Draper Esprit PLC Annual Report 2017

FY2017 Annual Report · Draper Esprit PLC

Loading PDF…

Backing Europe’s
most ambitious
entrepreneurs

Draper Esprit plc
Annual Report 2017

Draper Esprit is one of the most
active venture capital firms in Europe,
developing and investing in disruptive,
high growth technology companies.
We believe the best entrepreneurs
in Europe are capable of building
the global businesses of the future.
We fuel their growth with long-
term capital, access to international
networks and decades of experience
building businesses.

Highlights 2017
Financial highlights

£33.2m

Profit after tax of £33.2 million

£112.7m

Gross primary portfolio value increased
by 43% to £112.7 million

370.0p

NAV per share of 370.0 pence

£150.7m

Net Assets including goodwill,
of £150.7 million

Operational highlights

– The Group has invested in 13 new

and 6 existing portfolio companies.
– Core portfolio holdings have grown

by 30%.

– Significant cash realisations of £42.0

million in plc (including amounts held in
escrow), of which £37.1 million has already
been deployed into the next generation of
opportunities and to further support our
existing portfolio.

– £160.0 million additional capital raised

across the Group post year end. £100.0
million was raised by new and existing
shareholders in the plc, £25.0 million was
raised across the EIS and VCT vehicles
and £35.0 million for secondary deals.
– Hired experienced team of investment

professionals and appointed Ben
Wilkinson as new CFO in October 2016.

CONTENTS

CHAIRMAN’S INTRODUCTION

Strategic Report
01 Chairman’s Introduction
02 Our Business Model
03 Investment Platform
04 Our Investment Approach
06 CEO’s Statement
10 Our Team
12 Draper Venture Network
14 The Future of Venture Capital
16 Portfolio Review
18 Select Portfolio Companies
22 Financial Review
25 Principal Risks

Governance
28 Board of Directors
30 Chairman’s Corporate Governance

Introduction

31 Corporate Governance Report
33 Audit Committee Report
34 Directors’ Remuneration Report
37 Directors’ Report
39 Statement of Directors’

Responsibilities

Financials
40 Independent Auditor’s Report
42 Consolidated Statement of
Comprehensive Income
43 Consolidated Statement of

Financial Position

44 Consolidated Statement of Cash Flows
45 Consolidated Statement of Changes

in Equity

46 Notes to the Consolidated

Financial Statements

66 Statement of Company Financial

Position

67 Company Statement of Changes

in Equity

68 Notes to the Company Financial

Statements

73 Directors, Secretary And Advisers
74 Notice of Annual General Meeting
78 Glossary

The Strategic Report comprising the
inside cover to page 27 has been
approved by the Board and signed
on its behalf by

S. M. Chapman
24 July 2017

We continue to invest
in forward-thinking
and innovative
businesses, a standard
we also hold ourselves
to as we continue to
break new ground in
our marketplace.”

A very warm welcome to all our
shareholders to our maiden Annual
Report. It has been an extremely active
and productive year for the Company
since we listed in June 2016 on London’s
AIM and the ESM in Ireland.

The IPO, which included the acquisition
of Esprit Capital Partners LLP and Draper
Esprit (Ireland) Limited to form the Group,
received strong support from new and
existing shareholders, including several
prominent City institutions, successful
entrepreneurs, and family offices.

Since then, management has expanded
the team by adding new talent to give us
the capacity to drive more investments in
high growth companies, and has
increased our investments into selective
portfolio companies. We have been very
focused and determined to do what we
said we would do at the time of the IPO.
We aim to deliver significant returns to
shareholders over the longer term by
growing our Net Asset Value (“NAV”)
and target a portfolio return of 20% p.a.,
underpinned by an average of 30%
revenue growth in our core investee
companies.

We provide long-term capital and have
significant resources to deploy. Our
ambition is to build a bridge between
institutional and retail capital and high
growth private companies. We not only
screen deal flow but actively manage
the portfolio companies, helping the
entrepreneurs with a hands-on approach
to build businesses that scale. Post
year-end we have implemented the next
stage of this strategy by raising a further
£100.0 million from new and existing
institutional shareholders, to invest in the
next generation of tech entrepreneurs in
Europe and the UK. In addition to this, we
have raised £60.0 million across our EIS,
VCT and Secondary funds.

We continue to invest in forward-thinking
and innovative businesses, a standard we
also hold ourselves to as we continue to
break new ground in our marketplace. In
this regard, we have made a great start
and I would like to thank our entire team,
Board colleagues, shareholders, advisers
and wider network of contacts for their
support and hard work over the year.

Karen Slatford
Non-Executive Chair

See more at:
www.draperesprit.com

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

OUR BUSINESS MODEL

Investing in the most innovative
entrepreneurs

We invest in growing technology companies across
Europe. We source the best deals from thousands of
companies and provide them with capital, expertise and
networks to fuel their growth.

Draper Esprit invests in innovative
technology companies across Europe.
The Company provides long-term
capital to entrepreneurs, a unique
proposition for the portfolio companies
in a market dominated by fixed-term
funds. With the combination of the
plc balance sheet together with tax
efficient capital and secondary funds,
our portfolio companies are offered
a holistic funding platform which can
support diverse capital requirements.

The Company not only provides the
capital, but also extensive hands-on
support for entrepreneurs as they build
the businesses. When companies partner
with Draper Esprit, they get immediate
access to the Draper Venture Network.
This is the only global network of funds
of its kind, which not only helps the
companies to internationalise across the
world, but also facilitates introductions
to global corporates, helping the
investee companies navigate complex
sale cycles. Draper Esprit also sits on
the board of the investee companies,
providing advice and using their network
to ensure that the very best people are

hired as the companies expand. This
hands-on approach enables portfolio
companies to reach their potential.

Draper Esprit’s unique funding platform,
the ability to deploy long-term capital,
and the extensive support they provide
to entrepreneurs as they grow their
businesses ensure that the Company
sees the best deals in the market.

The model has been refined over
10 years by the investment team
and by over 20 years of investing
experience of the management team.

Draper Esprit’s business model

Select, build, grow
Draper Esprit seeks out high growth
companies originating from across
Europe that:
• Operate in new markets with the

potential for strong cross-border or
global expansion.

• Are run by impressive entrepreneurs
who have the ability to build world-
class management teams.

• Have the potential to address large

new markets or disrupt major existing
ones, utilising technology.

• Have competitive barriers to entry to
support strong gross margins and
capital efficient business models.

• Have the potential to be global sector

leaders.

• Will be attractive candidates for

acquisition by large corporations or
public ownership by institutions by
way of an IPO, with valuations ranging
from US$50.0 million to over
US$1.0 billion.

• Will generate multiples of invested

capital for investors.

Investment platform
The Company utilises three pools of
capital to invest in companies: the plc
balance sheet; tax-efficient investing in
EIS/VCT; and Secondary funds backed by
institutional capital focused on this space

The plc balance sheet forms the core
investment vehicle for the Group. 30% of
the Group’s investment capital goes
towards smaller early stage investments
with approximately 70% being invested in
larger growth stage investments. The
permanent capital model of a listed
vehicle also provides additional flexibility
to build stakes in the top performing
investments over time as opportunities
arise.

EIS and VCT (see below) tax efficient pools
of capital are investing alongside the plc
into the same deals. The ability to co-
invest using these different vehicles
enables the Company to hold a more
material stake in the portfolio companies.
The Company also receives management
fees from the EIS, VCT and secondary
funds which offset management costs for
plc shareholders.

1: DEALFLOW: SELECT, BUILD, GROW

2: INVESTMENT PLATFORM

+2,000

ENTREPRENEURS

+1,000

MEETINGS

+100

DETAILED
REVIEWS

+10-12

PORTFOLIO
COMPANIES &
FOLLOW ON
INVESTMENT

EIS and VCT co-investment vehicles

Plc balance sheet

LP secondary co-investment vehicle

Draper Esprit plc
Annual Report and Accounts 2017

The Group fixes the percentage allocated
to co-investment funds alongside the plc
on a periodic basis, according to the
available resources for that period.

EIS co-investment funds
Through its ownership of Encore
Ventures (an FCA authorised and
regulated management vehicle), the
Group manages six EIS co-investment
funds, currently with a total of over
£40.0 million under management.

The Encore funds have been
independently reviewed for four years
in a row and have been ranked number
one Growth EIS fund. They have
received a score of 88/100, the highest
of any EIS fund as of January 20171.

VCT co-investment funds
During the year the Company acquired a
30.77% stake in a leading VCT manager,
Elderstreet Holdings Limited, with an
option to acquire the balance. Elderstreet
Holdings Limited manages Elderstreet
VCT plc, LSE: EDV, which currently has
assets in excess of £35.0 million.

Secondary investments
The Group also acquires venture capital
portfolios through its division, Draper
Esprit Secondaries. The Company
invests in and receives a proportion of
management fees and carried interest in
respect of transactions carried out by
Draper Esprit Secondaries. Draper Esprit
Secondaries has previously acquired
several venture capital portfolios in Europe
including 3i, Prelude and Top Technology.

The portfolios we invest in consist of
companies that meet the Company’s
primary investment criteria and we
therefore deploy the plc balance sheet as
a direct investor into these secondary
opportunities. By aligning Group interests,
we provide plc investors with exposure to
the upside potential in these secondary
portfolios.

1 Martin Churchill, Tax Efficient Review, Review of EIS
Fund seeking growth with track record – multi-
sector, Draper Esprit EIS, November 2016

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials04

OUR INVESTMENT APPROACH

A sustainable, evergreen
investment model

We have built a model for venture capital which enables us
to back businesses for the long term as a strategic partner.
When we exit businesses, we return cash to our balance
sheet enabling us to re-invest in future opportunities.

Draper Esprit’s investment cycle

X I T

4 : E

1. Cash
When the companies exit,
the cash generated is
returned to the balance sheet
and re-invested into new
opportunities in the market.

2. Emerging companies
The Company invests
in entrepreneurial, fast-
growing businesses.

3. Core holdings
Draper Esprit will provide
follow-on capital, meaning
the stake the Company
holds becomes more
significant. This occurs at
the point that the business
has proven its model.

4. Exits
Businesses can exit the
portfolio either when an
emerging company, where
Draper Esprit holds a smaller
stake, or a core holding.
Businesses either exit to a
strategic buyer or by taking
they company public through
an Initial Public Offering (IPO).

1: CASH

2: 21 E

G
I

S
G
DIN
OL

4 : E XIT S

R E H

3 : C

Sectors
Our portfolio of investee companies
is diverse and the Company looks for
impressive entrepreneurs across four
primary sectors. Many of these sectors
remain significantly under-funded
for growth stage financing in Europe
despite their evident strengths and the
Directors believe there is considerable
potential for upside returns from the
companies that operate within them.

• Consumer Technology: companies

with exceptional growth opportunities
that are underpinned by new
consumer facing products, innovative
business models and proven execution
capabilities.

• Enterprise Technology: companies

developing the software infrastructure,
applications and services that drive
productivity improvements,
convenience and cost reduction for
enterprises.

Competitive Advantages
• As companies stay private for longer,
it is increasingly necessary for public
investors to adapt their strategy to
gain access to high growth
companies. The listed evergreen
vehicle provides investors with
ongoing liquidity versus private limited
partnership structures.

• High-growth companies have a need

for longer term capital, where
investors are willing to make a
financial investment in a business
without the time constraints that
require realisations in a defined
period. Instead, investors are willing
to forgo a short-term return to capture
growth, in anticipation of more
substantial returns at a later stage.
This approach not only benefits the
investors, but has been identified as
a strategic need for high-growth
businesses as the UK government
draws up its Patient Capital Review.

Pan European focus
and dual listing
Draper Esprit plc is focused on
companies and technologies across
Western Europe. The Company is dual
listed on AIM (LSE: GROW), operated
by the London Stock Exchange, and the
ESM (ISE: GRW), operated by the Irish
Stock Exchange. The dual listing provides
a pathway for continued access to
Europe in the post Brexit environment.
The entrepreneurial environment across
Europe has been steadily maturing
and our investment team work across
the continent to source the best
opportunities. The portfolio companies
are headquartered in places from Bristol
to Berlin, and Stockholm to Dublin.

• Hardware and Electronics:

•

companies developing differentiated
technologies that underpin advances
in computing, consumer electronics
and other industries.

• Digital Health and Wellness:

companies leveraging digital and
genomic technologies to create new
products and services for the health
and wellness markets.

Investors benefit from access to a
highly-experienced investment team
who generate dealflow and then
actively manage the companies,
usually taking Board positions in the
portfolio companies they invest in and
holding significant investor rights.

• The Group has a consistent track

record of 20% annual portfolio returns
since 2008, underpinned by an
average of 30% revenue growth of
the portfolio companies. In the period
since 2008, the Group has generated
cash returns in excess of its
invested capital.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

CEO’S STATEMENT

A substantial year of change
and progress

Since the IPO last year, we have grown our team,
invested in 13 new high growth companies and raised
over £100 million on the public market. We look forward
to the next financial year with confidence and optimism.

Simon Cook
CEO

Overview
I am pleased to report that the year
ended 31 March 2017 has been a
year of substantial change and
progress for the Company.

At the time of the IPO in June 2016, we
set out to demonstrate our model in a
public market setting of investing in high
growth private technology start-ups.
Through a series of successful exits,
further investments and our fast-growing
portfolio, we have demonstrated that the
public venture capital model is working.

Post year end, we continued onto the
next stage of the strategy by raising an
additional £100.0 million equity from our
supportive institutional shareholder base.
As a wider Group, we have also raised
significant co-investment funds through
our EIS, VCT and secondary funds, with
£60.0 million raised in 2017 to date.

Having scaled our capital resources,
the Group is now even better positioned
to invest larger amounts in more
companies, growing our holdings in
our most promising investments.

Operating review
The environment for innovation in Europe
is growing at a sustainable rate and the
venture capital market in Europe is now
worth US$15.0 billion. However, Europe
still lags behind the US, most notably
in the provision of growth capital. In
Europe, only 42% of start-ups go on to
complete a growth round, compared
to 85% in the US. By starving start-ups
of follow-on investment, it limits their
ability to grow internationally and
therefore compete on a global stage. Our
ambition is to fill this gap with long-term
capital for the best teams in Europe.

Furthermore, high growth technology
businesses are also staying private
for longer. Our decision to go public
has positioned us to play a leading
role by enabling us to offer a
partnership model with investors who
wouldn’t otherwise have access to,
or the capacity to actively manage,
these types of investments.

We have been very active in putting our
long-term capital model to work. Across
the Group, including £6.0 million co-
invested from EIS funds, we have invested
£34.0 million in 13 new companies, and
£9.0 million in the existing portfolio. In
addition, we have exited 4 companies
realising cash of £42.0 million to the plc
(including amounts held in escrows).
Going forward, further co-investment
will come from the VCT following the
acquisition of 30.77% in Elderstreet 2016.

Through a series of
successful exits, further
investments, and our
fast-growing portfolio,
we have demonstrated
the public capital
model is working.”

£42.0m

Cash realisation in plc (including
amounts held in escrow)

£160.0m

Additional capital raised across the
Group post year end

£37.1m

Cash invested in next generation
technology companies

The cash available for investment, across
the Group, is reviewed periodically and
the allocations split according to the
resources available. During 2016/17, we
have invested 66% from the plc and 34%
from EIS funds into qualifying companies.

In addition, we sold the remaining
stake (following the partial exit
pre-IPO) held by the Company in
Horizon Discovery, resulting in a cash
return of £2.8 million, generating
a 2.6x uplift on invested capital.

Successful exits
During the year, the Company has
announced four major disposals.

Firstly, we announced the sale of
Movidius Ltd (“Movidius”) to Intel
Corporation. Movidius is a leader in high
performance, ultra-low power computer
vision technology for connected devices.
The sale generated an estimated
total cash return to the Company of
approximately £27.4 million including
amounts held in escrow, generating
a 7.6x uplift on invested capital.

In October 2016, we announced that
ENEA, a leading global information
technology company agreed to acquire
portfolio company, Qosmos for a total
cash consideration of approximately
€52.7 million, resulting in cash to the
Company, including amounts held
in escrow, of £8.0 million, generating
a 1.9x uplift on invested capital.

In November 2016, we announced the
sale of Datahug, a sales forecasting
software company, to Callidus
Software Inc for a cash consideration
of around US$13.0 million, resulting
in a cash return to the Company of
approximately £3.6 million, including
funds held in escrow, generating
a 1.6x uplift on invested capital.

Separately, during 2016 secondary
funds managed or associated with
Draper Esprit were also involved in the
sale of optical switch business Polatis
to Huber+Suhner; and GreenPeak
Technologies, a leader in ultra-low
power, short range RF communication
technology to NASDAQ listed Qorvo,
Inc. These exits returned £23.0 million
to our Limited Partners, and resulted
in proceeds to the Company in fees
and carry of approx. £0.3 million
to partially offset Group costs.

These exits highlight the truly European
nature of Draper Esprit’s portfolio with
Movidius based in Dublin, Qosmos in
Paris, Polatis in Cambridge (UK) and
GreenPeak in the Benelux countries.
All companies were very active in
the US market, as per Draper Esprit’s
strategy of helping European companies
become global leaders. Moreover,
they demonstrate the investment and
value realisation model in practice.

Draper Esprit and secondary managed
funds associated with the Company
held significant minority stakes in each
portfolio company; the acquirers were
all respected international blue-chip
companies; and the aggregate total
value of these transactions was in
excess of US$600.0 million in 2016.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

CEO’S STATEMENT (CONTINUED)

Growing our diverse portfolio:
investments
We invest in companies that build the
future. In the year to date, the Company
or co-investment funds managed by
the Group invested £34.0 million in 13
new companies, including Graphcore,
LifeSum, PushDoctor, Resolver, Perkbox,
Realeyes, Clavis, Clue, RavenPack
and Podpoint. The portfolio is diverse:
whether they are building a whole new
infrastructure for developing artificial
intelligence applications (Graphcore),
the future of tracking female health
(Clue), or the infrastructure necessary
for electric vehicles (Podpoint), all the
companies are united by a strong team
and an ability to be global leaders.

Key to our strategy is to increase our
holdings into the rising stars within the
portfolio. To that effect, the Company
has increased its investment in Trustpilot,
the global multi-language review
company, bringing the total that it has
invested in new and existing portfolio
companies to £37.1 million (excluding
cash invested by EIS and VCT co-
investment funds) since the IPO.

Post year end, the Group has
invested a further £25.0 million in
new and existing companies. See
note 30 of the consolidated financial
statements for further details.

We continue to be excited by the growth
potential of the underlying portfolio
companies with all of our top holdings
continuing to make strong commercial
progress, growing sales significantly
and reporting positive newsflow.

Outlook and summary
It has been a remarkable year for
the Group as we made the transition
to a publicly listed model following
Admission. We serve as a leading player
on the European venture capital stage
with significant resources to deploy.

By democratising the venture capital
model and making our expertise
accessible to a wider market, we are
breaking new ground. We offer a
partnership model with investors who
otherwise wouldn’t have access to,
or the capacity to actively manage,
these types of investments. The recent
placing and subscription of £100.0
million is a superb validation of that
model. We are grateful for the support
that existing shareholders such as
Woodford Investment Management,
Baillie Gifford and the Ireland Strategic
Investment Fund have shown, and are
delighted to welcome new investors such
as Invesco Perpetual and Hargreave
Hale as major new shareholders.

Across the Group, in 2017 we have now
raised over £160.0 million (including plc,
secondaries, EIS and VCT). We have a
powerful investment platform which
will enable us to capture the increasing
innovation and entrepreneurship in
Europe, especially in enterprise software,
digital hardware, consumer services and
digital health. Our funds will be used to
continue investing in these areas from
early stage to growth stage, with 70% of
our capital reserved for scaling up and
increasing our stakes in existing portfolio
companies through later rounds.

Having scaled our
capital resources, the
Group is now even
better positioned to
invest larger amounts
in more companies,
and growing our
holdings in our
most promising
investments.”

If we continue to grow our co-
investment funds and make further
realisations for reinvestment, over the
five years of a typical LP fund, we will
have the equivalent of £800.0 million
(approximately US$1.0 billion) to deploy,
making us a strong partner in Europe.

We will continue to adopt a measured
and considered approach. Our goal is
to achieve at least 20% year-on-year
growth in portfolio value in line with
our historical record, whilst retaining
the ability to hold and grow our
companies for longer than our non-listed
competitors can and with larger sums
available for later rounds to maximise the
opportunity and build large successful
European technology businesses.

We have an experienced management
team, which we will continue to grow and
develop our young talent. I would like to
thank not only that team, but the wider
investee company management teams,
who share our vision to create European
technology leaders that can become the
world leaders in their respective fields of
tomorrow; as well as all our stakeholders.

Our model is working and we are
growing Net Asset Value substantially
to the benefit of our shareholders.

We are well positioned to capitalise
further on opportunities in 2017/18
and look forward to the next financial
year with confidence and optimism.

Simon Cook
CEO

Case Study

World leader in chip technology,
Movidius, sold to Intel

Movidius is a leader in high performance, ultra-low
power computer vision and artificial intelligence
technology for connected devices. By combining
sophisticated software algorithms with a powerful,
purpose-built Vision Processing Unit (“VPU”), Movidius
brings a new level of visual intelligence to smart devices.
Movidius’ leading technology is used in drones, security
cameras and Augmented and Virtual Reality devices.
Its latest chip, the Myriad 2, can make sense of multiple
video streams at once, all in a processor the size of
a fingernail.

Working closely with the management team of Movidius
for the last 4 years, we helped them grow to a team of
180 employees and hire their current CEO, Remi El-
Ouazzane. Over time, the company landed deals for its
chip technology with the likes of Lenovo, DJI, FLIR,
Hikvision and Google.

