Triodos Organic Growth Fund

Transcription

1 Triodos Organic Growth Fund Semi-annual report June 2015 TLIM

2 Organic food and agriculture Organic agriculture recognises the relationship between our environment, our health and the food we eat. The use of pesticides and chemical fertilisers is avoided and high standards of animal welfare maintained.

3 Triodos SICAV II - Triodos Organic Growth Fund Semi-annual report June 2015 Triodos Organic Growth Fund is a Sub-Fund of Triodos SICAV II (Société d Investissement à Capital Variable), which is established in the Grand Duchy of Luxembourg. Triodos SICAV II, including its Sub-Funds, is supervised by the Luxembourg regulator, the Commission de Surveillance du Secteur Financier (CSSF). Triodos Investment Management BV is the external alternative investment fund manager of Triodos SICAV II - Triodos Organic Growth Fund. Triodos Investment Management BV is incorporated under the laws of the Netherlands and is a wholly-owned subsidiary of Triodos Bank NV. Triodos Investment Management BV is supervised by the Dutch regulator, Autoriteit Financiële Markten. The value of investments may fluctuate. Past performance is no guarantee of future results. No subscription can be accepted on the basis of the financial reports. Subscriptions are only valid if they are made on the basis of the latest published prospectus accompanied by the latest annual report and the most recent semi-annual report, if published thereafter. The prospectus is available free of charge at the registered office of Triodos SICAV II in Luxembourg and from Triodos Bank: 3

4 Key figures (amounts in EUR) 1st half st half Total net asset value (end of reporting period) 29,968,929 27,256,476 28,424,863 Income 212, ,790 Expenses 472, , ,591 Net operating gain (260,083) (347,874) (286,801) Realised and unrealised results on investments, swaps and foreign exchange contracts 1,556, ,625 75,836 Net result 1,296,016 (26,249) (210,965) Ongoing charges per share class* Q-dis (EUR)** 3.05% 2.87% 2.61% Net asset value (NAV) per share*** (amounts in EUR) June 30, 2015 June 30, 2014 December 31, 2014 Q-dis (EUR) Return based on NAV per share*** 6-month return 1-year return Return p.a. since inception Q-dis 4.5% 3.8% 2.5% * The ongoing charges reflect the total normalised expenses charged to the result, divided by the average net asset value. For the calculation of the average net asset value, each published computation of the net asset value is taken into account. The ongoing charges are calculated over the 12-month period ending at the end of the reporting period. ** This share class was launched on January 13, Ongoing charges 2014 are based on best estimate. *** NAV per share is based on share prices as published on June 30, 2015, i.e. the last trading share prices of the reporting period. 4

5 Report of the Board of Directors Triodos Organic Growth Fund, established in January 2014 as a sub-fund of Triodos SICAV II, offers investors the opportunity to participate in the growth and momentum of the sustainable lifestyle and organic consumer sector in Europe. The fund takes significant minority or majority positions in mature, privately-owned sustainable consumer businesses. It aims to deliver a positive social and environmental impact by contributing to the long-term development of these valuesdriven companies and a transition to a sustainable economy. With this fund, Triodos Investment Management is pioneering a new model for impact investing: mission-aligned private equity with a long-term focus, not driven by exits. To date, Triodos Organic Growth Fund has realised two investments, as described below, and set up both a Luxembourg holding company and a German partnership to facilitate investment structuring in different European countries. Since inception, the fund s total net assets increased by 18.6% from EUR 25.3 million to EUR 30.0 million as per the end of June EUR 3.6 million of this increase was the result of capital growth; the remaining EUR 1.1 million was the result of the increase in value of the fund s portfolio and the fund s operating result. In the first six months of 2015, the fund s total net assets grew by EUR 1.6 million. Triodos Organic Growth Fund NAV per share and total net assets total net assets in millions of euro, left axis NAV per share in euro, right axis Jan-14 Jun-14 Dec-14 Source: Triodos Investment Management Jun As anticipated, during 2014 the share price development was slightly negative, mainly because the fund was still in the build-up phase. However, during the first half year of 2015, the net asset value per share (Q-dis share class) rose by 4.5%, from EUR per share on 31 December 2014 to EUR on 30 June This increase exceeds expectations and is mainly related to exceptionally strong earnings growth at one of the fund s portfolio companies and to a lesser extent to higher valuation multiples in financial and M&A markets. Market developments Triodos Organic Growth Fund invests in sustainable consumer businesses in Europe. The fund targets organic food, natural personal care, natural textiles and other sustainable lifestyle companies across the supply chain. As organic food represents the vast majority of the total sustainable consumer sector targeted by the fund, the following analysis focuses on the European organic food market. The interest in organically produced food is continuingly growing. The European organic food market as a whole grew at an average rate of 9.2% per annum over the ten-year period until The latest annual European growth numbers made available by the FiBL Research Institute of Organic Agriculture indicated a 7.0% growth rate in 2013 (2012: 6.1%), bringing the value of the European organic food market to EUR 24.3 billion. Europe is the second-largest market for organic food in the world, after North America (EUR 26.7 billion). Europe has the highest per capita organic consump - tion in the world. Within Europe in 2013 Switzerland had the highest per capita consumption (EUR 210 per annum), followed by Denmark (EUR 163 per annum) and Luxembourg (EUR 157 per annum). Organic product sales are highest in Switzerland and northern European countries, while growth rates vary across the different European countries. Many countries, including Germany, the UK and France, show solid growth and some countries, such as Sweden and Switzerland, even register double-digit growth. 5

