Annual Financial Report

RNS Number : 0502P

Intl. Biotechnology Trust PLC

19 October 2012

 



INTERNATIONAL BIOTECHNOLOGY TRUST PLC (the "Company")

Annual Financial Report Announcement of Audited Results for the year ended 31 August 2012

This announcement contains regulated information.

The information contained in this Annual Financial Report Announcement, including the 31 August 2011 comparatives, has been prepared in accordance with the applicable UK Accounting Standards (United Kingdom Generally Accepted Accounting Practice) and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (issued in January 2009 and adopted early).  The results for the year ended 31 August 2012 are audited but do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The statutory accounts have not yet been delivered to the Registrar of Companies. Full statutory accounts for the year ended 31 August 2011 included an unqualified audit report and have been filed with the Registrar of Companies.

Financial Summary

	31 August	31 August	%
	2012	2011	Change
Group Performance
Total equity (£'000)	128,922	91,764	40.5
Ordinary shares in issue# ('000)	55,458	56,008	(1.0)
Net asset value ("NAV") per share	232.47p	163.84p	41.9
Share price	204.50p	143.00p	43.0
Share price discount	(12.0)%	(12.7)%
Ongoing charges*	1.86%	2.19%
Ongoing charges including performance fee	1.86% ------------	2.67% -------------	-------------
Index Values
NASDAQ Biotechnology Index ("NBI") (Sterling-adjusted)	892.38	614.28	45.3
FTSE All-Share Index (Total Return)	4,247.77	3,855.30	10.2

# Excludes those held in treasury (31 August 2012: 550,000; 31 August 2011: 4,350,000).

* Calculated in accordance with The Association of Investment Companies ("the AIC") guidance. Based on total expenses excluding finance costs and performance fee and expressed as a percentage of average daily net assets. The ratio including performance fee has also been provided, in line with the AIC recommendations.

Chairman's Statement

Total Return to 31 Aug 12	1yr	3yr	5yr
IBT NAV	41.9%	53.4%	61.0%
Quoted portfolio	47.8%	73.7%	89.2%
Unquoted portfolio	21.7%	13.1%	4.5%
IBT Share Price	43.0%	69.4%	46.6%
FTSE All-Share	10.2%	31.4%	10.2%

Investment Performance

In this, my first letter to shareholders as Chairman, I am pleased to report to you a substantial positive return for the year ended 31 August 2012. The NAV increased by 41.9% to 232.5p per share. With a small narrowing of the discount to 12.0% from 12.7%, the Company's share price increased by 43.0%. By comparison, the FTSE All-Share Index produced a total return of just 10.2% over the same period.

For the first time in several years, positive absolute performance was generated from both the quoted and unquoted parts of the portfolio, with a 47.8% and 21.7% increase for each, respectively. Investor enthusiasm for the biotechnology sector improved dramatically over the period against the backdrop of positive, yet muted, price gains for the broader stock market.

The performance of the quoted portfolio was encouraging, outpacing the underlying NASDAQ Biotechnology Index ("NBI"), which increased 45.3%. During the year, four companies held within the quoted portfolio were acquired, including the Company's largest holding Micromet, and Pharmasset, which was the subject of an $11bn takeover by Gilead Sciences - the largest transaction for a development-stage biotechnology company in history.

The pick-up in performance from the unquoted portfolio was particularly encouraging. An exit for the Company's largest unquoted investment EUSA Pharma in April 2012 added £2.4m to the Company's NAV during the year. The valuations of investments held within the unquoted portfolio are continually reviewed, and a number of incremental valuation adjustments have been made to investments within this portfolio over the year.

Share buybacks during the period of £0.9m added 0.1p per share to the NAV, while other adjustments, including management and other expenses, reduced the NAV by 3.5p per share. Encouragingly, the changes to the Management Agreement implemented on 1 September 2011 and other cost savings have reduced the Ongoing Charges to 1.86% this year from 2.19% for the year ended 31 August 2011. No performance fee was generated for the Investment Manager under the new arrangements despite the strong gains in the NAV.

Currency movements had a modestly positive impact of £1.7m or 3.1p per share. The Board regularly reviews the position but the present policy is not to hedge the currency exposure resulting from the Company's largely US Dollar-denominated investments.

Share Buybacks

During the year under review, the Company repurchased a total of 550,000 Ordinary shares into Treasury (31 August 2011: 4,350,000) representing 1.0% of the issued share capital at the start of the year. At year end there were 55,457,663 Ordinary shares in issue and 550,000 held in Treasury, after 4,350,000 Ordinary shares held in Treasury were cancelled during the year.

It is the intention of the Board to continue its policy of buying back shares whether for cancellation or into Treasury, where appropriate, to assist in reducing the volatility of the discount and to enhance the NAV. The Board therefore proposes and recommends that powers to repurchase up to 14.99% of the Company's Ordinary shares for cancellation be renewed for a further period.

Board of Directors

In April 2012, Andrew Barker retired as Chairman of the Company and stepped down from the Board he had so ably led since January 2001. I would like to pay tribute here to Andrew's enormous contribution to the successful development of the Company over the past decade. Andrew led with determined and thoughtful command and I will do my own individual best to continue the momentum and progress he helped establish.

In accordance with the Company's Articles of Association, the Directors retiring by rotation and seeking re-election at this year's Annual General Meeting ("AGM") are Dr Bouchet and myself. The Nomination Committee has met to consider the attributes and contributions of the individuals concerned and, following its review, the Board recommends the re-election of the retiring Board members.

Mr Alex Hammond-Chambers has decided to retire after twelve years of service as a Director of the Company at the forthcoming AGM. The Company has benefitted greatly from his considerable experience and valuable insights and, on behalf of Shareholders, I thank him for his contribution and wish him well in the future.

Prospects

The performance of the biotechnology sector over the past year has been very strong and your Directors remain positive about the future investment outlook for the Company. With growing and ageing populations in both developed and emerging economies, the demand for innovative new drugs, diagnostics and medical devices to prevent and treat modern complex diseases continues to grow.

Thirty years on from the regulatory approval of the first biotechnology drug product - recombinant human insulin - and just over a decade on from the sequencing of the human genome, the biotechnology sector is coming of age as the expansion of technologies for drug discovery and development begins to deliver a plethora of exciting new drugs, diagnostics and devices to treat diseases where there is real unmet medical need.

Of course there are significant challenges to investing in the current economic environment. Availability of risk-tolerant long-term capital to invest in medical innovation is relatively scarce, but the Company's closed-ended structure, and the strength of its Investment Manager SV Life Sciences, puts the Company in the strongest of positions to capture the value of an industry beginning to deliver consistently on its promise.

With a stable pool of capital, the Company's Investment Manager is able to both exploit short-term pricing inefficiencies in the shares of emerging life sciences companies traded in the public markets, and also identify and support highly promising venture-stage technologies through the inevitable ups and downs of early stage technological development.

