Half-year Report

RNS Number : 1827K

Intl. Biotechnology Trust PLC

04 May 2022

 

4 May 2022

INTERNATIONAL BIOTECHNOLOGY TRUST PLC

("IBT" or the "Company")

Half Yearly Report for the six months ended 28 February 2022

CHAIRMAN'S STATEMENT

SUMMARY

In the first six months of the year the Fund Manager produced strong relative performance, albeit against a weak biotechnology market. For the six months ended 28 February 2022, the NAV per share returned -13.1%. By comparison, the NBI returned -23.0%. Over the same period, the ordinary share price of the Company returned -9.4%. Although negative returns are always disappointing, it is encouraging that IBT has substantially outperformed its comparator index over this difficult period for biotechnology shares. The Company's share price continues to outperform the NBI by 1.7% and 8.7% respectively over a 3 and 5-year period, with the 1-year period underperforming by -0.6%. All figures are on a sterling adjusted total return basis, with dividends reinvested.

QUOTED PORTFOLIO

The quoted portfolio NAV returned -19.9% for the six months ended 28 February 2022 (gross of management and performance fees). Whilst the initial fall in markets was the result of fears over rising interest rates as the economy recovered from the effects of the coronavirus pandemic, there has been a significant further weakness across the whole market in the early parts of 2022 due to the invasion of Ukraine. We are reassured to see that the defensive nature of biotech has meant that the fundamentals of the sector remain unscathed. The outperformance of the Company relative to the benchmark index is a strong indication of the Investment Managers' ability.

UNQUOTED PORTFOLIO

The Company's unquoted portfolio, a key feature which allows shareholders to gain exposure to differentiated returns from quoted markets, continues to perform well.

In December 2021, the Board announced its decision to invest in SV Health Investors' biotechnology focussed private fund, SV Biotech Crossover Opportunities Fund LP. BCOF will specifically focus on later stage, pre IPO opportunities and invest in clinical and near clinical stage biotech companies within and outside the SV portfolio, in the UK, EU and US that have the potential to deliver excellent investor returns and address significant unmet need in patients. This investment was in accordance with the Company's strategy of maintaining its exposure to unquoted companies within 5%-15% of the Company's net asset value.

Our most significant unquoted investment, SV Health Investor's Fund VI (SV Fund VI), has performed well delivering a currency adjusted internal rate of return (IRR) of 23.0% per annum since the date of the Company's first investment in the fund in 2016. During the six months ended 28 February 2022, SV Fund VI made three distributions totalling USD6.4m (£4.7m) and one capital call of USD0.8m (£0.6m).

PERFORMANCE FEE

No performance fee has been generated on either the unquoted or quoted portfolio for the period under review.

DIVIDENDS

The Company's dividend policy (approved at the Annual General Meeting) is to make dividend payments equivalent to 4% of the Company's NAV as at the last day of the preceding financial year (31 August), through two equal semi-annual distributions. The first dividend for the year of 15.7 pence per share was paid in January 2022. This represents a dividend yield of 4.98% as of 28 February 2022 and an increase of 10.6% on the prior year's dividend. The Board intends to make the declaration of the second dividend for the year, in accordance with the above policy, in July for payment in August 2022. We are pleased to be in a position to offer our shareholders an increased dividend during this period of extreme uncertainty. Paying the dividend out of capital returns gives the Company's shareholders a differentiated source of income from most other income generating investments, that is not affected by fluctuations in yield from the Company's portfolio companies.

ESG

The Directors are pleased to include the first review of the Company's new ESG screening process in this report which demonstrates a high level of ESG compliance of the top ten investments in the quoted portfolio. The Board continues to believe that ESG factors are an important consideration for investors and is pleased that the Fund Manager is incorporating an ESG review into the investment process. Similarly, the Company's suppliers are also now subject to an ESG review.

SHARE PREMIUM AND DISCOUNT, SHARE ISSUANCES AND BUYBACKS

The Directors regularly review the methods for managing both discount and premium, as appropriate. The Board considers that conducting share buybacks can help to manage the discount of its share price to NAV. The Company has repurchased 225,970 shares during the interim period which has helped support the share price and has decreased the discount from 6.8% at the start of the period, to 2.0% as of 28 February 2022.

Since the interim period end, the Company's discount has moved to 5.4% and the Company has bought back an additional 272,938 shares. The Board remains committed to the growth of the Company and to discount management and will continue to consider both share buybacks when the share price is trading at a discount and share issuance when the share price is trading at a premium.

