Final Results

BioScience VCT plc 24 March 2006 BioScience VCT plc 24 March 2006 Preliminary Results for the year ended 31 December 2005 Financial summary for the year ended 31 December 2005 31 December 2005 31 December 2004 (restated)** Net assets £5,679,000 £6,295,000 Net revenue before tax £(324,000) £(6,000) Revenue loss per share* (4.3)p (0.1)p Net asset value per share 74.8p 82.9p BioScience VCT plc is a Venture Capital Trust. The investment manager is Octopus Asset Management Limited ('Octopus') The Company was launched in October 2001 and raised over £7 million (£6.8 million net of expenses) through an offer for subscription. The Company invests in unquoted and quoted bioscience companies and aims to provide attractive long term returns to shareholders. * based on the weighted average of 7,596,393 (2004: 7,535,445) shares in issue in the year. ** Comparative figures have been extracted from the statutory accounts for the year ended 31 December 2004 and have been restated in accordance with UK Financial Reporting Standard 26 in respect of the valuation of quoted investments as disclosed in note 1 to the annual results. This restatement had no material effect on the net asset value per share at 31 December 2004. Chairman's statement I am pleased to present my first annual report to shareholders in BioScience VCT plc. Board During the year there were several changes to the composition of the Board. I joined the Board in the summer of 2005 and became Chairman on 31 August 2005 following the resignation of Dr Paul Nicholson. In November 2005, Professor Alex Markham resigned from the Board. Paul and Alex resigned from the Board as a result of time pressures from their other commitments. I would like to take this opportunity to thank Paul and Alex for their considerable contribution during their time on the Board. Investment Policy Following the completion of a number of investments in unquoted and AIM-listed companies during the last twelve months, BioScience VCT is now approximately 77% invested in VCT qualifying holdings. As at 31 December 2005, the portfolio included holdings in 8 unquoted and 11 AIM-listed businesses. We will continue to seek out further good opportunities, while at the same time managing the existing portfolio of investments in order to generate as much value as possible for shareholders during the coming years. The Board is taking an active role in managing the portfolio. This involves active support of investee companies by providing them with advice and contacts, as well as working with them to ensure that they achieve the progress that will be required in order for them to obtain the funding that may be needed for the next stage of their development. Investment Environment Despite isolated examples of the acquisitions of UK-based bioscience companies by larger biotechnology or pharmaceutical companies from around the world, the general environment for UK-based bioscience companies remains challenging, characterised by a poor overall availability of capital for companies in the earlier stages of their development. Although some commentators have suggested that 2006 may be a good year for quoted biotech companies, it is clear that the UK stock market is not at present prepared to ascribe the same value to companies with pipelines of products under development as investors in US biotech companies. If this differential is not closed by share price movements, it is possible that certain UK-based biotech companies may become acquisition targets for their US rivals, providing UK investors with a good exit route. NAV The Net Asset Value per share ('NAV') as at 31 December 2005 was 74.8p. Despite good progress by a number of our unquoted holdings, we are not able to write these valuations up at this stage under our valuation policy and the British Venture Capital Association guidelines. These guidelines ensure prudence, and correctly do not allow advanced discussions around licensing or sale to be reflected in the values for the unquoted investee companies that we show in the accounts. In addition, the NAV has been negatively impacted by the requirement for us to adopt certain new Financial Reporting Standards. These changes in accounting standards, which have been implemented as part of the process of bringing UK accounting practices into line with international standards, mean that we are now required to value our AIM-listed holdings at bid prices, rather than mid prices. This has a particularly significant impact on funds such as BioScience VCT, which have holdings in small AIM-listed companies where the difference between the bid and mid prices can be meaningful (bid prices are always lower than mid prices). The introduction of the new accounting standards has resulted in an NAV as at 31 December 2005 that is approximately 1.6p lower than it would have been under previous accounting standards. We are working hard as a team to generate value from our portfolio of investments and