CIC Annual Report 2017

ANNUAL REPORT AND ACCOUNTS

For the year ended 31 March 2017

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

ABOUT CAMBRIDGE INNOVATION CAPITAL

Cambridge Innovation Capital plc (CIC) combines a unique relationship with the University of Cambridge with deep financial and industry links, to invest in rapidly growing intellectual property rich companies in the Cambridge Cluster.

With the support of some of the most influential figures in the sector and a permanent capital structure, CIC is committed to building leading businesses from brilliant technologies.

AT 31 MARCH 2017

£125m FUNDS RAISED FOR INVESTMENT

£64m INVESTED/ COMMITTED

19

PORTFOLIO COMPANIES

READ MORE ABOUT THE PORTFOLIO ON PAGES 11 TO 17

As well as being a world-renowned academic institution and the crucible of many world-changing ideas, the University of Cambridge is home to Europe’s most successful technology innovation ecosystem. This pioneering spirit radiates into the surrounding area such that the Cambridge Cluster now forms the largest technology cluster in Europe. It is home to over 4,300 knowledge-intensive companies with a combined turnover of over £11 billion per year.

READ MORE ABOUT THE CAMBRIDGE CLUSTER ON PAGE 4

OVERVIEW

www.cicplc.co.uk

KEY STRENGTHS

• Unique access to investment opportunities arising from the University of Cambridge • A privileged position to invest in high growth companies in Europe’s largest technology cluster • An experienced team, well-networked in the Cambridge Cluster • A world-class Advisory Panel of business leaders, entrepreneurs and world-renowned scientists • A diverse portfolio of companies in rapidly growing technology and healthcare sectors

1

CONTENTS OVERVIEW About Cambridge Innovation Capital

IFC

Key Strengths

1

Chairman’s Statement

2

STRATEGIC REPORT Cambridge Cluster

4

Relationship with The University of Cambridge

5

Our Business and Strategy

6

Operational Report

8

Portfolio Review

11

Financial Review

18

GOVERNANCE Corporate Governance and Risk Management Framework 20 Board of Directors

“Over the last three years, CIC has grown and proven itself to be an integral part of the Cambridge ecosystem. The University is delighted to work with CIC as it continues its critical role in providing growth capital and support for the region and the country.”

Professor Sir Leszek Borysiewicz Vice-Chancellor of the University of Cambridge

24

Directors’ Report

26

Statement of Directors’ Responsibilities

28

FINANCIAL STATEMENTS Independent Auditors’ Report on the Consolidated Financial Statements

29

Consolidated Statement of Comprehensive Income

31

Consolidated Statement of Financial Position

32

Consolidated Statement of Changes in Equity

33

Consolidated Statement of Cash Flows

34

Notes to the Consolidated Financial Statements

35

Independent Auditors’ Report on the Company Financial Statements

48

Company Balance Sheet

50

Company Statement of Changes in Equity

51

Notes to the Company Financial Statements

52

COMPANY INFORMATION

IBC

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

2

CHAIRMAN’S STATEMENT

EDWARD BENTHALL NON-EXECUTIVE CHAIRMAN

In the year ended 31 March 2017 we enhanced our funding capability, raising £75 million from a range of existing and new investors, to increase our funds under management to £125 million. We also strengthened our relationship with the University of Cambridge.

Our ten-year agreement provides CIC with unique access to University of Cambridge spin-outs.

The additional capital, together with CIC’s status as a preferred investor for the University of Cambridge, will enable CIC to continue to support exciting IP-rich companies emanating from the University and the wider research and business community, known as the Cambridge Cluster, as they develop into category leaders of the future.

Our business The success of our business depends on the strengths of our relationships, not only within the University and Cluster, but also with a wide range of other stakeholders including our portfolio companies, our co-investors, potential acquirers of our portfolio companies and our shareholders.

During the year we raised £75 million from new investors, including Legal & General, Woodford Investment Management, Winton Ventures and the Oman Investment Fund as well as from our existing shareholders, including the University of Cambridge Endowment Fund, Lansdowne Partners, ARM and IP Group plc.

These funds have provided additional investment capital and enabled us to expand the team to capitalise on the strong inflow of new investment opportunities. We thank our existing shareholders for their continued support and are delighted to welcome our new shareholders.

Some of the companies in which we invest will take several years to reach maturity and our structure is designed to allow us to hold our investments for the time it takes them to reach their potential. It is by maximising this potential that we will generate a capital return for our investors over the long-term.

A BROAD AND KNOWLEDGEABLE INVESTOR BASE Cambridge University Endowment Fund

16.4%

University of Cambridge

20.0%

Lansdowne Partners

3.1%

Legal & General

5.0% 6.0%

% SHAREHOLDING

Oman Investment Fund 13.5%

Woodford IM Invesco IP Group

7.5% 13.5%

7.5% 7.5%

ARM

Others

OVERVIEW

www.cicplc.co.uk

3

CARRYING VALUE AND FUTURE COMMITMENT AT 31 MARCH 2017

Other

Imagen

PragmatIC Printing

Congenica

Origami Energy

Inivata

Carrick Therapeutics

Microbiotica

Storm Therapeutics

Cambridge Medical Robotics

Audio Analytic KEY:

Undo TECHNOLOGY

HEALTHCARE

Our investments

Our Board

Outlook

We have continued to invest to expand both the breadth and the size of the portfolio.

Concurrent with the completion of the funding round Tony Raven, CEO of Cambridge Enterprise, stepped down from the Board. Tony was instrumental in the origination of CIC and on behalf of all the Board, I thank him for his considerable contribution. We will, of course, continue to work closely with Tony in his role as CEO of Cambridge Enterprise.

We continue to see a healthy pipeline of extremely promising young companies emanating from both the University and elsewhere in the Cambridge Cluster. In addition, our existing portfolio companies are making good progress and we expect most of these to require further development and scale-up funding to allow them to fulfil their potential as global category leaders.

During the year we invested a total of £29.0 million in seven new and nine existing portfolio companies, such that cumulatively £49.7 million had been invested, and a further £14.0 million had been committed, subject to milestones, to 19 companies. The carrying value of those companies, plus our future commitment, is represented in the graphic above.

Despite our patient capital model, we are particularly pleased that after just three years of investing, net fair value gains have increased to £8.5 million, representing a 17% uplift on invested capital.

Relationship with the University of Cambridge The Group is a preferred investor for the University of Cambridge and has a unique relationship with Cambridge Enterprise. These relationships have been strengthened during the year by the signing of a Memorandum of Agreement. This ten-year agreement, extendable for rolling five-year periods, provides CIC with unique access to University of Cambridge spin-outs and includes co-investment rights alongside Cambridge Enterprise and pre-emption rights as a University affiliate alongside existing and future University of Cambridge equity stakes.

Our Advisory Panel Our Advisory Panel provides the Group with access to some of the Cambridge Cluster’s leading academics and entrepreneurs. Their formal role in reviewing significant prospective investment forms a core part of the operations of CIC, but they also provide introductions to new opportunities within the Cluster.

We recently welcomed William Tunstall-Pedoe, the founder of Cambridge start-up Evi which was sold to Amazon as the core of its Alexa product, to the Advisory Panel. William brings valuable expertise in artificial intelligence and machine learning, an area in which the Cluster excels. During the year Hermann Hauser, cofounder of Amadeus Capital Partners, stepped down from the Advisory Panel. We would like to thank Hermann for his contribution to our Advisory Panel since its inception, and for his substantial input into the development of the Cambridge Cluster over many years.

We remain confident that CIC is well-placed to thrive and build substantial value for shareholders.

EDWARD BENTHALL NON-EXECUTIVE CHAIRMAN 13 June 2017

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

4

CAMBRIDGE CLUSTER

CIC is a venture capital investor that looks to invest in high growth businesses.

Based in and focused on Cambridge, we are in a unique position to access Europe’s largest entrepreneurial ecosystem.

The city of Cambridge’s development has been intertwined with that of the University of Cambridge for over 800 years. The University of Cambridge is ranked consistently as one of the top five universities in the world and can lay claim to 96 Nobel prize winners, more than most countries and any other institution. Over 85 per cent of University of Cambridge research groups are characterised as world-leading or internationally excellent by the 2014 Research Excellence Framework and the University sits at the heart of Europe’s leading, and what is considered by many to be, most successful technology region, the Cambridge Cluster.

As well as being the crucible of many worldchanging ideas, the University is also home to Europe’s most successful technology innovation system. Many of the University’s discoveries have been transformed into significant commercial products: Humira, the anti-arthritis drug and Solexa’s gene sequencing technology are just two of these.

The University’s pioneering spirit radiates into the surrounding area. Over the past 50 years the University, together with its colleges, has played a central role in establishing and growing the Cambridge Cluster. Starting in 1970 when Trinity College established the UK’s first ever science park, the Cluster has grown so that there are now more than 20 research parks in the area.

The focus on facilitating innovation has fuelled the growth of the Cambridge Cluster and, along with a constant flow of innovation staff and graduates from the University of Cambridge to companies in the Cluster, has driven the associated economy. The Cluster has grown from 20 companies employing 100 people in 1978 to more than 4,300 high tech companies employing more than 58,000 people and turning over more than £11 billion per annum in 2016.

This growth is expected to continue with the Cambridge area predicted to be one of the fastest growing regions in the UK over the next three years. A number of significant developments in the area are underway to accommodate this expansion including: the 150 hectare expansion in North West Cambridge; the development of a further 90 acres at the Cambridge Biomedical Campus to

4,300+ KNOWLEDGE INTENSIVE FIRMS

create the International Healthcare Village with AstraZeneca plc as cornerstone tenant; and the CB1 development in the heart of the city.

The Cambridge Cluster has also produced several specialist technology consultancies and a large community of successful local entrepreneurs and angel investors that not only provide ongoing support to the ecosystem but are also instrumental in guiding the next generation of Cambridge businesses. CIC benefits from the experience of many of these successful individuals through their presence on the Advisory Panel.

Many local companies have had successful trade sales and others have been or continue to be listed. ARM, Autonomy Corporation, CSR, Domino Printing Sciences and Cambridge Antibody Technology Group all achieved trade sale values in excess of $1 billion and Abcam, Aveva Group and GW Pharmaceuticals each have a market capitalisation of over $1 billion.

World-leading companies, such as Amazon, Apple, Google, Microsoft and AstraZeneca, all have research and development centres in the Cluster to tap into its innovation and talent.

The Cambridge Cluster has developed a substantial seed and early-stage investment ecosystem. Angel networks such as Cambridge Angels and Cambridge Capital Group take an active role in creating and supporting seed stage ventures, as well as the University, through its seed funding activity managed

by Cambridge Enterprise. However, there is a shortage of long-term, later stage funding within the Cluster. Providing a trusted source of such locally available funding was the principle behind the foundation of CIC.

GENERATING

£11bn+ OF ANNUAL TURNOVER

STRATEGIC REPORT

www.cicplc.co.uk

RELATIONSHIP WITH THE UNIVERSITY OF CAMBRIDGE

5

CIC was founded in 2013 as an initiative by the University of Cambridge to create a trusted local entity that would be able to provide growth capital to promising businesses arising from the University and the Cambridge Cluster. CIC’s status as a preferred investor for the University of Cambridge and its strong relationship with the Cluster have enabled it to influence the path of University spin-out opportunities and establish a leading position in the Cambridge investment market.

Each year CIC reviews between 200 and 250 investment opportunities emerging from across the Cambridge Cluster, the largest single source of which is the University. CIC has a Memorandum of Agreement with Cambridge Enterprise, the commercialisation arm of the University, which describes the Group’s rights of access to University of Cambridge spin-outs and its working relationship with Cambridge Enterprise.

96

NOBEL PRIZE WINNERS

Under the Memorandum of Agreement, CIC has: • unique access to Cambridge Enterprise investment meetings, information systems and spin-out pipeline details; • co-investment rights alongside Cambridge Enterprise at inception/seed stage; and • pre-emption rights alongside existing and future University of Cambridge equity stakes as a University affiliate.

The Agreement is for an initial ten years to August 2026 and extendable thereafter for rolling five-year periods, subject to the University of Cambridge continuing to own a minimum of 5% of CIC and there being no change in the control of CIC.

This requirement, we believe, is completely consistent with CIC’s objective of seeking to be the investor of choice for academic and other entrepreneurial founders, in order to generate long-term capital returns for its investors.

Our relationship with the University extends far wider than the contractual terms of the Memorandum of Agreement. Two of our Nonexecutive Directors, Duncan Maskell and Ian Leslie, are eminent University of Cambridge academics; the University of Cambridge Endowment Fund is our largest contributor of capital, underlining the confidence it has in our investment strategy; the University is represented on our Advisory Panel; CIC’s office is co-located with Cambridge Enterprise on the University’s Cambridge West Site; and every employee works, lives and socialises in the Cambridge Cluster amongst the resident academics and our entrepreneurs.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

6

OUR BUSINESS AND STRATEGY

CIC is committed to building leading businesses from brilliant technologies.

CIC combines a unique relationship with the University of Cambridge with deep financial and industry links and the support of some of the most influential figures in the sector, to invest in rapidly growing intellectual property rich companies in the Cambridge Cluster.

A WELL-DEFINED AND RIGOROUS INVESTMENT PROCESS

UNIVERSITY DEALFLOW

CLUSTER DEALFLOW

CIC early access to:

CIC access to:

• Ideation • Company creation • Seed funding

• Leading angel groups • Key research institutes • Influential works

NUMBER OF OPPORTUNITIES PER ANNUM

CIC ENGINE

1

Initial opportunity assessment

2

3 Initial due diligence

Advisory Panel

Analyse 6

~200

4 Further due diligence

5

Investment Committee & Board approvals

Legals

~15

Transact

7 Completion

8 Kick-off plan actioned

9

Continued involvement at Board level and strategic reviews at CIC

Build value

10 Exit planning

£

STRATEGIC REPORT

www.cicplc.co.uk

7

Strategy

Investment thesis

Key differentiators

CIC’s ambition is to build category leaders in rapidly growing technology sectors. Building such companies requires patience: technology businesses which grow to a billion-dollar valuation in the UK have, on average, taken over eight years to reach that valuation.

CIC may only invest in entities that fulfil the following criteria:

CIC acknowledges that other individuals and organisations are seeking investment opportunities in high-growth, category-leading companies originating from the University of Cambridge and Cambridge Cluster. However, CIC believes that it is uniquely placed to identify and invest in high-growth companies in Europe’s largest technology cluster because it:

CIC’s permanent capital structure enables it to invest in such companies from inception through to commercial maturity.

Potential investee companies will typically, but not necessarily, have already received seed funding from early stage investors or incubator funds and will be seeking further funding to support growth. CIC also makes seed stage investments where it believes that the opportunity presented justifies the increased risk of such early investments, and to acquire the right to invest substantial further funds in subsequent rounds.

