of relative outperformance
above the sterling-adjusted NBI plus a 0.5% hurdle.
• The fee on the unquoted pool is 20% of net realised gains, taking
into account any unrealised losses but not unrealised gains.
• The payment of the performance fee is subject to the following
limits:
— The maximum performance fee in any one year is 2% of
average net assets;
— Any underperformance of the quoted portfolio against the
Benchmark is carried forward for the current financial period
plus two succeeding periods; and
— Performance fees in excess of the performance fee cap
are carried forward for the current financial period plus two
succeeding periods and being offset against any subsequent
underperformance before being paid out.
Under normal circumstances the Investment Management Deed is
terminable by either party on 12 months’ written notice.
A performance fee of £575,000 is payable in respect of the year
ended 31 August 2016 (31 August 2015: £1,348,000). This is
predominantly due to the 9.5% return from the unquoted portfolio,
though the quoted portfolio also outperformed.
Following Shareholder approval of the amendments to the
investment objective and policy at the Company’s General Meeting
on 29 September 2016, the Board agreed to make a commitment
of $30 million into SVLSF VI, which should enable the Company
to achieve the benefits of diversification, access to a wider range
of unquoted companies and increased liquidity as outlined above.
There will be no double charging of investment management fees in
relation to this commitment. The performance fee is calculated as
20% of realised gains once all committed capital has been repaid.
Administration, Depositary and Company Secretarial
Services
Fund accounting administration, depositary and custody services
are provided to the Company by HSBC Bank plc. The Administration
Agreement with HSBC Bank plc continues until terminated by
either party on giving not less than 12 months’ written notice.
The Depositary Agreement with HSBC Bank plc continues until
terminated by either party on giving not less than 90 days’ written
notice. The Depositary also retains the right to serve notice on the
Company requiring it, at the expiry of a period of not less than 270
calendar days, to give notice to the FCA of a proposal to wind-up
the affairs of the Company unless a replacement Depositary has
been appointed before the end of that period.
Company Secretarial services are provided by BNP Paribas
Securities Services S.C.A. who delegate this activity to their wholly
owned subsidiary, BNP Paribas Secretarial Services Limited. The
Agreement with BNP Paribas Securities Services S.C.A. may be
terminated by either party on giving not less than six months’
written notice.
Companies Act 2006 disclosures
In accordance with Section 992 of the Act the Directors disclose
the following information:
• The Company’s capital structure is summarised on page 49,
voting rights are summarised on page 71, and there are no
restrictions on voting rights nor any agreement between holders
of securities that result in restrictions on the transfer of securities
or on voting rights;
• There exist no securities carrying special rights with regard to the
control of the Company;
• The Company does not have an employees’ share scheme;
19
International Biotechnology Trust plc
Directors’ Report
(incorporating the Corporate Governance Statement)
• The rules concerning the appointment and replacement of
Directors, amendment to the Articles of Association and powers
to issue or buy back the Company’s shares are contained in the
Articles of Association of the Company and the Act;
• There exist no agreements to which the Company is party that
may affect its control following a takeover bid; and
• There exist no agreements between the Company and its Directors
providing for compensation for loss of office that may occur
because of a takeover bid.
Substantial share interests
As at the year end and up to the date of this Report, the interests
of 3% or more of the voting rights attaching to the Company’s
issued share capital, as notified to the Company in accordance
with Chapter 5 of the FCA’s Disclosure Guidance and Transparency
Rules or ascertained by the Company were as follows:
As at 31 August
2016
As at 3 November
2016
Number of
Ordinary
shares held
%
of total
voting
rights
Number of
Ordinary
shares held
%
of total
voting
rights
10,206,891
27.1
9,726,706
25.9
proposal for the continuation of the Company to Shareholders at
two yearly intervals. Shareholders approved the continuation of the
Company in 2015 and a further vote will take place in 2017.
As a result, the Directors believe that it is appropriate to adopt the
going concern basis in the preparation of the Financial Statements
as there are no material uncertainties related to events or conditions
that may cast significant doubt about the Company’s ability to
continue as a going concern.
Independent Auditors
In light of the requirements of the EU Audit Directive, the Company
has recently conducted a tender of audit services and, following
recommendation by the Audit Committee, the Board has decided
to retain PricewaterhouseCoopers LLP as Auditor for the Company.
the Company’s Auditors,
in 2007,
Having been appointed
PricewaterhouseCoopers LLP, have expressed their willingness
to continue in office. Accordingly, resolutions to re-appoint them
as Auditors and to authorise the Directors to determine their
remuneration will be proposed at the forthcoming AGM. There do not
exist any contractual obligations that restrict the choice of Auditors.
The Board considers that the Auditors remain independent.
Disclosure of information to Auditors
In accordance with Section 418 of the Act, the Directors at the date
of approval of this Report, as listed on page 17, confirm that:
Shareholder
Lazard Asset
Management (US)
East Riding Pension
Fund
Hargreaves Lansdown
Asset Management
South Yorkshire
Pensions Authority
M&G Investment
Management
Alliance Trust
West Yorkshire
Pension Fund
Barclays Wealth
1,157,065
3,725,000
9.9
3,725,000
9.9
(a) so far as each Director is aware, there is no relevant audit
information of which the Company’s Auditors are unaware; and
2,761,382
7.3
2,933,449
7.8
1,700,000
4.5
1,700,000
4.5
(b) each Director has taken all the steps that they ought to have
taken as a Director in order to make themselves aware of any
relevant audit information and to establish that the Company’s
Auditors are aware of that information.
1,698,928
1,262,414
1,245,599
4.5
3.4
3.3
3.1
1,653,749
1,330,418
1,245,599
1,213,374
4.4
3.5
3.3
3.2
AGM
The AGM will be held on Tuesday, 13 December 2016 at 12.30 pm at
the offices of BNP Paribas Fortis, 5 Aldermanbury Square, London
EC2V 7BP. Details of the business of the Meeting are set out in the
Notice of Meeting on pages 68 to 73, amongst which the Board is
seeking Shareholders’ approval of three special resolutions.
Going concern
The Company has reviewed the guidance issued by the Financial
Reporting Council (FRC) in order to determine whether the
going concern basis should be used in preparing the Financial
Statements for the year ended 31 August 2016. In doing so, the
Directors have considered the Company’s borrowing requirements
and covenants on existing borrowings; liquidity risk (see note 24
on page 56); the business environment and its impact on financial
risk; the nature of the portfolio; and expenditure projections for the
next 12 months. The Company’s assets consist mainly of equity
shares in companies listed on the NASDAQ stock exchange and
in most circumstances are realisable within a short timescale.
The Company’s Articles of Association require the Board to put a
Share buybacks and treasury share authority
Shareholders approved authorities for the Company to repurchase
up to 14.99% of its issued share capital (of which up to 10% of the
issued share capital may be retained in treasury for potential re-issue
at any time) at the AGM held on Wednesday, 9 December 2015.
During the year ended 31 August 2016, the Company bought back
2,575,000 of its issued shares to be held in treasury and 2,825,000
were cancelled. The Directors continue to believe it is in the best
interests of the Company and its Shareholders to have a general
authority for the Company to buy back its shares in the market
for cancellation or holding in treasury for potential subsequent re-
issue. No shares held in treasury will be re-issued at a discount
20
International Biotechnology Trust plc
Directors’ Report
(incorporating the Corporate Governance Statement)
wider than the discount prevailing at the time of acquisition. The
authority to hold shares in treasury is in addition to the power to buy
back shares for immediate cancellation.
Accordingly, a special resolution to authorise the Company to
purchase up to 14.99% of the share capital in issue at the date
of this Report for cancellation or for holding in treasury (up to a
maximum of 10% of the share capital in issue at the date of this
Report) will be proposed at the forthcoming AGM. Purchases will
only be made if the Directors consider them to be for the benefit
of the Company and its Shareholders, taking into account relevant
factors and circumstances at the time.
Issues of new shares and disapplication of pre-emption rights
In order to provide maximum flexibility, the Directors also wish to
seek the power to allot new Ordinary shares for cash at a premium
to the NAV at the forthcoming AGM.
The Directors intend to use this authority to issue new shares only
if they believe it is advantageous both to new investors and to the
Company’s existing Shareholders to do so. If new Ordinary shares
are to be allotted for cash, the Act requires such new shares to be
offered first to existing holders of Ordinary shares. This entitlement
is known as a “pre-emption right”. In certain circumstances it is
beneficial for the Directors to allot shares for cash otherwise
than pro rata to existing Shareholders and the Act provides for
Shareholders to give such power to the Directors by waiving their
pre-emption rights. Therefore, resolutions will be proposed at the
AGM which, if passed, will give the Directors power to allot Ordinary
shares for cash on a non pre-emptive basis up to an aggregate
nominal amount of £469,345.75, equivalent to 1,877,383 Ordinary
shares of 25p each and 5% of the Company’s existing issued
Ordinary share capital as at the date of this Report.
Notice of General Meetings
At last year’s AGM, a special resolution was passed allowing
General Meetings of the Company to be called on a minimum
notice period as provided for in the Act. For meetings other than
AGMs this is a period of 14 clear days. The Board believes that
it should have the flexibility to convene General Meetings of the
Company (other than AGMs) on 14 clear days’ notice. The Board
is therefore proposing Resolution 10 as a special resolution to
approve 14 clear days as the minimum period of notice for all
General Meetings of the Company other than AGMs. The authority,
if given, will be effective until the Company’s next AGM or until the
expiry of 15 months from the date of the passing of the special
resolution (whichever is earlier).
Recommendation
The Directors consider that passing the resolutions proposed at the
AGM will be in the best interests of Shareholders as a whole and
unanimously recommend that Shareholders vote in favour of each of
the resolutions as they intend to do so in respect of their own beneficial
holdings. The Board encourages your attendance at the AGM.
CORPORATE GOVERNANCE STATEMENT
Corporate governance
The Board is committed to high standards of corporate governance
and has implemented a framework for corporate governance
appropriate for an investment trust. The Board has considered the
principles and recommendations of the AIC Code of Corporate
Governance 2014 (AIC Code) by reference to the AIC Corporate
Governance Guide for Investment Companies (AIC Guide), both of
which can be found on the AIC website www.theaic.co.uk. The AIC
Code, as explained by the AIC Guide, addresses all the principles
set out in the UK Corporate Governance Code as well as setting
out additional principles and recommendations on issues that are of
specific relevance to the Company.
As an investment company most of the day to day responsibilities
are delegated to outside parties as the Company has no employees
and all the Directors are non-executive. Many of the provisions of the
UK Corporate Governance Code are not directly applicable to the
Company. The Board has determined that reporting against the AIC
Code provides the most appropriate information to Shareholders,
therefore the report on corporate governance describes how the
principles of the AIC Code have been applied.
Statement of compliance
The Board considers that, for the year under review each Director, the
Board and the Company have complied with the recommendations
of the AIC Code in so far as they apply to the Company’s business
and with the relevant provisions of the UK Corporate Governance
Code except as noted below:
• as all Directors are non-executive Directors and day to day
management has been contracted to third parties the Company
does not have a separate role for a Chief Executive from that of
Chairman of the Board;
• no Senior Independent Director was appointed throughout the
year under review with the role being carried out by both Caroline
Gulliver as Audit Committee Chairman (as regards to being
available to Shareholders if they have a concern that contact
through the normal channels has failed to resolve or where such
contact is inappropriate) and Véronique Bouchet (as regards to the
annual appraisal of the Chairman). Subsequent to the year end,
Véronique Bouchet was appointed as Senior Independent Director
with effect from 1 November 2016. Dr Bouchet’s appointment as
Senior Independent Director will be considered on an annual basis;
• as there are no executive Directors the provisions of the UK
Corporate Governance Code in respect of executive directors’
remuneration are not relevant;
• the Company does not have an internal audit function as it relies on
the systems of control operated by third party suppliers in particular
those of SV. The Board monitors these systems of internal control
to provide assurance that they operate as intended; and
21
International Biotechnology Trust plc
Directors’ Report
(incorporating the Corporate Governance Statement)
• following the year end, a General Meeting was convened for
29 September 2016. This General Meeting was called on not
less than 14 clear days’ notice in accordance with the authority
approved by Shareholders at the AGM last year. However the
AIC Code states that General Meetings should be called on not
less than 14 working days’ notice and therefore on that basis, the
Company was not compliant with this aspect of the AIC Code.
advise the Company Secretary as soon as they become aware of
any conflicts of interest.
The Board confirms that, during the year ended 31 August 2016,
it authorised any potential conflicts of interest that would impact
the Board’s or the Company’s operations, and that all procedures
relating to their authorisation were appropriate and followed.
Application of the AIC Code’s principles
The Board considers that it has managed its affairs throughout
in compliance with the
the year ended 31 August 2016
recommendations of the AIC Code and observed the relevant
requirements throughout the year under review. Where non
compliance occurs, an explanation has been provided.
The Board will continue
recommendations set out in the AIC Code in the future.
to observe
the principles and
This Corporate Governance Statement, together with the Management
Report and Directors’ Responsibilities Statement set out on page 29,
indicate how the Company has complied with the principles of good
governance and meets internal control requirements.
Role of the Chairman
The Chairman is responsible for leading the Board, ensuring its
effectiveness in all aspects of its role, and setting its agenda.
Role of the Board
The Board determines and monitors the Company’s investment
objective and policy, and considers its future strategic direction; being
collectively responsible for the long-term success of the Company.
A schedule of matters specifically reserved for consideration and
decision by the Board has been adopted. The Board is responsible
for presenting a fair, balanced and understandable assessment of
the Company’s position and, where appropriate, future prospects in
Annual and Half Yearly Financial Reports and other forms of public
reporting. It monitors and reviews the Shareholder base of the
Company, marketing and Shareholder communication strategies,
and evaluates the performance of all service providers, with input
from its Committees where appropriate. A procedure has been
adopted for Directors, in the furtherance of their duties, to take
independent professional advice at the expense of the Company,
where appropriate. The Directors have access to the advice and
services of the corporate Company Secretary through its appointed
representative, who is responsible to the Board for, inter alia, ensuring
that Board procedures are followed and that applicable rules and
regulations are complied with. The appointment and removal of the
Company Secretary is a matter for the whole Board.
Conflicts of interest
The Directors have declared any conflicts of interest to the Company
Secretary, who maintains the Register of Directors’ Conflicts of
Interests. It is reviewed annually by the Board, and the Directors
22
Board diversity, composition and independence
The Board currently consists of five non-executive Directors. The
biographical details of each Director, including his/her length of
service, are set out on page 17.
The Board recognises the objectives of the Davies Report to
improve the performance of corporate boards by encouraging
the appointment of the best people from a range of differing
perspectives and backgrounds.
The Directors have adopted a policy on tenure that is considered
appropriate for an investment trust. The Board is of the opinion that
long service does not necessarily compromise the independence
or contribution of Directors of investment trusts where continuity
and experience can significantly benefit a board, a view supported
by the AIC.
The independence of Directors will continue to be assessed on a
case by case basis. In order to give Shareholders the opportunity
to endorse this policy, any Director who has served for more
than nine years will thereafter be subject to annual re-election by
Shareholders. Alan Clifton has served the Company for over nine
years. The Board has considered his independence with particular
care and considers that his individual skills and knowledge of both
the Company and the industry provide continuity and an overall
balance to the Board. In particular, he continues to demonstrate
a strong independence in the manner in which he discharges his
responsibilities as Chairman.
The Board is satisfied that it is of sufficient size, with an appropriate
balance of skills and experience, and that no individual or group of
individuals is, or has been, in a position to dominate decision making.
Induction and training
When a Director is appointed, he or she receives a full, formal and
tailored induction, which is administered by the Company Secretary.
Directors are provided, on a regular basis, with key information on
the Board’s policies, regulatory requirements and internal controls.
Changes affecting Directors’ responsibilities are advised to the
Board as they arise and the Chairman regularly reviews and agrees
with each Director his or her training and development needs.
Other advisers to the Company also prepare reports for the Board
from time to time. In addition, Directors attend ad-hoc seminars,
conferences and other forums covering issues and developments
relevant to both the investment trust and biotechnology industries.
International Biotechnology Trust plc
Directors’ Report
(incorporating the Corporate Governance Statement)
Board evaluation
The Board has adopted an annual evaluation of its own
performance and that of its Committees and individual Directors
using a questionnaire as the basis for this formal and rigorous
annual evaluation. Evaluation takes place in two stages. First, the
evaluation of individual Directors is led by the Chairman and the
evaluation of the Chairman’s performance is led by the Senior
Independent Director. Secondly, the Board evaluates its own
performance and that of its Committees.
The Board evaluation considers attendance, the balance of skills,
experience, independence and knowledge of the Board, its
diversity, including gender, how the Board works together as a unit,
and other factors relevant to its effectiveness including the Board’s
ability to challenge SV’s recommendations.
