Half Yearly Report

27 March 2015

Imperial Innovations Group plc

Strong underlying performance and progress across maturing portfolio

Imperial Innovations Group plc (AIM: IVO, "Innovations" or "the Group"), a technology commercialisation and investment group, has published its results for the six months ended 31 January 2015.

Portfolio developments

Financial highlights

Martin Knight, Chairman of Imperial Innovations, said:

"We are focussed on deploying our considerable capital resources, investing £22.4m across our portfolio in the first half and £32m in the year to date. Along with our co-investors, we have now committed £1 billion in investment in UK innovation since our IPO in 2006.

"Our focus on the Golden Triangle of Oxford, Cambridge and London puts us at the heart of UK science, making connections between the academic community and the commercial world. This is greatly assisted by our reputation and capital strength.

"We are very encouraged by the performance of our portfolio as a whole, with many of our companies making significant technical, clinical and commercial progress, particularly within our unquoted portfolio. We remain confident that that there will be significant value enhancing events. The outlook is as good, if not better, than six months ago."

A pdf copy of the results is available at http://www.imperialinnovations.co.uk/interim2015.pdf

Enquiries:

About Imperial Innovations - www.imperialinnovations.co.uk

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 January 2015, Innovations has invested a total of £198.3 million across its portfolio companies, which have raised collectively investment of £926.8 million rising to £1.0 billion including post period end investments and commitments.

Overview

A key focus for the first half of the year has been to put the Group's capital to work in order to accelerate the development of its leading unquoted portfolio companies. During the period, Innovations led major funding rounds for Cell Medica (£50.0million) and Veryan Medical (£18.0million) with the Group committing £23.4 million across those rounds (of which £10.2 million was invested in the period).

The Group also made a number of smaller follow-on investments across its portfolio, most notably into two of the most promising therapeutic companies, PsiOxus and MISSION Therapeutics.

The Group's overall net portfolio value increased by £10.0 million to £262.0 million (H1 2014: £229.6million; FY 2014: £252.0million). Unlike last year, when both Circassia and Oxford Immunotec listed, there was no major IPO or trade sale during the period. However, the unquoted portfolio still contributed positively with a net fair value gain of £5.6million, representing a 4% increase over its value at the start of the year.

The Group added £20.9million to the cost of its unquoted investments and completed the sale of a software business, and in total, generated £5.1millon from disposals.

The gain in the value of the unquoted portfolio was more than off-set by a £13.0 million, or 12%, decrease in the quoted portfolio, with the carrying values of these four companies (Circassia Pharmaceuticals, Oxford Immunotec, Abzena and IXICO) marked-to-market at the period end. The aggregate movement, including both unquoted and quoted portfolios, represented a £7.4 million net fair value loss in the period. Since the end of the half year, these companies share prices have seen a recovery in value by £8.2 million as at 25 March 2015.

Trading performance was healthy, with the Group reporting revenues of £2.8million (H1 2014: £1.6million) largely as a result of licence and royalty income being significantly ahead of expectation. The pipeline of IP remains strong and this now includes prospects for new licence deals, as well as new ventures. Costs remain well controlled, and the net cost of operating the business was below budget.

As a result of the net fair value loss attributed to the quoted portfolio, the Group made a loss of £7.0 million in the period. As of 31 January 2015, the Group had total cash and short-term liquidity investments of £152.8million (FY 2014: £176.5million). Net assets were £397.8 million (FY 2014: £404.8 million).

Continuing momentum in the portfolio

The Board remains very encouraged by the performance of the portfolio, with many of the Group's companies making significant technical, clinical and commercial progress during the period.

Full details are included in the Portfolio Update section, but notable highlights in the unquoted portfolio include:

· Cell Medica: £50.0 million funding round, initiation of Phase II CITADEL study and start of commercial cell therapy manufacturing at its facility in Berlin;

· Veryan Medical: £18.0million funding round and distribution deal with BioSensors, heralding launch of sales outside US;

· Nexeon: start of sampling programme of materials to customers and partners;

· PsiOxus: grant of orphan medicinal product designation for its oncolytic vaccine, enadenotucirev, by the European Medicines Agency (EMA) for the treatment of platinum-resistant epithelial ovarian cancer;

· Autifony: initiation of Phase IIa study for first-in-class drug to treat tinnitus across 12 key hospital sites across the UK;

· Cortexica: launch of its findSimilarTM visual search technology, with the leading US & German online retailers Macy's and Zalando adopting it for their online platforms; and

· JustYoyo: which has now deployed its mobile payments platform across 10 universities and five high-street retailers, within a year of implementation at its first beta site at Imperial College London.

Not all companies performed to expectations and the Group reported £3.6 million of impairments in its unquoted portfolio. This was largely due to a write down of £3.1 million in Stanmore Implants, taken in the wake of the orthopaedic device manufacturer facing challenging regulatory conditions in the USA. There was also a £0.4 million fair value loss in Molecular Vision, following the disposal of its holding in exchange for shares in its acquirer, Abingdon Health.

Putting capital to work

At the end of the last financial year, the Group completed a £150 million fundraising. A key focus for the first half of the year has been to deploy that capital into the Group's leading unquoted portfolio companies.

During the period Innovations committed £23.4 million into Series B funding rounds for Cell Medica and Veryan. Both companies now have the necessary funding to advance their development, and for the commercialisation of their respective cancer immunotherapy and vascular stent technologies. The Group also invested £2.0 million in PsiOxus and £3.0 million in MISSION Therapeutics as a result of these companies completing key development milestones.

Oxford Immunotec, completed a major fundraise at the end of the period, raising US$57.5 million in a secondary share offer. Innovations acquired 200,000 shares in the offer, at a cost of £1.6 million, thereby substantially maintaining the Group's 4.6% holding in the company.

In aggregate, in the six months to 31 January 2015, the Group invested £22.4 million to fund 13 companies (H1 2014: £17.8 million in 17; FY 2014: £32.8million in 25) and added one new company to its accelerated growth portfolio (Inivata). The Group has already identified significant opportunities to scale other leading assets within its portfolio and is on track to invest at a similar rate in the second half of the year.

Matching world class management to world class science

A number of experienced professionals joined the Boards of Innovation's portfolio companies in the first half of the financial year. These include the appointment of Andrea Ponti, former Co-Head of Global Healthcare Investment Banking at J.P. Morgan, as a non-executive director of Cell Medica; Gordon Hurst, formerly Group Finance Director of Capita plc, appointed as non-executive Chairman of Featurespace; and the appointment of Richard Longdon, CEO of Aveva plc, as Chairman of PSE. Nexeon also strengthened its Board with the appointment of three experienced non-executive directors as the company builds its commercial expertise in both consumer electronics and electric vehicles.

