Final Results

Finsbury Life Sciences Inv Tst PLC 18 June 2003 18th June 2003 Finsbury Life Sciences Investment Trust PLC Preliminary results for the year ended 31 March 2003 Finsbury Life Sciences Investment Trust PLC today announces preliminary results for the year ended 31 March 2003. (Unaudited) (Audited) 31 March 2003 31 March 2002 % change Net Asset Value per share 65.1p 119.2p - 45.4 Share Price 44.0p 102.5p - 57.1 Discount 32.4% 14.0% N/A FTSE All Share Index (total return) 1,786.6 2,545.5 - 29.8 Lehman's UK and European Biotechnology Index 130.2 293.4 -55.6 No final dividend is proposed For and on behalf of Close Finsbury Asset Management Limited - Secretary 18 June 2003 - ENDS - The following are attached: • Chairman's Statement • Consolidated Cash Flow Statement • Consolidated Statement of Total Return • Notes to the Preliminary Results • Balance Sheets of the Group and of the Company For further information please contact: Alastair Smith, Close Finsbury Asset Management Limited 020 7426 6240 Fiona Harris, Quill Communications 020 7763 6970 Michael Bourne, Reabourne Technology Investment 020 7426 6290 Management Limited Dr Andrew Clark, Reabourne Technology Investment 020 7426 6288 Management Limited Finsbury Life Sciences Investment Trust PLC Chairman's Statement Performance During the year ended 31 March 2003 the Company's net asset value per share (NAV) declined from 119.2p to 65.1p, a fall of 45.4%. This compares with a decrease in the FTSE All Share Index (total return) of 29.8% and a fall in the Lehman's UK and European Biotechnology Index of 55.6%. From the launch of the Company in 1997 to the year end the NAV has decreased by 32.9% which compares to a decline in the FTSE All Share Index of 7.4% and a decline in the Lehman's UK and European Biotechnology Index of 62.1%. Since the year end the net asset value per share has increased by 32% from 65.1p to 86.0p as at 13 June 2003 and the mid market share price has increased by 53% over the same period from 44p to 67.5p, reflecting the gain in net asset value and a narrowing in the share price discount. This compares to an increase in the FTSE All Share Index (total return) of 17% and an increase in the Lehman's UK and European Biotechnology Index of 29%. Results and Dividend The total deficit for the year ended 31 March 2003 was 54.0p per share (2002: 44.4p). This was made up of a revenue deficit of 1.1p per share (2002: 0.6p) and a capital deficit of 52.9p per share (2002: 43.8p). No dividend is recommended in respect of the year ended 31 March 2003. Resolution for Company to Continue as an Investment Trust at this year's AGM On 21 May 2003 the Company announced certain proposed changes to its investment adviser personnel and its intention to put proposals to shareholders for the introduction of certain changes to the Company's management and advisory agreements and the introduction of a new continuation vote in 2005 (as described further below). The Board is pleased with the positive responses it has received from several of the Company's largest shareholders to the announcement of the proposed changes. However, the Board believes that the Company would benefit from being mandated, prior to the above arrangements taking effect, to continue as an investment trust through shareholders being given the opportunity to vote on continuation of the Company in its present form at this year's annual general meeting. Accordingly, an ordinary resolution will be put to shareholders at this year's AGM to the effect that the Company continues as an investment trust. If this resolution is passed (together with the resolution concerning the management arrangements and the 2005 continuation vote) shareholders will have further opportunities to vote on the continuation of the Company at the AGMs in 2005, 2007 and every 5 years thereafter. If this resolution is not passed the Board will put forward proposals within 3 months of the AGM which may or may not involve the winding-up of the Company. The Board recommends that shareholders vote in favour of continuation at this year's AGM as it continues to believe that an investment trust structure is appropriate for the Company. The investment trust structure offers flexibility whereby the investment manager and investment advisers are free to invest without the distraction of the potential cash inflows and outflows inherent in an open-ended vehicle. This is particularly valuable for a specialist investment vehicle such as your Company, especially given its committed holding of unquoted investments via the Merlin Fund LP which are not readily realisable. In addition, the Board believes that the winding-up or significant reconstruction of the Company in prevailing market conditions would result in a significant diminution of value for shareholders. Furthermore, the recent progress being made in the biotechnology sector would lend support to the belief that