Investing in Biotechnology
for a Healthier Future
ANNUAL REPORT | 31 AUGUST 2022
International Biotechnology Trust plc | Who We Are
WELCOME TO
INTERNATIONAL BIOTECHNOLOGY TRUST PLC’s
ANNUAL REPORT FOR THE YEAR ENDED 31 AUGUST 2022
WHO WE ARE
International Biotechnology Trust plc offers investors access to the fast-
growing biotechnology sector through an actively managed, diversified fund.
Our award-winning Investment Managers at SV Health
Managers LLP are scientifically, medically and financially
experienced with over 75 years of experience between
them. As well as investing in a wide-ranging portfolio of
global quoted biotechnology stocks, we include a small
proportion of otherwise inaccessible carefully selected
unquoted investments which have the potential to
deliver additional returns over the long-term. Excellent
management teams, unique innovative products and
strong potential for outperformance are the key criteria for
inclusion in our diversified portfolio of assets. The six key
attributes of the Company are detailed below:
2
Strong fundamentals
Driven by the strong
fundamental demand and supply
of the Biotechnology sector
Active management
Bottom up stock
selection with
diversification overlay
Diversified portfolio
Access to a broad spectrum
ofquoted and unquoted
investments
Expert team
Medically, scientifically and
financially experienced Investment
Managers with access to specialists
at SV Health Investors
Growth and yield
Provides investors exposure
to both growth and an
attractive yield
Innovation
Invested in some of the most
innovative companies in the world,
developing therapies to improve
andsave lives
NOMINEE
BIOTECH AND HEALTHCARE
NOMINEE
WINNER
Best Company for Shareholder
Communication
Responsible Investing
Best Biotechnology
Investment Strategy
ANNUAL
REPORT
31 August 2022
3
PORTFOLIO OVERVIEW
31 August 2022 31 August 2021
Number of total portfolio companies* 72 82
Number of quoted holdings 64 74
Number of unquoted holdings** 8 8
NAV £284.9m £323.8m
Quoted investments £285.5m £314.4m
Unquoted investments £28.0m £31.0m
Net (debt)*** (£40.0m) (£20.3m)
* Excluding unquoted companies fully written off (2022: 11; 2021: 10).
** Includes two SV unquoted funds. SV Fund VI and SV BCOF have a further 20 and 4 companies, respectively, in their portfolios.
*** Debt as at 31 August is a result of the Investment Managers’ investment strategy. Please refer to Glossary on pages 104 and 105 and APMs on page 106 for more information.
International Biotechnology Trust plc | Fund Facts
FUND FACTS
FINANCIAL HIGHLIGHTS
31 August 2022 31 August 2021
Total equity/Net asset value (NAV) (£’000) 284,889 323,775
NAV per share 697.2p 782.4p
Share price 651.5p 729.5p
Share price discount (6.6)% (6.8)%
Gearing 14.0% 6.3%
Ongoing charges* 1.3%** 1.2%**
Ongoing charges including performance fee 1.5%** 1.3%**
For detailed calculations on the discount/premium, gearing and ongoing charges, please refer to Alternative Performance Measures (APMs) on page 106.
* 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. Research
costs under MiFID II borne by the Company are included in the ongoing charges calculation.
** Includes management fees paid directly to SV Health Managers LLC from the investment in SV Fund VI (Fund VI) of £392,000 (2021: £377,000) and directly to SV Health Managers LLP
from the investment in SV Biotech Crossover Opportunities Fund LP (BCOF) of £231,000 (2021: nil).
FIVE YEAR PERFORMANCE (Cumulative Total Return)
1yr (%) 3yr (%) 5yr (%)
Share price total return to 31 August (6.4) 14.8 27.8
NAV per share total return to 31 August (6.9) 24.1 25.6
NASDAQ Biotechnology Index (NBI) to 31 August (13.8) 27.6 26.7
FTSE All-Share Index to 31 August 1.0 12.0 17.7
For detailed calculations on the Share price total return and the NAV per share total return, please refer to Alternative Performance Measures (APMs) on page 107. Data for NBI
and FTSE All-Share Index sourced from Bloomberg. All sterling-adjusted and on a shareholder returns basis.
TOP TEN HOLDINGS
As at 31 August 2022 As at 31 August 2021
Investment Therapeutic area Geographic location £’000 % of NAV % of NAV
Horizon Therapeutics Rare diseases United States 23,151 8.1 5.8
Seagen Oncology United States 22,036 7.7 6.8
SV Fund VI Venture Fund United States 18,866 6.6 6.7
Incyte Genomics Oncology United States 14,644 5.1 3.7
Regeneron Pharmaceuticals Ophthalmology United States 11,830 4.2 1.2
Gilead Sciences Infectious diseases United States 11,387 4.0 6.6
Neurocrine Biosciences Central nervous system United States 11,150 3.9 6.2
Harmony Biosciences Rare diseases United States 9,981 3.5 1.3
Mirati Therapeutics Oncology United States 9,461 3.3 2.8
Supernus Pharmaceuticals Central nervous system United States 8,752 3.1 1.8
141,258 49.5
At 31 August 2021 the top ten holdings represented 52.7% of NAV.
ANNUAL
REPORT
31 August 2022
4
AS AT 31 AUGUST 2022 AS AT 31 AUGUST 2021
International Biotechnology Trust plc | Portfolio Composition
PORTFOLIO COMPOSITION
NAV% by Size*
Mega cap > $30bn
Large cap = $10-30bn
Mid cap = $2-10bn
Small cap < $2bn
Unquoted funds
Directly-held unquoted
11%
32%
28%
7%
20%
2%
*Adjusted for cash/(debt) balance.
Oncology
Rare diseases
Central nervous system
Auto-immune
Other*
*Other includes unquoted funds.
NAV% by Therapeutic Area
29%
21%
14%
11%
Ophthalmology
4%
16%
Infectious diseases
5%
NAV% by Geography
Rest of WorldEurope/UKUS/Canada86% 11% 3%
NAV% by Development Stage
37%
32%
31%
Profitable
Revenue growth
Early-stage
NAV% by Size*
Mega cap > $30bn
Large cap = $10-30bn
Mid cap = $2-10bn
Small cap < $2bn
Unquoted funds
Directly-held unquoted
15%
18%
42%
6%
16%
3%
*Adjusted for cash/(debt) balance.
Oncology
Rare diseases
Central nervous system
Infectious diseases
Auto-immune
Ophthalmology
Other*
*Other includes unquoted funds.
NAV% by Therapeutic Area
33%
27%
15%
7%
5%
1%
12%
NAV% by Geography
Rest of WorldEurope/UKUS92% 5% 3%
NAV% by Development Stage
33%
26%
41%
Profitable
Revenue growth
Early-stage
ANNUAL
REPORT
31 August 2022
5
International Biotechnology Trust plc | Long-Term Record
LONG-TERM RECORD
TEN YEAR PERFORMANCE as at 31 August
As at
31August
Total NAV
£’000
Number of
shares inissue*
NAV pershare
pence
NAV**
totalreturn %
Share price
pence
Share price**
total return %
(Discount)/
premium %
NBI Index
Total Return
%
2022 284,889 40,863,009 697.2 (6.9) 651.5 (6.4) (6.6) (13.8)
2021 323,775 41,383,817 782.4 9.8 729.5 3.8 (6.8) 24.8
2020
†
283,897 38,436,817 738.6 22.4 730.0 18.7 (1.2) 18.6
2019 239,579 38,397,663 623.9 (6.8) 636.0 (2.1) 1.9 (9.8)
2018 262,473 37,547,663 699.0 8.6 680.0 13.7 (2.7) 10.1
2017 252,651 37,547,663 672.9 20.9 624.0 30.5 (7.3) 21.7
2016 216,651 37,672,663 575.1 (1.7) 497.5 (9.8) (13.5) (6.5)
2015 236,001 40,247,663 586.4 48.2 551.5 75.4 (6.0) 38.0
2014 214,970 54,332,663 395.7 26.4 314.5 16.9 (20.5) 33.8
2013 172,672 55,157,663 313.1 34.7 269.0 31.5 (14.1) 46.8
* Excludes treasury shares.
** On a total return basis (with all dividends reinvested since 2017).
†
Share price as at and total return to 28 August 2020 (31 August 2020 being a UK Bank Holiday).
TEN YEAR PERFORMANCE
Share Price/NASDAQ Biotechnology Index Total Return (%)
Source: Share Price Total Return from Morningstar. NASDAQ Biotechnology Index Total Return from Bloomberg. Data rebased to 100 at 31 August 2012.
100
150
200
250
300
350
400
Share Price Total Return
Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Aug-21
Aug-22
Nasdaq Biotechnology Index Total Return
ANNUAL
REPORT
31 August 2022
STRATEGIC REPORT
Chairman’s Statement ................................7
Fund Manager’s Review
............................. 10
Investment Managers
............................... 19
List of Portfolio Holdings
.............................20
Strategic Review
...................................24
DIRECTORS’ REPORT
AND FINANCIAL STATEMENTS
Directors’ Biographies...............................32
Directors’ Report
(Incorporating the Corporate Governance Statement)
......34
Report on Directors’ Remuneration
....................44
Audit Committee Report
.............................48
Management Report and Directors’
Responsibilities Statement
........................... 51
Independent Auditors’ Report
.........................53
Statement of Comprehensive Income
...................62
Statement of Changes in Equity
.......................63
Balance Sheet
.....................................64
Cash Flow Statement
...............................65
Notes to the Financial Statements
.....................66
Alternative Investment Fund Manager’s Disclosure . . . . . . . . 94
Statement of the Depositary’s Responsibilities
...........98
Notice of Meeting
..................................99
Notice of Meeting | Notes ............................ 101
Glossary
.........................................104
Alternative Performance Measures
....................106
Company Summary, Shareholder
Information, Directors and Advisers
...................108
CONTENTS
Further information:
www.ibtplc.com
International Biotechnology Trust plc | Contents
6
ANNUAL
REPORT
31 August 2022
International Biotechnology Trust plc | Chairman’s Statement
CHAIRMAN’S STATEMENT
SUMMARY
I am honoured to present the Company’s Annual Report for the
year ended 31 August 2022.
In difficult markets, the Company has performed well over the year,
significantly outperforming the NBI benchmark. The Company’s
NAV per share and share price returned -6.9% and -6.4%
respectively, whilst the NBI returned -13.8% and the FTSE All-
Share Index returned 1.0%. All figures are on a total return basis,
including costs and assuming dividends reinvested, and are sterling-
adjusted. Although negative returns are always disappointing, it is
encouraging that IBT has outperformed its comparator index over
this challenging period for biotechnologyshares.
The past year has seen two strong trends, with significant sell-offs
and a very weak biotechnology sector in the first part of the year,
followed by a strong recovery since June. After a difficult first half,
the Company’s NAV has risen 7% in the second half of the year.
Despite the turbulence of the past few years and the unfortunate
but necessary challenges caused by a restriction on investing
in COVID-19 vaccine producers at the height of the pandemic,
the Company has demonstrated its resilience with its NAV
outperforming the NBI Index over the past year.
QUOTED PORTFOLIO
The quoted portfolio fell by 7.6% in a very volatile period,
outperforming the benchmark which fell by 13.8%. In the first six
months, fears of rising interest rates and high levels of inflation hit the
biotechnology sector especially hard in the stock market fall which
occurred at the end of 2021. This was followed by significant further
weakness across the whole market when Russia invaded Ukraine.
Since then, the sector has seen a substantial recovery, largely
driven by a number of high value M&A transactions and a pick-up
in positive clinical data readouts. The Company has benefited from
this recovery. The main drivers of the Company’s performance are
discussed in more detail in the Fund Manager’s Review.
The Fund Manager uses active management and tactical asset
allocation to cushion the portfolio from some of the more
extreme swings in the biotech sector. This has contributed to the
outperformance against the benchmark index over the financial
year, as well as lower volatility than the index (see Figure 4 in the
Fund Manager’s Review on page 12).
UNQUOTED PORTFOLIO
The Company’s unquoted portfolio, a key feature which allows
shareholders to gain exposure to differentiated returns continues
to perform well.
7
Jim Horsburgh | Chairman
ANNUAL
REPORT
31 August 2022
8
The Company’s strategy is to maintain between 5%-15% exposure
to unquoted companies in the sector. In December 2021, the Board
announced its decision to allocate funds to SV Health Investors’
biotechnology focused private fund, SV Biotech Crossover
Opportunities Fund LP. It predominantly invests in later stage, pre-
IPO opportunities and invests in clinical and near clinical stage
biotech companies that have the potential to deliver excellent
investor returns and address significant unmet medical need in
patients. The Board is confident that this new allocation to unquoted
funds managed by SV will complement the existing investment
in SV Health Investors’ Fund VI. By the end of the financial year
the Company had invested £3.3m ($4.2m) in BCOF, which has
drawn $35m from its current total commitments of $212m and it
invested the drawn capital in three unquoted companies and one
quotedcompany.
Our most significant unquoted investment, SV Fund VI, has
delivered a net currency adjusted internal rate of return (IRR) of
22.3% per annum since the date of the Company’s first investment
into the fund in 2016. During the year ended 31 August 2022,
SV Fund VI made five distributions totalling $7.8m (£5.8m) and
two capital calls of $1.2m (£0.9m). The strength of the dollar in the
year contributed to the overall performance of £3.2m in GBP terms
to deliver an annual return of 9.0%.
In June 2022 the sale of Nordic Consulting Partners (a directly
held unquoted stock) to Accrete Health Partners was completed,
from which IBT received gross proceeds of £3.5m. This investment
generated a 6x multiple on its initial US dollar denominated
investment, including the prior proceeds received in 2016.
The remainder of the unquoted portfolio comprises investments
directly held and those with a carrying value representing contingent
milestones expected to be received. There was a negligible fair
value loss, net of foreign exchange gains, of £0.3m from these
holdings.
ESG
This report includes the Company’s second ESG report detailing
the outcome of the Company’s ESG engagement process. The
initial screening process delivered a meaningful insight for investors
into the level of ESG compliance among the major investments
in the Company’s portfolio. We intend to use this information as
a foundation on which to build our future ESG engagement with
portfolio companies. This most recent screening process encountered
a significantly lower level of compliance with the process from the
portfolio companies. Instead of responding individually to their many
shareholders, companies are now referring investors to their standard
ESG policies on their websites. This appears to be in response to
the increasing interest in ESG from investors, which is positive for
the sector overall. A discussion of the responses received and the
Fund Manager’s view on the ESG compliance of the Company’s
portfolio is set out in more detail on page 27. In order to make a
meaningful comparison between companies and to allow the Fund
Manager to screen investments effectively in the future, the Company
is reviewing the screening process described in its ESG policy and
will update shareholders when that process is complete. The Board
remains convinced that active engagement on these matters remains
the most effective way to have an impact.
I am delighted that our work on ESG has been recognised by
Capital Finance International with the Company being awarded Best
Biotechnology Investment Strategy (UK) in its 2022 Responsible
Investing Award. I have every confidence that the Fund Manager
will continue to develop its ESG strategy in this rapidly evolving
area to enable them to continue to incorporate ESG considerations
into the investment process and to report on ESG matters to the
Company’s shareholders.
PERFORMANCE FEE
The strong performance in 2021/2022 has not yet totally offset
the relative underperformance that was detailed in the 2020/2021
report, which was, in part, due to restrictions to trading vaccine
stocks. Therefore, a performance fee will not be paid on the
quoted portfolio for the financial year ended 31 August 2022.
A performance fee of £471,000 (£2021: £353,000) is payable on
the unquoted portfolio due to net realisation gains offsetting a fair
value loss.
SHARE PREMIUM AND DISCOUNT, SHARE
ISSUANCES AND BUYBACKS
The Board believes that keeping the Company’s share price and
NAV close is a benefit to existing shareholders and regularly
reviews the methods for managing both discount and premium,
as appropriate. Conducting share buybacks when the share price
is at a discount* to NAV is accretive to shareholders. Likewise,
the Company will continue to issue shares at a premium to the
NAV, when there is demand. The Board also believes growing the
Company increases liquidity and spreads the costs amongst a
greater number of shareholders.
During the period under review, the Company’s discount widened
at times, but closed the year at 6.6%, not dissimilar from the
6.8% discount at the start of the year. The Company executed 22
share buybacks of 520,808 shares in aggregate during the year
to 31 August 2022. No shares have been issued during the year
underreview.
CHAIRMAN’S STATEMENT | continued
International Biotechnology Trust plc | Chairman’s Statement
1
For information on how the performance fee is calculated, please refer to the Directors’ Report on pages 35 to 36.
* For detailed calculation of the discount, please refer to APMs on page 106.
ANNUAL
REPORT
31 August 2022
9
International Biotechnology Trust plc | Chairman’s Statement
CHAIRMAN’S STATEMENT | continued
DIVIDENDS
Paying a dividend out of capital returns gives the Company’s
shareholders a reliable source of income which is unusual from
growth orientated investments. The Company’s dividend policy is to
issue dividends equal to 4% of NAV as at the end of each preceding
financial year, paid in two equal instalments in January and August
each year. In 2022, the Company paid two dividends of 15.7pence
per share in accordance with this policy, an increase of 10.6% from
the dividend paid in the previous year. We are pleased to have been
able to offer our shareholders another dividend during this period of
extreme uncertainty. As the audited net asset value as at 31 August
2022 declined from the previous financial year, the absolute value
of the dividend will fall next year although the prospective dividend
yield as at 31August 2022 remains unchanged at 4.3% versus the
prospective dividend yield one year previously.
BOARD OF DIRECTORS
During the year the Company announced the appointment of
Professor Patrick Maxwell as a Non-executive Director with effect
from 1 January 2022. Professor Maxwell is one of the pre-eminent
UK scientists in the biotechnology sector. Please refer to page 33
for his biography.
I will be retiring from the Board at the conclusion of the AGM, having
had the honour of serving nine years on the Board. I am pleased to
announce that Kate Cornish-Bowden will succeed me as Chairman.
She has been on the Board since 2020 and is a highly valued
colleague. Kate has deep knowledge of the fund management and
investment industries and a strong personal interest in biotechnology.
Patrick Magee will become the Senior Independent Director and the
Board has commenced a recruitment process to bring the Board size
back to five members. Iwish my Board colleagues every success in
their new roles.
OUTLOOK
The Fund Manager and Directors will continue to monitor actively
the global economic and geopolitical situation and any potential
impact on the biotechnology sector’s prospects, financial condition,
and outlook.
Our Annual Reports in 2020 and 2021 were dominated by the effects
of the COVID-19 pandemic which disrupted investment markets
and the wider economy. Russia’s invasion of Ukraine has resulted in
similarly seismic shocks, creating a sharp rise in political instability,
economic disruption and an increase in the inflationary pressures
that many predicted would follow the pandemic. Despite this, the
fundamentals of the biotechnology industry remain intact. The
companies that we are invested in remain strong, with innovation
still continuing apace and demand for new therapies rising as the
elderly population grows and developing markets gain better access
to medicines. Indeed, the COVID-19 pandemic highlighted both the
increasingly important role of the life sciences industry, including
biotechnology, and the scale and speed of innovation this industry
can provide.
The past year has seen volatility in the market which looks set to
continue although, as predicted in the previous Interim Report, the
past few months have seen signs of a rebound from which the
Company has been well placed to benefit. This volatile landscape
will likely assist some biopharmaceutical companies more than
others. As an investment fund that actively manages a diverse
portfolio across the industry, the Company provides investors with
access to the biotechnology sector with a significantly reduced
risk of volatility than would be present if one directly purchased a
small portfolio of biotechnology company shares. The Company’s
closed-end structure allows it to gear, which prudently takes
advantage of varying market conditions and, because of greater
stability of capital, allows a longer-term approach to investment.
Further catalysts for the year ahead could include the growth
of M&A transactions fuelled by a combination of cash rich big
pharmaceutical companies looking to replenish their pipelines by
acquiring smaller biotechnology companies which are now trading
at attractively low valuations and whose management may now
have more realistic ideas about the achievable exit price. Indeed,
M&A has picked up substantially towards the end of the financial
year ended 31 August 2022 with seven transactions benefiting
the Company in the whole financial year. The Fund Manager’s
active investment strategy should ensure that the Company is
well placed to identify the greatest beneficiaries of growth over the
comingyears.
As noted above, I retire from the Board post the AGM. The Company
has many strengths. The fund management team are highly skilled
both in quoted and unquoted stocks. The strong Board with many
and varied talents is well-positioned to lead the Company’s strategy
for the benefit of shareholders and to provide effective governance.
Finally, the Company has many differentiating features that make it
attractive to new investors: the regular dividend; the ability to invest
in the full spectrum of biotechnology companies from start-ups to
multinationals; and the strong focus on ESG. With the fundamentals
for the biotechnology sector looking attractive, I am optimistic that
the Company can look to the future with confidence.
JIM HORSBURGH | Chairman
31 October 2022
ANNUAL
REPORT
31 August 2022
FUND MANAGER’S REVIEW
Ailsa CraigMarek Poszepczynski
10
International Biotechnology Trust plc | Fund Manager’s Review
SUMMARY
In the year to 31 August 2022, the NAV per share fell 6.9% and the
share price fell 6.4%. The Company’s benchmark, the NASDAQ
Biotechnology Index (NBI), fell 13.8% whilst the FTSE All-Share
Index rose 1%. All figures are on a sterling adjusted total return
basis, with dividends reinvested. The Company’s NAV has
risen 7% since the end of the first half of the financial year on
28February 2022.
As geopolitical and macro considerations took centre stage, the
year proved to be a turbulent one, where the main biotechnology
index (NBI) fell by about 30% between 31 August 2021 and
June 2022 before recovering slightly by the end of the financial
year, 31 August 2022. While a decline in NAV is disappointing,
the Company achieved strong relative performance and was
cushioned from the most dramatic falls.
As at 31 August 2022, the Company’s NAV amounted to £284.9m.
The quoted portfolio represented 91% of NAV (excluding cash and
other net assets) at £285.5m. The unquoted portfolio represented
9% of NAV at £28.0m and the Company had gearing of 14%.
By subsector, as at 31 August 2022, 80% of the portfolio was
invested in therapeutics, 10% in specialty pharmaceuticals, 3% in
life sciences, tools and diagnostics, and 7% in other subsectors.
The Company’s three largest therapeutic areas were Oncology
(29%), Rare Disease (21%) and CNS (14%).
COMPANY PERFORMANCE
Quoted portfolio
For the twelve-month period ended 31 August 2022, the NAV
of the quoted portfolio fell 7.6% versus a 13.8% decline for
the NASDAQ Biotechnology Index. All figures are on a sterling
adjusted total return basis, with dividends reinvested.
During the COVID-19 pandemic, the sector’s dynamic innovation
drew attention from generalist investors impressed by the speed
at which both vaccines and therapeutics came to the aid of the
world. Investor focus turned towards backing riskier, early-stage
biotechnology companies with potential game changing platform
technologies (such as cell therapy, gene therapy and RNA
platform technology) causing valuations across the whole market
to overheat. Small-cap companies were especially impacted by
this with companies in the early stages of clinical development
reaching valuations that had previously been reserved for
companies with proven products on the market. This enthusiasm
ANNUAL
REPORT
31 August 2022
FUND MANAGER’S REVIEW | continued
11
International Biotechnology Trust plc | Fund Manager’s Review
led to an unprecedented level of activity in the biotech IPO market,
which saw a total of $28.5bn of new investment in 2020 and 2021
according to the Biopharma Dive database (see Figure 1).
Since the peak in Spring 2021, a series of wider macroeconomic
factors have presented successive headwinds to the biotechnology
industry. Towards the end of 2020, generalist investors reconfigured
portfolios to hold overweight positions in sectors best positioned
to benefit from a post-COVID-19 reopening of the economy. In the
Autumn of 2021, the Federal Reserve (FED) hinted at raising interest
rates to combat rapidly rising inflation. Russia’s ongoing invasion of
Ukraine has since further disrupted equity markets, and put additional
upwards pressure on energy prices, inflation and, consequently,
interest rates. Biotechnology companies, especially those focused
on new drug development, are particularly sensitive to increases in
interest rates as they are typically not expected to realise earnings
for many years. Collectively, this has led to prolonged poor market
sentiment and one of the longest and deepest corrections to the
NBI and SPDR S&P Biotech ETF (XBI) indices since their inception.
The XBI is equal weighted so acts as a proxy index for the small
cap end of the biotech market. In the first half of 2022, the window
for IPOs almost completely closed, with IPOs in this period raising
less than 20% of the capital of the equivalent period in 2021. In
addition, there was less M&A activity in the sector during the first
half of 2022 possibly due to unrealistic valuation expectations at
target companies due to the hype of the previous year (see Figure 2).
Since the start of Summer 2022, market sentiment and the
indices have rebounded, enabling the Company’s NAV to recover
partially. Several factors appear to have precipitated this recovery.
First, fears of a dramatic increase in rates have been tempered.
Secondly, there has been some evidence of recovery in M&A with
both the Company and the wider industry benefiting from several
M&A transactions over the past few months (addressed below).
With financing being more challenging and many smaller biotechs
currently being valued at significantly more attractive levels than
the prior year, the likelihood of a further rebound in M&A over the
coming period appears high. As seen with recent M&A transactions,
de-risked, late-stage development assets that complement a
company’s strategic pipeline might be an M&A priority. We are
optimistic that after a challenging period, we are now seeing
the shoots of recovery and seem to be entering Stage 2 of the
investment cycle as discussed in our February blog “Not a cyclical
sector but a cyclical investment environment” (see Figure 3).
The Fund managers have used tactical asset allocation to anticipate
and respond to the macroeconomic trends and headwinds and
valuation shifts in the sector. Using the largest biotechnology
companies as a safer haven and the smaller emerging biotech
companies as the higher alpha generating area, the Fund managers
have adjusted the portfolio’s weighting in the various types and sizes
of companies to cushion the portfolio from some of the more extreme
VALUE AND NUMBER OF BIOTECH IPOS
FIGURE 1: Biotech IPOs 2018 - 2022 YTD
Source: Biopharma Dive to end August 2022.
VALUE AND NUMBER OF BIOTECH M&A DEALS
FIGURE 2: Biotech M&A Deals 2018 - 2022 YTD
Source: Biopharma Dive to end August 2022.
