Annual Financial Report

The Biotech Growth Trust PLC

(the Company)

Annual Results for the Year Ended 31 March 2024

The statements below are extracted from the Company’s annual report for the year ended 31 March 2024 (the Annual Report). The Annual Report, which includes the notice of the Company’s forthcoming annual general meeting, will be posted to shareholders on 12 June 2024. Members of the public may obtain copies from Frostrow Capital LLP, 25 Southampton Buildings, London WC2A 1AL or from 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.

The Annual Report will be submitted to the Financial Conduct Authority and will shortly be available in full, unedited text for inspection on the National Storage Mechanism (NSM): https://data.fca.org.uk/#/nsm/nationalstoragemechanism

Frostrow Capital LLP

Company Secretary

0203 709 8734

FINANCIAL HIGHLIGHTS

as at 31 March 2024

1,078.9p	995.0p	£361.3m
Net asset value per share**	Share price	Shareholders’ funds**
2023: 852.6p	2023: 783.0p	2023: £330.3m

26.5%	27.1%	5.0%
Net asset value per share	Share price	Benchmark*†
*(total return)^**	*(total return)^**	2023: 5.4%
2023: -11.0%	2023: -12.8%

7.8%	1.2%	66.6%
Discount of share price to	Ongoing Charges^	*Active Share^**
*net asset value per share^**	2023: 1.1%	2023: 76.6%
2023: 8.2%

* Source: Morningstar

^ Alternative Performance Measure (see glossary)

† Nasdaq Biotechnology Index (sterling adjusted)

** IFRS Measure

CHAIR’S STATEMENT

INTRODUCTION AND RESULTS

I am pleased to present to shareholders this annual report for the year ended 31 March 2024.

After a challenging two years, the Company performed well in both absolute and relative terms in the year under review; the net asset value (NAV) per share total return was 26.5% (2023: -11.0%), and the share price total return was 27.1% (2023: -12.8%), both outperforming the Company’s benchmark, the Nasdaq Biotechnology Index (sterling adjusted), which over the year rose 5.0% (2023: 5.4%). The small disparity between the performance of the Company’s NAV per share and its share price reflected a slight narrowing of the share price discount to the NAV per share from 8.2% at the start of the Company’s financial year to 7.8% at the year end.

The average exchange rate over the year was $1.258, some 4.5% higher than the previous year’s average of $1.204.

The Company’s gearing, which increased to 9.1% at the year end from 7.8% at the beginning of the year, contributed 1.2% to the Company’s NAV total return during the year.

While performance this year has been encouraging and we are relieved to be seeing signs of recovery in the sector, the Board is aware that there is still some way to go before the Company fully recovers its relative and absolute losses from the past two years. Nevertheless, our Portfolio Manager’s investment strategy has started once again to yield results. They intend to maintain the Company’s overweighting to small and mid-capitalisation (cap) companies, which they believe will deliver increasingly positive results to shareholders. In addition they anticipate that we can expect to see a continuation of the consolidation in the biotechnology industry, as larger companies seek to acquire smaller companies with promising pipelines of drugs and therapies to address impending patent expirations which threaten their future earnings.

Our portfolio contains a diverse range of biotech companies with exposure to the most exciting and promising new technologies. The areas in which our Portfolio Manager is finding the most promising investment opportunities include obesity, oligonucleotide therapeutics and oncology. I encourage you to read the Portfolio Manager’s Review to find out more about these themes and the companies making breakthroughs in these areas. The fact that the emerging technologies in these areas have been developed into approved new treatments reaffirms our view that the biotechnology industry is maturing and demonstrates its ability to convert laboratory research into effective medicines.

The Company has maintained a small exposure to Chinese biotechnology companies which overall made a negligible contribution to performance over the year. The difficult macroeconomic, geopolitical and local regulatory environment has meant that the valuations of Chinese biotech companies remain depressed although there have been some success stories such as AstraZeneca’s acquisition of Gracell Biotechnologies (which was held in our portfolio) for $1.2 billion. Chinese investments represented 7.7% (2023: 9.0%) of the portfolio at the year end and while our Portfolio Manager continues to believe the long-term outlook for Chinese biotech is promising, this level of exposure is unlikely to be increased unless or until the environment in China becomes more supportive.

The Company has not invested in any new private companies during the year and at the year end, the two remaining, directly held, private investments (both of which are Chinese companies) comprised 3.2% of the Company’s NAV. As announced earlier in the year and explained further in the Portfolio Manager’s Review, we wrote down the holding in Stemirna Therapeutics and this contributed to the negative return from the private investments over the year.

CAPITAL STRUCTURE

Shareholders will be aware that the Company pursues an active discount management policy, buying back shares when the discount of the Company’s share price to its NAV per share is higher than 6% (under normal market conditions).

The Company’s shares traded at a discount throughout the year, leading to the repurchase of 5,250,221 shares, at an average discount of 7.3% to the Company’s cum income NAV per share at the time, at a total cost of £43.6 million. This is a substantial return of capital, representing 13.6% of the issued share capital of the Company at the start of the year. Buying back these shares at a discount generated an uplift of 0.9% to the NAV over the year.

At the year end there were 33,487,198 shares in issue and the share price traded at an 7.8% discount to the cum income NAV per share. As we have previously commented, the shares can trade at a discount wider than 6% for a period of days or indeed longer, particularly in volatile or muted markets. However, the Company remains committed to protecting a 6% share price discount over the longer term. Since the year end, a further 290,000 shares have been bought back for cancellation and at the time of writing the share price discount stands at 8.2%.

REVENUE RETURN

The revenue return per share was 0.3p (2023: -1.6p). This reflects the relatively low yield generated from the biotechnology sector and, in particular, the small and mid-cap companies in this sector that comprise much of the portfolio.

As the Company has brought forward revenue losses, no dividend is recommended in respect of the year ended 31 March 2024 (2023: nil).

BOARD CHANGES

In October we were delighted to announce the appointment of Hamish Baillie as a non-executive director, effective 1 November 2023. Hamish will succeed Steve Bates as Chair of the Management Engagement Committee and Senior Independent Director following Steve’s retirement at the conclusion of the forthcoming annual general meeting (AGM).

In anticipation of his retirement, I would like to extend our sincere gratitude to Steve for his dedicated service. Throughout his tenure, his expertise, wealth of knowledge and insightful guidance have been invaluable to the Board. We wish him all the best for the future.

Other directors are coming to the end of their tenure and Board recruitment processes are underway in line with our succession plan.

PERFORMANCE FEE

There is currently no provision within the Company’s NAV for any performance fee payable at a future calculation date.

The arrangements for performance fees are described in detail on pages 51 and 52 of the Annual Report but I would highlight that it is dependent on the long-term outperformance of the Company: any outperformance has to be maintained for 12 months after the relevant calculation date and only becomes payable to the extent that the outperformance gives rise to a total fee greater than the total of all performance fees paid to date. This ensures that a performance fee is not payable for any outperformance that contributes to recovery of prior performance.

CHANGE OF BENCHMARK INDEX

As noted above, the Company’s performance is currently measured against the Nasdaq Biotechnology Index (sterling adjusted) and this is the index used to determine the entitlement (if any) of OrbiMed to a performance fee.

The index measures capital return, and as the biotechnology sector is largely made up of growth companies that tend not to pay dividends, historically there was very little difference between the capital and total return versions of the index.

In recent years, however, the biotechnology industry as a whole and the constituents of the index have changed as the industry has matured. The number of index constituents that pay a dividend has increased, although the number is still modest and the Company itself is not receiving sufficient income to be required to pay a dividend under current investment trust taxation rules. The Board believes this trend, in which dividend income contributes to the total return from the index, is likely to increase.

Therefore, following consultation with our advisers, the Board is proposing to shareholders that the index used to measure the Company’s performance and so the entitlement of OrbiMed to a performance fee, which is based on outperformance of the index, should be changed to the Nasdaq Biotechnology Index Total Return (sterling adjusted and net of withholding tax).

Under the Listing Rules, the proposed change is a related party transaction and must therefore by approved by shareholders. The proposed change will be put to shareholders at a general meeting which will be held immediately after the conclusion of the forthcoming AGM on 18 July 2024.

The proposed change is explained in more detail in a circular that will be sent to shareholders with this Annual Report and which will be available on the Company’s website: www.biotechgt.com.

ANNUAL GENERAL MEETING

The Company’s AGM will be held at the Barber-Surgeons’ Hall, Monkwell Square, Wood St, Barbican, London EC2Y 5BL on Thursday, 18 July 2024 at 12 noon. As well as the formal proceedings, there will be an opportunity for shareholders to meet the Board and the Portfolio Manager, and to receive an update on the Company’s strategy and its key investments.

I very much look forward to seeing as many shareholders as possible this year. For those investors who are not able to attend the meeting in person, a video recording of the Portfolio Manager’s presentation will be uploaded to the website after the meeting. Shareholders can submit questions in advance by writing to the Company Secretary at info@frostrow.com.

I encourage all shareholders to exercise their right to vote at the AGM. The Board strongly encourages shareholders to register their votes online in advance. Registering your vote in advance will not restrict you from attending and voting at the meeting in person should you wish to do so, but as the past few years have shown, unforeseen extraordinary events can make attendance difficult or impossible. The votes on the resolutions to be proposed at the AGM will be conducted on a poll. The results of the proxy votes will be published following the conclusion of the AGM by way of a stock exchange announcement and on the Company’s website: www.biotechgt.com.

OUTLOOK

It has been a volatile few years for the biotechnology sector and the Company. 2020 and 2021 saw a surge in investment in healthcare and biotechnology driven by low interest rates, merger and acquisition (M&A) activity and of course, the COVID pandemic. In 2022, as interest rates and inflation rose, the pandemic waned and the valuations of smaller biotech companies fell to all-time lows. This generated a performance headwind for the Company.

In the past year, I am glad to report that there have been signs of recovery which are reflected in the Company’s good performance over the past year, with an increase in regulatory approvals and a potential revival in the IPO market. The challenges facing the sector are still present: regulatory hurdles, uncertainty around funding and more broadly, a difficult macroeconomic environment characterised by persistent inflation and high costs of capital. However, the global biotech industry is expected to continue its growth trajectory, with groundbreaking innovations and new technologies improving and saving lives, creating value for shareholders and, ultimately, driving performance. The Company is exposed to a wide variety of the most promising technologies.

Our Portfolio Manager and the Board are excited about the innovation taking place in the sector and the portfolio companies we hold. As a consequence, our overall investment strategy remains unchanged and, assuming relatively benign markets, we look forward with confidence to good long-term returns for the Company.

Roger Yates

Chair

4 June 2024

INVESTMENT PORTFOLIO

INVESTMENTS HELD AS AT 31 MARCH 2024

		Fair value	% of
Security	Country/Region#	£’000	investments
Biogen	USA	23,375	5.9
Janux Therapeutics	USA	18,291	4.6
Regeneron Pharmaceuticals	USA	17,365	4.4
Sarepta Therapeutics	USA	16,610	4.2
Amgen	USA	14,265	3.6
Avidity Biosciences	USA	13,735	3.5
Argenx**	Netherlands	13,580	3.5
Scholar Rock Holding	USA	12,757	3.2
Apellis Pharmaceuticals	USA	12,467	3.2
Vaxcyte	USA	12,383	3.1
Ten largest investments		154,828	39.2
Geron	USA	11,634	3.0
XtalPi*	China	11,460	2.9
Heron Therapeutics	USA	11,044	2.8
Syndax Pharmaceuticals	USA	11,000	2.8
Ionis Pharmaceuticals	USA	10,865	2.8
Rhythm Pharmaceuticals	USA	10,024	2.5
BioMarin Pharmaceutical	USA	9,472	2.4
Neurocrine Biosciences	USA	9,066	2.3
Mineralys Therapeutics	USA	8,664	2.2
Aerovate Therapeutics	USA	8,196	2.1
Twenty largest investments		256,253	65.0
Vera Therapeutics	USA	7,900	2.0
ALX Oncology Holdings	USA	7,863	2.0
Esperion Therapeutics	USA	7,038	1.8
Praxis Precision Medicines	USA	6,664	1.7
Morphic Holding	USA	6,629	1.7
Innovent Biologics	China	6,089	1.6
Compass Therapeutics	USA	5,570	1.4
Immatics	Germany	5,435	1.4
Vertex Pharmaceuticals	USA	5,392	1.4
Amicus Therapeutics	USA	5,305	1.3
Thirty largest investments		320,138	81.3
Krystal Biotech	USA	5,233	1.3
Arrowhead Pharmaceuticals	USA	5,146	1.3
Vir Biotechnology	USA	5,127	1.3
Tyra Biosciences	USA	4,974	1.3
Neumora Therapeutics	USA	4,955	1.3
Xenon Pharmaceuticals	Canada	4,951	1.3
Dyne Therapeutics	USA	4,495	1.1
Nkarta, Inc.	USA	4,398	1.1
BeiGene	China	4,098	1.0
Edgewise Therapeutics	USA	3,829	1.0
Forty largest investments		367,344	93.3
Lexicon Pharmaceuticals, Inc.^*	USA	3,747	1.0
CytomX Therapeutics	USA	2,900	0.7
Cytokinetics, Inc.	USA	2,551	0.6
Ventyx Biosciences	USA	2,201	0.6
Fate Therapeutics	USA	2,099	0.5
Exact Sciences	USA	2,061	0.5
10X Genomics	USA	1,781	0.5
Kezar Life Sciences	USA	1,375	0.3
Milestone Pharmaceuticals	Canada	1,350	0.3
Prelude Therapeutics	USA	1,300	0.3
Fifty largest investments		388,709	98.6

		Fair value	% of
Security	Country/Region#	£’000	investments
OrbiMed Asia Partners*†	Asia	1,122	0.3
Dynavax Technologies	USA	1,115	0.3
New Horizon Health***	China	860	0.2
YS Biopharma	China	850	0.2
Enliven Therapeutics	USA	653	0.2
Suzhou Basecare Medical	China	448	0.1
Gracell Biotechnologies CVR*	China	389	0.1
Stemirna Therapeutics*	China	219	0.1
Repare Therapeutics	Canada	181	0.0
Lyell Immunopharma, Inc.	USA	166	0.0
Sixty largest investments		394,712	100.1
Imara	USA	–	–
Total investments		394,712	100.1
OTC equity swaps - financed
Swaps	China	5,890	1.5
Less: Gross exposure on financed swaps		(6,308)	(1.6)
Total OTC swaps		(418)	(0.1)
Total investments including OTC swaps		394,294	100.0

All of the above investments are equities unless otherwise stated. Please refer to the glossary for a definition of financed swaps.

# Primary listing

† Partnership interest

* Unquoted investment

** Includes Argenx ADR (see glossary) amounting to £10,139,000

^* Including the unquoted element amounting to £1,948,000 (Lexicon Series A Convertible Preferred stock)

*** Shares suspended on 28 March 2024 due to a delay in the issuance of the company’s annual report for 2023.

PORTFOLIO BREAKDOWN

	Fair value	% of
Investments	£’000	investments
Quoted
Equities	379,574	96.3
	379,574	96.3
Unquoted
Equities	14,016	3.5
Partnership interest	1,122	0.3
	15,138	3.8
Derivatives
OTC equity swaps	(418)	(0.1)
Total investments	394,294	100.0

PERFORMANCE ATTRIBUTION FOR THE YEAR ENDED 31 MARCH 2024

Contribution to total returns	%	%
Benchmark return		5.0
Portfolio Manager’s contribution		20.6
Portfolio total return		25.6
Gearing	1.2
Management fee and other expenses	(1.2)
Share buyback	0.9
Total		0.9
Return on net assets		26.5%

PORTFOLIO MANAGER’S REVIEW

PERFORMANCE REVIEW

We are pleased to report that the Company delivered strong performance for the fiscal year ended 31 March 2024. The Company’s NAV per share total return was 26.5% during the fiscal year, compared with a 5.0% increase for the Company’s benchmark, the Nasdaq Biotechnology Index, measured on a sterling adjusted basis (the Benchmark).

