ndrc annual report 2017 · helping to create high value jobs and generate economic impact. ndrc’s...

1.1.

20162017

NDRCANNUAL REPORT

2016 Snapshot Statement of Internal Controls

Statement of Cash Flows

02. 10. 16.

Directors’ Responsibilities Statement

Statement of Changesin Equity

Chairman’s ReportDr Sean Baker

Independent Auditors’Report

Notes to the Financial Statements

CEO’s Report Ben Hurley

Statement of Comprehensive Income

Directors’ Report Statement of Financial Position

03. 11. 17.

04. 13.

07. 14.

09. 15.

NDRCANNUAL REPORT

02.

2016SNAPSHOT 16.Creditors: A 16. Cre ditors:

807Jobs created

to date

440Applications

to NDRC in 2016

Number of digital startups created per year

NewsWhip

Bizimply

Nuritas

SilverCloudHealth

These NDRC companies raised significant Series A investments in 2016

€16M

€40M

€88M

€125M

€152M

Follow on Investmentraised by NDRC companies

Market Capital of NDRC companies

€39M

€120M

€220M

€328M

€427M

I am very pleased to present NDRC’s Annual Report for 2016. NDRC’s portfolio of digital startup companies, and the 32 new ventures we sourced and invested in this year, continue to demonstrate what can be achieved when the right combination of capital, experience and expertise are made available to companies at the very early stage that we invest.

The growth and development of innovation-led entrepreneurial activity within the economy is a key performance indicator for Ireland. The interdependent links between a competitive, innovation-rich economy and a healthy startup sector remain starkly clear across the globe. Continuing to source and build Irish startups that have the potential to create high value jobs at home and to compete internationally is more critically important than ever before.

NDRC portfolio companies achieving success in 2016 included NewsWhip, Bizimply, Nuritas and SilverCloud Health, all of which raised significant Series A investments during the year.

Stimulating a culture of digital entrepreneurship at an early stage was again a core focus of NDRC this year. Digital disruption is impacting business models in all sectors of the economy, providing both opportunities and threats. NDRC is uniquely placed to connect industry, talent and ideas to envision these new opportunities, supporting digital entrepreneurs in solving problems, creating solutions and taking on new business challenges.

With partners that included Bank of Ireland, the HSE and Aviva, NDRC delivered a range of successful pre-acceleration activities in FinTech, HealthTech and InsurTech.

In partnership with Enterprise Ireland, NDRC ran a Female Founders programme in 2016. Since 2009, 29% of NDRC

companies have had women in the founding team. Notably, 67% of NDRC companies with women in the founding team have secured follow on investment, compared to 51% without. The organisation remains committed to sourcing and supporting female digital entrepreneurs.

Of significance also was the success of NDRC in securing the EI led tenders to deliver two new regional accelerator programmes. Supporting entrepreneurs outside of Dublin is key to driving sustainable economic recovery and growth. We look forward to delivering this activity in 2017.

I am grateful to my colleagues on the Board for their valuable insight, expertise and commitment. I also warmly recognise the work of all NDRC staff and their continued focus on helping our entrepreneurs think global when it comes to the innovation potential of Irish businesses.

I warmly thank the Department of Communications, Climate Action and Environment for their continued support. The mandate they have provided to NDRC to build and invest in startups is helping to ensure that digital entrepreneurship is a vibrant and growing part of the Irish economy.

Dr Seán BakerChairman,NDRC

CHAIRMAN’S STATEMENT

03.

CHIEF EXECUTIVE’S REPORTNDRC was established by the Irish Government in 2007 to foster and embed the growth of digital entrepreneurship within the economy.

NDRC does this by building and investing in digital startups, 226 of them since we were founded. Our ultimate goal is to deliver a sustainable supply of globally scalable Irish digital companies, helping to create high value jobs and generate economic impact. NDRC’s annual report for 2016 provides a further update on our progress in fulfilling this ambition.

Best Place to StartIn 2016, NDRC sourced, built and invested in 32 digital startups. Competiton to enter NDRC remained high, with 440 applications to our acceleration and investment programmes. On average 10% of those entrepreneurs who applied to NDRC secured a place.

NDRC ran a dedicated six month Female Founders programme in 2016, in partnership with Enterprise Ireland, investing in and supporting ten female led companies.

NDRC’s impact on our investee ventures is evident in that the proportion of our ventures that secure next stage investment continued to be in the order of 50%.

Jobs GrowthBy the end of December 2016, NDRC portfolio companies had created 680 direct, high value jobs in Ireland and 127 jobs outside of Ireland. 32 new NDRC digital companies were created in 2016.

Market Value and Follow on InvestmentWith ten years of experience in guiding and investing in new technology businesses, NDRC’s key goal remains sourcing and building companies and startup teams, with a digital technology focus, who have the potential to attract follow on investment and grow internationally.

NDRC companies raised a cumulative €152 million by 2016, a 22% increase on the previous year. NDRC companies

collectively have a combined market value of over €427 million. In 2016, NDRC companies securing Series A investment included NewsWhip, Bizimply, Nuritas and SilverCloud. As a further indicator of the growing maturity and quality of NDRC companies over time, NDRC realised investment returns of €460K in the year.