• the potential investee company must have a connection to the University of Cambridge or the Cambridge Cluster; and • the underlying technology of the company has the potential to create a new market opportunity or significantly improve an existing market through improved performance or lower costs.

CIC invests broadly in healthcare and technology, with a particular focus on the inherent strengths of the Cambridge Cluster, including deep learning and artificial intelligence, wireless and wired devices, genomics, epigenetics and next generation biologics. The majority of these businesses will be based on many years of world-class research from the University or from research institutes in the Cluster.

CIC is an active investor, looking for a substantial minority equity holding and board positions to actively manage the business as it matures into a global leader.

Establishing a leader in microbiome commercialisation

• is headquartered in the Cluster; • invests with simple, transparent investment structures; • has a unique relationship with the University of Cambridge; • provides long-term capital to support sustained growth of investee companies; • prospers from the unrivalled expertise and network of its Board and Advisory Panel; and • collaborates with local angel networks as a trusted source of funding to identify, support and accelerate the growth of category-leading companies in their portfolios.

Microbiotica has been established to commercialise ground-breaking research conducted at the Wellcome Trust Sanger Institute into the role of the human microbiome, the body’s trillions of resident bacteria, in health and disease and its application to medicine. The Host Microbiota Interaction Lab at the WTSI has made significant breakthroughs in the analysis and understanding of the human microbiome, the importance of which is increasingly recognised in a wide range of diseases.

CIC worked closely with the founders and the Sanger Institute to provide Microbiotica with unique access to the Institute’s analysis and understanding of the human microbiome, together with exclusive rights to existing potentially therapeutic bacterial mixes that have shown striking effects in novel models of disease.

CIC co-led this investment with a £4 million contribution to total initial funding of £8 million.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

OPERATIONAL REPORT

8

VICTOR CHRISTOU CHIEF EXECUTIVE OFFICER

We have made tremendous progress during the year as we increased our assets under management, enhanced our portfolio and expanded the team to lay the foundations for future value creation.

Putting our capital to work

During the year we raised £75 million from new investors and our existing shareholders such that we have now raised a total of £125 million. This additional capital has enabled us to sustain our support for exciting intellectual property rich companies and we look forward to continuing to work very closely with the University of Cambridge and our wider network within the Cambridge Cluster.

Since completing the fundraising we have been actively engaged in closing a number of investments in new and existing portfolio companies. At 31 March 2017 we had invested a total of £49.7 million (2016: £20.7 million) and committed, subject to milestones, a further £14.0 million into a portfolio of 19 (2016: 12) companies. The total fair value of our portfolio has increased to £58.2 million (2016: £24.7 million) representing a net fair value gain in the year of £4.5 million (2016: £3.3 million).

TRANSACTIONS IN THE YEAR ENDED 31 MARCH 2017

KEY:

TECHNOLOGY

HEALTHCARE

Bubble size reflects the value of CIC’s commitment in the round Carrick Therapeutics

PragmatIC Printing Inivata Cambridge Medical Robotics

Congenica Microbiotica

Storm Therapeutics

Z Factor

Fluidic Analytics

Cambridge Medical Robotics

Audio Analytic Undo

Imagen Funding round (£ million)

Abcodia Exvastat

PervasID

JU

NE

6

201

SEP

TEM

BE

016 R2 DE

M CE

BE

016 R2

7

R MA

CH

201

STRATEGIC REPORT

www.cicplc.co.uk

9

New companies added to the portfolio are:

Significant portfolio company events

• Cambridge Medical Robotics, which is developing the next-generation universal robotic system for minimal access surgery;

The fundamentals of our business are very strong, with many of our portfolio companies raising substantial capital, making significant commercial and technical progress and being recognised for their achievements, during the year. We’ve included below a few selected highlights but further details, especially in relation to capital raises, are provided in the Portfolio Review on pages 11 to 17.

• Carrick Therapeutics, which launched with funding of $95 million to build a leading European oncology company; • Fluidic Analytics, which is developing a range of products for protein characterisation; • PervasID, which offers long-range, accurate, passive radio frequency identification (RFID) tag reading; • Microbiotica, which has been established to commercialise ground-breaking research conducted at the Wellcome Trust Sanger Institute into the role of the human microbiome; • Exvastat, which is repurposing and reformulating an existing drug for the treatment of acute respiratory distress syndrome; and • Z Factor, which is working on the discovery of new drugs to treat Alpha-1-Antitrypsin Deficiency, a significant cause of liver and lung disease.

Following the year end we invested £8.5 million in Bicycle Therapeutics, a company that is pioneering a new class of therapeutics based on its proprietary bicyclic peptide product platform.

Building a leading European oncology company

Cambridge Medical Robotics revealed its Versius system, the next-generation robotic system for universal minimal access surgery, and provided an update on ongoing cadaveric studies.

Congenica, a clinical interpretation partner for the 100,000 Genomes Project, was the first UK company to successfully deliver diagnostic reports to the NHS Genomic Medicine Centres. Congenica was also named “Best Implementation of Digital Healthcare” by OBN for introducing its Sapientia™ platform into one of the most highly regulated healthcare systems in the world in just two years.

Imagen announced that it had won the prestigious IABM Design and Innovation Award and the Media Asset Management award in the Streaming Media European Readers’ Choice Awards for the second year in a row. Imagen also announced new content and customers including The Premier League, Reuters Video Archive, Women’s Tennis Association, Formula 1 and BBC Media Action, the BBC’s international development charity.

Inivata launched its US clinical validation study in non-small cell lung cancer and announced a new partnership with N-of-One Inc, a precisionmedicine oncology decision support company, to support analysis of patient cases for Inivata’s InVision® liquid biopsy product line.

Jukedeck was awarded an Innovation Lion at Cannes Lions for their artificial intelligent music composer. The Cannes Lions bills itself as “the world’s biggest get-together of people interested in creativity” and the Lion awards are the equivalent of the Oscars for the creative world.

PragmatIC Printing secured agreements for the installation of its first FlexLogIC system capable of producing billions of flexible integrated circuits. FlexLogIC is a self-contained, fully automated, modular “fab-in-a-box” for high throughput manufacturing of flexible plastic semiconductor devices.

Storm Therapeutics moved to the next stage of its development with the appointment of Keith Blundy, formerly CEO of Cancer Research Technology, as Chief Executive Officer and serial entrepreneur Tim Edwards, previously Executive Chair of Atopix Therapeutics, as Chairman.

Undo released its free Live Recorder plugin for Jenkins which will arm DevOps teams with optimised technology designed to enable more efficient software testing during the Continuous Integration process and announced that SAP SE had integrated its record, rewind and replay technology into its automated testing environment for SAP HANA.

Carrick Therapeutics has a clear vision for cancer patients: to target the molecular pathways that drive the most aggressive and resistant forms of cancer in order to have a major impact on the lives of patients. One of Carrick’s founding scientific programmes is derived from work undertaken at the Gurdon Institute in Cambridge.

In October 2016 CIC committed $10.0 million in a $95.0 million round of tranched funding from leading healthcare investors including ARCH Venture Partners, Woodford Investment Management, Evotec AG and GV (Google Ventures). The funds raised will be used to build an innovative portfolio of first-in-class treatments that are advanced through understanding the mechanisms that cause cancer and resistance and are tailored to an individual patient’s tumour.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

10

OPERATIONAL REPORT

Key performance indicators Our current key performance indicators, together with a comparison to the year ended 31 March 2016, are as follows: 2017

2016

Net asset value per ordinary share^

Pence

75.8

69.6

Opportunities reviewed in the year

#

244

208

#

7/9

5/5

Investments New/follow-on investments

19

12

Funds invested in the year

£ million

29.0

13.9

Cumulative investments at year end

£ million

49.7

20.7

Future commitments, subject to milestones*

£ million

14.0

5.3

Number of portfolio companies at year end

#

^ The comparative year has been adjusted for the share capital reorganisation completed immediately prior to the fundraising * The £14.0 million at 31 March 2017 includes $8.3 million translated at $1.28/£1.00

The increase in the net asset value per share at 31 March 2017 is primarily due to the issue of 93.8 million shares at £0.80 per share, raising £75 million.

The consolidated net assets at 31 March 2017, which included the £75 million raised from the issue of shares, were £126.7 million (2016: £51.1 million).

However, the net asset value has also benefited from the net fair value gain of £4.5 million (2016: £3.3 million) arising on our investments as detailed further in the Financial Review on pages 18 to 19.

We continue to see a healthy flow of potential opportunities arising from both the University of Cambridge and the wider Cambridge Cluster. During the year ended 31 March 2017 we reviewed 244 opportunities (2016: 208) across a broadly even distribution of healthcare and technology investment opportunities.

Investment team During the year we have expanded our investment team with the appointment of Carol Cheung, Dr Andrew Williamson and Dr Michael Anstey.

Carol has an MBA from the University of Cambridge’s Judge Business School and prior to joining CIC worked in a variety of roles at several early-stage technology companies.

Carol has a background in financial analysis having worked in both the UK and Canada and is a CFA charterholder.

Andrew, a University of Cambridge undergraduate (Natural Sciences) and postgraduate (Physics), joins us from True North Venture Partners in Chicago where he was a partner in its $300 million venture fund. Prior to this, Andrew spent ten years leading materials science and semiconductor research in US government research laboratories, followed by managing director positions at venture capital funds, Physic Ventures in San Francisco, and MalibuIQ in Los Angeles.

Michael, who studied at the University of Cambridge as a postgraduate (Zoology), joins us from The Boston Consulting Group’s (BCG) office in Toronto, Canada where he was a Principal in the Healthcare Practice Area. He brings experience in advising multinational healthcare businesses across North America, Europe, India, and Japan on a broad range of topics, including corporate strategy, M&A, sales and marketing, new product launches, R&D and medical strategy. Prior to BCG Michael worked in venture capital, where he focused on investing in healthcare and life science businesses.

Operations

We are delighted to welcome Carol, Andrew and Mike to the CIC team. Each brings deep technology understanding, wide-ranging and industry specific networks and a plethora of skills which not only complements the existing team, but is also of great benefit to our portfolio companies.

Each year we see a healthy flow of potential new investment opportunities from which we have established a diverse portfolio of technology and healthcare businesses that are making good progress – but there is more to do. We will continue to work closely with the University of Cambridge and the wider Cambridge community, alongside appropriate and trusted co-investors, to provide patient capital to category leaders in rapidly growing technology sectors.

During 2016 we updated our branding to reflect the unique relationship that we have with the University of Cambridge and we moved to a larger, dedicated office within the Hauser Forum alongside Cambridge Enterprise.

Outlook We are committed to building leading businesses from brilliant technologies emanating from the University of Cambridge and wider Cambridge Cluster and we continue to believe in the fundamentals of our business model to achieve this ambition.

VICTOR CHRISTOU CHIEF EXECUTIVE OFFICER 13 June 2017

STRATEGIC REPORT

www.cicplc.co.uk

PORTFOLIO REVIEW

11

During the year ended 31 March 2017, the Group made 16 investments (2016: 11) and invested a total of £29.0 million (2016: £13.9 million) in seven new and nine existing portfolio companies, such that cumulatively £49.7 million (2016: £20.6 million) had been invested in 19 (2016: 12) companies. £ million

31 March 2016

31 March 2017

Activity during the year

Carrying value

Cost of investment

Fair value changes

PragmatIC Printing

2.4

–

2.4

6.0

2.9

11.3

Congenica

1.5

0.7

2.2

3.5

2.5

8.2

Inivata

4.2

1.3

5.5

2.7

–

8.2

Imagen

3.5

–

3.5

2.5

0.7

6.7

Origami Energy

3.4

1.9

5.3

–

–

5.3

–

–

–

4.0

–

4.0

Significant investments

Cambridge Medical Robotics

Carrying value

Cost of investment

Fair value changes

Feature companies

Microbiotica

–

–

–

1.5

–

1.5

Carrick Therapeutics

–

–

–

1.3

–

1.3

5.7

0.1

5.8

7.5

(1.6)

11.7

20.7

4.0

24.7

29.0

4.5

58.2

Other investments (11 companies)

Investments in existing portfolio companies have resulted in a net fair value gain of £4.5 million (2016: £3.3 million) which has increased the cumulative fair value gain to £8.5 million (2016: £4.0 million), representing a 17% uplift on invested capital.

Further details on the significant investments are provided on pages 12 to 17 and a brief introduction to this year’s feature companies, Microbiotica and Carrick Therapeutics, two exciting additions to CIC’s portfolio, are provided on page 7 and 9, respectively.

During the year CIC also completed: • follow-on investments into Undo, a software debugging tool supplier, Storm Therapeutics which is focused on the identification and development of small molecule drugs that target RNA-modifying enzyme, and Audio Analytics which provides intelligent sound detection software; and • initial investments into PervasID, developing long-range, accurate, passive radio frequency identification technology, Fluidic Analytics, commercialising a new technology for protein characterisation, Exvastat, repurposing an existing drug for the treatment of acute respiratory distress syndrome, and Z Factor, developing drugs to treat Alpha-1-Antitrypsin Deficiency.

In September 2016, Abcodia voluntarily suspended its US marketing activities for its ovarian cancer diagnostic product following an FDA Safety Communication recommending against using ovarian cancer screening. As a result, the historic investment in Abcodia was written down to zero. Notwithstanding the above, the Group continues to believe that there is intrinsic value in the business and contributed, alongside other institutional investors and Abcodia’s management team, to a £2.0 million secured loan, so that Abcodia can continue to execute its development and corporate options.

At 31 March 2017 CIC had committed, subject to milestones, £14.0 million (2016: £5.3 million) and following the year end CIC invested £8.5 million in Bicycle Therapeutics, a new portfolio company, so that the total capital currently committed to the portfolio is £72.2 million.

The portfolio now comprises 12 healthcare companies and eight technology companies and there are 11 companies with a direct University of Cambridge connection.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

12

PRAGMATIC PRINTING Electronics for a flexible world

PragmatIC Printing is a world leader in ultra-low cost flexible electronics, enabling the potential for trillions of “smart objects” that can sense and communicate with their environment.

PragmatIC’s platform delivers integrated circuits thinner than a human hair that can be easily embedded in any surface, introducing interactivity into a wide range of everyday items. At a fraction of the price of conventional silicon chips, PragmatIC’s products are being adopted by a growing base of multinational customers across diverse sectors including consumer goods, packaging, security printing, and mainstream electronics.

