Half Yearly Report for the 6 months to 28 Feb 2021

RNS Number : 4987W

Intl. Biotechnology Trust PLC

26 April 2021

 

INTERNATIONAL BIOTECHNOLOGY TRUST PLC ("the Company")

Half Yearly Report for the six months ended 28 February 2021

CHAIRMAN'S STATEMENT

SUMMARY

This is my first Interim Report as Chairman of International Biotechnology Trust's (the Company's) Board of Directors and while the last six months have been marked by the ongoing effects of the Covid-19 pandemic, I feel honoured to be a part of a Company and wider sector which has had a positive impact on the fight against the pandemic as well as helping to improve health globally.

On 15 March 2021, the Company's Lead Investment Manager, Carl Harald Janson, decided to step back from his role as Lead Investment Manager of the Company. On behalf of the Board, I would like to thank Carl Harald for the pivotal role he has played in leading the Company over the past seven years and wish him well for the future. Under Carl Harald's leadership, the Company achieved several key milestones including delivering annualised returns of 16% over the duration of his tenure; the introduction of the Company's dividend policy in 2016; moving the Company's significant discount to NAV to a premium to NAV resulting in growing the company by issuing shares, and the Company's NAV reaching an all-time high in 2020. The Company wishes Carl Harald well in the next chapter of his career and looks forward to staying in touch with him through his ongoing role as Senior Adviser to SV Health Investors. Kate Bingham, the Investment Manager of the Company's unquoted portfolio, will continue to represent the breadth and depth of experience of SV Health Investors. Ailsa Craig and Marek Poszepczynski, newly appointed Joint Lead Fund Managers, are talented investment professionals and long-standing core members of the Company's investment team and the Board is confident that they will continue to deliver strong returns for Shareholders.

We are delighted to welcome Kate Bingham back as Investment Manager of the Company's unquoted portfolio after she spent six months as Chair of the UK Vaccine Taskforce and congratulate her on all she has achieved in the fight against Covid-19 in the UK. In her absence, Houman Ashrafian, along with five other SV Managing Partners, and with the support of over 50 investment professionals at SV Health Investors have, very capably, looked after the Company's unquoted investments.

For the six months ended 28 February 2021, the NAV per share returned 6.9%. By comparison, the NBI returned 11.5% and the FTSE All-Share Index returned 12.0%. Over the same period, the ordinary share price of the Company returned 9.5%. Although the underperformance against the NBI over the period is a little disappointing, it has to be set in the context of the share price's continued outperformance over the 1, 3 and 5 year periods. All figures are on a sterling-adjusted total return basis, with dividends reinvested.

QUOTED PORTFOLIO

The quoted portfolio NAV returned 6.1% for the six months ended 28 February 2021 (gross of management and performance fees). The Investment Manager has continued to identify value creating investment opportunities, focusing on long term growth and avoiding binary events with the aim of reduce volatility in the Company's NAV. Details of the performance of the quoted portfolio is discussed further in the Fund Manager's Review.

UNQUOTED PORTFOLIO

The Company continues to enjoy success through its access to the unquoted element of the biotechnology and healthcare sectors, a differentiating feature of the Company which allows investors exposure to differentiated returns from quoted markets. This portfolio, which comprises 10.7% of the Company's NAV as at 28 February 2021, provides Shareholders with access to innovative early stage companies. SV Life Sciences Fund VI (SV Fund VI) has a currency-adjusted internal rate of return (IRR) of 23.5% per annum, since the date of the Company's first investment in the fund. During the six months ended 28 February 2021, SV Fund VI made three net distributions totalling £4.7m to the Company and has delivered impressive returns of 26.4%.

The Company has not made any new direct unquoted investments since 2016 when the strategy for the unquoted portfolio changed to investments via unquoted funds rather than direct investments. It is the Board's belief that investing via a fund gives the Company access to a wider opportunity set of unquoted investments, because SV Health Investors has broader relationships, deeper resources and therefore greater profile with the potential pool of investee companies.

Performance fee

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

Dividends, share premium and share issuances

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 14.2 pence per share was paid in January 2021.This represents a dividend yield of 3.6% as at 28 February 2021 and an increase of 14.5% on the prior years' 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 2021. 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 source of income that is not affected by fluctuations in yield from the Company's portfolio companies.

