THE BIOTECH GROWTH TRUST PLC 
By
THE BIOTECH GROWTH TRUST PLC
Audited Results for the Year Ended 31 March 2014
NEWS RELEASE
For immediate release
22 May 2014
To: City Editors
The Biotech Growth Trust PLC today announces audited results for the year ended
31 March 2014
About The Biotech Growth Trust PLC
The Biotech Growth Trust PLC seeks
capital appreciation through
investment in the worldwide
biotechnology industry. In order to
achieve its investment objective, the
Company invests in a diversified
portfolio of shares and related
securities in biotechnology companies
on a worldwide basis.
Further details of the Company's
investment policy are set out within
this announcement.
Keep up to date with
The Biotech Growth Trust PLC
For more information about
The Biotech Growth Trust PLC
visit the website at
www.biotechgt.com
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@biotechgt
Winner:
Investment Week, Investment Company
of the year, Specialist Category 2012
and 2013
techMark Technology Fund Manager of
the year 2011 and 2012 (OrbiMed
Capital LLC)
UKtech awards Fund Manager of the
year 2013 (OrbiMed Capital LLC)
Investment Trusts Magazine, Best
Specialist Trust 2011 and 2012
Company Summary
The Company
The Company is an investment trust and its
shares are listed on the Official List and
traded on the main market of the London
Stock Exchange. The Company is a member of
the Association of Investment Companies
("AIC").
Total assets less current liabilities as at
31 March 2014 were £340.2 million and the
market capitalisation was £318.6 million.
Management
The Company employs OrbiMed Capital LLC
("OrbiMed") as Investment Manager and
Frostrow Capital LLP ("Frostrow") to provide
company management, company secretarial,
administrative and marketing services.
Further details of the terms of these
appointments are provided within the Report
of the Directors.
Performance
Performance is measured against the NASDAQ
Biotechnology Index (sterling adjusted).
Capital Structure
The Company's capital structure is composed
solely of Ordinary Shares. Details are given
in note 11 to the accounts.
Dividend
No dividend is recommended in respect of the
year ended 31 March 2014 (2013: nil).
Continuation Vote
The next continuation vote of the Company
shall be held at the Annual General Meeting
in 2015, and further opportunities to vote
on the continuation of the Company shall be
given to shareholders every five years
thereafter.
ISA Status
The Company's shares are eligible for
Individual Savings Accounts (`ISAs') and for
Junior ISAs.
Company Summary
The Company
The Company is an investment trust and its shares are
listed on the Official List and traded on the main
market of the London Stock Exchange. The Company is a
member of the Association of Investment Companies
("AIC").
Total assets less current liabilities as at 31 March
2014 were £340.2 million and the market
capitalisation was £318.6 million.
Management
The Company employs OrbiMed Capital LLC ("OrbiMed")
as Investment Manager and Frostrow Capital LLP
("Frostrow") to provide company management, company
secretarial, administrative and marketing services.
Further details of the terms of these appointments
are provided within the Report of the Directors.
Performance
Performance is measured against the NASDAQ
Biotechnology Index (sterling adjusted).
Capital Structure
The Company's capital structure is composed solely of
Ordinary Shares. Details are given in note 11 to the
accounts.
Dividend
No dividend is recommended in respect of the year
ended 31 March 2014 (2013: nil).
Continuation Vote
The next continuation vote of the Company shall be
held at the Annual General Meeting in 2015, and
further opportunities to vote on the continuation of
the Company shall be given to shareholders every five
years thereafter.
ISA Status
The Company's shares are eligible for Individual
Savings Accounts (`ISAs') and for Junior ISAs.
Contents About The Biotech Growth Trust PLC
Company Summary
Company Summary
Strategic Report
Company Performance
Chairman's Statement
Investment Objective
Business Review
Investment Portfolio
Investment Manager's Review
Portfolio Focus
OrbiMed Capital LLC
Principal Contributions to and Detractors from Net Asset
Value
Governance
Board of Directors
Report of the Directors
Statement of Directors' Responsibilities
Corporate Governance
Audit and Management Engagement Committee Report
Directors' Remuneration Report
Directors' Remuneration Policy Report
Financial Statements
Independent Auditors' Report
Income Statement
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Accounts
Further Information
Shareholder Information
Glossary of Terms
How to Invest
Notice of Annual General Meeting
Explanatory Notes to the Resolutions
Explanatory Notes of Principal Changes to the Company's
Articles of Association
Statement of Circumstances
Company Information
Strategic Report / Company Performance
Financial Highlights
As at As at
31 March 31 March %
2014 2013 Change
Net asset value per share 498.7p 371.7p +34.2
Share price 467.0p 368.0p +26.9
Discount of share price to net asset value per 6.4% 1.0% -
share
Average discount/(premium) of share price to
net asset value per share 2.9% (0.4%) -
NASDAQ Biotechnology Index
(sterling adjusted) (Benchmark) 1,480.1 1,099.0 +34.7
Ongoing charges* 1.2% 1.3% -
Gearing* 8.3% - -
*See glossary
Five Year Performance Record
2009 2010 2011 2012 2013 2014
Net asset value per share 136.9p 182.6p 186.0p 250.9p 371.7p 498.7p
Share price 130.5p 175.8p 166.0p 236.0p 368.0p 467.0p
Discount of share price to net 4.7% 3.7% 10.8% 5.9% 1.0% 6.4%
asset value per share
NASDAQ Biotechnology
Index (sterling adjusted) 477.5 618.1 647.9 801.1 1,099.0 1,480.1
Strategic Report / Chairman's Statement
Investment Performance
Overall, the year under review was a very good one for shareholders in the
Company. During the year the Company's net asset value per share increased by
34.2% which was broadly in line with the Company's benchmark index which
increased by 34.7%. It is somewhat disappointing that we did not outperform the
benchmark index as we have in previous years. However, since the appointment of
OrbiMed as your investment manager in 2005, the Company's net asset value per
share has outperformed the Company's benchmark index by a significant margin.
This outperformance amounted to 103.9% as at 31 March 2014.
The Company's positive performance during the year was due in part to the
performance of holdings in Incyte, Illumina, Biogen Idec, Regeneron Pharma and
InterMune which all delivered good positive returns during the year. As I
reported at the half year stage, a significant detractor from performance
during the year was the Company's holding in Infinity Pharmaceuticals. In
addition Dynavax and Exelixis were poor performers during the year. Our
experience with these investments is, whilst disappointing, symptomatic of
investing in the biotechnology sector which is volatile; inevitably there will
be investments which do not deliver positive returns for shareholders. Further
information on the Company's investments can be found in Review of Investments.
The Company's continued strong overall performance has enabled it, and our
Investment Manager, to win further awards. It is particularly pleasing to
report that OrbiMed won the 2013 techMARK Technology Fund Manager of the Year
award for the third successive year. In addition your Company has recently been
declared the Investment Company of the year in the Specialist Category for 2013
by Investment Week for the second year in succession.
Share Price Performance, Premium Management and Discount Control
The Company's share price increased by somewhat less than the net asset value
per share, delivering a gain of 26.9% over the year as a whole. This lower
return when compared to the rise in net asset value was due to the share price
moving from a premium to net asset value per share at the start of the year to
a discount at the year end.
During the earlier part of the year, the Company's continued strong overall
performance gave rise to new demand for the Company's shares and a total of
4,420,000 new shares were issued at a small premium reflecting the Board's
desire to manage the premium to net asset value per share. This new share
issuance was offset by the need to buy back 662,309 shares in the later part of
the year reflecting the Board's commitment to limit the Company's share price
discount to about 6%. Share buy-backs have continued since the year end with a
further 107,128 shares having been bought back for holding in treasury up to
the date of this report.
Overall demand for the Company's shares remained strong during the year. The
Board is pleased to note that this new demand has continued to come mainly from
retail investors and we welcome all new shareholders to the Company's
shareholder register.
Return and Dividend
The total return per share amounted to 126.8p for the year (2013: 121.1p),
comprising a revenue deficit of 0.1p per share (2013: 0.1p) and a capital gain
of 126.9p (2013: 121.2p). No dividend is recommended in respect of the year
ended 31 March 2014 (2013: nil).
The Board
Dr John Gordon has served on the Board since the launch of the Company in 1997.
John has been an outstanding member of the Board and we have greatly valued his
contribution from both a scientific and a corporate governance perspective. In
particular the Board thanks him for the significant contribution he made at the
time of the change in the Company's investment management arrangements in 2005.
He will be greatly missed when he retires from the Board at the conclusion of
this year's Annual General Meeting. He will be succeeded as the Company's
Senior Independent Director by Andrew Joy.
Regulatory
The Board together with its advisors has been keeping developments with respect
to the Alternative Investment Fund Management Directive (`the Directive') which
is due to come into force on 22 July 2014 under close review. In accordance
with the Directive it is intended that JPMorgan will be appointed as the
Company's Custodian and Depository and the Company's Manager, Frostrow, will
take on the role of the Company's Alternative Investment Fund Manager. OrbiMed
will continue to be the Company's investment portfolio manager.
Outlook
Despite the biotechnology sector witnessing volatile market conditions in
recent months the focus of our Investment Manager continues to be on the
selection of stocks with strong prospects for capital enhancement. The
investment portfolio has been constructed not only to provide shareholders with
exposure to biotechnology companies with good prospects and at attractive
valuations, but also to position the Company to benefit from corporate activity
within the Healthcare sector as a whole, such corporate activity being a key
driver of superior returns within the sector.
Healthcare reform within the US market, also known as `Obamacare' has now been
implemented. In the near term our Investment Managers do not believe that these
changes will have any material impact on returns from the sector. In the medium
term however it is believed that Obamacare could be beneficial to the sector as
the number of individuals who are insured under the new arrangements increases.
Your Board believes that the long term investor in the biotechnology sector
will continue to be well rewarded.
Annual General Meeting
The Annual General Meeting of the Company this year will be held at the
Barber-Surgeons' Hall, Monkwell Square, Wood Street, London EC2Y 5BL on
Thursday, 10 July 2014 at 12.30 pm, and we hope as many shareholders as
possible will attend. This will be an opportunity to meet the Board and to
receive a presentation from our Investment Manager. Shareholders who are unable
to attend are encouraged to return their forms of proxy to ensure their votes
are represented.
The Rt Hon Lord Waldegrave of North Hill
Chairman
22 May 2014
Strategic Report / Investment Objective
Investment Objective and Policy
To seek capital appreciation through investment in the worldwide biotechnology
industry. In order to achieve its investment objective, the Company invests in
a diversified portfolio of shares and related securities in biotechnology
companies on a worldwide basis. Performance is measured against the NASDAQ
Biotechnology Index (sterling adjusted). Shareholder approval to amend the
Company's investment objective and policy was obtained at a General Meeting
held on 30 October 2013.
The Directors, as advised by the Investment Manager, believed that a
simplification of the Company's existing Investment Objective and Policy would
be beneficial to shareholders as it would allow greater flexibility in the size
of biotechnology companies in which the Company could invest. As a result the
Company's existing Investment Objective and Policy was amended, in particular
by the elimination of the restriction that a majority of the investee companies
must have a market capitalisation of less than U.S.$3 billion. This amendment
allows the Company to have a greater exposure to major biotechnology companies
and better aligns the Investment Policy with the Investment Manager's
expectations for the portfolio.
Additionally, although the Directors continued in the belief that it was
appropriate to limit exposure to swap instruments to 5% of the gross assets of
the Company at the time of entering into the contract, they did not believe it
was appropriate to limit exposure to one particular country represented in the
portfolio (India) particularly as the Company did not then (and still does not
have) any investments there either directly or through the use of swaps.
The Company's investment focus remains on biotechnology; there are no plans to
include investee companies that specialise in other aspects of healthcare. The
Company's benchmark remains unchanged.
Investment Approach
The Company`s assets are managed by OrbiMed Capital LLC ("OrbiMed").
OrbiMed, based in New York, is an investment manager focused exclusively on the
healthcare sector, with approximately U.S.$11 billion in assets under
management as at 31 March 2014 across a range of funds, including investment
trusts, hedge funds and private equity funds. OrbiMed's investment management
activities were founded in 1989 by Mr. Samuel D. Isaly.
Consistent with the revised mandate, OrbiMed has invested the Company's assets
in the worldwide biotechnology industry. Geographic allocation is in line with
the geographic distribution of investment opportunities, with the majority of
the Company's investments in companies based in North America. The portfolio
comprised 46 holdings as at 31 March 2014 (2013: 38 holdings).
OrbiMed takes a bottom-up approach to stock selection based on intensive
proprietary research. Stock selection is based on rigorous financial analysis,
exhaustive scientific review, frequent meetings with company management and
consultations with physicians and other industry experts.
OrbiMed looks for strong management teams, healthy organic growth from current
products and deep pipelines to fuel future growth.
Risk management is conducted via position size limits and geographic
diversification. The Company maintains adequate portfolio liquidity by limiting
the Company's ownership to 15% of an individual company's equity (at the time
of investment) and by strictly limiting the Company's exposure to direct
unquoted companies to 10% of the portfolio at the time of acquisition.
Investment Limitations
The Board seeks to manage the Company's risk by imposing various investment
limits and restrictions as follows:
The Company will not invest more than 10%, in aggregate, of the value of its
gross assets in other closed ended investment companies (including investment
trusts) listed on the London Stock Exchange, except where the investment
companies themselves have stated investment policies to invest no more than 15%
of their gross assets in other closed ended investment companies (including
investment trusts) listed on the London Stock Exchange.
The Company will not invest more than 15%, in aggregate, of the value of its
gross assets in other closed ended investment companies (including investment
trusts) listed on the London Stock Exchange.
The Company will not invest more than 15% of the value of its gross assets in
any one individual stock at the time of acquisition.
The Company will not invest more than 10% of the value of its gross assets in
direct unquoted investments at the time of acquisition. This limit does not
include any investment in private equity funds managed by the Investment
Manager or any affiliates of such entity.
The Company may invest or commit for investment a maximum of US$15 million,
after the deduction of proceeds of disposal and other returns of capital, in
private equity funds managed by OrbiMed, the Company's Investment Manager, or
an affiliate thereof.
The Company may be unable to invest directly in certain countries. In these
circumstances, the Company may gain exposure to companies in such countries by
investing indirectly through swaps. Where the Company invests in swaps,
exposure to underlying assets will not exceed 5% of the gross assets of the
Company at the time of entering into the contract.
The Company's gearing policy is that gearing will not exceed 10% of the
Company's net assets. The Company's gearing requirements are met through the
utilisation of a loan facility, repayable on demand, provided by the Company's
custodian, Goldman Sachs & Co. New York. This facility can be drawn at the
discretion of the Investment Manager.
In accordance with the requirements of the UK Listing Authority, any material
change to the investment policy will only be made with the approval of
shareholders by ordinary resolution.
Dividend Policy
The Company invests with the objective of achieving capital growth and it is
expected that dividends, if any, are likely to be small. The Board intends only
to pay dividends on the Company's shares to the extent required in order to
maintain the Company's investment trust status.
Strategic Report / Business Review
(Discount)/Premium to 31 March 2014
Discount of the Company's share price to the net asset value per share at 31
March 2014 stood at 6.4%.
During the year the Company traded at an average discount of 2.9%.
Number of ordinary shares in issue
68,886,347 64,466,347
(including 662,309 (nil Shares held in
shares held in treasury) treasury)
31 March 2014 31 March 2013
Ongoing charges ratio
For the year ended 31 March 2014 For the year ended 31 March 2013
1.2 % 1.3 %
Key Performance Indicators
The Board assesses its performance in meeting the Company's objective against
the following Key Performance Indicators:
Net asset Share price Stock Share price Ongoing
value return return contribution discount/ charges ratio
against the analysis premium
NASDAQ to net asset
Biotechnology value
Index per share
(sterling
adjusted)
The management of the portfolio has been delegated to OrbiMed and management,
company secretarial, administration and marketing services have been delegated
to the Manager Frostrow. Each provider is responsible to the Board which is
ultimately responsible to the shareholders for performing against the above
KPIs.
Net asset value total return - benchmark
The Directors regard the Company's net asset value total return as being the
overall measure of value delivered to shareholders over the long term. Total
return reflects the net asset value growth of the Company. OrbiMed's investment
style is such that performance is likely to deviate from that of the benchmark
index. The Board considers the most important comparator to be the
NASDAQ Biotechnology Index (sterling adjusted).
During the year under review the Company's net asset value per share return was
34.2% slightly underperforming the benchmark by 0.5%.
A full description of performance during the year under review and the
investment portfolio is contained in the Investment Manager's Review.
Share price return
The Directors also regard the Company's share price return to be a key
indicator of performance. This is monitored closely by the Board.
During the year under review the Company's share price return was 26.9%.
Stock contribution analysis
The Board undertakes a regular review of the portfolio and in particular the
principal contributors to and detractors from net asset value.
The Investment Manager provides a detailed explanation of portfolio performance
at each Board Meeting.
Further details of the principal contributors to and detractors from net asset
value performance for the year to 31 March 2014 can be found within the Report
of Directors.
Share discount/premium price to net asset value per share
The Board undertakes a regular review of the level of discount/premium and
consideration is given to ways in which share price performance may be
enhanced, including the effectiveness of marketing and share issuance and
buy-backs, where appropriate. The Board has a discount control mechanism in
place intended to establish a target level of no more than a 6% discount of
share price to the diluted net asset value per share. Shareholders should note,
however, that it remains possible for the share price discount to net asset
value per share to be greater than 6% on any one day and is due to the fact
that the share price continues to be influenced by overall supply and demand
for the Company's shares in the secondary market. The volatility of the net
asset value per share in an asset class such as biotechnology is another factor
over which the Board has no control. The making and timing of any share
buy-backs is at the absolute discretion of the Board.
During the year under review 662,309 shares were bought back to be held in
treasury by the Company.
Demand for the Company's Shares led to the issue of a total of 4,420,000 new
Shares during the year at a price representing a small premium to NAV per
share.
To meet this demand the Company published a Prospectus in July 2013. Since the
year end the Board exercised their discretion on 28 April 2014 to suspend the
Placing Programme under the 2013 Prospectus, as in the short term the Board
believes that further share issues can be made within the current limits
approved by Shareholders.
Ongoing charges ratio
The Board continues to be conscious of expenses and works hard to maintain a
sensible balance between strong service and costs.
As at 31 March 2014 the ongoing charges ratio was 1.2% (2013: 1.3%) which was
marginally less than the percentage for the previous year.
Risk Management
The Board is responsible for the management of the risks faced by the Company
and the Board regularly review these risks and how risk is mitigated. The Board
has categorised the risks faced by the Company under ten headings as follows:
Objective Level of Portfolio Operational Market Liquidity Shareholder Currency Loan Credit
and discount Performance and Price Risk Profile Risk Facility Risk
Strategy /premium Regulatory Risks
A summary of these risks and their mitigation is described below:
Principal Risks and Mitigation
Uncertainties
Objective and Strategy The Board reviews regularly the Company's
investment objective and investment guidelines
in the light of investor sentiment monitoring
closely whether the Company should continue in
its present form. The Board also considers the
size of the Company to ensure that it has
sufficient critical mass. The Board, through the
Manager and the Investment Manager, holds
regular discussions with major shareholders. A
The Company becomes continuation vote is to be held at the Annual
unattractive to investors. General Meeting in 2015 and every five years
thereafter. Each month the Board receives a
report which monitors the investments held in
the portfolio compared against the benchmark
index and the investment guidelines. Additional
reports and presentations are regularly
presented to investors by the Company's Manager,
Investment Manager and Corporate Stockbroker.
Level of discount/premium The Board undertakes a regular review of the
level of discount/premium and consideration is
given to ways in which share price performance
may be enhanced, including the effectiveness of
marketing and share issuance and buy-backs, if
considered appropriate. The Board has an active
The risk of the Company's discount management policy in place, buying back
share price not being the Company's shares to hold in treasury or for
representative of its cancellation if the market price is at a
underlying net assets. discount greater than 6% to the net asset value
per share. The making and timing of any share
issuance or buy-backs is at the absolute
discretion of the Board.
Portfolio Performance The Board reviews regularly investment
performance against the benchmark and against
the Company's peer group. The Board also
receives regular reports that show an analysis
of performance compared to other relevant
Investment performance may indices. The Investment Manager provides an
not be meeting shareholder explanation of significant stock selection
requirements. decisions and an overall rationale for the
make-up of the portfolio. The Investment Manager
discusses current and potential investment
holdings with the Board on a regular basis.
Operational and Regulatory All transactions and income and expenditure
forecasts are reviewed by the Board at each
A breach of Sections 1158 Board Meeting. The Board considers regularly all
and 1159 of the Corporation major risks, the measures in place to control
Tax Act 2010 could lead to them and the possibility of any other risks that
the Company being subject could arise. The Board also ensures that
to tax on capital gains, satisfactory assurances are received from
whilst a serious breach of service providers. The Compliance Officer of the
other regulatory rules Manager and Investment Manager produce regular
(including those associated reports for review at the Company's Audit and
with the Alternative Management Engagement Committee meetings and are
Investment Fund Managers available to attend such meetings in person if
Directive) may lead to required.
suspension from the Stock
Exchange or to a qualified
Audit Report. Other control
failures, either by the
Manager, the Investment
Manager or any other of the
Company's service
providers, may result in
operational and/or
reputational problems,
erroneous disclosures or
loss of assets through
fraud, as well as breaches
of regulations.
Market Price Risks The Board meets on a quarterly basis during the
year and on an ad hoc basis if necessary. At
each meeting the Directors consider the asset
allocation of the portfolio in order to minimise
the risk associated with particular countries,
Uncertainty about future sectors, or instruments. The Investment Manager
prices of financial has responsibility for selecting investments in
instruments held. accordance with the Company's investment
objective and seeks to ensure that investment in
individual stocks falls within acceptable risk
levels.
Liquidity Risk Ability to meet funding requirements when they
arise. The Investment Manager has constructed
the portfolio so that funds can be raised at
short notice if required.
