Harold Zagunis - Chief Financial Officer James Labe - Chairman and Chief Executive Officer Sajal Srivastava - President and Chief Investment Officer

Jonathan Bock - Wells Fargo Securities, LLC Casey Alexander - Compass Point Research & Trading, LLC

Good afternoon, ladies and gentlemen, and welcome to TriplePoint Venture Growth's Second Quarter Earnings Conference Call. At this time, all lines have been placed in a listen-only mode. After the speakers’ remarks there will be a question-and-answer period and instructions will follow at that time. This conference call is being recorded and a replay of the call will be available as an audio webcast on the TriplePoint Venture Growth website. I would now like to turn the call over to Harold Zagunis, Chief Financial Officer of TriplePoint Venture Growth. Mr. Zagunis, please go ahead.

Thank you, Amy. And thank you, everyone for joining us today. We are pleased to share with you our results for the second quarter. Here with me are Jim Labe, Chief Executive Officer and Chairman of the Board; and Sajal Srivastava, President and Chief Investment Officer. Before I turn the call over to Jim, I would like to direct your attention to the customary Safe Harbor disclosure in our press release regarding forward-looking statements, and remind you that during this call we will make certain statements that relate to future events or the Company's future performance or financial condition, which may be considered forward-looking statements under federal securities laws. We ask that you refer to our most recent filings with the Securities and Exchange Commission for important factors that could cause actual results to differ materially from these statements. We do not undertake any obligation to update our forward-looking statements or projections unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.tpvg.com. With that, I'll turn it over to Jim.

Thanks, Harold, and welcome everyone to our second quarter earnings call. I should mention given today's announced acquisition of our portfolio company Jet.com, I want to assure you that we didn't pick our earnings call timing based on that. This wasn't prearranged, but it was certainly good timing. We’ll talk about it and some other equally positive developments later on the call. But first let's talk results. This is our Company's fourth consecutive quarter of growth as we continue to achieve the goals and objectives we set out for the beginning of the year. We're very encouraged by the outlook for the second half now underway, which we expect will result in a strong finish to 2016. As we’ve stated our goals in the game plan remain straight forward. We plan to continue leading the venture lending industry with our brand and reputation. Working closely with our select venture capital investors on lending opportunities. Growing our investment portfolio and achieving our target leverage ratio. Covering and exceeding our dividend which shows a strong return profile of our business. Generating realized gains from our warrant on equity investment portfolio obtaining additional leverage through the SBIC program and making stock repurchases under our buyback program when it is to our stockholders benefit. We are on track building the TPVG franchise while generating attractive risk adjusted returns to our stockholders. In fact, in the second quarter we funded $22 million of investments with a 14.8% weighted average yield and made progress in increasing our leverage ratio. We received a near record level of direct referrals from our select venture capital and investors for company’s seeking debt financing. This is already resulted in $35 million of signed term sheets and $35 million of commitments and many more on the way through the second half of the year. We submitted our MAQ, which is the first part of the process for the SBIC program and we purchased some 2 million of stock under our buyback program. We're also pleased with some great developments in the portfolio after the quarter's end. These could translate into meaningful gains for some of our warrant and equity investments. This again includes today's announced acquisition of Jet.com by Walmart. The announced acquisition of Dollar Shave Club by Unilever, a few follow-on private equity financing around some companies and the potential for IPO's or even more acquisitions and some of our other exciting growth companies during the second half including the tonics which is filed publicly for its IPO. We have now had three companies which have been or about to be acquired for more than $1 billion and we believe this is only the start. As many of you know we announced Jet.com acquisition is the largest ever purchase of the U.S. e-commerce startup company. The announced Dollar Shave Club acquisition is reportedly the highest multiple ever paid for an e-commerce startup company. We continue to have a strong pipeline and are encouraged by the high quality of the deals we are now seeing. Our market remains strong. I'm pleased to report that this past quarter, we saw increased investment activity among our select venture capital investors. There's been no change in the strong demand for venture growth financing or our pipeline particularly in the value. Given the long standing relationships we've had with our select venture capital investors and our reputation in venture lending, the opportunities we are seeing today across the TriplePoint platform and the entrepreneur technologies and innovation behind them are very encouraging. We are also positive on the outlook for venture lending and our venture growth business given the current market conditions. This has supported and driven by the near record amounts of fund raising by venture capital funds. This includes some of our select group of leading venture investors that have raised new multibillion dollar funds this past quarter and other select investors which raise large funds, the previous quarter. We expect this recent fundraising activity will continue to fuel the strong demand for debt. As M&A activity continues to grow as the IPO market potentially opens up further, it will benefit our debt and our equity in our warrant portfolio. It's our assessment as well as our experience over several cycles that these indicators are strong and positive. We continue to acquire time tasted highly selective approach focused on balancing risk and return parameters. We are not out there chasing volume. We are not out there chasing deals nor we doing things that are inconsistent with our reputation and track record. I have been in the business for almost 30 years and in fact this August marks the 17-year that Sajal and I have been working together. Speaking of track record, I would like to point out that we believe our experience is unmatched. In venture lending to venture growth stage companies, we've now committed more than $1.6 billion of venture growth stage debt financing next to more than 80 venture growth stage companies with the TriplePoint platform level, which includes TPVG. Again, this is just our experience at venture growth stage company. It doesn't include the multi-billions of capital our sponsor, TriplePoint Capital has put to work across its other business segments at earlier stage venture capital-backed companies having a portfolio today that exceeds 400 customers. We have a time tested playbook and are being methodical in our approach. Like we have in the past, we are encouraged by the progress that's not to say that this path is easy or that it has been - not been without its challenges. We just started our third-year and we are still early in the innings of a long baseball game to diversify and scale the portfolio. We do expect to end the second half of this year with a strong finish and make progress deploying our capital. We also expect to cover a full year's dividend at our current level from our earnings. With that, I would like to stress that our interests have always been closely aligned with those of our stockholders. Our incentives are tied to the performance of that portfolio. We are one of the few BDC’s with this best-in-class fee structure. We are in this along with you and incented and driven to keep building a high-quality yielding venture growth portfolio and deliver results to our stockholders. Again, with the goals of generating warrant and equity gains and growing our assets, our portfolio and our net. With that, I’d like to turn the call over to Sajal.

