HgCapital Trust plc Regulatory News (HGT)

HgCapital Trust plc

FULL YEAR Results for the TWELVE months ended 31 DECEMBER 2015

London, 7 March 2016: HgCapital Trust plc ("the Trust"), which provides investors with a listed vehicle to invest in all private equity deals managed by HgCapital, today announces its full year results for the twelve months ended 31 December 2015.

Summary performance

1 Assuming reinvestment of all historic dividends

2015 key Highlights

§ NAV per share of £14.20, a total return of 14.1%.

§ Share price of £11.15, an increase of 8.6% on a total return basis.

§ 20-year annualised share price total return of 13.9% p.a. vs. 6.7% p.a. from the FTSE All-Share Index.

§ Proposed final dividend for the year of 40 pence per share, subject to shareholder approval.

§ Revenue growth of 10% and EBITDA growth of 12% across the top 20 buyout investments (87% of the portfolio value).

§ EV to EBITDA multiple of 14.5x and debt to EBITDA ratio of 4.6x for the top 20 buyout investments.

§ £65 million deployed on behalf of the Trust (including £10 million of co-investment) and £64 million of cash returned to the Trust.

year to date to 29 february 2016

§ NAV per share of £14.55, the increase principally reflects unrealised currency gains.

§ Share price has fallen to £9.82, alongside weakness and volatility in equity markets.

§ An estimated further £46 million, (including £8 million of co-investment) deployed on behalf of the Trust and a further £59 million has been returned to the Trust.

§ Pro-forma liquid resources after the completion of announced transactions and payment of the proposed dividend are £42 million (8% of NAV).

§ Pro-forma outstanding commitments of £123 million (23% of NAV).

Manager's Outlook

§ The portfolio continues to trade strongly, delivering double digit revenue and EBITDA. We remain confident that we have constructed a strong portfolio of sustainable growth companies, which offer good downside protection given current economic headwinds

§ Given increased ratings and a relatively buoyant market for realisations and debt, we are continuing our focus on returning capital to our investors.

§ In the current market environment, we think the clarity of our investment strategy confers a number of clear advantages to a disciplined buyer. Specifically, a continued focus on businesses that provide:

- a business-critical product or service;

- a fragmented loyal customer base; and

- strong contracted or recurring revenues.

§ The robust trading performance of the portfolio, combined with further opportunities in the medium term to realise investments will continue to drive value for shareholders.

Roger Mountford, Chairman of the Trust, commented:

"Healthy trading in the portfolio continues to drive strong performance in NAV growth, well ahead of the wider listed market".

- Ends -

The Trust's 2015 Annual Report and a video from the Manager to accompany the results are available to view at: http://www.hgcapitaltrust.com/.

For further details:

About HgCapital Trust plc

HgCapital Trust plc is an investment trust whose shares are listed on the London Stock Exchange. The Trust gives investors exposure, through a liquid vehicle, to a portfolio of high-growth private companies, managed by HgCapital, an experienced and well-resourced private equity firm with a long-term track record of delivering superior risk-adjusted returns for its investors.

For further details, see www.hgcapitaltrust.com and www.hgcapital.com

HgCapital Trust plc

Annual Report and Accounts

31 December 2015

The objective of the Trust is to provide shareholders with long-term returns in excess of the FTSE All-Share Index by investing predominantly in unquoted companies.

The Trust provides investors with exposure to a diversified portfolio of private equity investments, primarily in the UK and Continental Europe.

References in this announcement to HgCapital Trust plc have been abbreviated to 'HgCapital Trust' or the 'Trust'. HgCapital refers to the trading name of Hg Pooled Management Limited and HgCapital LLP. Hg Pooled Management Limited is the 'Manager'.

References in this announcement to 'Total Return' refer to a return where it is assumed that an investor has re-invested all historic dividends at the time when they were paid.

FINANCIAL HIGHLIGHTS

The annualised share price total return over the last twenty years has been +14%.

