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Nurturing innovation Annual Report and Accounts 2016

Who we are

Imperial Innovations is a leading UK technology commercialisation company.

We champion outstanding science by commercialising innovative research and nurturing the next generation of world-leading technology companies.

We achieve this through a robust strategy and a fully integrated business model, which has been proven over many years. It begins with original ideas and extends through Intellectual Property (IP) protection, company formation, seed funding, incubation and ultimately scale-up.

This provides us with a unique insight into leveraging early-stage research and turning it into substantial, high-quality, well-managed and well-funded commercial businesses.

Today, Imperial Innovations (‘Innovations’) is one of the UK’s leading investors in early-stage technology companies. Along with its co-investors, the Group has invested more than £1.5 billion in helping to drive innovation in the UK.

PurposeInnovations champions outstanding science by commercialising innovative research and creating the next generation of world-leading technology companies.

VisionThe vision for the business is to be the partner of choice for the commercialisation of outstanding science and to become a magnet for scientists and entrepreneurs seeking to realise the value of their technology. This will be demonstrated by the Group generating exceptional returns on a sustainable basis through high-value licences and the creation of billion-dollar companies.

StrategyInnovations is focused on building substantial, high-quality, well-funded and well-managed businesses in which it retains a meaningful stake.

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Imperial Innovations Annual Report and Accounts 2016 01

Contents

Strategic Report02 Group overview04 Chairman’s statement08 Our markets12 Our strategy14 Business review16 A compelling investment case

1. Unrivalled access to the UK’s best research2. Proven strong business model3. Established portfolio – with exciting pipeline4. Matching world-class management to world-class science5. Syndication

26 Chief Executive Officer’s review32 Portfolio update

TherapeuticsMedtech & DiagnosticsEngineering & MaterialsICT & Digital

52 Corporate and social responsibility56 Financial review60 Key performance indicators62 Principal risks and uncertainties68 Viability statement

Governance69 Chairman’s introduction70 Board of Directors72 Senior management team74 Corporate governance report

Compliance with the UK Corporate Governance CodeThe BoardRisk management and internal controlConflicts of interestInsurance Statement of Directors’ responsibilities

79 Nomination Committee81 Audit and Risk Committee84 Remuneration Committee Chairman’s introduction86 Directors’ Remuneration Report annual statement96 Directors’ report

FinancialsConsolidated financial statements100 Independent auditors’ report104 Consolidated statement of comprehensive income105 Consolidated balance sheet106 Consolidated cash flow statement107 Consolidated statement of changes in equity108 Notes to the consolidated financial statements

Company financial statements144 Independent auditors’ report146 Company balance sheet147 Company statement of changes in equity148 Notes to the Company financial statements

Company information152 Company information

View the full Annual Report online at www.imperialinnovations.co.uk

Chief Executive Officer’s reviewsee p26

Chairman's statementsee p04

A compelling investment casesee p16

Portfolio updatesee p32

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02 Imperial Innovations Annual Report and Accounts 2016

£335.1moverall net portfolio value (2015: £327.2m)

107companies in portfolio

45accelerated growth companies (those in which we actively invest and take a seat on the Board)

7new accelerated growth companies added during the year

£69.9minvested across 33 portfolio companies during the year

79%of this money was invested into existing portfolio companies

Portfolio

Therapeuticssee p34

Medtech & Diagnosticssee p40

Engineering & Materialssee p44

ICT & Digitalsee p48

Net portfolio value

£154.2m(2015: £186.4m)

£32.2mnet decrease

£56.7m(2015: £46.7m)

£10.0mnet increase

£77.9m(2015: £61.8m)

£16.1mnet increase

£46.3m(2015: £32.3m)

£14.0mnet increase

Group overview

Portfolio overview

£206.4mraised by the portfolio

during the year

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Nurturing innovation

Imperial Innovations Group plc (known as Innovations) creates, builds and invests in pioneering technology companies and licensing opportunities developed from outstanding scientific research focusing on the ‘Golden Triangle’, the geographical region broadly bounded by London, Cambridge and Oxford.

This area has an unrivalled cluster of outstanding academic research and technology businesses, and is home to four of the world’s top 10 universities (source: QS World University Rankings ® 2016/17) as well as leading research institutions, the cream of the UK’s science and technology businesses and many of its leading investors.

The Group supports scientists and entrepreneurs in the commercialisation of their ideas, through protecting and licensing out intellectual property, by leading the formation of new companies, by recruiting high-calibre management teams and by providing investment and encouraging co-investment.

Innovations provides continuity of funding from start-up to scale-up, with initial investments from seed stage onwards. Innovations remains an active investor over the life of its portfolio companies, with the majority of Innovations’ investment going into businesses in which it is already a shareholder. This strategy substantially de-risks investment scale-up in our portfolio companies. As Innovations invests from its own balance sheet it is not constrained by the five-to-seven year investment horizons of closed-end funds, nor is it under pressure to sell early in order to demonstrate a return to Limited Partners (LPs).

Innovations has a technology pipeline agreement with Imperial College London that extends until 2020, under the terms of which it has exclusive commercialisation rights and as acts as the College’s Technology Transfer Office (TTO). The Group also acts as the TTO for a number of NHS Trusts linked to Imperial College London, including Imperial College Healthcare NHS Trust and London North West Healthcare NHS Trust. Further information on the Group’s role as TTO for Imperial College can be found on page 11.

Following a fundraising in January 2011, Innovations broadened its addressable market beyond Imperial College London by making investments in opportunities arising from intellectual property developed at, or associated with, the University of Cambridge, the University of Oxford and University College London (UCL). Since then around one-third of all of the Group’s new companies have come from Imperial College London, one-third from the Cambridge cluster, with the final third derived from University of Oxford, UCL and management teams and research organisations around London.

In June 2014, Innovations completed a £150.0 million fundraising. Following this transaction, the Group expanded its operation to include sourcing of opportunities not only from its existing University partners, but also from the extensive network of entrepreneurs, management teams and co-investors that the Group has established within the ‘Golden Triangle’ over the last 10 years.

During the year, the Group raised £100.0 million through a placing in February which provided the Group with the capacity to maintain its interests in the larger later stage funding rounds of its maturing portfolio, whilst also seeking to capitalise on two new strategic partnerships signed during the year that were designed to increase Innovations’ access to deal flow. These were the UCL Technology Fund, which provides Innovations’ with formal access to IP created by UCL researchers, and the creation of Apollo Therapeutics. The latter is a pioneering collaboration between AstraZeneca, GlaxoSmithKline, Johnson & Johnson and TTOs of Imperial College London, University College London and the University of Cambridge, which aims to accelerate the development of new medicines and provides Innovations with visibility of therapeutics IP across all three universities.

Since becoming a public company in 2006, Innovations has raised more than £440.0 million of equity from investors, which has enabled it to invest in some of the most exciting spin-outs to come out of UK research. In addition, the Group has a £50.0 million undrawn loan facility from the European Investment Bank (EIB).

Between Innovations’ admission to AIM (August 2006) and 31 July 2016, Innovations has invested a total of £306.7 million and the total raised by the Group’s portfolio companies is more than £1.5 billion, with £206.4 million being raised this year.

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Chairman’s statement

David NewlandsChairman

Innovations is an outstanding business based on access to the best in UK science, a deep understanding of the academic mindset and a highly professional investment capability.

It gives me great pleasure to present this Annual Report to shareholders, my first as Chairman. After nearly three months in the role, I have had an opportunity to meet with many of Innovations’ key stakeholders and I have been struck by the consistently high regard in which the business is held as a leader in the rapidly emerging technology commercialisation sector.

I would like to start by thanking my predecessor Dr Martin Knight, the Group’s founder and Chairman from its Admission to AIM in 2006 until 31 July 2016, for his vision in developing such an exciting company. The team has built an outstanding business based on access to the finest science-driven intellectual property (IP) in the UK, a deep understanding of the academic mindset and a highly professional investment capability.

We have the opportunity to build on this platform to create important, powerful and valuable businesses, to the benefit of our shareholders and our wider stakeholder community.

Make no mistake, what we do is important. Commercialising outstanding UK research and creating the next generation of world-leading technology companies is crucial for the UK economy, not only in economic terms but also in reinforcing the UK’s position as a world-leader in scientific research. We have both the expertise and the financial strength needed to play an important role in this endeavour.

A platform on which to create important, powerful and valuable businesses

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A year of significant progress across the maturing asset portfolio.

£69.9 million invested across 33 portfolio companies (2015: £60.8 million across 30):

– 79% of this money invested into existing portfolio companies.

Led 6 major private funding rounds during the year, which raised in total:

– Kesios Therapeutics £19.0 million. – Inivata Limited £31.5 million. – MISSION Therapeutics £60.0 million. – Nexeon Limited £30.0 million. – Precision Ocular £15.5 million. – Storm Therapeutics £12.0 million.

£206.4 million raised by the portfolio during the year.

Seven accelerated growth companies added to investment portfolio.

Net assets of £455.9 million (2015: £420.1 million).

Net portfolio value up by £7.9 million to £335.1 million (2015: £327.2 million).

Cash and short-term investments of £148.3 million (2015: £128.1 million).

Pre-tax loss of £63.1 million (2015: profit of £15.1 million), includes a £56.2 million net fair value loss:

– Quoted net fair value loss of £66.9 million, largely as a result of decline in Circassia share price

– Unquoted net fair value gain of £10.7 million

Total realisations for the year were £5.8 million.

£198.3 million available to invest, including undrawn £50.0 million second loan facility from European Investment Bank (July 2015) still to be drawn down.

Revenues of £4.3 million (2015: £5.1 million).

Portfolio developments Financial highlights

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Our timeline IPO on AIM market raising £25.0 million. Focused on IP derived from Imperial College London.

Innovations raises £30.0 million in a placing.

£140.0 million rights issue. Operations broadened to encompass sourcing opportunities from University of Cambridge, University of Oxford and UCL, in addition to Imperial College London.

201120072006

Financial performanceOur focus is on building a portfolio of substantial high-quality, well-funded and well-managed businesses. The Group’s Net Asset Value (NAV), increased by £35.8 million to £455.9 million (2015: £420.1 million). The Group’s Net Portfolio Value (NPV) was £335.1 million (2015: £327.2 million).

The carrying value of the Group’s listed investments (Abzena plc, Circassia Pharmaceuticals plc, IXICO plc and Oxford Immunotec Global plc) are all marked-to-market at period end. At the end of the financial year they had a total net valuation of £42.9 million (2015: £106.8 million); a net fall of £63.9 million comprising investments of £3.0 million, less net fair value movements of £66.9 million. The largest component of this decline resulted from the fall in the share price of Circassia Pharmaceuticals following the failure of its cat allergy Phase III study.

This was a major disappointment but the results of a single clinical trial will not cause us to change our long-term strategy. We make investments that involve carefully calculated risks, including investing in drug development companies and clinical trials are an inherent feature of this sector.

What matters over the medium to long-term is the ultimate value of the companies we are creating. We are confident that we are building a number of UK science-based companies that have the potential to make a significant impact, not only on Innovations but on the UK as a whole.

We are very encouraged by the performance of our unquoted portfolio which gives us confidence for the future. Many of our companies made significant technical, clinical and commercial progress during the year. Notable examples include Cell Medica’s partnership with Baylor College of Medicine, PsiOxus’ collaboration with Bristol-Myers Squibb and the completion of recent funding rounds for Inivata, Nexeon and Econic.

Operational progressDuring the year Innovations completed three major transactions which strengthened the balance sheet and increased our pipeline of opportunities.

In February 2016, we raised £100.0 million which provided the Group with the resources to maintain its holdings in the larger later-stage funding rounds of its maturing portfolio.

The Group has also started to capitalise on the new strategic partnerships signed during the year with the UCL Technology Fund and Apollo Therapeutics. These agreements have significantly increased our visibility of technology coming from UCL and the University of Cambridge, as well as broadening and deepening our existing relationships with three of the world’s leading pharma companies (AstraZeneca, GlaxoSmithKline and Johnson & Johnson).

At the same time, we have continued to deploy our capital, investing £69.9 million across 33 companies, including £14.6 million invested in seven new additions to the portfolio which will provide the foundations for value generation in future. Collectively the portfolio raised £206.4 million of total investment during the year.

Chairman’s statementcontinued

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Innovations obtains £30.0 million loan facility from European Investment Bank (EIB).

June Innovations raises £150.0 million in a placing.

July Innovations obtains £50.0 million second loan facility from European Investment Bank (EIB).

January Innovations launches Apollo Therapeutics.

Innovations commits £24.8 million to UCL Technology Fund.

FebruaryInnovations raises £100.0 million in a placing.

2016201520142013

Such events illustrate the potential of these private companies to drive long-term returns for shareholders, but this potential does not necessarily translate into significant changes in valuation straight away. The growing partnership interest we are seeing from pharma companies and other industry partners in our companies is also very encouraging.

BrexitRight at the end of the financial year, the UK voted to leave the EU. In the months after this vote, the UK has entered a period of uncertainty. Whilst the full picture is yet to play out, we are confident UK science will maintain its pre-eminent position on the world stage.

However there are risks to research funding, to attracting and retaining talent and to university finances. We believe the UK government recognises these challenges and will address them as part of its new UK industrial strategy. Significantly, our ongoing partnership with the European Investment Bank (EIB) and European Investment Fund (EIF) remains strong with both organisations reaffirming their commitment to our loan facility and the UCL Technology Fund respectively. The impact on our own staff resourcing will be minimal.

Board changesAt the end of the financial year, after 13 years of outstanding service, my predecessor Dr Martin Knight stepped down from the Board. Martin became the Chairman of the Imperial Innovations group of companies in 2003 and was Chairman when the Group was quoted on AIM in 2006. He is one of the pioneers of the emerging IP commercialisation industry and provided outstanding leadership to Innovations over the last 13 years. On behalf of the Board and everyone at the Group, I would like to thank him for his huge contribution to the business.

I joined the Board as non-executive Chairman on 1 August 2016.

The opportunity Our executive team has built a powerful and strong platform for nurturing innovation and turning raw IP into a portfolio of early-stage businesses. Our ambition is to create a portfolio of companies that deliver real value to shareholders, as well as adding value to the wider economy.

We are well placed to do this. All the key ingredients are in place. We have a strong balance sheet, an experienced Board and our portfolio companies are led by world-class management teams. We are supported by a strong group of like-minded shareholders and co-investors.

Our confidence for the future extends beyond our existing portfolio. The quality of the IP we are seeing from the academic, research and entrepreneurial community within the ‘Golden Triangle’ augurs well for the future and we expect it to lead to exciting investment opportunities and prospects for further value creation.


12 October 2016

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Our markets

Operating in a growing market

Innovations is focused on the commercial exploitation of outstanding research originating in the ‘Golden Triangle’.

The Group’s focus on this geography, combined with the pull of its capital and growing track record, puts Innovations at the heart of this world-class science cluster from which it derives the vast majority of its spin-outs and investment opportunities.

Innovations’ integrated business model (see page 18), which extends from original research through seed funding, scale-up, and long-term support, equips the Group with a detailed understanding of the process of translating early-stage research into commercial business opportunities. In addition, deep sector-specialist knowledge provides expertise in evaluating the likely success of new scientific ideas, which makes Innovations an attractive partner for research teams seeking to commercialise their technology.

Academic insight and visionThe majority of the Group’s investments are derived from academic research. This provides the Group with early sight of discoveries in fundamental science that may have commercial application, as well as insight into the future and the development of next-generation technologies.

The Technology Pipeline Agreement (TPA) with Imperial College London provides Innovations with exclusive access to all the unencumbered IP developed at the College and the flexibility to commercialise that IP in any way it considers appropriate. Typically, this is achieved either through the formation of a spin-out company, or through licensing IP to an existing company in the same field.

The Group also works closely with academic communities associated with the University of Cambridge, the University of Oxford and University College London on a non-exclusive basis. This includes working with those universities’ own technology transfer offices (Cambridge Enterprise Limited, Oxford University Innovation (formerly ISIS Innovation) and UCL Business, respectively) as well as collaborating directly with the universities’ own dedicated funds in backing new spin-out businesses.

The most recent example of this is the UCL Technology Fund, which was launched in January 2016. This is the first investment fund that University College London has created to commercialise its multidisciplinary research.

Over the next five years this fund is expected to invest £50.0 million to support ideas from academics in life sciences and physical sciences, and will be used for early-stage proof of concept funding, licensing opportunities and the formation of new spin-out companies. Innovations is a Limited Partner (LP) in the fund and has committed £24.8 million to the fund, matched by a commitment of the same amount from the European Investment Fund (EIF).

During the year, the Group also committed £3.3 million to Apollo Therapeutics, a new £40.0 million joint venture between AstraZeneca, GlaxoSmithKline, Johnson & Johnson and the technology transfer offices of Imperial College London, University College London and the University of Cambridge.

The aim of this new venture is to support the translation of outstanding academic therapeutic science into innovative new medicines, and is yet another example of Innovations operating at the nexus of outstanding academic research and industrial strength expertise.

Funding UK innovationThe UK has long been criticised for its apparent inability, or the reluctance of its ecosystem, to fund and develop the scientific research breakthroughs that are generated at its many world-class universities. In 2014, figures from the British Venture Capital Association (BVCA) suggest that, out of total private equity and venture investments of £4.7 billion in the UK, just £108.0 million was deployed into seed, start-up and early-stage investments (http://www.bvca.co.uk/Portals/0/library/documents/IAR%20Autumn15.pdf).

This may be due to the fact that early-stage investors in cutting-edge science experience not only high technical and market risk, but may also have to wait a long time before they see a return on their investment. Nevertheless, whatever the underlying cause, the last decade has seen an emergence of funding vehicles that look to fund early-stage high-risk technology companies with a long-term investment horizon – so-called ‘Patient Capital’.

Flexible, open-ended funding models of this type are appropriate for funding spin-outs from universities because of the typically long gestation period from lab bench to commercialisation. Inventions generated at our leading academic institutions typically require substantial development before they are commercially viable. Companies based around high-technology university inventions may take more than 10 years (and sometimes even longer) from first patent filing to exit or IPO, and frequently require considerable funding to develop their technology.

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Geographic focus and established network within

the ‘Golden Triangle’ The Group has an established network

of academics, industry partners and co-investors which makes the Group the partner of choice for leading academics

and management teams within this world-class science cluster.

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Track record of forming management teams to maximise

opportunity from IPThe Group has a significant network

of experienced entrepreneurs and managers with proven expertise in forming and growing early-stage companies. The Group’s ability to create and develop top-quality management

teams for its portfolio companies is a significant attraction for scientists

partnering with the Group.

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Proprietary technology pipeline with Imperial College London and

commercialisation rightsThe Group has early and exclusive access

to research outputs from one of the world’s leading research universities,

and through Imperial College London, to one of the largest medical

schools in the UK.

Well-developed and mature portfolio of companies

Approximately 80% of the Group’s investment goes into businesses in which Innovations is already a shareholder, holds a board seat and knows from the inside.

This significantly reduces the risk of scaling up investment.

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Deep sector-specialist knowledge

The Group has expertise in evaluating the likely success, both technical and

commercial, of new scientific ideas. The ability to understand and talk deep science makes the Group an attractive partner for research teams seeking to commercialise

their technology, and differentiates us from many ‘digital’ investors.

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Investing from its own balance sheet

This gives the Group the ability to be involved with all stages of the

commercialisation process and the flexibility to take a long term approach to investments. This gives Innovations an opportunity to form companies and establish an influential role in the business before a venture capital investor

would get involved, and the ability to scale-up its investment as portfolio

companies develop.

5

Track record and integrated business model, which extends from original

research through to scale-up

The Group’s skills in IP management, technology and market assessment, product development, licensing and

investment make it an attractive partner for academics,

management teams and co-investors.

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Competitive strengthsInnovations has a number of distinct strengths that differentiate it, not only

from its listed peers but also from venture capital firms, institutional investors and other organisations that may compete with the Group by providing funding to companies in the commercialisation process.

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Traditional venture capital (VC) funding, which has relied on the limited partnership model in which the likes of pension funds put their money into a closed fund managed by a venture capital firm, has proved unsuitable for supporting early-stage high-technology companies in the UK. This is chiefly a result of the fixed life of these funds and pressure to deliver a return to Limited Partners, which means that funding typically operates over a five-to-seven year horizon. In general, this means VCs often prefer to wait until a technology is substantially de-risked before making their initial investment – typically at the Series A stage (the first substantial funding round following seed and other development funding).

In contrast, seed investors invest earlier than VCs but usually lack the cash to ‘follow’ their money, and therefore often shy away from investing in certain sectors such as biotechnology and automotive/aerospace engineering, which are capital-intensive with long development cycles.

Because neither of these models is particularly supportive of university spin-outs, academic-associated technology start-ups historically found themselves falling into the gap (often described as the ‘Valley of Death’); on the one hand finding it difficult to attract seed funding, and on the other, discovering that venture finance was similarly limited.

Patient Capital arose as a potential solution. The longer-term outlook and investment profile of these funds is ideally suited to technologies arising from academia. Patient Capital providers can afford to ‘get in early’ (at seed stage or earlier) and continue to invest (sometimes alongside VCs, corporate VCs or other Patient Capital providers) throughout the lifecycle of a high-technology business, protecting their equity position through follow-on investment. Furthermore, because they invest from their own balance sheet, they are not under pressure to return capital to their shareholders or unit holders within a short period, thus retaining the flexibility of growing into more substantial businesses over time.

Competitive environmentAs recently as two years ago, there were just three long-established companies: Imperial Innovations, IP Group and Fusion IP (subsequently acquired by IP Group) that were dedicated, university-associated listed Patient Capital businesses. However, over the last two years the IPO’s of Allied Minds, PureTech Healthcare and Mercia Technologies, have added greater weight to an IP commercialisation sector that has now raised more than £1.0 billion of capital.

Much of this technology commercialisation sector has been cornerstoned and underpinned by long-term supportive investment from wealth management funds such as Invesco Perpetual, Woodford Investment Management, Lansdowne Partners and others, who have all championed the benefits of investing in early-stage companies borne out of university research.

A common theme is the belief that UK intellectual property and early-stage spin-outs are significantly undervalued in comparison to their US counterparts and that there is a large potential upside to investing in UK innovation.

In addition, we have seen the emergence of specialist funds such as Woodford Patient Capital Trust (which last year raised more than £800.0 million of capital from investors to invest in early-stage technology companies) and other funds dedicated to commercialising the output of specific universities. The latter include the £50.0 million UCL Technology Fund (in which the Group is a Limited Partner), the £320.0 million Oxford Sciences Innovation (OSI) (launched in 2015) and Cambridge Innovation Capital (CIC) which has raised £125.0 million dedicated to investing in IP-rich companies from the University of Cambridge and the wider research and business community around the Cambridge area.

More recently, Draper Esprit became the first British venture capital investor of its type to float, raising £103.0 million by listing on AIM in June 2016. At the time of its IPO the company cited Innovations and IP Group as IP commercialisation companies whose success it was seeking to replicate, by gaining access to a more flexible source of capital and holding stakes in favoured businesses for longer without being forced to sell too early.

Sector growth brings greater choiceThe UK technology commercialisation sector is therefore clearly flourishing. These are welcome developments as they are not only beneficial for promoting UK innovation in general, but more specifically because they are likely to increase the number of potential opportunities in which the Group may invest, particularly as much of this new money is being deployed within the ‘Golden Triangle’.

Clearly, as a result of greater investor choice, there is increased competition in terms of attracting investment capital in the public markets, but this does not necessarily translate into direct competition when it comes to deploying that capital into university spin-outs and early-stage businesses. Each commercialisation company has its own geographic and sector specialisations, and as a result, they rarely compete in funding new opportunities. Greater choice is thus beneficial not only for investors but also for those seeking investment. Furthermore, despite the substantial sums raised recently, there is still a shortage of capital relative to the abundant supply of IP available to commercialise.

In addition, specialist skills and industry-specific expertise are needed to deploy capital effectively. On the rare occasions two or more investors do congregate around an opportunity, the tendency is to collaborate on creating stronger, more productive investor syndicates rather than to compete on terms.

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However, Innovations is well equipped to deal with competitive situations because of a number of key strengths which help the Group to source outstanding opportunities (see diagram on page 9).

So these macro-economic changes and new competition do not deflect the Group from its strategy. Rather, by virtue of its geographic focus, capital strength and track record, Innovations is well placed to be the lead investor or partner of choice for academics, management teams and co-investors within the ‘Golden Triangle’.

Furthermore, the Group’s active syndication of investments means it will continue to work collaboratively with dedicated university funds as well as leading financial investors, specialist venture capital firms and strategic investors. Further details of the key components of the Group’s investment case are articulated in pages 14-25.

Benefits of operating a Technology Transfer OfficeOperating a Technology Transfer Office (TTO) at Imperial College London gives Innovations a direct pipeline to the research being carried out at one of the world’s leading technical universities.

Staff in the TTO work every day in close proximity and collaboration with the academic staff developing ground-breaking technologies, which may in the future lead to substantial business opportunities.

As a result, the Group is intimately familiar with the technology that goes into Imperial College London spin-outs as the team has tracked its progression for a long time, even before a company is formed. The team seeks to leverage grant funding to help de-risk and develop these technologies at a very early stage, and use its sector-specific expertise to

step in to provide guidance and influence over the direction of technology development. This is beneficial, as it means that the technology and the future company develop in alignment so that the new spin-out company can hit the ground running. In addition, this familiarity allows the Group to determine early the optimum route forward for each technology for example, in deciding whether it should be licensed or form the basis of a new spin-out.

Aside from the benefits of working closely with technologies that may go on to form the basis of new businesses, the TTO also provides a reliable revenue stream that supports the operation of the Group.

Every year, many licence deals are signed with industry partners, whereby technology developed at Imperial College London is licensed for development to these companies. As the Group has undertaken IP protection on these technologies, it can generate revenue through up front licensing fees and future royalties in exchange for allowing industry partners access, sharing that 50/50 with Imperial College London.

In addition to generating revenue, this activity has additional related benefits. Firstly, industry partners who work with Innovations often see the benefit of technology developed at universities, and often provide specific research funding, which allows academics to undertake research in industry-relevant fields; secondly, the experience offered to academics through working with industry in licensing deals stands them in good stead for future industry interactions – such as entering into collaborations or forming businesses; and thirdly, this activity generates a network of scientific knowledge and contributors that ultimately benefits the pipeline of future technologies.

Alkion Biopharma is an example of one of Innovations’ many successful spin-outs from Imperial College London that are able to grow without receiving venture funding from the Group. It was formerly part of the Group’s organic growth portfolio of around 30 companies, for which the Innovations team provides ongoing support to raise funding, recruit management and promote organic growth.

Alkion is an Imperial College London spin-out co-founded by Innovations in 2011 and based on the work of Professor Peter Nixon and Dr Franck Michoux (Biochemistry). The company has developed a unique set of technologies that allow it to sustainably produce and purify valuable materials from

plant biomass and has positioned itself with a unique offering to several life sciences-based industries. These activities are backed by a strong portfolio of patented technology.

In May 2016, Innovations completed the sale of its shares in Alkion to Evonik Industries, a leading specialist chemical company operating in several fields such as nutrition, resource efficiency and performance materials. Commercial terms have not been disclosed. Innovations’ equity in Alkion derives from the early commercial support provided to the founders by Innovations’ Technology Transfer Office, as well as from licensing the founding IP.

Focus on Alkion Biopharma

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Our strategy

Our goals What we did in 2016 Links to KPIs Strategic risks Objectives for 2017

Generate exceptional returns for shareholdersGenerate exceptional returns to our shareholders through both unrealised fair value gains and cash realisations executed at the optimal time.

– Net portfolio value up by £7.9 million to £335.1 million

– Pre-tax loss of £63.1 million (includes net FV loss of £56.2 million)

– Disposals generated net proceeds of £5.8 million

– Growth in the value of the Group’s portfolio

– Net gain/loss in FV

– Potential value achievable from existing portfolio

– Change in government policy, legislation and taxation; decreased appetite for investment into research

See Strategic risk 4 on page 64

– Unrealised fair value gains and cash realisations from the Group’s maturing portfolio

Build $1.0 billion companiesSelectively back a few of our portfolio companies with patient capital to build $1.0 billion companies.

– Led major funding rounds for MISSION Therapeutics (£60.0 million), Inivata (£31.5 million), Nexeon (£30.0 million), Kesios Therapeutics (£19.0 million), Precision Ocular (£15.5 million) and Storm Therapeutics (£12.0 million)

– Investment made in portfolio companies

– Potential value available from existing portfolio

– Difficult to attract capital into early-stage businesses and through full economic cycle


– Continue to scale investment in the Group’s most promising portfolio companies

– Build strong syndicates with sector-specialist investors and financial investors

Leverage the UK’s outstanding scienceLeverage the strengths of the outstanding science emanating from the ‘Golden Triangle’ by engaging with the most promising technology opportunities and progressing them from inception to maturity.

– Seven new accelerated growth companies added to the portfolio, plus seven organic growth companies

– New companies added to the Group’s portfolio

– Loss of or reduction in access to flow of new opportunities through loss of Technology Pipeline Agreement (TPA)

– Failure to attract or retain key personnel

See Strategic risks 2 and 3 on page 63

– Maintain geographic focus, but broaden access to opportunities beyond university partners to other research institutions and entrepreneur-led companies

– Add five to eight accelerated growth companies, but with emphasis on quality over quantity

Successfully commercialise IPUse our deep sector knowledge and judgement to take calculated risks to deliver successful commercialisation of intellectual property through licensing or by forming portfolio companies.

– Licence and royalty revenues of £2.2 million (2015: £2.8 million)

– 39 commercial licence agreements signed (2015: 39) and 74 patents filed (2015: 66)

– A total of 14 new companies added to the portfolio

– Sale of Stanmore Implants, Alkion Biopharma and Hark Health Solutions

– Health and quality of intellectual pipeline from Imperial College London




– Maintain benefits of TPA with Imperial College London

– Expand licensing portfolio to create significant and sustainable future royalty streams

Build teams and syndicatesAttract high-calibre management teams to our portfolio companies.

Build strong syndicates with sector-specialist investors and financial investors.

– High-quality management appointments across portfolio

– Innovations’ venture partners appointed to Board positions in portfolio companies

– £206.4 million raised by the portfolio during the year (2015: £479.9 million)

– Investments made in portfolio companies




– Expand Ventures team to increase capacity

– Further syndication to reinforce Group’s position as lead investor or partner of choice for the top ‘Golden Triangle’ academics, management and co-investors, as well as dedicated university funds

Focus on sectors where we have expertiseUse our deep sector knowledge and judgement to identify new licensing and investment opportunities by evaluating the likely success of new scientific ideas (both technical and commercial).

– Seven accelerated growth companies added to the portfolio, comprising one therapeutics company, one engineering & materials company and five ICT & digital companies




– Increase emphasis on non-therapeutic sectors to rebalance the portfolio

– Particular emphasis on developing ICT portfolio

Provide continuity of funding from start-up to scale-upRetain flexibility to take a long term approach to realisation. Start small and then selectively scale investment in the most promising portfolio companies as they develop.

Continue to create new ventures to develop longevity in our portfolio.

– Increased investment rate in line with stated strategy

– £69.9 million invested in 33 portfolio companies (2015: £60.8 million in 30 companies)

– £100.0 million raised by means of a Placing in February 2016



– Dependence on material shareholders


– Maintain a similar rate of investment

– Continued focus on quality, adding six to eight new accelerated growth companies per annum

Innovations’ strategy is to build substantial, high-quality, well-funded and well-managed businesses.

–

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Our goals What we did in 2016 Links to KPIs Strategic risks Objectives for 2017

Generate exceptional returns for shareholdersGenerate exceptional returns to our shareholders through both unrealised fair value gains and cash realisations executed at the optimal time.

– Net portfolio value up by £7.9 million to £335.1 million

– Pre-tax loss of £63.1 million (includes net FV loss of £56.2 million)

– Disposals generated net proceeds of £5.8 million

– Growth in the value of the Group’s portfolio

– Net gain/loss in FV

– Potential value achievable from existing portfolio



– Unrealised fair value gains and cash realisations from the Group’s maturing portfolio

Build $1.0 billion companiesSelectively back a few of our portfolio companies with patient capital to build $1.0 billion companies.

– Led major funding rounds for MISSION Therapeutics (£60.0 million), Inivata (£31.5 million), Nexeon (£30.0 million), Kesios Therapeutics (£19.0 million), Precision Ocular (£15.5 million) and Storm Therapeutics (£12.0 million)

– Investment made in portfolio companies

– Potential value available from existing portfolio



– Continue to scale investment in the Group’s most promising portfolio companies

– Build strong syndicates with sector-specialist investors and financial investors

Leverage the UK’s outstanding scienceLeverage the strengths of the outstanding science emanating from the ‘Golden Triangle’ by engaging with the most promising technology opportunities and progressing them from inception to maturity.

– Seven new accelerated growth companies added to the portfolio, plus seven organic growth companies


– Loss of or reduction in access to flow of new opportunities through loss of Technology Pipeline Agreement (TPA)



– Maintain geographic focus, but broaden access to opportunities beyond university partners to other research institutions and entrepreneur-led companies

– Add five to eight accelerated growth companies, but with emphasis on quality over quantity

Successfully commercialise IPUse our deep sector knowledge and judgement to take calculated risks to deliver successful commercialisation of intellectual property through licensing or by forming portfolio companies.

– Licence and royalty revenues of £2.2 million (2015: £2.8 million)

– 39 commercial licence agreements signed (2015: 39) and 74 patents filed (2015: 66)

– A total of 14 new companies added to the portfolio

– Sale of Stanmore Implants, Alkion Biopharma and Hark Health Solutions

– Health and quality of intellectual pipeline from Imperial College London




– Maintain benefits of TPA with Imperial College London

– Expand licensing portfolio to create significant and sustainable future royalty streams

Build teams and syndicatesAttract high-calibre management teams to our portfolio companies.

Build strong syndicates with sector-specialist investors and financial investors.

– High-quality management appointments across portfolio

– Innovations’ venture partners appointed to Board positions in portfolio companies

– £206.4 million raised by the portfolio during the year (2015: £479.9 million)





– Expand Ventures team to increase capacity

– Further syndication to reinforce Group’s position as lead investor or partner of choice for the top ‘Golden Triangle’ academics, management and co-investors, as well as dedicated university funds

Focus on sectors where we have expertiseUse our deep sector knowledge and judgement to identify new licensing and investment opportunities by evaluating the likely success of new scientific ideas (both technical and commercial).

– Seven accelerated growth companies added to the portfolio, comprising one therapeutics company, one engineering & materials company and five ICT & digital companies




– Increase emphasis on non-therapeutic sectors to rebalance the portfolio

– Particular emphasis on developing ICT portfolio

Provide continuity of funding from start-up to scale-upRetain flexibility to take a long term approach to realisation. Start small and then selectively scale investment in the most promising portfolio companies as they develop.

Continue to create new ventures to develop longevity in our portfolio.

– Increased investment rate in line with stated strategy

– £69.9 million invested in 33 portfolio companies (2015: £60.8 million in 30 companies)

– £100.0 million raised by means of a Placing in February 2016



– Dependence on material shareholders


– Maintain a similar rate of investment

– Continued focus on quality, adding six to eight new accelerated growth companies per annum

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Business review

Russ CummingsChief Executive Officer

A unique and compelling investment case

The UK’s technology commercialisation sector is thriving, drawing in additional capital and shining a spotlight on us all.

The UK’s public technology commercialisation sector is thriving with a market capitalisation of £3.5 billion having raised over £1.0 billion in capital over the last two years (source: Eye on IP, Ken Rumpf, Stifel 4 July 2016).

Investors keen to gain an exposure to the sector now have a choice of six UK listed companies in which to invest, as well as a number of overseas companies. Common to all is that they provide exposure to very early-stage, potentially disruptive IP-based companies. However, there are significant differences in sector focus, business model, accounting policies and approach to valuation that make direct comparisons challenging.

For example, Innovations, IP Group and Mercia Technologies all focus predominantly on commercialising the output of academic research in the UK, whilst Allied Minds and PureTech Health target the US market and are basically US companies that have chosen to list in the UK because of the greater understanding of IP commercialisation in the London market. Even within the UK, Innovations is focused on the output of the ‘Golden Triangle’, whereas IP Group adopts a UK-wide approach and Mercia is focused predominantly on the Midlands and the North of England.

As a guide to investors we have set out, on the following pages, what we believe to be the five key components of Innovations’ investment case.

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Key components of our investment case

Unrivalled access to the UK’s best researchInnovations provides investors with an opportunity to gain exposure to the output of the best and most exciting research emanating from the ‘Golden Triangle’ of Oxford, London and Cambridge, including sourcing opportunities across all four of the UK’s leading research-intensive universities.

See pages 16-17 for more detail

Proven strong business model Our integrated business model, which includes patent and licensing activities, provides us with a unique insight into leveraging early-stage research and turning it into substantial, high-quality, well-managed and well-funded businesses. This end-to-end capability is not replicated by our listed peers.


Established portfolio – with exciting pipelineOver the last decade, Innovations has built an outstanding portfolio of early-stage companies, many of which are close to value creation events. These are businesses in which we have already invested £306.7 million and which have collectively raised investment of more than £1.5 billion.


Matching world-class management to world-class scienceIt takes high-quality, proven, highly-motivated management teams to build a successful business. It is not easy recruiting top talent into young companies, but companies in the ‘Golden Triangle’ have an advantage over those in other regions, because of the rich talent pool in the region and proximity to London, which makes it easier to attract international talent to the South East.


Syndication Syndication remains an important part of how we create strong businesses and we are very proud of the quality of co-investors that we are attracting to our portfolio. We work closely with leading financial investors, specialist venture capital firms and strategic investors such as the venture investment arms of major pharmaceutical companies.


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A compelling investment case

1. Unrivalled access to the UK’s best research

The ‘Golden Triangle’ is an unrivalled cluster of outstanding academic research and technology businesses. We are deeply embedded within this geography, which puts us at the heart of UK science, making connections between the research community and the commercial world. While the whole of the UK is rightly described as a research powerhouse, we believe the wealth of high-quality opportunities coming from this science cluster means that we do not need to expand our focus at the present time.

‘Golden Triangle’

University of Oxford

University of Cambridge

University College London

Imperial College London

Imperial College London, the University of Cambridge, the University of Oxford and University College London are the UK’s four leading research-intensive universities and are ranked as four of the top 10 universities in the world (source: QS World University Rankings 2016/17).

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Focus on

SAM Labs

SAM Labs is a great example of Innovations championing innovation, in this case by backing an Imperial College London alumni company that has developed wireless construction kits that are encouraging school children to take an interest in technology and engineering, thereby helping to inspire the next generation of STEM students.

SAM Labs’ wireless electronic kits allow users to build their own smart inventions using hardware, software and apps through the Internet of Things (IoT). The kits are aimed specifically at school-age children so they readily fit in with the UK’s national Computing at School curriculum that requires schools to introduce the concepts of coding to students from the age of six.

Importantly, the kits have been designed to make the basic elements of coding quick and easy to learn, which means that children learn even the most advanced coding concepts swiftly through the power of play.

The company was founded in April 2014 by a group of graduates from Imperial College London led by CEO Joachim Horn. SAM Labs raised more than £125,000 in October 2014 via the crowdfunding site Kickstarter and in May 2016, completed a £3.2 million funding round led by Innovations, which contributed £2.0 million to the round.

This new funding will allow SAM Labs to further develop its products and expand the commercial reach of its SAM kits which are already sold via its web site and through retailers such as the Science Museum and the Conran Shop.

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A compelling investment case continued

2. Proven strong business model

By virtue of the fact that we invest from our own balance sheet, we have flexibility with respect to the amount invested and the timescale for realisation.

We are not constrained by the five-to-seven year investment horizons of closed-end venture capital funds, nor under pressure to sell early in order to demonstrate a return to Limited Partners. Quite the contrary; if we have a portfolio company with significant growth potential we can increase our investment and hold for the long term.

By leveraging grant and proof-of-concept funding for early-stage investments, less than 6% of our own funds go into the highest risk start-up phase investments. The vast majority of our capital is deployed in the scale-up of portfolio companies, which we know intimately from the inside. This gives us the opportunity to invest with the benefit of more influence and make better-informed decisions than would be the case for late-stage investors.

From start-up to scale-up

One of the factors that makes us different is our ability to invest over long periods, forming companies before a venture capital company (VC) would get involved and scaling our investment in our maturing companies when they approach value.

Typically, we start with an initial seed investment in the order of £25,000 to £1.0 million to get the business off the ground. Assuming we are satisfied with the venture’s development, we then progressively deploy more

capital over time, typically in the order of £1.0 million to £5.0 million in Series A funding rounds to help the business build organisational strength and develop necessary partnerships.

We then selectively build our stake in our most promising assets by deploying more capital and attracting co-investors to the business. Our largest investments to date have been Nexeon (£27.4 million) and Circassia Pharmaceuticals plc (£25.5 million).

Continuity of funding with deep knowledge of assets

Start-up phase Scale-up phaseSeed investment £25k–£1m<6% of capital invested

Understand the opportunity & market

Seat on Board Build organisational strength

Exit at most opportune time

‘Live with’ the technology Accelerate investment in best opportunities

Series A round £1m–£5mIncreasing momentum and accelerating pace of development

Stake building £5m–£25m+

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Kesios Therapeutics

During the year the Group continued to deploy its substantial capital resources into its investment portfolio. In total the Group invested £69.9 million across 33 portfolio companies during the period. Kesios Therapeutics was one of the companies that benefited, with the Group committing £6.0 million to a £19.0 million Series A funding round, investing alongside SV Life Sciences and Abingworth.

Kesios is developing novel therapeutics for the treatment of multiple myeloma and other cancers. The company was created in 2011 to commercialise research led by Professor Guido Franzoso from the Department of Medicine at Imperial College London and has made rapid progress since Innovations first seed-funded the business.

Concurrent with its financing, Kesios has made swift progress in building a world-class management team to advance its innovative science and drug development. This includes the appointment of Paolo Paoletti MD, formerly President of GSK Oncology, as Chief Executive Officer, who leads an experienced team drawn from across the biotech/pharma industry.

Kesios’ lead drug candidate is about to enter clinical studies and, with this substantial Series A financing behind it, the team is in a strong position to deliver a new treatment option for patients with multiple myeloma.

1 MISSION Therapeutics 2 Econic3 TopiVert4 Abingdon

5 PsiOxus Therapeutics6 Nexeon7 Circassia

8 Cell Medica9 Veryan Holdings10 Abzena

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3. Established portfolio – with exciting pipeline

At 31 July 2016, our net portfolio value was £335.1 million. It comprises businesses that we have co-founded and know intimately.

Strong, well-funded pipeline

The average age of our eight largest unlisted portfolio companies (Nexeon, Cell Medica, Veryan Medical, PsiOxus Therapeutics, Mission Therapeutics, TopiVert, Abingdon Health and Econic Technologies respectively) is 8.6 years and these companies have raised commitments on average of £38.9 million each. These are substantial, well-managed and well-funded businesses, and are good examples of companies in the portfolio that we expect to trigger significant value-creation events over the medium term.

Beyond this leading cohort, we have a very strong and well-funded follow-on pipeline of exciting businesses, some of which will generate value in years to come.

An investment in Innovations is therefore a way for shareholders to support and participate in the growth in value of a diverse portfolio of early-stage technology companies, whilst leveraging Innovations’ expertise to select and build those businesses on their behalf.

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Focus on

Inivata

Inivata shows how Innovations’ capital strength has allowed the Group to rapidly accelerate the development of an extremely promising early-stage company, from a £4.0 million funding round in September 2014, to a £31.5 million Series A fundraising in January 2016.

Inivata is a clinical cancer genomics company harnessing the emerging potential of circulating tumour DNA (ctDNA) analysis to improve testing and treatment for oncologists and their patients. Unlike conventional invasive biopsies, Inivata detects and analyses genomic material from a cancer patient’s cell-free DNA (ctDNA) which can be collected through a simple blood sample.

This minimally-invasive approach – a liquid biopsy – offers a revolution in how cancer is detected, monitored and treated. The test allows precise analysis of cancer-related mutations present in ctDNA, and is designed to provide oncologists with clinically actionable genomic information to guide therapy selection, monitor treatment progress and detect new mutations as they emerge.

Inivata was spun out from Cancer Research UK in 2014 and launched with £4.0 million in funding from Innovations, Cambridge Innovation Capital and Johnson & Johnson Development Corporation.

The company made such rapid progress that in January 2016 it attracted a further £31.5 million in Series A fundraising. Innovations committed £10.0 million to the round alongside existing investors Cambridge Innovation Capital (CIC) and Johnson & Johnson Innovation (JJDC) and new investor Woodford Patient Capital Trust.

