TIDMTPOA TIDMTTM TIDMTPOB TIDMTPON
RNS Number : 6763N
Triple Point VCT 2011 PLC
21 May 2020
21 May 2020
Triple Point VCT 2011 plc
(the "Company")
RESULTS FOR THE YEARED 29 FEBRUARY 2020
The financial information set out in these statements does not
constitute the Company's statutory accounts for the year ended 29
February 2020, prepared in accordance with section 435 of the
Companies Act 2006, but is derived from those accounts. Statutory
accounts will be delivered to the Registrar of Companies in due
course. The auditors have reported on these accounts and their
report was unqualified and did not contain a statement under
section 498(2) of the Companies Act 2006.
Results
Triple Point VCT 2011 plc managed by Triple Point Investment
Management LLP today announces the results for the year ended 29
February 2020.
These results were approved by the Board of Directors on 21 May
2020.
You may view the Annual Report in due course on the Triple Point
website www.triplepoint.co.uk
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Triple Point Investment Management Tel: 020 7201 8989
LLP
(Investment Manager)
Ben Beaton
Belinda Thomas
The Company's LEI is 213800AOOAQA5XQDEA89
Further information on the Company can be found on its website
https://www.triplepoint.co.uk/current-vcts/triple-point-vct-2011-plc/s2539/
.
NOTES:
The Company is a Venture Capital Trust incorporated in July
2010. The Investment Manager is Triple Point Investment Management
LLP. The Company was established to fund small and medium sized
enterprises (SMEs). The Company launched a new share class, known
as The Venture Fund, in March 2019 which is mandated to invest in
SMEs producing products or digital services that solve challenges
faced by their larger corporate customers.
Financial Summary
Year ended 29 February 2020
Venture
A Shares B Shares Shares Total
Net assets GBP'000 5,749 6,996 6,625 19,370
Net asset value per share Pence 57.78p 102.77p 99p n/a
---------- ---------- --------
Profit/(loss) before tax GBP'000 309 105 (102) 312
Earnings/(loss) per share Pence 2.79p 1.67p (1.29p) n/a
---------- ---------- --------- --------
Cumulative return to Shareholders
(p)
Net asset value per share 57.78p 102.77p 99.01p
Total dividends paid 63.25p 5.00p -
Net asset value plus dividends
paid 121.03p 107.77p 99.01p
--------------------------------------------- ---------- ---------- --------- --------
Year ended 28 February 2019
Venture
A Shares B Shares Shares Total
Net assets GBP'000 10,995 7,243 - 18,238
Net asset value per share Pence 110.49p 106.10p - n/a
---------- ---------- --------
Profit before tax GBP'000 801 414 - 1,215
Earnings per share Pence 7.34p 6.10p - n/a
---------- ---------- --------- --------
Cumulative return to Shareholders
(p)
Net asset value per share 110.49p 106.10p -
Total dividends paid 7.75p - -
Net asset value plus dividends
paid 118.24p 106.10p -
--------------------------------------------- ---------- ---------- --------- --------
Triple Point VCT 2011 plc ("the Company") is a Venture Capital
Trust ("VCT"). The Investment Manager is Triple Point Investment
Management LLP ("TPIM" and "Triple Point"). The Company was
incorporated in July 2010.
-- A Ordinary Shares ("A Shares"): On 30 April 2015 the A Share
Class offer closed having raised GBP10.3 million with a total of
9,951,133 A Shares being issued.
-- B Ordinary Shares ("B Shares"): On 29 April 2016 the B Share
Class offer closed having raised GBP6,972,311 with a total of
6,824,266 B Shares being issued.
-- Venture Fund: On 30 August 2019 the Venture Fund offer closed
having raised gross proceeds of GBP7.1 million with a total of
6,912,338 Venture Fund Shares being issued.
The Strategic Report on pages 7 to 59, the Directors' Report on
pages 76 to 79, the Corporate Governance Report on pages 61 to 65
and the Directors' Remuneration Report on pages 70 to 75 have each
been drawn up in accordance with the requirements of English law
and liability in respect thereof is also governed by English law.
In particular, the responsibility of the Directors for these
reports is owed solely to Triple Point VCT 2011 plc.
The Directors submit to the members their Annual Report and
Financial Statements for the Company for the year ended 29 February
2020.
Key Highlights
-- Dividends per A share: 55.50p (Year ended 28 Feb 2019: 3.75p).
-- Dividend per B Share: 5.00p (Year ended 28 Feb 2019: Nil).
-- Ongoing Charges Ratio*: 2.74% (2019: 2.03%). The ongoing
charges ratio is a ratio of annualised ongoing charges expressed as
a percentage of average net asset values throughout the year.
-- Net Asset Value per A Share: 57.78p (Year ended 28 Feb 2019: 110.49p).
-- Net Asset Value per B Share: 102.77p (Year ended 28 Feb 2019: 106.10p).
-- Realisation Proceeds: GBP4.96 million. Realisations of
investments and loan repayments generated total proceeds for the
Company of GBP4.96 million.
-- Total Return per A Share*: 121.03p (Year ended 28 Feb 2019: 118.24p).
-- Total Return per B Share*: 107.77p (Year ended 28 Feb 2019: 106.10p).
-- Fundraising: GBP6.9m. The Venture Fund offer which closed on
31 August 2019 raise net proceeds of GBP6.9m.
*Total Return is made up by current Net Asset Value plus
Dividends paid to date. More information on Total Return is on
pages 20 to 21.
*Total Return and Ongoing Charges Ratio are defined as
Alternative Performance Measures ("APM"). The Board considers Total
Return to be the primary measure of shareholder value.
The Annual report contains a number of APMs. APMs are financial
measures that are in addition to those defined or specified in the
Company's reporting framework.
Strategic Report
Chairman's Statement
I am writing to present the Financial Statements for the Company
for the year ended 29 February 2020.
I am writing this at a time when we are all facing
unprecedented, uncertain and challenging times, as a result of the
Coronavirus ("COVID-19") pandemic. Businesses, economies, supply
chains and consumer habits in the UK and globally are
unquestionably facing challenges greater than most will have seen
before. Given the rapid and continuing evolution of the situation,
it is difficult to know the full extent of the economic impact that
the COVID-19 pandemic will have on the UK and businesses or how
long it may last. Society and industry will of course recover, but
now more than ever is the time to look towards long-term
opportunity. The Venture Fund in particular will work with industry
experts and innovation specialists, to find companies that have the
potential to deliver ground-breaking technology or products, at
scale, and to transform markets.
The impact of COVID-19 on the economy and on our portfolio of
companies was considered to be after the year end of the Company,
as such, the impact has been considered and disclosed as a post
balance sheet event. More information can be found in the note 23
to the financial statements.
I believe that the ability to transform challenges into
opportunities is the hallmark of all successful enterprises and
that despite the challenges we are all facing, the Company will be
able to weather this period of uncertainty and come out of this
crisis in a strong position and ready to capitalise on these
opportunities.
In the short term many companies across the economy, including
some of those within our Venture portfolio, are facing varying
degrees of pressure on their revenue lines. For some it will just
be a slow-down in their sales growth as acquiring new customers
becomes difficult in the next few months, while for others it will
be an actual contraction in sales. In both cases it is likely to
put pressure on our existing portfolio companies' cash flow. A
large number of our Venture businesses have recently raised funds,
therefore have a large cash runway which, along with other
provisions will help to navigate through the current crisis.
The Venture Fund is in its infancy and the Company and the
Investment Manager are still in the process of deploying funds. Our
initial offer closed in August 2019 and, to date, the Venture
portfolio has 11 qualifying investee companies, with one investment
made after the balance sheet date. Our current open fundraise is
going well with c.48% of the offer subscribed for. This will remain
open until 31 August 2020. At the time of writing, the Fund is
currently c.48% in cash and cash equivalents, so it is well placed
to take advantage of new opportunities arising from the current
difficult situation.
Despite the current challenges discussed above, the Company is
pleased to confirm that there has been minimal impact to the
investments across both A and B Share Classes.
The hydroelectric companies currently benefit from inflation
linked Feed in Tariff ("FiTs") Income and have all recently signed
up to a new 12-month fixed price power purchase agreement ("PPA or
Export") with one of the "big six" energy providers. The revenue
stack of the Hydro assets is currently weighted 75% FiT and 25%
Export, with a portion of the Export tariff being made up by
embedded benefits, which should not be affected by the fall in
energy prices. Consequently, we do not expect the hydroelectric
companies to be materially impacted by the current volatility we
are witnessing in the energy markets.
The Gas Power companies have begun to see volatility in
wholesale prices, which have declined (carbon prices, power and
gas). Spark-spreads (the gross-margin of a gas power plant from
selling a unit of electricity, having purchased the fuel required
to produce this unit of electricity) have started to narrow,
although despite the changing electricity demand profile, it still
remains highly profitable for the gas power assets to run during
the evening peak (the typical running hours for these assets). Over
the long term industry experts believe these will revert to
historical norms and therefore we think this will have a negligible
impact on these businesses.
These Share Classes are fully invested and all companies are
operating normally. Should operational issues arise at any of these
companies, lead times may suffer. Due to the crisis, global supply
chain disruptions may potentially make it harder to source
components for our energy projects. Our Operation & Maintenance
contractors are currently monitoring this and taking mitigating
actions where appropriate.
Investment Portfolio
The Company's funds at 29 February 2020 were 89% invested in a
portfolio of VCT qualifying and non-qualifying unquoted
investments.
The Investment Manager's review on pages 29 to 50 gives a more
detailed update on the portfolio of investments in 21 small
unquoted businesses.
A Share Class
I am pleased to report the A Share Class portfolio continues to
perform well and has recorded a profit over the period of 2.79
pence per share and as at 29 February 2020 the NAV per share stood
at 57.78 pence per share.
During the year A Class Shareholders were paid dividends of 55.5
pence per share. This is a fantastic achievement for the Company.
In total during the year GBP5.5 million was returned to A Class
Shareholders, taking total dividends paid to A Shareholders to date
to 63.25p per share.
One of the core targets of the A Share Class was to deliver to
investors a cash return of 100p per share by the end of year six.
It was initially intended that this return would be derived from a
combination of the initial income tax rebate, tax-free dividends in
years two, three, four and five, followed by a substantial capital
realisation in year six.
I am delighted to announce that a further dividend of 6.75 pence
per share will be paid on 30 June 2020.
Following the declaration of the latest 6.75 pence per share
dividend the Company has achieved its target of returning 100 pence
per share to the Shareholders (including the initial income tax
relief. This is an excellent achievement and I would like to thank
the Investment Manager for all their hard work in helping the
Company reach this milestone for its A Class Shareholders.
Looking to the future, the A Share Class now moves into its
income generation stage, where we are targeting an ongoing dividend
of 3.50p per annum.
Another highlight during the year, in line with the way the
investment was structured, was the sale of its holding in Green
Highland allt Garbh Limited ("Garbh"). The A Share Class received
net proceeds in excess of GBP2.25 million from the sale. This
disposal helped to contribute significantly to the dividend and
partial realisation target I discussed above.
B Share Class
The B Share Class has qualifying investments in two companies
that have each constructed a gas fired energy centre. Both energy
centres were successfully commissioned in May 2018 and are fully
operational. The B Share Class initially targeted aggregate
dividends of 10 to 15 pence per share over the five-year holding
period and an exit for investors shortly after the expiry of the
five-year holding period.
During the year the B Class Shareholders were paid their first
dividend of GBP341,213 equal to 5p per share, in line with the
target for this Share Class. This first distribution brings Net
Asset Value plus dividends paid to 107.77 pence per share. I am
pleased to announce a further 5 pence per share dividend will be
paid on 30 June 2020. The payment of this dividend takes total
dividends paid to B Shareholders to 10 pence per share. The Company
and the Investment Manager are now beginning to work towards a
potential realisation for the B Share Class, in line with investor
expectation.
The B Share Class has recorded a profit over the period of 1.67
pence per share.
At 29 February 2020 the NAV per share stood at 102.77 pence per
share.
Venture Fund
In September 2018 the Company launched a new Venture Fund offer
targeting investment in early stage businesses. The first Venture
Fund offer closed on 30 August 2019 and raised net proceeds of
GBP6.9 million. The first allotment from these funds took place in
March 2019. A Second Venture Fund offer is currently open, which
will close on 31 August 2020.
The fund's aim is to build a portfolio of Qualifying Investments
in early stage companies, capable of generating significant
long-term capital growth, whilst enabling investors to take
advantage of the substantial tax reliefs available to investors in
VCTs, including 30% income tax relief on amounts invested.
A total of GBP5.017 million was deployed into Venture Fund
portfolio companies during the period, and there was one exit. One
of our portfolio companies, Adepto was sold to Degreed Inc, the US
human resources ("HR") business. The exit took place in late 2019
and the earnout period is now underway. As part of the exit, cash
consideration and shares are being held in escrow until the end of
April 2020. The Company is currently awaiting the outcome, of this
transaction.
I am delighted to announce the first dividend to Venture
Shareholders of 3 pence per share which will be paid on 31 July
2020.
When the earnout period is complete, the Company will receive at
least its money back, in the form of Degreed Inc shares. However,
if Adepto's performance exceeds certain thresholds during the
earnout period, the Company may receive shares which are worth more
than the value of the initial investment. The Company is awaiting
the results of this earnout period, it is expected that the Company
will come out even. Degreed is an education technology company that
is engaged in enabling and recognising professional and lifelong
learning and skills. The platform allows users to learn, develop
and measure their skills.
A summary of the Venture Fund's investments during the year is
below.
New Investments
Cost Company Summary
(GBP'000)
GBP700 Counting Counting Up provides micro businesses with a fully integrated
Up accounting system and business bank account in one app.
---------------- ---------------------------------------------------------------
GBP300 Adepto as highlighted above Adepto was acquired by the US HR
business Degreed Inc.
---------------- ---------------------------------------------------------------
GBP150 MWS Technology MWS provides a high-quality training delivery platform
which gives business apprenticeship providers control
over the management and monitoring of their apprenticeship
programmes.
---------------- ---------------------------------------------------------------
GBP291 Augnet Augnet is a business that have developed a patent protected
technology that allows SMS's to be sent via the internet
without incurring a cost.
---------------- ---------------------------------------------------------------
GBP500 Ably Ably are a real time data delivery service provider.
---------------- ---------------------------------------------------------------
GBP400 Heydoc Heydoc have built a clinical system to enable medical
clinicians and admin staff to complete their day-to-day
work in one place rather than needing to use multiple
systems.
---------------- ---------------------------------------------------------------
GBP200 Vyne Vyne are a payments business that uses Open Banking
application programming interface ("APIs") to transfer
money directly from the bank accounts of consumers,
to the bank accounts of the online merchants they are
purchasing items or services from.
---------------- ---------------------------------------------------------------
GBP500 Aventus Aventus is an open API platform that enables insurance
companies to digitally join up their ecosystem of service
providers, partners and distributors, passing data to
and from each other as and when needed.
---------------- ---------------------------------------------------------------
GBP800 Adfenix Adfenix are a data-driven marketing automation tool
for estate agents.
---------------- ---------------------------------------------------------------
GBP698 Quit Genius Quit Genius provide of an online digital therapeutics
tool that helps users quit smoking and vaping.
---------------- ---------------------------------------------------------------
Share Buy-Backs
We have maintained our aim, subject to distributable reserves
and liquidity, of being willing to buy back the Company's shares in
the market at a 5% discount to NAV.
During the year ended 29 February 2020 a total of 18,915 B
shares and 220,809 Venture Fund shares were repurchased by the
Company for cancellation. Both these transactions were successfully
completed at a 5% discount to NAV.
These transactions represent 1.01% of the opening issued share
capital of the Company.
VCT Qualifying Status
The Company has maintained its approved venture capital trust
status with HM Revenue & Customs. The Company's compliance with
the VCT qualifying conditions is closely monitored by the Board,
who receive regular reports from the Investment Manager and from
our VCT tax compliance advisers Philip Hare & Associates
LLP.
VCT Legislation and Regulation
In previous communications with Shareholders we have highlighted
changes to the VCT landscape with the UK government, through its
"Financing Growth in Innovative Firms" consultation ("the Patient
Capital Review") emphasising the importance of VCTs in helping to
provide investments into SMEs.
As part of the Patient Capital Review, several changes were
introduced, including increasing a VCT's minimum qualifying
percentage threshold from 70% to 80%. This change came into effect
for the Company from 1 March 2020.
The Investment Manager has been monitoring this target very
closely since it was announced and I am pleased to say that the
Company complied fully during the year and now also continues to
comply with the updated rules since the year end.
A number of other measures have also applied to the Company for
the first time in the current financial year. From 1 March 2020,
the Company benefited from an increased disregard period available
before the proceeds of investment disposals become non-qualifying.
This disregard period was increased from six months to twelve
months.
This additional time may prove helpful in the event of any
future significant disposals.
In the case of the A Share class disposal of Garbh, the proceeds
of this disposal were paid out to Shareholders during the year,
within six months of disposal.
We will continue to work closely with the Investment Manager to
ensure the Company maintains compliance with the scheme rules.
Post Period End Update
Following the end of the period, the Company has allotted a
further 4,810,332 shares into the Venture Fund. The shares were
issued on 10 March 2020, 1 April 2020 and 3 April 2020
respectively. These allotments raised gross proceeds of GBP4.79
million for the Company.
For all future investments in the 2020/21 tax year, the offer
will remain open until Monday 31 August 2020, unless fully
subscribed at an earlier date.
The Venture Fund continues to make progress and a further
GBP500,000 was invested in Credit Kudos Limited, a new wave Credit
Reference Agency that utilises financial data obtained via Open
Banking APIs.
COVID -19 Valuation Impact
The Board has considered the potential impact on valuations
across our portfolio of Investee Companies. We believe that the
COVID-19 pandemic will have a minimal impact across our investments
in the A and B Share Classes. The Venture Share Class is relatively
new and given that all investments in the portfolio have been made
within the last 11 months, the average investee company cash runway
is 14 months. This means that most of our companies are in a good
cash position to manage through the current crisis and as such, we
believe that any impact on valuations will be small, accordingly
the allotments which took place on 1 April and 3 April 2020 were at
NAV for the Venture Share Class which had been reduced by 6%.
More detail on this, can be found in note 23 to the financial
statements.
Outlook
The Company is very mindful that the economic disruption in the
next few months will be severe and many small companies, including
those in our Venture portfolio and also across the UK and beyond
will have to assume that sales opportunities could be greatly
diminished.
The recovery from COVID-19 may be slow, depending on how
policies associated with the virus containment evolve. Despite all
of this, over the coming 6-12 months we expect there to be more
opportunities to invest in high quality, and better capitalised
companies. As a Company we hope to benefit in the coming years, as
the economy recovers and innovation continues. We hope to continue
financing businesses at the forefront of innovation in the UK.
As ever, with venture capital investing we are maintaining a
long-term investment time horizon. We are confident that thus far
we have backed outstanding founders running good quality businesses
that will continue to grow over the longer term.
Following the Patient Capital Review, the Company now focuses on
fully deploying the Venture Fund. The Investment Manager reports a
positive pipeline of promising venture investment opportunities.
Despite the current circumstances, your Board is encouraged by the
continued progress made by the Company, in particular the Venture
Fund, in implementing the updated investment policy and deploying
cash.
The Venture portfolio represents an increasingly important
component of the overall net asset value and will take time to
mature.
We will also be focusing on the positives that will come from
this crisis. A shock like this will change some behaviours
permanently and may lead many to think hard about how they run
their businesses. We expect the adoption of technology in
healthcare will further accelerate in the recovery as the pressure
for improved performance and resilience by the National Health
Service ("NHS") increases.
We expect to see more opportunity flow of good companies that
"prudently" want to build their cash reserves. Following the
allotment of further shares into the Venture Fund we are well
placed, having dry powder to utilise. Over the coming 6-12 months
we expect there to be more opportunities to invest in high quality,
better capitalised companies, with lower valuations and more
availability of talent.
These investments will likely benefit in the coming years, as
the economy recovers, and innovation continues.
As ever, with venture capital investing we continue to maintain
a long-term investment time horizon.
Brexit
Whilst it would seem that Brexit has taken a back seat in the
UK, along with COVID-19, the political and economic environment
continues to remain uncertain, although we do now know that Britain
has left the European Union ("EU"). Despite this, it remains
unclear as to what the eventual result of the ongoing negotiations
between Britain and the EU will look like. However, we do not
expect that it will have a significant impact on the current
operations of the Company.
I would like to take this opportunity to thank Shareholders for
your continued support, and our Investment Manager for their
support and commitment during the year.
I look forward to welcoming further Venture Fund Shareholders
during the year.
If you have any questions about your investment, please do not
hesitate to contact Triple Point on 020 7201 8990.
Jane Owen
Chairman
21 May 2020
Strategic Report - Strategy and Business Model
The Strategic Report has been prepared in accordance with the
requirements of section 414c of the Companies Act 2006. Its purpose
is to inform the members of the Company and help them to assess how
the Directors have performed their duty to promote the success of
the Company, in accordance with section 172 of the Companies Act
2006.
The Directors assess the Company's success in meeting its
objectives in relation to returns, stability, VCT qualification
and, ultimately, exit.
Investment Policy
Investment Objectives
The Company's Investment Policy is directed towards new
investments in businesses which either: (i) have the potential for
high growth, or (ii) are cash flow generative businesses with a
high-quality customer base. All investments must provide the
potential for a strong, positive, risk-adjusted return to
investors. All investments will be made with the intention of
growing and developing the revenues and profitability of the target
businesses.
Venture Fund
The Company's Venture Fund focuses on providing funding to
unquoted companies at an early stage in their lifecycle to help
them grow and scale. The Venture Fund will typically make initial
investments of between GBP50,000 and GBP2 million and may make
further follow-on investments into existing portfolio companies.
The intention is to build a portfolio of predominantly unquoted
companies with significant growth potential across a diversified
range of sectors.
The Company will not vary these objectives to any material
extent without the approval of the Shareholders.
A & B Shares
The key objectives of the Company's A Share Fund and B Share
Fund are to:
-- Pay regular tax-free dividends to investors;
-- Maintain qualifying VCT status to enable investors to benefit
from the associated tax reliefs;
-- Reduce the volatility normally associated with early stage
investments by applying its Investment
Policy;
-- Make investments typically in the range of GBP500,000 to GBP5
million in companies with contractual
revenues from financially sound counterparties; and
-- In respect of the B Share Fund only, provide investors with
the option to exit shortly after 5 years
following investment.
The Company will not vary any of the above objectives for the
Venture Fund, A Share Fund or B Share Fund to any material extent
without the approval of the Shareholders.
Target Asset Allocation
The Company aims to invest its capital fully in VCT Qualifying
Investments. Where this is not practicable, the long-term
investment profile of the Company is expected to be:
-- At least 80% in VCT Qualifying Investments, with a focus on
unquoted companies with high growth
potential for the Venture Fund; and
-- A maximum of 20% in permitted Non-Qualifying Investments, cash or cash-based similar liquid
investments.
Qualifying Investments
Investment decisions made must adhere to HMRC's VCT
qualification rules. In considering a prospective
investment in a company, particular regard is given to:
-- The track record, expertise and ability of the management
team with clear commercial and financial objectives;
-- A significant, often global, total addressable market;
-- The ability of the company to create and sustain a competitive advantage;
-- The quality of the company's assets, in particular where
appropriate the ownership and effective use of proprietary
technology and or an innovative product;
-- The high likelihood of a transformational corporate contract
and established market fit and then the opportunity to develop
regular, repeated income from new clients, leading to growth and
long-term profitability;
-- A high level of access to regular material financial and
other information during the holding period;
-- An attractive valuation at the time of the investment;
-- The long-term prospect of being sold or listed in the future
at a significant multiple of the initial investment value; and
-- In respect of the B Share Fund, the prospect of achieving an
exit after 5 years of the life of the fund.
In respect of the Venture Fund, no more than 10% of the NAV of
the Venture Fund (at the point of the investment), will be invested
in companies which are not revenue-generating or where there is no
expectation of revenues being generated in the near future.
As the value of investments increase, Triple Point will monitor
opportunities for the Company to realise capital gains to enable
the Company to make tax-free distributions to Shareholders.
Non-Qualifying Investments
The Non-Qualifying Investments will be managed with the
intention of generating a positive return. The Non-Qualifying
Investments will comprise from time to time a variety of assets
including (a) short-term deposits of money, shares or units in
alternative investment funds (which have the meaning given by
regulation 3 of the Alternative Investment Fund Managers
Regulations 2013) or in undertakings for the collective investment
in transferable securities (which have the meaning given by Section
363A(4) of the Taxation (International and Other Provisions) Act
2010), which may be repurchased, redeemed, or paid out on no more
than seven days' notice; and (b) ordinary shares or securities in a
company which are acquired on a regulated market (defined in
Section S274(4) ITA 2007).
Borrowing Powers
Any borrowing by the Company for the purposes of making
investments will be in accordance with the Company's articles of
association. To the extent that borrowing is required, the
Directors will restrict the borrowings of the Company and exercise
all voting and other rights or powers of control over its
subsidiary undertakings (if any) to ensure that the aggregate
amount of money borrowed by the Group, being the Company and any
subsidiary undertakings for the time being, (excluding intra-Group
borrowings), will not, without shareholder approval, exceed 30% of
its NAV at the time of any borrowing.
During the year, the Company entered into a short-term facility
agreement with Triple Point Advancr Leasing plc. The uncommitted
and unsecured facility was for GBP800,000 at a fixed rate of 4% per
annum. The facility was put in place to manage working capital in
the Venture Fund and to avoid incurring penalties withdrawing funds
on deposit to make investments at short notice. At the year-end
there was no loan outstanding, but the facility is still in
place.
Risk Diversification
The Company aims to invest in a number of different businesses
within different industry sectors but may focus investments in a
single sector where appropriate to do so. No single investment by
the Company will represent more than 15% of the aggregate NAV of
the Company at the time the investment is made.
