Ip Group Regulatory News (IPO)

("IP Group" or "the Group" or "the Company") IP Group plc 2023 Annual Results Release

Focused and well positioned for the future;significant inflection points expected over the short term.

IP Group plc (LSE: IPO), which invests in breakthrough science and innovation companies with the potential to create a better future for all, today announces its annual financial results for the year ended 31 December 2023.

Highlights

Maturing portfolio with multiple near-term value creation opportunities

- Significant portfolio inflection points, including over 10 companies now in clinical studies and expecting key data by the end of 2025, expected to evidence strong value creation

- Capital allocation prioritised to high-growth sectors where we have deep expertise and experience

o  Healthier future (Life Sciences): Istesso on track to deliver Phase 2b data for Leramistat (MBS2320) in rheumatoid arthritis in H1 2024; Pulmocide Phase 3 study of novel anti-fungal for invasive pulmonary Aspergillus underway

o  Tech-enriched future (Deeptech): Featurespace posts double-digit revenue growth; significant fundraisings completed for Quantum Motion, Accelercomm & Garrison, portfolio poised to benefit from growth in 2024

o  Regenerative future (Cleantech): Significant capital ($15m) committed to Hysata Series B fund raise, which will complete in 2024. Technical milestone achieved in 2023

- £0.7bn of total capital raised by portfolio in 2023 alongside leading co-investors including Bosch Ventures, BP Ventures, Clean Energy Ventures, L&G, M&G, Merck Ventures, Morningside, Pfizer, Roche and Sofinnova (2022 £1.0bn)

- Decisive action to focus on the highest-growth opportunities, deprioritising future investment in our US platform and cessation of plans for China growth fund

Financial strength maintained during challenging markets

- Strong balance sheet and liquidity with gross cash of £226.9m (2022: £241.5m)

- £73.2m portfolio investment into 33 companies across our three high-growth sectors (2022: £93.5m, 46 companies) representing around 10% of capital raised by our portfolio (2022: 9% of total capital raised)

- Cash proceeds in line with expectations at £38.6m (2022 £28.1m)

- NAV per share declined to 114.8p (-13%), driven primarily by adjustments to the carrying values of First Light Fusion, our US platform, Hinge Health and Akamis Bio and reflecting a fair value decrease of listed holding Oxford Nanopore, Since year-end, further reduction in listed portfolio of £45.4m.

- Third party managed funds of £650m (2022: £700m), with more than £100m available for investment

Continued commitment to shareholder returns

- Launched further £20m share buyback fulfilling our commitment to regular cash returns from realisations

- As announced on 18 December 2023, future cash returns are expected to be in the form of share buybacks when the share price discount to NAV exceeds 20%

- Over £75m of total cash returned to shareholders through dividends and share buybacks since 2021

Summary financials

(i) Note 29 details the Alternative Performance Measures ("APM")

Greg Smith, Chief Executive of IP Group, said:

"The market environment for early-stage investing remained challenging in 2023. In response, we have prioritised and heavily focused our activities and capital on developing leading portfolio opportunities in the high-growth sectors where our teams have deep expertise. The Group's portfolio successfully raised a total of £0.7bn, with the Group investing £73m alongside more than fifty co-investors. Having appropriately managed our level of portfolio investment, the Group finished the year in a strong financial position with £227m gross cash - an important strategic asset in the current environment.

The Board remains committed to delivering shareholder returns that include a regular cash component from realisations. This is now anticipated to be solely in the form of share buybacks while the share price discount to NAV exceeds 20%.

I believe the Group is well positioned for 2024. We have an excellent team that combines university relationships with deep sector experience and networks, allowing us to access highly differentiated dealflow. We are one of the companies most closely aligned with the UK's 'science superpower' ambition, which we intend to build on this year. In pursuing our purpose to accelerate the power of science for a better future by starting and growing businesses driving the energy transition, the digital transformation and improved health outcomes, we can make a significant dent in some of society's biggest needs and deliver compelling financial returns for our shareholders."

Webinar

IP Group will host a webinar for analysts and investors today, 13 March, at 09:00am. For more details or to register as a participant please visit https://www.investormeetcompany.com/ip-group-plc/register-investor.

For more information, please contact:

Further information on IP Group is available on our website: www.ipgroupplc.com

Notes

(i) Nature of announcement

This Annual Results Release was approved by the Directors on 13 March 2024.

The financial information set out in this Annual Results Release does not constitute the Company's statutory accounts for 2023 or 2022. Statutory accounts for the years ended 31 December 2023 and 31 December 2022 have been reported on by the Independent Auditor. The Independent Auditor's Reports on the Annual Report and Financial Statements for 2023 and 2022 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. Statutory accounts for the year ended 31 December 2022 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2023 will be delivered to the Registrar following the Company's Annual General Meeting.

The 2023 Annual Report and Accounts will be published in April 2024 and a copy will be posted on the Group's website (www.ipgroupplc.com). In accordance with Listing Rule 9.6.1 a copy of the Annual Report and Accounts will also be submitted to the National Storage Mechanism on or around this date and will be available for inspection at: www.Hemscott.com/nsm.do from that time.

Throughout this Annual Results Release the Group's holdings in portfolio companies reflect the undiluted beneficial equity interest excluding debt, unless otherwise explicitly stated.

(ii) Forward-looking statements

This Annual Report and Accounts may contain forward-looking statements. These statements reflect the Board's current view, are subject to a number of material risks and uncertainties and could change in the future. Factors that could cause or contribute to such changes include, but are not limited to, the general economic climate and market conditions, as well as specific factors relating to the financial or commercial prospects or performance of individual companies within the Group's portfolio.

STRATEGIC REPORT

CHAIRMAN'S SUMMARY

Rarely has the expression 'may you live in interesting times' been more apposite than when applied to the world in which we live today. Often expressed as a 'curse' to denote times of trouble and uncertainty, its accuracy in describing the geopolitical, economic and market backdrops that set the context for our activities in 2023 and our expectations for the current year is indisputable. The carry-over from 2022 of the re-rating downwards of listed technology companies, outside of those involved in AI, was progressively reflected in reduced appetite for venture investment in private market funds. This impacted valuations as funding rounds became more challenging to close, with fresh money able to negotiate advantageous terms often to the detriment of existing investors unable to fund follow-on investment.

Fortunately, the balance sheet strength that we established in mid-2022 through raising long-term debt capital ahead of the subsequent series of interest rate rises in the UK, provided the capacity to support our portfolio companies selectively where required. Once again, we progressively pared back our initial investment plans to ensure we retained capacity to support our priority portfolio companies into 2024 and ended the year with £227m gross cash.

The mix of our portfolio, substantially in life sciences and energy transition, plus leading companies in virtual reality, cyber resilience and fraud detection, remains highly relevant to the future desired by the societies we serve.

Increasing public policy support for science and innovation

We are increasingly encouraged by evidence of growing public policy support for science and innovation, given that we are one of the UK's leading companies supporting the transition of academic discovery and innovation to successful commercial realisation. We welcomed the Chancellor's announcement in June of a comprehensive package of policies spanning regulation, research and development ("R&D"), infrastructure, skills and planning, all aimed at driving investment, growth and innovation.

Investment capital to meet these objectives is key to delivering the economic growth and jobs needed to secure the improved lifestyle we desire to leave for future generations. Investing to enhance existing technologies and to bring through transformative new technologies aligns fully with our mission to deliver a better future for people and the planet.

Thus, we are also highly supportive of the initiatives announced by the Chancellor in the Spring Budget, the Autumn Statement and the Mansion House reforms to increase investment through UK retirement savings schemes into unlisted equities. The UK has an enviable, indeed leading, position in academic-led innovation and these reforms have highlighted the opportunities available both to scale-up investment support for such business and increase returns to retirees over their investment horizon. Once implemented, we stand to gain from the resulting investment flows.

Investment and Financial Performance in 2023

Notwithstanding the 'risk-off' sentiment across much of the market in 2023, we enjoyed some significant successes and achieved a number of critical milestones; let me draw attention to two.

In our energy transition portfolio, Hysata marked a year of outstanding progress, culminating in being recognised by the COP28 Presidency with an Energy Transition Changemaker award. Hysata's revolutionary high-efficiency electrolyser is designed to deliver the world's lowest cost green hydrogen, a key enabler of the clean energy transition. In December, the Group committed US$15m (£11.8m) to the first close of a fresh funding round for Hysata, which was externally priced at a substantial uplift to its previous round, resulting in our existing stake almost tripling in value, with a fair value uplift of £46.5m.

Istesso completed recruitment for its Phase 2b trial of Leramistat (MBS2320), its lead drug in rheumatoid arthritis, which represents a $25bn market, and expects the data by the first half of this year.

There were also disappointments; Oxford Nanopore (ONT), in which the Group owns a 9.8% stake, saw its share price fall markedly over the year, notwithstanding revenue growth just below the lower end of guidance. While the price decline reduced the value of our holding by £31.9m, we remain convinced of the long-term value of this investment.

Finally, First Light Fusion, which had successfully achieved fusion in 2022, has not yet completed a planned funding round given market conditions and, as a result, we wrote down our investment by £49.6m, or 43%, essentially reversing much of the unrealised gain recognised in 2022 following their announcement of achieving a fusion result.

Driven by write-downs in the portfolio, we recorded a loss of £174.4m for the year; (2022: £344.5m loss). As at 31 December 2023, our Net Asset Value stood at £1,190.3m (2022: £1,376.1m) or 114.8 pence/share (2022: 132.9pence/share). In 2023 we invested £73.2m into the portfolio, out of a total amount raised by the portfolio of £667m and we realised cash from disposals, including deferred cash from prior year disposals of £38.6m (2022 comparatives were respectively £93.5m, approximately £1bn and £28.1m). Our share price ended the year at 58.1p, marginally lower than its entry point to the year of 61.2p.

Addressing the discount to Net Asset Value ('NAV')

The Board set one of its objectives at the outset of 2023 to take steps designed to narrow the discount at which our shares trade, versus the stated NAV per share. We recognise that continuation of this discount is of considerable disappointment to our shareholders.

In conjunction with our advisors and brokers, management significantly increased the outreach made to current and potential shareholders, both in the UK and internationally. Additionally, the Board considered a wide range of alternative structures through which we could conduct our business and discussed these with advisers and, in principle, with a number of our larger shareholders. The outcome of these actions was successful in broadening interest in the Group from those who were not already invested but that has not yet resulted in material new investment. It was also clear that structural change did not offer an obvious route to a valuation uplift, and we concluded, with broad shareholder support, to continue to concentrate management effort on working with our priority portfolio companies, given the many critical events and milestones expected over the coming year. That concentration also resulted in scaling back on some of our international activities and Greg discusses this more fully in his report.