The Chairman uses the feedback from the discussion to make
recommendations to improve performance where necessary.
The Board considers annually, in the absence of the Chairman,
matters pertaining to his performance. It was concluded that the
performance of the Directors was satisfactory in all areas and they
were confident in their ability to make effective contributions and to
demonstrate commitment to their roles.
Meetings and attendance
The Board meets at least five times each year. Additional meetings
are arranged as required and regular contact between Directors,
SV and the Company Secretary is maintained throughout the year.
Representatives of SV and the Company Secretary attend each
meeting and other advisers also attend when requested to do so
by the Board.
The number of formal meetings of the Board and its Committees
held during the year and the attendance of individual Directors are
shown below:
Board
Audit
Committee
Nomination
Committee
Management
Engagement
Committee
Total
John Aston
Véronique Bouchet
Alan Clifton
David Clough*
Caroline Gulliver
Jim Horsburgh
5
5
5
5
2
5
5
* Retired on 9 December 2015.
3
3
3
3
1
3
3
2
2
2
2
0
2
2
1
1
1
1
0
1
1
23
The Board met twice to discuss strategic matters separate from
normal agenda matters. The matters covered included marketing
initiatives, investment policy and dividend policy, and the meetings
were attended by external consultants.
Four additional Board meetings were also held during the year
under review.
The Board is satisfied that each of the Chairman and the non-
executive Directors commit sufficient time to the affairs of the
Company to fulfil his or her duties as Directors.
Information flows
The Chairman ensures that all Directors receive, in a timely manner,
relevant management, regulatory and financial information and are
provided, on a regular basis, with key information on the Company’s
policies, regulatory requirements and internal controls. The Board
receives and considers reports regularly from SV, the Company
Secretary and other key advisers. Ad-hoc reports and information
are supplied to the Board as required.
Committees
The Board has delegated certain responsibilities and functions
to three Board Committees, all of which operate under written
terms of reference. Copies of the terms of reference for the Board
Committees have been published on the Company’s website. The
Chairman of the Board acts as Chairman for the Management
Engagement and Nomination Committees, and, with effect from
13 July 2016, Caroline Gulliver replaced John Aston as Chairman
of the Audit Committee. Committee membership is detailed on
page 17.
Audit Committee
The Audit Committee provides a forum through which the
Company’s external Auditors report to the Board. The main
responsibilities of the Audit Committee include monitoring the
integrity of the Company’s Annual Report and appropriateness
of its accounting policies; reviewing the internal control systems
and the risks to which the Company is exposed; and making
recommendations to the Board regarding the appointment of
the external Auditors, their independence and the objectivity and
effectiveness of the audit process.
The Audit Committee monitors any non-audit services being
provided to the Company by its external Auditors, in accordance
with the recommendations of the AIC Code. The Audit Committee
met three times during the year ended 31 August 2016 and reported
its findings to the Board on the matters described above after each
meeting. The Board considers that all the Directors have relevant
and recent financial experience as a result of their professional
positions in financial services and other industries as detailed in the
biographies on page 17 of this Report.
International Biotechnology Trust plc
Directors’ Report
(incorporating the Corporate Governance Statement)
The Company having no employees does not have a whistleblowing
policy procedure in place.
During the year ended 31 August 2016, the Audit Committee
considered the following significant issues:
Issue considered
How the issue was addressed
Valuation and
Consideration and review of valuation
existence of unlisted
processes and methodology at SV
investments and
and HSBC to establish accuracy and
gains and losses from
completeness over the valuations being
those investments
recommended for approval to the Board.
Valuation and
Consideration and review of processes
existence of listed
and procedures at HSBC and SV to
investments and
identify key processes and controls over
gains and losses from
the pricing and valuation of stocks.
those investments
Review of internal
Review of risk map, compliance against
control system
the AIC Code, compliance with Section
and risks
1158 Corporation Tax Act 2010 and all
policies and procedures in place.
Performance Fee
Review of the accuracy of the calculation
and completeness of disclosure.
Having taken all available information into consideration and having
discussed the content of the Annual Financial Report with the AIFM,
Investment Manager, Company Secretary and other third party
service providers, the Audit Committee has concluded that the
Annual Financial Report for the year ended 31 August 2016, taken
as a whole is fair, balanced and understandable and provides the
information necessary for Shareholders to assess the Company’s
position and performance, business model and strategy and has
reported these findings to the Board. The Board’s conclusions in
this respect are set out on page 29. The Board was made fully aware
of any significant financial reporting issues and judgements made
in connection with the preparation of the Financial Statements.
Effectiveness of the external audit process
The Audit Committee annually reviews the performance of
PricewaterhouseCoopers LLP, the Company’s external Auditors
and remains satisfied with the effectiveness of the audit provided.
The Auditors are required to rotate the audit partner every five
years. Mr Allan McGrath is the assigned audit partner overseeing
the audit for the fourth year.
Details of the amount paid to the external Auditors during the
financial year under review, for their audit services, are set out in
note 5 to the Financial Statements on page 44. The Audit Committee
annually monitors the non-audit services provided to the Company
and has developed a formal policy to ensure that such services do
not impair the independence or objectivity of the Auditors. No non-
audit services were provided during the year under review.
Nomination Committee
The Nomination Committee met twice during the year ended
31 August 2016 and intends to meet at least annually in the
future. The function of the Committee is to consider and make
recommendations to the Board on its composition and balance,
including identifying and nominating to the Board new Directors and
proposing that existing Directors be re-elected.
Before considering new appointments the Nomination Committee
evaluates the balance of skills, experience, independence, and
knowledge of the Board, and, in light of this evaluation, prepares
a description of the roles and capabilities required for particular
appointments. Directors’ independence and diversity of the Board
(including gender) is also considered. Newly appointed Directors are
then assessed using the aforementioned criteria.
On those occasions when the Committee is reviewing the Chairman,
or considering his successor, the Nomination Committee is chaired
by the Senior Independent Director or, in their absence, another
Committee member and the Chairman abstains from discussions
in this regard.
Management Engagement Committee
The Management Engagement Committee met once during the
year ended 31 August 2016 and will meet annually thereafter to
review matters relating to the performance of the Company’s third
party service providers, including SV, and to review the terms of
their contractual arrangements with the Company, ensuring their
continued competitiveness for Shareholders.
Relations with Shareholders
The Board receives feedback on the views of Shareholders from its
corporate broker and SV, both of whom regularly meet with the larger
Shareholders. The Chairman, and other Directors where appropriate,
discuss governance and strategy with major Shareholders and the
Chairman ensures the communication of Shareholders’ views to
the Board.
The Board believes that the AGM provides an appropriate forum
for investors to communicate with the Board, and encourages
Shareholder participation. The AGM is typically attended by the full
Board of Directors and proceedings include a presentation by SV.
There is an opportunity for individual Shareholders to question the
Chairman of the Board and the Chairman of each Board Committee
at the AGM. Details of proxy votes received in respect of each
resolution are made available to Shareholders at the meeting and are
published on the Company’s website following the meeting.
UK Stewardship Code
The UK Stewardship Code published in July 2014 aims to enhance the
quality of engagement between institutional investors and companies
to help improve long-term returns to Shareholders and the efficient
exercise of governance responsibilities.
24
Although the Board believes that it has robust systems of internal
control in place this can provide only reasonable and not absolute
assurance against material financial misstatement or loss and is
designed to manage, not eliminate, risk. The Company does not
have an internal audit function as it employs no staff and delegates to
third parties most of its operations. By the procedures set out above,
the Board will continue to monitor its system of internal control in
accordance with the Financial Reporting Council’s Guidance on Risk
Management, Internal Control and Related Financial and Business
Reporting and will continue to take steps to embed the system of
internal control and risk management into the operations of the
Company. In doing so, the Audit Committee will review at least
annually whether a function equivalent to an internal audit is needed.
During the course of its review of the systems of internal control, the
Board has not identified nor has it been advised of any findings or
weakness which it has determined to be significant.
Anti-bribery policy
The Company is committed to the practice of responsible behaviour
and to complying with all laws, regulations and other requirements
which govern the conduct of its activity. The Company is fully
committed to instilling a strong anti-corruption culture and is fully
committed to compliance with anti-bribery legislation including, but
not limited to, the Bribery Act 2014.
On behalf of the Board
Alan Clifton
Chairman
3 November 2016
International Biotechnology Trust plc
Directors’ Report
(incorporating the Corporate Governance Statement)
The Company has delegated to SV the day to day operations of this,
full details of which can be found on the website:
www.ibtplc.com
Accountability and audit
The Management Report and Directors’ Responsibilities Statement
in respect of the Financial Statements are on page 29 and a
statement of going concern is set out in the Directors’ Report on
page 20. The Independent Auditors’ Report can be found on pages
30 to 35.
Internal control
The AIC Code requires the Board to conduct at least annually a
review of the adequacy of the Company’s systems of internal
control and report to Shareholders that it has done so. The Board
has reviewed a detailed Risk Map identifying significant strategic,
investment-related, operational and service provider-related risks. It
has adopted a monitoring system to ensure that risk management
and all aspects of internal control are considered on a regular basis,
and fully reviewed it at least annually. The Board is satisfied that
these tools permit it to review the effectiveness of the Company’s
internal controls and on that basis confirms that it has reviewed the
effectiveness of the Company’s risk management and internal control
systems for the year under review, taking into account all matters
leading up to the date of the approval of the Financial Statements.
that
identified and
the key risks
The Board believes
the
implementation of an ongoing system to identify, evaluate and
manage these risks are relevant to the Company’s business as an
investment trust. The ongoing risk assessment, which has been in
place throughout the financial year and up to the date of this Report,
includes consideration of a number of terms of the scope and quality
of the systems of internal control. These include ensuring regular
communication of the results of monitoring by third parties to the
Board, the incidence of significant control failings or weaknesses
that have been identified at any time and the extent to which they
have resulted in unforeseen outcomes or contingencies that may
have a material impact on the Company’s performance or condition.
There were no significant control failings or weaknesses identified
during the course of the year and up to the date of this Report.
However, the SSA16 HSBC Securities Services’ (HSS) ISAE3402
Global Information Technology report for 1 January 2015 to
31 December 2015 had a qualified opinion. This qualification is in
respect of access restriction controls related to Logical Access and
Change Management. For both of these issues, remediation testing
has been completed by HSS’s auditors. In the year, Caroline Gulliver,
in her capacity as Chairman of the Audit Committee, and SV have
visited HSS and assessed the processes and controls over all areas
affecting the Company and are satisfied that no significant matters
arose as a result of the reported weakness in controls.
25
International Biotechnology Trust plc
Report on Directors’
Remuneration
Introduction
This Report is submitted in accordance with Sections 420 to 422
of the Act and it also meets the relevant Listing Rules of the FCA
and describes how the Board has applied the principles relating to
Directors’ remuneration.
The Company’s Auditors are required to report on certain information
contained within this Report. Where information set out below
has been audited, it is indicated as such. The Auditors’ opinion is
included within the Independent Auditors’ Report on pages 30 to 35.
Directors’ remuneration policy
The determination of the Directors’ fees is a matter dealt with by
the Board. A separate Remuneration Committee has not been
appointed.
The Company’s Articles of Association limit the aggregate fees
payable to Directors to £250,000 per annum. Subject to this limit,
it is the Company’s policy to determine the level of Directors’ fees
having regard to the level of fees payable to non-executive directors
in the industry, the role that individual Directors fulfil in respect of
Board and Committee responsibilities and time committed to the
Company’s affairs. Fees payable to Directors should be sufficient
to motivate and retain candidates of a high calibre to deliver the
Company’s investment objectives. No element of the Directors’
remuneration is performance-related.
The Board considers any comments received from Shareholders
on the remuneration policy on an ongoing basis and if appropriate,
takes these into consideration when reviewing remuneration.
All Directors have a Letter of Appointment with the Company. The
Letters of Appointment are available for inspection at the Company’s
Registered Office during normal business hours and at the location
of the AGM during the Meeting. Directors do not have service
contracts with the Company and no compensation is payable to
Directors on leaving office. It is the intention of the Board that this
policy will continue to apply in the forthcoming and subsequent
financial years.
All Directors are appointed for an initial term covering the period
from the date of their appointment until the first AGM thereafter,
at which they are required to stand for election in accordance with
the Company’s Articles of Association. Thereafter, Directors retire
by rotation at least every three years. The Chairman meets with
each Director before he or she is proposed for re-election and,
subject to the evaluation of performance carried out each year, the
Board agrees whether it is appropriate for such Director to seek an
additional term. When recommending whether an individual Director
should seek re-election, the Board will take into account the ongoing
recommendations of the AIC Code, including the need to refresh the
Board and its Committees.
26
The component parts of the Directors’ Remuneration are set out in
the table below:
Component parts of the Directors’ remuneration
Year commencing
Year ended
Year ended
1 September
31 August
31 August
2016
2016
2015
Chairman’s base fee
£42,500
£41,000
£41,000
Non-executive
Director base fee
£28,000
£27,000
£27,000
Additional fee for the
£4,500
£4,500
£4,500
Chair of the Audit
Committee
1. The Company’s policy is for the Chairman of the Board and the Chair of the
Audit Committee to be paid higher fees than the other Directors, to reflect
their more onerous roles.
2. Directors’ fees are paid up to the date of termination of their appointment,
with no exit payments or compensation for loss of office payments applicable.
3. As the Company has no employees, there are no comparisons to be made
between this Directors’ Remuneration Policy and a policy on the remuneration
of employees.
4. Directors’ are entitled to claim expenses in respect of duties undertaken in
connection with the management of the Company.
5. Fees are paid quarterly in arrears.
6. Fees are reviewed on an annual basis.
7. The Company retains the flexibility to pay additional one off fees to Directors
should they be required to undertake additional work in order to deliver time
consuming projects in the Shareholders’ interests.
Annual report on Directors’ remuneration
This Report sets out how the Directors’ Remuneration Policy was
implemented during the year ended 31 August 2016.
Directors’ fees are reviewed annually by the Board and, following
the last review in July 2016, it was agreed that Directors’ fees
would be increased with effect from 1 September 2016 as detailed
in the table above entitled ‘Component parts of the Directors’
remuneration’. Earlier changes to Directors’ remuneration were
made in 2008 and 2012. Recent adjustments to Directors’ fees
have been at rates below general inflation levels.
The amounts, set out in the following table, were paid by the
Company to the Directors for services as Directors in respect of the
year ended 31 August 2016 and the previous financial year.
International Biotechnology Trust plc
Report on Directors’
Remuneration
Single total figure of remuneration for each Director (audited)
The Directors who served during the year under review received the
following emoluments:
Total Fees(iv)
Year ended
Year ended
31 August 2016
31 August 2015
Expenditure by the Company on Directors’ remuneration
compared with distributions to Shareholders
The table below compares the remuneration paid to Directors and
distributions to Shareholders by way of share buybacks for the year
under review and the prior financial year.
% change
compared to
2016
2015
previous year
30,889(iii)
27,000
41,000
7,416(i)
27,611(iii)
27,000
160,916
31,500
27,000
41,000
27,000
11,226(ii)
27,000
164,726
Aggregate spend
£160,916
£164,726
(2.31)
on Directors’ fees*
Distributions to
£11,623,218
£57,448,560
(79.8)
Shareholders –
share buybacks†
* As the Company has no employees the total spend on remuneration comprises
solely of Directors’ fees.
† During the year under review no dividends were paid.
Directors’ beneficial and family interests (audited)
Directors
John Aston
Véronique Bouchet
Alan Clifton (Chairman)
David Clough
Caroline Gulliver
Jim Horsburgh
Total
(i) Retired 9 December 2015.
(ii) Appointed 1 April 2015.
Ordinary shares of
Ordinary shares of
25p each as at
25p each as at
31 August 2016
1 September 2015
John Aston
Véronique Bouchet
Alan Clifton
Caroline Gulliver
Jim Horsburgh
10,000
7,500
10,000
5,000
15,000
10,000
7,500
10,000
2,500
10,000
There have been no changes in the above holdings between the year
end and the date of this Report. No Director has any material interest
in any contract that is significant to the Company’s business.
Neither the Company’s Articles of Association nor the Directors’ Letters
of Appointment require any Director to own Shares in the Company.
(iii) Caroline Gulliver replaced John Aston as Chairman of the Audit Committee on
13 July 2016.
(iv) No aspect of the Directors’ remuneration, past or present, is performance-
related in light of the Directors’ non-executive status. As a result, no Director
is entitled to any bonuses, benefit in kind, share options, long-term incentives,
pension or other retirement benefit. The Directors are entitled to reimbursement
of all reasonable and properly documented expenses incurred in performing
their duties.