GEARING

The Company has authority to use gearing to a maximum of 30% of NAV. The cost of the gearing facility is 1.75% above the Bank of England base rate. Over the six-month period to 28 February 2022, the Company's gearing increased from 6.3% as of 1 September 2021 to 16.9% at the interim period end. The Investment Managers uses the gearing facility in an active manner i.e., increasing the gearing it sees opportunities in the sector, it wishes to take advantage of, rather than a consistent level of gearing at all times. As outlined in the Fund Manager's review, the Fund Manager is of the view that the sector retraction versus the broader market is extreme and has acted on this by increasing the Company's gearing to the current level. The Fund Manager reports the gearing level in the monthly factsheet which can be found on the Company website.

OPERATIONS

With effect from 1 March 2022, delegation for performing fund administration and depositary services has successfully transitioned from HSBC Securities Services (UK) Limited to The Northern Trust Company, London branch.

Also, as a result of this change in fund administration services, the Company paid back the drawn portion of the £55m debt facility to HSBC and took out a new £55m credit facility from The Northern Trust Company, London branch.

BOARD OF DIRECTORS

As part of our ongoing succession plan, the Board embarked on a recruitment process to identify a new Non-Executive Director with specialist scientific expertise, to replace Dr Véronique Bouchet who retired following the 2021 AGM.

I am delighted to welcome Professor Patrick Maxwell as a Non-Executive Director of the Company with effect from 1 January 2022. Professor Patrick Maxwell is the Regius Professor of Physic and Head of the School of Clinical Medicine at Cambridge University. He has extensive knowledge and experience of the biotechnology sector and has made important discoveries concerning oxygen sensing. He was elected a Fellow of the Academy of Medical Sciences in 2005.

OUTLOOK

The Fund Manager and Directors will continue to actively monitor the global economic and geopolitical situation and any potential impact on the biotechnology sector's prospects, financial condition and outlook.

Although the market has been shaken by the horrors of the war in Eastern Europe and its concomitant economic impact, the fundamentals of the biotech industry remain intact. The companies that the Company is invested in remain strong with innovation still continuing apace and demand for new therapies rising, as the elderly population grows and developing markets gain better access to medicines. The Company has not invested in any Russian companies.

From a broader economic perspective, the lessening impact of the pandemic should be positive for economic growth but brings with it the risk of inflation. The past months have seen volatility in the market which is likely to continue but the Directors are encouraged that valuations in the biotech sector are currently at historically low levels and share the Fund Manager's optimism for a rebound. Catalysts could include a return of M&A to the sector fuelled by a combination of cash rich big pharmaceutical companies looking to replenish their pipelines and smaller biotech companies trading at attractive valuations. The Fund Manager's active investment strategy will ensure that the Company is well placed to identify possible beneficiaries of a rebound. As a Board we have confidence that the Fund Manager will continue to seek to deliver market beating returns.

Jim Horsburgh

Chairman

3 May 2022

FUND MANAGER'S REVIEW

SUMMARY

In the six months to 28 February 2022, the NAV per share returned -13.1% and the share price returned -9.4%. The Company's benchmark, the NASDAQ Biotechnology Index, returned -23.0%. All figures are on a sterling adjusted total return basis, with dividends reinvested.

By subsector, 83.6% of the portfolio was invested in therapeutics, 5.1% in specialty pharmaceuticals and 2.2% in life sciences, tools, and diagnostics. 6.1% of the Company was invested in unquoted funds and 2.9% in directly held unquoted companies.

The Company's three largest therapeutic areas were rare diseases (32%), oncology (27%) and diseases of the central nervous system (15%).

At the end of the period the Company's gearing position was 16.9% and the Company's discount narrowed from 6.8% to 2.0%.

QUOTED PORTFOLIO

For the six-month period ended 28 February 2022, the NAV of the quoted portfolio returned -19.9%, versus -23.0% for the NASDAQ Biotechnology Index (gross of management and performance fees). All figures are on a sterling adjusted total return basis, with dividends reinvested.

Market Backdrop

During the period under review there was significant market volatility with two major drawdowns in the sector occurring in November 2021 and January 2022. The reasons behind these two downturns are multifaceted.

During the pandemic, the sector's rampant innovation was under the spotlight, drawing attention from generalist investors impressed at the speed that both vaccines and treatments came to the aid of the world. Investor focus expanded into early-stage biotechnology companies with potential game changing platform technologies (such as gene therapy and CRISPR) causing valuations to overheat. Biotech valuations corrected over the summer months and took another step down with rest of the markets in the Autumn as the Federal Reserve (FED) hinted at raising interest rates to address the threat of persistent inflation. Naturally the smaller and mid-sized companies were affected the most, whereas the profitable, cash-flow generating larger sized companies were relatively stable. During February 2022, the general equities market was disrupted by news of war in Eastern Europe which resulted in risk aversion and market sell off.

