BIOG Biotech Growth Trust (the) Plc

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:

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:

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.