0
10
20
30
40
50
60
70
80
Number of deals
Number of M&A deals (RH axis)
Value of M&A deals ($bn)
0
50
100
150
200
250
20192018 2020 2021 2022
YTD
Value of deals ($bn)
0
10
20
30
40
50
60
70
80
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2018 2019 2020 2021 2022
YTD
Number of deals
Value of deals ($m)
Value of IPOs ($m)
Number of IPO deals (RH axis)
ANNUAL
REPORT
31 August 2022
FUND MANAGER’S REVIEW | continued
swings in the sector. The Fund managers have also continued with
their policy of reducing exposure to companies with imminent binary
events such as a readout of clinical data. These two strategies have
played a major role in the relative outperformance and in reducing
volatility in the portfolio to a level below that of the benchmark NBI
index (see Figure 4).
Whilst too early to tell what the exact consequences will be for
the industry, it is important to note the recent passing of the
Inflation Reduction Act by the US Government which has specific
provisions targeted at reducing the price of prescription drugs for
those who qualify for Medicare insurance. This will undoubtably
cap total profits for various medicines, but the consensus view
is that the changes contained within the bill will end up being
tolerable to the industry and the passage of relatively light-touch
measures might prove a blessing by taking more significant drug
pricing controls “off the table” especially heading into the US
mid-term elections.
Unquoted portfolio
SV Fund VI has continued its good performance by delivering
further net distributions of £5.8m in the financial year by exiting
investments in AdaptHealth, Leiters Holdings, and Healthify Inc.,
some partially and some in their entirety. SV Fund VI’s investment
period has ceased, and is currently realising its investments and
performing some minor pre-determined follow-on investments in
the remaining portfolio.
Overall, SV Fund VI has nearly drawn down on its full commitment of
$30.0m from the Company and has successfully distributed £25.9m
($34.4m) back to the Company since initial investment; with a further
£19.0m ($21.9m) in NAV at 31 August 2022 remaining. The current
net IRR since inception in 2016 is 22.3% with a 1.9x multiple.
To support the unquoted strategy and ensure the Company
remains between 5-15% invested in the unquoted sector, on the
back of the successful investment in SV Fund VI the Company has
12
International Biotechnology Trust plc | Fund Manager’s Review
CYCLICAL INVESTMENT ENVIRONMENT
FIGURE 3: The stages of the biotech investment cycle
Stage 2
M&A kickstarts and
valuations start to recover
Stage 3
Fair value, growth, influx of
capital, steady stream of M&A
Stage 4
Hyped values, booming IPOS
Stage 5
M&A dries up, investment
outflows
Stage 1
Company values depressed
Stage
5
Stage
4
Stage
3
Stage
2
Stage
1
Where
do we
think we
are now?
Source: SV Health Managers LLP
VOLATILITY LOWER THAN BENCHMARK
FIGURE 4:
Return vs Volatility (5 Years Annualised)
Source: Morningstar/SV Health Investors LLP.
IBT Nasdaq IBT Biotechnology Index
0
1
2
3
4
5
6
7
8
9
10
Return %
Volatility %
14 15 16 17 18 19
20
ANNUAL
REPORT
31 August 2022
13
International Biotechnology Trust plc | Fund Manager’s Review
FUND MANAGER’S REVIEW | continued
invested in SV Health Investors’ biotechnology focused private
fund, SV Biotech Crossover Opportunities Fund LP. SV BCOF
focuses on biotech companies which are either in the clinic and/
or which have the potential to enter the clinic within 12 months
(near clinical stage), typically Series B and beyond. While most
of the BCOF’s investments will be made in later venture-led
growth rounds or pre-IPO crossovers, the fund is able to invest in
listed equities subject to restrictions as set out in its investment
guidelines. The total invested capital in the year to date by the
Company was £3.3m ($4.2m).
Within our portfolio of directly held unquoted investments the sale
of Nordic Consulting Partners to Accrete Health Partners was
completed at 31 August 2022, realising gross proceeds for the
Company of $4.3m (£3.5m), achieving a 6x multiple on its initial
US dollar denominated investment, including the proceeds already
received in 2016.
The remaining investments have been winding down since the
Board’s decision in 2015 to make all further unquoted investments
through funds and are classified as “exited investments with
contingent milestones” or “directly held investments”, as shown in
the analysis of Unquoted Investments on pages 22 and 23. There
was limited movement in the fair values of these investments in
the year; a distribution of $1.0m (£0.8m) was received from Ikano,
and a write down in values of three of the companies totalling
£1.1m was largely offset by the foreign currency gain across the
portfolio of £1.0m through the strengthening of the US dollar.
The unquoted portfolio gave rise to a performance fee of £471,000
(2021: £353,000).
Contributors to the NAV
Biohaven was the largest contributor to NAV per share after the
announcement that Pfizer intended to acquire the company for
$11.6bn in May 2022. Biohaven launched Nurtec for the treatment of
migraine in February of 2020. Nurtec is an oral anti-CGRP inhibitor,
a novel approach to treating the condition and indicated for both
IBT ASSET ALLOCATION
FIGURE 5: Evolution of quoted portfolio NAV by size of investment
Source: SV Health Managers LLP
0
5
-5
-10
-15
-20
May-22
Cash / (Gearing) %
Proportion of quoted
portfolio by Market Cap (%)
50
45
40
35
30
25
20
15
10
5
0
Aug-22
Jul-22 Jun-22
Aug-21
Sep-21
Oct-21
Nov-21 Dec-21
Jan-22
Feb-22 Mar-22
Apr-22
Small (<$2bn) Mid ($2-10bn) Large/Mega (>$10bn)
Cash balance/(Gearing) (RH Axis)
SUMMARY OF UNQUOTED INVESTMENTS
As at 31 August 2022
Fair value
(£’m) % of NAV
Number of
investments
SV Fund VI 19.0 6.6% 20*
SV BCOF 3.4 1.2% 4
Exited with contingent
milestones
5.3 1.8% 5
Directly-held unquoted 0.3 0.1% 1
Total unquoted** 28.0 9.7% 30
* The number of investments within SV Fund VI represents the number of investments
into underlying individual portfolio companies. Three of these companies were
quoted as at 31 August 2022.
** The Board expects the unquoted portfolio to remain within the guideline range of
5-15%.
ANNUAL
REPORT
31 August 2022
14
FUND MANAGER’S REVIEW | continued
International Biotechnology Trust plc | Fund Manager’s Review
WORST PERFORMING INVESTMENTS
Detractors from NAV (£’m)
Mirati Therapeutics (7.4)
Horizon Therapeutics (6.5)
Illumina Inc (5.7)
SECTOR PERFORMANCE UP TO 31 AUGUST 2022
FIGURE 6: NASDAQ Biotechnology Index (NBI), S&P Biotech ETF (XBI) and S&P 500 Index (SPX)
Source: Bloomberg (Normalised as of 1 March 2021. NBI is Market Cap weighted (dominated by large caps) and XBI is Equal weighted (dominated by small caps).
the treatment and prevention of migraines. In November 2021,
Biohaven entered a partnership for ex-US rights of Nurtec with Pfizer
supported by an impressive launch which exceeded expectations,
triggering the outright acquisition of thecompany by Pfizer.
Neurocrine markets a product called Ingrezza indicated to treat
a movement disorder called Tardive Dyskinesia. The condition
is an unfortunate side effect of traditional anti-psychotic drugs,
stigmatizing and potentially irreversible. Ingrezza was launched
in 2017 and initial uptake and unmet need was better and higher
than initially anticipated by the market. However, during the
pandemic, sales were affected as a direct result of fewer face
to face interactions with patients, which is a pre-requisite for
diagnosis. With the return of post-pandemic normality, patients
have started to return to the doctor’s office and sales of Ingrezza
have recovered.
Harmony sells a drug called Wakix for narcolepsy, a condition
where patients suffer from excessive daytime sleepiness. The
current treatments available on the market are “scheduled” drugs
which means that the writing of prescriptions requires extra
monitoring. The fact that Wakix is unscheduled poses benefits to
patients and uptake of the drug has been strong since the launch
in the US in 2019. Expectations might increase with potential label
expansion in idiopathic hypersomnia, the drug is on a trajectory
to exceed sales of $1bn within the coming years.
Detractors from the NAV
Mirati is developing a targeted oncology drug called adagrasib
for the treatment of a subset of cancer patients whose tumours
express a specific mutation called KRAS G12C, primarily in lung
cancer patients. Researchers have been aware of this mutation
for many years but failed to successfully develop a drug. Mirati
has filed adagrasib with the FDA with the decision on whether
to approve the drug expected in December 2022. Amgen, the
closest competitor in the KRAS G12C field, received its approval
in May 2021, but with a disappointing initial launch. Therefore,
this has had a negative knock-on effect to Mirati’s potential sales
expectations and thus the share price.
Horizon Therapeutics is an orphan drug company which had a
very successful launch of its drug, Tepezza, to treat thyroid eye
disease despite launching during the pandemic. However, the
BEST PERFORMING INVESTMENTS
Contributors to NAV (£’m)
Biohaven Pharmaceuticals 5.6
Neurocrine Biosciences 4.8
Harmony Biosciences 4.5
60
70
80
90
100
110
120
130
140
150
160
170
180
190
Dec-19
Apr-20 Aug-20 Dec-20 Apr-21 Aug-21 Dec-21 Apr-22
Aug-22
NBI XBI SPX
ANNUAL
REPORT
31 August 2022
15
company has recently reported a slowing in the rate of growth
of the drug which has had a negative impact on the share price.
A US district court of Delaware ruled that Illumina infringed on
patents owned by a competitor company, Complete Genomics. The
court invalidated three patents owned by Illumina. The company
has since stated it will appeal the verdict. Illumina, as a high growth
company, has been affected by the current geopolitical turmoil,
increased interest rates and slowing growth in China.
Mergers and acquisitions (M&A)
Over the past twenty years, emerging biotech companies have
become responsible for an increasing proportion of innovative
new drugs. Indeed, the majority of approved products now
originate from these smaller companies. As a consequence, cash
rich large pharmaceutical companies in need of new products to
replenish their own pipelines which have looming patent cliffs for
blockbuster drugs are looking to acquire these smaller biotechs.
Biotech M&A deals peaked at around $200bn before falling
dramatically in the face of overheated valuations in 2021 (see Figure
2). As valuations fall and biotechnology financing becomes more
difficult, a pharmaceutical buyer’s market may emerge, with cash
rich large pharmas reopening negotiations to acquire exciting targets
that were too expensive to justify the acquisition price in early 2021.
There are recent signs of an uptick in M&A as we progress through
2022 and this looks set to continue into the later part of 2022 and
beyond. The Company benefited from six particular acquisitions of
its portfolio companies during the period under review.
In September 2021, Merck announced its intention to acquire
IBT’s portfolio company Acceleron, a clinical stage company
with a treatment for pulmonary arterial hypertension in late-
stage development that should complement and boost Merck’s
cardiovascular pipeline. The deal was worth $11.5bn which
represented a premium of 38% over Acceleron’s average
share price during the prior three months. At the time of the
announcement the Company had a position of 3.1% of NAV.
In December 2021, CSL Behring announced that it would acquire
portfolio holding Vifor Pharma for $11.7bn which represented an
implied premium of approximately 61% to the closing price on
1 December 2021. Australian biopharma company CSL currently
develops vaccines and blood plasma products and by acquiring
Vifor the company aims to diversify into the kidney and iron
deficiency markets. The Company had a position of 1.9% of NAV
at the time of the announcement.
Also in December 2021, Pfizer announced its intention to
acquire Arena Pharmaceuticals for $6.7bn which represented a
premium of 100% to the prevailing share price. Arena is a clinical
stage biopharma company developing gastroenterological,
dermatological and cardiological conditions. The Company had a
position of 0.3% of NAV at the time of the announcement.
In January 2022, UCB announced its intention to acquire Zogenix
for $1.9bn, representing a premium of 66% to the prevailing
share price. Zogenix is a biotechnology company which recently
launched Fintepla, a treatment for a rare type of epilepsy called
Lennox-Gastaut syndrome. The Company held a position of 1.7%
of NAV at the time of the announcement.
In May 2022, Pfizer announced its intention to acquire Biohaven for
$11.6bn, representing a 78.6% premium to the last closing price.
Biohaven is a biotechnology company with a focus on neurological
diseases that recently launched Rimegepant, which is approved
for the treatment and prevention of migraines. The Company held
a position of 8.1% of NAV at the time of the announcement.
In August 2022, Amgen announced its intention to acquire
Chemocentryx for $3.7bn, representing a 116% premium to
the share price. Chemocentryx is a biotechnology company
with a focus on inflammatory and autoimmune disorders and
an approved, potential blockbuster treatment for inflammatory
disorders. The Company held a position of 0.65% of NAV at the
time of the announcement.
Biotech innovation remains robust
Despite the weakness in share prices and company valuations,
fundamental innovation in the industry remains robust. The
number of new chemical entities (new drugs) approved in 2022 is
going to be the lowest numbers since 2016, most likely as a result
of the COVID-19 related delays to clinical trials. We are optimistic
that the trajectory for the number of new drugs will be generally
upwards. The Company will look to continue to benefit from this
by investing both in companies producing innovative new drugs
from classical drug classes (small molecules and biologics) and
in companies innovating with novel drug modalities, which are
continuing to accumulate very exciting clinical data. These novel
modalities – cell therapy, gene therapy, RNA therapy and gene
editing – represent a very exciting source of innovation and a
great opportunity for the biotechnology industry (see Figure 7).
Cell therapy involves the delivery of cells to patients for
therapeutic benefit and represents an incredibly diverse array
of potential technologies. The term has come to apply to a
rather narrower group of treatments involving the introduction of
immune cells that have been engineered in such a way that they
can specifically target, and hopefully destroy, a patient’s cancer
cells. Six cell therapies have been approved by the Food and Drug
International Biotechnology Trust plc | Fund Manager’s Review
FUND MANAGER’S REVIEW | continued
ANNUAL
REPORT
31 August 2022
16
FUND MANAGER’S REVIEW | continued
Administration (FDA) since 2017 and all show remarkable results
in a small range of blood cancers. A second wave of innovation,
in which the Company has made some investments and seeks to
add more, is aiming to improve manufacturing and reduce the toxic
side effects of these drugs to increase benefits to patients as well
as finding ways for these drugs to treat solid tumours, where there
is both a big unmet need and a lucrative market.
Over 10,000 diseases, affecting around 300 million people
worldwide, are caused by mutations in single genes that prevent
their normal function. Gene therapies aim to treat these diseases
by reintroducing a healthy version of the faulty gene into a
patient’s cells. After decades of struggling with the technology of
delivering genes to patients in a safe manner, significant recent
technological progress has now allowed remarkable new gene
therapy drugs to reach patients for the first time and offer the
hope of a one-shot durable cure for previously fatal or highly
debilitating diseases. There is hope that gene therapies stand
at a watershed moment and a range of gene therapies might
soon be available for many of these 10,000 genetic diseases.
The Company aims to benefit from this innovation through small
biotech companies such as UniQure, which has a gene therapy
drug filed for approval for Haemophilia B, and larger biotech
companies such as Biomarin, which received approval for its
Haemophilia A product at the end of August 2022.
International Biotechnology Trust plc | Fund Manager’s Review
#
For more information on gearing, please refer to APMs on pages 106 to 107.
INNOVATION - EXPANDING TREATMENT OPTIONS AND MODALITIES
FIGURE 7: The Company invests in some of the most innovative companies in the biotech sector
Source: SV Health Managers LLP
RNAs are multifunctional molecules that can act either as
important messengers, carrying instructions from DNA to make
proteins, or themselves perform essential functions inside cells.
Recent advances to RNA delivery technology, made famous by
the Pfizer-BioNTech and Moderna messenger RNA COVID-19
vaccines and paralleled by alternative approaches such as
antibody-coupling pioneered by portfolio company Dyne
Therapeutics, now allow RNAs with a chosen sequence to be
efficiently delivered to cells in a variety of locations within our
bodies. The ability to efficiently deliver RNAs opens up a range
of exciting potential drug opportunities including in devastating
rare genetic diseases.
Gene editing involves the correction, removal, or addition of a
gene, by modifying the patient’s genome at a specific position
to treat disease and offers an overlapping but distinct range of
therapeutic opportunities to gene therapy. Whilst precise editing
of the human genome within a patient perhaps offers the most
lucrative upside, gene editing technology remains the least
developed of these novel modalities and a series of safety and
efficacy hurdles remain to be cleared. However, if successful,
pioneers such as Intellia and CRISPR Therapeutics, which have
early clinical stage drugs for ATTR Amyloidosis and a variety of
genetic blood disorders respectively, could open the floodgates
in this space and allow patients with untold numbers of diseases
of severe unmet need to benefit from this technology in future.
Cell based therapies Gene therapies RNA therapies Gene editing
The transfer of intact, live cells into
a patient to treat haematological
cancers
Offsetting the effect of a genetic
mutation by inserting a healthy
version of the gene to treat SMA
and Haemophilia
Modification or provision of
ribonucleic acid (RNA) to patients’
cells using messenger RNA
(mRNA)
A type of genetic engineering in a
which a mutated gene is revised,
removed or replaced
9 drugs approved 2 drugs approved 15 drugs approved 0 drugs approved
ANNUAL
REPORT
31 August 2022
FUND MANAGER’S REVIEW | continued
INITIAL PUBLIC OFFERINGS (IPOs)
2021 was a landmark year for Biotech IPOs, with a record 82
companies going public in a buoyant market, supported by a
multiyear trend of rising biotech valuations. However, as the year
closed so too did the IPO market and the first and second quarters
of 2022 saw the fewest IPOs for more than five years. Severely
depressed company valuations (80% of the companies to go
public in 2021 had lost value by year end) make an IPO unattractive
to both investors and company management, who would rather
remain private and wait until market sentiment improves to list.
2021 saw an interesting new trend of preclinical stage companies
listing and the share prices in these companies were particularly
hard hit by the recent downturn as investors weighed up the risk of
programs which are so far from generating revenue, even by biotech
standards, in the light of rising interest rates. More companies may
choose to wait for further clinical data before becoming public in
future. A return to high IPO levels will likely require an improvement
in market sentiment and rising valuations (see Figure 1).
FDA ENVIRONMENT
The first half of 2022 was a slow period for new drug approvals
by the FDA, with just 21 getting the greenlight by 31 August
compared to 50 new treatments in the whole of 2021 and 53 in all
of 2020. However, this is likely due to short-term factors relating
to the COVID-19 pandemic, which has delayed inspections of
manufacturing sites and held up clinical trials, rather than a lack of
innovation in drug development. The number of newly registered
clinical trials and drugs in R&D pipelines continues to grow. As the
economy fully reopens, it is expected that the FDA backlog should
clear and the next 18 months could be a bumper time for new drug
approvals (see Figures 8 and 9).
DRUG PRICING LEGISLATION
AND THE US MID-TERM ELECTIONS
As part of the August 2022 Inflation Reduction Act, the US
government has introduced meaningful measures to regulate
drug pricing for the first time in decades. The legislation applies
to drugs sold through Medicare Supplement Plan J and will
both stop above-inflation drug price rises and allow Medicare
to negotiate a reduced price for a number of the highest selling
drugs after a shortened period of exclusivity. The most significant
measures (price negotiations, which are essentially forced price
reductions) will kick in from 2027 and will only apply to a selection
of the biggest selling (top 100) Medicare drugs. There are specific
exemptions for blood-derived products (including cell therapies)
and drugs produced by small biotech companies. As expected,
these measures met with opposition from the biopharma industry
and are expected to reduce revenues, with some estimates
suggesting a total of 11% of global pharma sales will become up
for negotiation.
17
International Biotechnology Trust plc | Fund Manager’s Review
NUMBER OF NEW CLINICAL TRIALS
FIGURE 8: New trials registered each year
Source: New clinical studies disclosed per year on clinicaltrials.gov as of
12/09/2022.
NOVEL DRUG APPROVALS BY US FDA
FIGURE 9: Annual approvals of new drugs
Source: U.S. Food and Drug Administration (FDA) as of 12/09/2022.
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
YTD
0
10
20
30
40
50
60
70
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
YTD
ANNUAL
REPORT
31 August 2022
18
FUND MANAGER’S REVIEW | continued
International Biotechnology Trust plc | Fund Manager’s Review
The Company’s strategy is to invest in companies producing
innovative new products that are focused in the main across
oncology, central nervous system and orphan disease areas
where there is significant pricing power and high unmet medical
need. Products likely to be most affected by the new measures are
those that have been on the market for a long time, haven’t been
superseded by more innovative medicines, and consequently
retain a high price. It is these drugs that place the most significant
burden on the US government’s Medicare budget and are the
primary target of this legislation. Examples would include Humira,
a drug used to treat inflammatory disorders such as rheumatoid
arthritis. The Company is not investing in this area, but instead in
truly innovative products, and consequently is likely to be shielded
from the most significant effects of this recent legislation. Indeed,
since only the biggest selling drugs will be subjected to price
negotiation, smaller biotechs will likely regard the impact of future
price negotiations as a ‘nice problem to have’ – these measures
only become relevant to successful products that are raising
significant revenues for their manufacturers.
The US is heading into mid-term elections in November where
the Democrats are expected to lose control of at least one of
the Senate or Congress, making US policy progress even more
challenging. The last few mid-term elections have seen robust
discussions on drug pricing and it may be that the passage of
these new measures takes this discussion off the table. It is
possible that Republicans will use these drug pricing measures,
which they see as a prime example of ‘big government control’, as
a key electioneering point. If elected, the Republican party (who
were almost universally against these measures) may even scrap
the policy entirely. Either way, the Inflation Reduction Act is likely
to take further drug pricing measures off the table for the time
being and crucially, avoids the controls on price setting mooted
in previous US election rhetoric, that would be most detrimental
to the biopharmaceutical industry. Whilst unlikely to significantly
impact the Company’s short-term investment strategy, the effects
of the Inflation Reduction Act remain something to watch over the
coming years.
GEARING
As a closed-ended fund, the Company has authority to use gearing
to a maximum of 30% of NAV. Gearing is facilitated by a revolving
loan facility of £55m currently costing 1.5% above base rate.
The Fund Managers use this gearing facility in an active, tactical
manner, increasing the gearing when opportunities arise to allow
investment in attractive companies at fair valuations without being
forced to sell other holdings. On the other hand, gearing can be
reduced to reduce exposure to unfavourable market conditions.
Over the year under review, gearing varied between 5% of NAV,
during periods when the Investment Managers were concerned
about valuations, and close to 20% of NAV when the Investment
Managers were optimistic about a rebound. See Figure 5 for the
evolution of gearing over the financial year.
OUTLOOK
There is no doubt that after the highs of 2020 and 2021, the past
year has been a difficult one for the biopharmaceutical industry.
The realisation that many pre-approval biotech companies were
overvalued in 2021 has combined with global, macroeconomic
challenges including inflation and the Russian invasion of Ukraine
to send biotechnology stocks tumbling in the later stages of 2021
and into 2022. In order to counter rising inflation, the Bank of
England and the Federal Reserve have raised interest rates. This
rise in interest rates, combined with inflation it is designed to
counter, is contributing to an uncertain economic outlook that is
expected to continue into 2023 and possibly beyond.
Despite this, there are positive signs for the biotechnology
industry. As has happened before when company valuations
dip, M&A becomes more attractive and there are clear signs that
M&A transactions will remain a significant catalyst for the industry
over the short and medium term. Whilst the recent passing of
drug pricing legislation in the US through the Inflation Reduction
Act may lead to slight haircuts to the revenues produced by
future blockbuster drugs, the legislation has so far had very
little impact upon valuations of the innovative small and mid-
cap biotechnology companies in which the Company is primarily
invested. Innovation in biotechnology remains robust with record
numbers of drugs in R&D pipelines and clinical trials. Indeed,
there is real excitement that the new modalities reaching the
market in the 2010s and 2020s, such as gene and RNA therapies,
could transform healthcare across a variety of diseases where
there remains significant unmet need. The current financial
turmoil provides an opportunity for knowledgeable investors to
make meaningful returns on investments in companies that are
inappropriately undervalued. Whilst identifying these companies
is a challenge, this is an opportunity rarely offered during times of
continual growth and systematically high valuations.
SV HEALTH MANAGERS LLP
Ailsa Craig
Marek Poszepczynski
31 October 2022
ANNUAL
REPORT
31 August 2022
19
International Biotechnology Trust plc | Investment Managers
AILSA
CRAIG
Investment Manager
Ailsa joined SV Health in 2006
and is an Investment Manager
for the Company. Ailsa has a
BSc (Hons) in Biology from
the University of Manchester.
She was awarded the IMC in
2002 and a Securities Institute
Diploma in 2007.
MAREK
POSZEPCZYNSKI
Investment Manager
Marek joined SV Health in 2014
and is an Investment Manager
for the Company. Marek has
an MSc in Biochemistry and an
MSc in Business Management
from the Royal Institute of
Technology, Stockholm.
KATE
BINGHAM
Managing Partner SV
Kate joined SV Health in
1991 and is an Investment
Manager for the Company.
Kate is one of the SV Health’s
Managing Partners, has a first
class degree in Biochemistry
from Oxford University, and
graduated from Harvard
Business School with anMBA.
HOUMAN
ASHRAFIAN
Managing Partner SV
Houman joined SV in 2016
and represents the team of
investment professionals
managing the unquoted
portfolio. Houman is currently
Head of Experimental
Therapeutics at the University
of Oxford and an Honorary
Consultant Cardiologist, John
Radcliffe Hospital, Oxford.
The investment team has a breadth of experience across both public and private investments. The majority of investments made are in
the public markets, though private or venture capital investments are also made through a relationship with SV Health Managers LLP (the
Fund Manager) which provides unique deal flow for private company investment opportunities.
