LONDON STOCK EXCHANGE ANNOUNCEMENT
Legal Entity Identifier
549300Z41EP32MI2DN29
The Biotech Growth
Trust PLC
Audited Results for the Year Ended
31 March 2017
The Company’s Annual Report will be posted to shareholders on
7 June 2017. Members of the public
may obtain copies from Frostrow Capital LLP, 25 Southampton
Buildings, London WC2A 1AL or from
the Company’s website at:
www.biotechgt.com
The Company's Annual Report for the year ended 31 March 2017 has been submitted to the UK
Listing Authority, and will shortly be available for inspection on
the National Storage Mechanism (NSM):
www.morningstar.co.uk/uk/nsm
(Documents will usually be available for inspection within two
business days of this notice being given)
Mark Pope, Frostrow Capital LLP,
Company Secretary – 0203 008 4913
25 May 2017
Strategic Report / Company
Performance
Historic Performance Record for the
years ended 31 March
|
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
Net asset value per share
performance |
34.9% |
48.1% |
34.2% |
67.4% |
(24.8%) |
27.5% |
Share price performance |
42.2% |
55.9% |
26.9% |
69.9% |
(26.3%) |
27.9% |
Benchmark performance |
23.6% |
37.2% |
34.7% |
63.7% |
(21.8%) |
29.2% |
Net asset value per share |
250.9p |
371.7p |
498.7p |
834.7p |
627.9p |
800.8p |
Share price |
236.0p |
368.0p |
467.0p |
793.5p |
585.0p |
748.0p |
Discount of share price to net asset
value per share |
5.9% |
1.0% |
6.4% |
4.9% |
6.8% |
6.6% |
Ongoing charges* |
1.3% |
1.3% |
1.2% |
1.2% |
1.0% |
1.1% |
Gearing* |
Nil |
Nil |
8.3% |
9.4% |
11.1% |
3.2% |
* See
glossary.
Strategic Report / Chairman’s
Statement
Investment performance
Your Company produced a good return in absolute terms for the
year ended 31 March 2017. The
Company’s net asset value per share rose by 27.5% during the year,
which compares with the Company’s benchmark, the NASDAQ
Biotechnology Index (sterling adjusted), which rose by 29.2%. As
this shows, the biotechnology sector performed well over the year
in review, and in line with the broader U.S. stock market. Part of
the performance reflects sterling’s decline against other major
currencies and in particular the U.S. dollar, which is the currency
in which almost all the Company’s holdings are denominated.
Sterling fell 13.0% over the year.
The Company’s share price rose by 27.9%, a little more than the
net asset value, reflecting a slight narrowing in the discount of
the share price to net asset value per share, from 6.8% at the
start of the Company’s year, to 6.6% at 31
March 2017.
This was a year in which “macro” factors played a more
significant part in performance than individual stock selection.
The Biotechnology sector experienced considerable volatility during
the long-running primary and Presidential campaigns in the U.S.,
running up to the election in November
2016. Uncertainty persisted over both who might win the
election and what policies the winner would adopt. Ultimately, the
result was seen as positive for the market and in the case of the
biotechnology sector, the rally already in train from the depressed
levels in early 2016 was extended.
The other principal “macro” factor affecting performance was the
decline in sterling as noted above and in the Company’s half year
report, following the UK’s referendum vote to leave the European
Union.
Looking at the contribution to performance from individual
stocks, the Company’s positive performance during the year was due
in part to the holdings in Incyte, Celgene and
Biogen. Negative performance came from holdings in Impax
Laboratories, Achillion Pharmaceuticals and Shire.
Further information on the Company’s investments can be found in
the Portfolio Manager’s Review.
I note that the Company underperformed its benchmark slightly
despite the high absolute return. This was principally due to
individual stock selection over the course of the year.
Over the longer term, the Company’s performance continues to
remain strong, both on an absolute and relative basis. In the
five-year period to 31 March 2017,
the Company’s net asset value per share rose by 219.1% and the
share price by 217.0%, both outperforming the Company’s benchmark,
which rose by 205.5%.
Capital structure
The Board has continued to implement its policy of active
discount management and to buy back shares when the discount of the
share price against the net asset value per share is greater than
6%. During the year, a total of 4,455,561 shares were repurchased
by the Company at an average discount of 7.0% and at a cost of
£29.7m (including expenses). Since the year-end, to the date of
this report, no further shares have been repurchased by the
Company.
Return and dividend
The total return per share amounted to 171.5p for the year
(2016: loss of 208.1p), comprising a revenue gain of 1.6p per share
(2016: 1.3p) and a capital gain of 169.9p (2016: loss of 209.4p).
No dividend is recommended in respect of the year ended
31 March 2017 (2016: nil).
Board composition
The process of refreshment of the Board has continued. As
reported at the half year stage, one addition was made during the
year with Julia Le Blan joining the
Board on 12 July 2016.
Julia is a Chartered Accountant and has worked in the financial
services industry for over 30 years. She was formerly a tax partner
at Deloitte and sat for two terms on the AIC’s Technical Committee.
We are pleased to have someone of her calibre and experience join
the Board. She will succeed Peter
Keen as Chairman of the Audit Committee upon his
retirement.
Peter Keen will be retiring from
the Board at the conclusion of this year’s Annual General Meeting.
Peter has been a Director since the launch of the Company in 1997
and Chairman of the Audit Committee since 2005. His extensive
knowledge of the biotechnology sector and his wise counsel will be
greatly missed.
As I said in the half-year report in November, I was honoured to
succeed the Rt Hon Lord Waldegrave of North Hill as Chairman in
July last year. Like Peter Keen,
William had been a Director since the early days of the Company and
with Peter’s retirement in July this year there will now no longer
be any of the original Directors on the Board. To William, Peter
and all the original Directors, all shareholders owe a great debt
of gratitude, not least for having had the wisdom to appoint
OrbiMed as the Company’s Portfolio Manager. Since that moment 12
years ago, the growth in the Company’s net asset value per share
has been 704.0%, comfortably ahead of the sterling adjusted NASDAQ
Biotechnology Index.
Outlook
Despite continued uncertainty over drug pricing and also ongoing
political concerns, our Portfolio Manager believes that the
biotechnology sector is well-positioned for outperformance driven
principally by merger and acquisition activity, current depressed
valuations and sustained innovation. Their focus remains on the
selection of stocks with strong prospects for capital enhancement
and your Board strongly believes that the long-term investor will
be well rewarded.
Annual General Meeting
The Annual General Meeting of the Company this year will be held
at the Barber-Surgeons’ Hall, Monkwell Square, Wood Street,
London EC2Y 5BL on Wednesday,
12 July 2017 at 12 noon and we hope
as many shareholders as possible will attend. This will be an
opportunity to meet the Board and to receive a presentation from
our Portfolio Manager. Shareholders who are unable to attend are
encouraged to return their forms of proxy to ensure their votes are
represented.
Andrew
Joy
Chairman
25 May 2017
Strategic Report / Investment
Portfolio
Investments held as at 31 March 2017
Security |
Country/
Region |
Fair value
£’000 |
% of
investments |
Celgene |
United States |
61,217 |
13.3 |
Biogen |
United States |
53,702 |
11.6 |
Incyte |
United States |
42,909 |
9.3 |
Alexion Pharmaceuticals |
United States |
38,734 |
8.4 |
Vertex Pharmaceuticals |
United States |
36,673 |
8.0 |
Amgen |
United States |
23,198 |
5.0 |
Illumina |
United States |
19,064 |
4.1 |
DBV Technologies |
France |
14,446 |
3.1 |
Regeneron Pharmaceuticals |
United States |
11,979 |
2.6 |
BioMarin Pharmaceutical |
United States |
11,941 |
2.6 |
Ten largest investments |
|
313,863 |
68.0 |
Dermira |
United States |
11,603 |
2.5 |
GW Pharmaceuticals |
United Kingdom |
10,562 |
2.3 |
Aurinia Pharmaceuticals |
Canada |
10,536 |
2.3 |
Shire |
Jersey |
10,325 |
2.3 |
Gilead Sciences |
United States |
10,264 |
2.2 |
Ironwood Pharmaceuticals |
United States |
9,676 |
2.1 |
Actelion |
Switzerland |
8,398 |
1.8 |
Aerie Pharmaceuticals |
United States |
7,876 |
1.7 |
Array BioPharma |
United States |
7,829 |
1.7 |
Jazz Pharmaceuticals |
Ireland |
6,847 |
1.5 |
Twenty largest
investments |
|
407,779 |
88.4 |
Alkermes |
Ireland |
6,782 |
1.5 |
Tesaro |
United States |
5,808 |
1.2 |
OrbiMed Asia Partners L.P.
(unquoted)* |
Far East |
5,069 |
1.1 |
Achillion Pharmaceuticals |
United States |
4,788 |
1.0 |
Minerva Neurosciences |
United States |
4,562 |
1.0 |
Xencor |
United States |
4,512 |
1.0 |
Insys Therapeutics |
United States |
3,646 |
0.8 |
Puma Biotechnology |
United States |
3,538 |
0.8 |
Alnylam Pharmaceuticals |
United States |
3,368 |
0.7 |
Acadia Pharmaceuticals |
United States |
3,081 |
0.7 |
Thirty largest
investments |
|
452,933 |
98.2 |
BeiGene |
Cayman Islands |
2,443 |
0.5 |
Clearside Biomedical |
United States |
1,898 |
0.4 |
Infinity Pharmaceuticals |
United States |
1,646 |
0.4 |
Fluidigm |
United States |
1,568 |
0.3 |
Sarepta Therapeutics |
United States |
890 |
0.2 |
Total investments |
|
461,378 |
100.0 |
All of the above investments are equities unless otherwise
stated.
*
Partnership interest
Portfolio Breakdown
|
Fair value |
% of |
Investments |
£’000 |
investments |
Equities |
456,309 |
98.9 |
Partnership interest (unquoted) |
5,069 |
1.1 |
Total investments |
461,378 |
100.0 |
Strategic Report / Portfolio Manager’s
Review
Performance review
The Company’s net asset value per share increased 27.5% during
the year. This compares to a 29.2% increase in the Company’s
benchmark, the NASDAQ Biotechnology Index (NBI) (measured on a
sterling adjusted basis).
Incyte, Celgene, Biogen, Vertex Pharmaceuticals, and
Amgen were the leading positive contributors to performance
in the portfolio during the year.
- Shares in Incyte appreciated due to the announcement of a
strategic collaboration with Merck to advance the combination of
epacadostat/pembrolizumab to phase III trials in four new tumour
types. Full data from the trial that supported this decision to
advance the combination will be presented in June at the American
Society of Clinical Oncology meeting.
- Shares in Celgene outperformed due to multiple positive
catalysts including strong financial results, the approval of
Revlimid in the maintenance setting of multiple myeloma, and
positive Phase III data for ozanimod in multiple sclerosis.
- Shares in Vertex Pharmaceuticals appreciated due to the
announcement of positive Phase III data of tezacaftor and ivacaftor
in cystic fibrosis. Initial data suggests that this combination has
a greater tolerance and a slightly better efficacy profile compared
to their marketed CF product, Orkambi. Tezacafor/Ivacaftor is also
being combined with additional corrector drugs which may provide
additional efficacy to patients; preliminary data from the
triple-combination regimens are expected later this year.
- Shares in Amgen outperformed due to strong financial results
and a favourable court decision regarding its PCSK9 patents
litigation against Sanofi/Regeneron Pharmaceuticals. The decision
is currently being appealed. A final victory later this year could
lead to the permanent removal of Sanofi/Regeneron’s competing drug
from the market.
Impax Laboratories, Achillion Pharmaceuticals, Shire, Ono
Pharmaceutical, and Gilead Sciences were the principal
detractors.
- Shares in Impax Laboratories were weak due to disappointing
quarterly financial results and weak guidance.
- Shares in Achillion Pharmaceuticals underperformed due to an
adverse safety finding in the phase I study of its complement
factor D program. However, the company believes that it can achieve
adequate efficacy with a lower dose than previously planned.
- Shares in Shire underperformed due to investor concerns on
upcoming competition in the haemophilia market and a
slower-than-expected launch of Xiidra, a product for dry eye.
- Shares in Ono Pharmaceutical underperformed due to unexpected
negative data from a Phase III study of nivolumab in first-line
lung cancer conducted by its U.S. partner Bristol-Myers Squibb and
investor concerns regarding a potential government mandated cut in
nivolumab’s price in Japan.
- Shares in Gilead Sciences were weak due to negative sentiment
after hepatitis C sales and guidance missed investor
expectations.
Review of sector performance
During the year, the portfolio and the broader biotechnology
sector performed strongly, following a prior period of weakness
largely caused by concerns over the sustainability of drug pricing
in the U.S. These concerns persisted in the first half of the year,
fuelled by Hillary Clinton’s rhetoric on potential drug price
regulation during the U.S. Election. Additionally, as we detailed
in the previous report, the negative publicity of controversial
pricing practices by some specialty pharmaceutical companies, such
as Valeant and Mylan, caused worries among investors that enhanced
scrutiny of pricing policies would spill over to the biotechnology
sector, creating an overhang. The NBI remained down over 20% (in
dollar terms) during the calendar year to early November. However,
the unexpected election of Donald
Trump as President and the Republican sweep in Congress
caused an immediate positive reaction for biotechnology stocks,
with the NBI index up 9% on the day following the election.
Subsequently, Mr. Trump’s public statements on drug pricing took on
a more populist tone, including that drug companies “are getting
away with murder” and that drug “pricing for the American people
will come way down”. The sector initially underperformed following
these comments, but sentiment has improved as investors have
concluded that actual legislation on drug pricing will be hard to
enact, and the draft legislation for the repeal and replacement of
the Affordable Care Act (ACA, or “Obamacare”) did not contain
significant proposals that would be considered hostile toward the
pharmaceutical and biotechnology industries.
Healthcare reform proving to be more
difficult than expected
In the past few years, the biotechnology sector has been a net
beneficiary of Obamacare, as coverage expansion has increased drug
utilisation. However, structural flaws in Obamacare have become
evident, as lower than expected enrolment and a sicker patient pool
have caused significant premium increases and large losses for
insurance companies. This has prompted questions about the
sustainability of the law and what can be done to fix the issues.
Throughout the Obama administration, Republicans repeatedly
advocated for the repeal of Obamacare. However, internal divisions
within the party have delayed the process of repealing and
replacing Obamacare. Importantly for biotechnology investors, the
legislation ultimately passed in the House of Representatives made
no mention of drug pricing reform, and in fact called for the
removal of a tax on branded drug makers. At this time, the Senate
is crafting its own legislation, and it is not clear how close the
Senate version will be to the bill passed in the House. President
Trump has suggested that drug pricing would be addressed at a later
stage. However, the repeal and replace debate has highlighted the
difficulty of passing new healthcare legislation. We believe there
is not adequate Republican support in Congress to consider pricing
reform, and that President Trump will pivot to other priorities
where he may be more successful.
New tax changes could be positive for
the biotechnology sector
Mr. Trump has also called for significant tax cuts, particularly
for businesses. His initial proposal reduces the corporate tax rate
to 15% from 35%, and companies would pay little or no tax to the
U.S. on foreign profits. While most biotechnology companies already
enjoy lower effective tax rates given the multinational nature of
the business and foreign domicile of intellectual property, a lower
corporate tax as proposed will still benefit those that face high
tax rates, such as Biogen and Regeneron in our portfolio. Tax
reform is also expected to allow repatriation of cash that is held
overseas at a low tax rate. As a result of current corporate tax
laws, U.S. companies with international operations often hold cash
overseas to avoid paying the top corporate tax rate of 35% on those
foreign earnings. It is estimated that the eight U.S. major
pharmaceutical and biotechnology companies collectively held over
U.S.$130 billion in cash offshore at
the end of 2016. This repatriation could fuel a new wave of merger
& acquisition activity as this cash can be used to acquire U.S.
emerging biotechnology companies.
The regulatory climate is becoming
more favourable for the industry
President Trump has also pledged to streamline the drug approval
process so effective drugs can reach patients more quickly. We see
the recent appointment of Scott
Gottlieb to head the U.S. Food & Drug Administration
(FDA) as a positive development in that direction. Dr. Gottlieb has
previously been critical of the FDA’s “unreasonable hunger for
statistical certainty” when reviewing orphan drugs and has
advocated for modernising the generic drug framework to accommodate
complex drugs, which could increase competition and potentially
lower prices of off-patent drugs. We believe Dr. Gottlieb is a
highly capable Commissioner who will take a more pragmatic approach
to drug approvals. We would also highlight that the FDA continues
to make progress expediting “breakthrough medicines” which allows
more interaction between the agency and companies to speed the
approval of new important medicines. Last year, 46 additional drugs
received breakthrough designation, and nine drugs with this
designation were approved.
Innovation continues
Drug approvals and pipeline progress will continue to be major
themes for investment in the sector. Within the portfolio, there
have been a number of promising new drugs recently approved
including Biogen’s Spinraza for spinal muscular atrophy (SMA) and
Biomarin Pharmaceuticals’ Brineura for Batten disease. These new
drugs have shown profound benefits in the treatment of serious
diseases lacking adequate treatment options. For example, Spinraza,
the first-ever treatment for spinal muscular atrophy approved by
the FDA, significantly improved the motor function and survival of
young children with SMA who would otherwise have experienced rapid
disease progression and high mortality. Thus far, the launch has
been impressive. Biomarin’s Brineura was recently approved for the
treatment of Batten disease, a rare neurodegenerative disorder in
children. Clinical data shows that Brineura nearly halts the
progression of the disease.
2017 is poised to be a landmark year for biotechnology drug
development, as we should see the first U.S. approvals of two new
classes of therapy: gene therapy and CAR-T cell therapy. We expect
approval of Spark Therapeutics’ gene therapy to treat a rare
inherited form of blindness. We also expect approval of two CAR-T
therapies (T-cells that are genetically modified to fight cancer),
from Kite Pharma and Novartis. These new treatment modalities allow
drug developers to address targets and diseases that are not easily
treatable by more conventional means. We expect considerable
advancement of these methods in the coming years as many
biotechnology companies apply these technologies to create new
therapeutics.
We have previously highlighted the next wave of immuno-oncology
(IO) as the development of combination regimens that further
stimulate the immune response against cancer. This year, we are
pleased to see significant progress in this field, particularly
with portfolio company Incyte announcing expanded strategic
collaborations with both Merck and Bristol-Myers to develop the
combination of epacadostat, Incyte’s investigational oral selective
IDO1 enzyme inhibitor, with anti-PD1 therapy. These phase III
trials will test epacadostat/PD-1 in non-small cell lung cancer,
bladder cancer, head and neck cancer and renal cell cancer, in
addition to melanoma that has been previously announced. We believe
the strategic decisions made by Incyte and partners to move
research into this type of therapy forward were based on solid
clinical data from the phase II studies, which suggests IDO/PD1 has
emerged as a very promising combination with broad activity as a
next generation immunotherapy. We look forward to more data from
Incyte’s epacadostat/PD1 and other IO combos to further establish
the future cancer treatment landscape. We continue to believe
immuno-oncology combinations will be a major area of investor
interest this year.
Sven
Borho
OrbiMed Capital LLC, Portfolio Manager
25 May 2017
Principal contributors to and
detractors from net asset value performance
|
Contribution
for year to
31 March 2017 |
Contribution
per share |
Top five contributors |
£'000 |
(pence)* |
Incyte |
25,959 |
45.3 |
Celgene |
15,875 |
27.7 |
Biogen |
15,592 |
27.2 |
Vertex Pharmaceuticals |
13,837 |
24.1 |
Amgen |
12,756 |
22.3 |
|
84,019 |
146.6 |
|
|
|
Top five detractors |
|
|
Impax Laboratories† |
(4,943) |
(8.6) |
Achillion Pharmaceuticals |
(4,801) |
(8.4) |
Shire |
(3,447) |
(6.0) |
Ono Pharmaceutical† |
(3,446) |
(6.0) |
Gilead Sciences |
(2,632) |
(4.6) |
|
(19,269) |
(33.6) |
* based on
57,315,305 ordinary shares being the weighted average number of
shares in issue for the year ended 31 March
2017
† not held
in the portfolio at 31 March 2017
Strategic Report / Business Review
The aim of the Strategic Report is to provide shareholders with
the ability to assess how the Directors have performed their duty
to promote the success of the Company during the year under
review.
Structure and objective of the
Company
The Biotech Growth Trust PLC is an investment trust and has a
premium listing on the London Stock Exchange. Its investment
objective is set out below. In seeking to achieve this objective,
the Company employs Frostrow Capital LLP (Frostrow) as its
Alternative Investment Fund Manager (AIFM), OrbiMed Capital LLC
(OrbiMed) as its Portfolio Manager, J.P. Morgan Europe Limited as
its Depositary and J.P. Morgan Clearing Corp. as its Prime Broker
and Custodian. Further details about their appointments can be
found in the Report of the Directors. The Board has determined an
investment policy and related guidelines and limits, as described
below.
