Imperial Innovations Group Regulatory News (IVO)

7 April 2016

Imperial Innovations Group plc

Strategic relationships developed and additional funds raised

Imperial Innovations Group plc (AIM: IVO, "Innovations" or "the Group"), a leading technology commercialisation and investment group, has published its results for the six months ended 31 January 2016.

Strategic developments

· Broadened access to high quality IP

o Formal agreement with UCL Technology Fund

o Participation in Apollo Therapeutics linking university IP from UCL and University of Cambridge with three global pharmaceutical partners - AstraZeneca, GlaxoSmithKline and Johnson & Johnson

· Raised £100.0 million before costs via a placing in February 2016

Portfolio developments

· £27.5 million invested in 17 companies (H1 2015: £22.4 million in 13 companies)

· Led three major private funding rounds as the unquoted portfolio continues to mature

o £19.0 million Kesios Therapeutics Limited

o £31.5 million Inivata Limited

o Post period end £60.0 million MISSION Therapeutics Limited

· Six new companies added to unquoted investment portfolio with a total investment of £10.0 million

· Post period end invested £11.4 million taking the total invested in this financial year to £38.9 million

Financial highlights

· Net portfolio value up by £27.9 million to £355.1 million (FY 2015: £327.2 million)

· Pre-tax loss of £5.9 million (H1 2015: pre-tax loss of £7.0 million) primarily as a result of a £9.8 million decrease in the net fair value of quoted portfolio

· Net assets of £415.9 million (FY 2015: £420.1 million). Pro forma net assets of £512.9 million including the net proceeds of the placing

Martin Knight, Chairman of Imperial Innovations, said:

"Since the end of December, the Group has accomplished three key developments; two strategic agreements and post period-end a £100.0 million fund raising, which have notably strengthened our position.

"The agreements with the UCL Technology Fund and Apollo Therapeutics have significantly increased our visibility of technology coming from UCL and the University of Cambridge, as well as both broadening and deepening our existing relationships with three of the world's leading pharma companies.

"We also delivered on our promise to increase our investment focus on technology. All six of the new companies added to our portfolio during the first half were technology companies, with all but one in the ICT and digital sectors.

"Overall, we have continued to deploy our capital at speed, investing £27.5 million across 17 companies, including £10.0 million invested in the new additions in the period. Collectively the portfolio has raised £76.0 million of total investment in the first six months of the year.

"We now have £238.6 million available for investment and operations, which puts us in a very strong position with ample capital to continue to scale investment within our maturing portfolio as well as maximise the opportunities expected from the new alliances with UCL Technology Fund and Apollo Therapeutics."

A pdf copy of the results is available at http://www.imperialinnovations.co.uk/interim2016.pdf

Enquiries:

About Imperial Innovations - www.imperialinnovations.co.uk

Imperial Innovations Group plc ("Innovations") creates, builds and invests in pioneering technology companies and licensing opportunities developed from outstanding scientific research from the 'Golden Triangle', the geographical region broadly bounded by London, Cambridge and Oxford. This area has an unrivalled cluster of outstanding academic research and technology businesses, and is home to four of the world's top 10 universities, as well as leading research institutions, the cream of the UK's science and technology businesses and many of its leading investors.

Innovations supports scientists and entrepreneurs in the commercialisation of their ideas, through the licensing of intellectual property, by leading the formation of new companies, by recruiting high-calibre management teams and by providing investment and encouraging co-investment. Innovations remains an active investor over the life of its portfolio companies, with the majority of Innovations' investment going into businesses in which it is already a shareholder.

Since becoming a public company in 2006, Innovations has raised £346.0 million of equity from investors, which has enabled it to invest in some of the most exciting spin-outs to come out of UK academic research. Post period end the Group completed a Placing raising an additional £97.0 million from investors after expenses. £11.6 million of the proceeds are due on the issue of deferred shares following regulatory approval. In addition, the Group has agreed £80.0 million in loan facilities from the European Investment Bank ("EIB"), including the undrawn £50.0 million second loan facility secured in July 2015.

Between Innovations' admission to AIM (August 2006) and 31 January 2016, Innovations has invested a total of £264.3 million across its portfolio companies, which have raised collectively investment of over £1.3 billion.

Chief Executive's Report

Overview

Innovations reported another period of strong progress as it continued to develop its increasingly mature portfolio and secured two key strategic alliances.

Since the end of December, the Group has accomplished three key developments which have materially strengthened its overall position. Innovations signed an agreement with UCL Technology Fund providing formal access to IP created by UCL researchers and was instrumental in the creation of Apollo Therapeutics, which aims to accelerate the development of new medicines with three large pharmaceutical companies involved in the partnership. To support these initiatives and to continue to maintain the Group's interests in larger later stage funding rounds from its maturing portfolio, as well as new opportunities, Innovations raised £100.0 million (before expenses) by way of a placing in February 2016.

The Group's overall net portfolio value increased by £27.9 million to £355.1 million (31 July 2015: £327.2 million), driven by a combination of increased investment and broad-based net gains in its unquoted portfolio.

The increase is comprised of investments of £27.5 million across 17 companies and fair value gains of £12.7 million, less disposals of £0.1 million and fair value losses of £12.2 million.

The Group's net assets were £415.9 million (2015: £420.1 million). Pro forma net assets were £512.9 million including the net proceeds of the placing.

The performance of the portfolio has been good, with many of the companies making significant technical, clinical and commercial progress. In addition, the Group continued to source outstanding IP from within the 'Golden Triangle', the region broadly bounded by London, Oxford and Cambridge, and added 6 new portfolio companies to its accelerated growth portfolio during the period, a much faster rate than in the same period last year (H1 2015: 1; 31 July 2015: 6). There is no shortage of opportunities and the Group is ahead of plan, which means it can continue to be highly selective whilst still meeting its full year objective of adding 8-10 companies during the year.

As at 31 January 2016, the Group's portfolio consisted of holdings in 105 companies. The Group's net unquoted portfolio was valued at £255.1 million (31 July 2015: £220.4 million). The increase in value of £34.7 million is comprised of investments of £24.5 million and fair value gains of £12.7 million less disposals of £0.1 million and fair value losses of £2.4 million.

The Group's quoted portfolio comprises four companies (Circassia Pharmaceuticals plc, Abzena plc, Oxford Immunotec Global plc and IXICO plc) and was valued at £100.0 million at 31 January 2016 (31 July 2015: £106.8 million). The net fair value of the quoted portfolio fell by £9.8 million. Investments of £3.0 million were made in the quoted portfolio in the period.

Trading revenue was lower, with the Group reporting revenues of £2.2 million (H1 2015: £2.8 million). The pipeline of IP remains strong and this now includes prospects for new licence deals, as well as new ventures.

Net fair value gains of £10.3 million in the unquoted portfolio were offset by £9.8 million of fair value losses in the quoted portfolio and as a result, the Group is reporting a net fair value gain of £0.5 million in the period. The movement in the quoted portfolio contributed to a loss of £5.9 million (H1 2015: £7.0 million loss)

As at 31 January 2016, the Group had cash and short-term investments of £91.6 million (31 July 2015: £128.1 million).

