REG - Intnl. Biotechnology - Final Results
06/11/2025 07:00
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RNS Number : 3858G Intl. Biotechnology Trust PLC 06 November 2025
LONDON STOCK EXCHANGE ANNOUNCEMENT
INTERNATIONAL BIOTECHNOLOGY TRUST PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2025
Information disclosed in accordance with DTR 4.1
The Company's Annual Report and Financial Statements for the year ended 31
August 2025 is being published in hard copy format and an electronic copy
will shortly be available to download from the Company's web
pages: www.ibtplc.com (http://www.ibtplc.com/) . Please click on the
following link to view the document: www.ibtplc.com (http://www.ibtplc.com/)
.
Key highlights
· The Company's share price total return rose by 3.5% in the year under review,
outperforming the NASDAQ Biotechnology Index (the "Reference Index"), which
fell by 6.0%.
· The Company's NAV total return rose to 0.7% in the year under review. On an
annualised basis over one, three, five and ten years to 31 August 2025, the
NAV total return has outperformed the Reference Index.
· The Company's dividend policy, last approved in December 2024, pays
shareholders 4% of the Company's NAV through two semi-annual distributions; in
2025, dividends of 15.56p and 16.17p per share were paid, delivering a 4.7%
yield as at 31 August 2025, with the policy to be proposed again at the
December 2025 AGM.
· Five quoted portfolio holdings in late-stage businesses with clinically
approved assets were acquired during the year, taking the total since 2020 to
29, reflecting the portfolio's focus on de-risked companies with clear
commercial pathways.
· The Company's unquoted allocation, in particular, the investments in SV Fund
VI and SV BCOF, continued to perform well during the year. The Board has
decided to maintain the strategic allocation to 5 -15% of assets in unquoted
early-stage biotech via unlisted funds, starting with a £10 million
commitment (c.4% of assets) to a new limited partnership with Schroders
Capital, announced on 2 October 2025.
Investor presentation
Our Portfolio Managers, Ailsa Craig and Marek Poszepczynski will be presenting
at an investor webinar on 6 November 2025 at 2.00 pm (which can be signed up
to via the following link: www.schroders.events/IBTFY25
(https://www.schroders.events/event/IBTFY25/regProcessStep1) ).
Kate Cornish-Bowden, Chair of International Biotechnology Trust plc,
commented:
"I am pleased to report that on an annualised basis over one, three, five and
ten years to 31 August 2025, the Company's NAV total return has outperformed
the Reference Index. In the latter half of our financial year, the sector has
been performing well and there are good reasons to expect this to
continue. The need for cash-rich pharmaceutical companies to maintain growth
and adapt to potential regulatory changes has led to a surge in M&A
activity in recent months. The overall M&A activity trend reflects a shift
by big pharmaceutical players to strengthen pipeline positions in high-value
therapeutic areas such as oncology, neuroscience, and rare diseases.
The outcome of the drug pricing debate will take more time to resolve, but the
convergence of the transformational progress in scientific innovation, the
impact of artificial intelligence on trials and approvals, and increasing
demand for treatments should make biotechnology a lucrative investment for
shareholders in the years to come."
The Company has submitted a copy of its Annual Financial Report to the
National Storage Mechanism and it will shortly be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
Enquiries:
Schroder Investment Management Limited
Charlotte Banks/Kirsty Preston (Press) 020 7658 6000
Natalia de Sousa (Company Secretarial) 020 7658 6000
Chair's Statement
"I am pleased to report that on an annualised basis over one, three, five and
ten years to 31 August 2025, the Company's NAV total return has outperformed
the Reference Index."
Dear Shareholders
I am very pleased to report that the Company's share price total return rose
by 3.5% in the year under review, significantly outperforming the NASDAQ
Biotechnology Index (the "Reference Index"), which fell by 6.0%. The net asset
value (NAV) total return of the Company was 0.7% reflecting a slight narrowing
of the discount at which the shares trade to asset value during the financial
year. All figures are on a sterling adjusted basis with dividends reinvested.
It is also positive to note that on an annualised basis over one, three, five
and ten years to 31 August 2025, the Company's NAV total return has
outperformed the Reference Index across all the equivalent periods.
This year's performance has been achieved in a very volatile year in which the
Reference Index fell by over 22% to a low in April this year, followed by a
recovery of 25% at the financial year-end. The consequences of Liberation Day
and global tariffs sent markets into a downward spiral and healthcare was no
exception. The recovery in the biotechnology sector was precipitated by an
uptick in mergers and acquisitions (M&A) from pharmaceutical companies
adapting to the new environment, the realisation that certain companies with
novel science would be unlikely to be impacted by headline tariffs and early
signs of improving confidence in the funding environment for biotechnology
companies.
QUOTED PORTFOLIO
The NAV of the quoted portfolio, sterling adjusted with dividends reinvested,
rose by 3.8% during the year under review, strongly outperforming the
Reference Index, which fell by 6%.
During the first half of the financial year, investors digested the
appointment of Robert F Kennedy as US Health Secretary with increasing concern
as the news about cuts to healthcare funding, reduced headcount at regulatory
agencies, potential tariffs and talk of Most Favored Nation (MFN) drug pricing
added to the uncertainty.
The sector has witnessed a recovery in the second half of the year, as fears
have subsided with regards to the changes made at the regulatory level. Our
Portfolio Managers have continued to focus on companies with the strongest
potential to deliver the most innovative science and identify the revenue
generating biotechnology companies likely to become targets of larger
pharmaceutical companies seeking new growth.
The biggest contributor to performance during the period came from uniQure,
the Netherlands listed gene therapy company. UniQure is developing a
therapeutic treatment, AMT-130 which has the potential to slow the progression
of the rare neurodegenerative Huntington's Disease. Patients with this fatal
disease have very few treatment options. The development programme received
two regulatory designations during the year: agreement on a Food and Drug
Administration (FDA) Accelerated Approval pathway and Breakthrough Therapy
designation. Post the year-end, the company announced additional positive
pivotal data and the Portfolio Managers sold the position following a further
significant rise in the company's valuation.
Once again, the Portfolio Managers have proved very adept at identifying
revenue generating companies which have become acquisition targets. Amongst
the five portfolio holdings acquired this year, US-listed Intra-Cellular
Therapies, was the most significant. Intra-Cellular was the largest holding in
the Company's portfolio when it was bid for by Johnson & Johnson in
January 2025. Intra-Cellular's lead treatment, Caplyta, is an FDA-approved
treatment for depression and schizophrenia. Johnson & Johnson's $14.6
billion bid for Intra-Cellular, which was announced in January and closed in
April 2025, was the largest biopharma transaction in the past 12 months and
signalled the beginning of renewed activity in the industry this year.
The underweight position in the highly valued large-cap pharmaceutical company
Regeneron, which suffered from a clinical trial failure in its chronic
obstructive pulmonary disease (COPD) treatment this year, as well as ongoing
competitive pressure in its flagship Eylea franchise, also contributed to our
performance.
The underweight position in the large-cap biotechnology anti-infectives
company Gilead detracted from performance. Gilead has continued to report
strong results from sales of its human immunodeficiency virus (HIV)
medication, but the Portfolio Managers believe its dependence on the HIV
franchise makes the company vulnerable in an increasingly politicised
regulatory environment.
UNQUOTED PORTFOLIO
The unquoted portfolio, which represented 7.7% of the Company's investments at
year-end, is invested primarily in two venture capital funds managed by SV
Health Investors LLP (SV); SV Fund VI and SV Biotech Crossover Opportunities
Fund (BCOF). These two funds have delivered strong returns for the Company's
shareholders.
SV Fund VI, which represented 3.1% of the Company's investments at the end of
the financial period, is a mature venture capital fund which is 93% drawn
down. During the year under review, SV completed follow-on investments in Jet
Health, TRex Bio, Ribometrix, Enara Bio, Sitrix and Artios Therapeutics. The
fund received proceeds from sold holdings Endotronics and Caraway
Therapeutics. Since inception in 2016, the fund has achieved a net internal
rate of return (IRR) of 14.3%.
SV BCOF, which represented 3.5% of the Company's investments at the end of the
financial period, was launched in 2022 and is 39% drawn down. In the last
year, SV BCOF has seen a highly successful follow-on fundraising from Draig
Therapeutics. The investment partners received clinical milestone income from
the recently exited EyeBio. During the year, SV added new holdings to the BCOF
portfolio including Advancell, Artios Therapeutics and Imbria. Thanks to
excellent partial realisations from BCOF's initial investments in Nimbus
Therapeutics and EyeBio, the fund has recorded a net IRR of 89% since
inception.
Of the small number of directly held legacy assets, the most significant is
the discounted value of the royalty streams from Ikano Therapeutics which was
sold to Belgian listed UCB in 2006. It was pleasing to see significant
payments of £1,474,787.16 received in respect of Ikano Therapeutics during
the year. This holding represents 0.9% of total investments as at 31 August
2025.
PARTNERSHIP AGREEMENT WITH SCHRODERS CAPITAL
Following positive feedback from shareholders, it is the Board's intention to
maintain investments of 5-15% of the Company's assets in unquoted,
early-stage, innovative biotechnology opportunities utilising unlisted funds
not normally available to retail investors. On 2 October 2025, we announced
the establishment of a new limited partnership with Schroders Capital (the
"Partnership"), through which the Company intends, over time, to invest in
further unquoted biotechnology opportunities. Schroders Capital brings
significant expertise in US and European venture capital and growth equity
investments within the biotechnology and life science sectors. This new
Partnership enhances the Company's ability to access unquoted funds
diversified by manager, vintage and geography. The initial commitment of £10
million represents approximately 4% of the current company asset value.
DIVIDENDS
The Company's dividend policy, which was last approved at the Annual General
Meeting (AGM) in December 2024, is to make dividend payments equivalent to 4%
of the Company's NAV, as at the last day of the preceding financial year
ending 31 August, through two semi-annual distributions. This enables
shareholders to gain access to this exciting growth sector without sacrificing
the security of regular income. The first dividend for the year of 15.56p per
share was paid on 24 January 2025, and the second payment of 16.17 pence per
share, was made on 22 August 2025. This equates to a dividend yield of 4.7% as
at 31 August 2025.
The dividend policy will once again be proposed to shareholders at the
Company's AGM in December 2025.
DISCOUNT MANAGEMENT
Over the last twelve months, the widespread trend across the investment trust
industry of companies' share prices trading at a discount to NAV has
continued, and the biotechnology and healthcare sector is no exception. The
Board keeps the Company's share price discount to NAV under close review and
is committed to buying back its shares to help manage the position. The Board
bought back 3,107,419 shares to be held in treasury during the year, and the
discount narrowed slightly from 11.3% to 8.9%. The Board believes that buying
back shares at a discount to NAV is not only accretive to our shareholders but
demonstrates our confidence in the underlying fundamental value of our
investments.
COSTS AND FEES
I am pleased to report that Schroders has agreed to a reduction in the
management fee for the quoted portfolio. From 1 September 2025, the fee will
fall from 0.70% to 0.65% per annum.
The Board has recently approved an amendment to the basis on which a
performance fee is payable. The performance fee remains at 10% of any relative
outperformance above the Reference Index, subject to a hurdle rate of 0.5%.
Previously, the performance fee was payable only if a positive NAV per share
return was achieved over the relevant calculation period. If such a return was
not achieved, payment of the performance fee was deferred until the next
calculation period in which a positive NAV per share return was recorded. This
clause has now been amended to better reflect the contribution of dividends,
predominantly paid out of capital, to shareholders' overall NAV returns. Under
the revised terms, the performance fee will be payable only when a positive
total NAV per share return has been achieved. This is defined as the movement
in the NAV per share, adjusted to include the sum of any dividends reflected
in the Company's NAV over the relevant calculation period. If a positive total
NAV per share return is not achieved, payment of the performance fee will be
deferred until the next calculation period in which such a return is achieved.
The Board believes the newly amended terms will deliver greater alignment
between the Manager's incentive and shareholders' interests.
For the year ended 31 August 2025, a performance fee of £2,366,000 has
accrued to the Manager in respect of the quoted portfolio's performance. In
addition, a performance fee of £299,000 has accrued to SV Health due to the
performance of the unquoted portfolio.
Please refer to the Directors' Report for further information.
BOARD SUCCESSION
As previously reported, Caroline Gulliver resigned from the Board on 30 April
2025, and Alexa Henderson, who joined the Board on 1 January 2025, has
succeeded Caroline as Chair of the Audit Committee. I would like to record the
Board's thanks for Caroline's ceaseless work on behalf of our shareholders.
The Board continues to review its composition and effectiveness, as well as to
plan for orderly succession.
CONTINUATION VOTE
In accordance with the Company's Articles of Association, a biennial
continuation vote will be put to shareholders at the Annual General Meeting
(AGM). The Board believes that the Manager is well qualified, has delivered
strong results for shareholders and the investment mandate remains
appropriate. Using the advantages of an investment trust continues to be a
compelling way of accessing growth opportunities in the undervalued
biotechnology sector. The Board unanimously recommends that shareholders vote
in favour of continuation, and the Directors intend to vote their shares
accordingly.
WEBINAR
On 6 November 2025, the Company's Portfolio Managers will be presenting to
shareholders at a webinar at 2.00 p.m. To register your interest to attend
this webinar please visit www.schroders.
(https://www.schroders.events/event/IBTFY25/regProcessStep1) events/IBTFY25
(https://www.schroders.events/event/IBTFY25/regProcessStep1) , where the
facility to watch the recorded webinar afterwards will also be available.
AGM
The AGM will be held on Friday, 12 December 2025 at 12.00 noon at the offices
of Schroders at 1 London Wall Place, London EC2Y 5AU. Our Portfolio Managers
will present to shareholders at the AGM, and attendees will be able to ask
questions in person and meet the Directors. Details of the formal business of
the meeting are set out in the Notice of Meeting in the full Annual Report and
Financial Statements.
All shareholders are recommended to vote by proxy in advance of the AGM and to
appoint the Chair of the meeting as their proxy. This will ensure that
shareholders' votes will be counted even if they (or any appointed proxy) are
not able to attend.
If shareholders have any questions for the Board, please write, or email using
the details below. The questions and answers will be published on the
Company's web pages before the AGM.
To email, please use: amcompanysecretary@schroders.com
(mailto:amcompanysecretary@schroders.com) or write to us at the Company's
registered office address: Company Secretary, International Biotechnology
Trust plc, 1 London Wall Place, London, EC2Y 5AU.
