CIC Annual Report 2019 by Jones and Palmer

Annual Report and Accounts

For the year ended 31 March 2019

Welcome to Cambridge Innovation Capital We enable visionaries to build global, category-leading companies

Cambridge Innovation Capital (CIC) is a venture capital firm investing in IP-rich life science and technology businesses in the Cambridge ecosystem. Our unique relationship with the University of Cambridge, and sole focus on the Cambridge ecosystem, provides us with unparalleled access to investment opportunities. With our knowledge, experience and connections we work hard to build those opportunities into global, category-leading companies and create sustainable value for our stakeholders.

CIC has grown since its launch to become a key part of the Cambridge ecosystem. It has provided support and investment to a portfolio of leading-edge businesses, each of which has the potential to substantially improve people’s lives. We look forward to continuing our close relationship with the CIC team. Professor Stephen Toope VICE-CHANCELLOR OF THE UNIVERSITY OF CAMBRIDGE

£275m

secured for investment

£134m

invested/ committed

portfolio companies At 31 March 2019

IFC 04 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT

Our value proposition

GOVERNANCE FINANCIAL STATEMENTS

World-class intellectual property...

...generated by the Cambridge ecosystem. READ ABOUT OUR MARKET ON PAGES 6 TO 9

Unique access to opportunities...

...through our deep relationship with the University of Cambridge

Knowledgeable and experienced team...

...with an extensive global network

Rigorous and insightful analysis...

... to identify the best opportunities

A balanced and diverse portfolio...

... of ambitious life science and technology companies

READ ABOUT OUR BUSINESS MODEL ON PAGES 10 TO 11

READ MORE IN GOVERNANCE ON PAGES 28 TO 33

READ MORE IN THE OPERATIONAL REPORT ON PAGES 14 TO 25

CONTENTS

OVERVIEW Welcome to Cambridge Innovation Capital Our value proposition

IFC 1

STRATEGIC REPORT At a glance

Our market

GOVERNANCE

FINANCIAL STATEMENTS

Corporate governance and risk management framework

Independent auditors’ report 28

Consolidated statement of comprehensive income 42

Leadership team and Board of Directors

Consolidated statement of financial position

Directors’ report

Consolidated statement of changes in equity

Statement of Directors’ responsibilities

Consolidated statement of cash flows

Notes to the consolidated financial statements

Our business model

Company balance sheet

Our strategic objectives

Company statement of changes in equity

Our key performance indicators

Notes to the Company financial statements

Operational report

Company information

Financial review

62 IBC

01 www.cicplc.co.uk

At a glance

The opportunity to build world-leading, science-based businesses in Cambridge has never been greater. With the strategic commitment of the University, £150 million of new capital to invest, a widely diversified shareholder base, and a growing portfolio of businesses, CIC will play a leading role in the growth of the ecosystem. Edward Benthall EXECUTIVE CHAIRMAN

Who are we?

Cambridge Innovation Capital was founded in 2013 by the University of Cambridge to create a trusted local firm that would provide early stage capital to promising life science and technology businesses emerging from the University and the Cambridge ecosystem. The Cambridge ecosystem holds one of the richest seams of scientific knowledge and technological innovation in the world. Since our foundation, we have raised £275 million from a geographically diverse range of institutional and strategic

How have we performed?

investors, with the University of Cambridge and its Endowment Fund providing approximately 25% of these funds. We have committed £134 million of these funds to 26 intellectual property-rich life science and technology companies in fields as diverse as surgical robotics, flexible electronics, microbiome science, genomic diagnosis and edge intelligence and AI decision-making software. Our ambition is to build these businesses into global, category-leading companies, thereby creating sustainable value for our stakeholders.

Financial

Portfolio

NET ASSETS

FAIR VALUE OF PORTFOLIO

£206.4m

£186.3m

PROFIT

FAIR VALUE CHANGES IN THE YEAR

£27.8m

£30.7m

NET ASSETS PER SHARE

NUMBER OF PORTFOLIO COMPANIES

94.2p

CASH AND DEPOSITS

CAPITAL INVESTED IN THE YEAR

£31.8m

£44.9m

(2018: £144.0m)

(2018: £17.3m)

(2018: 86.0p)

(2018: £33.7m) 02

Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

(2018: £110.7m)

(2018: £19.8m)

(2018: 22)

(2018: £32.7m)

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

The University of Cambridge is the top source of founders of European venture-backed startups. THE STATE OF EUROPEAN TECH 2018, ATOMICO

What will be the key components to our success?

Our business model Our unique position, as a preferred investor for the University of Cambridge and sole focus on the Cambridge ecosystem, provides us with unparalleled access to emerging opportunities in Europeâ&#x20AC;&#x2122;s innovation capital. We apply our financial and people resources to invest in and support businesses with the potential to become global, category-leading companies to the benefit of the wider society. We aspire, through constructing a balanced and diversified portfolio of such companies, to create a prosperous and sustainable business.

INVESTMENT TEAM

BOARD

Our business model is underpinned by our relationship with the University of Cambridge. We are a preferred investor for the University of Cambridge and have a unique relationship with the University and Cambridge Enterprise, the commercialisation arm of the University, the terms of which are governed by a Collaboration Agreement. The Collaboration Agreement provides us with: privileged access to Cambridge Enterprise and its information systems, investment meetings and potential spin-out pipeline; co-investment rights alongside Cambridge Enterprise at inception/seed stage; and pre-emption rights of existing and future University equity stakes as a University affiliate.

Our people

* *

Our relationship with the University of Cambridge

* *

CAMBRIDGE ENTERPRISE

Our people are at the heart of our business. We have a knowledgeable and experienced team, with deep University and Cambridge connections and an extensive global network.

UNIVERSITY

We actively promote an inclusive and collaborative culture because our success inherently depends on the considerable efforts of our people.

KEY:

Investment team University NED/member Independent NED/member

ADVISORY PANEL

Members of investment team educated at the University of Cambridge 03

www.cicplc.co.uk

Investment team educated at Cambridge

At a glance CONTINUED

How is our portfolio constructed?

We have identified more than 1,250 funding opportunities since our foundation

46%

41%

SOURCE

SECTOR

54%

59%

KEY:

University

Life sciences

Ecosystem

Technology

Our team reviews these opportunities to determine those with Growth/ scalability

Visionary entrepreneurs

World-class IP

A clear path to commercialisation

Potential global category leaders

Following rigorous analysis, we have invested in 26 compelling businesses

35%

KEY:

SOURCE

65% 46%

SECTOR

University

Life sciences

Ecosystem

Technology

04 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

54%

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Our balanced portfolio of ambitious life science and technology companies currently has a carrying value of

186.3m

Â£

KEY:

Life sciences Technology Graphic represents carrying value at 31 March 2019

OTHER

05 www.cicplc.co.uk

Our market We are based in, and focused on, the Cambridge ecosystem. Our privileged position in Europe’s largest innovation ecosystem helps us source and secure the starting point from which we endeavour to build global, category-leading businesses.

Why Cambridge?

Cambridge innovation can fundamentally change the way we view the world and lead to commercial opportunities with significant global appeal and impact.

Cambridge excels in making the impossible, possible. Particular strengths include artificial intelligence, wireless and wired devices, materials, therapeutics, cell therapy, genomics, next generation biologics and generating insights from big data.

Monoclonal antibodies

Computing

Software

Genomics

1800s Charles Babbage Difference Engine

1967 Establishment of Computer-Aided Design (CAD) Centre as a breakaway from the University

1953 Francis Crick and James Watson discovered structure of DNA

1937 Alan Turing Theoretical computing machine

1988 World’s first plant walkthrough visualisation system (now AVEVA Review)

1977 Fred Sanger - first genome sequenced

1986 Greg Winter invented first humanised monoclonal antibody

1978–86 Nigel Searle and Clive Sinclair Sinclair Research

2001 CAD Centre changed its name to AVEVA

1998 Shankar Balasubramanian and John Berriman founded Solexa

1989 Greg Winter and David Chiswell founded Cambridge Antibody Technology (CAT)

2017 Acquired by SoftBank for £24 billion

2018 Merged with Schneider Electric in a £3 billion deal

2006 Acquired by Illumina for $0.6 billion

2006 Acquired by AstraZeneca for £0.7 billion

06 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

1975 George Köhler and César Milstein monoclonal antibodies

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

The Cambridge ecosystem

The city of Cambridge’s development has been intertwined with that of the University for more than 800 years. Over this time the University, together with its colleges, has played a central role in establishing and culturing innovation in the city. Innovation is about the application of new ideas, discoveries and inventions. The University’s innovative and entrepreneurial spirit is enshrined in its mission statement – to contribute to society through the pursuit of education, learning and research at the highest international levels of excellence. The foundation for innovation is the steady supply of excellent ideas, of which there is an abundance in Cambridge. Ingenuity and creativity, alongside the fundamental research which underpins these ideas and combined with the constant exchange of ideas between academics and companies, governments and NGOs has provided the recipe for this success.

Technology consultants

Network organisations

CIC portfolio companies

University of Cambridge Incubators

CIC

Trinity College founded the UK’s first ever science park, Cambridge Science Park, in 1970 and this was followed by St John’s Innovation Centre in 1987. These ground-breaking events have engendered a proliferation of similar developments such that there are now more than 20 science and research parks surrounding the city. Cambridge also benefits from a substantial seed and early-stage investment ecosystem which includes the University, through its seed funding activity managed by Cambridge Enterprise, and a sophisticated network of serial entrepreneurs and business angels that take an active role in creating and supporting early-stage businesses. The combination of commercial and scientific expertise, working in lock-step, has promoted the propagation of a wide range of intellectual property rich businesses.

The Cambridge ecosystem is now regarded as the largest technology hub in Europe with more than 4,700 knowledge-intensive companies, employing over 60,000 people and generating nearly £14 billion in annual revenues

Research institutes

Science parks

Major life science and technology companies

07 www.cicplc.co.uk

Our market CONTINUED

Cambridge’s global reputation, unique heritage and commercial expansion, combined with the deep scientific expertise, highly educated workforce and established networks for early-stage funding, make Cambridge a particularly attractive place to establish, nurture and cultivate intellectual property rich businesses.

The expansion of Cambridge

The University continues to develop a £1 billion, 150 hectares expansion in north west Cambridge, the largest capital project in the history of the University, to help it maintain its position as one of the world’s leading universities. The new development will include up to 100,000 square metres of academic research and development space, of which up to 40% may be private research with a University or research institute connection. Similarly, the Cambridge Biomedical Campus combines world-class biomedical research, patient care and education on a single site. The major expansion of the site, that includes the co-location of companies alongside the existing 17,500-strong community of healthcare professionals and research scientists, is on track to become one of the leading biomedical centres in the world by 2020. The Campus has the physical space to accommodate significant expansion and the international connections to be the global hub for content and research. The site already has planning permission to house an additional 75,000 square metres of new clinical and science-related facilities. With the foundations in place, the Campus is set to develop the treatments of the future and deliver further success to the UK’s life science industry.

08 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

In February 2018, Trinity College agreed a £200 million joint venture with TUS Park, the science park development body of Tsinghua University. The collaboration includes the development of 350,000 square feet of office and research space in five buildings on Cambridge Science Park. The first building opened in 2018 and the second, the BioInnovation Centre, which is the first bio-incubator located on the Science Park, was completed in May 2019. The CB1 development, in the centre of Cambridge, is more than halfway to completion and provides a mixture of commercial, residential and leisure facilities. Station Road, at the heart of this development, has been populated by many leading software and artificial intelligence companies as they seek to leverage the proximity to Cambridge’s central railway station to hire employees from London. The UK Government has recognised the potential for the development of a Cambridge to Oxford link and is supporting the new rail and road links provided by East-West Rail and the OxfordCambridge Expressway, originally recommended by the National Infrastructure Commission. This initiative, which will see the creation of new towns and up to one million new homes, has been predicted to add as much as £160 billion a year to the region’s economy by 2050.

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

This continually evolving community is like a perpetual motion engine attracting fresh, bright people inspired to do things differently. Charles Cotton FOUNDER, CAMBRIDGE PHENOMENON AND CHAIRMAN OF CIC’S ADVISORY PANEL

KEY TRENDS AND OPPORTUNITIES

1. Cambridge innovation

Over the years the ecosystem has not only produced revolutionary innovations that continue to benefit society, but also world-leading companies, several specialist technology consultancies and a diverse community of successful entrepreneurs and angel investors. Many of the individuals behind these success stories have remained active in the ecosystem, sharing their experiences and guiding the next generation of Cambridge businesses.