2015 PERFORMANCE

NET ASSET VALUE ('NAV') PER SHARE

The NAV per share at 31 December 2015 was £14.20, a total return over the year of: +14%

NET ASSETS

The total NAV of the Trust at 31 December 2015 was: £530m

SHARE PRICE

The share price at 31 December 2015 was £11.15, a total return for the year of: +9%

MARKET CAPITALISATION

The market capitalisation of the Trust at 31 December 2015 was: £416m

TOTAL ON-GOING CHARGES

For the year to 31 December 2015: 2.0%

DIVIDEND

Proposed final dividend, subject to shareholder approval: 40p

TOP 20 INVESTMENTS As at 31 December 2015 (87% of the portfolio value)

SALES GROWTH

Over the last twelve months

+10%

PROFIT GROWTH

Over the last twelve months

+12%

EV TO EBITDA MULTIPLE

14.5x

DEBT TO EBITDA RATIO

4.6x

INVESTMENT ACTIVITY IN 2015

CASH INVESTED ON BEHALF OF THE TRUST: £65m

CASH REALISED FOR THE BENEFIT OF THE TRUST: £64m

BALANCE SHEET ANALYSIS as at 31 December 2015

LIQUID RESOURCES

£40m

8% NAV

CASH INVESTED ON BEHALF OF THE TRUST

£160m

30% NAV

LONG-TERM PERFORMANCE RECORD

HISTORIC RECORD

HISTORICAL TOTAL RETURN PERFORMANCE

EXTRACT OF THE BOARD'S STRATEGIC REPORT

CHAIRMAN'S STATEMENT

Healthy trading in the portfolio continues to drive a strong performance in NAV growth, well ahead of the wider listed market.

NAV performance

During the year, the NAV per share grew by an impressive 14.1%, on a total return basis, to £14.20 at the year-end, with a particularly strong performance in the second half. This compared to a 1.0% return from the FTSE All-Share Index, a performance that largely reflected weakness in sectors in which the Trust has no direct exposure, such as banking, mining and oil.

There were three main contributory factors to the growth in NAV: the strong trading performance across the portfolio; realisations from the portfolio; and comparable company ratings.

The revenues of our top 20 investments (which represent 87% by value of the investment portfolio) continued to grow at 10%, in line with the average growth of 10% p.a. over the last three years. Aggregate growth in profits (EBITDA) was 12% in the year, a substantial increase over the 9% recorded in 2014;. Aggregate EBITDA margins of 23% on revenue show the high quality of the investment portfolio our Manager has assembled. This accelerated profit growth reflects the success of significant investment made into the cost base of several portfolio companies over recent years, which continues in several businesses, in order to build a platform for faster growth in later years.

It was a busy year for realisations, with four businesses realised or partially realised during the year, below, all at uplifts to the December 2014 valuations. In the case of SimonsVoss, Sporting Index, e-conomic and JLA, these realisations completed during 2015. The Manager also agreed the sale of TeamSystem and Casa Reha towards the end of the year and those sales completed early in 2016; the exit valuation of these investments was fully reflected in the NAV at December 2015.

The NAV performance was also supported by a rise in the multiples of businesses comparable to much of our portfolio, especially in the software sector. This was offset to a small degree by weakness against sterling of the foreign currencies in which a part of the portfolio is valued. Exchange rates between sterling and these currencies (principally the euro, US dollar and Norwegian kronor) continue to be volatile, due to weakness in the European economies. Nervousness around the referendum in the UK may potentially continue to generate volatility, affecting the NAV in the year ahead.

Share price performance

The share price delivered a total return of 8.6% in the year to 31 December 2015.

While the share price performance exceeded the return on the Index by a wide margin, it was nonetheless disappointing when compared with the growth in NAV in 2015; this led to a widening of the discount to NAV at which the Trust's shares traded in the market. Global uncertainties since the year-end, and the acute "risk-off" sentiment that has fed on these fears and stimulated further falls in share prices, have since the year-end further exacerbated the disconnect between the Trust's share price and the underlying NAV performance; the NAV at December is, of course, not known to the market until the publication of these results in March.

The graphs in the full Annual Report and Accounts show that, over the majority of periods, the Trust's shares have performed better than the All-Share Index and the LPX Index (that tracks the most actively traded private equity companies listed on a European exchange).

