Int.biotech. Regulatory News (IBT)

7 November 2023

INTERNATIONAL BIOTECHNOLOGY TRUST PLC

("IBT" or the "Company")

Annual Report for the year ended 31 August 2023

WHO WE ARE

International Biotechnology Trust plc offers investors access to the fast-growing biotechnology sector through an actively managed, diversified fund.

Our award-winning Investment Managers at SV Health Managers LLP are scientifically, medically and financially experienced with over 75 years of experience between them. As well as investing in a wide-ranging portfolio of global quoted biotechnology stocks, we include a small proportion of otherwise inaccessible carefully selected unquoted investments which have the potential to deliver additional returns over the long-term. Excellent management teams, unique innovative products and strong potential for outperformance are the key criteria for inclusion in our diversified portfolio of assets. The six key attributes of the Company are detailed below:

FUND FACTS

For detailed calculations on the share price total return and the NAV per share total return, please refer to Alternative Performance Measures (APMs) on page 113. Data for NBI and FTSE All-Share Index sourced from Bloomberg. All sterling-adjusted and on a shareholder returns basis.

At 31 August 2022, the top ten holdings represented 49.5% of NAV.

LONG-TERM RECORD

CHAIR'S STATEMENT

Kate Cornish-Bowden | Chair

SUMMARY

The share price total return of International Biotechnology Trust plc (IBT) rose by 3% over the financial year to the end of August 2023, while the benchmark NASDAQ Biotechnology Index (NBI) fell by 1.4% over the same period. The Company's Net Asset Value rose by 2.7%. All figures are on a sterling adjusted total return basis, with dividends reinvested. It is gratifying that the Fund Manager has again delivered a return in excess of the NBI, although disappointing to have underperformed the FTSE All Share Index. IBT has now outperformed the NBI over one, five and ten years.

It has been a very busy year for IBT, whilst we conducted a comprehensive, independent process to select a new fund manager for the Company; and it is particularly pleasing that the Investment Managers have continued to deliver strong performance during this transition.

QUOTED PORTFOLIO

The NAV of the quoted portfolio, which represents 91.6% of total investments, rose by 3.8% during the financial year, beating the NBI return by 5.2%. All figures are on a sterling adjusted total return basis, with dividends reinvested.

Your Investment Managers, Ailsa Craig and Marek Poszepczynski, have continued to focus their efforts on identifying companies which have innovative treatments for unmet medical needs which command powerful competitive positions, have strong balance sheets, and have experienced management teams. The largest exposures by therapeutic area are Rare Diseases (29%), Oncology (23%) and the Central Nervous System (19%).

Most of the outperformance during the financial year was due to careful selection of mid cap revenue-generating biotech opportunities, which became acquisition targets. IBT benefited from being overweight in six companies which were subject to M&A activity. The Fund Manager's Review provides more detail on these transactions, but I would like to draw your attention to both Horizon and Seagen, which represented the two largest portfolio holdings before they became the subject of takeover bids from Amgen and Pfizer respectively, in the first half of the year under review. In both cases shareholders benefited significantly from the performance uplift, and the Investment Managers subsequently took the decision to reduce the positions to lower exposure to the transaction risks. This has proved prescient as both share prices have been volatile following announcements of investigations into the deals by the Federal Trade Commission (FTC). Since the year end, the FTC has given the Amgen acquisition of Horizon the green light, but Pfizer's proposed takeover of Seagen remains under review by the regulator.

The outlook for M&A activity in the sector remains bright. The large cap companies in the industry have substantially outperformed their smaller brethren this year. Whilst the NBI, which is a market capitalisation weighted index which also includes pharmaceutical companies, fell by 1.4% in sterling terms, XBI, which is equal weighted, fell by 13% in sterling terms over the same period. The relative valuation differential has made the smaller innovative companies which are developing the drugs of the future look even more appealing. The industry is forecast to lose up to $200bn in sales per annum by 2030 as a result of major drugs coming off patent. The cash-rich, large cap companies in the sector are under pressure to maintain earnings growth and are eager to identify the next generation of innovative candidates to fill the pipeline.

UNQUOTED PORTFOLIO

The unquoted portfolio, which comprises 8.4% of total investments, is primarily invested in two venture capital funds, SV Fund VI and SV BCOF, managed by SV Health Investors LLC and SV Health Managers LLP respectively, as well as a small number of directly held unquoted companies, most of which have been exited with potential contingent milestone payments still remaining.

Rising interest rates have led to a tougher funding environment for the private equity industry, and biotechnology is no exception. Deal activity has fallen dramatically and the heady valuations of a couple of years ago are a distant memory. During the year SV Fund VI, which is a mature fund with 86% of the initial IBT $30m commitment drawn down, fell in value with a number of write downs. Nevertheless, since its launch in 2016, SV Fund VI has delivered a currency adjusted Internal Rate of Return (IRR) of 17.7% per annum for investors.

The younger fund, SV BCOF, focuses on later stage, pre IPO and newly listed opportunities. Of the initial $30m commitment from IBT, only 28% is drawn down, and invested in six companies. During the year, Nimbus, one of the original SV BCOF investments, announced the sale of one of its key assets, a TYK2 Inhibitor for psoriasis, to Takeda for $4bn in upfront cash, and up to $2bn in commercial milestone payments. This has led to an exceptional early return for investors in SV BCOF which has delivered a currency adjusted IRR of 109% since it was launched in January 2022. The majority of SV BCOF remains in cash assets ready to take advantage of the significantly reduced valuations in the recently derated private biotech space.

NEW MANAGER

At the beginning of August this year, we were able to release the news to our patient shareholders and the market that we have selected a new fund manager for IBT; Schroders. This has been the culmination of an exhaustive and independent process, and we are very pleased with the outcome. The transition to Schroders, which is due to occur on 20 November 2023, ensures continuity of the existing mandate combined with the benefit of the significant investment trust expertise which Schroders brings to the table. Ailsa Craig and Marek Poszepczynski are moving to Schroders and will continue to manage the quoted portfolio with the same investment philosophy.

As previously announced, SV Health Managers LLP served notice to IBT in February this year following the partnership's decision to focus on its venture capital business. The Board and its Advisers spoke to our major shareholders in order to gain an understanding of their priorities and expectations for the future of IBT. Our shareholders said they were pleased with the investment record of the Investment Managers and keen to ensure that our differentiated mandate remained as a distinctive option within the biotechnology and healthcare specialist area. Most of our shareholders value our policy of paying a regular dividend out of capital, and our commitment to invest up to 15% of assets in innovative private equity opportunities within the biotechnology sector.

Amongst the many expressions of interest which we received the Board was particularly keen to identify investment houses with experience of managing investment trusts. Schroders has an established investment trust business with 14 investment trusts and over £10bn under management, and is strongly placed to support IBT both from a regulatory and marketing perspective. IBT provides Schroders with a flagship biotechnology offering within its global thematic funds business.

UNQUOTED EQUITY EXPOSURE

SV Health Managers LLP, which has delivered a strong track record for IBT shareholders from investments in unquoted biotech assets, will continue to provide advice on the Company's current private equity exposure. This is primarily invested in two venture capital funds; SV Fund VI and SV BCOF. The remaining legacy direct investments, which now represent less than 2% of total assets, will no longer attract a management fee but will be subject to the same performance fee of 20% (capped at 2% of the Company's NAV).

CHANGE IN DEPOSITARY, CUSTODIAN AND LENDER

As part of the move to Schroders, IBT is changing its depositary and custodian from Northern Trust to HSBC. As a result of this change, the £55m one year lending facility from Northern Trust will be repaid early. The Board is in the process of negotiating a new, one year secured revolving lending facility with Scotiabank which will replace the arrangement with Northern Trust.

NEW FEE ARRANGEMENTS

The Board has negotiated a fee free period for up to six months with Schroders which will offset the costs associated with the transition. The annual management fee at Schroders will be 0.7%, in line with the effective fee currently payable on the quoted portfolio. The performance fee will be retained and is payable at a rate of 10% of the relative outperformance above the NBI plus a hurdle rate of 0.5%. The performance fee is subject to a cap of 1.25%, and payable only when the NAV per share has increased over the period. The ongoing charge ratio is expected to fall marginally and further reduce over time.

SUSTAINABILITY

Schroders has a dedicated sustainability team which will help complement IBT's initiatives to incorporate Environmental, Social and Governance (ESG) criteria into the investment process.

Investing in companies that develop innovative treatments for patients suffering with unmet medical needs has an inherent positive social impact. IBT has implemented an ESG policy which incorporates ESG screening in the investment process. Data provided by Morningstar's Sustainalytics is used to measure the environmental and social impact and the quality of governance in key portfolio holdings. The results of this screen are outlined on page 32 of this Report.

DIVIDENDS

The Company's dividend policy is to make dividend payments equivalent to 4% of the Company's closing NAV, as at the last day of the preceding financial year (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 14 pence per share was paid on 27 January 2023. The second dividend for the year of 14.2 pence per share was paid on 25 August 2023. The dividend policy, which will be once again proposed at the AGM, will remain the same after the transition to Schroders.

DISCOUNT AND PREMIUM MANAGEMENT

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 this. Similarly, the Board is keen to grow the Company and will issue shares when the share price is trading at a premium to NAV. During the year under review, 1,544,826 shares were bought back to be held in Treasury. The share price discount to NAV, which was 6.6% at 31st August 2022, stood at 6.3% at 31 August 2023.

PERFORMANCE FEE

Thanks to outperformance in both the quoted and unquoted portfolios, a performance fee of £514,000 is payable for the year ended 31 August 2023. The quoted portfolio outperformed the NBI plus a 0.5% hurdle rate by over 4.5% which has led to a performance fee payment of £418,000. A performance fee of £96,000 is also payable on the unquoted portfolio due to net realised gains of £479,000 during the financial year.

BOARD AND SUCCESSION

Gillian Elcock, who joined the Board in February this year following the retirement of Jim Horsburgh, will be standing for election for the first time at this year's AGM. Gillian was the founder and Managing Director of Denny Ellison, an independent investment research company, and is a member of the board of the CFA UK. Gillian is also a Non-executive Director of Melrose Industries plc and STS Global Income and Growth Trust plc.

I am a Director of Schroder Oriental Income Fund Limited and will be stepping down from this role prior to IBT's move to Schroders.

AGM AND CONTINUATION VOTE

We look forward to seeing as many of our shareholders as possible at the AGM on 12 December which will be held at 3.00pm at Schroders' offices at 1 London Wall Place, London EC2Y 5AU.

In accordance with the Company's Articles of Association, a biennial continuation vote will be put to shareholders as an ordinary resolution at the AGM. We have consulted with many of our shareholders during the year and have received positive feedback. In particular, many of our major shareholders have informed us that they are pleased with the impending move to Schroders, and the continuity of the mandate and the investment management team. The Board strongly recommends that shareholders vote in favour.

OUTLOOK

It has been a volatile year for all investors as markets have swung from facing the reality of global inflation and the threat of recession to the belief that the interest rate cycle may be nearing a peak and the worst may be over. At the time of writing, the devastating news of a resurgence of the conflict in the Middle East has shaken market confidence. The continuing war in Ukraine and the increasingly tense relations between the US and China have further exacerbated the uncertainty within the investment environment.

Nevertheless, the Board shares the Investment Managers' views that there are grounds for optimism. Whilst higher costs of capital have had a substantial effect on the funding environment for early stage drug discovery companies, the fundamentals of the sector remain very much intact: namely a growing elderly population, a rising middle class, and an increasing demand for treatments to cure disease and enhance the quality of our lives. This spend is, to a large degree, non-discretionary.

Furthermore, scientific innovation in areas such as personalised targeted therapies and the application of artificial intelligence has led to faster, positive outcomes from clinical trials and better prospects for patients.

I would like to take this opportunity to thank my fellow Directors, the investment management team, and our professional advisers, all of whom have worked hard this year to ensure that we achieved the optimum outcome for our shareholders. We are excited about the opportunities for IBT within the Schroders stable and are looking forward to the future with confidence.

Kate Cornish-Bowden | Chair

6 November 2023

FUND MANAGER'S REVIEW

SUMMARY

In the year to 31 August 2023, the NAV per share rose 2.7% and the share price total return was up 3.0%. The Company's Benchmark, the NASDAQ Biotechnology Index (NBI), fell 1.4% whilst the FTSE All-Share Index rose 5.0%. All figures are on a sterling adjusted total return basis, with dividends reinvested. As of 31 August 2023, the Company's NAV amounted to £270.3m. The quoted portfolio represented 102.3% at £276.6m including 12% gearing of £32.5m. The unquoted portfolio represented 9.3% of NAV at £25.3m, and other net assets at £0.9m represented 0.4% of NAV.

Although the Company's discount widened at points during the financial year, the discount was managed by share buybacks and closed the year at 6.3%, not dissimilar from the 6.6% discount at the start of the year.

By subsector, as of 31 August 2023, 87% of the portfolio was invested in therapeutics, 4% in speciality pharmaceuticals, 3% in life sciences, tools and diagnostics and 6% in other sub-sectors. The Company's three largest therapeutic areas were Rare Diseases (29%), Oncology (23%), and Central Nervous System (19%).

COMPANY PERFORMANCE

Quoted portfolio

For the twelve-month period ended 31 August 2023, the NAV of the quoted portfolio rose by 3.8% (gross of management and performance fees) against a fall of 1.4% for the NBI. All figures are on a sterling adjusted total return basis, with dividends reinvested. While the NBI saw a modest decline, XBI, representing smaller-cap biotech firms, faced a more substantial setback, falling 13% when measured in sterling terms.

The bulk of both the Company's and NBI's absolute returns materialised during the first half of the financial year, with performance holding relatively steady in the latter half. This stands in contrast to the broader market, as represented by the NASDAQ Composite, which was stagnant during the first half of the Company's financial year, but then exhibited an impressive turnaround, delivering a substantial 22% return (in dollar terms) during the second half of the calendar year. Investment flows veered away from the biotech sector towards large-cap tech stocks, driven by the surge in excitement over advancements in artificial intelligence (AI) and lower inflation expectations. Notably, the NBI concluded the financial year at c4,000, marking a respectable 22% increase (in dollar terms) from the mid-2022 lows. Nevertheless, it still trails significantly behind the peak reached in 2021 when the index surged to c5,500 (see Figure 1).

On a positive note, the biotech sector experienced an uptick in M&A activity, with several deals announced, including six acquisitions within the Company's portfolio. Additionally, this calendar year appears poised for significant new chemical entity approvals by the Federal Drug Agency (FDA), with the sector anticipating the green light for up to 70 new chemical entities, reflecting robust innovation and growth. Nonetheless, the sector found itself in a somewhat stagnant state during the second half of the financial year ended 31 August 2023, primarily due to a constellation of negative headwinds. These challenges encompassed macroeconomic factors, such as the rise in interest rates, uncertainty surrounding the impact of the Inflation Reduction Act, and unexpected actions by the FTC. The FTC's announcement of investigations into high-profile acquisition deals within the biopharmaceutical industry introduced an element of uncertainty into the sector's landscape.