We also concluded that we should pause paying a dividend while our shares stood at a significant discount to NAV and should embark upon a modest share buyback programme, both to capture the discount and evidence whether such market intervention would meaningfully narrow the discount. We announced a buyback programme of up to £20m on 18 December 2023. To date we have bought 5,225,207 shares at an average price of 51.4p.

Director retirement

Our Non-executive colleague, Dr. Elaine Sullivan, will this year have (substantially) completed her third term of three years and, accordingly, the Company announces that she will not be standing for re-election at its annual general meeting ("AGM") on 12 June 2024 and will step down from the Company's board of directors effective from the close of the AGM.

Looking forward to 2024

2024 sees elections in more than 50 countries representing close to half of the world's population and GDP, with many outcomes likely to bring significant change. Two major wars are continuing with no sign of resolution and indeed risk drawing others into conflict. Inflation seems to have peaked in major Western economies, but expectations now are for a more measured pattern of interest rate reductions. Cost of living challenges remain elevated and all of the above contribute to migration patterns that are difficult to control.

As a result, it is likely that risk appetite will remain cautious until at least the electoral map has settled and potential policy changes are digested. The areas in which we invest remain critical to building the future we desire to leave to future generations so we will continue to ensure that we have the people and financial resources to support our portfolio companies as they scale up their contributions to that future. Once again, I look forward to updating you on progress at the end of a year that we anticipate will see many milestones reached.

Sir Douglas Flint

Chairman

13 March 2024

CHIEF EXECUTIVE'S OPERATIONAL REVIEW

Overview

The overall market environment for growth companies and early-stage investing remained challenging during 2023, as Douglas has articulated above. In this context, the Group has made encouraging progress, focusing our capital and time on the most promising opportunities within the three high-growth sectors where we have deep expertise and experience, maintaining our financial strength and taking further action to deliver shareholder returns. Our overall financial performance for the year, a negative return of 13% on NAV per share, was disappointing and below our longer-term aspirations.

Our recent strategy has been one of increased focus, under which around half of our investment over the last two years has been into eight priority companies, while we have deprioritised future investment in the US and ceased plans to raise a fund in China. Nearly 80% of our portfolio value is now concentrated in 20 companies and more than 90% in 40 companies. I remain confident that this increased focus, combined with a significant number of portfolio inflection points in 2024 and beyond, has the potential to deliver compelling returns.

The market opportunity for our investment themes

The Group's overall investment thesis remains that scientific and technological innovation with a clear focus on the three thematic areas where the Group has deep expertise and experience, will address significant societal need and market opportunity allowing us to deliver financial returns with real-world impact.

For a healthier future (life sciences), rapid advancements in biotechnology, pharmaceuticals, and healthcare delivery are driving transformative changes in how we understand, treat, and prevent diseases, presenting a huge economic opportunity for innovation. Worldwide prescription drug sales are estimated to be $1.4tn in 2026, with the well-documented 'patent cliff' for blockbuster drugs putting $10bns of this at risk. EY estimates Biopharma companies have a record-equalling $1.4tn 'firepower' for business development and licencing of potential new drugs. IP Group is strategically positioned to capitalise on this megatrend, with over ten companies now in clinical studies and expecting key data by the end of 2025, including a number of later stage clinical trials.

For a tech-enriched future (deeptech), the global "digital transformation", characterised by the comprehensive integration and relentless increase in sophistication of digital technologies in every aspect of society and business, is the most profound and pervasive megatrend shaping the future of our world. Spending in this area is forecast to reach $3.4 trillion by 2026. IP Group has been investing for many years in the fundamental technologies enabling this transition including artificial intelligence, future computing, human-machine interface and next generation communication innovations. Embracing the digital transformation megatrend not only presents lucrative investment opportunities but also reinforces our commitment to fostering innovation and driving positive change in the global economy.

For a regenerative future (cleantech), the global trajectory continues to converge towards adoption of clean energy solutions. Global investment in the energy transition hit $1.8 trillion in 2023, up 17% on the previous year. Our foresight in recognising this market opportunity has positioned us to capitalise on the accelerating transition towards clean energy, resource efficiency, and environmental sustainability. Leveraging our expertise and networks through our Kiko Ventures brand, we are actively identifying and nurturing disruptive startups and visionary entrepreneurs driving impactful solutions that generate attractive financial returns.

Portfolio focused on high potential opportunities reaching maturity

As noted in our RNS on 30 January 2024, we have made a number of fair value reductions in the portfolio, primarily as a result of a more difficult funding environment. This resulted in a negative return on NAV of 13% or £172.2m (2022: negative return of 20%, £341.1m). As of 31 December 2023, the value of the Group's portfolio was £1,164.9m (2022: £1,258.5m). This is summarised as follows, with further commentary in the Portfolio Review below.

·  Healthier future (life sciences): Disappointing financial performance in a difficult funding environment for Life Sciences companies was balanced by underlying progress within the portfolio, with ten companies expecting key clinical data in the next two years. Most notable is Istesso, which expects Phase 2b data for Leramistat (MBS2320) in rheumatoid arthritis in the first half of this year, and Pulmocide, whose Phase 3 study of its novel anti-fungal for invasive pulmonary Aspergillus is well underway. Key notable non-clinical milestones included Genomics plc's £35m financing (which closed in 2024) to help develop its advanced genetic screening business build-out, and Apollo Therapeutics' $227m Series C financing. The largest fair value reductions were Oxford Nanopore and Hinge Health where, despite continued double-digit revenue growth for both companies, lower revenue multiples applied.

·  Tech-enriched future (deeptech): Our most valuable deeptech holding, Featurespace, continues to impress, posting double-digit revenue growth even at a time of a slowdown in the market more generally. Our early, maturing portfolio of assets attracted large amounts of growth capital including Accelercomm in a £21m series B and Quantum Motion Technologies closed the largest ever funding round for a European quantum computing start-up with over £40m raised. The portfolio did see some impairments caused by specific issues but as 2024 progresses it is, on the whole, well placed to capture growth.

·  Regenerative future (cleantech): the majority of the Kiko portfolio performed well this year, with successful funding rounds for C-Capture, OxCCU, Hysata and Mixergy despite worsening funding conditions. We have grown the Kiko team in anticipation of softening prices for new cleantech investments and anticipate an attractive environment for new investments in the coming year. First close of Hysata Series B generated a fair value uplift of £46.5m in our holding, following significant technical progress. First Light Fusion has not yet completed its planned Series C funding round, and we have reversed the fair value increase from 2022 to reflect this, while noting that the inertial confinement fusion landscape remains buoyant. We take the outcome of COP28 climate conference as broadly positive, with agreement to transition away from fossil fuels entering the final text for the first time and agreement to triple renewables capacity by 2030.

Geographic focus

Over the last 20 years, the Group has played a leading role in creating a vibrant ecosystem for science and technology commercialisation in the UK. We took a pioneering role in partnering with the University of Oxford, were founder investors in dedicated investment vehicles such as Oxford Science Enterprises, Cambridge Innovation Capital and the UCL Technology Fund and remain the most active backer of university spin-outs in the UK, primarily through our market-leading EIS fund manager, Parkwalk Advisors. To this end, 84% of the Group's portfolio by value is UK-based, although many companies provide their products and services to an international customer base.

Our operation in Australia is much younger. However, driven largely by the success of Hysata, a spin-out from the University of Wollongong in New South Wales, the portfolio had another strong year and has delivered the strongest returns since it was established in 2017. Australian portfolio companies are included within the relevant sectors in the portfolio analyses below.

In North America, where the Group has a 58% holding in a fund managed by Longview Innovation, the funding environment for LP funds has remained difficult. Having been unable to secure significant additional funding alongside $10m committed by the Group during 2022, the Longview team has scaled back its overheads and is focused on maximising value from its current portfolio. As part of our strategy, we have deprioritised any further capital to the US platform. While there are a number of potential value inflection points in the Longview portfolio this year, the Group has reduced the value of its holding in the US platform by around 50% to reflect these circumstances.

Further, consistent with our strategy to focus on the highest-growth opportunities, we have decided not to proceed with our plans to raise a fund in China, although continue to actively pursue co-investment from the wider Asia region.

Financial strength during challenging markets

The Group has proactively managed its level of investment during the year and, as a result, remains in a strong financial position with gross cash and deposits of £227m at year end. The Directors took proactive steps to maintain financial strength by securing a private market debt issue in 2022 and reducing investment levels to £73.2m in 2023 from £93.5m in 2022. £38.6m of cash proceeds were received in 2023. In addition, the Group's portfolio remains generally well-funded, having raised £667m in 2023.

Third-party funds under management

The Group has a flexible approach to capital that combines balance sheet monies with earlier-stage, tax-advantaged funds as well as later-stage private capital and now manages or advises £650m (2022: £700m). Having appointed a new Head of Global Capital to focus on third-party funds, the team has more than doubled its engagements with public and private investors in 2023 and continues to pursue further capital in our third-party funds platform.

Approximately three-quarters of the Group's private capital, £469m, is managed by Parkwalk, the Group's specialist EIS fund management subsidiary (2022: £477m). This includes funds managed in conjunction with the universities of Oxford, Cambridge, Bristol and Imperial College London. The Group has further integrated Parkwalk Advisors into the Group as a source of distinctive deal flow and strengthened relationships with industry peers to surface co-investment opportunities. Market data provider Beauhurst again named Parkwalk as the most active investor in the sector.

In May 2023, we received FCA approval for Parkwalk to be a full-scope AIFM (alternative investment fund manager). Parkwalk invested £45.1m in 2023 (2022: £57.4m) in the university spin-out sector across 27 companies (2022: 28). Eight new companies joined the Parkwalk portfolio, two successful exits were completed, returning £24.9m to investors, while two investments were sold for a loss and two were written-off. Parkwalk liaised closely with BEIS, the newly formed DSIT, HMT and HMRC on the financial ecosystem for knowledge-intensive spinout companies and the UK Government's 'science superpower' agenda.

The majority of our remaining funds are managed by our Australian team. The IP Group Hostplus Innovation Fund, managed for top-ten Australian Superannuation fund, Hostplus, now totals A$310m (£163m) and has invested in several of the Group's portfolio companies including Oxford Nanopore, Wave Optics, Oxa and Hysata, providing additive growth capital for companies as they scale. TelstraSuper is also investing alongside IP Group through a co-investment mandate.

Impact

The Group's purpose is to accelerate the impact of science for a better future, delivering financial returns alongside positive, real-world impact. Our strategy to do so is organised around five pillars of activity - 'accelerate value creation'; 'have an impact on the world that counts'; 'develop our unique insight, expertise and access'; 'build a truly distinctive reputation'; and 'be a home for exceptional talent' - underpinned by class-leading internal processes, services, and controls.