While many long-term investors can ride out these periods of adverse sentiment, the Board is very conscious that any period of material discount or constrained liquidity can have short-term implications for shareholders. The Board has to find the right balance between competing pressures: on the one hand, knowledge that, at the current price, the shares in the Trust represent good value against NAV and that buying-in shares would be accretive to NAV; on the other, our long-term strategic goals, responding to the expectations of investors over many years, to grow the Trust substantially and to make material commitments to each of our Manager's funds so as to keep the balancesheet as fully invested as we can, while sustaining our diversification across vintages. The Board continues to believe that, over time, discounts to NAV are minimised through delivering consistently good long-term returns, transparent reporting and the avoidance of adding risk at the Trust level.

Proposed dividend

In line with our policy on dividends, described in the full Annual Report and Accounts and in order to meet the income retention rules of an investment trust, the Board is seeking shareholders' approval for a dividend of 40 pence per share, compared with an ordinary dividend of 32 pence in 2014 (which was supplemented by a special dividend of 19 pence per share that reflected a one-off receipt from the sale of Visma in that year).

A table setting out the dividends paid by the Trust over the last ten years is included above. While the Trust's investment objective is expressed in terms of the total return to shareholders (including capital and dividends) the Board is also aware that many shareholders appreciate having some line of sight to the likely level of dividends they may expect. This means that, when necessary, the Board will consider declaring dividends above the level required to maintain investment trust status, to provide a degree of stability; in doing so, the Board will take into account the extent to which it needs to retain cash for investment.

Investment activity

2015 was a busy year across the portfolio with cash flow broadly balanced: £65 million was invested and £64 million returned. The Manager made five new buyout acquisitions, investing a total of £48 million on behalf of the Trust and an additional £10 million co-investment in Achilles to support its continuing development. These are described below and on the website.

Two portfolio companies were fully realised, raising £22 million in total. SimonsVoss was sold from our German industrial portfolio at a multiple of 1.5x original cost and the realisation of Sporting Index, a legacy investment from the Manager's consumer and leisure sector, represented the final sale from the MUST 4 fund vintage. In addition, more than £42 million was received by the Trust, mainly as a result of the recapitalisation of five highly cash-generative buyout investments; in one case, JLA, the Manager took advantage of a very attractive offer to sell a minority interest, banking with previous realisations 1.8x our original investment while retaining a 59% stake: overall, the combined return represents a multiple of 3.5x our original investment in a business that looks set to continue delivering attractive growth.

JLA was originally acquired in 2010 and is an example of a business where, even following substantial progress in developing the strategy, building a new management team and delivering excellent results, the Manager is confident that further value can be created over a holding period longer than the 4-5 years traditionally seen in private equity partnerships. A case study of our investment in JLA is set out below. Visma, IRIS and Achilles are other examples; in total these four holdings represent around 32% of the Trust's investment portfolio. However, should an offer come forward that reflects the continuing prospects of any of these businesses the Manager will sell (as it did with TeamSystem), or sell a stake in order to bank value and reduce risk, as we did previously with Visma and more recently with JLA. In both cases the Trust retained part of its interest in these very successful businesses and, in the case of the former, took up a co-investment that bears no fees or carried interest. As the Trust is a permanent pool of capital seeking to deliver long-term returns, the Board welcomes this more flexible approach.

In addition to these highly successful investments, there now remain in the portfolio more than a dozen buyouts, representing in aggregate more than a third of the investment portfolio, that are approaching the fourth anniversary of our original purchase: the next two years could see a steady flow of realisations from these investments, as we are confident that these businesses will attract wide interest from other investors and trade buyers.

The Manager has taken advantage of a window in debt markets and the strong cash generation of underlying investments to refinance a number of businesses with low cost financing on flexible terms: this has generated cash returns to the Trust from Zenith, JLA, IRIS, Sequel and Relay.

New investments are being made alongside the HgCapital 7 and Mercury funds. The Trust made a £200 million commitment to the HgCapital 7 Fund vintage in 2013 and a £60 million commitment to the Mercury Fund vintage in 2011. Following acquisitions made in early 2016, these are now almost 60% and 45% invested respectively. Both HgCapital 7 and Mercury have a good pipeline of potential investment opportunities.