Intel, a Santa Clara-based global technology company
(NASDAQ: INTC), made an offer for Movidius in
September 2016, which resulted in an estimated total
cash return of approximately £27.4 million for Draper
Esprit before provision for accrued tax and carried
interest payments. The proceeds that were realised from
this investment were returned to the balance sheet and
the Company is now actively re-investing the money into
more companies like Movidius: high-growth technology
companies with global markets.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

OUR TEAM

A diverse team with decades of experience

At Draper Esprit, teams are at the heart of everything we do. It takes ambitious teams
to build the technology and products of tomorrow. It also takes divergent thinking;
people coming together from different backgrounds, with different skills, offering
different ways of tackling problems. Innovation happens together.

The Draper Esprit team has a wealth
of experience. The team has now
operated for ten years and, prior to that,
its members worked in leading firms
within the venture capital industry. In
aggregate, the team has been involved
in investing over US$1.0 billion into
more than 200 technology businesses,
exiting companies with a value of US$6
billion from a total enterprise value of

US$8 billion. Since the IPO, we have
hired six new investment professionals,
an experienced CFO and a Head of
Marketing and Research. The team
is a unique combination of venture
capitalists, entrepreneurs and bankers.

See biographies of the board
on pages 28–29

Michael Jackson
Michael has been investing in
software since the early 1990s and
was notably Chairman of two FTSE
100 companies Sage, and
PartyGaming. He manages the VCT
fund with William Horlick.

Eleonore Butler
Eleonore is from France and
previously worked at another venture
capital firm in London as well as the
financial advisory, Ondra Partners.
She focuses on the French market
and also has an interest in
marketplaces.

Alan Duncan
Alan has been a venture capitalist for
over 20 years. An electronic engineer
by background, he is responsible for
Draper Esprit’s electronics
investments.

Nicola McClafferty
Nicola is a former entrepreneur
having founded her own online
retailer which she sold to ASOS.
Before that she worked in VC at
Balderton Capital. She invests across
industries but focuses on the Irish
market and consumer technology.

Max Filippov
Max is a French and Russian national
with a background in private equity in
digital media, education and gaming.
He is on the investment team and
focuses on dealflow particularly in the
French market.

Daragh Phelan
Daragh is a Chartered Accountant
with 8 years’ experience working with
private equity backed technology and
healthcare businesses as a senior
finance leader. Prior to this, Daragh
worked with KPMG as a Manager in
the Financial Services assurance
division.

Richard Marsh
Richard brings entrepreneurial
experience to the team having
founded and built Datanomic, which
was acquired by Oracle. He manages
the Draper Esprit EIS funds, invests
across sectors and works closely with
the boards he sits on.

Ben Wilkinson
Ben is the Group CFO and is an
experienced leader of public market
finance teams. Ben served for five
years as CFO of AIM listed President
Energy Plc, and prior to this was an
Investment Banker with ABN AMRO.
He is a Chartered Accountant.

Stephanie Edwards
Stephanie works with the investment
team administering dealflow. She
previously worked for other
investment firms in London, including
Amadeus Capital.

Philip O’Reilly
Philip brings legal investment
expertise to the team, having
previously worked as a lawyer
advising venture capital investors and
early stage businesses on all aspects
of financing. He invests across sectors
but has particular expertise in legal
tech and blockchain.

Jonathan Sibilia
With a background in Private Equity
and Investment Banking – having
worked at Jefferies International,
Rothschild in Paris – Jonathan brings
diverse investment experience to the
team. He is the Head of Secondaries
and also focuses on dealflow from
southern Europe.

Paula Darlison
Paula is the Group Administration
Manager and has been with Draper
Esprit since its inception. She has
more than 25 years experience in the
City of London.

Isabella Cookson
Isabella is the Head of Marketing and
Research. She previously worked at
two startups, Improbable and Qubit,
in roles across marketing, market
research and strategy. She has also
worked for the Financial Times and
Bloomberg, covering Africa.

David Cummings
David was previously Managing
Director at Lazard for sixteen years
running the Telecom and Technology
group. He now manages the EIS
co-investment funds and invests
across sectors. He is also a member
of the Cambridge Angels.

Brian Caulfield
Brian is a serial entrepreneur having
co-founded three software
businesses in the past, two of which
exited successfully. He is based in
Dublin and focuses on enterprise
software, hardware and managing
the Group’s Irish Investments. Brian is
also the team’s Managing Partner.

William Horlick
William has been investing in early
stage venture for 20 years and was
previously a stockbroker, CEO, and
army officer. He manages the VCT
fund with Michael Jackson.

Vinoth Jayakumar
Vinoth previously worked at a
boutique management consulting
firm and ran a small investing group,
investing in crowdfunded start-ups.
He works across sectors but brings
fintech and insuretech expertise to
the team.

Diana Krantz
Diana brings early stage investment
expertise to the team, having worked
for Techstars and Rocket Internet.
Originally from Sweden, she speaks 3
languages and focuses on the Nordic
region.

Stuart Chapman
Stuart is the Group’s COO and sits on
the board of the Draper Venture
Network. An experienced venture
capitalist, he has served as member
of the BVCA as Chairman of the
Venture Committee. Before Draper
Esprit he spent 13 years at 3i.

Simon Cook
Simon is CEO of Draper Esprit. With
over 20 years of experience, he has
invested in some of Europe’s most
successful startups including
LoveFilm and Cambridge Silicon
Radio (inventors of Bluetooth).

Dr Vishal Gulati (not pictured)
Vishal is one of Europe’s leading digital health investors. A qualified physician and chairman of the Digital Health Forum,
he works closely with the healthtech businesses to scale globally.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

DRAPER VENTURE NETWORK

Global companies need
global networks

As a global network, the Draper Venture Network enables
our portfolio to access markets as they shift. We have
partners in Asia, the US, and the Middle East. For both
commercial connections and future funding, our portfolio
companies are well supported to internationalise.

Headquartered in Silicon Valley, the
Draper Venture Network (“DVN”)
is a self-governed collective of 15
independent growth and venture
funds managing hundreds of portfolio
companies in multiple countries.
These independent venture capital
funds are based in technology hubs
across the world and collaborate on
deals, diligence and the provision of
value-added services. We are the
exclusive Western European member
of the network. Stuart Chapman, the
Company’s Chief Operating Officer, is
one of DVN’s five global board directors.

The network provides the company with:
• Offices in Silicon Valley and a team of
business development executives
available to assist portfolio companies
who are expanding to the US.

• An annual CEO summit, attended by
hundreds of CEOs and business
development executives of significant
technology companies.

• Significant advantage in the origination
and diligence of potential investments.

• Market intelligence and the

development of corporate relationships
to benefit investee companies.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

THE FUTURE OF VENTURE CAPITAL

Investing in a growing
European market

Europe is a unique place to invest; its diverse technology
hubs such as London, Dublin, Berlin, Stockholm, Paris
and Madrid enables varied opportunities across all
sectors to achieve success.

A new asset class for the
public market
Last year, the global venture capital
market was worth over US$128.0
billion2. Of that global market, European
venture capital represents over US$15.0
billion3. Venture capital has always
been an asset class dominated by
the five + five year limited partnership
model in which the likes of pension
funds have put their money, managed
by the venture capital firm.

Such markets are changing; globally
companies are staying private for
longer. Public market investors have had
reduced access to the value generated
by the early stage growth companies,
waiting for them to publicly float.
Increasingly, technology companies
worth more than US$1.0 billion have
fewer reasons to go public than they did
in the past. Recent research from the
University of Florida shows the average
technology company worth more than
US$10.0 billion went public within four
years in 1999; now that average has
more than doubled. According to data
from CB Insights, approximately 150
private technology companies were
valued at upward of US$1.0 billion, 14
others were valued over US$10.0 billion.

These trends highlight the diminished
access public market investors have to
the value coming out of high growth
technology businesses. This is driven
by a variety of factors; at a later stage
in a company’s life cycle, access to

investment from private equity firms or
mutual funds are increasingly available
and therefore removing the necessity
to undertake the time-consuming and
costly process of going public. Equally,
many start-ups, which are prioritising
growth to gain market share over profits,
may not prosper in the public market
environment which value profitability.

This trend looks set to continue. A key
reason for listing Draper Esprit was to
democratise access to the capital held
within the industry, enabling access
to private high growth technology
companies. Instead of being exposed to
the risk of investing in just one company,
public investors gain access to a portfolio
of companies; much like a traditional
LP but without the ten + years (often
fifteen + years) holding period or the
blind pool approach to investment.

A consequence of the typical five +
five year fixed life of an LP fund is that
VC firms are under pressure to deliver
a return during this fixed timeframe.
This structure ignores the fact that it
takes time to build a global company,
often leading to earlier acquisitions by
multinational strategic buyers or a private
equity house. A more flexible approach
to capital is needed for companies that
continue to grow, thereby increasing
the returns available to investors.

In the US, the picture is different. Many US
firms find it much easier to extend their
funds or to bolt on opportunity funds.

Number of deals by size in
Europe each year

Number of deals by size in
US each year

1400

1200

1000

800

600

400

200

3000

2500

2000

1500

1000

500

n <$5m n <$5–$75m n <$75m+

Europe: a story of continued growth
Europe is a unique place to invest;
its diverse technology hubs such as
London, Berlin, Stockholm, Dublin,
Paris and Madrid enable varied
opportunities for both start-ups and
VC investors to achieve success.
According to KPMG, while 2016 was
a challenging year for most regions
globally, Europe saw the second-best
year for the amount of venture capital
deployed4. Despite this, growth capital
for European technology companies
is still constrained (see graph).

The US is today a mature US$40.0 billion
venture capital market, and while Europe
is still behind that at US$15.0 billion, it is
growing. According to our own research,
European venture capital is following a
similar path to growth to the US in the
1990s.

Indeed, a significant difference between
the US and Europe is the distribution in
deployed funding. Last year saw over
3,700 deals in the US. Approximately
half of these were late-stage growth
rounds (over US$5.0 million), while the
other half were seed (or early-stage)
deals. 85% of early-stage deals went
onto get follow-on funding. In Europe, by
contrast, only 42% of start-ups now go
on to do a growth round. In Europe, the
opportunity lies in fuelling growth rounds
for companies who have the potential
to expand into global businesses. There
are positive signals in the market in this
direction. Year-on-year, there has been a
20% increase in growth funding rounds
in Europe. As the capital gap persists,
however, the opportunity it brings
for an active manager with a longer-
term capital approach is significant.

Europe needs a flexible
approach to capital in
order to follow the
success of the US
technology market.”

In their research in 2012, the Kauffman
Foundation, one of the most prominent
investors into venture capital in the US,
identified that the life of a venture capital
fund in the US was “frequently longer
than ten years, a large percentage of
our fund lives extend to between 12 and
15 years.” Interestingly, they recommend
that institutional investors model fund
performance “using a public market
equivalent”. Venture capital is restricted
by the fixed life of a fund in Europe, while
other investors cannot invest in illiquid
fund structures for regulatory reasons.

Europe needs a more flexible approach
to capital in order to follow the success
of the US technology market.

A more flexible capital model is not only
attractive to entrepreneurs who want to
be invested for the long term, it is also
an attractive solution for investors who
are now offered the flexibility to invest
throughout the life-cycle of a business,
protecting their equity through follow-on
investment, ensuring that they benefit
from the full potential of a company.

Draper Esprit plc
Annual Report and Accounts 2017

2 KMPG, Venture Pulse Report: Q4 2016
3

Ibid

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

PORTFOLIO REVIEW

Backing Europe’s most disruptive businesses

Overview
At the year ended 31 March 2017 the
fair value of the Company’s Gross
Primary Portfolio had increased to £112.7
million, from £78.7 million at the time of
Admission in June 2016. Excluding new
investments and realisations across
our portfolio of companies, the gross
portfolio value has increased 39% since
Admission and 10% over the six-month
period since 30 September 2016. Since
Admission, the Group has realised
the investment holdings in Movidius,
Datahug, Qosmos, Horizon Discovery
and Worldstores with £42.0 million of
cash generated (including amounts held
in escrow). The Company has invested
£37.1 million in the period, with a further
£6.0 million co-invested from EIS funds,
into the next generation of high growth
digital technology companies and to
further support our existing portfolio.

The current portfolio held by the plc
consists of significant minority interests
in 29 companies. The fair value of the
Gross Primary Portfolio is underpinned
by eight core holdings which account
for ~75% of the total portfolio value, with
the remaining value spread across 21
investments which have the potential to
grow into the core holdings of the future.

The core portfolio, comprising: Graze,
Trustpilot, M-Files, Conversocial, Lyst,
Sportpursuit, Clavis Insights and Perkbox,
is progressing well and these portfolio
companies now have average turnover
in excess of US$40.0 million (£32.0
million), growing in aggregate over 29%
annually from 2016. The gross profit
margin of the core holdings average
69% and demonstrate the ability of the
companies to reinvest for future revenue
growth and also the opportunity for
future profitability at the appropriate
time in the company’s lifecycle.

An important facet of the investment
model employed by the Group is to
target growth stage companies that have
a proven customer base and revenue

Draper Esprit plc
Annual Report and Accounts 2017

generation model that can be leveraged
internationally. The fair value of the
portfolio is underpinned by the revenue
generation of the portfolio companies
and the growth in this revenue in turn
drives the growth in the fair value.

Investments
The Group’s overall rate of capital
deployment increased during the
financial year, with a total of £37.1 million
deployed by the plc and a further £6.0
million across the Group in 19 companies
(13 new and 6 existing). Since the year
end the Group has invested a further
£25.0 million, £19.3 million of which
was through the Company. The Group
continues to balance the portfolio by
deploying approximately 30% of the
Group’s investment capital towards
smaller rounds in early stage companies
with approximately 70% being invested in
larger later stage growth rounds. As the
Group grows, and following the recent
equity raise, the intention is to increase
the size of the equity interest held in
the portfolio companies over time.

New investments made during the
financial year include:
• £2.3 million invested by the Company
of £3.1 million invested by the Group in
Graphcore, a machine intelligence
semiconductor company;

• £3.0 million invested by the Company
in LifeSum, a leading health tracking
mobile app company;

• £1.0 million invested by the Company

of £1.5 million invested by the Group in
PushDoctor, an on-demand
healthcare mobile app company;
• £0.9 million invested by the Company
of £1.3 million invested by the Group in
Resolver, a customer service software
company;

• £1.7 million invested by the Company
of £2.5 million invested by the Group
in Perkbox, an employee benefits and
engagement platform;

• £1.1 million invested by the Company

of £1.7 million invested by the Group in
Realeyes, a machine learning

Average Revenue –
Core

$40m

$31m

March 2017

Other PF
Companies
24%

0
Core
Holdings 76%

Average
2016
Revenue

Average
2017
Revenue

Number of Companies – Split by Sector
(Total plc)

Hardware &
Electronics
7%

Digital
Health &
Wellness
17%

Consumer
Tech 28%

Enterprise
Tech 48%

Capital Deployed – Split by Stage
of Investment
(Core Portfolio)

Early stage
35%

Late stage
65%

Gross Portfolio Value
(£ millions)

£120m

£100m

£80m

£60m

£40m

£20m

£0m

£106.8m

£112.7m

£78.7m

IPO

30 September
2016

31 March
2017

technology that measures emotions;
• £8.1 million invested by the Company

in Clavis, a leading ecommerce
Insights company;

• £4.3 million invested by the Company

in Clue, the digital female health
company;

• £3.3 million invested by the Company
in Ravenpack, the big data analytics
provider for financial services; and
• £3.4 million invested by the Company
in Podpoint, one of the UK’s leading
providers of electric car charging
solutions for home, workplace and
public charging.

• £5.5 million invested by the Company
in Trustpilot, a global multi-language
review community.

A further £25.0 million has been
invested in new and existing
companies post year end as follows:
• A further £1.9 million invested by the

Company in Graphcore’s £24.0 million
Series B investment round;

• A further £3.5 million invested by the
Company of £7.0 million invested by
the Group in PushDoctor’s £20.0
million Series B investment round;

• A further £6.6 million invested by the
Company in Perkbox, an employee
benefits and engagement platform;
and

• A further £5.6 million invested by the
Company in Trustpilot, a global
multi-language review community.
• £1.8 million invested by the Company
of £3.6m invested by the Group in an
as yet undisclosed insuretech
company

Realisations
The Company announced the following
disposals since the IPO:
• September 2016 – the sale of Movidius
to Intel Corporation. Movidius is a
leader in high performance, ultra-low
power computer vision technology
for connected devices. This sale brings
an estimated total gross cash return
to the Company of approximately
£27.4 million including amounts held
in escrow. This represented a cash
exit multiple on funds invested by the
Company of 7.6x;

• October 2016 – the sale of Qosmos to

ENEA. Qosmos is a supplier of network
intelligence software based on Deep

Packet Inspection and commands a
dominating share of its market.
The sale was for a total gross cash
consideration of approximately
€52.7 million resulting in cash to the
Company, including escrows, of
£8.0 million. This represented a cash
exit multiple on funds invested by the
Company of 1.9x; and

• November 2016 – the sale of Datahug,

a sales forecasting software
company, to Callidus Software Inc for
a cash consideration of approximately
US$13.0 million, resulting in a gross
cash return to the Company of
approximately £3.6 million, including
funds held in escrow. This represented
a cash exit multiple on funds invested
by the Company of 1.6x.

• Since the September 2016 interim
results the Group has disposed of
its remaining holding in Horizon
Discovery. The Company realised a
gross cash return on investment of
£2.9 million which represented a cash
exit multiple of 2.6x. In addition, the
Company also exited its investment in
Worldstores which realised a gross
cash loss of £4.3 million.

Gross Portfolio Value – by Portfolio Company
(£ millions)
£120m

£37.7m

£112.7m

£100m

£80m

£60m

£40m

£18.2m

£20m

£0m

Trustpilot

£6.9m

£1.7m

£8.1m

£9.7m

£9.8m

£10.1m

£10.7m

Clavis
Insight

Sport
Pursuit

M-Files

Graze

Lyst

Conversocial

Perkbox

Remaing
Portfolio

Gross
Portfolio

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

SELECT PORTFOLIO COMPANIES

Draper Esprit Funds first invested in Graze in 2010, with follow-on
investment in 2012 bringing the total investment by the Group to
£3.7 million.

Graze is an online and offline retailer and manufacturer of healthier
snacks, operating in the UK and the US. Founded in 2009, it
developed a subscription model based on experiences of founder
Graham Bosher at Lovefilm, the DVD rental business. The company
has developed logistics technology that allows it to deliver cost-
effectively across the UK and the US. It utilises data generated from
user reviews to innovate and develop new products for evolving
taste preferences and growing consumer demand for wholesome
on-the-go snack options.

The company has launched its own retail product with wide
availability in the UK across 3,000+ stores including retailers such
as Boots, Tesco, WH Smith and Sainsbury’s. This will drive further
UK growth together with new online ecommerce sales through a
subscription-based model. The company has recently launched
into 4,000+ retail stores in the USA, and further online growth is
forecast. Graze remains profitable with strong gross margins.

Graze’s vision is to become the number one health snack brand in
the world. Alongside the Company investors in Graze include The
Carlyle Group and Octopus Investments.

Draper Esprit Funds first invested in Trustpilot in 2013, with follow-on
investment in 2015 and 2017 bringing the total investment by the
Group to £17.0 million (including £5.6 million invested post year
end).

Founded in 2007, Trustpilot is a global, multi-language review
community. Trustpilot has customers in 65 countries including
Denmark, Sweden, the UK, France, Italy, Germany and the
Netherlands, as well as the US. Trustpilot’s aim is to build the world’s
single most trusted review company.

Consumers visit the Trustpilot website to leave positive or negative
reviews about an online merchant where they purchased a
product. Once a merchant has a paid subscription to use Trustpilot,
they are able to respond directly and openly with consumers who
have left reviews.

Trustpilot has built a strong SaaS revenue model with excellent
growth in Europe over the last 3 years. They are now successfully
expanding into the US with the recent additional capital raised.

Trustpilot raised US$73.5 million in 2015 led by Vitruvian Partners,
alongside existing investors, including Draper Esprit Funds, Index
Ventures, Northzone and SEED Capital Denmark.

Draper Esprit Funds first invested in SportPursuit in 2012, with
follow-on investment in 2013 and 2014 bringing the total investment
by the Group to £3.2 million.

Clavis Technologies is a provider of ecommerce store analytics to
consumer goods companies. Draper Esprit acquired a significant
minority stake for £8.1 million in 2016.

SportPursuit was founded in 2011 as a UK-based sport-specific
ecommerce website where members receive access to sales from
brand partners targeting the technical sportswear and outdoor
clothing and equipment space. The company offers up to 70%
discounts on sports and outdoor brands. SportPursuit has
customers in the UK, Australia, Germany, France and Scandinavia.
It aims to be the world’s largest private shopping club for sports
enthusiasts.

Currently sales are focused across the following niches: outdoor,
running, skiing & snowboarding, health & wellbeing, athletics,
swimwear, cycling, golf, tennis and experiences (gyms, clubs).
The vision of the team is to utilise the power of the online channel,
the SportPursuit brand and the community they build up around
it to realise a greater value opportunity.

Alongside Draper Esprit Funds, investors include CIT Growth Capital
and Scottish Equity Partners. The company raised £9.0 million,
announced in November 2015.

Clavis’ service gives companies detailed, real-time information
about how their products are being positioned in online stores.
Using an online dashboard or mobile app, a manager can see
the answers to questions such as: “What do I have online?” “How
is the product presented?” The service also lets managers see
how products are ranking against search terms and what online
reviewers are writing about products. The product monitors online
retailers across more than 20 countries and is growing in the US,
Europe and China.