Shareholder Profile Activist shareholders whose interests are not
consistent with the long-term objectives of the
Company may be attracted onto the shareholder
register.
The Manager provides a shareholder analysis at
every Board Meeting so that the Board can give
consideration as to any action required; this is
in addition to regular reporting by the
Company's Stockbroker. The Board has implemented
an active discount management policy.
Currency Risk Movements in exchange rates could adversely
affect the performance of the portfolio.
A significant proportion of the Company's assets
is, and will continue to be, invested in
securities denominated in foreign currencies, in
particular U.S. dollars. As the Company's shares
are denominated and traded in sterling, the
return to shareholders will be affected by
changes in the value of sterling relative to
those foreign currencies. The Board has made
clear the Company's position with regard to
currency fluctuations which is that it does not
currently hedge against currency exposure.
Loan Facility The provider of the Company's loan facility may
no longer be prepared to lend to the Company.
Both the Board and the Investment Manager are
kept fully informed of any likelihood of the
withdrawal of the loan facility so that
repayment can be effected in an orderly fashion.
The Company's borrowing requirements are met
through the utilisation of a loan facility,
repayable on demand, provided by Goldman Sachs &
Co. New York.
Credit Risk The Company's assets can be held by Goldman
Sachs & Co. New York as collateral for the loan
provided by them to the Company. Such assets
taken as collateral may be used, loaned, sold,
rehypothecated or transferred by Goldman Sachs &
Co. New York, although the Company maintains the
economic benefits from ownership of those
assets. Goldman Sachs & Co. New York may take up
to 140% of the value of the outstanding loan as
collateral. The Company is afforded protection
under both the SEC rules and U.S. legislation
equal to the value of net assets held by Goldman
Sachs & Co. New York.
Assets held by Goldman Sachs & Co. New York, as
custodian, that are not used as collateral, are
held in segregated client accounts.
Further information on financial instruments and
risk, as required by IFRS 7, can be found in
note 13 to the financial statements.
Strategic Report / Business Review
Director, Social, Economic and Environmental Matters and Looking to the Future
Directors
The Directors of the Company, who served during the year, are shown below:
The Rt Hon Lord Waldegrave of North Hill (Chairman)
Sven Borho
Professor Dame Kay Davies DBE
Paul Gaunt
Dr John Gordon
Andrew Joy
Peter Keen
Board Diversity
The Company is supportive of the recommendations of Lord Davies' Report that
the performance of corporate boards can be improved by encouraging the
appointment of the best people from a range of differing perspectives and
backgrounds. The Company recognises the benefits of diversity on the Board,
including gender, and takes this into account in its Board appointments. The
Company is committed to ensuring that any director search process actively
seeks persons with the right qualifications so that appointments can be made,
on the basis of merit, against objective criteria from a diverse selection of
candidates. To this end the Board will continue to consider diversity during
any director search process.
In anticipation of the retirement of Dr John Gordon, Professor Dame Kay Davies
DBE and Andrew Joy joined the Board in March 2012 as part of the Board's
ongoing succession plan.
Social, Economic and Environmental Matters
The Directors, through the Company's Investment Manager, encourage companies in
which investments are made to adhere to best practice with regard to Corporate
Governance. In light of the nature of the Company's business there are no
relevant human rights issues and the Company does not have a human rights
policy.
The Company recognises that social and environmental issues can have an effect
on some of its investee companies.
The Company is an investment trust and so its own direct environmental impact
is minimal. The Board of Directors consists of seven Directors, six of which
are resident in the UK and one is resident in the United States. The Board
holds its regular meetings in the United Kingdom and has a policy that travel,
as far as possible, is minimal, thereby minimising the Company's greenhouse gas
emissions.
Looking to the Future
The Board concentrates its attention on the Company's investment performance
and OrbiMed's investment approach and on factors that may have an effect on
this approach. Marketing reports are given to the Board at each Board meeting
by both OrbiMed and Frostrow, which include how the Company will be promoted
and details of planned communications with existing and potential shareholders.
The Board is regularly updated by Frostrow on wider investment trust industry
issues and discussions are held at each Board meeting concerning the Company's
future development and strategy.
The Company's Investment Manager believes that the outlook remains positive for
the biotechnology sector, with a strong earnings growth outlook for major
biotech companies and robust development pipelines from emerging biotech
companies. They believe that the portfolio is well positioned to capitalise on
the opportunities in the sector.
A review of the Company's year, its performance since the year-end and the
outlook for the Company can be found in the Chairman's Statement and in the
Investment Managers Review.
The Company's overall strategy remains unchanged.
Strategic Report / Investment Portfolio
Investment as at 31 March 2014
Security Country Fair value % of
/Region
£'000 investments
Biogen Idec United States 39,163 10.6
Gilead Sciences United States 37,002 10.0
Illumina United States 21,845 5.9
Incyte United States 17,076 4.6
Amgen United States 14,894 4.0
Alexion Pharmaceuticals United States 14,326 3.9
Ono Pharmaceutical Japan 14,267 3.9
BioMarin Pharmaceutical United States 11,373 3.1
Intermune United States 11,179 3.0
Impax Laboratories United States 11,089 3.0
Ten largest investments 192,214 52.0
Mylan United States 10,791 2.9
Prothena Ireland 9,759 2.7
Arrowhead Research United States 9,605 2.6
Jazz Pharmaceuticals United States 9,566 2.6
Neurocrine Biosciences United States 9,378 2.6
Fluidigm United States 9,119 2.5
Actelion Switzerland 8,662 2.4
Celgene United States 8,625 2.3
Medivation United States 8,493 2.3
Portola Pharmaceuticals United States 7,937 2.2
Twenty largest investments 284,149 77.1
Vertex Pharmaceuticals United States 6,784 1.8
Affymetrix United States 6,723 1.8
Regeneron Pharmaceutical United States 6,664 1.8
Xencor United States 5,636 1.5
Shire Ireland 5,433 1.5
Infinity Pharmaceuticals United States 5,066 1.4
Agilent Technologies United States 4,830 1.3
Cubist Pharmaceutical United States 3,948 1.1
PTC Therapeutics United States 3,809 1.0
Allergan United States 3,720 1.0
Thirty largest investments 336,762 91.3
Inovio Pharmaceuticals United States 3,595 1.0
Perrigo United States 3,524 1.0
Questcor Pharmaceutical United States 3,115 0.8
Ironwood Pharmaceuticals United States 2,727 0.7
Vanda Pharmaceuticals United States 2,556 0.7
Orbimed Asia Partners L.P. Far East 2,495 0.7
(unquoted)
Tesaro United States 2,304 0.6
Horizon Pharmaceutical United States 1,776 0.5
Celldex Therapeutics United States 1,759 0.5
Synageva Biopharma United States 1,657 0.5
Forty largest investments 362,270 98.3
ArQule United States 1,588 0.4
Exact Sciences United States 1,444 0.4
Exelixis United States 1,103 0.3
Bluebird Bio United States 742 0.2
GW Pharmaceuticals United Kingdom 634 0.2
Raptor Pharmaceutical United States 581 0.2
Total investments 368,362 100.0
All of the above investments are equities unless otherwise stated.
Portfolio Breakdown
Investments Fair value % of
£'000 investments
Equities 368,362 100.0
Total Investments 368,362 100.0
Strategic Report / Investment Manager's Review
Performance Review
The Company's net asset value per share Sven Borho
increased 34.2% during the financial
year. This compares to a 34.7% increase OrbiMed Capital LLC
in the Company's benchmark, the NASDAQ
Biotechnology Index (measured on a Investment Manager
sterling adjusted basis). The Company's
share price increased 26.9% as the
discount to net asset value per share
widened from 1.0% to 6.4%.
The leading contributors to performance in the portfolio during the financial
year were Incyte, Illumina, Biogen Idec, Regeneron Pharmaceuticals, and
InterMune.
• Incyte shares appreciated due to continued strong sales of lead drug Jakafi
for myelofibrosis, and due to positive clinical results for Jakafi in expanded
indications.
• Illumina shares appreciated due to strong sales of their sequencing product
offerings.
• Biogen Idec shares increased due to a robust launch of Tecfidera for multiple
sclerosis.
• Regeneron shares appreciated due to strong sales of lead drug Eylea for wet
age-related macular degeneration. Also, investor enthusiasm has increased for
their pipeline drug targeting PCSK9 for high cholesterol.
• InterMune shares appreciated due to the release of positive results from a
phase III study of Esbriet for idiopathic pulmonary fibrosis. This confirmatory
study will enable approval of the drug in the U.S.
Infinity Pharmaceuticals, Dynavax, and Exelixis were the principal detractors
from performance in the portfolio during the financial year.
• Infinity Pharmaceuticals shares declined due to concerns about the safety
profile and competitive position of lead drug IPI-145 for lymphoma and chronic
lymphocytic leukemia.
• Dynavax shares declined because the U.S. Food and Administration ("FDA")
requested an additional safety trial prior to approval of their hepatitis B
vaccine Heplisav, significantly delaying the launch of the vaccine.
• Exelixis shares declined in response to the continuation of their phase III
trial following an interim analysis. Many investors expected the trial to
succeed at the interim analysis; therefore the continuation of the trial was a
disappointment.
Sector Review
The biotechnology sector generated strong performance during financial year
2014. Biotech stocks have outperformed the broader market for the past two
years, which we believe is justified by improved fundamentals of the sector. In
last year's review of performance we highlighted upcoming earnings
reacceleration from the major biotechnology companies, led by new product
launches from Gilead Sciences and Biogen Idec. These launches have indeed
exceeded expectations. In the case of Gilead Sciences, the launch of Sovaldi
for the treatment of hepatitis C has been the most successful drug launch of
all time. In its first full quarter of launch, Sovaldi generated $2.27 billion
of sales. Previously the best performing drug launch was Vertex's Incivek, also
for hepatitis C, which generated $1.56 billion in its first four quarters of
launch. We believe Sovaldi will continue to exceed expectations and that the
longer-term run rate of patients being treated for hepatitis C will be higher
than investors currently expect. In the case of Biogen Idec, the launch of
Tecfidera for multiple sclerosis was better than expected, generating $1.38
billion in sales in its first four quarters of launch. The drug now accounts
for about 20% of all new prescriptions for multiple sclerosis treatments
according to IMS data. Approximately three quarters of new Tecfidera starts
come from patients switching from existing therapies, highlighting the
inadequacy of prior drugs.
We continue to believe valuations in biotech are attractive relative to
traditional large pharma. The following table shows the P/E, expected growth
rate and PEG ratios for the major biotechnology companies and the median of the
major pharmaceutical companies. We would highlight that even with the recent
share appreciation, the median 2015 P/E of biotech is 14.4x, below the 15.5x of
big pharma despite a superior earnings growth outlook for major biotech over
the next few years.
P/E Ratio EPS Growth PEG Ratio*
Company 2014 2015 2016 2015 2016 LTG 2014 2015 2016
Gilead 18.5x 12.1x 9.6x 53.2% 26.6% 35.2% 0.5x 0.3x 0.3x
Amgen 15.1x 14.2x 13.2x 6.9% 7.3% 7.4% 2.1x 1.9x 1.8x
Biogen Idec 27.0x 21.6x 17.6x 25.0% 22.6% 22.0% 1.2x 1.0x 0.8x
Celgene 19.2x 14.6x 11.4x 30.9% 28.1% 24.5% 0.8x 0.6x 0.5x
Major Biotech Median 18.9x 14.4x 12.3x 28.0% 24.6% 23.3% 1.0x 0.8x 0.6x
Major Pharma Median 16.7x 15.5x 14.4x 7.9% 10.4% 6.1% 2.7x 2.8x 2.5x
Source: FactSet, as of 31 March, 2014
* PEG Ratio calculated as P/E in respective year divided by consensus forecast
long-term growth ("LTG") rate.
Impact of Healthcare Reform is Modest for Biotech
The Affordable Care Act, also known as Obamacare, was signed into law in 2010.
The key provisions were recently implemented: the expansion in Medicaid
coverage, the individual requirement to have health insurance, and the creation
of state-based health exchanges. Recent technical glitches in the online site
for the federal health exchange shed some light on the difficulty in
implementing these changes. In the near-term, we see no material impact on
biotech from the implementation of Obamacare. In the medium term, Obamacare
could be a tailwind for biotech as the number of insured individuals is
expected to expand at a low-to-mid single-digit rate (2-4%). Therapeutic areas
with large uninsured populations that are most likely to benefit will be
infectious diseases, multiple sclerosis, respiratory diseases and mental
illnesses. This could be good for large cap biotech companies such as Gilead
and Biogen Idec. We do expect some headline risk on drug pricing. In fact,
Gilead shares have recently been under pressure due to a letter from U.S.
Representative Henry Waxman, questioning the pricing of Gilead's anti-HCV drug
Sovaldi. However, we do not expect Congress to take action while Republicans
remain in charge of the House of Representatives. We continue to believe that
due to the innovative nature of biotech, these drugs will be able to command a
premium, provided such pricing can be justified in the context of overall
healthcare spending.
Financing Environment is Strong
The financing environment for biotech was strong during the financial year,
indicative of high demand for biotech shares among institutional investors. The
chart below shows the total value of biotech initial public offerings and
follow-on offerings by year since 1994. As shown in the chart, 2013 easily
eclipses all prior years in terms of money raised by public biotech companies.
For the calendar year 2013 through to the first quarter of 2014, there were 62
biotechnology IPOs, with many experiencing strong initial share price
performance. The Company participated in 11 IPOs during the financial year.
Three recent IPOs are currently in the portfolio - Bluebird Bio, Portola
Pharmaceuticals, and PTC Therapeutics. The recent IPO activity offers many new
opportunities for investment in innovative approaches to drug development.
New Therapeutic Opportunities: Immuno-Oncology
We continue to look for investment opportunities in fields where rapid clinical
advances are being made that can dramatically transform the standard of care.
In past years, we have highlighted developments in the hepatitis C space as
significant progress was made through the development of direct acting
antiviral drugs. Hepatitis C became a key focus area for biotech investors, and
the fund profited meaningfully from investments in companies in this space,
including Vertex, Pharmasset, and Gilead.
We see a similarly promising new wave of therapies today in the field of
immuno-oncology. Using the immune system to fight cancer has long been an
appealing concept. However, cancers have developed the capacity to actively
evade the immune system, so generating an immune response against cancer using
"cancer vaccines" has generally not been sufficient to treat cancer. Therapies
are now being developed to target the inhibitory signals that cancer cells
exploit to evade immune clearance, and therefore reactivate the immune system
to attack these cancer cells. In particular, monoclonal antibodies that target
the PD-1 pathway are showing great promise for melanoma, kidney and lung cancer
and potentially other tumor types. The durable remissions induced by these
agents may in some cases be cures. Although the four PD-1 directed agents
currently in clinical trials are being developed by big pharma, the Japanese
specialty pharma company Ono Pharmaceuticals owns a roughly 20% interest in
Bristol-Myers Squibb's nivolumab, a leading PD-1 drug. Because of the large
potential of nivolumab relative to the company's existing business, this stock
is highly leveraged to the success of the drug. Ono is currently one of the
largest investments in the fund (see the portfolio Focus section for more
information about Ono). The next step for immuno-oncology is the development of
combination approaches that will further enhance tumor response and potentially
generate more cures.
Within the portfolio, Incyte has promising early data for their IDO inhibitor
(Indoleamine 2, 3-dioxygenase), in combination with an existing immunotherapy
for melanoma. This synergy may extend to other immunotherapies, such as PD-1,
and to other tumor types. Incyte is highlighted in the Portfolio Focus section.
Innate Pharma is a recent addition to the portfolio. Innate Pharma has licensed
its anti-KIR antibody, an activator of the innate immune system, to
Bristol-Myers Squibb. This drug is currently being combined with nivolumab in a
phase I trial, and we eagerly await results. Additionally, portfolio companies
Bluebird Bio and Celgene are collaborating to develop modified T-cells to
attack cancer. We believe that immuno-oncology will be a major focus area for
investors over the next several years and that our portfolio is well positioned
to benefit from advances in the field.
Outlook
The outlook remains positive for the biotechnology sector. The earnings growth
outlook for the major biotech companies is strong, and valuations of the major
biotech companies are attractive compared to pharma given the relative growth
profiles. Development pipelines from emerging biotech companies are robust;
there are many promising new compounds under development to address a wide
variety of therapeutic indications. Furthermore, the recent flurry of IPO
activity has served to reinvigorate the public biotech market with novel
approaches to treating disease. We are particularly excited about the advances
being made in immuno-oncology, and we expect that investor enthusiasm will
build for this therapeutic approach. We believe the portfolio is well
positioned to capitalize on the opportunities in the sector.
Sven Borho
OrbiMed Capital LLC, Investment Manager
22 May 2014
Strategic Report / Portfolio Focus
InterMune
InterMune is an emerging biopharmaceutical company focused on pulmonary
disease. Its lead drug is Esbriet for the treatment of idiopathic pulmonary
fibrosis (IPF). IPF is a progressive scarring of the lungs which causes loss of
lung function and ultimately leads to death, typically within 3-5 years of
diagnosis. Esbriet is a novel anti-fibrotic. The drug was tested in two nearly
identical phase III trials which were reported in 2009. One trial met its
primary endpoint in terms of reducing the rate of loss of lung function, but
the second trial was not successful (although there were some encouraging
trends). Because of these conflicting results, the U.S. FDA rejected the drug,
requesting an additional confirmatory phase III trial to support approval.
Esbriet did receive E.U. approval in 2011. The drug has now been launched in
the majority of European countries, and sales have beaten expectations over the
last several quarters.
Based on the totality of the data across trials, and the fact that the
statistical strength of the successful phase III trial argued that it was
unlikely to be a fluke, we believed that the ongoing confirmatory phase III was
likely to be successful. In February 2014, InterMune announced that the trial
was indeed a success, leading to a significant jump in the company's share
price. In fact, the treatment effect was larger than expected from the previous
trials. We are confident that this trial will be sufficient for U.S. approval,
expected in 2015. InterMune is now one of the few biotech companies with
worldwide rights to a drug with blockbuster potential. As such we believe that
the company would be an attractive acquisition target. In particular, Actelion
and Gilead have complementary franchises and would be potential acquirers.
Incyte
Incyte is a biopharmaceutical company focused on oncology and inflammatory
diseases. The company has developed a Jak inhibitor, Jakafi, for the treatment
of myelofibrosis (a hematological disorder which causes scarring of the bone
marrow). Jakafi causes profound symptomatic benefits and has been shown to
extend patient survival. The drug was launched in 2011 and continues to show
steady growth in both the U.S. and the E.U. (licensed to Novartis outside the
U.S.).
Jakafi was recently tested in a phase II trial of pancreatic cancer. The trial
demonstrated that in a sub-population, Jakafi doubled patient survival.
Previously there was no support for a role for Jakafi in solid tumors, so the
release of positive results dramatically increased Incyte's share price.
Details from the trial, including the disclosure of the biomarker to select for
patients that may benefit from the drug, will be presented in June at the
American Society of Clinical Oncology meeting (ASCO). There is now enthusiasm
that based on this biomarker, Jakafi may benefit patients with a broad range of
solid tumors.
Additionally, Incyte is developing an IDO inhibitor for cancer. IDO plays a
role in regulating immune response. By blocking IDO with an inhibitory drug,
the immune system may be activated to fight cancer. The drug is currently being
tested in a phase I trial in combination with Yervoy for melanoma. Initial data
suggests that significantly more patients respond to the combination than would
be expected to respond to Yervoy alone, providing some proof-of concept for IDO
inhibition. If successful in further trials, the IDO inhibitor could be a
blockbuster opportunity for Incyte.
Ono Pharmaceutical
Ono Pharmaceutical Co. Ltd. is a mid-tier Japanese pharmaceutical company based
in Osaka, Japan. While primarily focused on the domestic drug market there, the
company came to prominence in 2012 as investors began to appreciate some of the
pioneering work the company did in the field of immunotherapy for the treatment
of oncology.
In collaboration with researchers at Kyoto University, Ono discovered and
conducted early development on antibodies targeted to "PD-1", or Programmed
Death-1. PD-1 is a protein found on the surface of T-cells (immune system
cells) in the human body. This protein binds with a ligand, or "PD-L1", that is
expressed on tumor cells, and together they protect the cancer cell from attack
by the body's own immune system. Ono discovered that antibodies directed to
PD-1 (aka "anti-PD-1"), could block this interaction, thereby allowing the
immune system to resume the attack on the cancer.
In the middle of the last decade, Ono collaborated with a U.S.-based
biotechnology company, Medarex, and an early antibody candidate was identified
and designated ONO-4538. Clinical development commenced and three years later,
Medarex's commercial partner, the global drug company Bristol Myers-Squibb
(BMS), began to recognize the potential application and value of
immunotherapy-based drugs. Thus, BMS acquired Medarex and secured global rights
to ONO-4538 (ex-Japan).
Today, ONO-4538 is more formally known as nivolumab. BMS has demonstrated
proof-of-concept in a host of tumor types including skin, kidney, and lung
cancers. A hallmark of anti-PD-1 therapy compared to current cancer regimens
such as chemotherapy or targeted therapy is the incredible durability of
response in patients who do respond. Or, put another way, patients who respond
to nivolumab therapy may in fact be "cured" of their cancer. While data
continues to mature, BMS has shown that some patients with advanced disease,
who normally only live for weeks or months, can live for years after nivolumab
therapy.
Ono and BMS are collaborating on at least seven other solid tumor types, such
as liver, pancreatic, stomach, head & neck, and breast cancers. Utility in
blood cancers and virology (most notably HIV) is also being explored. The
commercial potential of nivolumab across such a large array of neoplasms is
truly unprecedented. Given the putative efficacy profile and potential for
cure, pricing of therapy will easily eclipse $100,000 per patient, if not more,
in developed markets. Combined with the significant prevalence of cancer
patients globally, a peak sales potential in excess of $10 billion per annum is
possible. Ono maintained commercial rights to nivolumab in Japan, the second
largest oncology market in the world. Moreover, with significant royalties from
BMS due to Ono, the holders of the PD-1 patent estate, we expect nivolumab to
be truly transformative to the profitability of the company.