The market sentiment has recently been poor due to market disruptions, inflation and geopolitical events, and the biotechnology sector has not been spared. After a bumper year in 2021 with record numbers of IPO's and huge investor support, the tide appears to have turned, and valuations have retracted to more normal and, in some cases, cheap levels. The lack of positive news flow and the 'risk-off' investor environment exacerbated the weakness.

Mergers & acquisitions (M&A)

The covid pandemic saw a drop off in the total value of M&A deals in the biotechnology sector likely due to the reduction in face-to-face interactions and elevated valuations discouraging buyers. However, M&A is a feature of the healthcare ecosystem and in the period under review the Company benefited from four acquisitions of its portfolio companies.

In September 2021, Merck announced its intention to acquire portfolio company Acceleron, a clinical stage company with a treatment for pulmonary arterial hypertension in late-stage development. The deal was worth USD11.5BN which represented a premium of 38% over Acceleron's average share price during the prior three months. At the time of the announcement the Company had a position of 3.1% of NAV.

In December 2021, CSL Behring announced that it would acquire portfolio holding Vifor Pharma for USD11.7BN which represented an implied premium of approximately 61% to the closing price on 1 December 2021. Australian biopharma company CSL currently develops vaccines and blood plasma products and by acquiring Vifor the company aims to diversify into the kidney and iron deficiency markets. The Company had a position of 1.9% of NAV at the time of the announcement.

Also in December 2021, Pfizer announced its intention to acquire Arena Pharmaceuticals for USD6.7BN which represented a premium of 100% to the share price. Arena is a clinical stage biopharma company developing gastroenterological, dermatological and cardiological conditions. The Company had a position of 0.3% of NAV at the time of the announcement.

In January 2022, UCB announced its intention to acquire Zogenix for USD1.9BN, representing a premium of 66% to the share price. Zogenix is a biotechnology company which recently launched Fintepla, a treatment for a rare type of epilepsy called Lennox-Gastaut syndrome. The Company held a position of 1.7% of NAV at the time of the announcement.

Positive contributors to NAV

BEST PERFORMING INVESTMENTS
	Contributors to NAV (£'m)
Acceleron	2.6
Vertex	2.3
Amgen	1.9

As mentioned above, Acceleron was acquired by Merck which contributed GBP2.6M to the Company's NAV.

Vertex Pharmaceuticals is a profitable US biotechnology company with approved therapeutics (Kalydeco and Orkambi) used to treat various mutations for cystic fibrosis. Its approach addresses the underlying disease mechanism whereas all other options currently approved only treat the symptoms of the disease. During the period under review, the company share price was driven by positive clinical outcome for VX-147 in Focal Segmental Glomerulosclerosis (FSGS) and news that competitor company Abbvie had downplayed the likelihood that its competitor program in CF would succeed in clinical trials.

Amgen is a mega-large cap biotechnology company which had revenues of USD26BN in 2021. The company benefited from an investor rotation away from higher risk growth companies into larger, cash generating entities.

Negative detractors from NAV

WORST PERFORMING INVESTEMENTS
	Detractors from NAV (£'m)
Mirati	(7.3)
Turning Point	(3.9)
Protagonist	(3.4)

Mirati is a development stage biotechnology company focusing on a sub-set of lung cancers harbouring the KRAS mutation. Mirati´s KRAS inhibitor is set for approval later this year. The company's share price decline was partly due to the broad selling pressure within the sector and news that a competitor product launch had not gone as well as hoped casting doubt of the commercial potential for Mirati's lead asset, Adagrasib.

Turning Point announced disappointing side effects for its development stage asset, Repotrectinib. The oncology drug is being studied in ROS1+ metastatic NSCLC and data released showed a tolerability issue which caused dizziness in patients. Although the efficacy was good, the commercial potential is affected by its reduced ability to compete with the current standard of care.

Protagonist shares fell on news that the FDA placed its clinical studies on hold for its drug Rusfertide for the blood disorder Polycythemia vera due to concerning toxicology findings in a non-clinical study.

UNQUOTED PORTFOLIO

Summary of unquoted investments

	As at 28 February 2022			As at 31 August 2021
	Fair Value (£m)	% of NAV	No. of Investments	Fair Value (£m)	% of NAV	No of Investments
Unquoted funds	19.1	7.2	22*	21.8	6.7	21*
Exited with contingent milestones	6.2	2.4	4	6.2	1.9	4
Directly-held unquoted	2.9	1.1	2	3.1	0.9	3
Total Unquoted	28.2	10.7	28	31.0	9.5	28
Previously unquoted, now quoted	-	-	-	2.2	0.7	2
Total unquoted for performance measurement	28.2	10.7	28	33.2	10.2	30

* The number of investments within unquoted funds represents the number of investments into underlying individual portfolio companies. Six of these companies were quoted as at 28 February 2022.