As these results suggest, the Company's unquoted portfolio - largely invested using the proceeds of a C share issue in February 2007 - is beginning to deliver strong returns. At year-end, the unquoted portfolio represented 16% of NAV, versus the long-term target of up to 30%, to some degree representing the effects of a significant exit for EUSA Pharma during the period, as well as the dilutive effects of the strong quoted portfolio performance.

The Board believes there are a number of exciting investments in the portfolio which will mature over the next few years and which could have a meaningful impact on the NAV.  Furthermore, the unquoted portfolio provides investors with an opportunity to generate absolute returns, whatever the direction of stock markets. In recent years, the unquoted portfolio has acted as a drag on NAV performance as stock markets have staged a dramatic recovery from the global financial crisis; in future years its influence on the Company's performance could be quite different.

With the Company's share price currently trading at a 12.0% discount to NAV, and the unquoted portfolio comprising 16.0% of overall NAV, the market is assigning little value to the unquoted portfolio.  The Board believes this represents a valuation anomaly and offers investors an excellent opportunity to become Shareholders in the biotechnology industry's quiet revolution, even after the quoted sector's recent very strong run.

AGM

This year's AGM will be held on Wednesday, 5 December 2012 at 12.00 pm at BNP Paribas Fortis, 5 Aldermanbury Square, London EC2V 7HR. In addition to the formal process of voting on various shareholder resolutions, the AGM is an opportunity for Shareholders to meet the Board and representatives of the Investment Manager. As in previous years, there will be a presentation from the Investment Manager.

Following recent changes in Company Law, the Board will seek approval at the AGM for changes to the Articles of Association to permit the distribution of capital gains.  Although there are no current plans to use this authority, its adoption will give the Company maximum future flexibility in how shareholders receive returns.

If you have any detailed or technical questions, it would be helpful if you could raise these in advance of the meeting by emailing the Company Secretary at [e-mail] or in writing to BNP Paribas Secretarial Services Limited, 55 Moorgate, London EC2R 6PA. Shareholders who are unable to attend the AGM are encouraged to use their proxy votes.

I look forward to welcoming as many of you as possible to the meeting.

Alan Clifton

Chairman

19 October 2012

 

Investment Manager's Review

Best Performing Investments

		% increase in
	Increase	the year ended
	in NAV	31 August
	(£m)	2012
Micromet	£4.2m	135%
Amgen	£2.8m	52%
Medivation	£2.5m	234%
EUSA Pharma	£2.4m	85%
Affymax	£2.4m	210%

Worst Performing Investments

		% decrease in
	Decrease	the year ended
	in NAV	31 August
	(£m)	2012
Vertex Pharmaceuticals	£0.5m	23%
Hansen Medical	£0.5m	55%
Idenix Pharma	£0.4m	32%
TranS1	£0.3m	32%
Momenta Pharma	£0.3m	22%

Summary

The year ended 31 August 2012 saw the Company's NAV per share increase by 41.9%, which includes a currency gain of approximately 1.1%. By comparison the NBI increased by 45.3%. The FTSE All-Share Index returned 10.2%. All figures are Sterling-adjusted.

The Company's quoted portfolio gained 47.8% over the year, helped by strong equity markets and significantly increased investor interest in the biotechnology sector on the back of strong product development and M&A news flow. The quoted portfolio benefitted from four acquisitions during the period - Caliper Life Sciences, Pharmasset, Micromet, and Ardea Biosciences. The unquoted portfolio returned 21.7% over the year, driven by an exit for EUSA Pharma and a number of incremental valuation changes elsewhere.

The Company's quoted portfolio gives shareholders exposure to an industry sector that continues to outperform the broader equity market over the long-term while the unquoted venture portfolio matures. The Company's venture portfolio has been built up since the C Share issue in February 2007. Five and a half years on, the Investment Manager expects exits from the unquoted portfolio to drive NAV returns and shareholder value in the near and mid-term.

Portfolio Overview

At 31 August 2012, the Company held investments in 70 companies: 45 quoted (representing 77% of NAV) and 25 unquoted companies (representing 16% of NAV). The remaining 7% comprised cash, money market instruments and other net assets. 1.4% of NAV is legally committed to further investments in unquoted companies, while 4.8% is Investment Committee-approved or reserved for further investment in unquoted companies.

While at 31 August 2011, £8.0m of the overdraft facility was drawn down, by the end of the year on 31 August 2012, these borrowings had been fully repaid, and the Company held a positive cash balance (cash, money market instruments, in addition to current net assets and liabilities) of £8.5m.

By subsector, 65% of NAV was invested in the biotechnology sector, 8% in the medical device sector, 9% in the specialty pharmaceuticals sector and 11% in the life sciences tools and diagnostics sector, emphasising the diversified nature of the Company's investments.

Representatives of the Investment Manager sat on the boards of 23 portfolio companies (21 unquoted and two quoted) at the end of the year. An active board seat on private companies remains an important aspect of the Investment Manager's investing activities in early-stage unquoted biotechnology companies.

Quoted Investments

During the year ended 31 August 2012, the combined effect of gains and losses on quoted investments, including currency movements, was to increase the Company's NAV by £35.3m or 63.6p per share. The return for the quoted portfolio over the year was an increase of 47.8%, after taking a currency gain of 0.7% into account.

Broader equity markets performed strongly during the period under review. Against this backdrop, the biotechnology sector performed particularly strongly, driven by an unusually high level of M&A activity and positive clinical and regulatory news flow updates on a number of major new biotechnology product opportunities.

During the year ended 31 August 2012 there was a small number of initial public offerings for biotechnology companies raising $0.8bn but pricing continued to be aggressive and the aftermarket performance lacklustre. By comparison $1.0bn, $1.6bn and $0.9bn was raised in the calendar years 2011, 2010 and 2009.

The market for follow-on, or secondary, financings for public biotech companies continues to be robust, with $4.4bn raised calendar year to date by the end of August 2012, compared to $6.0bn, $3.5bn and $6.2bn for calendars 2011, 2010 and 2009, respectively (source: BioCentury). High quality assets and management teams continue to be able to attract equity capital to fund research and development programmes.

The exit through acquisition of four companies within the quoted portfolio contributed to positive NAV performance. In September 2011, Caliper Life Sciences was acquired by PerkinElmer for $600m (generating a return of 3.7x invested capital); in November 2011 Pharmasset was acquired by Gilead Sciences for $11.0bn (generating a return of 2.9x invested capital); in January 2012 Micromet was acquired by Amgen for $1.2bn (generating a return of 1.9x invested capital); and in April 2012 Ardea Biosciences was acquired by AstraZeneca for $1.3bn (generating a return of 1.7x invested capital).