Consideration of matters relating to Directors’ remuneration
The Board as a whole reviewed the level of fees paid to Directors
during the year and no Director was responsible for setting their own
remuneration. No external advice was sought in considering the
level of Directors’ fees. However, the Company Secretary provided
an analysis of fees payable to other investment trust companies with
comparable investment objectives, of a similar size and also self
managed trusts which was taken into consideration.
27
International Biotechnology Trust plc
Report on Directors’
Remuneration
Performance graph
The performance graph below charts the cumulative share price
total return to Shareholders since 31 August 2009 compared to
that of a broad equity market index. The FTSE All-Share Index has
been used for this purpose as the NBI has a lack of diversity within
its constituents. A graph showing the Company’s share price total
return, compared with the FTSE All-Share Index Total Return, over
the last seven years, is shown below. The data have been rebased to
100 at 31 August 2009 (the start of the period covered by the graph).
Share price/FTSE All-Share Index performance (%)
Share Price Total Return
FTSE All-Share Total Return
500
450
400
350
300
250
200
150
100
August
2009
August
2010
August
2011
August
2012
August
2013
August
2014
August
2015
August
2016
Shareholder approval
Shareholders will be asked to approve the Annual Report on
Directors’ Remuneration annually by an advisory vote and an
ordinary resolution to approve the Report will be put to Shareholders
at the forthcoming AGM. In addition, Shareholders will be asked to
approve the Directors’ Remuneration Policy, which is subject to a
binding Shareholder vote, on a three-yearly basis. Any changes to
this policy would also require Shareholder approval. The Directors’
Remuneration Policy was last approved at the AGM held on
16 December 2014 and accordingly, an ordinary resolution will be
put to Shareholders next at the AGM to be held in 2017, unless the
Directors choose to amend the policy, at which time it would be
resubmitted to Shareholders for approval.
At the AGM held on 16 December 2014, votes cast (including the
votes cast at the Chairman’s discretion) in respect of the Directors’
Remuneration Policy were 23,586,929 (99.85%) in favour, 35,833
(0.15%) against and 7,989 votes withheld.
At the AGM held on 9 December 2015, votes cast (including the
votes cast at the Chairman’s discretion) in respect of the Annual
Report on Directors’ Remuneration were 22,443,244 (99.88%) in
favour, 26,280 (0.12%) against and 2,601 votes withheld.
Recommendation
The Board considers the resolutions to be proposed at the
forthcoming AGM are in the best interests of the Company and
Shareholders as a whole. Accordingly, the Board unanimously
recommends to Shareholders that they vote in favour of the
resolutions, as they intend to do so in respect of their own beneficial
holdings.
Source: Share Price Total Return from Morningstar. FTSE All-Share Total Return
from Thompson Datastream. Data rebased to 100 at 31 August 2009.
On behalf of the Board
Statement of implementation of Directors’
remuneration policy
The Board does not envisage that there will be any significant
changes to the implementation of the Directors’ Remuneration
Policy during the current financial year compared to how it was
implemented during the year ended 31 August 2016.
Alan Clifton
Chairman
3 November 2016
Annual statement
On behalf of the Board and in accordance with Part 2 of Schedule 8
of the Large and Medium-sized Companies and Groups (Accounts
and Reports) (Amendment) Regulation 2013, I, as Chairman of the
Board, confirm that the above Directors’ Remuneration Annual
Report summarises, as applicable, for the year ended 31 August
2016:
a) the major decisions on Directors’ remuneration;
b) any substantial changes relating to Directors’ remuneration
made during the year; and
c) the context in which those changes occurred and decisions
taken.
28
International Biotechnology Trust plc
Management Report and Directors’
Responsibilities Statement
(incorporating the Corporate Governance Statement)
be aware that legislation in the UK governing the preparation and
dissemination of the Annual Report may differ from legislation in their
home jurisdiction.
Having taken advice from the Audit Committee, the Directors
consider that the Annual Report, taken as a whole, is fair, balanced
for
and understandable and provides
Shareholders to assess the Company’s position, performance,
business model and strategy.
information necessary
Each of the Directors, whose names and functions are listed on page
17 of this Report, confirms that, to the best of his or her knowledge:
• The Financial Statements, which have been prepared in accordance
with IFRS as adopted by the EU, give a true and fair view of the
assets, liabilities, financial position and profit of the Company;
• The Strategic Report includes a fair review of the development and
performance of the business and the position of the Company,
together with a description of the principal risks and uncertainties
that it faces; and
• As outlined on page 20 of this Report, the Directors have undertaken
all necessary reviews to provide a going concern recommendation.
On behalf of the Board
Alan Clifton
Chairman
3 November 2016
Management report
Listed companies are required by the FCA’s Disclosure Guidance
and Transparency Rules (the Rules) to include a management report
in their Financial Statements. The information required to be in the
management report for the purposes of the Rules is included in the
Strategic Report on pages 3 to 16 inclusive (together with the sections
of the Annual Report incorporated by reference) and the Director’s
Report on pages 18 to 25. Therefore, a separate management report
has not been included.
Directors’ responsibilities statement
The Directors are responsible for preparing the Annual Report, the
Report on Directors’ Remuneration and the Financial Statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements
for each financial year. Under that law the Directors have prepared
the Financial Statements in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU).
Under company law the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Company and of the profit or loss of the
Company for that period. In preparing these Financial Statements,
the Directors are required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgements and accounting estimates that are reasonable
and prudent;
• State whether applicable IFRS as adopted by the EU have been
followed, subject to any material departures disclosed and explained
in the Financial Statements; and
• Prepare Financial Statements on the going concern basis unless it
is inappropriate to presume the Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Financial Statements and the Report on Directors’ Remuneration
comply with the Act. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Annual Report is published on the following website:
www.ibtplc.com
which is a website maintained by SV. The maintenance and
integrity of the website is, so far as it relates to the Company, the
responsibility of SV. The work carried out by the Auditors does
not involve consideration of the maintenance and integrity of this
website and accordingly, the Auditors accept no responsibility for
any changes that have occurred to the Annual Report since it was
initially presented on the website. Visitors to the website need to
29
International Biotechnology Trust plc
Independent Auditors’ Report
to the Members of International Biotechnology Trust plc
Report on the Financial Statements
Our opinion
In our opinion, International Biotechnology Trust plc ’s financial statements (the “financial statements”):
• give a true and fair view of the state of the Company’s affairs as at 31 August 2016 and of its loss and cash flows for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union;
and
• have been prepared in accordance with the requirements of the Companies Act 2006.
What we have audited
The financial statements, included within the Annual Report, comprise:
• the Balance Sheet as at 31 August 2016;
• the Statement of Comprehensive Income for the year then ended;
• the Statement of Changes in Equity for the year then ended
• the Cash Flow Statement for the year then ended; and
• the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.
Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements. These
are cross-referenced from the financial statements and are identified as audited.
The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as adopted by the European
Union, and applicable law.
Our audit approach
OVERVIEW
• Overall materiality: £2.17 million which
Our areas of focus included:
represents 1% of net assets.
• Gains/losses on quoted and unquoted investments held at fair value.
• Valuation and existence of quoted investments.
• Valuation and existence of unquoted investments.
• Performance fees recognised.
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we
looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management
override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material
misstatement due to fraud.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identified as
“areas of focus” in the table below. We have also set out how we tailored our audit to address these specific areas in order to provide an opinion
on the financial statements as a whole, and any comments we make on the results of our procedures should be read in this context. This is not
a complete list of all risks identified by our audit.
30
International Biotechnology Trust plc
Independent Auditors’ Report
to the Members of International Biotechnology Trust plc
AREA OF FOCUS
HOW OUR AUDIT ADDRESSED THE AREA OF FOCUS
Gains/losses on quoted and unquoted
investments held at fair value
Refer to page 24 (Audit Committee Report),
page 41 (Accounting Policies) and page 43
(notes).
ISAs (UK & Ireland) presume there is a risk
of fraud in revenue recognition because
of the pressure management may feel
to achieve capital growth in line with the
objective of the Company.
We assessed the accounting policy for quoted and unquoted investments held at fair value
for compliance with accounting standards, International Private Equity and Venture Capital
Valuation Guidelines and the AIC SORP and performed testing to check that quoted and
unquoted investments held at fair value had been accounted for in accordance with the stated
accounting policy as set out in note 1. (f) on page 41 of the financial statements.
We found that the accounting policy implemented was in accordance with accounting
standards and the AIC SORP, and that realised and unrealised gains/losses has been
accounted for in accordance with the stated accounting policy.
We focused on realised and unrealised
gains/losses on quoted and unquoted
investments held at fair value.
We understood and assessed the design and implementation of key controls surrounding
recognition of realised and unrealised gains/losses on quoted and unquoted investments held
at fair value recognition.
We also focused on unrealised gains/
losses on investments held at fair value due
to the subjective nature of the valuation of
unquoted investments.
This is because incomplete or inaccurate
gains/losses on quoted and unquoted
investments held at fair value could have
a material impact on the Company’s net
asset value.
The gains/losses on investments held at fair value comprise realised and unrealised gains/
losses.
For unrealised gains/losses, we obtained an understanding of, and then tested, the valuation
process as set out in the ‘Valuation and existence of quoted investments’ and ‘Valuation and
existence of unquoted investments’ areas of focus, to ascertain whether these gains/losses
were appropriately calculated.
For realised gains/losses, we tested disposal proceeds by agreeing the proceeds to bank
statements and sale agreements and we re-performed the calculation of a sample of realised
gains/losses.
No misstatements were identified by our testing which required reporting to those charged with
governance.
Valuation and existence of unquoted
investments
Refer to page 24 (Audit Committee Report),
page 41 (Accounting Policies) and page 43
(notes).
We understood and evaluated the valuation methodology applied, by reference to industry
practice, and tested the techniques used, by the Manager in determining the fair value of
unquoted investments. The testing included:
The investment portfolio at 31 August
2016 included unquoted investments.
We focused on the valuation of the
unquoted investments as these
investments represented a material
balance in the financial statements
(£22.2m) and the valuation requires
estimates and significant judgements
to be applied by the Manager such
that changes to key inputs to the
estimates and/or the judgements
made can result, either on an individual
unquoted investment or in aggregate,
in a material change to the valuation of
unquoted investments.
• comparing valuations based on recent transactions;
• comparing recent investments made in investee companies where there was a significant
new investor; and
• assessing valuation models that applied comparable quoted Company earnings multiples,
discounted appropriately to reflect the illiquidity of the investment, to earnings data from
audited financial statements, unaudited management accounts and/or forecasts for the
investee entities, being the key inputs in valuing the unquoted investments.
We also read the meeting minutes where the valuations of the unquoted investments were
discussed and agreed. This, together with the work outlined above and our knowledge of the
investee entities and the International Private Equity and Venture Capital Valuation guidelines,
enabled us to discuss with and challenge the Manager and directors as to the appropriateness
of the methodology and key inputs used, and the valuations themselves.
31
International Biotechnology Trust plc
Independent Auditors’ Report
to the Members of International Biotechnology Trust plc
AREA OF FOCUS
HOW OUR AUDIT ADDRESSED THE AREA OF FOCUS
Valuation and existence of unquoted
investments (continued)
We found that the Manager’s valuations of unquoted investments were consistent with the
International Private Equity and Venture Capital Valuation guidelines and that the assumptions used
to derive the valuations within the financial statements were appropriate based on the investee’s
circumstances, and actual and expected financial performance.
We tested the existence of the unquoted investment portfolio by agreeing a sample of the holdings
to an independent custodian confirmation from HSBC Bank plc.
Differences identified were investigated and explanations received from the Manager/Custodian
which we then corroborated to appropriate supporting evidence.
Valuation and existence of quoted
investments
Refer to page 24 (Audit Committee
Report), page 41 (Accounting Policies)
and page 43 (notes).
We tested the valuation of the quoted equity investments by agreeing the prices used in the
valuation to independent third party sources. No misstatements were identified by our testing
which required reporting to those charged with governance.
The investment portfolio at the year-end
compromised quoted equity investments
valued at £199.6m.
We focused on the valuation and
existence of quoted investments because
investments represent the principal
element of the net asset value as
disclosed on the Balance Sheet.
Performance fees recognised
Refer to page 24 (Audit Committee
Report), page 40 (Accounting Policies)
and page 44 (notes).
A performance fee is payable for the
year of £575,000. We focused on
this area because the performance
fee is calculated using an updated
methodology as set out in the Investment
Management Agreement between the
Company and the Manager.
We tested the existence of the investment portfolio by agreeing a sample of the holdings of
investments to an independent custodian confirmation from HSBC Bank plc. Any differences
identified were investigated and explanations received from the Manager/Custodian which we then
corroborated to appropriate supporting evidence.
We tested the performance fee of £575,000 to ensure it is calculated in accordance with
the methodology set out in the Investment Management Agreement and agreed the inputs
to the calculation, including the benchmark data, to independent third party sources, where
applicable. No misstatements were identified by our testing which required reporting to those
charged with governance.
We tested the allocation of the performance fee between the revenue and capital return
columns of the Statement of Comprehensive Income with reference to the accounting policy
as set out on page 40. We found that the allocation of the performance fee was consistent
with the accounting policy.
32
International Biotechnology Trust plc
Independent Auditors’ Report
to the Members of International Biotechnology Trust plc
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the types of investments within the Company, the involvement of the Manager and Administrator, the accounting
processes and controls, and the industry in which the Company operates.
The Company’s accounting is delegated to the Administrator who maintain their own accounting records and controls and report to the
Manager and the directors.
As part of our risk assessment, we assessed the control environment in place at both the Manager and the Administrator to the extent relevant
to our audit. This assessment of the operating and accounting structure in place at both organisations involved obtaining and reading the
relevant control reports issued by the independent auditor of the Manager and Administrator in accordance with generally accepted assurance
standards for such work. We then identified those key controls at the Administrator on which we could place reliance to provide audit evidence.
We also assessed the gap period of 8 months between the period covered by the controls report and the year-end of the Company. Following
this assessment, we applied professional judgement to determine the extent of testing required over each balance in the financial statements,
including whether we needed to perform additional testing in respect of those key controls to support our substantive work. For the purposes
of our audit, we determined that additional testing of controls in place at the Administrator was not required because additional substantive
testing was performed.
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on
the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall group materiality
£2.17 million (2015: £2.36 million).
How we determined it
1% of net assets.
Rationale for benchmark
applied
We have applied this benchmark, a generally accepted auditing practice for investment trust audits, in
the absence of indicators that an alternative benchmark would be appropriate and because we believe
this provides an appropriate and consistent year-on-year basis for our audit.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £108,000 (2015:
£118,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Going concern
Under the Listing Rules we are required to review the directors’ statement, set out on page page 20, in relation to going concern. We have
nothing to report having performed our review.
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to the
directors’ statement about whether they considered it appropriate to adopt the going concern basis in preparing the financial statements.
We have nothing material to add or to draw attention to.
As noted in the directors’ statement, the directors have concluded that it is appropriate to adopt the going concern basis in preparing the
financial statements. The going concern basis presumes that the Company has adequate resources to remain in operation, and that the
directors intend it to do so, for at least one year from the date the financial statements were signed. As part of our audit we have concluded
that the directors’ use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted,
these statements are not a guarantee as to the Company’s ability to continue as a going concern.
33
International Biotechnology Trust plc
Independent Auditors’ Report
to the Members of International Biotechnology Trust plc
Other required reporting
Consistency of other information
Companies Act 2006 reporting
In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements.
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
• Information in the Annual Report is:
− materially inconsistent with the information in the audited Financial Statements; or
− apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company
acquired in the course of performing our audit; or
− otherwise misleading.
We have no exceptions
to report.
• the statement given by the directors on page 29, in accordance with provision C.1.1 of the UK Corporate
Governance Code (the “Code”), that they consider the Annual Report taken as a whole to be fair, balanced
and understandable and provides the information necessary for members to assess the Company’s
position and performance, business model and strategy is materially inconsistent with our knowledge of
the Company acquired in the course of performing our audit.
We have no exceptions
to report.
• the section of the Annual Report on page 24, as required by provision C.3.8 of the Code, describing
the work of the Audit Committee does not appropriately address matters communicated by us to the
Audit Committee.
We have no exceptions
to report.
The directors’ assessment of the prospects of the Company and of the principal risks that would threaten the solvency or liquidity
of the Company
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw
attention to in relation to:
• the directors’ confirmation on page 14-15 of the Annual Report, in accordance with provision C.2.1 of the
Code, that they have carried out a robust assessment of the principal risks facing the Company, including
those that would threaten its business model, future performance, solvency or liquidity.
We have nothing material to
add or to draw attention to.
• the disclosures in the Annual Report that describe those risks and explain how they are being managed
or mitigated.