As has been discussed before, the 2020/2021 pandemic ignited fervent interest in the biotech sector, captivating generalist investors impressed by its rapid innovation in delivering vaccines and therapeutics. This enthusiasm drove investor focus toward early-stage biotech companies with ground breaking platform technologies (e.g. cell therapy, gene therapy, and RNA platforms), leading to overheated valuations across the market. Notably, early-stage, small-cap companies reached valuations traditionally reserved for those with proven products. However, the Federal Reserve's decision to raise interest rates to combat inflation had a significant impact, especially on early-stage biotech companies, which often operate without earnings for many years and depend on external financing for operations and clinical trials. These factors contributed to a prolonged market sentiment decline, resulting in one of the longest and deepest corrections in the NBI and small-cap biotech indices to date. Furthermore, IPOs stalled, and companies encountered challenges raising capital. Reduced M&A activity also played a role during the downturn, possibly due to unrealistic valuation expectations set during the 2021 hype.

However, since the lows of May/June 2022, M&A activity has picked up and is expected to persist as smaller companies seek financing and present more attractive valuations. De-risked, late-stage assets that align with an acquirer's strategic pipeline are likely to be a top M&A priority.

The Company experienced a significant cash inflow from two major M&A exits involving Horizon and Seagen. Both positions were the Company's largest holdings at the time of offers from Amgen and Pfizer respectively. The Investment Managers chose to reinvest this cash into smaller and mid-sized companies with promising innovative assets addressing unmet medical needs. Additionally, they continued to reduce exposure to companies facing imminent binary events, such as clinical data readouts. These strategies contributed to the Company's relative outperformance and reduced portfolio volatility compared to the NBI.

Unquoted portfolio

The Company's unquoted portfolio continues to perform well in its objective to give investors access to innovative early-stage companies and exposure to returns differentiated from quoted markets. As of 31 August 2023, it comprised 8.4% of the Company's total investments (9.3% of NAV) keeping it in line with the Company's guideline range of 5 to 15 per cent.

The portfolio currently includes two unquoted funds, SV Fund VI and SV BCOF as well as a small number of directly held unquoted companies, most of which have been exited with potential contingent milestone payments still remaining.

SV BCOF

SV BCOF is the newer fund which invests mostly in later stage, pre-IPO biotech opportunities. The $30m commitment is only 28% drawn as at 31 August 2023, but the fund was able to make distributions totalling $9.75m (£8.0m) during the year as a result of realising significant gains on Nimbus Therapeutics, one of its six underlying investments. In February 2023 Nimbus sold its TYK2 Inhibitor, which had demonstrated promising Phase 2 results in psoriasis, to Takeda for $4bn in upfront cash, and up to $2bn in commercial milestone payments.

SV Fund VI

SV Fund VI invests in a range of early-stage biotech, medical device and healthcare services companies. It is a mature portfolio and as at 31 August 2023, has drawn down 86% of the $30m capital committed. During the year, SV Fund VI made distributions of $2.2m (£1.9m) and capital calls of $1.9m (£1.6m). Performance for this year was disappointing with a number of write downs but, now comprising 5.2% of IBT's NAV, SV Fund VI has delivered a currency adjusted internal rate of return (IRR) of 17.7% per annum since the Company's first investment in the fund in 2016.

The remaining unquoted investments have been winding down since the Board's decision in 2016 to make all further unquoted investments through funds. They are classified as either "exited investments with contingent milestones" or "directly held investments" as set out in the analysis of Unquoted investments on pages 24 and 25. The net movement during the year has been broadly neutral with the total value of £5.9m dominated by Ikano which made distributions of £0.3m during the year.

The unquoted portfolio gave rise to a performance fee of £96,000 (2022: £471,000).

Positive contributors to NAV performance

Horizon Therapeutics was the main contributor to NAV during the year. The Investment Managers initiated an investment in 2018 after the company acquired River Vision Development Corp. in 2017 including the main product teprotumumab, a fully human monoclonal antibody in development for Thyroid Eye Disease, a rare autoimmune inflammatory disorder. Horizon successfully transitioned the product through clinical trials and received approval for the drug in January 2020. After a very strong launch, Amgen announced its intention to acquire Horizon for $28bn in December 2022. At the time of the announcement, the company was the largest holding in the Company.

Vera Therapeutics reported phase two data for its lead asset atacicept in IgA Nephropathy, a rare kidney disease in January 2023. The negative market interpretation of the data did not align with that of the Investment Managers who subsequently added to the holding within the Company. Vera shares recovered markedly after the company announced more mature data from the same trial which showed improved efficacy. Furthermore, competitor company Chinook Therapeutics, a read-across holding within the same disease area, was acquired by Novartis for $3.2bn, boosting the share price of Vera in parallel.

Seagen, an antibody-drug conjugate (ADC) company, is an established biotechnology company with multiple approved products addressing various oncology indications. In March 2023, Pfizer announced its intention to acquire the company for $48bn. At the time of the announcement, Seagen was the largest holding within the Company.

Detractors from NAV performance

Harmony Biosciences came under attack by Scorpion Capital, an activist hedge fund based in the US, in March 2023. Scorpion Capital's case report concerned Harmony's lead asset Wakix, which has been marketed since 2019 in the US for the treatment of a sleep condition called narcolepsy. Scorpion Capital cited safety concerns and then continued with a media campaign culminating in filing a citizen's petition with the FDA to take Wakix off the market. The FDA has responded to the citizen's petition but, as of the time of writing six months later, no action has been taken.

Revance launched Daxxify in January 2022 for forehead furrows. Sales of the drug have disappointed since the launch which has had a detrimental impact on the share price. In August 2023, the company announced a second indication for the drug, cervical dystonia.

Travere Therapeutics shares fell in February after disappointing data from a two-year study of a kidney drug which failed to show a statistically significant improvement. The company said the Phase 3 trial of sparsentan as a treatment for focal segmental glomerulosclerosis, or FSGS, did not meet the primary efficacy eGFR slope endpoint.

Mergers and acquisitions (M&A)

The Company benefitted from six of its portfolio companies becoming acquisition targets in the year to 31 August 2023. The Investment Managers anticipated that revenue growth companies would prove to be the most attractive targets due to the pressure on big pharmaceutical companies to plug impending gaps in their revenue pipelines with derisked assets with a shorter lead time to profitability. Big pharma continues to offer substantial premia to ensure success of their bids, which makes this a lucrative, alpha-generating area for the Company. Assuming that the share price moves close to the bid price on announcement, the Investment Managers will usually choose to exit their holding at that point in order that the Company is protected from transaction risk as the deal is negotiated further and scrutinised by the regulators. This has proved to be a wise strategy this year.

In December 2022, Amgen made a significant announcement of its intention to acquire Horizon for a substantial sum of $28bn, marking a noteworthy development for our biotech investment company. Horizon was the largest position in our portfolio, representing 13% of the Company's holdings. The acquisition process itself was characterised by a fiercely competitive bidding war involving major players in the pharmaceutical industry, including Johnson & Johnson and Sanofi. Amgen's offer for Horizon came with a substantial premium, providing a 48% increase over the previous day's closing share price, reflecting the perceived value of this strategic acquisition. The Company's position was sold soon after the transaction was announced in order to protect the Company from transaction risk, generating a substantial return on investment. Thereafter, in an unexpected turn of events in May, the FTC took action against Amgen, seeking to halt the transaction. The FTC expressed concerns that Amgen might engage in a practice commonly referred to as 'bundling'. This practice involves packaging different pharmaceutical products together and offering them at discounted rates, potentially creating barriers for competing drugs that lack such bundled advantages, especially for smaller pharmaceutical companies with fewer products in their portfolio. Despite the FTC's concerns the regulator settled with Amgen and the deal looks likely to close by the end of 2023.

Also in December 2022, Takeda announced its intention to acquire Nimbus, which is a holding within SV BCOF, part of the unquoted portfolio of the Company. The transaction amounted to an initial payment of $4bn with potential additional commercial-related milestone payments of up to $2bn. Nimbus Therapeutics, a clinical-stage drug discovery firm, employs cutting-edge computational techniques and machine learning-based predictive models to create small molecule medicines targeting validated yet challenging-to-address human disease targets. Its main project targets the TYK2 pathway, addressing inflammatory and autoimmune conditions such as psoriasis, inflammatory bowel disease, psoriatic arthritis and systemic lupus erythematosus.

Ipsen announced its intention to acquire Albireo, a specialised rare disease company, for a total consideration of $952m, in January 2023. Albireo, established 15 years ago as a spinout from AstraZeneca, is at the forefront of developing bile acid modulators to address a range of liver diseases. Albireo achieved notable milestones when its product, Bylvay, obtained regulatory approvals in both Europe and the United States in July 2021 for the treatment of pruritus associated with progressive familial intrahepatic cholestasis (PFIC). In October of the preceding year, Albireo presented compelling data demonstrating Bylvay's efficacy in managing another paediatric liver disorder, Alagille syndrome. Ipsen's tender offer for Albireo included a purchase price of $42 per share, with an additional contingent value right of $10 per share, contingent upon the potential approval of Bylvay for biliary atresia, the most prevalent among the three primary paediatric liver diseases.

Also in January of 2023, Sun Pharmaceutical entered into a definitive agreement to acquire Concert, amounting to a total equity value of $576m. Additionally, Concert shareholders will receive a contingent value right (CVR), offering the potential to receive an additional $3.50 per share of common stock in cash, subject to specific net sales milestones achieved by deuruxolitinib within defined timeframes as outlined in the contingent value rights agreement. Concert Pharmaceuticals is a late-stage biotech firm pioneering deuterium utilization in medicinal chemistry. Its patent portfolio features deuruxolitinib, a leading product candidate designed as an oral JAK1 and JAK2 inhibitor for treating Alopecia Areata, an autoimmune dermatological condition in late-stage development. Alopecia Areata is an autoimmune ailment characterised by immune attacks on hair follicles, causing hair loss on the scalp and body. Affecting up to 2.5% of the global population, this condition has limited treatment options and can lead to significant psychological consequences, including anxiety and depression.

In March 2023, Pfizer, entered into an agreement to acquire Seagen, a biotech firm specialising in oncology, for a total value of $43bn. Seagen was the Company's largest holding at the time, representing 10% of the portfolio as at end of February 2023. Pfizer offered $229 in cash per Seagen share representing a premium of approximately 35% over Seagen's closing price on the preceding Friday. Pfizer's CEO, Albert Bourla, emphasised the company's commitment to advancing cancer research, acknowledging oncology as a pivotal driver of global medical growth. Seagen's expertise in antibody-drug conjugates (ADC), a targeted therapy for cancer cells, further complements Pfizer's portfolio. Seagen's four approved ADC drugs are recognised for their effectiveness in treating specific conditions. In June 2022, speculations about a potential Seagen acquisition had surfaced, with initial discussions involving Merck. By July, Merck had put forward a substantial proposal, offering a minimum of $200 per share, equating to a prospective $40bn transaction value. However, negotiations between Seagen and Merck stagnated in August 2022, as the two entities couldn't reach a consensus on the deal's pricing terms.

After the collapse of the Seagen/Merck transaction, the Investment Managers bought more shares in Seagen, recognising that Seagen's Board of Directors would be under pressure to deliver a new deal to shareholders. Subsequently, in February 2023, reports emerged of Pfizer's interest in Seagen. This speculation was later confirmed a month later, as both companies disclosed their agreement to a purchase price of $229 per share, resulting in a monumental $43bn deal, one of the most significant in biotech history. The Investment Managers sold the Company's position shortly after the deal was announced to avoid exposing the Company to transaction risk. By June 2023, Seagen publicly announced in an SEC filing that Pfizer had initially withdrawn its application with the FTC, only to resubmit a similar document later the same day, reflecting the ongoing regulatory processes surrounding the acquisition which has still not closed.

In June 2023, Novartis said it had agreed to acquire Chinook Therapeutics for up to $3.2bn to boost its late-stage drug development line-up, raising the stakes in the race for a rare kidney disease treatment. Chinook's shareholders will receive $3.2bn, or $40 per share, in cash under the agreed deal, plus a contingent value right worth up to $300m, depending on certain regulatory achievements. The upfront payment represents a premium of 66.7% to Chinook's previous closing price. Chinook has a lead compound designed to treat IgA Nephrophathy, or IgAN, that can lead to kidney failure in young adults which is a focus for several companies and is already the target of a drug candidate.

INVESTMENT UPDATES

Many of the therapeutic areas represented in the Company's portfolio are at the cutting edge of current developments in biotech. The following section focuses on three of these and discusses how the Company's portfolio companies are at the forefront of the relentless pursuit of new effective therapies for debilitating diseases.

Gene Therapies

Over 10,000 genetic diseases, affecting millions of individuals globally, originate from single gene mutations. Gene therapy, a revolutionary approach, aspires to replace faulty genes with healthy counterparts or correct them, offering the potential of enduring cures. Recent technological breakthroughs have paved the way for ground breaking gene therapy drugs, and several companies in our portfolio have been instrumental in advancing this transformative field.

During November 2022, Uniqure's gene therapy, Hemgenix, received regulatory approval for the treatment of haemophilia B. This debilitating disease results from a deficiency in factor IX, a crucial protein in the blood clotting process. Uniqure, in collaboration with major Australian pharmaceutical company CSL Biopharma, embarked on a strategic partnership in 2020, culminating in a significant upfront payment of $450m. This partnership not only reinforced Uniqure's financial stability but also underlined the immense potential of gene therapy in addressing previously unmet medical needs.

In June 2023, Biomarin achieved a major milestone with the launch of Roctavian, their cutting-edge gene therapy. Indicated for the treatment of severe haemophilia A with congenital factor VIII deficiency, Roctavian offers a one-time single dose infusion aimed at restoring the missing gene. This breakthrough therapy empowers patients with severe haemophilia A to produce their own factor VIII protein, marking a transformative shift in the management of this condition.

May 2023 witnessed the regulatory approval of Krystal Bio's Vyjuvek, an innovative topical gene therapy developed by Krystal Bio. This therapy addresses the severely debilitating dystrophic epidermolysis bullosa disorder, a condition characterised by open wounds, skin infections, and an elevated risk of skin cancer. Unlike other gene therapies, Vyjuvek can be redosed with the replaced gene, enabling patients to generate vital collagen protein, thereby facilitating wound closure. This breakthrough offers newfound hope to these patients who have historically faced limited life expectancy.

Kidney Disease (IgA Nephropathy)

2023 marked significant progress in the pursuit of effective treatments for IgA Nephropathy, also known as Berger's disease. This kidney disorder, characterised by the accumulation of immunoglobulin A (IgA) in the kidneys, has garnered increasing attention from pioneering biotech companies dedicated to developing innovative therapies. The Investment Managers adopted a strategic "basket approach" to diversify risk across various developmental stages of treatments, as well as across distinct mechanistic approaches.