The quoted portfolio continues to be structured to include large, mid and small-cap biotechnology, emerging medical device and life science tools and diagnostics companies, which we believe provides the optimal risk-reward structure for long-term capital gains. After the recent strong performance of the sector - particularly among the mid-caps - we believe the most attractive opportunities now lie within the large and small-cap groups, and the quoted portfolio is weighted accordingly.

At the end of the year, the Company held 45 quoted investments, against 40 at the start. Descriptions of the Company's largest investments at 31 August 2012 are presented on pages 12 and 13 of the Annual Financial Report.

Unquoted Investments

During the year ended 31 August 2012, the combined effect of gains and losses on unquoted investments, including currency movements, was to increase the Company's NAV by £4.7m or 8.4p per share. The return for the unquoted portfolio over the year was an increase of 21.7%, after taking a currency gain of 2.8% into account.

The highlight of the year for the unquoted portfolio came in April 2012 with the acquisition of specialty pharmaceutical company

EUSA Pharma by Jazz Pharma for $700m. EUSA Pharma, a Company investment since March 2007, had recently received FDA approval for its childhood leukaemia drug, Erwinaze. The all-cash structured transaction closed in June 2012 and returned £4.8m in cash to the Company. The exit from this investment added £2.4m to NAV during the period for a 2.0x return on invested capital of £2.4m.

During the year under review, five investments were written down by £0.8m in total and eight investments were written up by £5.5m in total; Aptiv Solutions, Archemix, Cadent, EUSA Pharma, Ikano, Ophthotech and RespiVert. Over the year one new investment was made into Karus Therapeutics, while 18 follow-on investments were made with a combined value of £4m into 14 existing holdings.

At the year end, there were formal commitments to invest in certain unquoted companies (based on certain milestone achievements) of £1.7m; we also estimate that we may invest a further £6.2m into existing unquoted portfolio companies.

The Company currently recognises £0.7m of fair value for future milestone payments potentially due to the Company from unquoted investments already exited. The receipt of these payments is contingent on pre-agreed, and legally-binding, operational or clinical development milestones being achieved. If paid in full, these milestone payments would amount to £9.6m on current exchange rates, representing £8.8m of additional unrecognised value.

The current calendar year has seen a decline in the overall level of venture capital investment into the biotechnology industry, with $3.3bn invested up to the end of August 2012 compared to $5.3bn, $5.4bn and $5.1bn for calendars 2011, 2010 and 2009, respectively (source: BioCentury). The Investment Manager believes this reflects the difficult fund-raising environment for life sciences venture capital firms after a decade of poor average returns for the asset class.

However, a relatively small number of specialist venture capital firms with strong and consistent long-term performance records have been able to raise significant funds in recent years and have been able to finance the best opportunities on good valuation terms, and with smaller, tighter syndicates of similarly strong firms. A recent trend has been the emergence of corporate venture capital investing, which, as well as bringing capital, brings additional technical expertise to investing in (and exiting from) early-stage life sciences companies.

Despite the negative fundraising trends, the investment thesis for venture capital investing in the life sciences area remains intact. Highly creative and efficient small biotech companies continue to provide the novel products so desperately needed by the pharmaceutical industry. The recent trend for large pharmaceutical companies reducing internal investment in R&D in favour of outsourcing development-stage products from smaller biotechnology companies favours the venture capital investment model in two important ways.

First, it provides high quality deal-flow as relatively advanced drug development projects are spun-out of pharmaceutical companies along with their project teams and comprehensive intellectual property portfolios. Secondly, it provides a clear route to exiting investments while public markets risk appetite remains relatively low and biotech IPO activity continues to be suppressed.

The Company's venture capital investments - most of which have been made following the C Share issue in February 2007 - are continuing to mature. The Investment Manager expects news flow from the unquoted portfolio over the next 12-24 months - and volatility in valuations to increase accordingly - as the portfolio's venture-backed companies begin to generate proof-of-concept data on lead drug candidates and medical devices, or their businesses develop to a stage where they become attractive acquisition candidates for larger companies. Descriptions of the Company's unquoted investments are presented on pages 14 and 15 of the Annual Financial Report.

Outlook

This October marks the 30th anniversary of the first biotechnology drug approved for human medical use. On 28 October 1982, the FDA approved Genentech/Lilly's Humulin - a genetically engineered version of natural human insulin - for the treatment of diabetes.

Prior to this date, almost all insulin for human use was harvested in slaughterhouses from the pancreases of pigs and cattle. In the intervening period this synthetic version of human insulin has established itself as one of the standard treatment for millions of people with diabetes, avoiding the perils and pitfalls of injecting people with biological material extracted from other animals.

Although a case can be made for the industry's beginnings being James Watson and Francis Crick's 1953 discovery of double helix structure of human DNA, the regulatory approval of Humulin arguably marked the start of the modern biotechnology-driven drug industry.

Over the past three decades ever more sophisticated tools and technologies for manipulating genetic material (DNA) and biological molecular processes have been developed. The sequencing of the human genome just over a decade ago marked another seminal moment in medical progress, and in the biotechnology industry's evolution.

The number of biotechnology drugs successfully developed and brought into widespread clinical use has increased every year since Humulin received FDA approval thirty years ago. Several hundred new biotechnology-based drugs have now been developed, bringing great benefit to thousands of patients suffering serious life-threatening disorders, and generating tens of billions of US Dollars in sales annually, with several hundred more currently in clinical development.

While biotechnology is now used throughout the pharmaceutical industry, the number of R&D intensive companies has blossomed into the thousands, and these days, roughly two-thirds of all new drugs approved by the FDA have been discovered and/or developed by a small, nimble, capitally-efficient biotechnology company at some stage.

Such successful innovation is reflected in the market value of today's biotechnology industry - the NBI comprises 116 stock exchange listed companies for a combined market capitalisation of $465bn - and that excludes listed companies located outside the US and also the full-range of privately-owned venture-capital backed enterprises globally.

The NBI contains a number of companies with market capitalisations of greater than $10bn, companies that are generating billions of dollars of revenues and, on the bottom-line, generating earnings growth and free cash flow at double-digit annualised rates or higher. Biotechnology has truly "come of age", and is now a major global growth industry beginning to repay its investors for their patience and risk-tolerance over the years it has taken for the science to translate into successful commercial enterprise.

Despite the well-known risks of drug discovery and development, returns from investing in the biotechnology sector have historically been consistently strong - over the past 1, 3 and 5 years (to August 2012) the biotechnology sector (as measured by the NBI) has returned 42.1%, 76.7%, 76.5%, versus the broader market (as measured by the S&P500), which has returned 18.0%, 46.7%, 6.5%, respectively.