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7 AARSTIDERNE, DENMARK Aarstiderne in Denmark packs the season s best organic produce in a box, adds recipes written for tasty everyday meals and delivers the box to the front door of 55,000 households in Denmark and Sweden. 7

8 European growth figures for 2014 are not yet available, but some individual countries have already published their 2014 growth figures. During the initial stage Triodos Organic Growth Fund will focus its investments on northwestern Europe because of the relative size and attractiveness of these markets, as well as Triodos Bank s relevant contacts and expertise there. Below are the 2014 growth figures for the main organic food markets in which Triodos Organic Growth Fund operates: Germany represents the largest European market for organic food and accounts for almost a third of total European sales. Whereas food prices for many conventional products in Germany decreased, this was generally not the case for organic products. The organic food market in Germany grew by 4.8% (2013: 7.2%) to EUR 7.9 billion in 2014 and now represents 3.9% of the total German food market. While supermarkets and specialist shops in particular experienced strong growth in 2014, other sales channels, such as small conventional shops, saw a slight contraction of 1%. France, the second-largest organic food market in Europe, showed particularly strong growth of 10.2% in 2014 (2013: 8.8%), resulting in a market size of EUR 5.0 billion. This high growth percentage reflects the strong potential of this market, as organic food only represents 2.5% of the total food market, compared to a penetration rate of approximately 4.0% in Germany and the United States. Growth is realised via all the main retail channels, supermarkets and specialist shops alike. In the UK, which was the only European market showing a contraction during the financial crisis, the organic market firmly returned to growth, expanding by 4.0% in 2014 (2013: 2.8%). This is considered a significant improvement in a year when general food spending fell by 1.1%. The market thus grew to GBP 1.9 billion (2013: GBP 1.8 billion), representing 1.3% of the total UK food market. Remarkably, organic baby food sales represent 55.5% of total baby food sales. The Danish organic food market, which is relatively small in size at DKK 8.0 billion in 2014 (just over EUR 1.0 billion), grew by 6.0% in 2014 (2013: 6.0%). The country is important in this context due to the high penetration rate of 8.6% for organic produce (2013: 8.0%), as well as for the fund s investment in the Danish company Aarstiderne EUR million total net assets by the end of June 2015 The positive trend in the market for organic consumer goods is expected to continue in the years to come. According to Organic Monitor, the European market for organic food should continue to grow by approximately 6.0% per annum during the next five years. The main drivers for this growth are strong consumer demand for organic and health food products, increasing distribution through mainstream retailers also offering organic private label products, and rising demand from the out-of-home market. Portfolio data, June 30, 2015 Total net assets EUR 30.0 million Net asset value per share (Q-dis) EUR Number of equity investments 2 Number of subordinated loans 0 Number of countries 2 Source: Triodos Investment Management 8

9 Investments To date, Triodos Organic Growth Fund has completed two equity investments, which in total represent 40.9% of the total net assets of the fund. The investments were made in different countries, in both food and non-food related companies, thus contributing to the fund s objective of building a portfolio that is diversified across various sub-sectors and countries. Since February 2014, Triodos Organic Growth Fund holds 20% of the shares in Aarstiderne A/S (Danish for the Seasons ) from Denmark. Aarstiderne is an organic box scheme that delivers around 30,000 meal boxes per week in Denmark and Sweden via a subscription service to a base of 55,000 customers. In June 2014, Triodos Organic Growth Fund acquired a 20% stake in Triaz Group GmbH. Triaz Group is the leading German mail order company and online retailer for sustainable consumer goods and has a strong client base of approximately 750,000. Aarstiderne continues to deliver exceptional growth, both at the sales level and in terms of profitability, whilst Triaz Group shows a stable performance. Apart from completed investments, the fund continues to put substantial effort in further building the pipeline of potential future investments. Results Financial results On 30 June 2015, the total net assets of Triodos Organic Growth Fund amounted to EUR 30.0 million, compared to EUR 28.4 million per 31 December This increase of EUR 1.6 million is due to an increase in the value of the portfolio from EUR 9.7 million at year-end 2014 to EUR 12.3 million as per mid-year 2015, representing an increase of EUR 2.6 million. The fund, however, is building a provision for a potential earn-out to be paid in 2017, to which it added EUR 1.0 million during the first half of the year. The increase in the value of the portfolio net of earn-out provision therefore amounts to EUR 1.6 million. Triodos Organic Growth Fund received EUR 0.2 million in income during the first six months of 2015 (mainly dividends). Total expenses (the majority of which consist of management fees) amounted to EUR 0.5 million during the first half of 2015, compared to EUR 0.3 million in the first half of The fund therefore realised a net operating loss of EUR 0.3 million up to 30 June 2015, which is equal to the result achieved in the same period of Return The net asset value per share (Q-dis share class) increased from EUR at 31 December 2014 to EUR as per 30 June 2015, reflecting an increase of 4.5%. The result in the same period of the previous year was slightly negative. The result to date exceeds expectations, as the share price Return based on NAV per share* June 30, 2015** Share class 6-month return 1-year return Average return p.a. since inception Q-dis (EUR) 4.5% 3.8% 2.5% * NAV per share is based on share prices as published on 30 June, 2015, i.e. the last price at which shares were traded in the reporting period. **Source: RBC Investor Services Bank S.A. and Triodos Investment Management 9