• the directors’ explanation on page 15 of the Annual Report, in accordance with provision C.2.2 of the
Code, as to how they have assessed the prospects of the Company, over what period they have done
so and why they consider that period to be appropriate, and their statement as to whether they have a
reasonable expectation that the Company will be able to continue in operation and meet its liabilities as
they fall due over the period of their assessment, including any related disclosures drawing attention to
any necessary qualifications or assumptions.
We have nothing material to
add or to draw attention to.
We have nothing material to
add or to draw attention to.
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
• the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records
and returns.
We have no exceptions to report arising from this responsibility.
34
International Biotechnology Trust plc
Independent Auditors’ Report
to the Members of International Biotechnology Trust plc
Directors’ remuneration
Directors’ remuneration report - Companies Act 2006 opinion
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006.
Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified by law
are not made. We have no exceptions to report arising from this responsibility.
Corporate governance statement
Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to ten further provisions of the Code.
We have nothing to report having performed our review.
Responsibilities for the Financial Statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Management Report and Directors’ Responsibilities Statement set out on page 29, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland).
Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of
Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior
consent in writing.
What an audit of Financial Statements involves
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that
the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
• whether the accounting policies are appropriate to the Company’s circumstances and have been consistently applied and adequately
disclosed;
• the reasonableness of significant accounting estimates made by the directors; and
• the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements,
and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable
basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination
of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited
financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we
consider the implications for our report.
Allan McGrath (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh
3 November 2016
35
International Biotechnology Trust plc
Statement of Comprehensive Income
Notes
Revenue
£’000
For the year ended
31 August 2016
Capital
£’000
Total
£’000
Revenue
£’000
For the year ended
31 August 2015
Capital
£’000
Total
£’000
(Losses)/gains on investments held at fair value
through profit or loss
Exchange losses on currency balances
Income
Expenses
Management fee
Performance fee
Administrative expenses
(Loss)/profit before finance costs and tax
Finance costs
Interest payable
(Loss)/profit on ordinary activities before tax
Taxation
(Loss)/profit for the year attributable
to owners of the parent
2
2
3
4
4
5
6
8
–
–
676
(1,894)
–
(1,047)
(1,725)
(2,333)
–
–
(575)
–
(1,725)
(2,333)
676
(1,894)
(575)
(1,047)
–
–
409
(2,360)
–
(1,136)
83,559
(425)
–
–
(1,348)
–
83,559
(425)
409
(2,360)
(1,348)
(1,136)
(2,265)
(4,633)
(6,898)
(3,087)
81,786
78,699
(212)
(2,477)
(105)
–
(212)
(166)
–
(166)
(4,633)
–
(7,110)
(105)
(3,253)
(54)
81,786
–
78,533
(54)
(2,582)
(4,633)
(7,215)
(3,307)
81,786
78,479
Basic and diluted (loss)/earnings
per Ordinary share
9
(6.63)p
(11.89)p
(18.52)p
(7.52)p
186.06p
178.54p
The total column of this statement represents the Company’s Statement of Comprehensive Income, prepared in accordance with IFRS as
adopted by the EU.
The Company does not have any other comprehensive income and hence the net profit/(loss) for the year, as disclosed above, is the same
as the Company’s total comprehensive income.
The revenue and capital columns are supplementary and are prepared under guidance published by the AIC.
The notes on pages 40 to 61 form part of these Financial Statements.
36
International Biotechnology Trust plc
Statement of Changes in Equity
Company
For the year ended 31 August 2016
Balance at 1 September 2015
Total Comprehensive Income:
Loss for the year
Transactions with owners, recorded
directly to equity:
Shares bought back and held in treasury
Shares cancelled from treasury
Called up
share
capital
£’000
Notes
Share
Capital
premium redemption
reserve
account
£’000
£’000
Share
purchase
reserve
£’000
Capital
reserves
£’000
Revenue
reserve
£’000
Total
equity
£’000
11,116
18,805
30,701
–
204,440
(29,572)
235,490
–
15
17
–
(707)
–
–
–
–
–
(4,633)
(2,582)
(7,215)
–
707
–
–
(11,624)
–
–
–
(11,624)
–
Balance at 31 August 2016
10,409
18,805
31,408
–
188,183
(32,154)
216,651
Company
For the year ended 31 August 2015
Balance at 1 September 2014
Total Comprehensive Income:
Profit/(loss) for the year
Transactions with owners, recorded
directly to equity:
Shares bought back and held in treasury
Shares bought back and cancelled
Shares cancelled from treasury
Called up
share
capital
£’000
Notes
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Share
purchase
reserve
£’000
Capital
reserves
£’000
Revenue
reserve
£’000
Total
£’000
13,939
18,805
27,878
42,497
137,605
(26,265)
214,459
–
15
15
17
–
(2,748)
(75)
–
–
–
–
–
–
81,786
(3,307)
78,479
–
2,748
75
(4,064)
(38,433)
–
(9,398)
(5,553)
–
–
–
–
(13,462)
(43,986)
–
Balance at 31 August 2015
11,116
18,805
30,701
–
204,440
(29,572)
235,490
The notes on pages 40 to 61 form part of these Financial Statements.
37
International Biotechnology Trust plc
Balance Sheet
Non-current assets
Investments held at fair value through profit or loss
Current assets
Receivables
Cash and cash equivalents
Total assets
Current liabilities
Borrowings
Payables
Net assets
Equity attributable to equity holders
Called up share capital
Share premium account
Capital redemption reserve
Share purchase reserve
Capital reserves
Revenue reserve
At 31 August
2016
Company
£’000
At 31 August
2015
Company
£’000
Notes
10
221,788
246,929
11
12
221,788
246,929
9,242
90
9,332
14,456
296
14,752
231,120
261,681
12
13
(11,813)
(2,656)
(21,864)
(4,327)
(14,469)
(26,191)
216,651
235,490
15
16
17
18
19
20
10,409
18,805
31,408
–
188,183
(32,154)
11,116
18,805
30,701
–
204,440
(29,572)
Total equity
216,651
235,490
NAV per Ordinary share
21
575.09p
585.10p
The Financial Statements on pages 36 to 61 were approved by the Board on 3 November 2016 and signed on its behalf by:
Alan Clifton
Chairman
Caroline Gulliver
Chair of the Audit Committee
The notes on pages 40 to 61 form part of these Financial Statements.
International Biotechnology Trust plc
Company Number: 2892872
38
International Biotechnology Trust plc
Cash Flow Statement
Cash flows from operating activities
(Loss)/profit before tax
Adjustments for:
Decrease/(increase) in investments
Decrease/(increase) in receivables
Decrease in payables
Taxation
For the
year ended
31 August
2016
Company
£’000
For the
year ended
31 August
2015
Company
£’000
Notes
(7,110)
78,533
25,141
5,214
(1,671)
(105)
(22,206)
(13,566)
(3,810)
(54)
Net cash flows generated from operating activities
22
21,469
38,897
Cash flows used in financing activities
Share repurchase costs
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 September
(11,624)
(57,448)
(11,624)
(57,448)
9,845
(21,568)
(18,551)
(3,017)
Cash and cash equivalents at 31 August
12
(11,723)
(21,568)
The notes on pages 40 to 61 form part of these Financial Statements.
39
International Biotechnology Trust plc
Notes to the Financial Statements
1. Accounting policies
The Company comprises International Biotechnology Trust plc (the Company).
The nature of the Company’s operations and its principal activities are set out in the Strategic Report and Directors’ Reports.
The Company Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and
those parts of the Companies Act 2006 (the Act) applicable to companies reporting under IFRS. These comprise standards and
interpretations approved by the International Accounting Standards Board (IASB) and International Accounting Standards Committee
(IASC), as adopted by the EU.
For the purposes of the Financial Statements, the results and financial position of the Company are expressed in pounds sterling,
which is the functional currency and the presentational currency of the Company. Sterling is the functional currency because it is the
currency which is most relevant to the majority of the Company’s Shareholders and creditors and the currency in which the majority of
the Company’s operating expenses are paid.
The trading subsidiary IBT Securities Limited was dissolved and removed from the Companies House Register on 16 February 2016.
As such, there is no longer a Group in existence and therefore the Financial Statements have been presented on a Company only basis.
The principal accounting policies followed, which have been applied consistently for all years presented, are set out below:
(a) Basis of preparation
The Company Financial Statements have been prepared on a going concern basis and under the historical cost convention, as modified
by the inclusion of investments at fair value through profit or loss.
Where presentational guidance set out in the Statement of Recommended Practice (the SORP) for investment trusts issued by
The Association of Investment Companies (the AIC) in November 2014 (which superseded the SORP issued in January 2009) is
consistent with the requirements of IFRS, the Directors have sought to prepare the Financial Statements on a basis compliant with the
recommendations of the SORP.
(b) Presentation of Statement of Comprehensive Income
In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary
information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented
alongside the Statement of Comprehensive Income.
The net loss after taxation in the revenue column is the measure the Directors believe appropriate in assessing the Company’s compliance
with certain requirements set out in Section 1158 Corporation Tax Act 2010 (CTA).
(c) Income
Dividends receivable on equity shares are recognised as revenue for the year on an ex-dividend basis. Special dividends are treated as
revenue return or as capital return, depending on the facts of each individual case. Income from current asset investments is included
in the revenue for the year on an accruals basis and is recognised on a time apportionment basis. Where the Company has elected to
receive its dividends in the form of additional shares rather than cash, the amount of cash dividend foregone is recognised as income
in the revenue column of the Statement of Comprehensive Income. Any excess in the value of shares over the amount of cash dividend
foregone is recognised as a gain in the capital column of the Statement of Comprehensive Income.
Interest from fixed income securities is recognised on a time-apportionment basis so as to reflect the effective yield on the fixed
income securities.
Deposit interest outstanding at the year end is calculated and accrued on a time apportionment basis using market rates of interest.
(d) Expenses and interest payable
Administrative expenses, including the management fee and interest payable, are accounted for on an accruals basis and are recognised
when they fall due.
All expenses and interest payable have been presented as revenue items except as follows:
• Any performance fee payable is allocated wholly to capital, as it is primarily attributable to the capital performance of the Company’s
assets; and
• Transaction costs incurred on the acquisition or disposal of investments are expensed and included in the costs of acquisition or
deducted from the proceeds of sale as appropriate.
40
International Biotechnology Trust plc
Notes to the Financial Statements
1. Accounting policies (continued)
(e) Taxation
Deferred tax is calculated in full, using the liability method, on all taxable and deductible temporary differences at the Balance Sheet
date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets
and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability settled,
based on tax rates and tax laws that have been enacted or substantively enacted at the Balance Sheet date.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the
deductible temporary differences can be utilised.
In line with recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented in the capital
column of the Statement of Comprehensive Income is the marginal basis. Under this basis, if taxable income is capable of being offset
entirely by expenses presented in the revenue column of the Statement of Comprehensive Income, then no tax relief is transferred to
the capital column.
(f) Non-current asset investments held at fair value
Investments are recognised or derecognised on the trade date where a purchase or sale of an investment is under a contract whose
terms require delivery of the investment within the timeframe established by the market concerned.
On initial recognition all non-current asset investments are designated as held at fair value through profit or loss as defined by IFRS.
They are further categorised into the following fair value hierarchy:
• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: Having inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: Having inputs for the asset or liability that are not based on observable market data.
All non-current investments (including those over which the Company has significant influence) are measured at fair value with gains
and losses arising from changes in their fair value being included in net profit or loss for the year as a capital item.
The fair value for quoted investments is either the bid price or the last traded price, depending on the convention of the exchange on
which the investment is quoted.
In respect of unquoted investments, or where the market for a financial instrument is not active, fair value is established by using
various valuation techniques, in accordance with the International Private Equity and Venture Capital (IPEVC) Valuation Guidelines
(December 2015). These may include using recent arm’s length market transactions between knowledgeable, willing parties, if
available, reference to recent rounds of re-financing undertaken by investee companies involving knowledgeable parties, reference to
the current fair value of another instrument that is substantially the same or an earnings multiple.
As many of the unquoted investments are early stage investments, without revenue, valuation is also assessed up or down with
reference to a range of factors among which are: ability of portfolio company management to keep cash and operating budgets,
clinical developments towards management and/or investor milestone targets, clinical trial data, progress of competitor products,
performance and quality of the management team, litigation brought by or against the portfolio company, patent approval or challenge,
the market for the product being developed and the broad climate of the economies of the countries in which they will likely be sold
by reference to public stock market performance.
Any gains and losses realised on disposal are recognised in the capital column of the Statement of Comprehensive Income.
(g) Foreign currencies
Transactions involving currencies other than sterling are recorded at the exchange rate ruling on the transaction date.
At each Balance Sheet date, monetary items and non-monetary assets and liabilities that are fair valued, which are denominated in
foreign currencies, are retranslated at the closing rates of exchange. Foreign currency exchange differences arising on translation are
recognised in the Statement of Comprehensive Income. Exchange gains and losses on investments held at fair value through profit
or loss are included within “(Losses)/Gains on investments held at fair value”.
41
International Biotechnology Trust plc
Notes to the Financial Statements
1. Accounting policies (continued)
(h) Critical accounting estimates and judgements
The preparation of Financial Statements in conformity with IFRS requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that
are not readily apparent from other sources.
The critical estimates and assumptions relate, in particular, to the valuation of unquoted investments, as summarised in (g) on the
previous page.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if
the revision affects both current and future periods.
(i) Cash and cash equivalents
In the Statement of Cash Flows, cash and cash equivalents includes cash in hand, short-term deposits and bank overdrafts. These
are held for the purpose of meeting short-term cash commitments rather than for investment or other purpose and cash balances
are held at their value (translated to sterling at the Balance Sheet date where appropriate) and are stated at £90,000. In the Balance
Sheet, bank overdrafts (£11.8m) are shown within borrowings in current liabilities.
(j) Receivables
Other receivables do not carry any right to interest and are short-term in nature. Accordingly they are stated at their nominal value
(amortised cost) reduced by appropriate allowances for estimated irrecoverable amounts.
(k) Other payables
Other payables are not interest-bearing and are stated at their nominal amount (amortised cost). Where there are any long-term
borrowings, finance costs are calculated over the term of the debt on the effective interest basis.
(l) Repurchase of Ordinary shares (including those held in treasury)
The costs of repurchasing Ordinary shares including related stamp duty and transaction costs are taken directly to equity and
reported through the Statement of Changes in Equity as a charge on the share purchase reserve and thereafter the capital reseves.
Share purchase transactions are accounted for on a trade date basis. The nominal value of Ordinary share capital repurchased and
cancelled is transferred out of called up share capital and into the capital redemption reserve. Where shares are repurchased and
held in treasury, the transfer to capital redemption reserve is made if and when such shares are subsequently cancelled.
(m) Reserves
(i) Capital redemption reserve
The capital redemption reserve, which is non-distributable, holds the amount by which the nominal value of the Company’s issued
share capital is diminished when shares redeemed or purchased out of the Company’s distributable reserves are subsequently
cancelled.
(ii) Share premium account
A non-distributable reserve, representing the amount by which the fair value of the consideration received exceeds the nominal
value of shares issued.
(iii) Share purchase reserve
A distributable reserve, which is used to finance the repurchase of shares in issue.
(iv) Capital reserves
The following are accounted for in this reserve and are distributable:
• Gains and losses on the realisation of investments;
• Unrealised investment holding gains and losses;
42
International Biotechnology Trust plc
Notes to the Financial Statements
1. Accounting policies (continued)
(iv) Capital reserves (continued)
• Foreign exchange gains and losses;
• Performance fee; and
• Repurchase of shares in issue.
Note: Unrealised unquoted holding gains are not distributable.
(v) Revenue reserve
Comprises accumulated undistributed revenue profits and losses.
(n) New and revised accounting Standards
No new IFRS, or amendments to IFRS, became applicable in the year which had any impact on the Financial Statements.
At the date of authorisation of these Financial Statements, the following new and amended IFRS are in issue but are not yet
effective and have not been applied in these accounts:
• IFRS 5 (amended) Non-current Assets Held for Sale and Discontinued Operations
• IFRS 7 (amended) Financial Instruments: Disclosures
• IFRS 9 (2014) Financial Instruments
• IFRS 14 Regulatory Deferral Accounts
• IFRS 15 Revenue from Contracts with Customers
• IAS 1 (amended) Presentation of Financial Statements
• IAS 16 (amended) Property, Plant and Equipment
• IAS 19 (amended) Employee Benefits
• IAS 28 (amended) Investments in Associates and Joint Ventures
• IAS 34 (amended) Interim Financial Reporting
The Directors do not expect that the adoption of the Standards listed above will have a significant impact on the Company’s
accounts in future periods.
2.
