Half-year Report
LONDON STOCK EXCHANGE ANNOUNCEMENT
The Biotech Growth Trust PLC (the “Company”)
Unaudited Half Year Results For The Six Months Ended
30 September 2020
This Announcement is not the Company’s Half Year Report & Accounts. It is an abridged version of the Company’s full Half Year Report & Accounts for the six months ended 30 September 2020. The full Half Year Report & Accounts, together with a copy of this announcement, will shortly be available on the Company’s website at www.biotechgt.com where up to date information on the Company, including daily NAV, share prices and fact sheets, can also be found.
The Company's Half Year Report & Accounts for the six months ended 30 September 2020 has been submitted to the UK Listing Authority, and will shortly be available for inspection on the National Storage Mechanism (NSM) at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
For further information please contact: Mark Pope, Frostrow Capital LLP 020 3008 4913
Chairman’s Statement
Andrew Joy
Introduction and Results
In July, at the time of my statement in the Company’s Annual Report, I reflected that the Covid-19 pandemic had dealt a profound shock to the world in health, economic and political terms. While we are still far from clear on the long-term effects of the crisis, it has clearly reminded everybody of the critical importance and value to society of advances in medical science, not least in biotechnology. The strength and resilience of biotechnology stocks that became evident in March, in both absolute terms and relative to other sectors of the stock market, is testimony to this and has afforded a favourable environment for the Company’s performance. This has reinforced the already strong impetus from the new era of scientific research and discovery in the field of biotechnology, which is now being translated into new drugs and treatments by companies of the sort the Company invests in.
Not only has the sector performed well, but I am delighted to say that the Company has also handsomely outperformed the sector. In the six months to 30 September the Company’s net asset value (NAV) per share total return was 48.6% and the share price total return was 66.6%. This compares to a rise of 20.5% in the Company’s benchmark, the NASDAQ Biotechnology Index, measured in sterling terms. A number of factors contributed to this strong outperformance: the portfolio is significantly overweight compared to the benchmark in emerging as opposed to mature biotech companies; it is overweight in emerging markets, particularly China where our Portfolio Manager OrbiMed has been active for 11 years; the Company took advantage of continuing sector mergers & acquisitions (M&A), for example when Gilead Sciences announced in September it would acquire Immunomedics at more than double its undisturbed share price; and OrbiMed have used their expertise and access as an investor in unquoted biotech stocks to make several “crossover” investments in names which have subsequently gone, or are expected to go, public at a very significant premium to the Company’s entry price.
As a result of the Company’s strong outperformance of the benchmark, OrbiMed have earned a significant performance fee which is fully accrued in the Company’s daily NAV, albeit it only becomes payable if the outperformance is maintained for twelve months.
The very strong absolute and relative performance of the portfolio are testament to OrbiMed’s stockpicking skills. OrbiMed have agreed with the Board a strategy which encourages OrbiMed to pursue opportunities in which it has conviction, irrespective of their weighting in the benchmark index. The Company’s “Active Share” percentage, representing the proportion of the portfolio that differs from the benchmark, rose to 77.7% at the period end, the highest level seen in recent times. Shareholders should bear in mind that coming with the opportunity for very significant outperformance, as demonstrated in this six months, is the potential for enhanced volatility.
The Company’s gearing, which reduced slightly to 7.5% at the half year end from 9.0% at the beginning of the period, contributed 2.7% to the Company’s overall return in the period. As at 12 November 2020 the level of gearing stood at 7.0%. Sterling appreciated by 4.3% against the U.S. dollar over the period; the U.S. dollar being the currency in which the majority of the Company’s investments are denominated.
Discount and Premium Management
Shareholders will be aware that having pursued an active policy during most of the last financial year of buying back shares, when the discount of the Company’s share price to its net asset value per share was higher than 6%, the Board decided in March 2020 that it would be in the best interests of shareholders to suspend share buybacks as a result of extreme market volatility. At 31 March 2020, the Company’s year-end, the discount stood at 12.7% but subsequently it narrowed considerably and, while the Company’s share price stood at a 2.2% discount at the half-year end, it traded at a premium at times both during the latter part of half year and also since that date. This enabled the Company to issue a total of 480,000 new shares at an average premium of 1.1% to the Company’s cum income net asset value per share during the six months under review, raising £6.2m of additional funds. Subsequent to the half year end, to 12 November 2020, a further 625,500 new shares have been issued, at an average premium of 1.2% to the Company’s cum income net asset value per share, raising £8.9m of additional funds. As at 12 November 2020 there were 40,309,769 shares in issue and the share price traded at a 0.7% premium to the Company’s net asset value per share.
Continuation Vote
Shareholders will be aware that the Company’s articles provide that every five years there will be a continuation vote resolution tabled at the Annual General Meeting falling in that year. Accordingly, such a resolution was proposed to shareholders at the Company’s Annual General Meeting held in July. I am pleased to confirm that the resolution was passed by a significant majority, with 99.9% of the votes received being in favour.
Outlook
The Company’s strong performance has continued since 30 September with further significant outperformance against the NASDAQ Biotechnology Index in October.
Since the end of September there has also been the US Presidential election. The outcome, of a Democrat president and either a Republican Senate or a 50:50 Senate, for the reasons given by the Portfolio Manager in its report, is considered to be favourable for valuation of the healthcare sector on the Stock Market.
With a skilled Portfolio Manager and a favourable long-term backdrop as discussed above, your Board believes that long-term investors will be well rewarded.
Andrew Joy
Chairman
13 November 2020
Company Performance
Key Statistics
| As at 30 September 2020 |
As at 31 March 2020 |
% Change |
|
| Net asset value per share | 1,385.8p | 932.4p | +48.6% |
| Share price | 1,356.0p | 814.0p | +66.6% |
| Discount of share price to net asset value per share* | 2.2% | 12.7% | |
| Nasdaq Biotechnology Index – (sterling adjusted) “Benchmark” | 3,297.0 | 2,736.1 | +20.5% |
| Gearing* | 7.5% | 9.0% | |
| Ongoing charges* | 1.1% | 1.1% |
* Alternative Performance Measure (see glossary)
Portfolio Manager’s Review
Geoff Hsu
Performance
The Company’s net asset value (“NAV”) per share total return was +48.6% during the six-month period ended 30 September 2020. This compares to a 20.5% increase in the Company’s benchmark, the NASDAQ Biotechnology Index (measured on a sterling adjusted basis).