The Company is subject to UK and European legislation and
regulations including UK company law, International Financial
Reporting Standards, the Alternative Investment Fund Managers
Directive, the UK Listing, Prospectus, Disclosure Guidance and
Transparency Rules, taxation law and the Company’s own Articles of
Association.
The Company is an investment company within the meaning of
Section 833 of the Companies Act 2006 and has been approved by HM
Revenue & Customs as an investment trust (for the purposes of
Sections 1158 and 1159 of the Corporation Tax Act 2010). As a
result, the Company is not liable for taxation on capital gains.
The Directors have no reason to believe that approval will not
continue to be retained. The Company is not a close company for
taxation purposes.
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) (the Benchmark).
Investment strategy
The implementation of the Company’s Investment Objective has
been delegated to OrbiMed by Frostrow (as AIFM) under the Board’s
and Frostrow’s supervision and guidance.
Details of OrbiMed’s investment strategy and approach are set
out in the Portfolio Manager’s review. While performance is
measured against the Company’s Benchmark, Frostrow and OrbiMed have
been given the ability to manage the portfolio without regard to
the Benchmark and its make-up.
While the Board’s strategy is to allow flexibility in managing
the investments, in order to manage investment risk it has imposed
various investment, gearing and derivative guidelines and limits,
within which Frostrow and OrbiMed are required to manage the
investments, as set out below.
Any material changes to the investment Objective, Policy and
Benchmark or the investment and gearing guidelines and limits
require approval from shareholders.
Investment limits and guidelines
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
U.S.$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’s borrowing policy is that borrowing will not
exceed 20% of the Company’s net assets. The Company’s borrowing
requirements are met through the utilisation of an overdraft
facility, repayable on demand and provided by J.P. Morgan Clearing
Corp. This facility can be drawn at the discretion of the
AIFM.
- 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.
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.
Dividend policy
The Company invests with the objective of achieving capital
growth and it is expected that dividends, if any, are likely to be
small. The Board intends only to pay dividends on the Company’s
shares to the extent required in order to maintain the Company’s
investment trust status.
Continuation of the Company
An opportunity to vote on the continuation of the Company is
given to shareholders every five years. The next such continuation
vote will be held at the Annual General Meeting in 2020.
Company promotion
The Company has appointed Frostrow to provide marketing and
investor relations services, in the belief that a well-marketed
investment company is more likely to grow over time, have a more
diverse, stable list of shareholders and its shares will trade at
close to net asset value per share over the long run. Frostrow
actively promotes the Company in the following ways:
Engaging regularly with institutional investors,
discretionary wealth managers and a range of execution-only
platforms: Frostrow regularly meets with institutional
investors, discretionary wealth managers and execution-only
platform providers to discuss the Company’s strategy and to
understand any issues and concerns, covering both investment and
corporate governance matters;
Making Company information more accessible: Frostrow
works to raise the profile of the Company by targeting key groups
within the investment community, holding periodic investment
seminars, overseeing PR output and managing the Company’s website
and wider digital offering, including Portfolio Manager videos and
social media;
Disseminating key Company information: Frostrow performs
the Investor Relations function on behalf of the Company and
manages the investor database. Frostrow produces all key corporate
documents, distributes Monthly Factsheets, Annual Reports and
updates from OrbiMed on the portfolio and market developments;
and
Monitoring market activity, acting as a link between the
Company, shareholders and other stakeholders: Frostrow
maintains regular contact with sector Broker Analysts and other
research and data providers, and conducts periodic investor
perception surveys, liaising with the Board to provide up-to-date
and accurate information on the latest shareholder and market
developments.
Key performance indicators
Net asset value return
The Directors regard the Company’s net asset value total return
as being the overall measure of value delivered to shareholders
over the long term. Total return reflects the net asset value
growth of the Company. OrbiMed’s investment style is such that
performance is likely to deviate from that of the benchmark index.
The Board considers the most important comparator to be the NASDAQ
Biotechnology Index (sterling adjusted).
During the year under review the Company’s net asset value per
share return was +27.5% underperforming the benchmark by 1.7%.
A full description of performance during the year under review
and the investment portfolio is contained in the Portfolio
Manager’s Review.
Share price return
The Directors also regard the Company’s share price return to be
a key indicator of performance. This is monitored closely by the
Board.
During the year under review the Company’s share price return
was +27.9%.
Share price discount/premium to net
asset value per share
The Board undertakes a regular review of the level of
discount/premium and consideration is given to ways in which share
price performance may be enhanced, including the effectiveness of
marketing and share issuance and buy-backs, where appropriate. The
Board has a discount control mechanism in place intended to
establish a target level of no more than a 6% discount of share
price to the net asset value per share. Shareholders should note,
however, that it remains possible for the share price discount to
net asset value per share to be greater than 6% on any one day due
to the fact that the share price continues to be influenced by
overall supply and demand for the Company’s shares in the secondary
market. The volatility of the net asset value per share in an asset
class such as biotechnology is another factor over which the Board
has no control. The making and timing of any share buy-backs or
share issuance is at the absolute discretion of the Board.
During the year under review a total of 4,455,561 shares were
repurchased by the Company for cancellation.
The discount of the Company’s share price to the net asset value
per share at 31 March 2017 stood at
6.6% (2016: 6.8%).
Ongoing charges ratio
The Board continues to be conscious of expenses and works hard
to maintain a sensible balance between strong service and
costs.
As at 31 March 2017 the ongoing
charges ratio was 1.1% calculated by taking the operating expenses
of the Company divided by the average assets of £419.2m (2016: 1.0%
(average assets of £474.6m)).
(See glossary for further details).
Board diversity
The Board is supportive of the recommendations of Lord Davies’s
report that the performance of corporate boards can be improved by
encouraging the appointment of the best people from a range of
differing perspectives and backgrounds. The Company recognises the
benefits of diversity on the Board, including gender, and takes
this into account in its Board appointments. The Company is
committed to ensuring that any Director search process actively
seeks persons with the right qualifications so that appointments
can be made, on the basis of merit, against objective criteria from
a diverse selection of candidates. To this end the Board will
dedicate time to considering diversity during any Director search
process and keep in mind that the Davies Review of Women on Boards
recommended that UK Listed Companies in the FTSE 100 should be
aiming for a minimum of 25% of females on the Board.
|
Male |
Female |
Directors of the Company |
5 |
2 |
The Company does not have any employees. Therefore there is no
employee information to disclose.
Social, economic and environmental
matters
The Directors, through the Company’s Portfolio Manager,
encourage companies in which investments are made to adhere to best
practice with regard to corporate governance. In light of the
nature of the Company’s business there are no relevant human rights
issues and the Company does not have a human rights policy.
The Company recognises that social and environmental issues can
have an effect on some of its investee companies.
The Company is an investment trust and so its own direct
environmental impact is minimal. The Board of Directors consists of
seven Directors, six of whom are resident in the UK and one
resident in the United States. The
Board holds the majority of its regular meetings in the
United Kingdom and has a policy
that travel, as far as possible, is minimal, thereby minimising the
Company’s greenhouse gas emissions. Further details concerning
greenhouse gas emissions can be found within the Report of the
Directors.
Principal risks
The Directors confirm that they have carried out a thorough
assessment of the principal risks facing the Company, including
those that would threaten its business model, future performance,
solvency or liquidity. The risks identified and the ways in which
they are managed or mitigated are summarised below.
With the assistance of Frostrow, the Audit Committee has drawn
up a risk matrix, which identifies the key risks to the Company.
These are reviewed and noted on a regular basis. These key risks
fall broadly under the following categories:
Principal Risks and
Uncertainties |
|
Management/Mitigation |
Objective and
strategy
The Company becomes unattractive to investors. |
|
The Board reviews regularly the
Company’s investment objective and investment guidelines in the
light of investor sentiment monitoring closely whether the Company
should continue in its present form. The Board also considers the
size of the Company to ensure that it is at an optimum level. The
Board, through the AIFM and the Portfolio Manager, holds regular
discussions with major shareholders. Each month the Board receives
a report which monitors the investments held in the portfolio
compared against the benchmark index and the investment guidelines.
Additional reports and presentations are regularly presented to
investors by the Company’s AIFM and Portfolio Manager. |
Volatility and level
of discount/premium
The risk of the Company’s share price not being representative of
its underlying net assets. |
|
The Board undertakes a
regular review of the level of discount/premium and consideration
is given to ways in which share price performance may be enhanced,
including the effectiveness of marketing and investor relations
services and also share issuance and buy-backs, if considered
appropriate. The Board has an active discount management policy in
place, buying back the Company’s shares for cancellation if the
market price is at a discount greater than 6% to the net asset
value per share. The making and timing of any share issuance or
buy-backs is at the absolute discretion of the Board.
Shareholders should note, however, that it remains possible for the
share price discount to the net asset value per share to be greater
than 6% on any one day. This is due to the fact that the share
price continues to be influenced by overall supply and demand for
the Company’s shares in the secondary market. The volatility of the
net asset value per share in an asset class such as healthcare is
another factor over which the Board has no control. |
Portfolio
performance
Investment performance may not be meeting shareholder
requirements. |
|
The Board reviews regularly
investment performance against the benchmark and against the
Company’s peer group. The Board also receives regular reports that
show an analysis of performance compared to other relevant indices.
The Portfolio Manager provides an explanation of significant stock
selection decisions and an overall rationale for the make-up of the
portfolio. The Portfolio Manager discusses current and potential
investment holdings with the Board on a regular basis. |
Investment
management key person risk
The risk that the individual(s) responsible for managing the
Company’s portfolio may leave their employment or may be prevented
from undertaking their duties. |
|
The Board manage this risk by: |
Operational and
regulatory
A breach of Sections 1158 and 1159 of the Corporation Tax Act 2010
could lead to the Company being subject to tax on capital gains,
whilst a serious breach of other regulatory rules (including those
associated with the Alternative Investment Fund Managers Directive)
may lead to suspension from the Stock Exchange or to a qualified
Audit Report. Other control failures, including cyber crime,
relating to the AIFM, the Portfolio Manager or any other of the
Company’s service providers, may result in operational and/or
reputational problems, erroneous disclosures or loss of assets
through fraud, as well as breaches of regulations. |
|
All transactions and
income and expenditure forecasts are reviewed by the Board at each
Board Meeting. The Board considers regularly all major risks, the
measures in place to control them and the possibility of any other
risks that could arise. The Board also ensures that satisfactory
assurances are received from service providers.
The Audit Committee has reviewed the cyber security policies for
the Company’s principal services providers.
The Compliance Officer of the AIFM and of the Portfolio Manager
produce regular reports for review at the Company’s Audit Committee
meetings and are available to attend such meetings in person if
required. |
Market price
risk
Uncertainty about future prices of financial instruments held. |
|
The Portfolio Manager has
responsibility for selecting investments in accordance with the
Company’s investment objective and policy and seeks to ensure that
investment in individual stocks falls within acceptable risk
levels. Compliance with the limits and guidelines contained in the
Company’s investment policy is monitored daily by Frostrow and
OrbiMed and reported to the Board monthly. |
Liquidity
risk
Ability to meet funding requirements when they arise. |
|
The Portfolio Manager has
constructed the portfolio so that funds can be raised at short
notice if required. |
Shareholder
profile
Activist shareholders whose interests are not consistent with the
long-term objectives of the Company may be attracted onto the
shareholder register. |
|
The AIFM provides a shareholder
analysis at every Board meeting so that the Board can give
consideration as to any action required; this is in addition to
regular reporting by the Company’s Stockbroker. The Board has
implemented an active discount management policy. |
Currency
risk
Movements in exchange rates could adversely affect the sterling
performance of the portfolio. |
|
A significant proportion of the
Company’s assets is, and will continue to be, invested in
securities denominated in foreign currencies, in particular U.S.
dollars. As the Company’s shares are denominated and traded in
sterling, the return to shareholders will be affected by changes in
the value of sterling relative to those foreign currencies. The
Board has made clear the Company’s position with regard to currency
fluctuations which is that it does not currently hedge against
currency exposure. |
Overdraft
facility
The provider of the Company’s overdraft facility may no longer be
prepared to lend to the Company. |
|
The Board, the AIFM and
the Portfolio Manager are kept fully informed of any likelihood of
the withdrawal of the overdraft facility so that repayment can be
effected in an orderly fashion.
The Company’s borrowing requirements are met through the
utilisation of an overdraft facility, repayable on demand, provided
by J.P. Morgan Clearing Corp. |
Credit risk
The Company is exposed to credit risk arising from the use of
counterparties. If a counterparty were to fail, the Company could
be adversely affected through either a delay in settlement or a
loss of assets. |
|
The most significant
counterparty the Company is exposed to is J.P. Morgan Clearing Corp
(the Company’s Prime Broker) which is responsible for the
safekeeping of the Company’s assets and provides the overdraft
facility to the Company. As part of the arrangements with J.P.
Morgan Clearing Corp they may take assets, up to 140% of the value
of the drawn overdraft, as collateral. Such assets taken as
collateral by J.P. Morgan Clearing Corp may be used, loaned, sold,
rehypothecated or transferred. J.P. Morgan Clearing Corp is a
registered broker-dealer and is accordingly subject to limits on
rehypothecation, in particular limitations set out in U.S.
Securities and Exchange Commission Rule 15c3-3. In the event of
J.P. Morgan Clearing Corp’s insolvency, the Company may be unable
to recover in full assets held by the J.P. Morgan Clearing Corp as
Custodian.
This risk is managed through the selection of a financially strong
counterparty, through limitations on the use of gearing and through
reliance on a robust regulatory regime (SEC). Furthermore, the
external Auditor verifies the safekeeping of the assets or their
equivalent by confirmation from the Depositary/Prime Broker.
Further information on financial instruments and risk, as required
by IFRS 7, can be found in note 13 to the financial
statements. |
Long term viability
The Board has carried out a robust assessment of the principal
risks facing the Company including those that would threaten its
business model, future performance, solvency or liquidity. The
Board has drawn up a matrix of risks facing the Company and has put
in place a schedule of investment limits and restrictions,
appropriate to the Company’s investment objective and policy, in
order to mitigate these risks as far as practicable.
Previously, the Board considered it appropriate to assess the
Company’s viability over rolling three-year time horizons. However,
the Board now believes it to be more appropriate to make this
assessment over a five-year period. This basis is deemed more
appropriate due to our Portfolio Manager’s long-term investment
horizon and also what we believe to be investors’ horizons, taking
account of the Company’s current position and the potential impact
of the principal risks and uncertainties.
The Directors also took into account the liquidity of the
portfolio when considering the viability of the Company over a
five-year period and its ability to meet liabilities as they fall
due. In addition, the Board has noted that an opportunity to vote
on the continuation of the Company is given to shareholders every
five years. The next such continuation vote will be held at the
Annual General Meeting in 2020.
The Directors do not expect there to be any significant change
in the principal risks that have been identified and the adequacy
of the mitigating controls in place. Also the Directors do not
envisage any change in strategy or objectives or any events that
would prevent the Company from continuing to operate over that
period as the Company’s assets are liquid, its commitments are
limited and the Company intends to continue to operate as an
investment trust. The Directors believe that only a substantial
financial crisis affecting the global economy and causing
substantial falls in share prices could have an impact on this
assessment.
Based on this assessment, the Directors have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the next five-year
period.
Looking to the future
The Board concentrates its attention on the Company’s investment
performance and OrbiMed’s investment approach and on factors that
may have an effect on this approach. Marketing reports are given to
the Board at each Board meeting by the AIFM which include how the
Company will be promoted and details of planned communications with
existing and potential shareholders. The Board is regularly updated
by the AIFM on wider investment trust industry issues and
discussions are held at each Board meeting concerning the Company’s
future development and strategy.
A review of the Company’s year, its performance since the
year-end and the outlook for the Company can be found in the
Chairman’s Statement and in the Portfolio Manager’s Review.
By order of the Board
Frostrow Capital LLP
Company Secretary
25 May 2017
Governance / Board of Directors
Andrew Joy
(Chairman of the Board and also Chairman of the Nominations
Committee)
A Director since 2012
Seeks annual re-election by shareholders
Andrew was one of the founding Partners of Cinven, a leading
private equity firm investing in Europe and the U.S. He is a Senior Advisor of
Stonehage Fleming Group and Chairman of the investment committee of
FPE Capital. He has been Chairman or Director of numerous growing
companies over the past 30 years. He is a former Chairman of the
BVCA (British Venture Capital and Private Equity Association) and
Director of the EVCA.
Shareholding in the Company: 55,000
Sven Borho
A Director since 2006
Seeks annual re-election by shareholders
Sven is a founding Partner of OrbiMed, the Company’s Portfolio
Manager. He heads the public equity team and is the portfolio
manager for OrbiMed’s public equity and hedge funds. Sven has
played an integral role in the growth of OrbiMed’s asset management
activities. In 1991 he joined OrbiMed’s predecessor and was
promoted to portfolio manager in 1993. He studied business
administration at Bayreuth University in Germany and received a M.Sc. (Econs.),
Accounting and Finance, from The London School
of Economics.
Shareholding in the Company: 236,218
Peter Keen
(Chairman of the Audit Committee)
A Director since 1997
Seeks annual re-election by shareholders
A Chartered Accountant, Peter has over 30 years’ experience in
the management and financing of life science businesses and has
served on the boards of many private and public companies. Peter is
a Director of MRC Technology Ltd and Endomagnetics Limited and was
previously Chief Executive of the technology investment firm
Cambridge Innovation Capital plc. For nine years he was the Senior
Independent Director of Abcam plc and was a co-founder of
Chiroscience Group plc.
Shareholding in the Company: 55,000
Steven Bates
(Chairman of the Management Engagement Committee)
A Director since 2015
Seeks annual re-election by shareholders
Steven is chairman of F&C Capital and Income Investment
Trust plc, Baring Emerging Europe plc and the Vinacapital Vietnam
Opportunity Fund Limited. He is a non-executive director of British
Empire Trust plc and is also a director of Guard Cap Asset
Management Limited. He sits on, or is advisor to, various
committees in the wealth management and pension fund areas. He was
head of global emerging markets at J.P. Morgan Asset Management
until 2002.
Shareholding in the Company: Nil
Professor Dame Kay Davies,
CBE
(Chairman of the Remuneration Committee and Senior Independent
Director)
A Director since 2012
Seeks annual re-election by shareholders
Professor Dame Kay Davies is the
Dr. Lee’s Professor of Anatomy and Associate Head of the Medical
Sciences Division at the University of
Oxford and a fellow of Hertford College. She is also Co-Director of
the Oxford Neuromuscular Centre, an Independent Director of UCB
Pharma S.A, Deputy Chairman of the Wellcome Trust and a member of
the Scientific Advisory Board of biopharmaceutical company UCB
Pharma S.A. As part of her role as Deputy Chairman of the Wellcome
Trust she serves on the GRL Board (Sanger Institute) and the Genome
England Board (NHS).
Shareholding in the Company: 3,500
The Rt Hon Lord Willetts
A Director since 2015
Seeks annual re-election by shareholders
Lord Willetts is Executive Chairman of the Resolution Foundation
and a Visiting Professor at King's College London. He is also a
Governor of the Ditchley Foundation, a member of the Council of the
Institute for Fiscal Studies and a Board member of the Francis
Crick Institute and of the Biotech Industry Association.
He was Minister for Universities and Science, attending Cabinet,
from 2010-2014. He was the Member of Parliament for Havant from 1992-2015. Before that, Lord
Willetts worked at HM Treasury and the Number 10 Policy Unit. He
also served as Paymaster General in the last Conservative
Government.
Shareholding in the Company: Nil
Julia Le Blan
A Director since July 2016
Seeks annual re-election by shareholders
A Chartered Accountant Julia has worked in the financial
services industry for over 30 years. She was formerly a tax partner
at Deloitte and sat for two terms on the AIC’s technical
committee.
She is a non-executive Director of F&C UK High Income Trust
plc, Impax Environmental Markets plc, J.P. Morgan US Smaller
Companies Investment Trust plc and Aberforth Smaller Companies
Trust plc.
