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  • THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document or the action you should take, you are should immediately seek your own professional advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser duly authorised under the Financial Services and Markets Act 2000 (as amended) if you are in the United Kingdom or, if you are in a territory outside the United Kingdom, another appropriately authorised independent financial adviser. This document does not constitute or form part of any invitation or offer to issue or sell or a solicitation of any offer to subscribe for or buy Shares. All Shareholders are advised to consult their professional advisers regarding their own tax position.

    If you have sold or transferred all of your Shares, you should at once forward this document to the stockbroker, bank or other agent through whom the sale or transfer was effected for delivery to the purchaser or transferee. However, this document must not be forwarded into or transmitted or distributed in or into any jurisdiction where to do so would constitute a violation of the relevant laws of that jurisdiction. If you have sold or transferred only part of your holding, you should retain this document and contact your stockbroker, bank or other agent through whom the sale or transfer was effected immediately.

    The release, publication or distribution of this document in or into jurisdictions other than the United Kingdom may be restricted by the laws of those jurisdictions and therefore persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Failure to comply with any such restrictions may constitute a violation of the securities laws of such jurisdictions.

    J.P. Morgan Cazenove, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting for the Company and no one else in connection with the matters referred to herein and will not be responsible to anyone other than the Company for providing the protections afforded to clients of J.P. Morgan Cazenove or for giving advice in relation to such matters.

    TOUCHSTONE INNOVATIONS PLC (Incorporated in England and Wales under the Companies Act 1985 with registered number 05796766)

    Response to IP Group plc's Offer

    Shareholders should read carefully the whole of this document. In particular, your attention is drawn to the letter from the Chairman on behalf of the Directors which is set out in Part I of this document which contains, among other things, the unanimous recommendation to Shareholders not to accept the Offer unless the Offer has been declared wholly unconditional.

    The statements contained in this document are made as at the date of this document, unless some other time is specified in relation to them, and publication of this document shall not give rise to any implication that there has been no change in the facts set out in this document since such date. Nothing contained in this document shall be deemed to be a forecast, projection or estimate of the future financial performance of the Company except where expressly stated. A copy of this document is and will be available free of charge, subject to certain restrictions relating to persons in any jurisdiction where release, publication or distribution of this document would constitute a violation of the securities laws of such jurisdiction, for inspection on the Company's website at www.touchstoneinnovations.com until the end of the Offer Period. For the avoidance of doubt, the contents of this website are not incorporated into and do not form part of this document. You may request a hard copy of this document and any information incorporated into this document by reference to another source by submitting a request in writing to the Company Secretary of the Company at Touchstone Innovations plc, 7 Air Street, London W1B 5AD or by contacting the Company Secretary of the Company during normal business hours on 020 3053 8859 (or, if calling from outside of the United Kingdom, +44 (0)20 3053 8859). Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. A hard copy of this document and any other document referred to in this document will not be sent to you unless so requested. You may also request that all future documents, announcements and information to be sent to you in relation to the Offer should be in hard copy form. Please be aware that addresses, electronic addresses and certain information provided by Shareholders, persons with information rights and other relevant persons for the receipt of communications from the Company may have been or may be provided to IP Group during the Offer Period as required under Section 4 of Appendix 4 of the Takeover Code to comply with Rule 2.11(c) of the Takeover Code. If you are a Shareholder, by now you should have received the Offer Document from IP Group containing details of the Offer.

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    OVERSEAS SHAREHOLDERS

    The release, publication or distribution of this document in certain jurisdictions may be restricted by law. Persons who are not resident in the United Kingdom or who are subject to other jurisdictions should inform themselves of, and observe, any applicable requirements. Any failure to comply with such restrictions may constitute a violation of the securities laws of such jurisdictions. To the fullest extent permitted by law, the companies involved in the Offer disclaim any responsibility or liability for the violation of such restrictions by any person.

    This document is not intended to, and does not, constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities, or the solicitation of any vote or approval pursuant to the Offer or otherwise, in any jurisdiction in which such offer, invitation or solicitation is unlawful. This document has been prepared in connection with a proposal in relation to the Offer pursuant to, and for the purpose of complying with, the laws of England and Wales and the Takeover Code and the information disclosed may not be the same as that which would have been disclosed if this document had been prepared in accordance with the laws of jurisdictions outside the United Kingdom. Nothing in this document should be relied upon for any other purpose.

    Unless otherwise determined by the Company or required by the Takeover Code, and permitted by applicable law and regulation, this document will not be made available, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction. Copies of this document must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction, and persons receiving this document (including custodians, nominees and trustees) must not mail or otherwise distribute or send them in, into or from such jurisdictions where to do so would violate the laws in that jurisdiction.

    FORWARD-LOOKING STATEMENTS

    This document contains statements that are, or may be, forward-looking statements. All statements other than statements of historical facts included in this document may be forward-looking statements. Without limitation, any statements preceded or followed by or that include words such as "target", "plan", "believe", "expect", "aim", "intend", "will", "should", "could", "would", "may", "consider", "anticipate", "estimate", "synergy", "cost saving", "project", "goal" or "strategy" or words or terms of similar substance or the negative of such words are forward-looking statements. Forward-looking statements include statements relating to the following: future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, losses, profits and future prospects of the Company and/or the Group.

    These forward-looking statements are not guarantees of future financial performance. Except as expressly provided in this document, they have not been reviewed by the auditors of the Company. Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this document. The Company assumes no obligation to update or correct the information contained in this document, whether as a result of new information, future events or otherwise, except to the extent legally required. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof.

    All subsequent oral or written forward-looking statements attributable to the Company or any of its members, directors, officers or employees or any persons acting on their behalf, are expressly qualified in their entirety by the cautionary statement above. the Company and the Directors disclaim any obligation to update any forward looking or other statements contained herein, except as required by applicable law. All forward-looking statements included in this document are based on information available to the Company on the date of this document and are made only as of the date of this document.

    DISCLOSURE REQUIREMENTS OF THE TAKEOVER CODE

    Under Rule 8.3(a) of the Takeover Code, any person who is interested in one per cent. or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the tenth Business Day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the tenth Business Day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure. Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes, interested in one per cent. or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person

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    deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the Business Day following the date of the relevant dealing. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

    Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4). Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

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    CONTENTS

    Page

    PART I LETTER FROM THE CHAIRMAN OF TOUCHSTONE INNOVATIONS PLC 5

    PART II ADDITIONAL INFORMATION 11

    PART III DEFINITIONS

    23

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    PART I

    LETTER FROM THE CHAIRMAN OF TOUCHSTONE INNOVATIONS PLC

    TOUCHSTONE INNOVATIONS PLC (registered in England and Wales under company number 05796766)

    Directors: Registered Office:

    David Baxter Newlands (Chairman) 7 Air Street London

    W1B 5AD Russell Cummings (Chief Executive Officer)

    Nigel Aaron Pitchford (Chief Investment Officer)

    Anthony Charles Hickson (Managing Director Technology Transfer)

    Robert James Campbell Easton (Non-Executive Director)

    David Knox Houston Begg (Non-Executive Director)

    Linda Wilding (Non-Executive Director) 1 August 2017

    To all Shareholders Dear Shareholder,

    Response of the Board of Touchstone Innovations plc ("Touchstone" or the "Company") to the Offer for Touchstone by IP Group plc (the "IP Group") BACKGROUND

    On 4 April 2017, the board of directors of Touchstone (the "Board") received an indicative proposal (the "Indicative Proposal") from IP Group. The Indicative Proposal envisaged an offer comprising 2.1490 IP Group shares for each of the issued and to be issued shares of Touchstone. These terms implied an at-market combination with no premium to the prior day close.