Calliditas Therapeutics emerged as a prominent player in the IgA Nephropathy treatment landscape, offering Nefecon (marketed as Tarpeyo), the first drug approved to specifically tackle this condition. Nefecon, is an oral immunosuppressant which reduces the pathological IgA production and alleviates kidney inflammation. Encouraging clinical trial data indicated its potential to slow down disease progression. In February 2023, Calliditas received a conditional marketing authorisation for Nefecon. Further studies are underway to confirm its clinical benefit before seeking full FDA approval.

Travere Therapeutics secured conditional approval for its lead asset, sparsentan (branded as Filspari), just after Nefecon making it the second to market to treat IgA Nephropathy. Similar to Calliditas, Travere aspires to upgrade this conditional approval to full approval contingent upon the success of the phase 3 trial PROTECT, with results expected by the end of 2023.

Chinook Therapeutics, a development stage biotechnology company, is developing atrasentan, an endothelin type A antagonist currently in late-stage trials for IgA Nephropathy. The company also has an earlier stage, disease modifying asset BION-1301. Notably, in June 2023, Novartis announced its intention to acquire Chinook for $3.2bn with potential further upside for investors on the success of the Align clinical trial set to read out by the end of 2023.

Vera Therapeutics is also a development stage biotechnology company, whose lead asset atacicept is being developed to treat IgA Nephropathy. While initial data announced in January 2023 received a negative market response, resulting in a 70% drop in share price, our Investment Managers significantly increased their holding in the company, believing the data to be sound and the market response to be questionable. Subsequent positive data releases have validated their conviction, and the company has benefited from a significant recovery in its share price. The share price also benefited from the news of the Chinook acquisition by Novartis.

Central Nervous System

Data from the Centres of Disease Control paints a stark picture of the US mental health crisis: surging depression and anxiety, especially among youth, worsened by the COVID-19 pandemic. Existing antidepressants and antipsychotics have a slow onset of action, limited efficacy and often have to be combined, adding to stigmatising side effects, such as weight gain, leaving a clear unmet medical need. Pioneering treatments hope to address these limitations, many including totally novel mechanisms of action, providing hope for patients suffering from mental health issues.

Intra-Cellular Therapies, an innovative biotechnology company, unveiled Caplyta (lumateperone) in 2019, initially focused on treating schizophrenia. Traditional therapies often result in undesirable side effects, such as weight gain, often exacerbating the condition and hindering patient adherence. Caplyta, with its specific approach, mitigates these concerns, presenting a compelling alternative. Its expansion into bipolar depression in 2021, addressing another debilitating condition, expanded the potential market for the product. Concurrently, ongoing clinical trials are assessing its effectiveness in major depressive disorder, a mounting concern in the US, notably exacerbated by the pandemic.

In the latter part of 2022, Axsome Therapeutics launched Auvelity, a groundbreaking treatment for major depressive disorder. Unlike current therapies, which typically take six to eight weeks to show efficacy, Auvelity has an onset of action in under a week. Auvelity represents the first oral medication with a novel mechanism of action approved for major depression in six decades. This innovative drug operates by simultaneously targeting multiple neurotransmitter pathways, including the N-methyl-D-aspartate (NMDA) receptor and the monoamine system.

Xenon's lead asset, XEN1101, presented positive results from the Phase 2b X-TOLE study, demonstrating statistically significant reductions in seizures among patients grappling with challenging-to-treat focal onset seizure epilepsy. Building on this achievement, Xenon has recently initiated its Phase 3 epilepsy program. Separately, the company is actively engaged in an ongoing Phase 2 clinical trial to evaluate XEN1101's effectiveness in managing major depressive disorder, a significant comorbidity for epilepsy patients. Data from the X-NOVA trial are anticipated to be available by year-end 2023.

Karuna Therapeutics has achieved success in two late-stage clinical trials for KarXT, an experimental drug tailored for schizophrenia treatment. The company intends to submit an FDA approval application later this year. KarXT's innovative mechanism targets muscarinic receptor proteins, diverging from conventional dopamine and serotonin pathways, presenting a substantial market opportunity. Notably, the drug exhibited a promising safety profile, lacking the weight gain and extrapyramidal (involuntary muscle movements) side effects commonly associated with existing schizophrenia treatments. Furthermore, Karuna is exploring KarXT's potential applications in Alzheimer's disease psychosis and other conditions, broadening its therapeutic scope.

INITIAL PUBLIC OFFERINGS & THE SECONDARY MARKET

The biotech IPO market has witnessed remarkable strength in the past, reaching its zenith during the pandemic. 2021 saw a surge of listings from relatively young companies, prompting discussions about the appropriate timing for public offerings. Following this exuberance, the sector experienced a significant downturn, resulting in a very restricted IPO window during 2022.

However, recent developments indicate a reopening of this window, with a select few companies successfully completing IPOs in the current year. Notably, secondary fund raisings remain active in 2023, particularly for high-quality companies with compelling clinical data. (See Figure 4).

The Company has not invested in any IPOs in the calendar year 2023, with the Investment Managers preferring to wait until a proven track record is established by the management before making investments in this area. The possible reopening of the IPO window bodes well for the Company's investment in SV BCOF, a venture fund specialising in pre-IPO companies.

INDUSTRY RESPONSE TO THE MARKET DRAWDOWN

The biotechnology sector has displayed remarkable adaptability in the face of significant market turbulence following the boom during the COVID-19 pandemic. Since that peak period, the industry has experienced a notable decline in valuations, particularly among smaller, unprofitable biotech enterprises. This shift has necessitated challenging decisions for individual companies, given the tightening of funding sources. For several years, low interest rates and the Federal Reserve's monetary expansion policies fuelled an abundance of available funds for companies to go public and commence ambitious clinical programs that might otherwise have struggled to secure financing. Over the past decade, the number of biotech companies has more than tripled. (See Figure 5).

As we move beyond this era of abundance, the biotech industry has demonstrated resilience through strategic adaptation to a new normal:

Consolidation for Strength: In response to the shifting landscape, larger biopharmaceutical entities have actively acquired smaller biotech firms. This is a secular trend, but has accelerated in recent months, partly driven by more attractive valuations stemming from reduced stock prices. Additionally, the demand for inorganic revenue sources to counter future revenue losses due to patent expiries and potential pressures from the Inflation Reduction Act, has bolstered this consolidation trend. Furthermore, some companies have opted for "mergers of weakness", forming alliances that generate cost-saving synergies. These merged entities then focus their resources on the most promising assets in their pipelines, thereby reducing clinical development expenses.

Streamlined Portfolio Focus: Companies are strategically pruning their development programs, concentrating resources on the most promising pipeline assets. This approach minimises internal clinical development costs while maximising the potential for success.

Activist Investor Influence: A handful of activist investors have emerged as influential voices challenging company boards to reconsider their strategies and implement changes that benefit shareholders. This trend underscores the heightened scrutiny of corporate decisions within the industry.

Outcomes

The cumulative impact of these strategic shifts is expected to result in a gradual reduction in the number of publicly listed biotechnology companies. The Investment Managers view this as a positive development for the sector. The rationalisation of weaker companies eliminates inefficiencies and redirects resources away from clinical programs with limited value. In tandem with the aforementioned strategies, the rate of new biotech companies entering the stock market has substantially declined. This phenomenon is poised to further curtail the number of companies listed on public exchanges.

FDA ENVIRONMENT

In recent years, the biotech industry has maintained a steady pace of new drug approvals, see Figure 6, although underlying shifts in therapeutic focus have emerged. Notably, specialty pharma drugs have experienced a decline, offset by a rise in advanced modalities. The combined domains of neurology and oncology continue to account for approximately 40% of all approvals. Small molecules remain the predominant modality, comprising roughly two thirds of approvals YTD, although this figure has decreased from the 75-80% range observed during 2010-2020. Notably, 2023 witnessed three gene therapy approvals with Vyjuvek by Krystal Biotech, Biomarin's Roctavian and Uniqure's Hemgenix signalling potential growth in this field. All three companies are portfolio holdings in Company.

The emergence of "new" modalities such as cell therapy, gene therapy, oligos, RNAi, bispecific antibodies, and ADCs is evident, representing a growing proportion of New Chemical Entity approvals and expected to accelerate throughout the rest of the calendar year. As the years progress, these trends will evolve, and we remain vigilant in our analysis of the dynamic biotech landscape, poised to seize investment opportunities that align with these industry dynamics.

INFLATION REDUCTION ACT

In 2022, the Inflation Reduction Act was enacted as a pivotal legislative initiative, designed to address the challenges of escalating inflation and government spending. The centrepiece of the Inflation Reduction Act's impact on the pharmaceutical industry is the introduction of drug pricing negotiations between the government, specifically Medicare (the federal health insurance programme covering over 65s and those with disabilities or certain chronic diseases), and the pharmaceutical industry. Commencing in 2026, Medicare is empowered to negotiate prices for the top ten revenue-generating drugs annually, expanding the list over time. It is noteworthy that Medicare's contribution to pharmaceutical revenues accounts for just 22%, as illustrated in Figure 7.

In August 2023, the first ten drugs selected for Medicare price negotiations were unveiled. While there were few surprises in the selection, as industry observers had largely anticipated the choices, the implications for the pharmaceutical giants are unsubstantial as many of the drugs are close to patent expiry.

There is likely to be increased demand to acquire innovative early-stage and revenue growth biotech companies as larger pharmaceutical counterparts seek to mitigate revenue declines stemming from looming patent expirations as well as capped revenues on some of their blockbuster products triggered by inclusion on the list for price negotiations by the IRA. The introduction of the IRA has therefore amplified the urgency for acquisitions in the burgeoning biotech sector.

GEARING

In its capacity as a closed-ended fund, the Company possesses the requisite authority to employ leverage, up to a maximum limit of 30% of NAV. The utilisation of gearing is made possible through a revolving loan facility amounting to £55m, incurring an interest rate that is presently set at 1.5% above the prevailing base rate. The Investment Managers actively and judiciously employ this gearing facility as a tactical tool, increasing its deployment when advantageous opportunities arise for investment in promising companies at fair valuations, thereby avoiding the necessity of divesting existing holdings to make new investments. Conversely, the geared exposure can be curtailed to mitigate the risk associated with unfavourable market conditions.

Throughout the course of the reporting period, the degree of gearing employed fluctuated within the range of 0% to 20% of NAV. These fluctuations were driven by the Investment Managers' assessments of market valuations and macro-economic conditions as well as by cash inflows generated through acquisitions of holdings in the Company's portfolio.

OUTLOOK

After experiencing remarkable highs in 2020 and 2021, the biotech industry faced significant challenges in recent years. However, there are compelling reasons for optimism as we move forward.

The NBI has demonstrated resilience by rebounding 20% from mid-2022 lows in dollar terms. Smaller biotech companies, though affected by rising interest rates, continue to present appealing valuations, offering unique investment opportunities.

The confluence of rising interest rates and macroeconomic conditions, along with evolving industry dynamics related to the FTC and the Inflation Reduction Act, has created headwinds for the biotech sector. However, it is noteworthy that these challenges have had minimal impact on the valuations of innovative small and mid-cap biotech companies which represented 51% of the Company's NAV at the end of August 2023.

The recent period of valuation adjustments has stimulated increased M&A activity within the industry. We anticipate this trend to persist. Biotechnology continues to display robust innovation, boasting strong numbers of drug approvals and increasing numbers of clinical trials. Notably, emerging modalities such as gene and cell therapies hold transformative potential for addressing significant unmet medical needs across various diseases.

In conclusion, the biotech industry stands resilient and forward-looking. Increasing demand for high quality therapies, M&A activities, productivity improvements through consolidation, sustained innovation, and the allure of undervalued companies in this dynamic landscape contribute to a promising outlook for biotech investments. As we navigate these opportunities, our commitment to delivering value to our investors remains steadfast. We look forward to a future marked by growth and transformation in the biotech sector.

SV HEALTH MANAGERS LLP

Ailsa Craig

Marek Poszepczynski

6 November 2023

INVESTMENT MANAGERS

The investment team has a breadth of experience across both public and private investments. The majority of the Company's investments made are in the public markets, though private or venture capital investments are also made through a relationship with SV Health Managers LLP which provides unique deal flow for private company investment opportunities.

AILSA CRAIG

Investment Manager

Ailsa joined SV Health in 2006 and is an Investment Manager for the Company. Ailsa has a BSc (Hons) in Biology from the University of Manchester. She was awarded the IMC in 2002 and a Securities Institute Diploma in 2007.

MAREK POSZEPCZYNSKI

Investment Manager

Marek joined SV Health in 2014 and is an Investment Manager for the Company. Marek has an MSc in Biochemistry and an MSc in Business Management from the Royal Institute of Technology, Stockholm.

KATE BINGHAM

Managing Partner SV

Kate joined SV Health in 1991 and is the Investment Manager for the unquoted assets of the Company. Kate is one of the SV Health's Managing Partners, has a first class degree in Biochemistry from Oxford University, and graduated from Harvard Business School with an MBA.

HOUMAN ASHRAFIAN

Managing Partner SV

Houman joined SV in 2016 and represents the team of investment professionals managing the unquoted portfolio. Houman is currently Head of Experimental Therapeutics at the University of Oxford and an Honorary Consultant Cardiologist, John Radcliffe Hospital, Oxford. Houman left SV Health Managers LLP in September 2023 to join Sanofi as Head of R&D.

QUOTED INVESTMENTS

UNQUOTED INVESTMENTS

INVESTMENTS HELD THROUGH A VENTURE FUND

EXITED INVESTMENTS WITH CONTINGENT MILESTONES

Exited unquoted companies for which the Company retains rights to receive future contingent performance-based payments are shown below.

DIRECTLY-HELD UNQUOTED INVESTMENTS

Directly-held unquoted investments held by the Company are shown below:

Investments in unquoted companies that have previously been written down to nil net book value, but where ownership in the company is retained, are not disclosed in this table.

STRATEGIC REVIEW

The Board presents its Strategic Review for the Company for the year ended 31 August 2023.

BUSINESS MODEL

The Company is an investment company as defined in Section 833 of the Companies Act 2006 (the Act) and its Ordinary shares are listed and traded on the main market of the London Stock Exchange. The Company is incorporated in England and Wales as a public limited company and is domiciled in the UK.

LIFE OF THE COMPANY

The Company's Articles of Association provide for the Directors to put forward a proposal for the continuation of the Company at the AGM at two-yearly intervals. The last continuation vote was held at the AGM on 8 December 2021 and was passed on a show of hands. Proxy votes cast in respect of the vote were 11,761,047 (99.96%) in favour, 4,321 (0.04%) against and 1,408 withheld. The next continuation vote will be put to shareholders at the forthcoming AGM to be held on 12 December 2023.

INVESTMENT OBJECTIVE AND POLICY

The Company's investment objective is to achieve long-term capital growth by investing in biotechnology and other life sciences companies.

The Company will seek to achieve its objective by investing in a diversified portfolio of companies which may be quoted or unquoted and whose shares are considered to have good growth prospects, with suitably experienced management and strong potential upside through the development and/or commercialisation of a product, device or enabling technology. Investments may also be made in related sectors such as medical devices and healthcare services. While the Company's portfolio is held as one pool of assets, for operational purposes there is a quoted portfolio and an unquoted portfolio. The portfolio is diversified by geography, industry sub-sector and investment size with no single investment in a company normally accounting for more than 15% of the portfolio at the time of investment.