Elsewhere, Dr Anker Lundemose, formerly CEO of Norwegian vaccine company Bionor Pharma ASA, was appointed as the new Chief Executive Officer of MISSION Therapeutics and Tim Wright, former co-founder of specialty pharma company Solent Pharma Ltd, joined Aqdot as CEO in November 2014.

Licensing portfolio

Innovations is focussed on expanding its licensing portfolio in order to create significant and sustainable future revenue streams from milestone payments and royalties. Three licensing deals were signed during the period, and both licensing income and royalty fee income was substantially ahead of expectation.

Board

During the period Linda Wilding was appointed to the role of Senior Independent Director and Dr Paul Atherton stepped down from the Board on 16 December 2014. Paul served on the Board for ten years, during which time he played an important and influential role in the evolution of the Group.

Outlook

Whilst acknowledging the risks inherent in commercialising intellectual property and growing early-stage businesses, the Directors are very encouraged by the substantial progress being made by the portfolio and increasingly optimistic about the prospects of the Group. Innovations has a proven business model and the Directors are confident that the businesses it supports are strong, with experienced boards and cutting-edge technologies that address attractive, global markets.

On 31 January 2015, Innovations' portfolio was valued at £262.0 million. It comprises businesses that the Group has co-founded, knows from the inside and can grow with ambition. These are companies in which Innovations has already invested a total of £198.3 million and that have collectively raised investment of £926.8 million. Many of these businesses have matured and have been validated by the active participation and due diligence of the Group's co-investors.

The average age of Innovations' six largest unlisted portfolio companies (Nexeon, Veryan, Cell Medica, PsiOxus, Plaxica and Econic respectively) is 7.6 years old and these companies have raised commitments on average of £39.6 million each. These are substantial, well-managed and well-funded businesses, and are good examples of companies in the portfolio that could trigger significant value creation events over the medium-term.

Beyond this leading cohort, there is a very strong and well-funded follow on pipeline of exciting businesses (such as Pulmocide, MISSION and JustYoyo) as well as new seed investments (such as Kesios, Inivata and Calcico) which will provide the feedstock for future value creation. The Directors are increasingly confident that from within this portfolio there will be a handful of companies joining the public markets over the next few years, with others generating significant exits through trade sales.

The Group continues to see opportunities for increased capital deployment within its existing portfolio, as well as a healthy pipeline of new opportunities sourced from within its extensive network of academics, entrepreneurs, management teams and co-investors within the "Golden Triangle" of London, Oxford and Cambridge.

Innovations 'focus on this geography, combined with the "pull" of its capital strength and growing track record, puts the Group at the heart of the best of UK science and the commercial world. In addition to working with academics to develop their ideas into spin-outs or new licensing opportunities, this increasingly involves working with entrepreneurs seeking to leverage university research to form new companies.

All of this bodes well for the future and the Board remains confident that Innovations' 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.

Portfolio update

The Group's top 20 investments by value represent a total gross carrying value of £243.4 million (net £241.3 million). Of this total, 57.7% is represented by companies in the therapeutics sector, including the Group's largest asset, Circassia. 22.1% of the Group's top 20 assets are in the engineering and materials sector. The Group's medtech and medical devices companies represent 15.2% 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% of the total value.

With four public company transactions during FY14, the Group now has a quoted portfolio of four companies which as of 31 January 2015 had a net investment carrying value of £93.4million, and an unquoted portfolio valued at £168.6million as of the same date.

Quoted company portfolio

The Group's quoted portfolio comprises two therapeutics companies (Circassia and Abzena) and two medtech and medical devices companies (Oxford Immunotec and IXICO).

Circassia Pharmaceuticals plc

At 31 January 2015 the Group had a 14.0% interest in the issued share capital of Circassia with a fair value of £67.3 million.

Circassia is a clinical-stage speciality biopharmaceutical company focused on the development and commercialisation of a range of novel immunotherapy products for the long-term treatment of common allergies. 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. 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. 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.

On 8 December 2014, Circassia announced top line results from its second Phase II Ragweed trial. The data demonstrated a dose response, indicating a clinical effect, but a higher than expected placebo effect meant that the results did not reach statistical significance. On 26 February 2015, the company provided an update on this trial. Further analysis of the data demonstrated that patients exposed to Ragweed-SPIRE used less rescue medication during the season compared to placebo, although once again the results were slightly below statistical significance. The company will now extend the trial on existing patients for a further season and initiate an additional dose ranging Phase IIb study. This is planned to be a large study (500 patients) and is expected to commence in H1 2017. The results from these two trials are expected to be sufficient to shape a Phase III trial should the data prove positive.

On the 8 January 2015, Circassia announced that it had completed recruitment for its pivotal phase III study for Cat-SPIRE. The study has been designed to meet the requirements of various regulators, including the USA's Food and Drug Administration and the European Medicines Agency. The trial recruited 1,409 volunteers, exceeding the minimum target by 19% and included an additional 91 subjects enrolled at centres in Russia to support a potential filing in this significant market.

During the six months ended 31 January 2015, a fair value loss of £11.1 million was recognised by Innovations to reflect the closing share price of the company at the period end.

Abzena plc

At 31 January 2015 the Group had a 23.6% interest in the issued share capital of Abzena (formerly known as PolyTherics) with a fair value of £17.5 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.

On 21 August 2014, Abzena announced that its subsidiary Antitope would collaborate with University College London to humanize an anti-LRG1 antibody as part of a MRC-funded translational research and product development programme being undertaken by the UCL Institute of Ophthalmology.

Researchers at UCL have shown that LRG1 (leucine-rich alpha-2-glycoprotein 1) promotes the growth of blood vessels (a process known as 'angiogenesis') which is an important factor in the progression of cancer. Angiogenesis inhibitors have been used successfully to treat a wide range of ophthalmic diseases and Antitope will produce a range of fully humanized antibodies using its Composite Human Antibody™ technology that are designed to bind to and inhibit the function of LRG1. UCL will then select a lead antibody for further evaluation as a potential therapeutic product for the treatment of age-related macular degeneration (AMD).

On 12 January 2015, Abzena announced that Antitope, INSERM (the French National Institute of Health and Medical Research) and the Baylor Institute for Immunology Research will collaborate to produce manufacturing cell lines for two novel vaccines for HIV. The cell lines will be produced using Antitope's Composite CHO™ technology.

