Appointment of New Fund Manager

Intl. Biotechnology Trust PLC

03 August 2023

 

This Announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation EU 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018. This announcement has been authorised for release by the Company's Board of Directors.

03 August 2023

INTERNATIONAL BIOTECHNOLOGY TRUST PLC

("IBT" or the "Company")

Appointment of New Fund Manager

·    Schroders selected as IBT's Fund Manager and Alternative Investment Fund Manager

·    Continuity of investment approach and dividend policy

·    Ailsa Craig and Marek Poszepczynski to continue as the Company's portfolio managers

The Board of IBT is pleased to announce that it has decided to appoint Schroder Unit Trusts Ltd ("Schroders") as the Company's Fund Manager and Alternative Investment Fund Manager ("AIFM") with a mandate to continue IBT's investment policy, which offers access to the fast-growing biotechnology sector through an actively managed, diversified strategy.

This appointment is consistent with the feedback received from shareholders, which endorsed the continuity of the Company's investment approach under the existing investment management team and retaining the dividend policy. As such, the Board believes that Schroders' appointment will deliver positive long-term benefits for IBT and its shareholders.

Ailsa Craig and Marek Poszepczynski have accepted Schroders' conditional offer for them to continue as the Company's portfolio managers. Ailsa and Marek took on the position of IBT's Joint Lead Managers in March 2021, having been involved in managing IBT since 2006 and 2013 respectively. The Company's net asset value ("NAV") has outperformed its benchmark, the Nasdaq Biotechnology Index, by 6.7% since March 2021 and by 9.0% and 35.5% respectively over the last five and ten years⁽¹⁾.

Schroders will provide a platform from which IBT can continue to deliver its differentiated proposition of solid relative returns with lower volatility, and an annual dividend of 4% of NAV⁽²⁾. There are also no plans to change the Company's discount and premium management policy.

These appointments are subject to finalisation of legal documentation and to regulatory approval, and IBT is expected to transition formally to Schroders in November 2023, following publication of the Company's annual results to 31 August 2023.

IBT will continue to have a relationship with SV Health Managers LLP ("SV Health Investors") in connection with the existing unquoted portfolio, which is principally invested in two SV Health Investors funds.

The Company has consulted with a number of its major shareholders who have indicated their support for the Board's process. In accordance with the Company's articles of association, which provide for a continuation vote every two years, a continuation resolution will be proposed at the Company's December 2023 Annual General Meeting.

Kate Cornish-Bowden, Chair of IBT, commented:

"Schroders is an excellent fit for IBT. Following a comprehensive, independent process, we have identified a new Fund Manager for IBT, which aligns with the preference for continuity expressed by our shareholders. Schroders has extensive experience of managing investment trusts, and is well positioned to support, and help to grow IBT. We look forward to working with Schroders and continuing to deliver superior long-term returns for our shareholders."

Alex Tedder, Head of Global and Thematic Equities at Schroders, commented:

"We are delighted to partner with IBT and look forward to working with the Board to continue to deliver the Company's differentiated proposition for shareholders. We will be pleased to welcome Ailsa and Marek and believe that their significant specialist expertise will enhance our thematic capability. Coupled with Schroders' wealth of knowledge and experience of specialist equity strategies, Ailsa and Marek will help to drive shareholder returns in future."

Ailsa Craig and Marek Poszepczynski commented:

"In Schroders, the Board has found an excellent new home for IBT. We're pleased to be able to continue our focus on managing the Company's portfolio and delivering value for shareholders. We look forward to IBT benefiting from integration into an investment management business which is well-resourced in many key areas."

Kate Bingham, Managing Partner at SV Health Investors, commented:

"IBT has been a valued and important part of the SV platform for a number of years, so we are extremely pleased that they have found an excellent new manager to support their ongoing success. We at SV Health Investors will focus solely on our venture capital business which has grown in the past 5 years from $140m to >$1bn across our four dedicated biotech venture funds. We look forward to maintaining the close working relationship we have built with IBT in relation to their existing unquoted portfolio which is principally invested in our private funds, SV Fund VI and the SV Biotech Crossover Opportunities Fund."

Background

On 13 February 2023, IBT announced that the Company's AIFM and Fund Manager, SV Health Investors, had decided to focus on its venture capital business and had served notice of termination of its Investment Management Agreement with IBT ("IMA"). Accordingly, the Board instructed its advisers to commence an independent process to review the Company's options to ensure continuity of shareholders' exposure to the sector for the long term. As explained in the 2023 half yearly report, issued on 3 May 2023, the Board initially engaged with key shareholders to listen to their feedback, understand their perceptions of IBT's strengths and the key reasons why they had chosen to invest. That comprehensive feedback has informed the Board's decisions during the independent process of reviewing the Company's options. Following many expressions of interest, the Board, supported by its professional advisers, narrowed this field down to a short list of candidates before sending them requests for proposals. Following presentations from six institutions, the Board concluded, after negotiation of competitive commercial terms, that Schroders best met the Board's overall criteria.

Kate Cornish-Bowden, IBT's Chair, currently serves as a non-executive director of a Schroders-managed investment trust. In order that she continues to be deemed an independent director of IBT, Kate intends to resign from that other directorship prior to Schroders' appointment as IBT's Fund Manager and AIFM.