For regular news about the Company, shareholders are also encouraged to sign
up to the Manager's investment trusts update, which can be found at:
https://schro.link/ibt_subscribe. (https://schro.link/ibt_subscribe)
OUTLOOK
Although the Portfolio Managers have done an excellent job significantly
outperforming the Reference Index, political uncertainty has led to the
biotechnology and healthcare sectors lagging the wider equity indices for the
past few years, resulting in unprecedented low relative valuations. In the
latter half of our financial year, the sector has been performing well and
there are good reasons to expect this to continue.
The need for cash-rich pharmaceutical companies to maintain growth and adapt
to potential regulatory changes has led to a surge in M&A activity in
recent months. The overall M&A activity trend reflects a shift by big
pharmaceutical players to strengthen pipeline positions in high-value
therapeutic areas such as oncology, neuroscience, and rare diseases.
The outcome of the drug pricing debate will take more time to resolve, but the
convergence of the transformational progress in scientific innovation, the
impact of artificial intelligence (AI) on trials and approvals, and increasing
demand for treatments should make biotechnology a lucrative investment for
shareholders in the years to come.
KATE CORNISH-BOWDEN
Chair
5 November 2025
Investment Manager's Review
We are pleased to present the Portfolio Managers' Report for the year ended 31
August 2025. Despite a challenging backdrop, the Company delivered a positive
NAV total return of 0.7%, compared with a 6.0% decline for the Reference Index
(all figures are on a sterling adjusted basis). This marks the fourth
consecutive year of outperformance of the Reference Index for the Company,
each delivered across different market conditions. Over one, three, five and
ten years to 31 August 2025, the Company remains ahead of its Reference Index.
In share price terms, the Company delivered a positive total return of 3.5%
(sterling adjusted), which reflects a slight narrowing of the discount to NAV
to 8.9% at the financial year-end. Income continues to form an important part
of the Company's total return. In accordance with our dividend policy of
paying dividends equivalent to 4% of the Company's NAV, shareholders received
two dividends totalling 31.8p per share during the year. This reflects growth
of 12.0% on the prior year's dividend. The cost of the dividend was more than
twice covered by cash received from portfolio company acquisitions during the
year and provided an opportunity for us to share some of the gains from
mergers and acquisitions (M&A) activity directly with our shareholders.
MARKET OVERVIEW
The biotechnology sector experienced two distinct phases during the period
under review. The first half, as noted in the Company's Half Year Report, was
characterised by heightened uncertainty as markets awaited the outcome of the
US Presidential election, followed by a rally in late 2024 once the result was
known. Expectations of a more pro-business stance under the new administration
echoed the strong performance seen during the previous Trump Presidency. This
optimism was short-lived, however, as the policy agenda quickly shifted
towards tariffs, and the appointment of Robert F Kennedy Jr as Secretary of
Health and Human Services, introduced renewed unease due to his controversial
views on vaccines.
Market volatility intensified after President Trump's 'Liberation Day' tariff
announcements, which created uncertainty across all sectors and raised fears
of a trade-induced global recession. At the same time, the sudden departure
from the US regulator, the FDA, of Peter Marks, an industry-friendly figure
who had overseen the approval process for many innovative treatment
modalities, raised concerns about the FDA's priorities. These worries were
compounded by announcements of significant headcount reductions at the FDA and
other healthcare agencies, fuelling fears of disruption to the drug approval
process. Sentiment was further unsettled by the revival of the MFN pricing
model via an executive order, which proposed benchmarking US drug prices
against the lowest paid in other developed markets - a move perceived as
potentially undermining the commercial viability of future therapies.
Against this backdrop, the Reference Index reached its low point for the
period in mid-April. Thereafter, a steady recovery took hold, supported by a
step back from worst-case scenarios on trade and a more constructive policy
environment for the healthcare sector. Investors increasingly recognised that
biotechnology, as the engine room of drug innovation for the sector, was less
exposed to the threat of pricing reform than large-cap pharmaceutical
companies. The continued pace of FDA approvals and evidence of resilience in
the innovation pipeline helped restore confidence in the sector's long-term
fundamentals. Despite this turbulence, drug approvals have continued, with 27
new drugs approved in the first eight months of 2025.
In a longer-term context, the Reference Index is now around 40% above the lows
seen in 2022 but remains c.15% below its 2021 peak. This highlights both the
progress made and the potential for a sustained recovery should current trends
continue. Innovation in the biotechnology sector continued at pace, with more
than 70% of all new FDA approvals in 2024 originating from biotechnology
companies, underlining the sector's central role in driving drug development
(please refer to chart 1 in the full Annual Report and Financial Statements).
Any reference to sectors/countries/stocks/securities are for illustrative
purposes only and not a recommendation to buy or sell any financial
instrument/securities or adopt any investment strategy. Past performance is
not a guide to future performance and may not be repeated. The value of
investments and the income from them may go down as well as up and investors
may not get back the amounts originally invested. Exchange rate changes may
cause the value of investments to fall as well as rise.
PERFORMANCE REVIEW
The biotechnology sector is usually a stock picker's market - a sector in
which specialist investors can thrive by backing companies with the strongest
clinical and commercial prospects. But over the past year, that dynamic has at
times been overshadowed. Tariffs, trade policy and drug pricing reform
dominated the market narrative, and for a time, this macroeconomic noise
drowned out the fundamentals. Even though many of these pressures are more
relevant to pharmaceutical companies than to biotechnology firms, markets
didn't make the distinction - sentiment was broadly risk-off and
stock-specific progress struggled to cut through.
That makes the Company's positive return all the more encouraging, especially
given the Reference Index decline. At the lows, we increased our gearing - to
the highest level it's been since the financial crisis, which added value in
the recovery from April onwards and reflects the conviction we continue to
hold in the portfolio. We're now seeing signs that fundamentals are
reasserting themselves, with clinical milestones and commercial traction once
again starting to drive performance.
M&A
M&A activity remained an important driver of performance during the year.
Regulatory scrutiny and political uncertainty have dampened activity in recent
years, but five portfolio holdings were acquired during the year.
In December, small-cap holding Marinus, which had recently had a therapy,
Ztalmy, approved to address seizures in patients with the rare CDKL5
deficiency disorder, was acquired by Immedica for $151 million, representing a
48% premium to the share price.
In January, Johnson & Johnson agreed to acquire CNS specialist
Intra-Cellular Therapies for $14.6 billion, representing a near 40% premium to
its undisturbed share price. As the portfolio's largest position at the time,
the deal was a key contributor to the Company's NAV over the period. With
Caplyta, its drug addressing bipolar depression, already approved and with
further indications progressing, Intra-Cellular was de-risked and
launch-ready.
With the proceeds of the Intra-Cellular deal, we increased our position in
SpringWorks Therapeutics, which became the portfolio's largest holding. The
company develops targeted therapies for rare cancers and has recently
transitioned to commercial stage, with FDA-approved assets in desmoid tumours
and NF1-related neurofibromas. In April, Merck KGaA announced a $3.9 billion
all-cash acquisition at $47 per share, representing a 26% premium, leading to
another boost for the Company's NAV over the period.
The portfolio also held a position in Blueprint Medicines, a specialist in
rare immunological diseases with a focus on systemic mastocytosis (SM) and
mutations in the KIT gene, which regulates cell growth and survival. Its lead
asset, Ayvakit, is approved in both the US and EU for advanced and indolent
SM, with growing commercial traction. In June, Sanofi agreed to acquire
Blueprint in a deal worth up to $9.5 billion, including contingent value
rights through which shareholders benefit further if future regulatory
milestones are met, which represented a 27% premium.
The fifth deal involved the portfolio's position in Verona Pharma, a
biotechnology company focused on chronic respiratory diseases. Its lead
product, Ohtuvayre, is the first novel maintenance therapy for chronic
obstructive pulmonary disease (COPD) in over two decades, approved for use
alone or alongside existing treatments. In July, Merck agreed to acquire
Verona in a $10 billion deal, representing a 23% premium to the prior share
price.
Any reference to sectors/countries/stocks/securities are for illustrative
purposes only and not a recommendation to buy or sell any financial
instrument/securities or adopt any investment strategy. Past performance is
not a guide to future performance and may not be repeated. The value of
investments and the income from them may go down as well as up and investors
may not get back the amounts originally invested. Exchange rate changes may
cause the value of investments to fall as well as rise.
All five acquisitions involved late-stage businesses with approved assets,
reflecting the portfolio's focus on de-risked companies with clear commercial
pathways. Currently, 58% of the portfolio is allocated to businesses at this
stage of their journey as we see great prospects for these companies which
have a much lower risk profile and are reasonably priced as the market tends
not to attribute the full potential value of future sales of their assets.
With Marek Poszepczynski's background in Business Development, we have a good
insight into how pharmaceutical companies will be valuing these businesses and
can readily identify companies that will look attractive to them. Even if the
companies are not then acquired but choose to remain independent and launch
their own therapies on the market, we are confident that future sales will
lead to enhanced valuations, providing potential uplift for shareholders.
OTHER POSITIVE CONTRIBUTORS TO NAV
Elsewhere, another major positive contribution to performance came from
uniQure - a gene therapy company developing one-time treatments for severe
genetic disorders. Its most advanced program, AMT-130, is a potential
first-in-class gene therapy for Huntington's disease. Following FDA alignment
in December 2024 on the key elements of an accelerated approval pathway, the
program received Breakthrough Therapy designation in April 2025 - further
validating its clinical potential and accelerating its regulatory timeline.
The shares started the period with a very low enterprise value (market
capitalisation less net debt), which we believed significantly undervalued the
potential value of its approach. Assisted by these positive regulatory
developments, the share price almost trebled over the year.
Our decision not to hold Regeneron for much of the period, was a positive
contributor to relative performance, as the stock more than halved over the
year. We considered the valuation of the company, which is a large index
constituent that started the year with high expectations, to have been driven
to best case scenario levels, somewhat dislocated from its intrinsic value, by
market enthusiasm. The company endured a significant de-rating following mixed
Phase 3 data for its COPD candidate, itepekimab, and weaker-than-expected
earnings. With the valuation now looking more realistic, we introduced a small
position to the portfolio in early 2025.
RELATIVE NEGATIVE DETRACTORS TO NAV
By contrast, Gilead Sciences, which is not held in the portfolio, was a source
of relative underperformance. Its strong share price performance in the first
half of the period under review was driven by growing enthusiasm for
lenacapavir, a long-acting Human Immunodeficiency Virus (HIV) prevention
therapy. We remain underweight in Gilead, as we continue to believe that its
valuation reflects elevated investor sentiment rather than its underlying
commercial potential - particularly given the competitive dynamics in HIV
prevention and uncertainty around public health funding.
Within the portfolio, Rocket Pharmaceuticals, a clinical-stage company
developing gene therapies for rare childhood disorders, was a disappointing
performer. Its share price faced sustained pressure throughout the period,
including a sharp decline in May following news that the FDA had placed a
clinical hold on RP-A501, its gene therapy for Danon Disease, after a serious
adverse reaction and the death of a trial patient. The hold was lifted in
August 2025, with the trial resuming under revised dosing protocols, but
sentiment has remained cautious. While market attention has largely centred on
RP-A501, we continue to see broader value in Rocket's pipeline, which includes
multiple gene therapy candidates for other rare diseases. In combination, the
potential commercial value of this pipeline is ultimately much greater than
its current valuation implies.
Any reference to sectors/countries/stocks/securities are for illustrative
purposes only and not a recommendation to buy or sell any financial
instrument/ securities or adopt any investment strategy. Past performance is
not a guide to future performance and may not be repeated. The value of
investments and the income from them may go down as well as up and investors
may not get back the amounts originally invested. Exchange rate changes may
cause the value of investments to fall as well as rise.
Our decision on when to sell Alnylam - a commercial-stage company focused on
RNA interference therapeutics - also detracted from returns during the period.
This has been an excellent performer for the portfolio over the last couple of
years, driven by positive clinical progress in its treatment for ATTR
amyloidosis, which has now been approved for both polyneuropathy and
cardiomyopathy. The position was sold during the year, and with hindsight, we
exited too early, as the share price has continued to rise. However, the
proceeds have been recycled into other opportunities where we see greater
upside potential.
MACROECONOMIC AND POLITICAL LANDSCAPE
The past year has seen the biotechnology sector navigate a shifting policy and
macroeconomic landscape, with regulatory upheaval at the FDA emerging as a key
concern. The agency is undergoing its most significant restructuring in
decades, including a planned reduction of over 3,500 staff - more than 20% of
its workforce. While most cuts have targeted administrative roles, the sudden
departure of Peter Marks (who headed up the Centre of Biological Evaluation
and Research 'CBER') raised questions about commitment, continuity and
capacity. His replacement, Dr Vinay Prasard, has signalled a renewed focus on
drug approvals and innovation, particularly in gene and cell therapies.
Short-term disruption is possible, but the direction of travel remains
supportive of the biotechnology sector's long-term growth.
Drug pricing reform has also returned to the political spotlight. President
Trump's revival of the MFN pricing framework, alongside the ongoing rollout of
the Inflation Reduction Act (IRA), has created uncertainty around how and when
pricing pressure might affect the sector. For now, the biotechnology sector
remains somewhat insulated. Much of the sector is largely focused on
clinical-stage development and less on commercial sales, and the IRA's initial
scope is limited to a handful of blockbuster drugs. Crucially, the
long-standing model of patent-protected pricing power for breakthrough
therapies, especially those addressing rare or paediatric diseases, remains
intact, preserving incentives for innovation.
Trade and tariff policy continues to cast a shadow over sentiment, though here
too, the short- to medium-term impact on the biotechnology industry remains
limited. While broader pharmaceutical imports have come under scrutiny, many
biotechnology firms are not heavily exposed to global supply chains.
Nonetheless, uncertainty around future policy direction has contributed to a
cautious investor stance.
Regulatory environment - FDA
In June 2025, Robert F Kennedy posted on X "It's time to let it (the US
biotechnology industry) flourish - not tie it up in red tape, misalignment and
a process that gives the edge to foreign interest and large incumbents.". He
also termed the phrase "MABA - Make American Biotech Accelerate". This
underpinned our sense that while there is focus on streamlining the wider
sector, the innovative engine that is the biotechnology sector should be
relatively protected and hopefully enhanced. Indeed, the FDA is actively
pursuing several initiatives aimed at accelerating the drug review process.
Under the direction of Commissioner Dr. Marty Makary, the agency is navigating
significant operational changes, including a 20% reduction in workforce and
the departure of several senior leaders. Despite concerns around resourcing,
27 drugs were approved in the eight months to the end of August 2025(1), just
a little behind the run rate to meet the average of around 49 drugs per year
over the past five years but broadly encouraging given the upheaval in the
FDA.