Valuation Policy
All unquoted investments will be valued in accordance with BVCA
or similar guidelines under which investments are not normally
re-valued above cost within 12 months of acquisition unless third
party funding has occurred. A brief summary of the BVCA guidelines
as it applies to TP11's investments is as follows:
-- Investments should be reported at fair value where this can
be reliably determined by the Board on the recommendation of the
Investment Manager.
-- In estimating fair value for an investment, the valuation
methodology applied should be the most appropriate for a particular
investment. Such methodologies, including the price of the recent
investment, earnings multiples, net assets, discounted cash flows
or earnings and industry valuation benchmarks, should be applied
consistently.
The December 2018 update to the IPEVC Guidelines discourages the
use of cost or price of a recent investment as a primary
methodology for valuation. As a result, the policy for Venture
Investments is to use the recent round basis, where we believe this
to have been an arm's length fair value transaction, for the first
quarter date immediately following the round, but then switch to a
new primary basis for all subsequent periods. We expect that this
change will in fact have little impact on the portfolio's valuation
as we have calibrated the valuation basis used to the recent
investment round.
We would only usually expect significant adjustments to recent
investment values where an investment is significantly under- or
over-performing compared to our expectation at the time of
investment.
Any quoted investments, if made, will be valued at prevailing
bid prices.
Co-Investment Policy
The Company may invest alongside other funds or entities managed
or advised by the Investment Manager which would help the Company
to broaden its range of investments or the scale of opportunities
more than if it were investing on its own.
It is possible that conflicts may arise in these circumstances
between different funds or between the Company and the Investment
Manager. The Investment Manager maintains robust conflict of
interest procedures to manage potential conflicts and issues are
resolved at the discretion of the independent board of the
Company.
Dividend Policy
The Company will distribute by way of dividend such amount as
ensures that it retains not more than 15% of its income from shares
and securities. The Directors aim to maximise tax-free
distributions to Shareholders of income or realised gains. It is
envisaged that the Company will distribute most of its net income
each year by way of dividend, subject to liquidity.
For the Venture Fund, the Company intends to distribute 3 pence
per Venture Share in the financial year ending 28 February 2021, 3
pence per Venture Share in the financial year ending 28 February
2022, followed by regular dividends of up to 5 pence per Venture
Share per annum thereafter. The Company's ability to pay dividends
is subject to the existence of realised profits, legislative
requirements, and the available cash reserves.
Share Buy-Back Policy
TP11 aims, but is not committed, to offer liquidity to
Shareholders through on-going buybacks, subject to the availability
of distributable reserves, at a target discount of 5% to net asset
value.
Share Realisation Policy
After an anticipated holding period of between five and seven
years, which may include follow-on investments into investee
companies as appropriate, Triple Point intends to identify
opportunities to exit Venture Fund investments.
Exits will typically be realised through trade sales to
businesses, acquisitions by private equity funds, or selling
shareholdings to later stage venture and growth capital funds
during the course of further investee company fund raising
activity. Sales during the course of further investee company fund
raising activity may include investee companies buying back shares
at a price reflecting the valuation at that stage. The proceeds of
any realisation will be used to identify further investment
opportunities and to pay dividends to investors.
Key Performance Indicators ("KPIs")
As a VCT, the Company's objectives are to provide Shareholders
with up front tax relief, an attractive income and returns through
capital appreciation and the payment of dividends. The Company aims
to meet these criteria by investing its funds in line with the
Company's investment policy, more detail of which can be found on
pages 17 to 18.
The Board expects the Manager to deliver a performance which
meets the objectives of providing investors with an attractive
income and capital return. The Board has identified four KPIs that
it uses in its own assessment of the Company's performance.
These are intended to provide Shareholders with sufficient
information to assess how the Company has performed against its
objectives in the year to 29 February 2020, and over the longer
term, through the application of its investment and other principal
policies.
The primary KPIs in meeting these objectives are:
-- Net Asset Value ("NAV") plus dividends paid ("Total return");
-- Earnings per share;
-- Compliance with VCT Legislation; and
-- Ongoing charges ratio.
Total Return
NAV plus dividends paid is a measure of Shareholder value that
includes the current NAV plus cumulative dividends paid to
Shareholders to date. The Charts show how the Total Return of each
Share Class has developed since launch. Total Return is deemed an
alternative performance measure.
A Share Class
The net asset value per A Share has decreased from 110.49 pence
per share at 28 February 2019 to 57.78 pence per share at the
reporting date. After making an adjustment for dividends paid
during the year the A Shares total return has increased from 118.24
pence per share at 28 February 2019 to 121.03 pence per share at
the reporting date. This represents an increase of 2.36%.
The net asset value of the A Share Class decreased due to the
sale of one of its Hydro investments and the payment of dividends
in the sum of 55.5 pence per share. Whilst net asset value has
fallen, Total Shareholder Return has continued to increase.
The increase in the total return for the A Shareholders is in
line with the Company's long-term objectives to achieve both
capital growth and pay dividends to Shareholders. The Board is
pleased with this performance.
NAV per share Cumulative dividends Total
28-Aug-15 99.58 - 99.58
29-Feb-16 100.54 - 100.54
31-Aug-16 102.07 - 102.07
28-Feb-17 104.07 - 104.07
31-Aug-17 102.41 4.00 106.41
28-Feb-18 106.90 4.00 110.90
31-Aug-18 105.77 6.75 112.52
28-Feb-19 110.49 7.75 118.24
31-Aug-19 107.55 11.75 119.30
29-Feb-20 57.78 63.25 121.03
------------ --------------- ---------------------- --------
B Share Class
The net asset value per B Share has decreased from 106.10 pence
per share at 28 February 2019 to 102.77 pence per share at the
reporting date. After making an adjustment for dividends paid
during the year the B Shares total return has increased from 106.10
pence per share at 28 February 2019 to 107.77 pence per share at
the reporting date. This represents an increase of 1.57%.
The net asset value of the B Share Class decreased due to the
payment of dividends in the sum of 5 pence per share. Whilst net
asset value has fallen, Total Shareholder Return has increased from
the last financial year.
The increase in the total return for the B Shareholders is in
line with the Company's long-term objectives to achieve both
capital growth and pay dividends to Shareholders.
NAV per share Cumulative dividends Total
31-Aug-16 99.47 - 99.47
28-Feb-17 99.76 - 99.76
31-Aug-17 99.73 - 99.73
28-Feb-18 100.00 - 100.00
31-Aug-18 99.93 - 99.93
28-Feb-19 106.10 - 106.10
31-Aug-19 100.95 5.00 105.95
29-Feb-20 102.77 5.00 107.77
------------ --------------- ---------------------- --------
Venture Fund
The net asset value per Venture Fund Share for the year ended 29
February 2020 was 99.01 pence per share. No dividends have been
paid to date.
As this is the Venture Fund's inaugural year, no Chart has been
produced for this Share Class.
Earnings per share
The Charts below show the Company's earnings per share by Share
class for the year ended 29 February 2020. The longer-term trend of
performance on this measure is shown in the charts below.
A Shares
Revenue Capital Total
28-Aug-15 0.50p (0.34p) 0.16p
29-Feb-16 1.49p (0.29p) 1.20p
31-Aug-16 1.71p (0.18p) 1.53p
28-Feb-17 3.61p (0.08p) 3.53p
31-Aug-17 2.29p 0.05p 2.34p
28-Feb-18 4.44p 2.39p 6.83p
31-Aug-18 1.77p (0.15p) 1.62p
28-Feb-19 3.39p 3.95p 7.34p
31-Aug-19 1.29p (0.23p) 1.06p
29-Feb-20 2.03p 0.76p 2.79p
------------ --------- --------- -------
B Shares
Revenue Capital Total
28-Feb-17 (0.37p) 0.10p (0.27p)
31-Aug-17 0.01p (0.04p) (0.03p)
28-Feb-18 (0.01p) 0.26p 0.25p
31-Aug-18 (0.02p) (0.05p) (0.07p)
28-Feb-19 (0.09p) 6.19p 6.10p
31-Aug-19 (0.09p) (0.06p) (0.15p)
29-Feb-20 0.98p 0.69p 1.67p
------------ --------- --------- ---------
Compliance with VCT legislation
By making an investment in a Venture Capital Trust, Shareholders
become eligible for several tax benefits under VCT tax legislation.
This is, however, contingent on the Company complying with VCT tax
legislation.
The Board are of the opinion that the main business risk facing
the Company at present is the retention of VCT qualifying status.
In order to mitigate this risk, the Board receives regular updates
and reports on compliance with the VCT legislative tests from the
Investment Manager. In addition, the Board receives formal reports
from its VCT Tax Compliance Adviser, Philip Hare & Associates
LLP, once a year.
When making new investments, the Company seeks advice from our
Tax Compliance Adviser and other legal advisers to ensure all new
investments made are in compliance with the VCT legislative
tests.
The Board can confirm that throughout the year ended 29 February
2020, the Company continued to meet these tests.
To achieve compliance, the Company must meet a number of tests
set by HMRC. A summary of these steps is set out on page 22 under
"VCT Regulation".
Ongoing charges ratio
The ongoing charges ratio is a ratio of annualised ongoing
charges expressed as a percentage of the average net asset value
throughout the period. The annual running costs of the Company are
capped at 3.5% of the Company's NAV, above which, the Investment
Manager will bear any excess costs.
The ongoing charges of the Company for the financial year under
review represented 2.74% of the average net assets.
This ratio is calculated using the AIC's "Ongoing Charges"
methodology which can be found on their website
https://www.theaic.co.uk/ . The Ongoing Charges ratio is deemed an
alternative performance measure.
Tax Benefits
The Company's objective is to provide Shareholders with an
attractive income and capital return by investing its funds in a
broad spread of unlisted UK companies which meet the relevant
criteria for investment by Venture Capital Trusts.
Investing in a VCT brings the benefit of tax-free dividends, as
well as up-front income tax relief. The Company continues to meet
the VCT qualification requirements which are continuously monitored
by the Investment Manager and reviewed by the Directors.
Investment classification by asset value and sector value are
shown on the following pages:
Investment Portfolio - A Share Class
VCT Qualifying Investments 90%
VCT Non-Qualifying Investments 10%
Cash 0%
** Please note that the percentage of qualifying investments in
the above graph is not representative of the Company as a whole,
whose qualifying investments exceed the requisite 80% (2019: 70%)
threshold .
Investments by Sector - A Share Class
Hydro Electric Power 88%
SME Funding Hydroelectric
Power 12%
100%
Investment Portfolio - B Share Class
VCT Qualifying Investments 79%
VCT Non-Qualifying Investments 14%
Cash 7%
** Please note that the percentage of qualifying investments in
the above graph is not representative of the Company as a whole,
whose qualifying investments exceed the requisite 80% (2019: 70%)
threshold .
Investments by Sector - B Share Class
Gas Power 85%
SME Funding Hydroelectric
Power 15%
100%
Investment Portfolio - Venture Share Class
VCT Qualifying Investments 69%
VCT Non-Qualifying Investments 7%
Cash 24%
** Please note that the percentage of qualifying investments in
the above graph is not representative of the Company as a whole,
whose qualifying investments exceed the requisite 80% (2019: 70%)
threshold .
Investments by Sector - Venture Share Class
Software as a Service
(SaaS) 10%
Telecoms 6%
Human resources 6%
Fintech 27%
Health 22%
Digital marketing 16%
Education 3%
SME Funding - Other 10%
100%
VCT Regulation
VCTs were first introduced in the Finance Act 1995 to provide a
means for private individuals to invest in unquoted companies in
the UK. The Finance Act 2004 introduced changes to VCT legislation
designed to make VCTs more attractive to investors. The current tax
benefits available to eligible investors in VCTs include:
-- Up-front income tax relief of 30% on a maximum investment of
GBP200,000 per tax year on newly issued shares;
-- Exemption from income tax on dividends received; and
-- Exemption from capital gains tax on disposals of shares in VCTs.
Since the Finance Act 2004, the VCT rules have subsequently been
amended under the Finance Act 2014 and The Finance (No 2) Act 2015.
The Investment Manager, utilising advice from Philip Hare &
Associates LLP, ensures continued compliance with any legislative
changes.
As referred to in the Chairman's Statement on page 14, further
changes have been introduced with effect from 6 April 2019. The
Company will continue to ensure its compliance with the
qualification requirements.
The Company has been approved as a VCT by Her Majesty's Revenue
and Customs. In order to maintain this approval, the Company must
comply with certain requirements on a continuing basis. Within
three years from the effective date of provisional approval or
later allotment at least 80% (From 1 March 2020, the percentage of
the Company's investments held in "qualifying holdings" increased
to 80% from 70%) of the Company's investments must comprise
"qualifying holdings" of which at least 30% must be in eligible
Ordinary Shares. This investment criterion continues to be met.
FCA Regulation
On 22 July 2014 Triple Point VCT 2011 plc registered with the
Financial Conduct Authority as a small Alternative Investment Fund
Manager ("AIFM") under the AIFM Directive.
Exit Programme
The Company and Investment Manager continue to be committed to
ensuring a timely exit and return of funds to B Class Shareholders
as soon as practicable after the end of the minimum five-year
holding period. The Investment Manager has a strong track record in
managing such exits.
During the year, the Company took steps to achieve a partial
realisation for the A Class Shareholders. With the declaration of
the latest dividend, this takes total distributions to Shareholders
to 70 pence per share. This distribution, along with initial tax
relief equates to a return to A Class Shareholders of 100 pence per
share.
The Investment Manager is now working towards a realisation for
the B Class Shareholders.
Principal Risks and Uncertainties
The Directors seek to mitigate its principal risks by regularly
reviewing performance and monitoring progress and compliance. In
the mitigation and management of these risks, the Directors carry
out a robust assessment of the Company's emerging and principal
risks, including those that would threaten its business model,
future performance, solvency or liquidity and reputation.
The main areas of risk identified by them, along with the risks
to which the Company is exposed through its operational and
investing activities, are detailed below.
Details of the Company's internal controls are contained in the
Corporate Governance Internal Control section on page 64 and
further information on exposure to risks including those associated
with financial instruments is given in note 17 of the financial
statements.
VCT Qualifying Status Risk the Company is required at all times
to observe the conditions laid down in the Income Tax Act 2007 for
the maintenance of approved VCT status. The loss of such approval
could lead to the Company losing its exemption from corporation tax
on capital gains, to investors being liable to pay income tax on
dividends received from the Company and, in certain circumstances,
to investors being required to repay the initial income tax relief
on their investment.
Mitigation: The Investment Manager keeps the Company's VCT
qualifying status under continual review and reports to the Board
on a quarterly basis. The Board has also appointed Philip Hare
& Associates LLP to undertake an independent VCT status
monitoring role.
Investment Risk the Company's VCT qualifying investments will be
held in small and medium-sized unquoted investments which, by their
nature, entail a higher level of risk and lower liquidity than
investments in large quoted companies. This could make it difficult
to realise investments in line with the relevant strategy.
Mitigation: The Directors and Investment Manager aim to limit
the risk attached to the portfolio as a whole by careful selection
and timely realisation of investments, by carrying out rigorous due
diligence procedures and by maintaining a spread of holdings in
terms of industry sector and geographical location. The Board
reviews the investment portfolio with the Investment Manager on a
regular basis.
Financial Risk as a VCT the Company is exposed to market price
risk, credit risk, fair value risk, liquidity risk and interest
rate risk. As most of the Company's investments will involve a
medium to long-term commitment and will be relatively illiquid, the
Directors consider that it is inappropriate to finance the
Company's activities through borrowing, other than for short-term
liquidity.
Mitigation: The key elements of financial risk are discussed in
more detail in note 17.
Failure of Internal Controls Risk the Board regularly reviews
the system of internal controls, both financial and non-financial,
operated by the Company and the Investment Manager. These include
controls designed to ensure that the Company's assets are
safeguarded and that proper accounting records are maintained.
Mitigation: The Board maintains a risk register which sets out
the risks affecting both the Company and the investee companies in
which the Company is invested. This risk register is reviewed and
updated at least annually to ensure that procedures are in place to
identify the principal risks which may affect the Company and its
portfolio companies, mitigate and minimise the impact of those
risks should they crystallise and to identify emerging risks and to
determine whether any actions are required. This enables the Board
to carry out a robust assessment of the risks facing the Group,
including those risks that would threaten its business model,
future performance, solvency or liquidity and reputation.
Emerging Risks
Investee Companies
The risks of Brexit and COVID-19 are relevant to not just the
Company, but also the companies of which we invest.
The risks to the portfolio companies are discussed in more
detail in the Investment Manager's Review on pages 29 to 50.
Coronavirus
Following the outbreak of COVID-19 across the globe and in the
UK, the Company is navigating both volatile and uncertain times. It
is likely that the economic turmoil caused will certainly continue
in the near term, and likely the medium term. In a more challenging
and unstable financial environment, start-ups, like many of our
Venture Fund Portfolio companies, typically burn less cash, so they
will therefore grow less quickly. Slower growth may mean slower
appreciation in company value.
As ever, with venture capital investing we are maintaining a
long-term investment time horizon. We are confident that thus far
we have backed outstanding founders running good quality businesses
that will continue to grow over the longer term.
Due to the unprecedented situation, the progress and outcome of
the current COVID-19 pandemic remains uncertain.
The impact of COVID-19 is discussed at length in both the
Chairman's Statement on pages 7 and 14 and the Investment Manager's
Review on pages 29 to 50.
Brexit
Following the United Kingdom's withdrawal from the EU on 31
January 2020, the Investment Manager and the Board continue to keep
the impact of Brexit on the Company under review. Despite the UK
having now left the EU the current economic outlook and potential
impact from Brexit is relatively unknown as the terms of the UK's
exit has not been finalised with the EU. Any potential impact of
the UK's withdrawal is difficult to quantify.
The Company's strategy of investing in small UK-based
businesses, however, means that it is unlikely to be directly
exposed to the terms of any future deals negotiated with the EU. We
are, however, going through a period of some political and economic
uncertainty.
We believe that by investing carefully, monitoring our portfolio
rigorously and providing support to the businesses in which we have
invested, we can minimise the effects of this uncertainty.
Going Concern
The Company's business activities, together with the factors
likely to affect its future development, performance and position,
are set out in the Investment Manager's Report. The Company faces a
number of risks and uncertainties, as set out above.
The Company's going concern position is discussed in the
Principal Risks and Uncertainties section on page 26.
The Fnancial Risk Management objectives and policies of the
Company, including exposure to price risk, interest rate risk,
credit risk and liquidity risk are discussed in note 17 to the
nancial statements.
The Company continues to meet day-to-day liquidity needs through
its cash resources and income from its investment portfolio. As
highlighted in the Chairman's Statement, the Company's revenue
comes predominantly from A and B Share Class investments. The Hydro
portfolio is contractual, with inflation linked FiT income and
Export income from a recently signed 12-month PPA. We expect
minimal disruption to these revenue streams as a result of
COVID-19.
The Company had net current assets of GBP19.4 million
(2019:GBP18.2million) and had cash balances of GBP2.07 million
(2019: GBP0.5 million) (this does not include cash balances held
within investee companies), which are suf cient to meet current
obligations as they fall due. The Company has subsequently raised
circa GBP4.64 million post year end considerably increasing the
Company's cash runway.
The major cash out ows of the Company are the payment of
dividends and costs relating to the acquisition of new assets, both
of which are discretionary.
The Directors have reviewed cash flow projections which cover a
period of at least 12 months from the date of approval of this
report, which show that the Company has suf cient nancial resources
to continue in operation for at least the next 12 months.
Accordingly, the Directors continue to adopt the going concern
basis in preparing the nancial statements.
Viability Statement
The AIC's Code of Corporate Governance requires the Board to
assess the Company's viability over an appropriate period, the
Directors have assessed the prospect of the Company over a longer
period than 12 months required by the Going Concern provision.
The Board conducted this review for a period of five years,
which was considered to be an appropriate time horizon, as
investors in VCTs are required to hold their investment for a
period of five years in order to benefit from the associated tax
reliefs.
The Board has determined that five years up to 28 February 2025,
is the maximum timescale over which the future position of the
Company can be forecast with a material degree of accuracy and
therefore is the appropriate period over which to consider the
viability.
During the next five years, the B Share Class will reach its
five year holding period, based on this the Directors believe it is
reasonable to make their assessment over five years.
In order to assess this requirement, the Board regularly
considers the Company's strategy and takes into account the
Company's current position. The Board has carried out a robust
assessment of the principal and emerging risks, including those
that would threaten the Company's business model, future
performance, solvency or liquidity and reputation. Consideration
has also been given to the Company's reliance on, and close working
relationship, with the Investment Manager. This has enabled the
Directors to state that they have a reasonable expectation that the
Company will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment.
The Board has considered both the Company's long-term and
short-term cash flow projections and considers these to be
realistic and reasonable.
More information on the principal risks of the Company is set
out on page 24.
To provide this assessment the Board has considered the
Company's financial position and ability to meet its expenses as
they fall due as well as considering longer-term viability:
-- The expenses of the Company are predictable and modest in
comparison with the assets and there are no capital commitments
foreseen which would alter that position;
-- The Company has no employees, only Non-Executive Directors,
and consequently does not have redundancy or other employment
related liabilities or responsibilities;
-- Most of the Company's investments will involve a medium to
long-term commitment and will be relatively illiquid but the Board
reduces the risk as a whole by careful selection and timely
realisation of investments;
-- The Directors will continue to monitor closely changes in the
VCT legislation and adapt to any changes to ensure the Company
maintains approval. The Directors have appointed an independent
adviser to undertake the VCT status monitoring role; and
-- The Directors have considered the ongoing and future effects
of the COVID-19 pandemic on the Company and its longer-term
viability. More detail on this is included in the Principal Risks
and Uncertainties section on page 26.
Based on the results of this review, the Directors have a
reasonable expectation that the Company will be able to continue
its operations and meet its expenses and liabilities as they fall
due over the period of their assessment.
Section 172(1) Statement
The following disclosure describes how the Directors have had
regard to the matters set out in section 172(1)(a) to (f) when
performing their duty under section 172 and forms the directors'
statement required under section 414CZA of the Act.
This section describes how the Board engages with its key
stakeholders, and how it considers their interests when making its
decisions. Further, it demonstrates how the Board takes into
consideration the long-term impact of its decisions, and its desire
to maintain a reputation for high standards of business
conduct.
The Company's objective is to provide the potential for a
strong, positive, risk-adjusted return to investors by making
investments with the intention of growing and developing the
revenues and profitability of the target businesses and adhering to
HMRC's VCT qualification rules. By making an investment in a VCT,
Shareholders are eligible for several tax benefits under VCT tax
legislation and therefore encourage investment indirectly in a
range of unquoted smaller, higher risk trading companies.
Both the A and B Share Class are fully invested in companies in
the hydroelectric power sector and the gas power sector. Such
investment increases the resources and capital dedicated to the
development of renewable energy and contributes to the reduction of
greenhouse gas emissions or in the case of gas power, bridges the
gap between environmentally unfriendly fossil fuels and more
irregular solar and wind power helping to solve these short-term
peaks in the electricity demand profile. Equally the Company's
Venture Fund invest into small businesses that the UK Government
wishes to see backed by VCT capital that helps support job
creation, innovation and growth of the UK's economy and which the
Company believes will realise capital gains to enable the Company
to make tax-free distributions to Shareholders.
Section 172(1) Principal Decisions
Below are the principal decisions made or approved by the
Directors during the year. In taking these decisions, the Directors
considered their duties under section 172 of the Act. Principal
decisions have been defined as those that have a material impact to
the Company and its key stakeholders, as defined on pages 64 to
65
Dividends
The Company declared dividends during the year to A Share Class
holders of 55.5 pence per share and B Share Class holders of 5
pence per share. This decision represented a significant return of
Capital for A Share Class holders and the continuing payment of an
annual dividend for B Share Class holders.
Sale of Green Highland Allt Garbh Limited
The Company completed the sale of its holding in Green Highland
Allt Garbh Limited. Following recommendation from the Investment
Manager, the Directors considered the sale in the context of the
Company's Investment Policy, availability of financing and the
potential returns to investors.
The A Share Class received net proceeds in excess of GBP2.25
million from the sale and it contributed significantly to the
dividend and partial realisation target which were paid out to
Shareholders within six months of the disposal. In considering the
need to treat all members fairly, the Directors also considered the
qualifying investment requirement of the Company following the
disposal and the likely consequence of any decision in the long
term.
Facility Agreement
During the year, the Company entered into a facility agreement
with Triple Point Advancr Leasing plc. The uncommitted and
unsecured facility was for GBP800,000 at a fixed rate of 4% per
annum. The Board believed that the facility was in the best
interest of Shareholders as it would provide additional working
capital and would allow the Company to continue to execute its
pipeline of new Venture opportunities.
The facility was put in place to aid managing working capital in
the Venture Fund and to avoid incurring penalties withdrawing funds
on deposit to make investments at short notice. The Company
maintained an active dialogue for the lender to appraise the
Company's business model and its portfolio. As described on page 65
the Board also considered that further funds available to be
deployed into small businesses would benefit the wider
community.
Investments
During the year, the Company made 10 new qualifying Venture Fund
investments. The Directors considered that each investment was
capable of generating significant long-term capital growth for
Shareholders, whilst enabling investors to take advantage of the
substantial tax reliefs available to investors in VCTs. When
approving the proposed acquisitions the Board gave consideration to
the exit assumptions and valuation justification of the investee
companies in addition to considering the societal impact of each
investment.