    Following receipt of the Indicative Proposal, the Board unanimously decided to reject the Indicative Proposal stating that they could not see any basis for further discussions.

    In the days that followed, it was made clear to the Board that three of the Company's largest shareholders (Invesco Asset Management Limited ("Invesco"), Woodford Investment Management LLP ("Woodford") and Lansdowne Developed Markets Master Fund Ltd ("Lansdowne") (together the "Large Shareholders")) wanted Touchstone to engage with IP Group to see if a merger could be agreed. For this reason, and because the proposal had certain merits, the Board agreed to engage. Meetings were held, but no real progress was made on two very important issues: first, on the relative valuations of Touchstone and IP Group, and second, on the need to retain and build on the best of both companies and to establish a clear understanding of joint strategy, corporate governance and management arrangements.

    On 23 May 2017 IP Group announced that it had made an approach to the Board regarding a possible combination of the two businesses (the "Possible Offer"). Under the terms of the Possible Offer, Touchstone shareholders would have received 2.1490 IP Group shares for each Touchstone share, the same ratio suggested on 4 April 2017. On the same day, IP Group announced a proposed equity raise and included in the Possible Offer a mechanism for adjusting the number of IP Group shares offered for each Touchstone share for the amount of equity raised.

    The Possible Offer announcement stated that irrevocable undertakings and letters of intent in favour of the Possible Offer had been received from the Large Shareholders, representing 74.3% of Touchstone shares. The Large Shareholders also hold 50.9% of the ordinary share capital of IP Group.

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    On 1 June 2017, I wrote to you explaining the chronology of events up to that point, and also set out the reasons for the Board rejecting IP Group's Possible Offer. In summary, the Board's view was that the terms of the Possible Offer fundamentally undervalued Touchstone on a stand-alone basis, and in particular, the terms did not fully reflect:

    the value in Touchstone which has been built up over 10 years;

    the breadth and diversity of its portfolio (the vast majority of the value of which lies in unquoted companies);

    its therapeutics assets, which continue to attract interest from leading pharmaceutical companies;

    its unique access to opportunities arising from Imperial College London and UCL, as well as close relationships across the 'Golden Triangle';

    its close relationships with major pharmaceutical companies, as evidenced by the Apollo Therapeutics joint venture; and

    its relationships with co-investors and numerous other industry partners.

    THE OFFER

    On 20 June 2017, IP Group announced the terms of a firm offer to acquire the entire issued and to be issued ordinary share capital of Touchstone on the basis of 2.1575 IP Group shares for every Touchstone share held (the "Firm Offer"). The terms of the Firm Offer remained the same as those of the Possible Offer adjusted for IP Group's capital raise.

    On 28 June 2017, the Board announced that it had considered the Firm Offer and had unanimously concluded that the terms of the Firm Offer fundamentally undervalued the Company. The Board therefore continued to strongly advise Touchstone shareholders to take no action at that time.

    On 14 July 2017, the Board provided shareholders with a trading update to ensure that shareholders had the most up-to-date view of the Company and its portfolio when considering the Firm Offer. This trading update highlighted an increased net asset value ("NAV") of 502.2m or 312 pence per share as at 30 June 2017. This represented a 10.2% increase in NAV in the financial year to date.

    The Directors confirm that Deloitte LLP has confirmed that as at 31 July 2017, being the last practicable date prior to publication of this document, its opinion on the value of the Groups quoted and unquoted portfolio as at 30 June 2017 included in that trading update dated 14 July 2017 continues to apply.

    On 18 July 2017, IP Group published the offer document ("Offer Document") containing the terms and conditions of the Firm Offer as announced on 20 June. The Offer Document included an improved exchange ratio of 2.2178 IP Group shares for every Touchstone share held (the "Offer"). The terms of the Offer represented an increase of 2.8% from the exchange ratio of the Firm Offer.

    If you are a Touchstone shareholder, by now you should have received the Offer Document and the announcement of clarification to certain provisions of the Firm Offer from IP Group, containing details of the Offer. Copies of certain announcements and documents relating to the Offer (including the Deloitte LLP opinion referred to above) may be viewed via the Touchstone website at www.touchstoneinnovations.com.

    I am now writing to you on behalf of the Board to set out the views of the Board in relation to the Offer.

    THE BOARD'S VIEWS IN RELATION TO THE OFFER

    The Board considers the Offer to be a hostile offer and believes that the terms continue to fundamentally undervalue Touchstone on a stand-alone basis and fail to reflect the key strengths of the business. The Offer does not include any premium for control and no cash alternative. The reasons for the Board believing this are set out below.

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    The financial terms of the Offer are dilutive.

    On the basis of the most recently announced NAVs of both companies1, Touchstone would contribute 36.1% to the combined NAV. The terms of the Offer, even after the improvement, give Touchstone shareholders only approximately 33.9% of the combined group. Financial terms are dilutive to Touchstone shareholders and are not fair and reasonable so far as the Touchstone shareholders are concerned.

    While dilution may be acceptable for those Touchstone shareholders who also have a significant holding in IP Group, the Board does not believe that the financial terms, which are dilutive to this extent, are terms which are capable of being recommended.

    The imposition of an Offer Cap is inherently unfair to Touchstone shareholders.

    In addition, the Offer is "capped" (the "Offer Cap") such that if, as a result of an increase in the price of the IP Group shares, the implied offer value per Touchstone share were to become worth more than 330 pence (as compared to 316 pence which it was worth as at 31 July 2017, being the last practicable date prior to publication of this document), the number of new IP Group shares to be issued per Touchstone share will be reduced. This removes the ability for Touchstone shareholders to benefit from any increase in value of the Touchstone portfolio or an increase in the value of IP Group shares prior to the Offer completing to the extent that such increase would result in the implied offer value per Touchstone share becoming more than 330 pence. The Board believes that imposition of the Offer Cap is inherently unfair to Touchstone shareholders.

    The Board believes that the terms of the Offer do not reflect the future potential of Touchstone's assets - in particular its private investments, the breadth, maturity and diversity of its portfolio and its strategic relationships.

    Figure 1 sets out the difference between the Touchstone and IP Group portfolios, with the Touchstone portfolio composed of predominantly private investments. Currently, private companies make up 90% of Touchstones portfolio value and represent 79.5% of Touchstones NAV (399.1 million). Private companies represent only 48.0% (427.6 million) of IP Groups NAV. A single company, Oxford Nanopore, makes up 57.6% (246.3 million) of IP Groups unquoted portfolio and represents 27.7% of IP Groups NAV.