Shareholding in the Company: 4,000
Meeting attendance
The table below sets out the number of scheduled Board and
Committee meetings held during the year ended 31 March 2017 and the number of meetings attended
by each Director.
|
Management
Engagement
Committee* |
Board |
Audit and
Management
Engagement
Committee |
Nominations
Committee |
Remuneration
Committee |
Number of meetings held in
2016/17: |
1 |
4 |
2 |
1 |
1 |
The Rt Hon Lord Waldegrave of North
Hill† |
— |
2 |
1 |
— |
— |
Steven Bates |
1 |
4 |
2 |
1 |
1 |
Sven Borho^ |
— |
4 |
— |
— |
— |
Professor Dame Kay Davies, CBE |
1 |
4 |
2 |
1 |
1 |
Andrew Joy |
1 |
4 |
2 |
1 |
1 |
Peter Keen |
1 |
4 |
2 |
1 |
1 |
Julia Le Blan** |
1 |
3 |
1 |
1 |
1 |
The Rt Hon Lord Willetts |
1 |
4 |
2 |
1 |
1 |
All of the serving Directors attended the Annual General Meeting
held on 12 July 2016.
- At a Board meeting held in November
2016 it was agreed to split the ‘audit’ and ‘management
engagement’ functions of the Audit and Management Engagement
Committee and to create two new committees to be responsible for
these areas. The newly constituted Audit Committee did not meet
during the year. However, the Audit and Management Engagement
Committee met twice.
† Retired
on 12 July 2016.
^
Sven Borho is not a member of any of
the Company’s committees.
** Appointed on
12 July 2016.
Governance / Corporate Governance
The Board and Committees
Responsibility for effective governance lies with the Board. The
governance framework of the Company reflects the fact that as an
investment company it has no employees. Portfolio management is
delegated to OrbiMed and risk management, company management,
company secretarial, administrative and marketing services are
delegated to Frostrow. During the year, in order to strengthen its
governance structure, the Board agreed to split the ‘audit’ and
‘management engagement’ functions of the Audit and Management
Engagement Committee and to create two new committees (an Audit
Committee and a Management Engagement Committee) to be responsible
for these areas. This structure is reflected in the diagram
below.
The
Board
Chairman – Andrew Joy
Senior Independent Director – Professor Dame Kay Davies
Five additional non-executive Directors, all considered
independent, except for Sven Borho.
Key responsibilities: |
Remuneration
Committee
Chairman
Professor Dame
Kay Davies
All Independent Directors
Key responsibilities: |
Audit
Committee
Chairman
Peter Keen*
All Independent Directors
Key responsibilities: |
Nominations
Committee
Chairman
Andrew Joy
All Independent Directors
Key responsibilities:
to make recommendations for any changes or new appointments. |
Management
Engagement Committee
Chairman
Steven Bates
All Independent Directors
Key responsibilities: |
* The Directors
believe that Peter Keen has the
necessary recent and relevant financial experience to Chair the
Company’s Audit Committee.
Copies of the full terms of reference, which clearly define the
responsibilities of each Committee, can be obtained from the
Company Secretary, will be available for inspection at the Annual
General Meeting, and can be found on the Company’s website at
Corporate Governance
The Directors are accountable to shareholders for the governance
of the Company’s affairs. The UK Listing Rules require all listed
companies to disclose how they have applied the principles and
complied with the provisions of the UK Corporate Governance Code
(the ‘UK Code’) issued by the Financial Reporting Council (the
‘FRC’). The UK Code can be viewed at www.frc.org.uk.
The Association of Investment Companies (‘AIC’) publishes a Code
of Corporate Governance (‘AIC Code’) and a Corporate Governance
Guide for Investment Companies (‘AIC Guide’). In July 2016 the AIC published a revised AIC Code
and AIC Guide.
The Financial Reporting Council has confirmed that by following
the AIC Code and the AIC Guide, boards of investment companies will
meet their obligations in relation to the UK Code and paragraph
9.8.6 of the UK Listing Rules.
The AIC Code and AIC Guide address the principles set out in the
UK Code as well as additional principles and recommendations on
issues that are specific to investment trusts. The AIC Code can be
viewed at www.theaic.co.uk.
The Board considers that reporting against the principles and
recommendations of the AIC Code, and by reference to the AIC Guide
(which incorporates the UK Code), will provide better information
to shareholders.
Statement of Compliance
The Company has complied with the recommendations of the AIC
Code and the relevant provisions of the UK Corporate Governance
Code, except as follows:
The UK Code includes certain provisions relating to:
- the role of the chief executive
- executive directors’ remuneration
- the need for an internal audit function
For the reasons set out in the AIC Guide, and as explained in
the UK Code, the Board considers these provisions are not relevant
to the position of the Company, being an externally managed
investment company. In particular, all of the Company’s day-to-day
management and administrative functions are outsourced to third
parties. As a result, the Company has no executive directors,
employees or internal operations. Therefore with the exception of
the need for an internal audit function, the Company has not
reported further in respect of these provisions.
The principles of the AIC Code
The AIC Code is made up of 21 principles split into three
sections covering:
- The Board
- Board Meetings and relations with AIFM and Portfolio
Manager
- Shareholder Communications
AIC Code Principle |
|
Compliance Statement |
The Board
1. The Chairman should be independent. |
|
The Chairman, Andrew
Joy is responsible for the leadership of the Board and for ensuring
its effectiveness.
The Chairman continues to be independent of the AIFM and the
Portfolio Manager. There is a clear division of responsibility
between the Chairman, the Directors, the AIFM, the Portfolio
Manager and the Company’s other third party service providers. The
Chairman is responsible for the leadership of the Board and for
ensuring its effectiveness in all aspects of its role. There are no
relationships that may create a conflict of interest between the
Chairman’s |
2. A majority of the Board should
be independent of the Manager. |
|
Mr. Sven Borho is a
Founding General Partner of OrbiMed, the Company’s Portfolio
Manager and has served on the Board for more than nine years from
the date of his first election. He is not considered to be an
Independent Director. Mr Borho submits himself for annual
re-election by shareholders.
The Board consists of six other non-executive Directors, each of
whom is independent of the AIFM and the Portfolio Manager. None of
the Board members is or has been an employee of the Company. |
3. Directors should be submitted
for re-election at regular intervals. Nomination for re-election
should not be assumed but be based on disclosed procedures and
continued satisfactory performance. |
|
All Directors (who are
not retiring from the Board) submit themselves for annual
re-election by shareholders.
The individual performance of each Director standing for
re-election is evaluated annually by the remaining members of the
Board and, if considered appropriate, a recommendation is made that
shareholders vote in favour of their re-election at the Company’s
Annual General Meeting to be held in July 2017.
Peter Keen will be retiring from the Board and will therefore not
be seeking re-election at this year’s Annual General Meeting.
Julia Le Blan joined the Board on 12 July 2016. Accordingly, her
appointment will be proposed to shareholders for ratification at
the Annual General Meeting |
4. The Board should have a policy
on tenure, which is disclosed in the annual report. |
|
The Board, meeting as
the Nominations Committee, considers the structure of the Board and
recognises the need for progressive refreshing of its members.
The Board subscribes to the view expressed within the AIC Code that
long-serving Directors should not be prevented from forming part of
an independent majority. It does not consider that a Director’s
tenure necessarily reduces his or her ability to act independently
and, following formal performance evaluations, believes that each
of those Directors is independent in character and judgment and
that there are no relationships or circumstances which are likely
to affect their judgment. The Board’s policy on tenure is that
continuity and experience are considered to add significantly to
the strength of the Board and, as such, no limit on the overall
length of service of any of the Company’s Directors, including the
Chairman, has been imposed. In view of its non-executive nature,
the Board considers that it is not appropriate for the Directors to
be appointed for a specified term, although new Directors are
appointed with the expectation that they will serve for a minimum
period of three years subject to shareholder approval.
The AIC Code states that any Director who has served for more than
nine years is subject to annual re-appointment. All of the
Company’s Directors (who are not retiring from the Board) seek
re-appointment at each Annual General Meeting.
The terms and conditions of the Directors’ appointments are set out
in letters of engagement which are available for inspection on
request at the office of Frostrow, the Company’s AIFM and from the
Company Secretary at the Company’s Annual General Meeting to be
held in July 2017. |
5. There should be full
disclosure of information about the Board. |
|
The Directors’
biographical details demonstrate the wide range of skills and
experience that they bring to the Board together with details of
their other directorships and employment.
Further details of Board composition and succession planning can be
found within the Chairman’s Statement. |
6. The Board should aim to have a
balance of skills, experience, length of service and knowledge of
the company. |
|
The Nominations
Committee considers annually the skills possessed by the Board and
identifies any skill shortages to be filled by new Directors.
When considering new appointments, the Board reviews the skills of
the Directors and seeks to add persons with complementary skills or
who possess the skills and experience which fill any gaps in the
Board’s knowledge or experience and who can devote sufficient time
to the Company to carry out their duties effectively.
The experience of the current Directors is detailed in their
biographies.
The Company is committed to ensuring that any vacancies arising are
filled by the most qualified candidates and recognises the value of
diversity in the composition of the Board. When Board positions
become available as a result of retirement or resignation, the
Company will ensure that a diverse group of candidates is
considered. |
7. The Board
should undertake a formal and rigorous annual evaluation of its own
performance and that of its committees and individual
directors. |
|
During
the year the performance of the Board, its committees and
individual Directors (including each Director’s independence) was
evaluated through a formal assessment process led by the Senior
Independent Director. This involved the circulation of a Board
effectiveness checklist, tailored to suit the nature of the
Company, followed by discussions between the Senior Independent
Director and each of the Directors where necessary. The performance
of the Chairman was evaluated by the other Directors under the
leadership of the Senior Independent Director. The review concluded
that the Board was working well.
The Board is satisfied that the structure of skills, mix,
experience, independence, knowledge, diversity and operation of the
Board continue to be effective and relevant for the Company. |
8. Directors’ remuneration should
reflect their duties, responsibilities and the value of their time
spent. |
|
The Remuneration
Committee annually reviews the fees paid to the Directors and
compares these with the fees paid by the Company’s peer group and
the investment trust industry generally, taking into account the
level of commitment and responsibility of each Board member.
Details on the remuneration arrangements for the Directors of the
Company can be found in the Directors’ Remuneration Policy Report
and Directors’ Remuneration Report.
As all of the Directors are non-executive, the Board considers that
it is acceptable for the Senior Independent Director of the Company
to chair meetings when discussing Directors’ fees. The Senior
Independent Director takes no part in discussions regarding her own
remuneration. |
9. The independent directors
should take the lead in the appointment of new directors and the
process should be disclosed in the annual report. |
|
The Nominations
Committee is comprised of all directors who are independent and
chaired by the Chairman of the Board. Subject to there being no
conflicts of interest, all members of the Committee are entitled to
vote on candidates for the appointment of new directors and on
recommending for shareholders’ approval the Directors seeking
re-election at the Annual General Meeting.
The Chairman does not Chair the meeting when the committee is
dealing with matters concerning the appointment of a successor to
the Chairmanship.
Details of the Board’s commitment to diversity is set out within
the Business Review.
As part of the process to appoint Julia Le Blan, the Board engaged
the services of a specialist recruitment consultant, Nurole. Nurole
prepared a list of potential candidates for consideration by a
sub-committee appointed by the Nominations Committee. A short list
was then arrived at, the candidates were interviewed and Julia Le
Blan was subsequently appointed. Nurole has no other connection
with the Company. |
10. Directors should be offered
relevant training and induction. |
|
New appointees to the
Board are provided with a full induction programme. The programme
covers the Company’s investment strategy, policies and practices.
The Directors are also given key information on the Company’s
regulatory and statutory requirements as they arise including
information on the role of the Board, matters reserved for its
decision, the terms of reference for the Board Committees, the
Company’s corporate governance practices and procedures and the
latest financial information. It is the Chairman’s responsibility
to ensure that the Directors have sufficient knowledge to fulfil
their role and Directors are encouraged to participate in training
courses where appropriate.
The Directors have access to the advice and services of a Company
Secretary through its appointed representative which is responsible
to the Board for ensuring that Board procedures are followed and
that applicable rules and regulations are complied with. The
Company Secretary is also responsible for ensuring good information
flows between all parties. |
11. The Chairman (and the Board)
should be brought into the process of structuring a new launch at
an early stage. |
|
Principle 11 applies to
the launch of new investment companies and is therefore not
applicable to the Company. |
Board Meetings and
relations with Frostrow and OrbiMed |
12. Boards and managers should
operate in a supportive, co-operative and open
environment. |
|
The Board meets regularly throughout
the year and a representative of the AIFM and Portfolio Manager is
in attendance at each meeting and Committee meetings. The Chairman
encourages open debate to foster a supportive and co-operative
approach for all participants. |
13. The primary focus at regular
Board meetings should be a review of investment performance and
associated matters, such as gearing, asset allocation,
marketing/investor relations, peer group information and industry
issues. |
|
The Board has agreed a
schedule of matters specifically reserved for decision by the
Board. This includes establishing the investment objectives,
strategy and benchmarks, the level of borrowing, the permitted
types or categories of investments, the markets in which
transactions may be undertaken, the amount or proportion of the
assets that may be invested in any category of investment or in any
one investment, and the Company’s share issuance, share buy-back
and treasury share policies.
The Board, at its regular meetings, undertakes reviews of key
investment and financial data, revenue projections and expenses,
analysis of asset allocation, transactions and performance
comparisons, share price and net asset value performance, marketing
and shareholder communication strategies, the risks associated with
pursuing the investment strategy, peer group information and
industry issues.
The Chairman is responsible for ensuring that the Board receive
accurate, timely and clear information. Where appropriate
representatives of the AIFM report on issues affecting the
company.
All Directors have access to independent professional advice where
they judge it necessary to discharge their responsibility
properly.
The Audit Committee reviews the Company’s risk matrix and the
performance and cost of the Company’s third party service
providers. |
14. Boards should give sufficient
attention to overall strategy. |
|
The Board is responsible for
strategy and has established an annual programme of agenda items
under which it reviews the objectives and strategy for the Company
at each meeting. |
15. The Board should regularly
review both the performance of, and contractual arrangements with,
the AIFM and the Portfolio Manager (or executives of a self-managed
company). |
|
The Management
Engagement Committee reviews annually the performance of the AIFM
and Portfolio Manager. The Committee considers the quality, cost
and remuneration method (including the performance fee) of the
service provided by the AIFM and the Portfolio Manager against
their contractual obligations and the Board receives monthly
reports on compliance with the investment restrictions which it has
set. It also considers the performance analysis provided by the
AIFM and the Portfolio Manager.
The Management Engagement Committee reviews the compliance and
control systems of both the AIFM and the Portfolio Manager in
operation insofar as they relate to the affairs of the Company and
the Board undertakes periodic reviews of the arrangements with and
the services provided by the Depositary, to ensure that the
safeguarding of the Company’s assets and security of the
shareholders’ investment is being maintained.
All Directors act in what they consider to be in the best interests
of the Company, consistent with their statutory duties set out in
the Companies Act 2006. |
16. The Board should agree
policies with the AIFM and the Portfolio Manager covering key
operational issues. |
|
The Portfolio
Management Agreement between the Company, the AIFM and Portfolio
Manager sets out the limits of Portfolio Manager’s authority,
beyond which Board approval is required. The Board has also agreed
detailed investment guidelines with the AIFM and the Portfolio
Manager, which are considered at each Board meeting.
A representative of the AIFM and Portfolio Manager attends each
meeting of the Board to address questions on specific matters and
to seek approval for specific transactions which the Portfolio
Manager is required to refer to the Board.
Frostrow in their capacity as the Company’s AIFM have delegated the
management of the portfolio and subsequent proxy voting to OrbiMed
as Portfolio Manager, who retain the services of Broadridge and
Glass Lewis to undertake operational and administrative duties
relating to proxy voting. The Portfolio Manager notifies the Board
of any contentious issues that require voting upon.
The Board has reviewed the Portfolio Manager’s Proxy Voting &
Class Action Policy. Reports on commissions paid by the Portfolio
Manager are submitted to the Board regularly. |
17. Boards should monitor the
level of the share price discount or premium (if any) and, if
desirable, take action to reduce it. |
|
The Board considers any
imbalances in the supply of and the demand for the Company’s shares
in the market and takes appropriate action when considered
necessary.
The Board considers the discount or premium to net asset value of
the Company’s share price at each Board meeting and reviews the
changes in the level of discount or premium and in the share price
since the previous Board meeting and over the previous twelve
months.
At each meeting the Board reviews reports from the AIFM on
marketing and shareholder communication strategies. It also
considers their effectiveness as well as measures of investor
sentiment and any recommendations on share issuance and share
buy-backs.
The Board does not consider that any conflicts arose from the AIFM
and Portfolio Manager promoting the Company alongside their other
clients. |
18. The Board should monitor and
evaluate other service providers. |
|
The Management
Engagement Committee reviews, at least annually, the performance of
all the Company’s third party service providers, including the
level and structure of fees payable and the length of the notice
period, to ensure that they remain competitive and in the best
interests of shareholders.
The Committee also reviews reports from the principal service
providers on compliance and the internal and financial control
systems in operation and relevant independent audit reports
thereon, as well as reviewing service providers’ anti-bribery and
corruption policies to address the provisions of the Bribery Act
2010.
The Board is satisfied that the Company’s Auditor does not carry
out any work for the AIFM and therefore no potential conflict will
arise. |
Shareholder
Communications |
19. The Board should regularly
monitor the shareholder profile of the company and put in place a
system for canvassing shareholder views and for communicating the
Board’s views to shareholders. |
|
A detailed analysis of
the substantial shareholders in the Company is provided to the
directors at each Board meeting. Representatives of the AIFM and
the Portfolio Manager regularly meet with institutional
shareholders and private client asset managers to discuss strategy
and to understand their issues and concerns and, if applicable, to
discuss corporate governance issues. The results of such meetings
are reported at the following Board meeting.
Regular reports from the Company’s broker are submitted to the
Board on investor sentiment and industry issues.
Shareholders wishing to communicate with the Chairman, the Senior
Independent Director or any other member of the Board, may do so by
writing to the Company, for the attention of the Company Secretary
at the offices of the AIFM. All shareholders are encouraged to
attend the Annual General Meeting, where they are given the
opportunity to question the Chairman, the Board and representatives
of the Portfolio Manager. The Portfolio Manager will make a
presentation to shareholders covering the investment performance
and strategy of the Company at the forthcoming Annual General
Meeting to be held in July 2017.
The Directors welcome the views of all shareholders and place
considerable importance on communications with them. The Chairman
will ensure that all members of the Board are made aware of the
issues and concerns raised by shareholders and that the appropriate
steps are taken so that the Board has an adequate understanding of
these views, through communication with the Company’s AIFM (e-mail
address: info@frostrow.com) and advisers. |
20. The Board should normally
take responsibility for, and have a direct involvement in, the
content of communications regarding major corporate issues even if
the manager is asked to act as spokesman. |
|
All substantive communications
regarding any major corporate issues are discussed by the Board
taking into account representations from the AIFM, the Portfolio
Manager, the Auditor, legal advisers and stockbroker. |
21. The Board should ensure that
shareholders are provided with sufficient information for them to
understand the risk/reward balance to which they are exposed by
holding the shares. |
|
The Company places
great importance on communication with shareholders and aims to
provide them with a full understanding of the Company’s investment
objective, policy and activities, its performance and the principal
investment risks by means of informative annual and half-year
reports. This is supplemented by the daily publication, through the
London Stock Exchange, of the net asset value per share of the
Company’s shares.
The Board is responsible for the overall management of the Company,
approval of the Company’s long-term objectives and commercial
strategy and the review of the Company’s Investment Policy. The
Board continues to review the setting of maximum borrowing limits
under which the AIFM and Portfolio Manager operates within.
The Annual Report provides information on Portfolio Manager’s
investment performance, portfolio risk and operational and
compliance issues. Further details on the risk/reward balance are
set out in note 13 to the Financial Statements.
The Company’s website, www.biotechgt.com, is regularly updated with
monthly fact sheets and provides useful information about the
Company including the Company’s financial reports and
announcements. |
The Board has considered the position of all of the Directors as
part of the evaluation process, and believes that it would be in
the Company’s best interests to propose them, with the exception of
Peter Keen who will be retiring from
the Board at the conclusion of the forthcoming Annual General
Meeting, for election or re-election at the forthcoming Annual
General Meeting for the following reasons:
Mr Andrew Joy, has been a
Director since March 2012 and
Chairman since July 2016. He has
extensive knowledge of the financial sector and was one of the
founding Partners of Cinven, a leading private equity firm
investing in Europe and the U.S.
He has been Chairman or Director of numerous growing companies over
the past 30 years.
Professor Dame Kay Davies, CBE,
who has been a Director since March
2012. She is Senior Independent Director and Chairman of the
Remuneration Committee, has extensive knowledge of the
biopharmaceutical sector and is the Dr Lee’s Professor of Anatomy
and Associate Head of the Medical Science Division at the
University of Oxford.