Strategic Report
Investment Manager's Review
Sector Analysis
The unquoted investment portfolio can be analysed as
follows:
Electricity
Generation SME Funding
Software
as a Total
Industry Service Human Digital Hydroelectric Gas Hydroelectric Unquoted
Sector (SaaS) Telecoms resources Fintech Health marketing Education Power Power Power Other Investments
---------- ---------- ----------- --------- --------- ----------- ----------- --------------- --------- -------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ----------- --------- --------- ----------- ----------- --------------- --------- ---------
Investments
at 1 March
2019
--------------- ---------- ---------- ----------- --------- --------- ----------- ----------- --------------- --------- ------------- --------- -------------
A shares - - - - - - - 7,005 - 1,652 1,445 10,102
B shares - - - - - - - - 5,513 - 1,726 7,239
Venture
Shares - - - - - - - - - - - -
---------- ---------- ----------- --------- --------- ----------- ----------- --------------- --------- ------------- --------- -------------
Total
Investments - - - - - - - 7,005 5,513 1,652 3,171 17,341
---------- ---------- ----------- --------- --------- ----------- ----------- --------------- --------- ------------- --------- -------------
Investments
made during
the period
--------------- ---------- ---------- ----------- --------- --------- ----------- ----------- --------------- --------- ------------- --------- -------------
A Shares - - - - - - - - - - - -
B Shares - - - - - - - - - 1,005 - 1,005
Venture
Shares 500 300 300 1,400 1,098 799 150 - - - 490 5,037
-------------
Total
additions 500 300 300 1,400 1,098 799 150 - - 1,005 490 6,042
---------
Investments
disposed of
during the
period
--------------- ---------- ---------- ----------- --------- --------- ----------- ----------- --------------- --------- ------------- --------- -------------
A shares - - - - - - (2,346) - (1,005) (1,445) (4,796)
B Shares - - - - - - - - - (1,726) (1,726)
Venture
Shares - - - - - - - - - - -
-------------
Total
disposals - - - - - - - (2,346) - (1,005) (3,171) (6,522)
---------
Investment
revaluations
during the
period
--------------- ---------- ---------- ----------- --------- --------- ----------- ----------- --------------- --------- ------------- --------- -------------
A shares - - - - - - - 131 - - - 131
B Shares - - - - - - - - 107 - - 107
Venture
Shares - - - - 5 12 26 - - - 5 48
-------------
Total
revaluations - - - - 5 12 26 131 107 - 5 286
---------
Investments
at 29
February
2020
--------------- ---------- ---------- ----------- --------- --------- ----------- ----------- --------------- --------- ------------- --------- -------------
A Shares - - - - - - - 4,790 - 647 - 5,437
B Shares - - - - - - - - 5,620 1,005 - 6,625
Venture
Shares 500 300 300 1,400 1,103 811 176 - - - 495 5,085
500 300 300 1,400 1,103 811 176 4,790 5,620 1,652 495 17,147
Unquoted
Investments
% 2.92% 1.75% 1.75% 8.16% 6.43% 4.73% 1.03% 27.93% 32.78% 9.63% 2.89% 100.00%
---------- ---------- ----------- --------- --------- ----------- ----------- --------- ------------- ---------
* Other SME funding includes GBP495,000 of Venture Fund
investment into a UK-based LLP which provides finance to small and
medium-sized enterprises.
Investment Manager's Review
We have pleasure in presenting our annual review for the year
ended 29 February 2020. This was the inaugural year for the
Company's new Venture Fund, GBP6.9 million was raised after costs,
and good progress has been made in deploying these funds.
As the Chairman highlighted in her statement to Shareholders on
page 7 we are all currently facing unprecedented, uncertain and
challenging times as a result of the ongoing COVID-19 pandemic.
At Triple Point Investment Management, we believe we are well
equipped to deal with this challenging situation. The majority of
our revenues are recurring, giving us a high level of
predictability in our income streams. Triple Point can operate
effectively with remote, or home working, and as such we do not
depend heavily on the regular physical presence of staff in one
specific location though, of course, the sales process is often
impacted by the lack of face-to-face meetings. We are well
positioned to continue managing the Company efficiently and
effectively.
Like many businesses we are facing unprecedented circumstances.
Many of our ongoing projects and work streams will no doubt face
delays, and whilst this may be challenging, we believe,
fundamentally that the types of assets and businesses we fund, the
predictable returns we generate, and the impact we have, will never
be more attractive to investors.
In the short term, we anticipate that many companies across the
economy, including our Venture portfolio companies, are going to
face heightened pressure on their revenue. For some it will just be
a slow-down in their sales growth as acquiring new customers
becomes difficult in the next few months, while for others it will
be a contraction in sales. In both cases it will pressure investee
companies' cash flow. We are in close contact with all of our
portfolio companies to understand how much cash they have now, what
steps they can take to reduce their monthly spending (if necessary
and appropriate), how their supply chains might be impacted and
what else Triple Point can do to support them.
The Venture Fund is in its infancy, and as a result of this all
investments in the portfolio have been made within the last 11
months. Because of this, on average, our Venture portfolio
companies have relatively long cash runways. This means that most
of our Venture portfolio companies are in a good cash position to
manage through a crisis of between three and six months duration.
Some of our portfolio companies will of course want to raise extra
funds to ensure they have the visibility of funding to continue
growing their businesses. Where we remain convinced by their
underlying business model, we will consider follow-on investment
opportunities, but only if it represents an opportunity equal to or
better than investing capital elsewhere.
One defining feature of venture capital investing, is that
investments are traditionally made via equity, rather than debt
financing. Often in time of heightened pressure, it is often the
excess debt burden that can cause a company to collapse quickly in
circumstances such as the current crisis. All our Qualifying
Venture Portfolio Companies are funded with equity, and are not
leveraged.
Some of our companies will benefit from the unprecedented
measures put in place by the UK Government which were announced on
17 March. We expect further supportive initiatives to help small
companies from Government in the coming days and weeks.
Looking back at the year, a total of GBP5.04 million was
invested in ten new qualifying portfolio companies and one
non-qualifying portfolio company, the year also saw an exceptional
level of realisations for existing Shareholders, with aggregate
realisation proceeds of GBP4.96 million.
At 29 February 2020, the Company's venture capital portfolio
comprised ten qualifying investments at a cost of GBP4.5 million.
The remaining infrastructure asset portfolio across our A and B
Share classes comprised qualifying investments at a cost of GBP4.07
million and a valuation of GBP4.89 million across the A Share Class
and qualifying investments at a cost of GBP5.1 million and a
valuation of GBP5.6 million across the B Share Class. An uplift on
cost for these assets of 20.15% and 9.8% respectively.
The net cash outflow to Shareholders for the year was GBP5.5
million. However, after the year end, the Company allotted an
additional GBP4.79 million of gross applications under the latest
Venture Fund offer for subscription, meaning that the Company and
the Venture Fund remain well capitalised to take advantage of new
investment opportunities.
The existing Venture Fund offer remains open until 31 August
2020.
Review & Future Developments
Both the A and B Share Class remain fully invested in both
companies in the hydroelectric power sector and the gas power
sector. Despite the ongoing COVID-19 crisis, investments across
both share classes continue to generate electricity.
As many of the working population are now getting used to
working from home, the electricity demand pattern is expected to
take a new shape. It is widely anticipated that the electricity
demand in the coming weeks and months will largely resemble the
consumption pattern on the weekends as more adjust to life working
at home.
While we expect the companies across the A and B Share Classes
to be minimally affected by the COVID-19 pandemic, it is inevitable
that they may suffer some minor operational delays, as a result of
the crisis. Global supply chain disruptions could potentially lead
to delays in the sourcing of key components for both the
hydroelectric and gas power projects. Key manufacturing hubs are in
China, where previous quarantines slowed production to a halt,
though some are beginning to reopen, with lower production rates.
We continue to liaise with our Operation and Maintenance
contractors across all companies to try and avert any potential
future delays in the procurement process.
A Share Class
The A Share Class has investments in five hydroelectric
companies which between them own six hydroelectric schemes in the
Scottish Highlands. All seven schemes have been commissioned and
are operational. Small-scale hydro is highly efficient, and it
remains one of the cheapest forms of renewable electricity per
unit. We believe hydro has a key role to play in the development of
the world's renewable energy resources.
The six electric schemes are "run of river" plants which capture
river flow agreed above a certain level as determined by the
Scottish Environment Protection Agency (SEPA). Water flow is
generally captured before a descent and flows down the penstock
(pipe) to a turbine engine which produces electricity. The water is
then returned to the river.
Run of River systems have the advantage of a long operational
lifetime, with minimal maintenance. Also, these systems tend to
generate the most electricity in the colder months when the demand
is greater for electrical heating and extra lighting.
During the period to 29 February 2020, the hydroelectric
companies generated 11,750 MWh of electricity. Based on an average
of 3.8 MWh annual use per household, the companies generated enough
electricity for 3,092 homes during the period.
The hydro companies benefit from UK government backed Feed-in
Tariff (FiT) payments based on output and from the sale of the
electricity produced to utilities or other power companies under
PPAs.
The last 12 months have seen lower than expected rainfall across
the Scottish Highlands. Rainfall variability is to be expected over
the 40-year period of generation which our investee companies are
expected to experience overall, and we continue to be pleased with
the efficiency of the hydro plants owned by them. The hydroelectric
companies remain highly focused on improving efficiencies and
maximising output and continue working alongside hydro experts to
further enhance performance where possible.
Industry Update
As we highlighted in our Interim Report the hydroelectric
companies, together with other industry members and the British
Hydropower Association, had been lobbying the Scottish Government
to recognise the concern on business rates in the hydro sector. As
a result of this, the Tretton Review report was published in
January 2020, which unfortunately found that no changes to business
rates would be applied.
This was very disappointing news for us and the Hydro
Companies.
The report suggests temporary government reliefs, which don't
apply equally across the sector and are not guaranteed, should
continue, rather than recommending an industry-preferred permanent
solution to the unfair rateable value increase in 2017 which far
outstripped that faced by other businesses.
The British Hydropower Association along with other industry
members continues to pursue this matter and is putting forward
different ideas to the Scottish Government.
Solutions put forward by the sector, but which were not
mentioned by the Tretton Review include rateable values of 8-10%
being prescribed for the small hydro sector, or the wording in
current legislation being changed to ensure key components of plant
and machinery in hydro construction - the turbine, generator and
penstock - are not rateable.
Whilst this is obviously not the outcome that we hoped for, for
the financial year 2019/20, the hydroelectric companies received a
60% relief and it is expected that this relief will continue to be
applied for the financial year 2020/21.
B Share Class
The B Share Class remains fully invested with two Qualifying
Investments in companies operating gas fired energy centres. Both
energy centres were commissioned back in May 2018 and consist of
containerised gas combustion engines that generate electricity for
onward sale, especially at times when there is high demand for
power.
In June 2019, the UK Government became the first major economy
in the world to pass laws to end its contribution to global warming
by 2050.The target will require the UK to bring all greenhouse gas
emissions to net zero by 2050, compared with the previous target of
at least 80% reduction from 1990 levels.
As a result of this, the UK is aiming to close its coal-fired
power plants by 2025, and it is therefore expected that there will
be increased pressure on the supply of energy in the UK during
periods of peak demand. Although renewable energy makes an
increasing contribution, the irregular nature of its production
means that other baseload sources will also be required to help
make up the deficit.
The UK still experiences significant peaks and troughs in energy
consumption. From unexpected cold snaps that prompt consumers to
turn up their heating, to the mass switching on of televisions
between 4-7pm when people return home from work.
Gas fired energy centres help to solve these short-term peaks in
the electricity demand profile. These are small power plants
fuelled by gas, and generally run only when there is a high demand
for electricity. They bypass the nationwide transmission system to
deliver power direct to local distribution networks. Natural gas
neatly bridges the gap between environmentally unfriendly fossil
fuels and more irregular solar and wind power.
The companies have taken advantage of a gap in the market by
constructing and operating gas fired energy centres to produce and
sell electricity to customers. The energy centres utilise
established technology, provided by Rolls Royce, to deliver a
reliable and secure energy supply.
Gas fired energy centres play an important role in balancing the
UK electricity network, which is growing ever more reliant on
renewable energy sources, as the nation shifts towards a low-carbon
economy. The National Grid is keen to develop a smart, easily
accessible flexible system of supplementary services, which make
optimum use of the peaks and troughs of energy demand. With
gas-fired energy centres fitting the bill for reliable and
environmentally friendly energy solutions, the popularity and usage
of these plants is significantly increasing around the UK.
This enables greater solar, hydro and wind power generation
overall, as the gas fired energy centres are an important
facilitator of green energy base load.
How does it work?
Gas is purchased from the National Transmission System and
combusted in the engines. The electricity is then exported to the
National Grid and sold under a PPA. The companies receive revenues
from the sale of electricity and additional income from embedded
benefits.
Embedded benefits cover a range of payments available to small
electricity generators connected to the distribution network,
rather than the transmission grid. Benefits can be earned for
generating at peak times and for local distribution.
In addition, generators can earn additional revenues by
operating outside the peak 4-7pm hours to take advantage of
"intraday" and "post-gate closure" price volatility.
Highlights
Both qualifying companies are fully operational. During the
period to 29 February 2020, Green Peak Generation Ltd generated
14,890 MWh of electricity, and Distributed Generators Ltd generated
8,025 MWh of electricity. Based on an average of 3.8 MWh annual use
per household, the energy centres generated enough electricity for
3,918 and 2,112 homes respectively during the period.
During the period, both companies contracted with a market
leading Operation & Maintenance ("O&M") provider. The new
service provider currently manages a large fleet of the same
engines. Following their appointment, both the operational
performance and quality of maintenance has significantly improved.
We are hopeful that this improved service quality will result in a
longer useful life of the equipment.
Historical performance of these assets versus the technical
expectations has been modest. Since moving to the new O&M
provider there has been an uptick in availability and therefore
generation. This is through faster response and repair times with
the O&M provider having a greater depth of experience. There
has been a reduction in number of faults through better
preventative maintenance procedures. Looking forward, we hope to
continue working closely with the new provider to continue to
improve operational efficiencies and performance across both
companies.
Industry Update
In our interim update, we reported on the current status of the
Capacity Market. The Capacity Market was originally introduced to
provide an insurance policy against the possibility of future
blackouts - for example, during periods of low wind and high demand
this was to ensure that consumers continued to benefit from
reliable electricity supplies at an affordable price.
The Capacity Market is designed to ensure sufficient reliable
capacity is available by providing payments to encourage investment
in new capacity or for existing capacity to remain open.
On 15 November 2018, the European Court of Justice unexpectedly
announced that it did not believe that sufficient work had been
undertaken when the European Commission ("EC") approved the UK's
Capacity Market scheme. This led to a halt of all payments under
the scheme.
On 24 October 2019 the UK reinstated the capacity market scheme
following approval by the EC under state aid rules. Following a
lengthy and in-depth investigation, the EC found that the scheme is
necessary to guarantee security of electricity supply in the UK and
is in line with EU energy policy objectives.
We are pleased to announce that both Distributed Generators Ltd
and Green Peak Generation Ltd won one-year agreements in the recent
auctions for the 2022/23 and 2023/24 delivery years.
Venture Fund
This is the inaugural year for the Venture Fund, and it has been
a busy period for the Venture team. The first allotments were made
into the new Venture share class in late March 2019 which raised
(after costs) GBP6.9 million.
We have made excellent progress in deploying these funds. The
Venture Fund has since completed ten qualifying investments into a
diverse range of sectors spanning Human Resources to Fintech. Small
businesses are the backbone of the UK economy, making up 60% of
private sector employment and 99.3% of all private sector
businesses. For these reasons, the UK government recognises the
importance of supporting and encouraging investment into this
sector.
The biggest sector theme running through the Venture Fund so far
is Fintech, which includes companies involved in activities such as
business banking software, payments systems, and insurance
tech.
Fintech is an emerging industry that uses technology to improve
activities in finance. Our portfolio companies are helping
businesses to replace or enhance the usage of financial services
provided by existing financial companies.
Our portfolio companies are all software firms of one form or
another. Most of our investments have Software-as-a-Service (SaaS)
as a business model. Under this model, customers will typically
sign up for an annual contract or a monthly subscription and pay in
advance or pay monthly for the use of the software, helping to
generate recurring revenue streams.
All of our portfolio companies are currently following a
business to business ("B2B") operating model, which means they
don't sell direct to consumers. Within the portfolio there are a
variety of business customers served, from large enterprises to
SMEs to Education providers to GP surgeries.
While the fund has invested in several Series A funding rounds,
there is also an allocation of portfolio funds to seed stage deals.
Alongside Series A funding rounds, we can also invest in these
earlier stage funding rounds, which have a higher potential for
outsized returns if they are successful. We are able to invest in
these seed stage deals for two reasons:
i. Our smaller than average fund size, hence smaller ticket size for each investment; and
ii. Our origination network which benefits from a strong business angel network.
In making our portfolio investments, we are always co-investing,
either with other Venture Capital firms, our business angel network
or with other corporate partners.
We will continue to target an above average allocation to Seed
investments in the next 12 months.
Many, though not all that the venture fund invests in will
involve the use of new technology and be knowledge-intensive, very
much the types of innovative British businesses that the UK
government wishes to see backed by VCT capital.
The Venture Fund looks to maximise shareholder returns by
investing in innovative early-stage businesses, typically at the
point they have achieved market validation, which can be
accomplished by securing a contract with an established corporate.
When making investments, we have a key investment criterion that we
are looking for:
i. Significant addressable target market;
ii. Indication or firm commitment of a transformational
corporate contract and established market fit;
iii. Innovative product/intellectual property;
iv. Strong management team;
v. Aligned appetite for growth and path to long-term profitability;
vi. Realistic prospect of achieving an exit after the expected holding period; and
vii. Board rights where this is possible.
The Venture Fund aims to mitigate some of the risks typically
associated with venture capital investing by proactively working
with businesses with the potential for high growth that are
actively solving problems for established corporates, increasing
their chances of success. We call this our Challenge-Led
Approach.
The portfolio companies are performing in line with how expected
at this stage of their life cycle. COVID-19 has inevitably thrown
up challenges, but we believe it is still too early to say how this
will affect performance in the medium to long -term.
More detail on our current venture portfolio and the
Challenge-Led approach in action can be seen below:
CountingUp - Fintech
CountingUp ("CU") provides micro businesses with a fully
integrated accounting system and business bank account in one app.
The solution provides automated bookkeeping, quick and easy
invoicing and simple expense management.
Sole traders can use their CU debit card and have the
transaction automatically recorded (and tagged) in their accounting
system.
Adepto - Human Resources
Adepto is a SaaS based software business that developed an HR
system for large enterprises. The system, known as Total Talent,
manages the internal and external talent and resource network that
a firm has, so that the firm can effectively resource and manage
projects in their business, whether with the use of internal
permanent staff or irregular external contractors.
In late 2019 Adepto was sold to Degreed Inc, the large US HR
business. The earnout period is now underway. If Adepto performs
during this earnout period, the Company may receive shares worth
more than the value the VCT invested.
MWS Technology - Education
MWS Technology is a high-quality training delivery platform
which gives business apprenticeship providers control over the
management and monitoring of their apprenticeship programmes. The
introduction of new UK government policies announced in May 2017
have transformed the apprenticeship sector by increasing the size
of the market threefold and introducing significant new
requirements for apprenticeship training providers.
Through its "Aptem" product, MWS is currently the only software
provider able to supply the software functionality required for the
major changes in apprenticeship delivery and uniquely does so on an
end-to-end basis.
Augnet- Telecoms
Augnet have developed a patent protected technology that allows
SMSs to be sent via the internet without incurring a cost. The
technology provides a level of transparency regarding delivery and
performance of SMSs that is not currently available. Augnet can
provide a superior service at a lower price than currently offered
by the incumbent mobile network operators.
Ably - SaaS Real Time Data
Ably is a real time data delivery service provider with two
products:
i. A cloud-based network that makes it possible for companies to
stream their data (via realtime APIs) to any device at any time in
real time.
ii. API management platform and toolkit that enables internal
development teams to build real time APIs to the Ably protocol, and
developers at outside companies to build apps on top of those APIs
to utilise this real time data.
Heydoc - Healthcare
Heydoc is a clinical system built to enable medical clinicians
and admin staff to complete their day-to-day work in one place
rather than needing to use multiple systems. The software covers
the entire patient journey, saving the medical clinicians time,
enabling them to spend more time treating patients. The system,
which replaces legacy systems that are not user-friendly, covers
the entire patient journey and allows clinicians and their
assistants to perform all their tasks in one convenient place.
Vyne - Fintech
Vyne is a payments business that uses Open Banking APIs to
transfer money directly from the bank accounts of consumers to the
bank accounts of the online merchants they are purchasing items or
services from. This method of delivery bypasses the traditional
debit/credit card network and the fees applied by each
intermediary.
Aventus- Fintech
Aventus is an open API platform that enables insurance companies
to digitally join up their ecosystem of service providers, partners
and distributors, passing data to and from each other as and when
needed. The implication is that the insurance company can then:
i. Launch and distribute products (into any environment) faster
and at a fraction of the cost it currently requires today.
ii. Create seamless digital journeys, improving conversion and customer experience.
This is a classic build or buy infrastructure play, with the
alternative for the insurers being to build their own bespoke
connectors to every potential partner in the market.
Quit Genius - Healthcare
Quit Genius is the provider of an online digital therapeutics
tool that helps users quit smoking and vaping. The app provides
behaviour tracking, tips and encouragement to users. Alongside the
app, users may gain access to patches, gum and or a digital quit
smoking breathalyser. Alongside online communication with a quit
smoking therapist.
Quit Genius offers its app as a standalone product for consumer
download. It is a "freemium" app with paid-for upgrades. The
program with the breathalyser, drugs and therapist is a paid-for
product sold B2B (and the breathalyser is used to confirm quitting
is taking place). The B2B product is sold in the US to large
employers who manage their own group health plans, as well as to
the NHS in the UK.
Adfenix - Real Estate Marketing Tech
Adfenix provides data-driven marketing automation software to
large estate agencies so that they may reach their customers
directly, through targeted social media adverts. The implication
being the estate agency can then, reduce their reliance on
advertising portals such as Zoopla and Rightmove which then allows
the estate agency to reclaim the ownership of the client
relationship.
Challenge Led
We take an in-depth look at two of our portfolio companies
below. Digital Therapeutics, Inc. trading as Quit Genius and
Homelyfe Limited which trades as Aventus.
Case Studies
Digital Therapeutics, Inc. - Quit Genius
The Venture Fund made an Investment of $900,000 (GBP698,000)
into Quit Genius in February 2020. The Venture Fund participated in
the company's Series A funding round, in which the company raised a
total of circa $12,000,000.
Company Summary
Quit Genius is the provider of an online digital therapeutics
tool that aims to help users quit smoking and vaping. The Quit
Genius app provides behaviour tracking, tips and encouragement to
users.
Alongside the app, Quit Genius users may also gain access
to:
i. Patches/gum and a digital quit smoking breathalyser (which
tracks that users have quit); and
ii. Online communication with a specialist quit smoking therapist.
Quit Genius offers its app as a standalone product for consumer
download, the app is a "freemium" app offering users paid-for
upgrades. The program with the breathalyser, patches, gum and
therapist is a paid-for product which is sold B2B. The breathalyser
is used to confirm that quitting is taking place.
The B2B product is sold in the United States to large employers
who manage their own group health plans, as well as to the NHS in
the UK. It is worth highlighting that six peer-reviewed journals
have been published relating to the Quit Genius product.
What does the company do?
Problem being solved
In the United States, at least 60 million adults battle a
substance addiction that adversely affects their wellbeing,
including nicotine dependence, alcohol abuse, marijuana dependence,
prescribed medication abuse and illicit drug dependence.
Unfortunately, it has been found that fewer than 10% of
individuals with an addiction will actually seek treatment, and
successful quit rates are very low. This is despite the United
States spending more on healthcare than any other country in the
world.
Employers, who provide employer-sponsored health plans for more
than half of the market (or 181 million Americans), are
particularly affected, due to their exposure to creeping healthcare
costs and the significant additional effect of addictions on
workplace productivity.
Tobacco alone is a significant issue, costing employers US$120bn
in direct healthcare claims and US$156bn in workplace productivity
losses. This is equivalent to direct healthcare costs of US$3,598
per year per tobacco user.
To recoup some excess tobacco-related medical claims, nearly
half of US employers use surcharges of up to US$1,500 per tobacco
user, which are waived if the employee signs up to a cessation
program. However, conventional tobacco cessation programs have
failed to actually help people quit smoking and deliver
cost-savings, owing to their low utilisation and poor user
experience, with providers getting paid irrespective of outcomes or
engagement.
Quit Genius Solution
Quit Genius have pioneered a new model of care that combines
programmatically delivered personalised cognitive behavioural
therapy (CBT) content, virtual coaching, wearable technology and
easy access to proven medication.
The Quit Genius for Tobacco Cessation program consists of 3 core
components:
i. The mobile app;
ii. Nicotine patches and/or gum; and
iii. A connected carbon monoxide breath sensor.
All of these components work together to deliver a holistic
therapy program targeting the biological, psychological and social
components of nicotine addiction.
The Quit Genius mobile app gives each participant access to a
consistent virtual "Quit Coach", a personalised cognitive
behavioural therapy program and tracking capabilities to monitor
their progress.
The connected carbon monoxide breath sensor allows Quit Genius
to biochemically verify the user's smoking status without requiring
in-person clinic attendance.
Quit Genius encourages users to develop a relationship with
their Quit Coach, as they will be engaging with the same Quit Coach
throughout their journey. This is in contrast with conventional
employer-sponsored tobacco cessation programs, which consist of a
series of telephone coaching sessions with a different coach each
time. Quit Genius also gamifies self-paced activities, check-ins,
and achievements in app to reward and encourage user
engagement.
The result is that members will have an average of 90
interactions in the first 12 weeks of the program and 67% continue
to engage with the program after 12 months. User satisfaction
attracts an average Net Promoter Score ("NPS") score of 70+. The
NPS score is an index ranging from -100 to 100 that measures the
willingness of customers to recommend a company's products or
services to others. It is used as a proxy for gauging the
customer's overall satisfaction with a company's product or service
and the customer's loyalty to the brand.
In 2019, Quit Genius launched the largest randomised-controlled
trial (RCT) for a digital smoking cessation program aiming to enrol
500 participants into either Quit Genius or face-to-face therapy
arm. As of September 2019, they recruited 405 participants. For
participants who have reached their four-week quit date, Quit
Genius has reported a quit rate of 53% versus 27% for face-to-face
therapy.