Just after the period end, on 9 February 2015, Abzena provided an update on the clinical progress being made by products enabled by Abzena's technology platforms. This now includes six humanized therapeutic antibodies in Phase I or Phase II clinical development with pharma partners. Abzena incurs no costs in relation to their development, but does have the potential to earn royalties on the revenues for these products if successfully developed and approved.

During the six months ended 31 January 2015, a fair value loss of £0.5 million was recognised by Innovations to reflect the closing share price of the company at period end.

Oxford Immunotec Global plc

At 31 January 2015 the Group had a 4.6% interest in the issued share capital of Oxford Immunotec Global plc (Oxford Immunotec) with a fair value of £8.1 million.

Oxford Immunotec is a global, commercial-stage diagnostics company focused on developing and commercialising proprietary tests for the management of immune-regulated conditions. The company's lead product is the T-SPOT® TB test, which is used to test for latent tuberculosis infection and has been approved for sale in over 50 countries, including the United States, Europe, Japan and China. The company has an additional six products in various stages of development.

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.

On 5 January 2015, the company announced that its T-SPOT® TB test had completed the registration process with the China Food and Drug Administration (CFDA). The registration became effective 11 December 2014 and lasts for five years.

On 28 January 2015, Oxford Immunotec announced a $50 million underwritten share placing which completed on 4 February 2015. The offering generated gross proceeds of approximately $57.5 million, which the company will use to expand the marketing of the T-SPOT into new segments in the US; to accelerate commercial activities for two potential new transplant-related diagnostic tests; and to fund the development of new diagnostic tests in the field of immune-oncology. Innovations acquired 200,000 shares in the offer, at a cost of £1.6 million, thereby substantially maintaining the Group's holding in the company.

During the six months ended 31 January 2015, a fair value loss of £1.3 million was recognised by Innovations to reflect the closing share price of the company at period end.

IXICO plc

At 31 January 2015 the Group had an 11.5% interest in the issued share capital of IXICO with a fair value of £0.5 million.

IXICO has developed a range of innovative imaging technologies for use by those researching, diagnosing and treating serious diseases, with a particular focus on dementia.

In June 2014, IXICO signed an alliance framework with VirtualScopics (NASDAQ: VSCP) to provide the clinical trials industry with global operational capabilities in a wide range of therapeutic areas. This relationship bore fruit during the period with the announcement on the 16 December 2014 of news of a multi-year software licence and support agreement between the two companies for TrialTracker™, IXICO's proprietary imaging data and query management digital platform.

At the same time, IXICO reported that the alliance had been awarded its first joint project by a global top 15 pharmaceutical company. After the period end on 11 March 2015, IXICO announced that VirtualScopics and IXICO had jointly entered into a collaboration with Micron Inc., a provider of imaging services for clinical trials in Asia. This agreement expands the Alliance's reach and capabilities internationally, and especially in Asia where it offers the opportunity to build on its existing client base in Japan, China and Korea.

On 16 January 2015, IXICO announced that it had been selected as a partner within The European Prevention of Alzheimer's Dementia Initiative (EPAD), a novel collaboration between academic and private sectors to test innovative treatments for the secondary prevention of Alzheimer's dementia. EPAD will establish a European-wide register of 24,000 participants, of which 1,500 will be invited to participate in trials to test new treatments for prevention of Alzheimer's dementia. As part of this programme, IXICO will provide its TrialTracker™ platform to collect and manage imaging data in combination with its Assessa® medical device which will be used to identify subjects who are most likely to benefit from treatment.

During the six months ended 31 January 2015, a fair value loss of £0.2 million was recognised by Innovations to reflect the closing share price of the company at period end.

Unquoted company portfolio

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.

During the six months to 31 January 2015, the Group invested £15.1 million in private therapeutics companies, including:

· Investment of £7.5 million first tranche of a £50.0millionSeries B funding round in Cell Medica;

· Investment of £2.0million of an £8.0 million round in PsiOxus;

· Investment of £3.0million second tranche of a £20.0 million round in MISSION Therapeutics; and

· Investment of £1.3million in the seed funding round in Kesios Therapeutics.

In the first half of FY15, key developments within the portfolio included:

Cell Medica Limited

At 31 January 2015 the Group had a 27.0% interest in Cell Medica with a fair value of £19.1 million.

Cell Medica is a cellular immunotherapy company, focused on the development, manufacturing and marketing of cell-based therapeutics for the treatment of cancers related to oncogenic viruses and infections following hematopoietic stem cell (bone marrow) transplantations.

Cell Medica's lead cancer immunotherapy product is CMD-003, engineered T-cells targeted at malignant cells that express the oncogenic Epstein Barr virus (EBV). EBV is a virus that infects more than 90% of the human population on a latent basis and is known to be associated with various types of cancer, including 15-20% of lymphomas, 95% of nasopharyngeal carcinomas and 10% of gastric cancer. This suggests EBV is a viable target for certain cancers, regardless of whether EBV is directly involved in tumour growth mechanisms. Comprised of the patient's own immune cells, CMD-003 offers a targeted approach to cancer treatment with very limited side effects or toxicities.

During the period Cell Medica initiated a 35-patient CITADEL Phase II clinical trial assessing CMD-003 in patients with aggressive/advanced EBV-positive extranodal NK/T-cell lymphoma (ENKTCL); 100% of this tumour cell type expresses EBV, there are no effective treatments available (beyond radiotherapy and chemotherapy) and overall survival is typically less than one year. Results from this trial are expected by end-2016/early-2017, and given the poor survival rate for these patients, an indication of overall survival benefit may also be available around the same time.

Post period-end, on the 18 March 2015, Cell Medica announced that that the U.S. Food and Drug Administration (FDA) has granted Orphan Drug Designation to CMD-003. The designation was granted for the treatment of Epstein-Barr Virus (EBV) positive non-Hodgkin lymphomas. In addition, the company announced that it had treated the first patient in the CITADEL trial.

On 25 November, Innovations led a £50.0 million Series B funding round in Cell Medica alongside co-investors Invesco Asset Management and Woodford Investment Management. Innovations committed £15.0 million to the round, which was the fifth biggest biotech private financing round in 2014 and the third biggest venture financing raised by a UK-based drug developer in the last five years.

Cell Medica will use the investment capital to progress further the development of the company's cellular immunotherapy products which have the potential to transform the treatment of cancer and infectious diseases. In the infectious disease field, Cell Medica is developing Cytovir™ CMV for the treatment of cytomegalovirus infections and Cytovir™ ADV for the treatment of adenovirus infections. Both applications are aimed at treating and preventing infections in patients who are profoundly immunosuppressed following a bone marrow transplant.