10 had not been expected to rise during the start-up phase of the fund. The long-term net target return is 8.0% per annum, which Triodos Organic Growth Fund aims to achieve through a combination of dividend income and value gains in the portfolio. Liquidity Liquidity and other current assets of Triodos Organic Growth Fund represented 59.1% of the net asset value as on 30 June This is more than expected, given that the two transactions that the fund had expected to complete, did not materialise. During the first two quarters of 2015, the fund received capital inflows amounting to EUR 0.2 million (first two quarters 2014: EUR 2.0 million). At this stage, the investment manager will not undertake active fundraising until the fund is sufficiently invested and liquidity has decreased, which is expected to occur at the end of 2015 or in early Costs The main recurring item in the Triodos Organic Growth Fund cost structure is the management fee paid to the investment manager, Triodos Investment Management. The investment manager uses this fee primarily to cover staff costs and travel expenses incurred in connection with investments. The investment process is generally quite labour intensive and on average takes at least six months, from initial meeting to the signing of documentation. As the fund focuses on investment opportunities across a number of European countries (with the initial focus on northwestern Europe), relatively frequent travelling is required. The ongoing charges including the management fee represented 3.05% of the net asset value on an annual basis as per 30 June This is well below the upper limit of 3.50% set for the annual ongoing charges. Sustainability as a core value Triodos Organic Growth Fund uses a sustainability framework to assess the sustainability aspects of investee companies, both during the due diligence phase and during the life of the fund s investment. At the time of investment, a quick scan is performed as part of the fund s due diligence process. In addition, together with each investee company, Triodos Organic Growth Fund establishes a limited number of company-specific metrics that are measured during the life of the investment in order to track the realisation of a particular set of sustainability objectives. The fund s sustainability objectives capture economic, environmental, social and cultural elements, focusing on the full supply chain and covering investee impact on (agricultural) suppliers and end-users. Triodos Organic Growth fund plans to further develop its impact measurement framework during the remainder of the year and aims to start impact reporting in Risks Investments in Triodos Organic Growth Fund are subject to several risks, which are described in detail in the fund s prospectus. Some of the risks are highlighted below. Portfolio risk The fact that the returns generated by the investee companies are determined by various uncertain factors constitutes a long-term risk. Returns on individual investments arise through a combination of dividend distributions, growth in business value, or, in certain cases, through the partial or total sale of investments. In case of adverse business developments, dividend distributions may decline, as may the valuation of underlying investments. In case of a major default or bankruptcy of a portfolio company, the (expected) return may not be realised. No assurance can therefore be given that the fund s return objectives will be achieved. Over time 10

11 sufficient diversification in the portfolio will mitigate this risk. Lack of appropriate investment opportunities The fund s return furthermore depends on the availability of appropriate investment opportunities and the ability of the fund to successfully negotiate investments in qualifying companies. In the event that there are insufficient companies to invest in, the overall return would suffer as a result of the fund holding a relatively high proportion of cash. Through a good understanding of the growing organic and sustainable consumer market, an attractive long-term professional ownership proposition to values-based companies, excellent industry-wide relationships and its Europe-wide focus, Triodos Organic Growth Fund expects to be able to secure a sufficient number of quality investments to mitigate this risk. Concentration risk Triodos Organic Growth Fund has a very specific, sector-based investment focus on the organic food and sustainable consumer sector in Europe. If a downturn occurs in this market, or relevant sub-sectors of this market, this will likely have a negative impact on the performance of investee companies and therefore on the return of the fund. Also, the fund will achieve only limited diversification in geographical terms and across sub-sectors and value chain segments. Consequently, the fund s return may be negatively impacted by the performance of any particular investee company, country, sub-sector or value chain segment within the overall organic and sustainable consumer market. Valuation risk As Triodos Organic Growth Fund invests exclusively in assets not listed on any stock exchange or traded on a regulated market, its investments will not have readily available share prices and it may be difficult to value the fund s equity participations in these businesses. In order to determine the value of these investments on a quarterly basis, the fund employs a consistent, transparent and appropriate valuation methodology, based on the International Private Equity and Venture Capital Valuation Guidelines (IPEV), as published by the IPEV Board and endorsed by the European Private Equity and Venture Capital Association (EVCA). As this methodology relies on periodic market-based data and peer group comparisons, the valuation of the fund s assets will fluctuate with the variations in such data and therefore to a certain extent depends on developments in the capital markets. In addition, there is no guarantee that the valuations applied at the time of investment and for subsequent quarterly valuations reflect the price at which potentially interested parties would be willing to acquire such investment. Outlook The outlook for the second half of 2015 is cautiously positive. Triodos Organic Growth Fund continues to focus on generating deal flow and aims to complete two more investments during this period, each in a target range of EUR 1.0 to 5.0 million per investment. This target is considered feasible, yet challenging. In the period ahead Triodos Organic Growth Fund expects the net asset value per share to remain stable, as the costs associated with the ramp-up of the portfolio and the management of the fund are expected to offset the anticipated income and value build-up in the existing portfolio. Luxembourg, August 27, 2015 The Board of Directors of Triodos SICAV II Pierre Aeby (Chair) Marilou van Golstein Brouwers Patrick Goodman Olivier Marquet Garry Pieters 11