Sectors Reflecting the impact of digital, NDRC startups are emerging from all parts of the economy. They have academic and non academic backgrounds, they are gender and age diverse and they are non sector specific. Startups NDRC invested in this year included those in the recruitment, education, legal, beauty, transport, compliance and fintech sectors. The average age of those founding a startup in NDRC was 35.

ExpansionNDRC successfully secured the tender to run two regional accelerators on behalf of Enterprise Ireland in 2016. These joint initiatives are a key part of Enterprise Ireland’s programme to grow the number and quality of digital startups nationally.

NDRC looks forward to expanding its services and expertise in 2017 and to working in partnership with other key players in the ecosystem, such as Enterprise Ireland, in building a culture of digital entrepreneurship nationally.

Pre AccelerationIn 2016, NDRC ran pre-acceleration programmes in FinTech, HealthTech and InsurTech partnering with Bank of Ireland, the HSE, eir and Aviva.

NDRC also supported Accenture’s Leaders of Tomorrow Programme. Short term, less intense and more fluid than NDRC’s core acceleration or investment activity, pre-acceleration

04.

plays a valuable role in stimulating ideas among potential entrepreneurs, enabling the organisation to capture innovation within the economy at an earlier stage.

This activity also provides an important platform for startups and corporates to connect and create meaningful linkages in the innovation space.

Organisation DevelopmentIt has been a key year for NDRC from an organisational development perspective. We have streamlined internal structures; enhanced our corporate processes; and, most significantly, we have invested in the development of a people focused culture as a platform for the future.

This has enabled NDRC to integrate experienced new members of staff seamlessly, establishing a critical platform for our growth and development in 2017 and beyond. We have also expanded the depth and range of the industry partners we work with and have continued to grow our links with the investment community both here and abroad. We will focus more intensively on this stakeholder activity throughout 2017.

I thank the Chairman and Board for their strong guidance, encouragement and support, our staff, the Department of Communications, Climate Action and Environment, our industry and investment partners and all participants in our high value programmes and initiatives. Working strategically and collaboratively together, NDRC will continue to make a very significant contribution to the growth and development of digital entrepreneurship, innovation and success in Ireland.

Ben HurleyCEO, NDRC

CHIEF EXECUTIVE’S REPORT

05.

CONTENTS

Directors Sean Baker (Interim Chair)Brendan Cremen (Alternate)Orla FeelyBen HurleyGerard Lacey (resigned 20 October 2016)Aengus McCleanGearoid MooneyDiarmuid O’Brien (appointed 20 October 2016)Stjohn O’ConnorMark O’DonovanPhilip Sharpe

Company Secretary Royalwell Limited24/26 City Quay,Dublin 2D02 NY19

Registered number 398458

Registered office Digital Exchange BuildingCrane StreetThe Digital HubDublin 8D08 HKR9

Statutory Auditors Pricewaterhouse CoopersChartered Accountants and Statutory Audit FirmOne Spencer DockNorth Wall QuayDublin 1D01 X9R7

Bankers Bank of Ireland85 James StreetDublin 8D08 C2PR

Solicitors Venture Legal Services8 Upper Mount StreetDublin 2D02 FTS9

Directors’ Report

Directors’ Responsibilities Statement

Statement of Internal Controls

Independent Auditors’ Report

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Financial Statements

07.

09.

10.

11.

13.

14.

15.

16.

17.

06.

DIRECTORS’REPORTPrincipal ActivitiesNDRC’s role is to deliver a sustainable supply of globally scalable Irish digital startups to the next stage venture investor community. It does this by sourcing and building young digital companies to invest in.

NDRC has a commercial mandate from the Department of Communications, Climate Action and Environment tomake these investments, ensuring Ireland has a vibrant and growing culture of digital entrepreneurship. With itsdigital focus, NDRC is uniquely positioned at the centre of multiple players in the innovation and investment space – from third level institutions, to Enterprise Ireland, industry and investors.

NDRC operates at a stage when the risk is prohibitive to venture capital. It targets both financial and impact returns through its hybrid fund and provides a pipeline of risk-reduced venture investment opportunities to the economy.

The key business performance indicator for the company is third party follow-on investment (FoI) that is secured by ventures emerging or developing from the company’s portfolio. Cumulative follow-on investment increased by 22% year on year, from €125m by 2015 to €152m by 2016. The cumulative enterprise value of ventures emerging from NDRC also increased by 30% year on year, from €328m by 2015 to €427m by end 2016. These growth outcomes (cf. results for the year below) are a consequence of a continued flow of investments and ventures through NDRC, and increasing maturity of NDRC ventures that have proven their viability since emerging in previous years.

As continued validation of the development of the company, NDRC once again achieved realisations of financialreturns from its investments. During the year the company received a return on its equity stake following the sale ofa number of entities, for which the investment cost was expensed to the Income and Expenditure account over anumber of previous financial years in line with the company’s accounting policies. A reserves policy has been agreedby the Board following these significant returns. NDRC has decided to hold reserves of €1,259,154 which is thegross proceeds from these realisations which is detailed in the ‘Designated Reserves’ note to the financial statements. Designated reserves are held to enable NDRC to deploy funds to seed investments that may fall outside of the current programmes operated and to ensure that the organisation has the flexibility and financial security to do so; to fund working

capital where it might be necessary during the course of an accounting period; to enable NDRC to apply the funds in the pursuit of strategic goals and expansion activities and to cover any potential requirement for cost coverage or unforeseen events/liabilities. While the company’s current hybrid funds can only ever deliver a fractional financial return, these realisations, building on the first such return in 2014, underline the company’s positioning and performance as an early stage investor, substantiating its investment reputation, and validating its business model.