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4. Matching world-class management to world-class science

A common theme amongst the management that we attract to our portfolio companies is that many have blue-chip CVs, having worked for large corporations before going on to success in high-growth entrepreneurial start-ups. We like people who have proven abilities to operate in both environments, because we need both the entrepreneurial drive and an ability to understand what the ultimate acquirer expects to see before writing a large cheque, or what the public markets expect post IPO.

Putting the right team in place

Crucially for long term value creation, Innovations makes sure that its portfolio companies are set up correctly from the start. This means ensuring that the venture is funded sufficiently to attract experienced management with a track record and an insightful understanding of the market in which the technology will be deployed. It also means managing the evolution of the management team so that it is ‘stage-relevant’ to the lifecycle of the company.

The continuity of funding we provide from start-up to scale-up, and our close working relationship with the management of our portfolio companies, are important components of our model – it is far harder to influence a company’s development if you are a late-stage investor inheriting a team and investor base.

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Inflowmatix

Water network data analytics business Inflowmatix demonstrates the advantages of bringing in management with directly relevant industry experience to work alongside academic founders to lead the development of spin-out companies. This pairing ensures the correct blend of research, application expertise, technical skills and business innovation.

Inflowmatix provides water flow and pipe health analytics to water utilities worldwide, enabling them to diagnose hydraulic instabilities and failures, reduce bursts, prioritise network maintenance and reduce operating costs. The company was formed in July 2015 with £1.0 million in seed funding from Innovations. In May 2016, the company completed a £3.0 million series A round led by Innovations alongside new investor Parkwalk Advisors Limited.

Inflowmatix’s technology is based on research carried out in Dr Ivan Stoianov’s InfraSense Labs, in the Department of Civil & Environmental Engineering at Imperial College London.

In just over a year since formation, Innovations and Dr Stoianov have together brought in an experienced

management team including Chairman Dr David Parker, who has extensive experience in building companies from early-stage, and new CEO Steve George, who joined the company in October 2015.

Steve has worked in the water industry since 1999 and joined Inflowmatix from the Suez Group, where he worked in business and market development. He holds a wealth of experience in providing services and software solutions to water network management and was formerly IT Director for a leading UK consultancy company providing leakage management software and services. This industry expertise has helped Inflowmatix engage closely with water companies in order to ensure that the data and solutions the company is developing are valuable to customers.

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5. Syndication

Smart, sector-focused co-investors bring significant added value. They carry out extensive due diligence (in addition to our own) and thus help us to validate our portfolio and avoid ‘originator’s bias’, thereby ensuring that there is real quality in our portfolio. Meanwhile, we use our position of influence and our pre-emption rights as a founder shareholder to deploy the appropriate share of our capital.

Quality shareholders and co-investors

Syndication of investment is an important part of our approach to building strong companies. Our co-investors bring capital, but they also bring insight and people with operational experience, which can be invaluable.

Strategic investors also bring directly relevant expertise that can help with our companies’ development, for example with clinical development plans. And of course, they may be a potential acquirer, so they increase the range of trade sale options.

Shareholders• Invesco Asset Management• Lansdowne Partners• Woodford Patient Capital Trust• Imperial College London

Specialist investors• Sofinnova Partners• SV Life Sciences• Fidelity BioSciences• Abingworth• Octopus Investments• Jetstream Ventures

Strategic investors• Astellas• SR One• Pfizer Ventures Investments• Roche Venture Fund• Johnson & Johnson Innovation• Merck Ventures BV• Robert Bosch Venture Capital• Lundbeckfond Ventures

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Storm Therapeutics

Storm Therapeutics (formerly Iceni Therapeutics) is a classic example of our model – helping world-leading scientists to turn their outstanding research into exciting early-stage companies by providing long-term funding and building great syndicates of like-minded co-investors.

Storm Therapeutics is a drug discovery and development company focused on the identification and development of small molecules that target RNA-modifying enzymes. The company is a spin-out from the University of Cambridge’s Gurdon Institute and was created to commercialise the ground-breaking work of its founders, Professor Tony Kouzarides and Professor Eric Miska, in the field of RNA epigenetics.

RNA (ribonucleic acid) is the template of all protein synthesis and has key regulatory functions in cells. There is growing understanding of the importance of RNA modification in the development of cancer, opening up novel therapeutic targets in cancer treatment.

Innovations led the seed funding round for Storm Therapeutics in May 2015. On 28 June 2016, Innovations committed a further £3.0 million to the company’s £12.0 million Series A funding round, alongside existing investor Cambridge Innovation Capital and new investors Merck Ventures BV and Pfizer Venture Investments.

Storm Therapeutics intends to develop therapeutics, using IP licensed from Cambridge Enterprise (the commercialisation arm of the University of Cambridge). The proceeds of the funding will be used to identify small molecule modulators of these novel targets in RNA modification pathways and develop them into new classes of anti-cancer treatments.

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Chief Executive Officer’s review

The long-term prospects for the Group remain very good

The fundamentals of our business are very strong, with many of our portfolio companies making significant progress during the year.

I am pleased to report on another year of progress as we continue to develop our portfolio and lay the foundations for future value creation. However, I look back on the year with somewhat mixed emotions, because whilst I am excited about the very real progress we are making in the business and across our portfolio, I am disappointed by one specific non-cash event which impacted our headline numbers, namely the failure of Circassia’s Phase III trial.

This event should not overshadow a very good year for the Group. We have come a long way with a number of key developments which may ultimately prove to be of greater significance to shareholders.

Notable achievements included signing new strategic partnerships to increase our visibility of new investment opportunities; strengthening our balance sheet by means of a £100 million Placing; and once again increasing the level of investment in our portfolio to a record level. The Group’s net portfolio value is now £335.1 million and, although we are reporting a loss of £63.1 million for the period, net assets increased by £35.8 million to £455.9 million.


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The fundamentals of the business are very strong. Many of our portfolio companies made significant technical, clinical and commercial progress during the year and we led six major private funding rounds.

Significantly, there is growing evidence of strong partnership interest in our portfolio, both from corporate venture investors (e.g. Johnson & Johnson Innovations, SR One, Roche Venture Fund and Robert Bosch) and industry (e.g. BMS, Consort Medical, TSYS Inc and Sumitomo Chemical Co Limited) with the recently announced collaboration and licence agreement between Crescendo Biologics and Takeda Pharmaceuticals being a prime example. We remain confident about the prospects for long-term value creation.

Visibility of new investment opportunities remains very high. The quality and experience of our team means our ability to identify potential stars is continually improving. We have accelerated the development of some of our more recently formed companies. Good examples of this include the £31.5 million Series A funding round for Inivata and the £19 million Series A round in Kesios.

We added seven new companies to the accelerated growth portfolio during the year. As always, we have adopted a measured approach to growing the number of companies in our portfolio with a resolute focus on quality over quantity. Already the pipeline for the next financial year is looking strong.

Circassia’s Phase III trialThe result of Circassia’s Phase III trial was a disappointment. The large body of Phase II clinical data was indicative of a successful outcome. However, we understand that clinical trials do not always go to plan, so we hold a diversified portfolio of strong, well-funded and well-managed portfolio companies, which reduces the Group-level risk of failure of individual assets.

We are encouraged that Circassia has taken a similar approach in its own business. In addition to its allergy immunotherapy products, Circassia has built a fast-growing asthma diagnostics and management platform, and a broad pipeline of respiratory products, each of which have considerable value in their own right. The business is well funded and we are confident its experienced management team will implement whatever changes they deem necessary to adjust for this setback and create value in future.

The failure of this trial has led to a non-cash reduction in carrying value of Circassia, down by £54.8 million.

Strong balance sheetIn February 2016, the Group raised £100.0 million (before expenses) by means of a Placing. As of 31 July 2016, the Group had total cash and short-term liquidity investments of £148.3 million (2015: £128.1 million). In addition, the Group had a £50.0 million EIB loan facility that was undrawn at year-end.

This balance sheet strength combined with our policy of building strong investor syndicates, means we are in a strong position both in absolute terms and relative to our peers, particularly over companies with earlier-stage portfolios or non-syndicated investments.

“ The quality of new opportunities that the Group is seeing from the academic, research and entrepreneurial community within the ‘Golden Triangle’ remains very high, with a healthy stream of new investment opportunities.”

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Major funding rounds completed during the yearPortfolio company Funding round Co-investors

Kesios Therapeutics Limited £19.0 million series A SV Life Sciences, AbingworthInivata Limited £31.5 million Series A Cambridge Innovation Capital, Johnson & Johnson Innovation,

Woodford Patient Capital TrustMISSION Therapeutics £60.0 million funding round Woodford Patient Capital Trust plc, Sofinnova Partners, SR One,

Roche Venture Fund and Pfizer Venture InvestmentsNexeon Limited £30.0 million equity funding round Invesco Asset Management, Woodford Investment Management LLPPrecision Ocular Ltd £15.5 million investment Consort Medical plc, NeoMed, Hovione Scientia LimitedStorm Therapeutics £12.0 million Series A Cambridge Innovation Capital and new investors Merck Ventures BV

and Pfizer Venture Investments

Chief Executive Officer’s review continued

Putting our capital to workDuring the year the Group continued to deploy its substantial capital resources into its investment portfolio, and once again increased its investment levels, investing £69.9 million across 33 portfolio companies during the year (2015: £60.8 million across 30 portfolio companies). This is more than double the level of just two years ago and reflects the ambition and increasing maturity of our portfolio companies.

Of this 79% (£55.0 million) was invested into existing portfolio companies, with the balance being invested in new companies added to the portfolio. The Group’s portfolio companies raised a total of £206.4 million during the year (2015: £479.9 million).

Six portfolio companies completed major funding rounds during the period. Collectively these companies: MISSION Therapeutics, Nexeon, Inivata, Kesios Therapeutics, Precision Ocular and Storm Therapeutics raised £168.0 million. The fact that these private companies were able to raise such substantial funding is a result of our proactive policy of building strong investor syndicates and shows that the Group is not dependent upon the public markets to ensure that its portfolio companies grow with pace and ambition. The calibre and breadth of co-investors is notable and includes strategic investors, specialist funds and financial investors (see Table).

In addition to these major rounds, the Group completed investments into 20 other portfolio companies, including leading funding rounds in Featurespace (£6.2 million), Econic (£5.0 million), Abingdon Health (£3.0 million), Aqdot (£5.0 million) and Inflowmatix (£3.0 million).

The overall net portfolio value increased by £7.9 million to £335.1 million (2015: £327.2 million) through a combination of investments of £69.9 million, disposals of £5.8 million and net portfolio losses of £56.2 million. A major component this year was the £66.9 million net fair value loss attributable to movements in the value of the Group’s quoted portfolio which is marked-to-market at period end. Circassia Pharmaceuticals accounted for £54.8 million (or 81.9%) of the drop in value in the quoted portfolio.

Net assets were £455.9 million (2015: £420.1 million).

Total disposals for the year were £5.8 million. We completed the sale of three portfolio companies. In April 2016, the Group crystallised a net fair value gain of circa £1.4 million from the sale of its 16.4% interest in Stanmore Implants Worldwide to Stryker Corporation. This was followed by the sale of two organic portfolio companies, Alkion Biopharma and Hark Health Solutions, which were sold to Evonik Industries and Google DeepMind respectively. Both of these companies were spin-outs from Imperial College London in which Innovations held equity as a result of the Group’s Technology Transfer Office providing early commercial support to the founders, as well as from licensing the founding IP.

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Technology Transfer OfficeThe Group’s Technology Transfer Office (‘TTO’) was broadly in line with budget on all key metrics. Licensing and royalty income was £2.2 million (2015: £2.8 million). The TTO managed the sale of two portfolio companies: Hark Health Solutions and Alkion Biopharma.

The number of opportunities flowing through the pipeline from Imperial College London remains healthy. The Group reviewed 425 invention disclosures (2015: 386) and seven new Imperial spin-out companies were formed during the year (2015: 7) and joined the Group’s organic growth portfolio. 39 licensing deals were signed (2015: 39) and 74 patents filed during the period.

Continuing momentum in the portfolio We remain very encouraged by the performance of the portfolio. Full details are included in the ‘Portfolio update’ section on page 32, but notable highlights include:• Nexeon: the company is continuing to optimise its

silicon materials for the blended carbon/silicon anode applications currently being demanded by the battery industry. Material development has advanced to the point that the company can now offer a product that outperforms SiOx, the only silicon-based material being used in commercial quantities today. Product sampling is underway with several potential customers in both the consumer electronics and automotive sectors. On 11 October 2016 Nexeon opened a new office and development laboratory in Yokohama, close to many of the company’s development partners and prospective customers in the electronics and automotive sectors.

• PsiOxus Therapeutics: announced an exclusive clinical collaboration agreement to evaluate the safety, tolerability, and preliminary efficacy of Enadenotucirev in combination with Bristol-Myers Squibb’s PD-1 immune checkpoint inhibitor Opdivo® (nivolumab) to treat a range of tumour types in late-stage cancer patients. The company also announced a combination study with Paclitaxel in ovarian cancer.

• Cell Medica: significantly broadened its product pipeline with the announcement of an exclusive licensing agreement and a co-development partnership with the Baylor College of Medicine to develop next-generation cellular immunotherapies. This new partnership is expected to generate a significant number of new products for the company’s cellular immunotherapy pipeline and was followed shortly by the acquisition of Delenex Therapeutics AG, a Swiss biopharmaceutical company whose proprietary PENTRA®Body technology provides a key enabling technology for Cell Medica to develop a pipeline of next-generation CAR-modified immunotherapies. In August 2016, Cell Medica announced a research collaboration with UCL to generate leading-edge modified T Cell Receptor (TCR) products for the treatment of cancer.

• TopiVert Pharma: completed a Phase I trial of its lead product TOP1288 in ulcerative colitis. A Phase IIa proof of concept study started in October 2016. TopiVert also expects to start the clinical development of TOP1630, its candidate for dry-eye disease in early 2017.

• Circassia Pharmaceuticals plc: The Phase III failure was disappointing, but the company made progress in its respiratory products portfolio with the announcement that its lead asthma product has been approved in the UK. Circassia expects two further filings for regulatory approval by the end of 2017.

• Abzena plc: raised £20.0 million by means of a placing and completed two acquisitions in the USA. The company also announced a licensing agreement with a large, publicly listed US biotech for the development of Antibody-Drug Conjugates (ADCs) with the potential to receive licence fees and milestone payments of up to $150.0 million, and a manufacturing agreement with Faron Pharmaceuticals (AIM: FARN) to manufacture Clevegen®, a novel therapeutic antibody being developed to reduce immune suppression in cancer.

• Autifony Therapeutics: announced the successful completion of a Phase I study of AUT00206, its first-in-class Kv3 modulator for schizophrenia. This partly offsets the disappointing news of the failure of the company’s Phase II study in age-related hearing loss involving a second molecule AUT00063. Meanwhile, the Quick+fire study in adult cochlear implant users, which started in July 2016 and will test AUT00063 in a population of patients with different hearing difficulties is continuing.

• Featurespace: announced a number of significant new customer wins in the UK and growing traction in the USA. These include a five-year agreement with Zapp Limited, the UK mobile payment innovator; a new project with Camelot, the UK National Lottery operator; and a new partnership with US company TSYS Inc, one of the world’s largest payment solutions and services companies.

• Cortexica Vision Systems: announced the successful completion of a six-month consumer trial of its findSimilar™ product discovery tool on the John Lewis iPad app. As a result, John Lewis has permanently added this function to its Men’s and Women’s fashion product list pages.

• Abingdon Health: signed a multi-year, exclusive, global distribution agreement with Sebia, the world leader in medical diagnostics by electrophoresis, for its Seralite® – FLC serum product. The company also achieved a CE Mark for its related product Seralite® – FLC urine. In April 2016, the company announced a collaboration agreement with Sumitomo Chemical Co Limited to develop a next-generation multiplexed point of care biosensor device.

• Oxford Immunotec: acquired Imugen, Inc., a Massachusetts-based clinical laboratory that specialises in testing for tick-borne diseases. This transaction has expanded the company’s addressable market, whilst leveraging its existing commercial infrastructure.

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Building a pipeline for future value creationDuring the year, Group added seven new unquoted accelerated growth companies to the portfolio. In line with the plans set out the previous Annual Report, the Group is continuing to develop its investment portfolio by scaling its activities in non-therapeutics sectors. It is significant therefore that five of these seven new portfolio companies are in the ICT & Digital sector (Garrison Technology, Import.io, Telectic, WaveOptics and SAM Labs) one in the Group’s Engineering & Materials sector (Silicon Microgravity) and one in Therapeutics (Precision Ocular).

The Group’s accelerated growth portfolio now comprises 45 companies (2015: 39 companies) which collectively account for 99% of the portfolio by value.

The TTO’s company formation unit, Co.Create also contributed to the pipeline of future opportunities, forming seven new organic growth businesses. Co.Create works with academics at Imperial to form businesses, which will either grow organically or seek funding from Angel or VC investors. Innovations receives an equity stake at nil cost in return for its support in establishing the business and for the transfer of IP from Imperial College into the company.

Broadening the Group’s access to new IPIn January 2016, the Group announced two new initiatives aimed at expanding its licence portfolio and broadening its visibility of, and access to, IP from the elite universities within the ‘Golden Triangle’.

The first of these was participation in the new UCL Technology Fund LP, the first investment fund that University College London (UCL) has created to commercialise its multidisciplinary research. Over the next five years this fund is expected to invest £50.0 million to support ideas from academics in life sciences and physical sciences, and will be used for early-stage proof of concept funding, licensing opportunities and the formation of new spin-out companies.

Innovations is a Limited Partner (LP) in the fund and has committed £24.8 million to it, matched by a commitment of the same amount from the European Investment Fund (EIF). Participation in the fund provides Innovations with visibility of potential intellectual property from across UCL’s research base.

Chief Executive Officer’s review continued

In addition, the fund’s general partner Albion Ventures has obligations to offer co-investment opportunities to the LPs, to alert them to any projects that the fund chooses not to invest in, and to negotiate the right for LPs to take up pre-emption rights that the fund does not take up. As a result, in addition to its £24.8 million commitment to the fund, the expectation is that Innovations will also have opportunities to make direct investments into selected UCL Business plc (UCLB) spin-outs to support their long term growth and value creation.

Participation thus significantly increases Innovations’ access to deal-flow from one of the world’s leading universities, and also provides a template for a new, collaborative model which could be replicated at other universities. The fund has started to make its first investments including providing Proof of Concept funding to spin-out from the Department of Computer Science and backing for two early-stage therapeutics companies.

On 25 January 2016, Innovations announced that it had committed £3.3 million to Apollo Therapeutics, a new £40.0 million joint venture between Innovations, Cambridge Enterprise (the technology transfer office of the University of Cambridge), UCLB (the technology commercialisation company of UCL) and three of the world’s leading pharma companies, AstraZeneca, GlaxoSmithKline and Johnson & Johnson.

This new venture is supporting the translation of outstanding academic therapeutic science into innovative new medicines by combining the skills of the university academics with industry expertise at an early stage. The ultimate aim is to speed up the development of new medicines, as well as reducing the cost and improving the attrition rate of potential opportunities, whilst sharing the risk of early development.

Over the initial six-year life of the Apollo venture, the three TTOs will each contribute £3.3 million, while the three pharmaceutical companies will each contribute £10.0 million, as well as providing research and development expertise and resources to assist with the development of projects. In May 2016, Dr Richard Butt joined as CEO, bringing valuable experience in drug discovery and development following 20 years’ experience with Pfizer.

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Outlook The long-term prospects for the Group remain very promising. We have created a well-diversified business, with a strong financial position and a dynamic portfolio with potential for near-term exits and partnering transactions.

Our portfolio now includes 45 accelerated growth companies comprising four quoted and 41 private companies with the vast majority (85%) valued at cost or last funding round. We now have 10 companies with net carrying values between £10 million to £50 million spread across three sectors (see table on page 58). Of these 10 companies, eight are private companies with an average age of 8.6 years. These are well-managed and well-capitalised businesses which have raised an average of £38.9 million each. In addition, we have considerable strength in depth from other companies with potential, and the capital required to enable us to support their growth.

In the coming financial year, we will continue to deploy the bulk of our investment capital in existing portfolio companies. We expect to maintain this investment this year, in order to accelerate the growth of leading assets and maintain significant stakes in our high-potential companies. Creating strong syndicates with like-minded co-investors will remain an important part of our approach, allowing us to build substantial, well-managed and well-funded businesses whilst leveraging the complementary expertise of our co-investors.

Whilst the majority of our investment capital will be deployed in companies that we have co-founded and know intimately, we will maintain our new business creation activity at the current rate by selectively adding five to eight new companies per annum. We plan to continue our policy of balancing our portfolio by proactively growing our investment in non-therapeutics businesses whilst building further capacity in our tech ventures team.

The quality of new opportunities that the Group is seeing from the academic, research and entrepreneurial community within the ‘Golden Triangle’ remains very high, with a healthy stream of new investment opportunities. Imperial College is a key component of this cluster and remains a highly productive source of new opportunities. Since 2011, we have broadened our reach across the ‘Golden Triangle’ but still around one third of all of the Group’s new companies have come from this strategically important relationship.

We remain in a very strong financial position with nearly £200 million available to invest. This gives us ample capital to scale up our investment in the significant opportunities within our unquoted portfolio, whilst maximising the new opportunities expected from the new alliances with UCL Technology Fund and Apollo Therapeutics.

The current financial year has started very well. In the first quarter, portfolio company Permasense was sold to Emerson Electric and the Group secured a new five-year contract to manage the incubator at Imperial College London’s new White City Campus. Additionally, portfolio company Crescendo Biologics signed a global, strategic, multi-target collaboration and licence agreement with Takeda Pharmaceutical which has a potential value of $790.0 million subject to the successful completion of milestones. The Group has also added two new companies to its investment portfolio: ThisWay Global, a Cambridge-based technology company that is developing a software platform powered by machine learning for the recruitment industry; and Artios Pharma, a new Cambridge-based private biotech company, focused on the development of novel DNA Damage Response (DDR) cancer therapies.

The Board remains confident that Innovations’ business model and key principles of attracting world-class management, building stakes in selected portfolio companies alongside appropriate co-investors, and having the patience and capital resources to hold for the long-term, will generate attractive returns for shareholders.


12 October 2016

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Portfolio update

Our portfolio in detail

Innovations has built particular expertise in the key sectors of Therapeutics, Medtech & Diagnostics, Engineering & Materials, and ICT & Digital. These four sectors reflect the strengths of the UK science base and the technological heritage of the four universities that we work with. We have built our capability in each sector and adapted to each one’s different dynamics.

As at 31 July 2016, the Group had a portfolio of 107 companies. Of these there are 45 accelerated growth companies in which we actively invest and take a seat on the board. Collectively these 45 companies account for 98.8% of our portfolio by value. The balance is represented by 35 ‘lighter-touch’ companies, in which the Group gives support to promote organic growth and revenue generation, and some 27 low-involvement companies where the Group has a historical holding or has acquired shares through IP transactions.

The accelerated growth portfolio had a total net portfolio value of £331.1 million at the end of the financial year (2015: £320.1 million). Of this 46.6% is represented by companies in the therapeutics sector and 22.7% by companies in the Engineering & Materials sector. The Group’s Medtech & Diagnostics companies represent 16.7% of the value. The ICT & Digital sector is a growing part of the Group’s portfolio companies, currently representing 14.0% of the total value, and should increase in the years ahead as the Group puts an increasing focus on this sector.

The Group’s top 10 investments by net fair value represent a carrying value of £202.5 million.

Therapeutics 46.6%

Medtech & Diagnostics 16.7%

Engineering & Materials 22.7%

ICT & Digital 14.0%

Therapeutics 17

Medtech & Diagnostics 7

Engineering & Materials 10

ICT & Digital 11

Imperial College 65.7%

University of Cambridge 15.1%

University of Oxford 11.4%

UCL 1.7%

Other 6.1%

Portfolio analysis by net fair value Accelerated growth companies £331.1m

Portfolio analysis by number Accelerated growth companies 45

Portfolio analysis by source % of total net portfolio value

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Imperial College 29%

University of Cambridge 26%

University of Oxford 12%

UCL 6%

Other 27%

Portfolio source over the last five years% of new portfolio companies

Therapeutics 29%

Medtech & Diagnostics 15%

Engineering & Materials 18%

ICT & Digital 38%

% of new portfolio companies by sector

The Group now has a quoted portfolio of four companies which as of 31 July 2016 had a net investment carrying value of £42.9 million (12.8% of total portfolio value) (2015: £106.8 million, 32.6%) and an unquoted portfolio with a net investment carrying value of £292.2 million (87.2 % of total portfolio value) (2015: £220.4 million, 67.4%) as of the same date.

In the following pages we provide an update on the major developments for all of the Group’s top 10 portfolio companies together with a selection of other portfolio companies that either had significant news flow during the year or are in some other way representative of Innovations’ interests in each sector.

Full details of the Group’s holding, net investment carrying value and cumulative cash invested in each of the top 10 investee companies can be found on page 58.

Our portfolio in detail

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Portfolio update continued

TherapeuticsInnovations continues to prove its ability to identify innovative therapeutic science early in development, build high-quality investment syndicates to provide substantial funding where necessary and develop those assets into leading businesses.

One of our key differentiators from our listed peers is the strength of our therapeutics portfolio, which is truly world-class. During the year, the Group added three new therapeutics companies to this portfolio.

By virtue of Innovations’ success, the sector’s high capital requirements, companies in this sector represent around 57% of the valuation of our top 10 portfolio companies.

£154.2mvalue of our therapeutics assets within our portfolio

£96.3mraised by therapeutics companies during the year

£27.5minvested in therapeutics companies during the year

1new company added to the Therapeutics portfolio

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Crescendo Biologics is a Cambridge-based biopharmaceutical company that is harnessing the power of its proprietary transgenic mouse platform to efficiently discover and develop Humabody® therapeutics with a focus on cancer. The underlying technology was originally developed at the Babraham Institute, Cambridge. Crescendo was formed to commercialise this research and is backed by an impressive syndicate of blue-chip investors including Innovations, Sofinnova Partners, Astellas Venture Management and EMBL Ventures.

Focus on

Crescendo Biologics

Humabodies are a novel class of small, robust and potent protein therapeutics based on fully human VH domains. VH fragments are the smallest portions of immunoglobulin that retain target specificity and potency and are the most robust antibody fragments in terms of stability, ease of engineering and manufacture.

Compared to antibodies, Humabodies offer a unique combination of potential benefits that results from their small size, cost-effective production and modular configuration. This means that they can be readily modified and customised,

for example by extending their half-life to match a relevant therapeutic treatment regime. Cresecendo is building a pipeline of new differentiated medicines, including Humabody™ Drug Conjugates (HDCs) and multi-specific immuno-oncology (IO) modulators.

On 10 October 2016, Crescendo announced a a global, strategic, multi-target collaboration and licence agreement with Takeda Pharmaceutical Company for the development of drugs for the treatment of cancer indications with high unmet need.

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Circassia Pharmaceuticals plcCircassia is a speciality biopharmaceutical business focused on allergy and respiratory disease. The company has an established commercial infrastructure, marketed products, a pipeline of near-term therapies and a portfolio of next-generation treatments targeting multi-billion dollar market opportunities.

Circassia was established in 2006 based on a novel allergy immunotherapy platform, ToleroMune®, originally developed at Imperial College London. In February 2007, Innovations led the company’s Series A funding round, investing £2.0 million of a £6.5 million round. Subsequently Innovations led three other funding rounds, investing a total of £25.5 million in Circassia up until the company’s IPO and listing on the Main Market of the London Stock Exchange in March 2014. This IPO was followed in 2015 by a Placing which provided the finance for the Company to acquire Aerocrine and Prosonix as part of its strategy to broaden its pipeline beyond its original immunotherapy assets.

These acquisitions significantly diversified Circassia’s portfolio and Circassia is now a speciality biopharmaceutical company focused on the diagnosis, treatment and management of allergy, asthma and chronic obstructive pulmonary disease (COPD). From Aerocrine the company gained a novel, market-leading allergy management and diagnostics product NIOX® that is used by clinicians in over 40 countries to aid asthma diagnosis and management. Circassia markets these products directly in the USA and Germany and they are sold elsewhere around the world through a network of distributors.

The acquisition of Prosonix has provided Circassia with a broad pipeline of respiratory products. Circassia’s lead asthma product targets substitution of GSK’s Flixotide® pMDI, and was recently approved in the UK. Circassia expects two further filings for regulatory approval by the end of 2017, for products targeting direct substitution of Serevent® pMDI and Seretide® pMDI. The company is also developing a number of novel treatments for COPD.

On 20 June 2016, Circassia announced top-line results from its investigational cat allergy immunotherapy Phase III study. In the study, both treatment regimens and placebo greatly, and equally, reduced subjects’ combined allergy symptom and rescue medication use score from baseline. This meant that despite dramatic improvements in subjects’ allergy symptoms and rescue medication use, the very marked placebo effect meant that the treatment did not meet the study’s primary endpoint.

As a result of this news, management decided to minimise its expenditure on its allergy programme. Accordingly, Circassia stopped development activities in its grass and ragweed allergy programmes. The Phase IIb study of its house dust

mite allergy treatment will continue to completion in spring 2017. The company’s early-stage, small-scale Phase II birch allergy study also continued to completion.

On 27 September 2016, Circassia reported its interim results for the six months to 30 June 2016. The company noted substantially increased revenues from its asthma management products, strong growth in its respiratory portfolio and an expansion of its commercial footprint in order to capitalise on its broadening pipeline and early work on a number of new product opportunities.

The company also reported encouraging results from its Phase II birch allergy study but will wait for the results of its large-scale (700 patients enrolled) house dust mite field study which are due in Spring 2017, before reassessing the wider strategy for its allergy immunotherapy portfolio.

PsiOxus Therapeutics LimitedPsiOxus Therapeutics is an Oxford-based immuno-oncology company which has developed a patented platform for the systemic delivery of tumour-targeted oncolytic immune therapeutics. The company was founded in 2010 in its present form, having been created by the merger of Imperial College London spin-out Myotec Therapeutics with Oxford spin-out Hybrid BioSystems.

Founder John Beadle, a former Entrepreneur in Residence at Innovations, has been CEO from the start. The new team was further strengthened by the appointment of Paolo Paoletti as Chairman in January 2016. Dr Paoletti is CEO of another Innovations portfolio company, Kesios Therapeutics, and was previously president, GSK oncology and Vice President, clinical development at Lilly Oncology. PsiOxus has raised £45.7 million to date, with the most recent funding round being a £25.0 million Series C in May 2015.

PsiOxus’ Tumour-Specific Immuno-Gene (T-SIGn) therapy platform is based on the company’s oncolytic virus, enadenotucirev, which has unique properties that allow it to be delivered systemically via intravenous administration and to replicate only in tumour cells. The virus’s anti-cancer capability can be further enhanced through ‘arming’ – a process that involves the addition of new genes to the virus. The armed T-SIGn platform makes possible creation of a broad range of systemically delivered oncolytic immune therapeutics, including oncolytic viruses that express one or more antibodies, cytokines, immunomodulatory proteins, and nucleotide (RNA)-based payloads.

The T-SIGn platform is in pre-clinical stage, while Phase I/II clinical trials are ongoing with enadenotucirev in a variety of different tumour types and as a combination therapy alongside both checkpoint inhibitors (SPICE study with nivolumab) and conventional chemotherapeutics (OCTAVE study with paclitaxel).

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On 30 June 2016 PsiOxus announced an exclusive clinical collaboration agreement to evaluate the safety, tolerability, and preliminary efficacy of enadenotucirev in combination with Bristol-Myers Squibb’s Immuno-Oncology (I-O) agent Opdivo® (nivolumab) to treat a range of tumour types in late-stage cancer patients. Opdivo® was the first PD-1 immune checkpoint inhibitor to receive regulatory approval anywhere in the world in July 2014 and currently has regulatory approval in 51 countries including the USA, Japan and the European Union.

Given that enadenotucirev is designed to have immune stimulating effects and Opdivo® is designed to alleviate immune suppression, this new clinical collaboration will support Phase I studies to determine whether combining these two agents can significantly improve the proportion of patients achieving objective tumour responses, the extent of tumour shrinkage, and/or the durability of responses. Under the terms of this agreement, Bristol-Myers Squibb will make a one-time upfront payment of $10.0 million to PsiOxus, and the parties will share development costs.

Cell Medica LimitedCell Medica develops, manufactures and markets cellular immunotherapy products for the treatment of cancer and infections. Cell Medica employs a range of leading-edge technologies to develop immune cell products with the potential to transform the lives of cancer patients in the years ahead.

Cell Medica’s lead oncology programme is aimed at a range of cancers associated with the oncogenic Epstein Barr virus (EBV), including non-Hodgkin lymphomas, Hodgkin lymphoma and nasopharyngeal carcinoma. In addition to its oncology programs, the company is pioneering the use of adoptive T cell immunotherapy for the treatment of cytomegalovirus and adenovirus infections in patients who are profoundly immunosuppressed from allogeneic haematopoietic stem cell (bone marrow) transplantation.

The business was founded by CEO Gregg Sando, who gained an MSc Immunology at Imperial College London following a career in investment banking in London and New York. Since its initial seed funding round in 2007, Cell Medica has raised over £72.5 million of which £19.8 million has been invested by Innovations. The bulk of this funding was provided by a £50.0 million Series B funding in November 2014, which was led by Innovations alongside co-investors Invesco and Woodford Investment Management.

Cell Medica’s lead cancer immunotherapy product baltaleucel-T (CMD-003) comprises engineered T-cells targeted at malignant cells that express the oncogenic Epstein Barr virus. EBV is part of the Herpes family of viruses and was the first virus to be discovered to cause cancer.

It is now widely associated with a range of cancers. The safety and efficacy of this novel cancer immunotherapy is currently being investigated in a ground-breaking international Phase II clinical trial (CITADEL) for the treatment of advanced extra nodal natural killer T cell lymphoma (ENKTCL). The trial enrolled its first patient in early 2015 and initial data is expected towards end-2016 with completion expected in 2017.

CMD-003 was given orphan drug status by the FDA in March 2015 for the treatment of EBV+ non-Hodgkin lymphomas and in July 2016 the European Commission (EC) granted the product orphan drug designations for the treatment of ENKTCL and post-transplant lymphoproliferative disorder (PTLD).

Towards the end of 2016 the company expects to initiate label expansion studies for baltaleucel-T with the CIVIC trial. This will study baltaleucel-T in three additional indications: EBV+ Hodgkin’s lymphoma, EBV+ diffuse large B cell lymphoma and EBV+ post-transplant lympho-proliferative disease.

On 17 June 2016, Cell Medica announced an exclusive licensing agreement and a co-development partnership with the Baylor College of Medicine (‘Baylor’) to develop next-generation cellular immunotherapies incorporating chimeric antigen receptors (CARs) with genetically enhanced potency for the treatment of cancers that do not respond to conventional therapies. This new collaboration provides Cell Medica with an exclusive licence over several Baylor cell and gene technologies and an option to license new products introduced into the co-development partnership by Baylor’s leading research teams in the field of genetically engineered immune cells. As a result it is expected to generate a significant number of new products for the company’s cellular immunotherapy pipeline.

This news was followed on 12 July 2016, by the announcement of the acquisition of Delenex Therapeutics AG a privately held, clinical-stage biopharmaceutical company based in Switzerland. Delenex is focused on the development of locally and systemically applied antibody therapeutics and its proprietary PENTRA®Body technology provides a key enabling technology for Cell Medica to develop a pipeline of next-generation CAR-modified immunotherapies. Delenex’s scientific team and the company’s laboratory facilities in Switzerland will be maintained within Cell Medica’s global R&D operations which now encompass operations in the UK, USA, Germany and Switzerland.

Just after the year-end, on 24 August 2016, Cell Medica announced a research collaboration with UCL which will see the company utilise UCL’s novel T cell receptor (TCR) technology to generate leading-edge modified TCR products for the treatment of cancer. The collaboration also provides Cell Medica with an exclusive worldwide option and licence agreement for these technologies, as well as TCR gene sequences for the development and commercialisation of specific products.

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Abzena plcAbzena provides proprietary technologies and complementary services to enable the development and manufacture of biopharmaceutical products, a growing area that requires specialist knowledge and expertise. Abzena has a global customer base which includes the majority of the top 20 biopharmaceutical companies as well as large and small biotech companies and academic groups.

During the period, Abzena completed two acquisitions in the USA which have given it a footprint on both the East and West coasts of the USA and a broader offering for its customers. In September 2015, the company acquired PacificGMP, a contract biopharmaceutical manufacturing and development company based in San Diego, USA. In December 2015, it also acquired The Chemistry Research Solution (TCRS), a contract chemistry and bioconjugation business based in Bristol, near Philadelphia. This acquisition was partly funded by a £20.0 million placing announced in the previous month.

On 25 January 2016, Abzena announced that it had entered into a licensing agreement with a large, publicly listed US biotech for the development of Antibody-Drug Conjugates (ADCs) based on Abzena’s ThioBridge™ technology. The agreement covers the development of ADCs against three undisclosed targets. Abzena will receive an initial licence and target nomination fee and has the potential to receive further licence fees and milestone payments of up to $150.0 million. The licensing agreement follows a research collaboration between the two parties, which included the evaluation of multiple ADCs for safety and efficacy in pre-clinical models.

On 13 June 2016, Abzena’s full-year results highlighted a period of strong growth. The acquisitions of TCRS and PacificGMP significantly expanded Abzena’s offering and generated a significant increase in business from US-based customers. The company also reported that several of its ‘ABZENA Inside’ programmes were making strong progress towards commercialisation with leading partners, notably GS-5745 (Gilead Sciences) in gastric cancer. Abzena entered into a further eight licensing agreements in the financial year, bringing the total to over 40. Eleven ABZENA Inside programmes are in clinical trials funded by partners.

On 14 July 2016, Abzena announced a joint venture with the Baylor Scott & White Research Institute (BSWRI) based in Texas, to create a new company, Denceptor Therapeutics Limited, which will develop immunotherapeutic products to treat cancer and autoimmune diseases using BSWRI’s dendritic cell receptor-targeting antibodies. These antibodies will be humanised using Abzena’s Composite Human Antibody™ technology to reduce unwanted drug immunogenicity.

On 25 July 2016, Abzena entered into a manufacturing agreement with Faron Pharmaceuticals Limited (AIM: FARN) that will result in Abzena manufacturing Clevegen®, a novel therapeutic antibody being developed by Faron to reduce immune suppression in cancer. Clevegen was humanised by Abzena using its Composite Human Antibody® technology and is the first product produced using this technology that will also be manufactured by Abzena following its acquisition of PacificGMP.

TopiVert Pharma LimitedTopiVert is a clinical-stage biotechnology company developing narrow spectrum kinase inhibitors (NSKIs) as novel, locally-acting medicines for the local treatment of chronic inflammatory diseases of the gastrointestinal tract and eye.

NSKIs are novel small molecules that are potent inhibitors of a range of kinases involved in the inflammatory response. They are designed to have low bioavailability, which reduces their exposure to many of the body’s healthy tissues, thereby enhancing their safety and tolerability profiles. Together, these attributes make NSKIs ideal treatment candidates for chronic inflammatory diseases where long-term therapy demands a sustained effect accompanied by excellent safety and tolerability.

The company was founded in December 2011, following an £8.0 million funding round jointly led by Innovations and SV Life Sciences. In December 2013, TopiVert raised a further £17.0 million in a funding with new investors Johnson & Johnson Development Corporation and Neomed Management, joining the syndicate alongside SV Life Sciences and the Group.

TopiVert’s most advanced drug candidate, TOP1288 for the treatment of ulcerative colitis, has successfully completed Phase I development. On 6 October 2016, the company announced that the first patients had been dosed in its Phase IIa proof-of-concept study.

TopiVert also expects to start the clinical development of TOP1630, its candidate for dry eye disease (DED), in early 2017. Current therapies for these debilitating diseases provide inadequate long-term control in a high proportion of patients and considerable unmet medical need remains.

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MISSION Therapeutics LimitedCambridge-based MISSION Therapeutics was founded in 2011 to commercialise expert research into the ubiquitin pathway for the treatment of cancers and non-malignant disease. It has built a world-leading platform for the discovery and development of first-in-class, small molecule drugs that selectively target deubiquitinating enzymes (‘DUBs’) – an emerging, and hitherto intractable drug class that is attracting significant commercial interest as the potential ‘next kinase area’.

DUBs are involved in multiple cellular processes, including DNA damage response and cell proliferation. The inhibition of these enzymes has considerable potential for the generation of novel drugs for treating cancer and other unmet medical needs, including neurodegenerative disease, muscle wasting and infectious disease. Despite significant efforts within the pharmaceutical sector, there is a lack of DUB inhibitors in clinical development.

MISSION’s leadership team has a wealth of international, commercial and scientific experience and the company has strong links with key academic and research centres including Cancer Research UK laboratories and the Gurdon Institute, University of Cambridge. Professor Steve Jackson at Cancer Research UK laboratories and the Gurdon Institute, University of Cambridge is the scientific founder of MISSION and is the Chief Scientific Officer of the company.

To date, MISSION has raised £86.0 million from investors including a £60.0 million funding round announced on 2 February 2016 which was jointly led by Innovations and new investor Woodford Patient Capital Trust plc, with follow-on investment from existing shareholders Sofinnova Partners, SR One, Roche Venture Fund and Pfizer Venture Investments. The new funding will enable MISSION to maximise the potential of its world-leading DUB platform and advance a series of first-in-class small molecule drug candidates targeting specific DUBs into early clinical development.

Precison Ocular LimitedIn February 2016 Innovations led a £15.5 million investment round in Precision Ocular Limited an Oxford-based retinal therapeutics development company focused on combining proprietary drug delivery technology and drug formulations to treat sight-threatening diseases.

Innovations committed £6.9 million to the round alongside other investors, including NeoMed and V-Bio Ventures an international venture capital firms focused on the healthcare industry; Consort Medical plc, a leading global single-source pharma services drug and delivery device company with whom Precision Ocular has a strategic development and manufacturing agreement; and Hovione Scientia Limited, a leading pharmaceutical manufacturer specialising in particle engineering and drug encapsulation, with whom Precision Ocular is developing proprietary drug products.

Precision Ocular’s delivery technology enables routine injection to deliver drugs and therapeutics to specific tissues in the back of eye, resulting in improved therapeutic benefits and safety. Precision Ocular’s drug formulations are optimised to suit the unique ocular environments where they are delivered, resulting in better pharmacokinetics (drug movement) and pharmacodynamics (therapeutic effect) as well as extended treatment durations.

Precision Ocular’s lead programme is a drug/device combination product that is prepared in a preloaded, single-use, injection instrument and is being developed to treat adults with a number of eye conditions including diabetic macular oedema (DME) and retinal vein occlusion (RVO).

Post year-end

Artios PharmaLimitedOn 21 September 2016, Innovations committed £5.1 million to the £25.0 million Series A funding round of Artios Pharma Ltd., a new Cambridge-based private biotech company, focused on the development of novel DNA Damage Response (DDR) cancer therapies.

Artios was formed with assets from Cancer Research Technology (CRT), the technology transfer unit of Cancer Research UK (CRUK). It is backed by an impressive syndicate of leading European and US life science investors including SV Life Sciences, Merck Ventures, Arix Bioscience PLC, CRT Pioneer Fund (managed by Sixth Element Capital) and AbbVie Ventures (in addition to Innovations). This syndicate reflects Artios’ international ambitions to build a pipeline of first-in-class DDR therapies identified from a network of global, independent collaborators.

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Medtech & DiagnosticsThe Medtech & Diagnostics sector includes businesses that develop medical technologies and businesses that develop diagnostic tools such as those that detect disease or can ascertain the severity of a disease.

UK universities and research institutions, especially those in the ‘Golden Triangle’, have a strong history of developing pioneering advances in these fields and we are well placed to form and fund companies around such innovation.

£56.7mvalue of our Medtech & Diagnostics assets within our portfolio

£35.5mraised by Medtech & Diagnostics companies during the year

£14.5minvested in Medtech & Diagnostics companies during the year

0new companies added to the Medtech & Diagnostics portfolio

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Cambridge-based Ieso Digital Health is transforming the accessibility, affordability and accountability of mental health treatment by delivering therapy online.

Discreet one-to-one therapy is delivered in real time using written (typed) conversation, with patients meeting an accredited therapist in a secure virtual therapy room, at a time and location that is both convenient and comfortable for them.