    Touchstone's portfolio has developed considerably since its IPO in 2006, with acceleration of its strategy following its 2011 capital raising. Since that capital raise, reinforced by placings in 2014 and 2016, Touchstone has been able to selectively accelerate particularly exciting technologies and management teams. Touchstone has made larger investments in more mature assets, which it believes are closer to value inflection points and offer more near-term material upside to the Group's NAV than earlier stage investments.

    1 Being as at 30 June 2017 and in the case of Touchstone, as announced on 14 July 2017, and in the case of IP Group, as announced on 18 July 2017.

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    As of the 31 January 2017, each of Touchstones top 10 investee companies had net investment carrying values of between 10.0 million and 45.0 million and were spread across the Group's four specialist sectors of Therapeutics, Medtech & Diagnostics, Engineering & Materials and ICT & Digital. Nine of the top 10 were private companies with an average age of 10.3 years since foundation. The Board believes that the terms of the Offer do not reflect the potential up-side in this exciting and maturing portfolio of companies.

    A number of portfolio companies have, over the last 12 months, announced high value partnership and licensing agreements or are currently engaged in ongoing discussions on such arrangements. The two most notable of these are PsiOxus Therapeutics and Crescendo Biologics, with potential deal values up to US $936.0 million and US $790.0 million respectively. These are subject to achievement of pre-clinical and clinical milestones, but the Board believes that these are clear indications of the value that global pharma companies have placed on the underlying technology.

    The key strategic partnerships signed over the last 18 months to broaden visibility of intellectual property from the elite universities within the 'Golden Triangle' are delivering on expectations, with both Apollo Therapeutics and UCL Technology Fund now well established and actively reviewing and funding their first projects.

    The Board believes that the financial terms do not reflect the concentration risk within the IP Group Portfolio.

    Touchstone has a well-diversified portfolio, with its largest asset contributing only 10.9% to portfolio value. IP Group's largest asset, Oxford Nanopore, comprises 37.1% of IP Group's portfolio value, and 27.7% of IP Groups NAV, highlighting significant concentration risk of this asset within IP Group. Whilst Oxford Nanopore may present a significant upside potential for the combined group, the converse is also true should the commercialisation of Oxford Nanopore not be successful.

    With limited publicly available information, the Touchstone Board has been unable to assess the value implications of this key asset within the combined group. However, in the context of an all-share takeover, the Board believes that Touchstone Shareholders would be taking on a significant portfolio concentration risk which is not reflected in the financial terms of the Offer. This is especially true where Touchstone shareholders do not have a cross shareholding in IP Group. As stated above, the Large Shareholders hold 50.9% of the ordinary share capital of IP Group.

    The Board considers there to be clear differences in strategic approach between Touchstone and IP Group. Your Board believes that without an agreed and clear approach, the benefit of each approach may be lost or diluted, rather than maintained or enhanced.

    Touchstone's focus has been on building companies funded by venture capital and corporate venture syndicates in the unquoted domain. In contrast, IP Group has used the public markets more frequently than Touchstone to encourage investment in its assets.

    Furthermore, Touchstones focus on investing in research sourced from the UK's 'Golden Triangle', the geographic region broadly bounded by Oxford, London and Cambridge (the "Golden Triangle") differs from IP Groups stated broader international approach.

    The Golden Triangle is an unrivalled cluster of outstanding academic research and technology businesses and is home to four of the world's top 10 universities. Touchstone's geographic focus has been driven both by the quality of research produced in the Golden Triangle as well as the ability for Touchstone's ventures and Technology Transfer Office teams, which are located in the region, to be 'hands on' in working with portfolio companies. The Board believes that this focus on and proximity to its investments, has helped foster talent, first-class research, management teams and co-investors and should be of critical importance to a combined group. In contrast, as previously noted, IP Group has adopted a broader international approach which now encompasses entering into commercialisation agreements in Australia and New Zealand, in addition to its existing operations in the UK and USA. Given the very early nature of these new operations, the Board believes that the assets resulting from these commercialisation agreements will take longer to reach maturity than current Touchstone assets.

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    The Offer does not include any premium for control.

    Since the first letter from IP Group on 4 April 2017, the transaction has been described by IP Group variously as a "merger", a "takeover" and a "combination". The Offer was not solicited by the Board of Touchstone and despite discussions between the respective CEOs, no progress was made on addressing the issues of combined strategy, management and governance. Typically, these points would be agreed in the context of a merger, however IP Group have clearly indicated that these will be addressed on IP Group's terms and not by agreement. In these circumstances, the Board for Touchstone believes that the Offer should include a premium for taking control. An all-share takeover with no premium for control and no cash alternative offered to minority shareholders is not a fair outcome.

    Assuming the Offer becomes wholly unconditional the Board believes there are significant risks around staff and integration.

    The Board notes IP Group's comments around the risks and challenges associated with integrating the Touchstone Group into IP Group. These risks include integrating the management teams and retaining and incentivising key employees. IP Group also notes the risk that the combined group may not realise, or may take longer to realise, the expected benefits of the Offer, and that it may face operational difficulties in integrating the two businesses.

    Throughout this process the Board has been focused on whether a combined organisation would be one where our staff, particularly our ventures investment team and our Technology Transfer Office, would be attracted to stay.

    Touchstone has a strong team of talented employees central to its success. The members of this team have created a high-quality network of partners, co-investors and entrepreneurs from which Touchstone and its portfolio companies derive significant opportunities and benefit. It is the collective skills, knowledge and experience that resides in these people that the Board believes is crucial to the future success of Touchstone and any combined group. The Board notes the commitments by IP Group in the Offer Document in relation to people, the key individuals amongst whom we strongly believe are important to the future success of any combined group. In particular, the ventures investment team members play an important role as Investment Directors on the boards of portfolio companies. The Board believes that discontinuity in those relationships, or replacement with less experienced individuals, could be detrimental to the potential value of those companies. The Board is concerned that this uncertainty may lead to key staff leaving. In seeking to address this, the Board has made retention proposals to IP Group.

    Your Board considers these to be significant risks which need to be mitigated for the integration process to be successful.

    The Board acknowledges the requirements of the Takeover Code to set out its views on IP Group's strategic plans for Touchstone and the likely repercussions on employment and the locations of Touchstone's places of business. In fulfilling their obligations under the Takeover Code to give their views on these matters, the Board can only comment on the details provided in the Offer Document. In that regard the Board notes that IP Group intends to carry out an integration review but, pending the outcome of that review, IP Group's plans do not involve changes to the location of Touchstones operations.

    For the above reasons, the Board has concluded that the terms of the Offer do not reflect the full value of the business, its unique relationships and its prospects.