Results And DividendsThe Statement of comprehensive income for the year ended 31 December 2016 and the Statement of financial position at that date are set out on pages 13 and 14. The surplus for the year amounted to €459,684 (2015: €799,470). The company is exempt from taxation. Results in the form of third party follow-on investments in the outputs of the company’s collaborations are exceptionally strong for the year. Building on very strong results in the previous year, the company reports €152m(2015: €125m) of follow-on investment secured by new enterprises emerging or developing from the company’sinvestment programmes. The amount of equity released in these new enterprises to secure the follow-on investment indicates a year-end cumulative enterprise value of these enterprises of €427m (2015: €328m.).

DirectorsThe directors who served during the financial year were:

Sean Baker (Interim Chair)Brendan Cremen (Alternate)Orla FeelyBen HurleyGerard Lacey (resigned 20 October 2016)Aengus McCleanGearoid MooneyDiarmuid O’Brien (appointed 20 October 2016)Stjohn O’ConnorMark O’DonovanPhilip Sharpe

The company is limited by guarantee, does not have a share capital and in the event of a winding up, the membershave agreed to pay €5 each to the debts of the company.

Future DevelopmentsThe company will continue to operate to its main objective in 2017.

The directors present herewith their report and audited financial statements for the financial year ended 31 December 2016.

07.

DIRECTORS’REPORTHealth And Safety Of EmployeesThe Safety, Health and Welfare at Work Act, 2005 imposes certain obligations on employers and the directors aresatisfied that the company has taken the necessary action to ensure compliance with the Act.

Charitable And Political ContributionsThe company made no political or charitable contributions during the year.

Environmental MattersThe company pays particular adherence to minimise adverse impacts on the environment from its activities, whilstcontinuing to address health, safety and economic issues.

Principal Risks And UncertaintiesThe directors consider that the following is the principal risk factor that could materially and adversely affect thecompany’s operation:

• There is a dependence on the Department of Communication, Climate Action and Environment for short, medium and long term funding. There is a reasonable expectation that short term funding is available as there are formal agreements in place that govern cumulative funding of €42.5m for the period from mid-2008 to mid-2018.

The company has controls in place to limit potential exposures and management and the directors regularly review, reassess and proactively limit the associated risks.

Tax StatusThe company is recognised by the Revenue Commissioners as having registered charity status - registration number CHY 17664.

Accounting RecordsThe measures taken by the directors to ensure compliance with the requirements of Sections 281 to 285 of the Companies Act 2014 with regard to the keeping of accounting records, are the employment of appropriately qualified accounting personnel and the maintenance of computerised accounting systems. The company’s accounting records are maintained at the company’s registered office at Digital Exchange, Crane Street, The Digital Hub, Dublin 8, DO8 HKR9.

Statement On Relevant Audit InformationEach of the persons who are directors at the time when this

Directors’ Report is approved has confirmed that:

• so far as the director is aware, there is no relevant audit information of which the company’s auditors are unaware; and

• the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the company’s auditors are aware of that information.

Post Balance Sheet EventsNDRC regularly monitors investments in financial assets for indicators of impairment. Events may arise after the end of the reporting period which indicate an impairment of certain investments after the end of the reporting period, however the extent of the financial effect of such events is generally only determinable at the end of the next reporting period.

AuditorsThe auditors, Pricewaterhouse Coopers, have indicated their willingness to continue in office in accordance with section 383(2) of the Companies Act 2014, and a resolution that they be re-appointed will be proposed at the Annual General Meeting.

This report was approved by the board on and signed on its behalf.

Stjohn O’ConnorDirector

Philip SharpeDirector

08.

DIRECTORS’ RESPONSIBILITIES STATEMENT

For the financial year ended 31 December 2016.

The directors are responsible for preparing the Directors' Report and the financial statements in accordance withIrish law and regulations.

Irish law requires the directors to prepare the financial statements for each financial year. Under the law, the directors have elected to prepare the financial statements in accordance with Irish Generally Accepted Accounting Practice in Ireland (accounting standards issued by the Financial Reporting Council of the UK, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and promulgated by the Institute of Chartered Accountants in Ireland and Irish law).

Under company law, the directors must not approve the financial statements unless they are satisfied that they give atrue and fair view of the assets, liabilities and financial position of the company as at the financial year end date, of the profit or loss of the company for that financial year and otherwise comply with the Companies Act 2014.

In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

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

• state whether the financial statements have been prepared in accordance with applicable accounting standards, identify those standards, and note the effect and the reasons for any material departure from those standards; 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 ensuring that the company keeps or causes to be kept adequate accounting recordswhich:

• correctly explain and record the transactions of the company,

• enable at any time the assets, liabilities, financial position and profit or loss of the company to be determined with reasonable accuracy, and

• enable them to ensure that the financial statements and Directors' Report comply with the Companies Act 2014 and enable the financial statements to be audited.

The directors are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

On behalf of the board



09.

STATEMENT OF INTERNAL CONTROLS


On behalf of the Board of NDRC, I acknowledge our responsibility for ensuring that an effective system of internal control is maintained and operated.