The review period began after a broad market selloff in March 2020 due to the COVID-19 pandemic impacting the U.S. and Europe. The ensuing six months saw a strong recovery in biotechnology stocks from the March lows as investors realised that biotechnology companies would not be as affected by the pandemic as other sectors of the economy. In addition, the sector enjoyed a sentiment boost as many companies in the biopharmaceutical industry began devoting significant resources to developing therapeutics and vaccines for the coronavirus. Investors bid up shares in select biotechnology companies with COVID-19-related programmes in the hopes those firms would find a breakthrough treatment or vaccine for the disease. The Company’s NAV reclaimed its pre-COVID-19 highs by the end of April and proceeded to make new highs through mid-July. The final two months of the review period saw the biotechnology sector largely consolidate its existing gains as investor concerns about a potential Democratic sweep in the U.S. election on 3 November began rising in prominence.
The Company’s strong outperformance during the review period was driven broadly by the portfolio’s emerging biotechnology positions, with particularly strong contributions from investments in initial public offerings (“IPOs”) and emerging markets.
COVID-19 Impact Manageable for the Biotechnology Industry
We remain optimistic that effective vaccines and treatments will be developed for COVID-19, with Phase 3 data from multiple vaccine candidates expected by the end of this year. Most of the leading COVID-19 vaccine players have already invested in sufficient manufacturing capacity to deliver hundreds of millions of doses by the end of 2021, so pending a positive Phase 3 result, we would expect significant progress on mass vaccination next year. Thus far, biotechnology companies have fared reasonably well throughout the COVID-19 pandemic. Most companies have continued operating as essential businesses, with minimal impact to sales of established drugs. Manufacturing supply has not really been affected, and the U.S. Food and Drug Administration (the “FDA”) has largely adhered to its drug review timelines. The only significant negative impacts from COVID-19 have been some clinical trial delays (given that many healthcare institutions paused commencement of new trials to deal with COVID-19 patient demand) and hurdles with new product launches (since it’s difficult to promote effectively to physicians when many of them are working from home). As physicians have reopened their clinics for in-person visits and hospitals have resumed normal operations, these negative factors have abated.
We have generally not invested in companies whose valuations are heavily dependent on COVID-19 programmes, as we believe most of them are overvalued relative to the expected future profits from those programmes. Politically, we believe it will be very difficult for companies to generate a substantial profit from COVID-19 vaccines or treatments in the midst of the current crisis. Pricing will have to be extremely reasonable (i.e., modest) in order for companies to avoid accusations of profiteering. It’s also unclear to us whether COVID-19 will really be a phenomenon that recurs every year or one that fades away like previous virus outbreaks. Having said that, we think that COVID-19 does present an excellent opportunity for the biopharmaceutical industry to burnish its public image and demonstrate it can deliver significant value to society in a responsible way.
Robust IPO and Crossover Market
Throughout the COVID-19 pandemic, the IPO market for biotechnology companies has remained robust. Consistent with the Company’s strategy of investing in companies with the most innovative and novel technologies, we have been extremely active in participating in biotechnology IPOs, as these younger emerging companies are frequently at the forefront of the latest advances in drug development. During the review period, the Company participated in 20 IPOs, which have generally performed strongly in the after-market. Many of the stronger performers have been in the precision oncology sector – companies developing therapeutics that target tumours with specific genetic mutations (Relay Therapeutics, Prelude Therapeutics, Repare Therapeutics). Other novel technologies represented by these IPOs include antibody-mediated targeting of RNA-based therapeutics for muscle diseases (Dyne Therapeutics, Avidity Biosciences), gene therapy for hearing disorders (Akouos), and selective protein degradation to treat cancer and autoimmune diseases (Kymera Therapeutics, Nurix Therapeutics). Because our deal allocation in each IPO is typically less than 1.0% of NAV, our high participation rate in IPOs has resulted in an expansion in the number of names in the portfolio.
In addition to IPO investments, the Company has remained active in making crossover investments, i.e., investments in a company’s last private round prior to an IPO. The Company made six crossover investments during the review period, including investments in both U.S. and Chinese companies. OrbiMed’s longstanding venture capital businesses in both the U.S. and China continue to give us strong deal flow in this area. At 30 September 2020, 3.8% of the Company’s NAV was invested in crossovers. The Company’s current investment guidelines cap the proportion of unquoted investments at 10% of the Company’s gross assets, and the aggregate NAV allocated to crossovers will be dictated by the opportunity set we see at any given time. Generally speaking, we expect companies in which we’ve made a crossover investment to go public within six to twelve months, so new crossover investments are made as existing crossovers “graduate” to become public companies. Overall, we find crossover investments to provide some of the best risk/return characteristics in the investment landscape today. Three crossover investments executed successful IPOs during the review period: Keros Therapeutics, a company developing novel treatments targeting the TGF-? pathway for haematologic and musculoskeletal disorders; PMV Pharma, a precision oncology company developing first-in-class p53 regulators for cancer; and Burning Rock Biotech, the leading “liquid biopsy” company in China with a technology that allows cancer mutations to be detected from a patient’s blood sample.
Mergers and Acquisitions (M&A) Continues Despite COVID-19
Despite the fact that most management teams are working remotely, it has been encouraging to see that M&A transactions have still been occurring in the biotechnology sector. Selected transactions during the review period include Sanofi’s U.S.$3.68 bn acquisition of Principia Biopharma, Johnson & Johnson’s US$6.5 bn acquisition of Momenta Pharmaceuticals, and Gilead Sciences’ U.S.$21 bn acquisition of Immunomedics. The Company benefited directly from two of these transactions, with direct holdings in Principia Biopharma and Immunomedics. Our Immunomedics investment (4.95% of NAV prior to deal announcement) was the top single stock contributor for the period. The fact that outright acquisitions are still occurring under COVID-19 lockdown conditions shows how significant the appetite is among larger biopharmaceutical companies for the innovative assets and platform technologies offered by emerging biotech.