(Losses)/gains on investments held at fair value
Net gains on disposal of investments at historic cost
Less fair value adjustments in earlier years
(Losses)/gains based on carrying value at previous Balance Sheet date
Investment holding gains during the year
Attributable to:
Quoted investments
Unquoted investments
For the year ended
31 August
2016
£’000
For the year ended
31 August
2015
£’000
10,811
(23,170)
(12,359)
10,634
(1,725)
(4,939)
3,214
(1,725)
99,394
(39,241)
60,153
23,406
83,559
72,833
10,726
83,559
Exchange losses on currency balances
(2,333)
(425)
Exchange losses on currency balances arise on the retranslation of foreign currency balances held by the Company. Throughout the
year, the Company has held borrowings, predominantly in US dollars. As US dollars have strengthened significantly during the year vs.
Sterling, this has led to an exchange loss being recorded in respect of these borrowings.
43
International Biotechnology Trust plc
Notes to the Financial Statements
3.
Income
Income from investments held at fair value through profit or loss:
Unfranked dividends
Interest on debt securities
4. Management and performance fees
Fees payable to the Investment Manager are as follows:
Management fees (allocated to revenue)
Performance fee (allocated to capital)
For the year ended
31 August
2016
£’000
For the year ended
31 August
2015
£’000
676
–
676
363
46
409
For the year ended
31 August
2016
£’000
For the year ended
31 August
2015
£’000
1,894
1,894
575
575
2,360
2,360
1,348
1,348
Details of the management and performance fee arrangements are included in the Directors’ Report on page 19.
5. Administrative expenses
General expenses
Directors’ fees*
Company secretarial and administration fees
Auditors’ remuneration:
Fees payable to the Company’s auditors for the audit of the annual Financial Statements
*See the Directors’ Remuneration Report on pages 26 to 28.
6.
Interest payable
Bank overdraft interest payable
For the year ended
31 August
2016
£’000
For the year ended
31 August
2015
£’000
620
161
222
44
723
165
216
32
1,047
1,136
For the year ended
31 August
2016
£’000
For the year ended
31 August
2015
£’000
212
166
44
International Biotechnology Trust plc
Notes to the Financial Statements
7. Subsidiary undertaking
The Company had an investment in the entire issued ordinary share capital, fully paid, of £100 in its wholly owned subsidiary undertaking,
IBT Securities Limited, which was registered in England and Wales and operated in the United Kingdom. The subsidiary company
was placed into members’ voluntary liquidation on 16 February 2016. Therefore the Financial Statements are no longer prepared on a
consolidated basis and Company only accounts are produced.
Prior to its dissolution, following the decision by the Directors, the intercompany receivable of £511,000 from the Company was
derecognised and included in gains on investments. As a result, the corresponding creditor in the Company’s Financial Statements was
also released to the Profit & Loss Account (P&L). IBT Securities Limited was being carried at a value of £100 in the Company’s accounts.
This amount was written off to the P&L upon dissolution. These were the only reconciling items between the Group and Company
accounts.
8. Taxation
(a) Analysis of charge in period
Overseas tax
Total current tax charge for the year
For the year ended
31 August
2016
£’000
For the year ended
31 August
2015
£’000
105
105
54
54
(b) Factors affecting tax charge for the year
Approved investment trust companies are exempt from tax on capital gains within the Company.
The tax assessed for the year is lower than that resulting from applying the standard rate of Corporation Tax in the UK for a medium or
large company of 20% (2015: 20.58%). The differences are explained below:
For the year ended 31 August 2016
Capital
£’000
Total
£’000
Revenue
£’000
For the year ended 31 August 2015
Capital
£’000
Total
£’000
Revenue
£’000
Factors affecting tax charge for the year:
(Loss)/profit on ordinary activities before taxation
Tax at the UK Corporation Tax rate of
20% (2015: 21%)
20% (2015: 20%)
Tax effect of:
Non-taxable dividend income
Capital returns on investments
Exchange gains
Expenses not utilised in the year
Overseas tax
(2,477)
(4,633)
(7,110)
(3,253)
81,786
78,533
–
(927)
–
(1,422)
(398)
(271)
10,019
6,816
9,621
6,545
(927)
(1,422)
(669)
16,835
16,166
–
345
467
115
–
–
(140)
345
467
750
105
105
(75)
–
–
744
54
54
–
(17,199)
87
277
–
(75)
(17,199)
87
1,021
54
–
54
–
(495)
(495)
(140)
–
–
635
105
105
45
International Biotechnology Trust plc
Notes to the Financial Statements
8. Taxation (continued)
(c) Provision for deferred taxation
No provision for deferred tax has been made in the current or prior year.
(d) Factors that may affect future tax charges
At 31 August 2016 the Company had a potential deferred tax asset of £9,514,000 (2015: £9,809,000) on taxable losses based on a
prospective Corporation Tax rate of 18% (2015: 20%), which is available to be carried forward and offset against future taxable profits.
A deferred tax asset has not been recognised for these losses as it is considered unlikely that the Company will make taxable revenue
profits in the future and it is not liable to tax on capital gains.
Due to the Company’s status as an investment trust, and the intention to continue meeting the conditions required to obtain approval
in the foreseeable future, the Company has not provided for deferred tax on any capital gains and losses arising on the revaluation or
disposal of investments.
9. Net (loss)/earnings per Ordinary share
Net revenue loss
Net capital (loss)/profit
For the year ended
31 August
2016
£’000
For the year ended
31 August
2015
£’000
(2,582)
(4,633)
(7,215)
(3,307)
81,786
78,479
Weighted average number of Ordinary shares in issue during the year*
38,959,794
43,955,896
Pence
(6.63)
(11.89)
(18.52)
Pence
(7.52)
186.06
178.54
At 31 August
2016
£’000
At 31 August
2015
£’000
199,592
226,466
199,592
226,466
8,829
13,367
22,196
7,667
12,796
20,463
221,788
246,929
Revenue loss per Ordinary share
Capital (loss)/profit per Ordinary share
Total earnings per Ordinary share
*Excluding those held in treasury.
10. Investments held at fair value through profit or loss
(a) Analysis of investments
Quoted overseas
Unquoted in the United Kingdom
Unquoted overseas
Valuation of investments at 31 August
46
International Biotechnology Trust plc
Notes to the Financial Statements
10. Investments held at fair value through profit or loss (continued)
(b) Movements on investments
Opening book cost
Opening fair value adjustment
Opening valuation
Purchases at cost
Proceeds of disposals
Net (losses)/gains realised on disposals
Increase in fair value adjustment
Valuation of investments at 31 August
Closing book cost
Closing fair value adjustment
Closing valuation
For the year ended
31 August
2016
£’000
For the year ended
31 August
2015
£’000
214,657
32,272
246,929
288,219
(311,635)
(12,359)
10,634
176,616
48,107
224,723
323,596
(384,949)
60,153
23,406
221,788
246,929
202,052
19,736
214,657
32,272
221,788
246,929
The following transaction costs, including stamp duty and broker commissions, were incurred during the year:
On acquisitions
On disposals
For the year ended
31 August
2016
£’000
For the year ended
31 August
2015
£’000
170
181
351
184
230
414
(c) Significant undertaking
The Company has interests of 3% or more of any class of capital in the following investee companies.
Archemix
Atopix Therapeutics
EBR Systems
EBR Systems
Kalvista Pharmaceuticals
Karus Therapeutics
Oxagen Stocks
Oxagen Stocks
Oxagen Stocks
Reshape
Reshape
Topivert
Class of
shares held
% of
class held
Country of
incorporation
Series B
Series A Pref
Series C
Series D
Series A & B
Series B Pref
Series B Pref
Series A Pref
Series C pref
Series B
Series C Pref
Series A
3.80
6.73
7.84
4.16
4.23
4.34
9.10
4.63
4.18
10.00
4.50
3.02
USA
UK
USA
USA
UK
UK
UK
UK
UK
USA
USA
UK
47
International Biotechnology Trust plc
Notes to the Financial Statements
10. Investments held at fair value through profit or loss (continued)
(d) Disposals of unquoted investments
The significant unquoted investment disposals during the year were:
Investment
Celerion
Delenex
ESBA Tech
Oncoethix
Carrying value at
31 August 2015
£’000
Proceeds
£’000
Carrying value at
31 August 2016
£’000
55
296
216
1,490
147
316
1,665
365
–
–
41
1,152
The carrying value of these investments represents the value of contingent future payments and milestones.
(e) Significant changes in fair values of unquoted investments
During the year under review the following unquoted investments were written up/(down) by a significant extent (adjusted for currency
movements):
Reshape Medical
NCP Holdings
Karus Therapeutics
Ikano Therapeutics
11. Receivables
Amounts due within one year:
Sales awaiting settlement
Accrued income
Prepaid expenses
Tax recoverable
VAT recoverable
12. Cash and cash equivalents
Cash and cash equivalents include the following for the purposes of the Statement of Cash Flows:
Cash at bank
Bank overdraft
Cash and cash equivalents
Write up/(down)
£’000
883
561
519
(796)
At 31 August
2016
£’000
At 31 August
2015
£’000
9,153
42
23
8
16
9,242
14,311
106
24
–
15
14,456
At 31 August
2016
£’000
At 31 August
2015
£’000
90
(11,813)
(11,723)
296
(21,864)
(21,568)
The Company has a £35m uncommitted multi-currency overdraft facility. On 31 August 2016, £11,813,000 (2015: £21,864,000) was
drawn down. The principal covenants relating to this facility are that there must be at least twenty investments in the portfolio and that
performance must not fall 15% in a month, 25% in two months or 30% in any six month period. The Company has complied with the
terms of the facility throughout the financial year.
48
International Biotechnology Trust plc
Notes to the Financial Statements
13. Payables
Amounts falling due within one year:
Purchases awaiting settlement
Accrued expenses
Amount due to subsidiary
At 31 August
2016
£’000
At 31 August
2015
£’000
1,792
864
–
2,656
2,203
1,613
511
4,327
14. Capital commitments – contingent assets and liabilities
The Company has no commitments to further investments. All commitments outstanding at 31 August 2015 in the prior year were made
during the year in line with expected amounts (2015: Karus £353,434; Topivert £235,295; and Delenex £31,066). Subsequent to the
year end, following Shareholder approval on 29 September 2016, the Company made a commitment of $30m into SVLSF VI. This is
discussed in the Chairman’s Statement on page 4.
15. Called up share capital
Allotted, called up and fully paid:
Ordinary shares in issue
Ordinary shares held in treasury
Ordinary shares
of 25p each
at 31 August
2016
Ordinary shares
of 25p each
at 31 August
2015
Nominal value
at 31 August
2016
£’000
Nominal value
at 31 August
2015
£’000
37,672,663
3,965,000
40,247,663
4,215,000
9,418
991
41,637,663
44,462,663
10,409
10,062
1,054
11,116
During the year 2,575,000 Ordinary shares were repurchased to be held in treasury at a cost of £11,624,000 (2015: 3,090,000 shares
at a cost of £13,462,000). In addition, no shares were bought back for cancellation (2015: 10,995,000 shares at cost of £43,986,000).
2,825,000 (2015: 300,000) Ordinary shares held in treasury were cancelled during the year.
The Ordinary shares held in treasury have no voting rights and are not entitled to dividends.
This reserve is not distributable.
16. Share premium account
Balance brought forward
Balance carried forward
This reserve is not distributable.
At 31 August
2016
£’000
At 31 August
2015
£’000
18,805
18,805
18,805
18,805
49
International Biotechnology Trust plc
Notes to the Financial Statements
17. Capital redemption reserve
Balance brought forward
Nominal value of 2,825,000 (2015: 300,000) Ordinary shares cancelled from treasury
Nominal value of nil (2015: 10,995,000) Ordinary shares bought back and cancelled
Balance carried forward
This reserve is not distributable.
18. Share purchase reserve
Balance brought forward
Cost of shares bought back and held in treasury
Cost of shares bought back and cancelled
Balance carried forward
At 31 August
2016
£’000
At 31 August
2015
£’000
30,701
707
–
31,408
27,878
75
2,748
30,701
At 31 August
2016
£’000
At 31 August
2015
£’000
–
–
–
–
42,497
(4,064)
(38,433)
–
This reserve may be used to repurchase the Company’s shares or be distributed as dividends (subject to being a positive balance).
19. Capital reserves
Balance brought forward
(Losses)/gains on investments
Cost of shares bought back and held in treasury
Cost of shares bought back and cancelled
Performance fee
Realised exchange losses on currency balances
Balance carried forward
The capital reserves may be further analysed as follows:
Reserve on investments sold (i)
Reserve on investments held (ii)
At 31 August
2016
£’000
At 31 August
2015
£’000
204,440
(1,725)
(11,624)
–
(575)
(2,333)
137,605
83,559
(9,398)
(5,553)
(1,348)
(425)
188,183
204,440
168,447
19,736
172,168
32,272
188,183
204,440
(i) These are realised distributable capital reserves which maybe used to repurchase the Company’s shares or be distributed as dividends.
(ii) This reserve comprises holding gains on investments (which maybe deemed to be realised) and other amounts which are unrealised. An analysis has not been made
between amounts that are realised (and maybe distributed or used to repurchase the Company’s shares) and those that are unrealised.
20. Revenue reserve
Balance brought forward
Net loss for the year
Balance carried forward
At 31 August
2016
£’000
At 31 August
2015
£’000
(29,572)
(2,582)
(32,154)
(26,265)
(3,307)
(29,572)
The revenue reserve may be distributed or used to repurchase the Company’s shares (subject to being a positive balance).
50
International Biotechnology Trust plc
Notes to the Financial Statements
21. Net Asset Value per Ordinary share
The calculation of the NAV per Ordinary share is based on the following:
NAV (£’000)
Number of Ordinary shares in issue
NAV per Ordinary share (pence)
At 31 August
2016
At 31 August
2015
216,651
235,490
37,672,663
40,247,663
575.09
585.10
The decrease in the NAV per share from 585.10p (31 August 2015) to 575.09p (31 August 2016) includes the total earnings per share
as disclosed above and the effect of the Company, during the year, repurchasing shares at a discount to the prevailing NAV per share.
22. Notes to the Cash Flow Statement
Cash and cash equivalents comprise cash at bank, short-term deposits and bank overdrafts.
Included within the cash flows from operating activities are the cash flows associated with the purchases and sales of investments, as
these are not considered to be investing activities, given the purpose of the Company. Cash flow from operating activities can therefore
be further analysed as follows:
Proceeds on disposal of fair value through profit and loss investments
Purchases of fair value through profit and loss investments
Net cash inflow from investing activities
Cash flows from other operating activities
Net cash flows generated from operating activities
For the year ended
31 August
2016
£’000
For the year ended
31 August
2015
£’000
316,793
(288,630)
28,163
(6,694)
21,469
371,439
(328,771)
42,668
(3,771)
38,897
23. Transactions with the Investment Manager and related party transactions
(a) Transactions with the Investment Manager
Details of the management fee arrangement are given in the Directors’ Report on page 19. The total fee payable under this Agreement
to SV (the Investment Manager) for the year ended 31 August 2016 was £1,894,000 (2015: £2,360,000) of which £nil (2015: £nil) was
outstanding at the year end. In addition to this, SV is also entitled to a performance fee of £575,000 (2015: £1,348,000), which was
outstanding at the year end.
SV will often take seats on boards of companies in which the Company holds an investment. These positions help to monitor the investee
companies and in many cases add to the strength and depth of management. They sometimes provide an economic benefit to the
individual who takes the position – often in the form of a director’s fee or share awards. SV has agreed with the Board a set of guidelines
on how any economic interest will be divided between the Company and SV. The Board is informed of both the position held and any
economic benefits as they arise and a summary of all the positions, benefits and allocations is presented for review at each Board meeting
for formal approval. During the year ended 31 August 2016 £nil (2015: £nil) was received.
(b) Related party transactions
The Directors of the Company are key management personnel. The total remuneration payable to Directors in respect of the year
ended 31 August 2016 was £160,916 (2015: £164,726) of which £38,375 (2015: £45,125) was outstanding at the year end.
Details of the Directors’ interests in the Company’s Ordinary shares are detailed in the Report on Directors’ Remuneration on page 27.
51
International Biotechnology Trust plc
Notes to the Financial Statements
24. Financial instruments and risk management
Risk management policies and procedures
The Company’s financial assets and liabilities, in addition to short-term debtors and creditors and cash, comprise financial instruments
which include investments in equity funds.
The holding of securities, investment activities and associated financing undertaken pursuant to the investment policy involve certain
inherent risks. Events may occur that would result in either a reduction in the Company’s net assets or a reduction of the total return.
The main risks arising from the Company’s pursuit of its investment objective are those that affect stock market levels: market risk. In
addition, there are specific risks inherent in investing in the biotechnology sector. The Board reviews and agrees policies for managing
these risks, as summarised below. These policies have remained substantially unchanged throughout the current and preceding year.