12 General information Triodos Organic Growth Fund was launched in January 2014 as a sub-fund of Triodos SICAV II. The fund has a semi open-end fund structure and is not quoted on any stock market. Triodos Organic Growth Fund has a Euro share class for institutional, professional and certain qualified private investors. Triodos SICAV II consists of three sub-funds: Triodos Renewables Europe Fund, Triodos Microfinance Fund and Triodos Organic Growth Fund. Triodos SICAV II publishes an integrated, detailed and audited report annually in Luxembourg. Triodos SICAV II further publishes an integrated, detailed and unaudited semi-annual report in Luxembourg. Separate reports for each sub-fund of Triodos SICAV II are published by Triodos Investment Management. Copies may be obtained free of charge by any person at the registered office of Triodos SICAV II and from Triodos Bank: The prospectus of Triodos Organic Growth Fund can be obtained free of charge at Triodos Bank or at local distributors. Risk profile All investments in the sub-funds of Triodos SICAV II are exposed to a variety of risks. The sub-funds generally invest in risk-bearing, most often non-listed assets that cannot be made liquid in the short term. In most cases, added value in the sub-funds is generated over the longer term. Thus, investments in a sub-fund of Triodos SICAV II require a medium- to long-term investment horizon of the investor. In general, the sub-funds will only take on risks that are deemed reasonable to achieve their investment objectives. The sub-funds have different investment strategies and therefore different risk profiles. There is no guarantee that the sub-funds will achieve their goals, due to market fluctuations and other risks to which the investments are exposed. Risk management Triodos Investment Management has implemented an integral risk management framework, a comprehensive valuation framework and a liquidity management policy framework. The comprehensive risk management framework is implemented in order to adequately monitor and manage the risks related to the sub-funds (as determined in the sub-funds Particulars in the prospectus of Triodos SICAV II). This risk management framework is based on the COSO (The Committee of Sponsoring Organisations of the Treadway Commission) framework for integral risk management, and furthermore contains policies and procedures designed in accordance with European regulations and, best market practices. A permanent, independent risk management function is in place, in compliance with the AIFMD. Valuation framework The comprehensive valuation framework is implemented to ensure a sound, independent, comprehensive and appropriate use of valuation methodologies and procedures. This framework sets out general requirements regarding the selection, the implementation and the application of valuation methodologies and techniques for all asset types, taking into account the different nature of asset types and the accompanying market practices in the valuation of these assets. In addition, this framework sets out the requirements for or with regard to the valuation function at the fund level. It ensures consistent procedures regarding the selection, implementation and application of valuation methodologies and, moreover, ensures a consistent approach of the valuation function, valuation committees and the use of external valuers at the fund level. 12

13 Liquidity management Given the special liquidity characteristics of the investments, the risk management function has a specific liquidity (risk) management policy framework applicable to the sub-funds, in accordance with European regulations and best market practices, to ensure that liquidity risk is appropriately measured, monitored and managed at sub-fund level. The framework contains policies and procedures to: Ensure the availability of sufficient liquidity to meet financial obligations and adequately manage excess liquidity to act in the best interest of investors in the sub-funds. Investors should carefully take note that given the type of assets, there is no guarantee that there are sufficient funds to pay for the redemption of shares of the sub-fund and there is no guarantee that the redemption can take place at the requested date. Assess the risk of insufficient liquidity by regularly conducting tests under normal and exceptional (stress test) liquidity conditions. Provide adequate escalation measures in case of liquidity shortage or distressed situations (liquidity contingency plan). Ensure the coherence of the sub-funds investment strategy, their liquidity profile and their redemption policy. Triodos Investment Management has implemented standardised methods to monitor the liquidity position of the sub-funds and to assess near-future developments regarding liquidity, including early warning parameters. The liquidity position of the sub-funds is monitored at both the sub-fund level and the Investment Manager level. Specific risk factors for the sub-funds As the sub-funds differ significantly in their investment policy and associated risks, it is important to study the specific risk factors for each sub-fund. 13

