Final Results

15 October 2014

Imperial Innovations Group plc

Four IPOs, £150m raised and portfolio value up 38% to £252m

Imperial Innovations Group plc (AIM: IVO, "Innovations" or "the Group"), a leading technology commercialisation and investment group, has published its results for the year ended 31 July 2014.

Portfolio developments

· Circassia, the Group's largest investment, listed on LSE with market capitalisation of £581.0 million in March 2014

· Three further public company transactions:

o Abzena listing on AIM in July 2014

o Oxford Immunotec IPO on NASDAQ in November 2013

o IXICO listing on AIM in October 2013

· Significant progress across the rest of maturing asset portfolio

· 13 new companies added to portfolio (2013: 11) comprising six accelerated-growth companies, plus seven lighter-touch organic growth spin-outs

· 402 invention disclosures reviewed (2013: 386) 27 commercial agreements signed (2013: 32) and 57 patents filed (2013: 43)

Financial highlights

· Completion of placing in June 2014 raised £150.0 million before issue costs

· Pre-tax profit of £27.4 million (2013: £3.8 million)

· Net assets of £404.8 million (2013: £230.5 million)

· Net portfolio value up by £69.4 million (38.0%) to £252.0 million since 1 August 2013 (2013: £182.6 million)

· Net fair value gains of £40.5 million (2013: £10.8 million)

· £32.8 million invested in 25 portfolio companies (2013: £22.2 million in 28 companies)

· Portfolio raised £315.4 million (2013: £61.4 million) in the year

· Cash and short-term liquidity investments of £176.5m (2013: £65.6 million)

Martin Knight, Chairman of Innovations says:

"The Group made significant progress last year, marked by 38% growth in the value of our portfolio, record profits and four public company transactions. We also completed a £150 million fundraising and now have substantial capital resources to deploy.

"The launch of four portfolio companies, including Circassia, the biggest driver of our value growth, on different public markets is a clear demonstration of the strength in depth of our maturing portfolio.

"In addition to our public companies our private company portfolio continues to thrive. During the year we invested £28.6 million to fund 23 private portfolio companies which collectively raised £72.8 million. 

"We remain very optimistic about building on our achievements. We have the capital, proven operational and managerial expertise, as well as access to the intellectual property from the academic and research community in the 'Golden Triangle' - home to the UK's four leading research-intensive Universities.

"This all bodes well for the future and further value creation."

Enquiries:

Note to editors

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 the UK's four leading research-intensive universities.

This area is home to many new technology companies through its proximity to the academic communities of Imperial College London, the University of Cambridge, the University of Oxford and University College London, as well as other leading research institutions.

Imperial College London, the University of Cambridge, the University of Oxford and University College London collectively have research income of £1.4 billion per annum and are ranked as four of the top ten Universities in the world (source: QS World University Rankings 2014/15).

Innovations supports scientists and entrepreneurs in the commercialisation of their ideas through the licensing of 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 an incubator in London that is the initial home for many of its technology spin-outs.

Since admission of its shares to trading on AIM in 2006, Innovations has raised more than £346.0 million of equity from investors, which has enabled it to invest in some of the most exciting spin-outs to come out of UK academic research. In addition, the Group has a £30.0 million loan facility from the European Investment Bank (EIB) for investment in biotech and therapeutics businesses.

During the period from admission on AIM up until 31 July 2014, Innovations has invested a total of £176.0 million across its portfolio companies, which have raised collectively investment of £822.5 million.

Overview

This year saw the Group achieve a number of notable milestones, including a substantial increase in net asset value, the delivery of record profits and the successful execution of four public company transactions.

There was also significant progress reported across the portfolio, with a number of the portfolio companies reporting important developments. These included positive clinical trial results for PsiOxus and Autifony, the publication of full two-year trial data by Veryan, and the completion of the construction and commissioning of a new process development and manufacturing plant by Nexeon. In addition, Innovations saw a healthy flow of new projects and additions to the portfolio, which will provide feedstock for the future.

In June 2014 the Group completed a £150 million fundraising (before issue costs), which means it is in a strong position to continue to grow the business.

Net assets increased to £404.8 million (2013: £230.5 million) reflecting both the profit for the year and £150.0 million from the fund raising. As of 31 July 2014, the Group had total available cash resources of £191.5 million to invest (2013: £80.6 million), including the undrawn £15.0m second tranche of the EIB facility.

The strengthening of the balance sheet has greatly enhanced the Group's ability to support its portfolio companies from inception until maturity.

The net portfolio value increased by 38.0% to £252.0 million (2013: £182.6 million). Portfolio uplifts from fair value gains were £45.3 million, reflecting progress across the portfolio, but driven in particular by the successful IPO of Circassia, the Group's largest asset. These portfolio gains were offset by impairments of £4.8 million. 

The Group generated revenues of £3.6 million (2013: £3.3 million) from licensing, incubation services and corporate finance fees, which helped offset the costs of running the business.

The Group is reporting record profits of £27.4 million (2013: 3.8 million).

These achievements are set against the backdrop of a number of key organisational changes during the year, including the appointment of a new management team, which has reshaped the business and implemented tight control of operating costs.

Circassia raised £200.0 million at IPO, in what is widely believed to be the biggest ever biotech fundraising at IPO in the UK market. The company is now fully funded to take its products through clinical trials with the potential to become a leading international biopharmaceutical business. The other three public company transactions completed were the listing of Oxford Immunotec on NASDAQ in November 2013, and the admission to AIM of IXICO in October 2013 and Abzena in July 2014.

The Group has also led significant investor syndicates that alongside Innovations have invested in large funding rounds for private companies. For example, during the year the Group led a £17.5 million Series A funding round for Crescendo Biologics, and co-led a £17.0 million Series A funding round for Pulmocide, a £17.0 million Series A2 round for TopiVert and a £20.0 million Series B round for Mission Therapeutics. This clearly demonstrates that the Group is not dependent upon the public markets to make sure its portfolio companies grow with pace and ambition.

The Group reviewed 402 invention disclosures from Imperial College London (and NHS Trusts associated with the College) which resulted in the creation of 27 IP agreements (2013: 32) and 57 patent applications (2013: 43). 

Across all universities Innovations added 13 new companies to its portfolio. Of the six accelerated-growth companies added during the year, three were based on intellectual property developed at, or associated with, Imperial College London and one from each of the University of Cambridge, the University of Oxford and University College London.

At 31 July 2014, the net value of the Group's portfolio rose to £252.0 million (2013: £182.6 million). The increase represents £32.8 million (2013: £22.2 million) of investments to fund 25 (2013: 28) companies (both new and existing) in its portfolio, net disposals of £3.95 million and fair value gains of £40.5 million (2013: £10.8 million).

At 31 July 2014, Innovations had equity holdings in 95 portfolio companies. Of these, the Group has invested and takes an active management role in 36 accelerated-growth companies, with the balance comprising companies that are funded from their own operating revenues, grant funding or represent commercial licensing opportunities.

The Group has identified opportunities to increase the capital deployed in a number of its leading portfolio companies, which in aggregate, are seeking to raise over £100 million from investors over the next 12 months. Following the recent fundraising and given the increasing maturity of the portfolio, Innovations will begin to deploy more capital into its investment portfolio, but will maintain its focus on quality rather than quantity. The Directors do not envisage a significant increase in the number of new companies invested in.

However, the Group's increased capital strength will allow it to increase the total amount of investment in the portfolio from a current average of circa £30-35 million per annum, albeit this is likely to be phased over a number of years, as quality opportunities are identified.

