Half-yearly Report
NEWS RELEASE
For immediate release
10 November 2014
The Biotech Growth Trust PLC
Unaudited Half Year Results for the six months ended
30 September 2014
The following are attached:
•Company Summary and Financial Highlights
•Chairman's Statement
•Review of Investments
•Principal Contributors to and Detractors from Net Asset Value Performance
•Portfolio
•Income Statement
•Statement of Changes in Equity
•Statement of Financial Position
•Cash Flow Statement
•Notes to the Financial Statements
• Independent Review Report
•Interim Management Report
This Announcement is not the Company's Half Year report. It is an abridged
version of the Company's full Half Year report for the six months ended 30
September 2014. The full Half Year report will be sent to shareholders on 17
November 2014. The full Half Year report, together with a copy of this
announcement, will also be available on the Company's website:
www.biotechgt.com
The Company's Half Year Report & Accounts for the six months ended 30 September
2014 will be submitted to the UK Listing Authority, and will shortly be
available for inspection on the National Storage Mechanism (NSM):
www.hemscott.com/nsm.do
For further information please contact:
Victoria Hale
Frostrow Capital LLP
020 3170 8432
Company Summary
The Company
The Company is an investment trust and its shares are listed on the Official
List and traded on the main market of the London Stock Exchange. The Company is
a member of the Association of Investment Companies ("AIC").
Management
The Company has appointed Frostrow Capital LLP ("Frostrow") as Alternative
Investment Fund Manager ("AIFM") to provide company management, company
secretarial, administrative and marketing services. The Company and Frostrow
have jointly appointed OrbiMed Capital LLC as Portfolio Manager.
Performance
Performance is measured against the NASDAQ Biotechnology Index (sterling
adjusted).
Capital Structure
The Company's capital structure is composed solely of Ordinary Shares. Details
are given on page 4 of this half year report.
Dividend
No dividend was recommended in respect of the year ended 31 March 2014 (2013:
nil).
No dividend is recommended in respect of the half year ended 30 September 2014
(2013: nil).
Continuation Vote
The next continuation vote of the Company will be held at the Annual General
Meeting in 2015, and further opportunities to vote on the continuation of the
Company will be given to shareholders every five years thereafter.
ISA Status
The Company's shares are eligible for Individual Savings Accounts (`ISAs') and
for Junior ISAs.
Company Performance
Financial Highlights
As at As at
30 September 31 March %
2014 2014 Change
Net asset value per share 599.9 498.7p +20.3
Share price 567.0 467.0p +21.4
Discount of share price to net asset value 5.5% 6.4% -
per share
Average discount/(premium) of share price 6.8% 2.9% -
to net asset value per share
NASDAQ Biotechnology Index (sterling 1,762.8 1,480.1 +19.1
adjusted) (Benchmark)
Gearing* 9.8% 8.3% -
*See glossary
Investment Objective and Policy
To seek capital appreciation through investment in the worldwide biotechnology
industry. In order to achieve its investment objective, the Company invests in
a diversified portfolio of shares and related securities in biotechnology
companies on a worldwide basis. Performance is measured against the NASDAQ
Biotechnology Index (sterling adjusted).
Investment Approach
The Company's Portfolio Manager is OrbiMed Capital LLC ("OrbiMed").
OrbiMed, based in New York, is an investment manager focused exclusively on the
healthcare sector, with approximately U.S.$12 billion in assets under
management as at 30 September 2014 across a range of funds, including
investment trusts, hedge funds and private equity funds. OrbiMed's investment
management activities were founded in 1989 by Mr. Samuel D. Isaly.
OrbiMed has invested the Company's assets in the worldwide biotechnology
industry. Geographic allocation is in line with the geographic distribution of
investment opportunities, with the majority of the Company's investments in
companies based in North America.
OrbiMed takes a bottom-up approach to stock selection based on intensive
proprietary research. Stock selection is based on rigorous financial analysis,
exhaustive scientific review, frequent meetings with company management and
consultations with physicians and other industry experts.