2. Growing global reputation

3. Continued development

Cambridge’s popularity as a world-class location for prestige businesses continues to soar. Several multinational companies have targeted the city to access locally available innovation and talent. Amazon, Apple, Microsoft, Samsung and Siemens each have research and development centres in Cambridge and AstraZeneca relocated its global headquarters to the Cambridge Biomedical Campus.

As the current developments complete and state-of-the-art facilities open for business, Cambridge will have the physical space to accommodate more new and expanding local companies, and will be an attractive proposition for further multinational companies to move into the area.

IMPACT

Cambridge’s burgeoning innovation community provides a significant opportunity for us to capitalise on our unparalleled position within the ecosystem. With so much activity, but inevitably limited financial and other resources, CIC needs to be highly selective in the allocation of its resources to maximise impact and preserve its position.

Cambridge’s allure is not limited to the fact that it’s a major centre for research, development and innovation, and a melting pot of amazing minds. It’s also great to live in a safe, inspiring and vibrant community, with high-quality schools and leisure time facilities. The challenge for CIC, and many other Cambridge companies, is attracting high-calibre talent into an area with a relatively high cost of living, and then retaining that talent when there is so much opportunity in close proximity.

Combining leading science and technology with the experience of local entrepreneurs, and those attracted from around the world to be part of the Cambridge ecosystem, will drive further demand for space. The challenge for CIC, and its portfolio companies, is to secure high-quality facilities in the ideal location, for the business and its employees, at a justifiable cost.

09 www.cicplc.co.uk

Our business model We enable visionaries to build global, category-leading companies

3 We select the businesses with the best potential

We build global, category-leading companies

Our unique access helps us to source opportunities

We create sustainable value for our stakeholders

4 s po us t r tu o nit ies

Our business model is underpinned by our relationship with the University

lp he p e t o rea w e c t ne w e lec valu se The e and c sour

Privileged access to information ●●

Long-term partnership ●●

15-year agreement extendable by further periods of 15 years in perpetuity

●●

Formalised role for CIC when commercialising intellectual property

Unique access to Cambridge Enterprise and its information systems, investment meetings and potential spin-out pipeline

Equity investment rights ●●

Co-investment rights at inception/seed stage

●●

Pre-emption rights of existing and future University equity stakes

●●

Ability for CIC to allocate its own pre-emption rights to co-investment vehicles

Permanent link to the University

10 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

●●

Two Board members appointed by the University

●●

University has a 31% equity holding, 5% of which is undilutable

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Our unique access helps us to source opportunities

We select the businesses with the best potential

As a preferred investor for the University

Our people

●●

Unparalleled access to opportunities emerging from the University

●●

Complementary and collaborative relationship with Cambridge Enterprise

●●

A track record in identifying, nurturing and cultivating intellectual property rich businesses

●●

Our leadership team and Advisory Panel have considerable experience in technology entrepreneurship

●●

Unparalleled access to academic and industry experts

Our focus on Cambridge ●●

One of the largest technology ecosystems in Europe

●●

A global hub for scientific research and its commercialisation

Our process ●●

Rigorous and insightful analysis

●●

Diligent and considered approval process

Our network ●●

Connections of our employees, Board and Advisory Panel

●●

Links with research institutes, angel and network groups and intellectual property rich companies within the Cambridge ecosystem

We build global, categoryleading companies Our financial resources ●●

Net assets of £206.4 million and no long-term liabilities

●●

Cash, deposits and shareholder commitments of £135.0 million

Our philosophy ●●

●●

Our ambition ●●

To build category-leading companies from brilliant technologies in Europe’s innovation capital

●●

To create a prosperous and sustainable business

Value creation

Simple, transparent and fair investment structures

●●

Actively involved in the development of the business

Growth in net asset value and net asset value per share

●●

Realisations – at the optimal time for the portfolio companies concerned

Our network ●●

We create sustainable value for our stakeholders

Strategic and financial syndicate partners Local and global life science and technology companies

Societal benefits ●●

The potential impact of our portfolio companies should not be underestimated. If successful, they will make a material difference by, for example, improving cancer treatment, diagnosing genetic diseases, using energy more efficiently and making cities smarter

11 www.cicplc.co.uk

Our strategic objectives Building and realising value for our shareholders Construct a diversified portfolio of promising businesses

Secure and sustain a pipeline of opportunities

●●

A preferred investor for the University of Cambridge

●●

Leverage our network

●●

Focus on Cambridge

●●

Focus on opportunities with world-class intellectual property, visionary entrepreneur(s), potential to be a global category leader, ability to scale and a clear path to commercialisation

Cultivate and harvest portfolio companies for value

Actively nurture portfolio companies to help them flourish

●●

Proactive board representation

●●

Implement management changes and incentives

●●

Forge syndicates that fit the business

●●

Deploy capital and other resources

●●

Influence corporate strategy and business development

●●

Facilitate access to capital markets and M&A advisers

●●

Expedite realisations, as and when appropriate

Execute our disciplined screening and approval process

LINK TO KPIs

Net assets Number of portfolio companies

Total value of portfolio Number of portfolio companies Capital invested in the year

Capital invested in the year

Growth in new assets

Fair value changes in the year

Net assets per share Realisations

LINK TO PRINCIPAL RISKS 1

2 6

5 7

READ ABOUT OUR PRINCIPAL RISKS ON PAGES 30 TO 33

12 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT

Our key performance indicators

GOVERNANCE FINANCIAL STATEMENTS

Monitoring the effectiveness of our activities against our objectives KPIs NET ASSETS

DESCRIPTION The value of the Group’s assets less the value of its liabilities

PERFORMANCE 2019

£206.4m £144.0m

2018

2017

GROWTH IN NET ASSETS

The growth in net assets during the year

£17.3m £75.6m

The value of the Group’s interests in portfolio companies

2018

86.1 p 75.8 p

2019

£186.3m £110.7m

2018

2017

CAPITAL INVESTED IN THE YEAR

The total capital deployed into portfolio companies during the year

NUMBER OF PORTFOLIO COMPANIES

The net change in the valuation of portfolio companies, such valuation determined in accordance with the Group’s accounting policy

2019

£44.9m

2018

£32.7m

The number of portfolio companies in the Group

£29.0m

2019

£30.7m £19.8m

2018

2017

2019

22 19

2017

The total amount received from the disposal of interests in portfolio companies

Funds were deployed into four new and 17 existing portfolio companies, increasing the cumulative amount invested to £127.3 million (2018: £82.4 million) from 266 (2018: 255) opportunities reviewed in the year

Fair value changes in the year increased cumulative fair value changes to £59.0 million (2018: £28.3 million), representing a 46% (2018: 34%) uplift on deployed capital

£4.4m

2018

REALISATIONS

The £75.6 million increase (2018: £52.5 million) is attributable to capital invested and fair value changes during the year

£58.2m

2017

FAIR VALUE CHANGES IN THE YEAR

During the year the Company secured £150.0 million of commitments, at 88.5 pence per share, of which £38.6 million has been called. The increase in net assets per share is also attributable to fair value changes in the year

94.2 p

2019

2017

TOTAL VALUE OF PORTFOLIO

The growth in net assets included net proceeds from the issue of shares in 2019 of £34.4 million (2018: £nil; 2017: £73.2 million)

£62.4m

2017

Net assets, plus committed capital, divided by fully diluted number of shares

The increase arises from net proceeds from the issue of shares (£34.4 million) and fair value changes (£30.7 million), less net operational expenditure

£126.7m

2019

2018

NET ASSETS PER SHARE

COMMENTARY

2019

£0.0m

2018

£0.0m

2017

£0.0m

Two life science and two technology companies were added during the year such that the portfolio comprised 14 and 12 companies, respectively, at 31 March 2019, 17 of which have a direct connection to the University of Cambridge The Group’s first investment was in May 2014 and there have been no disposals to date

13 www.cicplc.co.uk

Operational report We have made tremendous progress during the year as we substantially increased our assets under management, augmented our portfolio and restructured the team to position our business for future expansion. In addition, our relationship with the University of Cambridge, including our privileged position as a preferred investor for the University, goes from strength to strength.

£150 million capital raise

During the year we completed a funding round of £150 million, bringing the total amount of capital raised to date to £275 million. The financing is one of the largest private financing rounds in Europe this year and more than doubles our financial resources.

Putting our capital to work

The round was supported by a geographically diverse range of new institutional and strategic investors, with the University of Cambridge and Cambridge University Endowment Fund contributing the cornerstone investment. The funds raised will be used to support our existing portfolio and enable investment in new opportunities arising from both the University of Cambridge and the wider Cambridge ecosystem.

During the year ended 31 March 2019, the Group made 31 investments (2018: 17) and deployed a total of £44.9 million (2018: £32.7 million) in four new and 17 existing portfolio companies, such that cumulatively £127.3 million (2018: £82.4 million) had been invested in 26 (2018: 22) companies.

Transactions of £1 million or more

FUNDING ROUND (£ MILLION)

100

KEY:

Life sciences Technology Bubble size reflects the value of CIC’s contribution to the round

0 JUNE 2018

14 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

SEPTEMBER 2018

DECEMBER 2018

MARCH 2019

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

We added four companies to our portfolio

AudioTelligence, where we led a £3.1 million seed funding round, and which is delivering real-time audio processing technology for the enhancement of automatic speech recognition (ASR) systems. Gyroscope Therapeutics, where we followed Cambridge Enterprise’s initial investment, and which is developing cutting edge, genetically defined therapies for the treatment of eye diseases linked to an unbalanced complement system, which is a part of the immune system. Polyprox Therapeutics, where we co-led with Cambridge Enterprise a £3.4 million seed financing round, and which will develop biopharmaceuticals for the treatment of cancer. Swim.ai, an edge intelligence software firm, where we led a $10 million Series B round alongside a strategic investment by Arm, the global semiconductor and software design company.

AudioTelligence’s technology dramatically enhances the accuracy of ASR systems, such as those used in mobile devices, home assistants and voice-activated, hands-free automotive systems, and also addresses other applications, such as the hearing assistance market. It processes the output from low-cost uncalibrated microphones and delivers significant improvements in separating a speaker’s voice from background noise and other conversations. The company is a spin-out from Cambridge-based CEDAR Audio, a world leader in audio restoration, dialogue noise suppression and speech enhancement for the entertainment and audio forensic sectors. AudioTelligence uses technology developed by the Signal Processing Group of the University of Cambridge, one of the leading global academic departments in this field. Further details are provided in the case study on page 24.

A significant portion of the founding intellectual property of Gyroscope Therapeutics came from the work of the laboratory of Professor Sir Peter Lachmann at the University of Cambridge. This was developed, licensed and invested in by Cambridge Enterprise. During the year, Gyroscope announced that the first patient had been successfully dosed in a Phase I/II clinical trial to assess the safety and biological activity of its lead product, GT0005, which uses a novel therapeutic approach in dry age-related macular degeneration (AMD). Following the year end, Gyroscope announced that it had merged with Orbit Biomedical, which has a sub-retinal surgical delivery technology, to create the world’s first end-to-end retinal gene therapy company with clinical, delivery and manufacturing capabilities.

PolyProx Therapeutics, a spin-out of the University of Cambridge, is based on more than a decade of research from the laboratory of the founder, Professor Laura Itzhaki, in the Department of Pharmacology. PolyProx Therapeutics is developing a new class of drugs, Polyproxin™ molecules, which selectively target tumour cells and trigger the natural degradation machinery within the cell to arrest tumour growth. The Polyproxin™ technology has the potential to address cancer targets that are not accessible using current technologies, offering the possibility of developing improved treatments in major diseases such as lung, colorectal and pancreatic cancers. The seed financing will support research to validate the technology across a range of tumour targets over the next two years.

Swim.ai provides edge intelligence software, which combines local data processing with analytics and machine learning to deliver real-time business insights. Edge computing is an emerging technology for processing data on sensors and control devices in a network closest to where that data is generated. Processing data at the edge, where it is captured, rather than transmitting that data to the cloud, reduces latency and bandwidth, and reduces cloud storage and computing costs. The Series B funding will be used to launch a Cambridge-based artificial intelligence R&D centre, capitalising on the expertise available in the Cambridge ecosystem, to accelerate product development, and expand sales and marketing into new verticals and geographies. Further details are provided in the case study on page 23.