Post the period end the Group raised an additional £97.0 million from investors after expenses. Including the undrawn £50.0 million second loan facility secured from the EIB in July 2015 the Group therefore has £238.6 million available for investment and operations.

Outlook

The Board remains confident that from within the Group's maturing portfolio there is the potential for a number of companies to generate significant returns.

Additionally, as demonstrated by the number of new companies added to the portfolio, the Group continues to see a healthy stream of new investment opportunities derived from outstanding research within the Golden Triangle.

The Group has ample capital to scale up its investment in the significant opportunities within its maturing portfolio, sustain the current rate of investment, and maximise the opportunities expected from the new alliances with UCL Technology Fund and Apollo Therapeutics.

Operational review

Putting our capital to work

The Group continues to deploy its substantial capital resources into its investment portfolio. In total the Group invested £27.5 million across 17 portfolio companies during the period. Of this 63.5% (£17.5 million) was invested into existing portfolio companies, with the balance of £10.0 million being invested in new companies added to the portfolio. The Group's portfolio companies raised a total of £76.0 million during the period ended 31 January 2016.

Two portfolio companies completed major funding rounds during the period. Collectively these companies, Kesios Therapeutics and Inivata Limited, raised £50.5 million in these private funding rounds, which illustrates the fact that the Group is not dependent upon the public markets to ensure that its portfolio companies grow with pace and ambition.

Since 1 August 2015, the Group has added six new unquoted accelerated growth companies to the portfolio. In line with the plans set out in the results for the year ended 31 July 2015 published on 14 October 2015, the Group is continuing to develop its investment portfolio, by scaling its activities in non-therapeutics sectors. All of the six new portfolio companies added to the portfolio between 1 August 2015 and 31 January 2016 are technology companies, comprising five in the Group's information communications technology sector (Garrison Technology Limited, Import.io Limited, Telectica Limited, WaveOptics Limited and SAM Labs) and one in the Group's engineering & materials sector (Silicon Microgravity Limited).

Post period end, on 2 February 2016 MISSION Therapeutics Limited completed a £60.0 million funding round, jointly led by Innovations and a new investor, Woodford Patient Capital Trust Plc, with follow-on investment from existing shareholders Sofinnova Partners, SR One, Roche Venture Fund and Pfizer Venture Investments. The proceeds will be used to advance a series of first-in-class small molecule drug candidates targeting specific deubiquitinating enzymes ("DUBs") into early clinical development.

Post period end, on 22 February 2016, Innovations completed a £13.5m funding round in Precision Ocular Limited, a London-based retinal therapeutics company that is pioneering an approach that targets specific small spaces in the eye to provide unique drug distribution to tissues specifically involved in retinal diseases.

Portfolio highlights

As at 31 January 2016, the Group's portfolio comprised 45 accelerated growth companies, which are the primary focus of the Group's time and investment capital. The performance of the portfolio continues to be very encouraging. Notable highlights include:

Participated in three major funding rounds

· Kesios Therapeutics Limited closing a £19.0 million series A funding round from a syndicate of leading venture investors including Innovations, SV Life Sciences and Abingworth, and strengthening its leadership team. This included appointing Paolo Paoletti MD, formerly President of GlaxoSmithKline Oncology, as Chief Executive Officer.

· Inivata Limited closing a £31.5 million Series A funding round. Innovations committed £10.0 million to the round, alongside existing investors Cambridge Innovation Capital and Johnson and Johnson Innovation, and new investor Woodford Patient Capital Trust plc. Innovations led the seed funding round for Inivata in September 2014. The fact that such a young company has secured funding of this size reflects both the potential of genomic analysis of ctDNA to transform cancer care and the great progress Inivata has made in developing innovative molecular profiling and monitoring products.

· Just after the period-end MISSION Therapeutics completed a £60 million funding round, jointly led by Innovations and a new investor, Woodford Patient Capital Trust Plc, with follow-on investment from existing shareholders Sofinnova Partners, SR One, Roche Venture Fund and Pfizer Ventures Investments. The proceeds will be used to advance a series of first-in-class small molecule drug candidates targeting specific DUBs into early clinical development.

Technical, clinical and commercial progress

· Circassia Pharmaceuticals plc announcing the positive outcome of the European Decentralised Procedure which demonstrated therapeutic equivalence to GlaxoSmithKline's FLIXOTIDE® pMDI for the prophylactic treatment of asthma, which will result in the UK's Medicines and Healthcare products Regulatory Agency issuing a national marketing licence.

· PsiOxus Therapeutics Limited announcing that it had initiated a study to assess the safety and efficacy of combining Merck's Keytruda (pembrolizumab) with EnAd to treat patients with carcinomas. Post period end, PsiOxus announced the first treatment of a patient combining EnAd with paclitaxel in ovarian cancer.

· TopiVert Pharma Limited making clinical progress with completion of a Phase I trial of its lead product TOP1288 in ulcerative colitis. A Phase IIa proof of concept study is planned to commence in the middle of this calendar year. TopiVert also plans to start the clinical development of a drug candidate for dry eye disease (DED) by early 2017.

· Abzena plc announcing a licensing agreement with a large, publicly listed US biotech for the development of Antibody-Drug Conjugates ("ADCs") based on Abzena's ThioBridge™ technology. Abzena will receive an initial licence and target nomination fee and has the potential to receive further licence fees and milestone payments of up to $150 million if the partner develops a product for each of three designated targets. Abzena also strengthened its position in the US through the acquisition of The Chemistry Research Solution LLC, a specialist contract chemistry company based in the US.

· Autifony Therapeutics Limited announcing its second programme in clinical trials with the start of a Phase I clinical evaluation of AUT002006 in schizophrenia.

· Featurespace Limited announcing a number of new customer wins including a five-year agreement with UK mobile payment innovator, Zapp Limited, and a new project with Camelot, the UK National Lottery operator. The latter will see Featurespace Limited's technology augment Camelot's existing processes for identifying and protecting online players at potential risk of harmful play.

New companies added to accelerated growth portfolio

· Silicon Microgravity Limited: a newly-formed University of Cambridge spin-out that has developed a technology used by oil well companies to enhance oil recovery. The company received initial funding of $3.0 million from Innovations and Cambridge Enterprise, together with grant funding from the UK government.

· SAM Labs: a company set up 2 years ago by an Imperial College Engineering graduate that is creating wireless electronics kits that allow anyone to build their own smart inventions. Innovations invested £2.0 million in a funding round which closed in January 2016.

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

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

· Telectica Limited: London-based start-up that uses artificial intelligence ("AI") to interpret the content of the World Wide Web which completed a £1.5 million seed funding round in October 2015. Innovations committed £1.3 million to the round alongside angel investors.

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

Technology transfer operation

Licensing and royalty income of £1.3 million was slightly less than the same period last year, however, the Group's technology transfer team has signed several licences in the first half of the financial year, which are expected to contribute to an increase in income in the second half of the year.

The occupancy levels and trading activities of the Imperial Incubator remain healthy. The number of opportunities flowing through the pipeline from Imperial College London also remain healthy and 207 inventions were disclosed and 33 patents filed in the period 1 August 2015 to 31 January 2016.