Historically, Innovations has taken interests representing approximately 30% of the equity capital of companies in which it has invested, but may progressively lift that to closer to 50% giving greater influence but not control. By doing so, the Group will hope to be able to capture a greater share of the value at the point of realisation.

The growing profile, track record and strong balance sheet will greatly enhance the Group's ability to attract new high-quality opportunities, not just from existing university partners, but also from the extensive network of academics, entrepreneurs, management teams and co-investors within the 'Golden Triangle'. Over the past three years Innovations has demonstrated that it can identify and support some of the brightest prospects from this region and the Group will continue to leverage this geographic focus which is not only where it is based, but also where the management talent, co-investment and cluster effect is greatest.

The Group remains fully committed to its role as the Technology Transfer Office of Imperial College London, which prior to 2010 was the primary source of the investment portfolio and remains a highly productive relationship. A key strategic objective over the next 12 months is to help the College create a thriving entrepreneurial community across all campuses, embracing academic staff, students and alumni and by so doing help create the next generation of companies. 

At the same time, the Group is also seeking to expand its licensing portfolio in order to create a significant and sustainable future revenue stream from milestone payments and royalties.

Current trading and outlook

Whilst there are risks inherent in commercialising intellectual property and growing early-stage businesses, Innovations remains optimistic about the prospects for the Group in the year ahead. 

Innovations has a robust and proven business model, considerable strength in depth in its maturing portfolio and the Directors are confident that the businesses the Group supports are strong, with experienced boards and cutting-edge technologies that address attractive, global markets. 

The Group continues to see opportunities for increased capital deployment within its existing portfolio and has a healthy pipeline of new opportunities to create value over the medium to long-term. The significant additional capital raised by the Group in June 2014 will greatly improve its ability to support the portfolio companies from inception until maturity, and will also enhance its ability to attract new high-quality investment opportunities.

The Board believes the business model and key principles of attracting world class management, building stakes in selected portfolio companies, and having the patience and capital resources to hold for the long-term will generate attractive returns for shareholders.

Operational review

The Group's top 20 investments by value represent a total gross carrying value of £236.9 million (net £234.7 million). Of this total, 56.7% is represented by companies in the therapeutics sector, including the Group's largest asset, Circassia. 22.8% of the Group's top 20 assets are in the engineering and materials sector. The Group's medtech and medical devices companies represent 15.4% of the value of its top 20 companies. The ICT sector is a small and growing part of the Group's top 20 portfolio companies, currently representing 5.1% of the total value.

Although the Group reports on the progress of its holdings by grouping them into these four different sectors, the Board monitors all investments as one portfolio.

Portfolio update: Therapeutics

Innovations continues to prove its ability to identify strong therapeutic assets early in development, build high-quality investment syndicates to provide substantial funding where necessary, and develop those assets into leading businesses. In addition to developments in the advanced therapeutics portfolio such as Circassia, Abzena, Cell Medica and PsiOxus, the Group has also made investments in new therapeutic assets such as Crescendo Biologics, Pulmocide and Puridify, ensuring the pipeline for the future.

During the year, the Group invested £15.9 million in therapeutics companies, including:

· £4.0 million in the IPO of Abzena;

· £1.5 million in MISSION Therapeutics, alongside co-investors Pfizer Venture Investments, Sofinnova Partners, SR One and Roche Venture Fund;

· £1.8 million in Pulmocide, alongside co-investors SV Life Sciences, Fidelity Biosciences and Johnson & Johnson Development Corporation;

· £3.3 million in Crescendo Biologics, alongside co-investors Astellas Venture Management and Sofinnova Partners; and

· £1.9 million in TopiVert, alongside co-investors Neomed, Johnson & Johnson Development Corporation and SV Life Sciences.

Circassia Pharmaceuticals plc

At 31 July 2014 the Group had a 14.0% interest in the issued share capital of Circassia with a fair value of £78.4 million.

Circassia is a clinical-stage specialty biopharmaceutical company focused on the development and commercialisation of a range of novel immunotherapy products for the long-term treatment of common allergies with its SPIRE (synthetic peptide immune-regulatory epitope) therapies. 

The company's proprietary ToleroMune® platform technology is based on technology developed at Imperial College London. Innovations has invested a total of £25.5 million in Circassia, making it the Group's largest ever investment.

Circassia has demonstrated clinical proof-of-concept for each of its four lead product candidates: Cat-SPIRE, HDM-SPIRE, Grass-SPIRE and Ragweed-SPIRE (for the treatment of allergy to cats, house dust mites, grass and ragweed respectively).

Cat-SPIRE is in an ongoing Phase III registration study and Circassia expects to have the results available by the first half of 2016. Subject to the results of this Phase III registration study, Circassia intends to submit applications to the FDA, Health Canada and the European Medicines Agency for marketing approval for Cat-SPIRE in the second half of 2016 and use this data to support applications in other territories.

Circassia has completed a Phase IIb study for each of HDM-SPIRE, Grass-SPIRE and Ragweed-SPIRE and also has a pipeline of early-stage product candidates for the treatment of a number of other allergies.

In September 2013, Circassia announced that its short-course house dust mite allergy treatment had achieved positive results in a Phase II clinical trial. Patients who received four doses of the treatment over a 12-week period showed significantly improved allergy symptoms one year after the start of the trial, when compared with placebo.

In October 2013, the company announced that its grass allergy treatment had achieved positive results during a Phase II clinical trial. Importantly, patients who received a short-course of treatment before the pollen season had significantly improved allergy symptoms at the end of the season, compared with those on placebo.

On 18 March 2014, Circassia was admitted to the Official List and to trading on the Main Market of the London Stock Exchange. The initial public offering (IPO) raised proceeds of over £200 million. The Group did not sell any shares in Circassia during the IPO.

During the six months ended 31 January 2014 a fair value gain of £28.8 million was recognised by Innovations to reflect the anticipated IPO. This was based on the expected valuation and discounted to reflect the illiquidity of the investment at the period end. As at the first day of trading, there was a further value gain of £8.2 million, taking total gains to £37.0 million. Since the date of its listing and as at 31 July 2014, the Group has recognised decreases of £3.8 million resulting in an overall gain for the year of £33.2 million.

PsiOxus Therapeutics Limited

At 31 July 2014 the Group had a 26.7% interest in PsiOxus with a fair value of £7.9 million.

PsiOxus is a biotechnology company that develops novel therapeutics for serious diseases, with a particular focus upon cancer. PsiOxus was formed in 2010 and has raised over £27 million from investors including SR One (the corporate venture capital arm of GlaxoSmithKline), Lundbeckfond Ventures Limited, Invesco Perpetual, Mercia Fund and the Group.

PsiOxus is developing MT-102, a small molecule therapeutic for the treatment of cancer cachexia, a wasting disease associated with significant morbidity and mortality in cancer patients. In November 2013, PsiOxus announced positive data from a Phase II clinical trial of MT-102, which showed that those treated with MT-102 over a 16-week period had a greater weight gain than placebo patients.

PsiOxus also made progress with two on-going clinical trials for its oncolytic vaccine enadenotucirev. These involved patients with metastatic colorectal cancer. The first of these trials, the EVOLVE study, has reported preliminary data that showed evidence of virus replication within tumour sites following intravenous delivery. 

In June, the company presented a further update on the EVOLVE study at the 2014 ASCO annual meeting. The results identified a suitable dose for further investigation in Phase II clinical studies. The company also provided an update on a Mechanism of Action study which confirmed previously published pre-clinical data showing that, unlike other viruses, enadenotucirev is not inactivated by antibodies or other human blood constituents.