OrbiMed looks for strong management teams, healthy organic growth from current
products and deep pipelines to fuel future growth.
Risk management is conducted via position size limits and geographic
diversification. The Company maintains adequate portfolio liquidity by limiting
the Company's ownership to 15% of an individual company's equity (at the time
of investment) and by strictly limiting the Company's exposure to direct
unquoted companies to 10% of the portfolio at the time of acquisition.
Investment Limitations
The Board seeks to manage the Company's risk by imposing various investment
limits and restrictions as follows:
The Company will not invest more than 10%, in aggregate, of the value of its
gross assets in other closed ended investment companies (including investment
trusts) listed on the London Stock Exchange, except where the investment
companies themselves have stated investment policies to invest no more than 15%
of their gross assets in other closed ended investment companies (including
investment trusts) listed on the London Stock Exchange.
The Company will not invest more than 15%, in aggregate, of the value of its
gross assets in other closed ended investment companies (including investment
trusts) listed on the London Stock Exchange.
The Company will not invest more than 15% of the value of its gross assets in
any one individual stock at the time of acquisition.
The Company will not invest more than 10% of the value of its gross assets in
direct unquoted investments at the time of acquisition. This limit does not
include any investment in private equity funds managed by the Portfolio Manager
or any affiliates of such entity.
The Company may invest or commit for investment a maximum of US$15 million,
after the deduction of proceeds of disposal and other returns of capital, in
private equity funds managed by OrbiMed, the Company's Portfolio Manager, or an
affiliate thereof.
The Company may be unable to invest directly in certain countries. In these
circumstances, the Company may gain exposure to companies in such countries by
investing indirectly through swaps. Where the Company invests in swaps,
exposure to underlying assets will not exceed 5% of the gross assets of the
Company at the time of entering into the contract.
The Company's gearing policy is that gearing will not exceed 15% of the
Company's net assets. The Company's gearing requirements are met through the
utilisation of a loan facility, repayable on demand, provided by J.P. Morgan
Clearing Corp. This facility can be drawn at the discretion of the AIFM.
In accordance with the requirements of the UK Listing Authority, any material
change to the investment policy will only be made with the approval of
shareholders by ordinary resolution.
Capital Structure
During the half year, a total of 4,160,625 shares were bought back by the
Company to hold in treasury. At 30 September 2014, the Company had 68,886,347
shares (including 4,822,934 shares held in treasury) of 25p each in issue (30
September 2013: 68,536,347 (nil shares held in treasury); 31 March 2014:
68,886,347 (including 662,309 shares held in treasury)). No new shares were
issued during the half year. Since the end of the half year 284,897 further
shares have been bought back by the Company to hold in treasury.
Gearing
The Company's borrowing policy was that borrowings would not exceed 10% of the
Company's net assets such limits were increased to 15% of the Company's net
assets in November 2014, for further details please refer to the Chairman's
statement. The Company's borrowing requirements are met through the utilisation
of a loan facility, repayable on demand, provided by the Company's prime
broker, J.P. Morgan Clearing Corp. As at 30 September 2014 the Company had
borrowed £37.7 million under this facility. As of this date the net gearing
level was 9.8% of the Company's net assets.
Chairman's Statement
Performance
I am delighted to report that after another period of strong performance the
Company's net asset value per share rose by 20.3% and the share price by 21.4%
during the period, both outperforming the benchmark, the NASDAQ Biotechnology
Index, which measured in sterling terms rose by 19.1%. The Company's
outperformance of the benchmark was principally due to the Company's holdings
in Gilead Sciences, Intermune and Puma Biotechnology. Further information on
investment performance and the outlook for the Company is given in the
Portfolio Manager's Review.
Capital Structure
The Board has continued to implement its policy of active discount management
and to buy back shares to hold in treasury when the discount of the share price
against the net asset value per share is greater than 6%. During the six months
under review the Company repurchased a total of 4,160,625 shares to be held in
treasury at a cost of £20,420,000 (including expenses). The average discount
during the period was 6.8%.