Capitalising on the Rise of Chinese Biotechnology
We have highlighted previously the tremendous innovation we are now seeing in emerging markets, especially in China. Given our local research team based in Shanghai and Hong Kong, we continue to be active in making investments in Chinese biotechnology companies. New investments in emerging markets during the review period include Akeso, a Chinese antibody company with a deep pipeline of therapeutics in oncology and autoimmune diseases; I-Mab, a Chinese biotechnology company developing fast-to-market and best-in-class biologics; and Harbour Biomed, a Chinese company with rights to a novel FcRn antibody for myasthenia gravis. While tensions between the U.S. and China have escalated in recent months, we believe our Chinese portfolio positions are well-insulated from those dynamics since they consist of Chinese companies primarily serving the domestic China market. Our exposure to emerging markets also helps diversify the portfolio away from some of the short-term volatility risk that may occur with U.S. political developments. At 30 September 2020, emerging markets positions represented 12% of the Company’s NAV. There is no formal cap on the proportion of emerging markets investments that can be made in the Company and the ultimate allocation to these geographies will be dictated by our bottom-up evaluation of individual companies.
Contributors to Performance
The principal contributors to performance during the review period were Immunomedics, Forte Biosciences, CRISPR Therapeutics, Turning Point Therapeutics, and Burning Rock Biotech.
· Immunomedics is an emerging biotechnology company developing antibody-drug conjugate therapies for cancer. Its lead product Trodelvy garnered FDA approval in April for triple-negative breast cancer. The stock moved up significantly in September when Gilead Sciences announced that it would acquire Immunomedics for U.S.$21 bn, representing a 108% premium to Immunomedics’ last closing share price.
· Forte Biosciences is an emerging biotechnology company developing a live biotherapeutic, FB-401, for the treatment of inflammatory skin diseases. The Company participated in a private placement in the company concurrent with a reverse merger into a public shell, and the shares performed strongly after the reverse merger closed.
· CRISPR Therapeutics is a leading gene editing company that has pioneered the use of CRISPR technology in patients. The company has shown strong initial clinical data in both sickle cell disease and beta thalassemia patients, suggesting their CTX001 gene editing approach could be a functional cure in these patients. The shares appreciated due to positive data at the European Hematology Association conference and anticipation of initial data from their gene edited allogeneic CAR-T platform prior to year-end.
· Turning Point Therapeutics is a precision oncology company developing a number of targeted therapies for cancer. The stock rose in anticipation of data at the EORTC-NCI-AACR conference in October.
· Burning Rock Biotech is a leading diagnostics company in China specialising in liquid biopsy, a technology that allows one to identify genetic mutations of a patient’s cancer from a blood sample. The Company participated in a crossover round in the company and a subsequent IPO on NASDAQ and shares appreciated after the IPO.
Detractors from Performance
The principal detractors from performance were Theravance Biopharma, Applied Therapeutics, Biogen, Avrobio, and Gilead Sciences.
· Theravance Biopharma is a biopharmaceutical company specialising in the discovery and development of organ-selective medicines. The company offers Yupelri, a once-daily, nebulised long-acting muscarinic antagonist used for the treatment of chronic obstructive pulmonary disease (“COPD”) and receives royalties from GlaxoSmithKline’s triple combination therapy, Trelegy, which is approved in both COPD and asthma. The company’s pipeline includes TD-1473, a gut-selective pan-janus kinase (JAK) inhibitor that is in a Phase IIb/III clinical trial for the treatment of ulcerative colitis and TD-8236, an inhaled lung-selective pan-JAK inhibitor, which is in a Phase II trial for asthma. Theravance’s shares pulled back over the period due to increased concern around respiratory drug launches during the COVID-19 pandemic as well as delayed pipeline readouts for TD-1473 and TD-8236. We think that these risks are overly discounted in the current share price.
· Applied Therapeutics shares underperformed as an anonymous short report circulated calling into question the company’s lead pipeline product, AT-007, under development for the treatment of the rare metabolic disease galactosemia. We believe many of the concerns raised in the short report were unfounded or misstatements of the data, and continue to expect AT-007 to be approved in 2021 and become a cornerstone of galactosemia treatment.
· Biogen is a major biotechnology company with a portfolio of drugs in the areas of neurology, oncology and immunology. The company’s main products include Tecfidera for multiple sclerosis and Spinraza for the treatment of spinal muscular atrophy. The company is also developing aducanumab, an investigational human monoclonal antibody for the treatment of Alzheimer’s disease, which is currently under FDA review. Biogen shares underperformed over the period after a district court ruled that the key patent protecting Tecfidera was invalid, allowing generic companies to begin competing.
· Avrobio is a gene therapy company targeting a variety of rare lysosomal storage diseases including Fabry Disease and Gaucher Disease. The shares pulled back over the review period despite announcing positive updates for their programs. Investors have been debating whether the company’s gene therapies are sufficiently superior to current enzyme replacement therapies to merit widespread commercial adoption.
· Gilead Sciences is a large-capitalisation biotechnology company specialising in developing drugs in oncology, hepatology and immunology. Gilead shares underperformed after its COVID-19 antiviral treatment remdesivir showed modest results in clinical trials. Shares have also been under pressure due to commercial challenges in their HIV and hepatitis C businesses caused by COVID-19.
Outlook and Election Impact
In recent months, the dominant concern of investors with regards to the biotechnology sector has been the presidential election in the U.S., which took place on 3 November. In particular, investors were concerned that a Democratic sweep with former Vice President Joe Biden winning the presidency and the Democrats taking control of both houses of Congress could lead to aggressive drug pricing legislation that could curtail future biotech profitability. As of this writing, Biden has won the presidency but the Senate outcome remains undetermined. It appears based on vote counts thus far that the Republicans will have at least 50 seats in the Senate, with 2 seats in Georgia to be adjudicated in a run-off election in early January.
If the Democrats win both seats in Georgia, the Senate would be split evenly 50-50 between Republicans and Democrats, with Vice President Kamala Harris casting a tie-breaking vote in favor of the Democrats. Thus, any Democratic majority in the Senate would be extremely thin and unlikely to be significant enough to pass progressive drug pricing legislation. Ultimately, we believe any drug legislation that is passed will be incremental and manageable for the industry. Historically speaking, when there have been political overhangs in the past, there is frequently a relief rally when investors realise their concerns were overblown. We expect a similar dynamic once the Georgia Senate seats have been determined.
Aside from the political overhang, all of the positive investment themes we have outlined previously for the biotechnology sector remain intact: significant innovation (including in China), continued M&A, a friendly regulatory environment, and reasonable valuations. For the long-term investor, we firmly believe biotechnology remains a great place to invest.
OrbiMed Update
Given the rich opportunity set we are now seeing in the biotechnology sector, we have continued to expand our research team to comprehensively cover the biotechnology universe. Over the past few months, two additional biotechnology analysts have joined OrbiMed’s research team, both of whom have PhD degrees in the sciences. An additional analyst was also hired for our Hong Kong office, who will start by year-end. We will continue to expand our research team appropriately to identify the best investment opportunities in this exciting sector. Our professionals continue to work from home for the time being, but as demonstrated by the Company’s strong performance this year, we have not noticed any significant impairment in our ability to research stocks and manage the portfolio thus far.