In accordance with the Company's strategy to maintain its exposure to unquoted companies within a 5%-15% of NAV range, the Board announced its decision to invest USD25m in SV Health Investors' biotechnology focussed private fund, SV Biotech Crossover Opportunities Fund LP. BCOF will specifically focus on later stage, pre-IPO opportunities and invest in clinical and near clinical stage biotech companies within and outside the SV portfolio, in the UK, EU and US that have the potential to deliver excellent investor returns and address significant unmet need in patients.

SV Health Investor's Fund VI (SV Fund VI) has a currency adjusted internal rate of return (IRR) of 23.0% per annum since the date of the Company's first investment in the fund in 2016. During the six months ended 28 February 2022, SV Fund VI made three distributions totalling USD6.4m (£4.7m) and one capital call of USD0.8m (£0.6m).

OUTLOOK

The biotechnology sector has experienced a significant period of weakness in certain areas since the highs of Spring 2021 and the Investment Managers believe that valuations at current levels look attractive. The sector fundamentals remain intact with continuous innovation and exciting new approaches addressing debilitating diseases suffered by many all over the world and a corresponding rise in patient numbers due to demographic factors.

The Investment Managers have responded to the correction by seeing it as an opportunity to gain more exposure to this exciting sector, especially in the smaller and more innovative companies, many of which are trading at a fraction of their valuations of a year ago.

The gearing of the Company sits at 16.9% as at the end of the period, a level higher than at any point in the last decade which exemplifies the Managers' view of the opportunity at the valuations prevailing at that time.

The Investment Managers believe that the current negative sentiment towards the sector will reverse at some point in the future, as its unique characteristics of secular growth are unaffected by geopolitical events and major economic downturns. This "defensive growth" characteristic should bode well in times of global uncertainty.

Importantly, the Investment Managers believe that the derating of the sector will not have gone unnoticed by the larger pharmaceutical companies who face ongoing patent expirations each year and insufficient internal R&D to fill the revenue gaps. These companies generate high margin cash-flows, in some cases bolstered by the recent pandemic sales, which might be used to acquire more innovative assets, giving a boost to M&A in the sector.

Catalysts such as a pickup in M&A, positive clinical readouts and good product launches could reignite interest in the sector once more and boost returns into the future. The Company is well positioned for that event having increased its gearing and exposure to the smaller biotech companies which tend to be the target of M&A.

SV HEALTH MANAGERS LLP

3 May 2022

ENVIRONMENTAL, SOCIAL AND GOVERNANCE POLICY

The Company outlined its ESG policy in its Annual Report for the year ended August 2021.

Its policy was adopted in October 2021 in conjunction with IBT's Fund Manager, SV Health Investors (SVH), and aims to integrate consideration for ESG factors into the investment process, governance and choice of suppliers for IBT and to exert influence on portfolio companies and suppliers to consider ESG factors in their respective activities. SVH has developed a proprietary screening system for ranking the ESG compliance. This will be applied to IBT's top ten quoted investments by size of holding and will be used to exert influence over portfolio companies and encourage adherence to high standards of ESG factors. IBT's Board also considers ESG factors in its choice of suppliers.

All of IBT's investments and activities are aligned with UN's Sustainable Development Goal number 3: "Good Health and Well-being. Ensure healthy lives and promote well-being for all at all ages." IBT is dedicated to investing in tomorrow's healthcare breakthroughs. IBT has invested in scientific development, medical innovation, and technologies across a wide spectrum of diseases with particular focus on areas of high unmet need.

IBT as an investor

The Board considers that focusing on the ESG adherence of its investments and engaging with the management of key portfolio companies has the potential to bring about positive change in its investment universe. The Fund Manager believes its potential for the greatest impact will be on its private holdings where its larger investment size could give it greater influence, especially in private companies in which the Fund Manager holds a board seat, and its top ten quoted holdings. The Board believes that through IBT's focus on ESG as an investor, it can help maximise its portfolio companies' positive impact whilst generating attractive investor returns. IBT's ESG policy has three key areas in as far as it relates to investments.

1. Thorough ESG diligence and investing for impact;

2. Meaningful engagement with portfolio companies; and

3. Reporting to shareholders.

SV Health Investors solicited responses to its ESG screening process from the top ten companies in IBT's quoted portfolio which together account for 52% of IBT's NAV as at 28 February 2022. The questionnaire is available for perusal on IBT's website: https://ibt.ams3.digitaloceanspaces.com/IBT-Full-ESG-Policy.pdf

Of the companies approached and subsequently responded, IBT is pleased to report that those companies scored an average of 98% in the Governance section of the screening process, 69% in the Environmental section and 67% in the Social section. IBT is engaging with the companies that failed to participate in the screening, and improving the accessibility of the screening, in the hope of achieving higher participation in the future.