Illumina
Illumina remains one of our core positions within the portfolio. Continued
innovation fuelling its current competitive advantage in the fast growing
genomics sequencing market has allowed the investment to outperform both the
broad market and the healthcare sector by a significant margin. Illumina's
products are making a significant impact on research and promise to improve the
way patients are treated as medicine becomes more personalized.
Illumina - enabling scientific breakthroughs
Illumina participates in a fast growing genomics research market providing
next-generation sequencing instruments to multiple end-markets. Next-generation
sequencing enables researchers and clinicians to decode the genomic patterns
underlying the fundamental biology for all organisms. Human genome sequencing
has changed dramatically since the very first genome was sequenced in 2001 at a
total cost of $100mm. Since the assembly of the first human genome on first
generation sequencing instruments, the cost of sequencing has precipitously
fallen outpacing Moore's Law. Based on the most recent quarterly data provided
by NHGRI (National Human Genome Research Institute), the cost of a fully
assembled genome currently stands at approximately $4,000. This drop has mainly
been enabled by Illumina's technology. Later in 2014, with Illumina's newly
introduced instrument, HiSeq X Ten, the cost of a whole human genome will
likely reach a price point of $1,000, which is considered the "holy grail" of
genomics research.
Why sequence the genome?
Unlocking the biological code that enables our body to function can
significantly add to our understanding of diseases, traits and physiology.
Simply put, our genome comprising of three billion base pairs is the map to our
body. The scientific and clinical knowledge gained through understanding our
genetic make-up will greatly increase our knowledge of how our proteins are
coded and its impact on disease onset and treatments, metabolisms, and other
personal traits.
Illumina's positioning in genetic analysis
Illumina, as a forerunner in technology innovation, currently is the dominant
market leader in next generation sequencing with approximately 70% market share
with the remainder being split by three companies (Thermo Fisher, Roche, and
Pacific BioSciences). As Illumina continues to push its technology - driving
the cost of sequencing lower- it has created market segments that previously
didn't exist. A once cost prohibitive research for many, now enabled by the
promise of the $1,000 genome price, has democratized the research field.
Sequencing human genome at scale is now becoming a realistic research area.
Illumina's technology has significantly advanced our understanding of the
genome.
Instrument cost Throughput Application
HiSeq X High cost Super high Population studies
HiSeq 2500 High cost High Oncology/Reproductive
health
NextSeq 500 Low cost Medium Hospital/Clinical
MiSeq Low cost Low/Medium Hospital/Clinical
Illumina - expanding applications, $20BN total addressable market (TAM)
The current pace of innovation by Illumina in the genomics research market has
opened up new market opportunities for next generation sequencing. Management
highlighted these existing current market opportunities at a recent investor
event valuing the addressable market at $20BN, conservatively.
The oncology market is Illumina's largest market opportunity currently. The
evolving understanding of the underlying biology of cancer is fundamentally
changing how clinicians are treating the disease category. High-throughput
genomic research enabled by sequencing and other technologies over the last
decade has shifted our view of cancer from simple anatomic views to genomic
views targeting the underlying biology and mutations.
Applications within oncology vary from initial predictive testing to providing
necessary information to helping to personalize treatment decisions for each
individual patient.
Population sequencing - a new frontier of genomic research
As mentioned earlier, Illumina's recent product announcement and the ensuing
launch of its HiSeq X Ten has been showcased as the instrument that can take
genomic research to the next level. HiSeq X Ten promises to enable super
high-throughput scientific research. With this product launch, Illumina has
further separated itself from the rest of its competitors in sequencing,
offering whole genome sequencing at a cost of only $1,000 per sample. We expect
this will enable broader population sequencing studies to get additional
insight into biology. As more genomic data are pulled together through these
wide-net population studies, researchers should gain clearer understanding into
various mutations and genomic heterogeneity.
HiSeq 2500 HiSeq X
Price $740k $1m
Output per run 1Tb 1.8Tb
Output per day 167Gb 600Gb
Illumina - best in class life sciences asset
As discussed, Illumina's technology has significantly benefited genomic
research. We expect the company to continue to be successful as it rolls out
new products that will enable additional research applications.
Strategic Report / OrbiMed Capital LLC
Firm History
OrbiMed's investment business was founded in 1989 with a vision to invest
across the spectrum of healthcare companies: from venture capital start-ups to
large multinational companies.
Beginning with our first public equity fund in 1989, we expanded to include
long/short equity and private equity investments in 1993. In 2007 the firm
expanded to Asia, opening offices in Mumbai and Shanghai, and launching a fund
focused on private equity healthcare opportunities in China and India. In 2010
we expanded to the Middle East, opening an office in Israel to seek innovative
life sciences venture capital opportunities across the region. In 2011 OrbiMed
launched a Royalty Opportunities fund, focused on investing in healthcare
royalty streams.
Today, OrbiMed has a singular focus on seeking successful investments on a
worldwide basis across the entire spectrum of private and publicly-traded life
sciences companies. With approximately $11 billion in net assets under
management, OrbiMed ranks as the world's largest healthcare-dedicated
investment firm.
OrbiMed's investment professionals possess a combination of extensive
scientific, medical, and financial expertise. The following four individuals
represent the portfolio management team for the Company:
The OrbiMed Team for the Company
Mr. Samuel D. Isaly is the Managing Partner of OrbiMed. Mr. Isaly is one of the
world's most recognised healthcare fund managers and has been active in global
healthcare investing and analysis since 1968 when he joined Chase Manhattan
Bank in New York. During his career, Mr. Isaly has been a pharmaceutical
analyst with Chase Manhattan Bank, Merrill Lynch, Legg Mason, and S.G. Warburg.
Mr. Isaly launched OrbiMed's asset management business in 1989. Mr. Isaly has a
B.A. in Economics from Princeton University and a M. Sc. (Econ.) from The
London School of Economics.
Mr. Sven H. Borho, CFA, is a founding Partner of OrbiMed. Mr. Borho's biography
can be found within the Directors' biography.
Mr. Geoffrey C. Hsu, CFA, is a Partner at OrbiMed. He joined OrbiMed in 2002 as
a biotechnology analyst. Prior to joining OrbiMed, he worked as a financial
analyst in the healthcare investment banking group at Lehman Brothers. Mr. Hsu
received his A.B. degree summa cum laude from Harvard University and holds an
M.B.A. from Harvard Business School. Prior to business school, he spent two
years studying medicine at Harvard Medical School.
Mr. Richard D. Klemm, Ph.D., CFA, is a Public Equity Partner focused on
biotechnology companies. He completed a Ph.D. from the Massachusetts Institute
of Technology in molecular biology in 2000. Dr. Klemm has published scientific
articles in the fields of DNA replication and transcription. He received a B.A.
from the University of California, Berkeley in 1994 with majors in molecular
and cell biology and economics.
Haige Lu, Ph.D, is an Analyst focused on biotechnology companies. Prior to
joining OrbiMed, he worked as a Research Fellow at Memorial Sloan-Kettering
Cancer Centre. He received his Ph.D. from Stanford University in Chemical
Biology and his B.S. in Chemistry from Peking University in China.
Strategic Report / Principal Contributors to and Detractors from
Net Asset Value
Principal Contributors to and Detractors from Net Asset Value Performance for
the Year to 31 March 2014
Top Five Contributors
Contribution
for
the year to Contribution
per
31 March 2014 share
£'000 (pence)*
Incyte 14,071 20.7
Illumina 11,430 16.8
Biogen Idec 8,406 12.3
Regeneron Pharmaceuticals 7,759 11.4
InterMune 7,189 10.5
48,855 71.7
Top Five Detractors
Contribution
for
the year to Contribution
per
31 March 2014 share
£'000 (pence)*
Infinity (17,603) (25.8)
Dynavax (2,595) (3.8)
Exelixis (2,349) (3.5)
Prosensa (1,243) (1.8)
Raptor Pharmaceuticals (1,105) (1.6)
(24,895) (36.5)
* based on 68,115,445 ordinary shares being the weighted average number of
shares in issue for the year ended 31 March 2014.
On behalf of the Board
The Rt Hon Lord Waldegrave of North Hill
Chairman
22 May 2014
Governance / Board of Directors
The Rt Hon Lord Waldegrave Of Sven Borho
North
Sven Borho joined the Board in
Hill Chairman 2006 and is a founding Partner
of OrbiMed, the Company's
The Rt Hon Lord Waldegrave of Investment Manager. He heads
North Hill joined the Board in the public equity team and is
June 1998. He is Provost of the portfolio manager for
Eton College, Chairman of OrbiMed's public equity and
Coutts and Co Limited and hedge funds. Sven has played
Chairman of the Royal Mint an integral role in the growth
Advisory Committee. He was of OrbiMed's asset management
formerly Vice-Chairman of the activities. In 1991 he joined
Investment Banking Department OrbiMed's predecessor and was
at UBS, Chairman of the Global promoted to portfolio manager
Financial Institutions Group in 1993. He studied business
at Dresdner Kleinwort administration at Bayreuth
Wasserstein and a Director of University in Germany and
Fleming Family Partners. From received a M.Sc. (Econs.),
1979 to 1997, he was MP for Accounting and Finance, from
Bristol West holding a number The London School of
of Cabinet posts including Economics.
Secretary of State for Health.
Professor Dame Kay Davies, DBE Paul Gaunt
Professor Dame Kay Davies DBE Paul Gaunt joined the Board in
joined the Board in March June 1997. Paul is
2012. She is the Dr Lee's self-employed and has over 30
Professor of Anatomy and years' experience in the
Associate Head of the Medical investment industry. He was
Sciences Division at the formerly Senior Investment
University of Oxford and a Manager and an Assistant
fellow of Hertford College. General Manager of The
She is also a Director of the Equitable Life Assurance
MRC Functional Genomics Unit Society and a Director of
at Oxford, an Independent Worldwide Healthcare Trust
Director of UCB Pharma S.A, PLC, Brit Insurance Holdings
Deputy Chairman of the PLC and of Oasis Healthcare
Wellcome Trust and a member of plc. Paul is also a Director
the Scientific Advisory Boards of RCM Technology Trust PLC.
of biopharmaceutical companies
UCB Pharma S.A. and ProSensa
plc and a consultant to drug
discovery company Summit plc.
Dr John Gordon Peter Keen
Dr John Gordon joined the Peter Keen has served on the
Board in June 1997 and has Board as a Director since the
been designated as the Senior launch of the Company in June
Independent Director; he is 1997 and is Chairman of the
also Chairman of the Audit and Management
Remuneration Committee. Dr Engagement Committee. A
Gordon is Chairman of, and Chartered Accountant he has
employed by, Quercus nearly 30 years experience in
Management Limited, Chairman the management and financing
of the William Harvey Research of life science businesses. He
Institute in London and Senior is Chief Executive of the
Adviser of Cardeas Pharma in technology investment firm
Seattle. He has previously Cambridge Innovation Capital
acted as Director of several plc and has served on the
biotechnology companies, as board of many private and
well as working at Beecham public companies. He is
Research Laboratories, currently the Senior
Cambridge University and the Independent Director of Abcam
Medical Research Council. plc and a Director of MRC
Technology Ltd. He was
formerly Finance Director of a
number of privately held
biopharmaceutical companies
and a co-founder of
Andrew Joy Chiroscience Group plc.
Andrew Joy joined the Board in All Directors, with the exception of
March 2012. He was one of the Sven Borho, are members of the Audit
founding Partners of Cinven and Management Engagement,
where he continues as a Senior Nominations and Remuneration
Advisor. He is a Senior Committees.
Advisor of FF&P (Fleming
Family & Partners) and All members of the Board are
Chairman of the private equity non-executive Directors, each of whom
sub-committee. Mr. Joy has is independent of the Investment
been Chairman or Director of Manager, with the exception of Mr.
numerous growing companies Sven Borho who is a Founding General
over the past 30 years. He is Partner of OrbiMed, the Company's
a former Chairman of the BVCA Investment Manager and is not
(British Venture Capital and considered to be an Independent
Private Equity Association) Director, none of the Directors have
and Director of the EVCA. been employed by any of the companies
in which the Company holds an
investment, or any of the Company's
service providers.
Scheduled Meetings
The table below sets out the number of scheduled Board and Committee meetings
held during the year ended 31 March 2014 and the number of meetings attended by
each Director.
Audit and
Management
Engagement Nominations Remuneration
Board Committee Committee Committee
Number of meetings held in 2013/ (4) (3) (1) (1)
14:
The Rt Hon Lord Waldegrave of 4 3 1 1
North Hill
Sven Borho^ 4 - - -
Professor Dame Kay Davies, DBE 4 2 1 1
Paul Gaunt 4 3 1 1
Dr John Gordon 4 2 1 1
Andrew Joy 4 3 1 1
Peter Keen 4 3 1 1
All of the Directors attended the Annual General Meeting held on 9 July 2013.
^ Sven Borho is not a member of any of the Company's committees.
In addition to the scheduled Board meetings there were a number of unscheduled
Board Meetings to consider matters such as the issuance of shares, including
the Prospectus issued in July 2013, the regulations concerning the Alternative
Investment Fund Managers Directive and matters concerning the Board's decision
to undertake an audit tender.
Directors' Interests
The beneficial interests of the Directors and their families in the Company
were as set out below:
Number of shares held as at
22 May 31 March 31 March
2014 2014* 2013*
The Rt Hon Lord Waldegrave of North Hill 58,716 58,716 58,716
Sven Borho 236,218 236,218 236,218
Professor Dame Kay Davies, DBE - - -
Paul Gaunt - - -
Dr John Gordon 70,000 70,000 70,000
Andrew Joy 25,000 25,000 25,000
Peter Keen 55,000 55,000 45,000
*Audited information.
None of the Directors was granted or exercised rights over shares during the
year. Sven Borho is a Partner at OrbiMed, the Company's Investment Manager,
which is party to the Investment Management Agreement with the Company and
receives fees
As at 22 May 2014, the latest practicable date before publication of the Annual
Report there have been no changes in the interests of the Directors shares of
the Company.
Governance / Report of the Directors
In accordance with the requirements of the Companies Act 2006 (the "Act") and
the UK Listing and Transparency Rules, the Directors present their annual
report on the affairs of the Company, together with the audited Financial
Statements and the Independent Auditors' Report for the year ended 31 March
2014.
The Corporate Governance Statement forms part of this Report of the Directors.
Business and Status of the Company
The Company is registered as a public limited company and is an investment
company within the terms of Section 833 of the Act. Its shares are listed on
the Official List of the UK Listing Authority and traded on the main market of
the London Stock Exchange which is a regulated market as defined in Section
1173 of the Act.
The Company has received approval from HM Revenue & Customs as an authorised
investment trust under Sections 1158 and 1159 of the Corporation Tax Act 2010
("CTA 2010"), for the year commencing 1 April 2012. This approval is subject to
there being no subsequent enquiry under corporation tax self-assessment. In the
opinion of the Directors, the Company continues to direct its affairs so as to
enable it to qualify for such approval.
Continuation of the Company
A resolution was passed at a General Meeting of the Company held on 4 December
2009, that the Company continue as an investment trust for a further five year
period (from the Annual General Meeting held in 2010). In accordance with the
Company's Articles of Association, shareholders will have an opportunity to
vote on the continuation of the Company at the Annual General Meeting in 2015
and every five years thereafter.
Investment Objective
The Biotech Growth Trust PLC seeks capital appreciation through investment in
the worldwide biotechnology industry. In order to achieve its investment
objective, the Company invests in a diversified portfolio of shares and related
securities in biotechnology companies on a worldwide basis.
Investment Policy
In order to achieve its investment objective, the Company invests in a
diversified portfolio of shares and related securities in biotechnology
companies on a worldwide basis.
Results and Dividend
The results attributable to shareholders for the year and the transfer to
reserves are shown within this announcement. No dividend is proposed in respect
of the year ended 31 March 2014 (2013: nil).
Loan Facility
The Company's borrowing requirements are met through the utilisation of a loan
facility, repayable on demand, provided by Goldman Sachs & Co. New York.
(Further details can be found in note 13).
Share Capital
As part of the package of measures adopted in 2005 by the Board to improve the
attraction of the Company's shares to new investors and also to provide the
prospect of a sustained improvement in the rating of the Company's shares, an
active discount management policy was implemented to buy-back shares to either
hold in treasury or for cancellation if the market price is at a discount
greater than 6% to net asset value per share. As at 31 March 2014, the discount
was 6.4%, which was close to the stated target of 6%. The making and timing of
any share buy-back remains at the absolute discretion of the Board. Authority
to buy-back up to 14.99% of the Company's issued share capital is sought at
each Annual General Meeting. During the year a total of 662,309 shares were
bought back to hold in treasury representing 1.03% of the issued share capital
at the beginning of the year. The purchases were made at £5.1409 per share and
£5.1159 per share at a cost of £3,420,000 (including expenses) and at a
discount of 6.2% and 6.8% to the net asset value per share. In addition during
the year, 4,420,000 new shares were issued raising £17,715,000 of new funds for
the Company. Subsequent to the year end to 22 May 2014 a further 107,128 shares
were bought back to hold in treasury. As at the date of this report there were
68,886,347 (including 769,437 shares held in treasury) shares in issue.
Company Management
Investment Manager
The Company's investment portfolio is managed by OrbiMed Capital LLC
("OrbiMed"). OrbiMed have been engaged under the terms of an Investment
Management Agreement (the "IMA") effective from 26 April 2005. The Investment
Manager receives a periodic fee equal to 0.65% p.a. of the Company's net asset
value. The IMA may be terminated by either party giving notice of not less than
12 months. The Investment Manager under the terms of the IMA provides, inter
alia, the following services:
seeking out and evaluating investment opportunities;
recommending the manner by which monies should be invested, disinvested,
retained or realised;
advising on how rights conferred by the investments should be exercised;
analysing the performance of investments made; and
advising the Company in relation to trends, market movements and other matters
which may affect the investment policy of the Company.
The proportion of the Company's assets committed for investment in OrbiMed Asia
Partners L.P., a limited partnership managed by OrbiMed Asia G.P., L.P., an
affiliate of the Company's Investment Manager, is excluded from the Investment
Management fee calculation.
Performance Fee
Dependent on the level of long-term outperformance of the Company, the
Investment Manager and the Manager are entitled to the payment of a performance
fee. The performance fee is calculated by reference to the amount by which the
Company's net asset value (`NAV') performance has outperformed the NASDAQ
Biotechnology Index (sterling adjusted), the Company's benchmark index.
The fee is calculated quarterly by comparing the cumulative performance of the
Company's NAV with the cumulative performance of the benchmark since the
commencement of the performance fee arrangement on 30 June 2005. The
performance fee amounts to 16.5% of any outperformance over the benchmark, the
Investment Manager receiving 15% and the Manager receiving 1.5% respectively.
Provision is also made within the daily NAV per share calculation as required
and in accordance with generally accepted accounting standards.
In order to ensure that only sustained outperformance is rewarded, at each
quarterly calculation date any performance fee is based on the lower of:
(i)The cumulative outperformance of the portfolio over the benchmark as at the
quarter end date; and
(ii)The cumulative outperformance of the portfolio over the benchmark as at the
corresponding quarter end date in the previous year.
In addition, a performance fee only becomes payable to the extent that the
cumulative outperformance gives rise to a total fee greater than the total of
all performance fees paid to date.
During the year performance fee amounts totaling £2,663,000 crystallised in
relation to maintained outperformance of which £982,000 remained payable at 31
March 2014 (31 March 2013: £1,640,000 crystallised). See note 3 for further
details.
The proportion of the Company's assets invested in OrbiMed Asia Partners L.P.
is excluded from the Investment Manager's performance fee calculation.
Manager
Frostrow Capital LLP ("Frostrow" or the "Manager"), acts as the Company's
Manager, Company Secretary and Administrator. Frostrow is an independent
provider of services to the investment companies sector and currently has five
other investment trust clients whose assets totalled approximately £3.8 billion
as at 31 March 2014. The Manager receives a periodic fee equal to 0.30% per
annum of the Company's market capitalisation, plus a fixed amount equal to £
60,000 per annum. The notice period in the Company Management, Company
Secretarial and Administration Agreement (the "Agreement") with the Manager,
dated 5 April 2007, is not less than 12 months. Termination can be at the
instigation of either party.
The Manager, under the terms of the Agreement provides, inter alia, the
following services:
marketing and shareholder services;
administrative services;
advice and guidance in respect of corporate governance requirements;
maintaining adequate accounting records in respect of Company dealing,
investments, transactions, dividends and other income, the income account,
statement of financial position and cash books and statements;
preparation and dispatch of the audited annual, and the unaudited half-year,
report and financial statements and interim management statements; and
attending to general tax affairs where necessary.
Investment Manager and Manager Evaluation and Re-Appointment
The performance of the Investment Manager and the Manager is reviewed
continuously by the Audit and Management Engagement Committee (the "Committee")
with a formal evaluation being undertaken each year. As part of this process,
the Committee monitors the services provided by the Investment Manager and the
Manager and receives regular reports and views from them. The Committee also
receives comprehensive performance measurement reports to enable it to
determine whether or not the performance objectives set by the Board have been
met. The Committee reviewed the appropriateness of the appointment of the
Investment Manager and the Manager in February 2014 with a recommendation being
made to the full Board.
The Board believes the continuing appointment of the Investment Manager and the
Manager, under the terms described above, is in the interests of shareholders
as a whole. In coming to this decision, it also took into consideration the
following additional reasons:
the quality and depth of experience allocated by the Investment Manager 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; and
the quality and depth of experience of the company management, company
secretarial, administrative and marketing team that the Manager allocates to
the management of the Company.
Directors
Directors' Fees
A report on Directors' Remuneration and also the Directors' Remuneration Policy
Report are set out within this announcement.