Alongside Draper Esprit, investors include Accel KKR and Unilever
Ventures.

£3.7m

Invested

£17.0m

Invested

£3.2m

Invested

£8.1m

Invested

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

SELECT PORTFOLIO COMPANIES

Perkbox, a digital employee engagement platform, received
£2.5 million (plc £1.7 million) from the Group in 2016. Post year end, a
further £6.6 million has been invested by the plc.

Perkbox provides a platform that enables companies of all sizes
(from large corporates to small start-ups) to incentivise, motivate
and attract staff through over 200 perks and benefits, including a
sophisticated rewards and recognition infrastructure. Launched in
2015, the company already has over 300,000 paying members
ranging from SMEs to large corporations such as British Gas and
BUPA. Perkbox was recently listed number two in the Startups 100
Index for being one of the most innovative emerging ventures in the
country.

Draper Esprit first invested in Perkbox alongside the crowd on the
Seedrs platform.

Push Doctor is Europe’s largest online GP marketplace. The
company has raised a total of £8.8 million from the Group across
two rounds of funding, in 2016 and 2017. Of this, the plc invested £1.0
million in 2016 and £3.5 million in 2017, post year end.

PushDoctor.co.uk is changing the way everyone can access
healthcare using its’ on-demand online GP surgery, making
healthcare accessible for the tens of millions of people in the UK
who find seeing a doctor difficult. The Care Quality Commission-
regulated and NHS-commissioned service allows patients to book
and attend secure video GP appointments seven days per week,
365 days of the year, via a website and iOS app.

The company has treated more cases digitally than anyone in
Europe and has consistently grown over 35% month-on-month for
16 months. The company has a unique dataset that provides a
unique view of the medical issues facing the nation. They are
creating a data-driven digital health platform that will treat the
whole person. No one before Push Doctor has provided consumers
with access to a single digital health platform that combines
responsive medicine and chronic condition management as well as
fitness and nutritional conditioning.

Alongside Draper Esprit, investors include ADV, Oxford Capital
Ventures, Partech Ventures and Seventure Partners.

POD Point, the innovative electric charge point supplier, received
£3.0 million for new shares and £2.0 million for secondaries from
the Group. POD Point is a well established, leading player in the
UK’s electric vehicle sector, having manufactured and sold over
27,000 charging points since it was founded in 2009.

Globally, the electric vehicles market is going from strength to
strength, driven by advances in technology, infrastructure
developments and cost efficiencies. Here in the UK, over 38,000
plug-in vehicles were registered in 2016, compared to just 1,052 in
2011. Following recent partnerships with Barratt Homes, Holiday
Extra and Hyundai, POD Point intends to have one of its stations
installed everywhere people park for an hour or more by 2020.

Alongside Draper Esprit, investors include Barclay’s Capital
and QVentures.

The Group first backed Graphcore last year and has now invested
£4.9 million in total, with the most recent investment post year end
of £1.9 million. Draper Esprit’s latest investment is part of a wider
US$30.0 million Series B funding round.

Graphcore is a machine intelligence semiconductor company,
changing the way that developers can build AI and machine
learning applications through its cutting-edge processing
capabilities. Its technology will be indispensable for advancements
in Artificial Intelligence across diverse industries. The Graphcore
processors will be used in machine intelligence applications from
autonomous vehicles to personalized healthcare, intelligent mobile
devices and collaborative robots. The appetite for an easier and
more powerful way to develop such applications is growing rapidly.

The business is a spin-out of XMOS, another VC-backed
semiconductor business based near Bristol, UK. Nigel Toon, the
CEO and Simon Knowles, the CTO, were previously founders of
Icera, a VC-backed semiconductor business which was sold to
nVidia for US$360 million in 2011. The company will be bringing a
processing system to market in 2017 which will enable material
performance increases (from 10-100x) for machine learning
computation.

Alongside Draper Esprit, investors include: Atomico, Amadeus
Capital, Robert Bosch Ventures, C4 Ventures, Dell Technologies
Capital, Foundation Capital, Pitango Venture Capital, the Samsung
Catalyst Fund and AI experts such as Demis Hassabis (DeepMind)
as angel investors.

£8.8m

Invested

£9.1m

Invested

£4.9m

Invested

£5.0m

Invested

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

FINANCIAL REVIEW

A new chapter in the Group’s history as
a public company

Since the IPO, the value of the strategic model has been demonstrated
by the cash generated through successful realisations, the consequent
increase in NAV and the reinvestment of funds into new high growth
portfolio companies.

Ben Wilkinson
CFO

The June 2016 IPO
received strong
support from both
new and existing
shareholders to raise
total proceeds of
£122.0 million.”

The year to 31 March 2017 has been
an exciting period for the Group with
the June 2016 Admission to AIM and
ESM opening a new chapter in the
Group’s history as a public company.
Since the IPO the value of the strategic
model has been demonstrated by the
cash generated through successful
realisations, the consequent increase in
NAV and the reinvestment of funds into
new high growth portfolio companies.

The June 2016 IPO received strong
support from both new and existing
shareholders to raise total proceeds of
£122.0 million. The proceeds from the
IPO were utilised to acquire Draper Esprit
(Ireland) Limited, which held the initial
portfolio of minority interests in 24 digital
technology companies, for £63.9 million,
the management company Esprit Capital
Partners LLP and to provide an initial
cash balance for further investment
of £30.0 million. The acquisition of
Esprit Capital Partners LLP by Draper
Esprit plc has been accounted for as a
business combination in accordance
with IFRS 3 Business Combinations in
the consolidated financial statements
(note 18). Draper Esprit (Ireland) Limited
is controlled but not consolidated, and
is held on the consolidated balance
sheet at fair value through the profit
and loss account as it is a qualifying
investment company in accordance
with IFRS 10. For further details on the
basis of consolidation see note 3(a) of
the consolidated financial statements.

In the nine months since the IPO the
Group has realised successful exits from
the investments in Movidius, Qosmos,

Datahug and Horizon Discovery
(remaining stake following initial
disposals pre-IPO), generating £42.0
million of cash proceeds (including
amounts held in escrow). These amounts
have been utilised for new investments
with £37.1 million being deployed into
the next generation of high growth
digital technology companies.

The Gross Primary Portfolio, the gross
value of the Company’s investment
holdings before deductions for carry
and any deferred tax, has increased
£34.0 million to £112.7 million (£78.7
million at 15 June 2016). The uplift in
value has been driven by the revenue
growth of the portfolio companies, which
translates into increased fair value within
the portfolio, and the realisations of
investments for a higher valuation than
they were being held in the portfolio.

The Group’s portfolio is valued in
accordance with the International Private
Equity and Venture Capital Valuation
Guidelines (“IPEV”). Following the initial
investment in a portfolio company the
value of the investment is held at cost in
the Group’s books. The mechanism for
growth in the portfolio companies to be
translated into increased fair values in
the accounts of the Group is triggered by
the portfolio company achieving either
financing rounds at higher valuations
(with external investors as well as the
Group) or revenue growth in the portfolio
company being reflected against listed
comparable companies price-sales ratio
multiples. The range of comparable
multiples that are utilised in the valuation
process reflects the range of sub-sectors

Gross Portfolio Value Table

Investment
Trustpilot
Clavis Insight
SportPursuit
M-Files
Graze
Lyst
Conversocial
Perkbox
Remaining Portfolio
Draper Esprit (Ireland) Limited

Pro-Forma
at IPO*
15th June
2016
£’000

Adjustment**
15th June
2016
£’000

Investment
Portfolio
15th June
2016
£’000

Investments
£’000

Realisations***
£’000

Movement
in Fair Value
£’000

Draper
Esprit
(Ireland)
Limited
£’000

Fair Value of
Investments
31st March
2017
£’000

Interest FD
category ****
at reporting
date

8,896
–
8,226
6,677
7,186
9,277
5,384
–
30,714
–

(1,447)
–
(1,338)
(1,086)
(1,169)
(1,509)
(876)
–
(4,995)
–

7,449
–
6,888
5,591
6,017
7,768
4,508
–
25,719
–

5,521
8,080
–
–
–
–
–
1,650
21,889
–

–
–
–
–
–
–
–
–
(34,279)
–

5,256
2,593
3,182
4,198
3,666
284
2,391
–
21,130
–

–
–
–
–
–
–
–
–
–
1,293

18,226
10,673
10,070
9,789
9,683
8,052
6,899
1,650
34,459
1,293

3
4
4
2
2
3
4
3

Total

76,360

(12,420)

63,940

37,140

(34,279)

42,700

1,293

110,794

Co-invest assigned to plc

2,385

(734)

1,651

–

(839)

1,123

–

1,935

Gross Portfolio Value

78,745

(13,154)

65,591

37,140

(35,118)

43,823

1,293

112,729

Carry external
Portfolio deferred tax
Trading carry & co-invest

–
–
1,847

–
–
(676)

–
–
1,171

–
–
150

–
–
–

(5,621)
(3,413)
955

–
–
–

(5,621)
(3,413)
2,276

Net portfolio value

80,592

(13,830)

66,762

37,290

(35,118)

35,744

1,293

105,971

* Based on 30 December 2015 valuation adjusted solely for currency
** Reflects arm’s length price agreed for the acquisition of initial portfolio for £63.9 million, carried interest and co-invest assigned to plc plus currency adjustments to 15 June

2016

*** Realisations do not include amounts held in escrow. Total cash realisations including amounts held in escrow was £42.0 million
**** Fully diluted interest categorised as follows: Cat 1: 0-5%, Cat 2: 6-10%, Cat 3: 11-15%, Cat 4: 16-25%, Cat 5: >25%

the portfolio companies operate within,
as well as their growth rates versus
listed peers and average 3x across
the core portfolio. This appropriately
prudent approach to valuation is
highlighted by the uplift in value achieved
from the successful realisations in
the period with £42.0 million of cash
being realised against £17.6 million of
holding value at the June 2016 IPO.

The gross primary portfolio of £112.7
million is subject to deductions for
the fair value of the carry liabilities
and deferred tax to generate the net
investment value of £106.0 million
which is reflected on the consolidated
statement of financial position as
financial assets held at fair value
through the profit or loss. The above
table has been generated to reflect
the movement in value of the portfolio
during the period, using the acquisition
cost at the IPO as a reference point.

The fair value gain on investments
of £35.7 million reflected through the
income statement is attributable to the
net fair value gain on the Gross Primary

Portfolio of £43.8 million to £112.7 million
(£65.6 million acquisition cost at IPO)
and further movements in the fair value
of liabilities. A deferred tax provision of
£3.4 million has been recognised in the
period against the gains in the portfolio
to reflect holdings for a period of less
than 12 months. This amount is netted
off the investments in the consolidated
statement of financial position. With the
exception of the realisations in the period,
it is anticipated that these investments
will benefit from participation exemption,
and therefore not be subject to tax,
once they have been held for over
12 months. Carry balances due to
previous and current employees of the
Group are accrued on the basis of the
current fair value at the year-end and
deducted against the Gross Primary
Portfolio, the Carried Interest Plan
is further described in the Directors’
Remuneration Report (page 35).

Net assets have increased by 17% to
£150.7 million (£128.7 million at IPO) in
the period while net assets excluding
goodwill have grown by 22% to £130.2
million (£106.9 million at IPO). Year-end

cash balances of £24.9 million reflect
the cash proceeds from the IPO of £69.3
million (net of £2.7 million of directly
attributable costs, which are reflected
in the share premium account on the
statement of financial position), the cash
component of the acquisition of the initial
portfolio for £40.0 million, £37.1 million of
investments made in the period and the
administrative costs of the Company.

Goodwill of £20.5 million was generated
from the acquisition of Esprit Capital
Partners LLP (“ECP”) and is held on the
balance sheet as an intangible asset.
The goodwill was recognised as the
difference between the consideration
and the fair value of the assets
acquired in the accounts of ECP.

In November 2016 the Group sought
to expand it’s tax-efficient investment
offering through the acquisition of a
30.77% stake in Elderstreet Holdings
Limited, the holding company of
Elderstreet Investments Limited
(“Elderstreet”), with an option to acquire
the balance of the Elderstreet shares.
The initial consideration has been

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

FINANCIAL REVIEW (CONTINUED)

PRINCIPAL RISKS

satisfied by the issue of 73,667 new
ordinary shares of 1 pence each in the
capital of the Company; these shares
are subject to an 18 month lock-in.

The cost of the acquisition is being
reflected on the balance sheet as an
investment in associates (note 15).

Consolidated statement of
comprehensive income
Investment income for the year
comprises the £35.7 million of unrealised
investment gains (gains are unrealised
as they are held within Draper Esprit
(Ireland) Limited which is accounted
for as an investment company) and
fee income of £1.7 million which is
generated from management fees,
performance fees and director fees. It
is the intention of the Group to increase
the revenues generated by growing
the EIS, VCT and secondary platforms

of the Group. Administrative costs of
£3.9 million, predominantly relating to
employment costs and other operating
expenses, are in line with expectations
and reflect the investments made to
grow the investment team. Non-cash
share-based payments of £0.1 million are
included within administrative expenses
and reflect the charge for the year being
expensed to the income statement
(note 13). The remaining amounts
are reflected within the share-based
payment reserve in equity and will be
released to the income statement over
the remaining period that they vest.

Post balance sheet events
On 5 June 2017 the Company announced
a placing and subscription for £100.0
million. 25,912,346 new shares were
issued on 20 June 2017 to trading on
AIM and ESM. The equity raise has
broadened the Company shareholder

base, with support from new as well as
existing institutional shareholders, and
provides a platform to further grow our
investments into portfolio companies.
We are grateful for the support of new
and existing shareholders who share the
Board’s vision to support high growth
private technology investing in Europe.

Subsequent to the equity raise, the
Group have made further investments
totalling £25.0 million (see note 30).

Draper Esprit is well positioned to
grow and build on its successful
first year as a public company, with
capital at its disposal and a broad
investment platform to take advantage
of the opportunities in the market.

Ben Wilkinson
CFO

KEY PERFORMANCE INDICATORS

KPI

How measured

Progress

Fair value determined using International
Private Equity and Venture Capital
Valuation Guidelines for the year end and
interim reporting periods.

Gross portfolio value has increased to
£112.7 million from £78.7 million at the
June 2016 IPO (see Financial Review for further
details).

Cash generated from portfolio company
exits against original cost.

£42.0 million realised in the period, including
amounts held in escrow.

Deploying funds for investments into
new portfolio companies, follow-on
investments into existing companies,
stake building into existing companies
and secondary investments.

Tracking the private company financing
rounds across Europe and analysing
against the Group’s internal CRM database
to determine if we saw the opportunity.

Maintaining sufficient liquidity to meet
operational requirements and to take
advantage of investment opportunities and
support the growth of portfolio companies.

£37.1 million invested in the period from plc,
with a further £6.0 million across the Group.

Through our brand and network we continue to
access high quality dealflow across Europe.

£24.9 million at year end with a further
£100.0 million equity raise post year end.

1. Growth in value of the portfolio

2. Realising cash

3. New investments

4. Dealflow

5. Cash balances

Draper Esprit plc
Annual Report and Accounts 2017

The Board consider the following to be
the principal key business risks faced
by the Group. The Group’s strategy
is aligned to mitigating these risks as
outlined below. The Board regularly
reviews the risks faced by the Group
and ensures the mitigation strategies
in place are the most effective and
appropriate to the Group. There may
be additional risks and uncertainties

which are not known to the Board
and there are risks and uncertainties
which are currently deemed to be less
material, which may also adversely
impact performance. It is possible that
several adverse events could occur and
that the overall impact of these events
would compound the possible impact
on the Group. Any number of the below
risks could materially adversely affect

the Company’s business, financial
condition, results of operations and/or
the market price of the ordinary shares.

Risk

Possible consequences

Mitigation strategies

The investment portfolio
businesses are at an early stage
and carry inherent risk

The technology and offering developed by
these businesses may fail and/or these
businesses may not be able to develop
their offering or technology into
commercially viable products or
technologies.

The Investment team are experts in their sector
and undertake rigorous due-diligence prior to
any investment. The team provides active
management, secures a significant minority
stake with board participation and rights in
portfolio companies.

2. Portfolio value may be

dominated by single or limited
number of companies

There is a risk that if one or more such
investee companies experience difficulties
or suffer from poor market conditions and
if, as a result, their value were to be
adversely affected, this would have a
material adverse impact on the overall
value of the Group’s portfolio of investee
companies.

The Company will hold non-
controlling interests in the
investment portfolio businesses

Non-controlling interests may lead to a
limited ability to protect the Company’s
position in such investments.

The financial structure of the investment
provides downside protection.

The Group adopts a broad sector approach
with a focus on four core sectors. Risk is
diversified within the portfolio by not focusing
on any one sector and by deploying capital
across growth stages.

The Board expects to allocate approximately
30% of the Group’s investment capital
towards smaller rounds of seed and series A
investments with approximately 70% being
invested in larger follow-on series B+ and
series C+ investments to scale technology
companies to fund later stage growth.

The Group is an active manager of its
investments and usually takes a board position
on the investee company. Investments are
made with suitable minority protections,
including veto rights on key decisions.
Investments are often made in investee
companies in which other institutional investors
are also shareholders. Collectively a greater
degree of protection can be afforded.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

PRINCIPAL RISKS (CONTINUED)

Risk

Possible consequences

Mitigation strategies

Risk

Possible consequences

Mitigation strategies

4. Proceeds from the sale of
investments may vary
substantially from year to year

The timing of portfolio company
realisations are uncertain and cash returns
to the Group are therefore not predictable.

Fluctuations in foreign exchange
rates may adversely affect the
performance of the Company’s
portfolio

Certain of the Group’s investments are
made or operate in currencies other than
Sterling and the Group may make certain
of its future investments in other currencies
and in companies that use other currencies
as their functional currency. Accordingly,
changes in exchange rates may have an
adverse effect on the valuations and/or
revenues of the Group’s investments, and
on its investments’ ability to make debt
payments, pay dividends or make other
distributions to investors such as the Group.

The Group maintains sufficient cash resources
to manage its ongoing operational and
investment commitments. Regular working
capital reviews are undertaken using cash flow
projections.

The Board regularly reviews and considers the
possible impacts of currency movements on
the Group’s portfolio.

The portfolio companies generate revenues
across a range of currencies, predominantly
US Dollars, Sterling and Euro, and a degree of
natural hedge therefore exists.

The Company does not currently intend to
enter into any hedging arrangements to
mitigate its exposure to fluctuations in
exchange rates.

6. Portfolio company valuations

subject to change

The valuations of the Group’s underlying
portfolio of investments are substantially
based on the revenue generated by these
businesses.

The Group invests in market leaders, across a
spread of geographies and sub-sectors which
provide diversification in revenue sources,
macro economic risks and peers groups.

Each of these businesses, and therefore
their ability to generate revenue, are
subject to the macro economic
environment in the countries in which the
businesses operate.

Similarly, where comparable peer groups
are used as a benchmark to determine
valuations based on revenue multiples, the
performance of the peer group will impact
portfolio valuations.

The decision by one of these shareholders
to dispose of their holding in the Group
might have an adverse effect on the
Group’s operations.

The Group is dependent on a
small number of shareholders
who hold a large proportion of
the total share capital of the
Group

The Directors seek to build a mutual
understanding of objectives between the
Group and its shareholders. Regular
communication is maintained with all
shareholders through the Group’s
announcements and its annual and half-yearly
reports. The Directors maintain regular contact
with institutional shareholders through
presentations and meetings held throughout
the year.

Draper Esprit plc
Annual Report and Accounts 2017

8. The Group and its portfolio

companies are subject to
competition risk

The Group may not be able to
retain and attract investment
team members and support staff
with the right skills and
experience

10. Esprit Capital Partners or Encore
Ventures cease to be authorised
by FCA

The execution of the Company’s investment
strategy depends primarily on the ability of
the Company to identify opportunities to
make investments and to convert those
opportunities. A number of entities
compete with the Company for investment
opportunities, including public and private
investment funds, commercial and
investment banks, commercial finance
companies, business development
companies and operating companies
acting as strategic buyers.

The competitive pressures faced by the
Company may prevent it from identifying
investments that are consistent with its
investment objectives or that generate
attractive returns for shareholders. The
Company may lose investment
opportunities in the future if it does not
match investment prices, structures and
terms offered by competitors. Alternatively,
the Company may experience decreased
rates of return and increased risks of loss if
it matches investment prices, structures
and terms offered by competitors.

The industry in which the Group operates is
a specialised area and the Group requires
highly qualified and experienced
management and personnel. If the Group
does not succeed in retaining skilled
personnel or is unable to continue
to attract all personnel necessary for the
development and operation of its business,
it may not be able to grow its business as
anticipated or meet its financial objectives.

Should either Esprit Capital and/or Encore
Ventures cease to be authorised and
regulated by the FCA as small authorised
UK AIFMs then they would no longer be
authorised to act as the investment
manager of the Company or the Encore
Funds respectively or as the UK AIFM to the
Group.

11. UK future exit from the EU may

impact on the Group

The ability to make investments into Europe
may be reduced.

12. The termination of the Group’s
arrangements with the Draper
Venture Network may reduce the
opportunities available for
investment

If the Group’s arrangements with the
Draper Venture Network were terminated
for any reason, the Company would lose
the advantages of that membership.

Competition for investment opportunities is
based primarily on pricing, terms and structure
of a proposed investment, certainty of
execution and, in some cases, brand or
reputational presence.

The Group seeks to mitigate competition risks
by having diversified sources of opportunities,
by creating a strong brand based on a
reputation of successful experiences with
entrepreneurs and by demonstrating ongoing
financial discipline in its investment decision
process.