The sector's notable recent outperformance has been driven by a wave of new biotechnology drugs making it through challenging clinical development and regulatory hurdles. Investors have witnessed multiple positive clinical data and regulatory approvals for exciting new drugs to treat diseases such as hepatitis, multiple sclerosis, prostate cancer and cystic fibrosis - areas of real unmet medical need.

Highly effective drugs to treat these diseases represent multi-billion Dollar commercial opportunities for the biotechnology companies that have successfully developed them. M&A activity has also stepped up, as large pharmaceutical companies access this successful innovation to fill product pipeline gaps caused by disappointing internal R&D productivity and a wave of patent expirations for major branded products.

There are strong arguments to be made that this long-term success is set to continue. Ageing populations in developed economies and burgeoning middle classes in developing economies provide the demographic foundations for the long-term secular growth of the industry. Demand for innovative new drugs, diagnostics and medical devices to prevent and treat complex diseases associated with living longer and with unhealthier lifestyles is only set to increase.

Furthermore, as the global economy grapples with low growth and austerity, providers of healthcare must achieve more with fewer resources - drugs, devices and diagnostics must all improve, and healthcare delivery itself must evolve - and the only way is to constantly innovate. Advances in the understanding of the drivers of health and disease - in part achieved through the application of ever more powerful computing technology, in part by well established scientific experimentation and human intellectual endeavour - are set to accelerate the development of new medical technologies over the coming few years, bringing us closer to the long-heralded era of "personalised medicine".

As biotechnology companies successfully bring new products through the clinical development and regulatory licensing processes much of the technical difficulty of evaluating new biotechnology drug opportunities falls away. In the current low interest rate, low economic growth environment, investors are looking for exciting new growth opportunities. The biotechnology sector is delivering them.

SV Life Sciences Managers LLP

Investment Manager

19 October 2012

Principal Risks and Uncertainties

The Board uses a framework of key risks which affect its business, and related internal controls designed to enable the Directors to take steps to mitigate these risks as appropriate. A full analysis of the Directors' system of internal control is set out in the Corporate Governance Statement on page 26 of the Annual Financial Report.

The Company's key risks include:

Market Risk

The Company's returns are affected by changes in economic, financial and corporate conditions which can cause market fluctuations; a significant fall in equity markets is likely to affect adversely the value of the Company's portfolio. The Investment Manager provides the Board with information on the market at each Board meeting and the Board discusses appropriate strategies to manage the impact of any significant change in circumstances.

The biotechnology sector has its own specific risks leading to higher volatility than broad equity market indices. While the Company seeks to maintain a diversified portfolio within the confines of the current investment policy, biotechnology sector-specific or equity market risks cannot be eliminated by a diversified exposure to global biotechnology.

Investment and Strategy

Alignment of the investment strategy with the Company's Investment Objective is essential and an inappropriate approach by the Investment Manager towards stock selection and asset allocation may lead to loss and/or underperformance and failure to achieve the Company's objective of long-term capital growth, resulting in a widening of the discount. The Board manages these risks through its framework of investment restrictions and regular monitoring of the Investment Manager's adherence to the agreed investment strategy.

As mentioned above, SVLS provides regular reports to the Board on portfolio activity, strategy and performance, as well as risk monitoring. The reports are discussed in detail at Board meetings, which are all attended by the Investment Manager, to allow the Board to monitor the implementation of investment strategy and process. The Investment Manager operates in a collegiate manner, with no one individual having overall influence over the Company's investments.

Currency Risk

The Financial Statements and performance of the Company are denominated in Sterling because it is the currency of most relevance to the Company's investors. However, the majority of the Company's assets are denominated in US Dollars. Accordingly, the total return and capital value of the Company's investments can be significantly affected by movements in foreign exchange rates. It is not the Company's policy to hedge against foreign currency movements.

Discount to the NAV

Failure to meet investment objectives and/or poor sector-specific or general equity sentiment can affect the Company's share price, resulting in shares trading at a relatively large discount to the underlying NAV. The Board continually reviews the Company's investment performance, taking into account changes in the market, and regularly reviews the position of the NAV per share compared to the share price. Further information on the Company's discount is provided in the Chairman's Statement above.

Accounting, Legal and Regulatory               

To qualify for the status of an investment trust, the Company must comply with Section 1158 CTA 2010. Further details of the Company's approval under Section 1158 CTA are set out in "Status of the Company" on page 17 of the Annual Financial Report.

A breach of Section 1158 CTA could result in the Company being subject to Capital Gains Tax on the sale of investments. Consequently, pre-trade compliance checks are embedded into the investment procedures of the Investment Manager. Reports confirming the Company's compliance with the provisions of Section 1158 CTA are submitted by the Investment Manager to each Board meeting together with relevant portfolio and financial information.

The Company is also subject to compliance with other laws and regulations, including the Companies Act 2006 and the FSA's Listing, Prospectus and Disclosure and Transparency Rules. Breaches of these laws and regulations could lead to criminal action being taken against Directors or suspension of the Company's shares from trading. The Investment Manager and Company Secretary provide regular reports to the Board on compliance with relevant provisions and report breaches without delay. The Board also relies on the services of its other professional advisers to minimise these risks.

The Board continues to be alert to the many developments in regulation. These include the Alternative Investment Fund Managers Directive, the Foreign Account Tax Compliance Act and the Retail Distribution Review.

Operational

As the Company's main functions are delegated to third party service providers, operational risk arises from insufficient processes of internal control which would include compliance with statutes and regulations governing the functions of the Company.

Such risks are assessed by the Board, which receives regular reports from its main service providers as to the internal control processes in place within those organisations. The Chairman of the Audit Committee annually reviews the internal control reports of the Company's main service providers produced in accordance with AAF 01/06 and ISAE 3402 guidance and brings any issues of concern to the Board.

Financial

The financial risks faced by the Company are set out in note 24 to the Financial Statements on pages 51 to 59 of the Annual Financial Report, which includes further analysis of financial risks including market and currency exposure risks.

Related Party Transactions

Details of the management fee arrangement are given in the Directors' Report on page 22 of the Annual Financial Report.

The total fee payable under this Agreement to SVLS (the "Investment Manager") for the year ended 31 August 2012 was £1,269,000 (2011: £1,351,000) of which £nil (2011: £nil) was outstanding at the year end. In addition to this, SVLS is also entitled to a performance fee of £nil (2011: £486,000).

The Directors of the Company are key management personnel. The total remuneration payable to Directors in respect of the year ended 31 August 2012 was £163,109 (2011: £183,772) of which £nil (2011: £nil) was outstanding at the year end.

SVLS will often take seats on boards of companies in which the Company holds an investment. These positions help to monitor the investee companies and in many cases add to the strength and depth of management. They sometimes provide an economic benefit to the individual who takes the position - often in the form of a director's fee or share awards. SVLS has agreed with the Board a set of guidelines on how any economic interest will be divided between the Company and SVLS. The Board is informed of both the position held and any economic benefits as they arise and a summary of all the positions, benefits and allocations is presented for review at each Board meeting for formal approval. During the year ended 31 August 2012 £nil (2011: £nil) was received.