Homelyfe Limited - Aventus
The Venture Fund made an investment of GBP500,000 into Aventus
in December 2019. The Venture Fund participated in a seed funding
round, in which the company raised circa GBP2,000,000.
Company Summary
Aventus is an (open API) platform that enables insurance
companies to digitally join up their ecosystem of service
providers, partners and distributors, passing data to and from each
other as and when needed.
The implication being that the insurance company can then:
i. Launch and distribute products (into any environment) faster
and at a fraction of the cost it currently requires today; and
ii. Create seamless digital journeys, improving conversion and
customer experience.
This is a classic build or buy infrastructure play, with the
alternative for the insurers being to build their own bespoke
connectors to every potential partner in the market. This would be
expensive and impractical and this is what makes Aventus' solution
very compelling for insurance businesses.
What is an API?
A public "Application Programming Interface" provides developers
with controlled access to a proprietary software application or web
service. APIs are sets of requirements that govern how one
application can communicate and interact with another.
What does the company do?
Problem being solved
Insurance is one of the last sectors to modernise and embrace
digital transformation, as a result of this, insurance companies
have outdated legacy systems. These legacy systems are difficult
and costly to integrate into third party distribution channels.
This means it is expensive to launch and test new products,
whist also being costly and complex to launch and test new
distribution channels. They are also unable to offer online
customer journeys and levels of service comparable to other
industries that consumers are now used to, this means conversion
rates are low, typically 3%, whereas the Aventus platform has so
far produced conversion rates of around 20%.
It is similar to the situation that faced the retail and
commercial banks before the Fintech phase began over a decade
ago.
Another knock-on effect of this legacy technology is the
inability for insurers to dynamically change pricing or easily
customise products for certain demographics. This has resulted in
insurance products becoming a commodity, pitched against each other
(on price alone) on price comparison websites. This is an issue
particularly for home and car insurance where 50% and 70% of
policies are respectively sold via price comparison websites.
The over reliance on price aggregators means the customer
relationship is increasingly owned by the intermediary and not the
insurer. Insurers need to build relationships and data sharing
protocols with the digital players of the future or risk being
locked out of the customer relationship.
Aventus Solution
Aventus offers a platform that enables insurance companies to
digitally connect to their service providers, partners and
distributors, passing data to and from each other as and when
needed, without having to build bespoke integrations.
This enables the insurance company to build their own technology
on top of the platform and attain features currently beyond their
reach, such as:
i. Prepopulated and/or simplified question sets for customers
during the quote journey, increasing customer conversion and
lowering customer acquisition cost;
ii. Integration with other platforms to handle non-core aspects
of policy administration, for example: payments and
sales/underwriting workflows which lead to lowering operational
costs;
iii. Acquire new distribution channels with the requirement to
build specific and highly complex bilateral interfaces for each
partner, lowering marketing costs; and
iv. Better customer service experiences and therefore increased
customer retention.
The platform enables insurers to obtain digital transformation
without tearing up their legacy systems and starting from the
ground up. For context, the incumbent system (Guidewire) requires
an integration that typically costs $100m+ for a large insurer.
The core value of the Aventus platform for the customer is speed
to market and a transformational reduction in capital expenditure
required to launch products via new distribution channels.
Additionally, their long-term product road map extends to giving
insurers the ability to reach new customers (or service existing
customers) at the most relevant "insurance moment".
Offer for subscription
The Company currently has an Offer open to new investors. This
offer has so far to date resulted in funds being raised in excess
of GBP4.79 million and 4,810,332 new shares allotted.
For all investments in the 2020/21 tax year, the Offer will
remain open until 31 August 2020 unless fully subscribed at an
earlier date.
If you have any questions, please do not hesitate to call us on
020 7201 8990.
Outlook
As the current Covid-19 crisis begins to settle, and the
stimulus provided by the UK Government begins to take effect, we
expect to see more potential opportunities to invest in good
companies, who will want to prudently build their cash reserves
now. However, the recovery may be slow, depending on how policies
associated with virus containment evolve. We intend to continue to
be prudent, but looking at the current and potential future venture
landscape we expect there to be more opportunities to invest in
high quality, better capitalised companies, with lower valuations
and more availability of talent.
These investments will likely benefit in the coming years, as
the economy recovers, and innovation continues.
Ben Beaton
Managing Partner
For Triple Point Investment Management LLP
21 May 2020
Responsible Investing
UN Sustainable Development Goals
Never before have environmental and social considerations played
such a prominent role in the world of finance and investing. This
mirrors the shift we are observing in the investment community
towards applying an ESG lens to capital allocation.
Triple Point's investment ethos is based on the 17 UN
Sustainable Development Goals ("SDGs") and focuses on the four
themes of health, environment, children & young people and
inequality. We invest in companies that meet our impact threshold
and measure their impact on an on-going basis. Our aim is to
provide an estimate of a company's impact that is measurable,
comparable and is delivered at an appropriate level of
resource.
What are the SDGs?
The 17 UN SDGs sit at the heart of the 2030 Agenda for
Sustainable Development. Adopted by all United Nations Member
States in 2015, the SDGs provide the blueprint for a more
sustainable future by tackling some of the biggest and most urgent
global challenges we face, such as poverty, inequality, climate
change and environmental degradation.
Climate change will influence the achievement of most, if not
all, of the SDGs.
The SDGs were agreed by all UN Member States as the blueprint to
achieve a better and more sustainable future for all.
The SDGs can be broadly grouped into five overarching elements:
people, planet, prosperity, peace and partnership and are made up
of 17 inter-related and mutually supporting goals.
The SDGs are emerging as a global framework for investors and
corporations to prioritise agendas, and report on their impact. 72%
of respondents to the Global Impact Investing Network ("GIIN")
investor survey use the SDGs to measure and report on their
impact.
Impact
The Company's aim is to invest in smaller UK businesses to help
them grow, with the primary objective of delivering strong
financial returns. However, the Company and the Investment Manager
are increasingly mindful of the impact, that our activities and
those of the businesses in which we invest have not just on the
environment, but also their employees, communities and society at
large.
The Company believes that its investment activities have many
positive benefits beyond the returns we deliver for Shareholders.
In the case of the Venture fund investments, these businesses help
create new employment, develop and implement new technologies and
products, improve productivity all of which contribute to the UK
economy and have benefit to those employed in those businesses and
their supply chains.
During the recent COVID-19 pandemic, some of our investee
companies have been using their technologies to help where they
can:
Heydoc, a company that provides a modern patient management
system for clinicians and medical staff, is providing free video
consultations for all HeyDoc users during the Covid-19 crisis.
Quit Genius is giving employees of new clients access to its
digital tobacco and vaping cessation programme at no cost to their
employer, if they sign up in March and April 2020. According to the
World Health Organisation, smokers have an increased susceptibility
to COVID-19. Quitting smoking is one of the best ways to protect
yourself from the effects of Coronavirus.
Strategic Report - Investment Portfolio Summary
Qualifying holdings
29 February 2020 28 February 2019
---------------------------------------- ----------------------------------------
Cost Valuation Cost Valuation
GBP'000 % GBP'000 % GBP'000 % GBP'000 %
Unquoted qualifying holdings 13,720 77.01 15,097 78.56 11,423 70.49 12,518 72.00
Non Qualifying holdings 2,025 20.94 2,050 19.54 4,736 29.23 4,823 27.74
Financial assets at fair value
through profit or loss 15,745 97.95 17,147 98.10 16,159 99.72 17,341 99.74
Cash and cash equivalents 2,070 2.05 2,070 1.90 46 0.28 46 0.26
17,815 100.00 19,217 100.00 16,205 100.00 17,387 100.00
========= ======== ========= ======== ========= ======== ========= ========
Qualifying Holdings
Unquoted
Venture Investments
Striesen Holdings Pty Ltd (t/a
Adepto) 300 1.68 300 1.56 - - - -
Augnet Ltd 300 1.68 300 1.56 - - - -
MWS Technology Ltd 150 0.84 176 0.92 - - - -
Counting Ltd (t/a Counting
Up) 700 3.93 700 3.64 - - - -
Ably Real Time Ltd 500 2.81 500 2.60 - - - -
Heydoc Ltd 400 2.25 400 2.08 - - - -
Vyne Technologies Ltd 200 1.12 200 1.04 - - - -
Homelyfe Limited (t/a Aventus) 500 2.81 500 2.60 - - - -
Digital Therapeutics Inc (t/a
Quit Genius) 698 3.92 702 3.65 - - - -
Adfenix AB 799 4.48 812 4.23 - - - -
Hydroelectric Power
Green Highland Allt Choire
A Bhalachain (225) Ltd 30 0.17 36 0.19 30 0.19 35 0.20
Green Highland Allt Garbh Ltd - - - - 2,250 13.88 2,250 12.94
Green Highland Allt Ladaidh
(1148) Ltd 1,470 8.25 2,201 11.45 1,470 9.07 2,063 11.87
Green Highland Allt Luaidhe
(228) Ltd 855 4.80 1,037 5.40 855 5.28 958 5.51
Green Highland Allt Phocachain
(1015) Ltd 858 4.82 1,021 5.31 858 5.29 1,088 6.26
Green Highland Shenval Ltd 860 4.82 592 3.08 860 5.31 611 3.51
Gas Power
Distributed Generators Ltd 3,200 17.96 3,582 18.64 3,200 19.75 3,472 19.97
Green Peak Generation Ltd 1,900 10.67 2,038 10.61 1,900 11.72 2,041 11.74
13,720 77.01 15,097 78.56 11,423 70.49 12,518 72.00
========= ======== ========= ======== ========= ======== ========= ========
Strategic Report - Investment Portfolio Summary
Non-qualifying holdings
29 February 2020 28 February 2019
-------------------------------------- --------------------------------------
Cost Valuation Cost Valuation
GBP'000 % GBP'000 % GBP'000 % GBP'000 %
Non-Qualifying Holdings
Unquoted
Hydroelectric Power
Green Highland Allt Choire
A Bhalachain (225) Ltd - - - - 3 0.02 3 0.02
Green Highland Allt Ladaidh
(1148) Ltd - - - - 30 0.19 30 0.17
Green Highland Allt Luaidhe
(228) Ltd - - - - 61 0.38 61 0.35
Green Highland Allt Phocachain
(1015) Ltd - - - - 2 0.01 3 0.02
SME Funding:
Hydroelectric Power
Broadpoint 2 Ltd* 550 3.09 550 2.86 550 3.39 550 3.16
Broadpoint 3 Ltd 1,005 15.21 1,005 14.10 1,005 6.20 1,005 5.78
Other
Funding Path Ltd - - - - 925 5.71 925 5.32
Modern Power Generation Ltd 470 2.64 495 2.58 2,160 13.33 2,246 12.92
2,025 20.94 2,050 19.54 4,736 29.23 4,823 27.74
========= ======= ========= ======= ========= ======= ========= =======
*Following the reporting date, the loan of GBP550,000 to
Broadpoint 2 Ltd was repaid in full.
Financial Assets are measured at fair value through profit or
loss. The initial best estimate of fair value of these investments
that are either quoted or unquoted on an active market is the
transaction price (i.e. cost). The fair value of these investments
is subsequently measured by reference to the enterprise value of
the investee company, which is best deemed to reflect the fair
value. Where the Board considers the investee company's enterprise
value to remain unchanged since acquisition, investments continue
to be held at cost less any loan repayments received.
For accounting periods commencing 1 January 2019 onwards,
updated International Private Equity and Venture Capital Valuation
("IPEV") guidelines no longer allow "cost" and "price of a recent
investment" to be used as the primary valuation technique when
valuing investments. This is discussed further in note 11.
Strategic Report - Investment Portfolio Ten Largest Unquoted
Investments
Distributed Generators Ltd
Date of first Cost GBP Valuation Valuation Income Equity Equity Held
investment GBP Method recognised Held by by TPIM
by TP11 TP11 % managed
for the funds %
year GBP'000
Discounted
02-Apr-2015 3,200,000 3,582,000 Cash Flow - 45 45
Summary of Information from Investee Company Financial Statements: GBP'000
Turnover 1,056
Earnings before interest, tax, amortisation and depreciation
(EBITDA) 381
Profit before tax 200
Net assets before VCT loans 3,002
Net assets 2,042
Distributed Generators Ltd constructed a 5 MW gas power plant in Bedford.
The 2 x 2.5 MW gas fired MTU Rolls Royce Engines were installed and
construction was completed in May 2018. The plant generates revenues
through the sale of electricity to the National Grid, when electricity
prices are at their highest.
----------------------------------------------------------------------------------------------------
Green Highland Allt Ladaidh (1148)
Ltd
Date of first Cost GBP Valuation Valuation Income Equity Equity Held
investment GBP Method recognised Held by by TPIM
by TP11 TP11 % managed
for the funds %
year GBP'000
Discounted
19-Mar-2015 1,470,000 2,201,000 Cash Flow 126 15 100
Summary of Information from Investee Company Financial Statements: GBP'000
Turnover 669
Earnings before interest, tax, amortisation and depreciation
(EBITDA) 512
Profit before tax (68)
Net assets before VCT loans 4,384
Net assets 2,884
Green Highland Allt Ladaidh (1148) Ltd operates a 1,350 KW run-of-river
hydroelectric power plant near Loch Garry, Invergarry in the Scottish
Highlands. The company earns Feed-in-Tariffs and other revenues from
the generation and export of electricity to the National Grid.
----------------------------------------------------------------------------------------------------
Green Peak Generation Ltd
Date of first Cost GBP Valuation Valuation Income Equity Equity Held
investment GBP Method recognised Held by by TPIM
by TP11 TP11 % managed
for the funds %
year GBP'000
Discounted
02-Apr-2015 1,900,000 2,038,000 Cash Flow - 42 90
Summary of Information from Investee Company Financial Statements: GBP'000
Turnover 1,402
Earnings before interest, tax, amortisation and depreciation
(EBITDA) 418
Profit before tax 136
Net assets before VCT loans 3,843
Net assets 2,613
Green Peak Generation Ltd constructed a 7.5 MW gas power plant in Bedford.
The 3 x 2.5 MW gas fired MTU Rolls Royce Engines were installed and construction
was completed in May 2018. The plant will generate revenues through the
sale of electricity to the National Grid, when electricity prices are
at their highest.
----------------------------------------------------------------------------------------------------
Green Highland Allt Luaidhe (228)
Ltd
Date of first Cost GBP Valuation Valuation Income Equity Equity Held
investment GBP Method recognised Held by by TPIM
by TP11 TP11 % managed
for the funds %
year GBP'000
Discounted
18-Mar-2015 855,000 1,037,000 Cash Flow 73 15 100
Summary of Information from Investee Company Financial Statements: GBP'000
Turnover 424
Earnings before interest, tax, amortisation and depreciation
(EBITDA) 250
Profit before tax (75)
Net assets before VCT loans 1,977
Net assets 1,122
Green Highland Allt Luaidhe (228) Ltd operates a 500 KW run-of-river
hydroelectric power plant located in Knockie, Whitebridge near Inverness
in the Scottish Highlands. The company earns Feed-In-Tariffs from the
generation and export of electricity to the National Grid.
---------------------------------------------------------------------------------------------------
Green Highland Allt Phocachain (1015)
Ltd
Date of first Cost GBP Valuation Valuation Income Equity Equity
investment GBP Method recognised Held by Held by
by TP11 TP11 % TPIM managed
for the funds %
year GBP'000
Discounted
13-Nov-2014 858,000 1,021,000 Cash Flow 73 8 100
Summary of Information from Investee Company Financial Statements: GBP'000
Turnover 803
Earnings before interest, tax, amortisation and depreciation
(EBITDA) 467
Profit before tax (68)
Net assets before VCT loans 3,823
Net assets 2,386
Green Highland Allt Phocachain (1015) Ltd operates two separate 500
KW run-of-river hydraulic power plants located in Glen Moriston, in
the Scottish Highlands. The company earns Feed-in-Tariffs from generation
and export of electricity to the National Grid.
--------------------------------------------------------------------------------------------------------
Broadpoint 3 Ltd
Date of first Cost GBP Valuation Valuation Income Equity Equity Held
investment GBP Method recognised Held by by TPIM
by TP11 TP11 % managed
for the funds %
year GBP'000
Discounted
08-Jan-2016 1,005,000 1,005,000 cash flow* - - -
Summary of Information from Investee Company Financial Statements: GBP'000
Turnover Not disclosed
Earnings before interest, tax, amortisation and depreciation Not disclosed
(EBITDA)
Profit before tax Not disclosed
Net assets before VCT loans Not disclosed
Net assets Not disclosed
Broadpoint 3 Ltd owns equity stakes in hydroelectric power companies
and one digital deployment company.
-------------------------------------------------------------------------------------------------------
*The Directors consider the fair value to be equivalent to the
par value.
Adfenix AB
Date of first Cost GBP Valuation Valuation Income recognised Equity Equity Held
investment GBP Method by TP11 Held by TPIM
for the by TP11 managed
year GBP'000 % funds %
Last Equity
25-Feb-2020 799,000 812,000 Raise - 4 -
Summary of Information from Investee Company Financial Statements: GBP'000
Turnover Not disclosed
Earnings before interest, tax, amortisation and depreciation Not disclosed
(EBITDA)
Profit before tax Not disclosed
Net assets before VCT loans Not disclosed
Net assets Not disclosed
Adfenix AB provides data-driven marketing automation software to large
estate agencies so that they may reach their customers directly, through
targeted social media adverts.
----------------------------------------------------------------------------------------------------------
Digital Therapeutics Inc (Quit Genius)
Date of first Cost GBP Valuation Valuation Income Equity Equity Held
investment GBP Method recognised Held by by TPIM
by TP11 TP11 % managed
for the funds %
year GBP'000
Last Equity
14-Feb-2020 698,000 702,000 Raise - 2 -
Summary of Information from Investee Company Financial Statements: GBP'000
Turnover Not disclosed
Earnings before interest, tax, amortisation and depreciation Not disclosed
(EBITDA)
Profit before tax Not disclosed
Net assets before VCT loans Not disclosed
Net assets Not disclosed
Quit Genius is the provider of an online digital therapeutics tool
that helps users quit smoking and vaping. The app provides behaviour
tracking, tips and encouragement to users.
----------------------------------------------------------------------------------------------------------
Counting Ltd (Counting Up)
Date of first Cost GBP Valuation Valuation Income Equity Equity Held
investment GBP Method recognised Held by by TPIM
by TP11 TP11 % managed
for the funds %
year GBP'000
Last Equity
06-06-2019 700,100 700,100 Raise - 3 -
Summary of Information from Investee Company Financial Statements: GBP'000
Turnover Not disclosed
Earnings before interest, tax, amortisation and depreciation Not disclosed
(EBITDA)
Profit before tax Not disclosed
Net assets before VCT loans Not disclosed
Net assets Not disclosed
Counting Up provides micro businesses with a fully integrated accounting
system and business bank account in one app. The solution provides automated
bookkeeping, quick and easy invoicing, and simple expense management.
------------------------------------------------------------------------------------------------------
Broadpoint 2 Ltd
Date of first Cost* Valuation Valuation Income Equity Equity Held
investment GBP GBP Method recognised Held by by TPIM
by TP11 TP11 % managed
for the funds %
year GBP'000
Discounted
07-Jan-2016 550,000 550,000 cash flow* 43 49 98
Summary of Information from Investee Company Financial Statements: GBP'000
Turnover -
Earnings before interest, tax, amortisation and depreciation
(EBITDA) (11)
Profit before tax -
Net assets before VCT loans 3,370
Net assets (14)
Broadpoint 2 Ltd is a VCT non-qualifying investment, which has provided
investment to hydro-electric power companies.
----------------------------------------------------------------------------------------------------
* The loan from Broadpoint 2 was repaid in full following the
year end.
The Strategic Report has been approved by the Board and signed
on their behalf by the Chairman.
Jane Owen
Chairman
21 May 2020
GOVERNANCE
Board of Directors
Jane Owen is the Chairman of the Board of the Company. After
graduating in law from Oxford University, Jane was called to the
Bar in 1978 and until 1989 was a practising barrister in the
chambers that are now 3 Verulam Buildings. Subsequently, Jane
became UK group legal director at Alexander & Alexander
Services, and was appointed Aon's General Counsel in the UK in
1997, a position she held until 2008, where she was also a director
of Aon Limited from 2001 to 2008. She was also a Non-Executive
Director of TWG Europe Ltd and related companies and a Governor of
James Allen's Girls' School.
Chad Murrin graduated in law from Cambridge University, and then
qualified as a barrister. He worked for 3i Group plc from
1986-2004, the last five years as 3i's Corporate Development
Director. In 2004, he set up his own corporate advisory business,
Murrin Associates Limited. He holds the Advanced Diploma in
Corporate Finance from The Corporate Finance Faculty of the ICAEW.
He is a Non-Executive Director of Keytask Management Limited, E.W.
Beard (Holdings) Limited, Procom-IM Limited and other
companies.
Tim Clarke graduated in PPE from Oxford University. He joined
Panmure Gordon & Co as an equities analyst, subsequently
becoming a Partner and Head of Research. He joined Bass PLC in
1990, holding a number of operating roles in the Hotels, Pub and
Restaurant divisions before becoming Chief Executive in 2000.
Following its demerger he was Chief Executive of Mitchells &
Butlers PLC until 2009. He was a Non-Executive Director of
Associated British Foods PLC from 2004 until 2017. He is currently
Chairman of Birmingham Airport, Chairman of Timothy Taylor & Co
Ltd, and a Non-Executive Director of Hall & Woodhouse Ltd. He
is Governor of the Foundation of the Schools of King Edward VI in
Birmingham.
CORPORATE GOVERNANCE
Compliance Statement
The Board of Triple Point VCT 2011 plc has considered the
Principles and Provisions of the Association of Investment
Companies Code of Corporate Governance 2019 (AIC Code). The AIC
Code addresses the principles and Provisions set out in the UK
Corporate Governance Code (the UK Code), as well as setting out
additional Provisions on issues that are of specific relevance to
Triple Point VCT 2011 plc.
The Board considers that reporting against the principles and
provisions of the AIC Code, which has been endorsed by the
Financial Reporting Council and will provide improved reporting to
Shareholders.
The Company has complied with the Principles and Provisions of
the AIC Code except as set out below:
AIC Code of Corporate Governance Explanation
The appointment of a Senior Independent As there are only two independent
Director (Provision 14) Non-Executive Directors, excluding
the Chairman, it is not considered
appropriate to identify a member
of the Board as senior independent
Director. Both independent Non-Executive
Directors, as appropriate, will
act as a sounding board for the
Chairman, serve as intermediaries
between Directors and Shareholders,
and evaluate the Chairman's performance
as part of the Board's annual evaluation.
--------------------------------------------
Chairman of the Audit Committee The Chairman of the Board is the
(Provision 29) Chairman of the Audit Committee.
The Board considers this appointment
appropriate given the size and complexity
of the Company.
--------------------------------------------
The AIC Code is available on the AIC website ( www.theaic.co.uk
). It includes an explanation of how the AIC Code adapts the
Principles and Provisions set out in the UK Code to make them
relevant for investment companies.
Board of Directors
The Board compromises of three Non-Executive Directors.
The Board's role is to promote the long-term sustainable success
of the Company, generating value for its Shareholders and
contributing to a wider society.
All Directors are considered independent and day-to-day
management responsibilities are delegated to the Investment
Manager. The Directors have a combination of skills, experience and
knowledge which are relevant to the Company. Biographies of each
director are presented on page 60 of this report.
The Directors are provided with key information on the Company's
activities, including regulatory and statutory requirements, by the
Investment Manager and Company Secretary.
The Board has direct access to the Company Secretary and may
also take independent professional advice at the Company's expense
where necessary in the performance of their duties. During the
year, the Board was satisfied that all Directors were able to
commit sufficient time to discharge their responsibilities
effectively having given due consideration to their other
significant commitments. The Directors were advised on appointment
of the expected time required to fulfil their roles and have
confirmed that they remain able to make that commitment. No
external appointments accepted during the year were considered to
be significant for the relevant Directors, taking into account the
expected time commitment and nature of these roles.
All Directors have sufficient time to meet their Board
responsibilities and provide constructive challenge, strategic
guidance, offer specialist advice and hold third party service
providers to account.
The Chairman, Jane Owen, leads the Board and is responsible for
its overall effectiveness in directing the Company. The Chair leads
the process in determining its strategy and the achievement of its
objectives. The Chairman is responsible for setting the Board
agenda focusing on strategy, performance, value creation, culture,
stakeholders and ensuring that issues relevant to these areas are
reserved for Board decision. The Chair facilitates constructive
Board relations and the effective contribution of all the
Directors, encouraging a culture of openness and debate and ensures
the Directors receive accurate, timely and clear information. The
Chair does not have significant commitments which conflict with her
Board responsibilities.
Appointment of New Directors
Any appointment to the Board is subject to a formal, rigorous
and transparent procedure and is based on merit and objective
criteria which promotes diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths.
Company's Operations
The Investment Manager has authority over the management of the
investment portfolio, the organisation of custodial services,
accounting and administrative services. The Investment Manager
makes investment recommendations for the Board's approval.
The Board meets regularly in person or via conference call at
least four times a year, and on other occasions as required, to
review the investment performance and monitor compliance with the
investment policy laid down by the Board. There is a formal
schedule of matters reserved for Board decision which includes:
-- Review investment performance and monitor compliance with the investment policy;
-- The consideration and approval of future developments or
changes to the investment policy, including risk and asset
allocation;
-- Consideration of corporate strategy;
-- Approval of any dividend or return of capital to be paid to the Shareholders;
-- The appointment, evaluation, removal and remuneration of the
Investment Manager and the Company Secretary;
-- The performance of the Company, including monitoring the net asset value per share;
-- Monitoring shareholder profiles and considering shareholder communications; and
-- Approving major investments.