PragmatIC raised £18.0 million towards the end of 2016 with CIC contributing £6 million alongside existing investor ARM and new investor Avery Dennison. Fortune 500 company Avery Dennison has leading global positions in labelling and packaging, as well as radio frequency identification (RFID). The investment is expected to accelerate the mass deployment of intelligent packaging, with Avery Dennison leveraging the potential of PragmatIC’s flexible integrated circuits in its inlays portfolio.

PragmatIC has recently announced its plans to establish billion-unit production capacity by 2018.

“We’re excited about this collaboration with PragmatIC, which presents a promising opportunity to build on our high volume RFID inlay manufacturing capabilities.

With PragmatIC’s technology, there is the potential to extend the use of unique itemlevel digital identities to improve consumer experiences in a number of new segments, such as fast-moving consumer goods.”

Francisco Melo, Vice President and General Manager, Global RFID, Avery Dennison

£11.3m CARRYING VALUE 31 MARCH 2017

STRATEGIC REPORT

www.cicplc.co.uk

CONGENICA

13

Decoding genetic diseases

Congenica aggregates, analyses and interprets clinical and genetic data to provide improvements to the diagnosis and management of genetic diseases. Its founding technology and know-how was spun out from the Wellcome Trust Sanger Institute (WTSI).

Congenica has developed its differentiated genome analysis product, Sapientia™, to improve genome diagnostics and facilitate drug discovery.

In early 2017 CIC led a £10.0 million series B funding round that included strategically important investors BGI Genomics (BGI), a recognised global leader in genomics, and Healthlink Capital, another well-established China-based life-science investor. The funding will allow Congenica to ramp up the commercial roll out of its Sapientia™ clinical genome analysis platform in the UK and international markets.

In addition to investing, BGI Genomics and UniteGen, Healthlink’s associated clinical diagnostic lab, signed commercial contracts to use Sapientia™ to support their operations in China. These contracts represent Congenica’s first commercialisation in the territory and are consistent with Congenica’s international ambitions.

“The unrivalled integrated end-to-end solution provided by BGI’s powerful BGI Online platform and Congenica’s authoritative Sapientia™ software offers multiple advantages for our partners.”

Ning Li, Chief Development Officer at BGI Genomics

£8.2m CARRYING VALUE 31 MARCH 2017

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

14

INIVATA From liquid biopsies to clinical outcomes

Inivata is a clinical cancer genomics company that is harnessing the emerging potential of circulating tumour DNA (ctDNA) analysis to improve cancer management, bringing benefits for oncologists and their patients. Using a simple blood test, ctDNA analysis is a new tool for oncologists to monitor cancer, stratify patients, and assess individual response to treatment. This non-invasive approach – a liquid biopsy – offers a revolution in how cancer is monitored and tracked.

Inivata secured £31.5 million of funding in January 2016 with CIC committing £8.0 million alongside existing investors Imperial Innovations and Johnson & Johnson and new investor Woodford Investment Managers. Two of the three equal tranches have been invested to date and the third tranche is dependent on the achievement of certain development milestones.

“This Inivata test allowed us to rescue patients unable to undergo a biopsy. I foresee a future where liquid biopsy will not only be used as a diagnostic tool, but also as a dynamic test to prospectively monitor non-small cell lung cancer evolution.”

Benjamin Besse, Chairman of the Thoracic Unit, Medical Oncologist at Gustave Roussy

In early 2017 Inivata and Gustave Roussy, a premier European Cancer Centre announced, in the journal Annals of Oncology, positive results from a study using Inivata’s InVision™ liquid biopsy platform to guide cancer treatment.

The study is the first to be published on the prospective testing of the efficacy of a cancer treatment based on ctDNA results in a realworld setting.

£8.2m CARRYING VALUE 31 MARCH 2017

STRATEGIC REPORT

www.cicplc.co.uk

IMAGEN

15

Enabling the storage, management and retrieval of video content Video content, generated and used by consumers, corporates, and surveillance systems is growing rapidly. This creates management, delivery and archival problems because video files are large and complex; the content is highly unstructured; it needs managing; and content owners need to find ways to search, secure, share and make it reusable to create financial value from it. Imagen’s Enterprise Video Platform provides a highly scalable solution for managing and distributing these audiovisual assets.

In 2016 CIC invested a further £2.5 million in Imagen to develop and expand Imagen’s customer base. Imagen’s Enterprise Video Platform is used by a number of key customers such as Premier League, ATP World Tour, Channel 4, Endemol and IMG Media to manage, distribute and commercialise legacy and near-live content to global broadcast partners such as NBC, ESPN and Sky. The latest version of the platform, Imagen 5 which was released in February 2017, creates even more opportunities to generate revenue for content owners as well as preserving large libraries of media with bestin-class workflow and archiving tools.

“We wanted to rejuvenate our video management and distribution solution to enable our users to find the clips they need quickly and easily, with a consumer-focused interface. The new version of Imagen has given us all the tools we need to offer better search methods and a more userfriendly environment.”

Alex Rothwell, Head of Video, Press Association

£6.7m CARRYING VALUE 31 MARCH 2017

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

16

ORIGAMI ENERGY Using technology to shape energy

Origami Energy’s technology platform improves network efficiency, reduces costs and generates new income for its customers, whether energy users, generators or energy storage entities. It connects, monitors and controls distributed energy assets to improve utilisation of intermittent energy and to “shape” load on the grid.

In early 2016 Origami Energy raised £13.7 million to fund the move from pilot field trials to multi-site commercial deployments with a wide range of customers, focusing initially on industrial and commercial sites. The funding was also provided to enable Origami to build out an energy storage asset development capability.

Origami is currently exploring longer term strategic partnerships in parallel with the company’s near-term commercial focus on securing a growing portfolio of assets to provide flexible capacity for a range of contracts with National Grid and other flexibility users.

Some of these partnerships will provide additional capacity and channels to market, as well as access to new value streams.

“When you work with Origami Energy, you quickly realise that the competition aren’t a touch on what Origami Energy can offer in terms of their data, technology and industry knowledge.”

Mike Robertson-Lambert, Director of Engineering, iESCO

£5.3m CARRYING VALUE 31 MARCH 2017

STRATEGIC REPORT

www.cicplc.co.uk

CAMBRIDGE MEDICAL ROBOTICS

17

Developing the next-generation universal robotic system for minimal access surgery Cambridge Medical Robotics (CMR) is developing a next-generation universal robotic system for minimal access surgery. Versius®, CMR’s modular and light-weight system, uses state-of-the-art 3D high-definition imagery, bringing significantly enhanced flexibility and operating theatre workflow advantages . The system overcomes obstacles to widespread adoption of robotic minimal access surgery, namely robot size, instrument size, versatility, port placement, cost and ease of use, allowing the system to be highly utilised and ultimately cost-comparable to manual laparoscopic surgery.

In July 2016 CIC participated in a $20.3 million fundraising alongside ABB Technology Ventures, the strategic venture capital investment arm of ABB, and LGT Global Invest, the leading international private banking and asset management group. Following the successful start of clinical cadaveric trials, the funds are enabling CMR to continue on its path towards becoming a global medical device manufacturer. Specifically, the proceeds are being used to progress development and commercialisation of its medical robotic technology, and to expand the team in preparation for regulatory approval.

“ABB invests in CMR as the company has what looks to be the next-generation platform for minimal access surgery, a field with an enormous potential given today’s expanding needs in the healthcare industry.

Furthermore, CMR’s technologies can have even wider application as the robotic world moves toward fully versatile, collaborative robotic systems.”

Girish Nadkarni, President of ABB Technology Ventures

£4.0m CARRYING VALUE 31 MARCH 2017

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

18

FINANCIAL REVIEW

ROB SPRAWSON CHIEF FINANCIAL OFFICER

Statement of comprehensive income During the year ended 31 March 2017 the Group made a loss of £38,568 (2016: profit of £1,689,065).

The principal components of the loss are fair value changes on investments and administrative expenses as summarised below: 2016

£

£

4,444,183

3,276,353

(4,855,719)

(2,001,298)

Fair value changes in investments Administrative expenses

2017

55,104

Other operating income Finance income

317,864

(Loss)/profit and total comprehensive (expense)/income for the year

(38,568)

The Group measures fair value of its unquoted investments in line with International Private Equity and Venture Capital (“IPEV”) Valuation Guidelines. The IPEV valuation methodology used most commonly is the “price of recent investment” approach and this is the de facto starting position for any fair value estimate made by the Group. Using this approach, the Group considers that fair value estimates based entirely on observable market data are of greater reliability than those based on assumptions. Accordingly, where there has been a recent investment by a third party, the price of that investment will generally provide the basis of the valuation, subject to adjustment for any subsequent milestones or impairments.

The Group’s investment valuation policy is provided in note 3 to the consolidated financial statements.

During the year the Group recorded a net unrealised fair value gain of £4.5 million (2016: £3.3 million) resulting from aggregate fair value gains of £6.4 million arising on Audio Analytic, Congenica, Imagen, PragmatIC Printing and Undo and a £2.0 million write down in the value of Abcodia following publication of the FDA’s Safety Communication regarding ovarian cancer screening. Further details are provided in the Portfolio Review on pages 11 to 17.

88,725 325,285 1,689,065

Administrative expenses comprise:

Share based payments Employer’s NIC due on exercise of options Fundraising expenses Other administrative expenses

2017

2016

£

£

2,448,799

(40,747)

335,624

125,533

–

525,000

2,071,296

1,391,512

4,855,719

2,001,298

The significant charge for non-cash share based payments primarily arises from the share capital reorganisation, but also from the reallocation of previously lapsed options, with all such options being over shares held by the Employee Benefit Trust. The Group is liable for employer’s National Insurance Contributions due on the exercise of these options.

During the year ended 31 March 2017 the Group incurred £1.8 million of fundraising expenses that were charged directly against the share premium account. In the prior year fundraising costs were expensed through the income statement. Total fundraising costs of £2.3 million for the two years ending 31 March 2017 represented approximately 3% of funds raised in the same period.

Other administrative expenses, which primarily relate to people costs, facilities expenses and professional fees (other than fundraising expenses) have increased as a result of an expansion of the team and enhanced remuneration following the fundraising during the year.

STRATEGIC REPORT

www.cicplc.co.uk

19

Statement of financial position At 31 March 2017 the Group had net assets attributable to shareholders of £126.7 million (2016: £51.1 million), with the £75.2 million increase over the prior year being primarily attributable to the £75.0 million raised during the year. The Company had 167.2 million ordinary shares in issue at 31 March 2017 and therefore the net asset value per share was 75.8 pence (2016: 69.6 pence, adjusted for the share capital reorganisation completed immediately prior to the fundraising), a rise of 6.2 pence (9%) over the prior year.

2017

2016

£

£

Investments

58,163,591

24,720,999

Short-term deposits and cash

68,918,607

26,925,874

(420,957)

Other assets and liabilities (net) Net assets

Share capital and premium account Share based payments reserve Capital reserve Retained profit/(accumulated losses) Total equity The value of the Group’s holdings in portfolio companies increased to £58.2 million at 31 March 2017 (2016: £24.7 million) after net fair value gains of £4.54 million (2016: £3.3 million) and investments of £29.0 million (2016: £13.9 million). In addition, the Group had committed, subject to milestones, a further £14.0 million (2016: £5.3 million) at the end of the year. The Portfolio Review on pages 11 to 17 contains a detailed description of the Group’s portfolio including key developments and movements during the year.

126,661,241

51,085,806

50,066,575

50,057,200

3,340,082

891,283

8,498,427

4,054,244

64,756,157

(3,916,921)

126,661,241

51,085,806

The £75 million fundraising has substantially increased the funds available for investment, with short-term deposits and cash and cash equivalents together amounting to £68.9 million at 31 March 2017 (2016: £26.9 million), an increase of £42.0 million. The Group continues to place cash which is surplus to near-term investment and working capital requirements, on short-term deposits with financial institutions, in accordance with the Group’s treasury policy. The Group’s treasury policy is described in note 19 to the consolidated financial statements alongside details of the credit ratings of the Group’s cash and deposit counterparties.

INVESTMENTS AND FUTURE COMMITMENTS BY YEAR

CARRYING VALUE OF INVESTMENTS AT YEAR END

50

£ million

£ million

(561,067)

45 40 35

70

19

60 50

30

12

40

25 20

30

15

20

7

10 10

5 0

2014

2015

2016

2017

0

0

2014

2015

Cash invested

Cash invested

Future commitments at year end

Fair value changes

2016

Number of companies in portfolio

2017

Share capital reorganisation and capital reduction Immediately prior to the fundraising, the existing A and B ordinary shares of £1 each were sub-divided into 10,000 shares of £0.0001 each and were subsequently redesignated into ordinary and deferred shares, with the former having equal rights and votes and the latter carrying no votes or rights. Further details are provided in note 17 to the consolidated financial statements.

The Company issued 93.8 million ordinary shares at £0.80 per share to raise £75 million which, after the deduction of fundraising expenses of £1.8 million, resulted in a net increase in the share premium account of £73.2 million. The Company then undertook a courtapproved capital reduction, in accordance with the Companies Act 2006, to cancel the share premium account created in connection with the fundraising and thus provide the Company with distributable reserves. Notwithstanding the above, the Company’s intention for the foreseeable future is to retain earnings to finance growth and not to pay dividends.

Taxation The Group’s business model seeks to deliver long-term value to its stakeholders by investing, via its Jersey based subsidiary, in rapidly growing intellectual property rich companies.

The Group primarily seeks to generate capital gains from its holdings in these companies over the longer term but has historically made annual net operating losses from its operations from a UK tax perspective.

ROB SPRAWSON CHIEF FINANCIAL OFFICER 13 June 2017

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

CORPORATE GOVERNANCE AND RISK MANAGEMENT FRAMEWORK The Board is focused on becoming the leading provider of finance to emerging high technology businesses arising from the University of Cambridge and the Cambridge Cluster and is accountable to the Company’s shareholders for its corporate governance and risk management framework as summarised below.

BOARD

Schedule of matters reserved for the Board Nomination Committee

Audit and Risk Management Committee

Investment activities

Other operational matters

Investment Committee

Executive Directors

Legal advisers Financial advisers Independent assurance

Advisory Panel Legal advisers Technical consultants

KEY:

Remuneration Committee

STRATEGIC

The Board The Board consists of the Non-executive Chairman, two Executive Directors and five Non-executive Directors, three of whom are considered by the Board to be independent (Clive Birch, Adam Glinsman and Mike Muller). The biographies of the Directors are provided on pages 24 to 25.

The Board seeks to provide entrepreneurial leadership, albeit in compliance with its corporate governance and risk management framework, to help identify and invest in rapidly growing intellectual property rich companies that have the potential to grow into global businesses. The Board acknowledges that nurturing great ideas into global businesses can take a long time and as such, presents certain strategic and operational challenges.