At 31 August 2012, there was an outstanding balance of £511,000 due to Subsidiary, IBT Securities Limited (2011: £511,000 due to Subsidiary).

Management Report

Listed companies are required by the FSA's Disclosure and Transparency Rules (the "Rules") to include a management report in their annual financial statements. The information required to be in the management report for the purposes of the Rules is included in the Chairman's Statement on pages 6 and 7, the Investment Manager's Review on pages 8 to 11 and the Business Review as contained in the Director's Report on pages 17 and 18 of the Annual Financial Report. Therefore, a separate management report has not been included.

Directors' Responsibilities Statement

The Directors are responsible for preparing the Annual Report, the Directors' Remuneration 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 have prepared the Group and Parent Company Financial Statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union ("EU"). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Parent Company and of the profit or loss of the Group 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; and

• State whether applicable IFRSs as adopted by the EU have been followed, subject to any material departures disclosed and explained in the Financial Statements.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and the Group and enable them to ensure that the Financial Statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group Financial Statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Parent Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the UK governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

The Annual Report is published on the following website: www.ibtplc.com, which is a website maintained by the Company's Investment Manager. The maintenance and integrity of the website maintained by the Investment Manager is, so far as it relates to the Company, the responsibility of the Investment Manager. The work carried out by the Auditors does not involve consideration of the maintenance and integrity of this website and accordingly, the Auditors accept no responsibility for any changes that have occurred to the Annual Report since it was initially presented on the website. Visitors to the website need to be aware that legislation in the UK governing the preparation and dissemination of the Annual Report may differ from legislation in their home jurisdiction.

Each of the Directors, whose names and functions are listed on page 5 of the Annual Financial Report, confirms that, to the best of his or her knowledge:

• The Group Financial Statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true

and fair view of the assets, liabilities, financial position and profit of the Group;

• The Directors' Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces; and

• As outlined on page 23 of the Annual Financial Report, the Directors have undertaken all necessary reviews to provide a going concern recommendation.

In accordance with Section 418 of the Companies Act 2006, the Directors at the date of approval of this Report, as listed on page 5 of the Annual Financial Report, confirm that:

(a) so far as the Director is aware, there is no relevant audit information of which the Company's Auditors are unaware; and

(b) he/she has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company's Auditors are aware of that information.

By order of the Board

Alan Clifton

Chairman

19 October 2012

 

GROUP STATEMENT OF COMPREHENSIVE INCOME

		For the year ended 31 August 2012			For the year ended 31 August 2011
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value	2	-	39,683	39,683	-	7,179	7,179
Exchange losses on currency balances		-	(179)	(179)	-	(101)	(101)
Income	3	380	260	640	196	-	196
Expenses
Management fee		(1,269)	-	(1,269)	(1,351)	-	(1,351)
Performance fee		-	-	-	-	(486)	(486)
Administrative expenses		(802) -----------	- ----------	(802) ----------	(830) ----------	- ---------	(830) ----------
(Loss)/profit before finance costs and tax		(1,691)	39,764	38,073	(1,985)	6,592	4,607
Finance costs
Interest payable		(20) ----------	- ----------	(20) ----------	(23) ----------	- ---------	(23) ----------
(Loss)/profit on ordinary activities before tax		(1,711)	39,764	38,053	(2,008)	6,592	4,584
Taxation		(42) -----------	- ----------	(42) ----------	(14) ----------	- ---------	(14) ----------
(Loss)/profit for the year attributable to owners of the parent		(1,753) ======	39,764 =====	38,011 =====	(2,022) ======	6,592 ======	4,570 ======
(Loss)/earnings per Ordinary share	4	(3.16)p ======	71.58p =====	68.42p =====	(3.45)p ======	11.24p ======	7.79p ======

The total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with

IFRSs as adopted by the EU.

The Group does not have any other comprehensive income and hence the net (loss)/profit for the year, as disclosed above, is the same as the Group's total comprehensive income.

The revenue and capital columns are supplementary and are prepared under guidance published by the AIC.

The accompanying notes form part of these Financial Statements.

 

GROUP AND COMPANY STATEMENTS OF CHANGES IN EQUITY

 

	Called up	Share	Capital	Share
	share	premium	redemption	purchase	Capital	Revenue
Group	capital	account	reserve	reserve	reserves	reserve	Total
For the year ended 31 August 2012	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 August 2011	15,089	18,805	26,728	46,449	4,501	(19,808)	91,764
Total Comprehensive Income:
Profit/(loss) for the year	-	-	-	-	39,764	(1,753)	38,011
Transactions with owners, recorded directly to equity:
Shares bought back and held in treasury	-	-	-	(853)	-	-	(853)
Shares cancelled from treasury	(1,087) -----------	- ----------	1,087 ------------	- ------------	- ------------	- -------------	- ------------
Balance at 31 August 2012	14,002 ======	18,805 ======	27,815 =======	45,596 =======	44,265 =======	(21,561) =======	128,922 =======
	Called up	Share	Capital	Share
	share	premium	redemption	purchase	Capital	Revenue
Group	capital	account	reserve	reserve	reserves	reserve	Total
For the year ended 31 August 2011	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 August 2010	16,208	18,805	25,609	52,913	(2,091)	(17,786)	93,658
Total Comprehensive Income:
Profit/(loss) for the year	-	-	-	-	6,592	(2,022)	4,570
Transactions with owners, recorded directly to equity:
Shares bought back and held in treasury	-	-	-	(6,464)	-	-	(6,464)
Shares cancelled from treasury	(1,119) -----------	- -----------	1,119 ------------	- ------------	- -----------	- ------------	- -----------
Balance at 31 August 2011	15,089 =======	18,805 =======	26,728 =======	46,449 =======	4,501 =======	(19,808) =======	91,764 ======
	Called up	Share	Capital	Share
	share	premium	redemption	purchase	Capital	Revenue
Company	capital	account	reserve	reserve	reserves	reserve	Total
For the year ended 31 August 2012	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 August 2011	15,089	18,805	26,728	46,449	3,990	(19,808)	91,253
Total Comprehensive Income:
Profit/(loss) for the year	-	-	-	-	39,764	(1,753)	38,011
Transactions with owners, recorded directly to equity:
Shares bought back and held in treasury	-	-	-	(853)	-	-	(853)
Shares cancelled from treasury	(1,087) ------------	- ------------	1,087 ------------	- -----------	- ------------	- ------------	- -----------
Balance at 31 August 2012	14,002 =======	18,805 =======	27,815 =======	45,596 ======	43,754 =======	(21,561) =======	128,411 ======
	Called up	Share	Capital	Share
	share	premium	redemption	purchase	Capital	Revenue
Company	capital	account	reserve	reserve	reserves	reserve	Total
For the year ended 31 August 2011	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 August 2010	16,208	18,805	25,609	52,913	(2,602)	(17,786)	93,147
Total Comprehensive Income:
Profit/(loss) for the year	-	-	-	-	6,592	(2,022)	4,570
Transactions with owners, recorded directly to equity:
Shares bought back and held in treasury	-	-	-	(6,464)	-	-	(6,464)
Shares cancelled from treasury	(1,119) -----------	- -----------	1,119 ------------	- ------------	- -------------	- -------------	- -----------
Balance at 31 August 2011	15,089 =======	18,805 ======	26,728 =======	46,449 ======	3,990 =====	(19,808) ======	91,253 =====

 

The accompanying notes form part of these Financial Statements.