Julia Le Blan joined the Board in
July 2016. A Chartered Accountant and
a former tax partner at Deloitte, she has a wealth of financial
services industry experience. Julia will succeed Peter Keen as Chairman of the Audit Committee
upon his retirement from the Board.
Mr Sven Borho, who has been a
Director since March 2006 is one of
the founding partners of OrbiMed the Company’s Portfolio Manager.
He heads public equity and hedge funds and has played an integral
role in the growth of OrbiMed’s asset management activities.
Mr Steven Bates joined the Board
in July 2015. He has a wealth of
experience as an investment manager. He is Chairman of the
Management Engagement Committee.
The Rt Hon Lord Willetts joined the Board in November 2015. A former government minister, he
has extensive and relevant experience and a strong interest in the
biotechnology sector.
The Chairman is pleased to report that following a formal
performance evaluation, the Directors’ performance continues to be
effective and they continue to demonstrate commitment to the
role.
The Board’s responsibilities
The Board meets regularly and four Board meetings were held
during the year to deal with the stewardship of the Company and
other matters. There is a formal schedule of matters specifically
reserved for decision by the Board; it is responsible for all
aspects of the Company’s affairs, including the setting of
parameters for and the monitoring of the investment strategy and
the review of investment performance and investment policy. It also
has responsibility for all corporate strategy issues, dividend
policy, share buy-back and issuance policy, borrowing, share price
and discount/premium monitoring and corporate governance
matters.
Conflicts of interest
Directors have a duty to avoid a situation in which he or she
has, or can have, a direct or indirect interest that conflicts, or
possibly may conflict, with the Company’s interests (a “situational
conflict”).
It is the responsibility of each individual Director to avoid an
unauthorised conflict situation arising. He or she must request
authorisation from the Board as soon as he or she becomes aware of
the possibility of a situational conflict arising.
The Board is responsible for considering Directors’ requests for
authorisation of situational conflicts and for deciding whether
they should be authorised. The factors to be considered will
include whether the situational conflict could prevent the Director
from performing his or her duties, whether it has, or could have,
any impact on the Company and whether it could be regarded as
likely to affect the judgment and/or actions of the Director in
question. When the Board is deciding whether to authorise a
conflict or potential conflict, only Directors who have no interest
in the matter being considered are able to take the relevant
decision, and in taking the decision the Directors must act in a
way they consider, in good faith, will be most likely to promote
the Company’s success. The Directors are able to impose limits or
conditions when giving authorisation if they think this is
appropriate in the circumstances.
A register of conflicts is maintained by the Company Secretary
and is reviewed at each Board meeting, to ensure that any
authorised conflicts remain appropriate. Directors are required to
confirm at these meetings whether there has been any change to
their position.
The Directors must also comply with the statutory rules
requiring company directors to declare any interest in an actual or
proposed transaction or arrangement with the Company.
Anti-Bribery and corruption policy
The Board has adopted a zero tolerance approach to instances of
bribery and corruption. Accordingly it expressly prohibits any
Director or associated persons when acting on behalf of the
Company, from accepting, soliciting, paying, offering or promising
to pay or authorise any payment, public or private, in the
United Kingdom or abroad to secure
any improper benefit for themselves or for the Company.
A copy of the Company’s anti-bribery and corruption policy can
be found on its website at www.biotechgt.com. The policy is
reviewed regularly by the Audit Committee.
Relationship with shareholders
The Board, the AIFM and the Portfolio Manager consider
maintaining good communications with shareholders and engaging with
larger shareholders through meetings and presentations a key
priority. Shareholders are being informed by the publication of
annual and half year reports which include financial statements.
These reports are supplemented by the daily release of the net
asset value per share to the London Stock Exchange and the
publication of monthly fact sheets. All this information including
interviews with the Portfolio Manager is available on the Company’s
website at www.biotechgt.com.
The Board is also keen that the Annual General Meeting (“AGM”)
be a participative event for all shareholders. The Portfolio
Manager makes a presentation and shareholders are encouraged to
attend. The Chairmen of the Board and of the Committees attend the
AGM and are available to respond to queries and concerns from
shareholders. Twenty working days’ notice of the AGM has been given
to shareholders and separate resolutions are proposed in relation
to each substantive issue. Shareholders may submit questions for
the AGM in advance of the meeting or make general enquiries of the
Company via the Company Secretary at the registered office of the
Company. The Directors make themselves available after the AGM to
meet shareholders.
Where the vote is decided on a show of hands, the proxy votes
received are relayed to the meeting and subsequently published on
the Company’s website. Proxy forms have a ‘vote withheld’ option.
The Notice of Meeting sets out the business of the AGM together
with the full text of any special resolutions.
The Board monitors the share register of the Company; it also
reviews correspondence from shareholders at each meeting and
maintains regular contact with major shareholders. Shareholders who
wish to raise matters with a Director may do so by writing to them
at the registered office of the Company.
Exercise of voting powers
The Board has delegated authority to the Portfolio Manager to
vote the shares owned by the Company. The Board has instructed that
the Portfolio Manager submit votes for such shares wherever
possible. This accords with current best practice whilst
maintaining a primary focus on financial returns. The Portfolio
Manager may refer to the Board on any matters of a contentious
nature. The Company does not retain voting rights on any shares
that are subject to rehypothecation in connection with the
overdraft facility provided by J.P. Morgan Clearing Corp.
Nominee share code
Where shares are held in a nominee company name and where the
beneficial owner of the shares is unable to vote in person, the
Company nevertheless undertakes:
- to provide the nominee company with multiple copies of
shareholder communications, so long as an indication of quantities
has been provided in advance; and
- to allow investors holding shares through a nominee company to
attend general meetings, provided the correct authority from the
nominee company is available.
Nominee companies are encouraged to provide the necessary
authority to underlying shareholders to attend the Company’s
general meetings.
Beneficial owners of shares –
information rights
Beneficial owners of shares who have been nominated by the
registered holder of those shares to receive information rights
under section 146 of the Companies Act 2006 are required to direct
all communications to the registered holder of their shares rather
than to the Company’s registrar, Capita Asset Services, or to the
Company directly.
By order of the Board
Frostrow Capital LLP
Company Secretary
25 May 2017
Governance / Report of the
Directors
The Directors present this Annual Report on the affairs of the
Company together with the Audited Financial Statements and the
Independent Auditor’s Report for the year ended 31 March 2017.
Company management
Alternative
Investment Fund Manager
Frostrow under the terms of its AIFM agreement with the Company
provides, inter alia, the following services: delegation
(subject to the oversight of Frostrow and the Board) of the
portfolio management function to OrbiMed; investment portfolio
administration and valuation; risk management services; marketing
and shareholder services; share price discount and premium
management; administrative and secretarial services; advice and
guidance in respect of corporate governance requirements;
maintenance of the Company’s accounting records; preparation and
dispatch of annual and half year reports and monthly fact sheets;
ensuring compliance with applicable legal and regulatory
requirements; and maintenance of the Company’s website.
Frostrow receives a periodic fee equal to 0.30% per annum of the
Company’s market capitalisation, plus a fixed amount equal to
£60,000 per annum. Either party may terminate the AIFM Agreement on
not less than 12 months’ notice.
Portfolio
Manager
OrbiMed under the terms of its portfolio management agreement
with the AIFM and the Company provides, inter alia, the
following services: the seeking out and evaluating of investment
opportunities; recommending the manner by which monies should be
invested, disinvested, retained or realised; advising on how rights
conferred by the investments should be exercised; analysing the
performance of investments made; and advising the Company in
relation to trends, market movements and other matters which may
affect the investment objective and policy of the Company. OrbiMed
receives a periodic fee equal to 0.65% per annum of the Company’s
net asset value. The proportion of the Company’s assets committed
for investment in OrbiMed Asia Partners L.P., a limited partnership
managed by OrbiMed Asia G.P., L.P., an affiliate of the Portfolio
Manager, is excluded from the fee calculation. The Portfolio
Management Agreement may be terminated by either Frostrow or the
Portfolio Manager giving notice of not less than 12 months.
Performance
fee
Dependent on the level of long-term outperformance of the
Company, the AIFM and Portfolio Manager are entitled to the payment
of a performance fee. The performance fee is calculated by
reference to the amount by which the Company’s net asset value
(‘NAV’) performance has outperformed the NASDAQ Biotechnology Index
(sterling adjusted), the Company’s benchmark index.
The fee is calculated quarterly by comparing the cumulative
performance of the Company’s NAV with the cumulative performance of
the benchmark since the commencement of the performance fee
arrangement on 30 June 2005. The
performance fee amounts to 16.5% of any outperformance over the
benchmark, the AIFM receiving 1.5% and the Portfolio Manager
receiving 15% respectively. Provision is also made within the daily
NAV per share calculation as required and in accordance with
generally accepted accounting standards.
In order to ensure that only sustained outperformance is
rewarded, at each quarterly calculation date any performance fee is
based on the lower of:
(i) The cumulative outperformance
of the portfolio over the benchmark as at the quarter end date;
and
(ii) The cumulative outperformance of
the portfolio over the benchmark as at the corresponding quarter
end date in the previous year.
In addition, 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.
The proportion of the Company’s assets invested in OrbiMed Asia
Partners L.P. is excluded from the Portfolio Manager’s performance
fee calculation.
Depositary and
Prime Broker
The Company appointed J.P. Morgan Europe Limited (the
“Depositary”) as its depositary. Under the terms of the Depositary
Agreement the Company has agreed to pay the Depositary a fee
calculated at 1.75 bps on net assets up to £150 million, 1.50 bps
on net assets between £150 million and £300 million, 1.00 bps on
net assets between £300 million and £500 million and 0.50 bps on
net assets above £500 million.
The Depositary has delegated the custody and safekeeping of the
Company’s assets to J.P. Morgan Clearing Corp (the “Prime
Broker”).
Under the terms of a Delegation Agreement, liability has been
transferred under Article 21(12) of the AIFMD for the loss of the
Company’s financial instruments held in custody by the Prime Broker
to the Prime Broker in accordance with Article 21(13) of the AIFMD.
While the Depositary Agreement prohibits the re-use of the
Company’s assets by the Depositary or the Prime Broker without the
prior consent of the Company or Frostrow, the Company has consented
to the transfer and re-use of its assets by the Prime Broker (known
as “rehypothecation”) in accordance with the terms of an
institutional account agreement between the Company, the Prime
Broker and certain other J.P. Morgan Entities (as defined therein)
(the “Institutional Account Agreement”). This activity is
undertaken in order to take advantage of lower financing costs on
the Company’s overdraft and also lower custody charges.
The Prime Broker is a registered broker-dealer and is
accordingly subject to limits on rehypothecation, in particular
limitations set out in U.S. SEC Rule 15c3-3. In the event of the
Prime Broker’s insolvency, the Company may be unable to recover in
full all assets held by the Prime Broker as Custodian. (See note 13
for further details.)
AIFM and Portfolio Manager evaluation
and re-appointment
The performance of the AIFM and the Portfolio Manager is
reviewed by the Company’s Management Engagement Committee (the
“Committee”) with a formal evaluation being undertaken each year.
As part of this process, the Committee monitors the services
provided by the AIFM and the Portfolio Manager and receives regular
reports and views from them. The Committee also receives
comprehensive performance measurement reports to enable it to
determine whether or not the performance objectives set by the
Board have been met. The Committee reviewed the appropriateness of
the appointment of the AIFM and the Portfolio Manager in
February 2017 with a recommendation
being made to the Board.
The Board believes the continuing appointment of the AIFM and
the Portfolio Manager, under the terms described above and on the
previous page, is in the interests of shareholders as a whole. In
coming to this decision, it also took into consideration the
following additional reasons:
- the quality and depth of experience allocated by the Portfolio
Manager to the management of the portfolio and the level of
performance of the portfolio in absolute terms and also by
reference to the benchmark index; and
- the quality and depth of experience of the company management,
company secretarial, administrative and marketing team that the
AIFM allocates to the management of the Company.
Overdraft facility
The Company’s borrowing requirements are met through the
utilisation of an overdraft facility, repayable on demand, provided
by J.P. Morgan Clearing Corp. (Further details can be found in
notes 1 and 13.
Share capital
As part of the package of measures adopted in 2005 by the Board
to improve the attraction of the Company’s shares to new investors
and also to provide the prospect of a sustained improvement in the
rating of the Company’s shares, an active discount management
policy was implemented to buy-back shares to either hold in
treasury or for cancellation if the market price is at a discount
greater than 6% to net asset value per share. As at 31 March 2017, the discount was 6.6%. The making
and timing of any share buy-back remains at the absolute discretion
of the Board. Authority to buy-back up to 14.99% of the Company’s
issued share capital is sought at each Annual General Meeting.
Shareholders should note, however, that it remains possible for
the share price discount to the net asset value per share to be
greater than 6% on any one day. This is due to the fact that the
share price continues to be influenced by overall supply and demand
for the Company’s shares in the secondary market. The volatility of
the net asset value per share in an asset class such as healthcare
is another factor over which the Board has no control.
During the year a total of 4,455,561 shares were bought back
representing 7.4% of the issued share capital at the beginning of
the year. The purchases were made at a total cost of £29.7 million
(including expenses). No shares have been repurchased by the
Company since the year-end. As at 25 May
2017 there were 55,839,913 shares in issue.
Annual General Meeting
THE FOLLOWING INFORMATION TO BE
DISCUSSED AT THE FORTHCOMING ANNUAL GENERAL MEETING IS IMPORTANT
AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt about the
action you should take, you should seek advice from your
stockbroker, bank manager, solicitor, accountant or other financial
adviser authorised under the financial services and markets act
2000 (as amended). if you have sold or transferred all of your
ordinary shares in the company, you should pass this document,
together with any other accompanying documents, including the form
of proxy, at once to the purchaser or transferee, or to the
stockbroker, bank or other agent through whom the sale or transfer
was effected, for onward transmission to the purchaser or
transferee.
Resolutions relating to the following items of special business
will be proposed at the forthcoming Annual General Meeting.
Resolution 11 Authority to allot shares
Resolution 12 Authority to disapply pre-emption rights
Resolution 13 Authority to buy back shares
Resolution 14 Authority to hold General Meetings (other than the
AGM) on at least 14 working days’ notice
The full text of the resolutions can be found in the Notice of
Annual General Meeting.
Directors
Directors’ &
Officers’ liability insurance cover
Directors’ & Officers’ liability insurance cover was
maintained by the Board during the year ended 31 March 2017. It is intended that this policy
will continue for the year ended 31 March
2018 and subsequent years.
Directors’
indemnities
As at the date of this report, indemnities are in force between
the Company and each of its Directors under which the Company has
agreed to indemnify each Director, to the extent permitted by law,
in respect of certain liabilities incurred as a result of carrying
out his/her role as a Director of the Company. The Directors are
also indemnified against the costs of defending any criminal or
civil proceedings or any claim by the Company or a regulator as
they are incurred provided that where the defence is unsuccessful
the Director must repay those defence costs to the Company. The
indemnities are qualifying third party indemnity provisions for the
purposes of the Companies Act 2006.
A copy of each deed of indemnity is available for inspection at
the Company’s registered office during normal business hours and
will be available for inspection at the Annual General Meeting.
Substantial shareholdings
The Company was aware of the following substantial interests in
the voting rights of the Company as at 30
April 2017, the latest practicable date before publication
of the annual report.
|
30
April 2017 |
31
March 2017 |
|
|
% of |
|
% of |
|
|
Issued |
|
Issued |
|
No. of |
share |
No. of |
share |
Shareholders |
shares |
capital |
shares |
capital |
Hargreaves
Lansdown |
5,278,037 |
9.5 |
5,335,384 |
9.6 |
East Riding of
Yorkshire |
4,698,000 |
8.4 |
4,698,000 |
8.4 |
Alliance Trust
Savings |
2,895,039 |
5.2 |
2,939,133 |
5.3 |
Standard Life
Wealth |
1,860,553 |
3.3 |
1,870,613 |
3.3 |
Veritas Investment
Management |
1,706,202 |
3.1 |
1,703,752 |
3.1 |
Hansa Capital
Partners |
1,677,615 |
3.0 |
2,073,415 |
3.7 |
As at 31 March 2017 the Company
had 55,839,913 shares in issue. As at 30
April 2017 the Company had 55,839,913 shares in issue.
Financial instruments
The Company’s financial instruments comprise its portfolio, cash
balances, debtors and creditors that arise directly from its
operations, such as sales and purchases awaiting settlement and
accrued income. The financial risk management and policies arising
from its financial instruments are disclosed in note 13 to the
Financial Statements.
Results and dividend
The results attributable to shareholders for the year and the
transfer from reserves are shown in the Income Statement. No
dividend is proposed in respect of the year ended 31 March 2017 (2016: nil).
Alternative performance measures
The Financial Statements set out the required statutory
reporting measures of the Company’s financial performance. In
addition, the Board assesses the Company’s performance against a
range of criteria which are viewed as particularly relevant for
investment trusts are explained in greater detail in the Strategic
Report, under the heading ‘Key Performance Indicators’.
Awareness and disclosure of relevant
audit information
So far as each of the Directors is aware, there is no relevant
audit information (as defined in the Companies Act) of which the
Company’s auditors are unaware.
Each of the Directors has taken all the steps that he or she
ought to have taken as a Director in order to make himself or
herself aware of any relevant audit information (as defined) and to
establish that the Company’s auditors are aware of that
information.
The above confirmation is given and should be interpreted in
accordance with the provision of Section 418(2) of the Companies
Act 2006.
S.1 2007/1093 C.49 Commencement No2.
Order 2007
The following disclosures are made in accordance with S.1
2007/1093 C.49 Commencement No2. Order 2007
Capital
structure
The Company’s capital structure is composed solely of Ordinary
Shares. Details are given in note 11 to the Financial
Statements.
Voting rights in
the Company’s shares
Details of the voting rights in the Company’s shares at the date
of this Annual Report are given in note 9 to the Notice of Annual
General Meeting.
Political and charitable donations
The Company has not in the past and does not intend in the
future to make political or charitable donations.
Modern Slavery Act 2015
The Company does not provide goods or services in the normal
course of business, and as a financial investment vehicle does not
have customers. The Directors do not therefore consider that the
Company is required to make a statement under the Modern Slavery
Act 2015 in relation to slavery or human trafficking.
Global greenhouse gas emissions
The Company has no greenhouse gas emissions to report from its
operations, nor does it have responsibility for any other emissions
producing sources under Large and Medium sized Companies and Groups
(Accounts and Reports) Regulations 2008 (as amended), (including
those within our underlying investment portfolio).
Common Reporting Standard (CRS)
CRS is a global standard for the automatic exchange of
information commissioned by the Organisation for Economic
Cooperation and Development and incorporated into UK law by the
International Tax Compliance Regulations 2015. CRS requires the
Company to provide certain additional details to HMRC in relation
to certain shareholders. The reporting obligation began in 2016 and
will be an annual requirement going forward. The Registrars, Capita
Asset Services, have been engaged to collate such information and
file the reports with HMRC on behalf of the Company.
Corporate governance
The Corporate Governance Statement forms part of the Report of
the Directors.
Listing Rule 9.8.4
Listing Rule 9.8.4 requires the Company to include certain
information in a single identifiable section of the Annual Report
or a cross reference table indicating where the information is set
out. The Directors confirm that there are no disclosures to be made
in this regard.
By order of the Board
Frostrow Capital LLP
Company Secretary
25 May
2017
Governance / Statement of Directors’
Responsibilities
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable
United Kingdom law and
regulations.
Company law requires the directors to prepare Financial
Statements for each financial year. Under that law, the Directors
are required to prepare Financial Statements under International
Financial Reporting Standards (“IFRSs”) as adopted by the European
Union. Under Company Law the Directors must not approve the
Financial Statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of
the profit or loss of the Company for that period. In preparing
these Financial Statements the Directors are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and accounting estimates that are reasonable
and prudent;
- state whether applicable IFRSs as adopted by the European Union
have been followed, subject to any material departures disclosed
and explained in the financial statements; and
- prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and to enable them to ensure that
the financial statements and the Directors’ Remuneration Report
comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors consider that the Annual Report, taken as a whole,
is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company’s performance,
business model and strategy.
Going concern
The Directors believe that it is appropriate to adopt the going
concern basis in preparing the Financial Statements as the assets
of the Company consist mainly of securities that are readily
realisable and, accordingly, the Company has adequate financial
resources to continue in operational existence for the foreseeable
future.
Statement under DTR 4.1.12
Each of the Directors confirms that, to the best of his or her
knowledge:
- the Company’s financial statements, which have been prepared in
accordance with IFRSs as adopted by the European Union on a going
concern basis, give a true and fair view of the assets,
liabilities, financial position and loss of the Company; and
- the Strategic Report includes a fair review of the development
and performance of the business and the position of the Company
together with a description of the principal risks and
uncertainties that it faces.