    ADDITIONAL CONSIDERATIONS OF THE BOARD

    The indications of support from the Large Shareholders, and Imperial College London following the improved terms, make it likely that IP Group will obtain acceptances in respect of 90% or more of Touchstone shares under the Offer. If that is indeed the case, it will provide IP Group with the right to compulsorily acquire the remaining Touchstone shares whose holders have not accepted the Offer, subject to the remaining conditions of the Offer being satisfied or waived.

    IP Group has stated its intention to apply for the cancellation of Touchstone's listing on AIM and re-registering Touchstone as a private limited company, should not less than 75% of Touchstone shareholders accept the Offer and the Offer becomes or is declared wholly unconditional. The Large Shareholders have provided irrevocables and letters of intent representing 74.3% of Touchstone's issued share capital, making this very likely.

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    Following this and with the improved terms announced by IP Group on 18 July 2017, Imperial College London provided a letter of intent in support of the Offer. This increased the collective indications of support to a level representing 89.7% of Touchstone's issued share capital.

    IP Group has further stated an intention to exercise its right pursuant to the provisions of Chapter 3 of Part 28 of Companies Act 2006 to acquire compulsorily the remaining Touchstone shares (through a "squeeze-out" process) should IP Group receive acceptances in respect of, or otherwise acquire 90% or more of the Touchstone shares to which the Offer relates, and assuming all other conditions of the Offer have been satisfied or waived. The level of shareholder support indicated in the Offer Document indicates that this is likely.

    The Board notes that if acceptances do not reach 90% there is a risk that shareholders who do not accept the Offer could, as a result, own a minority interest in an unquoted company controlled by IP Group and would no longer be afforded the protections available to them whilst the Company remains a quoted public company. In addition, cancellation of the listing will significantly reduce the liquidity and marketability of the Touchstone shares and the value of Touchstone shares may therefore be significantly adversely affected.

    This should be considered by shareholders when considering their decision on whether or not to accept the Offer.

    Shareholders should note that whilst the Offer includes statements of support in respect of 89.7% of Touchstone's issued share capital, the Offer remains subject to the following key terms and conditions, detail of which are set out in the Offer document:

    - Acceptance Condition: the Offer will remain conditional upon valid acceptances of the Offer being received by no later than 1:00pm on 15 September 2017 in respect of not less than 75 per cent. of the Touchstone Shares;

    - IP Group shareholder approval: the passing of the necessary resolutions at an IP Group general meeting to approve, implement and effect the Offer which is being held at 11:00 a.m. on 10 August 2017;

    - CMA clearance: the Competition and Markets Authority ("CMA") issuing a decision to the effect that the transaction can proceed without further investigation or else the CMA's period for issuing a decision expiring; and

    - FCA approval: the necessary FCA approvals being obtained.

    CONCLUSION

    The Board, which has been so advised by J.P. Morgan Cazenove as to the financial terms of the Offer, continues to believe that the financial terms of the Offer, including the improved terms are not fair and reasonable.

    In providing its advice to the Board, J.P. Morgan Cazenove has taken into account the commercial assessments of the Board. J.P. Morgan Cazenove is providing independent financial advice to the Board for the purposes of Rule 3 of the Takeover Code.

    Accordingly, the Board therefore recommends that Touchstone shareholders should not accept the Offer unless the Offer has been declared wholly unconditional. The Directors who own shares in Touchstone in their personal capacity have decided they will not accept the Offer in respect of their own beneficial holdings at this stage.

    Yours faithfully,

    David Newlands Chairman of the Board of Touchstone Innovations plc

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    PART II

    ADDITIONAL INFORMATION

    1. The Company

    The Company, which is the subject of the Offer, is incorporated and registered in England and Wales as a public limited company (registered number 05796766) with its registered office at 7 Air Street, London W1B 5AD.

    2. Responsibility

    The Directors, whose names and business addresses are set at paragraph 3 of this Part II, each accept responsibility for the information contained in this document, except that the only responsibility accepted by them in respect of the information contained in this document relating to IP Group, which has been compiled from published sources, is to ensure that such information has been correctly and fairly reproduced and presented. Subject as aforesaid, to the best of the knowledge and belief of each of the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.

    3. Directors

    3.1 The Directors and their respective positions are set out below:

    Name Position held

    David Newlands Chairman

    Russell Cummings Chief Executive Officer

    Nigel Pitchford Chief Investment Officer

    Anthony Hickson Managing Director Technology Transfer

    David Begg Non-Executive Director

    Robert Easton Non-Executive Director

    Linda Wilding Non-Executive Director

    3.2 The business address of each of the Directors is 7 Air Street, London W1B 5AD.

    4. Disclosures of interests and dealings

    Definitions and references

    4.1 For the purposes of this paragraph 4:

    (a) "acting in concert" has the meaning given to it in the Takeover Code;

    (b) "arrangement" includes any indemnity or option arrangement and any agreement or understanding, formal or informal, of whatever nature relating to relevant securities of the Company or to the relevant securities of IP Group which may be an inducement to deal or refrain from dealing;

    (c) a company is an "associated company" of another company where both companies are

    subsidiaries of the same body corporate;

    (d) "dealing" or "dealt" means:

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    (i) acquiring or disposing of relevant securities, of the right (whether conditional or absolute) to exercise or direct the exercise of the voting rights attaching to relevant securities or of general control of relevant securities;

    (ii) taking, granting, acquiring, disposing of, entering into, closing out, terminating,

    exercising (by either party) or varying an option (including a traded option contract) in respect of any relevant securities;

    (iii) subscribing or agreeing to subscribe for relevant securities; (iv) exercising or converting, whether in respect of any new or existing securities, or any

    relevant securities carrying conversion or subscription rights; (v) acquiring, disposing of, entering into, closing out, exercising (by either party) of any

    rights under, or varying, a derivative referenced, directly or indirectly, to relevant securities;

    (vi) entering into, terminating or varying the terms of any agreement to purchase or sell

    relevant securities; and (vii) any other action resulting, or which may result, in an increase or decrease in the

    number of relevant securities in which a person is interested or in respect of which he has a short position;

    (e) "derivative" includes any financial product the value of which, in whole or in part, is

    determined directly or indirectly by reference to the price of an underlying security; (f) "Disclosure Period" means the period commencing on 23 May 2017 and ending on 31 July

    2017 (being the latest practicable date prior to the publication of this document; (g) "relevant securities" has the meaning given to it in the Takeover Code and includes equity

    share capital and securities convertible into, or rights to subscribe for, options (including traded options) in respect thereof and derivatives references thereto;

    (h) "securities" has the meaning given to it by the Takeover Code; (i) "short position" means any short position (whether conditional or absolute and whether in the

    money or otherwise) including any short position under a derivative any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery; and

    (j) a person has an "interest" or is "interested" in relevant securities if he has a long

    economic exposure, whether absolute or conditional, to changes in the price of those securities (but not if he or she only has a short position in such securities) and in particular if:

    (i) he or she owns them; (ii) he or she has the right (whether conditional or absolute) to exercise or direct the

    exercise of the voting rights attaching to them or has general control of them; or (iii) by virtue of any agreement to purchase, option or derivative he or she:

    (A) has the right or option to acquire them or call for their delivery; or

    (B) is under an obligation to take delivery of them,

    whether the right, option or obligation is conditional or absolute and whether it is in the money or otherwise; or

    (iv) he or she is party to any derivative:

    (A) whose value is determined by reference to their price; and

  • 13

    (B) which results, or may result, in his having a long position in them.