this is not the time to terminate the Company's existing investment remit. Subject to shareholder approval of the package of measures referred to below, at this year's Annual General Meeting, shareholders will have a further opportunity to vote on continuation in 2005, by which time the unquoted investments in the portfolio, inter alia, will have matured further. Changes to Investment Adviser Personnel and Proposals for Changes to Management and Advisory Agreements and the Introduction of a New Continuation Vote in 2005 Investment Adviser Personnel Dr Andrew Clark, the principal investment adviser in relation to the Company's quoted portfolio, will cease full-time employment at Reabourne Technology Investment Management Limited ('Reabourne'), one of the Company's investment advisers, with effect from this year's Annual General Meeting. He will provide fund management and investment advisory consultancy services to Reabourne on an exclusive basis following such date, and this role will include providing advice on your Company's quoted investment portfolio. The Board has agreed with its investment manager, Close Finsbury Asset Management Limited ('Close Finsbury'), and Reabourne that Reabourne's principal investment advisory team going forward from the Annual General Meeting will consist of Mr Michael Bourne (the founder of Reabourne) and Dr Huaizheng Peng, a biotechnology investment specialist, together with Dr Clark in a consultancy capacity. Dr Clark will continue to manage the Company's quoted portfolio together with Mr Bourne and Dr. Peng until the date of the AGM to ensure a smooth transition in the management arrangements. Proposed changes to the Management and Advisory Agreements: Investment Management and Advisory Notice Periods and Fees The Board has agreed with Close Finsbury, Reabourne and its other investment adviser, Merlin Biosciences Limited ('Merlin'), that, subject to shareholder approval at this year's Annual General Meeting, the respective notice periods for termination of services under the relevant investment management and advisory agreements should be reduced from 24 months to 12 months and that, in addition, the annual management fee will reduce to 1% from 1.25% per annum on gross assets (less any investment in the Merlin Fund) in excess of £50 million (1.25% per annum on such assets below £50 million). Benchmark Index Since the launch of the Company in 1997 the benchmark index has been the FTSE All Share Index and the performance fee hurdle has been for the Company's net asset value (excluding any investment in the Merlin Fund) to out-perform the FTSE All Share Index (on a total return basis) plus 8 percentage points over each 3 year performance fee period. Following a review of potential replacement biotechnology based indices, the Board has resolved, subject to shareholder approval, to adopt the Lehman's UK and European Biotechnology Index (the 'Lehman Index') as the Company's benchmark index, both for performance measurement purposes and for performance fee purposes with effect from 1 April 2003. The performance fee hurdle will thereafter be based on out-performance of the Lehman Index (with no additional 8 percentage point hurdle). No performance fee was payable in respect of the 3 year period ended 31 March 2003 and no performance fee will, in any case, be payable in the future unless the value of the Company's net assets (less any investment in the Merlin Fund) at the end of any performance fee period exceeds the 'high water mark' of c.£49m set on 31 March 2000. This would require growth of approximately 125% in the present value of the net assets (less the Merlin Fund investment) of c.£22.0m as at 13 June 2003. 2005 Continuation Vote In light of the changes in management arrangements, the Board believes it is appropriate that shareholders be given a further opportunity to vote on the Company's continuation at the Annual General Meeting to be held in 2005. It is therefore the Board's intention that, subject to the continuation vote at this year's AGM being passed, and to shareholder approval of the changes to the management and advisory agreements described above, it will put forward an ordinary resolution to shareholders at the 2005 AGM to the effect that the Company continues as an investment trust and, if such resolution is not then passed, put forward proposals within three months thereafter which may or may not involve the winding up of the Company. The Board will nevertheless keep the new management arrangements under review prior to such date. If this package of measures (under the headings 'Proposed Changes to Management and Advisory Agreements' and '2005 Continuation Vote', above) is approved by shareholders at this year's AGM, the changes to the notice periods, management fee and benchmark will be deemed to take effect from 1 April 2003. Unquoted Investments 21.6% of the investment portfolio is invested in