On 16 June 2014, PsiOxus initiated first dosing of a patient in the OCTAVE (Ovarian Cancer Treated with Adeno Vaccine Enadenotucirev) study. OCTAVE is a Phase I/II clinical trial to assess the safety and efficacy of enadenotucirev in platinum-resistant ovarian cancer patients at multiple UK cancer centres. The OCTAVE study will examine the safety, tolerability, pharmacokinetics and efficacy of administering the vaccine directly into the abdomen of cancer patients (a process known as intra-peritoneal delivery) where ovarian cancer tends to recur. The Phase I component of the study will determine the dose of enadenotucirev to be used alone or in combination with paclitaxel. The Phase II component will be an open label (both the researchers and participants know which treatment is being administered) dose expansion of the combination regimen of enadenotucirev and paclitaxel to determine whether this combination has a risk-benefit profile that supports further investigation in the treatment of patients with platinum-resistant epithelial ovarian cancer.

In October 2013, PsiOxus was named the most innovative biotech SME by EuropaBio. PsiOxus received the award in recognition of its innovative approach to developing novel cancer therapeutics.

The Group believes the current fair value of PsiOxus reflects progress within the company.

Abzena plc

At 31 July 2014 the Group had a 23.6% interest in the issued share capital of Abzena (formerly known as PolyTherics) with a fair value of £18.0 million.

Abzena is focused on providing proprietary technologies and value-added services to enable the development of better biopharmaceuticals. The company has built a global customer base over the past decade, including the majority of the top 20 biopharmaceutical companies as well as large and small biotech companies and academic groups.

Abzena comprises two wholly owned subsidiary businesses - PolyTherics and Antitope. PolyTherics specialises in proprietary site-specific conjugation technologies for antibody drug conjugate development and solutions for optimisation of the therapeutic properties of biopharmaceuticals. Antitope provides immunogenicity assessment, protein engineering to create humanised antibodies and deimmunised therapeutic proteins, and cell line development for manufacture.

Abzena signed multiple service agreements, research collaborations and commercialisation deals during the year. Among these, it announced deals with TUBE Pharma to combine its linker technology with TUBE's novel cytotoxic drugs to produce reagents to create more stable and homogenous antibody-drug conjugates (ADCs) and with Annexon, to generate novel therapeutic antibodies for neurodegenerative diseases. The antibodies will be produced using Antitope's Composite Human Antibody™ technology so will be fully human with a consequent low risk of producing immunogenicity in the clinic. Annexon plans to take the antibody into preclinical trials. Currently, six antibodies that have been created by Antitope for its customers using the Composite Human Antibody™ platform are in clinical development and have the potential to yield future royalties to Abzena. 

During the period, Abzena also extended its collaboration with MacroGenics to produce novel ADCs; and announced new collaborations with Alpha Cancer Technologies, to produce novel drug conjugates targeting cancer; with Baylor Institute for Immunology Research, to produce a manufacturing cell line for novel therapeutic dendritic-cell-targeting vaccine; and with Dutch pharma company Synthon to assess immunogenicity of the candidate antibodies in their ADC programme.

On 7 July 2014, Abzena raised £20.0 million in conjunction with its admission to AIM with an initial market capitalisation of £77.9m. As part of the placing, the Group purchased 5,000,000 shares at an aggregate cost of £4.0 million.

As at 31 July 2014 the net value of this quoted stock was £18.0 million. This includes a £2.8 million uplift which has arisen since the date of the Admission of Abzena's shares to trading on the London Stock Exchange. 

Cell Medica Limited

At 31 July 2014 the Group had a 25.2% interest in Cell Medica with a fair value of £8.0 million.

Cell Medica is developing T-cell immunotherapy for the treatment of virally-associated cancer and for the treatment of viral infection post bone marrow transplantation.

Cell Medica's products include: Cytorex EBV, for the treatment of cancers associated with the oncogenic Epstein-Barr virus (EBV); and two cell therapies for the control of specific viral infections following bone marrow (hematopoietic stem cell) transplant: Cytovir CMV, for the prevention of cytomegalovirus infection and Cytovir ADV, for prevention of adenovirus infections.

Cell Medica's Cytorex EBV product, which focuses on Epstein-Barr virus-related cancers, has the potential to access a significant market. This is because approximately 15 to 20% of lymphomas, which are the fifth most common cancer in the US and EU, may be related to Epstein-Barr virus infection.

In September 2013, the company announced that it had acquired a manufacturing facility in Berlin-Buch (Germany). The facility has been opened with the intention of focusing on the manufacture of Cytovir CMV.

In January 2014, Cell Medica received orphan drug designation in the European Union for CytovirTM ADV. Orphan drug designation provides eligibility for protocol assistance, possible exemptions or reductions in regulatory fees during development, and ten years of market exclusivity from product launch in the European Union. The Directors believe that it should therefore provide an important competitive advantage to support Cell Medica's commercialisation strategy.

On 24 September 2014, Cell Medica announced the appointment of Andrea Ponti as a non-executive director. Former Co-Head of Global Healthcare Investment Banking at J.P. Morgan, Andrea will provide the Cell Medica Board with an exceptional understanding of the strategic and financial drivers for success in the healthcare industry.

During the year to 31 July 2014, the Group invested £1.5 million. The investment did not result in a fair value gain or loss. The Group believes the current valuation reflects progress within the company.

Autifony Therapeutics Limited

At 31 July 2014 the Group had a 25.7% interest in Autifony Therapeutics with a fair value of £6.1 million.

Autifony is developing pharmaceuticals that target voltage-gated ion channels, the modulation of which has the potential to treat both hearing loss and tinnitus. The company, which works closely with the University College London Ear Institute, was founded in 2011, as a spin-out from GlaxoSmithKline.

Autifony's lead programme AUT00063 is a novel, first-in-class Kv3 potassium channel modulator in development for the treatment of age-related hearing loss. The product has recently completed a Phase I study, conducted in the UK, which investigated the safety, tolerability and pharmacokinetics of orally administered single and multiple dose regimens of AUT00063 in over 60 healthy volunteers.

On 4 June 2014, Autifony announced that it had been awarded funding of £2.2 million, in the form of a grant from the Technology Strategy Board (now called Innovate UK) which will enable the company to investigate the potential of AUT00063 for the treatment of tinnitus. 

A fair value gain of £1.0 million was recognised by the Group to reflect completion of an investment round at a higher valuation.

TopiVert Limited

At 31 July 2014 the Group had a 33.1% interest in TopiVert with a fair value of £6.0 million.

TopiVert is developing topical anti-inflammatories for the treatment of diseases of the gastrointestinal tract and the eye, and operates from the Imperial Incubator.

In December 2011, the Group and SV Life Sciences committed to invest, in aggregate, £8.0 million in the new start-up company. TopiVert has licensed NSKI (narrow spectrum kinase inhibitor) and related intellectual property from RespiVert Limited, a former Group portfolio company, which was acquired by Janssen Biotech, Inc. (formerly known as Centocor Ortho Biotech Inc. and part of the Johnson & Johnson group of companies) in 2010. Both participants in this funding round were also investors in RespiVert Limited.

In December 2013, TopiVert raised a further £17.0 million in a funding round involving new investors Johnson & Johnson Development Corporation and Neomed Management, together with existing investors SV Life Sciences and the Group, with the Group committing to invest £4.5 million. This funding is expected to enable TopiVert to achieve clinical proof-of-concept in one indication.

During the year the Group invested £1.9 million of the amount committed. The investment did not result in a fair value gain or loss.

MISSION Therapeutics Limited

At 31 July 2014 the Group had a 20.0% interest in MISSION Therapeutics with a fair value of £3.0 million.