The portfolio is split between large, mid and small-capitalisation companies, primarily quoted on stock exchanges in North America, where the most established and commercial biotechnology and other life sciences companies operating in related sectors are based, though investments may also be made in Europe, Asia and Australia. Investments may also be made into unquoted companies and into funds not quoted on a stock exchange, including venture capital funds. This may include funds managed by the Fund Manager and/or members of its group. The primary purpose of investment in unquoted funds will be to gain exposure to unquoted companies.

The Company may invest through equities, index-linked securities and debt securities, cash deposits, money market instruments and foreign currency exchange transactions. Forward or derivative transactions are not used by the Company.

The Company may borrow from time to time to exploit specific investment opportunities, rather than to apply long-term structural gearing to the Company's portfolio of investments.

INVESTMENT RESTRICTIONS

The Company observes the following investment restrictions:

? The Company will invest primarily in biotechnology and other life science companies that are either quoted or unquoted.

? The Company will normally invest no more than 15% in aggregate, of the value of its gross assets in any one individual company at the time of acquisition.

? The great majority of the Company's assets will be invested in the quoted biotechnology sector with a global mandate across the entire spectrum of quoted companies. The weighting of investment in unquoted companies will vary according to the attractiveness of the opportunities identified.

? Gearing is restricted to 30% of NAV.

? The Company will invest no more than 15% in aggregate, of the value of its gross assets in other closed-ended investment companies quoted on the London Stock Exchange or any other stock exchanges.

No material change will be made to the investment objective or policy without the approval of shareholders by ordinary resolution.

INVESTMENT STRATEGY

The Company has delegated responsibility for day-to-day investment of its assets to the Alternative Investment Fund Manager, SV Health Managers LLP. Consistent with the Company's investment policy the Fund Manager makes the majority of its investments in biotechnology companies focused on drug discovery and development. Investments are also made in related sectors such as medical devices or healthcare services.

The Investment Managers use a bottom-up approach to stock selection focused on assessing the fundamentals of each investment. The universe of possible investments is assessed and reduced to take into account a number of key criteria such as disease area, target market, unmet medical need, management team, stock liquidity, market capitalisation, product portfolio and competition. The risk/reward of each investment is assessed on its own merits.

The Company has a £55m loan facility in place with the Northern Trust Company which provides the Company with funds to take advantage of investment opportunities that occur from time to time on occasions when the portfolio is otherwise fully invested. As at 31 August 2023, £32.5m was drawn down against this facility.

PERFORMANCE

An outline of performance, market background, investment activity and portfolio strategy during the year under review, as well as the outlook, is provided in the Chair's Statement on pages 7 to 9 and the Fund Manager's Review on pages 10 to 20.

KEY PERFORMANCE INDICATORS (KPIs)

The Board meets regularly to review the performance of the Company and its shares. The Board uses the following KPIs to help assess the Company's progress and its success at meeting its investment objective. For detailed calculations, please refer to the APMs on pages 112 and 113.

PRINCIPAL AND EMERGING RISKS

The Board considers that the risks detailed below are the principal risks facing the Company currently, along with the risks detailed in note 23 to the financial statements. These are the risks that could affect the ability of the Company to deliver its strategy. The Board confirms that the principal risks of the Company, including those which would threaten its business model and future performance, have been robustly assessed throughout the year ended 31August 2023. In making this assessment the Board has taken into account the emerging risks such as the tensions between the US and China, conflicts in Ukraine and the Middle East, longer term climate change risk, cyber security risk and the impact of artificial intelligence on the investment industry and confirms that processes are in place to continue this assessment.

The Audit Committee takes responsibility for overseeing the effectiveness of risk management and internal control systems on behalf of the Board and advises the Board on the principal risks facing its business. The Audit Committee uses a framework of key risks which affect its business and related internal controls designed to enable the Directors to take steps to mitigate these risks as appropriate; the Company's risks have been divided into the following risk categories:

? Strategic/Performance

? Political

? Investment related

? Operational and service provider

? Tax legal and regulatory

A detailed Risk Map is reviewed on a bi-annual basis. A summary of the Directors' review of internal controls, including the review of the Risk Map, is set out in the Corporate Governance Statement on page 48.

The principal risks detailed below are assessed by the Audit Committee, which receives regular reports from its main third party service providers on their own internal control processes.

VIABILITY STATEMENT

In accordance with Provision 31 of the UK Corporate Governance Code 2018, the Audit Committee has assessed the prospects of the Company over a five year period. This is considered to be an appropriate period given the long-term nature of investment and the expected maturity period of the unquoted portfolio.

The Company's current position and prospects are set out in the Chair's Statement, the Fund Manager's Review and the Strategic Report.

In its assessment of the viability of the Company, the Audit Committee has considered each of the Company's principal risks and uncertainties and how these are managed. These risks and uncertainties are detailed in this Strategic Review on pages 27 to 29 and the effectiveness of the Company's risk management and internal control systems are detailed on page 48.

The Audit Committee has reviewed the potential impact of emerging risks, in particular, heightened geopolitical risk as a result of the resurgence of the conflict in the Middle East, and is comfortable that any potential risk is suitably mitigated.

The Audit Committee has considered the income and expenditure projections. Included within these projections are key assumptions such as expected NAV growth and expenses to be incurred by the Company. In order to test the reliability of the income and expenditure projections, the key assumptions were stressed to include scenarios of a decline in NAV and a 10% year on year increase in expenses. The Audit Committee is satisfied that the income and expenditure projections appear reasonable.

The Audit Committee has also considered the impact of the year end gearing position. As at 31 August 2023, the Company had drawn £32.5m of its £55m loan facility. The Audit Committee is satisfied that the Company's investments comprise readily realisable securities which can be sold to meet funding requirements, if necessary.

As at 31 August 2023 the Company had total undrawn commitments to unquoted funds, namely SV BCOF and SV Fund VI, of £21.8m. With historical practice in mind, the Audit Committee considers it highly improbable that the full undrawn commitments would be called together at one time. However, in an extreme scenario, it is again satisfied that the Company's investments comprise readily realisable securities which can be sold to meet funding requirements, if necessary.

The Board is mindful that the biennial continuation vote will be put to shareholders at the AGM in December 2023 following a change of AIFM. As noted in the Chair's Statement we have consulted with many of our shareholders during the year and have received positive feedback. In particular, many of our major shareholders have informed us that they are pleased with the impending move to Schroders, and the continuity of the existing mandate and the existing investment management team. The Board strongly recommends that shareholders vote in favour of the continuation of the Company and has a reasonable expectation that the continuation vote will be passed.

In light of these considerations and based upon the Company's processes for evaluating the composition of the investment portfolio, monitoring the ongoing costs of the Company, the discount to the NAV, the level of gearing, and taking into account the Company's current position and principal risks and uncertainties, the Board, based on a recommendation by the Audit Committee, considers that there is a reasonable expectation that the Company will continue to operate and meet its liabilities, as they fall due over the next five years.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE POLICY (ESG)

The Board recognises that a responsible and proactive approach to ESG related factors can positively impact the performance and success of its portfolio companies and the Company. The Company outlined its ESG policy in its Annual Report for the year ended August 2021.

Its policy was adopted in October 2021, and since amended in February 2023 and aims to integrate consideration for ESG factors into the investment process, governance and choice of suppliers for the Company and to exert influence on portfolio companies and suppliers to consider ESG factors in their respective activities. The Company's Board also considers ESG factors in its choice of suppliers. The Company's ESG policy is available on its website.

All of the Company's investments and activities are aligned with UN Sustainable Development Goal number 3: 'Good Health and Well-being. Ensure healthy lives and promote well-being for all at all ages.' as well as six other goals. The Company is dedicated to investing in tomorrow's healthcare breakthroughs. The Company has invested in scientific development, medical innovation, and technologies across a wide spectrum of diseases with particular focus on areas of high unmet medical need. The Company also adheres to all six UN Principles for Responsible Investment (PRI) and supports all the Ten Principles of the UN Global Compact. Schroders, the Company's new AIFM from November 2023, is a signatory to the UN PRI and the UN Global Compact.

The Company uses data gathered by Sustainalytics to monitor the compliance of its quoted portfolio with an accepted set of ESG standards. The benefit of this service means that the Company has access to a detailed set of ESG data on the majority of the quoted biotech universe which not only facilitates ESG reporting and enables comparisons to benchmarks beyond the Company's own portfolio, but also enables the incorporation of ESG screening into its portfolio management process. In addition, the access to this data means that the Company's Investment Managers can more readily engage with portfolio companies with respect to areas in which Sustainalytics considers them to fall short of their peers. The Company continues to commit to screening and reporting on the ESG compliance of its top 10 quoted portfolio companies in aggregate on a semi-annual basis to coincide with the annual and interim period ends.

The screening of the biotech companies in the Company's unquoted portfolio takes place annually, carried out by the Fund Manager and depends on those companies completing its bespoke ESG screening questionnaire.

ESG Report

Suppliers: The Company requests its suppliers to provide ESG policies annually and 14 of the 22 suppliers shared their latest ESG Policies with the Company and ten (45%) have agreed to have links to their policies displayed on the Company's website. This is an improvement on 2022 when only 29% of suppliers agreed to have links to their policies displayed on the Company's website.

Portfolio companies: The Company has been delivering financial value to shareholders since 1994 whilst simultaneously creating a positive social impact by investing in companies that develop innovative treatments for patients suffering with unmet medical needs. The products developed by the companies in which the Company invests can radically change the way diseases are treated, bringing positive impact to patients and healthcare systems globally.

The Company's investment approach in relation to ESG is based on three pillars:

1. Thorough ESG diligence and investing for impact;

2. Meaningful engagement with portfolio companies; and

3. Reporting to shareholders.

The Board considers that focusing on the ESG compliance of its investments and engaging with the management of key portfolio companies has the potential to bring about positive change in its investment universe. In particular, the Company believes its potential to generate the greatest impact will generally be on its top ten quoted holdings where the Company's larger investment size gives it greater influence. The Board notes that ESG and sustainability concerns have become key considerations for many of its investors. The Board believes that through the Company's focus on ESG as an investor, it can help maximise its portfolio companies' positive impact whilst generating attractive investor returns.

Sustainalytics ranks the pharmaceutical and biotech industries in aggregate as relatively high risk in comparison to other industries. This is mainly driven by a combination of poor Quality and Safety scores (relating to drugs in clinical trials being found to be inefficacious or toxic), Business Ethics issues relating to drug pricing and availability and "Weak" management scores, relating, in the main, to poor disclosure or perceived failure to adequately mitigate the risks inherent in the industry. Arguably the Quality and Safety issues and Business Ethics issues are part and parcel of drug development and difficult for companies to avoid. Against that backdrop, it is unsurprising that in its industry report in October 2022, Sustainalytics rated over 55% of biotech companies as having Severe (14%) or High (42%) ESG Risk, with only 8% having Low ESG Risk.

In respect of the year ended 31 August 2023, we are pleased to report that one of the Company's top holdings was rated as Low ESG Risk which is in line with 8% for the industry as a whole and 50% of the Company's top ten quoted holdings were rated with a Medium ESG Risk Score compared with 36% for the industry as a whole. Four of the top ten quoted companies were categorised as High ESG Risk which is in line with the industry as a whole. None of the top 10 were in the Severe Risk category. All four of those categorised as High ESG risk had "Medium" Exposure scores which refers to the extent to which a company is exposed to different material ESG Issues, and none of them have been implicated in any significant ESG-related controversies. Two of them had Management scores categorised as "Weak". On a positive note, two of the High ESG Risk companies in the top 10 quoted companies are shown to be on a positive trajectory in comparison to their previous Sustainalytics screening.

The Investment Managers have closely examined the background behind the current ESG rankings of those companies categorised as High ESG Risk and established that the majority of the issues that have contributed to their High ESG Risk rating results from lack of disclosure. The Investment Managers will continue to engage with these companies over the coming months to ensure that the current disclosure is not concealing anything of concern, and to encourage them to adhere to best practice on disclosure. In the case of Vera Therapeutics below, for example, where the score for Management by Sustainalytics is "Weak", this relates to poor disclosure on certain key policies. The Investment Managers will engage with Vera about ensuring that these policies are in place and disclosed over the coming year.

The Company's Investment Managers actively engage with the management teams of their portfolio companies, and bring to light any issues uncovered in the screening process. For example, in the last financial year, the Investment Managers have discussed the timing of the release of clinical data with a portfolio company. It was felt that releasing clinical data too soon in the drug development process led to volatility in the share price as investors did not always understand the risks of early data being proven to be inconclusive later in the clinical trial process. As a further example, during the financial year, the Company's Investment Managers engaged with another portfolio company, which was rated as High Risk in 2022. The Investment Managers discussed the rating with the company's management and encouraged the company to be more transparent with respect to its procedures and policies which affect its ESG ranking. While the portfolio company is still rated High Risk in 2023, the rating has significantly improved bringing it to within a whisker of a Medium Risk rating.

With regards to the 2023 screening of SV's unquoted biotech investments, we can report the following. 12 portfolio companies completed the Fund Manager's proprietary questionnaire, compared to seven in 2022 and the results were analysed across the full portfolios of the SV funds in which the Company invests as well as the companies included being broken down into stages of development as determined by number of full time employees. The decision to do this additional layer of analysis was to provide portfolio companies with a better sense of their performance against companies of a similar size as well as to help the Fund Manager better tailor its support. The overall results were encouraging, particularly in the area of corporate governance and social policies, where companies have made good progress in matters such as having formal organisational structures and grievance resolution procedures in place, recycling lab plastics and measuring green house gas emissions. In the previous assessment, the early stage companies significantly lagged later stage companies and in this respect, an improvement was seen. Interestingly, the mid-sized companies outperformed the latest stage companies in a number of areas. The weakest performance was seen in environmental-related factors as is consistent with previous years and the Fund Manager is working to support portfolio companies in improving in these areas in a relevant way given the relative stage and size of these companies. Of note is that in October 2022, we are pleased to report that Sustainalytics ranked one of the companies held in SV BCOF as having the lowest ESG Risk rating in the industry.

The Company's Investment Managers continue to meet portfolio companies individually to make their own assessments and use Sustainalytics to assist with meaningful engagement on ESG matters with portfolio companies as well as highlighting any areas of concern. The Company continues to negatively screen companies which would exclude from potential investment any companies which engage in certain unsavoury practices, such as price gouging, involvement in the US opioid scandal, "me-too" drugs lacking innovation and anything that leads to negative effects on public health or wellbeing.

The Fund Manager uses a third-party platform, ProxyEdge from Broadridge Financial Solutions, to implement its voting policy, with the option to deviate from the recommended action when it differs from the Fund Manager's consideration of the standards for good corporate governance and management of environmental and social issues.

