Chairman’s introduction

Strategic Report

Corporate governance report

Governance

Dear Shareholder

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

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

Financials

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

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

David Newlands Chairman 12 October 2016

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Board of Directors

Strategic Report

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

Governance

Appointed to the Board | 2016

Financials

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

Company information

Appointed to the Board | 2006

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

Tony Hickson Managing Director – Technology Transfer Tony Hickson joined the Group in early 2002 and is Managing Director of the Technology Transfer team, responsible for intellectual property sourcing, management and licensing for technologies arising from Imperial College London. Tony has over 20 years of commercial business development and licensing experience in bioscience companies including Wellcome Group R&D, Murex Biotech, Abbott Laboratories and Kalibrant Limited. He has been a board director or observer for a number of portfolio companies including Emcision Ltd, Polytherics Ltd, Catapult Therapy TCR Limited and RespiVert Limited. Tony is a Registered Technology Transfer Professional, a Certified Licensing Professional and a board director of PraxisUnico. Appointed to the Board | 2013

Committee membership key Membership as at 12 October 2016   

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Audit and Risk Committee

Imperial Innovations Annual Report and Accounts 2016

Nomination Committee

Remuneration Committee

Strategic Report

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

Company information

Dr Robert Easton Non-Executive Director Dr Robert Easton is a Partner and Senior Advisor at The Carlyle Group, the global alternative asset management company. During his 16 years with the firm he ran the buyout team in the UK, served as co-head of Carlyle Europe Technology Partners, led Carlyle’s Ireland-focused fund and served on multiple portfolio company boards in many different sectors. Before joining Carlyle Dr Easton was Vice President of Corporate Development at Invensys plc. He is a past Chairman of the British Venture Capital Association and a founding director of the independent transparency body for private equity disclosure. Dr Easton is a serial investor in early stage and start-up companies. Appointed to the Board | 2015

Dr Linda Wilding Non-Executive Director Dr Linda Wilding has extensive experience in the private equity investment and healthcare sectors. Having qualified as a chartered accountant with Ernst & Young, from 1989 to 2001 she worked in the private equity division of Mercury Asset Management, rising to the position of Managing Director. She has served as a non-executive director (including as Chairman) on the boards of a number of companies. She is currently Chairman of the HG Capital Private Equity Valuation Committee and a non-executive director of UDG Healthcare plc. Appointed to the Board | 2014

Imperial Innovations Annual Report and Accounts 2016

Financials

Appointed to the Board | 2014

Governance

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

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

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

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

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

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

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

Company information

Financials

Governance

Strategic Report

Senior management team

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Strategic Report

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

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

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

Company information

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

Financials

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

Governance

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

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Company information

Financials

Governance

Strategic Report

Corporate governance report Compliance with the UK Corporate Governance Code (September 2014) The Directors are committed to a high standard of corporate governance and seek to comply with established best practice, as set out in the UK Corporate Governance Code issued by the Financial Reporting Council in September 2014 (‘the Code’). It should be noted that the Group is not required to comply with the Code and the following disclosure is made voluntarily. The Code is publicly available on the Financial Reporting Council website (www.frc.org.uk). During the year ended 31 July 2016, the Directors consider that the Group has been in compliance with all provisions of the Code except as set out below: • contrary to provision A.3.1 of the Code, Dr Martin Knight was not deemed to be independent at the time of his appointment as Chairman, due to his position (at that time) as a governor and council member of Imperial College London. At the time of Dr Martin Knight’s appointment the Group was not seeking to comply with the Code. Dr Martin Knight has not held office at Imperial College London since 2010. David Newlands, who became Chairman on 1 August 2016, was considered to be independent at the time of his appointment; • contrary to provision B.2.1 of the Code, it was not the case that a majority of the members of the Nomination Committee were independent non-executive directors. The Group has sought to address this through the appointment to the Nomination Committee of David Newlands from 1 August 2016. The Directors consider this to be appropriate in the circumstances, as the Quoted Companies Alliance Code recognises that the chairman may count as one of the independent directors provided that he was independent at the time of appointment; and • contrary to provision D.1.3 of the Code, Dr Martin Knight held options over Ordinary Shares and the terms of such options did not require any shares acquired by exercise of the options to be held until at least one year after his departure from the Board. The options were granted at the time of the Group’s IPO in 2006, when the Group was not seeking to comply with the Code. The Board Board size and composition The Group is controlled through the Board, which currently comprises a Non-Executive Chairman, three Executive Directors and four Non-Executive Directors and is responsible to shareholders for the proper management of the Group. The Chairman is David Newlands and the Chief Executive Officer is Russ Cummings. The full details of all the Directors are set out on pages 70 and 71. The Board operates both formally, through Board and committee meetings, and informally, through regular contact between the Directors and senior executives. The composition of the Board provides an appropriate blend of skills, experience, qualifications and knowledge, and the number of Non-Executive Directors provides a strong base for ensuring appropriate corporate governance of the Group. 74

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In accordance with the Code, the Group has established an Audit and Risk Committee, a Remuneration Committee and a Nomination Committee, with formally delegated duties and responsibilities and written terms of reference. From time to time, separate committees may be set up by the Board to handle specific matters when the need arises. Board changes The majority of the Directors served throughout the year under review. However, David Newlands joined the Board as Chairman and Non-Executive Director after the end of the year (on 1 August 2016), and also joined the Nomination Committee on that date. Dr Martin Knight resigned as Chairman and Non-Executive Director on 31 July 2016. Roles and responsibilities The main roles of the Board are: • to create value for shareholders; • to provide entrepreneurial leadership of the Group; • to approve the Group’s strategic objectives; and • to ensure that the necessary financial and other resources are made available to enable the Group to meet those objectives. The Board also has a schedule of matters reserved for its approval, which are as follows: • setting Group strategy and approving an annual budget and medium-term projections; • reviewing operational and financial performance; • reviewing the Group’s systems of financial control and risk management; • ensuring that appropriate management development and succession plans are in place; • reviewing the environmental and health and safety performance of the Group; • approving appointments to the Board; • approving policies relating to Directors’ remuneration and the severance of Directors’ contracts; and • ensuring that a satisfactory dialogue takes place with shareholders. Regular meetings of the Board are held every other month. Board papers are provided to the Directors in advance of each regular Board meeting, including management accounts and accompanying reports from Executive Directors and other members of the senior management team. At each regular Board meeting, the Directors discuss issues arising, review the progress of the Group towards its objectives and monitor its financial performance against budget and forecasts. Where Directors have concerns about the running of the Group or a proposed course of action, these are recorded in the minutes of the relevant meeting and are followed up appropriately. In addition to the regular bi-monthly meetings, the Board also meets as required to consider major transactions and other corporate business.

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

Number of Board meetings attended

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

12/12 12/12 12/12 12/12 12/12 12/12 11/12 12/12

Re-election of Directors All Directors are subject to election by shareholders at the first Annual General Meeting (AGM) after their appointment by the Board, and to re-election thereafter at intervals of no more than three years. Any Non-Executive Directors who have more than nine years’ service on the Board will also be subject to annual re-election. The names of Directors submitted for election or re-election are accompanied by sufficient biographical details and any other relevant information to enable shareholders to take an informed decision on their election. The Board will satisfy itself that the performance of the Directors seeking re-election at the next AGM continues to be effective, that they demonstrate commitment to their respective roles, and that the re-election of these Directors will ensure that the Group continues to have a broad balance of skills, knowledge and experience available to it.

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

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Company information

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

Director

Financials

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

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

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

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

Strategic Report

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

Company information

Financials

Governance

Strategic Report

Corporate governance report continued Directors’ independence The Board has noted the following items in relation to the independence of certain members of the Board: • Dr Martin Knight served for more than nine years on the Board (or on the Board of Imperial Innovations Limited, which was previously the vehicle of the Group’s business). The Board considered the independence of Dr Martin Knight and satisfied itself that he continued to be independent in character and judgement throughout his tenure as a Director. Discussions with major investors of the Group also indicated no demand for change; • Professor David Begg is not deemed to be an Independent Non-Executive Director because of his appointment to the Board by Imperial College London; and • Dr Martin Knight held options over Ordinary Shares of the Group as set out on page 74. Taking into account the Code, the Board considers David Newlands (who was considered independent on his appointment), Peter Chambré, Dr Linda Wilding and Dr Robert Easton to be the Independent Non-Executive Directors of the Group at the date of this report. As noted above, Dr Martin Knight was also considered to be an Independent Non-Executive Director throughout the year. Acceptance of other directorships The Non-Executive Directors may accept appointments as Directors of other companies and retain any related fees paid to them. David Newlands, Dr Martin Knight, Professor David Begg, Peter Chambré, Dr Linda Wilding and Dr Robert Easton all act as Directors of companies outside the Group. At the time of his appointment as Chairman, the other commitments of David Newlands were his chairmanship of Raeburn Place Foundation, his directorships of Raeburn Place Development Limited and Walton Heath Golf Club Limited, and his membership of Prospect Investment Management (I) LLP. Those other commitments have not changed as at the date of this report. The Executive Directors may accept external appointments as Non-Executive Directors of other companies with the prior consent of the Board. Where such appointment is to the Board of one of the Group’s portfolio companies, any related fees are paid to the Group. Board development, support and evaluation Professional development of Directors On appointment, a Director takes part in an induction programme through which he or she receives information about the Group, the role of the Board and the matters reserved for its decision, the terms of reference and membership of the Board committees, the Group’s corporate governance practices and procedures, and the latest financial information about the Group. On appointment, Directors are also advised of their legal and other duties and obligations as a Director of an AIM-quoted company. This induction also gives the Director an opportunity to request to meet with major shareholders. 76