    Interests and dealings in relevant securities of the Company

    4.2 As at the last day of the Disclosure Period, the interests of the Directors and their immediate families, related trusts and close relatives, all of which are beneficial unless otherwise stated, in relevant securities of the Company were as follows:

    Director Number of Shares

    David Newlands 100,000

    David Begg 18,319

    Linda Wilding 15,000

    Russ Cummings 139,6362

    Anthony Hickson 52,4723

    4.3 As at the last day of the Disclosure Period, the following options over Shares had been granted to Directors under the 2006 LTIP, the 2016 LTIP and the SAYE Plan and remained outstanding. No price was paid for the grant of any of the options referred to in the table below:

    Director Description Number of options

    over Shares Exercise Period Exercise Price (p)

    Russ Cummings 2006 LTIP 257,142

    1/8/2016 to 31/7/2021 350

    Russ Cummings 2006 LTIP 109,167 26/11/2019 to 26/11/2024 455

    Russ Cummings 2006 LTIP 100,752 26/11/2019 to 26/11/2024 493

    Russ Cummings 2016 LTIP 83,619 2/12/2019 to 1/6/2020 3 1/33 (3.03)

    Russ Cummings 2016 LTIP 83,619 1/12/2020 to 31/5/2021 3 1/33 (3.03)

    Russ Cummings 2016 LTIP 83,619 1/12/2021 to 31/5/2022 3 1/33 (3.03)

    Russ Cummings SAYE Plan 4,390 1/1/2018 to 30/6/2018 410

    Nigel Pitchford 2006 LTIP 257,142 1/8/2016 to 31/7/2021 350

    Nigel Pitchford 2006 LTIP 109,167 26/11/2019 to 26/11/2024 455

    Nigel Pitchford 2006 LTIP 100,752 26/11/2019 to 26/11/2024 493

    Nigel Pitchford 2016 LTIP 25,131 2/12/2019 to 1/6/2020 3 1/33 (3.03)

    Nigel Pitchford 2016 LTIP 25,131 1/12/2020 to 31/5/2021 3 1/33 (3.03)

    Nigel Pitchford 2016 LTIP 25,132 1/12/2021 to 31/5/2022 3 1/33 (3.03)

    Nigel Pitchford SAYE Plan 4,390 1/1/2018 to 30/6/2018 410

    Anthony Hickson 2006 LTIP 32,142 1/8/2016 to 31/7/2021 350

    Anthony Hickson 2006 LTIP 17,467 26/11/2019 to 26/11/2024 455

    Anthony Hickson 2006 LTIP 32,454 26/11/2019 to 26/11/2024 493

    2 Held in EBT. 3 1,577 Shares owned by spouse, 50,895 Shares held in EBT.

  • 14

    Anthony Hickson 2016 LTIP 14,622 2/12/2019 to 1/6/2020 3 1/33 (3.03)

    Anthony Hickson 2016 LTIP 14,622 1/12/2020 to 31/5/2021 3 1/33 (3.03)

    Anthony Hickson 2016 LTIP 14,622 1/12/2021 to 31/5/2022 3 1/33 (3.03)

    Anthony Hickson SAYE Plan 3,073 1/1/2018 to 30/6/2018 410

    4.4 The options granted under the 2006 LTIP and 2016 LTIP are subject to the satisfaction of performance targets.

    4.5 In addition, the following Directors have interests set out below in the Group's Carried Interest Plan. The Carried Interest Plan allows permanent employees to obtain an equity participation in the growth of the underlying investments of the Group, and provides remuneration to participants on the basis of the amount of proceeds from the sale of investments in excess of a hurdle. The proceeds of disposals are distributed in the following order: (1) retention by the Group of the original amount invested, (2) retention by the Group of the relevant hurdle, (3) a 'catch-up' payment to participants until the desired profit share ratio for the portfolio is reached, and (4) retention by the Group and distribution to participants in the desired profit share ratio.

    As at 31 July 2017 (%)

    Amounts receivable in respect of scheme

    interests as at 31July 20174

    ()

    Accrued value of scheme interest as at

    30 June 20175

    ()

    Russ Cummings

    Class 2007 carried interest plan 3.00 Nil -

    Class 2008 carried interest plan 3.00 Nil 578,354

    Class 2009 carried interest plan 2.03 Nil -

    Class 2010 carried interest plan 2.25 Nil -

    Class 2011 carried interest plan 2.25 Nil -

    Class 2012 carried interest plan 1.91 Nil -

    Class 2013 carried interest plan 1.38 Nil 75,946

    Class 2014 carried interest plan (A) 1.96 Nil 204,132

    Class 2014 carried interest plan (B) 1.96 Nil -

    Class 2015 carried interest plan (A) 1.73 Nil -

    Class 2015 carried interest plan (B) 1.44 Nil 215,529

    Class 2016 carried interest plan (A) 1.62 Nil 75,963

    Class 2016 carried interest plan (B) 1.70 Nil 125,396

    Class 2017 carried interest plan (A) 0.00 Nil -

    Class 2017 carried interest plan (B) 0.00 Nil -

    4 No amounts are receivable in respect of scheme interests as there is no amount of proceeds from the sale of

    investments that is in excess of the hurdle. 5 Calculated by reference to fair value uplifts in the individual portfolios.

  • 15

    As at 31 July 2017 (%)

    Amounts receivable in respect of scheme

    interests as at 31July 20174

    ()

    Accrued value of scheme interest as at

    30 June 20175

    ()

    Nigel Pitchford

    Class 2007 carried interest plan 0.90 Nil -

    Class 2008 carried interest plan 0.90 Nil 173,506

    Class 2009 carried interest plan 0.90 Nil -

    Class 2010 carried interest plan 1.88 Nil -

    Class 2011 carried interest plan 1.80 Nil -

    Class 2012 carried interest plan 1.91 Nil -

    Class 2013 carried interest plan 1.38 Nil 75,946

    Class 2014 carried interest plan (A) 1.96 Nil 204,132

    Class 2014 carried interest plan (B) 1.96 Nil -

    Class 2015 carried interest plan (A) 1.73 Nil -

    Class 2015 carried interest plan (B) 1.44 Nil 215,529

    Class 2016 carried interest plan (A) 1.62 Nil 75,963

    Class 2016 carried interest plan (B) 1.70 Nil 125,396

    Class 2017 carried interest plan (A) 1.32 Nil -

    Class 2017 carried interest plan (B) 1.32 Nil 138,218

    Anthony Hickson

    Class 2007 carried interest plan 1.13 Nil -

    Class 2008 carried interest plan 0.71 Nil 137,359

    Class 2009 carried interest plan 0.68 Nil -

    Class 2010 carried interest plan 0.68 Nil -

    Class 2011 carried interest plan 0.94 Nil -

    Class 2012 carried interest plan 0.38 Nil -

    Class 2013 carried interest plan 0.35 Nil 18,987

    Class 2014 carried interest plan (A) 0.40 Nil 40,027

    Class 2014 carried interest plan (B) 0.00 Nil -

    Class 2015 carried interest plan (A) 0.23 Nil -

    Class 2015 carried interest plan (B) 0.23 Nil 34,485

  • 16

    As at 31 July 2017 (%)