Directors' & Officers' Liability Insurance Cover
Directors' & Officers' liability insurance cover was maintained by the Board
during the year ended 31 March 2014. It is intended that this policy will
continue for the year ended 31 March 2015 and subsequent years.
Directors' Indemnities
As at the date of this report, indemnities are in force between the Company and
each of its Directors under which the Company has agreed to indemnify each
Director, to the extent permitted by law, in respect of certain liabilities
incurred as a result of carrying out his/her role as a Director of the Company.
The Directors are also indemnified against the costs of defending any criminal
or civil proceedings or any claim by the Company or a regulator as they are
incurred provided that where the defence is unsuccessful the Director must
repay those defence costs to the Company. The indemnities are qualifying third
party indemnity provisions for the purposes of the Companies Act 2006.
A copy of each deed of indemnity is available for inspection at the Company's
registered office during normal business hours and will be available for
inspection at the Annual General Meeting.
Substantial Shareholdings
The Company was aware of the following substantial interests in the voting
rights of the Company as at 22 May 2014, the latest practicable date before
publication of the annual report.
22 May 2014 31 March 2014
% of % of
Issued Issued
No. of share No. of share
Shareholders shares capital shares capital
Hargreaves Lansdown 5,395,362 7.91 5,679,385 8.32
Newton Investment Management 5,337,105 7.83 5,611,587 8.23
East Riding of Yorkshire 5,200,000 7.62 5,200,000 7.62
Reliance Mutual 3,454,450 5.06 3,454,450 5.06
Alliance Trust Savings 2,691,943 3.95 2,749,643 4.03
Hansa Capital Partners 2,364,629 3.47 2,364,629 3.47
JPMorgan Asset Management 2,048,833 3.00 2,048,833 3.00
As at 31 March 2014 the Company had 68,886,347, (including 662,309 shares held
in treasury) shares in issue. As at 22 May 2014 the Company had 68,886,347
(including 769,437 shares held in treasury) shares in issue.
Beneficial Owners of Shares - Information Rights
Beneficial owners of shares who have been nominated by the registered holder of
those shares to receive information rights under section 146 of the Companies
Act 2006 are required to direct all communications to the registered holder of
their shares rather than to the Company's registrar, Capita Asset Services, or
to the Company directly.
Individual Savings Accounts
The Company's shares are eligible to be held in the stocks and shares component
of an ISA or Junior ISA, subject to applicable annual subscription limits (£
11,880 for an ISA and £3,540 for a Junior ISA for the 2014/2015 tax year).
Investments held in ISAs or Junior ISAs will be free of UK tax on both capital
gains and income. The opportunity to invest in Ordinary Shares through an ISA
is restricted to certain UK resident individuals aged 18 or over. Junior ISAs
are available for UK resident children aged under 18 and born before 1
September 2002 or after 2 January 2011. Sums received by a shareholder on a
disposal of Ordinary Shares held within an ISA or Junior ISA will not count
towards the shareholder's annual limit. Individuals wishing to invest in
Ordinary Shares through an ISA should contact their professional advisers
regarding their eligibility as should individuals wishing to invest through a
Junior ISA for children under 18 years old.
With effect from 1 July 2014 the government announced that ISAs will be
reformed into a new simpler product, the New ISA ("NISA") with equal limits for
cash, and stocks and shares.
The overall NISA limits for 2014/15 will be £15,000 which offers the option to
save in cash, stocks and shares, or any combination of two.
Retail Investors advised by IFAs
The Company currently conducts its affairs so that its shares can be
recommended by Independent Financial Advisers ("IFAs") in the UK to ordinary
retail investors in accordance with the Financial Conduct Authority ("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.
Financial Instruments
The Company's financial instruments comprise its portfolio, cash balances,
debtors and creditors that arise directly from its operations, such as sales
and purchases awaiting settlement and accrued income. The financial risk
management and policies arising from its financial instruments are disclosed in
note 13 to the accounts.
Audit Tender
As reported in the Company's 2013 Annual Report, Grant Thornton UK LLP have
been in post for over 16 years and the Board, after consideration, agreed that
a tender process should take place.
Following the formal tender process held in March 2014, it is proposed that on
the recommendation of the Audit and Management Engagement Committee, Ernst &
Young LLP be appointed as Auditor of the Company. A resolution for their
appointment will be proposed at the forthcoming Annual General Meeting.
Please note that further details of the audit tender process can be found
within the Audit and Management Engagement Committee Report.
Awareness and Disclosure of Relevant Audit Information
So far as the Directors are aware, there is no relevant audit information of
which the Auditor is unaware. The Directors have taken all steps they ought to
have taken to make themselves aware of any relevant audit information and to
establish that the Auditor is aware of that information.
S.1 2007/1093 C.49 Commencement No2. Order 2007
The following disclosures are made in accordance with S.1 2007/1093 C.49
Commencement No2. Order 2007
Capital structure
The Company's capital structure is composed solely of Ordinary Shares. Details
are given in note 11 to the accounts.
Voting rights in the Company's shares
Details of the voting rights in the Company's shares at the date of this annual
report are given in note 9 to the Notice of Annual General Meeting.
Anti-Bribery and Corruption Policy
The Board has adopted a zero tolerance approach to instances of bribery and
corruption. Accordingly it expressly prohibits any Director or associated
persons when acting on behalf of the Company, from accepting, soliciting,
paying, offering or promising to pay or authorise any payment, public or
private, in the United Kingdom or abroad to secure any improper benefit for
themselves or for the Company.
Political Donations
The Company has not in the past and does not intend in the future to make
charitable or political donations.
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from its operations, nor
does it have responsibility for any other emissions producing sources under
Large and Medium sized Companies and Groups (Accounts and Reports) Regulations
2008 (as amended), (including those within our underlying investment
portfolio).
By order of the Board
Frostrow Capital LLP
Company Secretary
22 May 2014
Governance / Statement of Directors' Responsibilities
Company law in the United Kingdom requires the Directors to prepare financial
statements for each financial year. The Directors are responsible for preparing
the financial statements in accordance with applicable law and regulations. In
preparing these financial statements, the Directors have:
selected suitable accounting policies and applied them consistently;
made judgments and estimates that are reasonable and prudent;
followed applicable international accounting standards; and
prepared the financial statements on a going concern basis.
The Directors are responsible for keeping adequate accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply with the
Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for ensuring that the Report of the Directors and
other information included in the Annual Report is prepared in accordance with
company law in the United Kingdom. They are also responsible for ensuring that
the annual report includes information required by the Listing Rules of the
Financial Conduct Authority.
The financial statements are published on the Company's website
(www.biotechgt.com) and via the website of the Manager (www.frostrow.com). The
maintenance and integrity of these websites, so far as they relate to the
Company, is the responsibility of the Manager. The work carried out by the
Auditors does not involve consideration of the maintenance and integrity of
these websites and, accordingly, the Auditors accept no responsibility for any
changes that have occurred to the financial statements since they were
initially presented on these websites. Visitors to the websites need to be
aware that legislation in the United Kingdom governing the preparation and
dissemination of the financial statements may differ from legislation in their
jurisdiction.
Going Concern
The Directors believe that it is appropriate to adopt the going concern basis
in preparing the accounts as the assets of the Company consist mainly of
securities that are readily realisable and, accordingly, the Company has
adequate financial resources to continue in operational existence for the
foreseeable future.
Responsibility Statement of the Directors in respect of the annual financial
report
The Directors, whose details can be found within the directors biographies,
confirm to the best of their knowledge that:
the Financial Statements, within this Annual Report, have been prepared in
accordance with applicable accounting standards, give a true and fair view of
the assets, liabilities, financial position and the profit for the year ended
31 March 2014;
the Chairman's Statement, Strategic Report and the Report of the Directors
include a fair review of the information required by 4.1.8R to 4.1.11R of the
FCA's Disclosure and Transparency Rules; and
the annual report and financial statements taken as a whole are fair, balanced
and understandable and provide the information necessary to assess the
Company's performance, business model and strategy.
On behalf of the Board
The Rt Hon Lord Waldegrave of North Hill
Chairman
22 May 2014
Governance / Corporate Governance
This Statement forms part of the Report of the Directors.
The Board confirms that, with the exception of the below, it has in all
respects met its obligations under the Listing Rules and the UK Corporate
Governance Code throughout the period of this report:
Director Tenure (Provision B.1.1 of the UK Corporate Governance Code);
The role of the Chief Executive (Provision A.2.1 of the UK Corporate Governance
Code);
Executive Directors Remuneration Provisions D.2.1, D.2.2, D.2.3 and D.2.4 of
the UK Corporate Governance Code); and
The need for an internal audit (Provision C.3.6 of the UK Corporate Governance
Code).
For reasons set out in the AIC Guide and in the preamble to the AIC Code, the
Board considers these provisions are not relevant to the position of the
Company, being an externally managed investment trust. Therefore with the
exception of Director tenure, 36 and the need for an internal audit function,
the Company has not reported further in respect of these provisions.
The Principles of the AIC Code
The AIC Code is made up of twenty-one principles split into three
sections covering:
- The Board
- Board Meetings and relations with OrbiMed and Frostrow
- Shareholder Communications
AIC Code Principle Compliance Statement
The Board
1. The Chairman should be The Chairman, The Rt Hon Lord Waldegrave of
independent. North Hill, continues to be independent of the
Investment Manager. There is a clear division
of responsibility between the Chairman, the
Directors, Investment Manager, Manager and the
Company's other third party service providers.
The Chairman is responsible for the leadership
of the Board and for ensuring its
effectiveness in all aspects of its role.
2. A majority of the Board Mr. Sven Borho is a Founding General Partner
should be independent of the of OrbiMed, the Company's Investment Manager
manager. and is not considered to be an Independent
Director. The Board consists of six other
non-executive Directors, each of whom is
independent of the Investment Manager. None of
the Board members have been an employee of the
Company.
3. Directors should be All Directors will submit themselves for
submitted for re-election at annual re-election by shareholders.
regular intervals. Nomination
for re-election should not be The individual performance of each Director
assumed but be based on standing for re-election is evaluated annually
disclosed procedures and by the remaining members of the Board and, if
continued satisfactory considered appropriate, a recommendation is
performance. made that shareholders vote in favour of their
re-election at the Company's Annual General
Meeting to be held in July.
Dr John Gordon will not be seeking re-election
at this year's Annual General Meeting. He will
be succeeded as the Senior Independent
Director and Chairman of the Remuneration
Committee by Mr. Andrew Joy.
4. The Board should have a The Board, meeting as the Nomination
policy on tenure, which is Committee, considers the structure of the
disclosed in the annual Board and recognises the need for progressive
report. refreshing of the Board.
The Board subscribes to the view expressed
within the AIC Code that long-serving
Directors should not be prevented from forming
part of an independent majority. It does not
consider that a Director's tenure necessarily
reduces his ability to act independently and,
following formal performance evaluations,
believes that each of those Directors is
independent in character and judgment and that
there are no relationships or circumstances
which are likely to affect their judgment. The
Board's policy on tenure is that continuity
and experience are considered to add
significantly to the strength of the Board
and, as such, no limit on the overall length
of service of any of the Company's Directors,
including the Chairman, has been imposed. In
view of its non-executive nature, the Board
considers that it is not appropriate for the
Directors to be appointed for a specified
term, although new Directors are appointed
with the expectation that they will serve for
a minimum period of three years subject to
shareholder approval.
The terms and conditions of the Directors'
appointments are set out in letters of
engagement which are available for inspection
on request at the office of Frostrow Capital
LLP, the Company's Manager, and from the
Company Secretary at the Company's Annual
General Meeting to be held in July.
5. There should be full The Directors' biographical details,
disclosure of information demonstrate the wide range of skills and
about the Board. experience that they bring to the Board.
Details of the Board's Committees and their
composition are set out within this
announcement.
The Audit and Management Engagement Committee
membership comprises all of the Directors whom
are considered independent. The Chairman of
the Company is a member of the Audit and
Management Engagement Committee, but does not
chair it. His membership of the Audit and
Management Engagement Committee is considered
appropriate given the Chairman's extensive
knowledge of the financial services industry.
The Remuneration Committee is comprised of all
Directors whom are considered independent. The
Senior Independent Director of the Company
acts as Chairman of this Committee in light of
the remit of the Committee.
6. The Board should aim to The Nomination Committee considers annually
have a balance of skills, the skills possessed by the Board and
experience, length of service identifies any skill shortages to be filled by
and knowledge of the company. new Directors.
When considering new appointments, the Board
reviews the skills of the Directors and seeks
to add persons with complementary skills or
who possess the skills and experience which
fill any gaps in the Board's knowledge or
experience and who can devote sufficient time
to the Company to carry out their duties
effectively.
The experience of the current Directors is
detailed in their biographies.
The Company is committed to ensuring that any
vacancies arising are filled by the most
qualified candidates and recognises the value
of diversity in the composition of the Board.
When Board positions become available as a
result of retirement or resignation, the
Company will ensure that a diverse group of
candidates is considered.
7. The Board should undertake During the year the performance of the Board,
a formal and rigorous annual its committees and individual Directors
evaluation of its own (including each Director's independence) was
performance and that of its evaluated through a formal assessment process
committees and individual led by the Senior Independent Director. This
directors. involved the circulation of a Board
effectiveness checklist, tailored to suit the
nature of the Company, followed by discussions
between the Senior Independent Director and
each of the Directors. The performance of the
Chairman was evaluated by the other Directors
under the leadership of the Senior Independent
Director. The review concluded that the Board
was working well.
The Board is satisfied that the structure, mix
of skills and operation of the Board continue
to be effective and relevant for the Company.
8. Director remuneration The Remuneration Committee annually reviews
should reflect their duties, the fees paid to the Directors and compares
responsibilities and the value these with the fees paid by the Company's peer
of their time spent. group and the investment trust industry
generally, taking into account the level of
commitment and responsibility of each Board
member. Details on the remuneration
arrangements for the Directors of the Company
can be found in the Directors' Remuneration
Policy Report and Directors' Remuneration
Report and in note 14 to the Accounts.
As all of Directors are non-executive, the
Board considers that it is acceptable for the
Senior Independent Director of the Company to
chair meetings when discussing Directors'
fees. The Senior Independent Director takes no
part in discussions regarding his own
remuneration.
9. The independent directors The Nomination Committee is comprised of all
should take the lead in the Directors whom are independent. Subject to
appointment of new directors there being no conflicts of interest, all
and the process should be members of the Committee are entitled to vote
disclosed in the annual on candidates for the appointment of new
report. Directors and on recommending for
shareholders' approval the Directors seeking
re-election at the Annual General Meeting.
10. Directors should be New appointees to the Board are provided with
offered relevant training and a full induction programme. The programme
induction. covers the Company's investment strategy,
policies and practices. The Directors are also
given key information on the Company's
regulatory and statutory requirements as they
arise including information on the role of the
Board, matters reserved for its decision, the
terms of reference for the Board Committees,
the Company's corporate governance practices
and procedures and the latest financial
information. It is the Chairman's
responsibility to ensure that the Directors
have sufficient knowledge to fulfil their role
and Directors are encouraged to participate in
training courses where appropriate.
The Directors have access to the advice and
services of a Company Secretary through its
appointed representative which is responsible
to the Board for ensuring that Board
procedures are followed and that applicable
rules and regulations are complied with. The
Company Secretary is also responsible for
ensuring good information flows between all
parties.
11. The Chairman (and the Principle 11 applies to the launch of new
Board) should be brought into investment companies and is therefore not
the process of structuring a applicable to the Company.
new launch at an early stage.
Board Meetings and relations with OrbiMed and Frostrow
12. Boards and managers should The Board meets regularly throughout the year
operate in a supportive, and a representative of Investment Manager and
co-operative and open Manager is in attendance at each meeting and
environment. Committee meetings. The Chairman encourages
open debate to foster a supportive and
co-operative approach for all participants.
13. The primary focus at The Board has agreed a schedule of matters
regular Board meetings should specifically reserved for decision by the
be a review of investment Board. This includes establishing the
performance and associated investment objectives, strategy and
matters, such as gearing, benchmarks, the permitted types or categories
asset allocation, marketing/ of investments, the markets in which
investor relations, peer group transactions may be undertaken, the amount or
information and industry proportion of the assets that may be invested
issues. in any category of investment or in any one
investment, and the Company's share issuance
and share buy-back policies.
The Board, at its regular meetings, undertakes
reviews of key investment and financial data,
revenue projections and expenses, analyses of
asset allocation, transactions and performance
comparisons, share price and net asset value
performance, marketing and shareholder
communication strategies, the risks associated
with pursuing the investment strategy, peer
group information and industry issues.
The Audit and Management Engagement Committee
reviews the Company's risk matrix and the
performance and cost of the Company's third
party service providers.
14. Boards should give The Board is responsible for strategy and has
sufficient attention to established an annual programme of agenda
overall strategy. items under which it reviews the objectives
and strategy for the Company at each meeting.
15. The Board should regularly The Audit and Management Engagement Committee
review both the performance reviews annually the performance of Investment
of, and contractual Manager and Manager. The Committee considers
arrangements with, the the quality, cost and remuneration method
investment manager and the (including the performance fee) of the service
manager (or executives of a provided by Investment Manager and Manager
self-managed company). against their contractual obligations and the
Board receives regular reports on compliance
with the investment restrictions which it has
set. It also considers the performance
analysis provided by Investment Manager and
Manager.
The Audit and Management Engagement Committee
reviews the compliance and control systems of
both Investment Manager and Manager in
operation insofar as they relate to the
affairs of the Company and the Board
undertakes periodic reviews of the
arrangements with and the services provided by
the Custodian, to ensure that the safeguarding
of the Company's assets and security of the
shareholders' investment is being maintained.
Governance / Corporate Governance
AIC Code Principle Compliance Statement
16. The Board should agree The Investment Management Agreement between
policies with the investment the Company and Investment Manager sets out
manager and the manager the limits of Investment Manager's authority,
covering key operational beyond which Board approval is required. The
issues. Board has also agreed detailed investment
guidelines with Investment Manager, which are
considered at each Board meeting.
A representative of the Investment Manager and
Manager attends each meeting of the Board to
address questions on specific matters and to
seek approval for specific transactions which
Investment Manager is required to refer to the
Board.
The Board has delegated discretion to
Investment Manager to exercise voting powers
on its behalf, other than for contentious or
sensitive matters which are to be referred to
the Board for consideration.
The Board has reviewed the Investment
Manager's Proxy Voting & Class Action Policy.
Reports on commissions paid by Investment
Manager are submitted to the Board regularly.
17. Boards should monitor the The Board considers any imbalances in the
level of the share price supply of and the demand for the Company's
discount or premium (if any) shares in the market and takes appropriate
and, if desirable, take action action when considered necessary.
to reduce it.
The Board considers the discount or premium to
net asset value of the Company's share price
at each Board meeting and reviews the changes
in the level of discount or premium and in the
share price since the previous Board meeting
and over the previous twelve months.
At each meeting the Board reviews reports from
both the Investment Manager and Manager on
marketing and shareholder communication
strategies. It also considers their
effectiveness as well as measures of investor
sentiment and any recommendations on issuance
and share buy-backs.
18. The Board should monitor The Audit and Management Engagement Committee
and evaluate other service reviews, at least annually, the performance of
providers. all the Company's third party service
providers, including the level and structure
of fees payable and the length of the notice
period, to ensure that they remain competitive
and in the best interests of shareholders.
The Committee also reviews reports from the
principal service providers on compliance and
the internal and financial control systems in
operation and relevant independent audit
reports thereon, as well as reviewing service
providers' anti-bribery and corruption
policies to address the provisions of the
Bribery Act 2010.
Shareholder Communications
19. The Board should regularly A detailed analysis of the substantial
monitor the shareholder shareholders of the Company is provided to the
profile of the company and put Directors at each Board meeting.
in place a system for Representatives of Investment Manager and
canvassing shareholder views Manager regularly meet with institutional
and for communicating the shareholders and private client asset managers
Board's views to shareholders. to discuss strategy and to understand their
issues and concerns and, if applicable, to
discuss corporate governance issues. The
results of such meetings are reported at the
following Board meeting.
Regular reports from the Company's broker are
submitted to the Board on investor sentiment
and industry issues.
Shareholders wishing to communicate with the
Chairman, or any other member of the Board,
may do so by writing to the Company, for the
attention of the Company Secretary at the
offices of Manager. All shareholders are
encouraged to attend the Annual General
Meeting, where they are given the opportunity
to question the Chairman, the Board and
representatives of the Investment Manager. The
Investment Manager will make a presentation to
shareholders covering the investment
performance and strategy of the Company at the
forthcoming Annual General Meeting to be held
in July. The Directors welcome the views of
all shareholders and place considerable
importance on communications with them.
20. The Board should normally All substantive communications regarding any
take responsibility for, and major corporate issues are discussed by the
have a direct involvement in, Board taking into account representations from
the content of communications Investment Manager, Manager, the Auditor,
regarding major corporate legal advisers and stockbroker.
issues even if the manager is
asked to act as spokesman.
21. The Board should ensure The Company places great importance on
that shareholders are provided communication with shareholders and aims to
with sufficient information provide them with a full understanding of the
for them to understand the Company's investment objective, policy and
risk/reward balance to which activities, its performance and the principal
they are exposed by holding investment risks by means of informative
the shares. annual and half-year reports and interim
management statements. This is supplemented by
the daily publication, through the London
Stock Exchange, of the net asset value of the
Company's shares.
The annual report provides information on
Investment Manager's investment performance,
portfolio risk and operational and compliance
issues. Further details on the risk/reward
balance are set out in note 13 to the
accounts.
The Investment Portfolio is listed within this
announcement..
The Company's website, www.biotechgt.com, is
regularly updated with monthly factsheets and
provides useful information about the Company
including the Company's financial reports and
announcements.
Committees of the Board
The Board has delegated certain responsibilities and functions to committees.
