REG - Triple Point Inc VCT - Annual Financial Report <Origin Href="QuoteRef">TPV1.L</Origin> - Part 1
RNS Number : 2322ITriple Point Income VCT PLC15 June 2017Triple Point Income VCT plc
LEI: 213800IXD8S5WY88L245
Final Results
Triple Point Income VCT plc managed by Triple Point Investment Management LLP today announces the final results for the year ended 31 March 2017.
These results were approved by the Board of Directors on 15 June 2017.
You may view the Annual Report in due course on the Triple Point website www.triplepoint.co.uk
Financial Summary
Year ended 31 March 2017
Year ended 31 March 2016
Ord. Shares
A Shares
C Shares
D Shares
Total
Ord. Shares
A Shares
C Shares
D Shares
Total
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
Net assets
13,573
2,179
14,314
14,413
44,479
13,175
2,118
14,118
13,875
43,286
Net asset value per share
69.74p
42.46p
106.49p
105.19p
n/a
67.69p
41.28p
105.03p
101.26p
n/a
Net profit before tax
429
73
957
652
2,111
729
(39)
807
377
1,874
Earnings per share
2.05p
1.18p
6.46p
3.93p
n/a
3.64p
(0.72p)
5.27p
2.19p
n/a
Cumulative return to shareholders (p)
Ord. Shares
A Shares
C Shares
D Shares
Net asset value per share
69.74
42.46
106.49
105.19
Dividends paid
25.56
56.20
5.00
-
Net asset value plus dividends paid
95.30
98.66
111.49
105.19
Triple Point Income VCT plc ("the Company") is a Venture Capital Trust ("VCT"). The Investment Manager is Triple Point Investment Management LLP ("TPIM" or "Triple Point").
Ordinary Shares: these are held by the shareholders that were in the Company prior to the merger on 21 November 2012; and by former TP70 2008(II) VCT plc shareholders; and shares that were held by the B Ordinary Shareholders which were converted to Ordinary Shares on 31 October 2013.
A Ordinary Shares: these are held by the former TP12(I) VCT plc shareholders prior to the merger on 21 November 2012.
C Ordinary Shares: these are the shares issued in the Offer that closed on 27 May 2014. A total of 14.0 million was raised and 13,441,438 C Shares were issued.
D Ordinary Shares: these are the shares issued in the Offer that closed on 30 April 2015. A total of 14.3 million was raised and 13,701,636 D Shares were issued.
Post Balance Sheet
E Ordinary Shares: During the year the Company's shareholders approved proposals for a new E Share Class offer ("the Offer"). At the year end no shares had been issued. The Offer closed on 15 May 2017 raising just under 30 million with a total of 28,949,575 E Shares being issued.
The Strategic Report on pages 2 to 23, the Directors' Report on pages 24 to 28, the Corporate Governance report on pages 29 to 33 and the Directors' Remuneration Report on pages 34 to 36 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 Income VCT plc.
The Directors submit to the members their Annual Report and Financial Statements for the Company for the year ended 31 March 2017.
Strategic Report
The Strategic Report, on pages 2 to 23, 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.
Chairman's Statement
I am writing to present the Financial Statements for the Company for the year ended 31 March 2017, a year which has seen appreciation in all share classes, in line with expectations.
Investment Portfolio
The Company's funds at 31 March 2017 are 94% invested in a portfolio of VCT qualifying and non-qualifying unquoted investments. It continues to meet the condition that 70% of funds must be invested in VCT qualifying investments within three years.
The Investment Manager's review on pages 13 to16 gives an update on the portfolio of investments in 20 small unquoted businesses.
Ordinary Share Class
The Ordinary Share Class has a diverse portfolio consisting of cinema digitisation, electricity generation, crematorium management and SME funding.
The Ordinary Share Class has recorded a profit over the period of 2.05p per share. As at 31 March 2017 the net asset value stood at 69.74p per share. Adding back the total dividends of 25.56p paid to Ordinary Class Shareholders takes the total return including net asset value to 95.30p per share, which compares to a weighted average share price at acquisition or conversion of 83.60p.
The Ordinary Share Class has built up a cash reserve of 1.6 million and as the minimum 5 year holding period will be reached in April 2018, the Board has resolved to pay a special dividend of 2.5p as well as the regular annual dividend of 5p. The dividend of 1,459,734 equal to 7.5p per share will be paid on 14 July 2017 to shareholders on the register on 30 June 2017.
A Share Class
April 2017 marked the end of the five year anniversary and in line with A Shareholders' expectations we are now focused on returning funds to investors as soon as possible. After the realisation of a substantial part of its portfolio in 2015 the remaining portfolio consists of three investments, two in landfill gas and one in an SME Funding company. The SME Funding company will be divested in June 2017; and the sale of the two landfill gas companies is expected to take place during the summer. As such the Board has resolved to pay a dividend to A Class Shareholders of 1,282,838 equal to 25p per share which will be paid on 14 July 2017 to shareholders on the register on 30 June 2017.
The A Share Class has recorded a profit over the period of 1.18p per share. As at 31 March 2017 the net asset value stood at 42.46p per share. Adding back the dividends paid to A Class Shareholders of 56.20p per share takes the total return including net asset value to 98.66p per share, which compares to a weighted average share price at conversion of 86.40p.
C Share Class
The C Share Class has investments in three companies in the Hydroelectric Power sector which between them own six hydroelectric schemes in the Scottish Highlands. All schemes have been successfully commissioned and are operating in line with expectations. The C Share Class has also invested in companies which provide SME funding in the Hydroelectric Power sector.
The C Share Class has recorded a profit over the period of 6.46p per share. At 31 March 2017 the net asset value stood at 106.49p per share. The Company paid its first dividend to C Class Shareholders of 672,072 equal to 5p per share on 8 July 2016. Adding back this dividend takes the total return including the net asset value to 111.49p per share.
The Board has resolved to pay a second dividend to C Class Shareholders of 672,072 equal to 5p per share which will paid on 14 July 2017 to shareholders on the register on 30 June 2017.
D Share Class
The D Share Class has investments in five companies in the Hydroelectric Power sector which between them own six hydroelectric schemes in the Scottish Highlands. Five schemes have been successfully commissioned and are operational with the final scheme due to be commissioned in August 2017. The D Share Class has also invested in two companies, providing funding to SMEs, one of which focuses on the Hydroelectric Power sector.
The D Share Class has recorded a profit over the period of 3.93p per share. At 31 March 2017 the net asset value stood at 105.19p per share.
The Board has resolved to pay the first dividend to D Class Shareholders of 685,082 equal to 5p per share which will paid on 14 July 2017 to shareholders on the register on 30 June 2017.
E Share Class
The E Share Class offer closed on 15 May 2017 raising just under 30 million with a total of 28,949,575 E Shares being issued. Whilst the Investment Manager is seeking investment opportunities the main focus is on cash management.
Risks
The Board believes that the principal risks currently facing the Company are:
investment risk associated with holding VCT qualifying investments;
risk of failure to maintain approval as a VCT;
risk of ability to return funds to investors in line with expectations.
The Board and the Investment Manager continue to work to minimise the likelihood and the potential impact of these risks.
Outlook
The Company and the Investment Manager continue to monitor the performance of the Ordinary Share portfolio and to secure an exit for the A Share portfolio.
The Company's focus on the C and D Share Class investments in the Hydroelectric Power sector will be on the operation of completed sites and progress of the remaining scheme under construction.
The Company's focus on the E Share Class is to invest the funds raised into unquoted investments as soon as possible.
If you have any questions or comments, please do not hesitate to contact Triple Point on 020 7201 8989.
David Frank
Chairman
15 June 2017
Company Strategy and Business Model
The Directors assess the Company's success in meeting its objectives in relation to returns, stability, VCT qualification and, ultimately, exit.
Performance Update
At launch the Ordinary Shares targeted a return of 8% to 10% pa including the benefit of tax relief. At a weighted average share price at acquisition or conversion of 83.6p using an 8% return this is broadly equivalent to a total target return to investors in 2018 of 90.4p. This compares to a net asset value per share for the Ordinary Share Class at 31 March 2017 of 69.74p which together with dividend payments of 25.56p, brings the total return at 31 March 2017 to 95.30p, meaning the Ordinary Share Class has exceeded the minimum targeted return.
The A Share Class, previously shares in TP12 (I) VCT plc, targeted a return of 9% to 12% per annum. On a weighted average share price at conversion of 86.4p using a 9% return this broadly equates to a total target return to investors in 2017 of 97.6p. This compares to a net asset value per share for the A Share Class at 31 March 2017 of 42.46p which together with a dividend payment of 56.20p brings the total return at 31 March 2017 to 98.66p, meaning the A Share Class has exceeded the minimum targeted return.
The C Share Class targets a return of 100p per share by the end of year six. It is intended that this will comprise the income tax rebate, tax-free dividends in years two, three, four and five of an average 5p per share, followed by a substantial capital realisation in year six. It is anticipated that from year six investors will then receive, on average, an annual tax-free dividend of around 7% in each of the next nine years, and a final tax-free payment of approximately 50p per share in 2029, following the sale of the VCT's hydro projects.The net asset value per share for the C Share Class at 31 March 2017 stood at 106.49p. The Company is meeting its objectives for the C Share Class and declaring its second dividend to be paid this year.
The target for the D Share Class is to pay shareholders a cash return of 100p per share by the end of the sixth year. It is intended that this will comprise the income tax rebate, tax-free dividends in years two, three, four and five of an average 5p per share, followed by a substantial capital realisation in year six. It is anticipated that from year six investors will then receive, on average, an annual tax-free dividend of around 7% in each of the next nine years, and a final tax-free payment of approximately 50p per share in 2030, following the sale of the VCT's hydro projects. The net asset value per share for the D Share Class at 31 March 2017 stood at 105.19p. The Company is meeting its objectives for the D Share Class and declaring its first dividend to be paid this year.
In respect of the E Share Class, the Company aims to distribute from income generated by its investments an average of 5p per E Share for the financial year ending 31 March 2020 followed by a regular dividend of up to 5p per E Share per annum for the remaining life of the E Share Class.
The Board and the Investment Manager are both committed to ensuring that returns on the investment portfolio are optimised and that the VCT remains fully invested and continues to be managed in line with the Company's investment strategy and risk profile.
A review of the performance of the Company's investments during the financial year, the position of the Company at the year end and the outlook for the coming year is contained within the Chairman's statement on pages 2 to 3 and the Investment Manager's Review on pages 13 to 16.
Dividend Requirements
Generally, a VCT must distribute by way of dividend such amounts to ensure 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.
Investment Policy
The Company's main focus is to generate returns from a portfolio of investments in companies based in the UK in order to make regular tax-free dividends.
The key objectives of the Company are to:
a) Pay regular tax-free dividends to investors;
b) Maintain VCT status to enable investors to benefit from the associated tax reliefs;
c) Reduce the volatility normally associated with early stage investments by applying its Investment Policy;
d) In respect of the Ordinary Share Fund and the A Ordinary Share Fund, provide investors with the opportunity to exit shortly after five years following investment;
e) In respect of the C Ordinary Share Fund and the D Ordinary Share Fund, provide investors with the opportunity to exit shortly after 16 years following investment with a partial return to shareholders after 6 years; and
f) In respect of the E Ordinary Share Fund, provide investors with the opportunity to exit between ten and twelve years following investment with a possible early partial return of funds to shareholders if market conditions present such an opportunity.
The Company will not vary these objectives to any material extent without the approval of the Shareholders. The Company's investment policy has been designed to satisfy the legislative requirements of the VCT scheme and to provide regular tax-free dividends to investors. The Company's investment policy is directed towards new investments into cash flow generative businesses with the capacity for growth and which can provide a positive return to investors.
The investments will be made with the intention of growing and developing the revenues and profitability of the target businesses to enable them to be considered for traditional forms of bank finance and other funding. This, in turn, should enable the Company to benefit from gains from a favourable sale of the business to a third party or from a refinance or capital restructuring of the business.
In respect of Qualifying Investments the Company will seek:
a) investments on which robust due diligence has been undertaken;
b) investments where there is access to regular material financial and other information;
c) investments where it may be possible to mitigate capital losses through careful analysis of the collateral available; and
d) investments where there is a strong relationship with the key decision makers.
Target Asset Allocation
The majority of the Company's net assets are or will be invested in unquoted companies. The remaining assets are or will be deployed for liquidity management purposes into Non-Qualifying Investments including cash and other highly liquid investments (which may be repurchased, redeemed, or paid out on no more than seven days' notice). Qualifying Investments will typically range between 500,000 and 5,000,000 and encompass businesses with strong asset bases, and good prospects. No single investment by the Company will represent more than 15 per cent of the aggregate NAV of the Company at the time the investment is made.
Qualifying Investments
Although investments will be sought in a diverse range of sectors, the Company's portfolio will comprise companies with certain characteristics; for example clear commercial and financial objectives, strong customer relationships and, where possible, tangible assets with value. The Company will focus on identifying cash generative businesses with a capacity for growth and which can provide a positive return to investors.
The criteria against which investment targets would be assessed will include the following:
a) an attractive valuation at the time of the investment;
b) managed risk of capital losses;
c) the quality of the company's cash flows;
d) the quality of the businesses' counterparties, suppliers and market position;
e) the sector in which the business is active;
f) the quality of the company's assets;
g) the opportunity to structure an investment that can produce distributable income;
h) the potential for growing and developing the revenues and profitability of the company to enable it to be considered for traditional forms of bank finance and other funding; and
i) the ability to facilitate an exit which enables the Company to meet its key investment objective of returning funds in line with shareholder expectations. As the value of investments increase, the Company's investment manager will monitor opportunities for the Company to realise capital gains to enable it to make tax-free distributions to shareholders.
Non-Qualifying Investments
Non-Qualifying Investments will be made for the purpose of liquidity management. These investments will include the following:
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
The Company has no present intention of utilising direct borrowing as a strategy for improving or enhancing returns. 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), shall not without the previous sanction of an ordinary resolution of the Company exceed 30% of its NAV at the time of any borrowing.
VCT Regulation and Tax Benefits
VCTs were 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 tax benefits available to eligible investors in VCTs include:
up-front income tax relief of 30%
exemption from income tax on dividends received
exemption from capital gains tax on disposals of shares in VCTs.