MISSION is based at the Babraham Research Campus, Cambridge, and is seeking to leverage the cell biology research on DNA repair from the Gurdon Institute, University of Cambridge, in order to develop new cancer therapeutics. MISSION has identified differences in the DNA damage response pathways between healthy cells and cancer cells and its research indicates that the cancer cells' genetic backgrounds, which result in them being more vulnerable to DNA repair inhibitors than healthy cells (a phenomenon known as "synthetic lethality"), may be exploited to create novel anti-cancer therapeutics.

In November 2013, MISSION secured a further £20.0 million in a second funding round that saw Pfizer Ventures become a new investor in MISSION, with the Group committing to invest £4.5 million. The proceeds raised from this further funding round are expected to enable MISSION to advance its lead programmes through preclinical development.

During the year the Group invested £1.5 million of the amount committed. The higher value of this round resulted in an uplift in fair value of £0.1 million.

New therapeutics companies

Crescendo Biologics Limited

At 31 July 2014 the Group had a 17.4% interest Crescendo Biologics with a fair value of £3.3 million.

Crescendo develops novel medicines based on innovative transgenic antibody fragment VH technology developed from intellectual property arising from the Babraham Institute, Cambridge.

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. This makes them highly attractive therapeutic agents with significant advantages in the development of products for local and topical delivery, pure antagonists and bi- or multi-specifics.

On 17 December 2013, the Group led a £17.5 million funding round for the company, committing £6.5 million alongside Astellas Venture Management and Sofinnova Partners. In April 2014, Crescendo announced a second closing of this round, bringing total funds raised to £19.5 million.

During the year the Group invested £3.3 million of the amount committed. The investment did not result in a fair value gain or loss as this was the Group's first investment into the company.

Pulmocide Limited

At 31 July 2014 the Group had a 25.0% interest in Pulmocide with a fair value of £1.8 million.

Pulmocide is focused on the discovery and development of a new generation of inhaled medicines for the treatment of serious viral and fungal infections of the respiratory tract.

In November 2013, Pulmocide raised £17.0 million in funding from a syndicate of leading venture investors which included SV Life Sciences, Fidelity Biosciences, Johnson & Johnson Development Corporation and the Group. The Group committed £4.25 million as part of this funding round.

During the year the Group invested £1.8 million of the amount committed. The investment did not result in a fair value gain or loss as this was the Group's first investment into the company.

Puridify

At 31 July 2014 the Group had a 16.0% interest in the issued share capital of Puridify with such interest having a fair value of £0.2 million.

On 27 May 2014, Innovations and S.R.One (GlaxoSmithKline's venture capital fund) announced that they had led, alongside co-investor UCL Business PLC (UCLB), an £850,000 seed financing for Puridify, a newly formed company providing purification solutions for biotherapeutic manufacturing.

Puridify is a spin-out from the Advanced Centre for Biochemical Engineering at University College London. The company is developing a proprietary nanofibre technology to improve the efficiency of purification in biopharmaceutical production, allowing more drug product to be produced in a shorter amount of time and at lower cost. Puridify's technology, FibroSelect is a novel chromatography reagent, which offers significant advantages across key performance attributes that allow chromatography associated costs to be reduced by up to 90%.

Portfolio update: Medtech and Medical Devices

Strong progress has been made by a number of the Group's holdings in this sector, most notably with the IPO of Oxford Immunotec on NASDAQ and admission of IXICO to AIM. Veryan is continuing its progress towards commercialisation following publication in June 2014 of the full two-year data for its Phase II trials.

Investments during the year

The Group invested £2.8 million in medtech and medical devices companies, including £1.8 million in Veryan and £0.2 million in IXICO as part of its reverse takeover process.

Veryan Holdings Limited

At 31 July 2014 the Group had a 44.0% interest in Veryan with such a fair value of £18.1 million.

Veryan is a specialist in vascular disease that has developed and patented a three-dimensional stent technology, BioMimics 3D™, the aim of which is to improve upon the biomechanical and flow characteristics of straight tubular stents, particularly those used in arteries of the leg.

Existing stents indicated for placement in the leg arteries have a straight tubular design that tends to straighten the natural 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. In addition, fracture of straight nitinol stents has been reported in femoropopliteal applications.

In November 2012, Veryan gained a CE Mark (the mark indicating compliance with EU legislation and thereby enabling sales of its BioMimics 3D™ stent within the European Economic Area (EEA)), since which time it has been gathering clinical data about the product's performance in patients.

In October 2013, data presented at the VIVA13 conference in Las Vegas, US, showed the BioMimics 3D™ stent has demonstrated safety and promising clinical performance at 12 months in the treatment of patients with peripheral arterial disease. This data also showed that the Veryan stent outperformed the control stent in both patency (the extent to which the vessel around the stent remains open) and in freedom from clinically driven target lesion revascularisation.

On 30 May 2014, Veryan published the full two-year data from the Mimics randomised controlled study of its BioMimics 3D™ Stent System at the 15th Annual New Cardiovascular Horizons (NCVH) Conference in New Orleans. The results confirmed that BioMimics 3D™ provides a significant improvement in long-term patency compared to a straight nitinol control stent in patients undergoing femoropopliteal artery intervention.

The results from this trial provided the first independent evaluation of Veryan's biomimetic 3D helical stent technology. In the light of these results, the Group is in the process of revisiting the strategic options for commercialising Veryan's novel 3D helical stents, and is minded to consider strategic partnerships for sales outside of the US, whilst raising additional investment to take the product through pre-market approval (PMA) in the US.

During the year the Group invested £1.8 million at the last round price. The investment did not result in a fair value gain or loss.

Oxford Immunotec plc

At 31 Juy 2014 the Group had a 4.7% interest in the issued share capital of Oxford Immunotec with a fair value of £7.8 million.

Oxford Immunotec's lead product is the T-SPOT®TB test, which is a diagnostic test that can identify patients who are suffering from latent tuberculosis infection. The test has regulatory approval in the US, China, Europe and many other significant jurisdictions and is approved for sale in more than 40 countries. 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.

Oxford Immunotec has an extensive presence in the US, where it has received pre-market approval from the US Food and Drug Administration, and has established reimbursement for its products. It maintains a laboratory in Memphis, Tennessee, and the T-SPOT®TB test has an extensive market in the US, where members of certain professions must undergo mandatory annual testing for tuberculosis.

In November 2013, the company undertook an initial public offering and raised US$62.8 million (£39.0 million) after expenses. Oxford Immunotec's shares are listed on NASDAQ. The Group did not sell any shares in Oxford Immunotec believing that there is further upside to be captured from the company's development. For the six months ended 30 June 2014, the company's revenue was US$24 million, compared to US$17.8 million for the same period of 2013.

On 5 August 2014, the company broadened its portfolio through the acquisition of the assets of Boulder Diagnostics Inc., a private diagnostics company based in Colorado, USA that is developing immunology-based assays for rheumatology and infectious disease.

At 31 July 2014 the net fair value was £7.8 million which includes a £0.3 million uplift which has arisen since the date of the admission of the company to NASDAQ. 

IXICO plc

At 31 July 2014 the Group had a 11.5% interest in the issued share capital of IXICO with a fair value of £0.7 million.

IXICO is a leading provider of imaging solutions for clinical trials, research studies and diagnostics in the pharmaceutical and medical devices industries. The company has developed a range of innovative imaging technologies for use by those researching, diagnosing and treating serious diseases, with a particular focus on dementia.

The company was admitted to trading on AIM in a reverse takeover in which IXICO was acquired by Phytopharm plc, and the enlarged Phytopharm group was renamed IXICO plc. The Group purchased a small number of shares during the transaction.