The Group carries out regular market
comparisons for staff and Executive
remuneration. Senior Executives are
shareholders in the business and the Group
operates appropriate incentive programmes to
align individuals with the Group’s strategy over
the long term.

The Group encourages staff development and
inclusion through coaching and mentoring.

The Group ensures that Esprit Capital and
Encore Ventures fulfil their ongoing
requirements under FCA rules.

The Company is dual listed on AIM in London
and ESM in Dublin, thereby providing flexibility
to participate in European investments going
forward.

The Group is an active member of the Draper
Venture Network and participates as a Board
member.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

BOARD OF DIRECTORS

Karen Slatford
(age 60)
Non-Executive Chair

Simon Christopher Cook
(age 48)
Chief Executive Officer

Stuart Malcolm Chapman
(age 47)
Chief Operating Officer

Grahame David Cook
(age 58)
Non-Executive Director

Richard Fowler Pelly OBE
(age 60)
Non-Executive Director

Between 1983 and 2001 Karen was at
Hewlett Packard, where in 2000 she
became Vice President and General
Manager Worldwide Sales & Marketing
for the Business Customer Organisation.
She was responsible for sales of all
Hewlett Packard’s products, services and
software to business customers globally.

Since 2001, Karen has held various roles
at board level at a range of technology
companies, including Portwise AB, Via
Networks, Inc, Compel Group plc, HAL
Knowledge Systems, and Stepstone ASA.
She is currently chair of The Foundry, a
leading special effects software
company, the senior independent
non-executive director and chair of the
nominations committee of Micro Focus
International, chair of ECI Debitoor
Limited and non-executive director at
both Intelliflo Ltd and Accesso
Technology Group plc. Karen holds a BA
honours degree in European Studies
from Bath University and a Diploma in
Marketing.

Simon has been active in the UK venture
capital industry since 1995. Previously,
Simon was a partner with Cazenove and
with Elderstreet Investments and a
director at 3i in Cambridge.

Prior to establishing the Group, with
Simon in 2006, Stuart was a Director of 3i
Ventures in London. Having joined 3i in
1992, he has 25 years of venture capital
experience in Europe and the US.

He was a founding partner of 3i US,
based in Menlo Park, CA from 1999 until
2003. Stuart was responsible for Esprit’s
investments in Lagan Technology (sold
to Verint), Redkite (sold to Nice) and
Kiadis (IPO). Stuart currently serves as a
director with Netronome, Kiadis, Resolver,
Realeyes and Conversocial and observer
with Metalysis and Crate.

Stuart is a member of the British Venture
Capital Association Venture Committee.
Prior to 3i, Stuart was involved in
software and systems implementations
for Midland Bank. He is a graduate of
Loughborough University and currently
serves on the Strategic Advisory Board
for the Loughborough School of
Business.

In 2006, he led the management buy-out
of Cazenove Private Equity and
acquisition of Prelude Ventures and he
negotiated the Group’s partnership with
the Draper Venture Network. Simon has
invested in a number of successful
technology startups, including
Cambridge Silicon Radio (IPO), Virata
(IPO), Horizon Discovery (IPO), nCipher
(IPO), Lovefilm (sold to Amazon), Zeus
(sold to Riverbed) and KVS (sold to
Veritas). Simon currently works as a
director or observer with Graze, Lyst,
SportPursuit, Crowdcube and Trustpilot.

Prior to venture capital, Simon worked as
a strategy and IT consultant at KPMG,
where he established the Digital Media
strategy consulting practice, and as a
computer games developer, including
running his own development company
started at age 19. Simon is a graduate of
the University of Manchester Institute of
Science and Technology (“UMIST”) with a
BSc in Computation. He is a former
member of the EVCA Venture Platform
group and was voted VC Personality of
the Year 2008.

Grahame Cook is an experienced FTSE
and AIM non-executive, with extensive
experience as an audit committee
chairman. With a background in banking,
where he has specialised in the life
sciences, pharma and biotech sectors,
Grahame has over 20 years’ experience
of M&A, equity capital markets and
investor relations.

Grahame started his career at Arthur
Andersen, where he qualified as a
chartered accountant and worked within
audit and corporate investigations.
Subsequent positions include at UBS,
where he was a member of the global
investment banking management
committee and global head of equity
advisory, and at WestLB Panmure, where
he was joint chief executive officer.

Grahame currently sits on a number of
boards, including Horizon Discovery Plc,
and chairs four, including Sinclair Pharma
Plc and Morphogenesis Inc.

Up until April 2014, Richard was the chief
executive of the European Investment
Fund (‘‘EIF’’), Europe’s largest investor in
venture capital funds.

Before joining EIF in April 2008, Richard
was managing director of structured
asset finance at Lloyds TSB Bank in
London from 2005 to 2007. From 1998 to
2005, he worked for GE Capital, first as
chairman and CEO of Budapest Bank in
Hungary and then as CEO of UK
Business Finance within GE Commercial
Finance.

Prior to his career at GE, Richard worked
for Barclays Bank in various functions in
the UK and in France from 1977 to 1997,
including business development,
corporate finance, structured finance
and retail banking.

Richard holds an honours degree in
psychology from Durham University, a
diploma from the Institute of Bankers
and obtained an MBA with distinction
from INSEAD Fontainebleau. In 2003, he
was awarded an OBE in the Queen’s
Honours List for Services to the
community in Hungary.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

CHAIRMAN’S CORPORATE GOVERNANCE INTRODUCTION

CORPORATE GOVERNANCE REPORT

Our corporate governance
statement

We hold the view that good governance is fundamental
to the successful growth of the business.

established and clearly articulated
roles, authority limits and controls. We
believe that the governance structure
we have implemented is appropriate
and effective, and the Board will keep
the relevant systems and procedures
under regular review to ensure that
they develop in line with the growth
and strategic progress of the Group.

The Board agreed that it was not
appropriate to conduct a formal Board
performance evaluation process
during the year as it was only the first
year of the Board’s operation, and
would have been too early to draw
any meaningful conclusions. We will
consider an appropriate performance
evaluation process during the financial
year ending 31 March 2018.

Karen Slatford
Chairman

I am pleased to introduce our first
Corporate Governance Statement, which
sets out our approach to corporate
governance and summarises both how
our Board and Committees operate
and their key activities during the year.

We stated in our AIM Admission
document our intention to observe the
principles of the corporate governance
code for small and mid-size quoted
companies published by the Quoted
Companies Alliance (the “QCA Code”).
The Directors share the view that
good governance is fundamental to
the successful growth of the business
and we are therefore mindful of the
recommendations of the QCA Code
and have sought to ensure that
appropriate systems and procedures
are maintained which are both effective
and appropriate for the size and nature
of the Company and its operations.

A number of governance procedures
and policies were adopted by the Board
in connection with the IPO, in particular
to constitute the formal Committees of
the Board described more fully below,
and to ensure systems are in place to
support compliance with the AIM Rules
and other regulatory requirements which
apply to an AIM listed company. The
objective of our governance structure
is to allow the executive team to focus
on delivering the investment strategy
of the Group within a framework of

Karen Slatford
Chairman

We believe that the
governance structure
we have implemented
is appropriate and
effective.”

Draper Esprit plc
Annual Report and Accounts 2017

Composition of the Board
Including the Chairman, the Board
comprises five Directors, of which two are
Executive Directors and three are Non-
Executive Directors, and the Company
therefore complies with the principles
of the QCA Code with respect to the
independence of the Board. The skills
and experience of the Board are set out
in their biographies on pages 28 and 29.

Collectively, the Non-Executive
Directors bring an appropriate balance
of functional and sector skills and
experience such that they are able
to provide constructive support and
challenge to the Executive Directors.

•

How the Board operates
The Directors are responsible for the
determination of the Company’s
investment policy and strategy and have
overall responsibility for the Company’s
activities, including the review of
investment activity and performance. The
operation of the Board is documented in
a formal schedule of matters reserved for
its approval. This is reviewed annually,
and includes matters relating to:
•

the Group’s strategic aims, objectives
and investment strategy.
the approval of any single investment
greater than £5.0 million or the sale of
any assets where the proceeds will be
greater than 10% of market
capitalisation.
the approval of any investment decision
where a conflict of interest exists.
• structure and capital of the Group.
• financial reporting, financial controls
and dividend policy and approving
annual budgets.
internal control and risk management
(including the Group’s appetite for risk).
the approval of significant contracts
and expenditure.

•

• appointments to the Board and its

Committees.

Day-to-day management of the Group is
the responsibility of the CEO, COO and
the Executive Management team.

Board meetings
The Board met formally eight times
during the period from IPO to the
end of the financial year and will
meet at least ten times p.a.

The Directors are expected to attend
all meetings of the Board and the
Committees on which they sit, and the
Non-Executive Directors are expected to
devote sufficient time to the Company
to enable them to fulfil their duties as
Directors. The Board is satisfied that the
Chairman and each of the Non-Executive
Directors is able to devote sufficient time
to the business, and they each maintain
open communication with the Executive
Directors and senior management
between the formal Board meetings.

The table below shows Directors’
attendance at scheduled Board and
Committee meetings during the year.

Director

Karen Slatford

Simon Cook

Stuart Chapman

Grahame Cook

Richard Pelly

No. of
meetings
attended

Board activity during the year
The Board has an agreed schedule
of activity covering regular business
updates, financial, operational and
governance matters. Each Board
Committee has also compiled a
schedule of work to ensure that all
areas for which the Board has overall
responsibility are addressed and
reviewed during the course of the year.

Board and Committee papers are
distributed to Directors in advance
of the meetings, and each meeting is
minuted by the Company Secretary.
Every Director is aware of the right
to have any concerns minuted.

Board Committees
The Board has delegated specific
responsibilities to the Audit Committee
and the Remuneration and Nomination
Committee, details of which are
set out below. Due to the size of
the Board and the nature of the
Company’s structure and operations,
it was agreed during the year that
a separate Nomination Committee
was not required. The Remuneration
Committee and Nomination Committee
were therefore combined.

Each Committee has written terms of
reference setting out its duties, authority
and reporting responsibilities. The
terms of reference of each Committee
were reviewed by the Committees
and the Board during the year, and it
is intended that these will be reviewed
on an annual basis going forward to
ensure they remain appropriate and
reflect any changes in legislation,
regulation or best practice.

Audit Committee
The Audit Committee is chaired by
Grahame Cook, who is an experienced
Main Market and AIM listed company
audit committee chairman with
significant financial experience. Its
other members are Karen Slatford
and Richard Pelly. All members of the
Audit Committee are independent
Non-Executive Directors.

The Audit Committee is responsible for
monitoring the integrity of the Group’s
financial statements, reviewing significant
financial reporting issues and monitoring
the adequacy and effectiveness of
the Group’s internal control and risk
management systems. It also oversees
the relationship with the external auditor,
advises the Board on the appointment
of the auditor and reviews their fees and
the nature, scope and results of the audit.

The Audit Committee will meet at
least three times per year, and met on
three occasions in the period between
IPO and the financial year-end.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

CORPORATE GOVERNANCE REPORT (CONTINUED)

AUDIT COMMITTEE REPORT

The Group also has a long established
conflicts of interest policy, under which
employees and Executive Directors are
prohibited from investing in companies
that fall within the target investment
focus of the Group, and which requires
Non-Executive Directors to seek approval
from the Group Compliance Officer
if they wish to invest in companies
falling within the mandate of Group.

Board evaluation
No formal performance evaluation
has been undertaken in the year
due to the fact that the Board has
only been operating since the IPO.
The Board does, however, intend to
conduct a performance evaluation
process during the year ending
31 March 2018 and will report on that
process in next year’s Annual Report.

Relations with shareholders
Regular communication with institutional
shareholders is maintained through
individual meetings with the Executive
Directors and CFO, particularly following
the publication of interim and full-year
results. Investor relations is a standing
item on the Board’s agenda, and the
executive team routinely updates the
Board as to outcomes of their meetings
with shareholders and potential investors.

General information about the
Company, the management team
and the Group’s investments is
also available on the Company’s
website www.draperesprit.com, the
investor section of which contains
details of all recent announcements
and all information required to be
maintained under AIM Rule 26.

Shareholders will have an opportunity
to raise questions with the Board at
the Group’s Annual General Meeting.

Annual General Meeting
The Annual General Meeting will take
place on 5 September 2017. The Notice
of Annual General Meeting and the
ordinary and special resolutions to
be put to the meeting are included
at the end of this Annual Report.

Internal controls
The Board has ultimate responsibility for
the Group’s system of internal controls
and for the ongoing review of their
effectiveness. Systems of internal control
can only identify and manage risks and
not eliminate them entirely. As a result,
such controls cannot provide an absolute
assurance against misstatement or loss.
The Board considers that the internal
controls which have been established and
implemented are appropriate for the size,
complexity and risk profile of the Group.

The main elements of the Group’s
internal control system include:
• Close management of the day-to-day
activities of the Group by the Executive
Directors.

• An organisational structure with
defined levels of responsibility.

• Specified investment approval levels

and financial authority limits.

• An annual budgeting process which is

approved by the Board.

• Monthly management reporting

against agreed KPIs (KPIs are further
outlined on page 24 of the Strategic
Report).

• Financial controls to ensure that the

assets of the Group are safeguarded
and that appropriate accounting
records are maintained.

The Board continues to review the
system of internal controls to ensure it is
fit for purpose and appropriate for the
size and nature of the Company’s
operations and resources.

The Committee has unrestricted access
to the Group’s external auditor. The CFO
is invited to attend each meeting of the
Audit Committee, and other Executive
Directors and senior management
may also attend by invitation.

Remuneration and
Nomination Committee
The Remuneration and Nomination
Committee is chaired by Richard
Pelly and its other members are
Karen Slatford and Grahame Cook.
The Remuneration and Nomination
Committee’s responsibilities include
agreeing with the Board the
remuneration policy for the Executive
Directors, reviewing and approving
corporate goals and objectives for the
Executive Directors and monitoring
performance against those objectives.
The Remuneration and Nomination
Committee is also responsible for
making recommendations relating
to appointments to the Board or
changes to the constitution of the
Board and its Committees.

The Executive Directors and CFO
are invited to attend meetings of
the Committee where their input
is required, but they do not take
part in any discussion on their own
benefits and remuneration.

The Remuneration Report on pages
34 to 36 contains more information
on the Committee’s role and the
remuneration and fees of the Executive
and Non-Executive Directors.

Conflicts of interest
At each meeting of the Board or its
Committees, the Directors are required
to declare any interests in the matters
to be discussed and are regularly
reminded of their duty to notify any
actual or potential conflicts of interest.
The Company’s Articles of Association
provide for the Board to authorise any
actual or potential conflicts of interest
if deemed appropriate to do so.

Draper Esprit plc
Annual Report and Accounts 2017

On behalf of the Board, I am pleased
to present the Audit Committee Report
for the year ended 31 March 2017.

The Audit Committee is responsible for
ensuring that the financial performance
of the Group is properly reported on and
monitored. Its role includes monitoring
the integrity of the Group’s financial
statements, reviewing significant
financial reporting issues, reviewing the
effectiveness of the Company’s internal
control and risk management systems
and overseeing the relationship with the
external auditors (including advising
on their appointment, agreeing the
scope of the audit and reviewing the
audit findings). It is also responsible for
establishing, monitoring and reviewing
procedures and controls for ensuring
compliance with the AIM Rules.

Members of the Audit Committee
The Committee consists of three
independent Non-Executive Directors:
Grahame Cook (as Chairman of the
Committee), Karen Slatford and Richard
Pelly. The Board is satisfied that
Grahame Cook, who is a qualified
Chartered Accountant and an
experienced Non-Executive Director and
audit committee chair, has recent and
relevant financial experience.

The Audit Committee met three times
during the period since IPO (and on one
occasion since the year end), and will
meet at least three times per year going
forward at appropriate times in the
reporting and audit cycle and otherwise
as required. The Audit Committee will
also meet frequently with the Company’s
external auditors.

Duties
The duties of the Audit Committee are
set out in its terms of reference, which are
available on request from the Company
Secretary. The Committee reviewed its
terms of reference during the year, with
minor amendments approved by the
Board.

The main items of business considered
by the Audit Committee during the year
included:

• Review of terms of reference.
• Review of the risk management and

internal control systems.

• Review and approval of the interim

financial statements and the external
auditor’s report thereon.

• Review of the year-end audit plan, and
consideration of the scope of the audit
and the external auditor’s fees.
• Review of the Annual Report and
financial statements, including
consideration of the significant
accounting issues relating to the
financial statements (see below), and
the going concern review.

• Consideration of the external audit

report and management
representation letter.

• Meeting with the external auditor
without management present.

• Assessment of the need for an internal

audit function.

• Review of whistleblowing

arrangements.

Role of the external auditor
The Audit Committee is responsible
for monitoring the relationship with the
external auditor, Grant Thornton LLP,
in order to ensure that the auditor’s
independence and objectivity are
maintained. As part of this responsibility,
the Audit Committee reviews the
provision of non-audit services by
the external auditor and the Audit
Committee Chairman is consulted by
management prior to the external
auditor being engaged to provide any
such non-audit services. The breakdown
of fees between audit and non-audit
services is provided in note 8.

Having reviewed the auditor’s
independence and performance, the
Audit Committee has recommended
to the Board that a resolution to
reappoint Grant Thornton LLP as the
Company’s auditor be proposed at the
forthcoming Annual General Meeting.

Audit process
The external auditor prepares an
audit plan for its review of the full-
year financial statements, and the
audit plan is reviewed and agreed
in advance by the Audit Committee.

Prior to approval of the financial
statements, the external auditor presents
its findings to the Audit Committee,
highlighting areas of significant
financial judgement for discussion.

Internal Audit
The Audit Committee has considered
the need for an internal audit function
and has determined that, given
the size and nature of the Group’s
operations and finance team, there
is no current requirement to establish
a separate internal audit function.

Risk management and internal
controls
As described in the Corporate
Governance Report on page 32, the
Group has established a system of risk
management and internal controls.
The Audit Committee is responsible
for reviewing the systems of risk
management and internal control, and
has reviewed both the risk register
and management’s progress in
implementing and maintaining such
control systems during the year. The
Committee is satisfied that the internal
control systems which have been
established are operating effectively.

Share dealing, anti-bribery and
whistleblowing
The Group has adopted a share dealing
code in conformity with the requirements
of Rule 21 of the AIM Rules. All
employees, including new joiners, are
required to agree to comply with the
code. The Group has also adopted
anti-bribery and whistleblowing policies,
which are included in every employee’s
staff handbook. The Group operates an
open and inclusive culture and
employees are encouraged to speak up
if they have any concerns. The aim of
such policies is to ensure that all
employees bring matters which cause
them concern to the attention of either
the Executive or Non-Executive Directors.

Grahame Cook
Audit Committee Chairman

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

DIRECTORS’ REMUNERATION REPORT

I am pleased to present our first
Remuneration Report which sets out the
remuneration policy and remuneration
paid to Directors during the year. As
an AIM listed company, Draper Esprit
is not required by the Companies Act
2006 to prepare a remuneration report
and therefore the following disclosures
are presented on a voluntary basis.

Remuneration and Nomination
Committee
Given the size and nature of the
operations of the Company, the
Board agreed in November 2016 that
the roles of the Remuneration and
Nomination Committees (which had
been established on IPO as individual
committees) should be merged. The
members of the combined Remuneration
and Nomination Committee (the
“Committee”) are Richard Pelly
(Chairman of the Committee),
Grahame Cook and Karen Slatford,
all of whom are independent Non-
Executive Directors of the Company.

The Committee operates under terms of
reference, which are reviewed annually
and approved by the Board. The
Committee’s core responsibilities include:
• determining the policy for the

remuneration of the Chairman,
Executive Directors and Chief Financial
Officer and recommending the total
remuneration packages (including
bonuses, incentive payments and
share options or other awards) for
those individuals; and
identifying and nominating members
of the Board, and recommending the
composition of each Committee of the
Board (including the Chair of each
Committee).

•

The Committee met on three occasions
during the year under review and
has met once since the year-end. It is
intended that the Committee will meet
at least twice per year going forward.

The activity of the Committee during
the year was focused on remuneration
matters, including approving one-off
awards of options under the Company
Share Option Plan (see below) and
approving bonus payments to the
Executive Directors following the
assessment of performance against
agreed financial KPIs. The bonus amounts
are set out in the table on page 36.

The Committee also approved an
increase to the CEO’s salary from
£240,000 p.a. to £270,000 p.a.

Remuneration policy
The objective of the Company’s
remuneration policy is to attract,
motivate and retain high calibre,
qualified, executives with the necessary
skills and experience in order for the
Company to achieve its strategic
objectives. The Directors also recognise
the importance of ensuring that
employees are incentivised and identify
closely with the success of the Company.
Accordingly, the Committee’s aim is to
provide a framework for remuneration
which creates an appropriate balance
between fixed and performance-related
elements. It is the Committee’s intention
that performance-related remuneration
is linked to the achievement of objectives
which are aligned with shareholders’
interests over the medium term.

The main elements of the remuneration
package for Executive Directors are:
• Base salary.
• Performance-related annual bonus.
• Other benefits (including life and

health insurance).

• Participation in the Company’s carried

interest plans.

• Participation in the Company’s Share

Option Plan.

Executive Directors’ service contracts
The Executive Directors signed new
service contracts with the Company on
Admission. These are not for a fixed
duration, and are terminable upon six
months’ notice by either party.

Non-Executive Directors
Each of the Non-Executive Directors
signed a letter of appointment with the
Company on Admission to AIM. Subject
to their re-election by shareholders,
the initial term of appointment for
each Non-Executive Director is three
years, and their appointments are
terminable upon three months’ notice
by either party. The Non-Executive
Directors’ fees are determined by the
Board, subject to the limit set out in the
Company’s Articles of Association.