15 www.cicplc.co.uk

Operational report CONTINUED

We also invested in 17 of our existing portfolio companies

●●

Bicycle Therapeutics, which closed a £22 million round to continue progressing its therapeutic pipeline based on its proprietary bicyclic peptide (Bicycle®) product platform.

●●

CMR Surgical, which closed a $100 million Series B round, Europe’s largest medical device financing, to commercialise its next-generation surgical robot, Versius®. Activities include the completion of validation studies for regulatory approval processes in both Europe and the US and commercial scale-up in response to considerable industry interest in the adoption of this new product.

●●

GeoSpock, in which we led a £10 million funding round alongside new investor, KDDI Supership, and other existing investors. The additional funding will support the spatial data company’s international expansion strategy and enable continued research and development, particularly in the areas of machine learning and data science.

●●

Inivata, in which we participated in the Series B fundraising of £40 million. The first close occurred in August 2018, and the final close of the over-subscribed round completed in March 2019. The funds raised will be used to advance the US commercial roll-out of Inivata’s InVisionFirst™-Lung liquid biopsy test.

●●

Morphogen-IX, where we participated in the £18 million Series B financing to support formal preclinical development of the company’s lead candidate, MGX292. MGX292 is a proteinengineered variant of BMP9 that has proven highly efficacious and safe in extensive preclinical studies. MGX292 is the first agent

with the potential to be disease-modifying and to transform the lives of patients with pulmonary arterial hypertension. ●●

PragmatIC, where we led a £13 million round from existing and new investors. The financing will enable PragmatIC to continue to increase production of its flexible integrated circuits and launch its ConnectIC family of ultra-low cost RFID circuits.

●●

Undo, where we led a $14 million Series B funding round for the continued development of new software debugging technologies. The funding will be used to grow Undo’s software development team, accelerate its product development and expand its US operations.

During the year we determined that the value of Exvastat and Jukedeck had deteriorated, the former due to the results of a negative clinical trial and the latter due to a lack of commercial traction. While these outcomes are disappointing, the early stage businesses that we support are inherently high risk and it is inevitable that a certain proportion of these businesses will not succeed. While we strive to minimise such risks, our business model is sufficiently robust that we can prosper even if some of our individual portfolio companies fail to achieve their potential. Since the year end, the Group has invested a further £12 million in new and existing portfolio companies, including River Lane Research, Bicycle Therapeutics, Cytora, Prowler.io and Storm Therapeutics, such that the total capital currently committed to the portfolio is £146 million and the portfolio comprises 27 companies, with 18 having a direct University of Cambridge connection.

Investments in existing portfolio companies have resulted in a net fair value gain of £30.7 million (2018: £19.8 million) which has increased the cumulative fair value gain to £59.0 million (2018: £28.3 million), representing a 46% (2018: 34%) uplift on invested capital as set out below. 31 MARCH 2018 £ MILLION

ACTIVITY DURING THE YEAR

31 MARCH 2019

CASE STUDY

COST OF INVESTMENT

FAIR VALUE CHANGES

CARRYING VALUE

COST OF INVESTMENT

FAIR VALUE CHANGES

CARRYING VALUE

Page 19

7.5

15.9

23.4

7.0

0.5

30.9

Significant investments CMR Surgical

11.6

1.3

12.9

6.9

4.1

23.9

PragmatIC

Page 20

8.4

2.9

11.3

5.0

4.9

21.2

Bicycle Therapeutics

Page 21

8.5

1.3

9.8

2.5

2.0

14.3

Congenica

Page 22

5.0

3.2

8.2

0.5

4.1

12.8

Imagen

6.0

0.7

6.7

1.9

4.0

12.6

Origami Energy

5.9

3.2

9.1

–

9.1

GeoSpock

3.5

0.5

4.0

3.0

1.2

8.2

26.0

(0.7)

25.3

18.1

9.9

53.3

82.4

28.3

110.7

44.9

30.7

186.3

Inivata

Other investments

16 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW OVERVIEW STRATEGIC REPORT GOVERNANCE GOVERNANCE FINANCIAL FINANCIAL STATEMENTS STATEMENTS

Our portfolio made significant progress

We have a balanced portfolio with a strong momentum, including several companies that are already demonstrating significant potential. We have summarised below some recent notable achievements. Bicycle Therapeutics, which is developing a new class of therapeutics to treat cancer and other debilitating diseases based on its proprietary bicyclic peptide (Bicycles® platform), announced its Nasdaq IPO. This is the first company in our portfolio to conduct an IPO, and exemplifies the way in which we support the transformation of exciting, early-stage companies from the Cambridge ecosystem as they develop into global, category-leading companies. Carrick Therapeutics, the biopharmaceutical company focusing on the innovative research and development of transformative oncology medicines, licensed exclusive worldwide rights to develop and commercialise an investigational targeted ovarian cancer drug from BTG plc, the global specialist healthcare company. The addition of this targeted therapy means that Carrick is now developing two clinical assets and a pre-clinical pipeline, all of which is targeting critical pathways that drive aggressive and resistant cancers. Congenica was awarded a multi-year contract by Genomics England to be a provider of Diagnostic Decision Support Services in relation to the world-leading Genomic Medicine Service which the UK National Health Service is establishing. Initially, patients who suffer with rare and inherited diseases and cancer will be able to access genomic testing - an area of focus for Congenica’s Sapientia™ platform. Sapientia™ has already been extensively validated on approximately 10,000 genomes during the 100,000 Genomes Project run by Genomics England. CMR Surgical, the company behind the next-generation surgical robotic system Versius®, announced that it had successfully completed its first series of robotically assisted surgical procedures in humans. The surgeries consisted of minor, intermediate and major gynaecological and upper gastrointestinal procedures and no adverse events were reported as a result of the use of Versius® after a 30-day follow-up. Inivata, a leader in liquid biopsy, announced that it had received a final coverage determination for its InVisionFirst™-Lung Liquid Biopsy test, a blood-based circulating tumour DNA (ctDNA) test for the detection of genomic alterations in the most commonly mutated genes in advanced Non-Small Cell Lung Cancer (NSCLC).

This policy, which became effective on 8 April 2019, provides specific coverage for InVisionFirst™Lung for all fee-for-service Medicare patients in the United States with advanced (Stage IIIB/IV) NSCLC who meet specific clinical criteria. The disease is by far the leading cause of cancer death among both men and women - approximately 222,500 new cases of lung cancer were diagnosed in the US during 2018 with 80% to 85% being NSCLC. Microbiotica, a preeminent player in microbiomebased therapeutics spun out of the Wellcome Sanger Institute, entered into a multi-year strategic collaboration with Genentech, a member of the Roche Group, to discover, develop and commercialise biomarkers, targets and medicines for inflammatory bowel disease (IBD) in a deal worth up to $534 million. Microbiotica will use its precision metagenomics microbiome platform to analyse patient samples from clinical trials of Genentech’s investigational IBD medicines, in order to identify microbiome biomarker signatures of drug response, novel IBD drug targets, and live bacterial therapeutic products. Origami Energy gained further commercial traction when its technology platform was selected by SSE, the UK’s leading industrial and commercial energy supplier and the UK’s leading generator of renewable energy. The collaboration provides a significant enhancement to SSE’s market-leading energy supply proposition, enabling industrial and commercial customers to access new revenue streams in the flexibility market, while taking a more sustainable approach to their energy use. PragmatIC, a world leader in ultra-low cost flexible electronics, installed and commissioned the first FlexLogIC™ “fab-in-a-box” in its facility at Sedgefield, UK. FlexLogIC is a self-contained, fully automated system delivering high throughput manufacturing of ultra-low cost, thin and flexible integrated circuits. In addition, PragmatIC announced strategic collaborations with Smooth & Sharp Corporation and Mühlbauer to accelerate the adoption of its flexible integrated circuits (FlexICs), for which it had already received orders for over 20 million units. Prowler.io, which is taking artificial intelligence (AI) beyond pattern recognition, launched VUKU, its AI platform for enterprise decision-making. VUKU deploys novel AI technologies for autonomous, adaptive and data-efficient decision-making in complex, dynamic and uncertain environments, such as financial portfolio management, logistics, ride sharing, port management and autonomous systems.

17 www.cicplc.co.uk

Operational report CONTINUED

Strategic initiative

Our Board

Immediately following the year end we announced the launch of Start Codon, a new strategic initiative aimed at accelerating the translation of world-class research into commercially successful companies. We are a founding investor in Start Codon and are joined by: Babraham Bioscience Technologies; Genentech, a member of the Roche Group; Dr Jonathan Milner, co-founder and Deputy Chairman of Abcam plc and a member of CIC’s Advisory Panel; and Dr Ian Tomlinson, founder of Domantis and Chairman of Apollo Therapeutics and the Stevenage Bioscience Catalyst.

On 1 April 2018 we welcomed Professor Andy Neely, Pro-Vice-Chancellor: Enterprise and Business Relations at the University of Cambridge, as he succeeded Professor Duncan Maskell as a University-nominated Director. Previously, Andy was Head of the Institute for Manufacturing (IfM) and of the Manufacturing and Management Division of Cambridge University Engineering Department and is a Fellow of Sidney Sussex College.

Start Codon will identify and recruit high-potential life science and healthcare companies from across the UK and beyond, provide seed funding, and leverage the world-class resources of the Cambridge ecosystem to reduce risk and prepare them for a successful Series A fundraise. The accelerator will be the first within the Cambridge area to provide life science startups with seed funding, a full-time dedicated team of experienced and active mentors, and office and laboratory space located at the Milner Therapeutics Institute within the Cambridge Biomedical Campus. We are proud to have been part of the Start Codon initiative from inception and we are excited to support the world class businesses that will emerge from its programme. The Cambridge ecosystem has already created over a dozen billion-pound businesses and we see Start Codon as an important facilitator in creating more such successes.

Our leadership team In April 2019, following the successful completion of the £150 million fundraising, we announced the departure of Victor Christou. Victor had spent over five years with the Company, most of which had been as Chief Executive Officer.

Our Advisory Panel During the year we welcomed Ruth March, Senior Vice President of AstraZeneca’s Precision Medicine and Genomics function, to our Advisory Panel of business leaders, entrepreneurs and worldrenowned scientists. Her leadership in precision medicine has led to the regulatory approval and launch of 25 new diagnostics linked to four of AstraZeneca’s precision medicines in oncology and inflammation. In addition, Ruth has driven the adoption of innovative precision medicine approaches by 90% of AstraZeneca’s clinical portfolio. These include the first therapeutic label based on circulating tumour DNA, the first companion diagnostic for complex laboratory testing, and the first point of care diagnostic linked to respiratory disease treatment.

Outlook After five years of operation, we have established Cambridge Innovation Capital as a leading provider of capital and expertise in the Cambridge ecosystem. Our relationship with the University of Cambridge has grown in strength and depth and we are pleased to report that 65% of our portfolio comprises University-originated spin-out companies. The other part of our portfolio is derived from the greater Cambridge ecosystem, which continues to expand and flourish faster than anywhere else in the UK.

Victor made a significant contribution to the success of the Company. He led the process of establishing a first-class team and an excellent portfolio of companies. He also led two fundraising rounds, raising £225 million in aggregate, and took CIC from its early foundation to become a principal investor in UK intellectual property. He leaves with our gratitude for all that he has done and we wish him the very best for the next stages of his career.

We are proud to be a key participant in such a thriving community and we look forward with much anticipation to the future development of our business.

Following Victor’s departure, Edward Benthall assumed the role of Executive Chairman and the leadership team was restructured to reflect a partnership model in readiness for the next phase in CIC’s development. To help support this development we are actively recruiting two additional investment-focused partners, one each for the life science and technology teams.