INVESTMENT MANAGERS
ANNUAL
REPORT
31 August 2022
20
QUOTED INVESTMENTS RANKED BY % OF NAV
As at 31 August 2022
Investment Therapeutic area Geographic location £’000 % of NAV
Horizon Therapeutics Rare diseases United States 23,151 8.1
Seagen Oncology United States 22,036 7.7
Incyte Genomics Oncology United States 14,644 5.1
Regeneron Pharmaceuticals Ophthalmology United States 11,830 4.2
Gilead Sciences Infectious diseases United States 11,387 4.0
Neurocrine Biosciences Central nervous system United States 11,150 3.9
Harmony Biosciences Rare diseases United States 9,981 3.5
Mirati Therapeutics Oncology United States 9,461 3.3
Supernus Pharmaceuticals Central nervous system United States 8,752 3.1
Exelixis Oncology United States 8,278 2.9
Total of Top Ten Investments 130,670 45.8
Intra Cellular Therapies Central nervous system United States 7,639 2.7
Biogen Inc Central nervous system United States 7,637 2.7
UniQure Other Europe 7,611 2.7
Ultragenyx Pharmaceutical Rare diseases United States 7,132 2.5
Travere Therapeutics Rare diseases United States 7,038 2.5
Alnylam Pharmaceuticals Rare diseases United States 6,745 2.4
Alkermes Central nervous system Europe 6,669 2.3
Chinook Therapeutics Nephrology United States 6,073 2.1
Galapagos (ADR) Inflammation Europe 5,305 1.9
Vera Therapeutics Nephrology United States 5,144 1.7
Total of Top Twenty Investments 197,663 69.3
Sanofi Other Europe 5,060 1.8
BioMarin Pharmaceutical Rare diseases United States 4,496 1.6
KalVista Pharmaceuticals Rare diseases United States 4,469 1.6
Illumina Inc Tools & Diagnostics United States 4,332 1.5
Novavax Inc
Infectious diseases United States 3,762 1.3
Aurinia Pharmaceuticals Inflammation United States 3,623 1.3
Amgen Oncology United States 3,352 1.2
Guardant Health Tools & diagnostics United States 3,193 1.1
Zai Lab Ltd Oncology United States 3,121 1.1
Viatris Pharmaceuticals United States 2,984 0.9
Total of Top Thirty Investments 236,055 82.7
QUOTED INVESTMENTS
International Biotechnology Trust plc | Quoted Investments
ANNUAL
REPORT
31 August 2022
21
International Biotechnology Trust plc | Quoted Investments
QUOTED INVESTMENTS RANKED BY % OF NAV
As at 31 August 2022
Investment Therapeutic area Geographic location £’000 % of NAV
Dyne Therapeutics Rare diseases United States 2,939 1.0
United Therapeutics Rare diseases United States 2,922 1.0
Fate Therapeutics Oncology United States 2,713 1.0
Krystal Biotech Rare diseases United States 2,711 1.0
I Mab (ADR) Oncology United States 2,663 0.9
Argen X Rare diseases Europe 2,517 0.9
BeiGene Oncology United States 2,316 0.8
Jazz Pharmaceuticals Other Europe 2,295 0.8
Ascendis Pharma Rare diseases United States 2,262 0.8
Novocure Oncology Europe 2,254 0.8
Caribou Biosciences Inc Oncology United States 2,188 0.8
CRISPR Therapeutics Rare diseases United States 1,910 0.7
Adicet Bio Inc Oncology United States 1,881 0.7
Legend Biotech Other United States 1,516 0.5
Concert Pharmaceuticals Auto-immune United States 1,502 0.5
Swedesh Orphan Biovitrum Haematology Europe 1,443 0.5
Intellia Therapeutics Healthcare services United States 1,238 0.4
Fulcrum Therapeutics Rare diseases United States 1,230 0.4
Beam Therapeutics Oncology United States 1,102 0.4
Ideaya Biosciences Oncology United States 918 0.3
Denali Therapeutics Central nervous system United States 902 0.3
PTC Therapeutics Rare diseases United States 901 0.3
Xenon Pharmaceuticals Central nervous system United States 851 0.3
Insmed Inc Rare diseases United States 848 0.3
Rocket Pharmaceuticals Other United States 833 0.3
Axsome Therapeutics Central nervous system
United States 767 0.3
Hutchmed China (ADR) Other United States 751 0.3
Biocryst Pharmaceuticals Rare diseases United States 680 0.2
Allogene Therapeutics Oncology United States 589 0.2
Ironwood Pharmaceuticals Other United States 555 0.2
Iovance Biotherapeutics Oncology United States 515 0.2
Madrigal Pharmaceuticals Inflammation United States 332 0.1
Relmada Therapeutics Central nervous system United States 251 0.1
Black Diamond Therapeutics Oncology United States 121 0.0
Reshape Lifesciences Other United States — 0.0
Total Investments 285,471 100.0
QUOTED INVESTMENTS | continued
ANNUAL
REPORT
31 August 2022
22
UNQUOTED INVESTMENTS
EXITED INVESTMENTS WITH CONTINGENT MILESTONES
Exited unquoted companies for which the Company retains rights to receive future contingent performance-based payments are shown below.
As at 31 August 2022 As at 31 August 2021
Investment Sector classification Geographic location
Fair value
£’000
% of
NAV
Fair value
£’000
% of
NAV
1 Ikano Therapeutics Biotechnology United States 4,330 1.5 4,964 1.5
A company focused on nasally delivered pharmaceutical products that sold its assets to Upsher Smith Laboratories in 2010. The
terms of the deal provide for an upfront payment and a series of milestones and royalties. Through a series of transactions, the Ikano
contingent payouts have now been assumed by UCB.
2 Convergence Biotechnology United States 349 0.1 730 0.2
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.
3 Spinal Kinetics Medical Devices United States 289 0.1 244 0.1
A company pioneering a new generation of artificial discs for treating degenerative disc disease in the cervical and lumbar spine that
was acquired by Orthofix International N.V. (NASDAQ: OFIX). The terms of the deal provide upfront proceeds additional amounts
based on certain contingent milestones and amounts held in escrow.
4 Archemix Biotechnology United States 284 0.1 239 0.1
Formerly a small biotechnology company discovering, developing, and commercialising aptamer therapeutics, which was liquidated
in 2011. The former shareholders of Archemix may be entitled to future proceeds upon achievement of contingent milestones under
a licensing agreement entered into between Archemix and IVERIC bio, Inc. (NASDAQ: ISEE).
5 NCP Holdings Healthcare services United States 88 — 2,519 0.8
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. The investment was sold in June 2022 realising proceeds of £3.4m ($4.3m) for the Company.
A small receivable is held in escrow at the year-end.
Total exited investments with contingent milestones 5,340 1.8 8,696 2.7
INVESTMENTS HELD THROUGH A VENTURE FUND
As at 31 August 2022 As at 31 August 2021
Investment Sector classification Geographic location
Fair value
£’000
% of
NAV
Fair value
£’000
% of
NAV
1 SV Fund VI Venture Fund United States 18,866 6.6 21,803 6.7
An investment in a venture capital fund, SV Fund VI, which invests in portfolio companies across three sectors; biotechnology (37%),
healthcare services (44%) and medical devices (19%). SV Fund VI’s portfolio consists of 20 underlying investments, 3 of which are
listed as at 31 August 2022. The Company made a commitment of $30m to the fund on 19 October 2016, equivalent to 7.5% of the
total commitments, which has nearly been drawn down over the term of the fund. As at 31 August 2022 the Company has invested
£23.2m ($30.0m, excluding recallable distributions) with total distributions received of £25.9m ($34.4m) resulting in a net IRR of 22.3%
and a TVPI of 1.9x.
2 SV BCOF Venture Fund United Kingdom 3,411 1.2 — —
An investment in a venture capital fund, SV BCOF, which focuses on biotech companies which are either in the clinic and/or which have
the potential to enter the clinic within 12 months (near clinical stage), typically Series B and beyond. The fund will also invest in listed
equities subject to the restrictions set out in its investment guidelines. The Company made a commitment of $25m to the fund in 2021
and has invested £3.3m ($4.2m) in this financial year. The fund’s portfolio consists of 3unlisted investments and 1 listed investment.
Total investments held through a venture fund 22,277 7.8 21,803 6.7
International Biotechnology Trust plc | Unquoted Investments
ANNUAL
REPORT
31 August 2022
23
DIRECTLY-HELD UNQUOTED INVESTMENTS
Directly-held unquoted investments held by the Company are shown below:
As at 31 August 2022 As at 31 August 2021
Investment Sector classification Geographic location
Fair value
£’000
% of
NAV
Fair value
£’000
% of
NAV
1 Autifony Therapeutics Biotechnology United Kingdom 341 0.1 341 0.1
An early-stage company focused on delivering drugs for hearing disorders by targeting specific ion channel modulators in the field of
hearing and sensory disorders, including schizophrenia.
2 TopiVert Biotechnology United Kingdom — — 131 —
A company developing small, novel molecules as topical treatments for inflammatory diseases of the gut and eye. Founded in 2011
as spin out of RespiVert, following its acquisition of Centocor Ortho Biotech (now Janssen Bioech). The investment was written down
to nil in this financial year.
Total directly-held unquoted investments 341 0.1 472 0.1
Total exited investments with contingent milestones 5,340 1.8 8,696 2.7
Investments held through a venture fund 22,277 7.8 21,803 6.7
Total unquoted investments 27,958 9.7 30,971 9.5
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, 2022: 15 companies (2021: 10 companies).
International Biotechnology Trust plc | Unquoted Investments
UNQUOTED INVESTMENTS | continued
ANNUAL
REPORT
31 August 2022
24
International Biotechnology Trust plc | Strategic Review
The Board presents its Strategic Review for the Company for the
year ended 31 August 2022.
BUSINESS MODEL
The Company is an investment company as defined in Section
833 of the Companies Act 2006 (the Act) and its Ordinary shares
are listed and traded on the main market of the London Stock
Exchange. The Company is incorporated in England and Wales
as a public limited company and is domiciled in the UK.
LIFE OF THE COMPANY
The Company’s Articles of Association provide for the 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 previous AGM on 8 December 2021 and was passed
on a show of hands. Proxy votes cast in respect of the vote were
11,761,047 (99.96%) in favour, 4,321 (0.04%) against and 1,408
withheld. The next continuation vote will be put to shareholders at
the AGM to be held in December 2023.
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 suitably 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
biotechnology and other life sciences companies operating in
related sectors are based, though investments may 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 Fund 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 normally invest no 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 normally invest no 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.
INVESTMENT STRATEGY
The Company has delegated responsibility for day-to-day
investment of its assets to the Alternative Investment Fund
Manager (AIFM), SV Health Managers LLP (the Fund Manager).
Consistent with the Company’s investment policy the Fund
Manager 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.
STRATEGIC REVIEW
ANNUAL
REPORT
31 August 2022
25
The Fund Manager uses a bottom-up approach to stock 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 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.
The Company has a £55m loan facility in place with the Northern
Trust Company 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. As at
31 August 2022, £40.0m was drawn down against this facility.
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 7 to 9 and the Fund Manager’s Review on pages 10 to 18.
KEY PERFORMANCE INDICATORS (KPIs)
The Board meets regularly to review the performance of the
Company and its shares. The Board uses the following KPIs to
help assess the Company’s progress and its success at meeting
its investment objective. For detailed calculations, please refer to
the APMs on pages 106 and 107.
PRINCIPAL AND EMERGING RISKS
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 and
emerging risks facing the Company, including those that would
threaten its business model and its future performance. The Board
reviews a detailed Risk Map on a six-monthly basis. A summary of
the Directors’ review of internal controls, including the review of
the Risk Map, is set out in the Corporate Governance Statement
on page 42.
The principal risks detailed below are assessed by the Audit
Committee, which receives regular reports from its main third
party service providers on their own internal control processes.
Strategic/Performance risk
The Company’s returns are affected by changes in economic,
financial and corporate conditions, which can cause market
and exchange rate fluctuations. A significant fall in US equity
markets is likely to adversely affect the value of the Company’s
portfolio. The Fund Manager provides the Board with the latest
market information 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 the
broader 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.
The Financial Statements and performance of the Company are
denominated in GBP because the Company is a UK company
listed on the London Stock Exchange. 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.
Failure to meet the Company’s investment objectives and/or
poor sentiment towards the general or biotechnology sector-
specific equity market can affect the Company’s share price,
which could result in the Company’s shares trading at a relatively
large discount to its underlying NAV.
International Biotechnology Trust plc | Strategic Review
KPIs
Year ended
31 August 2022
Year ended
31 August 2021
NAV (£’000) 284,889 323,775
Share price (pence)
651.5 729.5
NAV per share (pence)
697. 2 782.4
Share price total return*
(6.4%) 3.8%
NAV total return*
(6.9%) 9.8%
(Discount)/Premium
(6.6%) (6.8%)
Gearing
14.0% 6.3%
Ongoing charges 1.3% 1.2%
For detailed calculations on the share price total return, NAV per share total return,
discount/premium, gearing and ongoing charges, please refer to Alternative
Performance Measures (APMs) on pages 106 and 107.
* Total return assumes all dividends are reinvested.
STRATEGIC REVIEW | continued
ANNUAL
REPORT
31 August 2022
26
International Biotechnology Trust plc | Strategic Review
STRATEGIC REVIEW | continued
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 8.
Political risk
Political developments are closely monitored and considered by the
Board. The Board continues to assess the potential consequences
for the Company’s investment portfolio and future business
activities. The Board understands that global factors, including
the war in Ukraine, and legislation concerning drug pricing in the
United States are likely to persist as issues that could potentially
have a negative impact on the healthcare sector.
Investment related risks
Alignment of the Company’s investment strategy with its
investment objective is essential and an inappropriate approach
by the Fund Manager 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 the Fund Manager’s adherence to the
agreed investment strategy.
The Fund Manager 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 Fund Manager, to allow the Board to
monitor the implementation of investment strategy and process.
Operational and service provider risks
In common with most other investment trusts, the Company has a
Board of Non-executive Directors and has no executive Directors,
executive management or employees. Its main functions are
delegated to third party service providers which are specialists in
their fields. Operational risk arises from insufficient processes of
internal control which would include compliance with statutes and
regulations governing the functions of the Company. The Board
reviews the performance of these third party service providers
and their risk control procedures, on a regular basis, as well as the
terms on which they provide services to the Company.
Tax, legal and regulatory risks
To qualify as an investment trust, the Company must comply with
Section 1158 of the Corporation Tax Act 2010 (CTA). HM Revenue
& Customs (HMRC) has approved the Company as an investment
trust and the Directors expect the affairs of the Company to
continue to satisfy the conditions for Capital Gains Tax exemption.
A breach of Section 1158 of the 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 the Fund Manager. Reports confirming
the Company’s compliance with the provisions of Section 1158 of
the CTA are submitted by the Fund Manager to each Board Meeting
together with relevant portfolio and financialinformation.
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. The Fund Manager 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.
VIABILITY STATEMENT
In accordance with Provision 31 of the UK Corporate Governance
Code 2018, 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 has considered each of the Company’s principal risks
and uncertainties and how these are managed. These risks and
uncertainties are detailed in this Strategic Review on pages 25
and 26 and the effectiveness of the Company’s risk management
and internal control systems are detailed on page 42. 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 every second AGM. In December
2021, 99.96% of the votes cast were in favour of the
continuation of the Company. The next continuation vote
will be put to shareholders at the AGM in 2023.
• 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
desirable by investors.
• Regulation will not increase to a level that makes the
running of the Company uneconomical in comparison to
other competitive products.
ANNUAL
REPORT
31 August 2022
27
International Biotechnology Trust plc | Strategic Review
STRATEGIC REVIEW | continued
• 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 Fund Manager.
• There are no material or significant changes in the
principal risks.
The Audit Committee has reviewed the potential impact of
emerging risks such as the changing political environment and the
heightened geopolitical risk, including the war in Ukraine, and is
comfortable that any potential risk is suitably mitigated.
The Audit Committee has considered the income and expenditure
projections. Included within these projections are key assumptions
such as expected NAV growth and expenses to be incurred by
the Company. In order to test the reliability of the income and
expenditure projections, the key assumptions were stressed to
include scenarios of no growth in NAV and a 10% year on year
increase in expenses. The Audit Committee is satisfied that the
income and expenditure projections appear reasonable.
The Audit Committee has also considered the impact of the year
end gearing position. As at 31 August 2022, the Company had a
£55m drawn loan facility as a result of the Fund Manager’s gearing
strategy. The Audit Committee is satisfied that the Company’s
investments comprise readily realisable securities which can be
sold to meet funding requirements if necessary.
In light of these considerations and based upon the Company’s
processes for evaluating 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, which the Directors consider to be an
appropriate time horizon, due to the Company’s investment
objective of achieving long term capital growth and taking into
account the continuation vote which is held on a biennial basis.
ENVIRONMENTAL, SOCIAL AND
GOVERNANCE POLICY
The Company has been delivering financial value to shareholders
since 1994 whilst simultaneously creating a positive social impact
by investing in companies that develop innovative treatments
for patients suffering with unmet medical needs. The products
developed by the companies we invest in can radically change
the way diseases are treated, bringing positive impact to patients
and healthcare systems globally.
The Board recognises that a responsible and proactive approach
to Environmental, Social and Governance (ESG) related factors
can positively impact the performance and success of its portfolio
companies and the Company.
In October 2021, the Board adopted a new ESG Policy for IBT.
The policy aimed to integrate consideration for ESG factors into
the investment process, governance and choice of suppliers for
IBT and to exert influence on portfolio companies and suppliers
to consider ESG factors in their respective activities. The Fund
Manager implemented a policy which integrates consideration for
ESG factors into the investment process. SV Health Managers has
developed a proprietary screening system for ranking the ESG
compliance of portfolio companies. However, in the most recent
screening process, a disappointing number of quoted portfolio
companies engaged with the Company’s screening questionnaire.
The high demand on quoted companies to answer ESG questions
from many individual shareholders has led to a reluctance in some
to engage on a one to one basis with shareholders regarding
ESG. Companies instead are choosing to state their ESG policies
on their websites. To this end, the Company’s ESG policy will be
reviewed as to how best to provide a meaningful insight into ESG
compliance of existing and potential portfolio companies. IBT’s
Board also considers ESG factors in its choice of suppliers.
The policy focuses on three key areas.
IBT as an investor IBT as a company IBT’s suppliers
IBT as an investor
The Board considers that focusing on the ESG adherence of its
investments and engaging with the management of key portfolio
companies has the potential to bring about positive change in its
investment universe. The Fund Manager believes its potential for
the greatest impact will generally be on its top ten quoted holdings
and its private holdings where its larger investment size gives it
greater influence. The Board believes that through IBT’s focus on
ESG as an investor, it can help maximise its portfolio companies’
positive impact whilst generating attractive investor returns. IBT’s
ESG policy has three key areas in as far as it relates to investments.
1. Thorough ESG diligence and investing for impact;
2. Meaningful engagement with portfolio companies; and
3. Reporting to shareholders.
As a shareholder, IBT exerts its influence over the most significant
companies in its portfolio through screening and engagement
on ESG matters. The most recent screening process of quoted
companies received meaningful responses from only a small
proportion of the portfolio which was disappointing but, in some
ANNUAL
REPORT
31 August 2022
28
STRATEGIC REVIEW | continued
International Biotechnology Trust plc | Strategic Review
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investors to give ESG information which in turn should lead to
greater ESG awareness at portfolio companies. As a result of this
pressure, companies are moving away from individual responses
and are instead directing investors to their public ESG policies.
The Fund Manager is, nonetheless, satisfied from the responses
it did receive, from companies’ public ESG policies and, most
importantly, from its direct engagement with management teams
that its significant quoted portfolio companies meet the criteria
of good corporate governance, strong management teams,
innovative products addressing unmet medical need, and, having
reviewed their ESG policies, is not aware of any cause for serious
concern on ESG matters. All investments are screened for various
activities which the Company would want to avoid such as price
gouging, involvement in the US opioid scandal, “me-too” drugs
lacking innovation and anything that leads to negative effects on
public health or wellbeing. On the unquoted side of the business,
companies representing over 50% of the value of the unrealised
investments in SVF6 responded to the proprietary screening
questionnaire. The results were encouraging, particularly in the
area of corporate governance and social policies. It was clear
from the results that there is still work to be done at some of these
early stage companies in creating and adhering to environmental
policies and SV will work with these portfolio companies to
support them in their ESG initiatives as the companies develop.
The Fund Manager’s proprietary ESG questionnaire is available for
perusal on IBT’s website.
IBT as a company
IBT is listed on the London Stock Exchange. It has no office of its
own, and its only employees are its Directors. IBT is committed to
the principles of ESG compliance and endeavours to implement
positive changes in all areas. The Board adheres to the highest
standards in terms of its reporting and governance and follows the
guidelines of the Association of Investment Companies.
IBT’s suppliers’ sustainability policies
Other than the oversight role played by the Board, all the key
functions of the Company are undertaken by external suppliers. The
Board recognises the opportunity which that creates to influence
and improve the ESG policies of a range of different financial
services providers and other related companies.
The Board requests that the key suppliers to the Company supply
details of their own ESG policies and efforts made to enhance their
ESG profile annually. Where permitted, links have been added
ANNUAL
REPORT
31 August 2022
29
STRATEGIC REVIEW | continued
International Biotechnology Trust plc | Strategic Review
to IBT’s website. In the event of a supplier consistently failing to
supply such credentials, and/or failing to implement suitable ESG
measures in their business, the Board will engage with them on this
matter and ultimately, in the case of continued non-compliance,
will consider changing suppliers.
Of the 24 suppliers to IBT who were approached to provide their
ESG policy, 17 supplied their policy in full, 4 are in the process of
formalising their ESG policies, and 3 declined to respond.
IBT will encourage those suppliers which are drafting their policies
to continue with that process. IBT will continue to work with those
suppliers which have failed to respond to encourage them to
initiate the process of formalising their ESG commitments. 8 of
IBT’s suppliers have agreed for IBT to share their ESG policies on
IBT’s website, up from only 4 at the half year screening point. IBT
will continue to request the information from those companies that
have declined to give permission. IBT believes that in publicising
the ESG commitments of its suppliers, it can maximise its influence
on other companies in financial services to prioritise ESG.
DIVERSITY AND GENDER
REPRESENTATION ON THE BOARD
The Company has no employees and as at the date of this Report,
40% of the Board were female.
The Board is mindful of the newly introduced Listing Rule
9.8.6R (9)(a) for companies to include whether specific board
diversity targets have been met on a ‘comply or explain’ basis,
which applies to financial years commencing on or after 1 January
2022. The Board will report against these new requirements in
the Annual Report and Financial Statements for the year ending
31August 2023.
Towards the end of the year the Board initiated a recruitment
process as part of its ongoing succession efforts. The process
remains underway, and the Board has considered throughout the
benefits of diversity, including gender and ethnicity. The specific
board diversity targets will be taken into consideration in respect
of the recruitment of all new Directors of the Company, however
the Board’s position is to appoint candidates based on merit
and therefore the new Non-executive Director will be selected
as the most appropriate candidate for the Board based on their
experience and complementary skillsets, ensuring that the Board
continues to have an appropriate balance of skills.
MODERN SLAVERY ACT 2015
As an investment trust, the Company does not provide goods
or services in the normal course of business and does not have
any customers or employees. All the Company’s activities are
outsourced to third parties and the Board considers the Company’s
supply chain to be low risk, in terms of engaging in activities which
could be deemed modern slavery, as its suppliers are typically
professional advisers and regulated entities. The Company does not
fall within the scope of the Modern Slavery Act 2015 and therefore
is not required to make a slavery and human trafficking statement
and has not been required to adopt a policy on Human Rights. The
investment portfolio companies that the Company invest in are high
profile listed companies who have their own governing bodies to
comply with the Modern Slavery Act 2015.
ANTI-BRIBERY, CORRUPTION
&TAXEVASION
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 complying with anti-bribery legislation including,
but not limited to, the Bribery Act 2014. Further, the Company
has adopted a zero-tolerance approach to tax evasion and
is committed to compliance with anti-tax evasion legislation,
including but not limited to, the Criminal Finances Act 2017. This
is consistent with the policies implemented by the Fund Manager
and the Company expects its third party service providers to
adopt the same standard of zero-tolerance.
The Company has implemented a conflicts of interest policy to
which the Directors must adhere. The Company is committed to
acting with integrity and in the interests of shareholders.
GREENHOUSE GAS EMISSIONS
As an investment trust without employees, the Company is also
not required to report against the Task Force on Climate-related
Financial Disclosures (TCFD) framework. However, understanding
and managing climate-based risks and opportunities based
on the TCFD’s recommendations is a fundamental part of IBT’s
investment approach.
The Companies Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013 require companies listed on the Main Market
of the London Stock Exchange to report on the greenhouse gas
emissions for which they are responsible. All of the Company’s
activities are outsourced to the Fund Manager and other third party
providers and as such the Company does not have any employees
or premises at which it conducts its business. Further, for the
same reason, the Company considers that it is a ‘low energy user’
under the Streamlined Energy & Carbon Reporting regulations
and therefore a disclosure on energy and carbon emissions is not
required.
ANNUAL
REPORT
31 August 2022
30
STRATEGIC REVIEW | continued
International Biotechnology Trust plc | Strategic Review
Stakeholder Group Why it is important to engage? How Management and/or Directors engaged?
Investors The Board is delighted that IBT has
been nominated for the Share Awards
2022 as Best Company for Shareholder
Communication.
Continued investor support and
engagement are critical to the continued
existence of the Company and the
successful delivery of its long-term
strategy.
• Annual/Interim Financial
Reports.
• Monthly factsheets and Fund
Manager commentary.
• Quarterly videos.
• Advertorials and marketing
campaigns.
• Webinars.
• AGM.
• RNS announcements.
• Website.
• Shareholder feedback from its
corporate broker and the Fund
Manager.
• Meetings with shareholders by the
Board and Fund Manager when
requested.
AIFM and
Investment
Managers
Maintaining a close and constructive
working relationship with the AIFM
and Fund Manager is crucial to the
Board. The Board aims to continue to
achieve consistent, long-term returns
and to ensure that the portfolio is run in
adherence to the Company’s strategy.
The Board maintains an open discussion
with the AIFM and Investment
Managers, whilst ensuring that the
interests of investors are aligned.
• The Chairman and Board regularly meet with the Investment Managers
and other representatives of the Fund Manager throughout the year,
both formally at quarterly Board Meetings and informally, as required.
At an ad hoc meeting in December 2021, pursuant to the Investment
Manager’s proposal, the Board approved an investment in BCOF.
• Representatives of the AIFM attend Board Meetings discussing the
Company’s overall performance as well as developments in individual
portfolio companies and wider macroeconomic developments.
• The Board also met with members of the Fund Manager’s compliance
team to better understand SV’s internal controls.
Service
Providers
To keep service providers updated with
regards to the Company’s strategy in
order to ensure they can provide the
required services.
• The Fund Manager has annual service review sessions with Northern
Trust and regularly meets with Numis, Kepler and Lansons.
• The Company Secretary liaises with the Registrar on a regular basis and
relays any relevant information to the Board.
