IP Group plc Annual Results Release

Cash investment analysis by company stage	2016 £m	2015 £m
Focus	39.0	60.0
Development	10.8	10.7
Early stage	9.0	5.2
Total	58.8	75.9
Multi-sector platforms	10.9	40.0
Total purchase of equity and debt investments	69.7	115.9

Cash proceeds from sales of equity investments	14.7	0.6

Net investment	55.0	115.3

Stage	As at 31 December 2016	As at 31 December 2015
Focus	473.3	86%	19	21%	435.8	86%	18	22%
Development	57.0	10%	32	36%	57.6	11%	34	41%
Early-stage	20.3	4%	39	43%	13.2	3%	30	37%
Total	550.6¹	100%	90	100%	506.6¹	100%	82	100%
Multi-sector platforms	62.5	-	3	-	45.2	-	3	-
De minimis holdings	0.9	-	20	-	0.4	-	15	-
	614.0	-	113	-	552.2	-	100	-

Sector	As at 31 December 2016	As at 31 December 2015
Healthcare	328.0	60%	27	29%	277.6	55%	27	33%
Technology	93.6	17%	31	36%	91.6	18%	27	33%
Cleantech	76.9	14%	20	22%	69.0	14%	19	23%
Biotech	52.1	9%	12	13%	68.4	13%	9	11%
Total	550.6¹	100%	90	100%	506.6¹	100%	82	100%
Multi-sector platforms	62.5	-	3	-	45.2	-	3	-
De minimis holdings	0.9	-	20	-	0.4	-	15	-
	614.0	-	113	-	552.2	-	100	-

Company name	Description	Quoted/ Unquoted	Group stake at 31 December 2016⁽ⁱ⁾ %	Fair value of Group holding at 31 December 2015 £m	Year to 31 December 2016	Fair value of Group holding at 31 December 2016 £m
Oxford Nanopore Technologies Limited	Enabling the analysis of any living thing, by any person, in any environment. Developer of the portable, real time, long-read, low cost MinION nanopore DNA/RNA sequencer	Unquoted	19.6%	193.0	19.5	33.8	246.3
hVIVO plc	World leader in human models of viral disease	Quoted	16.7%	29.0	-	(7.2)	21.8
Tissue Regenix Group plc	Regenerative dCELL® soft tissue body parts	Quoted	13.6%	15.5	-	5.2	20.7
Creavo Medical Technologies Limited⁽ⁱⁱ⁾	Quantum cardiac imaging technology	Unquoted	48.1%	6.5	-	-	6.5
Alesi Surgical Limited	Medical devices to improve the safety and efficiency of laparoscopic surgery	Unquoted	58.8%	6.5	-	(1.2)	5.3
Genomics plc	Platform for analysis and interpretation of genomic sequence data	Unquoted	19.0%	4.9	-	-	4.9
Other companies (21 companies)			17.3	3.3	(2.9)	17.7
Value not attributable to equity holders			4.9	0.6	(0.7)	4.8
Total⁽ⁱⁱⁱ⁾				277.6	23.4	27.0	328.0

Company name	Description	Quoted/ Unquoted	Group stake at 31 December 2016⁽ⁱ⁾ %	Fair value of Group holding at 31 December 2015 £m	Year to 31 December 2016	Fair value of Group holding at 31 December 2016 £m
Actual Experience plc	Optimising the human experience of networked applications	Quoted	24.9%	23.8	-	(0.4)	23.4
Tracsis plc	Resource optimisation software for the transport industry	Quoted	-	14.6	(14.6)	-	-
Mirriad Advertising Limited	Native in-video advertising allowing post-production ad placement	Unquoted	38.9%	4.5	4.0	4.9	13.4
Ultrahaptics Holdings Limited⁽ⁱⁱ⁾	Contactless haptic technology "feeling without touching"	Unquoted	33.8%	7.9	-	-	7.9
Applied Graphene Materials plc	Producer of speciality graphene materials	Quoted	20.8%	6.0	2.0	(2.2)	5.8
Uniformity Labs Inc	Equipment, materials and software for additive manufacturing	Unquoted	25.1%	0.2	2.5	2.4	5.1
Perpetuum Limited	Self-powered, wireless sensing technology	Unquoted	29.2%	3.4	0.7	-	4.1
Other companies (24 companies)			28.8	7.5	(4.8)	31.5
Value not attributable to equity holders			2.4	-	-	2.4
Total⁽ⁱⁱⁱ⁾				91.6	2.1	(0.1)	93.6

Company name	Description	Quoted/ Unquoted	Group stake at 31 December 2016⁽ⁱ⁾ %	Fair value of Group holding at 31 December 2015 £m	Year to 31 December 2016	Fair value of Group holding at 31 December 2016 £m
Xeros Technology Group plc	Polymer bead, near-waterless cleaning for commercial laundry	Quoted	11.5%	23.4	-	(3.2)	20.2
Ceres Power Holdings plc	World leading developer of next generation fuel cell technology	Quoted	25.5%	12.2	6.6	(0.8)	18.0
First Light Fusion Limited	New methodology for achieving extreme intensity cavity collapse	Unquoted	34.9%	13.9	-	-	13.9
Azuri Technologies Limited	Pay-as-you-go solar power for off-grid customers in rural emerging markets	Unquoted	34.6%	1.6	2.9	1.0	5.5
Other companies (16 companies)			16.6	3.3	(3.0)	16.9
Value not attributable to equity holders			1.3	0.9	0.2	2.4
Total⁽ⁱⁱ⁾				69.0	13.7	(5.8)	76.9

Company name	Description	Quoted/ Unquoted	Group stake at 31 December 2016⁽ⁱ⁾ %	Fair value of Group holding at 31 December 2015 £m	Year to 31 December 2016	Fair value of Group holding at 31 December 2016 £m
Diurnal Group plc	Novel treatments of hormone deficiency	Quoted	45.0%	39.6	-	(10.3)	29.3
Avacta Group plc	Bio-therapeutic affimer technology	Quoted	23.1%	21.1	-	(9.9)	11.2
Other companies⁽ⁱⁱ⁾ (10 companies)			7.7	4.1	(0.2)	11.6
Value not attributable to equity holders			-	-	-	-
Total⁽ⁱⁱ⁾				68.4	4.1	(20.4)	52.1