In December 2013, IXICO launched Assessa, a decision-support tool for diagnosing dementia. Assessa is designed to help healthcare professionals make fast, accurate diagnosis of dementia by providing clinically actionable information from brain scans. It does this by making precise measurements of the brain and comparing it with a reference database of normal elderly people and dementia patients of the same age. IXICO is collaborating with InHealth to provide access to the product in the UK and Ireland. Also in December, the company signed a memorandum of understanding with Beijing Union Medical and Pharmaceutical General Corporation during the UK Prime Minister's trade mission to China.

In June 2014, IXICO announced its participation in the Medical Research Council's (MRC) launch of the UK Dementia Research Platform (UKDP), a £16 million public-private partnership intended to accelerate research into dementia. IXICO will act as the MRC's imaging partner on the project.

At 31 July 2014 the net fair value of this quoted stock was £0.7 million which includes a £0.5 million fall in value which has arisen since the date of the admission of the company to the AIM.

Abingdon Health

At 31 July 2014 the Group had a 35.5% interest in Abingdon Health with a fair value of £3.9 million.

Abingdon Health is a specialist medical diagnostics company based in Oxford with facilities in London, Birmingham and York. Abingdon's mission is to create a global, diversified healthcare business through both selective acquisition and the development of patent-protected, clinically relevant diagnostic products. During the year, the company saw progress across a number of its subsidiary companies.

In August 2013, Serascience gained a CE Mark for Seralite®, the world's first rapid diagnostic device for diagnosis and monitoring of multiple myeloma. Multiple myeloma is a common blood cancer for which rapid diagnosis plays a key role in improving patient outcomes by removing existing delays in diagnosis, identifying patient relapse earlier, and enabling quicker decisions by clinicians.

Two group subsidiary companies received funding from the Technology Strategy Board (Innovate UK) in September 2013. Linear Diagnostics, which is developing a technology platform based on linear dichroism, and Molecular Vision, an optical detection company with platform technology based on the integration of organic light emitting diodes (OLEDs) and organic photo detectors (OPD), which received the grant to develop a diagnostic test to help prevent the spread of crop disease.

AltaBioscience continues to expand its analytical services by introducing circular dichroism (CD) analysis and analytical ultra-centrifugation (AUC) analysis, while Forsite Diagnostics has seen an increase in its contract manufacturing business with a number of projects moving from R&D into manufacturing.

During the year the Group invested £0.2 million. The investment did not result in a fair value gain or loss. The Group believes the current valuation reflects progress within the company.

Post year-end: Inivata

On 23 September 2014 Innovations announced that it had led a £4m funding round for Inivata, a new spin-out from Cancer Research UK. Inivata is focused on harnessing the potential of circulating tumour DNA (ctDNA) analysis to improve cancer testing and treatment through simple blood tests.

Inivata's goal is to provide physicians with the information they need to provide the best outcomes for patients and effective design for clinical trials. Co-investors in Inivata include Cambridge Innovation Capital and Johnson & Johnson Development Corporation

Portfolio update: Engineering and Materials

A number of the Group's holdings in this sector have an interest in UK manufacturing, with Nexeon and Plaxica both commissioning plants in the UK.

Investments during the year

The Group invested £7.8 million in engineering and materials companies, including:

· £3.9 million in Plaxica alongside co-investors NESTA and Invesco Perpetual;

· £2.9 million in Econic Technologies alongside Jetstream Capital;

· £0.6 million in seed funding for Oxford Biotrans; and

· £0.3 million in AQDOT alongside co-investors Cambridge Enterprise Limited, Parkwalk Advisors and Providence Investment Company.

Nexeon Limited

At 31 July 2014 the Group had a 40.0% interest in Nexeon with a fair value of £34.1 million.

Nexeon is a battery materials company that is developing silicon anodes for the next generation of lithium-ion rechargeable batteries. Nexeon is developing a range of silicon anode materials that enable increased capacity without compromising lithium-ion battery cycle-life, providing the potential for lighter batteries with more power and a longer lifetime between charges.

The company has a broad patent portfolio relating to high-aspect ratio silicon materials and the use of these materials in lithium-ion batteries. Nexeon has raised a total of £55.0 million in investment from a range of investors including Invesco Perpetual and the Group.

Nexeon has a strategic partnership with Wacker Chemie, through which the German chemicals company is sharing its expertise in silicon processing. In August 2013, Nexeon appointed Tsuyonobu Hatazawa, ex-Head of Advanced Battery Research at Sony, as its Chief Technology Officer.

Nexeon is seeking to optimise its silicon materials for applications demanded by the battery industry. The Directors believe that the industry has tended towards producing blended carbon/silicon anodes, rather than switching straight to pure or high-load silicon anodes. Nexeon's first generation of anodes were not optimised to work in a silicon/carbon blend and as a result, Nexeon is undertaking further optimisation work so that it can meet the needs of this blended design.

On 24 April 2014, Nexeon announced that it had 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 addition to these manufacturing capabilities, the new facility includes integrated laboratories for process development and material characterisation.

Despite having to complete further optimisation work, the company has made progress in a number of other areas such as the completion and commissioning of its plant.

The Group believes the current fair value of Nexeon reflects, on balance, progress within the company.

Plaxica Limited

At 31 July 2014 the Group had a 45.7% interest in Plaxica with a fair value of £9.4 million.

Plaxica's Versalac technology enables the production of low-cost lactic acid, a platform chemical for the production of a variety of bio-chemical products including polylactic acid. Traditionally lactic acid has been produced through the fermentation of food grade sugars, an expensive process that requires high-grade raw materials. As Versalac is a chemical process, it is tolerant to chemical impurities and therefore a wide range of feedstock can be used including waste from the forestry and agriculture industries. This results in production of a high-purity lactic acid with a very low variable cost base. Plaxica has developed strong relationships with both upstream feedstock owners such as the pulp and paper industry and with leading players in the downstream lactic acid and derivatives market.

On 10 September 2013, Plaxica completed a £8.0 million fundraising round, with investment from the Group, Invesco Perpetual and NESTA. The Group committed £3.9 million as part of the round. The proceeds from this fundraising round (the third fundraising round undertaken by Plaxica) are expected to allow Plaxica to construct its second lactic acid demonstration plant and to progress a number of important partnership and licensing discussions.

Also during the year, Plaxica was highly commended by the Institute of Chemical Engineers in the Engineers' Chemical Engineering Project of the Year 2013 during the prestigious IChemE awards.

During the year the Group invested £3.9 million. The investment did not result in a fair value gain or loss. The Group believes the current valuation reflects progress within the company.

Econic Technologies Limited

At 31 July 2014 the Group had a 56.1% interest in Econic with a fair value of £6.1 million.

Econic is developing new catalysts to facilitate manufacturing polymers from CO2. The use of CO2 to replace conventional petrochemical-based feedstocks is expected to enable a cost reduction for certain polymer manufacturers. For example, Econic's polycarbonates replace between 30-50% of traditional petrochemical feedstock with lower cost CO2, resulting in 30-40% cost reductions. The resulting polycarbonates can be used in a variety of applications including the production of polyurethane, which includes products such as foams, plastics and polyesters.

In December 2013, Econic received £5.1 million in investments from the Group and a new investor, Jetstream Capital. Funding from this round will be used to further the testing and scale-up of Econic's catalyst technology.

In February 2014, Econic won grant funding from the Technology Strategy Board (Innovate UK) for a collaborative project with Imperial College London to develop novel catalysts that enable polyols to be manufactured from CO2. Polyols are precursor materials that can be used in the production of high value materials such as polycarbonates.