KEY INITIATIVES
AI integration
The FDA has deployed a new AI tool, 'Elsa', designed to assist and potentially
increase the efficiency of the drug review workload.
Voucher-based fast track
The agency has introduced the Commissioner's National Priority Voucher (CNPV)
programme. This pilot limits the number of vouchers granted, focusing on drug
applications that address US national priorities such as public health crises,
novel treatments, unmet needs, or domestic manufacturing enhancements.
Successful applicants may see review times compressed from a year to as little
as a month via a 'tumour board' multidisciplinary evaluation approach. The
scheme allows for early submission of critical parts of a drug filing ahead of
trial completion. However, it lacks Congressional authority at this stage, and
details around implementation, eligibility and transparency remain limited.
Conditional approvals for ultra-rare diseases
Dr. Makary has also floated the concept of granting conditional approvals for
certain drugs based on plausible mechanisms of action, rather than completed
randomised clinical trial evidence, particularly within ultra-rare disease
categories.
While these FDA initiatives strive to shorten development timelines, concerns
have been raised about the potential impact on patient safety, regulatory
rigour, and industry transparency. Questions remain regarding resource
allocation given organisational contraction, the risk of increased litigation
due to a lack of clarity in selection processes, and the possibility of the
review process becoming politicised.
As further details emerge, we will continue to assess the impact of these
regulatory changes on portfolio companies and the broader innovation
landscape. We remain vigilant in monitoring the FDA's evolving approach to
balancing expedited access with robust evaluation standards. We are greatly
encouraged by the overall sentiment of these measures which are designed to
improve the path to market for the sorts of innovative therapies that we
invest in.
Any reference to sectors/countries/stocks/securities are for illustrative
purposes only and not a recommendation to buy or sell any financial
instrument/securities or adopt any investment strategy.
1 Source: US Food and Drug Administration (FDA), Novel Drug Approvals
2025.
Trends in the biotechnology sector tend to trade inversely with US interest
rates. This is largely a function of the valuation methods used by the market,
which apply a discount to future cash flows based on the prevailing interest
rate. The normal inverse relationship between the performance of the
biotechnology sector and US interest rates was less relevant in this
environment of policy uncertainty, albeit lower interest rates from here could
prove supportive in the months ahead.
STRATEGY AND PORTFOLIO POSITIONING
Over the last four years, the strategy we have adopted for the Company's
portfolio has shifted profoundly in response to the evolving opportunity set.
In 2021, when we took over as lead Portfolio Managers, our cautious view of
valuations in a period of exuberance towards the biotechnology sector drove a
focus on larger, resilient, cash-flow generating businesses. This cautious
stance paid off through the market downturn of 2022, allowing us to take
advantage of lower valuations in 2023, moving back towards smaller,
earlier-stage companies as the market stabilised. Shareholders have continued
to see the benefit of these strategic moves, as we have continued to build
exposure to businesses that are clinically de-risked. Currently, approximately
51% of the portfolio is clinically de-risked i.e. passed through clinical
development and are either awaiting approval, launched or are profitable(2).
2 Source: Schroders.
There are several reasons for this positioning. Firstly, as illustrated by
chart 1 in the full Annual Report and Financial Statements, the biotechnology
industry has become the main engine of healthcare innovation. Ten years ago,
the pharmaceutical sector was responsible for the bulk of new FDA drug
approvals, but it has since stepped away from internal research and
development (R&D), allowing biotechnology firms to take up the mantle of
innovation3. In 2024, more than 70% of new drug approvals came from the
biotechnology sector(3).
Secondly, more than $200 billion of existing pharmaceutical revenues are due
to be lost by 2030 as patents on key drugs expire(4). Many major
pharmaceutical companies may feel compelled to engage in M&A activity in
order to replace these lost revenues, with late-stage, de-risked assets, such
as the ones that dominate the Company's portfolio, at the top of their
shopping lists.
Thirdly, and perhaps most importantly, the portfolio is currently dominated by
biotechnology companies on the cusp of commercialisation because this is where
we are finding the most compelling opportunities. These businesses are
tantalisingly close to becoming commercial success stories on their own.
M&A can offer a quick win for shareholders, but if these advanced
clinical-stage businesses remain independent, the ultimate rewards may be even
greater. Many of our key holdings will be launching their therapies
independently over the next couple of years if they are not acquired.
RARE DISEASES
Another key portfolio focus is on rare diseases, currently the largest
exposure in the portfolio. We are drawn to this area because it combines high
unmet medical need with compelling scientific and commercial dynamics.
Regulatory frameworks such as the Orphan Drug Act, introduced in 1983, offer
meaningful incentives - including market exclusivity and accelerated approval
pathways - that de-risk development and enhance value creation. These
incentives have helped make rare diseases a natural launch pad for
breakthrough technologies such as gene therapy and RNA-based treatments, which
were first validated in orphan indications before expanding to broader
applications.
Prominent positions in the portfolio that are involved in rare diseases
include Ascendis Pharma, which focuses on growth hormone deficiency and other
rare endocrine disorders, Avidity Biosciences, a clinical stage company
focused on rare muscle disorders, and KalVista Pharmaceuticals, which is
developing therapies for hereditary angioedema, a rare disorder causing
unpredictable and potentially life-threatening swelling episodes.
ONCOLOGY
Oncology continues to represent a significant component of our portfolio,
reflecting ongoing innovation in targeted therapies, cell-based treatments,
and immuno-oncology. However, the remarkable progress seen within the sector
has attracted a growing number of entrants, leading to an increasingly
competitive and, at times, less differentiated project landscape. Given this
heightened competition and the rapidly shifting development landscape, we have
adopted a more measured approach to oncology investments, selecting
opportunities with the most compelling prospects. While oncology remains a
significant area in the portfolio, we currently see more attractive
opportunities in fields characterised by high unmet medical need, where
differentiation and value creation may be more pronounced.
Any reference to sectors/countries/stocks/securities are for illustrative
purposes only and not a recommendation to buy or sell any financial
instrument/securities or adopt any investment strategy.
3 Source: US Food and Drug Administration (FDA), NDA/BLA Approvals;
Bank of America Global Research, company reports.
4 Source: Evaluate Pharma May 2024.
OUTLOOK & CONCLUSION
The investment case for biotechnology is rooted in powerful global trends -
ageing populations, rising chronic disease burdens and the urgent need to
improve healthcare efficiency. As governments and public health systems
grapple with rising costs, fiscal deficits and growing demand for better
outcomes, our strategy has focused on the companies best placed to deliver
both therapeutic innovation and long-term value.
The Company's portfolio contains many advanced clinical-stage assets that may
well prove too tempting for larger pharmaceutical companies, with their bare
pipelines and looming patent cliffs, to ignore. Pharmaceutical companies, like
us, are seeking best in class assets at reasonable valuations. M&A may
well prove a catalyst for continued outperformance as it has done before, but
importantly, we are not counting on it. For most of the largest holdings in
the portfolio, there are two clear paths ahead for value creation. They may be
acquired by larger pharmaceutical businesses at a share price premium, or they
can commercialise their technology independently. Either way, shareholders
stand to benefit. In our view, this is a positive situation for the Company
and its shareholders.
Of course, many risks remain, some macro and some micro, some known and some
unknown. But with powerful structural tailwinds and valuations low in the
context of history, we are optimistic that the sector can deliver positive
progress in the years ahead. With our bottom-up stock picking and top-down
risk aware overlay, we are well positioned, as skilled active, specialist
investors to reap rewards from outperforming biotechnology companies while
protecting our investors from downside risk. With a portfolio full of
innovation and near-term catalysts, we believe the Company is positioned not
just to participate in the sector's continued progress - but to outperform it.
We appreciate your continued support and look to the future with great
confidence.
AILSA CRAIG and MAREK POSZEPCZYNSKI
Portfolio Managers
SCHRODER INVESTMENT MANAGEMENT LIMITED
5 November 2025
RISK REPORT
The Board, through its delegation to the Audit Committee, is responsible for
the Company's system of risk management and internal control and for reviewing
its effectiveness. The Board has adopted a detailed matrix of principal risks
affecting the Company's business as an investment trust and has established
associated policies and processes designed to manage and, where possible,
mitigate those risks, which are monitored by the Audit Committee on an ongoing
basis.
This system assists the Board in determining the nature and extent of the
risks it is willing to take in achieving the Company's strategic objectives.
RISK ASSESSMENT AND INTERNAL CONTROLS REVIEW BY THE BOARD
Risk assessment includes consideration of the scope and quality of the systems
of internal control operating within key service providers, and ensures
regular communication of the results of monitoring by such providers to the
Audit Committee, including the incidence of significant control failings or
weaknesses that have been identified at any time and the extent to which they
have resulted in unforeseen outcomes or contingencies that may have a material
impact on the Company's performance or condition.
Although the Board believes that it has a robust framework of internal
controls in place this can provide only reasonable, and not absolute,
assurance against material financial misstatement or loss and is designed to
manage, not eliminate, risk.
Both the principal risks and uncertainties and the monitoring system are also
subject to robust review at least annually. The last assessment took place in
October 2025.
During the year, the Board discussed and monitored a number of risks which
could potentially impact the Company's ability to meet its strategic
objectives. The Board receives updates from the Investment Manager, Company
Secretary and other service providers on emerging risks that could affect the
Company. The Board was mindful of the evolving global environment during the
year and the risks posed by volatile markets and geopolitical uncertainty,
including the new US Administration, particularly threats to the FDA and
reductions in federal spending, as well as ongoing conflict in Ukraine and the
Middle East. However, these are not factors which explicitly impact the
Company's performance although they could exacerbate existing risks. Where
relevant these have been incorporated in the table below.
Following the Company's financial year-end, J.P. Morgan Europe Limited was
appointed to provide depositary, custodian and certain fund administration
services, effective 3 October 2025. The Board was mindful of the operational
risks associated with the transition and received quarterly progress updates
ahead of the transfer from HSBC to J.P. Morgan. Further details are included
in the table below.
The Board considered in detail whether there were any material emerging risks
and has continued to include the development of artificial intelligence as an
emerging risk in the table below.
No significant control failings or weaknesses were identified from the Audit
Committee's ongoing risk assessment throughout the financial year and up to
the date of this report. The Board is satisfied that it has undertaken a
detailed review of the risks facing the Company and that the internal control
environment continues to operate effectively. A full analysis of the financial
risks facing the Company is set out in note 19 to the financial statements in
the full Annual Report and Financial Statements.
The Board considers that the risks set out in the table below are the
principal risks currently facing the Company to deliver its strategy together
with those actions taken by the Board and, where appropriate, its Committees,
to manage and mitigate those risks.
The "Change" column on the right highlights at a glance the Board's assessment
of any increases or decreases in risk during the year after mitigation and
management. The arrows in the change column show the risks as increased or
decreased or unchanged.
Risk Mitigation and management Change
Strategic
Investment strategy The appropriateness of the Company's investment mandate and the long-term
The investment strategy may, if inappropriate, result in negative investor investment strategy is periodically reviewed by the Board and the success of
sentiment, leading to a reduction in the share price and the Company the Company in meeting its stated objectives is monitored. The Board holds a
underperforming the market and/or its peer group companies. strategy meeting each year to consider the investment objective and policy and
the Company's longer-term investment strategy.
Investor appetite The Portfolio Managers update the Board monthly and at each scheduled Board
A loss of investor appetite for investment in the biotechnology sector as a meeting on issues pertinent to the portfolio and the biotechnology sector
result of political conditions, including US Food and Drug Administration and generally, including the political landscape and expected future drivers.
Federal Trade Commission policy as well as uncertainties regarding the
execution of the US tariff regime implemented by the Trump administration, The Board reviews the global factors which may affect investor appetite,
might materially affect the ability of the Company to achieve its objective including US/China tensions, conflicts in Ukraine and the Middle East, and
and reduce demand for the Company's shares, leading to a wide discount. political and policy developments including legislation concerning Medicare
and drug pricing in the United States. These may persist as issues that could
potentially have a negative impact on the biotechnology and healthcare
sectors.
Continuation vote The Manager and the corporate broker engage with shareholders to understand
The Company's Articles of Association require the Board to put a proposal for investor sentiment and regularly provide feedback to the Board.
the continuation of the Company to shareholders on a biennial basis. A
resolution will be put to shareholders at the AGM to be held in December 2025. Directors also engage directly with shareholders at the AGM to understand
their views.
Performance/investment
Macro factors The Portfolio Managers consider carefully the portfolio composition by size of
The Company's returns are affected by changes in economic, political, company, development stage and therapeutic area and adjusts accordingly. The
financial and corporate conditions, which can cause substantial market and Board is also supportive of the Portfolio Managers' approach to reducing
exchange rate fluctuations. A significant fall in US equity markets is likely exposure to companies with imminent binary events such as a readout of data
to adversely affect the value of the Company's portfolio. from a clinical trial.
The biotechnology sector has its own specific risks leading to higher The Portfolio Managers provide regular reports to the Board on general
volatility than the broader equity market indices. Wider geopolitical risks economic conditions as well as portfolio activity, strategy and performance,
include regional tensions, trade wars and sanctions against companies, in including risk monitoring. The reports are discussed in detail at Board
areas which the Company invests or may invest. meetings, which are all attended by the Portfolio Managers, to allow the Board
to monitor the implementation of the investment strategy and process.
In addition, the financial statements and performance of the Company are
denominated in sterling because the Company is a UK company listed on the
London Stock Exchange. However, the majority of the Company's assets are
denominated in US dollars ("$"). Accordingly, the total return and capital
value of the Company's investments can be significantly affected by movements
in foreign exchange rates.
Share price performance The share price relative to the NAV per share is kept under review as a key
Share price performance may consistently lag NAV performance leading to a wide performance indicator and is considered against the Company's peers on a
and persistent discount to NAV. regular basis. The Board has implemented a robust share buyback and issuance
policy which has been used consistently during the year under review with
3,107,419 shares being repurchased to be held in treasury. The discount
narrowed slightly during the year. The use of the buyback authority is
reviewed regularly.
Proactive engagement with shareholders takes place via the AGM, feedback from
shareholder presentations, and ad hoc meetings with the Board.
The Manager provides a dedicated, experienced investment trust marketing team
together with PR resource. The Manager and corporate broker monitor market
feedback and the Board consider this at each quarterly meeting.