The use of technology and written conversation offers greater patient choice, more widespread access

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Ieso Digital Health

to effective, evidence-based therapy and a freedom to express themselves by communicating online. A written conversation also improves learning and retention compared to a spoken conversation. The therapy has been clinically validated within the NHS across a range of conditions and has been shown to be comparable or better than face to face therapy.

Innovations first invested in Ieso in 2013 by which time the company had treated a few hundred patients. The company has made huge progress since then and is now the largest provider of Cognitive Behavioural Therapy (CBT) in the UK.

During the last financial year the company had more than 5,000 patient referrals in the NHS, representing a 61% year-on-year growth compared to the same period in 2015. More than 14,000 hours of therapy were delivered in the first half of 2016 alone.

Ieso has now started treating patients in the US via a partnership with Beacon Health Options, the largest behavioural health managed care organisation in the USA and covers 45 million lives.

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Veryan Holdings LimitedVeryan is a medical technology company that has developed and patented a three-dimensional stent, BioMimics 3D™, for use in the peripheral (leg) arteries. The shape of the BioMimics 3D™ stent improves its biomechanical performance and blood flow in the vessel, with a demonstrated benefit on clinical outcomes in peripheral arterial disease.

Existing stents indicated for placement in the leg arteries have a straight tubular design that tends to straighten any curvature present in vessels. This straightening effect may interfere with normal shortening of the femoropopliteal artery during lower limb movement, such as when the knee is bent.

However, Veryan’s BioMimics 3D™ stent technology involves adapting traditional straight stent designs to a patented three-dimensional helical shape, which more closely mimics the natural geometry of the human vascular system. When implanted, the BioMimics stent imparts natural curvature to the diseased artery, thereby promoting swirling blood flow, which improves the outcome of peripheral intervention. The unique biomimetic design of the BioMimics 3D™ stent also provides more flexibility, kink and fracture resistance than other laser-cut nitinol tube stents, making it perform particularly well over long periods of time.

In November 2012, Veryan gained CE Mark approval for its BioMimics 3D™ peripheral stent. This was followed in November 2014, with the publication of the full two-year data from the ‘Mimics’ randomised controlled study, which confirmed that Veryan’s advanced stent design provided statistically significant clinical benefits over two years when compared to straight nitinol stents.

On 14 January 2015, Innovations led an £18.0 million Series B funding round in Veryan, alongside co-investors Invesco, Seroba Kernel and Seven Mile. Innovations committed up to £8.4 million to the round. The proceeds of this fundraising were used to initiate the company’s ongoing MIMICS-2 study.

This is a prospective, single-arm, multicentre clinical study of 280 patients at more than 40 investigational sites in the USA, Germany and Japan. The study is being conducted under an FDA Investigational Device Exemption (IDE), with Japanese PMDA concurrence through the ‘Harmonization by Doing’ initiative, to provide clinical data to support parallel pre-market approval reviews in USA and Japan. On 13 June 2016, Veryan announced that the 200th patient had been recruited to the trial.

Abingdon Health Limited Abingdon Health is a UK-based medical diagnostics group focused on developing, manufacturing and commercialising point of care immunoassay tests for disorders of the immune system. Since the company’s formation in 2008 it has completed a series of selective acquisition and licensing transactions to bring together intellectual property, diagnostic platforms and manufacturing and has also created a sales and marketing structure.

Abingdon Health’s initial focus is on developing rapid tests for haematology oncology and specifically B-cell dyscrasias, which are diseases caused by disorders of plasma cells. The company is addressing unmet clinical needs in this area with the introduction of rapid and near-patient tests for diagnosis and monitoring of B-cell dyscrasias. Abingdon’s first product to market is Seralite®– FLC, the world’s first rapid diagnostic device in multiple myeloma which was launched in March 2015.

On 27 June 2016, the company announced that it has entered into a multi-year, exclusive, global distribution agreement with Sebia, the world leader in medical diagnostics by electrophoresis. The deal allows Sebia to add Abingdon Health’s Seralite®– FLC Dual Kappa and Lambda serum lateral flow immunoassay to its worldwide offering.

This announcement was quickly followed by the news that the company had secured the CE mark for Seralite®– FLC urine. This test utilises the same well characterised antibodies featured in Seralite®– FLC serum and provides accurate quantification of free light chains in urine within 10 minutes as an aid to the diagnosis and management of multiple myeloma.

Abingdon Health is also developing a multiplexed rapid diagnostics technology platform to meet the market need for simple to use, rapid, cost-effective, portable systems. The company’s rapid testing system integrates low-cost Organic Light Emitting diodes (OLEDs) and Organic Photodetectors (OPDs) with immunoassay lateral flow chemistry to allow the quantitative measurement of a range of multiplexed assay panels.

On 18 April 2016, Abingdon Health announced the signing of a collaboration agreement with Sumitomo Chemical Co Limited to develop a next-generation multiplexed point-of-care biosensor device. This agreement follows a two-year joint development agreement between Molecular Vision, a subsidiary of Abingdon Health, and Sumitomo Chemical.

On 11 July 2016, Abingdon announced the completion of a further £3.0 million investment round.

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Oxford Immunotec Global plcOxford Immunotec Global plc, headquartered near Oxford, UK is a global, high-growth diagnostics company focused on developing and commercialising proprietary tests for the management of immune-regulated conditions. The company has an extensive presence in the USA, and since November 2013 has been listed on NASDAQ. Revenues for the year ended 31 December 2015 were $62.8 million an increase of 33% on a constant currency basis compared to prior year.

Oxford Immunotec’s first product is the T-SPOT®TB test, which is used to test for tuberculosis infection. This diagnostic test has been approved for sale in over 50 countries, including the USA, where it has received pre-market approval from the Food and Drug Administration, Europe, where it has obtained a CE mark, Japan and China. The T-SPOT®TB test has advantages over current TB diagnosis methods (such as the tuberculin skin test), as it returns results more quickly and more accurately, and is suitable for use in a wider range of patients.

In addition, Oxford Immunotec has two other products, the T-SPOT.CMV test and the T-SPOT.PRT test as part of a series of products intended for the transplantation market. In addition to these three products, the company has an additional six active development programmes, each of which leverages its T cell, B cell and innate immune measuring technology.

On 23 June 2016, Oxford Immunotec announced it has entered into a definitive agreement to acquire Imugen, Inc., a Massachusetts-based clinical laboratory focused on developing and performing specialised testing for tick-borne diseases, for US$22.2 million in an all-cash transaction. This transaction is a significant step forward for Oxford Immunotec as it expands the company’s addressable market, whilst leveraging its existing commercial infrastructure to grow and diversify its revenue streams.

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Engineering & MaterialsWe take a broad approach to investing in the Engineering & Materials sector, though our focus is on enabling or platform technologies that have the potential to form the basis of very large businesses addressing significant global markets.

Many advances in the fields of engineering and materials derive from fundamental research undertaken at universities, such as those within the ‘Golden Triangle’. Our close links to these research centres give us good insight into new developments and an early chance to identify these opportunities.

£77.9mvalue of our Engineering & Materials assets within our portfolio

£49.3mraised by Engineering & Materials companies during the year

£14.6minvested in Engineering & Materials companies during the year

1new company added to the Engineering & Materials portfolio

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One of the new additions to Innovations’ accelerated growth portfolio this year was Cambridge-based Silicon Microgravity (‘SMG’) a newly-formed University of Cambridge spin-out which has developed a novel sensor technology that aims to improve the management of oil and gas reservoirs.

SMG’s robust, miniature and highly sensitive sensors, which have been developed in partnership with BP, are sent deep into boreholes to distinguish oil from water. Once the position of water is established and tracked, reservoir engineers can mitigate the potentially damaging results of water reaching a production well. SMG estimates that the technology could improve yields

on conventional reservoirs by up to 2%, representing significant increases in production and revenues. The first field trial in a production well is scheduled for 2017.

The underpinning sensor technology was developed by a team of Cambridge scientists, led by Dr Ashwin Seshia, of the University’s Department of Engineering, which has been working closely with BP to develop the sensors. SMG was set up to commercialise this research and benefited from a US$3.0 million funding led by Innovations alongside Cambridge Enterprise, the commercialisation arm of the University of Cambridge, together with grant funding from the UK government.

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Nexeon Limited Nexeon is a battery materials company that is developing silicon anodes for the next generation of lithium-ion rechargeable batteries. Batteries made with silicon anodes have increased capacity, offering the potential for lighter batteries with more power and a longer lifetime between charges.

Nexeon has a broad IP portfolio relating to silicon materials and their use in lithium-ion batteries, comprising over 375 patents, of which more than 200 have been granted. In April 2014, the company completed the construction and commissioning of its new process development and manufacturing facility plant in Milton Park, Oxford, UK. The plant is capable of producing over 20 tonnes of product a year and has been built to handle a wide range of materials and reagents. In parallel, the company has toll manufacturing arrangements with a number of third-parties to augment its production capability and to react quickly to customer demands.

Nexeon is continuing to optimise its silicon materials for the blended carbon/silicon anode applications currently being demanded by the battery industry. Material development has advanced to the point that the company can now offer a product that outperforms SiOx, the only silicon-based material being used in commercial quantities today. Product sampling is underway with several potential customers in both the consumer electronics and automotive sectors. The company continues to supply low volumes of materials into niche applications such as defence where energy density is the priority.

Nexeon has designed its technology for easy adoption in existing Li-ion battery production lines. The plan is for the graphite currently used in anodes to be replaced with hybrid electrodes containing Nexeon materials which can be used in combination with conventional polymer binders and current collectors as part of the standard battery manufacturing process. In this way, Nexeon offers a drop-in capability, which gives battery manufacturers a low switching cost by virtue of the simple integration of Nexeon’s silicon anode into existing manufacturing processes.

On 4 May 2016, Nexeon completed a £30.0 million equity funding round. Innovations committed £5.0 million to the round alongside existing investor Invesco Asset Management and new investor Woodford Investment Management. Nexeon is using these funds to launch products, acquire IP and complementary technology to broaden its offering to customers, and to begin work on the design of a larger manufacturing facility. These initiatives will improve Nexeon’s ability to achieve world-leading levels of battery energy density and to satisfy the demand for superior battery performance in applications. These range from smart phones and other mobile consumer devices to electric vehicles and the large-scale static energy storage of renewable energy.

On 11 October 2016, Nexeon announced the opening of a new office and development laboratory in Yokohama, close to many of the company’s development partners and prospective customers in the electronics and automotive sectors.

Econic Technologies Limited Econic Technologies is an innovative and fast-growing chemical technology company that develops and commercialises novel catalyst technologies to build carbon dioxide (CO2)into polyurethanes and other polymers. The underlying catalyst technology was developed at Imperial College London by a team of scientists led by Professor Charlotte Williams. The current technology is covered by a number of worldwide patents and patent applications.

Econic Technologies was founded in 2011 to develop the technology further towards commercial applications. Innovations led an initial £1.1 million funding round alongside Norner Verdandi, part of Norner AS, a leading international technology consultancy and partner for polymers and materials industries. This was followed by a £1.85 million round in early 2013. In December 2013, Econic received a further £5.1 million in investments from the Group and a new investor, Jetstream Capital.

Econic’s technology is one of the few commercially viable ways to chemically utilise CO2, which although highly abundant and cheap, is very un-reactive and needs to be activated using a catalyst. Econic’s catalysts enable manufacturers to make a whole new generation of everyday plastics – for use in cars, mattresses, running shoes – that will be both profitable and ecological.

Econic partners with plastic manufacturers to help them make their products using CO2. Econic’s technology will allow replacement of up to 50% of traditional petrochemical feedstock with lower cost CO2, reducing feedstock cost by as much as 30-40%, to create added value through the chain. This means that manufacturers save money and natural resources by replacing key ingredients made from oil with a waste product they already have. At the same time, CO2 is being recycled into new plastics, instead of released back into the environment.

On 6 July 2016 Econic completed a £5.0 million funding round. Innovations has committed £2.5 million to the round alongside Jetstream Capital and new investor Woodford Investment Management. The funding will provide crucial support for the development of future catalyst generations and the expansion of Econic’s facilities, thereby accelerating the commercialisation of Econic’s catalyst technology. This latest round of investment is complemented by an EU Horizon 2020 SME award, which adds a further £2.0 million of funding over the next two years.

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Aqdot LimitedAqdot™ is a specialist chemical company which operates in the rapidly growing encapsulation market, currently valued at £4 billion. Its proprietary technologies encapsulate and protect valuable active products (cargoes) in a variety of settings and allow them to be delivered when and where the customer requires.

To date the challenge for encapsulated products has been in triggering encapsulation systems to release their cargo at the time that the customer needs them. It is this unique proprietary capability that Aqdot’s technology delivers, based on a disruptive platform originally discovered at and spun out of the University of Cambridge.

Aqdot’s technology has the potential to be game-changing in a wide range of industries, including household products such as detergents, pharmaceuticals, oil and gas, agrochemicals, cosmetics, food, paint, fragrances and personal products. By identifying unmet needs in these sectors, Aqdot is seeking to develop products that enable manufacturers to introduce novel and differentiated brands, reduce manufacturing costs and make a truly positive impact on the environment.

Innovations first invested in Aqdot in November 2013, leading a £1.0 million funding round alongside Cambridge Enterprise Limited, Parkwalk Advisors and Providence Investment Company. This was followed by a further £2.6 million funding round in December 2014 featuring the same investors. In February 2016, Innovations led a £5.0 million Series A fundraising, committing a further £3.0 million of investment to the company.

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ICT & DigitalThis sector as a whole is thriving in the UK and is supported by university talent. Our investments in this sector will often centre on entrepreneurial management teams trained and nurtured in these institutions.

In line with the strategy set out in last year’s Annual Report, the Group has increased its investment in this sector and added five new ICT & Digital companies to its accelerated growth portfolio during the year.

£46.3mvalue of our ICT & Digital assets within our portfolio

£25.3mraised by ICT & Digital companies during the year

£13.3minvested in ICT & Digital companies during the year

5new companies added to the ICT & Digital portfolio

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In October 2015 Innovations led a £1.5 million seed funding for Telectic, a London-based start-up that uses artificial intelligence (AI) to interpret the content of the World Wide Web. The company’s initial focus is on the substantial business information market, where Telectics’ AI technology can be used to provide live interpretation of the Web’s content for decision-makers, their networks and organisations, providing invaluable insights into professional networks for anyone doing research and business development.

The underlying technology has been developed over the last five years by a research team led by AI veteran Dr Jason Kingdon alongside three

other experienced AI and software entrepreneurs, Sergi Martorell, Dr Iain Mclaren and Pedro Esteban. In addition to co-founding UCL’s Intelligent Systems Lab, Jason Kingdon was the co-founder and CEO of big data AI analytics pioneer Searchspace (now part of Nice Systems) and backer of Robotic Process Automation software company Blue Prism.

Telectic thus provides a good example of Innovations’ investment in ICT & Digital companies, where it is more likely to be based around people or teams, often leveraging university research, as opposed to being created around a specific piece of IP born out of university research.

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Telectic

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Yoyo Wallet LimitedYoyo Wallet (‘Yoyo’) was founded in 2013 at Innovations by a team of highly experienced entrepreneurs from the credit card and payments industry, led by Innovations’ Venture Partner Alain Falys. The company has created an app that offers a better experience for retail customers, simplifying and speeding up in-store transactions by combining payment and loyalty in one easy scan. It also provides a marketing platform for retailers that enables digital customer engagement in-store. Retailers gain access to a set of tools that enables them to better target their customers through loyalty rewards, offers and incentives.

Crucially in a noisy mobile payments space, Yoyo offers not only mobile payments, but also adds value to consumers and retailers by integrating loyalty and engagement respectively. For example, retailers at no additional transaction cost, and with a small monthly per till fee for the EPOS software, gain a host of detailed transaction data about their customers and their purchases which current payment systems don’t provide. Yoyo’s personalised basket data thus transforms customers from anonymous purchasers to individuals with habits, tastes and motivations who can be targeted with offers and loyalty programmes.

In turn consumers gain from the fast payment transactions, get to consolidate and maximise their loyalty/deals effortlessly in one app and benefit from retail promotions specifically targeted to their interests and needs (based on their historical purchasing patterns). They also earn rewards based on usage.

These benefits provide reasons for both consumers and retailers respectively to adopt the technology and provides revenue streams (EPOS software licences per till point and share of promotional value-added sales) on top of a thin slice of transaction commissions.

Targeting two ‘closed’ groups, university campus retailers and corporate office facilities, has enabled Yoyo to achieve high transaction rates and avoid having to win over users one by one.

The ‘app’ was launched in early 2014 across 32 food and drink outlets at Imperial College London. Since then, Yoyo’s experienced management team has made strong commercial progress and as at 31 July 2016, had signed 34 universities as customers and deployed the solution at 80 head office corporate catering locations. Yoyo has also signed up a number of high-street retailers.

Featurespace Limited Featurespace is an Adaptive Behavioural Analytics company which has developed a machine learning software platform, the behaviour analytics engine (ARIC) that enables the identification of abnormal behaviour in high-volume real-time applications such as online betting and credit card transactions. The underlying technology is based on Bayesian statistics and research undertaken at the University of Cambridge by the late Professor Bill Fitzgerald and Featurespace CTO David Excell.

Featurespace’s software delivers significant economic benefits to customers, by providing a granular view of transactions which allows them to predict likely fraud and take appropriate action. For example, for a UK credit card company it reduced fraud loss by 40%, and cut the ratio of false positives to genuine rejections from 23:1 to 6:1.

Featurespace’s growing customer base includes companies such as CallCredit and KPMG in financial services, and Betfair and William Hill in gaming and lotteries. During the year the company announced a number of new customer wins including a five-year agreement with UK mobile payment innovator, Zapp Limited, to provide real-time fraud protection for its mobile payment customers, and a new project with Camelot, the UK National Lottery operator. The latter involved Featurespace’s technology being used to augment Camelot’s existing processes for identifying and protecting online players at potential risk of harmful play.

More recently, on 11 July 2016, Featurespace announced a partnership with OpenBet, the world’s leading software provider to the sports betting industry, which will result in Featurespace’s market-leading ARIC engine being implemented into OpenBet’s activity feeds, enabling OpenBet customers to have real-time access to player data.

Featurespace also made progress in the USA, announcing a number of major new customer wins with USA-based companies. The most recent of these, announced on 19 May 2016, is a new partnership with TSYS Inc, one of the world’s largest payment solutions and services companies, in which Featurespace’s adaptive behavioural analytics platform will be used to reduce fraud and false positives for TSYS’ clients.

On 31 May 2016, Featurespace completed a £6.2 million funding round. Innovations committed £2.5 million to the round alongside new co-investor TTV Capital, a leading US venture company focused on early-stage fintech companies, which contributed £2.4 million to the round. The balance was made up by existing investors, including Nesta and a number of members of the Cambridge Angels group. The new funding will enable Featurespace to expand its operations in the UK and USA and to continue to grow in financial services.

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Cortexica Vision Systems LimitedCortexica Vision Systems is the leading provider of cloud-based image recognition systems and mobile visual search technology. The company was spun-out from the Bioengineering Department of Imperial College London, originating from a research project to reverse-engineer the human visual cortex.

Cortexica provides advanced visual search and image recognition software to global retailers, brands and digital publishers that allows their customers to purchase products at the moment of inspiration by matching images to inventory. Cortexica seeks to visually empower its clients by supporting them in using its technology to drive both sales through customer engagement and to improve internal operations through simplifying existing processes.

The company’s proprietary findSimilar™ technology is used by a growing list of global retailers, including Zalando, Macy’s and Shop Direct as well as many other brands across an increasing range of verticals. findSimilar™ is an online function that displays search results of a range of products within a particular category that are visually similar in colours, shapes, details and patterns. By searching visually through the inventory, the customer has access to a greater range of product choice and inspiration without the need for inputting keywords.

On 8 July 2016, Cortexica announced the successful completion of a six-month consumer trial of its product discovery tool on the John Lewis iPad app. As a result, John Lewis has permanently added the findSimilar™ function to its Men’s and Women’s fashion product list pages.

New ICT & Digital companies In line with the plans set out in last year’s Annual Report, Innovations is continuing to develop its investment portfolio by scaling its activities in the ICT and Digital sector. Of the seven companies added to the accelerated growth portfolio during the year, five were in this sector.

• SAM Labs: a company set up two years ago by an Imperial College London Engineering graduate that is creating wireless electronics kits that allow anyone to build their own smart inventions. Innovations invested £2.0 million in a funding round which closed in January 2016.

• Garrison Technology Limited: London-based cybersecurity firm which completed a £2.0 million seed funding round in August 2015. Innovations committed £1.6 million to the round alongside existing angel investors.

• Import.io: London-based machine-learning start-up addressing the data-as-a-service (DaaS) market which completed a $13.0 million Series A funding round in January 2016, led by Innovations, with participation from Wellington Partners, Oxford Capital, Delin Capital and AME Cloud Ventures.

• Telectic Limited: London-based start-up that uses artificial intelligence (AI) to interpret the content of the internet, which completed a £1.5 million seed funding round in October 2015. Innovations committed £1.3 million to the round alongside angel investors.

• WaveOptics Limited: Oxford-based developer of Augmented Reality (AR) technology displays. Innovations led the funding round in December 2015 alongside Robert Bosch Venture Capital GmbH, Octopus Ventures, angel investors and existing investor Blippar.

Post year-end

ThisWay GlobalOn 27 September 2016, Innovations led a £1.6 million funding round in ThisWay Global Limited, a Cambridge-based technology company that is developing a software platform for the recruitment industry.

The round participants also included US-based Jetstream Ventures and Grupa Pracuj, a global recruitment technology company with a dedicated investment arm for emerging HR tech companies. ThisWay’s platform uses machine learning to streamline the recruitment process by matching high-quality candidates to the most appropriate job opportunities. The funding will allow the company to expand its offering to recruiters and pursue existing customer demand.

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Corporate and social responsibility

Innovations recognises its obligations to act responsibly, ethically and with integrity in its interactions with its employees and all its stakeholders.

The Group is committed to conducting its business in an honest, ethical and socially responsible manner and in accordance with established best practice. Furthermore, the Group endeavours to provide a safe working environment for its employees as well as to minimise its impact on the environment. In all activities, the Group aims to be commercial and fair, to maintain its integrity and professionalism and to respect the needs of its investors, employees and suppliers.

Social responsibility The Group operates an ethical licensing policy that seeks to use reasonable efforts to insert clauses into therapeutic drug licence agreements that promote fair access to technology by less economically developed countries.

The Group focuses its investment activities on businesses which will improve the quality of life of people across the world. These include businesses addressing global problems in healthcare, energy, engineering and the environment.

The Group complies with international regulations and related laws, and its internal rules enable it to implement sound and fair corporate practices, in order to earn the trust of stakeholders such as customers, shareholders, employees, business partners and society. To that end, the Group will communicate with all stakeholders and disclose business information in a timely and fair manner. It will also conduct reliable financial reporting through accurate accounting processes.

Volunteering and fundraising The Group supports outreach activities that promote science, technology and engineering to the general public. An example of this is its continued involvement in the Imperial Festival, an event which is designed to highlight to the public the research activities undertaken by Imperial College London staff and students. Innovations has been involved with the festival since its inauguration three years ago and believes that the Group’s involvement in projects such as this contributes to an interest in science and technology from young people and that they are inspired to take up professions in the field.

The Group also encourages its employees to undertake charitable volunteering activities and offers each member of staff up to two days’ paid time off each year to volunteer for, or support, registered charities.

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Health and safety The promotion and awareness of health and safety is an important responsibility of staff and management throughout the Group to ensure a safe environment for all employees. The Group has a Health and Safety Policy that is contained within its staff handbook along with a variety of other policies and procedures. This staff handbook is designed to help each employee adapt to the Group’s work environment and operate in a safe and responsible manner. On joining Innovations each employee is issued with a copy of the staff handbook and given a fire safety induction.

Environmental policyThe Group actively contributes to social and environmental initiatives in the local community and has organised and taken part in corporate charitable activities – including donating time to community projects. Through its business activities the Group also actively encourages the development and diffusion of environmentally friendly practices.

Innovations also encourages its employees to cycle to work and the HMRC-sponsored Cycle-To-Work scheme is available to employees.

The Group understands and acknowledges the many objections to animal testing, but believes that in certain select cases (and where testing is mandated by regulation and undertaken with a responsibility to ensure the highest standards of animal welfare) such testing can ultimately be beneficial, and may result in positive advancements in the development of medical treatments for serious disease.

As of 31 July 2016, the Group employed a full-time equivalent of 68 employees (including the Executive Directors), the majority of whom are based within Innovations’ registered office. The Group therefore considers that its direct environmental impact is relatively low. However, the Group is committed to operating its business in an environmentally responsible and sustainable manner. To demonstrate the Group’s commitment to this aspect of its business, details of the Group’s greenhouse gas emissions are set out overleaf.

Greenhouse gas (GHG) emissionsFor the third year running, we have included our voluntary reporting of greenhouse gas emissions, as well as wider details on the Group’s environmental impact. The reporting period is the same as the Group’s financial year.

Organisation boundary and scope of emissionsWe have reported on all of the emission sources required under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013 as it applies to Quoted companies.

An operational control approach has been used in order to define our organisational boundary. This is the basis for determining the Scope 1 and 2 emissions for which the Group is responsible.

For avoidance of doubt, this excludes any emissions from our investment subsidiary companies. Management believe the approach taken best captures the emissions for which the Group is directly responsible and has control over.

MethodologyFor the Group’s reporting, the Group has employed the services of a specialist adviser, Verco, to quantify and verify the GHG emissions associated with the Group’s operations.

The following methodology was applied by Verco in the preparation and presentation of this data:• the Greenhouse Gas Protocol published by the World

Business Council for Sustainable Development and the World Resources Institute (the ‘WBCSD/WRI GHG Protocol’);

• application of Defra emission factors to the Group’s activities to calculate GHG emissions;

• inclusion of all the applicable Kyoto gases, expressed in carbon dioxide equivalents, or CO2e;

• presentation of gross emissions as the Group does not purchase carbon credits (or equivalents);

• verification of all data against appropriate evidence.

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Corporate and social responsibility continued

Absolute emissionsThe total Scope 1 and 2 greenhouse emissions from the Group’s operations in the year ended 31 July 2016 were: • 35.6 tonnes (2015: 41.0 tonnes) of CO2 equivalent (tCO2e)

using a ‘location-based’ emission factor methodology.• 37.8 tonnes of CO2 equivalent (tCO2e) using a ‘market-

based’ emission factor methodology. Since this is a new methodology, no comparative figure is available.

Key figuresImperial Innovations Group plc – breakdown of emissions by scope tCO2e

2016 (location-based)

Scope 1 Scope 2

7.0

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

28.6

2016 (market-based)

Scope 1 Scope 2

7.0

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

30.8

Intensity ratioAs well as reporting the absolute emissions, the Group’s GHG emissions are reported below on the metrics of tonnes per employee and kilograms per square footage of office space. These being the most appropriate metrics given that the majority of emissions result from the operation of the Group’s offices and the day-to-day activities of the employees.

Target and baselinesGiven the comparatively low GHG impact of the Group’s operations, the Group’s objective is to maintain or reduce its GHG per employee and per square footage of office space each year and will report each year whether it has been successful in this regard.

The Group’s emissions have decreased modestly from last year. The main source of this decrease is from Scope 2 emissions driven by a reduction in electricity consumption and the carbon intensity of the electricity grid in the United Kingdom. There has also been a decrease in GHG emissions on a per employee and a per square footage basis.

GHG emissions

2016 2015

Tonnes CO2e

tCO2e/emp. 4

kgCO2e/sq. ft. 5

Tonnes CO2e

tCO2e/emp. 4

kgCO2e/sq. ft. 5

Scope 11 7.0 0.10 0.63 6.5 0.101 0.58Scope 2 2 (location-based) 28.6 0.42 2.57 34.5 0.539 3.10Scope 2 3 (market-based) 30.8 0.46 2.77 N/A N/A N/ATotal GHG emissions (location-based Scope 2) 35.6 0.52 3.20 41.0 0.640 3.68

Total GHG emissions (market-based Scope 2) 37.8 0.56 3.40 N/A N/A N/A

1 Scope 1 comprises emissions from the Group’s combustion of fuel and operation of facilities.

2 Scope 2 comprises electricity (from location-based calculations), heat, steam and cooling purchased for the Group’s own use.

3 Scope 2 comprises electricity (from market-based calculations), heat, steam and cooling purchased for the Group’s own use.

4 Employee number: 68.

5 Occupied office space: 11,119 ft 2.

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Understanding the indirect environmental impacts of our business activitiesAs described previously, the Group’s day-to-day operational activities have a limited impact on the environment. We do, however, recognise that the more significant impact occurs indirectly, through the investment decisions we make and the operation of the companies we choose to invest in. The Group therefore considers it important to establish and invest in businesses that comply with existing applicable environmental, ethical and social legislation. It is also important that these businesses can demonstrate that an appropriate strategy is in place to meet future applicable legislative and regulatory requirements and that these businesses can operate to specific industry standards, striving for best practice.

Employee diversity and human rightsThe Group is an equal opportunities employer which promotes diversity through the selection, training, career development and promotion of employees and does not differentiate on grounds of gender, ethnicity, religion or physical ability.

As at 31 July 2016, the Group employed 72 employees, inclusive of senior management and the Board of Directors. A breakdown of staff by gender is set out in the illustration above.

The number of persons (including Non-Executive Directors) as shown in the table is representative of those employed by the Group as at 31 July 2016. Therefore this figure will not reconcile with the average monthly number of persons (including only Executive Directors) in note 21 to the consolidated financial statements.

Given the nature of the business, the Group believes that the principal human rights issues affecting the business relate to non-discrimination, gender equality and fair employment practices. The Group supports the principles of the United Nations Declaration on Human Rights and ensures that all transactions the Group enters into uphold these principles.

Diversity as at 31 July 2016

Board of Directors

Male

88% (7)

Female

12% (1)

Senior management

Male

83% (10)

Female

17% (2)

Employees

Male

50% (26)

Female

50% (26)

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Financial review

The financial results for the year to 31 July 2016 reflect a year of progress and challenges

The Group’s rate of investment in its portfolio companies increased to £69.9 million across 33 companies (2015: £60.8 million across 30 companies). This takes the total invested since the IPO in July 2006 to £306.7 million and the total raised by the Group’s portfolio companies to £1.5 billion.

The financial results for the year to 31 July 2016 reflect a year of progress and challenges. We increased the rate of investment into our portfolio by 15% to £69.9 million creating the potential for significant future returns. Our investment capability was additionally strengthened through the completion of a £100.0 million placement during February 2016 and we still have an undrawn £50.0 million facility with the European Investment Bank (EIB).

Loss after tax for the Group for the year to 31 July 2016 was £63.1 million, compared to a profit of £15.1 million in 2015.

This result includes a £56.2 million net loss in the portfolio (2015: net gain of £21.3 million). Net assets at the year end of £455.9 million (2015: £420.1 million) increased by £35.8 million from 31 July 2015. The increase reflects the net proceeds from the share issue less the fair value loss and operating costs for the year.

Cash and short-term liquidity investments increased to £148.3 million (2015: £128.1 million) primarily following the net proceeds from share issues of £98.6 million offset by the increase of the investment rate to £69.9 million (2015: £60.8 million). The Group entered into a new £50.0 million facility with the EIB in the prior year. This facility has not been drawn upon, however it adds significant further investment capability.

The Group’s rate of investment in its portfolio companies increased to £69.9 million across 33 companies (2015: £60.8 million across 30 companies). This takes the total invested since the IPO in July 2006 to £306.7 million and the total raised by the Group’s portfolio companies to £1.5 billion.

Anjum AhmadTreasury and Finance Director

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Summarised statement of comprehensive income

Summary of financial performance:2016

£m2015

£m

Revenue 4.3 5.1 Cost of sales (1.4) (1.8)Net change in fair value of investments (56.2) 21.3 Admin expenses:Carried Interest Plan release 3.0 1.2 Other (12.6) (11.5)Finance costs (1.2) (0.6)Finance income 1.0 1.4 (Loss)/profit and total comprehensive income for the year (63.1) 15.1 Basic (loss)/earnings per Ordinary Share (pence) (43.2) 11.1

Revenue Total revenues decreased by 15.7% to £4.3 million (2015: £5.1 million). The main reason for the decrease in revenue is a decline in royalty income of £0.5 million, £0.1 million decrease in licence income and £0.3 million decrease in revenue from services and recoveries. The fall in royalty income reflects lower receipts on the Volcano licence. The fall in services and recoveries has arisen as prior year cost recoveries on investments completed, were higher.

The split of revenue is as follows: licence and royalty income was £2.2 million (2015: £2.8 million), revenue from services was £1.6 million (2015: £1.9 million), corporate finance fees were £0.4 million (2015: £0.4 million) and dividends received were £0.1 million.

Cost of salesCost of sales, which mainly arises from the revenue-sharing arrangement with Imperial College London, decreased to £1.4 million (2015: £1.8 million), primarily reflecting the decreased licence and royalty income.

Change in fair value of investments reflecting investment portfolio performanceTotal net fair value losses were £56.2 million (2015: £21.3 million gains) and reflect gains in the net fair value of the Group’s holdings of £22.1 million (2015: £29.7 million) across the portfolio, offset by impairments and losses of net fair value of £78.3 million (2015: £8.4 million).

Portfolio movements excluding cash invested:

2016 £m

2015 £m

Net fair value gains on the revaluation of investments 22.1 29.7Net fair value losses on the revaluation of investments (78.3) (8.4)Net fair value (loss)/gain (56.2) 21.3

Total net fair value gains were £22.1 million (2015: £29.7 million). This includes a net fair value gain of £4.1 million on Mission Therapeutics Limited and £4.0 million gain on TopiVert Limited.

Additional gains of £2.3 million arose following the sales of portfolio companies during the year. Other significant gains include Econic Technologies Limited of £1.5 million, Inivata Limited of £1.3 million, Kesios Therapeutics Limited of £0.7 million, Nexeon Limited of £2.8 million and Process Systems Enterprise Limited of £1.8 million. The balance of the gain reflects smaller mechanistic uplifts.

The above gains were offset by net fair value impairments and losses of £78.3 million (2015: £8.4 million) within the portfolio. This includes net fair value losses on quoted stock on Circassia Pharmaceuticals plc of £54.8 million, Abzena plc of £9.6 million and Oxford Immunotec Global plc of £2.5 million. These losses reflect the market prices of these quoted stocks at the end of July 2016. The balance includes general impairments across the portfolio.

Carried Interest Plan The Group’s Carried Interest Plan, which is a long term employee incentive scheme, generated an accounting release of £3.0 million (2015: a release of £1.2 million). This reflects the impact of the hurdle which must be exceeded by gains in the portfolio before the performance conditions are met and an accounting charge arises. There is no cash payment due to members of the scheme until the Group has made substantial future cash realisations. For additional understanding of this plan refer to the Directors’ Remuneration Report on page 87.

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Financial review continued

Other administrative expensesOther administrative expenses increased by 8.6% to £12.6 million (2015: £11.6 million). The small increase reflects the increased activity across the Group.

Administrative expenses includes costs of £1.5 million (2015: £1.4 million) incurred on filing patents and protecting the ‘as yet’ unexploited intellectual property emanating from Imperial College London.

Finance costsFinance costs were £1.1 million in the year to 31 July 2016 (2015: £0.6 million) and relate to the £30.0 million EIB facility, which was drawn down in two tranches during July 2013 and June 2015 respectively. There are no finance costs associated with the new £50.0 million facility arranged in the prior year as this has yet to be drawn down.

Finance incomeFinance income was £1.1 million (2015: £1.4 million) mainly attributable to the lower cash balance during the year before the receipt of the equity raise proceeds in February 2016.

Earnings per shareBasic loss per share was 43.2 pence (2015: earnings of 11.1 pence).

Financial position and resources Net assets at the year-end of £455.9 million (2015: £420.1 million) increased by £35.8 million from 31 July 2015. The increase reflects the net proceeds on issue of shares less the loss for the year.

Investment portfolio and activityDuring the year, the net value of the Group’s investment portfolio rose to £335.1 million spread across 107 companies (2015: £327.2 million spread across 98 companies). The increase represents £69.9 million (2015: £60.8 million) of investments to fund 33 (2015: 30) companies in its portfolio, net disposals of £5.8 million (2015: £6.9 million) and net fair value losses of £56.2 million (2015: net fair value gains of £21.3 million) which have been analysed below.

The Group has invested a total of £274.4 million in the portfolio of currently active technology companies; £154.8 million invested in the top 10 companies and £119.6 million in the remaining companies. In total the portfolio companies raised £206.4 million in cash (2015: £479.9 million) from all sources of investment.

The table below separates out the top 10 portfolio companies, by net fair value, to illustrate the relative carrying value in the Group’s investments in such companies and the movement in value from 1 August 2015 to 31 July 2016.

Table of net fair value movement: Top 10 portfolio companies

Name of company

Net investment carrying value

as at 1 August 2015

£000

Cash investedyear to

31 July 2016 £000

Cash divestedyear to

31 July 2016 £000

Fair value movement

year to 31 July 2016

£000

Net investment carrying value

as at 31 July 2016

£000

Cumulative cash invested

as at 31 July 2016

£000

% Issued share capital

held as at 31 July 2016

%

Nexeon Limited 34,086 5,000 – 2,804 41,890 27,373 33.7%Cell Medica Limited 21,037 7,500 – – 28,537 19,810 25.5%Veryan Holdings Limited 20,893 5,606 – – 26,499 19,317 46.1%Circassia Pharmaceuticals PLC 79,750 – – (54,818) 24,932 25,500 9.3%Psioxus Therapeutics Limited 22,623 – – – 22,623 13,676 27.8%MISSION Therapeutics Limited 6,012 3,937 – 4,111 14,060 9,770 11.6%TopiVert Pharma Limited 7,543 1,059 – 4,045 12,647 8,500 29.5%Abzena plc 17,773 2,500 – (9,607) 10,666 12,975 19.8%Abingdon Health Limited 7,717 2,725 – – 10,442 11,014 33.7%Econic Technologies Limited 2 6,145 2,500 – 1,533 10,178 6,900 53.7%Other companies 103,641 39,047 (5,759) (4,317) 132,612 119,596 ¹Net total 327,220 69,874 (5,759) (56,249) 335,086 274,431

1 Currently active companies.

2 The Group does not control this company (control as defined by IFRS10), and therefore does not consolidate it.

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All carrying values reflect the net fair value of the investment being the gross value of the holding less the attributable revenue-sharing obligations associated with each investment. The percentage of issued share capital represents the absolute percentage of the shares held, without reflecting any revenue-sharing obligations. The percentage holdings in these companies are increasing in line with the Group’s strategy to hold larger stakes in its portfolio companies.

The early-stage nature of many of the portfolio companies is such that investments are made on a milestone/tranche basis that matches the companies’ needs for cash with the achievement of agreed milestones. This provides investment security for the companies and more control over the Group’s cash payments to the portfolio.

Additional investment commitments undrawn at the year-end amounted to £29.0 million (2015: £22.3 million).

The Group does not have, directly or indirectly, more than half of the voting power of these entities nor does it have power over more than half of the voting rights by virtue of any agreement with any other investor.

Cash and short-term liquid investments The Group ended the financial year with total cash and short-term liquidity investments of £148.3 million (2015: £128.1 million), comprising £133.3 million of cash (2015: £108.1 million) and £15.0 million (2015: £20.0 million) of short-term liquidity investments. The Group drew down the £15.0 million second tranche of the EIB facility during June 2015 and completed a new EIB facility of £50.0 million, which is yet to be drawn down.

Cash and short-term liquidity investments increased from the prior year primarily because of the proceeds from the placement, reduced by the increased rate of investment.

The decrease in the cash and short-term liquidity investments balance is shown below:

2016 £m

2015 £m

Net cash used in operating activities (10.8) (9.3)Purchase of trade investments (69.9) (60.0)Investments in funds (1.2) –Net proceeds from sale of trade investments 5.0 6.2 Net cash from other investing activities 1.1 1.4 Financing activities 96.0¹ 13.3Movement in net cash reserves 20.2 (48.4)

1 Primarily reflects the proceeds of £98.6 million equity raised (net of issue costs).

The Group invests cash surplus to working capital requirements in short-term deposits, classified as short-term liquidity investments, across a number of banks with a focus on capital preservation rather than interest earned. The Group has no foreign currency deposits.

Deferred payment obligations The Group has a Technology Pipeline Agreement (‘TPA’) with Imperial College London which stipulates the terms for sharing revenue generated from the commercialisation of Imperial College London intellectual property which is assigned to Imperial Innovations Limited (subsidiary company).

Non-current provisions for liabilities and charges relating to revenue-sharing obligations (including those due under the TPA and on HEIF and UCSF investments) rose to £9.4 million (2015: £6.7 million).

Going concernAfter making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of at least 12 months from the date of approval of these financial statements. For this reason, they continue to adopt the going concern basis in preparing the financial statements. In addition, the Group has prepared a viability statement.

Anjum AhmadTreasury and Finance Director

12 October 2016

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Key performance indicators

How measured Progress KPI

1. Growth in value of the Group’s interest in its portfolio of companies

This KPI monitors the strategic objective of maximising value through measuring progress in the value of the portfolio companies.

Measured in terms of the net value and net gain or loss arising in the value of the portfolio using established valuation methodologies based on International Private Equity and Venture Capital Guidelines (IPEVCVG). The value is net of revenue-sharing obligations.

The value of the Group’s portfolio fell reflecting the decline in the quoted portfolio. However, the unquoted portfolio continued to show growth through fair value gains and investment activity.

Net portfolio value £m

2015

2016

2014

335.1

252.0

327.2

Net (loss)/gain in the value of the Group’s interest in its portfolio £m

2015

2016

2014

(56.2)

40.5

21.3

2. Investments made in portfolio companies This KPI monitors the strategic objective of providing continuity of

funding through measuring investment made by the Group as well as total investment from external sources.

Measured in terms of total cash raised by the portfolio, together with the investments made by the Group, giving an indication of the appetite for funding within the portfolio.

The Group has increased the rate of investment and the rate of investment from external sources has fallen.

Investments made in portfolio companies £mGroup investment Total raised by portfolio

2015

2016

2014

69.9

32.8

60.8

3. New companies added to the Group’s portfolio This KPI monitors the strategic objective of leveraging

outstanding research.

Measured in terms of all new companies added to the Group’s portfolio. New companies can be added through investments arising from relationships with, among others, Cambridge Enterprise Limited, Oxford Spin-out Equity Management and UCL Business plc, or technology transfer activities with Imperial College London.

The Group has continued to select a range of technology opportunities from the UK’s four leading research-intensive universities as well as other research institutions and entrepreneurs.

Number of new companies added to the Group’s portfolio

2015

2016

2014

77

67

67

Accelerated growth

Lighter touch

14 new companies during the year, comprising 7 accelerated growth, 7 lighter touch.

4. Potential value available from the existing portfolio This KPI monitors value creation, which will then flow through

to realisations and provide funds for future investments.

A measure of the net increase in value in the accelerated growth portfolio calculated by the movement in the portfolio value during the year less investments made.

The potential value available from the accelerated growth portfolio has continued to increase.

Net increase in accelerated growth portfolio value £m

2015

2016

2014

11.0

38.3

20.4

5. Exits achieved This KPI monitors the Group’s strategy to grow its most valuable

companies in order to optimise value.

Measured in terms of cash returned to sustain future investments.

Net realisations of £5.8 million were in line with prior year.

Net realisations £m

2015

2016

2014

5.8

4.0

6.9

6. Health and quality of intellectual property pipeline from Imperial College London

This KPI monitors the success of the Group’s commercialisation of intellectual property.

Measured by the number of opportunities flowing through the pipeline from Imperial College London, demonstrated by the number of inventions disclosed, patents filed, and new licences.

The flow of opportunities has remained healthy.

Of the 425 invention disclosures in the year ended 31 July 2016, 310 came from Imperial College London and the remainder came from other sources. The Group entered into 39 new IP agreements and generated £2.2 million in revenue from its portfolio of 202 licensing and royalty agreements.

Health and quality of intellectual property pipelinePatents filed Invention disclosures

2015

2016

2014

74

57

66

2015

2016

2014

425

402

386

Number of new licences

2015

2016

2014

39

27

39

The key performance indicators (KPIs) below measure the Group’s results of operations.

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How measured Progress KPI

1. Growth in value of the Group’s interest in its portfolio of companies

This KPI monitors the strategic objective of maximising value through measuring progress in the value of the portfolio companies.

Measured in terms of the net value and net gain or loss arising in the value of the portfolio using established valuation methodologies based on International Private Equity and Venture Capital Guidelines (IPEVCVG). The value is net of revenue-sharing obligations.