In July 2014, the company appointed Rowena Sellens as CEO. She joined Econic from Lucite International where she was firstly Director of Global Research, moving to Commercial Director and then latterly General Manager, EMEA Materials. Prior to Lucite, she held a variety of senior roles at ICI. Chairman David Morgan, a former executive director with Johnson Matthey who was previously acting as CEO for Econic, remains involved as the non-executive chairman.

The Group does not control Econic (control as defined by IAS 27), and therefore does not consolidate it. The Group does not have, directly or indirectly, more than half of the voting power of Econic nor does it have power over more than half of the voting rights by virtue of any agreement with any other investor.

During the year the Group invested £2.9 million of the amount committed. The value of this investment round resulted in a £1.7 million fair value gain relating to the existing shareholding.

AQDOT Limited

At 31 July 2014 the Group had a 19.7% interest of AQDOT with a fair value of £0.4 million.

AQDOT is a University of Cambridge spin-out that has developed a proprietary chemical encapsulation technology that enables the production of small droplets that can carry 'active materials' such as cleaning enzymes used in domestic detergents, or agrochemicals for crop treatments. In November 2013, Innovations led a £1.0 million funding round alongside Cambridge Enterprise Limited, Parkwalk Advisors and Providence Investment Company.

During the year the Group invested £0.3 million. The investment did not result in a fair value gain or loss.

New engineering and materials companies

Oxford Biotrans

At 31 July 2014 the Group had a 35.3% interest in of Oxford Biotrans with a fair value of £0.6 million.

Oxford Biotrans is a spin-out from the University of Oxford's technology transfer company, ISIS Innovation Ltd, and was added to the portfolio in 2013. Innovations made a seed investment of £0.6 million in the company, in a round alongside Oxford Spin-out Equity Management. IP Group plc is also a shareholder in the company.

Oxford Biotrans is developing proprietary enzyme technology to convert low-cost feedstocks into high-value chemical compounds. The company's technology enables novel routes of production for these high value chemicals, in a process that requires little energy and generates very small amounts of waste in contrast to conventional chemical routes to these products.

During the year the Group invested £0.6 million. The investment did not result in a fair value gain or loss as this was the Group's first investment into the company.

Sub-Salt Solutions

At 31 July 2014, the Group had a 37.9% interest in the issued share capital of Sub-Salt Solutions ("Sub-Salt") with such interest having a fair value of £0.3 million.

Sub-Salt is a start-up company focused on developing novel seismic imaging techniques for the oil and gas industries. The company is developing techniques that will deliver substantial improvements in the quality of seismic imagery in areas affected by salt. Higher quality seismic imaging in such areas will reduce exploration risk, improve appraisal of oil and gas deposits, and enhance recovery.

The company is founded on the work of Prof. Mike Warner and his team (Department of Earth Science & Engineering). The business was spun out of Imperial College London and co-funded by Innovations and Intercontinental Ventures. The Group invested £0.3 million in March 2014.

Portfolio update: ICT & Digital

The ICT sector is a growing part of the Group's asset portfolio and a key focus for the future. Our investment approach tends to be on leveraging our university partners' strengths in computer engineering rather than on social or digital media, but we are keeping a watchful eye on new initiatives in these rapidly emerging subsectors. 

During the year the Group invested in JustYoyo, a customer loyalty and mobile payments business, and also successfully completed the trade sale of one of its software companies, realising a 3x return on an investment made in 2012.

Investments during the year

The Group invested £6.4 million in ICT and digital companies, including:

· £2.2 million in Cortexica Vision Systems;

· £1.7 million in FeatureSpace as part of a £3.0 million funding round alongside co-investors NESTA and a number of members of the Cambridge Angels group; and

· £2.0 million in JustYoyo as part of a £2.8 million funding round for Yoyo alongside Firestartr and a number of angel investors.

Cortexica Vision Systems Limited

At 31 July 2014 the Group had a 30.0% interest in Cortexica with a fair value of £5.4 million.

Cortexica is a London-based leading provider of cloud-based image recognition systems and mobile visual search technology. The company has developed image recognition, visual search and categorisation software for online businesses based on original research from Imperial College London. Cortexica's leading product is Find Similar™ for Fashion. Cortexica's FindSimilar™ technology uses algorithms that mimic the way the human brain recognises images and objects, leading to over 95% first-time positive matches - higher than any competing technology.

FindSimilar™ returns visually similar items from an online database or inventory when users take a photograph of a piece of clothing or accessory with their mobile device. Cortexica's business model is to provide its FindSimilar™ technology on a software-as-a-service (SaaS) basis to large fashion retailers or fashion retail aggregators, who will then deploy the technology to their customers. Early adopters include online retailers Zalando, ShopStyle, Style Thief and Grabble. Cortexica has signed up ten new customers in the past six months.

On 12 June 2014, the Group announced that it had invested a further £1.5 million in Cortexica. The Group first invested in the company in 2009 and holds a 30%. Following this new investment, the Group will hold a 73.4% equity stake (on a fully diluted basis) in the issued share capital following conversion of loan stock. The Group does not control Cortexica (control as defined by IAS 27), and therefore does not consolidate it. The Group does not have, directly or indirectly, more than half of the voting power of Cortexica nor does it have power over more than half of the voting rights by virtue of any agreement with any other investor.

To date, Cortexica has signed several revenue-generating deals for its technology. However, in spite of this growth in customers and an investment by the Group of £2.2 million in the year, due to delays in hitting anticipated milestones there has been a fair value impairment of £3.9 million.

Featurespace

At 31 July 2014 the Group had a 27.7% interest in Featurespace with a fair value of £2.6 million.

Featurespace, is a predictive analytics company, pioneering a new form of data analysis called "Adaptive Behavioural Analytics" which has the ability to predict what an individual or group will do next, based on an understanding of normal patterns of behaviour and by doing so deliver insights that can help to detect and prevent fraud, and prevent customer churn.

Featurespace's Fraud Manager helps companies to spot new types of fraud as they occur, in real time, thereby allowing organisations to reduce risk and operational costs while improving the customer experience. By having a real-time understanding of normal or expected behaviour, it is able to detect unexpected transactions, regardless of whether that type of fraud has been seen before, or is a new form of fraudulent activity. It can also reduce the number of false positives by 60-80%, allowing companies to accept more transactions and increase revenue.

Featurespace's Churn Protector software uses real-time analysis of customer data for the early detection of behaviour symptomatic of churning, thereby helping organisations to quickly take corrective action. 

The company made good customer progress during the year, signing partnerships for its fraud detection product with Zapp/Vocalink (leading provider of payment systems), Callcredit Information Group (experts in consumer information management) and Betfair (online gaming).

On 10 June 2014, Innovations announced that the Group had invested £1.7 million in FeatureSpace as part of a £3.0 million funding round alongside co-investors NESTA and a number of members of the Cambridge Angels group. The higher value of this investment round resulted in a £0.2 million fair value gain on the existing stake.

New ICT and Digital companies

JustYoyo

The Group had a 36.2% interest in Yoyo with a fair value of £2.9 million.

Yoyo was founded in 2013 at Innovations by a team of highly experienced entrepreneurs. 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 via 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.

The app was launched in early 2014 across 32 food and drink outlets at Imperial College London. Yoyo has also launched the app across the University of Greenwich, the University of Essex and the University of Westminster and is in the process of rolling the app out at a number of other universities and high-street retailers.

On 22 May 2014, the Group completed a £2.9 million seed investment round in Yoyo. This completed the second tranche of the round, with the first investment having been made in August 2013. The Group invested a total of £2.0 million in the round, with the balance made up by Firestartr and a number of angel investors.