Risk and description	Impact	Mitigation	Risk trend	Developments during the year	Strategy	KPI
1 It may be difficult for the Group and its early-stage companies to attract capital. The Group's operations are reliant on capital markets, particularly those in the UK. As the Group's operations, and the operations of the majority of its portfolio companies, are based in the UK, the financial and operational performance of the Group and particularly the ability of its portfolio companies to attract development capital is influenced by the general economic climate and trading conditions in the UK.	The success of those portfolio companies which require significant funding in the future may be influenced by the market's appetite for investment in early stage companies, which may not be sufficient. Failure of companies within the Group's portfolio may make it more difficult for the Group or its spin-out companies to raise additional capital.	The Group has significant balance sheet and managed funds capital to deploy in attractive portfolio opportunities. The Group operates a corporate finance function which carries out fundraising mandates for portfolio companies. The Group maintains close relationships with a wide variety of co-investors that focus on companies at differing stages of development. The Group frequently forecasts cash requirements of the portfolio and ensures all capital allocations are compliant with budgetary limits, treasury policy guidelines and transaction authorisation controls.	No change	The Group announced the proposed acquisition of Parkwalk Advisors Ltd, the UK's leading university spin-out focused EIS fund manager. The acquisition reinforces IP Group's access to a diversified pool of capital for co-funding the earlier stages of the portfolio. The Group hosted investor relations roadshows in the UK and US	Develop Deliver	Change in fair value of equity and debt investments. Total equity ("net assets"). Profit/loss attributable to equity holders.
2 The returns and cash proceeds from the Group's early-stage companies can be very uncertain. The following risks are typically associated with early-stage companies: · may not be able to secure later rounds of funding; · may not be able to source or retain appropriately skilled staff; · competing technologies may enter the market; · technology can be materially unproven and may fail; · IP may be infringed, copied or stolen; · may be more susceptible to cyber crime; and · other administrative, taxation or compliance issues may lead to company failure.	Portfolio company failure directly impacts the Group's value and profitability. At any time, a large proportion of the Group's portfolio value may be accounted for by one, or very few, companies, which could exacerbate the impact of any impairment or failure of one or more of these companies. Oxford Nanopore is an example of such a portfolio company that has the potential to materially impact the Group's results. The value of the Group's in-house drug discovery company MBS may be significantly impacted by a negative clinical trial result. Cash realisations from the Group's portfolio through trade sales and IPOs could vary significantly from year to year.	The Group's staff have significant experience in sourcing, developing and growing early-stage technology companies to significant value, including use of the Group's systematic opportunity evaluation and business building methodologies within delegated board authorities. Members of the Group's senior team often serve as non-executive directors or advisers to portfolio companies to help identify and remedy critical issues promptly. Support on operational, legal and company secretarial matters is offered to minimise failures due to common administrative factors. The Group has spin-out company holdings across different sectors managed by experienced sector-specialist teams to reduce the impact of a single company failure or sector demise. The Group maintains significant cash balances and seeks to employ a capital efficient process deploying low levels of initial capital to enable identification and mitigation of potential failures at the earliest possible stage.	No change	The Group's portfolio companies raised approximately £230m of capital. The Group maintained board representation on approximately 80% of companies by number. 2016 saw significant volatility in equity markets, particularly around the timing of the Brexit referendum.	Deliver	Change in fair value of equity and debt investments. Purchase of equity and debt investments. Proceeds from the sale of equity investments.
3 Universities or other research-intensive institutions may terminate their partnerships or other collaborative relationships with the Group. The Group's business, results of operations and prospects are at least partially dependent on competitive advantage gained from access to leading scientific research through partnerships and other collaborative arrangements with research-intensive institutions and commercial partners such as Oxford Sciences Innovation plc, Technikos LLP and Cambridge Innovation Capital. The Group may be unable to recreate these elements of its competitive advantage in other geographies in which it may seek to operate (such as the US).	Termination or non-renewal of arrangements through failure to perform obligations may result in the loss of exclusive rights. The loss of exclusive rights may limit the Group's ability to secure attractive IP opportunities to commercialise. This could potentially have a material adverse effect on the Group's long-term business, results of operations, performance and prospects. With several new entrants to our market, this may reduce our opportunities to create new spin-out businesses.	Dedicated New Business & Partnerships team to service existing partnerships and source new opportunities. The Group continues to consider and, where appropriate, enter into new and innovative partnerships and collaborations with research institutions. The Group has been able to source opportunities through non-exclusive relationships and other sources. Members of the Group's senior team work closely with partner institutions to ensure that each commercial relationship is mutually beneficial and productive. The Group's track record in IP commercialisation may make the Group a partner of choice for other institutions, acting as a barrier to entry to competitors.	No change	Completed agreements with two additional US university partners. The Group announced the proposed acquisition of Parkwalk Advisors Ltd. Parkwalk's investment vehicles include the University of Cambridge Enterprise Funds, the University of Oxford Innovation Funds and the University of Bristol Enterprise Funds. The Directors believe that Parkwalk's strong links to university partners will be beneficial to the Group. Completed seed investments with both Oxford Sciences Innovation and Cambridge Innovation Capital as co-investors, demonstrating the value of our strategic stakes in these partners.	Create	Number of new portfolio companies.
4 The Group may lose key personnel or fail to attract and integrate new personnel. The industry in which the Group operates is a specialised area and the Group requires highly qualified and experienced employees. There is a risk that the Group's employees could be approached and solicited by competitors or other technology-based companies and organisations, or could otherwise choose to leave the Group. Given the relatively small size of the Group, its operations are reliant on a small number of key individuals. Scaling the team, particularly into foreign jurisdictions such as the US, presents an additional potential risk.	Loss of key executives and employees of the Group or an inability to attract, retain and integrate appropriately skilled and experienced staff could have an adverse effect on the Group's competitive advantage, business, financial condition, operational results and/or future prospects.	Senior team succession plans are in place and updated regularly. The Group's corporate culture and values are well-articulated and consistently promoted. The Group carries out regular market comparisons for staff and executive remuneration and seeks to offer a balanced incentive package comprising a mix of salary, benefits, performance-based long-term incentives and benefits such as flexible working and salary sacrifice arrangements. The Group encourages staff development and inclusion through coaching and mentoring and carries out regular objective setting and appraisal.	No change	The Group continues to promote an open culture of communication and provides an inspiring and challenging workplace where people are given autonomy to do their jobs. We are fully supportive of flexible working and have enabled employees with technology to work flexibly. The Group also continues to dedicate resources to remuneration and incentivisation. Staff attrition increased slightly during the year, albeit at 4%, it remained at low absolute levels. Approximately 45% of staff have been with the Company for at least five years.	Develop Deliver	Total equity ("net assets"). Number of new portfolio companies.
5 Macroeconomic conditions may negatively impact the Group's ability to achieve its strategic objectives. Adverse macroeconomic conditions could reduce the opportunity to deploy capital into opportunities or may limit the ability of such portfolio companies to raise third party funds, develop profitable businesses or achieve increases in value or exits. Political uncertainty, including impacts from Brexit or similar scenarios, could have a number of potential impacts, including changes to the labour market available to the Group for recruitment or regulatory environment in which the Group operates.	The UK's recession has had (and may continue to have) an adverse effect on trading conditions and availability of capital in the UK, particularly for smaller businesses. The success of those portfolio companies which require significant external funding may be influenced by the market's appetite for investment in early stage companies, which may not be sufficient. A significant proportion of the Group's portfolio value is held in companies quoted on the AIM market and decreases in values to this market could result in a material fair value impact to the portfolio as a whole.	Management team receives regular capital market and economic updates from the Group's capital markets team and its brokers. Six-monthly budget and capital allocation process and monitoring against agreed budget. Regular oversight of upcoming capital requirements of portfolio from both the Group and third parties.	No change	Macroeconomic and geopolitical conditions remain uncertain in the UK, Europe and the rest of the world. Both the Brexit referendum and the US presidential election were a source of uncertainty in the year, with negotiations around the exit from the EU likely to be a source of volatility through 2017 and 2018.	Develop Deliver	Change in fair value of equity and debt investments. Total equity ("net assets"). Profit/loss attributable to equity holders.
6 There may be changes to, impacts from, or failure to comply with, legislation, government policy and regulation. There may be unforeseen changes in, or impacts from, government policy, regulation or legislation (including taxation legislation). This could include changes to funding levels or to the terms upon which public monies are made available to universities and research institutions and the ownership of any resulting intellectual property.	Changes could result in universities and researchers no longer being able to own, exploit or protect intellectual property on attractive terms. Changes to tax legislation or the nature of the Group's activities, in particular in relation to the Substantial Shareholder Exemption, may adversely affect the Group's tax position and accordingly its value and operations. Regulatory changes or breaches could ultimately lead to withdrawal of regulatory permissions for the Group's FCA-authorised subsidiary resulting in loss of fund management contracts, reputational damage or fines. A material adverse event could occur during an MBS clinical trial. A data security or cyber breach could occur or the Group could otherwise fail to adhere to data protection regulations.	University partners are incentivised to protect their IP for exploitation as the partnership agreements share returns between universities, academic founders and the Group. The Group utilises professional advisers as appropriate to support its monitoring of, and response to changes in, tax, insurance or other legislation. The Group has internal policies and procedures to ensure its compliance with applicable FCA regulations and these are subject to external review. MBS utilises an experienced specialist advisory panel covering all aspects of clinical trial design and delivery. The Group maintains D&O, professional indemnity and clinical trial insurance policies. The Group reviews its data and cyber-security processes with its external outsourced IT provider and applies the UK Government's 'ten steps' framework.	Decreased	Proposed changes to UK Substantial Shareholding Exemption rules reduce the level of uncertainty around the exemption of disposal gains. Ongoing focus on regulatory compliance including third party reviews. UK Government has committed to university funding and has emphasised the importance of science and innovation. Specialist therapeutics advisory panel continually consulted. Increased focus on cyber security including further development of the Group's controls using the UK Government's 'ten steps' approach and review of the Cyber Essentials regime and how this applies to the Group.	Create Deliver	Total equity ("net assets").