14 Statement of net assets as per June 30, 2015 (amounts in EUR) Notes June 30, 2015 Assets December 31, 2014 June 30, 2014 Fixed assets Investment in financial assets 2 12,255,244 9,664,200 9,564,793 Historic cost: EUR 10,619,394 as at June 30, 2014; EUR 9,959,405 as at December 31, 2014; EUR 9,249,858 as at June 30, 2014 Formation expenses 3 327, , ,117 Current assets Cash and cash equivalents 19,239,043 19,195,635 17,897,773 Net unrealised gain on forward foreign exchange contracts 9 7,365 6,755 Other current assets 35,441 43,354 Total assets 31,857,415 29,263,323 27,808,438 Liabilities Liabilities due within one year Net unrealized loss on forward foreign exchange contracts 9 6,333 Investment management, distribution and service fees payable 6 148, , ,291 Accounts payable and accrued expenses 8 1,733, , ,671 Total liabilities 1,888, , ,962 Net assets 29,968,929 28,424,863 27,256,476 The accompanying notes form an integral part of these financial statements. The figures shown in these financial statements have not been subjected to an external audit. 14

15 Statement of operations for the period ended June 30, 2015 (amounts in EUR) Notes 1st half year, st half year, 2014 Income Dividend income 2 189, ,238 Bank interest 22,276 43,552 Total income 212, ,790 Expenses Amortisation of formation expenses 3 25,082 24,431 10,883 Investment management, distribution and service fees 6 295, , ,782 Administrative and custodian fees 5 48,220 89,959 35,869 Audit and reporting expenses 11,367 29,106 14,984 Subscription tax 4 7,442 13,680 6,535 Interest paid Other tax 1,605 3,210 Other expenses 7 82,327 66,870 36,636 Total expenses 472, , ,874 Net operating gain/(loss) (260,083) (286,801) (347,874) Realised gain on forward foreign exchange contracts 4,186 Realised loss on forward foreign exchange contracts (1,444) Realised gain on foreign exchange Realised loss on foreign exchange (514) (226) Change in net unrealised appreciation on investments 1,567,055 68, ,936 Change in net unrealised appreciation on forward foreign exchange contracts 7,365 6,755 Change in net unrealised depreciation on forward foreign exchange contracts (13,698) Net increase/(decrease) in net assets resulting from operations 1,296,016 (210,965) (26,249) The accompanying notes form an integral part of these financial statements. The figures shown in these financial statements have not been subjected to an external audit. 15

16 Statement of changes in net assets for the period ended June 30, 2015 (amounts in EUR) 1st half year, st half year, 2014 Operations Net operating gain/(loss) (260,083) (286,801) (347,874) Realised gain on forward foreign exchange contracts 4,186 Realised loss on forward foreign exchange contracts (1,444) Realised gain on foreign exchange Realised loss on foreign exchange (514) (226) Change in net unrealised appreciation on investments 1,567,055 68, ,936 Change in net unrealised appreciation on forward foreign exchange contracts 7,365 6,755 Change in net unrealised depreciation on forward foreign exchange contracts (13,698) Net increase/(decrease) in net assets resulting from operations 1,296,016 (210,965) (26,249) Capital transactions Capital subscriptions Q Share Class 248,050 28,635,728 27,282,625 P Share Class Total subscriptions 248,050 28,635,828 27,282,725 Capital redemptions Q Share Class P Share Class Total redemptions Net increase/(decrease) in net assets resulting from capital transactions 248,050 28,635,828 27,282,725 Net assets Net assets at the beginning of the period/year 28,424,863 Total increase in net assets 1,544,066 28,424,863 27,256,476 Net assets at the end of the period/year 29,968,929 28,424,863 27,256,476 The accompanying notes form an integral part of these financial statements. The figures shown in these financial statements have not been subjected to an external audit. 16

17 Cash flow statement for the period ended June 30, 2015 (amounts in EUR) Cash provided by operating activities 1st half year, st half year, 2014 Profit/(loss) after taxation 1,296,016 (210,965) (26,249) (-) increase/(+) decrease in unrealised gains and losses on investments and forward foreign exchange contracts (1,553,357) (76,160) (321,691) (+) increase/(-) decrease in receivables and other assets 32,995 (396,122) (339,117) (+) increase/(-) decrease in payables 1,043, , ,964 Net cash provided by operating activities 819, ,213 (135,093) Cash provided by financing activities (+) proceeds from shares issued 248,050 28,635,828 27,282,725 (-) decrease from shares redeemed Net cash provided by financing activities 248,080 28,635,828 27,282,725 Cash provided from investing activities (-) acquisitions of financial assets (1,023,989) (9,595,406) (9,249,859) Net cash used by investing activities (1,023,989) (9,595,406) (9,249,859) Cash Net increase/(decrease) in cash and cash equivalents 43,408 19,195,635 17,897,773 Cash at the beginning of the period/year 19,195,635 Cash at the end of the period/year 19,239,043 19,195,635 17,897,773 The accompanying notes form an integral part of these financial statements. The figures shown in these financial statements have not been subjected to an external audit. 17