The Company has successfully boosted its NAV through the reissuance from treasury of 2.4m shares with a total value of £19.4m during the six-month period ended 28 February 2021. No shares were repurchased during the reporting period. This new issuance was able to take place because the Company moved into a premium position of 1.2% as at 28 February from a discount of -1.2% as at 31 August 2020. Since the interim period end, the Company's premium has changed to 0.8% and the Company has issued an additional 341,000 shares. The Board remains committed to the growth of the Company and will continue to issue shares, at a premium to the net asset value to satisfy market demand.

OUTLOOK

The impact of the vaccine roll out is beginning to have a positive effect on economic growth. Slowly, life will become more normal. However, in some areas, the changes we have had in the last two years will be more permanent, for example, the rise in internet commerce and the impact on the 'high street', and the changes to working practices. One thing that we anticipate won't change is the demand for improved healthcare, better prescription drugs, more efficient medicine delivery systems, innovative treatments and more comfortable care for the sick and elderly. The Company will be looking to invest in these trends.

The Company's investment strategy remains unchanged. The Investment Management team will continue to seek out companies with strong fundamentals that have the ability to deliver strong investor returns over the long term.

The Board remains fully supportive of this investment strategy and has every confidence in the ability of the Joint Lead Investment Managers to continue to deliver on the Company's investment objectives.

Jim Horsburgh

Chairman

23 April 2021

FUND MANAGERS' REVIEW

SUMMARY

SV Health Investors thanks Carl Harald for his contribution throughout his tenure as Lead Fund Manager of the Company and looks forward to working with him in his role as Senior Adviser.

As at 28 February 2021, the Company's NAV amounted to £316.6m, representing a total return of 6.9% on the NAV per share for the six months ended 28 February 2021. By comparison, the NBI increased by 11.5% over the same period. All figures are on a sterling-adjusted total return basis, with dividends reinvested.

For financial reporting purposes, the quoted portfolio represented 89.3% of the NAV (excluding cash and other net assets) as at 28 February 2021, while the unquoted portfolio represented 10.7% of the NAV. For performance measurement purposes, companies that were first invested in from the unquoted pool and have now become quoted, but continue to be managed by the unquoted Investment Manager, are included within the unquoted portfolio.

By sub-sector, 90.9% of the portfolio was invested in therapeutics, 2.0% in life sciences, tools, diagnostics and services and 7.1% in a venture capital fund, SV Fund VI. The three largest specialty areas within therapeutics were rare, diseases (33.1%), oncology (23.6%), and central nervous system diseases (12.0%). SV Fund VI invests in unquoted companies across three sectors - biotechnology, healthcare services and medical devices. Gearing amounted to 2.9% of NAV at the period end. The Company has continued to apply a conservative approach to gearing and makes use of the gearing facility when market conditions are deemed favourable.

QUOTED PORTFOLIO

For the six months ended 28 February 2021, the quoted portfolio returned 6.1% (gross of management and performance fees) on a NAV basis. By comparison, the NBI returned 11.5% and the FTSE All-Share Index returned 12.0%. All figures are on a sterling-adjusted total return basis, with dividends reinvested. No performance fee has been earned for the period under review.

Although we have started to see economic recovery in the last six months, global equity markets continue to experience the lingering effects of Covid-19 pandemic. Market volatility has been further compounded by geopolitical events such as the November 2020 Presidential election, which saw Biden assume the 46th Presidency of the US, and the withdrawal of the UK from the EU (Brexit) in January 2021.

Kate Bingham, who represents the investment manager of the unquoted portfolio with over 50 dedicated investment professionals, spent six months as Chair of the UK Vaccine Taskforce, reporting to the Prime Minister. On 8 December 2020 the UK started Covid-19 vaccinations - the first Western country to do so.  We are incredibly proud of what Kate achieved in that role and the contribution she has made as in the fight against the Covid-19 pandemic. Since her appointment, the Company has not invested in companies that create Covid-19 vaccines to avoid a perceived conflict of interest.

Furthermore, the Investment Managers have noted an enthusiastic market response to several early-stage companies launched in recent months, many of which are yet to have revealed any clinical data. This has led to valuations becoming dislocated from company fundamentals. The Investment Managers have continued to approach the whole sector with a valuation focussed, highly selective approach. With many valuations in the smaller cap space looking unsustainable, the Company has an underweight position in this space versus the NBI and this has also contributed to a relative underperformance over the six-month period.