	2016 £m	2015 £m
Number of spin-out companies per year	10-15	10-15
Annual investment rate	£40-£75m	£40m-£60m
Rate of return achieved	15%-22%	18%-22%
Initial equity stake acquired by the Group under the university partnership	12%-30%	15%-35%
Proportion of spin-out companies failing	38%-54%	32%-45%
Weighted average holding period (years)	4-6	3-5
Dilution rates prior to exit as a result of financing for spin-out companies	40%-60%	40%-60%
Proportion of IPO exits	25%-35%	25%-35%
IPO exit valuations	£30m-£40m	£30m-£40m
Proportion of disposal exits	25%-32%	28%-32%
Disposal valuations	£25m-£35m	£25m-£35m
Discount rate	9%-11%	9%-11%

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	2016 £m	2015 £m
Unrealised gains on the revaluation of investments	56.6	115.3
Unrealised losses on the revaluation of investments	(50.3)	(29.0)
Effects of movement in exchange rates	0.7	0.1
Change in fair value of equity and debt investments	7.0	86.4
Loss on disposals of equity investments	(0.5)	(0.2)
Net portfolio gains	6.5	86.2

	2016 £m	2015 £m
Net portfolio gains ^1.	6.5	86.2
Change in fair value of limited and limited liability partnership interests	(0.3)	0.4
Fair value loss on contingent value rights	(1.4)	-
Licensing income	0.2	8.1
Other income	2.6	3.6
Amortisation of intangible assets¹	(5.6)	(7.3)
Administrative expenses - Modern Biosciences	(1.4)	(2.5)
Administrative expenses - other consolidated portfolio companies	(1.1)	(0.3)
Administrative expenses - performance based staff incentives and share based payments charge	(1.5)	(3.4)
Administrative expenses - all other expenses	(13.0)	(11.0)
Acquisition costs	(0.4)	-
Net finance income	0.6	1.3
(Loss)/profit for the year	(14.8)	75.1
Other comprehensive income	0.1	0.1
Total comprehensive (loss)/income for the period	(14.7)	75.2
Exclude:
Amortisation of intangible assets and amortisation of Oxford Equity Rights asset	5.6	7.3
Share based payment charge	1.5	1.5
Return on Hard NAV	(7.6)	84.0