The Board meets at least six times a year to review, formulate and approve the Company’s strategy, budgets, corporate actions and oversee the Company’s progress towards its goals. The Board recognises that to achieve its ambition it needs to maintain and periodically review its policy and decision-making framework whilst: ensuring that the necessary financial and human resources are in place to implement its strategy; and regularly monitoring the Group’s performance against key financial and non-financial indicators.

The Directors are responsible for: promoting the long-term success of the Group, taking into account the interests of its shareholders and other key stakeholders; ensuring that obligations to shareholders and other stakeholders are understood and met; and maintaining a satisfactory dialogue with shareholders.

OPERATIONAL

INFORMATION, ANALYSIS AND RECOMMENDATIONS

ENTREPRENEURIAL LEADERSHIP AND MONITORING PERFORMANCE

20

EXTERNAL

All Directors are equally accountable to the Group’s shareholders for the proper stewardship of its affairs and the long-term success of the Group.

The responsibility of the Directors is collective, taking into account their respective roles as Executive Directors and Non-executive Directors.

The Executive Directors are directly responsible for developing and implementing strategy and running the day-to-day operations. The Non-executive Directors are responsible for constructively challenging and contributing to proposals on strategy, scrutinising the performance of management, determining levels of remuneration and for succession planning for the Executive Directors. The Non-executive Directors must also satisfy themselves as to the integrity of financial information and that financial controls and risk management systems are robust and comprehensive.

The Board has adopted a schedule of matters that are significant to the Group, due to their strategic, financial or reputational implications, and reserved for its decision and approval. Otherwise the Board has delegated: • investment activities to the Investment Committee, which comprises the Executive Directors and investment directors of the Company, although Directors are provided with all briefing papers and may attend meetings; and • other operational matters to the Executive Directors.

CIC maintains an ongoing dialogue with its shareholders, with the Executive Directors offering them regular updates, usually at least following publication of full and half year results. The remaining Board members are happy to discuss corporate governance and other matters with shareholders as and when required.

GOVERNANCE

www.cicplc.co.uk

21

Board Committees

Internal control

The Board has established an Audit and Risk Management Committee, a Remuneration Committee and a Nomination Committee, each with formally delegated duties and responsibilities and written terms of reference as summarised below. From time to time, separate committees may be established by the Board to consider specific issues as and when the need arises.

The Board is responsible for establishing and monitoring internal control systems and for reviewing the effectiveness of these systems. The Board views the effective operation of a rigorous system of internal control as critical to the success of the Group. It recognises that such systems can provide only reasonable and not absolute assurance against material misstatement or loss.

Audit and Risk Management Committee

The key elements of the Group’s internal control system, all of which have been in place during the financial year and up to the date of these financial statements were approved, are summarised below. In addition, the Group’s financial risk management objectives and policies and exposure to market, liquidity and credit risk are provided in note 19 of the consolidated financial statements.

The Audit and Risk Management Committee is chaired by Clive Birch and its other member is Edward Benthall. The Committee is expected to meet formally at least twice a year and otherwise as required. It is responsible for ensuring that the financial performance of the Company is properly reported on and reviewed and its role includes monitoring the integrity of the financial statements of the Company, reviewing internal control and risk management systems, reviewing any changes to accounting policies, reviewing and monitoring the extent of the non-audit services undertaken by external auditors and advising on the appointment of external auditors.

Nomination Committee The Nomination Committee comprises Edward Benthall (chair of the Committee), Duncan Maskell and Mike Muller. The Committee is expected to meet when appropriate, but at least once a year, to consider the structure, size and composition of the Board, retirements and appointments of additional and replacement directors and make appropriate recommendations to the Board.

Remuneration Committee The Remuneration Committee is chaired by Clive Birch and its other members are Edward Benthall and Adam Glinsman. The Committee is expected to meet not less than twice a year and at such other times as required. It is responsible for determining, within the agreed terms of reference, the Company’s policy on the remuneration packages of the Company’s Chief Executive Officer, Chairman, and the Executive Directors, the company secretary, senior managers and such other members of the executive management as it is designated to consider.

The Committee also has the responsibility for determining, within the terms of the Company’s policy and in consultation with the Chairman of the Board and/or the Chief Executive Officer, the total individual remuneration package for each Executive Director, the company secretary and other designated senior executives and such other members of the executive management as it is designated to consider (including bonuses, incentive payments and share options or other share awards).

The remuneration of Non-executive Directors is a matter for the Chairman and Executive Directors of the Board. No Director or manager is allowed to partake in any discussions as to their own remuneration.

Control environment and procedures The Group has a clear operational structure with defined responsibilities and accountabilities and expects its employees to adopt the highest values surrounding quality, integrity and ethics. The Group has detailed written policies and procedures in place, including a formal whistleblowing policy, which has been communicated to employees, that sets out the process to follow if an employee feels that it is appropriate to make a disclosure.

Identification and evaluation of principal risks and uncertainties The operations of the Group and the implementation of its strategy and objectives are subject to a number of key risks and uncertainties as set out on pages 22 to 23. The Board ensures that appropriate controls and procedures are in place to monitor and, where possible, mitigate these risks and formally reviews them at least once a year.

The Board reviews the Group’s equity investments on a quarterly basis, although the performance of specific investments may be reviewed more frequently if there are likely to be any strategic, financial or reputational implications.

Information and financial reporting systems The Group has systems and controls in place to ensure adequate accounting records are maintained and transactions are recorded accurately and fairly to permit the preparation of the financial statements in accordance with IFRS. The Board approves the Group’s annual budget each year and reviews the actual performance in comparison to the budget as presented in the management accounts each month.

Internal audit The Group does not maintain a separate internal audit function due to the size of the Group and the fact that the Executive Directors exercise close control over operations. Notwithstanding the above, the Audit Committee considers the need for an internal audit function each year.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

22

CORPORATE GOVERNANCE AND RISK MANAGEMENT FRAMEWORK Summary of principal risks, potential impact and mitigation A summary of the principal risks affecting the Group and the steps taken to manage each risk is set out below.

1 The Group may only invest in companies that have a connection to the University of Cambridge or the Cambridge Cluster. It may be difficult for the Group to access attractive opportunities that meet these criteria

RISK

IMPACT

MITIGATION

The Group may not be aware of potential opportunities because of an ineffective working relationship with the University of Cambridge, Cambridge Enterprise or the Cambridge Cluster

The quality and quantity of investment opportunities may diminish which would have an adverse effect on the value and long-term growth prospects of the Group

The Group has a Memorandum of Agreement with Cambridge Enterprise, the commercialisation arm of the University, which describes the Group’s rights of access to University of Cambridge spinouts and its working relationship with Cambridge Enterprise

The Group may not be included in funding rounds because the academics, entrepreneurs and companies concerned may choose to accept funding from third parties

The University of Cambridge is represented on the Group’s Board and Advisory Panel and the Group’s office is co-located with Cambridge Enterprise. In addition, every employee works, lives and socialises in the Cambridge Cluster amongst the resident academics and entrepreneurs

Competition for investment opportunities may increase, thus reducing the number of opportunities available The University and Cluster may not generate companies that are sufficiently attractive to warrant investment

The Group’s Board, Advisory Panel and employees are actively engaged in sourcing new opportunities from key organisations and contacts within the Cambridge Cluster

2 The Group may over or underestimate the opportunity and/or future potential of the investee company RISK

IMPACT

MITIGATION

The Group may not identify and acquire appropriate investments

The Group may pass on credible investment opportunities and portfolio companies may not generate a return, both of which would have an adverse effect on the value and long-term growth prospects of the Group

The Group’s Board and employees have significant experience in evaluating investment opportunities and each investment is subject to a rigorous due diligence and approval process

The Group’s assessment of an opportunity may not accurately reflect the actual value or eventual outcome of the opportunity

3 The Group’s portfolio companies may not fulfil their potential RISK

IMPACT

MITIGATION

There is no guarantee that intellectual property protection is obtained, or effectively enforced, by investee companies

The Group’s investments may not flourish as anticipated, and indeed may fail, which would have an adverse impact on the value and longterm growth prospects of the Group

The Group’s investment team have significant experience in developing and growing earlystage technology companies to significant value

The technology and intellectual property held by portfolio companies may be rendered obsolete by, for example: • other technological advances; • competing products; • changes in market/demand; and/or • evolving industry standards Portfolio companies may fail to bring products to market on a timely basis and in line with market requirements and expectations Portfolio companies may not be able to attract sufficient future investment to achieve their business objectives

Under-performance and failure of investee companies may make it more difficult for the investee company to raise additional capital

The Group usually requires, as a condition of investment, representation on the board of a portfolio company to help identify and resolve critical issues promptly The Group has a significant cash balance which it invests diligently to help minimise the Group’s exposure to loss The Group maintains close relationships with a variety of strategic and financial co-investors that focus on differing stages of development and investment time-frames

GOVERNANCE

www.cicplc.co.uk

4 The Group may not be able to realise its investments RISK

IMPACT

MITIGATION

There is no guarantee that the investments that the Group has made will generate gains or income for the Group

Portfolio companies may not develop and mature in line with the Group’s expectations

The Group usually requires, as a condition of investment, representation on the board of a portfolio company to help identify and resolve critical issues promptly and, when appropriate, to encourage and support realisations

The Group typically holds minority stakes so may not be able to exercise its influence over investee companies, including in the sale or transfer of its holding in that investment

The Group may be forced to exit its investment, may be unable to realise its investment or suffer dilution of its interest, all of which may have an adverse impact on the value and long-term growth prospects of the Group

The Group may not be able to realise some of its investments for a number of years

5 The Group’s ability to achieve its objectives is dependent on attracting and retaining key personnel within the Group and its investee companies

RISK

IMPACT

MITIGATION

The ability to attract and retain key individuals is often critical to successful commercialisation of intellectual property

A loss of key personnel or a delay in recruiting or an inability to recruit and integrate a suitable replacement may have an adverse impact on the value and long-term growth prospects of the Group

The Group compares executive and staff remuneration of its, and its portfolio companies, to relevant peer groups

Key personnel, including the founders, may leave an investee company if, for example, they are not incentivised appropriately Investee companies may not have the financial resources to offer competitively attractive salary and other incentivisation packages

The Group seeks, and encourages its portfolio companies to seek, to offer balanced incentive packages comprising a mix of salary, benefits and performance based incentives The Group encourages staff development through internal coaching and external training and performs regular objective setting and appraisal

6 The Group has limited capital and is exposed to portfolio and liquidity risk RISK

IMPACT

MITIGATION

The Group will need additional capital to fund the development and scale-up of portfolio companies to allow them to fulfil their potential

The failure of portfolio companies may make it more difficult for the Group to raise additional capital

The Group has a significant cash balance that it can deploy in attractive portfolio companies

A significant proportion of the overall value of the Group may reside within a small proportion of the Group’s investee companies at any one time

The Group’s interest in portfolio companies may be diluted due to its inability to participate in funding rounds

The Group may not manage its liquidity requirements sufficiently

The Group’s overall performance may become overly dependent on a small number of investee companies Liquid funds may not be available when required for investment

The aggregate investment in any investee company is limited to a percentage of net assets at the time of making, or committing to, an investment. In addition, the Group considers portfolio risk when considering new investment opportunities The Group has a Treasury Policy that is periodically reviewed to ensure that it is fit for purpose The Group monitors the future funding requirements of its portfolio companies and the aggregate requirement helps to determine the Group’s funding strategy

7 Changes in legislation, government policy and economic environment, including but not limited to the impact of Brexit, may have an adverse effect on the Group and its investee companies

RISK

IMPACT

MITIGATION

Such changes may impact: • Cambridge Enterprise and/or the University of Cambridge directly; • the quantum of research funding made available to research institutions which may impact on the quality and quantity of their research output; • the resources available to generate intellectual property and investment opportunities; • the availability of tax credits and other incentives for research and development; • the terms on which monies are provided to generate intellectual property; and • the way in which intellectual property can be commercialised

The quality and quantity of investment opportunities may diminish and the Group’s investments may not flourish as anticipated, and indeed may fail, all of which would have an adverse impact on the value and long-term growth prospects of the Group

The Group utilises professional advisers as appropriate to support its monitoring of, and response to, capital market conditions and legislative changes

The success of those portfolio companies which require significant funding may be influenced by the market’s appetite for investment in earlystage companies, which may not be sufficient A downturn in the UK’s economic health may have an adverse effect on trading conditions of, and availability of capital for, portfolio companies

The Group prepares an annual budget, which is reviewed and revised six months into the year, and monitors actual performance against these budgets The Group monitors the future funding requirements, trading performance and development progress of its portfolio companies

23

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

24

BOARD OF DIRECTORS EDWARD BENTHALL

A

N

R

NON-EXECUTIVE CHAIRMAN Edward Benthall has been involved with CIC since its inception, having been Chairman of Cambridge Enterprise Limited between 2010 and 2014, and before that he was Chairman of the Campaign Council for the University of Cambridge’s 800th Anniversary Campaign. Edward has over 20 years of experience in UK private equity gained at Charterhouse Capital Partners, a leading UK private equity firm. During his tenure, Charterhouse raised six funds totalling around €13 billion and realised over 40 investments, achieving a gross internal return rate in excess of 40%. Edward is a Chartered Accountant and a graduate of Magdalene College, University of Cambridge.

VICTOR CHRISTOU CHIEF EXECUTIVE OFFICER Victor Christou has considerable experience as both an entrepreneur and an investor. Immediately prior to CIC, Victor was at pan-European venture capital investors Wellington Partners, where he was a Venture Partner in the Tech Team. Before that he founded Opsys, an organic electronics business focusing on OLEDs which was sold to Cambridge Display Technology, Inc. Victor has a BSc and PhD in Chemistry from Imperial College, London and was a Sloan Fellow in the Graduate School of Business at Stanford University. In the early stages of his career, he was an academic at the University of California at Berkeley and then at the University of Oxford.

ROB SPRAWSON CHIEF FINANCIAL OFFICER AND COMPANY SECRETARY Rob Sprawson joined CIC as Chief Financial Officer and Company Secretary on 1 September 2015 and was appointed as a Director on 22 April 2016. He has more than 20 years of professional and commercial experience providing strategic, financial and corporate finance advice to boards and shareholders of both private and publicly quoted companies, especially in the pharmaceutical, biotechnology, technology and technology consulting industries in the Cambridge Cluster and further afield. Rob is a Fellow of the Institute of Chartered Accountants in England and Wales and holds a BA (Hons) in Accounting and Financial Analysis from Newcastle University.

CLIVE BIRCH

A

R

INDEPENDENT NON-EXECUTIVE DIRECTOR Clive Birch was partner in charge of PwC’s Cambridge office for 15 years to 2010, during which time he was responsible for all aspects of that business. The majority of Clive’s clients were technology and healthcare companies and, as the partner responsible for them, he not only looked after their audit needs but also helped them deal with the rigours of setting up systems and processes, dealing with outside stakeholders and corporate governance. Clive was also part of the teams involved in fundraising and listing companies on various markets.