Copies of the full terms of reference, which clearly define the
responsibilities of each committee, can be obtained from the Company Secretary,
will be available for inspection at the
Annual General Meeting and can be found at the Company's website at
www.biotechgt.com. The membership of the Company's committees comprises those
Directors considered independent by the Board. The Remuneration Committee is
chaired by
Dr John Gordon, the Nominations Committee is chaired by the Chairman of the
Company, The Rt Hon Lord Waldegrave of North Hill, and the Audit and Management
Engagement Committee is chaired by Mr. Peter Keen.
Nominations Committee
The Nominations Committee met on one occasion during the year and is
responsible for the Board appraisal process and for making recommendations to
the Board on the appointment of new Directors. Where appropriate, each Director
is invited to submit nominations and external advisers may be used to identify
potential candidates.
Remuneration Committee
The Company's Remuneration Committee met on one occasion during the year as all
Directors are non executive. Throughout the life of the Company the level of
Directors' fees is reviewed every two years relative to other comparable
investment companies and in the light of Directors' responsibilities.
Consistent with this policy as at 1 April 2014, the Directors' fees remain
unchanged. Details of the fees paid to the Directors in the year under review
are detailed in the Directors' Remuneration Report and also the Directors'
Remuneration Policy Report.
Audit and Management Engagement Committee
The Audit and Management Engagement Committee (the "Committee") meets at least
three times a year and is responsible for the review of the half-year and
annual financial statements, the nature and scope of the external audit and the
findings therefrom and the terms of appointment of the Auditors, including
their remuneration and the provision of any non-audit services by them. In
addition, the Committee is responsible for the review of the Company's
financial controls and of the Management and Investment Management Agreements
and of the services provided by the Manager and the Investment Manager.
The Committee meets representatives of the Manager and Investment Manager and
their Compliance Officers who report as to the proper conduct of business in
accordance with the regulatory environment in which the Company, Manager and
Investment
Manager operate. The Company's Auditors also attend meetings of this Committee
at its request and report on their work procedures and their findings in
relation to the Company's statutory audit. They also have the opportunity to
meet with the
Committee without representatives of the Manager or the Investment Manager
being present.
Internal Audit
The Audit and Management Engagement Committee carries out an annual review of
the need for an internal audit function. As the Company delegates to third
parties its day-to-day operations and has no employees, it has determined that
there are no requirements for an internal audit function.
The Board applies the same standards to its service providers in their
activities for the Company.
A copy of the Company's anti-bribery and corruption policy can be found on its
website at www.biotechgt.com. The policy is reviewed regularly by the Audit and
Management Engagement Committee.
Relations with Shareholders
The Board reviews the shareholder register at each Board meeting. The Company
has regular contact with its institutional shareholders particularly through
the Manager and the Board supports the principle that the Annual General
Meeting be used to communicate with private investors. The full Board attends
the Annual General Meeting under the Chairmanship of the Chairman of the Board.
Details of proxy votes received in respect of each resolution are made
available to shareholders at the meeting and are also published on the
Company's website at www.biotechgt.com. Representatives from the Investment
Manager attend the Annual General Meeting and give a presentation on investment
matters to those present. The Company has adopted a nominee share code which is
set out below.
The Board continues to strive to make information about the Company as
accessible as possible for investors. We do this directly via the Company's
website and via data providers, platforms and intermediaries.
The Board receives marketing and public relations reports from the Manager to
whom the marketing function has been delegated. The Board reviews and considers
the marketing plans of the Manager on a regular basis.
The annual and half-year financial reports, the interim management statements
and a monthly fact sheet are available to all shareholders. The Board considers
the format of the annual and half-year financial reports so as to ensure they
are useful to all shareholders and others taking an interest in the Company. In
accordance with best practice, the annual report, including the notice of the
Annual General Meeting, is sent to shareholders at least 20 working days before
the meeting. Separate resolutions are proposed for substantive issues.
Exercise of Voting Powers
The Board has delegated authority to the Investment Manager to vote the shares
owned by the Company that are held on its behalf by its custodian, Goldman
Sachs & Co. New York. The Board has instructed that the Investment Manager
submit votes for such shares wherever possible. This accords with current best
practice whilst maintaining a primary focus on financial returns. The
Investment Manager may refer to the Board on any matters of a contentious
nature. The Company does not retain voting rights on any shares that are
subject to rehypothecation in connection with the loan facility provided by
Goldman Sachs & Co. New York.
Nominee Share Code
Where shares are held in a nominee company name and where the beneficial owner
of the shares is unable to vote in person, the Company nevertheless undertakes:
to provide the nominee company with multiple copies of shareholder
communications, so long as an indication of quantities has been provided in
advance;
to allow investors holding shares through a nominee company to attend general
meetings, provided the correct authority from the nominee company is available;
and
that investors in the Alliance Trust Savings Scheme or ISA are automatically
sent shareholder communications, including details of general meetings,
together with a form of direction to facilitate voting and to seek authority to
attend.
Nominee companies are encouraged to provide the necessary authority to
underlying shareholders to attend the Company's general meetings.
By order of the Board
Frostrow Capital LLP
Company Secretary
22 May 2014
Governance / Audit and Management Engagement Committee Report
for the year ended 31 March 2014
The Committee, which comprises of all the Directors, with the exception of Mr.
Sven Borho, meets at least twice during the year.
Responsibilities
The Committee's main responsibilities during the year were:
To review the Company's half-year and annual financial statements together with
announcements and other filings relating to the financial performance of the
Company and issues of the Company's shares. In particular, the Committee
considered whether the annual financial statements are fair, balanced and
understandable, allowing shareholders to more easily assess the Company's
strategy, investment policy, business model and financial performance.
To review the risk management and internal control processes of the Company and
its key service providers. As part of this review the Committee again reviewed
the appropriateness of the Company's anti-bribery and corruption policy. During
the year the Committee reviewed the Internal Controls in place at the Company's
Investment Manager, OrbiMed, its Manager Frostrow, Capita Asset Services and
Goldman Sachs & Co.
To recommend the appointment of an external auditor, and agreeing the scope of
its work and its remuneration, reviewing its independence and the effectiveness
of the audit process.
To consider any non-audit work to be carried out by the auditors. The Committee
reviews the need for non-audit services and authorises such fees on a case by
case basis, having consideration to the cost effectiveness of the services and
the independence and objectivity of the Auditors. Non audit fees of £6,000 were
paid to Grant Thornton UK LLP for their review of the Company's half-year
accounts and their review of the performance fee calculation as at June 2013,
September 2013 and December 2013. In addition fees totaling £4,000 were earned
in relation to taxation services. The external auditor carried out no other
non-audit work during the year.
To consider the need for an internal audit function. Since the Company
delegates its day-to-day operations to third parties and has no employees, the
Committee has determined there is no requirement for such a function.
The Committee's terms of reference are available for review on the Company's
website at www.biotechgt.com.
Meetings and Business
The Committee which consists of all the independent Directors of the Company,
met three times during the year. Attendance by each Director is shown within
this announcement.
The following matters were dealt with at these meetings:
May 2013
Review of the Committee's terms of reference
Review of the preliminary results
Approval of the annual report and financial statements
Review of risk management, internal controls and compliance
Review of the Manager's internal control framework
November 2013
Review of the auditor's plan for the 2013/2014 audit
Review of the Committee's terms of reference
Review of risks, internal control and compliance
Review of the Company's anti bribery and corruption policy and the measures put
in place by the Company's service providers
Approval of the half-year report
Consideration of the implications of the 2012 UK Corporate Governance Code and
the required changes to the Company's annual report and financial statements
February 2014
Review of the Committee's terms of reference
A review of the Company's service providers
The formal audit tender
Financial Statements
The financial statements, and the annual report as a whole, are the
responsibility of the Board. The Board looks to the Audit and Management
Engagement Committee to advise them in relation to the financial statements
both as regards their form and content, issues which might arise and on any
specific areas requiring judgment.
Significant Reporting Matters
During the year the Committee considered key accounting issues, matters and
judgments in relation to the Company's financial statements and disclosures
relating to:
Investments
The Committee approached and dealt with this area of risk by:
reconfirming its understanding of the processes in place to record investment
transactions and to value the investment portfolio;
gaining an overall understanding of the performance of the investment portfolio
both in capital and revenue terms through comparison to a suitable benchmark;
and
ensuring that all investment holdings and cash/deposit balances have been
agreed to confirmation from the custodian or relevant bank.
Taxation
The Committee approached and dealt with the area of risk, surrounding
compliance with section 1158 of the Corporation Tax Act 2010, by:
seeking confirmation from the Manager that the Company continues to meet the
eligibility conditions as outlined in section 1158;
by obtaining written confirmation from HMRC, evidencing the approval of the
Company as an investment trust under the regime; and
understanding the risks and consequences if the Company breaches this approval
in future years.
Internal Controls
In accordance with the provision C2 and C3 of the UK Corporate Governance Code,
risk assessment and the review of internal controls are undertaken by the Board
in the context of the Company's overall investment objective. The review covers
the key business, operational, compliance and financial risks facing the
Company. In arriving at its judgment of what risks the Company faces, the Board
has considered the Company's operations in the light of the following factors:
the nature and extent of risks which it regards as acceptable for the Company
to bear within its overall business objective;
the threat of such risks becoming a reality; and
the Company's ability to reduce the incidence and impact of risk on its
performance.
Against this background, the Board has split the review of risk and associated
controls into five sections reflecting the nature of the risks being addressed.
These sections are as follows:
corporate strategy;
investment activity;
published information, compliance with laws and regulations;
service providers; and
financial activity.
The Company has appointed Frostrow Capital LLP ("Frostrow") to provide
administrative services to the Company. The Company has obtained from its
various service providers assurances and information relating to their internal
systems and controls to enable the Board to make an appropriate risk and
control assessment, including the following:
details of the control environment in operation;
identification and evaluation of risks and control objectives;
review of communication methods and procedures; and
assessment of the control procedures.
The key procedures which have been established to provide internal financial
controls are as follows:
investment management is provided by OrbiMed Capital LLC ("OrbiMed") who
provide regular updates and reports to the Board. The Board is responsible for
setting the overall investment policy and monitors the actions of the
Investment Manager at administration, company secretarial and marketing duties
for the Company are performed by Frostrow;
custody of assets is undertaken by Goldman Sachs & Co. New York;
the Board clearly defines the duties and responsibilities of their agents and
advisers. The appointment of agents and advisers to the Company is conducted by
the Board after consideration of the quality of the parties involved; the Board
monitors their ongoing performance and contractual arrangements;
mandates for authorisation of investment transactions and expense payments are
set by the Board; and
the Board regular Board meetings;
reviews financial information produced by the Investment Manager and the
Manager in detail on a regular basis.
All of the Company's management functions are performed by third parties whose
internal controls are reviewed by the Board or on its behalf by Frostrow.
In accordance with guidance issued to directors of listed companies, the
Directors confirm that they have carried out a review of the effectiveness of
the system of internal financial control and risk management during the year,
as set out above.
External Auditor
Meetings:
This year the nature and scope of the audit together with Grant Thornton UK
LLP's audit plan were considered by the Committee on 27 November 2013 without
the auditor being present.
As Chairman of the Committee, I met the audit partner, Julian Bartlett, and his
audit manager on 1 May 2014 to discuss the outcome of the audit and the draft
2014 annual report and accounts. The Committee then met Grant Thornton UK LLP
on 15 May 2014 to review the progress of the audit and to discuss the limited
matters that arose.
Given the changes to narrative reporting which are incorporated in the annual
report for the first time, we have also discussed the presentation of the
annual report with the Auditor and sought their perspective.
Independence and Effectiveness:
In order to fulfil the Committee's responsibility regarding the independence of
the Auditor, we reviewed:
the senior audit personnel in the audit plan for the year,
the Auditor's arrangements concerning any conflicts of interest,
the extent of any non-audit services,
the statement by the Auditor that they remain independent within the meaning of
the regulations and their professional standards. and
Auditor independence
In order to consider the effectiveness of the audit process, we reviewed:
the Auditor's fulfilment of the agreed audit plan,
the report arising from the audit itself, and
feedback from the Manager.
The Committee is satisfied with the Auditor's independence and the
effectiveness of the audit process, together with the degree of diligence and
professional skepticism brought to bear.
Appointment of New Auditor
It had been noted by the Committee that the Company's current Auditor, Grant
Thornton UK LLP and its predecessor firm, have been in office since the
Company's inception, during which time no audit tender had taken place. Whilst
the audit partner has changed periodically in accordance with professional and
regulatory standards to protect independence and objectivity, in accordance
with best practice it was felt appropriate to undertake a formal audit tender.
Following a formal tender process, the Directors are proposing to appoint Ernst
& Young LLP as Auditor of the Company commencing with the 2014/15 financial
year. As resigning Auditor Grant Thornton UK LLP has provided the Company with
a `statement of circumstances' confirming that it will resign as Auditor of the
Company following its unsuccessful participation in the audit tender process. A
copy of the Statement of Circumstances is available upon request from the
Company Secretary.
Grant Thornton UK LLP will resign with effect from the conclusion of the Annual
General Meeting to be held on 10 July 2014. Having satisfied themselves of the
appropriateness of Ernst & Young LLP following the tender process and in
accordance with the Companies Act 2006, shareholder approval concerning the
appointment of a new Auditor and the authority to fix their remuneration will
be sought at the forthcoming Annual General Meeting to be held on 10 July 2014.
Grant Thornton UK LLP carried out the audit for the year ended 31 March 2014
and were considered to be independent by the Board. The Directors wish to
record their appreciation of the audit services provided by Grant Thornton UK
LLP to the Company since its inception.
Full details of the resolution appointing Ernst & Young LLP as Auditors can be
found within the Notice of Meeting.
Peter Keen
Chairman of the Audit and Management Engagement Committee
22 May 2014
Governance / Directors' Remuneration Report
for the year ended 31 March 2014
Statement from the Chairman
I am pleased to present the Directors' Remuneration Report to shareholders.
This report has been prepared in accordance with the requirements of Section
421 of the Companies Act 2006 and the Enterprise and Regulatory Reform Act
2013. An Ordinary Resolution for the approval of this report will be put to the
shareholders at the forthcoming Annual General Meeting. The Directors
Remuneration Policy Report, which is separate to this report can be found
below.
The law requires the Company's Auditors to audit certain of the disclosures
provided in this report. Where disclosures have been audited, they are
indicated as such and the Auditors' opinion is included in their report to
shareholders. The Remuneration Policy Report forms part of this report.
The Remuneration Committee considers the framework for the remuneration of the
Directors on an annual basis. It reviews the ongoing appropriateness of the
Company's remuneration policy and the individual remuneration of Directors by
reference to the activities of the Company and comparison with other companies
of a similar structure and size. This is in line with the AIC Code.
At the most recent review held on 27 February 2014, it was agreed that there
was to be no increase to fees paid to the Directors during the year. Myself, as
Chairman of the Company receives an annual fee of £34,000 and Mr. Peter Keen as
Chairman of the Audit and Management Engagement Committee and Dr John Gordon as
Senior Independent Director receive an annual fee of £26,000. Professor Dame
Kay Davies DBE, Mr. Paul Gaunt and Mr. Andrew Joy each receive an annual fee of
£24,000. The last increase in Directors' fees took effect on 1 April 2013.
Directors' Fees
The Directors, as at the date of this report, and who all served throughout the
year, received the fees listed in the table below. These exclude any employers'
national insurance contributions, if applicable. No other forms of remuneration
were received by the Directors and so fees represent the total remuneration of
each Director.
As noted in the Strategic Report, all of the Directors are non-executive and
therefore there is no Chief Executive Officer. The Company does not have any
employees. There is therefore no CEO or employee information to disclose.
No payments were made to former directors of the Company during the financial
year ending 31 March 2014 (2013: £9,000 in respect to fees paid to Mr John
Sclater, CVO who retired from the Board on 12 July 2012).
Directors' Emoluments for the Year (audited information)
The Directors who served in the year received the following emoluments in the
form of fees:
Date of Fees Fees
Appointment
to the 2014 2013
Board
The Rt Hon Lord Waldegrave of North Hill* 6 June 1998 34,000 29,000
(Chairman)
Sven Borho 23 March 24,000 22,000
2006
Professor Dame Kay Davies, DBE 15 March 24,000 22,000
2012
Paul Gaunt 5 June 1997 24,000 22,000
Dr John Gordon (Senior Independent Director &
Chairman of the
Remuneration Committee) 5 June 1997 26,000 24,000
Andrew Joy 15 March 24,000 22,000
2012
Peter Keen (Chairman of the Audit & Management 23 June 26,000 24,000
Engagement Committee) 1997
182,000 165,000
*appointed as Chairman of the Company on 12 July 2012.
A non-binding Ordinary Resolution proposing adoption of the Directors'
Remuneration Report was put to Shareholders at the Annual General Meeting of
the Company held on 9 July 2013, and was passed by 99.2% (40,144,402 Shares) of
shareholders voting on the Resolution.
Sums paid to Third Parties (audited information)
None of the fees referred to in the above table were paid to any third party in
respect of the services provided by any of the Directors.
Other Benefits
Taxable Benefits - Article 88 of the Company's Articles of Association provides
that Directors are entitled to be reimbursed for reasonable expenses incurred
by them in connection with the performance of their duties and attendance at
Board and General Meetings.
Pensions related benefits - Article 90 permits the Company to provide pension
or similar benefits for Directors and employees of the Company. However, no
pension schemes or other similar arrangements have been established and no
Director is entitled to any pension or similar benefits.
Loss of office
Directors do not have service contracts with the Company but are engaged under
Letters of Appointment. These specifically exclude any entitlement to
compensation upon leaving office for whatever reason.
Share Price Return
Share price versus the NASDAQ Biotechnology Index (sterling adjusted). The
chart below illustrates the shareholder return for a holding in the Company's
shares as compared to the NASDAQ Biotechnology Index (sterling adjusted), which
the Board has adopted as the measure for both the Company's performance and
that of the Investment Manager for the year.
Relative Cost of Directors' Remuneration for the year ended 31 March 2014
2014 2013 Difference
Spend £000 £000 £000
Fees of non-executive directors 182 165 17
Dividends paid to shareholders in respect of - - -
year ended 31 March 2014
Share buy-backs* 3,420 47 3,373
* Share buy-back activity forms part of the Board's active discount management
policy
The above table does not reflect the issuance of new shares during the year
ended 31 March 2014.
Directors' Interests
The beneficial interests of the Directors and their families in the Company
were as set out below:
Number of shares held
as at
22 May 31 March 31
March
2014 2014* 2013*
The Rt Hon Lord Waldegrave of North Hill 58,716 58,716 58,716
Sven Borho 236,218 236,218 236,218
Professor Dame Kay Davies, DBE - - -
Paul Gaunt - - -
Dr John Gordon 70,000 70,000 70,000
Andrew Joy 25,000 25,000 25,000
Peter Keen 55,000 55,000 45,000
*Audited information
None of the Directors was granted or exercised rights over shares during the
year. Sven Borho is a Partner at OrbiMed, the Company's Investment Manager,
which is party to the Investment Management Agreement with the Company and
receives fees.
As at 22 May 2014, the latest practicable date before publication of the Annual
Report there have been no changes in the interests of the Directors shares of
the Company.
Annual Statement
On behalf of the Board I confirm that this Remuneration Policy, of this annual
report and Remuneration Report summarises, as applicable, for the year to 31
March 2014:
the major decisions on Directors' remuneration;
any substantial changes relating to Directors' remuneration made during the
year; and
the context in which the changes occurred and decisions have been taken.
The Rt Hon Lord Waldegrave of North Hill
Chairman
22 May 2014
Governance / Directors' Remuneration Policy Report
for the year ended 31 March 2014
The Company's Remuneration Policy provides that fees payable to the Directors
should reflect the time spent by the Board on the Company's affairs and the
responsibilities borne by the Directors and should be sufficient to enable
candidates of high calibre to be recruited. Directors are remunerated in the
form of fees payable monthly in arrears, paid to the Director personally or to
a specified third party. There are no long-term incentive schemes, share option
schemes or pension arrangements and the fees are not specifically related to
the Directors' performance, either individually or collectively. Directors'
remuneration comprises solely Directors' fees. The current and projected
Directors' fees for 2014 and 2015 are shown in the table below. The Company
does not have any employees.
Directors' Fees Current and Projected
Date of Fees Fees
Appointment
to the Board 2015 2014
The Rt Hon Lord Waldegrave of North Hill* 6 June 1998 34,000 34,000
(Chairman)
Sven Borho 23 March 24,000 24,000
2006
Professor Dame Kay Davies, DBE 15 March 24,000 24,000
2012
Paul Gaunt 5 June 1997 24,000 24,000
Dr John Gordon (Senior Independent Director &
Chairman of the
Remuneration Committee) 5 June 1997 7,212** 26,000
Andrew Joy 15 March 25,487** 24,000
2012
Peter Keen (Chairman of the Audit & Management 23 June 1997 26,000 26,000
Engagement Committee)
164,699 182,000
* appointed as Chairman of the Company on 12 July 2012.
** 2015 fees have been adjusted to account for Dr Gordon's retirement from the
Board in July 2014 and the subsequent appointment of Mr Joy as Senior
Independent Director and Chairman of the Remuneration Committee.
No change is expected to the current level of Directors' fees until February
2015. Any new director being appointed to the Board that has not been appointed
as either Chairman of a Committee or as the Senior Independent Director will
under the current level of fees receive £24,000 pa.
None of the Directors has a service contract. The terms of their appointment
provide that Directors shall retire and be subject to election at the first
annual general meeting after their appointment and to re-election annually
thereafter. The terms also provide that a Director may be removed without
notice and that compensation will not be due on leaving office.
No communications have been received from shareholders regarding Directors'
remuneration.
The remuneration for the non-executive Directors is determined within the
limits set out in the Company's Articles of Association. The present limit is £
200,000 in aggregate per annum. In order to continue with the Boards succession
planning an Ordinary Resolution will be put to shareholders at the forthcoming
Annual General Meeting to increase the limit to £250,000. Further details of
this proposal can be found within the Explanatory Notes to the Resolutions.