ESG considerations The consideration of climate change risks and ESG factors is integrated into
The Board recognises that a responsible and proactive approach to ESG-related the investment process and reported at Board meetings. The Manager's approach
factors can positively impact the performance and success of its portfolio to ESG matters is set out in the Investment Manager's Review. The Company uses
companies and the Company. A failure to focus sufficiently on ESG matters may data gathered by Sustainalytics to monitor the compliance of its quoted
not promote the Company to shareholders in a way that generates investor portfolio with an accepted set of ESG standards.
demand.
Operational
Oversight of service providers The Board receives reports from the Manager and Investment Manager on its
Inadequate performance of service providers could lead to poor performance internal controls and risk management throughout the year, including those
and/or exposure to a number of financial, regulatory and business risks. relating to cybersecurity, and receives assurances from all its other
significant service providers on at least an annual basis.
Service providers may terminate their services if they deem the Company to no
longer fit their business model. The Management Engagement Committee reviews the performance of key service
providers at least annually. The Manager and Investment Manager also monitor
Operational risks may arise from the transfer of custodian, depositary and closely the control environments and quality of services provided by third
fund administration services to a new service provider. parties, including those of the depositary, through service level agreements
and regular meetings.
The Directors also receive reporting on internal controls from the Company's
key service providers including the depositary and custodian, and the
registrar on an annual basis.
Experienced service providers are appointed by the Company subject to due
diligence processes and clearly documented contractual arrangements which
include agreed service level specifications and notice periods for
terminations.
In respect of the transition of custodian, depositary and fund administration
services from HSBC to J.P. Morgan, a detailed transition plan was put in
place, closely monitored by the Manager via a Risks, Assumptions, Issues and
Dependencies (RAID) log. The Board received quarterly progress updates on the
transition, with the Audit Committee Chair acting as the primary point of
contact between update cycles. All migration of financial data from HSBC to
J.P. Morgan was subject to close oversight by the Company's external auditors.
Further details of the internal controls which are in place are set out in the
Audit Committee's Report in the full Annual Report and Financial Statements.
Information technology (IT), resilience and security Cybersecurity is closely monitored by the Audit Committee as part of the
review of the internal controls of its service providers.
Cyber risks such as fraud, sabotage or crime perpetrated against the Company
or any of its third party service providers could result in data theft, In response to the evolving global threat landscape and the continued rise in
service disruption and reputational damage. cyber risks, the Board has determined that this risk has increased during the
year and continues to monitor it closely.
During the Company's financial year, Schroders' IT security team presented to
the Directors on the Manager's cybersecurity controls.
EMERGING
Artificial intelligence (AI)
Whilst there are opportunities and benefits associated with the development of
AI, and a risk of not embracing these opportunities and benefits, the
development of AI presents potential risks to businesses in almost every
sector. The extent of the risk presented by AI is extremely hard to assess at
this point but the Board considers that it is an emerging risk and together
with the Manager and Investment Manager, will monitor developments in this
area.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND
FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the financial
statements in accordance with UK-adopted international accounting standards.
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 return or loss of the Company for that
period. In preparing the financial statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· state whether applicable UK-adopted international accounting
standards have been followed, subject to any material departures disclosed and
explained in the financial statements;
· make judgements and accounting estimates that are reasonable
and prudent; and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will continue in
business.
The Directors 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 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
enable them to ensure that the financial statements and the Directors'
Remuneration Report comply with the Companies Act 2006.
The Manager is responsible for the maintenance and integrity of the web pages
dedicated to the Company. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Directors' Statement
Each of the Directors, whose names and functions are listed in the Board of
Directors in the full Annual Report and Financial Statements confirm that, to
the best of their knowledge:
· the Company's financial statements, which have been prepared
in accordance with UK-adopted international accounting standards, give a true
and fair view of the assets, liabilities, financial position and result of the
Company;
· 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; and
· that the Annual Report and Financial Statements, taken as a
whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's performance, business model
and strategy.
ON BEHALF OF THE BOARD
KATE CORNISH-BOWDEN
Chair
5 November 2025
Statement of Comprehensive Income for the year ended 31 August 2025
Note 2025 2025 2025 2024 2024 2024
Revenue
Capital
Total
Revenue
Capital
Total
£'000
£'000
£'000
£'000
£'000
£'000
Gains on investments held at fair value through profit or loss 2 - 4,735 4,735 - 41,620 41,620
Net foreign currency gains - 819 819 - 1,656 1,656
Income 3 514 - 514 1,263 - 1,263
--------------- --------------- --------------- --------------- --------------- ---------------
Total income 514 5,554 6,068 1,263 43,276 44,539
========= ========= ========= ========= ========= =========
Management fee 4 (1,638) - (1,638) (1,297) - (1,297)
Performance fee 4 - (2,665) (2,665) - (904) (904)
Administrative expenses 5 (967) - (967) (1,129) - (1,129)
--------------- --------------- --------------- --------------- --------------- ---------------
(Loss)/profit before finance costs and taxation (2,091) 2,889 798 (1,163) 42,372 41,209
Finance costs 6 (1,940) - (1,940) (2,198) - (2,198)
--------------- --------------- --------------- --------------- --------------- ---------------
(Loss)/profit before taxation (4,031) 2,889 (1,142) (3,361) 42,372 39,011
Taxation 7 (28) - (28) (135) - (135)
--------------- --------------- --------------- --------------- --------------- ---------------
Net (loss)/profit for the year (4,059) 2,889 (1,170) (3,496) 42,372 38,876
========= ========= ========= ========= ========= =========
(Loss)/earnings per share (pence) 8 (11.42) 8.13 (3.29) (9.16) 110.97 101.81
========= ========= ========= ========= ========= =========
The "Total" column of this statement represents the Company's Statement of
Comprehensive Income prepared in accordance with UK-adopted International
Accounting Standards.
The Company does not have any other comprehensive income and hence the net
(loss)/profit for the year, as disclosed above, is the same as the Company's
total comprehensive income.
The "Revenue" and "Capital" columns represent supplementary information
prepared under guidance set out in the statement of recommended practice for
investment trust companies (the "SORP") issued by the Association of
Investment Companies in July 2022.
All revenue and capital items in the above statement are derived from
continuing operations.
The notes in the full Annual Report and Financial Statements form part of
these financial statements.
Statement of Changes in Equity for the year ended 31 August 2025
Note Share Share Capital Capital Revenue Total
capital
premium
redemption
reserves
reserve
£'000
£'000
£'000
reserve
£'000
£'000
£'000
At 31 August 2023 10,346 29,873 31,482 249,147 (50,531) 270,317
Net profit/(loss) for year - - - 42,372 (3,496) 38,876
Dividends paid in the year 9 - - - (10,768) - (10,768)
Repurchase of ordinary shares into treasury - - - (16,160) - (16,160)
At 31 August 2024 10,346 29,873 31,482 264,591 (54,027) 282,265
Net profit/(loss) for year - - - 2,889 (4,059) (1,170)
Dividends paid in the year 9 - - - (11,196) - (11,196)
Repurchase of ordinary shares into treasury - - - (20,490) - (20,490)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 August 2025 10,346 29,873 31,482 235,794 (58,086) 249,409
========= ========= ========= ========= ========= =========
The notes in the full Annual Report and Financial Statements form an integral
part of these financial statements.
Statement of Financial Position at 31 August 2025
Note 2025 2024
£'000
£'000
Non-current assets
Investments at fair value through profit or loss 10 268,920 297,507
--------------- ---------------
Current assets
Receivables 11 136 215
Cash and cash equivalents 12 14,980 10,433
--------------- ---------------
15,116 10,648
========= =========
Total assets 284,036 308,155
========= =========
Current liabilities
Loan 13 (29,607) (22,827)
Payables 13 (5,020) (3,063)
--------------- ---------------
(34,627) (25,890)
========= =========
Net assets 249,409 282,265
Equity attributable to shareholders
Share capital 15 10,346 10,346
Share premium 16 29,873 29,873
Capital redemption reserve 16 31,482 31,482
Capital reserves 16 235,794 264,591
Revenue reserve 16 (58,086) (54,027)
--------------- ---------------
Total equity attributable to shareholders 249,409 282,265
========= =========
Net asset value per share (pence) 17 739.48p 766.30p
========= =========
The financial statements in the full Annual Report and Financial Statements
were approved by the Board of Directors and authorised for issue on 5 November
2025 and signed on its behalf by:
Alexa Henderson
Chair of the Audit Committee
The notes in the full Annual Report and Financial Statements form an integral
part of these financial statements.
Registered in England and Wales as a public company limited by shares.
Company registration number: 02892872.
Cash Flow Statement for the year ended 31 August 2025
Note 2025 2024
£'000
£'000
Operating activities
Profit before finance costs and taxation 798 41,209
Adjustments for:
Net foreign currency gains (819) (1,656)
Gains on investments at fair value through profit or loss (4,735) (41,620)
Net sales of investments at fair value through profit or loss 33,513 50,463
Dividend income (286) (1,045)
Interest income (228) (218)
Decrease in receivables 9 14
Increase/(decrease) in payables 1,766 (746)
Overseas taxation paid (26) (134)
--------------- ---------------
Net cash inflow from operating activities before dividends and interest 29,992 46,267
========= =========
Dividends received 336 1,098
Interest received 245 185
Interest paid (1,940) (2,198)
--------------- ---------------
Net cash inflow from operating activities 28,633 45,352
========= =========
Financing activities
Bank loan drawdown 31,106 46,186
Bank loan repaid (23,345) (21,456)
Repurchase of ordinary shares into treasury (20,490) (16,160)
Dividends paid 9 (11,196) (10,768)
--------------- ---------------
Net cash outflow from financing activities (23,925) (2,198)
========= =========
Increase in cash and cash equivalents 4,708 43,154
Cash and cash equivalents at the start of the year 10,433 (32,474)
Effect of foreign exchange rates on cash and cash equivalents (161) (247)
--------------- ---------------
Cash and cash equivalents at the end of the year 12 14,980 10,433
========= =========
The notes in the full Annual Report and Financial Statements form an integral
part of these financial statements.
Notes to the Financial Statements
1. Material accounting policies
The nature of the Company's operations and its principal activities are set
out in the Strategic Report and Directors' Report.
The Company's financial statements have been prepared in accordance with
UK-adopted International Accounting Standards and those parts of the Companies
Act 2006 ("the Act") applicable to companies reporting under UK-adopted
International Accounting Standards. These comprise standards and
interpretations approved by the International Accounting Standards Board
("IASB") and International Accounting Standards Committee ("IASC"), that
remain in effect and to the extent that they have been adopted by the United
Kingdom and the Listing Rules of the FCA.
For the purposes of the financial statements, the results and financial
position of the Company are expressed in pounds sterling, which is the
functional currency and the presentational currency of the Company.
Sterling is the functional currency because it is the currency which is most
relevant to the majority of the Company's shareholders and creditors and the
currency in which the majority of the Company's operating expenses are paid.
All values are rounded to the nearest thousand pound and (£'000) except where
otherwise indicated.
The principal accounting policies followed, which have been applied
consistently for all years presented, are set out below:
(a) Basis of preparation
The Company's financial statements have been prepared on a going concern basis
(as set out in the full Annual Report and Financial Statements) and under the
historical cost convention, as modified by the inclusion of investments at
fair value through profit or loss.
Where presentational guidance set out in the Statement of Recommended Practice
(the "SORP") for investment trusts issued by The Association of Investment
Companies (the "AIC") in November 2014 (and updated in July 2022) is
consistent with the requirements of UK-adopted International Accounting
Standards, the Directors have sought to prepare the financial statements on a
basis compliant with the recommendations of the SORP.
The financial position of the Company as at 31 August 2025 is shown in the
Statement of Financial Position. As at 31 August 2025, the Company's total
assets exceeded its total liabilities by a multiple of over 8. The assets of
the Company consist mainly of securities that are held in accordance with the
Company's investment policy, as set out in the full Annual Report and
Financial Statements. The Directors have considered a detailed assessment of
the Company's ability to meets its liabilities as they fall due. The
assessment took account of the Company's current financial position, its cash
flows and its liquidity position. In addition to the assessment, the Company
carried out stress testing, which used a variety of falling parameters to
demonstrate the effects on the Company's share prices and NAV.
In light of the results of these tests, the Company's cash balances, and the
liquidity position, the Directors consider that the Company has adequate
financial resources to enable it to continue in operational existence. The
Directors expect shareholders to vote in favour of continuation at the 2025
AGM. Accordingly, the Directors believe that it is appropriate to continue to
adopt the going concern basis in preparing the Company's financial statements.
(b) Presentation of the Statement of Comprehensive Income
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 Statement of Comprehensive Income between items of a revenue and
capital nature has been presented alongside the Statement of Comprehensive
Income.
The net loss after taxation in the revenue column 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 ("CTA").
(c) Income
Dividends receivable on equity shares are recognised as revenue for the year
on an ex-dividend basis. Special dividends are treated as revenue return or as
capital return, depending on the facts of each individual case. Income from
current asset investments is included in the revenue for the year on an
accruals basis and is recognised on a time apportionment basis.
Where the Company has elected to receive its dividends in the form of
additional shares rather than cash, the amount of cash dividend foregone is
recognised as income in the revenue column of the Statement of Comprehensive
Income. Any excess in the value of shares over the amount of cash dividend
foregone is recognised as a gain in the capital column of the Statement of
Comprehensive Income.
Interest from fixed income securities is recognised on a time apportionment
basis so as to reflect the effective yield on the fixed income securities.
Deposit interest outstanding at the year-end is calculated and accrued on a
time apportionment basis using market rates of interest.
(d) Expenses and interest payable
Administrative expenses including the management fee and interest payable are
accounted for on an accruals basis and are recognised when they fall due.
All expenses and interest payable have been presented as revenue items except
as follows:
· Any performance fee payable is allocated wholly to capital,
as it is primarily attributable to the capital performance of the Company's
assets.
· Transaction costs incurred on the acquisition or disposal of
investments are expensed and included in the costs of acquisition or deducted
from the proceeds of sale as appropriate.
(e) Taxation
Deferred tax is calculated in full, using the liability method, on all taxable
and deductible temporary differences at the Statement of the Financial
Position date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes. Deferred tax assets and
liabilities are measured at the tax rates that are expected to apply to the
period when the asset is realised or the liability settled, based on tax rates
and tax laws that have been enacted or substantively enacted at the Statement
of Financial Position date.
Deferred tax assets are recognised to the extent that it is probable that
future taxable profits will be available against which the deductible
temporary differences can be utilised.