drive the NAV upwards. As a result of the substantial level of investment in underlying holdings in bioscience companies, the Fund had £1,369,000 held in cash and money market funds at the end of 2005, a figure that is expected to reduce in the future as a small number of additional investments are completed. As a result of this, the income that is generated for the Fund from the cash and money market holdings will remain low for the foreseeable future. In addition, as a result of the nature of the underlying investments, the income that is generated from the unquoted and AIM-listed investee companies is expected to be small, as few of them pay dividends at present. The impact of this is that the Fund does not generate sufficient income to defray the overall running costs, which has a negative impact on NAV. The Board is focused on identifying ways in which the Fund's ongoing running costs can be reduced, in order to limit their impact on the Fund's overall performance. Investment Process As a result of the number and type of investments that have already been made and the reduction in the anticipated level of future investment activity, the Board has reviewed the Fund's investment process and strategy. As we are nearly fully invested we have a reduced ongoing requirement for the specialist due diligence services that have been provided since the launch of the fund by Medical Marketing International Group plc ('MMI'). The Board announced on 9 March 2006 that, by mutual consent, it had reached conditional agreement with MMI for the termination of the Technology Adviser contract. The agreement is conditional on BioScience VCT shareholders agreeing to a change of name (see below) and to settlement of amounts due to MMI under the agreement. In addition, under the terms of the agreement, MMI will forego its entitlement to any future payments of performance fees, and BioScience VCT has agreed to indemnify and hold MMI harmless from and against any liabilities arising out of or in connection with the services that it has performed for BioScience VCT, except for investment decisions made by the Fund after relying on due diligence performed by MMI. The Board has also agreed to table a resolution at the Annual General Meeting to be held on 19 April 2006 concerning a change of name of BioScience VCT (as the name 'BioScience' is associated with MMI). The Board strongly recommends that shareholders vote in favour of the resolution to change the name of the Fund to Hygea VCT plc. On an ongoing basis, a simpler investment decision-making process is in place whereby future investment proposals from the Investment Manager will be referred to the full Board for approval. The impact of this is that the Investment Committee and the Scientific Advisory Board (as described in the prospectus) no longer operate. When necessary the Board will seek specific scientific and technical input regarding potential investee companies from appropriate specialist external experts. This change should reduce the Fund's overall ongoing running costs, while allowing the Board access to appropriate specialist advice that is relevant to the specific investment opportunity under consideration. Share Premium Account I am pleased to be able to report that on 7 December 2005 the High Court approved our application for permission to change our balance sheet structure through the cancellation of part of the share premium account. This was registered at Companies House on 15 December 2005. This now provides us with the legal ability to carry out share buybacks which had previously been restricted by the lack of distributable reserves. Investors in VCTs sometimes need to sell their shares at a fairly early stage of the VCT's life because of probate or other events. As 'second hand' VCT shares do not qualify for upfront income tax relief, there tend to be few purchasers of these shares. For this reason the sale of even a small number of VCT shares can force the quoted share price well below the NAV. Although the Board sees the use of share buy backs as a mechanism of last resort to close the gap between the share price and the underlying NAV, our preference is to focus on generating real value from the investee companies in order to stimulate interest in the shares. VCT Qualifying Status PricewaterhouseCoopers LLP continues to provide the Board with advice on the ongoing compliance with HM Revenue & Customs rules and regulations concerning VCTs. The Board has been advised that BioScience VCT is in compliance with the conditions laid down by HM Revenue & Customs for maintaining approval as a VCT. Outlook We are in the process of adapting the BioScience VCT's structure and cost base to reflect its more mature position in the investment process. The bioscience sector still provides exciting opportunities and, given skill, support and patience, successful bioscience companies can amply reward their investors. We have been encouraged by the progress that