The Trust now holds sixteen buyout investments across these two most recent vintages, representing with co-investments around 36% of the investment portfolio. The Manager's sector and portfolio teams are working hard to support the management of these and earlier investments to build value that will underpin shareholder returns for several years into the future.

Funding and commitments

The Trust has commitments to invest alongside three of the Manager's active funds, with the result that the pace of new investment is likely to remain high. At the year-end, the Trust's outstanding commitments totalled £160 million (reduced to £117 million since the year-end), with the majority of this likely to be drawn down over the next two years; at the year-end, the Trust held £40 million in liquid resources to fund these investments. The Trust also has the benefit of a bank facility enabling the Board to manage the balance sheet and remain more fully invested across the cycle of commitment-investment-realisation. Late last year we agreed with Lloyds to extend the £40 million facility until June 2019, with an increase to £80 million from 31 December 2016. This will provide additional funding during a period when our cash flow projections indicate that the balance sheet will be fully invested, pending the start of realisations from the HgCapital 7 vintage. It will also give the Board confidence when deciding on the level of commitment to make to the Manager's next buyout fund, a decision we anticipate making later this year. The quality of the underlying portfolio allows the Trust to borrow on an unsecured basis, creating further flexibility, should it be needed.

The relationship between commitments, liquid funds available and anticipated proceeds from selling portfolio companies is a strategic issue that the Board and Manager monitor closely. The Board is keen to keep the balance sheet as fully invested as possible, consistent with the commitment-investment-realisation cycle and taking account of changing market conditions for the purchase or sale of businesses. The Board is well aware that the Trust is a vehicle for shareholders to gain exposure to investments where the Manager's expertise in identifying businesses with potential for rapid growth in value can be expected to grow NAV faster than listed equity markets. The Board remains resolute to maintain this objective and to avoid "style drift" in our strategy and dilution to returns. When opportunities arise to take up co-investments (on which the Trust pays no fees or carried interest) in businesses we already hold, or by acquiring limited partnership interests in the Manager's funds, these are considered on their individual merits and after considering the Trust's available cash. The Trust currently has £39.8 million in co-investments across HgCapital funds.

Provision for carried interest

Given the strong performance of HgCapital 6 over the year, we have significantly increased the provision for carried interest. The alignment of interest between manager and investors is achieved in private equity through payment of a carried interest, which shares the profits of the fund between the investors and the Manager, provided that a minimum return to investors is achieved first. No carried interest becomes payable until the repayment to the Trust of its invested capital plus a preferred return of 8% p.a.; a 20% interest in realised and unrealised gains then becomes payable as carried interest. There is a period after the investors' preferred return has been achieved in which the right to receive 100% of profits is credited to the carried interest until it catches up with investors; thereafter, profits are shared 80% to investors and 20% to carried interest. Although no cash is paid to the Manager until, typically, six to eight years after the first investment is made, the Board believes it is appropriate to provide for this liability progressively, from the date when the preferred return is first achieved, by recognising the amount of carried interest that would be payable if the investments in the HgCapital 6 vintage were realised at fair value at the balance sheet date. The provision for this catch-up affected returns in 2015, but at 31 December 2015 full provision had been made for carried interest earned on cumulative gains in the HgCapital 6 portfolio. Accordingly, its catch-up has been satisfied and 80% of incremental gains (and 100% of gains on co-investments) will accrue to shareholders, with the carried interest limited to 20% of gains on investments under the Trust's original commitment to the HgCapital 6 vintage.

Reporting to shareholders

The Trust has continually sought to improve the scope and clarity of reporting to shareholders. We have done this not only to fulfil our duties to shareholders, but also in the belief that transparent reporting encourages a better understanding of listed private equity and of our business model, and thus may create broader and continuing demand for the Trust's shares, thereby helping to close the discount to NAV. We have continued to improve the clarity of our reporting in this year's annual report, with a view to this being better co-ordinated with our website, which for many investors and analysts is now the preferred source of information about the Trust. Although our website has won awards, we and the Manager decided that further enhancement was desirable; in 2015 we launched a new website, with more information, helping shareholders and potential investors to gain further insights into the investment opportunity we offer, in a site that is easier to navigate. The Board and Manager are always ready to consider suggestions for improving the scope and quality of our reporting.