DIVERSITY AND GENDER REPRESENTATION ON THE BOARD

The Board's policy on diversity is to ensure that the Directors on the Board has a broad range of experience, skills and knowledge, with diversity of thinking, background and perspective. Appointments to the Board are made on merit against objective criteria, having regard to the benefits of diversity and the current and future needs of the business and the other factors set out in the UK Corporate Governance Code.

The composition of the Board exceeds the criteria of both the Hampton-Alexander Review on gender balance and the Parker Review on ethnic diversity. As at 31 August 2023, 60 per cent of the Board were female and 20 per cent were from an ethnic minority background.

The Board is mindful of the Listing Rules and amendments to the Disclosure Guidance and Transparency Rules, which came into effect for accounting periods starting on or after 1 April 2022 and will applied to the Company from the 2023 financial year.

The Board has demonstrated its support of the Financial Conduct Authority's aim to encourage increased transparency around diversity reporting at a Board and senior management level by proactively reporting on the requirements in this year's Report.

As at 31 August 2023, the Board had already met all three criteria set out in the Listing Rules, since 60 per cent of the Board members are women, one of which holds a senior position on the Board, and one Director is from an ethnic minority background. The Company collects the data used for the purposes of making this disclosure from Directors on a voluntary basis.

In accordance with Listing Rule 9 Annex 2.1, the following tables, in prescribed format, show the gender and ethnic background of the Directors at the date of this Report.

MODERN SLAVERY ACT 2015

As an investment trust, the Company does not provide goods or services in the normal course of business and does not have any customers or employees. All the Company's activities are outsourced to third parties and the Board considers the Company's supply chain to be low risk, in terms of engaging in activities which could be deemed modern slavery, as its suppliers are typically professional advisers and regulated entities. The investment portfolio companies that the Company invests in are high profile listed companies who have their own governing bodies to comply with the Modern Slavery Act 2015 or the equivalent in their country of domicile.

The Company does not fall within the scope of the Modern Slavery Act 2015. Accordingly, the Directors consider that the Company is not required to make any slavery or human trafficking statement under the Modern Slavery Act 2015.

ANTI-BRIBERY, CORRUPTION & TAX EVASION

The Company is committed to the practice of responsible behaviour and to complying with all laws, regulations and other requirements which govern the conduct of its activity. The Company is fully committed to instilling a strong anti-corruption culture and complying with anti-bribery legislation including, but not limited to, the Bribery Act 2014. Further, the Company has adopted a zero-tolerance approach to tax evasion and is committed to compliance with anti-tax evasion legislation, including but not limited to, the Criminal Finances Act 2017. This is consistent with the policies implemented by the Fund Manager and the Company expects its third party service providers to adopt the same standard of zero tolerance.

The Company has implemented a conflicts of interest policy to which the Directors must adhere. The Company is committed to acting with integrity and in the interests of shareholders.

GREENHOUSE GAS EMISSIONS

The Company has no greenhouse gas emissions to report from the operations of the Company and does not have responsibility for any other emissions producing sources or energy consumed reportable under the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 or the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, implementing the UK Government's policy on Streamlined Energy and Carbon Reporting. As an investment trust without employees, the Company is not required to report against the TCFD framework, however, understanding and managing climate-related risks and opportunities based on the TCFD´s recommendations is a fundamental part of the Company's investment approach.

SECTION 172 STATEMENT

The Companies (Miscellaneous Reporting) Regulations 2018 require Directors to explain more fully how they have discharged their duties under Section 172(1) of the Companies Act 2006. Each of the Directors is mindful of their duties under s172 to run the Company for the benefit of its shareholders, and in doing so, to take into account the long-term impact of any decisions on stakeholder relationships and the impact of the Company's activities on the environment whilst maintaining its reputation for high standards of business conduct at all times. This enhanced disclosure covers how the Board has engaged with and understands the views of stakeholders and how stakeholders' needs have been taken into account, the outcome of this engagement and the impact that it has had on the Board's decisions.

As the Company does not have any employees or customers beyond its Directors, the Board considers the groups mentioned in the following table as the key stakeholders of the Company. The reasons for this determination, and the Board's overarching approach to engagement, are set out in the following table.

The table below also sets out the key decisions taken by the Directors during the year under review.

Portfolio

The Chair's Statement on pages 7 to 9 and the Fund Manager's Review on pages 10 to 20 includes details of the Company's performance and portfolio activity during the year under review. The Strategic Report on pages 26 and 27 describes the investment strategy undertaken by the Fund Manager.

These factors around the portfolio and performance contribute to the long-term success of the Company and help inform investors so that they may make personal investment decisions.

Dividend

In accordance with the Dividend Policy approved by shareholders at the AGM held on Tuesday, 6 December 2022, two interim dividends of 14.0p and 14.2p per share were paid on 27 January and 25 August 2023, respectively.

Discount and Premium Management

Buying back shares can help to narrow the the discount of the share price to NAV. Issuing shares helps to provide liquidity in the Company's shares where there is sufficient demand. The Board keeps the discount management under review, and it continues to be the Board's view that this policy is in the interest of all shareholders. The Company bought back 1,544,826 of its own Ordinary shares during the year ended 31 August 2023, which has assisted in narrowing the discount. During the year the Company issued no Ordinary shares.

Changes to Board composition

Given Jim Horsburgh's planned departure at the Company's 2022 Annual General meeting, the Board begun the search for a new candidate to join the Board as a Non-executive Director. The Board agreed on a description of the role, skills and attributes based on a skills matrix and in an effort to achieve greater diversity, including that of gender. In September 2022, the Board engaged Trust Associates, an executive search firm, to help identify suitable candidates. Following an extensive search process, the Board is very pleased to welcome Gillian Elcock to the Board. The Board confirms that Trust Associates has no other connection to IBT.Gillian Elcock joined the Board in February this year and will be standing for election for the first time at this year's AGM.

CURRENT AND FUTURE DEVELOPMENTS

Details of the Company's developments during the year ended 31 August 2023, along with its prospects for the future are set out in the Chair's Statement on pages 7 to 9 and the Fund Manager's Review on pages 10 to 20.

By order of the Board

Link Company Matters Limited

Company Secretary

6 November 2023

DIRECTORS' BIOGRAPHIES

KATE CORNISH-BOWDEN

Chair

Kate Cornish-Bowden was appointed as a Non-executive Director of the Company on 19 May 2020 and was Senior Independent Director since 8 December 2021. She became Chair of the Board upon the conclusion of the Company's 2022 Annual General Meeting on 6 December 2022. Kate worked for Morgan Stanley Investment Management from 1992 to 2004 where she was a Managing Director, head of MSIM's global core equity business and head of the pharmaceuticals research team. Prior to joining Morgan Stanley, she worked for M&G Investment Management as a research analyst

Kate is currently a Non-executive Director of Finsbury Growth & Income Trust plc and CC Japan Income & Growth Trust plc, where she is also Audit Committee Chair. She is also a Non-executive Director of Schroder Oriental Income Fund Limited, however will be stepping down from her role on 17 November 2023, prior to IBT's move to Schroders.

Kate has previously held directorships of Scancell Holdings plc, Calculus VCT plc and Arcis Biotechnology Limited. She is a member of the Chartered Financial Analyst Institute (formerly AIIMR), holds an MBA and has completed the Financial Times Non-executive Director Diploma.

PATRICK MAGEE

Senior Independent Director

Patrick Magee was appointed as a Non- executive Director of the Company on 19 May 2020 and has been the Senior Independent Director since the conclusion of the 2022 Annual General Meeting on 6 December 2022.

Patrick joined the British Business Bank in 2014 and was its Chief Commercial Officer from 2017 to July 2022 and was an executive director on the Bank's Board. Before joining the British Business Bank in 2014, Patrick worked at the Shareholder Executive from June 2012 to October 2014. Prior to joining the Shareholder Executive, Patrick was a Managing Director of corporate finance at JP Morgan Cazenove, having worked at the predecessor firms for almost 18 years. Patrick has an MBA from Georgetown University, Washington DC and an LLB from Queen's University Belfast.

Patrick is currently a member of the Investment Committee at Queen's University, Belfast, and a Director of Edge Future Capital, Allica Bank and Power Roll Limited. He is also a Non-executive member of the NI Civil Service Board.

CAROLINE GULLIVER

Chair of the Audit Committee

Caroline Gulliver was appointed as a Non-executive Director of the Company on 1 April 2015 and as Chair of the Audit Committee on 13 July 2016. She spent a 25 year career with Ernst & Young LLP, from where she retired in 2012 to pursue other interests including Non-executive directorship positions. She is a Chartered Accountant with a background in the provision of audit and advisory services to the asset management industry, with a particular focus on investment trusts. She is also a Non-executive Director of JPMorgan Global Emerging Markets Income Trust plc and abrdn European Logistics Income plc. Caroline stepped down from her role as Non-executive Director and Audit and Management Engagement Committee Chair of Civitas Social Housing PLC in June 2023 when the company agreed to the terms of a private offer. Since August 2022, Caroline has been Trustee and Treasurer of Ukraine to Chilterns Charitable Incorporated Organisation.

GILLIAN ELCOCK

Gillian Elcock was appointed as a Non-executive Director of the Company on 1 February 2023. She is the founder of Denny Ellison, an independent investment research and training company, and was its Managing Director for ten years. Prior to this, she was an equity research analyst for several years at Putnam Investments and Insight Investment. She was named a finalist in the 'Investment Analyst of the Year' category of the Women in Investment Awards 2018.

Gillian is a Non-executive Director of Melrose Industries plc and STS Global Income & Growth Trust plc. She is also a member of the board of the CFA Society of the UK. She holds an MBA from the Harvard Business School and MEng and BSc degrees from the Massachusetts Institute of Technology.

PATRICK MAXWELL

Professor Patrick Maxwell was appointed as a Non-executive Director of the Company on 1 January 2022. He is currently Regius Professor of Physic and Head of the School of Clinical Medicine at the University of Cambridge. As a clinician scientist he has been centrally involved in a series of discoveries that have revealed how changes in oxygenation are sensed, and how genetic alterations cause kidney disease. Patrick is a Fellow of the Royal College of Physicians and the Academy of Medical Sciences, Director of Cambridge University Health Partners and a Non-Executive Director of Cambridge University Hospitals and Scottish Mortgage Investment Trust.

Patrick holds a BA from Oxford, MB BS from the University of London, D Phil from Oxford and is on the General Medical Council's Specialist Register for Nephrology and General (Internal) Medicine.

DIRECTORS' REPORT | Incorporating the Corporate Governance Statement

The Directors present their Report and the audited Financial Statements of the Company for the year ended 31 August 2023.

INFORMATION DISCLOSED IN THE STRATEGIC REPORT

The following matters required to be disclosed in this Report under the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 are covered in the Strategic Report on pages 26 to 37: the Company's status, investment objective and policy, investment strategy, investment restrictions, financial risk management, the Company's exposure to risks, a statement regarding the Company's greenhouse gas emissions and the current and future developments as well as important events effecting the Company since the year end.

PRINCIPAL ACTIVITIES AND PURPOSE

The principal activity and therefore the purpose of the Company is the making of investments in accordance with the investment objective and policy set out on page 26. The Board delegates investment management of the Company's portfolio to the Fund Manager. A description of the Company's activities and strategy during the year, as well as the outlook, is given in the Chair's Statement on pages 7 to 9; and the Fund Manager's Review on pages 10 to 20.

The current portfolio of the Company is such that its shares are eligible for inclusion in an ISA, and the Directors expect this eligibility to be maintained.

The Company currently conducts its affairs so that its shares can be recommended by Independent Financial Advisers in the UK to ordinary retail investors in accordance with the FCA Rules in relation to non-mainstream investment products and intends to continue to do so. The shares are excluded from the FCA's restrictions which apply to non-mainstream investment products because they are shares in an authorised investment trust.

RESULTS AND DIVIDENDS

The results for the year are shown in the Statement of Comprehensive Income on page 68. At the AGM held on 6 December 2022, shareholders approved the Company's dividend policy to pay an annual dividend, equivalent to 4% of the Company's NAV, calculated using the published NAV on the last day of the Company's preceding financial year, being 31 August 2022. Dividends are paid through two distributions in January and August of each year and are paid out of capital reserves.

Accordingly, the Board declared and paid two interim dividends during the year of 14.0 pence per Ordinary share for the first interim dividend and for 14.2 pence per Ordinary share for the second interim dividend (2022: 15.7 pence per Ordinary share in equal payments). These were paid on 27 January 2023 and 25 August 2023. Further, the Directors intend to pay Interim Dividends for the year ended 31 August 2023 in two tranches in January and August 2024.

In accordance with the Board's decision to seek shareholder approval of the Company's dividend policy at each AGM, a resolution to this effect has been included in the Notice of Meeting on page 105.

SHARE CAPITAL

At the AGM on 6 December 2022, shareholders gave approval for the Company to purchase up to 6,124,285 Ordinary shares of its own capital for cash, being 14.99% of the share capital in issue as at the date of the Notice of Meeting. During the year under review, 1,544,826 shares were repurchased by the Company. The Board considers that conducting share buybacks can help to manage the discount of its share price to NAV, therefore enhancing share price performance for existing shareholders. The positive effect of share buybacks on the Company's NAV during the year has been explained in the Chair's Statement on page 9 and in the Strategic Review on page 37. The Board regularly reviews the methods for managing the discount and these include the use of share buybacks, payment of dividends and marketing the Company to prospective investors.

Shareholders also provided approval for the Company to issue 4,132,834 Ordinary shares (excluding those from Treasury) with pre-emption rights disapplied. During the year, no Ordinary shares were re-issued from Treasury. The issued share capital of the Company is detailed in note 15 to the Financial Statements. The total number of Ordinary shares as at 3 November 2023 is 41,383,817.

DIRECTORS

All of the Directors as at 31 August 2023 held office throughout the year under review, with the exception of Gillian Elcock who was appointed to the Board on 1 February 2023. Jim Horsburgh retired as a Non-executive Director and Chair on 6 December 2022. The biographies of the Directors of the Company can be found on pages 38 and 39.

As indicated on page 46, all Directors are deemed by the Board to be independent in both character and judgement, and have performed their duties in an independent manner at all times. The independence of Directors will continue to be assessed on a case by case basis.

The Board recognises corporate governance best practice is for all Directors to be submitted for annual re-election. Accordingly, all Directors will be standing for re-election at the forthcoming AGM. Gillian Elcock will be standing for election for the first time since her initial appointment to the Board on 1 February 2023.

The Board has considered the position of each of the Directors as part of the performance evaluation, the process for which is explained in more detail on page 46. The Board has a broad range of relevant experience to contribute towards the Company's strategic priorities, including specialist understanding of the biotechnology and healthcare sectors, investment trust companies, fund management, venture capital market experience, accounting and auditing, as detailed in the Directors' biographies on pages 38 and 39. Further, the Board has concluded that each Director continues to demonstrate commitment to their role and provides a valuable contribution to the deliberations of the Board. The Board therefore recommends that shareholders vote in favour of the election of Gillian Elcock, and re-elections of Kate Cornish-Bowden, Caroline Gulliver, Patrick Magee and Patrick Maxwell at the forthcoming AGM.