Benefits of appointing Schroders

The Board has agreed conditionally to appoint Schroders as the Company's Fund Manager and AIFM.

IBT will be positioned within Schroders' global thematic equities capability as its flagship biotechnology offering. Ailsa and Marek will join Schroders' quoted healthcare team, which has a global footprint including specialist analysts in London, New York, Tokyo and Hong Kong. The seven-strong healthcare team of Schroders Capital, Schroders' private markets investment division, will be an additional resource available to the fund managers.

IBT expects to benefit from Schroders' broad client base and marketing capabilities. IBT will be Schroders' only pure biotechnology strategy available to retail UK investors and will be the subject of dedicated promotional campaigns.

IBT will further benefit from the operational support that comes from Schroders' long standing experience managing investment trusts and other fund products. This is particularly important in light of the increasing regulatory burden on investment trusts as retail-facing products. Schroders currently has 14 investment trusts on its platform, with c. £10 billion of assets under management, and IBT is expected to benefit from cost and operational synergies that come from managing multiple investment trusts.

Schroders' commitment to sustainability and impact investment strategies will support IBT's established Environmental, Social and Governance ("ESG") policy. IBT strives to ensure that its portfolio companies consistently prioritise ESG principles in their day-to-day operations.

Schroders will charge a management fee payable by IBT on its quoted portfolio of 0.7% per annum, which is broadly in line with the effective fee currently payable to SV Health Investors. This will be in conjunction with a performance fee structure, being 10% of the relative outperformance of the quoted portfolio above the Pound Sterling-adjusted NASDAQ Biotechnology Index plus a 0.5% hurdle, capped at an amount equal to 1.25% of the Company's net assets in any financial period. As currently, any underperformance of the quoted portfolio against the index will be carried forward for the current financial period plus two succeeding periods and performance fees in excess of the performance fee cap will be carried forward for the current financial period plus two succeeding periods and paid in such subsequent period(s) subject to any offset against any subsequent underperformance before being paid out. Additionally, any performance fee calculated in respect of a financial period shall only be paid if the NAV per share has increased over such financial period, with any performance fee not paid being carried forward and paid in the next financial period in which the NAV per share increases (subject to the performance fee cap). In respect of its unquoted portfolio with SV Health Investors, IBT will continue to pay the prevailing management fees and carried interest on its investments in two SV Health Investors venture and crossover funds, which represented 7% of the Company's net assets as at 30 June 2023. There will no longer be any management fee payable on the Company's existing direct unquoted portfolio, which represented 2% of the Company's net assets as at 30 June 2023; the current performance fees on these assets will continue to be payable, subject to an annual cap of 2% of the Company's net assets.

Compared to the costs and fee arrangements prevailing for the current financial year, it is anticipated that IBT's ongoing charge ratio (excluding any performance fees) will reduce marginally for its next financial year to 31 August 2024, and further over time.

Schroders has agreed to make a significant contribution to the Company's costs in connection with the change of Fund Manager, by way of a waiver of up to six months of management fees, which is expected to offset the Company's direct transaction costs.

Further information

The Company will hold an analyst meeting this morning at 8.30 a.m. Please contact KL Communications for registration details. Details of professional and retail shareholder events will be publicised in due course.

The person responsible for arranging the release of this announcement on behalf of the Company is Indu Shastri, Link Company Matters - Company Secretary. 

For further information, please contact:

International Biotechnology Trust plc
Kate Cornish-Bowden, Chair	Via KL Communications or Numis
Patrick Magee, Senior Independent Director	Via KL Communications or Numis
Numis - Corporate Broker
Nathan Brown	[phone] / [phone]
Vicki Paine	[phone] / [phone]
KL Communications - Financial PR	[e-mail]
Charles Gorman Henry Taylor Charlotte Francis	[phone]
Link Company Matters - Company Secretary
Indu Shastri	[phone]

Notes:

(1) Source: Bloomberg and SV Health Managers LLP. Quoted in sterling as at 31 July 2023. Past performance is not a guide to future performance. All performance data are quoted net of all costs to the Company.

(2) The dividend target stated in this announcement is a target only and not a profit forecast. There can be no assurance that the target will be met, or that the Company will make any distributions at all and they should not be taken as an indication of the Company's expected future results. The Company's actual returns will depend upon a number of factors, including but not limited to, the Company's net income and the level of ongoing charges.

Forward looking statements

This announcement contains certain forward-looking statements with respect to certain of the Company's current expectations and projections about future events and the Company's future financial condition and performance. These statements, which sometimes use words such as "aim", "anticipate'', "believe", "may", "will", "should", "intend", "plan", "assume'', "estimate", "expect' (or the negative thereof) and words of similar meaning, reflect the current beliefs and expectations of the directors of the Company and involve known and unknown risks, uncertainties and assumptions, many of which are outside the Company's control and difficult to predict, that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement.

The information contained in this announcement speaks only as at the date of this announcement and is subject to change without notice and the Company does not assume any responsibility or obligation to, and does not intend to, update or revise publicly or review any of the information contained in this announcement, whether as a result of new information, future events or otherwise, except to the extent required by law or any appropriate regulatory authority. These forward-looking statements reflect the Company's judgment at the date of this announcement and are not intended to give any assurance as to future results.

LEI: 213800N1QUJ744P76D11

 

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