On 16 February 2015, Cell Medica announced the start of commercial cell therapy manufacturing at its facility in Berlin, with its first product successfully manufactured and delivered for use in a patient. Manufacturing at this site will initially be focused on Cytovir™ CMV for the treatment of patients with cytomegalovirus (CMV) infections following a hematopoietic stem cell (bone marrow) transplant.

Cytovir CMV is an individualised immune cell therapy that is comprised of naturally-occurring donor cytotoxic T cells which are transferred from a donor into an immunosuppressed patient, in order to reconstitute their immunity to Cytomegalovirus (CMV). The product is currently available to treat patients in the UK, Ireland and Germany.

The start of commercial manufacture underlines Cell Medica's position as one of the leaders in this new field of cell therapy, as it is one of the very first companies of its type to have taken a product from early development into commercial sales with an industrial-scale manufacturing system. Cell Medica will now be able to leverage this manufacturing capability across a broad range of T-cell immunotherapy products, including both infectious disease and its exciting oncology programme.

During the six months ended 31 January 2015, the Group invested £7.5 million in Cell Medica as part of the £50.0 million funding round. The higher value of this investment resulted in a fair value gain of £3.7 million.

PsiOxus Therapeutics Limited

At 31 January 2015 the Group had a 28.5% interest in PsiOxus with a fair value of £11.5 million.

PsiOxus is a biotechnology company that develops novel therapeutics for serious diseases, with a particular focus upon cancer developing oncolytic vaccines. 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 Management and the Group.

The company's lead product is Enadenotucirev, an oncolytic virus that is given intravenously and travels around the patient's body seeking out and killing cancer cells. A recent mechanism of action study has shown some very compelling data confirming selective take up by tumour cells; replication in tumour cells; and the ability to deliver by intravenous injection and get virus into the tumour cells. This study had formerly been limited to newly diagnosed colon cancer patients, but has now been expanded to lung and renal cancer patients, in order to replicate the data and to facilitate discussions around using the oncolytic virus as part of a combination therapy alongside other oncology drugs.

On 14 January 2015 PsiOxus was granted a positive opinion from the European Medicines Agency's (EMA) Committee for Orphan Medicinal Products (COMP) for an orphan medicinal product designation of Enadenotucirev for the treatment of platinum-resistant epithelial ovarian cancer.

The EMA grant an orphan drug designation to promote the development of products that demonstrate promise for the treatment of rare diseases or conditions. Orphan drug designation provides 10 years of market exclusivity in the EU due to various regulatory and economic benefits.

During the six months ended 31 January 2015, the Group invested £2.0million in PsiOxus as a result of the company completing key milestones. The higher value of this investment resulted in a fair value gain of £1.6 million.

Autifony Therapeutics Limited

At 31 January 2015 the Group had a 25.1% 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 and tinnitus.

On the 20 November 2014, Autifony initiated a Phase IIa study in tinnitus subjects with AUT00063. This proof of concept study is evaluating the potential of AUT00063 to reduce the symptoms of tinnitus, an area of significant unmet medical need. The study is being conducted in 12 key hospital sites across the UK and is co-funded by a UK government-backed Biomedical Catalyst award.

AUT00063 is also in development for the treatment of age-related hearing loss and a Phase IIa clinical trial in this indication is expected to start soon in the US.

Autifony has made good technical progress in the period but consistent with the Group's valuation policy and in the absence of a third party funding event the valuation has not changed.

MISSION Therapeutics Limited

At 31 January 2015 the Group had a 21.2% interest in MISSION Therapeutics with a fair value of £6.0 million.

MISSION Therapeutics, based at the Babraham Research Campus, Cambridge, is a specialist pharmaceutical company developing cancer therapeutics based on new molecular understandings of human cell biology and the DNA damage response. The company is developing small molecule drugs that target deubiquitylating enzymes (DUBS) involved in the DNA damage response, with the aim of inducing synthetic lethality, a powerful mechanism to selectively kill specific tumour cells. To date, the company has raised £26.0 million from investors including a £20.0 million funding phased in two tranches with the first in October 2013 and the second in October 2014, that saw Pfizer Ventures become a new investor in the company.

On 12 January 2015 MISSION appointed Dr Anker Lundemose as its new Chief Executive Officer. Dr Lundemose brings extensive experience to MISSION, with his appointment representing his fourth CEO position. Recently, he was CEO of Norwegian vaccine company Bionor Pharma ASA, prior to which he co-founded and led Prosidion, the UK spin-out of OSI Pharmaceuticals' diabetes and obesity assets.

During the period, the Group invested £3.0 million in MISSION as a result of the company completing key development milestones. The investment, which was at last round price did not result in a fair value gain or loss.

Kesios Therapeutics

At 31 January 2015 the Group had a 48.4% interest in Kesios Therapeutics ("Kesios") with a fair value of £1.9 million.

Kesios is developing novel therapeutics for the treatment of multiple myeloma and other blood-related cancers. The company has been created to commercialise research led by Professor Guido Franzoso and his team from the Department of Medicine at Imperial College London, who have identified a novel drug target within a pathway that appears to be critical in promoting cancer cell survival in certain white blood cells of patients with multiple myeloma and other malignancies. Kesios is developing novel drug candidates that disrupt this target and demonstrate the potential to specifically and selectively kill cancer cells, without causing toxicity to normal cells.

On 8 October 2014 Innovations completed the balance of the seed investment in Kesios. The development programme also received a Biomedical Catalyst grant from the Medical Research Council (MRC) up to the value of £3.9 million, in order to validate the modality and efficacy of its novel drug target through the development of a distinct drug candidate to clinical proof of concept in multiple myeloma.

During the period, the Group invested £1.3 million in Kesios. The investment, which was at last round price did not result in a fair value gain or loss.

Medtech and Medical Devices

Strong progress has been made by a number of the Group's holdings in this sector, most notably by Veryan, which raised £18million in a Series B funding round led by Innovations. During the six months to 31 January 2015, the Group invested £5.9 million in unquoted companies in this sector.

In the first half of FY15, key developments within the portfolio included:

Veryan Holdings Limited

At 31 January 2015 the Group had a 48.2% interest in Veryan with a fair value of £20.9 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.

In November 2014, the full two-year data from the "Mimics" randomised controlled study of Veryan's BioMimics 3D™ Stent System were presented by Principal Investigator Professor Thomas Zeller, at the VIVA Symposium in Las Vegas. The results of this study confirmed that the advanced stent design offers statistically significant clinical benefits in terms of improved haemodynamics and clinical outcomes, and improved vascular compatibility, when compared to straight nitinol stents.