1. Market risk
The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This
market risk comprises three elements - price risk, currency risk and interest rate risk. The Investment Manager assesses the exposure
to market risk when making each investment decision, and monitors the overall level of market risk on the whole of the investment
portfolio on an ongoing basis.
a) Price risk
The Company is an investment company and as such its performance is dependent on the valuation of its investments. A breakdown
of the investment portfolio is given on pages 9 to 12 and in the Investment Manager’s Review on pages 6 to 8. Market price risk arises
mainly from uncertainty about future prices of the financial instruments held.
Management of the risk
The Board regularly considers the asset allocation of the portfolio as part of the process of managing the risks associated with the
biotechnology sector, described in greater detail in the section on specific risk, whilst continuing to follow the investment objective.
It is not the Company’s current policy to use derivative instruments to hedge the investment portfolio against market price risk.
Price risks exposure
At the year end, the Company’s assets exposed to market price risk were as follows:
Non-current asset investments at fair value through profit or loss
Total
At 31 August
2016
£’000
At 31 August
2015
£’000
221,788
246,929
221,788
246,929
The level of assets exposed to market price risk increased by approximately 10% during the year, through a combination of acquisitions
of investments and increases in fair values.
Concentration of exposure to price risk
The Company currently holds investments in 75 companies, in a mixture of quoted and unquoted investments in a variety of countries,
which significantly spreads the risk of individual investments performing poorly and reduces the concentration of exposure. The
classification of investments by sector and region is provided on page 12.
Price risk sensitivity
The following table illustrates the sensitivity of the profit for the year and the equity to an increase or decrease of 10% in the fair
values of the Company’s investments. This level of change is considered to be reasonably possible based on observation of current
market conditions. The sensitivity analysis is based on the Company’s investments at each Balance Sheet date, with all other variables
held constant.
52
International Biotechnology Trust plc
Notes to the Financial Statements
24. Financial instruments and risk management (continued)
Company
Effect on revenue return
Effect on capital return
Effect on total return and net assets
31 August 2016
Increase in
fair value
£’000
31 August 2016
Decrease in
fair value
£’000
31 August 2015
Increase in
fair value
£’000
31 August 2015
Decrease in
fair value
£’000
(200)
22,218
22,018
200
(22,218)
(22,018)
(222)
24,693
24,471
222
(24,693)
(24,471)
b) Currency risk
The Financial Statements and performance of the Company are denominated in sterling. However, the majority of the Company’s net
assets and the total return are denominated in US dollars, accordingly the total return and capital value of the Company’s investments
can be significantly affected by movements in foreign exchange rates. It is not the Company’s policy to hedge against foreign currency
movement. The geographical split of investments is detailed on page 12.
Management of the risk
The Investment Manager monitors the Company’s exposure to foreign currencies on a daily basis, and reports to the Board on a regular
basis.
Foreign currency exposure
The fair values of the Company’s monetary items that have foreign currency exposure at 31 August 2016 are shown below.
Where the Company’s equity investments (which are non monetary items) are priced in foreign currency, they have been included
separately in the analysis so as to show the overall level of exposure.
Monetary assets/(liabilities)
Cash and cash equivalents:
US dollars
Short-term receivables:
US dollars
Short-term payables:
Swiss francs
US dollars
Euros
Danish krone
Foreign currency exposure on net monetary items
Non-current asset investments held at fair value
US dollars
Danish krone
Swiss francs
Euros
Canadian dollars
Swedish kroner
At 31 August
2016
£’000
At 31 August
2015
£’000
–
96
9,202
14,407
–
(13,628)
–
–
(4,426)
186,364
11,831
9,865
9,762
–
–
(1)
(22,664)
(1,023)
(402)
(9,587)
223,410
7,441
2,515
8,460
741
827
Total net foreign currency exposure
213,396
233,807
At the year end, approximately 98% (2015: 99%) of the Company’s net assets were denominated in currencies other than sterling. This
level of exposure is broadly representative of the levels throughout the year.
53
International Biotechnology Trust plc
Notes to the Financial Statements
24. Financial instruments and risk management (continued)
Foreign currency sensitivity
During the financial year sterling weakened by 14.8% against the US dollar, 13.5% against the Swiss franc and by 14.3% against the
Euro (2015: weakened 7.4%, 2.2% and strengthened 8.9% respectively). Given this and more recent market movements a change of
10% or even more is clearly possible.
The following table illustrates the sensitivity of the profit after taxation for the year and the equity in regard to the Company’s financial
assets and financial liabilities, assuming a further 10% change in exchange rates.
If sterling had weakened against the exposure currencies by 10%, with all other variables held constant, this would have affected net
assets and net profit/(loss) for the year attributable to equity Shareholders as follows:
US dollars
Swiss francs
Euros
Danish krone
Canadian dollars
Swedish krona
At 31 August
2016
£’000
At 31 August
2015
£’000
18,194
987
976
1,183
–
–
21,340
21,525
251
744
704
74
83
23,381
If sterling had strengthened against the exposure currencies by 10%, with all other variables held constant, this would have affected net
assets and net profit/(loss) after taxation attributable to equity Shareholders as follows:
US dollars
Swiss francs
Euros
Danish krone
Canadian dollars
Swedish krona
At 31 August
2016
£’000
At 31 August
2015
£’000
(18,194)
(987)
(976)
(1,183)
–
–
(21,340)
(21,525)
(251)
(744)
(704)
(74)
(83)
(23,381)
In the opinion of the Directors, the above sensitivity analyses are not necessarily representative of the year as a whole, since the level of
exposure changes as part of the currency risk management process used to meet the Company’s objectives.
c) Interest rate risk
The Company will be affected by interest rate changes as it holds interest-bearing financial assets and liabilities. Interest rate changes
will also have an impact in the valuation of investments, although this forms part of price risk, which is considered separately above.
Management of the risk
Interest rate risk is limited by the Company’s financial structure with operations mainly financed through the share capital, share premium
and retained reserves. The majority of the Company’s financial assets are, under normal circumstances, equity shares and other
investments which neither pay interest nor have a stated maturity date. Liquidity and overdraft facilities are managed with the aim of
increasing returns for Shareholders.
In the normal course of business, the Company’s policy is to be fully invested and, other than as arising from the timing of investment
transactions, the cash holding is kept to a minimum.
54
International Biotechnology Trust plc
Notes to the Financial Statements
24. Financial instruments and risk management (continued)
At the year end £11,813,000 (2015: £21,864,000) was drawn down under the Company’s committed overdraft facility.
It is not the Company’s policy to use derivative instruments to mitigate interest rate risk, as the Board believes that the effectiveness of
such instruments does not justify the costs involved.
Interest rate exposure
The exposure, at 31 August 2016, of financial assets and liabilities to interest rate risk is shown by reference to:
• Floating interest rates (i.e. giving cash flow interest rate risk) – when the rate is due to be re-set; and
• Fixed interest rates (i.e. giving fair value interest rate risk) – when the financial instrument is due for repayment.
Company
Exposure to floating interest rates:
Cash and cash equivalents
Exposure to fixed interest rates:
Non-current asset investments held at
fair value through profit or loss
Total exposure to interest rates
At 31 August 2016
At 31 August 2015
Within
one year
£’000
More than
one year
£’000
Total
£’000
Within
one year
£’000
More than
one year
£’000
Total
£’000
(11,723)
–
(11,723)
(21,568)
–
(21,568)
–
(11,723)
–
–
–
124
(11,723)
(21,444)
–
–
124
(21,444)
The weighted average interest rate for the fixed rate financial assets was 0.0% (2015: 7.0%) and the effective period for which the rate
was fixed was 0.00 years (2015: 0.07 years).
The above amounts are not necessarily representative of the exposure to interest rates in the year ahead, as the level of cash or cash like
assets such as money market funds and borrowings varies during the year according to the performance of the stock market, events
within the wider economy and opportunities within the unquoted market and the Investment Manager’s decisions on the best use of
cash or borrowings over the period. During the year under review, the level of financial assets and liabilities exposed to interest rates
fluctuated between £2.5m and £26.8m.
Interest rate sensitivity
The following table illustrates the sensitivity of the profit after taxation for the year and equity to an increase or decrease of 50 (2015: 50)
basis points in interest rates in regard to the Company’s monetary financial assets, which are subject to interest rate risk. This level of
change is considered to be reasonably possible based on observation of current market conditions.
The sensitivity analysis is based on the Company’s monetary financial instruments held at each Balance Sheet date, with all other
variables held constant.
Effect on revenue return
Effect on capital return
Effect on total return and on net assets
31 August 2016
Increase
in rate
£’000
31 August 2016
Decrease
in rate
£’000
31 August 2015
Increase
in rate
£’000
31 August 2015
Decrease
in rate
£’000
(59)
–
(59)
59
–
59
(108)
–
(108)
108
–
108
In the opinion of the Directors, the above sensitivity analyses may not be representative of the year as a whole, since the level of exposure
may change.
55
International Biotechnology Trust plc
Notes to the Financial Statements
24. Financial instruments and risk management (continued)
2. Credit risk
In undertaking purchases and sales of investments, there is a risk that the counterparty will not deliver the investment before or after the
Company has fulfilled its responsibilities. Additionally, the Company has funds on deposit with banks or in money market funds. HSBC
Bank plc is the Custodian of the Company’s assets. The Company’s investments are held in accounts which are segregated from the
Custodian’s own trading assets. If the Custodian were to be become insolvent, the Company’s right of ownership is clear and they are
therefore protected. However cash balances deposited with the Custodian may be at risk in this instance, as the Company would rank
alongside other creditors.
Management of the risk
During the year the Company bought and sold investments only through brokers which had been approved by the Investment Manager
as acceptable counterparties. In addition, limits are set as to the maximum exposure to any individual broker that may exist at any time.
These limits are reviewed regularly.
Cash balances will only be deposited with reputable banks with high quality credit ratings.
Credit risk exposure
The exposure to credit risk at the year end comprised:
At 31 August
2016
At 31 August
2015
Group & Company Group & Company
£’000
£’000
Sales awaiting settlement
Accrued income
Cash at bank
9,153
42
90
9,285
14,311
106
296
14,713
All of the above financial assets are current, their fair values are considered to be the same as the values shown and the likelihood of a
material credit default is considered to be low.
None of the Company’s financial assets are past due or impaired.
3. Liquidity risk
Liquidity risk is the possibility of failure of the Company to realise sufficient assets to meet its financial liabilities.
Management of the risk
Liquidity and cash flow risk are minimised as the Investment Manager aims to hold sufficient Company assets in the form of readily
realisable securities which can be sold to meet funding commitments as necessary. In addition, the Company has an overdraft facility
with HSBC Bank PLC of £35 million.
It should be noted, however, that investments in unquoted securities will not be readily realisable. Furthermore, even where the
Company holds an investment in quoted securities, the Company may be restricted in its ability to trade that investment either because
the investment becomes subject to restrictions when the company concerned becomes publicly quoted or, at certain times, as a
consequence of the Company being privy to confidential price sensitive information as a result of the Investment Manager’s active
involvement in that company.
Liquidity risk exposure
A summary of the Company’s financial assets and liabilities is provided on the following pages in sub-note 6.
56
International Biotechnology Trust plc
Notes to the Financial Statements
24. Financial instruments and risk management (continued)
4. Specific risk
As well as the general risk factors outlined above, investing in the biotechnology sector carries some particular risks:
(a) the stock prices of publicly quoted biotechnology companies have been characterised by periods of high volatility;
(b) a proportion of the Company’s investments will be in companies whose securities are not publicly traded or freely marketable and
may, therefore, be difficult to realise. In addition, there are inherent difficulties in valuing unquoted investments and the realisations
from sales of investments could be less than their carrying value;
(c) biotechnology companies typically have a limited product range and those products may be subject to extensive government
regulation. Obtaining necessary approval for new products can be a lengthy process, which is expensive and uncertain as to outcome;
(d) technological advances can render existing biotechnology products obsolete;
(e) intense competition exists in certain product areas in relation to obtaining and sustaining proprietary technology protection and the
complex nature of the technologies involved can lead to patent disputes;
(f) certain biotechnology companies may be exposed to potential product liability risks, particularly in relation to the testing, manufacturing
and sales of healthcare products;
(g) biotechnology companies spend a considerable proportion of their resources on R&D, which may be commercially unproductive or
require the injection of further funds to exploit the results of their work; and
(h) the growing cost of providing healthcare has placed financial strains on governments, insurers, employers and individuals, all of whom
are searching for ways to reduce costs. As a result, certain areas may be affected by price controls and reimbursement limitations.
5. Fair values of financial assets and financial liabilities
All financial assets and liabilities are either carried in the Balance Sheet at fair value or the Balance Sheet amount is a reasonable
approximation of fair value. The fair value of quoted shares and securities is based on the bid price or last traded price, depending on
the convention of the exchange on which the investment is quoted.
Unquoted investments are valued in accordance with IPEVC Valuation Guidelines. The methods commonly used to value unquoted
securities are stated in accounting policy 1(f).
6. Summary of financial assets and financial liabilities by category
The carrying amounts of the Company’s financial assets and financial liabilities as recognised at the Balance Sheet date of the reporting
periods under review are categorised as follows:
Financial Assets
Financial assets at fair value through profit or loss:
Non-current asset investments - designated as such on initial recognition
Loans and receivables:
Current assets:
Receivables
Cash and cash equivalents
At 31 August
2016
£’000
At 31 August
2015
£’000
221,788
246,929
9,219
90
9,309
14,432
296
14,728
57
International Biotechnology Trust plc
Notes to the Financial Statements
24. Financial instruments and risk management (continued)
6. Summary of financial assets and financial liabilities by category (continued)
Financial Liabilities
Measured at amortised cost
Creditors: amounts falling due within one month:
Purchases awaiting settlement
Bank overdraft
Accruals
Note: Amortised cost is the same as the carrying value shown above.
7. Classification under the fair value hierarchy
The table below sets out fair value measurements using the IFRS 7 fair value hierarchy:
(i) Financial assets at fair value through profit or loss
At 31 August
2016
Group
£’000
At 31 August
2015
Company
£’000
1,792
11,813
864
14,469
2,203
21,864
1,613
25,680
At 31 August 2016
Equity investments
Fixed interest investments
At 31 August 2015
Equity investments
Fixed interest investments
Total
£’000
221,788
–
Level 1
£’000
199,592
–
221,788
199,592
Total
£’000
246,805
124
Level 1
£’000
226,464
–
246,929
226,464
Level 2
£’000
–
–
–
Level 2
£’000
2
–
2
Level 3
£’000
22,196
–
22,196
Level 3
£’000
20,339
124
20,463
Categorisation within the hierarchy has been determined on the basis of the lowest level of input that is significant to the fair value
measurement of the relevant asset as follows:
Level 1 – valued using quoted prices in active markets for identical assets.
Level 2 – valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1.
Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data.
The valuation techniques used by the Company are explained in the accounting policies noted on pages 40 and 41.
There have been no transfers during the year between Levels 1 and 2.
A reconciliation of fair value measurements in Level 3 is set out on the opposite page.
58
International Biotechnology Trust plc
Notes to the Financial Statements
24. Financial instruments and risk management (continued)
(ii) Level 3 investments at fair value through profit or loss (Company)
Opening valuation
Transfers out of Level 3
Acquisitions
Disposal proceeds
Total gains/(losses) included in the Statement of Comprehensive Income
- on assets sold
- on assets held at the year end
At 31 August
2016
£’000
At 31 August
2015
£’000
20,463
–
1,476
(2,956)
1,733
1,480
18,232
(3,190)
2,867
(8,172)
5,511
5,215
Closing valuation
22,196
20,463
The transfers out of Level 3 represent the value of investments that were listed during the year, having previously been unquoted.
(iii) Sensitivity of Level 3 valuations
Valuation techniques
Multiple of revenue/
comparable market
companies
Multiple of EBITDA
Discounted cash flow
Market comparable/
multiple of revenue
Probability weighted
expected return
Market comparable/
multiple of EBITDA
For the year ended 31 August 2016
Effect of reasonably possible
alternative assumptions
For the year ended 31 August 2015
Effect of reasonably possible
alternative assumptions
Significant
unobservable
inputs
Carrying Favourable Unfavourable
changes
changes
£’000
£’000
value
£’000
Carrying
value
£’000
Favourable Unfavourable
changes
£’000
changes
£’000
Revenue multiple
EBITDA multiple
Discount rate
Probability of
milestone achievement
Revenue estimates
Revenue multiple
Probability of
expected outcomes
–
–
5,250
–
–
–
–
–
–
–
–
6,299
–
–
213
–
–
(29)
–
–
–
–
2,075
488
(1,261)
(209)
–
–
–
–
–
–
–
1,527
210
(1,614)
(204)
–
–
2,562
89
(170)
EBITDA multiple
2,167
590
(279)
1,606
261
(149)
7,417
3,153
(1,749)
10,467
2,300
(2,167)
The table above outlines the Level 3 investments where there are considered to be reasonable possible alternatives to the assumptions
used within the valuations. The effects of using the alternatives within the valuations are shown. The table does not include Level 3
investments where there is not considered to be reasonable possible alternatives to the assumptions used within the valuations or where
no assumptions are used in the valuations (e.g. where the Level 3 investment is valued by reference to the initial cost).