18 Statement of changes in the number of shares outstanding for the period ended June 30, st half year, st half year, 2014 Number of Shares outstanding at the beginning of the period/year Q Share Class 286, P Share Class Subscriptions over the period/year Q Share Class 2, , , P Share Class Redemptions over the period/year Q Share Class P Share Class Number of Shares outstanding at the end of the period/year Q Share Class 288, , , P Share Class Statistics (amounts in EUR) June 30, 2015 December 31, 2014 June 30, 2014 Total net asset value at the end of the period/year Q Share Class 29,968,825 28,424,764 27,256,376 P Share Class ,968,929 28,424,863 27,256,476 Net asset value per share at the end of the period/year Q Share Class P Share Class The accompanying notes form an integral part of these financial statements. The figures shown in these financial statements have not been subjected to an external audit. 18

19 Notes to the financial statements 1. General Triodos SICAV II (the SICAV ) has been incorporated under the laws of the Grand Duchy of Luxembourg as a société d investissement à capital variable (SICAV) under the form of a société anonyme on April 10, 2006, for an unlimited period. Triodos SICAV II is governed by Part II of the Luxembourg Law of December 17, The SICAV is an alternative investment fund ( AIF ) subject to the requirements of the Directive 2011/61/EU of June 8, 2011, on Alternative Investment Fund Managers Directive ( AIFD ) as implemented in Luxembourg through the law of July 12, 2013, on alternative investment fund managers (the Law of 2013 ). The Registered Office of the SICAV is established at 11/13, Boulevard de la Foire, L-1528 Luxembourg. The Articles have been deposited with the Chancery of the District Court of Luxembourg on April 27, 2006, and published in the Mémorial C, Recueil des Sociétés et Associations (the Mémorial ). The SICAV has been registered with the Companies Register of the District Court of Luxembourg under number B The Articles were last amended at the extraordinary general meeting of shareholders held on October 16, 2014, and published in the Mémorial. The SICAV is structured as an umbrella fund, which provides both institutional and retail investors with a variety of Sub-Funds, each of which relates to a separate portfolio of assets permitted by law and managed within specific investment objectives. As at June 30, 2015, the SICAV has three Sub-Funds: Triodos Renewables Europe Fund, Triodos Microfinance Fund and Triodos Organic Growth Fund. The objective of the sub-fund is to invest primarily in mature and profitable privately-owned organic and sustainable lifestyle businesses in Europe. It aims to offer investors a unique investment opportunity in the long-term development of organic and sustainable consumer sector in Europe and to contribute to a positive social and environmental impact. The investment focus will be on selected values-based businesses with a track-record of successful trading and profitability. Through an evergreen approach that is not driven by exits, the sub-fund will invest as an aligned co-owner, by providing succession and/or growth capital. As a long-term investment partner, the sub-fund will typically take significant minority or majority equity positions, be represented at the board of directors of Investees and add value through a strategic, professional ownership approach. The first net asset value of Triodos Organic Growth Fund was calculated on March 31, Shares may be subscribed once a quarter, on each valuation date, subject to a 15 days subscription notice period. The sub-fund is semi open-ended, i.e. Shares may be redeemed in principle once a quarter on the valuation date, subject to a 45 days redemption notice period and subject to available liquidity. The fund aims to retain 10% of its assets in cash or equivalents to cash. During the first three years after inception, shares may only be redeemed when (an) other investor(s) subscribe(s) for (in total) at least an amount of shares the redemption of which has been requested. This restriction does not apply when the redemptions do not cause the net asset value to fall below EUR 30 million. The sub-fund may offer Shares of the following Classes: Euro-denominated Class Q Shares Distribution, Euro-denominated Class P Shares Capitalisation. Class Q Shares are open to Institutional Investors, professional investors and certain qualified private investors, such as clients of private banks and/or high net worth individuals, depending on their country of residence. Class P Shares are open to entities of Triodos Group. Class P Shares give the right, in accordance with the Articles, to propose to the general meeting of shareholders a list containing the names of candidates for the position of director of the Company 19

20 out of which a majority of the Board of Directors of the Company must be appointed. Shares are issued in registered form. For the Classes of Shares which are of the Capitalisation type, there are no distributions of dividends. Income earned in these Classes of Shares is reinvested. For the Classes of Shares which are of the Distribution type, there are distributions of dividends. The sub-fund Triodos Organic Growth Fund incorporated Triodos OGF Luxco S.à r.l. ( the holding company ) in June As a wholly-owned subsidiary of the sub-fund, all assets and liabilities, income and expenses of the holding company are consolidated in the statement of net assets, the statement of operations and the statement of changes in net assets of the sub-fund. All investments held by the holding company are disclosed in the financial statements of the sub-fund. The financial year end of the SICAV is end of December each year. Triodos SICAV II, including its sub-funds, is supervised by the Luxembourg supervisory authority, the Commission de Surveillance du Secteur Financier (CSSF). Triodos SICAV II, including its sub-funds, is also registered with the Dutch Supervisory authorities, the Autoriteit Financiële Markten (AFM). 2. Summary of significant accounting principles Investments are valued at their fair value. The fair value is determined as follows: (a) The valuation of private equity investments (such as equity, subordinated debt and other types of mezzanine finance) are based on the International Private Equity and Venture Capital Valuation Guidelines, as published from time to time by the European Venture Capital Association (EVCA), and is conducted with prudence and in good faith. Other assets are valued according to the following rules: (b) Senior debt instruments, invested in/granted to companies not listed or dealt in on any stock exchange or any other Regulated Market, are valued at fair market value, deemed to be the nominal value, increased by any interest accrued thereon; such value is adjusted, if appropriate, to reflect the appraisal of the Advisor of the relevant Sub-Fund on the creditworthiness of the relevant debtor. The Board of Directors uses its best endeavors to continually assess this method of valuation and recommend changes, where necessary, to ensure that debt instruments are valued at their fair value as determined in good faith by the Board of Directors. (c) The value of money market instruments not listed on any stock exchange or dealt in on any other Regulated Market and with a remaining maturity of less than 12 months is deemed to be the nominal value thereof, increased by any interest accrued thereon. (d) The value of securities which are admitted to official listing on any stock exchange is based on the latest available price or, if appropriate, on the average price on the stock exchange which is normally the principal market of such securities, and each security dealt on any other Regulated Market is based on the last available price. In the event that this price is, in the opinion of the Board of Directors, not representative of the fair market value of such securities, for example in the case of illiquid securities and/or stale prices, the directors value the securities at fair market value according to their best judgment and information available to them at that time. 20