The proceeds of the May 2014 funding round will be used primarily to increase the number of retailers using Yoyo in-store, with a focus initially on university campuses and high-street chains. Yoyo also intends to expand its partnership programme with point-of-sale software vendors and leading catering companies.

During the year the Group invested a total of £2.0 million. The investment resulted in a £0.9 million uplift, reflecting the price of the round on the existing stake.

Financial Review

The financial results for the year to 31 July 2014 reflect a good year for the business, both strategically and operationally. The Group generated good underlying growth in its investment portfolio, reported a substantial profit and significantly strengthened its balance sheet through a placing which raised £150.0 million (before issue costs).

Profit after tax for the Group for the year to 31 July 2014 was £27.4 million (2013: £3.8 million).

This result includes a £40.5 million net gain in the portfolio (2013: £10.8 million). Net assets at the year-end of £404.8 million (2013: £230.5 million) increased by £174.3 million from 31 July 2013. The increase reflects the proceeds of the £150 million placing (before issue costs) and the profit for the year.

Cash and short-term liquidity investments increased significantly to £176.5 million (2013: £65.6 million) primarily following receipt of the proceeds of the placing offset by investments and operating costs.

The Group's rate of investment in its portfolio companies (including both public and private companies) was £32.8 million across 25 companies (2013: £22.2 million across 28 companies). This takes the total invested since the IPO in July 2006 to £176.0 million and the total raised by the Group's portfolio companies to £822.5 million.

Revenue

Total revenues rose by 9% to £3.6 million (2013: £3.3 million). The main driver of the increase in revenue is a rise in royalty income of £0.2 million, which includes royalties of £0.1 million arising from a July 2010 licence with Volcano Corporation and a £0.1m increase in corporate finance fees as a result of new deals being completed in the year.

The split of revenue is as follows: licence and royalty income was £1.6 million (2013: £1.4 million), revenue from services was £1.6 million (2013: £1.6 million) and corporate finance fees were £0.4 million (2013: £0.3 million).

Cost of sales

Cost of sales, which mainly arises from the revenue-sharing arrangement with Imperial College London, increased to £1.0 million (2013: £0.8 million) primarily reflecting the increased licence and royalty income.

Change in fair value of investments reflecting investment portfolio performance.

Total net fair value gains were £40.5 million (2013: £10.8 million) and reflect gains in the fair value of the Group's holdings of £45.3 million (2013: £13.2 million) across the portfolio offset by impairments and losses of £4.8 million (2013: £2.4 million).

Total fair value gains were £45.3 million (2013: £13.2 million). This includes a significant gain on Circassia of £33.2 million.

£2.8 million of the gain relates to Abzena (previously named Polytherics) which completed an IPO in June 2014. The gain reflects the market price of this quoted stock at the end of July 2014.

A further £2.2 million of the gain relates to a mechanistic movement in the Cambridge Communications Systems holding following signing of term sheets in the next investment round.

Additional gains of £2.6 million arose following the sale of a portfolio company during the year and other significant gains include Econic of £1.7 million and Autifony of £1.0 million reflecting mechanistic movements based on the value of new investment rounds.

The balance of the gain reflects smaller mechanistic uplifts.

The above fair value gains were offset by impairments and losses of £4.8 million (2013: 2.4 million) within the portfolio. These include a £3.9 million write-down on the value of Cortexica in the first half of the year due to delays in hitting anticipated milestones. It is pleasing that Cortexica has however since started to demonstrate some healthy sales activity from its FindSimilar™ product in the second half of the year.

Other losses include £0.5 million relating to IXICO's quoted stock and £0.4 million of other smaller losses.

Carried Interest Plan

The Group's carried interest plan, which is a long-term employee incentive scheme, generated an accounting charge of £4.8 million (2013: a release of £2.4 million). This reflects the continuing healthy progress in the portfolio companies. There is no cash payment due to members of the scheme until the Group has made substantial future cash realisations.

Other administrative expenses

Other administrative expenses increased by 15.8% to £11.0 million as expected (2013: £9.5 million). The increase reflects higher personnel costs and some costs associated with the placing. Most of the placing costs have been charged to equity.

Within this overall figure for administrative expenses, are costs of £1.4 million (2013: £1.2 million) incurred on filing patents and protecting the 'as yet' unexploited intellectual property emanating from Imperial College London. The increase reflects the desire of the Group to protect its intellectual property assets.

Finance costs

Finance costs were £0.5 million for the year to 31 July 2014 (2013: nil) and relate to the £15.0 million first tranche of the EIB loan which was drawn down during July 2013.

Finance income

Finance income in the year to 31 July 2014 was £0.6 million (2013: £1.1 million) mainly attributable to the lower cash balance during the year (prior to receipt of the equity raise proceeds).

Earnings per share

Basic earnings per share was 26.8p (2013: 4.6p).

Financial Position and Resources

Net assets at the year-end of £404.8 million (2013: £230.5m) increased by £174.3 million from 31 July 2013. The increase reflects the proceeds of the £150.0 million equity raise and the profit for the year.

During the year the Group's investment portfolio grew to £257.7 million spread across 95 companies (2013: £188.2 million spread across 92 companies) and portfolio companies raised £315.4 million in cash (2013: £61.4 million) from all sources of investment.

At 31 July 2014, the net value of the Group's portfolio rose to £252.0 million (2013: £182.6 million). The increase represents £32.8 million (2013: £22.2 million) of investments to fund 25 (2013: 28) companies in its portfolio, net disposals of £3.95 million and fair value gains of £40.5 million (2013: £10.8 million) which have been analysed below.

At 31 July 2014 the Group has invested a total of £155.9 million in the portfolio of currently active technology companies, £142.8 million invested in the top 20 companies and £13.1 million in the remaining companies.

The table below separates out the top 20 portfolio companies, by value, to illustrate the relative carrying value in the Group's investments in such companies and the movement in value from 31 July 2013 to 31 July 2014.

All carrying values reflect the net fair value of the investment being the gross value of the holding less the attributable revenue share 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 £16.5 million (2013: £14.7 million).

 Table of net fair value movements

(1) Previously called PolyTherics.

(2) Currently active companies.

(3) The Group's investment in Molecular Vision is included within Abingdon Health investment following its acquisition of 50% of the Molecular Vision equity.

(4) The Group does not control these companies (control as defined by IAS 27), 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.

(1) Primarily reflects the proceeds of a £150.0 million equity raise (before 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.

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-share obligations (including those due under the TPA and on HEIF and UCSF investments) rose slightly to £5.8 million (2013: £5.7 million).

Going concern

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Key Performance Indicators

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

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

How measured: 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).

Progress: The Group has demonstrated continually growth in the value of its portfolio through fair value gains and investment activity.

£252.0 million absolute value

+ 38.0 %

£40.5 million net gain

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.

How measured: 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.

Progress: The Group has demonstrated a steady rate of investment and the rate of investment from external sources has continued to increase.

£315.4 million total cash raised by portfolio

£32.8 million invested by the Group

This KPI monitors the strategic objective of leveraging outstanding academic research.

How measured:

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

Progress: The Group has continued to select a range of technology opportunities from the UKs four leading research-intensive universities and provided ongoing support.

13 new companies

Six accelerated-growth companies, and seven lighter-touch companies.

4. Potential value available from the existing portfolio

This KPI monitor's value creation which will then flow through to realisations and provide funds for future investments.

How measured: A measure of the net increase in value in the accelerated-growth portfolio calculated by the increases in the portfolio value during the year less investments made.

Progress: The potential value available from the accelerated-growth Portfolio has significantly increased on the prior year. The net increase in the accelerated-growth portfolio is £38.3m.