Geoff Hsu
OrbiMed Capital LLC
Portfolio Manager
13 November 2020
Investment Portfolio
Investments held as at 30 September 2020
| Fair value | % of | ||
| Security | Country/Region | £000 | investments |
| Horizon Therapeutics | United States | 28,280 | 4.8 |
| Forte Biosciences+ | United States | 26,884 | 4.6 |
| Neurocrine Biosciences | United States | 25,238 | 4.3 |
| Biogen | United States | 24,319 | 4.1 |
| Vertex Pharmaceuticals | United States | 21,608 | 3.6 |
| Burning Rock Biotech | China | 21,130 | 3.6 |
| Turning Point Therapeutics | United States | 19,973 | 3.4 |
| Alexion Pharmaceuticals | United States | 18,887 | 3.2 |
| Amgen | United States | 17,976 | 3.0 |
| Acceleron Pharma | United States | 17,461 | 2.9 |
| Ten largest investments | 221,756 | 37.5 | |
| CRISPR Therapeutics | Switzerland | 14,622 | 2.5 |
| Hansoh Pharmaceutical | China | 14,522 | 2.5 |
| Mirati Therapeutics | United States | 13,895 | 2.3 |
| Zymeworks | Canada | 12,282 | 2.1 |
| Sarepta Therapeutics | United States | 12,231 | 2.1 |
| Keros Therapeutics | United States | 12,202 | 2.1 |
| HBM (unquoted) | United States | 11,329 | 1.9 |
| Trillium Therapeutics | Canada | 10,646 | 1.8 |
| Athenex | United States | 10,164 | 1.7 |
| MeiraGTx | United States | 10,089 | 1.7 |
| Twenty largest investments | 343,738 | 58.2 | |
| Agios Pharmaceuticals | United States | 9,925 | 1.7 |
| Theravance Biopharma | United States | 9,817 | 1.7 |
| Applied Therapeutics | United States | 9,426 | 1.6 |
| Gilead Sciences | United States | 9,387 | 1.6 |
| Heron Therapeutics | United States | 9,320 | 1.6 |
| Arcturus Therapeutics | United States | 8,569 | 1.4 |
| Flexion Therapeutics | United States | 8,378 | 1.4 |
| Xenon Pharmaceuticals | Canada | 8,322 | 1.4 |
| Vaxcyte | United States | 8,025 | 1.3 |
| PMV Pharmaceuticals | United States | 7,307 | 1.2 |
| Thirty largest investments | 432,214 | 73.1 | |
| Yisheng Biopharma 3.50% 07/10/2023 (unquoted)^ | China | 7,193 | 1.2 |
| Syndax Pharmaceuticals | United States | 7,176 | 1.2 |
| Exelixis | United States | 6,888 | 1.2 |
| Avrobio | United States | 6,694 | 1.1 |
| Adverum Biotechnologies | United States | 6,381 | 1.1 |
| NanoString Technologies | United States | 6,327 | 1.1 |
| Celldex Therapeutics | United States | 6,188 | 1.1 |
| I-Mab | China | 6,058 | 1.0 |
| Prelude Therapeutics | United States | 5,833 | 1.0 |
| Aurinia Pharmaceuticals | Canada | 5,514 | 0.9 |
| Forty largest investments | 496,466 | 84.0 |
+ Includes 587,315 warrants, fair value £16,939,000
^ Convertible bond
All of the above investments are equities unless otherwise stated.
| Fair value | % of | ||
| Security | Country/Region | £000 | investments |
| Iovance Biotherapeutics | United States | 5,453 | 0.9 |
| Alphamab Oncology | China | 5,344 | 0.9 |
| Deciphera Pharmaceuticals | United States | 5,282 | 0.9 |
| JHBP | Hong Kong | 4,991 | 0.8 |
| Aptose Biosciences | Canada | 4,152 | 0.7 |
| Prothena | Ireland | 3,990 | 0.7 |
| Relay Therapeutics | United States | 3,970 | 0.7 |
| Pandion Therapeutics | United States | 3,864 | 0.7 |
| Arena Pharmaceuticals | United States | 3,858 | 0.6 |
| Mersana Therapeutics | United States | 3,833 | 0.6 |
| Fifty largest investments | 541,203 | 91.5 | |
| ACADIA Pharmaceuticals | United States | 3,414 | 0.6 |
| Verona Pharma | United Kingdom | 3,218 | 0.5 |
| Annexon | United States | 3,090 | 0.5 |
| Graybug Vision | United States | 3,022 | 0.5 |
| ORIC Pharmaceuticals | United States | 3,008 | 0.5 |
| IMARA | United States | 2,950 | 0.5 |
| Inozyme Pharma | United States | 2,826 | 0.5 |
| Nurix Therapeutics | United States | 2,801 | 0.5 |
| Akeso | China | 2,687 | 0.5 |
| OrbiMed Asia Partners L.P. (unquoted)* | Asia | 2,387 | 0.4 |
| Sixty largest investments | 570,606 | 96.5 | |
| Galecto (unquoted) | United States | 2,361 | 0.4 |
| Milestone Pharmaceuticals | Canada | 2,184 | 0.4 |
| CanSino Biologics | China | 2,048 | 0.4 |
| Akouos | United States | 1,929 | 0.3 |
| Dyne Therapeutics | United States | 1,899 | 0.3 |
| AnaptysBio | United States | 1,863 | 0.3 |
| InflaRx | Germany | 1,819 | 0.3 |
| Guardant Health | United States | 1,719 | 0.3 |
| Repare Therapeutics | Canada | 1,197 | 0.2 |
| Curis | United States | 1,124 | 0.2 |
| Seventy largest investments | 588,749 | 99.6 | |
| Fusion Pharmaceuticals | Canada | 948 | 0.2 |
| Kymera Therapeutics | United States | 855 | 0.1 |
| Avidity Biosciences | United States | 457 | 0.1 |
| Calliditas Therapeutics | Sweden | 108 | – |
| Total Investments | 591,117 | 100.0 |
* Partnership interest.
All of the above investments are equities unless otherwise stated.