We have successfully refreshed the Group's brand identity, aimed at highlighting our expertise and clearly aligning around our impactful purpose. In terms of impact, we have partnered with the Value Balancing alliance to co-create an impact framework and approach for developing KPIs for VCs and have built an impact approach for life sciences and co-convened a working group for VC firms with the Operating Principles for Impact Management (OPIM), to provide a platform that will allow for the sharing of best practice and key learnings around impact. The Group is AAA rated by MSCI, ranked first for our industry group by Sustainalytics and has PRIME status in the ISS ESG corporate rating.

Talent as a key driver of success

The talent and capability within in our investment teams is a key asset for the Group. Strengthening the professional capabilities of our investment teams has been a key focus since the formation of the investment partnerships in 2018. Our investment partners have considerable experience across venture and in their respective domains of commercial specialisation, complemented by strong operational experience. The teams each have a wide network of co-investors, innovators, and entrepreneurs, which brings high-quality pipeline opportunities, complimentary capital and portfolio management talent. We continue to work hard to build stronger networks amongst potential acquirers and to expand our geographical network to help our companies with international reach.

We are also improving the external visibility and reputation of our investment teams, notably with the Kiko brand but also across all our divisions by marketing our thought leadership on social media and speaking at events. All our investment teams have now worked together for an extended period. Team processes have been professionalised and are continuously improving, with investment decision-making delegated appropriately to practitioners.

During 2023 the Group has seen exceptionally low unplanned talent turnover and added a small number of Investment Associates into our Kiko team. We have maintained a 'high' eNPS score, completed our 'values' project and delivered on the second year of our employee-led Inclusion and Diversity (IDP) masterplan. The Group was placed first in the 2024 Honordex Inclusive PE & VC index.

The Artificial Intelligence opportunity

As outlined above, one of the Group's investment areas includes identifying, backing and growing businesses that apply artificial intelligence and machine learning to significant market opportunities as well as the deep technology solutions that will enable the realisation of these opportunities, such as future compute and next generation networks.

We are also taking a proactive approach to the use of generative artificial intelligence (Gen AI) within our business processes, both through the deployment of market leading off-the-shelf solutions to improve team productivity, and the development of in-house, proprietary toolsets for improving efficiency across all our workstreams. We expect that the development of Gen AI tools will have a positive impact on opportunity sourcing, due diligence and market analysis in the shorter term. As an example, we have developed a proprietary IP landscaping tool that leverages the inherent power of large language models to rapidly analyse and deliver insights from bulk data, which is being used initially in our Australian business. We are also actively monitoring the use of Gen AI across the venture capital ecosystem, employing our deep understanding of technology to identify, employ and invest in differentiated solutions that align with our tech-enriched future/digital transformation investment theme.

Continued commitment to shareholder returns

The Group aims to deliver returns to shareholders primarily in the form of long-term capital appreciation. Subject to the Group's capital allocation policy, the majority of cash proceeds will be typically reinvested with a smaller proportion used to deliver a cash return to shareholders. Since the introduction of this approach in 2021, the Group has delivered more than £75m of cash returns to our shareholders via dividends and share buybacks.

Given the continued discount between the Company's share price and its NAV per share, which the Directors believe significantly undervalues the Group's portfolio, we launched a share buyback of up to £20m in December 2023. The Board remains committed to utilising a proportion of realisations to make regular cash returns to shareholders, which will typically be made in the form of share buybacks when the share price discount to NAV exceeds 20%. As previously announced, regular dividend payments will be suspended under such conditions, and accordingly the Board is not recommending a final dividend for 2023.

During 2023, the Group purchased 220,302 shares for £0.1m and a further 5,004,905 shares for £2.6m have been purchased in 2024. In 2023, the Group paid the final 2022 dividend of 0.76 pence per share and an interim dividend of 0.51 pence per share, a total of £13.0m for the year.

In addition, we have more than doubled our investor relations activities with further investor-focussed events as well as our flagship 'Scale it up' event at London's Science Museum in May where we hosted a debate on how the UK can help support more UK innovation to become world-leading companies, showcasing a number of our portfolio companies. We have also increased the number of roadshows the Group undertakes, meeting with shareholders and non-holders in the UK, Europe, US and Middle East.

Outlook

As the UK's most active investor in university spin-outs, we continue to see huge opportunity for the Group to benefit from increasing public policy support for science and innovation with £109m capital across our third party managed funds including Parkwalk still to invest alongside balance sheet funding. While the current macro environment remains challenging, we see continued interest in our portfolio and remain confident that investor appetite for growth companies will return. The Group and its portfolio remain well-funded and we are confident the Group will reap the benefits of our maturing portfolio given the number of key milestones anticipated over the next 12-18 months, particularly in life sciences. The Group is committed to delivering value for all stakeholders and anticipates that the next 18 months could be transformational to fair value growth.

Greg SmithChief Executive Officer 13 March 2024

PORTFOLIO REVIEW BY SECTOR

Overview

The Group has a focused and maturing portfolio of companies that contribute to a healthier future (life sciences), a tech-enriched future (deeptech) and a regenerative future (cleantech, through our Kiko Ventures platform).

In addition, a small number of investments are categorised as platform investments, which are funds or portfolio companies that invest in other opportunities.

Portfolio Review: Healthier future: Life sciences

IP Group's Life Sciences portfolio comprises holdings in 33 companies valued at £567.4m at 31 December 2023.

Oxford Nanopore continues to underperform on a results and share-price basis, culminating in a disappointing results announcement in March, having warned that its 2023 revenues would be lower than its previous guidance range in January 2024. With core growth of 16% in 2023, and revised guidance towards underlying core growth of 20-30% in 2024 and 30% in the mid-term, we continue to believe that the company's long-term fundamentals remain intact. We believe that the company has now rebased its forecast, margins and growth outlook to what we feel is a realistic level, with room for outperformance.

The largest transaction in 2023 for the Group was a £15.0m investment into Istesso, primarily via a convertible note, with a further £10m convertible loan invested in January 2024. We continue to see good progress at Istesso with its Phase 2b study of Leramistat in rheumatoid arthritis due to read out in the first half of 2024. The largest funding round within the portfolio was Apollo Therapeutics' $226.5m Series C financing while, in early 2024, Genomics plc completed a £35m funding round which will help the company build upon its initial commercial traction in the field of advanced genetic screening.

In terms of clinical progress across the portfolio, we saw Mission and Artios Pharma announcing positive Phase 1 data for their lead programmes, and Artios Pharma, Mission, Kynos and Pulmocide all initiating important clinical studies, including Pulmocide's Phase 3 study in invasive pulmonary Aspergillus. We now have ten companies in clinical studies that could provide key value-driving data over the coming two years. We also saw positive outcomes for Autifony, which announced a global licensing deal worth up to $770m with Nasdaq's Jazz Pharmaceuticals which resulted in a £6.1m fair value uplift.

In terms of NAV performance, the value of the portfolio declined by £73.9m (-17%) over the year, driven largely by significant fair value reductions in some key assets, including Hinge Health £17.8m (-33%), Akamis Bio £15.9m (-75%), Oxular £14.1m (-88%), Enterprise Therapeutics £7.9m (-39%), Mission Therapeutics £6.3m (-35%) and Oxehealth £5.2m (-50%). These write-downs resulted from independent valuation reappraisals informed by the more difficult funding and pricing environment, fundraising conducted at depressed prices or, in the case of Oxular, from clinical setbacks.

We expect a more positive year in 2024, with downward pressure on valuations reducing, and evidence that the pharma industry's appetite for acquiring the best clinical assets is only increasing, as witnessed by some very significant transactions announced in late 2023/early 2024.

Portfolio Review: Tech-enriched future: Deeptech

IP Group's Technology portfolio comprises holdings in 32 companies valued at £231.4m at 31 December 2023.

The IP Group Deeptech team invests in breakthrough technologies across four high growth sectors of future compute, applied AI, next generation networks and the human-machine interface, areas in which the UK excels and is increasingly becoming a dominant global force.

While 2023 was a challenging year for the global technology venture market, impacting both the availability of new capital as well as the price of funding rounds, the technology portfolio proved resilient, and we were pleased to have completed all of our key targeted transactions at uplifted or flat valuations. These included a £42m round for Quantum Motion Technologies, the largest ever single investment into a quantum computing startup in the UK, a £21.5m series B round for Accelercomm and a £15.5m round for Garrison Technologies. While there were some impairments to valuations, either where comparator valuation benchmarks reduced and/or where progress was a little slower than planned, we are pleased with the overall performance and firmly believe the deeptech portfolio remains poised for growth in 2024 and stands to benefit both from the continued acceleration of digital transformation across the economy and specifically from the huge potential of new technologies such as generative AI.

In 2023, Featurespace continued to deliver healthy growth with double-digit increases to revenue, a trend which was replicated elsewhere in the portfolio in companies including Itaconix. Garrison, which eliminates cyber threats whilst delivering full web access without putting an organisation's sensitive data and systems at risk, hit its revenue targets to the year ended March 2023 and raised £15.5m of new investment from Legal and General and British Patient Capital, alongside existing investors including IP Group. The company has grown rapidly over the last 4 years, compounding revenues at 64% year on year over this period, with continued attractive growth expected this year.

It was also pleasing to see the completion of a £21.5m series B investment round at our portfolio company Accelercomm, which is supercharging the world's wireless infrastructure. The round was led by Swisscom Ventures and Parkwalk Advisors alongside Hostplus with follow-on funding from all the existing investors. Accelercomm's technology, which can halve the cost of spectrum and power in 5G networks by increasing throughput and reducing latency, is already being used by several of the world's largest corporates, and the company continues to grow through evolving partnerships with the likes of AMD, Vodafone and Lockheed Martin.

Quantum Motion Technologies closed a £42m funding round, the largest ever single investment into a quantum computing startup in the UK. The investment, which the company will use to develop its silicon-based approach to building a cost-effective and scalable quantum computer, was provided by Robert Bosch Venture Capital alongside Porsche SE and British Patient Capital. IP Group and Parkwalk participated alongside all of the company's other existing investors (Inkef, NSSIF, Octopus Ventures and OSE). Another of our quantum computing portfolio companies, Oxford Quantum Circuits, announced its $100m funding round and the public availability of "OQC Toshiko", the world's first enterprise-ready quantum computing platform. IP Group was instrumental in the formation of both these quantum computing companies, and we are proud of their progress in this pioneering field that has the potential to shape the future of computing.