The Company Secretary, Hanway Advisory Limited, is responsible
for ensuring that Board procedures are complied with, advising the
Board on all governance matters, supporting the Chairman and
helping the Board and its committees to function effectively. The
Company Secretary will also provide the Board with support in
ensuring that it has the policies, processes, information, time and
resources it needs in order to function effectively.
The Company's articles of association and the schedule of
matters reserved to the Board for decision provide that the
appointment and removal of the Company Secretary is a matter for
the full Board.
The Board reviews the performance of the Investment Manager
annually taking into consideration the contractual arrangements and
scrutinises their performance. The Board as a whole carries out
this review and due to the size of the Board, does not consider it
appropriate to establish a separate management engagement
committee.
Re-election of Directors
Directors' retirement and re-election is subject to the
Company's articles of association and the AIC Code. The AIC Code
requires that all Directors should be subject to an annual
re-election. The Directors have therefore agreed to submit
themselves for annual re-election at the next Annual General
Meeting.
Independence of Directors
The Board has a non-executive Chairman and two other
non-executive Directors, all of whom were considered independent on
and since their appointment. All of the Directors are independent
of the Investment Manager.
The AIC Code outlines circumstances that are likely to impair a
director's independence including whether a director has served on
the board for more than nine years from the date of their first
appointment. All Directors have served on the Board for nine years
or more. Length of service is currently one of several indicators
the Board consider when assessing independence. The Board is of the
view that a term of service in excess of nine years does not in
itself compromise independence and notes the positive contribution
that their long-service offers. In particular that they are better
able serve the needs of the Company and its Shareholders by
providing experience across the business/economic cycle. The nature
of the Company's business is such that the Directors' experience
and continuity is critical to promote the long-term sustainable
success and future viability of the Company. The Board regularly
reviews the independence of its Directors and are satisfied that
all Directors remain independent, including in character and
judgement.
As part of the annual evaluation, the Directors considered
length of service of the Board as a whole and agreed to implement a
succession plan that addresses the regular refreshment of Board
membership whilst maintaining continuity.
Policy on Tenure of the Chairman
The Board considers that the length of time each Director,
including the Chairman, serves on the Board should not be limited
and has not set a finite tenure policy. Continuity,
self-examination and ability to do the job are the relevant
criteria on which the Board assesses a Director's independence.
Length of service of current Directors and future succession
planning will be reviewed each year as part of the Board evaluation
process.
Board Committees
The Board only has one committee which is the Audit Committee.
The Directors consider that due to the size of the Board, there
being no employees or executive directors, it is not necessary to
appoint a separate remuneration committee. The remuneration report
is detailed on pages 70 to 75.
Board Meeting Attendance
During the period the following Board meetings were held and the
number attended by each Director compared with the maximum possible
attendance:
Directors Board
Meetings
Jane Owen, Chairman 7/8
Chad Murrin 8/8
Tim Clarke 8/8
The attendance of the audit committee is detailed in the Audit
Committee report on page 68.
Performance Evaluation
The Board, led by the Chairman, established a formal process for
a formal and rigorous annual evaluation of the performance of the
Board, individual Directors and the Audit Committee. The evaluation
considered the composition, diversity, investment matters,
development and how effectively each member works together to
achieve its objectives.
During the period, the Board conducted its first performance
evaluation by completing a written questionnaire to appraise and
gather useful learnings on the functioning of the Board, the Audit
Committee and individual Directors.
The Chairman, supported by the Company Secretary, acted on the
results of the evaluation. The results of the questionnaire
demonstrated that there is a consensus that the performance and
functioning of the Board remains effective. However, the following
areas of improvement were identified with the appropriate action
addressed and approved by the Board:
-- Additional time should be dedicated to considering and
refreshing the strategy. The Board agreed to schedule an annual
strategy meeting.
-- Greater focus should be given to the tenure of the Board to
ensure that membership is regularly refreshed. The Board agreed
that a clear succession plan in the medium term be established that
considers diversity of gender, social and ethnic backgrounds with
the intention to gradually refresh Board membership.
-- Further training on an ongoing basis and regular updates on
legal, regulatory and governance matters should be provided to the
Board. The Board agreed that additional governance and compliance
reports and training be provided at future Board meetings.
Corporate Social Responsibility
The Board is committed to integrating social, environmental and
governance matters in the Company's business operations, including
the Company itself and the companies it invests in. The Board is
actively seeking ways to interact with their stakeholders. The
Board seeks to avoid investing in companies which do not operate
within ethical, environmental and social legislation. Details on
the Company's responsible investing can be found on pages 51 to
52.
Internal Control and Risk Management
The Board has overall responsibility for establishing procedures
to manage risk, overseeing the internal control framework,
determining the nature and extent of the principal risks the
Company is willing to take in order to achieve its long-term
strategic objectives, and identifying emerging risks. The purpose
of an internal control framework is to ensure that proper
accounting records are maintained, the Company's assets are
safeguarded, and the financial information used within the business
and for publication is accurate and reliable; such a system can
only provide reasonable and not absolute assurance against material
misstatement or loss. Emerging risks are regularly monitored, and
to the extent possible or practicable, mitigating actions are
implemented.
The system of risk management and internal control is designed
to manage rather than eliminate the risk of failure to achieve
business objectives. As part of this process an annual review of
the risk management and internal control systems is carried out.
The review covers all material controls including financial,
operational and compliance controls.
The Directors regularly review financial results and investment
performance with the Investment Manager.
The Directors have established an ongoing process designed to
meet the particular needs of the Company in identifying, evaluating
and managing the significant and emerging risks to which it is
exposed including, among others, market risk, VCT qualifying
investment risk and operational risks which are recorded on a risk
register. The controls employed to mitigate these risks are
identified and the residual risks are rated taking into account the
impact of the mitigating factors. The risk register is reviewed
bi-annually. The principal risks and uncertainties including
emerging risks identified from the risk register and a description
of the Group's risk management procedures can be found on page
24-26.
TPIM is engaged to provide accounting services, and Hanway
Advisory Limited is engaged to provide secretarial services and
retains physical custody of the documents of title relating to
investments.
The Directors regularly review the system of internal controls,
both financial and non-financial, operated by the Company and the
Investment Manager. These include controls designed to ensure that
the Company's assets are safeguarded and that proper accounting
records are maintained. Internal control systems include the
production and review of quarterly bank reconciliations and
management accounts. The Investment Manager is engaged to provide
accounting services and the Company Secretary provides secretarial
services and retains physical custody of the documents of title
relating to investments.
Capital management is monitored and controlled by the Investment
Manager. The capital being managed includes equity and fixed
interest VCT qualifying investments, cash balances and liquid
resources including debtors and creditors. The Investment Manager's
procedures are subject to internal compliance checks.
The Company's objectives when managing capital are:
-- To safeguard its ability to continue as a going concern, so
that it can continue to provide returns to Shareholders and
benefits for other stakeholders;
-- To ensure sufficient liquid resources are available to meet
the funding requirements of its investments and to fund new
investments where identified.
Stakeholder Engagement
The Company continuously interacts with a variety of
stakeholders important to its success. This includes regular
engagement with the Company's Shareholders and other
stakeholders by the Board and the Investment Manager. The Directors
are responsible for acting in a way that they consider, in good
faith, is the most likely to promote the success of the Company for
the benefit of its members. In doing so, they have regard for the
needs of stakeholders and the wider society along with the matters
set out in the Section 172 statement on pages 27 to 28 .
The Company is committed to understanding the views of its
stakeholders and maintaining effective dialogue with its key
stakeholders of which include:
-- Shareholders
-- investee companies;
-- the Investment Manager;
-- lenders; and
-- the wider communities in which the Company and its' investee companies operate.
Shareholders
In addition to the formal business of the Annual General Meeting
where Shareholders have an opportunity to question the Board and
the Investment Manager on matters relating to the Company's
operation and performance, formal updates are provided to
Shareholders on a quarterly basis. The Board and the Investment
Manager will also respond to any written queries made by
Shareholders during the course of the year. The Chairman provides
feedback to the Board and is responsible for providing a clear
understanding of the views of Shareholders to the Board. The Board
recognises the importance of providing strong financial returns to
Shareholders and the eligible tax benefits under VCT tax
legislation and takes this in consideration when making investments
into and from investee companies, approving offers for subscription
and declaring declarations.
Investee Companies
The Company via its Investment Manager has important
relationships with individuals responsible for the maintenance and
performance of its investee companies. This includes monthly
operational reports from the Operation & Maintenance
("O&M") providers. Site visits are undertaken at least annually
by representatives from the Investment Manager including the
Investor Directors and portfolio management team. The Investment
Manager is in regular contact with the O&M providers.
Management accounts and performance reports are provided to the
Directors of investee companies on a quarterly basis.
As part of achieving its investment objectives, the Company
provides funding to a number of investee companies and as such, has
debtor relationships with several companies. Should issues arise
with payment deadlines, the Investment Manager, on behalf of the
Company will consider appropriate measures to engage with any
debtors and take into consideration their circumstances, with the
aim of not causing detriment to the Company's long term sustainable
success.
Investment Manager
The Company maintains a good relationship with the Investment
Manager, Triple Point Investment Management LLP and regularly
considers their performance. The Investment Manager attends every
Board meeting and presents a detailed portfolio analysis and
reports on key issues such as VCT compliance, investment pipeline
and valuations.
Lenders
The Company values its relationships with its debt providers.
Prudent debt financing is important to effectively manage the
Company's capital and achieve the target return promised to
Shareholders. The Investment Manager engaged with and ensured the
Company met its obligations in relation to the loan facility
agreement which was put in place during the year. The Company
entered into and received a working capital facility from Triple
Point Advancr Leasing plc. This is disclosed further in note 20 to
the Financial Statements.
Community
The Directors recognise that the long term success of the
Company is linked to the success of the communities in which the
Group, and its investee companies, operate. The Board encourages
the responsible investment ethos of the Investment Manager that is
based on the 17 UN Sustainable Development Goals. The Board is
cognisant of the impact of the Company's operations and of the
companies in which it invests and believes that its investment
activities have many positive benefits beyond the returns delivered
for Shareholders.
Directors' Share Interests
All of the Directors' share interests were held beneficially and
they are actively encouraged to own shares. Details of the
Directors' share interests can be found in the remuneration report
on page 65. The Company has not set out any formal requirements or
guidelines to Directors concerning their ownership of shares in the
Company.
On behalf of the Board.
Jane Owen
Chairman
21 May 2020
Audit Committee Report
The Audit Committee consists of the Chairman Jane Owen and the
Non-Executive Directors, Tim Clarke and Chad Murrin. The Audit
Committee deals with matters relating to audit, financial reporting
and internal control systems. The Committee meets at least twice a
year and as required. The Audit Committee also has direct access to
BDO LLP, the Company's auditor.
Audit Committee Role and Responsibilities
In respect of the year ended 29 February 2020, the Audit
Committee discharged its responsibilities by:
-- Reviewing the external auditor's plan for the audit of the financial statements, including identification of key risks and confirmation of auditor independence;
-- Monitoring the integrity of the financial statements of the
Company and any formal announcements relating to the Company's
financial performance, and reviewing significant financial
reporting judgements contained in them;
-- Reviewing the Company's internal financial controls and
internal control and risk management systems operated in relation
to the Company's business and assessing those controls in
minimising the impact of key risks;
-- Reviewing periodic reports on the effectiveness of TPIM's compliance procedures;
-- Reviewing the appropriateness of the Company's accounting policies;
-- Providing advice on whether the annual report and account,
taken as a whole, is fair, balanced and understandable, and
provides the information necessary for Shareholders to assess the
company's position and performance, business model and
strategy;
-- Reviewing the Company's half-yearly results and draft annual
Financial Statements prior to Board approval;
-- Making recommendations to the Board regarding the
reappointment of the external auditor and approving their
remuneration;
-- Reviewing and monitoring the external auditor's independence and objectivity;
-- Reviewing the effectiveness of the external audit process,
taking into consideration relevant UK professional and regulatory
requirements;
-- Reviewing the Company's going concern status; and
-- Reviewing the external auditor's findings document.
Financial Reporting
The primary role of the Audit Committee in relation to financial
reporting is to review with the Investment Manager, the
Administrator and the Auditor the appropriateness of the half year
report and Annual Report and financial statements, concentrating
on, amongst other matters:
-- Compliance with financial reporting standards and relevant
financial and governance reporting requirements;
-- Amendments to legislation and corporate governance reporting requirements;
-- The impact of any new and proposed amendments to accounting
standards which affect the Company;
-- Material areas in which significant judgements have been applied;
-- Whether the Committee believes that proper and appropriate
processes and procedures have been followed
in the preparation of the annual report; and
-- Considering and recommending the contents of the annual
report and financial statements for approval.
Significant Issues Raised by the Audit Committee
The Audit Committee is responsible for considering and reporting
on any significant issues that arise in relation to the Financial
Statements and how they have been addressed.
The following key issues were discussed:
-- Compliance with HM Revenue & Customs conditions for
maintenance of approved Venture Capital Trust status.
-- Valuation and existence of unquoted investments.
-- Net asset value projections of the A and B Shares.
Compliance with HMRC Conditions
The Investment Manager provides the Board with monthly
qualifying investment updates. This report, shows the current
qualifying percentage position of the Company and highlights and
actions which may be required to maintain this position in the
future. The qualifying position of the Company is a recurring
agenda item at Board meetings and is often discussed by the Board
at length.
The Company also has in place an engagement with Philip Hare and
Associates LLP, the Board seek their opinion before undertaking any
material transaction which may affect the qualifying status of the
Company. The Company also seek the opinion of Shoosmiths LLP when
making any new Venture Fund Investments.
Valuation & Net Asset Value Projections
The Company's unquoted Investment portfolio is valued in line
with the International Private Equity Valuation guidelines. The
Company's accounting policy is to designate investments at fair
value through pro t or loss. Therefore, the most signi cant risk in
the nancial statements is whether its investments are fairly
valued. Being unquoted there is uncertainty and estimation involved
in determining the investment valuations.
There is also an inherent risk of management override as the
Investment Manager's fee is calculated based on NAV as disclosed in
note 5 to the nancial statements. The Investment Manager is
responsible for calculating the NAV, prior to approval by the
Board.
On a quarterly basis, the Investment Manager provides a detailed
analysis of the NAV highlighting any movements and assumption
changes from the previous quarter's NAV. This analysis and the
rationale for any changes made is considered and challenged by the
Chairman of the Audit Committee and subsequently considered and
approved by the Board.
BDO LLP attended 1 of the 2 formal Audit Committee meetings held
during the year. Matters typically discussed include the Auditor's
assessment of the transparency and openness of the Investment
Manager, con rmation that there has been no restriction in scope
placed on them, the independence of their audit and how they have
exercised professional scepticism.
External Audit
It is the Audit Committee's responsibility to monitor the
performance, objectivity and independence of the external auditors
and this is assessed by the committee each year. In evaluating
BDO's performance, the committee examine effectiveness of the audit
process, independence and objectivity of the auditor, taking into
consideration the length of tenure of the external auditors, the
non-audit services undertaken during the year and relevant UK
professional and regulatory requirements, and the quality of
delivery of its services.
When considering whether to recommend the reappointment of the
external auditor, the Audit Committee takes into account their
current fee compared to the external audit fees paid by other
similar companies. The quality and competence of the external
auditor is also taken into consideration. The Audit Committee will
then recommend to the Board the appointment of an external auditor
which is approved by Shareholders at the Annual General
Meeting.
The FRC's Ethical Standard requires the audit partner to rotate
every five years. The first audit engagement for BDO LLP was for
the year ended 28 February 2018.
The independence and effectiveness of the external audit process
is assessed as part of the Board evaluation conducted annually and
by the quality and content of the audit plan provided to the Audit
Committee by the external auditor and the discussions then held on
topics raised. The Audit Committee will challenge the external
auditor at the Audit Committee meeting if appropriate.
The Audit Committee's terms of reference include the following
roles and responsibilities:
-- Periodically considering the need for an internal audit function;
-- Reviewing and monitoring the external auditor's independence
and objectivity and the effectiveness of the audit process, taking
into consideration relevant UK professional regulatory
requirements;
-- Monitoring the extent to which the external auditor is
engaged to supply non-audit services; and
-- Ensuring that the Investment Manager has arrangements in
place for the investigation and follow-up of any concerns raised
confidentially by staff in relation to propriety of financial
reporting or other matters.
The Committee reviews its terms of reference and effectiveness
annually and recommends to the Board any changes required as a
result of the review. The terms of reference are available on
request from the Company Secretary.
The Board considers that the members of the Committee
collectively have the skills and experience required to discharge
their duties effectively and the Committee as a whole has
competence relevant to the sector in which it operates.
The Company does not have an independent internal audit function
as it is not deemed appropriate given the size of the Company and
the nature of the Company's business. However, the Committee
considers annually whether there is a need for such a function and,
if there were, would recommend it be established.
Non-Audit Services
The Audit Committee safeguards the objectivity and independence
of the auditor by reviewing the nature and extent of non-audit
services supplied by the external auditor to the Company. Details
of fees paid to BDO LLP during the year are disclosed in note 7 to
the financial statements. During the year, BDO LLP were appointed
to perform certain agreed-upon procedures with regards to the Net
asset value of the Venture fund as at 31 January 2020, as part of
the board's consideration of the appropriateness of the issue price
for the most recent Venture Fund allotment. The Audit Committee
approved these fees after a review of the level and nature of work
to be performed and were satisfied that they are appropriate for
the scope of the work required.
The Audit Committee was satisfied that BDO LLP had adequate
safeguards in place and that provision of these non-audit services
did not affect the objectivity or independence of the external
auditor.
Independence
The Audit Committee is required to consider the independence of
the external auditor. In fulfilling this requirement, the Audit
Committee has considered the Audit Strategy report from BDO LLP
which describes their arrangements to identify, report and manage
any conflict of interest and their independence.
Audit Committee Meeting Attendance
During the period, the following Audit Committee meetings were
held, and the number attended by each director compared with the
maximum possible attendance:
Directors Audit Committee
Meetings
Jane Owen, Chairman 2/2
Chad Murrin 2/2
Tim Clarke 2/2
The Audit Committee relies on the Investment Manager to assess
the valuation of unquoted investments and the existence of those
investments. The Investment Manager has a director on the board of
all the investee companies and meets regularly with the other
directors and hence has an oversight of all the investments made.
The Audit Committee have reviewed the valuations and discussed them
with both the Investment Manager and the external auditor to
confirm their assessment of the valuation of the unquoted
investments and the existence of those investments.
The Investment Manager has confirmed to the Audit Committee that
the conditions for maintaining the Company's status as an approved
Venture Capital Trust had been complied with throughout the year.
The position has been reviewed by Philip Hare & Associates LLP
in its capacity as adviser to the Company on taxation matters.
The Audit Committee has considered the whole Report and Accounts
for the year ended 29 February 2020 and has reported to the Board
that it considers them to be fair, balanced and understandable
providing the information necessary for Shareholders to assess the
Company's position, performance, business model and strategy.
On behalf of the Board.
Jane Owen
Audit Committee Chairman
21 May 2020
Directors' Remuneration Report
Statement of the Chairman
I am pleased to present the Remuneration Report on behalf of the
Board for the year ended 29 February 2020.
This report is submitted in accordance with schedule 8 of the
Large and Medium Sized Companies and Groups (Accounts and Reports)
(amendment) Regulations 2013 and The Companies (Miscellaneous
Reporting) Regulations 2018, in respect of the year ended 29
February 2020. This report also meets the Financial Conduct
Authority's Listing Rules and describes how the Board has applied
the principles and provisions relating to Directors' remuneration
set out in the AIC Code. The reporting requirements require two
sections to be included:
-- Directors' Remuneration Policy - This sets out our
Remuneration Policy for Directors of the Company for the future and
will be subject to a binding shareholder at our 2020 AGM. There
have been no changes to the policy since its approval by
Shareholders at the 2017 AGM other than presentational amendments
to display the policy in a simple and transparent manner.
-- Annual Remuneration Report - T his sets out how our Directors
were paid for the period ended 29 February 2020. There will be an
advisory shareholder vote on this section of the report at our 2020
AGM.
The Company's auditor, BDO LLP, is required to give their
opinion on certain information included in this report, comprising
the Directors' emoluments section and their shareholdings below.
Their report on these and other matters is set out on pages 81 to
86.
During the period, as part of the performance evaluation
undertaken by the Board, the remuneration of the Directors was
reviewed, taking into account the Company and individual
performance.
The Board agreed that the fees of the Non-Executive Directors
and the Chairman should be increased to reflect the time commitment
and responsibilities of the role. The fee for the Non-Executive
Directors (excluding the Chairman) was increased from GBP15,000 to
GBP18,000 and the fee for the Chairman was increased from GBP17,500
to GBP22,500.
This fee increase took effect from 1 March 2019. The increased
remuneration of the Directors reflects the findings of a
benchmarking exercise undertaken by the Company Secretary in which
the remuneration of directors of comparable Venture Capital Trusts
of a similar size, objective and structure were evaluated against
those of the Company's Directors.
We value engagement with our Shareholders and for the
constructive feedback we receive and look forward to your support
at the forthcoming AGM.
Jane Owen
Chairman
Directors' Remuneration Policy
Approval of Remuneration Policy
The Company's Remuneration Policy was last approved on 13 July
2017 at the Annual General Meeting. In accordance with section 439A
of the Companies Act 2006, a resolution to approve this Directors'
Remuneration Policy will be proposed at the Annual General Meeting
of the Group to be held on 9 July 2020. If the resolution is
passed, the provisions of the policy will apply until they are next
put to Shareholders for renewal of that approval, which must be at
intervals of not more than three years, or if the Remuneration
Policy is varied, in which event shareholder approval for the new
Remuneration Policy will be sought.
Remuneration Policy Overview
The Board currently comprises three Directors, all of whom are
Non-Executive. The Board's policy is that the remuneration of
Non-Executive Directors should reflect the experience of the Board
as a whole, be fair and be comparable with that of other relevant
Venture Capital Trusts that are similar in size and have similar
investment objectives and structures. Furthermore, the level of
remuneration should be sufficient to attract and retain the
Directors needed to oversee the Company properly and to reflect the
specific circumstances of the Company, the duties and
responsibilities of the Directors and the value and amount of time
committed to the Company's affairs. The articles of association
provide that the Directors shall be paid in aggregate a sum not
exceeding GBP100,000 per annum. None of the Directors are eligible
for bonuses, pension benefits, share options, long-term incentive
schemes or other benefits in respect of their services as
Non-Executive Directors of the Company.
Consideration of Remuneration
The Board does not have a separate Remuneration Committee, as
the Company has no employees or executive directors. The Board has
not retained external advisers in relation to remuneration matters
but has access to information about Directors' fees paid by other
companies of a similar size and type. As such, the Board as a whole
will consider the remuneration of the Directors, however no
director is involved in determining their own remuneration. The
Board will review the remuneration of the Directors in line with
the VCT industry on an annual basis, if thought appropriate.
Otherwise, only a change in responsibilities is likely to incur a
change in remuneration of any one Director or the remuneration
policy itself.
Directors' Service Contracts
The Directors are engaged under letters of appointment and do
not have service contracts with the Company.
Directors' Term of Office
The Directors' letters of appointment provide for an appointment
of 12 months, after which three months written notice must be given
by either party. Each Director will be subject to annual
re-election by Shareholders at the Company's Annual General Meeting
in each financial year.
Policy on Payment for Loss of Office
A Director who ceases to hold office is not entitled to receive
any payment other than accrued fees (if any) for past services.
Consideration of Shareholder Views
The Company is committed to ongoing shareholder dialogue and
takes an active interest in voting outcomes. Where there are
substantial votes against resolutions in relation to directors'
remuneration, the Group will seek the reasons for any such vote and
will detail any resulting actions in the Directors' Remuneration
Report. No views which are relevant to the formulation of the
Directors' remuneration policy have been expressed to the Company
by Shareholders, whether at a general meeting or otherwise.
Future Policy Table
The Directors are entitled only to the fees as set out in the
table below. No element of Directors' remuneration is subject to
performance factors. There are no other fees payable to the
Directors for additional services outside of their contracts.
Component How it Operates Maximum Fee Link to Strategy Provisions
to Recover
or Withhold
Sums
Annual Fee Each Director The total aggregate The level of the There are
receives a basic fees that can annual fee has no provisions
fee which is be paid to the been set to attract to recover
paid on a quarterly Directors is calculated and retain high or withhold
basis. in accordance calibre Directors sums.
with the articles with the skills
of association. and experience
necessary for
the role. The
fee has been benchmarked
against companies
of a similar size.
---------------------- -------------------------- --------------------------- ----------------
Other benefits The Directors Article 89 of In line with market
shall be entitled the Company's practice, the
to be repaid Articles of Association Company will reimburse
expenses. permits for any the Directors
director to be for expenses to
repaid reasonable ensure that they
expenses incurred are able to carry
in attending or out their duties
returning from effectively.
meetings of the
Board, committees
of the Board or
shareholder meetings
or otherwise in
connection with
the performance
of their duties
as Directors of
the Company.
---------------------- -------------------------- --------------------------- ----------------
Annual Remuneration Report
Directors' Fees
Details of each Director's contract is shown below. The Chairman
is paid more than the other Directors to reflect the additional
responsibilities of the role.
Annual rate
Date of Unexpired term of Directors' Policy on payment
Contract of contract fees for loss of office
GBP
Jane Owen, Chairman 23-Sep-10 none 22,500 none
Chad Murrin 23-Sep-10 none 18,000 none
Tim Clarke 05-May-11 none 18,000 none
Single Total Figure (audited information)
The fees paid to Directors in respect of the year ended 29
February 2020 and the prior year are shown below:
Emoluments Emoluments
for the Year for the Year
ended 29 February ended 28 February
2020 2019
GBP GBP
Jane Owen, Chairman 22,500 17,500
Chad Murrin 18,000 15,000
Tim Clarke 18,000 15,000
58,500 47,500
---------------------- --------------------
None of the Directors are eligible for bonuses, pension
benefits, share options, long-term incentive schemes or other
benefits in respect of their services as Non-Executive Directors of
the Company.