DIRECTORS' AND OFFICERS' LIABILITY INSURANCE AND DIRECTORS' INDEMNITIES

Directors' and Officers' Liability Insurance cover was purchased by the Company in April 2023 and continues to be in force as at the date of this Report.

FUND MANAGER'S PERFORMANCE AND CONTRACTUAL ARRANGEMENTS

The Fund Manager is SV Health Managers LLP. The Board keeps the performance of the Fund Manager under continual review. The Management Engagement Committee conducts an annual review of the Fund Manager's performance and makes a recommendation to the Board about its continuing appointment. As announced in February 2023, SV Health Managers LLP decided to focus on its venture capital business and served notice of termination to IBT. As a result, the continued appointment of the Fund Manager was not recommended by the Committee. Effective November 2023, the Fund Manager and AIFM will transition to Schroders which will ensure the continuity of IBT's investment approach. The Board believes that Schroders will deliver positive long-term benefits for IBT and its shareholders.

The Fund Manager during the year under review, SV Health Managers LLP was entitled to a management fee payable of 0.9% per annum of the Company's NAV and to an annual performance fee which is calculated as follows:

? The portfolio consists of two pools: quoted and unquoted.

? The fee on the quoted pool is 10% of relative outperformance above the sterling-adjusted NBI plus a 0.5% hurdle.

? The fee on the unquoted pool, excluding unquoted funds, is 20% of net realised gains, taking into account any unrealised losses but not unrealised gains.

? There is no performance fee calculated on unquoted funds as the Fund Manager has carried interest in these funds.

The payment of the performance fee is subject to the following limits:

? The maximum performance fee in any one year is 2% of average net assets.

? Any underperformance of the quoted portfolio against the benchmark is carried forward for the current financial period plus two succeeding periods. Performance fees in excess of the performance fee cap are carried forward for the current financial period plus two succeeding periods and being offset against any subsequent underperformance before being paid out.

A performance fee of £514,000 (£418,000 quoted, £96,000 unquoted) was payable for the unquoted portfolio in respect of the year ended 31 August 2023 (31 August 2022: £nil quoted, £471,000 unquoted)). Please see the Chair's Statement on page 9 for further information.

The future fee arrangements in the new Investment Management Agreement with Schroders Unit Trust Limited are outlined on page 8.

ADMINISTRATION, DEPOSITARY AND COMPANY SECRETARIAL SERVICES

Fund administration and depositary services are provided by the Northern Trust Company, London branch. The Administration Agreement with the Northern Trust Company continues until terminated by either party on giving not less than 12 months' written notice. The Depositary Agreement with Northern Trust Investor Services Limited continues until terminated by either party on giving not less than 6 months written notice. The Depositary also retains the right to serve notice on the Company requiring it, at the expiry of a period of not less than 270 calendar days, to give notice to the FCA of a proposal to wind-up the affairs of the Company unless a replacement Depositary has been appointed before the end of that period.

Company Secretarial services are provided by Link Company Matters. The Agreement with Link Company Matters may be terminated by either party on giving not less than six months' written notice.

As referred to in the Chair's statement, as part of the move to Schroders, IBT has appointed HSBC Bank plc as Administrator, Custodian and Depositary with effect from 20 November 2023. Schroder Investment Management Limited will be appointed as Company Secretary from the same date.

COMPANIES ACT 2006 (THE ACT) DISCLOSURES

In accordance with Section 992 of the Act, the Directors disclose the following information:

The Company's capital structure is summarised on page 84, voting rights are summarised on page 84 and there are no restrictions on voting rights nor any agreement between holders of securities that result in restrictions on the transfer of securities or on voting rights.

There exists no securities carrying special rights with regard to the control of the Company.

The Company does not have an employees' share scheme.

The rules concerning the appointment and replacement of Directors, amendment to the Articles of Association and powers to issue or buyback the Company's shares are contained in the Articles of Association of the Company and the Act. There exists no agreements to which the Company is party that may affect its control following a takeover bid.

There exists no agreements between the Company and its Directors providing for compensation for loss of office that may occur because of a takeover bid.

GOING CONCERN

The Company has reviewed the guidance issued by the FRC in order to determine whether the going concern basis should be used in preparing the Financial Statements for the year ended 31 August 2023. In doing so, the Directors have considered the Company's borrowing requirements and covenants on existing borrowings; liquidity risk (see note 23.3 on page 93); the business environment and its impact on financial risk; the nature of the portfolio; and expenditure projections for the next 12 months. The Company's assets consist mainly of equity shares in companies listed on the NASDAQ stock exchange and in most circumstances are realisable within a short timescale.

The Company's Articles of Association require the Board to put a proposal for the continuation of the Company to shareholders on a biennial basis. The relevant resolution will therefore be included in the Notice of Meeting for the forthcoming AGM. The previous continuation vote in 2021 was passed with 99.96% of votes being in favour of continuation. The Board is mindful that this will be the first continuation vote following a change of AIFM and Fund Manager. As noted in the Chair's Statement we have consulted with many of our shareholders during the year and have received positive feedback with many informing us that they are pleased with the impending move to Schroders, and the continuity of the existing mandate and investment management team. The Board noted no adverse impact on share price or discount to NAV following announcement of the decision to appoint Schroders. As a result of this shareholder feedback the Board has a reasonable expectation that the continuation vote will be passed.

As a result, the Directors believe that it is appropriate to adopt the going concern basis in the preparation of the Financial Statements as, assuming a successful continuation vote, there are no material uncertainties related to events or conditions that may cast significant doubt about the Company's ability to continue as a going concern.

INDEPENDENT AUDITOR

Following a recommendation by the Audit Committee to the Board, resolutions to re-appoint PricewaterhouseCoopers LLP as Auditor and to authorise the Directors to determine their remuneration will be proposed at the forthcoming AGM. The Board considers that the Auditor remains independent and PricewaterhouseCoopers LLP have expressed their willingness to continue in office. For information relating to the effectiveness of the external audit process including information regarding the full external tender of audit services which took place in 2016, please see the Audit Committee Report on pages 54 to 56.

SUBSTANTIAL SHARE INTERESTS

As at the year ended 31 August 2023, the interests of 3% or more of the voting rights attaching to the Company's issued share capital, as notified to the Company in accordance with Chapter 5 of the FCA's Disclosure Guidance and Transparency Rules or ascertained by the Company were as follows:

The Company has not been informed of any changes to the above interests between 31 August 2023 and the date of this Report.

DISCLOSURE OF INFORMATION TO AUDITORS

In accordance with Section 418 of the Act, the Directors at the date of approval of this Report, as listed on pages 38 and 39, confirm that:

(a)so far as each Director is aware, there is no relevant audit information of which the Company's Auditors are unaware; and

(b)each Director has taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's Auditors are aware of that information.

AGM

The AGM will be held on Tuesday, 12 December 2023 at 3.00pm. Details of the business of the Meeting are set out in the Notice of Meeting on pages 105 and 106.

Pursuant to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, the Directors are required to provide detailed information, amongst others, on their powers in relation to the issuing or buying back of the Company's shares. As a result, the Board is seeking shareholder approval for the following seven items.

Continuation Vote

The Company's Articles of Association require the Board to put a proposal for the continuation of the Company to shareholders at two yearly intervals. The next continuation vote will be put to shareholders at the forthcoming AGM on 12 December 2023 as Resolution 12 and the Directors strongly recommend shareholders vote in favour.

Authority to allot shares

In order to provide maximum flexibility in the implementation of the Company's corporate strategy and premium management policy, the Directors wish to seek the power to allot new Ordinary shares for cash at a premium to the NAV at the forthcoming AGM.

Resolution 13 seeks authority for Directors to allot shares for cash up to a nominal amount of £1,021,575, equivalent to 4,086,300 Ordinary shares (being 10% of the issued Ordinary share capital of the Company (excluding Treasury shares) in issue on 3 November 2023 (being the latest practicable date prior to the publication of the Notice of Meeting)).

In addition, Resolution 14 seeks authority for Directors to allot further shares for cash up to a nominal amount of £1,021,575, equivalent to 4,086,300 Ordinary shares (being 10% of the issued Ordinary share capital of the Company (excluding Treasury shares) in issue on 3 November 2023 (being the latest practicable date prior to the publication of the Notice of Meeting)).

The Directors intend to use these authorities to issue new shares only if they believe it is in the best interests of the Company and is advantageous both to new investors and to the Company's existing shareholders to do so. New shares will only be issued at a price not less than the most recent published NAV per Ordinary share prior to such issue. Both authorities will expire at the conclusion of next year's AGM or 15 months from the date of passing of the resolutions, whichever is earlier, unless revoked, varied or renewed prior to that date.

Authority to disapply pre-emption rights

If new Ordinary shares are to be allotted for cash or Treasury shares are to be sold for cash, the Act requires such new shares to be offered first to existing holders of Ordinary shares. This entitlement is known as a "pre-emption right". In certain circumstances it is beneficial for the Directors to allot shares for cash or Treasury shares to be sold for cash otherwise than pro rata to existing shareholders and the Act provides for shareholders to give such power to the Directors by waiving their pre-emption rights.

Therefore, Resolution 15 will be proposed at the AGM which, if passed, will give the Directors power to disapply the statutory pre-emption rights of existing shareholders in relation to the issue of Ordinary shares for cash or the sale of Ordinary shares for cash out of Treasury up to an aggregate nominal amount of £1,021,575 equivalent to 4,086,300 Ordinary shares (being 10% of the Company's existing issued Ordinary share capital (excluding Treasury shares) on 3 November 2023 (being the latest practicable date prior to the publication of the Notice of Meeting)) such Ordinary shares to be allotted or sold at a price not less than the most recent published NAV per Ordinary share prior to such allotment or sale.

This authority will expire at the conclusion of next year's AGM or 15 months from the date of passing of the Resolution, whichever is earlier, unless revoked, varied or renewed prior to that date provided that the Company shall be entitled to make offers or agreements before the expiry of such authority which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities pursuant to any such offer or agreement as if this authority had not expired.

Resolution 16 is being proposed at the AGM in addition to Resolution 15 which, if passed, will give Directors power to disapply the statutory pre-emption rights of existing shareholders in relation to the issue of Ordinary shares for cash or the sale of Ordinary shares for cash out of Treasury, subject to the passing of Resolution 14, up to an aggregate nominal amount of £1,021,575 equivalent to 4,086,300 Ordinary shares (being 10% of the Company's existing issued Ordinary share capital (excluding Treasury shares) on 3 November 2023 (being the latest practicable date prior to the publication of the Notice of Meeting)) such Ordinary shares to be allotted or sold at a price not less than the most recent published NAV per Ordinary share prior to such allotment or sale. This authority will expire at the conclusion of next year's AGM or 15 months from the date of passing of the resolution, whichever is earlier, unless revoked, varied or renewed prior to that date provided that the Company shall be entitled to make offers or agreements before the expiry of such authority which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities pursuant to any such offer or agreement as if this authority had not expired.

The Board is aware that when combined the authorities sought under Resolutions 15 and 16 to disapply statutory pre-emption rights amount to 20% of the Company's issued Ordinary share capital is higher than the level recommended by best practice in accordance with The Investment Association Share Capital Management Guidelines and the Pre-emption Group's Statement of Principles on Disapplying Pre-emption Rights. However, the Board notes that the Prospectus Regulation allows for issuance for up to 20% of the Company's issued Ordinary share capital without the need for a prospectus and therefore, believes that the increased authority is justified and it would be in the best interest of shareholders to provide the extra flexibility to issue further shares in connection with the Company's corporate strategy and premium management policy.

The increased authority:

? would avoid the additional delay and expense of a further shareholder resolution, which would be required in the event that the initial 10% authority is granted and exhausted through the programme of tap issuance;

? is key to managing the share price premium to NAV, ensuring that shareholders are not forced to pay an excessive premium when adding to their holding; and

? facilitates enhanced scale for the Company, which would have the benefits of increasing the potential investor audience, enhancing trading liquidity and reducing the ongoing charges ratio.

During the year ended 31 August 2023, the Company did not re-issue any shares from Treasury.

Share buybacks and Treasury share authority

Shareholders approved authorities for the Company to repurchase up to 14.99% of its issued share capital (of which up to 10% of the issued share capital may be retained in Treasury for potential re-issue at any time) at the AGM held on Tuesday, 6 December 2022.

During the year ended 31 August 2023, the Company repurchased 1,544,826 Ordinary shares to be held in Treasury. The Directors continue to believe it is in the best interests of the Company and its shareholders to have a general authority for the Company to buyback its shares in the market for cancellation or holding in Treasury for potential subsequent re-issue. No shares held in Treasury will be re-issued at a discount to NAV. The authority to hold shares in Treasury is in addition to the power to buyback shares for immediate cancellation.

Accordingly, a special resolution, Resolution 17, to authorise the Company to purchase up to 14.99% of the share capital in issue at the date of this Report for cancellation or for holding in Treasury (up to a maximum of 10% of the share capital in issue at the date of this Report) will be proposed at the forthcoming AGM. Purchases will only be made if the Directors consider them to be for the benefit of the Company and its shareholders, taking into account relevant factors and circumstances at the time. The Company can confirm that purchases of Ordinary shares under the authority will only be made in the market for cash at prices below the prevailing NAV per share.

Notice of General Meetings

At last year's AGM, a special resolution was passed allowing General Meetings of the Company to be called on a minimum notice period as provided for in the Act. For meetings other than AGMs this is a period of 14 clear days. The Board believes that it should have the flexibility to convene General Meetings of the Company (other than AGMs) on 14 clear days' notice. The Board is therefore proposing a special resolution to approve 14 clear days as the minimum period of notice for all General Meetings of the Company other than AGMs. The authority, if given, will be effective until the Company's next AGM or until the expiry of 15 months from the date of the passing of the special resolution (whichever is earlier) and will only be used where it is merited by the purpose of the Meeting.

Recommendation

The Directors consider that passing the Resolutions proposed at the AGM will be in the best interests of shareholders as a whole and unanimously recommend that shareholders vote in favour of each of the resolutions as they intend to do so in respect of their own beneficial holdings.

Details of proxy votes received in respect of each Resolution are published on the Company's website following the meeting.

CORPORATE GOVERNANCE STATEMENT

CORPORATE GOVERNANCE

The Board is committed to high standards of corporate governance and has implemented a framework for corporate governance appropriate for an investment trust. The Board has considered the principles and recommendations of the AIC Code of Corporate Governance 2019 (AIC Code) which can be found on the AIC website www.theaic.co.uk. The AIC Code addresses the principles set out in the UK Corporate Governance Code as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company.

As an investment company most of the day-to-day responsibilities are delegated to outside parties as the Company has no employees and all the Directors are Non-executive Directors. Many of the provisions of the UK Corporate Governance Code are not directly applicable to the Company. The Board has determined that reporting against the AIC Code provides the most appropriate information to shareholders, therefore the report on corporate governance describes how the principles of the AIC Code have been applied.