The Draper Esprit plc Share Option
Plan (“CSOP”)
The Committee is responsible for
granting awards of options under the
CSOP, which was adopted by the
Company on 1 August 2016. All Executive
Directors and employees are eligible to
participate in the CSOP.

The CSOP comprises two parts. Options
granted under the first part are intended
to be qualifying CSOP Options under
the CSOP Code set out in Schedule
4 to the Income Tax (Earnings and
Pensions) Act 2003. This means that
options granted under that part are
subject to capital gains tax treatment.
Options granted under the second part
are not tax-favoured options. The CSOP
Rules specify that no options may be
granted more than ten years after
its adoption, and that the number of
ordinary shares in the Company over
which options may be granted on any
date is limited so that the total number
of ordinary shares issued and issuable
in respect of options granted in any
ten-year period under the CSOP and any
other employees’ share scheme of the
Company will be restricted to 5% of the
issued ordinary shares from time to time.

investments made over the relevant
period once the Company has received
an aggregate annualised 10% realised
return on investments and follow-on
investments made during the relevant
period. The Plan Participants’ return is
subject to a ‘‘catch-up’’ in their favour.
Plan Participants’ carried interests vest
over five years for each carried interest
plan and are subject to good and bad
leaver provisions. Any unvested carried
interest resulting from a Plan Participant
becoming a leaver can be reallocated
by the Remuneration Committee.

The first options granted under the
CSOP were granted in November 2016
over a total of 1,771,770 ordinary shares
at an exercise price of 355 pence per
ordinary share (being the closing mid-
market price of an ordinary share on
28 November 2016). The options are not
subject to any performance conditions
and will be exercisable after three years,
and within ten years of the date of grant,
subject to continued employment.

Carried interest plan
The Company has established carried
interest plans for the Executive Directors,
other members of the investment team
and certain other employees (together,
the ‘‘Plan Participants’’) in respect of any

investments and follow-on investments
made from Admission. Each carried
interest plan will operate in respect of
investments made during a 24-month
period and related follow-on investments
made for a further 36-month period
save that: (i) there is a separate carried
interest plan for the initial portfolio and,
in due course, a separate carried interest
plan for related follow-on investments;
and (ii) the first such carried interest
plan after Admission is for the period
from Admission to 31 March 2018.

Subject to certain exceptions, Plan
Participants will receive, in aggregate,
15% of the net realised cash profits
from the investments and follow-on

The remuneration policy for 2017/18 will operate as follows:

Role

Executive

Simon Cook

Chief Executive Officer

Stuart Chapman

Chief Operations Officer

Non-Executive

Karen Slatford

Chairman

Grahame Cook

Chairman of Audit Committee

Richard Pelly

Chairman of Remuneration and

Nomination Committee

Basic
salary/fee
£’000s

Maximum
bonus
potential

270

205

60%

–

Annual bonus
The 2017/18 annual bonus for Executive
Directors will be assessed against
financial KPIs. Challenging targets have
been set, with 50% of the annual bonus
potential (i.e. 30% of base salary) earned
for achieving threshold performance,
increasing on a straight line basis to
60% (36% of base salary) for achieving
target performance then increasing on
a straight line basis to 100% of bonus
potential (60% of base salary) for

achieving stretch levels of performance.
Actual performance targets are not
disclosed as they are considered to be
commercially sensitive at this time.

Statutory information
The following information includes
disclosures required by the AIM Rules
and UK company law.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

DIRECTORS’ REMUNERATION REPORT (CONTINUED)

DIRECTORS’ REPORT

Directors’ remuneration
The following table summarises the gross aggregate remuneration of the Directors who served during the year to 31 March 2017:

Executive Directors

Simon Cook

Stuart Chapman

Non-Executive Directors

Karen Slatford

Grahame Cook

Richard Pelly

Total

Basic

salary/fees
£’000s

Pension
contributions
£’000s

Taxable
benefits
£’000s

Performance-
related bonus
£’000s

2016/17
Total
£’000s

2015/16
Total
£’000s

190.0

158.3

66.7

33.3

481.6

28.5

23.8

44.5

1.0

109.6

91.4

372.6

274.5

–

66.7

33.3

52.3

201.0

780.4

–

Share options
The individual interests of the Executive Directors under the CSOP are as follows:

Simon Cook

Stuart Chapman

Date of grant

CSOP options

Number of

Number of
unapproved
options

First exercise
date

Exercise price

28/11/16

8,450

226,385

28/11/19

226,385

28/11/19

£3.55

The details of the CSOP are set out in note 13 to the consolidated financial statements.

Directors’ share interests
The interests of the Directors who served in the year and who held an interest in the ordinary shares of the Company were as
follows:

Simon Cook

Stuart Chapman

None of the Non-Executive Directors currently hold shares in the Company.

Richard Pelly
Chairman of the Remuneration Committee
24 July 2017

Number of
ordinary shares as at

31 March 2017

Number of
ordinary shares as at

31 March 2016

2,230,214

–

Draper Esprit plc
Annual Report and Accounts 2017

The Directors present their report
together with the audited financial
statements for the year ended 31 March
2017.

Results and dividends
The Group’s profit for the year was £33.2
million (period ended 31 March 2016:
£3,000 loss). In accordance with our
stated dividend policy, the Directors do
not recommend the payment of a
dividend.

Future developments
Details of future developments and
events that have occurred after the
balance sheet date can be found in the
Strategic Report on page 8 and 9.

Review of business
The Chairman’s Statement on page 1 and
the Strategic Report on pages 1 to 27
provide a review of the business, the
Group’s performance for the year ended
31 March 2017, key performance
indicators and an indication of future
developments and risks, and form part
of this Directors’ Report.

Directors
The Directors of the Company who held
office during the year were:

Stuart Chapman (appointed 15 June 2016)
(appointed 15 June 2016)
Grahame Cook
(appointed 15 June 2016)
Simon Cook
(appointed 15 June 2016)
Richard Pelly
(appointed 15 June 2016)
Karen Slatford

Ireland Strategic Investment Fund

Woodford Investment Management

China Huarong International Holdings Limited

Simon Cook

Stuart Chapman

Baillie Gifford

WH Ireland

Brian Caulfield

Brief biographical details for each of the
Directors are given on pages 28 and 29.

and currency risk, are provided in
note 27 of the financial statements.

Directors’ interests
A table showing the interests of the
Directors in the share capital of Draper
Esprit plc is set out in the Directors’
Remuneration Report on page 36.

Directors’ indemnity provisions
As permitted by the Articles of
Association, the Directors have the
benefit of an indemnity which is a
qualifying third party indemnity
provision as defined by Section 236
of the Companies Act 2006. The
indemnity was in force throughout
the financial period and at the date of
approval of the financial statements.

The Company has purchased and
maintained throughout the financial
period Directors’ and Officers’ liability
insurance in respect of itself and its
Directors.

Political donations
The Company made no political
donations during the year to 31 March
2017.

Financial instruments
The financial risk management
objectives of the Group, including
details of the exposure of the Company
and its subsidiaries to financial risks
including credit risk, interest rate risk

Share capital structure
At 31 March 2017, the Company’s issued
share capital was £407,475.76 divided
into 40,747,576 ordinary shares of £0.01
each. Details of the movements in issued
share capital in the year are set out in
note 22 to the financial statements.

The holders of ordinary shares are
entitled to one vote per share at
meetings of the Company. There are no
restrictions on the transfer of shares.

Pursuant to the lock-in and vesting deed
executed in connection with the IPO, the
Executive Directors have undertaken to
Numis (the Company’s Nominated Adviser)
not to dispose of any interest in any of the
ordinary shares in the Company held by
them at Admission for a period of two
years from Admission except in certain
limited circumstances. The Executive
Directors have also undertaken not to
dispose of 37%, 25% and 12.5% of the
ordinary shares held by each of them at
Admission (on the same basis as described
above) for the third, fourth and fifth years
following Admission respectively.

Substantial shareholdings
As at 31 March 2017, the Group had been
notified, in accordance with Chapter
5 of the Disclosure and Transparency
Rules, of the following voting rights
of shareholders of the Group:

Number of
ordinary shares

% of total
voting rights

10,904,502

10,62 1 ,000

3,333,333

2,230,2 1 4

2,200,000

1,5 41 ,666

1,324,237

26.8

26.0

8.2

5.5

5.4

3.8

3.2

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

DIRECTORS’ REPORT (CONTINUED)

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

are made as appropriate. It is the
policy of the Group that the training,
career development and promotion
of a disabled person should, as far as
possible, be identical to that of a person
who does not suffer from a disability.

The Directors’ Report was approved by
the Board on 24 July 2017 and is signed
on its behalf by:

Stuart Chapman
Chief Operating Officer
24 July 2017

Disclosure of information to auditors
As far as the Directors are aware, there
is no relevant audit information of which
the Group’s auditor is unaware, and
each Director has taken all reasonable
steps that he or she ought to have taken
as a Director in order to make himself
or herself aware of any relevant audit
information to establish that the Group’s
auditors are aware of that information.

Going concern
After making enquiries, the Directors
have a reasonable expectation that
the Group has adequate resources
to continue in operational existence
for the foreseeable future. For this
reason, they continue to adopt the
going concern basis in preparing
the financial statements.

Auditor
Grant Thornton LLP has indicated its
willingness to continue in office as auditor
and a resolution to re-appoint them will
be proposed at the forthcoming Annual
General Meeting.

Annual General Meeting
The Annual General Meeting will be
held on 5 September 2017. The Notice of
Annual General Meeting and the ordinary
and special resolutions to be put to the
meeting are included at the end of this
Annual Report and financial statements.

Employees
Employees are encouraged to be
involved in decision-making processes
and are provided with information on the
financial and economic factors affecting
the Group’s performance, through team
meetings, updates from the Chief
Executive Officer and via an open and
inclusive culture.

Applications for employment by
disabled persons are always fully
considered, bearing in mind the
aptitudes of the applicant concerned.
In the event of a member of staff
becoming disabled, every effort is
made to ensure that their employment
within the Group continues and that
workspace and other modifications

The Directors are responsible for
preparing the Annual Report and
the audited financial statements
in accordance with applicable
law and regulations.

Company law requires the Directors
to prepare financial statements for
each financial period. Under that law
the Directors are required to prepare
the Group financial statements in
accordance with International Financial
Reporting Standards (“IFRSs”) as
adopted by the European Union and
have also chosen to prepare the Parent
Company financial statements in
accordance with Financial Reporting
Standard 101 ‘Reduced Disclosure
Framework’. Under company law
the Directors must not approve the
financial statements unless they are
satisfied that they give a true and fair
view of the state of affairs of the Group
and the Company and of the profit
or loss of the Group for that period.

In preparing the Group financial
statements, International Accounting
Standard 1 requires that the Directors:
• properly select and apply accounting

policies;

• present information, including

accounting policies, in a manner that
provides relevant, reliable, comparable
and understandable information;
• provide additional disclosures when

compliance with the specific
requirements in IFRSs is insufficient to
enable users to understand the impact
of particular transactions, other events
and conditions on the entity’s financial
position and financial performance;
and

• make an assessment of the Group’s

ability to continue as a going concern.

In preparing the Company financial
statements, the Directors are required to:
• select suitable accounting policies and

then apply them consistently;

• make judgements and accounting
estimates that are reasonable and
prudent;

• state whether Financial Reporting
Standard 101 ‘Reduced Disclosure
Framework’ has been followed,
subject to any material departures
disclosed and explained in the
financial statements; and

• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.

The Directors are responsible for
keeping adequate accounting records
that are sufficient to show and explain
the Group’s and the Company’s
transactions and disclose with
reasonable accuracy at any time the
financial position of the Group and the
Company, enabling them to ensure
that the financial statements comply
with the Companies Act 2006. They are
also responsible for safeguarding the
assets of the Group and the Company
and hence for taking reasonable
steps for the prevention and detection
of fraud and other irregularities.

The Directors are responsible for
the maintenance and integrity of the
corporate and financial information
included on the Group’s website.
Legislation in the UK governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.

We confirm that to the best of our
knowledge:
•

the financial statements, prepared in
accordance with the relevant financial
reporting framework, give a true and
fair view of the assets, liabilities,
financial position and profit of the
Group and the undertakings included
in the consolidation taken as a whole;
the Strategic Report includes a fair
review of the development and
performance of the business and the
position of the Group and the
undertakings included in the
consolidation taken as a whole,
together with a description of the
principal risks and uncertainties that
they face; and
the Annual Report and financial
statements, taken as a whole, are fair,
balanced and understandable and
provide the information necessary for
shareholders to assess the Group’s
performance, business model and
strategy.

•

This responsibility statement was
approved by the Board on 24 July
2017 and signed on its behalf by:

Stuart Chapman
Chief Operating Officer
24 July 2017

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF DRAPER ESPRIT PLC

We have audited the financial statements of Draper Esprit plc for the year ended 31 March 2017 which comprise the consolidated
statement of comprehensive income, the consolidated and company statements of financial position, the consolidated statement
of cash flows, the consolidated and parent company statements of changes in equity and the related notes. The financial reporting
framework that has been applied in the preparation of the group financial statements is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the
preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).

This report is made solely to the company’s shareholders, 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 shareholders 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 shareholders as a body, for our audit work, for this report, or
for the opinions we have formed.

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 39, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and
express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.

Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and parent company and its environment obtained in the course of
the audit, we have not identified any material misstatements in the Strategic Report and Directors’ Report.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our
opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been

received from branches not visited by us; or
the parent company financial statements 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.

William Pointon
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
24 July 2017

Opinion on financial statements
In our opinion:
•

the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 March
2017 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

•
•

•

Opinion on other matters prescribed by 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 Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements.
the Strategic Report and Directors’ Report has been prepared in accordance with applicable legal requirements.

•

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2017

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 MARCH 2017

Unrealised gains on investments held at fair value through the profit and loss
Fee income

Total investment income

Operating expenses
Administrative expenses
Other expenses

Operating profit/(loss) from operations

Finance income

Operating profit/(loss) before tax

Income taxes

Profit/(loss) for the year/period

Share of profit/(loss) attributable to non-controlling interests

Profit/(loss) from continuing operations

Other comprehensive income/(expense):
Other comprehensive expense

Total comprehensive income/(loss) for the year/period

Earnings per share attributable to:
Equity holders of parent (pence)

The notes on pages 46 to 65 are an integral part of these consolidated financial statements.

Year
ended
31 Mar 2017
£’000s

Period
ended
31 Mar 2016
£’000s

Notes

5
6

35,744
1,673

37,417

(3,934)
(21)

33,462

221

33,683

11, 21

(438)

33,245

(330)

32,915

–

32,915

80.8

–
–

–

–
(3)

(3)

–

(3)

–

(3)

–

(3)

–

(3)

(6)

Non-current assets

Non-current assets
Intangible assets
Investments in associates
Financial assets held at fair value through the profit or loss
Property, plant and equipment

Total non-current assets

Current assets
Trade and other receivables
Cash and cash equivalents

Total current assets

Current liabilities
Trade and other payables

Total current liabilities

Non-current liabilities
Deferred tax

Total non-current liabilities

Net assets

Equity
Share capital
Share premium account
Merger relief reserve
Share-based payments reserve
Retained earnings

Equity attributable to owners of parent

Non-controlling interests

Total equity

Net assets per share (pence)

Year
ended
31 Mar 2017
£’000s

Period
ended
31 Mar 2016
£’000s

Notes

14
15
16
17

22
22
22
13

21,158
260
105,971
152

127,541

527
24,892

25,419

(1,550)

(716)

150,694

407
93,248
23,920
123
32,892

150,590

104

150,694

370

–
–
–
–

–

50
–

(3)

–

50
–
–
–
(3)

–

The financial statements were approved by the Board of Directors and authorised for issue on 24 July 2017.

S. M. Chapman
Chief Operating Officer

The notes on pages 46 to 65 are an integral part of these consolidated financial statements.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2017

Cash flows from operating activities
Operating profit/(loss) before tax
Adjustments to reconcile operating profit to net cash flows used in operating activities:
Revaluation of investments held at fair value through the profit and loss
Depreciation and amortisation
Share-based payments
Bad debt provision
Decrease in trade and other receivables
Increase in trade and other payables

Net cash used in operating activities
Tax paid

Net cash inflow/(outflow) from operating activities

Cash flows from investing activities
Purchase of property, plant and equipment
Cash acquired on purchase of subsidiary
Loans repaid from underlying investment vehicles
Purchase of initial portfolio
Purchase of investments

Net cash outflow investing activities

Cash flows from financing activities
Cash paid to non-controlling interests
Proceeds from issue of share capital net of fees

Net cash outflow from financing activities

Net increase/(decrease) in cash & cash equivalents

Cash and cash equivalents at beginning of period
Exchange differences on cash and cash equivalents

Cash and cash equivalents at end of period

The notes on pages 46 to 65 are an integral part of these consolidated financial statements.

Notes

16
16
16

33,683

(35,744)
155
123
37
681
224

(841)
–

(841)

(166)
495
17,137
(40,000)
(20,602)

(43,136)

(246)
69,336

69,090

25,113

–
(221)

24,892

(3)

–
–
–
–
(50)
3

(50)
–

(50)

–

–
–
–

–

–
50

–

–
–

–

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2017

Year
ended
31 Mar 2017
£’000s

Period
ended
31 Mar 2016
£’000s

Share
capital
£’000s

Share
premium
£’000s

Merger
relief
reserve
£’000s

Share-based
payments
reserve
£’000s

Total
attributable to
equity holders
of the parent
£’000s

Attributable
to non-
controlling
interests
£’000s

Retained
earnings
£’000s

Total
equity
£’000s

–

(3)

–

(3)

–

(3)

–

(3)

–

32,915

330

33,245

(20)

–

(246)

32,895

104

32,999

Balance at 29 September 20151
Total comprehensive Income

for the period
Loss for the period

Total comprehensive income/

(loss) for the period
Contributions by and

distributions to the owners:

Issue of share capital

Balance at 31 March 2016

Comprehensive Income for

the year

Profit for the year
Acquired reserves due to
non-controlling interest

Amounts withdrawn by

non-controlling interest

Total comprehensive income

for the year

Contributions by and

distributions to the owners:
Issue of share capital (note 22)
Share premium (note 22)
Merger relief reserve (note 22)
Share based payment (note 13)

357
–
–
–

–
93,248
–
–

–
–
23,920
–

–
–
–
123

–
–
–
–

357
93,248
23,920
123

–
–
–
–

357
93,248
23,920
123

Balance at 31 March 2017

407

93,248

23,920

123

32,892

150,590

104

150,694

1 Draper Esprit plc was incorporated on 29 September 2015

The notes on pages 46 to 65 are an integral part of these consolidated financial statements.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. General information
Draper Esprit plc (the “Company”) is a public limited company incorporated and domiciled in England and Wales. On 15 June 2016,
the Company listed on the London Stock Exchange’s AIM market and the Irish Stock exchange’s ESM market (the “IPO”). This is the
Company’s first Annual Report as a public company. The Company’s registered address is 20 Garrick Street, London WC2E 9BT.

3. Significant accounting policies continued
a) Basis of consolidation
The consolidated financial statements comprise the Company and the results, cash flows and changes in equity of the following
subsidiary undertakings:

The Company is the ultimate parent company in which results of all subsidiaries are consolidated. The consolidated financial
statements (“the Group accounts”) for the year ended 31 March 2017 comprise the financial statements of the Company and its
subsidiaries (together, “the Group”). The comparative period presents the consolidated statement of comprehensive income,
cashflows and statement of changes in equity for the period since 29th September 2015 (incorporation date of the Company) through
to 31 March 2016. The comparative consolidated and Company balance sheets are presented as at 31 March 2016.

The consolidated financial statements are presented in Pounds Sterling (£) which is the currency of the primary economic
environment the Group operates. All amounts are rounded to the nearest thousand, unless otherwise stated.

2. Adoption of new and revised standards
Information on the Draper Esprit Group’s structure is given in note 3(a). Information on other related party relationships of the
Draper Esprit Group is provided in note 28.

In the current year, the following new and revised Standards and Interpretations have been adopted and have affected the
amounts reported in these consolidated financial statements.

Standards affecting the reported results or financial position
In the current year, there were no new and revised standards and Interpretations that have been adopted which affected the
amounts reported in these consolidated financial statements.

Standards not affecting the reported results or financial position
At the date of authorisation of these consolidated financial statements, the following Standards and Interpretations which have not
been applied in these financial statements were in issue but not yet effective:

•

IFRS 15 Revenue from Contracts with Customers is the only new Standard effective from 1 January 2017. IFRS 15 establishes
principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of
revenue and cash flows arising from an entity’s contracts with customers. The Directors have not yet fully determined the impact
on the Group’s consolidated financial statements as a result of adopting this standard.

IFRS 16 Leases was issued in January 2016. It will result in almost all leases being recognised on the balance sheet, as the
distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item)
and a financial liability to pay rentals are recognised. The only exceptions are short-term and low value leases. The accounting
for lessors will not significantly change. The standard will affect primarily the accounting for the Group’s operating leases. As at
the reporting date, the Group has non-cancellable operating lease commitments, see note 23. The Directors have not yet fully
determined the impact on the Group’s consolidated financial statements as a result of adopting this standard.

IFRS 9 Financial Instruments: IFRS 9 will eventually replace IAS 39 in its entirety. The process has been divided into three main
components, being classification and measurement; impairment; and hedge accounting. The Group provisionally assesses the
potential effect to be immaterial given the majority of its financial assets will be held ‘at fair value through profit or loss’ (‘FVTPL’).
IFRS 9 is expected to be implemented in 2018. The Directors have not yet fully determined the impact on the Group’s
consolidated financial statements as a result of adopting this standard.