Andrew Williamson

Rob Sprawson

MANAGING PARTNER

PARTNER and CFO

Michael Anstey

Robert Tansley

PARTNER

19 JUNE 2019

18 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT

CMR Surgical

GOVERNANCE FINANCIAL STATEMENTS

As the first surgeon to conduct a laparoscopic procedure in a clinical setting using Versius®, I can say that the system has been shown to be highly effective and has significant potential for bringing minimal access surgery to patients. The Versius® Surgical Robotic System is flexible and fits easily into our busy operating environment. Dr Dhananjay Kelkar LEADING LAPAROSCOPIC SURGEON

Next generation robotic system for minimal access surgery

Company description ●●

●●

To create the next generation of surgical robot the founders started with a blank piece of paper; in just five years they created Versius®. From the very start, the design has been guided by the needs of patients, surgeons and surgical teams. Versius® was designed to fit easily into existing surgical workflows, while the console design allows surgeons to work in a way that has the potential to reduce physical and mental effort The Versius® robotic system is versatile, ergonomic, portable, easy to set up and cost-effective. These parameters are required for the company to meet its mission of bringing the benefits of minimal access surgery (MAS) to everyone who needs it

Recent developments ●●

The Versius® surgical robotic system was successfully used to complete 30 procedures at a leading hospital in India

●●

The company received a European CE Mark in March 2019 for its Versius® Surgical Robotic System

●●

Opened its new global headquarters of 55,000 square feet on the outskirts of Cambridge

●●

In May 2018 CMR Surgical completed a $100 million Series B funding in which CIC also participated

Potential to change the world ●●

Versius® aims to bring the benefits of MAS to everyone who needs it

●●

MAS delivers acknowledged clinical benefits which include less trauma, reduced scarring, faster recovery times and lower costs for healthcare providers

●●

Robot assisted surgery offers the potential to be easier to master and less physically demanding than manual laparoscopy

£30.9m

CARRYING VALUE

10.0% EQUITY HOLDING

19 www.cicplc.co.uk

PragmatIC Global companies, eager to enhance their digital presence, have quickly identified a variety of exciting use-cases for connectivity in everyday items. Scott White CEO, PRAGMATIC

Electronics in everyday objects

Company description ●●

PragmatIC is a world leader in ultra-low-cost flexible electronics

●●

Unique technology platform delivers flexible integrated circuits (FlexICs) that are thinner than a human hair and can be easily embedded into everyday objects

●●

Enables the potential for trillions of smart objects that can engage with consumers and their environments

Recent developments ●●

Launched the ConnectIC® family of ultra-lowcost RFID flexible integrated circuits for applications including stock control, supply chain assurance, brand protection and consumer engagement

●●

Received orders for over 20 million units in just two months

●●

Strategic partnership with Mühlbauer, which has over 90% global market share in RFID assembly equipment

Potential to change the world ●●

PragmatIC’s ultra-low-cost technology increases the addressable market for electronic intelligence by an order of magnitude or more

●●

Fully automated “fab-in-a-box” enables highly scalable manufacturing with 100x lower capex than a silicon fabrication plant

●●

Vision to embed FlexICs in a trillion smart objects over next decade

£23.9m CARRYING VALUE

32.6% EQUITY HOLDING

20 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT

Bicycle Therapeutics

GOVERNANCE FINANCIAL STATEMENTS

We are grateful for the continued support of our investors, including CIC, as we progress our lead candidate, BT1718, through the clinic and continue to advance our preclinical programmes, including toxin drug conjugates and immune modulators to treat cancer and other debilitating diseases. Kevin Lee CEO, BICYCLE THERAPEUTICS

Pioneering therapeutics based on proprietary bicyclic peptides

Company description ●●

●●

Bicycle Therapeutics is a clinical-stage biopharmaceutical company developing a novel class of medicines, referred to as “Bicycles®”, for diseases that are underserved by existing therapeutics The company’s internal programmes are focused on oncology indications with high unmet medical need, with the lead product candidate currently being evaluated in patients with advanced solid tumorous Bicycle is headquartered in Cambridge, UK, with many key functions and members of its leadership team located near the biotech hub of Boston, Massachusetts

Recent developments ●●

On 22 May 2019, Bicycle Therapeutics announced the pricing of its initial public offering in the US. Bicycle’s shares are trading on Nasdaq and the gross proceeds of the offering are expected to be approximately $60.7 million

●●

AstraZeneca expanded its collaboration with Bicycle to include additional targets in respiratory and cardio-metabolic diseases

●●

Founder and director, Sir Gregory Winter, awarded the Nobel Prize in chemistry for his work in developing phage display for the directed evolution of antibodies and peptides to produce new medicines

Potential to change the world ●●

While excellent progress has been made in the development of new cancer therapeutics, most patients with metastatic disease remain incurable

●●

The uniqueness of Bicycle’s proprietary technology enables the design and development of versatile and innovative medicines for patients with the most aggressive cancers, such as pancreatic, lung, gastric and triple negative breast cancer

£14.3m

CARRYING VALUE

10.5% EQUITY HOLDING

21 www.cicplc.co.uk

Congenica Congenica is at the exciting scale-up stage of its commercial development. As a top-tier Cambridgebased life sciences company at the forefront of the fastmoving genomics market, Congenica has demonstrated how, with the right investment and leadership, the UK can build world-leading technology companies originating from world-leading UK science. Dr Andy Richards CHAIRMAN, CONGENICA

Enabling genomic medicine

Company description ●●

●●

Congenica is the provider of the diagnostic decision support platform, Sapientia™, and associated clinical services, which enable clinicians to interrogate the human genome to identify disease-causing variants Headquartered in Cambridge, UK, and with a footprint in the US and China, Congenica is born out of pioneering research from the Wellcome Sanger Institute and the NHS

Potential to change the world ●●

Genomic medicine is the use of advanced genomics techniques, such as Next Generation Sequencing, combined with bioinformatics

●●

Its introduction into healthcare promises to substantially improve disease diagnosis and management

●●

Congenica is leading the genomic medicine revolution by providing life-changing answers to patients with genetic disorders

Recent developments ●●

Raised an additional £13.3 million to reach a total of £23.3 million for its Series B funding round

●●

Awarded a multi-year contract by Genomics England to be a provider of Diagnostic Decision Support Services for the delivery of the world-leading NHS Genomic Medicine Service

●●

Entered into an agreement with a new strategic partner, Digital China Health Technologies (DCHealth), to develop a version of the Sapientia™ platform designed to enable clinicians and patients in China to benefit from clinical genomics

£12.8m CARRYING VALUE

31.4% EQUITY HOLDING

22 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT

Swim.ai

GOVERNANCE FINANCIAL STATEMENTS

Swim’s ability to analyse data and apply machine learning at the edge unlocks new IoT use cases by unleashing data that was previously too difficult, slow or expensive to send to the cloud for analysis. Damon Civin PRINCIPAL DATA SCIENTIST, ARM

Intelligent DataFabric software

Company description ●●

Swim software provides an intelligent data fabric for edge/streaming data, analytics and applications

●●

Swim provides enterprises with ‘intelligent data fabric’ solutions for edge/streaming data visualisation and analytics

●●

Swim enables developers to rapidly create a new generation of stateful streaming data applications

●●

Swim uses edge compute, digital twin and warp streaming technology to efficiently collect, reduce, analyse and process data anywhere, at massive scale, for a fraction of the cost of central data solutions

Recent developments ●●

CIC led a $10 million Series B funding round in the third quarter of 2018

●●

Funding will fuel growth in this US-based edge computing business to launch an R&D centre in Cambridge, UK and accelerate development to meet growing demand for Swim DataFabric software

Potential to change the world ●●

Swim DataFabric eliminates the need to “store and then process” real-time data. For the first time, 80% of the world’s data can be instantly analysed and acted on – wherever there is compute available

£3.0m

CARRYING VALUE

11.6% EQUITY HOLDING

23 www.cicplc.co.uk

AudioTelligence With the proliferation of consumer products that rely on speech recognition, our technology creates new opportunities in a world that’s filled with noise. Ken Roberts CEO, AUDIOTELLIGENCE

Making speech clear in a noisy world

Company description ●●

AudioTelligence uses a data driven approach, called blind audio signal separation, to help distinguish the target voices from background noise

●●

The technology doesn’t require matched microphones, which makes it cheaper and easier to implement, it doesn’t require the user to train the algorithm, and it offers high performance with very low latency

●●

The system is also adaptive so, if new noises appear, these are also eliminated from the sound heard by the listener. The resulting sound is high quality with no artefacts or echo

Recent developments ●●

CIC led a £3.1 million seed funding round in the third quarter of 2018

●●

The company has already received orders from a tier 1 customer in Asia to deploy the technology in various consumer products to improve speech recognition in noisy environments

Potential to change the world ●●

AudioTelligence’s technology addresses the “cocktail party problem” which affects many people with hearing difficulties - around 10% of the world population, according to the World Health Organisation

£2.6m CARRYING VALUE

31.7% EQUITY HOLDING

24 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW OVERVIEW STRATEGIC REPORT GOVERNANCE GOVERNANCE FINANCIAL FINANCIAL STATEMENTS STATEMENTS

25 www.cicplc.co.uk

Financial review Statement of comprehensive income

During the year ended 31 March 2019 the Group made a profit of £27.85 million (2018: £17.30 million). The principal components of the profit are fair value changes on investments and administrative expenses as summarised below: 2019 £ MILLION

2018 £ MILLION

Fair value changes in investments

30.71

19.80

Administrative expenses

(3.35)

(2.90)

Other operating income

0.04

0.05

Finance income

0.46

0.36

Tax

(0.01)

Profit and total comprehensive income for the year

27.85

17.30

The Group measures the fair value of its unquoted investments in line with International Private Equity and Venture Capital (“IPEV”) Valuation Guidelines and has adopted the December 2018 IPEV Valuation Guidelines for the year ended 31 March 2019. The Group considers that fair value estimates based entirely on observable market data are of greater reliability than those based on assumptions. Given that at the year end the Group’s investments were 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 price of recent investment is considered to be the best estimate of fair value at the date of investment and is therefore used as the de facto starting position for any fair value estimate made by the Group. Accordingly, where there has been a recent investment by a third party, the price of that investment will also provide the starting position for fair value, subject to adjustment for any subsequent milestones or impairments. The Group’s accounting policy for valuing its investments is provided in note 3 to the consolidated financial statements. During the year the Group recorded an unrealised fair value gain of £30.71 million (2018: £19.80 million). Further details are provided in the Operational Report on pages 14 to 25.

Administrative expenses 2019 £ MILLION

2018 £ MILLION

Core administrative expenses

3.16

2.87

Share based payments

0.13

0.03

Employer’s NIC on options not yet exercised

0.06

–

3.35

2.90

Average number of employees during the year

Core administrative expenses, which primarily relate to people costs, facilities expenses and professional fees, have increased as a result of recruitment fees, for planned expansion to the team, and general inflationary pressures. PROFIT/(LOSS) ATTRIBUTABLE TO EQUITY HOLDERS

NET ASSETS

CASH AND SHORT-TERM DEPOSITS £68.92m

£206.38m

£27.85m

£143.99m

£17.30m

£42.03m

£126.66m

£33.68m

£31.76m

2018

2019

£26.93m £49.44m

£51.09m

2015

2016

£1.69m 2015 £(0.37)m

2016

2017

2018

2019

2017

2018

£(0.04)m

26 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

2019

2015

2016

2017

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Statement of financial position

At 31 March 2019 the Group had: ●●

net assets attributable to shareholders of £206.38 million (2018: £143.99 million);

●●

additional committed capital of £111.42 million (2018: £nil); and

●●

and fully diluted total issued shares of 337.39 million (2018: 167.36 million).

As a result, the adjusted net assets per fully diluted share was 94.2 pence (2018: 86.0 pence), a rise of 8.2 pence (9.5%) over the prior year. 2019 £ MILLION

2018 £ MILLION

186.29

110.71

31.76

33.68

Other net assets and (liabilities)

(11.67)

(0.40)

Net assets

206.38

143.99

84.48

50.07

Investments Cash and short-term deposits

Share capital and premium account

3.49

3.37

Capital reserve

59.01

28.30

Retained profit

59.40

62.25

206.38

143.99

Share based payments reserve

Total equity The value of the Group’s holdings in portfolio companies increased to £186.29 million at 31 March 2019 (2018: £110.71 million) after net fair value gains of £30.71 million (2018: £19.80 million) and investments of £44.87 million (2018: £32.75 million). In addition, the Group had committed, subject to milestones, a further £6.42 million (2018: £6.36 million) at the end of the year. The Operational Report on pages 14 to 25 contains further details on the Group’s portfolio, including key developments during the year. CARRYING VALUE OF INVESTMENTS AT 31 MARCH KEY:

Cash Invested Fair value changes Number of companies in portfolio 26 £186.29m

19 £58.16m

£24.72m

£7.53m

2015

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. Details of the credit ratings of the Group’s cash and deposit counterparties are provided in note 18 to the consolidated financial statements.