We consider the Annual Report and the financial statements,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
On behalf of the Board
Andrew
Joy
Chairman
25 May 2017
Governance / Audit Committee
Report
for the year ended 31 March 2017
Introduction from the Chairman
I present my last formal report to shareholders as Chairman of
the Audit Committee, for the year ended 31
March 2017. I shall be retiring from the Board at the
conclusion of this year’s Annual General Meeting at which time
Julia Le Blan, a Chartered
Accountant, will succeed me as Chairman of the Audit Committee.
Constitution Composition and
Meetings
During the year, in order to strengthen the Company’s governance
structure, the Board agreed to split the ‘audit’ and ‘management
engagement’ functions of the Audit and Management Engagement
Committee and to create two new Committees (an Audit Committee and
a Management Engagement Committee) to be responsible for these
areas. The Audit and Management Engagement Committee, met twice
during the year. Membership comprises the independent Directors. I
was appointed Chairman of the Committee in 2005. The Board has
taken note of the requirements that the Committee as a whole should
have competence relevant to the sector in which the Company
operates and that at least one member of the Committee should have
recent and relevant financial experience. The Committee is
satisfied that the Committee is properly constituted in both
respects: I am a Chartered Accountant and have over 30 years’
experience in the management and financing of life science
businesses; the other Committee members have a combination of
financial, investment and other relevant experience gained
throughout their careers.
Responsibilities
The Committee’s main responsibilities during the year were:
1. To review the Company’s half
year and annual financial statements together with
announcements and other filings relating to the financial
performance of the Company and issues of the Company’s shares. In
particular, the Committee considered whether the annual financial
statements are fair, balanced and understandable, allowing
shareholders to more easily assess the Company’s strategy,
investment policy, business model and financial performance.
2. To review the risk
management and internal control processes of the Company and
its key service providers. As part of this review the Committee
again reviewed the appropriateness of the Company’s anti-bribery
and corruption policy. During the year the Committee reviewed the
Internal Controls in place at the Company’s AIFM, Frostrow, its
Portfolio Manager, OrbiMed, its Registrar, Capita Asset Services
and its custodian J.P. Morgan Clearing Corp. Further information
concerning risk management can be found within the Strategic
Report.
3. To recommend the appointment
of an external auditor, and agreeing the scope of its work and
its remuneration, reviewing its independence and the effectiveness
and objectivity of the audit process.
4. To consider any non-audit
work to be carried out by the auditor. The Committee reviews
the need for non-audit services and authorises such fees on a case
by case basis, having consideration to the cost effectiveness of
the services and the independence and objectivity of the Auditors.
Non-audit fees of £6,825 were paid to Ernst & Young LLP for
their review of the Company’s half-year accounts. In addition fees
totalling £1,300 were earned in relation to taxation services. The
external auditor carried out no other non-audit work during the
year.
5. To consider the need for an
internal audit function. Since the Company delegates its
day-to-day operations to third parties and has no employees, the
Committee has determined there is no requirement for such a
function.
The Committee’s terms of reference are available for review on
the Company’s website at www.biotechgt.com.
Financial statements
The financial statements, and the Annual Report as a whole, are
the responsibility of the Board. The Board looks to the Audit
Committee to advise them in relation to the Financial Statements
both as regards their form and content, issues which might arise
and on any specific areas requiring judgment.
Significant reporting matters
During the year the Committee considered key accounting issues,
matters and judgments in relation to the Company’s financial
statements and disclosures relating to:
Company’s
Investments – valuation and ownership of the Company’s
investments
The Committee approached and dealt with this area of risk
by:
- reconfirming its understanding of the processes in place to
record investment transactions and to value the investment
portfolio;
- gaining an overall understanding of the performance of the
investment portfolio both in capital and revenue terms through
comparison to a suitable benchmark; and
- ensuring that all investment holdings and cash/deposit balances
have been agreed to confirmation from the custodian or relevant
bank.
Taxation –
ensuring that the regulations for the Company to maintain its
investment trust status have been observed
The Committee approached and dealt with the area of risk,
surrounding compliance with section 1158 of the Corporation Tax Act
2010, by:
- seeking confirmation from the AIFM that the Company continues
to meet the eligibility conditions as outlined in section 1158
through reports received at each Board meeting and also as part of
the monthly Compliance Monitoring Report sent to the Board;
- by obtaining written confirmation from HMRC, evidencing the
approval of the Company as an investment trust under the regime;
and
- understanding the risks and consequences if the Company
breaches this approval in future years.
Terms of Reference
and Non-Audit Services Policy
The Committee undertook a review of the Committee’s Terms of
Reference and the Company’s non-audit services policy in light of
the change in the nature of the Committee’s responsibilities and
also of the new ethical standards.
Internal controls
The Board has established an ongoing process for identifying,
evaluating and managing any major risks faced by the Company. The
process accords with advice issued by the FRC and is subject to
regular review by the Audit Committee. The Board has overall
responsibility for the Company’s system of internal controls and
for reviewing its effectiveness. However, such a system is designed
to manage rather than eliminate risks of failure to achieve the
Company’s business objectives and can only provide reasonable and
not absolute assurance against material misstatement or loss. The
Audit Committee has reviewed the effectiveness of the Company’s
system of internal controls for the year ended 31 March 2017. During the course of its review
the Audit Committee has not identified or been advised of any
failings or weaknesses that have been determined as significant.
All business risks faced by the Company are recorded in a detailed
risk map which is reviewed periodically. In arriving at its
judgement of what constitutes a sound system of internal control,
the Directors considered the following factors:
- the nature and extent of risks which it regards as acceptable
for the Company to bear within its overall business objective;
- the threat of such risks becoming a reality; and
- the Company’s ability to reduce the incidence and impact of
risk on its performance.
Against this background, the Board has split the review of risk
and associated controls into five sections reflecting the nature of
the risks being addressed. These sections are as follows:
- corporate strategy;
- investment activity;
- published information, compliance with laws and
regulations;
- service providers; and
- financial activity.
The Company has obtained from its various service providers
assurances and information relating to their internal systems and
controls to enable the Board to make an appropriate risk and
control assessment, including the following:
- details of the control environment in operation;
- identification and evaluation of risks and control
objectives;
- review of communication methods and procedures; and
- assessment of the control procedures.
All of the Company’s management functions are performed by third
parties whose internal controls are reviewed by the Board or on its
behalf by Frostrow.
In accordance with guidance issued to directors of listed
companies, the Directors confirm that they have carried out a
review of the effectiveness of the system of internal financial
control and risk management during the year, as set out above and
that the ongoing process for identifying, evaluating and managing
significant risks faced by the Company, has been in place for the
year under review and up to 25 May
2017.
Non-Audit Services
The Company operates on the basis whereby the provision of all
non-audit services by the Auditor has to be pre-approved by the
Audit Committee. Such services are only permissible where no
conflicts of interest arise, the service is not expressly
prohibited by audit legislation, where the independence of the
Auditor is not likely to be impinged by undertaking the work and
the quality and the objectivity of both the non-audit work and
audit work will not be compromised. In particular, non-audit
services may be provided by the Auditor if they are inconsequential
or would have no direct effect on the Company’s financial
statements and the audit firm would not place significant reliance
on the work for the purposes of the statutory audit.
Audit Tendering
As a public company listed on the London Stock Exchange, the
Company is subject to the mandatory Auditor rotation requirements
of the European Union. The Company will put the external audit out
to tender at least every 10 years and change Auditor at least every
20 years. Ernst & Young LLP have been in post since
July 2014, which was the last
occasion an audit tender was held. Formal Audit tender guidelines
have been adopted to govern the Audit tender process.
Auditor Reappointment
Ernst & Young LLP have indicated their willingness to
continue to act as Auditor to the Company for the forthcoming year
and a resolution for their re-appointment will be proposed at the
Annual General Meeting.
The Committee reviews the scope and effectiveness of the audit
process, including agreeing the Auditor’s assessment of materiality
and monitors the Auditor’s independence and objectivity. It
conducted a review of the performance of the Auditor during the
year and concluded that performance was satisfactory and there were
no grounds for change.
Peter
Keen
Chairman of the Audit Committee
25 May 2017
Governance / Directors’ Remuneration
Report
for the year ended 31 March 2017
Statement from the Chairman of the
Remuneration Committee
I am pleased to present the Directors’ Remuneration Report to
shareholders.
This report has been prepared in accordance with the
requirements of Section 421 of the Companies Act 2006 and the
Enterprise and Regulatory Reform Act 2013. A non-binding Ordinary
Resolution for the approval of this report was last put to the
shareholders at the 2016 Annual General Meeting.
The law requires the Company’s Auditor to audit certain of the
disclosures provided in this report. Where disclosures have been
audited, they are indicated as such and the Auditor’s opinion is
included in their report to shareholders. The Remuneration Policy
Report forms part of this report.
The Remuneration Committee considers the framework for the
remuneration of the Directors on an annual basis. It reviews the
ongoing appropriateness of the Company’s remuneration policy and
the individual remuneration of Directors by reference to the
activities of the Company and comparison with other companies of a
similar structure and size. This is in line with the AIC Code.
At the most recent review held on 28
February 2017, the following increases to the fees paid to
the Directors were agreed with effect from 1
April 2017: Chairman £36,500 pa; Chairman of the Audit
Committee £28,000 pa; Senior Independent Director £28,000 pa;
Director £25,500 pa. The last increase took effect from
1 April 2015.
In the year to 31 March 2017, the
Directors’ fees were paid at the following annual rates: the
Chairman of the Company £35,500, Peter
Keen as Chairman of the Audit Committee and myself as the
Senior Independent Director received an annual fee of £27,000. The
remaining Directors received £25,000.
All levels of remuneration reflect both the time commitment and
responsibility of the role.
Directors’ fees
The Directors, as at the date of this report, and who all served
throughout the year (unless where stated), received the fees listed
in the table below. These exclude any employers’ national insurance
contributions, if applicable.
As noted in the Strategic Report, all of the Directors are
non-executive and therefore there is no Chief Executive Officer.
The Company does not have any employees. There is therefore no CEO
or employee information to disclose.
Directors’ emoluments for the year
(audited)
The Directors who served in the year received the following
emoluments in the form of fees:
|
|
Year ended 31 March 2017 |
Year ended 31 March 2016 |
|
Date of
Appointment |
Base |
Taxable |
|
Base |
Taxable |
|
|
to the
Board |
Salary |
Benefits+ |
Total |
Salary |
Benefits+ |
Total |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
The Rt Hon Lord
Waldegrave of |
|
|
|
|
|
|
|
North Hill (retired 12
July 2016) |
6 June
1998 |
9,967 |
— |
9,967 |
35,500 |
— |
35,500 |
Steven Bates |
8 July
2015 |
25,000 |
— |
25,000 |
18,397 |
— |
18,397 |
Sven Borho |
23 March
2006 |
25,000 |
— |
25,000 |
25,000 |
— |
25,000 |
Professor Dame Kay
Davies^ |
15 March
2012 |
26,369 |
439 |
26,808 |
25,000 |
231 |
25,231 |
Paul Gaunt (retired on
8 July 2015) |
|
— |
— |
— |
4,744 |
506 |
5,250 |
Andrew Joy
(Chairman)† |
15 March
2012 |
33,022 |
— |
33,022 |
27,000 |
— |
27,000 |
Peter Keen (Chairman of
the |
|
|
|
|
|
|
|
Audit Committee)~ |
23 June
1997 |
27,000 |
1,164 |
28,164 |
27,000 |
561 |
27,561 |
Julia Le Blan** |
12 July
2016 |
18,013 |
— |
18,013 |
— |
— |
— |
The Rt Hon Lord
Willetts |
11
November 2015 |
25,000 |
— |
25,000 |
9,679 |
— |
9,679 |
|
|
189,371 |
1,603 |
190,974 |
172,320 |
1,298 |
173,618 |
- Taxable benefits primarily comprise travel and associated
expenses incurred by the Directors in attending Board and Committee
meetings in London. These are
re-imbursed by the Company and, under a new interpretation of HMRC
Rules, are subject to tax and National Insurance and therefore are
treated as a Benefit in Kind with this table.
^
Appointed Senior Independent Director on 12
July 2016.
†
Appointed as Chairman on 12 July
2016. Prior to this he was the Senior Independent
Director.
~ Will
retire from the Board on 12 July
2017. He will be succeeded as Chairman of the Audit
Committee by Julia Le Blan.
** Appointed on
12 July 2016.
The Directors are entitled to be re-imbursed for reasonable
expenses incurred by them in connection with the performance of
their duties and attendance at Board and General Meetings.
In certain circumstances, under HMRC rules, travel and other out
of pocket expenses reimbursed to the Directors may be considered as
taxable benefits. Where expenses are classed as taxable under HMRC
guidance they are shown in the Taxable Benefits column of the table
on the previous page.
Relative cost of directors’
remuneration for the year ended 31 March
2017
To enable shareholders to assess the relative cost of directors’
remuneration, this has been shown in the table below compared with
the Company’s AIFM, Portfolio Management and other expenses.
|
2017 |
2016 |
Difference |
|
£000 |
£000 |
£000 |
Fees of non-executive directors
(base salary) |
189 |
172 |
17 |
AIFM, Portfolio management fees and
other expenses (excluding performance fee provisions) |
4,608 |
4,943 |
(335) |
Performance fee provision/(write
back) |
— |
(1,854) |
1,854 |
* During
the year ended 31 March 2017 no
performance fees were paid (2016: £nil).
At the Annual General Meeting held in July 2016 the results in respect of the
non-binding resolution to approve the Directors’ Remuneration
Report were as follows:
Directors’ remuneration report
|
Percentage
of |
Percentage
of |
Number of |
|
votes cast |
votes cast |
votes |
|
For |
Against |
withheld |
|
99.20% |
0.80% |
53,991 |
At the Annual General Meeting held in July 2014 the results in respect of the binding
resolution to approve the Directors’ Remuneration Policy were as
follows:
Directors’ remuneration policy
|
Percentage
of |
Percentage
of |
Number of |
|
votes cast |
votes cast |
votes |
|
For |
Against |
withheld |
|
77.15 |
22.85 |
68,430 |
Further details concerning Director Remuneration can be found in
the Corporate Governance section.
A copy of the Directors’ Remuneration Policy may be inspected by
shareholders by either contacting the Company Secretary or visiting
the Company’s website at www.biogtechgt.com.
Loss of office
Directors do not have service contracts with the Company but are
engaged under Letters of Appointment. These specifically exclude
any entitlement to compensation upon leaving office for whatever
reason.
Share price return
Share price versus the NASDAQ Biotechnology Index (sterling
adjusted). The chart overleaf illustrates the shareholder return
for a holding in the Company’s shares as compared to the NASDAQ
Biotechnology Index (sterling adjusted), which the Board has
adopted as the measure for both the Company’s performance and that
of the Portfolio Manager for the period.
Directors’ interests in ordinary
shares (audited)
The Directors interests in the share capital of the Company are
shown in the table below:
|
Number
of shares held as at |
|
25 May |
31 March |
31 March |
|
2017 |
2017 |
2016 |
Andrew Joy (Chairman) |
55,000 |
55,000 |
55,000 |
The Rt Hon Lord Waldegrave of North
Hill |
N/A |
N/A |
58,716 |
Steven Bates |
nil |
nil |
nil |
Sven Borho |
236,218 |
236,218 |
236,218 |
Professor Dame Kay Davies, CBE |
3,500 |
3,500 |
nil |
Peter Keen |
55,000 |
55,000 |
55,000 |
Julia Le Blan |
4,000 |
4,000 |
N/A |
The Rt Hon Lord Willetts |
nil |
nil |
nil |
None of the Directors was granted or exercised rights over
shares during the year. Sven Borho
is a Partner at OrbiMed, the Company’s Portfolio Manager, which is
party to the Portfolio Management Agreement with the Company and
receives fees.
Annual statement
On behalf of the Board I confirm that the Remuneration Policy
and Remuneration Report summarise, as applicable, for the year to
31 March 2017:
(a) the major decisions on Directors’
remuneration;
(b) any substantial changes relating to
Directors’ remuneration made during the year; and
(c) the context in which the changes
occurred and decisions have been taken.
Professor Dame Kay Davies CBE
Senior Independent Director and Chairman of the Remuneration
Committee
27 May 2017
Governance / Directors’ Remuneration
Policy
The Company follows the recommendations of the AIC Code that
Directors’ remuneration should reflect their duties,
responsibilities and the value of their time spent. The Board’s
policy is that the remuneration of the Directors should reflect the
experience of the Board as a whole, and is determined with
reference to comparable organisations and appointments. There are
no performance conditions attaching to the remuneration of the
Directors as the Board does not believe that this is appropriate
for non-executive Directors. This policy is reviewed annually and
it is intended that it will continue for the year ending
31 March 2017 and for subsequent
financial years.
The fees for the Directors are determined within the limits set
out in the Company’s Articles of Association, the maximum aggregate
limit currently being £250,000 per annum, and they are not eligible
for bonuses, pension benefits, share options, long-term incentive
schemes or other benefits. The current and projected Directors’
fees are shown in the following table. The Company does not have
any employees.
Directors’ remuneration year ended
31 March 2017
None of the Directors has a service contract. The terms of their
appointment provide that Directors shall retire and be subject to
election at the first Annual General Meeting after their
appointment and to re-election annually thereafter. The terms also
provide that a Director may be removed without notice and that
compensation will not be due on leaving office.
No communications have been received from shareholders regarding
Directors’ remuneration.
In accordance with best practice recommendations the Board will
put the Remuneration Policy to shareholders at the Annual General
Meeting at least once every three years.
Approval of this policy was granted by shareholders at the
Annual General Meeting held in July
2014 and so shareholder approval will again be sought at
this year’s Annual General Meeting.
Governance / Independent Auditor’s
Report to the Members of The Biotech Growth Trust PLC
Our opinion on the financial
statements
In our opinion the accompanying
financial statements:
- give a true and fair view of the financial position of the
Company as at 31 March 2017 and of
its financial performance and its cash flows for the year then
ended;
- have been properly prepared in accordance with IFRSs as adopted
by the European Union; and
- the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
What we have audited
We have audited the financial statements of The Biotech Growth
Trust PLC which comprise:
- Income Statement for the year ended 31
March 2017
- Statement of Financial Position as at 31
March 2017
- Statement of Changes in Equity for the year ended 31 March 2017
- Statement of Cash Flows for the year ended 31 March 2017
- The related notes 1 to 17
The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
Overview of our audit approach
Risks of material
misstatement
- Incorrect valuation of the investment portfolio.
Audit
Scope
- We performed an audit of the complete financial information of
The Biotech Growth Trust PLC.
Materiality
- £4.4 million which represents 1% of total equity (2016: £3.8
million) as at 31 March 2017.
Our assessment of risk of material
misstatement
We identified the risks of material misstatement described below
as those that had the greatest effect on our overall audit
strategy, the allocation of resources in the audit and the
direction of the efforts of the audit team. In addressing these
risks, we have performed the procedures below which were designed
in the context of the financial statements as a whole and,
consequently, we do not express any opinion on these individual
areas.
Risk |
|
Our response to the risk |
|
What we concluded to the
Audit Committee |
Incorrect valuation of the
investment portfolio |
|
We performed the following
procedures: |
|
|
The valuation of the assets held in
the investment portfolio is the key driver of the Company’s
investment return. Incorrect valuation of assets by the Company
could have a significant impact on portfolio valuation and,
therefore, the return generated for shareholders. |
|
For quoted investments, we
agreed 100% of the year end prices to independent pricing
sources. For the unquoted investment, we have assessed the
Company’s estimation of fair value and have obtained independent
confirmation that the fair value, as at the year-end date, is in
accordance with the Company’s valuation policy. We have ensured
that there is no material difference between management’s valuation
and the company’s partner’s capital as at 31 March 2017. We have
also assessed the reasonableness of the FX used to an independent
source. No issues noted. |
|
The results of our
procedures identified no material error in the valuation of the
investment portfolio assets.
Based on the work performed, we have no matters to report. |
The scope of our audit
Our assessment of audit risk, our evaluation of materiality and
our allocation of performance materiality determine our audit scope
for the company. Taken together, this enables us to form an opinion
on the financial statements. We take into account size, risk
profile, the organisation of the Company and effectiveness of
controls, including controls at Frostrow Capital LLP and J.P.
Morgan Chase Bank, changes in the business environment and other
factors such as recent Service Organisation Control (‘SOC’) Reports
when assessing the level of work to be performed at Company
level.
Our application of materiality
We apply the concept of materiality in planning and performing
the audit, in evaluating the effect of identified misstatements on
the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or
misstatement that, individually or in the aggregate, could
reasonably be expected to influence the economic decisions of the
users of the financial statements. Materiality provides a basis for
determining the nature and extent of our audit procedures.
