Interim Results

Finsbury Emerging Biotechnology Tst 21 November 2006 21 November 2006 Finsbury Emerging Biotechnology Trust PLC Interim Results for the six months ended 30 September 2006 Financial Highlights 30 September 31 March % Change 2006 2006 Shareholders' Funds Â£72.8m Â£36.6m +98.9 Net Asset Value per Ordinary share 110.4p 131.8p -16.2 Share price 108.0p 135.5p -20.3 (Discount)/premium of share price to net asset value per share (2.2)% 2.8% - NASDAQ Biotechnology Index (sterling adjusted) 403.0 483.7 -16.7 FTSE All-Share Index (total return) 3,522.6 3,462.2 +1.7 No interim dividend is proposed. The following are attached: â€¢ Chairman's Statement â€¢ Income Statement â€¢ Statement of Changes in Equity â€¢ Balance Sheet â€¢ Cash Flow Statement â€¢ Notes to the Interim Financial Statements For further information please contact: Mark Pope, Close Investments Limited 020 7426 6294 Jo Stonier, Quill Communications 020 7758 2230 CHAIRMAN'S STATEMENT Investment Performance During the period ended 30 September 2006, the Company's net asset value per share fell from 131.8p to 110.4p, a decrease of 16.2 per cent. The Company's benchmark, the NASDAQ Biotechnology Index (sterling adjusted), fell slightly more, by 16.7 per cent., over the same period. The Company's share price fell by 20.3 per cent. and stood at a 2.2 per cent. discount to the net asset value per share at the half-year end, compared to a 2.8 per cent. premium as at 31 March 2006. This figure is still well within the 6.0 per cent. limit set by the Board as part of its active discount management policy. It is now six months since the Placing and Offer for Subscription. OrbiMed Capital LLC, the new Investment Adviser, had by then already substantially reorganised the Portfolio and the bulk of the new funds raised were used to increase existing holdings. In addition, three new positions were added as noted in the Review of Investments that forms part of the Interim Report. Results and Dividend The total return for the six months ended 30 September 2006 was a loss of 6.9p per share (year to 31 March 2006: return of 30.1p per share, six months to 30 September 2005: return of 17.5p per share). This was made up of a revenue loss of 0.3p per share (year to 31 March 2006: loss of 1.9p per share, six months to 30 September 2005: loss of 1.5p per share) and a capital loss of 6.6p per share (year to 31 March 2006: gain of 32.0p per share, six months to 30 September 2005: gain of 19.0p per share). The investments comprising the Company's portfolio typically provide little, if any, income and accordingly no interim dividend has been declared (2005: nil). Review and Outlook This has been a difficult period for the biotechnology sector which has seen a significant underperformance of the wider market. In addition, the continued weakness of the US dollar has adversely affected the sterling value of the Portfolio as the majority of the Company's assets are denominated in US dollars. The Board continues to take the view that the investment policy should be to identify the best companies in the sector without being swayed by currency fluctuations. The Board believes that the prospects for emerging biotechnology companies remain good, particularly as long-term growth fundamentals remain strong and as a pick-up in merger and acquisition activity, following a quiet period during the summer, will help buoy performance in the sector. John Sclater Chairman Income Statement For the six months ended 30 September 2006 (Unaudited) (Unaudited) (Audited) Six months ended Six months ended Year ended 30 September 2006 30 September 2005 31 March 2006 Revenue Capital Total Revenue Capital Total Revenue Capital Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 ------------ ------- ------- ------- ------- ------- ------- ------- ------- ------- Investment income Investment income 18 - 18 9 - 9 93 - 93 Other income 2 - 2 10 - 10 18 - 18 ------------ ------- ------- ------- ------- ------- ------- ------- ------- ------- Total income 20 - 20 19 - 19 111 - 111 (note 3) Gains and losses on investments (Losses)/ gains on investments held at fair - (2,947) (2,947) - 5,878 5,878 - 9,774 9,774 value through profit or loss Exchange losses on currency balances - (104) (104) - (101) (101) - (207) (207) Expenses Investment management fees - (463) (463) - (505) (505) - (752) (752) (note 4) Other (178) - (178) (436) - (436) (605) - (605) expenses ------- ------- ------- ------- ------- ------- ------- ------- ------- ------------ (Loss)/profit before finance costs and (158) (3,514) (3,672) (417) 5,272 4,855 (494) 8,815 8,321 taxation ------- ------- ------- ------- ------- ------- ------- ------- ------- ------------ Finance costs (6) - (6) (2) (21) (23) (16) (21) (37) ------------ ------- ------- ------- ------- ------- ------- ------- ------- ------- (Loss)/profit before taxation (164) (3,514) (3,678) (419) 5,251 4,832 (510) 8,794 8,284 ------------ ------- ------- ------- ------- ------- ------- ------- ------- ------- Taxation - - - - - - - - - ------------ ------- ------- ------- ------- ------- ------- ------- ------- ------- (Loss)/profit for the (164) (3,514) (3,678) (419) 5,251 4,832 (510) 8,794 8,284 period ------- ------- ------- ------- ------- ------- ------- ------- ------- ------------ (Loss)/ earning s per Ordinary (6.9)p 17.5p 30.1p share ------- ------- ------- ------- ------- ------- ------- ------- ------- (note 2) The total column of this statement represents the Income Statement, prepared in accordance with IFRS. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies (formerly the Association of Investment Trust Companies). All items in the above statement derive from continuing operations. All income is attributable to the equity holders of Finsbury Emerging Biotechnology Trust PLC. There are no minority interests. Statement of Changes in Equity For the six months ended 30 September 2006 Six months ended 30 September 2006 Ordinary Share Capital Share Premium Special Redemption Capital Retained Capital Account Reserve Reserve Reserve Earnings Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 ------- ------- ------ -------- ------ ------- ------ At 31 March 2006 6,935 272 19,167 653 11,201 (1,672) 36,556 Net loss for the period - - - - (3,514) (164) (3,678) Issue of Ordinary shares 9,543 31,267 - - - - 40,810 Issue expenses - (938) - - - - (938) Share premium account cancelled - (30,601) 30,601 - - - - Issue expenses written back - - - - 37 - 37 --------------- ------- ------- ------ -------- ------ ------- ------ At 30 September 2006 16,478 - 49,768 653 7,724 (1,836) 72,787 --------------- ------- ------- ------ -------- ------ ------- ------ For the year ended 31 March 2006 Ordinary Share Capital Share Premium Special Redemption Capital Retained Capital Account Reserve Reserve Reserve Earnings Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 -------------- ------- ------- ------ -------- ------ ------- ------ At 31 March 2005 7,525 - 21,679 - 2,407 (1,162) 30,449 Net profit/(loss) for the year - - - - 8,794 (510) 8,284 Buyback of Ordinary shares (653) - (2,512) 653 - - (2,512) Issue of Ordinary shares 63 272 - - - - 335 --------------- ------- ------- ------ -------- ------ ------- ------ At 31 March 2006 6,935 272 19,167 653 11,201 (1,672) 36,556 --------------- ------- ------- ------ -------- ------ ------- ------ Balance Sheet as at 30 September 2006 (Unaudited) (Unaudited) (Audited) 30 September 30 September 31 March 2006 2005 2006 Â£'000 Â£'000 Â£'000 --------- --------- --------- Non current assets Investments held at fair value through profit or loss 73,081 33,610 37,043 (note 1(a)) Current assets Other receivables 170 58 1,302 Cash and cash equivalents 538 329 729 --------- --------- -------- 708 387 2,031 --------- --------- -------- Total assets 73,789 33,997 39,074 Current liabilities Other payables 742 1,225 1,369 Bank overdrafts 260 3 1,149 --------- --------- --------- 1,002 1,228 2,518 --------- --------- --------- Net assets 72,787 32,769 36,556 --------- --------- --------- Equity attributable to equity holders Ordinary share capital 16,478 6,872 6,935 Share premium - - 272 Special reserve 49,768 19,167 19,167 Capital redemption reserve 653 653 653 Capital reserve 7,724 7,658 11,201 Retained earnings (1,836) (1,581) (1,672) --------------------------- --------- --------- -------- Total equity 72,787 32,769 36,556 --------------------------- --------- --------- -------- Net asset value per Ordinary share (note 6) 110.4p 119.2p 131.8p --------------------------- --------- --------- --------- Cash Flow Statement for the six months ended 30 September 2006 (Unaudited) (Unaudited) (Audited) Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2006 2005 Â£'000 Â£'000 Â£'000 ------------- ------------- ------------- Net cash (outflow)/inflow from operating activities (note 7) (39,107) 2,638 1,657 -------------------- ------------- ------------- ------------- Net cash (outflow)/inflow before financing (39,107) 2,638 1,657 Net cash inflow/(outflow) from financing activities 39,909 (2,512) (2,177) -------------------- ------------- ------------- ------------- Net increase/(decrease) in cash and cash equivalents 802 126 (520) Cash and cash equivalents at start of period (420) 301 301 Realised loss on foreign currency (104) (101) (201) -------------------- ------------- ------------- ------------- Cash and cash equivalents at period end 278 326 (420) -------------------- ------------- ------------- ------------- Notes to the Interim Financial Statements Accounting Policies 1. Basis of Presentation The financial statements have been prepared under the historical cost convention, except where stated in (a) below. Where presentational guidance set out in the Statement of Recommended Practice ("the SORP") for Investment Trust Companies produced by the Association of Investment Companies (formerly known as the Association of Investment Trust Companies) ("AIC") in December 2005 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. The same accounting policies used for the year ended 31 March 2006 have been applied. The Company's dormant subsidiary undertaking, FLIT