The system provides reasonable, but not absolute, assurance that assets are safeguarded, transactions authorised and properly recorded, and that material errors or irregularities are either prevented or detected in a timely period. The Board further states that:

• An annual review of the effecitveness of the control environment was conducted in respect of the year ending 31 December 2016;

• No breaches in control occurred;

• No material losses or fraud were disclosed.

The system of Internal Control is based on a framework of regular management information and administrative procedures including segregation of duties, and a system of delegation of accountability.

In particular it includes: • A comprehensive budgeting system

with an annual budget which is reviewed and agreed by the Board;

• Regular reviews by the Board of monthly management accounts and reporting and annual financial reports which indicate financial performance against budget;

• Setting of metrics in line with the objectives of NDRC to measure financial and other performance;

• Clearly defined capital investment control guidelines.

The System of Internal Control was reviewed by the external auditors as part of the external audit 2016.

The Board has taken steps to ensure that appropriate control procedures are in place to provide effective internal control, by:

• Enhancing the Financial Policies and Procedures;

• Clearly defining management responsibilities;

• Establishing formal procedures for reporting significant control failures and ensuring appropriate corrective action;

• Recruiting suitably qualified personnel to oversee the finance function;

• Developing a culture of accountability across the organisation.

The Board has established processes to identify and evaluate business risks by:

• Establishing a comprehensive Risk Register;

• Identifying the nature, extent and financial implication of risks facing NDRC including the extent and categories which it regards as acceptable;

• Assessing the likelihood of identified risks occuring;

• Assessing NDRC’s ability to manage and mitigate the risks that do occur;

• Assessing the costs of operating

particular controls relative to the benefit obtained.

NDRC has an internal audit function carried out by an external third party which operates in accordance with the Code of Practice for the Governance of State Bodies. The work of internal audit is informed by analysis of the risk to which the organisation is exposed, with specific areas identified annually through an annual plan and analysed on a rotational basis. The analysis of risk and the internal audit plans are endorsed by the Audit & Risk Committee and approved by the Board. The Audit & Risk Committee meets at least quarterly and reports directly to the Board. The reports include internal audit’s opinion on the adequacy and effectiveness of the system of internal financial control.

The Board’s monitoring and review of the effectiveness of the system of internal control is informed by the work of internal audit, external audit and the Audit & Risk Committee, which oversees the work of internal audit, and the management of NDRC who have responsibility for the development and maintenance of the financial control framework.

NDRC seeks to comply with the guidelines and rules set out by the Office of Government Procurement.

Signed on behalf of the Board

Seán Baker

Seán BakerChairman23rd June 2017

10.

INDEPENDENT AUDITORS’REPORTOur opinionIn our opinion, National Digital Research Centre’s financial statements (the “financial statements”):

• give a true and fair view of the company’s assets, liabilities and financial position as at 31 December 2016 and of its result and cash flows for the year then ended;

• have been properly prepared in accordance with Generally Accepted Accounting Practice in Ireland; and

• have been properly prepared in accordance with the requirements of the Companies Act 2014.

What we have auditedThe financial statements, included within the Directors’ Report and Financial Statements, comprise:

• the Statement of Financial Position as at 31 December 2016;

• the Statement of Comprehensive Income for the year then ended;

• the Statement of Cash Flows for the year then ended;

• the Statement of Changes in Equity for the year then ended; and

• the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

The financial reporting framework that has been applied in the preparation of the financial statements is Irish law andaccounting standards issued by the Financial Reporting Council and promulgated by the Institute of Chartered Accountants in Ireland (Generally Accepted Accounting Practice in Ireland), including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”.

In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.

Matters on which we are required to report by the Companies Act 2014

• We have obtained all the information and explanations which we consider necessary for the purposes of our audit.

• In our opinion the accounting records of the company were sufficient to permit the financial statements to be readily and properly audited.

• The financial statements are in agreement with the accounting records.

• In our opinion the information given in the Directors’ Report is consistent with the financial statements.

Matter on which we are required to report by exceptionDirectors’ remuneration and transactions

Under the Companies Act 2014 we are required to report to you if, in our opinion, the disclosures of directors’ remuneration and transactions specified by sections 305 to 312 of that Act have not been made. We have no exceptions toreport arising from this responsibility.

Responsibilities for the financial statements and the auditOur responsibilities and those of the directorsAs explained more fully in the Directors’ Responsibilities Statement set out on page 4, 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 Irish law andInternational Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing PracticesBoard’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with section 391 of the Companies Act 2014 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Report on the financial statements

11.

What an audit of financial statements involvesWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland). An audit involvesobtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:

• whether the accounting policies are appropriate to the company’s circumstances and have been consistently applied and adequately disclosed;

• the reasonableness of significant accounting estimates made by the directors; and

• the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary toprovide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness ofcontrols, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Directors’ Report and Financial Statements to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Paul O’Connorfor and on behalf of PricewaterhouseCoopersChartered Accountants and Statutory Audit FirmDublin24 August 2017

(a) The maintenance and integrity of the National Digital Research Centre website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

(b) Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

INDEPENDENT AUDITORS’REPORT

Report on the financial statements

12.