In line with the recommendations of the SORP, the allocation method used to
calculate tax relief on expenses presented in the capital column of the
Statement of Comprehensive Income 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 Statement of Comprehensive Income, then no tax
relief is transferred to the capital column.
(f) Non-current asset investments held at fair value
The Company holds three types of investments: direct investments in quoted
companies; direct investments in unquoted companies; and indirect investments
held through venture funds.
Investments are recognised or derecognised on the trade date where a purchase
or sale of an investment is under a contract whose terms require delivery of
the investment within the timeframe established by the market concerned.
On initial recognition all non-current asset investments are designated as
held at fair value through profit or loss as defined by UK-adopted
International Accounting Standards. They are further categorised into the
following fair value hierarchy:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities.
Level 2: Having inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: Having inputs for the asset or liability that are
not based on observable market data.
All non-current investments (including those over which the Company has
significant influence) are measured at fair value with gains and losses
arising from changes in their fair value being included in net profit or loss
for the year as a capital item.
Any gains and losses realised on disposal are recognised in the capital column
of the Statement of Comprehensive Income.
Quoted investments
The fair value of quoted investments is either the bid price or the last
traded price, depending on the convention of the exchange on which the
investment is quoted.
Unquoted investments
In respect of unquoted investments (excluding investments in the SV unquoted
funds), or where the market for a financial instrument is not active, fair
value is established by the adviser using various valuation techniques, in
accordance with the International Private Equity and Venture Capital ("IPEV")
guidelines issued in December 2022 and Special Valuations Guidance issued in
March 2020. These may include reference to recent rounds of re-financing
undertaken by investee companies involving knowledgeable parties, an earnings
or multiple, a discounted cashflow model or the present value of future
milestone payments, all with reference to recent arm's length market
transactions between knowledgeable parties, where available.
The valuations of the unquoted investments are assessed by the adviser to
ensure that the fair value is fairly reflected and will be revalued
accordingly, driven by the underlying assumptions deriving the value
including: the ability of portfolio company management to keep cash and
operating budgets; investor milestone targets; clinical trial data; progress
of competitor products; any underlying litigation at the portfolio company
level; performance of the investment and quality of the management team; and
the market for the product being developed; and the broad climate of the
economies of the countries in which they will likely be sold by reference to
public stock market performance. Management scrutinises and challenges the
assumptions, judgements and valuation inputs used by the adviser on a
quarterly basis.
Investment in unquoted funds
The Company receives formal quarterly reports from each of the private equity
funds in which it invests: SV Fund VI and SV BCOF (the "SV unquoted funds").
The values of the SV unquoted funds' investments in the underlying private
equity companies are reported in these quarterly reports. The reports
typically arrive within 60 days of the end of the quarter (90 days at calendar
year-end). As soon as a quarterly report is received by the Company, the
reported value of the SV unquoted funds is reflected in the NAV on the next
NAV date.
During the period between quarterly reports, the Company may be advised of a
sale of a portfolio company (or its securities) held within one of the funds
at a different price from the last reported value in that quarterly report. As
soon as the Company is informed of the completion of any such transaction
establishing a new value for the investment, the new NAV of that investment to
SV the unquoted funds is reflected in the NAV on the next NAV date. With
respect to any investments within the SV unquoted funds for which there is a
listed price, the Company revalues its investment in the SV unquoted funds to
take account of market movements in the underlying security. The listed price
of these underlying securities is monitored on a daily basis. Any price move
in the SV unquoted funds' underlying investments that materially impacts the
Company's holding in the SV unquoted funds is immediately reflected in the NAV
on the next NAV date. If there are no material movements, these underlying
securities are revalued on a monthly basis and immediately reflected in the
NAV on the next NAV date.
The value of a fund investment used by the Company in determining the NAV is
always based on the most current information known to the Company on the NAV
date.
(g) Foreign currencies
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 translated at the closing rates of exchange. Foreign currency
exchange differences arising on translation are recognised in the Statement of
Comprehensive Income. Exchange gains and losses on investments held at fair
value through profit or loss are included within "Gains/(losses) on
investments held at fair value".
(h) Critical accounting estimates and judgements
The preparation of financial statements in conformity with UK-adopted
International Accounting Standards requires the use of estimates and
judgements. These estimates and judgements affect the reported amounts of
assets and liabilities at the reporting date. While estimates are based on
best judgement using information and financial data available, the actual
outcome may differ from these estimates. The key sources of estimation and
uncertainty relate to the fair value of the unquoted investments.
Judgements
The Directors consider that the preparation of the financial statements
involves the following key judgements:
(i) The fair value of the unquoted investments.
The key judgements in the fair value process are:
(i) The advisor's (SV Health's) determination of the appropriate application
of the IPEV Valuation Guidelines (December 2022) and Special Valuations
Guidance (March 2020) to each unquoted investment; and
(ii) The Directors' consideration of whether each fair value is appropriate
following detailed review and challenge.
The judgement applied by the adviser in the selection of the methodology used
for determining the fair value of each unquoted investment can have a
significant impact upon the valuation.
Estimates
The key estimate in the financial statements is the determination of the fair
value of the unquoted investments (excluding investments in the SV unquoted
funds) by SV Health for consideration by the Directors. This estimate is key
as it significantly impacts the valuation of the unquoted investments
(excluding investments in the SV unquoted funds) at the Statement of Financial
Position date. The fair value process involves estimation using subjective
inputs that are unobservable (for which market data is unavailable).
The main estimates involved in the selection of the valuation process inputs
are:
(i) The application of an appropriate discount factor to reflect
macro-economic factors and the reduced liquidity of unquoted companies;
(ii) The selection of an appropriate estimate of the probability of royalty
income reflecting potential commercial uptake risk, competitor risk and
uncertainty around drug pricing; and
(iii) The calculation of valuation adjustments derived from milestone
achievement analysis incorporating the likelihood of clinical trial success.
Fair value estimates are cross-checked to alternative estimation methods where
possible to improve the robustness of the estimate. As the valuation outcomes
may differ from the fair value estimates a price sensitivity analysis is
provided in Level 3 investments at fair value through profit and loss - price
risk sensitivity in note 19.7 (iii) to illustrate the effect on the financial
statements of an over or under estimation of the significant observable
inputs.
(i) Other financial assets and liabilities
In the Cash Flow Statement, cash and cash equivalents includes cash in hand,
short-term deposits and bank overdrafts. These are held for the purpose of
meeting short-term cash commitments rather than for investment or other
purposes and cash balances are held at their fair value (translated to
sterling at the Statement of Financial Position date where appropriate).
Interest-bearing bank loans are initially recognised at cost, being the
proceeds net of direct issue costs, and subsequently at amortised cost.
(j) Receivables
Other receivables do not carry any right to interest and are short term in
nature. Accordingly they are stated at their nominal value (amortised cost)
reduced by appropriate allowances for estimated irrecoverable amounts.
(k) Other payables
Other payables are not interest-bearing and are stated at their nominal amount
(amortised cost). Where there are any long-term borrowings, finance costs are
calculated over the term of the debt on the effective interest basis.
(l) Bank loans and finance costs
Interest-bearing bank loans are initially recognised at cost, being the
proceeds received net of direct issue costs, and subsequently at amortised
cost. The amounts falling due for repayment within one year are included under
current liabilities and more than one year under non-current liabilities in
the Statement of Financial Position.
Finance costs are calculated using the effective interest rate method and
accounted for on an accrual basis and, in line with the management fee
expense, are charged 100% to the revenue account of the Statement of
Comprehensive Income.
(m) Repurchase of ordinary shares (including those held in treasury) and
subsequent reissues
The costs of repurchasing ordinary shares including related stamp duty and
transaction costs are taken directly to equity and reported through the
Statement of Changes in Equity as a charge on the capital reserves.
The sales proceeds of treasury shares reissued are treated as a realised
profit up to the amount of the purchase price of those shares and is
transferred to capital reserves. The excess of the sales proceeds over the
purchase price is transferred to share premium.
Share purchase transactions are accounted for on a trade date basis. The
nominal value of ordinary share capital repurchased and cancelled is
transferred out of called up share capital and into the capital redemption
reserve. Where shares are repurchased and held in treasury, the transfer to
the capital redemption reserve is made if and when such shares are
subsequently cancelled.
(n) Dividend distributions
Dividend distributions to shareholders are recognised in the period in which
they are paid.
(o) Reserves
(i) Capital redemption reserve:
The capital redemption reserve, which is non-distributable, holds the amount
by which the nominal value of the Company's issued share capital is diminished
when shares redeemed or purchased out of the Company's distributable reserves
are subsequently cancelled.
(ii) Share premium account:
A non-distributable reserve, represents the amount by which the fair value of
the consideration received exceeds the nominal value of shares issued.
(iii) Capital reserves:
When making a distribution to shareholders, the Directors determine profits
available by reference to 'Guidance realised and distributable profits under
the Companies Act 2006' issued by the Institute of Chartered Accountants in
England and Wales and the Institute of Chartered Accountants of Scotland in
April 2017. The availability of distributable reserves in the Company is
dependent on those dividends meeting the definition of qualifying
consideration within the guidance and on available cash resources of the
Company and other accessible source of funds. The distributable reserves are
therefore subject to any future restrictions or limitations at the time such
distribution is made.
The following are accounted for in this reserve and are distributable:
· Gains and losses on the realisation of investments;
· Realised investment holding gains and losses;
· Foreign exchange gains and losses;
· Performance fee;
· Reissue of ordinary shares from treasury;
· Repurchase of ordinary shares in issue; and
· Dividends paid to shareholders.
Note: Unrealised unquoted holding gains are not distributable.
(iv) Revenue reserve:
Comprises accumulated undistributed revenue profits and losses.
(p) New and revised accounting standards
There were no new IFRSs or amendments to IFRSs applicable to the current year
which had any significant impact on the Company's financial statements.
(i) The following new or amended standards became effective for the current
annual reporting period and the adoption of the standards and interpretations
have not had a material impact on the financial statements of the Company.
Standards and Interpretations Effective for periods commencing on or after
Amendments to IAS 1 Presentation of Financial Statements The amendments clarify that only covenants with which an entity must comply on 1 January 2024
or before the reporting date will affect a liability's classification as
· Non-current liabilities with Covenants current or non-current and the disclosure requirement in the financial
statements for the risk that non-current liabilities with covenant could
· Deferral of Effective Date Amendment (published 15 July 2020) become repayable within twelve months.
· Classification of Liabilities as Current or Non-Current
(Amendments to IAS 1) (publicised 23 January 2020)
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7) The amendments address the disclosure requirements to enhance the transparency 1 January 2024
of supplier finance arrangements and their effects on a company's liabilities,
cash flows and exposure to liquidity risk.
(ii) At the date of authorisation of the Company's financial statements, the
following relevant standards that potentially impact the Company are in issue
but are not yet effective and have not been applied in the financial
statements:
Standards and Interpretations Effective for periods commencing on or after
Lack of Exchangeability (Amendments to IAS 21) The amendments specify how to assess whether a currency is exchangeable and 1 January 2025
how to determine a spot exchange rate if it is not.
Annual Improvements to IFRS Accounting Standards - Volume 11 The amendments clarify the requirements for: 1 January 2026
Hedge accounting by a first-time adopter (IFRS 1 First-time Adoption of
International Financial Reporting Standards); Gain or loss on derecognition
(IFRS 7 Financial Instruments: Disclosures); Transaction price (IFRS 9
Financial Instruments); Derecognition of lease liabilities (IFRS 9);
Determination of a 'de facto agent' (IFRS 10 Consolidated Financial
Statements) and Cost method (IAS 7 Statement of Cash Flows).
Amendments to IFRS 9 and IFRS 7 - Amendments to the Classification and The amendments address two of the issues identified during the 1 January 2026
Measurement of Financial Instruments post-implementation review of IFRS 9, being the derecognition of a financial
liability settled through electronic transfer and the classification of
financial assets, it also introduces new and amended disclosure requirements.
The Directors expect that the adoption of the standards listed above will have
either no impact or that any impact will not be material on the financial
statements of the Company in future periods.
2. Gains on investments held at fair value through profit or loss
For the For the
year ended
year ended
31 August
31 August
2025
2024
£'000
£'000
Gains on sales of investments based on historic cost 14,686 11,923
Amounts recognised in investment holdings losses in the previous year in 3,486 12,199
respect of investments sold in the year
--------------- ---------------
Gains on sales of investments based on the carrying value at the previous 18,172 24,122
Statement of Financial Position date
Net movement in investment holding gains (13,437) 17,498
--------------- ---------------
Gains on investments held at fair value through profit or loss 4,735 41,620
========= =========
Gains/(losses) attributable to:
Quoted investments 7,868 36,155
Unquoted investments (3,133) 5,465
--------------- ---------------
4,735 41,620
========= =========
3. Income
For the For the
year ended
year ended
31 August
31 August
2025
2024
£'000
£'000
Income from investments:
UK dividends 102 146
Overseas dividends 184 899
--------------- ---------------
286 1,045
========= =========
Other income:
Deposit interest 228 218
--------------- ---------------
Total income 514 1,263
========= =========
4. Management and performance fees
For the For the
year ended
year ended
31 August
31 August
2025
2024
£'000
£'000
Management fee (allocated to revenue) 1,638 1,297
Performance fees (allocated to capital) 2,665 904
========= =========
The basis for calculating the investment management fee and any performance
fees are set out in the Directors' Report in the full Annual Report and
Financial Statements.
Following the investments into the SV unquoted funds, the management fees are
paid through the venture capital investments. Venture capital fees paid
through the investments in the SV unquoted funds in the year were £648,000
(2024: £691,000). The total management fee on a comparative basis was
£2,286,000 (2024: £1,988,000).
Refer to note 18, Transactions with the Manager and related party
transactions, for further details.
5. Administrative expenses
For the For the
year ended
year ended
31 August
31 August
2025
2024
£'000
£'000
General expenses 610 723
Directors' fees* 183 218
Company secretarial and administration fees 100 111
Auditors' remuneration for audit services1 74 77
--------------- ---------------
967 1,129
========= =========
1 There are no non-audit services performed by the auditors during the
year (2024: none).
* A one off fee, amounting to £46,310 in total, was paid to the
Directors following the completion of the change of Manager in November 2023
to compensate the Directors for the considerable additional time associated
with the transaction. Full details are provided in the Directors' Remuneration
Report.
6. Finance costs
For the For the
year ended
year ended
31 August
31 August
2025
2024
£'000
£'000
Interest on loan and overdraft 1,940 2,198
========= =========
All finance costs are allocated 100% to revenue.