The scores achieved by several of the companies targeted were impacted by lack of data tracking on social issues such as outcomes for underrepresented groups. They have indicated that this is something that they are working on improving so SV Health Managers hopes to see those scores improve by the next time the screening process is implemented. This is something that IBT will actively track and expect them to deliver.

Only one company scored below 50% in any category, and IBT will be engaging with that company to encourage them into improving their performance in this area. That said, the issues identified are not serious enough to warrant any investment response at this stage.

While IBT will actively engage with these quoted companies' management teams on any areas which the screening process has flagged as falling below optimal standards, it should be noted that IBT's shareholding in the top ten quoted companies averages 0.1% of their share registries, with some as low as 0.02% and the highest being only 0.4%. As such, while the Fund Manager will engage with management teams and encourage them to strive for best practice in all areas, IBT's individual influence is limited. Nonetheless, IBT recognises the pressure that can be brought to bear on companies when many of their minority shareholders actively monitor their ESG adherence and IBT will continue to play its part in exerting this pressure by holding its portfolio companies to account on ESG.

SV's annual ESG screening process of its unquoted portfolio will have taken place before IBT's full year report is published in November 2022. We expect to be able to report on the ESG screening of IBT's unquoted portfolio at that point.

IBT as a company

IBT is listed on the London Stock Exchange. It has no office of its own, and its only employees are its Directors. IBT is committed to the principles of ESG compliance and endeavours to implement positive changes in all areas. The Board adheres to the highest standards in terms of its reporting and governance.

IBT's suppliers' Sustainability Policies

Other than the oversight role played by the Board, all the key functions of IBT are undertaken by external suppliers. The Board recognises the opportunity which that creates to influence and improve the ESG policies of a range of different financial services providers and other related companies.

The Board has requested all the key suppliers to the Company to supply details of their own ESG policies and efforts made to enhance their ESG profile annually. Where permitted, links to these will be added to IBT's website. In the event of a supplier consistently failing to supply such credentials, and/or failing to implement suitable ESG measures in their business, the Board will engage with them on this matter and ultimately, in the case of continued noncompliance, will consider changing suppliers.

Of the 21 suppliers to IBT who were approached to supply their ESG policy, 13 supplied their policy in full, 5 are in the process of formalising their ESG policies, and 3 declined to respond.

IBT will encourage those suppliers which are drafting their policies to continue with that process and hopes to be able to show progress on this front in IBT's Full Year report expected November 2022. IBT will continue to work with those suppliers which have failed to respond to encourage them to initiate the process of formalising their ESG commitments. Only 4 of IBT's suppliers have agreed for IBT to share their ESG policies on IBT's website. IBT would like to see this number increase and will continue to request the information from those companies that have declined to give permission. IBT believes that in publicising the ESG commitments of its suppliers, it can maximise its influence on other companies in financial services to prioritise ESG.

INTERIM MANAGEMENT REPORT AND DIRECTORS' RESPONSIBILITY STATEMENT

Interim Management Report

The important events that have occurred during the period under review, the key factors influencing the financial statements and the principal risks and uncertainties for the remaining six months of the financial year are set out in the Chairman's Statement on pages 7 to 9 and the Fund Manager's Review on pages 10 to 13.

The principal and emerging risks facing the Company are substantially unchanged since the date of the Annual Report and Accounts for the year ended 31 August 2021 and continue to be as set out in that report on pages 21 to 22

Risks faced by the Company include, but are not limited to, strategic/performance risk, investment related risks, operational risks, tax, legal and regulatory risks and political risk.

Responsibilities Statement

In respect of the Interim Report for the six months ended 28 February 2022, we confirm that, to the best of our knowledge:

· the condensed set of Financial Statements contained within have been prepared in accordance with IAS 34 "Interim Financial Reporting" and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company as at 28 February 2022 as required by the UK Listing Authority's Disclosure Guidance and Transparency Rule 4.2.4R;

· the Interim Report includes a fair review as required by Disclosure Guidance and Transparency Rule 4.2.7R, of important events that have occurred during the six months to 28 February 2022 and their impact on the condensed set of Financial Statements, and a description of the principal and emerging risks for the remaining six months of the financial year; and

· the Interim Report includes a fair review of the information concerning related party transactions as required by Disclosure Guidance and Transparency Rule 4.2.8R.

The Interim Report has not been reviewed or audited by the Company's auditors.