As Restated

STATEMENT OF COMPREHENSIVE INCOME

Government subvention Other incomeRealisations on investmentsTotal income

Research investment & fund managementGeneral overheads and fund administrationFair value movements on investmentsSurplus on ordinary activities before tax

Tax on surplus on ordinary activities Surplus for the financial year Other comprehensive income for the financial year

Total comprehensive income for the financial year

3,698,060381,176

459,6844,538,920

(3,209,623)(853,227)

(16,386)459,684

-459,684

-

459,684

3,111,110 262,439 799,470 4,173,019

(2,417,257) (908,246)

(48,046) 799,470

- 799,470

-

799,470

456

7

2016€

2015€

Notes

All amounts relate to continuing operations.

There were no recognised gains and losses for 2016 or 2015 other than those included in the Statement of comprehensive income.


13.

As Restated

Fixed AssetsTangible assets Financial assets

Current AssetsDebtorsCash at bank and in hand

Creditors (amounts falling due within one year)

Net Current AssetsTotal Assets Less Current LiabilitiesNet Assets

Capital And ReservesDesignated reservesProfit and loss accountShareholders’ funds

1213

1415

16

1818

14,220

1,104,9411,119,161

7,978 2,484,4692,492,447

(1,621,559)

870,8881,990,0491,990,049

1,259,154730,895

1,990,049

2,412741,992

744,404

81,0803,938,2444,019,324

(3,233,363)

785,9611,530,3651,530,365

799,470730,895

1,530,365

The financial statements were approved and authorised for issue by the board:



STATEMENT OF FINANCIAL POSITION

2016€

2015€

Notes

As at 31 December 2016

14.

STATEMENT OF CHANGES IN EQUITY

As Restated

799,470

-459,684

1,259,154

730,895

459,684

(459,684)730,895

1,530,365

459,684-

1,990,049

At 1 January 2016Total comprehensive income for the financial yearSurplus for the financial year Transfer to designated reserves At 31 December 2016

Designated Reserves

€

Profit andloss account

€

Total equity€

-

-799,470799,470

730,895

730,895

799,470(799,470)

730,895

730,895

799,470-

1,530,365

At 1 January 2015Total comprehensive income for the financial yearSurplus for the financial year Transfer to designated reserves At 31 December 2015

Designated Reserves

€

Profit andloss account

€

Total equity€

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015


15.

STATEMENT OF CASH FLOWS

As Restated

Cash flows from operating activitiesSurplus for the financial year Adjustments for:Depreciation of tangible assets Decrease in debtors (Decrease)/increase in creditors Fair value movement on investments Net cash generated from operating activities

Cash flows from investing activitiesPurchase of tangible fixed assetsPurchase of financial assetsNet cash used in investing activities

Net (decrease)/increase in cash and cash equivalentsCash and cash equivalents at beginning of financial yearCash and cash equivalents at the end of financial year

Cash and cash equivalents at the end of financial year comprise:Cash at bank and in hand

459,684

2,38873,102

(1,611,804)16,386

(1,060,244)

(14,196)(379,335)(393,531)

(1,453,775)3,938,2442,484,469

2,484,4692,484,469

799,470

69231,401

1,700,28348,046

2,779,269

(2,481)(427,750)(430,231)

2,349,0381,589,2063,938,244

3,938,2443,938,244

2016€

2015€


16.

NOTES TO THE FINANCIAL STATEMENTS1. General informationNational Digital Research Centre is a company limited by guarantee and incorporated in Ireland. Its registered office is at Digital Exchange, Crane Street, The Digital Hub, Dublin 8, D08 HKR9. The company was founded in 2006 and began operational establishment in 2007, for the charitable purpose of education, including promotion of innovation, research, development and education in the arts and sciences.

2. Accounting Policies2.1 Basis of preparation of financial statementsThe entity financial statements have been prepared on a going concern basis and in accordance with Irish GAAP (accounting standards issued by the Financial Reporting Council of the UK and promulgated by the Institute of Chartered Accountants in Ireland and the Companies Act 2014). The entity financial statements comply with Financial Reporting Standard 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) and the Companies Act 2014.

These policies have been consistently applied to all financial years presented, unless otherwise stated. Information on the impact of first-time adoption of FRS 102 is given in note 24. The preparation of entity financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the company’s accounting policies (see note 3). The following principal accounting policies have been applied:

2.2 IncomeIncome from the Department of Communication, Energy and Natural Resources is recognised when related costs are incurred. Grant income from EU sources is recognised when related costs are incurred.

Other sources of income are accounted for in the period to which they relate.

2.3 Employee benefits

Short term employee benefits, including wages and salaries, paid holiday arrangements and other similar non-monetary benefits, are recognised as an expense in the financial year in which employees render the related service. The company operates an annual bonus plan for employees. An expense is recognised in the profit and loss account when the company has a present legal or constructive obligation to make payments under the plan as a result of past events and a reliable estimate of the obligation can be made.

2.4 Tangible fixed assetsTangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes the original purchase price and expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.

The estimated useful lives range as follows:

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the Statement of Comprehensive Income.

Tangible fixed assets are derecognised on disposal or when no future economic benefits are expected.

2.5 Project Related Fixed AssetsCapital equipment purchased by research partners and funded by NDRC, most of which is computer equipment, is written off to the Income and Expenditure account at time of purchase.

2.6 Investment In Research ActivitiesThe company invests in the early stages of research-driven technology development and commercialisation through partnerships, new ventures, and continuous assessment projects.Investment in these projects is expensed to the Income and Expenditure account as the directors believe that given the stage of development of these entities and the underlying business opportunities, there is not an appropriate level of certainty as to the recoverability of the investment.