• Where appropriate, the depositary, administrator, Company Secretary
and Registrar submit copies of their annual audited internal control
reports to the Audit Committee.
• The Board met regularly with the AIFM and Company Secretary,
representatives of which attend every quarterly Board Meeting, to
discuss updates on risk management, accounting, administration,
corporate governance and marketing matters. Key decisions included:
– the investment into BCOF;
– an Authority to buy back the Company’s shares;
– the appointment of Professor Patrick Maxwell; and
– the appointments of The Northern Trust Company, and Northern Trust
Investor Services Limited as Administrator and Depositary, respectively.
• The Board, meeting as the Management Engagement Committee,
reviewed the performance of all service providers.
SECTION 172 STATEMENT
The Companies (Miscellaneous Reporting) Regulations 2018 require
Directors to explain more fully how they have discharged their duties
under Section 172(1) of the Companies Act 2006 in promoting the
success of their companies for the benefit of members as a whole.
This enhanced disclosure covers how the Board has engaged with
and understands the views of stakeholders and how stakeholders’
needs have been taken into account, the outcome of this engagement
and the impact that it has had on the Board’s decisions.
As IBT does not have any employees or customers beyond its
Directors, the Board considers the groups mentioned in the
following table as the key stakeholders of the Company. The
reasons for this determination, and the Board’s overarching
approach to engagement, are set out below.
The table below and continued on page 31 also sets out the key
decisions taken by the Directors during the year under review.
ANNUAL
REPORT
31 August 2022
31
STRATEGIC REVIEW | continued
International Biotechnology Trust plc | Strategic Review
Portfolio
The Chairman’s Statement on pages 7 to 9 and the Fund Manager’s
Review on pages 10 to 18 includes details of the Company’s
performance and portfolio activity during the year under review.
The Strategic Report on page 24 describes the investment strategy
undertaken by the Fund Manager.
These factors around the portfolio and performance contribute to
the long-term success of the Company and help inform investors
so that they may make personal investment decisions.
Dividend
In accordance with the Dividend Policy approved by shareholders
at the AGM held on Wednesday, 8 December 2021, two interim
dividends of 15.7p per share were paid on 28 January and
26August 2022.
Discount and Premium Management
During the year the Company issued no Ordinary shares. Buying
back shares can help to narrow the share price to NAV discount.
Issuing shares helps to provide liquidity in the Company’s shares
where there is sufficient demand. The Board keeps the discount
management under review, and it continues to be the Board’s
view that this policy is in the interest of all shareholders. The
Company bought back 520,808 of its own Ordinary shares during
the year ended 31 August 2022, which has assisted in narrowing
the discount.
Succession Planning
In accordance with the Board’s previous disclosure in respect of
succession planning, Jim Horsburgh will retire at the conclusion
of this year’s AGM to be held on Tuesday, 6 December 2022. At a
Board Meeting held on 31 October 2022, the Directors determined
that Kate Cornish-Bowden will succeed Jim Horsburgh as
Chairman following his retirement. The Directors have commenced
a search for an additional Director to join the Board using Trust
Associates who have no other connection with the Company or
the Directors.
CURRENT AND FUTURE DEVELOPMENTS
Details of the Company’s developments during the year ended
31August 2022, along with its prospects for the future are set
out in the Chairman’s Statement on pages 7 to 9 and the Fund
Manager’s Review on pages 10 to 18.
By order of the Board
Link Company Matters Limited
Company Secretary
31 October 2022
Stakeholder Group Why it is important to engage? How Management and/or Directors engaged?
Service
Providers
(continued)
• The Audit Committee reviewed the quality and effectiveness of the audit
and recommended to the Board that it be proposed to shareholders that
PricewaterhouseCoopers LLP be re-appointed as Auditor.
• The Audit Committee met with the Auditor to review the audit plan and set
their remuneration for the year.
Portfolio
Investee
Companies
The Investment Managers hold
shares in biotechnology companies
with excellent management teams
and innovative products which
have the potential to treat disease.
Closely monitoring the performance
and research data from investee
companies helps the Investment
Managers identify investment
opportunities which have strong
potential for outperformance.
• The Investment Managers regularly meet with the investee companies in
which the Company invests.
• The Investment Managers also participate in voting at shareholder meetings in
order to encourage the highest standards of governance.
• There are extensive discussions on portfolio companies at quarterly Board
Meetings, attended by the Investment Managers.
• The Board sets expectations for its portfolio companies as part of the
Investment Policy and the Board receives ESG information on each of its
portfolio companies, upon request.
Wider
community and
the environment
Production of new drugs for an
ageing population with unmet
medical needs.
• The Investment Managers consider social, community and environmental
factors when making investment decisions.
• The Fund Manager takes these factors into account when voting at investee
company meetings.
• Further explanation around the Company’s approach to ESG is provided on
page 27.
ANNUAL
REPORT
31 August 2022
32
DIRECTORS’ BIOGRAPHIES
Jim Horsburgh is Chairman of the Management Engagement and Nomination Committees as well as the main Board.
All Directors are independent. | All Directors are Members of the Audit, Management Engagement and Nomination Committees.
International Biotechnology Trust plc | Directors’ Biographies
JIM HORSBURGH
Chairman
Jim Horsburgh was appointed as a Non-
executive Director of the Company on
1 February 2013 and was subsequently
appointed as Chairman of the Company
on 15 December 2020. 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, subsequently
becoming an account director, a director
and in 1998, the 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.
KATE CORNISH-BOWDEN
Senior Independent Director
Kate Cornish-Bowden was appointed as
a Non-executive Director of the Company
on 19 May 2020 and has been the Senior
Independent Director since 8 December
2021. Kate worked for Morgan Stanley
Investment Management for twelve years
where she was a managing director, head
of MSIM’s global core equity business
and head of the pharmaceuticals research
team. Prior to joining Morgan Stanley, she
worked for M&G Investment Management
as a research analyst. Kate is currently
a non-executive director of Finsbury
Growth & Income Trust plc, non-executive
director and senior independent director at
Schroder Oriental Income Fund Ltd, and a
non-executive audit committee chair of CC
Japan Income & Growth Trust plc. She has
previously held directorships of Scancell
Holdings plc, Calculus VCT plc and Arcis
Biotechnology Limited. Kate is a member
of the Chartered Financial Analyst Institute
(formerly AIIMR), holds an MBA and has
completed the Financial Times Non-
Executive Director Diploma.
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, Civitas Social Housing PLC and abrdn
European Logistics Incomeplc.
ANNUAL
REPORT
31 August 2022
33
International Biotechnology Trust plc | Directors’ Biographies
DIRECTORS’ BIOGRAPHIES | continued
PATR ICK M AGEE
Patrick Magee was appointed as a Non-
executive Director of the Company on
19May 2020. Until 30 June 2022, he was
Chief Commercial Officer at the British
Business Bank plc and was an executive
director on the Bank’s Board. Before joining
the British Business Bank in 2014, Patrick
worked at the Shareholder Executive from
June 2012 to October 2014. Prior to joining
the Shareholder Executive, Patrick was a
Managing Director of corporate finance
at JP Morgan Cazenove, having worked
at the predecessor firms for almost 18
years. In his Investment Banking career
Patrick advised on a broad range of M&A,
Capital Markets and Corporate Broking
assignments. Patrick also spent two years
on secondment to the Panel for Takeovers
and Mergers. Patrick has an MBA from
Georgetown University, Washington DC
and an LLB from Queen’s University Belfast.
He is currently a member of the Investment
Committee at Queen’s University, Belfast
and is an adviser to/investor in a number of
high growth companies.
PATRICK MAXWELL
Professor Patrick Maxwell was appointed as
a Non-executive Director of the Company
on 1 January 2022. He is currently Regius
Professor of Physic and Head of the School
of Clinical Medicine at the University of
Cambridge. As a clinician scientist he
has been centrally involved in a series of
discoveries that have revealed how changes
in oxygenation are sensed, and how genetic
alterations cause kidney disease. Patrick is a
Fellow of the Royal College of Physicians and
the Academy of Medical Sciences, Director
of Cambridge University Health Partners
and a Non-Executive Director of Cambridge
University Hospitals and Scottish Mortgage
Investment Trust.
ANNUAL
REPORT
31 August 2022
34
International Biotechnology Trust plc | Directors’ Report
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 2022.
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 24 to 31: 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 AND PURPOSE
The principal activity and therefore the purpose of the Company
is the making of investments in accordance with the investment
objective and policy set out on page 24. The Board delegates
investment management of the Company’s portfolio to the Fund
Manager. 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 7 to 9; and the Fund Manager’s Review on
pages 10 to 18.
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 62. At the AGM held on
8 December 2021, shareholders approved the Company’s
dividend policy to pay an annual dividend, equivalent to 4% of
the Company’s NAV. This was calculated using the published NAV
on the last day of the Company’s preceding financial year, being
31August 2021. Dividends are paid through two equal distributions
in January and August of each year, and are paid out of capital
reserves. Accordingly, the Board declared and paid two interim
dividends during the year, each totalling 15.7 pence per Ordinary
share (2021: 14.2 pence per Ordinary share). These were paid
on 28January 2022 and 26 August 2022. Further, the Directors
intend to pay Interim Dividends for the year ended 31August 2022
in two tranches in January and August 2023.
In accordance with the Board’s decision to seek shareholder
approval of the Company’s dividend policy at each AGM, a
resolution to this effect has been included in the Notice of Meeting
on page 99.
SHARE CAPITAL
At the AGM on 8 December 2021, shareholders gave approval for
the Company to purchase up to 6,195,119 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,
520,808 shares were repurchased by the Company. The Board
considers that conducting share buybacks can help to manage
the discount of its share price to NAV, therefore enhancing share
price performance for existing shareholders. The positive effect of
share buybacks on the Company’s NAV during the year has been
explained in the Chairman’s Statement on page 8. The Board
regularly reviews the methods for managing the discount and
these include the use of share buybacks, payment of dividends
and marketing the Company to prospective investors.
Shareholders also provided approval for the Company to issue
4,132,834 Ordinary shares (excluding those from treasury) with pre-
emption rights disapplied. During the year, no Ordinary shares were
re-issued from treasury. The issued share capital of the Company
is detailed in note 15 to the Financial Statements. The total number
of Ordinary shares as at 28 October 2022 is 41,383,817.
DIRECTORS
All of the Directors as at 31 August 2022 held office throughout the
year under review, with the exception of Patrick Maxwell who was
appointed to the Board on 1 January 2022. Véronique Bouchet
retired as a Director on 8 December 2021. The biographies of the
Directors of the Company can be found on pages 32 and 33.
As indicated on page 40, all Directors are deemed by the Board
to be independent in both character and judgement, and have
performed their duties in an independent manner at all times. The
independence of Directors will continue to be assessed on a case
by case basis.
ANNUAL
REPORT
31 August 2022
35
International Biotechnology Trust plc | Directors’ Report
As disclosed by the Chairman on page 9, he will be retiring from
the Board at the conclusion of the Company’s forthcoming AGM
in accordance with the Board’s succession plan. Details of his
replacement will be announced in the coming weeks.
The Board recognises corporate governance best practice is for
all Directors to be submitted for annual re-election. Accordingly,
all Directors will be standing for re-election at the forthcoming
AGM with the exception of Jim Horsburgh. Patrick Maxwell will be
standing for election for the first time since his initial appointment
to the Board on 1 January 2022.
The Board has considered the position of each of the Directors
as part of the performance evaluation, the process for which is
explained in more detail on pages 40 and 41. The Board has a
broad range of relevant experience to contribute towards the
Company’s strategic priorities, including specialist understanding
of the biotechnology and healthcare sectors, investment trust
companies, fund management, venture capital market experience,
accounting and auditing, as detailed in the Directors’ biographies
on pages 32 and 33. Further, the Board has concluded that each
Director continues to demonstrate commitment to their role
and provides a valuable contribution to the deliberations of the
Board. The Board therefore recommends that shareholders vote
in favour of the election of Patrick Maxell, and re-elections of
Kate Cornish-Bowden, Caroline Gulliver and Patrick Magee at the
forthcoming AGM.
DIRECTORS’ AND OFFICERS’ LIABILITY
INSURANCE AND DIRECTORS’
INDEMNITIES
Directors’ and Officers’ Liability Insurance cover was purchased by
the Company in April 2022 and continues to be in force as at the
date of this report.
The Company had a Deed Poll in place during the financial year to
indemnify the Directors against any liability suffered or incurred in
their capacity as a Director of the Company.
FUND MANAGER’S PERFORMANCE AND
CONTRACTUAL ARRANGEMENTS
The Fund Manager is SV Health Managers LLP. The performance
of the Fund 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 Health Managers LLP, 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 2022 with a recommendation for continued appointment
being made to the Board.
The Board believes the continued appointment of SV Health
Managers LLP is in the interests of shareholders as a whole. In
coming to this decision, the Board 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.
The Fund Manager is entitled to a management fee payable
monthly at the rate of 0.9% per annum of the Company’s NAV and
to an annual performance fee which 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, excluding unquoted funds,
is 20% of net realised gains, taking into account any
unrealised losses but not unrealised gains.
• There is no performance fee calculated on unquoted funds
as the Fund Manager has carried interest in these funds.
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. 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 paidout.
Under normal circumstances the Investment Management
Agreement is terminable by either party on 12 months’ written notice.
A performance fee of £471,000 is payable for the unquoted
portfolio in respect of the year ended 31 August 2022 (31 August
2021: £353,000). Please see the Chairman’s Statement on page 8
for further information.
DIRECTORS’ REPORT | continued
ANNUAL
REPORT
31 August 2022
36
DIRECTORS’ REPORT | continued
The Board has made commitments into unquoted funds, enabling
the Company to achieve the benefits of diversification. There is
no double charging of investment management fees in relation to
these commitments.
ADMINISTRATION, DEPOSITARY AND
COMPANY SECRETARIAL SERVICES
With effect from 1 March 2022, delegation for performing fund
administration and depositary services moved from HSBC
Securities Services (UK) Limited to the Northern Trust Company,
London branch. The Administration Agreement with the Northern
Trust Company continues until terminated by either party on giving
not less than 12 months’ written notice. The Depositary Agreement
with Northern Trust Investor Services Limited continues until
terminated by either party on giving not less than 6 months 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 Link Company
Matters. The Agreement with Link Company Matters may be
terminated by either party on giving not less than six months’
written notice.
COMPANIES ACT 2006 (THE ACT)
DISCLOSURES
In accordance with Section 992 of the Act, the Directors disclose
the following information:
The Company’s capital structure is summarised on page 78, voting
rights are summarised on page 78 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 exists no securities carrying special rights with regard to the
control of the Company.
The Company does not have an employees’ share scheme.
The rules concerning the appointment and replacement of
Directors, amendment to the Articles of Association and powers
to issue or buyback the Company’s shares are contained in the
Articles of Association of the Company and the Act. There exists
no agreements to which the Company is party that may affect its
control following a takeover bid.
There exists no agreements between the Company and its
Directors providing for compensation for loss of office that may
occur because of a takeover bid.
GOING CONCERN
The Company has reviewed the guidance issued by the FRC in
order to determine whether the going concern basis should be used
in preparing the Financial Statements for the year ended 31 August
2022. In doing so, the Directors have considered the Company’s
borrowing requirements and covenants on existing borrowings;
liquidity risk (see note 23.3 on page 87); 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. As discussed in the Chairman’s Statement,
the Company’s Articles of Association require the Board to put a
proposal for the continuation of the Company to shareholders on a
biennial basis. The relevant resolution will therefore be included in
the Notice of Annual General Meeting for next year’s AGM.
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 AUDITOR
Following a recommendation by the Audit Committee to the Board,
resolutions to re-appoint PricewaterhouseCoopers LLP as Auditor
and to authorise the Directors to determine their remuneration will
be proposed at the forthcoming AGM. The Board considers that
the Auditor remains independent and PricewaterhouseCoopers
LLP have expressed their willingness to continue in office. For
information relating to the effectiveness of the external audit
process including information regarding the full external tender
of audit services which took place in 2016, please see the Audit
Committee Report on pages 48 to 50.
SUBSTANTIAL SHARE INTERESTS
As at the year ended 31 August 2022, 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 asfollows:
International Biotechnology Trust plc | Directors’ Report
ANNUAL
REPORT
31 August 2022
37
DIRECTORS’ REPORT | continued
The Company has not been informed of any changes to the above
interests between 31 August 2022 and the date of this report.
DISCLOSURE OF INFORMATION TOAUDITORS
In accordance with Section 418 of the Act, the Directors at the
date of approval of this Report, as listed on pages 32 and 33,
confirm that:
(a) so far as each Director is aware, there is no relevant audit
information of which the Company’s Auditors are unaware; and
(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.
AGM
The AGM will be held on Tuesday, 6 December 2022 at 2.30pm.
Details of the business of the Meeting are set out in the Notice of
Meeting on pages 99 and 100.
Pursuant to the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008, the Directors are
required to provide detailed information, amongst others, on their
powers in relation to the issuing or buying back of the Company’s
shares. As a result, the Board is seeking shareholder approval for
the following six items.
Authority to allot shares
In order to provide maximum flexibility in the implementation of
the Company’s corporate strategy and premium management
policy, the Directors wish to seek the power to allot new Ordinary
shares for cash at a premium to the NAV at the forthcoming AGM.
Resolution 11 seeks authority for Directors to allot shares for cash
up to a nominal amount of £1,021,575, equivalent to 4,086,300
Ordinary shares (being 10% of the issued Ordinary share capital
of the Company (excluding treasury shares) in issue on 28 October
2022 (being the latest practicable date prior to the publication of
the Notice of Meeting)).
In addition, Resolution 12 seeks authority for Directors to allot
further shares for cash up to a nominal amount of £1,021,575,
equivalent to 4,086,300 Ordinary shares (being 10% of the issued
Ordinary share capital of the Company (excluding treasury shares)
in issue on 28 October 2022 (being the latest practicable date prior
to the publication of the Notice of Meeting)).
The Directors intend to use these authorities to issue new shares
only if they believe it is in the best interests of the Company and
is advantageous both to new investors and to the Company’s
existing shareholders to do so. New shares will only be issued
at a price not less than the most recent published NAV per
Ordinary share prior to such issue. Both authorities will expire at
the conclusion of next year’s AGM or 15 months from the date of
passing of the resolutions, whichever is earlier, unless revoked,
varied or renewed prior to that date.
As at 31 August 2022
Shareholder
Number of Ordinary
shares held
% of
voting rights
Interactive Investor 5,104,743 12.49
Hargreaves Lansdown 5,033,728 12.32
Charles Stanley 3,209,992 7.86
Border to Coast Pensions Partnership 2,535,000 6.20
Brewin Dolphin 1,753,236 4.29
South Yorkshire Pension Authority 1,700,000 4.16
AJ Bell, stockbrokers 1,658,135 4.06
West Yorkshire PF 1,245,599 3.05
Mattioli Woods 1,002,422 2.45
Rathbones 992,793 2.43
International Biotechnology Trust plc | Directors’ Report
ANNUAL
REPORT
31 August 2022
38
Authority to disapply pre-emption rights
If new Ordinary shares are to be allotted for cash or treasury shares
are to be sold 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 or treasury
shares to be sold 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-emptionrights.
Therefore, Resolution 13 will be proposed at the AGM which, if
passed, will give the Directors power to disapply the statutory
pre-emption rights of existing shareholders in relation to the
issue of Ordinary shares for cash or the sale of Ordinary shares
for cash out of treasury up to an aggregate nominal amount
of £1,021,575 equivalent to 4,086,300 Ordinary shares (being
10% of the Company’s existing issued Ordinary share capital
(excluding treasury shares) on 28 October 2022 (being the latest
practicable date prior to the publication of the Notice of Meeting))
such Ordinary shares to be allotted or sold at a price not less than
the most recent published NAV per Ordinary share prior to such
allotment or sale.
This authority will expire at the conclusion of next year’s AGM or
15 months from the date of passing of the Resolution, whichever
is earlier, unless revoked, varied or renewed prior to that date
provided that the Company shall be entitled to make offers or
agreements before the expiry of such authority which would or
might require equity securities to be allotted after such expiry
and the Directors may allot equity securities pursuant to any such
offer or agreement as if this authority had not expired.
Resolution 14 is being proposed at the AGM in addition to
Resolution 13 which, if passed, will give Directors power to
disapply the statutory pre-emption rights of existing shareholders
in relation to the issue of Ordinary shares for cash or the sale
of Ordinary shares for cash out of treasury, subject to the
passing of Resolution 12, up to an aggregate nominal amount
of £1,021,575 equivalent to 4,086,300 Ordinary shares (being
10% of the Company’s existing issued Ordinary share capital
(excluding treasury shares) on 28 October 2022 (being the latest
practicable date prior to the publication of the Notice of Meeting))
such Ordinary shares to be allotted or sold at a price not less
than the most recent published NAV per Ordinary share prior to
such allotment or sale. This authority will expire at the conclusion
of next year’s AGM or 15 months from the date of passing of the
resolution, whichever is earlier, unless revoked, varied or renewed
prior to that date provided that the Company shall be entitled to
make offers or agreements before the expiry of such authority
which would or might require equity securities to be allotted after
such expiry and the Directors may allot equity securities pursuant
to any such offer or agreement as if this authority had not expired.
The Board is aware that when combined the authorities sought
under Resolutions 13 and 14 to disapply statutory pre-emption
rights amount to 20% of the Company’s issued Ordinary share
capital is higher than the level recommended by best practice
in accordance with The Investment Association Share Capital
Management Guidelines and the Pre-emption Group’s Statement
of Principles on Disapplying Pre-emption Rights. However, the
Board notes that the Prospectus Regulation allows for issuance
for up to 20% of the Company’s issued Ordinary share capital
without the need for a prospectus and therefore, believes that
the increased authority is justified and it would be in the best
interest of shareholders to provide the extra flexibility to issue
further shares in connection with the Company’s corporate
strategy and premium management policy.
The increased authority:
• would avoid the additional delay and expense of a
further shareholder resolution, which would be required
in the event that the initial 10% authority is granted and
exhausted through the programme of tap issuance;
• is key to managing the share price premium to NAV,
ensuring that shareholders are not forced to pay an
excessive premium when adding to their holding; and
• facilitates enhanced scale for the Company, which
would have the benefits of increasing the potential
investor audience, enhancing trading liquidity and
reducing the ongoing charges ratio.
During the year ended 31 August 2022, the Company did not re-
issue any shares from treasury.
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,
8 December 2021.
DIRECTORS’ REPORT | continued
International Biotechnology Trust plc | Directors’ Report
ANNUAL
REPORT
31 August 2022
39
During the year ended 31 August 2022, the Company
repurchased 520,808 Ordinary shares to be held in treasury.
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 buyback 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 to NAV. The
authority to hold shares in treasury is in addition to the power to
buyback shares for immediate cancellation.
Accordingly, a special resolution, Resolution 15, 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. The
Company can confirm that purchases of Ordinary shares under
the authority will only be made in the market for cash at prices
below the prevailing NAV per share.
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 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) and will only be used where it is merited by
the purpose of the Meeting.
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.
Details of proxy votes received in respect of each Resolution are
published on the Company’s website following the meeting.
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 2019 (AIC Code) which can be found
on the AIC website www.theaic.co.uk. The AIC Code addresses
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 Directors. 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.
• 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 Health Managers LLP.
The Board monitors these systems of internal control to
provide assurance that they operate as intended.
DIRECTORS’ REPORT | continued
International Biotechnology Trust plc | Directors’ Report
ANNUAL
REPORT
31 August 2022
40
International Biotechnology Trust plc | Directors’ Report
This Corporate Governance Statement, together with the Management
Report and Directors’ Responsibilities Statement set out on page
51, indicate how the Company has applied 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,
ensuring itself that these and its culture is aligned; 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 at each Board Meeting, and the Directors
advise the Company Secretary as soon as they become aware of
any new actual or potential conflicts of interests that would need to
be considered and approved by the disinterested Directors.
BOARD COMPOSITION
The Board currently consists of five non-executive Directors. The
biographical details of each Director, including their length of
service, are set out on pages 32 and 33.
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. This is kept under continuous review by the Board as part
of ongoing succession planning.
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. However, it is not considered
necessary, given the diverse skill set of the Board to have set
targets in relation to diversity.
The Board has set a policy on tenure that, in normal circumstances,
Directors will retire at the AGM in their 10th year of service. 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. Taking this policy
into account, and in accordance with the Company’s succession
plan, Jim Horsburgh will retire following this year’s AGM.
INDUCTION AND TRAINING
Upon appointment to the Board, Directors are provided with
all the relevant information regarding the Company and their
duties and responsibilities as a Director. They receive a formal
and tailored induction, which is administered by the Company
Secretary and the Fund Manager. 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
their 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.
BOARD EVALUATION
In line with best practice, the Board’s effectiveness is reviewed
on an annual basis through a formal performance evaluation,
including an assessment of the Board and its Committees. An
external evaluator conducts the review every third year, and in the
two intervening years this is carried out by the Company Secretary
to ensure continuity over the three-year cycle.
DIRECTORS’ REPORT | continued
ANNUAL
REPORT
31 August 2022
41
International Biotechnology Trust plc | Directors’ Report
The review for the year ending 31 August 2022 was conducted
by Lintstock Ltd, an experienced independent provider of board
effectiveness reviews and took the form of electronic performance
evaluation questionnaires.
The evaluation looked at several key areas, including the
performance of the Board and its Committees, the effectiveness of
the Board’s oversight of the Fund Manager, investment strategy and
performance, risk management, external relations and succession
planning. The responses were then collated, analysed and presented
to both the Nomination Committee and the Board in July 2022.
There were no significant issues arising from the evaluation
process and it was agreed that the Board and its Committees were
functioning effectively.
Key findings highlighted the need to prioritise ethnic diversity,
marketing experience and investment experience, when considering
future appointments to the Board.
MEETINGS AND ATTENDANCE
The Board meets at least five times each year. Additional
meetings are arranged as required and regular contact between
the Directors, the Fund Manager and the Company Secretary
is maintained throughout the year. Representatives of the Fund
Manager and the Company Secretary attend each Meeting and
other advisers also attend when requested to do so by theBoard.
A schedule of Directors’ attendance at Board and Committee
Meetings held during the financial year is set out below.
In addition, a number of unscheduled Board Meetings took place
during the year under review to discuss matters separate from
normal agenda matters. Parts of these Meetings were attended
by external advisers. The whole Board also met twice to discuss
strategic matters separate from the normal agenda matters
including: the Board’s objectives, fundraising and marketing
opportunities, discount control, dividend policy, the unquoted
portfolio strategy, ESG and hedging.