GOVERNANCE

www.cicplc.co.uk

25

ADAM GLINSMAN

R

INDEPENDENT NON-EXECUTIVE DIRECTOR Adam Glinsman spent 15 years focusing on equities in capital markets roles at investment banks before taking a sabbatical to complete an MPhil in International Relations at the University of Cambridge. He subsequently became COO and Partner at Lansdowne Partners, the fundamental equity hedge fund firm. Since leaving Lansdowne in 2009, Adam has been actively involved in several advisory roles, including advising on investments emanating from the commercialisation of UK university intellectual property and the evolution of the University of Cambridge’s own IP commercialisation programme. Adam is now Co-Head of GAM Systematic having been CEO of Cantab Capital Partners, which became part of GAM Systematic in October 2016.

MIKE MULLER

N

INDEPENDENT NON-EXECUTIVE DIRECTOR Mike Muller was appointed Chief Technology Officer of ARM in October 2000 and joined the board of directors in 2001. Mike was one of the founding members of ARM and has extensive knowledge within marketing and business development, having worked as vice president for both divisions at ARM. Before joining ARM, Mike worked for Orbis Computers and had the responsibility for hardware strategy and development of portable products at Acorn Computers. In July 2012, he became director of Intelligent Energy Holdings PLC and Infinite Energy Inc. Mike has a BA (Hons) in Computer Science from the University of Cambridge.

IAN LESLIE NON-EXECUTIVE DIRECTOR Ian Leslie is a Professor of Computer Science at the University of Cambridge Computer Laboratory with interests in operating systems, distributed systems and networks. Ian was formerly Head of the Computer Laboratory and Pro-Vice Chancellor for Research for the University, with responsibility for coordinating research policy, providing academic oversight of grants and contracts and interacting with both industrial sponsors and the UK Government. Ian is a Fellow of Christ’s College.

DUNCAN MASKELL

N

NON-EXECUTIVE DIRECTOR Duncan Maskell is the University of Cambridge’s Senior Pro-Vice Chancellor (Planning and Resources), the Marks & Spencer Professor of Farm Animal Health, Food Science and Food Safety at the Department of Veterinary Medicine and is a Fellow of Wolfson College. Duncan is a non-executive director of Genus plc, a FTSE 250 animal breeding company, was a co-founder of Arrow Therapeutics, Discuva Limited and Bactevo Limited, and has been a consultant to a number of other businesses.

Duncan has spent his research career working on bacterial infectious diseases in humans and other animals and previously worked for Wellcome Biotech, before taking up positions at the University of Oxford and Imperial College, London.

KEY:

A AUDIT AND RISK MANAGEMENT COMMITTEE

N NOMINATION COMMITTEE

R REMUNERATION COMMITTEE

CHAIRMAN

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

26

DIRECTORS’ REPORT

Report of the Directors The Directors present their report together with the audited financial statements for the year ended 31 March 2017. The objectives and future developments of the Company are addressed within the Strategic Report.

Corporate governance and risk management framework Information on the Group’s corporate governance and risk management framework is provided on pages 20 to 23.

Results and dividends During the year, the Group made a loss after tax for the year ended 31 March 2017 of £38,568 (2016: profit of £1,689,065). The Directors do not recommend the payment of a dividend (2016: £nil).

Directors The Directors who served during the year and up to the date of signing the financial statements, except as indicated below, were as follows: Edward Benthall Victor Christou

Non-executive Chairman Chief Executive Officer

Rob Sprawson Clive Birch Adam Glinsman Mike Muller Ian Leslie Duncan Maskell Tony Raven

Chief Financial Officer and Company Secretary Independent Non-executive Director Independent Non-executive Director Independent Non-executive Director Non-executive Director Non-executive Director Non-executive Director

Appointed 22 April 2016

Resigned 5 August 2016

Directors’ emoluments Directors’ emoluments are disclosed in note 7 of the consolidated financial statements.

Directors’ interests in shares The Directors who held office during the year ended 31 March 2017 had the following beneficial interests in the ordinary shares of the Company: At 31 March 2017

At 31 March 2016

Number of ordinary shares

% of issued share capital

Number of ordinary shares

% of issued share capital

Edward Benthall

361,250

0.17%

80,000

0.16%

Adam Glinsman

168,750

0.10%

–

–

The Directors who held office during the year ended 31 March 2017 had the following beneficial interests in options over the ordinary shares of the Company: Exercise price (pence)

At 31 March 2016

Granted during the year

Issued during the year1

At 31 March 2017

Victor Christou

250,000

179,371

1,006,338

1,435,709

0.17

Rob Sprawson

–

8,741

20,487

29,228

0.17

1

on the sub-division and redesignation of A ordinary shares, see note 17 of the consolidated financial statements for further information

www.cicplc.co.uk

GOVERNANCE

27

Directors’ indemnities As detailed in the Company’s Articles of Association, indemnities are in force between the Company and each of its Directors under which the Company has agreed to indemnify each Director, to the extent permitted by law, in respect of certain liabilities incurred as a result of carrying out his/ her duties as a Director of the Company. The Company has Directors’ and Officers’ Liability Insurance and it is the intention to maintain such a policy in the future.

Substantial shareholders As at 13 June 2017, the Company had the following shareholders with interests of 3% or more in its ordinary share capital. The ordinary shares carry equal voting rights, equal rights to income and distributions of assets on liquidation, or otherwise, and no right to fixed income. Other than as shown below, so far as the Company (and its Directors) are aware, no other person holds or is beneficially interested in a disclosable interest in the Company.

Shareholder

Cambridge University as trustee of the Cambridge University Endowment Fund The Chancellor, Masters and Scholars of the University of Cambridge Lansdowne Partners Legal & General Oman Investment Fund Woodford Investment Management Lisbet Rausing Invesco IP Group ARM

%

20.0 13.5 13.5 7.5 7.5 7.5 6.7 6.0 5.0 3.1

Political donations The Group did not make any political donations during the year (2016: £nil).

Post balance sheet events Material events occurring since the balance sheet date are disclosed in the Strategic Report and in note 21 to the consolidated financial statements.

Disclosure of information to the independent auditors In accordance with Section 418 of the Companies Act 2006, each Director in office at the date the Directors’ report is approved confirms that: • so far as the Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and • he has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

Appointment of auditors A resolution to reappoint PricewaterhouseCoopers LLP, together with a resolution to authorise the Directors to determine their remuneration, will be proposed at the forthcoming Annual General Meeting.

Going concern The Directors confirm that they have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future and accordingly they continue to adopt the going concern basis in preparing the financial statements.

Approved by the Board of Directors and signed on its behalf by

EDWARD BENTHALL CHAIRMAN 13 June 2017

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

28

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 Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law).

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 and Company for that period. In preparing the financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • state whether applicable IFRSs as adopted by the European Union have been followed for the Group financial statements and United Kingdom Accounting Standards, comprising FRS 102, have been followed for the Company financial statements, subject to any material departures disclosed and explained in the financial statements; • make judgements and accounting estimates that are reasonable and prudent; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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

In the case of each Director in office at the date the Directors’ Report is approved: • so far as the Director is aware, there is no relevant audit information of which the Group and Company’s auditors are unaware; and • they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Group and Company’s auditors are aware of that information.

Approved by the Board of Directors and signed on its behalf by

EDWARD BENTHALL CHAIRMAN 13 June 2017

www.cicplc.co.uk

FINANCIAL STATEMENTS

INDEPENDENT AUDITORS’ REPORT

to the members of Cambridge Innovation Capital plc

Report on the Group financial statements Our opinion In our opinion, Cambridge Innovation Capital plc’s Group financial statements (the “financial statements”): • give a true and fair view of the state of the Group’s affairs as at 31 March 2017 and of its loss and cash flows for the year then ended; • have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union; and • have been prepared in accordance with the requirements of the Companies Act 2006.

What we have audited The financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), comprise: • the Consolidated Statement of Comprehensive Income for the year then ended; • the Consolidated Statement of Financial Position as at 31 March 2017; • the Consolidated Statement of Cash Flows for the year then ended; • the Consolidated Statement of Changes in Equity for the year then ended; and • the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as adopted by the European Union, and applicable law.

In applying the financial reporting framework, the Directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.

Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

In addition, in light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we are required to report if we have identified any material misstatements in the Strategic Report and the Directors’ Report. We have nothing to report in this respect.

Other matters on which we are required to report by exception Adequacy of information and explanations received Under the Companies Act 2006 we are required to report to you if, in our opinion, we have not received all the information and explanations we require for our audit. We have no exceptions to report arising from this responsibility.

Directors’ remuneration Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

Responsibilities for the financial statements and the audit Our responsibilities and those of the Directors As explained more fully in the Statement of Directors’ Responsibilities set out on page 28, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

29

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

30

INDEPENDENT AUDITORS’ REPORT

to the members of Cambridge Innovation Capital plc

What an audit of financial statements involves We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: • whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; • the reasonableness of significant accounting estimates made by the Directors; and • the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. With respect to the Strategic Report and Directors’ Report, we consider whether those reports include the disclosures required by applicable legal requirements.

Other matter We have reported separately on the Company financial statements of Cambridge Innovation Capital plc for the year ended 31 March 2017.

SIMON ORMISTON (SENIOR STATUTORY AUDITOR) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Cambridge 13 June 2017

FINANCIAL STATEMENTS

www.cicplc.co.uk

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

31

for the year ended 31 March 2017

Year ended 31 March Note

Fair value changes in investments Administrative expenses

2017 £

2016 £

4,444,183

3,276,353

(4,855,719)

(2,001,298)

55,104

Other operating income Operating (loss)/profit

6

(356,432)

Finance income

9

317,864 (38,568)

(Loss)/profit on ordinary activities before taxation Tax on (loss)/profit on ordinary activities

10

(Loss)/profit and total comprehensive (expense)/income for the year attributable to the equity holders (Loss)/profit per share

– (38,568)

88,725 1,363,780 325,285 1,689,065 – 1,689,065

11

Basic

(0.000)

0.024

Diluted

(0.000)

0.023

All activities derive from continuing operations.

The notes on pages 35 to 47 are an integral part of these financial statements.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

32

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31 March 2017

At 31 March Note

2017 ÂŁ

2016 ÂŁ

Property, plant and equipment

12

120,996

63,481

Investments

13

58,163,591

24,720,999

58,284,587

24,784,480

Assets Non-current assets

Current assets 165,157

166,294

Short-term deposits

11,400,000

16,605,007

Cash and cash equivalents

57,518,607

10,320,867

69,083,764

27,092,168

127,368,351

51,876,648

Trade and other receivables

14

Total assets Liabilities Current liabilities Trade and other payables

15

Net assets

(707,110)

(790,842)

126,661,241

51,085,806

50,009,375

50,000,000

57,200

57,200

Equity Issued share capital Share premium account

17

Share based payments reserve

3,340,082

891,283

Capital reserve

8,498,427

4,054,244

64,756,157

(3,916,921)

126,661,241

51,085,806

Retained profit/(accumulated losses) Total equity The notes on pages 35 to 47 are an integral part of these financial statements.

The financial statements on pages 31 to 47 were authorised for issue by the Board of Directors on 13 June 2017 and were signed on its behalf by

ROB SPRAWSON CHIEF FINANCIAL OFFICER

FINANCIAL STATEMENTS

www.cicplc.co.uk

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

33

for the year ended 31 March 2017

Issued share capital £

Share premium account £

Share based payments reserve £

Capital reserve £

50,000,000

57,200

932,030

777,891

Profit for the year and total comprehensive income

–

–

–

Fair value changes in investments

–

–

–

At 1 April 2015

Retained profit/ (accumulated losses) £

Total equity £

(2,329,633)

49,437,488

–

1,689,065

1,689,065

3,276,353

(3,276,353)

–

Transactions with owners

Share based payments

–

–

(40,747)

–

–

(40,747)

50,000,000

57,200

891,283

4,054,244

(3,916,921)

51,085,806

Loss for the year and total comprehensive expense

–

–

–

–

(38,568)

(38,568)

Fair value changes in investments

–

–

–

4,444,183

(4,444,183)

–

9,375

73,155,829

–

–

–

73,165,204

–

–

73,155,829

–

At 31 March 2016

Transactions with owners

Share capital issued (net of expenses)

Share premium account reduction

Share based payments

At 31 March 2017

– (73,155,829) – 50,009,375

–

2,448,799

–

–

2,448,799

57,200

3,340,082

8,498,427

64,756,157

126,661,241

The notes on pages 35 to 47 are an integral part of these financial statements.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

34

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 31 March 2017

Year ended 31 March Note

2017 £

2016 £

Cash flows from operating activities (356,432)

1,363,780

13

(4,444,183)

(3,276,353)

8

2,448,799

(40,747)

12

35,261

4,287

Operating (loss)/profit Adjustments for: Fair value changes in investments Share based payments Depreciation Increase/(decrease) in trade and other receivables (Decrease)/increase in trade and other payables Net cash used in operating activities

24,762

(70,446)

(83,732)

538,510

(2,375,525)

(1,480,969)

Cash flows from investing activities Purchase of property, plant and equipment

12

(92,776)

(61,145)

Purchase of investments

13

(28,998,409)

(13,916,156)

5,205,007

6,519,922

Movement in short-term deposits Treasury investment returns and interest received Net cash used in investing activities

294,239 (23,591,939)

354,249 (7,103,130)

Cash flows from financing activities Net proceeds from issue of ordinary shares

73,165,204

–

Net cash generated from financing activities

73,165,204

–

Net change in cash and cash equivalents

47,197,740

(8,584,099)

Cash and cash equivalents at beginning of the year

10,320,867

18,904,966

Cash and cash equivalents at end of the year

57,518,607

10,320,867

The notes on pages 35 to 47 are an integral part of these financial statements.

www.cicplc.co.uk

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 March 2017

1 GENERAL INFORMATION Cambridge Innovation Capital plc is incorporated and domiciled in the UK, the address of its registered office being Hauser Forum, 3 Charles Babbage Road, Cambridge, CB3 0GT. Cambridge Innovation Capital plc and its wholly owned subsidiary, Cambridge Innovation Capital (Jersey) Limited form “the Group” and the Group’s consolidated financial statements presented herein are in sterling. The Group is an investment fund that invests in rapidly growing intellectual property rich companies based in and around Cambridge and/or with a connection to the University of Cambridge.