Broadening the Group's access to new IP

In January 2016, the Group announced two new initiatives aimed at expanding its licence portfolio and broadening its visibility of and access to intellectual property from the elite universities within the Golden Triangle.

On 18 January 2016, Innovations announced its participation in the new UCL Technology Fund LP, which is the first investment fund that University College London has created to commercialise its multidisciplinary research. Over the next five years this fund is expected to invest £50 million to support ideas from academics in life sciences and physical sciences, and will be used for early-stage proof of concept funding, licensing opportunities and the formation of new spin-out companies.

Innovations is a Limited Partner (LP) in the fund and has committed £24.75 million to the fund, matched by a commitment of the same amount from the European Investment Fund ("EIF"). Participation in the fund provides Innovations with visibility of potential intellectual property from across University College London's research base. In addition, the fund's general partner Albion Ventures has obligations to use all reasonable endeavours to offer co-investment opportunities to the LPs, to alert them to any projects that the fund chooses not to invest in, and to negotiate the right for LPs to take up pre-emption rights that the fund does not take up. As a result, in addition to its £24.75 million commitment to the fund, the expectation is that the Group will also have opportunities to make direct investments into selected UCL Business PLC ("UCLB") spin-outs to support their long-term growth and value creation.

It is expected that participation in the fund will thus significantly increase Innovations' access to deal-flow from one of the world's leading universities, as well as providing new opportunities to apply the Group's skills and deploy its investment capital and enhances the Group's position in the Golden Triangle, particularly in London.

As well as enhancing the opportunities from University College London, participation in the partnership signals a step-change in the Group's approach to commercialising the outstanding research output from the UK's elite universities. This is a new, collaborative model that the Directors believe could be replicated by Innovations with other universities.

On 25 January 2016, Innovations announced that it had committed £3.3 million to the new £40.0 million venture between AstraZeneca, GlaxoSmithKline, Johnson & Johnson and the technology transfer offices of three of the world's top universities (Imperial College London, University College London and the University of Cambridge) (source: QS World University Rankings 2015/16), Innovations, UCLB and Cambridge Enterprise respectively. The agreement establishes a Limited Liability Partnership, Apollo Therapeutics LLP.

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

Over the six year life of the Apollo venture, the three technology transfer offices will each contribute £3.3 million, while the three pharmaceutical companies will each contribute £10.0 million, as well as providing research and development expertise and resources to assist with the development of projects.

Placing

On 4 February 2016, Innovations announced a Placing to raise £100.0 million (before expenses) by means of a Placing of 23.5 million shares at a Placing Price of 425p, representing a premium of approximately 8.0% to the mid-market closing price of the Group's Ordinary Shares on 3 February 2016. 20.8 million of the placing shares were admitted to trading on 23 February 2016. The remaining 2.7 million deferred placing shares will be issued conditional on regulatory approval, which is expected to be received on or before 31 May 2016.

The net proceeds of the Placing comprising £85.4 million (plus a further £11.6 million of gross proceeds from the 2.7 million deferred placing shares referred to above) will be used to invest in existing and new portfolio companies across the Group's target investment areas.

Following this placing, the Group has £238.6 million available for investment and operations, including the undrawn £50.0 million second loan facility secured from the EIB in July 2015.

Portfolio update

Innovations has built particular expertise in the key sectors of Therapeutics, Medtech & Diagnostics, Engineering & Materials, and ICT & Digital. These four sectors reflect the strengths of the UK science base and the technological heritage of the four universities that we work with.

As at 31 January 2016, the Group had a portfolio of 105 companies. Of these, there are 45 accelerated growth companies in which it actively invests and takes a seat on the Board. Collectively these 45 companies account for just over 98.9% of the portfolio by value.

The balance is represented by 32 'lighter-touch' companies, in which the Group gives support to promote organic growth and revenue generation and some 28 low-involvement companies where Innovations has a historical holding or has acquired shares through IP transactions.

The total net portfolio value at 31 January 2016 was £355.1 million (FY 2015: £327.2 million) with the Group's top 10 investments by net fair value representing a carrying value of £232.6 million.

Of this £232.6 million, 67.0% is represented by companies in the Therapeutics sector, including the Group's largest asset, Circassia. 18.7% of the Group's top 10 assets are in the Engineering & Materials sector. The Group's Medtech & Diagnostics companies represent 10.2% of the value of its top 10 companies. The ICT & Digital sector is a small but growing part of the Group's top 10 portfolio companies, currently representing 4.1% of the total value.

The Group has a quoted portfolio of four companies which as at 31 January 2016 had a net investment carrying value of £100.0 million (28.2% of total portfolio value) (FY 2015: £106.8 million, 32.6%) and an unquoted portfolio with a net investment carrying value of £255.1 million (71.8% of total portfolio value) (FY 2015: £220.4 million, 67.4%) as of the same date.

Top 10 Portfolio companies by value

Circassia Pharmaceuticals plc

As at 31 January 2016, the Group had a 9.3% interest in the issued share capital of Circassia Pharmaceuticals plc ("Circassia"), with such interest having a net fair value of £77.5 million. Circassia's shares were admitted to the premium segment of the Official List and to trading on the Main Market of the London Stock Exchange in March 2014.

Circassia is a clinical-stage speciality biopharmaceutical company focused on the development and commercialisation of a range of novel immunotherapy products for the long-term treatment of common allergies. The company's proprietary ToleroMune® platform technology is based on technology originally developed at Imperial College London.

Circassia's lead product, Cat-SPIRE (a new treatment for cat allergy), is currently in a Phase III registration study. The trial is due to report out in the second quarter of 2016. A positive outcome of this trial is likely to represent a substantial value inflection point for the business. In 2015 Circassia completed the 1,409 subject trial. The primary end-point will measure symptoms and medication use one year after treatment. Results are due to be published in the second quarter of 2016. Three other products developed to treat a broad range of seasonal and perennial allergies (house dust mites (HDM), grass and ragweed) have completed clinical proof-of-concept Phase IIb studies. The HDM Phase IIb study completed recruitment of 715 subjects. Results are expected in H1 2017. The Grass allergy registration study is on track to start H1 2016 with results anticipated in H2 2018.

On 15 May 2015, Circassia announced the acquisitions of Swedish public company Aerocrine AB ("Aerocrine") and UK private company Prosonix Limited ("Prosonix"), with these acquisitions funded by a £275.0 million placing. These acquisitions have transformed the enlarged Circassia into a leading speciality biopharmaceutical company focused on the diagnosis, treatment and management of allergy, asthma and chronic obstructive pulmonary disease. The acquisition of Aerocrine provides Circassia with an opportunity to leverage its existing sales structure in US and Germany, which will form the basis of Circassia's own commercialisation strategy ahead of the planned launch of its own SPIRE products in 2017.

In addition, Circassia's expanded product portfolio offers significant potential for further growth. The acquisition of Aerocrine brought with it NIOX asthma diagnostic products, which are already revenue generating, whilst Prosonix has provided Circassia with a pipeline of asthma products. The most advanced product from this pipeline is a generic version of GlaxoSmithKline's FLIXOTIDE®. On 24 November 2015, Circassia announced the positive outcome of the European Decentralised Procedure (DCP) which demonstrated therapeutic equivalence to GlaxoSmithKline's FLIXOTIDE® pMDI for the prophylactic treatment of asthma, which will result in the UK's Medicines and Healthcare products Regulatory Agency (MHRA) issuing a national marketing licence, marking the favourable conclusion of Circassia's first ever marketing authorisation application for a product using its particle-engineering technology.