Regulatory
I reported in my year-end statement that the Board together with its advisers
had been keeping developments with respect to the Alternative Investment Fund
Managers Directive (the `Directive') under close review. I am pleased to
confirm that the Company entered into the necessary arrangements to ensure
compliance with the Directive on 22 July 2014.
The Company appointed its existing Manager, Frostrow Capital LLP as its
Alternative Investment Fund Manager (`AIFM') on the terms and subject to the
conditions of a new management agreement. In addition the Company and Frostrow
entered into a portfolio management agreement with OrbiMed Capital LLC. The fee
basis of both Frostrow and OrbiMed remain unchanged as a result of these new
arrangements. The old agreements between the Company, Frostrow Capital LLP and
OrbiMed Capital LLC were terminated.
In order to achieve compliance with the AIFM Directive the Company appointed
J.P. Morgan Europe Limited to act as the Company's depositary and J.P. Morgan
Clearing Corp to act as the prime broker. The custody agreement between the
Company and Goldman Sachs & Co was terminated.
Gearing
The Board has decided that the Company's gearing limit be increased from 10% to
15% of the Company's net assets with immediate effect in order to provide
flexibility to our Portfolio Manager. The Board will continue to keep the
gearing limit under review.
Dividend
No dividend was recommended in respect of the year ended 31 March 2014 (2013:
nil). No dividend is recommended in respect of the half year ended 30 September
2014 (2013: nil).
Outlook
The development of new products and the prospect of merger and acquisition
activity continue to be key drivers for the biotechnology sector. Our Portfolio
Manager, OrbiMed Capital LLC believes that large capitalisation biotechnology
companies, in particular, offer good value opportunities due, in part, to
positive earnings prospects for 2015 and beyond. Against this back-drop, the
Board remains confident about the future performance of the biotechnology
sector with the portfolio being well-positioned to benefit from this positive
outlook.
Despite the biotechnology sector witnessing volatile market conditions in
recent months our Portfolio Manager's focus remains on the selection of stocks
with strong prospects for capital enhancement and we reiterate our belief that
the long-term investor in the sector will be well rewarded.
The Rt Hon Lord Waldegrave of North Hill
Chairman
10 November 2014
Portfolio Manager's Review
Interim Performance Review
Top contributors to performance in the portfolio were Gilead Sciences,
InterMune, Puma Biotechnology, Medivation, and Vertex Pharmaceuticals.
Gilead shares appreciated due to the strong launch of Sovaldi for the treatment
of Hepatitis C. In the first half of 2014, Sovaldi sales were $5.75 billion,
significantly beating analyst expectations.
InterMune shares increased due to the company's acquisition by Roche for $8.3
billion. The deal offered shareholders a 38% premium to the share price
preceding the merger announcement.
Puma Biotechnology shares appreciated due to successful phase III results of
neratinib for Her2+ breast cancer following Herceptin-based adjuvant therapy.
Success in this trial was not widely expected; the shares increased nearly 300%
following the announcement.
Medivation shares appreciated over the period due to strong sales of Xtandi for
prostate cancer. Additionally, investors became more optimistic about the
potential of Xtandi for the treatment of breast cancer. Data in that indication
will be released by year-end.
Vertex shares increased due to positive phase III data for the combination of
Ivacaftor and Lumacaftor for the treatment of cystic fibrosis patients with the
most common mutation, F508del. This represents a multi-billion dollar
opportunity.
The largest losses were from positions in Fluidigm, Prothena, and Vanda
Pharmaceuticals.
Fluidigm shares declined due to poor performance from the company's recently
acquired DVS BioScience division. Fluidigm revised growth expectations for DVS
substantially lower than prior guidance due to disruptions in sales channels.
Prothena shares declined due to the release of disappointing results from a
phase I trial of NEOD001 for AL amyloidosis.