Non-executive Directors are not eligible for bonuses, pension benefits, share
options, long-term incentive schemes or other benefits including performance
related benefits.
In accordance with best practice recommendations the Board will put the
Remuneration Policy to shareholders at the annual general meeting at least once
every three years.
An Ordinary Resolution for the approval of this policy will be considered by
shareholders at the forthcoming Annual General Meeting of the Company to be
held in July.
Financial Statements / Independent Auditor's Report to the Members of The
Biotech Growth Trust PLC
We have audited the financial statements of The Biotech Growth Trust PLC for
the year ended 31 March 2014 which comprise the Income Statement, the Statement
of Changes in Equity, the Statement of Financial Position, the Statement of
Cash Flows and the related notes. The financial reporting framework that has
been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRS) as adopted by the European Union.
This report is made solely to the Company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company's members those matters we are
required to state to them in an auditor's report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities Statement, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. Our responsibility is
to audit and express an opinion on the financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's (APB's)
Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on
the Financial Reporting Council's website at www.frc.org.uk/apb/scope/
private.cfm.
Auditor commentary
An overview of the scope of our audit
Our audit approach was based on a thorough understanding of the Company's
business and is risk-based. The day-to-day management of the Company's
investment portfolio, the custody of its investments and the maintenance of the
Company's accounting records is outsourced to third-party service providers.
Accordingly, our audit work is focused on obtaining an understanding of, and
evaluating, internal controls at the Company and relevant third-party service
providers. This included a review of reports on the description, design and
operating effectiveness of internal controls at relevant third-party service
providers. We undertook substantive testing on significant transactions,
account balances and disclosures, the extent of which was based on various
factors such as our overall assessment of the control environment, the design
effectiveness of controls over individual systems and the management of
specific risks.
Our application of materiality
We apply the concept of materiality in planning and performing our audit, in
evaluating the effect of any identified misstatements and in forming our
opinion. For the purpose of determining whether the financial statements are
free from material misstatement we define materiality as the magnitude of a
misstatement or an omission from the financial statements or related
disclosures that would make it probable that the judgement of a reasonable
person, relying on the information would have been changed or influenced by the
misstatement or omission. We also determine a level of performance materiality
which we use to determine the extent of testing needed to reduce to an
appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality for the financial statements as a
whole.
We established materiality for the financial statements as a whole to be £
3,800,000, which is 1% of the Company's total assets.
We have determined the threshold at which we communicate misstatements to the
Audit Committee to be £190,000. In addition, we communicate misstatements below
that threshold that, in our view, warrant reporting on qualitative grounds.
Our assessment of risk
Without modifying our opinion, we highlight the following matters that are, in
our judgement, likely to be most important to users' understanding of our
audit. Our audit procedures relating to these matters were designed in the
context of our audit of the financial statements as a whole, and not to express
an opinion on individual transactions, balances or disclosures.
Existence and valuation of investments
The Company's business is investing in financial assets with a view to profit
from the total return primarily in the form of capital gains. Accordingly, the
investment portfolio is a significant material item in the financial
statements. The recognition and measurement of the investment portfolio is
therefore a risk that requires particular audit attention.
Our audit work included, but was not restricted to, understanding management's
process to recognise and measure investments including ownership of those
investments, obtaining a confirmation of investments held at the year end
directly from the independent custodian, testing the reconciliation of the
custodian records to the records maintained by the Company's administrator,
testing a selection of investment additions and disposals shown in the
Company's records to supporting documentation and agreeing the valuation of
quoted investments to an independent source of market prices. In addition, we
have assessed the evidence supporting the valuation of the one unquoted
investment.
The Company's accounting policy on the valuation of investments is included in
note 1(b), and its disclosures about investments held at the year end are
included in note 8.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the Company's affairs as at 31 March
2014 and of its profit for the year then ended;
have been properly prepared in accordance with IFRS as adopted by the European
Union; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Other reporting responsibilities
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
the part of the Directors' Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 2006;
the information given in the Strategic Report and Directors' Report for the
financial year for which the financial statements are prepared is consistent
with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the ISAs (UK and Ireland), we are required to report to you if, in our
opinion, information in the annual report is:
materially inconsistent with the information in the audited financial
statements; or
apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the Company acquired in the course of performing our audit; or
otherwise misleading.
In particular, we are required to consider whether we have identified any
inconsistencies between our knowledge acquired during the audit and the
directors' statement that they consider the annual report is fair, balanced and
understandable, and whether the annual report appropriately discloses those
matters that were communicated to the audit committee which we consider should
have been disclosed.
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
adequate accounting records have not been kept, or returns adequate for our
audit have not been received from branches not visited by us; or
the financial statements and the part of the Directors' Remuneration Report to
be audited are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made;
or
we have not received all the information and explanations we require for our
audit.
Under the Listing Rules we are required to review:
the directors' statement, in relation to going concern; and
the part of the Corporate Governance Statement relating to the Company's
compliance with the nine provisions of the UK Corporate Governance Code
specified for our review.
JULIAN BARTLETT
SENIOR STATUTORY AUDITOR
FOR AND ON BEHALF OF GRANT THORNTON UK LLP
STATUTORY AUDITOR, CHARTERED ACCOUNTANTS
LONDON
22 May 2014
Financial Statements /
Income Statement
for the year ended 31 March 2014
2014 2013
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Income
Investment 2 873 - 873 570 - 570
income
Total 873 - 873 570 - 570
income
Gains and
losses on
investments
Gains on 8 - 87,614 87,614 - 80,714 80,714
investments
held at
fair value
through
profit or
loss
Exchange - 1,670 1,670 - 92 92
gains on
currency
balances
Expenses
Investment
management,
management 3 - (2,763 ) (2,763 ) - (4,586 ) (4,586 )
and
performance
fees
Other 4 (869 ) - (869 ) (566 ) - (566 )
expenses
Profit 4 86,521 86,525 4 76,220 76,224
before
finance
costs and
taxation
Finance 5 - (94 ) (94 ) (18 ) (18 )
costs
Profit 4 86,427 86,431 4 76,202 76,206
before
taxation
Taxation 6 (94 ) - (94 ) (58 ) - (58 )
(Loss)/ (90 ) 86,427 86,337 (54 ) 76,202 76,148
profit for
the year
Basic and 7 (0.1 ) 126.9p 126.8p (0.1 ) 121.2p 121.1p
diluted p p
(loss)/
earnings
per share
The Company does not have any income or expenses which are not included in the
profit for the year. Accordingly the "profit for the year" is also the "total
comprehensive income for the period", as defined in IAS 1 (revised) and no
separate Statement of Comprehensive Income has been presented.
All of the profit and total comprehensive income for the period is attributable
to the owners of the Company.
The "Total" column of this statement represents the Company's Income Statement,
prepared in accordance with International Financial Reporting Standards (IFRS).
The "Revenue" and "Capital" columns are supplementary to this and are prepared
under guidance published by the Association of Investment Companies.
All items in the above statement derive from continuing operations.
The accompanying notes are an integral part of this statement.
Financial Statements / Statement of Financial Position
as at 31 March 2014
2014 2013
Notes £'000 £'000
Non current assets
Investments held at fair value through 8 368,362 244,296
profit or loss
Current assets
Other receivables 9 12,072 13,967
Cash and cash equivalents - 8,401
12,072 22,368
Total assets 380,434 266,664
Current liabilities
Other payables 10 40,186 27,048
40,186 27,048
Net assets 340,248 239,616
Equity attributable to equity holders
Ordinary share capital 11 17,222 16,117
Share premium account 42,732 26,122
Special reserve 21,747 25,167
Capital redemption reserve 5,577 5,577
Capital reserve 15 256,768 170,341
Revenue reserve (3,798 ) (3,708 )
Total equity 340,248 239,616
Net asset value per share 12 498.7p 371.7p
The financial statements were approved by the Board on 22 May 2014 and were
signed on its behalf by:
The Rt Hon Lord Waldegrave of North Hill Chairman
Chairman
The accompanying notes are an integral part of this statement.
The Biotech Growth Trust PLC - Company Registration Number 3376377 (Registered
in England)
Financial Statements / Statement of Changes in Equity
for the year ended 31 March 2014
Ordinary Share Special Capital Capital Revenue
share premium redemption
capital account reserve reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 16,117 26,122 25,167 5,577 170,341 (3,708 ) 239,616
March 2013
Net profit - - - - 86,427 (90 ) 86,337
/(loss)
for the
year
Issue of 1,105 16,610 - - - - 17,715
new shares
Repurchase - - (3,420 ) - - - (3,420 )
of own
shares to
be held in
treasury
At 31 17,222 42,732 21,747 5,577 256,768 (3,798 ) 340,248
March 2014
for the year ended 31 March 2013
Ordinary Share Special Capital Capital Revenue
share premium redemption
capital account reserve reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 March 15,560 19,300 25,214 5,572 94,139 (3,654 ) 156,131
2012
Net profit/ - - - - 76,202 (54 ) 76,148
(loss) for
the year
Issue of new 562 6,822 - - - - 7,384
shares
Repurchase (5 ) - (47 ) 5 - - (47 )
of own
shares for
cancellation
At 31 March 16,117 26,122 25,167 5,577 170,341 (3,708 ) 239,616
2013
The accompanying notes are an integral part of this statement.
Financial Statements / Statement of Cash Flows
for the year ended 31 March 2014
2014 2013
£'000 £'000
Operating activities
Profit before tax 86,431 76,206
Add back interest paid 94 18
Less: gain on investments held at fair value through (87,614 ) (80,714 )
profit or loss
Add: exchange (gains)/losses on currency balances (1,670 ) (92 )
Purchases of investments held at fair value through (317,854 ) (126,693 )
profit or loss
Sales of investments held at fair value through profit or 271,667 129,878
loss
Increase in other receivables (162 ) (49 )
(Decrease)/increase in other payables (2,950 ) 2,676
Net cash (outflow)/inflow from operating activities (52,058 ) 1,230
before interest and taxation
Interest paid (94 ) (18 )
Taxation paid (94 ) (58 )
Net cash (outflow)/inflow from operating activities (52,246 ) 1,154
Financing activities
Issue of shares 17,715 7,384
Repurchase of own shares to be held in treasury/ (3,420 ) (47 )
cancellation
Drawdown from the loan facility 27,880 -
Net cash inflow from financing 42,175 7,337
(Decrease)/increase in cash and cash equivalents (10,071 ) 8,491
Cash and cash equivalents at start of year 8,401 (182 )
Effect of foreign exchange rate changes 1,670 92
Cash and cash equivalents at end of year - 8,401
The accompanying notes are an integral part of this statement.
Financial Statements / Notes to the Accounts
1.Accounting Policies
The financial statements of the Company have been prepared in accordance with
International Financial Reporting Standards ("IFRS"). These comprise standards
and interpretations approved by the International Accounting Standards Board
("IASB"), together with interpretations of the International Accounting
Standards and Standing Interpretations Committee approved by the International
Accounting Standards Committee ("IASC") that remain in effect, to the extent
that IFRS have been adopted by the
European Union.
(a) Accounting Convention
The financial statements have been prepared under the historical cost
convention, except for the measurement at fair value of investments. Where
presentational guidance set out in the revised Statement of Recommended
Practice ("the SORP") for Investment Trust Companies and Venture Capital Trusts
produced by the Association of Investment Companies ("AIC") dated January 2009
is consistent with the requirements of IFRS, the Directors have sought to
prepare the financial statements on a basis compliant with the recommendations
of the SORP.
(b) Investments
Investments are recognised and de-recognised on the trade date.
As the entity's business is investing in financial assets with a view to
profiting from their total return in the form of interest, dividends or
increases in fair value, investments are designated as fair value through
profit or loss and are initially recognised at fair value. The entity manages
and evaluates the performance of these investments on a fair value basis in
accordance with its investment strategy, and information about the investments
is provided internally on this basis to the Board.
Investments designated as at fair value through profit or loss, which are
quoted investments, are measured at subsequent reporting dates at fair value,
which is either the bid or the last trade price, depending on the convention of
the exchange on which it is quoted.
In respect of unquoted investments, or where the market for a financial
instrument is not active, fair value is established by using valuation
techniques which may include using recent arm's length market transactions
between knowledgeable, willing parties, if available, reference to the current
fair value of another instrument that is substantially the same, discounted
cash flow analysis and option pricing models. Where there is a valuation
technique commonly used by market participants to price the instrument and that
technique has been demonstrated to provide reliable estimates of prices
obtained in actual market transactions, that technique is utilised.
Gains and losses on disposal are also recognised in the Income Statement.
The total transaction costs for the year were £707,000 (31 March 2013: £
436,000) broken down as follows: purchase transaction costs for the year to 31
March 2014 were £412,000, (31 March 2013: £226,000), sale transaction costs
were £295,000 (31 March 2013: £210,000). These costs consist mainly of
commission and stamp duty.
(c) Presentation of Income Statement
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 Income Statement between items of a revenue and capital nature has
been presented alongside the Income Statement. Net revenue is the measure the
Directors believe appropriate in assessing the Company's compliance with
certain requirements set out in section 1158 of the Corporation Tax Act 2010.
(d) Income
Dividends receivable on equity shares are recognised on the ex-dividend date.
Where no ex-dividend date is quoted, dividends are recognised when the
Company's right to receive payment is established.
Dividends and interest on investments in unquoted shares and securities are
recognised when they become receivable.
(e) Expenses and Finance Costs
All expenses are accounted for on an accruals basis. Expenses are charged
through the Income Statement as follows:
expenses which are incidental to the acquisition or disposal of an investment
are charged to the capital column of the Income Statement;
expenses are charged to the capital column of the Income Statement where a
connection with the maintenance or enhancement of the value of the investment
can be demonstrated, and accordingly;
investment management and management fees and related irrecoverable VAT are
charged to the capital column of the Income Statement as the Directors expect
that in the long term virtually all of the Company's returns will come from
capital;
loan interest is charged to the Income Statement and allocated to capital as
the Directors expect that in the long term virtually all of the Company's
returns will come from capital; and
bank overdraft interest is charged through the Income Statement and allocated
to the revenue column.
(f) Taxation
In line with the recommendations of the SORP, the allocation method used to
calculate tax relief on expenses presented against capital returns in the
supplementary information in the Income Statement 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 Income Statement, then no tax
relief is transferred to the capital column.
Investment trusts which have approval under Section 1158 Corporation Tax Act
2010 are not liable for taxation on capital gains.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the Balance Sheet liability method. Deferred
tax liabilities are recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the Income Statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity, or Other Comprehensive Income (OCI).
(g) Foreign Currencies
The currency of the primary economic environment in which the Company operates
(the functional currency) is pounds sterling ("sterling"), which is also the
presentational currency of the Company. Transactions involving currencies other
than sterling are recorded at the exchange rate ruling on the transaction date.
At each Statement of Financial Position 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.
Exchange differences arising on settlements of monetary items and from
retranslating at the Statement of Financial Position date including investments
and other financial instruments measured as fair value through profit or loss
and other monetary items are included in the Income Statement and allocated as
capital if they are of a capital nature, or as revenue if they are of a revenue
nature.
(h) Functional and presentational currency
The financial information is shown in sterling, being the Company's
presentational currency. In arriving at the functional currency the Directors
have considered the following:
(the primary economic environment of the Company;
the currency in which the original capital was raised;
the currency in which distributions are made;
the currency in which performance is evaluated; and
the currency in which the capital would be returned to shareholders on a break
up basis.
The Directors have also considered the currency to which the underlying
investments are exposed and liquidity is managed. The Directors are of the
opinion that sterling best represents the functional currency.
(i) Reserves
Capital reserves
The following are credited or charged to the capital column of the Income
Statement and then transferred to the Capital Reserve:
gains or losses on disposal of investments
exchange differences of a capital nature
expenses allocated to this reserve in accordance with the above referred
policies
increases and decreases in the valuation of investments held at year end
Capital Redemption Reserve
a transfer will be made to this reserve on cancellation of the Company's own
shares purchased, equal to the nominal value of the Shares
Special Reserve
During the financial year ended 31 March 2004 a Special Reserve was created,
following the cancellation of the Share Premium account, in order to provide an
increased distributable reserve out of which to purchase the Company's own
shares.
• a transfer will be made to this reserve on cancellation of the Company's own
shares purchased or when the Company repurchases its own shares to be held in
treasury.
(j) Cash and cash equivalents
Cash in hand and in banks and short-term deposits which are held to maturity
are carried at cost. Cash and cash equivalents are defined as cash in hand,
demand deposits and short-term, highly liquid investments readily convertible
to known amounts of cash and subject to insignificant risk of changes in value.
Bank overdrafts that are repayable on demand, which form an integral part of
the Company's cash management, are included as a component of cash and cash
equivalents for the purpose of the statement of cash flows.
(k) Operating segments
IFRS 8 requires entities to define operating segments and segment performance
in the financial statements based on information used by the Board of
Directors. The Directors are of the opinion that the Company is engaged in a
single segment of business, being the investments business. The results
published in this report therefore correspond to this sole operating segment.
2. Income
2014 2013
£'000 £'000
Investment income
Overseas income 873 570
Total income 873 570
3. Investment Management, Management and Performance Fees
2014 2013
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management - 1,967 1,967 - 1,245 1,245
fee
Management fee - 890 890 - 583 583
Performance fee - (94 ) (94 ) - 2,758 2,758
- 2,763 2,763 - 4,586 4,586
During the year, performance fees totaling £2,663,000 crystallised, of which £
982,000 remained payable at the period end. (31 March 2013: £1,640,000
crystallised).
The performance fee amount of £94,000 which was written back as at 31 March
2014 represents outperformance generated as 31 March 2013 which was not
maintained for the twelve month period. In accordance with the performance fee
arrangements this amount was written back as at 31 March 2014.
The fees crystallised at the following quarterly calculation dates:
£'000
30 June 2013 -
30 September 2013 579
31 December 2013 1,102
31 March 2014 982
Fees crystallised during the year ended 31 March 2014 2,663
Details of the performance fee basis and amounts paid during the year can be
found in the Report of the Directors
4. Other Expenses
2014 2013
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Directors' emoluments 182 - 182 174 - 174
Frostrow's fixed fee 60 - 60 60 - 60
Auditors' 25 - 25 25 - 25
remuneration for the
audit of the
Company's financial
statements
Auditors' 6 - 6 5 - 5
remuneration for
review of the interim
accounts and
performance fee
calculation
Auditor's 4 - 4 3 - 3
remuneration for
other services
Legal and 196 - 196 2 - 2
professional fees*
Registrar fees 49 - 49 34 - 34
Listing fees 49 - 49 84 - 84
Other including 298 - 298 179 - 179
irrecoverable VAT
869 - 869 566 - 566
* includes legal fees of £126,000 in relation to the prospectus published in
July 2013 and £54,000 in connection with advice sought relating to the
Alternative Investment Fund Managers Directive.
Details of the amounts paid to Directors are included in the Directors'
Remuneration Report and the Directors' Remuneration Policy Report
5. Finance Costs
2014 2013
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Loan interest - 94 94 - 18 18
- 94 94 - 18 18
6.Taxation
(a) Analysis of charge in the year:
Revenue Capital 2014 Revenue Capital 2013
£'000 £'000 Total £'000 £'000 Total
£'000 £'000
Overseas tax suffered 94 - 94 58 - 58
Total current 94 - 94 58 - 58
taxation for the year
(see note 6(b))
(b) Factors affecting current tax charge for year
Approved investment trusts are exempt from tax on capital gains made within the
Company.
The tax assessed for the year is lower than the standard rate of corporation
tax in the UK of 23% (2013: 24%). The differences are explained below:
2014 2013
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net profit on 4 86,427 86,431 4 76,202 76,206
ordinary
activities before
taxation
Corporation tax 1 19,878 19,879 1 18,288 18,289
at 23% (2013:
24%)
Effects of:
Non-taxable gains - (20,535 ) (20,535 ) - (19,393 ) (19,393 )
on investments
held at fair
value through
profit or loss
Non-taxable (201 ) - (201 ) (137 ) - (137 )
overseas
dividends
Overseas taxes 94 - 94 58 - 58
Excess expenses 198 657 855 135 1,105 1,240
unused
Disallowed 2 - 2 1 - 1
expenses
Current tax 94 - 94 58 - 58
charge
(c) Provision for deferred tax
No provision for deferred taxation has been made in the current or prior year.
The Company has not provided for deferred tax on capital gains or losses
arising on the revaluation or disposal of investments, as it is exempt from tax
on these items because of its status as an investment trust company.
The Company has not recognised a deferred tax asset of £5,618,000 (2013: £
5,610,000) arising as a result of excess management expenses and loan
relationship deficits. These excess expenses will only be utilised if the
Company generates sufficient taxable income in the future.
7. Basic and Diluted (Loss)/Earnings per Share
The Return/(loss) per Ordinary Share is as follows:
2014 2013
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
(Loss)/earnings per (0.1 ) 126.9p 126.8p (0.1 ) 121.2p 121.1p
share p p
The total gain per share of 126.8p (2013: gain 121.1p) is based on the total
gain attributable to equity shareholders of £86,337,000 (2013: gain £
76,148,000).
The revenue loss per share 0.1p (2013: loss 0.1p) is based on the revenue loss
attributable to equity shareholders of £90,000 (2013: £54,000). The capital
gain per share of 126.9p (2013: gain 121.2p) is based on the capital gain
attributable to equity shareholders of £86,427,000 (2013: gain £76,202,000).
The total revenue loss and capital gain per share are based on the weighted
average number of shares in issue during the year of 68,115,445 (2013:
62,887,103).
8.Investments Held at Fair Value Through Profit and Loss
All investments are designated as fair value through profit or loss on initial
recognition, therefore all gains and losses arise on investments designated as
fair value through profit or loss.
As at 31 March 2014, all investments with the exception of the unquoted
investment in OrbiMed Asia Partners L.P fund have been classified as level 1.
OrbiMed Asia Partners L.P fund has been classified as level 3. See note 13 for
further details.