Elsewhere in the portfolio, Audioscenic launched its first commercial product at CES 2023 as the power behind Razer's latest gaming soundbar, the Leviathon V2 Pro (which won a dozen awards), and they showcased new products in both laptops and PC monitors at CES 2024. Intrinsic Semiconductor Technologies, a game-changing company with technology aiming to revolutionise the $100bn non-volatile memory market, far exceeded its technical milestones and will now greatly accelerate its commercial development.

In terms of fair value reductions, we reduced the value of our holding in Teya by £4.5m due to stronger than expected market headwinds although we continue to believe the business has strong growth prospects and excellent fundamentals. Ultraleap also faced challenging conditions in the key eXtended Reality (XR) market which has been slow to materialise, and we have reduced the fair value of our holding by £6.9m. Ultraleap has, nonetheless, secured several key licence agreements in the period with well-recognised names and we remain bullish on the longer-term adoption of XR technologies.

In 2023, the team backed two new opportunities including one in Australia as well as a £3m investment into DeepRender which is developing the next generation of image and video compression technology using an AI-first approach. DeepRender already has commercial engagement with several of the world's top content streamers and looks set to significantly disrupt this market in the years to come. As 2024 unfolds, we expect to see strong growth across our focus portfolio as software sales rebound in the more mature assets, and technologies deployed into new products in our mid and early-stage portfolio. Together this positions the asset base well for value accrual provided the market provides continued access to additional growth and expansion capital.

Portfolio Review: Regenerative future: Cleantech (Kiko Ventures)

The Cleantech (Kiko Ventures) portfolio comprises holdings in 16 companies valued at £275.3m at 31 December 2023.

An early highlight of the year was the $140m Series C fund raise by autonomous vehicle pioneer Oxa in January 2023. The fundraising, which saw new investor Google join the share register, was the largest by a cleantech company in IP Group's history. Google and Oxa have already worked together on simulation and testing technology, and it was highly encouraging to see one of the world's most valuable technology companies take a stake in one of our cleantech assets. Another highlight was electrolyser company Hysata achieving its Series A technical milestone months ahead of schedule, triggering the second tranche of its oversubscribed £24m Series A. The technical progress was impressive with Hysata demonstrating stacks operating at the same exceptionally high 95% efficiency as the single cell experiment reported in Nature in 2021. Hysata subsequently launched its Series B funding round, achieving a first close in January 2023, supported by both Kiko and IP Group Australia. The round achieved a significant uplift to the Series A, reflecting the impressive technical progress made by the company. This resulted in a fair value gain of £46.5m. It is encouraging to see large up-rounds in our cleantech companies against a backdrop of falling valuations in the wider venture ecosystem.

Earlier-stage assets were also successful in fund raising with Oxford spin-outs OxCCU and Mixergy both raising up-rounds. In May, OxCCU, which has breakthrough technology for the synthesis of sustainable aviation fuels (SAFs), raised an oversubscribed £18m Series A. The round was led by well-established US cleantech VC Clean Energy Ventures and was their first investment in a UK company. In January, smart home heating company Mixergy completed a £9m Series B raise, led by OSE, with new investors Nesta and EDP Ventures joining the share register. Mixergy has continued to make good progress and has doubled revenue each year for the past three years. In addition to the four new investments made in 2022, the team completed one new investment in 2023 into smart home energy pioneer Tado°. Tado° is the European leader in smart home energy technology and its smart thermostats, protected by a strong patent portfolio, lead to reductions in home energy costs of 22% on average. The company's offerings are particularly welcome and impactful at the current time of high energy prices and it has now sold a total of 3 million thermostats. Kiko jointly led a ?43m funding round in January 2023 to help the company expand its offering into home energy management, combining its thermostats with time-of-use energy tariffs.

In less welcome news, First Light Fusion has not yet completed its Series C funding round, which was planned to conclude in 2023, leveraging momentum following its fusion result in 2022. While there is still activity in the fusion funding market, there has been a decline in multi-hundred-million funding rounds like those seen in 2021 and targeted by First Light. Given this delay to funding and the change to fusion market sentiment, we have carried out a re-evaluation of our holding in First Light using expert third party input. This has led to a reduction in our holding value of £49.6m. Following the announcement this year of further improvement to net positive gain achieved at the National Ignition Facility lab in the US, there is growing interest in inertial confinement fusion (ICF) technology, as pursued for commercialisation by First Light. The company recently entered into a technology collaboration on ICF with the Sandia federal lab in the US giving access to the Z-machine, the world's most powerful pulse power driver. First Light is the first privately-funded fusion company to fire a shot on the Z-machine and its amplifier technology enabled a new pressure record to be set for the facility.

We have also continued to build the ecosystem around the Kiko brand with a wide range of speaking and clean energy innovation engagement policy activities. As one of the founders of Cleantech for UK, a new cleantech policy initiative, backed by Bill Gates' Breakthrough Energy Ventures, Kiko helped convene a total of £6bn of funds to support the initiative. Cleantech for UK aims to promote UK cleantech champions, drawing on the country's world-class research facilities and investor base, and was launched at Imperial College in February at an event attended by Bill Gates and the Prime Minister. We continue to be a member of the leading energy think tank, the Energy Transitions Commission (ETC), which published an assessment of the role of fossil fuels in the transition ahead of the UN climate change conference COP28 in Dubai. Our view of the COP28 outcome was that the acknowledgement of the need to transition away from fossil fuels represents an important step in the right direction. ETC analysis shows that coal use can and must fall by 85% by 2050, gas by 70% and oil by 95% in order to meet the UN climate goals of limiting global heating to safe levels. The agreements to triple renewables and double the rate of energy efficiency improvement also follow longstanding ETC recommendations. Despite wider headwinds in the venture ecosystem, the need for clean energy technology remains clear and was reiterated at COP28.

Portfolio review: Platform Investments

IP Group's Platform Investments portfolio comprises holdings in two companies and three interests in Limited Partnerships, valued at £90.8m at 31 December 2023.

The Platform Investments portfolio contains holdings in funds and companies that operate in a similar way to IP Group, most significantly our interest in our US platform, managed by Longview Innovation, Oxford Science Enterprises Limited, Cambridge Innovation Capital Limited, and the UCL Technology Fund in all of which IP Group was a founding investor.

Having been unable to secure additional significant funding from third parties other than $10m which the Group committed in 2022, Longview Innovation has taken proactive steps to focus its resources on a smaller number of its most promising portfolio companies, resulting in a rationalisation of the portfolio and a corresponding portfolio fair value reduction of £42.1m.

Portfolio review: Additional Analysis

Number of investments by sector

1 Excludes de minimis holdings, which have a small value to the Group and are not actively managed to the same extent as core holdings

Number of Investments

1 De minimis holdings have a small value to the Group and are not actively managed to the same extent as core holdings, and are accordingly not included in the stated number of companies

Co-investment analysis

Including the £73.2m of capital invested by the Group, the Group's portfolio raised £667m during 2023 (2022: £1.0bn). Co-investment from parties or funds with a greater than 1% shareholding in IP Group plc totalled £1.0m (2022: £24.9m). An analysis of this co-investment by source is as follows:

1 Reflects primary investment only; during 2023 the Group invested £nil via secondary purchase of shares (2022: £3.7m).

2 Includes Parkwalk Advisors and other funds managed by IP Group.

Portfolio funding position

The following table lists information on the expected cash-out dates for portfolio companies IP Group's investment holding value is greater than £4m.

FINANCIAL REVIEW

"We continue to navigate carefully through difficult markets. With £227m gross cash and only 13% of our portfolio needing to raise money in 2024, we are well-positioned for an improvement in investor appetite."

David Baynes, Chief Financial and Operating Officer

·  Loss for the period of (£174.4m) (2022: loss of £344.5m)

·  Net assets were £1,190.3m (2022: £1,376.1m)

·  Net assets per share were 114.8p (2022: 132.9p)

·  Final 2022 dividend of 0.76pps and 2023 interim dividend of 0.51pps paid in period, talking total cumulative dividends and share buy-backs since 2021 to over £75m

·  £60m second tranche of long-term private loan notes drawn

Consolidated statement of comprehensive income

A summary analysis of the Group's performance is provided below:

1 Defined in note 29 Alternative Performance Measures.

2 See net overheads table below and definition in note 29 Alternative Performance Measures.

Net portfolio gains/(losses) consist primarily of realised and unrealised fair value gains and losses from the Group's equity and debt holdings in portfolio companies.

Fair value movements

A summary of the unrealised and realised fair value gains and losses is as follows:

A summary of the largest unrealised and realised fair value gains and losses by portfolio investment is as follows:

Net overheads

Other income

Other income comprises fund management fees and licensing and patent income. In 2023 other income totalled £5.9m (2022: £7.1m), a decrease from 2022, primarily due to a £0.6m decrease in revenues from the Group's patent and license portfolio, and a £0.4m reduction in corporate finance fees due to our decision to largely cease this activity.

Other central administrative expenses

Other central administrative expenses, excluding performance-based staff incentives and share-based payments charges, have increased by £1.6m from the prior year to £25.8m (2022: £24.3m) as a result of increases in non-staff cost across a number of expense categories.

The charge of £2.6m (2022: £3.0m) in respect of the Group's Annual Incentive Scheme, reflects a provisional assessment of performance against 2023 AIS targets which include Group, Team, and Individual performance elements as described in the Directors Remuneration Report.

Other income statement items

The share-based payments charge of £2.6m (2022: £2.9m) reflects the accounting charge for the Group's Restricted Share Plan, Long-Term Incentive Plan and Deferred Bonus Share Plan. This non-cash charge reflects the fair value of services received from employees, measured by reference to the fair value of the share-based payments at the date of award, but has no net impact on the Group's total equity or net assets.

Carried interest plan charge

The carried interest plan credit of £4.7m (2022: £12m charge) relates to the recalculation of liabilities under the Group's carry schemes, with the credit in the year reflecting this year's reduction in value of assets within the scheme. As at 31 December 2023, 70% by value of the Group's equity & debt investments were included within carry scheme arrangements (2022: 67%). The liabilities are calculated based upon any excess of current fair value above cost and hurdle rate of return within each scheme or vintage. Any payments will only be made following the full achievement of cost and hurdle via cash realisations and are only paid on the event of a cash realisation.

Consolidated statement of financial position

A summary analysis of the Group's assets and liabilities is provided below:

The composition of, and movements in, the Group's portfolio are described in the portfolio review above.