Vanda shares declined due to a weaker than expected launch of Hetlioz for
Non-24-hour sleep-wake disorder.
Outlook
Following a selloff in March and April, biotech stocks rebounded and are now
close to an all-time high, as measured by the Nasdaq Biotechnology Index. We
believe the sector remains fundamentally strong, and the case remains good for
continued outperformance. Valuations remain attractive among the major
biotechnology companies, and we believe that they still do not fully
incorporate the reacceleration of growth from new products that we have
previously detailed. For example, Gilead Sciences launched its new blockbuster
drug for HCV, Sovaldi, which is expected to generate nearly $12 billion in
revenue this year. Yet even with this success and strong stock performance this
year, the shares are only trading at 11x consensus 2015 EPS.
The strong performance of Puma Biotechnology and Vertex Pharmaceuticals
following positive phase III results highlights the importance of clinical data
releases to catalyze stock appreciation in the sector. We expect an abundance
of clinical catalysts over the next year. We have previously noted that
immuno-oncology has become a major focus among investors. This field has
experienced substantial breakthroughs over the past several years and will have
very active news flow over the next year. In particular, the first pivotal
clinical trials of Opdivo in lung cancer are expected shortly. This drug,
developed by Bristol-Myers Squibb and its partner Ono Pharmaceuticals (held
within the portfolio) is an inhibitor of PD-1 which releases suppression of
immune T-cells to fight cancer and has shown activity across a broad range of
tumors. Using the anti-PD-1 drugs in combination with other activators of the
immune system will potentially extend the benefit to a larger group of
patients. Toward this end, we will see proof of concept data from portfolio
companies Incyte and Innate Pharma for their combination approaches in 2015.
M&A activity will continue to be a major catalyst in the sector. During the
review period, portfolio holdings InterMune and Shire announced agreements to
be acquired by Roche and AbbVie, respectively. The Shire acquisition was
proposed in part to benefit AbbVie through a lower tax due to reincorporation
in the UK. However, subsequently U.S. Treasury Secretary Jack Lew announced new
rules to discourage tax inversions, which caused AbbVie's Board to abandon the
deal in October. Although acquisitions for tax inversion had become popular in
healthcare, this manoeuvre was more common among specialty pharma companies
rather than traditional biotech. We therefore see little change in the
attractiveness of biotech companies for acquisition, and see the ongoing
weaknesses in pharma pipelines as the main motivation for M&A.
The number of holdings in the Trust is approximately 35. Currently
approximately one-third of the Trust's assets are invested in emerging
biotechnology companies, and two-thirds are invested in major biotechnology
companies. With attractive valuation and abundant clinical and regulatory
catalysts, we believe that the sector is well positioned to continue its
positive momentum.
Sven Borho
OrbiMed Capital LLC
Portfolio Manager
10 November 2014
Principal Contributors to and Detractors from Net Asset Value
For the Six Months to 30 September
Top Five Contributors
Contribution Contribution
2014 per share
£'000 (pence)*
Gilead Sciences 19,722 29.5p
Intermune 11,196 16.8p
Puma Biotechnology 10,092 15.1p
Medivation 6,077 9.1p
Vertex 6,054 9.1p
79.6p
Top Five Detractors
Contribution
for six
months to
30 September Contribution
2014 per share
£'000 (pence)*
Fluidigm (3,904) (5.8)p
Prothena (3,483) (5.2)p