Thank you, Jim and good afternoon everyone. In Q2, we signed $35 million of term sheets at TriplePoint Capital and closed $35 million of new commitments at TPVG with two new customers. First, is FinancialForce.com which is a leading software company that provides businesses with a cloud-based platform that organizes sales, services, finance and HR on the Salesforce.com App Cloud. Headquartered in San Francisco, the FinancialForce has raised approximately $200 million of equity capital from technology crossover ventures, Salesforce ventures, Advent International and Unit4. Next is Munchery, which is a food preparation and delivery service that offers cooking kits and fresh meals delivered to your home. Munchery is also headquartered in San Francisco and has raised more than $120 million of equity capital for Menlo Ventures, Sherpa Capital and others. During Q2 we funded $22.4 million of debt investments to five companies and acquired warrants valued at 700,000 in six companies. All of our fundings in the last month of the quarter with roughly 70% occurring in the last week of the month. In fact, 62% funded on the last day of the quarter. The weighted average yield for the assets funded this quarter was 14.8%. Had these loans funds at the beginning of the quarter, we would have had an additional 700,000 of interest income. Our portfolio yield for the quarter was 13.2% as a result of not having customer prepayments this quarter, but through the fact as mentioned last quarter yields on the loan to Virtual Instruments were lowered as part of the acquisition of the Company and the assumption of our loans, which I'll get into more shortly. At quarters end, our unfunded commitments totaled $164.5 million to 10 companies of which the $100 million is dependent upon the Company's reaching certain business or time-based milestones before the debt commitment becomes available to them. $75.5 million of the $164.5 million will expire during 2016. During Q2, we had $39.4 million of unfunded commitments expire or terminate early. Moving on to credit quality. As of June 30, the weighted average internal credit rating of the debt investment portfolio was 2.06, as compared to 2.09 at the end of the prior quarter. As a reminder, under our rating system, loans are rated from 1 to 5, with 1 being the strongest credit rating, and new loans are initially generally rated 2. During the quarter, we upgraded $10 million of loans from category 2 to category 1 and added $22.4 million of new fundings to category 2. We also downgraded $38 million of loans from category 1 to category 2 unrelated to credit performance. We upgraded Virtual Instruments to category 4 to category 3 as part of the closings of its merger with low dynamics. As mentioned last quarter, as part of the merger, the new Company has retained the Virtual Instruments brand name and raised $20 million of equity capital getting its significant operating runway. In conjunction with the merger, all of our loans to Virtual Instruments were assumed in full including all previously recognized end-of-term payments. The new loans include interest rates ranging from 5% to 10% with no additional end-of-term payments. We took all of this into account in Q1, in this quarter there were no further marks against it. Post-merger, the combined Company is performing ahead of plan and we are optimistic for its outlook. During Q2, we also downgraded one customer KnCMiner from category 3 to category 4 as a result of the Company filing for bankruptcy. KnC is a bitcoin mining company that generated approximately $30 million of revenues in 2015. The profitability and outlook for the Company was impacted by a number of unforeseen external factors related to changes in bitcoin pricing, tax treatment, rate of availability, and government subsidies as well as factors specific to KnC like the cost of their electricity and effectiveness of their technology. The business is still generating bitcoins and revenues and we are participating in discussions