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Throughout their period in office the Directors are continually updated on the Group’s business and the competitive and regulatory environments in which it operates, as well as changes to the legal and governance requirements applicable to the Group and to themselves as Directors. The Chairman is also available to discuss the training and development needs of the Directors when required. Board evaluation of performance The Board is mindful of the requirement to undertake an annual evaluation of its performance and that of its committees and individual Directors. The Board has adopted the following procedures in order to conduct Board performance evaluation. The performance of the Board, its committees and the individual Executive and Non-Executive Directors is evaluated by the Chairman on an ongoing basis. The Chairman meets with the other Directors regularly throughout the year. The Chairman also conducts a formal performance appraisal of the Chief Executive Officer annually. Also, in conjunction with the Chief Executive Officer, the Chairman assesses annually the performance of the other Executive Directors, as well as the Company Secretary and other senior managers. The Chairman will also, as appropriate, hold meetings with the Non-Executive Directors without the Executive Directors being present. The Chairman himself is appraised annually by the Non-Executive Directors, led by the Senior Independent Director, taking into account the views of Executive Directors. Access to independent advice and support The Directors are given access to independent professional advice at the Group’s expense when the Directors deem it necessary in order for them to carry out their responsibilities. All Directors also have access to the advice and services of the Company Secretary, who is responsible to the Board as a whole for ensuring that Board procedures are properly followed and that applicable rules and regulations are complied with. Relations with shareholders The Board attaches great importance to communications with both institutional and private shareholders. In fulfilment of the Group’s obligations under the Code, the Chairman gives feedback to the Board, and in particular to the Non-Executive Directors, on issues raised with him by major shareholders. Non-Executive Directors may attend scheduled meetings with major shareholders. Regular communication is maintained with all shareholders through the Group’s announcements, its Annual Report and its half-yearly report.

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

No significant weaknesses or failings of the Group’s internal controls have been identified during the year. The Audit and Risk Committee and the Board are committed to working together to ensure that appropriate remedial action is taken if any such issues arise in the future. All members of staff are aware of the internal controls of the Group, and the Group has produced a staff handbook which covers a variety of policies and procedures which are designed to help each employee understand the Group’s work environment. Such policies cover areas such as communications, health and safety, data protection, equal opportunities, and whistleblowing.

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Company information

Risk management The Group has an ongoing process for identifying, evaluating and managing the significant risks the Group faces. The process is as follows: • risks are regularly identified, through a review of the environment in which the Group operates; • each identified risk is then subject to an assessment to determine (a) probability and (b) impact; • the probability of the risk occurring and the potential impact are then used to derive a colour-coding for the risk, and the identified risks are set out in tabular form in a risk register; • a response to accept, monitor, mitigate or transfer the risk is then recommended by the Treasury and Finance Director; and • the risk is then re-evaluated post mitigation and may be given a revised colour-coding.

Financials

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

Governance

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

Internal control The Audit and Risk Committee and the Board have reviewed the effectiveness of the Group’s internal controls, including financial, operational and compliance controls, for the period 1 August 2015 up to the date of approval of this Annual Report, and have addressed issues as they have been identified. The key features of the internal control systems that operated throughout the year covered by the financial statements are set out below: • the Group prepares consolidated financial statements which are reviewed and approved by qualified and experienced individuals, underpinned by a system of checklists which ensures that all elements of the financial statements and appropriate disclosures are considered and accurately stated; • the Group prepares detailed budgets and working capital forecasts, which are based upon the strategy of the Group and are approved by the Board. Detailed management accounts are prepared each month and are compared to budgets, with any variances being investigated; • the Board monitors the activities of the Group through the supply of regular consolidated financial information as set out in Board papers; • the Board routinely monitors the performance of its investments. The Group employs stringent investment appraisal processes prior to deciding on investment. Regular reports are made to the Board on the status and valuation of investments and significant disposals require Board approval; • the Group has a structure with clearly drawn lines of accountability and authority. Employees are required to follow clearly laid out internal procedures and policies appropriate to the business and their position within the business; and • the Group employs Directors and senior employees with the appropriate knowledge and experience.

Strategic Report

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

Company information

Financials

Governance

Strategic Report

Corporate governance report continued The Group seeks at all times to conduct its business with the highest standards of integrity and honesty, and has therefore adopted a whistleblowing policy under which staff are encouraged to report to an Executive Director or the General Counsel any alleged wrongdoing, breach of legal obligation or improper conduct by or on the part of the Group or any officers, Directors, employees, consultants or advisers of the Group. The manager dealing with any matter will investigate the concerns. This may require him or her to meet with the staff member to obtain further information (although anonymous reports can also be made), to interview potential witnesses, and to examine documents. Upon completing the investigation the manager will determine appropriate action. If the investigation concludes that the staff member’s concern is justified, action will be taken to address and rectify the wrongdoing, and if necessary to involve the appropriate authorities. If the staff member is unhappy about the speed or conduct of the investigation they can raise concerns with the Chief Executive Officer or the Chairman of the Audit and Risk Committee. The Audit and Risk Committee is informed of any whistleblowing reports. The above risk management and internal controls process has been in place throughout the year in review and up to the date of the approval of this Annual Report. The system of internal controls accords with the guidance issued by the Financial Reporting Council and is reviewed at least once a year by the Audit and Risk Committee and the Board. This review covers all material controls, including financial, operational and compliance, as well as risk management systems. The Board acknowledges that it has ultimate responsibility for the Group’s system of internal controls and for reviewing their effectiveness. However, the system of internal controls is designed to manage rather than eliminate the risk of failure to achieve business objectives, and it can only provide reasonable and not absolute assurance against material misstatement or loss.

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Conflicts of interest Each Director has a statutory duty under the Companies Act 2006 (the ‘Act’) to avoid a situation in which he or she has or can have a direct or indirect interest that conflicts or may potentially conflict with the interests of the Group. Each Director must also disclose to the Board any transaction or arrangement under consideration by the Board in which he or she is interested. The Company’s articles of association permit the Board to authorise conflicts or potential conflicts of interest. Procedures are in place to deal with such conflicts of interest and these have been operated effectively throughout the year. Directors are regularly reminded of their duties in respect of conflicts of interest. Insurance The General Counsel has responsibility for arranging adequate insurance cover for key business risks, and appropriate insurance is in place under which Imperial Innovations Group plc is the insured entity, with cover extending to its subsidiaries and Directors. The Group’s insurance broker is Lockton Companies LLP. Statement of Directors’ responsibilities A statement of the Directors’ responsibilities is set out in the Directors’ report on page 98.

David Newlands Chairman 12 October 2016

Nomination Committee

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

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

Financials

Members David Newlands (from 1 August 2016) Professor David Begg Dr Linda Wilding Dr Martin Knight (until 31 July 2016)

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

Governance

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

Strategic Report

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

Number of meetings attended

0 1 1

The Nomination Committee employed the services of Russell Reynolds Associates to conduct a comprehensive external search for the new Chairman, into which were added candidates identified from the Group’s own networks. Russell Reynolds Associates also carried out due diligence and referencing for the short-listed candidates. Russell Reynolds Associates has no other connection with the Group. Functions and responsibilities The Nomination Committee’s main responsibilities as set out in its terms of reference include: • to review regularly the structure, size and composition of the Board and to make recommendations to the Board with regard to any necessary adjustments; • to identify and nominate suitable candidates; and • to satisfy itself that processes and plans are in place for appointments to the Board.

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Company information

Dr Martin Knight Professor David Begg Dr Linda Wilding

Before an appointment is made, the Nomination Committee evaluates the balance of skills, knowledge, independence and experience on the Board, including gender diversity, and in the light of this evaluation prepares a description of the role, the expected time commitment and the capabilities required for a particular appointment. The Nomination Committee’s terms of reference are publicly available on request or on the Group’s website. The Nomination Committee gives full consideration to succession planning in the course of its work, taking into account the challenges and opportunities facing the Group and the skills and expertise needed on the Board in the future. Appointment of Directors Each of the Directors is appointed in accordance with specified terms, subject to re-election and to statutory provisions relating to removal of Directors. The details of the service agreements/letters of appointment under which each of the Directors has been appointed are set out in the Directors’ Remuneration Report on page 88. As set out on page 76, on appointment the Directors participate in an induction programme and continue to have the opportunity to regularly review and discuss their training and development needs with the Chairman.

Company information

Financials

Governance

Strategic Report

Nomination Committee continued

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

David Newlands Chairman, Nomination Committee 12 October 2016

Audit and Risk Committee

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

Financials

Members Dr Linda Wilding Peter Chambré Dr Robert Easton

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

Governance

Chairman Dr Linda Wilding

Strategic Report

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

Number of meetings attended

6 6 6

Company information

Dr Linda Wilding Peter Chambré Dr Robert Easton

Since the end of the financial year the Committee has met on two further occasions (in August and September 2016) to consider this Annual Report, with the external auditors being present at one of the two meetings. The Board considers that the Chairman of the Audit and Risk Committee has appropriate recent and relevant financial experience.