STATEMENT OF COMPLIANCE

The Board considers that, for the year under review each Director, the Board and the Company have complied with the recommendations of the AIC Code in so far as they apply to the Company's business and with the relevant provisions of the UK Corporate Governance Code except as noted below:

? As all Directors are Non-executive Directors and day-to-day management has been contracted to third parties the Company does not have a separate role for a Chief Executive from that of Chair of the Board.

? As there are no Executive Directors the provisions of the UK Corporate Governance Code in respect of executive directors' remuneration are not relevant.

? The Company does not have an internal audit function as it relies on the systems of control operated by third party suppliers, in particular those of SV Health Managers LLP. The Board monitors these systems of internal control to provide assurance that they operate as intended.

This Corporate Governance Statement, together with the Management Report and Directors' Responsibilities Statement set out on page 45, indicate how the Company has applied the principles of good governance and meets internal control requirements.

ROLE OF THE CHAIR

The Chair is responsible for leading the Board, ensuring its effectiveness in all aspects of its role, and setting its agenda.

ROLE OF THE BOARD

The Board determines and monitors the Company's investment objective and policy, and considers its future strategic direction, ensuring itself that these and its culture is aligned; being collectively responsible for the long-term success of the Company. A schedule of matters specifically reserved for consideration and decision by the Board has been adopted. The Board is responsible for presenting a fair, balanced and understandable assessment of the Company's position and, where appropriate, future prospects in Annual and Half Yearly Financial Reports and other forms of public reporting. It monitors and reviews the shareholder base of the Company, marketing and shareholder communication strategies, and evaluates the performance of all service providers, with input from its Committees where appropriate. A procedure has been adopted for Directors, in the furtherance of their duties, to take independent professional advice at the expense of the Company, where appropriate. The Directors have access to the advice and services of the corporate Company Secretary through its appointed representative, who is responsible to the Board for, inter alia, ensuring that Board procedures are followed and that applicable rules and regulations are complied with. The appointment and removal of the Company Secretary is a matter for the whole Board.

CONFLICTS OF INTEREST

The Directors have declared any conflicts of interest to the Company Secretary, who maintains the Register of Directors' Conflicts of Interests. It is reviewed at each Board Meeting, and the Directors advise the Company Secretary as soon as they become aware of any new actual or potential conflicts of interests that would need to be considered and approved by the disinterested Directors.

In addition to chairing the Company, Kate Cornish-Bowden is also currently a Director of Schroder Oriental Income Fund Limited. In order to remain independent, Kate will be resigning from Schroder Oriental Income prior to IBT's move to Schroders.

BOARD COMPOSITION

The Board currently consists of five Non-executive Directors. The biographical details of each Director, including their length of service, are set out on pages 38 and 39.

The Board is satisfied that it is of sufficient size, with an appropriate balance of skills and experience, and that no individual or group of individuals is, or has been, in a position to dominate decision making. This is kept under continuous review by the Board as part of ongoing succession planning.

The Board recognises the objectives of the Davies Report to improve the performance of corporate boards by encouraging the appointment of the best people from a range of differing perspectives and backgrounds. However, it is not considered necessary, given the diverse skill set of the Board to have set targets in relation to diversity.

The Board has set a policy on tenure that, in normal circumstances, Directors will retire at the AGM in their 10th year of service. The Board is of the opinion that long service does not necessarily compromise the independence or contribution of Directors of investment trusts where continuity and experience can significantly benefit a board, a view supported by the AIC.

INDUCTION AND TRAINING

Upon appointment to the Board, Directors are provided with all the relevant information regarding the Company and their duties and responsibilities as a Director. They receive a formal and tailored induction, which is administered by the Company Secretary and the Fund Manager. Directors are provided, on a regular basis, with key information on the Board's policies, regulatory requirements and internal controls. Changes affecting Directors' responsibilities are advised to the Board as they arise and the Chair regularly reviews and agrees with each Director their training and development needs. Other advisers to the Company also prepare reports for the Board from time to time. In addition, Directors attend ad hoc seminars, conferences and other forums covering issues and developments relevant to both the investment trust and biotechnology industries.

BOARD EVALUATION

In line with best practice, the Board's effectiveness is reviewed on an annual basis through a formal performance evaluation, including an assessment of the Board and its Committees. An external evaluator conducts the review every third year, and in the two intervening years this is carried out by the Company Secretary to ensure continuity over the three-year cycle.

The review for the year ended 31 August 2023 was conducted by the Company Secretary, following an external performance review conducted by Lintstock Ltd in 2022.

The evaluation looked at several key areas, including the performance of the Board and its Committees, the effectiveness of the Board's oversight of the Fund Manager, investment strategy and performance, risk management, external relations and succession planning. The responses were then collated, analysed and presented to both the Nomination Committee and the Board in July 2023.

There were no significant issues arising from the evaluation process and it was agreed that the Board and its Committees were functioning effectively.

MEETINGS AND ATTENDANCE

The Board held five scheduled meetings in the financial year which were attended by all Directors entitled to attend. Additional meetings are arranged as required and regular contact between the Directors, the Fund Manager and the Company Secretary is maintained throughout the year. Representatives of the Fund Manager and the Company Secretary attend each Meeting and other advisers also attend when requested to do so by the Board.

A schedule of Directors' attendance at Board and Committee Meetings held during the financial year is set out above.

All Directors attended numerous additional ad hoc meetings during the year under review in connection with the change of fund manager.

The Board is satisfied that each of the Chair and the Non-executive Directors commit sufficient time to the affairs of the Company to fulfil his or her duties as Directors.

INFORMATION FLOWS

The Chair ensures that all Directors receive, in a timely manner, relevant management, regulatory and financial information and are provided, on a regular basis, with key information on the Company's policies, regulatory requirements and internal controls. The Board receives and considers reports regularly from the Fund Manager, the Company Secretary and other key advisers. Ad hoc reports and information are supplied to the Board as required.

COMMITTEES

The Board has delegated certain responsibilities and functions to three Committees, all of which operate under written terms of reference. Copies of the terms of reference for the Committees have been published on the Company's website. Committee membership is detailed on pages 46 and 47. Please refer to page 54 for the report on the work of the Audit Committee.

Nomination Committee

The Chair of the Board acts as Chair to the Nomination Committee which met once during the year ended 31 August 2023. The function of the Committee is to consider and make recommendations to the Board on its composition and balance, including identifying and nominating new Directors to the Board and proposing that existing Directors be re-elected.

Before considering new appointments, the Nomination Committee evaluates the balance of skills, experience, independence, and knowledge of the Board, and, in light of this evaluation, prepares a description of the roles and capabilities required for particular appointments. Directors' independence and diversity of the Board (including gender and ethnicity) is also considered. Newly appointed Directors are then assessed using the aforementioned criteria.

On those occasions when the Committee is reviewing the Chair, or considering a successor, the Nomination Committee is chaired by the Senior Independent Director or, in his absence, another Committee Member and the Chair abstains from discussions in this regard.

Management Engagement Committee

The Chair of the Board acts as Chair to the Management Engagement Committee which met once during the year ended 31 August 2023 and intends to meet annually in the future to review matters relating to the performance of the Company's third party service providers, including the Fund Manager, and to review the terms of their contractual arrangements with the Company, ensuring their continued competitiveness for shareholders.

ACCOUNTABILITY AND AUDIT

The Management Report and Directors' Responsibilities Statement in respect of the Financial Statements are on page 57 and a statement of going concern is set out in the Directors' Report on page 42. The Independent Auditors' Report can be found on pages 59 to 67 and the Audit Committee Report on pages 54 to 57.

INTERNAL CONTROL

The AIC Code requires the Board to conduct at least annually a review of the adequacy of the Company's systems of internal control and report to shareholders that it has done so. The Board has reviewed a detailed Risk Map identifying significant strategic, investment-related, operational and tax, legal and regulatory risks and emerging risks. It has adopted a monitoring system to ensure that risk management and all aspects of internal control are considered on a regular basis, and fully reviewed at least annually. The Board is satisfied that these tools permit it to review the effectiveness of the Company's internal controls and on that basis confirms that it has reviewed the effectiveness of the Company's risk management and internal control systems for the year under review, taking into account all matters leading up to the date of the approval of the Financial Statements.

The Board believes that the key risks identified and the implementation of an ongoing system to identify, evaluate and manage these risks are relevant to the Company's business as an investment trust. The ongoing risk assessment, which has been in place throughout the financial year and up to the date of this Report, includes consideration of the scope and quality of the systems of internal control. This includes ensuring regular communication of the results of monitoring by third parties to the Board, 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. There were no significant control failings or weaknesses identified during the course of the year and up to the date of this Report.

Although the Board believes that it has robust systems of internal control 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. The Company does not have an internal audit function or a whistleblowing policy as it employs no staff and delegates to third parties most of its operations. By the procedures set out above, the Board will continue to monitor its system of internal control in accordance with the FRC's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting and will continue to take steps to embed the system of internal control and risk management into the operations of the Company. In doing so, the Audit Committee will review at least annually whether a function equivalent to an internal audit is needed. During the course of its review of the systems of internal control, the Board has not identified nor has it been advised of any findings or weakness which it has determined to be significant.

Certain information is required to be included in the Annual Financial Report by Listing Rule 9.8.4. The necessary details are included in the Report, and if not shown, the requirement is not applicable to the Company.

DIRECTORS' DUTIES

The Board believes that it has acted in the way that they consider in good faith would be most likely to promote the success of the Company for the benefit of its Members (having regard to the matters set out in Section 172(1)(a)-(f) of the Act) in the principal decisions taken by the Board during the year. The Section 172 Statement on pages 34 to 36 of the Strategic Review sets out further details on how the Directors had regard to its stakeholders in its principal decisions during the year.

On behalf of the Board

INTERNATIONAL BIOTECHNOLOGY TRUST PLC

KATE CORNISH-BOWDEN | Chair

6 November 2023

REPORT ON DIRECTORS' REMUNERATION

INTRODUCTION

This Report is submitted in accordance with Sections 420 to 422 of the Act and it also meets the relevant Listing Rules of the FCA and describes how the Board has applied the principles relating to Directors' remuneration.

The Company's Auditor is required to report on certain information contained within this Report. Where information set out below has been audited, it is indicated as such. The Auditors' opinion is included within the Independent Auditors' Report on pages 59 to 67.

DIRECTORS' REMUNERATION POLICY

The determination of the Directors' fees is a matter dealt with by the Board. As all the directors are independent Non-executive, a separate remuneration committee has not been established.

The Company's Articles of Association limit the aggregate fees payable to Directors to £250,000 per annum. Subject to this limit, it is the Company's policy to determine the level of Directors' fees having regard to the level of fees payable to non-executive directors in the industry, the role that individual Directors fulfil in respect of Board and Committee responsibilities and time committed to the Company's affairs in order to promote the long-term success of the Company. Fees payable to Directors should be sufficient to motivate and retain candidates of a high calibre to deliver the Company's investment objectives. No element of the Directors' remuneration is performance-related.

The Board considers any comments received from shareholders on the remuneration policy on an ongoing basis and if appropriate, takes these into consideration when reviewing remuneration.

All Directors have a Letter of Appointment with the Company. The Letters of Appointment are available for inspection at the Company's registered office during normal business hours and at the location of the AGM for at least 15 minutes prior to and during the meeting. Directors do not have service contracts with the Company and no compensation is payable to Directors on leaving office. It is the intention of the Board that this policy will continue to apply in the forthcoming and subsequent financial years.

All Directors are appointed for an initial term covering the period from the date of their appointment until the first AGM, thereafter they are required to retire by rotation at least every three years in accordance with the Company's Articles of Association. The Board recognises corporate governance best practice is for all Directors to be submitted for annual re-election. Accordingly, all Directors stand for re-election annually.

Following the performance evaluation carried out each year, the Board considers whether it is appropriate for each Director to seek re-election. When recommending whether an individual Director should seek re-election, the Board will take into account the ongoing recommendations of the AIC Code, including the need to refresh the Board and its Committees.

The component parts of the Directors' Remuneration are set out in the table below:

Component parts of the Directors' remuneration

ANNUAL REPORT ON DIRECTORS' REMUNERATION

This Report sets out how the Directors' Remuneration Policy was implemented during the year ended 31 August 2023. Directors' fees were last reviewed by the Board in April 2023 and was examined alongside the Directors' Remuneration Policy.

During the year under review, the Directors approved an annual fee increase of £2,000 each, with effect from 1 March 2023. Previous changes to Directors' remuneration were made in 2016 and 2017 when the additional fee for the Senior Independent Director was introduced with effect from 1 September 2017. The amounts, set out in the following table, were paid by the Company to the Directors for services in respect of the year ended 31 August 2023 and the previous financial year.

Single total figure of the remuneration for each Director (audited)

The Directors who served during the year under review received the following emoluments:

There were no taxable benefits claimed during the years ended 31 August 2023 and 31 August 2022.

Annual Percentage Change in Directors' Remuneration

The table below sets out the annual percentage change in the Directors' fees for the past four financial years:

Consideration of Matters Relating to Directors' Remuneration

In accordance with the Companies Act 2006, the Company is required to seek shareholder approval for its remuneration policy on a triennial basis. The Remuneration Policy was last approved by shareholders at the 2020 annual general meeting and accordingly, a resolution to approve the policy will be put to shareholders at this year's annual general meeting. There have been no changes to the provisions of the last approved policy. It is the intention of the Board that the following policy on remuneration, will continue to apply for the next three financial years to 31 August 2026, subject to shareholder approval at the annual general meeting held on 12 December 2023.

Expenditure by the Company on Directors' remuneration compared with distributions to shareholders

The graph and table below compare the remuneration paid to Directors and distributions to shareholders by way of share buybacks and dividends for the past five years. As a result of a lower NAV dividends paid to shareholders during the year decreased, compared to the level paid in 2022.

Directors' shareholdings (audited)

All shares are held beneficially. No Director has any material interest in any contract that is significant to the Company's business.

Neither the Company's Articles of Association nor the Directors' Letters of Appointment require any Director to own shares in the Company.

PERFORMANCE GRAPH

The performance graph below charts the cumulative share price total return to shareholders since 31 August 2013 compared to that of the NBI. The data has been rebased to 100 at 31 August 2013 (the start of the period covered by the graph).

STATEMENT OF IMPLEMENTATION OF DIRECTORS' REMUNERATION POLICY

The Board does not envisage that there will be any significant changes to the implementation of the Directors' Remuneration Policy during the current financial year compared to how it was implemented during the year ended 31 August 2023.

ANNUAL STATEMENT

On behalf of the Board and in accordance with Part 2 of Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulation 2013, I, as Chair of the Board, confirm that the above Directors' Remuneration Annual Report summarises, as applicable, for the year ended 31 August 2023:

(a) the major decisions on Directors' remuneration;

(b) any substantial changes relating to Directors' remuneration made during the year; and

(c) the context in which those changes occurred and decisions taken.