Prospects

The Manager's outlook is set out below, and refers to the uncertainties presented by volatility in equity markets and concerns about macro-economic conditions. Despite this, the Manager remains confident that its focus on specific business models can identify businesses that offer strong risk-adjusted returns, even against the background of a weak global economy. The Manager's pipeline of potential acquisitions include a well-balanced range of opportunities across sectors and geographies. Three new buyout investments have already been announced this year and we anticipate further investment activity during 2016. In addition, the Manager is proactively planning exits for 2016 and beyond. The types of companies in which the Trust holds investments are attractive to a range of potential buyers and we would expect to see further realisations over the next year.

The Board recognises that, for many shareholders, their allocation to the Trust will probably be made from a broadly based equity portfolio. The Board has for some years set out its view that an allocation to private equity is appropriate in the investment portfolio of a patient, long-term investor. The Trust's performance relative to listed markets over longer periods remains strong because it gives exposure to a portfolio of businesses under active, hands-on management as they undergo rapid development or transformation. The total return to shareholders over the last twenty years that HgCapital has managed the Trust was 14% p.a., some 7% p.a. above the All-Share Index.£1,000 invested in the Trust twenty years ago would be worth £13,483 today, compared with £3,675 invested over the same period in the All-Share Index (assuming reinvestment of all historic dividends). In the low-interest rate environment of the last decade, the total return to shareholders has been 9.4% p.a., nearly 4% p.a. ahead of the Index.

Healthy trading in portfolio companies continues to drive strong NAV growth well ahead of the wider listed market, but returns to shareholders have been affected by volatility in equity markets. If macro-economic conditions continue to give rise to concern, then some of the businesses in the portfolio may be affected; however, it is our belief that the business models of the great majority of the companies in which we are invested mean they will continue to prosper even against economic headwinds. Given our confidence in the Manager, we believe there is currently an exceptional opportunity for long-term investors to acquire exposure to a portfolio of high quality, growth companies managed by HgCapital, which has an established and successful track record of creating value for shareholders.

Roger Mountford

Chairman

4 March 2016

Going concern

The Trust's business activities, together with the factors likely to affect its future development, performance and financial position are described in the Board's Strategic Report and the Manager's Review. The financial position of the Trust, its cash flows, liquidity and borrowing facilities are described in this Strategic Report. In addition, note 19 to the Financial Statements of the Annual Report describes the Trust's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. The Directors believe that the Trust is well placed to manage its business risks successfully. The Directors review cash flow projections regularly, including important assumptions as to future realisations and the rate at which funds will be deployed into new investments. The Directors have a reasonable expectation that the Trust will have adequate resources to continue in operational existence for the foreseeable future and be able to meet its outstanding commitments, as noted below. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.

Long-term viability statement

In accordance with provision C.2.2 of the 2014 revision of the UK Corporate Governance Code, the Directors have assessed the prospects of the Trust over a longer period than the twelve months required by the 'Going Concern' provision. The Board believes that the appropriate period over which to assess the Trust's viability may vary from year to year, depending on a number of factors, notably its outstanding investment commitments, which currently run until approximately 2018. However, the Board believes that it should assess the viability of the Trust over a minimum of five years and, accordingly, has elected this year to assess the Trust's viability over the five year period ending December 2020.

In their assessment, the Directors have considered the Trust's position with reference to the business model, the balance sheet, cash flow projections, availability of funding and the Trust's contractual commitments. This has been undertaken alongside a detailed review of the principal risks and uncertainties associated with the Trust including: performance; regulatory; operational; financial; liquidity; and borrowing, as detailed below. The Directors recognise the importance of its close working relationship with the Manager and regularly monitor and review the strategy, risks and associated internal controls of the Manager.

Based on this assessment, the Directors of the Trust confirm that they expect the Company will continue to operate and meets its liabilities, as they fall due, during the five years ending December 2020.