Portfolio Breakdown
| Fair value | % of | |
| Investments | £000 | investments |
| Quoted | ||
| Equities | 550,908 | 93.2 |
| Total quoted investments | 550,908 | 93.2 |
| Unquoted | ||
| Equities | 13,690 | 2.3 |
| Warrants | 16,939 | 2.9 |
| Bond | 7,193 | 1.2 |
| Partnership interest | 2,387 | 0.4 |
| Total unquoted investments | 40,209 | 6.8 |
| Total investments | 591,117 | 100.0 |
Principal Contributors to and Detractors from Net Asset Value Performance
For the Six Months ended 30 September 2020
Top Five Contributors
| Contribution for the Six months ended 30 September 2020 £000 |
Contribution per share (pence)* |
|
| Immunomedics+ | 36,853 | 93.6 |
| Forte Biosciencs* | 30,265 | 76.9 |
| CRISPR Therapeutics | 9,706 | 24.7 |
| Turning Point Therapeutics | 9,447 | 24.0 |
| Burning Rock Biotech | 8,448 | 21.5 |
| 94,719 | 240.7 |
+ not held in the portfolio as at 30 September 2020
* includes warrants
Top Five Detractors
| Contribution for the Six months ended 30 September 2020 £000 |
Contribution per share (pence)* |
|
| Theravance Biopharma | (5,880) | (14.9) |
| Applied Therapeutics | (5,493) | (14.0) |
| Biogen | (3,637) | (9.2) |
| Avrobio | (1,525) | (3.9) |
| Gilead Sciences | (1,421) | (3.6) |
| (17,956) | (45.6) |
* based on 39,373,690 shares being the weighted average number of shares in issue during the six month period ended 30 September 2020
Source: Frostrow Capital LLP
Condensed Income Statement
for the six months ended 30 September 2020
| (Unaudited) | (Unaudited) | (Audited) | ||||||||
| Six months ended | Six months ended | Year ended | ||||||||
| 30 September 2020 | 30 September 2019 | 31 March 2020 | ||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | ||
| Notes | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| Investment Income | ||||||||||
| Investment income | 2 | 490 | – | 490 | 649 | – | 649 | 1,313 | – | 1,313 |
| Total income | 490 | – | 490 | 649 | – | 649 | 1,313 | – | 1,313 | |
| Gains/(losses) on investments | ||||||||||
| Gains/(losses) on investments held at fair value through profit or loss | – | 197,215 | 197,215 | – | (18,897) | (18,897) | – | 67,624 | 67,624 | |
| Exchange gains/(losses) on currency balances | – | 1,973 | 1,973 | – | (1,697) | (1,697) | – | (2,982) | (2,982) | |
| Expenses | ||||||||||
| AIFM, Portfolio management and performance fees | 3 | (185) | (20,843) | (21,028) | – | (1,752) | (1,752) | – | (3,629) | (3,629) |
| Other expenses | (235) | – | (235) | (307) | – | (307) | (651) | – | (651) | |
| Profit/(loss) before finance costs and taxation | 70 | 178,345 | 178,415 | 342 | (22,346) | (22,004) | 662 | 61,013 | 61,675 | |
| Finance costs | (6) | (116) | (122) | – | (317) | (317) | – | (580) | (580) | |
| Profit/(loss) before taxation | 64 | 178,229 | 178,293 | 342 | (22,663) | (22,321) | 662 | 60,433 | 61,095 | |
| Taxation | (68) | – | (68) | (97) | – | (97) | (196) | – | (196) | |
|
Profit/(loss) for the period/year |
(4) | 178,229 | 178,225 | 245 | (22,663) | (22,418) | 466 | 60,433 | 60,899 | |
|
Basic and diluted earnings/(loss) per share |
4 | 0.0p | 452.7p | 452.7p | 0.5p | (47.1)p | (46.6)p | 1.0p | 133.9p | 134.9p |
The Company does not have any income or expenses which are not included in the profit or loss for the period. Accordingly the “profit for the period” is also the “Total Comprehensive Income for the period”, as defined in IAS 1 (revised) and no separate Statement of Comprehensive Income has been presented.
All of the profit and total comprehensive income for the period is attributable to the owners of the Company.
The “Total” column of the statement is the Company’s Income Statement, prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the EU.
The “Revenue” and “Capital” columns are supplementary to this and are prepared under guidelines published by the Association of Investment Companies.
All items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.
The financial statements for the six months ended 30 September 2020 have not been audited by the Company’s auditors.
Condensed Statement of Changes in Equity
(Unaudited) Six months ended 30 September 2020
| Ordinary | Share | Capital | ||||
| Share | premium | redemption | Capital | Revenue | ||
| capital | account | reserve | reserve | reserve | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| At 31 March 2020 | 9,802 | 43,021 | 12,997 | 300,099 | (346) | 365,573 |
| Net profit/(loss) for the period | – | – | – | 178,229 | (4) | 178,225 |
| Issue of new shares | 120 | 6,056 | – | – | – | 6,176 |
| At 30 September 2020 | 9,922 | 49,077 | 12,997 | 478,328 | (350) | 549,974 |
(Unaudited) Six months ended 30 September 2019
| Ordinary | Share | Capital | ||||
| Share | premium | redemption | Capital | Revenue | ||
| capital | account | reserve | reserve | reserve | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| At 31 March 2019 | 12,992 | 43,021 | 9,807 | 343,868 | (812) | 408,876 |
| Net (loss)/profit for the period | – | – | – | (22,663) | 245 | (22,418) |
| Repurchase of own shares for | ||||||
| cancellation | (1,558) | – | 1,558 | (46,598) | – | (46,598) |
| At 30 September 2019 | 11,434 | 43,021 | 11,365 | 274,607 | (567) | 339,860 |
(Audited) Year ended 31 March 2020
| Ordinary | Share | Capital | ||||
| Share | premium | redemption | Capital | Revenue | ||
| capital | account | reserve | reserve | reserve | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| At 31 March 2019 | 12,992 | 43,021 | 9,807 | 343,868 | (812) | 408,876 |
| Net profit for the year | – | – | – | 60,433 | 466 | 60,899 |
| Repurchase of own shares for cancellation | (3,190) | – | 3,190 | (104,202) | – | (104,202) |
| At 31 March 2020 | 9,802 | 43,021 | 12,997 | 300,099 | (346) | 365,573 |
Condensed Statement of Financial Position
as at 30 September 2020
| (Unaudited) | (Unaudited) | (Audited) | ||
| 30 September | 30 September | 31 March | ||
| 2020 | 2019 | 2020 | ||
| Notes | £000 | £000 | £000 | |
| Non current assets | ||||
| Investments held at fair value through profit or loss | 591,117 | 369,668 | 398,657 | |
| Current assets | ||||
| Other receivables | 8,643 | 7,118 | 2,532 | |
| 8,643 | 7,118 | 2,532 | ||