has been made in recent months by some of our unquoted holdings. In addition, we hope that as we progress through 2006 investors will adopt a more positive approach to quoted biotech companies, which should result in benefits for our portfolio of AIM-listed companies. We look forward to updating you on the progress of our portfolio of investments in due course. James Otter Chairman 24 March 2006 Income Statement Year ended 31 December 2005 Year ended 31 December 2004 Revenue Capital Total Revenue Capital Total £000's £000's £000's £000's £000's £000's Realised gain on investments - 8 8 - - - Unrealised loss on investments - (123) (123) - (675) (675) Income 34 - 34 222 - 222 Investment management fees (59) (177) (236) (52) (157) (209) Other expenses (299) - (299) (176) - (176) Loss on ordinary activities before tax (324) (292) (616) (6) (832) (838) Tax on ordinary activities - - - - - - Loss on ordinary activities after tax (324) (292) (616) (6) (832) (838) Loss per share (4.3)p (3.8)p (8.1)p (0.1)p (11.0)p (11.1)p Reconciliation of movements in shareholders' funds Year ended Year ended 31 December 2005 31 December 2004 £000's £000's Shareholders' funds at start of year 6,299 6,911 Middle market price to bid price valuation movement (4) (6) Restated shareholders' funds at start of year 6,295 6,905 Loss on ordinary activities after tax (616) (838) Net proceeds of share issue - 232 Cost of share buyback - (4) Shareholders' fund at end of year 5,679 6,295 Balance Sheet 31 December 2005 31 December 2004 (restated) £000's £000's Fixed asset investments 4,428 1,383 Current assets: Debtors 13 210 Cash at bank 1,369 4,742 1,382 4,952 Creditors: amounts falling due within one (131) (40) year Net current assets 1,251 4,912 Net assets 5,679 6,295 Called up equity share capital 3,798 3,798 Share premium 1,722 3,422 Special distributable reserve 1,700 - Capital redemption reserve 5 5 Capital reserve - realised (534) (365) - unrealised (680) (557) Revenue reserve (332) (8) Total equity shareholders' funds 5,679 6,295 Net Asset Value Per Share 74.8p 82.9p Cash Flow Statement Year ended Year ended 31 December 2005 31 December 2004 £000's £000's £000's £000's Net cash outflow from operating activities (213) (454) Financial investment: Purchase of investments (3183) (1207) Sale of investments 23 - Net cash outflow from financial investment (3160) (1207) Net cash inflow from management of liquid - 5,969 resources Dividends paid - equity - (37) Net cash (outflow)/inflow before financing (3373) 4,271 Financing: Issue of ordinary shares - 244 Share issue expenses - (12) Repurchase of own shares - (4) Total financing - 228 (Decrease)/Increase in cash resources (3373) 4,499 Notes to the preliminary announcement Fixed asset investments Unlisted AIM-listed Listed Total investments investments investments Book cost as at 1 January 2005 1,613 312 15 1,940 Restatement from middle market to bid price - (4) - (4) Unrealised appreciation at 1 January 2005 (456) (102) 5 (553) Valuation at 1 January 2005 1,157 206 20 1,383 Movements in the year: Purchases at cost 1,495 1,688 - 3,183 Disposals - - (23) (23) Transfers (119) 119 - - Net realised gain - - 8 8 Decrease in unrealised appreciation (118) - (5) (123) Valuation at 31 December 2005 2,415 2,013 - 4,428 Comprising: Book cost at 31 December 2005 2,657 2,451 - 5,108 Unrealised appreciation at 31 December 2005 (242) (438) - (680) Investment Portfolio Summary 31 December 2005 Total Cost Carrying Value £000's £000's Unlisted investments BioAnaLab Ltd 250 250 Caretek Medical Ltd 100 100 DxS Ltd 263 262 Hallmarq Veterinary Imaging Ltd 500 500 ImmunoBiology Ltd 300 300 Insense Ltd 148 181 Purely Proteins Ltd 371 222 Scancell Ltd 725 600 2,657 2,415 AIM-listed investments Abcam plc 44 66 Angel Biotechnology Holdings plc 750 378 BBI Holdings plc 62 65 Cobra Bio-manufacturing plc 137 72 DawMed Systems plc 101 63 Evolutec Group plc 347 334 NeutraHealth plc 360 428 Phoqus Group plc 150 150 ReNeuron Group plc 150 144 Stem Cell Sciences plc 250 206 York Pharma plc 100 107 2,451 2,013 5,108 4,428 The above summary of results for the year ended 31 December 2005 does not constitute statutory financial statements within the meaning of section 240 of the Companies Act 1985 and has not been delivered to the Registrar of Companies. Statutory financial statements will be filed with the Registrar of Companies in due course; the auditors report on those financial statements under S235 of the Companies Act 1985 is unqualified and does not contain a statement under S237 (2) or (3) of the Companies Act 1985. A copy of the full annual report and financial statements for the year ended 31 December 2005 is expected to be posted to shareholders shortly and will be available to the public at the registered office of the company at 8 Angel Court, London, EC2R 7HP. ENDS This information is provided by RNS The company news service from the London Stock Exchange

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