The Company was provisionally approved as a VCT by Her Majesty's Revenue and Customs. In order to secure final 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 70% of the Company's investments must comprise "qualifying holdings" of which at least 30% must be in eligible ordinary shares.
FCA Regulation
On 1 April 2014 Triple Point Income VCT plc registered with the Financial Conduct Authority as a small Alternative Investment Fund Manager ("AIFM") under the AIFM Directive.
Exit Programme
The Company is committed to realising its investments and returning funds to Ordinary Shareholders and A Shareholders as soon as practicable after the end of the five year holding period which will be April 2017 for the A Shares and May 2018 for the Ordinary Shares. In relation to the C Share Class the Company is intending to secure a partial realisation after its five year anniversary but plans to retain its investment in the Hydro companies until 2029. In relation to the D Share Class the Company is intending to secure a partial realisation after its five year anniversary but plans to retain its investment in the Hydro companies until 2030.
The valuation of, and potential exit routes, for the Company's portfolio of investments are reviewed and discussed at each Board meeting. The Investment Manager has successfully implemented exit plans for other VCTs under its management.
Investment classification for the Ordinary Share Class by asset value and sector value are shown below:
Investment Portfolio - Ordinary Share Class
Qualifying Investments 75%
Non Qualifying Holdings 13%
Cash 12%
Qualifying Investments by Sector - Ordinary Share Class
Electricity Generation - other 34%
Cinema Digitisation 29%
Hydro Electric Power 23%
Crematorium Management 7%
SME Funding - other 4%
SME Funding - hydro electric power 3%
Investment classification for the A Share Class by asset value and sector value are shown below:
Investment Portfolio - A Share Class
Qualifying Investments 42%
Non Qualifying Holdings 50%
Cash 8%
Investments by Sector - A Share Class
Landfill Gas45%
SME Funding - other 55%
Investment classification for the C Share Class by asset value and sector value are shown below:
Investment Portfolio - C Share Class
Qualifying Investments 71%
Non Qualifying Holdings 27%
Cash 2%
Investments by Sector- C Share Class
Hydro Electric Power 77%
SME Funding - hydro electric power 23%
Investment classification for the D Share Class by asset value and sector value are shown below:
Investment Portfolio - D Share Class
Qualifying Investments 80%
Non Qualifying Holdings 16%
Cash 4%
Investments by Sector - D Share Class
Hydro Electric Power 85%
SME Funding - hydro electric power 9%
SME Funding - Other 6%
Principal Risk and Risk Management
The Directors carry out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. 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.
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. 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 are held in small and medium-sized unquoted companies 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 the 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 instrument risk: Financial Instrument risks are described in note 16.
Financial 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 unless it is to manage short term liquidity. Accordingly a proportion of the Company's assets are maintained in cash or cash equivalents in order to be in a position to take advantage of unquoted investment opportunities as they arise.
Internal control 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.
Viability Statement
In accordance with provision C.2.2 of the 2014 revision to the Corporate Governance Code, the Directors have assessed the prospect of the Company over a longer period than 12 months required by the Going Concern provision. In order to assess the new requirement, the Board takes into account the Company's current position and the principal risks as set out on page 11 so that the Directors may 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.
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; and
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.
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. The A Share Class reached its 5 year holding period in April 2017, the Ordinary Share Class will reach its 5 year holding period in 2018 and the C and D Share Class will partially exit during the next 5 years. Based on this the Directors believe it is reasonable to make their assessment over 5 years.
Share Buy-Back Discount Policy
The Company has a share buy-back facility, committing to buy back shares at no more than a 10% 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.
Environmental, Social, Employee and Human Rights Issues
The Company hasnothing to report in relation to social, employee or human rights issues. It has no employees and its three directors are Non-Executive.
Gender Diversity
The Board of Directors comprises 3 male Directors. The Investment Manager has 56 employees and members of whom 31 are men and 25 are women.
Investment Manager's Review
Sector Analysis
The unquoted investments can be analysed as follows:
Industry Sector
Cinema Digitisation
Crematorium Management
Hydroelectric Power
Other
Hydroelectric Power
Other
Total Unquoted Investments
'000
'000
'000
'000
'000
'000
'000
Investments at 31 March 2016
Ord Shares
3,294
788
4,098
3,970
-
450
12,600
A Shares
-
-
-
789
-
950
1,739
C Shares
-
-
10,434
-
3,698
-
14,132
D Shares
-
-
11,083
1
1,206
800
13,090
Total
3,294
788
25,615
4,760
4,904
2,200
41,561
Investments made during the year
Ord Shares
-
-
-
-
350
-
350
A Shares
-
-
-
-
-
-
-
C Shares
-
-
-
-
-
-
-
D Shares
-
-
-
-
-
-
-
-
-
-
-
350
-
350
Investments realised during the year
Ord Shares
-
(200)
(1,269)
-
(34)
-
(1,503)
A Shares
-
-
-
-
-
-
-
C Shares
-
-
-
-
(486)
-
(486)
D Shares
-
-
-
-
-
-
-
-
(200)
(1,269)
-
(520)
-
(1,989)
Investments revalued during the year
Ord Shares
72
4
(28)
207
-
3
258
A Shares
-
-
-
-
-
7
7
C Shares
-
-
514
-
-
-
514
D Shares
-
-
29
-
-
6
35
72
4
486
207
-
16
814
Investments at 31 March 2017
Ord Shares
3,366
592
2,801
4,177
316
453
11,705
A Shares
-
-
-
789
-
957
1,746
C Shares
-
-
10,948
-
3,212
-
14,160
D Shares
-
-
11,112
1
1,206
806
13,125
Total
3,366
592
24,861
4,967
4,734
2,216
40,736
Total investments %
8.26%
1.45%
61.04%
12.19%
11.62%
5.44%
100.00%
The Company's funds at 31 March 2017 are 94% invested in a portfolio of VCT qualifying and non-qualifying unquoted investments. It continues to meet the condition that 70% of funds must be invested in VCT qualifying investments within three years.
The VCT was established to fund small and medium sized enterprises. At 31 March 2017 it had four share classes each invested in their own portfolio as detailed on page 13. The overall portfolio comprised investments in 20 small, unquoted companies in four sectors: cinema digitisation; crematorium management; electricity generation; and SME Funding.
The Company had a successful raise which was fully subscribed and closed early and as a result the Company's gross assets now stand at circa 74 million spreading fixed costs over a larger asset base.
Review and Outlook
Ordinary Share Class
The Company and the Investment Manager will continue to focus on monitoring the performance of the Ordinary Share Class investment portfolio and on maintaining or improving the performance of the Share Class within its target range.
Cinema Digitisation
The Company maintains two holdings in cinema digitisation businesses which provide cinema digitisation services in the UK, Germany and Ireland.These businesses continue to look for opportunities to grow and to acquire projectors.
Crematorium Management
The Company has an investment in a business that provides crematory and mercury abatement services for the crematoria of a London Borough. In line with expectations for the sector this investment has delivered a modest but steady return over the 7 years that it has been held.
Solar
The Company holds an investment in Green Energy For Education Limited ("GEFE"), a company that owns a portfolio of rooftop PV systems. The PV systems have been outperforming their electricity generation targets and the investment continues to provide an attractive exposure to a business benefitting from low risk Feed in Tariffs. The Company also holds an investment in Cmore Energy Limited ("Cmore"), a ground mount solar farm located in Herefordshire. Revenues are earned from the sale of Renewable Obligation Certificates and the sale of electricity. Cmore's revenues have been protected from the wider decline in wholesale electricity prices due to a long term Power Purchase Agreement.
Hydroelectric Power
The Ordinary Share Class has investments in two companies which between them own two hydroelectric schemes in the Scottish Highlands. Further updates on this sector are detailed on page 15.
Gas Power
The Company has invested in a company that is constructing a gas power plant which will provide a reliable and secure energy supply. The power plant is under construction and expected to start generating in Q1 2018.
A Share Class
The Company and the Investment Manager will continue to focus on the successful realisation of the A Share Class investments. April 2017 marked the end of the five year minimum VCT holding period for this share class. In line with its investment strategy we will be working towards facilitating a rapid exit for shareholders with realisations expected in the summer and payments to shareholders soon after. To date the Company has distributed 56.2p per share to the A Class Shareholders and will be paying a further dividend of 25p per share on 14 July 2017.
Landfill Gas
Craigahulliar Energy Ltd ("CEL") and Aeris Power Ltd ("APL") each generate renewable electricity from landfill gas at sites operated respectively by local councils and a large waste management company in Northern Ireland. Both businesses continue to generate electricity for export to the Grid, earning long term cash flows through the sale of electricity to a utility company and potentially to the site owners, as well as through the sale of the Renewable Obligation Certificates. CEL is generating in line with expectations while APL's generation is running at lower levels than planned due to lower than expected gas extraction. Management have taken actions to address this and APL continues to be able to comfortably meet the VCT's interest payments.The Company is in discussions with a potential acquirer of its holdings in both these companies.
C Share Class
The Company and the Investment Manager will monitor the ongoing operation and efficiency of the C Share Class investments. The C Share Class has investments in three companies which between them own six hydroelectric schemes in the Scottish Highlands. Further updates on this sector are detailed below.
D Share Class
We are pleased to report that five of the six Hydro schemes located in the Scottish Highlands held by the D Share Class were commissioned on time and within budget. Our focus now turns to improving operation and efficiency of the schemes. In line with initial expectations the sixth scheme is under construction and due to be commissioned during August 2017.
Hydroelectric Power Sector
2016 was a mixed year for the VCTs hydro portfolio. All the relevant schemes were commissioned on time and within budget, snagging issues were addressed early in the year and the schemes performed well when operating, however, the autumn and winter periods were uncharacteristically dry, and river levels were significantly below the long term average. Whilst reduced generation in the first full year of operation is frustrating, we remain confident in our long term forecasts and the original hydrology studies that the schemes were based on.
During the year there were major upgrade works carried out on the Transmission Network by SSE, and consequently five of the schemes were restricted to just 50kW of output for periods of up to 11 to 59 days. Although the majority of restricted generation occurred on days when there was little or no river flow, it has had a negative impact on revenue generation nonetheless. We are not expecting this to be a continuing issue for the schemes as the majority of works have now been completed.
In addition to earning RPI-linked Feed-in Tariffs, the schemes have also earned revenue through the sale of electricity under Power Purchase Agreements. At outset, the companies expected to earn a total of 5p per kWh for the sale of electricity and embedded benefits, and we are pleased to report that on average the schemes have been earning 6.62p per kWh.
In December 2016, the Scottish Assessor announced new draft business rates that in some instances were 2.5 times the current level. Over the past few months there has been extensive lobbying by the industry as a whole, and it is expected that existing schemes under 1MW will be limited to an increase of 12.5%, which is good news for the majority of the portfolio. The position of new schemes and schemes over 1MW remains unclear.
Looking forward to the comingyear, we will focus our attention on aligning and optimising the power purchase agreements for the portfolio of companies, looking at ways to increase performance through asset management, and working with Green Highland Renewables and the British Hydro Association to assess and potentially challenge the proposed new business rates.
E Share Class
We are pleased to report that the E Share Class reached its maximum subscription and raised just under 30 million. Going forward, the Company and the Investment Manager are focused on ensuring that the funds are invested in line with the Company's strategy and the requirements of the VCT legislation.
Non-Qualifying Investments
SME Funding
The Company has invested in three companies which provide funding to a range of small and medium sized businesses. Two of these companies focus on the Hydroelectric Power sector. All three companies are performing in line with expectation.
If you have any questions, please do not hesitate to call us on 020 7201 8989.
Ben Beaton
Managing Partner
for Triple Point Investment Management LLP
15 June 2017
Investment Portfolio Summary
31 March 2017
31 March 2016
Cost
Valuation
Cost
Valuation
'000
%
'000
%
'000
%
'000
%
Unquoted Holdings
Unquoted qualifying holdings
30,584
73.01
31,986
73.92
31,088
73.99
31,695
74.42
Unquoted non-qualifying holdings
8,762
20.92
8,750
20.23
9,898
23.56
9,866
23.23
Financial assets at fair value through profit or loss
39,346
93.93
40,736
94.15
40,986
97.55
41,561
97.65
Cash and cash equivalents
2,534
6.07
2,534
5.85
1,032
2.45
1,032
2.35
41,880
100.00
43,270
100.00
42,018
100.00
42,593
100.00
Unquoted Qualifying Holdings
'000
%
'000
%
'000
%
'000
%
Cinema digitisation
Digima Ltd
1,262
3.01
1,296
3.00
1,262
3.00
1,274
2.99
Digital Screen Solutions Ltd
2,020
4.82
2,070
4.78
2,020
4.81
2,020
4.74
Solar
Cmore Energy Ltd
1,000
2.39
1,221
2.82
1,000
2.38
1,153
2.71
Green Energy for Education Ltd
475
1.13
752
1.74
475
1.13
608
1.43
PJC Renewable Energy Ltd
5
0.01
-
-
5
0.01
5
0.01
Landfill Gas*
Aeris Power Ltd
525
1.25
424
0.98
525
1.25
424
1.00
Craigahulliar Energy Ltd
350
0.84
365
0.84
350
0.83
365
0.86
Hydroelectric Power
Elementary Energy Ltd
2,060
4.92
2,102
4.86
2,060
4.90
2,130
5.00
Green Highland Allt Choire A Bhalachain (225) Ltd
3,130
7.47
3,038
7.02
3,130
7.45
3,130
7.35
Green Highland Allt Garbh Ltd
2,710
6.47
2,710
6.26
2,710
6.45
2,710
6.36
Green Highland Allt Ladaidh (1148) Ltd
3,500
8.36
3,500
8.09
3,500
8.33
3,500
8.22
Green Highland Allt Luaidhe (228) Ltd
1,995
4.76
2,047
4.73
1,995
4.75
1,995
4.68
Green Highland Allt Phocachain (1015) Ltd
3,932
9.39
3,941
9.11
3,932
9.36
3,932
9.23
Green Highland Shenval Ltd
1,120
2.67
1,120
2.59
1,624
3.87
1,624
3.81
Green Highland Renewables (Achnacarry) Ltd
4,300
10.27
5,200
12.02
4,300
10.23
4,625
10.86
Gas Power
Green Peak Generation Ltd
2,200
5.25
2,200
5.08
2,200
5.24
2,200
5.17
30,584
73.01
31,986
73.92
31,088
73.99
31,695
74.42
*Assets held for sale
31 March 2017
31 March 2016
Cost
Valuation
Cost
Valuation
Unquoted Non-Qualifying Holdings
'000
%
'000
%
'000
%
'000
%
Crematorium Management
Furnace Managed Services Ltd
620
1.48
592
1.37
820
1.95
788
1.85
Hydroelectric Power
Elementary Energy Ltd
310
0.74
310
0.72
344
0.82
344
0.81
Green Highland Allt Choire A Bhalachain (225) Ltd
342
0.82
342
0.79
341
0.81
341
0.80
Green Highland Allt Garbh Ltd ST Loan
-
-
-
-
30
0.07
30
0.07
Green Highland Allt Luaidhe (228) Ltd
185
0.44
185
0.43
185
0.44
185
0.43
Green Highland Allt Phocachain (1015) Ltd
161
0.38
161
0.37
175
0.42
175
0.41
Kinlochteacius Hydro Limited
-
-
-
-
762
1.81
762
1.79
Green Highland Renewables (Achnacarry) Ltd
100
0.24
100
0.23
133
0.32
133
0.31
Gas Power
Green Peak Generation Ltd
-
-
-
-
4
0.01
4
0.01
SME Funding
Hydroelectric Power:
Broadpoint 2 Ltd
2,834
6.77
2,834
6.55
2,894
6.89
2,894
6.79
Broadpoint 3 Ltd
2,010
4.80
2,010
4.65
2,010
4.78
2,010
4.72
Other:
Funding Path Ltd
2,200
5.25
2,216
5.12
2,200
5.24
2,200
5.24
8,762
20.92
8,750
20.23
9,898
23.56
9,866
23.23
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 not quoted 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. Where the Board considers the investee company's enterprise value has changed since acquisition, investments are held at a value measured using a discounted cash flow model or the value expected to be realised on disposal which is equivalent to fair value.