Vanda (1,741) (2.6)p
Xencor (1,041) (1.6)p
Incyte Genomics (1,017) (1.5)p
(16.7)p
* based on 66,809,765 (excluding treasury shares) ordinary shares being the
weighted average number of shares in issue for the six months ended 30
September 2014
Source: Frostrow Capital LLP
Investment Portfolio
Investment as at 30 September 2014
Fair value % of
Security Country/ £'000 investments
Region
Biogen Idec United 41,934 10.0
States
Celgene United 35,663 8.5
States
Amgen United 35,263 8.4
States
Gilead Sciences United 32,569 7.7
States
Illumina United 20,842 5.0
States
Alexion Pharmaceuticals United 20,253 4.8
States
Medivation United 20,124 4.8
States
Vertex Pharmaceuticals United 20,091 4.8
States
Regeneron Pharmaceuticals United 17,343 4.1
States
Pacira Pharmaceuticals United 14,223 3.4
States
Ten largest investments 258,305 61.5
Incyte United 12,741 3.0
States
Ono Pharmaceutical Japan 11,490 2.8
Jazz Pharmaceuticals United 11,390 2.7
States
GW Pharmaceuticals United 11,022 2.6
Kingdom
Impax Laboratories United 10,238 2.5
States
Arrowhead Research United 9,871 2.4
States
Agilent Technologies United 9,386 2.2
States
Actelion Switzerland 9,062 2.2
Salix Pharmaceuticals United 7,896 1.9
States
Affymetrix United 7,738 1.8
States
Twenty largest investments 359,139 85.6
Neurocrine Biosciences United 7,724 1.8
States
Ironwood Pharmaceuticals United 6,993 1.7
States
Horizon Pharmaceutical United 6,787 1.6
States
Infinity Pharmaceuticals United 5,880 1.4
States
Fluidigm United 5,215 1.3
States
Innate Pharmaceutical France 5,210 1.2
Xencor United 4,806 1.2
States
NPS Pharmaceuticals United 3,920 0.9
States
Amag Pharmaceuticals United 3,110 0.7
States
OrbiMed Asia Partners L.P. (unquoted)* Far East 2,904 0.7
Thirty largest investments 411,688 98.1
Qiagen Netherlands 2,666 0.6
Puma Biotechnology United 2,046 0.5
States
Synageva Biopharma United 1,413 0.4
States
Achillion Pharmaceuticals United 973 0.2
States
ArQule United 896 0.2
States
Total investments 419,682 100.0
All of the above investments are equities unless otherwise stated.
* Partnership interest
Portfolio Breakdown
Fair value % of
£'000 investments
Equities 416,778 99.3
Partnership interest 2,904 0.7
Total investments 419,682 100.0
Income Statement
for the six months ended 30 September 2014
(Unaudited) (Unaudited) (Audited)
Six months ended 30 Six months ended 30 Year ended 31 March
September 2014 September 2013 2014
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment
income
Investment 2 509 - 509 477 - 477 873 - 873
income
Total income 509 - 509 477 - 477 873 - 873
Gains and losses
on investments
Gains on - 67,035 67,035 - 43,772 43,772 - 87,614 87,614
investments held
at fair value
through profit
or loss
Exchange - (763) (763) - 927 927 - 1,670 1,670
(losses)/gains
on currency
balances
Expenses
Portfolio 3 - (1,852) (1,852) - 875 875 - (2,763) (
management, AIFM 2,763)
and performance
fees
Other expenses (330) - (330) (469) - (469) (869) - (869)
Profit before 179 64,420 64,599 8 45,574 45,582 4 86,521 86,525
finance costs
and taxation
Finance costs - (69) (69) - (20) (20) - (94) (94)
Profit before 179 64,351 64,530 8 45,554 45,562 4 86,427 86,431
taxation
Taxation (56) - (56) (44) - (44) (94) - (94)
Profit/(loss) 123 64,351 64,474 (36) 45,554 45,518 (90) 86,427 86,337
for the period/
year
Basic and 4 0.2p 96.3p 96.5p (0.1)p 67.4p 67.3p (0.1)p 126.9p 126.8p
diluted earnings
/(loss) per
share
The Company does not have any income or expenses which are not included in the
profit for the period. Accordingly the "profit/(loss) 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/(loss) 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 2014 have not
been audited by the Company's auditors.