We determined materiality for the company to be £4.4 million
(2016: £3.8 million), which is 1% of total equity as at
31 March 2017. We believe that total
equity is the most important financial metric on which shareholders
judge the performance of the Company.
Performance materiality
The application of materiality at the
individual account or balance level. It is set at an amount to
reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds
materiality.
On the basis of our risk assessments, together with our
assessment of the Company’s overall control environment, our
judgement was that performance materiality (i.e. our tolerance for
misstatement in an individual account or balance) was 75% (2016:
75%) of our planning materiality, namely £3.4 million (2016: £2.8
million). We have set performance materiality at this percentage
due to our past experience of the audit that indicates a lower risk
of misstatements, both corrected and uncorrected.
Given the importance of the distinction between revenue and
capital for the Company we also applied a separate testing
threshold of £60k (2016: £54k) for the revenue column of the income
statement, being 5% of the revenue profit before taxation.
Reporting threshold
An amount below which identified
misstatements are considered as being clearly trivial.
We agreed with the audit committee that we would report to them
all uncorrected audit differences in excess of £224k (2016: £189k),
which is set at 5% of planning materiality, as well as differences
below that threshold that, in our view, warranted reporting on
qualitative grounds.
We evaluate any uncorrected misstatements against both the
quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations in forming our
opinion.
Scope of the audit of the financial
statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the Directors; and the
overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the Annual
Report to identify material inconsistencies with the audited
financial statements and to identify any information that is
apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Respective responsibilities of
directors and auditor
As explained more fully in the Statement of Directors’
Responsibilities, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board’s Ethical Standards for
Auditors.
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Opinion on other matters prescribed by
the Companies Act 2006
In our opinion:
- the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies Act
2006; and
- based on the work undertaken in the course of the audit:
- the information given in the Strategic Report and the
Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements.
- the Strategic Report and the Directors’ Report have been
prepared in accordance with applicable legal requirements;
Matters on which we are required to
report by exception
ISAs (UK and Ireland)
reporting |
|
We are required to
report to you if, in our opinion, financial and non-financial
information in the annual report is:
In particular, we are required to report whether we have identified
any inconsistencies between our knowledge acquired in the course of
performing the audit and the directors’ statement that they
consider the annual report and accounts taken as a whole is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the entity’s performance, business model
and strategy; and whether the annual report appropriately addresses
those matters that we communicated to the audit committee that we
consider should have been disclosed. |
|
We have no exceptions to
report. |
Companies Act 2006
reporting |
|
In light of the
knowledge and understanding of the Company and its environment
obtained in the course of the audit, we have identified no material
misstatements in the Strategic Report, Directors’ Report or
Corporate Governance Report.
We are required to report to you if, in our opinion: |
|
We have no exceptions to
report. |
Listing Rules review
requirements |
|
We are required to review: |
|
We have no exceptions to
report. |
Statement on the Directors’ assessment
of the principal risks that would threaten the solvency or
liquidity of the entity
ISAs (UK and Ireland)
reporting |
|
We are required to give a statement
as to whether we have anything material to add or to draw attention
to in relation to: |
|
We have nothing material to add or
to draw attention to. |
AMARJIT SINGH
SENIOR STATUTORY AUDITOR
FOR AND ON BEHALF OF ERNST & YOUNG LLP
STATUTORY AUDITOR
LONDON
25 May 2017
Financial Statements / Income
Statement
for the year ended 31 March 2017
|
|
|
2017 |
|
|
2016 |
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Notes |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Investment Income |
|
|
|
|
|
|
|
Investment income |
2 |
1,905 |
— |
1,905 |
1,820 |
— |
1,820 |
Total income |
|
|
|
|
1,820 |
— |
1,820 |
Gains/(losses) on
investments |
|
|
|
|
|
|
|
Gains/(losses) on investments held
at fair value |
|
|
|
|
|
|
|
through profit or loss |
8 |
— |
103,813 |
103,813 |
— |
(125,284) |
(125,284) |
Exchange losses on currency
balances |
|
— |
(2,252) |
(2,252) |
— |
(1,802) |
(1,802) |
Expenses |
|
|
|
|
|
|
|
AIFM, Portfolio management and |
|
|
|
|
|
|
|
performance fees |
3 |
— |
(3,905) |
(3,905) |
— |
(2,353) |
(2,353) |
Other expenses |
4 |
(703) |
— |
(703) |
(736) |
— |
(736) |
Profit/(loss) before finance
costs and taxation |
|
1,202 |
97,656 |
98,858 |
1,084 |
(129,439) |
(128,355) |
Finance costs |
5 |
— |
(280) |
(280) |
— |
(340) |
(340) |
Profit/(loss) before
taxation |
|
1,202 |
97,376 |
98,578 |
1,084 |
(129,779) |
(128,695) |
Taxation |
6 |
(281) |
— |
(281) |
(254) |
— |
(254) |
Profit/(loss) for the
year |
|
921 |
97,376 |
98,297 |
830 |
(129,779) |
(128,949) |
Basic and diluted earnings/(loss)
per share |
7 |
1.6p |
169.9p |
171.5p |
1.3p |
(209.4)p |
(208.1)p |
The Company does not have any income or expenses which are not
included in the profit for the year. Accordingly the “profit for
the year” is also the “total comprehensive income for the year”, as
defined in IAS 1 (revised) and no separate Statement of
Comprehensive Income has been presented.
The “Total” column of this statement represents 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 guidance published by the Association of Investment
Companies.
The accompanying notes are an integral part of this
statement.
Financial Statements / Statement of
Financial Position
as at 31 March
2017
|
|
2017 |
2016 |
|
Notes |
£’000 |
£’000 |
Non current assets |
|
|
|
Investments held at fair value
through profit or loss |
8 |
461,378 |
420,427 |
Current assets |
|
|
|
Other receivables |
9 |
117 |
4,718 |
|
|
117 |
4,718 |
|
|
461,495 |
425,145 |
Current liabilities |
|
|
|
Other payables |
10 |
1,235 |
10,389 |
Bank overdraft |
|
13,083 |
36,189 |
|
|
14,318 |
46,578 |
Net assets |
|
447,177 |
378,567 |
Equity attributable to equity
holders |
|
|
|
Ordinary share capital |
11 |
13,960 |
15,074 |
Share premium account |
|
43,021 |
43,021 |
Capital redemption reserve |
|
8,839 |
7,725 |
Capital reserve |
16 |
383,283 |
315,594 |
Revenue reserve |
|
(1,926) |
(2,847) |
Total equity |
|
447,177 |
378,567 |
Net asset value per
share |
12 |
800.8p |
627.9p |
The financial statements were approved by the Board on
25 May 2017 and were signed on its
behalf by:
Andrew Joy
Chairman
The accompanying notes are an integral part of this
statement.
The Biotech Growth Trust PLC – Company Registration Number
3376377 (Registered in England)
Financial Statements / Statement of
Changes in Equity
for the year ended 31 March 2017
|
Ordinary |
Share |
|
Capital |
|
|
|
|
share |
premium |
Special |
redemption |
Capital |
Revenue |
|
|
capital |
account |
reserve |
reserve |
reserve |
reserve |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
At 31 March 2016 |
15,074 |
43,021 |
— |
7,725 |
315,594 |
(2,847) |
378,567 |
Net profit for the year |
— |
— |
— |
— |
97,376 |
921 |
98,297 |
Repurchase of own shares for
cancellation* |
(1,114) |
— |
— |
1,114 |
(29,687) |
— |
(29,687) |
At 31 March 2017 |
13,960 |
43,021 |
— |
8,839 |
383,283 |
(1,926) |
447,177 |
*
Further details can be found in note 11.
for the year ended 31 March 2016
|
Ordinary |
Share |
|
Capital |
|
|
|
|
share |
premium |
Special |
redemption |
Capital |
Revenue |
|
|
capital |
account |
reserve |
reserve |
reserve |
reserve |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
At 31 March 2015 |
17,222 |
43,021 |
252 |
5,577 |
470,907 |
(3,677) |
533,302 |
Net (loss)/profit for the year |
— |
— |
— |
— |
(129,779) |
830 |
(128,949) |
Repurchase of own shares to be held
in treasury* |
— |
— |
(252) |
— |
(10,241) |
— |
(10,493) |
Repurchase of own shares for
cancellation* |
(570) |
— |
— |
570 |
(15,293) |
— |
(15,293) |
Cancellation of own shares held in
treasury* |
(1,578) |
— |
— |
1,578 |
— |
— |
— |
At 31 March 2016 |
15,074 |
43,021 |
— |
7,725 |
315,594 |
(2,847) |
378,567 |
The accompanying notes are an integral part of this
statement.
Financial Statements / Statement of
Cash Flows
for the year ended 31 March 2017
|
2017 |
2016 |
|
£’000 |
£’000 |
Operating activities |
|
|
Profit/(loss) before taxation* |
98,578 |
(128,695) |
Finance costs |
280 |
340 |
(Gains)/losses on investments held
at fair value through profit or loss |
(103,813) |
125,284 |
Decrease/(increase) in other
receivables |
45 |
(24) |
Increase/(decrease) in other
payables |
186 |
(2,218) |
Net cash outflow from operating
activities before interest and taxation |
(4,724) |
(5,313) |
Finance costs – interest paid |
(280) |
(340) |
Taxation paid |
(281) |
(254) |
Net cash outflow from operating
activities |
(5,285) |
(5,907) |
Investing Activities |
|
|
Purchases of investments held at
fair value through profit or loss |
(298,295) |
(378,906) |
Sales of investments held at fair
value through profit or loss |
356,373 |
422,793 |
Net cash inflow from investing
activities |
58,078 |
43,887 |
Financing activities |
|
|
Repurchase of own shares to be held
in treasury |
— |
(10,493) |
Repurchase of own shares for
cancellation |
(29,687) |
(15,293) |
Net cash outflow from financing
activities |
(29,687) |
(25,786) |
Net increase in cash and cash
equivalents |
23,106 |
12,194 |
Cash and cash equivalents at start
of year |
(36,189) |
(48,383) |
Cash and cash equivalents at end
of year |
(13,083) |
(36,189) |
* Includes
dividends and other income earned during the year of £1,905,000
(2016: £1,820,000).
The accompanying notes are an integral part of this
statement.
Financial Statements / Notes to the
Financial Statements
1. Accounting policies
(a) Basis of preparation
The financial statements of the Company have been prepared in
accordance with International Financial Reporting Standards
(“IFRS”). These comprise standards and interpretations approved by
the International Accounting Standards Board (“IASB”), together
with interpretations of the International Accounting Standards and
Standing Interpretations Committee approved by the International
Accounting Standards Committee (“IASC”) that remain in effect, to
the extent that IFRS have been adopted by the European Union.
The principal accounting policies adopted are set out below.
The financial statements have been prepared under the historical
cost convention, except for the measurement at fair value of
investments. Where presentational guidance set out in the Statement
of Recommended Practice (“the SORP”) for Investment Trust Companies
and Venture Capital Trusts produced by the Association of
Investment Companies (“AIC”) revised November 2014 is consistent with the requirements
of IFRS, the Directors have sought to prepare the financial
statements on a basis compliant with the recommendations of the
SORP.
The Company’s financial statements are presented in sterling and
all values are rounded to the nearest thousand pounds (£’000)
except when otherwise indicated. The accounts have been prepared on
a going concern basis as the Directors consider that in the
foreseeable future (at least 12 months from the date of approval of
the financial statements) the Company will continue to be able to
meet its liabilities as they fall due.
The accounting policies adopted are consistent with those of the
previous financial year.
Judgements and key sources of
estimation and uncertainty
The preparation of the financial statements requires the
Directors to make judgements, estimates and assumptions that affect
the amounts reported for assets and liabilities as at the statement
of financial position date and the amounts reported for revenues
and expenses during the year. However, the nature of estimation
means that actual outcomes could differ from those estimates. In
the process of applying the Company’s accounting policies, the
Directors have made the following estimate:
Fair value of the
unquoted investments estimate
The unquoted investment OrbiMed Asia Partners L.P., has been
valued using the Net Asset Value as presented in the partnership’s
Consolidated Financial Statements as at 31
December 2016. The statements were audited by KPMG LLP (New
Jersey Headquarters) and were approved on 28 March 2017.The
Directors believe that the NAV as at 31
March 2017 is not materially different.
(b) Investments
Investments are recognised and de-recognised on the trade
date.
As the entity’s business is investing in financial assets with a
view to profiting from their total return in the form of dividends
or increases in fair value, investments are designated as fair
value through profit or loss and are initially recognised at fair
value. The entity manages and evaluates the performance of these
investments on a fair value basis in accordance with its investment
strategy, and information about the investments is provided
internally on this basis to the Board.
Investments designated as at fair value through profit or loss,
which are quoted investments, are measured at subsequent reporting
dates at fair value which is either the bid or the last trade
price, depending on the convention of the exchange on which it is
quoted.
In respect of unquoted investments, or where the market for a
financial instrument is not active, fair value is established by
using valuation techniques which may include using recent arm’s
length market transactions between knowledgeable, willing parties,
if available, reference to the current fair value of another
instrument that is substantially the same, discounted cash flow
analysis and option pricing models. Where there is a valuation
technique commonly used by market participants to price the
instrument and that technique has been demonstrated to provide
reliable estimates of prices obtained in actual market
transactions, that technique is utilised.
Gains and losses on disposal and fair value changes are also
recognised in the Income Statement.
(c) Presentation of Income
Statement
In order to better reflect the activities of an investment trust
company, and in accordance with guidance issued by the AIC,
supplementary information which analyses the Income Statement
between items of a revenue and capital nature has been presented
alongside the Income Statement. Net revenue is the measure the
Directors believe appropriate in assessing the Company’s compliance
with certain requirements set out in section 1158 of the
Corporation Tax Act 2010. The requirements are to distribute net
revenue but only so far as there are positive revenue reserves.
(d) Income
Dividends receivable on equity shares are recognised on the
ex-dividend date. Where no ex-dividend date is quoted, dividends
are recognised when the Company’s right to receive payment is
established.
Dividends from investments in unquoted shares and securities are
recognised when they become receivable. Income from stock
re-hypothecation is recognised when the Company’s right to receive
payment is established.
(e) Expenses and finance costs
All expenses are accounted for on an accruals basis. Expenses
are charged through the Income Statement as follows:
- expenses which are incidental to the acquisition or disposal of
an investment are charged to the capital column of the Income
Statement;
- expenses are charged to the capital column of the Income
Statement where a connection with the maintenance or enhancement of
the value of the investment can be demonstrated, and
accordingly;
- AIFM and Portfolio management fees are charged to the capital
column of the Income Statement as the Directors expect that in the
long term virtually all of the Company’s returns will come from
capital; and
- bank overdraft interest is charged through the Income Statement
on an effective rate basis and allocated to the capital column, as
the Directors expect that in the long-term virtually all of the
Company’s returns will come from capital.
(f) Taxation
In line with the recommendations of the SORP, the allocation
method used to calculate tax relief on expenses presented against
capital returns in the supplementary information in the Income
Statement is the “marginal basis”. Under this basis, if taxable
income is capable of being offset entirely by expenses presented in
the revenue column of the Income Statement, then no tax relief is
transferred to the capital column.
Investment trusts which have approval under Section 1158
Corporation Tax Act 2010 are not liable for taxation on capital
gains.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
Balance Sheet liability method. Deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible
temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the Income
Statement, except when it relates to items charged or credited
directly to equity, or Other Comprehensive Income (OCI), in which
case the deferred tax is also dealt with in equity or OCI
respectively.
(g) Foreign currencies
The currency of the primary economic environment in which the
Company operates (the functional currency) is sterling, which is
also the presentational currency of the Company. Transactions
involving currencies other than sterling are recorded at the
exchange rate ruling on the transaction date. At each Statement of
Financial Position date, monetary items and non-monetary assets and
liabilities that are fair valued, which are denominated in foreign
currencies, are retranslated at the closing rates of exchange.
Exchange differences are included in the Income Statement and
allocated as capital if they are of a capital nature, or as revenue
if they are of a revenue nature.
(h) Functional and presentational
currency
The financial information is shown in sterling, being the
Company’s presentational currency. In arriving at the functional
currency the Directors have considered the following:
(i) the primary economic
environment of the Company;
(ii) the currency in which the original
capital was raised;
(iii) the currency in which
distributions are made;
(iv) the currency in which performance
is evaluated; and
(v) the currency in which the
capital would be returned to shareholders on a break up basis.
The Directors have also considered the currency to which the
underlying investments are exposed and liquidity is managed. The
Directors are of the opinion that sterling best represents the
functional currency.
(i) Reserves
Equity share capital
- represents the nominal value of the issued share capital
Capital reserves
The following are credited or charged to the capital column of
the Income Statement and then transferred to the Capital
Reserve:
- gains or losses on disposal of investments
- exchange differences of a capital nature
- expenses allocated to this reserve in accordance with the above
referred policies
- increases and decreases in the valuation of investments held at
year end
Capital redemption reserve
- a transfer will be made to this reserve on cancellation of the
Company’s own shares purchased, equal to the nominal value of the
Shares
Special reserve
During the financial year ended 31 March
2004, a Special Reserve was created, following the
cancellation of the Share Premium account, in order to provide an
increased distributable reserve out of which to purchase the
Company’s own shares.
- a transfer will be made from this reserve on cancellation of
the Company’s own shares purchased or when the Company repurchases
its own shares to be held in treasury.
(j) Cash and cash equivalents
Cash and cash equivalents are defined as cash in hand, demand
deposits and short-term deposits with a majority of three months or
less, highly liquid investments readily convertible to known
amounts of cash and subject to insignificant risk of changes in
value. Bank overdrafts that are repayable on demand, which form an
integral part of the Company’s cash management, are included as a
component of cash and cash equivalents for the purpose of the
statement of cash flows.
(k) Bank overdraft
The Company has an overdraft facility repayable on demand,
provided by J.P. Morgan Clearing Corp. Interest on the facility is
charged at the Federal Funds open rate plus 45 basis points.
Finance costs are apportioned 100% to capital in accordance with
the policy set out under note 1(e) Expenses and finance costs.
(l) Operating segments
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 the investments business. The results published in
this report therefore correspond to this sole operating
segment.
In line with IFRS 8, additional disclosure by geographical
segment has been provided in note 14.
(m) Financial instruments
Financial assets and financial liabilities are recognised on the
statement of financial position when the Company becomes a party to
the contractual provisions of the instrument. Financial assets are
de-recognised when the Company’s contractual right to the cash
flows from the asset expires or substantially all the risks and
rewards of ownership are transferred. Financial liabilities are
de-recognised when the contractual obligation is discharged, with
gains and losses recognised in the income statement.
(n) Standards, amendments and
interpretations to existing standards become effective in future
accounting periods and have not been adopted by the Company:
- IFRS 9 Financial Instruments – The standard introduces new
requirements for classification and measurement, impairment, and
hedge accounting. IFRS 9 is effective for annual periods beginning
on or after 1 January 2018. It is not
practicable to provide a reasonable estimate of the effect of the
standard until a detailed review has been completed, however the
adoption of IFRS 9 is unlikely to have a material effect on the
classification and measurement of the Company’s financial assets or
liabilities.
- IFRS 15 Revenue from contracts with customers – The objective
of IFRS 15 is to establish the principles that an entity shall
report useful information to users of financial statements about
the nature, amount, timing, and uncertainty of revenue and cash
flows arising from a contact with a consumer. Application of the
standard of mandatory for annual reporting periods starting from
1 January 2018.
2. Income
|
2017 |
2016 |
|
£’000 |
£’000 |
Investment income |
|
|
Overseas dividend income |
1,823 |
1,820 |
Other income |
|
|
Other fee income |
82 |
— |
Total income |
1,905 |
1,820 |
3. AIFM, portfolio management and
performance fees
|
2017 |
2016 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
AIFM fee |
— |
1,190 |
1,190 |
— |
1,266 |
1,266 |
Portfolio management fee |
— |
2,715 |
2,715 |
— |
2,941 |
2,941 |
Performance fee/(provision written
back) |
— |
— |
— |
— |
(1,854) |
(1,854) |
|
— |
3,905 |
3,905 |
— |
2,353 |
2,353 |
Further details of the AIFM, portfolio management fee and the
performance fee basis can be found in the Report of the
Directors.