 

GROUP AND COMPANY BALANCE SHEETS

		At 31 August	At 31 August	At 31 August	At 31 August
		2012	2012	2011	2011
		Group	Company	Group	Company
	Note	£'000	£'000	£'000	£'000
Non-current assets
Investments held at fair value through profit or loss		120,389 -------------	120,389 --------------	95,867 ------------	95,867 -------------
		120,389	120,389	95,867	95,867
Current assets
Current asset investments		6,043	6,043	-	-
Receivables		355	355	5,427	5,427
Cash and cash equivalents		2,334 -------------	2,334 -------------	23 ------------	23 -------------
		8,732 -------------	8,732 -------------	5,450 ------------	5,450 -------------
Total assets		129,121	129,121	101,317	101,317
Current liabilities
Borrowings		-	-	(7,996)	(7,996)
Payables		(199) ------------	(710) ------------	(1,557) ------------	(2,068) -------------
		(199) ------------	(710) ------------	(9,553) ------------	(10,064) -------------
Net assets		128,922 ------------	128,411 ------------	91,764 ------------	91,253 -------------
Equity attributable to equity holders
Called up share capital		14,002	14,002	15,089	15,089
Share premium account		18,805	18,805	18,805	18,805
Capital redemption reserve		27,815	27,815	26,728	26,728
Share purchase reserve		45,596	45,596	46,449	46,449
Capital reserves		44,265	43,754	4,501	3,990
Revenue reserve		(21,561) ------------	(21,561) ------------	(19,808) ------------	(19,808) ------------
Total equity		128,922 =======	128,411 =======	91,764 =======	91,253 =======
Net asset value per Ordinary share	5	232.47p =======	231.55p =======	163.84p =======	162.93p =======

The Financial Statements were approved by the Board on 19 October 2012 and signed on its behalf by Alan Clifton, Chairman and John Aston, Director

The accompanying notes form part of these Financial Statements.

 

 

GROUP AND COMPANY CASH FLOW STATEMENTS

	For the	For the	For the	For the
	year ended	year ended	year ended	year ended
	31 August	31 August	31 August	31 August
	2012	2012	2011	2011
	Group	Company	Group	Company
	£'000	£'000	£'000	£'000
Cash flows from operating activities
Profit before finance costs and tax	38,073	38,073	4,607	4,607
Exchange losses on currency balances	179	179	101	101
Adjustments for:
Increase in investments	(24,522)	(24,522)	(4,418)	(4,418)
(Increase)/decrease in current asset investments	(6,043)	(6,043)	1,500	1,500
Decrease/(increase) in receivables	5,072	5,072	(4,553)	(4,553)
(Decrease)/increase in payables	(1,349)	(1,349)	138	138
Taxation	(42) -------------	(42) -------------	(14) -------------	(14) --------------
Net cash flows generated from/(used in) operating activities	11,368 -------------	11,368 -------------	(2,639) -------------	(2,639) --------------
Cash flows used in financing activities
Share repurchase costs	(853)	(853)	(6,464)	(6,464)
Interest paid on bank overdrafts	(29) -------------	(29) -------------	(14) -------------	(14) -------------
Net cash used in financing activities	(882) -------------	(882) -------------	(6,478) -------------	(6,478) -------------
Net increase/(decrease) in cash and cash equivalents/(net debt)	10,486	10,486	(9,117)	(9,117)
Effect of foreign exchange losses	(179)	(179)	(101)	(101)
Cash and cash equivalents/(net debt) at beginning of year	(7,973) -------------	(7,973) ------------	1,245 ------------	1,245 -------------
Cash and cash equivalents/(net debt) at 31 August	2,334 ========	2,334 =======	(7,973) =======	(7,973) ========

The accompanying notes form part of these Financial Statements.

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 August 2012

1. Accounting Policies

The Group comprises International Biotechnology Trust plc (the "Company") and its wholly owned subsidiary, IBT Securities Limited (the "Subsidiary").

The nature of the Group's operations and its principal activities are set out in the Report of the Directors on page 17 of the Annual Financial Report.

Consolidated and Company Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") and those parts of the Companies Act 2006 (the "Act") applicable to companies reporting under IFRSs.  These comprise standards and interpretations approved by the International Accounting Standards Board ("IASB") and International Accounting Standards Committee ("IASC"), as adopted by the EU.

For the purposes of the consolidated Financial Statements, the results and financial position of each entity is expressed in pounds Sterling, which is the functional currency of the Company and of its subsidiary and the presentational currency of the Group. Sterling is the functional currency because it is the currency which is most relevant to the majority of the Company's Shareholders and creditors and the currency in which the majority of the Group's operating expenses is paid.

The principal accounting policies followed are set out below:

(a) Basis of preparation

The consolidated and parent company Financial Statements have been prepared on a going concern basis and under the historical cost convention, as modified by the inclusion of investments at fair value through profit or loss.

Where presentational guidance set out in the Statement of Recommended Practice ("the SORP") for investment trusts issued by The Association of Investment Companies ("the AIC") in January 2009 is consistent with the requirements of IFRS, the Directors have sought to prepare the Financial Statements on a basis compliant with the recommendations of the SORP.

(b) Basis of consolidation

The consolidated Financial Statements of the Group comprise the Financial Statements of the Company and its Subsidiary.

The Subsidiary is fully consolidated from the date on which control is transferred to the Group. Control is achieved where the

Company has power to govern the financial and operating policies of an investee entity so as to obtain all the benefits from its activities. Inter-company transactions, balances and unrealised gains/losses on transactions between group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

No Statement of Comprehensive Income is presented for the Company, as permitted under Section 408 of the Act.

(c) Presentation of Statement of Comprehensive Income

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income.

The net profit after taxation in the revenue column is the measure the Directors believe appropriate in assessing the Group's compliance with certain requirements set out in Section 1158 Corporation Tax Act 2010.