Portfolio valuations

Given the public market valuation reductions in the year and slowdown in private company fundraise activity, we have carried our year-end private portfolio valuations against a backdrop of heightened valuation uncertainty. As a response, we have carried out an enhanced valuation process in the period, including obtaining external valuations for eleven (2022: ten) of our largest private assets (Istesso, Featurespace, Oxa, First Light Fusion, Hinge Health, Ultraleap, Ieso Digital Health, Artios Pharma, Mission Therapeutics, Akamis Bio and MOBILion) accounting for 46% (2022: 44%) of the private portfolio value.

In the case of Featurespace, our third-party valuers recommended an increase in valuation in the year, because of strong performance against milestones. In the case of First Light Fusion, Hinge Health, Ultraleap, Ieso Digital Health and Mission Therapeutics they recommended a reduction in our carrying values, reflecting the impact of reduced public market valuations the more challenging fundraise environment and company-specific performance. Valuations of Istesso, Oxa, MOBILion and Artios Pharma were broadly unchanged. In all cases, our carrying values reflect the mid-point or below of the valuation ranges we received from our external valuation consultants.

Although we saw an increase in the proportion of down rounds within our portfolio (i.e. where a funding round is agreed at a lower valuation than the previous funding round price), most of our portfolio fundraises were at higher valuations than the previous funding round. An analysis of funding rounds within our portfolio is as follows:

The above table reflects priced funding rounds in the private portfolio (excluding organic and de minimis companies) and excludes debt funding and funding transactions where a subsequent tranche is drawn based on pre-agreed pricing.

Most of our portfolio remains well funded, with many of our more mature companies evidencing commercial progress or anticipating technical or funding milestones in the next 12-24 months, therefore we remain confident around the resilience of our portfolio.

The table below summarises the valuation basis for the Group's portfolio. Further details on the Group's valuation policy and approach can be found in notes 13 and 14.

Further context: Parkwalk portfolio valuations

Thirteen portfolio companies closed funding rounds at uplifts in valuation, six unchanged and nine at lower valuations than the previously held value.

Other assets

The majority of other long-term and short-term assets relate to amounts receivable on sale of equity and debt investments, representing deferred and contingent consideration amounts to be received in more than one year. Property, plant and equipment includes the lease asset relating to the Group's Kings Cross head office, which increased in the period due to an extension of the lease.

Other long-term liabilities relate to carried interest and revenue share payables, and loans from LPs of consolidated funds. The Group consolidates the assets of a fund in which it has a significant economic interest, IP Venture Fund II LP. Loans from third parties of consolidated funds represent third-party loans into this partnership. These loans are repayable only upon these funds generating sufficient realisations to repay the Limited Partners.

Borrowings

On 2 August 2022, the Group signed a Note Placing Agreement ("NPA") to issue a £120m debt private placement to London-based institutional investors (primarily Phoenix Group). £60m of this was drawn in December 2022 and the balance was drawn in June 2023, with three equal repayment maturities in December in 2027, 2028 and 2029. The interest rate is fixed at an average of 5.25%. Approximately £15m of the proceeds were used to repay early the shorter-dated portion of our EIB debt, leaving £15.6m of EIB debt to be progressively repaid between now and January 2026 (£6.3m of the EIB debt will be repaid within twelve months of the period end).

Under the terms of the NPA, the Group is required to maintain a minimum cash balance of £25m at any time, equity must be at least £500m and gross debt less restricted cash must not exceed 25% of total equity as at the Group's 30 June and 31 December reporting dates. The NPA also includes 'Cash Trap' provisions which stipulate that the Group is required to maintain cash and cash equivalents of not less than £50m at any time and equity must be at least £750m, gross debt less restricted cash must not exceed 20% of total equity as at the Group's 30 June and 31 December reporting dates. In the event of the Cash Trap being triggered, the Group is not permitted to pay or declare a dividend or purchase any of its shares. In addition, investments are restricted to £2.5m per calendar quarter other than those legally committed to. The Group is also required to place the net proceeds of all realisations (over a threshold of £1m) into a blocked bank account. Entering a Cash Trap does not constitute a default under the NPA.

For further details of the Group's loans including covenant details see note 18.

Cash and deposits

At 31 December 2023, the Group's cash and deposits totalled £226.9m, a decrease of £14.6m from a total of £241.5m at 31 December 2022, predominantly due to outflows from portfolio investment of £73.2m, a £19.3m net cash outflow from operations, £13.1m of dividend payments and share buy-backs, offset by net drawdown of debt of £53.8m and realisations of £38.6m.

The principal constituents of the movement in cash and deposits during the period are as follows:

Investments and realisations

The Group invested a total of £73.2m across 33 portfolio companies during the year (2022: £93.5m; 46), and realised cash proceeds of £38.6m (2022: £28.1m).

Largest investments and realisations by portfolio company:

1. Plus, deferred consideration valued at £1.5m (2022: £nil)

Deferred consideration estimated at £9.1m was outstanding at year end (2022: £48.2m), relating to the Group's realisation of Enterprise Therapeutics (£7.6m, exited in 2020) and Zihipp Limited (£1.5m, exited in 2023).

Treasury policy

It remains the Group's policy to place cash that is surplus to near-term working capital requirements on short-term and overnight deposits with financial institutions that meet the Group's treasury policy criteria or in low-risk treasury funds rated prime or above. The Group's treasury policy is described in detail in note 2 to the Group financial statements alongside details of the credit ratings of the Group's cash and deposit counterparties. On 31 December 2023, the Group had a total of £0.1m (2022: £0.1m) held in US Dollars, £nil (2022: £nil) held in Euros, £0.8m (2022: £0.7m) held in Australian Dollars and £0.9m (2022: £0.7m) held in Hong Kong Dollars

Dividend and share buyback

As announced in the Group's half-yearly results, an interim 2023 dividend of 0.51p per ordinary share was paid in September 2023, totalling £5.3m.

On 18 December 2023 the Group announced that, in light of the prevailing discount between the Company's share price and its NAV per share, it had initiated a share buyback of up to £20m. The Board remains committed to making regular cash returns to shareholders from realisations. In future these regular cash returns will normally be made in the form of share buybacks when the share price discount to NAV exceeds 20%. Regular dividend payments will be suspended under such conditions, including consideration of any final dividend for 2023.

Taxation

The Group's business model seeks to deliver long-term value to its stakeholders through the commercialisation of fundamental research carried out at its partner universities. To date, this has been largely achieved through the formation of, and provision of services and development capital to, spin-out companies formed around the output of such research. The Group primarily seeks to generate capital gains from its holdings in spin-out companies over the longer term but has historically made annual net operating losses from its operations from a UK tax perspective. Capital gains achieved by the Group would ordinarily be taxed upon realisation of such holdings; however, since the Group typically holds more than 10% in its portfolio companies and those companies are themselves trading, the majority of the portfolio will qualify for the Substantial Shareholdings Exemption ("SSE") on disposal.

This exemption provides that gains arising on the disposal of qualifying holdings are not chargeable to UK corporation tax and, as such, the Group has continued not to recognise a provision for deferred taxation in respect of uplifts in value on those equity holdings that meet the qualifying criteria. Gains arising on sales of holdings which do not qualify for SSE will ordinarily give rise to taxable profits for the Group, to the extent that these exceed the Group's ability to offset gains against current and brought forward tax losses (subject to the relevant restrictions on the use of brought-forward losses). In such cases, a deferred tax liability is recognised in respect of estimated tax amount payable.

The Group complies with relevant global initiatives including the US Foreign Account Tax Compliance Act ("FATCA") and the OECD Common Reporting Standard.

Alternative Performance Measures ("APMs")The Group discloses alternative performance measures, such as NAV per share and Return on NAV, in this Annual Report. The Directors believe that these APMs assist in providing additional useful information on the underlying trends, performance, and position of the Group. Further information on APMs utilised in the Group, including the details of a new APM for Cash proceeds is set out in note 29.

risk management

Managing risk: our framework for balancing risk and reward

Governance

Overall responsibility for the risk framework and definition of risk appetite rests with the Board who, through regular review of risks, ensure that risk exposure is balanced with an ability to achieve the Group's strategic objectives. The IP Group Risk Council is the executive body that operates to establish, recommend and maintain a fit-for-purpose risk management framework appropriate for the Group and to oversee the effective application of the framework across the business. The Risk Council is chaired by the CFOO, its members include the Company Secretary, Finance Director and Senior Compliance and Risk Manager and it has representation from operational business units as required during the year. Risk identification is carried out through a bottom-up process via operational risk registers maintained by individual teams, which are updated and reported to the Risk Council at least biannually, with additional top-down input from the Executive Committee and with a non-executive review carried out by the Audit and Risk Committee at least annually.

Risk management process

Ranking of the Group's risks is carried out by combining the financial, strategic, operational, reputational, regulatory and employee impact of risks and the likelihood that they may occur. Operational risks are collated into strategic risks, which identifies key themes and emerging risks, and ultimately informs our principal risks, which are detailed in the Principal Risk and Uncertainties section of this report. The operations of the Group, and the implementation of its objectives and strategy, are subject to a number of principal risks and uncertainties. Were more than one of the risks to occur together, the overall impact on the Group may be compounded.

The design and ongoing effectiveness of the key controls over the Group's principal risks are documented using a 'risk and control matrix', which includes an assessment of the design and operating effectiveness of the controls in question. The key controls over the Group's identified principal risks are reviewed as part of the Group's risk management process, by management, the Audit and Risk Committee and the Board during the year. However, the Group's risk management programme can only provide reasonable, not absolute, assurance that principal risks are managed to an acceptable level.

The risk management activity in 2023 included updating the Group's risk appetite statements and key risk indicators, refreshing the Group's existing operational, strategic and principal risk registers, performing a full refresh of the key controls and an assessment of the strategic risks and the appropriateness of our principal risks via executive team and Board risk workshops.

Risk Council activity

During 2023, the Risk Council continued to build on the Group's existing risk management framework, enhancing risk management and internal control processes and working with PwC in an outsourced internal audit capacity and, in doing so, supported the Board in exercising its responsibility surrounding risk management.

While awaiting further updates with detail of the exact requirements and confirmed dates in relation to the proposed legislation and updates to the UK Corporate Governance Code outlined in the BEIS response statement in June 2022, the Risk Council considered an existing programme of 'no-regrets' workstreams identified in a previous scoping review which would support the Group's transition to the expected internal controls regime once announced in H1 2023. This included a financial reporting focused 'record to report' review, an entity level controls review and a treasury controls review to identify and remediate any controls gaps to the expected standard. The Risk Council reviewed a consultation on proposed changes to the UK Corporate Governance Code released in May and facilitated the Group's response to the FRC's consultation with input from Executive and Non-Executive Directors, Company Secretary and People Director. The Risk Council reviewed the proposed changes to the Code and considered an appropriate implementation timeline and resourcing plan to meet the flagged effective date and continue to update our plans in light of emerging guidance. The Risk Council will review the final changes and associated guidance once published and reconsider its existing implementation plan.