Listed 2014 Total 2013
Equity Unquoted £'000 Total
£'000 £'000 £'000
Cost at 1 April 2013 165,797 2,218 168,015 142,536
Investment holding gains at 1 April 75,993 288 76,281 19,119
2013
Valuation at 1 April 2013 241,790 2,506 244,296 161,655
Movement in the year
Purchases at cost 305,739 323 306,062 145,510
Sales - proceeds (269,610 ) - (269,610 ) (143,583 )
- gains on disposal 64,338 - 64,338 23,552
Net movement in investment holding 23,610 (334 ) 23,276 57,162
gains
Valuation at 31 March 2014 365,867 2,495 368,362 244,296
Closing book cost at 31 March 2014 266,264 2,541 268,805 168,015
Investment holding gains at 31 March 99,603 (46 ) 99,557 76,281
2014
Valuation at 31 March 2014 365,867 2,495 368,362 244,296
2014 2013
£'000 £'000
Gains on investments:
Gains on disposal based on historical cost 64,338 23,552
Amounts recognised as investment holding loss in previous (38,085 ) (6,804 )
year
Gains on disposal based on carrying value at previous 26,253 16,748
financial position date
Net movement in investment holding gains in the year 61,361 63,966
Gains on investments 87,614 80,714
9.Other Receivables
2014 2013
£'000 £'000
Future settlements - sales 11,795 13,852
Other debtors 105 40
Prepayments and accrued income 172 75
12,072 13,967
10.Other Payables
2014 2013
£'000 £'000
Future settlements - purchases 10,427 22,219
Performance fee accrued 982 4,131
Bank loan* 27,880 -
Other creditors and accruals 897 698
40,186 27,048
* Further details can be found in note 13 beginning
11. Ordinary share capital
2014 2013
£'000 £'000
Allotted, called up, issued and fully paid:
68,224,038 shares of 25p (2013: 64,466,347) 17,056 16,117
662,309 shares of 25p held in treasury (2013: nil) 166 -
17,222 16,117
As at 31 March 2014 the Company had 68,886,347 shares of 25p in issue including
662,309 shares held in treasury (2013: 64,466,347). During the year 4,420,000
shares were issued raising £17,715,000. In addition, 662,309 shares were
repurchased to be held in treasury at a cost of £3,420,000 (including
expenses). Subsequent to the year end and to the date of this report a further
107,128 shares were repurchased to be held in treasury at a cost of £463,000.
12. Net Asset Value per Share
2014 2013
£'000 £'000
Net asset value per share 498.7p 371.7p
The net asset value per share is based on the net assets attributable to equity
shareholders of £340,248,000 (2013: £239,616,000) and on 68,224,038 (excluding
662,309 shares held in treasury) (2013: 64,466,347) shares in issue at 31 March
2014.
13. Risk Management Policies and Procedures
As an investment trust, the Company invests in equities and other investments
for the long term in order to achieve its investment objective. In pursuing its
investment objective, the Company is exposed to a variety of risks that could
result in either a reduction or increase in the Company's net assets or in
profits.
The Company's financial instruments comprise securities and other investments,
cash balances, debtors and creditors and a loan facility that arise directly
from its operations (for example, in respect of sales and purchases awaiting
settlement).
The main risks the Company faces from its financial instruments are (i) market
price risk (comprising currency risk, interest rate risk and other price risk
(i.e. changes in market prices other than those arising from interest rate or
currency risk)), (ii) liquidity risk and (iii) credit risk.
The Board reviews and agrees policies regularly for managing and monitoring
each of these risks.
1.Market price 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 - currency risk, interest rate risk and other price
risk.
The Company's portfolio is exposed to market price fluctuations which are
monitored by the Investment Manager in pursuance of the investment objective.
Further information on the composition of the portfolio is set out within this
announcement. .
No derivatives or hedging instruments are utilised to manage market price risk.
(a) Currency risk:
A significant proportion of the Company's portfolio is denominated in
currencies other than sterling (the Company's functional currency, and in which
it reports its results). As a result, movements in exchange rates can
significantly affect the sterling value of those items.
Management of risk
The Investment Manager and Manager monitor the Company's exposure to foreign
currencies on a continuous basis and report to the Board regularly. The
Investment Manager does not hedge against foreign currency movements, but takes
account of the risk when making investment decisions.
Income denominated in foreign currencies is converted into sterling on receipt.
The Company does not use financial instruments to mitigate the currency
exposure in the period between the time that the income is included in the
financial statements and its receipt.
Foreign currency exposure
At the date of the Statement of Financial Position the Company held £
345,433,000 (2013: £234,260,000) of investments denominated in U.S. dollars and
£22,929,000 (2013: £10,036,000) in other non-sterling currencies.
Currency sensitivity
The following table details the sensitivity of the Company's profit or loss
after taxation for the year to a 10% increase and decrease in the value of
sterling compared to the U.S. dollar (2013: 10% increase and decrease).
The above percentages have been determined based on market volatility in
exchange rates over the previous twelve months. The analysis is based on the
Company's foreign currency financial instruments held at each Statement of
Financial Position date, after adjusting for an increase/decrease in management
fees. Movements in the performance fee accruals have been excluded from the
analysis below.
If sterling had weakened against U.S. dollars, as stated above, this would have
had the following effect:
2014 2013
USD USD
£'000 £'000
Impact on revenue return - -
Impact on capital return 38,132 25,860
Total return after tax/effect on shareholders' funds 38,132 25,860
If sterling had strengthened against the U.S. dollar, as stated above, this
would have had the following effect:
2014 2013
USD USD
£'000 £'000
Impact on revenue return - -
Impact on capital return (31,199 ) (21,158 )
Total return after tax/effect on shareholders' funds (31,199 ) (21,158 )
(b) Interest rate risk:
Interest rate risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates.
Management of the risk
The possible effects on fair value and cash flows that could arise as a result
of changes in interest rates are taken into account when making investment
decisions.
The Company, generally, does not hold significant cash balances, with short
term borrowing being used when required and therefore deems this risk to be
immaterial.
Interest rate exposure
The Company has a loan facility with Goldman Sachs & Co. New York which is
repayable on demand.
(c) Other price risk
Other price risk may affect the value of the quoted investments.
If market prices at the date of the Statement of Financial Position had been
20% higher or lower (2013: 20% higher or lower) while all other variables had
remained constant, the return and net assets attributable to shareholders for
the year ended 31 March 2014 would have increased/decreased by £73,193,000
(2013: £48,542,000), after adjusting for an increase or decrease in management
fees. The calculations are based on the portfolio valuations as at the
respective Statement of Financial Position dates.
2.Liquidity risk:
This is the risk that the Company will encounter difficulty in meeting
obligations associated with financial liabilities.
Management of the risk
Liquidity risk is not significant as the majority of the Company's assets are
investments in quoted equities and other quoted securities that are readily
realisable. The Company has a loan facility repayable on demand, provided by
Goldman Sachs & Co. New York. Interest on the facility is charged at the
Federal Funds effective rate plus 1 week LIBOR-OIS spread+, plus 35 basis
points.
The Board gives guidance to the Investment Manager as to the maximum amount of
the Company's resources that should be invested in any one company.
Liquidity exposure
Contractual maturities of the financial liabilities as at 31 March 2014, based
on the earliest date on which payment can be required, are as follows:
Amounts due to brokers and accruals £12,306,000 (2013: £27,048,000). All of the
stated financial liabilities are repayable within three months or less.
3.Credit risk:
The failure of the counterparty to a transaction to discharge its obligations
under that transaction could result in the Company suffering a loss.
Certain of the Company's assets are held by Goldman Sachs as collateral for the
loan provided by them to the Company. Such assets held by Goldman Sachs are
available for rehypothecation†. As at 31 March 2014, assets with a total market
value of £37.1 million were held as collateral (2013: nil).
† See glossary
Management of the risk
The risk is not significant and is managed as follows:
by only dealing with brokers which have been approved by OrbiMed Capital LLC
and banks with high credit ratings; and
by setting limits to the maximum exposure to any one counterparty at any time.
At 31 March 2014 the Company's exposure to credit risk amounted to £12,072,000
and was in respect of cash and other receivables, such as amounts due from
brokers and dividends (2013: £22,368,000).
Hierarchy of investments
The Company has classified its financial assets designated at fair value
through profit or loss using a fair value hierarchy that reflects the
significance of the inputs used in making the fair value measurements. The
hierarchy has the following levels:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2 - inputs other than quoted prices included with Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
Level 3 - inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
As at 31 March 2014 the investment in OrbiMed Asia Partners LP fund has been
classified as Level 3. The fund has been valued at the estimated net asset
value as at 31 December 2013 and it is believed that the value of the fund as
at 31 March 2014 will not be materially different. If the value of the fund was
to increase or decrease by 10%, while all other variables had remained
constant, the return and net assets attributable to Shareholders for the year
ended 31 March 2014 would have increased/decreased by £250,000.
Level 1 Level Level Total
2 3
As of 31 March 2014 £'000 £'000 £'000 £'000
Assets
Financial investments designated at fair 365,867 - 2,495 368,362
value through profit or loss
Level 1 Level Level Total
2 3
As of 31 March 2013 £'000 £'000 £'000 £'000
Assets
Financial investments designated at fair 241,790 - 2,506 244,296
value through profit or loss
Level 3 Reconciliation
Please see below a reconciliation disclosing the changes during the year for
the financial assets and liabilities designated at fair value through profit or
loss classified as being Level 3.
2014 2013
£'000 £'000
Assets
As at 1 April 2,506 1,790
Total gains during the year (334 ) 287
Net capital commitments 323 429
Assets as at 31 March 2,495 2,506
Fair value of financial assets and financial liabilities:
Financial assets and financial liabilities are either carried in the Statement
of Financial Position at their fair value or at a reasonable approximation of
fair value.
Capital management policies and procedures
The Company's capital management objectives are:
to ensure that it will be able to continue as a going concern; and
to maximise the total return to its equity shareholders through an appropriate
balance of equity capital and debt.
The Company's capital is disclosed in the Statement of Financial Position and
is managed on a basis consistent with its investment objective and policy. The
Company currently has a loan facility with Goldman Sachs & Co. New York which
is repayable on demand, which can be used to satisfy the Company's borrowing
requirements.
The Board, with the assistance of the Manager and the Investment Manager,
monitors and reviews the broad structure of the Company's capital on an ongoing
basis. This review includes:
the planned level of gearing, which takes into account the Investment Manager's
view of the market;
the need to buy back equity shares, for cancellation, or to be held in treasury
which takes account of the difference between the net asset value per share and
the share price (i.e. the level of share price discount or premium);
the possible need for new issues of equity shares; and
the extent to which revenue in excess of that which is required to be
distributed should be retained.
The Company's objectives, policies and processes for managing capital are
unchanged from the preceding accounting period.
14. Related Parties
The following are considered to be related parties:
OrbiMed Capital LLC
The Directors of the Company
Details of the relationship between the Company and OrbiMed Capital LLC, the
Company's Investment Manager, are disclosed in the Report of Directors. Sven
Borho is a Director of the Company, as well as a Partner at OrbiMed Capital
LLC. During the year ended 31 March 2014, OrbiMed Capital LLC earned £1,967,000
in respect of Investment Management fees, of which £544,000 was outstanding at
the year end. In addition, amounts totaling £2,442,000 were earned by OrbiMed
Capital LLC during the year in respect of performance fees which crystallised,
of which £914,000 was outstanding at the year end. All material related party
transactions have been disclosed within this announcement and in note 3.
Details of the remuneration of all Directors can be found within this
announcement.
15. Capital Reserve
Capital
reserve -
Capital investment
reserves holdings
-
other gains/ Total
(losses)
£'000 £'000 £'000
At 31 March 2013 94,060 76,281 170,341
Transfer on disposal of investments 38,085 (38,085 ) -
Net gains on investments 26,253 61,361 87,614
Exchange gains 1,670 - 1,670
Expenses charged to capital (2,857 ) - (2,857 )
At 31 March 2014 157,211 99,557 256,768
Profits arising out of a change in fair value of assets, recognised in
accordance with Accounting Standards, may be distributed provided the relevant
assets can be readily convertible into cash. Securities listed on a recognised
stock exchange are generally regarded as being readily convertible into cash.
Under the terms of the revisions made to the Company's Articles of Association
in 2013, sums within "Capital reserves - other" are also available for
distribution.
Further Information / Shareholder Information
Financial Calendar
31 March Financial Year End
June Final Results Announced
30 September Half Year End
November Half Year Results Announced
February/ Interim Management
August Statement Announced
July Annual General Meeting
Annual General Meeting
The Annual General Meeting of The Biotech Growth Trust PLC will be held at the
Barber Surgeons' Hall, Monkwell Square, Wood Street, London EC2Y 5BL on
Thursday, 10 July 2014 at 12.30 p.m.
Share Prices
The Company's Ordinary Shares are listed on the London Stock Exchange under
`Investment Companies'. The price is given daily in the Financial Times and
other newspapers.
Change of Address
Communications with shareholders are mailed to the address held on the share
register. In the event of a change of address or other amendment this should be
notified to the Company's Registrars, Capita Asset Services, under the
signature of the registered holder.
Daily Net Asset Value
The daily net asset value of the Company's shares can be obtained on the
Company's website at www.biotechgt.com and is published daily via the London
Stock Exchange.
Profile of the Company's Ownership
% of Ordinary Shares held at 31 March
2014 2013
Further Information / Glossary of Terms
Investment Trust Terms
AIFM
The Alternative Investment Fund Manager Directive (the "Directive") is a
European Union Directive that entered into force on 22 July 2013. The Directive
regulates EU fund managers that manage alternative investment funds (this
includes investment trusts). There is a one-year transition period within which
alternative funds must comply with the provisions of the Directive.
Compound Annual Growth Rate
The average year-on-year growth rate of an investment over a number of years.
While investments usually do not grow at a constant rate, the compound annual
return smoothes out returns by assuming constant growth.
Discount or Premium
A description of the difference between the share price and the net asset value
per share. The size of the discount or premium is calculated by subtracting the
share price from the net asset value per share and is usually expressed as a
percentage (%) of the net asset value per share. If the share price is higher
than the net asset value per share the result is a premium. If the share price
is lower than the net asset value per share, the shares are trading at a
discount.
Gearing
Calculated using the Association of Investment Companies definition.
Total assets, less current liabilities (before deducting any prior charges)
minus cash/cash equivalents divided by Shareholders' Funds, expressed as a
percentage.
Initial Public Offering (IPO)
The initial offer by a company of shares to be quoted on a stock exchange.
Often known as a flotation.
Net Asset Value (NAV)
The value of the Company's assets, principally investments made in other
companies and cash being held, minus any liabilities. The NAV is also described
as `shareholders' funds' per share. The NAV is often expressed in pence per
share after being divided by the number of shares which have been issued. The
NAV per share is unlikely to be the same as the share price which is the price
at which the Company's shares can be bought or sold by an investor. The share
price is determined by the relationship between the demand and supply of the
shares.
Ongoing Charges
Ongoing charges are calculated by taking the Company's annualised ongoing
charges, excluding performance fees and exceptional items, and dividing by the
average net asset value of the Company over the year.
Overnight Indexed Swap (OIS)
An interest rate swap that serves as a measure of investor expectations of an
average effective overnight rate over the term of the swap.
Rehypothecation
The pledging to banks by securities brokers of the assets in a customer's
margin account used as collateral for a loan.
Total Assets
Total assets less current liabilities before deducting prior charges. Prior
charges includes all loans for investment purposes.
Treasury Shares
Shares previously issued by a company that have been bought back from
Shareholders to be held by the Company for potential sale or cancellation at a
later date. Such shares are not capable of being voted and carry no rights to
dividends.
Further Information / How to Invest
Investment Platforms
The Company's shares are traded openly on the London Stock Exchange and can be
purchased through a stock broker or other financial intermediary. The shares
are available through savings plans (including Investment Dealing Accounts,
ISAs, Junior ISAs and SIPPs) which facilitate both regular monthly investments
and lump sum investments in the Company's shares. There are a number of
investment platforms that offer these facilities. A list of some of them, that
is not comprehensive nor constitutes any form of recommendation, can be found
below:
AJ Bell Youinvest http://www.youinvest.co.uk/
Alliance Trust http://www.alliancetrustsavings.co.uk/
Savings
Barclays https://www.barclaysstockbrokers.co.uk/Pages/index.aspx
Stockbrokers
Charles Stanley https://www.charles-stanley-direct.co.uk/
Direct
Club Finance http://www.clubfinance.co.uk/
Fast Trade http://www.fastrade.co.uk/wps/portal
FundsDirect http://www.fundsdirect.co.uk/Default.asp?
Halifax Share http://www.halifax.co.uk/Sharedealing/
Dealing
Hargreaves http://www.hl.co.uk/
Lansdown
HSBC https://investments.hsbc.co.uk/
iDealing http://www.idealing.com/
IG Index http://www.igindex.co.uk/
Interactive http://www.iii.co.uk/
Investor
IWEB http://www.iweb-sharedealing.co.uk/share-dealing-home.asp
James Brearley http://www.jbrearley.co.uk/Marketing/index.aspx
Natwest http://www.natweststockbrokers.com/nw/
Stockbrokers products-and-services/share-dealing.ashx
Saga Share Direct https://www.sagasharedirect.co.uk/
Selftrade http://www.selftrade.co.uk/
The Share Centre https://www.share.com/
Saxo Capital http://uk.saxomarkets.com/
Markets
TD Direct http://www.tddirectinvesting.co.uk/
Investing
Capita Asset Services - Share Dealing Service
A quick and easy share dealing service is available to existing shareholders
through the Company's Registrar, Capita Asset Services, to either buy or sell
shares. An online and telephone dealing facility provides an easy to access and
simple to use service.
Type of trade Online Telephone
Share certificates 1% of the value of 1.5% of the value of the
the deal deal
Costs* (Minimum £21.00, max (Minimum £28.50, max £
£125.00) 175.00)
There is no need to pre-register and there are no complicated forms to fill in.
The online and telephone dealing service allows you to trade `real time' at a
known price which will be given to you at the time you give your instruction.
To deal online or by telephone all you need is your surname, shareholder
reference number, full postcode and your date of birth. Your shareholder
reference number can be found on your latest statement or certificate where it
will appear as either a `folio number' or `investor code'. Please have the
appropriate documents to hand when you log on or call, as this information will
be needed before you can buy or sell shares.
The maximum deal size for online trades is £25,000. Deals over this amount can
be done over the telephone and rates will be advised at the time of dealing.
For further information on this service please contact: www.capitadeal.com
(online dealing) or 0871 664 0364† (telephone dealing).
If calling from outside of the UK please dial +44 (0) 203 367 2686
† Calls cost 10p per minute plus network extras and may be recorded for
training purposes. Lines are open from 8.00 a.m. to 4.30 p.m. Monday to Friday.
*These are correct at the time of printing and may be subject to change. Please
visit www.capitadeal.com for the current costs.
RISK WARNINGS
Past performance is no guarantee of future performance.
The value of your investment and any income from it may go down as well as up
and you may not get back the amount invested. This is because the share price
is determined, in part, by the changing conditions in the relevant stockmarkets
in which the Company invests and by the supply and demand for the Company's
shares.
As the shares in an investment trust are traded on a stockmarket, the share
price will fluctuate in accordance with supply and demand and may not reflect
the underlying net asset value of the shares; where the share price is less
than the underlying value of the assets, the difference is known as the
`discount'. For these reasons, investors may not get back the original amount
invested.
Although the Company's financial statements are denominated in sterling, all of
the holdings in the portfolio are currently denominated in currencies other
than sterling and therefore they may be affected by movements in exchange
rates. As a result, the value of your investment may rise or fall with
movements in exchange rates.
Investors should note that tax rates and reliefs may change at any time in the
future.
The value of ISA and Junior ISA tax advantages will depend on personal
circumstances. The favourable tax treatment of ISAs and Junior ISAs may not be
maintained.
Further Information / Notice of the Annual General Meeting
Notice is hereby given that the Annual General Meeting of The Biotech Growth
Trust PLC will be held at the Barber-Surgeons' Hall, Monkwell Square, Wood
Street, London EC2Y 5BL on Thursday, 10 July 2014 at 12.30 p.m. for the
following purposes:
Ordinary Business
To consider and, if thought fit, pass the following as ordinary resolutions:
1.To receive and, if thought fit, to accept the Audited Financial Statements
and the Report of the Directors for the year ended 31 March 2014
2.To approve the Directors' Remuneration Report for the year ended 31 March
2014
3.To receive and approve the Remuneration Policy
4. To re-elect The Rt Hon Lord Waldegrave of North Hill as a Director of the
Company
5. To re-elect Professor Dame Kay Davies, DBE as a Director of the Company
6. To re-elect Andrew Joy as a Director of the Company
7. To re-elect Sven Borho as a Director of the Company
8. To re-elect Paul Gaunt as a Director of the Company
9. To re-elect Peter Keen as a Director of the Company
10. To appoint Ernst & Young LLP as Auditors to the Company and to authorise
the Directors to determine their remuneration
Auditors have to be appointed at each general meeting at which the annual
report and accounts are presented to shareholders. On the recommendation of the
Audit and Management Engagement Committee, the Board are proposing to appoint
Ernst & Young LLP as auditor to the Company following a formal tender process
and the subsequent resignation of Grant Thornton UK LLP with effect from the
conclusion of the Annual General Meeting to be held on 10 July 2014.
Accordingly, shareholder approval is now sought to appoint Ernst & Young LLP as
auditor of the Company and to authorise the Directors to determine their
remuneration. As resigning auditor, Grant Thornton UK LLP has provided the
Company with a `Statement of Circumstances' confirming that it resigned as
auditor of the Company following the tender process. A copy of the `Statement
of Circumstances' can be obtained from the Company Secretary upon request.
