LONDON - International Biotechnology Trust (IBT), the UK's largest biotechnology trust, will be forced to restructure as a result of pressure from the arbitrageur Millennium Partners LP, of New York, which owns 10 percent of the #285 million (US$425 million) trust.

IBT has two months to put forward restructuring proposals, following an extraordinary general meeting (EGM) July 7, which supported Millennium's call for a restructuring. However, Millennium's second and third resolutions, calling for the resignation of IBT Chairman John Green-Armytage and Deputy Chairman Donald Cecil, respectively, were not passed.

Millennium called for the reconstruction to allow shareholders to realize their holdings at a price close to the net asset value. IBT's share price has been trading at a significant discount to its asset value. On July 10 the net asset value was #3.14 per share, while the share price was #2.76.

After coming under pressure from Millennium in May, the board of IBT argued in a letter to shareholders on June 30 that a reconstruction would defeat the purpose of shareholders who are looking to benefit from a longer-term investment view, and said, "Millennium has no interest in IBT strategy, or in the biotechnology sector generally." However, the board did propose to return #45 million to shareholders. The day before the EGM it increased the offer to #70 million in September 2000, and a further #30 million to #50 million by September 2001. The return would be at a small discount to net asset value.

"These returns of capital will allow those shareholders wishing to remain invested in the company to do so and for their entitlement to be taken up by shareholders wishing to exit," said the IBT board.

Following the EGM, IBT issued a short statement saying it would now consult with shareholders on the reorganization proposals.

Millennium also had tabled a resolution calling for the removal of Jeremy Curnock Cook, a director of IBT and head of the Rothschild Bioscience Unit at Rothschild Asset Management, which manages IBT's investments. Millennium raised questions about the share options granted to Curnock Cook as a non-executive director of companies that IBT invests in. IBT said any gains from these options would be transferred to IBT. However, Curnock Cook chose to resign before the EGM.

The net asset value of IBT increased from #55 million in March 1999 to #285 million in June 2000. The trust is currently cash rich, having taken significant profits during the market boom in January and February.

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