As a quoted company, the fair value of the Group's investment in Circassia is marked-to-market at the period end, and as a result, the Group recognised a fair value loss of £2.2 million on its investment. Circassia moved into the FTSE 250 UK Index Series in September 2015 and, as at 29 January 2016, Circassia had a market capitalisation of £833.6 million.

Nexeon Limited

As at 31 January 2016, the Group had a 39.3% interest in the issued share capital of Nexeon Limited ("Nexeon"), with such interest having a net fair value of £34.1 million.

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

Nexeon has a broad intellectual property portfolio relating to high-aspect ratio silicon materials and the use of these materials in lithium-ion batteries, comprising over 300 patents, of which more than 100 have been granted. In April 2014, the company completed the construction and commissioning of its new process development and manufacturing facility plant in Milton Park, Oxford, UK. The plant is capable of producing over 20 tonnes of product a year and has been built to handle a wide range of materials and reagents. Manufacturing at the plant is expected to start during 2016 or early 2017. The company has sold material into one niche application and is actively sampling to lead customers in other application areas. Nexeon plans to establish even closer links with parts of its target markets by setting up a laboratory in Asia. The location will be finalised shortly, but will be strategically located close to key development and commercial centres in consumer electronics and automotive technology.

Nexeon is continuing to optimise its silicon materials for the blended carbon/silicon anode applications currently being demanded by the battery industry. Further development is required to improve cycle life for use in consumer electronics and automotive applications but the gap between current material performance and customer requirements has been significantly reduced.

As there was no valuation event during the period, the carrying value of the Group's holding in Nexeon remains unchanged.

Veryan Holdings Limited

As at 31 January 2016, the Group had a 47.8% interest in the issued share capital of Veryan Holdings Limited ("Veryan"), with such interest having a net fair value of £23.6 million.

Veryan is a specialist in vascular disease that has developed and patented a three dimensional stent technology, BioMimics 3D™, which is intended to improve the biomechanical and blood flow characteristics of vascular stents.

The objective of Veryan's proprietary technology is to improve upon the biomechanical and flow characteristics of straight tubular stents particularly those used in arteries of the leg. Existing stents indicated for placement in the leg arteries have a straight tubular design that tends to straighten any curvature present in vessels. This straightening effect may interfere with normal shortening of the femoropopliteal artery during lower limb movement, such as when the knee is bent. In addition, fracture of straight nitinol stents has been reported in the femoropopliteal application. It is the inherent shortcomings of existing straight tubular stents that is driving Veryan's development of BioMimics 3D™ technology, which is based on research originally undertaken at Imperial College London.

In November 2012, Veryan gained CE Mark (the mark indicating compliance with EU legislation and thereby enabling its sale within the EEA) approval for its BioMimics 3D™ peripheral stent, since which time it has been gathering clinical data about the product's performance in patients. In November 2014, the full two-year data from the 'Mimics' randomised controlled study confirmed that the advanced stent design offers statistically significant clinical benefits, specifically significantly improved patency at 24 months, and a significant reduction in re-intervention between 12 and 24 months, when compared to straight nitinol stents.

On 14 January 2015, the Group led an £18.0 million Series B funding round in Veryan, alongside co-investors Invesco, Seroba Kernel and Seven Mile. The Group committed up to £8.4 million to the round.

On 1 July 2015, Veryan announced the enrolment of the first subject in its MIMICS-2 study, which has been designed specifically to provide data to support a US Premarket Approval Application of the Company's BioMimics 3D™ stent system, which is a prerequisite for commercial launch in the US. The trial will recruit 280 subjects. In parallel, 35‐50 patients will be enrolled across 6 sites in Japan targeting Japanese approval at the same time as US FDA approval in 2018.

During the six months ended 31 January 2016, the Group invested £2.7 million in Veryan. This investment, which was at last round price, did not result in a fair value gain or loss.

PsiOxus Therapeutics Limited

As at 31 January 2016, the Group had a 27.9% interest in the issued share capital of PsiOxus Therapeutics Limited ("PsiOxus"), with such interest having a net fair value of £22.6 million.

PsiOxus is a biotechnology company that develops novel therapeutics for serious diseases, with a particular focus upon cancer. The company's lead product is Enadenotucirev ("EnAd"), an oncolytic virus that is given intravenously and travels around the patient's body seeking out and killing cancer cells. EnAd is being evaluated in a number of different cancers including colorectal, ovarian, bladder, lung and renal cell carcinoma.

On 16 April 2015, PsiOxus expanded two of its ongoing Phase I studies involving EnAd. The company's Phase I Mechanism of Action study of EnAd in colon cancer patients, was expanded to include intravenous delivery to three additional tumour types (non-small cell lung, urothelial bladder and renal cell cancer), whilst the EVOLVE trial (which is a first in human Phase I/II study to determine the dose, safety, tolerability and potential efficacy of EnAd when delivered intravenously to patients with epithelial cancers) has also been expanded to include repeat intravenous dosing of EnAd in metastatic urothelial bladder cancer.

In April 2015, PsiOxus presented data highlighting the progress of its next-generation 'Antibody Armed EnAd' ("AbEnAd") anti-cancer therapeutic platform at the American Association for Cancer Research Annual Meeting 2015 in Philadelphia. This preclinical programme is aimed at expanding the anti-cancer scope of EnAd through 'arming' - a process that involves the addition of new genes to EnAd, which makes possible the creation of a broad range of oncolytic immune therapeutics.

In May 2015, the Group led a £25.0 million Series C funding round in PsiOxus, committing £7.0 million to the round alongside existing investors Invesco, SROne, Lundbeckfond and Mercia Technologies. In addition, Woodford joined the funding syndicate.

On 18 December 2015, PsiOxus initiated a study to assess the safety and efficacy of combining Merck's Keytruda (pembrolizumab) with EnAd to treat patients with carcinomas. Keytruda is one of a number of closely related therapies dubbed immune checkpoint inhibitors that target the programmed cell death 1 (PD-1) receptor responsible for inhibiting the immune response against cancer cells. The SPICE study aims to explore this combination in a range of solid tumour types including metastatic colorectal cancer. The study will involve several leading clinical centres in the United States and is planned to run until 2017.

Post period end, on 10 March 2016, PsiOxus announced the first treatment of a patient combining EnAd with paclitaxel in an ovarian cancer study. Pre-clinical studies have shown the successful combination of treatment with these two agents in models of platinum-resistant ovarian cancer, with the potential for improved efficacy over monotherapy alone. The OCTAVE study is recruiting platinum-resistant ovarian cancer patients at multiple cancer centres in the UK and Spain. Until now, patients in Phase 1a have received intra-peritoneal enadenotucirev alone. The Phase 1b component of the study will now examine the combination with intravenous paclitaxel. In 2015, enadenotucirev in combination was awarded orphan drug status when combined with paclitaxel for the treatment of epithelial ovarian cancer in Europe by the EMA.