Statement of Changes in Equity
Ordinary Share Capital
Share Premium Special Redemption Capital Revenue
(Unaudited) Capital Account Reserve Reserve Reserve Reserve Total
Six months ended £'000 £'000 £'000 £'000 £'000 £'000 £'000
30 September 2014
At 31 March 2014 17,222 42,732 21,747 5,577 256,768 (3,798) 340,248
Net profit for - - - - 64,351 123 64,474
period
Repurchase of own - - (20,420) - - - (20,420)
shares to be held
in treasury
At 30 September 17,222 42,732 1,327 5,577 321,119 (3,675) 384,302
2014
Ordinary Share Capital
Share Premium Special Redemption Capital Revenue
(Unaudited) Capital Account Reserve Reserve Reserve Reserve Total
Six months ended £'000 £'000 £'000 £'000 £'000 £'000 £'000
30 September 2013
At 31 March 2013 16,117 26,122 25,167 5,577 170,341 (3,708) 239,616
Net profit/(loss) - - - - 45,554 (36) 45,518
for period
Issue of new 1,017 14,870 - - - - 15,887
shares
At 30 September 17,134 40,992 25,167 5,577 215,895 (3,744) 301,021
2013
Ordinary Share Capital
Share Premium Special Redemption Capital Revenue
(Audited) Capital Account Reserve Reserve Reserve Reserve Total
Year ended 31 £'000 £'000 £'000 £'000 £'000 £'000 £'000
March 2014
At 31 March 2013 16,117 26,122 25,167 5,577 170,341 (3,708) 239,616
Net profit/(loss) - - - - 86,427 (90) 86,337
for the year
Issue of new 1,105 16,610 - - - - 17,715
shares
Repurchase of own - - (3,420) - - - (3,420)
shares to be held
in treasury
At 31 March 2014 17,222 42,732 21,747 5,577 256,768 (3,798) 340,248
Statement of Financial Position
as at 30 September 2014
(Unaudited) (Unaudited) (Audited)
30 30 31 March
September September
2014 2013 2014
Note £'000 £'000 £'000
Non current assets
Investments held at fair value 419,682 325,346 368,362
through profit or loss
Current assets
Other receivables 15,716 1,226 12,072
15,716 1,226 12,072
Total assets 435,398 326,572 380,434
Current liabilities
Other payables 13,440 16,226 12,306
Bank overdraft 37,656 9,325 27,880
51,096 25,551 40,186
Net assets 384,302 301,021 340,248
Equity attributable to equity holders
Ordinary share capital 17,222 17,134 17,222
Share premium account 42,732 40,992 42,732
Special reserve 1,327 25,167 21,747
Capital redemption reserve 5,577 5,577 5,577
Capital reserve 321,119 215,895 256,768
Revenue reserve (3,675) (3,744) (3,798)
Total equity 384,302 301,021 340,248
Net asset value per share 5 599.9p 439.2p 498.7p
Statement of Cash Flows
for the six months ended 30 September 2014
(Unaudited) (Unaudited) Restated
(Audited)
Six months Six months Year
ended ended ended
30 30 31 March
September September
2014 2013 2014
£'000 £'000 £'000
Net cash inflow/(outflow) from operating 11,407 (34,540) (52,246)
activities (note 6)
Net cash inflow/(outflow) before financing 11,407 (34,540) (52,246)
Net cash (outflow)/inflow from financing (20,420) 15,887 14,295
activities
Net decrease in cash and cash equivalents (9,013) (18,653) (37,951)
Cash and cash equivalents at start of period (27,880) 8,401 8,401
Realised (losses)/gains on foreign currency (763) 927 1,670
Cash and cash equivalents at period/year end (37,656) (9,325) (27,880)
Notes to the Financial Statements
1.a) General information
The Biotech Growth Trust PLC is a Company incorporated and registered in
England. 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 starting on
or after 1 April 2012. The Company is managed in such a way to ensure that it
continues to meet the eligibility conditions contained in Section 1158 of the
Corporation Tax Act 2010 and the on- going requirements outlined in Chapter 3
of Part 2 of the regulations.
1.b) Basis of preparation
The interim condensed financial statements of the Company for the six months
ended 30 September 2014 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 2014.