with parties interested in the Company. We expect a resolution in Q3 and have marked the loans to reflect our expectation of a substantial recovery. This amount was offset by meaningful unrealized gains on the loan portfolio this quarter due to the credit and yield improvements previously mentioned. During the quarter, we removed two customers from our watch list. The first was HouseTrip which as we discussed in detail last quarter was marked down to our recovery value in Q1 is part of the sale process which closed in early Q2. We took a realized loss in HouseTrip this quarter equal to the unrealized loss we recorded last quarter, so there is no change in our recovery estimates. The second was Intermodal Data. Intermodal has been rated or in general watch list since Q1 2015 in an acquired certain assets from our prior portfolio company quarried. As of Q1, we have marked the value of Intermodal’s loan down to $5.9 million from $14.5 million. In Q2, we took the value down by $5.8 million and then took the entire amount to the realized loss. With an unfortunate outcome for Intermodal given the promising technology and despite our efforts facilitating the sale of Core A to Intermodal thereby enabling the team to develop the technology, staying closely on top of their progress and even introducing them to potential customers, investors, and acquirers all of whom unfortunately were not a fit given current dynamics in the market for storage companies. The only remaining company rated category 2 on our watch list is Mind Candy, which has been on the list since Q3, 2014, so we've been on top of them for some time. The company hired a new CEO earlier this year, who are stabilizing the business in addition to driving more value from their existing assets in addition to growing for new initiatives. We on regular communication with the Company and the Board and are actively engaged to ensure our loan continues to perform. Our loan started to amortize in Q3 and it's fair value reflects our expectation for full repayment balanced by the additional risks associated with the Company since our initial underwriting. As we look to the portfolio as a whole based on where we are today we believe the credit situations are behind us. Today, we believe the portfolio is strong and as Jim mentioned we are focusing up on growing it given the strong demand and high quality opportunities we are seeing. On that front so far in Q3 TriplePoint Capital has signed 27 million of venture growth term sheets we've closed 15 million in new commitments and funded $5.2 million to two companies all contributing to our goals for a strong finish to the year. We believe that by growing our portfolio in a disciplined fashion and levering our business up we will again generate substantial earnings in excess of our dividend which along with our share purchase program will enable us to grow our net asset value. Another important catalyst for us and differentiator our business is our equity and warrant portfolio which is starting to generate additional upside and value to shareholders. As many of you know in July our portfolio company Dollar Shave Club announced that it would agree to be acquired for 1 billion by Unilever, which we estimate will generate earning and gains for us of more than 700,000 in Q3 without us actually lending them a single dollar. Our first infinity IRR in fact if you look. Also as Jim mentioned today Walmart announced that it agreed to acquire Jet.com for $3 billion in cash and $300 million in Walmart stock. We made a $50 million commitment to Jet of which $10 million has been drawn and includes end of term payments and prepayment penalties in addition to warrants. We expect to see more exit events as we approach the end of the year and as we make our way into 2017. Some of which have been announced like [new tonics] and others which haven't been [indiscernible]. With that, I’ll now turn the call over to Harold, to review the financial highlights for the second quarter.