Macroeconomic factors continued to dominate portfolio performance during most of the fiscal year. The fiscal year began with an auspicious start in April and May, with a number of biotech M&A transactions helping to improve sentiment in the small and mid-cap biotech space. However, from June through October, a string of positive economic news suggested that the U.S. Federal Reserve (the Fed) could leave interest rates “higher for longer” without tipping the economy into recession. This led to a gradual rise in 10-year U.S. government yields, which peaked at around 5% in October. The rise in interest rates pressured unprofitable, small cap technology stocks generally, including emerging biotech. In November and December, the Fed began telegraphing that it had finished raising interest rates and guided investors to rate cuts in 2024. This catalysed a sharp recovery in small and mid cap biotech stocks, coinciding with a drop in 10-year yields from 5% to 3.8% over the span of a couple of months. With the Fed signaling that it was done raising rates, investor sentiment towards small and mid cap biotech noticeably improved, leading to significant performance in that segment from November through February. Having said that, we recognise that the interest rate outlook remains variable, and the Fed will remain data-driven in its approach. In 2024, there were three successive monthly inflation readings that were a bit higher than expectations, so investor expectations for the timing and number of interest rate cuts became more muted towards the end of the fiscal year. We continue to believe that it is a question of “when, not if” those interest rate cuts will materialise, and we do not believe further interest rate hikes are likely. As macro dynamics stabilise, we believe this will create a conducive environment for stock selection, and fundamental research will be rewarded.

As we have noted over the past two years, our overweight positioning in smaller cap emerging biotech has been premised on three main investment points:

1) Emerging biotech valuations were driven to unprecedented lows in the performance drawdown beginning in early 2021, primarily due to rising interest rates. That drawdown occurred on both an absolute and relative basis versus the broader market and large cap biotech. We expected interest rate pressure ultimately to abate as inflation declined in the U.S., allowing stocks to recover to historical valuation levels.

2) We expected an increase in M&A activity due to: a) the compelling valuations of smaller biotech targets; and b) the urgent need on the part of “Big Pharma” to acquire biotech assets to address revenue gaps due to expected generic and biosimilar competition for their major blockbuster drugs in the second half of the decade.

3) Emerging biotech, rather than large cap biotech, is still contributing about two-thirds of the total biopharmaceutical industry pipeline. That segment of the biotech universe remains the primary driver of innovation for the sector, and importantly, the valuation correction that we have witnessed since early 2021 has not properly reflected the strong fundamental innovation delivered by these companies.

We were pleased to see that the long overdue recovery in smaller biotech began manifesting itself towards the end of the fiscal year. The portfolio’s heavier weighting in smaller cap stocks relative to the Benchmark, aided by some particularly strong individual stocks, led to the Company’s significant outperformance versus the Benchmark during the review period.

As shown in Figure 1 (on page 10 of the Annual Report), if one looks at the market cap distribution of the Company’s portfolio at the beginning of the fiscal year, the portfolio was 41% overweight small caps and 33% underweight large caps relative to the Benchmark. If one plots the average stock price performance of the Benchmark constituents in each of those market capitalisation categories, one observes that small cap biotech significantly outperformed large cap biotech by about 35% during the review period. Figure 2 (on page 11 of the Annual Report) shows the extent of small cap underperformance over a longer period, since 31 March 2021. Despite the strong performance of small caps since October 2023, we believe that there is still quite a bit of outperformance left to be generated by this segment. If interest rates begin declining over the next several months, we expect the performance gap between small cap and large cap stocks since 31 March 2021 to fully “close up” in the months ahead.

Our China holdings made an inconsequential contribution to performance during the fiscal year. Valuations in Chinese healthcare remain at depressed levels given the difficult economic environment in China and the persistence of geopolitical tensions between the U.S. and China. The Hang Seng Healthcare Index, which tracks Chinese healthcare companies on the Hong Kong exchange, trades at record lows. Having said that, we continue to like the fundamental outlook for Chinese biotech. Chinese central government support for biotech innovation in the country remains robust. Recent comments from the CEOs of Big Pharma companies like Pfizer and AstraZeneca have indicated their desire to increase their access to Chinese innovation. In fact, in December 2023, AstraZeneca announced its intention to acquire a Chinese cell therapy company called Gracell Biotechnologies, which was held in the portfolio, for $1.2 billion. Other examples of Western biopharmaceutical interest in Chinese innovation include Novartis’ recent acquisition of SanReno Therapeutics, a private Chinese company with two late-stage assets for immunoglobulin A nephropathy, and Bristol Myers Squibb’s licensure of a bispecific antibody-drug conjugate for cancer from Chinese company Sichuan Biokin Pharmaceuticals for an $800 million upfront payment. We continue to allocate a portion of the portfolio to investments in Chinese biotech (approximately 7.7% of the portfolio as of 31 March 2024). Just as U.S. small cap biotech has begun recovering from record lows, we believe a similar recovery can occur for Chinese biotech. We are comfortable with the current level of exposure and do not anticipate meaningfully increasing our China exposure until there is more stability on the macro front.

EMERGING BIOTECH VALUATIONS RECOVERING FROM UNPRECEDENTED LOWS

We have been encouraged to see the early stages of a recovery in small cap biotech from unprecedented absolute and relative valuations.

One proxy commonly used to track the performance of small and mid cap biotech is the XBI, an exchange traded fund created in 2006 that tracks an equal-weighted index of biotech companies. About 50% of this index consists of small cap names. If one plots the relative performance of the XBI versus the S&P 500 (shown in Figure 3 on page 12 of the Annual Report), one can see that since inception, the XBI has outperformed the S&P 500, indicating that emerging biotech has historically been a sector offering better returns than the broader market. Over the past 18 years, however, there have been short periods when the XBI has underperformed the S&P 500, shown by the red circles. Typically, these drawdown periods result in underperformance versus the S&P 500 of 30-45%. The most recent relative drawdown was 77%, making it the longest and largest drawdown of the XBI on both an absolute and relative basis. Prior drawdowns have been followed by periods of significant outperformance of the XBI versus the S&P 500, denoted by the green arrows on the graph, which usually results in the biotech index reclaiming prior outperformance highs. We believe the relative performance drawdown of the XBI versus the S&P 500 has likely run its course, as shown by some indications of stabilisation in Figure 3 (on page 12 of the Annual Report) over the past few months. We continue to expect small cap biotech to outperform the S&P 500 from current levels, just as it has rebounded historically.

Despite the nascent recovery in small cap biotech, absolute valuations remain at historically depressed levels. A significant number of biotech companies are still trading at negative enterprise values (i.e. market caps below the net cash on their balance sheets). As shown in Figures 4 and 5 (on page 13 of the Annual Report), we estimate close to 15% of the biotech universe, representing approximately 60 companies, is now trading at a negative enterprise value as of 31 March 2024. While there has certainly been an improvement on this metric coincident with the recent recovery in emerging biotech, we expect further valuation increases will restore levels to historical norms.

We believe the first interest rate cut by the Fed could be the trigger that catalyses a more full-fledged valuation recovery from currently depressed levels. At the current time, the Fed is still anticipating that rate cuts will begin in 2024. In the meantime, continued M&A activity and positive clinical developments should help the sector re-rate.

TOP AND BOTTOM FIVE CONTRIBUTORS TO NET ASSET VALUE PERFORMANCE FOR THE YEAR TO 31 MARCH 2024

		Contribution
		per share
Top Five Contributors	£’000	(pence)*
Vera Therapeutics	18,242	50.6
Scholar Rock Holding	14,957	41.5
Janux Therapeutics	11,182	31.0
Bellus Health#	9,002	25.0
Chinook Therapeutics#	6,942	19.3
	60,325	167.4

Top Five Detractors
Travere Therapeutics#	(9,905)	(27.5)
uniQure#	(6,891)	(19.1)
Biogen	(6,601)	(18.3)
Stemirna Therapeutics	(4,985)	(13.8)
Mersana Therapeutics#	(3,818)	(10.6)
	(32,200)	(89.3)

* Based on 36,041,496 shares being the weighted average number of shares in issue during the year ended 31 March 2024.

# Not held at the year end.

CONTRIBUTORS AND DETRACTORS

Vera Therapeutics, Scholar Rock Holding, Janux Therapeutics, Bellus Health, and Chinook Therapeutics were the leading positive contributors to performance in the portfolio during the year.

· Vera Therapeutics is a clinical-stage biotechnology company focused on developing and commercialising treatments for patients with serious immunological diseases. In July 2023, the company reported positive Phase 2a data for its lead asset atacicept in patients with IgA nephropathy (IgAN), an autoimmune disease in which antibodies build up in kidney tissue. In January 2024, additional positive data was presented, showcasing atacicept as a potential functional cure for IgAN.

· Scholar Rock Holding is a clinical-stage biotechnology company developing medicines that target myostatin, a protein that regulates muscle growth. The stock outperformed after the company announced in October that it will advance programs in obesity. This effort in obesity is intended to help individuals retain muscle mass in the context of GLP-1-targeted weight loss therapies, which are associated with both muscle and fat loss. In conjunction with the announcement of these new programs, Scholar Rock also completed an upsized public offering that extended its cash runway.

· Janux Therapeutics is a clinical-stage immuno-oncology company developing T-cell engager medicines. In February, shares rose following the release of positive Phase 1 data in prostate cancer, which suggested that the company may have a best-in-class asset. This data also suggested that Janux’s technology could be successfully applied to additional targets in tumor types such as lung, kidney, and head and neck cancer.

· Bellus Health is a clinical stage company developing camlipixant for the treatment of refractory chronic cough. In mid-April, GlaxoSmithKline agreed to acquire the company for $2 billion in cash, representing a 103% premium to Bellus' share price prior to the announcement.

· Chinook Therapeutics is a clinical-stage biopharmaceutical company focused on discovering, developing, and commercialising precision medicines for kidney diseases. In June, Novartis agreed to acquire the company for up to $3.5 billion, a ~67% premium to Chinook’s last closing price.

Travere Therapeutics, uniQure, Biogen, Stemirna Therapeutics, and Mersana Therapeutics were the principal detractors for the year.

· Travere Therapeutics is a commercial-stage biotechnology company focused on rare diseases. In late September, the company’s two-year Phase 3 trial showed a numerical benefit for its drug Filspari versus standard of care on kidney function, but missed statistical significance by a narrow margin in patients with IgA nephropathy. Filspari was subsequently approved under Accelerated Approval, but the commercial launch has been slower than expected.

· uniQure is a clinical-stage gene therapy company that focuses on neurological disorders. In June, the company showed interim data from its Phase 1/2 trial of its gene therapy for Huntington’s disease, a genetic disorder that causes breakdown of nerve cells in the brain, that fell below investor expectations.

· Biogen is a large cap biotechnology company with a pipeline of commercial and clinical stage treatments for neurological and neurodegenerative diseases. The company’s stock declined due to a slower-than-expected launch of Leqembi, its first-in-class treatment for Alzheimer’s disease.

· Stemirna Therapeutics is a private Chinese biotech company developing mRNA-based vaccines and therapeutics. The Company initially invested in Stemirna in 2021 because it was developing one of the leading domestic mRNA-based COVID vaccines in China at a time when no mRNA-based vaccines had yet been approved in China. Given that the commercial opportunity for COVID vaccines has diminished substantially, Stemirna decided to abandon its COVID program and focus on its earlier-stage programs, including a personalised cancer vaccine in Phase I. As a result, the company’s next financing round will likely be done at a substantial discount to its last round. The Company’s third-party valuation agent, Kroll, recommended an appropriate write-down to reflect this update.

· Mersana Therapeutics is a clinical stage company developing antibody-drug conjugate therapeutics. At the end of July, the company’s shares declined when the company announced that its lead asset, UpRi, had failed to show a significant benefit in late-stage ovarian cancer patients.

REGULATORY CLIMATE CONTINUES TO BE CONSTRUCTIVE

The U.S. Food and Drug Administration (FDA) regulatory environment for the approval of novel drugs remains constructive. Since the first year of the Trump administration in 2017, we have witnessed an elevated level of new drug approvals at the FDA. In fact, as shown in Figure 7 (on page 16 of the Annual Report), 2023 was a record year for FDA new drug approvals (including biologics approved at FDA’s biologics division and drugs approved by the FDA’s traditional drug division). The increased number of approvals likely reflects a combination of increased innovation in the sector and continued agency flexibility on approval requirements. The FDA has generally been proactive about approving new drugs quickly if they address unmet medical needs, even if some of the clinical trials have delivered mixed results. About 65% of drug approvals in 2023 used an expedited means of approval, whether it be Fast Track, Breakthrough Designation, Priority Review, or Accelerated Approval. We do not foresee any change to this favourable regulatory climate, regardless of who is elected president in the U.S. in November 2024.

EXPECT SOME ELECTION YEAR NOISE ON DRUG PRICING BUT NOTHING MATERIAL IN THE NEAR TERM

With the upcoming U.S. presidential election in November 2024, we expect both presidential candidates, Joe Biden and Donald Trump, to discuss ways in which they might reduce drug prices if elected. We view this as campaign-related rhetoric to attract votes and do not foresee any substantive legislative changes on this issue post-election. In 2022, the Biden administration signed into law the Inflation Reduction Act (the IRA), which granted Medicare the authority to negotiate drug prices. Given that this law already addresses the drug pricing issue, we think it would be unlikely that Congress would revisit the topic again post-election. Additionally, any further adverse drug pricing legislation would likely require the Democrats to control both chambers of Congress and the presidency, which is highly uncertain at the current time. Meanwhile, Big Pharma has launched numerous legal challenges against the government to overturn the law and the drug industry continues to engage in intense lobbying to soften some of the IRA’s requirements. From an M&A perspective, the IRA may actually assist the biotech industry. The prospect of Medicare-related price cuts on key products for Big Pharma only increases the need of those companies to acquire biotech companies to maintain earnings growth.

FINANCING ACTIVITY SURGING WITH CONFIDENTIALLY MARKETED TRANSACTIONS OFFERING OUTSIZED RETURNS

After a relatively quiet 2022 and the first half of 2023, initial public offerings (IPOs) have begun increasing again as valuations have recovered. The Company has selectively participated in some IPOs thus far and will continue to do so. We did not make any new private investments during the fiscal year as the IPO market is still in the early stages of opening up, and we want to make sure any private investment we make has an opportunity to go public within the next 12 months. We continue to monitor the receptivity of the capital markets and will resume making crossover investments once we feel the IPO window has conclusively opened.

As of 31 March 2024, the Company had two private company investments totaling approximately 3.2% of the Company’s NAV. Both of the positions are Chinese biotech companies: XtalPi, an artificial intelligence-based drug discovery company, and Stemirna Therapeutics, a Chinese mRNA vaccine company. During the fiscal year, as explained above, Kroll recommended (and the Board approved, following a recommendation from the Valuation Committee) a significant write-down on Stemirna given the company’s pivot away from its mRNA COVID vaccine due to the lack of commercial demand. XtalPi still hopes to go public in 2024.