2 BASIS OF PREPARATION The financial statements have been prepared: • on a going concern basis and under the historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities at fair value through the income statement as required by International Accounting Standard (“IAS”) 39 “Financial Instruments: Recognition and Measurement”; and • in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”), interpretations of the IFRS Interpretations Committee (formerly the IFRIC) and the Companies Act 2006 applicable to companies reporting under IFRS. The principal accounting policies adopted in the preparation of these financial statements have been consistently applied to all the years presented, unless otherwise stated.

The preparation of the financial statements in conformity with IFRS as endorsed by the EU requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 4.

The Directors have performed a detailed assessment of the amendment to IFRS 10, “Consolidated Financial Statements”, which has been adopted for the first time during the year, and determined that the Group may continue to prepare consolidated financial statements including its subsidiary, Cambridge Innovation Capital (Jersey) Limited.

The Directors considered whether Cambridge Innovation Capital (Jersey) Limited meets the criteria to be treated as an investment entity. Cambridge Innovation Capital (Jersey) Limited, as a wholly owned subsidiary of Cambridge Innovation Capital plc, holds a portfolio of investments and provides services to its parent in relation to its parent’s core investment activities. Cambridge Innovation Capital (Jersey) Limited is considered to provide investment management services as an extension of Cambridge Innovation Capital plc and not as an investment entity in its own right. As a result, the Directors have determined that Cambridge Innovation Capital (Jersey) Limited should be consolidated by Cambridge Innovation Capital plc.

If Cambridge Innovation Capital (Jersey) Limited had been assessed as being an investment entity, it would not have been consolidated and the Group would not have been able to produce consolidated financial statements. Instead it would have measured its investment in Cambridge Innovation Capital (Jersey) Limited at fair value through profit or loss.

The following new standards have not been applied in these financial statements: • IFRS 9, “Financial Instruments”, effective 1 January 2018: • IFRS 15, “Revenue from contracts with customers”, effective 1 January 2017; and • IFRS 16, “Leases”, effective 1 January 2019.

The Directors do not anticipate that the adoption of these standards, where relevant, in future years will have a material impact on the Group’s financial statements.

3 SIGNIFICANT ACCOUNTING POLICIES Basis of consolidation

The consolidated financial statements include the financial information of the Company and its subsidiary undertaking. The financial information of the subsidiary undertaking is prepared for the same reporting period as the Company, using consistent accounting policies. Subsidiary undertakings are consolidated from the date on which control is transferred to the Group and would cease to be consolidated from the date on which control is transferred out of the Group. Intra-group transactions, profits and balances are eliminated in full on consolidation.

Segmental reporting The Chief Operating Decision Maker has been identified as the Company’s Board of Directors. The Board are of the opinion that the Group operates one operating segment, that of investing in technology and healthcare businesses. The Board assesses the performance of the operating segment using financial information which is measured and presented in a manner consistent with that in the financial statements. All of the assets of the Group are related to that operating segment and are held in either the UK or Jersey, a British Crown dependency.

35

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

36

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 March 2017

Property, plant and equipment Property, plant and equipment is stated at cost (or deemed cost) less accumulated depreciation and accumulated impairment losses. Cost includes the original purchase price and costs directly attributable to bringing the asset to its working condition for its intended use.

Depreciation on assets is calculated, using the straight-line method, to allocate the cost to their residual values over their estimated useful lives, as follows: • Leasehold improvements

5 years

• Furniture and equipment

3 years

• Computer equipment

3 years

Investments The Group classifies all its equity investments which are not subsidiaries as financial assets at fair value through profit or loss. These financial assets are initially recognised at fair value, which is normally the transaction price, and subsequently carried at fair value with any changes in fair value recognised in profit or loss in the period in which they arise.

The Group measures the fair value of its equity investments in line with International Private Equity and Venture Capital (“IPEV”) Valuation Guidelines.

Given that the Group’s investments are in unquoted companies, where there are often no current earnings, no short-term future earnings or positive cash flows, it is often difficult to make reliable cash flow forecasts. In such circumstances, the IPEV valuation methodology used most commonly is the “price of recent investment” approach and this is the de facto starting position for any fair value estimate made by the Group. Using this approach, the Group considers that fair value estimates based entirely on observable market data are of greater reliability than those based on assumptions.

Accordingly, where there has been a recent investment by a third party, the price of that investment will generally provide the basis of the valuation, subject to adjustment for any subsequent milestones or impairments.

Where the Group considers that the price of recent investment, unadjusted, is no longer relevant and there are limited or no comparable companies or transactions from which to infer value, the Group carries out an enhanced assessment based on milestone analysis and industry and sector analysis.

When appropriate, the Group may consider the use of external advisers to assess the reasonableness of any change in fair value estimated by the Group.

The following factors are considered in the assessment of the fair value of any investment: • where the investment was made recently, its cost will generally provide the basis of fair value. The length of period for which it remains appropriate to use the price of a recent investment depends on the specific circumstances of the investment and the stability of the external environment; • the price of any recent third party investment; and • where the equity structure of a portfolio company involves different class rights in a sale or liquidity event, the Group takes these rights into account when forming a view of the value of its investment.

At each measurement date, or if the Group considers that there is a reason to believe that the fair value might have changed between measurement dates, an assessment is made of the required adjustment to the fair value estimate of the investment. Wherever possible, the adjustment is based on objective data from the company in which the investment was made.

When applying the milestone analysis approach to investments in companies in early or development stages, the Group seeks to determine whether there is an indication of change in fair value based on a consideration of performance against any milestones that were set at the time of the investment, as well as taking into consideration key market drivers for the investee company and the overall economic environment.

Where deterioration in value is assessed to have occurred, the Group reduces the carrying value of the investment to reflect the estimated decrease. In these circumstances, the fair value of the investment is reduced by 25%, 50%, 75% or 100%, as judged appropriate by the Group.

If there is evidence of positive developments and value creation unrelated to recent investments, the Group may increase the fair value estimate of the investment. However, it is often difficult to determine the specific value attributable to those positive developments and the costs and risks associated with realising that value.

Factors which the Group considers in its assessment of the fair value of an investment include, inter alia: technical measures such as product development phases and patent approvals; financial measures such as changes in the rate of cash consumption; changes in profitability expectations; and market and sales measures such as product development phases, market launches and geographic expansions.

www.cicplc.co.uk

FINANCIAL STATEMENTS

37

Trade and other receivables Trade and other receivables are classified as loans and receivables and are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the consolidated statement of comprehensive income.

Short-term deposits Short-term deposits represent bank deposits with an original maturity of over three months.

Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less.

Financial liabilities Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial liabilities, unless required to be categorised as at fair value through profit or loss, are recorded initially at fair value and subsequently at amortised cost using the effective interest method, with interest-related charges recognised as an expense in finance cost in the income statement. A financial liability is derecognised only when the obligation is extinguished.

Share based payments The Group operates an equity-settled, share based payment compensation plan, under which the entity receives services from employees as consideration for equity instruments (options) of the Company. The fair value of the employee service received in exchange for the grant of the options is recognised as an expense over the vesting period. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted. At each reporting date, the entity revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the consolidated statement of comprehensive income, with a corresponding adjustment to equity. The social security contributions payable in connection with the grant of options is considered an integral part of the grant itself, and the charge is treated as a cash-settled transaction. The fair value of cash-settled transactions is measured at each balance sheet date and is recognised as an expense over the vesting period.

Pension costs The Group makes payments for each employee to a defined contribution scheme or a scheme of their choice. The assets of the defined contribution scheme are held separately from the Group in independently administered funds. Contributions made by the Group are charged to the consolidated statement of comprehensive income in the period to which they relate.

Operating leases Operating lease payments are expenses in the consolidated statement of comprehensive income on a straight-line basis over the period of the lease.

Taxation Taxation expense comprises current and deferred tax recognised in the reporting period. Tax is recognised in the profit and loss account, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case tax is also recognised in other comprehensive income or directly in equity respectively.

Current or deferred taxation assets and liabilities are not discounted.

Current tax Current tax is the amount of income tax payable in respect of the taxable profit for the period or prior periods. Tax is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the period end.

Deferred tax Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

38

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 March 2017

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Equity Equity comprises the following: • share capital represents the nominal value of equity shares; • share premium represents the excess over nominal value of the fair value of consideration received for equity; • share based payments reserve represents equity-settled share based remuneration until such instruments are exercised; • capital reserve represents fair value gains and losses on investments which are initially recorded through the statement of comprehensive income but are transferred to the capital reserve to track the cumulative gains and losses; and • retained profit/(accumulated losses) represents retained profits/(accumulated losses).

4 CRITICAL ACCOUNTING ESTIMATES In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy, accounting estimate or assumption to be followed could materially affect the reported results or the net asset position of the Group. Management considers that certain accounting estimates and assumptions relating to the valuation of investments are critical accounting estimates. The treatment of equity investments has been detailed above.

5 SEGMENTAL REPORTING The Group’s property, plant and equipment (note 12) and investments (note 13) are held in the UK and Jersey, respectively. The Group’s short-term deposits and cash and cash equivalents are held in Jersey except for £1,903,091 (2016: £91,354) which is held in the UK.

6 OPERATING (LOSS)/PROFIT Year ended 31 March 2017 £

2016 £

35,261

4,287

(55,104)

(88,725)

15,000

10,000

Tax compliance services

4,225

3,475

Other assurance services

25,000

160,000

Other services

14,450

50,000

58,675

223,475

Operating (loss)/profit is stated after charging/(crediting): Depreciation Other operating income Services provided by the Group’s auditors Fees payable to the Group’s auditors and their associates for the audit of the Company and the consolidated financial information Fees payable to the Group’s auditors for other services

During the year ended 31 March 2017, fees payable to the Group’s auditors of £25,000 (2016: £nil) were charged to the share premium account.

www.cicplc.co.uk

FINANCIAL STATEMENTS

39

7 EMPLOYEES AND DIRECTORS The average monthly number of persons (including Executive Directors but excluding Non-executive Directors) employed by the Group during the year was: Year ended 31 March 2017 Number

2016 Number

Investment managers

4

4

Support staff

3

2

7

6

By primary activity

Year ended 31 March 2017 ÂŁ

2016 ÂŁ

Wages and salaries

983,831

711,608

Social security costs

270,239

97,130

Employee benefit expenses for the above persons

122,051

98,686

2,448,799

(40,747)

3,824,920

866,678

518,831

383,921

Other pension costs

52,967

50,420

Employer national insurance

64,478

52,973

920,255

(102,868)

1,556,531

384,446

270,730

191,354

Other pension costs Share based payments (note 8)

Key management, being Executive and Non-executive Directors, compensation Emoluments

Share based payments

Emoluments of the highest paid Director Emoluments Other pension costs

32,567

27,833

303,297

219,187

No Directors exercised options during either year.

At 31 March 2017 there were two Directors (2016: one) who were members of a defined contribution pension scheme to which the Company contributed.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

40

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 March 2017

8 SHARE BASED PAYMENTS Certain employees of the Company have been granted call options over A ordinary shares of the Company held by the Cambridge Innovation Capital plc Employee Benefit Trust. On 18 August 2016 the Company’s A ordinary shares were sub-divided and then redesignated into ordinary shares and deferred shares (see note 17), the latter having minimal, if any, economic value. As a result, the analysis below is limited to call options over A ordinary and ordinary shares.

Under the terms of the call options, shares may be acquired at a fixed share price and are capable of being acquired in tranches commencing 12 months from the commencement of employment. Unvested tranches expire if an employee leaves and vested tranches must be acquired within six months of an Initial Public Offering or within ten years.

Movements in the number of call options outstanding and their related weighted average exercise prices are as follows:

Class of share

Weighted average exercise price Pence

Number

Outstanding at 31 March 2016

A ordinary

0.5720

900,000

Granted during the year

A ordinary

0.5720

350,000

Ordinary

0.0000

2,929,688

Issued on the sub-division and redesignation of A ordinary shares Exercised during the year Outstanding at 31 March 2017

Ordinary

0.1711

(1,337,500)

Ordinary

0.1711

2,842,188

The weighted average remaining contractual life of the options outstanding at 31 March 2017 is 6.75 years (2016: 7.53 years).

Exercisable At 31 March 2017

Ordinary

0.1711

2,824,651

At 31 March 2016

A ordinary

0.5720

800,000

The fair value of the options has been calculated based on the fair value of the shares at the date of grant less the nominal exercise price. During the year a charge of £2,448,799 (2016: credit of £40,747) has been recorded.

9 FINANCE INCOME Year ended 31 March

Bank and other interest

2017 £

2016 £

317,864

325,285

10 TAX ON (LOSS)/PROFIT ON ORDINARY ACTIVITIES The relationship between the expected tax expense based on the standard corporation tax rate of the Company and the tax expense actually recognised in the income statement is reconciled as follows: Year ended 31 March 2017 £

(Loss)/profit on ordinary activities before taxation Standard corporation tax rate Expected tax expense

(38,568)

2016 £

1,689,065

20%

20%

(7,714)

338,141

(888,837)

(663,420)

Expenses not tax deductible

646,365

165,695

Tax losses carried forward

250,186

159,584

–

–

Income not subject to tax (fair value changes)

Tax on profit on ordinary activities

The standard rate of UK Corporation Tax reduced from 20% to 19% on 1 April 2017 and will reduce from 19% to 17% from 1 April 2020. As a result, deferred tax has been calculated at 17% in these financial statements (see note 16).

FINANCIAL STATEMENTS

www.cicplc.co.uk

41

11 (LOSS)/PROFIT PER SHARE The calculation of the basic earnings per share is based on the losses or profits attributable to the Company’s shareholders divided by the weighted average number of shares in issue during the year. All earnings per share calculations relate to continuing operations of the Company. The weighted average number of shares for the year ended 31 March 2017 does not include the deferred shares (see note 17). The options outstanding at 31 March 2017 are considered to be non-dilutive as the Group is loss-making. The weighted average number of shares for the comparative year has been adjusted for the sub-division of A and B ordinary shares detailed in note 17.