The bank loan as at 31 March 2014 has been restated and is now presented as a
bank overdraft.
Those financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the EU.
1.c) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
segment of business, being investment business.
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
forseeable future. The next continuation vote of the Company will be held at
the Annual General Meeting in 2015, 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 Six months Year
ended ended ended
30 30 31 March
September September
2014 2013 2014
£'000 £'000 £'000
Investment income 509 477 873
Overseas income
Total income 509 477 873
3. Portfolio Management, AIFM and Performance Fees
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 30 31 March
September September
2014 2013 2014
£'000 £'000 £'000
Portfolio management fee 1,218 894 1,967
AIFM fee 532 410 890
Performance fee charged/(written back) in the 102 (2,179) (94)
period/year*
1,852 (875) 2,763
*In accordance with the performance fee arrangements described on pages 29 and
30 of the Company's 2014 Annual Report, a performance fee of £102,000 was
accrued at 30 September 2014 (30 September 2013: £579,000).
4. Basic and diluted Earnings/(Loss) per Share
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended ended
30 30 31 March
September September
2014 2013 2014
£'000 £'000 £'000
The earnings/(loss) per share is based on the
following figures:
Net revenue gain/(loss) 123 (36) (90)
Net capital gain 64,351 45,554 86,427
Net total gain 64,474 45,518 86,337
Weighted average number of shares in issue 66,809,765 67,630,199 68,115,445
during the period/year
Pence Pence Pence
Revenue earnings/(loss) per share 0.2 (0.1) (0.1)
Capital earnings per share 96.3 67.4 126.9
Total earnings per share 96.5 67.3 126.8
5. Net Asset Value per Share
The net asset value per share is based on the net assets attributable to equity
shareholders of £384,302,000 (30 September 2013: £301,021,000; 31 March 2014: £
340,248,000) and on 64,063,413 shares (excluding 4,822,934 shares held in
treasury), (30 September 2013: 68,536,347; 31 March 2014: 68,224,038) being the
number of shares in issue at the period end.
6. Reconciliation of Profit Before Taxation to Net Cash Inflow/(outflow) From
Operating Activities
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 30 31 March
September September
2014 2013 2014
£'000 £'000 £'000
Profit before taxation 64,530 45,562 86,431
Gains on investments held at fair value (66,272) (44,699) (89,284)
through profit or loss
Net sales/(purchases) of investments 13,922 (31,928) (46,187)
Decrease/(increase) in other receivables 63 (44) (162)
Decrease in other payables (836) (3,431) (3,014)
Net cash inflow/(outflow) from operating 11,407 (34,540) (52,246)
activities
7. Analysis of changes in net debt
Foreign 30 September
1 April Cash Flow Exchange 2014
2014
£'000 £'000 £'000 £'000
Debt:
Bank overdraft (27,880) (9,013) (763) (37,656)
(27,880) (9,013) (763) (37,656)
8. Transaction Costs
Purchase and sale transaction costs for the six months ended 30 September 2014
were £307,000 (six months ended 30 September 2013: £359,000; year ended 31
March 2014: £707,000). These costs comprise mainly of commission costs.
9. 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 2014 the investment in OrbiMed Asia Partners LP Fund has been
classified as level 3. The fund has been valued at the adjusted net asset value
as at 30 September 2014. If the value of the find 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 2014 would have
increased/decreased by £290,000.
The table below sets out fair value measurements of financial assets in
accordance with IFRS13 fair value hierarchy system:
Six months ended 30 September 2014
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity investments 416,778 - - 416,778
Partnership interest in L.P - - 2,904 2,904
Total 416,778 - 2,904 419,682
Six months ended 30 September 2013
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity investments 322,692 - - 322,692
Partnership interest in L.P - - 2,654 2,654
Total 322,692 - 2,654 325,346
Year ended 31 March 2014
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity investments 365,867 - - 365,867
Partnership interest in L.P - - 2,495 2,495
Total 365,867 - 2,495 368,362
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.