As there was no valuation event during the period, the carrying value of the Group's holding in PsiOxus remains unchanged.

Cell Medica Limited

As at 31 January 2016, the Group had a 27.0% interest in the issued share capital of Cell Medica Limited ("Cell Medica"), with such interest having a net fair value of £21.0 million.

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

The Group has led each of Cell Medica's subsequent funding rounds and has been actively involved in the recruitment of Cell Medica's management and Board of Directors, including the recruitment of Thomas Hecht as Chairman.

Cell Medica's lead cancer immunotherapy product is CMD-003, which comprises engineered T-cells targeted at malignant cells that express the oncogenic Epstein Barr virus ("EBV"). In addition to CMD-003, these include Cytovir™ CMV for the treatment of cytomegalovirus infections and Cytovir™ ADV for the treatment of adenovirus infections, both of which are aimed at treating and preventing infections in patients who are profoundly immunosuppressed following a bone marrow transplant.

On 25 November 2014, the Group led a £50.0 million Series B funding round in Cell Medica alongside co-investors Invesco and Woodford Investment Management.

In February 2015, Cell Medica announced the start of commercial cell therapy manufacturing at its facility in Berlin, with its first product successfully manufactured and delivered for use in a patient. Manufacturing at this site currently focuses on Cytovir™ CMV, which is available to treat patients in the UK, Ireland and Germany.

On 18 March 2015, Cell Medica announced that the U.S. Food and Drug Administration (the "FDA") had granted Orphan Drug Designation to CMD-003. The designation was granted for the treatment of EBV-positive non-Hodgkin lymphomas. In addition, Cell Medica announced that it had treated the first patient in the CITADEL trial. This is a 35-patient Phase II clinical trial assessing CMD-003 in patients with aggressive/advanced EBV-positive extranodal NK/T-cell lymphoma.

The Group had, as at 31 January 2016, invested a total of £12.3 million in Cell Medica since the date of its first £380,000 seed investment in 2007.

As there was no valuation event during the period, the carrying value of the Group's holding in Cell Medica remains unchanged.

TopiVert Pharma Limited

As at 31 January 2016, the Group had a 30.6% interest in the issued share capital of TopiVert Pharma Limited ("TopiVert"), with such interest having a net fair value of £11.6 million.

TopiVert is a clinical-stage biotechnology company developing narrow spectrum kinase inhibitors as novel, locally-acting medicines for the local treatment of chronic inflammatory diseases of the gastrointestinal tract and eye. TopiVert's most advanced drug candidate, TOP1288, for the treatment of ulcerative colitis, completed a Phase I trial during the period. A Phase IIa proof of concept study is planned to commence in the middle of this calendar year. TopiVert also plans to start the clinical development of a drug candidate for dry eye disease (DED) by early 2017. Current therapies for these debilitating diseases provide inadequate long-term control in a high proportion of patients and considerable unmet medical need remains.

TopiVert commenced operations in early 2012 and has raised £21 million from investors including Innovations, SV Life Sciences, NeoMed and Johnson and Johnson Development Corporation.

During the six months ended 31 January 2016, the Group recognised a fair value gain of £4.0 million in TopiVert in recognition of the progress made by the company against key clinical milestones.

Abzena plc

As at 31 January 2016, the Group had a 19.9% interest in the issued share capital of Abzena plc ("Abzena"), with a net fair value of £13.1 million. Abzena was admitted to AIM in July 2014.

Abzena offers a suite of complementary services and technologies to enable the development of biopharmaceuticals which have a greater chance of reaching the market. Abzena has built a global customer base over the past decade, including the majority of the top 20 biopharmaceutical companies, as well as large and small biotech companies and academic groups.

During the period, as part of its strategy to broaden its service offering, Abzena completed two acquisitions in the US. In September 2015, the Company acquired PacificGMP, a contract biopharmaceutical manufacturing and development company based in San Diego (USA) and in December 2015, it also acquired The Chemistry Research Solution (TCRS), a contract chemistry and bioconjugation business based in Bristol, near Philadelphia (USA).

The Group has seen a positive response from customers to the integrated services it can offer for biopharmaceutical development following the acquisitions of PacificGMP and TCRS. Contract bookings have been strong across the Group from new and existing customers with significant opportunities for customers to benefit from leveraging the breadth of Abzena's offering which includes immunogenicity assessment, antibody engineering and manufacturing, chemistry services and bioconjugation technologies.

Following the two recent acquisitions, the Abzena Group now comprises four separate trading companies: Antitope, PacificGMP, PolyTherics and TCRS. By the middle of 2016 it is intended that all Group businesses will be branded and trading under the Abzena name. The change will help reinforce Abzena's integrated offering and will provide a single identity for its services and technologies. 

On 24 November 2015, Abzena announced that it had conditionally raised £20 million through the placing of new shares. Part of this funding was used to acquire The Chemistry Research Solution LLC, with the balance for capital expenditure on building manufacturing capacity, R&D and working capital.

On 25 January 2016, Abzena announced that it had entered into a licensing agreement with a large, publicly listed US biotech for the development of Antibody-Drug Conjugates (ADCs) based on Abzena's ThioBridge™ technology. The agreement covers the development of ADCs against three undisclosed targets. Abzena will receive an initial licence and target nomination fee and has the potential to receive further licence fees and milestone payments of up to $150 million if the partner develops a product for each of three designated targets with the ThioBridge™ technology, as well as royalties on the sale of ThioBridge™ ADC products developed under this agreement. The licensing agreement follows a research collaboration between the two parties, which included the evaluation of multiple ADCs for safety and efficacy in pre-clinical models.

During the six months ended 31 January 2016, the Group invested £2.5 million in Abzena.

As a quoted company, the fair value of the Group's investment in Abzena is marked-to-market at the period end, and as a result, the Group recognised a fair value loss of £7.2 million on its investment.

MISSION Therapeutics Limited

As at 31 January 2016, the Group had a 21.2% interest in the issued share capital of MISSION Therapeutics Limited ("MISSION"), with such interest having a net fair value of £10.1 million.

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

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

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

During the six months ended 31 January 2016, the Group recognised a fair value gain of £4.1 million in MISSION reflecting the post period end investment.

Yoyo Wallet Limited

As at 31 January 2016, the Group had a 51.4% interest in the issued share capital of Yoyo Wallet ("Yoyo"), with such interest having a net fair value of £9.5 million.

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

The 'app' was launched in early 2014 across 32 food and drink outlets at Imperial College London. Since then, Yoyo's experienced management team have made strong commercial progress and as at 31 January 2016, the team has signed 32 universities as customers and deployed the solution at 60 head office corporate catering locations. Yoyo has also signed up a number of high street retailers, but is currently focusing on closed environments of universities and corporate canteens which are driving larger transaction volumes.

On 15 April 2015, Innovations announced the completion of a £5.9 million Series A funding round for Yoyo. The Group committed £5.0 million in this round, with the balance made up by a number of angel investors, including Phillip Riese (former president of American Express Consumer Card Services who also joins the Yoyo board) and Taavet Hinrikus (co-founder of Transferwise and Firestartr.co, the technology investment platform).