Performance

In the twelve months to 31 December 2015, the Trust's NAV per share increased by 14.1% on a total return basis. In comparison, the FTSE All-Share Index increased by 1.0%. The total return of the Trust's share price was 8.6%. All of the above assume the reinvestment of all historical dividends.

Key performance indicators

At each Board meeting the Directors conduct a detailed review of the portfolio and reviews trading results and ratios to understand the impact on the Trust of the trading performance of the individual portfolio holdings.

The KPIs used to measure the progress and performance of the Trust over time and which are comparable to those reported by other investment trusts include NAV per share, share price, total return per share, average monthly trading volumes and cash flow. Further information on KPIs and the Trust's progress against these can be found in the Chairman's statement above and the Manager's review below. The Directors recognise that it is in the long-term interest of shareholders that shares do not trade at a significant discount to the prevailing NAV and they monitor the Trust's discount or premium regularly.

PRINCIPAL RISKS AND UNCERTAINTIES

The key financial risks faced by the Trust are set out below and in note 19 to the financial statements.

The Board regularly reviews and agrees policies for managing each risk, as summarised below.

Performance

An inappropriate investment strategy may lead to poor performance. The Board is responsible for deciding the investment policy to fulfil the Trust's objectives and for monitoring the performance of the Manager. To help manage this risk, the Manager provides an explanation of all investment decisions and the rationale for the composition of the investment portfolio. The Manager monitors and maintains an adequate spread of investments, based on the diversification requirements inherent in the Trust's investment policy, in order to minimise the risks associated with particular countries or factors specific to particular sectors.

Regulatory

The Trust operates as an investment trust in accordance with Sections 1158 and 1159 of the Corporation Tax Act 2010 ('CTA'). As such, the Trust is exempt from corporation tax on capital gains realised from the sale of its investments, so the impact of losing investment trust status would be significant to the Trust. The Board believes the likelihood of this risk occurring is low. The Manager monitors investment movements, the level and type of forecast income and expenditure, and the amount of retained income (if any) to ensure that the provisions of Sections 1158 and 1159 of CTA are not breached. The Trust's compliance with the conditions for retaining investment trust status are reported to the Board at each meeting.

General changes in legislation, regulation or government policy could significantly influence the decisions of investors or impact upon the markets in which the Trust invests.

Operational

In common with most other investment trust companies, the Trust has no employees. The Trust therefore relies upon the services provided by third parties and is dependent upon the internal control systems of the Manager and the Trust's other service providers. The security of the Trust's assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depend on the effective operation of these systems. These are regularly tested and monitored and an internal control report, which includes an assessment of risks, together with procedures to mitigate such risks, is prepared by the Manager and reviewed by the Board and the Audit & Valuation Committee twice each year.

The Trust is also an Alternative Investment Fund ('AIF') for the purposes of the Alternative Investment Fund Managers Directive (Directive 2011/61/EU) ('AIFMD') and the Manager has been appointed as its Alternative Investment Fund Manager ('AIFM') for the purposes of the AIFMD.

The Board has considered an Assurance Report on Internal Controls (AAF 01/06) as prepared by the Manager, and independently reviewed by Deloitte LLP, for the year ended 31 December 2014. The Board will consider the 2015 Assurance Report when issued later in March 2016.

Financial

The Trust's investment activities expose it to a variety of financial risks that include valuation risk, liquidity risk, market price risk, credit risk, foreign exchange risk and interest rate risk. Further details are disclosed in note 19 to the financial statements, together with a summary of the policies for managing these risks.

Liquidity

The Trust, by the very nature of its investment objective, predominantly invests in unquoted companies, and liquidity in their securities can be constrained, potentially making the investments difficult to realise at, or near, the Directors' published valuation at any one point in time. The Manager has regard to the liquidity of the portfolio when making investment decisions, and the Trust manages its liquid resources to ensure sufficient cash is available to meet its contractual commitments.

In the event that, after providing for necessary expenditure, the Trust will have insufficient cash resources to fund a new investment, the Manager may exercise an opt-out in respect of new buyout investments alongside HgCapital 7. This helps the Trust to manage the risks associated with over-commitment.