The value of the Group’s portfolio fell reflecting the decline in the quoted portfolio. However, the unquoted portfolio continued to show growth through fair value gains and investment activity.

Net portfolio value £m

2015

2016

2014

335.1

252.0

327.2

Net (loss)/gain in the value of the Group’s interest in its portfolio £m

2015

2016

2014

(56.2)

40.5

21.3

2. Investments made in portfolio companies This KPI monitors the strategic objective of providing continuity of

funding through measuring investment made by the Group as well as total investment from external sources.

Measured in terms of total cash raised by the portfolio, together with the investments made by the Group, giving an indication of the appetite for funding within the portfolio.

The Group has increased the rate of investment and the rate of investment from external sources has fallen.

Investments made in portfolio companies £mGroup investment Total raised by portfolio

2015

2016

2014

69.9

32.8

60.8

3. New companies added to the Group’s portfolio This KPI monitors the strategic objective of leveraging

outstanding research.

Measured in terms of all new companies added to the Group’s portfolio. New companies can be added through investments arising from relationships with, among others, Cambridge Enterprise Limited, Oxford Spin-out Equity Management and UCL Business plc, or technology transfer activities with Imperial College London.

The Group has continued to select a range of technology opportunities from the UK’s four leading research-intensive universities as well as other research institutions and entrepreneurs.

Number of new companies added to the Group’s portfolio

2015

2016

2014

77

67

67

Accelerated growth

Lighter touch

14 new companies during the year, comprising 7 accelerated growth, 7 lighter touch.

4. Potential value available from the existing portfolio This KPI monitors value creation, which will then flow through

to realisations and provide funds for future investments.

A measure of the net increase in value in the accelerated growth portfolio calculated by the movement in the portfolio value during the year less investments made.

The potential value available from the accelerated growth portfolio has continued to increase.

Net increase in accelerated growth portfolio value £m

2015

2016

2014

11.0

38.3

20.4

5. Exits achieved This KPI monitors the Group’s strategy to grow its most valuable

companies in order to optimise value.

Measured in terms of cash returned to sustain future investments.

Net realisations of £5.8 million were in line with prior year.

Net realisations £m

2015

2016

2014

5.8

4.0

6.9

6. Health and quality of intellectual property pipeline from Imperial College London

This KPI monitors the success of the Group’s commercialisation of intellectual property.

Measured by the number of opportunities flowing through the pipeline from Imperial College London, demonstrated by the number of inventions disclosed, patents filed, and new licences.

The flow of opportunities has remained healthy.

Of the 425 invention disclosures in the year ended 31 July 2016, 310 came from Imperial College London and the remainder came from other sources. The Group entered into 39 new IP agreements and generated £2.2 million in revenue from its portfolio of 202 licensing and royalty agreements.

Health and quality of intellectual property pipelinePatents filed Invention disclosures

2015

2016

2014

74

57

66

2015

2016

2014

425

402

386

Number of new licences

2015

2016

2014

39

27

39

2015

2016

2014

206.4

315.4

479.9

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1. Difficult to attract capital into early-stage businesses and through full economic cycle and investee technologies may not succeed

Risk has decreased following growth of capital available in the sector.

Risk Consequences Mitigation

As market conditions tend to be cyclical there are times where it will be easier to attract investment into early-stage technology companies and into the Group and conversely there are times where investment will be less readily forthcoming.

Some portfolio companies may have significant funding requirements in the future. The success of these portfolio companies and the ability of the Group to maintain its equity holding may be influenced by the market’s appetite for investment in early-stage companies, which may be insufficient in relation to the funding demands of portfolio companies.

The majority of the Group’s investments are made at an early stage of a portfolio company’s development when the portfolio company’s technology is materially unproven. Such investments are subject to the following risks typically associated with early-stage investments:(a) early-stage portfolio companies may not be able to

secure subsequent rounds of funding, which may restrict their ability to fund ongoing research and the development and commercialisation of their intellectual property;

(b) the technology developed by portfolio companies may fail and/or the portfolio companies may not be able to develop their intellectual property into commercially viable products or technologies or into products which offer sufficiently compelling benefits to customers;

(c) competing technologies may enter the market which may adversely affect the portfolio companies’ ability to commercialise their intellectual property, or the portfolio companies may not be able adequately to protect their intellectual property (whether due to lack of financial resource or otherwise) or patent applications made by the portfolio companies may not proceed through to grant;

Were market conditions to become unfavourable this could lead to a constraint on the appetite for investment in the Group and thus the ability to invest into promising opportunities would be negatively impacted.

Therefore it may take longer for the Group to realise value from equity holdings in portfolio companies which have significant funding requirements and the consideration received by the Group may include shares and/or deferred cash consideration, the value of which may depend upon the future performance of the portfolio company; alternatively, the Group may not realise value from such holdings at all.

Lack of funding and/or an inability to attract or retain appropriately skilled personnel may restrict the ability of portfolio companies to fund ongoing research and the development and commercialisation of their intellectual property. This could in some cases result in a portfolio company being forced to sell off its assets or cease its development.

Competing technologies may adversely affect portfolio companies’ ability to commercialise their intellectual property.

The failure of portfolio companies adequately to protect their intellectual property could potentially have an adverse effect on their performance or prospects.

Any of the foregoing factors could have a material adverse effect on the value of the relevant portfolio companies and, in turn, upon the Group’s financial condition, results of operations and/or profits.

The Group seeks to mitigate the risk of portfolio companies being unable to access sources of funds by ensuring that appropriate capital levels are maintained to reduce the impact of market flux and to reduce dependency on short-term realisations.

The Group further seeks to mitigate the risk of portfolio companies being unable to access sources of funds by assisting or leading funding rounds through maintaining relationships with co-investors and by helping to ensure that the portfolio company is appropriately capitalised such that it is not dependent on a premature exit.

To mitigate the inherent risk of unproven early-stage technology companies, the Group employs experienced personnel who have considerable experience of building and developing early-stage technology-based companies. Initial investments may involve seed funding to identify and mitigate early risks before proceeding with more substantial investments. The Group seeks to monitor the progress of its portfolio companies, and may take a Board seat for a substantial period of time to ensure familiarity with issues and risk.

Principal risks and uncertainties

The management of the business and the execution of the Group’s strategy are subject to a number of risks.

Risks are formally identified by the Board and appropriate processes are put in place to monitor and mitigate them. If more than one event occurs, it is possible that the overall effect of such events would compound the possible effects on the Group. The risks that the Board has identified as the key business risks facing the Group are set out in the table below along with the consequences and mitigation of each

risk as well as the risk change on the prior year. Any number of these could have a material adverse effect on the Group, its financial condition, its development, results of operations, portfolio companies and/or future prospects. During the period the Directors reviewed the Group Risk Register and amended the view of the principal risks faced by the Group. As a consequence the risks noted below changed from those identified in the previous year. The Directors confirm that their assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity, was robust.

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1. Difficult to attract capital into early-stage businesses and through full economic cycle and investee technologies may not succeed continued

Risk has decreased following growth of capital available in the sector.


(d) portfolio companies may not be able to attract and/or retain appropriately skilled personnel;

(e) portfolio companies may not generate any, or any significant, returns for their shareholders; and

(f) the Group may not be able to secure a profitable exit from its investment in any or all of the portfolio companies and/or it may take time to realise investments and portfolio companies may not grow within the timescales envisaged by the Group.

2. Loss or reduction in access to flow of new opportunities through loss of Technology Pipeline Agreement (TPA) before 2020


Imperial College London has the ability to terminate the Technology Pipeline Agreement (TPA) during the remainder of its term until 2020 in circumstances where a change of control of the Group occurs and Imperial College London reasonably considers the new controlling party would significantly affect its ability to obtain research funding or whose activities were incompatible with Imperial College London’s ethical principles or which might affect Imperial College London’s charitable status.

At the end of the term of the TPA, the Group has no right to further intellectual property generated at Imperial College London. Intellectual property equity acquired by the Group during the term of the TPA will be retained by the Group when the TPA ends, as will intellectual property that has been assigned to the Group during the period of the TPA (subject to limited cases where Imperial College London can require reassignment). Intellectual property equity, licence agreements and intellectual property which came into existence during the term of the TPA will continue to be subject to revenue-sharing arrangements.

The Group seeks to mitigate this risk by diversifying its sources of opportunities across other research intensive universities and other industrial sources.

The Group engages with Imperial College London to ensure that they have comfort that the Group is using its best endeavours to achieve the best possible outcome from the commercialisation of IP.

3. Failure to attract or retain key personnel


The industry in which the Group operates is a specialised area and the Group requires highly qualified and experienced management and personnel. Many of the Group’s key employees have links to communities of academics, entrepreneurs, investors and potential management teams that provide the Group with commercial opportunities. Further, given the relatively small size of the Group, its operations are reliant on a small number of key individuals, including the Executive Directors. There is a risk that the Group’s employees could be approached and solicited by competitors of the Group or other organisations or could otherwise choose to leave the Group.

The UK voted to leave the EU during the year. The UK has entered a period of uncertainty ahead of the conclusion and subsequent negotiations.

If the Group does not succeed in retaining skilled personnel or is unable to continue to attract all personnel necessary for the development and operation of its business, it may not be able to grow its business as anticipated or meet its financial objectives, which may have a material adverse effect on the Group’s business, financial condition, results of operations and/or prospects.

There could be potential risks to research funding, to attracting and retaining talent and to university finances generally.

The Group carries out regular market comparisons for staff and executive remuneration. Senior executives are shareholders in the business and the Group encourages staff development and inclusion through coaching and mentoring. The Group believe the UK government recognise the challenges of the UK leaving the EU and will address them as part of its new UK industrial strategy.

We believe the UK government recognises these challenges and will address them as part of its new UK industrial strategy.

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4. Change in government policy, legislation and taxation; decreased appetite for investment into research


Changes in legislation (including research and development tax credits and other tax legislation) and government policy may occur which could adversely affect the Group, its business and/or the position of shareholders and which could reduce the return that shareholders receive on their investment in the company. In particular, any change to law and/or regulation relating to the funding and resources available to research-intensive universities could adversely affect the ability of such organisations to carry out research and therefore result in a reduction in the quantity and quality of intellectual property in which the Group could have the opportunity to invest.

Changes to the funding of technology or to research and development tax credits and other tax legislation could adversely impact the development activities carried out by portfolio companies by, for example, increasing the costs incurred by a portfolio company in carrying out its business and/or could result in a portfolio company needing to alter the way in which it conducts its business.

Future changes in tax legislation could result in an unforeseen tax liability.

Any such changes to law and/or regulation could also result in such institutions being unable, or it not being commercially viable for them, to own, develop, exploit and/or protect the intellectual property that they generate. This could have a material adverse effect on the business, financial condition, results of operations and prospects of the Group.

Any such event could lead to a reduction in investment opportunities for the Group and/or could adversely affect the value of a portfolio company and therefore have a material adverse effect on the business, financial condition and results of operations of the Group.

The Group engages in discussion with Government to provide education on the benefits of research to the UK scientific base.

The Group utilises professional advisers as appropriate to support its monitoring of, and response to, changes in tax or other legislation.

5. Dependence on material shareholders


The Group is dependent on a small number of shareholders who hold a large proportion of the total share capital of the Group.

The decision by one of these shareholders to dispose of their holding in the Group might have an adverse effect on the Group’s operations.

The Directors seek to build a mutual understanding of objectives between the Group and its shareholders.

Regular communication is maintained with all shareholders through the Group’s announcements and its annual and half-yearly reports.

The Directors maintain regular contact with institutional shareholders through presentations and meetings held throughout the year.

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6. Domination of portfolio by few larger investments or licences


A large proportion of the overall value of the investment portfolio held by the Group may at any time be accounted for by one, or very few, portfolio companies.

A large proportion of the overall revenue from licences granted by the Group may at any time be accounted for by one, or very few, licence agreements. Revenue from licences granted by the Group comprises revenue from licence fees and from royalty income.

If one or more such investments in portfolio companies experience financial or operational difficulties, fails to achieve anticipated results or suffers from poor stock market conditions and if, as a result, its value were to be adversely affected, this could have a material adverse impact on the overall value of the Group’s portfolio.

Should a licence or licence agreements be terminated or expire, or should the income received under such licence or licence agreements decline, this could have a material adverse effect on the revenue received by the Group.

The Group mitigates this risk by carefully monitoring its assets on a regular basis, by careful portfolio management and by employing appropriately qualified experienced staff. However, it is the Group’s expectation that there will always be companies and licence agreements that dominate in this way.

7. Performance of high value and high potential portfolio companies


The Group has a portfolio of 39 accelerated growth companies in which we actively invest and take a seat on the Board; these are considered to be our high potential companies.

If one or more such investments in portfolio companies experience financial or operational difficulties, fails to achieve anticipated results or suffers from poor stock market conditions and if, as a result, its value were to be adversely affected, this could have a material adverse impact on the overall value of the Group’s future portfolio.

The Group seeks to mitigate these risks by diversifying its investments in portfolio companies and syndicating to reduce our exposure.

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8. Competitive pressures


The Group is subject to competitive pressures at all stages of the commercialisation process, in particular the following:• Over the last few years the UK commercialisation

sector has gone through a period of significant growth, marked by the inflow of capital into the sector and the emergence of new companies whose business model involves investing in early-stage science and technology companies. Whilst in some respects these are welcoming developments as they are not only beneficial for promoting UK innovation in general, but more specifically because they will increase the number of potential opportunities in which the Group may invest, however in other respects it will clearly lead to increased competition in terms of attracting investment capital and competition for the same opportunities.

• Underperformance of competitors (for example, via unexpectedly poor performance of one of their portfolio companies) may impact the sector as a whole as investors lose confidence in the sector’s ability to generate returns.

• On the other hand, if competitors consistently outperform the Group, Innovations may find it difficult to raise new capital and to invest this capital as investors, research institutions and portfolio companies chose to do business with competitors rather than us.

Increased competition, in particular within the ‘Golden Triangle’ area which is bounded by London, Oxford and Cambridge, could result in a loss of opportunities to commercialise intellectual property.

The Group may face difficulties raising additional capital or deploying this capital into commercialisation opportunities.

The Group seeks to mitigate this risk by diversifying its sources of opportunities across other research-intensive universities and other industrial sources.

The Group regularly monitors the performance of its competitors and their portfolio companies.

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9. Insufficient liquidity to meet future obligations as they fall due


It is essential that the Group maintains sufficient liquidity to enable it to meet future financial obligations when they become due. Insufficient liquidity usually arises when there is a mismatch in the timing of cash flows.

Having insufficient liquidity would mean that the Group would be unable to meet future obligations as they fall due, or would only be able to do so at excessive cost (for example, through the sale of assets or through a high interest loan). This could ultimately lead to the failure of the Group.

The Group seeks to manage financial risk, and in particular liquidity risk, ensuring that sufficient liquidity is available to meet foreseeable requirements and to invest surplus cash in low risk instruments with reputable institutions.

The Group manages its exposure to liquidity risk through cash flow forecasting and monitoring its counterparties.

10. General, commercial, technological and clinical risks


The Group’s portfolio companies are exposed to a wide range of general, commercial, technological and clinical risks. In particular:• Reputational damage, for example because of animal

testing or a targeted social media campaign.• Failure to obtain approval by the FDA and/or other

regulatory bodies for new products developed.• Failure to sell products profitably or in sufficient

volumes.• Launch of a competing product.• Negative results from clinical trials.

All of these risks could potentially lead to a decline in the valuation of a portfolio company, or in extreme cases lead to the portfolio company failing.

By placing experienced staff members on Boards of portfolio companies the Group aims to mitigate these risks.

The Director of Communications and Investor Relations works closely with CEO and CIO to ensure early warning of any likely issues with the portfolio companies and that an appropriate communication strategy is put in place.

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The Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three year period ending 31 July 2019.

The assessment of prospects and viability has been made with reference to the Group’s business model and the Board’s assessment of principal risks and uncertainties including how these are monitored and mitigated, as detailed on pages 62 to 67. The assessment has been performed over a three year period to 31 July 2019 as this coincides with the Group’s three year strategic planning horizon. The Group also produces a less detailed 10 year strategic plan.

The Group’s prospects have been assessed through its strategic planning process in which a detailed three year budget is set using a bottom up approach. This process is carried out at least annually.

The three year plan makes certain assumptions about the timing and value of realisations, the rate of investment into portfolio companies, the performance of the portfolio companies, the continuation of the EIB loan facilities and the level of overheads.

The Group has a cash balance of £148.3 million and an undrawn EIB facility of £50.0 million. The Group has commitments of £29.0 million into its portfolio companies and, over the next five years, has committed £24.8 million towards the UCL Technology Fund LP fund and £3.3 million towards the Apollo Therapeutics LLP fund. The Group’s rate of investment into its portfolio is flexible and can be reduced if expected realisations are not achieved.

In assessing the Groups’ viability, the Board have stress tested the three year plan using the following scenarios, which they consider to be ‘severe but plausible’:• Failure or poor performance of one of the high value

portfolio companies resulting in no future realisations from this company.

• Failure or poor performance of two or more of the high future value potential portfolio companies resulting in no future growth and realisations from these companies.

In stress testing these scenarios the Directors have considered the interdependency between risks, for example the impact on cashflow, realisations, investment rate, investor confidence, the retention of key personnel and the impact on the EIB facility covenants. The Directors have also modelled a situation where both of the above scenarios occur.

The results of this stress testing show that over the three year period modelled, the Group would be able to withstand the impact of these scenarios on its cash reserves by reducing the rate of planned investment and that it should remain within the terms of its EIB covenants.

The Strategic Report was approved by the Board of Directors on 12 October 2016 and signed on its behalf by:

David Newlands Russ CummingsChairman Chief Executive Officer

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Chairman’s introduction

Corporate governance report

Dear Shareholder

During the last year, the Board saw two changes to its composition. On 1 August 2015, Dr Robert Easton joined the Group as an independent Non-Executive Director. And on 31 July 2016, after 13 years of outstanding leadership of the company, Dr Martin Knight stepped down from the Board and the Chairmanship. On 1 August 2016, I joined the Group as Chairman and independent Non-Executive Director.

There have also been changes to the composition of the Board Committees. With effect from 1 August 2015 Dr Linda Wilding became Chair of the Audit and Risk Committee and Dr Robert Easton joined the Remuneration Committee and the Audit and Risk Committee. I replaced Dr Martin Knight as Chairman of the Nomination Committee upon my appointment as a Director. The changes to the composition of the Board Committees are set out in more detail on pages 79 to 84.

This report, together with the Reports of the Nomination, Audit and Risk, and Remuneration Committees of the Board, sets out our approach to corporate governance and how we have voluntarily applied the main principles set out in the UK Corporate Governance Code.

If you are able to attend, my fellow Directors and I look forward to seeing you at the AGM in November.


12 October 2016


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David NewlandsChairmanDavid Newlands joined the Board and became Non-Executive Chairman with effect from 1 August 2016, the start of the Group’s new financial year. Amongst his numerous board positions, David was formerly Chairman of PayPoint plc, Tomkins plc, Britax International, Kesa Electricals plc and HellermanTyton plc. His experience spans flotations, mergers and acquisitions, and growth companies. Prior to these positions, David was Group Finance Director of The General Electric Company plc from 1989-1997 and Group Finance Director of Saatchi & Saatchi plc from 1986-1989. He trained as an accountant with Deloitte and Touche and became a partner in 1977 specialising in large international clients.

Appointed to the Board | 2016

Russ Cummings Chief Executive OfficerRuss Cummings joined the Group from Scottish Equity Partners Limited where, as director in the Information Technology Group, he was responsible for investment in high-growth technology companies. Russ joined the Board as Chief Investment Officer on 18 September 2006 and was appointed Chief Executive Officer on 16 July 2013. Before joining Scottish Equity Partners, Russ worked at 3i Group plc where he was a director in their UK Technology Group. Russ previously worked at Rolls-Royce Motors as a development engineer. Russ serves on the boards of the following portfolio companies: Circassia Pharmaceuticals plc and Nexeon Limited. Russ has a BSc in Mechanical Engineering from Imperial College London.


Dr Nigel Pitchford Chief Investment OfficerDr Nigel Pitchford joined the Group in January 2012 from DFJ Esprit, where as a partner he was responsible for leading their healthcare activities across Europe. Prior to that, Nigel worked at 3i for 12 years, becoming a partner in 2006 and ultimately leading their venture healthcare activities across Europe and the USA. Nigel studied Chemistry at the University of Oxford, before completing a PhD at the University of Durham. He also has an MBA from Warwick Business School. Nigel was appointed as the Company’s Chief Investment Officer on 16 October 2013. He serves on the boards of the following portfolio companies: Abzena plc, Veryan Medical Ltd, Epsilon 3 Bio Ltd and Precision Ocular Ltd.


Tony Hickson Managing Director – Technology Transfer Tony Hickson joined the Group in early 2002 and is Managing Director of the Technology Transfer team, responsible for intellectual property sourcing, management and licensing for technologies arising from Imperial College London. Tony has over 20 years of commercial business development and licensing experience in bioscience companies including Wellcome Group R&D, Murex Biotech, Abbott Laboratories and Kalibrant Limited. He has been a board director or observer for a number of portfolio companies including Emcision Ltd, Polytherics Ltd, Catapult Therapy TCR Limited and RespiVert Limited. Tony is a Registered Technology Transfer Professional, a Certified Licensing Professional and a board director of PraxisUnico.


Board of Directors

Committee membership keyMembership as at 12 October 2016

Audit and Risk Committee

Nomination Committee

Remuneration Committee

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Professor David Begg Non-Executive DirectorProfessor David Begg joined the Company in 2012 from Imperial College London where he was Professor of Economics and Principal of its Business School from 2003 until his retirement from that position in February 2012. During his career, he has held a number of distinguished advisory and academic appointments. He was Professor of Economics at Birkbeck College, University of London, for 16 years and amongst other prestigious appointments was a Visiting Professor at INSEAD. Professor Begg has frequently been commissioned as an adviser on monetary policy to organisations such as HM Treasury, the International Monetary Fund and the Bank of England.


Peter Chambré Non-Executive DirectorPeter Chambré has held a number of senior executive and non-executive positions in healthcare companies, including as Chief Executive Officer of Cambridge Antibody Technology Group plc until its acquisition by AstraZeneca plc in 2006. He is currently Chairman of four companies operating in the healthcare sector, including Cancer Research Technology Ltd, the cancer-focused technology development and commercialisation arm of Cancer Research UK, and he is also a non-executive director of Spectris plc.


Dr Robert Easton Non-Executive DirectorDr Robert Easton is a Partner and Senior Advisor at The Carlyle Group, the global alternative asset management company. During his 16 years with the firm he ran the buyout team in the UK, served as co-head of Carlyle Europe Technology Partners, led Carlyle’s Ireland-focused fund and served on multiple portfolio company boards in many different sectors. Before joining Carlyle Dr Easton was Vice President of Corporate Development at Invensys plc. He is a past Chairman of the British Venture Capital Association and a founding director of the independent transparency body for private equity disclosure. Dr Easton is a serial investor in early stage and start-up companies.


Dr Linda Wilding Non-Executive DirectorDr Linda Wilding has extensive experience in the private equity investment and healthcare sectors. Having qualified as a chartered accountant with Ernst & Young, from 1989 to 2001 she worked in the private equity division of Mercury Asset Management, rising to the position of Managing Director. She has served as a non-executive director (including as Chairman) on the boards of a number of companies. She is currently Chairman of the HG Capital Private Equity Valuation Committee and a non-executive director of UDG Healthcare plc.



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Senior management team

William Rayner General Counsel and Company SecretaryWilliam joined the Group’s legal team in 2004 and became General Counsel and Company Secretary in 2014. He has extensive experience of venture capital and technology licensing transactions, as well as general corporate legal matters. Before becoming a barrister, William spent five years working in technology transfer. He has a BSc in Physics and Philosophy and an MSc in Philosophy and History of Science, both from King’s College London.

Brian Graves Director of Engineering Technology Transfer OfficeBrian joined the Group in 2001 as head of the Engineering Technology Transfer team. Brian has over 20 years’ experience in business development, product development and marketing in the engineering industry and previously worked for John Crane Limited, a division of Smiths Group plc.

Anjum Ahmad Treasury and Finance DirectorAnjum joined the Group in 2003. Previously he was Finance Director at a start-up venture, and he has held roles at GlaxoSmithKline, BBC Worldwide and the British Red Cross. Anjum is a Fellow of the Association of Chartered Certified Accountants. He has an MBA and holds the AMCT qualification of the Association of Corporate Treasurers.

Kelsey Lynn Skinner Director of Technology VenturesKelsey joined Innovations in 2012 from Firelake Capital, a Palo Alto venture capital firm specialising in energy and materials science investments. An engineer by training, Kelsey has worked in energy technology since 2003, including roles with Google’s green energy strategy group and Stanford’s Global Climate and Energy Project (GCEP). Kelsey has a BSc and MSc in Mechanical Engineering & Thermodynamics from Stanford University and an MBA from Stanford’s Graduate School of Business.

Robert Bahns Director of Technology VenturesRobert has over 20 years’ experience in industry and finance and currently represents Innovations on the boards of Plaxica, Oxford Biotrans, Silicon Microgravity, Waveoptics, Sub Salt Solutions, SAM Labs, and CCS. Previously, he was a director in the technology investment team at Nomura International plc where he led investments in the semiconductor and wireless space. He is trained as an electronics engineer and worked in Japan for Pioneer Electronics, both in R&D and in the establishment of the company’s first UK manufacturing facility. He has an MBA from INSEAD and an Electrical Sciences degree from the University of Cambridge.

Dr Rob Woodman Director of Healthcare VenturesRob joined Innovations in 2012 and was previously Principal in the life science team at Sofinnova Partners, a leading European venture capital firm. He is currently in the boards of Mission Therapeutics, Crescendo Biologics, Storm Therapeutics, Inivata, Enterprise Therapeutics, and Nascient. Rob’s experience ranges from technology transfer with Cancer Research Technology (CRUK) through to pharmaceutical consultancy with IMS Health. Rob holds an MSc in Biochemistry from the University of Oxford and a PhD in Oncology from the University of Cambridge.

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Maina Bhaman Director of Healthcare VenturesMaina joined the Group in 2007 and has more than a decade of start-up experience gained at US and UK biotechnology ventures, including Celltech, where she was Senior Scientist on the Oncology R&D team. Maina has a BSc from the University of Texas at Austin and an MBA from Imperial College London Business School. She sits on the boards of PsiOxus Therapeutics, Cell Medica, TopiVert, Autifony, Kesios, Pulmocide, and Calcico.

Dr Andrew Tingey Director of Healthcare LicensingAndrew joined Innovations in December 2014 as Director of Healthcare Licensing and heads the team that sources, develops and licenses new technologies in the healthcare sector from Imperial College London. Previously, Andrew was Director of Licensing at Royal DSM NV, based near Maastricht, the Netherlands. Andrew has a PhD in biochemistry from the University of Leicester, a BSc in biochemistry from the University of York and an MBA from The Open University in the United Kingdom.

Dr Bobby Soni Director of Healthcare VenturesBobby joined Imperial Innovations from Novo Seeds, the early stage investment arm of Novo AS. He has led several investments in seed stage companies including Acesion, Avilex, RSPR Pharma, and Contera Pharma. Holding a PhD in Biology from the University of Virginia, Bobby has 17 years of experience across the life sciences industry including drug development, business development, and venture capital investing.

Dr Dani Bach Director of Healthcare Ventures Dani joined Innovations in January 2016 bringing with him a decade of experience as a venture capital investor at Index Ventures and Aravis. With interests ranging from medical devices to protein therapeutics, Dani focuses on early stage companies, at times matching technologies with passionate management teams. Prior to his career in investment, he spent 10 years in academic research. Dani holds a PhD in molecular biology from the University of Barcelona and an executive MBA.

Dr Jon Davies Director of Communications and Investor RelationsJon joined Innovations in January 2014 after a 25-year career promoting technology and life sciences companies. This included most recently a nine-year spell working in the City with the Capital Markets team of the College Group (now Instinctif Partners) and in-house roles as Director of Communications and IR for Datatec Limited (and its subsidiary Logicalis Group) and Xenova Group plc. Jon has a DPhil in Behavioural Ecology from Sussex University.

Jon Edington Director of Technology VenturesJon joined the Group in 2010 from Sovereign Capital, a mid-market buyout firm, having previously spent seven years at 3i. He focuses on investments in the ICT & Digital sector, having led Innovations’ investments in companies such as Featurespace, Acunu, and Cortexica. Prior to 3i, Jon worked at Deloitte Consulting in London, having gained six years’ manufacturing and industrial experience in the USA and Japan. He has a BEng from Imperial College London and an MBA from INSEAD.


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Compliance with the UK Corporate Governance Code (September 2014) The Directors are committed to a high standard of corporate governance and seek to comply with established best practice, as set out in the UK Corporate Governance Code issued by the Financial Reporting Council in September 2014 (‘the Code’). It should be noted that the Group is not required to comply with the Code and the following disclosure is made voluntarily. The Code is publicly available on the Financial Reporting Council website (www.frc.org.uk).

During the year ended 31 July 2016, the Directors consider that the Group has been in compliance with all provisions of the Code except as set out below:• contrary to provision A.3.1 of the Code, Dr Martin Knight

was not deemed to be independent at the time of his appointment as Chairman, due to his position (at that time) as a governor and council member of Imperial College London. At the time of Dr Martin Knight’s appointment the Group was not seeking to comply with the Code. Dr Martin Knight has not held office at Imperial College London since 2010. David Newlands, who became Chairman on 1 August 2016, was considered to be independent at the time of his appointment;

• contrary to provision B.2.1 of the Code, it was not the case that a majority of the members of the Nomination Committee were independent non-executive directors. The Group has sought to address this through the appointment to the Nomination Committee of David Newlands from 1 August 2016. The Directors consider this to be appropriate in the circumstances, as the Quoted Companies Alliance Code recognises that the chairman may count as one of the independent directors provided that he was independent at the time of appointment; and

• contrary to provision D.1.3 of the Code, Dr Martin Knight held options over Ordinary Shares and the terms of such options did not require any shares acquired by exercise of the options to be held until at least one year after his departure from the Board. The options were granted at the time of the Group’s IPO in 2006, when the Group was not seeking to comply with the Code.

The Board Board size and compositionThe Group is controlled through the Board, which currently comprises a Non-Executive Chairman, three Executive Directors and four Non-Executive Directors and is responsible to shareholders for the proper management of the Group. The Chairman is David Newlands and the Chief Executive Officer is Russ Cummings. The full details of all the Directors are set out on pages 70 and 71.

The Board operates both formally, through Board and committee meetings, and informally, through regular contact between the Directors and senior executives. The composition of the Board provides an appropriate blend of skills, experience, qualifications and knowledge, and the number of Non-Executive Directors provides a strong base for ensuring appropriate corporate governance of the Group.

In accordance with the Code, the Group has established an Audit and Risk Committee, a Remuneration Committee and a Nomination Committee, with formally delegated duties and responsibilities and written terms of reference. From time to time, separate committees may be set up by the Board to handle specific matters when the need arises.

Board changesThe majority of the Directors served throughout the year under review. However, David Newlands joined the Board as Chairman and Non-Executive Director after the end of the year (on 1 August 2016), and also joined the Nomination Committee on that date. Dr Martin Knight resigned as Chairman and Non-Executive Director on 31 July 2016.

Roles and responsibilitiesThe main roles of the Board are:• to create value for shareholders;• to provide entrepreneurial leadership of the Group;• to approve the Group’s strategic objectives; and• to ensure that the necessary financial and other resources

are made available to enable the Group to meet those objectives.

The Board also has a schedule of matters reserved for its approval, which are as follows: • setting Group strategy and approving an annual budget

and medium-term projections;• reviewing operational and financial performance;• reviewing the Group’s systems of financial control and

risk management;• ensuring that appropriate management development

and succession plans are in place;• reviewing the environmental and health and safety

performance of the Group;• approving appointments to the Board;• approving policies relating to Directors’ remuneration

and the severance of Directors’ contracts; and• ensuring that a satisfactory dialogue takes place

with shareholders.

Regular meetings of the Board are held every other month. Board papers are provided to the Directors in advance of each regular Board meeting, including management accounts and accompanying reports from Executive Directors and other members of the senior management team. At each regular Board meeting, the Directors discuss issues arising, review the progress of the Group towards its objectives and monitor its financial performance against budget and forecasts. Where Directors have concerns about the running of the Group or a proposed course of action, these are recorded in the minutes of the relevant meeting and are followed up appropriately. In addition to the regular bi-monthly meetings, the Board also meets as required to consider major transactions and other corporate business.

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The Board delegates specific responsibilities to certain committees. The three standing Board Committees are the Audit and Risk Committee, the Remuneration Committee and the Nomination Committee, each of which assists the Board in fulfilling its duties and provides independent oversight within its domain. Details of each committee are set out within this corporate governance report and the terms of reference for each committee are publicly available on request or via the Group’s website (www.imperialinnovations.co.uk).

The Group has adopted a code of practice in relation to dealings in the Group’s securities which is considered appropriate for a company with shares admitted to trading on AIM. The code helps Directors and employees to ensure that they neither abuse, nor place themselves under suspicion of abusing, price-sensitive information that they may possess or be thought to possess.

The Board has also delegated investment decision-making to the Group’s investment committees (which comprise the Chief Executive Officer, the Chief Investment Officer and other executives), except in cases where certain financial thresholds are exceeded or the investment in question is outside the Group’s normal investment scope, where the Board itself takes the investment decision.

Roles of the Chairman and the Chief Executive OfficerOther than as set out above, operational control and decision-making is delegated by the Board to the Chief Executive Officer or such other executives as the Chief Executive Officer shall determine. Non-Executive Directors are able to contact the Executive Directors at any time for further information. The division of responsibilities between the Chairman of the Board and the Chief Executive Officer is clearly defined and has been approved by the Board. The Chairman has not held the role of Chief Executive Officer prior to his appointment.

The Chairman spends one to two days per week on the business of the Group. He leads the Board in the determination of its strategy and in the achievement of its objectives and is responsible for organising the business of the Board, ensuring its effectiveness and setting its agenda. He also facilitates constructive relations between Executive and Non-Executive Directors, and ensures that Directors receive clear and accurate information in a timely fashion.

The Chief Executive Officer has direct charge of the Group on a day-to-day basis and is accountable to the Board for the operational and financial performance of the Group.

Senior Independent Director Dr Linda Wilding was appointed as the Group’s Senior Independent Director on 24 October 2014. The Senior Independent Director attends meetings with a range of major shareholders in order to help the Group develop a balanced understanding of the issues and concerns of major shareholders.

Board attendanceDuring the year the Board met 12 times. Details of Board attendance are set out in the table below.

DirectorNumber of Board

meetings attended

Dr Martin Knight (Chairman) 12/12Russ Cummings (Chief Executive Officer) 12/12Dr Nigel Pitchford (Chief Investment Officer) 12/12Tony Hickson (Managing Director – Technology Transfer) 12/12Professor David Begg (Non-Executive Director) 12/12Dr Robert Easton (Independent Non-Executive Director) 12/12Peter Chambré (Independent Non-Executive Director) 11/12Dr Linda Wilding (Independent Non-Executive Director) 12/12

Re-election of DirectorsAll Directors are subject to election by shareholders at the first Annual General Meeting (AGM) after their appointment by the Board, and to re-election thereafter at intervals of no more than three years. Any Non-Executive Directors who have more than nine years’ service on the Board will also be subject to annual re-election. The names of Directors submitted for election or re-election are accompanied by sufficient biographical details and any other relevant information to enable shareholders to take an informed decision on their election.

The Board will satisfy itself that the performance of the Directors seeking re-election at the next AGM continues to be effective, that they demonstrate commitment to their respective roles, and that the re-election of these Directors will ensure that the Group continues to have a broad balance of skills, knowledge and experience available to it.


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Directors’ independence The Board has noted the following items in relation to the independence of certain members of the Board:• Dr Martin Knight served for more than nine years on the

Board (or on the Board of Imperial Innovations Limited, which was previously the vehicle of the Group’s business). The Board considered the independence of Dr Martin Knight and satisfied itself that he continued to be independent in character and judgement throughout his tenure as a Director. Discussions with major investors of the Group also indicated no demand for change;

• Professor David Begg is not deemed to be an Independent Non-Executive Director because of his appointment to the Board by Imperial College London; and

• Dr Martin Knight held options over Ordinary Shares of the Group as set out on page 74.

Taking into account the Code, the Board considers David Newlands (who was considered independent on his appointment), Peter Chambré, Dr Linda Wilding and Dr Robert Easton to be the Independent Non-Executive Directors of the Group at the date of this report. As noted above, Dr Martin Knight was also considered to be an Independent Non-Executive Director throughout the year.

Acceptance of other directorshipsThe Non-Executive Directors may accept appointments as Directors of other companies and retain any related fees paid to them. David Newlands, Dr Martin Knight, Professor David Begg, Peter Chambré, Dr Linda Wilding and Dr Robert Easton all act as Directors of companies outside the Group.

At the time of his appointment as Chairman, the other commitments of David Newlands were his chairmanship of Raeburn Place Foundation, his directorships of Raeburn Place Development Limited and Walton Heath Golf Club Limited, and his membership of Prospect Investment Management (I) LLP. Those other commitments have not changed as at the date of this report.

The Executive Directors may accept external appointments as Non-Executive Directors of other companies with the prior consent of the Board. Where such appointment is to the Board of one of the Group’s portfolio companies, any related fees are paid to the Group.

Board development, support and evaluationProfessional development of DirectorsOn appointment, a Director takes part in an induction programme through which he or she receives information about the Group, the role of the Board and the matters reserved for its decision, the terms of reference and membership of the Board committees, the Group’s corporate governance practices and procedures, and the latest financial information about the Group. On appointment, Directors are also advised of their legal and other duties and obligations as a Director of an AIM-quoted company. This induction also gives the Director an opportunity to request to meet with major shareholders.

Throughout their period in office the Directors are continually updated on the Group’s business and the competitive and regulatory environments in which it operates, as well as changes to the legal and governance requirements applicable to the Group and to themselves as Directors. The Chairman is also available to discuss the training and development needs of the Directors when required.

Board evaluation of performanceThe Board is mindful of the requirement to undertake an annual evaluation of its performance and that of its committees and individual Directors. The Board has adopted the following procedures in order to conduct Board performance evaluation.

The performance of the Board, its committees and the individual Executive and Non-Executive Directors is evaluated by the Chairman on an ongoing basis. The Chairman meets with the other Directors regularly throughout the year. The Chairman also conducts a formal performance appraisal of the Chief Executive Officer annually. Also, in conjunction with the Chief Executive Officer, the Chairman assesses annually the performance of the other Executive Directors, as well as the Company Secretary and other senior managers. The Chairman will also, as appropriate, hold meetings with the Non-Executive Directors without the Executive Directors being present. The Chairman himself is appraised annually by the Non-Executive Directors, led by the Senior Independent Director, taking into account the views of Executive Directors.

Access to independent advice and supportThe Directors are given access to independent professional advice at the Group’s expense when the Directors deem it necessary in order for them to carry out their responsibilities. All Directors also have access to the advice and services of the Company Secretary, who is responsible to the Board as a whole for ensuring that Board procedures are properly followed and that applicable rules and regulations are complied with.

Relations with shareholders The Board attaches great importance to communications with both institutional and private shareholders. In fulfilment of the Group’s obligations under the Code, the Chairman gives feedback to the Board, and in particular to the Non-Executive Directors, on issues raised with him by major shareholders. Non-Executive Directors may attend scheduled meetings with major shareholders. Regular communication is maintained with all shareholders through the Group’s announcements, its Annual Report and its half-yearly report.

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The Directors seek to build a mutual understanding of objectives between the Group and its shareholders. The Directors maintain contact with institutional shareholders through presentations and meetings regularly throughout the year. With private shareholders this is not always practicable. The Board therefore uses the Group’s AGM as the opportunity to meet private shareholders, who are encouraged to attend the AGM and take the opportunity to ask questions of the Directors and discuss the development of the business.

The Group operates a website, www.imperialinnovations.co.uk, which includes the information about the Group that is required to be disclosed under the AIM Rules for Companies.

Risk management and internal controlIt is the responsibility of the Directors and senior management to safeguard the value of the business and assets of the Group. Fulfilling this responsibility requires the development of policies and internal controls to ensure the Group’s resources are properly managed and risks that might undermine the Group’s business and assets are identified.

The Board is responsible for determining the nature and extent of significant risks it is willing to take in achieving its strategic objectives. To support this the Board maintains a risk management and internal control system.

Risk management The Group has an ongoing process for identifying, evaluating and managing the significant risks the Group faces. The process is as follows:• risks are regularly identified, through a review of the

environment in which the Group operates; • each identified risk is then subject to an assessment

to determine (a) probability and (b) impact; • the probability of the risk occurring and the potential impact

are then used to derive a colour-coding for the risk, and the identified risks are set out in tabular form in a risk register;

• a response to accept, monitor, mitigate or transfer the risk is then recommended by the Treasury and Finance Director; and

• the risk is then re-evaluated post mitigation and may be given a revised colour-coding.

Internal controlThe Audit and Risk Committee and the Board have reviewed the effectiveness of the Group’s internal controls, including financial, operational and compliance controls, for the period 1 August 2015 up to the date of approval of this Annual Report, and have addressed issues as they have been identified. The key features of the internal control systems that operated throughout the year covered by the financial statements are set out below:• the Group prepares consolidated financial statements

which are reviewed and approved by qualified and experienced individuals, underpinned by a system of checklists which ensures that all elements of the financial statements and appropriate disclosures are considered and accurately stated;

• the Group prepares detailed budgets and working capital forecasts, which are based upon the strategy of the Group and are approved by the Board. Detailed management accounts are prepared each month and are compared to budgets, with any variances being investigated;

• the Board monitors the activities of the Group through the supply of regular consolidated financial information as set out in Board papers;

• the Board routinely monitors the performance of its investments. The Group employs stringent investment appraisal processes prior to deciding on investment. Regular reports are made to the Board on the status and valuation of investments and significant disposals require Board approval;

• the Group has a structure with clearly drawn lines of accountability and authority. Employees are required to follow clearly laid out internal procedures and policies appropriate to the business and their position within the business; and

• the Group employs Directors and senior employees with the appropriate knowledge and experience.

No significant weaknesses or failings of the Group’s internal controls have been identified during the year. The Audit and Risk Committee and the Board are committed to working together to ensure that appropriate remedial action is taken if any such issues arise in the future.

All members of staff are aware of the internal controls of the Group, and the Group has produced a staff handbook which covers a variety of policies and procedures which are designed to help each employee understand the Group’s work environment. Such policies cover areas such as communications, health and safety, data protection, equal opportunities, and whistleblowing.


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The Group seeks at all times to conduct its business with the highest standards of integrity and honesty, and has therefore adopted a whistleblowing policy under which staff are encouraged to report to an Executive Director or the General Counsel any alleged wrongdoing, breach of legal obligation or improper conduct by or on the part of the Group or any officers, Directors, employees, consultants or advisers of the Group.

The manager dealing with any matter will investigate the concerns. This may require him or her to meet with the staff member to obtain further information (although anonymous reports can also be made), to interview potential witnesses, and to examine documents. Upon completing the investigation the manager will determine appropriate action. If the investigation concludes that the staff member’s concern is justified, action will be taken to address and rectify the wrongdoing, and if necessary to involve the appropriate authorities. If the staff member is unhappy about the speed or conduct of the investigation they can raise concerns with the Chief Executive Officer or the Chairman of the Audit and Risk Committee. The Audit and Risk Committee is informed of any whistleblowing reports.

The above risk management and internal controls process has been in place throughout the year in review and up to the date of the approval of this Annual Report. The system of internal controls accords with the guidance issued by the Financial Reporting Council and is reviewed at least once a year by the Audit and Risk Committee and the Board. This review covers all material controls, including financial, operational and compliance, as well as risk management systems.

The Board acknowledges that it has ultimate responsibility for the Group’s system of internal controls and for reviewing their effectiveness. However, the system of internal controls is designed to manage rather than eliminate the risk of failure to achieve business objectives, and it can only provide reasonable and not absolute assurance against material misstatement or loss.

Conflicts of interestEach Director has a statutory duty under the Companies Act 2006 (the ‘Act’) to avoid a situation in which he or she has or can have a direct or indirect interest that conflicts or may potentially conflict with the interests of the Group. Each Director must also disclose to the Board any transaction or arrangement under consideration by the Board in which he or she is interested. The Company’s articles of association permit the Board to authorise conflicts or potential conflicts of interest. Procedures are in place to deal with such conflicts of interest and these have been operated effectively throughout the year. Directors are regularly reminded of their duties in respect of conflicts of interest.