As there was no valuation event during the period, the carrying value of the Group's holding in YoyoWallet remains unchanged.

Plaxica Limited

As at 31 January 2016, the Group had a 45.7% interest in the issued share capital of Plaxica Limited ("Plaxica"), with such interest having a net fair value of £9.4 million.

Plaxica's Versalac technology enables the production of low-cost lactic acid, a platform chemical for the production of a variety of bio-chemical products including polylactic acid and propylene glycol. These are high value commodity chemicals with strong environmental credentials, offering the potential to replace traditional oil-based polymers such as PET (polyethylene terephthalate - also known as polyester) and nylon, for example in packaging and textile manufacture, or in the production of 'green' solvents.

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

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

Plaxica has developed strong relationships with both upstream feedstock owners (such as the pulp and paper industry) and with leading players in the downstream lactic acid and derivatives market. Plaxica's technology has been proven at demonstration scale at Plaxica's pilot plant facility based at Wilton in the north-east of England, but as an intermediary in the overall supply chain.

Plaxica is also seeking to appoint industrial partners to assist with industrial scale-up and in July 2015, announced a collaboration with INVISTA, one of the world's largest integrated producers of polymers and fibres (leading brands including LYCRA®, COOLMAX®, CORDURA®, STAINMASTER® and ANTRON®) which will see the two companies collaborate to accelerate the commercialisation of Plaxica's bio-derived lactic acid technology. Under the agreement, in which INVISTA will have an option for an equity stake in Plaxica, INVISTA will provide Plaxica with engineering, technical and commercial support from its global technology licensing organisation. The two companies will work together to develop and commercialise Plaxica's lactic acid technology, which both companies believe will offer substantial cost and performance benefits to licensees in the polylactic acid and bio-propylene glycol value chains.

As there was no valuation event during the period, the carrying value of the Group's holding in Plaxica remains unchanged.

Financial review

Summary

The Group's financial position remains strong, particularly after the recent fund raising, and the value of its portfolio has continued to grow.

Cash and short term liquidity investments moved to £91.6 million (H1 2015: £152.8 million, FY 2015: £128.1 million). The key driver of this movement was investments of £27.5 million made in the period (H1 2015: £22.4 million, FY 2015: £60.8 million).

On 5 February 2016 the Group completed a placing of £100.0 million, of which £85.4 million (after issue costs) was received in February 2016, and the balance of £11.6 million is expected during May 2016. Following this placing, the Group has £238.6 million available for investment and operations, including the undrawn £50.0 million second loan facility secured from the EIB in July 2015.

The Group generated a loss during the period of £5.9 million (H1 2015: £7.0 million loss, FY 2015: £15.1 million profit). The fall in the value of the quoted portfolio has contributed to the loss. This has been offset by a gain in the unquoted portfolio resulting in an overall net gain on the portfolio of £0.5 million (H1 2015: £7.4 million loss; FY 2015: £21.3 million gain). Net assets at the period end of £415.9 million (H1 2015: £397.8 million, FY 2015: £420.1 million) decreased by £4.2 million from 31 July 2015.

The Group's rate of investment in its portfolio companies was £27.5 million across 17 portfolio companies (H1 2015: £22.4 million, FY 2015: £60.8 million). This takes the total invested since Innovations' IPO in July 2006 to £264.3 million and the total raised by the Group's portfolio companies to over £1.3 billion.

Cash and short-term liquidity investments

At 31 January 2016, the Group had cash and short term liquidity investments of £91.6 million (H1 2015: £152.8 million, FY 2015: £128.1 million).

The movement in cash and short term liquidity investments of £36.5 million from the opening balance as at 31 July 2015 is summarised below:

The Group invests cash surplus to working capital requirements in short-term deposits, classified as short term liquidity investments, across a number of banks with a focus on capital preservation rather than interest earned.

Revenues, cost of sales and operating costs

Total trading revenue of £2.2 million (H1 2015: £2.8 million; FY 2015: £5.1 million) was lower than the prior half year as a result of a reduction in the licence and royalty income stream to £1.3 million (H1 2015: £1.6 million, FY 2015: £2.8 million) and corporate finance fees earned. Corporate finance fees were £0.04 million (H1 2015: £0.4 million; FY 2015: £0.4 million) and were primarily generated by the Group-led funding rounds.

Cost of sales, which mainly arises from the revenue sharing arrangements with Imperial College London, were £0.8 million (H1 2015: £1.0 million; FY 2015: £1.8 million) reflecting the decreased licence and royalty activity.

Other administrative expenses were £6.9 million (H1 2015: £5.1 million; FY 2015: £11.6 million). The higher expenses over the prior period primarily reflect the increased staff resources focused on delivering the business strategy. Other administrative expenses include costs of £0.9 million (H1 2015: £0.8 million; FY 2015: £1.4 million) incurred filing patents and protecting the as yet unexploited intellectual property from Imperial College London.

The Group's carried interest plan, which is a significant portion of its long term incentive arrangements, recognised a charge of £0.9 million (H1 2015: release of £3.1 million, FY 2015: a release of £1.2 million) as a result of an increase in the value of the unquoted portfolio. There is no cash payment due to members of the scheme until the Group has made substantial cash realisations.

Finance income was lower than the prior period, at £0.5 million (H1 2015: £0.7 million, FY 2015: £1.4 million), reflecting the lower cash balance. During the period ended 31 January 2016, the Group made quarterly payments of interest of £0.6 million (H1 2015: £0.3 million, FY 2015: £0.6 million) on the EIB loan.

The Group reported a loss before tax of £5.9 million (H1 2015: £7.0 million loss, FY 2015: £15.1 million profit). The Group's basic loss per share was 4.3p (H1 2015: basic loss per share 5.2p, FY 2015: basic earnings per share 11.1p). The Group did not pay a dividend (H1 2015: nil, FY 2015: nil).

Investment portfolio performance

The Group reported a net fair value gain arising from the portfolio of £0.5 million (H1 2015: £7.4 million loss, FY 2015: £21.3 million gain). An analysis of the change in fair value is set out in note 2 to the interim report and accounts and is summarised below:

As at 31 January 2016, the value of the Group's portfolio, net of £7.2 million due to revenue share agreements, increased to £355.1 million (FY 2015: £327.2 million). The increase represents £27.5 million (FY 2015: £60.8 million) of investments to fund 17 (FY 2015: 30) companies in its portfolio, net disposals of £0.1 million (FY 2015: £6.9 million) and fair value gains of £0.5 million (FY 2015: £21.3 million gains).

The total gross value of the portfolio increased from £333.3 million as at 31 July 2015 to £362.4 million as at 31 January 2016 as a result of investments of £27.5 million (FY 2015: £60.8 million), less disposals of £0.1 million (FY 2015: £7.9 million), gains on revaluation of £14.2 million (FY 2015: £32.2 million) less losses on the revaluation of investments of £12.5 million (FY 2015: £8.9 million) (of which £9.9 million relates to losses on the quoted portfolio (FY 2015: £7.8 million)). Non-current liabilities on investments increased to £7.2 million (FY 2015: £6.0 million) and reflect the gains on revaluations.