4. Other expenses
|
|
|
2017 |
|
|
2016 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Directors’ emoluments |
189 |
— |
189 |
172 |
— |
172 |
AIFM fixed fee |
60 |
— |
60 |
60 |
— |
60 |
Auditor’s remuneration for the audit
of the Company’s financial statements |
27 |
— |
27 |
26 |
— |
26 |
Auditor’s remuneration for
independent review of the half year accounts |
7 |
— |
7 |
7 |
— |
7 |
Auditor’s remuneration for tax |
|
— |
|
|
— |
|
compliance services |
1 |
— |
1 |
3 |
— |
3 |
Legal and professional fees |
1 |
— |
1 |
25 |
— |
25 |
Registrar fees |
44 |
— |
44 |
61 |
— |
61 |
Depositary fees |
61 |
— |
61 |
66 |
— |
66 |
Listing fees |
27 |
— |
27 |
26 |
— |
26 |
Other costs |
286 |
— |
286 |
290 |
— |
290 |
Total expenses |
703 |
— |
703 |
736 |
— |
736 |
Details of the amounts paid to Directors are included in the
Directors’ Remuneration Report and the Directors’ Remuneration
Policy Report.
5. Finance costs
|
|
|
2017 |
|
|
2016 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Bank overdraft interest |
— |
280 |
280 |
— |
340 |
340 |
|
— |
280 |
280 |
— |
340 |
340 |
6. Taxation
(a) Analysis of charge in the
year:
|
|
|
2017 |
|
|
2016 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Overseas tax suffered |
281 |
— |
281 |
254 |
— |
254 |
Total taxation for the year (see
note 6(b)) |
281 |
— |
281 |
254 |
— |
254 |
(b) Factors affecting total tax charge
for year
Approved investment trusts are exempt from tax on capital gains
made within the Company.
The tax assessed for the year is lower than the standard rate of
corporation tax in the UK of 20% (2016: 20%). The differences are
explained below:
|
|
|
2017 |
|
|
2016 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Net profit on ordinary activities
before taxation |
1,202 |
97,376 |
98,578 |
1,084 |
(129,779) |
(128,695) |
Corporation tax at 20% (2016:
20%) |
240 |
19,475 |
19,715 |
217 |
(25,956) |
(25,739) |
Effects of: |
|
|
|
|
|
|
Non-taxable (gains)/losses on |
|
|
|
|
|
|
investments |
— |
(20,312) |
(20,312) |
— |
25,417 |
25,417 |
Non-taxable overseas dividends |
(365) |
— |
(365) |
(364) |
— |
(364) |
Overseas taxes |
281 |
— |
281 |
254 |
— |
254 |
Excess expenses unused |
125 |
837 |
962 |
147 |
539 |
686 |
Total tax charge |
281 |
— |
281 |
254 |
— |
254 |
(c) Provision for deferred tax
No provision for deferred taxation has been made in the current
or prior year.
The Company has not provided for deferred tax on capital gains
or losses arising on the revaluation or disposal of investments, as
it is exempt from tax on these items because of its status as an
investment trust company.
The Company has not recognised a deferred tax asset of
£7,311,000 (17% tax rate) (2016: £6,876,000 (18% tax rate)) arising
as a result of excess management expenses and loan relationship
deficits. These excess expenses will only be utilised if the
Company generates sufficient taxable income in the future.
7. Basic and diluted earnings/(loss)
per share
The Return/(loss) per Ordinary Share is as follows:
|
|
|
2017 |
|
|
2016 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
pence |
pence |
pence |
pence |
pence |
pence |
Earnings/(loss) per share |
1.6 |
169.9 |
171.5 |
1.3 |
(209.4) |
(208.1) |
The total earnings per share of 171.5p (2016: loss 208.1p) is
based on the total earnings attributable to equity shareholders of
£98,297,000 (2016: loss £128,949,000).
The revenue gain per share 1.6p (2016: gain 1.3p) is based on
the revenue gain attributable to equity shareholders of £921,000
(2016: revenue gain of £830,000). The capital gain per share of
169.9p (2016: loss 209.4p) is based on the capital gain
attributable to equity shareholders of £97,376,000 (2016: loss
£129,779,000).
The total earnings per share are based on the weighted average
number of shares in issue during the year of 57,315,305 (2016:
61,972,355).
8. Investments held at fair value
through profit and loss
All investments are designated as fair value through profit or
loss on initial recognition, therefore all gains and losses arise
on investments designated as fair value through profit or loss.
As at 31 March 2017, all
investments with the exception of the unquoted investment in
OrbiMed Asia Partners L.P. fund have been classified as level 1.
OrbiMed Asia Partners L.P. fund has been classified as level 3. See
note 13 for further details.
|
|
2017 |
|
2016 |
|
Listed |
|
|
|
|
Equity |
Unquoted |
Total |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
Cost at 1 April 2016 |
376,651 |
2,614 |
379,265 |
346,840 |
Investment holding gains at 1 April
2016 |
39,762 |
1,400 |
41,162 |
236,369 |
Valuation at 1 April 2016 |
416,413 |
4,014 |
420,427 |
583,209 |
Movement in the year |
|
|
|
|
Purchases at cost |
288,955 |
— |
288,955 |
386,664 |
Sales – proceeds |
(351,431) |
(386) |
(351,817) |
(424,162) |
– gains on
disposal |
79,321 |
73 |
79,394 |
69,923 |
Net movement in investment holding
gains |
23,051 |
1,368 |
24,419 |
(195,207) |
Valuation at 31 March 2017 |
456,309 |
5,069 |
461,378 |
420,427 |
Closing book cost at 31 March
2017 |
393,496 |
2,301 |
395,797 |
379,265 |
Investment holding gains at 31 March
2017 |
62,813 |
2,768 |
65,581 |
41,162 |
Valuation at 31 March 2017 |
456,309 |
5,069 |
461,378 |
420,427 |
|
2017 |
2016 |
|
£’000 |
£’000 |
Gains/(losses) on investments: |
|
|
Gains on disposal based on
historical cost |
79,394 |
69,923 |
Amounts recognised as investment
holding loss in previous year |
(48,986) |
(105,360) |
Gains(losses) on disposal based on
carrying value at previous financial position date |
30,408 |
(35,437) |
Net movement in investment holding
gains in the year |
73,405 |
(89,847) |
Gains/(losses) on investments |
103,813 |
(125,284) |
The total transaction costs for the year were £472,000
(31 March 2016: £453,000) broken down
as follows: purchase transaction costs for the year to 31 March 2017 were £238,000, (31 March 2016: £187,000), sale transaction costs
were £234,000 (31 March 2016:
£266,000). These costs consist mainly of commission.
9. Other receivables
|
2017 |
2016 |
|
£’000 |
£’000 |
Future settlements – sales |
— |
4,556 |
Other debtors |
15 |
26 |
Prepayments and accrued income |
102 |
136 |
|
117 |
4,718 |
10. Other payables
|
2017 |
2016 |
|
£’000 |
£’000 |
Future settlements – purchases |
— |
9,340 |
Other creditors and accruals |
1,235 |
1,049 |
|
1,235 |
10,389 |
11. Ordinary share capital
|
2017 |
2016 |
|
£’000 |
£’000 |
Allotted, issued and fully
paid: |
|
|
55,839,913 shares of 25p (2016:
60,295,474) |
13,960 |
15,074 |
No shares were held in treasury at
31 March 2017 (2016: nil) |
— |
— |
|
13,960 |
15,074 |
|
|
2017 |
|
|
2016 |
|
|
Issued
& |
Treasury |
Outstanding |
Issued
& |
Treasury |
Outstanding |
|
fully paid |
Shares |
Shares |
fully paid |
Shares |
Shares |
At 1 April |
60,295,474 |
— |
60,295,474 |
68,886,347 |
4,997,831 |
63,888,516 |
Repurchase of own shares to be held
in treasury |
— |
— |
— |
— |
1,313,257 |
(1,313,257) |
Cancellation of own shares held in
treasury |
— |
— |
— |
(6,311,088) |
(6,311,088) |
— |
Repurchase of own shares for
cancellation |
(4,455,561) |
— |
(4,455,561) |
(2,279,785) |
— |
(2,279,785) |
At 31 March |
55,839,913 |
— |
55,839,913 |
60,295,474 |
— |
60,295,474 |
As at 31 March 2017 the Company
had 55,839,913 shares of 25p in issue, no shares were held in
treasury (2016: 60,295,474). During the year a total of 4,455,561
share were repurchased for cancellation by the Company at a cost of
£29.7 million. Subsequent to the year end and to the date of this
report no further shares were repurchased for cancellation.
12. Net asset value per share
|
2017 |
2016 |
Net asset value per share |
800.8p |
627.9p |
The net asset value per share is based on the net assets
attributable to equity shareholders of £447,177,000 (2016:
£378,567,000) and on 55,839,913 (2016: 60,295,474) shares in issue
at 31 March 2017.
13. Risk management policies and
procedures
As an investment trust, the Company invests in equities and
other investments for the long term in order to achieve its
investment objective. In pursuing its investment objective, the
Company is exposed to a variety of risks that could result in
either a reduction or increase in the Company’s net assets or in
profits.
The Company’s financial instruments comprise securities and
other investments, cash balances, debtors and creditors and an
overdraft facility that arise directly from its operations (for
example, in respect of sales and purchases awaiting
settlement).
The main risks the Company faces from its financial instruments
are (i) market price risk (comprising currency risk, interest rate
risk and other price risk (i.e. changes in market prices other than
those arising from interest rate or currency risk)), (ii) liquidity
risk and (iii) credit risk.
The Board reviews and agrees policies regularly for managing and
monitoring each of these risks.
I. Market price risk:
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.
The Company’s portfolio is exposed to market price fluctuations
which are monitored by the AIFM and the Portfolio Manager in
pursuance of the investment objective.
No derivatives or hedging instruments are utilised to manage
market price risk.
(a) Currency risk:
The Company’s portfolio is denominated in currencies other than
sterling (the Company’s functional currency, and in which it
reports its results). As a result, movements in exchange rates can
significantly affect the sterling value of those items.
Management of risk
The AIFM and Portfolio Manager monitor the Company’s exposure to
foreign currencies on a continuous basis and report to the Board
regularly. The Company does not hedge against foreign currency
movements.
Income denominated in foreign currencies is converted into
sterling on receipt. The Company does not use financial instruments
to mitigate the currency exposure in the period between the time
that the income is included in the financial statements and its
receipt.
Foreign currency exposure
At the date of the Statement of Financial Position the Company
held £452,980,000 (2016: £387,367,000) of investments denominated
in U.S. dollars and £8,398,000 (2016: £33,060,000) in other
non-sterling currencies.
Currency sensitivity
The following table details the sensitivity of the Company’s
profit or loss after taxation for the year to a 10% increase and
decrease in the value of sterling compared to the U.S. dollar and
other non-sterling currencies (2016: 10% increase and
decrease).
The above percentages have been determined based on market
volatility in exchange rates over the previous twelve months. The
analysis is based on the Company’s foreign currency financial
instruments held at each Statement of Financial Position date,
after adjusting for an increase/decrease in management fees.
Movements in the performance fee accruals have been excluded from
the analysis below.
If sterling had weakened against the U.S. dollar and other
non-sterling currencies, as stated above, this would have had the
following effect:
|
2017 |
2016 |
|
£’000 |
£’000 |
Impact on revenue return |
— |
— |
Impact on capital return |
50,777 |
42,761 |
Total return after tax/effect on
shareholders’ funds |
50,777 |
42,761 |
If sterling had strengthened against the U.S. dollar, as stated
above, this would have had the following effect:
|
2017 |
2016 |
|
£’000 |
£’000 |
Impact on revenue return |
— |
— |
Impact on capital return |
(41,545) |
(34,986) |
Total return after tax/effect on
shareholders’ funds |
(41,545) |
(34,986) |
(b) Interest rate risk:
Interest rate risk is the risk that the fair value of future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates.
Interest rate exposure
The Company’s main exposure to interest rate risk is through its
overdraft facility with J.P. Morgan Clearing Corp. which is
repayable on demand.
At the year end financial liabilities subject to interest rate
risk were as follows (there were no assets subject to interest rate
risk).
|
2017 |
2016 |
|
£’000 |
£’000 |
Financial liabilities: |
|
|
Overdraft facility |
13,083 |
36,189 |
Interest rate sensitivity
The majority of the Company’s financial assets are equity shares
and other investments which neither pay interest nor have a
maturity date. The Company has an overdraft facility with
J.P.Morgan Clearing Corp. disclosed above. The amount overdrawn at
31 March 2017 was £13,083,000 (2016:
£36,189,000). Interest is charged at the Federal Funds Open rate
plus 45 basis points. The level of interest fluctuates in line with
the Federal Funds open rate and the amount of the overdraft. If the
open rate increased by 1%, the impact on the profit or loss and net
assets would be expected to be £131,000 (2016: £362,000).
(c) Other price risk
Other price risk may affect the value of the quoted
investments.
If market prices at the date of the Statement of Financial
Position had been 20% higher or lower (2016: 20% higher or lower)
while all other variables had remained constant, the return and net
assets attributable to shareholders for the year ended 31 March 2017 would have increased/decreased by
£91,399,000 (2016: £83,287,000), after adjusting for an increase or
decrease in the AIFM and Portfolio management fees. The
calculations are based on the portfolio valuations as at the
respective Statement of Financial Position dates.
2. Liquidity risk:
This is the risk that the Company will encounter difficulty in
meeting obligations associated with financial liabilities.
Management of the risk
Liquidity risk is not significant as the majority of the
Company’s assets are investments in quoted equities that are
readily realisable within one week, in normal market
conditions.
The Board gives guidance to the Portfolio Manager as to the
maximum amount of the Company’s resources that should be invested
in any one company.
Liquidity exposure and maturity
Contractual maturities of the financial liabilities as at
31 March 2017, based on the earliest
date on which payment can be required, are as follows:
|
2017 |
2016 |
|
3 months |
3 months |
|
or less |
or less |
|
£’000 |
£’000 |
Overdraft facility |
13,083 |
36,189 |
Amounts due to brokers and
accruals |
1,235 |
10,389 |
|
14,318 |
46,578 |
3. Credit risk:
Credit risk is the risk of failure of a counterparty to
discharge its obligations resulting in the Company suffering a
loss.
J.P. Morgan Clearing Corp. may take assets with a value of up to
140% of the overdraft as collateral. Such assets held by J.P.
Morgan Clearing Corp. are available for rehypothecation†
. As at 31 March 2017, the maximum
value of assets available for rehypothecation was £18.3 million
(31 March 2016: £50.7 million). As at
this date, assets with a total market value of £7.8m were
rehypothecated (2016: £49.3 million).
See the Business Review for further details on the overdraft
facility and the associated credit risk.
† See
glossary.
Management of the risk
The risk is not significant and is managed as follows:
- by only dealing with brokers which have been approved by
OrbiMed Capital LLC and banks with high credit ratings; and
- by investing in markets that operate DVP (delivery versus
payment) settlement.
- all cash balances are held with approved counterparties. J.P.
Morgan Clearing Corp. is the custodian of the Company’s assets and
all assets are segregated from J.P. Morgan’s own assets.
At 31 March 2017 the Company’s
exposure to credit risk amounted to £117,000 and was in respect of
amounts due from brokers in relation to future settlements and
other receivables, such as amounts due from brokers and accrued
income (2016: £4,718,000).
Hierarchy of investments
As required under IFRS 13 “Fair Value Measurement”, the Company
has classified its financial assets designated at fair value
through profit or loss using a fair value hierarchy that reflects
the significance of the inputs used in making the fair value
measurements. The hierarchy has the following 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).
As at 31 March 2017 the investment
in OrbiMed Asia Partners LP fund has been classified as Level 3.
The fund has been valued at the net asset value as at 31 December 2016 and it is believed that the
value of the fund as at 31 March 2017
will not be materially different. If the value of the fund was to
increase or decrease by 10%, while all other variables had remained
constant, the return and net assets attributable to Shareholders
for the year ended 31 March 2017
would have increased/decreased by £507,000 (2016: £401,000).
|
Level 1 |
Level 2 |
Level 3 |
Total |
As of 31 March 2017 |
£’000 |
£’000 |
£’000 |
£’000 |
Assets |
|
|
|
|
Financial investments designated at
fair value through profit or loss |
456,309 |
— |
5,069 |
461,378 |
|
Level 1 |
Level 2 |
Level 3 |
Total |
As of 31 March 2016 |
£’000 |
£’000 |
£’000 |
£’000 |
Assets |
|
|
|
|
Financial investments designated at
fair value through profit or loss |
416,413 |
— |
4,014 |
420,427 |
Level 3 Reconciliation
Please see on the previous page a reconciliation disclosing the
changes during the year for the financial assets and liabilities
designated at fair value through profit or loss classified as being
Level 3. There has been no transfer between fair value hierarchy
levels.
|
2017 |
2016 |
|
£’000 |
£’000 |
Assets |
|
|
As at 1 April |
4,014 |
3,439 |
Net movement in investment holding
gains during the year |
1,441 |
789 |
Return of capital |
(386) |
(214) |
Assets as at 31 March |
5,069 |
4,014 |
Fair value of financial assets and
financial liabilities:
Financial assets and financial liabilities are either carried in
the Statement of Financial Position at their fair value or at a
reasonable approximation of fair value.
Capital management
The Board considers the capital of the Company to be its issued
share capital and reserves.
The Company’s capital management objectives are:
- to ensure that it will be able to continue as a going concern;
and
- to maximise the total return to its equity shareholders.
The Company’s capital is disclosed in the Statement of Financial
Position and is managed on a basis consistent with its investment
objective and policy.
Shares may be repurchased by the Company.
The Company’s objectives, policies and processes for managing
capital are unchanged from the preceding accounting period.
14. Segment reporting
Geographical segments
|
2017 |
2016 |
|
Value of |
Value of |
|
investments |
investments |
Region |
£’000 |
£’000 |
North America |
398,949 |
359,328 |
Europe |
57,360 |
26,276 |
Asia |
5,069 |
34,823 |
Total |
461,378 |
420,427 |
15. Related parties
The following are considered to be related parties:
- Frostrow Capital LLP (under the Listing Rules)
- OrbiMed Capital LLC
- The Directors of the Company
A number of the partners at, and a former partner of OrbiMed
Capital LLC have a minority financial interest totalling 20% in
Frostrow Capital LLP, the Company’s AIFM.
Further details of the relationship between the Company and
Frostrow Capital LLP, the Company’s AIFM and OrbiMed Capital LLC,
the Company’s Portfolio Manager, are disclosed in the Report of
Directors. During the year ended 31 March
2017 Frostrow Capital LLP earned £1,250,000 in respect of
AIFM fees of which £309,000 was outstanding at the year end; during
the year ended 31 March 2017, OrbiMed
Capital LLC earned £2,715,000 in respect of Portfolio Management
fees, of which £710,000 was outstanding at the year end. Mr
Sven Borho is a Director of the
Company, as well as a Partner at OrbiMed Capital LLC. During the
year no performance fees crystallised (2016: nil). All material
related party transactions have been disclosed. Details of the
remuneration of all Directors can be found in the Directors’
Remuneration Report.
16. Capital reserve
|
|
2017 |
|
|
2016 |
|
|
|
Capital |
|
|
Capital |
|
|
|
reserve – |
|
|
reserve – |
|
|
Capital |
investment |
|
Capital |
investment |
|
|
reserves – |
holdings |
|
reserves – |
holdings |
|
|
other |
gains/(losses) |
Total |
other |
gains/(losses) |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
At 1 April |
274,432 |
41,162 |
315,594 |
234,538 |
236,369 |
470,907 |
Transfer on disposal of
investments |
48,986 |
(48,986) |
— |
105,360 |
(105,360) |
— |
Net gains/(losses) on
investments |
30,408 |
73,405 |
103,813 |
(35,437) |
(89,847) |
(125,284) |
Exchange losses |
(2,252) |
— |
(2,252) |
(1,802) |
— |
(1,802) |
Expenses charged to capital |
(4,185) |
— |
(4,185) |
(2,693) |
— |
(2,693) |
Repurchase of own shares to be |
|
|
|
|
|
|
held in Treasury |
— |
— |
— |
(10,241) |
— |
(10,241) |
Repurchase of own shares for
cancellation |
(29,687) |
— |
(29,687) |
(15,293) |
— |
(15,293) |
At 31 March |
317,702 |
65,581 |
383,283 |
274,432 |
41,162 |
315,594 |
Profits arising out of a change in fair value of assets,
recognised in accordance with Accounting Standards, may be
distributed provided the relevant assets can be readily convertible
into cash. Securities listed on a recognised stock exchange are
generally regarded as being readily convertible into cash. Under
the terms of the revisions made to the Company’s Articles of
Association in 2013, sums within “Capital reserves – other” are
also available for distribution.
17. Contingent liabilities and capital
commitments
As at 31 March 2017 there were no
contingent liabilities or capital commitments for the Company
(2016: £nil).