2.7 DebtorsShort term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, including transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.


Industrial equipment

Fixtures andfittings

Computerequipment

- 4 years straight line



17.

NOTES TO THE FINANCIAL STATEMENTS2.8 Cash And Cash EquivalentsCash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

In the Statement of Cash Flows, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the company’s cash management.

2.9 Financial instrumentsThe company has chosen to apply the provisions of Section 11 and 12 of FRS 102 to account for all of its financial instruments.

The company enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and otherthird parties, loans to related parties and investments in non-puttable ordinary shares.

Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of

interest that is not a market rate or in case of an outright short-term loan not at market rate, the financial asset or liability is measured, initially, at the present value of the future cash flow discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost.

Investments in non-convertible preference shares and in non-puttable ordinary and preference sharesare measured:

• at fair value with changes recognised in the Statement of Comprehensive Income if the shares are publicly traded or their fair value can otherwise be measured reliably;

• at cost less impairment for all other investments.

As part of the investment portfolio of the company, follow-on investment by the company in the shares of companies that are commercialising intellectual property generated by the company’s researchinvestment activities is recognised on the Statement of Financial Position at cost, less allowance for impairment losses unless the fair value of investments can be measured reliably.

Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Statement of comprehensive income.

For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset’s carrying amount and the present value of estimated cash flows discounted at the asset’s original effective interest rate. If a financial asset has a variable interest rate, the discount rate for

measuring any impairment loss is the current effective interest rate determined under the contract.

For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset’s carrying amount and the best estimate of the recoverable amount, which is an approximation of the amount that the company would receive for the asset if it were to be sold at thereporting date.

Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is an enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or income as appropriate. The company does not currently apply hedge accounting for interest rate and foreign exchange derivatives.

2.10 CreditorsShort term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, including transaction costs, and are measured subsequently at amortised cost using the effective interest method.


18.

NOTES TO THE FINANCIAL STATEMENTS2.11 Pensions

The company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate entity. Once the contributions have been paid the company has no further payment obligations.

The contributions are recognised as an expense in the Statement of Comprehensive Income when theyfall due. Amounts not paid are shown in accruals as a liability in the Statement of Financial Position. The assets of the plan are held separately from the company in independently administered funds.

2.12 Holiday pay accrualA liability is recognised to the extent of any unused holiday pay entitlement which is accrued at the Statement of Financial Position date and carried forward to future periods. This is measured at the undiscounted salary cost of the future holiday entitlement so accrued at the Statement of FinancialPosition date.

2.13 TaxationUnder the Taxes Consolidation Act, 1997, the company is exempted from corporation tax due to its status as a registered charity.

2.14 Designated reservesThe company transfers other income received as a result of realisations and other recoupment on investments to a designated reserves fund. The reserves are released to the income and expenditure account when a decision has been made by the Board to utilise part or all of the fund for a specific agreed purpose or significant event. The level of reserves is reviewed annually to ensure that they are meeting the organisations needs.

003. Judgments in applying accounting policies and key sources of estimation uncertainty

3.1 Critical management judgement in applying accounting policiesSignificant management judgements in applying the accounting policies of the company that have the most significant effect on the financial statements is as follows:

Recognition of provisions and contingencies Judgment is exercised by management to distinguish between provisions and contingencies.

Subsequent measurement offinancial assetsJudgement is exercised by management in determining that follow on investment in the shares of companies that are commercialising intellectual property generated by the company’s research investment activities, which are not publicly traded, are subsequently measured at cost less impairment as fair values cannot be measured reliably.

3.2 Key sources of estimation uncertaintyInformation about estimates and assumptions that have the most significant effect on recognition andmeasurement of assets, liabilities, income and expenses is provided below. Actual results may be substantiallydifferent.

Estimating useful lives of tangible fixed assetsThe company estimates the useful lives of tangible fixed assets based on the period over which the assets areexpected to be available for use. The estimated useful lives are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence

and legal or other limits on the use of the assets. In addition, estimation of the useful lives of tangible fixed assets is based on collective assessment of industry practice, internal techincal evaluation and experience with similar assets. Actual results, however, may vary due to changes in estimates brought about by changes in factors mentioned above.

Impairment of investments and fair value movements on investmentsAllowance is made for valuations of investments where objective evidence of impairment exists. The company evaluates the amount of allowance for impairment based on available facts and circumstances surrounding the fair value of investments and also relies on the share price recorded at the reporting date and subsequent funding rounds for investments that are not publicly traded and whose fair value cannot bereliably measured.


19.

As Restated

NOTES TO THE FINANCIAL STATEMENTS

4. IncomeAn analysis of income by class is as follows:

Government subvention Other incomeRealisations on investments

All income arose in Ireland.

3,698,060381,176

459,6844,538,920

3,111,110 262,439 799,470 4,173,019

2016€

2015€

5. Other Income

Other income - DomesticProceeds on sale of interest

381,176-

381,176

107,189155,250262,439

2016€

2015€

6. Realisations On Investments

Realisations on investments 459,684459,684

799,470799,470

2016€

2015€

During the year, the company’s realisations included €414,559 from its investment in ClearSight Innovations Limited, €22,597 from RevelOps Ireland Limited, €10,960 from Reverbeo Limited and €10,000 from Localmint Limited.