7. Taxation
(a) Analysis of tax charge for the year
For the year ended 31 August 2025 For the year ended 31 August 2024
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Irrecoverable overseas tax 28 - 28 135 - 135
--------------- --------------- --------------- --------------- --------------- ---------------
Taxation for the year 28 - 28 135 - 135
========= ========= ========= ========= ========= =========
The Company has no corporation tax liability for the year ended 31 August 2025
(2024: the same).
(b) Factors affecting tax charge for the year
The tax assessed for the year ending 31 August 2025 is higher (2024: lower)
than the Company's applicable rate of corporation tax for that year of 25%
(2024: 25%).
The factors affecting the tax charge for the year are as follows:
For the year ended 31 August 2025 For the year ended 31 August 2024
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Net (loss)/return before taxation (4,031) 2,889 (1,142) (3,361) 42,372 39,011
Net (loss)/return before taxation multiplied by the Company's applicable rate (1,008) 722 (286) (840) 10,593 9,753
of corporation tax for the year of 25% (2024: 25%)
Effects of:
Revenue not chargeable to corporation tax (63) - (63) (261) - (261)
Tax exempt capital returns on investments - (1,143) (1,143) - (10,405) (10,405)
Non taxable exchange gains - (245) (245) - (414) (414)
Non taxable expenses not utilised in the year 1,071 666 1,737 1,101 226 1,327
Irrecoverable overseas tax 28 - 28 135 - 135
--------------- --------------- --------------- --------------- --------------- ---------------
Taxation for the year 28 - 28 135 - 135
========= ========= ========= ========= ========= =========
(c) Deferred taxation
The Company has an unrecognised deferred tax asset of £23,062,000 (2024:
£21,345,000) based on a main rate of corporation tax of 25% (2024: 25%). The
main rate of corporation tax increased to 25% for fiscal years beginning on or
after 1 April 2023.
The deferred tax asset has arisen due to the cumulative excess of deductible
expenses over taxable income. Given the composition of the Company's
portfolio, it is not likely that this asset will be utilised in the
foreseeable future and therefore no asset has been recognised in the financial
statements.
Given the Company's status as an investment trust company, no provision has
been made for deferred tax on any capital gains or losses arising on the
revaluation or disposal of investments.
8. (Loss)/earnings
For the For the
year ended
year ended
31 August
31 August
2025
2024
£'000
£'000
Net revenue loss (4,059) (3,496)
Net capital profit 2,889 42,372
--------------- ---------------
Total (loss)/profit (1,170) 38,876
========= =========
Weighted average number of ordinary shares in issue during the year* 35,541,347 38,184,030
Revenue loss per share (pence) (11.42) (9.16)
Capital profit per share (pence) 8.13 110.97
Total (loss)/earnings per share (pence) (3.29) 101.81
========= =========
* Excluding those ordinary shares held in treasury.
9. DIVIDENDS PAID
(a) Dividends paid and declared
For the For the
year ended
year ended
31 August
31 August
2025
2024
£'000
£'000
2025 First interim dividend paid of 15.56p per share (2024: 13.90p per share) 5,626 5,391
2025 Second interim dividend paid of 16.17p per share (2024: 14.50p per share) 5,570 5,377
--------------- ---------------
Total dividends paid of 31.73p per share (2024: 28.40p per share) 11,196 10,768
========= =========
Dividends are included in the financial statements in the year in which they
are paid.
The Company is not required to pay a dividend under the requirements of
Section 1158 CTA due to the negative accumulated balance on its revenue
reserve. The above dividends are paid out of the capital reserve.
10. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
(a) Analysis of investments
At At
31 August
31 August
2025
2024
£'000
£'000
Quoted overseas 247,853 270,883
--------------- ---------------
247,853 270,883
========= =========
Unquoted in the United Kingdom 9,898 8,813
Unquoted overseas 11,169 17,811
--------------- ---------------
21,067 26,624
========= =========
Valuation of investments 268,920 297,507
========= =========
(b) Movements on investments
For the For the
year ended
year ended
31 August
31 August
2025
2024
£'000
£'000
Opening book cost 277,196 311,290
Opening investment holdings gains/(losses) 20,311 (9,386)
--------------- ---------------
Opening fair value 297,507 301,904
========= =========
Analysis of transactions made during the year
Purchases at cost 576,780 349,648
Sales proceeds (610,102) (395,665)
Gains on investments held at fair value through profit or loss 4,735 41,620
--------------- ---------------
Closing fair value 268,920 297,507
========= =========
Closing book cost 258,560 277,196
Closing investment holding gains 10,360 20,311
--------------- ---------------
Closing fair value 268,920 297,507
========= =========
The Company received £610,102,000 (2024: £395,665,000) from disposals of
investments in the year. The book cost of these investments when they were
purchased was £595,416,000 (2024: £383,742,000). These investments have been
revalued over time and until they were sold any unrealised gains/losses were
included in the fair value of the investments.
The investment holding gains of £10,360,000 (2024: £20,311,000) have not
been further analysed between those amounts that are distributable and those
that are not distributable.
The following transaction costs, mainly comprising brokerage commissions, were
incurred during the year:
For the For the
year ended
year ended
31 August
31 August
2025
2024
£'000
£'000
On acquisitions 228 146
On disposals 179 122
--------------- ---------------
407 268
========= =========
(c) Significant undertakings
The Company has interests of 3% or more of any class of capital in the
following investee companies:
Class of % of Country of
shares held
class held
incorporation
TopiVert Series A 12.01% UK
TopiVert Series B 19.65% UK
========= ========= =========
The Company has a holding of 11.2% in the unquoted fund SV BCOF and 7.7% in
the unquoted fund SV Fund VI which are both managed by SV Health. These
percentages are of the underlying fund share capital and not the NAV of the
company.
The total invested in both funds to date is £37.3m (at cost). The investment
is drawn not committed.
Arrangements are in place to ensure there is no double charging of management
fees.
(d) Disposals of unquoted investments
There were no significant unquoted investment disposals during the year (2024:
nil).
(e) Significant changes in fair values of unquoted investments
During the year under review the following unquoted investments were written
(down/up) (adjusted for currency movements) by:
Write (down/up) Write (down/up)
2025
2024
£'000
£'000
SV Fund VI* (4,788) (985)
SV BCOF* 1,086 3,233
========= =========
* The movement in Fair Value (FV) loss was a combination of
distributions from the above funds of £4.4 million (2024: £5.7million),
capital contributions of £3.5 million (2024: £3.0 million), and foreign
currency and FV losses of £2.8 million (2024: £5.0 million),
11. Receivables
At At
31 August
31 August
2025
2024
£'000
£'000
Receivables
Dividends and interest receivable 49 109
Prepaid expenses 21 7
Tax recoverable 35 45
VAT recoverable 31 54
--------------- ---------------
136 215
========= =========
12. Cash and cash equivalents
Cash and cash equivalents include the following for the purposes of the
Statement of Cash Flows:
At At
31 August
31 August
2025
2024
£'000
£'000
Cash at bank 14,980 10,433
--------------- ---------------
Cash and cash equivalents 14,980 10,433
========= =========
13. Current liabilities
At At
31 August
31 August
2025
2024
£'000
£'000
Payables
Bank loan 29,607 22,827
Securities purchased awaiting settlement 2,063 1,872
Accrued expenses 2,957 1,191
--------------- ---------------
34,627 25,890
========= =========
The Company arranged a £55 million secured credit facility revolving on a
monthly basis with The Bank of Nova Scotia, effective from 16 November 2023
and amended and restated on 14 November 2024. Interest is payable at the
aggregate of the compounded Risk Free Rate ("RFR") for the relevant currency
and loan period, plus a margin. Amounts are normally drawn down on the
facility for a one month period, at the end of which it may be rolled over or
adjusted. As at 31 August 2025, the Company had a drawdown amount $40.0
million (£29.6 million) (2024: $30.0 million or £22.8 million) which
carries an interest of 5.44% per annum (2024: 6.5%). The revolving credit
facility is secured on all the Company's assets (except for level 3 assets)
and undertakings both present and future. The drawings are subject to
covenants and restrictions which are customary for a facility of this nature
and all of these have been complied with.
14. Capital commitments - contingent assets and liabilities
The Company made a $30.0 million commitment to SV Fund VI in 2016. Of this
$30.0 million commitment, the Company has further commitments of $2.2 million
as at 31 August 2025 (2024: $3.0 million). The outstanding capital commitments
are callable by SV Fund VI at any time.
While the fund will no longer make new investments, additional follow on
investments are likely to be made by the fund into its investee companies.
The Company has a commitment of $30.0 million to SV BCOF (2024: $30.0
million). The Company made no further commitments in 2025 (2024: nil). Of this
commitment, the Company has further commitments of $18.3 million (including
recallable distributions) as at 31 August 2025 (2024: $21.5 million).
15 Share capital
2025 2024
£'000
£'000
Ordinary shares of 25p each, allotted, called-up and fully paid:
Opening balance of 36,834,910 (2024: 39,318,183) shares, excluding shares held 9,209 9,830
in treasury
Repurchase of 3,107,419 (2024: 2,483,273) shares into treasury (777) (621)
Sub total of 33,727,491 (2024: 36,834,910) shares, excluding shares held in 8,432 9,209
treasury
7,656,326 (2024: 4,548,907) shares held in treasury 1,914 1,137
Closing balance of 41,383,817 (2024: 41,383,817) shares 10,346 10,346
========= =========
The ordinary shares rank pari passu, and each share carries one vote. The
ordinary shares held in treasury have no voting rights and are not entitled to
dividends. The nominal value of each share is 25p.
During the year, the Company purchased 3,107,419 of its own shares, nominal
value of £777,000 to hold in treasury for a total consideration of
£20,489,000 representing 7.5% of the shares outstanding at the beginning of
the year (including shares held in treasury). The reason for these shares
purchases was to seek to manage the volatility of the share price discount to
net asset value per share.
16. Reserves
Capital reserves
Share Capital Gains and Investment Revenue
premium(1)
redemption
losses on
holding
reserve(4)
£'000
reserve(1)
sales of
gains and
£'000
£'000
Investment(2)
losses(3)
£'000
£'000
At 1 September 2024 29,873 31,482 243,207 21,384 (54,027)
Gains on sales of investments based on the carrying value at the previous - - 18,172 - -
Statement of Financial Position date
Net movement in investment holding gains and losses - - - (13,437) -
Transfer on disposal of investments - - (3,486) 3,486 -
Realised exchange losses on cash and short-term deposits - - (161) - -
Exchange gains on foreign currency loan - - 347 633 -
Performance fees allocated to capital - - (2,665) - -
Share repurchases into treasury - - (20,490) - -
Dividend paid - - (11,196) - -
Net revenue loss for the year - - - - (4,059)
--------------- --------------- --------------- --------------- ---------------
At 31 August 2025 29,873 31,482 223,728 12,066 (58,086)
========= ========= ========= ========= =========
Capital reserves
Share Capital Gains and Investment Revenue
premium(1)
redemption
losses on
holding
reserve(4)
£'000
reserve(1)
sales of
gains and
£'000
£'000
Investment(2)
losses(3)
£'000
£'000
At 1 September 2023 29,873 31,482 258,533 (9,386) (50,531)
Gains on sales of investments based on the carrying value at the previous - - 24,122 - -
Statement of Financial Position date
Net movement in investment holding gains and losses - - - 17,498 -
Transfer on disposal of investments - - (12,199) 12,199 -
Realised exchange losses on cash and short-term deposits - - (247) - -
Exchange gains on foreign currency loan - - 830 1,073 -
Performance fees allocated to capital - - (904) - -
Share repurchases into treasury - - (16,160) - -
Dividend paid - - (10,768) - -
Net revenue loss for the year - - - - (3,496)
--------------- --------------- --------------- --------------- ---------------
At 31 August 2024 29,873 31,482 243,207 21,384 (54,027)
========= ========= ========= ========= =========
1 These reserves are not distributable.
2 These are realised (distributable) capital reserves which may be
used to repurchase the Company's own shares or distributed as dividends.
3 This reserve comprises holding gains on liquid investments (which
may be deemed to be realised) and other amounts which are unrealised. An
analysis has not been made between those amounts that are realised (and may be
distributed as dividends or used to repurchase the Company's own shares) and
those that are unrealised.
4 The revenue reserve may be distributed as dividends or used to
repurchase the Company's own shares (subject to being a positive balance). A
negative revenue reserve will reduce any distributable reserves available in
the capital reserve.
17. Net asset value per share
At At
31 August
31 August
2025
2024
£'000
£'000
Net assets attributable to shareholders (£'000) 249,409 282,265
Shares in issue at year-end 33,727,491 36,834,910
--------------- ---------------
Net asset value per share (pence) 739.48 766.30
========= =========
18. Transactions with the Manager and related party transactions
(a) Transactions with the AIFM/Investment Manager
With effect from 20 November 2023, Schroder Unit Trusts Limited ("SUTL") has
been appointed as the Company's AIFM. SUTL agreed to waive its management fee
for the first six months from 20 November 2023, after which the management fee
payable by the Company on its quoted portfolio will be 0.7% per annum. Please
see note 21 for details on the new terms of the management fee post year end.
Details of the management and performance fee agreements are given in the
Directors' Report in the full Annual Report and Financial Statements. The
management fee payable in respect of the year amounted to £2,286,000 (2024:
£1,988,000), which includes £648,000 (2024: £691,000) paid to SV Health for
the Company's investment into the SV unquoted funds. As at year-end, £137,000
was outstanding to SUTL (2024: £308,000).
Fees paid to the investment manager/adviser: 2025 2024
£'000
£'000
Management fee paid by the Company directly to SUTL 1,638 498**
Management fee paid through unquoted funds to SV Health - 154
Adviser fee paid through unquoted funds to SV Health 648 537
Management fee paid by the Company directly to SV Health Managers LLP - 799*
Accounting and administration fee payable by the Company directly to SUTL 100 78
--------------- ---------------
Total 2,386 2,066
========= =========
* Includes a termination fee of £289,439 paid to SV Health.
** Reflects SUTL agreed waiver of six months management fees from 20
November 2023 to 20 May 2024 under the terms of the new AIFM agreement.
Performance fees of £2,665,000 were payable for the year ended 31 August 2025
(2024: £904,000). Of the £2,665,000 payable, £299,000 was outstanding to SV
Health and £2,366,000 was outstanding to SUTL at the year end. Please refer
to note 21 for details of the new terms under which a quoted performance fee
is payable, including the related party opinion provided by Deutsche Numis,
the Company's corporate broker.