The follow-on financing environment for quality emerging biotech companies remained relatively strong throughout the fiscal year, capped by a particularly strong quarter ending 31 March 2024. In general, companies with strong fundamentals have had no problems raising capital from equity investors, while companies of lesser quality have continued to find fundraising difficult.

Recently, there has been an increasing trend of companies conducting confidentially marketed offerings to a select number of potential investors. To attract further interest from healthcare investors, companies are disclosing confidential information about their programs as part of the process, including clinical trial data and other material information. The investors that participate are restricted from trading in the stock while they conduct diligence on the investment opportunity before the financing is disclosed to the public. Given OrbiMed’s longstanding presence in the healthcare investment space, the firm is regularly invited to participate in many of these deals, averaging four to five deals per week. We would note that in most cases only a handful of investment firms are informed of these confidential financings; they are not broadly offered to the wider investment community. We have been extremely selective in participating in these deals and only invest in a small minority of them.

Some recent financings where we were able to take advantage of this fundraising paradigm include:

1) In October 2023, we invested $8.5 million in an equity offering for Scholar Rock Holdings. The company shared confidentially the launch of a new obesity program with its anti-myostatin antibody, which has shown promising weight-reduction effects in mice while preserving lean muscle mass. Our holding in Scholar Rock contributed approximately 4.6% to NAV performance for the fiscal year.

2) In July 2023, we invested $2.2 million in a confidentially marketed financing for Janux Therapeutics. The company shared some encouraging early data for its T-cell engager in prostate cancer as part of our investment due diligence. We added to our position after the financing. A positive update on the prostate cancer dataset was subsequently released in February 2024, leading to a sharp rise in the stock. Our holding in Janux Therapeutics contributed approximately 5.5% to NAV performance for the fiscal year.

3) In August 2023, we invested $4.7 million in an offering for Mirati Therapeutics. Prior to the deal, the company shared confidentially updated data for its drug, Krazati, in lung cancer, promising initial data for a PRMT5 inhibitor for cancer, and news of a CEO change. All of this news was released to the marketplace simultaneously with news of the completed financing. The stock reacted positively to the news and two months later, Bristol Myers Squibb announced that it was acquiring Mirati for $5.8 billion. Our holding in Mirati contributed approximately 1.2% to NAV performance for the fiscal year.

We will continue to leverage the firm’s access to confidentially marketed deal flow to make attractive investments.

M&A ACTIVITY CONTINUES TO BE ROBUST

Biotech M&A activity continued to be robust during the fiscal year, driven by: 1) the low valuations of biotech targets; and 2) the urgent need of Big Pharma to acquire new products to replace lost revenues from expected patent expirations in the second half of the decade.

BIOTECH M&A CONTINUING AT ELEVATED RATE

The Company benefited directly from six M&A transactions during the fiscal year because of holdings at the time of the announcement in the target companies:

· GlaxoSmithKline’s acquisition of Bellus Health for $2 billion;

· Novartis’ acquisition of Chinook Therapeutics for $3.5 billion;

· Eli Lilly’s acquisition of DICE Therapeutics for $2.4 billion;

· Bristol Myers Squibb’s acquisition of Mirati Therapeutics for $5.8 billion;

· AstraZeneca’s acquisition of Gracell Biotechnologies for $1.2 billion; and

· Johnson & Johnson’s acquisition of Ambrx Biopharma for $2 billion.

Though many transactions have occurred, many Big Pharma companies still need to do more to shore up their pipelines. Acquirors are typically looking for biotech companies with drugs that have already demonstrated proof of concept in a clinical trial and have commercial potential in excess of $1 billion in sales. Strategic fit with the acquirors’ existing therapeutic areas of focus and strong intellectual property are additional considerations. As shown in Figure 13 (on page 21 of the Annual Report), we estimate close to $270 billion of blockbuster drug sales are at risk of generic or biosimilar competition by the end of the decade, including mega-blockbusters like Merck’s Keytruda and Bristol Myers Squibb’s Eliquis. We believe there are many holdings in the portfolio that would make suitable M&A targets for larger companies.

BIG PHARMA PATENT CLIFF DRIVES BIOTECH M&A

Company	Drug	US Loss of Exclusivity (Projected)	'23 Global Sales ($bn)
Merck	Keytruda	2028	$25.0
Bristol Myers Squibb & Pfizer	Eliquis	2026	$12.2
Sanofi	Dupixent	2029	$11.6
Johnson & Johnson	Stelara	2025	$10.9
Johnson & Johnson	Darzalex	2029	$9.7
Bristol Myers Squibb	Opdivo	2028	$9.0
Abbvie & Johnson & Johnson	Imbruvica	2027	$4.9
Pfizer	Ibrance	2027	$4.8

Source: S&P Global report, company reports

STRONG INNOVATION CONTINUES TO DRIVE INDUSTRY VALUE

Innovation remains strong for the biotech industry. A significant proportion of the 67 drug approvals by the FDA in 2023 consisted of first-in-class drugs with mechanisms of action different from those of existing therapies. While biotech has generally been a high-risk sector, these approvals of drugs based on previously unproven modalities show that the sector is maturing. Below are just some examples of first-in-class novel drug approvals originated by biotech companies in 2024:

· Casgevy, the first gene-editing CRISPR-based treatment ever approved, for sickle cell disease (Vertex Pharmaceuticals/CRISPR Therapeutics);

· Roctavian, the first gene therapy approved for hemophilia A (BioMarin Pharmaceuticals);

· Elevidys, the first gene therapy approved for Duchenne muscular dystrophy (Sarepta Therapeutics);

· Vyjuvek, the first topical gene therapy ever approved, for dystrophic epidermolysis bullosa (Krystal Biotech);

· Daybue, the first treatment for Rett syndrome (Acadia Pharmaceuticals);

· Skyclarys, the first treatment for Friedrich’s ataxia (Biogen); and

· Zurzuvae, the first oral medication for postpartum depression (Sage Therapeutics/Biogen).

The number of next generation biotherapeutics entering development based on novel development technologies like cell therapy and gene therapy continues to rise. The Company has exposure across a wide swath of these new technologies, as shown below (note some positions are double counted because they use more than one technology):

Other seminal events in the biotech sector during the review period include:

· Argenx announced positive Phase 3 data for Vyvgart, an anti-FcRN antibody, in chronic inflammatory demyelinating polyneuropathy (CIDP), an autoimmune disease that causes muscle weakness. Vyvgart is expected to become the first novel treatment for CIDP approved in over 10 years.

· MoonLake Immunotherapeutics reported best-in-class Phase 2 efficacy and safety data for its anti-IL17 nanobody sonelokimab in hidradenitis suppurativa, a painful chronic skin condition that causes skin abscesses and scarring of the skin.

· Crinetics Pharmaceuticals announced a positive Phase 3 trial for paltusotine, the first once-daily oral medication for the treatment of acromegaly, a rare condition where the body produces too much growth hormone.

· Cytokinetics reported best-in-class Phase 3 safety and efficacy data for aficamten, a cardiac myosin inhibitor, for the treatment of obstructive hypertrophic cardiomyopathy, a disease that causes impaired heart function. The results of the study showed that aficamten improved exercise capacity and increased peak oxygen uptake relative to a placebo.

While innovation is taking place across all therapeutic areas and drug development technologies, we are currently finding particularly attractive investment opportunities in the following areas:

Obesity

Eli Lilly and Novo Nordisk have generated significant sales for their obesity drugs and sell-side analysts now expect the therapeutic category to reach $100+ billion in sales in 2030. Because those two companies are considered to be Big Pharma companies, we have not held them in our biotech portfolio. Given the commanding lead that Eli Lilly and Novo Nordisk have established and the fact that their pipeline assets have already shown weight loss of 20-25%, our view is that biotech companies will need to differentiate based on mechanism of action, tolerability, or some other significant aspect in order to take market share. Some examples of biotech companies held in the portfolio as of 31 March 2024 that have obesity programs include:

· Scholar Rock Holding - Current GLP-1 agents cause people to lose both fat mass and muscle mass. Scholar Rock is developing an anti-myostatin antibody that could be dosed in conjunction with GLP-1 agents in order to preserve muscle mass. We like the fact that this agent would not directly compete with the leading assets from Eli Lilly and Novo Nordisk but would instead be used as a companion therapeutic that could ride on the coattails of those agents.

· Innovent - Innovent is a leading Chinese biotech company that is developing mazdutide, a GLP-1/GPCR dual agonist, for obesity in Phase 3 trials in China. We believe Innovent will be first-to-market with a new branded agent in obesity among domestic companies in China and should therefore take a significant share in that market.

· BrightGene Bio-Medical Technology - BrightGene is a Chinese biotech developing a dual GLP-1/GIP agent for obesity in Phase 2. We believe the drug could deliver better efficacy than Eli Lilly’s Mounjaro/Zepbound.

· Lexicon Pharmaceuticals - Lexicon announced a weight loss agent with a novel mechanism of action targeting ACLS5 in April 2024 during its analyst day.

· Amgen - Amgen is a large cap biotech company developing an obesity agent called MariTide that could be dosed on a once-monthly basis rather than on a weekly basis.

· Regeneron Pharmaceuticals - Regeneron is a large cap biotech company that is developing antibodies against myostatin and activin A to preserve lean muscle mass as an adjunct treatment for GLP-1 agents.

Oligonucleotide Therapeutics

Oligonucleotides are short strands of DNA or RNA that can be administered to patients to allow them to express a new protein or to block expression of a patients’ genes for therapeutic effect. Some examples of biotech companies held in the portfolio as of 31 March 2024 that have oligonucleotide therapeutics include:

· Sarepta Therapeutics - Sarepta Therapeutics is a leader in precision genetic medicine for rare diseases. It currently has three commercial RNA-based products for Duchenne muscular dystrophy (DMD), and it has the first FDA-approved gene therapy, Elevydis, for this devastating disease. Elevidys is only approved for 4-5 year olds currently, but we believe it is likely to secure a broader label this year that will allow it to be marketed to all age groups.

· Ionis Pharmaceuticals - Ionis Pharmaceuticals is a leader in RNA-targeted therapeutics. The company has made tremendous progress in the last 12 months - pivoting from a clinical stage company to an independent commercial organisation. The company’s marketed products include Qalsody for SOD1-amyotrophic lateral sclerosis, Spinraza for spinal muscular atrophy, and Wainua for TTR polyneuropathy. The next wave of late-stage products include donidalorsen for hereditary angioedema and olezarsen for familial chylomicronemia syndrome.

· Dyne Therapeutics - Dyne Therapeutics is a clinical-stage muscle disease company with a proprietary FORCE™ platform to deliver antisense oligonucleotides conjugated to antigen-binding fragments to muscle tissues. Its lead program in myotonic dystrophy Type 1 (DM1) has demonstrated best-in-class efficacy in improving patient function.

· Avidity Biosciences - Avidity Biosciences is an emerging biotech company developing first-in-class antibody oligonucleotide conjugates which combine the tissue selectivity of monoclonal antibodies with the precision of oligonucleotide-based therapies. It is leading the field with clinical development programs for three rare muscle diseases: myotonic dystrophy type 1 (DM1), Duchenne muscular dystrophy (DMD), and facioscapulohumeral muscular dystrophy (FSHD).

Oncology

Oncology remains the largest therapeutic area of drug development for the biopharmaceutical industry given the significant unmet need that still exists. Some examples of biotech companies held in the portfolio as of 31 March 2024 that have novel approaches to treating cancer include:

· Geron - Geron is a clinical stage oncology company developing imetelstat, a telomerase inhibitor. In 2023, Geron announced positive Phase 3 trial results in low-risk myelodysplastic syndrome (MDS), an indication with few effective options for patients. If approved, imetelstat would become the first ever FDA-approved telomerase inhibitor. We believe that the commercial launch of imetelstat will be successful, driven by broad uptake among academic and community physicians seeking to treat a large fraction of low-risk MDS patients.

· Janux Therapeutics - Janux is developing a bispecific T-cell engager that has shown compelling early data in prostate cancer. The company’s masking technology allows its bispecific to preferentially activate the immune system at the site of the tumor, facilitating tumor-specific killing and reducing toxicity to healthy tissue. The platform has potential broad applicability to a range of solid tumors.

· ALX Oncology - ALX Oncology is developing a CD47 immune checkpoint inhibitor to turn off one of the mechanisms by which cancer cells evade the immune system. The company combines its therapy with anti-cancer antibodies as well as antibody-drug conjugates to enhance its effectiveness. ALX has recently shown that its drug combined with the standard of care in later line gastric cancer significantly increased the number of patients that had their tumors shrink relative to patients on the standard of care alone.

STRATEGY, OUTLOOK, AND ORBIMED UPDATE

We are encouraged that the recovery in small and mid cap biotech that we have been predicting for the past couple of years finally appears to be manifesting itself. Strategy-wise, we intend to remain overweight small caps and underweight large caps versus the Benchmark, as we believe we are still in the early stages of an emerging biotech recovery from depressed valuation levels. Having said that, we are cognisant that the interest rate picture in the U.S. can change rapidly, leading to short-term volatility in the portfolio. Our aim is to identify quality companies with promising drugs that can generate value regardless of market conditions.

From a risk management perspective, we diversify the portfolio by stage of company, geography (U.S., Europe, China), therapeutic area, and drug development technology. We manage much of the idiosyncratic risk via prudent position sizing. When we hold stocks into binary events like a pivotal clinical trial result, we size the positions to minimise downside risk in case the events turn out to be negative. The biotech sector is a rapidly changing industry with stock-moving catalysts occurring on a daily basis, whether it is a clinical trial result, a regulatory decision, or an earnings result. Frequently a clinical trial result for one company not only affects the share price of that company but also the share prices of any competitors in the field. Because the portfolio is tilted towards more volatile smaller stocks, turnover in the portfolio is relatively high in order to successfully navigate these catalysts in a prudent way. The annual one standard deviation move in a small cap biotech stock is roughly 78%. Most small cap biotech companies’ entire valuation depends on the success or failure of a single lead asset. As a result, we regularly trade around positions (trimming high, adding low) to ensure position sizes appropriately reflect risk/reward, especially in advance of binary events. The turnover in the portfolio during the fiscal year was 102% and shareholders should expect that level of turnover going forward. The portfolio had an average of 56 positions during the fiscal year and we added 20 names and exited 17 names over the course of the year. In addition, we made an intra-period entry and exit in nine stocks during the fiscal year (i.e. we initiated a new position in a stock and sold the stock completely during the fiscal year). The turnover reflects valuation discipline and appropriate risk management. Gearing will remain in the 5-10% range.

There were no significant changes to the OrbiMed research team during the fiscal year. Despite the macro volatility, we remain focused on the fundamentals of each company that we invest in and remain committed to delivering the best returns for the Company’s shareholders. We continue to believe that the valuation disconnect we are currently observing in the sector provides an excellent entry point for long-term investors seeking to invest in the breakthrough innovation in biotech.

OrbiMed Advisors LLC

Portfolio Manager

4 June 2024

BUSINESS REVIEW

The Strategic Report contains a review of the Company’s business model and strategy, an analysis of its performance during the financial year and its future developments, as well as details of the principal risks and challenges it faces.

Its purpose is to inform shareholders and help them to assess how the Directors have performed their duty to promote the success of the Company. The Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the date of this report. Such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information.

BUSINESS MODEL

The Biotech Growth Trust PLC is an externally managed investment trust and its shares are listed on the premium segment of the Official List and traded on the main market of the London Stock Exchange.