| Total assets | 599,760 | 376,786 | 401,189 | |
| Current liabilities | ||||
| Other payables | 25,400 | 10,484 | 2,879 | |
| Loan facility | 24,386 | 26,442 | 32,737 | |
| 49,786 | 36,926 | 35,616 | ||
| Net assets | 549,974 | 339,860 | 365,573 | |
| Equity attributable to equity holders | ||||
| Ordinary share capital | 9,922 | 11,434 | 9,802 | |
| Share premium account | 49,077 | 43,021 | 43,021 | |
| Capital redemption reserve | 12,997 | 11,365 | 12,997 | |
| Capital reserve | 478,328 | 274,607 | 300,099 | |
| Revenue reserve | (350) | (567) | (346) | |
| Total equity | 549,974 | 339,860 | 365,573 | |
| Net asset value per share | 5 | 1,385.8p | 743.1p | 932.4p |
Condensed Statement of Cash Flows
for the six months ended 30 September 2020
| (Unaudited) | (Unaudited) | (Audited) | |
| Six months ended | Six months ended | Year ended | |
| 30 September | 30 September | 31 March | |
| 2020 | 2019 | 2020 | |
| £000 | £000 | £000 | |
| Operating activities | |||
| Profit/(loss) before taxation | 178,293 | (22,321) | 61,095 |
| Add back interest expense | 122 | 317 | 580 |
| (Gains)/losses on investments held at fair value through profit & loss | (197,215) | 18,897 | (67,624) |
| Exchange (gains)/losses on currency balances | (1,973) | 1,697 | 2,982 |
| Increase in other receivables | (33) | (18) | (17) |
| Increase/(decrease) in other payables | 18,952 | (112) | (5) |
| Net cash outflow from operating activities before interest payable and taxation | (1,854) | (1,540) | (2,989) |
| Interest expense | (122) | (317) | (580) |
| Tax paid | (68) | (97) | (196) |
| Net cash outflow from operating activities | (2,044) | (1,954) | (3,765) |
| Investing activities | |||
| Purchases of investments | (260,320) | (222,483) | (491,471) |
| Sales of investments and derivatives | 262,566 | 258,671 | 582,401 |
| Net cash inflow from investing activities | 2,246 | 36,188 | 90,930 |
| Financing activities | |||
| Repurchase of shares for cancellation | – | (48,138) | (106,079) |
| Issue of new shares | 6,176 | – | – |
| (Repayment)/drawdown from the loan facility | (6,378) | 13,904 | 18,914 |
| Net cash outflow from financing activities | (202) | (34,234) | (87,165) |
Changes in liabilities arising from financing activities
| (Unaudited) | (Unaudited) | (Audited) | |
| Six months ended | Six months ended | Year ended | |
| 30 September | 30 September | 31 March | |
| 2020 | 2019 | 2020 | |
| £000 | £000 | £000 | |
| Balance as at 31 March 2020 | 32,737 | 10,841 | 10,841 |
| Net cash flow | (6,378) | 13,904 | 18,914 |
| Exchange (gains)/losses on currency balances | (1,973) | 1,697 | 2,982 |
| 24,386 | 26,442 | 32,737 |
Notes to the Financial Statements
1.a) General Information
The Biotech Growth Trust PLC is a company incorporated and registered in England and Wales. The Company operates as an investment trust company within the meaning of Section 833 of the Companies Act 2006 and has made a successful application under Regulation 5 of the Investment Trust (Approved Company) (Tax) Regulations 2011 for investment trust status to apply to all accounting periods commencing on 1 April 2012.
1.b) Basis Of Preparation
The Company’s half year condensed financial statements for the six months ended 30 September 2020 have been prepared in accordance with IAS 34 “Interim Financial Reporting”. They do not include all the financial information required for the full annual financial statements and have been prepared using accounting policies adopted in the audited financial statements for the year ended 31 March 2020 with the exception of, the change made to the allocation of expenses and finance costs, with effect from 1 April 2020 the AIFM, Portfolio Management fees and finance costs, 95% of those fees were charged to Capital and 5% charged to Revenue. Prior to 1 April 2020, 100% of such fees and costs were charged to Capital.
Those financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the EU.
1.c) Segmental Reporting
IFRS 8 requires entities to define operating segments and segment performance in the financial statements based on information used by the Board of Directors. The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business.
In line with IFRS 8, a disclosure by geographical segment has been provided in note 10 of this report.
1.d) Going Concern
The Directors believe that it is appropriate to adopt the going concern basis in preparing the accounts as the assets of the Company consists mainly of securities that are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future. The next continuation vote of the Company will be held at the Annual General Meeting in 2025, and further opportunities to vote on the continuation of the Company will be given to shareholders every five years thereafter.
2. Income
| (Unaudited) | (Unaudited) | (Audited) | |
| Six months ended | Six months ended | Year ended | |
| 30 September | 30 September | 31 March | |
| 2020 | 2019 | 2020 | |
| £000 | £000 | £000 | |
| Investment income | |||
| Overseas dividend income | 453 | 649 | 1,313 |
| Fixed interest income | 37 | – | – |
| Total income | 490 | 649 | 1,313 |
3. AIFM, Portfolio Management and Performance Fees
| Total | Total | ||||||||
| (Unaudited) | (Unaudited) | Total | |||||||
| Six months | Six months | (Audited) | |||||||
| ended | ended | Year ended | |||||||
| 30 September | 30 September | 31 March | |||||||
| Revenue | Capital | 2020 | Revenue | Capital | 2019 | Revenue | Capital | 2020 | |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| AIFM fee | 39 | 732 | 771 | – | 528 | 528 | – | 1,086 | 1,086 |
| Portfolio management fee | 86 | 1,637 | 1,723 | – | 1,224 | 1,224 | – | 2,543 | 2,543 |
| Performance fee charge for the period/year* | – | 18,534 | 18,534 | – | – | – | – | – | – |
| 125 | 20,903 | 21,028 | – | 1,752 | 1,752 | – | 3,629 | 3,629 |
* During the six months ended 30 September 2020, due to strong outperformance against the Benchmark and in accordance with the performance fee arrangements of the Company’s 2020 Annual Report, a provision of £18,534,000 was made in the financial statements (six months ended 30 September 2019: £nil, March 2020: nil).