Information required on executive Directors, including the Chief
Executive Officer and employees has been omitted because the
Company has neither and therefore it is not relevant.
Directors' emoluments compared to payments to Shareholders:
29 February 28 February
Unaudited 2020 2019
GBP'000 GBP'000
Total Dividends paid 5,864 373
Total Directors' emoluments 59 48
Directors' Share Interests (audited information)
At 29 February 2020, Jane Owen held 24,624 A Shares, 24,378 B
Shares and 24,499 Venture Shares (2019: 24,624 A Shares; 24,378 B
Shares and Nil Venture Shares).
Tim Clarke held 24,624 B Shares and 24,499 Venture Shares (2019:
24,624 B Shares and Nil Venture Shares).
Chad Murrin held 24,874 A Shares, 24,624 B Shares and 24,437
Venture Shares (2019: 24,874 A Shares; 24,624 B Shares and Nil
Venture Shares).
No other connected parties to the Directors held any shares at
29 February 2020 (2019: nil) . Any shares owned by the Directors
were purchased at the same price offered to investors. There are no
requirements or restrictions on Directors holding shares in the
Company.
Company Performance
The following performance charts compare the Total Return of the
A & B Share Classes over the period from 1 March 2015 to 29
February 2020 with the Total Return from notional investments in
the FTSE All-Share index and FTSE Small-Cap index over the same
period.
Investors should be reminded that shares in Venture Capital
Trusts generally continue to trade at a discount to the NAV of the
Company.
The Total Return does not include the initial 30% tax relief
available to investors.
A Ordinary Share Net Asset Value total return since launch
against the FTSE All-Share and FTSE Small Cap index total return
(rebased to 100p at launch)
FTSE Small Cap FTSE All Share Total Return
28-Aug-15 100 100 100.00
---------------- ---------------- --------------
29-Feb-16 95.24 97.41 100.96
---------------- ---------------- --------------
31-Aug-16 106.62 107.64 102.50
---------------- ---------------- --------------
28-Feb-17 115.13 115.10 104.51
---------------- ---------------- --------------
31-Aug-17 124.42 118.58 106.86
---------------- ---------------- --------------
28-Feb-18 124.18 115.92 111.37
---------------- ---------------- --------------
31-Aug-18 127.07 119.55 112.99
---------------- ---------------- --------------
28-Feb-19 118.06 113.22 118.74
---------------- ---------------- --------------
31-Aug-19 117.05 115.09 119.80
---------------- ---------------- --------------
29-Feb-20 117.23 106.96 121.54
---------------- ---------------- --------------
B Ordinary Share Net Asset Value total return since launch
against the FTSE All-Share and FTSE Small Cap index total return
(rebased to 100p at launch)
FTSE Small Cap FTSE All Share Total Return
31-Aug-16 100.00 100.00 100.00
---------------- ---------------- --------------
28-Feb-17 107.98 106.93 100.29
---------------- ---------------- --------------
31-Aug-17 116.69 110.16 100.26
---------------- ---------------- --------------
28-Feb-18 116.47 107.69 100.53
---------------- ---------------- --------------
31-Aug-18 119.18 111.06 100.46
---------------- ---------------- --------------
28-Feb-19 110.73 105.18 106.67
---------------- ---------------- --------------
31-Aug-19 109.77 106.92 106.51
---------------- ---------------- --------------
29-Feb-20 109.95 99.36 108.35
---------------- ---------------- --------------
These charts have been prepared in accordance with part 3 to
schedule 8 of the Companies Act 2006. The Company measures its
performance against its target returns as detailed in the Strategic
Report.
As highlighted above, the charts do not take in to account the
tax benefit of investing in a VCT.
Statement of Voting at the Annual General Meeting
The resolutions to approve the Directors' Remuneration Report
was passed at the Annual General Meeting on 12 July 2019 and the
Directors' Remuneration Policy was passed at the Annual General
Meeting on 13 July 2017 on a show of hands. Details of the proxy
votes in respect of the resolutions are as set out below:
Voting for Voting Against Vote Withheld
Remuneration
Report 99.051% 0.949% 0
------------ ---------------- ---------------
Remuneration
Policy 99.705% 0.295% 0
------------ ---------------- ---------------
During the year, the Company did not receive any communications
from Shareholders specifically regarding Directors' pay.
On behalf of the Board.
Jane Owen
Chairman
21 May 2020
Directors' Report
The Directors are pleased to present the Directors' Report for
the year ended 29 February 2020.
The information that fulfils the requirements of the Corporate
Governance statement in accordance with rule
7.2 of the DTR can be found in this Directors' report and in the
Governance section on pages 60 to 86 all of which is
incorporated into this Directors' report by reference.
Directors
The Directors of the Company during the period were Jane Owen,
Chad Murrin and Tim Clarke.
Principal Activity and Status
The principal activity of the Company is that of a Venture
Capital Trust ("VCT") and its main activity is investing in
companies involved in venture, renewable energy, energy production
and SME funding.
The Company has been approved as a VCT by HMRC, in accordance
with Section 274 of the Income Tax Act 2007 and, in the opinion of
the Directors, has conducted its affairs so as to enable it to
continue to obtain such approval. In order to maintain its status
under VCT legislation, a VCT must comply on a continuing basis with
the provisions of Section 274 and further details can be found on
page 78.
The Company is registered in England as a Public Limited Company
(Registration number 07324448) and its shares are listed on the
main market of the London Stock Exchange.
The Company was not at any time up to the date of this report a
close company within the meaning of S439 of the Corporation Tax Act
2010.
Post Balance Sheet Events
Following the Company's year-end, the country went into lockdown
as a result of the COVID-19 pandemic which has affected the UK and
the world. The effect on the Company as a result of COVID-19 is
discussed at length in both the Chairman's Statement and the
Investment Manager's Review.
Further details of COVID-19 and other post balance sheet events
can be seen in note 23 to the Financial Statements.
Directors' and Officers' Liability Insurance
The Company has, as permitted by Section 233 of the Companies
Act 2006, maintained insurance cover on behalf of the Directors and
Company Secretary, indemnifying them against certain liabilities
which may be incurred by them in relation to their offices with the
Company.
Research and Development
No expenditure on research and development was made during the
year (2019: Nil).
Management
TPIM acts as Investment Manager to the Company and has done
since incorporation. The principal terms of the Company's
management agreement with TPIM are set out in note 5 to the
Financial Statements.
The Board has evaluated the performance of the Investment
Manager based on the returns generated since taking on the
management of the Fund and a review of the management contract and
the services provided in accordance with its terms. As required by
the Listing Rules, the Directors confirm that in their opinion the
continuing appointment of TPIM as Investment Manager is in the best
interests of the Shareholders as a whole. In reaching this
conclusion the Directors have taken into account the performance of
other VCTs managed by TPIM and the service provided by TPIM to the
Company.
Substantial Shareholdings
As at the date of this report no disclosures of major
shareholdings had been made to the Company under Disclosure and
Transparency rule 5 (Vote Holder and Issuer Notification
Rules).
Share Price Discount Policy
The Company has a share buy-back facility, committing to buy
back shares at no more than a 5% discount to the prevailing NAV,
subject to the Directors' discretion. We will be asking
Shareholders at the Annual General Meeting to extend the facility
for the Company to purchase shares in the market for cancellation.
Shareholders should note that if they sell their shares within five
years of subscription, they forfeit any tax relief obtained. If you
are considering selling your shares, please contact TPIM on 020
7201 8989.
Purchase of Own Shares
During the year, the Company purchased back for cancellation
18,915 B Shares for a consideration of GBP18,139.49.
During the year, the Company purchased back for cancellation
220,809 Venture Shares for a consideration of GBP207,693.
The Directors may exercise on behalf of the Company its powers
to purchase its own shares to the extent permitted by Shareholders
and the articles of association.
Global Greenhouse Gas Emissions, Energy Consumption and Energy
Efficiency
The Company has no greenhouse gas emissions to report from its
operations, nor does it have responsibility for any other emission
producing sources under the Companies Act 2006 (Strategic Report
and Directors' Reports) Regulations 2013.
It is worth highlighting that the Company has invested in
renewable energy, through its portfolio of hydroelectric companies.
It has also invested in two companies which operate gas fired
energy centres. Natural gas neatly bridges the gap between
environmentally unfriendly fossil fuels and more irregular solar
and wind power. Gas fired energy centres play an important role in
balancing the UK electricity network, which is growing ever more
reliant on renewable energy sources, as the nation shifts towards a
low-carbon economy.
More information on the hydro portfolio and the gas fired energy
centres can be found in the Investment Manager's review on pages34
to 41.
Share Capital
As at 29 February 2020 the Company's issued share capital
amounted to 23,448,013, consisting of 9,951,133 A Shares of 1p
each, 6,805,351 B shares of 1p each and 6,691,529 Venture Shares of
1p each. As at that date none of the issued shares were held by the
Company as treasury shares.
There are no restrictions on the transfer of securities in the
Company other than the Group's Share Dealing Code and other certain
restrictions which may be impaired by law, for example, the Market
Abuse Regulation.
The Company is not aware of any agreements between holders of
securities that may result in restrictions on transferring
securities in the Company. There are no securities of the Company
carrying special rights with regards to the control of the Company
in issue.
Annual General Meeting
Notice of the 2020 annual general meeting to be held on 9 July
2020 is set out at the end of the Annual Report to Shareholders
along with the explanatory notes on the resolutions.
Amendment of Articles of Association
The Company's articles of association may be amended by the
members of the Company by special resolution (requiring a majority
of at least 75% of the persons voting on the relevant
resolution).
Appointment and Replacement of Directors
A person may be appointed as a Director of the Company by the
Shareholders in general meeting by ordinary resolution (requiring a
simple majority of the persons voting on the relevant resolution)
or by the Directors. No person, other than a Director retiring by
rotation or otherwise, shall be appointed or re-appointed a
Director at any general meeting unless he is recommended by the
Directors or, not less than seven nor more than 42 clear days
before the date appointed for the meeting, notice is given to the
Company of the intention to propose that person for appointment or
re-appointment in the form and manner set out in the Company's
articles of association.
Each Director who is appointed by the Directors (and who has not
been elected as a Director of the Company by the members at a
general meeting held in the interval since his appointment as a
Director of the Company) is to be subject to election as a Director
of the Company by the members at the first Annual General Meeting
of the Company following his or her appointment. Thereafter all
Directors are subject to re-election at each Annual General Meeting
of the Company.
A person also ceases to be a Director if he or she resigns in
writing, ceases to be a Director by virtue of any provision of the
Companies Act, becomes prohibited by law from being a Director,
becomes bankrupt or is the subject of a relevant insolvency
procedure, or becomes of unsound mind, or if the Board so decides
following at least six months' absence without leave or if he or
she becomes subject to relevant procedures under the mental health
laws, as set out in the Company's articles of association.
Powers of the Directors
Subject to the provisions of the Companies Act, the memorandum
and articles of association of the Company and any directions given
by Shareholders by special resolution, the articles of association
specify that the business of the Company is to be managed by the
Directors, who may exercise all the powers of the Company, whether
relating to the management of the business or not.
Conflicts of Interests
The Directors review the disclosure of conflicts of interest
quarterly, with changes reviewed and noted at the beginning of each
Board meeting. A Director who has a potential conflict of interest
has the interest authorised and acknowledged by the Board.
Procedures to disclose and authorise conflicts have been adhered to
throughout the year.
Directors' Responsibilities
The Directors confirm that:
-- So far as each of the Directors is aware there is no relevant
audit information of which the Company's auditor is unaware;
and
-- The Directors have taken all steps that they ought to have
taken as Directors in order to make themselves aware of any
relevant audit information and to establish that the auditor is
aware of that information.
Auditor
BDO LLP is the appointed auditor of the Company and offer
themselves for reappointment. In accordance with section 489 (4) of
the Companies Act 2006 a resolution to reappoint BDO LLP as auditor
and to authorise the Directors to fix their remuneration will be
proposed at the forthcoming Annual General Meeting.
Going Concern
After making the necessary enquiries, the Directors confirm that
they are satisfied that the Company has adequate resources to
continue in business for at least the next 12 months. The Board
receives regular reports from the Investment Manager and the
Directors believe that, as no material uncertainties leading to
significant doubt about going concern have been identified, it is
appropriate to continue to apply the going concern basis in
preparing the Financial Statements.
Annual Report
The Board is of the opinion that the Annual Report, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for Shareholders to assess the position,
performance, strategy and business model of the Company.
The Board recommends that the Annual Report, the Report of the
Directors and the Independent Auditor's Report for the year ended
29 February 2020 are received and adopted by the Shareholders. A
resolution concerning this will be proposed at the forthcoming
Annual General Meeting.
VCT Regulation
The Investment Policy is designed to ensure that the Company
continues to qualify and is approved as a VCT by HMRC. In order to
maintain its status under Venture Capital Trust legislation, a VCT
must comply on a continuing basis with the provisions of section
274 of the Income Tax Act 2007 as follows:
(1) The Company's income must be derived wholly or mainly from
shares and securities;
(2) At least 80% of the HMRC value of its investments must have
been represented throughout the year by shares or securities that
are classified as "qualifying holdings". This increased from 70%
from 1 March 2020;
(3) At least 70% by HMRC value of its total qualifying holdings
must have been represented throughout the year by holdings of
"eligible share". Investments made before 6 April 2018 from funds
raised before 6 April 2011 are excluded from this requirement;
(4) At least 30% of funds raised in accounting periods beginning
on or after 6 April 2018 must be invested in qualifying holdings by
the anniversary of the end of the accounting period in which funds
were raised;
(5) At the time of investment, or addition to an investment, the
Company's holdings in any one company must not have exceeded 15% by
HMRC value of its investments;
(6) The Company must not have retained greater than 15% of its
income earned in the year from shares and securities;
(7) The Company's shares, throughout the year, must have been
listed on a regulated European market;
(8) An investment in any company must not cause that company to
receive more than GBP5 million in State aid risk finance in the 12
months up to date of the investment, nor more than GBP12 million in
total (the limits are GBP10 million and GBP20 million respectively
for a "knowledge intensive" company);
(9) The Company must not invest in a company whose trade is more
than seven years old (ten years for a "knowledge intensive"
company) unless the company previously received State and risk
finance in its first seven years, or the company is entering a new
market and a turnover test is satisfied;
(10) The Company's investment in another company must not be
used to acquire another business, or shares in another company;
and
(11) The Company may only make qualifying investments or certain
non-qualifying investments permitted by section 274 of the Income
Tax Act 2007.
Environment
The management and administration of the Company is undertaken
by the Investment Manager. TPIM recognises the importance of its
environmental responsibilities, monitors its impact on the
environment, and designs and implements policies to reduce any
damage that might be caused by its activities. Initiatives designed
to minimise the Company's impact on the environment include
recycling and reducing energy consumption.
Anti-bribery Policy
The Company has a zero tolerance approach to bribery, and will
not tolerate bribery under any circumstances in any transaction the
Company is involved in.
TPIM reviews the anti-bribery policies and procedures of all
portfolio companies.
Environmental, Social, Employee and Human Rights Issues
As an externally managed investment company with no employees
the Company does not maintain specific policies in relation to
these matters. Due to the nature of the Company's activities, there
being no employees and only 3 Non-Executive Directors, there are no
Human Rights issues to report. Its' investment in companies engaged
in energy generation from renewable sources means it will
contribute to the reduction in carbon emissions.
Diversity
The Board of Directors comprises one female and two male
Directors.
The Company is an externally managed Investment Company which
does not have any employees or office space. As such the Company
does not operate a diversity policy with regards to any
administrative, management and supervisory functions.
Employees
The Company has no employees and accordingly no requirement to
separately report on this area.
The Investment Manager is an equal opportunities employer who
respects and seeks to empower each individual and the diverse
cultures, perspectives, skills and experiences within its
workforce. The Investment Manager places great importance on
Company culture and the wellbeing of its employees and considers
various initiatives and events to ensure a positive work
environment.
Investment and Co-Investment
The Company co-invests with other venture capital trusts and
funds managed by TPIM.
Matters Covered in the Strategic Report
The information that fulfils the reporting requirements relating
to the following matters can be found on the pages identified.
Matter Page Reference
Future Developments 7 to 16
----------------
Jane Owen
Chairman
21 May 2020
Directors' Responsibility Statement
The Directors are responsible for preparing the Strategic
Report, the Directors' Report, the Directors' Remuneration Report
and the Financial Statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law the Directors
have elected to prepare the Financial Statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union. 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 and profit
or loss of the Company for that year. In preparing these Financial
Statements, the Directors are required to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgments and accounting estimates that are reasonable and prudent;
-- State whether applicable IFRS have been followed, subject to
any material departures disclosed and explained in the Financial
Statements; and
-- Prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Financial Statements and the Remuneration Report comply with
the Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors are responsible for preparing the Annual Report in
accordance with applicable law and regulations. The Directors
consider the Annual Report and the Financial Statements, taken as a
whole, provide the information necessary to assess the Company's
position, performance, business model and strategy and are fair,
balanced and understandable.
The Company's Financial Statements are published on the TPIM
website, www.triplepoint.co.uk. The maintenance and integrity of
this website is the responsibility of TPIM and not of the Company.
Legislation in the United Kingdom governing the preparation and
dissemination of Financial Statements may differ from legislation
in other jurisdictions.
To the best of our knowledge:
-- The Financial Statements, prepared in accordance with IFRSs
as adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company; and
-- The Strategic Report includes a fair review of the
development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties that it faces.
On behalf of the Board.
Jane Owen
Chairman
21 May 2020
Statement of Comprehensive Income
For the year ended 29 February 2020
29 February 2020 28 February 2019
------------------------------- -------------------------------
Note Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment income 4 727 - 727 711 - 711
Loss arising on the realisation
of investments during the
period - - - - - -
Gain arising on the revaluation
of investments at the period
end - 204 204 - 862 862
Investment return 727 204 931 711 862 1,573
--------- --------- --------- --------- --------- ---------
Investment management fees 5 272 90 362 135 45 180
Other expenses 6 247 10 257 166 12 178
519 100 619 301 57 358
--------- --------- --------- --------- --------- ---------
Profit before taxation 208 104 312 410 805 1,215
--------- --------- --------- --------- --------- ---------
Taxation 9 (20) 18 (2) (78) 11 (67)
Profit after taxation 188 122 310 332 816 1,148
--------- --------- --------- --------- --------- ---------
Other comprehensive income - - - - - -
Total comprehensive income 188 122 310 332 816 1,148
--------- --------- --------- --------- --------- ---------
Basic & diluted earnings per
share (pence)
A Share 10 2.03p 0.76p 2.79p 3.39p 3.95p 7.34p
B Share 10 0.98p 0.69p 1.67p (0.09p) 6.19p 6.10p
Venture Share 10 (1.25p) (0.04p) (1.29p) - - -
The total column of this statement is the Statement of
Comprehensive Income of the Company prepared in accordance with
International Financial Reporting Standards (IFRS). The
supplementary revenue return and capital columns have been prepared
in accordance with the Association of Investment Companies
Statement of Recommended Practice (AIC SORP) in so far as it does
not conflict with IFRS.
All revenue and capital items in the above statement derive from
continuing operations.
This Statement of Comprehensive Income includes all recognised
gains and losses.
The accompanying notes on pages 100 to 112 form an integral part
of these statements.
Balance Sheet
At 29 February 2020
Company No: 07324448
29 February 2020 28 February 2019
Note GBP'000 GBP'000
Non-current assets
Financial assets at fair value
through profit or loss 11 17,147 17,341
------------------ ------------------
Current assets
Receivables 13 499 1,052
Cash and cash equivalents 14 2,070 46
2,569 1,098
------------------ ------------------
Total assets 19,716 18,439
------------------ ------------------
Current liabilities
Payables and accrued expenses 15 347 135
Current taxation payable (1) 66
346 201
------------------ ------------------
Net assets 19,370 18,238
================== ==================
Equity attributable to equity
holders
Share capital 16 235 168
Share Premium 13,598 6,756
Share redemption reserve 2 -
Special distributable reserve 4,279 9,927
Capital reserve 1,257 1,135
Revenue reserve (1) 252
Total equity 19,370 18,238
================== ==================
Shareholders' funds
Net asset value per A Share 18 57.78p 110.49p
Net asset value per B Share 18 102.77p 106.10p
Net asset value per Venture
Share 18 99.01p -
The statements were approved by the Directors and authorised for
issue on 21 May 2020 and are signed on their behalf by:
Jane Owen
Chairman
21 May 2020
The accompanying notes on pages 100 to 112 form an integral part
of these statements.
Statement of Changes in Shareholders' Equity
For the year ended 29 February 2020
Capital Special
Issued Redemption Share Distributable Capital Revenue
Capital Reserve Premium Reserve Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Year ended 29
February
2020
Opening
balance 168 - 6,756 9,927 1,135 252 18,238
---------- ------------- ---------- --------------- ---------- ---------- ---------
Issue of share
capital 69 - 7,033 - - - 7,102
Cost of issue
of
shares - - (191) - - - (191)
Cancellation
of shares (2) 2 - - - (225) (225)
Dividends paid - - - (5,648) - (216) (5,864)
Transactions
with
owners 67 2 6,842 (5,648) - (441) 822
---------- ------------- ---------- --------------- ---------- ---------- ---------
Profit before
taxation - - - - 104 208 312
Taxation - - - - 18 (20) (2)
Profit after
taxation - - - - 122 188 310
Other -
comprehensive
income - - - - - -
Total
comprehensive
profit for
the period - - - - 122 188 310
---------- ------------- ---------- --------------- ---------- ---------- ---------
Balance at 29
February
2020 235 2 13,598 4,279 1,257 (1) 19,370
========== ============= ========== =============== ========== ========== =========
The Capital
Reserve
consists of:
Investment
holding
gains 1,386
Other realised losses (129)
1,257
----------
Year ended 28
February
2019
Opening
balance 168 - 16,683 - 319 293 17,463
---------- ------------- ---------- --------------- ---------- ---------- ---------
Cancellation
of Share
Premium - - (9,927) 9,927 - - -
Dividend Paid - - - - - (373) (373)
Transactions
with
owners - - (9,927) 9,927 - (373) (373)
---------- ------------- ---------- --------------- ---------- ---------- ---------
Profit after
taxation - - - - 816 332 1,148
Total
comprehensive
profit for
the period - - - - 816 332 1,148
---------- ------------- ---------- --------------- ---------- ---------- ---------
Balance at 28
February
2019 168 - 6,756 9,927 1,135 252 18,238
========== ============= ========== =============== ========== ========== =========
The Capital
Reserve
consists of:
Investment
holding
losses 1,182
Other realised losses (47)
1,135
----------
The capital reserve represents the proportion of Investment
Management fees charged against capital and realised/unrealised
gains or losses on the disposal/revaluation of investments. The
unrealised element of the capital reserve is not distributable.
The special distributable reserve was created on court
cancellation of the share premium account. Due to VCT rules, this
was not distributable until 1 March 2019. The revenue reserve,
realised capital reserve and special distributable reserve are
distributable by way of dividend.
At 29 February 2020 the total reserves available for
distribution are GBP4,149,000. This consists of the distributable
revenue reserve, the special distributable reserve net of the
realised capital loss.
Statement of Cash Flows
For the year ended 29 February 2020
Year ended Year ended
28 February
29 February 2020 2019
GBP'000 GBP'000
Cash flows from operating activities
Profit before taxation 312 1,215
Loss arising on the disposal of investments
during the period - -
(Gain) arising on the revaluation of investments
at the period end (204) (862)
Cash flow generated by operations 108 353
Decrease/(increase) in receivables 553 (273)
Increase in payables 212 15
Cash flows from operating activities 873 95
------------ -------------
Adjustment for non-cash items:
Foreign exchange (gain) (17) -
(Decrease) in taxation (68) (104)
Net cash flows from operating activities 788 (9)
------------ -------------
Cash flows from investing activities
Purchase of financial assets at fair value
through profit or loss (4,547) -
Disposal of financial assets at fair value
through profit or loss 4,961 75
Net cash flows from investing activities 414 75
------------ -------------
Cash flows from financing activities
Issue of shares 6,911 -
Short-term credit facility 875 -
Short-term credit facility repayment (875) -
Share buyback & cancellation (225) -
Dividends paid (5,864) (373)
Net cash flows from financing activities 822 (373)
------------ -------------
Net increase/(decrease) in cash and cash
equivalents 2,024 (307)
============ =============
Reconciliation of net cash flow to movements
in cash and cash equivalents
Cash and cash equivalents at 1 March 2019 46 353
Net increase/(decrease) in cash and cash
equivalents 2,024 (307)
-------------
Cash and cash equivalents at 29 February
2020 2,070 46
------------ -------------
The accompanying notes on pages 100 to 112 form an integral part
of these statements.