The purpose of the Company is to achieve long-term growth in its shareholders' wealth by providing a vehicle for investors to gain exposure to a portfolio of worldwide biotechnology companies, through a single investment.

The Company’s strategy is to create value for shareholders by addressing its investment objective. As an externally managed investment trust, all of the Company's day-to-day management and administrative functions are outsourced to service providers. As a result, the Company has no executive directors, employees or internal operations.

The Company employs Frostrow Capital LLP (Frostrow) as its Alternative Investment Fund Manager (AIFM), OrbiMed Capital LLC (OrbiMed) as its Portfolio Manager, J.P. Morgan Europe Limited as its Depositary and J.P. Morgan Securities LLC as its Custodian and Prime Broker. Further details about their appointments can be found in the Report of the Directors.

The Board is responsible for all aspects of the Company’s affairs, including setting the parameters for and monitoring the investment strategy as well as the review of investment performance and policy.

The Company is an investment company within the meaning of Section 833 of the Companies Act 2006 and has been approved by HM Revenue & Customs as an investment trust (for the purposes of Section 1158 of the Corporation Tax Act 2010). As a result, the Company is not liable for taxation on capital gains. The Directors believe that approval will continue to be retained. The Company is not a close company for taxation purposes.

INVESTMENT OBJECTIVE AND POLICY

The Company 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.

In connection with the investment policy, the following guidelines apply:

· 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 unquoted investments at the time of acquisition. This limit includes any investment in private equity funds managed by the Portfolio Manager or any affiliates of such entity.

· The Company may invest or commit for investment a maximum of U.S.$15 million, after the deduction of proceeds of disposal and other returns of capital, in private equity funds managed by the Portfolio Manager, or any affiliates thereof.

· The Company’s borrowing policy is that borrowings will not exceed 20% of the value of the Company’s net assets. Any loan facility in place from time to time may be drawn by the Portfolio Manager overseen by the AIFM.

· The Company may be unable either to invest directly or invest efficiently in certain countries or share classes. In these circumstances, the Company may gain exposure by investing indirectly through swaps or other derivative instruments where it is more efficient to do so. Exposure to underlying investments thus obtained will count towards and be subject to the investment limits set out above. Further, where the Company invests via swaps or derivatives for such a purpose, exposure to these financial instruments will count towards and be subject to the limits on the use of derivatives and equity swaps set out below.

· In line with the Investment Objective, derivatives are employed, when appropriate, in an effort to enhance returns and to improve the risk-return profile of the Company’s portfolio. The Board has set the following limits within which derivative exposures are managed:

· Derivative transactions (excluding equity swaps) can be used to mitigate risk and/or enhance return and will be restricted to an aggregate net exposure of 5 per cent. of the value of the gross assets measured at the time of the relevant transaction;

· Equity swaps may be used for efficient portfolio management purposes and aggregate net counterparty exposure through a combination of derivatives (as set out in the previous bullet point) and equity swap transactions is restricted to 12 per cent. of the value of the gross assets of the Company at the time of the transaction.

In accordance with the requirements of the Financial Conduct Authority, any material change to the investment policy will only be made with the approval of shareholders by ordinary resolution.

INVESTMENT STRATEGY

The implementation of the Investment Objective has been delegated to OrbiMed by Frostrow (as AIFM) under the Board’s and Frostrow’s supervision and guidance.

Details of OrbiMed’s investment strategy and approach are set out in the Portfolio Manager’s Review. While performance is measured against the Benchmark, the Board encourages OrbiMed to manage the portfolio without regard to the Benchmark and its make-up.

While the Board’s strategy is to allow flexibility in managing the investments, in order to manage investment risk it has imposed the various investment, gearing and derivative guidelines and limits, within which Frostrow and OrbiMed are required to manage the investments, as set out in the Investment Policy.

PERFORMANCE MEASUREMENT

The Board measures OrbiMed's performance against the Nasdaq Biotechnology Index (sterling adjusted). The Board also monitors the Company's performance against its peer group.

The Board is recommending to shareholders a change to the Benchmark Index. Please refer to the Chair's Statement beginning for further information.

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.

No dividends were paid or declared during the year (2023: None).

CONTINUATION OF THE COMPANY

An opportunity to vote on the continuation of the Company is given to shareholders every five years. The next such continuation vote will be proposed at the Annual General Meeting to be held in 2025.

COMPANY PROMOTION

The Company has appointed Frostrow to provide marketing and investor relations services, in the belief that a well-marketed investment company is more likely to grow over time, have a more diverse, stable list of shareholders and its shares will trade closer to the net asset value per share over the long term. Frostrow actively promotes the Company in the following ways:

Engaging regularly with institutional investors, discretionary wealth managers and a range of execution-only platforms: Frostrow regularly meets with institutional investors, discretionary wealth managers and execution-only platform providers to discuss the Company’s strategy and to understand any issues and concerns, covering both investment and corporate governance matters;

Making Company information more accessible: Frostrow works to raise the profile of the Company by targeting key groups within the investment community, holding periodic investment seminars, commissioning and overseeing PR output and managing the Company’s website and wider digital offering, including Portfolio Manager videos and social media;

Disseminating key Company information: Frostrow performs the Investor Relations function on behalf of the Company and manages the investor database. Frostrow produces all key corporate documents, distributes monthly fact sheets, annual and half yearly reports and updates from OrbiMed on the portfolio and market developments; and

Monitoring market activity, acting as a link between the Company, shareholders and other stakeholders: Frostrow maintains regular contact with sector broker analysts and other research and data providers, and conducts periodic investor perception surveys, liaising with the Board to provide up-to-date and accurate information on the latest shareholder and market developments.

KEY PERFORMANCE INDICATORS (KPIs)

The Board assesses the Company’s performance in meeting its objective against the following KPIs:

· net asset value total return;

· share price total return;

· share price discount to net asset value per share; and

· ongoing charges.

A full description of the Company’s performance is provided in the Chair’s Statement and the Portfolio Manager’s Review and a record of these measures is shown on pages 1, 5 and 6 of the Annual Report. The KPIs have not changed from the prior year:

NET ASSET VALUE PER SHARE TOTAL RETURN^

The Directors regard the Company’s net asset value per share total return as being the overall measure of value generated by the Portfolio Manager over the long term. The Board considers the principal comparator to be the Nasdaq Biotechnology Index (sterling adjusted) (the Benchmark). OrbiMed’s investment style is such that performance is likely to deviate from that of the Benchmark.

During the year under review, the Company’s net asset value per total share return was 26.5%, outperforming the Benchmark by 21.5% (2023: -11.0%, underperforming the Benchmark by 16.4%). Since OrbiMed’s date of appointment (19 May 2005) to 31 March 2024, the Company’s net asset value per share total return is 983.3% compared with 840.9% for the Benchmark.

SHARE PRICE TOTAL RETURN^

The Directors also regard the Company’s share price total return to be a key indicator of performance. This reflects the Company's share price growth which the Board recognises is important to investors.

During the year under review the Company’s share price total return was 27.1% (2023: -12.8%). Since OrbiMed’s date of appointment (19 May 2005) to 31 March 2024, the Company’s share price total return is 955.7% compared with Benchmark performance of 840.9%.

^ Alternative Performance Measure (See glossary).

SHARE PRICE (DISCOUNT)/PREMIUM TO NET ASSET VALUE PER SHARE^

The Board regularly reviews the level of the discount/ premium of the Company’s share price to the net asset value per share and considers ways in which share price performance may be enhanced, including the effectiveness of marketing, share issuance and buybacks, where appropriate. The Board has a discount control mechanism in place, the aim of which is to prevent the level of the share price discount to the net asset value per share exceeding 6%. Shareholders should note, however, that it remains possible for the discount to be greater than 6% on any one day due to sector volatility and the fact that the share price continues to be influenced by the overall supply of and demand for the Company’s shares in the secondary market. Any decision to repurchase shares is at the discretion of the Board. 5,205,221 shares were repurchased by the Company during the year (2023: 2,421,263).

When the Company's shares trade at a premium to the net asset value per share, new shares can be issued at a premium to the net asset value per share.

The Board believes that the benefits of issuing new shares in such conditions are as follows:

· to fulfil excess demand in the market in order to help manage the premium at which the Company’s shares trade to net asset value per share;

· to provide a small enhancement to the net asset value per share of existing shares through new share issuance at a premium to the estimated net asset value per share;

· to grow the Company, thereby spreading operating costs over a larger capital base, which should reduce the ongoing charges ratio; and

· to improve liquidity in the market for the Company’s shares.

As the Company's shares traded at a discount to the net asset value per share throughout the year, no new shares were issued during the year (2023: Nil).

The volatility of the net asset value per share in an asset class such as biotechnology is a factor over which the Board has no control. The making and timing of any share buy-backs or share issuance is at the absolute discretion of the Board.

ONGOING CHARGES^

Ongoing charges represent the costs that the Company can reasonably expect to pay from one year to the next, under normal conditions. The Board continues to be conscious of expenses and seeks to maintain a sensible balance between high quality service and costs. The Board therefore considers the ongoing charges ratio to be a KPI and reviews the figure on a regular basis.

As at 31 March 2024 the ongoing charges figure was 1.2% (2023: 1.1%).

^ Alternative Performance Measure (see glossary).

RISK MANAGEMENT

The Board is responsible for managing the risks faced by the Company. Through delegation to the Audit Committee, the Board has established procedures to manage risk, to review the Company’s internal control framework and to establish the level and nature of the principal risks the Company is prepared to accept in order to achieve its long-term strategic objective. The Audit Committee has carried out a robust assessment of the principal and emerging risks with the assistance of Frostrow (the AIFM). A risk management process has been established to identify and assess risks, their likelihood and the possible severity of impact. Further information is provided in the Audit Committee Report. These principal risks and the ways they are managed or mitigated are set out on the following pages.

PRINCIPAL RISKS AND UNCERTAINTIES		MANAGEMENT/MITIGATION
MARKET RISK		(No change)
The Company’s portfolio is exposed to fluctuations in market prices (changes in broad market measures, individual security prices and foreign exchange rates) in the biotechnology sector and the regions in which it invests, which may result in a reduction in assets due to market falls and higher volatility. The biotechnology sector has historically been more volatile than other equity sectors, reflecting factors inherent in biotech companies, including emerging technologies, uncertainty of drug approval outcomes, regulatory and pricing policy. More generally, geopolitical and economic uncertainties have affected markets globally and are likely to continue to do so. These include the continued impact of the war in Ukraine and the effect of sanctions against Russia, tensions between the US/ West and China, and the Israel/Palestine conflict. New regulations designed to combat climate change and uncertainties associated with shifts in population and resource availability/demand may also have an impact on global markets. In addition, climate change events could have an impact on the business models of the portfolio companies and their operations. Broad economic risks include prolonged inflation and elevated interest rates, slowing global economic growth and the fear or presence of recession.		To an extent, this risk is accepted as being inherent to the Company's activities. However, the Board has set limits in the investment policy which ensure the portfolio is diversified. Compliance with the limits and guidelines contained in the Company’s investment policy is monitored daily by Frostrow and OrbiMed and reported monthly to the Board. OrbiMed report at each Board meeting on the Company’s performance including the impact of wider market trends and events. The Portfolio Manager spreads investment risk over a wide portfolio of investments. At the year end the Company’s portfolio comprised investments in 62 companies. As part of its review of the going concern and long-term viability of the Company, the Board considers the sensitivity of the portfolio to changes in market prices and foreign exchange rates (see note 14) and the ability of the Company to liquidate its portfolio if the need arose. Further details are included in the Going Concern and Viability Statements. The Board monitors and challenges the Portfolio Manager's awareness of emerging climate change risks and the resources they have devoted to assessing climate risks. The Board is conscious that climate change poses a general risk to the investment environment and, through discussions with the Portfolio Manager, has noted that the biotechnology industry is not a major contributor to greenhouse gas emissions. For this reason, the Portfolio Manager does not consider climate change to be a material ESG consideration when engaging with investee companies. However energy management is noted as a material concern in the wider healthcare and pharmaceutical sectors, and this forms part of OrbiMed’s ESG monitoring.
PORTFOLIO PERFORMANCE		(No change)
Investment performance may not achieve the Investment Objective and the value of the investments held in the portfolio may fall materially out of line with the sector. The Portfolio Manager’s approach is expected to lead to performance that will deviate from comparators, including both market indices and other investment companies investing in the biotechnology sector.		The Portfolio Manager has responsibility for selecting investments in accordance with the Investment Objective and Policy and seeks to ensure that investments in individual stocks fall within acceptable risk levels. To manage this risk, the Board: · reviews and challenges, at each Board meeting, reports from OrbiMed which cover portfolio composition, asset allocation, concentration and performance; · reviews investment performance over the long term against the Benchmark and the Company's peer group; and · formally reviews OrbiMed's appointment, including their performance, service levels and contractual arrangements, each year.
SHARE PRICE PERFORMANCE		(No change)
The risk that the Company’s share price is not representative of its underlying net assets.		To manage this risk, the Board: · regularly reviews the level of the share price discount/premium to the net asset value per share and considers ways in which share price performance may be enhanced, including the effectiveness of marketing and investor relations services, new share issuance and share buybacks, as appropriate; · has implemented a discount management policy, buying back the Company’s shares when the level of the share price discount to the net asset value per share exceeds 6% (in normal market conditions). · may issue shares at a premium to the net asset value per share to help prevent a share price premium reaching too high a level; · reviews an analysis of the shareholder register at each Board meeting and is kept informed of shareholder sentiment; and · regularly discusses the Company’s future development and strategy with the Portfolio Manager and the AIFM.
CYBER RISK		(No change)
Cyber crime may lead to the disruption or failure of systems covering dealing, trade processing, administrative services, financial and other operational functions.		The Board relies on controls in place at OrbiMed, Frostrow, J.P. Morgan, Link and other third-party service providers. Audit Committee reviews the internal controls reports of the principal service providers, as well as their data storage and information security arrangements.
KEY PERSON RISK		(Decreased)
The risk that the individuals responsible for managing the Company’s portfolio may leave their employment or may be prevented from undertaking their duties.		The Board manages this risk by: · appointing OrbiMed, who in turn have appointed Geoff Hsu and Josh Golomb to manage the Company’s portfolio. Mr Hsu and Mr Golomb are supported by a team of researchers and analysts dedicated to the biotechnology sector; · receiving reports from OrbiMed at each Board meeting, which include any significant changes in the make-up of the team supporting the Company; · meeting the wider team at OrbiMed’s offices and encouraging the participation of the wider OrbiMed team in investor updates; and · delegating to the Management Engagement Committee the responsibility to perform an annual review of the service received from OrbiMed, including, inter alia, the team supporting the lead managers and their succession plans. In light of the successful introduction of Mr Golomb as co-portfolio manager, the Board considers that this risk has reduced during the year.
VALUATION RISK		(Decreased)
Pursuant to the Investment Policy, the Company may invest up to 10% of its gross assets in unquoted investments at the time of acquisition. The valuation of unquoted assets involves a degree of subjectivity and there is a risk that proceeds received on the disposal of unquoted holdings may prove to be significantly lower than the value at which the investment is held in the Company’s portfolio.		Unquoted investments comprised 3.8% of the Company's portfolio at the year end. The Company’s directly held unquoted investments are valued by an independent, third-party valuation agent. The Board has established a Valuation Committee to review the valuations of the unquoted investments and the methodologies used in the valuations. The valuations are recommended to the Committee by Frostrow, the Company's AIFM, following review by its own valuations committee. The Valuation Committee makes recommendations to the Board, as appropriate. Further information can be found in the Audit Committee Report and note 1 to the financial statements. In light of the additional scrutiny provided by the Valuation Committee, and the reduction in the number and proportion of unquoted investments in the Company's portfolio during the year, the Board considers that the potential impact of this risk on the Company has reduced during the year.
COUNTERPARTY RISK		(No change)
The Company is exposed to credit risk arising from the use of counterparties. If a counterparty were to fail, the Company could be adversely affected through either a delay in settlement or a loss of assets.		The most significant counterparty to which the Company is exposed is J.P. Morgan Securities LLC (J.P. Morgan), the Custodian and Prime Broker, which is responsible for the safekeeping of the Company’s assets and provides the loan facility to the Company. As part of the arrangements with J.P. Morgan they may take assets as collateral up to 140% of the value of the loan drawn down. The assets taken as collateral by J.P. Morgan may be used, loaned, sold, rehypothecated or transferred. The level of the Company's gearing is at the discretion of the AIFM and the Board and the loan can be repaid at any time, at which point the assets taken as collateral will be released back to the Company. Any of the Company’s assets taken as collateral are not covered by the custody arrangements provided by J.P. Morgan. J.P. Morgan is a registered broker-dealer and is accordingly subject to limits on rehypothecation* imposed by the U.S. Securities and Exchange Commission (SEC). In the event of J.P. Morgan’s insolvency, the Company may be unable to recover in full assets held by it as Custodian or held as collateral. The risk is managed through the selection of a financially stable counterparty, limitations on the use of gearing and reliance on the SEC's robust regulatory regime. In addition, the Board monitors the credit rating of J.P. Morgan. J.P. Morgan is also subject to regular monitoring by J.P. Morgan Europe Limited, the Depositary, and the Board receives regular reports from the Depositary. During the year the Company entered into swap transactions with Goldman Sachs International. Further information can be found in note 14 to the financial statements.
OPERATIONAL DISRUPTION		(No change)
As an externally managed investment trust, the Company is reliant on the systems of its service providers for dealing, trade processing, administration, financial and other functions. If such systems were to fail or be disrupted (including, for example, as a result of a pandemic, war, network disruption or simply poor performance/controls) this could prevent accurate reporting of the Company’s financial position or lead to a failure to comply with applicable laws, regulations and governance requirements and/or to a financial loss.		To manage these risks, the Board (in some cases meeting as the Audit Committee): · periodically meets representatives from the Company's key service providers to gain a better understanding of their control environment, and the processes in place to mitigate any disruptive events; · receives a monthly report from Frostrow, which includes, inter alia, confirmation of compliance with applicable laws and regulations; · reviews the internal control reports and key policies (including disaster recovery procedures and business continuity plans) of its service providers; · maintains a risk matrix with details of risks to which the Company is exposed, the approach to managing those risks, the key controls and the frequency of the controls operation; · receives updates on pending changes to the regulatory and legal environment and progress towards the Company’s compliance with such changes; and · has considered the increased risk of cyber-attacks and received reports and assurance from its service providers regarding the information security controls in place.