Mergers & Acquisitions (M&A)

M&A activity continues to be a key driver of performance for the biotechnology sector and the features that make a company attractive to the Investment Managers are also those that make them attractive to a potential acquiror. During the six-month period ended 28 February 2021, the Company has been well placed to take advantage of this M&A activity to generate returns for its Shareholders.

In September 2020, Gilead Sciences had announced that it had entered a deal to acquire Immunomedics, a leader in next-generation antibody-drug conjugate (ADC) technology committed to help transform the lives of people with hard-to-treat cancers, for a cash consideration approximately $21bn, which represented a premium of 108% to the share price. The Company's NAV benefited from this announcement as the Company had 3.7% of its NAV invested in Immunomedics and 5.3% of its NAV invested in Gilead Sciences.

In October 2020, Bristol Myers Squibb announced its intention to acquire MyoKardia, a clinical-stage biopharmaceutical company pioneering a precision medicine approach to discover, develop and commercialise targeted therapies for the treatment of serious cardiovascular diseases, for a cash consideration of $13.1bn, representing a 61% premium to the share price. At the time of the announcement, the Company had 2.3% of its NAV invested in MyoKardia.

In December 2020, AstraZeneca announced its intention to acquire global biopharmaceutical company Alexion Pharmaceuticals for $39bn, a 45% premium on the share price. Alexion focuses on the treatment of immune-mediated rare diseases caused by uncontrolled activation of the complement system, a critical part of the immune system. At the time of the announcement the Company held 1.7% of its NAV in Alexion.

In February 2021, Jazz Pharmaceuticals announced its intention to acquire GW Pharmaceuticals, another holding of the Company, for a cash consideration of $7.2bn. This represented a 50% premium to the acquiree company's share price. GW Pharmaceuticals has established a world leading position in the development of plant-derived cannabinoid therapeutics through its proven drug discovery and development processes, intellectual property portfolio and regulatory and manufacturing expertise. At the time of the announcement, the Company had 0.3% of its NAV invested in GW Pharmaceuticals.

Positive contributors to the NAV

BEST PERFORMING INVESTMENTS
	Contributors to NAV (£'m)
Immunomedics	10.1
Myokardia	5.8
Halozyme	4.4

During the six-month period under review, the acquisitions of Immunomedics and Myokardia, described in detail above, contributed an increase to the Company's NAV of £10.1m and £5.8m, respectively.

Halozyme is a US biotechnology company that licenses its novel drug delivery technology through corporate partnerships. The company's share price appreciated after it reported better than expected income from its partnered drug, Darzalex Faspro. This is a subcutaneous version of the multiple myeloma drug, Darzalex, which is sold by Johnson & Johnson.

Detractors from NAV

WORST PERFORMING INVESTEMENTS
	Detractors from NAV (£'m)
Vertex	(4.1)
Regeneron	(3.2)
Neurocrine	(3.0)

In October 2020, Vertex, an orphan disease company and a global leader in the development of treatments for cystic fibrosis, experienced a sharp decrease in share price following the news that it had discontinued the development of its lead molecule for alpha-1 antitrypsin deficiency.

Regeneron's share price experienced a steady decline over the six-month period, following the rerating of the company earlier in the year. A further decrease then followed when a competitor announced positive data for a potential competitor drug to the company's lead marketed drug, Eylea.

Neurocrine develops treatments for neurological and endocrine related diseases and disorders. The company's share price decreased resulting from the slowing sales growth of its main pipeline drug, Ingrezza, due to the Covid-19 pandemic.

UNQUOTED PORTFOLIO

Summary of unquoted investments

	As at 28 February 2021			As at 31 August 2020
	Fair Value  (£m)	% of NAV	No. of   Investments	Fair   Value   (£m)	% of NAV	No of Investments
SV Fund VI	22.5	7.1	25*	21.6	7.6	25
Exited with contingent milestones	9.6	3.0	4	9.9	3.4	5
Directly-held unquoted	2.0	0.6	5	3.8	1.3	6
Total Unquoted	34.1	10.7	34	35.3	12.3	36
Previously unquoted, now quoted	2.2	0.7	2	2.8	1.0	3
Total unquoted for performance measurement	36.3	11.4	36	38.1	13.3	39

* The number of investments within SV Fund VI represents the number of investments into underlying individual portfolio companies. Five of these companies were quoted as at 28 February 2021.