(d) Income

Dividends receivable on equity shares are recognised as revenue for the year on an ex-dividend basis. Special dividends are treated as revenue return or as capital return, depending on the facts of each individual case. Income from current asset investments is included in the revenue for the year on an accruals basis. Where the Group has elected to receive its dividends in the form of additional shares rather than cash, the amount of cash dividend foregone is recognised as income in the revenue column of the Statement of Comprehensive Income. Any excess in the value of shares over the amount of cash dividend foregone is recognised as a gain in the capital column of the Statement of Comprehensive Income.

Deposit and other interest receivable are accounted for on an accruals basis.

(e) Expenses and interest payable

Administrative expenses including the management fee and interest payable are accounted for on an accruals basis.

All expenses and interest payable have been presented as revenue items except as follows:

• Any performance fee payable is allocated wholly to capital, as it is primarily attributable to the capital performance of the Company's assets; and

• Transaction costs incurred on the acquisition or disposal of investments are expensed and included in the costs of acquisition or deducted from the proceeds of sale as appropriate.

(f) Taxation

Deferred tax is provided in full, using the liability method, on all taxable and deductible temporary differences at the Balance Sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are measured, without discounting, at the tax rates that are expected to apply to the period when the asset is realised or the liability settled, based on tax rates and tax laws that have been enacted or substantively enacted at the Balance Sheet date.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences can be utilised.

In line with recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented in the capital column of the Statement of Comprehensive Income is the marginal basis. Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital column.

Due to the Company's status as an investment trust company, and the intention to continue to meet the conditions required by Section 1159 of the Corporation Tax Act 2010 to obtain approval in the foreseeable future, the Company has not provided for deferred tax on any capital gains and losses arising on the revaluation of investments, or current tax on any capital gains on the disposal of investments.

(g) Non-current asset investments held at fair value

Investments are recognised or derecognised on the trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned.

On initial recognition all non-current asset investments are designated as held at fair value through profit or loss as defined by IFRSs. They are further categorised into the following fair value hierarchy:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: Having inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e as prices) or indirectly (i.e derived from prices).

• Level 3: Having inputs for the asset or liability that are not based on observable market data.

All non-current investments (including those over which the Group has significant influence) are measured at fair value with gains and losses arising from changes in their fair value being included in net profit or loss for the year as a capital item.

The fair value for quoted investments is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted.

In respect of unquoted investments, or where the market for a financial instrument is not active, fair value is established by using various valuation techniques, in accordance with the International Private Equity and Venture Capital ("IPEVC") Valuation Guidelines (August 2010). These may include using recent arm's length market transactions between knowledgeable, willing parties, if available, reference to recent rounds of re-financing undertaken by investee companies involving knowledgeable parties, reference to the current fair value of another instrument that is substantially the same or an earnings multiple.

As many of the unquoted investments are early-stage investments, without revenue, valuation is also assessed up or down with reference to a range of factors among which are: ability of portfolio company management to keep cash and operating budgets, clinical developments towards management and/or investor milestone targets, clinical trial data, progress of competitor products, performance and quality of the management team, litigation brought by or against the portfolio company, patent approval or challenge, the market for the product being developed and the broad climate of the economies of the countries in which they will likely be sold by reference to public stock market performance.

Any gains and losses realised on disposal are recognised in the capital column of the Statement of Comprehensive Income.

(h) Current asset investments

Current asset investments are measured at fair value with gains and losses arising from their changes in fair value being included in the Statement of Comprehensive Income as a revenue item.  Current asset investments comprise liquidity funds as disclosed in note 10 in the Annual Financial Report.  These are all short-term in nature and held for less than one year.

(i) Investment in subsidiary

The Company's investment in the Subsidiary included at cost in the Company's Balance Sheet.

(j) Foreign currencies

Transactions involving currencies other than Sterling are recorded at the exchange rate ruling on the transaction date.

At each Balance Sheet date, monetary items and non-monetary assets and liabilities that are fair valued, which are denominated in foreign currencies, are retranslated at the closing rates of exchange. Foreign currency exchange differences arising on translation are recognised in the Statement of Comprehensive Income. Exchange gains and losses on investments held at fair value through profit or loss are included within "gains/(losses) on investments held at fair value".

(k) Critical accounting estimates and judgements

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.

The critical estimates and assumptions relate, in particular, to the valuation of unquoted investments, as summarised in (g) above.

Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

(l) Cash and cash equivalents

In the Statement of Cash Flows, cash and cash equivalents includes cash in hand, short-term deposits and bank overdrafts. These are held for the purpose of meeting short-term cash commitments rather than for investment or other purpose and cash balances are held at their value (translated to Sterling at the Balance Sheet date where appropriate) and are stated at £2.3m. In the Balance Sheet, bank overdrafts are shown within borrowings in current liabilities.

(m) Other receivables

Other receivables do not carry any right to interest and are short-term in nature. Accordingly they are stated at their nominal value (amortised cost) reduced by appropriate allowances for estimated irrecoverable amounts.

(n) Other payables

Other payables are not interest-bearing and are stated at their nominal amount (amortised cost). Where there are any long-term borrowings, finance costs are calculated over the term of the debt on the effective interest basis.

(o) Repurchase of Ordinary shares (including those held in treasury)

The costs of repurchasing Ordinary shares including related stamp duty and transaction costs are taken directly to equity and reported through the Statement of Changes in Equity as a charge on the share purchase reserve. Share repurchase transactions are accounted for on a trade date basis. The nominal value of Ordinary share capital repurchased and cancelled is transferred out of called up share capital and into the capital redemption reserve. Where shares are repurchased and held in treasury, the transfer to capital redemption reserve is made if and when such shares are subsequently cancelled.

(p) Reserves

(i) Capital redemption reserve:

The capital redemption reserve, which is non-distributable, holds the amount by which the nominal value of the Company's issued share capital is diminished when shares redeemed or purchased out of the Company's distributable reserves are subsequently cancelled.

(ii) Share premium account:

A non-distributable reserve, represents the amount by which the fair value of the consideration received exceeds the nominal value of shares issued.

(iii) Share purchase reserve:

A distributable reserve, which is used to finance the repurchase of shares in issue.

(iv) Capital reserves

The following are accounted for in this reserve:

• Gains and losses on the realisation of investments;

• Unrealised investment holding gains and losses;

• Foreign exchange gains and losses; and

• Performance fee.

(v) Revenue reserve:

Comprises accumulated undistributed revenue profits available for distribution as dividends.

(q) Accounting developments

(a) Standards, amendments and interpretations becoming effective in the year ended 31 August 2012:

• IFRS 1 (Amendment), 'First Time Adoption of International Financial Reporting Standards'. Amendments resulting from the 2010 Annual Improvement review.

• IFRS 7 (Amendment), 'Financial Instruments - Disclosures'. Amendments resulting from the 2010 Annual Improvement review.