Year ended 31 March 2017

(38,568)

(Loss)/profit attributable to shareholders (£)

127,982,984

Weighted average number of shares

2016

1,689,065 69,257,812

Basic (loss)/profit per share (£)

(0.000)

0.024

Diluted (loss)/profit per share (£)

(0.000)

0.023

12 PROPERTY, PLANT AND EQUIPMENT Leasehold improvements £

Furniture and equipment £

Computer equipment £

Total £

Cost At 1 April 2015

–

1,793

10,700

12,493

Additions

–

33,337

27,808

61,145

At 31 March 2016

–

35,130

38,508

73,638

Additions

60,840

21,039

10,897

92,776

60,840

56,169

49,405

166,414

At 1 April 2015

–

746

5,124

5,870

Provided in the year

–

548

3,739

4,287

At 31 March 2016

–

1,294

8,863

10,157

Provided in the year

8,768

13,982

12,511

35,261

At 31 March 2017

8,768

15,276

21,374

45,418

52,072

40,893

28,031

120,996

–

33,836

29,645

63,481

2017 £

2016 £

At 31 March 2017 Accumulated depreciation

Net book amount At 31 March 2017 At 31 March 2016

13 INVESTMENTS At 1 April

24,720,999

7,528,490

Investments made during the year

28,998,409

13,916,156

Fair value changes in investments

4,444,183

3,276,353

58,163,591

24,720,999

At 31 March

The Directors have determined that the Company is an investment entity and therefore, investments that are held as part of the Group’s investment portfolio are carried in the statement of financial position at fair value even though the Group may have significant influence over these companies.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

42

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 March 2017

At 31 March 2017 the Group held investments in the following companies: Name

Abcodia Limited

Primary instrument

% held

A Ordinary shares

19.6%

Audio Analytic Limited

Series A Preferred shares

16.2%

Cambridge Medical Robotics Limited

Series A Preferred shares

9.1%

Carrick Therapeutics Limited Congenica Limited Exvastat Limited Fluidic Analytics Limited Geospock Limited

Preferred shares

4.8%

A Ordinary shares

39.6%

Series A shares

54.8%

Series A shares

2.7%

Ordinary shares

16.2%

Imagen Limited

Series A shares

46.0%

Inivata Limited

Series A shares

26.0%

A Ordinary shares

27.8%

Jukedeck Limited Microbiotica Limited Morphogen-IX Limited Origami Energy Limited PervasID Limited

Seed shares

21.7%

Series A shares

11.3%

A Ordinary shares

15.6%

Ordinary shares

11.0%

PragmatIC Printing Limited

A Ordinary shares

31.2%

Storm Therapeutics Limited

A Preferred shares

18.1%

Ordinary shares

21.5%

Series A shares

0.2%

Undo Limited Z Factor Limited

All of the Group’s investments are in unquoted companies and all of the companies are incorporated in England and Wales with the exception of Carrick Therapeutics Limited, which is registered in Ireland.

At 31 March 2017 the Group had committed, subject to certain milestone provisions contained in the relevant investment agreements, to make further investments of £7.5 million and $8.3 million (2016: £5.3 million and $nil). As these relate to future investments they have not been included in the financial statements.

14 TRADE AND OTHER RECEIVABLES At 31 March

Prepayments and accrued income Other receivables

2017 £

2016 £

145,035

135,888

20,122

30,406

165,157

166,294

All amounts are short-term. The carrying values of receivables are considered reasonable approximations to fair value. All of the receivables have been reviewed for indicators of impairment.

FINANCIAL STATEMENTS

www.cicplc.co.uk

43

15 TRADE AND OTHER PAYABLES At 31 March

Trade payables

2017 £

2016 £

63,638

53,580

Social security and other taxes

49,936

30,511

Accruals and deferred income

593,536

706,751

707,110

790,842

All trade and other payables are unsecured, interest free and payable on demand. The carrying values of trade and other payables are all in pounds sterling and are considered reasonable approximations to fair value.

16 DEFERRED TAX There were no deferred tax assets or liabilities recognised by the Group during the year reported on. A deferred tax asset would be recognised only when sufficient taxable profits are expected to be generated to relieve the trading losses.

At 31 March 2017 £

2016 £

404,600

203,400

Deferred tax amounts not provided for Trade losses unrelieved

The Company may also benefit from a tax deduction when the outstanding call options over ordinary shares of the Company are exercised. Such a benefit would create an additional tax deductible expense.

The Company’s trading tax losses at 31 March 2017 are approximately £2,380,000 (2016: £1,130,000).

17 EQUITY At 31 March 2017 £

2016 £

10,000,000 A ordinary shares of £1 each

–

10,000,000

40,000,000 B ordinary shares of £1 each

–

40,000,000

16,719

–

Allotted, called up and fully paid

167,187,500 ordinary shares of £0.0001 each 499,926,562,500 deferred shares of £0.0001 each

49,992,656

–

50,009,375

50,000,000

On 18 August 2016: • each of the existing A ordinary and B ordinary shares of £1 each were sub-divided into 10,000 shares of £0.0001 each; • the 100,000,000,000 A ordinary shares of £0.0001 each arising from the sub-division were redesignated into 33,437,500 ordinary shares and 99,966,562,500 deferred shares, each of £0.0001 each; • the 400,000,000,000 B ordinary shares of £0.0001 each arising from the sub-division were redesignated into 40,000,000 ordinary shares and 399,960,000,000 deferred shares, each of £0.0001 each; and • 93,750,000 ordinary shares of £0.0001 each were issued at a subscription price of £0.80 per ordinary share.

The ordinary shares carry equal voting rights, equal rights to income and distributions of assets on liquidation, or otherwise, and no right to fixed income.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

44

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 March 2017

The deferred shares: • carry no right to participate in the income of the Company; • carry no right to receive notice of, or to attend, speak or vote at any general meeting of the Company; • on a return of assets on liquidation or capital reduction or otherwise, the holders of the deferred shares, if any, shall only be entitled to a total of £1.00 for the entire class of deferred shares; • are not transferable; and • may be purchased by the Company at any time, at its option, for a total of £1.00 for the entire class of deferred shares.

At 31 March 2017 the Cambridge Innovation Capital plc Employee Benefit Trust held 12,495,820,312 deferred shares of £0.0001 each.

18 RELATED PARTY TRANSACTIONS The Group discloses transactions with related parties which are not wholly owned within the same Group.

Convertible loans to portfolio companies are expected to convert to equity and typically have the potential to be long-term in nature. As a result, they are included within non-current investments (see note 13). Where the Group has a representative on the board of a portfolio company, this is considered a related party and the aggregate balance is shown below: 2017 £

2016 £

500,000

–

Loans advanced during the year

1,056,000

500,000

Loans at 31 March

1,556,000

500,000

Loans at 1 April

Income from related parties primarily relates to investment related fees and interest on convertible loans as set out below: Income during the year ended 31 March

University of Cambridge and its subsidiaries Portfolio companies

Amounts due from at 31 March

2017 £

2016 £

2017 £

2016 £

–

300

–

360

107,245

116,585

81,770

44,652

107,245

116,885

81,770

45,012

Purchases from related parties primarily relate to the Group’s office and the provision of other services as set out below: Purchases during the year ended 31 March

University of Cambridge and its subsidiaries

Amounts due to at 31 March

2017 £

2016 £

2017 £

2016 £

48,896

47,843

7,216

11,512

www.cicplc.co.uk

FINANCIAL STATEMENTS

45

19 FINANCIAL INSTRUMENTS The Group is entirely equity funded and uses certain financial instruments including cash, trade and other receivables, trade and other payables and equity interests in, and loans to, investments held by the Group. The carrying amounts of assets and liabilities may be categorised as follows: At 31 March 2017 £

2016 £

58,163,591

24,720,999

242

6,360

Short-term deposits

11,400,000

16,605,007

Cash and cash equivalents

57,518,607

10,320,867

68,918,849

26,932,234

657,174

760,331

Financial assets at fair value through profit or loss Investments Loans and receivables Trade and other receivables

Financial liabilities at amortised cost Trade and other payables

Risk management objectives The main risks associated with the Group’s financial instruments relate to market (price and interest rate risk), liquidity and credit risk. The Group does not have any committed borrowing facilities and it is the Group’s policy not to trade in derivative instruments, or to enter into hedging transactions.

The Group’s main objective in using financial instruments is to invest in rapidly growing intellectual property rich companies based in and around Cambridge and/or with a connection to the University of Cambridge from funds raised specifically for this purpose. Within the context of this objective, the Group seeks to maximise returns from funds held on deposit whilst maintaining liquidity and credit risk at acceptable levels.

Balance sheets at 31 March 2017 and 2016 are not necessarily representative of the positions throughout the year, as investments, short-term deposits and cash and cash equivalents vary considerably depending on when equity raisings, investments and placing amounts on short-term deposits have actually occurred.

Market (price) risk Investments are held for strategic rather than trading purposes and are not actively traded by the Group. The Group is exposed to price risk in respect of equity interests in, and loans to, investments held by the Group and classified on the balance sheet as at fair value through profit or loss. The Group seeks to manage this risk by routinely monitoring and reporting to the Board the status, performance and valuation of these investments. Proposed investments are subject to a detailed analysis and approval process and significant investments and disposals require Board approval.

Post tax profit for the year may increase or decrease as a result of fair value gains/losses on investments classified at fair value through profit or loss and are allocated to the capital reserve.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

46

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 March 2017

Market (interest-rate) risk The Group has no liabilities that are exposed to interest rate risk.

The Group receives interest from short-term deposits and cash and cash equivalents, all of which is held in sterling, and the level of this interest is dependent upon the prevailing interest rates. The Group seeks to maximise the receipt of interest subject to acceptable levels of credit and liquidity risk. The interest rate risk profile of the Group’s financial assets was as follows: At 31 March 2017 £

2016 £

Floating rate

58,909,785

21,820,867

Fixed rate

10,008,822

5,105,007

68,918,607

26,925,874

Floating rate interest

0.15% to 1.24%

0.13% to 1.35%

Fixed rate interest

0.41% to 0.95%

0.45% to 1.50%

31 to 91 days

91 to 365 days

Fixed rate period

The following table illustrates the sensitivity of the profit/(loss) for the year and total equity to a reasonably possible change in interest rates to +2% and 0% for all years with effect from the beginning of each year. The changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on the Group’s financial assets held during the year. All other variables are held constant.

At 31 March 2017

2017

2016

2016

+2.0%

0%

+2.0%

0%

£

£

£

£

Result for the year

958,445

(317,864)

691,447

(325,285)

Equity

958,445

(317,864)

691,447

(325,285)

Liquidity risk Liquidity risk is the risk that the Group may not be able to meet its financial obligations. The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet forecast cash flows. Net cash requirements are compared to available cash and updated on a monthly basis.

Credit risk In order to minimise the risk of loss, short-term deposits and cash and cash equivalents are only held with European authorised financial institutions of good credit rating, being those at or above the credit rating of the main UK clearing banks. The credit rating, as per Standard & Poor’s rating services, profile of the Group’s financial assets was as follows: At 31 March 2017 £

2016 £

AA-

25,553,727

9,131,896

A

25,134,295

16,651,706

A-

18,230,585

1,142,273

68,918,607

26,925,874

Foreign exchange risk The Group occasionally enters into transactions in currencies other than sterling. At 31 March 2017 the Group had committed, subject to certain milestone provisions contained in the relevant investment agreements, to make further investments of $8.3 million (2016: $nil). The Group has not hedged this commitment because of its policy not to enter into hedging transactions.

www.cicplc.co.uk

FINANCIAL STATEMENTS

47

Capital risk management The capital structure of the Group is limited to its equity comprising share capital, reserves and retained losses. The Group manages its capital to ensure that entities within the Group will be able to continue as going concerns while maximising the return to shareholders through the optimisation of any equity balance. The Group’s overall strategy remains unchanged for the years under review.

Fair values The fair values of the Group’s financial assets and liabilities are considered a reasonable approximation to the carrying values shown in the statement of financial position. The basis for determining fair values is described in note 3.

Estimation of fair values If one or more of the significant inputs to the fair value is not based on observable market data, the instrument is included in Level 3. All of the Group’s investments are in unquoted companies, which the Group classifies as Level 3, and are held at fair value in accordance with the investments policy in note 3. The movement in Level 3 instruments is summarised in note 13.

The Audit Committee and Board review the investment valuation process, and resultant fair values, at least twice a year in line with the Group’s reporting dates. The valuation of investments is prepared by the investment team, and reviewed by the Executive Directors, before being submitted to the Audit Committee and Board for approval. The fair value profile of investments is summarised as follows: At 31 March 2017 £

2016 £

Adjusted for milestones or impairments

556,000

–

Investment completed within one year

49,142,437

22,071,019

Price of recent investment

Investment completed between one and two years

8,465,154

2,649,980

58,163,591

24,720,999

If the fair value of the Group’s investments varied by +/-10%, the profit for the year would change by +/- £5,816,359 (2016: +/- £2,472,100).

20 OPERATING LEASE COMMITMENTS The future aggregate minimum lease payments under non-cancellable operating leases are as follows: At 31 March

Within one year Later than one year but not later than five years

2017 £

2016 £

24,161

–

6,502

–

30,663

–

Lease payments primarily relate to amounts payable for the Group’s office. The lease term is five years from 1 July 2016 but the Group may terminate the lease at any time after 1 July 2018.

21 POST BALANCE SHEET EVENTS On 18 April 2017, Congenica Limited raised an additional £2 million from third parties such that the Group’s interest decreased to 36.2%.

On 26 May 2017 the Group invested £8.5 million in Bicycle Therapeutics Limited.

Further details are provided in the Strategic Report.

22 CONTROLLING PARTY There is no ultimate controlling party.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

48

INDEPENDENT AUDITORS’ REPORT

to the members of Cambridge Innovation Capital plc

Report on the Company financial statements Our opinion In our opinion, Cambridge Innovation Capital plc’s Company financial statements (the “financial statements”): • give a true and fair view of the state of the Company’s affairs as at 31 March 2017; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been prepared in accordance with the requirements of the Companies Act 2006.

What we have audited The financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), comprise: • the Company Balance Sheet as at 31 March 2017; • the Company Statement of Changes in Equity for the year then ended; and • the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

The financial reporting framework that has been applied in the preparation of the financial statements is United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law (United Kingdom Generally Accepted Accounting Practice).

In applying the financial reporting framework, the Directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.

Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

In addition, in light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we are required to report if we have identified any material misstatements in the Strategic Report and the Directors’ Report. We have nothing to report in this respect.

Other matters on which we are required to report by exception Adequacy of accounting records and information and explanations received Under the Companies Act 2006 we are required to report to you if, in our opinion: • we have not received all the information and explanations we require for our audit; or • adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or • the financial statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Directors’ remuneration Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

www.cicplc.co.uk

FINANCIAL STATEMENTS

49

Responsibilities for the financial statements and the audit Our responsibilities and those of the Directors As explained more fully in the Statement of Directors’ Responsibilities set out on page 28, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What an audit of financial statements involves We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: • whether the accounting policies are appropriate to the Company’s circumstances and have been consistently applied and adequately disclosed; • the reasonableness of significant accounting estimates made by the Directors; and • the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. With respect to the Strategic Report and Directors’ Report, we consider whether those reports include the disclosures required by applicable legal requirements.

Other matter We have reported separately on the Group financial statements of Cambridge Innovation Capital plc for the year ended 31 March 2017.