The Group’s business model seeks to deliver long-term value to its stakeholders by supporting category-leading businesses in rapidly growing technology sectors. The Group primarily seeks to generate capital growth from its holdings in these companies over the longer term but has historically made cumulative losses from its operations from a UK tax perspective.

£110.71m

At 31 March 2019 cash and short-term deposits amounted to £31.76 million (2018: £33.68 million). This balance, together with other liabilities, include a subscription received in advance of notice for draw down being given of £8.17 million.

Taxation

During the year the Company secured £150.00 million of commitments from existing and new shareholders, increasing the total amount of capital raised to £275.00 million. At 31 March 2019 £38.58 million had been drawn down with the balance, £111.42 million, expected to be drawn down in the next two years. Total fundraising costs, which were approximately 2.75% of committed funds, were charged directly to the share premium account.

Rob Sprawson 2016

2017

2018

2019

PARTNER AND CHIEF FINANCIAL OFFICER 19 JUNE 2019

27 www.cicplc.co.uk

Corporate governance and risk management framework

BOARD

Schedule of matters reserved for the Board Audit and Risk Management Committee

Nomination Committee

Investment activities

Operational matters

Investment Committee

Partners

Legal advisers Financial advisers Independent assurance

Advisory Panel Legal advisers Technical consultants

KEY:

Remuneration Committee

STRATEGIC

The Board The Board consists of the Executive Chairman, the Managing Partner and the Chief Financial Officer, collectively the Executive Directors, and seven Non-executive Directors, five of whom are considered by the Board to be independent. The biographies of members of the Board are provided on pages 34 to 35. The Board seeks to provide entrepreneurial leadership, albeit in compliance with its corporate governance and risk management framework, to help identify, invest in and build intellectual property rich life science and technology companies that have the potential to become global category leaders. 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 Group’s strategy, budgets and corporate actions and oversee progress towards defined goals. The Board recognises that to achieve its ambition it needs to maintain and periodically review its policy and decision-making framework while 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 key stakeholders are understood and met; and

●●

maintaining a satisfactory dialogue with shareholders.

OPERATIONAL

INFORMATION, ANALYSIS AND RECOMMENDATIONS

ENTREPRENEURIAL LEADERSHIP AND MONITORING PERFORMANCE

The Board is focused on building global, category-leading life science and technology businesses in the Cambridge ecosystem and is accountable to the Company’s shareholders for its corporate governance and risk management framework which is summarised below.

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 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: ●●

portfolio company, and potential portfolio company, related matters to the Investment Committee, which comprises the Executive Directors and Partners of the Company, although all Directors are provided with all briefing papers and may attend meetings; and

●●

operational matters to the Executive Directors.

CIC maintains an ongoing dialogue with its shareholders, with the Executive Directors offering them regular updates as and when appropriate. The Non-executive Directors are also available to discuss corporate governance and other matters with shareholders as and when required.

28 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

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. In addition, 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 18 to the consolidated financial statements.

The Audit and Risk Management Committee is chaired by Clive Birch and its other members are Dipti Amin and Edward Benthall. The Committee meets formally at least twice a year and otherwise as required. It is responsible for ensuring that the financial performance of the Company is appropriately reported 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), Ian Leslie 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 Humphrey Battcock and its other members are Clive Birch 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 Chairman, Executive Directors, 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 Managing Partner, the total individual remuneration package for the Company’s Executive Directors, company secretary, senior managers 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 30 to 33. 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 interests in its portfolio companies on a quarterly basis, although the performance of specific portfolio companies 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 and Risk Management Committee considers the need for an internal audit function each year.

29 www.cicplc.co.uk

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. RISK AND TREND

1. If the Group ceases to invest in opportunities arising from the University of Cambridge or the Cambridge ecosystem, the University may terminate its relationship with the Group. TREND: NO CHANGE £44.87 million (2018: £32.75 million) was deployed into four new and 17 existing portfolio companies (2018: two new, 11 existing) from 266 (2018: 255) opportunities reviewed in the year

2. The Group may overestimate or underestimate the opportunity and/or future potential of a portfolio company.

DESCRIPTION

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 ecosystem

IMPACT

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

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 and Cambridge ecosystem may not generate opportunities that are sufficiently attractive to warrant investment

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

The Group has a Collaboration 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

OBJECTIVES

KPIs

Read more on page 13

SECURE AND SUSTAIN A STRONG PIPELINE OF OPPORTUNITIES

NET ASSETS

CONSTRUCT A DIVERSIFIED PORTFOLIO OF PROMISING BUSINESSES

CAPITAL INVESTED IN THE YEAR

ACTIVELY NURTURE PORTFOLIO COMPANIES TO HELP THEM FLOURISH

TOTAL VALUE OF PORTFOLIO

NUMBER OF PORTFOLIO COMPANIES

CULTIVATE AND HARVEST PORTFOLIO COMPANIES FOR VALUE

33 www.cicplc.co.uk

Leadership team and Board of Directors Edward Benthall EXECUTIVE CHAIRMAN

Edward has been involved with CIC since its inception. He was Chairman of Cambridge Enterprise Limited, the University of Cambridge’s commercialisation arm, between 2010 and 2014. Before that he was Chairman of the Campaign Council for the University’s 800th Anniversary Campaign. Until April 2012, Edward was a Partner of 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 rate of return of more than 40%. Edward is also Chairman of the Eden Trust, the parent charity of the Eden Project.

Andrew Williamson

MANAGING PARTNER

Andrew has an undergraduate degree in Natural Science and a PhD in Physics from the University of Cambridge. After completing his PhD, Andrew performed postdoctoral research on solar power at the National Renewable Energy Laboratory before joining Lawrence Livermore National Laboratory (LLNL) in California, USA where he was a Lawrence Fellow and Project Leader for Nanomaterials research. Andrew left LLNL to complete an MBA at the University of California, Berkeley and from there joined Physic Ventures in San Francisco. Immediately prior to joining the Company, Andrew was a Partner at True North Venture Partners based in Chicago where he led that firm’s investments in energy and materials.

Rob Sprawson PARTNER AND CHIEF FINANCIAL OFFICER

Rob has more than 25 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 ecosystem and further afield. His previous roles have included being Chief Financial Officer of an ophthalmic specialty pharmaceutical company, a molecular diagnostic company and of Warwick Ventures Limited, the commercialisation arm of the University of Warwick, having worked for ten years in Corporate Finance at PricewaterhouseCoopers. Rob is a Fellow of the Institute of Chartered Accountants in England and Wales.

Michael Anstey PARTNER

Michael has a DPhil in Zoology in the field of neurobiology and was jointly supervised by professors at the University of Cambridge and the University of Oxford. Immediately prior to joining the Company, he was a Principal in the Healthcare Practice Area at Boston Consultancy Group (BCG), where he advised multinational healthcare businesses across North America, Europe, India and Japan on a broad range of topics, including corporate strategy, sales and marketing, market access, R&D strategy, and M&A. He also co-founded a biotechnology company focused on developing small molecule drugs that target protein-protein interactions implicated in disease. Prior to joining BCG Michael was an Investment Analyst at Oxford Capital Partners.

Robert Tansley PARTNER

Robert qualified in medicine from University College London and worked in hospital medicine before joining the pharma industry in development and regulatory roles at Sanofi, the MHRA and Roche. Robert then joined the Cambridge-based company Arakis as Medical Director until its £106 million sale to Sosei Inc before being involved in a number of startup companies, including being founding CEO of the malaria-focused company Treague and University of Copenhagen spin-out, Avilex Pharma. In addition, he was part of the founding team of Nasdaq-listed KalVista Pharmaceuticals, which is developing the first plasma kallikrein inhibitor for diabetic macular edema in collaboration with its scientific co-founders from Harvard Medical School. Robert is a member of the Royal College of Obstetricians & Gynaecologists and the Faculty of Pharmaceutical Medicine and has an MBA from London Business School and an MPhil in Biostatistics from the University of Cambridge.

KEY:

Board

Audit and Risk Management Committee

34 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

Nomination Committee

Remuneration Committee

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Dipti Amin INDEPENDENT NON-EXECUTIVE DIRECTOR

Dipti is currently a director at Maaya Associates Limited. Previously she was Senior Vice President and Chief Compliance Officer at Quintiles Transnational (recently rebranded as IQVIA). Over the last 25 years Dipti has held positions of operational and strategic responsibility within Pharmaceutical Services at the C-suite and board level, delivering consistently on growth, quality, customer, employee and process targets in businesses of £50-£500 million. Her broad and significant experience covers clinical pharmacology, as a Principal Investigator in Phase I clinical pharmacology studies, ethical issues in clinical research, drug development, ethics and compliance programmes as well as leadership and management of large, multi-functional, multi-geography groups.

Humphrey Battcock INDEPENDENT NON-EXECUTIVE DIRECTOR

Humphrey was previously co-head of Europe and on the executive committee of Advent International which he joined in 1994. Advent International is one of the world’s leading private equity firms with operations in ten countries. During his tenure, the firm increased its assets under management from £200 million to £30 billion. Prior to Advent, Humphrey was at Trinity Capital Partners, a UK-focused technology venture capital firm. Humphrey is a chartered accountant, with an MBA from London Business School and a Physics degree from Cambridge University. Humphrey is a member of the Cambridge University Campaign Board and a panel member of the Competition and Market Authority, as well as a trustee of Sadler’s Wells, the Woodland Trust and the Institute for Research in Schools.

Clive Birch INDEPENDENT NON-EXECUTIVE DIRECTOR

Clive Birch is a retired PricewaterhouseCoopers partner. Clive was partner in charge of the Cambridge office for 15 years up to 2010, during which time he was responsible for all aspects of that stand-alone 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. He was also part of the teams involved in fundraising and listing those clients on various markets. Clive is a Governor of Birkbeck College, part of London University, and is Chairman of Pigeon Land Limited and Pigeon Land 2 Limited.

Adam Glinsman INDEPENDENT NON-EXECUTIVE DIRECTOR

Adam was previously Co-Head of GAM Systematic, having been CEO of Cantab Capital Partners, a technology-driven systematic asset manager located in Cambridge, and acquired by Zurich-based GAM Asset Management in October 2016. Before Cantab, between 2003-2009, Adam held the role of COO, Partner and a member of the Management Committee of Lansdowne Partners, which grew to become one of the world’s leading equity hedge fund firms. Prior to that, Adam had held a variety of senior roles in the equity capital markets. Adam holds a BSc (Econ) with First Class Honours from the London School of Economics and an MPhil in International Relations from the University of Cambridge. Adam is also a member of the board of trustees at the Cambridge Arts Theatre. He has been involved with CIC since its inception.

Mike Muller 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 of ARM. Before joining ARM, he worked for Orbis Computers and had responsibility for hardware strategy and development of portable products at Acorn Computers.

Ian Leslie NON-EXECUTIVE DIRECTOR

Ian Leslie is Director of Information Services at the University of Cambridge and is Special Advisor to the Vice-Chancellor on environmental sustainability. He was previously Professor of Computer Science at the University’s Computer Laboratory with interests in operating systems, distributed systems and networks. Ian was also 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.

Andy Neely NON-EXECUTIVE DIRECTOR

Andy Neely is Pro-Vice-Chancellor: Enterprise and Business Relations at the University of Cambridge and former Head of the Institute for Manufacturing (IfM) and of the Manufacturing and Management Division of Cambridge University Engineering Department. He is a Fellow of Sidney Sussex College and founding director of the Cambridge Service Alliance. Previously he was a Fellow of Churchill College and has held appointments at Cranfield University, London Business School, Nottingham University and British Aerospace. He was also Deputy Director of AIM Research, the UK’s management research initiative, from 2003 until 2012.

35 www.cicplc.co.uk

Directors’ report Report of the Directors The Directors present their report together with the audited financial statements for the year ended 31 March 2019. 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 28 to 33.

Results and dividends During the year, the Group made a profit after tax for the year ended 31 March 2019 of £27.85 million (2018: £17.30 million). The Directors do not recommend the payment of a dividend (2018: £nil).