59
International Biotechnology Trust plc
Notes to the Financial Statements
24. Financial instruments and risk management (continued)
8. Capital management policies and procedures
The Company’s objectives, policies and processes for managing capital are unchanged from the preceding accounting year.
The Company’s debt and capital structure comprises the following:
Debt
Bank overdraft
Equity
Called up share capital
Reserves
Total debt and equity
At 31 August
2016
£’000
At 31 August
2015
£’000
11,813
21,864
10,409
206,242
11,116
224,374
216,651
235,490
228,464
257,354
The Company’s capital is managed to ensure that it will continue as a going concern and to maximise the capital return to its equity
Shareholders over the longer-term.
The Board, with the assistance of the Investment Manager, monitors and reviews the broad structure of the Company’s capital on an
ongoing basis. This includes consideration of:
(i) the buy back or issuance of equity shares;
(ii) the level of gearing, if any; and
(iii) dividend payments, if any.
The Company is subject to externally imposed capital requirements through the Act, with respect to its status as a public limited
company.
In addition, with respect to the obligation and ability to pay dividends, the Company must comply with the provisions of Section 1158
Corporation Tax Act 2010 and the Act respectively.
Gearing for this purpose is defined as borrowings used for investment purposes, less cash, expressed as a percentage of net assets.
Borrowings used for investment purposes, less cash
Net assets
Gearing
At 31 August
2016
£’000
11,723
216,651
At 31 August
2015
£’000
21,568
235,490
5.4%
9.2%
Borrowings are made on a relatively short-term basis to exploit specific investment opportunities, rather than to apply long-term
structural gearing to the Company’s portfolio of investments.
60
International Biotechnology Trust plc
Notes to the Financial Statements
25. Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The
chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has
been identified as the Board.
The Board is of the opinion that the Company is engaged in a single segment of business, namely the investment in development
staged biotechnology and other life sciences companies in accordance with the Company’s investment objective, and consequently
no segmental analysis is provided.
26. Exchange rates
Foreign currency assets and liabilities have been translated into sterling on the Balance Sheet date at the following rates of exchange:
Australian dollars
Danish krone
Euros
Norwegian krone
Swiss francs
US dollars
At 31 August
2016
At 31 August
2015
1.74267
8.75220
1.17594
10.92434
1.28685
1.30970
2.16941
10.24470
1.37260
12.89682
1.48732
1.53800
61
International Biotechnology Trust plc
Company Summary, Shareholder Information,
Directors and Advisers
Company Status
The Company was established in 1994 as an independent
investment trust whose shares are listed on the London Stock
Exchange (Ordinary shares: ISIN No: GB0004559349; EPIC
Code: IBT). The Company is registered in England and Wales
with a company number of 2892872.
Directors
Alan Clifton (Chairman)
John Aston
Véronique Bouchet (Senior Independent Director)
Caroline Gulliver (Chair of the Audit Committee)
Jim Horsburgh
Life of the Company
The Company’s Articles of Association provide for Directors to put
forward a proposal for the continuation of the Company at the
Company’s AGM at two-yearly intervals. Accordingly, a proposal
will be put forward at the AGM to be held in December 2017.
Advisers
Investment Manager and AIFM
SV Life Sciences Managers LLP
71 Kingsway, London WC2B 6ST
Telephone: 020 7421 7070
Share Price and Net Asset Value Information
The Company’s shares are listed on the London Stock
Exchange. The Company’s share price is quoted daily in the
Daily Telegraph and The Financial Times.
The Company releases its NAV per share to the market on a
daily basis.
Association of Investment Companies
The Company is a member of the Association of Investment
Companies (the AIC). Further information on the AIC can be
found at its website, www.theaic.co.uk.
2017 Financial Calendar
January
April
August
31 August
November
December
Payment of interim dividend
Half Yearly Results announced
Payment of interim dividend
Year End
Annual Results announced
Annual General Meeting (AGM)
Shares in Issue
As at 31 August 2016, the Company had 37,672,663 Ordinary
shares of 25p each in issue and 3,965,000 Ordinary shares of
25p each held in treasury.
Website
The Company’s website is located at www.ibtplc.com. The
site provides share price and NAV information as well as details
of the Board of Directors and SV, information on investee
companies, monthly fact sheets, the latest published Annual
and Half Yearly Financial Statements and access to recent
market announcements.
Company Secretary and Registered Office
BNP Paribas Secretarial Services Limited
10 Harewood Avenue, London NW1 6AA
Telephone: 020 7410 5791
Email: secretarialservice@uk.bnpparibas.com
Administrator, Banker and Custodian
HSBC Bank plc
8 Canada Square, London E14 5HQ
Independent Auditor
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Atria One, 144 Morrison Street, Edinburgh EH3 8EX
Stockbroker
Cenkos Securities plc
6.7.8 Tokenhouse Yard, London EC2R 7AS
Registrar
Equiniti Limited
Aspect House, Spencer Road
Lancing, West Sussex BN99 6DA
Shareholder Helpline: 0371 384 2624*
Overseas Helpline: +44 121 415 7047
Website: www.shareview.co.uk
* Lines are open from 8.30 am to 5.30 pm Monday to Friday (excluding
UK public holidays).
62
International Biotechnology Trust plc
Alternative Investment Fund Manager’s Disclosure
SV is the Company’s Alternative Investment Fund Manager (AIFM). Details of the Management Agreements dated 11 February 2016 are
included in the Directors’ Report on page 19.
The below disclosures include information required by the FCA Fund 3.2 and 3.3.
Investment management
The AIFM provides portfolio management of assets and investment advice in relation to the assets of the Company. The Board remains
responsible for setting the investment strategy, investment policy and investment guidelines and the AIFM operates within these guidelines.
Any material changes to the published investment policy are put to shareholders for a vote. Any changes to the investment strategy are
agreed by the Board of the Company.
Details of the Company’s investment objective and policy, and investment strategy, including limits, are on page 13 of the Annual Report 2016.
Contractual relationship with the Company
The Articles between the Company’s Shareholders and the Company is governed by English law and, by purchasing shares, investors
agree that the Courts of England have exclusive jurisdiction to settle any disputes. All communications in connection with the purchase of
the Company’s shares will be in English. Certain judgments obtained in EU member states (excluding Denmark at this time) in proceedings
commenced on or after 10 January 2016, can be enforced in England and Wales under the Recast Brussels Regulation by obtaining a
certificate from the court of origin certifying that the judgment is enforceable, serving the certificate and judgment on the judgment debtor
and, when seeking enforcement, providing the courts of England and Wales with an authenticated copy of the judgment and certificate and
certifying compliance with the requirements as to service on the debtor. The judgment debtor can apply for the enforcement of the judgment
to be refused on limited grounds. Further, certain judgments obtained in EU member states (including Denmark) in proceedings commenced
before 10 January 2016, or in Iceland, Norway and Switzerland can be enforced in England and Wales under the 2001 Brussels Regulation
or the 2007 Lugano Convention and certain judgements obtained from a country to which any of the Administration of Justice Act 1920,
the Foreign Judgments (Reciprocal Enforcement) Act 1933 or the Civil Jurisdiction and Judgments Act 1982 applies can also be enforced in
England and Wales by making an application to the High Court for an order for registration of the judgment for enforcement. The judgment
debtor may appeal/challenge registration on limited grounds. It may also be possible to enforce a judgment obtained in a country to which
none of the above regimes apply in England and Wales if such judgment is: (1) final and conclusive on the merits; (2) given by a court regarded
by English law as competent to do so; and (3) for a fixed sum of money.
Professional liability risk
The AIFM maintains both the capital requirements and the required professional inclemently insurance at the level required under AIFM Rules
in order to cover potential liability risks arising from professional negligence.
Company management
The Board announced on 21 July 2015 that with effect from 21 July 2015 the Company had entered in to new agreements with the relevant
suppliers of services to the Company to comply with AIFMD. The agreements with the Company’s Investment Manager and AIFM – SV Life
Sciences Managers LLP, the Company Secretary BNP Paribas Securities Services S.C.A.and Administrator, HSBC Security Services Ltd –
differ only to the extent necessary to comply with the AIFMD.
Also on 21 July 2015, the Company appointed HSBC Bank plc to the new AIFMD role of Depositary which amended the custody agreement
and created a new Custody Agreement with HSBC Bank plc to reflect the different roles under the AIFMD legislation. Under the terms of the
Depositary Agreement the Company has agreed to pay the HSBC fee of 5bps on the net assets of the Company.
Management functions delegated by AIFM
A description of safe-keeping functions, administrative functions and secretarial functions delegated by the AIFM and the identity of such
delegates can be found on page 19 under the heading “Administration, Depositary and Company Secretarial Services”. The AIFM does not
consider that any conflicts of interest arise from the delegation of these functions.
Valuation policy
The Company’s portfolio of assets will be valued on each Dealing Day (a day on which the London Stock Exchange and banks in England
and Wales are normally open for business). All instructions to issue or cancel ordinary shares given for a prior Dealing Day shall be assumed
to have been carried out (and any cash paid or received).
63
International Biotechnology Trust plc
Alternative Investment Fund Manager’s Disclosure
The valuation will be based on the following:
(a) Cash and amounts held in current and deposit accounts and in other time-related deposits will be valued at their nominal value.
(b) All transferable securities will be valued at fair value:
i. fair value for quoted investments is deemed to be bid market prices, or last traded price, depending on the convention of the
exchange on which they are quoted; and
(c) All other property contained within the Company’s portfolio of assets will be priced at a value which, in the opinion of the AIFM,
represents a fair and reasonable price.
(d) If there are any outstanding agreements to purchase or sell any of the Company’s portfolio of assets which are incomplete, then the
valuation will assume completion of the agreement.
(e) Added to the valuation will be:
i. any accrued and anticipated tax repayments of the Company;
ii. any money due to the Company because of ordinary shares issued prior to the relevant Dealing Day;
iii. income due and attributed to the Company but not received; and
iv. any other credit of the Company due to be received by the Company. Amounts which are de minimis may be omitted from the
valuation.
(f) Deducted from the valuation will be:
i. any anticipated tax liabilities of the Company;
ii. any money due to be paid out by the Company because of ordinary shares bought back by the Company prior to the valuation;
iii. the principal amount and any accrued but unpaid interest on any borrowings; and
iv. any other liabilities of the Company, with periodic items accruing on a daily basis. Amounts which are de minimis may be omitted
from the valuation.
Valuations of NAV per Ordinary share will be suspended only in any circumstances in which the underlying data necessary to value the
investments of the Company cannot readily or without undue expenditure be obtained. Any such suspension will be announced to the
Regulatory Information Service.
The Company’s unquoted portfolio of assets will be valued on each working day in accordance with IFRS and the PE and VC Valuation
guidelines (IPEVC) www.privateequityvaluation.com. Further information regarding the valuation of unquoted assets and any sensitivities
arising from unobservable inputs can be found in note 24 to the Financial Statements.
Liquidity risk management
The AIFM has a liquidity management policy which it uses to monitor the liquidity risk of the Company. Shareholders have no right to redeem
their Ordinary shares from the Company but may trade their Ordinary shares on the secondary market. However, there is no guarantee that
there is a liquid market in the Ordinary shares.
Further details regarding the risk management process and liquidity management are available from the AIFM, on request.
Fees
A description of certain of the fees, charges and expenses and of the maximum amounts thereof (to the extent that this can be assessed)
which are borne by the Company and thus indirectly by investors are included in the paragraph above ‘Company Management’. In addition
to these administration and depositary fees, the Company will pay all other fees, charges and expenses incurred in the operation of its
business including, without limitation:
• brokerage and other transaction charges and taxes;
• Directors’ fees and expenses;
• fees and expenses for custodial, registrar, legal, auditing and other professional services;
64
International Biotechnology Trust plc
Alternative Investment Fund Manager’s Disclosure
• any borrowing costs;
• the ongoing costs of maintaining the listing of the ordinary shares and their continued admission to trading on the London Stock Exchange;
• directors’ and officers’ insurance premiums;
• promotional expenses (including membership of any industry bodies, including the AIC, and marketing initiatives approved by the Board); and
• costs of printing the Company’s financial reports and posting them to Shareholders.
Such fees and expenses are not subject to a maximum unit.
Remuneration of the AIFM staff
The AIFM operates under the terms of the Remuneration Policy Statement. This ensures that the AIFM complies with the requirements of the
FCA’s Remuneration Code (SYSC19A); the AIFM Remuneration Code (SYSC19B) and the BIPRU Remuneration Code (SYSC19C).
Following completion of an assessment of the application of the proportionality principle to the FCA’s AIFM Remuneration Code, the AIFM
has disapplied the pay-out process rules with respect to it and any of its delegates. This is because the AIFM considers that it is operating
on a small scale, carries out non-complex activities and has a relatively low risk profile.
Fair treatment of investors
The AIFM has procedures, arrangements and policies in place to ensure compliance with the principles more particularly described in the
AIFM Rules relating to the fair treatment of investors. The principles of treating investors fairly include, but are not limited to:
• acting in the best interests of the Company and of the Shareholders;
• ensuring that the investment decisions taken for the account of the Company are executed in accordance with the Company’s investment
policy and objective and risk profile;
• ensuring that the interests of any group of Shareholders are not placed above the interests of any other group of Shareholders;
• ensuring that fair, correct and transparent pricing models and valuation systems are used for the Company;
• preventing undue costs being charged to the Company and Shareholders;
• taking all reasonable steps to avoid conflicts of interests and, when they cannot be avoided, identifying, managing, monitoring and, where
applicable, disclosing those conflicts of interest to prevent them from adversely affecting the interests of Shareholders; and
• recognising and dealing with complaints fairly.
The AIFM maintains and operates organisational, procedural and administrative arrangements and implements policies and procedures
designed to manage actual and potential conflicts of interest. In addition, as its Ordinary shares are admitted to the Official List, the Company
is required to comply with, among other things, the FCA’s Listing Rules and Disclosure Guidance and Transparency Rules and the Takeover
Code, all of which operate to ensure a fair treatment of investors. As at the date of this Annual Report, no investor has obtained preferential
treatment or the right to obtain preferential treatment.
Procedure and conditions for the issuance of Ordinary shares
The Company’s ordinary shares are admitted to the Official List of the UKLA and to trading on the main market of the London Stock
Exchange. Accordingly, the Company’s Ordinary shares may be purchased and sold on the main market of the London Stock Exchange.
While the Company will typically have Shareholder authority to buy back shares, Shareholders do not have the right to have their shares
purchased by the Company.
Net asset value
The NAV of the Company’s Ordinary shares is published daily by the AIFM via a Regulatory Information Service announcement.
Historical performance
Historical financial information demonstrating the Company’s historical performance can be found on page 3. Copies of the Company’s
audited accounts for the three financial years ended 31 August 2016 are available for inspection at the Registered Office address of
BNP Paribas Secretarial Services Limited and can be viewed on the Company’s website at www.ibtplc.com.
65
International Biotechnology Trust plc
Alternative Investment Fund Manager’s Disclosure
Transfer and reuse of the Company’s assets
The Depositary may not use or re-use the Company’s securities or other investments without the prior consent of the Company.
Periodic disclosures
During the year ended 31 August 2016, the overdraft facility available to the Company was £35m.
Risk management
In its capacity as AIFM, SV has a responsibility for risk management for the Company which is in addition to the Board’s corporate governance
responsibility for risk management.
The Company has Risk Management controls which are agreed with the Board. The Investment Manager maintains adequate risk
management systems in order to identify, measure and monitor principal risks at least annually under AIFMD. The Investment Manager is
responsible for the implementation of various risk activities such as risk systems, risk profile, risk limits and testing.
The Board, as part of UK corporate governance, remain responsible for the identification of significant risks and for the ongoing review of the
Company’s risk management and internal control processes.
The AIFM has an ongoing process for identifying, evaluating and managing the principal risks faced by the Company and this is regularly
reviewed by the Board. The Board remains responsible for the Company’s system of internal control and for reviewing its effectiveness.
Further details can be found in the Strategic Review on pages 14 and 15 of the Annual Report 2016 and in note 24 to the Financial
Statements 2016 on pages 52 to 60.
Valuation of illiquid assets
The Directive requires the disclosure of the percentage of the AIF’s assets which are subject to special arrangements arising from their illiquid
nature. Further, any new arrangements for managing the liquidity of the Company must be disclosed.