Unaudited Non-Statutory Analysis of - The A Share Fund
Statement of Comprehensive Year ended 29 February Year ended 28 February
Income 2020 2019
------------------------------- -------------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment income 526 - 526 629 - 629
Unrealised gain on
investments - 118 118 - 433 433
Investment return 526 118 644 629 433 1,062
Investment management
fees (154) (51) (205) (135) (37) (172)
Other expenses (130) - (130) (77) (12) (89)
Profit before taxation 242 67 309 417 384 801
Taxation (42) 10 (32) (79) 9 (70)
Profit after taxation 200 77 277 338 393 731
Profit and total comprehensive
income for the period 200 77 277 338 393 731
Basic and diluted
earnings per share 2.03p 0.76p 2.79p 3.39p 3.95p 7.34p
--------- --------- --------- ---------
Balance Sheet 29 February 2020 28 February 2019
GBP'000 GBP'000
Non-current assets
Financial assets at
fair value through
profit or loss 5,437 10,102
Current assets
Receivables 475 995
Cash and cash equivalents 2 3
477 998
Current liabilities
Payables (136) (36)
Corporation Tax (29) (69)
Net assets 5,749 10,995
Equity attributable to equity
holders 5,749 10,995
Net asset value per
share 57.78p 110.49p
Statement of Changes
in Shareholders' Equity
28 February
29 February 2020 2019
GBP'000 GBP'000
Opening Shareholders'
funds 10,995 10,637
Profit for the period 277 731
Dividend paid (5,523) (373)
Closing Shareholders'
funds 5,749 10,995
Unaudited Non-Statutory Analysis of - The A Share Fund
Investment Portfolio
29 February 2020 28 February 2019
Cost Valuation Cost Valuation
GBP'000 % GBP'000 % GBP'000 % GBP'000 %
Unquoted qualifying holdings 4,073 88.07 4,887 89.85 6,323 67.25 7,005 69.34
Non-Qualifying holdings 550 11.89 550 10.11 3,076 32.72 3,097 30.65
Financial assets at fair value
through profit or loss 4,623 99.96 5,437 99.96 9,399 99.97 10,102 99.97
Cash and cash equivalents 2 0.04 2 0.04 3 0.03 3 0.03
4,625 100.00 5,439 100.00 9,402 100.00 10,105 100.00
Qualifying Holdings
Unquoted
Hydroelectric Power
Green Highland Allt Choire
A Bhalachain (225) Ltd 30 0.65 36 0.66 30 0.32 35 0.35
Green Highland Allt Garbh Ltd - - - - 2,250 23.93 2,250 22.27
Green Highland Allt Ladaidh
(1148) Ltd 1,470 31.78 2,201 40.47 1,470 15.63 2,063 20.42
Green Highland Allt Luaidhe
(228) Ltd 855 18.49 1,037 19.07 855 9.09 958 9.48
Green Highland Allt Phocachain
(1015) Ltd 858 18.55 1,021 18.77 858 9.13 1,088 10.77
Green Highland Shenval Ltd 860 18.59 592 10.88 860 9.15 611 6.05
4,073 88.07 4,887 89.85 6,323 67.25 7,005 69.34
29 February 2020 28 February 2019
Cost Valuation Cost Valuation
Non-Qualifying Holdings GBP'000 % GBP'000 % GBP'000 % GBP'000 %
Unquoted
Hydroelectric Power
Green Highland Allt Choire
A Bhalachain (225) Ltd - - - - 3 0.03 3 0.03
Green Highland Allt Ladaidh
(1148) Ltd - - - - 30 0.32 30 0.30
Green Highland Allt Luaidhe
(228) Ltd - - - - 61 0.65 61 0.60
Green Highland Allt Phocachain
(1015) Ltd - - - - 2 0.02 3 0.03
SME Funding:
Hydroelectric Power
Broadpoint 2 Ltd* 550 11.89 550 10.11 550 5.85 550 5.44
Broadpoint 3 Ltd - - - - 1,005 10.69 1,005 9.95
Other
Funding Path Ltd - - - - 925 9.84 925 9.15
Modern Power Generation Ltd - - - - 500 5.32 520 5.15
550 11.89 550 10.11 3,076 32.72 3,097 30.65
*Following the reporting date, Broadpoint 2 Ltd repaid its
outstanding loan of GBP550,000 to the Company.
Unaudited Non-Statutory Analysis of - The B Share Fund
Statement of
Comprehensive Year ended 29 February Year ended 28 February
Income 2020 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment income 154 - 154 82 - 82
Unrealised gain
on investments - 55 55 - 429 429
Investment return 154 55 209 82 429 511
Investment management
fees (28) (9) (37) (41) (8) (49)
Other expenses (67) - (67) (48) - (48)
Profit/(loss)
before taxation 59 46 105 (7) 421 414
Taxation 5 2 7 1 2 3
Profit/(loss)
after taxation 64 48 112 (6) 423 417
Profit and total
comprehensive
income/(loss)
for the period 64 48 112 (6) 423 417
Basic and diluted
earnings/(loss)
per share 0.98p 0.69p 1.67p (0.09p) 6.19p 6.10p
Balance Sheet 29 February 2020 28 February 2019
GBP'000 GBP'000
Non-current assets
Financial assets
at fair value
through profit
or loss 6,625 7,239
Current assets
Receivables 4 57
Corporation Tax 7 3
Cash and cash equivalents 504 43
515 103
Current liabilities
Payables (144) (99)
Net assets 6,996 7,243
Equity attributable to equity holders 6,996 7,243
Net asset value per share 102.77p 106.10p
Statement of Changes
in Shareholders'
Equity
29 February 2020 28 February 2019
GBP'000 GBP'000
Opening Shareholders' funds 7,243 6,826
Share buyback & cancellation (18) -
Profit for the period 112 417
Dividend paid (341) -
Closing Shareholders' funds 6,996 7,243
Unaudited Non-Statutory Analysis of - The B Share Fund
Investment Portfolio
29 February 2020 28 February 2019
Cost Valuation Cost Valuation
GBP'000 % GBP'000 % GBP'000 % GBP'000 %
Unquoted qualifying holdings 5,100 77.16 5,620 78.83 5,100 74.97 5,513 75.71
Non-Qualifying holdings 1,005 15.21 1,005 14.10 1,660 24.40 1,726 23.70
Financial assets at fair
value through profit
or loss 6,105 92.37 6,625 92.93 6,760 99.37 7,239 99.41
Cash and cash equivalents 504 7.63 504 7.07 43 0.63 43 0.59
6,609 100.00 7,129 100.00 6,803 100.00 7,282 100.00
Qualifying Holdings
Unquoted
Gas Power
Distributed Generators
Ltd 3,200 48.41 3,582 50.24 3,200 47.04 3,472 47.68
Green Peak Generation
Ltd 1,900 28.75 2,038 28.59 1,900 27.93 2,041 28.03
5,100 77.16 5,620 78.83 5,100 74.97 5,513 75.71
29 February 2020 28 February 2019
Cost Valuation Cost Valuation
Non-Qualifying Holdings GBP'000 % GBP'000 % GBP'000 % GBP'000 %
Unquoted
SME Funding
Other
Modern Power Generation
Ltd - - - - 1,660 24.40 1,726 23.70
Hydroelectric Power
Broadpoint 3 Ltd 1,005 15.21 1,005 14.10 - - - -
1,005 15.21 1,005 14.10 1,660 24.40 1,726 23.70
Unaudited Non-Statutory Analysis of - The Venture Fund
Statement of Comprehensive Year ended 29 February Year ended 28 February
Income 2020 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment income 47 - 47 - - -
Realised (loss) on
investments - - - - - -
Unrealised gain on
investments - 31 31 - - -
Investment return 47 31 78 - - -
Investment management
fees (104) (30) (134) - - -
Other expenses (36) (10) (46) - - -
Loss before taxation (93) (9) (102) - - -
Taxation 17 6 23 - - -
Loss after taxation (76) (3) (79) - - -
Loss and total comprehensive
loss for the period (76) (3) (79) - - -
Basic and diluted
loss per share (1.25p) (0.04p) (1.29p) - - -
Balance Sheet 29 February 2020 28 February 2019
GBP'000 GBP'000
Non-current assets
Financial assets at
fair value through
profit or loss 5,085 -
Current assets
Receivables 20 -
Corporation tax 23 -
Cash and cash equivalents 1,564 -
1,607 -
Current liabilities
Payables (67) -
Net assets 6,625 -
Equity attributable to
equity holders 6,625 -
Net asset value per
share 99.01p -
Statement of Changes
in Shareholders' Equity
29 February 2020 28 February 2019
GBP'000 GBP'000
Issue of new shares 6,911 -
Share buyback & cancellation (207) -
Loss for the period (79) -
Closing Shareholders'
funds 6,625 -
Unaudited Non-Statutory Analysis of - The Venture Fund
29 February 2020 28 February 2019
Cost Valuation Cost Valuation
GBP'000 % GBP'000 % GBP'000 % GBP'000 %
Unquoted qualifying holdings 4,547 69.09 4,590 69.03 - - - -
Non-Qualifying holdings 470 7.14 495 7.44 - - - -
Financial assets at fair
value through profit or
loss 5,017 76.23 5,085 76.48 - - - -
Cash and cash equivalents 1,564 23.77 1,564 23.52 - - - -
6,581 100.00 6,649 100.00 - - - -
Qualifying Holdings
Unquoted
Venture Investments
Striesen Holdings Pty
Ltd (t/a Adepto) 300 4.56 300 4.51 - - - -
Augnet Ltd 300 4.56 300 4.51 - - - -
MWS Technology Ltd 150 2.28 176 2.65 - - - -
Counting Ltd (t/a Counting
Up) 700 10.64 700 10.53 - - - -
Ably Real Time Ltd 500 7.60 500 7.52 - - - -
Heydoc Ltd 400 6.08 400 6.02 - - - -
Vyne Technologies Ltd 200 3.04 200 3.01 - - - -
Homelyfe Limited (t/a
Aventus) 500 7.60 500 7.52 - - - -
Digital Therapeutics Inc
(t/a Quit Genius) 698 10.61 702 10.56 - - - -
Adfenix AB 799 12.14 812 12.21 - - - -
4,547 69.09 4,590 69.03 - - - -
29 February 2020 28 February 2019
Cost Valuation Cost Valuation
GBP'000 % GBP'000 % GBP'000 % GBP'000 %
Non-Qualifying Holdings
Unquoted
Other
Modern Power Generation
Ltd 470 7.14 495 7.44 - - - -
470 7.14 495 7.44 - - - -
Notes to the Financial Statements
1. Corporate Information
The Financial Statements of the Company for the year ended 29
February 2020 were authorised for issue in accordance with a
resolution of the Directors on 21 May 2020.
The Company applied for listing on the London Stock Exchange on
24 December 2010.
Triple Point VCT 2011 plc is incorporated and domiciled in Great
Britain and registered in England and Wales. The address of the
Company's registered office, which is also its principal place of
business, is 1 King William Street, London, EC4N 7AF.
The Company is required to nominate a functional currency, being
the currency in which the Company predominately operates. The
functional and reporting currency is pounds sterling (GBP),
reflecting the primary economic environment in which the Company
operates.
The principal activity of the Company is investment. The
Company's investment strategy is to offer combined exposure to cash
or cash-based funds and venture capital investments focused on
companies with contractual revenues from financially secure
counterparties.
2. Basis of Preparation and Accounting Policies
Basis of Preparation
After making the necessary enquiries, the Directors confirm that
they are satisfied that the Company has adequate resources to
continue in business for at least 12 months from the date of
approval of the financial statements. The Board receives regular
reports from the Investment Manager and the Directors believe that,
as no material uncertainties leading to significant doubt about
going concern have been identified, it is appropriate to continue
to apply the going concern basis in preparing the Financial
Statements. The impact of COVID-19 has been considered, more detail
on these considerations can be found under the Principal Risks and
Uncertainties section on page 24. This is also discussed in the
Chairman's Statement on page 7 and 14, the going concern statement
on page 26 and note 23 to financial statements.
At the Balance Sheet date, the Company had a cash Balance of
GBP2.07million. Following the period end, the Company has also
raised further capital of circa GBP4.64 million. Whilst 30% of this
new fund raise needs to be deployed in 12 months under VCT
legislation, this still leaves the Company a sufficient cash
runway. Other than Investment Management fees & dividends, the
Company has a low level of non-discretionary cash outflows. Should
cash flow come under pressure, the Company has the option to
suspend dividends and negotiate deferral of investment management
fees. On this basis, the Directors believe the going concern basis
is and continues to be appropriate.
The Financial Statements of the Company for the year to 29
February 2020 have been prepared in accordance with International
Financial Reporting Standards ("IFRS") adopted for use in the
European Union and comply with the Statement of Recommended
Practice: "Financial Statements of Investment Trust Companies and
Venture Capital Trusts" (SORP) issued by the Association of
Investment Companies (AIC) in October 2019.
The Financial Statements are prepared on a historical cost basis
except that investments are shown at fair value through profit or
loss ("FVTPL").
The preparation of Financial Statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and the reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
various other factors believed to be reasonable under the
circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ
from these judgements.
The judgements, estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities relate to:
-- The valuation of unlisted financial investments held at fair
value through profit or loss, which are valued on the basis noted
below (under the heading Non-Current Asset Investments) and in note
10;
-- The recognition or otherwise of accrued income on loan notes
and similar instruments granted to investee companies, which are
assessed in conjunction with the overall valuation of unlisted
financial investments as noted above; and
-- The previously uncharged investment management fees, which
are discussed further below in note 5 and note 19.
The key judgements made by Directors are in the valuation of
non-current assets and the assessment of realised losses. The
estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects
that period or in the period of revision and future periods if the
revision affects both current and future periods. The carrying
value of investments is disclosed in note 10.
The Directors do not believe that there are any further key
judgements made in applying accounting policies or estimates in
respect of the Financial Statements.
These Financial Statements have been prepared in accordance with
the accounting policies set out below which are based on the
recognition and measurement principles of IFRS in issue as adopted
by the European Union (EU).
These accounting policies have been applied consistently in
preparing these Financial Statements.
New and amended standards and interpretations applied
There were no new standards or interpretations effective for the
rst time for periods beginning on or after 1 January 2019 that had
a signi cant effect on the Company's nancial statements.
Furthermore, none of the amendments to standards that are effective
from that date had a signi cant effect on the nancial
statements.
IFRS 16 "Leases" was issued and became effective for accounting
periods beginning on or after 1 January 2019. As the Company's
investments are held at fair value through pro t or loss and any
operating leases are held at SPV level, the introduction of IFRS 16
has had no impact on the reported results and nancial position of
the Company.
New and amended standards and interpretations not applied
Other accounting standards and interpretations have been
published and will be mandatory for the Company's accounting
periods beginning on or after 1 January 2020 or later periods. The
impact of these standards is not expected to be material to the
reported results and nancial position of the Company.
Presentation of Statement of Comprehensive Income
In order better to reflect the activities of a Venture Capital
Trust, and in accordance with the guidance issued by the
Association of Investment Companies, supplementary information
which analyses the Statement of Comprehensive Income between items
of a revenue and capital nature has been presented alongside the
Income Statement.
The Company had no external debt at the reporting date;
consequently, all capital is represented by the value of share
capital, distributable and other reserves. Total shareholder equity
at 29 February 2020 was GBP19.37 million (2019: GBP18.24
million).
Non-Current Asset Investments
The Company invests in financial assets with a view to profiting
from their total return through income and capital growth. These
investments are managed, and their performance is evaluated on a
fair value basis in accordance with the investment policy detailed
in the Strategic Report on page 17 to 18 and information about the
portfolio is provided internally on that basis to the Company's
Board of Directors. Accordingly, upon initial recognition the
investments are classified by the Company as "at fair value through
profit or loss" in accordance with IFRS 9.
They are included initially at fair value, which is taken to be
their cost (excluding expenses incidental to the acquisition which
are written off in the Statement of Comprehensive Income and
allocated to "capital" at the time of acquisition). Subsequently
the investments are valued at "fair value" which is the price that
would be received to sell an asset or paid to transfer a liability
(exit price) in an orderly transaction between market participants
at the measurement date.
This is measured as follows:
-- Unlisted investments are fair valued by the Directors in
accordance with the International Private Equity and Venture
Capital Valuation Guidelines. Fair value is established by using
measurements of value such as discounted cash flows and initial
cost of investment.
The Board believe that those investments valued based on the
transaction price are done so because the transaction price is
still representative of fair value.
Where securities are classified upon initial recognition at fair
value through profit or loss, gains and losses arising from changes
in fair value are included in the Statement of Comprehensive Income
for the year as capital items in
accordance with the AIC SORP 2019. The profit or loss on
disposal is calculated net of transaction costs of disposal.
Investments are recognised as financial assets on legal
completion of the investment contract and are de-recognised on
legal completion of the sale of an investment.
The Company has taken the exemption permitted by IAS 28
"Investments in Associates and Joint Ventures" and IFRS11"Joint
Arrangements" for entities similar to investment entities and
measures its investments in associates and joint ventures at fair
value. The Directors consider an associate to be an entity over
which the Group has signi cant in uence, through an ownership of
between 20% and 50%. The Group's associates and joint ventures are
disclosed in note 12.
Income
Investment income includes interest earned on bank balances and
investment loans and includes income tax withheld at source.
Dividend income is shown net of any related tax credit and is
brought into account on the ex-dividend date.
Fixed returns on investment loans and debt are recognised on a
time apportionment basis so as to reflect the effective yield,
provided there is no reasonable doubt that payment will be received
in due course.
Expenses
All expenses are accounted for on the accruals basis. Expenses
are charged to revenue with the exception of the investment
management exit fee which has been charged to the capital account
and the investment management fee which has been charged 75% to the
revenue account and 25% to the capital account to reflect, in the
Directors' opinion, the expected long-term split of returns in the
form of income and capital gains respectively from the investment
portfolio.
The Company's general expenses are split between the Share
Classes using the net asset value of each Share Class divided by
the total net asset value of the Company.
Taxation
Corporation tax payable is applied to profits chargeable to
corporation tax, if any, at the current rate in accordance with IAS
12 "Income Taxes". The tax effect of different items of income/gain
and expenditure/loss is allocated between capital and revenue on
the "marginal" basis as recommended by the AIC SORP 2014.
In accordance with IAS 12, deferred tax is recognised using the
balance sheet method providing for temporary differences between
the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. A
deferred tax asset is recognised to the extent that it is probable
that future taxable profits will be available against which the
temporary difference can be utilised. Deferred tax is measured at
the tax rates that are expected to be applied to the temporary
differences when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date. The
Directors have considered the requirements of IAS 12 and do not
believe that any provision should be made.
Financial Instruments
The Company's principal financial assets are its investments and
the accounting policies in relation to those assets are set out
above. Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements
entered.
An equity instrument is any contract that evidences a residual
interest in the assets of the entity after deducting all of its
financial liabilities.
Where the contractual terms of share capital do not have any
terms meeting the definition of a financial liability then this is
classed as an equity instrument.
Financial assets and financial liabilities are recognised in the
Company's Statement of Financial Position when the Company becomes
a party to the contractual provisions of the instrument. At 29
February 2020 and 28 February 2019 the carrying amounts of cash and
cash equivalents, receivables, payables, accrued expenses and
short-term borrowings reflected in the financial statements are
reasonable estimates of fair value in view of the nature of these
instruments or the relatively short period of time between the
original instruments and their expected realisation.
Financial Assets
The classi cation of nancial assets at initial recognition
depends on the purpose for which the nancial asset was acquired and
its characteristics. All nancial assets are initially recognised at
fair value. All purchases of nancial assets are recorded at the
date on which the Company became party to the contractual
requirements of the nancial asset.
The Company's nancial assets principally comprise of investments
held at fair value through pro t or loss and loans and
receivables.
Investments are designated upon initial recognition as held at
fair value through pro t or loss. Gains or losses resulting from
the movement in fair value are recognised in the Statement of
Comprehensive Income at each valuation date.
The Company's loan and equity investments are held at fair value
through pro t or loss. Gains or losses resulting from the movement
in fair value are recognised in the Company's Statement of
Comprehensive Income at each valuation date.
Financial assets are recognised/derecognised at the date of the
purchase/disposal. Investments are initially recognised at cost,
being the fair value of consideration given. Transaction costs are
recognised in the Consolidated Statement of Comprehensive Income as
incurred.
Fair value is de ned as the amount for which an asset could be
exchanged between knowledgeable willing parties in an arm's length
transaction. Fair value is calculated on an unlevered, discounted
cash ow basis in accordance with IFRS 13 and IFRS 9.
Derecognition of nancial assets (in whole or in part) takes
effect:
-- When the Group has transferred substantially all the risks
and rewards of ownership; or
-- When it has neither transferred or retained substantially all
the risks and rewards and when it no longer has control over the
assets or a portion of the asset; or
-- When the contractual right to receive cash ow has
expired.
Financial liabilities
Financial liabilities are classi ed according to the substance
of the contractual agreements entered into and are recorded on the
date on which the Company becomes party to the contractual
requirements of the nancial liability.
All loans and borrowings are initially recognised at cost, being
fair value of the consideration received, less issue costs where
applicable. After initial recognition, all interest-bearing loans
and borrowings are subsequently measured at amortised cost using
the effective interest rate method.
Although not appropriate for this reporting date, loan balances
at the year-end would not usually be discounted to re ect amortised
cost, as the amounts would not usually be materially different from
the outstanding balances.
The Company's other nancial liabilities measured at amortised
cost include trade and other payables which are initially
recognised at fair value and subsequently measured at amortised
cost using the effective interest rate method.
A nancial liability (in whole or in part) is derecognised when
the Group has extinguished its contractual obligations, it expires
or is cancelled. Any gain or loss on derecognition is taken to the
Consolidated Statement of Comprehensive Income.
Issued Share Capital
A Shares, B Shares and Venture Shares are classified as equity
because they do not contain an obligation to transfer cash or
another financial asset.
Issue costs associated with the allotment of shares have been
deducted from the share premium account in accordance with IAS
32.
Cash and Cash Equivalents
Cash and cash equivalents representing cash available at less
than 3 months' notice are classified as loans and receivables at
amortised cost under IFRS 9.
Reserves
The revenue reserve (retained earnings) and capital reserve
reflect the guidance in the AIC SORP 2014. The capital reserve
represents the proportion of Investment Management fees charged
against capital and realised/unrealised gains or losses on the
disposal/revaluation of investments. The unrealised capital reserve
is not distributable.
The special distributable reserve was created on court
cancellation of the share premium account and has been available
for distribution since 1 March 2019.
The revenue reserve, realised capital reserve and special
distributable reserve are distributable by way of dividend.
Foreign currencies
Transactions in foreign currencies are translated at the foreign
exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies at the reporting date are translated at the foreign
exchange rate ruling at that date. Foreign exchange differences
arising on translation are recognised in the Statement of
Comprehensive Income.
Dividends
Dividends payable are recognised as distributions in the nancial
statements when the Company's obligation to make payment has been
established.
3. Segmental Reporting
The Directors are of the opinion that the Company only has a
single operating segment of business, being investment
activity.
All revenues and assets are generated and held in the UK.
4. Investment Income
Year ended 29 February 2020 Year ended 28 February 2019
Venture Venture
A Shares B Shares Shares Total A Shares B Shares Shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Interest
receivable
on bank balances 1 1 31 33 1 - - 1
Loan interest 502 66 16 584 628 82 - 710
Dividend income 23 87 - 110 - - - -
526 154 47 727 629 82 - 711
Disclosure by share class is unaudited.
5. Investment Management Fees
TPIM provides investment management and administration services
to the Company under an Investment Management Agreement effective
23 September 2010 and a deed of variation to that agreement
effective 14 September 2018.
A Shares: The agreement provides for an investment management
fee of 2.00% per annum of net assets payable quarterly in arrear
for A Shares. For A Shares, the appointment shall continue for a
period of at least 6 years from the admission of those shares.
B Shares: The agreement provides for an investment management
fee of 1.90% per annum of net assets payable quarterly in arrear
for B Shares. For B Shares, the appointment shall continue for a
period of at least 6 years from the admission of those shares.
Venture: The agreement provides for an investment management fee
of 2.00% per annum of net assets payable quarterly in arrear for
Venture Shares. For Venture Shares, the appointment shall continue
for a period of at least 6 years from the admission of those
shares.
Following a deed of variation to the Investment Management
agreement, dated 14 September 2018. An administration fee equal to
0.25% of the Company's NAV replaces the previously charged
GBP37,500 per annum.
Year ended 29 February 2020 Year ended 28 February 2019
Venture Venture
A Shares B Shares Shares Total A Shares B Shares Shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment
Management
Fees 205 37 120 362 147 33 - 180
TPIM agreed not to charge their management fees for the A share
class for the financial year ending 28 February 2018, to build up
distributable reserves improving the ability of the share class to
make dividend payments. The amount waived during the 2018 financial
year was GBP206,400.
Subject to performance of the A Share Class, these fees may be
recovered by TPIM.
TPIM agreed not to charge their management fees from 1 January
2017 on the amounts invested in gas power projects, which
represents circa 75% of the B Share Class NAV, until these
investments started to generate income. These fees continue not to
be accrued.
The total fee waived to date for the B Share Class is
GBP526,000.
Subject to performance of the B Share Class and in the event of
a successful disposal of B Share Assets, these fees may be
recovered by TPIM.
Fees paid to the Investment Manager for administrative and other
services during the year was GBP55,000 (2019: GBP41,000).
The Investment Manager also received fees of GBPNil (2019:
GBPNil) for services provided to investee companies.
6. Operating Expenses
All expenses are accounted for on an accruals basis.
Expenses are charged wholly to revenue, apart from management
fees which are charged 25% to capital and 75% to revenue, any
performance fees incurred are charged wholly to capital.
Transaction costs incurred when selling assets are written off to
the Income Statement in the period that they occur.
Operating expenses Year ended Year ended
29 February 2020 28 February 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial and regulation
costs 30 - 30 26 - 26
General administration 76 - 76 49 - 49
Fees payable to the Company's
auditor for audit services 25 - 25 24 - 24
Fees payable to the Company's
auditor for other services 6 - 6 - - -
Company secretarial services 9 - 9 8 - 8
Other professional fees 24 10 34 11 12 23
Directors fees 59 - 59 48 - 48
Financing costs 1 - 1 - - -
Interest write-off 34 - 34 - - -
Foreign exchange (gains) (17) - (17) - - -
247 10 257 166 12 178
The ongoing charges ratio for the Company for the year to 29
February 2020 was 2.74% (2019: 2.03%). Total annual running costs
are capped at 3.5% of the Company's net assets.
TP11's annual running costs will continue to be capped at 3.5%
of NAV (excluding any arrangement fees (including any fees paid to
the Triple Point Venture Network) and also any performance fees
payable to Triple Point). Any excess will be met by Triple Point by
way of a reduction in future management fees.