    Amounts receivable in respect of scheme

    interests as at 31July 20174

    ()

    Accrued value of scheme interest as at

    30 June 20175

    ()

    Class 2016 carried interest plan (A) 0.22 Nil 10,236

    Class 2016 carried interest plan (B) 0.00 Nil -

    Class 2017 carried interest plan (A) 0.00 Nil -

    Class 2017 carried interest plan (B) 0.00 Nil -

    4.7 As at the last day of the Disclosure Period, no persons acting in concert with the Company nor any of

    the Directors, their immediate families, related trusts or close relatives has any short positions in the Company.

    4.8 Neither the Company nor any person acting in concert with the Company, nor the Directors, their immediate families, related trusts and close relatives has dealt in any securities of the Company during the Disclosure Period.

    Interests in relevant securities of IP Group

    4.9 As at the last day of the Disclosure Period, neither the Company, nor the Directors, their immediate families, related trusts and close relatives has:

    (a) any interest in relevant securities of IP Group;

    (b) rights to subscribe for relevant securities of IP Group;

    (c) short positions in IP Group;

    (d) any interest to disclose that they have borrowed or lent relevant securities of IP Group; or

    (e) dealt in relevant securities of IP Group during the Disclosure Period.

    General

    4.10 As at the last day of the Disclosure Period, save as disclosed in this document, neither the Company nor any person acting in concert with the Company had borrowed or lent any relevant securities (including for these purposes any financial collateral arrangements of the kind referred to in Note 4 on Rule 4.6 of the Takeover Code) of the Company or IP Group.

    4.11 As at the last day of the Disclosure Period, save as disclosed in this document, there were no arrangements between the Company, or any person acting in concert with the Company, and any other person.

    4.12 The Company has not redeemed or purchased any Shares or any securities convertible into, rights to subscribe for or options in respect of, or derivatives referenced to Shares during the Disclosure Period.

    5. Directors' service contracts and letters of appointment

    5.1 Set out below are the details of the Directors' service contracts and letters of appointment:

    Director Date of current letter of

    appointment or service contract Date of appointment

    to Board Date of expiry/ Notice period

    David Newlands 11 May 2016 1 August 2016 Three months' notice

  • 17

    Russell Cummings 18 September 2006 18 September 20066 Six months' notice

    Nigel Pitchford 1 January 2012 16 October 2013 Six months' notice

    Anthony Hickson 18 February 2005 16 October 2013 Three months' notice

    David Begg 22 March 2012 20 March 2012 Three months' notice

    Robert Easton 8 June 2015 1 August 2015 Three months' notice

    Linda Wilding 29 May 2014 19 June 2014 Three months' notice

    None of the Directors' service contracts or letters of appointment have been entered into or amended within six months of the date of this document

    5.2 Set out below are details of the remuneration paid to the Directors in the year ended 31 July 2016:

    Director

    Fee/ Basic salary

    ()

    Bonus

    ()

    Benefits in kind

    ()

    Total

    ()

    Pension contribution

    ()

    David Newlands - - - - -

    Russell Cummings 290,000 - 6,000 321,000 25,000

    Nigel Pitchford 260,000 - 4,000 286,000 22,000

    Anthony Hickson 149,000 16,000 4,000 199,000 30,000

    David Begg 43,000 - - 43,000

    Robert Easton 43,000 - - 43,000

    Linda Wilding 47,000 - - 47,000

    5.3 During the year ended 31 July 2016, the Remuneration Committee agreed to pay directly to Russ Cummings 25,000 and Nigel Pitchford 22,000 in lieu of pension contributions.

    5.4 With effect from 1 August 2016, the Remuneration Committee increased the following base salaries:

    (a) Russell Cummings 305,000 (previously 290,000);

    (b) Nigel Pitchford 275,000 (previously 260,000); and

    (c) Anthony Hickson 149,000 with an additional 11,000 paid into his pension scheme in accordance with salary sacrifice arrangements (previously 149,000).

    5.5 The cost of insured benefits and benefits in kind for the year ending 31 July 2017 are estimated to be as follows:

    (a) Russell Cummings 7,000 (previously 6,000);

    (b) Nigel Pitchford 5,000 (previously 4,000); and

    (c) Anthony Hickson 5,000 (previously 4,000).

    5.6 Pension contributions (or equivalent payments in lieu) for the year ending 31 July 2017 are estimated to be as follows:

    (a) Russell Cummings 26,000 (previously 25,000);

    6 Russell Cummings was appointed as Chief Executive Officer on 16 July 2013.

  • 18

    (b) Nigel Pitchford 23,000 (previously 22,000); and

    (c) Anthony Hickson 30,000 (previously 30,000).

    Chairman's letter of appointment

    5.7 The Chairman was appointed to the Board on 1 August 2016. Details of the date of the Chairman's letter of appointment and the period of notice required to terminate it are set out paragraph 5.1 above. The annual fee for his service, both as a non-executive Director and as Chairman, is 150,000. Upon termination of his services to the Company the Chairman is not entitled to any benefits.

    Executive Directors' service contracts

    5.8 Details of the date of the Executive Directors' service agreements and the period of notice required to terminate them are set out in paragraph 5.1 above. Details of the Executive Directors' compensation and benefits in kind for the financial year ended 31 July 2016 are set out in paragraphs 5.2 and 5.3 above.

    5.9 No Executive Director is entitled under his service contract to any benefits on the termination of his employment beyond any payment in lieu of contractual notice. On termination of employment of the Executive Directors, the Company may at its discretion require each of them not to carry out any duties during their notice period.

    Non-Executive Directors' letters of appointment

    5.10 Details of the date of the Non-Executive Directors' letters of appointment and the period of notice required to terminate them are set out in paragraph 5.1 above. Details of the Non-Executive Directors' compensation and benefits in kind for the financial year ended 31 July 2016 are set out in paragraphs 5.2 and 5.3 above.

    5.11 David Begg was appointed to the Board by Imperial College London and his appointment may be terminated by Imperial College London.

    5.12 There are no existing or proposed service agreements, consultancy agreements or letters of appointment between any of the Directors and any member of the Group which provide benefits upon termination of employment or otherwise.

    6. Material contracts

    The following contracts have been entered into by the Group otherwise than in the ordinary course of business since 23 May 2015 (being two years before commencement of the Offer Period):

    (a) 2015 European Investment Bank loan agreement

    On 13 July 2015, IIL (as borrower), the Company (as guarantor) and Imperial Innovations Businesses LLP (as guarantor) entered into a 50.0 million loan agreement with EIB (the "2015 EIB Loan Agreement").