Special Business
To consider and, if thought fit, pass the following resolutions of which
resolutions 12, 13, 14 and 16 will be proposed as special resolutions:
Authority to Allot Shares
11.THAT in substitution for all existing authorities the Directors be and are
hereby generally and unconditionally authorised in accordance with Section 551
of the Companies Act 2006 (the "Act") to exercise all powers of the Company to
allot relevant securities (within the meaning of Section 551 of the Act) up to
a maximum aggregate nominal amount of £1,702,922 (being 10% of the issued share
capital of the Company at the date of the notice convening the meeting at which
this resolution is proposed) and representing 6,811,691 shares of 25 pence each
(or, if less, the number representing 10% of the issued share capital of the
Company at the date at which this resolution is passed), provided that this
authority shall expire at the conclusion of the Annual General Meeting of the
Company to be held in 2015 or 15 months from the date of passing this
resolution, whichever is the earlier, unless previously revoked, varied or
renewed, by the Company in general meeting and provided that the Company shall
be entitled to make, prior to the expiry of such authority, an offer or
agreement which would or might require relevant securities to be allotted after
such expiry and the Directors may allot relevant securities pursuant to such
offer or agreement as if the authority conferred hereby had not expired.
Disapplication of Pre-emption Rights
12.THAT in substitution of all existing powers the Directors be and are hereby
generally empowered pursuant to Sections 570 and 573 of the Companies Act 2006
(the "Act") to allot equity securities (within the meaning of section 560 of
the Act) including if immediately before the allotment, such shares are held by
the Company as treasury shares (as defined in Section 724 of the Act) for cash
pursuant to the authority conferred on them by resolution 11 set out in the
notice convening the Annual General Meeting at which this resolution is
proposed or otherwise as if section 561(1) of the Act did not apply to any such
allotment and to sell relevant shares (within the meaning of section 560 of the
Act) for cash as if section 561(1) of the Act did not apply to any such sale,
provided that this power shall be limited to the allotment of equity securities
pursuant to:
(a)an offer of equity securities open for acceptance for a period fixed by the
Directors where the equity securities respectively attributable to the
interests of holders of shares of 25 pence each in the Company ("Shares") are
proportionate (as nearly as may be) to the respective numbers of Shares held by
them but subject to such exclusions or other arrangements in connection with
the issue as the Directors may consider necessary, appropriate, or expedient to
deal with equity securities representing fractional entitlements or to deal
with legal or practical problems arising in any overseas territory, the
requirements of any regulatory body or stock exchange, or any other matter
whatsoever; and
(b)(otherwise than pursuant to sub-paragraph (a) above) up to an aggregate
nominal value of £1,702,922 or, if less, the number representing 10% of the
issued share capital of the Company at the date of the meeting at which this
resolution is passed,
and expires at the conclusion of the next Annual General Meeting of the Company
after the passing of this resolution or 15 months from the date of passing this
resolution, whichever is the earlier, unless previously revoked, varied or
renewed by the Company in general meeting and provided that the Company shall
be entitled to make, prior to the expiry of such authority, an offer or
agreement which would or might require equity securities to be allotted after
such expiry and the Directors may allot equity securities pursuant to such
offer or agreement as if the power conferred hereby had not expired.
Authority to Repurchase Ordinary Shares
13.THAT the Company be and is hereby generally and unconditionally authorised
in accordance with section 701 of the Companies Act 2006 (the "Act") to make
one or more market purchases (within the meaning of section 693(4) of the Act)
of ordinary shares of 25 pence each in the capital of the Company ("Shares")
either for retention as treasury shares for future reissue, resale, transfer or
for cancellation provided that:
(a)the maximum aggregate number of Shares authorised to be purchased is
10,210,724 (representing approximately 14.99% of the issued share capital of
the Company at the date of the notice convening the meeting at which this
resolution is proposed);
(b)the minimum price (exclusive of expenses) which may be paid for a Share is
25 pence;
(c)the maximum price (exclusive of expenses) which may be paid for a Share is
an amount equal to the greater of (i) 105% of the average of the middle market
quotations for a Share as derived from the Daily Official List of the London
Stock Exchange for the five business days immediately preceding the day on
which that Share is purchased and (ii) the higher of the price of the last
independent trade in shares and the highest then current independent bid for
shares on the London Stock Exchange as stipulated in Article 5(1) of Regulation
No. 2233/2003 of the European Commission (Commission Regulation of 22 December
2003 implementing the
Market Abuse Directive as regards exemptions for buy-back programmes and
stabilisation of financial instruments);
(d)the authority hereby conferred shall expire at the conclusion of the Annual
General Meeting of the Company to be held in 2015 or, if earlier, on the expiry
of 15 months from the date of the passing of this resolution unless such
authority is renewed prior to such time; and
(e)the Company may make a contract to purchase Shares under this authority
before the expiry of such authority which will or may be executed wholly or
partly after the expiration of such authority, and may make a purchase of
Shares in pursuance of any such contract.
Adoption of New Articles of Association
14.THAT the Articles of Association set out in the document produced to the
meeting and signed by the Chairman of the meeting for the purposes of
identification be and are hereby approved and adopted as the Articles of
Association of the Company in substitution for and to the exclusion of the
existing Articles of Association of the Company.
Full explanatory notes of principal changes to the Articles of Association are
set within this announcement.
Directors' Fees
15.THAT the limit of Directors' fees be increased from £200,000 to £250,000 in
aggregate per annum.
General Meetings
16.THAT the Directors be authorised to call general meetings (other than annual
general meetings) on not less than 14 clear days' notice, such authority to
expire at the conclusion of the next Annual General Meeting of the Company or,
if earlier, until expiry of 15 months from the date of the passing of this
resolution.
By order of the Board Registered office:
One Wood Street
Frostrow Capital LLP London EC2V 7WS
Company Secretary
22 May 2014
Notes
1. Members are entitled to appoint a proxy to exercise all or any of their
rights to attend and to speak and vote on their behalf at the meeting. A
shareholder may appoint more than one proxy in relation to the meeting provided
that each proxy is appointed to exercise the rights attached to a different
share or shares held by that shareholder. A proxy need not be a shareholder of
the Company. A proxy form which may be used to make such appointment and give
proxy instructions accompanies this notice.
2.A vote withheld is not a vote in law, which means that the vote will not be
counted in the calculation of votes for or against the resolutions. If no
voting indication is given, a proxy may vote or abstain from voting at his/her
discretion. A proxy may vote (or abstain from voting) as he or she thinks fit
in relation to any other matter which is put before the meeting.
3.To be valid any proxy form or other instrument appointing a proxy must be
completed and signed and received by post or (during normal business hours
only) by hand at Capita Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent
BR3 4TU no later than 12.30 p.m. on 8 July 2014.
4.In the case of a member which is a company, the instrument appointing a proxy
must be executed under its seal or signed on its behalf by a duly authorised
officer or attorney or other person authorised to sign. Any power of attorney
or other authority under which the instrument is signed (or a certified copy of
it) must be included with the instrument.
5 The return of a completed proxy form, other such instrument or any CREST
Proxy Instruction (as described below) will not prevent a shareholder attending
the meeting and voting in person if he/she wishes to do so.
6.Any person to whom this notice is sent who is a person nominated under
section 146 of the Companies Act 2006 to enjoy information rights (a "Nominated
Person") may, under an agreement between him/her and the shareholder by whom he
/she was nominated, have a right to be appointed (or have someone else
appointed) as a proxy for the meeting. If a Nominated Person has no such proxy
appointment right or does not wish to exercise it, he/she may, under any such
agreement, have a right to give instructions to the shareholder as to the
exercise of voting rights.
7.The statement of the rights of shareholders in relation to the appointment of
proxies in paragraphs 1 and 3 above does not apply to Nominated Persons. The
rights described in these paragraphs can only be exercised by shareholders of
the Company.
8.Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001,
only shareholders registered on the register of members of the Company (the
"Register of Members") at 5.30 p.m. on 8 July 2014 (or, in the event of any
adjournment, on the date which is two days before the time of the adjourned
meeting) will be entitled to attend and vote or be represented at the meeting
in respect of shares registered in their name at that time. Changes to the
Register of Members after that time will be disregarded in determining the
rights of any person to attend and vote at the meeting.
9.As at 22 May 2014 (being the last business day prior to the publication of
this notice) the Company's issued share capital consists of 68,886,347 ordinary
shares (including 769,437 shares held in treasury), carrying one vote each.
Therefore, the total voting rights in the Company as at 22 May 2014 are
68,116,910.
10.CREST members who wish to appoint a proxy or proxies through the CREST
electronic proxy appointment service may do so by using the procedures
described in the CREST Manual. CREST Personal Members or other CREST sponsored
members, and those CREST members who have appointed a 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.
11.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 the specifications of Euroclear UK
and Ireland Limited ("CRESTCo"), and must contain the information required for
such instruction, as described in the CREST Manual. The message, regardless of
whether it constitutes the appointment of a proxy or is 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 RA10) no later
than 48 hours before the time appointed for holding the meeting. 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 Application 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.
12.CREST members and, where applicable, their CREST sponsors, or voting service
providers should note that CRESTCo does not make available special procedures
in CREST for any particular message. 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, 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
system providers are referred, in particular, to those sections of the CREST
Manual concerning practical limitations of the CREST system and timings.
13.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.
14.In the case of joint holders, where more than one of the joint holders
purports to appoint a proxy, only the appointment submitted by the most senior
holder will be accepted. Seniority is determined by the order in which the
names of the joint holders appear in the Register of Members in respect of the
joint holding (the first named being the most senior).
15.Members who wish to change their proxy instructions should submit a new
proxy appointment using the methods set out above. Note that the cut-off time
for receipt of proxy appointments (see above) also applies in relation to
amended instructions; any amended proxy appointment received after the relevant
cut-off time will be disregarded.
16.Members who have appointed a proxy using the hard-copy proxy form and who
wish to change the instructions using another hard-copy form, should contact
Capita Asset Services on 0871 664 0300 (calls cost 10p per minute plus network
extras). Lines are open 8.30am to 5.30pm Monday to Friday.
17.If a member submits more than one valid proxy appointment, the appointment
received last before the latest time for the receipt of proxies will take
precedence.
18.In order to revoke a proxy instruction, members will need to inform the
Company. Members should send a signed hard copy notice clearly stating their
intention to revoke a proxy appointment to Capita Asset Services, PXS, 34
Beckenham Road, Beckenham, Kent BR3 4TU.
In the case of a member which is a company, the revocation notice must be
executed under its common seal or signed on its behalf by an officer of the
company or an attorney for the company. Any power of attorney or any other
authority under which the revocation notice is signed (or a duly certified copy
of such power of attorney) must be included with the revocation notice. If a
member attempts to revoke their proxy appointment but the revocation is
received after the time for receipt of proxy appointments (see above) then,
subject to paragraph 4, the proxy appointment will remain valid.
LOCATION OF THE ANNUAL GENERAL MEETING
the Barber-Surgeons' Hall, Monkwell Square, Wood Street, London EC2Y 5BL
Further Information / Explanatory Notes to the Resolutions
Resolution 1 - To receive the Annual Report and Accounts
The Annual Report and Accounts for the year ended 31 March 2014 will be
presented to the Annual General Meeting. These accounts accompanied this Notice
of Meeting and shareholders will be given an opportunity at the meeting to ask
questions.
Resolutions 2 to 3 - Remuneration Policy and Remuneration Report
It is now mandatory for all listed companies to put both their Report on
Directors' Remuneration and their Remuneration Policy to a shareholder vote.
The Report on Directors' Remuneration and the Directors' Remuneration Policy
Report are set out in full within this announcement.
Resolutions 4 to 9 - Re-election of Directors
Resolutions 4 to 9 deal with the re-election of each Director.
The Board has confirmed, following a performance review, that the Directors
standing for election and re-election continue to perform effectively.
Resolution 10 - Appointment of Auditors and the determination of their
remuneration
Resolution 10 relates to the appointment of Ernst & Young LLP as the Company's
independent auditors to hold office until the next Annual General Meeting of
the Company and also authorises the Directors to set their remuneration.
Full details concerning the audit tender process can be found in the Audit and
Management Engagement Committee Report.
Resolutions 11 and 12 - Issue of Shares
Ordinary Resolution No. 11 in the Notice of Annual General Meeting will renew
the authority to allot the unissued share capital up to an aggregate nominal
amount of £1,702,922 (equivalent to 6,811,691 shares, or 10% of the Company's
existing issued share capital on 22 May 2014, being the nearest practicable
date prior to the signing of this Report). Such authority will expire on the
date of the next Annual General Meeting or after a period of 15 months from the
date of the passing of the resolution, whichever is earlier. This means that
the authority will have to be renewed at the next Annual General Meeting.
When shares are to be allotted for cash, Section 551 of the Companies Act 2006
(the "Act") provides that existing shareholders have pre-emption rights and
that the new shares must be offered first to such shareholders in proportion to
their existing holding of shares. However, shareholders can, by special
resolution, authorise the Directors to allot shares otherwise than by a pro
rata issue to existing shareholders. Special Resolution No. 12 will, if passed,
give the Directors power to allot for cash equity securities up to 10% of the
Company's existing share capital on 22 May 2014, as if Section 551 of the Act
does not apply. This is the same nominal amount of share capital which the
Directors are seeking the authority to allot pursuant to Resolution No. 11.
This authority will also expire on the date of the next Annual General Meeting
or after a period of 15 months, whichever is earlier. This authority will not
be used in connection with a rights issue by the Company.
The Directors intend to use the authority given by Resolutions Nos. 11 and 12
to allot shares and disapply pre-emption rights only in circumstances where
this will be clearly beneficial to shareholders as a whole. The issue proceeds
would be available for investment in line with the Company's investment policy.
No issue of shares will be made which would effectively alter the control of
the Company without the prior approval of shareholders in general meeting.
Resolution 13 - Share Repurchases
The Directors wish to renew the authority given by shareholders at the previous
Annual General Meeting. The principal aim of a share buy-back facility is to
enhance shareholder value by acquiring shares at a discount to net asset value,
as and when the Directors consider this to be appropriate. The purchase of
shares, when they are trading at a discount to net asset value per share,
should result in an increase in the net asset value per share for the remaining
shareholders. This authority, if conferred, will only be exercised if to do so
would result in an increase in the net asset value per share for the remaining
shareholders and if it is in the best interests of shareholders generally. Any
purchase of shares will be made within guidelines established from time to time
by the Board. It is proposed to seek shareholder authority to renew this
facility for another year at the Annual General Meeting.
Under the current Listing Rules, the maximum price that may be paid on the
exercise of this authority must not exceed the higher of (i) 105% of the
average of the middle market quotations for the shares over the five business
days immediately preceding the date of purchase and (ii) the higher of the last
independent trade and the highest current independent bid on the trading venue
where the purchase is carried out. The minimum price which may be paid is 25p
per share. Shares which are purchased under this authority will either be
cancelled or held as treasury shares.
Special Resolution No. 13 in the Notice of Annual General Meeting will renew
the authority to purchase in the market a maximum of 14.99% of shares in issue
on 22 May 2014, being the nearest practicable date prior to the signing of this
Report, (amounting to 10,210,724 shares). Such authority will expire on the
date of the next Annual General Meeting or after a period of 15 months from the
date of passing of the resolution, whichever is earlier. This means in effect
that the authority will have to be renewed at the next Annual General Meeting
or earlier if the authority has been exhausted.
Resolution 14 - Amendment to Articles of Association
It is proposed to make certain changes to the Company's Articles of Association
in order to reflect changes prompted by the introduction of the EU Alternative
Investment Fund Managers Directive. Full explanatory notes of Principal Changes
to the Articles of Association are set out below.
Resolution 15 - Directors' Remuneration
Shareholder approval is sought to increase the limit on Director's fees from £
200,000 to £250,000 in aggregate per annum.
Shareholder approval to increase the limit on Directors fees was last sought in
2009. Directors are now seeking shareholder approval to increase the limit as
part of board succession planning whereby there may be a period of overlap
between the appointment of a new director and the retirement of an existing
member of the Board.
Resolution 16 - General Meetings
Special Resolution No. 16 seeks shareholder approval for the Company to hold
General Meetings (other than the Annual General Meeting) at 14 clear days'
notice.
Recommendation
The Board considers that the resolutions relating to the above items of special
business, are in the best interests of shareholders as a whole. Accordingly,
the Board unanimously recommends to the shareholders that they vote in favour
of the above resolutions to be proposed at the forthcoming Annual General
Meeting as the Directors intend to do in respect of their own beneficial
holdings totaling 444,934 shares.
Further Information / Explanatory Notes of Principal Changes to the Company's
Articles of Association
It is proposed that the Company adopts new Articles of Association ("Articles")
to reflect changes prompted by the introduction of the EU Alternative
Investment Fund Managers Directive ("AIFMD")
Set out below is a summary of the principal changes in the Articles to be
adopted at the Annual General Meeting of the Company to be held on 10 July
2014.
A copy of the current Articles and of the proposed new Articles marked up to
show the proposed amendments will be available for inspection at the offices of
Frostrow Capital LLP during normal business hours and will be available for
inspection at the
Annual General Meeting, in each case until conclusion of the meeting.
The Company is an alternative investment fund for the purposes of the AIFMD.
The AIFMD and its implementing regulations require that certain disclosures be
made in the instrument constituting the Company.
For this reason, the Company is proposing that the Articles be amended to
provide that the Company's annual report and accounts will be prepared in
accordance with generally accepted accounting standards or such other
accounting standards determined by the Company's directors and permitted by UK
law from time to time. Additionally, it is proposed that the Articles be
amended to state that valuations will be made in accordance with the accounting
standards then in force.
The Company is proposing that the Articles be amended to provide that the net
asset value of the Company will be calculated at least annually and shall be
disclosed to shareholders from time to time in such manner as may be determined
by the Company's directors.
The Company is also proposing that the Articles be amended to provide that the
information required by the AIFMD to be disclosed to shareholders prior to an
investment in the Company shall be made available to prospective and existing
shareholders from time to time in such manner as may be determined by the
Company's directors.
Such disclosures reflect current practice by the Company and do not reflect a
change in policy.
The Company is proposing to appoint J.P. Morgan Europe Limited ("J.P. Morgan")
as its depositary on the terms and subject to the conditions prescribed in the
AIFMD. Article 21(14)(a) of the AIFMD states that, where the law of a third
country requires that financial instruments are held in custody by a local
entity and there are no local entities that satisfy the delegation requirements
laid down in the AIFMD, J.P. Morgan can discharge itself of liability for any
loss caused to the Company or its investors by such local entity provided that
the Articles of the Company expressly allow for such a discharge. Therefore,
J.P. Morgan has requested that the Articles be amended to expressly allow for
such discharge of liability, and the amended Articles will make such provision.
Further Information / Statement of Circumstances
The Company Secretary
The Biotech Growth Trust plc
One Wood Street
London
EC2V 7WS
22 May 2014
Company Number 3376377
The Biotech Growth Trust plc
Further to the requirements of section 519 of the Companies Act 2006 the
circumstances connected with our ceasing to hold office are as follows:
we were not reappointed after a tender process for the auditors
Grant Thornton UK LLP
Further Information / Company Information
Directors
The Rt Hon Lord Waldegrave of North Hill, (Chairman) Sven Borho
Professor Dame Kay Davies, DBE
Paul Gaunt
Dr John Gordon (Senior Independent Director and Chairman of the Remuneration
Committee)
Andrew Joy
Peter Keen (Chairman of the Audit and Management
Engagement Committee)
Registered Office
One Wood Street
London EC2V 7WS
Website
www.biotechgt.com
Company Registration Number
3376377 (Registered in England)
The Company is an investment company as defined under Section 833 of the
Companies Act 2006.
The Company was incorporated in England on 20 May 1997. The Company was
incorporated as Reabourne Merlin Life Sciences Investment Trust PLC.
Investment Manager
OrbiMed Capital LLC
601 Lexington Avenue, 54th Floor
New York NY10022 USA
Telephone: +1 212 739 6400
Website: www.orbimed.com
Registered under the U.S. Securities and Exchange Commission.
Manager, Company Secretary and Administrator
Frostrow Capital LLP
25 Southampton Buildings London
WC2A 1AL
Telephone: 0203 008 4910
E-Mail: info@frostrow.com
Website: www.frostrow.com
Authorised and regulated by the Financial Conduct Authority.
If you have an enquiry about the Company or if you would like to receive a copy
of the Company's monthly fact sheet by e-mail, please contact Frostrow Capital
using the stated e-mail address.
Independent Auditors
Grant Thornton UK LLP
30 Finsbury Square
London EC2P 2YU
Custodian and Banker
Goldman Sachs & Co.
200 West Street, Third Floor
New York, NY 10282 USA
Registrars
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone (in UK): 0871 664 0300†
Telephone (from overseas): +44 20 8639 3399
Facsimile: +44 (0) 1484 600911
E-Mail: ssd@capitaassetservices.com
Website: www.capitaassetservices.com
Please contact the Registrars if you have a query about a certificated holding
in the Company's shares.
† calls cost 10p per minute plus network charges and may be recorded for
training purposes. Lines are open from 8.30 a.m. to 5.30 p.m. Monday to Friday.
Brokers
Winterflood Securities Limited
The Atrium Building
Cannon Bridge
25 Dow Gate Hill
London EC4R 2GA
Solicitors
Dechert LLP
160 Queen Victoria Street
London EC4V 4QQ
Identification Codes
Shares:
SEDOL 0038551
ISIN:GB0000385517
BLOOMBERG:BIOG LN
EPIC:BIOG
22 May 2014
020 3170 8732
www.frostrow.com
The Annual Report will be posted to shareholders on Friday, 30 May 2014 Further
copies may be obtained from Frostrow Capital LLP, the Company Secretary at 25
Southampton Buildings, London WC2A 1AL.
A copy of the Annual Report will be submitted to the National Storage Mechanism
and will shortly be available for inspection at www.hemscott.com/nsm.do
The Annual Report is also available on the Company's website at
www.biotechgt.com where up to date information on the Company, including daily
NAV, share prices and fact sheets, can also be found.
End
The Rt Hon Lord Waldegrave of North Hill
ChairmanBIOTECH GROWTH : Final Results
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