	2016 £m	2015 £m
Total Equity or Net Assets	768.7	781.9
Exclude:
Goodwill	(57.1)	(57.1)
Other intangible assets	(5.1)	(10.5)
Hard NAV	706.5	714.3
Hard NAV per share	125.0p	126.5p

	2016 £m	2015 £m
Net Cash (used)/generated by operating activities (excluding cash flows from deposits)	(11.4)	2.3
Net Cash used in investing activities	(55.2)	(114.6)
Issue of share capital	-	178.8
Drawdown of debt facility	-	14.9
Effect of foreign exchange rate changes	0.1	0.1
Movement during period	(66.5)	81.5

	Note	2016 £m	2015 £m
Portfolio return and revenue
Change in fair value of equity and debt investments	14	7.0	86.4
Loss on disposal of equity investments		(0.5)	(0.2)
Change in fair value of limited and limited liability partnership interests	22	(0.3)	0.4
Change in fair value of contingent value right	16	(1.4)	-
Other portfolio income		-	0.2
Licensing income		0.2	8.1
Revenue from services and other income		2.6	3.4
		7.6	98.3
Administrative expenses
Research and development costs		(1.0)	(2.0)
Share-based payment charge	21	(1.5)	(1.5)
Change in fair value of Oxford Equity Rights asset		-	(1.3)
Amortisation of intangible assets	12	(5.6)	(6.0)
Acquisition costs		(0.4)	-
Other administrative expenses		(14.5)	(13.7)
		(23.0)	(24.5)
Operating (loss)/profit	7	(15.4)	73.8
Finance income - interest receivable		1.1	1.3
Finance costs - interest payable		(0.5)	-
(Loss)/profit before taxation		(14.8)	75.1
Taxation	9	-	-
(Loss)/profit for the year		(14.8)	75.1

Other comprehensive income
Exchange differences on translating foreign operations		0.1	0.1
Total comprehensive (loss)/income for the period		(14.7)	75.2

Attributable to:
Equity holders of the parent		(13.5)	73.9
Non-controlling interest		(1.2)	1.3
		(14.7)	75.2
Earnings per share
Basic (p)	10	(2.39)	13.66
Diluted (p)	10	(2.39)	13.63

	Attributable to equity holders of the parent
	Share capital £m	Share premium⁽ⁱ⁾ £m	Merger reserve⁽ⁱⁱ⁾ £m	Retained earnings⁽ⁱⁱⁱ⁾ £m	Total £m	Non- controlling interest^(iv) £m	Total equity £m
At 1 January 2015	9.6	327.6	12.8	176.2	526.2	-	526.2
Comprehensive income	-	-	-	73.9	73.9	1.3	75.2
Issue of equity	1.7	177.1	-	-	178.8	0.2	179.0
Equity settled share based payments	-	-	-	1.5	1.5	-	1.5
At 1 January 2016	11.3	504.7	12.8	251.6	780.4	1.5	781.9
Comprehensive income	-	-	-	(13.5)	(13.5)	(1.2)	(14.7)
Equity-settled share-based payments	-	-	-	1.5	1.5	-	1.5
At 31 December 2016	11.3	504.7	12.8	239.6	768.4	0.3	768.7

	2016				2015
	Fixed rate £m	Floating rate £m	Interest free £m	Total £m	Fixed rate £m	Floating rate £m	Interest free £m	Total £m
Financial assets
Equity investments	-	-	594.9	594.9	-	-	543.1	543.1
Debt investments	0.2	-	18.9	19.1	0.2	-	8.9	9.1
Limited and limited liability partnership interests	-	-	4.2	4.2	-	-	4.4	4.4
Contingent value rights	-	-	-	-	-	-	1.4	1.4
Deposits	-	-	-	-	70.0	-	-	70.0
Cash and cash equivalents	30.0	82.3	-	112.3	-	108.8	-	108.8
Trade receivables	-	-	2.3	2.3	-	-	3.0	3.0
Other receivables	-	-	0.3	0.3	-	-	0.2	0.2
	30.2	82.3	620.6	733.1	70.2	108.8	561.0	740.0
Financial liabilities
Trade payables	-	-	(0.7)	(0.7)	-	-	(0.7)	(0.7)
Other accruals and deferred income	-	-	(1.4)	(1.4)	-	-	(3.2)	(3.2)
EIB debt facility	-	(14.9)	-	(14.9)	-	(14.9)	-	(14.9)
Loans from limited partners of consolidated funds	-	-	(9.8)	(9.8)	-	-	(7.1)	(7.1)
	-	(14.9)	(11.9)	(26.8)	-	(14.9)	(11.0)	(25.9)

Credit rating	2016 £m	2015 £m
P1	76.7	126.3
P2	35.6	52.5
Total deposits and cash and cash equivalents	112.3	178.8

Year ended 31 December 2016	University partnership business £m	Venture capital fund management £m	In-licensing activity £m	Consolidated £m
STATEMENT OF COMPREHENSIVE INCOME
Portfolio return and revenue
Change in fair value of equity and debt investments	7.0	-	-	7.0
Loss on disposal of equity investments	(0.5)	-	-	(0.5)
Change in fair value of limited and limited liability partnership interests	(0.3)	-	-	(0.3)
Change in fair value of contingent value right	(1.4)			(1.4)
Other portfolio income
Licensing income	0.2	-	-	0.2
Revenue from services and other income	0.8	0.9	-	1.7
Revenue from fund management services	-	0.9	-	0.9
Amortisation of intangible assets	(5.6)	-	-	(5.6)
Acquisition costs	(0.4)	-	-	(0.4)
Administrative expenses	(14.9)	(0.7)	(1.4)	(16.9)
Operating loss	(15.1)	1.1	(1.4)	(15.4)
Finance income - interest receivable	0.6	-	-	0.6
Loss before taxation	(14.5)	1.1	(1.4)	(14.8)
Taxation	-	-	-	-
Loss for the year	(14.5)	1.1	(1.4)	(14.8)