Veryan has already gained a CE Mark enabling sales of its BioMimics 3D™ stent within the European Economic Area (EEA) and on 28 January 2015, the company announced that it had secured a major distribution agreement with Biosensors International for the distribution of the BioMimics 3D™ stent in the EU, Asia Pacific and other international markets, excluding the USA and Japan for which separate clinical trials will be required. Biosensors has an established expertise in coronary stenting and growing presence in the area of peripheral arterial disease, together with established sales forces in most major global markets, and is therefore the ideal partner to effectively promote Veryan's 3D helical stent in these markets.

On the 14 January 2015, Innovations led an £18.0 million Series B funding round in Veryan, alongside co-investors Invesco Asset Management, Seroba Kernel and Seven Mile. Innovations committed up to £8.4 million to the round. The funds from the Series B investment round will now enable Veryan to build a team to support the international launch later this year and to expand the addressable market by completing an FDA regulatory trial, with a view to taking the product through pre-market approval (PMA) in the USA. Veryan intends to initiate this clinical study in the US this year, but it is likely to take two to three years to complete.

Simon Cartmell, an Operating Partner at Innovations, was also appointed as Chairman of Veryan in January 2015. Simon has more than 30 years pharmaceutical, biotech and medtech experience and was formerly CEO of ApaTech, which he developed into a world leader in orthobiologics prior to its sale to Baxter for $330m in March 2010.

During the six months to 31 January 2015, the Group invested £2.7 million in Veryan. The investment resulted in a £0.04 million mechanistic uplift to reflect the impact of the higher round.

Abingdon Health

At 31 January 2015 the Group had a 35.5% interest in Abingdon Health with a fair value of £4.3 million.

Abingdon Health is a specialist medical diagnostics company which is aiming to create a global, diversified healthcare business through a combination of selective acquisition and the development of patent-protected, clinically relevant diagnostic products. Since Abingdon Health's formation in 2008, the company has completed a series of selective acquisition and licensing transactions to bring together intellectual property, diagnostic platforms, manufacturing and created a sales and marketing structure. During this period the company furthered this strategy through the completion of two acquisitions.

On 13 October 2014, Abingdon Health strengthened its position in rapid diagnostic testing with the acquisition of Serascience Limited and fundraising of £2.1million from current shareholders.

Serascience was formed in April 2011 through Abingdon Health's and the University of Birmingham's joint venture, Bioscience Ventures Limited (BSVL), which develops early stage diagnostics opportunities to the point at which they can be licensed, acquired, or sold as a service. Serascience licensed a portfolio of monoclonal antibodies from the University and its first product to market will be Seralite®, a rapid test for the diagnosis and monitoring of the progression of myeloma and MGUS (a benign non-cancerous condition). This market is estimated to be worth over £200million per annum.

This acquisition was followed on the 8 January 2015 by the acquisition of 100% of the shares of Molecular Vision Limited. Abingdon had previously held 55% of the shares of Molecular Vision, an optical detection company in which Innovations was a founding investor. Molecular Vision has developed a patent protected technology platform using low-cost, Organic Light Emitting Diodes (oLEDs) and Organic Photodetectors (OPDs) for versatile and quantitative optical detection in a portable and disposable format. The technology allows for simultaneous testing of multiple diagnostic markers and can be applied across the medical, veterinary, food safety, plant testing, and security sectors.

The combination of the patented plastic electronics-based optical detection technology from Molecular Vision, and the immunodiagnostics expertise within Abingdon Health, considerably strengthens Abingdon's offering as a leading technology based diagnostic company.

During the six months to 31 January 2015, the Group invested £1.6 million in Abingdon. The investment was not at a higher or lower price than the last round and therefore did not result in a fair value gain or loss.

New medtech and medical devices companies

Inivata

At 31 January 2015 the Group had a 27.3% interest in Inivata with a fair value of £0.8 million.

On 23 September 2014 Innovations announced that it had led a £4.0 million funding round for Inivata, a new spin-out from Cancer Research UK. Inivata is focused on harnessing the potential of circulating tumour DNA (ct DNA) 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.

On 11 March 2015, Inivata announced a partnership with US molecular diagnostics company, Biodesix, to develop and commercialise Next Generation Sequencing (NGS)-blood based tests for clinical applications in lung cancer. The agreement will leverage Inivata's proprietary, enhanced TAm-Seq™ technology platform and Biodesix' development and commercialisation capabilities in the US market to provide new, clinically actionable tests to physicians.

Approximately 30% of non-small cell lung cancer (NSCLC) patients are unable to obtain a biopsy or have insufficient tissue from a lung cancer biopsy to provide the diagnostic information needed for their care. Blood-based diagnostics can make a real difference in such cases and the use of Inivata's circulating tumour DNA (ctDNA) analysis platform, will provide physicians with information that was previously unattainable for these patients, which should ultimately lead to better outcomes.

During the period, the Group invested £0.8 million.

Engineering and materials

During the six months to 31 January 2015, the Group only invested £1.4 million in portfolio companies in this sector as many of these companies are already well-funded. A number of the companies made strong technical or commercial progress which is not immediately apparent in the absence of a major funding round or corporate event.

In the first half of FY15, key developments within the portfolio included:

Nexeon Limited

At 31 January 2015 the Group had a 40.1% interest in Nexeon with a fair value of £34.1 million.

Nexeon is a battery materials company that is developing the next generation of lithium-ion rechargeable batteries. More specifically, 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. 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.

During the period, Nexeon has continued to make good progress in optimising its silicon materials for the blended carbon/silicon anode applications currently being demanded by the battery industry. In particular, Nexeon has designed its technology for easy adoption in existing Li-ion battery production lines. The graphite currently used in anodes can simply be replaced with Nexeon materials and used in combination with conventional polymer binders and current collectors as part of the standard battery manufacturing process. In this way, Nexeon technology truly 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.

The company also made a number of strategic Board changes in the first half of the year, appointing seasoned non-executive directors with relevant experience in both the consumer electronics and automotive sectors.

In December 2014, Nexeon appointed Dr Antti Vasara (formerly Vice President of Nokia's corporate strategy unit) as non-executive director to help the company lead its push into the consumer electronics market. In January 2015, Nexeon appointed top automotive industry expert Tony Posawatz, well known in the automotive industry for leading the team that brought the award-winning Chevrolet Volt from concept to production, as a non-executive director. Tony is an expert in vehicle electrification, alternative/advanced propulsion, energy and clean technology, with over 30 years' experience, much of it at General Motors.