A performance fee only becomes payable to the extent that the cumulative outperformance gives rise to a total fee greater than the total of all performance fees paid to date. There were no performance fees payable as at 30 September 2020 (30 September 2019: £nil, 31 March 2020 £nil). The maximum amount that could become payable by 30 September 2021, assuming outperformance is maintained is £18,534,000.
Also during the period under review and in line with the revised accounting policy, the AIFM and Portfolio Management fees were allocated 5% to Revenue and 95% to Capital. For further details see note 1 of this report.
4. Basic and Diluted Earnings/(Loss) per Share
| (Unaudited) | (Unaudited) | (Audited) | |
| Six months ended | Six months ended | Year ended | |
| 30 September | 30 September | 31 March | |
| 2020 | 2019 | 2020 | |
| £000 | £000 | £000 | |
| The earnings/(loss) per share is based on the following figures: | |||
| Net revenue (loss)/gain | (4) | 245 | 466 |
| Net capital gain/(loss) | 178,229 | (22,663) | 60,433 |
| Net total gain/(loss) | 178,225 | (22,418) | 60,899 |
| Weighted average number of shares in issue during the period/year | 39,373,690 | 48,085,930 | 45,157,104 |
| Pence | Pence | Pence | |
| Revenue earnings per share | – | 0.5 | 1.0 |
| Capital earnings/(loss) per share | 452.7 | (47.1) | 133.9 |
| Total earnings/(loss) per share | 452.7 | (46.6) | 134.9 |
5. Net Asset Value per Share
The Net Asset Value per share is based on the net assets attributable to equity shareholders of £549,974,000 (30 September 2019: £339,860,000; 31 March 2020: £365,573,000) and on 39,687,269 shares (30 September 2019: 45,735,075; 31 March 2020: 39,207,269) being the number of shares in issue at the period end.
6. Transaction Costs
Purchase and sale transaction costs for the six months ended 30 September 2020 amounted to £530,000 (six months ended 30 September 2019: £546,000; year ended 31 March 2020: £1,060,000), broken down as follows: purchase transactions for the six months ended 30 September 2020 amounted to £259,000 (six months ended 30 September 2019: £320,000; year ended 31 March 2020: £548,000). Sale transactions amounted to £271,000 (six months ended 30 September 2019: £226,000; year ended 31 March 2020: £512,000). These costs comprise mainly commission.
7. Investments
IFRS 13 requires the Company to classify fair value measurements using the fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following three levels
· Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
· Level 2 – inputs other than quoted prices included with Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices), and
· Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs)
At 30 September 2020 the investment in OrbiMed Asia Partners LP Fund (the LP Fund), Galecto, HBM and Yisheng Biopharma have been classified as level 3. The LP Fund is valued quarterly by OrbiMed Advisors LLC and is audited annually by KPMG LLP. As the 30 September 2020 valuation is not yet available, the LP Fund has been valued at its net asset value as at 30 June 2020. It is believed that the value of the LP Fund as at 30 September 2020 will not be materially different.
If the value of the LP Fund was to increase or decrease by 10%, while other variables had remained constant, the return and net assets attributable to shareholders for the period ended 30 September 2020 would have increased/decreased by £239,000 (2019: £332,000). If during the same period, the values of Galecto, HBM and Yisheng Biopharma were to increase or decrease by 10%, the return and net assets attributable to shareholders would have increased or decreased by £2,088,000 (2019: £nil).
Forte Warrants have been classified as level 2 at period end. If the value of the warrants were to increase or decrease by 10%, the return and net assets attributable to shareholders would have increased or decreased by £1,694,000 (2019: nil).
The table below sets out fair value measurements of financial assets in accordance with IFRS13 fair value hierarchy system:
(Unaudited)
Six months ended 30 September 2020
| Level 1 | Level 2 | Level 3 | Total | |
| £000 | £000 | £000 | £000 | |
| Equity investments | 550,908 | – | 13,690 | 564,598 |
| Bond | – | – | 7,193 | 7,193 |
| Warrants | – | 16,939 | – | 16,939 |
| Partnership interest in LP Fund | – | – | 2,387 | 2,387 |
| Total | 550,908 | 16,939 | 23,270 | 591,117 |
(Unaudited)
Six months ended 30 September 2019
| Level 1 | Level 2 | Level 3 | Total | |
| £000 | £000 | £000 | £000 | |
| Equity investments | 366,345 | – | – | 366,345 |
| Partnership interest in LP Fund | – | – | 3,323 | 3,323 |
| Total | 366,345 | – | 3,323 | 369,668 |
(Audited)
Year ended 31 March 2020
| Level 1 | Level 2 | Level 3 | Total | |
| £000 | £000 | £000 | £000 | |
| Equity investments | 381,751 | – | 14,529 | 396,280 |
| Partnership interest in LP Fund | – | – | 2,377 | 2,377 |
| Total | 381,751 | – | 16,906 | 398,657 |
Level 3 reconciliation
Please see below a reconciliation disclosing the changes during the six months for the financial assets and liabilities designated at fair value through profit or loss classified as being Level 3.
| (Unaudited) | (Unaudited) | (Audited) | |
| Six months ended | Six months ended | Year ended | |
| 30 September | 30 September | 31 March | |
| 2020 | 2019 | 2020 | |
| £000 | £000 | £000 | |
| Assets as at beginning of period | 16,906 | 3,039 | 3,039 |
| Purchase of unquoted investments | 17,937 | – | 10,174 |
| Return of capital | – | – | (442) |
| Net movement in investment holding gains during the period/year | (1,399) | 284 | 4,135 |
| Transfer from level 3 to level 1 | (10,174) | – | – |
| Assets as at 30 September/31 March | 23,270 | 3,323 | 16,906 |
8. Principal Risks Profile
The principal risks which the Company faces from its financial instruments are:
· market price risk, including currency risk, interest rate risk and other price risk;
· liquidity risk; and
· credit risk
Market price risk – is the risk that the fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements – currency risk, interest rate risk and other price risk.
Liquidity risk – This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
Credit risk – This is the risk of the failure of the counterparty to a transaction to discharge its obligations under that transaction which could result in the Company suffering a loss. (see note 11).
Further details of the Company’s management of these risks can be found in note 13 of the Company’s 2020 Annual Report.