The Group adopted a 'Cyber Response Guide' and 'Strategic Ransomware Response Playbook' in 2021 which details how the Group would respond to a cyber crisis addressing the threat that cyber attacks now pose to businesses in every sector. In 2023, the Risk Council onboarded senior external communications support to provide strategic level support and additional resources to supplement a crisis scenario in the future, a 'Crisis Communications Manual' was developed as part of this workstream training was provided to the relevant individuals within the Group. The Risk Council also updated all existing policies, procedures and reference materials and provided refresher training to all staff on plans in place at the Group to respond to a cyber attack, support available, examples of what a ransomware attack might look like and the appropriate steps to take if they identify signs of a compromise. The Risk Council held two communications-focused scenario-based training sessions with the internal and external communications teams and Silver Response Team (SRT) Chair in the year and held an externally facilitated cyber crisis simulation for all members of the SRT including external legal and communications supports. The Risk Council received a formal report from the Baker Mackenzie team who facilitated the all-parties training session noting multiple effective procedures were in place to respond to issues raised in the training scenario, which the SRT were obviously familiar with, excellent engagement from the SRT and other attendees, demonstration of good awareness of many cybersecurity issues and also noted a common-sense approach to responding to complex issues raised and considered practical ways to minimise effects and severity of the simulated cyber attack scenario. Areas for improvement were also identified and the Risk Council is leading the implementation of the actions identified which are expected to supplement current procedures in place.

Other projects in the year included:

· Monitoring the set-up of an RMB fund from ICCV,

· The Group's joint venture with China Everbright, to be operated by the Group's Hong Kong subsidiary and obtaining the requisite licencing authorities from the local regulator to allow this activity,

· Reviewing risk management disclosures in the Annual Report and Accounts,

· Updating the Group's Business Continuity Plans,

· Monitoring training and testing completion rates by employees,

· Testing of key controls over the Group's principal risks,

· Monitoring key risk indicators,

· Performing a control investment review to ensure the desired levels of controls agreed by the Board were in place,

· Continued monitoring of internal audit remediation points,

· Monitoring progress of the Risk Council against its agreed objectives,

· Reviewing a cyber compliance monitoring programme,

· Providing project management support to the ARC in relation to the audit tender process,

· The launch of a formal compliance-focused onboarding programme for new joiners,

· Monitoring of the Group's conflicts procedures,

· Considering the Group's relevant fraud risk categories alongside their relevant controls and potential likelihood and impact

· Continued communication of key outputs of the risk management programme to operational business heads and the wider employee group.

Internal audit reviews were conducted over the following areas:

(i) Cybersecurity review: an 'ethical hacking' type review which consisted of a time-bound collaborative assumed compromise assessment across all IT infrastructures in operation across the Group;

(ii) Investment process review: a review of the investment approval process in the Group's Australian business which considered:

(a) Due diligence and risk assessment,

(b) Review, approval and execution of investment documentation

(c) Regulation and compliance

(iii) ESG review: a review of high-level governance arrangements surrounding internal and external ESG reporting and processes related to data collection and monitoring to inform internal and external ESG reporting.

Priorities for 2024 include further business reviews by the internal audit function, review of the finalised UK Governance Code and associated preparation for updated internal controls requirements, delivering training and scenario-based testing programmes for operational resilience workstreams, and continued enhancement of Group risk reporting and communication across the business. We continue to monitor the impact of the ongoing wars in Ukraine and the Middle East, heightened geopolitical tension, supply chain disruption, inflation and interest rate trends, elevated levels of the cost of living and volatile capital markets and note the greatest impact to the Group has been the marked decline in the valuation of technology and Life Sciences sector listed companies, which we consider heighten our principal risks of macroeconomic environment and access to capital risks.

Emerging risk

The Group's management and Board regularly consider emerging risks and opportunities, both internal and external, which may affect the Group in the near, medium, and long term. The Board considered this subject in detail at its annual risk workshop at the Board Strategy Day in October and continue to consider emerging risks throughout the year. Set out below are examples of some of the potential emerging risks that are currently being monitored by management and the Board:

Summary of principal risks and mitigants

A summary of the principal risks affecting the Group and the steps taken to manage these is set out below. Further discussion of the Group's approach to principal risks and uncertainties is given in the Corporate Governance Statement and in the Audit and Risk Committee report, while further disclosure of the Group's financial risk management is set out in note 3 to the consolidated financial statements. Following the 2023 annual review process, the heatmap below describes the relative potential risks posed by each of the Group's identified principal risks i.e. how the principal risks are ranked against each other.

Consideration of risk appetite

The Group accepts that certain risks are inherent in achieving its strategic aims, which are set out in the strategy section of the report. The Group accepts risk only as it is consistent with the Group's purpose and strategy and where they can be appropriately managed and offer a sufficient risk/reward balance. The Board has determined its risk appetite in relation to each of its principal risks and considered appropriate metrics to monitor performance relative to defined thresholds.

The Board's assessment of risk appetite is provided in the summary of each principal risk below.

Risk appetite ratings defined:

risk management.

Principal risks and uncertainties

KEY

STRATEGIC PILLARS

1 Have an impact on the world that counts

2 Develop our unique insights, expertise and access

3 Accelerate value creation

4 Build a truly differentiated reputation

5 Be a home for exceptional talent

Viability statement

The Directors have carried out a robust assessment of the viability of the Group over a three-year period to December 2026, considering its strategy, its current financial position and its principal risks. The three-year period reflects the time horizon reviewed by the Board, and over which the Group places a higher degree of reliance over the forecasting assumptions used.

The strategy and associated principal risks underpin the Group's three-year financial plan and scenario testing, which the Directors review and approve at least annually. As a business which seeks to accelerate the impact of science for a better future through our portfolio companies, our business model seeks to balance cash investments, the generation of portfolio returns and portfolio realisations. The three-year plan is built using a bottom-up model using assumptions over:

· the level of portfolio investment

· the level of realisations from the portfolio (net of carried interest payments)

· the financial performance (and valuation) of the underlying portfolio companies

· the Group's drawdown and repayment of its debt

· the Group's ability to raise further capital

· the level of the Group's net overheads and

· the level of dividends and share buybacks

Of the Group's principal risks, those relating to insufficient capital (both Group and portfolio companies), insufficient investment returns and macroeconomic conditions are deemed to be the most relevant to the Group's viability assessment due to their potential to impact the Group's liquidity position and net asset position, both of which directly impact the level of headroom over the Group's debt covenants. Other principal risks including; personnel risk; legislation, governance and regulation; cyber and IT and international operations could have an impact on the Group's performance but are less likely to have a direct impact on viability within the assessment period.

To assess the impact of the principal risks highlighted above on the prospects of the Group, the financial plan is stress-tested by modelling severe but plausible and intermediate downside scenarios where adverse impacts across the Group's principal risks relating to insufficient capital, insufficient investment returns and macroeconomic conditions were considered as part of the review. Under the severe downside scenario, a 70% reduction in planned realisations and a 35% decline in portfolio fair values which were considered together with a series of mitigating actions, including reducing planned levels of investment.

Under these stress-testing scenarios, significant reductions to portfolio investments are made to preserve the Group's remaining cash balances. In all scenarios modelled, the Group remains solvent throughout the three-year period with no breach of debt covenants of a "cash trap period" occurring. See Note 19 for further details on cash trap arrangements.

Based on this assessment, the Directors have a reasonable expectation that the Group will continue to operate and meets its liabilities, as they fall due, up to December 2026.

Strategic Report approval

The Strategic Report as set out above has been approved by the Board.

The financial information set out below has been extracted from the Annual Report and Accounts of IP Group plc for the year ended 31 December 2023 and is an abridged version of the full financial statements, not all of which are reproduced in this announcement. Directors' Responsibilities Statement The responsibility statement set out below has been reproduced from the Annual Report and Accounts, which will be published in April 2024, and relates to that document and not this announcement.

Each of the Directors confirms to the best of their knowledge:

? The Group financial statements have been prepared in accordance with UK-adopted International Financial Reporting Standards ("UK-adopted IFRS") and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group.

? The Annual Report and Accounts includes a fair review of the development and performance of the business and the financial position of the Group and the parent company, together with a description or the principal risks and uncertainties that they face.

On behalf of The Board

Sir Douglas Flint Greg Smith

Chairman Chief Executive Officer 

13 March 2023

Consolidated statement of comprehensive income.

For the year ended 31 December 2023

Consolidated statement of financial position.

As at 31 December 2023

Registered number: 04204490

The accompanying notes form an integral part of the financial statements. The financial statements were approved by the Board of Directors and authorised for issue on 13 March 2024 and were signed on its behalf by:

Greg Smith

Chief Executive Officer

David Baynes

Chief Financial Officer

Consolidated statement of cash flows.

For the year ended 31 December 2023

1 In the current year interest paid and interest received on deposits have been shown separately. The directors have chosen not to represent the prior year comparatives as the amounts are immaterial.

The accompanying notes form an integral part of the financial statements.

Consolidated statement of changes in equity. For the year ended 31 December 2023

1. Share premium - Amount subscribed for share capital in excess of nominal value, net of directly attributable issue costs.

2. Retained earnings - Cumulative net gains and losses recognised in the consolidated statement of comprehensive income net of associated share-based payments credits and distributions to shareholders.

3. Non-controlling interest - Share of profits attributable to the Limited Partners of IP Venture Fund II LP.

4. Issue of shares - Share premium in connection with the Interim Scrip Dividend, the Group has received valid elections from shareholders resulting in a requirement to issue new ordinary shares of 2p each ("New Shares").

5. Purchase of treasury shares - Reflects the issue of 220,302 ordinary shares, with an aggregate value of £0.1m, these were purchased by the Company during the year and are held in treasury. Total value including costs was £0.1m. (2022: 7,429,494 shares purchased for total value of £8.0m, total including costs of £8.0m). These shares were purchased for the £20m share buyback share buyback approved by the Board in December 2023.

6. Equity-settled share-based payments - amounts recognised in respect of the Group's share-based payments schemes recognised as a subsidiary investment in the Company accounts with a corresponding entry against equity.

7. Ordinary dividends - Of the £13.0m dividends paid in 2023, £13.0m was settled in cash (2022: £12.7m total, £12.3m cash, £0.4m Scrip). No new shares were issued in respect of scrip dividends in 2023 (2022: 485,569 shares issued).

8. Currency translation - Reflects currency translation differences on reserves non-GBP functional currency subsidiaries. Exchange differences on translating foreign operations are presented before tax.

Notes to the consolidated financial statements.