Insurance The General Counsel has responsibility for arranging adequate insurance cover for key business risks, and appropriate insurance is in place under which Imperial Innovations Group plc is the insured entity, with cover extending to its subsidiaries and Directors. The Group’s insurance broker is Lockton Companies LLP.

Statement of Directors’ responsibilities A statement of the Directors’ responsibilities is set out in the Directors’ report on page 98.


12 October 2016

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ChairmanDavid Newlands (from 1 August 2016)Dr Martin Knight (until 31 July 2016)

Members David Newlands (from 1 August 2016)Professor David BeggDr Linda WildingDr Martin Knight (until 31 July 2016)

OverviewThe Nomination Committee takes the lead in the process of Board appointments and the re-election and succession of Directors, with a view to ensuring that the Board is composed of individuals with the necessary skills, knowledge and experience to enable it to discharge its duties effectively.

The Nomination Committee does not meet in respect of appointments to the Board made by Imperial College London, which are made in accordance with the College’s right under the relationship agreement between the College, Imperial Innovations Limited and Imperial Innovations Group plc.

The Chairman does not chair the Nomination Committee when it is dealing with the appointment of a successor to the Chairmanship; in that case, the Committee is Chaired by a Non-Executive Director elected by the remaining members.

CompositionDuring the financial year, the Nomination Committee met once in order to consider the proposed appointment of David Newlands as a Director and Chairman. As the business of the meeting was to consider a successor to Dr Martin Knight as Chairman, Dr Martin Knight did not attend the meeting and Dr Linda Wilding chaired the meeting.

DirectorNumber of

meetings attended

Dr Martin Knight 0Professor David Begg 1Dr Linda Wilding 1

The Nomination Committee employed the services of Russell Reynolds Associates to conduct a comprehensive external search for the new Chairman, into which were added candidates identified from the Group’s own networks. Russell Reynolds Associates also carried out due diligence and referencing for the short-listed candidates. Russell Reynolds Associates has no other connection with the Group.

Functions and responsibilitiesThe Nomination Committee’s main responsibilities as set out in its terms of reference include:• to review regularly the structure, size and composition

of the Board and to make recommendations to the Board with regard to any necessary adjustments;

• to identify and nominate suitable candidates; and• to satisfy itself that processes and plans are in place

for appointments to the Board.

Nomination Committee


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Before an appointment is made, the Nomination Committee evaluates the balance of skills, knowledge, independence and experience on the Board, including gender diversity, and in the light of this evaluation prepares a description of the role, the expected time commitment and the capabilities required for a particular appointment. The Nomination Committee’s terms of reference are publicly available on request or on the Group’s website.

The Nomination Committee gives full consideration to succession planning in the course of its work, taking into account the challenges and opportunities facing the Group and the skills and expertise needed on the Board in the future.

Appointment of DirectorsEach of the Directors is appointed in accordance with specified terms, subject to re-election and to statutory provisions relating to removal of Directors. The details of the service agreements/letters of appointment under which each of the Directors has been appointed are set out in the Directors’ Remuneration Report on page 88. As set out on page 76, on appointment the Directors participate in an induction programme and continue to have the opportunity to regularly review and discuss their training and development needs with the Chairman.

DiversityThe Board is committed to fostering a culture that attracts and retains talented people to deliver outstanding performance. It strongly supports the principle of improving gender balance both at Board level and throughout the business of the Group.

The Directors support the overall aims of the Davies Report entitled ‘Women on Boards’ but for now do not feel that the setting of a measurable objective is appropriate in light of their policy of recruiting on merit. The Group has one female Board member, and will aim to maintain female representation on the Board at least at the current level and give due consideration to increasing the level if suitable candidates are available when Board vacancies arise. In engaging search firms to assist with the recruitment of both Executive and Non-Executive Directors, the Nomination Committee seeks to ensure that due regard is given to diversity.

David NewlandsChairman, Nomination Committee

12 October 2016

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ChairmanDr Linda Wilding

Members Dr Linda WildingPeter ChambréDr Robert Easton

OverviewThe Audit and Risk Committee is an essential element of the Group’s governance framework, to which the Board has delegated oversight of the Group’s financial reporting, risk management and external audit. The Audit and Risk Committee is also, at the Board’s request, responsible for advising the Board that the Annual Report is fair, balanced and understandable, as required by the UK Corporate Governance Code (the ‘Code’).

The Audit and Risk Committee has concluded that sound risk management and internal controls have been in operation throughout the annual accounting period. The Committee is satisfied that the Annual Report, taken as a whole, provides a fair, balanced and understandable assessment of the Group’s position at 31 July 2016, and has advised the Board accordingly. In reaching this conclusion the Committee has considered the information provided by management and has taken into account the external audit performed by PwC.

CompositionDuring the financial year the Committee met six times. The external auditors were present at two of the six meetings.

DirectorNumber of

meetings attended

Dr Linda Wilding 6Peter Chambré 6 Dr Robert Easton 6

Since the end of the financial year the Committee has met on two further occasions (in August and September 2016) to consider this Annual Report, with the external auditors being present at one of the two meetings.

The Board considers that the Chairman of the Audit and Risk Committee has appropriate recent and relevant financial experience.

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Functions and responsibilitiesThe primary responsibilities of the Audit and Risk Committee are the oversight of the Group’s financial reporting, risk management and internal controls and the work of the external auditors. The Committee’s main responsibilities, as set out in its terms of reference, are to review and advise the Board on:• the financial statements of the Group being properly

reported and monitored and the integrity of such financial statements and any formal announcements relating to the Group’s financial performance;

• the accounting methodologies used, accounting policies applied and significant financial reporting issues and judgements contained in such financial statements;

• the Annual Report: to assess whether it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s performance, business model and strategy;

• the external audit report relating to the financial statements;

• monitoring of the risks facing the Group and maintenance of a risk register;

• the Group’s financial reporting and internal control policies and procedures, including whistleblowing arrangements, and the assessment and reporting of financial and non-financial risks; and

• the external auditors’ independence and objectivity, the effectiveness of the audit process and the appointment, reappointment and removal of the external auditors.

At least annually, the Committee reviews the provision of non-audit services by the Group’s auditors and monitors the auditors’ independence. The Committee’s terms of reference are publicly available on request or on the Group’s website.

Activities during the yearSet out below are the key matters the Committee considered during the financial year and at the August and September 2016 Committee meetings in preparation for the approval of this Annual Report, including how any issues were addressed.

Financial management and reporting The Committee:• reviewed and made recommendations in respect

of the Group’s annual and half-yearly reports;• reviewed the fair value of investments; and• carried out a detailed review of the top 10 investments

by carrying value and additionally considered amounts attributed to those investments which did not have an investment round in the last 12 months.

Significant matters considered by the Audit and Risk Committee in relation to the financial statements and areas of judgement routinely considered and challenged were as follows:• the methodology and assumptions applied in the Group’s

valuation of investments. The valuation helps to determine a significant part of the Group’s net asset value and reported performance. As a consequence the scrutiny of material valuations represents an important part of the Committee’s remit. Valuations for the full and half year were reviewed and challenged by both management and the Committee;

• the judgements involved in the recognition and movement in the Group’s Carried Interest Plan liability, in particular the leaver assumptions, discount rate and timing of portfolio realisations;

• the Group’s significant shareholders and related party classification;

• treasury management and controls to ensure that investments are made in line with investment policy;

• the Group’s two loan facilities with the European Investment Bank and compliance with the financial covenants of those facilities;

• the Group’s share-based payments and their implications for its financial statements, including the fair value of long term incentive schemes;

• the Group’s status as a going concern and its viability statement; and

• assessing compliance with the Group’s tax structure protocol and the risks associated with any non-compliance.

The Committee is satisfied that the judgements made by management are reasonable and that appropriate disclosures in relation to key judgements and estimates have been included in the financial statements. In reaching this conclusion the Committee has considered reports and analysis prepared by management and has also constructively challenged assumptions. The Committee has also considered detailed reporting from, and discussions with, the external auditors.

Risk management and internal controlThe Committee:• reviewed the Group’s risk register and the appropriate

classification as described on page 77; and• reviewed the effectiveness of the Group’s internal controls.

External auditThe Committee:• reviewed and agreed the scope and methodology of

the work undertaken by the Group’s external auditors;• evaluated the independence and objectivity of the

external auditors; and• agreed the terms of engagement and fees to be paid

to the external auditors.

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External auditorsPricewaterhouseCoopers LLP (PwC) have been the external auditors of the Group since 2006, when the Group’s shares were admitted to trading on AIM. Before 2006 PwC were the auditors of Imperial Innovations Limited whilst it was a subsidiary of Imperial College London. A review of PwC’s independence and audit process effectiveness is performed each year before a recommendation is made to the Board to propose PwC for re-election at the AGM. In assessing PwC’s independence, the Committee received confirmation that, in PwC’s professional judgement, PwC is independent within the meaning of all UK regulatory and professional requirements and the objectivity of the audit partner and audit staff are not impaired.

Audit and non-audit servicesThe Committee is responsible for the development, implementation and monitoring of policies and procedures on the use of the external auditors for non-audit services, in accordance with professional and regulatory requirements. These are kept under review to ensure that the Group benefits in a cost-effective manner from the cumulative knowledge and experience of its external auditors whilst also ensuring that the external auditors maintain the necessary degree of independence and objectivity.

Any non-audit work to be undertaken by the external auditors is required to be authorised by the Treasury and Finance Director before it begins and the aggregate expenditure with the external auditors is reviewed by the Committee.

The Committee will approve the use of the external auditors to provide certain specified accounting and tax services, including tax compliance, tax planning and related implementation advice and certain other services when it is in the best interests of the Group to do so and they can be undertaken without jeopardising the independence of the external auditors.

Non-audit services carried out in the year related to management consultancy work in relation to the Group’s strategy (the contract for which was won through a competitive tender process), advisory and compliance review work in relation to tax, and reporting accountant services relating to the Company’s fundraising of £100.0 million during February 2016. The Committee was satisfied throughout the year that the objectivity and independence of PwC was not in any way impaired by the nature of the non-audit related services that they undertook for the Group during the year, by the level of non-audit fees charged, or by any other facts or circumstances.

Auditors feesThe total fees paid to PwC for the year ended 31 July 2016 were £438,000 of which £295,000 related to non-audit work (see note 7 of the consolidated financial statements). The non-audit work primarily related to tax compliance, management consultancy and work to support the Company’s fundraising of £100.0 million during February 2016. PwC were considered independent as no accounting judgement was involved.

Review of external auditorsThe Committee assesses the independence, objectivity and effectiveness of the external audit process in the following way:• consideration of report from external auditors describing

arrangements to identify, report and manage any conflicts of interest;

• consideration of the extent of non-audit services provided by external auditors;

• review of the audit plan and execution against the plan; and

• review of reports highlighting any major issues arising during the course of an audit.

In addition, the Chairman of the Committee maintains a dialogue with the auditors outside the Committee.

To fulfil its responsibility for oversight of the audit process, the Committee reviewed:• the terms, areas of responsibility, associated duties

and scope of the audit as set out in the auditors’ engagement letter for the year;

• the audit work plan for the current year;• the audit fee proposal;• the major issues that arose during the course of the

audit and their resolution;• key accounting and audit judgements;• the levels of errors identified during the audit; and• recommendations made by the auditors in their

management letters, and the adequacy of management’s response.

Internal audit functionGiven the Group’s size and development, the Board did not consider it necessary to have an internal audit function during the year. The Board will continue to monitor this requirement annually.

Dr Linda WildingChairman, Audit and Risk Committee

12 October 2016


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Directors’ Remuneration ReportRemuneration Committee Chairman’s introduction

Dear Shareholder

On behalf of the Board, I am pleased to present our Directors’ Remuneration Report for the year ended 31 July 2016. As in previous years, we have chosen in this Report to make additional voluntary disclosures in addition to those required by the AIM Rules for Companies and applicable regulations.

Over the past three years, the Group has invested £164.0 million into our portfolio of important and exciting innovative companies, with the prospects of delivering exceptional growth and returns. After this period of increasing investment, the Committee decided this year to review whether our remuneration structures were properly aligned with the clear strategy and objectives of the Group and whether we appropriately remunerated and incentivised our very talented organisation. With the support of external consultants, we conducted a review to consider a number of key questions:• How competitive are the levels of pay offered by

the Group?• Are the remuneration structures focused on the most

appropriate performance measures?• Does the Group have the right balance of short

and long term incentives in the packages it offers to Executive Directors and senior executives?

Overall, the review indicated that the Group’s existing remuneration policies were broadly appropriate. However, it highlighted some areas where improvements to the alignment of remuneration with the Group’s goals could be achieved. As a result of the review, the Committee is now putting forward a new remuneration policy for a vote by shareholders. A full explanation of the proposed new policy for the Group is set out in the Directors’ Remuneration Policy section below.

Among the key policy proposals are:• A proposal to increase the profit share ratio in the

Carried Interest Plan to 11.5%–12.5% (previously 10.5%–11.5%) to take account of the increased headcount that the Group’s business plan requires over the next five years.

• A requirement for Executive Directors and senior executives to build over time a meaningful personal shareholding in the Group.

• Changes to how annual bonus payments are calculated with the intention that Executive Directors will have 80% of any potential award linked to corporate measures which can be objectively established, with the remaining 20% being linked to the achievement of their personal objectives.

• A requirement that half of any cash annual bonus, above a threshold, is granted in the form of deferred share awards under the proposed 2016 Long Term Incentive Plan, which are not normally exercisable for two years.

• The adoption of a new share plan, the 2016 Long Term Incentive Plan, to replace the Unapproved Share Option Scheme and the Long Term Incentive Plan (both of which expired on 24 May 2016). The 2016 Long Term Incentive Plan will facilitate the grant of performance share awards (PSAs), which will be used instead of the total shareholder return (TSR) share options granted under the old Long Term Incentive Plan.

As Chairman of the Remuneration Committee I believe that we are putting in place a remuneration structure which will appropriately reward and incentivise our Executive Directors and senior executives to deliver exceptional returns to our shareholders.

Peter ChambréChairman, Remuneration Committee

12 October 2016

ChairmanPeter Chambré

MembersPeter ChambréDr Linda WildingDr Robert Easton

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Overview The Remuneration Committee assists the Board in determining its responsibilities in relation to remuneration, including making recommendations to the Board on the Company’s policy on all aspects of executive remuneration, and determining the individual remuneration and incentive and benefits package of each of the Executive Directors, the Chairman, and all those employees who receive an annual basic salary of £150,000 or more and any other employees who the Committee determines should be included in such groups from time to time. The remuneration of the Non-Executive Directors is considered by the Board following recommendations by the Executive Directors. The current terms of reference for the Remuneration Committee were approved by the Board and came into effect on 23 October 2014, and are publicly available on request and on the Group’s website.

Functions and responsibilitiesIn accordance with its terms of reference, the duties of the Remuneration Committee include to review and determine, on behalf of the Board and shareholders:• the framework or broad policy regarding executive

remuneration and the entire individual remuneration and incentive packages for each of the Executive Directors, Chairman and management (including all personnel receiving annual basic salary of £150,000 or more) and determining the relevant terms of employment of those persons;

• the participation by the Executive Directors and management in any discretionary employee share or other incentive schemes and bonus arrangements operated by the Group;

• targets for any performance-related payments and individual incentives for Executive Directors and management;

• the policy and scope of any pension arrangements for the Chairman, Executive Directors and management;

• the policy and scope of any termination payments and the severance terms for Executive Directors and management;

• the policy for authorising claims for expenses of Directors;• any major changes in remuneration policy or employee

benefit structures throughout the Group;• the ongoing appropriateness and relevance of

remuneration policy for the Executive Directors; and• the selection criteria, appointment and terms of reference

for any remuneration consultants who advise the Remuneration Committee.

The Chief Executive Officer may be invited to attend the Committee’s meetings but is not present when his own remuneration is discussed. The remuneration of the Non-Executive Directors is a matter for the Board. The Board may, however, delegate responsibility to a committee consisting of

Executive Directors including the Chief Executive Officer and in that matter the Non-Executive Directors play no part. No Director is involved in deciding his or her own remuneration.

CompositionDuring the year, the Remuneration Committee met five times at the Group’s offices. When appropriate, non-Committee members were invited to attend, including the Chief Executive Officer.

DirectorNumber of

meetings attended

Peter Chambré 5Dr Linda Wilding 5Dr Robert Easton 5

Key activities during the yearThe key activities of the Remuneration Committee during the year ended 31 July 2016 were as follows: • commenced the review of the Group’s remuneration

policy referred to in the Chairman’s letter above, with the assistance of external advisers;

• reviewed and approved the overall salaries and any proposed salary increases;

• reviewed and approved any proposed bonus payments; and• reviewed and approved the allocation of LTIP awards

(set out in detail below) for senior management.

Advisers to the Remuneration CommitteeDuring the year, the Remuneration Committee commissioned and received the advice of the external advisers shown in the table below:

Adviserto the Group Appointed by

Services provided to Remuneration Committee

Other services provided to the Group

M M & K Limited


Advising on the Group’s remuneration proposals and on market trends

None

M M & K Limited were selected to advise the Remuneration Committee from a short list of three firms.

The Remuneration Committee is satisfied that the advice it received from its external advisers was objective and independent. Total fees for advice provided to the Remuneration Committee during the year ended 31 July 2016 amount to £57,000 (2015: £41,000).

Peter ChambréChairman, Remuneration Committee

12 October 2016


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Introduction to Remuneration Report

Although the Group’s shares are not admitted to the Official List, the Board has chosen to include a Directors’ Remuneration Report within the Annual Report in order to demonstrate its commitment to best practice in corporate governance. The Directors’ Remuneration Report for the year ended 31 July 2016 includes information required to be included in the Group’s annual accounts by virtue of Rule 19 of the AIM Rules for Companies and Schedule 5 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. The Board has also chosen to include certain additional information within the Directors’ Remuneration Report that would be required to be included if the Group’s shares were admitted to the Official List. This additional information is in the form of disclosures which address selected requirements of Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended).

A resolution to approve the Remuneration Report will be proposed at the Annual General Meeting of the Group in November 2016.

The Remuneration Report comprises three sections:1. Directors’ Remuneration Policy.2. Statement of implementation of the Remuneration Policy for the year ending 31 July 2017.3. Annual Report on Directors’ Remuneration, which sets

out details of how the existing remuneration policy was implemented for the year ended 31 July 2016.

Directors’ Remuneration Policy

Remuneration policy The Remuneration Committee is setting out a new Remuneration Policy for the next three years which, it believes, will meet the demands of retaining and motivating the Executive Directors and senior executives.

The Group’s policy is to provide senior management with remuneration packages that are linked to the performance of both the Group and the individual. The mix of individual and collective, performance-based, reward is designed to incentivise senior management to work together to deliver the strategic aims of the business. Remuneration of senior management comprises basic salary, annual bonus awards, benefits in kind, pensions and long-term incentive arrangements. Further details of these are set out below.

The Remuneration Committee will regularly take reasonable and appropriate steps to establish whether the remuneration packages offered to senior management are broadly comparable with those offered by similar businesses. However, the Remuneration Committee will only use this information as a market indicator, and any changes to remuneration packages will be, first and foremost, driven by the strategic and commercial needs of the Group.

It is the Group’s policy that no Executive Director, who serves as a Non-Executive Director of another company in which the Group has an investment, receives direct remuneration from that other company.

The Remuneration Committee consider it appropriate that senior management should build up a meaningful personal holding in the Group. ‘Meaningful’ in this context has been determined as 2 x salary for the CEO, 1.5 x salary for the other Executive Directors and 1 x salary for the senior executives.

In forming the Group’s policy on remuneration the Board gives full consideration to Schedule D of the UK Corporate Governance Code (September 2014), which sets out guidelines for the design of performance-related remuneration. The Directors believe that the success of the Group depends on the performance of the senior management. The Directors also recognise the importance of ensuring that employees are appropriately incentivised and that they identify closely with the values of the Group. The Remuneration Committee considers when determining the remuneration of the Chairman and the Executive Directors not only the pay and conditions of the Chairman and the Executive Directors but also employment conditions across the Group, especially when determining annual salary increases.

Directors’ Remuneration Report

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Remuneration components a) Base salary This takes into account experience and personal contribution to the Group’s strategy, and aims to attract and retain executives of the quality required to deliver the Group’s strategy. Base salaries are reviewed regularly by the Remuneration Committee, taking into account factors that include the Group’s performance, individual performance and changes in responsibility. They may also be determined with reference to advice from external consultants and comparisons with an appropriate comparator group of companies.

The base salaries of the Directors are as set out in the table on page 91 under the heading ‘Single total figure table of remuneration of the Directors’.

b) Annual bonus award Each year discretionary bonus awards are considered and recommended by the Remuneration Committee. Such awards are based on both an employee’s own performance and that of the Group.

For the reported year, the Group has recommended awards to such Directors as are set out under the heading ‘Annual Report on Directors’ Remuneration’ in the column headed ‘Annual bonus earned’ on page 91.

Under the proposed Remuneration Policy the performance conditions for Executive Directors will comprise a mixture of corporate objectives that track the Group’s financial and/or strategic performance (weighted at 80%) and personal objectives that relate to the role and responsibilities of the Executive Director (weighted at 20%). The maximum payment that can be made to an Executive Director will be 100% of his or her base salary for the CEO and the CIO, and 50% of his or her base salary for the Managing Director – Technology Transfer.

Where the amount paid in annual bonus to a member of senior management exceeds £25,000, 50% of any excess over that amount will be granted in the form of deferred share awards under the proposed 2016 Long Term Incentive Plan. These awards will take the form of nominal or nil cost options which are not normally exercisable for two years.

The Chairman and Non-Executive Directors are not eligible for any annual bonus award.

c) Benefits – life assurance arrangements, private medical cover and permanent health insuranceThe Group also has a Group Death-In-Service plan insured with Legal & General covering all employees, which has been in place since inception on 1 August 2005. It pays a lump sum of four times the employee’s basic salary. As well as this Death-In-Service benefit, the Executive Directors are each entitled to private medical insurance (family cover) and permanent health insurance (for long-term sickness) under which, after 13 weeks of absence due to illness, they are entitled to 75% of basic salary until they return to work.

d) Pension entitlementsThe Executive Directors are members of the Imperial Innovations Pension Scheme (a defined contribution scheme), to which the Group contributes. Pensionable earnings do not include elements of remuneration other than salary. Neither the Chairman nor any of the Non-Executive Directors participate in the Group pension plan. Where an Executive Director has insufficient capacity to receive a pension contribution because he or she has reached his or her lifetime allowance, an alternative payment, not exceeding the amount due under pension entitlements, may be paid in lieu.

e) Long term incentive arrangements Under the proposed Remuneration Policy the Group will operate two main long term incentive arrangements for Executive Directors and senior management: the Carried Interest Plan and Performance Share Awards (PSAs) granted under the proposed 2016 Long Term Incentive Plan. The Group also operates an Employee Benefit Trust (EBT) and, historically, made awards in the form of Total Shareholder Return (TSR) share options. Details of the EBT and the TSR share options are set out on page 93.

The Carried Interest Plan In future, the Group will continue to operate the long term incentive arrangement known as the Carried Interest Plan that allows permanent employees of the Group, including the Executive Directors, to obtain an equity participation in the growth of the underlying investments of the Group. The Chairman and the Non-Executive Directors are not eligible to participate in the plan.

The Carried Interest Plan is divided into several portfolios. Portfolios remain open for new investments in the financial year and follow-on investments for the next four years.

Under the new Remuneration Policy, the CEO and the Managing Director – Technology Transfer will not participate in any portfolios after P10 below.

From 2014 onwards the Carried Interest Plan for each year has been split into two portfolios, A) new investments for the full financial year, and B) follow-on investments made into companies from earlier portfolios which are now over four years old and consequently closed.

Carried Interest Plan portfolios

Class Year ended

P1-2007 31 July 07P2-2008 31 July 08P3-2009 31 July 09P4-2010 31 July 10P5-2011 31 July 11P6-2012 31 July 12P7-2013 31 July 13P8-2014 31 July 14P9-2015 31 July 15P10-2016 31 July 16P11-2017 31 July 17


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Before any payment to participants becomes due under any portfolio, the Group must first receive back the original amount invested in that portfolio plus an additional amount representing 8% compound annual growth on the original amount invested. This additional amount is known as the ‘hurdle’.

The amount of proceeds from the sale of investments in excess of the hurdle (the Excess Return) may be shared with the participants using a profit share ratio. Profit sharing ratios vary between portfolios:

Participants Group

Portfolios until 31 July 2011 15% 85%Portfolios ending between 31 July 2012 and 31 July 2016 1 10.5%-11.5% 2 89.5%-88.5%Portfolios ending 31 July 2017 and beyond 1 11.5%-12.5% 3 88.5%-87.5%

1 Ratio agreed annually by the Group’s Remuneration Committee.

2 Reduced to take into account the introduction of the TSR scheme.

3 Increased by 1% to take account of the future growth in the Company and corresponding requirement for additional Carried Interest.

Once future disposals of investments are made, the proceeds are distributed in the following order:1. Retention by the Group of the original amount invested.2. Retention by the Group of 8% hurdle.3. ‘Catch-up’ payment to participants until the desired profit

share ratio for the portfolio is reached (in respect of the proceeds in excess of the original amount invested in the portfolio).

4. Retention by the Group and distribution to participants in the desired profit share ratio.

Accordingly there is no cash payment due to individual members of the scheme until the Group has ceased investment in the companies in the relevant portfolio and has made sufficient realisations. The amount which participants receive as a result of the sharing of the Excess Return is known as the carried interest.

The Carried Interest Plan has a requirement of three years’ continuous service before any value is retained by good leavers (who are defined as set out in the scheme rules); thereafter any leaver vesting is on a straight-line basis over ten years.

Performance Share Awards (PSAs)Performance Share Awards will be granted to employees, including the Executive Directors, under the proposed 2016 Long Term Incentive Plan, which will be submitted to shareholders for approval at the AGM in November. PSAs will initially be granted in the form of nominal cost options to acquire shares in the Group, although they could also be granted in the form of nil cost options.

Going forward, for Executive Directors Russ Cummings and Tony Hickson, it is intended that 100% of their long term incentive will be made by way of PSAs and they will not participate in any Carried Interest Plan portfolios after portfolio P10. Given his role as Chief Investment Officer, approximately one-third of the expected grant value of the long term incentive for Dr Nigel Pitchford is planned to be awarded under the PSP, with two-thirds in the Carried Interest Plan scheme. The Remuneration Committee will monitor the appropriateness of this split on an annual basis.

The maximum ‘face value’ award that may be made on an annual basis to the CEO is 300% of salary, and the maximum award to any other Executive Director is 150% of salary.

PSAs will have performance measures attached that must be met in order for the shares to vest. These will include a minimum growth threshold that must be achieved before any of the PSAs vest. For the measures applying to PSAs to be granted in the year ending 31 July 2017, see the statement of implementation for 2017 on page 90. Each annual award will be divided into three equal tranches, with each tranche only being exercisable (should the shares have vested) after three, four and five years respectively.

Service contract and letters of appointmentThe table below sets out the appointment details for each of the Directors.Table of Directors’ service

Director PositionDate of appointment to the Board

Date of current contract/letter of appointment Date of expiry/notice period

David Newlands Chairman 1 August 2016 11 May 2016 Three months’ noticeRuss Cummings Chief Executive Officer 18 September 20061 18 September 2006 Six months’ noticeDr Nigel Pitchford Chief Investment Officer 16 October 20132 29 September 2011 Six months’ noticeTony Hickson Managing Director –

Technology Transfer16 October 20133 18 February 2005 Three months’ notice

Professor David Begg Non-Executive Director 21 March 2012 22 March 2012 Three months’ noticePeter Chambré Non-Executive Director 19 June 2014 29 May 2014 Three months’ noticeDr Linda Wilding Non-Executive Director 19 June 2014 29 May 2014 Three months’ noticeDr Robert Easton Non-Executive Director 1 August 2015 8 June 2015 Three months’ notice

1 Russ Cummings was appointed as a CEO on 16 July 2013.

2 Dr Nigel Pitchford was appointed as a Director of Imperial Innovations Limited and Imperial Innovations Investments Limited on 26 July 2013.

3 Tony Hickson was appointed as a Director of Imperial Innovations Limited and Imperial Innovations Investments Limited on 26 July 2013.

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Chairman’s service contractThe remuneration of the Chairman is determined by the Remuneration Committee, in which matter the Chairman plays no part. The annual fee for his service, both as a Non-Executive Director and as Chairman, is £150,000. Either the Group or the Chairman may terminate his appointment at any time on giving three months’ prior written notice to the other. Upon termination of his services to the Group the Chairman is not entitled to any benefits.

Chief Executive Officer’s service contractThe Chief Executive Officer’s appointment is terminable on not less than six months’ written notice by either party. He is entitled to 25 days’ paid holiday, in addition to normal public holidays. On termination of his employment, the Group may at its discretion require him not to carry out any duties during his notice period or pay him salary in lieu of notice. He is not entitled to any other benefits on the termination of his employment.

Executive Directors’ service contractsExecutive Directors each have a service contract of indefinite duration until normal retirement age. It is the Group’s policy that Directors’ service contracts should incorporate no more than six months’ notice of termination from the Group, in line with current best practice. The acceptance by an Executive Director of Non-Executive Director appointments with other companies is subject to Board approval.

Non-Executive Directors’ service contractsThe remuneration of the Non-Executive Directors is determined by the Board, in which matter the Non-Executive Directors play no part. Whilst some letters of appointment originally anticipated a three-year term, the Board has resolved to continue such appointments upon their existing terms, subject to, and conditional upon, the re-election of such Directors by shareholders from time to time in accordance with the Group’s Articles of Association.

The appointment of each of the Non-Executive Director is terminable at any time on either party giving three months’ written notice. Professor David Begg was appointed to the Board by Imperial College London and his appointment may be terminated by Imperial College London in accordance with its right under the Relationship Agreement.

Prior to appointment, the Board is made aware of each of the Non-Executive Directors’ other significant commitments with a broad indication of the time involved, as well as any subsequent changes.

The annual fee for the Non-Executive Directors is £42,500, with the Chairman of the Audit and Risk Committee and the Chairman of the Remuneration Committee each receiving an additional £5,000. No individual is entitled to any benefits upon the termination of his/her service to the Group.

Full details of the Directors’ remuneration are shown in note 21 to the consolidated financial statements and on pages 90 to 94.

Policy on payments for loss of officeNone of the Directors’ service contracts have a provision for compensation for loss of office or wrongful termination upon change of control beyond payment in lieu of contractual notice. The Committee’s policy for provision for compensation for loss of office is to provide compensation which reflects the Group’s contractual obligations.

Statement of consideration of employment conditions elsewhere in the GroupThe remuneration approach is consistently applied at levels below the Executive Directors, ensuring that there is alignment with business strategy throughout the Group. When conducting the annual salary review for all employees, account is taken of the external market, and for the majority of the management population, individual performance is also a key factor.

Statement of consideration of shareholder views The Committee understands that listening to the views of the Group’s major shareholders plays a vital role in the success of the business. It is committed to an ongoing dialogue with the Group’s shareholders and maintains regular contact with them throughout the year.


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Statement of implementation of the remuneration policy for the year ending 31 July 2017SalariesExecutive Directors’ salaries for the financial year ending 31 July 2017 have been set as follows:• Russ Cummings £305,000• Dr Nigel Pitchford £275,000• Tony Hickson £149,000 1

1 An additional £11,000 is paid into Tony Hickson’s pension scheme in accordance with salary sacrifice arrangements.

BenefitsThe cost of insured benefits and benefits in kind for the financial year ending 31 July 2017 are estimated to be as follows:• Russ Cummings £7,000• Dr Nigel Pitchford £5,000• Tony Hickson £5,000

Pension contributions (or equivalent payments in lieu) are for the financial year ending 31 July 2017 are estimated to be as follows:• Russ Cummings £26,000• Dr Nigel Pitchford £23,000• Tony Hickson £30,000

Long term incentive plansThe Remuneration Committee expects to grant performance share award share options (PSAs) to Executive Directors on the following basis:• Russ Cummings 300% of salary• Dr Nigel Pitchford 100% of salary• Tony Hickson 100% of salary

In the case of Russ Cummings and Dr Nigel Pitchford, the vesting of these options will be dependent on the three-year corporate performance as follows:• 60% dependent on net asset value growth (taking into

account dividends declared in the period)• 40% dependent on absolute total shareholder return

In the case of Tony Hickson, the vesting of these options will be dependent on the three-year corporate performance as follows:• 25% dependent on net asset value growth (taking into

account dividends declared in the period)• 25% dependent on absolute total shareholder return • 50% dependent on metrics specific to the performance

of the Technology Transfer Office

Under each of the performance criteria, 100% of the options awarded will vest if performance of 15% per annum growth is achieved, 25% will vest if performance of 6% per annum (threshold) growth is achieved, and any growth performance between the threshold and the maximum will be calculated on a straight-line basis. The number of performance shares that vest is independent under each of the performance criteria.

Dr Nigel Pitchford will also receive awards under the Carried Interest Plan, including participation in P11 as defined above.

In accordance with the new Remuneration Policy, Russ Cummings will receive further awards under the Carried interest Plan (but only in portfolios up to and including P10), while Tony Hickson will not receive any further awards under the Carried Interest Plan.


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Annual Report on Directors’ Remuneration

Single total figure table of remuneration of the Directors (audited)The following table shows a single total figure of remuneration in respect of qualifying services for the 2016 financial year for each Director, together with the comparative figure for 2015.

Salaries and fees payable

All taxable benefits and

expenses allowances5

Annual bonus earned

LTIP awards and options

vestedPension

scheme benefits Total

2016 £000

2015 £000

2016 £000

2015 £000

2016 £000

2015 £000

2016 £000

2015 £000

2016 £000

2015 £000

2016 £000

2015 £000

Executive DirectorsRuss Cummings 1 290 275 6 4 – 138 – – 25 23 321 440Dr Nigel Pitchford 1 260 245 4 3 – 123 – – 22 20 286 391Tony Hickson 1 149 130 4 4 16 49 – – 30 26 199 209Chairman and Non-Executive DirectorsProfessor David Begg 43 42 – – – – – – – – 43 42Peter Chambré 47 45 – – – – – – – – 47 45Dr Linda Wilding 47 42 – – – – – – – – 47 42Dr Robert Easton 43 – – – – – – – – – 43 –Former DirectorsDr Martin Knight2 100 100 – – – – – – – – 100 100Dr Paul Atherton3 – 17 – – – – – – – – – 17Mark Rowan4 – 46 – – – – – – – – – 46Total 979 942 14 11 16 310 – – 77 69 1,086 1,332

1 With effect from 1 August 2016, the Remuneration Committee increased the following base salaries: Russ Cummings £305,000 (previously £290,000), Dr Nigel Pitchford £275,000 (previously £260,000). During the year ended 31 July 2016, the Remuneration Committee agreed to pay directly to Russ Cummings £25,000 and Dr Nigel Pitchford £22,000 in lieu of pension contributions. Tony Hickson elected for £11,000 of his salary to be subject to salary sacrifice arrangments into his pension scheme.

2 Dr Martin Knight resigned from the Board with effect from 31 July 2016.3 Dr Paul Atherton resigned from the Board with effect from 16 December 2014. 4 Mark Rowan resigned from the Board with effect from 31 July 2015.5 Benefits in kind comprises private healthcare cover, life assurance and permanent health insurance.

Total pension entitlements (audited)The Executive Directors are members of the Imperial Innovations Pension Scheme, to which the Group contributes. Pensionable earnings do not include elements of remuneration other than salary. This scheme is described more fully in note 22 to the consolidated financial statements. The Directors and former Directors to whom retirement benefits accrued under money purchase pension schemes were, in the year to 31 July 2016, Tony Hickson and, in the year to 31 July 2015, Dr Nigel Pitchford and Tony Hickson.

Payments for loss of office (audited)The Group has not made any payments for loss of office during the last financial year (2015: nil).

Directors’ shareholding and share interests (audited)Directors’ interests in the Ordinary Shares of Imperial Innovations Group plc at 31 July 2016 Set out below are details of the Directors’ shareholdings and share options at the end of the year. The table sets out details of an interest in the Ordinary Shares of Imperial Innovations Group plc (‘Ordinary Shares’): • held, either directly or indirectly, by Directors and their connected persons; and• held by the Trustee of the Group’s Employee Benefit Trust (EBT), which has notified Directors that it holds Ordinary Shares

in the Group for their benefit on the dates as set out in the column ‘Beneficial Interest’.

At the date of his appointment as a Director (1 August 2016), David Newlands had a direct holding of 100,000 shares, and this has not changed as at the date of this report. During the year, the EBT did not increase its holding of Innovations’ Ordinary Shares (2015: no increase). See note 17 in the consolidated financial statements.


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Number of Ordinary Shares held by Directors at 31 July

2016 Direct

interest

2016 Beneficial

interest

2015 Direct

interest

2015 Beneficial

interest

Dr Martin Knight (Ex-Chairman) 100,640 324,662 100,640 245,902 Russ Cummings (Chief Executive Officer) – 139,636 – 139,636 Tony Hickson (Managing Director Technology Transfer) 1,577 50,895 1,577 50,895Dr Nigel Pitchford (Chief Investment Officer) – – – –Professor David Begg (Non-Executive Director) 18,319 – 18,319 –Dr Linda Wilding (Non-Executive Director) 15,000 – 15,000 –

Peter Chambré (Non-Executive Director) 3,000 – 3,000 –Dr Robert Easton – – – –

Interests of the Directors in options over Ordinary Shares of the Group (audited)Directors’ share optionsDetails of the Directors’ shareholdings in the Group, in so far as they relate to share options, are set out below. No price was paid for the award of any of the options referred to in the table below. No changes since grant have been made to the criteria relating to any of the options described and no options were exercised by Directors during the year (2015: nil). There were no gains made by individual Directors from the exercise of share options (2015: nil). The market price of the Company’s shares at the end of the financial year (being close on the last trading day of the year, 31 July 2016) was £4.25 (2015: £4.85). The range of prices during the year was between £3.41 and £5.25 (2015: £4.29 and £5.03).

Number of options Exercise dates

At 31 July 2016 At 31 July 2015 Date of grant Exercise price From To

Russ Cummings 85,714 ¹ 85,714 5 July 12 £3.50 1 Aug 2016 31 July 202185,714 ¹ 85,714 18 Oct 12 £3.50 1 Aug 2016 31 July 202185,714 ¹ 85,714 5 Dec 13 £3.50 1 Aug 2016 31 July 2021

109,167 2 109,167 26 Nov 14 £4.55 26 Nov 2019 26 Nov 20244,390 3 4,390 9 Dec 14 £4.10 1 Jan 2018 30 June 2018

100,752 4 – 4 Nov 15 £4.93 26 Nov 2019 26 Nov 2024Dr Nigel Pitchford 85,714 ¹ 85,714 5 July 12 £3.50 1 Aug 2016 31 July 2021

85,714 ¹ 85,714 18 Oct 12 £3.50 1 Aug 2016 31 July 202185,714 ¹ 85,714 5 Dec 13 £3.50 1 Aug 2016 31 July 2021

109,167 ² 109,167 26 Nov 14 £4.55 26 Nov 2019 26 Nov 20244,390 3 4,390 9 Dec 14 £4.10 1 Jan 2018 30 June 2018

100,752 4 – 4 Nov 15 £4.93 26 Nov 2019 26 Nov 2024Tony Hickson 10,714 ¹ 10,714 5 July 12 £3.50 1 Aug 2016 31 July 2021

10,714 ¹ 10,714 18 Oct 12 £3.50 1 Aug 2016 31 July 202110,714 ¹ 10,714 5 Dec 13 £3.50 1 Aug 2016 31 July 202117,467 2 17,467 26 Nov 14 £4.55 26 Nov 2019 26 Nov 20243,073 3 3,073 9 Dec 14 £4.10 1 Jan 2018 30 June 2018

32,454 4 – 4 Nov 15 £4.93 26 Nov 2019 26 Nov 2024

1 Granted as part of the Group’s decision to award executives TSR share options (described in further detail below). It is a condition of their exercise that the options shall only be exercisable on or after 1 August 2016 to the extent that, on any proposed date of exercise between 1 August 2016 and 31 July 2021, the aggregate of (i) the increase in the share price per share above the exercise price and (ii) all dividends declared per share (collectively ‘the Shareholder Return’) is equal to or greater than compound annual growth per share of 8% above £3.50.

2 Also granted as TSR share options. The options are only exercisable on or after the fifth anniversary of the date of grant and only to the extent that either (i) for any period of five consecutive dealing days between the third anniversary and the fifth anniversary of the date of grant the Shareholder Return (as defined above) is equal to or greater than £2.14 or (ii) for any period of five consecutive dealing days after the fifth anniversary of the date of grant the Shareholder Return is equal to or greater than compound annual growth of 8% above the exercise price.

3 Options granted as part of the Group’s SAYE share option scheme.

4 Also granted as TSR share options. The options are only exercisable on or after 26 November 2019 and only to the extent that either (i) between 26 November 2017 and 25 November 2019 (inclusive) the Shareholder Return (as defined above) is equal to or greater than £1.81 or (ii) on or after 26 November 2019 the Shareholder Return is equal to or greater than compound annual growth of 8% above the exercise price. The share price component of Shareholder Return for these options is based on a 30-day average.


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Further information on the TSR share optionsThe TSR options were granted under the rules of the Long Term Incentive Plan that were approved by shareholders on 20 July 2006. No new awards under those rules are possible after 24 May 2016; however, TSR share options granted in the year to 31 July 2016 and prior years may still vest in the future. Two categories of TSR share option grants were made, the first with an effective start date of 1 August 2011 and an exercise price of 350 pence per share, and the second with an effective start date of 1 August 2014 and a variable exercise price based on the share price at each grant date.

For Executive Directors Russ Cummings and Dr Nigel Pitchford, approximately one third of their long term incentive during the period was estimated to reside in TSR options and two thirds in the Carried Interest Plan scheme. For the remaining members of the senior management team a one-fifth TSR options to four-fifths Carried Interest Plan ratio was adopted.

The TSR share options and Carried Interest Plan have a requirement of three years’ continuous service before any value is retained by good leavers (who are defined as set out in the scheme rules); thereafter any leaver vesting is on a straight-line basis over five years to 100% in the case of TSR share options and on a straight-line basis over 10 years in the Carried Interest Plan.

Further details of the options outstanding at the end of the financial year are set out in note 5 (share-based payments).

Further information on the Employee Benefit Trust (EBT)The Group also established an EBT in 2005 for the purpose of benefiting current and former staff (other than the Non-Executive Directors) and certain of their family members. The trustee of the EBT is RBC cees Trustee Limited, part of the Royal Bank of Canada (the ‘Trustee’), which is an independent and professional trustee.

The EBT is entirely discretionary and the Group may only make recommendations regarding benefits provided to any beneficiary: the Group has no control over any aspect of such benefits, should the Trustee see fit to provide them.

The EBT currently holds Ordinary Shares in the Group for the benefit of Directors as set out in the Directors’ Remuneration Report on page 92. The Group has no control over these shares and therefore they have not been consolidated by the Group. The EBT also has a pool of unallocated shares and unallocated cash. These amounts are considered to be under the de facto control of the Group and have therefore been consolidated in the Group financial statements as treasury shares and cash respectively.


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Directors’ Remuneration Report continued

Directors’ interests in the Carried Interest Plans (audited)Interests of the Executive Directors in the Carried Interest Plans are set out in the table below and there are no changes to those details as at the date of this report. The maximum permissible percentage interest of all participants in the Excess Return of each Carried Interest Plan is set out on page 88. The individual percentage interest of each Executive Director in the Excess Return of each Carried Interest Plan is shown below, comprising any interests awarded to them during and since the reported year as well as any existing interests.