• IAS 1 (Amendment), 'Presentation of Financial Statements' - amendments resulting from the 2010 Annual Improvement review.

• IAS 24 (revised), 'Related Party Disclosures'. Revised definition of related parties.

None of the above has an impact of the Financial Statements.

(b) Standards, amendments and interpretations to existing standards that become effective in future accounting periods and have not been adopted early by the Group or Company:

• IFRS 7 (Amendment), 'Financial Instruments - Disclosures' (effective for periods beginning on or after 1 January 2013). Amendments enhancing disclosures about offsetting financial assets and financial liabilities.

• IFRS 7 (Amendment), 'Financial Instruments - Disclosures' (effective for periods beginning on or after 1 January 2015, or otherwise when IFRS 9 first applied). Amendments requiring disclosures about the initial application of IFRS 9.

• IFRS 9, 'Financial Instruments' (effective for financial periods beginning on or after 1 January 2015). Replaces IAS 39. Simplifies accounting for financial assets, replacing the current multiple measurement categories with a single principle-based approach to classification. All financial assets to be measured at either amortised cost or fair value. The Group will apply IFRS 9 from 1 September 2015, subject to endorsement by the EU.

• IFRS 10, 'Consolidated Financial Statements' (effective for periods beginning on or after 1 January 2013). Provides additional guidance to assist in the determination of control where this is difficult to assess. The Group will apply IFRS 10 from 1 September 2013.

• IFRS 12, 'Disclosure of Interests in Other Entities' (effective for periods beginning on or after 1 January 2013). Includes the disclosure requirement for all forms of interest in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The Group will apply IFRS 12 from 1 September 2013.

• IFRS 13, 'Fair Value Measurement' (effective for periods beginning on or after 1 January 2013). Aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across all IFRSs. The Group will apply IFRS 13 from 1 September 2013.

• IAS 1, 'Presentation of Financial Statements' (effective for periods beginning on or after 1 July 2012). Amendments to revise the way other comprehensive income is presented. The Group will apply this amendment from 1 September 2013.

(c) The following standards, amendments and interpretations to existing standards become effective in future accounting periods, but are not relevant for the Group's operations:

• IFRS 11, 'Joint Arrangements' (effective for periods beginning on or after 1 January 2013).

• IAS 12 (amendment), 'Income Taxes' (effective for periods beginning on or after 1 January 2012).

• IAS 27 (revised 2011), 'Separate Financial Statements' (effective for periods beginning on or after 1 January 2013).

• IAS 28 (revised 2011), 'Associates and joint ventures' (effective for periods beginning on or after 1 January 2013).

(r) Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board.

The Board is of the opinion that the Group is engaged in a single segment of business, namely the investment in development staged biotechnology and other life sciences companies in accordance with the Company's Investment Objective, and consequently no segmental analysis is provided.

2.	Gains on investments held at fair value

	For the year ended	For the year ended
	31 August	31 August
	2012	2011
	£'000	£'000
Net gains on disposal of investments at historic cost	24,336	12,241
Less fair value adjustments in earlier years	(5,221) -----------	(939) -----------
Gains based on carrying value at previous Balance Sheet date	19,115	11,302
Investment holding gains/(losses) during the year	20,568 -----------	(4,123) -----------
	39,683 =======	7,179 =======
Attributable to:
Listed investments	35,025	9,646
Unquoted investments	4,658 ------------	(2,467) ------------
	39,683	7,179

 

3.

Income

	For the year ended	For the year ended
	31 August	31 August
	2012	2011
	£'000	£'000
Revenue:
Income from investments held at fair value through profit or loss:
Franked dividends	3	7
Unfranked dividends	276	183
Interest on debt securities	108 ------------	2 -----------
	387	192
Other income:
Income from current asset investments	(7)	3
Other income	- ------------	1 ------------
	380 =======	196 =======
Capital:
Special dividends allocated to capital	260 =======	- =======

 

4.	Net (Loss)/Earnings per Ordinary Share

 

	For the year ended	For the year ended
	31 August	31 August
	2012	2011
	£'000	£'000
Net revenue loss	(1,753)	(2,022)
Net capital profit	39,764 ---------------	6,592 --------------
	38,011 ========	4,570 ========
Weighted average number of Ordinary shares in issue during the year*	55,554,794	58,642,458
	Pence	Pence
Revenue loss per Ordinary share	(3.16)	(3.45)
Capital profit per Ordinary share	71.58 --------------	11.24 -------------
Total profit per Ordinary share	68.42 ========	7.79 =======

* Excluding those held in treasury.

The increase in the NAV per share from 163.84p (31 August 2011) to 232.47p (31 August 2012) includes the total profit per share as disclosed above and the effect of the Company, during the year, repurchasing shares at a discount to the prevailing NAV per share.

5.	Net Asset Value per Ordinary Share

The calculation of the NAV per Ordinary share is based on the following:

	At 31 August	At 31 August	At 31 August	At 31 August
	2012	2012	2011	2011
	Group	Company	Group	Company
Net asset value (£'000)	128,922 =========	128,411 =========	91,764 ==========	91,253 ==========
Number of Ordinary shares in issue	55,457,663 =========	55,457,663 =========	56,007,663 ==========	56,007,663 ==========
Basic net asset value per Ordinary share (pence)	232.47 ========	231.55 ========	163.84 =========	162.93 =========

6.

The figures and financial information for the year ended 31 August 2011 have been extracted from the latest published Financial Statements and do not constitute the statutory accounts for that year as defined in Section 434 of the Companies Act 2006.  Those Financial Statements have been delivered to the Registrar of Companies and included the Report of the Auditors which was unqualified and did not contain a statement under Section 498 of the Companies Act 2006.   This Annual Financial Report Announcement does not constitute statutory accounts for the year ended 31 August 2012 as defined in Section 434 of the Companies Act 2006.

7.

The Annual Report for the year ended 31 August 2012 will be posted to shareholders in October 2012 and thereafter copies will be available upon request at the Company's registered office: 55 Moorgate, London EC2R 6PA.  The Annual Report will also be available on the Company's website, www.ibtplc.com, from today.  A copy of the Annual Report for the year ended 31 August 2012 has been submitted to the National Storage Mechanism of the UK Listing Authority and will shortly be available for inspection at: www.Hemscott.com/nsm.do. The Company's AGM will be held at 12 noon on Wednesday, 5 December 2012 at the offices of BNP Paribas Fortis, 5 Aldermanbury Square, London EC2V 7HR.

 

 

For further information, please contact:

Kate Bingham

Telephone: [phone]

SV Life Sciences Managers LLP

Investment Manager

Rhona Gregg

Telephone: [phone]

BNP Paribas Secretarial Services Limited

Company Secretary

19 October 2012

 

 

END

 

 

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