On 29 January 2015, Nexeon appointed Ian Jenks as non-executive director. Formerly an advisor to the company, Ian brings with him extensive experience of growing leading-edge technology businesses. He is currently a board director of Optimal Payments, Birdstep Technology and Econic Technologies. Earlier in his career, he was President - Lasers and Fibre Optics at JDS Uniphase, Executive Chairman of Evo Electric, Chairman of Quantasol and Partner in Crescendo Ventures.

Despite the substantial technical progress made by Nexeon during the period, in the absence of a third party funding event, the carrying value of the Group's holding in Nexeon remains unchanged.

Plaxica Limited

At 31 January 2015 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 (PLA) and propylene glycol. These are high value commodity chemicals with strong environmental credentials, offering the potential to displace traditional oil-based polymers such as PET (polyethylene terephthalate - also known as polyester) and nylon for example in packaging and textile manufacture or in the production of "green" solvents.

Traditionally lactic acid has been produced through the fermentation of food grade sugars, an expensive process that requires costly high-grade raw materials. By contrast Versalac is a chemical process and is tolerant to chemical impurities, which means that a wide range of feedstock can be used in production, including the waste from the forestry and agriculture industries. This results in production of a high-purity lactic acid with a very low variable cost base, which opens up the potential to use lactic acid in markets where it previously proved to be too costly.

To further add value to its process, Plaxica has developed the Optipure chemical process, which enables the production of superior performance PLA polymers suitable for creating environmentally friendly textiles for the automotive industry.

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. The company's technology has been proven at demonstration scale at Plaxica's pilot plant facility based at Wilton in the north-east of England, but as an intermediary in the overall supply chain, Plaxica is also seeking to appoint industrial partners to assist with industrial scale up.

In September 2014, Plaxica announced the appointment of its first two engineering partners; Foster Wheeler and Jacobs. Foster Wheeler AG is a global engineering and construction company and power equipment supplier employing 13,000 professionals worldwide, whereas Jacobs is one of the world's largest and most diverse providers of technical professional and construction services.

As there was no valuation event during the period the value of this investment remains unchanged.

Econic Technologies Limited

At 31 January 2015, the Group had a 56.1% interest in Econic with a fair value of £6.1 million.

Econic is developing new patented catalysts that enable the incorporation of captured waste CO2 into various polymers: not only reducing CO2emissions, but also using the captured CO2 to replace expensive petrochemical feedstocks. For example, 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.

Econic's technology is one of the few commercially viable ways to chemically utilise CO2, which although highly abundant and cheap, is very unreactive and needs to be activated using a catalyst. The resulting polycarbonates can be used for many applications including the production of polyurethane products such as foams, plastics and polyesters. The global plastics market is estimated to be worth over £360 billion per annum, with polyurethanes representing ca 6-7% of that value. The global market for polymerisation catalysts is estimated at over £2 billion.

On 22 August 2014, Econic was one of the winners of the RSC Emerging Technologies Competition, winning the category of 'Environment, Materials and Process Chemistry'

The Group does not control Econic (control as defined by IFRS 10), 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.

As there was no valuation event during the period the value of this investment remains unchanged.

Aqdot Limited

At 31 January 2015 the Group had a 34.5% interest of Aqdot with a fair value of £1.6 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 for Aqdot alongside Cambridge Enterprise Limited, Parkwalk Advisors and Providence Investment Company. On 17 December 2014, Innovations followed this investment with a further a £2.55m funding round, alongside the same investors. Due to the potentially significant environmental benefit of the technology, the company has also been supported by Climate-KIC, receiving approximately €135,000 through different Climate-KIC funded initiatives.

On the same day, the company also announced the appointment of Tim Wright as Chief Executive Officer. Tim brings a wealth of experience to the role having successfully developed, licensed and grown brands and businesses at all stages of their lifecycle. Prior to joining Aqdot, he co-founded Solent Pharma Ltd, a privately held speciality pharmaceutical company.

On the 8 January 2015, Professor Chris Abell, the founder of Aqdot, was announced as one of three new Pro Vice Chancellors of the University of Cambridge. He is Professor of Biological Chemistry in the Department of Chemistry and a Fellow of Christ's College.

During the period the Group invested £1.2 million in Aqdot. The higher value of this investment resulted in a fair value gain of £0.05 million.

Sub-Salt Solutions

At 31 January 2015, the Group had a 37.9% interest in the issued share capital of Sub-Salt Solutions ("Sub-Salt") with 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 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.

In November 2014 Sub-Salt came first in a seismic inversion contest at a recent Society of Exploration Geophysicists conference, where the Sub-Salt team came closest to the true model in competition with major processing companies.

As there was no valuation event during the period the value of this investment remains unchanged.

ICT & Digital

The ICT sector is a growing part of the Group's asset portfolio and a key focus for the future and investments will be made as opportunities are identified. During the six months to 31 January 2015, the Group made no investments in unquoted companies in this sector. The Group completed the trade sale of one of its software companies, realising a 2.4x multiple on cash invested and an IRR of 65% on an investment made in January 2013.

In the first half of FY15, key developments within the portfolio included:

Cortexica Vision Systems Limited

At 31 January 2015 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 businesses with an online presence, based on original research from Imperial College London. Cortexica's leading product is findSimilar™ for fashion which returns visually similar items from an online database or inventory when users take a photograph of a piece of clothing or an 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 via their smartphone applications. During the period the company made significant commercial progress signing up a number of major traditional and online retailers.

In August 2014, German online fashion retailer Zalando announced that it had integrated Cortexica's technology into its Photo Search app for use in its home country. In October 2014, based on the success of the app in Germany, Zalando rolled out service to 15 additional countries and the Android platform. On 12 November 2014, Cortexica announced that Macy's, the US retailer, had launched an iOS App incorporating the company's mobile image recognition and findSimilar™ visual search software.

As there was no valuation event during the period the value of this investment remains unchanged.

Featurespace

At 31 January 2015 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 is a type of artificial intelligence that 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, for example, 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.

The technology has been adopted by Betfair in order to improve online betting platform's fraud systems, but has now been adapted for the financial services, insurance and retail industries and is being used by clients such as IG Index and Callcredit to detect and predict fraud in its many guises, from money laundering to the theft of credit cards.

On 12 November 2014, Featurespace announced the appointment of Gordon Hurst as the non-executive Chairman of its Board of Directors. Hurst was formerly the Group Finance Director of Capita plc, a FTSE 100 company with 65,000 employees and one of the UK's leading business process and customer management organisations.

On 13 December 2014 Featurespace announced a collaboration with KPMG, the professional services firm, in which KPMG will combine its data and analytics knowledge with Featurespace's analytics, technical and software-driven expertise offering to clients in the financial services sector the tools to monitor employee activity and spot frauds before they happen.

