La Agencia tendrá las siguientes atribuciones:

Property, plant and equipment

Property, plant and equipment is stated at cost, net of depreciation

Investments in associates and joint ventures

The Group’s interests in its associates, being those entities over

Trade and other receivables

Trade receivables are recognised and carried at the lower of their original invoiced value and recoverable amount. Provision is made when there is objective evidence that the Group will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote.

Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purposes of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

Leasing

Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at fair value, less

Notes to the financial statements ^continued

1 Accounting policies continued

Borrowing costs

Borrowing costs directly attributed to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Share-based payments

The Group operates a number of executive and employee share option schemes, including a Long-Term Incentive Plan (LTIP) and a Value Realisation Plan (VRP), under which shares may be granted to staff members. The level of grant to members of staff under the LTIP is dependent upon the total shareholder return of Vectura (a market condition) compared to a peer group of UK pharmaceutical and biotechnology companies. In accordance with IFRS 2, for all grants of share options and awards, the cost of equity-settled transactions is measured by reference to their fair value at the date at which they are granted. The Black–Scholes model is used to determine fair value for options and the Monte Carlo binomial model for LTIP and VRP awards.

The cost of equity-settled share transactions is recognised, together with a corresponding increase in equity, over the period until the award vests. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. At each reporting date, the cumulative expense recognised for equity-based transactions reflects the extent to which the vesting period has expired and the number of awards that, in the opinion of the Directors at that date, will ultimately vest. The Group has taken advantage of the exemptions afforded by IFRS 1 in respect of equity-settled awards and has applied IFRS 2 only to equity-settled awards granted after 7 November 2002 and not vested at 1 January 2005.

New accounting Standards and Interpretations

In the current financial year, the Group has adopted the following Standards and Interpretations issued by the IASB and the International Financial Reporting Interpretations Committee:

IAS 27 (Amendment) (January 2008) – Consolidated and Separate Financial Statements

IFRS 3 (revised January 2008) – Business combinations Adoption of these Standards and Interpretations did not have any effect on the financial statements of the Group, or result in changes in accounting policy or additional disclosure.

During the year, the IASB and IFRIC have issued a number of Standards and Interpretations with an effective date after the date of these financial statements. The new Standards and

Interpretations issued include the following:

IAS 12 (Amendment) (December 2010) – Deferred Tax: Recovery of Underlying Assets

IAS 24 (revised November 2009) – Related Party Disclosures IAS 32 (Amendment) (October 2009) – Classification of Rights Issues IFRS 1 (Amendment) (July 2009) – Additional Exemptions for

First-Time Adopters

IFRS 1 (Amendment) (December 2010) – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters

IFRS 1 (Amendment) (December 2010) – Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters IFRS 7 (Amendment) (October 2010) – Disclosures – Transfers of

Financial Assets

IFRS 9 – Financial Instruments Improvements to IFRSs 2010 (May 2010)

IFRIC 14 (Amendment) (November 2009) – Prepayments of a Minimum Funding Requirement

IFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the Group’s financial statements.

2 Revenue

Revenue represents amounts invoiced to third parties, derived from the provision of licences and services that fall within the Group’s sole principal activity, the development of pharmaceutical products.

Revenue by category 2011 2010

£m £m

Royalties 13.6 13.6

Product licensing 10.6 8.8

Technology licensing 12.9 9.4

Pharmaceutical development services 4.2 7.6

Device sales 1.6 0.7

42.9 40.1

Investment income:

Interest income (note 5) 0.8 0.6

Total income 43.7 40.7

Revenue by 2011 2010

customer location £m £m

United Kingdom 11.6 2.7

Rest of Europe 15.1 22.4

United States of America 13.5 14.8

Rest of World 2.7 0.2

42.9 40.1

Information about major customers

Revenue earned from the Group’s major customers was as follows:

Customer A – £14.4m (2010: £14.6m), Customer B – £13.5m (2010:

£14.8m) and Customer C – £11.5m (2010: £0.8m).