£'000
Assets as at 1 April 2014 2,495
Capital commitment during the period 267
Total gains during the period 142
Asset as at 30 September 2014 2,904
10.Principal risks profile
The principal risks which the Company faces include exposure to:
i) market price risk, including currency risk, interest rate risk and other
price risk;
ii) liquidity risk; and
iii) 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 could result in
the Company suffering a loss.
Further details of the Company's management of these risks can be found in note
13 of the Company's 2014 annual report.
There have been no changes to the management of or the exposure to these risks
since that date.
11. Related party transactions
There have been no changes to the related party arrangements or transactions as
reported in Annual Financial report for the year ended 31 March 2014.
12. Comparative Information
The financial information contained in this half year report does not
constitute statutory accounts as defined in section 435(1) of the Companies Act
2006. The financial information for the six months ended 30 September 2014 and
2013 has not been audited by the auditors.
The information for the year ended 31 March 2014 has been extracted from the
latest published audited financial statements. The audited financial statements
for the year ended 31 March 2014 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 of the Companies Act 2006.
Independent Review Report to the Biotech Growth Trust PLC
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the period 1 April 2014 to
30 September 2014 which comprises the Condensed Statement of Comprehensive
Income, the Condensed Statement of Financial Position, the Condensed Statement
of Changes in Net Assets, the Condensed Statement of Cash Flows and the related
notes 1 to 12.
We have read the other information contained in the half yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with guidance contained
in International Standard on Review Engagements 2410 (UK and Ireland) "Review
of Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Auditing Practices Board. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the financial statements of the Company are prepared in
accordance with IFRSs as adopted by the European Union. The condensed set of
financial statements included in this half-yearly financial report has been
prepared in accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with the International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the period from 1 April 2014 to 30 September 2014 is not
prepared, in all material respects, in accordance with International Accounting
Standard 34 as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
10 November 2014
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 beginning on page 5 and in the Portfolio Manager's
Review beginning on page 6. The principal risks faced by the Company fall into
the following broad categories: objective and strategy; level of discount/
premium; portfolio performance; operational and regulatory; market price risks;
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 2014. 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.
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 objective,
risk management policies, capital management policies and procedures, and the
nature of the portfolio and the expenditure projections, are satisfied 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. 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 has been prepared in accordance with applicable International Accounting
Standards, (IAS) 34; and
(ii) the interim management report and the Chairman's statement includes a fair
review of the information required by 4.2.7R and 4.2.8R of the Transparency
Rules.
In order to provide these confirmations, and in preparing these financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
• state whether applicable IFRS have been followed, subject to any material
departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business;
and the Directors confirm that they have done so.
The Half Year Report has not been audited by the Company's auditors.
The Half Year Report was approved by the Board on 10 November 2014 and the
above responsibility statement was signed on its behalf by:
The Rt Hon Lord Waldegrave of North Hill
Chairman
Glossary of Terms
Investment Trust Terms
AIFM Directive
The Alternative Investment Fund Manager 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). There was a one-year transition period within
which alternative funds must comply with the provisions of the Directive.
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.
Gearing
Calculated using the Association of Investment Companies definition.
Total assets, less current liabilities (before deducting any prior charges)
minus cash/cash equivalents divided by Shareholders' Funds, expressed as a
percentage.
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' per share. 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.
Ongoing Charges
Ongoing charges are calculated by taking the Company's annualised ongoing
charges, excluding performance fees and exceptional items, and dividing by the
average net asset value of the Company over the year.
Total Assets
Total assets less current liabilities before deducting prior charges. Prior
charges includes all loans for investment purposes.
Treasury Shares
Shares previously issued by a company that have been bought back from
Shareholders to be held by the Company for potential sale or cancellation at a
later date. Such shares are not capable of being voted and carry no rights to
dividends.
For and on behalf of
Frostrow Capital LLP, Secretary
10 November 2014
- ENDS -
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