SIMON ORMISTON (SENIOR STATUTORY AUDITOR) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Cambridge 13 June 2017

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

50

COMPANY BALANCE SHEET

as at 31 March 2017

At 31 March Note

2017 £

2016 £

Fixed assets Tangible assets

G

120,996

63,481

Investments

H

120,000,000

49,000,000

120,120,996

49,063,481

62,387

50,697

Current assets Debtors

I

Short-term deposits Cash at bank and in hand

Creditors: amounts falling due within one year

J

1,400,000

–

503,091

91,354

1,965,478

142,051

(676,044)

(771,766)

1,289,434

(629,715)

Total assets less current liabilities

121,410,430

48,433,766

Net assets

121,410,430

48,433,766

L

50,009,375

50,000,000

57,200

57,200

M

3,340,082

891,283

Retained profit/(accumulated losses)

70,641,112

(1,755,903)

Loss for the year

(2,637,339)

Net current assets/(liabilities)

Capital and reserves Called up share capital Share premium account Share based payments reserve

Total shareholders’ funds

121,410,430

(758,814) 48,433,766

The notes on pages 52 to 57 are an integral part of these financial statements.

The financial statements on pages 50 to 57 were authorised for issue by the Board of Directors on 13 June 2017 and were signed on its behalf by

ROB SPRAWSON CHIEF FINANCIAL OFFICER

FINANCIAL STATEMENTS

www.cicplc.co.uk

COMPANY STATEMENT OF CHANGES IN EQUITY

51

for the year ended 31 March 2017

Called up share capital £

Share premium account £

Share based payments reserve £

50,000,000

57,200

932,030

(1,755,903)

49,233,327

–

–

–

(758,814)

(758,814)

–

–

(40,747)

–

(40,747)

50,000,000

57,200

891,283

(2,514,717)

48,433,766

–

–

–

(2,637,339)

(2,637,339)

9,375

73,155,829

–

–

73,165,204

Share premium account reduction

–

(73,155,829)

–

73,155,829

–

Share based payments

–

–

2,448,799

–

2,448,799

50,009,375

57,200

3,340,082

68,003,773

121,410,430

At 1 April 2015 Loss for the year and total comprehensive expense

Retained profit/ (accumulated losses) £

Total shareholders’ funds £

Transactions with owners Share based payments At 31 March 2016 Loss for the year and total comprehensive expense Transactions with owners Share capital issued (net of expenses)

At 31 March 2017

The notes on pages 52 to 57 are an integral part of these financial statements.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

52

NOTES TO THE COMPANY FINANCIAL STATEMENTS

for the year ended 31 March 2017

A GENERAL INFORMATION Cambridge Innovation Capital plc (the “Company”) is incorporated and domiciled in the UK, the address of its registered office being Hauser Forum, 3 Charles Babbage Road, Cambridge, CB3 0GT.

B STATEMENT OF COMPLIANCE The Company meets the definition of a qualifying entity under Financial Reporting Standard (“FRS”) 100 issued by the Financial Reporting Council (“FRC”). The financial statements have therefore been prepared in compliance with UK Accounting Standards including FRS 102 “The Financial Reporting Standard Applicable in the UK and Republic of Ireland” and the Companies Act 2006.

C SIGNIFICANT ACCOUNTING POLICIES Basis of preparation

These financial statements are prepared on a going concern basis, under the historical cost convention, as modified by the revaluation of certain assets and liabilities measured at fair value through profit or loss.

The principal accounting policies adopted in the preparation of these financial statements have been consistently applied to all the years presented, unless otherwise stated.

Tangible fixed assets Tangible fixed assets are stated at cost (or deemed cost) less accumulated depreciation and accumulated impairment losses. Cost includes the original purchase price and costs directly attributable to bringing the asset to its working condition for its intended use.

Depreciation on assets is calculated, using the straight-line method, to allocate the cost to their residual values over their estimated useful lives, as follows: • Leasehold improvements

5 years

• Furniture and equipment

3 years

• Computer equipment

3 years

Investments Investments in subsidiary companies are held at cost less any accumulated impairment losses. An impairment review is performed to assess the carrying value of those investments with no investment in the year at each reporting date.

Financial instruments The Company does not have any financial instruments other than equity investments, cash, debtors and creditors. Cash, debtors and creditors are all measured at cost on the date the transaction was entered into and financial assets are subsequently reviewed for possible impairment.

Short-term deposits Short-term deposits represent bank deposits with an original maturity of over three months.

Cash at bank and in hand Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less.

Share based payments The Company operates an equity-settled, share based payment compensation plan, under which the entity receives services from employees as consideration for equity instruments (options) of the Company. The fair value of the employee service received in exchange for the grant of the options is recognised as an expense over the vesting period. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted. At each reporting date, the entity revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the profit and loss account, with a corresponding adjustment to equity. The social security contributions payable in connection with the grant of options is considered an integral part of the grant itself, and the charge is treated as a cashsettled transaction. The fair value of cash-settled transactions is measured at each balance sheet date and is recognised as an expense over the vesting period.

Pension costs The Group makes payments for each employee to a defined contribution scheme or a scheme of their choice. The assets of the defined contribution scheme are held separately from the Group in independently administered funds. Contributions made by the Group are charged to the profit and loss in the period to which they relate.

www.cicplc.co.uk

FINANCIAL STATEMENTS

53

Operating leases Operating lease payments are expenses in the profit and loss on a straight-line basis over the period of the lease.

Taxation Taxation expense comprises current and deferred tax recognised in the reporting period. Tax is recognised in the profit and loss account, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case tax is also recognised in other comprehensive income or directly in equity respectively.

Current or deferred taxation assets and liabilities are not discounted.

Current tax Current tax is the amount of income tax payable in respect of the taxable profit for the period or prior periods. Tax is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the period end.

Deferred tax Deferred tax arises from timing differences that are differences between taxable profits and total comprehensive income as stated in the financial statements. These timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements.

Deferred tax is recognised on all timing differences at the reporting date except for certain exceptions. Unrelieved tax losses and other deferred tax assets are only recognised when it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Capital and reserves Capital and reserves comprises the following: • called up share capital represents the nominal value of equity shares; • share premium represents the excess over nominal value of the fair value of consideration received for equity; • share based payments reserve represents equity-settled share based remuneration until such instruments are exercised; and • retained profit/(accumulated losses) represents retained profits/(accumulated losses).

Exemptions for qualifying entities under FRS 102 The Company has not provided a statement of cash flows or certain disclosures in relation to key management and related party transactions, as this information is included in the consolidated financial statements.

D CRITICAL ACCOUNTING ESTIMATES In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy, accounting estimate or assumption to be followed could materially affect the reported results or the net asset position of the Company. Management considers that certain accounting estimates and assumptions relating to the carrying value of investment in subsidiaries are critical accounting estimates. The treatment of investments in subsidiary companies has been detailed above.

E RESULTS OF THE COMPANY The Company has taken advantage of Section 408 of the Companies Act 2006 and has not included a profit and loss account. The Company’s loss for the year ended 31 March 2017 is £2,637,339 (2016: £758,814).

F EMPLOYEES AND DIRECTORS All of the Group’s employees are employed by the Company. Employee numbers and employee benefit expenses are disclosed in note 7 of the consolidated financial statements.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

54

NOTES TO THE COMPANY FINANCIAL STATEMENTS

for the year ended 31 March 2017

G TANGIBLE ASSETS Leasehold improvements £

Furniture and equipment £

Computer equipment £

Total £

At 1 April 2015

–

1,793

10,700

12,493

Additions

–

33,337

27,808

61,145

At 31 March 2016

–

35,130

38,508

73,638

60,840

21,039

10,897

92,776

60,840

56,169

49,405

166,414

At 1 April 2015

–

746

5,124

5,870

Provided in the year

–

548

3,739

4,287

Cost

Additions At 31 March 2017 Accumulated depreciation

At 31 March 2016

–

1,294

8,863

10,157

Provided in the year

8,768

13,982

12,511

35,261

At 31 March 2017

8,768

15,276

21,374

45,418

52,072

40,893

28,031

120,996

–

33,836

29,645

63,481

Net book amount At 31 March 2017 At 31 March 2016

www.cicplc.co.uk

FINANCIAL STATEMENTS

55

H INVESTMENTS Cambridge Innovation Capital (Jersey) Limited, whose principal activity is to invest in high growth technology businesses, is a wholly owned subsidiary of the Company, is registered in Jersey and its registered address is Gaspé House, 66-72 Esplanade, St Helier, Jersey, Channel Islands, JE2 3QT.

I DEBTORS At 31 March 2017 £

2016 £

Prepayments and accrued income

42,265

20,291

Other debtors

20,122

30,406

62,387

50,697

All amounts are short-term. The carrying values of debtors are considered reasonable approximations to fair value. All of the debtors have been reviewed for indicators of impairment.

J CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR At 31 March

Trade payables Taxation and social security Accruals and deferred income

2017 £

2016 £

63,638

53,580

49,936

30,511

562,470

687,675

676,044

771,766

All creditors are unsecured, interest free and payable on demand. The carrying values of creditors are all in pounds sterling and are considered reasonable approximations to fair value.

K DEFERRED TAX There were no deferred tax assets or liabilities recognised by the Company during the year reported on. A deferred tax asset would be recognised only when sufficient taxable profits are expected to be generated to relieve the trading losses.

At 31 March 2017 £

2016 £

404,600

203,400

Deferred tax amounts not provided for Trade losses unrelieved

The Company may also benefit from a tax deduction when the outstanding call options over ordinary shares of the Company are exercised. Such a benefit would create an additional tax deductible expense.

The Company’s trading tax losses at 31 March 2017 are approximately £2,380,000 (2016: £1,130,000).

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

56

NOTES TO THE COMPANY FINANCIAL STATEMENTS

for the year ended 31 March 2017

L CALLED UP SHARE CAPITAL At 31 March 2017 £

2016 £

10,000,000 A Shares of £1 each

–

10,000,000

40,000,000 B Shares of £1 each

–

40,000,000

Allotted, called up and fully paid

16,719

–

49,992,656

–

50,009,375

50,000,000

167,187,500 ordinary shares of £0.0001 each 499,926,562,500 deferred shares of £0.0001 each

On 18 August 2016: • each of the existing A ordinary and B ordinary shares of £1 each were sub-divided into 10,000 shares of £0.0001 each; • the 100,000,000,000 A ordinary shares of £0.0001 each arising from the sub-division were redesignated into 33,437,500 ordinary shares and 99,966,562,500 deferred shares, each of £0.0001 each; • the 400,000,000,000 B ordinary shares of £0.0001 each arising from the sub-division were redesignated into 40,000,000 ordinary shares and 399,960,000,000 deferred shares, each of £0.0001 each; and • 93,750,000 ordinary shares of £0.0001 each were issued at a subscription price of £0.80 per ordinary share.

The ordinary shares carry equal voting rights, equal rights to income and distributions of assets on liquidation, or otherwise, and no right to fixed income.

The deferred shares: • carry no right to participate in the income of the Company; • carry no right to receive notice of, or to attend, speak or vote at any general meeting of the Company; • on a return of assets on liquidation or capital reduction or otherwise, the holders of the deferred shares, if any, shall only be entitled to a total of £1.00 for the entire class of deferred shares; • are not transferable; and • may be purchased by the Company at any time, at its option, for a total of £1.00 for the entire class of deferred shares.

At 31 March 2017 the Cambridge Innovation Capital plc Employee Benefit Trust held 12,495,820,312 deferred shares of £0.0001 each.

FINANCIAL STATEMENTS

www.cicplc.co.uk

57

M SHARE BASED PAYMENTS Certain employees of the Company have been granted call options over A ordinary shares of the Company held by the Cambridge Innovation Capital plc Employee Benefit Trust. On 18 August 2016 the Company’s A ordinary shares were sub-divided and then redesignated into ordinary shares and deferred shares (see note L), the latter having minimal, if any, economic value. As a result, the analysis below is limited to call options over A ordinary and ordinary shares.

Under the terms of the call options shares may be acquired at a fixed share price and are capable of being acquired in tranches commencing 12 months from the commencement of employment. Unvested tranches expire if an employee leaves and vested tranches must be acquired within six months of an Initial Public Offering or within ten years.

Movements in the number of call options outstanding and their related weighted average exercise prices are as follows:

Class of share

Weighted average exercise price Pence

Number

Outstanding at 31 March 2016

A ordinary

0.5720

900,000

Granted during the year

A ordinary

0.5720

350,000

Ordinary

0.0000

2,929,688

Issued on the sub-division and redesignation of A ordinary shares Exercised during the year Outstanding at 31 March 2017

Ordinary

0.1711

(1,337,500)

Ordinary

0.1711

2,842,188

The weighted average remaining contractual life of the options outstanding at 31 March 2017 is 6.75 years (2016: 7.53 years) Exercisable At 31 March 2017

Ordinary

0.1711

2,824,651

At 31 March 2016

A ordinary

0.5720

800,000

The fair value of the options has been calculated based on the fair value of the shares at the date of grant less the nominal exercise price. During the year a charge of £2,448,799 (2016: credit of £40,747) has been recorded.

N OPERATING LEASE COMMITMENTS The future aggregate minimum lease payments under non-cancellable operating leases are as follows: At 31 March

Within one year Later than one year but not later than five years

2017 £

2016 £

24,161

–

6,502

–

30,663

–

Lease payments primarily relate to amounts payable for the Company’s office. The lease term is five years from 1 July 2016 but the Company may terminate the lease at any time after 1 July 2018.

O RELATED PARTY TRANSACTIONS The Company had no transactions with related parties other than those with its wholly owned subsidiary.

P CONTROLLING PARTY There is no ultimate controlling party.

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2017

58

SHAREHOLDER NOTES

www.cicplc.co.uk

COMPANY INFORMATION

Company registration number 08243718

Registered office Hauser Forum 3 Charles Babbage Road Cambridge CB3 0GT

Directors

Edward Benthall Victor Christou Rob Sprawson Clive Birch Adam Glinsman Michael Muller Ian Leslie Duncan Maskell

Non-executive Chairman Chief Executive Officer Chief Financial Officer Independent Non-executive Director Independent Non-executive Director Independent Non-executive Director Non-executive Director Non-executive Director

Company secretary Rob Sprawson

Bankers Barclays Bank plc 9-11 St Andrew’s Street Cambridge CB2 3AA

Legal advisers Taylor Wessing LLP 5 New Street Square London EC4A 3TW

Independent auditors PricewaterhouseCoopers LLP Abacus House Castle Park Gloucester Street Cambridge CB3 0AN

Financial PR Consilium Strategic Communications Limited 41 Lothbury London EC2R 7HG

IBC

Cambridge Innovation Capital plc Hauser Forum 3 Charles Babbage Road Cambridge CB3 0GT cicplc.co.uk +44 (0)1223 764875