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 the Fund
Manager, the Company Secretary and other key advisers. Ad-hoc
reports and information are supplied to the Board as required.
DIRECTORS’ REPORT | continued
BOARD AUDIT COMMITTEE NOMINATION COMMITTEE
MANAGEMENT
ENGAGEMENT COMMITTEE
Number
entitled to
attend
Number
attended
Number
entitled to
attend
Number
attended
Number
entitled to
attend
Number
attended
Number
entitled to
attend
Number
attended
Jim Horsburgh 6 6 3 3 1 1 1 1
Véronique Bouchet* 2 2 1 1 0 0 0 0
Kate Cornish-Bowden 6 6 3 3 1 1 1 1
Caroline Gulliver 6 6 3 3 1 1 1 1
Patrick Magee 6 6 3 3 1 1 1 1
Patrick Maxwell** 3 3 2 2 1 1 1 1
* Retired 8 December 2022
** Appointed 1 January 2022.
ANNUAL
REPORT
31 August 2022
42
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.
Committee Membership is detailed on page 41. Please refer to
page 48 for the report on the work of the Audit Committee.
Nomination Committee
The Chairman of the Board acts as Chair to the Nomination
Committee which met once during the year ended 31 August
2022. The function of the Committee is to consider and make
recommendations to the Board on its composition and balance,
including identifying and nominating new Directors to the Board
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 and ethnicity) 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
her absence, another Committee Member and the Chairman
abstains from discussions in this regard.
Management Engagement Committee
The Chairman of the Board acts as Chairman to the Management
Engagement Committee which met once during the year ended
31August 2022 and intends to meet annually in the future to review
matters relating to the performance of the Company’s third party
service providers, including the Fund Manager, and to review
the terms of their contractual arrangements with the Company,
ensuring their continued competitiveness for shareholders.
ACCOUNTABILITY AND AUDIT
The Management Report and Directors’ Responsibilities
Statement in respect of the Financial Statements are on page
51 and a statement of going concern is set out in the Directors’
Report on page 36. The Independent Auditors’ Report can be
found on pages 53 to 61 and the Audit Committee Report on
pages 48 to 50.
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 tax, legal and
regulatory risks and emerging 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 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.
The Board believes that the key risks identified and 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 the scope and quality
of the systems of internal control. This includes 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.
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 or a whistleblowing policy
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 FRC’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.
DIRECTORS’ REPORT | continued
International Biotechnology Trust plc | Directors’ Report
ANNUAL
REPORT
31 August 2022
43
DIRECTORS’ REPORT | continued
DIRECTOR DUTIES
The Board believes that it has acted in the way that they consider
in good faith would be most likely to promote the success of the
Company for the benefit of its Members (having regard to the
matters set out in Section 172(1)(a)-(f) of the Act) in the principal
decisions taken by the Board during the year. The Strategic
Report on pages 30 to 31 sets out further details on how the
Directors had regard to its stakeholders in its principal decisions
during the year.
On behalf of the Board
INTERNATIONAL BIOTECHNOLOGY TRUST PLC
JIM HORSBURGH | Chairman
31 October 2022
International Biotechnology Trust plc | Directors’ Report
ANNUAL
REPORT
31 August 2022
44
International Biotechnology Trust plc | Report on Directors’ Remuneration
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 Auditor is 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 53
to 61.
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 in order to promote the long-term success
of the Company. 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. The
remuneration policy will be reviewed and put to a shareholder
vote at the Company’s annual general meeting (“AGM”) to be held
in2023.
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 for at least 15 minutes prior to and 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
they are required to retire by rotation at least every three years
in accordance with the Company’s Articles of Association. The
Board recognises corporate governance best practice is for all
Directors to be submitted for annual re-election. Accordingly, all
Directors stand for re-election annually.
This year, I will be retiring from the Board and thus will not offer
myself for re-election. Professor Patrick Maxwell will be standing
for election for the first time since his initial appointment to the
Board on 1 January 2022.
Following the performance evaluation carried out each year,
the Board considers whether it is appropriate for each Director
to seek re-election. 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.
The component parts of the Directors’ Remuneration are set out
in the table below:
Component parts of the Directors’
remuneration
Year ended
31 August 2022
Year ended
31 August 2021
Chairman's base fee £42,500 £42,500
Non-executive Director
base fee
£28,000 £28,000
Additional fee for the Chair
of the Audit Committee
£4,500 £4,500
Additional fee for the Senior
Independent Director
£2,000 £2,000
1. The Company’s policy is for the Chairman of the Board, the Chair of the Audit
Committee and the Senior Independent Director to be paid higher fees 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
31 August 2022
45
REPORT ON DIRECTORS’ REMUNERATION | continued
ANNUAL REPORT ON DIRECTORS’ REMUNERATION
This Report sets out how the Directors’ Remuneration Policy was implemented during the year ended 31 August 2022. Directors’ fees were last
reviewed by the Board in July 2021 and will be examined alongside the Directors’ Remuneration Policy prior to the year ended 31 August 2023.
Previous changes to Directors’ remuneration were made in 2012 and 2016 and the additional fee for the Senior Independent Director was
introduced with effect from 1 September 2017. The amounts, set out in the following table, were paid by the Company to the Directors for
services in respect of the year ended 31 August 2022 and the previous financial year.
International Biotechnology Trust plc | Report on Directors’ Remuneration
Single total figure of the remuneration for each
Director (audited)
The Directors who served during the year under review received
the following emoluments:
TOTAL FEES* Remuneration for Qualifying Services
Directors
Year ended
31 August 2022
£
Year ended
31 August 2021
£
John Aston** — 10,031
Véronique Bouchet** 10,000 30,000
Kate Cornish-Bowden*** 29,077 28,056
Caroline Gulliver 32,500 32,500
Jim Horsburgh (Chairman)**** 42,500 39,600
Patrick Magee 28,000 28,056
Patrick Maxwell***** 18,667 —
Total 160,744 168,243
There were no taxable benefits claimed during the years ended
31August 2022 or 31 August 2021.
Directors
%
change
2019 to
2020
%
change
2020 to
2021
%
change
2021 to
2022
John Aston** Nil (76%) N/A
Véronique Bouchet** Nil Nil (67%)
Kate Cornish-Bowden*** N/A 255% 4%
Caroline Gulliver Nil Nil Nil
Jim Horsburgh (Chairman)**** Nil 41% 7%
Patrick Magee N/A 255% 0%
Patrick Maxwell***** N/A N/A N/A
* 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.
**John Aston and Véronique Bouchet retired from the Board on 15 December 2020 and 8 December 2021, respectively.
*** Kate Cornish-Bowden replaced Véronique Bouchet as Senior Independent Director on 8 December 2021.
**** Jim Horsburgh was appointed as Chairman on 15 December 2020.
***** Patrick Maxwell was appointed as a Non-executive Director with effect from 1 January 2022.
Annual Percentage Change in Directors’
Remuneration
The table below sets out the annual percentage change in the
Directors’ fees for the past three years:
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. The
Board recognised that, whilst no increase was proposed during
the year, the current level of remuneration had remained constant
for a number of years and therefore is likely to be subject to an
inflationary rise infuture.
Expenditure by the Company on Directors’
remuneration compared with distributions
toshareholders
The table on the following page compares the remuneration paid
to Directors and distributions to shareholders by way of share
buybacks and dividends for the year under review and the prior
financial year. Dividends paid to shareholders during the year
increased compared to the level paid in 2021.
SHARE PRICE/NASDAQ BIOTECHNOLOGY INDEX TOTAL RETURN (%)
ANNUAL
REPORT
31 August 2022
46
REPORT ON DIRECTORS’ REMUNERATION | continued
Directors’ beneficial and family interests (audited)
Directors
Ordinary shares of 25p each
as at 31 August 2022
Ordinary shares of 25p each
as at 31 August 2021
Véronique Bouchet* N/A 8,572
Kate Cornish-Bowden 11,000 8,000
Caroline Gulliver 9,500 9,500
Jim Horsburgh 30,000 30,000
Patrick Magee 10,000 3,500
Professor Patrick Maxwell 3,725 N/A
* Retired at AGM held on 8 December 2021.
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.
PERFORMANCE GRAPH
The performance graph below charts the cumulative share price total return to shareholders since 31 August 2012 compared to that of
the benchmark NASDAQ Biotechnology Index. The data has been rebased to 100 at 31 August 2012 (the start of the period covered by
the graph).
International Biotechnology Trust plc | Report on Directors’ Remuneration
Year ended
31 August 2022
£’000
Year ended
31 August 2021
£’000
Aggregate spend on Directors’ fees * 161 168
Distributions to shareholders – dividends 12,879 11,564
– share buybacks 3,534 —
16,574 11,732
* As the Company has no employees the total spend on remuneration comprises solely Directors’ fees.
Source: Share Price Total Return from Morningstar. NASDAQ Biotechnology Index Total Return from Bloomberg. Data rebased to 100 at 31 August 2012.
100
150
200
250
300
350
400
Share Price Total Return
Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Aug-21
Aug-22
Nasdaq Biotechnology Index Total Return
ANNUAL
REPORT
31 August 2022
47
REPORT ON DIRECTORS’ REMUNERATION | continued
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 2022.
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 2022:
(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.
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 15 December 2020 and accordingly, an
ordinary resolution will be put to shareholders at the AGM to be
held in 2023, unless the Directors choose to amend the policy, at
which time it would be resubmitted to shareholders for approval.
At the AGM held on 15 December 2020, votes cast (including the
votes cast at the Chairman’s discretion) in respect of the Directors’
Remuneration Policy were 10,102,858 (95.91%) in favour, 430,305
(4.09%) against and 32,132 votes withheld.
At the AGM held on 8 December 2021, votes cast (including the
votes cast at the Chairman’s discretion) in respect of the Annual
Report on Directors’ Remuneration were 11,696,167 (99.51%) in
favour, 57,399 (0.49%) against and 16,437 votes withheld.
RECOMMENDATION
The Board considers the resolution to be proposed at the
forthcoming AGM in the best interests of the Company and
shareholders as a whole. Accordingly, the Directors unanimously
recommend to shareholders that they vote in favour of the
resolution, as they intend to do so in respect of their own
beneficial holdings.
On behalf of the Board
JIM HORSBURGH | Chairman
31 October 2022
International Biotechnology Trust plc | Report on Directors’ Remuneration
ANNUAL
REPORT
31 August 2022
48
COMPOSITION AND MEETINGS
OF THE AUDIT COMMITTEE
The Audit Committee is chaired by Caroline Gulliver. Given the size
of the Board, it is considered both proportionate and practical for
all Directors, including the Chairman of the Company (who was
independent on appointment), to be members. All members of
the Committee are independent and have competence relevant
to the sector as a result of their current or recent employment
in financial services and other industries. As the Chair of the
Committee, Caroline Gulliver has relevant and recent financial
experience in financial services as 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. All the Committee members have extensive
experience working in financial services. The biographies of each
of the Committee Members are shown on pages 32 to 33.
The Audit Committee met three times during the year ended
31 August 2022 and reported its findings to the Board on the
matters described below after each Meeting. The Company’s
Auditor is invited to attend meetings as necessary as well as
representatives of the Fund Manager.
THE ROLE OF THE COMMITTEE
The Audit Committee operates under written terms of reference
which are reviewed annually and are available on the Company’s
website. The process in respect of the evaluation of the Audit
Committee’s performance is disclosed on pages 40 and 41.
The Audit Committee provides a forum through which the
Company’s external Auditor reports to the Board. The main
responsibilities of the Audit Committee include:
• Monitoring the integrity of the Company’s Annual
and Half Yearly Reports and appropriateness of its
accounting policies.
• Reviewing the internal control systems and the risks to
which the Company is exposed.
• Making recommendations to the Board on whether the
Company’s Annual Report, when taken as a whole, is fair,
balanced and understandable and provides shareholders
with the information they need to assess the Company’s
business model, strategy, position and performance.
AUDIT COMMITTEE REPORT
International Biotechnology Trust plc | Audit Committee Report
ANNUAL
REPORT
31 August 2022
49
AUDIT COMMITTEE REPORT | continued
• Making recommendations to the Board regarding the
appointment of the external Auditor, its independence
and the objectivity and effectiveness of the audit process.
• Monitoring any non-audit services being provided to the
Company by its external Auditor.
• Consideration of the need for the Company to have its
own Internal Audit function.
EFFECTIVENESS OF THE EXTERNAL
AUDIT PROCESS
The Audit Committee annually reviews the performance of
PricewaterhouseCoopers LLP, the Company’s external Auditor
and discusses its effectiveness with representatives of the Fund
Manager, who work closely with the Auditor during the annual
audit process. As part of this review, the Audit Committee takes
into consideration the qualifications, expertise and resources,
and independence of the external Auditor and the effectiveness
of the external audit process, which includes a report from the
external Auditor on its own internal quality procedures. The
Auditor attends the Audit Committee meeting at which the Annual
Report is considered in order to present its report and have the
opportunity to meet privately with the Audit Committee members
without representatives of the Fund Manager present. The Auditor
is required to rotate the audit partner every five years and this is the
second year for which Colleen Local has served as audit partner.
Details of the amounts paid to the external auditor during the
financial year under review, for audit services, are set out in note 5
to the Financial Statements on page 72. 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. Following its review, the Audit Committee remains
satisfied with the effectiveness of the audit provided and that the
Auditor remains independent.
AUDIT TENDER AND RE-APPOINTMENT
OFTHE AUDITOR
The Company must also comply with UK Competition and Market
Authority rules, which require the external audit contract to be put
out to tender at least every 10 years, with the proviso that no single
firm may serve as the Company’s external auditor for a period
exceeding 20 years. PricewaterhouseCoopers LLP was initially
appointed in 2007 and accordingly, the Company conducted a
tender of audit services in 2016 in respect of the ongoing audits.
Following recommendation by the Audit Committee, the Board
decided to retain PricewaterhouseCoopers LLP as Auditor for
the Company. Following a review of the Auditors’ performance,
as described above, the Audit Committee recommends the re-
appointment of the Auditor at the forthcoming AGM.
SIGNIFICANT ISSUES CONSIDERED WITH RESPECT TO THE ANNUAL REPORT
Issue considered How the issue was addressed
Valuation and existence of quoted and unquoted investments
and gains and losses from those investments
Consideration and review of valuation processes and methodology
at SV Health Managers LLP and the Northern Trust Company to
establish the existence of and the accuracy and completeness over
the valuations being recommended for approval to theBoard.
Performance Fee Review of the accuracy of the calculation and completeness
ofdisclosure.
International Biotechnology Trust plc | Audit Committee Report
ANNUAL
REPORT
31 August 2022
50
INTERNAL AUDIT
The Audit Committee have considered the requirement for the
Company to have an internal audit function pursuant to provisions
25 and 26 of the UK Code. It was deemed unnecessary for the
Company to have its own internal audit function due to:
• The Board delegates its main functions to third-party
service providers, who have their own internal audit
functions and established internal controls frameworks
which provide reasonable assurance on the effectiveness
of the internal controls operated on behalf of their clients.
• The Fund Manager reports on compliance within the
terms of its delegated authority under the Investment
Management Agreement on a quarterly basis.
• The Company Secretary also reports any breaches of
law and regulation as and when they arose.
• In the last two financial years, when reviewing the
system of internal controls, the Audit Committee had not
identified nor been advised of any failings or weaknesses
which it had determined to be significant.
CONCLUSIONS WITH RESPECT
TO THE ANNUAL REPORT
The production and the external audit of the Company’s Annual
Report is an intricate process, involving a number of parties. The
Audit Committee has reviewed the internal controls in place at
each of the third party service providers in order to gain comfort
over the accuracy of the Company’s financial records. Having
received the Auditors’ Report on the results of the annual audit
and having taken all available information into consideration and
having discussed the content of the Annual Report with the AIFM,
Fund Manager, Company Secretary and other third party service
providers, the Audit Committee has concluded that the Annual
Report for the year ended 31 August 2022, 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 51. The Board was made fully aware
of any significant financial reporting issues and judgements made
in connection with the preparation of the Financial Statements.
CAROLINE GULLIVER | Chair of the Audit Committee
31 October 2022
International Biotechnology Trust plc | Audit Committee Report
AUDIT COMMITTEE REPORT | continued
ANNUAL
REPORT
31 August 2022
51
MANAGEMENT REPORT AND DIRECTORS’
RESPONSIBILITIES STATEMENT
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
included in the management report for the purposes of the Rules
is included in the Strategic Report on pages 24 to 31 inclusive
(together with the sections of the Annual Report incorporated by
reference) and the Directors’ Report on pages 34 to 43. Therefore,
a separate management report has not been included.
STATEMENT OF DIRECTORS’
RESPONSIBILITIES IN RESPECT
OFTHEFINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable law
and regulation.
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 UK
adopted international accounting standards.
Under company law, 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 the Financial
Statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• state whether applicable UK adopted international
accounting standards have been followed, subject to
any material departures disclosed and explained in the
Financial Statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the Financial Statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are also 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 Directors’
Remuneration Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity
of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of Financial
Statements may differ from legislation in other jurisdictions.
DIRECTORS’ CONFIRMATIONS
Having taken advice from the Audit Committee the Directors
consider that the Annual Report and Accounts, 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.
Each of the Directors, whose names and functions are listed in
the Directors’ Report confirm that, to the best of their knowledge:
• the Company Financial Statements, which have been
prepared in accordance with UK adopted international
accounting standards, give a true and fair view of the
assets, liabilities, financial position and result of the
Company; and
• 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.
The Annual Report is published on www.ibtplc.com which is
maintained by SV Health Managers LLP. The maintenance and
integrity of the website is, so far as it relates to the Company, the
responsibility of SV Health Managers LLP. The work carried out
by the Auditor does not involve consideration of the maintenance
and integrity of this website and accordingly, the Auditor accepts
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 be aware that legislation in the UK governing
the preparation and dissemination of the Annual Report may
differ from legislation in their home jurisdiction.
This Statement of Directors’ Responsibilities was approved by
the Board and signed on its behalf by:
JIM HORSBURGH | Chairman
31 October 2022
International Biotechnology Trust plc | Management Report and Directors’ Responsibilities Statement
ANNUAL
REPORT
31 August 2022
52
International Biotechnology Trust plc
53
INDEPENDENT AUDITORS’ REPORT
to the members of International Biotechnology Trust plc
REPORT ON THE AUDIT OF
THEFINANCIAL STATEMENTS
OPINION
In our opinion, International Biotechnology Trust plc’s financial
statements:
• give a true and fair view of the state of the Company’s
affairs as at 31 August 2022 and of its loss and cash
flows for the year then ended;
• have been properly prepared in accordance with UK-
adopted international accounting standards; and
• have been prepared in accordance with the requirements
of the Companies Act 2006.
We have audited the financial statements, included within
the Annual Report, which comprise: the Balance Sheet as at
31August 2022; the Statement of Comprehensive Income, the
Statement of Changes in Equity, and the Cash Flow Statement
for the year then ended; and the notes to the financial statements,
which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for
ouropinion.
Independence
We remained independent of the Company in accordance with
the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical
Standard, as applicable to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance with
these requirements.
To the best of our knowledge and belief, we declare that non-
audit services prohibited by the FRC’s Ethical Standard were
notprovided.
We have provided no non-audit services to the Company in the
period under audit.
International Biotechnology Trust plc | Independent Auditors’ Report
ANNUAL
REPORT
31 August 2022
ANNUAL
REPORT
31 August 2022
54
OUR AUDIT APPROACH
Overview
Audit scope
• The Company is a standalone Investment Trust Company
and engages SV Health Managers LLP (the Fund Manager)
to manage its assets.
• We conducted our audit of the financial statements using
information from HSBC Bank plc (the Administrator
to 28/02/2022), and Northern Trust (the Administrator
from 1/03/2022) to whom the Fund Manager has, with
the consent of the Directors, delegated the provision of
certain administrative functions.
• We tailored the scope of our audit taking into account
the types of investments held by the Company, the
involvement of the third parties referred to above, the
accounting processes and controls, and the industry in
which the Company operates.
• We obtained an understanding of the control environment
in place at both the Fund Manager and the Administrator,
and adopted a fully substantive testing approach
using reports obtained from the Fund Manager and
Administrator.
Key Audit Matters
• Valuation and existence of unquoted investments.
• Valuation and existence of quoted investments.
• Income from investments.
Materiality
• Overall materiality: £2,800,000 (2021: £3,200,000) based
on approximately 1% of net assets.
• Performance materiality: £2,100,000 (2021: £2,400,000).
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements.
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the audit
of the financial statements of the current period and include the
most significant assessed risks of material misstatement (whether
or not due to fraud) identified by the auditors, including those
which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the
engagement team. These matters, and any comments we make
on the results of our procedures thereon, were addressed in the
context of our audit of the financial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
This is not a complete list of all risks identified by our audit.
Ability to continue as a going concern, which was a key audit
matter last year, is no longer included because of approval of
the continuation vote at the 2021 AGM. Otherwise, the key audit
matters below are consistent with last year.
INDEPENDENT AUDITORS’ REPORT | continued
International Biotechnology Trust plc | Independent Auditors’ Report
ANNUAL
REPORT
31 August 2022
55
INDEPENDENT AUDITORS’ REPORT | continued
Key audit matter How our audit addressed the key audit matter
Valuation and existence of unquoted
investments
Refer to the Audit Committee Report, Note 1 Accounting
Policies and Note 10 Investments held at fair value through
profit or loss.
The investment portfolio at 31 August 2022 included unquoted
investments. We focused on the valuation and existence of
the unquoted investments as these investments represented
a material balance in the financial statements (£28.0m) and
the valuation requires significant estimates and judgements to
be applied by the Directors and the Fund Manager such that
changes to key inputs to the estimates and/or the judgements
made can result in a material change to the valuation of
unquoted investments.
Valuation of unquoted investments
- We have understood and evaluated the valuation methodology
applied, by reference to IFRS and the International Private
Equity and Venture Capital Valuation guidelines (IPEV). We have
assessed the techniques used by the Directors in determining
the fair value of unquoted investments, as outlined below.
Our testing, performed on a sample basis, included:
- Assessing the appropriateness of the valuation models used,
- Assessing the reasonableness of assumptions and estimates
used, and
- Testing the inputs through validation to appropriate third party
sources.
We also read the Board papers and meeting minutes where the
valuations of the unquoted investments were discussed by the
Directors.
This, together with the work outlined above and our knowledge of
the investee entities, IFRS, the AIC SORP and the IPEV guidelines,
enabled us to discuss with and challenge the Directors and the
Fund Manager as to the appropriateness of the methodologies,
key inputs used and the valuations themselves.
We found that the Fund Manager’s valuations of unquoted
investments were consistent with IFRS and that the assumptions
used to derive the valuations within the financial statements were
reasonable based on the investee’s circumstances or consistent
with appropriate third party sources.
Existence of unquoted investments
We tested the existence of the unquoted investment portfolio
by agreeing holdings to an independently obtained confirmation
from the custodian, Northern Trust, as at 31 August 2022. No
material misstatements were identified from this testing.
Valuation and existence of quoted investments
Refer to the Audit Committee Report, Note 1 Accounting
Policies and Note 10 Investments held at fair value through
profit and loss.
The investment portfolio at the year-end comprised quoted
equity investments valued at £285.5m. 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.
We tested the valuation of the quoted equity investments by
agreeing 100% of prices used in the valuation to independent
third party sources.
We tested the existence of the quoted investment portfolio
by agreeing 100% of the holdings of quoted investments to
an independently obtained confirmation from the custodian,
Northern Trust, as at 31 August 2022.
No material misstatements were identified from this testing.
International Biotechnology Trust plc | Independent Auditors’ Report
ANNUAL
REPORT
31 August 2022
56
INDEPENDENT AUDITORS’ REPORT | continued
Key audit matter How our audit addressed the key audit matter
Income from investments
Refer to the Audit Committee Report, Note 1 Accounting
Policies, Note 3 Income and Note 10 Investments held at fair
value through profit and loss.
ISAs (UK) presume there is a risk of fraud in income recognition
because of the pressure management may feel to achieve a
certain objective. In this instance, we consider that ‘income’
refers to all the Company’s income streams, both revenue and
capital (including gains and losses on investments). We focused
this risk on the accuracy and occurrence of gains/losses on
investments and occurrence, accuracy and completeness of
dividend income and its presentation in the Income Statement
as set out in the requirements of The Association of Investment
Companies’ Statement of Recommended Practice (the “AIC
SORP”).
We assessed the accounting policy for income recognition for
compliance with accounting standards and the AIC SORP and
performed testing to confirm that income had been accounted
for in accordance with this stated accounting policy.
We found that the accounting policies implemented were in
accordance with accounting standards and the AIC SORP,
and that income (revenue and capital gains and losses on
investments) has been accounted for in accordance with the
stated accounting policy.
We understood and assessed the design and implementation of
key controls surrounding income recognition.
Capital gains/losses on investments
The gains/losses on investments held at fair value comprise
realised and unrealised gains/losses.
For unrealised gains and losses, we have tested the valuation of
the portfolio at the year-end (see above), together with testing the
reconciliation of opening and closing investments, thereby we
have assessed the accuracy of the gains/losses recorded. We
have also verified the occurrence of the gains/losses through our
testing of the existence of investments, as noted above.
For realised gains/losses, we tested a sample of disposal
proceeds by agreeing the proceeds to bank statements, in order
to verify the occurrence of the gain/loss. We re-performed the
calculation of a sample of realised gains/losses in order to assess
the accuracy of the gains/losses recorded.
Revenue (or dividend income)
To test the accuracy of dividend income, we tested a sample
of dividend receipts by agreeing the dividend rates from all
investments to independent third party sources.
To test for completeness, we tested that the appropriate dividends
had been received in the year by reference to independent data
of dividends declared for all listed investments during the year.
Our testing did not identify any unrecorded dividends.
We tested the occurrence assertion by testing that all dividends
recorded in the year had been declared in the market by
investment holdings, and we traced a sample of dividends
received to bank statements.
We also tested the allocation and presentation of dividend
income between the revenue and capital return columns of the
Income Statement in line with the requirements set out in the AIC
SORP by determining reasons behind dividend distributions.
No material misstatements were identified from this testing.