Investment Portfolio's Ten Largest VCT Unquoted Investments
Green Highland Renewables (Achnacarry) Ltd
Date of first investment
Cost
Valuation
Valuation Method
Income recognised by TP Income for the year '000
Equity Held by TP Income %
Equity Held by TPIM managed funds %
13 August 2014
4,300,000
5,200,000
Discounted Cash Flow
112
40.65
40.65
Summary of Information from Investee Company Financial Statements ending in 2016:
'000
Turnover
1,061
Earnings before interest, tax, amortisation and depreciation (EBITDA)
754
Profit before tax
215
Net assets before VCT loans
5,156
Net assets
3,668
Green Highland Renewables (Achnacarry) Ltd is operating three separate run-of-river hydroelectric power plants located adjacent to Loch Arkaig near Fort William, having reached financial close in August 2014. The Allt Dubh site (722kw) was commissioned in November 2015, the Loch Blair site (1,250kw) and the Cheanna Mhuir site (500kw) were both successfully commissioned in December 2015. The company earns Feed-in-Tariffs and other revenues from the generation and export of electricity.
Green Highland Allt Phocachain (1015) Ltd
Date of first investment
Cost
Valuation
Valuation Method
Income recognised by TP Income for the year '000
Equity Held by TP Income %
Equity Held by TPIM managed funds %
13 November 2014
3,932,000
3,941,000
Discounted Cash Flow
350
42.70
100.00
Summary of Information from Investee Company Financial Statements ending in 2016:
'000
Turnover
383
Earnings before interest, tax, amortisation and depreciation (EBITDA)
258
Profit before tax
(295)
Net assets before VCT loans
4,722
Net assets
2,832
Green Highland Allt Phocachain (1015) Ltd has constructed two separate 500kw run-of-river hydroelectric power plants located in Glen Moriston, Scottish Highlands. Both schemes were commissioned on schedulein December 2015. The company earns Feed-in-Tariffs from the generation and export of electricity.
Green Highland Allt Ladaidh (1148) Ltd
Date of first investment
Cost
Valuation
Valuation Method
Income recognised by TP Income for the year '000
Equity Held by TP Income %
Equity Held by TPIM managed funds %
20 March 2015
3,500,000
3,500,000
Cost
294
35.17
50.25
Summary of Information from Investee Company Financial Statements ending in 2016:
'000
Turnover
34
Earnings before interest, tax, amortisation and depreciation (EBITDA)
11
Profit before tax
(28)
Net assets before VCT loans
4,855
Net assets
3,355
Green Highland Allt Ladaidh (1148) Ltd has constructed a run-of-river hydro-electric power plant near Loch Garry, Invergarry in the Scottish Highlands. The 1,300kW Allt Ladaidh scheme completed construction and was commissioned in August 2016. The company earns Feed-in-Tariffs and other revenues from the generation and export of electricity.
Green Highland Allt Choire A Bhalachain (225) Ltd
Date of first investment
Cost
Valuation
Valuation Method
Income recognised by TP Income for the year '000
Equity Held by TP Income %
Equity Held by TPIM managed funds %
18 July 2014
3,130,000
3,038,000
Discounted Cash Flow
297
49.90
100.00
Summary of Information from Investee Company Financial Statements ending in 2016:
'000
Turnover
264
Earnings before interest, tax, amortisation and depreciation (EBITDA)
124
Profit before tax
(269)
Net assets before VCT loans
2,699
Net assets
1,751
Green Highland Allt Choire a Bhalachain (225) Ltd is currently operating a 740kw run-of-river hydro-electric power plant located at Tomdoun, Invergarry in the Scottish Highlands. The project started construction in July 2014 and was commissioned on schedule in November 2015. The company earns Feed-in-Tariffs and other revenues from the generation and export of electricity.
Broadpoint 2 Ltd
Date of first investment
Cost
Valuation
Valuation Method
Income recognised by TP Income for the year '000
Equity Held by TP Income %
Equity Held by TPIM managed funds %
12 February 2015
2,834,000
2,834,000
Share of Net Assets
238
49.00
98.00
Summary of Information from Investee Company Financial Statements ending in 2016:
'000
Turnover
173
Earnings before interest, tax, amortisation and depreciation (EBITDA)
30
Profit before tax
4
Net assets before VCT loans
3,637
Net assets
3
Broadpoint 2 Ltd is a non-qualifying investment which provides finance to the Hydroelectric Power sector.
Green Highland Allt Garbh Ltd
Date of first investment
Cost
Valuation
Valuation Method
Income recognised by TP Income for the year '000
Equity Held by TP Income %
Equity Held by TPIM managed funds %
01 April 2015
2,710,000
2,710,000
Cost
208
27.46
50.25
Summary of Information from Investee Company Financial Statements ending in 2016:
'000
Turnover
-
Earnings before interest, tax, amortisation and depreciation (EBITDA)
(7)
Profit before tax
339
Net assets before VCT loans
4,959
Net assets
3,471
Green Highland Allt Garbh Ltd is constructing a run-of-river hydroelectric power plant near Glen Affric, Cannich. The 1,500kW Allt Garbh scheme reached commercial close and has begun construction and is scheduled to be commissioned by August 2017. The company will earn Feed-in-Tariffs and other revenues from the generation and export of electricity.
Green Peak Generation Ltd
Date of first investment
Cost
Valuation
Valuation Method
Income recognised by TP Income for the year '000
Equity Held by TP Income %
Equity Held by TPIM managed funds %
02 April 2015
2,200,000
2,200,000
Cost
12
26.97
50.25
Summary of Information from Investee Company Financial Statements ending in 2016:
'000
Turnover
-
Earnings before interest, tax, amortisation and depreciation (EBITDA)
(5)
Profit before tax
9
Net assets before VCT loans
4,108
Net assets
2,878
Green Peak Generation Ltdreached financial close during May 2017 on a 7.5 MW gas power plant in Cumbria, which is expected to be commissioned during Q1 2018.
Elementary Ltd
Date of first investment
Cost
Valuation
Valuation Method
Income recognised by TP Income for the year '000
Equity Held by TP Income %
Equity Held by TPIM managed funds %
18 March 2013
2,060,000
2,102,000
Discounted Cash Flow
207
49.93
99.22
Summary of Information from Investee Company Financial Statements ending in 2016:
'000
Turnover
268
Earnings before interest, tax, amortisation and depreciation (EBITDA)
180
Profit before tax
(88)
Net assets before VCT loans
1,954
Net assets
414
Elementary Energy Ltd is currently operating a 500kw run-of-river hydroelectric power plant situated at Abhainn Shalachain river at Fiunary, Morven, Scotland. The plant was commissioned in January 2015 and is operating successfully and earns Feed-in-Tariffs and other revenues from the generation and export of electricity.
Funding Path Ltd
Date of first investment
Cost
Valuation
Valuation Method
Income recognised by TP Income for the year '000
Equity Held by TP Income %
Equity Held by TPIM managed funds %
29 January 2016
2,200,000
2,216,000
Share of Net Assets
171
49.00
98.00
Summary of Information from Investee Company Financial Statements ending in 2016:
'000
Turnover
275
Earnings before interest, tax, amortisation and depreciation (EBITDA)
268
Profit before tax
41
Net assets before VCT loans
3,232
Net assets
32
Funding Path Ltd provides funding for SME Leasing companies.
Digital Screen Solutions Ltd
Date of first investment
Cost
Valuation
Valuation Method
Income recognised by TP Income for the year '000
Equity Held by TP Income %
Equity Held by TPIM managed funds %
31 March 2009
2,020,000
2,070,000
Discounted Cash Flow
68
35.36
99.87
Summary of Information from Investee Company Financial Statements ending in 2016:
'000
Turnover
1,657
Earnings before interest, tax, amortisation and depreciation (EBITDA)
1,588
Profit before tax
539
Net assets before VCT loans
3,382
Net assets
1,968
Digital Screen Solutions Ltd is a provider of cinema digitisation equipment. During the course of the year it significantly added to its portfolio of projectors and now operates digital projection equipment in the UK, Ireland and Germany. It fully recouped its expected return on its projectors in Italy and no longer retains an interest in these systems. At year end the company owned a portfolio of 833 screens across the UK, Ireland and Germany. Digital cinema projection conversion is paid for under the globally recognised Virtual Print Fee model, through which film studios pay for the cost of the deployment over a number of years with the majority of the company's revenues deriving ultimately from the six major investment grade Hollywood Studios.
All investments are held in the UK.
The investments are a combination of debt and equity.
Equity holding is equal to the voting rights.
The Strategic Report has been approved by the Board and signed on their behalf by the Chairman.
David Frank
Chairman
15 June 2017
Report of the Directors
The Directors present their Report and the audited Financial Statements for the year ended 31 March 2017.
Details of Directors
David Frank was a partner in Slaughter and May for twenty two years before retiring from the firm in 2008. As well as being the firm's first Practice Partner from 2001 to 2008, his practice involved acting for several venture capital houses, including 3i and Schroder Ventures. He was also involved in several flotations in the venture capital sector, including 3i, Baronsmead and SVG Capital. Since retiring from legal practice, he has established a portfolio of voluntary roles. He has been a Director and Chairman of the Company since 11 November 2010.
Simon Aclandhas over twenty five years' experience in venture capital, primarily at Quester, where he became Managing Director. When Quester was sold in 2007 it had 200m under management and was one of the leading UK venture capital and VCT investment managers. Simon was a director of over 20 companies in Quester's portfolio, many of which achieved successful exits through flotation or trade sales. Simon is also a director of various other private companies and charities, and a member of the investment committee of the British Business Bank's Angel Co-Fund. Simon was appointed a Director on 12 March 2009.
Michael Stanes has been an Investment Director at Heartwood Investment Management, a London-based firm providing investment management and wealth structuring services for high net worth individuals, since 2010. He began his career at Warburg Investment Management (which became Mercury Asset Management) where he ran equity portfolios in London and Tokyo. He then moved to the US where he founded a business on behalf of Merrill Lynch offering equity portfolio management to high net worth individuals. In 2002 he joined Goldman Sachs Asset Management in London running global equity portfolios for a range of institutional and individual clients before joining a new fund management partnership as CEO. Michael was appointed a Director on 21 November 2012.
All Directors are considered to be independent.
The Board has considered provision B.7.2 of the UK Corporate Governance Code (September 2014) and believes that all the Directors continue to be effective and to demonstrate commitment to their roles, the Board and the Company. The Directors are discussed further within the Corporate Governance report on pages 29 and 30 which demonstrates the Board's compliance with the UK Corporate Governance code.
Activities and Status
The Company is a Venture Capital Trust and its main activity is investing.
The Company has been provisionally approved as a VCT by HMRC.
The Company is registered in England as a Public Limited Company (Registration number 6421083). The Directors have managed, and intend to continue to manage, the Company's affairs in such a manner as to comply with Section 274 of the Income Tax Act 2007 which grants approval as a VCT.
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
Post balance sheet events are described in note 21.
Directors' and Officers' Liability Insurance
The Company has, as permitted by S233 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.
Matters Covered in the Strategic Report
Dividends and financial risk management have both been discussed within the Strategic Report on pages 4 and 11.
TPIM acts as Investment Manager to the Company. 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 inception 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).
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from the operations of the Company, nor does it have responsibility for any other emission producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.
Annual General Meeting
Notice convening the 2017 Annual General Meeting of the Company and a form of proxy in respect of that meeting can each be found at the end of this document.