SVI Fund VI

The Company's investment in a venture capital fund, SV Fund VI, continues to be a success and to generate positive returns for the Company with a currency adjusted IRR of 23.5% since the date of the Company's first investment into the fund. During the six-month period under review, SV Fund VI returned 26.4% and made three net distributions totalling £4.7m.

AeroCare Holdings Inc, a portfolio holding of SV Fund VI, leading national technology-enabled respiratory and home medical equipment ("HME") distribution platform in the US, was acquired by AdaptHealth Corp. The transaction valued AeroCare at approximately $2.0bn on a debt-free, cash-free basis, with cash consideration of $1.1bn and 31 million shares of AdaptHealth common stock, which now forms one of SV Fund VI's quoted holdings. The transaction completed in February 2021.

SV Fund VI's investee companies are diversified between biotechnology, healthcare services and medical devices similar to our existing unquoted investments, but with smaller allocations to each individual company, allowing for greater diversification. The draw down to date on the commitment of $30.0m is $22.4m, which represents 74.7% of the total committed capital.

Directly-held unquoted companies and exited with contingent milestones

The fair value gain on the directly-held unquoted portfolio for the six months ended 28 February 2021 was 0.6% (gross of performance and management fees). The Company received three distributions during the year, amounting to £0.3m, as a result of milestones being achieved by Archemix and Ikano Therapeutics and a final liquidation payment received from TopiVert.

The largest contributor to performance for the six months ended 28 February 2021 was KalVista, a holding that is now quoted, but previously formed part of the unquoted portfolio for performance measurement purposes. In February 2021, the Company sold its holding in KalVista for proceeds of £4.5m, with 55% being sold in the market and the remaining 45% being transferred to the Company's quoted portfolio at fair value. As at 28 February 2021, 0.9% of the quoted NAV was represented by the holding in KalVista.

During the reporting period, the Company fully wrote down its investments in Karus Therapeutics and Atopix following decisions made by the companies to suspend their clinical trial programs. The Company's investment in each company was £1.4m and £0.3m at 31 August 2020, respectively.

OUTLOOK

Ailsa and Marek will continue to manage the Company using a robust bottom-up stock selection process, applying a top-down diversification overlay. They will continue to apply a conservative risk management approach, focussing on innovative biotechnology companies with strong fundamentals addressing unmet medical need.

We are optimistic about the future of the Company and the biotechnology sector more broadly. In our view, there are two main themes that will drive Company and sector performance, namely M&A activity and company valuations. In line with the company's risk mitigation strategy, the Fund Manager takes a cautious approach to investing in early-stage companies without clinical data where valuations have become frothy. In contrast, later stage and sales growth companies, including large cap companies (i.e. companies whose valuation is in excess of $10bn), are broadly considered undervalued and make them prime targets for M&A activity.

Our outlook for the biotech sector remains positive. Innovation remains strong, with a record number of drugs in development in 2020 - a trend which is expected to continue throughout 2021. With an aging global population, the fundamentals of supply and demand within the biotechnology sector remain intact.

Ailsa and Marek, along with sector specialists at SV Health Managers, have deep and broad scientific, medical and financial expertise and the team is well positioned to continue to generate strong investment returns for the Company's Shareholders.

SV HEALTH MANAGERS LLP

23 April 2021

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 and the Manager's Report above.

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 2020 and continue to be as set out in that report on pages 21 and 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 2021, 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 2021 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 2021 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 2021 was approved by the Board and the above Responsibilities Statement has been signed on its behalf by:

JIM HORSBURGH

Chairman

23 April 2021

STATEMENT OF COMPREHENSIVE INCOME

	Notes	(Unaudited) For the six months ended 28 February 2021			(Unaudited)  For the six months ended  29 February 2020			(Audited)  For the year ended  31 August 2020
		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		-	20,444	20,444	-	9,841	9,841	-	54,127	54,127
Exchange (losses)/gains on currency balances		-	(65)	(65)	-	589	589	-	1,765	1,765
Income	2	538	-	538	486	-	486	1,134	-	1,134
Expenses
Management fee		(1,189)	-	(1,189)	(844)	-	(844)	(1,878)	-	(1,878)
Performance fee		-	-	-	-	-	-	-	(243)	(243)
Administrative expenses		(545)	-	(545)	(520)	-	(520)	(1,051)	-	(1,051)
Profit/(loss) before finance costs and tax		(1,196)	20,379	19,183	(878)	10,430	9,552	(1,795)	55,649	53,854
Interest payable		(74)	-	(74)	(203)	-	(203)	(260)	-	(260)
Profit/(loss) on ordinary activities before tax		(1,270)	20,379	19,109	(1,081)	10,430	9,349	(2,055)	55,649	53,594
Taxation		(77)	-	(77)	(71)	-	(71)	(170)	-	(170)
Profit/(loss) for the year attributable to Shareholders		(1,347)	20,379	19,032	(1,152)	10,430	9,278	(2,225)	55,649	53,424
Basic and diluted earnings/ (loss) per Ordinary share	3	(3.39)p	51.31p	47.92p	(2.99)p	27.07p	24.08p	(5.79p)	144.70p	138.91p

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 below form part of these Financial Statements

STATEMENT OF CHANGES IN EQUITY

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 six months ended 29 February 2020 (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 2019	10,335	19,993	31,482	216,525	(38,756)	239,579
Total Comprehensive Income:
Profit/(loss) for the period	-	-	-	10,430	(1,152)	9,278
Transactions with owners, recorded directly to equity:
Dividend paid in the period	-	-	-	(4,781)	-	(4,781)
Ordinary shares issued from treasury	-	214	-	767	-	981
Ordinary shares bought back into treasury	-	-	-	(805)	-	(805)
Balance at 29 February 2020	10,335	20,207	31,482	222,136	(39,908)	244,252

For the year ended 31 August 2020 (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 2019	10,335	19,993	31,482	216,525	(38,756)	239,579
Total Comprehensive Income:
Profit/(loss) for the year	-	-	-	55,649	(2,225)	53,424
Transactions with owners, recorded directly to equity:
Dividend paid in the year	-	-	-	(9,547)	-	(9,547)
Ordinary shares issued from treasury	-	441	-	1,131	-	1,572
Ordinary shares bought back into treasury	-	-	-	(1,131)	-	(1,131)
Balance at 31 August 2020	10,335	20,434	31,482	262,627	(40,981)	283,897

The notes below form part of these Financial Statements

BALANCE SHEET AS AT 28 FEBRUARY 2021

	Notes	(Unaudited)  At 28 February   2021  £'000	(Unaudited) At 29 February 2020 £'000	(Audited) At 31 August 2020 £'000
Non-current assets
Investments held at fair value through profit or loss		321,573	234,980	302,223
		321,573	234,980	302,223
Current assets
Receivables		5,218	4,844	161
Cash and cash equivalents		-	8,014	324
		5,218	12,858	485
Total assets		326,791	247,838	302,708
Current liabilities
Borrowings		(9,134)	(407)	(18,096)
Payables		(1,059)	(3,179)	(715)
		(10,193)	(3,586)	(18,811)
Net assets		316,598	244,252	283,897
Equity attributable to equity holders
Called up share capital		10,335	10,335	10,335
Share premium account		28,253	20,207	20,434
Capital redemption reserve		31,482	31,482	31,482
Capital reserves	5	288,856	222,136	262,627
Revenue reserve		(42,328)	(39,908)	(40,981)
Total equity		316,598	244,252	283,897
NAV per Ordinary share (pence)	6	775.73p	635.64p	738.61p

The notes below form part of these Financial Statements.