Imperial Innovations Annual Report and Accounts 2016

81

Company information

Financials

Governance

Strategic Report

Audit and Risk Committee continued Functions and responsibilities The primary responsibilities of the Audit and Risk Committee are the oversight of the Group’s financial reporting, risk management and internal controls and the work of the external auditors. The Committee’s main responsibilities, as set out in its terms of reference, are to review and advise the Board on: • the financial statements of the Group being properly reported and monitored and the integrity of such financial statements and any formal announcements relating to the Group’s financial performance; • the accounting methodologies used, accounting policies applied and significant financial reporting issues and judgements contained in such financial statements; • the Annual Report: to assess whether it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s performance, business model and strategy; • the external audit report relating to the financial statements; • monitoring of the risks facing the Group and maintenance of a risk register; • the Group’s financial reporting and internal control policies and procedures, including whistleblowing arrangements, and the assessment and reporting of financial and non-financial risks; and • the external auditors’ independence and objectivity, the effectiveness of the audit process and the appointment, reappointment and removal of the external auditors. At least annually, the Committee reviews the provision of non-audit services by the Group’s auditors and monitors the auditors’ independence. The Committee’s terms of reference are publicly available on request or on the Group’s website. Activities during the year Set out below are the key matters the Committee considered during the financial year and at the August and September 2016 Committee meetings in preparation for the approval of this Annual Report, including how any issues were addressed. Financial management and reporting The Committee: • reviewed and made recommendations in respect of the Group’s annual and half-yearly reports; • reviewed the fair value of investments; and • carried out a detailed review of the top 10 investments by carrying value and additionally considered amounts attributed to those investments which did not have an investment round in the last 12 months.

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Significant matters considered by the Audit and Risk Committee in relation to the financial statements and areas of judgement routinely considered and challenged were as follows: • the methodology and assumptions applied in the Group’s valuation of investments. The valuation helps to determine a significant part of the Group’s net asset value and reported performance. As a consequence the scrutiny of material valuations represents an important part of the Committee’s remit. Valuations for the full and half year were reviewed and challenged by both management and the Committee; • the judgements involved in the recognition and movement in the Group’s Carried Interest Plan liability, in particular the leaver assumptions, discount rate and timing of portfolio realisations; • the Group’s significant shareholders and related party classification; • treasury management and controls to ensure that investments are made in line with investment policy; • the Group’s two loan facilities with the European Investment Bank and compliance with the financial covenants of those facilities; • the Group’s share-based payments and their implications for its financial statements, including the fair value of long term incentive schemes; • the Group’s status as a going concern and its viability statement; and • assessing compliance with the Group’s tax structure protocol and the risks associated with any non-compliance. The Committee is satisfied that the judgements made by management are reasonable and that appropriate disclosures in relation to key judgements and estimates have been included in the financial statements. In reaching this conclusion the Committee has considered reports and analysis prepared by management and has also constructively challenged assumptions. The Committee has also considered detailed reporting from, and discussions with, the external auditors. Risk management and internal control The Committee: • reviewed the Group’s risk register and the appropriate classification as described on page 77; and • reviewed the effectiveness of the Group’s internal controls. External audit The Committee: • reviewed and agreed the scope and methodology of the work undertaken by the Group’s external auditors; • evaluated the independence and objectivity of the external auditors; and • agreed the terms of engagement and fees to be paid to the external auditors.

Non-audit services carried out in the year related to management consultancy work in relation to the Group’s strategy (the contract for which was won through a competitive tender process), advisory and compliance review work in relation to tax, and reporting accountant services relating to the Company’s fundraising of £100.0 million during February 2016. The Committee was satisfied throughout the year that the objectivity and independence of PwC was not in any way impaired by the nature of the non-audit related services that they undertook for the Group during the year, by the level of non-audit fees charged, or by any other facts or circumstances.

In addition, the Chairman of the Committee maintains a dialogue with the auditors outside the Committee. To fulfil its responsibility for oversight of the audit process, the Committee reviewed: • the terms, areas of responsibility, associated duties and scope of the audit as set out in the auditors’ engagement letter for the year; • the audit work plan for the current year; • the audit fee proposal; • the major issues that arose during the course of the audit and their resolution; • key accounting and audit judgements; • the levels of errors identified during the audit; and • recommendations made by the auditors in their management letters, and the adequacy of management’s response.

Company information

The Committee will approve the use of the external auditors to provide certain specified accounting and tax services, including tax compliance, tax planning and related implementation advice and certain other services when it is in the best interests of the Group to do so and they can be undertaken without jeopardising the independence of the external auditors.

Financials

Any non-audit work to be undertaken by the external auditors is required to be authorised by the Treasury and Finance Director before it begins and the aggregate expenditure with the external auditors is reviewed by the Committee.

Review of external auditors The Committee assesses the independence, objectivity and effectiveness of the external audit process in the following way: • consideration of report from external auditors describing arrangements to identify, report and manage any conflicts of interest; • consideration of the extent of non-audit services provided by external auditors; • review of the audit plan and execution against the plan; and • review of reports highlighting any major issues arising during the course of an audit.

Governance

Audit and non-audit services The Committee is responsible for the development, implementation and monitoring of policies and procedures on the use of the external auditors for non-audit services, in accordance with professional and regulatory requirements. These are kept under review to ensure that the Group benefits in a cost-effective manner from the cumulative knowledge and experience of its external auditors whilst also ensuring that the external auditors maintain the necessary degree of independence and objectivity.

Auditors fees The total fees paid to PwC for the year ended 31 July 2016 were £438,000 of which £295,000 related to non-audit work (see note 7 of the consolidated financial statements). The non-audit work primarily related to tax compliance, management consultancy and work to support the Company’s fundraising of £100.0 million during February 2016. PwC were considered independent as no accounting judgement was involved.

Strategic Report

External auditors PricewaterhouseCoopers LLP (PwC) have been the external auditors of the Group since 2006, when the Group’s shares were admitted to trading on AIM. Before 2006 PwC were the auditors of Imperial Innovations Limited whilst it was a subsidiary of Imperial College London. A review of PwC’s independence and audit process effectiveness is performed each year before a recommendation is made to the Board to propose PwC for re-election at the AGM. In assessing PwC’s independence, the Committee received confirmation that, in PwC’s professional judgement, PwC is independent within the meaning of all UK regulatory and professional requirements and the objectivity of the audit partner and audit staff are not impaired.

Internal audit function Given the Group’s size and development, the Board did not consider it necessary to have an internal audit function during the year. The Board will continue to monitor this requirement annually.

Dr Linda Wilding Chairman, Audit and Risk Committee 12 October 2016  

Imperial Innovations Annual Report and Accounts 2016

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Directors’ Remuneration Report Remuneration Committee Chairman’s introduction Strategic Report

Chairman Peter Chambré

Governance

Members Peter Chambré Dr Linda Wilding Dr Robert Easton

Company information

Financials

Dear Shareholder On behalf of the Board, I am pleased to present our Directors’ Remuneration Report for the year ended 31 July 2016. As in previous years, we have chosen in this Report to make additional voluntary disclosures in addition to those required by the AIM Rules for Companies and applicable regulations. Over the past three years, the Group has invested £164.0 million into our portfolio of important and exciting innovative companies, with the prospects of delivering exceptional growth and returns. After this period of increasing investment, the Committee decided this year to review whether our remuneration structures were properly aligned with the clear strategy and objectives of the Group and whether we appropriately remunerated and incentivised our very talented organisation. With the support of external consultants, we conducted a review to consider a number of key questions: • How competitive are the levels of pay offered by the Group? • Are the remuneration structures focused on the most appropriate performance measures? • Does the Group have the right balance of short and long term incentives in the packages it offers to Executive Directors and senior executives? Overall, the review indicated that the Group’s existing remuneration policies were broadly appropriate. However, it highlighted some areas where improvements to the alignment of remuneration with the Group’s goals could be achieved. As a result of the review, the Committee is now putting forward a new remuneration policy for a vote by shareholders. A full explanation of the proposed new policy for the Group is set out in the Directors’ Remuneration Policy section below.

Among the key policy proposals are: • A proposal to increase the profit share ratio in the Carried Interest Plan to 11.5%–12.5% (previously 10.5%–11.5%) to take account of the increased headcount that the Group’s business plan requires over the next five years. • A requirement for Executive Directors and senior executives to build over time a meaningful personal shareholding in the Group. • Changes to how annual bonus payments are calculated with the intention that Executive Directors will have 80% of any potential award linked to corporate measures which can be objectively established, with the remaining 20% being linked to the achievement of their personal objectives. • A requirement that half of any cash annual bonus, above a threshold, is granted in the form of deferred share awards under the proposed 2016 Long Term Incentive Plan, which are not normally exercisable for two years. • The adoption of a new share plan, the 2016 Long Term Incentive Plan, to replace the Unapproved Share Option Scheme and the Long Term Incentive Plan (both of which expired on 24 May 2016). The 2016 Long Term Incentive Plan will facilitate the grant of performance share awards (PSAs), which will be used instead of the total shareholder return (TSR) share options granted under the old Long Term Incentive Plan. As Chairman of the Remuneration Committee I believe that we are putting in place a remuneration structure which will appropriately reward and incentivise our Executive Directors and senior executives to deliver exceptional returns to our shareholders.