Under the terms of the AIFM agreement, SUTL is entitled to receive an annual
fee of £100,000 in respect of the accounting and administration services it
provides to the Company. The administration fee payable in respect of the
period under SUTL was £100,000 of which £8,000 was outstanding at the year
end.
SV Health will continue to provide ongoing investment management assistance to
the Company in respect of the exited investments with contingent milestones,
the exited investments in liquidation and the directly held unquoted
investments in consideration for payment of a performance fee on the same
terms as previously set out in the Directors' Report on page 41 of the Annual
Report for the year ended 31 August 2023.
(b) Related party transactions
The Directors of the Company are key management personnel. The total
remuneration payable to Directors in respect of the year ended 31 August 2025
was £183,500 (2024: £218,000) of which £29,000 (2024: £27,000) was
outstanding at the year end. 2024 includes a one off fee of £46,310 for the
additional work in relation to the change of AIFM. Please refer to note 21 for
details of a new post year end related party transaction with Schroders
Capital.
19. Financial instruments
Risk management policies and procedures
The Company's financial assets and liabilities, in addition to short-term
debtors and creditors and cash, comprise financial instruments which include
investments in equity.
The holding of securities, investment activities and associated financing
undertaken pursuant to the investment policy involve certain inherent risks.
Events may occur that would result in either a reduction in the Company's net
assets or a reduction of the total return.
The main risks arising from the Company's pursuit of its investment objective
are those that affect stock market levels: market risk, credit risk and
liquidity risk. In addition, there are specific risks inherent in investing in
the biotechnology sector. The Board reviews and agrees policies for managing
these risks, as summarised below. These policies have remained substantially
unchanged throughout the current and preceding year. In assessing any changes
to these risks, the Board considered changes in the economic and geopolitical
climate, including the resurgence of the conflict in the Middle East; the
continuing war in Ukraine and the increasingly tense relations between the US
and China, and noted that it did not have a significant impact on the risk
management policies for the year end 31 August 2025.
19.1 Market 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 - price risk, currency risk and interest rate risk.
The Portfolio Managers assesses the exposure to market risk when making each
investment decision, and monitor the overall level of market risk on the whole
of the investment portfolio on an ongoing basis.
(a) Price risk
The Company is an investment company and as such its performance is dependent
on the valuation of its investments. A breakdown of the investment portfolio
is given in the full Annual Report and Financial Statements. Market price risk
arises mainly from uncertainty about future prices of the financial
instruments held.
Management of the risk
The Board regularly considers the asset allocation of the portfolio as part of
the process of managing the risks associated with the biotechnology sector,
described in greater detail in the section on specific risk (note 19.4),
whilst continuing to follow the investment objective. It is not the Company's
current policy to use derivative instruments to hedge the investment portfolio
against market price risk.
Price risk exposure
At the year end, the Company's assets exposed to market price risk were as
follows:
At At
31 August
31 August
2025
2024
£'000
£'000
Non-current asset investments at fair value through profit or loss 268,920 297,507
--------------- ---------------
Total 268,920 297,507
========= =========
The level of assets exposed to market price risk decreased by approximately
9.6% (2024: 1.5%) during the year, through a combination of acquisitions and
disposal of investments and changes in fair values.
Concentration of exposure to price risk
The Company currently holds investments in 84 (2024: 83) companies (excluding
those valued at nil), in a mixture of quoted and unquoted investments in a
variety of countries, which significantly spreads the risk of individual
investments performing poorly and reduces the concentration of exposure.
This includes the Company's investment into SV Fund VI and SV BCOF as two
unquoted holdings. However, SV Fund VI and SV BCOF have 13 and 13 companies,
respectively, in their own portfolios. The classification of investments by
sector is provided within the Investment Portfolio section of the report.
Price risk sensitivity
The following table illustrates the sensitivity of the profit for the year and
the equity to an increase or decrease of 10% (2024: 10%) in the fair values of
the Company's investments. The Board believes that a 10% (2024: 10%) movement
is sufficient to provide a reasonable range that could have affected the
investment valuations at the year end. This level of change is considered to
be reasonably possible based on observation of current market conditions and
based on the average total share price percentage return over the last five
years on the 'Ten-Year Financial Record' page.
The sensitivity analysis is based on the Company's investments at each
Statement of Financial Position date, with all other variables held constant.
31 August 2025 31 August 2024
Increase Decrease Increase Decrease
in fair value
in fair value
in fair value
in fair value
£'000
£'000
£'000
£'000
Company:
Effect on net revenue return (188) 188 (208) 208
Effect on net capital return 26,892 (26,892) 29,751 (29,751)
--------------- --------------- --------------- ---------------
Effect on total net return and net assets 26,704 (26,704) 29,543 (29,543)
========= ========= ========= =========
(b) Currency risk
The financial statements of the Company are denominated in sterling. However,
the majority of the Company's assets and the total return are denominated in
US dollars, accordingly the total return and capital value of the Company's
investments can be significantly affected by movements in foreign exchange
rates. It is not the Company's policy to hedge against foreign currency
movement.
Management of the risk
The Manager monitors the Company's exposure to foreign currencies on a daily
basis, and reports to the Board on a regular basis.
Foreign currency exposure
The fair values of the Company's monetary items that have foreign currency
exposure at 31 August 2025 are shown below. Where the Company's equity
investments (which are not monetary items) are priced in a foreign currency,
they have been included separately in the analysis so as to show the overall
level of exposure.
Monetary assets/(liabilities) At At
31 August
31 August
2025
2024
£'000
£'000
Cash and cash equivalents:
US dollars 14,138 7,009
--------------- ---------------
Short term receivables:
US dollars 65 109
Danish krone 4 13
--------------- ---------------
Short term payables:
US dollars (31,316) (24,716)
--------------- ---------------
Foreign currency exposure on net monetary items (17,109) (17,585)
========= =========
Non-current asset investments held at fair value
US dollars 268,539 291,948
Euros - 5,178
--------------- ---------------
Total net foreign currency exposure 251,430 279,541
========= =========
At the year end, approximately 100.8% (2024: 99.0%) of the Company's net
assets were denominated in currencies other than sterling, reflecting a small
overall net sterling liability at year end, compared with a small net sterling
asset balance at the end of 2024. This level of exposure is broadly
representative of the levels throughout the year.
Foreign currency sensitivity
The Company measures foreign currency sensitivity by calculating the standard
deviation of rates throughout the financial year. On this basis sterling
strengthened by 2.8% against the US dollar and weakened by 2.8% against the
Euro, 2.7% against the Danish krone, 3.2% against the Swiss franc and by 5.0%
against Swedish krona (2024: strengthened 3.7%, 1.7%, 1.8% and weakened by
0.4% and 3.0% respectively). Given the movements over the last two years, a
change of 10% or even more is possible.
The following table illustrates the sensitivity of the profit after taxation
for the year and the equity in regard to the Company's financial assets and
financial liabilities, assuming a 10% (2024: 10%) change in exchange rates.
If sterling had weakened by 10% against the exposure currencies, with all
other variables held constant, this would have affected Company net assets and
net profit for the year attributable to equity shareholders as follows:
At At
31 August
31 August
2025
2024
£'000
£'000
US dollars 25,143 27,435
Euros - 518
Danish krone - 1
--------------- ---------------
25,143 27,954
========= =========
If sterling had strengthened by 10% against the exposure currencies, with all
other variables held constant, this would have affected Company net assets and
net profit after taxation attributable to equity shareholders as follows:
At At
31 August
31 August
2025
2024
£'000
£'000
US dollars (25,143) (27,435)
Euros - (518)
Danish krone - (1)
--------------- ---------------
(25,143) (27,954)
========= =========
In the opinion of the Directors, the above sensitivity analyses are not
necessarily representative of the year as a whole, since the level of exposure
changes as part of the currency risk management process used to meet the
Company's objectives.
(c) Interest rate risk
The Company will be affected by interest rate changes as it holds
interest-bearing financial assets and liabilities. Interest rate changes will
also have an impact on the valuation of investments, although this forms part
of price risk, which is considered separately above.
Management of the risk
Interest rate risk is limited by the Company's financial structure with
operations mainly financed through the share capital, share premium and
retained reserves. The majority of the Company's financial assets are, under
normal circumstances, equity shares and other investments which neither pay
interest nor have a stated maturity date. Liquidity and loan facilities are
managed with the aim of increasing returns for shareholders.
In the normal course of business, the Company's policy is to be fully invested
and, other than as arising from the timing of investment transactions, the
cash holding is kept to a minimum.
It is not the Company's policy to use derivative instruments to mitigate
interest rate risk, as the Board believes that the effectiveness of such
instruments does not justify the costs involved.
Interest rate exposure
The exposure of financial assets and financial liabilities to floating rates,
giving cash flow interest risk when rates are re-set, is shown below:
At At
31 August
31 August
2025
2024
£'000
£'000
Exposure to floating interest rates:
Cash and cash equivalents 14,980 10,433
Other payables: drawings on credit facility (29,607) (22,827)
--------------- ---------------
Total exposure (14,627) (12,394)
========= =========
The above year end amounts are not representative of the exposure to interest
rates during the year as the level of cash balances and drawings on the
secured credit facility have fluctuated. The maximum and minimum net interest
rate exposure during the year has been as follows:
At At
31 August
31 August
2025
2024
£'000
£'000
Maximum interest rate exposure during the year - net debt (34,762) (34,101)
Minimum/maximum interest rate exposure during the year - net (debt)/cash (6,874) 117
========= =========
Interest rate sensitivity
The following table illustrates the sensitivity of the return after taxation
for the year and net assets to a 3.0% (2024: 3.0%) increase or decrease in
interest rates in regards to the Company's monetary financial assets and
financial liabilities. This level of change is considered to be a reasonable
illustration based on observation of current market conditions. The
sensitivity analysis is based on the Company's monetary financial instruments
held at the Statement of Financial Position date with all other variables held
constant.
The sensitivity analysis is based on the Company's monetary financial
instruments held at each Statement of Financial Position date, with all other
variables held constant.
31 August 2025 31 August 2024
3% 3% 3% 3%
increase
decrease
increase
decrease
in rate
in rate
in rate
in rate
£'000
£'000
£'000
£'000
Effect on net revenue return (439) 439 (372) 372
Effect on net capital return - - - -
--------------- --------------- --------------- ---------------
Effect on total net return (439) 439 (372) 372
========= ========= ========= =========
In the opinion of the Directors, this sensitivity analysis may not be
representative of the Company's future exposure to interest rate changes due
to fluctuations in the level of cash balances and drawings on the secured
credit facility.
(d) Loss of investor appetite
Loss of investor appetite risk is the risk that there will be a loss of
investor appetite for investing in the sector as a result of political
conditions, including FDA and FTC policy, or declining interest in IPOs.
Management of the risk
Loss of investor appetite risk is mitigated as the Portfolio Managers update
the Board monthly and at each scheduled Board meeting on issues pertinent to
the portfolio and the biotechnology sector generally, including expected
future drivers.
Loss of investor appetite risk exposure
At an investment trust that invests in the biotechnology sector, the Company
has a moderate loss of investor appetite risk exposure.
19.2 Credit risk
Credit risk is the exposure to loss from failure of a counterparty to deliver
securities or cash for acquisitions or disposals of investments. Additionally,
the Company has funds on deposit with banks or in money market funds. HSBC
Bank plc was the custodian of the Company's assets prior to 3 October 2025.
The Company's investments are held in accounts which are segregated from the
custodian's own trading assets.
If the custodian were to be become insolvent, the Company's right of ownership
is clear and they are therefore protected. However cash balances deposited
with the custodian may be at risk in this instance, as the Company would rank
alongside other creditors.
Management of the risk
During the year the Company bought and sold investments only through brokers
which had been approved by the Manager as acceptable counterparties. In
addition, limits are set as to the maximum exposure to any individual broker
that may exist at any time. These limits are reviewed regularly.
Cash balances will only be deposited with reputable banks with high quality
credit ratings.
At At
31 August
31 August
2025
2024
£'000
£'000
Accrued income 49 109
Cash at bank 14,980 10,433
--------------- ---------------
15,029 10,542
========= =========
All of the above financial assets are current, their fair values are
considered to be the same as the values shown and the likelihood of a material
credit default is considered to be low.
None of the Company's financial assets are past due or impaired.
19.3 Liquidity risk
Liquidity risk is the possibility of failure of the Company to realise
sufficient assets to meet its financial liabilities.
Management of the risk
Liquidity and cash flow risk are mitigated as the Portfolio Managers aim to
hold sufficient Company assets in the form of readily realisable securities
which can be sold to meet funding commitments as necessary. In addition, the
Company has a secured credit facility with The Bank of Novia Scotia, London
branch, of £55.0 million (2024: same).
It should be noted, however, that investments in unquoted securities will not
be readily realisable. Furthermore, even where the Company holds an investment
in quoted securities, the Company may be restricted in its ability to trade
that investment either because the investment becomes subject to restrictions
when the company concerned becomes publicly quoted or, at certain times, as a
consequence of the Company being privy to confidential price sensitive
information as a result of the Portfolio Managers' active involvement in that
company.
Liquidity risk exposure
As an investment trust, the Company has limited liquidity risk. In any event,
the Company estimates it could liquidate 91% (2024: 87%) of the portfolio
within five days if required. A summary of the Company's financial liabilities
is provide in sub-note 19.6.
19.4 Sector specific risk
As well as the general risk factors outlined above, investing in the
biotechnology sector carries some particular risks:
(a) the stock prices of publicly quoted biotechnology companies have
been characterised by periods of high volatility;
(b) a significant proportion of the Company's investments will be in
companies whose securities are not publicly traded or freely marketable and
may, therefore, be difficult to realise. In addition, there are inherent
difficulties in valuing unquoted investments and the realisations from sales
of investments could be less than their carrying value;
(c) biotechnology companies typically have a limited product range and
those products may be subject to extensive government regulation. Obtaining
necessary approval for new products can be a lengthy process, which is
expensive and uncertain as to outcome;
(d) technological advances can render existing biotechnology products
obsolete;
(e) intense competition exists in certain product areas in relation to
obtaining and sustaining proprietary technology protection and the complex
nature of the technologies involved can lead to patent disputes;
(f) certain biotechnology companies may be exposed to potential
product liability risks, particularly in relation to the testing,
manufacturing and sales of healthcare products;
(g) biotechnology companies spend a considerable proportion of their
resources on R&D, which may be commercially unproductive or require the
injection of further funds to exploit the results of their work; and
(h) the growing cost of providing healthcare has placed financial
strains on governments, insurers, employers and individuals, all of whom are
searching for ways to reduce costs. As a result, certain areas may be affected
by price controls and reimbursement limitations.