STATEMENT OF FINANCIAL POSITION
Assets	778.4	10.9	6.2	795.5
Liabilities	(26.5)	(0.1)	(0.2)	(26.8)
Net assets	751.9	10.8	6.0	768.7
Other segment items
Capital expenditure	0.1	-	-	0.1
Depreciation	(0.1)	-	-	(0.1)

Year ended 31 December 2015	University partnership business £m	Venture capital fund management £m	In-licensing activity £m	Consolidated £m
STATEMENT OF COMPREHENSIVE INCOME
Portfolio return and revenue
Change in fair value of equity and debt investments	86.4	-	-	86.4
Gain on disposal of equity investments	(0.2)	-	-	(0.2)
Change in fair value of limited and limited liability partnership interests	0.4	-	-	0.4
Other portfolio income	0.2	-	-	0.2
Licensing income	0.1	-	8.0	8.1
Revenue from services and other income	0.9	1.1	-	2.0
Revenue from fund management services	-	1.4	-	1.4
Change in fair value of Oxford Equity Rights asset	(1.3)	-	-	(1.3)
Amortisation of intangible assets	(6.0)	-	-	(6.0)
Administrative expenses	(13.9)	(0.8)	(2.5)	(17.2)
Operating profit	66.6	1.7	5.5	73.8
Finance income - interest receivable	1.3	-	-	1.3
Profit before taxation	67.9	1.7	5.5	75.1
Taxation	-	-	-	-
Profit for the year	67.9	1.7	5.5	75.1

STATEMENT OF FINANCIAL POSITION
Assets	788.8	11.3	7.7	807.8
Liabilities	(25.5)	(0.1)	(0.3)	(25.9)
Net assets	763.3	11.2	7.4	781.9
Other segment items
Capital expenditure	-	-	-	-
Depreciation	(0.1)	-	-	(0.1)

	2016 £'000s	2015 £'000s
Fees payable to the Company's auditor for the audit of the Company's annual accounts	74	73
The audit of the Company's subsidiaries, pursuant to legislation	87	87
Total fees for audit services	161	160
Audit-related assurance services	21	20
Total assurance services	182	180
Tax compliance services	-	-
Taxation advisory services	-	-
All other services	18	-
Total non-assurance services	-	-
	200	180

	2016 £m	2015 £m
Salaries	7.0	5.5
Defined contribution pension cost	0.4	0.3
Share-based payment charge (see note 21)	1.5	1.5
Other bonuses accrued in the year	-	2.2
Social security	0.6	0.8
	9.5	10.3

	2016 £m	2015 £m
Profit before tax	(14.8)	75.1
Tax at the UK corporation tax rate of 20.0% (2015: 20.3%)	(3.0)	15.2
Expenses not deductible for tax purposes	0.9	1.4
Fair value movement on investments qualifying for SSE	(1.3)	(18.8)
Movement on share-based payments	0.1	(0.6)
Unrecognised other temporary differences	-	1.3
Movement in tax losses arising not recognised	3.3	1.5
Total tax charge	-	-

Number of shares	2016 Number of shares	2015 Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share	565,056,171	540,681,647
Effect of dilutive potential ordinary shares:
Options or contingently issuable shares	-	1,237,274
Weighted average number of ordinary shares for the purposes of diluted earnings per share	565,056,171	541,918,921

	2016		2015
	Amount £m	Deferred tax £m	Amount £m	Deferred tax £m
Share-based payment costs and other temporary differences	14.1	2.4	6.0	1.1
Unused tax losses	127.6	21.7	99.5	17.9
	141.7	24.1	105.5	19.0

	2016 £m	2015 £m
University partnership CGU	55.0	55.0
Fund management CGU	2.1	2.1
	57.1	57.1

	£m
Cost
At 1 January 2016	21.4
Additions	0.2
At 31 December 2016	21.6
Accumulated amortisation
At 1 January 2016	10.9
Charge for the year	5.6
At 31 December 2016	16.5
Net book value
At 31 December 2016	5.1
At 31 December 2015	10.5

	At fair value through profit or loss
Financial assets	Held for trading £m	Designated upon initial recognition £m	Loans and receivables £m	Total £m
At 31 December 2016
Equity investments	-	594.9	-	594.9
Debt investments	-	19.1	-	19.1
Other financial assets	-	-	-	-
Limited and limited liability partnership interests	-	4.2	-	4.2
Trade and other receivables	-	-	2.6	2.6
Deposits	-	-	-	-
Cash and cash equivalents	-	-	112.3	112.3
Total	-	618.2	114.9	733.1
At 31 December 2015
Equity investments	-	543.1	-	543.1
Debt investments	-	9.1	-	9.1
Other financial assets	-	-	-	-
Contingent value rights	-	1.4	-	1.4
Limited and limited liability partnership interests	-	4.4	-	4.4
Trade and other receivables	-	-	3.2	3.2
Deposits	-	-	70.0	70.0
Cash and cash equivalents	-	-	108.8	108.8
Total	-	558.0	182.0	740.0

	Level 1	Level 2		Level 3
	Equity investments in quoted spin-out companies £m	Equity investments in unquoted spin-out companies £m	Unquoted debt investments in spin-out companies £m	Equity investments in unquoted spin-out companies £m	Total £m
At 1 January 2016	201.3	308.6	9.1	33.2	552.2
Investments during the year	10.9	50.9	6.2	1.7	69.7
Transaction-based reclassifications during the year	-	0.7	(0.7)	-	-
Other transfers between hierarchy levels during the year	-	(39.8)	6.7	33.1	-
Disposals	(15.0)	(0.2)	(0.1)	-	(15.3)
Fees settled via equity	-	0.4	-	-	0.4
Change in fair value in the year⁽ⁱ⁾	(36.1)	47.4	(2.1)	(2.2)	7.0
At 31 December 2016	161.1	368.0	19.1	65.8	614.0
At 1 January 2015	138.2	193.2	4.0	14.5	349.9
Investments during the year	26.2	82.3	7.1	0.3	115.9
Transaction-based reclassifications during the year	2.3	(1.4)	(0.9)	-	-
Other transfers between hierarchy levels during the year	24.6	(50.9)	0.1	26.2	-
Disposals	-	-	(0.3)	(0.5)	(0.8)
Fees settled via equity	-	0.7	-	-	0.7
Change in fair value in the year⁽ⁱ⁾	10.0	84.7	(0.9)	(7.3)	86.5
At 31 December 2015	201.3	308.6	9.1	33.2	552.2