* See glossary.

EMERGING RISKS

The Company has carried out a robust assessment of the Company’s emerging risks and the procedures in place to identify emerging risks are described below. The International Risk Governance Council definition of an ‘emerging’ risk is one that is new, or is a familiar risk in a new or unfamiliar context or under new context conditions (re-emerging).

The Audit Committee reviews a risk schedule at its half-yearly meetings. Emerging risks are discussed in detail as part of this process and also throughout the year to try to ensure that emerging (as well as established) risks are identified and, so far as practicable, mitigated.

During the year, the Audit Committee identified and discussed emerging elements of market risk such as threats to research funding and increased costs in the biotechnology sector which may affect the Company's investee companies and potentially damage the breadth and pace of future development. The Audit Committee also discussed demographic trends in China and Europe including, notably, the potential impact of ageing populations. It was noted that this could present opportunities for the biotech and healthcare sectors but may also have broader adverse effects including reduced economic growth and a reduction in the availability of risk capital needed to fund innovative companies and technologies.

GOING CONCERN

The financial statements have been prepared on a going concern basis. The Directors consider this is the appropriate basis as the Company has adequate resources to continue in operational existence for at least the next 12 months from the date of approval of this report on 4 June 2024. The Company’s portfolio, trading activity, cash balances, revenue and expense forecasts, and the trends and factors likely to affect the Company’s performance are reviewed and discussed at each Board meeting. The Board has considered a detailed assessment of the Company’s ability to meet its liabilities as they fall due, including stress tests which modelled the effects of substantial falls in portfolio valuations and liquidity constraints on the Company’s financial position. Further information is provided in the Audit Committee Report.

Based on the information available to the Directors at the date of this report, including the results of these stress tests, the conclusions drawn in the Viability Statement below, the Company’s current cash balances, and the liquidity of the Company’s investments, the Directors are satisfied that the Company has adequate financial resources to continue in operation for at least the next 12 months from the date of approval of this report on 4 June 2024. Accordingly, the Directors are satisfied that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

VIABILITY STATEMENT

In accordance with the UK Corporate Governance Code and the Listing Rules, the Directors have carefully assessed the Company’s position and prospects as well as the principal risks and have formed a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five financial years. The Board has chosen a five-year horizon in view of the long-term outlook adopted by the Portfolio Manager when making investment decisions.

To make this assessment and in reaching this conclusion, the Audit Committee has considered the Company’s financial position, its ability to liquidate its portfolio and meet its liabilities as they fall due and, in particular, notes the following:

· The portfolio is principally comprised of investments traded on major international stock exchanges. Based on recent market volumes 96.3% of the current portfolio could be liquidated within 30 trading days and 94.5% in seven days. There is no expectation that the nature of the investments held within the portfolio will be materially different in future.

· The Board has considered the viability of the Company under various scenarios, including periods of acute stock market and economic volatility, and concluded that it would expect to be able to ensure the financial stability of the Company through the benefits of having a diversified portfolio of (mostly) listed and realisable assets. As illustrated in note 14 to the financial statements, the Board has considered other price risk (the sensitivity of the value of shareholders' funds to changes in the fair value of the Company's investments), foreign currency sensitivity (the sensitivity to changes in key exchange rates to which the portfolio is exposed) and interest rate sensitivity (the sensitivity to changes in the interest rate charged on the Company's loan facility).

· With an ongoing charges ratio of 1.2%, the expenses of the Company are predictable and modest in comparison with the assets and there are no capital commitments foreseen which would alter that position.

· The Company has a short-term bank facility which can be used to meet its liabilities. Details of the Company’s current liabilities are set out in note 11 to the financial statements.

· The Company has no employees. Consequently it does not have redundancy or other employment related liabilities or responsibilities.

The Audit Committee, as well as considering the potential impact of the Company’s principal risks and various severe but plausible downside scenarios, has made the following assumptions in considering the Company’s longer-term viability:

· There will continue to be demand for investment trusts;

· The Portfolio Manager will continue to adopt a long-term view when making investments;

· The Company invests principally in the securities of listed companies traded on international stock exchanges to which investors will wish to continue to have exposure;

· Shareholders will vote for the continuation of the Company at the Annual General Meeting to be held in 2025. The Company's shareholders are asked every five years to vote for the continuation of the Company. At the current time, the Directors believe they have a reasonable expectation that the next vote will be passed;

· The closed-ended nature of the Company means that, unlike open-ended funds, it does not need to realise investments when shareholders wish to sell their shares;

· The Company will continue to be able to fund share buybacks when required. The Company bought back 5,250,221 ordinary shares in the year under review at a total cost of £43.6 million and experienced no problem with liquidity in doing so. It had shareholders’ funds in excess of £361 million at the year end; and

· The long-term performance of the Company will continue to be satisfactory.

ENVIRONMENTAL, SOCIAL, COMMUNITY AND HUMAN RIGHTS MATTERS

As an externally managed investment trust, the Company does not have any employees or maintain any premises, nor does it undertake any manufacturing or other physical operations itself. All its operational functions are outsourced to third party service providers. Therefore, the Company has no material, direct impact on the environment or any particular community and, as a result, the Company itself has no environmental, human rights, social or community policies.

Under the Listing Rules, the Company is also exempt from reporting against the Taskforce for Climate-Related Financial Disclosures (TCFD) framework. However, the Board recognises that climate change poses a general risk to the investment environment and has discussed with the Portfolio Manager the potential impact of climate change risk on the Company's investments.

The Board believes that consideration of environmental, social and governance (ESG) factors is important and has the potential to protect and enhance investment returns. The Portfolio Manager’s investment criteria ensure that ESG factors are integrated into their investment process and best practice in this area is encouraged by the Board. The Portfolio Manager engages with the Company’s underlying investee companies in relation to their corporate governance practices and the development of their policies on social, community and environmental matters.

The Board is committed to carrying out the Company’s business in an honest and fair manner with a zero-tolerance approach to bribery, corruption, and tax evasion. As such, policies and procedures are in place to prevent this. In carrying out the Company’s activities, the Board aims to conduct itself responsibly, ethically and fairly. The Board’s expectations are that the Company’s principal service providers have appropriate governance policies in place.

PERFORMANCE AND FUTURE DEVELOPMENTS

A review of the Company’s year, its performance and the outlook for the Company can be found in the Chair’s Statement and in the Portfolio Manager’s Review.

The Company’s overall strategy remains unchanged.

STAKEHOLDER INTERESTS AND BOARD DECISION-MAKING (SECTION 172 OF THE COMPANIES ACT 2006)

The following disclosure, which is required by the Companies Act 2006 and the AIC Code of Corporate Governance, describes how the Directors have had regard to the views of the Company’s stakeholders in their decision-making.

STAKEHOLDER GROUP	HOW THE BOARD HAS ENGAGED WITH THE COMPANY’S STAKEHOLDERS
Investors	The Board’s key mechanisms of engagement with investors include: · The Annual and Half-yearly Reports · The Annual General Meeting · The Company’s website which hosts reports, articles and insights, monthly fact sheets and video interviews with the Portfolio Manager · The Company’s distribution list which is maintained by Frostrow and is used to communicate with shareholders on a regular basis · Online seminars with presentations from the Portfolio Manager · One-to-one investor meetings The AIFM and the Portfolio Manager, on behalf of the Board, completed a programme of investor relations throughout the year, reporting to the Board on the feedback received. The Board aims for at least one Director to attend the in person and online events at which the Portfolio Manager presents to investors. In addition, the Chair has been and remains available to engage with the Company’s shareholders.
Portfolio Manager	The Board met regularly with the Portfolio Manager throughout the year, both formally at quarterly Board meetings and informally, as required. The Board engaged primarily with key members of the portfolio management team, discussing the Company’s overall performance as well as developments at individual portfolio companies and wider macroeconomic developments. The Board also visited OrbiMed's office in New York where the Directors met with members of the Portfolio Manager’s risk management, compliance and trading teams to better understand their internal controls and processes. The Management Engagement Committee reviewed the performance of the Portfolio Manager and the terms and conditions on which they are engaged.
Other Service Providers	The Board met regularly with the AIFM, representatives of which attend every quarterly Board meeting to provide updates on risk management, accounting, administration, corporate governance and marketing matters. The Management Engagement Committee reviewed the performance of all the Company’s service providers, receiving feedback from Frostrow in their capacity as AIFM and Company Secretary. The AIFM, which is responsible for the day-to-day operational management of the Company, meets and interacts with the other service providers including the Depositary, Custodian and Registrar, on behalf of the Board, on a daily basis. This can be through email, one-to-one meetings and/or regular written reporting. The Audit Committee reviewed the quality and effectiveness of the audit and recommended to the Board that it be proposed to shareholders that BDO LLP (BDO) be re-appointed as Auditor. The Audit Committee also met with BDO to review the audit plan and set their remuneration for the year.

As an externally managed investment trust, the Company has no employees, customers, operations or premises. Therefore, the Company’s key stakeholders (other than its shareholders) are considered to be its service providers. The need to foster good business relationships with the service providers and maintain a reputation for high standards of business conduct are central to the Directors’ decision-making as the Board of an externally managed investment trust.

KEY AREAS OF ENGAGEMENT		MAIN DECISIONS AND ACTIONS TAKEN
INVESTORS · Ongoing dialogue with shareholders concerning the strategy of the Company, performance and the portfolio. · Share price performance.		The Board and the Portfolio Manager provided updates via RNS, the Company’s website, the distribution list and the usual financial reports and monthly fact sheets. The Board continued to monitor share price movements closely. When the discount of the share price to the net asset value per share exceeded 6%, the Company sought to buy back shares in the market. As a result, 5,250,221 shares were bought back during the year. No shares were issued at a premium to the net asset value per share during the year.
PORTFOLIO MANAGER · Portfolio composition, performance, outlook and business updates. · The Portfolio Manager’s system of internal controls and investment risk management including their cyber security arrangements. · The terms and conditions of the Portfolio Management Agreement, including performance measurement in particular.		The Directors were pleased to be able to visit OrbiMed's offices in New York during the year, to meet with the OrbiMed team in person. While the Board considers the visits to OrbiMed's offices to be valuable, in view of the environmental and cost benefits associated with reduced long distance travel, the Board has agreed that the frequency of such visits should be approximately 18 months. The Board concluded that it was in the interests of shareholders for OrbiMed to continue in their role as Portfolio Manager. Following discussion with OrbiMed, the Board resolved to recommend to shareholders that the total return version of the Nasdaq Biotechnology Index (net, sterling adjusted) should be used as the benchmark against which to assess the Portfolio Manager’s performance, rather than the capital return version. The Audit Committee concluded that the Portfolio Manager’s internal controls were satisfactory.
OTHER SERVICE PROVIDERS · The promotion and marketing strategy of the Company. · Service providers’ internal controls, business continuity plans and cyber security provisions. · The effectiveness of the audit and the Auditor’s reappointment. · The terms and conditions under which the Auditor is engaged.		The Board concluded that it was in the interests of shareholders for Frostrow to continue in their role as AIFM. The Board approved the Audit Committee’s recommendation that it would be in the interests of shareholders for BDO to be re-appointed as the Company’s auditor for a further year. Please refer to the Audit Committee Report and the Notice of AGM for further information.

By order of the Board

Frostrow Capital LLP

Company Secretary

4 June 2024

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the financial statements in accordance with UK-adopted international accounting standards. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the Company for that period.

In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and accounting estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with UK-adopted international accounting standards, subject to any material departures disclosed and explained in the financial statements;

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and

· prepare a directors’ report, a strategic report and directors’ remuneration report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements 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 Annual Report and financial statements, taken as a whole, are fair, balanced, and understandable and provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy.

WEBSITE PUBLICATION

The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL REPORT

We confirm that to the best of our knowledge:

· the financial statements have been prepared in accordance with the applicable set of accounting standards and give a true and fair view of the assets, liabilities, financial position and the return of the Company for the year ended 31 March 2024; and

· the Annual Report includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that they face.

The Directors consider the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.