Thank you, Sajal. For the Second quarter, our total investment and other income was $9.4 million. As Sajal mentioned, if we had funded our investments at the beginning of the quarter instead of the very end we would have an extra $700,000 in investment income in the quarter. For the quarter, we had a weighted average portfolio of yield of 13.2%, of which 10.1% was from coupon payments, 0.8% was from the accretion of upfront facility fees and warrants, and 2.3% was from the accretion of end-of-term payments. There were no prepayments in the second quarter. The weighted average annualized deal is the net interest income over the average cost basis of our debt investments. We do not include income from expired commitments in this calculation. I would like to also point out that only one of our existing obligors has picked interest on a portion of it is outstanding loans. Our expenses this quarter were $4.4 million, our based management fee was $1.3 million, our debt expenses were $1.9 million and our administrative and general expenses were $1.2 million. There was no incentive fee due to our best-in-class fee structure, which provides that no incentive fees payable except to the extent that 20% of the cumulative increase in net assets resulting from operations since our IPO exceeded the cumulative incentive fees accrued and our paid since our IPO. As a result of this feature our stockholders benefited by an additional $600,000 or $0.04 per share of income. Our net investment income in core investment income were both $5 million. I remind you that core net investment income of the non-GAAP financial measure is provided in addition to but not as a substitution for net investment income. For reconciliation of core net investment income to net investment income. Please see the press release we issued this afternoon. On an annualized return basis our net investment income and core investment income represented at 9.1% return on average net assets. This quarter we had net realized and unrealized losses of $5 million or $0.30 per share. As many of you are aware when we realize the gain or loss under investment and we previously recorded unrealized gain or loss on net investment is reverse. For the quarter we realized $20.5 million in net losses on debt investments to two portfolio companies and $800,000 on warrants investments to four portfolio companies. We reported net unrealized gains on investments of $16.4 million primarily due to a reversal of $14.7 million previously recorded unrealized losses on debt investments in addition to recording net unrealized gains of $900,000 and other debt investments due to markups and $800,000 of net unrealized gains on warrants and equity investments. Our net change in net assets resulting from operations for the second quarter was $300,000 as our net realized and unrealized losses offset our net investment income. As of June 30, the Company's net assets were approximately $212 million and $13.05 per share compared to approximately $219 million or $13.40 per share as of March 31. The decrease in net asset value as a result of no net change in net assets during the quarter are $0.36 per share quarterly distribution and the impact of our share repurchases. As of June 30, we had 88 investments in 33 companies. Our investments included 52 debt investments, 29 warrant investments, and 7 direct equity investments. The total cost and fair value of these investments was approximately $301 million and just under $300 million respectively. 38% of our debt investments were floating rate slight increased from the 36% as of the end of the first quarter. As of June 30, our total cash position was $20 million. At the end of the quarter, we had $53 million of debt drawn on our $20 million revolving credit facility. Including our baby bonds, we are at approximately 0.5 times levered at the end of the quarter. During the second half of this year, we expect to continue to grow our portfolio and reach our targeted leverage ratio 0.6 times to 0.8 times. As we mentioned in previous earnings calls, our net interest income covers our dividend rate at the low end of your target leverage range without any additional benefit of prepayment. We are pleased to report that in July, we submitted our management assessment questionnaire with the U.S. small business administration and look forward to working with the SBA through this process. For the third quarter of 2016, our Board of Directors declared a dividend of $0.36 per share payable on September 16 to stockholders of record as of August 31. This marks the 10 consecutive quarters since our IPO that we have maintained or raised our quarterly dividend rate. Pursuant to our Board approved $25 million share repurchase program, we have purchased over 656,000 shares at a cost of $70.6 million since late last year including over 190,000 shares at a cost of $2 million during the second quarter. As Jim, mentioned, we expect to continue to use our buyback program during periods when our stock trades are at material discounts to book value. Now, I'll turn the call back over to Jim.