As at 31 July 2016

Awarded in year

As at 31 July 2015

Amounts receivable in respect of scheme

interests 1

Accrued value of scheme

interest as at 31 July 2016 £ 2

Accrued value of scheme

interest as at 31 July 2015 £ 2

Russ Cummings

Class 2007 Carried Interest Plan 3.00% – 3.00% Nil – –Class 2008 Carried Interest Plan 3.00% – 3.00% Nil – 39,337Class 2009 Carried Interest Plan 2.03% 0.12% 1.91% Nil – –Class 2010 Carried Interest Plan 2.25% – 2.25% Nil – –Class 2011 Carried Interest Plan 2.25% – 2.25% Nil – –Class 2012 Carried Interest Plan 1.91% – 1.91% Nil – 525,264Class 2013 Carried Interest Plan 1.38% – 1.38% Nil 53,805 62,902Class 2014 Carried Interest Plan (A)3 1.73% – 1.73% Nil – 31,028Class 2014 Carried Interest Plan (B)4 1.96% – 1.96% Nil – 40,614Class 2015 Carried Interest Plan (A)3 1.73% 0.29% 1.44% Nil 19,581 –Class 2015 Carried Interest Plan (B)4 1.44% – 1.44% Nil 79,359 –Class 2016 Carried Interest Plan (A)3 1.39% 1.39% – Nil – –Class 2016 Carried Interest Plan (B)4 1.70% 1.70% – Nil 75,108 –Dr Nigel PitchfordClass 2007 Carried Interest Plan 0.90% – 0.90% Nil – –Class 2008 Carried Interest Plan 0.90% – 0.90% Nil – 11,801Class 2009 Carried Interest Plan 0.90% 0.52% 0.38% Nil – –Class 2010 Carried Interest Plan 1.88% – 1.88% Nil – –Class 2011 Carried Interest Plan 1.80% 0.30% 1.50% Nil – –Class 2012 Carried Interest Plan 1.91% – 1.91% Nil – 525,264Class 2013 Carried Interest Plan 1.38% – 1.38% Nil 53,805 62,902Class 2014 Carried Interest Plan (A)3 1.73% – 1.73% Nil – 31,028Class 2014 Carried Interest Plan (B)4 1.96% – 1.96% Nil – 40,614Class 2015 Carried Interest Plan (A)3 1.73% 0.29% 1.44% Nil 19,581 –Class 2015 Carried Interest Plan (B)4 1.44% – 1.44% Nil 79,359 66,254Class 2016 Carried Interest Plan (A)3 1.39% 1.39% – Nil – –Class 2016 Carried Interest Plan (B)4 1.70% 1.70% – Nil 75,108 –Tony HicksonClass 2007 Carried Interest Plan 1.13% – 1.13% Nil – –Class 2008 Carried Interest Plan 0.71% – 0.71% Nil – 9,343Class 2009 Carried Interest Plan 0.68% – 0.68% Nil – –Class 2010 Carried Interest Plan 0.68% – 0.68% Nil – –Class 2011 Carried Interest Plan 0.94% – 0.94% Nil – –Class 2012 Carried Interest Plan 0.38% – 0.38% Nil – 105,053Class 2013 Carried Interest Plan 0.35% – 0.35% Nil 13,451 15,726Class 2014 Carried Interest Plan (A)3 0.40% – 0.40% Nil – 7,240Class 2014 Carried Interest Plan (B)4 0.00% – – Nil – –Class 2015 Carried Interest Plan (A)3 0.23% – 0.23% Nil 2,611 –Class 2015 Carried Interest Plan (B)4 0.23% – 0.23% Nil 12,698 10,601Class 2016 Carried Interest Plan (A)3 0.22% 0.22% – Nil – –Class 2016 Carried Interest Plan (B)4 – – – Nil – –

1 No amounts are receivable in respect of scheme interests as there is no amount of proceeds from the sale of investments that is in excess of the hurdle.

2 Calculated by reference to fair value uplifts in the individual portfolios.

3 Carried interest plan (A) are investments in new companies.

4 Carried interest plan (B) are follow on investments made into companies previously included in earlier portfolios which are over four years old and are consequently closed.

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Total Shareholder ReturnA graph of the Total Shareholder Return (TSR), showing Innovations’ TSR for the last financial year ended 31 July and comparisons to indices has been set out below. Innovations’ shares were admitted to trading on AIM on 31 July 2006 and therefore no information is available prior to this date.

Performance graphThe chart below shows the share price performance from 31 July 2006, being the date on which Innovations’ shares were admitted to trading on AIM, to 31 July 2016 alongside the performance of the FTSE AIM All-Share and FTSE All-Share indices.

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For ease of comparison these figures have been rebased such that the Group’s share price on 31 July 2006 is equal to the FTSE AIM All-Share and FTSE All-Share indices. The Directors have selected the FTSE AIM All-Share and FTSE All-Share indices as, in their opinion, these indices comprise the most relevant equity indices of which the Group is a member against which Total Shareholder Return of the Group should be measured.

On behalf of the Board

Peter ChambréChairman of the Remuneration Committee

12 October 2016


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Report of the Directors The Directors present their report and the audited consolidated financial statements for Imperial Innovations Group plc (‘the Company’) for the year ended 31 July 2016.

Corporate governance statement Information that fulfils the requirements of the corporate governance statement can be found in the Corporate Governance report on pages 74 to 78 and in the Directors’ Remuneration Report on pages 86 to 95 and is incorporated into this Directors’ report by reference.

General information on Imperial Innovations Group plcImperial Innovations Group plc is an AIM-quoted company, incorporated in England and Wales under company number 05796766. It is the ultimate parent company of the Group and its registered office is located at 52 Princes Gate, Exhibition Road, London, SW7 2PG.

Performance and future developmentsThe Strategic Report on pages 2 to 68 contains information relating to the performance of the Group’s business during the financial year, the position of the Group at the end of the year, and the likely future developments of the Group. The Company had eight subsidiaries at 31 July 2016 (which are described more fully in note 4 to the parent company financial statements) and does not have any branches. Information in relation to the Group’s key performance indicators and principal risks are disclosed in the Strategic Report.

Results and dividends The Group’s loss for the financial year was £63.1 million (2015: £15.1 million profit). The Directors do not recommend the payment of a dividend for the year ended 31 July 2016 (2015: nil).

Research and development The Group from time to time funds technology development through its proof-of-concept programme to establish the technical viability of the inventions disclosed during its technology identification process. Wherever possible these activities are funded through a number of proof-of-concept funds secured from external sources, such as the Higher Education Innovation Fund. The resulting intellectual property is normally retained by the Group. These activities tend to be low in value (between £5,000 and £25,000) and to last between six and 18 months.

Contracts of significanceThe Technology Pipeline Agreement with Imperial College London provides the Group with proprietary access to all the unencumbered intellectual property developed at Imperial College London and the flexibility to use that intellectual property in any way it considers appropriate.

Change of controlOn 1 July 2013 the Group entered into a £30.0 million loan facility with the European Investment Bank (EIB), and on 13 July 2015 the Group entered into a second £50.0 million loan facility with the EIB. Under the provisions of both loan facilities, the Group is required to inform the EIB if a change of control event has occurred, or is likely to occur, in respect of itself (control meaning the power to direct the management and policies of an entity, whether through the ownership of voting capital, by contract or otherwise). In such circumstances the EIB has the right to cancel any undisbursed portion of the credit available and demand repayment of the loan, together with accrued interest and all other amounts accrued or outstanding under the facility.

Imperial College London has the ability to terminate the Technology Pipeline Agreement (TPA) during the remainder of its term until 2020 in circumstances where a change of control of the Group occurs and Imperial College London reasonably considers the new controlling party would significantly affect its ability to obtain research funding or the activities of the new controlling party are incompatible with Imperial College London’s ethical principles or may affect Imperial College London’s charitable status.

Directors and former DirectorsThe summary biographical details of Directors as at the date of this report can be found on pages 70 and 71. Additional details regarding the length of time the current Directors have served as a Director of Imperial Innovations Group plc and/or Imperial Innovations Limited (which, prior to the incorporation of Imperial Innovations Group plc, had been the vehicle of the Group’s business) are set out within the Directors’ Remuneration Report on page 88.

There have also been certain changes to the Board during the financial year. Dr Robert Easton joined the Board on 1 August 2015 and Dr Martin Knight left the Board on 31 July 2016. David Newlands joined the Board on 1 August 2016. There have been no other changes to the composition of the Board of Imperial Innovations Group plc between 31 July 2016 and the date of this report. At the next AGM, resolutions will be proposed to re-elect certain Directors. Further details will be set out in the notice of AGM sent to all shareholders.

Directors’ interests in the Ordinary Shares of Imperial Innovations Group plc at 31 July 2016 Details of the Directors’ shareholdings and share options at the end of the year under review are set out within the Directors’ Remuneration Report on page 92, together with details of any changes in such interests since year-end.

Share capitalDetails of the issued share capital of Imperial Innovations Group plc are set out in note 17 to the consolidated financial statements on pages 131 to 132.

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Purchase of own sharesAt a general meeting of Imperial Innovations Group plc on 19 June 2014, the shareholders authorised the Company to enter into a purchase contract with the holders of the non-voting deferred shares of 346 32/33 pence each in the capital of the Company, for the purchase by the Company of 36,990,086 deferred shares for a total consideration of £0.01 in accordance with the Articles of Association and as set out in the purchase contract. The purchase contract was executed on 24 September 2015 and the deferred shares were cancelled on the same date.

At the last AGM of Imperial Innovations Group plc on 19 November 2015, authority was given to the Directors pursuant to the relevant provisions of the Companies Act 2006 to make market purchases (as defined by the Act) of up to a maximum aggregate number of 13,767,471 Ordinary Shares of 3 and 1/33 pence each, provided that:(a) the minimum price (excluding expenses) per Ordinary

Share is not less than 3 and 1/33 pence; and(b) the maximum price (excluding expenses) per Ordinary

Share is the higher of:• an amount equal to 105% of the average of the middle

market quotations for the Ordinary Shares as taken from the AIM Appendix of the London Stock Exchange Daily Official List for the five business days preceding the date of purchase; and

• the higher of the price quoted for the last independent trade of and the highest current independent bid for any number of Ordinary Shares on the London Stock Exchange.

The authority has not been exercised and will expire on 19 February 2017. A renewal of the authority will not be sought at the AGM.

Substantial shareholdingsAs at 12 October 2016, Innovations had been advised of the following shareholders with interests of 3% or more in its Ordinary Share capital:

Shareholder %

Invesco Asset Management Limited 39.0Woodford Investment Management Limited 23.8Imperial College London 15.3Lansdowne Developed Markets Master Fund Limited 12.7

The Group has considered whether Invesco Asset Management Limited and Woodford Investment Management Limited, with their substantial shareholdings in Innovations (albeit in a number of different funds), are related parties under IAS 24 (‘Related party disclosures’).

As Invesco and Woodford do not take part in financial or operating policy decisions, have no right to appoint a Board member and do not exert significant influence over the Group, the Group has taken the view that they are not related parties for the purpose of IAS 24. The Board manages the relationships with Invesco and Woodford carefully to ensure that any co-investment involving the Group and Invesco and/or Woodford is conducted on an arm’s length basis.

Although the Group may have significant influence over a portfolio company, ultimately the portfolio company makes the final decision regarding the investors as part of a fundraising. Where the Group leads a fundraising all co-investors are responsible for their own evaluation and due diligence with no preferential treatment afforded to any particular investor.

Company SecretaryThe Company Secretary of the Group is William Rayner.

Employees The Group employed an average of 68 employees (2015: 63) throughout the year, and the Group is therefore of a size where it is not necessary to have introduced a formal employee consultation process. However, employees are encouraged to be involved with decision-making processes and are provided with information on the financial and economic factors affecting the Group’s performance, through departmental meetings, CEO updates and an open and informal reporting structure.

The Group operated a discretionary annual bonus scheme during the year for its staff whereby staff are eligible for an annual bonus based on their own, and the Group’s, performance for the year.

Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment within the Group continues and that the appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of a disabled person should, as far as possible, be identical to that of a person who does not suffer from a disability.

Financial risk exposure and managementThe Group through its operations is exposed to a number of risks. Further detail regarding the financial risk exposure and management is set out in the Corporate Governance Report on pages 77 and 78, and note 19 to the financial statements.

Corporate responsibility and greenhouse gas emissionsDetails on corporate responsibility and greenhouse gas emissions are set out within the Strategic Report on pages 52 to 55.


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Directors’ indemnities and insuranceThe Company’s articles of association provide that the Directors will be indemnified through a qualifying third-party indemnity provision as defined by section 234 of the Companies Act 2006. The indemnity was in force throughout the last financial year and is currently in force. Innovations also purchased and maintained throughout the financial year Directors’ and officers’ liability insurance in respect of itself and the Directors.

Independent auditorsThe Group’s independent auditors, PricewaterhouseCoopers LLP (PwC), have indicated their willingness to continue in office and the Audit and Risk Committee has recommended that PwC remain in office. A resolution to re-appoint the independent auditors will be proposed at the Annual General Meeting.

Statement of Directors’ responsibilitiesThe Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101). Under company law the 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 Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:• select suitable accounting policies and then apply them

consistently;• make judgements and accounting estimates that are

reasonable and prudent;• state whether IFRSs as adopted by the European Union

and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and Company financial statements respectively; 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 keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006.

They are also responsible for safeguarding the assets of the parent company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the Directors in respect of the annual financial reportHaving taken advice from the Audit and Risk Committee, the Directors consider that the annual financial statements, taken as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s performance, business model and strategy.

Each of the Directors, whose names and functions are listed on pages 70 and 71, confirm that, to the best of their knowledge:• the consolidated financial statements, which have been

prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the parent company and the Group; and

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

Provision of information to auditorsSo far as each of the Directors is aware, there is no relevant audit information of which the Group’s auditors are unaware. Each Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Group’s auditors are aware of that information.

Annual General MeetingThe Annual General Meeting of Imperial Innovations Group plc will be held at 11.30am on 21 November 2016 in the Boardroom, 52 Princes Gate, Exhibition Road, London, SW7 2PG. Full details of the resolutions to be proposed to shareholders, and explanatory notes in respect of these resolutions, can be found in the notice of AGM, a copy of which can be found on the Group’s website. The voting results of the resolutions proposed at the 2016 AGM will be published on the Group’s website. Where any resolution is decided on a poll, information on proxy appointments will be given at the AGM and published on the Group’s website.

By order of the Board

William RaynerCompany Secretary

12 October 2016

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Financials Consolidated financial statements100 Independent auditors’ report104 Consolidated statement of comprehensive income105 Consolidated balance sheet106 Consolidated cash flow statement107 Consolidated statement of changes in equity108 Notes to the consolidated financial statements

Company financial statements144 Independent auditors’ report146 Company balance sheet147 Company statement of changes in equity148 Notes to the Company financial statements


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Report on the Group financial statements

Our opinionIn our opinion, Imperial Innovations Group plc’s group financial statements (the ‘financial statements’):• give a true and fair view of the state of the group’s affairs

as at 31 July 2016 and of its loss and cash flows for the year then ended;

• have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the European Union; and

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

What we have auditedThe financial statements comprise:• the consolidated balance sheet as at 31 July 2016;• the consolidated statement of comprehensive income

for the year then ended;• the consolidated cash flow statement for the year

then ended;• the consolidated statement of changes in equity for

the year then ended; and• the notes to the financial statements, which include a

summary of significant accounting policies and other explanatory information.

Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements. These are cross-referenced from the financial statements and are identified as audited.

The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as adopted by the European Union, and applicable law.

Our audit approachOverview• Overall group materiality: £4.6 million

which represents approximately 1% of net assets.

• We audited the complete financial information of the eight UK-based statutory entities which together provided the audit evidence we needed for our opinion on the Group financial statements.

• Valuation of unlisted equity investments.• Valuation of the Carried Interest Plan

liability

The scope of our audit and our areas of focusWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’).

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.

The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identified as ‘areas of focus’ in the table below. We have also set out how we tailored our audit to address these specific areas in order to provide an opinion on the financial statements as a whole, and any comments we make on the results of our procedures should be read in this context. This is not a complete list of all risks identified by our audit.

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Materiality

Audit scope

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Area of focus How our audit addressed the area of focus

Valuation of unlisted equity investments (see note 3 and the Audit and Risk Committee report on page 82) The Group has investments with a net carrying value of £335.1 million. Of this, investments with a carrying value of £42.9 million are listed and market price data, providing objective evidence of the value, is readily available.

The remaining £292.2 million of investments has no quoted market price available. There is a risk that the carrying value of the portfolio does not reflect its fair value at the balance sheet date due to:• the subjectivity of management

estimates used in the valuation process (which is described in the Accounting Policies), including:

– the appropriateness of the valuation basis selected for each type of investment;

– the assessment of when an investment company has achieved a milestone event and the impact of this on the investment valuation;

– where the price of recent investment was used as the valuation basis that this was on an arm’s length basis; and

– the assessment of when an investment has underperformed against previous expectation and the extent, if any, of impairment to be recognised; or

• inappropriate application of the International Private Equity and Venture Capital Valuation Guidelines.

We obtained audit evidence in relation to the year-end quoted investment valuations by agreeing the bid prices on the quoted portfolio used at the balance sheet date to external market data. No exceptions were noted as a result of these procedures.

For the unquoted investments, we performed our work firstly with a greater focus on the largest 8 unquoted investments which together represented 56% of the value of the unquoted portfolio as at the year-end date and, secondly, by selecting for testing individual investments with a value of more than £0.4 million or a movement of greater than £0.5 million from the prior year.

For investments with an investment round in the year, we agreed pricing to supporting documentation and tested the calculation of the investment valuation. We then assessed the appropriateness of the resulting valuations in the unquoted investment portfolio by assessing management’s key judgements and assumptions, as follows:• we performed an independent search for milestones by reading third party news sources,

websites and documents to compare to management’s identified milestone events and, where there were milestones identified, we assessed the valuation judgements made by management using independent data sources where these were available;

• where the progress of an investment appeared to be behind earlier expectations, evaluating management’s assessment as to the extent, if any, of impairment that may have arisen and challenging it based on our independently formed expectation;

• where the price of recent investment was used as the basis of the investment valuation, evaluating whether this was on an arm’s length basis; and

• considering the objectivity of the evidence provided by management and considering this in the wider context of other available information, including that obtained from third party sources.

Our evaluation included use of our valuation expertise and experience to challenge the assumptions used for certain of the more significant and subjective valuations. We also considered the consistency of the valuation methodologies used.

We also considered events subsequent to the year end up to the date of this report and their impact on investment valuations. We identified a number of investments for which events after the balance sheet date provided support for their valuation at the year end and found that management had considered them and treated them appropriately in the financial statements.

Based on this work, we found the judgements and assumptions used to be materially appropriate.

We also checked that valuations were performed in a manner consistent with the International Private Equity and Venture Capital Valuation Guidelines and identified no material deviation from these guidelines.

Valuation of the Carried Interest Plan liability The Group operates a Carried Interest Plan (CIP) for certain Executive Directors and employees (see explanation of the plan on page 87). The calculation of the CIP liability of £1.7 million is complex and includes a number of estimates including a leavers’ assumption, discount rate and timing of portfolio realisations.

We agreed the inputs into the CIP calculation to supporting documentation and tested the accuracy of the calculation, without identifying any material differences. We discussed the leavers’ assumptions, discount rate and expected timing of the portfolio realisations with management and compared:• the estimate of leaver rates to the actual leaver rate in previous years, finding it to

be materially consistent;• the discount rate to our independent expectation of the discount rate to be used,

which was based upon prevailing market discount rates, finding it to be higher than our expectation but noting an immaterial difference to the CIP liability on applying a rate at the lower end of our expected range; and

• the portfolio realisation dates to the prior year and the Group’s working capital model for consistency.

We performed sensitivity analyses on the key assumptions used within the calculation, being the discount rate and the leaver assumptions, and also the forecast timing of the realisation of individual investment portfolios. Having ascertained the extent of change in those assumptions that either individually or collectively would be required for a material change in the valuation of the liability, we considered the likelihood of such a movement arising in those key assumptions. Based on this work we found the judgments and assumptions used to be materially appropriate.


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How we tailored the audit scopeWe 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 geographic structure of the Group, the accounting processes and controls, and the industry in which the Group operates.

The Group structure consists of the parent company (Imperial Innovations Group plc), one main trading entity (Imperial Innovations Limited), one main entity for holding the Group’s investments (Imperial Innovations Businesses LLP), one entity for holding the Group’s investment in the UCL fund (Imperial Innovations Limited Partner Limited), one holding company (Imperial Innovations Sarl), three further entities providing additional services to the Group, including Imperial Innovations Investment Management Limited, which is the Group’s Financial Conduct Authority regulated entity, and one dormant entity. The Group financial statements are a consolidation of these nine entities.

We audited the complete financial information of the eight UK-based statutory entities which together provided the audit evidence we needed for our opinion on the Group financial statements. There were no significant changes in the audit scope from the prior year as a consequence of the increase in the materiality benchmark applied.

MaterialityThe 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 on the financial statements as a whole.

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

Overall Group materiality

£4.6 million (2015: £2.1 million).

How we determined it Approximately 1% of net assets.Rationale for benchmark applied

We have selected an asset-based benchmark given the nature of the Group’s business activities with investment valuations being the focus of performance for the Group. The above benchmark has increased from 0.5% for the year ended 31 July 2015 to 1% for year ended 31 July 2016. This is due to aligning to a more generally accepted rule of thumb for the benchmark used.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.2 million (2015: £0.1 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Going concernThe Directors have chosen to voluntarily report how they have applied the UK Corporate Governance Code (the ‘Code’) as if the company were a premium listed company. Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to the Directors’ statement about whether they considered it appropriate to adopt the going concern basis in preparing the financial statements. We have nothing material to add or to draw attention to.

As noted in the Directors’ statement, the Directors have concluded that it is appropriate to adopt the going concern basis in preparing the financial statements. The going concern basis presumes that the group has adequate resources to remain in operation, and that the Directors intend it to do so, for at least one year from the date the financial statements were signed. As part of our audit we have concluded that the Directors’ use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group’s ability to continue as a going concern.

Other required reporting

Consistency of other informationCompanies Act 2006 opinionIn our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

ISAs (UK & Ireland) reportingAs a result of the Directors’ voluntary reporting on how they have applied the Code, under ISAs (UK & Ireland) we are required to report to you if, in our opinion:

• information in the Annual Report is: − materially inconsistent with the

information in the audited financial statements; or

− apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course of performing our audit; or

− otherwise misleading.

We have nothing material to add or to draw attention to.

• the statement given by the Directors on page 98, in accordance with provision C.1.1 of the Code, that they consider the Annual Report taken as a whole to be fair, balanced and understandable and provides the information necessary for members to assess the Group’s position and performance, business model and strategy is materially inconsistent with our knowledge of the Group acquired in the course of performing our audit.


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• the Directors’ explanation on page 68 of the Annual Report, in accordance with provision C.2.2 of the Code, as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.


Adequacy of information and explanations receivedUnder the Companies Act 2006 we are required to report to you if, in our opinion, we have not received all the information and explanations we require for our audit. We have no exceptions to report arising from this responsibility.

Directors’ remunerationUnder the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

Responsibilities for the financial statements and the audit

Our responsibilities and those of the DirectorsAs explained more fully in the Statement of Directors’ responsibilities set out on page 98, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

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.

What an audit of financial statements involvesAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: • whether the accounting policies are appropriate to the

Group’s circumstances and have been consistently applied and adequately disclosed;

• the reasonableness of significant accounting estimates made by the directors; and

• the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Other matter

We have reported separately on the company financial statements of Imperial Innovations Group plc for the year ended 31 July 2016.

Simon Ormiston (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Cambridge

12 October 2016


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Note 2016 £000

2015 £000

Revenue 2 4,257 5,099 Cost of sales (1,395) (1,769)Gross profit 2,862 3,330 Fair value losses and gains on investments 3(i) (56,249) 21,324 Administrative expenses:– Carried Interest Plan release 4a 2,972 1,161 – Other administrative expenses 4b (12,634) (11,567)Total administrative expenses (9,662) (10,406)Operating (loss)/profit (63,049) 14,248Finance costs 6(i) (1,141) (555)Finance income 6(ii) 1,077 1,372 (Loss)/profit before taxation 7 (63,113) 15,065 Taxation 8 – – (Loss)/profit and total comprehensive income for the financial year (63,113) 15,065 Basic (loss)/earnings per Ordinary Share (pence) 9 (43.2) 11.1Diluted (loss)/earnings per Ordinary Share (pence) 9 (43.2) 11.0

The notes on pages 108 to 143 are an integral part of these consolidated financial statements.

Consolidated statement of comprehensive incomefor the year ended 31 July 2016

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Note2016 £000

2015 £000

AssetsNon-current assetsProperty, plant and equipment 11 18 29 Trade investments 3(i) 343,973 333,268 University Challenge Seed Fund (UCSF) investments 3(iii) 163 460Higher Education Innovation Fund (HEIF) loans 3(iv) 288 179 Apollo Therapeutics and UCL Technology Fund 3(v) 1,173 – Total non-current assets 345,615 333,936

Current assetsTrade and other receivables 12 4,486 2,409 Short-term liquidity investments 13 15,000 20,000 Cash and cash equivalents 13 133,306 108,097 Total current assets 152,792 130,506 Total assets 498,407 464,442

Equity and liabilitiesEquity attributable to equity holdersIssued share capital 17 4,885 132,500 Share premium 304,938 207,068 Capital redemption reserve 128,344 –Retained (loss)/earnings (9,234) 53,879 Share-based payments reserve 8,861 8,528 Other reserves 18 18,096 18,096 Total equity 455,890 420,071

LiabilitiesNon-current liabilitiesBorrowings 15 24,089 27,222 Higher Education Innovation Fund (HEIF) and University Challenge Seed Fund (UCSF) 16 477 666Provisions for liabilities and charges 3(i) 8,887 6,048 Carried Interest Plan liability 4a 1,731 4,703 Total non-current liabilities 35,184 38,639

Current liabilitiesBorrowings 15 3,167 1,500Trade and other payables 14 4,166 4,232 Total liabilities 42,517 44,371 Total equity and liabilities 498,407 464,442


The Financial Statements on pages 104 to 143 were approved by the Board of Directors on 12 October 2016 and were signed on its behalf by Russ Cummings.

Company registered number: 05796766


12 October 2016

Consolidated balance sheet as at 31 July 2016


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Note2016 £000

2015 £000

Cash flows from operating activities:Operating (loss)/profit (63,049) 14,248

Adjustments to reconcile operating profit to net cash flows used in operating activities:Depreciation of property, plant and equipment 11 14 Fair value movement in investments 56,249 (21,324)Share-based payment charge 333 224 Carried Interest Plan release (2,972) (1,161)

Working capital adjustments: Increase in trade and other receivables (273) (679)Decrease in trade and other payables (1,098) (653)Net cash used in operating activities (10,799) (9,331)

Cash flows from investing activities:Purchase of trade investments 13 (69,873) (59,957)Investments in funds (1,173) – Proceeds from sale of trade investments 13 4,979 7,179 Revenue-share paid on realisations of trade investments 13 – (989)

Net cash flows used in investments (66,067) (53,767)

Purchase of property, plant and equipment – (17)Interest received 1,079 1,410 Decrease in short-term liquidity investments 5,000 50,000 Net cash flows generated from other investing activities 6,079 51,393Net cash used in investing activities (59,988) (2,374)

Cash flows from financing activities:Proceeds from issuance of Ordinary Shares¹ 101,636 – Transaction costs relating to issuance of Ordinary Shares² (3,037) – Proceeds from EIB loan – 15,000 Costs incurred for EIB loan – (181)Repayment of EIB loan (1,500) (944)Interest paid (1,103) (535)Net cash generated from financing activities 95,996 13,340

Net increase in cash and cash equivalents 25,209 1,635 Cash and cash equivalents at beginning of the year 108,097 106,462 Cash and cash equivalents at end of the year 13 133,306 108,097

1 Issue of 523,677 ordinary shares on exercise of share options by two former Directors during August 2015 and a further issue of 23,529,412 ordinary shares as part of the placing during February 2016 (see note 17).

2 These transaction costs were deducted from share premium.


Consolidated cash flow statement for the year ended 31 July 2016

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Issued share

capital £000

Share premium

£000

Capital redemption

reserve £000

Retainedearnings/

(accumulatedloss)

£000

Share-based payments

reserve £000

Other reserves

£000

Total equity £000

At 1 August 2014 132,500 207,068 – 38,814 8,304 18,096 404,782

Comprehensive incomeProfit for the financial year – – – 15,065 – – 15,065 Total comprehensive income – – – 15,065 – – 15,065 Transactions with owners recognised directly in equityValue of employee services – – – – 224 – 224Transactions with owners – – – – 224 – 224At 31 July 2015 132,500 207,068 – 53,879 8,528 18,096 420,071

Comprehensive incomeLoss for the financial year – – – (63,113) – – (63,113)Total comprehensive loss – – – (63,113) – – (63,113)Transactions with owners recognised directly in equityValue of employee services – – – – 333 – 333Share capital issued 729 100,907 – – – – 101,636Costs of share capital issued – (3,037) – – – – (3,037)Cancellation of deferred shares (128,344) – 128,344 – – – –Transactions with owners (127,615) 97,870 128,344 – 333 – 98,932At 31 July 2016 4,885 304,938 128,344 (9,234) 8,861 18,096 455,890

Treasury shares with a cost of £2,564,009 (2015: £2,564,009) have been netted against retained earnings representing shares held by the Employee Benefit Trust.


Consolidated statement of changes in equity for the year ended 31 July 2016 attributable to equity holders of the Group


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Notes to the consolidated financial statements

1. Accounting policies

General information Imperial Innovations Group plc is a Public Limited Company incorporated and domiciled in the United Kingdom whose shares are registered on the Alternative Investment Market of the London Stock Exchange (AIM). The address of the registered office is Imperial Innovations Group plc, 52 Princes Gate, Exhibition Road, London SW7 2PG. Imperial Innovations Group plc’s shares were admitted to AIM on 31 July 2006.

Imperial Innovations Group plc creates, builds and invests in pioneering technologies developed from the academic research within the ‘Golden Triangle’ broadly bounded by London, Cambridge and Oxford, which is home to four of the UK’s leading research-intensive universities.

The Group supports scientists and entrepreneurs in the commercialisation of their ideas and intellectual property by leading the formation of new companies, providing facilities in the early stages, providing investment and encouraging co-investment to accelerate development, providing operational expertise and recruiting high-calibre management teams. It also runs a Technology Incubator in London that is the initial home for many of its technology spin-outs.

Basis of preparationThe consolidated financial statements comprise a consolidation of amounts included in the financial statements of the following subsidiary companies:

Company Nature of operations Country of incorporation

Imperial Innovations Limited Technology licensing and investment holding company EnglandImperial Innovations LLP Investment holding entity EnglandImperial Innovations Investments Limited Investment holding company EnglandImperial Innovations Businesses LLP Investment holding entity EnglandImperial Innovations Investment Management Limited Investment services company EnglandImperial College Company Maker Limited Investment holding company EnglandInnovations Limited Partnership Limited Investment holding company EnglandImperial Innovations Sarl Investment holding company Luxembourg

All the subsidiaries of the Group are 100% owned within the Group and have been included in the consolidated financial statements.

The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities at fair value through profit or loss, as required by International Accounting Standard (IAS) 39 ‘Financial Instruments: Recognition and Measurement’.

The consolidated financial statements of Imperial Innovations Group plc (the Group) have been prepared in accordance with European Union Endorsed International Financial Reporting Standards (IFRSs), the IFRS Interpretations Committee (formerly the International Financial Reporting Interpretations Committee (IFRIC)) interpretations as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS.

The principal accounting policies adopted in the preparation of these financial statements have been consistently applied to all the years presented, unless otherwise stated.

The preparation of financial statements in conformity with IFRS as endorsed by the EU requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 20.

Changes in accounting policies(a) New Standards, amendments and interpretations adopted by the GroupAnnual Improvements to IFRSs 2010 – 2012 cycleAnnual Improvements to IFRSs 2011 – 2013 cycle

No impact on the reported results or disclosures of the Group has occurred as a result of the introduction of the standards above.

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1. Accounting policies continued

(b) New standards, amendments and interpretations not yet adoptedIFRS 9 ‘Financial Instruments’ – effective for annual periods beginning on or after 1 January 2018.IFRS 16 ‘Leases’ – effective for Annual periods beginning on or after 1 January 2019 with earlier application permitted if IFRS 15, ‘Revenue from Contracts with Customers’, is also applied.IFRS 15 ‘Revenue from Contracts with Customers’– effective for annual periods beginning on or after 1 January 2018.Amendments to IFRS 10 and IAS 28 on investment entities applying the consolidation exemption – effective for annual periods beginning on or after 1 January 2016.Amendment to IAS 1 ‘Presentation of Financial Statements’ on the disclosure initiative – effective for annual periods beginning on or after 1 January 2016.Amendments to IAS 16 ‘Property, Plant and Equipment’ and IAS 38 ‘Intangible Assets’ on depreciation and amortisation – effective for annual periods beginning on or after 1 January 2016.Amendments to IAS 27 ‘Separate Financial Statements’ on the equity method – effective for annual periods beginning on or after 1 January 2016.Annual Improvements to IFRS 2014 cycle – effective for annual periods beginning on or after 1 January 2016.IAS Amendments to IAS 7, Statement of cash flows on disclosure initiative – effective for annual periods beginning on or after 1 January 2017.Amendments to IAS 12,’Income taxes’ on Recognition of deferred tax assets for unrealised losses (effective 1 January 2017) – effective for annual periods beginning on or after 1 January 2016.Amendments to IFRS 11 ‘Joint Arrangements’ on acquisition of an interest in a joint operation – effective for annual periods beginning on or after 1 January 2016.

IFRS 15, ‘Revenue from contracts with customers’, deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted subject to EU endorsement. The Group assessed the impact of IFRS 15 and concluded that it will have no material impact on the Group.

The Directors do not anticipate that the adoption of these standards, amendments and interpretations, where relevant, in future periods will have a material impact on the Group’s financial statements.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

Basis of consolidationThe Group’s consolidated financial statements consist of Imperial Innovations Group plc and all of its subsidiaries.

Subsidiaries Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The Group controls an investee when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. Where shareholdings exceed 50% of an investee company, but where the Group does not control these companies (control as defined by IFRS 10), it does not consolidate them.

The acquisition method of accounting has been used and consistent accounting policies are in place throughout the Group. The cost of acquisition is measured at fair value of assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Acquisition related costs are expensed as incurred. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are initially measured at their fair values at acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets is recorded as goodwill.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated.


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AssociatesInvestments that are held as part of the Group’s investment portfolio are carried in the balance sheet at fair value even though the Group may have significant influence over these companies. This treatment is permitted by IAS 28 ‘Investments in Associates’, which requires such investments to be excluded from its scope where those investments are designated, upon initial recognition, as at fair value through profit or loss and accounted for in accordance with IAS 39 ‘Financial instruments: Recognition and measurement’, with changes in fair value recognised in the period of change.

Foreign currency translationThe consolidated financial statements are presented in pounds sterling, which is the Company’s functional and the Group’s presentation currency. The Group determines the functional currency of each entity and items included in the financial statements of each entity are measured using that functional currency. Transactions denominated in foreign currencies are translated into sterling at the actual rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at rates ruling at the balance sheet date. Exchange differences are included in the consolidated statement of comprehensive income. The assets and liabilities of foreign subsidiaries are translated into pounds sterling at closing rate at the date of the balance sheet and income and expenses are translated at average exchange rates.

Revenue recognition and cost of salesRevenue, which excludes value added tax, represents the income generated by the Group from licensing activities, royalty revenues and patent cost recoveries, services provided by the Group to Imperial College London and other parties and corporate finance fees. Revenue is stated gross of any revenue-share due to Imperial College London or other parties, where appropriate, with any revenue-share included in cost of sales.

Licence and royalty revenue When granting a licence, an initial up-front fee may be receivable on signing followed by subsequent payments when milestone conditions are met. The initial up-front fee receivable on the execution of a licence is generally recognised in full on signing as long as all the Group’s obligations under the licence have been completed and the fees are not refundable. Milestone payments are recognised at the date all the conditions are satisfied for the particular milestone payment and all the Group’s obligations have been completed. Additionally, a portion of costs previously incurred by the Group through the filing and enforcement of patents may be recovered from either licensees or portfolio companies when the intellectual property is commercialised or the portfolio company is funded. In addition, sales royalties may also be due under licence agreements. Royalty income is recognised on an accruals basis in accordance with the substance of the relevant agreements.

Income received in the form of quoted or unquoted investments from licensing activities is recognised as licensing income for those investments that have either a market value or a value attributed to them by other independent third parties.

Revenue from servicesRevenue from services represents intellectual property management and other commercialisation services provided to Imperial College London and other parties. Revenue from intellectual property management services is recognised on a straight line basis over the period to which the services relate. Grant (including government funding) and investment awards are recognised initially in deferred income and amortised to the consolidated statement of comprehensive income in line with the terms and conditions of the award.

Commercial proof-of-concept type awards are recognised in the consolidated statement of comprehensive income and matched to related expenditure. Technical proof-of-concept type awards are recognised in the balance sheet, under payables, and reduced by related expenditure.

Corporate finance feesCorporate finance fees are generally earned as a fixed percentage of total funds raised and recognised at the time the related transaction is successfully concluded.

Dividend income Dividend income is recognised when the right to receive payment is established.

Notes to the consolidated financial statements continued

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Intangible assetsIntangible assets, which include acquired patent rights, are stated at cost less any accumulated amortisation and any accumulated impairment losses and are tested annually for any impairment and whenever circumstances indicate that the carrying amount may not be recoverable. Patent costs incurred on internally generated intellectual property are written off to the consolidated statement of comprehensive income in the period in which they are incurred.

Going concernAfter making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of at least 12 months from the date of approval of these financial statements. For this reason, they continue to adopt the going concern basis in preparing the financial statements. In addition, the Group has prepared a viability statement.

GoodwillGoodwill arising on the acquisition of a subsidiary represents the excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired. Goodwill is recognised as an asset and is reviewed annually for impairment and is carried at cost less accumulated impairment. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Property, plant and equipmentAll property, plant and equipment are stated at historical cost together with any incidental costs of acquisition less accumulated depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided on all property, plant and equipment at rates calculated to write each asset down to its estimated residual value on a straight line basis over its expected useful life, as follows:

Office equipment and computers – over four years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

Financial assetsEquity investments and other financial assetsFinancial assets within the scope of IAS 39 are classified as either financial assets at fair value through the profit or loss, loans and receivables, held to maturity investments or available for sale financial assets. When financial assets are recognised initially they are measured at fair value, plus directly attributable transaction costs.

Financial assets at fair value through profit or lossThe Group classifies all its equity investments as financial assets at fair value through profit or loss. The financial assets carried at fair value through profit or loss are initially recognised at fair value and subsequently re-measured at their fair value. Investments in associated undertakings that are held by the Group with a view to the ultimate realisation of capital gains are designated as financial assets at fair value through profit or loss. Investments in undertakings that do not meet the definition of an associated undertaking are also designated as financial assets at fair value through profit or loss on initial recognition.

The fair value movement is net of revenue-share (as set out in note 3).

Treatment of gains and losses arising on fair valueRealised and unrealised gains and losses on financial assets at fair value through profit or loss are included in the consolidated statement of comprehensive income in the period in which they arise.

Valuation of investmentsThe fair values of quoted investments are based on bid prices at the balance sheet date.

When a price for an asset or liability is not observable, the Group measures fair value using another valuation technique that maximises the use of relevant observable inputs and minimises the use of unobservable inputs.

The fair value of unlisted securities is established using International Private Equity and Venture Capital Valuation Guidelines (IPEVCVG). The valuation methodology used most commonly by the Group is the ‘price of recent investment’ or a ‘milestone analysis’ approach. Given the nature of the Group’s investments in seed, start-up and early-stage companies, where there are often no current and no short-term future earnings or positive cash flows, it can be difficult to gauge the probability and financial impact of the success or failure of development or research activities and to make reliable cash flow forecasts.


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Consequently, the most appropriate approach to determine fair value is a methodology that is based on market data, that being the price of a recent investment. The Group considers that fair value estimates that are based entirely on observable market data will be of greater reliability than those based on assumptions and accordingly where there has been any recent investment by third parties, the price of that investment will generally provide a basis of the valuation.

Where the Group considers that the price of recent investment, unadjusted, is no longer relevant and there are limited or no comparable companies or transactions from which to infer value, the Group carries out an enhanced assessment based on milestone analysis and/or industry and sector analysis. In applying the milestone analysis approach to investments in companies in early or development stages the Group seeks to determine whether there is an indication of change in fair value based on a consideration of performance against any milestones that were set at the time of the original investment decision, as well as taking into consideration the key market drivers of the investee company and the overall economic environment. When considered appropriate, the Group may use external valuers to assess the reasonableness of any change in fair value estimated by management.

The following considerations are used when calculating the fair value:• where the investment being valued was itself made recently, its cost will generally provide a good indication of fair value

unless there is objective evidence that the investment has since been impaired, such as observable data suggesting a deterioration of the financial, technical, or commercial performance of the underlying business;

• where there has been any recent investment by third parties, the price of that investment will provide a basis of the valuation;• if there is no readily ascertainable value from following the ‘price of recent investment’ methodology, the Group considers

alternative methodologies in the IPEVCVG guidelines, being principally discounted cash flows and price-earnings multiples requiring management to make assumptions over the timing and nature of future earnings and cash flows when calculating fair value;

• where a fair value cannot be estimated reliably, the investment is reported at the carrying value at the previous reporting date unless there is evidence that the investment has since been impaired;

• all recorded values of investments are regularly reviewed for any indication of impairment and adjusted accordingly;• the length of period for which it remains appropriate to use the price of recent investment depends on the specific

circumstances of the investment and the stability of the external environment. During this period the Group considers whether any changes or events subsequent to the transaction would imply a change in the fair value of the investment may be required; where the Group considers that there is an indication that the fair value has changed, an estimation is made of the required amount of any adjustment from the last price of recent investment. Wherever possible, this adjustment is based on objective data from the investee company and the experience and judgement of the Group. However any adjustment is, by its very nature, subjective. Where deterioration in value has occurred, the Group reduces the carrying value of the investment to reflect the estimated decrease. If there is evidence of value creation, the Group may consider increasing the carrying value of the investment. However, in the absence of additional financing rounds or profit generation it can be difficult to determine the value that a purchaser may place on positive developments given the potential outcome and the costs and risks to achieving that outcome. This is a critical accounting judgement as set out in note 20;

• factors which the Group considers include, inter alia, technical measures such as product development phases and patent approvals, financial measures such as cash burn rate and profitability expectations, and market and sales measures such as testing phases, product launches and market introduction; and

• where the equity structure of a portfolio company involves different class rights in a sale or liquidity event, the Group takes these different rights into account when forming a view of the value of its investment.

Recognition of financial assetsThe purchase or sale of financial assets is recognised using trade date accounting for all assets held at fair value through profit or loss. The recognition of an asset and the liability to pay for it or the de-recognition of an asset, recognition of any gain or loss on disposal and the recognition of a receivable from a buyer occur on the date that a commitment is made to purchase or to sell the asset.

Trade and other receivablesTrade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables.


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The amount of the provision is the difference between the asset’s carrying amount and the present value of the estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the consolidated statement of comprehensive income within administrative expenses.

Other receivables includes deferred consideration. Deferred consideration is recognised at its fair value at the date of sale and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Cash and cash equivalentsCash and cash equivalents include cash in hand, deposits held with banks and other short-term highly liquid investments with original maturities of less than three months. Short-term liquid investments with a maturity of over three months and less than 12 months are included in a separate category, ‘Short-term liquidity investments’.

Share capitalOrdinary Shares are classified as equity. Incremental costs directly attributable to the issue of new Ordinary shares are shown as a deduction, net of tax, from the proceeds.

Deferred shares are not transferable and do not entitle the holder to the payment of any dividend or otherwise participate in the profits of the Company or to receive notice of or attend or vote at any general meeting of the Company and on any reduction of capital in accordance with the Companies Act 2006, may be cancelled without payment of consideration. The Deferred Shares are not listed on any stock exchange. The Company may purchase the Deferred Shares for not more than the sum of £0.01 in aggregate for all the Deferred Shares and cancel the Deferred Shares so purchased, without any requirement to obtain the consent or sanction of the holders of the Deferred Shares. After the Deferred Shares are purchased, the shares will be cancelled and the value will be recognised in a capital redemption reserve.

BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated statement of comprehensive income over the period of the borrowing using the effective interest rate method.

Employee benefitsPensions The Group makes payments to a defined contribution scheme. The assets of the scheme are held separately from the Group in independently administered funds. Contributions made by the Group are charged to the consolidated statement of comprehensive income in the period to which they relate.