Peter Chambré Chairman, Remuneration Committee 12 October 2016

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Remuneration Committee

Number of meetings attended

Director

Peter Chambré Dr Linda Wilding Dr Robert Easton

5 5 5

Key activities during the year The key activities of the Remuneration Committee during the year ended 31 July 2016 were as follows: • commenced the review of the Group’s remuneration policy referred to in the Chairman’s letter above, with the assistance of external advisers; • reviewed and approved the overall salaries and any proposed salary increases; • reviewed and approved any proposed bonus payments; and • reviewed and approved the allocation of LTIP awards (set out in detail below) for senior management.

Adviser to the Group Appointed by

MM&K Limited

Services provided to Remuneration Committee

Other services provided to the Group

Remuneration Advising on the Group’s None Committee remuneration proposals and on market trends

M M & K Limited were selected to advise the Remuneration Committee from a short list of three firms. The Remuneration Committee is satisfied that the advice it received from its external advisers was objective and independent. Total fees for advice provided to the Remuneration Committee during the year ended 31 July 2016 amount to £57,000 (2015: £41,000).

Peter Chambré Chairman, Remuneration Committee 12 October 2016  

Imperial Innovations Annual Report and Accounts 2016

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Company information

Advisers to the Remuneration Committee During the year, the Remuneration Committee commissioned and received the advice of the external advisers shown in the table below:

Financials

The Chief Executive Officer may be invited to attend the Committee’s meetings but is not present when his own remuneration is discussed. The remuneration of the NonExecutive Directors is a matter for the Board. The Board may, however, delegate responsibility to a committee consisting of

Composition During the year, the Remuneration Committee met five times at the Group’s offices. When appropriate, nonCommittee members were invited to attend, including the Chief Executive Officer.

Governance

Functions and responsibilities In accordance with its terms of reference, the duties of the Remuneration Committee include to review and determine, on behalf of the Board and shareholders: • the framework or broad policy regarding executive remuneration and the entire individual remuneration and incentive packages for each of the Executive Directors, Chairman and management (including all personnel receiving annual basic salary of £150,000 or more) and determining the relevant terms of employment of those persons; • the participation by the Executive Directors and management in any discretionary employee share or other incentive schemes and bonus arrangements operated by the Group; • targets for any performance-related payments and individual incentives for Executive Directors and management; • the policy and scope of any pension arrangements for the Chairman, Executive Directors and management; • the policy and scope of any termination payments and the severance terms for Executive Directors and management; • the policy for authorising claims for expenses of Directors; • any major changes in remuneration policy or employee benefit structures throughout the Group; • the ongoing appropriateness and relevance of remuneration policy for the Executive Directors; and • the selection criteria, appointment and terms of reference for any remuneration consultants who advise the Remuneration Committee.

Executive Directors including the Chief Executive Officer and in that matter the Non-Executive Directors play no part. No Director is involved in deciding his or her own remuneration.

Strategic Report

Overview The Remuneration Committee assists the Board in determining its responsibilities in relation to remuneration, including making recommendations to the Board on the Company’s policy on all aspects of executive remuneration, and determining the individual remuneration and incentive and benefits package of each of the Executive Directors, the Chairman, and all those employees who receive an annual basic salary of £150,000 or more and any other employees who the Committee determines should be included in such groups from time to time. The remuneration of the Non-Executive Directors is considered by the Board following recommendations by the Executive Directors. The current terms of reference for the Remuneration Committee were approved by the Board and came into effect on 23 October 2014, and are publicly available on request and on the Group’s website.

Company information

Financials

Governance

Strategic Report

Directors’ Remuneration Report Introduction to Remuneration Report

Directors’ Remuneration Policy

Although the Group’s shares are not admitted to the Official List, the Board has chosen to include a Directors’ Remuneration Report within the Annual Report in order to demonstrate its commitment to best practice in corporate governance. The Directors’ Remuneration Report for the year ended 31 July 2016 includes information required to be included in the Group’s annual accounts by virtue of Rule 19 of the AIM Rules for Companies and Schedule 5 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. The Board has also chosen to include certain additional information within the Directors’ Remuneration Report that would be required to be included if the Group’s shares were admitted to the Official List. This additional information is in the form of disclosures which address selected requirements of Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended).

Remuneration policy The Remuneration Committee is setting out a new Remuneration Policy for the next three years which, it believes, will meet the demands of retaining and motivating the Executive Directors and senior executives.

A resolution to approve the Remuneration Report will be proposed at the Annual General Meeting of the Group in November 2016. The Remuneration Report comprises three sections: 1. Directors’ Remuneration Policy. 2. Statement of implementation of the Remuneration Policy for the year ending 31 July 2017. 3. Annual Report on Directors’ Remuneration, which sets out details of how the existing remuneration policy was implemented for the year ended 31 July 2016.

The Group’s policy is to provide senior management with remuneration packages that are linked to the performance of both the Group and the individual. The mix of individual and collective, performance-based, reward is designed to incentivise senior management to work together to deliver the strategic aims of the business. Remuneration of senior management comprises basic salary, annual bonus awards, benefits in kind, pensions and long-term incentive arrangements. Further details of these are set out below. The Remuneration Committee will regularly take reasonable and appropriate steps to establish whether the remuneration packages offered to senior management are broadly comparable with those offered by similar businesses. However, the Remuneration Committee will only use this information as a market indicator, and any changes to remuneration packages will be, first and foremost, driven by the strategic and commercial needs of the Group. It is the Group’s policy that no Executive Director, who serves as a Non-Executive Director of another company in which the Group has an investment, receives direct remuneration from that other company. The Remuneration Committee consider it appropriate that senior management should build up a meaningful personal holding in the Group. ‘Meaningful’ in this context has been determined as 2 x salary for the CEO, 1.5 x salary for the other Executive Directors and 1 x salary for the senior executives. In forming the Group’s policy on remuneration the Board gives full consideration to Schedule D of the UK Corporate Governance Code (September 2014), which sets out guidelines for the design of performance-related remuneration. The Directors believe that the success of the Group depends on the performance of the senior management. The Directors also recognise the importance of ensuring that employees are appropriately incentivised and that they identify closely with the values of the Group. The Remuneration Committee considers when determining the remuneration of the Chairman and the Executive Directors not only the pay and conditions of the Chairman and the Executive Directors but also employment conditions across the Group, especially when determining annual salary increases.

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e) Long term incentive arrangements Under the proposed Remuneration Policy the Group will operate two main long term incentive arrangements for Executive Directors and senior management: the Carried Interest Plan and Performance Share Awards (PSAs) granted under the proposed 2016 Long Term Incentive Plan. The Group also operates an Employee Benefit Trust (EBT) and, historically, made awards in the form of Total Shareholder Return (TSR) share options. Details of the EBT and the TSR share options are set out on page 93.

b) Annual bonus award Each year discretionary bonus awards are considered and recommended by the Remuneration Committee. Such awards are based on both an employee’s own performance and that of the Group. For the reported year, the Group has recommended awards to such Directors as are set out under the heading ‘Annual Report on Directors’ Remuneration’ in the column headed ‘Annual bonus earned’ on page 91.

Where the amount paid in annual bonus to a member of senior management exceeds £25,000, 50% of any excess over that amount will be granted in the form of deferred share awards under the proposed 2016 Long Term Incentive Plan. These awards will take the form of nominal or nil cost options which are not normally exercisable for two years. The Chairman and Non-Executive Directors are not eligible for any annual bonus award. c) Benefits – life assurance arrangements, private medical cover and permanent health insurance The Group also has a Group Death-In-Service plan insured with Legal & General covering all employees, which has been in place since inception on 1 August 2005. It pays a lump sum of four times the employee’s basic salary. As well as this Death-In-Service benefit, the Executive Directors are each entitled to private medical insurance (family cover) and permanent health insurance (for long-term sickness) under which, after 13 weeks of absence due to illness, they are entitled to 75% of basic salary until they return to work.

Company information

Under the proposed Remuneration Policy the performance conditions for Executive Directors will comprise a mixture of corporate objectives that track the Group’s financial and/ or strategic performance (weighted at 80%) and personal objectives that relate to the role and responsibilities of the Executive Director (weighted at 20%). The maximum payment that can be made to an Executive Director will be 100% of his or her base salary for the CEO and the CIO, and 50% of his or her base salary for the Managing Director – Technology Transfer.

The Carried Interest Plan In future, the Group will continue to operate the long term incentive arrangement known as the Carried Interest Plan that allows permanent employees of the Group, including the Executive Directors, to obtain an equity participation in the growth of the underlying investments of the Group. The Chairman and the Non-Executive Directors are not eligible to participate in the plan. The Carried Interest Plan is divided into several portfolios. Portfolios remain open for new investments in the financial year and follow-on investments for the next four years. Under the new Remuneration Policy, the CEO and the Managing Director – Technology Transfer will not participate in any portfolios after P10 below. From 2014 onwards the Carried Interest Plan for each year has been split into two portfolios, A) new investments for the full financial year, and B) follow-on investments made into companies from earlier portfolios which are now over four years old and consequently closed. Carried Interest Plan portfolios Class

Year ended

P1-2007 P2-2008 P3-2009 P4-2010 P5-2011 P6-2012 P7-2013 P8-2014 P9-2015 P10-2016 P11-2017

31 July 07 31 July 08 31 July 09 31 July 10 31 July 11 31 July 12 31 July 13 31 July 14 31 July 15 31 July 16 31 July 17

Imperial Innovations Annual Report and Accounts 2016

Financials

The base salaries of the Directors are as set out in the table on page 91 under the heading ‘Single total figure table of remuneration of the Directors’.