As there was no valuation event during the period the value of this investment remains unchanged.

JustYoyo

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

JustYoyo 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. Since then, JustYoyo's experienced management team have made strong commercial progress and the team has signed 12 Universities as customers and implemented the solution at 10. They have also implemented JustYoyo at five High Street retailers.

As there was no valuation event during the period the value of this investment remains unchanged.

Russell Cummings

Chief Executive Officer

Financial Review

Summary

The Group's financial position remains strong and the value of its portfolio continued to increase. Net assets at the period end of £397.8 million (H1 2014: £254.8 million, FY 2014: £404.8 million) decreased by £7.0 million from 31 July 2014.

Cash and short term liquidity investments remained healthy at £152.8 million (H1 2014: £48.1 million, FY 2014: £176.5 million).

The Group generated a loss during the period of £7.0 million (H1 2014: £24.4 million profit, FY 2014:£27.4 million profit). The loss has primarily arisen due to a fall in the value of the quoted portfolio, however the unquoted portfolio has shown a net gain.

Net cash collected from realisations was £3.8 million (H1 2014: £3.4 million, FY 2014:£3.4 million).

The Group's rate of investment in its portfolio companies was £22.4 million across 13 portfolio companies (H1 2014: £17.8 million, FY 2014: £32.8 million). This takes the total invested since Innovations' IPO in July 2006 to £198.3 million and the total raised by the Group's portfolio companies to over £926.8 million.

Cash and short-term liquidity investments

At 31 January 2015, the Group had cash and short term liquidity investments of £152.8 million (H1 2014: £48.1 million, FY 2014: £176.5 million).

Including the undrawn £15.0 million second tranche of the European Investment Bank ("EIB") loan, which should be drawn down by July 2015, the total available for investment and working capital is £167.8 million (H1 2014: £63.1 million, FY 2014: £191.5 million).

The movement in cash and short term liquidity investments of £23.7 million from the opening balance at 31 July 2014 is summarised below:

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

Revenues, cost of sales and operating costs

Total trading revenue of £2.8 million (H1 2014: £1.6 million; FY 2014: £3.6 million) was better than the prior half year as a result of a good licence and royalty income stream. Within this licence and royalty revenue was £1.6 million (H1 2014: £0.5 million, FY 2014: £1.6 million). Revenue from services was £0.8 million (H1 2014: £0.8 million; FY 2014: £1.6 million). Corporate finance fees were £0.4 million (H1 2014: £0.3 million; FY 2014: £0.4 million) and were primarily generated by the Group-led funding rounds.

Cost of sales, which mainly arises from the revenue sharing arrangements with Imperial College London, increased to £1.0 million and was higher than the prior half year (H1 2014: £0.3 million; FY 2014: £1.0 million) reflecting the increased licence and royalty activity.

Other administrative expenses were £5.1 million (H1 2014: £4.5 million; FY 2014: £11.0million). Other administrative expenses include costs of £0.8 million (H1 2014: £0.7 million; FY 2014: £1.4 million) incurred filing patents and protecting the as yet unexploited intellectual property from Imperial College London.

The Group's carried interest plan, which is a significant portion of its long term incentive arrangements, recognised a release of £3.1 million (H1 2014: charge of £5.6 million, FY 2014: a charge of £4.8 million) as a result of a fall in the value of the quoted portfolio. There is no cash payment due to members of the scheme until the Group has made substantial cash realisations.

Finance income was higher at £0.7 million (H1 2014: £0.3 million, FY 2014: £0.6 million), reflecting the higher cash balance. During the period ended 31 January 2015, the Group made its repayments of quarterly interest of £0.3 million (H1 2014: £0.3 million, FY 2014: £0.5 million) on the EIB loan.

The Group reported a loss before tax of £7.0 million (H1 2014: £24.4 million profit, FY 2014: £27.4 million profit). The Group's basic loss per share was 5.2p (H1 2014: basic earnings per share 24.7p, FY2014: basic earnings per share 26.8p). The Company did not pay a dividend (H1 2014: nil, FY 2014: nil).

Investment portfolio performance

The Group reported a net fair value loss arising from the portfolio of £7.4million (H1 2014: £33.2 million gain, FY 2014: £40.5 million gain). An analysis of the change in fair value is set out in note 2 to the interim report and accounts and is summarised below:

The total gross value of the portfolio increased from £257.1 million to £267.2 million as a result of investments of £22.4 million, less disposals of £5.1 million, gains on revaluation of £9.5 million less losses on the revaluation of investments of £16.8 million (of which £13.0 million relates to losses on the quoted portfolio). Non-current liabilities on investments remained steady at £5.2million (FY 2014: £5.1million).

Investment and divestment

During the period the Group made £22.4 million of investments to fund 13 technology companies in its portfolio and at the end of the period had outstanding investment commitments of £24.6 million.

Total net investment after net cash disposals in the period was £17.8 million (H1 2014: £14.4 million, FY 2014: £29.5 million).

Portfolio company creation

At 31 January 2015, the Group held equity stakes in 98 companies (H1 2014: 93 companies, FY 2014: 95 companies). The movement reflects formations during the period.

Portfolio company overview

During the period the gross value of the Group's investment portfolio grew to £267.8 million spread across 98 companies (FY 2014: £257.7 million spread across 95 companies) and portfolio companies raised £103.6 million in cash (FY 2014: £315.4 million) from all sources of investment.

As at 31 January 2015, the net value of the Group's portfolio rose to £262.0 million (FY 2014: £252.0 million). The increase represents £22.4 million (FY 2014: £32.8 million) of investments to fund 13 (FY 2014: 25) companies in its portfolio, net disposals of £5.1 million and fair value losses of £7.4 million (2013: £40.5 million gains).

The Group has a total of £175.6 million invested capital at work in the portfolio of currently active technology companies, £160.3 million invested in the top 20 companies and £15.3 million in the remaining companies.

The table below sets out the top 20 technology companies in the portfolio by value, including contingent consideration, to illustrate the spread of the investments held and their relative carrying value. All of the carrying values listed below 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 portfolio of companies are grouped into four sectors (as noted in the Chief Executive's report) for the purpose of external reporting. 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.

Table of the net fair value of the top 20 investee companies

1 Previously called PolyTherics.

2Currently active companies.

3The Group's investment in Molecular Vision was previously disclosed as part of the Abingdon Health investment following Abingdon Health's acquisition of 50% of the Molecular Vision equity. The Group's investment in Molecular Vision was acquired by Abingdon Health during the six month period ended 31 January 2015. The balances at 31 July 2014 have been updated to split these two investments, with Molecular Vision reclassified into 'Other Companies' for clarity of movement in the individual investments in the period to be understood.