SHAREHOLDER APPROVAL

Shareholders will be asked to approve the Annual Report on Directors' Remuneration annually by an advisory vote and an ordinary resolution to approve the Report will be put to shareholders at the forthcoming AGM. In addition, shareholders will be asked to approve the Directors' Remuneration Policy, which is subject to a binding shareholder vote, on a three-yearly basis. Any changes to this policy would also require shareholder approval. The Directors' Remuneration Policy was last approved at the AGM held on 15 December 2020 and accordingly, an ordinary resolution will be put to shareholders at the annual general meeting held on 12 December 2023.

At the AGM held on 15 December 2020, votes cast (including the votes cast at the Chair's discretion) in respect of the Directors' Remuneration Policy were 10,102,858 (95.91%) in favour, 430,305 (4.09%) against and 32,132 votes withheld.

At the AGM held on 6 December 2022, votes cast (including the votes cast at the Chair's discretion) in respect of the Annual Report on Directors' Remuneration were 13,467,767 (99.71%) in favour, 39,498 (0.29%) against and 16,904 votes withheld.

RECOMMENDATION

The Board considers the resolutions to be proposed at the forthcoming AGM in the best interests of the Company and shareholders as a whole. Accordingly, the Directors unanimously recommend to shareholders that they vote in favour of the resolution, as they intend to do so in respect of their own beneficial holdings.

On behalf of the Board

KATE CORNISH-BOWDEN | Chair

6 November 2023

AUDIT COMMITTEE REPORT

COMPOSITION AND MEETINGS OF THE AUDIT COMMITTEE

The Audit Committee is chaired by Caroline Gulliver. Given the size of the Board, it is considered both proportionate and practical for all Directors, including the Chair of the Company (who was independent on appointment), to be members. All members of the Committee are independent and have competence relevant to the sector as a result of their current or recent employment in financial services and other industries. As the Chair of the Committee, Caroline Gulliver has relevant and recent financial experience in financial services as a Chartered Accountant with a background in the provision of audit and advisory services to the asset management industry, with a particular focus on investment trusts. All the Committee members have extensive experience working in financial services. The biographies of each of the Committee Members are shown on pages 38 to 39.

The Audit Committee met three times during the year ended 31 August 2023 and reported its findings to the Board on the matters described below after each Meeting. The Company's Auditor is invited to attend meetings as necessary as well as representatives of the Fund Manager.

THE ROLE OF THE COMMITTEE

The Audit Committee operates under written terms of reference which are reviewed annually and are available on the Company's website. The process in respect of the evaluation of the Audit Committee's performance is disclosed on pages 46 and 47.

The Audit Committee provides a forum through which the Company's external Auditor reports to the Board. The main responsibilities of the Audit Committee include:

? Monitoring the integrity of the Company's Annual and Half Yearly Reports and appropriateness of its accounting policies.

? Reviewing the internal control systems and the risks to which the Company is exposed.

? Making recommendations to the Board on whether the Company's Annual Report, when taken as a whole, is fair, balanced and understandable and provides shareholders with the information they need to assess the Company's business model, strategy, position and performance.

? Making recommendations to the Board regarding the appointment of the external Auditor, its independence and the objectivity and effectiveness of the audit process.

? Monitoring any non-audit services being provided to the Company by its external Auditor.

? Consideration of the need for the Company to have its own Internal Audit function.

EFFECTIVENESS OF THE EXTERNAL AUDIT PROCESS AND AUDITOR INDEPENDENCE

The Audit Committee annually reviews the performance of PricewaterhouseCoopers LLP, the Company's external Auditor and discusses its effectiveness with representatives of the Fund Manager, who work closely with the Auditor during the annual audit process. As part of this review, the Audit Committee takes into consideration the qualifications, expertise and resources, and independence of the external Auditor and the effectiveness of the external audit process, which includes a report from the external Auditor on its own internal quality procedures. The FRCs Audit Quality Inspection Report on the audits carried out by PricewaterhouseCoopers LLP was also considered by the Audit Committee. The Auditor attends the Audit Committee meeting at which the Annual Report is considered in order to present its report and have the opportunity to meet privately with the Audit Committee members without representatives of the Fund Manager present.

Details of the amounts paid to the external auditor during the financial year under review, for audit services, are set out in note 5 to the Financial Statements on page 78. The Audit Committee annually monitors the non-audit services provided to the Company and has developed a formal policy to ensure that such services do not impair the independence or objectivity of the Auditors. No non-audit services were provided during the year under review. Following its review, the Audit Committee remains satisfied with the effectiveness of the audit provided and that the Auditor remains independent.

AUDITOR APPOINTMENT AND TENURE

The Company must also comply with UK Competition and Market Authority rules, which require the external audit contract to be put out to tender at least every 10 years, with the proviso that no single firm may serve as the Company's external auditor for a period exceeding 20 years. PricewaterhouseCoopers LLP was initially appointed in 2007 and accordingly, the Company conducted a tender of audit services in 2016 in respect of the ongoing audits. Following recommendation by the Audit Committee, the Board decided to retain PricewaterhouseCoopers LLP as Auditor for the Company. Following a review of the Auditors' performance, as described above, the Audit Committee recommends the re-appointment of the Auditor at the forthcoming AGM.

The Auditor is required to rotate the audit partner every five years and this is the third year for which Colleen Local has served as audit partner.

SIGNIFICANT ISSUES CONSIDERED WITH RESPECT TO THE ANNUAL REPORT

INTERNAL AUDIT

The Audit Committee has considered the requirement for the Company to have an internal audit function pursuant to provisions 25 and 26 of the UK Code. It was deemed unnecessary for the Company to have its own internal audit function due to:

? The Board delegates its main functions to third-party service providers, who have their own internal audit functions and established internal controls frameworks which provide reasonable assurance on the effectiveness of the internal controls operated on behalf of their clients.

? The Fund Manager reports on compliance within the terms of its delegated authority under the Investment Management Agreement on a quarterly basis.

? The Company Secretary also reports any breaches of law and regulation as and when they arose.

? In the last two financial years, when reviewing the system of internal controls, the Audit Committee had not identified nor been advised of any failings or weaknesses which it had determined to be significant.

CONCLUSIONS WITH RESPECT TO THE ANNUAL REPORT

The production and the external audit of the Company's Annual Report is an intricate process, involving a number of parties. The Audit Committee has reviewed the internal controls in place at each of the third party service providers in order to gain comfort over the accuracy of the Company's financial records. Having received the Auditors' Report on the results of the annual audit and having taken all available information into consideration and having discussed the content of the Annual Report with the AIFM, Fund Manager, Company Secretary and other third party service providers, the Audit Committee has concluded that the Annual Report for the year ended 31 August 2023, taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy and has reported these findings to the Board. The Board's conclusions in this respect are set out on page 57. The Board was made fully aware of any significant financial reporting issues and judgements made in connection with the preparation of the Financial Statements.

CAROLINE GULLIVER | Chair of the Audit Committee

6 November 2023

MANAGEMENT REPORT AND DIRECTORS' RESPONSIBILITIES STATEMENT

MANAGEMENT REPORT

Listed companies are required by the FCA's Disclosure Guidance and Transparency Rules (the Rules) to include a management report in their Financial Statements. The information required to be included in the management report for the purposes of the Rules is included in the Strategic Report on pages 27 to 37 inclusive (together with the sections of the Annual Report incorporated by reference) and the Directors' Report on pages 40 to 48. Therefore, a separate management report has not been included.

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and the 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 ("IFRS").

Under company law, Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing 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 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 also 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 Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

DIRECTORS' CONFIRMATIONS

Having taken advice from the Audit Committee the Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the Directors' Report confirm that, to the best of their knowledge:

? the Company 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; and

? the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

The Annual Report is published on www.ibtplc.com which is currently maintained by SV Health Managers LLP. The maintenance and integrity of the website is, so far as it relates to the Company, the responsibility of SV Health Managers LLP. The work carried out by the Auditors does not involve consideration of the maintenance and integrity of this website and accordingly, the Auditors accepts no responsibility for any changes that have occurred to the Annual Report since it was initially presented on the website. Visitors to the website need to be aware that legislation in the UK governing the preparation and dissemination of the Annual Report may differ from legislation in their home jurisdiction.

This Statement of Directors' Responsibilities was approved by the Board and signed on its behalf by:

KATE CORNISH-BOWDEN | Chair

6 November 2023

INDEPENDENT AUDITORS' REPORT

to the members of International Biotechnology Trust plc

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

OPINION

In our opinion, International Biotechnology Trust plc's financial statements:

? give a true and fair view of the state of the Company's affairs as at 31 August 2023 and of its profit and cash flows for the year then ended;

? have been properly prepared in accordance with UK-adopted international accounting standards; and

? have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Annual Report, which comprise: the Balance Sheet as at 31 August 2023; the Statement of Comprehensive Income, the Statement of Changes in Equity, and the Cash Flow Statement for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.

Our opinion is consistent with our reporting to the Audit Committee.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remained independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC's Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC's Ethical Standard were not provided.

We have provided no non-audit services to the Company in the period under audit.

OUR AUDIT APPROACH

Context

The Company is a standalone Investment Trust Company and engages SV Health Managers LLP (the Fund Manager) to manage its assets.

Overview

Audit scope

? We conducted our audit of the financial statements using information from Northern Trust (the Administrator) with whom the Directors have engaged to provide certain administrative functions.

? We tailored the scope of our audit taking into account the types of investments held by the Company, the involvement of the third parties referred to above, the accounting processes and controls, and the industry in which the Company operates.

? We obtained an understanding of the control environment in place at both the Fund Manager and the Administrator, and adopted a fully substantive testing approach using reports obtained from the Fund Manager and Administrator.

Key Audit Matters

? Valuation and existence of unquoted investments

? Valuation and existence of quoted investments

? Income from and gains on investments

? Ability to continue as a going concern - Continuation Vote

Materiality

? Overall materiality: £2,703,000 (2022: £2,800,000) based on approximately 1% of net assets.

? Performance materiality: £2,027,000 (2022: £2,100,000).

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.

Key audit matters

Key audit matters are those matters that, in the auditors' professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

This is not a complete list of all risks identified by our audit.

Ability to continue as a going concern - Continuation Vote is a new key audit matter this year. Otherwise, the key audit matters below are consistent with last year.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Company, the accounting processes and controls, and the industry in which it operates.

The Company is a standalone authorised, closed ended investment Company that has outsourced the management and safekeeping of its assets to the Fund Manager and the Custodian respectively. The Company's accounting is delegated to the Administrator who maintains the Company's accounting records and has implemented controls over those accounting records. We applied professional judgement to determine the extent of testing required over each balance in the financial statements and obtained our audit evidence which was substantive in nature from the Fund Manager and the Administrator.

The impact of climate risk on our audit

As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk on the Company's financial statements, and we remained alert when performing our audit procedures for any indicators of the impact of climate risk. Our procedures did not identify any material impact as a result of climate risk on the Company's financial statements.

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2022: 75%) of overall materiality, amounting to £2,027,000 (2022: £2,100,000) for the Company financial statements.

In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £135,000 (2022: £140,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

CONCLUSIONS RELATING TO GOING CONCERN

Our evaluation of the Directors' assessment of the Company's ability to continue to adopt the going concern basis of accounting included:

? evaluating the Directors' updated risk assessment and considering whether it addressed relevant threats, including market volatility cause by geopolitical events and wider macroeconomic uncertainty;

? obtaining evidence to support the key assumptions and forecasts driving the Directors' assessment. This included reviewing the Directors' assessment of the Company's financial position and forecasts, their assessment of liquidity and loan covenant compliance as well as their review of the operational resilience of the Company and oversight of key third party service providers;

? assessing the performance of the Company when compared to its stated performance comparator;

? assessing the premium/discount the Company's share price trades at compared to its net asset value per share; and

? challenging the Directors' assessment of going concern in relation to the passing of the continuation vote and obtaining audit evidence which supports their conclusion.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Company's ability to continue as a going concern.

In relation to the Directors' reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors' statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

REPORTING ON OTHER INFORMATION

The other information comprises all of the information in the Annual Report other than the financial statements and our auditors' report thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.

With respect to the Strategic report and Directors' Report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included.

Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below.

Strategic report and Directors' Report

In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors' Report for the year ended 31 August 2023 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.

In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic report and Directors' Report.

Directors' Remuneration

In our opinion, the part of the Report on Directors' Remuneration to be audited has been properly prepared in accordance with the Companies Act 2006.

CORPORATE GOVERNANCE STATEMENT

The Listing Rules require us to review the Directors' statements in relation to going concern, longer-term viability and that part of the corporate governance statement relating to the Company's compliance with the provisions of the UK Corporate Governance Code specified for our review. Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other information section of this report.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to:

? The Directors' confirmation that they have carried out a robust assessment of the emerging and principal risks;

? The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an explanation of how these are being managed or mitigated;

? The Directors' statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the Company's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;

? The Directors' explanation as to their assessment of the Company's prospects, the period this assessment covers and why the period is appropriate; and

? The Directors' statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Our review of the Directors' statement regarding the longer-term viability of the Company was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors' process supporting their statement; checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial statements and our knowledge and understanding of the Company and its environment obtained in the course of the audit.

In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:

? The Directors' statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for the members to assess the Company's position, performance, business model and strategy;

? The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and

? The section of the Annual Report describing the work of the Audit Committee.

We have nothing to report in respect of our responsibility to report when the Directors' statement relating to the Company's compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors.

RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT

Responsibilities of the Directors for the financial statements

As explained more fully in the Statement of Directors' responsibilities in respect of the Financial Statements, the Directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

Based on our understanding of the Company and industry, we identified that the principal risks of non-compliance with laws and regulations related to breaches of section 1158 of the Corporation Tax Act 2010, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006. We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to increase revenue (investment income and capital gains) or to increase net asset value and management bias in accounting estimates. Audit procedures performed by the engagement team included:

? enquiries with Fund Manager and the Audit Committee, including consideration of known or suspected instances of non-compliance with laws and regulation and fraud where applicable;

? reviewing relevant committee meeting minutes, including those of the Board and Audit Committee;

? assessment of the Company's compliance with the requirements of section 1158 of the Corporation Tax Act 2010, including recalculation of numerical aspects of the eligibility conditions;

? challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to the valuation of unquoted investments (see related key audit matter);

? identifying and testing journal entries, in particular a sample of manual year end journal entries posted during the preparation of the financial statements; and

? designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.

A further description of our responsibilities for the audit of the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors' report.

Use of this report

This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

OTHER REQUIRED REPORTING

Companies Act 2006 exception reporting

Under the Companies Act 2006 we are required to report to you if, in our opinion:

? we have not obtained all the information and explanations we require for our audit; or

? adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or

? certain disclosures of Directors' remuneration specified by law are not made; or

? the financial statements and the part of the Report on Directors' Remuneration to be audited are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Appointment

Following the recommendation of the Audit Committee, we were appointed by the Directors on 12 July 2007 to audit the financial statements for the year ended 31 August 2007 and subsequent financial periods. The period of total uninterrupted engagement is 17 years, covering the years ended 31 August 2007 to 31 August 2023.

Colleen Local (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

London

6 November 2023

STATEMENT OF COMPREHENSIVE INCOME