Thanks again Harold. At this point, we will be happy to take your questions. Operator, can you please open the lines?

[Operator Instructions] The first question comes from Jonathan Bock at Wells Fargo.

Good afternoon and thank you for taking my questions. Starting first with maybe a philosophical oriented question and then diving into the impact of credit in terms of - particularly some that have been troubled. So Jim, when we look at a model that focuses on high-quality investments and in that case also a subset of VC’s we've seen - that the opportunities can bring about some nice gains right. But then also what we're looking at is a portfolio that's generated $20 million of realized losses and so the question we're trying to ascertain is does it become problematic when you're focusing on a subset of sponsor to the extent the sponsor hits the next Uber and you have underwritten three or four portfolio close in that same vintage fund. You are kind of - is the game that you're going to get on that Uber going to cover up the losses that we've experienced on the portfolio companies that might not exactly materialize the way you would have thought, because it’s a question when I and others sit with investors that hold a portfolio that seem a significant amount of lost, but then also not an uptick in non-accruals?

Yes, Jonathan I guess a couple things here come to mind and we certainly can get into this many different views in terms of philosophy and viewpoints, but I would say at the highest level that we have found over a long period of time and history shows that the gains more that outweigh our losses and we don't expect that to deviate over time. The BDC is little over two years, were small, there is little lumpiness and we're in a building mode and already are talking about some potential net gains around the corner. And again, if you look at the track record in the $1.6 billion that we put to work in venture growth stage companies, but we don't get down to levels of what might happen in certain areas of venture capital equity and home runs having to make up for all kinds of other mistakes at this highest level.

Got it. And I appreciate that. Look, no one expects anybody to data 1,000 and sometimes it's a matter of timing in terms of where we are, maybe jumping into some specific investment for a moment. So, Jet clearly I think $10 million drawn, brings about a nine point EOT fee, is that correct?

Yes. We're just looking it uptick confirm Jonathan that in addition to the EOT, the loans also include a prepayment penalty - 9.25, sorry 9.25 EOT. So plus if there is a prepayment penalty plus their advantage assuming the unfunded commitment is terminated than the value of all the unfunded commitments would come to gains as well. In addition to the warrants, I think our estimate is again assuming they prepay this quarter, we're looking at $2 million of gains from the fees and income just associated with the loan and then incremental upside from the warrants if and when they - but we don't have the details yet as it just got announced today and moves our estimate.

Okay, got it. And so is it I mean I don't really kind of know what the private valuation was, but I think you had a $350,000 equity stake in the business, I mean is it very typical to see buyouts of this nature. I mean is it one times the money, two times the money, what I mean just historical or any color here would be helpful.

Yes. I think if you look at the press, again there were reports that Jet raised capital/private round was a $1 billion valuation and this acquisition was at $3 billion of cash and or up to $3 billion of cash and $300 million of Walmart stock.

Okay. So you could perhaps gain a multiple there, okay. Now moving back to another one because look there's some gains and there’s some troubled investments which is normal and certainly Jet was a great gain, but looking at VI. So understanding this, the new deal that you've had effectively crystallizes your previously accrued EOT fee and assumption of that loan in the business. Is that previous EOT that you've booked subject to any performance measures for the underlying loan meaning is there in fact any type of clawback or potential for you to lose that previously acquired income it's already been books, right as a result of further deterioration at the Company because if that is the case, how are we still able to kind of look at that as accrued income when it's really not subject - or it's really very subjective related to the Company's performance. There's a little bit of accounting and there's also a little bit of kind of practical view in terms of how one would it account for something they haven't received in cash. And if that thing isn’t put on the performance of the Company after the new loan has been assumed it just creates questions that investors want to make sure are effectively buttoned up.

Yes. Again based on what we get - I don't have the loan agreement in front of us, but I'm not aware of any performance related milestones regarding our EOT’s to the extent that’s not the case which I don’t believe we’ll disclose, but that’s my understanding is there are no performance based milestone regarding the EOT’s there.

Got it. Then the next one goes to the - I think roughly a $5.8 million net realized loss associated with Intermodal? What was important I mean it stuck out in the releases that was not realized or recognized is unrealized depreciation in the prior quarter. Walk us through what happens that last $5.8 million requiring it to go to zero?

Yes. Sure, the company had launched their product. It was actually in a capital raising process and so we had last marked the loan down based on again the positive developments watching the product having initial customer win it going into a potential fund raise. Unfortunately given some of the dynamics in the market for storage companies has been it's clearly a game of the - the clear winners with hundreds of millions if not billions of dollars of capital. And then a whole host of over funded early and later stage companies and so unfortunately given that backdrop and the lack of I would say active new investment by VCs in the earlier later stages for storage companies they were unable to raise a new round of financing and then they pursued potential M&A path that the traction wasn't strong enough for potential acquirers to bid forward to acquire the company and so our expectations are at least from - at the end of Q1 of at least raising a round or having success in M&A didn’t come together.

Okay. That I also appreciate. And then if we look at kind of the forward outlook, you mentioned that the portfolio kind of credit issues are contained we've got a good sense of the portfolio is going to do - going well and you outlined Jet and others. Just one name, I want to - you discussed Mind Candy and kind of the potential turnaround. Is it closer to the candidate to where you know there's just not a lot of assets there and even there's a problem. I mean trying to understand that portfolio Co in the context of the kind of risk reward would be helpful because we've seen if you kind of go-to-zero and want to know where, where that name affectively fits I know you've discussed it. But any additional kind of view on the risks that are put forth because they raise some additional capital but how would you kind of qualify it as you know as a potential risk of loss at this moment in time?