3. Significant accounting policies
Basis of accounting
The Group accounts have been prepared and approved by the Directors in accordance with all relevant IFRSs as issued by the
International Accounting Standards Board (“IASB”), and interpretations issued by the IFRS Interpretations Committee, endorsed by
the European Union (“EU”). The financial reporting framework that has been applied in the preparation of the Company financial
statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting
Practise). The Company has taken advantage of disclosure exemptions available under FRS 101 as explained further in note 1 of the
Company’s accounts. The financial statements are prepared on a going concern basis as disclosed in the Directors’ Report.

Name of undertaking

Nature of business

Esprit Capital Partners LLP

Investment Management

Encore Ventures LLP

Investment Management

Esprit Capital I GP Limited

DFJ Esprit III GP Limited

General Partner

Esprit Capital III Founder GP Limited

General Partner

Esprit Capital III GP LP

Encore I GP Limited

Encore I Founder GP Limited

General Partner

Esprit Capital Management Limited

Admin company

Esprit Capital Holdings Limited

Esprit Nominees Limited

Esprit Capital I CIP Limited

Dormant

Country of
incorporation

ownership

England

100%

71%

100%

Subsidiaries
Subsidiaries are entities controlled by the Group. Control, as defined by IFRS 10, is achieved when the Group is exposed, or has rights,
to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the
investee. Subsidiaries are fully consolidated from the date on which the Group effectively obtains control. They are de-consolidated
from the date that control ceases. Control is reassessed whenever circumstances indicate that there may be a change in any of
these elements of control. Refer to note 4(b) for further information. The Group has accounted for the acquisition of Esprit Capital
Partners LLP on 15 June 2016 as an acquisition in accordance with IFRS 3 business combinations and not as a reverse acquisition
having assessed the substance of the transaction, including control and changes of in ownership.

Associates
Associates are all entities over which the Group has significant influence but not control or joint control. This is generally the case
where the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity
method of accounting, after initially being recognised at cost. Under the equity method of accounting, the investments are initially
recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the investee in
profit or loss, and the Group’s share of movements in other comprehensive income. Dividends received or receivable from
associates and joint ventures are recognised as a reduction in the carrying amount of the investment.

When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other
unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments
on behalf of the other entity.

The carrying amount of equity-accounted investments is tested for impairment where there are indications that the carrying value
may no longer be recoverable.

Investment company
In accordance with the provisions of IFRS 10, Draper Esprit plc considers itself to be an investment entity and its wholly-owned
subsidiary, Draper Esprit (Ireland) limited to be an investment company as its sole purpose is hold investments on behalf of the
Group. Consequently, Draper Esprit (Ireland) Limited is not consolidated in accordance with IFRS10, instead it is recognised as an
investment held at fair value through the profit and loss on the consolidated balance sheet. Loans to investment vehicles are
treated as net investments at fair value through the profit and loss.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. Significant accounting policies continued
The below is a list of entities that are controlled and not consolidated but held as investments at fair value through the profit and
loss on the consolidated balance sheet.

Name of undertaking

Principal activity

Draper Esprit (Ireland) Limited

Investment company

Esprit Capital III LP

Esprit Capital IV LP

Esprit Investments (1) LP

Limited partnership

Country of
incorporation

Ireland

England

Limited Partnerships (co-investment)
The following limited partnerships that the Group’s General Partners are members of are not considered to be controlled and
therefore not consolidated in these financial statements:

Name of undertaking

Encore I GP LP

Principal activity

General partner

DFJ Esprit II Founder LP

Co-investment limited partnership

DFJ Esprit II Founder 2 LP

Co-investment limited partnership

Encore I Founder LP

Co-investment limited partnership

Encore I Founder 2014 LP

Co-investment limited partnership

Encore I Founder 2014-A LP

Co-investment limited partnership

Esprit Capital III Founder LP

Co-investment limited partnership

Country of
incorporation

England

b) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services
provided in the normal course of business, net of discounts, VAT and other sales related taxes. All revenue from services is
generated within the UK and is stated exclusive of value added tax.

Revenue from services comprises:

• Fund management services
Fund management fees are either earned at a fixed annual rate or are set at a fixed percentage of funds under management,

measured either by commitments or invested cost, depending on the stage of the fund being managed. Revenues are
recognised as the related services are provided.

• Arrangement fees
Occasionally Draper Esprit plc may charge a fee as part of arranging an investment from one of the funds it manages into a

portfolio company. Such fees are charged at a rate determined on a case-by-case basis and are payable upon completion of
the investment.

• Portfolio Directors’ fees
Portfolio Directors’ fees are annual fees, charged in arrears, to an investee company and payable to Draper Esprit plc as the

fund manager. Draper Esprit plc only charges Directors’ fees on a limited number of the investee companies.

c) Deferred income
The Group’s management fees are typically billed either quarterly of half-yearly in advance. Where fees have been billed for an
advance period the amounts are credited to deferred income, and then subsequently released through the profit and loss
accounting the period the fees relate to.

Draper Esprit plc
Annual Report and Accounts 2017

3. Significant accounting policies continued
d) Business combinations
The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to
obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred
and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent
consideration arrangement. Acquisition costs are expensed as incurred. Assets acquired and liabilities assumed are generally
measured at their acquisition-date fair values.

The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they
have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities
assumed are generally measured at their acquisition-date fair values. Goodwill is stated after separate recognition of identifiable
intangible assets. It is calculated as the excess of the sum of: a) fair value of consideration transferred; b) the recognised amount of
any non-controlling interest in the acquiree; and c) acquisition-date fair value of any existing equity interest in the acquiree, over the
acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above,
the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately.

e) Goodwill and other intangible assets
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the
acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-
date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date
amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of
any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the
excess is recognised immediately in profit or loss as a bargain purchase gain.

When the consideration transferred by the Group in a business combination includes an asset or liability resulting from a
contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as
part of the consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify
as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement
period adjustments are adjustments that arise from additional information obtained during the “measurement period” (which
cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

Other intangible assets
Certain previously unrecognised assets acquired in a business combination that qualify for separate recognition are recognised as
intangible assets at their fair values e.g. brand names, customer contracts and lists (see note 14). All finite-lived intangible assets, are
accounted for using the cost model whereby capitalised costs are amortised on a straightline basis over their estimated useful lives.
Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairment testing as
described below. Customer contracts are amortised on a straight-line basis over their useful economic lives which is typically the
duration of the underlying contracts. The following useful economic lives are applied:
• customer contracts: eight years.

f) Impairment
For the purposes of assessing impairment, assets are grouped at the lowest level for which there are largely independent cash
inflows (“cash generating units” or “CGU”). As a result, some assets are tested individually for impairment and some are tested at
cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the
related business combination and represent the lowest level within the Group at which management monitors goodwill. All other
individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.

An impairment loss is recognised in the consolidated statement of total comprehensive income for the amount by which the assets
or cash generating units carrying amount exceeds its recoverable amount which is the higher of fair value less costs to sell and
value-in-use. To determine value-in-use, management estimates expected future cashflows from each cash-generating unit and
determine a suitable discount rate in order to calculate the present value of those cashflows. Discount factors are determined
individually for each cash-generating unit and reflect their respective risk profile as assessed by management. Impairment losses
for cash generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining
impairment loss is charged pro-rata to the other assets in the cash-generating unit with the exception of goodwill, and all assets are
subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment charge
is reversed if the cash-generating units recoverable amount exceeds its carrying amount.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. Significant accounting policies continued
g) Foreign currency
Transactions entered into by Group entities in a currency other than the functional currency in which they operate are recorded at
the rates prevailing when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates
prevailing at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are
recognised immediately in the profit and loss.

The individual financial statements of the Group’s subsidiary undertakings are presented in their functional currency. For the
purpose of these consolidated financial statements, the results and financial position of each subsidiary undertaking are expressed
in Pounds Sterling, which is the presentation currency for these consolidated financial statements.

The assets and liabilities of the Group’s undertakings whose functional currency is not pounds sterling are translated at exchange
rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period.

h) Financial assets
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a
contract whose terms require delivery of the financial asset within the timeframe established by the market concerned and are
initially measured at fair value, plus transaction costs, except for those financial assets classified at fair value through profit or loss,
which are initially measured at fair value.

Financial assets are classified by the Group into the following specified categories: financial assets ‘at fair value through profit or
loss’ (FVTPL) and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is
determined at the time of initial recognition.

Fair value through profit or loss
A financial asset may be designated as at FVTPL upon initial recognition if:
(a) such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
(b) the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its

performance is evaluated on a fair value basis, in accordance with the Draper Esprit Group’s documented risk management or
investment strategy, and information about the grouping is provided internally on that basis; or

(c) it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and

Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.

The Group considers that the investment interests it holds in Esprit Capital III LP, Esprit Capital III Founder LP, DFJ Esprit II Founder
LP, Esprit Capital IV LP and Esprit Investments(I) LP are appropriately designated as at FVTPL as they meet criteria (b) above.

Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. After initial recognition, these are measured at amortised cost using the effective interest method, less provision for
impairment. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and
most other receivables fall into this category of financial instruments.

Individually significant receivables are considered for impairment when they are past due or when other objective evidence is
received that a specific counterparty will default.

The Groups loans and receivables comprise trade and other receivables and cash and cash equivalents in the consolidated
statement of financial position.

i) Financial liabilities
The Group’s financial liabilities may include borrowings and trade and other payables.

All financial liabilities are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a
contract whose terms require delivery of the financial asset within the timeframe established by the market concerned and are
initially measured at fair value, plus transaction costs.

3. Significant accounting policies continued
Financial liabilities are measured subsequently at amortised cost using the effective interest Method. All interest-related charges
and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within finance costs or
finance income.

j) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable
that the outflow of resources embodying the economics benefits will be required to settle the obligation and a reliable estimate can
be made of the amount of the obligation.

k) Share capital
Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a
financial liability or financial asset.

The Group’s ordinary shares are classified as equity instruments.

l) Defined contribution schemes
Contributions to defined contribution pension schemes are charged to the consolidated statement of comprehensive income in the
year to which they relate.

m) Share-based payments
Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the
consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account
by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market
vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a
charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for
failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to the consolidated statement of comprehensive income over the
remaining vesting period. Where equity instruments are granted to persons other than employees, the consolidated statement of
comprehensive income is charged with the fair value of goods and services received.

n) Leased assets
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a
“finance lease”) the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of
the fair value of the leased property and the present value of the minimum payments payable of the term of the lease. The
corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest
element is charged to the consolidated statement of comprehensive income over the period of the lease and is calculated so that it
represents constant proportion of the lease liability. The capital element reduces the balance owed to the lessor.

Where substantially all of the risks and rewards incidental to the ownership are not transferred to the Group (an “operating lease”)
the total rentals payable under the lease are charged to the consolidated statement of comprehensive income on a straight line
basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the
lease term on a straight line basis.

o) Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when
declared by directors. In the case of final dividends, this is when approved by the shareholders at the AGM.

p) Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income
statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted
or substantively enacted by the balance sheet date.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. Significant accounting policies continued
q) Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using
the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the
initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and
interests in joint ventures, except where the group is able to control the reversal of the temporary difference and it is probable that
the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary
differences associated with such investments and interests are only recognised to the extent that it is probable that there will be
sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised
based on tax laws and rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or
credited in the income statement, except when it relates to items charged or credited in other comprehensive income, in which case
the deferred tax is also dealt with in other comprehensive income.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which
the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities Deferred
tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets
and liabilities on a net basis.

r) Property, Plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is
recognised so as to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line
method, on the following basis:

Leasehold improvements – over the term of the lease
Fixtures and equipment
Computer equipment

– 33% p.a. straight line
– 33% p.a. straight line

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the
effect of any changes in estimate accounted for on a prospective basis.

s) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments
maturing within 90 days from the date of acquisition that are readily convertible into known amounts of cash and which are subject
to an insignificant risk of changes in value.

t) Segmental reporting
IFRS8, “Operating Segments” defines operating segments as those activities of an entity about which separate financial information
is available and which are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocation of
resource. The Chief Operating Decision Maker has been identified by the Board of Directors as the Chief Executive Officer.

3. Significant accounting policies continued
u) Financial instruments
Financial assets and financial liabilities are recognised on the consolidated balance sheet when the Group becomes a party to the
contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through
profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial
recognition.

Fair value measurement
Management uses valuation techniques to determine the fair value of financial assets. This involves developing estimates and
assumptions consistent with how market participants would price the assets. Management bases its assumptions on observable
data as far as possible but this is not always available. In that case management uses the best information available. Estimated fair
values may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date (see Note 4(a))

4. Critical accounting estimates and judgements
The Directors have made the following judgements and estimate that have had the most significant effect on the carrying amounts
of the assets and liabilities in the consolidated financial statement. 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
only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

a) Valuation of unquoted equity investments at fair value through the profit and loss
The judgements and estimations required to determine the appropriate valuation methodology of unquoted equity investments
means there is a risk of material adjustment to the carrying amounts of assets and liabilities. These judgements include whether to
increase or decrease investment valuations or not and require the use of judgement, estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily available or observable.

The fair value of unlisted securities is established with reference to the International Private Equity and Venture Capital Valuation
Guidelines (IPEVCVG). In line with the IPEVCVG, the Group may base valuations on earnings or revenues where applicable, market
comparables, price of recent investments in the investee companies, or on net asset values.

The Group invests in early stage and growth technology companies, through predominantly unlisted securities. Given the nature of
these investments, there are often no current or short-term future earnings or positive cash flows. Consequently, the most
appropriate approach to determine fair value is based on a methodology with reference to observable market data, that being the
price of the most recent transaction. Fair value estimates that are based on observable market data will be of greater reliability
than those based on estimates and assumptions and accordingly where there have been recent investments by third parties, the
price of that investment will generally provide a basis of the valuation.

The length of period for which it remains appropriate to use the price of recent investment depends on the specific circumstances of
the investment, and the Group will consider whether the basis remains appropriate each time valuations are reviewed. If the “price of
recent investment” methodology is no longer considered appropriate, the Group then considers alternative methodologies in the
IPEVCVG guidelines, being principally price-revenue or price-earnings multiples, depending upon the stage of the asset, requiring
management to make assumptions over the timing and nature of future revenues and earnings when calculating fair value.

Where a fair value cannot be estimated reliably, the investment is reported at the carrying value at the previous reporting date
unless there is evidence that the investment has since been impaired.

In all cases, valuations are based on the judgement of the Directors after consideration of the above and upon available
information believed to be reliable, which may be affected by conditions in the financial markets. Due to the inherent uncertainty of
the investment valuations, the estimated values may differ significantly from the values that would have been used had a ready
market for the investments existed, and the differences could be material. Due to this uncertainty, the Group may not be able to sell
its investments at the carrying value in these financial statements when it desires to do so or to realise what it perceives to be fair
value in the event of a sale.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. Critical accounting estimates and judgements continued
b) Control assessment
The Group has a number of entities within its corporate structure and consideration has been made of which should be
consolidated in accordance with IFRS 10 and which should not. The Group consolidates all entities where it has control over the
following: power over the investee to significantly direct the activities; exposure, or rights, to variable returns from its involvement
with the investee; and the ability to use its power over the investee to affect the amount of the investor’s returns. The Company does
not consolidate qualifying investment companies it controls in accordance with IFRS 10 and instead recognises them as
investments held at fair value through the profit and loss. See note 3 (a) for further details.

c) Carrying amount of goodwill
Determining whether goodwill is impaired requires an estimation of the recoverable amount of the cash-generating units to which
goodwill is allocated. The recoverable amount is based on “value in use” calculations which requires estimates of future cashflows
expected from the cash generation unit (CGU) and a suitable discount rate in order to calculate present value. The carrying amount
of goodwill at balance sheet date was £20.5 million (31 March 2016: nil).

d) Business combinations
The directors have undertaken a detailed assessment of the substance of the transaction through which the Company acquired the
underlying investment vehicles and Esprit Capital Partners LLP and its subsidiaries with reference to the requirements of IFRS 10
and IFRS 3. Following that assessment directors have determined that this transaction is appropriately accounted for as an
acquisition.

5. Fair value movement in investments

Unrealised gains on investments held at fair value through the profit and loss (note 16)

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

35,744

–

6. Revenue
Revenue is derived solely within the UK, from continuing operations for all periods. An analysis of the Group’s revenue is as follows:

Management fees
Portfolio Directors’ fees

7. Administration expenses
Administration expenses comprise:

Employee benefit expenses (note 9)
Operating lease rentals
Legal and professional
Irrecoverable VAT
Depreciation and amortisation
Travel expenses
Other administration costs

Draper Esprit plc
Annual Report and Accounts 2017

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

1,632
41

1,673

–
–

–

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

2,473
115
666
130
155
121
274

3,934

–
–
–
–
–
–
–

–

8. Profit for the year/period
The profit for the year/period has been arrived at after charging:

Audit fees payable to the Company’s auditors
Audit of the accounts of any associate of the company
Audit-related assurance services
Other assurance services
Taxation compliance services
Other taxation advisory services

Total fees payable to the Company’s auditor

Bad debt provision

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

47
32
22
15
58
3

177

3
3
–
–
–
–

–

The total for all services relating to corporate finance transactions (either proposed or entered into) by or on behalf of the Company
or any of its associates with the Auditors was £564,000 and has been debited to share premium as part of equity issuance costs
(note 22).

9. Employee benefit expenses
Employee benefit expenses (including directors) comprise:

Wages and salaries
Defined contribution pension costs
Benefits (Healthcare and Life Assurance)
Recruitment Costs
Share-based payment expense (note 13)
Social security contributions and similar taxes

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

1,858
167
16
63
123
246

2,473

–
–
–
–
–

–

The average number of persons (including Executive and Non-executive Directors) employed by the Group during the year was:

Technology Investment
Corporate functions

Year ended
31 Mar 2017
Number

Period ended
31 Mar 2016
Number

10
7

–
–

–

Corporate functions comprise non-executive directors, finance, marketing, human resources and administration.

Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the Group, including the Directors of the Company listed on page 37, the managing partner and the CFO of the Company.

Wages and salaries
Short-term non-monetary benefits
Defined contribution pension costs
Share-based payment expense (note 13)
Social security contributions and similar taxes

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

730
39
90
63
89

1,011

–
–
–
–
–

–

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. Finance Income

Net foreign exchange gain

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

221

–

13. Share-based payments

Draper Esprit plc 2016

Company Share Option Scheme (CSOP)

Date of Grant

28-Nov-16
28-Nov-16

Number of
CSOP Options

Number of
approved

Options Vesting period

Exercise Price
(pence)

1,618,967
152,528

101,400
–

3 Years
5 Years

355
355

Fair value
per granted
instrument
(pence)

64.1
89.3

11. Tax expense
The charge to tax, which arises in the Group and the corporate subsidiaries included within these financial statements, is:

Current tax expense
Current tax on profits for the year/period
Adjustments for under/(over) provision in prior periods

Total current tax
Deferred tax expense
Arising on co-invest and carry (note 21)
Reversal of amounts previously recognised

Total deferred tax

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

–
–

–

578
(140)

438

–
–

–

–
–

–

The UK standard rate of corporation tax is 19% (2016: 20%). There is no current tax charge in the year (2016: £nil).

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United
Kingdom applied to profits for the year/period are as follows:

Year ended
31 Mar 2017

Period ended
31 Mar 2016

Profit/(loss) for the year before tax

Profit/(loss) on ordinary activities of Group companies before tax
Tax using the Company’s domestic tax rate of 19% (2016: 20%)
Expenses not deductible for tax purposes
Unrealised revaluation of investments
Other tax adjustments

Total tax charge for the year

33,683

6,400
–
(6,791)
829

438

–

–
–
–
–

–

12. Earnings per share and net asset value
The calculation of basic earnings per share is based on the profit attributable to shareholders and the number of basic average
shares. When calculating the diluted earnings per share, the weighted average number of shares in issue is adjusted for the effect
of all dilutive share options and awards. There was no dilution during the year as arising from the issue of share options.

31 March 2017

Basic earnings per ordinary share

Profit

after tax
£’000s

Weighted
average no.
of shares

‘000

Pence per
share

32,915

40,748

80.8

Net asset value (“NAV”) per share is based on the net asset attributable to shareholders and the number of basic average shares.
When calculating the diluted earnings per share, the weighted average number of shares in issue is adjusted for the effect of all
dilutive share options and awards. There was no dilution during the year as arising from the issue of share options.

31 March 2017

Net asset value per ordinary share

Draper Esprit plc
Annual Report and Accounts 2017

Adj. Net
assets
£’000s

Weighted
average no.
of shares

‘000

Pence per
share

150,694

40,748

370

The Draper Esprit plc 2016 Company Share Option Plan (CSOP) was launched on 28th November 2016 and made available to
certain employees, Directors and Trusts. The Options have an exercise price of 355 pence per share and are exercisable at the end
of a three and five-year period ending on 28th November 2019 and 28th November 2021 respectively. A total of 1,771,495 shares
under option were granted in the year. The share-based payment charge for the year is £122,940 (period ended 31 March 2016:
£nil). The share price at grant date was 355 pence. The Black Scholes Option Pricing Model has been used for valuation purposes.
All options are settled in shares. Volatility is expected to be in the range of 20-30% based on an analysis of the Company’s and peer
groups share price. The risk free rate used was 0.73% and 1.57% and was taken from zero coupon United Kingdom government
bonds on a term consistent with the vesting period. There are no performance conditions attached to these share options.