Investment and divestment

The Group made £27.5 million of investments to fund 17 companies in its portfolio and at the end of the period had outstanding investment commitments of £31.0 million (FY 2015: £22.3 million). In addition the Group committed £24.8 million towards the new UCL Technology Fund LP and £3.3 million towards the new partnership, Apollo Therapeutics LLP.

Total net investment after net cash disposals in the period was £27.4 million (H1 2015: £17.4 million, FY 2015: £53.9 million).

Portfolio company creation

At 31 January 2016, the Group held equity stakes in 105 companies (H1 2015: 98 companies, FY 2015: 98 companies). The movement reflects formations during the period.

Portfolio company overview

The net value of the Group's investment portfolio grew to £355.1 million (FY 2015: £327.2 million spread across 98 companies) and portfolio companies raised £76.0 million in cash (FY 2015: £479.9 million) from all sources of investment.

The Group has a total of £237.9 million invested capital at work in the portfolio of currently active technology companies; £132.5 million invested in the top 10 companies and £105.4 million in the remaining companies.

The table on the next page sets out the top 10 companies in the portfolio by value to illustrate the spread of the investments held and their relative carrying value. All of the carrying values listed reflect the net fair value of the investment, being the gross value of the holding less the attributable revenue-sharing obligations associated with each investment. The percentage of issued share capital represents the absolute percentage of the shares held, without reflecting any revenue-sharing obligations.

The portfolio of companies are grouped into four sectors (as noted in the Chief Executive's Report) for the purpose of external reporting. The Directors are of the opinion that under IFRS 8 the Group has only one operating segment, which commercialises academic research and uses it to build businesses. The Board of Directors assess the performance of the operating segment using financial information which is measured and presented in a manner consistent with that in the financial statements.

Table of the net fair value of the top 10 investee companies

1 Previously called PolyTherics.

2 Currently active companies.

3 The Group does not control these companies (control as defined by IFRS 10), and therefore does not consolidate them. The Group does not have, directly or indirectly, more than half of the voting power of these entities nor does it have power over more than half of the voting rights by virtue of any agreement with any other investor.

4 Quoted companies.

Consolidated interim statement of comprehensive income for the six month period to 31 January 2016

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

Consolidated interim balance sheet as at 31 January 2016

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

The interim financial statements were approved by the Board of Directors on 6 April 2016 and were signed on its behalf by R. Cummings.

Consolidated interim cash flow statement for the six month period to 31 January 2016

1 Issue of 523,677 ordinary shares on exercise of share options by two former Directors and purchase of deferred shares for the total sum of £0.01 in aggregate (see note 4).

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

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

For the six months to 31 January 2015:

For the year ended 31 July 2015:

For the six months to 31 January 2016:

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

Notes to the interim financial statements

1. Basis of preparation 

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

These condensed consolidated interim financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of certain financial assets at fair value, as required by IAS 39, "Financial instruments: Recognition and Measurement". The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 July 2015, as described in those financial statements, with the exception of the following new standards which have been applied for the first time during the year commencing 1 August 2015:

Annual improvements 2010-2012 (effective 1 July 2014) (endorsed for 1 Feb 2015);

Amendment to IAS 19, 'Employee benefits', on defined benefit plans (effective 1 July 2014) (endorsed for 1 Feb 2015); and Annual improvements 2011-2013 (effective 1 July 2014) (endorsed for 1 Jan 2015).

As these amendments merely clarify the existing requirements, they do not affect the Group's accounting policies or any of the disclosures.

Certain new accounting standards and interpretations have been published that are not mandatory for the year ending 31 July 2016 and have not been early adopted by the Group or have not yet been subject to EU endorsement. These include Amendments to IFRS 10, 'Consolidated financial statements' and IAS 28,'Investments in associates and joint ventures' on applying the consolidation exemption. The proposed amendments to these standards, which have not yet been subject to EU endorsement, may have a significant impact on the financial statements of the Group. The Group continues to assess the potential impact of implementation of these proposed amendments.

Other standards, amendments and interpretations which are effective for the financial year beginning on 1 August 2015 are not material to the group.

These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 July 2015 were approved by the Board of Directors on 13 October 2015 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

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

Net change in fair value for the period represents the change in fair value less the revenue share charge on these fair value movements.

Included within the net fair value movement recognised in the Consolidated Statement of Comprehensive Income are provisions for liabilities and charges. These are made up of the revenue sharing provision which represents a fair value estimate of monies due to Imperial College London and other third parties such as co-funders of research work and the Appointee Directors' Pool. The provision will be payable upon the eventual realisation of investments held by the Group under the revenue sharing arrangements of the Technology Pipeline Agreement (TPA) and in recognition of Imperial College London's right to call for a transfer of its share of the Group's holding in investments. The timing and amount of the realisation of the provision is dependent on the timing of the disposal of investments, which is uncertain as this is determined by the investment strategy.

HEIF funded investment and University Challenge Seed Fund

The University Challenge Seed Fund (UCSF) reflects an award made by the UK government and third parties and must be deployed according to the conditions of that award. The purpose of the fund covers seed investment and funds for proof of concept awards. These terms include a restriction on distribution of monies from UCSF investments until the fund size has reached a multiple of three times the original investment of £4.15 million, excluding donations from industry parties. The corresponding creditor balance is reflected on the balance sheet under 'non-current liabilities'.

The Higher Education Innovations Fund (HEIF) reflects an award made by the UK government and must be deployed according to the conditions of that award. The purpose of the fund covers seed investment and funds for proof of concept awards. These terms include a restriction on distribution of monies. Realisation must be paid back to the fund for re-deployment. The corresponding creditor balance is reflected on the balance sheet under 'non-current liabilities'.

Non-current investments

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

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

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

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

The table below sets out the movement in the balance sheet value of the provision for liabilities and charges arising on revenue sharing obligations from the start to the end of the period, setting out any fair value gains and losses together with the impact arising as a result of disposals.

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

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

2 The provision for liabilities and charges represents monies due to Imperial College London upon the eventual realisation of investments held by the Group under the revenue sharing arrangements of the Technology Pipeline Agreement (TPA) and in recognition of Imperial College London's right to call for a transfer of its share of the Group's holding in these particular investments.

Additionally, monies are due to parties in the Appointee Directors' Pool in respect of the Imperial Innovations LLP assets acquired as part of the stepped acquisition in 2005 and to other third parties. These are included in 'Revenue Sharing Other' in the table below. The timing and amount of the realisation of the provision is dependent on the timing of the disposal of investments, which is uncertain as this is determined by the investment strategy.

The following table analyses the provision by obligation:

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

The table below sets out the movement in the balance sheet value of the provision for liabilities and charges arising on revenue sharing obligations from the start to the end of the prior year, setting out any fair value gains and losses together with the impact arising as a result of disposals.

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

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

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

The table below sets out the movement in the balance sheet value of the provision for liabilities and charges arising on revenue sharing obligations from the start to the end of the period, setting out any fair value gains and losses together with the impact arising as a result of disposals.