Share-based payments – Equity settled transactionsEmployees (and Directors) receive remuneration in the form of share-based payments, whereby employees render services in exchange for shares or for rights over shares. The fair value of the employee services received in exchange for the grant of options or shares is recognised as an expense. The total amount to be expensed is recognised on a straight line basis over the vesting period is determined by reference to the fair value of the options or shares determined at the grant date, excluding the impact of any non-market based vesting conditions (for example, continuation of employment and performance targets). The share options are valued using the binomial option pricing model for the long term incentive scheme and using the Black-Scholes model for the SAYE scheme. Non-market based vesting conditions are included in assumptions about the number of options that are expected to become exercisable or the number of shares that the employee will ultimately receive. This estimate is revised at each balance sheet date to allow for forecast leaving employees and the difference is charged or credited to the consolidated statement of comprehensive income, with a corresponding adjustment to the share-based payments reserve.

Employee benefit trust An employee benefit trust holds shares in the Group. The trust is considered an independent entity and not controlled by the Group and therefore not consolidated. However, unallocated shares and cash which are considered to be under the de-facto control of the Group are consolidated in the financial statements. The cost of treasury shares is netted against retained earnings.

Current and deferred income taxIncome tax on the result for the period comprises current and deferred tax. Income tax is recognised in the consolidated statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.


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Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the outflow of resources embodying the economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

The Group has the following provisions created under signed agreements whereby there is a constructive obligation to pay in the future:

Technology Pipeline AgreementThe Group provides for liabilities in respect of revenue sharing with Imperial College London, arising under the Technology Pipeline Agreement (TPA), and other parties. Provision for revenue-share, based on fair value, on the future realisation of quoted and unquoted investments is recognised as part of the movement in fair value through profit or loss (see note 3).

Appointee Director PoolImperial Innovations LLP, whose parent company is Imperial Innovations Group plc, has entered into a Carry Plan Agreement with members of the Appointee Director Network. Upon a sale by Imperial Innovations LLP of all or part of a shareholding in one of the specified companies, an ‘allocated amount’ (based on a fixed percentage of net proceeds) will be paid to the Appointee Directors. A provision is made for this expected future payment based on fair value.

Carried Interest PlanThe Group operates a Carried Interest Plan for Executive Directors and employees. Before any payment to a participant becomes due under the Carried Interest Plan, the Group must first have received back the amount of their investment in the relevant class together with a hurdle rate of 8% per annum compound on their investment. At the point at which the hurdle rate has been exceeded a provision is included for the unrealised gain due to members of the Carried Interest Plan. The provision is measured by reference to the fair value of the relevant investments, with movements in the provision taken to the consolidated statement of comprehensive income within administrative expenses.

Trade payablesTrade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Operating leasesOperating lease payments are recognised in the consolidated statement of comprehensive income on a straight line basis over the lease term.

Segment reporting An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity’s Chief Operating Decision Maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Operating segments are aggregated into reporting segments where they share similar economic characteristics.


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2. Segmental reporting

For the year ended 31 July 2016 and the year ended 31 July 2015, the Group’s revenue and (loss)/profit was derived from its principal activity within the United Kingdom.

IFRS 8, ‘Operating Segments’ defines operating segments as those activities of an entity about which separate financial information is available and which are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocation of resources. The Chief Operating Decision Maker has been identified as the Board of Directors. The Directors are of the opinion that under IFRS 8 the Group has only one operating segment, which commercialises academic research and uses it to build businesses.

Whilst the Chief Operating Decision Maker monitors all investments as one portfolio, the Group reports on the progress of its holdings in the financial statements by grouping them into the different sectors including Therapeutics, Medtech and Medical Devices, Engineering and ITC/digital/communications in the strategic report. This is to allow clearer understanding of the sectors in which the Group invests.

The Group has two customers contributing revenues of £914,000 and £601,000 respectively that account for £1,515,000 (36%) of the Group’s revenue (2015: two customers that account for £2,175,000 (43%)).

Breakdown of the revenue from all sources is as follows:

Analysis of revenue by category2016 £000

2015 £000

Licence and royalty revenue 2,186 2,834 Revenue from services 1,606 1,822 Corporate finance fees 400 429 Dividends received 65 14 Total revenue 4,257 5,099

3. Investments

(i) Net change in fair value of trade investments held at fair value through profit or lossNet change in fair value of investments for the year of £56,249,000 loss (2015: £21,324,000 gain) represents the change in fair value taking into account the movement in the revenue-share provision on these fair value movements.

Included within the net fair value movement recognised in the consolidated statement of comprehensive income are provisions for liabilities and charges. These are made up of the revenue sharing provision which represents an estimate of the fair value of monies due to Imperial College London and other third parties such as co-funders of research work and the Appointee Directors’ pool. The provision will be payable upon the eventual realisation of investments held by the Group under the revenue sharing arrangements of the Technology Pipeline Agreement (TPA) and in recognition of Imperial College London’s right to call for a transfer of its share of the Group’s holding in investments. The timing and amount of the realisation of the provision is dependent on the timing of the disposal of investments, which is uncertain as this is determined by the investment strategy.

The following tables in this note set out how the net fair value recognised in the consolidated statement of comprehensive income for each of the years is generated, along with the year end position with respect to the carrying value of investments.


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3. Investments continued

For the year ended 31 July 2016The table below sets out the movement in the balance sheet value of the investments from the start to the end of the year, setting out the fair value gains and losses together with any investments and disposals.

Gross investments – designated at fair value through profit or loss For the year ended 31 July 2016

Quoted 1 companies

Total £000

Unquoted companies

Total £000

Total £000

At 1 August 2015 107,113 226,155 333,268

Gains on the revaluation of investments – 26,404 26,404Losses on the revaluation of investments (67,060) (11,727) (78,787)Net fair value (losses)/gains (67,060) 14,677 (52,383)

Investments during the year 3,081 66,793 69,874Disposal of investments – (6,786) (6,786)Net investment 3,081 60,007 63,088At 31 July 2016 43,134 300,839 343,973

1 Quoted companies are registered on AIM, NASDAQ and the Main Market of the London Stock Exchange.

The table below sets out the movement in the balance sheet value of the provision for liabilities and charges arising on revenue sharing obligations from the start to the end of the year, setting out any fair value gains and losses together with the impact arising as a result of disposals.

Provisions for liabilities and charges 2 For the year ended 31 July 2016

Quoted 1 companies

Total £000

Unquoted companies

Total £000

Total £000

At 1 August 2015 345 5,703 6,048

Increase of liability arising from changes in fair value of investments – 4,321 4,321Decrease of liability arising from changes in fair value of investments (134) (321) (455)Net (reduction)/increase in fair value of liability during the year (134) 4,000 3,866

Disposals during the year – (1,027) (1,027)At 31 July 2016 211 8,676 8,887

The table below sets out the movement in the net carrying value of investments from the start to the end of the year, setting out the net fair value gains and losses together with any investments and disposals.

Net investments – designated at fair value through profit or loss (net of revenue-share) For the year ended 31 July 2016

Quoted 1 companies

Total £000

Unquoted companies

Total £000

Total £000

At 1 August 2015 106,768 220,452 327,220

Gains on the revaluation of investments – 22,083 22,083Losses on the revaluation of investments (66,926) (11,406) (78,332)Net fair value (losses)/gains (66,926) 10,677 (56,249)

Investments during the year 3,081 66,793 69,874Disposal of investments – (5,759) (5,759)Net investments 3,081 61,034 64,115At 31 July 2016 42,923 292,163 335,086


2 The provision for liabilities and charges represents monies due to Imperial College London upon the eventual realisation of investments held by the Group under the revenue sharing arrangements of the Technology Pipeline Agreement (TPA) and in recognition of Imperial College London’s right to call for a transfer of its share of the Group’s holding in these particular investments. Deferred consideration represents monies due to Imperial College London upon the eventual realisation of the Imperial Innovations LLP assets acquired from Imperial College London as part of the private share placement in 2005.


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Additionally, monies are due to parties in the Appointee Directors’ Pool in respect of the Imperial Innovations LLP assets acquired as part of the stepped acquisition in 2005 and to other third parties. These are included in ‘Revenue sharing other’ in the table below. The timing and amount of the realisation of the provision is dependent on the timing of the disposal of investments, which is uncertain as this is determined by the investment strategy.

The following table analyses the provision by obligation:Revenue sharing Imperial College

London £000

Revenue sharing

other £000

Total £000

At 1 August 2015 5,748 300 6,048 Settlements and provisions utilised (843) (184) (1,027)Charged to the consolidated statement of comprehensive income 3,532 334 3,866At 31 July 2016 8,437 450 8,887

For the year ended 31 July 2015 The table below sets out the movement in the balance sheet value of the investments from the start to the end of the year, setting out the fair value gains and losses together with any investments and disposals.

Gross investments – designated at fair value through profit or loss For the year ended 31 July 2015

Quoted 1 companies

Total £000

Unquoted companies

Total £000

Total £000

At 1 August 2014 105,251 151,854 257,105

Gains on the revaluation of investments 1,391 30,778 32,169Losses on the revaluation of investments (1,080) (7,858) (8,938)Net fair value gains 311 22,920 23,231

Investments during the year 1,551 59,266 60,817 Disposal of investments – (7,885) (7,885)Net investment 1,551 51,381 52,932 At 31 July 2015 107,113 226,155 333,268

The table below sets out the movement in the balance sheet value of the provision for liabilities and charges arising on revenue sharing obligations from the start to the end of the year, setting out any fair value gains and losses together with the impact arising as a result of disposals.

Provisions for liabilities and charges 2For the year ended 31 July 2015

Quoted 1 companies

Total £000

Unquoted companies

Total £000

Total £000

At 1 August 2014 385 4,726 5,111

Increase of liability arising from changes in fair value of investments – 2,452 2,452Decrease of liability arising from changes in fair value of investments (40) (505) (545)Net (reduction)/increase in fair value of liability during the year (40) 1,947 1,907

Disposals during the year – (970) (970)At 31 July 2015 345 5,703 6,048


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The table below sets out the movement in the net carrying value of investments from the start to the end of the year, setting out the net fair value gains and losses together with any investments and disposals.

Net investments – designated at fair value through profit or loss (net of revenue-share) For the year ended 31 July 2015

Quoted 1 companies

Total £000

Unquoted companies

Total £000

Total £000

At 1 August 2014 104,866 147,128 251,994

Gains on the revaluation of investments 1,391 28,326 29,717 Losses on the revaluation of investments 3 (1,040) (7,353) (8,393)Net fair value gains 351 20,973 21,324

Investments during the year 1,551 59,266 60,817

Disposal of investments – (6,915) (6,915)

Net investments 1,551 52,351 53,902 At 31 July 2015 106,768 220,452 327,220


2 The provision for liabilities and charges represents monies due to Imperial College London upon the eventual realisation of investments held by the Group under the revenue sharing arrangements of the Technology Pipeline Agreement (TPA) and in recognition of Imperial College London’s right to call for a transfer of its share of the Group’s holding in these particular investments.

3 The quoted loss includes a £3.9 million fall in the value of the Circassia Pharmaceuticals plc share price following its IPO in March 2014 and consequential transfer to ‘quoted companies’. However the overall net gain in Circassia in the year was £33.2 million composed of gains of £37.0 million before the IPO less losses of £3.8 million following the IPO. In aggregate therefore total gains on the revaluation of investments are £45.3 million and total losses on the revaluation of investments are £4.8 million.

(ii) Trade investmentsIn accordance with the Group’s accounting policy, investments that are held as part of the Group’s investment portfolio are carried in the balance sheet at fair value even though the Group may have significant influence over these companies. This treatment is permitted by IAS 28, ‘Investments in Associates’. At 31 July 2016, the Group has investments where it holds 20% or more of the issued share capital as follows:

Portfolio company

% of Issued Share Capital

held

Net assets/(liabilities)

of the portfolio company

£000

Profit/(loss) of the portfolio

company £000

Date of financial statements

Abingdon Health Limited 33.7% 4,241 (2,382) 31 December 2014AnywhereHPLC Limited 1, 2 50.0% – – 31 July 2015Aqdot Limited 46.5% 6,495 (1,140) 31 December 2015Atazoa Limited 24.9% (2,703) (1) 30 June 2014Auspherix Limited 1 33.2% 1,746 (1,220) 31 December 2015Autifony Therapeutics Limited 26.9% 6,849 (3,291) 31 December 2014Calcico Therapeutics Limited 45.8% 998 (1,111) 31 December 2015Cardiovascular Imaging Solutions Limited 24.9% 300 16 31 July 2015Cell Medica Limited 25.5% 13,429 (12,565) 31 December 2015Charterdirect Shipping Limited¹ 35.0% N/A N/A None AvailableCity Orbit Limited 1, 2 50.0% 25 – 30 June 2015Concirrus Limited 28.6% (26) 2 31 December 2014Convincis Limited 49.9% 9 1 31 August 2015Cortexica Vision Systems Limited 30.0% (7,700) (2,797) 31 December 2015Crescendo Biologics Limited 22.7% 10,567 (5,660) 30 June 2015Digitalstitch Limited 25.7% 1 16 31 May 2015Econic Technologies Limited 2 53.7% 2,655 (1,847) 31 December 2015Embody Orthopaedic Limited 36.8% 12 (37) 31 July 2015Emcision Limited 22.7% 199 205 30 June 2015Enterprise Therapeutics Limited 1 42.1% 3,671 (267) 31 May 2015Epsilon-3 Bio Limited 22.6% 972 (882) 31 December 2015Eva Diagnostics Limited 1 33.6% – – 31 March 2016Featurespace Limited 36.9% 2,380 (831) 31 December 2014


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Portfolio company

% of Issued Share Capital

held

Net assets/(liabilities)

of the portfolio company

£000

Profit/(loss) of the portfolio

company £000

Date of financial statements

Garrison Limited¹ 21.9% N/A N/A None AvailableHexxcell Limited 36.6% 133 96 31 July 2015Ieso Digital Health Limited (formerly Psychologyonline.co.uk Limited) 46.9% 2,449 (1,655) 31 December 2015Impression Technologies Limited 2 59.9% (138) (533) 31 December 2015Inflowmatix Limited 1, 2 57.2% N/A N/A None AvailableInivata Limited 30.6% 883 (3,117) 31 December 2015Ipalk SAS¹ 23.5% N/A N/A None AvailableIR Pharma Limited 27.9% 61 1 31 March 2015Kesios Therapeutics Limited 49.8% (1,888) (1,318) 31 July 2015Metabometrix Limited 25.6% (818) (115) 30 April 2015Microtech Ceramics Limited 28.9% (71) – 31 December 2014MISSION Therapeutics Limited 21.6% 11,468 (8,097) 31 December 2015Nascient Limited 2 77.5% 37 (463) 31 January 2016Nexeon Limited 33.7% 17,755 (7,163) 31 December 2015Oxford Biotrans Limited 1 41.0% 2,569 (396) 30 September 2015Permasense Limited 26.0% 4,176 1,521 31 October 2015Plaxica Limited 45.7% 2,144 (3,005) 31 October 2015Precision Ocular Limited 23.2% 7,634 (427) 29 February 2016Process Systems Enterprise Limited 23.3% 7,341 2,226 31 December 2015PsiOxus Therapeutics Limited 27.8% 19,412 (6,037) 30 November 2015Pulmocide Limited 25.0% (6,780) (5,236) 31 March 2015Puridify Limited 37.2% 543 (307) 31 March 2015Rio tech Limited 26.1% – – 30 November 2015Ryvoan Limited (formerly EVO Electric Limited) 34.1% 462 (139) 31 December 2014Sensixa Limited 42.7% 159 27 31 July 2015Silicon Micro Limited 31.7% 1,282 (108) 30 September 2015Smart Surgical Appliances Limited 23.6% 308 (226) 31 August 2015Sub Salt Solutions Limited 1 37.9% 436 (40) 31 January 2015Therapeutic Frontiers 25.8% 436 (40) 31 January 2015TopiVert Limited 29.5% 21,390 677 31 December 2015Veryan Holdings Limited 46.1% (17,111) (8,008) 31 December 2015Wave Optics Limited 21.8% 57 – 30 September 2015Yoyo Wallet Limited (formerly JustYoyo Limited) 2 51.4% 3,621 (2,793) 31 December 2015

1 Financial statements are not available where companies have recently been incorporated or have not yet filed an annual return.

2 The Group does not control these companies (control as defined by IFRS 10), and therefore does not consolidate them. The Group does not have, directly or indirectly, more than half of the voting power of these entities nor does it have power over more than half of the voting rights by virtue of any agreement with any other investor. As a result these investment companies have not been consolidated.

In addition, at 31 July 2016 the Group has the following investments in portfolio companies where it holds less than 20% of the issued share capital. Portfolio company % of Issued Share Capital

Acublate Limited 9.9%Abzena plc (formerly PolyTherics Limited) 19.8%Aimim Limited formally Stanmore Implants Worldwide Limited 16.4%Aniko Biopharma Limited 7.1%Asep Healthcare Limited 18.0%ASIO Limited 9.7%BioMin Technologies Limited 15.7%Cambridge Communication Systems Limited 8.8%Catapult Therapy TCR Limited 10.8%Circassia Pharmaceuticals plc (formerly Circassia Holdings Limited) 9.3%



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Portfolio company % of Issued Share Capital

DeltaDOT Limited 5.9%D-Gen Limited 15.9%Drop Tech Limited 19.1%Duvas Technologies Limited 6.1%Dynamic Boosting Systems Limited 5.7%Equinox Pharma Limited 16.2%Heliswirl Petrochemicals Holdings Limited 19.8%i2India Holdings Limited 7.3%Import.IO Limited 12.0%Innovative Materials Processing Technologies Limited 16.9%IXICO plc 13.7%Lontra Limited 9.4%Microtest Matrices Limited 6.6%Neuroprotexeon Limited 19.9%OpenIOLabs Limited (formally Ionscope Limited) 2.7%Orion Logic Limited 12.5%Orthonika Limited 19.2%Oxford Immunotec Global plc 4.6%Slamcore Limited 10.0%Stam Labs Limited 19.6%Storm Bio Inc 12.6%Strom Therapeutics Limited (formally Iceni Limited) 18.9%Telectica Limited 18.3%Trojantech Limited 11.2%VerticalBand Limited 8.0%Amura Holdings Limited 0.0%Click Mechanic Limited 1.4%DNA Electronics Limited 0.4%Evince Technology Limited 1.4%Flashbackr Limited 3 0.0%Get Fractal Limited 3 0.0%Hydroventuri Limited 0.8%NightstarX Limited 1.2%Kymeta Corporation 0.0%Omnicyte Limited 1.7%Pulmagen Therapeutics (Asthma) Limited (formerly Argenta Oral Therapeutics Limited) 0.9%Pulmagen Therapeutics (Holdings) Limited (formerly Argenta Inhaled Therapeutics Group Limited) 0.9%Pulmagen Therapeutics (Inflammation) Limited (formerly Argenta Therapeutics Limited) 0.9%Sweetgen Limited 0.0%Ublend LImited 0.0%Uquant Limited 0.0%

3 Holdings relate to convertible loans. As these are of a long term investment nature they are accounted for in the same way as equity investments i.e. at fair value through profit or loss. The loans are repayable at agreed future dates, however in the event of default, the loan can be converted to non-voting shares.

All companies are incorporated in England and Wales with the exception of Storm Bio Inc. and Kymeta Corporation, which are registered in the USA; i2India Holdings Limited, which is registered in Mauritius; Trojantech Limited, which is registered in Cyprus and Ipalk SAS which is registered in France.



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(iii) University Challenge Seed Fund The Group is the agreed corporate vehicle for holding Imperial College London’s University Challenge Seed Fund (UCSF). This is managed under the terms of an award established by The Office of Science and Technology of the United Kingdom Government. The award established a fund of £4.15 million which must be deployed according to the conditions of that award. The purpose of the fund is to provide seed funding to early-stage companies.

The terms of the award include a restriction on distribution of monies from UCSF investments until the fund size has reached a multiple of three times the original investment of £4.15 million, excluding donations from industry parties. The fund is ring-fenced in recognition of this restriction before any repayments or disbursements can be made to Imperial College London. Imperial College London has assigned its rights to receive monies greater than £12.45 million to the Group. The corresponding balance is reflected on the balance sheet under ‘non-current liabilities’.

UCSF advances are initially made as a loan to individual technology businesses. All loans are non-interest bearing. ‘Pathfinder’ loans to a maximum of £25,000 and seed funding loans to a maximum of £250,000 are made to individual portfolio companies. The overall loan cannot exceed £250,000.

The loan is then repayable in cash or converted to equity, at a rate mutually agreed, at the earliest opportunity after the company’s formation. Loans are treated on the same basis as equity for valuation purposes. UCSF equities are bi-annually reviewed for revaluation or impairment. Changes in value arising on revaluation or impairment are set against the fund. The fair value of loans as at 31 July 2016 and 31 July 2015 was £nil.

University Challenge Seed Fund – Equity InvestmentsYear ended 31 July 2016 £000

Equity investments – Fair valueAt 1 August 2015 460Fair value movements (297)At 31 July 2016 163

Year ended 31 July 2015 £000

Equity investments – Fair valueAt 1 August 2014 543 Fair value movements (83) At 31 July 2015 460

The tables above represent the carrying values of the equity investments held in the University Challenge Seed Fund. Changes in the fair value of equity investments are set against the value of the UCSF fund and not through the consolidated statement of comprehensive income. This is in recognition that the value of the fund has to increase threefold before any repayments or disbursements can be made to the Group. See also note 16(i).

(iv) Higher Education Innovation FundThe Higher Education Innovations Fund (HEIF) reflects an award made by the UK government and must be deployed according to the conditions of that award. The purpose of the fund covers seed investment and funds for proof-of-concept awards. These terms include a restriction on distribution of monies. Realisation must be paid back to the fund for re-deployment. The corresponding creditor balance is reflected on the balance sheet under ‘non-current liabilities’.

Higher Education Innovation Fund – LoansThe tables below represent the carrying values of the loans held in the Higher Education Innovation Fund. Changes in the fair value of loans are set against the value of the HEIF fund and not through the consolidated statement of comprehensive income. See also note 16(ii).

£000

Loans – Fair valueAt 1 August 2015 179Investments during the year 109At 31 July 2016 288


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3. Investments continued £000

Loans – Fair valueAt 1 August 2014 69 Investments during the year 110 At 31 July 2015 179

(v) Apollo Therapeutics LLP and UCL Technology FundApollo Therapeutics LLPOn 25 January 2016, the Group committed £3.3 million to the new £40.0 million venture between AstraZeneca, GlaxoSmithKline, Johnson & Johnson and the technology transfer offices of Imperial College London, University College London and the University of Cambridge, Innovations, UCLB and Cambridge Enterprise respectively. The agreement establishes a Limited Liability Partnership, Apollo Therapeutics LLP.

The venture will support the translation of outstanding academic therapeutic science into innovative new medicines by combining the skills of the university academics with industry expertise at an early stage. This aims to speed up the development of new medicines, as well as reducing the cost and improving the attrition rate of potential opportunities, whilst sharing the risk of early development.

Over the six year life of the Apollo venture, the three technology transfer offices will each contribute £3.3 million, while the three pharmaceutical companies will each contribute £10.0 million, as well as providing research and development expertise and resources to assist with the development of projects.


Equity investments – Fair valueAt 1 August 2015 –Investments during the year 42At 31 July 2016 42


Equity investments – Fair valueAt 1 August 2014 – Fair value movements –At 31 July 2015 –

The UCL Technology FundOn 18 January 2016, the Group announced its participation in the new UCL Technology Fund LP, which is the first investment fund that University College London has created to commercialise its multidisciplinary research. Over the next five years this fund is expected to invest £50.0 million to support ideas from academics in life sciences and physical sciences, and will be used for early-stage proof of concept funding, licensing opportunities and the formation of new spin-out companies.

Innovations is a Limited Partner (LP) in the fund and has committed £24.75 million to the fund, matched by a commitment of the same amount from the European Investment Fund (‘EIF’). Participation in the fund provides Innovations with visibility of potential intellectual property from across University College London’s research base. In addition, the fund’s general partner Albion Ventures has obligations to use all reasonable endeavours to offer co-investment opportunities to the LPs, to alert them to any projects that the fund chooses not to invest in, and to negotiate the right for LPs to take up pre-emption rights that the fund does not take up. As a result, in addition to its £24.75 million commitment to the fund, the expectation is that the Group will also have opportunities to make direct investments into selected UCL Business PLC (‘UCLB’) spin-outs to support their long-term growth and value creation.

It is expected that participation in the fund will thus significantly increase Innovations’ access to deal-flow from one of the world’s leading universities, as well as providing new opportunities to apply the Group’s skills and deploy its investment capital and enhances the Group’s position in the Golden Triangle, particularly in London.


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As well as enhancing the opportunities from University College London, participation in the partnership signals a step-change in the Group’s approach to commercialising the outstanding research output from the UK’s elite universities. This is a new, collaborative model that the Directors believe could be replicated by Innovations with other universities.


Equity investments – Fair valueAt 1 August 2015 –Investments during the year 1,131At 31 July 2016 1,131


Equity investments – Fair valueAt 1 August 2014 –Fair value movements –At 31 July 2015 –

4. Administrative expenses

(a) Carried Interest Plan release2016 £000

2015 £000

(2,972) (1,161)

The Group’s Carried Interest Plan generated an accounting release of £3.0 million (2015: release of £1.2 million) for the year ended 31 July 2016, with a corresponding liability of £1.7 million (2015: £4.7 million). An accounting liability is reflected as the fair value of the portfolio of companies has exceeded the investments made by the Group plus 8% interest compounded. Once future disposals are made they are distributed in the following order: retention by the Group of the original amount invested, retention by the Group of an 8% hurdle, then a catch up until the desired investor: executive ratio for the portfolio in question (which will be in the range from 85:15 to 89.5:10.5) has been achieved and then retention of any excess by the Group and distribution to the executives in that same ratio. Accordingly there is no cash payment due to the members of the scheme until the Group has ceased investment in the companies in the relevant portfolio and has made future realisations.

(b) Other administrative expenses2016 £000

2015 £000

Staff related (note 21) 7,345 6,596Share-based payments (note 5) 333 224 Patent costs 1,539 1,405 Other 3,417 3,342

12,634 11,567


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5. Share-based payments

(i) Awards made under long term incentive and other arrangementsThe following information applies to options outstanding at the end of the year:

Date of grant

Number of options

outstanding

Contractual life at grant

dateRisk-free

interest rate

Fair value per granted

instrument at grant date Vesting conditions

1: Share Options issued under the Long-Term Incentive Plan 1 5 July 2012 322,504 10 years 0.58% 26.39 pence See details below

2: Share Options issued under the Long-Term Incentive Plan 2 18 October 2012 308,572 10 years 0.56% 37.50 pence See details below

3: Share Options issued under the Long-Term Incentive Plan 3 5 December 2013 308,572 10 years 0.81% 89.76 pence See details below

4: Share Options issued under the Long-Term Incentive Plan 4 26 November 2014 428,360 10 years 1.37% 112.15 pence See details below

5: Share Options issued under the Long-Term Incentive Plan 5 4 November 2015 459,995 10 years 1.17% 102.51 pence See details below

1 Share price at grant date was 286.5 pence, exercise price of 350.0 pence, expected life is 10 years and vesting period is 4.08 years from grant date.





The share-based payment charge for the year ended 31 July 2016, for these options, is £312,000 (2015: £209,000) and relates to shares awarded under the Long-term Incentive Plan (‘LTIP’). The general terms and conditions of the award are governed by the Rules of the Imperial Innovations Long-Term Incentive Plan (24 May 2006); and the Deed of Amendment to the LTIP scheme. Exercise of the options is conditional upon:• satisfaction of certain market-based vesting conditions (the ‘Vesting Condition’). For share options (1), (2) and (3) the Award

shall only be exercisable to the extent that, on the proposed Date of Exercise, the aggregate of (i) the increase in the Share Price of an Award Share above the Exercise Price and (ii) all dividends declared on an Award Share (collectively ‘the Shareholder Return’) between 1 August 2011 and the proposed Date of Exercise is equal to or greater than compound annual growth per Award Share of 8% above the Exercise Price. For share options (4) and (5) the Award shall only be exercisable to the extent that either (i) for any period of five consecutive dealing days between the 3rd anniversary and the 5th anniversary of the Date of Grant the Shareholder Return is equal to or greater than £2.14 for share options (4) and £1.81 for share options (5) or (ii) for any period of five consecutive dealing days after the 5th anniversary of the Date of Grant the Shareholder Return is equal to or greater than compound annual growth per Award Share of 8% above the Exercise Price; and

• entering into a restricted securities election with the Company, if requested to do so.

Range of exercise prices (pence)Weighted average

exercise price (pence)Number

of options

Weighted average remaining life (years)

Expected Contractual

301-400 350 pence 939,648 1 1 401-500 475 pence 888,355 4 4

1,828,003

Reconciliation of movements in the number of share options as follows:Number

of options

Weighted average

exercise price (pence)

Outstanding at 1 August 2015 1,970,445 349 Granted during the year 459,995 493Lapsed during the year (78,760) 13Exercised during the year (523,677) 312Outstanding at 31 July 2016 1,828,003 411Exercisable at 31 July 2016 nil –

The nature of all arrangements is the grant of share options and these have an expected option life at grant date of 10 years. Expected dividend (dividend yield) in all cases is 0%. The binomial model has been used for valuation purposes. All options are expected to be settled in shares. The expected volatility is between 25% and 30% based upon review of comparators and analysis of movements to the share price since the Company’s listing.


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5. Share-based payments continued

(ii) Awards made under SAYE schemeThe Imperial Innovations SAYE Share Option Scheme was formally launched on 17 November 2014 and made available to all employees employed by the Group on the same date. 64% of permanent employees had taken up the offer by the time of the closing date of 1 December 2014.

The options have an exercise price of 410 pence per share and are exercisable at the end of a three-year savings contract ending 1 January 2018. The exercise price of 410 pence per share has been set according to HMRC rules, at a 10% discount to the market price at the time of the launch. A total of 65,513 shares were under option for this scheme, but the number has reduced to 53,924 at 31 July 2016 (2015: 56,294) because of leavers.

The share-based payment charge for the year ended 31 July 2016, for these options, is £21,000 (2015: £15,000).

Date of grant

Number of options

outstandingContractual life

at grant dateRisk-free

interest rate

Fair value per granted

instrument at grant date Vesting conditions

SAYE Share Option Scheme 1 9 December 2014 53,924 3 years 0.88% 132.0 pence Continuous serviceand contribution

1 Share price at grant date was 452.5 pence, exercise price of 410.0 pence, expected life is three years and vesting period is 3.09 years.

The nature of all arrangements is the grant of share options and these have an expected option life at grant date of 3.09 years. Expected dividend (dividend yield) is 0%. The Black-Scholes Option Pricing Model has been used for valuation purposes. All options are expected to be settled in shares. The expected volatility is 35% based upon an analysis of movements to the share price since the Company’s listing.

6. Finance costs and finance income

(i) Finance costs

2016 £000

2015 £000

EIB interest (note 15) 1,107 538 Amortisation of transaction costs 34 17

1,141 555

(ii) Finance income

2016 £000

2015 £000

Interest receivable on cash deposits 1,077 1,372 1,077 1,372

7. (Loss)/profit before taxation

2016 £000

2015 £000

(Loss)/profit before taxation is stated after charging:Staff costs (note 21) 7,345 6,596Share-based payment charge (note 5) 333 224Depreciation of property, plant and equipment (note 11) 11 14Operating lease costs (land and buildings) 324 251Reversal of bad debt provision (10) (15)Auditors’ remuneration:Fees payable to the Group’s auditors for the audit of the parent company and consolidated financial statements 48 46Fees payable to the Group’s auditors and its associates for other services:– Audit of the Group’s subsidiaries 67 66– Audit related assurance services 28 27– Taxation compliance services 48 23– Taxation advisory services 18 18– Services relating to corporate finance transactions ¹ (90% of which has been deducted from the share

premium account) 60 –– All other non-audit services 169 12

1 Performance of the reporting accountant role for the February 2016 equity raise.


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8. Taxation

2016 £000

2015 £000

Analysis of charge in the year:United Kingdom corporation tax – –Total tax charge – –

There is no current tax charge in the year as the Group has group relieved losses during the year and was exempt from tax on disposals made (see below). The tax for the year is lower (2015: lower) than the standard rate of corporation tax in the UK of 20.00% (2015: 20.67%). The differences are explained below:

Reconciliation from reported profit to total tax charge2016 £000

2015 £000

(Loss)/profit before taxation (63,113) 15,065 (Loss)/profit before taxation multiplied by the applicable rate of corporation tax in the UK of 20.0% (2015: 20.67%) (12,623) 3,114 Tax effect of:Fair value movements and income not subject to tax¹ 10,793 (4,503)Expenses not deductible for tax purposes 83 108Tax losses for which no deferred income tax asset was recognised 1,747 1,281Total tax charge – –

1 This primarily includes fair value movements on the portfolio.

The standard rate of Corporation Tax in the UK remained at 20% throughout the year. Accordingly, the Group’s losses for this accounting year are taxed at a rate of 20.00% (2015: 20.67%).

Changes to the UK corporation tax rates were substantively enacted as part of the Finance Bill 2015 on 26 October 2015. These include reductions to the main rate to reduce the rate to 19% from 1 April 2017 and to 18% from 1 April 2020. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.

A further change to the UK corporation tax rate was announced in the chancellor’s budget on 16 March 2016. This was to reduce the main rate further from 18% to 17% from 1 April 2020. As this change had not been substantively enacted at the balance sheet date, its effect is not included in these financial statements. The overall effect of this change, if it had been applied to the unrecognised deferred tax asset at the balance sheet date, would be to reduce the unrecognised deferred tax asset by £534,000.

These changes are not anticipated to have a material impact on the Group’s financial statements in future years.

Deferred tax liability2016 £000

2015 £000

Accelerated capital allowances – –Deferred tax arising on fair value uplifts of non-substantial shareholdings 13 (23)Losses (13) 23Total deferred tax liability – –

As at 31 July 2016, the unrecognised deferred tax asset amounted to £9,610,000 (2015: £8,724,000). There are no time limitations associated with the utilisation of the unrecognised deferred tax asset. This asset will be recognised once there is greater certainty of recovery.

In January 2011, Imperial Innovations Limited and Imperial Innovations Investments Limited transferred their shares in Imperial Innovations Businesses LLP to a new Luxembourg Holding Company (‘Imperial Innovations Sarl’) in a share for share exchange. Following this transfer the dividends and gains arising to Imperial Innovations Sarl (through its interest in Imperial Innovations Businesses LLP) should be exempt from tax under Luxembourg law provided the conditions for the participation exemption are met for each investment or each investment can be attributed to a UK permanent establishment. Tax residence of Imperial Innovations Sarl will be maintained in Luxembourg and no UK tax should arise on the gains in the Group.


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9. (Loss)/earnings per share

Basic earnings per share is calculated by dividing the (loss)/profit for the financial year by the weighted average number of Ordinary Shares in issue during the year. Diluted earnings per share is computed by dividing the (loss)/profit for the financial year, by the weighted-average number of Ordinary Shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares, including share options (and in the prior year the impact of the partly paid New Convertible B shares) on an as-if-converted basis. The potential dilutive shares are included in diluted earnings per share computations on a weighted average basis for the year. The profits and weighted average number of shares used in the calculations are set out below:

2016 2015

(Loss)/earnings per Ordinary Share (Loss)/profit for the financial year (£000) (63,113) 15,065 Weighted average number of Ordinary Shares (basic) (thousands) 146,063 136,180 Effect of dilutive potential Ordinary Shares – 480 Weighted average number of Ordinary Shares for the purposes of diluted earnings per share (thousands) 146,063 136,660

Earnings per Ordinary Share basic (pence) (43.2) 11.1Earnings per Ordinary Share diluted (pence)¹ (43.2) 11.0

1 No adjustment has been made to the basic loss per share in the year ended 31 July 2016, as the exercise of share options would have the effect of reducing the loss per ordinary share, and therefore is not dilutive.

10. Intangible assets

Year ended 31 July 2016Goodwill

£000

Intellectual property

£000Total £000

CostAt 31 July 2016 and at 1 August 2015 2,524 27 2,551

ImpairmentAt 31 July 2016 and at 1 August 2015 (2,524) (27) (2,551)

Net book value:At 31 July 2016 – – – At 31 July 2015 – – –

Year ended 31 July 2015Goodwill

£000

Intellectual property

£000Total £000

CostAt 31 July 2015 and at 1 August 2014 2,524 27 2,551

ImpairmentAt 31 July 2015 and at 1 August 2014 (2,524) (27) (2,551)

Net book value:At 31 July 2015 – – – At 31 July 2014 – – –

Goodwill of £2.5 million arose following the acquisition of the non-controlling interest in Imperial Innovations LLP during the year ended 31 July 2005. This represented the excess of the consideration given over the fair value of the assets and liabilities acquired and was written off to the consolidated statement of comprehensive income on consolidation. The consideration which gave rise to the goodwill written-off included payment for certain rights which were acquired from Fleming Family & Partners and which have no future value to the Group.


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11. Property, plant and equipment

Year ended 31 July 2016

Office equipment and computers

£000

CostAt 1 August 2015 162Additions –At 31 July 2016 162

Accumulated depreciationAt 1 August 2015 (133)Charge for the year (11)At 31 July 2016 (144)

Net book valueAt 31 July 2016 18At 31 July 2015 29

Year ended 31 July 2015

Office equipment and computers

£000

CostAt 1 August 2014 145 Additions 17 At 31 July 2015 162

Accumulated depreciationAt 1 August 2014 (119)Charge for the year (14)At 31 July 2015 (133)

Net book valueAt 31 July 2015 29 At 31 July 2014 26

12. Trade and other receivables

2016 £000

2015 £000

Current:Trade receivables 1,422 1,078 Less: provision for impairment of trade receivables – (12)Net trade receivables 1,422 1,066 Other receivables¹ 2,405 655Tax recoverable 162 265 Prepayments 497 423 Total 4,486 2,409

1 Other receivables include £2,237,000 of deferred consideration on the disposal of an investment during the year.

The ageing of trade receivables at the reporting date was as follows:2016

Gross £000

2016 Impairment

£000

2015 Gross £000

2015 Impairment

£000

Not past due 1,374 – 894 – Past due 0-30 days 48 – 39 – Past due 31-60 days – – 2 – Past due 61-90 days – – 48 – More than 91 days – – 95 (12)Total 1,422 – 1,078 (12)


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12. Trade and other receivables continued

Movements on the provision for impairment of trade receivables are as follows:

2016 £000

2015 £000

At 1 August 12 127 Unused amounts reversed (10) (15)Receivables written off during the year as uncollectible (2) (100)At 31 July – 12

The impairment provision at 31 July 2015 related to trade receivables from portfolio companies. Management believe that the credit quality of trade receivables which are within the Group’s typical payment terms is good.

The £10,000 provision reversed (2015: £15,000 provision reversed) in the provision for impaired receivables has been included in other administrative expenses in the consolidated statement of comprehensive income. The maximum exposure to credit risk of the receivables at the reporting date is the fair value of each class of receivable mentioned above. The Group does not hold collateral as security.

13. Short-term liquidity investments and cash and cash equivalents

2016 £000

2015 £000

Cash at bank and in hand 133,306 108,097 Total cash and cash equivalents 133,306 108,097

Total short-term liquidity investments (3 to 12 months) 15,000 20,000

Total cash and cash equivalents include restricted balances of £2.1 million (2015: £0.6 million). Pursuant to the amended and restated EIB facility agreement (see note 15) the Group is required to maintain a debt service reserve account pledged in favour of the lender. The account is available solely to pay any outstanding interest and principal payments owed under the EIB agreement for the following six months.

Reconciliation of amounts invested in trade investments to net cash invested2016 £000

2015 £000

Invested in trade investments in the year 69,874 60,817 Investments unpaid at year end (1) –Exchange of holding for shares in another spin-out – (860)Net cash invested in trade investments in the year 69,873 59,957

Reconciliation of disposals of trade investments to cash flows arising from sale of trade investments

2016 £000

2015 £000

Disposals of trade investments 6,786 7,885 Disposal of investment in exchange for shares in portfolio company – (860)Deferred consideration received 430 584 Deferred consideration accrued (2,237) (430)Cash flow arising on the proceeds from sale of investment in trade investments 4,979 7,179

Reconciliation of cash flows arising on revenue-share paid on asset realisations of trade investments

2016 £000

2015 £000

Movement in revenue sharing liability arising from disposal of trade investments 1,027 989 Revenue-share outstanding (included within accruals) (1,027) – Cash flow arising on the settlement of revenue sharing liabilities on sale of trade investments – 989


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14. Trade and other payables

2016 £000

2015 £000

Trade payables 596 385 Tax and social security 209 236 Accruals and deferred income 3,361 3,611 Total 4,166 4,232

15. Borrowings

This note provides information about the contractual terms of the Group’s interest-bearing borrowings, which are measured at amortised cost. For more information about the Group’s exposure to interest and liquidity risk arising from these borrowings, see note 19 – Financial Risk Management.

2016 £000

2015 £000

EIB Loan – non-current 24,089 27,222 EIB Loan – current 3,167 1,500Total 27,256 28,722

On 1 July 2013 the Group entered into a £30.0 million loan agreement with the European Investment Bank (EIB) available to draw down in two tranches of £15.0 million. The purpose of the loan is to provide funding towards Biotech and Therapeutics investments.

The first tranche of £15.0 million was drawn down on 30 July 2013. Transaction costs in the year ended 31 July 2013 of £186,000 were incurred to obtain the loan and were set against the loan amount. These costs are subsequently amortised over the life of the loan. During the year ended 31 July 2016, £15,000 (2015: £16,000) was charged to the statement of comprehensive income. The loan is based on a floating interest rate related to LIBOR and is repayable in 10 equal annual instalments over a 12 year period with the first payment paid on 25 July 2016. There was an uncapped cash sweep of 25% of all investment realisations used to prepay the loan. During the current year £1,500,000 (2015: £944,000) was repaid. This cash sweep was removed with the signing of the new loan during the current year.

The second tranche of £15.0 million was drawn down on 30 June 2015. Transaction costs of £181,000 were incurred to obtain the loan and were set against the loan amount. These costs are subsequently amortised over the life of the loan. During the year ended 31 July 2016, £18,000 (2015: £2,000) was charged to the statement of comprehensive income. The loan is based on a fixed interest rate of 4.199% and is repayable in nine equal annual instalments over a 10 year period with the first payment due on 25 July 2017.

On 13 July 2015 the Group entered into a second loan agreement of £50.0 million with the European Investment Bank (EIB) available to draw down in up to four tranches with a minimum tranche value of £10.0 million. The purpose of the loan is to provide funding towards Biotech and Therapeutics investments. This loan has not been drawn down. There is a non-utilisation fee calculated on the daily undrawn, uncancelled balance of the loan from the date falling six months after the date of the agreement at a rate of 0.10% per annum.

The loans contain a debt covenant requiring that the ratio of the total fair value of investments plus cash and qualifying liquidity to debt should at no time fall below 4:1. The loan also stipulates that on any date, the aggregate of all amounts scheduled for payment to the EIB in the following six months should be kept in a separate bank account.

The Group closely monitors that the covenants are adhered to on an ongoing basis and has complied with these covenants throughout the year. The Company will continue to monitor the covenants position against forecasts and budgets to ensure that it operates within the prescribed limits.

The maturity profile of the borrowings was as follows:2016 £000

2015 £000

Due under 6 months 1,583 – Due 6 to 12 months 1,584 1,500Due 1 to 5 years 15,833 15,833Due after 5 years 8,556 11,722Total ¹ 27,556 29,055

1 These are gross amounts repayable and exclude costs of £300,000 (2015: £333,000) incurred on obtaining the loans and amortised over the life of the loans.


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16. Higher Education Innovation Fund (HEIF) and University Challenge Seed Fund (UCSF) – non-current

(i) University Challenge Seed Fund (UCSF)2016 £000

2015 £000

UCSF amounts represented by:Investments and loans less provisions 163 460 UCSF cash 26 27 Total 189 487

UCSF loans are non-interest bearing. The repayment terms are set out in note 3(iii).

Investments and loans on the balance sheet are matched with an equal and opposite creditor evidencing that these are ring-fenced, as fund income cannot be used by the Group until the fund value exceeds three times the original fund.