International Biotechnology Trust plc | Independent Auditors’ Report
ANNUAL
REPORT
31 August 2022
57
INDEPENDENT AUDITORS’ REPORT | continued
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 structure of
the Company, the accounting processes and controls, and the
industry in which it operates.
As part of designing our audit, we determined materiality and
assessed 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.
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 in aggregate 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 Company materiality £2,800,000 (2021: £3,200,000).
How we determined it Approximately 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 use performance materiality to reduce to an appropriately
low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically,
we use performance materiality in determining the scope of our
audit and the nature and extent of our testing of account balances,
classes of transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 75% (2021: 75%)
of overall materiality, amounting to £2,100,000 (2021: £2,400,000)
for the Company financial statements.
In determining the performance materiality, we considered a
number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and
concluded that an amount at the upper end of our normal range
was appropriate.
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above £140,000 (2021:
£160,000) as well as misstatements below that amount that, in
our view, warranted reporting for qualitative reasons.
International Biotechnology Trust plc | Independent Auditors’ Report
ANNUAL
REPORT
31 August 2022
58
INDEPENDENT AUDITORS’ REPORT | continued
CONCLUSIONS RELATING TO
GOINGCONCERN
Our evaluation of the Directors’ assessment of the Company’s
ability to continue to adopt the going concern basis of accounting
included:
• Obtaining evidence to support the key assumptions and
forecasts driving the Directors’ assessment. This included
reviewing the Directors’ assessment of the Company’s
financial position and forecasts, their assessment of
liquidity and loan covenant compliance as well as their
review of the operational resilience of the Company and
oversight of key third party service providers.
• Assessing the performance of the Company when
compared to its stated performance comparator; and
• Assessing the premium/discount the Company’s share
price trades at compared to its net asset value per share.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Company’s ability to continue as a going concern for a period of
at least twelve months from when the financial statements are
authorised for issue.
In auditing the financial statements, we have concluded that the
Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the Company’s
ability to continue as a going concern.
In relation to the Directors’ reporting on how they have applied the
UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the Directors’ statement in the
financial statements about whether the Directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections of
this report.
REPORTING ON OTHER INFORMATION
The other information comprises all of the information in the Annual
Report other than the financial statements and our auditors’ report
thereon. The Directors are responsible for the other information.
Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion
or, except to the extent otherwise explicitly stated in this report,
any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in
the audit, or otherwise appears to be materially misstated.
If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required
to report that fact. We have nothing to report based on these
responsibilities.
With respect to the Strategic report and Directors’ Report, we
also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions
and matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the
audit, the information given in the Strategic report and Directors’
Report for the year ended 31 August 2022 is consistent with the
financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the Company and
its environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic report and
Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Report on Directors’ Remuneration
to be audited has been properly prepared in accordance with the
Companies Act 2006.
International Biotechnology Trust plc | Independent Auditors’ Report
ANNUAL
REPORT
31 August 2022
59
INDEPENDENT AUDITORS’ REPORT | continued
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the Directors’ statements
in relation to going concern, longer-term viability and that part of
the corporate governance statement relating to the Company’s
compliance with the provisions of the UK Corporate Governance
Code specified for our review. Our additional responsibilities
with respect to the corporate governance statement as other
information are described in the Reporting on other information
section of this report.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit, and we
have nothing material to add or draw attention to in relation to:
• The Directors’ confirmation that they have carried out a
robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are
being managed or mitigated;
• The Directors’ statement in the financial statements
about whether they considered it appropriate to adopt
the going concern basis of accounting in preparing them,
and their identification of any material uncertainties to
the Company’s ability to continue to do so over a period
of at least twelve months from the date of approval of the
financial statements;
• The Directors’ explanation as to their assessment of
the Company’s prospects, the period this assessment
covers and why the period is appropriate; and
• The Directors’ 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 its assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the Directors’ statement regarding the longer-term
viability of the Company was substantially less in scope than an
audit and only consisted of making inquiries and considering
the Directors’ process supporting their statement; checking
that the statement is in alignment with the relevant provisions of
the UK Corporate Governance Code; and considering whether
the statement is consistent with the financial statements and
our knowledge and understanding of the Company and its
environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit,
we have concluded that each of the following elements of the
corporate governance statement is materially consistent with
the financial statements and our knowledge obtained during
theaudit:
• The Directors’ statement that they consider the
Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary
for the members to assess the Company’s position,
performance, business model and strategy;
• The section of the Annual Report that describes the
review of effectiveness of risk management and internal
control systems; and
• The section of the Annual Report describing the work of
the Audit Committee.
We have nothing to report in respect of our responsibility to
report when the Directors’ statement relating to the Company’s
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified under the Listing
Rules for review by the auditors.
International Biotechnology Trust plc | Independent Auditors’ Report
ANNUAL
REPORT
31 August 2022
60
INDEPENDENT AUDITORS’ REPORT | continued
RESPONSIBILITIES FOR THE FINANCIAL
STATEMENTS AND THE AUDIT
Responsibilities of the Directors
for the financial statements
As explained more fully in the Statement of Directors’
responsibilities in respect of the financial statements, the
Directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for
being satisfied that they give a true and fair view. The Directors
are also responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless
the Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud, is detailed below.
Based on our understanding of the Company and industry,
we identified that the principal risks of non-compliance with
laws and regulations related to breaches of section 1158 of
the Corporation Tax Act 2010, and we considered the extent
to which non-compliance might have a material effect on
the financial statements. We also considered those laws and
regulations that have a direct impact on the financial statements
such as the Companies Act 2006. We evaluated management’s
incentives and opportunities for fraudulent manipulation of the
financial statements (including the risk of override of controls),
and determined that the principal risks were related to posting
inappropriate journal entries to increase revenue or reduce
expenditure, and management bias in accounting estimates.
Audit procedures performed by the engagement team included:
• discussions with the Administrator, Fund Manager and
the Audit Committee, including consideration of known
or suspected instances of non-compliance with laws and
regulation and fraud where applicable;
• reviewing relevant committee meeting minutes, including
those of the Board and Audit Committee;
• assessment of the Company’s compliance with the
requirements of section 1158 of the Corporation Tax Act
2010, including recalculation of numerical aspects of the
eligibility conditions;
• challenging assumptions and judgements made by
management in their significant accounting estimates,
in particular in relation to the valuation of unquoted
investments (see related key audit matter);
• identifying and testing journal entries, in particular a
sample of manual year end journal entries posted during
the preparation of the financial statements; and
• designing audit procedures to incorporate unpredictability
around the nature, timing or extent of our testing.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related
to events and transactions reflected in the financial statements.
Also, the risk of not detecting a material misstatement due to fraud
is higher than the risk of not detecting one resulting from error,
as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through collusion.
International Biotechnology Trust plc | Independent Auditors’ Report
ANNUAL
REPORT
31 August 2022
61
INDEPENDENT AUDITORS’ REPORT | continued
International Biotechnology Trust plc | Independent Auditors’ Report
Our audit testing might include testing complete populations
of certain transactions and balances, possibly using data
auditing techniques. However, it typically involves selecting a
limited number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of the
financial statements is located on the FRC’s website at: www.frc.
org.uk/auditorsresponsibilities. This description forms part of our
auditors’ report.
Use of this report
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.
OTHER REQUIRED REPORTING
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
• we have not obtained all the information and explanations
we require for our audit; or
• adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not
been received from branches not visited by us; or
• certain disclosures of Directors’ remuneration specified
by law are not made; or
• the financial statements and the part of the Report
on Directors’ Remuneration to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were
appointed by the Directors on 12 July 2007 to audit the financial
statements for the year ended 31 August 2007 and subsequent
financial periods. The period of total uninterrupted engagement is
16 years, covering the years ended 31 August 2007 to 31 August
2022.
Colleen Local (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
31 October 2022
ANNUAL
REPORT
31 August 2022
62
International Biotechnology Trust plc | Statement of Comprehensive Income
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 August 2022 For the year ended 31 August 2021
Notes
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
(Losses)/gains on investments held at fair value 2 — (14,696) (14,696) — 30,925 30,925
Exchange (losses)/gains on currency balances — (4,378) (4,378) — 65 65
Income 3 1,113 — 1,113 1,105 — 1,10 5
Expenses
Management fee 4 (2,009) — (2,009) (2,402) — (2,402)
Performance fee 4 — (471) (471) — (353) (353)
Administrative expenses 5 (1,218) — (1,218) (1,075) — (1,075)
(Loss)/profit before finance costs and tax (2,114) (19,545) (21,659) (2,372) 30,637 28,265
Finance costs
Interest payable 6 (663) — (663) (218) — (218)
(Loss)/profit before tax (2,777) (19,545) (22,322) (2,590) 30,637 28,047
Taxation 7 (151) — (151) (162) — (162)
(Loss)/profit for the year attributable to shareholders (2,928) (19,545) (22,473) (2,752) 30,637 27, 885
Basic and diluted (loss)/earnings per Ordinary share 8 (7.13)p (47.59)p (54.72)p (6.80)p 75.66p 68.86p
All revenue and capital items in the above statement derive from continuing operations. The total column of this statement represents the
Company’s Statement of Comprehensive Income, prepared in accordance with IFRSs.
The Company does not have any other comprehensive income and hence the net 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 66 to 93 form part of these Financial Statements.
ANNUAL
REPORT
31 August 2022
63
International Biotechnology Trust plc | Statement of Changes in Equity
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 August 2022 Notes
Called up
share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Capital
reserves
£’000
Revenue
reserve
£’000
Total
£’000
Balance at 1 September 2021 10,346 29,873 31,482 295,807 (43,733) 323,775
Total Comprehensive Income:
Loss for the year — — — (19,545) (2,928) (22,473)
Transactions with owners, recorded
directly to equity:
Dividends paid in the year 9 — — — (12,879) — (12,879)
Ordinary shares bought back into treasury — — — (3,534) — (3,534)
Balance at 31 August 2022 10,346 29,873 31,482 259,849 (46,661) 284,889
For the year ended 31 August 2021 Notes
Called up
share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Capital
reserves
£’000
Revenue
reserve
£’000
Total
£’000
Balance at 1 September 2020 10,335 20,434 31,482 262,627 (40,981) 283,897
Total Comprehensive Income:
Profit/(loss) for the year — — — 30,637 (2,752) 27,885
Transactions with owners, recorded
directly to equity:
Dividends paid in the year 9 — — — (11,564) — (11,564)
Ordinary shares issued from treasury — 9,158 — 14,107 — 23,265
New Ordinary shares issued 11 281 — — — 292
Balance at 31 August 2021 10,346 29,873 31,482 295,807 (43,733) 323,775
The notes on pages 66 to 93 form part of these Financial Statements.
ANNUAL
REPORT
31 August 2022
64
International Biotechnology Trust plc | Balance Sheet
BALANCE SHEET
Notes
At 31 August 2022
£’000
At 31 August 2021
£’000
Non-current assets
Investments held at fair value through profit or loss 10 313,429 345,336
313,429 345,336
Current assets
Receivables 11 13,487 942
Cash and cash equivalents 12 — 1,557
13,487 2,499
Total assets 326,916 347,835
Current liabilities
Borrowings 12 (39,976) (21,869)
Payables 13 (2,051) (2,191)
(42,027) (24,060)
Net assets 284,889 323,775
Equity attributable to equity holders
Called up share capital 15 10,346 10,346
Share premium account 16 29,873 29,873
Capital redemption reserve 17 31,482 31,482
Capital reserves 18 259,849 295,807
Revenue reserve 19 (46,661) (43,733)
Total equity 284,889 323,775
NAV per Ordinary share 20 697.18 p 782.37p
The Financial Statements on pages 62 to 65 were approved by the Board on 31 October 2022 and signed on its behalf by:
JIM HORSBURGH
| Chairman CAROLINE GULLIVER | Chair of the Audit Committee
The notes on pages 66 to 93 form part of these Financial Statements.
International Biotechnology Trust plc Company Number 2892872
ANNUAL
REPORT
31 August 2022
65
International Biotechnology Trust plc | Cash Flow Statement
CASH FLOW STATEMENT
Notes
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
Cash flows from operating activities
(Loss)/profit before tax (22,322) 28,047
Adjustments for:
Decrease/(increase) in investments 19,009 (43,113)
Losses on foreign exchange 4,375 —
Increase in receivables (33) (781)
Increase in payables 261 1,476
Taxation (166) (162)
Net cash flows generated from/(used in) operating activities 21 1,124 (14,533)
Cash flows from financing activities
Issue of Ordinary shares from treasury — 23,265
Issue of New Ordinary shares — 292
Buyback of Ordinary shares into treasury (3,534) —
Dividends paid 9 (12,879) (11,564)
Net cash (used in)/generated from financing activities (16,413) 11,993
Effect of foreign exchange rates (4,375) —
Net decrease in cash and cash equivalents (19,664) (2,540)
Cash and cash equivalents at 1 September (20,312) (17,772)
Cash and cash equivalents at 31 August 12 (39,976) (20,312)
The notes on pages 66 to 93 form part of these Financial Statements.
ANNUAL
REPORT
31 August 2022
1. ACCOUNTING POLICIES
The nature of the Company’s operations and its principal activities
are set out in the Strategic Report and Directors’ Report.
The Company’s Financial Statements have been prepared in
accordance with UK adopted International Accounting 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).
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. All values are rounded to the nearest thousand pound
(£’000) except where otherwise indicated.
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 (as set out on page 36) 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 October 2019 (and updated in April 2021) 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.
The financial position of the Company as at 31 August 2022 is
shown in the balance sheet on page 64. As at 31 August 2022
the Company’s total assets exceeded its total liabilities by a
multiple of over seven. The assets of the Company consist mainly
of securities that are held in accordance with the Company’s
Investment Policy, as set out on page 24. The Directors have
considered a detailed assessment of the Company’s ability
to meets its liabilities as they fall due. The assessment took
account of the Company’s current financial position, its cash
flows and its liquidity position. In addition to the assessment
the Company carried out stress testing, which used a variety of
falling parameters to demonstrate the effects in the Company’s
share prices and NAV. In light of the results of these tests, the
Company’s cash balances, and the liquidity position, the Directors
consider that the Company has adequate financial resources
to enable it to continue in operational existence. The Directors
expect shareholders to vote in favour of continuation at the 2022
AGM. Accordingly, the Directors believe that it is appropriate
to continue to adopt the going concern basis in preparing the
Company’s accounts.
(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 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.
NOTES TO THE FINANCIAL STATEMENTS
66
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
(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.
•
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.
(e) Ta xation
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
The Company holds three types of investments: direct investments
in quoted companies, direct investments in unquoted companies
and investments in funds.
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.
Any gains and losses realised on disposal are recognised in the
capital column of the Statement of Comprehensive Income.
Quoted investments
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.
Unquoted Investments
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 2018) and Special Valuations Guidance (March 2020).
These may include reference to recent rounds of re-financing
undertaken by investee companies involving knowledgeable
parties, an earnings or multiple, a discounted cashflow model
or the present value of future milestone payments, all with
reference to recent arm’s length market transactions between
knowledgeable parties, where available.
NOTES TO THE FINANCIAL STATEMENTS | continued
67
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
The valuations of the unquoted investments are assessed to
ensure that the fair value is fairly reflected and will be revalued
accordingly driven by the underlying assumptions deriving the
value, including: the ability of portfolio company management
to keep cash and operating budgets; investor milestone targets;
clinical trial data; progress of competitor products; performance
of the investment and quality of the management team; 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.
Investment in Funds
The Company receives formal quarterly reports from each of
the private equity funds in which SV Fund VI and SV BCOF (SV
unquoted funds) hold an investment. The value of SV unquoted
funds’ investment in these funds is reported in these quarterly
reports. The reports typically arrive within 60 days of the end
of the quarter (90 days at calendar year end). As soon as a
quarterly report is received by the Company, the reported value
of the SV unquoted funds’ investment in that fund is reflected in
the NAV on the next NAV date.
During the period between quarterly reports, the Company may
be advised of a sale of a portfolio company (or its securities)
held within one of the funds at a different price from the
last reported value in that quarterly report. As soon as the
Company is informed of the completion of any such transaction
establishing a new value for the investment, the new NAV of
that investment to SV unquoted funds is reflected in the NAV on
the next NAV date. With respect to any investments within SV
unquoted funds for which there is a listed price, the Company
revalues its investment in SV unquoted funds to take account of
market movements in the underlying security. The listed price
of these underlying securities is monitored on a daily basis.
Any price move in SV unquoted funds’ underlying investments
that materially impacts the Company’s holding in SV unquoted
funds is immediately reflected in the NAV on the next NAV date.
If there are no material movements, these underlying securities
are revalued on a monthly basis and immediately reflected in the
NAV on the next NAV date.
The value of a fund investment used by the Company in
determining the NAV is always based on the most current
information known to the Company on the NAV date.
(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 “Gains/(losses) on
investments held at fair value”.
(h) Critical accounting estimates and
judgements
The preparation of Financial Statements in conformity with IFRS
requires the use of estimates and judgements. These estimates
and judgements affect the reported amounts of assets and
liabilities at the reporting date. While estimates are based on best
judgement using information and financial data available, the
actual outcome may differ from these estimates. The key sources
of estimation and uncertainty relate to the fair valuation of the
unquoted investments.
Judgements
The Directors consider that the preparation of the Financial
Statements involves the following key judgements:
(i) The fair value of the unquoted investments.
The key judgements in the fair valuation process are:
(i) The Investment Managers’ determination of the
appropriate application of the IPEVC Valuation Guidelines
(December 2018) and Special Valuations Guidance
(March 2020) to each unquoted investment;
(ii) The Directors’ consideration of whether each fair value is
appropriate following detailed review and challenge. The
judgement applied in the selection of the methodology
used for determining the fair value of each unquoted
investment can have a significant impact upon the
valuation; and
NOTES TO THE FINANCIAL STATEMENTS | continued
68
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
(iii) The selection of appropriate comparable companies
in order to derive revenue multiples and meaningful
relationships between enterprise value, revenue and
earnings growth. Comparable companies are chosen on
the basis of their business characteristics, such as the
industry sector in which they operate and the geographic
location of the company’s operations, and revenue
earnings and growth rates.
Estimates
The key estimate in the Financial Statements is the determination
of the fair value of the unquoted investments by the Fund Manager
for consideration by the Directors. This estimate is key as it
significantly impacts the valuation of the unquoted investments
at the Balance Sheet date. The fair valuation process involves
estimation using subjective inputs that are unobservable (for
which market data is unavailable).
The main estimates involved in the selection of the valuation
process inputs are:
(i) The application of an appropriate discount factor to
reflect macro-economic factors and the reduced liquidity
of unquoted companies;
(ii) The selection of an appropriate estimate of the probability
of royalty income reflecting potential commercial uptake
risk, competitor risk and uncertainty around drug pricing;
and
(iii) The calculation of valuation adjustments derived from
milestone achievement analysis incorporating the
likelihood of clinical trial success.
Fair value estimates are cross-checked to alternative estimation
methods where possible to improve the robustness of the
estimate. As the valuation outcomes may differ from the fair
value estimates a price sensitivity analysis is provided in Level3
investments at fair value through profit and loss – price risk
sensitivity in note 23(7)(iii) on page 90 to illustrate the effect on
the Financial Statements of an over or under estimation of the
significant observable inputs.
(i) Cash and cash equivalents
In the Cash Flow Statement, 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 fair value (translated to sterling at the Balance
Sheet date where appropriate).
(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) and subsequent re-issues
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 capital reserves.
The sales proceeds of treasury shares re-issued are treated as
a realised profit up to the amount of the purchase price of those
shares and is transferred to capital reserves. The excess of the
sales proceeds over the purchase price is transferred to the share
premium account.
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) Dividend distributions
Dividend distributions to shareholders are recognised in the
period in which they are paid.
(n) 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.
NOTES TO THE FINANCIAL STATEMENTS | continued
69
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
(ii) Share premium account:
A non-distributable reserve, represents the amount by which the
fair value of the consideration received exceeds the nominal value
of shares issued.
(iii) Capital reserves:
When making a distribution to shareholders, the Directors
determine profits available for distribution by reference to
‘Guidance on realised and distributable profits under the
Companies Act 2006’ issued by the Institute of Chartered
accountants in England and Wales and the Institute of Chartered
Accounts of Scotland in April 2017. The availability of distributable
reserves in the Company is dependent on those dividends
meeting the definition of qualifying consideration within the
guidance and on available cash resources of the company and
other accessible source of funds. The distributable reserves are
therefore subject to any future restrictions or limitations at the
time such distribution is made.
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;
•
Foreign exchange gains and losses;
•
Performance fee;
•
Re-issue of Ordinary shares from treasury;
•
Repurchase of Ordinary shares in issue; and
•
Dividends paid to shareholders.
Note: Unrealised unquoted holding gains are not distributable.
(iv) Revenue reserve:
Comprises accumulated undistributed revenue profits and losses.
(o) New and revised accounting standards
There were no new IFRSs or amendments to IFRSs applicable
to the current year which had any significant impact on the
Company’s Financial Statements.
The following standards became effective for periods commencing
on or after on 1 January 2021 and the adoption of the standards
and interpretations have not had a material impact on the Financial
Statements of the Company.
IFRS 4 Insurance Contracts – temporary exemption
from IFRS 9 (amended)
The temporary exemption permits companies whose
activities are predominantly connected with insurance to
defer the application of IFRS 9 to annual periods beginning
on or after 1 January 2023.
IFRS 9, IAS 39, IFRS 7, IFRS 16 and IFRS 4: Interest
Rate Benchmark Reform – phase 2 (amended)
IBOR Reform - Phase 2 address issues that might
affect financial reporting during the reform of an interest
rate benchmark, including the effects of changes to
contractual cash flows or hedging relationships arising
from the replacement of an interest rate benchmark with an
alternative benchmark rate.
Effective for periods commencing on or after 1 January 2022:
IAS 37 Onerous Contracts – Costs of Fulfilling a
Contract (amended)
Amendments to clarify which costs needs to be included
when assessing whether a contract is onerous or loss-
making.
The following standards that have not yet been applied, were in
issue at the date of authorisation of these Financial Statements
and effective for periods commencing on or after 1 January 2023:
IAS 1 Classification of Liabilities as Current or Non-
Current (amended)
Amendments to clarify what is meant by a right to defer
settlement, that a right to defer must exist at the end of
the reporting period, that classification is unaffected by the
likelihood that an entity will exercise its deferral right and
that only if an embedded derivative in a convertible liability
is itself an equity instrument, would the terms of a liability
not impact its classification.
IAS 8 Definition of Accounting Estimates (amended)
Amendments to clarify the distinction between changes in
accounting estimates and changes in accounting policies
and the correction of errors. Also, to clarify how companies
use measurement techniques and inputs to develop
accounting estimates.
NOTES TO THE FINANCIAL STATEMENTS | continued
70
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
NOTES TO THE FINANCIAL STATEMENTS | continued
2. GAINS ON INVESTMENTS HELD AT FAIR VALUE
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
Net gains on disposal of investments at historic cost 24,495 46,873
Less fair value adjustments in earlier years (3,465) (31,976)
Gains based on carrying value at previous Balance Sheet date 21,030 14,897
Investment holding (losses)/gains during the year (35,726) 16,028
(14,696) 30,925
Attributable to:
Quoted investments (16,726) 29,059
Unquoted investments 2,030 1,866
(14,696) 30,925
3. INCOME
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
Income from investments held at fair value through profit or loss:
Unfranked dividends 1,113 1,105
1,113 1,105
71
International Biotechnology Trust plc | Notes to the Financial Statements
IAS 1 and IFRS Practice Statement 2 Disclosure of
Accounting Policies (amended)
Amendments aim to help entities provide accounting
policy disclosures that are more useful by replacing the
requirement for entities to disclose their ‘significant’
accounting policies with a requirement to disclose their
‘material’ accounting policies and adding guidance on how
to apply the concept of materiality in making decisions
about accounting policy disclosures.
The Company does not believe that there will be a material impact
on the financial statements or the amounts reported from the
adoption of these standards.
ANNUAL
REPORT
31 August 2022
4. MANAGEMENT AND PERFORMANCE FEES
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
Fees payable to the Fund Manager are as follows:
Management fees paid by Company (allocated to revenue) 2,009 2,402
Performance fee (allocated to capital) 471 353
Details of the management and performance fee arrangements are included in the Directors’ Report on page 35.
Following the investment into the SV Fund VI and SV BCOF (SV unquoted funds), management fees are partially paid through the venture
capital investments. Venture Capital fees paid through the SV unquoted funds’ investment in the year were £623,000 (2021: £377,000).
Total Management fees on a comparative basis were £2,632,000 (2021: £2,779,000). Refer to note 22 Related Party Transactions on page
81, for further details.
5. ADMINISTRATIVE EXPENSES
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
General expenses 743 619
Directors’ fees* 161 168
Company Secretarial and administration fees 249 231
Auditors’ remuneration:
Fees payable to the Company’s Auditor for the audit
of the annual Financial Statements
65 57
1,218 1,075
* See the Directors’ Remuneration Report on pages 44 to 47.
NOTES TO THE FINANCIAL STATEMENTS | continued
72
International Biotechnology Trust plc | Notes to the Financial Statements
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NOTES TO THE FINANCIAL STATEMENTS | continued
6. INTEREST PAYABLE
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
Loan interest payable 663 218
7. TAXATION
(a) Analysis of charge in year
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
Overseas tax 151 162
Total tax charge for the year 151 162
(b) Factors affecting tax charge for the year
The tax assessed for the year is higher than that resulting from applying the standard rate of Corporation Tax in the UK for a medium or
large company of 19% (2021: 19%). The differences are explained below:
For the year ended 31 August 2022 For the year ended 31 August 2021
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Factors affecting tax charge for the year:
(Loss)/profit before taxation (2,777) (19,545) (22,322) (2,590) 30,637 28,047
Tax at the UK corporation tax rate of 19% (2021:19%) (528) (3,714) (4,242) (492) 5,821 5,329
Tax effect of:
Non-taxable dividend income (211) — (211) (210) — (210)
Capital returns on investments — 2,792 2,792 — (5,876) (5,876)
Exchange losses — 832 832 — (12) (12)
Expenses not utilised in the year 739 90 829 702 67 769
Overseas tax 151 — 151 162 — 162
Total tax charge for the year 151 — 151 162 — 162
(c) Provision for deferred taxation
No provision for deferred tax has been made in the current or prior year.