Governance

d) Pension entitlements The Executive Directors are members of the Imperial Innovations Pension Scheme (a defined contribution scheme), to which the Group contributes. Pensionable earnings do not include elements of remuneration other than salary. Neither the Chairman nor any of the Non-Executive Directors participate in the Group pension plan. Where an Executive Director has insufficient capacity to receive a pension contribution because he or she has reached his or her lifetime allowance, an alternative payment, not exceeding the amount due under pension entitlements, may be paid in lieu.

Strategic Report

Remuneration components a) Base salary This takes into account experience and personal contribution to the Group’s strategy, and aims to attract and retain executives of the quality required to deliver the Group’s strategy. Base salaries are reviewed regularly by the Remuneration Committee, taking into account factors that include the Group’s performance, individual performance and changes in responsibility. They may also be determined with reference to advice from external consultants and comparisons with an appropriate comparator group of companies.

87

Governance

Strategic Report

Directors’ Remuneration Report continued Before any payment to participants becomes due under any portfolio, the Group must first receive back the original amount invested in that portfolio plus an additional amount representing 8% compound annual growth on the original amount invested. This additional amount is known as the ‘hurdle’. The amount of proceeds from the sale of investments in excess of the hurdle (the Excess Return) may be shared with the participants using a profit share ratio. Profit sharing ratios vary between portfolios: Portfolios until 31 July 2011 Portfolios ending between 31 July 2012 and 31 July 2016 1 Portfolios ending 31 July 2017 and beyond 1

Participants

Group

15%

85%

10.5%-11.5% 2

89.5%-88.5%

11.5%-12.5% 3

88.5%-87.5%

1 Ratio agreed annually by the Group’s Remuneration Committee. 2 Reduced to take into account the introduction of the TSR scheme.

Company information

Financials

3 Increased by 1% to take account of the future growth in the Company and corresponding requirement for additional Carried Interest.

Once future disposals of investments are made, the proceeds are distributed in the following order: 1. Retention by the Group of the original amount invested. 2. Retention by the Group of 8% hurdle. 3. ‘Catch-up’ payment to participants until the desired profit share ratio for the portfolio is reached (in respect of the proceeds in excess of the original amount invested in the portfolio). 4. Retention by the Group and distribution to participants in the desired profit share ratio. Accordingly there is no cash payment due to individual members of the scheme until the Group has ceased investment in the companies in the relevant portfolio and has made sufficient realisations. The amount which participants receive as a result of the sharing of the Excess Return is known as the carried interest.

The Carried Interest Plan has a requirement of three years’ continuous service before any value is retained by good leavers (who are defined as set out in the scheme rules); thereafter any leaver vesting is on a straight-line basis over ten years. Performance Share Awards (PSAs) Performance Share Awards will be granted to employees, including the Executive Directors, under the proposed 2016 Long Term Incentive Plan, which will be submitted to shareholders for approval at the AGM in November. PSAs will initially be granted in the form of nominal cost options to acquire shares in the Group, although they could also be granted in the form of nil cost options. Going forward, for Executive Directors Russ Cummings and Tony Hickson, it is intended that 100% of their long term incentive will be made by way of PSAs and they will not participate in any Carried Interest Plan portfolios after portfolio P10. Given his role as Chief Investment Officer, approximately one-third of the expected grant value of the long term incentive for Dr Nigel Pitchford is planned to be awarded under the PSP, with two-thirds in the Carried Interest Plan scheme. The Remuneration Committee will monitor the appropriateness of this split on an annual basis. The maximum ‘face value’ award that may be made on an annual basis to the CEO is 300% of salary, and the maximum award to any other Executive Director is 150% of salary. PSAs will have performance measures attached that must be met in order for the shares to vest. These will include a minimum growth threshold that must be achieved before any of the PSAs vest. For the measures applying to PSAs to be granted in the year ending 31 July 2017, see the statement of implementation for 2017 on page 90. Each annual award will be divided into three equal tranches, with each tranche only being exercisable (should the shares have vested) after three, four and five years respectively.

Service contract and letters of appointment The table below sets out the appointment details for each of the Directors. Table of Directors’ service Director

Position

David Newlands Russ Cummings Dr Nigel Pitchford Tony Hickson

Chairman Chief Executive Officer Chief Investment Officer Managing Director – Technology Transfer Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director

Professor David Begg Peter Chambré Dr Linda Wilding Dr Robert Easton

Date of appointment to the Board

Date of current contract/ letter of appointment

Date of expiry/notice period

1 August 2016 18 September 20061 16 October 20132 16 October 20133

11 May 2016 18 September 2006 29 September 2011 18 February 2005

Three months’ notice Six months’ notice Six months’ notice Three months’ notice

21 March 2012 19 June 2014 19 June 2014 1 August 2015

22 March 2012 29 May 2014 29 May 2014 8 June 2015

Three months’ notice Three months’ notice Three months’ notice Three months’ notice

1 Russ Cummings was appointed as a CEO on 16 July 2013. 2 Dr Nigel Pitchford was appointed as a Director of Imperial Innovations Limited and Imperial Innovations Investments Limited on 26 July 2013. 3 Tony Hickson was appointed as a Director of Imperial Innovations Limited and Imperial Innovations Investments Limited on 26 July 2013.

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Policy on payments for loss of office None of the Directors’ service contracts have a provision for compensation for loss of office or wrongful termination upon change of control beyond payment in lieu of contractual notice. The Committee’s policy for provision for compensation for loss of office is to provide compensation which reflects the Group’s contractual obligations. Statement of consideration of employment conditions elsewhere in the Group The remuneration approach is consistently applied at levels below the Executive Directors, ensuring that there is alignment with business strategy throughout the Group. When conducting the annual salary review for all employees, account is taken of the external market, and for the majority of the management population, individual performance is also a key factor. Statement of consideration of shareholder views The Committee understands that listening to the views of the Group’s major shareholders plays a vital role in the success of the business. It is committed to an ongoing dialogue with the Group’s shareholders and maintains regular contact with them throughout the year.

The appointment of each of the Non-Executive Director is terminable at any time on either party giving three months’ written notice. Professor David Begg was appointed to the Board by Imperial College London and his appointment may be terminated by Imperial College London in accordance with its right under the Relationship Agreement.

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Company information

Non-Executive Directors’ service contracts The remuneration of the Non-Executive Directors is determined by the Board, in which matter the Non-Executive Directors play no part. Whilst some letters of appointment originally anticipated a three-year term, the Board has resolved to continue such appointments upon their existing terms, subject to, and conditional upon, the re-election of such Directors by shareholders from time to time in accordance with the Group’s Articles of Association.

Full details of the Directors’ remuneration are shown in note 21 to the consolidated financial statements and on pages 90 to 94.

Financials

Executive Directors’ service contracts Executive Directors each have a service contract of indefinite duration until normal retirement age. It is the Group’s policy that Directors’ service contracts should incorporate no more than six months’ notice of termination from the Group, in line with current best practice. The acceptance by an Executive Director of Non-Executive Director appointments with other companies is subject to Board approval.

The annual fee for the Non-Executive Directors is £42,500, with the Chairman of the Audit and Risk Committee and the Chairman of the Remuneration Committee each receiving an additional £5,000. No individual is entitled to any benefits upon the termination of his/her service to the Group.

Governance

Chief Executive Officer’s service contract The Chief Executive Officer’s appointment is terminable on not less than six months’ written notice by either party. He is entitled to 25 days’ paid holiday, in addition to normal public holidays. On termination of his employment, the Group may at its discretion require him not to carry out any duties during his notice period or pay him salary in lieu of notice. He is not entitled to any other benefits on the termination of his employment.

Prior to appointment, the Board is made aware of each of the Non-Executive Directors’ other significant commitments with a broad indication of the time involved, as well as any subsequent changes.

Strategic Report

Chairman’s service contract The remuneration of the Chairman is determined by the Remuneration Committee, in which matter the Chairman plays no part. The annual fee for his service, both as a Non-Executive Director and as Chairman, is £150,000. Either the Group or the Chairman may terminate his appointment at any time on giving three months’ prior written notice to the other. Upon termination of his services to the Group the Chairman is not entitled to any benefits.