I would say again. We’re kind of optimistic given the new CEO Ian Chambers who came on Board really great job of stabilizing the business as I mentioned kind of focusing on driving value they have this great asset known more in Europe and then in the U.S. Moshi Monsters which is a very well-known children's property plus a fair number of other assets and gain properties and so he's focused on not only driving more value from an existing valuable asset. But also this - the rest of its here in Q4 is that on launching publicly a brand new asset and so we've seen some initial data against it which is very promising. And so again and more importantly they actually have you know the cash runway and so you know Jonathan I think that’s as we look to how we score and rank I mean obviously they're not out of the clear but as we look to you know they're not going to shutdown tomorrow. We obviously would inherently working with venture backed companies there are times where things tend to move quickly and we've seen that with some of the other portfolio companies but this one in particular you know we've had on the radar for two years now and our loan is amortizing and we're in regular and frequent contact with the company and the Boards that we feel kind of ahead of the curve.

Got it. And then you know you mentioned of the 164 in effective you know outstanding or unfunded commitments 100 subject to a capital or assuming to milestones on additional and pretty if I know if we’re incorrect let’s say 30 million that will kind of a roll off, this year so walk us through first off your true availability to fund new investments in terms of what you have an available borrow in cash up to the point seven times kind of target level. And how you balance that versus your unfunded commitments. Because even if we were to net 60, let's say 60 million of unfunded is not subject to milestones. Is that not also lower than the true amount available capital you currently have on hand?

Yes. Well, I think the other quick math to is that you subtract $20 million of Dollar Shave Club which terminated in July and conceptually the $40 million of Jet.com that will terminate with the merger of the company. So there is $60 million of unfunded commitment that either has come off the books or will come off the books rather quickly, so that takes the 164 down to a 100 plus. But answer to your question, we have $150 million almost available on our credit facility plus we get monthly collections from our portfolio from the amortizations then we'll have obviously $10 million conceptually - although we don't have any formal notice from Jet that the $10 million that's outstanding would - that Walmart who want to pay 14%, 15% cost of debt to us.

Correct.

Again we see - and then obviously not all of the actual milestone-based unfunded commitments have actually been met and so not all that is maybe available or may not be available to them. So, again we have room to grow, we were very thoughtful and careful as we add new commitments to the company, but I think again the good news is we are churning through some of the more legacy long-term unfunded commitments from customers that don't utilize with now more focus on getting customers to draw a closer to have greater visibility on [indiscernible].

Okay. And then last question. So if you look at the earnings profile of the business understand that with low repayments, come no repayment fees and in which case have been a major earnings driver because of the upside associated with the EOT? This quarter $0.04 light as it relates to 700K of interest income you would have received if you did funded at the beginning of the quarter, but also $0.04 aided roughly or so maybe little bit more by roughly the NOI incentive fee kind of waiver. Guys when we look at your dividend profile relative to your earnings profile, help us understand the true stability that you have in funding that dividend in light of the volatility that can come with repayments. You've seen a number of BDC’s reduced dividends because effectively the math doesn't work. And I think it would be fair just in light of the credit issues experienced, how you would look at funding that dividend and whether or not you believe there needs to be a reexamination of that dividend going forward in light of your earning space?

Yes. Good question. So I’d say that the first fundamental element as we look at the yield of the assets we put on the book, so 14.8% for the quarter and so as we look to the yield profile of not only the existing contractual unfunded commitment, so that 100 - let’s say $100 million or $160 million and how are if you want to look at it and the strong yield profile of that plus, obviously the term sheets outstanding which translates into obviously portfolio yield. And so we look - so first fundamental is the yield of the new assets or the assets we’re adding to the book. Second is overall portfolio yield, so we look at 14.8, we look at 13.2 again without prepays. And then I think the second, so we know fundamentally that we had a very yield product, highly differentiated and we see a fair amount of demand for it as indicated by unfunded commitments as indicated by the pipeline that we have. I think the other key element is well, we actually have to fundamentally lever up, right and so it's great to have a yielded portfolio, but if you don't have a lot of it then given the equity base that we have. We either have to grow it or we have to buy back stock and level set our capital base to our outlook for fundings or to your point Jonathan take down the dividend. So from our perspective, we made some incremental and that's the word I’d use on the leverage just given this quarter given we do have a fair amount of cash on balance sheet, we funded $5 million so far in Q3. But I think fundamentally as we look to pipeline, we look to unfunded, we look to our ability to lever up the business. And so as Harold mentioned that the low end of our leverage ratio, we cover the dividend from just the pure income perspective. As we get to the higher end of that we cover it with just the core interest income on the monthly basis not factoring in the terms or prepays or things like that. So I think we fundamentally believe we have a strong product, strong market outlook and we feel we have the ability to continue to grow the portfolio and lever the business. If we didn't then I think it's a very good question, good debate to have with our Board with regards to the dividend and more aggressive buybacks, but I think we've been aggressive with the buybacks and we do feel particularly strongly about our ability to have a strong finish for the year and hit our target leverage ratio.

