5 June 2024
The
Biotech Growth Trust PLC
Publication
of a circular and notice of general meeting
The
Biotech Growth Trust plc (the "Company"
or "BIOG")
has today published a circular with notice of general meeting in
connection with a proposed change to the Company's benchmark index
(the "Circular")
Background
It was
announced on 5 June 2024 as part of
the Company's annual results that, after discussion with OrbiMed
Capital LLC (the "Portfolio
Manager"), the
Board is proposing
that the benchmark index used for measuring the Company's
performance and so the entitlement (if any) of the Portfolio
Manager to a performance fee payable under the Portfolio Management
Agreement should be amended to reflect this.
Under the
Listing Rules this change to the benchmark index in the Portfolio
Management Agreement is a related party transaction and must
therefore be approved by Shareholders. The purpose of the Circular
is therefore to explain and provide the background to the proposed
change to the benchmark index (the "Benchmark
Index Change") and to
give notice of the General Meeting at which an ordinary resolution
will be proposed to approve the change.
The
Proposed Benchmark Index Change
The Board
is asking Shareholders to approve a change to the Index which is
used as the Benchmark for measuring the Company's performance and a
corresponding change to the definition of the "Index" in the
Portfolio Management Agreement.
The Index
is used as the benchmark against which the Board measures the
growth in the Company's net asset value (or "NAV")
since the appointment of the Portfolio Manager on 19 May 2005.
It is used
for calculating whether, after adjustment for any share issues or
buy-backs in the relevant calculation period and deduction of
outperformance fees paid in respect of previous calculation
periods, there has been outperformance against the Index as so
adjusted, which would entitle the Portfolio Manager to an
outperformance fee.
The
Company's investment objective is to seek capital appreciation
through investment in the worldwide biotechnology
sector.
The Index
used to measure performance against that objective is the NASDAQ
Biotechnology Index, which began on 1
November 1993 at a base value of 200.00 and is sterling
adjusted. The NASDAQ Biotechnology Index does not include any
reinvestment of cash distributions of index members.
On
25 September 2003, NASDAQ introduced
a refinement to the historic NASDAQ Biotechnology Index by creating
the NASDAQ Biotechnology Index Total Return. This index includes
reinvestment of all cash distributions of index members on the
ex-date.
In recent
years the Biotechnology industry as a whole and the constituents of
the NASDAQ Biotechnology Index have changed as the industry has
become more mature. This has seen an increase in the number of
Index constituents who pay a dividend, meaning that shareholders in
some of these Index companies now receive a total return comprising
both dividends and capital return.
While the
element of the Index's total return comprised of dividends is
currently modest and the Company itself is not receiving sufficient
dividend income to be required to pay a dividend under current
investment trust taxation rules, the Board believes this trend, in
which dividend income contributes to the total return earned from
the Index, is likely to increase.
The Board
therefore considers that it is appropriate to compare the Company's
NAV total return with the NASDAQ Biotechnology Index Total Return
(net of withholding tax and sterling adjusted) and that this is the
correct index to incentivise the Portfolio Manager to
outperform.
If the
Benchmark Index Change is approved at the General Meeting, it would
take effect from 30 September 2024,
being the first quarterly calculation date for the performance fee
after the General Meeting.
The
Company's NAV per Ordinary Share total return during the period
1 April 2021 to 31 March 2024 (31 March
2021 being the last date as at which a performance fee was
payable) was -25.4%, as compared with the NASDAQ Biotechnology
Index Total Return (net of withholding tax and sterling adjusted)
of 4.2%, whereas the NASDAQ Biotechnology Index (net of withholding
tax and sterling adjusted) for this period returned
2.5%.
The
Company's non-annualised performance as compared with both indices
is shown below:
|
1
year
|
3
years
|
5
years
|
NASDAQ
Biotechnology Index (Capital Only)
|
5.0%
|
2.5%
|
29.8%
|
NASDAQ
Biotechnology Index (Net, Total Return)
|
5.6%
|
4.2%
|
33.1%
|
BIOG NAV
Total Return
|
26.5%
|
-25.4%
|
37.1%
|
General
Meeting
Shareholder
approval for the Benchmark Index Change is being sought by the
Resolution to be proposed as an ordinary resolution at a General
Meeting to be held immediately after the conclusion of the
Company's Annual General Meeting on 18 July
2024. Notice of the General Meeting, including the full text
of the Resolution, is set out at the end of the
Circular.
Document
availability
The
Circular will shortly be available for inspection at the National
Storage Mechanism which is located at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
and on the
Company's website at
www.biotechgt.com. Terms
used and not defined in this announcement shall have the meanings
given to them in the Circular.
LEI:
549300Z41EP32MI2DN29
For
further information please contact:
Frostrow
Capital LLP
Company
Secretary
|
020 3709
8734
|
Winterflood
Securities Limited, Corporate Broker
Neil
Morgan
|
020 3100
0000
|
Disclaimers
The
information set out in this announcement is a summary of the
Circular.
Shareholders should
read the whole of the Circular when considering what action they
should take in connection with the General
Meeting.