International Biotechnology Trust : Interim Report & Accounts 2024

**Includes Management fees paid to SV Health Managers LLP ("SV Health") through the investment in SV Health Investor's Fund VI

("SV Fund VI") and SV Biotech Crossover Opportunities Fund ("SV BCOF") of £354,000 (28 February 2023: £428,000; 31 August 2023: £791,000).

Introduction Interim Management Report

Financial

Other Information

Dear Shareholders

I am pleased to report that the Company's NAV has again beaten the NASDAQ Biotechnology Index (with dividends reinvested) sterling adjusted (the "Reference Index") during the six-month period under review. The Company delivered a NAV total return of 11.2% per share, while the Reference Index rose by 8.2%. The share price total return per share was 8.7%, marginally ahead of the Reference Index, reflecting widening discounts across the sector.

More muted inflation data globally and increased confidence that the interest rate cycle has peaked, led to a change in investor appetite for risk towards the end of the calendar year, 2023. This has continued into the first quarter of 2024, and we have seen long awaited evidence of a nascent recovery in the biotechnology sector.

This is my first report to you since the Company transitioned to Schroders as Alternative Investment Fund Manager (the "Manager") in November last year, and I'm delighted to confirm that the integration of the new Manager arrangements has gone well. We received a positive endorsement of this strategic decision at the Company's Annual General Meeting ("AGM") in December 2023, when shareholders voted by over 99% in favour of continuation of the Company.

Ailsa Craig and Marek Poszepczynski have moved from SV Health to Schroders and are continuing to manage the quoted portfolio with the same investment philosophy, focused on offering access to the fast-growing biotechnology sector through an actively managed, diversified portfolio. The team passed their three-year anniversary as joint lead Fund Managers of the Company on 15 March 2024. Over this period, the Company has delivered a total return of 4.9%, comfortably ahead of the Reference Index which fell by 1.1% over the period. This is no mean feat during a very volatile time for the sector, which included the pandemic vaccine-related euphoria, the subsequent hangover, the threat of recession as global inflation and interest rates rose and a substantial increase in geopolitical risk. To have outperformed significantly during a time of up to 30% swings in the Reference Index is a great achievement and vindicates the investment philosophy of selectively identifying exciting

opportunities in the biotechnology sector with an active risk management approach.

The Company also continues to maintain a relationship with SV Health, which provides advice on the Company's unquoted exposure, principally through investment in two SV Health funds.

Quoted portfolio

During the six months under review, the NAV per share of the quoted portfolio produced a total return of 13.1%, substantially outperforming the Reference Index, which returned 8.2%.

The biggest contributor to performance came from Vera Therapeutics, an autoimmune company which is a top 10 holding in the portfolio. The share price doubled following promising early clinical trial results from the Company's lead development drug, Atacicept for Immunoglobin A (IgA) nephropathy, a chronic kidney disease. Current treatments for this rare disease focus on alleviating symptoms only. Late stage trial news will not be available until 2025, but Atacicept may treat the inflammatory process.

Further contributions to performance came from another two holdings becoming acquisition targets. Bristol Myers Squibb bid for both Mirati, an oncology company with a lung cancer treatment and Karuna, a company with a product to treat psychosis in Alzheimer's Disease. These two acquisitions, which together contributed an increase of 2.5% to NAV, reinforce the importance of a thriving mergers and acquisitions ("M&A") environment in biotechnology investing. Following a dearth of M&A activity in 2022, a rebound in 2023 led to a record number of biotechnology companies becoming takeover candidates. The Company has benefited from being invested in 23 such candidates in the last three years.

Disappointing sales of two newly launched products Lupkynis, an oral drug for lupus from Aurinia; and Daxxify, an injectable for the treatment of glabellar lines from Revance, detracted from performance during the last six months.

The share price of Uniqure which is developing a treatment for Huntington's disease has fallen by over 25% after revealing disappointing clinical trial data in December 2023.

Unquoted portfolio

The unquoted portfolio, which comprised 7.9% of the Company's total investments at the period end, continued to be primarily invested in two venture capital funds managed by SV Health, SV Fund VI and SV BCOF, as well as a small number of direct investments in unquoted companies, most of which have been exited with potential contingent milestone payments still remaining. Early stage biotechnology companies have been significantly affected by higher costs of capital and a deteriorating funding environment. Valuation adjustments in unquoted investments inevitably lag those of the broader market and the portfolio has seen some holdings within the venture capital funds marked down since we last reported to shareholders. Over the longer term the unquoted funds continue to deliver a strong rate of return.

SV Fund VI

During the six month period to 29 February 2024, a short period of time for a long term venture fund, SV Fund VI, which represented 4.3% of the Company's total investments fell slightly in value. Over the longer term the fund has performed well, delivering a currency adjusted internal rate of return ("IRR") of 16.5% per annum since the Company's first investment in 2016. SV Fund VI, which includes

a range of early-stage biotechnology, medical device and healthcare services companies, is now a mature portfolio with most of the capital committed drawn down. In November 2023, one of the investments in SV Fund VI, Caraway, a pre-clinical company with

a pipeline of small-molecule therapeutics for the treatment of neurodegenerative diseases, was sold to Merck, resulting in a further distribution to investors.

SV BCOF

SV BCOF, a newer fund which invests in later stage and/or pre-initial public offering ("IPO") opportunities, represents 1.9% of the Company's total investments. The $30 million commitment is only partially drawn down. As reported previously, one of the first investments in SV BCOF, Nimbus Therapeutics, sold its TYK2 Inhibitor, which had demonstrated promising Phase 2 results in psoriasis, to Takeda in February 2023, resulting in a very early distribution back to investors. SV BCOF has recently made a new investment in BioAge, a company which is developing an oral obesity drug, Azelaprag. This brought the total number of holdings in the company to eight. Thus far, SV BCOF has delivered a net IRR of 86.5%, an excellent performance, albeit very early in the life of this venture capital fund.