73
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
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31 August 2022
(d) Factors that may affect future tax charges
The Company has a potential deferred tax asset of £18,746,000 (2021: £13,418,000) based on a main rate of corporation tax of 25% (2021:
19%). In October 2022 the government confirmed that the main rate of corporation tax (for all profits except ring fence profits) will increase
to 25% from the 1st of April 2023.
The deferred tax asset has arisen due to the cumulative excess of deductible expenses over taxable income. Given the composition of
the Company’s portfolio, it is not likely that this asset will be utilised in the foreseeable future and therefore no asset has been recognised
in the Financial Statements.
Given the Company’s status as an investment trust company, no provision has been made for deferred tax on any capital gains or losses
arising on the revaluation or disposal of investments.
8. BASIC AND DILUTED (LOSS)/EARNINGS PER ORDINARY SHARE
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
Net revenue loss (2,928) (2,752)
Net capital (loss)/profit (19,545) 30,637
(22,473) 27,885
Weighted average number of Ordinary shares in issue during the year* 41,072 ,164 40,495,020
Pence Pence
Revenue loss per Ordinary share (7.13) (6.80)
Capital (loss)/profit per Ordinary share (47.59) 75.66
Total (loss)/earning per Ordinary share (54.72) 68.86
*Excluding those Ordinary shares held in treasury.
9. DIVIDENDS
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
Dividends paid
2022 First interim dividend paid of 15.70p (2021: 14.20p) 6,464 5,687
2022 Second interim dividend paid of 15.70p (2021: 14.20p) 6,415 5,877
Total dividends paid in the year 12,879 11,564
Dividends are included in the Financial Statements in the year in which they are paid.
The Company is not required to pay a dividend under the requirements of Section 1158 of the CTA due to the negative accumulated
balance on its revenue reserve. The above dividends are paid out of the capital reserve.
NOTES TO THE FINANCIAL STATEMENTS | continued
74
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
NOTES TO THE FINANCIAL STATEMENTS | continued
10. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
(a) Analysis of investments
At 31 August 2022
£’000
At 31 August 2021
£’000
Quoted overseas 285,471 314,365
285,471 314,365
Unquoted in the United Kingdom 3,752 472
Unquoted overseas 24,206 30,499
27,95 8 30,971
Valuation of investments 313,429 345,336
(b) Movements on investments
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
Opening book cost 311,419 252,358
Opening investment holdings gains 33,917 49,865
Opening fair value 345,336 302,223
Analysis of transactions made during the year
Purchases at cost 396,544 318,038
Proceeds of disposals (413,755) (305,850)
(Losses)/gains on investments held at fair value (14,696) 30,925
Closing fair value 313,429 345,336
Closing book cost 318,702 311,419
Closing investment holding (losses)/gains (5,273) 33,917
Closing fair value 313,429 345,336
The Company received £413,755,000 (2021: £305,850,000) from disposal of investments in the year. The book cost of these investments
when they were purchased were £389,260,000 (2021: £258,977,000). These investments have been revalued over time and until they were
sold any unrealised gains/losses were included in the fair value of the investments.
The investment holding losses of £5,273,000 (2021: gains of £33,917,000) have not been further analysed between those amounts that are
distributable and those that are not distributable.
75
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
The following transaction costs, including stamp duty and broker commissions were incurred during the year:
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
On acquisitions 224 188
On disposals 220 176
444 364
(c) Significant undertakings
The Company has interests of 3% or more of any class of capital in the following investee companies:
Class
of share held
% of class
of share held
Country
of incorporation
Archemix Series B 3.80% US
EBR Systems* Series C 7.84% US
Karus Therapeutics* Series B Pref 3.25% UK
Oxagen Stocks* Series B Pref 25.89% UK
Oxagen Stocks* Series A Pref 11.55% UK
Oxagen Stocks* Series C Pref 11.60% UK
Topivert** Series A 12.01% UK
Topivert** Series B 19.65% UK
* Although the Company continues to hold its investment the fair value of this holding has been fully written off in prior years.
** This investment is currently in liquidation.
The Company has a holding of 11.8% in the unquoted fund SV BCOF which is managed by the Fund Manager, and a holding of less than
10% in the unquoted fund SV Fund VI which is managed by SV Health Managers LLC. The total invested in both Funds to date is $34.2m.
Arrangements are in place to ensure there is no double charging of management fees.
(d) Disposals of unquoted investments
Book Cost
at 31 August 2021
£’000
Carrying Value
at 31 August 2021
£’000
Proceeds
£’000
Increase
in fair value
£’000
Carrying Value
at 31 August 2022
£’000
NCP Holdings 303 2,519 3,461 1,030 88
(e) Significant changes in fair values of unquoted investments
During the year under review the following unquoted investment was written down by a significant extent (adjusted for currency movements):
Write down
£’000
SV Fund VI* (2,937)
* The movement in Fair Value (FV) was a combination of distributions from the fund of (£5.8m), capital contributions of £0.9m, the strengthening of the dollar £3.2m, and a FV
loss suffered (£1.2m).
NOTES TO THE FINANCIAL STATEMENTS | continued
76
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
NOTES TO THE FINANCIAL STATEMENTS | continued
11. RECEIVABLES
At 31 August 2022
£’000
At 31 August 2021
£’000
Amounts due within one year:
Sales awaiting settlement 13,251 754
Accrued income 90 91
Prepaid expenses 68 44
Tax recoverable 57 42
VAT recoverable 21 11
13,487 942
12. CASH AND CASH EQUIVALENTS AND BORROWINGS
Cash and cash equivalents and borrowings include the following for the purposes of the Statement of Cash Flows:
At 31 August 2022
£’000
At 31 August 2021
£’000
Cash and cash equivalents — 1,557
Bank overdraft (39,976) (21,869)
Cash and cash equivalents (39,976) (20,312)
The Company has a £55.0m unsecured multi-currency overdraft facility. The facility is structured as part committed, part uncommitted
such that 60% of the facility is made available on a committed basis and the remaining 40% is made available on an uncommitted basis.
All cash balances are netted off against the drawn facility to result in a net drawn overdraft balance as this is a multi-currency overdraft
facility.
On 31 August 2022, £40.0m (2021: £20.3m) was drawn down. The principal covenants relating to this facility are as follows:
• the borrowing base to consist of 20 or more individual eligible investments; and
• the net asset value per share of the Company must not fall by 15% over a rolling one month period, 25% over a rolling three month
period or 35% over a rolling six month period.
The Company has complied with the terms of the facility throughout the financial year.
13. PAYABLES
At 31 August 2022
£’000
At 31 August 2021
£’000
Amounts falling due within one year:
Purchases awaiting settlement 1,196 1,597
Accrued expenses 855 575
Other — 19
2,051 2,191
77
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
14. CAPITAL COMMITMENTS – CONTINGENT ASSETS AND LIABILITIES
The Company made a $30.0m commitment to SV Fund VI in 2016, and at 31 August 2022 has fully invested this amount. A commitment
of $25.0m was made to SV BCOF in December 2021 and $4.2m has been invested to date.
15. CALLED UP SHARE CAPITAL
Allotted, Called up and Fully paid:
At 31 August 2022
Number
At 31 August 2021
Number
At 31 August 2022
£’000
At 31 August 2021
£’000
Allotted, Called up and Fully paid shares of 25p each:
Ordinary shares in issue 40,863,009 41,383,817 10,216 10,346
Ordinary shares held in treasury 520,808 — 130 —
41,383,817 41,383,817 10,346 10,346
During the year, there were 520,808 Ordinary shares repurchased into treasury for total cost of £3,534,000 (2021: nil).
There were no new Ordinary shares issued (2021: £41,154 new Ordinary shares issued for total proceeds of £292,000) and no Ordinary
shares issued from treasury (2021: 2,905,846 Ordinary shares reissued for total proceeds of £23,265,000). No Ordinary shares were
cancelled (2021: nil).
Post year-end as at 28 October 2022, 50,650 shares were repurchased to be held intreasury.
The Ordinary shares held in treasury have no voting rights and are not entitled to dividends.
16. SHARE PREMIUM ACCOUNT
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
Balance brought forward 29,873 20,434
Ordinary shares issued from treasury — 9,158
Ordinary shares issued — 281
Balance carried forward 29,873 29,873
This reserve is not distributable.
NOTES TO THE FINANCIAL STATEMENTS | continued
78
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
NOTES TO THE FINANCIAL STATEMENTS | continued
17. CAPITAL REDEMPTION RESERVE
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
Balance brought forward 31,482 31,482
Balance carried forward 31,482 31,482
Movement during the year — —
This reserve is not distributable.
18. CAPITAL RESERVES
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
Balance brought forward 295,807 262,627
(Losses)/gains on investments (14,696) 30,925
Proceeds from Ordinary shares re-issued from treasury — 14,107
Cost of Ordinary shares bought back into treasury (3,534) —
Performance fee (471) (353)
Dividend paid out of capital (12,879) (11,564)
Realised exchange (losses)/gains on currency balances (4,378) 65
Balance carried forward 259,849 295,807
19. REVENUE RESERVE
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
Balance brought forward (43,733) (40,981)
Net loss for the year (2,928) (2,752)
Balance carried forward (46,661) (43,733)
The revenue reserve may be distributed or used to repurchase the Company’s shares (subject to being a positive balance). A negative
revenue reserve will reduce any distributable reserves available in the capital reserve.
79
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
20. NET ASSET VALUE PER ORDINARY SHARE
The calculation of the NAV per Ordinary share is based on the following:
For the year ended
31 August 2022
For the year ended
31 August 2021
NAV (£’000) 284,889 323,775
Number of Ordinary shares in issue 40,863,009 41,383,817
Basic NAV per Ordinary share (pence) 697.18 782.37
The decrease in the NAV per share from 782.37p (31 August 2021) to 697.18p (31 August 2022) includes the total loss per share during the
year, and the effect on the Company of any issue of Ordinary shares, share buybacks and dividend payments.
There are no dilutive securities; hence, the basic and diluted NAV per share are the same.
21. 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.
Cash flow from operating activities can therefore be further analysed as follows:
For the year ended
31 August 2022
£’000
For the year ended
31 August 2021
£’000
Proceeds on disposal of fair value through profit and loss investments 401,258 305,096
Purchases of fair value through profit and loss investments (396,945) (316,565)
Net cash inflow/(outflow) from operating activities 4,313 (11,469)
Cash flows from other operating activities (7,564) (3,064)
Net cash flows used in operating activities (3,251) (14,533)
22. TRANSACTIONS WITH THE MANAGER AND RELATED PARTY TRANSACTIONS
(a) Transactions with the Fund Manager
Details of the management fee arrangement are given in the Directors’ Report on page 35. The total fee payable under this Agreement to
SV Health Managers LLP for the year ended 31 August 2022 was £2,632,000 (2021: £2,779,000) of which £nil (2021: £nil) was outstanding
at the year end. £623,000 (2021: £377,000) of the total management fees payable are paid to SV Health Investors LLC and SV Health
Managers LLP through the Company’s investments into SV Fund VI and SV BCOF respectively. In addition to this, SV Health Managers
LLP is also entitled to a performance fee of £471,000 on the unquoted portfolio (2021: £353,000 on the quoted portfolio).
NOTES TO THE FINANCIAL STATEMENTS | continued
80
International Biotechnology Trust plc | Notes to the Financial Statements
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REPORT
31 August 2022
NOTES TO THE FINANCIAL STATEMENTS | continued
SV Health Managers LLP will often take seats on boards of companies in which the Company holds an unquoted 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. The Fund
Manager has agreed with the Board a set of guidelines on how any economic interest will be divided between the Company and the
Fund Manager. 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. During the year ended 31 August 2022 £nil (2021: £nil)
wasreceived.
(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 2022 was £160,744 (2021: £168,243) of which nil (2021: £40,250) was outstanding at the year end.
23. FINANCIAL INSTRUMENTS
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.
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, credit
risk and liquidity 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. In assessing any changes to these risks, the Board considered the continued impact of the Ukraine war and noted
that it did not have a significant impact on the risk management policies for the year ended 31 August 2022.
23.1 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 Fund 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 20 to 23. 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 sector specific risk, (note 23.4), 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.
81
International Biotechnology Trust plc | Notes to the Financial Statements
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31 August 2022
Price risk exposure
At the year end, the Company’s assets exposed to market price risk were as follows:
At 31 August 2022
£’000
At 31 August 2021
£’000
Non-current asset investments at fair value through profit or loss 313,429 345,336
Total 313,429 345,336
The level of assets exposed to market price risk decreased by 9.2% (2021: increased by 14.3%) during the year, through a combination of
acquisitions and disposal of investments and decreases in fair values.
Concentration of exposure to price risk
The Company currently holds investments in 74 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. This includes
the Company’s investments into SV Fund VI and SV BCOF as two unquoted holdings. However, SV Fund VI and SV BCOF have 20 and 4
companies, respectively, in their own portfolios. The classification of investments by sector is provided within the Fund Facts.
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% (2021: 10%) in the
fair values of the Company’s investments. The Board believe that a 10% (2021: 10%) movement is sufficient to provide a reasonable range
that could have affected the investment valuations at the year end. 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.
At 31 August 2022 At 31 August 2021
Increase
in fair value
£’000
Decrease
in fair value
£’000
Increase
in fair value
£’000
Decrease
in fair value
£’000
Effect on revenue return (282) 282 (311) 311
Effect on capital return 31,343 (31,343) 34,534 (34,534)
Effect on total return and net assets 31,061 (31,061) 34,223 (34,223)
NOTES TO THE FINANCIAL STATEMENTS | continued
82
International Biotechnology Trust plc | Notes to the Financial Statements
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31 August 2022
(b) Currency risk
The Financial Statements of the Company are denominated in sterling. However, the majority of the Company’s 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.
Management of the risk
The Fund 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 2022 are shown below. Where the
Company’s equity investments (which are not monetary items) are priced in a foreign currency, they have been included separately in the
analysis so as to show the overall level of exposure.
At 31 August 2022
£’000
At 31 August 2021
£’000
Monetary (liabilities)/assets
Cash and cash equivalents:
US dollars (39,771) (21,869)
Danish krone — 789
Euros — 655
Short-term receivables:
US dollars 13,378 113
Danish krone 20 774
Short-term payables:
US dollars (1,196) (1,597)
Foreign currency exposure on net monetary items (27,56 9) (21,135)
Non-current asset investments held at fair value
US dollars 309,128 342,543
Danish krone — 288
Euros 2,517 2,033
Swedish krona 1,443 —
Total net foreign currency exposure 285,519 323,729
At the year end, 99.8% (2021: 100%) 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.
NOTES TO THE FINANCIAL STATEMENTS | continued
83
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
Foreign currency sensitivity
The Company measures foreign currency sensitivity by calculating the standard deviation of rates throughout the financial year. On
this basis sterling strengthened by 0.45% against the US dollar, by 0.34% against the Euro, by 0.34% against the Danish krone, by
0.39% against the Swiss franc and by 0.49% against Swedish krona (2021: strengthened 2.8%, 4.1% and 4.0% respectively). Given the
movements over the last two years, a change of 10% or even more is 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 10% (2021: 10%) change in exchange rates.
If sterling had weakened by 10% against the exposure currencies, with all other variables held constant, this would have affected Company
net assets and net profit for the year attributable to equity shareholders as follows:
At 31 August 2022
£’000
At 31 August 2021
£’000
US dollars 28,154 31,919
Euros 252 269
Danish krone 2 185
Swedish krona 144 —
28,552 32,373
If sterling had strengthened by 10% against the exposure currencies, with all other variables held constant, this would have affected
Company net assets and net profit for the year attributable to equity shareholders as follows:
At 31 August 2022
£’000
At 31 August 2021
£’000
US dollars (28,154) (31,919)
Euros (252) (269)
Danish krone (2) (185)
Swedish krona (144) —
(28,552) (32,373)
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 on 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 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.
NOTES TO THE FINANCIAL STATEMENTS | continued
84
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
At the year end, £40.0m (2021: £20.3m) 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 2022, 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.
For the year ended 31 August 2022 For the year ended 31 August 2021
Within one
year
£’000
More than one
year
£’000
Total
£’000
Within
one year
£’000
More than one
year
£’000
Total
£’000
Exposure to floating interest rates:
Cash and cash equivalents (39,976) — (39,976) (20,312) — (20,312)
Exposure to fixed interest rates:
Non-current asset investments held at
fair value through profit or loss — — — — — —
Total exposure to interest rates (39,976) — (39,976) (20,312) — (20,312)
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 Fund 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 £6.9m and £51.7m.
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 300 (2021: 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.
At 31 August 2022 At 31 August 2021
Increase in rate
£’000
Decrease in rate
£’000
Increase in rate
£’000
Decrease in rate
£’000
Effect on revenue return (1,199) 1,19 9 (102) 102
Effect on capital return — — — —
Effect on total return and net assets (1,199) 1,199 (102) 102
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.
NOTES TO THE FINANCIAL STATEMENTS | continued
85
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
(d) Loss of investor appetite
Loss of investor appetite risk is the risk that there will be a loss of investor appetite for investing in the biotech sector as a result of political
conditions, including FDA and FTC policy, or declining interest in IPOs.
Management of the risk
Loss of investor appetite risk is minimised as the Fund Manager updates the Board monthly and at each scheduled Board Meeting on
issues pertinent to the portfolio and the biotechnology sector generally, including expected future drivers.
Loss of investor appetite risk exposure
As an Investment Trust that invests in the biotech sector the Company has a moderate loss of investor appetite risk exposure.
23.2 Credit risk
Credit risk is the risk of exposure to loss from failure of a counterparty to deliver securities or cash for acquisitions or disposals of
investments. Additionally, the Company has funds on deposit with banks or in money market funds. Northern Trust 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 the investments 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 Fund 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
At 31 August 2022
£’000
At 31 August 2021
£’000
Sales awaiting settlement 13,251 754
Accrued income 90 91
Cash at bank — 1,557
13,341 2,402
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.
NOTES TO THE FINANCIAL STATEMENTS | continued
86
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
23.3 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 Fund 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 a loan facility with Northern Trust
of £55.0m (2021: HSBC £55.0m).
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 Fund Manager’s active involvement in that company.
Liquidity risk exposure
As an Investment Trust, the Company has limited liquidity risk. In any event, the Company estimates it could liquidate 60% (2021: 60%)
of the portfolio within five days if required, in normal functioning markets. A summary of the Company’s financial liabilities is provided in
note 23.6.
23.4 Sector 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 significant 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.
NOTES TO THE FINANCIAL STATEMENTS | continued
87
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
23.5 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).
23.6 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
At 31 August 2022
£’000
At 31 August 2021
£’000
Financial assets at fair value through profit or loss:
Non-current asset investments – designated as such on initial recognition 313,429 345,336
Cash and receivables:
Current assets:
Receivables 13,487 898
Cash at bank — 1,557
13,487 2,455
Financial liabilities
At 31 August 2022
£’000
At 31 August 2021
£’000
Measured at amortised cost
Creditors: amounts falling due within one month:
Purchases awaiting settlement 1,196 1,597
Bank overdraft 39,976 21,869
Accruals 855 575
Payables — 19
42,027 24,060
Note: Amortised cost is the same as the carrying value shown above.
NOTES TO THE FINANCIAL STATEMENTS | continued
88
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
23.7 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 2022
Total
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Equity investments 313,429 285,471 — 27,958
313,429 285,471 — 27,958
At 31 August 2021
Total
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Equity investments 345,336 314,365 — 30,971
345,336 314,365 — 30,971
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 page 67.
There have been no transfers during the year between Levels 1, 2 and 3. A reconciliation of fair value measurements in Level 3 is set
outbelow.
(ii) Level 3 investments at fair value through profit or loss
At 31 August 2022
£’000
At 31 August 2021
£’000
Opening valuation 30,971 35,276
Acquisitions 1,324 652
Disposal proceeds (7,362) (6,677)
Total gains/(losses) included in the Statement of Comprehensive Income
– on assets sold 6,186 121
– on assets held at the year end (3,161) 1,599
Closing valuation 27,95 8 30,971
NOTES TO THE FINANCIAL STATEMENTS | continued
89
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
(iii) Level 3 investments at fair value through profit and loss – price risk sensitivity
Investments are reported at their fair values. A full list of the Company’s investments is given on pages 20 to 23. As at 31 August 2022,
91.1% of the Company’s investments are invested in quoted investments and 8.9% of the Company’s net assets are invested in unquoted
investments.
The fair value of unquoted investments is influenced by the estimates, assumptions and judgements made in the valuation process. A
sensitivity analysis is provided below which recognises that the valuation methodologies used involve different levels of subjectivity in
theirinputs.
Year ended 31 August 2022 Effect of reasonably possible alternative assumptions
Valuation techniques*
Fair value
£’000
Significant
unobservable inputs*
Favourable impacts
£’000
Unfavourable impacts
£’000
Discounted future cash flows 4,330 Probability estimate of royalty income 444 (404)
Discount rate 225 (210)
Present value of future milestone
payments
922 Probability estimate of milestone achievement 64 (58)
Discount rate 4 (4)
Calibration price of recent investment 341 Calibration price of recent investment 34 (34)
5,593 770 (710)
Net asset value 88 No significant judgements applied — —
5,681 770 (710)
Year ended 31 August 2021 Effect of reasonably possible alternative assumptions
Valuation techniques*
Fair value
£’000
Significant
unobservable inputs*
Favourable impacts
£’000
Unfavourable impacts
£’000
Discounted future cash flows 4,964 Probability estimate of royalty income 506 (460)
Discount rate 206 (214)
Present value of future milestone payments 1,213 Probability estimate of milestone achievement 97 (89)
Discount rate 5 (5)
Price multiples 2,519 Estimated sustainable earnings 504 (504)
Selection of appropriate price multiple 655 (655)
Calibration price of recent investment 341 Calibration price of recent investment 34 (34)
9,037 2,007 (1,961)
Net asset value 131 No significant judgements applied — —
9,168 2,007 (1,961)
* Excludes investments in unquoted funds.
Please refer to the accounting policy note 1(f) on pages 67 to 68 for details on the valuation methodology for SV Fund VI and SV BCOF. As
at 31 August 2022, SV unquoted funds have been valued in accordance with this valuation methodology. No key estimates or assumptions
have been applied to the valuation of SV Fund VI and SV BCOF between the date of the last quarterly report received and 31 August 2022.
NOTES TO THE FINANCIAL STATEMENTS | continued
90
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
*Significant unobservable inputs
The significant unobservable inputs applicable to each type of valuation technique will vary dependent on the particular circumstances
of each unquoted company valuation. An explanation of each of the significant unobservable inputs is provided below and includes an
indication of the range in value for each input, where relevant. The assumptions made in the production of the inputs are described in note
1(f) on pages 67 to 68.
Probability estimate of royalty income
The probability estimate of royalty income is a key variable input in the discounted future cash flow valuation technique and represents
the potential commercial uptake risk, competitor risk and uncertainty around drug pricing. To factor in the uncertainty surrounding the
probability estimate of royalty income, the input has been stressed by a factor of +/- 10%. Management is comfortable that the largest
differential in the flux of the valuations would be 10%.
Probability estimate of milestone achievement
The probability estimate of milestone achievement is a key variable input in the present value of future milestone payments valuation
technique and represents the potential risk that commercial milestones are not achieved in accordance with the estimated timeline.
To factor in the uncertainty surrounding the probability estimate of milestone achievement, the input has been stressed by a factor of
+/- 10%. Management is comfortable that the largest differential in the flux of the valuations would be 10%.
Discount rate
The application of a risk adjusted discount rate has been applied to discounted future cash flow and present value of future milestone
payments valuation techniques. The discount rate takes into account the macro market risk and the liquidity premium. To factor in the
uncertainty surrounding the discount rate, the input has been stressed by +/- 2%. Management is comfortable that the largest differential
in the flux of the discount rate would be 2%.
Estimated sustainable earnings
The selection of sustainable revenue or earnings will depend on whether the company is sustainably profitable or not and the value of the
investment’s assets and liabilities on the valuation date. The valuation approach will typically assess companies based on the last twelve
months of revenue or earnings, as they are the most recent available and therefore viewed as the most reliable. To factor in the uncertainty
surrounding the estimated sustainable earnings, the fair value of the investment at the reporting date has been stressed by +/- 20%.
Selection of appropriate price multiple
The selection and relevance of the appropriate multiple is assessed individually for each investment at the date of valuation. The key
criteria used in selecting appropriate comparable companies on which the multiple is selected are the industry sector in which they
operate, the geographic location of the company’s operations, the respective revenue and earnings growth rates and the operating
margins. Approximately 10 comparable companies will be selected for each investment, depending on how many relevant comparable
companies are identified. To factor in the uncertainty surrounding the selection of comparable companies, the applicable multiple has
been stressed by +/- 2%.
Calibration price of recent investment
The fair values of the underlying investments are based on the calibration price but remain unadjusted from the recent price of the
investment. To factor in the uncertainty surrounding the selection of calibration price, the fair value of the investment at the reporting date
has been stressed by +/- 10%.
NOTES TO THE FINANCIAL STATEMENTS | continued
91
International Biotechnology Trust plc | Notes to the Financial Statements
ANNUAL
REPORT
31 August 2022
92
International Biotechnology Trust plc | Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS | continued
23.8 Capital management policies and procedures
The Company’s objectives, policies and processes for managing capital are unchanged from the preceding accounting year.
At 31 August 2022
£’000
At 31 August 2021
£’000
Debt
Bank loan 39,976 21,869
Equity
Called up share capital 10,346 10,346
Reserves 274,543 313,429
Total equity 284,889 323,775
Total debt and equity 324,865 345,644
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 Fund Manager, monitors and reviews the broad structure of the Company’s capital on an ongoing
basis. This includes consideration of:
(i) the planned level of gearing;
(ii) the need to buyback or issue equity shares; and
(iii) the determination of dividend payments.
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 of
the CTA and the Act respectively.
Gearing represents borrowings used for investment purposes, less cash, expressed as a percentage of net assets.
At 31 August 2022
£’000
At 31 August 2021
£’000
Borrowings used for investment purposes, including cash 39,976 20,312
Net assets 284,889 323,775
Gearing 14.0% 6.3%
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.
ANNUAL
REPORT
31 August 2022
93
International Biotechnology Trust plc | Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS | continued
24. 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 biotechnology and
other life sciences companies in accordance with the Company’s investment objective, and consequently no segmental analysis is
provided.