At certain points in the investment cycle, the Trust may hold substantial amounts of cash awaiting investment, which it may invest in government or corporate securities, or in bank deposits, or in managed funds.

Borrowing

The Board and the Manager agree that prudent use of borrowing to fund acquisitions can increase diversification

within the portfolio and increase rates of return to shareholders. Businesses in the underlying portfolio are acquired with the benefit of bank borrowing at levels that can be serviced from the cash flows generated within that business. The Board does not currently see any advantage in using a further level of long-term borrowing by the Trust, as this would add risk without any certainty of enhancing returns, but anticipates making tactical use of bank borrowing from time to time, in order to remain more fully invested.

The Board keeps the management of the Trust's resources under frequent review and regularly considers long-term cash flow projections for the Trust and the use of gearing.

The Trust has extended and increased its multi-currency standby facility with Lloyds Bank plc to 30 June 2019, as described in the full Annual Report and Accounts. The Directors believe the borrowing facility gives the Board further flexibility in managing the Trust's resources, without adding undue risk. The facility was undrawn as at 31 December 2015.

OTHER MATTERS

Employees, human rights and community issues

The Board recognises the requirement under section 414C of the Companies Act 2006 to provide information about employees, human rights and community issues, including information in respect of any policies it has in relation to these matters and their effectiveness. These requirements do not apply to the Trust as it has no employees, all of the Directors are non-executive and it has outsourced all its functions to third party providers. The Trust has therefore not reported further in respect of these provisions.

Gender diversity

At the end of the year under review, the Board of Directors of the Trust comprised four men and one woman. The Board's policy is to make appointments to the Board solely on merit and, when selecting potential candidates for the Board, looks equally for the best qualified male and female candidates. The Manager has an equal opportunities policy and currently employs 71 men and 44 women on a permanent basis.

For and on behalf of the Board

Roger Mountford

Chairman of the Board

4 March 2016

THE MANAGER'S REVIEW

HgCapital is a private equity investor focused on the European mid-market.

Our business model combines deep sector specialisation with dedicated portfolio management support. HgCapital invests primarily in growth companies in expanding sectors via leveraged buyouts and in renewable energy-generating projects across Europe.

HgCapital's vision is to be the most sought after private equity manager in Europe, being a partner of choice for management teams and renewable power developers, so as to produce consistent superior returns for our clients and a rewarding environment for our staff.

References in this announcement to the 'portfolio', 'investments', 'companies' or 'businesses', refer to a number of buyout investments, held as:

• indirect investments by the Trust through its direct investments in fund limited partnerships (HGT LP, HGT 6 LP, HGT 7 LP and HgCapital Mercury D LP ('Hg Mercury')) of which the Trust is the sole limited partner;

• a secondary purchase of a direct interest in HgCapital's 6 fund through HgCapital 6 E LP ('Hg6E'), in which the Trust is a limited partner; and

• direct investments in renewable energy fund limited partnerships (Hg Renewable Power Partners LP ('RPP1') and HgCapital Renewable Power Partners 2 C LP ('RPP2')), of which the Trust is a limited partner.

INTRODUCTION TO THE MANAGER

HgCapital Trust plc is the largest client of HgCapital, which was appointed Manager in 1994. The Trust offers investors a liquid investment vehicle, through which they can obtain an exposure to our diversified portfolio of private equity investments with minimal administrative burdens, no long-term lock-up or minimum size of investment, and with the benefit of an independent board and associated corporate governance.

We have progressively invested in and strengthened the business over the years to establish a significant competitive advantage.

With over 100 staff in two investment offices in the UK and Germany, HgCapital has assets under management of over £5 billion serving a range of highly regarded institutional investors, including private and public pension funds, charitable endowments, insurance companies and family offices.

Hg Pooled Management Limited was authorised as an Alternative Investment Fund Manager with effect from 22 July 2014. For further details, refer to the full Annual Report and Accounts.

INVESTMENT STRATEGY

HgCapital primarily focuses on mid-market buyouts across the TMT, services and industrials sectors, with enterprise values ("EV") of between £80 million and £500 million and lower mid-market buyouts in the TMT sector with enterprise values between £20 million and £80 million.