On behalf of the Board

Roger Yates

Chair

4 June 2024

INCOME STATEMENT

FOR THE YEAR ENDED 31 MARCH 2024

			2024			2023
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£’000	£’000	£’000	£’000	£’000	£’000
Income	2	1,203	–	1,203	310	–	310
Gains/(losses) on investments held at fair value through profit or loss	8	–	79,143	79,143	–	(32,727)	(32,727)
Foreign exchange losses		–	(621)	(621)	–	(3,759)	(3,759)
AIFM, Portfolio management and performance fees	3	(153)	(2,917)	(3,070)	(176)	(3,355)	(3,531)
Other expenses	4	(742)	(39)	(781)	(692)	(51)	(743)
Profit/(loss) before finance costs and taxation		308	75,566	75,874	(558)	(39,892)	(40,450)
Finance costs	5	(56)	(1,059)	(1,115)	(40)	(752)	(792)
Profit/(loss) before taxation		252	74,507	74,759	(598)	(40,644)	(41,242)
Taxation	6	(159)	–	(159)	(56)	–	(56)
Profit/(loss) for the year		93	74,507	74,600	(654)	(40,644)	(41,298)
Basic and diluted earnings/(loss) per share	7	0.3p	206.7p	207.0p	(1.6)p	(100.9)p	(102.5)p

The Company does not have any income or expenses which are not included in the profit/(loss) for the year. Accordingly the “profit/(loss) for the year” is also the “total comprehensive profit/(loss) for the year”, as defined in IAS 1 (revised) and no separate Statement of Other Comprehensive Income has been presented.

The “Total” column of this statement represents the Company’s Income Statement, prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards The “Revenue” and “Capital” columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

The accompanying notes are an integral part of this statement.

STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2024

		2024	2023
	Notes	£’000	£’000
Non current assets
Investments held at fair value through profit or loss	8	394,712	357,229
Derivative – OTC equity swaps	8, 9	42	–
		394,754	357,229
Current assets
Other receivables	10	14,535	508
Cash and cash equivalents		2,131	2,772
		16,666	3,280
Total assets		411,420	360,509
Current liabilities
Other payables	11	2,575	8,846
Loan	14	47,078	20,170
Derivative – OTC equity swaps	8, 9	460	1,202
		50,113	30,218
Net assets		361,307	330,291
Equity attributable to equity holders
Ordinary share capital	12	8,371	9,684
Share premium account		79,951	79,951
Capital redemption reserve		15,059	13,746
Capital reserve	16	258,891	227,968
Revenue reserve		(965)	(1,058)
Total equity		361,307	330,291
Net asset value per share	13	1,078.9p	852.6p

The financial statements were approved by the Board on 4 June 2024 and were signed on its behalf by:

Roger Yates

Chair

The accompanying notes are an integral part of this statement.

The Biotech Growth Trust PLC – Company Registration Number 03376377 (Registered in England and Wales)

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2024

		Ordinary	Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
	Notes	£’000	£’000	£’000	£’000	£’000	£’000
At 1 April 2023		9,684	79,951	13,746	227,968	(1,058)	330,291
Net profit for the year		–	–	–	74,507	93	74,600
Repurchase of own shares for cancellation		(1,313)	–	1,313	(43,584)	–	(43,584)
At 31 March 2024	12, 13	8,371	79,951	15,059	258,891	(965)	361,307

FOR THE YEAR ENDED 31 MARCH 2023

		Ordinary	Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
	Notes	£’000	£’000	£’000	£’000	£’000	£’000
At 1 April 2022		10,289	79,951	13,141	291,231	(404)	394,208
Net loss for the year		–	–	–	(40,644)	(654)	(41,298)
Repurchase of own shares for cancellation		(605)	–	605	(22,619)	–	(22,619)
At 31 March 2023	12, 13	9,684	79,951	13,746	227,968	(1,058)	330,291

The accompanying notes are an integral part of this statement.

See note 16 for details of the amounts of reserves available for distribution.

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2024

		2024	2023
	Notes	£’000	£’000
Operating activities
Profit/(loss) before taxation*		74,759	(41,242)
Finance costs		1,115	792
(Gains)/losses on investments held at fair value through profit or loss	8	(80,669)	30,945
Foreign exchange losses		621	3,759
Decrease/(increase) in other receivables		(6)	28
Increase/(decrease) in other payables		98	(116)
Taxation paid	6	(159)	(56)
Net cash outflow from operating activities		(4,241)	(5,890)
Investing activities
Purchases of investments and derivatives		(350,835)	(459,606)
Sales of investments and derivatives		373,176	505,300
Net cash inflow from investing activities		22,341	45,694
Financing activities
Repurchase of own shares for cancellation		(43,913)	(20,910)
Finance costs – interest paid		(1,115)	(792)
Drawdown/(repayment) of the loan facility		26,287	(15,330)
Net cash outflow from financing activities		(18,741)	(37,032)
Net (decrease)/increase in cash and cash equivalents		(641)	2,772
Cash and cash equivalents at start of year		2,772	–
Cash and cash equivalents at end of year†		2,131	2,772

* Includes dividends earned during the year of £1,080,000 (2023: £283,000) and deposit interest of £123,000 (2023: £11,000).

† Collateral cash held at Goldman Sachs £2,131,000 (2023: £2,772,000).

CHANGES IN NET DEBT ARISING FROM FINANCING ACTIVITIES

	2024	2023
	£’000	£’000
Balance as at 1 April	20,170	31,741
Drawdown/(repayment) of the loan facility	26,287	(15,330)
Foreign exchange losses	621	3,759
Loan balance at 31 March	47,078	20,170

The accompanying notes are an integral part of this statement.

NOTES TO THE FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

(A) BASIS OF PREPARATION

The financial statements of the Company have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

The principal accounting policies adopted are set out below.

The financial statements have been prepared under the historical cost convention, except for the measurement at fair value of investments. Where presentational guidance is set out in the Statement of Recommended Practice (the SORP) for Investment Trust Companies and Venture Capital Trusts produced by the Association of Investment Companies (AIC) issued in July 2022, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

The Company adopted Disclosure of Accounting Policies (Amendments to IAS 1 IFRS Practical Statement 2) from 1 January 2023. Although the amendments did not result in any changes to the accounting policies, they impacted the accounting policy information disclosed in the financial statements. The amendments require the disclosure of “material”, rather than “significant” accounting policies. Management received the accounting policies and made updates to the information disclosed in note 1.

Going concern

The Directors are required to make an assessment of the Company’s ability to continue as a going concern and have concluded that the Company has adequate resources to continue in operational existence for at least 12 months from the date these financial statements were approved.

In making this assessment, the Directors have considered a wide variety of emerging and current risks to the Company, as well as the mitigation strategies that are in place. The Board has also reviewed stress-testing and scenario analyses prepared by the AIFM. The stress tests and scenario analyses considered the effect of various downturns, based on historic bear markets, on the asset value and expenses of the Company. The tests modelled the impact of decreases of up to 50% on the value of the investment portfolio and decreases in current market liquidity of up to 50%.

These tests are carried out as an arithmetic exercise, which can apply equally to any set of circumstances in which asset value and income are significantly impaired. It was concluded that even in an extreme downside scenario, the Company would be able to continue to meet its liabilities as they fell due. Whilst the economic future is uncertain, the opinion of the Directors is that there is no foreseeable downside scenario that would threaten the Company’s ability to continue to meet its liabilities as they fall due.

Based on the information available to the Directors at the time of this report, including the results of the stress tests and scenario analyses, and having taken account of the liquidity of the investment portfolio, the Company’s cash flow and borrowing position, the Directors are satisfied that the Company has adequate financial resources to continue in operation for at least 12 months from the date of signing these financial statements and that, accordingly, it is appropriate to adopt the going concern basis.

The Company’s financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (£’000) except when otherwise indicated.

Judgements and key sources of estimation and uncertainty

The preparation of the financial statements requires the Directors to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the Statement of Financial Position date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. In the process of applying the Company’s accounting policies, the Directors have made the following estimate:

Fair value of the unquoted investments estimate

The Board has established a Valuation Committee to review the valuations and the valuation methodologies of the Company’s unquoted investments. The Board has approved the valuations of the unquoted investments on the recommendation of the Valuation Committee.

The unquoted investment in OrbiMed Asia Partners L.P. has been valued using the Net Asset Value presented in the Statement of Partner’s Capital Activity as at 31 December 2023, as permitted under the IPEV guidelines. The Statement of Partner’s Capital Activity as at 31 March 2024 was received in May 2024 and was not materially different from the valuation at 31 December 2023. The Consolidated Financial Statements of the partnership for the year ended 31 December 2023 were audited by KPMG LLP (New Jersey Headquarters) and were approved on 29 March 2024.

The investments in Stemirna Therapeutics and XtalPi have been valued by Kroll, an independent valuer, using the probability – weighted expected returns methodology (PWERM). The valuations have been approved by the Board on the recommendation of the Valuation Committee. Under the PWERM, fair value is determined through consideration of the values of the investment under a range of scenarios. These scenarios range from the “no recovery” to “full recovery” of the amount invested, through to a number of IPO or similar exit scenarios. Each scenario is assigned a probability, with the value of the investment reflecting the sum of each scenario’s valuation weighted by the probability of its occurrence. Examples of the inputs into the valuation models are:

 The probability assigned to potential future outcomes;

 Likely exit scenarios; and

 The discount rate used to calculate the present value of future outcomes.

The investments in Gracell Biotechnologies Contingent Value Rights (CVR) and Lexicon series A convertible preference stock (Lexicon) have also been valued by Kroll. Gracell’s CVRs have been valued using the PWERM and Lexicon using the price of the recent funding, discounted for the lack of marketability.

(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 dividends or increases in fair value, investments are classified as fair value through profit or loss (FVTPL) 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 classified 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 weighted expected returns, 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.

Transfers between levels of fair value hierarchy are deemed to have occurred at the date of the event or change in circumstances that caused the transfer.

Gains and losses on disposal and fair value changes are also recognised in the Income Statement.

(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. The requirements are to distribute net revenue but only so far as there are positive revenue reserves.

(D) INVESTMENT 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. Foreign dividends are grossed up at the appropriate rate of withholding tax, with the withholding tax recognised in the taxation charge.

Dividends from investments in unquoted shares and securities are also recognised when the Company’s right to receive payment is established.

Income from fixed interest securities is recognised on a time appointment basis so as to reflect the effective interest rate.

In deciding whether a dividend should be regarded as a capital or revenue receipt, the Company reviews all relevant information as to the reasons for and sources of the dividend on a case by case basis depending upon the nature of the receipt.

Special dividends of a revenue nature are recognised through the revenue column of the Income Statement. Special dividends of a capital nature are recognised through the capital column of the Income Statement.

(E) EXPENSES AND FINANCE COSTS

All expenses are accounted for on an accruals basis. Expenses are charged through the Income Statement as follows:

· transaction costs on 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:

· during the year, AIFM and Portfolio Management fees are charged 95% 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;

· during the year, loan interest is charged 95% 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.

· performance fees are charged 100% to the capital column of the Income Statement. Performance fees are recognised as a liability of the Company when they crystallise and become due for payment. Details of the performance fee are set out on pages 51 and 52 of the Annual Report; and

· all other expenses are charged to revenue column of the Income Statement.

(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.

Current tax is provided at the amounts expected to be paid or recovered.

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, or Other Comprehensive Income (OCI), in which case the deferred tax is also dealt with in equity or OCI respectively.

(G) FUNCTIONAL AND PRESENTATION CURRENCY

The financial information is shown in sterling, being the Company’s presentation currency. In arriving at the functional currency the Directors have considered the following:

(i) the primary economic environment of the Company;

(ii) the currency in which the original capital was raised;

(iii) the currency in which distributions would be made;

(iv) the currency in which performance is evaluated; and

(v) 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.

(H) RESERVES

Ordinary share capital

· represents the nominal value of the issued share capital.

Share premium account

· represents the surplus of net proceeds received from the issue of new shares over the nominal value of such shares. The Share premium account is non-distributable.

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. This reserve is non-distributable.

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 policies;

· increases and decreases in the valuation of investments held at year-end; and

· shares which have been bought back by the Company for cancellation.

Realised Capital Reserves are distributable by way of a dividend.

Revenue reserve

· reflects all income and expenditure recognised in the revenue column of the Income Statement. Amounts standing to the credit of the Revenue Reserve are distributable by way of dividend.

(I) LOAN

The Company has a loan facility repayable on demand, provided by J.P. Morgan Securities LLC (J.P. Morgan). As part of the arrangements with J.P. Morgan they may take assets as collateral, up to 140% of the value of the loan drawn down. Such assets taken as collateral by J.P. Morgan may be used, loaned, sold, rehypothecated† or transferred. Any of the Company’s assets taken as collateral are not covered by the custody arrangements provided by J.P. Morgan. Loans payable on demand are carried at the undiscounted amount of the cash or other consideration expected to be paid. Interest on the facility is charged at the U.S. overnight bank funding rate plus 45 basis points. Finance costs are apportioned 95% to capital in accordance with the policy set out under note 1(e) expenses and finance costs.

† See glossary.

(J) 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.

(K) FINANCIAL INSTRUMENTS INCLUDING DERIVATIVE FINANCIAL INSTRUMENTS

Financial assets and financial liabilities are recognised on the Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the Company’s contractual right to the cash flows from the asset expires or substantially all the risks and rewards of ownership are transferred. Financial liabilities are derecognised when the contractual obligation is discharged, with gains and losses recognised in the income statement.

The Company uses derivative financial instruments, namely equity swaps. All derivative instruments are valued initially, and at subsequent reporting dates, at fair value in the Statement of Financial Position.

The equity swaps are accounted for as non-current assets or current liabilities.

(L) ADOPTION OF NEW AND REVISED STANDARDS

Standards and amendments to existing standards effective 1 January 2023

The Company has applied the following standards and amendments for the first time for its annual reporting period commencing 1 April 2023:

· Disclosure of Accounting Policies – Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2; and

· Definition of Accounting Estimates – Amendments to IAS 8.

These amendments did not have any impact on the amounts recognised in both current and prior years.

New standards, amendments and interpretations effective after 1 January 2024 which have not been early adopted

The below new amendment and interpretations will become effective for annual periods beginning after 1 January 2024:

· Classification of Liabilities as Current or Non-Current – Amendments to IAS 1 Presentation of Financial Statements.

This amendment is not expected to have a material effect on the financial statements of the Company.

2. INCOME

	2024	2023
	£’000	£’000
Investment income
Overseas dividend income	1,080	283
Other income
Derivatives	–	16
Deposit interest	123	11
Total income	1,203	310

3. AIFM, PORTFOLIO MANAGEMENT AND PERFORMANCE FEES

			2024			2023
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
AIFM fee – Frostrow Capital LLP	47	886	933	53	1,010	1,063
Portfolio management fee – OrbiMed Capital LLC	106	2,031	2,137	123	2,345	2,468
	153	2,917	3,070	176	3,355	3,531

During the financial year ended 31 March 2024, in accordance with the performance fee arrangements in place, no performance fee was earned (2023: nil).

As at 31 March 2024, no performance fees were accrued or payable (31 March 2023: £nil).

Further details of the AIFM, portfolio management fee and the performance fee basis can be found in the Report of the Directors on page 51 and 52 of the Annual Report.

4. OTHER EXPENSES

	2024	2023
	Total	Total
	£’000	£’000
Directors’ emoluments	177	165
Fees payable to the Company’s auditor for the audit of the Company’s financial statements	52	50
Registrar fees	36	35
Depositary fees	48	58
Marketing and PR costs	71	68
Legal and professional fees^	61	51
Broker fees	43	39
Listing fees	39	37
Printing costs	33	32
Other costs	182	157
Total expenses charged to Revenue	742	692
Professional fees charged to Capital*	39	51
Total expenses	781	743

^ Includes quarterly valuation fees in relation to the valuation of the unquoted investments.

* Professional fees in respect of acquisition of unquoted and pre-IPO investments.

Details of the amounts paid to Directors are included in the Directors’ Remuneration Report on pages 63 to 66 of the Annual Report.