25. POST BALANCE SHEET EVENTS
After the year end and up to 28 October 2022, 50,650 Ordinary shares were bought back to be held in treasury. Following this buyback,
the total number of shares in issue was 41,383,817 of which 571,458 were held in treasury.
No other significant events occurred after the end of the reporting period to the date of this Report requiring disclosure.
ANNUAL
REPORT
31 August 2022
94
International Biotechnology Trust plc | Alternative Investment Fund Manager’s Disclosure
ALTERNATIVE INVESTMENT
FUND MANAGER’S DISCLOSURE (UNAUDITED)
SV Health Managers LLP is the Company’s Alternative Investment
Fund Manager (AIFM). Details of the Management Agreements
dated 11 February 2017 are included in the Directors’ Report on
page 35.
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 24 of this Report.
Contractual relationship with the Company
The Articles of Association 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 judgements obtained in EU Member States
(excluding Denmark at this time) in proceedings commenced
on or after 10 January 2017, can be enforced in England and
Wales under the Recast Brussels Regulation by obtaining a
certificate from the court of origin certifying that the judgement
is enforceable, serving the certificate and judgement on the
judgement debtor and, when seeking enforcement, providing
the Courts of England and Wales with an authenticated copy
of the judgement and certificate and certifying compliance with
the requirements as to service on the debtor. The judgement
debtor can apply for the enforcement of the judgement to be
refused on limited grounds. Further, certain judgements obtained
in EU Member States (including Denmark) in proceedings
commenced before 10 January 2017, 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 judgement for enforcement. The judgement
debtor may appeal/challenge registration on limited grounds.
It may also be possible to enforce a judgement obtained in a
country to which none of the above regimes apply in England and
Wales if such judgement 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 indemnity 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 2016 that with effect from
21 July 2016 the Company had entered into new Agreements
with the relevant suppliers of services to the Company to comply
with AIFMD. The Agreements with the Company’s Fund Manager
and AIFM – SV Health Managers LLP, the Company Secretary
Link Company Matters Limited and Administrator, HSBC Security
Services Ltd – differ only to the extent necessary to comply with
the AIFMD.
Also on 21 July 2016, 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 Bank plc a 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 36 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 listed 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).
ANNUAL
REPORT
31 August 2022
95
International Biotechnology Trust plc | Alternative Investment Fund Manager’s Disclosure
ALTERNATIVE INVESTMENT
FUND MANAGER’S DISCLOSURE (UNAUDITED) | continued
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. 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.
(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
(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
(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). Further information regarding the valuation of
unquoted assets and any sensitivities arising from unobservable
inputs can be found in note 23 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 ‘Company Management’
on page 94. In addition to the 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.
• 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’ Liability insurance premiums.
• Research costs.
ANNUAL
REPORT
31 August 2022
96
International Biotechnology Trust plc | Alternative Investment Fund Manager’s Disclosure
ALTERNATIVE INVESTMENT
FUND MANAGER’S DISCLOSURE (UNAUDITED) | continued
• Promotional expenses (including membership of any
industry bodies, including the AIC, and marketing
initiatives approved by the Board).
• 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.
• 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
ofOrdinary 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
buyback 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 under the Long-term
record on page 5. Copies of the Company’s audited Financial
Statements for the financial year ended 31 August 2021 are
available for inspection at the Registered Office address of
Link Company Matters Limited and can be viewed on the
Company’s website at www.ibtplc.com.
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.
ANNUAL
REPORT
31 August 2022
97
ALTERNATIVE INVESTMENT
FUND MANAGER’S DISCLOSURE (UNAUDITED) | continued
Periodic disclosures
During the year ended 31 August 2022, the overdraft facility
available to the Company was £55.0m (2021: £55.0m).
Risk management
In its capacity as AIFM, SV Health Managers LLP 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 Fund Manager maintains adequate risk
management systems in order to identify, measure and monitor
principal risks at least annually under AIFMD. The Fund 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, remains
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 and emerging 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 25 to 26 of the Annual Report 2022
and in note 23 to the Financial Statements 2022 on pages 81
to92.
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.
Gearing
The Company uses gearing to increase its exposure primarily for
short-term investment opportunities. The AIFM in dialogue with
the Board has set maximum levels of gearing 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 gearing limits are 30.0% for both the gross method
and the commitment method of calculating gearing. There have
been no changes to the maximum level of gearing that the
Company may employ during the year.
At 31 August 2022, £40m was drawn down against the uncommitted
loan 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 77.
Periodic disclosures will be made to investors through the
Company’s website, www.ibtplc.com, regarding the following
areas as required:
• Brokerage and other transaction charges and taxes.
• Directors’ fees and expenses.
• Fees and expenses for custodial, registrar, legal, auditing
and other professional services.
• 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’ Liability insurance premiums .
• Research costs.
• Promotional expenses (including membership of any
industry bodies, including the AIC, and marketing
initiatives approved by the Board).
• Costs of printing the Company’s financial reports and
posting them to shareholders.
SV HEALTH MANAGERS LLP
31 October 2022
International Biotechnology Trust plc | Alternative Investment Fund Manager’s Disclosure
ANNUAL
REPORT
31 August 2022
98
STATEMENT OF THE
DEPOSITARY’S RESPONSIBILITIES (UNAUDITED)
Statement of the Depositary’s Responsibilities
in Respect of the Scheme and Report of the
Depositary to the Shareholders of International
Biotechnology Trust plc (“the Company”) for
the Year Ended 31 August 2022
The Depositary must ensure that the Company is managed in
accordance with the Financial Conduct Authority’s Investment
Funds Sourcebook, (“the Sourcebook”), the Alternative Investment
Fund Managers Directive (“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 in 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 net asset value 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;
• the Company’s income is applied in accordance with the
Regulations; and
• the instructions of the Alternative Investment Fund
Manager (“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.
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.
Northern Trust Investor Services Limited
UK Trustee and Depositary Services
31 October 2022
International Biotechnology Trust plc | Statement of the Depositary’s Responsibilities
ANNUAL
REPORT
31 August 2022
99
NOTICE OF MEETING (UNAUDITED)
International Biotechnology Trust plc | Notice of Meeting
Notice is hereby given that the Annual General Meeting (AGM)
of International Biotechnology Trust plc (the Company) will be
held at 2.30pm on Tuesday, 6 December 2022 at Franks Room,
Wellcome Collection, 183 Euston Road, London, NW1 2BE, to
consider and, if thought fit, to pass the following resolutions, of
which resolutions 1 to 11 will be proposed as Ordinary Resolutions
and resolutions 12 to 15 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 2022.
2. To approve the Annual Report on Directors’ Remuneration
for the year ended 31 August 2022.
3. To approve the Company’s dividend policy of making
dividend payments, equivalent to 4% of the Company’s NAV
as at the last day of the Company’s preceding financial year,
through two equal semi-annual distributions.
4. To re-elect Miss Kate Cornish-Bowden as a Director of the
Company.
5. To re-elect Mrs Caroline Gulliver as a Director of the Company.
6. To re-elect Mr Patrick Magee as a Director of the Company.
7. To elect Professor Patrick Maxwell as Director of the Company.
8. To re-appoint PricewaterhouseCoopers LLP as the
Independent Auditor 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.
9. To authorise the Directors to determine the remuneration of
the Auditor.
To consider and, if thought fit, pass the following resolutions:
10. THAT, the Directors be generally and unconditionally
authorised pursuant to and in accordance with Section
551 of the Companies Act 2006 (the “Act”), to exercise all
the powers of the Company to allot Ordinary shares in the
Company and to grant rights to subscribe for or to convert
any security into Ordinary shares in the Company up to
an aggregate nominal amount of £1,021,575, equivalent to
4,086,300 Ordinary shares (being 10% of the issued Ordinary
share capital of the Company on 28 October 2022 (excluding
treasury shares) (being the latest practical date prior to the
publication of this Notice of Meeting)), such authority to
apply in substitution for all previous authorities pursuant to
Section 551 of the Act and to expire at the conclusion of the
AGM held in 2023 (or 15 months from the date of passing this
resolution, whichever is the earlier, but, in each case, so that
the Company may, before such expiry, make offers and enter
into agreements which would, or might, require shares to be
allotted or rights to subscribe for or to convert any security
into shares to be granted after the authority given by this
resolution has expired.
11. THAT, subject to the passing of Resolution 10, in addition
to the authority granted pursuant to resolution 10, the
Directors of the Company be and are hereby generally and
unconditionally authorised pursuant to Section 551 of the Act,
to exercise all the powers of the Company to allot Ordinary
shares in the Company and to grant rights to subscribe for or
convert any security into Ordinary shares in the Company up
to an aggregate nominal amount of £1,021,575, equivalent to
4,086,300 Ordinary shares (being 10% of the issued Ordinary
share capital of the Company on 28 October 2022 (excluding
treasury shares) (being the latest practicable date prior to the
publication of this Notice)), and to apply until the conclusion of
the AGM held in 2023 (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) save
that the Company may make offers and enter into agreements
before the expiry of this authority which would, or might,
require Ordinary shares to be allotted or rights to subscribe
for or convert securities into Ordinary shares to be granted
after the authority ends and the Directors may allot Ordinary
shares or grant rights to subscribe for or convert securities
into Ordinary shares under any such offer or agreement as if
the authority had not ended.
SPECIAL RESOLUTIONS
12. THAT, subject to the passing of Resolution 10, the Directors
be and are hereby authorised pursuant to Sections 570 and
573 of the Act, to allot and make offers or agreements to allot
equity securities (as defined in Section 560 of the Act) and to
sell equity securities held by the Company as treasury shares
(as defined in Section 724 of the Act) for cash pursuant to
the authority granted by Resolution 10 as if Section 561(1) of
the Act did not apply to any such allotment or sale of equity
securities, provided that this authority:
(a) shall be limited to the allotment of equity securities
and/or the sale of equity securities held in treasury for
cash up to an aggregate nominal amount of £1,021,575
ANNUAL
REPORT
31 August 2022
100
International Biotechnology Trust plc | Notice of Meeting
NOTICE OF MEETING (UNAUDITED) | continued
equivalent to 4,086,300 Ordinary shares (representing
10% of the Company’s existing issued Ordinary share
capital (excluding treasury shares) on 28 October 2022
(being the latest practicable date prior to the publication
of this Notice));
(b) Shall expire at the earlier of the conclusion of the AGM
held in 2023 (or, 15 months from the date of passing
this resolution, unless previously revoked, varied or
renewed, by the Company in General Meeting); but
in each case, prior to its expiry the Company may
make offers, and enter into agreements, which would,
or might, require equity securities to be allotted (and
treasury shares to be sold) after the authority expires
and the Directors may allot equity securities (and sell
treasury shares) under any such offer or agreement as
if the authority had not expired.
13. THAT, subject to the passing of Resolution 11, the Directors
be and are hereby authorised (and in addition to any authority
granted under Resolution 12) to allot equity securities (as
defined in Section 560 in the Act) wholly for cash pursuant
to the authority given by Resolution 12 above or to sell
equity securities 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 up to an aggregate nominal amount
of £1,021,575 equivalent to 4,086,300 Ordinary shares (being
10% of the Company’s existing issued Ordinary share capital
(excluding treasury shares) on 28 October 2022 (being the
latest practicable date prior to the publication of this Notice)),
such authority to apply until the conclusion of the AGM held in
2023 (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, prior to its expiry the Company may make offers, and
enter into agreements, which would, or might, require equity
securities to be allotted (and treasury shares to be sold)
after the authority expires and the Directors may allot equity
securities (and sell treasury shares) under any such offer or
agreement as if the authority had not expired.
14. THAT, the Company be generally and unconditionally
authorised, for the purposes of Section 701 of the Act to
make market purchases (within the meaning of Section 693(4)
of the Act) of Ordinary shares of 25p each in the capital of
the Company, in such a manner and upon such terms as the
Directors may from time to time determine, provided that:
(a) the maximum number of Ordinary shares which may
be purchased is 6,124,285 (being 14.99% of the issued
Ordinary share capital, excluding treasury shares, as at
28 October 2022 (being the last practicable date prior to
the publication of this Notice));
(b) the minimum price which may be paid for such
Ordinary share is 25p (being the nominal value of an
Ordinary share) exclusive of associated expenses,
(c) the maximum price, exclusive of expenses, which may
be paid for an Ordinary share is an amount equal to
the higher of:
(i) 105% of the average of the closing price of
an Ordinary 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 of an Ordinary share and the highest
current bid for an Ordinary share on the trading
venue where the purchase is carried out
(exclusive of associated expenses); and
(d) the authority to purchase hereby conferred shall
expire at the end of the Company’s AGM in 2023 or
(or, 15 months from the date of passing this resolution,
whichever is the earlier), save that the Company may
make a contract to purchase Ordinary shares under
this authority before the expiry of the authority which
will or may be completed wholly or partly thereafter
and a purchase of Ordinary shares may be made in
pursuance of any such contract.
15. THAT, a General Meeting (other than an AGM) may be called
on not less than 14 clear days’ notice.
By order of the Board
LINK COMPANY MATTERS LIMITED
Company Secretary
Registered Office:
6th floor, 65 Gresham St, London EC2V 7NQ
31 October 2022
ANNUAL
REPORT
31 August 2022
101
International Biotechnology Trust plc | Notice of Meeting | Notes
NOTICE OF MEETING | NOTES (UNAUDITED)
NOTICE OF MEETING NOTES
1. 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 forms 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.
2. 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 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 shareholders of the Company.
3. 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 6.30pm on Friday, 2 December 2022, two
working days prior to the date of an adjourned Meeting, shall
be entitled to submit proxy votes at the Meeting in respect of
the number of shares registered in their name at that time.
Changes to the Register of Members after 6.30pm on Friday,
2 December 2022 shall be disregarded in determining the right
of any person to vote at the Meeting. The voting record date
has been determined as Friday, 2 December 2022.
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 by
proxy, shall be accepted to the exclusion of the votes of the
other joint holders.
5. Proxies may be submitted electronically at www.sharevote.
co.uk by entering the Voting ID, Task ID and Shareholder
Reference ID set out in the attached proxy form.
Alternatively, Ordinary shareholders who have already
registered with Equiniti’s Shareview service can appoint
their proxy/proxies by logging onto their account at www.
shareview.co.uk using their usual user ID and password. Once
logged in simply click “View” on the “My Investments” page,
click on the link to vote then follow the on screen instructions.
6. If you are an institutional investor you may be able to appoint
a proxy electronically via the Proxymity platform, a process
which has been agreed by the Company and approved by the
Registrar. For further information regarding Proxymity, please
go to www.proxymity.io. Your proxy must be lodged by 2.30pm
on 2 December 2022 in order to be considered valid. Before
you can appoint a proxy via this process you will need to have
agreed to Proxymity’s associated terms and conditions. It is
important that you read these carefully as you will be bound
by them and they will govern the electronic appointment of
your proxy.
7. 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, 6 December
2022 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 2.30pm on Friday, 2 December 2022. 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.
ANNUAL
REPORT
31 August 2022
102
International Biotechnology Trust plc | Notice of Meeting | Notes
NOTICE OF MEETING | NOTES (UNAUDITED) | continued
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.
8. 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.
9. 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 their
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.
10. The biographies of the Directors offering themselves for re-
election are set out on pages 32 and 33 of the Company’s
Annual Report for the year ended 31 August 2022 and set out
each Director’s experience. These, along with the disclosure
in the Directors’ Report on pages 34 and 35, explain why the
Directors’ contributions are important to the Company’s long-
term sustainable success.
11. As at 28 October 2022, 41,383,817 Ordinary shares of
25 pence were in issue, of which, 571,458 Ordinary shares
were held in treasury (equivalent to 1.38% of the issued share
capital, including treasury shares). Accordingly, the total
number of voting rights of the Company as at 28 October
2022 is 40,812,359.
12. 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 Guidance 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 Guidance and Transparency
Rules, need not make a separate notification to the Company
and the FCA.
13. 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.
14. 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.
15. 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
(c) it is undesirable in the interests of the Company or
the good order of the Meeting that the question be
answered.
ANNUAL
REPORT
31 August 2022
103
International Biotechnology Trust plc | Notice of Meeting | Notes
NOTICE OF MEETING | NOTES (UNAUDITED) | continued
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 email at
cmuk-ibt_cosec@linkgroup.co.uk.
16. 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. 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:
(a) 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
(b) any circumstance connected with the Auditor 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
Auditor not later than the time when it makes the statement
available on the website.
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 required 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.
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GLOSSARY (UNAUDITED)
Administrator – the administrator is the Northern Trust
Company to which the Company has delegated certain trade
processing, valuation and middle office tasks and systems.
AIC
– Association of Investment Companies, the trade body for
investment companies.
AIFM
– Alternative Investment Fund Manager – SV Health
Managers LLP.
AIFMD
– Alternative Investment Fund Managers Directive –
Issued by the European Parliament in 2012 and 2013, the Directive
requires that all investment vehicles (AIFs) in the European
Union, including investment trusts, appoint a Depositary and an
Alternative Investment Fund Manager (AIFM). The Board remains
responsible, however, for all aspects of the Company’s strategy,
operations and compliance with regulations.
APM(s)
– Alternative Performance Measures (please refer to
pages 106 to 107).
BCOF
– SV Biotech Crossover Opportunities Fund LP.
Benchmark – the benchmark is the NASDAQ Biotechnology
Index (NBI) (total return in sterling with dividends reinvested).
Company
– International Biotechnology Trust plc or IBT.
Custodian – the Custodian is Northern Trust Investor Services
Limited. The Custodian is a financial institution responsible for
safeguarding the securities and cash assets of the Company,
as well as the income arising therefrom, through provision of
custodial, settlement and associated services.
Depositary
– the Depositary is Northern Trust Investor
Services Limited. Under AIFMD rules, the Company must have
a Depositary whose duties in respect of investments and cash
include safekeeping; verification of ownership and valuation; and
cash monitoring. Under the AIFMD rules, the Depositary has strict
liability for the loss of the Company’s financial assets in respect of
which it has safekeeping duties.
Discount/Premium
– the share price of an investment trust
is derived from buyers and sellers trading their shares on the
London Stock Exchange and is not always the same as the NAV
per share. If the share price is lower than the NAV per share, the
shares are said to be trading ‘at a discount’. If the share price is
above the NAV per share, the shares are said to be trading ‘at a
premium’.
Distributable reserves
– reserves distributable by way of
dividend or for the purpose of buying back Ordinary share capital.
Fund Manager and Alternative Investment Fund Manager
(AIFM)
– SV Health Managers LLP. The responsibilities and
remuneration of the Fund Manager are set out in the Directors’
Report and note 4 to the Financial Statements.
Independent Auditor
– PricewaterhouseCoopers LLP.
Joint Lead Investment Managers – Ailsa Craig and Marek
Poszepczynski, employees of the Fund Manager with overall
management responsibility for the total portfolio.
Management fee
– the Fund Manager is entitled to a management
fee payable monthly at the rate of 0.9% per annum of the Company’s
N AV.
Market capitalisation
– the stock market quoted price of the
Company’s shares, multiplied by the number of shares in issue.
If the Company’s shares trade at a discount to NAV, the market
capitalisation will be lower than the NAV.
Net Asset Value (NAV)
– the assets less the liabilities of the
Company, as set out in the Statement of Financial Position, all
valued in accordance with the Company’s accounting policies as
described in note 1 to the Financial Statements.
Non-executive Director
– a Director who has a letter of
appointment, rather than a contract of employment, with the
Company. The Company does not have any executive Directors.
Ongoing charges
– ongoing charges are all operating costs
expected to be regularly incurred and that are payable by the
Company. Ongoing charges are 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. Research costs under MiFIDII
borne by the Company are included in the ongoing charges
calculation.
Performance fee
– the Fund Manager is entitled to a performance
fee which is calculated as follows:
• The fee on the quoted portfolio is 10% of relative
outperformance above the sterling-adjusted NBI plus a
0.5% hurdle.
International Biotechnology Trust plc | Glossary
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REPORT
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International Biotechnology Trust plc | Glossary
GLOSSARY (UNAUDITED) | continued
• The fee on the unquoted pool, excluding the investments
in unquoted funds, 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; and
• Any underperformance of the quoted portfolio against the
benchmark is carried forward for the current financial period
plus two succeeding periods. Performance fees in excess
of the performance fee cap are carried forward for the
current financial period plus two succeeding periods and
are offset against any subsequent underperformance
before being paidout.
Total return
– the total return is the return to Shareholders after
reinvesting the net dividend on the date that the share price goes
ex-dividend, calculated on either a share price or NAV basis.
UK Code of Corporate Governance (UK Code)
– the
standards of good practice in relation to board leadership and
effectiveness, remuneration, accountability and relations with
Shareholders that all companies with a Premium Listing on the
London Stock Exchange are required to report on in their annual
report and accounts.
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International Biotechnology Trust plc | Alterntaive Performance Measures
Alternative Performance Measures (APMs) (UNAUDITED)
The Board uses the following APMs to review the performance of the Company (listed in alphabetical order):
Discount/Premium
The Company’s share price is not always the same as the NAV per share. If the share price is lower than the NAV per share, the shares are
said to be trading ‘at a discount’. If the share price is above the NAV per share, the shares are said to be trading ‘at a premium’. The Board’s
objective is to keep the discount within a defined range and actively monitors it to allow it to take the correcting action of conducting share
buybacks when the discount widens beyond that range.
At 31 August 2022 At 31 August 2021
NAV per share (pence) a 697. 2 782.4
Share price (pence) b 651.5 729.5
Discount (b ÷ a) - 1 (6.6%) (6.8%)
Gearing
Gearing for this purpose is defined as borrowings used for investment purposes, less cash, expressed as a percentage of net assets.
The Company has authority to use gearing to a maximum of 30% of NAV and this is monitored daily to ensure this level is not exceeded.
Note At 31 August 2022 At 31 August 2021
Borrowings used for investment purposes including cash (£’000) a 12 39,976 20,312
Net assets (£’000) b 284,889 323,775
Gearing a ÷ b 14.0% 6.3%
Ongoing charges
Ongoing charges are calculated in accordance with the AIC’s recommended methodology using the charges for the current year and the
average NAV during the year. This calculation allows a comparison to be made between the costs of the Company and external investment
companies and is a key metric used by the Board to ensure it remains competitive.
Note
Year ending
31 August 2022
Year ending
31 August 2021
Management fee paid by the Company (£’000) 4 2,009 2,402
Management fee paid directly by SV unquoted funds (£’000) 4 623 377
Administrative expenses (£’000) 5 1,218 1,075
Total ongoing expenses (£’000) a 3,850 3,854
Average daily NAV (£’000) b 290,719 313,619
Ongoing Charges (expressed as a percentage) a ÷ b 1.3% 1.2%
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International Biotechnology Trust plc | Alterntaive Performance Measures
APMs (UNAUDITED) | continued
Total return
The total return is the return to shareholders after reinvesting the net dividend on the date that the share price goes ex-dividend. Total
Return is the primary measurement used by the Board to assess Company performance against the benchmark and its competitors on
a consistent basis.
(a) NAV total return
Year ending
31 August 2022
Year ending
31 August 2021
Opening NAV per share (pence) a 782.4 738.6
Closing NAV per share (pence) b 697. 2 782.4
Dividend adjustment factor* c 1.0450 1.0363
Adjusted closing NAV per share (pence) d = b x c 728.6 810.8
Total return (d ÷ a) -1 (6.9%) 9.8%
* The dividend adjustment factor is calculated on the assumption that the dividends paid by the Company during the year were reinvested into shares of the Company at the
cum income NAV per share/share price, as appropriate, at the ex-dividend date.
Due to 31 August 2021 being a UK public holiday, performance data reported in the 2021 Annual Report differed slightly from the
performance data reported in the Factsheet for August 2021.
(b) Share price total return
Year ending
31 August 2022
Year ending
31 August 2021
Opening price per share (pence) a 729.5 730.0
Closing price per share (pence) b 651.5 729.5
Dividend adjustment factor* c 1.0482 1.0389
Adjusted closing price per share (pence) d = b x c 682.9 757.9
Total return (d ÷ a) -1 (6.4%) 3.8%
* The dividend adjustment factor is calculated on the assumption that the dividends paid by the Company during the year were reinvested into shares of the Company at the
cum income NAV per share/share price, as appropriate, at the ex-dividend date.
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International Biotechnology Trust plc | Company Summary, Shareholder Information, Directors and Advisers
COMPANY SUMMARY, SHAREHOLDER INFORMATION,
DIRECTORS AND ADVISERS (UNAUDITED)
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.
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 2023.
Share Price and NAV Information
The Company’s shares are listed on the London Stock Exchange.
The Company releases its NAV per share to the market on a
dailybasis.
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.
Financial Calendar
January Payment of first interim dividend
28 February Half Year End
April Half Yearly Results announced
August Payment of second interim dividend
31 August Year End
October Annual Results announced
December Annual General Meeting (AGM)
Shares in Issue
As at 28 October 2022, the Company had 41,383,817 Ordinary
shares of 25p each in issue which included 571,458 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 Health Managers LLP, information
on investee companies, monthly fact sheets, the latest published
Annual and Half Yearly Financial Statements and access to recent
market announcements.
Directors
Jim Horsburgh (Chairman)
Kate Cornish-Bowden (Senior Independent Director)
Caroline Gulliver (Chair of the Audit Committee)
Patrick Magee
Professor Patrick Maxwell
ADVISERS
Fund Manager and AIFM
SV Health Managers LLP
71 Kingsway, London, WC2B 6ST
Telephone: 020 7421 7070
Company Secretary and Registered Office
Link Company Matters Limited
6th Floor, 65 Gresham Street, London, England, EC2V 7NQ
Telephone: +44 (0)20 7410 5971
Email: companymatters@linkgroup.co.uk
Administrator
The Northern Trust Company
50 Bank Street, London, E14 5NT
Custodian and Depositary
Northern Trust Investor Services Limited
50 Bank Street, London, E14 5NT
Independent Auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
7 More London Riverside, London, SE1 2RT
Stockbroker
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square, London EC4M 7LT
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 8.30am to 5.30pm Monday to Friday
(excluding public holidays in England and Wales).
SV Health Managers LLP
71 Kingsway
London, WC2B 6ST
Telephone: +44 (0)20 7421 7070
Email: IBT-IR@svhealthinvestors.com
Link Company Matters Limited
6th Floor, 65 Gresham Street
London, England, EC2V 7NQ
Telephone: +44 (0)20 7410 5971
For further information: www.ibtplc.com
ANNUAL
REPORT
31 August 2022