There have been no changes to the management of or the exposure to these risks since the date of the Annual Report.
9. Related Party Transactions
There have been no changes to the related party arrangements or transactions as reported in the Annual Report for the year ended 31 March 2020.
10. Segmental Reporting
Geographical Segments
| (Unaudited) | (Unaudited) | (Audited) | |
| Six months ended | Six months ended | Year ended | |
| 30 September 2020 | 30 September 2019 | 31 March 2020 | |
| Value of Investments | Value of Investments | Value of Investments | |
| £000 | £000 | £000 | |
| North America | 501,000 | 315,866 | 350,800 |
| Asia | 66,360 | 29,994 | 13,840 |
| Europe | 23,757 | 23,808 | 34,017 |
| Total | 591,117 | 369,668 | 398,657 |
11. Credit Risk
J.P. Morgan Securities LLC (J.P. Morgan) may take assets with a value of up to 140% of the loan as collateral. Such assets held by J.P. Morgan are available for rehypothecation*.
As at 30 September 2020, the maximum value of assets available for rehypothecation was £34.2 million being 140% of the loan balance (£24.4 million) (30 September 2019: £26.4 million), (31 March 200: £32.7 million).
* See glossary.
12. Comparative Information
The financial information contained in this half year report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information for the six months ended 30 September 2020 and 2019 has not been audited by the auditors.
The information for the year ended 31 March 2020 has been extracted from the latest published audited financial statements. The audited financial statements for the year ended 31 March 2020 have been filed with the Registrar of the Companies. The report of the auditors on those accounts was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006.
Interim Management Report
Principal Risks and Uncertainties
A review of the half year, including reference to the risks and uncertainties that existed during the period and the outlook for the Company can be found in the Chairman’s Statement and in the Portfolio Manager’s Review. The principal risks faced by the Company fall into the following broad categories: objective and strategy; volatility and the level of discount/premium; portfolio performance; Investment Management key person risk; operational and regulatory (including cyber risk); market price risk; liquidity risk; shareholder profile; currency risk; the risk associated with the Company’s loan facility; and credit risk. Information on each of these areas is given in the Strategic Report/ Business Review within the Annual Report and Accounts for the year ended 31 March 2020. In the view of the Board these principal risks and uncertainties are applicable to the remaining six months of the financial year as they were to the six months under review.
The Board notes that equity markets experienced substantial volatility during the period due to uncertainties linked to the Covid-19 pandemic. The Directors have considered the impact of the continued uncertainty on the Company’s financial position and, based on the information available to them at the date of this report, have concluded that no adjustments are required to the accounts as at 30 September 2020. The Board is also aware that the UK’s exit from the European Union has introduced elements of political and economic uncertainty. Developments continue to be closely monitored by the Board.
Related Party Transactions
During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company.
Going Concern
The Directors believe, having considered the Company’s investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future and, more specifically, that there are no material uncertainties relating to the Company that would prevent its ability to continue in such operational existence for at least twelve months from the date of the approval of this half yearly financial report. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.
Directors’ Responsibilities
The Board of Directors confirms that, to the best of its knowledge:
i) the condensed set of financial statements contained within the Half Year Report have been prepared in accordance with applicable International Accounting Standards, (IAS) 34; and
ii) the interim management report includes a true and fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
The Half Year Report has not been audited by the Company’s auditors.
This Half Year Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the date of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
The Half Year Report was approved by the Board on 13 November 2020 and the above responsibility statement was signed on its behalf by:
Andrew Joy
Chairman
Glossary of Terms and Alternative Performance Measures (‘APMs’)
AIFMD
The Alternative Investment Fund Managers Directive (the “Directive”) is a European Union Directive that entered into force on 22 July 2013. The Directive regulates EU fund managers that manage alternative investment funds (this includes investment trusts).
Discount or Premium^
A description of the difference between the share price and the net asset value per share. The size of the discount or premium is calculated by subtracting the share price from the net asset value per share and is usually expressed as a percentage (%) of the net asset value per share. If the share price is higher than the net asset value per share the result is a premium. If the share price is lower than the net asset value per share, the shares are trading at a discount.
| As at | As at | ||
| 30 September | 31 March | ||
| 2020 | 2020 | ||
| pence | pence | ||
| Share Price | 1,356.0 | 814.0 | |
| Net Asset value per share (see note 5 for further information) | 1,385.8 | 932.4 | |
| Discount of share price to net asset value per share | 2.2% | 12.7% |
Gearing^
Gearing represents prior charges, adjusted for net current liabilities, expressed as a percentage of net assets. Prior charges includes all loans for investment purposes.
| As at | As at | ||
| 30 September | 31 March | ||
| 2020 | 2020 | ||
| pence | pence | ||
| Prior Charges | 24,386 | 32,737 | |
| Net Current Liabilities (excluding prior changes) | 16,757 | 347 | |
| 41,143 | 33,084 | ||
| Net Assets | 549,974 | 365,573 | |
| Gearing | 7.5% | 9.0% |
Net Asset Value (NAV)
The value of the Company’s assets, principally investments made in other companies and cash being held, minus any liabilities. The NAV is also described as ‘shareholders’ funds’. The NAV is often expressed in pence per share after being divided by the number of shares which have been issued. The NAV per share is unlikely to be the same as the share price which is the price at which the Company’s shares can be bought or sold by an investor. The share price is determined by the relationship between the demand and supply of the shares in the secondary market.
Ongoing Charges^
Ongoing charges are calculated by taking the Company’s annualised operating expenses expressed as a proportion of the average daily net asset value of the Company over the year.
The costs of buying and selling investments are excluded, as are interest costs, taxation, performance fees, cost of buying back or issuing ordinary shares and other non-recurring costs.
| As at | As at | ||
| 30 September | 31 March | ||
| 2020 | 2020 | ||
| pence | pence | ||
| AIFM and Portfolio Management fees* | 5,066 | 3,629 | |
| Operating Expenses* | 542 | 651 | |
| Total expenses* | 5,608 | 4,280 | |
| Average Assets for the period/year | 484,905 | 389,364 | |
| Ongoing charges | 1.1% | 1.1% |
* Estimated expenses for the year ending 31 March 2021 based on assets as at 30 September 2020.
^ Alternative Performance Measure
Rehypothecation
Rehypothecation is the practice by banks and brokers of using collateral posted as security for loans as regulated by the U.S. Securities Exchange Commission.
13 November 2020
Frostrow Capital LLP
Company Secretary
END
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