Directors The Directors who served during the year and up to the date of signing the financial statements were as follows: Edward Benthall Victor Christou Andrew Williamson Rob Sprawson

Executive Chairman Chief Executive Officer

Resigned 16 April 2019

Managing Partner

Appointed 9 May 2019

Partner and Chief Financial Officer

Dipti Amin

Independent Non-executive Director

Humphrey Battcock

Independent Non-executive Director

Clive Birch

Independent Non-executive Director

Adam Glinsman

Independent Non-executive Director

Mike Muller

Independent Non-executive Director

Ian Leslie

Non-executive Director

Andy Neely

Non-executive Director

Appointed 1 April 2018

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

Directors’ interests in shares The Directors who held office during the year ended 31 March 2019 had the following beneficial interests in the shares of the Company: AT 31 MARCH 2019

AT 31 MARCH 2018

NUMBER OF ORDINARY SHARES

NUMBER OF CLASS A COMMITMENT SHARES

% OF VOTING SHARE CAPITAL

NUMBER OF ORDINARY SHARES

% OF VOTING SHARE CAPITAL

Dipti Amin

72,832

210,784

0.08%

–

Humphrey Battcock

72,541

209,945

0.08%

–

433,791

209,945

0.19%

361,250

0.22%

12,477

36,111

0.01%

–

Victor Christou*

4,352

12,597

0.01%

–

Adam Glinsman

245,644

222,541

0.14%

168,750

0.10%

Michael Muller

58,033

167,956

0.07%

–

Edward Benthall Clive Birch

*Victor Christou’s interests are held by a connected party

36 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

The Directors who held office during the year ended 31 March 2019 had the following beneficial interests in options over the ordinary shares of the Company: AT 31 MARCH 2018

GRANTED DURING THE YEAR

AT 31 MARCH 2019

EXERCISE PRICE (PENCE)

1,435,709

–

1,435,709

0.17

51,650

126,500

178,150

0.01

29,228

–

29,228

0.17

18,018

44,128

62,146

0.01

Victor Christou

Rob Sprawson

Directors’ indemnities

Political donations

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.

The Group did not make any political donations during the year (2018: £nil).

Substantial shareholders As at 19 June 2019, the Company had the following shareholders with interests of 3% or more, in aggregate, of the Company’s ordinary and class A commitment shares. The ordinary and class A commitment shares carry equal voting rights, equal rights to income and distributions of assets on liquidation, or otherwise, and no right to fixed income. The Company’s issued share capital is disclosed in note 16 to the consolidated financial statements. 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

18.3% 12.4%

Post balance sheet events Material events occurring since the balance sheet date are disclosed in the Strategic Report and in note 20 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 Group’s cash and short-term deposits, together with commitments to invest secured from existing and new investors during the year ended 31 March 2019, are sufficient to meet the investment requirements and operational needs of the Group for at least a year from the date of approval of the financial statements.

Union Bancaire Privée

8.3%

Fosun Industrial

6.7%

Lansdowne

6.7%

Private Equity Solutions

5.0%

Legal & General

3.7%

Oman Investment Fund

3.7%

Given the above, 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.

Woodford Investment Management

3.7%

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

Bluesky Partnership II LP

3.7%

Lisbet Rausing

3.3%

Edward Benthall EXECUTIVE CHAIRMAN 19 JUNE 2019

37 www.cicplc.co.uk

Statement of Directors’ responsibilities IN RESPECT OF THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation. 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 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. 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 EXECUTIVE CHAIRMAN 19 JUNE 2019

38 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

39 www.cicplc.co.uk

Independent auditors’ report TO THE MEMBERS OF CAMBRIDGE INNOVATION CAPITAL PLC

Report on the audit of the financial statements Opinion In our opinion: ●●

Cambridge Innovation Capital plc’s Group financial statements and Company financial statements (the “financial statements”) give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 March 2019 and of the Group’s profit and cash flows for the year then ended;

●●

the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union;

●●

the Company financial statements have been properly prepared 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); and

●●

the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”), which comprise: the consolidated statement of financial position and the Company balance sheet as at 31 March 2019; the consolidated statement of comprehensive income, the consolidated statement of cash flows, and the consolidated and Company statements of changes in equity for the year then ended; the accounting policies; and the notes to the financial statements.

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Conclusions relating to going concern ISAs (UK) require us to report to you when: ●●

the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

●●

the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group’s and Company’s ability to continue to adopt the going concern basis of accounting for a period of at least 12 months from the date when the financial statements are authorised for issue.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s and Company’s ability to continue as a going concern. For example, the terms on which the United Kingdom may withdraw from the European Union are not clear, and it is difficult to evaluate all of the potential implications on the Group’s trade, customers, suppliers and the wider economy.

Reporting on other information The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included. Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report certain opinions and matters as described below. Strategic Report and Directors’ Report In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for the year ended 31 March 2019 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report.

Responsibilities for the financial statements and the audit Responsibilities of the Directors for the financial statements As explained more fully in the Statement of Directors’ Responsibilities in respect of the financial statements, the Directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

We have nothing to report in respect of the above matters.

40 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditors’ report. Use of this report 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.

Other required reporting Companies Act 2006 exception reporting 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

●●

certain disclosures of Directors’ remuneration specified by law are not made; or

●●

the Company financial statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility. Simon Ormiston SENIOR STATUTORY AUDITOR

for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Cambridge 19 JUNE 2019

41 www.cicplc.co.uk

Consolidated statement of comprehensive income FOR THE YEAR ENDED 31 MARCH 2019

YEAR ENDED 31 MARCH 2019 ÂŁ

2018 ÂŁ

Fair value changes in investments

30,709,963

19,798,701

Administrative expenses

(3,349,461)

(2,895,567)

NOTE

Other operating income

41,373

50,233

Operating profit

27,401,875

16,953,367

Finance income

462,201

360,342

27,864,076

17,313,709

Profit on ordinary activities before taxation Tax on profit on ordinary activities Profit and total comprehensive income for the year attributable to the equity holders All activities derive from continuing operations. The notes on pages 46 to 59 are an integral part of these financial statements.

42 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

(16,134) 27,847,942

(10,877) 17,302,832

OVERVIEW STRATEGIC REPORT

Consolidated statement of financial position

GOVERNANCE FINANCIAL STATEMENTS

AT 31 MARCH 2019

AT 31 MARCH NOTE

2019 £

2018 £

Property, plant and equipment

37,094

79,039

Investments

186,293,337

110,708,908

186,330,431

110,787,947

Assets Non-current assets

Current assets Trade and other receivables

Short-term deposits Cash and cash equivalents

Total assets

433,022

849,167

–

1,400,000

31,756,200

32,285,169

32,189,222

34,534,336

218,519,653

145,322,283

Liabilities Current liabilities Trade and other payables

Net assets

(12,136,916)

(1,329,248)

206,382,737

143,993,035

50,020,029

50,009,375

34,461,609

57,200

Equity Issued share capital Share premium account

3,495,741

3,369,044

Capital reserve

59,007,091

28,297,128

Retained earnings

59,398,267

62,260,288

206,382,737

143,993,035

Share based payment reserve

Total equity The notes on pages 46 to 59 are an integral part of these financial statements.

The consolidated financial statements on pages 42 to 59 of Cambridge Innovation Capital plc, registered number 08243718, were authorised for issue by the Board of Directors on 19 June 2019 and were signed on its behalf by Rob Sprawson PARTNER AND CHIEF FINANCIAL OFFICER

43 www.cicplc.co.uk

Consolidated statement of changes in equity FOR THE YEAR ENDED 31 MARCH 2019

NOTE

At 1 April 2017 Profit for the year and total comprehensive income Fair value changes in investments

ISSUED SHARE CAPITAL £

SHARE PREMIUM ACCOUNT £

SHARE BASED PAYMENT RESERVE £

CAPITAL RESERVE £

RETAINED EARNINGS £

TOTAL EQUITY £

50,009,375

57,200

3,340,082

8,498,427

64,756,157

126,661,241

–

17,302,832

–

19,798,701

(19,798,701)

–

Transactions with owners Share based payments

–

28,962

–

28,962

50,009,375

57,200

3,369,044

28,297,128

62,260,288

143,993,035

–

27,847,942

–

30,709,963

(30,709,963)

–

10,654

34,404,409

–

34,415,063

At 31 March 2018 Profit for the year and total comprehensive income Fair value changes in investments Transactions with owners Share capital issued (net of expenses) Share based payments At 31 March 2019

–

126,697

–

126,697

50,020,029

34,461,609

3,495,741

59,007,091

59,398,267

206,382,737

The notes on pages 46 to 59 are an integral part of these financial statements.

44 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT

Consolidated statement of cash flows

GOVERNANCE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2019

YEAR ENDED 31 MARCH NOTE

2019 £

2018 £

Cash flows from operating activities Operating profit Adjustments for: Fair value changes in investments Share based payments Depreciation

27,401,875

16,953,367

(30,709,963)

(19,798,701)

126,697

28,962

43,208

43,194

582,441

(647,889)

Decrease/(increase) in trade and other receivables (Decrease)/increase in trade and other payables Cash used in operating activities Income tax paid Net cash used in operations

(202,802)

622,138

(2,758,544)

(2,798,929)

(16,134)

(10,877)

(2,774,678)

(2,809,806)

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

(1,263)

(1,237)

Purchase of investments

(44,874,466)

(32,746,616)

1,400,000

10,000,000

295,905

324,221

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

(43,179,824)

(22,423,632)

38,581,929

–

(1,331,174)

–

Cash flows from financing activities Proceeds from issue of shares

Share issue costs Funds received in advance of notice for draw down being given Net cash generated from financing activities Net change in cash and cash equivalents

8,174,778 45,425,533 (528,969)

– (25,233,438)

Cash and cash equivalents at beginning of the year

32,285,169

57,518,607

Cash and cash equivalents at end of the year

31,756,200

32,285,169

The notes on pages 46 to 59 are an integral part of these financial statements.

45 www.cicplc.co.uk

Notes to the consolidated financial statements FOR THE YEAR ENDED 31 MARCH 2019

1 GENERAL INFORMATION

Segmental reporting

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 subsidiaries, Cambridge Innovation Capital (Jersey) Limited and Cambridge Innovation Capital (Manager) Limited, form “the Group” and the Group’s consolidated financial statements presented herein are in sterling. The Group invests in and otherwise supports rapidly growing intellectual property rich companies based in and around Cambridge and/or with a connection to the University of Cambridge.

The Chief Operating Decision Maker has been identified as the Company’s Board of Directors. The Board is of the opinion that the Group operates one operating segment, that of investing in and otherwise supporting rapidly growing intellectual property rich companies based in and around Cambridge and/or with a connection to the University of Cambridge. 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.

2 BASIS OF PREPARATION The Group’s cash and short-term deposits, together with commitments to invest secured from existing and new investors during the year, are sufficient to meet the investment requirements and operational needs of the Group for at least a year from the date of approval of the financial statements. Given the above, the financial statements for the year ended 31 March 2019 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; 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 Group has reviewed its accounting policies following the adoption of IFRS 9, “Financial Instruments” and IFRS 15, “Revenue from Contracts with Customers” and has concluded that there is no impact on the financial statements from adopting these new standards. As a result, the principal accounting policies adopted in the preparation of these financial statements have been consistently applied to all the years presented. 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. IFRS 16, “Leases”, effective 1 January 2019, has not been applied in these financial statements. The Directors do not anticipate that the adoption of this standard, 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 undertakings. The financial information of the subsidiary undertakings 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.

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, five years;

●●

furniture and equipment, three years; and

●●

computer equipment, three 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 and has adopted the December 2018 IPEV Valuation Guidelines for the year ended 31 March 2019. The Group considers that fair value estimates based entirely on observable market data are of greater reliability than those based on assumptions. 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 price of recent investment is considered to be the best estimate of fair value at the date of investment and is therefore used as the de facto starting position for any fair value estimate made by the Group. Accordingly, where there has been a recent investment by a third party, the price of that investment will also provide the starting position for fair value, 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.

46 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

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.

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 consolidated statement of comprehensive income. 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 expensed 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.

47 www.cicplc.co.uk

Notes to the consolidated financial statements FOR THE YEAR ENDED 31 MARCH 2019

Current tax

Equity

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.