4 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.

5Quoted companies.

6 The full name of CCS is Cambridge Communication Systems and the full name of SIW is Stanmore Implants Worldwide.

Anjum Ahmad

Treasury and Finance Director

Consolidated interim statement of comprehensive income for the six month period to 31 January 2015

The accompanying notes are an integral part of these interim financial statements.

Consolidated interim balance sheet as at 31 January 2015

The accompanying notes are an integral part of these interim financial statements.

The interim financial statements were approved by the Board of Directors on 26 March 2015 and were signed on its behalf by R. Cummings.

R. Cummings

Chief Executive Officer

Consolidated interim cash flow statement for the six month period to 31 January 2015

The accompanying notes are an integral part of these interim financial statements.

Consolidated interim statement of changes in equity attributable to equity holders of the Group

The accompanying notes are an integral part of these interim financial statements.

Notes to the interim financial statements

1. Basis of preparation

These unaudited condensed consolidated interim financial statements have been prepared in accordance with the AIM Rules and European Union endorsed International Financial Reporting Standards and International Financial Reporting Interpretation Committee Interpretations. These comprise the consolidated interim statement of comprehensive income, the consolidated interim balance sheet, the consolidated interim cash flow statement, the consolidated interim statement of changes in equity and the related notes ("the condensed consolidated interim financial statements"). The Group has chosen not to adopt IAS 34, "Interim Financial Reporting", in the preparation of these condensed consolidated interim financial statements.

These condensed consolidated interim financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of certain financial assets at fair value, as required by IAS 39, "Financial instruments: Recognition and Measurement". The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 July 2014, as described in those financial statements, with the exception of the following new standards which have been applied for the first time during the year commencing 1 August 2014:

IFRS 10, 'Consolidated financial statements' builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess.

IFRS 12, 'Disclosures of interests in other entities' includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, structured entities and other off balance sheet vehicles.

Amendment to IAS 32, 'Financial instruments: Presentation' on offsetting financial assets and financial liabilities. This amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also considers settlement mechanisms.

Amendments to IAS 36, 'Impairment of assets', on the recoverable amount disclosures for non-financial assets. This amendment removed certain disclosures of the recoverable amount of CGUs which had been included in IAS 36 by the issue of IFRS 13.

Other standards, amendments and interpretations which are effective for the financial year beginning on 1 August 2014 are not material to the group.

These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 July 2014 were approved by the Board of Directors on 14 October 2014 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

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

Net change in fair value for the period represents the change in fair value less 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.

HEIF funded investment and University Challenge Seed Fund

The University Challenge Seed Fund (UCSF) reflects an award made by the UK government and third parties 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 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 corresponding creditor balance is reflected on the balance sheet under 'non-current liabilities'.

The 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'.

Fixed asset investments

All equity investments held by the Group are defined as financial assets under International Accounting Standard (IAS) 32 'Financial Instruments: Disclosure and Presentation' and are classified as financial assets held at fair value under IAS 39, 'Financial Instruments: Recognition and Measurement'. This includes all UCSF equity investments.

Under IAS 39 the carrying value of all investments is measured at fair value with changes in fair value between accounting periods being charged or credited to the Consolidated Statement of Comprehensive Income.

The following tables in this note set out how the net fair value gains recognised in the Consolidated Statement of Comprehensive Income for each of the periods is generated. The tables exclude any UCSF or HEIF related investments as returns are repayable to the respective funds based on the above terms.

The table below sets out the movement in the balance sheet value of the investments from the start to the end of the period, 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 period, 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 period, setting out the net fair value gains and losses together with any investments and disposals.

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

2The 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.

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:

The table below sets out the movement in the balance sheet value of the investments from the start to the end of the period, 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 period, 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 period, 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.

The table below sets out the movement in the balance sheet value of the investments from the start to the end of the period, 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 period, 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 period, setting out the net fair value gains and losses together with any investments and disposals.

1 Quoted companies are registered on AIM and NASDAQ

3. 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 period. Diluted earnings per share is computed by dividing the profit for the financial period, by the weighted-average number of Ordinary Shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares, including share options on an as-if-converted basis and excluding treasury shares. The potential dilutive shares are included in diluted earnings per share computations on a weighted average basis for the period. The profits and weighted average number of shares used in the calculations are set out below:

4. Share capital and equity raise and EBT

Share Capital and equity

On 21 January 2013 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 were taken to the share premium account. Marketing and other costs of £0.2 million were charged to the statement of comprehensive income.

The total issued voting share capital as at 31 January 2015 was 137,151,035 voting shares (FY 2014: 137,151,035 voting shares).

Employee Benefit Trust

As at 31 January 2015, the Employee Benefit Trust (EBT) held 971,080 (FY 2014: 971,080) of the Group's Ordinary Shares, which have a cost of £2,564,009 (FY 2014: £2,564,009). These represent 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 period (FY 2014: nil).

5. 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:

6. Borrowings - non-current

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 amortised over the life time of the loan. During the period ended 31 January 2015, £8,000 (FY 2014: £16,000) 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 and during the period the Group repaid £917,625 (FY 2014: £nil) on investment realisations.

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 period. The Company will continue to monitor the covenant position against forecasts and budgets to ensure that it operates within the prescribed limits.

Independent review report to Imperial Innovations Group plc

Introduction

We have been engaged by the company to review the condensed consolidated interim financial statements in the Interim Report and Accounts for the six months ended 31 January 2015, which comprises the consolidated interim statement of comprehensive income, consolidated interim balance sheet, consolidated interim cash flow statement, consolidated interim statement of changes in equity attributable to equity holders of the Group and related notes. We have read the other information contained in the Interim Report and Accounts and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial statements.

Directors' responsibilities

The Interim Report and Accounts are the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report and Accounts in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated interim financial statements included in this half-yearly financial report has been prepared in accordance with the basis of preparation set out in note 1.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed consolidated interim financial statements in the Interim Report and Accounts based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the AIM Rules for Companies and for no other purpose. We do not, in producing this report, 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.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements in the Interim Report and Accounts for the six months ended 31 January 2015 is not prepared, in all material respects, in accordance with the basis of preparation set out in note 1 and the AIM Rules for Companies.

PricewaterhouseCoopers LLP

Chartered Accountants

26 March 2015

Cambridge

Notes:

The maintenance and integrity of the Imperial Innovations Group plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Company Information