	2016 £m	2015 £m
Fair value gains	57.3	115.4
Fair value losses	(50.3)	(29.0)
	7.0	86.4

	2016 £m	2015 £m
Trade debtors	2.3	3.0
Prepayments	0.3	0.2
Other receivables	-	-
	2.6	3.2

Current liabilities	2016 £m	2015 £m
Trade payables	0.7	0.7
Social security expenses	0.3	0.2
Other accruals and deferred income	1.1	3.0
	2.1	3.9

Non-current liabilities	2016 £m	2015 £m
EIB debt facility	14.9	14.9
Loans drawn down from the Limited Partners of consolidated funds	9.8	7.1
	24.7	22.0

	2016		2015
Issued and fully paid:	Number	£m	Number	£m
Ordinary Shares of 2p each
At 1 January	564,648,168	11.3	479,524,397	9.6
Issued under share placings	-	-	83,388,888	1.7
Issued under employee share plans	573,799	-	1,734,883	-
At 31 December	565,221,967	11.3	564,648,168	11.3

IP Group plc Annual Results Release

Portfolio highlights

Financial and operational highlights

Performance summary

Investments and realisations

· Microbiotica Limited is a newly formed spin-out company from the Wellcome Trust Sanger Institute ("the Sanger Institute") established to commercialise the Sanger Institute's ground-breaking research into the role of the human microbiome in disease.

· Heliochrome Limited (University of Cambridge) is developing perovskite-based light-emitting devices for next generation displays. They enhance the colour quality and enable flexible design of displays, bringing visual experience to the next level;

· Lumiode Inc (Columbia University) is a New York City-based semiconductor start-up building the next generation of microdisplay technologies for head-worn, high brightness, augmented reality systems.

Portfolio analysis by stage of company maturity

Portfolio analysis by sector

Purpose

Review of the year

Purpose

Review of the year

Purpose

Review of the year

Purpose

Review of the year

Statement of financial position

Cash, cash equivalents and short-term deposits ("Cash")

The principal constituents of the movement in Cash during the year are summarised as follows:

Taxation

Risk Management

Governance

Risk management process

Summary of principal risks and mitigants

The success of those portfolio companies which require significant funding in the future may be influenced by the market's appetite for investment in early stage companies, which may not be sufficient.

Failure of companies within the Group's portfolio may make it more difficult for the Group or its spin-out companies to raise additional capital.

The Group has significant balance sheet and managed funds capital to deploy in attractive portfolio opportunities.

The Group operates a corporate finance function which carries out fundraising mandates for portfolio companies.

The Group maintains close relationships with a wide variety of co-investors that focus on companies at differing stages of development.

The Group frequently forecasts cash requirements of the portfolio and ensures all capital allocations are compliant with budgetary limits, treasury policy guidelines and transaction authorisation controls.

The Group announced the proposed acquisition of Parkwalk Advisors Ltd, the UK's leading university spin-out focused EIS fund manager. The acquisition reinforces IP Group's access to a diversified pool of capital for co-funding the earlier stages of the portfolio.

The Group hosted investor relations roadshows in the UK and US

Change in fair value of equity and debt investments.

Total equity ("net assets").

Profit/loss attributable to equity holders.

· may not be able to secure later rounds of funding;

· may not be able to source or retain appropriately skilled staff;

· competing technologies may enter the market;

· technology can be materially unproven and may fail;

· IP may be infringed, copied or stolen;

· may be more susceptible to cyber crime; and

· other administrative, taxation or compliance issues may lead to company failure.

Portfolio company failure directly impacts the Group's value and profitability.

The value of the Group's in-house drug discovery company MBS may be significantly impacted by a negative clinical trial result.

Cash realisations from the Group's portfolio through trade sales and IPOs could vary significantly from year to year.

The Group's staff have significant experience in sourcing, developing and growing early-stage technology companies to significant value, including use of the Group's systematic opportunity evaluation and business building methodologies within delegated board authorities.

Members of the Group's senior team often serve as non-executive directors or advisers to portfolio companies to help identify and remedy critical issues promptly.

Support on operational, legal and company secretarial matters is offered to minimise failures due to common administrative factors.

The Group has spin-out company holdings across different sectors managed by experienced sector-specialist teams to reduce the impact of a single company failure or sector demise.

The Group maintains significant cash balances and seeks to employ a capital efficient process deploying low levels of initial capital to enable identification and mitigation of potential failures at the earliest possible stage.

The Group's portfolio companies raised approximately £230m of capital.

The Group maintained board representation on approximately 80% of companies by number.

2016 saw significant volatility in equity markets, particularly around the timing of the Brexit referendum.

Change in fair value of equity and debt investments.

Purchase of equity and debt investments.

Proceeds from the sale of equity investments.

Termination or non-renewal of arrangements through failure to perform obligations may result in the loss of exclusive rights.

The loss of exclusive rights may limit the Group's ability to secure attractive IP opportunities to commercialise.

This could potentially have a material adverse effect on the Group's long-term business, results of operations, performance and prospects.

With several new entrants to our market, this may reduce our opportunities to create new spin-out businesses.

Dedicated New Business & Partnerships team to service existing partnerships and source new opportunities.

The Group continues to consider and, where appropriate, enter into new and innovative partnerships and collaborations with research institutions.

The Group has been able to source opportunities through non-exclusive relationships and other sources.

Members of the Group's senior team work closely with partner institutions to ensure that each commercial relationship is mutually beneficial and productive.