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 payment 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 earnings represents retained profits less accumulated losses.

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. 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.

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS 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 11) and investments (note 12) 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 £22,749,436 (2018: £2,003,653) which is held in the UK.

6 OPERATING PROFIT YEAR ENDED 31 MARCH 2019 £

2018 £

43,208

43,194

(41,373)

(50,233)

21,515

18,350

Tax compliance services

10,510

6,000

Other assurance services

10,000

–

5,000

10,000

47,025

34,350

Operating 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

Other services

48 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

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 2019 NUMBER

2018 NUMBER

Investment staff

Support staff

By primary activity

YEAR ENDED 31 MARCH 2019 £

2018 £

1,468,770

1,500,359

Social security costs

187,458

193,037

Other pension costs

183,502

177,843

Employee benefit expenses for the above persons Wages and salaries

126,697

28,962

1,966,427

1,900,201

661,204

625,014

63,292

59,248

Employer national insurance

81,827

78,267

Share based payments

46,407

14,040

852,730

776,569

272,348

294,283

35,772

34,899

308,120

329,182

Share based payments (note 8)

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

Emoluments of the highest paid Director Emoluments Other pension costs

No Directors exercised options during either year. At 31 March 2019 there were two Directors (2018: two) who were members of a defined contribution pension scheme to which the Company contributed.

49 www.cicplc.co.uk

Notes to the consolidated financial statements FOR THE YEAR ENDED 31 MARCH 2019

8 SHARE BASED PAYMENTS The Company has issued options over ordinary shares held by the Cambridge Innovation Capital plc Employee Benefit Trust and options over ordinary shares to be issued, on exercise of the options, in relation to the Company’s incentive schemes. The total share based payments charge in the year was £126,697 (2018: £28,962). Certain employees have been granted call options over ordinary shares of the Company held by the Cambridge Innovation Capital plc Employee Benefit Trust. The terms provide that shares may be acquired at a fixed price in tranches commencing one year from the date of employment and expiring on the earlier of six months after an Initial Public Offering and ten years from the date of the award. If an employee leaves, there is no impact on vested tranches but unvested tranches expire on the leaving date. Certain employees have been granted options over ordinary shares of the Company in accordance with the Company’s incentive schemes. The options granted to date provide that shares may be acquired at a fixed price in tranches commencing two years, and expiring after five years, from the date of the award. If an employee leaves and is considered a good leaver, vested tranches expire one year after leaving and unvested tranches expire one year after the future vesting date. If an employee leaves and is considered a bad leaver, vested and unvested tranches expire on the leaving date. Movements in the number of options outstanding and their related weighted average exercise prices are as follows: AT 31 MARCH 2018

GRANTED DURING THE YEAR

AT 31 MARCH 2019

Number

2,842,188

–

2,842,188

Exercisable

2,842,188

n/a

2,842,188

Options over shares held by the Employee Benefit Trust

Exercise price for all options (pence)

0.1711

–

0.1711

Weighted average remaining contractual life (years)

5.7496

n/a

4.7496

The fair value of the options over shares held by the Employee Benefit Trust 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 £nil (2018: £3,668) has been recorded in relation to options over shares held by the Employee Benefit Trust. AT 31 MARCH 2018

GRANTED DURING THE YEAR

AT 31 MARCH 2019

169,894

536,420

706,314

–

n/a

–

Exercise price for all options (pence)

0.0100

Weighted average remaining contractual life (years)

6.8233

n/a

6.5640

Options over shares issued in accordance with the Company’s incentive schemes Number Exercisable

Proceeds receivable on exercise (£)

The fair value of the options over ordinary shares issued in accordance with the Company’s incentive schemes has been calculated using the Black Scholes valuation model. The fair value of options granted in the year was £0.8612 (2018: £0.7959). The inputs into the model for awards granted in the year were as follows: YEAR ENDED 31 MARCH

Share price at date of grant Expected volatility

2019

2018

£0.8613

£0.7960

100%

4 years

Expected dividend yield

Risk free rate

Expected life

During the year a charge of £126,697 (2018: £25,924) has been recorded in relation to options issued in accordance with the Company’s incentive schemes.

50 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

9 FINANCE INCOME YEAR ENDED 31 MARCH

Bank and other interest

2019 £

2018 £

462,201

360,342

10 TAX ON 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

Profit on ordinary activities before taxation Standard corporation tax rate Expected tax expense Income not subject to tax (fair value changes) Expenses not tax deductible Utilisation of tax losses not previously recognised Tax on profit on ordinary activities

2019 £

2018 £

27,864,076

17,313,709

19%

5,294,174

3,289,605

(5,834,893)

(3,761,753)

529,124

485,821

(4,539)

(24,550)

(16,134)

(10,877)

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 15).

51 www.cicplc.co.uk

Notes to the consolidated financial statements FOR THE YEAR ENDED 31 MARCH 2019

11 PROPERTY, PLANT AND EQUIPMENT LEASEHOLD FURNITURE AND IMPROVEMENTS EQUIPMENT £ £

COMPUTER EQUIPMENT £

TOTAL £

Cost At 1 April 2017 Additions At 31 March 2018 Additions

60,840

56,169

49,405

166,414

–

1,237

60,840

56,169

50,642

167,651

–

1,263

60,840

56,169

51,905

168,914

8,768

15,276

21,374

45,418

Provided in the year

12,168

18,125

12,901

43,194

At 31 March 2018

20,936

33,401

34,275

88,612

Provided in the year

12,168

18,126

12,914

43,208

At 31 March 2019

33,104

51,527

47,189

131,820

At 31 March 2019

27,736

4,642

4,716

37,094

At 31 March 2018

39,904

22,768

16,367

79,039

At 31 March 2019 Accumulated depreciation At 1 April 2017

Net book amount

12 INVESTMENTS AT 31 MARCH

At 1 April

2019 £

2018 £

110,708,908

58,163,591

Investments

44,874,466

32,746,616

Fair value changes in investments

30,709,963

19,798,701

186,293,337

110,708,908

At 31 March

The Directors have determined that the Company meets the definition of an investment entity as set out in IFRS 10, “Consolidated Financial Statements” and, therefore, investments that are held as part of the Group’s investment portfolio are carried in the consolidated statement of financial position at fair value even though the Group may have significant influence over these companies.

52 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

At 31 March 2019 the Group held investments in the following companies: NAME Abcodia Limited

PRIMARY INSTRUMENT

% HELD

Convertible loan

19.6%

Series A Preferred shares

16.1%

AudioTelligence Limited

A Preferred shares

31.7%

Bicycle Therapeutics Limited

B Ordinary shares

10.5%

Carrick Therapeutics Limited

Preferred shares

7.7%

Series B Preferred shares

10.0%

A Ordinary shares

31.4%

Ordinary shares

1.3%

Exvastat Limited

Series A shares

50.7%

Fluidic Analytics Limited

Series A shares

1.2%

Series A1 Preferred shares

25.3%

Audio Analytic Limited

CMR Surgical Limited Congenica Limited Cytora Limited

Geospock Limited Gyroscope Therapeutics Limited Imagen Limited Inivata Limited Jukedeck Limited Microbiotica Limited Morphogen-IX Limited Origami Energy Limited PervasID Limited Polyprox Limited PragmatIC Printing Limited Prowler.io Limited Storm Therapeutics Limited Swim.ai Incorporated Undo Limited Z Factor Limited

Series A Preferred shares

1.0%

Series A shares

43.2%

Series B Preference shares

26.2%

Convertible loan

27.7%

Seed shares

28.0%

Series B shares

16.1%

A Ordinary shares

14.9%

Ordinary shares

12.4%

Ordinary shares

20.3%

A Ordinary shares

32.6%

Series A Preferred shares

14.8%

A Preferred shares

18.2%

Series B Preferred stock

11.6%

B Preferred shares

24.3%

Series A shares

0.3%

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, and Swim.ai Incorporated, which is registered in Delaware in the United States. At 31 March 2019 the Group had committed, subject to certain milestone provisions contained in the relevant investment agreements, to make further investments of £3.7 million and $3.5 million (2018: £2.0 million and $6.1 million). As these relate to future investments they have not been included in the financial statements. Please also see the post balance sheet events disclosed in note 20.

53 www.cicplc.co.uk

Notes to the consolidated financial statements FOR THE YEAR ENDED 31 MARCH 2019

13 TRADE AND OTHER RECEIVABLES AT 31 MARCH

Prepayments and accrued income Other receivables At 31 March

2019 £

2018 £

416,716

799,999

16,306

49,168

433,022

849,167

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.

14 TRADE AND OTHER PAYABLES AT 31 MARCH

Trade payables

2019 £

2018 £

85,058

118,464

Social security and other taxes

58,073

60,483

Accruals and deferred income

3,819,007

1,150,301

Other payables

8,174,778

–

12,136,916

1,329,248

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. Other payables relates to a subscription received in advance of notice for draw down being given that was returned to the shareholder concerned immediately following the year end.

15 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 2019 £

2018 £

280,500

397,800

Deferred tax amounts not provided for are as follows Trade losses unrelieved

54 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

16 EQUITY AT 31 MARCH 2019 £

2018 £

Allotted, called up and fully paid –

–

21,078

16,719

6,295

–

49,992,656

50,020,029

50,009,375

1 special share (2018: nil) of £0.0001 210,775,782 (2018: 167,187,500) ordinary shares of £0.0001 each 125,903,250 (2018: nil) class A commitment shares of £0.00005 each 499,926,562,500 (2018: 499,926,562,500) deferred shares of £0.0001 each

On 24 April 2018 the Company issued one special share to the University of Cambridge. The special share: ●●

entitles the University of Cambridge to be issued ordinary shares for no consideration if, on the issue of ordinary or class A commitment shares to third parties, its founding shareholding falls below 5% of the then in issue ordinary and class A commitment shares;

●●

carries no right to participate in the income of the Company;

●●

carries no right to receive notice of, or to attend, speak or vote at any general meeting of the Company;

●●

entitles the holder to the nominal value of the special share on a return of assets on liquidation or capital reduction or otherwise; and

●●

is not transferable.

During the year ended 31 March 2019: ●●

the Company secured £150 million of commitments; and

●●

in relation to this commitment, the Company issued 43,588,282 (2018: nil) ordinary shares at a subscription price of £0.885 each and 125,903,250 (2018: nil) class A commitment shares at a subscription price of £0.00005 pence each.

The ordinary and class A commitment 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;

●●

entitle the holders of the deferred shares to £1.00 for the entire class of shares on a return of assets on liquidation or capital reduction or otherwise;

●●

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 2019 the Cambridge Innovation Capital plc Employee Benefit Trust held 2,842,188 ordinary and 12,495,820,312 deferred shares of £0.0001 each.

55 www.cicplc.co.uk

Notes to the consolidated financial statements FOR THE YEAR ENDED 31 MARCH 2019

17 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 12). 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: AT 31 MARCH 2019 £

2018 £

Loans at 1 April

2,842,000

1,556,000

Loans advanced

3,972,296

2,286,000

Loans impaired

(1,736,130)

–

Loans converted or exchanged for equity

(2,016,700)

(1,000,000)

3,061,466

2,842,000

Loans at 31 March

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

Portfolio companies

AMOUNTS DUE FROM AT 31 MARCH

2019 £

2018 £

2019 £

2018 £

383,760

172,939

303,590

81,770

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

2019 £

2018 £

2019 £

2018 £

67,986

56,663

1,284

6,614

18 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 2019 £

2018 £

186,293,337

110,708,908

Financial assets at fair value through profit or loss Investments Financial assets at amortised cost (2018: Loans and receivables) Trade and other receivables Short-term deposits Cash and cash equivalents

5,705

14,419

–

1,400,000

31,756,200

32,285,169

31,761,905

33,699,588

3,901,065

1,265,765

Financial liabilities at amortised cost Trade and other payables

56 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

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 while maintaining liquidity and credit risk at acceptable levels. Balance sheets at 31 March 2019 and 2018 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.