Further Information / AIFMD Related
Disclosure
Alternative Investments Fund Managers
Directive (AIFMD) Disclosures (Unaudited)
Investment objective and leverage
A description of the investment strategy and objectives of the
Company, the types of assets in which the Company may invest, the
techniques it may employ, any applicable investment restrictions,
the circumstances in which it may use leverage, the types and
sources of leverage permitted and the associated risks, any
restrictions on the use of leverage and the maximum level of
leverage which the AIFM and Portfolio Manager are entitled to
employ on behalf of the Company and the procedures by which the
Company may change its investment strategy and/or the investment
policy can be found in the Business Review within the Strategic
Report.
The table below sets out the current maximum permitted limit and
actual level of leverages for the Company:
|
As a percentage of
net assets |
|
Gross
Method |
Commitment
Method |
Maximum level of leverage |
130.0% |
130.0% |
Actual level at 31 March 2017 |
103.2% |
103.2% |
Remuneration of AIFM staff
Following completion of an assessment of the application of the
proportionality principle to the FCA’s AIFM Remuneration Code, the
AIFM has disapplied the pay-out process rules with respect to it
and any of its delegates. This is because the AIFM considers that
it carries out non-complex activities and is operating on a small
scale.
Further disclosures required under the AIFM Rules can be found
within the Investor Disclosure Document on the Company’s website:
www.biotechgt.com.
Further Information / Glossary of
Terms
AIC
Association of Investment Companies.
Alternative Investment Fund Managers
Directive (AIFMD)
Agreed by the European Parliament and the Council of the
European Union and transported into UK legislation, the AIFMD
classifies certain investment vehicles, including investment
companies, as Alternative Investment Funds (AIFs) and requires them
to appoint an Alternative Investment Fund Manager (AIFM) and
depositary to manage and oversee the operations of the investment
vehicle. The Board of the Company retains responsibility for
strategy, operations and compliance and the Directors retain a
fiduciary duty to shareholders.
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.
Gearing represents borrowings less cash and cash equivalents
expressed as a percentage of shareholders’ funds.
Leverage
The AIFM Directive (the “Directive”) has introduced the
obligation on the Company and its AIFM in relation to leverage as
defined by the Directive. The Directive leverage definition is
slightly different to the Association of Investment Companies
method of calculating gearing and is as follows: any method by
which the AIFM increases the exposure of an AIF it manages whether
through borrowing of cash or securities, or leverage embedded in
derivative positions.
There are two methods for calculating leverage under the
Directive – the Gross Method and the Commitment Method. The process
for calculating exposure under each methodology is largely the
same, except, where certain conditions are met, the Commitment
Method enables instruments to be netted off to reflect ‘netting’ or
‘hedging’ arrangements and the entity exposure is effectively
reduced.
Net Asset Value (NAV)
The value of the Company’s assets, principally investments made
in other companies and cash being held, less 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.
Rehypothecation
Rehypothecation is the practice by banks and brokers of using,
for their own purposes, assets that have been posted as collateral
by clients.
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.
Further Information / Notice of the
Annual General Meeting
Notice is hereby given that the Annual General Meeting of The
Biotech Growth Trust PLC will be held at Barber-Surgeons’ Hall,
Monkwell Square, Wood Street, London EC2Y 5BL on Wednesday 12 July 2017 at 12 noon, for the following
purposes:
Ordinary business
To consider and, if thought fit, pass the following as ordinary
resolutions:
1. To receive and, if thought fit,
to accept the Audited Financial Statements and the Report of the
Directors for the year ended 31 March
2017
2. To approve the Directors’
Remuneration Report for the year ended 31
March 2017
3. To approve the Directors’
Remuneration Policy
4. To re-elect Andrew Joy as a Director of the Company
5. To re-elect Professor Dame
Kay Davies, CBE as a Director of the
Company
6. To re-elect Sven Borho as a Director of the Company
7. To re-elect Steven Bates as a Director of the Company
8. To re-elect The Rt Hon Lord
Willetts as a Director of the Company
9. To elect Julia Le Blan as a Director of the Company
10. To re-appoint Ernst & Young LLP as
Auditor to the Company and to authorise the Audit Committee to
determine their remuneration
Special business
To consider and, if thought fit, pass the following resolutions
of which resolutions 12, 13 and 14 will be proposed as special
resolutions:
Authority to allot shares
11. THAT in substitution for all existing
authorities the Directors be and are hereby generally and
unconditionally authorised in accordance with Section 551 of the
Companies Act 2006 (the “Act”) to exercise all powers of the
Company to allot relevant securities (within the meaning of Section
551 of the Act) up to a maximum aggregate nominal amount of
£1,395,997 (being 10% of the issued share capital of the Company at
the date of the notice convening the meeting at which this
resolution is proposed) and representing 5,583,991 shares of
25 pence each (or, if less, the
number representing 10% of the issued share capital of the Company
at the date at which this resolution is passed), provided that this
authority shall expire at the conclusion of the Annual General
Meeting of the Company to be held in 2018 or 15 months from the
date of passing this resolution, whichever is the earlier, unless
previously revoked, varied or renewed, by the Company in general
meeting and provided that the Company shall be entitled to make,
prior to the expiry of such authority, an offer or agreement which
would or might require relevant securities to be allotted after
such expiry and the Directors may allot relevant securities
pursuant to such offer or agreement as if the authority conferred
hereby had not expired.
Disapplication of pre-emption
rights
12. THAT in substitution of all existing
powers the Directors be and are hereby generally empowered pursuant
to Sections 570 and 573 of the Companies Act 2006 (the “Act”) to
allot equity securities (within the meaning of section 560 of the
Act) including if immediately before the allotment, such shares are
held by the Company as treasury shares (as defined in Section 724
of the Act) for cash pursuant to the authority conferred on them by
resolution 13 set out in the notice convening the Annual General
Meeting at which this resolution is proposed or otherwise as if
section 561(1) of the Act did not apply to any such allotment and
to sell relevant shares (within the meaning of section 560 of the
Act) for cash as if section 561(1) of the Act did not apply to any
such sale, provided that this power shall be limited to the
allotment of equity securities pursuant to:
(a) an offer of equity securities open
for acceptance for a period fixed by the Directors where the equity
securities respectively attributable to the interests of holders of
shares of 25 pence each in the
Company (“Shares”) are proportionate (as nearly as may be) to the
respective numbers of Shares held by them but subject to such
exclusions or other arrangements in connection with the issue as
the Directors may consider necessary, appropriate, or expedient to
deal with equity securities representing fractional entitlements or
to deal with legal or practical problems arising in any overseas
territory, the requirements of any regulatory body or stock
exchange, or any other matter whatsoever; and
(b) (otherwise than pursuant to
sub-paragraph (a) above) up to an aggregate nominal value of
£1,395,997 or, if less, the number representing 10% of the issued
share capital of the Company at the date of the meeting at which
this resolution is passed, and expires at the conclusion of the
next Annual General Meeting of the Company after the passing of
this resolution or 15 months from the date of passing this
resolution, whichever is the earlier, unless previously revoked,
varied or renewed by the Company in general meeting and provided
that the Company shall be entitled to make, prior to the expiry of
such authority, an offer or agreement which would or might require
equity securities to be allotted after such expiry and the
Directors may allot equity securities pursuant to such offer or
agreement as if the power conferred hereby had not expired.
Authority to repurchase ordinary
shares
13. THAT the Company be and is hereby
generally and unconditionally authorised in accordance with section
701 of the Companies Act 2006 (the “Act”) to make one or more
market purchases (within the meaning of section 693(4) of the Act)
of ordinary shares of 25 pence each
in the capital of the Company (“Shares”) either for retention as
treasury shares for future reissue, resale, transfer or for
cancellation provided that:
(a) the maximum aggregate number of
Shares authorised to be purchased is 8,370,402 (representing
approximately 14.99% of the issued share capital of the Company at
the date of the notice convening the meeting at which this
resolution is proposed);
(b) the minimum price (exclusive of
expenses) which may be paid for a Share is 25 pence;
(c) the maximum price (exclusive of
expenses) which may be paid for a Share is an amount equal to the
greater of (i) 105% of the average of the middle market quotations
for a Share as derived from the Daily Official List of the London
Stock Exchange for the five business days immediately preceding the
day on which that Share is purchased and (ii) the higher of the
price of the last independent trade in shares and the highest then
current independent bid for shares on the London Stock Exchange as
stipulated in Article 5(1) of Regulation No. 2233/2003 of the
European Commission (Commission Regulation of 22 December 2003
implementing the Market Abuse Directive as regards exemptions for
buy-back programmes and stabilisation of financial
instruments);
(d) the authority hereby conferred shall
expire at the conclusion of the Annual General Meeting of the
Company to be held in 2018 or, if earlier, on the expiry of 15
months from the date of the passing of this resolution unless such
authority is renewed prior to such time; and
(e) the Company may make a contract to
purchase Shares under this authority before the expiry of such
authority which will or may be executed wholly or partly after the
expiration of such authority, and may make a purchase of Shares in
pursuance of any such contract.
General meetings
14. THAT the Directors be authorised to call
general meetings (other than Annual General Meetings) on not less
than 14 working days’ notice, such authority to expire at the
conclusion of the next Annual General Meeting of the Company or, if
earlier, until expiry of 15 months from the date of the passing of
this resolution.
By order of the Board |
Registered office: |
Frostrow Capital
LLP
Company Secretary
25 May 2017 |
One Wood Street
London EC2V 7WS |
Notes
1. Members are
entitled to appoint a proxy to exercise all or any of their rights
to attend and to speak and vote on their behalf at the meeting. A
shareholder may appoint more than one proxy in relation to the
meeting provided that each proxy is appointed to exercise the
rights attached to a different share or shares held by that
shareholder. A proxy need not be a shareholder of the Company. A
proxy form which may be used to make such appointment and give
proxy instructions accompanies this notice.
2. A vote
withheld is not a vote in law, which means that the vote will not
be counted in the calculation of votes for or against the
resolutions. If no voting indication is given, a proxy may vote or
abstain from voting at his/her discretion. A proxy may vote (or
abstain from voting) as he or she thinks fit in relation to any
other matter which is put before the meeting.
3. To be valid
any proxy form or other instrument appointing a proxy must be
completed and signed and received by post or (during normal
business hours only) by hand at Capita Asset Services, PXS1, 34
Beckenham Road, Beckenham, Kent BR3 4ZF no later than 12 noon on
10 July 2017.
4. In the case
of a member which is a company, the instrument appointing a proxy
must be executed under its seal or signed on its behalf by a duly
authorised officer or attorney or other person authorised to sign.
Any power of attorney or other authority under which the instrument
is signed (or a certified copy of it) must be included with the
instrument.
5. The return of
a completed proxy form, other such instrument or any CREST Proxy
Instruction (as described below) will not prevent a shareholder
attending the meeting and voting in person if he/she wishes to do
so.
6. Any person to
whom this notice is sent who is a person nominated under section
146 of the Companies Act 2006 to enjoy information rights (a
“Nominated Person”) may, under an agreement between him/her and the
shareholder by whom he/she was nominated, have a right to be
appointed (or have someone else appointed) as a proxy for the
meeting. If a Nominated Person has no such proxy appointment right
or does not wish to exercise it, he/she may, under any such
agreement, have a right to give instructions to the shareholder as
to the exercise of voting rights.
7. The statement
of the rights of shareholders in relation to the appointment of
proxies in paragraphs 1 and 3 above does not apply to Nominated
Persons. The rights described in these paragraphs can only be
exercised by shareholders of the Company.
8. Pursuant to
regulation 41 of the Uncertificated Securities Regulations 2001,
only shareholders registered on the register of members of the
Company (the “Register of Members”) at the close of business on
10 July 2017 (or, in the event of any
adjournment, on the date which is two days before the time of the
adjourned meeting) will be entitled to attend and vote or be
represented at the meeting in respect of shares registered in their
name at that time. Changes to the Register of Members after that
time will be disregarded in determining the rights of any person to
attend and vote at the meeting.
9. As at
25 May 2017 (being the last business
day prior to the publication of this notice) the Company’s issued
share capital consists of 55,839,913 ordinary shares, carrying one
vote each. Therefore, the total voting rights in the Company as at
25 May 2017 are 55,839,913.
10. CREST members who wish
to appoint a proxy or proxies through the CREST electronic proxy
appointment service may do so by using the procedures described in
the CREST Manual. CREST Personal Members or other CREST sponsored
members, and those CREST members who have appointed a service
provider(s), should refer to their CREST sponsor or voting service
provider(s), who will be able to take the appropriate action on
their behalf.
11. In order for a proxy
appointment or instruction made using the CREST service to be
valid, the appropriate CREST message (a “CREST Proxy Instruction”)
must be properly authenticated in accordance with the
specifications of Euroclear UK and Ireland Limited (“CRESTCo”), and
must contain the information required for such instruction, as
described in the CREST Manual. The message, regardless of whether
it constitutes the appointment of a proxy or is an amendment to the
instruction given to a previously appointed proxy must, in order to
be valid, be transmitted so as to be received by the issuer’s agent
(ID RA10) no later than 48 hours before the time appointed for
holding the meeting. For this purpose, the time of receipt will be
taken to be the time (as determined by the timestamp applied to the
message by the CREST Application Host) from which the issuer’s
agent is able to retrieve the message by enquiry to CREST in the
manner prescribed by CREST. After this time any change of
instructions to proxies appointed through CREST should be
communicated to the appointee through other means.
12. CREST members and, where
applicable, their CREST sponsors, or voting service providers
should note that CRESTCo does not make available special procedures
in CREST for any particular message. Normal system timings and
limitations will, therefore, apply in relation to the input of
CREST Proxy Instructions. It is the responsibility of the CREST
member concerned to take (or, if the CREST member is a CREST
personal member, or sponsored member, or has appointed a voting
service provider, to procure that his CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to
ensure that a message is transmitted by means of the CREST system
by any particular time. In this connection, CREST members and,
where applicable, their CREST sponsors or voting system providers
are referred, in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and
timings.
13. The Company may treat as
invalid a CREST Proxy Instruction in the circumstances set out in
Regulation 35(5)(a) of the Uncertificated Securities Regulations
2001.
14. In the case of joint
holders, where more than one of the joint holders purports to
appoint a proxy, only the appointment submitted by the most senior
holder will be accepted. Seniority is determined by the order in
which the names of the joint holders appear in the Register of
Members in respect of the joint holding (the first named being the
most senior).
15. Members who wish to
change their proxy instructions should submit a new proxy
appointment using the methods set out above. Note that the cut-off
time for receipt of proxy appointments (see above) also applies in
relation to amended instructions; any amended proxy appointment
received after the relevant cut-off time will be disregarded.
16. Members who have
appointed a proxy using the hard-copy proxy form and who wish to
change the instructions using another hard-copy form, should
contact Capita Asset Services on 0871 664 0300 or 0371 664 0300 if
calling from outside the United
Kingdom. Calls cost 12p per minute plus your phone company’s
access charge. Calls outside the United
Kingdom will be charged at the applicable international
rate. Lines are open between 09.00-17.30, Monday to Friday
excluding public holidays in England and Wales.
17. If a member submits more
than one valid proxy appointment, the appointment received last
before the latest time for the receipt of proxies will take
precedence.
18. In order to revoke a
proxy instruction, members will need to inform the Company. Members
should send a signed hard copy notice clearly stating their
intention to revoke a proxy appointment to Capita Asset Services,
PXS1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF.
In the case of a member which is a company, the revocation
notice must be executed under its common seal or signed on its
behalf by an officer of the company or an attorney for the company.
Any power of attorney or any other authority under which the
revocation notice is signed (or a duly certified copy of such power
of attorney) must be included with the revocation notice. If a
member attempts to revoke their proxy appointment but the
revocation is received after the time for receipt of proxy
appointments (see above) then, subject to paragraph 4, the proxy
appointment will remain valid.
Further Information / Explanatory
Notes to the Resolutions
Resolution 1 – To
receive the Annual Report and Accounts
The Annual Report and Accounts for the year ended 31 March 2017 will be presented to the Annual
General Meeting. These accounts accompanied this Notice of Meeting
and shareholders will be given an opportunity at the meeting to ask
questions.
Resolutions 2 and
3 – Remuneration Report and Remuneration Policy
The Report on Directors’ Remuneration is set out in full in the
Directors’ Remuneration Report. The Remuneration Policy is also set
out separately following this report.
Resolutions 4 to 9
– Re-election of Directors
Resolutions 4 to 9 deal with the election and re-election of
each Director.
The Board has confirmed, following a performance review, that
the Directors standing for election and re-election continue to
perform effectively.
Resolution 10 –
Re-Appointment of Auditor and the determination of their
remuneration
Resolution 10 relates to the re-appointment of Ernst & Young
LLP as the Company’s independent auditor to hold office until the
next Annual General Meeting of the Company and also authorises the
Audit Committee to set their remuneration.
Resolutions 11 and
12 – Issue of Shares
Ordinary Resolution 11 in the Notice of Annual General Meeting
will renew the authority to allot the unissued share capital up to
an aggregate nominal amount of £1,395,997 (equivalent to 5,583,991
shares, or 10% of the Company’s existing issued share capital on
25 May 2017, being the nearest
practicable date prior to the signing of this Report). Such
authority will expire on the date of the next Annual General
Meeting or after a period of 15 months from the date of the passing
of the resolution, whichever is earlier. This means that the
authority will have to be renewed at the next Annual General
Meeting.
When shares are to be allotted for cash, Section 551 of the
Companies Act 2006 (the “Act”) provides that existing shareholders
have pre-emption rights and that the new shares must be offered
first to such shareholders in proportion to their existing holding
of shares. However, shareholders can, by special resolution,
authorise the Directors to allot shares otherwise than by a pro
rata issue to existing shareholders. Special Resolution 12 will, if
passed, give the Directors power to allot for cash equity
securities up to 10% of the Company’s existing share capital on
25 May 2017, as if Section 551 of the
Act does not apply. This is the same nominal amount of share
capital which the Directors are seeking the authority to allot
pursuant to Resolution 11. This authority will also expire on the
date of the next Annual General Meeting or after a period of 15
months, whichever is earlier. This authority will not be used in
connection with a rights issue by the Company.
The Directors intend to use the authority given by Resolutions
11 and 12 to allot shares and disapply pre-emption rights only in
circumstances where this will be clearly beneficial to shareholders
as a whole. The issue proceeds would be available for investment in
line with the Company’s investment policy. No issue of shares will
be made which would effectively alter the control of the Company
without the prior approval of shareholders in general meeting.
Resolution 13 –
Share Repurchases
The Directors wish to renew the authority given by shareholders
at the previous Annual General Meeting. The principal aim of a
share buy-back facility is to enhance shareholder value by
acquiring shares at a discount to net asset value, as and when the
Directors consider this to be appropriate. The purchase of shares,
when they are trading at a discount to net asset value per share,
should result in an increase in the net asset value per share for
the remaining shareholders. This authority, if conferred, will only
be exercised if to do so would result in an increase in the net
asset value per share for the remaining shareholders and if it is
in the best interests of shareholders generally. Any purchase of
shares will be made within guidelines established from time to time
by the Board. It is proposed to seek shareholder authority to renew
this facility for another year at the Annual General Meeting.
Under the current Listing Rules, the maximum price that may be
paid on the exercise of this authority must not exceed the higher
of (i) 105% of the average of the middle market quotations for the
shares over the five business days immediately preceding the date
of purchase and (ii) the higher of the last independent trade and
the highest current independent bid on the trading venue where the
purchase is carried out. The minimum price which may be paid is 25p
per share. Shares which are purchased under this authority will
either be cancelled or held as treasury shares.
Special Resolution 13 in the Notice of Annual General Meeting
will renew the authority to purchase in the market a maximum of
14.99% of shares in issue on 25 May
2017, being the nearest practicable date prior to the
signing of this Report, (amounting to 8,370,402 shares). Such
authority will expire on the date of the next Annual General
Meeting or after a period of 15 months from the date of passing of
the resolution, whichever is earlier. This means in effect that the
authority will have to be renewed at the next Annual General
Meeting or earlier if the authority has been exhausted.
Resolution 14 –
General Meetings
Special Resolution 14 seeks shareholder approval for the Company
to hold General Meetings (other than the Annual General Meeting) on
not less than at 14 working days’ notice.
Recommendation
The Board considers that the resolutions relating to the above
items of special business, are in the best interests of
shareholders as a whole. Accordingly, the Board unanimously
recommends to the shareholders that they vote in favour of the
above resolutions to be proposed at the forthcoming Annual General
Meeting as the Directors intend to do in respect of their own
beneficial holdings totaling 353,718 shares.
Frostrow Capital LLP,
Company Secretary
25 May 2017
ANNOUNCEMENT ENDS