The Group's track record in IP commercialisation may make the Group a partner of choice for other institutions, acting as a barrier to entry to competitors.

Completed agreements with two additional US university partners.

Completed seed investments with both Oxford Sciences Innovation and Cambridge Innovation Capital as co-investors, demonstrating the value of our strategic stakes in these partners.

Number of new portfolio companies.

Loss of key executives and employees of the Group or an inability to attract, retain and integrate appropriately skilled and experienced staff could have an adverse effect on the Group's competitive advantage, business, financial condition, operational results and/or future prospects.

Senior team succession plans are in place and updated regularly.

The Group's corporate culture and values are well-articulated and consistently promoted.

The Group carries out regular market comparisons for staff and executive remuneration and seeks to offer a balanced incentive package comprising a mix of salary, benefits, performance-based long-term incentives and benefits such as flexible working and salary sacrifice arrangements.

The Group encourages staff development and inclusion through coaching and mentoring and carries out regular objective setting and appraisal.

Staff attrition increased slightly during the year, albeit at 4%, it remained at low absolute levels. Approximately 45% of staff have been with the Company for at least five years.

Total equity ("net assets").

Number of new portfolio companies.

The UK's recession has had (and may continue to have) an adverse effect on trading conditions and availability of capital in the UK, particularly for smaller businesses.

The success of those portfolio companies which require significant external funding may be influenced by the market's appetite for investment in early stage companies, which may not be sufficient.

Total equity
("net assets").

Total equity
("net assets").

	2016 £m	2015 £m
Within one year	0.6	0.3
In the second to fifth years inclusive	3.1	0.1
	3.7	0.4

	2016	2015
Share price at date of award	£1.558	£2.188
Exercise price	£nil	£nil
Fair value at grant date	£0.41	£0.78
Expected volatility (median of historical 50-day moving average)	31%	32%
Expected life (years)	2.83	2.83
Expected dividend yield	0%	0%
Risk-free interest rate	1.0%	1.0%

	£m
At 1 January 2015	4.6
Additions during the year	-
Realisations in the year	(0.6)
Change in fair value during the year	0.4
At 1 January 2016	4.4
Additions during the year	0.1
Realisations in the year	-
Change in fair value during the year	(0.3)
At 31 December 2016	4.2