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 2019 £

2018 £

31,756,200

33,685,169

–

31,756,200

33,685,169

Floating rate interest

0.00% to 1.50%

0.00% to 1.53%

Fixed rate interest

0.50% to 0.60%

0.25% to 0.41%

32 days

31 to 91 days

Floating rate Fixed rate

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 2019 +2.0% £

2019 0% £

2018 +2.0% £

2018 0% £

Result for the year

654,414

(462,201)

673,703

(360,342)

Equity

654,414

(462,201)

673,703

(360,342)

57 www.cicplc.co.uk

Notes to the consolidated financial statements FOR THE YEAR ENDED 31 MARCH 2019

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 profile, as per Standard & Poor’s rating services, of the Group’s financial assets was as follows: AT 31 MARCH 2019 £

2018 £

AA-

48,921

70,306

A+

213

–

179,141

10,247,519

A-

31,527,925

23,367,344

31,756,200

33,685,169

Foreign exchange risk The Group occasionally enters into transactions in currencies other than sterling. At 31 March 2019 the Group had committed, subject to certain milestone provisions contained in the relevant investment agreements, to make further investments of $3.5 million (2018: $6.1 million). The Group has not hedged this commitment because of its policy not to enter into hedging transactions.

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 12. The Audit and Risk Management 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 2019 £

2018 £

Price of recent investment Adjusted for milestones or impairments

1,705,333

742,000

Investment completed within one year

161,438,161

80,089,016

17,927,144

26,873,720

Investment completed between one and two years Investment completed more than two years ago

5,222,698

3,004,172

186,293,336

110,708,908

If the fair value of the Group’s investments varied by +/–10%, the profit for the year would change by +/–£18,629,334 (2018: +/–£11,070,891).

58 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

19 OPERATING LEASE COMMITMENTS The future aggregate minimum lease payments under non-cancellable operating leases are as follows: AT 31 MARCH 2019 £

2018 £

Within one year

1,600

7,525

Later than one year but not later than five years

2,001

3,601

11,126

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 has been able to terminate the lease at any time since 1 July 2018.

20 POST BALANCE SHEET EVENTS Following the year end, the Group has invested £12 million in new and existing portfolio companies. Further details are provided in the Strategic Report. On 22 May 2019 Bicycle Therapeutics announced its initial public offering on the Nasdaq. On 30 May 2019 the Company drew down £22.5 million from shareholders via the issue of 25,426,577 class B commitment shares that immediately paired up with the same amount of class A commitment shares with each pair of class A and class B commitment shares converting into one new ordinary share.

21 CONTROLLING PARTY There is no ultimate controlling party.

59 www.cicplc.co.uk

Company balance sheet AT 31 MARCH 2019

AT 31 MARCH NOTE

2019 £

2018 £

Tangible assets

37,094

79,039

Investments

145,000,000

120,000,000

145,037,094

120,079,039

Fixed assets

Current assets Debtors

Short-term deposits

118,136

707,497

–

1,400,000

22,749,436

603,653

22,867,572

2,711,150

(12,070,671)

(1,307,796)

10,796,901

1,403,354

Total assets less current liabilities

155,833,995

121,482,393

Net assets

155,833,995

121,482,393

50,020,029

50,009,375

34,461,609

57,200

Cash at bank and in hand

Creditors: amounts falling due within one year

Net current assets

Capital and reserves Called up share capital

Share premium account Share based payment reserve Retained profit (Loss)/profit for the year Total shareholders' funds

3,495,741

3,369,044

68,046,774

68,003,773

(190,158) 155,833,995

43,001 121,482,393

The notes on pages 62 to 67 are an integral part of these financial statements. The financial statements on pages 60 to 67 of Cambridge Innovation Capital plc, registered number 08243718, were authorised for issue by the Board of Directors on 19 June 2019 and were signed on its behalf by Rob Sprawson PARTNER AND CHIEF FINANCIAL OFFICER

60 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT

Company statement of changes in equity

GOVERNANCE FINANCIAL STATEMENTS

FOR THE YEAR 31 MARCH 2019

NOTE

At 1 April 2017

CALLED UP SHARE CAPITAL £

SHARE PREMIUM ACCOUNT £

SHARE BASED PAYMENT RESERVE £

50,009,375

57,200

3,340,082

68,003,773

121,410,430

–

43,001

–

28,962

–

28,962

50,009,375

57,200

3,369,044

68,046,774

121,482,393

–

(190,158)

10,654

34,404,409

–

34,415,063

–

126,697

–

126,697

50,020,029

34,461,609

3,495,741

67,856,616

155,833,995

Profit for the year and total comprehensive income

TOTAL RETAINED SHAREHOLDERS’ PROFIT FUNDS £ £

Transactions with owners Share based payments

At 31 March 2018 Loss for the year and total comprehensive expense Transactions with owners Share capital issued (net of expenses) Share based payments At 31 March 2019

The notes on pages 62 to 67 are an integral part of these financial statements.

61 www.cicplc.co.uk

Notes to the Company financial statements FOR THE YEAR ENDED 31 MARCH 2019

A GENERAL INFORMATION

Share based payments

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.

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 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.

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.

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.

Operating leases Operating lease payments are expensed in the profit and loss on a straightline basis over the period of the lease.

Taxation

●●

leasehold improvements, five years;

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.

●●

furniture and equipment, three years; and

Current or deferred taxation assets and liabilities are not discounted.

●●

computer equipment, three years.

Current tax

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:

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.

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

62 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

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 payment 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 AND JUDGEMENTS 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 2019 is £190,158 (2018: profit of £43,001).

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 to the consolidated financial statements.

G TANGIBLE ASSETS LEASEHOLD IMPROVEMENTS £

FURNITURE AND EQUIPMENT £

COMPUTER EQUIPMENT £

TOTAL £

60,840

56,169

49,405

166,414

–

1,237

60,840

56,169

50,642

167,651

–

1,263

60,840

56,169

51,905

168,914

Cost At 1 April 2017 Additions At 31 March 2018 Additions At 31 March 2019 Accumulated depreciation At 1 April 2017

8,768

15,276

21,374

45,418

Provided in the year

12,168

18,125

12,901

43,194

At 31 March 2018

20,936

33,401

34,275

88,612

Provided in the year

12,168

18,126

12,914

43,208

At 31 March 2019

33,104

51,527

47,189

131,820

At 31 March 2019

27,736

4,642

4,716

37,094

At 31 March 2018

39,904

22,768

16,367

79,039

Net book amount

63 www.cicplc.co.uk

Notes to the Company financial statements FOR THE YEAR ENDED 31 MARCH 2019

H INVESTMENTS Cambridge Innovation Capital (Jersey) Limited, whose principal activity is to invest in high growth technology businesses, and Cambridge Innovation Capital (Manager) Limited, which is currently dormant, are wholly owned subsidiaries of the Company. Both companies are registered in Jersey at the following registered address: Gaspé House, 66-72 Esplanade, St Helier, Jersey, Channel Islands JE2 3QT. During the year the Company invested £25 million (2018: £nil) in its subsidiary companies.

I DEBTORS AT 31 MARCH

Prepayments and accrued income Other debtors

2019 £

2018 £

101,830

671,924

16,306

35,573

118,136

707,497

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

2019 £

2018 £

85,058

118,464

58,073

60,483

Accruals and deferred income

3,752,762

1,128,849

Other creditors

8,174,778

–

12,070,671

1,307,796

Taxation and social security

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. Other creditors relates to a subscription received in advance of notice for draw down being given that was retuned to the shareholder concerned immediately following the year end.

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 2019 £

2018 £

280,500

397,800

Deferred tax amounts not provided for are as follows 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 2019 were approximately £1,650,000 (2018: £2,340,000).

64 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

L CALLED UP SHARE CAPITAL AT 31 MARCH 2019 £

2018 £

–

21,078

16,719

6,295

–

49,992,656

50,020,029

50,009,375

Allotted, called up and fully paid 1 special share (2018: nil) of £0.0001 210,775,782 (2018: 167,187,500) ordinary shares of £0.0001 each 125,903,250 (2018: nil) class A commitment shares of £0.00005 each 499,926,562,500 (2018: 499,926,562,500) deferred shares of £0.0001 each

On 24 April 2018 the Company issued one special share to the University of Cambridge. The special share: ●●

●●

carries no right to participate in the income of the Company;

●●

carries no right to receive notice of, or to attend, speak or vote at any general meeting of the Company;

●●

entitles the holder to the nominal value of the special share on a return of assets on liquidation or capital reduction or otherwise; and

●●

is not transferable.

During the year ended 31 March 2019: ●●

the Company secured £150 million of commitments; and

●●

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;

●●

entitle the holders of the deferred shares to £1.00 for the entire class of shares on a return of assets on liquidation or capital reduction or otherwise;

●●

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 2019 the Cambridge Innovation Capital plc Employee Benefit Trust held 2,842,188 ordinary and 12,495,820,312 deferred shares of £0.0001 each.

65 www.cicplc.co.uk

Notes to the Company financial statements FOR THE YEAR ENDED 31 MARCH 2019

M SHARE BASED PAYMENTS The Company has issued options over ordinary shares held by the Cambridge Innovation Capital plc Employee Benefit Trust and options over ordinary shares to be issued, on exercise of the options, in relation to the Company’s incentive schemes. The total share based payments charge in the year was £126,697 (2018: £28,962). Certain employees have been granted call options over ordinary shares of the Company held by the Cambridge Innovation Capital plc Employee Benefit Trust. The terms provide that shares may be acquired at a fixed price in tranches commencing one year from the date of employment and expiring on the earlier of six months after an Initial Public Offering and ten years from the date of the award. If an employee leaves, there is no impact on vested tranches but unvested tranches expire on the leaving date. Certain employees have been granted options over ordinary shares of the Company in accordance with the Company’s incentive schemes. The options granted to date provide that shares may be acquired at a fixed price in tranches commencing two years, and expiring after five years, from the date of the award. If an employee leaves and is considered a good leaver, vested tranches expire one year after leaving and unvested tranches expire one year after the future vesting date. If an employee leaves and is considered a bad leaver, vested and unvested tranches expire on the leaving date. Movements in the number of options outstanding and their related weighted average exercise prices are as follows: AT 31 MARCH 2018

GRANTED DURING THE YEAR

AT 31 MARCH 2019

Number

2,842,188

–

2,842,188

Exercisable

Options over shares held by the Employee Benefit Trust 2,842,188

n/a

2,842,188

Exercise price for all options (pence)

0.1711

–

0.1711

Weighted average remaining contractual life (years)

5.7496

n/a

4.7496

GRANTED DURING THE YEAR

AT 31 MARCH 2019

169,894

536,420

706,314

Options over shares issued in accordance with the Company’s incentive schemes Number

–

n/a

–

Exercise price for all options (pence)

0.0100

Weighted average remaining contractual life (years)

6.8233

n/a

6.5640

16.9894

Exercisable

Proceeds receivable on exercise (£)

The fair value of the options over ordinary shares issued in accordance with the Company’s incentive schemes has been calculated using the Black Scholes valuation model. The fair value of options granted during the year was £0.8612 (2018: £0.7959). The inputs into the model for awards granted in the year were as follows: YEAR ENDED 31 MARCH 2019

2018

£0.8613

£0.7960

100%

4 years

Expected dividend yield

Risk free rate

Share price at date of grant Expected volatility Expected life

During the year a charge of £126,697 (2018: £25,924) has been recorded in relation to options issued in accordance with the Company’s incentive schemes.

66 Cambridge Innovation Capital plc | Annual Report and Accounts for the year ended 31 March 2019

OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

N OPERATING LEASE COMMITMENTS The future aggregate minimum lease payments under non-cancellable operating leases are as follows: AT 31 MARCH 2019 £

2018 £

Within one year

1,600

7,525

Later than one year but not later than five years

2,001

3,601

11,126

O RELATED PARTY TRANSACTIONS The Company’s related party transactions are limited to transactions with: the University of Cambridge and its subsidiaries; its wholly owned subsidiary; and portfolio companies of its wholly owned subsidiary. Related party transactions for the Group are disclosed in note 17 to the consolidated financial statements.

P POST BALANCE SHEET EVENTS On 11 April 2019 the Company invested £10.0 million in Cambridge Innovation Capital (Jersey) Limited. On 15 April 2019 the Company invested £0.3 million in Start Codon Limited. On 30 May 2019 the Company drew down £22.5 million from shareholders via the issue of 25,426,577 class B commitment shares that immediately paired up with the same amount of class A commitment shares with each pair of class A and class B commitment shares converting into one new ordinary share.

Q CONTROLLING PARTY There is no ultimate controlling party.

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Shareholdersâ&#x20AC;&#x2122; notes