Share Capital, Rights Attaching to the Shares and Restrictions on Voting and Transfer
The Company had in issue 19,463,120 Ordinary Shares, 5,131,353 A Ordinary Shares, 13,441,438 C Ordinary Shares and 13,701,636 D Ordinary Shares at 31 March 2017 (see note 15). As at that date none of the issued shares were held by the Company as treasury shares. Subject to any suspension or abrogation of rights pursuant to relevant law or the Company's articles of association, the shares confer on their holders (other than the Company in respect of any treasury shares) the following principal rights:
a) the right to receive out of profits available for distribution such dividends as may be agreed to be paid (in the case of a final dividend in an amount not exceeding the amount recommended by the Board as approved by shareholders in general meeting or in the case of an interim dividend in an amount determined by the Board). All dividends unclaimed for a period of 12 years after having become due for payment are forfeited automatically and cease to remain owing by the Company;
b) the right, on a return of assets on a liquidation, reduction of capital or otherwise, to share in the surplus assets of the Company remaining after payment of its liabilities pari passu with other holders of ordinary shares of that class; and
c) the right to receive notice of and to attend and speak and vote in person or on a poll by proxy at any general meeting of the Company. On a show of hands every member present or represented and voting has one vote and on a poll every member present or represented and voting has one vote for every share of which that member is the holder; the validly executed appointment of a proxy must be received not less than 48 hours before the time of the holding of the relevant meeting or adjourned meeting or, in the case of a poll taken otherwise than at or on the same day as the relevant meeting or adjourned meeting, be received after the poll has been demanded and not less than 24 hours before the time appointed for the taking of the poll.
These rights can be suspended. If a member, or any other person appearing to be interested in shares held by that member, has failed to comply within the time limits specified in the Company's articles of association with a notice pursuant to S793 of the Companies Act 2006 (notice by a Company requiring information about interests in its shares), the Company can until the default ceases suspend the right to attend and speak and vote at a general meeting and if the shares represent at least 0.25% of their class the Company can also withhold any dividend or other money payable in respect of the shares (without any obligation to pay interest) and refuse to accept certain transfers of the relevant shares.
Shareholders, either alone or with other shareholders, have other rights as set out in the Company's articles of association and in company law.
A member may choose whether his or her shares are evidenced by share certificates (certificated shares) or held in electronic (uncertificated) form in CREST (the UK electronic settlement system). Any member may transfer all or any of his or her shares, subject in the case of certificated shares to the rules set out in the Company's articles of association or in the case of uncertificated shares to the regulations governing the operation of CREST (which allow the Directors to refuse to register a transfer as therein set out); the transferor remains the holder of the shares until the name of the transferee is entered in the register of members. The Directors may refuse to register a share transfer if it is in respect of a certificated share which is not fully paid up or on which the Company has a lien provided that, where the share transfer is in respect of any share admitted to the Official List maintained by the UK Listing Authority, any such discretion may not be exercised so as to prevent dealings taking place on an open and proper basis, or if in the opinion of the Directors (and with the concurrence of the UK Listing Authority) exceptional circumstances so warrant, provided that the exercise of such power will not disturb the market in those shares. Whilst there are no squeeze-out and sell-out rules relating to the shares in the Company's articles of association, shareholders are subject to the compulsory acquisition provisions in S974 to S991 of the Companies Act 2006.
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. At each Annual General Meeting of the Company one third of the Directors for the time being, or if their number is not three or an integral multiple of three the number nearest to but not exceeding one-third, are to be subject to re-election.
The Companies Act allows shareholders in general meeting by ordinary resolution (requiring a simple majority of the persons voting on the relevant resolution) to remove any Director before the expiry of his or her period of office, but without prejudice to any claim for damages which the Director may have for breach of any contract of service between him or her and 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. In particular, the Directors may exercise on behalf of the Company its powers to purchase its own shares to the extent permitted by shareholders.
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
Grant Thornton UK LLP offers itself for reappointment as auditor. In accordance with S489(4) of the Companies Act 2006 a resolution to reappoint Grant Thornton UK LLP as auditor will be proposed at the forthcoming Annual General Meeting.
On behalf of the Board.
David Frank
Director
15 June 2017
Directors' Responsibilities 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;
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 IFRS 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 annual report including 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
David Frank
Chairman15 June 2017
Corporate Governance
The Board of Triple Point Income VCT plc has considered the principles and recommendations of the Association of Investment Companies Code of Corporate Governance (AIC Code 2015) by reference to the Association of Investment Companies Corporate Governance Guide for Investment Companies (AIC Guide). The AIC Code 2015, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code (September 2014), as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company. The Board considers that reporting against principles and recommendations of the AIC Code 2015, by reference to the AIC Guide, which incorporates the UK Corporate Governance Code (September 2014), will provide improved reporting to shareholders.
The Company is committed to maintaining high standards in corporate governance and has complied with the recommendations of the AIC Code 2015 and the relevant provisions of the UK Corporate Governance Code (September 2014), except as set out at the end of this report in the Compliance Statement.
Board of Directors
The Company has a Board of three Non-Executive Directors. Since all Directors are Non-Executive and day-to-day management responsibilities are sub-contracted to the Investment Manager, the Company does not have a Chief Executive Officer. The Directors have a range of business and financial skills which are relevant to the Company; these are described on page 24 of this report. Directors are provided with key information on the Company's activities, including regulatory and statutory requirements, by the Investment Manager. The Board has direct access to company secretarial advice and compliance services provided by the Investment Manager which is responsible for ensuring that Board procedures are followed and applicable regulations complied with. All Directors are able to take independent professional advice in furtherance of their duties.
Any appointment of new Directors to the Board is conducted, and appointments made, onmerit and with due regard for the benefits of diversity on theBoard, including gender. All Directors are able to allocate sufficient time to the Company todischarge their responsibilities.
The Board meets regularly on a quarterly basis, 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 and the agreement between the Company and the Investment Manager has authority limits beyond which Board approval must be sought.
The Investment Manager has authority over the management of the investment portfolio, the organisation of custodial services, accounting, secretarial and administrative services. In practice the Investment Manager makes investment recommendations for the Board's approval. In addition all investment decisions involving other VCTs managed by the Investment Manager are taken by the Board rather than the Investment Manager. Other matters reserved for the Board include:
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;
the performance of the Company, including monitoring the net asset value per share; and
monitoring shareholder profiles and considering shareholder communications.
The Chairman leads the Board in the determination of its strategy and in the achievement of its objectives. The Chairman is responsible for organising the business of the Board, ensuring its effectiveness and setting its agenda and has no involvement in the day to day business of the Company. He facilitates the effective contribution of the Directors and ensures that they receive accurate, timely and clear information and that they communicate effectively with shareholders.The Chairman does not have significant commitments conflicting with his obligations to the Company.
The Company Secretary is responsible for advising the Board on all governance matters. All of the Directors have access to the advice and services of the Company Secretary which has administrative responsibility for the meetings of the Board and its committees. Directors may also take independent professional advice at the Company's expense where necessary in the performance of their duties. As all of the Directors are Non-Executive, it is not considered appropriate to identify a member of the Board as the senior Non-Executive Director of the Company.
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 Company's articles of association require that one third of the Directors should retire by rotation each year and seek re-election at the Annual General Meeting and that Directors newly appointed by the Board should seek re-appointment at the next Annual General Meeting. The Board complies with the requirement of the UK Corporate Governance Code (September 2014) that all Directors are required to submit themselves for re-election at least every three years.
During the period covered by these Financial Statements the following meetings were held:
Directors present
4 Full Board
2 Audit Committee
Meetings
Meetings
David Frank, Chairman
4
2
Simon Acland
3
2
Michael Stanes
4
2
Audit Committee
The Board hasappointed an audit committee of which David Frank is Chairman, which deals with matters relating to audit, financial reporting and internal control systems. The Committee meets as required and has direct access to Grant Thornton UK LLP, the Company's auditor.
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. The audit committee has reviewed the non-audit service provided by the external auditor, being the corporation tax return for the year ended 31 March 2016, and does not believe it is sufficient to influence its independence or objectivity due to the fee being an immaterial expense. Non audit services for the current financial year have not been provided by the auditor.
When considering whether to recommend the reappointment of the external auditor the audit committee takes into account its current fee tender compared to the external audit fees paid by other similar companies. The audit committee will then recommend to the Board the appointment of an external auditor which is ratified at the Annual General Meeting.
The Auditing Practices Board requires the audit partner to rotate every five years. The audit partner rotated in the prior year. No audit tender has been undertaken since the Company was incorporated. Under the requirements of the UK Corporate Governance Code (September 2014) listed companies are required to put their audit out to tender every 10 years. As such the Company will put their audit out to tender after the AGM in July 2017.
The effectiveness of the external audit 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:
reviewing and making recommendations to the Board in relation to the Company's published Financial Statements and other formal announcements or regulatory returns relating to the Company's financial performance, reviewing significant financial reporting judgements contained in them;
reviewing and making recommendations to the Board in relation to the Company's internal control (including internal financial control) and risk management systems;
periodically considering the need for an internal audit function;
making recommendations to the Board in relation to the appointment, re-appointment and removal of the external auditor and approving the remuneration and terms of engagement of the external auditor;
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 that the Chairman of the committee meets the requirements of the UK Corporate Governance Code (September 2014) as to relevant financial experience.
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.
In respect of the year ended 31 March 2017, the audit committee discharged its responsibilities by:
reviewing and approving the external auditor's terms of engagement and remuneration and independence;
reviewing the external auditor's plan for the audit of the Financial Statements, including identification of key risks and confirmation of auditor independence;
reviewing TPIM's statement of internal controls 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;
reviewing the Company's half-yearly results and draft annual Financial Statements prior to Board approval;
reviewing the external auditor's audit plan document to the audit committee on the annual Financial Statements; and
reviewing the Company's going concern status.
The audit committee is responsible for considering and reporting on any significant issues that arise in relation to the Financial Statements.
The key areas of risk that have been identified and considered by the audit committee in relation to the business activities and the Financial Statements of the Company are as follows:
valuation and existence of unquoted investments; and
compliance with HM Revenue & Customs conditions for maintenance of approved Venture Capital Trust status.
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 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 is also 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 31 March 2017 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.
Internal Control
The Directors have overall responsibility for keeping under review the effectiveness of the Company's systems of internal controls. The purpose of these controls 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. The system of internal controls 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 internal control systems is carried out. The review covers all material controls including financial, operational and risk management systems. 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 risks to which it is exposed. The process adopted is one whereby the Directors identify the risks to which the Company 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 updated twice a year.
TPIM is engaged to provide administrative including accounting 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 VCT is subject to a full annual audit. The auditors are the same auditors as other VCTs managed by the Investment Manager. The Investment Manager's procedures are subject to internal compliance checks.
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.
Relations with Shareholders
The Board recognises the value of maintaining regular communications with shareholders. In addition to the formal business of the Annual General Meeting, an opportunity is given to all shareholders to question the Board and the Investment Manager on matters relating to the Company's operation and performance. The Board and the Investment Manager will also respond to any written queries made by shareholders during the course of the year and both can be contacted at 18 St Swithin's Lane, London, EC4N 8AD or on 020 7201 8989.
Compliance Statement
The Listing Rules require the Board to report on compliance with the UK Corporate Governance Code (September 2014) provisions throughout the accounting period. With the exception of the limited items outlined below, the Directors consider that the Company has complied throughout the period under review with the provisions set out in the UK Corporate Governance Code (September 2014).
1. New Directors do not receive a full, formal and tailored induction on joining the Board. Such matters are addressed on an individual basis as they arise (B.4.1).
2. Due to the size of the Board and the nature of the Company's business, a formal performance evaluation of the Board, its committees, the individual Directors and the Chairman has not been undertaken. Specific performance issues are dealt with as they arise (B.6.1, B.6.3).
3. The Company does not have a senior Independent Director. The Board does not consider such an appointment appropriate for the Company (A.4.1).
4. The Company conducts a formal review as to whether there is a need for an internal audit function. The Directors do not consider that an internal audit would be an appropriate control for a Venture Capital Trust (C.3.6).
5. As all the Directors are Non-Executive, it is not considered appropriate to appoint a Nomination or Remuneration Committee (B.2.1 and D.2.1).
6. The Audit committee includes three Non-Executive Directors all of whom are considered independent. David Frank is Chairman of the Company and is also chairman of the audit committee but it is not considered appropriate to appoint another independent director. The Board regularly reviews the independence of its Directors (C.3.1).
On behalf of the Board
David Frank
Chairman
15 June 2017
Directors' Remuneration Report
Introduction
This report is submitted in accordance with schedule 8 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008, in respect of the year ended 31 March 2017. This report also meets the Financial Conduct Authority's Listing Rules and describes how the Board has applied the principles relating to Directors' remuneration set out in UK Corporate Governance Code (issued September 2014). The reporting requirements require two sections to be included, a Policy Report and an Annual Remuneration Report which are presented below.
Directors' Remuneration Policy Report
This statement of the Directors' Remuneration Policy was effective following approval by shareholders at the Annual General Meeting on 24 July 2014. The Board currently comprises three Directors, all of whom are Non-Executive. 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. 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.
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 100,000 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.
The articles of association provide that Directors shall retire and be subject to re-election at the first Annual General Meeting after their appointment and that any Director who has not been re-elected for three years shall retire and be subject to re-election at the Annual General Meeting. Also any Director not considered independent shall retire each year and offer himself for re-election at the Annual General Meeting. The Directors' service contracts provide for an appointment of 12 months, after which three months' written notice must be given by either party. A Director who ceases to hold office is not entitled to receive any payment other than accrued fees (if any) for past services. The same policies will apply if a new Director is appointed.
Details of each Director's contract are shown below. The Chairman is paid more than the other Directors to reflect the additional responsibilities of that role. There are no other fees payable to the Directors for additional services outside of their contracts.
Date of Contract
Unexpired term of contract at 31 March 2017
Annual rate of Directors' fees
Policy on payment of loss of office
David Frank, Chairman
11-Nov-10
None
20,000
None
Simon Acland
12-Mar-09
None
17,500
None
Michael Stanes
21-Nov-12
None
17,500
None
It was agreed that the Directors' remuneration would increase when the E Share Class Offer was launched, in the case of David Frank, to 20,000 and in the case of the other Directors to 17,500.
Annual Remuneration Report
The remuneration policy described above has not changed during the last three years. Approval to renew the policy will be sought on 13 July 2017 at the Annual General Meeting and will remain unchanged for another three year period. 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 role is likely to incur a change in remuneration of any one Director.