Director/Company Secretary	Company name	Number of shares held at 1 January 2016	Number of shares acquired/ (disposed) in the period	Number of shares held at 31 December 2016	%
Alan Aubrey	Accelercomm Limited	-	333	333	0.3%
	Alesi Surgical Limited	18	-	18	0.2%
	Amaethon Limited - A Shares	104	-	104	3.1%
	Amaethon Limited - B Shares	11,966	-	11,966	1.0%
	Amaethon Limited - Ordinary shares	21	-	21	0.3%
	Avacta Group plc^(v)	202,761	-	202,761	0.3%
	Boxarr Limited	1,732	-	1,732	0.3%
	Capsant Neurotechnologies Limited	11,631	-	11,631	0.8%
	Cloud Sustainability Limited	26	-	26	0.4%
	Crysalin Limited	1,447	-	1,447	0.1%
	Diurnal Group plc	15,000	-	15,000	<0.1%
	EmDot Limited	15	-	15	0.9%
	Empiricom Technologies Limited	-	119,965,724	119,965,724	17.3%
	Getech Group plc	15,000	-	15,000	<0.1%
	Gunsynd plc	767,310	-	767,310	<0.1%
	hVivo plc	37,160	-	37,160	<0.1%
	Ilika plc	69,290	-	69,290	<0.1%
	Karus Therapeutics Limited	223	-	223	<0.1%
	Microbiotica Limited	-	3,750	3,750	<0.1%
	Mirriad Advertising Limited	33,333	-	33,333	<0.1%
	MDL 2016 Limited - Ordinary shares	3,226	-	3,226	0.4%
	MDL 2016 Limited - A shares	229	-	229	0.5%
	Modern Biosciences plc	1,185,150	-	1,185,150	1.7%
	Modern Water plc	519,269	-	519,269	0.7%
	Cronin Group plc	2,172,809	-	2,172,809	0.4%
	Oxford Nanopore Technologies Limited	101,208	-	101,208	0.4%
	Oxtox Limited	25,363	(25,363)	-	0.0%
	Perachem Holdings plc	108,350	-	108,350	0.8%
	Revolymer plc	88,890	-	88,890	0.1%
	Salunda Limited	53,639	-	53,639	<0.1%
	Structure Vision Limited	212	-	212	1.0%
	Surrey Nanosystems Limited	453	-	453	0.3%
	Tissue Regenix Group plc	2,389,259	-	2,389,259	0.3%
	Xeros Technology Group plc	40,166	-	40,166	<0.1%
	Zeetta Networks Limited	212	212	424	<0.1%
Mike Townend	Amaethon Limited - A Shares	104	-	104	3.1%
	Amaethon Limited - B Shares	11,966	-	11,966	1.0%
	Amaethon Limited - Ordinary shares	21	-	21	0.3%
	Applied Graphene Materials plc	-	7,619	7,619	<0.1%
	Avacta Group plc^(v)	9,314	10,687	20,001	<0.1%
	Capsant Neurotechnologies Limited	11,282	-	11,282	0.8%
	Cloud Sustainability Limited	25	-	25	0.4%
	Creavo Technologies Limited⁽ⁱ⁾	117	-	117	<0.1%
	Crysalin Limited	1,286	-	1,286	0.1%
	Diurnal Group plc	15,000	-	15,000	<0.1%
	EmDot Limited	14	-	14	0.8%
	Getech Group plc	20,000	-	20,000	<0.1%
	hVivo plc	37,160	-	37,160	<0.1%
	Ilika plc	10,000	-	10,000	<0.1%
	Mirriad Advertising Limited	25,000	-	25,000	<0.1%
	Mode Diagnostics Limited	1,756	-	1,756	0.1%
	Modern Biosciences plc	1,185,150	-	1,185,150	1.7%
	Modern Water plc	575,000	-	575,000	0.7%
	Cronin Group plc	932,944	-	932,944	0.2%
	Oxford Advanced Surfaces Limited	5,000	-	5,000	0.2%
	Oxford Nanopore Technologies Limited	30,967	-	30,967	0.1%
	Oxtox Limited	25,363	(25,363)	-	0.0%
	Perachem Holdings plc	113,222	-	113,222	0.8%
	Revolymer plc	35,940	29,000	64,940	<0.1%
	Structure Vision Limited	212	-	212	1.0%
	Surrey Nanosystems Limited	404	-	404	0.2%
	Tissue Regenix Group plc	1,950,862	-	1,950,862	0.3%
	Tracsis plc	25,430	(25,430)	-	0.0%
	Ultrahaptics Holdings Limited^(iv)	35	-	35	<0.1%
	Xeros Technology Group plc	35,499	-	35,499	<0.1%
Greg Smith	Alesi Surgical Limited	2	-	2	<0.1%
	Avacta Group plc^(v)	3,904	-	3,904	<0.1%
	Capsant Neurotechnologies Limited	896	-	896	<0.1%
	Cloud Sustainability Limited	8	-	8	0.1%
	Crysalin Limited	149	-	149	<0.1%
	Diurnal Group plc	15,000	-	15,000	<0.1%
	EmDot Limited	4	-	4	0.2%
	Encos Limited	5,671	-	5,671	0.3%
	Getech Group plc	8,000	-	8,000	<0.1%
	hVivo plc	61,340	-	61,340	<0.1%
	Perachem Holdings plc⁽ⁱⁱ⁾	4,830	-	4,830	<0.1%
	Mirriad Advertising Limited	16,667	-	16,667	<0.1%
	MDL 2016 Limited - Ordinary shares	361	-	361	<0.1%
	MDL 2016 Limited - A shares	28	-	28	<0.1%
	Modern Biosciences plc	313,425	-	313,425	0.5%
	Modern Water plc	7,250	-	7,250	<0.1%
	Oxford Nanopore Technologies Limited	1,581	-	1,581	<0.1%
	Revolymer plc	4,500	-	4,500	<0.1%
	Summit Therapeutics plc	798	-	798	<0.1%
	Surrey Nanosystems Limited	88	-	88	<0.1%
	Tissue Regenix Group plc	50,000	-	50,000	<0.1%
	Xeros Technology Group plc	1,392	-	1,392	<0.1%
David Baynes	Alesi Surgical Limited	4	-	4	<0.1%
	Arkivum Limited	377	-	377	<0.1%
	Creavo Technologies Limited⁽ⁱ⁾	46	-	46	<0.1%
	Diurnal Group plc	73,000	-	73,000	0.1%
	Mirriad Advertising Limited	16,667	-	16,667	<0.1%
	Oxford Nanopore Technologies Limited	155	19	174	<0.1%
	Ultrahaptics Holdings Limited^(iv)	26	-	26	<0.1%
	Zeetta Networks Limited	212	212	424	<0.1%
Angela Leach	Alesi Surgical Limited	2	-	2	<0.1%
	Avacta Group plc^(v)	1,897	-	1,897	<0.1%
	Boxarr Limited	102	-	102	<0.1%
	Capsant Neurotechnologies Limited	1,858	-	1,858	0.1%
	Cloud Sustainability Limited	10	-	10	0.1%
	Creavo Technologies Limited⁽ⁱ⁾	23	-	23	<0.1%
	Cronin Group plc	68,101	-	68,101	<0.1%
	Diurnal Group plc	11,500	-	11,500	<0.1%
	Gunsynd plc⁽ⁱⁱⁱ⁾	7,990	-	7,990	<0.1%
	First Light Fusion Limited	17	-	17	<0.1%
	Getech Group plc	2,083	-	2,083	<0.1%
	hVivo plc	25,903	-	25,903	<0.1%
	Mirriad Advertising Limited	16,667	-	16,667	<0.1%
	MDL 2016 Limited - Ordinary Shares	606	-	606	<0.1%
	MDL 2016 Limited - A Shares	102	-	102	0.2%
	Modern Water plc	15,570	-	15,570	<0.1%
	Modern Biosciences plc	322,923	-	322,923	0.5%
	Oxford Nanopore Technologies Limited	1,721	61	1,782	<0.1%
	Revolymer plc	4,500	-	4,500	<0.1%
	Structure Vision Limited	21	-	21	0.1%
	Surrey Nanosystems Limited	90	-	90	<0.1%
	Tissue Regenix Group plc	329,172	(52,381)	276,791	<0.1%
	Ultrahaptics Holdings Limited^(iv)	5	-	5	<0.1%
	Xeros Technology Group plc	5,666	-	5,666	<0.1%

	2016 £000s	2015 £000s
Short-term employee benefits¹	1,489	1,890
Post-employment benefits²	71	89
Other long-term benefits	-	-
Termination benefits	-	-
Share-based payments³	623	550
Total	2,183	2,529

Partnership	Year of commencement of partnership	Original commitment £m	Invested to date £m	Remaining commitment £m
University of Southampton⁽ⁱ⁾	2002	5.0	3.6	1.4
King's College London⁽ⁱⁱ⁾	2003	5.0	1.8	3.2
University of York - CNAP⁽ⁱⁱⁱ⁾	2003	0.8	0.2	0.6
University of Leeds^(iv)	2005	4.2	1.1	3.1
University of Bristol^(v)	2005	5.0	1.1	3.9
University of Surrey^(vi)	2006	5.0	0.5	4.5
University of York⁽ⁱⁱⁱ⁾	2006	5.0	0.2	4.8
Queen Mary University of London^(vii)	2006	5.0	0.7	4.3
University of Bath^(viii)	2006	5.0	0.2	4.8
University of Glasgow^(ix)	2006	5.0	1.6	3.4
University of Manchester^(x)	2013	7.5	0.2	7.3
		52.5	11.2	41.3

Partnership	Year of commencement of partnership	Original commitment £m	Invested to date £m	Remaining commitment £m
IP Venture Fund	2006	3.1	3.0	0.1
IP Venture Fund II L.P.	2013	10.0	3.9	6.1
		13.1	6.9	6.2