    The 2015 EIB Loan Agreement contains representations, undertakings and events of default which are customary for this type of agreement.

    The purpose of the loan is to partly fund certain investments in Portfolio Companies undertaking research and/or development of devices, products, services or technologies in the life sciences field which have been founded by or associated with UK universities or research establishments. The investments may be made between 1 August 2015 and 31 July 2018.

    The loan may be drawn down in up to four tranches, with a minimum tranche value of 10.0 million. This loan has been drawn down. Each tranche may be designated as having a fixed rate of interest or a floating rate of interest.

    The 2015 EIB Loan Agreement contains a debt covenant requiring that the ratio of the total fair value of investments plus cash and qualifying liquidity to debt should at no time fall below 4:1 and requires

  • 19

    certain conditions to be satisfied before dividends are paid, as well as containing other covenants as required by the EIB and as negotiated to be commercially acceptable to the Company, including a covenant requiring that, on the dates set out in the 2015 EIB Loan Agreement, the aggregate amount of cash, cash equivalent investments and other qualifying liquidity should not fall below 30.0 million.

    Security for the 2015 EIB Loan Agreement is in the form of an account charge in favour of the EIB over IIL's debt service reserve account. The account is available solely to pay any outstanding interest and principal owing at any time for the following six months under the 2013 EIB Loan Agreement or the 2015 EIB Loan Agreement and the amount required to be held in the account as at 21 July 2017 was 2,812,579. Pursuant to a guarantee and indemnity agreement entered into between the EIB, the Company and Imperial Innovations Businesses LLP, IIL's liabilities under the 2015 EIB Loan Agreement are guaranteed by the Company and Imperial Innovations Businesses LLP.

    (b) 2016 Placing Agreement

    On 4 February 2016 the Company, Cenkos Securities and J.P. Morgan Cazenove entered into the 2016 Placing Agreement pursuant to which, inter alia:

    the Company agreed, subject to certain conditions, to allot and issue 23,529,412 new Ordinary Shares in the Company to placees procured by Cenkos Securities and J.P. Morgan Cazenove at a price of 425 pence per share; and

    Cenkos Securities and J.P. Morgan Cazenove agreed, subject to certain conditions, to procure subscribers for new Ordinary Shares in the Company.

    In consideration for their services, the Company agreed to pay to Cenkos Securities and J.P. Morgan Cazenove the fees and commissions set out in the fee letters entered into between the Company and each of Cenkos Securities and J.P. Morgan Cazenove.

    The Company gave certain customary representations, warranties and undertakings to J.P. Morgan Cazenove and Cenkos Securities. In addition, the Company gave certain customary indemnities to J.P. Morgan Cazenove and Cenkos Securities

    (c) UCL Technology Fund Limited Partnership Agreement

    On 17 January 2016, the Company's subsidiary, Innovations Limited Partner Ltd., was admitted as a limited partner in UCL Technology Fund LP (the "Partnership") with a commitment (pursuant to a subscription agreement) of 24.75 million to the Partnership over a five year period. The European Investment Fund ("EIF") became a limited partner in the Partnership on the same date, also committing 24.75 million to the Partnership.

    The Partnership is established pursuant to an amended and restated limited partnership agreement (the "LPA") dated 17 January 2016 between (1) UTF General Partner LLP (the "General Partner") and (2) UTF Carry Partner LP.

    Purpose of the Partnership

    The purpose of the Partnership is to carry on the business of an investor and to identify, research and negotiate investment opportunities and make and monitor the progress of, and arrange the sale of, investments with the principal objective of providing investors with a high overall rate of return by means of both income and capital. The Partnership will invest in technology transfer opportunities in the life sciences and physical sciences sectors emanating from University College London and will make investments in early-stage "proof-of-concept" projects, licensing opportunities and new spin-out companies.

    Management of the Partnership

    Responsibility for the operation of the Partnership is vested exclusively in the General Partner, which has appointed Albion Ventures LLP ("Albion") as manager to operate the Partnership and manage its investment portfolio on a discretionary basis. Albion will also commit 500,000 to the Partnership as a limited partner. Albion will draw on the experience of the University College London's technology transfer company, UCL Business plc ("UCLB"), to advise on matters including project origination,

  • 20

    initial project work, project design and coordination and licensing activity.

    Under a project access agreement, UCLB has, subject to limited exceptions, an obligation to provide details to the Partnership of all projects with commercial potential arising from University College London's research base and falling within the investment policy of the Partnership, to promote the Partnership within University College London and to work with Albion to develop projects into spin-out companies or licensing opportunities.

    The General Partner has obligations to use all reasonable endeavours to offer co-investment opportunities to Innovations Limited Partner Ltd. and EIF, to alert them to any projects that the Partnership chooses not to invest in, and to negotiate rights for Innovations Limited Partner Ltd. and EIF to take up any of the Partnership's pre-emption rights that the Partnership does not take up.

    Innovations Limited Partner Ltd. and EIF are each entitled to appoint representatives to the advisory board of the Partnership, whose role, amongst other things, is to provide guidance on the investment policy of the Partnership, consider any conflicts of interest, review valuations of the Partnership's investments and consider the approach to the valuation of investments.

    Financial arrangements

    Income of the Partnership will be distributed to the limited partners at such times as the General Partner in its discretion decides and no later than three months after receipt by the Partnership. Distributions of a capital nature shall be made as soon as practicable after the relevant amount becomes available for distribution.

    Albion and UCLB will share management fees (2.4% per annum calculated by reference to total commitments during the investment period of the Partnership and invested capital after the investment period) and carried interest of 20% of realised profits of the Partnership once the limited partners have received distributions equal to 120% of their commitments.

    The LPA contains typical exculpation and indemnification provisions in favour of, amongst others, the General Partner, Albion and their respective officers and employees.

    Term and termination

    The Partnership's initial investment period will be five years from the first closing date (being 17 January 2016) and the term of the Partnership will continue until the expiration of ten years from the first closing date. The term of the Partnership may be extended by up to two successive periods of one year each by the election of the General Partner and consent by each of Innovations Limited Partner Ltd. and EIF.

    The General Partner may not withdraw as general partner during the term of the Partnership unless with the consent of each of Innovations Limited Partner Ltd. and EIF, except that the General Partner may transfer its rights and obligations to an associate without requiring such consent. The LPA contains certain customary termination provisions and shall also terminate upon the occurrence of any of the following events:

    the suspension of drawdowns from investors following a change of control or key executive departure which continues unresolved for longer than six months; or

    UCLB becomes unable to perform its obligations pursuant to the project access agreement and Albion's proposals for how it intends to proceed are not approved by the Partnership's advisory board (save where the Partnership is continued pursuant to the LPA).

    7. Significant change

    There has been no significant change in the financial or trading position of the Company since 31 January 2017 (the date to which the latest half-yearly report of the Company was prepared).