19.5 Fair values of financial assets and financial liabilities
All financial assets and liabilities are either carried in the Statement of
Financial Position at fair value or the Statement of Financial Position amount
is a reasonable approximation of fair value. The fair value of quoted shares
and securities is based on the bid price or last traded price, depending on
the convention of the exchange on which the investment is quoted.
Unquoted investments are valued in accordance with IPEVC Guidelines. The
methods commonly used to value unquoted securities are stated in accounting
policy 1(f).
19.6 Summary of financial assets and financial liabilities by category
The carrying amounts of the Company's financial assets and financial
liabilities as recognised at the Statement of Financial Position date of the
reporting periods under review are categorised as follows:
Financial assets At At
31 August
31 August
2025
2024
£'000
£'000
Financial assets at fair value through profit or loss:
Non-current asset investments - designated as such on initial recognition 268,920 297,507
Cash and receivables:
Current assets:
Receivables 136 215
Cash at bank 14,980 10,433
--------------- ---------------
15,116 10,648
========= =========
Financial liabilities At At
31 August
31 August
2025
2024
£'000
£'000
Measured at amortised cost
Creditors: amounts falling due within one month:
Purchases awaiting settlement 2,063 1,872
Bank loan 29,607 22,827
Accruals 2,957 1,191
--------------- ---------------
34,627 25,890
========= =========
Note: Amortised cost is the same as the carrying value shown above.
19.7 Disclosures regarding financial instruments measured at fair value
The Company's portfolio of investments, which may comprise investments in
quoted equities and unquoted holdings, are carried in the Statement of
Financial Position at fair value. Other financial instruments held by the
Company may comprise amounts due to or from brokers, dividends and interest
receivable, accruals, cash at bank and drawings on the secured credit
facility.
For these instruments, the Statement of Financial Position amount is a
reasonable approximation of fair value.
The investments are categorised into a hierarchy comprising the following
three levels:
Level 1 - valued using quoted prices in active markets.
Level 2 - valued by reference to valuation techniques using observable inputs
other than quoted prices included within Level 1.
Level 3 - valued by reference to valuation techniques using inputs that are
not based on observable market data.
Categorisation within the hierarchy has been determined on the basis of the
lowest level of input that is significant to the fair value measurement of the
relevant asset.
Details of the valuation techniques used by the Company are given in the
accounting policies noted in the full Annual Report and Financial Statements.
(i) Financial assets at fair value through profit and loss
31 August 2025
Total Level 1 Level 2 Level 3
£'000
£'000
£'000
£'000
Equity investments 268,920 247,853 - 21,067
--------------- --------------- --------------- ---------------
Total 268,920 247,853 - 21,067
========= ========= ========= =========
31 August 2024
Total Level 1 Level 2 Level 3
£'000
£'000
£'000
£'000
Equity investments 297,507 270,883 - 26,624
--------------- --------------- --------------- ---------------
Total 297,507 270,883 - 26,624
========= ========= ========= =========
There were no transfers between levels 1, 2 or 3 during the period (2024:
same). A reconciliation of fair value measurements in Level 3 is set out
below.
(iii) Level 3 investments at fair value through profit or loss
2025 2024
£'000
£'000
Opening valuation 26,624 25,262
Capital contributions 3,513 2,995
Distributions (5,937) (7,098)
Total gains/(losses) included in the Statement of Comprehensive Income
On assets realised 4,035 (5,701)*
On assets held at the year end (7,168) 11,166*
Closing valuation 21,067 26,624
========= =========
* The prior year gains and losses on assets realised and on assets
held at year end have been reallocated as a result of subsequent information
received from the previous custodian post migration in 2023.
(iii) Level 3 investments at fair value through profit and loss - price risk
sensitivity
Investments are reported at their fair values. A full list of the Company's
investments is given in the full Annual Report and Financial Statements. As at
31 August 2025, 99.4% of the Company's net asset value is invested in level 1
investments and 8.45% in level 3 investments.
The fair value of level 3 investments is influenced by the estimates,
assumptions and judgements made in the valuation process. A sensitivity
analysis is provided below which recognises that the valuation methodologies
used involve different levels of subjectivity in their inputs in respect of
unquoted investments (excluding investments in the SV unquoted funds). The SV
unquoted funds do not have significant observable inputs used in the
determination of their fair value, as described in note 1 (f). No key
estimates or assumptions have been applied to the valuation of SV Fund VI and
SV BCOF between date of the last quarterly report received and 31 August 2025.
31 August 2025* Effect of reasonably possible
alternative assumptions
Valuation techniques** Fair value Significant Favourable Unfavourable
£'000
unobservable inputs**
impacts
impacts
£'000
£'000
Discounted future cash flows 2,486*** Probability estimate of royalty income 257 (256)
Discount rate 88 (83)
Present value of future milestone payments 350 Probability estimate of milestone achievement 35 (35)
Discount rate 2 (2)
Calibration price of a similar investment 341 Calibration price of a similar investment 34 (34)
--------------- --------------- ---------------
3,177 417 (410)
Net asset value 40 No significant judgements applied - -
--------------- --------------- ---------------
3,217 417 (410)
========= ========= =========
31 August 2024* Effect of reasonably possible
alternative assumptions
Valuation techniques** Fair value Significant Favourable Unfavourable
£'000
unobservable inputs**
impacts
impacts
£'000
£'000
Discounted future cash flows 4,382*** Probability estimate of royalty income 438 (438)
Discount rate 157 (148)
Present value of future milestone payments 309 Probability estimate of milestone achievement 31 (31)
Discount rate 4 (4)
Calibration price of recent investment 341 Calibration price of recent investment 34 (34)
--------------- --------------- ---------------
5,032 664 (655)
Net asset value 40 No significant judgements applied - -
--------------- --------------- ---------------
5,072 664 (655)
========= ========= =========
* Investments in the table above have been valued by the adviser for
the unquoted portfolio.
** Excludes investments in the SV unquoted funds.
*** Ikano Therapeutics. There is uncertainty surrounding an on-going lawsuit
with CIPLA. The model has been adjusted to account for this uncertainty and
now encompasses a probability weighted expected return method (PWERM) to
consider the uncertainty of the law-suit ruling. A 33% chance that loss of
exclusivity takes effect in 2026, 2027 and 2028 has been used to assess the
valuation of Ikano as at 31 August 2025.S
Significant unobservable inputs
The significant unobservable inputs applicable to each type of valuation
technique will vary dependent on the particular circumstances of each unquoted
company valuation. An explanation of each of the significant unobservable
inputs is provided below and includes an indication of the range in value for
each input, where relevant. The assumptions made in the production of the
inputs are described in note 1(f).
Probability estimate of royalty income
The probability estimate of royalty income is a key variable input in the
discounted future cash flow valuation technique used by the adviser and
further probability adjusted at 80% (2024: 80%) of the calculated net present
value.
Its represents the potential commercial uptake risk, competitor risk and
uncertainty around drug pricing. To factor in the uncertainty surrounding the
probability estimate of royalty income, the input has been stressed by a
factor of +/- 10%. Management is comfortable with the adviser assessment that
the largest differential in the flux of the valuations would be 10%.
Probability estimate of milestone achievement
The probability estimate of milestone achievement is a key variable input in
the present value of future milestone payments valuation technique used by the
adviser and represents the potential risk that commercial milestones are
achieved/not achieved in accordance with the estimated timeline. To factor in
the uncertainty surrounding the probability estimate of milestone achievement,
the input has been stressed by a factor of +/- 10%. Management is comfortable
with the adviser's assessment that the largest differential in the flux of the
valuations would be 10%.
Discount rate
The application of a risk adjusted discount rate (14% for Ikano Therapeutics
(2024: 13.5%)) has been applied by the adviser to discounted future cash flow
and present value of future milestone payments valuation techniques. The
discount rate takes into account the macro market risk and the liquidity
premium. To factor in the uncertainty surrounding the discount rate, the input
has been stressed by +/- 2%. Management is comfortable with the adviser's
assessment that the largest differential in the flux of the valuations would
be 2%.
Calibration price of similar/recent investment
The fair values of the underlying investments are based on the calibration
price but remain unadjusted from the recent price of the investment. To factor
in the uncertainty surrounding the selection of calibration price, the fair
value of the investment at the reporting date has been stressed by +/- 10%.
19.8 CAPITAL MANAGEMENT POLICIES AND PROCEDURES
The Company's objectives, policies and processes for managing capital are
unchanged from the preceding year.
The Company's debt and capital structure comprises the following: At At
31 August
31 August
2025
2024
£'000
£'000
Debt
Bank loan 29,607 22,827
--------------- ---------------
Total debt 29,607 22,827
========= =========
Equity
Share capital 10,346 10,346
Reserves 239,063 271,919
--------------- ---------------
Total equity 249,409 282,265
========= =========
Total debt and equity 279,016 305,092
========= =========
The Company's capital management objectives are to ensure that it will
continue as a going concern and to maximise total return to its equity
shareholders through an appropriate level of gearing.
The Board's policy is to limit gearing to 30%. Gearing for this purpose is
defined as borrowings used for investment purposes, less cash, expressed as a
percentage of net assets.
At At
31 August
31 August
2025
2024
£'000
£'000
Borrowings used for investment purposes, including cash 14,627 12,394
Net assets 249,409 282,265
Gearing 5.9% 4.4%
========= =========
The Board, with the assistance of the Manager, monitors and reviews the broad
structure of the Company's capital on an ongoing basis. This review includes:
(i) the planned level of gearing, which takes into account the
Manager's view of the market;
(ii) the need to buyback the Company's own shares for cancellation or
to hold in treasury, which takes into account the share price discount;
(iii) the opportunities for issue of new shares or to reissue shares
from treasury; and
(iv) the amount of dividend to be paid, in excess of that which is
required to be distributed.
20. SEGMENTAL REPORTING
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board.
The Board is of the opinion that the Company is engaged in a single segment of
business, namely the investment in biotechnology and other life sciences
companies in accordance with the Company's investment objective, and
consequently no segmental analysis is provided.
21. POST STATEMENT OF FINANCIAL POSITION EVENTS
After the year end and up to 4 November 2025, 1,351,308 ordinary shares were
bought back to be held in treasury. Following the buy backs, the total number
of shares in issue was 41,383,817 of which 9,007,634 were held in treasury.
On 4 November 2025, the Company signed a deed of amendment and restatement and
an amended and restated AIFM agreement to amend the basis under which a quoted
performance fee is payable. The quoted performance fee will now only be
payable when a positive total NAV per share return has been achieved. This is
defi ned as the movement in the NAV per share, adjusted to include the sum of
any dividends paid in addition to the Company's NAV capital return over the
relevant calculation period. If a positive total NAV per share return is not
achieved, payment of the performance fee will be deferred until the next
calculation period in which such a return is achieved.
Eff ective 1 September 2025, the management fee has decreased from 0.70% per
annum to 0.65% per annum on the Company's quoted portfolio.
On 30 September 2025, the Company entered into an agreement with Schroders
Capital (a related party to the Company) to establish a partnership (the
"Partnership") through which the Company intends over time to invest in
further unquoted biotechnology opportunities. The Company has made an initial
commitment to the Partnership of £10 million. Under the Partnership
agreement, Schroders Capital is entitled to a management fee of 0.90% per
annum based on the asset value of the Company's investment in the Partnership,
with a minimum of £60,000 payable per annum for the fi rst three years, as
well as £25,000 per annum for administration costs, with aggregate fees due
to Schroders Capital in any one year being capped at 0.25% of the Company's
net asset value.
The Manager and Schroders Capital are related parties of the Company under
UKLR 11.5.3. The amendment to the basis on which the performance fee is
payable constitutes a relevant related party transaction under UKLR
11.5.4R(1). The Board, having been so advised by Deutsche Numis, considers
this amendment to be fair and reasonable as far as shareholders are concerned.
In providing its advice, Deutsche Numis has taken into account the Board's
commercial assessment of the relevant related party transaction. In assessing
the Company's obligations under the UK Listing Rules, the Company has as
required by UKLR 11.5.4R(2), assessed the materiality of the management fee
reduction and new partnership agreement with Schroders Capital which are also
relevant related party transactions.
The depository, administration and custody services of the Company
transitioned from HSBC Bank plc to J.P. Morgan Europe Limited and JPMorgan
Chase Bank, N.A., London Branch, effective 3 October 2025.
No other significant events occurred after the end of the reporting period to
the date of this Report require disclosure.
STATUS OF RESULTS ANNOUNCEMENT
2025 Financial Information
The figures and financial information for 2025 are extracted from the Annual
Report and Financial Statements for the year ended 31 August 2025 and do not
constitute the statutory accounts for that year. The Annual Report and
Financial Statements include the Report of the Independent Auditors which is
unqualified and does not contain a statement under either section 498(2) or
section 498(3) of the Companies Act 2006. The Annual Report and Financial
Statements will be delivered to the Registrar of Companies in due course.
2024 Financial Information
The figures and financial information for 2024 are extracted from the Annual
Report and Financial Statements for the year ended 31 August 2024 and do not
constitute the statutory accounts for that year. The Annual Report and
Financial Statements include the Report of the Independent Auditors which is
unqualified and does not contain a statement under either section 498(2) or
section 498(3) of the Companies Act 2006. The Annual Report and Financial
Statements will be delivered to the Registrar of Companies in due course.
Neither the contents of the Company's web pages nor the contents of any
website accessible from hyperlinks on the Company's web pages (or any other
website) is incorporated into, or forms part of, this announcement.
5 November 2025
For further information:
Natalia de Sousa
Schroder Investment Management Limited
E-mail: AMCompanySecretary@Schroders.com
(mailto:AMCompanySecretary@Schroders.com)
Issued by Schroder Investment Management Limited. Registration No 1893220
England.
Authorised and regulated by the Financial Conduct Authority. For regular
updates by e-mail please register online at www.schroders.com
(https://url.uk.m.mimecastprotect.com/s/t7puCxn15T1LlkKtvh4FyxHrZ?domain=schroders.com/)
for our alerting service.
ENDS
A copy of the 2025 Annual Report and Financial Statements will shortly be
submitted to the FCA's National Storage Mechanism and will be available for
inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
The 2025 Annual Report and Financial Statements will shortly be available on
the Company's web pages at www.ibtplc.com (http://www.ibtplc.com/) where
up-to-date information on the Company, including daily NAV and share prices,
factsheets and portfolio in formation can also be found.
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