During 2015, the company realised €617,469 from its investment in ClearSight Innovations Limited and €182,001 from RevelOps Ireland Limited.


20.


7. Surplus On Ordinary Activities Before TaxThe surplus for the year is stated after charging:

Depreciation of tangible fixed assetsDefined contribution pension cost

2,38844,734

6966,992

2016€

2015€

As Restated8. EmployeesStaff costs were as follows:

Wages and salariesSocial insurance costsCost of defined contribution scheme

Capitalised employee costs during the financial year amounted to €NIL (2015 - €NIL).

The average monthly number of employees, including the directors, during the financial year was as follows:

Employees

1,238,367121,49544,734

1,404,596

890,04492,97566,992

1,050,011

2016€

2015€

2016€

2015€

13 10

9. Key Management CompensationKey management includes the directors and members of senior management. The compensation paid or payable to key management for employee services is shown below:

Salaries and other short-term benefitsTotal key management compensation

____781,031781,031

_____510,261510,261

2016€

2015€


21.


10. Directors’ Remuneration

Directors’ emolumentsCompany contributions to defined contribution pension schemes

163,97624,008

187,984

164,21324,008188,221

2016€

2015€

Retirement benefits are accruing to one director under a defined contribution scheme.

In accordance with its approval by the Revenue Authorities as a charitable entity, directors’ emoluments are not paid in respect of services as directors. Directors’ emoluments relate to the services of the ChiefExecutive Officer, whose remuneration is determined by the Remuneration Committee and ratified by the Board.

11. TaxationThe service is exempt from company taxation on the basis that it is an eligible tax exempt charity for the purposes of Section 45 of the Finance Act, 2001.

Cost or valuationAt 1 January 2016AdditionsAt 31 December 2016

DepreciationAt 1 January 2016Charge for the period on owned assetsAt 31 December 2016

Net Book ValueAt 31 December 2016At 31 December 2015

69,830 -

69,830

69,830 -

69,830

- -

226,0857,761

233,846

223,6732,051

225,724

8,1222,412

65,8636,435

72,298

65,863337

66,200

6,098 -

361,77814,196

375,974

359,3662,388

361,754

14,2202,412

Industrialequipment

€

Computerequipment

€


€

Total

€12. Tangible Fixed Assets


22.

Cost or ValuationAt 1 January 2015AdditionsAt 31 December 2015

DepreciationAt 1 January 2015Charge for the period on owned assetsAt 31 December 2015


69,830-

69,830

69,830 -

69,830

- -

223,6042,481

226,085

223,60469

223,673

2,412-

65,863-

65,863

65,863-

65,863

--

359,297

2,481361,778

359,29769

359,366

2,412-

Industrialequipment

€

Computerequipment

€


€

Total

€


12. Tangible Fixed Assets


23.


As Restated

Cost or valuationAt 1 January 2016AdditionsDisposals Fair value movementAt 31 December 2016

ImpairmentAt 1 January 2016DisposalsAt 31 December 2016


107,204--

(16,386)90,818

---

90,818107,204

749,788379,335

(115,000)-

1,014,123

115,000(115,000)

-

1,014,123634,788

856,992379,335

(115,000)(16,386)

1,104,941

115,000(115,000)

-

1,104,941741,992

Listedinvestments

Fair value€

Unlistedinvestments

Cost €

Total€

13. Financial Assets


24.


Cost or valuationAt 1 January 2015AdditionsFair value movementAt 31 December 2015

ImpairmentAt 1 January 2015At 31 December 2015


-155,250

(48,046)107,204

--

107,204-

477,288272,500

-749,788

115,000115,000

634,788362,288

477,288427,750

(48,046)856,992

115,000115,000

741,992362,288

Listedinvestments

Fair value€

Unlistedinvestments

Cost €

Total€

13. Financial Assets - In respect of prior financial year

The company holds a proprietary beneficial interest of 7.2% in Silvercloud Health Limited, 10.9% in NVMdurance Limited and less than 1% in Fieldaware Group Limited.

During the year as part of research commercialisation, the company made a number of follow-on investments in spinouts created for the commercial exploitation of intellectual property developed.

The following categories of investment were made during the year:

Healthcare EnterpriseSoftware

Fintech Semi-conductor

Total

2016No.

Investments Amounts

2€150,000

3€129,335

1€100,000

0€nil

6€379,335

2015No.

Investments Amounts

2€122,500

0€nil

1€50,000

1€100,000

4€272,500


25.


14. Debtors

Trade debtorsPrepayments and accrued income

1,2766,7027,978

55,35025,73081,080

2016€

2015€

15. Cash And Cash Equivalents

Cash at bank and in hand 2,484,4692,484,469

3,938,2443,938,244

2016€

2015€

16. Creditors: Amounts falling due within one year

Trade creditors Taxation and social insurancePension and VHI AccrualsDeferred income (note 21)

192,85040,28510,636

833,286544,502

1,621,559

168,60529,780

5,6651,854,1211,175,192

3,233,363

2016€

2015€

Trade and other creditors are payable at various dates in the next three months in accordance with the suppliers’ usual and customary credit terms.

Tax and social insurance are repayable at various dates over the coming months in accordance with the applicable statutory provisions.


26.