Directors' Remuneration (audited information)
The fees paid to Directors in respect of the year ended 31 March 2017 and the prior year are shown below:
Emoluments for theyearended
31 March 2017Emoluments for theyearended 31 March 2016
David Frank
18,492
17,500
Simon Acland
15,992
15,000
Michael Stanes
15,992
15,000
50,476
47,500
Employers' NI contributions
607
1,197
Total Emoluments
51,083
48,697
None of the Directors is 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:
31 March 2017
31 March 2016
'000
'000
Dividends paid:
Ordinary Shareholders
-
4,177
A Shareholders
-
2,310
C Shareholders
672
-
Share buy-backs
-
11
Total paid to shareholders
672
6,498
Directors' emoluments
51
48
Directors' Share Interests (audited information)
At 31 March 2017 the Directors held no shares in the Company (2016: none). At 31 March 2017 Simon Acland's wife held 48,750 D Class Shares (2016: 48,750). There have been no changes in the holdings of the Directors or their connected parties between 31 March 2017 and the date of this report. There are no requirements or restrictions on Directors holding shares in the Company.
Company Performance
There have been no material trades in the Company's shares in the period under review. Therefore, no performance graph comparing the share price of the Company over the year ended 31 March 2017 with the total return from a notional investment in the FTSE All-Share index over the same period has been included.
No market maker has been appointed and therefore no current bid and offer price is available for the Company's shares. However the Board's policy is to buy back shares from shareholders at a 10% discount to net asset value. The Company will produce a graph of its share performance once there is sufficient activity that the graph would be meaningful to shareholders.
Statement of Voting at the Annual General Meeting
The 2016 Remuneration Report was presented to the Annual General Meeting in July 2016 and received shareholder approval following a vote. 97% of those voting were in favour and no one abstained.
The 2014 Remuneration Policy was presented to the Annual General Meeting in July 2014 and received shareholder approval following a vote 100% in favour and none abstained.
Statement of the Chairman
At 31 March 2017 the Directors' fees are fixed at 20,000 for the Chairman and 17,500 for each of the other Directors. The remuneration of the Directors reflects the experience of the Board as a whole and is fair and comparable with that of other relevant Venture Capital Trusts that are similar in size and have similar investment objectives and structures.
On behalf of the Board
David Frank
Chairman
15 June 2017
Independent auditor's report to the members of Triple Point Income VCT plc
Our opinion on the financial statements is unmodified
In our opinion the financial statements:
give a true and fair view of the state of the Company's affairs as at 31 March 2017 and of its profit for the year then ended;
have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Who we are reporting to
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
What we have audited
Triple Point Income VCT plc's financial statements for the year ended 31 March 2017 comprise the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in Shareholders' Equity, the Statement of Cash Flows and the related notes.
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.
Overview of our audit approach
Overall materiality: 445,000, which represents approximately 1% of the Company's net assets; and
Key audit risks were identified as valuation of unquoted investments and completeness of investment income.
Our assessment of risk
In arriving at our opinions set out in this report, we highlight the following risks that, in our judgement, had the greatest effect on our audit:
Audit risk
How we responded to the risk
Valuation of unquoted investments (including assets held for sale)
The Company's objective is to build a portfolio of investments in unquoted companies which are cash generative and, therefore, capable of producing income and capital repayments to the Company prior to their disposal by the Company. Unquoted investments amount, by value, to 90.5% of the Company's total assets, and are designated as being at fair value through profit or loss. Measurement of the value of an unquoted investment includes significant assumptions and judgements. We therefore identified the valuation of unquoted investments as a significant risk requiring special audit consideration.
Our audit work included, but was not restricted to:
assessing whether the Company's accounting policy for unquoted investments is in accordance with the requirements of IFRSs as adopted by the European Union and the Association of Investment Companies (AIC) Statement of Recommended Practice (SORP) and testing whether the Company has accounted for unquoted investments in accordance with the policy;
ascertaining an understanding of how the valuations were performed by obtaining the underlying models from the investment manager, discussing the review process and considering whether they were made in accordance with published guidance, in particular the International Private Equity and Venture Capital (IPEVC) Valuation Guidelines;
reviewing and challenging the basis and reasonableness of the assumptions made by the investment manager in conjunction with available supporting information, such as the corroboration of financial inputs to the relevant investee company management accounts or offer letters from the potential buyer as applicable; and
for a sample of investments, engaging our valuation specialists to gain comfort over the discount rates used.
The Company's accounting policies on non-current asset investments and assets held for sale are included in note 2, and its disclosures about unquoted investments held at the year end are included in note 10. The Audit Committee also identified and considered the valuation and existence of unquoted investments as a key area of risk in their report included within the Corporate Governance Statement on page 31, where the Committee also described theaction that it has taken to address this risk.
Completeness of investment income
Revenue consists of interest earned on loans and cash balances, and dividend income received from investee companies. Under International Standard on Auditing (ISA) 240 'The auditor's responsibilities relating to fraud in an audit of financial statements', there is a presumed risk of fraud in revenue recognition. Revenue is also a key factor in demonstrating the performance of the Company's portfolio and considered a significant risk requiring special audit consideration.
Our audit work included, but was not restricted to:
assessing whether the Company's accounting policy for revenue recognition is in accordance with the IFRSs as adopted by the European Union and the AIC SORP and testing its correct application during the year;
performing substantive audit testing on interest income recognised during the year by comparing the actual to expected income, calculated using the interest rates in the loan instruments; and
for accrued interest income, reviewing management's assessment of recoverability by checking to post year end receipts and also by discussion with management.
The Company's accounting policy on income, including its recognition, is included in note 2, and its disclosures about investment income recognised in the year are included in note 4.
Our application of materiality and an overview of the scope of our audit
Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature, timing and extent of our audit work and in evaluating the results of that work.
We determined materiality for the audit of the financial statements as a whole to be 445,000, which is approximately 1% of the Company's net assets. This benchmark is considered the most appropriate because net assets, which are primarily composed of the Company's investment portfolio, is considered to be the key driver of the Company's total return performance.
Materiality for the current year is higher than the level that we determined for the year ended 31 March 2017 to reflect the increase in the Company's net assets.
We use a different level of materiality, performance materiality, to drive the extent of our testing and this was set at 75% of financial statement materiality. We also determine a lower level of specific materiality for certain areas such as the statement of total comprehensive income, directors' remuneration and related party transactions.
We determined the threshold at which we will communicate misstatements to the audit committee to be 22,000. In addition, we will communicate misstatements below that threshold that, in our view, warrant reporting on qualitative grounds.
Overview of the scope of our audit
A description of the generic scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate.
We conducted our audit in accordance with ISAs (UK and Ireland). Our responsibilities under those standards are further described in the 'Responsibilities for the financial statements and the audit' section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Company in accordance with the Auditing Practices Board's Ethical Standards for Auditors, and we have fulfilled our other ethical responsibilities in accordance with those Ethical Standards.
Our audit approach was based on a thorough understanding of the Company's business and is risk based. The day-to-day management of the Company's investment portfolio and the maintenance of the Company's accounting records is outsourced to third-party service providers. Accordingly, our audit work included:
obtaining an understanding of and evaluating design and implementation of controls in place at the relevant third party service providers around key audit risks areas; and
undertaking substantive testing on significant transactions, balances and disclosures, the extent of which was based on various factors such as our overall assessment of risk of material misstatement and the effectiveness of design and implementation of controls around such areas.
Other reporting required by regulations
Our opinions on other matters prescribed by the Companies Act 2006 are unmodified
In our opinion, the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements;
the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements;
the information about internal control and risk management systems in relation to financial reporting processes and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules and Transparency Rules sourcebook made by the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in accordance with applicable legal requirements; and
information about the Company's corporate governance code and practices and about its administrative, management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.
Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in:
the Strategic Report or the Report of the Directors; or
the information about internal control and risk management systems in relation to financial reporting processes and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules.
Matters on which we are required to report by exception
Under the Companies Act 2006 we are required to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit; or
a Corporate Governance Statement has not been prepared by the Company.
Under the Listing Rules, we are required to review:
the directors' statements in relation to going concern and longer-term viability set out on pages 32 and 11 respectively; and
the part of the Corporate Governance Statement relating to the Company's compliance with the provisions of the UK Corporate Governance Code specified for our review.
Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:
materially inconsistent with the information in the audited financial statements; or
apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in the course of performing our audit; or
otherwise misleading.
In particular, we are required to report to you if:
we have identified any inconsistencies between our knowledge acquired during the audit and the directors' statement that they consider the annual report is fair, balanced and understandable; or
the annual report does not appropriately disclose those matters that were communicated to the audit committee which we consider should have been disclosed.
We have nothing to report in respect of any of the above matters.
We also confirm that we do not have anything material to add or to draw attention to in relation to:
the directors' confirmation in the annual report that they have carried out a robust assessment of the principal risks facing the Company including those that would threaten its business model, future performance, solvency or liquidity;
the disclosures in the annual report that describe those risks and explain how they are being managed or mitigated;
the directors' statement in the financial statements about whether they have considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the Company's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements; and
the directors' explanation in the annual report as to how they have assessed the prospects of the Company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether 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, including any related disclosures drawing attention to any necessary qualifications or assumptions.
Responsibilities for the financial statements and the audit
What the directors are responsible for:
As explained more fully in the Directors' Responsibilities Statement set out on page 28, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
What we are responsible for:
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
Nicholas Page
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
15 June 2017
Unaudited Non-Statutory Analysis of - The Ordinary Share Fund
Statement of Comprehensive Income
Year ended
Year ended
31 March 2017
31 March 2016
Revenue
Capital
Total
Revenue
Capital
Total
'000
'000
'000
'000
'000
'000
Investment income
421
-
421
694
-
694
Realised gain on investments
-
-
-
-
342
342
Unrealised gain on investments
-
258
258
-
80
80
Investment return
421
258
679
694
422
1,116
Investment management fees
(163)
(43)
(206)
(183)
(61)
(244)
Other expenses
(44)
-
(44)
(127)
(16)
(143)
Profit before taxation
214
215
429
384
345
729
Taxation
(43)
12
(31)
(33)
12
(21)
Profit after taxation
171
227
398
351
357
708
Profit and total comprehensive income for the year
171
227
398
351
357
708
Basic and diluted earnings per share
0.88p
1.17p
2.05p
1.80p
1.84p
3.64p
Year ended
Year ended
Balance Sheet
31 March 2017
31 March 2016
'000
'000
Non-current assets
Financial assets at fair value through profit or loss
11,705
11,992
Current assets
Assets held for sale
-
608
Receivables
334
333
Cash and cash equivalents
1,632
326
1,966
1,267
Current liabilities
Payables
(98)
(84)
Net assets
13,573
13,175
Equity attributable to equity holders
13,573
13,175
Net asset value per share