Ikano Therapeutics

Of the small number of directly-held legacy assets, the most significant is Ikano Therapeutics, which represents 1.5% of the Company's total investments.

Further comment on investment performance and the investment policy can be found in the Fund Managers' review.

Dividends

The Company's dividend policy, which was last approved at the AGM in December 2023, is to make dividend payments equivalent to 4% of the Company's NAV, as at the last day of the preceding financial year ending 31 August, through two semi-annual distributions. The first dividend for the year of 13.9p per share was paid on 26 January 2024. The Board intends to make the declaration of the second dividend for the year in accordance with the above policy in July 2024 for payment in August 2024.

Discount management

The last six months has seen an increase in share prices trading at a discount to NAV throughout the investment trust industry, and the biotechnology and healthcare sector is no exception. The Board

continues to keep the Company's share price discount to NAV under close review and is committed to buying back its shares to help manage the position. Although 1,060,776 shares were bought back to be held in treasury during the period, the discount widened from 6.3% to 8.7%. This is frustrating when the Company's performance is strong, delivering a peer group leading dividend yield.

The Manager is working hard to introduce the Company's specialist mandate to new shareholders. The Board believes that buying back shares at a discount to NAV is not only accretive to shareholders but demonstrates confidence in the underlying fundamental value of the portfolio investments.

Costs and fees

As previously explained, the Manager has waived its management fee for the first six months of the appointment (from 20 November 2023), to offset the costs associated with the mandate transition.

As expected, the ongoing charges ratio ("OCR") has decreased since the transition to Schroders and is expected to fall further.

In accordance with the Company's Remuneration Policy to pay additional one off fees in the event Directors have undertaken time-consuming work to deliver projects in shareholders' interests, all Board members have been awarded a one off increment following completion of the transition of the Company from SV Health to Schroders. These are detailed in the related party transactions note on page 24.

Due to the outperformance of the quoted portfolio since

20 November 2023, a performance fee of £1,682,000 has accrued to the Manager. A fee has also accrued to SV Health of £177,000 due to the performance of the unquoted portfolio.

Environmental, social and governance ("ESG") matters

One of the advantages of moving to Schroders is that the Company can benefit from Schroders' expertise in integrating ESG into the investment process. Investing in innovative biotechnology companies, which are developing treatments to extend and improve the lives of patients suffering from disease, has an important social impact. The Board and Fund Managers understand that including ESG factors in the analysis of investment ideas will contribute to the sustainable success and performance of investee companies.

In accordance with the Company's ESG policy, this half year report includes a summary of the ESG measures of the top holdings using data provided by Morningstar's Sustainalytics. When reporting to you at the end of the financial year, it is intended to use data provided by the Manager's in-house dedicated sustainability team, which has developed its own proprietary tools, to expand the ESG disclosures.

Board and succession

Caroline Gulliver, Chair of the Company's Audit Committee will have served on the Board for nine years this year and has indicated her intention to step down as a Director at this year's AGM.

During the period under review, the Board appointed Gillian Elcock to act as Chair of the Company's Nomination Committee. Gillian is leading the Committee's search for Caroline's successor. An independent search consultant has been engaged to assist with this search, with the intention of making an appointment prior to the Company's financial year end. This will enable Caroline to lead the year end annual report process while allowing a smooth transition for her successor.

Introduction

Interim Management Report

Financial

Other Information

Fund Managers' Review

We are pleased to present the Fund Managers' Review for the six months ended 29 February 2024. During the period under review, the Company completed the transition of its AIFM to Schroders, in a move that had been announced in August 2023, following SV Health's decision to relinquish the mandate.

Many shareholders expressed a strong desire for continuity through the transition and we both joined Schroders on 20 November 2023 to continue to manage the quoted portfolio with the same investment philosophy. Meanwhile, Schroders brings significant investment trust expertise to the proposition, and is strongly placed to support the Company from a regulatory and marketing perspective.

Market overview

Overall, the biotechnology sector experienced a mixed performance during the period under review, declining during the first couple of months before staging a strong recovery through the last few weeks of 2023 and into the start of this year. Underlying this have been some encouraging and potentially significant developments.

Consolidation in the sector has continued, with many companies undergoing restructuring or M&A. This has been driven by a desire among large pharmaceutical companies to fill the revenue gap that stems from their impending patent expiries and the impact of implementation of the US Inflation Reduction Act. 2023 saw a record value of M&A transactions in the industry. This has presented opportunities for active investors to add value by capitalising on potential efficiencies, the gradual reshaping of the industry landscape and raises the prospect of improved productivity going forward.

The Company benefited from two acquisition bids during the period. Both were from Bristol Myers Squibb which acquired our portfolio holding Mirati, an oncology company with an approved product addressing a specific population of lung cancer patients, and another of our portfolio holdings, Karuna, a company focusing on schizophrenia and psychosis in Alzheimer's Disease. These acquisitions demonstrate the attractiveness of our portfolio companies and the potential for value realisation in the Company through M&A.

M&A - a major theme of the biotechnology industry

Strong M&A deal flow for the Company in recent years 23 M&A deals among IBT's portfolio companies since 20201

Source: Schroders.

1In some transactions the market price rose sharply before the announcement.

2M&A premium not disclosed in unquoted portfolio.

Reference to securities are for illustrative purposes only and not a recommendation to buy or sell.

Introduction

Interim Management Report

Financial

Other Information