As Restated


Other taxation and social insurance

Income tax deducted under PAYEPay related social insurance

26,99913,286

40,285

14,43615,34429,780

2016€

2015€

17. Financial instruments

Financial assets measured at fair value through profit or loss Financial assets - listed investments

Financial assets that are debt instruments measured at amortised costTrade debtorsBank and cash balances

Financial assets that are equity instruments measured at cost less impairmentFinancial assets - unlisted investments

Financial liabilities measured at amortised costTrade creditorsOther creditors

90,818

1,2762,484,4692,485,745

1,014,1231,014,123

192,85010,636

203,486

107,204

55,3503,938,2443,993,594

634,788634,788

168,6055,665

174,270

2016€

2015€

Fixed financial assets comprise unlisted investments measured at cost less impairment and listed investments measured at fair value determined by a quoted market price in an active market.


27.

NOTES TO THE FINANCIAL STATEMENTS18. Capital And ReservesDesignated reservesDesignated reserves are held to enable NDRC to deploy funds to seed investments that may fall outside of the current programmes operated and to ensure that the organisation has the flexibility and financial security to do so; to fund working capital where it might be necessary during the course of an accounting period; to enable NDRC to apply the funds in the pursuit of strategic goals and expansion activities and to cover any potential requirement for cost coverage or unforeseen events/liabilities.

Profit and loss accountThe profit and loss account includes all retained surplus for current and prior period.

19. Company StatusThe company is limited by guarantee and consequently does not have share capital. Each of the members is liable to contribute an amount not exceeding €5 towards the assets of the company in the event of liquidation.

20. Pension CommitmentsThe company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the company in an independently administered fund. The pension cost charge represents contributions payable by the company to the fund and amounted to €44,734 (2015: €66,992).

Contributions payable to the fund at the year-end have been included in accruals and amount to €7,701 (2015: €5,665).

21. Other Financial CommitmentsThe company has entered into a renewed management operation and maintenance agreement (Concession Agreement MKII) with the Department of Communications, Energy and Natural Resources in August 2013 which provides for additional funding of €17.5m over a multi-year period from 1 July 2013, bringing the cumulative total to €42.5m under these agreements. The renewed agreement, approved in August 2013,is governed by a contractual commitment of €17.5m funding with the expectation that the funding be fully drawn down within five years from 1 July 2013. At 31 December 2016, cumulative funding of €24.4 million had been received under the original agreement (2015: €24.4 million) and €11.8m (2015: €8.8m) under the renewal agreement. The funds are used in order to achieve the purpose of the fund as outlined in the Concession Agreement.

The purpose of this grant is service provision. In line with the Concession Agreement, the mission of the fund is to create high-impact ventures out of opportunities in the research base. The national benefit targeted is high-value jobs, and the advancement of Ireland’s capability in digital entrepreneurship and science and technology commercialisation.

21. Other Financial Commitments

Opening deferred incomeCash received in the periodGrant taken to income in the periodClosing deferred income at the end of the period

1,175,1923,067,370

(3,698,060)544,502

864,9163,421,386(3,111,110)1,175,192

2016€

2015€


28.

NOTES TO THE FINANCIAL STATEMENTS22. Related party transactionsDr Sean Baker, a director of the company, provided services to the company outside of his role as a director. During the year, he provided services amounting to €18,955 (2015: €1,646), of which €18,955 (2015: €1,646) was outstanding at 31 December 2016.

Philip Sharpe, a director of the company, provided services to the company outside of his role as a director. During the year, he provided services amounting to €10,660 (2015: €9,121), of which €10,660 (2015: €9,121) was outstanding at 31 December 2016.

23. Post balance sheet eventsNDRC regularly monitors investments in financial assets for indicators of impairment. Events may arise after the end of the reporting period which indicate an impairment of certain investments after the end of the reporting period; however the extent of the financial effect of such events is generally only determinable at the end of the next reporting period.


29.


Fixed assetsCurrent assets Creditors: amounts falling due within one year

Net current assets

Total assets less current liabilities

Net assetsCapital and reserves

Total Income

Research investment and fund managementGeneral overheads and fund administrationFair value movements on investments

Operating surplus

Surplus on ordinary activities after taxationand for the financial year

792,4504,019,324

(3,281,409)

737,915

1,530,365

1,530,3651,530,365

(48,046)-

48,046

48,046

-

--

744,4044,019,324

(3,233,363)

785,961

1,530,365

1,530,3651,530,365

As previouslystated

31 December2015

€

Effect oftransition

31 December2015

€

FRS 102(as restated)31 December

2015€

24. First time adoption of FRS 102The company transitioned to FRS 102 from previously extant Irish GAAP as at 1 January 2015. The impact of the transition to FRS 102 is as follows:

Explanation of changes to previously reported surplus and equity:1. The changes to previously reported surplus and equity is due to the accrual for holiday pay and the fairvalue movements on investments.

4,111,515

(2,417,257)(894,788)

-

799,470

799,470

61,504

-(13,458)

(48,046)

-

-

4,173,019

(2,417,257)(908,246)

(48,046)

799,470

799,470

As previouslystated

31 December2015

€

Effect oftransition

31 December2015

€

FRS 102(as restated)31 December

2015€


30.

NOTES TO THE FINANCIAL STATEMENTS25. Approval of financial statementsThe board of directors approved these financial statements for issue on 22 June 2017.


31.

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