Got it. Guys thank you for taking the question.

The next question is from Casey Alexander at Compass Point Research.

Yes. Good afternoon and I have to give Jonathan credit for asking a lot of my questions. I do have a couple more. Coming into the quarter Virtual Instruments and Intermodal I believe we're both on [pick]. Now Intermodal is gone is Virtual Instruments still on pick or as you've moved it up the credit scale and you're discussing it's improved performance has it or do you expect it to return to a cash paying status?

So Casey just a couple things. So just to point out so you're correct, last quarter we had two loans or two customers on pick, Intermodal and Virtual Instruments we were not recognizing any income from Intermodal, in fact we have not recognized even though with pick income we had not recognized any income from Intermodal since it acquired the quarried assets and so as we mentioned with the write-off that loan is gone and there's no additional pick. With regards to Virtual, a portion of the loans to Virtual are cash pay and the remaining amounts are pick and so if their loans have a combination of cash pay and pick. We have been recognizing the pick income associated with the Company given the strong profile, given the strong performance and continue to expect to that we extent there was concern and credit issues down the road. Obviously, we'd factor that in when if that those circumstances arose, but again to answer your question it’s indicated in our SOI we do indicate those loans which are pick and those which are cash pay.

Right, but from the SOI it was hard to tell you know whether or not there was some portion of that was cash pay. But that's great. Of your the $22 million that you funded in this quarter, I'm assuming that those also came with some unfunded commitments tied to them. How much unfunded commitments came along with the $22 million that you funded?

Generally those were existing customers and so let’s see except for Munchery, so just to answer question Casey, so $19.4 million of the funding this quarter were to existing customers so no incremental unfunded commitment associated with…

So those were draws against existing unfunded commitments.

Correct.

Okay.

And then $3 million of the $22 was to a customer Munchery which had $5 million total commitment so leaving $2 million of remaining unfunded commitment which is included in that 164 number.

Right. Okay. You mentioned that assuming that the $40 million of unfunded commitment that goes to Walmart goes away that you will capture some fees associated with the expiration of those unfunded commitments? Is that also true with the $20 million that was unfunded and never drawn by Dollar Shave Club?

Correct. That $725,000 amount included both warrant and equity gains as well as gains associated with the unfunded commitments.

Okay. So now the income that you capture from the expiration or elimination of the unfunded commitments that that goes to your investment income not to your capital gain schedule correct?

It goes into our other income. So it is part of the investment income and other income.

Yes, let me try to put it in portfolio yield just to know key element just to differentiate.

It's not included in portfolio yield. All right, because for instance the acceleration of the end-of-term payments and the prepayment penalties that arise from Jet will go to investment income correct?

Yes. Notable we included in our yield and I’ll tell you how is that whether due to the prepayments.

But any step up in the warrants on Walmart or Dollar Shave will go against your capital gains.

Correct.

And is it right now you have a $22 million loss carry-forward in the capital gains on the balance sheet and not until that's fully eliminated with new positive capital gains. Would any new investor expect to see any accrual of an incentive fee based on capital gains right?

And again Harold can you provide…

There's a difference between GAAP and tax there. So Jim.

Total realized losses on debt investments for our tax purposes, count against our ordinary losses. So capital gains for distribution purposes or based on our taxable capital gains which would be only the gains and net realized gains and losses that we are actually managing on our warrants and equity investments.

Okay. And do you know what that balance is right now?

Should be in the 10-Q. Let us look…

Actually Q hasn't been published yet. I don’t think.

We just posted it.

Okay.

If it took - a lots not in the Q. I can get you that information, but it’s we have - don’t have running count on that because we haven’t provided any taxable income information in the Q.