14. Intangible assets

31 March 2017

Cost
Cost carried forward as at 1 April 2016
Additions during the year
Acquired through business combinations (note 18)

Cost as at 31 March 2017
Accumulated amortisation
Amortisation carried forward as at 1 April 2016
Charge for the year

Accumulated amortisation as at 31 March 2017
Net book value:
As at 31 March 2017

Goodwill1
£’000s

Customer
contracts2
£’000s

Total
£’000s

–
20,476

20,476

–
–

–

–
818

818

–
(136)

(136)

–
21,294

21,294

–
(136)

(136)

20,476

682

21,158

1 Goodwill of £20.5 million arose on the acquisition of all the capital interests in Esprit Capital Partners LLP, a Venture Capital manager based in the UK, on 15 June 2016 and
represents the value of the acquired expertise and knowledge of the fund managers. The directors have identified the fund managers as the cash-generating unit (“CGU”)
being the smallest group of assets that generates cash inflows independent of cash flows from other assets or groups of assets. The fund managers are responsible for
generating deal flow and working closely with investee companies creating value and maximising returns for the Group. The Group tests goodwill annually for impairment
comparing the recoverable amount using value-in-use calculations and the carrying amount. Value-in-use calculations are based on future expected cash flows generated by
the CGU from the realisation of investments for the next eight years with reference to the most recent financial budget and forecasts. The key assumptions for the value in use
calculations are the discount rate using pre-tax rates that reflect the current market assessments of the time value of money and risks specific to the CGU. The internal rate of
return (“IRR”) used was based on past performance and experience. The discount rate used was 10% and the IRR used was 20%.

2 An intangible asset of £0.8 million was also recognised in respect of the anticipated profit from the participation in Encore Ventures LLP as a consequence of the acquisition of

Esprit Capital Partners LLP.

15. Investments in associates
On 24 November 2016, Draper Esprit acquired a 30.77% stake in Elderstreet Holdings Limited, the holding company of Elderstreet
Investments Limited with an option to acquire the balance of the Elderstreet shares. The initial consideration of £0.26 million has
been satisfied by the issue of 73,667 new ordinary shares of 1 pence each in the capital of the Company. The Groups share of
post-acquisition profits in the four-month period was not material and there were no indications of impairment at balance
sheet date.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. Investments
The Group holds investments through investment vehicles it manages. The investments are predominantly in unlisted securities and
are carried at fair value through the profit and loss. The Groups valuation policies are set out in note 4(a) and note 26. The table
below sets out the movement in the balance sheet value of investments from the start to the end of the year, showing investments
made, cash receipts and fair value movements.

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

As at 1 April 2016
Initial portfolio acquired on 15 June 20161
Carry and Co-invest acquired on 15 June 2016
Investments made since IPO2
Loans repaid from underlying investment vehicles
Unrealised gains on the revaluation of investments

As at 31 March 2017

–
63,940
2,822
20,602
(17,137)
35,744

105,971

–
–
–
–
–
–

–

1 The initial portfolio was acquired on 15th June 2016 as part of the IPO which was satisfied by a mixture of cash (£40.0 million) and shares of (£23.9 million) issued by the

Company.
Investments made post IPO on 15th June 2016 are amounts the Company has invested in underlying investment vehicles. This is not the equivalent to the total amount invested
in portfolio companies as existing cash balances from the investment vehicles are reinvested.

17. Property, plant and equipment

Cost
Cost carried forward as at 1 April 2016
Additions during the year
Acquired through business combinations (note 18)

Cost as at 31 March 2017
Accumulated depreciation
Depreciation carried forward as at 1 April 2016
Charge for the year

Accumulated deprecation as at 31 March 2017
Net book value:
As at 31 March 2017

Leasehold
Improvements
£’000s

Computer
Equipment

£’000s

Total
£’000s

–
138
–

138

–
(13)

(13)

125

–
28
5

–
(6)

(6)

–
166
5

171

–
(19)

(19)

152

18. Acquisition of Esprit Capital Partners LLP
On 15 June 2016, the Company acquired 100% of the member’s capital of Esprit Capital Partners LLP, a venture capital manager
based in the UK. The business was acquired in order for Draper Esprit plc to become a self-managed investment entity. The
revenues and profits of the acquired group would have been £1.2 million and £32.9 million had the entity been acquired at the
beginning of the accounting period being 1 April 2016. Details of the business combination are as follows:

Fair value of equity shares issued

Total

Recognised amounts of identifiable net assets:
Property, plant and equipment
Intangible assets
Investments
Trade and other receivables
Cash and cash equivalents
Deferred tax liabilities
Trade and other payables

Net identifiable assets and liabilities

Goodwill

£’000s

24,000

5
818
2,675
1,165
495
(310)
(1,324)

3,524

20,476

Consideration transferred
The acquisition was settled by issuing 8,000,000 shares of Draper Esprit plc. The fair value of the equity shares issued was based
on the market value of Draper Esprit plc’s traded shares on the acquisition date. Certain Directors each received 2,911,311 ordinary
shares pursuant to the terms of the of the Esprit Capital Acquisition Agreement on 15 June 2016 and agreed to immediately sell
681,156 ordinary shares.

19. Trade and other receivables due within one year

Trade receivables
Bad debt provision
Other receivables and prepayments

The ageing of trade receivables at reporting date is as follows:

Not past due
Past due 1-30 days
Past due 31-60 days
More than 60 days

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

272
(37)
292

527

–
–
50

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

59
43
97
73

272

–
–
–
–

–

The maximum exposure to credit risk of the receivables at the reporting date is the fair value of each class of receivable mentioned
above. The Group does not hold any collateral as security.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20. Trade and other payables due within one year

Trade payables
Other taxation and social security
Other payables
Accruals and deferred income

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

(36)
(208)
(82)
(1,224)

(1,550)

–
–
–
(3)

(3)

22. Share capital and share premium continued
Share premium

Allotted and fully paid

At the beginning of the year
Premium arising on the issue of ordinary shares
Equity issuance costs

At the end of the year

Share
premium

reserve^
£’000s

–
95,972
(2,724)

93,248

All trade and other payables are short-term.

^ The premium on ordinary shares arises from the issue of 32,747,576 new ordinary shares of 1 pence each on the 15 June 2016 and 26 November 2016.

21. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19% (2016: 20%).
The movement on the deferred tax account is shown below:

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

–

(164)

(578)

(716)

Number

Pence

50,000

(50,000)

40,747,576

100

Merger relief reserve
In accordance with the Companies Acts 2006, a Merger Relief Reserve of £23.9 million (net of the cost of share capital issued of
£80k) was created on the issue of 8,000,000 ordinary shares for 300 pence each in Draper Esprit plc as consideration for the
acquisition of 100% of the capital interests in Esprit Capital Partners LLP on 15 June 2016. The Merger Relief Reserve forms part of
the Groups distributable reserves.

23. Leases
Operating leases – lessee
The total future value of minimum lease payments is due as follows:

Not later than one year
Later than one year but not later than five years
Later than five years

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

333
1,332
611

2,276

–
–
–

–

24. Retirement benefits
The Draper Esprit Group makes contributions to personal pension schemes set up to benefit its employees. The Group has no
interest in the assets of these schemes and there are no liabilities arising from them beyond the agreed monthly contribution for
each employee or member that is included in employment costs in the profit and loss account as appropriate.

Arising on business combination

Arising on co-invest and carried interest

Other timing differences

At 31 March

22. Share capital and share premium
Ordinary share capital

Allotted and fully paid

At the beginning of the year

Redeemed during the year1

Issued of share capital during the year

At the end of the year

1 During the year, 50,000 management shares were redeemed by the Company at par for 100 pence each.

On 15 June 2016, 40,673,909 of new ordinary shares of 1 pence each were issued for trading on the AIM and ESM at a price of 300p
per share as part of an IPO transaction to purchase Esprit Capital III LP and acquire the Esprit Capital Partners LLP Group. The
shares were issued as follows:
• 23,829,017 shares (£69.3 million) were issued to investors for cash proceeds net of issuance costs;
• 8,844,892 shares (£23.9 million) were issued for the acquisition of investment interests held by Draper Esprit Ireland in Esprit

Capital III LP as described in note 16;

• 8,000,000 shares (£24.0 million) were issued for the acquisition of Esprit Capital Partners LLP as described in note 18.

On 26 November 2016, a further 73,667 of new ordinary shares of 1 pence each were issued at a price of 350 pence per share to
purchase Elderstreet Holdings limited as described in note 15.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

25. Financial assets and liabilities
The description of each category of financial asset and financial liability and the related accounting policies are shown below. The
carrying amounts of financial assets and financial liabilities in each category are as follows:

31 March 2016
Financial assets

Investments in unlisted securities
Long-term financial assets
Trade and other receivables
Cash and cash equivalents
Short-term financial assets
Total financial assets
Financial liabilities

Trade and other payables

Total financial liabilities

31 March 2017
Financial assets

Investments

Long-term financial assets

Trade and other receivables
Cash and cash equivalents

Short-term financial assets

Total financial assets

Financial Liabilities
Trade and other payables

Total financial liabilities

26. Fair value measurements
This section should be read with reference to note 4(a) and note 16. The Group classifies financial instruments measured at fair
value through the profit and loss according to the following fair value hierarchy:
• Level 1: inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the

measurement date;

• Level 2: inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either

directly or indirectly; and

• Level 3: inputs are unobservable inputs for the asset or liability.

All investments are held at fair value through the profit and loss are classified as level 3 in the fair value hierarchy. As a
consequence, the values of investments at balance sheet date are considered to be entirely based on Level 3 inputs. There were no
transfers between Levels 1, 2 and 3 during the year.

Significant unobservable inputs for Level 3 valuations
The Group’s investments are all classified as Level 3 investments. The Group may base valuations on earnings or revenues where
applicable, market comparables, price of recent investments in the investee companies, or on net asset values. The Group mainly
uses most recent investment price as a proxy for fair value where available. Where such data is not available or no longer
appropriate a revenue multiple is used. See note 4(a) where valuation policies are discussed in more detail.

Designated
FVTPL
£’000s

Amortised

cost
£’000s

Total
£’000s

–
–
50
–
–
–

(3)

–
–
50
–
–
–

(3)

–
–
–
–
–
–

–

105,971

–
–

–

527
24,892

25,419

105,971

527
24,892

25,419

105,971

25,419

131,390

–

(1,550)

27. Financial instruments risk
Financial risk management
Financial risks are usually grouped by risk type: market, liquidity and credit risk. These risks are discussed in turn below.

Market risk – Foreign currency
A significant portion of the Group’s, investments and cash deposits are denominated in a currency other than sterling. The principal
currency exposure risk is to changes in the exchange rate between GBP and USD/EUR. Presented below is an analysis of the
theoretical impact of 10% volatility in the exchange rate on shareholder equity.

Theoretical impact of a change in the exchange rate of +/-10% between GBP and USD/EUR would be as follows:

Foreign currency exposures – Investments

Investments
10% decrease in GBP
10% increase in GBP

31 March 2017
£’000s

31 March 2016
£’000s

105,971
110,573
101,369

–
–
–

Certain cash deposits held by the Group are denominated in Euros. The theoretical impact of a change in the exchange rate of
+/-10% between GBP and USD/EUR would be as follows:

Foreign currency exposures – Cash

Cash denominated in EUR
10% decrease in EUR:GBP
10% increase in EUR:GBP
Cash denominated in USD
10% decrease in USD:GBP
10% increase in USD:GBP 10% increase in EUR:GBP

31 March 2017
£’000s

31 March 2016
£’000s

3,081
2,773
3,389
3,225
2,902
3,547

–
–
–
–
–
–

The combined theoretical impact on shareholders’ equity of the changes to revenues, investments and cash and cash equivalents
of a change in the exchange rate of +/-10% between GBP and USD/EUR would be as follows:

Foreign currency exposures – Equity

Shareholders’ Equity
10% decrease in EUR:GBP/USD:GBP
10% increase in EUR:GBP/USD:GBP

31 March 2017
£’000s

31 March 2016
£’000s

150,694
144,056
156,864

47
47
47

Market risk – Price risk
The Group is exposed to equity price risk in respect of equity rights and investments held by the Group and classified on the
balance sheet at fair value through the profit and loss. The Group seeks to manage this risk by routinely monitoring the
performance of these investments, employing stringent investment appraisal processes.

Liquidity risk
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less held in
readily accessible bank accounts. The carrying amount of these assets is approximately equal to their fair value. Responsibility for
liquidity risk management rests with the Board of Draper Esprit plc, which has established a framework for the management of the
Group’s funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and
by continuously monitoring forecast and actual cash flows.

All Group payable balances as at 31 March 2017 and 31 March 2016 fall due for payment within one year.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

30. Post reporting date events
On the 5 June 2017, the Company raised gross proceeds of approximately £100.0 million at an issue price of 324 pence per share
by way of the conditional placing of 25,912,346 new ordinary shares and a subscription of 4,951,851 new ordinary shares.

A further £25.0 million has been invested in new and existing companies post year end as follows:
• A further £1.9 million invested by the Company in Graphcore’s £24.0 million Series B investment round;
• A further £3.5 million invested by the Company of £7.0 million invested by the Group in PushDoctor’s £20.0 million Series B

investment round;

• A further £6.6 million invested by the Company in Perkbox, an employee benefits and engagement platform;
• A further £5.6 million invested by the Company in Trustpilot, a global multi-language review community; and
• £1.8 million invested by the Company of £3.6 million invested by the Group in an as yet disclosed insuretech company

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

27. Financial instruments risk continued
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss. The Group is
exposed to this risk for various financial instruments, for example by granting receivables to customers, placing deposits,
investment in unlisted securities through its co-investments The Group’s trade receivables are amounts due from the investment
funds under management, or underlying portfolio companies. The Group’s maximum exposure to credit risk is limited to the
carrying amount of financial assets at 31 March as summarised below;

Classes of financial assets, carrying amounts

Investments
Trade and other receivables
Cash at bank and on hand

31 March 2017
£’000s

31 March 2016
£’000s

105,971
272
24,892

131,135

–
–
–

–

The Directors consider that all the above financial assets that are not impaired or past due for each of the reporting date under
review are of good credit quality. In respect of trade and other receivables the Group is not exposed to significant risk as the
principal customers are the investment funds managed by the Group, and in these the Group has control of the banking as part of
its management responsibilities.

Investments in unlisted securities are held within limited partnerships for which the Group acts as manager, and consequently the
Group has responsibility itself for collecting and distributing cash associated with these investments. The credit risk of amounts held
on deposit is limited by the use of reputable banks with high quality external credit ratings and as such is considered negligible.

Capital management
The Group’s objectives when managing capital are to
• safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits

for other stakeholders, and

• maintain an optimal capital structure.

The Group is wholly equity funded and has no debt at balance sheet date.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to manage cash.

28. Related party transactions
Draper Esprit plc may require that one of its members is appointed to the board of an investee company in a non-executive role. In
such circumstances Draper Esprit plc charges an administration fee to the investees for the provision of the Director services. These
fees which amounted to £29,825 (period ended March 2016: £nil) have been included in the turnover for the period. Draper Esprit
does not exercise control or management through any of these non-executive positions.

On Admission, Simon Cook and Stuart Chapman assigned a portion of their personal entitlements in the carried interest in DFJ
Esprit III(i) LP to the Group. The fair value of the DFJ Esprit IIIi LP interest assigned, calculated in accordance with the policies
applied with the Group’s financial statements was £656,000. A payment of £75,000 each was made in favour of Simon Cook and
Stuart Chapman in recognition of the transfer. The members of the LLP also assigned a 61.5% interest in the gains of DFJE III FP LP
for £nil consideration. The fair value of the DFJE III FP LP interest assigned, calculated in accordance with the policies applied with
the Group’s financial statements was £444,000. All amounts have been settled by the year end.

29. Ultimate controlling party
The Directors of Draper Esprit plc do not consider there to be a single ultimate controlling party of the group.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

STATEMENT OF COMPANY FINANCIAL POSITION
AS AT 31 MARCH 2017

Assets

Non-current assets
Financial assets held at fair value through the profit and loss
Investments in subsidiary undertaking
Investments in associates
Property, plant and equipment

Total non-current assets

Current assets
Trade and other receivables
Cash and cash equivalents

Total current assets

Current liabilities
Trade and other payables

Total current liabilities

Total liabilities

Net assets

Equity
Share capital
Share premium account
Merger relief reserve
Share-based payments reserve
Retained earnings

Total equity

COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2017

Year
ended

31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

Note

Share capital
£’000s

Share
premium
£’000s

Merger relief
reserve
£’000s

Share-based
payments
reserve
£’000s

Retained
earnings
£’000s

Total equity
£’000s

Balance at 29 September 20151
Total comprehensive Income for the period
Loss for the period

Total comprehensive income for the period
Contributions by and distributions to the owners:
Issue of share capital

Balance at 31 March 2016
Comprehensive Income for the year
Profit for the year
Share-based payments

Total comprehensive income for the year
Contributions by and distributions to the owners:
Issue of share capital (note 11)
Share premium (note 11)
Merger relief reserve (note 11)
Share-based payment (note 12)

–

–
–

–

357
–
–
–

–

–
–

–

–
–

–

–
93,248
–
–

–
–
23,920
–

Balance at 31 March 2017

407

93,248

23,920

1 Draper Esprit plc was incorporated on 29th September 2015

–

–
–

–

–
–
–
123

123

–

23,895
–

23,895

–
–
–
–

–

23,895
–

23,895

357
117,168
23,920
123

23,892

141,590

6
7
7
8

11
11
11
12

93,902
24,000
260
146

118,308

298
24,122

24,420

(1,138)

141,590

407
93,248
23,920
123
23,892

141,590

–
–
–
–

–

50
–

(3)

50
–
–
–
(3)

The Directors have taken advantage of the exemption available under Section 408 of the Companies Act 2006 and have not
presented a statement of comprehensive income for the Company.

The Company’s result for the year was a profit of £23.9 million (period ended 31 March 2016: £3,000 loss).

These financial statements were approved by the Board on 24 July 2017.

Signed on behalf of the Board

S.M. Chapman
Chief Operating Officer

Company registration number: 09799594

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2017

1. Basis of preparation
These financial statements have been prepared in accordance with Financial Reporting Standard 101, Reduced Disclosure
Framework and the Companies Act 2006 as applicable to companies using FRS101. FRS101 sets out a reduced disclosure framework
for a “qualifying entity” as defined in the standard which addresses the financial reporting requirements and disclosure exemptions
in the individual financial statements of qualifying entities that otherwise apply the recognition, measurement and disclosure
requirements of EU-adopted IFRS.

The financial statements have been prepared on a going concern basis and under the historical cost convention. A summary of the
more important Company accounting policies, which have been consistently applied except where noted, is set out below.

The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements, in
accordance with FRS 101:
• paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based Payment (details of the number and weighted average exercise prices of

•
•
•

•

share options, and how the fair value of goods or services received was determined);
IFRS 7 Financial Instruments: Disclosures;
IAS 7 Statement of Cash Flows;
the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more
members of a group;
IAS 1 Presentation of Financial Statements and the following paragraphs of IAS 1: (d) (statement of cash flows), 16 (statement of
compliance with all IFRS), 111 (cash flow statement information), and 134-136 (capital management disclosures).

2. Investments in subsidiary undertakings
Unlisted investments are held at cost less any provision for impairment.

3. Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments
maturing within 90 days from the date of acquisition that are readily convertible into known amounts of cash and which are subject
to an insignificant risk of changes in value.

4. Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is
recognised so as to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line
method, on the following basis:

Leasehold improvements – over the term of the lease
Fixtures and equipment – 33% p.a. straight line
– 33% p.a. straight line
Computer equipment

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the
effect of any changes in estimate accounted for on a prospective basis.

5. Results for the Parent Company
The auditor’s remuneration for audit services and other services is disclosed in note 8 to the consolidated financial statements.

6. Investments held at fair value through the profit and loss

Name of subsidiary undertaking

Registered office

Activity

Holding

Country

Fair value
£’000

Draper Esprit (Ireland) Limited

32 Molesworth Street,
Dublin 2, Ireland.

Investment
company

100%

Ireland

93,902

As at 1 April 2016
Initial investment in Draper Esprit (Ireland) Limited on 15 June 20161
Investments made since IPO2
Loans repaid from underlying investment vehicles
Unrealised gains on the revaluation of investments

As at 31 March 2017

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

–
63,940
20,602
(16,273)
25,633

93,902

–
–
–
–
–

–

1 The initial investment made in Draper Esprit (Ireland) limited on 15 June 2016 as part of the IPO to acquire the initial portfolio satisfied by a mixture of cash (£40.0 million) and

shares of (£23.9 million) issued by the Company.
Investments made post IPO on 15th June 2016 are amounts the Company has invested in underlying investment vehicles. This is not the equivalent to the total amount invested
in portfolio companies as existing cash balances from the investment vehicles are reinvested.

See note 3 and 4 in the consolidated financial statements for the accounting policies in respect of investments held at fair value
through the profit and loss.

7. Investments in subsidiary undertakings and associates
On the 15 June 2016, the Company acquired the entire capital interests of Esprit Capital Partners LLP for £24.0 million which was
satisfied in shares as explained in note 18 of the consolidated financial statements and is held at cost on the Company’s balance sheet.

On the 26th of November 2016, the Company acquired 30.77% of the capital interests in Elderstreet Holdings Limited for £0.26
million as explained in note 15 of the consolidated financial statements and is held at cost on the Company’s balance sheet.