Strategic Report

Directors’ Remuneration Report continued Statement of implementation of the remuneration policy for the year ending 31 July 2017 Salaries Executive Directors’ salaries for the financial year ending 31 July 2017 have been set as follows: • Russ Cummings £305,000 • Dr Nigel Pitchford £275,000 • Tony Hickson £149,000 1

Company information

Financials

Governance

1 An additional £11,000 is paid into Tony Hickson’s pension scheme in accordance with salary sacrifice arrangements.

Benefits The cost of insured benefits and benefits in kind for the financial year ending 31 July 2017 are estimated to be as follows: • Russ Cummings £7,000 • Dr Nigel Pitchford £5,000 • Tony Hickson £5,000 Pension contributions (or equivalent payments in lieu) are for the financial year ending 31 July 2017 are estimated to be as follows: • Russ Cummings £26,000 • Dr Nigel Pitchford £23,000 • Tony Hickson £30,000 Long term incentive plans The Remuneration Committee expects to grant performance share award share options (PSAs) to Executive Directors on the following basis: • Russ Cummings 300% of salary • Dr Nigel Pitchford 100% of salary • Tony Hickson 100% of salary

90

Imperial Innovations Annual Report and Accounts 2016

In the case of Russ Cummings and Dr Nigel Pitchford, the vesting of these options will be dependent on the three-year corporate performance as follows: • 60% dependent on net asset value growth (taking into account dividends declared in the period) • 40% dependent on absolute total shareholder return In the case of Tony Hickson, the vesting of these options will be dependent on the three-year corporate performance as follows: • 25% dependent on net asset value growth (taking into account dividends declared in the period) • 25% dependent on absolute total shareholder return • 50% dependent on metrics specific to the performance of the Technology Transfer Office Under each of the performance criteria, 100% of the options awarded will vest if performance of 15% per annum growth is achieved, 25% will vest if performance of 6% per annum (threshold) growth is achieved, and any growth performance between the threshold and the maximum will be calculated on a straight-line basis. The number of performance shares that vest is independent under each of the performance criteria. Dr Nigel Pitchford will also receive awards under the Carried Interest Plan, including participation in P11 as defined above. In accordance with the new Remuneration Policy, Russ Cummings will receive further awards under the Carried interest Plan (but only in portfolios up to and including P10), while Tony Hickson will not receive any further awards under the Carried Interest Plan.

Annual Report on Directors’ Remuneration

Salaries and fees payable

Annual bonus earned

LTIP awards and options vested

Pension scheme benefits

Total

2015 £000

2016 £000

2015 £000

2016 £000

2015 £000

2016 £000

2015 £000

2016 £000

2015 £000

2016 £000

2015 £000

290 260 149

275 245 130

6 4 4

4 3 4

– – 16

138 123 49

– – –

– – –

25 22 30

23 20 26

321 286 199

440 391 209

43 47 47 43

42 45 42 –

– – – –

– – – –

– – – –

– – – –

– – – –

– – – –

– – – –

– – – –

43 47 47 43

42 45 42 –

100 – – 979

100 17 46 942

– – – 14

– – – 11

– – – 16

– – – 310

– – – –

– – – –

– – – 77

– 100 100 – – 17 – – 46 69 1,086 1,332

Total pension entitlements (audited) The Executive Directors are members of the Imperial Innovations Pension Scheme, to which the Group contributes. Pensionable earnings do not include elements of remuneration other than salary. This scheme is described more fully in note 22 to the consolidated financial statements. The Directors and former Directors to whom retirement benefits accrued under money purchase pension schemes were, in the year to 31 July 2016, Tony Hickson and, in the year to 31 July 2015, Dr Nigel Pitchford and Tony Hickson. Payments for loss of office (audited) The Group has not made any payments for loss of office during the last financial year (2015: nil). Directors’ shareholding and share interests (audited) Directors’ interests in the Ordinary Shares of Imperial Innovations Group plc at 31 July 2016 Set out below are details of the Directors’ shareholdings and share options at the end of the year. The table sets out details of an interest in the Ordinary Shares of Imperial Innovations Group plc (‘Ordinary Shares’): • held, either directly or indirectly, by Directors and their connected persons; and • held by the Trustee of the Group’s Employee Benefit Trust (EBT), which has notified Directors that it holds Ordinary Shares in the Group for their benefit on the dates as set out in the column ‘Beneficial Interest’. At the date of his appointment as a Director (1 August 2016), David Newlands had a direct holding of 100,000 shares, and this has not changed as at the date of this report. During the year, the EBT did not increase its holding of Innovations’ Ordinary Shares (2015: no increase). See note 17 in the consolidated financial statements.

Imperial Innovations Annual Report and Accounts 2016

91

Company information

1 With effect from 1 August 2016, the Remuneration Committee increased the following base salaries: Russ Cummings £305,000 (previously £290,000), Dr Nigel Pitchford £275,000 (previously £260,000). During the year ended 31 July 2016, the Remuneration Committee agreed to pay directly to Russ Cummings £25,000 and Dr Nigel Pitchford £22,000 in lieu of pension contributions. Tony Hickson elected for £11,000 of his salary to be subject to salary sacrifice arrangments into his pension scheme. 2 Dr Martin Knight resigned from the Board with effect from 31 July 2016. 3 Dr Paul Atherton resigned from the Board with effect from 16 December 2014. 4 Mark Rowan resigned from the Board with effect from 31 July 2015. 5 Benefits in kind comprises private healthcare cover, life assurance and permanent health insurance.

Financials

2016 £000

Governance

Executive Directors Russ Cummings 1 Dr Nigel Pitchford 1 Tony Hickson 1 Chairman and Non-Executive Directors Professor David Begg Peter Chambré  Dr Linda Wilding  Dr Robert Easton Former Directors Dr Martin Knight2 Dr Paul Atherton3 Mark Rowan4 Total

All taxable benefits and expenses allowances5

Strategic Report

Single total figure table of remuneration of the Directors (audited) The following table shows a single total figure of remuneration in respect of qualifying services for the 2016 financial year for each Director, together with the comparative figure for 2015.

Strategic Report

Directors’ Remuneration Report continued Number of Ordinary Shares held by Directors at 31 July

Dr Martin Knight (Ex-Chairman) Russ Cummings (Chief Executive Officer) Tony Hickson (Managing Director Technology Transfer) Dr Nigel Pitchford (Chief Investment Officer) Professor David Begg (Non-Executive Director) Dr Linda Wilding (Non-Executive Director)

Company information

Financials

Governance

Peter Chambré (Non-Executive Director) Dr Robert Easton

2016 Direct interest

2016 Beneficial interest

2015 Direct interest

2015 Beneficial interest

100,640 – 1,577 – 18,319 15,000

324,662 139,636 50,895 – – –

100,640 – 1,577 – 18,319 15,000

245,902 139,636 50,895 – – –

3,000 –

– –

3,000 –

– –

Interests of the Directors in options over Ordinary Shares of the Group (audited) Directors’ share options Details of the Directors’ shareholdings in the Group, in so far as they relate to share options, are set out below. No price was paid for the award of any of the options referred to in the table below. No changes since grant have been made to the criteria relating to any of the options described and no options were exercised by Directors during the year (2015: nil). There were no gains made by individual Directors from the exercise of share options (2015: nil). The market price of the Company’s shares at the end of the financial year (being close on the last trading day of the year, 31 July 2016) was £4.25 (2015: £4.85). The range of prices during the year was between £3.41 and £5.25 (2015: £4.29 and £5.03). Number of options At 31 July 2016 At 31 July 2015

Russ Cummings

Dr Nigel Pitchford

Tony Hickson

85,714 ¹ 85,714 ¹ 85,714 ¹ 109,167 2 4,390 3 100,752 4 85,714 ¹ 85,714 ¹ 85,714 ¹ 109,167 ² 4,390 3 100,752 4 10,714 ¹ 10,714 ¹ 10,714 ¹ 17,467 2 3,073 3 32,454 4

85,714 85,714 85,714 109,167 4,390 – 85,714 85,714 85,714 109,167 4,390 – 10,714 10,714 10,714 17,467 3,073 –

Exercise dates Date of grant

Exercise price

From

To

5 July 12 18 Oct 12 5 Dec 13 26 Nov 14 9 Dec 14 4 Nov 15 5 July 12 18 Oct 12 5 Dec 13 26 Nov 14 9 Dec 14 4 Nov 15 5 July 12 18 Oct 12 5 Dec 13 26 Nov 14 9 Dec 14 4 Nov 15

£3.50 £3.50 £3.50 £4.55 £4.10 £4.93 £3.50 £3.50 £3.50 £4.55 £4.10 £4.93 £3.50 £3.50 £3.50 £4.55 £4.10 £4.93

1 Aug 2016 1 Aug 2016 1 Aug 2016 26 Nov 2019 1 Jan 2018 26 Nov 2019 1 Aug 2016 1 Aug 2016 1 Aug 2016 26 Nov 2019 1 Jan 2018 26 Nov 2019 1 Aug 2016 1 Aug 2016 1 Aug 2016 26 Nov 2019 1 Jan 2018 26 Nov 2019

31 July 2021 31 July 2021 31 July 2021 26 Nov 2024 30 June 2018 26 Nov 2024 31 July 2021 31 July 2021 31 July 2021 26 Nov 2024 30 June 2018 26 Nov 2024 31 July 2021 31 July 2021 31 July 2021 26 Nov 2024 30 June 2018 26 Nov 2024

1 Granted as part of the Group’s decision to award executives TSR share options (described in further detail below). It is a condition of their exercise that the options shall only be exercisable on or after 1 August 2016 to the extent that, on any proposed date of exercise between 1 August 2016 and 31 July 2021, the aggregate of (i) the increase in the share price per share above the exercise price and (ii) all dividends declared per share (collectively ‘the Shareholder Return’) is equal to or greater than compound annual growth per share of 8% above £3.50. 2 Also granted as TSR share options. The options are only exercisable on or after the fifth anniversary of the date of grant and only to the extent that either (i) for any period of five consecutive dealing days between the third anniversary and the fifth anniversary of the date of grant the Shareholder Return (as defined above) is equal to or greater than £2.14 or (ii) for any period of five consecutive dealing days after the fifth anniversary of the date of grant the Shareholder Return is equal to or greater than compound annual growth of 8% above the exercise price. 3 Options granted as part of the Group’s SAYE share option scheme. 4 Also granted as TSR share options. The options are only exercisable on or after 26 November 2019 and only to the extent that either (i) between 26 November 2017 and 25 November 2019 (inclusive) the Shareholder Return (as defined above) is equal to or greater than £1.81 or (ii) on or after 26 November 2019 the Shareholder Return is equal to or greater than compound annual growth of 8% above the exercise price. The share price component of Shareholder Return for these options is based on a 30-day average.