The Interim Report for the six months ended 28 February 2022 was approved by the Board and the above Responsibilities Statement has been signed on its behalf by:

JIM HORSBURGH

Chairman

3 May 2022

STATEMENT OF COMPREHENSIVE INCOME

	Notes	(Unaudited) For the six months ended 28 February 2022			(Unaudited)  For the six months ended  29 February 2021			(Audited)  For the year ended  31 August 2021
		Revenue  £'000	Capital  £'000	Total  £'000	Revenue  £'000	Capital  £'000	Total  £'000	Revenue  £'000	Capital  £'000	Total  £'000
Gains on investments held at fair value		-	(46,452)	(46,452)	-	20,444	20,444	-	30,925	30,925
Exchange (losses)/gains on currency balances		-	(609)	(609)	-	(65)	(65)	-	65	65
Income	2	647	-	647	538	-	538	1,105	-	1,105
Expenses
Management fee		(1,289)	-	(1,289)	(1,189)	-	(1,189)	(2,402)	-	(2,402)
Performance fee		-	-	-	-	-	-	-	(353)	(353)
Administrative expenses		(575)	-	(575)	(545)	-	(545)	(1,075)	-	(1,075)
Profit/(loss) before finance costs and tax		(1,217)	(47,061)	(48,278)	(1,196)	20,379	19,183	(2,372)	30,637	28,625
Interest payable		(257)	-	(257)	(74)	-	(74)	(218)	-	(218)
Profit/(loss) on ordinary activities before tax		(1,474)	(47,061)	(48,535)	(1,270)	20,379	19,109	(2,055)	30,637	28,047
Taxation		(97)	-	(97)	(77)	-	(77)	(170)	-	(162)
Profit/(loss) for the year attributable to Shareholders		(1,571)	(47,061)	(48,632)	(1,347)	20,379	19,032	(2,752)	30,637	27,885
Basic and diluted earnings/ (loss) per Ordinary share	3	(3.81)p	(114.14)p	(117.95)p	(3.39)p	51.31p	47.92p	(6.80p)	75.66p	68.81p

All revenue and capital items in the above statement derive from continuing operations. The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRSs as adopted by the EU.

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

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

The notes on pages 22 to 25 form part of these Financial Statements.

STATEMENT OF CHANGES IN EQUITY

For the six months ended 28 February 2022 (Unaudited)	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital   Reserves  £'000	Revenue reserve £'000	Total   £'000
Balance at 1 September 2021	10,346	29,873	31,482	295,807	(43,733)	323,775
Total Comprehensive Income:
Profit/(loss) for the period	-	-	-	(47,061)	(1,571)	(48,632)
Transactions with owners, recorded directly to equity:
Dividend paid in the period	-	-	-	(6,464)	-	(6,464)
Ordinary shares brought back into treasury	-	-	-	(1,639)	-	(1,639)
Balance at 28 February 2022	10,346	29,873	31,482	240,643	(45,304)	267,040

For the six months ended 28 February 2021 (Unaudited)	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital   Reserves  £'000	Revenue reserve £'000	Total  £'000
Balance at 1 September 2020	10,335	20,434	31,482	262,627	(40,981)	283,897
Total Comprehensive Income:
Profit/(loss) for the period	-	-	-	20,379	(1,347)	19,032
Transactions with owners, recorded directly to equity:
Dividend paid in the period	-	-	-	(5,687)	-	(5,687)
Ordinary shares issued from treasury	-	7,819	-	11,537	-	19,356
Balance at 28 February 2021	10,335	28,253	31,482	288,856	(42,328)	316,598

For the year ended 31 August 2021 (Audited)	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital   reserves  £'000	Revenue   reserve  £'000	Total  £'000
Balance at 1 September 2020	10,335	20,434	31,482	262,627	(40,981)	283,897
Total Comprehensive Income:
Profit/(loss) for the year	-	-	-	30,637	(2,752)	27,885
Transactions with owners, recorded directly to equity:
Dividend paid in the year	-	-	-	(11,564)	-	(11,564)
Ordinary shares issued from treasury	-	9,158	-	14,107	-	23,265
New ordinary shares issued	11	281	-	-	-	292
Balance at 31 August 2021	10,346	29,873	31,482	295,807	(43,733)	323,775

The notes on pages 22 to 25 form part of these Financial Statements.