69.74p
67.69p
Statement of Changes in Shareholders' Equity
Year ended
Year ended
31 March 2017
31 March 2016
'000
'000
Opening shareholders' funds
13,175
16,649
Purchase of own shares
-
(7)
Issue of new shares
-
3
Profit for the year
398
708
Dividends paid
-
(4,178)
Closing shareholders' funds
13,573
13,175
31 March 2017
31 March 2016
Cost
Valuation
Cost
Valuation
'000
%
'000
%
'000
%
'000
%
Unquoted qualifying holdings
9,381
73.62
10,000
74.98
10,646
84.54
11,014
85.21
Unquoted non-qualifying holdings
1,730
13.58
1,705
12.78
1,618
12.84
1,586
12.27
Financial assets at fair value through profit or loss
11,111
87.20
11,705
87.76
12,264
97.38
12,600
97.48
Cash and cash equivalents
1,632
12.80
1,632
12.24
326
2.62
326
2.52
12,743
100.00
13,337
100.00
12,590
100.00
12,926
100.00
Unquoted Qualifying Holdings
Cinema digitisation
Digima Ltd
1,262
9.90
1,296
9.72
1,262
10.02
1,274
9.86
Digital Screen Solutions Ltd
2,020
15.85
2,070
15.52
2,020
16.04
2,020
15.63
Solar
C More Energy Ltd
1,000
7.85
1,221
9.15
1,000
7.94
1,153
8.92
Green Energy for Education Ltd
475
3.73
752
5.64
475
3.77
608
4.70
PJC Renewable Energy Ltd
5
0.04
-
-
5
0.04
5
0.04
Hydroelectric Power
Elementary Energy Ltd
2,060
16.17
2,102
15.76
2,060
16.36
2,130
16.48
Green Highland Shenval Ltd
359
2.82
359
2.69
1,624
12.90
1,624
12.56
Gas Power
Green Peak Generation Ltd
2,200
17.26
2,200
16.50
2,200
17.47
2,200
17.02
9,381
73.62
10,000
74.98
10,646
84.54
11,014
85.21
Unquoted Non-Qualifying Holdings
Crematorium Management
Furnace Managed Services Ltd
620
4.87
592
4.44
820
6.51
788
6.10
Hydroelectric Power
-
-
Elementary Energy Ltd
310
2.43
310
2.32
344
2.73
344
2.66
Gas Power
Green Peak Generation Limited
-
-
-
-
4
0.03
4
0.03
SME Funding
Hydroelectric Power:
Broadpoint 2 Ltd
350
2.75
350
2.62
-
-
-
-
Other:
Funding Path Ltd
450
3.53
453
3.40
450
3.57
450
3.48
1,730
13.58
1,705
12.78
1,618
12.84
1,586
12.27
Unaudited Non-Statutory Analysis of - The A Ordinary Share Fund
Statement of Comprehensive Income
Year ended
Year ended
31 March 2017
31 March 2016
Revenue
Capital
Total
Revenue
Capital
Total
'000
'000
'000
'000
'000
'000
Investment income
110
-
110
490
-
490
Realised loss on investments
-
-
-
-
(362)
(362)
Unrealised gain/(loss) on investments
-
7
7
-
(101)
(101)
Investment return
110
7
117
490
(463)
27
Investment management fees
(30)
(8)
(38)
(39)
(13)
(52)
Other expenses
(6)
-
(6)
(10)
(4)
(14)
Profit/(loss) before taxation
74
(1)
73
441
(480)
(39)
Taxation
(15)
3
(12)
(1)
2
1
Profit/(loss) after taxation
59
2
61
440
(478)
(38)
Profit/(loss) and total comprehensive income for the year
59
2
61
440
(478)
(38)
Basic and diluted earnings/(loss) per share
1.15p
0.03p
1.18p
8.57p
(9.29p)
(0.72p)
Year ended
Year ended
Balance Sheet
31 March 2017
31 March 2016
'000
'000
Non-current assets
Financial assets at fair value through profit or loss
957
950
Current assets
Assets held for sale
789
789
Receivables
311
313
Cash and cash equivalents
146
78
1,246
1,180
Current liabilities
Payables
(24)
(12)
Net assets
2,179
2,118
Equity attributable to equity holders
2,179
2,118
Net asset value per share
42.46p
41.28p
Statement of Changes in Shareholders' Equity
Year ended
Year ended
31 March 2017
31 March 2016
'000
'000
Opening shareholders' funds
2,118
4,465
Profit/(loss) for the year
61
(38)
Dividends paid
-
(2,309)
Closing shareholders' funds
2,179
2,118
Investment Portfolio
31 March 2017
31 March 2016
Cost
Valuation
Cost
Valuation
'000
%
'000
%
'000
%
'000
%
Unquoted qualifying holdings
875
44.40
789
41.70
875
45.98
789
43.43
Unquoted non-qualifying holdings
950
48.20
957
50.58
950
49.92
950
52.28
Financial assets at fair value through profit or loss
1,825
92.60
1,746
92.28
1,825
95.90
1,739
95.71
Cash and cash equivalents
146
7.40
146
7.72
78
4.10
78
4.29
1,971
100.00
1,892
100.00
1,903
100.00
1,817
100.00
Unquoted Qualifying Holdings
Landfill Gas*
-
Aeris Power Ltd
525
26.64
424
22.41
525
27.59
424
23.34
Craigahulliar Energy Ltd
350
17.76
365
19.29
350
18.39
365
20.09
875
44.40
789
41.70
875
45.98
789
43.43
Unquoted Non-Qualifying Holdings
SME Funding
Other:
Funding Path Ltd
950
48.20
957
50.58
950
49.92
950
52.28
950
48.20
957
50.58
950
49.92
950
52.28
* Assets held for sale
Unaudited Non-Statutory Analysis of - The C Ordinary Share Fund
Year ended
Year ended
31 March 2017
31 March 2016
Revenue
Capital
Total
Revenue
Capital
Total
'000
'000
'000
'000
'000
'000
Investment income
804
-
804
832
-
832
Unrealised gain on investments
-
514
514
-
325
325
Investment return
804
514
1,318
832
325
1,157
Investment management fees
(244)
(70)
(314)
(230)
(77)
(307)
Other expenses
(45)
(2)
(47)
(43)
-
(43)
Profit before taxation
515
442
957
559
248
807
Taxation
(103)
14
(89)
(113)
15
(98)
Profit after taxation
412
456
868
446
263
709
Profit and total comprehensive income for the year
412
456
868
446
263
709
Basic and diluted earnings per share
3.06p
3.40p
6.46p
3.31p
1.96p
5.27p
Year ended
Year ended
Balance Sheet
31 March 2017
31 March 2016
'000
'000
Non current assets
Financial assets at fair value through profit or loss
14,160
14,132
Current assets
Receivables
76
2
Cash and cash equivalents
257
246
333
248
Current liabilities
Payables
(179)
(262)
Net assets
14,314
14,118
Equity attributable to equity holders
14,314
14,118
Net asset value per share
106.49p
105.03p
Statement of Changes in
Year ended
Year ended
Shareholders' Equity
31 March 2017
31 March 2016
'000
'000
Opening shareholders' funds
14,118
13,409
Profit for the year
868
709
Dividends paid
(672)
-
Closing shareholders' funds
14,314
14,118
Investment Portfolio
31 March 2017
31 March 2016
Cost
Valuation
Cost
Valuation
'000
%
'000
%
'000
%
'000
%
Unquoted qualifying holdings
9,430
69.45
10,269
71.23
9,430
67.10
9,755
67.85
Unquoted non-qualifying holdings
3,891
28.66
3,891
26.99
4,377
31.15
4,377
30.45
Financial assets at fair value through profit or loss
13,321
98.11
14,160
98.22
13,807
98.25
14,132
98.30
Cash and cash equivalents
257
1.89
257
1.78
246
1.75
246
1.70
13,578
100.00
14,417
100.00
14,053
100.00
14,378
100.00
Unquoted Qualifying Holdings
Hydroelectric Power
Green Highland Allt Choire A Bhalachain (225) Ltd
3,130
23.05
3,038
21.07
3,130
22.27
3,130
21.77
Green Highland Allt Phocachain (1015) Ltd
2,000
14.73
2,031
14.09
2,000
14.23
2,000
13.91
Green Highland Renewables (Achnacarry) Ltd
4,300
31.67
5,200
36.07
4,300
30.60
4,625
32.17
9,430
69.45
10,269
71.23
9,430
67.10
9,755
67.85
Unquoted Non-Qualifying Holdings
Hydroelectric Power
Green Highland Allt Choire A Bhalachain (225) Ltd
342
2.52
342
2.37
341
2.43
341
2.37
Green Highland Allt Garbh Ltd ST Loan
-
-
-
-
30
0.21
30
0.21
Green Highland Allt Phocachain (1015) Ltd
161
1.19
161
1.12
175
1.25
175
1.22
Green Highland Renewables (Achnacarry) Ltd
100
0.74
100
0.69
133
0.95
133
0.93
SME Funding
Hydroelectric Power:
Broadpoint 2 Ltd
2,484
18.29
2,484
17.23
2,894
20.59
2,894
20.13
Broadpoint 3 Ltd
804
5.92
804
5.58
804
5.72
804
5.59
3,891
28.66
3,891
26.99
4,377
31.15
4,377
30.45
Unaudited Non-Statutory Analysis of - The D Ordinary Share Fund
Year ended
Year ended
31 March 2017
31 March 2016
Revenue
Capital
Total
Revenue
Capital
Total
'000
'000
'000
'000
'000
'000
Investment income
972
-
972
687
-
687
Realised gain on investments
-
-
-
-
1
1
Unrealised gain on investments
-
36
36
-
-
-
Investment return
972
36
1,008
687
1
688
Investment management fees
(239)
(68)
(307)
(141)
(46)
(187)
Other expenses
(47)
(2)
(49)
(76)
(48)
(124)
Profit/(loss) before taxation
686
(34)
652
470
(93)
377
Taxation
(137)
23
(114)
(94)
9
(85)
Profit/(loss) after taxation
549
(11)
538
376
(84)
292
Profit/(loss) and total comprehensive income for the year
549
(11)
538
376
(84)
292
Basic and diluted earnings/(loss) per share
4.01p
(0.08p)
3.93p
2.82p
(0.63p)
2.19p
Year ended
Year ended
Balance Sheet
31 March 2017
31 March 2016
'000
'000
Non current assets
Financial assets at fair value through profit or loss
13,125
13,090
Current assets
Receivables
1,005
561
Cash and cash equivalents
499
382
1,504
943
Current liabilities
Payables
(216)
(158)
Net assets
14,413
13,875
Equity attributable to equity holders
14,413
13,875
Net asset value per share
105.19p
101.26p
Statement of Changes in
Year ended
Year ended
Shareholders' equity
31 March 2017
31 March 2016
'000
'000
Opening shareholders' funds
13,875
5,198
Issue of new shares
-
8,385
Profit for the year
538
292
Closing shareholders' funds
14,413
13,875
Investment Portfolio
31 March 2017
31 March 2016
Cost
Valuation
Cost
Valuation
'000
%
'000
%
'000
%
'000
%
Unquoted qualifying holdings
10,898
80.20
10,928
80.21
10,137
75.25
10,137
75.25
Unquoted non-qualifying holdings
2,191
16.13
2,197
16.13
2,953
21.92
2,953
21.92
Financial assets at fair value through profit or loss
13,089
96.33
13,125
96.34
13,090
97.17
13,090
97.17
Cash and cash equivalents
499
3.67
499
3.66
382
2.83
382
2.83
13,588
100.00
13,624
100.00
13,472
100.00
13,472
100.00
Unquoted Qualifying Holdings
Hydroelectric Power
Green Highland Allt Garbh Ltd
2,710
19.94
2,710
19.89
2,710
20.12
2,710
20.12
Green Highland Allt Ladaidh (1148) Ltd
3,500
25.76
3,500
25.69
3,500
25.98
3,500
25.98
Green Highland Allt Luaidhe (228) Ltd
1,995
14.68
2,047
15.02
1,995
14.81
1,995
14.81
Green Highland Allt Phocachain (1015) Ltd
1,932
14.22
1,910
14.02
1,932
14.34
1,932
14.34
Green Highland Shenval Ltd
761
5.60
761
5.59
-
-
-
-
10,898
80.20
10,928
80.21
10,137
75.25
10,137
75.25
Unquoted Non-Qualifying Holdings
Hydroelectric Power
Green Highland Allt Luaidhe (228) Ltd
185
1.36
185
1.36
185
1.37
185
1.37
Kinlochteacius Hydro Limited
-
-
-
-
762
5.66
762
5.66
SME Funding
Hydroelectric Power:
Broadpoint 3 Ltd
1,206
8.88
1,206
8.85
1,206
8.95
1,206
8.95
Other:
Funding Path Ltd
800
5.89
806
5.92
800
5.94
800
5.94
2,191
16.13
2,197
16.13
2,953
21.92
2,953
21.92
Statement of Comprehensive Income
Year ended
Year ended
31 March 2017
31 March 2016
Note
Rev.
Cap.
Total
Rev.
Cap.
Total
'000
'000
'000
'000
'000
'000
Income
Investment income
4
2,307
-
2,307
2,703
-
2,703
(Loss) arising on the disposal of investments during the year
-
-
-
-
(19)
(19)
Gain arising on the revaluation of investments at the year end
-
815
815
-
304
304
Investment return
2,307
815
3,122
2,703
285
2,988
Expenses
Investment management fees
5
676
189
865
593
197
790
Financial and regulatory costs
32
-
32
24
-
24
General administration
9
-
9
16
-
16
Legal and professional fees
6
51
4
55
55
68
123
Directors' remuneration
7
50
-
50
48
-
48
Interest payable
-
-
-
113
-
113
Operating expenses
818
193
1,011
849
265
1,114
Profit/(loss) before taxation
1,489
622
2,111
1,854
20
1,874
Taxation
8
(298)
52
(246)
(241)
38
(203)
Profit after taxation
1,191
674
1,865
1,613
58
1,671
Profit and total comprehensive income for the year
1,191
674
1,865
1,613
58
1,671
Basic and diluted earnings per share
9
n/a
n/a
n/a
n/a
n/a
n/a
The total column of this statement is the Statement of Comprehensive Income of the Company prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The supplementary revenue return and capital columns have been prepared in accordance with the Association of Investment Companies Statement of Recommended Practice (AIC SORP 2014).
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 are an integral part of these statements.
Balance Sheet
31 March 2017
31 March 2016
Note
'000
'000
Non-current assets
Financial assets at fair value through profit or loss
10
39,947
40,164
Current assets
Assets held for sale
11
789
1,397
Receivables
12
1,726
1,210
Cash and cash equivalents
13
2,534
1,032
5,049
3,639
Total Assets
44,996
43,803
Current liabilities
Payables and accrued expenses
14
253
316
Current taxation payable
264
201
517
517
Net Assets
44,479
43,286
Equity attributable to equity holders of the parent
Share capital
15
518
518
Share redemption reserve
2
2
Share premium
16,307
16,307
Special distributable reserve
27,301
27,447
Capital reserve
(841)
(1,515)
Revenue reserve
1,192
527
Total equity
44,479
43,286
Net asset value per share
17
n/a
n/a
The statements were approved by the Directors and authorised for issue on 15 June 2017 and are signed on their behalf by:
David Frank
Chairman
15 June 2017
Company registration number 6421083.
The accompanying notes are an integral part of this statement.
Statement of Changes in Shareholders' Equity
Issued Capital
Share Redemption Reserve
Share Premium
Special Distributable Reserve
Capital Reserve
Revenue Reserve
Total
'000
'000
'000
'000
'000
'000
'000
Year ended 31 March 2017
Opening balance
518
2
16,307
27,447
(1,515)
527
43,286
Dividends paid
-
-
-
(146)
-
(526)
(672)
Transactions with owners
-
-
-
(146)
-
(526)
(672)
Profit for the year
-
-
-
-
674
1,191
1,865
Profit and total comprehensive income for the year
-
-
-
-
674
1,191
1,865
Balance at 31 March 2017
518
2
16,307
27,301
(841)
1,192
44,479
Capital reserve consists of:
Investment holding gains
1,390
Other realised losses
(2,231)
(841)
Year ended 31 March 2016
Opening balance
434
451
32,405
6,997
(1,573)
1,007
39,721
Issue of new shares
84
-
8,687
(383)
-
-
8,388
Purchase of own shares
-
-
-
(7)
-
-
(7)
Cancellation of share premium
-
(449)
(24,785)
25,234
-
-
-
Dividend paid
-
-
-
(4,394)
-
(2,093)
(6,487)
Transactions with owners
84
(449)
(16,098)
20,450
-
(2,093)
1,894
Profit for the year
-
-
-
58
1,613
1,671
Profit and total comprehensive income for the year
-
-
-
58
1,613
1,671
Balance at 31 March 2016
518
2
16,307
27,447
(1,515)
527
43,286
Capital reserve consists of:
Investment holding gains
575
Other realised losses
(2,090)
(1,515)
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, share redemption reserve and share premium reserve are not distributable. The special distributable reserve was created on court cancellation of the share premium account. The revenue, special distributable and realised capital reserves are distributable by way of dividend.
Statement of Cash Flows
Year ended
Year ended
31 March 2017
31 March 2016
'000
'000
Cash flows from operating activities
Profit before taxation
2,111
1,874
Loss arising on the disposal of investments during the period
-
19
(Gain) arising on the revaluation of investments at the period end
(815)
(304)
Cashflow generated by operations
1,296
1,589
(Increase) in receivables
(571)
(428)
(Decrease) in payables
(63)
(2,196)
Taxation
(183)
(118)
Net cash flows from operating activities
479
(1,153)
Cash flow from investing activities
Purchase of financial assets at fair value through profit or loss
-
(16,707)
Proceeds of sale of financial assets at fair value through profit or loss
1,695
16,005
Net cash flows from investing activities
1,695
(702)
Cash flows from financing activities
Issue of new shares
-
8,388
Purchase of own shares
-
(7)
Dividends paid
(672)
(6,487)
Net cash flows from financing activities
(672)
1,894
Net increase/(decrease) in cash and cash equivalents
1,502
39
Reconciliation of net cash flow to movements in cash and cash equivalents
Opening cash and cash equivalents
1,032
993
Net increase/(decrease) in cash and cash equivalents
1,502
39
Closing cash and cash equivalents
2,534
1,032
The accompanying notes are an integral part of these statements.