8. Property, plant and equipment

Cost
Cost carried forward as at 1 April 2016
Additions during the year

Cost as at 31 March 2017
Accumulated depreciation
Depreciation carried forward as at 1 April 2016
Charge for the year

Accumulated depreciation as at 31 March 2017
Net book value
As at 31 March 2017

Leasehold
improvements
£’000s

Computer
equipment
£’000s

Total
£’000s

–
138

138
–
–
(13)

(13)
–
125

–
24

24
–
–
(3)

(3)
–
21

–
162

162
–
–
(16)

(16)
–
146

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

16. Financial assets and liabilities
The description of each category of financial asset and financial liability and the related accounting policies are shown below. The
carrying amounts of financial assets and financial liabilities in each category are as follows:

NOTES TO THE COMPANY FINANCIAL STATEMENTS (CONTINUED)

9. Trade and other receivables due within one year

Unpaid share capital

Trade receivables

Total

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

–

298

–

All amounts are short-term. The net carrying value of all financial liabilities is considered a reasonable approximation of fair value.

10. Trade and other payables due within one year

Accruals

Total

Year ended
31 Mar 2017
£’000s

Period ended
31 Mar 2016
£’000s

(1,138)

(3)

All amounts are short-term. The net carrying value of all financial liabilities is considered a reasonable approximation of fair value.

11. Share Capital and other reserves
Share capital and other reserves are explained in note 22 of the consolidated financial statements.

12. Share-based payments
The Company operates a share option scheme which is explained in note 13 of the consolidated financial statements.

13. Directors’ emoluments and employee information
Full details of Directors’ remuneration can be found in note 9 of the consolidated financial statements.

14. List of subsidiary undertakings

Name of subsidiary undertaking

Activity

Holding Registered office

Draper Esprit (Ireland) Limited
Esprit Capital Partners LLP
Draper Esprit (Nominee) Limited1 Dormant

Investment company
Investment management

100% 32 Molesworth Street, Dublin 2, Ireland
(note 6)
100% 20 Garrick Street, London WC2E 9BT, United Kingdom (note 7)
100% 20 Garrick Street, London WC2E 9BT, United Kingdom

1 Draper Esprit Nominee Limited is held at cost £nil (2016: £nil) on the Company’s balance sheet

15. Critical accounting estimates and judgements
The Directors have made judgements and estimates with respect to those items that have made the most significant effect on the
carrying amounts of the assets and liabilities in the financial statements. These are described in note 4 of the consolidated financial
statements.

31 March 2016

Financial Assets
Investments in unlisted securities
Long term financial assets

Trade and other receivables
Cash and cash equivalents
Short term financial assets

Total financial assets

Financial Liabilities
Trade and other payables

Total financial liabilities

31 March 2017

Financial Assets
Investments

Long term financial assets

Trade and other receivables
Cash and cash equivalents

Short term financial assets

Total financial assets

Financial Liabilities

Total financial liabilities

Designated
FVTPL
£’000s

Amortised cost
£’000s

Total
£’000s

–
–

–
–
–

–

–
–

50
–
–

–

(3)

–
–

50
–
–

–

(3)

Designated
FVTPL
£’000s

Amortised cost
£’000s

Total
£’000s

93,902

–
–

–

93,902

–

298
24,122

24,420

(1,138)

93,902

298
24,122

24,420

118,322

(1,138)

17. Fair value measurements
The Company holds investments at fair value through the profit and loss. Refer to note 26 for the Group’s policies with respect to
fair value measurements and note 6 of the Company financial statements.

18. Financial instruments risk
In the normal course of business, the Company uses certain financial instruments including cash, trade and other receivables and
investments. The Company is exposed to a number of risks through the performance of its normal operations. Refer to note 27 of
the consolidated financial statements.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

NOTES TO THE COMPANY FINANCIAL STATEMENTS (CONTINUED)

DIRECTORS, SECRETARY AND ADVISERS

19. Post balance sheet events
On the 5 June 2017, the Company raised gross proceeds of approximately £100.0 million at an issue price of 324 pence per share
by way of the conditional placing of 25,912,346 new ordinary shares and a subscription of 4,951,851 new ordinary shares.

investment round;

Directors
Karen Slatford (Non-executive Chair)
Simon Cook (Chief Executive Officer)
Stuart Chapman (Chief Operating
Officer)
Grahame Cook (Non-executive Director)
Richard Pelly (Non-executive Director)

Registered office
20 Garrick Street, London WC2E 9BT,
United Kingdom

Website
www.draperesprit.com

Broker and Nominated Adviser
Numis Securities Limited
10 Paternoster Row
London EC2M 7LT
United Kingdom

Broker and ESM Adviser
Goodbody Stockbrokers
Ballsbridge Park
Ballsbridge
Dublin 4
Ireland

Legal Advisers to the Company
(as to English law)
Gowling WLG (UK) LLP
4 More London Riverside
London SE1 2AU
United Kingdom

Legal Advisers to the Company
(as to Irish law)
Maples and Calder
75 St. Stephen’s Green
Dublin 2
Ireland

Independent auditor
Grant Thornton UK LLP
30 Finsbury Square
London EC2A 2YU
United Kingdom

Public relations adviser
Belvedere Communications (PR)
Enterprise House
1-2 Hatfields, London SE1 9PG
United Kingdom

Principal Bankers
Barclays Bank Plc,
9-11 St Andrews St,
Cambridge, CB2 3AA
United Kingdom

Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
United Kingdom

Company Secretary
Prism Cosec Limited
42-50 Hersham Road
Walton-On-Thames
Surrey
KT12 1RZ

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

NOTICE OF ANNUAL GENERAL MEETING

Draper Esprit plc
(Incorporated and registered in England and Wales with registered number 9799594)

NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting (“AGM”) of Draper Esprit plc (the “Company”) will be held at the offices of
Gowling WLG (UK) LLP, 4 More London Riverside, London SE1 2AU on 5 September 2017 at 10.00 a.m. for the purpose of considering
and, if thought fit, passing the following resolutions (which will be proposed, in the case of resolutions 1 to 9 as ordinary resolutions
and resolutions 10 to 12 as special resolutions):

Ordinary business
ORDINARY RESOLUTIONS
1. To receive and adopt the Annual Report and Accounts of the Company for the financial year ended 31 March 2017 together with

the Directors’ Report and Auditors’ Report thereon.

2. To approve the Directors’ Remuneration Report for the financial year ended 31 March 2017.

3. That Simon Cook, who retires as a Director in accordance with the Articles of Association (the “Articles”) and being eligible to do

so offers himself for re-election as a Director, be re-elected as a Director of the Company.

4. That Stuart Chapman, who retires as a Director in accordance with the Articles and being eligible to do so offers himself for

re-election as a Director, be re-elected as a Director of the Company.

5. That Karen Slatford, who retires as a Director in accordance with the Articles and being eligible to do so offers herself for

re-election as a Director, be re-elected as a Director of the Company.

6. That Grahame Cook, who retires as a Director in accordance with the Articles and being eligible to do so offers himself for

re-election as a Director, be re-elected as a Director of the Company.

7. That Richard Pelly, who retires as a Director in accordance with Articles and being eligible to do so offers himself for re-election

as a Director, be re-elected as a Director of the Company.

8. To re-appoint Grant Thornton UK LLP as auditors of the Company to hold office from the conclusion of this meeting until the

conclusion of the next annual general meeting of the Company at which the Company’s accounts are laid and to authorise the
Directors to determine the amount of the auditors’ remuneration.

Special business
ORDINARY RESOLUTION
9. That the Directors be and are hereby generally and unconditionally authorised pursuant to section 551 of the Companies Act
2006 (the “Act”) to exercise all powers of the Company to allot shares in the Company and to grant rights to subscribe for or
convert any security into shares in the Company up to an aggregate maximum nominal amount of £69,759.92 provided that this
authority shall expire (unless renewed, varied or revoked by the Company in general meeting) on the earlier of the conclusion of
the next annual general meeting of the Company and 30 September 2018 save that the Company shall be entitled to make,
prior to the expiry of such authority, any offer or agreement which would or might require shares to be allotted or rights to
subscribe for or convert any security into shares to be granted after the expiry of such authority and the Directors may allot
shares or grant rights to subscribe for or convert securities into shares in pursuance of such offer or agreement as if the
authority conferred hereby had not expired. The authority granted by this resolution shall replace all existing authorities to allot
any shares in the Company and to grant rights to subscribe for or convert any security into shares in the Company previously
granted to the Directors pursuant to section 551 of the Act.

SPECIAL RESOLUTIONS
10. That, subject to the passing of resolution no. 9, the Directors be and are hereby empowered pursuant to sections 570 and 573 of
the Act to allot equity securities (as defined in section 560 of the Act) for cash either pursuant to the authority conferred by
resolution no. 9 above or by way of sale of treasury shares as if section 561(1) of the Act did not apply to such allotment,
provided that this power shall be limited to the allotment and/or transfer of equity securities up to an aggregate nominal
amount of £34,879.96, provided that this authority shall expire (unless renewed, varied or revoked by the Company in general
meeting) on the earlier of the conclusion of the next annual general meeting of the Company and 30 September 2018 save that
the Company shall be entitled to make, prior to the expiry of such authority, offers or arrangements which would or might
require equity securities to be allotted and/or transferred after such expiry, and the Directors may allot and/or transfer equity
securities in pursuance of any such offer or agreement as if the power conferred by this resolution had not expired. The
authority granted by this resolution shall replace all existing authorities previously granted to the Directors to allot equity
securities for cash or by way of a sale of treasury shares as if section 561(1) of the Act did not apply.

11. That, subject to the passing of resolution no. 9, the Directors be and are hereby empowered, in addition to any authority

granted under resolution 10, pursuant to sections 570 and 573 of the Act to allot equity securities (as defined in section 560 of
the Act) for cash either pursuant to the authority conferred by resolution no. 9 above or by way of sale of treasury shares as if
section 561(1) of the Act did not apply to such allotment, provided that this power shall be limited to the allotment and/or
transfer of equity securities up to an aggregate nominal amount of £34,879.96 provided that this authority shall expire (unless
renewed, varied or revoked by the Company in general meeting) on the earlier of the conclusion of the next annual general
meeting of the Company and 30 September 2018 save that the Company shall be entitled to make, prior to the expiry of such
authority, offers or arrangements which would or might require equity securities to be allotted and/or transferred after such
expiry, and the Directors may allot and/or transfer equity securities in pursuance of any such offer or agreement as if the
power conferred by this resolution had not expired.

12. That the Company be authorised generally and unconditionally, in accordance with section 701 of the Act, to make market

purchases (within the meaning of section 693(4) of the Act) of Ordinary Shares provided that:

(a)
(b)
(c)

the maximum number of Ordinary Shares that may be purchased is 6,975,992;
the minimum price which may be paid for an Ordinary Share is 0.01 pence; an
the maximum price which may be paid for an Ordinary Share is the higher of: (i) five per cent. above the average of the
mid-market value of the Ordinary Shares for the five business days before the purchase is made; and (ii) the higher of the
last independent trade and the highest current independent bid for any number of Ordinary Shares on the trading venue
where the purchase is carried out.

The authority conferred by this resolution will expire on the earlier of the conclusion of the next annual general meeting of
the Company and 30 September 2018 save that the Company may, before the expiry of the authority granted by this
resolution, enter into a contract to purchase Ordinary Shares which will or may be executed wholly or partly after the expiry of
such authority.

By order of the Board of Directors

Prism Cosec Limited
Company Secretary of Draper Esprit plc

24 July 2017

Registered Office: 20 Garrick Street, London WC2E 9BT

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

NOTICE OF ANNUAL GENERAL MEETING (CONTINUED)

Notes:
Proxies
1. A member is entitled to appoint one or more proxies to exercise all or any of the member’s rights to attend, speak and vote at
the AGM. A proxy need not be a member of the Company and a member may appoint more than one proxy in relation to a
meeting to attend, speak and vote on the same occasion provided that each proxy is appointed to exercise the rights attached
to a different share or shares held by a member. To appoint more than one proxy, the proxy form should be photocopied and
the name of the proxy to be appointed indicated on each form together with the number of shares that such proxy is appointed
in respect of (which, in aggregate, should not exceed the number of shares held by you). Please also indicate if the proxy
instruction is one of multiple instructions being given. All forms must be signed and should be returned together in the same
envelope.

2. A form of proxy is enclosed with this notice. Forms of proxy may also be obtained on request from the Company’s registered
office. In order to be valid any proxy form or other instrument appointing a proxy must be returned duly completed by one of
the following methods no later than 48 hours before the time of the Annual General Meeting (excluding non-working days), in
hard copy form by post, by courier, or by hand to the Company’s registrar, Equiniti Limited, Aspect House, Spencer Road,
Lancing, West Sussex BN99 6DA. Submission of a proxy appointment will not preclude a member from attending and voting at
the AGM should they wish to do so. To direct your proxy on how to vote on the resolutions, mark the appropriate box on your
proxy form with an ‘X’. To abstain from voting on a resolution, select the relevant “Vote withheld” box. A vote withheld is not a
vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting
indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from
voting) as he or she thinks fit in relation to any other matter which is put before the AGM.

3. Any power of attorney or any other authority under which your proxy form is signed (or a duly certified copy of such power or

authority) must be returned to the registered office with your proxy form.

Thresholds and entitlement to vote
4. To be passed, ordinary resolutions require a majority in favour of the votes cast and special resolutions require a majority of not
less than 75% of members who vote in person or by proxy at the meeting. On a show of hands every shareholder who is present
in person (or being a company is present by a representative not himself, a shareholder) and who is allowed to vote at a
general meeting shall have one vote. Upon a poll every member holding Ordinary Shares who is present in person or by proxy
(or being a company is represented) shall have one vote for every Ordinary Share of which he is the registered holder.

5. The Company, pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 (as amended), specifies that only
those members registered in the Register of Members of the Company at 6.00pm on 1 September 2017 (or if the AGM is
adjourned, members entered on the Register of Members of the Company no later than 48 hours before the time fixed for the
adjourned AGM) shall be entitled to attend, speak and vote at the AGM in respect of the number of Ordinary Shares registered
in his or her name at that time. Changes to entries on the Register of Members of the Company after 6.00pm on 1 September
2017 shall be disregarded in determining the rights of any person to attend, speak or vote at the AGM.

In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint
holders appear in the Company’s Register of Members in respect of the joint holding (the first named being the most senior).

7. A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf, all its
powers as a member provided that no more than one corporate representative exercises powers over the same share.

8. As at 21 July 2017, being the latest practicable date before the publication of this notice of AGM, the Company’s issued share

capital consisted of 69,759,922 Ordinary Shares each carrying one vote. Therefore, the total voting rights in the Company as at
21 July 2017 is 69,759,922.

Miscellaneous
9. Copies of the Directors’ service contracts and letters of appointment are available for inspection at the registered office of the

Company during normal business hours from 24 July 2017 and will be available for inspection at the place where the meeting is
being held from 15 minutes prior to and during the meeting.

10. Members who have general queries about the Annual General Meeting should write to the Company Secretary at the

Company’s Registered Office: 20 Garrick Street, London WC2E 9BT.

Explanation of certain resolutions
1. Resolution 1 – the Directors are required to present the accounts, Directors’ report and auditor’s report to the meeting. These are

contained in the Company’s Annual Report and Financial Statements 2017.

2. Resolution 2 – the Directors’ are required to approve the Remuneration Report for the financial year.

3. Resolutions 3 to 7 – retirement by rotation – in accordance with good corporate governance, each Director shall retire and

submit themselves for re-election by Shareholders at each AGM.

4. Resolution 8 – auditor re-appointment and remuneration – at each meeting at which the Company’s accounts are presented to
its shareholders, the Company is required to appoint an auditor to serve until the next such meeting and seek Shareholder
consent for the Directors to set the remuneration of the auditors.

5. Resolution 9 – general authority to allot – this resolution, to be proposed as an ordinary resolution, relates to the grant to the
Directors of authority to allot unissued Ordinary Shares until the earlier of the conclusion of the annual general meeting to be
held in 2018 and 30 September 2018 (being six months after the financial year end of the Company), unless the authority is
renewed or revoked prior to such time. This authority is limited to a maximum of nominal amount of £69,759.92 (representing 10
per cent. of the issued Ordinary Share capital of the Company as at 21 July 2017 (the latest practicable date prior to the
publication of this document).

6. Resolutions 10 and 11 – disapplication of statutory pre-emption rights – the passing of these resolutions would allow Directors to
allot Ordinary Shares (or sell any Ordinary Shares which the Company may purchase and hold in treasury) without first offering
them to existing holders in proportion to their existing holdings. The authority set out in resolution 10 is limited to up to an
aggregate nominal amount of £34,879.96 (representing 3,487,996 Ordinary Shares). This aggregate nominal amount represents
five per cent of the issued ordinary share capital of the Company (excluding treasury shares) as at 21 July 2017, the latest
practicable date before the publication of this notice of AGM. The authority set out in resolution 11 is limited to allotments or sales
of up to an aggregate nominal amount of £34,879.96 (representing 3,487,996 Ordinary Shares) in addition to the authority set out
in resolution 10. This aggregate nominal amount represents an additional five per cent of the issued ordinary share capital of
the Company (excluding treasury shares) as at 21 July 2017, the latest practicable date before the publication of this notice of
AGM. This authority will expire at the conclusion of the next AGM of the Company or, if earlier, at the close of business on
30 September 2018.

7. Resolution 12 – market purchases – the Directors are requesting authority for the Company to make market purchases of
Ordinary Shares up to a maximum nominal amount of £69,759.92 (representing ten per cent. of the issued Ordinary Share
capital of the Company as at 21 July 2017 (the latest practicable date prior to the publication of this document). There is no
present intention to exercise such general authority. Any repurchase of Ordinary Shares will be made subject to the Act and
within guidelines established from time to time by the Directors (which will take into account the income and cash flow
requirements of the Company) and will be at the absolute discretion of the Directors, and not at the option of shareholders.
Subject to shareholder authority for the proposed repurchases, general purchases of the Ordinary Shares in issue will only be
made through the market. Such purchases may only be made provided the price to be paid is not more than the higher of: (i)
five per cent. above the average of the middle market quotations for the Ordinary Shares for the five Business Days before the
purchase is made; or (ii) the higher of the price of the last independent trade and the highest current independent bid at the
time of purchase.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

GLOSSARY

In this document, where the context permits, the expressions set out below shall bear the following meaning:

“Admission” or “IPO”

“Act”
“AIM”
“Audit Committee”
“Company” or “Draper Esprit” or “plc”

“Directors” or “Board”

“Draper Esprit Funds”
“Draper Venture Network”

“EIS”

“Encore Funds”

“Encore Ventures”

“ESM”

“Esprit Capital”

“Esprit Ireland”

“FCA”
“Gross Porfolio Value” or “Gross
Primary Portfolio”

“Grant Thornton”

“Group”

“HMRC”
“IFRS” or “IFRSs”

“Irish Stock Exchange”
“IRR”
“Net Asset Value”

Draper Esprit plc
Annual Report and Accounts 2017

the Admission of the enlarged share capital to trading on AIM and ESM on 15 June
2016 and such admission becoming effective in accordance with the AIM Rules and
the ESM Rules respectively. The IPO included the acquisition of Esprit Capital
Partners LLP and Draper Esprit (Ireland) Limited.
the UK Companies Act 2006
AIM, the market of that name operated by the London Stock Exchange
the audit committee of the Board
Draper Esprit plc, a company incorporated in England and Wales with registered
number 09799594 and having its registered office at 20 Garrick Street,
London, WC2E 9BT,
the directors of the Company from time to time, but whose names as at the date of
this document appear on page 37 of this document
the Esprit Funds and the Encore Funds
the self-governed network of ten independent growth and venture funds, of which
Esprit Capital is a member
Enterprise Investment Scheme under the provisions of Part 5 of the Income
Tax Act 2007
DFJ Esprit Angels’ EIS Co-Investment Fund, DFJ Esprit Angels’ EIS Co-Investment II,
DFJ Esprit EIS III and DFJ Esprit EIS IV and each an “Encore Fund”
Encore Ventures LLP, a limited liability partnership incorporated in England
and Wales with registration number OC347590 whose registered office is at
20 Garrick Street, London, WC2E 9BT.
the Enterprise Securities Market operated and regulated by the
Irish Stock Exchange
Esprit Capital Partners LLP (previously Draper Esprit LLP), a limited liability
partnership incorporated in England and Wales with registration number OC318087
whose registered office is at 20 Garrick Street, London WC2E 9BT, the holding
vehicle of the Group immediately prior to Admission
Draper Esprit (Ireland) Limited, a wholly owned subsidiary of the Company
incorporated in Ireland with registered number 572006 and having its registered
office at 32 Molesworth Street, Dublin 2, Ireland.
the UK Financial Conduct Authority
Gross portfolio value is the value of the portfolio of investee companies held by
funds controlled by the Company before accounting for deferred tax, external
carried interest and amounts co-invested.
Grant Thornton UK LLP, a limited liability partnership registered in England and
Wales with registered number OC307742 and having its registered office at
30 Finsbury Square, London EC2A 1AG
the Company and its subsidiaries from time to time and, for the purposes of this
document, including Esprit Capital and its subsidiaries and subsidiary undertakings
HM Revenue & Customs
International Financial Reporting Standards, as adopted for use in the
European Union
Irish Stock Exchange Plc
the internal rate of return
the value, as at any date, of the assets of the Company after deduction of all
liabilities determined in accordance with the accounting policies adopted by the
Company from time to time

“Ordinary Shares”
“EIS”
“International Private Equity and
Venture Capital Valuation Guidelines”
“VC”
“VCT”

ordinary shares of £0.01 pence each in the capital of the Company
enterprise investment scheme
the International Private Equity and Venture Capital Valuation Guidelines, as
amended from time to time
venture capital
A VCT (venture capital trust) is a UK closed-ended collective investment scheme.

Draper Esprit plc
Annual Report and Accounts 2017

Strategic ReportGovernanceFinancials

NOTES

Draper Esprit plc
Annual Report and Accounts 2017

London | HQ
20 Garrick Street
London, WC2E 9BT
Tel: +44 (0)20 7931 8800
draperesprit.com