BALANCE SHEET AS AT 28 FEBRUARY 2022

	Notes	(Unaudited)  At 28 February   2022  £'000	(Unaudited) At 28 February 2021 £'000	(Audited) At 31 August 2021 £'000
Non-current assets
Investments held at fair value through profit or loss		312,388	321,573	345,336
		312,388	321,573	345,336
Current assets
Receivables		188	5,218	942
Cash and cash equivalents		-	-	1,557
		188	5,218	2,499
Total assets		312,576	326,791	347,835
Current liabilities
Bank overdrafts		(45,140)	(9,134)	(21,869)
Payables		(396)	(1,059)	(2,191)
		(10,193)	(3,586)	(18,811)
Net assets		267,040	316,598	323,775
Equity attributable to equity holders
Called up share capital		10,346	10,335	10,346
Share premium account		29,873	28,253	29,873
Capital redemption reserve		31,482	31,482	31,482
Capital reserves	5	240,643	288,856	295,807
Revenue reserve		(45,304)	(42,328)	(43,733)
Total equity		267,040	316,598	323,775
NAV per Ordinary share	6	648.82p	775.73p	782.37p

The notes on pages 22 to 25 form part of these Financial Statements.

CASH FLOW STATEMENT

	(Unaudited) For the six months  ended 28 February 2022 £'000	(Unaudited) For the six months  ended 28 February 2021 £'000	(Audited) For the year ended 31 August 2021 £'000
Cash flows from operating activities
Profit before tax	(48,535)	19,109	28,047
Adjustments for:
Decrease/(increase) in investments	32,948	(19,350)	(43,113)
Decrease/(increase) in receivables	754	(5,057)	(781)
Decrease/(increase) in payables	(1,795)	344	1,476
Taxation	(97)	(77)	(162)
Net cash flow used in operating activities	(16,725)	(5,031)	(14,533)
Cash flows from financing activities
Buyback of Ordinary shares into treasury	(1,639)	-	-
Issue of Ordinary shares from treasury	-	19,356	23,265
Issue of new Ordinary shares	-	-	292
Dividend paid	(6,464)	(5,687)	(11,564)
Net cash generated/(used in) from financing activities	(8,103)	13,669	11,993
Net (decrease)/increase in cash and cash equivalents	(24,828)	8,638	(2,540)
Cash and cash equivalents at beginning of period	(20,312)	(17,772)	(17,772)
Cash and cash equivalents at end of period	(45,140)	(9,134)	(20,312)

The notes on pages 22 to 25 form part of these Financial Statements.

NOTES TO THE FINANCIAL STATEMENTS

1. Accounting Policies

The Financial Statements have been prepared on a going concern basis, in accordance with International Accounting Standard 34 Interim Financial Reporting and the accounting policies set out in the Annual Report of the Company for the year ended 31 August 2021. Where presentational guidance set out in the Statement of Recommended Practice (the SORP) for investment trusts issued by the Association of Investment Companies in October 2019 is inconsistent with the requirements of IFRS, the Financial Statements have been prepared on a basis compliant with the recommendations of the SORP.

The interim information for each of the six month periods ended 28 February 2022 and 28 February 2021 comprises non-statutory accounts within the meaning of Sections 434 - 436 of the Companies Act 2006 (the Act). The financial information for the year ended 31 August 2021 has been extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.

The Company has reviewed the guidance issued by the Financial Reporting Council (FRC) in order to determine whether the going concern basis should be used in preparing the Financial Statements for the six months ended 28 February 2022. The Directors have reviewed the likely operational costs and cashflows for the Company for the 12 months from the date of this Half Yearly Report and are of the opinion that the Company has adequate resources to continue in operational existence for the foreseeable future. The Directors believe that it is appropriate to adopt the going concern basis in the preparation of the Financial Statements as there are no material uncertainties related to events or conditions that may cast significant doubt about the Company's ability to continue as a going concern.

The Company's principal and emerging risks remained unchanged to those described in the Annual Report for the year ended 31 August 2021. These include strategic/ performance risk, investment related risks, operational risks, tax, legal and regulatory risks and political risk. These risks, and the way in which they are managed, are described in more detail under the heading Principal and emerging risks within the Strategic Report in the Company's Annual Report for the year ended 31 August 2021.

2. Income

	(Unaudited) For the six months ended 28 February 2022 £'000	(Unaudited) For the six months ended 28 February 2021 £'000	(Audited) For the year ended 31 August 2021 £'000
Revenue:
Income from investments held at fair value through profit or loss:
Unfranked dividends	647	538	1,105
Other income:
Bank interest	-	-	-
	647	538	1,105

3. Net earnings/(losses) per Ordinary share

	(Unaudited) For the six months ended 28 February 2022	(Unaudited) For the six months ended 28 February 2021	(Audited) For the year ended 31 August 2021
Net revenue loss (£'000)	(1,571)	(1,347)	(2,752)
Net capital profit (£'000)	(47,061)	20,379	30,637
	(48,632)	19,032	27,885
Weighted average number of Ordinary shares in issue*	41,231,966	39,718,111	40,495,020
Revenue loss per Ordinary share	(3.81)p	(3.39)p	(6.80)p
Capital (loss)/profit per Ordinary share	114.14p	51.31p	75.66p
Total (losses)/earnings per Ordinary share	(117.95)p	47.92p	68.86p

* Excludes those held in treasury (28 February 2022: 225,970; 31 August 2021: nil; 28 February 2021: 529,846).

4. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS

The Company's portfolio of investments, comprising investments in companies and any derivatives, are carried in the balance sheet at fair value. Other financial instruments held by the Company comprise amounts due to or from brokers, dividends and interest receivable, accruals, cash and drawings on the credit facility. For these instruments, the balance sheet amount is a reasonable approximation of fair value. The recognition and measurement policies for financial instruments measured at fair value have not changed from those set out in the statutory accounts of the Company for the year ended 31 August 2021.

The investments in the Company's portfolio are categorised into a hierarchy comprising the following three levels:

Level 1 - valued using quoted prices in active markets.

Level 2 - valued by reference to valuation techniques using observable inputs other than quoted market prices included within Level 1.

Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.

At 28 February 2022, the Company's investment portfolio and derivative financial instruments were categorised as follows:

	(Unaudited) At 28 February 2022 £'000	(Unaudited) At 28 February 2021 £'000	(Audited) At 31 August 2021 £'000
Level 1	284,107	287,482	314,365
Level 2	-	-	-
Level 3	28,281	34,091	30,971
Total	312,388	321,573	345,336

There have been no transfers between Levels 1, 2 or 3 during the period (period ended 28 February 2021 and year ended 31 August 2021: nil).

5. Capital reserves

The capital reserve account comprises both realised gains on investments sold and unrealised gains and losses on investments held, which are analysed as follows:

	(Unaudited) At 28 February 2022 £'000	(Unaudited) At 28 February 2021 £'000	(Audited) At 31 August 2021 £'000
Capital reserve - on investments sold	273,449	264,131	261,890
Capital reserve - on investments held	(32,806)	24,725	33,917
	240,643	288,856	295,807

6. NAV per Ordinary share

	(Unaudited) At 28 February 2022	(Unaudited) At 28 February 2021	(Audited) At 31 August 2021
Net assets attributable to Ordinary Shareholders (£'000)	267,040	316,598	323,775
Ordinary shares in issue at end of period*	41,157,847	40,812,817	41,383,817
NAV per Ordinary share	648.82p	775.73p	782.37p

*Excludes those held in treasury (28 February 2022: 225,970; 31 August 2021: nil; 28 February 2021: 529,846).

7. RELATED PARTY TRANSACTIONS

There have been no related party transactions that have materially affected the financial position or the performance of the Company during the six month period to 28 February 2022.

a) Transactions with the Investment Manager

Details of the management fee arrangement are given in the Directors' Report on page 31 of the Annual Report for the year ended 31 August 2021. Following the investment into the SV Fund VI fund in October 2016, a portion of the management fee has been paid via fees due on this investment, with the remaining fees charged directly to the Company. The amounts paid can be seen in the table below and continue to total 0.9% of NAV.

Fees paid to the Investment Manager	(Unaudited) At 28 February 2022	(Unaudited) At 28 February 2021	(Audited) At 31 August 2021
Management Fee paid through unquoted funds	92,353	193,423	377,000
Management fees paid by the Company directly to the Fund Manager	1,288,775	1,189,500	2,402,000
Total	1,381,128	1,382,923	2,779,000

No performance fee has been accrued as at 28 February 2022 (28 February 2021: £nil; 31 August 2021: £353,000).

b) Transactions with Key Management Personnel

The Directors of the Company are key management personnel. The total remuneration payable to Directors in respect of the six months ended 28 February 2022 was £80,000 (28 February 2021: £91,100), of which £nil (28 February 2021: £43,750) was outstanding at the period end.

8. Events after the reporting period

The Directors have evaluated the period since the interim date and have not noted any events which have not been reflected in the financial statements.

The Company's Interim Report for the six months ended 28 February 2022 will be posted to Shareholders in May 2022. A copy of the Interim Report will shortly be available on the Company's website, www.ibtplc.com, which is a website maintained by the Company's Fund Manager, SV Health Managers LLP. A copy of the Interim Report for the six months ended 28 February 2022 has been submitted to the National Storage Mechanism of the Financial Conduct Authority and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

For further information, please contact:

Company Secretary and Registered Office

Link Company Matters Limited

6th Floor, 65 Gresham Street, London, England, EC2V 7NQ

Telephone: [phone]

Email: [e-mail]

LEI: 213800N1QUJ744P76D11

 

END

 

 

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