Notes to the Financial Statements
1. Corporate Information
The Financial Statements of the Company for the year ended 31 March 2017 were authorised for issue in accordance with a resolution of the Directors on 15 June 2017.
The Company was admitted for listing on the London Stock Exchange on 6 February 2008.
The Company is incorporated and domiciled in Great Britain and registered in England and Wales. The address of its registered office, which is also its principal place of business, is 18 St Swithin's Lane, London EC4N 8AD.
The Company is required to nominate a functional currency, being the currency in which the Company predominantly operates. The functional and reporting currency is sterling, reflecting the primary economic environment in which the Company operates.
The principal activity of the Company is investment. The Company's investment strategy is that at least 70% of the Company's net assets are or will be invested in VCT qualifying unquoted companies. The remaining assets are exposed either to cash or cash-based similar liquid investments or investments originated in line with the Company's VCT Qualifying Investment Policy.
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 the foreseeable future. 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 Financial Statements of the Company for the year to 31 March 2017 have been prepared in accordance with International Financial Reporting Standards ("IFRS") adopted for use in the European Union and complied 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 November 2014 and updated in January 2017, in so far as this does not conflict with IFRS.
The Financial Statements are prepared on a historical cost basis except that investments are shown at fair value through profit or loss.
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 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 is assessed in conjunction with the overall valuation of unlisted financial investments as noted above.
The key judgements made by Directors are in the valuation of unquoted investments. 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 and 11.
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.
Standards issued but not yet effective
The following new standards, amendments to standards and interpretations are not yet effective for the year ended 31 March 2017, and have not been applied in preparing these Financial Statements.
IFRS 9 Financial Instruments (effective 1 January 2018)
IFRS Revenue from contracts with customers (effective 1 January 2018)
All of these changes will be applied by the Company from the effective date but none of them are expected to have a significant impact on the Company's Financial Statements.
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.
Capital Management
Capital management is monitored and controlled using the internal control procedures set out on page 32. The capital being managed includes equity and fixed interest VCT qualifying investments, cash balances and liquid resources including debtors and creditors.
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.
to enter into short term finance only to enhance short term liquidity.
All capital is represented by the value of share capital, distributable and other reserves. Total Shareholder equity at 31 March 2017 was 44.5 million (2016: 43.3 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 pages 5 and 6 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 designated by the Company as "at fair value through profit or loss" in accordance with IAS39 "Financial instruments recognition and measurement". 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 price of recent transactions, discounted cash flows, cost, and initial cost of investment.
listed investments are fair valued at bid price on the relevant date.
Where securities are designated upon initial recognition as 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 2014. 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.
Assets Held for Sale
Current assets classified as held for sale are presented separately and measured at the value expected to be realised on disposal, which is equivalent to fair value.
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 fee, which has been charged 75% to the revenue account and 25% to the capital account (2016: 75% revenue, 25% capital) 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 their net asset value divided by the Company's net asset value.
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 into. 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. Dividends and distributions relating to equity instruments are debited direct to equity.
Issued Share Capital
Ordinary Shares, A shares, C Shares, D Shares and E 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 under IAS 39.
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, share redemption reserve and share premium reserve are not distributable. The special distributable reserve was created on court cancellation of the share premium account. The revenue, special distributable and realised capital reserves are distributable by way of dividend.
3. Segmental Reporting
The Company only has one class of business, being investment activity. All revenues and assets are generated and held in the UK.
4. Investment Income *
Year ended
Year ended
31 March 2017
31 March 2016
Ord.
A
C
D
Ord.
A
C
D
Shares
Shares
Shares
Shares
Total
Shares
Shares
Shares
Shares
Total
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
Loan stock interest
421
110
804
972
2,307
458
55
828
683
2,024
Dividends receivable
-
-
-
-
-
232
434
-
-
666
Interest receivable on bank balances
-
-
-
-
-
4
1
4
4
13
421
110
804
972
2,307
694
490
832
687
2,703
5. Investment Management Fees
TPIM provides investment management and administration services to the Company under an Investment Management Agreement effective 6 February 2008 and deeds of variation to that agreement effective 21 November 2012, 28 October 2014 and 7 October 2016.
Ordinary Shares: The agreement provides for an investment management fee of 1.50% per annum of net assets payable quarterly in arrear for the Ordinary Shares. For the Ordinary Shares issued under the 2007 offer the agreement ran until 6 February 2014 after which the management fee of 1.5% has not been charged. For all other Ordinary Shares the appointment shall continue until at least 30 April 2018. Thereafter there is a 1% exit fee on all funds returned to shareholders.
A Shares: The agreement provides for an investment management fee of 1.50% per annum of net assets payable quarterly in arrear. The appointment shall continue until at least 30 April 2017. Thereafter there is a 1% exit fee on all funds returned to shareholders.
C shares: The agreement provides for an administration and investment management fee of 2% per annum of net assets payable quarterly in arrear for an appointment of at least six years from the admission of those shares. Subject to distributions to the C Shareholders exceeding the C Share hurdle, the Investment Manager will be entitled to a performance incentive fee of 20%.
D shares: The agreement provides for an administration and investment management fee of 2% per annum of net assets payable quarterly in arrear for an appointment of at least six years from the admission of those shares. Subject to distributions to the D Shareholders exceeding the D Share hurdle, the Investment Manager will be entitled to a performance incentive fee of 20%.
E shares: The agreement provides for an administration and investment management fee of 2% per annum of net assets payable quarterly in arrear for an appointment of at least six years from the admission of those shares. Subject to distributions to the E Shareholders exceeding the E Share hurdle, the Investment Manager will be entitled to a performance incentive fee of 20%.
To date there have been no performance fees paid.
An administration fee equal to 0.25% per annum of the Company's net assets is payable quarterly in arrear.
Year ended
Year ended
31 March 2017
31 March 2016
Ord.
A
C
D
Ord.
A
C
D
Shares
Shares
Shares
Shares
Total
Shares
Shares
Shares
Shares
Total
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
Investment Management Fees
173
32
279
273
757
209
45
273
166
693
Administration Fees
33
6
35
34
108
35
7
34
21
97
206
38
314
307
865
244
52
307
187
790
6. Legal and Professional Fees *
Legal and professional fees include remuneration paid to the Company's auditor, Grant Thornton UK LLP, as shown in the following table:
Year ended
Year ended
31 March 2017
31 March 2016
Ord.
A
C
D
Ord.
A
C
D
Shares
Shares
Shares
Shares
Total
Shares
Shares
Shares
Shares
Total
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
Fees payable to the Company's auditor:
- for the audit of the financial statements
7
2
9
9
27
10
2
8
7
27
- for taxation compliance services
-
-
-
-
-
1
-
1
1
3
7
2
9
9
27
11
2
9
8
30
7. Directors' Remuneration *
Year ended
Year ended
31 March 2017
31 March 2016
Ord.
A
C
D
Ord.
A
C
D
Shares
Shares
Shares
Shares
Total
Shares
Shares
Shares
Shares
Total
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
David Frank
6
1
6
5
18
6
2
5
5
18
Simon Acland
5
1
5
5
16
5
1
4
5
15
Michael Stanes
5
-
5
6
16
6
1
5
3
15
Total
16
2
16
16
50
17
4
14
13
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.
* Disclosure by share class is unaudited
8. Taxation *
Year ended
Year ended
31 March 2017
31 March 2016
Ord.
A
C
D
Ord.
A
C
D
Shares
Shares
Shares
Shares
Total
Shares
Shares
Shares
Shares
Total
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
Profit/(loss) on ordinary activities before tax
429
73
957
652
2,111
729
(39)
807
377
1,874
Corporation tax @ 20%
86
15
192
130
423
146
(8)
162
75
375
Effect of:
-
Capital (gains)/losses not taxable
(52)
(2)
(103)
(7)
(164)
(84)
93
(65)
-
(56)
Income received not taxable
-
-
-
-
-
(46)
(87)
-
-
(133)
Disallowed expenditure
-
-
-
-
3
1
-
10
14
Unrelieved tax losses arising in the year
-
-
-
(1)
-
-
-
(1)
Prior year adjustment
(3)
(1)
-
(9)
(13)
3
-
1
-
4
Tax charge
31
12
89
114
246
21
(1)
98
85
203
Capital gains and losses are exempt from corporation tax due to the Company's status as a Venture Capital Trust.
9. Earnings/(loss) per Share
Earnings per Ordinary Share is 2.05p (2016: 3.64p) based on the profit after tax of 398,000 (2016: 708,000) and on the weighted average number of shares in issue during the period of 19,463,120 (2016:19,474,787).
Earnings per A Share is 1.18p (2016: loss 0.72p) based on the profit after tax of 61,000 (2016: loss 38,000) and on the weighted average number of shares in issue during the period of 5,131,353 (2016: 5,131,353).
Earnings per C Share are 6.46p (2016: 5.27p) based on the profit after tax of 868,000 (2016: 709,000) and on the weighted average number of shares in issue during the period of 13,441,438 (2016: 13,441,438).
Earnings per D Share are 3.93p (2016: 2.19p) based on the profit after tax of 538,000 (2016: 292,000) and on the weighted average number of shares in issue during the period of 13,701,636 (2016: 13,325,044).
There were no changes to the number of shares in issue during the year therefore the weighted average number of shares in issue during the year for all share classes is equal to the number of shares at 31 March 2017.
There are no potentially dilutive capital instruments in issue and, therefore, no diluted return per share figures are included in these Financial Statements.
* Disclosure by share class is unaudited
10. Financial Assets at Fair Value through Profit or Loss
Investments
Fair Value Hierarchy:
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.
Further details of these investments are provided in the Investment Manager's Review and Investment Portfolio.
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:
Sector
Valuation Techniques
Significant unobservable inputs
Inter relationship between significant unobservable inputs and fair value measurement
Estimated fair value would increase/(decrease) if:
Cinema Digitisation
Discounted cash flows: The valuation model considers the present value of expected payment, discounted using a risk-adjusted discount rate.
Discount rate 4.50%
The discount rate was lower/(higher)
Hydroelectric Power
Discounted cash flows: The valuation model considers the present value of expected payment, discounted using a risk-adjusted discount rate.
Discount rate between 9% and 11.10%
Inflation rate 2%
The discount rate was lower/(higher)
The inflation rate was higher/(lower)
Solar
Discounted cash flows: The valuation model considers the present value of expected payment, discounted using a risk-adjusted discount rate.
Discount rate 8%
Inflation rate 2%
The discount rate was lower/(higher)
The inflation rate was higher/(lower)
Consideration has been given 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.
Where discount rates have been applied to the unquoted investments, alternative discount rates have been considered. Two alternative scenarios for each investment have been modelled, a more prudent assumption (downside case) and a more optimistic assumption (upside case). Applying the downside alternative, the aggregate change in value of the unquoted investments would be 1.3 million or 5.9 per cent lower. Using the upside alternative the aggregate value of the unquoted investments would be 1.9 million or 8.6 per cent higher.
Movements in investments held at fair value through the profit or loss during the year to 31 March 2017 were as follows:
Year ended 31 March 2017 *
Level 3 Unquoted Investments
Ord Shares
A Shares
C Shares
D Shares
Total
'000
'000
'000
'000
'000
Opening cost
11,789
950
13,807
13,090
39,636
Opening investment holding losses
203
-
325
-
528
Opening fair value
11,992
950
14,132
13,090
40,164
Transfers between share classes
(411)
-
(350)
761
-
Disposal proceeds
(742)
-
(136)
(762)
(1,640)
Investment holding gains
258
7
514
36
815
Reclassification as assets held for sale
608
-
-
-
608
Closing fair value at 31 March 2017
11,705
957
14,160
13,125
39,947
Closing cost
11,111
950
13,321
13,089
38,471
Closing investment holding gains
594
7
839
36
1,476
Year ended 31 March 2016 *
Level 3 Unquoted Investments
Ord Shares
A Shares
C Shares
D Shares
Total
'000
'000
'000
'000
'000
Opening cost
7,759
875
13,126
7,432
29,192
Opening investment holding (losses)/gains
128
15
-
-
143
Opening fair value
7,887
890
13,126
7,432
29,335
Purchases at cost
5,878
950
1,511
8,368
16,707
Disposal proceeds
(1,849)
-
(830)
(2,711)
(5,390)
Realised gains/(losses)
1
-
-
1
2
Investment holding losses
75
(101)
325
-
299
Reclassification as assets held for sale
-
(789)
-
-
(789)
Closing fair value at 31 March 2016
11,992
950
14,132
13,090
40,164
Closing cost
11,789
950
13,807
13,090
39,636
Closing investment holding losses
203
-
325
-
528
All investments are designated as fair value through the 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.
* Disclosure by share class is unaudited
Material disposals during the year
Investee Company
Cost
Opening Valuation
Disposal
Realised Gain/(loss)
Green Highland Shenval Ltd
504,000
504,000
504,000
-
Kinlochteacius Hydro Ltd
761,319
761,319
761,319
-
1,265,319
1,265,319
1,265,319
-
11. Assets Held for Sale *
Year ended
Year ended
31 March 2017
31 March 2016
Ord.
A
C
D
Ord.
A
C
D
Shares
Shares
Shares
Shares
Total
Shares
Shares
Shares
Shares
Total
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
Aeris Power Ltd
-
424
-
-
424
-
424
-
-
424
Craighulliar Energy Ltd
-
365
-
-
365
-
365
-
-
365
Green Energy for Education Ltd
-
-
-
-
-
608
-
-
-
608
-
789
-
-
789
608
789
-
-
1,397
Green Energy for Education Ltd previously treated as an asset held for sale has been reclassified as a financial asset at fair value through profit or loss as at 31 March 2017, following the Investment Managers recommendation not to sell the investment in the next 12 months.