21 (e) Units or shares of open-end UCIs are valued at their last official net asset values, as reported or provided by such UCI or their agents, or at their last unofficial net asset values (i.e. estimates of net asset values) if more recent than their last official net asset values, provided that due diligence has been carried out by the relevant Advisor, in accordance with instructions and under the overall control and responsibility of the Board of Directors, as to the reliability of such unofficial net asset values. (f) The liquidating value of futures, forward or options contracts not admitted to official listing on any stock exchange or dealt on any other Regulated Market means their net liquidating value determined, pursuant to the policies established prudently and in good faith by the Board of Directors, on a basis consistently applied for each different variety of contracts. (g) The value of any cash at hand or on deposit, bills and demand notes and accounts receivable, prepaid expenses, cash dividends declared and interest accrued, and not yet received are deemed to be the full amount thereof, unless, however, the same is unlikely to be paid or received in full, in which case the value thereof is determined after making such discounts as the Board of Directors may consider appropriate to reflect the true value thereof. (h) Swaps, as far as credit swaps are concerned, are valued at fair market values as determined prudently and in good faith by the Board of Directors. Cross-currency interest rate swaps are valued on the basis of the prices provided by the counterparty. (i) All other securities and assets are valued at fair market value as determined in good faith pursuant to procedures established by the Board of Directors. (j) Placements in foreign currency are quoted in euro s with due observance of the currency exchange rates most recently known. (k) Realised and non-realised changes in the value of investments are incorporated in the profit and loss account. (l) The principle for determination of profit is based on the attribution of income and expenses to the relevant period. The income from payments of profit on equity participations is accounted for in the year in which they are made payable. Prepaid costs and costs still to be paid are taken into account in determining the expenses. (m) Other assets and liabilities are recorded at nominal value after deduction of any provision in respect of anticipated non-recovery. (n) The costs of investments expressed in currencies other than EUR are translated into EUR at the exchange rate prevailing at purchase date. (o) Interest income is accrued pursuant to the terms of the underlying investment. Income is recorded net of respective withholding taxes, if any. (p) Gain and losses arising from un-matured forward foreign exchange contracts are determined on the basis of the applicable forward exchange rates at the valuation date and are booked in the profit and loss accounts. (q) Dividend income is recognised on cash basis, net of any withholding taxes. (r) Equity investments of Triodos SICAV II are excluded from consolidation due to exemptions by temporary holding, size and time window. 21

22 3. Formation expenses The total formation expenses of the sub-fund amount to EUR 377,200 of which EUR 350,000 is related to the initial formation of the sub-fund. The formation expenses of Triodos OGF Luxco S.à r.l. amount to EUR 27,200. These formation expenses are amortised over a period of five years. 4. Taxation According to the law in force and current practice, the SICAV is not subject to any Luxembourg tax on income and capital gains nor are dividends paid by the SICAV subject to any Luxembourg withholding tax. However, each of the SICAV s sub-funds is subject to a subscription tax (taxe d abonnement) at an annual rate of 0.05% p.a. Such rate may be decreased to 0.01% p.a. for certain sub-funds or classes of shares which are restricted to Institutional Investors as specified in the relevant sub-fund particulars. This tax is calculated and payable quarterly on the basis of the net asset value of each sub-fund at the end of each quarter. This tax is not due on that portion of the SICAV s assets invested in other Luxembourg UCIs. In addition, the issue of Shares in the SICAV is not subject to any registration duties or other taxes in Luxembourg. 5. Administrative and custodian fees The Depositary and Paying Agent, the Administrative Agent, the Domiciliary and Corporate Agent and the Registrar and Transfer Agent are entitled to receive fees in accordance with usual practice in Luxembourg and payable monthly. The administrative and depositary fees comprise the following: (amounts in EUR) 1st half year, June 30, 2014 Domiciliary agency fee 8,625 13,749 4,500 Administrative fee 27,746 51,779 20,381 Transfer agency fee 3,349 8,298 3,807 Custodian fee 8,500 16,133 7,181 Total 48,220 89,959 35,869 22