1. Basis of preparation

A) Basis of preparation

The Annual Report and Accounts of IP Group plc ("IP Group" or the "Company") and its subsidiary companies (together, the "Group") are for the year ended 31 December 2023. The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated. The Group financial statements have been prepared and approved by the directors in accordance with UK-adopted international accounting standards ("UK-adopted IFRS").

The preparation of financial statements in compliance with IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in the most appropriate selection of the Group's accounting policies. The areas where significant judgements and estimates have been made in preparing the financial statements and their effect are disclosed in note 2.

Going concern

The financial statements are prepared on a going concern basis. The directors have completed a detailed financial forecast alongside severe but plausible scenario-based downside stress-testing, including the impact of declining portfolio values and a reduced ability to generate portfolio realisations.

At the balance sheet date, the Group had cash and deposits of £226.9m, providing liquidity for at least two years' operating expenses, portfolio investment and debt repayments at recent levels. Furthermore, the Group has a portfolio of investments valued at around £1.2bn, which is anticipated to provide further liquidity over the forecast period. Accordingly, our forecasting indicates that the Group has adequate resources to enable it to meet its obligations including its debt covenants and to continue in operational existence for at least the next twelve months from the approval date of the accounts. For further details see the Group's viability statement above.

Changes in accounting policies

(i) New standards, interpretations and amendments effective from 1 January 2023

No new standards, interpretations and amendments effective in the year have had a material effect on the Group's financial statements.

(ii) New standards, interpretations and amendments not yet effective

No new standards, interpretations and amendments not yet effective are expected to have a material effect on the Group's future financial statements.

(B) Basis of consolidation

IFRS 10 Investment Entity Exemption

IFRS 10 defines an investment entity as one which:

a. Obtains funds from one or more investors for the purpose of providing those investors with investment management services

b. Commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both

c. Measures and evaluates the performance of substantially all of its investments on a fair value basis

We believe that IP Group plc does not meet this definition of an investment entity with the key factors behind this conclusion being:

? the absence of specific exit strategies for early-stage assets (indicating condition (b) above is not satisfied)

? the ability to hold investments indefinitely (indicating condition (b) above is not satisfied)

? the flexibility to explore the direct commercialisation of intellectual property within the Group if that is determined to be the most attractive means of generating value for shareholders. (indicating condition (a) above is not satisfied)

Accordingly, we have applied IFRS 10 consolidation principles for each group of entities as follows:

(i) Subsidiaries

Where the Group has control over an entity, it is classified as a subsidiary. Typically, the Group owns a non-controlling interest in its portfolio companies; however, in certain circumstances, the Group takes a controlling interest and hence categorises the portfolio company as a subsidiary. As per IFRS 10, an entity is classed as under the control of the Group when all three of the following elements are present: power over the entity; exposure to variable returns from the entity; and the ability of the Group to use its power to affect those variable returns.

In situations where the Company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights, it is considered that de facto control exists. In determining whether de facto control exists the Group considers the relevant facts and circumstances, including:

? The size of the Company's voting rights relative to both the size and dispersion of other parties who hold voting rights;

? Substantive potential voting rights held by the Company and by other parties;

? Other contractual arrangements; and

? Historic patterns in voting attendance.

In assessing the IFRS 10 control criteria in respect of the Group's private portfolio companies, direction of the relevant activities of the company is usually considered to be exercised by the company's board, therefore the key control consideration is whether the Group currently has a majority of board seats on a given company's board, or is able to obtain a majority of board seats via the exercise of its voting rights. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full. The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets and liabilities are initially recognised at their fair values at the acquisition date. Contingent liabilities dependent on the disposed value of an associated investment are only recognised when the fair value is above the associated threshold. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are consolidated until the date on which control ceases.

(ii) Associates/portfolio companies

The majority of the Group's portfolio companies are deemed to be Associates, as the Group has significant influence (generally accompanied by a shareholding of between 20% and 50% of the voting rights) but not control. A small number of the Group's portfolio companies are controlled and hence consolidated, as per section (i) above.

As permitted under IAS 28, the Group elects to hold investments in Associates at fair value through profit and loss in accordance with IFRS 9. This treatment is specified by IAS 28 Investment in Associates and Joint Ventures, which permits investments held by a venture capital organisation or similar entity to be excluded from its measurement methodology requirements where those investments are designated, upon initial recognition, as at fair value through profit or loss and accounted for in accordance with IFRS 9 Financial Instruments. Therefore, no associates are presented on the consolidated statement of financial position.

Changes in fair value of associates are recognised in profit or loss in the period of the change. The Group has no interests in Associates through which it carries on its operating business. During 2023, the Group made a £0.6m investment into a Joint Venture established in preparation for potential fund operations in China. Joint ventures are held at fair value with any change in value recognised through the income statement.

The disclosures required by Section 409 of the Companies Act 2006 for associated undertakings are included in note 13 of the Company financial statements. Similarly, those investments which may not have qualified as an Associate but fall within the wider scope of significant holdings and so are subject to Section 409 disclosures of the Companies Act 2006 are included in note 11 of the Company financial statements.

(iii) Limited Partnerships and Limited Liability Partnerships ("Limited Partnerships")

a) Consolidated Limited Partnership fund holdings

The Group has a holding in the following Limited Partnership fund, which it determines that it controls and hence consolidates on a line by line basis:

In order to determine whether the Group controls the above funds, it has considered the IFRS 10 control model and related application guidance. In respect of IPVFII, the Group has power via its role as fund manager of the partnership, and exposure to variable returns via its 33.3% ownership interest, resulting in the conclusion that the Group controls and hence consolidates the fund.

b) Other non-consolidated Limited Partnership fund holdings

In addition to Limited Partnerships where Group entities act as general partner and investment manager, the Group has interests in three further entities which are managed by third parties:

The rationale for IPG Cayman LP's categorisation as a non-consolidated fund is considered a significant accounting judgment and is set out in note 2.

The Group has a 46.4% interest in the total capital commitments of the UCL Fund. The Group has committed £24.8m to the fund alongside the European Investment Fund ("EIF"), University College London and other investors. Participation in the UCL Fund provides the Group with the opportunity to generate financial returns and visibility of potential intellectual property from across University College London's research base.

The Group has an 17.7% interest in the total capital commitments of Technikos, a fund with an exclusive pipeline agreement with Oxford University's Institute of Biomedical Engineering.

See note 27 for disclosure of outstanding commitments in respect of Limited Partnerships.

iv) Other third party funds under management

In addition to the Limited Partnership fund IPVFII, described above, the Group also manages other third-party funds, including within its Parkwalk business unit, described in further detail in the portfolio review section above, and on behalf of Australian superannuation fund Hostplus. In both cases, the Group has no direct beneficial interest in the assets being managed, and its sole exposure to variable returns relates to performance fees payable on exits above a specified hurdle. As a result, the Group is not deemed to control these managed assets under IFRS10 and they are not consolidated.

v) Non-controlling interests

The total comprehensive income, assets and liabilities of non-wholly owned entities are attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests.

vi) Business combinations

The Group accounts for business combinations using the acquisition method from the date that control is transferred to the Group (see (i) Subsidiaries above). Both the identifiable net assets and the consideration transferred in the acquisition are measured at fair value at the date of acquisition and transaction costs are expensed as incurred. Goodwill arising on acquisitions is tested at least annually for impairment. In instances where the Group owns a non-controlling stake prior to acquisition the step acquisition method is applied, and any gain or losses on the fair value of the pre-acquisition holding is recognised in the consolidated statement of comprehensive income.

c) Other accounting policies

Regulated capital

Top Technology Ventures Limited and Parkwalk Advisors Ltd, are Group subsidiaries which are subject to external capital requirements imposed by the Financial Conduct Authority ("FCA"). Similarly, the Group's subsidiary in Hong Kong IP Group Greater China Services Limited is subject to external capital requirements imposed by the Securities and Futures Commission of Hong Kong ("SFC"). As such these entities must ensure that they have sufficient capital to satisfy their respective requirements. The Group ensures it remains compliant with these requirements as described in their respective financial statements.

Cash flow statement classification of portfolio investments

Cash flow relating to portfolio investments have been presented as investing cash flows as opposed to cash flows from operating activities. Management considers this to be an appropriate classification representing the fact that the relevant cashflows are allocated towards resources intended to generate future income and cash flows.

2. Significant accounting estimates and judgements

The directors make judgements and estimates concerning the future. Estimates and judgements are continually evaluated and are based on historical experience and other factors, such as expectations of future events, and are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions which have the most significant effects on the carrying amounts of the assets and liabilities in the financial statements are discussed below.

(i) Valuation of unquoted equity and debt investments and limited partnership interests (significant estimate)

The Group's accounting policy in respect of the valuation of unquoted equity and debt investments is set out in note 13, and in respect of limited partnership interests in note 14. In applying this policy, the key areas over which judgement are exercised include:

? Consideration of whether a funding round is at arm's length and therefore representative of fair value.

? The relevance of the price of recent investment as an input to fair value, which typically becomes more subjective as the time elapsed between the recent investment date and the balance sheet date increases.

? In the case of companies with complex capital structures, the appropriate methodology for assigning value to different classes of equity based on their differing economic rights.

? Where an upwards or downwards calibration adjustment to a funding transaction valuation to reflect positive or negative developments within the company in question, the size of the adjustment made.

? Where using valuation methods such as discounted cash flows or revenue multiples, the assumptions around inputs including the probability of achieving milestones and the discount rate used, and the choice of comparable companies used within revenue multiple analysis.

? Where valuations are based on future events such as sales processes or future funding rounds, the appropriate level of execution risk to be applied to the anticipated event when assessing its valuation impact as at the balance sheet date.

? Debt investments typically represent convertible debt; in such cases judgement is exercised in respect of the estimated equity value received on conversion of the loan.

Valuations are based on management's judgement after consideration of the above and upon available information believed to be reliable, which may be affected by conditions in the financial markets. Due to the inherent uncertainty of the investment valuations, the estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. Note 13 provides disclosure details on sensitivity and estimation uncertainty.

(ii) Application of IFRS 10 in respect of Istesso Limited and IPG Cayman LP (significant judgement)

Istesso Limited

In respect of Istesso Limited, although the Group has a 56.5% undiluted economic interest in the company, the Group holds a significant proportion of its equity via non-voting shares resulting in it holding less than 50% of the voting rights at the company. Under Istesso's Articles of Association, strategic and day-to-day decisions over running of the business rest with Istesso's board of directors rather than through shareholder voting rights attached to direct ownership of equity interests held in the entity. In this respect, power over Istesso is exercised predominantly through directors' meetings, on which IP Group is not deemed to have majority representation. As such, the relationship between Istesso and IP Group is designed in such a way that "shareholder" voting rights are not the dominant factor in deciding who directs the investee's relevant activities, but it is the directors who do so. IP Group does not control the board of Istesso Limited via a majority of board directors, and is specifically prevented from appointing additional directors to gain control of the board via restrictions in Istesso's Articles of Association.