Right. Okay. But if I understood what’s you said correctly earlier that appropriately levered at your target leverage and within a normal flow of prepayments, which are to be expected in the business you believe that your regular run rate, net investment income would comfortably cover the dividend. Is that correct what you said?

Correct with prepays more than comfortably covers the $0.36?

Once were - our targeted leverage range.

Right. Okay and…

For the entire quarter.

All right great. That's consistent with what I understand. All right thank you for taking my questions.

Thanks.

Next question is from [Mitchell Panattoni].

Hi, guys, I just wanted to follow-up on Jonathan's questions. So what is the average default rate that you've seen over your history?

Well, so Mitchell default is a little complicated because again given the recovery process. So I don't have that default rate in front of us but if we were to look at the $1.6 billion of venture growth commitments. Our losses have been - the credit losses have been just the $20 million or so million that we've reported this quarter.

And maybe going in a different way. What's the average recovery on a default?

Its case specific and customer specific there, again situations where you have soft landings, where again company may get sold or you may get taken out by another lender, you found that in other situations. And so I would say it's case specific as to circumstances of the credit situation or the issue with the company.

Yes. There is no real rule of thumb for that.

But I would say we've had more than three defaults, the number of defaults that we've had here at TPVG, obviously we've had more than just that and so we have had clearly a high recovery rate again over the long-term as we look to generally the performance, but again to have these two realized losses here at TPVG.

Are the losses to the same sponsors or they different sponsors?

Different sponsors.

And how many total sponsors do you deal with?

Generally it's a universe of 30 to 40 ventures sponsors that we work with.

Got it. And how would you characterize the venture market. Is this like a great time for venture? I'm trying to understand you have the defaults in the context of sort of the cyclicality or the secular nature of that business. Is this really good for venture and these defaults were just unusual or is this sort of a tough time for venture and these defaults were sort of expected and ventures going to get better.

Mitch, it’s Jim. So I think somewhere earlier and somewhat consistent. First of all this business is not one that lends itself to a quarter-by-quarter measurement, it’s more than long-term and even venture capital funds each of them have 10-year lives and so the focus on a particular quarter at a particular point in time is always a difficult thing when you're in a long-term baseball game and the conversation next quarter could very easily much different. But putting that aside, losses are defaults are part of this segment in this business, others have them is bankruptcies and others out there that experiencing. So it's not all sweet smelling roses all the time on the way up. But the market is robust, there's a lot of equity out there for high quality companies, a little bit of a drawback at some of the tourist money as they call it, but a lot of strategic financial funds are out there. The quarter before last was a record for fund raising by venture capital funds $12 billion last quarter I think it was $8 billion, the money has to go somewhere and our select sponsors have recently raised the number of them big fund. So there's a strong demand for our product. That there's nothing unusual that we're seeing out there in the market and this is consistent and if not better than the kinds of things that happen in venture lending is part of the businesses set others are.

And I'd only add that our names of our losses they're not new names I mean these are companies that we have been talking about for a couple of quarters some as you mentioned Mind Candy since Q4 2014. So I’d say - we wait and say that there is anything unique or occurring in the venture equity markets or in the venture debt markets that that's causing these events to happen and these are all specifics to the situation.

The false cause you to change any of your underwriting procedures?

No I don't think, again we’ve a pretty time tested process, again almost $2 billion in venture growth and multiple billion on top of that in our early in venture stages. So I'd say generally there's no change in our perspective. We do learn from our mistakes and so we definitely factor in venture that have occurred, track record with the sponsors, sectors and dynamics of sectors and so we take all that and we learn from it on a go forward basis, but I would say there was nothing as we look to our underwriting that we think went wrong in our process.

One last question, should we - and this is just a follow-up, should we assume that the incentive fee likely doesn't get paid for the remainder of the year?

I would say we're estimating, we start making incentive fee next quarter just given obviously some of the developments that we talked about with Dollar Shave and to the extent that Jet comes in with where we are estimating I mean those immaterial amounts of income for us.

Okay. Great. Thank you.

That concludes this afternoon’s question-and-answer session. I’ll turn the call back over to Jim Labe for concluding remarks.

I’ll close this by again expressing my appreciation to all of you for your continued interest and support in TriplePoint Venture growth. We hope you share the excitement that we do and we expect on the go forward opportunities both in our pipeline and potential developments in the portfolio and we plan to continue to focus on delivering attractive returns to our stockholders. Thanks and we look forward to speaking with you again soon.

That concludes today’s call. You may now disconnect.