Assets held for Sale are measured at fair value through profit and loss at the discounted price expected to be achieved through the expected sale after the year end. Income for the year relating to these investments amounted to 36,000 and expenses were nil. These assets are fair value through profit or loss and classified as Level 3 (2016: Level 3).
* Disclosure by share class is unaudited
12. Receivables *
31 March 2017
31 March 2016
Ord. Shares
A Shares
C Shares
D Shares
Total
Ord. Shares
A Shares
C Shares
D Shares
Total
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
Receivables
332
311
74
1,003
1,720
321
313
1
545
1,180
Prepayments and accrued income
2
-
2
2
6
13
-
1
16
30
334
311
76
1,005
1,726
334
313
2
561
1,210
13. Cash and Cash Equivalents
Cash and cash equivalents comprise deposits with The Royal Bank of Scotland plc.
14. Payables and Accrued Expenses *
31 March 2017
31 March 2016
Ord. Shares
A Shares
C Shares
D Shares
Total
Ord. Shares
A Shares
C Shares
D Shares
Total
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
Payables
52
9
78
81
220
-
-
77
-
77
Accrued expenses
10
2
11
10
33
67
14
90
68
239
62
11
89
91
253
67
14
167
68
316
15. Share Capital
31 March 2017
31 March 2016
Ordinary Shares of 0.01 each
Issued & Fully Paid
No. Of Shares
19,463,120
19,463,120
Par Value '000
195
195
A Ordinary Shares of 0.01 each
Issued & Fully Paid
Number of shares
5,131,353
5,131,353
Par Value '000
51
51
C Ordinary Shares of 0.01 each
Issued & Fully Paid
Number of shares
13,441,438
13,441,438
Par Value '000
135
135
D Ordinary Shares of 0.01 each
Issued & Fully Paid
Number of shares
13,701,636
13,701,636
Par Value '000
137
137
Total Shares of 0.01 each
Issued & Fully Paid
Number of shares
51,737,547
51,737,547
Par Value '000
518
518
The rights attached to each class of share are disclosed in the Directors' Report on pages 25 and 26.
On 15 May 2017 a new E Share Class offer closed with a total of 28,949,575 E Shares being issued.
* Disclosure by share class is unaudited
16. 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 5 and 6.
The following table discloses the financial assets and liabilities of the Company in the categories defined by
IAS 39, "Financial Instruments; Recognition & Measurement".
Total value
Loan and receivables
Financial liabilities held at amortised cost
Designated at fair value through profit or loss
31 March 2017
Assets:
Financial assets at fair value through profit or loss
39,947
-
-
39,947
Assets held for Sale
789
-
-
789
Receivables
1,720
1,720
-
-
Cash and cash equivalents
2,534
2,534
-
-
44,990
4,254
-
40,736
Liabilities:
Other payables
220
-
220
-
Taxation payable
264
-
264
-
Accrued expenses
33
-
33
-
517
-
517
-
31 March 2017
Assets:
Financial assets at fair value through profit or loss
40,164
-
-
40,164
Assets held for Sale
1,397
-
-
1,397
Receivables
1,180
1,180
-
-
Cash and cash equivalents
1,032
1,032
-
-
43,773
2,212
-
41,561
Liabilities:
Other payables
77
-
77
-
77
-
77
-
Fixed Asset Investments (see note 10 and 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 in 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.
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:
Market Risk
The Company's VCT qualifying investments are held in small and medium-sized unquoted companies 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 17 to 23.
An increase of 1% in the value of investments would increase the capital profits for the period and the net asset value at 31 March 2017 by 407,000. A decrease of 1% would reduce the capital profits and net asset value by the same amount. A movement of 1% is used as a multiple to demonstrate the impact of varying changes on the capital profits and net asset value of the Company.
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 VCT qualifying holdings are part equity and part loan. The loan element of investments totals 18,949,000 (2016: 19,252,000) and is subject to fixed interest rates for the five year loan terms and as a result there is no cashflow 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 amounts held in variable rate investments at the balance sheet date are as follows:
31 March 2017
31 March 2016
'000
'000
Cash on deposit
2,534
1,032
2,534
1,032
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 31 March 2017. The Board believes that in the current economic climate a movement of 1% is a reasonable illustration.
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.
31 March 2017
31 March 2016
'000
'000
Qualifying Investment loans
18,949
19,252
Non Qualifying Investment loans
8,220
9,352
Cash on deposit
2,534
1,032
Receivables
1,720
1,180
31,423
30,816
The Company's bank accounts are maintained with The Royal Bank of Scotland plc ("RBS") whose credit quality and financial position are monitored by the Investment Manager.
Credit risk arising on unquoted loan stock held within unlisted investments is considered to be part of market risk as disclosed above.
Foreign Currency Risk
The Company does not have exposure to material foreign currency risks.
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 31 March 2017 cash amounted to 2,534,000 (2016: 1,032,000).
17. Net Asset Value per Share
The net asset value per Ordinary Share is 69.74p (2016: 67.69p) and is based on Net Assets of 13,573,000 (2016: 13,175,000) divided by the 19,463,120 (2016: 19,463,120) Ordinary Shares in issue.
The net asset value per A Ordinary Share is 42.46p (2016: 41.28p) and is based on Net Assets of 2,179,000 (2016: 2,118,000) divided by the 5,131,353 (2016: 5,131,353) A Ordinary Shares in issue.
The net asset value per C Ordinary Share is 106.49p (2016: 105.03p) and is based on Net Assets of 14,314,000 (2016: 14,118,000) divided by the 13,441,438 (2016: 13,441,438) C Ordinary Shares in issue.
The net asset value per D Ordinary Share is 105.19p (2016: 101.26p) and is based on Net Assets of 14,413,000 (2016: 13,875,000) divided by the 13,701,636 (2016: 13,701,636) D Ordinary Shares in issue.
18. Commitments and Contingencies
The Company has no outstanding commitments or contingent liabilities.
19. Relationship with Investment Manager
During the period, TPIM received 864,459 which has been expensed (2016: 790,444) for providing management and administrative services to the Company. At 31 March 2017 220,315 was owing to TPIM (2016: 278,385).
20. Related Party Transactions
The Directors' Remuneration Report on pages 34 to 36 discloses the Directors remuneration and shareholdings.
21. Post Balance Sheet Events
During the year the Company's shareholders approved proposals for a new E Share Class offer. At the year end no shares had been issued. The Offer closed on 15 May 2017 raising 30 million with a total of 28,949,575 E Shares being issued.
22. Dividends
The Company paid its first dividend to C Class Shareholders of 672,072 equal to 5p per share on 8 July 2016.
The Board has resolved to pay a dividend to Ordinary Class Shareholders of 1,459,734 equal to 7.5p per share which will paid on 14 July 2017 to shareholders on the register on 30 June 2017.
The Board has resolved to pay a dividend to A Class Shareholders of 1,282,838 equal to 25p per share which will paid on 14 July 2017 to shareholders on the register on 30 June 2017.
The Board has resolved to pay a dividend to C Class Shareholders of 672,072 equal to 5p per share which will be paid on 14 July 2017 to shareholders on the register on 30 June 2017.
The Board has resolved to pay the first dividend to D Class Shareholders of 685,082 equal to 5p per share which will paid on 14 July 2017 to shareholders on the register on 30 June 2017.
Information
Details of Advisers
Secretary and Registered Office:
Triple Point Investment Management LLP
18 St Swithin's Lane
London
EC4N 8AD
Registered Number
06421083
FCA Registration number
659457
Investment Manager and Administrator
Triple Point Investment Management LLP
18 St Swithin's Lane
London
EC4N 8AD
Tel: 020 7201 8989
Independent Auditor
Grant Thornton UK LLP
Chartered Accountants and Statutory Auditor
30 Finsbury Square
London
EC2P 2YU
Solicitors
Howard Kennedy LLP
No. 1 London Bridge
London
SE1 9BG
Registrars
Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen
West Midlands
B63 3DA
VCT Taxation Advisers
Philip Hare & Associates LLP
First floor
4-6 Staple Inn
Holborn
London
WC1V 7QH
Bankers
The Royal Bank of Scotland plc
54 Lime Street
London
EC3M 7NQ
Shareholder Information
The Company
Triple Point Income VCT plc (formerly TP70 2008(I) VCT plc) is a Venture Capital Trust. The Investment Manager is Triple Point Investment Management LLP.
Financial Calendar
The Company's financial calendar is as follows:
19 July 2017 Annual General Meeting
November 2017 Interim report for the six months ending 30 September 2017 despatched
June 2018 Results for the year to 31 March 2018 announced; Annual Report and Financial Statements published.
Notice of Annual General Meeting
NOTICE is hereby given that the Annual General Meeting of Triple Point Income VCT plc will be held at 18 St. Swithin's Lane, EC4N 8AD at 1.30pm on Thursday, 19 July 2017 for the following purposes:
Ordinary Business
1. To receive, consider and adopt the Report of the Directors and Financial Statements for the year ended 31 March 2017 together with the Independent Auditors Report thereon (Ordinary Resolution).
2. To approve the Directors' Remuneration Report for the year ended 31 March 2017 (Ordinary Resolution).
3. To approve the Directors' Remuneration Policy (Ordinary Resolution)
4. To re-elect David Frank as a Director (Ordinary Resolution).
5. To re-appoint Grant Thornton UK LLP as auditor and determine their remuneration (Ordinary Resolution).
Special Business
6. That the Company be and is hereby authorised in accordance with s701 of the Companies Act 2006 (the "Act") to make one or more market purchases (as defined in section 693(4) of the Act) of Ordinary Shares, A Shares, C Shares, D Shares and E Shares provided that:
(i) the maximum aggregate number of Ordinary Shares authorised to be purchased is an amount equal to 10% of the issued Ordinary Shares as at the date of this Resolution;
(ii) the maximum aggregate number of A Shares authorised to be purchased is an amount equal to 10% of the issued A Shares as at the date of this Resolution;
(iii) the maximum aggregate number of C Shares authorised to be purchased is an amount equal to 10% of the issued C Shares as at the date of this Resolution;
(iv) the maximum aggregate number of D Shares authorised to be purchased is an amount equal to 10% of the issued D Shares as at the date of this Resolution;
(v) the maximum aggregate number of E Shares authorised to be purchased is an amount equal to 10% of the issued E Shares as at the date of this Resolution;
(vi) the minimum price which may be paid for an Ordinary Share, A Share, C Share, D Share or E Share is 1 pence;
(vii) the maximum price which may be paid for an Ordinary Share, A Share, C Share, D Share or E Share is an amount, exclusive of expenses, equal to 105 per cent. of the average of the middle market prices for the Ordinary Shares, A Shares, C Shares, D Shares or E Shares as derived from the Daily Official List of the UK Listing Authority for the five business days immediately preceding the day on which that Ordinary Share, A Share, C Share, D Share or E Shares (as applicable) is purchased; and
(viii) this authority shall expire either at the conclusion of the next Annual General Meeting of the Company or 15 months following the date of the passing of this Resolution, whichever is the first to occur (unless previously renewed, varied or revoked by the Company in general meeting), provided that the Company may, before such expiry, make a contract to purchase its own shares which would or might be executed wholly or partly after such expiry, and the Company may make a purchase of its own shares in pursuance of such contract as if the authority hereby conferred had not expired. (Special Resolution).
By Order of the Board
David Frank
Director
Registered Office:
18 St Swithin's Lane
London
EC4N 8AD
15 June 2017
Notes:
(i) A member entitled to vote at the Meeting is entitled to appoint one or more proxies to attend and, on a poll, vote on his or her behalf. A proxy need not be a member of the Company.
(ii) A form of proxy is enclosed. To be effective, the instrument appointing a proxy (together with the power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority) must be deposited at or posted to the office of the registrars of the Company, Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA, so as to be received not less than 48 hours before the time fixed for the Meeting. Completion and return of the form of proxy will not preclude a member from attending or voting at the Meeting in person if he or she so wishes.
(iii) Members who hold their shares in uncertificated form must be entered in the Company's register of Members 48 hours before the Meeting to be entitled to attend or vote at the Meeting. Such shareholders may only cast votes in respect of Ordinary Shares held by them at such time.
(iv) Copies of the service contracts of each of the Directors, the register of Directors' interests in shares of the Company kept in accordance with the Listing Rules and a copy of the Memorandum and Articles of Association of the Company, will be available for inspection at the registered office of the Company during usual business hours on any week day (Saturdays, Sundays and public holidays excepted) from the date of this notice until the date of the Annual General Meeting and at the place of the Annual General Meeting from at least 15 minutes prior to and until the conclusion of the Annual General Meeting.
Form of Proxy
Relating to the 2017 Annual General Meeting of Triple Point Income VCT plc
I/We
BLOCK CAPITALS PLEASE - Name in which shares registered
of
hereby appoint.
or failing him/her the Chairman of the meeting to be my/our proxy and vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held at 1.30pm on Thursday 19 July 2017, notice of which was sent to shareholders with the Directors' Report and the Accounts for the period ended 31 March 2017, and at any adjournment thereof. The proxy will vote as indicated below in respect of the resolutions set out in the notice of meeting:
Resolution number
For
Against
Withheld
1.
To receive, consider and adopt the Report of the Directors and the Financial Statements for the year ended 31 March 2017 together with the Independent Auditors Report.
2.
To approve the report set out in the Directors' Remuneration Report for the year ended 31 March 2017.
3.
To approve the Directors' Remuneration Policy.
4.
To re-elect David Frank as a Director.
5.
To re-appoint Grant Thornton UK LLP as auditor and determine their remuneration.
6.
To authorise the Directors to make market purchases of the Company's own shares (Special Resolution).
Signed: ....................................................................... Dated: ................................................ ..2017
Notes
1. A member wishing to appoint a person other than the Chairman of the meeting as proxy should insert the name and address of such person in the space provided.
2. Use of the proxy form does not preclude a member from attending and voting in person.
3. Where this form of proxy is executed by a corporation it must be either under its seal or under the hand of an officer or attorney duly authorised.
4. If the proxy form is signed and returned without any indication as to how the proxy shall vote, the proxy will exercise his/her discretion as to whether and how he/she votes.
5. To be valid, the proxy form must be received by Neville Registrars at Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA no later than 48 hours before the commencement of the meeting.
This information is provided by RNSThe company news service from the London Stock ExchangeENDFR SFMFDIFWSELM
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