During the year, the Group provided a £13.5m convertible loan to Istesso Limited. This was in addition to a £10m convertible loan which was provided in 2022. The terms of the loans contain specific provisions preventing their conversion where this would result in IP Group obtaining control of Istesso. In addition, the Group provided £1.5m equity funding to Istesso in 2023. As part of this transaction, convertible loans advanced by IP Group and a third party in 2020 converted into equity, leading to a marginal increase in IP Group's economic interest (from 56.4% to 56.5%), but a decrease in IP Group's voting rights as a result of IP Group's debt conversion being into non-voting shares.

Based on an updated control assessment, including considerations around whether IP Group has 'de facto' control of Istesso including inter alia the number of voting shares held by the Group and its connected parties and the dispersion of other parties' voting rights, we have concluded that the Group does not control Istesso Limited under IFRS 10.

Had we concluded that consolidation in the current year was appropriate, the impact on the Group Balance Sheet would have been to recognise Istesso Limited's assets and liabilities and to recognise additional intangible assets including goodwill based on the fair value of the company at acquisition. The impact on the Group Income Statement would have been the recognition of Istesso Limited's costs from the point of acquisition. Furthermore, any subsequent fair value movements in the debt and equity of Istesso Limited would not be recognised until the point where IP Group was no longer deemed to control Istesso Limited.

IPG Cayman LP

The Group's US portfolio is held via a limited partnership fund, IPG Cayman LP, which was set up in 2018 to facilitate third party investment into this portfolio. The fund is managed by Longview Innovations Inc., formerly an operating subsidiary of the Group. Prior to 2021, the Group was judged to control both IPG Cayman LP and Longview innovations Inc. under IFRS 10 and hence both entities were consolidated.

In 2021, several events took place which caused us to reassess the Group's control of both entities:

? IPG Cayman LP raised additional third-party funds in the first half of 2021, which reduced the Group's stake in the fund from 80.7% to 58.1% and revised the fund's Limited Partnership Agreement to reduced the Group's rights to replace the fund manager.

? Investors in the 2021 IPG Cayman LP funding round hold an option to subscribe additional funds which, if exercised, would result in IP Group holding less than 50% in the fund.

? In November 2021 the Group disposed of its equity in IPG Cayman LP's fund manager, Longview Innovations Inc. and hence no longer controls the fund manager.

As a result of these changes, our control assessment concluded that Longview Innovations Inc, is acting as an agent on behalf of all investors in the Cayman LP and not solely IPG plc, therefore the Group no longer controls IPG Cayman LP. The Group therefore ceased to consolidate it from November 2021.

Arriving at this conclusion required the application of judgement, most significantly in assessing the application guidance contained in IFRS 10 B19 which suggests that in some instances a special relationship may exist (such as the fact that we remain the largest individual investor in the fund), implying that an investor has a more than passive interest in the investee. Having considered this guidance we have concluded that on balance the Group does not have power over IPG Cayman LP and hence does not control it.

During 2023, the Group advanced $10m into IPG Cayman LP via a Simple Agreement for Future Equity ("SAFE"). The terms of this SAFE were consistent with those of another third party who entered into a SAFE with IPG Cayman LP in the year and did not confer any additional substantive rights to the Group in the normal course of business and as a result did not change the consolidation conclusion in respect of IPG Cayman LP.

Had we concluded that consolidation was appropriate in the current year, the impact on the Group Balance Sheet would have been a gross-up adjustment to reflect the full value of IPG Cayman LP's assets and liabilities, with no impact on the Group's net assets. The impact on the Group Income Statement would have been to recognise IPG's gross portfolio fair value movements and costs from the date of acquisition, with profits attributable to minority interest in IPG Cayman LP being reflected as a movement in Minority Interest.

3. Financial risk management

As set out in the principal risks and uncertainties section above, the Group is exposed, through its normal operations, to a number of financial risks, the most significant of which are market, liquidity and credit risks.

In general, risk management is carried out throughout the Group under policies approved by the Board of Directors. The following further describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

A) Market risk

Price risk

The Group is exposed to equity securities price risk as a result of the equity and debt investments, and investments in Limited Partnerships held by the Group and recognised as at fair value through profit or loss.

The Group mitigates this risk by having established investment appraisal processes and asset monitoring procedures which are subject to overall review by the Board. The Group has also established corporate finance and communications teams dedicated to supporting portfolio companies with fundraising activities and investor relations.

The Group holds ten investments valued at £203.8m which are publicly traded (2022: 13, £228.7m), and the remainder of its investments are not traded on an active market.

The net portfolio loss in 2023 of £160.5m represents a 13% decrease against the opening balance (2022: loss of £304.3m, 21.5%). Sensitivity analysis showing the impact of movements in quoted equity and debt investments is disclosed in Note 13, and movements in Limited and Limited Liability interests is shown in Note 14.

(ii) Foreign exchange risk

The Groups' main exposure to foreign currency risk is via its investment portfolio, which is partially denominated in US dollars, Australian dollars, Euros and Swedish Krona. Further details of currency exposure in the portfolio are given in notes 13 and 14.

The Group's US dollar-denominated proceeds included in deferred consideration at December 2023 was £9.4m (2022: £35.5m). The reduction is largely due to the receipt of US dollar-denominated proceeds totalling £30.8m in the first half of 2023 relating to the disposal of WaveOptics.

The Group periodically enters into forward foreign exchange contracts to mitigate risk of exchange rate exposure in respect of non GPD-denominated proceeds. As at 31 December 2023 the notional amount of the forward foreign exchange contracts held by the Company was £nil (2022: $26.3m). The settlement date of the contacts outstanding in 2022 was 30 June 2023.

(iii) Interest rate risk

The Group holds a debt facility with the European Investment Bank and a loan note facility primarily with Phoenix Group with the overall balance as at 31 December 2023 amounting to £135.6m (excluding setup costs). These loans are all subject to fixed rate interest (following the repayment of variable rate loans in the year) being subject to an average fixed rate interest of 4.99% (2022: 4.65%).

For further details of the Group's loans including covenant details see note 19.

The other primary impact of interest rate risk to the Group is the impact on the income and operating cash flows as a result of the interest-bearing deposits and cash and cash equivalents held by the Group.

(iv) Concentrations of risk

The Group is exposed to concentration risk via the significant majority of the portfolio being UK-based companies and thus subject to the performance of the UK economy. In recent years, the Group has decreased the scale of its operations in the US as a result of the dilution of its holding in IPG Cayman LP. The group has, however, the scale of its operations in Australia have increased as a result of additional investment in this geography and portfolio value gains.

The Group mitigates this risk, in co-ordination with liquidity risk, by managing its proportion of fixed to floating rate financial assets. The table below summarises the interest rate profile of the Group.

At 31 December 2023, if interest rates had been 1% higher/lower, post-tax loss for the year, and other components of equity, would have been £2.2m (2022: £2.0m) higher/lower as a result of higher interest received on cash & deposits.

B) Liquidity risk

The Group seeks to manage liquidity risk, to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The Group's treasury management policy asserts that at any one point in time no more than 60% of the Group's cash and cash equivalents will be placed in fixed-term deposits with a holding period greater than three months. Accordingly, the Group only invests working capital in short-term instruments issued by reputable counterparties. The Group continually monitors rolling cash flow forecasts to ensure sufficient cash is available for anticipated cash requirements.

C) Credit risk

The Group's credit risk is primarily attributable to its deposits, cash and cash equivalents, debt investments and trade receivables. The Group seeks to mitigate its credit risk on cash and cash equivalents by making short-term deposits with counterparties, or by investing in treasury funds with an "AA" credit rating or above managed by institutions. Short-term deposit counterparties are required to have most recently reported total assets in excess of £5bn and, where applicable, a prime short-term credit rating at the time of investment (ratings are generally determined by Moody's or Standard & Poor's). Moody's prime credit ratings of "P1", "P2" and "P3" indicate respectively that the rating agency considers the counterparty to have a "superior", "strong" or "acceptable" ability to repay short-term debt obligations (generally defined as having an original maturity not exceeding 13 months). An analysis of the Group's deposits and cash and cash equivalents balance analysed by credit rating as at the reporting date is shown in the table opposite. All other financial assets are unrated.

1. The Group holds £66.7m (2022: £54.6m) with JP Morgan GBP liquidity fund, which has a AAAMMF credit rating with Fitch.

2. The Group holds £1.3m (2022: £9.5m) with Arbuthnot Latham, a private bank with no debt in issue and, accordingly, on which a credit rating is not applicable. Bloomberg assess Arbuthnot Latham's 1-year default probability at 0.020408% (2022: 0.2107%).

The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. The Group has detailed policies and strategies which seek to minimise these associated risks including defining maximum counterparty exposure limits for term deposits based on their perceived financial strength at the commencement of the deposit. The single counterparty limit for fixed term deposits in excess of 3 months at 31 December 2023 was the greater of 60% of total group cash or £50m (2022: 60%, £50m). In addition, no single institution may hold more than the higher of 50% of total cash or £50m. (2022: 50%, £50m).

The group's exposure to credit risk on debt investments is managed in a similar way to equity security price risk, as described above, through the Group's investment appraisal processes and asset monitoring procedures which are subject to overall review by the Board. The maximum exposure to credit risk for debt investments, receivables and other financial assets is represented by their carrying amount.

4. Revenue from services

Revenue from services is derived from the provision of advisory and venture capital fund management services or from licensing activities, royalty revenues and patent cost recoveries.

5. Operating segments

For both the year ended 31 December 2023 and the year ended 31 December 2022, the Group's revenue and profit before taxation were derived largely from its principal activities within the UK.

For management reporting purposes, the Group is currently organised into five operating segments:

i. Venture Capital investing within our 'Healthier future' thematic area

ii. Venture Capital investing within our 'Tech-enriched future' thematic area

iii. Venture Capital investing within our 'Regenerative future' thematic area

iv. Venture Capital investing: Other, representing investments not included within our three thematic areas above, including platform investments

v. the management of third party funds and the provision of corporate finance advice

Reporting line items within Venture Capital investing which are not allocated by thematic sector are presented in the 'Venture Capital investing: other' segment. The element of our 'Healthier future' thematic area relating to Oxford Nanopore Technologies Limited is disclosed separately given its size.

These activities are described in further detail in the strategic report above.