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Imperial Innovations Annual Report and Accounts 2016

For Executive Directors Russ Cummings and Dr Nigel Pitchford, approximately one third of their long term incentive during the period was estimated to reside in TSR options and two thirds in the Carried Interest Plan scheme. For the remaining members of the senior management team a one-fifth TSR options to four-fifths Carried Interest Plan ratio was adopted.

Further details of the options outstanding at the end of the financial year are set out in note 5 (share-based payments).

Governance

The TSR share options and Carried Interest Plan have a requirement of three years’ continuous service before any value is retained by good leavers (who are defined as set out in the scheme rules); thereafter any leaver vesting is on a straight-line basis over five years to 100% in the case of TSR share options and on a straight-line basis over 10 years in the Carried Interest Plan.

Strategic Report

Further information on the TSR share options The TSR options were granted under the rules of the Long Term Incentive Plan that were approved by shareholders on 20 July 2006. No new awards under those rules are possible after 24 May 2016; however, TSR share options granted in the year to 31 July 2016 and prior years may still vest in the future. Two categories of TSR share option grants were made, the first with an effective start date of 1 August 2011 and an exercise price of 350 pence per share, and the second with an effective start date of 1 August 2014 and a variable exercise price based on the share price at each grant date.

Further information on the Employee Benefit Trust (EBT) The Group also established an EBT in 2005 for the purpose of benefiting current and former staff (other than the Non-Executive Directors) and certain of their family members. The trustee of the EBT is RBC cees Trustee Limited, part of the Royal Bank of Canada (the ‘Trustee’), which is an independent and professional trustee. Financials

The EBT is entirely discretionary and the Group may only make recommendations regarding benefits provided to any beneficiary: the Group has no control over any aspect of such benefits, should the Trustee see fit to provide them.

Imperial Innovations Annual Report and Accounts 2016

93

Company information

The EBT currently holds Ordinary Shares in the Group for the benefit of Directors as set out in the Directors’ Remuneration Report on page 92. The Group has no control over these shares and therefore they have not been consolidated by the Group. The EBT also has a pool of unallocated shares and unallocated cash. These amounts are considered to be under the de facto control of the Group and have therefore been consolidated in the Group financial statements as treasury shares and cash respectively.

Company information

Financials

Governance

Strategic Report

Directors’ Remuneration Report continued Directors’ interests in the Carried Interest Plans (audited) Interests of the Executive Directors in the Carried Interest Plans are set out in the table below and there are no changes to those details as at the date of this report. The maximum permissible percentage interest of all participants in the Excess Return of each Carried Interest Plan is set out on page 88. The individual percentage interest of each Executive Director in the Excess Return of each Carried Interest Plan is shown below, comprising any interests awarded to them during and since the reported year as well as any existing interests. Accrued Accrued Amounts value of value of receivable scheme scheme in respect interest as at interest as at of scheme interests 1 31 July 2016 £ 2 31 July 2015 £ 2

As at 31 July 2016

Awarded in year

As at 31 July 2015

3.00% 3.00% 2.03% 2.25% 2.25% 1.91% 1.38% 1.73% 1.96% 1.73% 1.44% 1.39% 1.70%

– – 0.12% – – – – – – 0.29% – 1.39% 1.70%

3.00% 3.00% 1.91% 2.25% 2.25% 1.91% 1.38% 1.73% 1.96% 1.44% 1.44% – –

Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil

– – – – – – 53,805 – – 19,581 79,359 – 75,108

– 39,337 – – – 525,264 62,902 31,028 40,614 – – – –

0.90% 0.90% 0.90% 1.88% 1.80% 1.91% 1.38% 1.73% 1.96% 1.73% 1.44% 1.39% 1.70%

– – 0.52% – 0.30% – – – – 0.29% – 1.39% 1.70%

0.90% 0.90% 0.38% 1.88% 1.50% 1.91% 1.38% 1.73% 1.96% 1.44% 1.44% – –

Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil

– – – – – – 53,805 – – 19,581 79,359 – 75,108

– 11,801 – – – 525,264 62,902 31,028 40,614 – 66,254 – –

1.13% 0.71% 0.68% 0.68% 0.94% 0.38% 0.35% 0.40% 0.00% 0.23% 0.23% 0.22% –

– – – – – – – – – – – 0.22% –

1.13% 0.71% 0.68% 0.68% 0.94% 0.38% 0.35% 0.40% – 0.23% 0.23% – –

Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil

– – – – – – 13,451 – – 2,611 12,698 – –

– 9,343 – – – 105,053 15,726 7,240 – – 10,601 – –

Russ Cummings Class 2007 Carried Interest Plan Class 2008 Carried Interest Plan Class 2009 Carried Interest Plan Class 2010 Carried Interest Plan Class 2011 Carried Interest Plan Class 2012 Carried Interest Plan Class 2013 Carried Interest Plan Class 2014 Carried Interest Plan (A)3 Class 2014 Carried Interest Plan (B)4 Class 2015 Carried Interest Plan (A)3 Class 2015 Carried Interest Plan (B)4 Class 2016 Carried Interest Plan (A)3 Class 2016 Carried Interest Plan (B)4 Dr Nigel Pitchford Class 2007 Carried Interest Plan Class 2008 Carried Interest Plan Class 2009 Carried Interest Plan Class 2010 Carried Interest Plan Class 2011 Carried Interest Plan Class 2012 Carried Interest Plan Class 2013 Carried Interest Plan Class 2014 Carried Interest Plan (A)3 Class 2014 Carried Interest Plan (B)4 Class 2015 Carried Interest Plan (A)3 Class 2015 Carried Interest Plan (B)4 Class 2016 Carried Interest Plan (A)3 Class 2016 Carried Interest Plan (B)4 Tony Hickson Class 2007 Carried Interest Plan Class 2008 Carried Interest Plan Class 2009 Carried Interest Plan Class 2010 Carried Interest Plan Class 2011 Carried Interest Plan Class 2012 Carried Interest Plan Class 2013 Carried Interest Plan Class 2014 Carried Interest Plan (A)3 Class 2014 Carried Interest Plan (B)4 Class 2015 Carried Interest Plan (A)3 Class 2015 Carried Interest Plan (B)4 Class 2016 Carried Interest Plan (A)3 Class 2016 Carried Interest Plan (B)4

1 No amounts are receivable in respect of scheme interests as there is no amount of proceeds from the sale of investments that is in excess of the hurdle. 2 Calculated by reference to fair value uplifts in the individual portfolios. 3 Carried interest plan (A) are investments in new companies. 4 Carried interest plan (B) are follow on investments made into companies previously included in earlier portfolios which are over four years old and are consequently closed.

94

Imperial Innovations Annual Report and Accounts 2016

Performance graph The chart below shows the share price performance from 31 July 2006, being the date on which Innovations’ shares were admitted to trading on AIM, to 31 July 2016 alongside the performance of the FTSE AIM All-Share and FTSE All‑Share indices.

Strategic Report

Total Shareholder Return A graph of the Total Shareholder Return (TSR), showing Innovations’ TSR for the last financial year ended 31 July and comparisons to indices has been set out below. Innovations’ shares were admitted to trading on AIM on 31 July 2006 and therefore no information is available prior to this date.