23 6. Investment management, distribution and service fees For the services it provides, the Alternative Investment Fund Manager is entitled to an annual fee payable quarterly and calculated as described in the relevant sub-fund s particulars. The sub-fund pays for the provision of investment management services and supporting services an annual fee of 2.00% for Class Q Shares and Class P Shares, calculated on the relevant Class net assets, accrued and payable quarterly. The costs for marketing activities may amount to maximum 0.20% (on an annual basis) of the net assets of the sub-fund. 7. Other expenses The other expenses comprise the following: (amounts in EUR) 1st half year, st half year, 2014 Supervisory fee (CSSF) 2,000 2,000 2,000 Remuneration of the Board of Directors/Manager* 10,000 12,174 6,840 Legal fees 14,214 14,848 21,843 Consulting fees (7,784) 25,619 Bank fees Portfolio transaction costs 42,499 Other expenses 20,950 11,877 5,947 Total 82,327 66,870 36,636 * Amounts include the remuneration of the Board of Managers of the sub-fund s holding company Triodos OGF Luxco S.à r.l. 8. Accounts payable and accrued expenses As per June 30, 2015, the accounts payable and accrued expenses mainly include the following expenses: administrative fees, audit fees, expected earn-out amounts, depositary fees, domiciliary agency fees, legal fees and transfer agency fees. The high level of payables is related to an accrual for a potential earn-out payment in relation to an investment. 9. Forward foreign exchange contract The sub-fund achieved an unrealised depreciation of EUR 6,333 on a forward foreign exchange contract (DKK against EUR) with counterparty Triodos Bank NV. 23

24 10. Ongoing charges cost ratios 12 months ending June 30, months ending December 31, months ending June 30, 2014 Share Class Q* 3.05% 2.87% 2.61% Share Class P* 3.00% 2.75% 2.66% *This share class was launched in Ongoing charges 2014 are based on best estimate. The ongoing charges reflect the total normalised expenses charged to the result, divided by the average net asset value. For the calculation of the average net asset value, each computation and publication of the net asset value is taken into account. The ongoing charges are calculated over the twelve month period ending at the end of the reporting period. 11. Exchange rate The exchange rates used as per June 30, 2015 are: 1 EUR = DDK 12. Other information As at June 30, 2015, the members of the Board of Directors of Triodos SICAV II do not hold shares in Triodos Organic Growth Fund. 24

25 Management and administration Board of Directors Pierre Aeby Chair Chief Financial Officer and member of the Executive Board of Triodos Bank NV Marilou van Golstein Brouwers Managing Director of Triodos Investment Management BV Patrick Goodman Independent, Partner of Innpact S.à r.l. Olivier Marquet Managing Director of Triodos Bank NV (Belgian branch) Garry Pieters Independent, Associate The Directors Office Luxembourg Alexander Schwedeler until May 12, 2014 Managing Director of Triodos Bank NV (German branch) Fund Manager Riëlla Hollander joined Triodos Bank as Fund Manager for Triodos Organic Growth Fund in May 2013 to lead the team of investment professionals. She has 15 years of acquisition finance experience, heading the Acquisition Finance team for Lloyds Bank in the Benelux and Nordics, working alongside Private Equity houses on mid- and large-end Management Buy Outs in a wide range of sectors. Prior to Lloyds, Riëlla Hollander has been active in M&A Advisory and general Corporate Banking. She holds an MBA from Leuven University. As at 30 June 2015, the fund manager does not hold shares in Triodos Organic Growth Fund. Alternative Investment Fund Manager Triodos Investment Management B.V. Utrechtseweg 60 P.O. Box 55, 3700 AB Zeist The Netherlands Distributor Triodos Investment Management B.V. Utrechtseweg 60 P.O. Box 55, 3700 AB Zeist The Netherlands Registered Office 11-13, Boulevard de la Foire, L-1528 Luxembourg Grand Duchy of Luxembourg Custodian, Paying Agent, Domiciliary, Corporate and Administrative Agent RBC Investor Services Bank S.A. 14, Porte de France, L-4360 Esch-sur-Alzette Grand Duchy of Luxembourg Registrar and Transfer Agent RBC Investor Services Bank S.A. 14, Porte de France, L-4360 Esch-sur-Alzette Luxembourg Cabinet de révision agréé KPMG Luxembourg, Société Coopérative 39, Avenue John F. Kennedy, L-1855 Luxembourg Grand Duchy of Luxembourg Legal Advisor in Luxembourg Arendt & Medernach 14, rue Erasme, L-2082 Luxembourg Grand Duchy of Luxembourg 25

26 Colophon Triodos SICAV II - Triodos Organic Growth Fund semi-annual report June 2015 Published August 2015 Text Triodos Investment Management, Zeist, The Netherlands Design Michael Nash Associates, London, United Kingdom Layout Via Bertha, Utrecht, The Netherlands Photography Photos in this semi-annual report have been provided by Aarstiderne A/S. If you have comments or questions about this report, please contact Triodos Investment Management. This document can be downloaded from: 26

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