5. FINANCE COSTS

			2024			2023
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Loan interest	56	1059	1,115	40	752	792
	56	1,059	1,115	40	752	792

6. TAXATION

(A) FACTORS AFFECTING TOTAL 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 higher than the standard rate of corporation tax in the UK of 25% (2023: 19%). The differences are explained below:

			2024			2023
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Net profit/(loss) before taxation	252	74,507	74,759	(598)	(40,644)	(41,242)
Corporation tax at 25% (2023: 19%)	63	18,627	18,690	(114)	(7,722)	(7,836)
Effects of:
Non-taxable (gains)/losses on investments	–	(19,631)	(19,631)	–	6,932	6,932
Non-taxable overseas dividends	(270)	–	(270)	(54)	–	(54)
Overseas tax suffered	159	–	159	39	–	39
Expenses charged to capital available to be utilised	(14)	–	(14)	–	–	–
Excess expenses unused	221	1,004	1,225	168	790	958
Corporation tax charge	–	–	–	17	–	17
Total taxation for the year (see note 6(b))	159	–	159	56	–	56

(B) ANALYSIS OF CHARGE IN THE YEAR:

			2024			2023
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Overseas tax suffered	159	–	159	39	–	39
Corporation tax charge†	–	–	–	17	–	17
Total taxation for the year	159	–	159	56	–	56

† Corporation tax was paid during the financial year ended 31 March 2023 due to the large performance fee reversed in 2022 which was captured by the corporate loss restrictions rules.

(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 profit 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.

At 31 March 2024, the Company had unutilised management expenses and other losses of £88,442,000 (2023: £83,627,000) that are available to offset future taxable revenue.

A deferred tax asset of £22,111,000 (25% tax rate) (2023: £20,907,000 (25% tax rate)) arising as a result of these excess management expenses and other losses has not been recognised because the Company is not expected to generate sufficient taxable income in future periods in excess of the available deductible expenses. Given the composition of the Company’s portfolio, it is not likely that this asset will be used in the foreseeable future and therefore no asset has been recognised in the financial statements.

7. BASIC AND DILUTED EARNINGS/(LOSS) PER SHARE

			2024			2023
	Revenue	Capital	Total	Revenue	Capital	Total
	pence	pence	pence	pence	pence	pence
Earnings/(loss)/per share	0.3p	206.7p	207.0p	(1.6)	(100.9)p	(102.5)p

The total earnings per share of 207.0p (2023: loss of 102.5p) is based on the total earnings attributable to equity shareholders of £74,600,000 (2023: loss £41,298,000).

The revenue profit per share 0.3p (2023: loss of 1.6p) is based on the revenue profit attributable to equity shareholders of £93,000 (2023: loss of £654,000). The capital profit per share of 206.7p (2023: loss of 100.9p) is based on the capital profit attributable to equity shareholders of £74,507,000 (2023: loss of £40,644,000).

The total profit per share is based on the weighted average number of shares in issue during the year of 36,041,496 (2023: 40,287,724).

There are no dilutive instruments issued by the Company (2023: none).

8. INVESTMENTS

As at 31 March 2024, all investments with the exception of the unquoted investments and derivatives have been classified as level 1. The unquoted investments have been classified as either level 2 or level 3. See note 14 for further details.

				2024				2023
			Derivative				Derivative
			Financial				Financial
	Quoted		Instruments		Quoted		Instruments
	Investments	Unquoted	– Net	Total	Investments	Unquoted	– Net	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Opening book cost	392,482	14,341	–	406,823	512,894	22,943	–	535,837
Opening investment holding (losses)/gains	(55,520)	5,926	(1,202)	(50,796)	(119,725)	11,287	–	(108,438)
Valuation at 1 April	336,962	20,267	(1,202)	356,027	393,169	34,230	–	427,399
Movement in the year	–	–		–
Purchases at cost	342,843	1,952	–	344,795	465,360	–	–	465,360
Sales proceeds	(388,521)	(71)	1,395*	(387,197)	(505,787)	–	–	(505,787)
Transfer between levels	–	–	–	–	9,887	(9,887)	–	–
Net movement in investment holding gains/(losses)	88,290	(7,010)	(611)	80,669	(25,667)	(4,076)	(1,202)	(30,945)
Valuation at 31 March	379,574	15,138	(418)	394,294	336,962	20,267	(1,202)	356,027
Closing book cost at 31 March	354,597	16,268	–	370,865	392,482	14,341	–	406,823
Investment holding gains/(losses) at 31 March	24,977	(1,130)	(418)	23,429	(55,520)	5,926	(1,202)	(50,796)
Valuation at 31 March	379,574	15,138	(418)	394,294	336,962	20,267	(1,202)	356,027

The sales proceeds of £387,197,000 (2023: £505,787,000) includes transaction costs of £814,000 (2023: £991,000). The book cost of these investments when they were purchased was £380,753,000 (2023: £594,374,000).

These investments have been revalued over time and until they were sold any unrealised gains/loss were included in the fair value of these investments.

* Sale of financed equity swap.

GAINS/(LOSSES) ON INVESTMENTS

	2024	2023
	£’000	£’000
Gains/(losses) on investments	80,669	(30,945)
Transaction costs	(1,526)	(1,782)
Gains/(losses) on investments held at fair value through profit or loss	79,143	(32,727)

The total transaction costs for the year were £1,526,000 (31 March 2023: £1,782,000) broken down as follows: purchase transaction costs for the year to 31 March 2024 were £712,000 (31 March 2023 £791,000), sale transaction costs were £814,000 (31 March 2023: £991,000). These costs consist mainly of commission. Transaction costs are recorded in the capital column of the Income Statement.

9. DERIVATIVE FINANCIAL INSTRUMENTS

	2024	2023
	£’000	£’000
Fair value of OTC equity swaps (assets)	42	–
Fair value of OTC equity swaps (liabilities)	(460)	(1,202)
	(418)	(1,202)

(See note 1(k) for further details).

10. OTHER RECEIVABLES

	2024	2023
	£’000	£’000
Future settlements – sales	14,508	487
Prepayments and accrued income	27	21
	14,535	508

11. OTHER PAYABLES

	2024	2023
	£’000	£’000
Future settlements – purchases	167	6,206
Amounts due to brokers in respect of shares repurchased by the Company for cancellation	1,379	1,695
Other creditors and accruals	1,029	945
	2,575	8,846

12. ORDINARY SHARE CAPITAL

	2024	2023
	Number of	Number of
	Shares	Shares
Allotted, issued and fully paid at 1 April 2023	38,737,419	41,158,682
Shares bought back for cancellation during the year	(5,250,221)	(2,421,263)
At 31 March 2024	33,487,198	38,737,419

	2024	2023
	£’000	£’000
Allotted, issued and fully paid shares of 25p	8,371	9,684

During the year no new ordinary shares were issued (2023: nil). 5,250,221 shares were bought back for cancellation for a consideration of £43,584,000 (2023: 2,421,263 shares were bought back for a consideration of £22,619,000).

13. NET ASSET VALUE PER SHARE

	2024	2023
Net asset value per share	1,078.9p	852.6p

The net asset value per share is based on the net assets attributable to equity shareholders of £361,307,000 (2023: £330,291,000) and on 33,487,198 (2023: 38,737,419) shares in issue at 31 March 2024.

14. 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 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 also considers (iv) fair value measurement and (v) capital management.

The Board reviews and agrees policies regularly for managing and monitoring each of these risks.

OTC EQUITY SWAPS

The Company uses OTC equity swap positions to gain access to Chinese markets where the Company is not locally registered to trade directly. During the year the Company entered into an OTC equity swap contracts related to Brightgene Bio-Medical, Mabwell Shanghai Bioscience and Shanghai Runda Medical, with Goldman Sachs as the counterparty. See glossary for further details.

1. MARKET PRICE RISK:

The Company’s portfolio is exposed to fluctuations in market prices in the biotechnology sector and the regions in which it invests. Market-wide uncertainties which have recently caused increased volatility in the markets include the war in Ukraine, increasing political, military and commercial tensions between the US/West and China, and increased inflationary pressures.

The Company’s portfolio is exposed to market price fluctuations which are monitored by the AIFM and the Portfolio Manager in pursuance of the investment objective.

This market risk comprises three elements – foreign currency risk, interest rate risk and other price risk.

(a) Foreign currency risk:

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 the risk

The AIFM and the Portfolio Manager monitor the Company’s exposure to foreign currencies on a continuous basis and report to the Board regularly. The Company does not hedge against foreign currency movements to manage market price risk.

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 £379,359,000 (2023: £345,049,000) of investments denominated in U.S. dollars and £14,935,000 (2023: £10,978,000) in other non-sterling currencies.

Foreign currency sensitivity

The fair value of the Company’s monetary items that have foreign currency exposure at 31 March 2024 is shown below.

Where the Company’s equity investments (which are not monetary items) are priced in a foreign currency they are shown separately in the analysis as to show the overall level of exposure.

	2024	2023
	£’000	£’000
Sterling equivalent of U.S.$ and other non-sterling exposure
Current assets	16,640	3,257
Creditors	(167)	(6,206)
Spot currency contracts	(1,406)	(1,692)
Loan (non-sterling)	(47,063)	(20,167)
Foreign currency exposure on net monetary items	(31,996)	(24,808)
Investments held at fair value through profit or loss including derivative equity swap	394,294	356,027
Total net foreign currency exposure	362,298	331,219

The table on page 92 of the Annual Report details the sensitivity of the Company’s profit or loss after taxation for the year (investment values) to a 10% increase and decrease in the value of sterling compared with the U.S. dollar and other non-sterling currencies (2023: 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 the AIFM and portfolio management fees.

If sterling had weakened against the U.S. dollar and other non-sterling currencies, as stated above, this would have had the following effect:

	2024	2023
	£’000	£’000
Impact on revenue return	–	–
Impact on capital return	46,816	43,302
Total return after tax/effect on shareholders’ funds	46,816	43,302

If sterling had strengthened against the U.S. dollar and other non-sterling currencies, as stated above, this would have had the following effect:

	2024	2023
	£’000	£’000
Impact on revenue return	–	–
Impact on capital return	(26,943)	(24,220)
Total return after tax/effect on shareholders’ funds	(26,943)	(24,220)

(b) Interest rate risk:

Interest rate risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market interest rates.

Interest rate exposure

The Company’s main exposure to interest rate risk is through its loan facility with J.P. Morgan Securities LLC which is repayable on demand. Interest is charged at the US overnight bank funding rate plus 45 basis points.

At the year-end financial assets and liabilities subject to interest rate risk were as follows:

	Fixed	Floating	Floating
	rate	rate	rate
	2024	2024	2023
	£’000	£’000	£’000
Loan facility with J.P. Morgan Securities LLC	–	47,078	20,170
Gross exposure on OTC equity swaps	–	6,308	6,224
Total liabilities subject to interest rate risk	–	53,386	26,394
Less cash held at Goldman Sachs	–	2,131	2,772
Total net liabilities subject to interest rate risk	–	51,255	23,622

Management of the risk

The level of borrowings is approved and monitored by the Board and the AIFM on a regular basis.

Interest rate sensitivity

The majority of the Company’s financial assets are equity shares and other investments which neither pay interest nor have a maturity date. The amount subject to interest risk as at 31 March 2024 was £51,256,000 (2023: £23,622,000). If the rate increased by 1%, the impact on the profit or loss and net assets would be expected to be £513,000 (2023: £236,000).

(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 (2023: 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 2024 would have increased/decreased by £78,110,000 (2023: £71,762,000), after adjusting for an increase or decrease in the AIFM and the Portfolio management fees. The calculations are based on the portfolio valuations as at the respective Statement of Financial Position dates.

Other price risk exposure

			2024			2023
			Net			Net
	Assets	Liabilities	Fair Value	Assets	Liabilities	Fair Value
	£’000	£’000	£’000	£’000	£’000	£’000
Investments	394,712	–	394,712	357,229	–	357,229
OTC equity swaps	42	(460)	(418)	–	(1,202)	(1,202)
	394,754	(460)	394,294	357,229	(1,202)	356,027

The notional exposure of the OTC equity swaps calculated in accordance with AIFMD requirements, is £5,890,000 (2023: £5,022,000) see glossary for further details.

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 that are readily realisable within one week, in normal market conditions. Stress tests have been performed to understand how long the portfolio would take to realise in such situations. The Board is comfortable that in such situations the Company would be able to meet its liabilities as they fall due. Short-term funding flexibility can be achieved through the use of the bank loan facility. The maximum amount of gearing permitted by the Board is 20% of net assets which equated to £72,261,000 at the year end.

The Board gives guidance to the Portfolio Manager as to the maximum amount of the Company’s resources that should be invested in any one company.

Liquidity exposure and maturity

Contractual maturities of the financial liabilities as at 31 March 2024, based on the earliest date on which payment can be required, are as follows:

	2024	2024	2023	2023
	3 months	3 to	3 months	3 to
	or less	12 months	or less	12 months
	£’000	£’000	£’000	£’000
Loan facility (repayable on demand)	47,078	–	20,170	–
Future settlements	167	–	6,206	–
Derivative – OTC equity swaps	–	460	–	1,202
Other creditors and accruals	2,408	–	2,640	–
	49,653	460	29,016	1,202

3. CREDIT RISK:

Credit risk is the risk of failure of a counterparty to discharge its obligations resulting in the Company suffering a loss.

J.P. Morgan Securities LLC (J.P. Morgan) may take assets with a value of up to 140% of the loan as collateral. Such assets held by J.P. Morgan are available for rehypothecation†.

As at 31 March 2024, the maximum value of assets available for rehypothecation was £65,909,000 being 140% of the loan balance of £47,078,000 (31 March 2023: £28,238,000 being 140% of the loan balance of £20,170,000).

See page 35 of the Annual Report for further details on the loan facility and the associated credit risk.

† See glossary.

Management of the risk

The risk is not significant and is managed as follows:

J.P. Morgan

· by receiving and reviewing regular updates from the Custodian and Prime Broker and Depository.

· by reviewing their Internal Control reports and regularly monitor J.P. Morgan’s credit rating. J.P. Morgan has a credit rating of Aa3 (Moody’s), A+ (S&P) and AA (Fitch).

· by reviewing on a monthly basis assets which are available for rehypothecation.

Other counterparties

· by only dealing with brokers which have been approved by OrbiMed Capital LLC and banks with high credit ratings such as Goldman Sachs International who have a credit rating of A1 (Moody’s), A+ (S&P) and A+ (Fitch);

· by investing in markets that mainly operate DVP (delivery versus payment) settlement.

· all cash balances are held with approved counterparties. J.P. Morgan is the Custodian of the Company’s assets and all assets are segregated from J.P. Morgan’s own assets.

At 31 March 2024 the Company’s exposure to credit risk amounted to £16,639,000 and was in respect of amounts due from brokers in relation to future settlements and cash held as collateral (2023: £3,260,000).