200p 180p

Governance

160p 140p 120p 100p 80p

Financials

60p 40p 20p 0p

July 06

July 08

FTSE All Share

July 09

July 10

July 11

July 12

July 13

July 14

July 15

July 16

Company information

IVO

July 07

FTSE AIM All Share

For ease of comparison these figures have been rebased such that the Group’s share price on 31 July 2006 is equal to the FTSE AIM All-Share and FTSE All-Share indices. The Directors have selected the FTSE AIM All-Share and FTSE All-Share indices as, in their opinion, these indices comprise the most relevant equity indices of which the Group is a member against which Total Shareholder Return of the Group should be measured. On behalf of the Board

Peter Chambré Chairman of the Remuneration Committee 12 October 2016

Imperial Innovations Annual Report and Accounts 2016

95

Company information

Financials

Governance

Strategic Report

Directors’ report Report of the Directors The Directors present their report and the audited consolidated financial statements for Imperial Innovations Group plc (‘the Company’) for the year ended 31 July 2016. Corporate governance statement Information that fulfils the requirements of the corporate governance statement can be found in the Corporate Governance report on pages 74 to 78 and in the Directors’ Remuneration Report on pages 86 to 95 and is incorporated into this Directors’ report by reference. General information on Imperial Innovations Group plc Imperial Innovations Group plc is an AIM-quoted company, incorporated in England and Wales under company number 05796766. It is the ultimate parent company of the Group and its registered office is located at 52 Princes Gate, Exhibition Road, London, SW7 2PG. Performance and future developments The Strategic Report on pages 2 to 68 contains information relating to the performance of the Group’s business during the financial year, the position of the Group at the end of the year, and the likely future developments of the Group. The Company had eight subsidiaries at 31 July 2016 (which are described more fully in note 4 to the parent company financial statements) and does not have any branches. Information in relation to the Group’s key performance indicators and principal risks are disclosed in the Strategic Report. Results and dividends The Group’s loss for the financial year was £63.1 million (2015: £15.1 million profit). The Directors do not recommend the payment of a dividend for the year ended 31 July 2016 (2015: nil). Research and development The Group from time to time funds technology development through its proof-of-concept programme to establish the technical viability of the inventions disclosed during its technology identification process. Wherever possible these activities are funded through a number of proof-of-concept funds secured from external sources, such as the Higher Education Innovation Fund. The resulting intellectual property is normally retained by the Group. These activities tend to be low in value (between £5,000 and £25,000) and to last between six and 18 months. Contracts of significance The Technology Pipeline Agreement with Imperial College London provides the Group with proprietary access to all the unencumbered intellectual property developed at Imperial College London and the flexibility to use that intellectual property in any way it considers appropriate.

96

Imperial Innovations Annual Report and Accounts 2016

Change of control On 1 July 2013 the Group entered into a £30.0 million loan facility with the European Investment Bank (EIB), and on 13 July 2015 the Group entered into a second £50.0 million loan facility with the EIB. Under the provisions of both loan facilities, the Group is required to inform the EIB if a change of control event has occurred, or is likely to occur, in respect of itself (control meaning the power to direct the management and policies of an entity, whether through the ownership of voting capital, by contract or otherwise). In such circumstances the EIB has the right to cancel any undisbursed portion of the credit available and demand repayment of the loan, together with accrued interest and all other amounts accrued or outstanding under the facility. Imperial College London has the ability to terminate the Technology Pipeline Agreement (TPA) during the remainder of its term until 2020 in circumstances where a change of control of the Group occurs and Imperial College London reasonably considers the new controlling party would significantly affect its ability to obtain research funding or the activities of the new controlling party are incompatible with Imperial College London’s ethical principles or may affect Imperial College London’s charitable status. Directors and former Directors The summary biographical details of Directors as at the date of this report can be found on pages 70 and 71. Additional details regarding the length of time the current Directors have served as a Director of Imperial Innovations Group plc and/or Imperial Innovations Limited (which, prior to the incorporation of Imperial Innovations Group plc, had been the vehicle of the Group’s business) are set out within the Directors’ Remuneration Report on page 88. There have also been certain changes to the Board during the financial year. Dr Robert Easton joined the Board on 1 August 2015 and Dr Martin Knight left the Board on 31 July 2016. David Newlands joined the Board on 1 August 2016. There have been no other changes to the composition of the Board of Imperial Innovations Group plc between 31 July 2016 and the date of this report. At the next AGM, resolutions will be proposed to re-elect certain Directors. Further details will be set out in the notice of AGM sent to all shareholders. Directors’ interests in the Ordinary Shares of Imperial Innovations Group plc at 31 July 2016 Details of the Directors’ shareholdings and share options at the end of the year under review are set out within the Directors’ Remuneration Report on page 92, together with details of any changes in such interests since year-end. Share capital Details of the issued share capital of Imperial Innovations Group plc are set out in note 17 to the consolidated financial statements on pages 131 to 132.

Shareholder

Invesco Asset Management Limited Woodford Investment Management Limited Imperial College London Lansdowne Developed Markets Master Fund Limited

%

39.0 23.8 15.3 12.7

The Group has considered whether Invesco Asset Management Limited and Woodford Investment Management Limited, with their substantial shareholdings in Innovations (albeit in a number of different funds), are related parties under IAS 24 (‘Related party disclosures’).

Employees The Group employed an average of 68 employees (2015: 63) throughout the year, and the Group is therefore of a size where it is not necessary to have introduced a formal employee consultation process. However, employees are encouraged to be involved with decision-making processes and are provided with information on the financial and economic factors affecting the Group’s performance, through departmental meetings, CEO updates and an open and informal reporting structure. The Group operated a discretionary annual bonus scheme during the year for its staff whereby staff are eligible for an annual bonus based on their own, and the Group’s, performance for the year. Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment within the Group continues and that the appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of a disabled person should, as far as possible, be identical to that of a person who does not suffer from a disability. Financial risk exposure and management The Group through its operations is exposed to a number of risks. Further detail regarding the financial risk exposure and management is set out in the Corporate Governance Report on pages 77 and 78, and note 19 to the financial statements. Corporate responsibility and greenhouse gas emissions Details on corporate responsibility and greenhouse gas emissions are set out within the Strategic Report on pages 52 to 55.

Imperial Innovations Annual Report and Accounts 2016

97

Company information

Substantial shareholdings As at 12 October 2016, Innovations had been advised of the following shareholders with interests of 3% or more in its Ordinary Share capital:

Company Secretary The Company Secretary of the Group is William Rayner.

Financials

The authority has not been exercised and will expire on 19 February 2017. A renewal of the authority will not be sought at the AGM.

Although the Group may have significant influence over a portfolio company, ultimately the portfolio company makes the final decision regarding the investors as part of a fundraising. Where the Group leads a fundraising all co-investors are responsible for their own evaluation and due diligence with no preferential treatment afforded to any particular investor.

Governance

At the last AGM of Imperial Innovations Group plc on 19 November 2015, authority was given to the Directors pursuant to the relevant provisions of the Companies Act 2006 to make market purchases (as defined by the Act) of up to a maximum aggregate number of 13,767,471 Ordinary Shares of 3 and 1/33 pence each, provided that: (a) the minimum price (excluding expenses) per Ordinary Share is not less than 3 and 1/33 pence; and (b) the maximum price (excluding expenses) per Ordinary Share is the higher of: • an amount equal to 105% of the average of the middle market quotations for the Ordinary Shares as taken from the AIM Appendix of the London Stock Exchange Daily Official List for the five business days preceding the date of purchase; and • the higher of the price quoted for the last independent trade of and the highest current independent bid for any number of Ordinary Shares on the London Stock Exchange.

As Invesco and Woodford do not take part in financial or operating policy decisions, have no right to appoint a Board member and do not exert significant influence over the Group, the Group has taken the view that they are not related parties for the purpose of IAS 24. The Board manages the relationships with Invesco and Woodford carefully to ensure that any co-investment involving the Group and Invesco and/ or Woodford is conducted on an arm’s length basis.

Strategic Report

Purchase of own shares At a general meeting of Imperial Innovations Group plc on 19 June 2014, the shareholders authorised the Company to enter into a purchase contract with the holders of the non-voting deferred shares of 346 32/33 pence each in the capital of the Company, for the purchase by the Company of 36,990,086 deferred shares for a total consideration of £0.01 in accordance with the Articles of Association and as set out in the purchase contract. The purchase contract was executed on 24 September 2015 and the deferred shares were cancelled on the same date.

Governance

Strategic Report

Directors’ report continued Directors’ indemnities and insurance The Company’s articles of association provide that the Directors will be indemnified through a qualifying thirdparty indemnity provision as defined by section 234 of the Companies Act 2006. The indemnity was in force throughout the last financial year and is currently in force. Innovations also purchased and maintained throughout the financial year Directors’ and officers’ liability insurance in respect of itself and the Directors.

They are also responsible for safeguarding the assets of the parent company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Independent auditors The Group’s independent auditors, PricewaterhouseCoopers LLP (PwC), have indicated their willingness to continue in office and the Audit and Risk Committee has recommended that PwC remain in office. A resolution to re-appoint the independent auditors will be proposed at the Annual General Meeting.

Responsibility statement of the Directors in respect of the annual financial report Having taken advice from the Audit and Risk Committee, the Directors consider that the annual financial statements, taken as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s performance, business model and strategy.

Company information

Financials

Statement of Directors’ responsibilities The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and Company financial statements respectively; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006.

The Directors are responsible for the maintenance and integrity of the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors, whose names and functions are listed on pages 70 and 71, confirm that, to the best of their knowledge: • the consolidated financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the parent company and the Group; and • the Strategic Report includes a fair review of the development and performance of the business and the position of the parent company and the Group, together with a description of the principal risks and uncertainties that it faces. Provision of information to auditors So far as each of the Directors is aware, there is no relevant audit information of which the Group’s auditors are unaware. Each Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Group’s auditors are aware of that information. Annual General Meeting The Annual General Meeting of Imperial Innovations Group plc will be held at 11.30am on 21 November 2016 in the Boardroom, 52 Princes Gate, Exhibition Road, London, SW7 2PG. Full details of the resolutions to be proposed to shareholders, and explanatory notes in respect of these resolutions, can be found in the notice of AGM, a copy of which can be found on the Group’s website. The voting results of the resolutions proposed at the 2016 AGM will be published on the Group’s website. Where any resolution is decided on a poll, information on proxy appointments will be given at the AGM and published on the Group’s website. By order of the Board

William Rayner Company Secretary 12 October 2016

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Imperial Innovations Annual Report and Accounts 2016