7. Legal and Professional Fees
Legal and professional fees include remuneration paid to the
Company's auditor, BDO LLP as shown in the following table:
Year ended 29 February 2020 Year ended 28 February 2019
Venture Venture
A Shares B Shares Shares Total A Shares B Shares Shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fees payable to the Company's
auditor:
for the audit
of the Financial
Statements 11 7 7 25 12 8 - 20
other services - - 6 6 - - - -
11 7 13 31 12 8 - 20
During the year, BDO LLP were appointed to perform certain
agreed-upon procedures with regards to the Net asset value of the
Venture fund as at 31 January 2020, as part of the board's
consideration of the appropriateness of the issue price for the
most recent Venture Fund allotment.
VAT has been removed from the Audit fees and allocated to
General Administration expenses.
Disclosure by share class is unaudited.
8. Directors' Remuneration
Year ended 29 February 2020 Year ended 28 February 2019
Venture Venture
A Shares B Shares Shares Total A Shares B Shares Shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Jane Owen 9 8 6 23 11 7 - 18
Chad Murrin 8 5 5 18 9 6 - 15
Tim Clarke 8 5 5 18 9 6 - 15
25 18 16 59 29 19 - 48
The only remuneration received by the Directors was their
Directors' fees. The Company has no employees other than the
Non-Executive Directors. The average number of Non-Executive
Directors in the year was three. Full disclosure of Directors'
remuneration is included in the Directors' Remuneration report.
9. Taxation
Year ended 29 February 2020 Year ended 28 February 2019
Venture Venture
A Shares B Shares Shares Total A Shares B Shares Shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Profit/(loss) on
ordinary
activities
before tax 309 105 (92) 322 801 414 - 1,215
Corporation tax @
19% 59 20 (18) 61 156 79 - 235
Effect of:
Utilisation of tax
losses brought
forward - - - - - - - -
Capital (gains)
not
taxable (22) (10) (6) (38) (82) (82) - (164)
Dividends received
not taxable (4) (17) - (21) - - - -
Disallowed
expenditure - - 1 1 - - - -
Unrelieved tax
losses
arising in the
year - - - - (4) - - (4)
Tax
charge/(credit)
for the period 33 (7) (23) 3 70 (3) - 67
Capital gains and losses are exempt from corporation tax due to
the Company's status as a Venture Capital Trust.
10. Earnings per Share
The earnings per A Share is 2.79p (2019: 7.34p) and is based on
a profit from ordinary activities after tax of GBP277,805 (2019:
GBP730,417) and on the weighted average number of A Shares in issue
during the period of 9,951,133 (2019: 9,951,133).
The earnings per B Share is 1.67p (2019: 6.10p) and is based on
a profit from ordinary activities after tax of GBP112,297 (2019:
GBP416,563) and on the weighted average number of B Shares in issue
during the period of 6,818,891 (2019: 6,824,266).
The loss per Venture Share is 1.29p (2019: Nil) and is based on
a loss from ordinary activities after tax of GBP78,137 (2019:
GBPNil) and on the weighted average number of Venture Shares in
issue during the period of 6,050,762 (2019: Nil).
11. Financial Assets at Fair Value through Profit or Loss
Investments
Fair Value Hierarchy:
IFRS13 requires disclosure of fair value measurement by level.
The level of fair value hierarchy within the nancial assets or
nancial liabilities is determined on the basis of the lowest level
input that is signi cant to the fair value measurement.
Financial assets and nancial liabilities are classi ed in their
entirety into only one of the following 3 levels:
Level 1: quoted prices on active markets for identical assets or
liabilities. The fair value of financial instruments traded on
active markets is based on quoted market prices at the balance
sheet date. A market is regarded as active where the market in
which transactions for the asset or liability takes place with
sufficient frequency and volume to provide pricing information on
an ongoing basis. The quoted market price used for financial assets
held by the Company is the current bid price. These instruments are
included in level 1.
Level 2: the fair value of financial instruments that are not
traded on active markets is determined by using valuation
techniques. These valuation techniques maximise the use of
observable inputs including market data where it is available
either directly or indirectly and rely as little as possible on
entity specific estimates. If all significant inputs required to
fair value an instrument are observable, the instrument is included
in level 2.
Level 3: the fair value of financial instruments that are not
traded on an active market (for example, investments in unquoted
companies) is determined by using valuation techniques such as
discounted cash flows. If one or more of the significant inputs is
based on unobservable inputs including market data, the instrument
is included in level 3.
There have been no transfers between these classifications in
the period. Any change in fair value is recognised through the
Statement of Comprehensive Income.
The portfolio of the Company is classified as level 3 and
further details of the types of investments are provided in the
Investment Manager's Review and Investment Portfolio on pages 30,
53 and 54.
The Company's Investment Manager performs valuations of
financial items for financial reporting purposes, including level 3
fair values. Valuation techniques are selected based on the
characteristics of each instrument, with the overall objective of
maximising the use of market-based information.
Level 3 valuations include assumptions based on non-observable
data with the majority of investments being valued on discounted
cash flows or price of recent transactions.
Valuation techniques and unobservable
inputs:
Inter relationship
between significant
unobservable
Significant unobservable inputs and fair
Sector Valuation Techniques inputs value measurement
Estimated fair
value would increase/(decrease)
if:
Hydroelectric
Power * Discounted cash flows: The valuation model considers * Discount rate 6.75% * The discount rate was lower/(higher)
the present value of expected payment, discounted
using a risk-adjusted discount rate.
(2019: 7.25%)
* Inflation rate: OBR 5-year forecast,
2.75% long term. * The inflation rate was higher/(lower)
(2019: OBR 5-year forecast,
2.75% long term.)
Gas Power
* Discounted cash flows: The valuation model considers * Discount rate 10% * The discount rate was lower/(higher)
the present value of expected payment, discounted
using a risk-adjusted discount rate.
(2019: 8.5%)
* Inflation rate: OBR 5-year forecast,
2.75% long term. * The inflation rate was higher/(lower)
(2019: OBR 5-year forecast,
2.75% long term.)
For the Venture portfolio, the Directors do not consider there
to be reasonable alternative input assumptions that would have a
material impact on the valuations at 29 February 2020.
IPEV issued updated valuations guidance in December 2018 and
removed cost and price of recent investment as recognised primary
valuation methodologies. A handful of the Venture portfolio
investments remain valued at cost and in the Board's opinion,
having followed guidance in the IPEV guidelines, fair value is
deemed to still be represented by the price on the date of
transaction.
The Board considers the discount rates used reflect the current
levels of risk and life expectancy of the investments and to be in
line with Market expectations. However, consideration has been
given as to whether the effect of changing one or more inputs to
reasonably possible alternative assumptions would result in a
significant change to the fair value measurement. Each unquoted
portfolio company has been reviewed in order to identify the
sensitivity of the valuation methodology to using alternative
assumptions.
On this basis, where discount rates have been applied to the
unquoted investments, alternative discount rates have been
considered, an upside case and a downside case. For the upside
case, the assumptions were flexed 1% and for the downside scenarios
the assumptions were flexed by 0.5%. No sensitivity has been
performed on other key assumptions such as asset life and P50
because the Directors believe the asset life assumptions and
discount rate applied interact appropriately with one another to
give an appropriate valuation.
The two alternative scenarios for each investment have been
modelled with the resulting movements as follows:
Applying the downside alternative, the aggregate change in value
of the unquoted investments would be a reduction in the value of
the portfolio of GBP330,776 or 3.1%.
Using the upside alternative, the aggregate value of the
unquoted investments would be an increase of GBP710,640 or
6.7%.
It is considered that, due to the prudent selection of discount
rates by the board, the sensitivity discussed above provides the
most meaningful potential impact of the possible changes across the
portfolio.
Movements in investments held at fair value through the profit
or loss during the year to 29 February 2020 were as
follows:
Year ended 29 February 2020 Year ended 28 February 2019
Venture Venture
A Shares B Shares Shares Total A Shares B Shares Shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening Cost 9,399 6,760 - 16,159 9,474 6,760 - 16,234
Opening unrealised
gains 703 479 - 1,182 270 50 - 320
Opening fair value
at 1 March 2019 10,102 7,239 - 17,341 9,744 6,810 - 16,554
Purchases at cost - - 4,547 4,547 - - - -
Disposal proceeds (3,627) (1,334) - (4,961) (75) - - (75)
Transfers between
share classes (1,155) 665 490 - - - - -
Investment holding
gains 118 55 31 204 433 429 - 862
Closing fair value
at 29 February
2020 5,438 6,625 5,068 17,131 10,102 7,239 - 17,341
Closing cost 4,623 6,105 5,017 15,745 9,399 6,760 - 16,159
Closing investment
holding gains 815 520 68 1,403 703 479 - 1,182
All investments are designated as fair value through profit or
loss at the time of acquisition and all capital gains or losses
arising on investments are so designated. Given the nature of the
Company's venture capital investments, the changes in fair values
of such investments recognised in these Financial Statements are
not considered to be readily convertible to cash in full at the
balance sheet date and accordingly any gains or losses on these
items are treated as unrealised.
Further details of the types of investments are provided in the
Investment Manager's review and investment portfolio on pages 30,
53 and 54, and details of entities over which the VCT has
significant influence are included on page 108.
12. Unconsolidated, associates and joint ventures
The principal undertakings in which the Company's interest at
the year-end is 20% or more are as follows:
Name Registered address Holding
Broadpoint 2 Limited 1 King William Street, London, EC4N 7AF 49.00%
Distributed Generators
Limited 1 King William Street, London, EC4N 7AF 45.00%
Funding Path Limited 1 King William Street, London, EC4N 7AF 49.00%
Green Highland Shenval Q Court, 3 Quality Street, Edinburgh, EH4
Limited 5BP 22.09%
Green Peak Generation Q Court, 3 Quality Street, Edinburgh, EH4
Limited 5BP 41.67%
-- The investments are a combination of debt and equity.
-- Equity holding is equal to the voting rights.
-- All investments are held in the UK.
Disclosure by share class is unaudited.
13. Receivables
29 February 2020 28 February 2019
Venture Venture
A Shares B Shares Shares Total A Shares B Shares Shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Accrued income 52 - - 52 100 13 - 113
Prepaid expenses 7 4 4 15 3 2 - 5
Other debtors* 416 - 16 432 892 42 - 934
475 4 20 499 995 57 - 1,052
*Other debtors relate to interest receivable on investment
loans.
14. Cash and Cash Equivalents
Cash and cash equivalents comprise deposits with The Royal Bank
of Scotland plc and Cater Allen Private Bank.
15. Payables and Accrued Expenses
29 February 2020 28 February 2019
Venture Venture
A Shares B Shares Shares Total A Shares B Shares Shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade Creditors 112 129 52 293 18 88 - 106
Other taxation
and social
security 5 3 3 11 3 2 - 5
Accrued expenses
& deferred
income 19 12 12 43 15 9 - 24
136 144 67 347 36 99 - 135
Disclosure by share class is unaudited.
16. Share Capital
29 February 2020 28 February 2019
A Shares of GBP0.01 each
Issued & Fully Paid
Number of shares 9,951,133 9,951,133
Par Value GBP'000 100 100
B Shares of GBP0.01 each
Issued & Fully Paid
Number of shares 6,805,351 6,824,266
Par Value GBP'000 68 68
Venture Shares of GBP0.01 each
Issued & Fully Paid
Number of shares 6,691,529 -
Par Value GBP'000 67 -
Company Total Shares of GBP0.01
each
Issued & Fully Paid
Number of shares 23,448,013 16,775,399
Par Value GBP'000 235 168
During the year, the Company bought back and cancelled 18,915 B
Shares and 220,809 Venture Shares.
17. Financial Instruments and Risk Management
The Company's financial instruments comprise VCT qualifying
investments and non-qualifying investments, cash balances and
liquid resources including debtors and creditors. The Company holds
financial assets in accordance with its investment policy detailed
in the Strategic Report on pages 17 to18.
The Investment Manager reports to the Board on a quarterly basis
and provides information to the Board which allows it to monitor
and manage nancial risks relating to its operations. The Group's
activities expose it to a variety of nancial risks including market
risk (comprising price risk, interest rate risk and foreign
currency risk), credit risk and liquidity risk.
Fixed Asset Investments (see note 11) are valued at fair value.
Unquoted investments are carried at fair value as determined by the
Directors in accordance with current venture capital industry
guidelines. The fair value of all other financial assets and
liabilities is represented by their carrying value on the balance
sheet.
The Directors believe that where an investee company's
enterprise value, which is equivalent to fair value, remains
unchanged since acquisition that investment should continue to be
held at cost less any loan repayments received. Where they consider
the investee company's enterprise value has changed since
acquisition, that should be reflected by the investment being held
at a value measured using a discounted cash flow model or a recent
transaction price.
In carrying out its investment activities, the Company is
exposed to various types of risk associated with the financial
instruments and markets in which it invests. The Company's approach
to managing its risks is set out below together with a description
of the nature of the financial instruments held at the balance
sheet date.
The following table discloses the financial assets and
liabilities of the Company in the categories defined by IFRS 9,
"Financial Instruments".
Financial Fair value
Assets at Financial Liabilities through
amortised held at amortised profit or
Total value cost cost loss
GBP'000 GBP'000 GBP'000 GBP'000
Year ended 29 February
2020
Assets:
Financial assets at
fair value through profit
or loss 17,147 - - 17,147
Receivables 484 - - 484
Cash and cash equivalents 2,070 2,070 - -
19,701 2,070 - 17,631
Liabilities:
Other Payables 347 - 347 -
347 - 347 -
Year ended 28 February
2019
Assets:
Financial assets at
fair value through profit
or loss 17,341 - - 17,341
Assets held for sale - - - -
Receivables 774 - - 774
Cash and cash equivalents 46 46 - -
18,161 46 - 18,115
Liabilities:
Other Payables 120 - 120 -
120 - 120 -
Market Risk
The Company's VCT qualifying investments are held in small and
medium-sized unquoted investments which, by their nature, entail a
higher level of risk and lower liquidity than investments in large
quoted companies. The Directors and Investment Manager aim to limit
the risk attached to the portfolio as a whole by careful selection
and timely realisation of investments, by carrying out rigorous due
diligence procedures and by maintaining a spread of holdings in
terms of industry sector and geographical location.
The Board reviews the investment portfolio with the Investment
Manager on a regular basis. Details of the Company's investment
portfolio at the balance sheet date are set out on pages 53 to
54.
Interest Rate Risk
Some of the Company's financial assets are interest bearing, of
which some are at fixed rates and some at variable rates. As a
result, the Company is exposed to interest rate risk arising from
fluctuations in the prevailing levels of market interest rates.
Investments made into qualifying holdings are part equity and
part loan. The loan element of investments totals GBP2,730,900
(2018: GBP3,405,900) and is subject to fixed interest rates of
between 21.6% and 29.5% for between 5 - 20 years and, as a result,
there is no cash flow interest rate risk. As the loans are held in
conjunction with equity and are valued in combination as part of
the enterprise value, fair value risk is considered part of market
risk.
The Company also has non-qualifying loan investments of
GBP1,726,500 (2019: GBP3,305,000) which carry interest rates
between 7.75 and 13.5% for between 5 - 15 years.
The amounts held in variable rate investments at the balance
sheet date are as follows:
29 February 28 February
2020 2019
GBP'000 GBP'000
Cash on Deposit 2,070 46
2,070 46
An increase in interest rates of 1% per annum would not have a
material effect either on the revenue for the year or the net asset
value at 29 February 2020. The Board believes that in the current
economic climate a movement of 1% is reasonably possible.
Credit Risk
Credit risk is the risk that a counterparty will fail to
discharge an obligation or commitment that it has entered into with
the Company. The Investment Manager and the Board carry out a
regular review of counterparty risk. The carrying value of the
financial assets represent the maximum credit risk exposure at the
balance sheet date.
29 February 2020 28 February 2019
GBP'000 GBP'000
Non-Qualifying investment
loans 1,727 3,371
Qualifying investment loans 2,731 3,406
Cash on Deposit 2,070 46
Receivables* 484 1,047
7,012 7,870
* Receivables do not include prepayments.
The Company's loan to Broadpoint 3 Limited was due for repayment
on 28 February 2019. After discussions between the Board of the
Company and that of Broadpoint 3 Limited, it was agreed to extend
the due date on a rolling basis to be repayable on demand. Any
impact of this extension has been considered in deriving the fair
value of the instrument.
No other issues have been identified which would be cause for
concern with regards the quality of credit for any other investee
company.
The Company's bank accounts are maintained with The Royal Bank
of Scotland plc ("RBS") and Cater Allen private Bank. Should the
credit quality or financial position of RBS or Cater Allen
deteriorate significantly, the Investment Manager will move the
cash holdings to another bank.
Credit risk arising on unquoted loan stock held within unlisted
investments is considered to be part of Market risk as disclosed
above
Liquidity Risk
The Company's financial assets include investments in unquoted
equity securities which are not traded on a recognised stock
exchange and which are illiquid. As a result, the Company may not
be able to realise some of its investments in these instruments
quickly at an amount close to their fair value in order to meet its
liquidity requirements.
The Company's liquidity risk is managed on a continuing basis by
the Investment Manager in accordance with policies and procedures
laid down by the Board. The Company's overall liquidity risks are
monitored by the Board on a quarterly basis.
The Board maintains a liquidity management policy where cash and
future cash flows from operating activities will be sufficient to
pay expenses. At 29 February 2020 cash held by the Company amounted
to GBP2.07 million. The Company entered into a loan facility with
Triple Point Advancr Leasing plc during the year. The GBP800k
facility was still in place at the year-end but remained undrawn.
All amount drawn during the year were repaid in full.
Foreign Currency Risk
Foreign currency risk is de ned as the risk that the fair values
of future cash ows will uctuate because of changes in foreign
exchange rates. With the exception of Adfenix AB and Digital
Therapeutics Inc (t/a Quit Genius) whose
investment is denominated in Swedish Kroner ("SEK") and US
dollars ("USD") respectively the Company's nancial assets and
liabilities are denominated in GBP and with the exception of the
above substantially all of its revenues and expenses are in
GBP.
The Company does not consider the investments in Adfenix AB and
Digital Therapeutics Inc (t/a Quit Genius) to materially expose the
Company to foreign currency risk.
18. Net Asset Value per Share
The net asset value per share for the A Shares is 57.78p (2019:
110.49p) and is calculated based on net assets of GBP5,750,000
(2019: GBP10,638,000) divided by the 9,951,133 A Shares in
issue.
The net asset value per share for the B Shares is 102.77p (2019:
106.10p) and is calculated on net assets of GBP6,994,000 (2019:
GBP7,227,000) divided by the 6,805,351 B Shares in issue.
The net asset value per share for the Venture Shares is 99.01p
(2019: Nil) and is calculated based on net assets of GBP6,625,000
(2019: Nil) divided by the 6,691,529 Venture Shares in issue.
19. Commitments and Contingencies
As highlighted in note 5, the Investment Manager has waived
total management fees of GBP732,400 across the A and B Share
Classes.
Subject to the performance of the underlying investments and
proceeds received on any future disposals, the Investment Manager
may decide to charge these previously waived fees to the Company.
The likelihood of these outstanding fees being recovered is not
currently considered probable and therefore no provision has been
made.
20. Relationship with Investment Manager
During the period, TPIM received GBP416,949 (2019: GBP221,164)
(which has been expensed by the Company) for providing management
and administrative services to the Company.
The Investment Manager also charge GBP9,000 for the provision of
Company Secretarial services.
At the Balance Sheet date, the total fee which have been waived
by the Investment Manager stood at GBP732,400.
During the year, the Company entered into a facility agreement
with another Triple Point Managed entity, Triple Point Advancr
Leasing plc. The uncommitted and unsecured facility entered into
was for GBP800,000 at a fixed rate of 4% per annum. The facility
was put in place to manage working capital in the Venture Fund and
to avoid incurring penalties withdrawing funds on deposit to make
investments at short notice.
Interest of GBP1,466 was charged on amounts drawn during the
period.
21. Ultimate controlling party
In the opinion of the Board, on the basis of the shareholdings
advised to them, the Company has no ultimate controlling party.
22. Related Party Transactions
The Directors Remuneration Report on page 73 discloses the
Directors' remuneration and shareholdings.
There were no other related party transactions during the
period.
23. Post Balance Sheet Events
Following the balance sheet date, the Company allotted a further
6,038,330 shares into the Venture Share Class.
COVID-19
The Company has considered the Covid-19 pandemic, and the impact
that this will have on the investment portfolio.
The hydroelectric companies in the A Share Class benefit from
inflation linked contractual Feed in Tariff Income, and currently
have circa 16 years remaining on these contracts across the
companies. Alongside the FiT revenue stream, the companies have
recently signed up to a new 12-month fixed PPA with one of the "big
six" energy providers.
The revenue stack of the Hydro assets is weighted circa 75% FiT
and circa 25% Export, with a portion of the Export tariff being
made up by embedded benefits, which should not be affected by the
fall in energy prices. Consequently, we do not expect the
hydroelectric companies to be materially impacted by the current
volatility we are witnessing in the energy markets.
The most relevant risk exists in the supply chain for spare
parts and the availability of technicians to attend on site, should
this be restricted, if any of the companies require significant,
unexpected repair or maintenance work. This risk is considered to
be low and the NAV impact minimal.
It is expected that there will be a 10-20% drop in annualised
power consumption. This will be driven by reduced manufacturing and
heavy impact on the services industry. With many people working
from home and schools shut, people are less governed by routines
and strict adherence to times for commuting or the school run. This
has caused the typical morning electricity "peak" to flatten
out.
As a result, in this changing demand profile we have already
seen wholesale prices decline (carbon prices, power and gas). We
have seen spark-spreads (the gross-margin of a gas power plant from
selling a unit of electricity, having purchased the fuel required
to produce this unit of electricity) begin to narrow, although we
note that despite the changing demand profile, it still remains
highly profitable for the gas power assets to run during the
evening peak (the typical running hours for these assets).
Over the long-term industry experts believe these will revert to
historical norms and therefore we think this will have a minimal
impact on valuations.
The Investment Manager has been in close contact with all of our
Venture portfolio companies to understand their cash positions,
what steps they can take to reduce their monthly spending (if
necessary and appropriate), how their supply chains might be
impacted and what else Triple Point can do to support them.
Given that the Venture Fund is a relatively new share class, we
are still in the process of deploying funds. Our initial offer
closed in August 2019 and, to date, the portfolio has 10 investee
companies, (a further investment was made after the balance sheet
date, so the Venture Fund now has 11 investments) whilst our
current open fundraise is going well with c.45% of the offer
subscribed for. The Fund is currently c.55% in cash and cash
equivalents (this includes funds allotted post year-end), it is
well placed take advantage of any new opportunities arising from
the current difficult situation.
The average investee company cash runway is 14 months. This
means that most of our companies are in a good cash position to
manage through the current crisis. Whilst we expect to see a
short-term fall in valuations, as evidenced by the 1 and 3 April
2020 allotments, we believe that our portfolio companies are well
capitalised to navigate this crisis thus the valuations in the
medium to long-term should not be affected.
24. Dividend
A Share Class:
On 27 June 2019 a dividend of GBP398,045 equal to 4 pence per
share was paid to the A Class Shareholders.
On 29 November 2019 a dividend of GBP2,338,516 equal to 23.50
pence per share was paid to the A Class Shareholders.
On 28 February 2020 a dividend of GBP2,786,317 equal to 28 pence
per share was paid to the A Class Shareholders.
Total distributions to A Class Shareholders during the period
were GBP5,522,879.
The Board has resolved to pay a seventh dividend to A Class
Shareholders of GBP671,071 equal to 6.75p per share which will be
paid on 30 June 2020 to Shareholders on the register on 12 June
2020.
B Share Class:
On 27 June 2019 a dividend of GBP341,213 equal to 5 pence per
share was paid to the B Class Shareholders.
The Board has resolved to pay its second dividend to B Class
Shareholders of GBP341,213 equal to 5 pence per share which will be
paid on 30 June 2020 to Shareholders on the register on 12 June
2020.
Venture Share Class:
The Board has resolved to pay its first dividend to Venture
Class Shareholders of 3 pence per share which will be paid on 31
July 2020 to Shareholders on the register on 17 July 2020.
The ex-dividend date for the A & B Share dividends will be
11 June 2020. The ex-dividend date for the Venture Share dividends
will be 16 July 2020.
Forward looking statements
The Front Section of this report (including but not limited to
the Chairman's Statement, Strategic Report, Investment Manager's
Review and Report of the Directors) has been prepared to provide
additional information to Shareholders to assess the Company's
strategies and the potential for those strategies to succeed. These
should not be relied on by any other party or for any other
purpose.
The Review Section may include statements that are, or may be
deemed to be, "forward-looking statements". These forward-looking
statements can be identi ed by the use of forward-looking
terminology, including the terms "believes", "estimates",
"anticipates", "expects", "intends", "may", "will" or "should" or,
in each case, their negative or other variations or comparable
terminology.
These forward-looking statements include all matters that are
not historical facts. They appear in a number of places throughout
this document and include statements regarding the intentions,
beliefs or current expectations of the Directors and the Investment
Manager concerning, amongst other things, the investment objectives
and Investment Policy, nancing strategies, investment performance,
results of operations, nancial condition, liquidity, prospects, and
distribution policy of the Company and the markets in which it
invests.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future.
Forward-looking statements are not guarantees of future
performance. The Company's actual investment performance, results
of operations, nancial condition, liquidity, distribution policy
and the development of its nancing strategies may differ materially
from the impression created by the forward-looking statements
contained in this document.
Subject to their legal and regulatory obligations, the Directors
and the Investment Manager expressly disclaim any obligations to
update or revise any forward-looking statement contained herein to
re ect any change in expectations with regard thereto or any change
in events, conditions or circumstances on which any statement is
based.
In addition, the Review Section may include target gures for
future nancial periods. Any such gures are targets only and are not
forecasts. This Annual Report has been prepared for the Company as
a whole and therefore gives greater emphasis to those matters which
are signi cant in respect of Triple Point VCT 2011 plc.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SEWFIFESSELI
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May 21, 2020 11:54 ET (15:54 GMT)
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