4. FAIR VALUE MEASUREMENT

Hierarchy of investments

As required under IFRS 13 “Fair Value Measurement”, 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 of 31 March 2024	Level 1	Level 2	Level 3	Total
As of 31 March 2024	£’000	£’000	£’000	£’000
Assets	379,574	–	15,138	394,712
Derivatives: equity swap (assets)	–	42	–	42
Derivatives: equity swap (liabilities)	–	(460)	–	(460)
Financial investments held at fair value through profit or loss	379,574	(418)	15,138	394,294

As at 31 March 2023	Level 1	Level 2	Level 3	Total
As at 31 March 2023	£’000	£’000	£’000	£’000
Assets	336,962	–	20,267	357,229
Financial investments held at fair value through profit or loss	–	(1,202)	–	(1,202)
	336,962	(1,202)	20,267	356,027

As at 31 March 2024, the investments in OrbiMed Asia Partners LP Fund has been classified as Level 3. The OrbiMed Asia Partners Fund LP has been valued at the net asset value presented in its Statement of Partners Capital Activity as at 31 December 2023, as permitted under the IPEV guidelines. The Statement of Partner’s Capital Activity as at 31 March 2024 was received in May 2024 and was not materially different from the valuation at 31 December 2023. If the value of the fund were to increase or decrease by 10%, while all other variables remain constant, the return and net assets attributable to shareholders for the year ended 31 March 2024 would have increased/decreased by £112,000 (2023: £216,000).

The following two investments have been valued by the Board, following recommendations received from the Valuation Committee which has reviewed in detail both the valuation and the methodologies provided by Kroll, an independent valuer. Stemirna and XtalPi have been valued using the probability-weighted expected returns methodology (PWERM) and are classified as Level 3.

These Level 3 investments include assumptions based on non-observable market data such as:

(i) the probability of certain scenarios;

(ii) the expected time to the date of sale or realisation opportunity; and

(iii) discount rates.

Stemirna

As at 31 March 2024, the PWERM was used. Under the PWERM, the fair value was mainly determined based on consideration of the values for the company under different scenarios. As highlighted in the Portfolio Manager’s Review, this investment was written down to reflect a change in the company’s outlook. As a result, the following scenarios were used to value the Company:

(i) No recovery – probability 10%

(ii) Restructuring scenario 1, where the proposed financing closes as expected, with no additional shares issued – probability 70%

(iii) Restructuring scenario 2, where the proposed financing closes as expected with a proportion of additional shares – probability 20%

If the probabilities of scenario were to change by 10%, while all other variables remain constant, the return to shareholders would have increased/decreased by £22,000 (2023: £515,000).

XtalPi

As at 31 March 2024, the PWERM was also used. The scenarios used for this investment were as follows:

(i) Partial Recovery – probability 2.5%

(ii) Full Recovery Scenario – probability 2.5%

(iii) IPO Scenario 1 (30/6/2024) – probability-37.5%

(iv) IPO Scenario 2 (30/9/2024) – probability-37.5%

(v) IPO Scenario 3 (30/9/2024) – probability-20.0%

If the probabilities of scenario were to change by 10%, while all other variables remain constant, the return to shareholders would have increased/decreased by £1,162,000 (2023: £1,271,000).

The tables below set out the range of inputs applied in arriving at the fair value of the Level 3 investments valued by Kroll.

Probability of Scenario – (Stemirna and XtalPi)

The probability assigned to certain scenarios is determined by the independent valuer following consultation with the Portfolio Manager. The probability assigned to any scenario reflects a number of factors including the operating performance and prospects of the investee company and market receptivity for IPOs or other realisation routes.

2024	Probability of scenario	2.5%-70%
	Weighted average probability of scenario	36.25%
2023	Probability of scenario	5%-35%
	Weighted average probability of scenario	20%

Expected time to date of sale or realisation opportunity (XtalPi)

The expected time to a sale or realisation opportunity is determined by the independent valuer following consultation with the Portfolio Manager and reflects a number of factors including the operating performance and prospects of the investee company and the current and expected market receptivity for IPOs and other realisation routes.

2024	Expected time to sale or realisation opportunity	0.2 years - 0.8 years
	Weighted average expected time to sale or realisation opportunity	0.5 years
2023	Expected time to sale or realisation opportunity	1-2.5 years
	Weighted average expected time to sale or realisation opportunity	1.75 years

If the expected average time to date of sale or realisation was extended by three months, while all other variables remain constant, the return to shareholders would have decreased by £544,000 (2023: £656,000).

Discount rate (XtalPi)

The discount rates assigned to certain scenarios are determined by the independent valuer using market surveys of discount rates used in a range of private equity and unquoted investment transactions.

2024	Discount rate	23.5%
	Discount rate weighted average	23.5%
2023	Discount rate	22.5%
	Discount rate weighted average	22.5%

If the discount rate was to increase by 5%, while all other variables remain constant, the return to shareholders would have decreased by £159,000 (2023: £382,000).

The valuations of Gracell Biotechnologies CVR and Lexicon Series A Convertible Preferred Stock (Lexicon) as at 31 March 2024, which were produced by Kroll, have been approved by the Board on the recommendation of the Valuations Committee. The Gracell CVR was valued using the PWERM and Lexicon was valued using the price of the most recent funding round, with a discount applied to reflect their lack of marketability.

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. There has been no transfer between fair value hierarchy levels.

	2024	2023
	£’000	£’000
Assets
As at 1 April	20,267	33,927
Purchase of unquoted investments	1,952	–
Repayment of capital – unquoted investment	(71)	–
Net movement in investment holding gains during the year	(7,010)	(3,773)
Transfer from level 3 to level 1	–	(9,887)*
Assets as at 31 March	15,138	20,267

*Yisheng Biopharma and Summit Healthcare Acquisition Corp. entered into a definitive agreement for a business combination and upon closing of the transaction in March 2023, the combined company was renamed as YS Biopharma Co. Ltd and became a publicly traded company on the Nasdaq.

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.

5. CAPITAL MANAGEMENT

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.

The Board’s policy is to limit gearing to a maximum of 20% of the Company’s net assets.

As at 31 March 2024 the Company’s gearing ratio was 9.1% (2023: 7.8%).

The capital structure of the Company consists of the equity share capital, retained earnings and other reserves shown in the Statement of Financial Position.

Shares may be repurchased by the Company as explained on pages 30 and 31 of the Annual Report.

The Company’s objectives, policies and processes for managing capital are unchanged from the preceding accounting period. As at 31 March 2024, the maximum value of assets available for rehypothecation was £65,909,000, being 140% of the loan balance of £47,078,000 (31 March 2023: £28,238,000 being 140% of the loan balance of £20,170,000).

15. TRANSACTIONS WITH RELATED PARTIES AND THE MANAGERS

Related Parties

The Directors of the Company are considered to be related parties.

Details of the remuneration of the Directors of the Company can be found on page 64 of the Annual Report. Geoff Hsu has waived his Directors’ fees. Details of the Directors’ interests in the capital of the Company can be found on page 66.

Transactions with the Managers

· Frostrow Capital LLP

· OrbiMed Capital LLC

Details of the relationship between the Company and Frostrow Capital LLP, the Company’s AIFM, and OrbiMed Capital LLC, the Company’s Portfolio Manager, are disclosed on page 51 of the Annual Report. Geoff Hsu, who joined the Board on 16 May 2018, is a General Partner at OrbiMed. Details of fees paid to OrbiMed by the Company can be found in note 3. All material related party transactions have been disclosed in notes 3 and 4.

The Company holds an interest in OrbiMed Asia Partners Fund which equates to 0.3% of the investments held at 31 March 2024. Further details can be found on page 80 of the Annual Report.

Three current and two former partners at OrbiMed Capital LLC have a minority financial interest totalling 20% in Frostrow Capital LLP, the Company’s AIFM. Details of the fees paid to Frostrow Capital LLP by the Company can be found in note 3.

16. CAPITAL RESERVE

		2024			2023
		Capital Reserves			Capital Reserves
		Investment			Investment
		holdings			holdings
		gains/			gains/
	Other	(losses)	Total	Other	(losses)	Total
	£’000	£’000	£’000	£’000	£’000	£’000
At 1 April	278,564	(50,596)	227,968	399,416	(108,185)	291,231
Net gains/(losses) on investments	5,014	74,129	79,143	(90,316)	57,589	(32,727)
Foreign exchange losses	(621)	–	(621)	(3,759)	–	(3,759)
Expenses charged to capital	(4,015)	–	(4,015)	(4,158)	–	(4,158)
Repurchase of own shares for cancellation	(43,584)	–	(43,584)	(22,619)	–	(22,619)
At 31 March	235,358	23,533	258,891	278,564	(50,596)	227,968

Sums within the Total Capital Reserve less unrealised gains (those on investments not readily convertible to cash) are available for distribution. Investment holding gains in the table above are unrealised.

17. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

As at 31 March 2024 there were no contingent liabilities or capital commitments for the Company (2023: nil).

The figures and financial information for 2023 are extracted from the published Annual Report for the year ended 31 March 2023 and do not constitute the statutory accounts for that year. The Annual Report for the year ended 31 March 2023 has been delivered to the Registrar of Companies and included the Independent Auditor’s Report which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

The figures and financial information for 2024 are extracted from the Annual Report for the year ended 31 March 2024 and do not constitute the statutory accounts for the year. The Annual Report for the year ended 31 March 2024 includes the Independent Auditor’s Report which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and financial statements have not yet been delivered to the Registrar of Companies.

GLOSSARY OF TERMS AND ALTERNATIVE PERFORMANCE MEASURES

ACTIVE SHARE

Active Share is expressed as a percentage and shows the extent to which a fund’s holdings and their weightings differ from those of the fund’s benchmark index. A fund that closely tracks its index might have a low Active Share of less than 20% and be considered passive, while a fund with an Active Share of 60% or higher is generally considered to be actively managed.

ADR

An American depositary receipt (ADR) is a negotiable security that represents securities of a foreign company and allows that company’s shares to trade in the U.S. financial markets. Shares of many non-U.S. companies trade on U.S. stock exchanges through ADRs, which are denominated and pay dividends in U.S. dollars, and may be traded like regular shares of stock.

AIC

Association of Investment Companies.

ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (AIFMD)

Agreed by the European Parliament and the Council of the European Union and transposed into UK legislation, the AIFMD classifies certain investment vehicles, including investment companies, as Alternative Investment Funds (AIFs) and requires them to appoint an Alternative Investment Fund Manager (AIFM) and depositary to manage and oversee the operations of the investment vehicle. The Board of the Company retains responsibility for strategy, operations and compliance and the Directors retain a fiduciary duty to shareholders.

ALTERNATIVE PERFORMANCE MEASURE (APM)

An APM is a numerical measure of the Company’s current, historical or future financial performance, financial position or cash flows, other than a financial measure defined or specified in the applicable financial framework. In selecting these Alternative Performance Measures, the Directors considered the key objectives and expectations of typical investors in an investment trust such as the Company.

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.

	As at 31	As at 31
	March 2024	March 2023
	(pence)	(pence)
Share price	995.0	783.0
Net asset value per share (see note 13 for further information)	1,078.9	852.6
Discount of share price to net asset value per share	7.8%	8.2%

^ Alternative Performance Measure

GEARING^

Gearing represents prior charges, adjusted for net current liabilities, expressed as a percentage of net assets (AIC methodology). Prior charges includes all loans and overdrafts for investment purposes.

	31 March	31 March
	2024	2023
	£’000	£’000
Loan	47,078	20,170
Net current (assets)/liabilities (excluding loan and derivatives)*	(14,091)	5,566
	32,987	25,736
Net assets	361,307	330,291
Gearing	9.1%	7.8%

* Current liabilities less current assets

IPO

An Initial Public Offering (IPO) is the process by which the shares of a previously private company are listed on a stock exchange for the first time. Through this process a company can raise new capital, offer an exit opportunity for private investors and founders, and enable the trading of its shares.

IPO LOCK-IN

When a company offers shares in an IPO, investors sometimes enter into a lock-in agreement preventing them from selling their shares for a specified period after the IPO.

LEVERAGE

The AIFMD leverage definition is slightly different from the Association of Investment Companies’ method of calculating gearing and is defined as follows: any method by which the AIFM increases the exposure of an AIF it manages whether through borrowing of cash or securities, or leverage embedded in derivative positions.

For the purposes of the AIFMD, leverage is any method which increases the Company’s exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company’s exposure and its net asset value and can be calculated on a gross and a commitment method. Under the gross method, exposure represents the sum of the Company’s positions after the deduction of sterling cash balances, without taking into account any hedging and netting arrangements. Under the commitment method, exposure is calculated without the deduction of sterling cash balances and after certain hedging and netting positions are offset against each other.

	Gross Method	Commitment Method
Maximum limit	130.0%	130.0%
Actual as at 31 March 2024	110.5%	109.7%

MARGINABLE SECURITIES

Marginable securities are stocks, bonds, futures or other securities capable of being traded on a Margin Account and are available for rehypothecation*.

NET ASSET VALUE (NAV)

The net asset value of the Company’s assets, principally investments made in other companies and cash held, less any liabilities. The NAV is also described as “shareholders’ funds”. 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 in the secondary market.

* See glossary.

NET ASSET VALUE PER SHARE TOTAL RETURN^

The net asset value per share return for the year ended 31 March 2024 is calculated by taking the percentage movement from the net asset value per share as at 31 March 2023 of 852.6p (2022: 957.8p) to the net asset value per share at 31 March 2024 of 1,078.9p (2023: 852.6p). The Company has not paid any dividends to shareholders in respect of the above-mentioned years.

ONGOING CHARGES^

Ongoing charges are calculated by taking the Company’s annualised operating expenses expressed as a proportion of the average daily net asset value of the Company over the year.

The costs of buying and selling investments are excluded, as are interest costs, taxation, performance fees, cost of buying back or issuing ordinary shares and other non-recurring costs.

	31 March	31 March
	2024	2023
	£’000	£’000
AIFM & portfolio management fees (note 3)	3,070	3,531
Other re-occurring expenses (note 4)	742	692
Total ongoing charges	3,812	4,223
Average daily net assets for the year	323,811	394,525
Ongoing charges	1.2%	1.1%

OTC EQUITY SWAPS

Over-the-Counter (OTC) refers to the process of how securities are traded via a broker - dealer network, as opposed to on a centralised exchange.

An equity swap is an agreement where one party (counterparty) transfers the total return of an underlying equity position to the other party (swap holder) in exchange for a payment of the principal, and interest for financed swaps, at a set date. Total return includes dividend income and gains or losses from market movements. The exposure of the holder is the market value of the underlying equity position.

There are two main types of equity swaps:

· Funded – where payment is made on acquisition. They are equivalent to holding the underlying equity position with the exception of additional counterparty risk and not possessing voting rights in the underlying security; and

· Financed – where payment is made on maturity. As there is no initial outlay, financed swaps increase exposure by the value of the underlying equity position with no initial increase in the investments value – there is therefore embedded leverage within a financed swap due to the deferral of payment to maturity.

REHYPOTHECATION

Rehypothecation is the practice by banks and brokers of using collateral posted as security for loans as regulated by the U.S. Securities Exchange Commission.

SUSTAINABILITY ACCOUNTING STANDARDS BOARD (SASB)

The Sustainability Accounting Standards Board (SASB) is a non-profit organisation, founded in 2011 to develop sustainability accounting standards. Its stated mission is “to establish industry-specific disclosure standards across ESG topics that facilitate communication between companies and investors about financially material, decision-useful information. Such information should be relevant, reliable and comparable across companies on a global basis.”

SHARE PRICE TOTAL RETURN^

The share price total return represents the theoretical return to a shareholder, on a closing market price basis. The share price total return is calculated by taking the percentage movement from the share price as at 31 March 2023 of 783.0p (2022: 898.0p) to the share price as at 31 March 2024 of 995.0p (2023: 783.0p). The Company has not paid dividends to shareholders in respect of the above mentioned years.

VARIABLE INTEREST ENTITY (VIE)

A corporate structure through which an investor can own the economic interests of shares in a company through a contractual relationship. This structure is common in China, including in the biotechnology sector.

ANNOUNCEMENT ENDS

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

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