The liquidity management policy requires the AIFM to identify and monitor its investment in asset classes which are considered to be relatively
illiquid. The majority of the Company’s investment portfolio is invested directly in liquid equities and this equity portfolio is monitored on an
ongoing basis to ensure that it is adequately diversified.
The liquidity management policy is reviewed and updated, as required, on at least an annual basis.
Leverage
The Company uses leverage to increase its exposure primarily for short-term investment opportunities. The AIFM in dialogue with the Board
has set maximum levels of leverage that are reasonable. It has implemented systems to calculate and monitor compliance against these
limits and has ensured that the limits have been complied with at all times.
The maximum leverage limits are 30.0% for both the Gross Method and the Commitment Method of calculating leverage. There have been
no changes to the maximum level of leverage that the Company may employ during the year.
At 31 August 2016, actual leverage was 5.4% for both the Gross Method and the Commitment Method.
At 31 August 2016, £11.8m was drawn down against the uncommitted overdraft facility. The Company has complied with the terms of the
facility throughout the financial year. Further details can be found in note 12 on page 48 and note 24 on page 55.
Periodic disclosures will be made to investors through the Company’s website, www.ibtplc.com, regarding the following areas as required:
• The percentage of the AIF’s assets which are subject to special arrangements arising from their illiquid nature;
• Any new arrangements for managing the liquidity of the AIF;
• The risk profile of the AIF and the risk management systems employed by the AIFM to manage these risks;
• Any changes to the maximum level of leverage and to any right to reuse collateral or any guarantee granted under the leverage arrangements;
and
• The total amount of leverage used by the AIF.
66
International Biotechnology Trust plc
Statement of the Depositary’s Responsibilities
Periodic disclosures
The Depositary must ensure that the Company is managed in accordance with the FCA’s Investment Funds Sourcebook (the Sourcebook),
the AIFMD (together the Regulations) and the Company’s Articles of Association.
The Depositary must in the context of its role act honestly, fairly, professionally, independently and in the interests of the Company and
its investors.
The Depositary is responsible for the safekeeping of the assets of the Company in accordance with the Regulations.
The Depositary must ensure that:
• the Company’s cash flows are properly monitored and that cash of the Company is booked into the cash accounts in accordance with
the Regulations;
• the sale, issue, repurchase, redemption and cancellation of shares are carried out in accordance with the Regulations;
• the assets under management and the NAV per share of the Company are calculated in accordance with the Regulations;
• any consideration relating to transactions in the Company’s assets is remitted to the Company within the usual time limits;
• that the Company’s income is applied in accordance with the Regulations; and
• the instructions of the AIFM are carried out (unless they conflict with the Regulations).
The Depositary also has a duty to take reasonable care to ensure that the Company is managed in accordance with the Articles of
Association in relation to the investment and borrowing powers applicable to the Company.
Report of the Depositary to the Shareholders of International Biotechnology Trust plc (the Company)
for the year ended 31 August 2016
Having carried out such procedures as we consider necessary to discharge our responsibilities as Depositary of the Company, it is our
opinion, based on the information available to us and the explanations provided, that in all material respects the Company, acting through
the AIFM has been managed in accordance with the rules in the Sourcebook, the Articles of Association of the Company and as required
by the AIFMD.
HSBC Bank plc
3 November 2016
67
International Biotechnology Trust plc
Notice of Meeting
Notice is hereby given that the Annual General Meeting (AGM) of International Biotechnology Trust plc will be held at 12.30 pm on
Tuesday, 13 December 2016 at BNP Paribas Fortis, 5 Aldermanbury Square, London EC2V 7BP, to consider and, if thought fit, to pass
the following resolutions, of which resolutions 1 to 7 will be proposed as ordinary resolutions and resolutions 8 to 10 will be proposed
as special resolutions:
Ordinary resolutions
1. To receive the Directors’ Report and the audited Financial Statements for the year ended 31 August 2016.
2. To approve the Annual Report on Directors’ Remuneration for the year ended 31 August 2016.
3. To re-elect Mr Alan Clifton as a Director of the Company.
4. To re-elect Mr Jim Horsburgh as a Director of the Company.
5.
To re-appoint PricewaterhouseCoopers LLP as the Independent Auditors of the Company from the conclusion of this Meeting until
the conclusion of the next AGM at which the Financial Statements are laid before Members.
6. To authorise the Directors to determine the Auditors’ remuneration.
7.
THAT, the Board be authorised to allot shares in the Company and to grant rights to subscribe for or convert any security into shares
in the Company:
(a) up to a nominal amount of £469,345.75 (being 5% of the issued Ordinary share capital at the date of this Notice); and
(b) comprising equity securities (as defined in the Companies Act 2006 (the Act)) up to a nominal amount of £938,691.50 (including
within such limit any shares and rights to subscribe for or convert any security into shares allotted under paragraph (a) above) in
connection with an offer by way of a rights issue or other pre-emptive offer:
(i) to Ordinary Shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
(ii) to holders of other equity securities as required by the rights of those securities or as the Board otherwise considers necessary,
and so that the Board may impose any limits or restrictions and make any arrangements which it considers necessary or
appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or
under the laws of, any territory or any other matter, such authorities to apply until the end of the AGM to be held in 2017 (or
15 months from the date of passing this resolution, whichever is earlier, unless previously revoked, varied or renewed, by the
Company in General Meeting) but, in each case, so that the Company may make offers and enter into agreements during the
relevant period which would, or might, require shares to be allotted or rights to subscribe for or convert securities into shares
to be granted after the authority ends and the Board may allot shares or grant rights to subscribe for or convert securities into
shares under any such offer or agreement as if the authorities had not ended.
Special resolutions
To consider and, if thought fit, pass the following three resolutions as special resolutions:
8.
THAT, if resolution 7 is passed, the Board be given power to allot equity securities (as defined in the Act) for cash under the authority
given by that resolution and/or to sell Ordinary shares held by the Company as treasury shares for cash, as if Section 561 of the Act
did not apply to any such allotment or sale, such power to be limited:
(a) to the allotment of equity securities and sale of treasury shares in connection with an offer of equity securities (but in the case of
the authority granted under paragraph (b) of resolution 7, by way of a rights issue or other pre-emptive offer of equity securities
only):
(i) to Ordinary Shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
(ii) to holders of other equity securities, as required by the rights of those securities or, as the Board otherwise considers
necessary;
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International Biotechnology Trust plc
Notice of Meeting
and so that the Board may impose any limits or restrictions and make any arrangements which it considers necessary or
appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under
the laws of, any territory or any other matter; and
(b) in the case of the authority granted under paragraph (a) of resolution 7 and/or in the case of any sale of treasury shares, to the
allotment (otherwise than under paragraph (a) above) of equity securities up to a nominal amount of £469,345.75, equivalent to
1,877,383 Ordinary shares, (being 5% of the issued Ordinary share capital at the date of this Notice);
such power to apply until the end of the AGM to be held in 2017 (or, 15 months from the date of passing this resolution, whichever
is earlier, unless previously revoked, varied or renewed, by the Company in General Meeting) but during this period the Company
may make offers, and enter into agreements, which would, or might, require equity securities to be allotted after the power ends
and the Board may allot equity securities under any such offer or agreement as if the power had not ended.
9.
THAT, the Company be generally and unconditionally authorised, for the purposes of Section 701 of the Act to make one or more
market purchases (within the meaning of Section 693(4) of the Act) of Ordinary shares of 25p each in the capital of the Company,
subject to the following restrictions and provisions:
(a) the maximum number of Ordinary shares hereby authorised to be purchased is 5,628,394 (being 14.99% of the issued Ordinary
share capital at the date of this Notice);
(b) the maximum price, exclusive of expenses, which may be paid for any such Ordinary share shall be the higher of:
(i) an amount equal to 105% of the average of the closing middle market quotations for an Ordinary share (as derived from the
London Stock Exchange Daily Official List) for the five Business Days immediately preceding the day on which that Ordinary
share is contracted to be purchased; and
(ii) the higher of the price of the last independent trade and the highest current independent bid on the London Stock Exchange
at the time the purchase is carried out;
(c) the minimum price which may be paid for such Ordinary share is 25p per share; and
(d) unless previously revoked or varied the authority conferred hereby shall expire at the end of the AGM of the Company to be held
in 2017 or, if earlier, on the expiry of 15 months from the date of passing this resolution, (unless previously revoked, varied or
extended by the Company in General Meeting), except that the Company may before such expiry enter into a new contract or
contracts to purchase such Ordinary shares under the authority conferred hereby that will or may be executed wholly or partly
after the expiry of such authority and the Company may make a purchase of Ordinary shares in pursuance of any such contract
or contracts as if the authority had not expired.
10. THAT, a General Meeting (other than an AGM) may be called on not less than 14 clear days’ notice, such authority to expire at the
conclusion of the next AGM of the Company or on the expiry of 15 months from the date of the passing of this resolution (whichever
is earlier).
By order of the Board
BNP Paribas Secretarial Services Limited
Company Secretary
3 November 2016
Registered Office:
10 Harewood Avenue
London NW1 6AA
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Notice of Meeting
Notes
1.
2.
3.
Ordinary Shareholders are entitled to attend and vote at the Meeting and to appoint one or more proxies or corporate representatives
to exercise all or any of their rights to attend, speak and vote on their behalf at the Meeting but only if each proxy or corporate
representative is appointed to vote on separate or separate blocks of shares registered to the Shareholder. A proxy need not be
a Member of the Company. A proxy form is enclosed accordingly. To be valid, the proxy form should be completed, signed and
returned in accordance with the instructions printed thereon.
Any person to whom this notice is sent, who is a person nominated under Section 146 of the Act to enjoy information rights
(a Nominated Person) may, under an agreement between him or her and the Shareholder by whom he or she was nominated, have
a right to be appointed (or to have someone else appointed) as a proxy for the AGM. If a Nominated Person has no such proxy
appointment right or does not wish to exercise it, he or she may, under any such agreement, have a right to give instructions to the
Shareholder as to the exercise of voting rights.
The statement of the rights of Ordinary Shareholders in relation to the appointment of proxies in this note does not apply to
Nominated Persons. The rights described in this note can only be exercised by Ordinary Shareholders of the Company.
Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company has specified that only those Shareholders
registered in the Register of Members of the Company at 6.30 pm on Friday, 9 December 2016, or 6.30 pm two working days prior
to the date of an adjourned Meeting, shall be entitled to attend and vote at the Meeting in respect of the number of shares registered
in their name at that time. Changes to the Register of Members after 6.30 pm on Friday, 9 December 2016 shall be disregarded
in determining the right of any person to attend and vote at the Meeting. The voting record date has been determined as Friday,
9 December 2016.
4.
In the case of joint holders of a share the vote of the first named on the Register of Members who tenders a vote, whether in person
or by proxy, shall be accepted to the exclusion of the votes of the other joint holders.
5.
Members (and any proxies or corporate representatives appointed) agree, by attending the Meeting, that they are expressly
requesting and are willing to receive any communications relating to the Company’s securities made at the Meeting.
6.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so
for the AGM to be held on Tuesday, 13 December 2016 and any adjournment(s) thereof by using the procedures described in the
CREST Manual on the Euroclear website (www.euroclear.com). CREST personal members or other CREST sponsored members,
and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service
provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message
(a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications
and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of
whether it constitutes the appointment of a proxy or an amendment to the instruction given to a previously appointed proxy must, in
order to be valid, be transmitted so as to be received by the issuer’s agent (ID RA19) by 12.30 pm on Friday, 9 December 2016. For
this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST
Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by
CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee
through other means.
CREST members and, where applicable, their CREST sponsors or voting service provider(s) should note that Euroclear UK & Ireland
Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations
will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to
take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s),
to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message
is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable,
their CREST sponsors or voting service provider(s) are referred, in particular, to those sections of the CREST Manual concerning
practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
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7.
You should not use any electronic address provided either in the Notice of Meeting or any related documents (including the form of
proxy) to communicate with the Company for any purposes other than those expressly stated.
8.
Copies of the Appointment Letters of the non-executive Directors, the Company’s Articles of Association and a statement of
all transactions of each Director and of his family interests in the shares of the Company, will be available for inspection by any
Shareholder of the Company at the Registered Office of the Company during normal business hours on any weekday (English public
holidays excepted) and at the AGM by any attendee, for at least 15 minutes prior to, and during, the AGM. None of the Directors has
a contract of service with the Company.
9.
The biographies of the Directors offering themselves for re-election are set out on page 17 of the Company’s Annual Report for the
year ended 31 August 2016.
10. As at 3 November 2016, 37,547,663 Ordinary shares of 25 pence were in issue and 3,795,000 Ordinary shares were held in treasury.
Accordingly, the total number of voting rights of the Company as at 3 November 2016 is 37,547,663.
11. If the Chairman, as a result of any proxy appointments, is given discretion as to how the votes of those proxies are cast and the
voting rights in respect of those discretionary proxies, when added to the interests of the Company’s securities already held by the
Chairman, result in the Chairman holding such number of voting rights that he has a notifiable obligation under the Disclosure and
Transparency Rules, the Chairman will make the necessary notifications to the Company and the FCA. As a result, any Member
holding 3 per cent. or more of the voting rights in the Company who grants the Chairman a discretionary proxy in respect of some or
all of those voting rights and so would otherwise have a notification obligation under the Disclosure and Transparency Rules, need
not make a separate notification to the Company and the FCA.
12. The Annual Report and this Notice of Meeting will be available on the Company’s website, www.ibtplc.com, from the date of the
announcement of the Company’s annual results to the market. The Annual Report contains details of the total number of shares in
the Company in which Shareholders are entitled to exercise voting rights, along with the total number of votes that Shareholders
are entitled to exercise at the Meeting in respect of each share class.
13. A map of the location of the AGM venue is shown on page 73 to assist Shareholders who wish to attend the AGM. A personalised
proxy form will be sent to each registered Shareholder with the Annual Report and this Notice of Meeting, and instructions on how
to vote will be contained thereon.
14. Shareholders are advised that they have the right to have questions answered at the AGM. The Company must cause to be
answered any such question relating to the business being dealt with at the AGM but no such answer need be given if:
(a) to do so would interfere unduly with the preparation for the Meeting or involve the disclosure of confidential information;
(b) the answer has already been given on the Company’s website (www.ibtplc.com) in the form of an answer to a question; or
(c) it is undesirable in the interests of the Company or the good order of the Meeting that the question be answered.
The Board encourages Shareholders to submit any questions they may wish to raise at the AGM in writing to the Company
Secretary in advance of the Meeting. The Company Secretary can be contacted by writing to: BNP Paribas Secretarial Services
Limited, 10 Harewood Avenue, London NW1 6AA or by email at secretarialservice@uk.bnpparibas.com.
15. As soon as practicable following the AGM, the results of the voting at the Meeting and the number of votes cast for and against and
the number of votes withheld in respect of each resolution will be announced via a Regulatory Information Service and placed on
the Company’s website.
16. Under Section 527 of the Act, Shareholders meeting the threshold requirements set out in that Section have the right to require the
Company to publish on a website a statement setting out any matter relating to:
(i) the audit of the Company’s Financial Statements (including the Independent Auditors’ Report and the conduct of the audit) that
are to be laid before the AGM; or
(ii) any circumstance connected with the Auditors of the Company ceasing to hold office since the previous meeting at which an
Annual Report and Financial Statements were laid in accordance with Section 437 of the Act.
The Company may not require the Shareholders requesting any such website publication to pay its expenses in complying with
Sections 527 or 528 of the Act. Where the Company is required to place a statement on a website under Section 527 of the Act, it
must forward the statement to the Company’s Auditors not later than the time when it makes the statement available on the website.
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The business which may be dealt with at the AGM includes any statement that the Company has been required under Section 527
of the Act to publish on a website.
17. A copy of this notice, and other information by Section 311A of the Act, can be viewed and/or downloaded at www.ibtplc.com and,
if applicable, any Members’ statements, resolutions or matters of business received by the Company after the date of this Notice
will be available on the Company’s website www.ibtplc.com.
Registered Office:
10 Harewood Avenue
London NW1 6AA
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International Biotechnology Trust plc
Location of Meeting
BNP PARIBAS FORTIS, 5 ALDERMANBURY SQUARE, LONDON EC2V 7HR
BNP PARIBAS FORTIS, 5 ALDERMANBURY SQUARE, LONDON EC2V 7BP
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For further information:
www.ibtplc.com
SV Life Sciences Managers LLP
71 Kingsway
London WC2B 6ST
BNP Paribas Secretarial Services Limited
10 Harewood Avenue
London NW1 6AA
Telephone: +44 (0)20 7421 7070
Fax: +44 (0)20 7421 7077
Telephone: +44 (0)20 7410 5971
Fax: +44 (0)20 7410 4449