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

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

3. Earnings per share

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

4. Share capital and equity raised and EBT

Share capital and equity

Deferred shares are not transferable and do not entitle the holder to the payment of any dividend or otherwise participate in the profits of the Company or to receive notice of or attend or vote at any general meeting of the Company and on any reduction of capital in accordance with the Companies Act 2006, may be cancelled without payment of consideration. The Deferred Shares are not listed on any stock exchange. The Company may purchase the Deferred Shares for not more than the sum of £0.01 in aggregate for all the Deferred Shares and cancel the Deferred Shares so purchased, without any requirement to obtain the consent or sanction of the holders of the Deferred Shares. Pursuant to this right, on 24 September 2015 the Company purchased all the Deferred Shares for the total sum of £0.01 in aggregate and the shares were then cancelled.

On 17 August 2015, the Company's total issued voting capital increased through the issue of 523,677 Ordinary Shares of 3 and 1/33 pence each at an average price of approximately 312 pence per Ordinary Share pursuant to the exercise of share options held by two former Directors, taking the total number of Ordinary Shares admitted to trading on AIM to 137,674,712.

The total issued voting share capital as at 31 January 2016 was 137,674,712 voting shares (FY 2015: 137,151,035 voting shares).

On 4 February 2016, after the period end, the Company announced a placing to raise £100,000,000 before issue costs, through the issue of 23,529,412 Ordinary Shares of 3 and 1/33 pence each (total nominal value of £713,000) at 425 pence each. As of 7 April 2016, the Company has 158,464,520 shares in issue, with a further 2,739,604 deferred placing shares still to be issued conditional on regulatory approval which is expected to take place on or before 31 May 2016.

Employee Benefit Trust

As at 31 January 2016, the Employee Benefit Trust (EBT) held 971,080 (FY 2015: 971,080) of the Group's Ordinary Shares, which have a cost of £2,564,009 (FY 2015: £2,564,009). These represent shares which are considered to be under the de-facto control of the Group and have therefore been netted against the P&L reserve in the financial statements.

It is the intention of the Group to use these shares to settle the option liabilities at the point of exercise and they represent a partial hedge on the cost of the exercise. No shares have been issued from the EBT during the period (FY 2015: nil).

5. Short term liquidity investments and cash and cash equivalents

1 These investments were all made on 27 June 2014, £15.0 million matured on 29 June 2015, post the period end, £10.0 million matured on 29 March 2016 and the final £10.0 million will mature on 27 June 2016. 

Total cash and cash equivalents include restricted balances of £2.1 million (FY 2015: £0.6 million). Pursuant to the amended and restated EIB facility agreement, the Group is required to maintain a debt service reserve account pledged in favour of the lender. The account is available solely to pay any outstanding interest and principal payments owed under the EIB agreement for the following six months (see note 6).

Reconciliation of amounts invested to trade investments:

Reconciliation of cash flows arising from sale of trade investments:

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

6. Borrowings

On 1 July 2013 the Group entered into a £30.0 million loan agreement with the European Investment Bank (EIB) available to draw down in two tranches of £15.0 million. The purpose of the loan is to provide funding towards Biotech and Therapeutics investments.

The first tranche of £15.0 million was drawn down on 30 July 2013. Transaction costs in the year ended 31 July 2013 of £186,000 were incurred to obtain the loan and were set against the loan amount. These costs are subsequently amortised over the life time of the loan. During the half year ended 31 January 2016, £8,000 (H1 2015: £8,000; FY2015: £16,000) was charged to the statement of comprehensive income. The loan is based on a floating interest rate related to LIBOR and is repayable in 10 equal annual instalments over a twelve year period with the first payment due on 25 July 2016. There was an uncapped cash sweep of 25% of all investment realisations used to prepay the loan. During the current period £nil (H1 2015: £918,000; FY2015: £944,000) was repaid. This cash sweep was removed with the signing of the new loan during the current year.

The second tranche of £15.0 million was drawn down on 30 June 2015. Transaction costs of £181,000 were incurred to obtain the loan and were set against the loan amount. These costs are subsequently amortised over the life time of the loan. During the half year ended 31 July 2016, £9,000 (FY2015: £2,000) was charged to the statement of comprehensive income. The loan is based on a fixed interest rate of 4.199% and is repayable in 9 equal annual instalments over a ten year period with the first payment due on 25 July 2017.

On 13 July 2015, the Group entered into a second loan agreement of £50.0 million with the European Investment Bank (EIB) available to draw down in up to four tranches with a minimum tranche value of £10.0 million. The purpose of the loan is to provide funding towards Biotech and Therapeutics investments. This loan has not been drawn down. There is a non-utilisation fee calculated on the daily undrawn, uncancelled balance of the loan from the date falling six months after the date of the agreement at a rate of 0.10% per annum.

The loans contain a debt covenant requiring that the ratio of the total fair value of investments plus cash and qualifying liquidity to debt should at no time fall below 4:1. The loan also stipulates that on any date, the aggregate of all amounts scheduled for payment to the EIB in the following six months should be kept in a separate bank account.

The Group closely monitors that the covenants are adhered to on an ongoing basis and has complied with these covenants throughout the year. The Group will continue to monitor the covenant's position against forecasts and budgets to ensure that it operates within the prescribed limits.

7. Trade and other receivables

The increase in trade and other receivables as at 31 January 2016 is primarily due to investments made but which completed after the period end.

8. Events after balance sheet date - pro forma effect of placing of 4 February 2016

On 4 February 2016, Innovations announced a Placing to raise £100.0 million (before expenses) by means of a Placing of 23.5 million shares at a Placing Price of 425p, representing a premium of approximately 8.0% to the mid-market closing price of the Group's Ordinary Shares on 3 February 2016. 20.8 million of the placing shares were admitted to trading on 23 February 2016. The remaining 2.7 million deferred placing shares will be issued conditional on regulatory approval, which is expected to be received on or before 31 May 2016.

The net proceeds of the Placing comprising £85.4 million (plus a further £11.6 million of gross proceeds from the 2.7 million deferred placing shares referred to above) will be used to invest in existing and new portfolio companies across the Group's target investment areas.

Set out below is a pro forma statement of unreviewed consolidated net assets of the Group which has been prepared for illustrative purposes as if the placing had occured on 31 January 2016.

The adjustment of £97.0 million represents only the net proceeds of the £100.0 million placing after costs of £3.0 million and does not reflect any other valuation change or other change since 31 January 2016.

Independent review report to Imperial Innovations Group plc

Introduction

We have been engaged by the company to review the condensed consolidated interim financial statements in the Interim Report and Accounts for the six months ended 31 January 2016, which comprises the consolidated interim statement of comprehensive income, consolidated interim balance sheet, consolidated interim cash flow statement, consolidated interim statement of changes in equity attributable to equity holders of the Group and related notes. We have read the other information contained in the Interim Report and Accounts and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial statements.

Directors' responsibilities

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

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

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed consolidated interim financial statements in the Interim Report and Accounts based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the AIM Rules for Companies and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements in the Interim Report and Accounts for the six months ended 31 January 2016 is not prepared, in all material respects, in accordance with the basis of preparation set out in note 1 and the AIM Rules for Companies.

PricewaterhouseCoopers LLP

Chartered Accountants

6 April 2016

Cambridge

Notes:

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

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

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