    8. Fees and expenses

    The aggregate amount of estimated fees and expenses expected to be incurred by the Company in

  • 21

    connection with the Offer is between approximately 5.55 million and 5.61 million (excluding any applicable VAT). Separate estimates of the fees and expenses (in each case, excluding any applicable VAT) expected to be incurred in relation to discrete categories of advice are:

    (a) 4,500,000 for financial and corporate broking advice;

    (b) 430,000 to 460,000 in relation to legal advice; legal fees are estimated at a range as they are charged by reference to hourly rates and, at the latest practicable date prior to publication of this document, the residual amount of legal work required, inter alia, in connection with the anti-trust and regulatory filings is uncertain;

    (c) 380,000 in relation to accounting advice;

    (d) 67,000 in relation to public relations advice;

    (e) 49,000 in relation to other professional services; and

    (f) 125,000 to 150,000 in relation to other costs and expenses; other costs and expenses are estimated at a range as they are charged by reference to hourly rates and, at the latest practicable date prior to publication of this document, the residual amount of work required is uncertain.

    9. Miscellaneous

    (a) J.P Morgan Cazenove has given and has not withdrawn its written consent to the inclusion in this document of the references to its name and the form and context in which it appears.

    (b) Deloitte LLP has given and has not withdrawn its written consent to the inclusion in this document of the references to its name and the form and context in which it appears.

    10. Documents available on the Company's website

    10.1 Copies of the following documents will be available, free of charge, on the Company's website at www.touchstoneinnovations.com from the date of this document. The contents of that website are not incorporated into, and do not form part of, this document:

    (a) the Articles;

    (b) Deloitte's opinion on the value of the Group's portfolio dated 14 July 2017;

    (c) the consent letters referred to in paragraph 9 above; and

    (d) this document.

    10.2 Any Shareholder, person with information rights or other person to whom this document is sent may request a copy of each of the documents set out above, or a copy of this document, in hard copy form. Hard copies will be sent only where valid requests are received from such persons. Requests for hard copies may be made by submitting a request in writing to the Company Secretary, Touchstone Innovations plc, 7 Air Street, London W1B 5AD, or by contacting the Company Secretary during normal business hours on 020 3053 8859 or if calling from outside the UK on +44 (0)20 3053 8859. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. A hard copy of this document and any other document referred to in this document will not be sent to you unless so requested. You may also request that all future documents, announcements and information to be sent to you in relation to the Offer should be in hard copy form.

    11. Presentation of information and sources

    11.1 Unless otherwise stated in this document, financial information relating to the Company has been extracted from the annual report and accounts of the Company for the year ended 31 July 2016. Financial information is reported under International Financial Reporting Standards unless otherwise stated.

    11.2 The Company confirms that the information in this document has been rounded and accordingly may

  • 22

    not add up to 100 per cent.. Certain financial data has also been rounded. As a result of this rounding, the totals of data presented in this document may vary slightly from the actual arithmetic totals of such data.

  • PART III

    DEFINITIONS The following definitions have the meanings in this document, unless the context requires otherwise:

    "2006 LTIP" the Touchstone Innovations Long Term Incentive Plan adopted by the Company on 24 June 2006;

    "2016 LTIP" the Touchstone Innovations 2016 Long Term Incentive Plan adopted by the Company on 21 November 2016;

    "" and "pence" the lawful currency of the United Kingdom;

    "Articles" the articles of association of the Company;

    "Board" the board of Directors of the Company;

    "Business Day" a day (other than Saturdays, Sundays, public holidays or bank holidays) on which banks are generally open for normal business in the City of London;

    "Carried Interest Plan" the carried interest plan operated by the Group;

    "Cenkos Securities" Cenkos Securities plc, a public limited company incorporated in England and Wales with registered number 05210733 and having its registered office at 6.7.8 Tokenhouse Yard, London EC2R 7AS;

    "Company" Touchstone Innovations plc, a public limited company incorporated in England and Wales with registered number 05796766 and having its registered office at 7 Air Street, London W1B 5AD;

    "Directors" the Directors of the Company referred to in paragraph 3 of Part II (Additional Information) of this document or, where the context requires, the directors of the Company from time to time;

    "EIB" the European Investment Bank;

    "Executive Directors" Russell Cummings, Nigel Pitchford and Anthony Hickson;

    "Financial Conduct Authority" the Financial Conduct Authority in its capacity as the competent authority for the purposes of Part VI of the Financial Services Markets Act 2000, as amended, or any successor body or bodies;

    "Group" the Company and its subsidiaries and subsidiary undertakings;

    "holder" a registered holder and includes a person entitled by transmission;

    "IIL" Imperial Innovations Limited, a private limited company incorporated in England and Wales with registered with number 02060639 and having its registered office at 52 Princes Gate, Exhibition Road, London SW7 2PG;

    "Imperial College London" Imperial College London of Science, Technology and Medicine of Faculty Building, Imperial College London, London SW7 2AZ incorporated by Royal Charter, registered with number RC000231;

    "IP Group" IP Group plc, a public limited company incorporated in England and Wales with registered number 04204490 and having its registered office at The Walbrook Building, 25 Walbrook, London EC4N 8AF;

    "J.P. Morgan Cazenove" J.P. Morgan Limited (which operates its investment banking activities in the United Kingdom as J.P. Morgan Cazenove), a public limited company incorporated in England and Wales with registered number 00248609 and having its registered office at 25 Bank Street, Canary Wharf, London E14 5JP;

    "London Stock Exchange" London Stock Exchange plc;

    "members" the members of the Company on the register of members at any relevant date;

  • "Non-Executive Directors" David Begg, Robert Easton and Linda Wilding;

    "Offer" the offer implemented by way of a takeover offer as defined in Chapter 3 of Part 28 of the Companies Act 2006 to be made by IP Group to acquire the entire issued and to be issued ordinary share capital of the Company and, where the context admits, any subsequent revision, variation, extension or renewal of such offer;

    "Offer Period" the offer period (as defined in the Takeover Code) relating to the Company, which commenced on 23 May 2017;

    "Panel" the Panel on Takeovers and Mergers;

    "Portfolio Company" a company established for exploiting intellectual property in which company the Group has an equity interest as a result of the transfer or licensing of intellectual property and/or monetary investment;

    "Restricted Jurisdiction" the United States, Canada, Japan, Australia or any jurisdiction where local laws or regulations may result in a significant risk of civil, regulatory or criminal exposure if information concerning the Offer or the contents of this document is sent or made available to Shareholders in any of those jurisdictions;

    "SAYE Plan" the SAYE plan operated by the Company;

    "Shareholders" the holders of Shares;

    "Shares" the ordinary shares of 31/33 pence each in the capital of the Company;

    "Takeover Code" the City Code on Takeovers and Mergers; and

    "United Kingdom" the United Kingdom of Great Britain and Northern Ireland.

    For the purposes of this document, "subsidiary" and "subsidiary undertaking" each have the respective meanings given to them under the Companies Act 2006.