This KPI monitors the Group's strategy to grow its most valuable companies bigger in order to optimise value.

How measured: Measured in terms of cash returned to sustain future investments.

Progress: Net realisations of £4.0 million (2013: £0.2 million) was a substantial increase on prior year.

 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

How measured: Measured by the number of opportunities flowing through the pipeline from Imperial College London which is demonstrated by the number of inventions disclosed, patents filed and proof of concept projects undertaken at Imperial College London and its associated NHS Trusts.

Progress: The flow of Opportunities has steadily increased through the number of inventions disclosed and the percentage outcome of patents filed.

402 inventions disclosures

57 patents filed

Invention disclosures are ideas that are recorded and assessed as having commercial merit on which the technology transfer team conducts initial work. 

Of the 402 invention disclosures in the year ended 31 July 2014, 323 came from Imperial College London and the balance came from external sources. The Directors continue to expect the Group's intellectual property pipeline to remain steady.

Patents filed

The Group's patent portfolio provides the basis for licensing and/or for the creation of portfolio companies. However, models evolve allowing for the exploitation of technologies not underpinned by patents - for example software, which is covered by copyright. During the year, the Group filed 57 new patent applications (2013: 43 patent applications).

New deals in the year

An indicator of growth in the portfolio of IP transfer agreements (e.g. licences, assignments, options).

At 31 July 2014, the Group had a portfolio of 175 agreements under which it may receive income from the licensing or transfer of intellectual property ("IP Agreements"). In the financial year ended 31 July 2014, the Group entered into 27 new IP agreements and generated £1.6 million in revenue from licensing and royalty activities.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 July 2014

CONSOLIDATED BALANCE SHEET

As at 31 July 2014

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 July 2014

1 These transaction costs were deducted from share premium

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to equity holders of the Group

Treasury shares with a cost of £2,564,009 (2013: £2,564,009) have been netted against retained earnings representing shares held by the Employee Benefit Trust.

Notes

1. Basis of preparation

The preliminary announcement for the year ended 31 July 2014 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as at 31 July 2014 and with the accounting policies disclosed in the Company's annual report for the year ended 31 July 2013. The financial information contained in this preliminary announcement does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information has been extracted from the financial statements for the year ended 31 July 2014, which have been approved by the Board of Directors. The report of the auditors on the financial statements for the year ended 31 July 2014 was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The financial statements will be delivered to the Registrar of Companies after the Annual General Meeting. The financial statements for the year ended 31 July 2013, upon which the auditors reported without qualification, have been delivered to the Registrar of Companies.

2. Segmental reporting

For the year ended 31 July 2014 and the year ended 31 July 2013, the Group's revenue and 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. The Board of Directors assess the performance of the operating segment using financial information which is measured and presented in a manner consistent with that in the financial statements.

Whilst the Chief Operating Decision Maker monitors all investments as one portfolio, the Group is reporting 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 ICT & Digital. This is to allow clearer understanding of the sectors in which the Group invests.

The Group has two customers of £0.7 million and £0.5 million respectively that account for £1.2 million (33%) of the Group's revenue (2013: two customers that account for £1.2 million (36%)).

Breakdown of the revenue from all sources is as follows:

3. Investments

Net change in fair value of investments held at fair value through profit or loss

Net change in fair value of investments for the year of £40,549,000 (2013: £10,794,000) represents the change in fair value taking into account the movement in the revenue share charge 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 a fair value estimate 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 periods is generated, along with the period end position with respect to the carrying value of investments.

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.

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.

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.

1 Quoted companies are registered on AIM, NASDAQ and the main market of the London Stock Exchange.

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.

3 The current year quoted loss includes a £3.8 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.

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:

4a. Carried interest plan charge/(release)

The Group's carried interest plan generated an accounting charge of £4.8 million (2013: release of £2.4 million) for the year ended 31 July 2014, with a corresponding liability of £5.9 million (2013: £1.0 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: repayment of monies back to the Group, repayment of an 8% hurdle back to the Group, then a catch up until an 85%:15% investor: executive ratio has been achieved and then a range of rates from 85% - 89.5% : 15% - 10.5% thereafter. 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.

4b. Other administrative expenses

5. Earnings per share

Basic earnings per share is calculated by dividing the 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 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:

6. Short-term liquidity investments and cash and cash equivalents

Reconciliation of amounts invested to trade investments:

Reconciliation of cash flows arising from sale of trade investments:

Reconciliation of cash flows arising on revenue share paid on asset realisations of trade investments:

7. Borrowings - non-current

This note provides information about the contractual terms of the Group's interest-bearing borrowings, which are measured at amortised cost.

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 time of the loan. During the year ended 31 July 2014, £16,000 (FY 2013: £nil) was released 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 twelve year period with the first payment due on 25 July 2016. There is an uncapped cash sweep of 25% of all investment realisations used to prepay the loan. 

The loan contains 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 Group closely monitors that the covenant is adhered to on an on-going basis and has complied with this covenant throughout the year. The Company will continue to monitor the covenant position against forecasts and budgets to ensure that it operates within the prescribed limits.

There is no commitment fee on the undrawn second tranche of the EIB loan of £15.0 million.

8. Issued share capital

1 Issue of 37,500,000 Ordinary Shares of £0.0303 each

Share Capital

On 24 January 2011, the Company's total issued voting share capital increased through the issue of 2,870,328 Ordinary Shares of 3 and 1/33 pence each at 350 pence each pursuant to a 2 for 3 Rights Issue (taking the total number of Ordinary Shares admitted to trading on AIM to 62,660,949) and 36,990,086 Convertible B Shares of 350 pence each, which had not been admitted to trading on AIM. The issue price for the Convertible B Shares was 350 pence (the "issue price") each payable in three instalments, comprising 150 pence (paid during the period of the Rights Issue), 100 pence paid on 20 January 2012 and 100 pence paid on 21 January 2013.

The Convertible B Shares represented a separate class of shares but, save as expressly provided for in the Group's Articles of Association (adopted on 6 January 2011), ranked pari passu in all respects, including voting, with the Existing Ordinary Shares. The Convertible B Shares had a nominal value of 350 pence but, until the entire issue price had been paid, were non-transferable. The Convertible B shares carried no right to dividends or other distributions declared, made or paid during the period of their issue.

Following receipt of the final instalment, on 21 January 2013 in respect of the issue price of all Convertible B Shares the Convertible B Shares were converted into new fully paid Ordinary Shares of 3 and 1/33 pence each (which were admitted to trading on AIM on 22 January 2013) and new fully paid Deferred Shares of 346 and 32/33 pence each.

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.

On 26 June 2014, the Company's total issued voting share capital increased through the issue of 37,500,000 Ordinary Shares of 3 and 1/33 pence each (total nominal value of £1,136,000) at 400 pence each (total gross proceeds of £150,000,000 before issue costs) pursuant to a placing, taking the total number of Ordinary Shares admitted to trading on AIM to 137,151,035. Costs of £3.2 million directly associated with the transaction have been taken to the share premium account. Marketing and other costs of £0.2 million have been charged to the statement of comprehensive income.

The total issued voting share capital as at 31 July 2014 was 137,151,035 voting shares (31 July 2013: 99,651,035 voting shares).

Employee Benefit Trust

At 31 July 2014, the Employee Benefit Trust (EBT) held 971,080 (2013: 971,080) of the Group's Ordinary Shares, which have a cost of £2,564,009 (2013: £2,564,009). During the year the Employee Benefit Trust did not increase its holding (2013: increased by 500,000 shares for a cost of £1,581,007). As set out in the Directors' remuneration report for the year ended 31 July 2014 , 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 (2013: nil).

Company Information