unquoted investments, with the majority of this being within the Merlin Fund LP. The initial £5,825,000 commitment to the Merlin Fund has now been fully drawn down. The majority of the companies within the Merlin Fund portfolio will need to raise further funds prior to an exit being achieved for investors in the Merlin Fund, including the Company. Against a background of very difficult market conditions your Board has continued to make a provision against the Merlin Fund, currently 25%, which results in the Fund being carried within the Company's NAV at a more prudent valuation than that advocated by the current British Venture Capital Association guidelines. Review of the Year and Outlook The year under review has been another extremely difficult one for biotechnology investors. The market for biotechnology shares in Europe has seen capitulation and the German Neuer Markt has been closed down following a 95% decline from its peak valuation. The factors behind the performance are threefold. Firstly, general market sentiment was very poor, secondly the absence of a Food and Drug Administration Commissioner in the US for the two years to 2002 and thirdly, the poor performance of the large pharmaceutical multinationals, a major source of capital for biotechnology companies. Against this very difficult background your Board has continued to adopt a policy of being fully invested in biotechnology shares and during the year a modest amount of gearing was introduced into the portfolio. The portfolio continues to represent exposure to cutting edge European biotechnology companies whilst retaining a core of high quality, well managed, profitable businesses. The year ahead is looking more encouraging, the disheartening news flow of the last year has eased and the new direction being provided by the new FDA Commissioner is being well received by the market. Against a background of encouraging interest in the sector and strong gains in valuations in recent weeks, your Board remains optimistic as to the outlook for the European biotechnology sector and continues to believe that it will provide positive returns to the long-term investor. Annual General Meeting The Annual General Meeting of the Company will be held on 31 July 2003 at 12 noon and I hope as many shareholders as are able will attend. This will be an opportunity to meet the Board and to hear presentations from the two investment advisers to the Company. John Sclater Chairman Finsbury Life Sciences Investment Trust PLC Consolidated Statement of Total Return Incorporating the revenue account for the year ended 31 March 2003 (Unaudited) (Audited) Revenue Capital Total Revenue Capital Total 2003 2003 2003 2002 2002 2002 £000 £000 £000 £000 £000 £000 ----------------------------------------------------------------------------------------- Losses on - (15,593) (15,593) - (12,620) (12,620) investments Exchange losses on currency - (8) (8) - (40) (40) balances Income (see note 2) 28 - 28 183 - 183 Investment management fee (see note 3) - (284) (284) - (497) (497) Other expenses (352) - (352) (346) - (346) ----------------------------------------------------------------------------------------- Net loss before finance costs and (324) (15,885) (16,209) (163) (13,157) (13,320) taxation Interest payable and similar (6) (47) (53) (6) (29) (35) charges ----------------------------------------------------------------------------------------- Loss on ordinary activities before taxation (330) (15,932) (16,262) (169) (13,186) (13,355) Taxation on (6) - (6) (3) - (3) ordinary activities ----------------------------------------------------------------------------------------- Loss on ordinary activities after taxation (336) (15,932) (16,268) (172) (13,186) (13,358) ----------------------------------------------------------------------------------------- Transfer from (336) (15,932) (16,268) (172) (13,186) (13,358) reserves ----------------------------------------------------------------------------------------- Loss per ordinary (1.1)p (52.9)p (54.0)p (0.6)p (43.8)p (44.4)p share (see note 4) The revenue column of this statement is the profit and loss account of the Group. All revenue and capital items in the above statement derive from continuing operations. Finsbury Life Sciences Investment Trust PLC Balance Sheets of the Group and Company as at 31 March 2003 (Unaudited) (Audited) (Unaudited) (Audited) Group Group Company Company 2003 2002 2003 2002 £000 £000 £000 £000 ----------------------------------------------------------------------------------------- Fixed assets - 20,752 35,633 20,752 35,633 investments Group undertaking - - - 3 ----------------------------------------------------------------------------------------- Current Assets Debtors 14 9 14 9 Cash at Bank 12 478 12 472 ----------------------------------------------------------------------------------------- 26 487 26 481 Creditors Amounts falling due (1,175) (249) (1,175) (246) within one year ----------------------------------------------------------------------------------------- Net current (1,149) 238 (1,149) 235 (liabilities)/ assets Net assets 19,603 35,871 19,603 35,871 ----------------------------------------------------------------------------------------- Capital and reserves Called up share capital 7,525 7,525 7,525 7,525 Share premium 21,679 21,679 21,679 21,679 Capital reserve - realised 11,667 17,477 11,664 17,477 Capital reserve - unrealised (20,985) (10,863) (20,985) (10,860) Revenue reserve (283) 53 (280) 50 ----------------------------------------------------------------------------------------- Total shareholders' funds 19,603 35,871 19,603 35,871 ----------------------------------------------------------------------------------------- Net asset value per ordinary share (see note 5) 65.1p 119.2p 65.1p 119.2p ----------------------------------------------------------------------------------------- Finsbury Life Sciences Investment Trust PLC Consolidated Cash Flow Statement For the year ended 31 March 2003 (Unaudited) (Audited) 2003 2002 £000 £000 ----------------------------------------------------------------------------- Net cash outflow from operating (715) (658) activities Servicing of finance Bank overdraft and loan interest paid (31) (35) Financial investment Purchase of investments (3,497) (15,238) Sales of investments 2,785 13,249 Net cash outflow from financial investment (712) (1,989) Equity dividends paid - (60) ------------------------------------------------------------------------------ Net cash outflow before financing (1,458) (2,742) Drawdown of loans 1,000 - ----------------------------------------------------------------------------- Net cash inflow from financing 1,000 - ------------------------------------------------------------------------------ Decrease in cash (458) (2,742) ------------------------------------------------------------------------------ Reconciliation of net cash flow to movement in net (debt)/funds (458) (2,742) Cashflow from financing (1,000) - Exchange movements (8) (40) ----------------------------------------------------------------------------- Movement in net (debt)/funds (1,466) (2,782) Net funds at 1 April 478 3,260 ------------------------------------------------------------------------------ Net (debt)/funds at 31 March (988) 478 ------------------------------------------------------------------------------ Finsbury Life Sciences Investment Trust PLC Notes 1 Revenue Account The revenue column of the Statement of Total Return represents the revenue account of the Group. 2 Income Income for the year was derived from the following sources: 2003 2002 £000 £000 Income from listed investments 26 113 Other operating income 2 70 ----------------------------------------------------------------------- Total 28 183 3 Investment management fee Revenue Capital Total Revenue Capital Total 2003 2003 2003 2002 2002 2002 £000 £000 £000 £000 £000 £000 -------------------------------------------------------------------------- Periodic fee - 245 245 - 432 432 Irrecoverable VAT - 39 39 - 65 65 -------------------------------------------------------------------------- Total - 284 284 - 497 497 4 Loss per share The revenue loss per ordinary share is based on a revenue loss of £336,000 (2002: loss of £172,000) on ordinary activities after taxation and dividends on non-equity shares, and on 30,100,000 being the number of ordinary shares in issue throughout the year (2002: 30,100,000). Capital loss per ordinary share is based on a net capital loss for the financial year of £15,932,000 (2002: loss of £13,186,000) and on 30,100,000 (2002: 30,100,000) ordinary shares as above. Finsbury Life Sciences Investment Trust PLC Notes (continued) 5 Net Asset Value per share The net asset value per ordinary share is based on the net assets attributable to equity shareholders of £19,603,000 (2002: £35,871,000) and on 30,100,000 (2002: 30,100,000) ordinary shares in issue at 31 March 2003. 6 Comparative information These accounts are not statutory accounts. The above results have been agreed with the Auditors and are an abridged version of the Company's full draft accounts, which have not yet been signed or filed with the Registrar of Companies. They have been prepared using the same accounting policies as those adopted in the financial statements for the year ended 31 March 2002. The accounts for 2002 have been delivered to the Registrar of Companies and those for 2003 will be despatched to shareholders shortly. The 2002 accounts received an audit report which was unqualified and did not contain statements under Section 237 (2) and (3) of the Companies Act 1985. Close Finsbury Asset Management Limited - Secretary 18 June 2003 This information is provided by RNS The company news service from the London Stock Exchange

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