CASH FLOW STATEMENT

	(Unaudited) For the six months   ended  28 February 2021  £'000	(Unaudited) For the six months   ended  29 February 2020  £'000	(Audited) For the year  ended  31 August 2020  £'000
Cash flows from operating activities
Profit before tax	19,109	9,349	53,594
Adjustments for:
(Increase)/decrease in investments	(19,350)	2,380	(64,863)
(Increase)/decrease in receivables	(5,057)	(2,228)	2,455
Increase/(decrease) in payables	344	1,896	(568)
Taxation	(77)	(71)	(170)
Net cash (outflow)/inflow generated from operating activities	(5,031)	11,326	(9,552)
Ordinary shares bought back into treasury	-	(805)	(1,131)
Ordinary shares issued from treasury	19,356	981	1,572
Dividend paid	(5,687)	(4,781)	(9,547)
Net cash generated/(used) in financing activities	13,669	(4,605)	(9,106)
Net increase/(decrease) in cash and cash equivalents	8,638	6,721	(18,658)
Cash and cash equivalents at beginning of period	(17,772)	886	886
Cash and cash equivalents at period end	(9,134)	7,607	(17,772)

The notes below 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 2020. 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 2021 and 29 February 2020 comprises non-statutory accounts within the meaning of Sections 434 - 436 of the Companies Act 2006. The financial information for the year ended 31 August 2020 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 2021. Considering the impact of Covid-19 and the continuation vote to take place in December 2021, 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 and uncertainties remained unchanged to those described in the Annual Report for the year ended 31 August 2020. 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 2020.

2. Income

	(Unaudited) For the six months ended 28 February 2021 £'000	(Unaudited) For the six months ended 29 February 2020 £'000	(Audited) For the year ended 31 August 2020 £'000
Revenue:
Income from investments held at fair value through profit or loss:
Unfranked dividends	538	481	1,128
Other income:
Bank interest	-	5	6
	538	486	1,134

3. Net earnings/(losses) per Ordinary share

	(Unaudited)  For the six   months ended  28 February 2021	(Unaudited)  For the six   months ended  29 February 2020	(Audited)  For the year  ended  31 August 2020
Net revenue loss (£'000)	(1,347)	(1,152)	(2,225)
Net capital profit (£'000)	20,379	10,430	55,649
	19,032	9,278	53,424
Weighted average number of Ordinary shares in issue*	39,718,111	38,530,405	38,458,263
Revenue loss per Ordinary share	(3.39)p	(2.99)p	(5.79)p
Capital profit per Ordinary share	51.31p	27.07p	144.70p
Total earnings per Ordinary share	47.92p	24.08p	138.91p

* Excluding those held in treasury (28 February 2021: 529,846; 31 August 2020: 2,905,846; 29 February 2020: 2,916,476).

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 2020.

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 2021, the Company's investment portfolio and derivative financial instruments were categorised as follows:

	(Unaudited) At 28 February 2021 £'000	(Unaudited) At 29 February 2020 £'000	(Audited) At 31 August 2020 £'000
Level 1	287,482	200,089	266,947
Level 2	-	-	-
Level 3	34,091	34,891	35,276
Total	321,573	234,980	302,223

There have been no transfers between Levels 1, 2 or 3 during the period (period ended 29 February 2020 and year ended 31 August 2020: 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 2021 £'000	(Unaudited) At 29 February 2020 £'000	(Audited) At 31 August 2020 £'000
Capital reserve - on investments sold	264,131	204,718	212,762
Capital reserve - on investments held	24,725	17,418	49,865
	288,856	222,136	262,627

6. NAV per Ordinary share

	(Unaudited) At 28 February 2021	(Unaudited) At 29 February 2020	(Audited) At 31 August 2020
Net assets attributable to Ordinary Shareholders (£'000)	316,598	244,252	283,897
Ordinary shares in issue at end of period*	40,812,817	38,426,187	38,436,817
NAV per Ordinary share	775.73p	635.64p	738.61p

*Excludes those held in treasury (28 February 2021: 529,846; 31 August 2020: 2,905,846; 29 February 2020: 2,916,476).

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 2021.

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 2020. Following the investment into the SV Fund VI venture capital 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 2021	(Unaudited) At 29 February 2020	(Audited) At 31 August 2020
Management Fee paid through SV Fund VI	193,423	225,806	416,522
Management fees paid by the Company directly to the Fund Manager	1,189,500	844,521	1,878,538
Total	1,382,923	1,070,327	2,295,060

No performance fee has been accrued as at 28 February 2021 (29 February 2020: £nil; 31 August 2020: £243,000).

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 2021 was £91,100 (29 February 2020: £66,500), of which £43,750 (29 February 2020: £32,250) 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 2021 will be posted to Shareholders in May 2021. 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 2021 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

 

 

IR IJMATMTITBRB