Investments Limited, was dissolved on 27 June 2006. The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS"). These comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee ("IASC") that remain in effect, to the extent that IFRS have been adopted by the European Union. These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Company operates. The financial statements of the Company for the year ending 31 March 2007 will also be prepared in accordance with IFRS. (a) Investments Investments are recognised and derecognised on the trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are initially measured at fair value. Investments have been designated by the Board as held at fair value through profit or loss and accordingly are valued at fair value, deemed to be bid market prices. As the entity's business is investing in financial assets with a view to profiting from their total return in the form of interest, dividends or increases in fair value, listed equities and fixed income securities are designated as fair value through profit or loss on initial recognition. The entity manages and evaluates the performance of these investments on a fair value basis in accordance with its investment strategy, and information about the Company is provided internally on this basis to the entity's key management personnel. Financial assets designated as at fair value through profit or loss, which are quoted investments, are measured at subsequent reporting dates at fair value, which is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. In respect of unquoted instruments, or where the market for a financial instrument is not active, fair value is established by using valuation techniques, which may include using recent arm's length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, that technique is utilised. On disposal, realised gains and losses are also recognised in the Income Statement. Purchase and sale transaction costs for the six months ended 30 September 2006 were Â£214,000, 31 March 2006 Â£210,000, and 30 September 2005 Â£112,000. These costs comprise of mainly stamp duty and commission. (b) Presentation of Income Statement In order to better reflect the activities of an investment trust company, and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. In accordance with the Company's status as a UK investment company under section 266 of the Companies Act 1985, net capital returns may not be distributed by way of dividend. Additionally, the net revenue is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in section 842 of the Income and Corporation Taxes Act 1988. (c) Income Dividends receivable on equity shares are recognised on the ex-dividend date. Where no ex-dividend date is quoted, dividends are recognised when the Company's right to receive payment is established. Dividends and interest on investments in unquoted shares and securities are recognised when they become receivable. Fixed returns on non-equity shares are recognised on a time apportionment basis so as to reflect the effective yield, provided there is no reasonable doubt that payment will be received in due course. Underwriting commission is recognised as income in so far as it relates to shares not required to be taken up. Where a proportion of the shares underwritten is required to be taken up, the same proportion of commission received is treated as a deduction from the cost of the shares taken up, the balance taken to the income statement and allocated to revenue. (d) Expenses and Finance Costs All expenses are accounted for on an accruals basis. Expenses are charged through the income statement except as follows: (i) expenses which are incidental to the acquisition or disposal of an investment are charged to the Income Statement and allocated to the Capital Reserve; (ii) expenses are charged to the income statement and allocated to the realised Capital Reserve where a connection with the maintenance or enhancement of the value of the investments can be demonstrated, and accordingly; Notes to the Interim Financial Statements (continued) (iii) investment management fees and related irrecoverable VAT are charged to the Income Statement and allocated to the realised Capital Reserve as the Directors expect that in the long term virtually all of the Company's returns will come from capital; and (iv) loan interest is charged to the Income Statement and allocated to capital as the Directors expect that in the long-term virtually all of the Company's returns will come from capital. (e) Taxation The payment of taxation is deferred or accelerated because of timing differences between the treatment of certain items for accounting and taxation purposes. Full provision for deferred taxation is made under the liability method on all timing differences that have arisen, but no reversed by the Balance Sheet date, unless such provision is not permitted by International Accounting Standard 12. In line with the recommendation of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Income Statement is the "marginal basis". Under this basis, if taxable