(ii) Higher Education Innovation Fund (HEIF)

2016 £000

2015 £000

HEIF amounts represented by:Investments and loans less provisions 288 179 Total 288 179

Total Higher Education Innovation Fund (HEIF) and University Challenge Seed Fund (UCSF) 477 666

17. Issued share capital

Ordinary Shares2016 £000

2015 £000

Allotted and fully paid: Balance at beginning of year (137,151,035 Ordinary Shares of £0.0303 each) (2015: 137,151,035 Ordinary Shares of £0.0303 each) 4,156 4,156 Issue of share capital during the year 729 – Balance as at end of year (161,204,124 Ordinary Shares of £0.0303 each) (2015: 137,151,035 Ordinary Shares of £0.0303 each) 4,885 4,156

Deferred Shares

Allotted and fully paid: Balance as at beginning of year (36,990,086 Deferred shares of £3.4697 each) 128,344 128,344 Cancellation of shares and transfer to capital redemption reserve (128,344) –Balance as at end of year of nil (2015: 36,990,086 Deferred shares of £3.4697 each) – 128,344

Total balance as at end of year 4,885 132,500

Share capital Deferred shares are not transferable and do not entitle the holder to the payment of any dividend or otherwise participate in the profits of the Company or to receive notice of or attend or vote at any general meeting of the Company and on any reduction of capital in accordance with the Companies Act 2006, may be cancelled without payment of consideration. The Deferred Shares are not listed on any stock exchange. The Company may purchase the Deferred Shares for not more than the sum of £0.01 in aggregate for all the Deferred Shares and cancel the Deferred Shares so purchased, without any requirement to obtain the consent or sanction of the holders of the Deferred Shares. Pursuant to this right, on 24 September 2015 the Company purchased all the Deferred Shares for the total sum of £0.01 in aggregate and the shares were then cancelled.

On 17 August 2015, the Company’s total issued voting capital increased through the issue of 523,677 Ordinary Shares of 3 and 1/33 pence each (total nominal value of £16,000) at an average price of approximately 312 pence per Ordinary Share pursuant to the exercise of share options held by two former Directors.

On 4 February 2016 the Company announced a placing to raise £100,000,000 before issue costs, through the issue of 23,529,412 Ordinary Shares of 3 and 1/33 pence each (total nominal value of £713,000) at 425 pence each.

The total issued voting share capital as at 31 July 2016 was 161,204,124 voting shares (2015: 137,151,035 voting shares).


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17. Issued share capital continued

Employee Benefit Trust As at 31 July 2016, the Employee Benefit Trust (EBT) held 971,080 (2015: 971,080) of the Group’s Ordinary Shares, which have a cost of £2,564,009 (2015: £2,564,009), which was offset against the retained earnings in prior years. During the year the Employee Benefit Trust did not increase its holding (2015: no increase). As set out in the Directors’ Remuneration Report for the year ended 31 July 2016, these represent unallocated shares which are considered to be under the de-facto control of the Group and have therefore been consolidated in the financial statements.

It is the intention of the Group to use these shares to settle the option liabilities at the point of exercise and they represent a partial hedge on the cost of the exercise. No shares have been issued from the EBT during the year (2015: nil).

18. Other reserves

The other reserve represents a reserve arising on consolidation, being the share capital and share premium account balances of Imperial Innovations Limited at 1 August 2005 less the nominal value of the shares issued by the Group to acquire the shares, reflecting the position as if the merger had occurred on 1 August 2005.

19. Financial risk management

Financial risk factorsIn the normal course of business, the Group uses certain financial instruments including cash, trade and other receivables, equity rights, equity investments and loans to investee companies. The Group’s financial liabilities include loans from the European Investment Bank and trade and other payables.

Monies provided by way of UCSF grants are loaned to individual technology businesses. These loans are repayable in cash or convertible to equity, at a rate mutually agreed by the Group and technology business, at the earliest opportunity after the technology business’ formation. Loans are treated on the same basis as equity for valuation purposes.

Risk management objectives The Group is exposed to a number of risks through the performance of its normal operations. The most significant are liquidity and market price risk. Income from surplus funds is dependent on market interest rates and expose the Group to interest rate risk.

The Group’s main objective in using financial instruments is to promote the commercialisation of intellectual property held by technology businesses through the raising and investing of funds for this purpose. The Group’s policies in calculating the nature, amount and timing of investments’ equity fundraisings are determined by planned future investment activity.

Due to the nature of the Group’s activities, the Directors may consider it necessary to use derivative financial instruments to hedge the Group’s exposure to fluctuations in exchange rates, where these exposures have been significant.

Financial instruments by category

Assets per balance sheet at 31 July 2016

Loans and receivables

£000

Assets at fair value through profit or loss

£000

Trade and other receivables (excluding prepayments and VAT) 3,827 –Financial assets at fair value through profit or loss – 345,597Short-term liquidity investments 15,000 –Cash and cash equivalents 133,306 –Total 152,133 345,597

Liabilities per balance sheet at 31 July 2016

Financial liabilities at

amortised cost £000

Borrowings 27,256Higher Education Innovation Fund (HEIF) and University Challenge Seed Fund (UCSF) 477Trade and other payables (excluding deferred income, tax and social security) 3,833Total 31,566


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19. Financial risk management continued

Assets per balance sheet at 31 July 2015

Loans and receivables

£000

Assets at fair value through profit or loss

£000

Trade and other receivables (excluding prepayments and VAT) 1,721 – Financial assets at fair value through profit or loss – 333,907Short-term liquidity investments 20,000 – Cash and cash equivalents 108,097 – Total 129,818 333,907

Liabilities per balance sheet at 31 July 2015

Financial liabilities at

amortised cost £000

Borrowings 28,722 Higher Education Innovation Fund (HEIF) and University Challenge Seed Fund (UCSF) 666 Trade and other payables (excluding tax and social security) 3,996Total 33,384

(a) Market risk(i) Price riskThe Group is exposed to price risk in respect of equity rights, equity investments and loans to the technology businesses held by the Group and classified on the balance sheet as at fair value through profit or loss. The Group seeks to manage this risk by routinely monitoring the performance of these investments. The Group employs stringent investment appraisal processes prior to deciding on investment. Regular reports are made to the Board on the status and valuation of investments and significant disposals require Board approval. The value of the investment portfolio can be affected by the performance of the international equity markets and the carrying value is likely to be adversely affected by material declines in these markets. Furthermore, the ability to liquidate market positions will be affected by weak equity markets.

The Group holds investments which are traded on AIM, NASDAQ and the Main Market of the London Stock Exchange and investments which are not traded on an active market. The table below summarises, as an example, the impact of 1% increase/decrease in price of quoted and unquoted investments on the Group’s post tax profit for the year.

2016 Quoted

£000

2016 Unquoted

£000Total £000

2015 Quoted

£000

2015 Unquoted

£000Total £000

Investments – designated at fair value through profit or loss 432 3,008 3,440 1,071 2,262 3,333

Post tax profit for the year would increase/decrease as a result of fair value gains/losses on investments classified at fair value through profit or loss. There would be no impact on other components of equity. The Group is not exposed to commodity price risk.

(ii) Interest rate riskAt the end of the year the interest rate profile of the Group’s interest-bearing financial instruments was as follows:

Fixed rate instruments2016 £000

2015 £000

Financial assets 15,000 20,000 Financial liabilities (14,839) (14,821)Total 161 5,179

Variable rate instruments2016 £000

2015 £000

Financial assets 133,306 108,097 Financial liabilities (12,417) (13,901)Total 120,889 94,196


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Financial assetsThe Group has directly maintained special interest-bearing accounts with corporate banks at variable and fixed rates of interest related to LIBOR. These deposits are made on a daily basis with minimal balances held on current account.

The variable rates are linked to clearing banks’ base rates. The weighted average interest rate on the variable deposits during the year ended 31 July 2016 was 0.64% (2015: 0.64%). The weighted average interest rate on the fixed rate deposits during the year ended 31 July 2016 was 2.29% (2015: 1.89%).

Financial liabilitiesThe first tranche of the EIB loan is linked to quarterly LIBOR rate. The loan was disbursed on 30 July 2013 and the floating interest rate including LIBOR was 3.30%. The Group has decided not to take up any hedging instruments to cover against interest rate fluctuation as the financial assets at variable rates are considered a natural hedge and any remaining exposure is deemed insignificant.

The second tranche of the EIB loan is based on a fixed interest rate of 4.199%. The loan was disbursed on 30 June 2015.

SensitivityA general increase/decrease of one percentage point in interest rates at the end of the reporting year would have increased/(decreased) the Group’s profit before tax by amounts shown below. A rate of 1% is considered reasonable given the current level of interest rates.

31 July 2016 31 July 2015Increase

£000Decrease

£000Increase

£000Decrease

£000

Variable rate instruments 692 (692) 117 (117)Fixed rate instruments 1 50 (50) 32 (32)Cash flow sensitivity (net) and impact on equity 742 (742) 149 (149)

1 The Group considers it appropriate to consider the impact of a movement in interest rates in fixed rate investments as these are generally held for between three months and 12 months and therefore subject to the impact of movements in short-term interest rates.

(iii) Foreign exchange riskThe Group occasionally enters into transactions in currencies other than sterling. Any exposure to fluctuations in market currency exchange rates is generally considered immaterial from a Group perspective. Occasionally, where the Group operates internationally, it may be exposed to foreign exchange risk arising from various currencies, primarily with respect to the US dollar. Foreign exchange risk arises from future commercial transactions in foreign operations and investments denominated in a currency that is not the entity’s functional currency.

Management has set up a policy to require Group companies to manage their foreign exchange risk. The Group companies are required to hedge their foreign exchange risk exposure if the exposure is material. To manage their foreign exchange risk arising from future commercial transactions, entities in the Group use forward contracts. There are no forward contracts in place at the year-end as the Group had minimal exposure to currency fluctuations at the year-end (2015: nil).

(b) Liquidity risk The Group seeks to manage financial risk, and in particular liquidity risk, ensuring that sufficient liquidity is available to meet foreseeable requirements and to invest surplus cash in low risk instruments with reputable institutions.

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts in the table, with the exception of the EIB loan, are the contractual undiscounted cash flows equal to the carrying balances. Transaction costs in the year ended 31 July 2013 of £186,000 and £181,000 in the year ended 31 July 2015 were incurred to obtain the EIB loan and were set against the loan amount. These costs are subsequently amortised over the life of the loan. The Group manages its exposure to liquidity risk through cash flow forecasting and monitoring its counterparties.

At 31 July 2016

Less than one year

£000

Over one year

£000

Borrowings – EIB Loan 3,167 24,089UCSF and HEIF – 477Trade and other payables (excluding deferred income, tax and social security) 3,833 –


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At 31 July 2015

Less than one year

£000

Over one year

£000

Borrowings – EIB Loan 1,500 33,827UCSF – 666 Trade and other payables (excluding tax and social security) 3,996 –

As disclosed in note 15, the Group has an EIB loan which contains a debt covenant. A future breach of covenant would require the Group to repay the loan earlier than indicated in the table above, however the probability of the breach occurring is considered very low. Except for this, it is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

(c) Credit riskCredit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and short-term liquidity investments as well as credit exposures to trade and other receivables.

The table below shows analysis of the Group’s cash and cash equivalents and short-term liquidity investments according to Fitch’s short-term credit rating or long term credit rating.

2016 £000

2015 £000

Fitch Credit rating – short-termF1+ 153 154 F1 84,282 77,247F2 22,808 27,674

107,243 105,075Fitch Credit rating – long termAAAmmf 26,063 3,022Total 133,306 108,097

The table below shows analysis of the Group’s long term liquidity investment as defined by credit agencies as investments in excess of 12 months, according to Fitch’s long term credit rating.

2016 £000

2015 £000

Fitch Credit rating – long termA 15,000 20,000Total 15,000 20,000

Group policy is to place no more than £35.0 million (2015: £35.0 million) of its cash (at the time the cash is placed) with any one institution. All investments are in sterling with a minimum credit rating of F3.

The maximum exposure to credit risk for trade and other receivables is represented by their carrying amount set out in note 12. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. The Group assesses the credit quality of customers, taking into account their current financial position and past experience.

(d) Capital risk managementThe Group is funded by equity finance and a long term loan. Total capital is calculated as ‘total equity’ as shown in the consolidated balance sheet.

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group maintains a maturity analysis profile for short-term liquidity investments. The Group has some external debt and no material externally imposed capital requirements and the Group’s share capital is clearly set out in note 17. The Group is subject to covenants under the external debt arrangement as mentioned in note 15.


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(e) Fair valuesThe fair values of the Group’s financial assets and liabilities are considered a reasonable approximation to the carrying values shown in the balance sheet. The basis for determining fair values is disclosed in note 1.

(f) Fair value estimationThe following table presents the Group’s assets that are measured at fair value at 31 July 2016:

Level 1

£000Level 2

£000Level 3

£000Total £000

AssetsFinancial assets at fair value through profit or loss 43,134 – 302,463 345,597Total assets 43,134 – 302,463 345,597

The following table presents the Group’s assets that are measured at fair value at 31 July 2015:

Level 1

£000Level 2

£000Level 3

£000Total £000

AssetsFinancial assets at fair value through profit or loss 107,113 – 226,794 333,907Total assets 107,113 – 226,794 333,907

Financial instruments in Level 1The fair value of financial instruments traded in active markets is based upon quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, price service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market prices used for financial assets held by the Group is the current bid price. These instruments are included in Level 1. Instruments included in Level 1 comprise AIM, NASDAQ and the Main Market of the London Stock Exchange registered equity investments.

Financial instruments in Level 2The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. For the Group, this category includes derivatives used for hedging and quoted securities that are not actively traded in an active market.

Financial instruments in Level 3If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. For the Group, this includes all unquoted companies, and UCSF investments and loans. For a detailed understanding of the valuation techniques for Level 3 financial instruments, see ‘Valuation of investments’ in note 1.

The following table presents the changes in Level 3 instruments for the year ended 31 July 2016 and the year ended 31 July 2015:

2016 £000

2015 £000

Opening balance 226,794 152,466Investments into Level 3 68,075 59,376Realisations from Level 3 (6,786) (7,885)Fair value movements on UCSF (297) (83)Fair value movements on HEIF – – Gains and losses on investments recognised in profit or loss gross of revenue-share 14,677 22,920Closing balance 302,463 226,794


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Information about fair value measurements using significant unobservable inputs (Level 3)The Group’s finance department, in consultation with the investment team, performs valuations of investments held for financial reporting purposes, including Level 3 fair values. Discussions of valuation processes and results are held at least twice a year, in line with the Group’s reporting dates. The valuation techniques, unobservable inputs and the relationship of unobservable inputs to fair value are discussed in note 20.

Information about fair value measurements for the year ended 31 July 2016

Valuation technique Level

Net fair value at

31 July 2016 £000 Inputs

Unobservable Inputs

Weighted average input

Reasonable possible shift +/-

Change in valuation £000

Relationship of inputs to value

Listed investments 1 42,923 Publicly available share price at balance sheet date

– – – – –

Price of latest funding round adjusted for recent milestones or impairments

3 41,405 Performance against milestones

Unobservable inputs include management’s assessment of performance against milestones, and considerations and calculation of any impairment. For further information on valuation methodology, see note 20. An assessment of change in valuation of total investments has been provided in note 19(a). The main unobservable input relates to the assessment of impairment:Assessment of impairment

The greater the assessment of impairment, the lower the fair value

Price of latest funding round (investment made within the last two years)

3 246,150 Price of the latest funding round

The price of latest funding round provides observable input into the valuation of any individual investment. However, subsequent to the funding round, management are required to re-assess the carrying value of investments at each period end, including assessment of any impairment indicators, which result in unobservable inputs into the valuation methodology. For further information on valuation methodology, see note 20. An assessment of change in valuation of total investments has been provided in note 19(a). The main unobservable input relates to the assessment of impairment:Assessment of impairment


Price of latest funding round (investment made more than two years ago)

3 250 Price of the latest funding round

Unobservable inputs include management’s assessment of the performance of the investment company and considerations and calculation of any impairment. For further information on valuation methodology, see note 20. An assessment of change in valuation of total investments has been provided in note 19(a). The main unobservable input relates to the assessment of impairment:Assessment of impairment


Earnings multiple 3 4,358 Earnings of comparable companies and discount for lack of marketability

Discount for lack of marketability

40% 20% 1,249/ (1,249)

The greater the discount factor, the lower the fair value.

335,086


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Information about fair value measurements for the year ended 31 July 2015

Valuation technique Level

Net fair value at

31 July 2015 £000 Inputs

Unobservable inputs

Weighted average input

Reasonable possible shift +/-

Change in valuation £000

Relationship of inputs to value

Listed investments 1 106,768 Publicly available share price at balance sheet date

– – – – –

Price of latest funding round adjusted for recent milestones or impairments

3 26,992 Performance against milestones

Unobservable inputs include management’s assessment of performance against milestones, and considerations and calculation of any impairment. For further information on valuation methodology, see note 20. An assessment of change in valuation has been provided in note 19(a). The main unobservable input relates to the assessment of impairment:Assessment of impairment


Price of latest funding round (investment made within the last two years)


The price of latest funding round provides observable input into the valuation of any individual investment. However, subsequent to the funding round, management are required to re-assess the carrying value of investments at each period end, including assessment of any impairment indicators, which result in unobservable inputs into the valuation methodology. For further information on valuation methodology, see note 20. An assessment of change in valuation has been provided in note 19(a). The main unobservable input relates to the assessment of impairment:Assessment of impairment


Price of latest funding round (investment made more than two years ago)


Unobservable inputs include management’s assessment of the performance of the investment company and considerations and calculation of any impairment. For further information on valuation methodology, see note 20. An assessment of change in valuation has been provided in note 19(a). The main unobservable input relates to the assessment of impairment:Assessment of impairment


Earnings multiple 3 3,876 Earnings of comparable companies and discount for lack of marketability

Discount for lack of marketability

40% 20% 1,249/ (1,249)

The greater the discount factor, the lower the fair value.

327,220

20. Critical accounting estimates and judgements

The Directors have made the following judgements and estimates that have had the most significant effect on the carrying amounts of the assets and liabilities in the financial statements.

The Group has concluded that it is not an investment company as identified by IFRS10.

Valuation of unquoted equity investmentsThe judgements required to determine the appropriate valuation methodology of unquoted equity investments means there is a risk of material adjustment to the carrying amounts of assets and liabilities. These judgements include a decision whether or not to increase or decrease investment valuations.


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20. Critical accounting estimates and judgements continued

The fair value of unlisted securities is established using International Private Equity and Venture Capital Valuation Guidelines (IPEVCVG). The valuation methodology used most commonly by the Group is the ‘price of recent investment’ or a ‘milestone analysis’ approach. Given the nature of the Group’s investments in seed, start-up and early-stage companies, where there are often no current and no short-term future earnings or positive cash flows, it can be difficult to gauge the probability and financial impact of the success or failure of development or research activities and to make reliable cash flow forecasts.

Consequently, the most appropriate approach to determine fair value is a methodology that is based on market data, that being the price of a recent investment. The Group considers that fair value estimates that are based entirely on observable market data will be of greater reliability than those based on assumptions and accordingly where there has been any recent investment by third parties, the price of that investment will generally provide a basis of the valuation.

Where the Group considers that the price of recent investment, unadjusted, is no longer relevant and there are limited or no comparable companies or transactions from which to infer value, the Group carries out an enhanced assessment based on milestone analysis and/or industry and sector analysis. In applying the milestone analysis approach to investments in companies in early or development stages the Group seeks to determine whether there is an indication of change in fair value based on a consideration of performance against any milestones that were set at the time of the original investment decision, as well as taking into consideration the key market drivers of the investee company and the overall economic environment. When considered appropriate, the Group may use external valuers to assess the reasonableness of any change in fair value estimated by management.

The following considerations are used when calculating the fair value:• where the investment being valued was itself made recently, its cost will generally provide a good indication of fair value

unless there is objective evidence that the investment has since been impaired, such as observable data suggesting a deterioration of the financial, technical, or commercial performance of the underlying business;

• where there has been any recent investment by third parties, the price of that investment will provide a basis of the valuation;• if there is no readily ascertainable value from following the ‘price of recent investment’ methodology, the Group considers

alternative methodologies in the IPEVCVG guidelines, being principally discounted cash flows and price-earnings multiples requiring management to make assumptions over the timing and nature of future earnings and cash flows when calculating fair value;

• where a fair value cannot be estimated reliably, the investment is reported at the carrying value at the previous reporting date unless there is evidence that the investment has since been impaired;

• all recorded values of investments are regularly reviewed for any indication of impairment and adjusted accordingly; • the length of period for which it remains appropriate to use the price of recent investment depends on the specific

circumstances of the investment and the stability of the external environment. During this period the Group considers whether any changes or events subsequent to the transaction would imply a change in the fair value of the investment may be required; where the Group considers that there is an indication that the fair value has changed, an estimation is made of the required amount of any adjustment from the last price of recent investment. Wherever possible, this adjustment is based on objective data from the investee company and the experience and judgement of the Group. However any adjustment is, by its very nature, subjective. Where deterioration in value has occurred, the Group reduces the carrying value of the investment to reflect the estimated decrease. If there is evidence of value creation, the Group may consider increasing the carrying value of the investment. However, in the absence of additional financing rounds or profit generation it can be difficult to determine the value that a purchaser may place on positive developments given the potential outcome and the costs and risks to achieving that outcome;

• factors which the Group considers include, inter alia, technical measures such as product development phases and patent approvals, financial measures such as cash burn rate and profitability expectations, and market and sales measures such as testing phases, product launches and market introduction; and

• where the equity structure of a portfolio company involves different class rights in a sale or liquidity event, the Group takes these different rights into account when forming a view of the value of its investment.

Note 19 summarises the impact of a 1% increase/decrease in the price of unquoted investments on the Group’s post tax profit for the year.


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20. Critical accounting estimates and judgements continued

Valuation of Carried Interest Plan liabilityFor several years, the Group has maintained a long term incentive arrangement known as the Carried Interest Plan. It is the intention of the Group to continue to use the Carried Interest Plan as part of the Group’s long term incentive arrangements, alongside the introduction of share options.

The provision is measured by reference to the fair value of the relevant investments. The judgements required to determine the appropriate valuation methodology of unquoted equity investments means there is a corresponding risk of material adjustment to the carrying amounts of the Carried Interest Plan liability. The additional considerations used when calculating the Carried Interest Plan liability include estimates for an appropriate discount rate, leaver provisions and year of realisation.

21. Employees and Directors

2016 £000

2015 £000

Wages and salaries 5,851 5,387Termination payments 25 – Social security costs 826 647Other pension costs (note 22) 643 562Total before share-based payment charge 7,345 6,596Share-based payments (note 5) 333 224 Carried Interest Plan (release)/charge (2,972) (1,161)Total 4,706 5,659

Average monthly number of persons (including Executive Directors) employed:

By activity 2016

Number2015

Number

Investment and technology transfer 51 47 Central Group functions (see below) 17 16 Total 68 63

Central Group functions comprise general management, finance, human resources, marketing and information technology.

The Group considers all members of the Board to be key management. A number of senior staff are also involved in the execution of the Group’s tactical plans which are set by the Board of Directors. However, these senior members of staff are not considered to be key management personnel as defined in IAS 24 as they are not involved with the planning, Directorship and controlling of the Group’s strategic plan or of setting tactical plans, with the exception of Anjum Ahmad who is the Group’s Treasury and Finance Director. In this role he attends all Board meetings and contributes towards Board decision making.

Key management compensation2016 £000

2015 £000

Salaries and short-term employee benefits 1,183 1,455Share-based payments charge 189 124Post-employment benefits 95 85Benefits in kind 18 15Total 1,485 1,679

Directors’ emoluments are as follows:

Directors2016 £000

2015 £000

Aggregate emoluments 995 1,252Company contributions to defined contribution pension schemes and payments in lieu of pension contributions 77 69Benefits in kind 14 11Total 1,086 1,332


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21. Employees and Directors continued

Highest-paid Director:

2016 £000

2015 £000

Total amount of emoluments & amounts (excluding shares) receivable under long term schemes 296 417Company payments in lieu of pension contributions 25 23

There were no gains made by individual Directors from the exercise of share options (2015: £nil).

The Directors and former Directors to whom retirement benefits accrued under money purchase pension schemes in the year to 31 July 2016 was Tony Hickson and in the year ended 31 July 2015 were Dr Nigel Pitchford and Tony Hickson. Details of Directors’ share options, which are audited, are included on page 92 of the Annual Financial Statements.

22. Pension

The Group contributes to a money purchase pension scheme for employees. The Group contributes up to 10.5% of pensionable salary to the scheme for staff who have been in employment since before 27 April 2005 and 8.5% for all other employees. The amount paid in the year to 31 July 2016 was £643,000 (2015: £562,000). As at 31 July 2016, the amount outstanding was £11,000 (2015: £2,000).

23. Operating lease commitments

2016 £000

2015 £000

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:No later than one year 385 240 Later than one year and no later than five years 1,540 960 Later than five years 5,390 3,600 Total 7,315 4,800

Lease payments represent amounts payable by the Group for its office property. The lease term is 25 years with a break clause after 10 years. In accordance with the lease agreement, a rent review was conducted, resulting in an increased lease commitment effective from 21 January 2016.

24. Related party disclosures

The Group does not have an ultimate parent company.

The Group’s ultimate parent company was Imperial College London (Imperial College of Science, Technology and Medicine, South Kensington Campus, London, SW7 2AZ, United Kingdom) by virtue of its shareholding in the Group, until the equity raise in 2011. The Group has a Technology Pipeline Agreement (TPA) with Imperial College London which stipulates the terms for sharing revenue generated from the commercialisation of Imperial College London intellectual property which is assigned to Imperial Innovations Limited. The Group has agreements with Imperial College London across a range of services, including an operating lease for office premises (from June 2010 at 52 Princes Gate, Exhibition Road) as disclosed in note 23 and an agreement covering information technology and intellectual property advice (services agreement). In addition, following the June 2014 placing, Imperial College London has the right to nominate one member to sit on the Board of Imperial Innovations Group plc (down from two members prior to the placing). On this basis, the Directors have considered that Imperial College London continues to be a related party.

Transactions with Appointee Directors are excluded as these are not considered to exert influence on the Group, with the exception of Dr Martin Knight where disclosures have been made on page 143.


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24. Related party disclosures continued

The Group has considered whether Invesco Limited, Woodford Investment Management, and Landsdowne with their significant shareholdings in the Group (albeit in a number of different funds), are related parties under IAS 24, ‘Related party disclosures’. As these shareholders cannot take part in financial or operating policy decisions, have no right to appoint a Board member, and do not exert significant influence over the Group, the Group has taken the view that they are not Related Parties under IAS 24,‘Related party disclosures’.

Under the AIM rules, shareholders with a shareholding of more than 10% are considered to be related parties and therefore investments with the above shareholders are disclosed below. Given the substantial shareholdings, the Board of Directors manages the relationship with the relevant shareholders carefully to ensure that any co-investments are conducted on an arm’s length basis.

Although the Group may have significant influence over an investee company, ultimately the investee company makes the final decision regarding the investors as part of a fundraising. Where the Group leads a fundraising all co-investors are responsible for their own evaluation and due diligence with no preferential treatment afforded to any particular investor.

During the year Invesco invested £20.6 million in total in the following unlisted portfolio companies: Cell Medica,Nexeon and Veryan (2015: £22.4 million in PsiOxus, Cell Medica and Veryan).

During the year the Lansdowne partners invested £nil (2015: nil).

During the year the Woodford Investment Management LLP invested £39.1 million in Cell Medica, Inivata, Mission, Nexeon and Econic (2015: £9.3 million in PsiOxus and Cell Medica).

Transactions with related parties are laid out in the tables below.

Sale of goods and services (including recovery of costs)

2016 £000

2015 £000

Trading with Imperial College London 512 551Government grants received via Imperial College London 867 1,070Trading with portfolio companies 925 959

2,304 2,580

Purchases of goods and services

2016 £000

2015 £000

Rent paid to subsidiary of Imperial College London 314 240Revenue-share and other expenditure with Imperial College London 1,783 2,911

2,097 3,151

Year-end balances arising from sales/purchases of goods/services

2016 £000

2015 £000

Receivables from portfolio companies 73 67 Receivables from Imperial College London 896 417Payables to Imperial College London (1,609) (590)

(640) (106)


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24. Related party disclosures continued

The receivables from related parties arise mainly from sale transactions and are due one month after the date of sale. The receivables are unsecured in nature and bear no interest. The payables to related parties arise mainly from purchase transactions and are due one month after the date of purchase. The payables bear no interest.

Convertible loans to portfolio companies are expected to convert to equity and are of a long term investment nature. As a result, they are included within non-current investments (see note 3(i)). Where the Group has a representative on the board of a portfolio company, this is considered a related party and the aggregate balance is shown below.

Loans to portfolio companies2016 £000

2015 £000

Beginning of the year 18,219 16,335Loans advanced 7,876 10,857Loans disposed (296) (1,024)Loans converted or exchanged from debt to equity (3,746) (6,526)Revaluation/(impairment) of loans 132 (1,423)

22,185 18,219

Transactions with DirectorsThe Group considers all members of the Board to be key management and their remuneration is disclosed in note 21. Directors’ shareholdings in the Group are disclosed in the Directors’ Remuneration Report.

Dr Martin Knight was previously a member of the Council of Imperial College London. Imperial Innovations LLP and certain individuals not considered to be related parties, including Dr Martin Knight, are parties to an Appointee Director pool. The agreement provides for the payment of cash to the individuals on any sale by Imperial Innovations LLP of its shareholdings in specified companies. Any payments to these individuals are outside the control of the Group and are directed solely by a committee of those individuals. No payments were made during the year.

Dr Martin Knight has agreed that following his receipt of a cumulative total of £18,750, representing the deemed value of his interest in the Appointee Director pool to the date he started to receive remuneration as Chairman of the Group, any further amount he receives shall be paid or assigned to the Group. Such cumulative realised total at present stands at £17,541, leaving a further £1,209 before Dr Martin Knight pays or assigns to the Group any such further amount.

25. Financial commitments

The Group has agreed to make further investments of £29.0 million (2015: £22.3 million) in certain technology businesses under milestone provisions contained in investment agreements. These relate to future investments so have not been included in the financial statements.

In addition the Group committed £24.8 million over the next five years towards the UCL Technology Fund LP of which £23.6 million remains payable and £3.3 million towards the partnership, Apollo Therapeutics LLP of which £3.3 million remains payable as at 31 July 2016.


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Report on the Company financial statements

Our opinionIn our opinion, Imperial Innovations Group plc’s company financial statements (the ‘financial statements’):• give a true and fair view of the state of the company’s

affairs as at 31 July 2016;• have been properly prepared in accordance with United

Kingdom Generally Accepted Accounting Practice; and• have been prepared in accordance with the requirements

of the Companies Act 2006.

What we have auditedThe financial statements, included within the Annual Report and Accounts (the ‘Annual Report’), comprise:• the Company balance sheet as at 31 July 2016;• the Company statement of changes in equity for the year

then ended; and• the notes to the Company financial statements, which

include a summary of significant accounting policies and other explanatory information.

Certain required disclosures have been presented elsewhere in the Annual Report and Accounts (‘the Annual Report’), rather than in the notes to the financial statements. These are cross-referenced from the financial statements and are identified as audited.

The financial reporting framework that has been applied in the preparation of the financial statements is United Kingdom Accounting Standards, comprising FRS 101 ‘Reduced Disclosure Framework’, and applicable law (United Kingdom Generally Accepted Accounting Practice).

Independent auditors’ report to the members of Imperial Innovations Group plc

Other required reporting

Consistency of other informationCompanies Act 2006 opinionIn our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

ISAs (UK & Ireland) reportingThe Directors have chosen to voluntarily comply with the UK Corporate Governance Code (the ‘Code’) as if the company were a premium listed company. Under International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’) we are required to report to you if, in our opinion, information in the Annual Report is:• materially inconsistent with the information in the audited

financial statements; or• apparently materially incorrect based on, or materially

inconsistent with, our knowledge of the company acquired in the course of performing our audit; or

• otherwise misleading.

We have no exceptions to report arising from this responsibility.

Adequacy of accounting records and information and explanations receivedUnder the Companies Act 2006 we are required to report to you if, in our opinion:• we have not received 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

• the financial statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Directors’ remunerationUnder the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

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Responsibilities for the financial statements and the audit

Our responsibilities and those of the DirectorsAs explained more fully in the Statement of Directors’ responsibilities set out on page 98, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

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.

What an audit of financial statements involvesWe conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: • whether the accounting policies are appropriate to the

company’s circumstances and have been consistently applied and adequately disclosed;

• the reasonableness of significant accounting estimates made by the Directors; and

• the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Other matter

We have reported separately on the group financial statements of Imperial Innovations Group plc for the year ended 31 July 2016.

Simon Ormiston (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Cambridge

12 October 2016


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Note 2016 £000

2015 £000

Fixed assetsInvestments in subsidiary undertakings 4 10,247 9,914 Current assetsDebtors 5 300,838 220,960 Short-term investments 15,000 20,000 Cash at bank and in hand 129,663 106,098

445,501 347,058 Total assets 455,748 356,972

Capital and reservesCalled up share capital 7 4,885 132,500 Share premium account 304,938 207,068 Capital redemption reserve 128,344 –Profit and loss account 3,416 2,351 Share-based payments reserve 8,861 8,528 Total shareholders’ funds 450,444 350,447 Creditors: amounts falling due within one year 6 5,304 6,525 Total shareholders’ funds and liabilities 455,748 356,972

The Financial Statements on pages 146 to 151 were approved by the Board of Directors on 12 October 2016 and were signed on its behalf by Russ Cummings.


12 October 2016

Company balance sheetas at 31 July 2016Company registered number: 05796766

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Called up share capital

£000

Share premium account

£000

Capital redemption

reserve £000

Profit and loss account

£000

Share-based payments

reserve £000

Total shareholders’

funds £000

At 1 August 2014 132,500 207,068 – 987 8,304 348,859

Comprehensive incomeProfit for the financial year – – – 1,364 – 1,364 Total comprehensive income – – – 1,364 – 1,364 Transactions with ownersValue of employee services – – – – 224 224Transactions with owners – – – – 224 224At 31 July 2015 132,500 207,068 – 2,351 8,528 350,447

Comprehensive income

Profit for the financial year – – – 1,065 – 1,065Total comprehensive income – – – 1,065 – 1,065Transactions with ownersValue of employee services – – – – 333 333Share capital issued 729 100,907 – – – 101,636Costs of share capital issued – (3,037) – – – (3,037)Cancellation of deferred shares (128,344) – 128,344 – – –Transactions with owners (127,615) 97,870 128,344 – 333 98,932At 31 July 2016 4,885 304,938 128,344 3,416 8,861 450,444

Treasury shares with a cost of £2,564,009 (2015: £2,564,009) have been netted against retained earnings representing shares held by the Employee Benefit Trust.

The notes on pages 148 to 151 are an integral part of these parent company financial statements.

Company statement of changes in equityfor the year ended 31 July 2016


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Notes to the Company financial statements

1. Accounting policies

Basis of preparationThese financial statements have been prepared in accordance with Financial Reporting Standard 101, ‘Reduced Disclosure Framework’ (FRS 101) and the Companies Act 2006 (the Act) as applicable to companies using IFRS 101. FRS 101 sets out a reduced disclosure framework for a ‘qualifying entity’ as defined in the standard which addresses the financial reporting requirements and disclosure exemptions in the individual financial statements of qualifying entities that otherwise apply the recognition, measurement and disclosure requirements of EU-adopted IFRS. Shareholders of the Company may object to the use of the reduced disclosure framework by writing to the Company Secretary at the Company’s registered office before 31 July each accounting year.

The financial statements have been prepared on a going concern basis and under the historical cost convention. A summary of the more important Company accounting policies, which have been consistently applied except where noted, is set out below.

Investments in subsidiary undertakingsUnlisted investments are held at cost less any provision for impairment.

Share-based paymentsWhere the parent company has granted rights over its equity instruments to the employees of Imperial Innovations Limited there is a corresponding increase recognised in the investment in the subsidiary.

Employees (and Directors) receive remuneration in the form of share-based payments, whereby employees render services in exchange for shares or for rights over shares. The fair value of the employee services received in exchange for the grant of options or shares is recognised as an expense. The total amount to be expensed on a straight line basis over the vesting period is determined by reference to the fair value of the options or shares determined at the grant date, excluding the impact of any non-market based vesting conditions (for example, continuation of employment and performance targets). The share options are valued using the binomial option pricing model for the long term incentive scheme and using the Black-Scholes model for the SAYE scheme. Non-market based vesting conditions are included in assumptions about the number of options that are expected to become exercisable or the number of shares that the employee will ultimately receive. This estimate is revised at each balance sheet date to allow for forecast leaving employees and the movement is charged or credited to the investments in subsidiary undertakings, with a corresponding adjustment to equity.

Cash at bank and in handCash at bank and in hand includes cash in hand, deposits held with banks and other short-term highly liquid investments with original maturities of less than three months. Short-term liquid investments with a maturity of over three months and less than 12 months are included in a separate category, ‘Short-term investments’.

Deferred taxDeferred tax is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date.

A net deferred tax asset is recognised as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits against which to recover carried forward tax losses and from which the future reversal of underlying temporary differences can be deducted.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the temporary differences are expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Share capitalOrdinary Shares are classified as equity. Incremental costs directly attributable to the issue of new Ordinary shares are shown as a deduction, net of tax, from the proceeds.

Deferred shares are not transferable and do not entitle the holder to the payment of any dividend or otherwise participate in the profits of the Company or to receive notice of or attend or vote at any general meeting of the Company and on any reduction of capital in accordance with the Companies Act 2006, may be cancelled without payment of consideration. The Deferred Shares are not listed on any stock exchange. The Company may purchase the Deferred Shares for not more than the sum of £0.01 in aggregate for all the Deferred Shares and cancel the Deferred Shares so purchased, without any requirement to obtain the consent or sanction of the holders of the Deferred Shares. After the Deferred Shares are purchased, the shares will be cancelled and the value will be recognised in a capital redemption reserve.

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2. Summary of disclosure exemptions adopted

The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements, in accordance with FRS 101: • paragraphs 45(b) and 46 to 52 of IFRS 2, ‘Share-based payment’ (details of the number and weighted-average exercise

prices of share options, and how the fair value of goods or services received was determined);• IFRS 7, ‘Financial Instruments: Disclosures’;• IAS 7, ‘Statement of cash flows’;• the requirements in IAS 24, ‘Related party disclosures’ to disclose related party transactions entered into between two

or more members of a group;• IAS 1 – Presentation of Financial Statements; and• the following paragraphs of IAS 1, ‘Presentation of financial statements’: – 0(d), (statement of cash flows), – 16 (statement of compliance with all IFRS), – 111 (cash flow statement information), and – 134-136 (capital management disclosures).

3. Results for the parent company

The Directors have taken advantage of the exemption available under Section 408 of the Companies Act 2006 and have not presented a statement of comprehensive income for the parent company. The parent company’s result for the year was a profit of £1,065,000 (2015: profit £1,364,000). As fees payable to the auditors are accounted within, and paid by Imperial Innovations Limited, a Group company, no fee is charged to the Company and therefore this amount is not reflected in the Company’s statement of comprehensive income. For details of auditors’ remuneration, see note 7 of the consolidated financial statements.

4. Investments in subsidiary undertakings

£000

At 1 August 2015 9,914Capital contributions arising from share-based payment charges 333At 31 July 2016 10,247

The capital contributions arising from share-based payment charges represent the Company granting rights over its equity instruments to the employees of Imperial Innovations Limited. This results in a corresponding increase in investment in subsidiary.

Details of the Company’s subsidiary undertakings (which are all wholly owned within the Group) at 31 July 2016 are as follows:

Company Nature of operations Country of incorporation

Imperial Innovations Limited Technology licensing and investment holding company EnglandImperial Innovations LLP ¹ Investment holding entity EnglandImperial Innovations Investments Limited Investment holding company EnglandImperial Innovations Businesses LLP ¹ Investment holding entity EnglandImperial Innovations Investment Management Limited Investment services company EnglandImperial Limited Partnership Limited Investment holding company EnglandImperial College Company Maker Limited ¹ Investment holding company EnglandImperial Innovations Sarl1 Investment holding company Luxembourg

1 Indirectly held.

The Directors believe that the carrying value of the investments is supported by their underlying net assets and investment holdings.


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5. Debtors

2016 £000

2015 £000

Amounts falling due within one year:Other debtors 63 65 Amounts owed by subsidiary undertakings 300,775 220,895Total 300,838 220,960

Amounts owed by subsidiary undertakings represent investments made on behalf of Imperial Innovations Investments Limited, Imperial Innovations Businesses LLP and Imperial Innovations Limited. These are unsecured, interest free and there is no fixed repayment term.

6. Creditors: amounts falling due within one year

2016 £000

2015 £000

Amounts owed to Imperial Innovations Limited 846 2,067 Amounts owed to Imperial Innovations LLP 2,781 2,781 Amounts owed to Imperial Innovations Businesses LLP 1,676 1,676 Other creditors 1 1 Total 5,304 6,525

The amounts owed to Imperial Innovations Limited, Imperial Innovations LLP and Imperial Innovations Businesses LLP are unsecured, interest free and there is no fixed repayment term.

7. Called up share capital

Ordinary Shares2016 £000

2015 £000

Allotted and fully paid: Balance at beginning of year (137,151,035 Ordinary Shares of £0.0303 each) (2015: 137,151,035 Ordinary Shares of £0.0303 each) 4,156 4,156 Issue of share capital during the year ¹ 729 – Balance as at end of year (161,204,124 Ordinary Shares of £0.0303 each) (2015: 137,151,035 Ordinary Shares of £0.0303 each) 4,885 4,156

Deferred Shares

Allotted and fully paid: Balance as at beginning of year (36,990,086 Deferred shares of £3.4697 each) 128,344 128,344 Cancellation of shares and transfer to capital redemption reserve (128,344) –Balance as at end of year of nil (2015: 36,990,086 Deferred shares of £3.4697 each) – 128,344

Total balance as at end of year 4,885 132,500

1 Issue of 24,053,089 Ordinary Shares of £0.0303 each.

See note 17 of the consolidated financial statements for further details.

Notes to the Company financial statements continued

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8. Share-based payments

The parent company has granted rights over its equity instruments to the employees of Imperial Innovations Limited. For detailed share-based payment disclosures, see note 5 to the consolidated financial statements.

9. Related parties

During the years ended 31 July 2016 and 31 July 2015, the Company made investments on behalf of Imperial Innovations Investments Limited, Imperial Innovations Businesses LLP and Imperial Innovations Limited (see note 5). See note 24 of the consolidated financial statements for details of the Group’s related party transactions. The Company has taken advantage of the exemption available to parent companies under IAS 24, not to disclose transactions and balances with wholly owned subsidiaries.

10. Directors’ emoluments and employee information

The remuneration of the Directors is borne by Group subsidiary undertakings in respect of the Directors’ services to the Group as a whole. Full details of Directors’ remuneration can be found in note 21 of the consolidated financial statements. The Company had no employees during the years ended 31 July 2015 and 31 July 2016.

11. Critical accounting estimates and judgements

The Directors have made judgements and estimates with respect to those items that have made the most significant effect on the carrying amounts of the assets and liabilities in the financial statements. These are described in Note 20 of the Consolidated Financial Statements.


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DirectorsDavid Newlands ChairmanRuss Cummings Chief Executive OfficerDr Nigel Pitchford Chief Investment OfficerTony Hickson Managing Director – Technology TransferProfessor David Begg Non-Executive DirectorPeter Chambré Non-Executive DirectorDr Linda Wilding Non-Executive DirectorDr Robert Easton Non-Executive Director

Company SecretaryWilliam Rayner

Registered Office52 Princes Gate Exhibition Road London SW7 2PG

Independent AuditorsPricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Abacus House Castle Park Cambridge CB3 0AN

Principal BankersNational Westminster Bank plc PO Box No 592 18 Cromwell Place London SW7 2LB

Joint Brokers Cenkos Securities plc 6.7.8 Tokenhouse Yard London EC2R 7AS

Company Registration Number05796766

SolicitorsMayer Brown International LLP 201 Bishopsgate London EC2M 3AF

Financial Advisers, Joint Brokers and NomadJ.P. Morgan Cazenove 25 Bank Street Canary Wharf London E14 5JP

Share RegistrarsEquiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA

Imperial Innovations Group plc52 Princes Gate Exhibition Road London SW7 2PG

+44 (0)20 3053 8850

www.imperialinnovations.co.uk

Company information

This report has been printed in the UK. Our printers hold FSC ® chain of custody certification and they are also carbon neutral. The paper used is Heaven 42 which is fully recyclable and biodegradable and is an FSC mix certified accredited material, using an Elemental Chlorine Free (ECF) process and partly bleached using a Totally Chlorine Free (TCF) process.

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For further information please see our website

www.imperialinnovations.co.uk

Imperial Innovations Group plc

52 Princes GateExhibition RoadLondon SW7 2PG

+44 (0)20 3053 8850 www.imperialinnovations.co.uk

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