income in capable of being offset entirely by expenses presented in the revenue column of the Income Statement, then no tax relief is transferred to the capital return column. (f) Foreign Currencies The currency of the primary economic environment in which the Company operates (the functional currency) is pounds sterling ("sterling"). Transactions involving currency 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. Exchange differences arising on settlements of monetary items and from retranslating at the Balance Sheet date: - investments and other financial instruments measured as fair value through profit or loss; and - other monetary items. All foreign exchange differences are taken to the income statement and allocated to income and capital accordingly. (g) Reserves Capital Reserves The following are charged or credited to the Income Statement and then transferred to the Capital Reserve: - gains or losses on the realisation of investments; - realised exchange differences of a capital nature; - expenses charged to this reserve in accordance with the above referred policies; - increases and decreases in the valuation of investments held at year end; - unrealised exchange differences of a capital nature. 2. (Loss)/Earnings per Ordinary Share The (loss)/earnings per Ordinary share figure is based on the net loss for the six months of Â£3,678,000 (six months ended 30 September 2005: Â£4,832,000 gain; year ended 31 March 2006: Â£8,284,000 gain) and on 53,188,176 (six months ended 30 September 2005: 27,612,514 and year ended 31 March 2006: 27,490,000) Ordinary shares, being the weighted average number of Ordinary shares in issue during the period. (Unaudited) (Unaudited) (Audited) 30 September 30 September 31 March 2006 2006 2005 Â£'000 Â£'000 Â£'000 ---------------------- ---------- ---------- --------- Net revenue loss (164) (419) (510) Net capital (loss)/gain (3,514) 5,251 8,794 ---------------------- ---------- ---------- --------- Net total (loss)/gain (3,678) 4,832 8,284 ---------------------- ---------- ---------- --------- Weighted average number of Ordinary shares in issue during the period 53,188,176 27,612,514 27,490,000 Pence Pence Pence Revenue loss per Ordinary share (0.3) (1.5) (1.9) Capital (loss)/earnings per Ordinary share (6.6) 19.0 32.0 ---------------------- ---------- ---------- --------- Total (loss)/earnings per Ordinary shares (6.9) 17.5 30.1 ---------------------- ---------- ---------- --------- 3. Income (Unaudited) (Unaudited) (Audited) 30 September 30 September 31 March 2006 2005 2006 Â£'000 Â£'000 Â£'000 Investment income 18 9 93 Bank interest 2 10 18 ---------------------- ---------- ---------- -------- Total 20 19 111 ---------------------- ---------- ---------- -------- 4. Investment Management Fees (Unaudited) (Unaudited) (Audited) 30 September 30 September 31 March 2006 2005 2006 Â£'000 Â£'000 Â£'000 Periodic fee 294 345 519 Performance fee 169 96 168 Irrecoverable VAT thereon - 64 65 ---------------------- ---------- ---------- -------- Total 463 505 752 ---------------------- ---------- ---------- -------- Notes to the Interim Financial Statements (continued) 5. Comparative Information The financial information contained in this interim report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the six months ended 30 September 2006 and 2005 has not been audited. The information for the year ended 31 March 2006 has been extracted from the latest published audited financial statements. The audited financial statements for the year ended 31 March 2006 have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification, reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report, or statement under section 237(2) or (3) of the Companies Act 1985. 6. Net Asset Value per Ordinary share The Net Asset Value per Ordinary share is based on the net assets attributable to equity shareholders of Â£72,787,000 (30 September 2005: Â£32,769,000 as restated; 31 March 2006: Â£36,556,000) and on 65,912,263 (30 September 2005: 27,490,000; 31 March 2006: 27,740,000) Ordinary shares, being the number of Ordinary shares in issue at the period end. 7. Reconciliation of Profit Before Taxation to Net Cash Outflow From Operating Activities (Unaudited) (Unaudited) (Audited) Six months Six months Year ended ended ended 30 September 2006 30 September 2005 31 March 2006 Â£'000 Â£'000 Â£'000 ---------------------- ----------- ----------- --------- (Loss)/gain before taxation (3,678) 4,832 8,284 (Gain)/loss on investments held at fair value through profit or loss 3,051 (5,777) (9,567) Net (purchases)/sa les of investments held at fair value through profit or loss (38,622) 3,541 2,979 (Increase)/dec rease in other receivables (16) (14) 22 Increase/(decr ease) in other payables 158 56 (62) Taxation on overseas income - - 1 ---------------------- ----------- ----------- --------- (39,107) 2,638 1,657 ---------------------- ----------- ----------- --------- This information is provided by RNS The company news service from the London Stock Exchange

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