These companies are small enough to provide opportunities for operational improvement, yet large enough to attract high quality management and to offer multiple exit options across market cycles.

We also invest in specialist infrastructure through renewable power generating projects across Western Europe.

These markets offer a high volume of companies with proven financial performance and strong market positions.

HgCapital's investment strategy provides investors with access to the substantial majority of private equity opportunities within our target size range and across our chosen geographies.

Clear investment criteria

HgCapital applies a rigorous approach when evaluating all investment opportunities. Our objective is to acquire the most attractive investments, rather than be constrained by a top-down asset allocation.

For buyouts, we seek companies across our sectors that share similar characteristics, such as: high levels of recurring or contracted revenues, a product or service that is business-critical but typically low spend; low customer concentration, high customer loyalty and low sensitivity to market cycles, often providing a platform for mergers and acquisitions ("M&A") opportunities. We believe that these companies have the potential for significant performance improvement.

We target situations where our specialist knowledge and skills can make a real difference in supporting management to grow industry champions.

Sector focus

HgCapital's sector teams combine the domain knowledge and expertise of a trade buyer - giving them enhanced credibility and the ability to make confident decisions - with the speed of execution and discipline of a financial investor leading to high conversion rates on deals.

This deep sector focus is channelled through a rigorous, research-based investment process; systematically identifying the most attractive growth sub-sectors and business models of the European mid-market; and through repeated investment in them, deal flow is optimised and returns improved.

Geographic focus

We focus our buyout investments primarily in the UK and Northern Europe.

The renewable energy investments are focused on the UK, Ireland, the Nordic region and Spain.

All investments are managed by specialist, dedicated sector and portfolio management teams located in London and Munich who work with a common purpose and culture, applying consistent processes.

Active portfolio management

Following each investment, our dedicated Portfolio Management Team works to enhance value by adopting clear strategies for growth and ultimately for realisation of the value created.

HgCapital's objective is to ensure that all businesses in which we invest maximise their long-term potential and reward all of their stakeholders. As a result, we typically invest as the lead, majority shareholder and appoint our executives to the companies' boards to assist each firm in applying active, results-oriented corporate governance.

Beyond the boardroom, HgCapital actively supports management teams to reach their potential through both hands-on support from the Portfolio Management Team as well as best practice sharing from many years of investing in similar business models. The Portfolio Management Team strives to foster a community amongst the management teams and some of the best industry thinkers to create cutting edge thinking across software, services and industrials, so they can remain industry champions.

OUR PEOPLE

HgCapital succeeds through superior insights into new and emerging dynamics in the economy. Developing these insights requires profound understanding of technology, markets and business practices. To this end we employ best-in-class talent to identify and execute investment opportunities and accelerate value realisation during ownership.

This specialisation - both in investment selection and portfolio management - requires significant resources and we have built a business employing over 110 staff, including more than 65 investment and other professionals. Investing primarily in European businesses, many of which have a global footprint, requires time and a deep understanding of local cultures. Accordingly, our people come from around the globe, including ten Western European countries. Our partners have, on average, nineteen years' experience in private equity management.

Positioning ourselves as a best in class recruiter

HgCapital's recruitment and selection processes are rigorous and agile, which, along with our vibrant culture, allow us to attract and hire the best talent in our industry. We place a strong emphasis on delivering an experience that will encourage the best candidates to join us.

Improving our ability to identify talent

We have strengthened our talent identification processes with a focus on outperformers and how we can best accelerate their development within the business. We believe that this is the basis of effective succession planning.

Employee engagement

Our people are highly motivated by, and committed to, delivering outstanding value to our clients and our portfolio company leadership teams. They are engaged by their work, our values and the opportunity to grow to their full potential within HgCapital.

Our values have evolved over many years and are embodied in our working culture and these are aligned with our performance review and compensation structures.

Developing future leaders

We are explicit about the behaviours we wish to encourage at HgCapital, and have aligned training, coaching, performance feedback and incentives to our values.

"With experienced people and an approach that focuses on delivering value, we believe we have the capability and commitment to deliver strong investment returns to investors."

A full description of HgCapital and our key staff is available at www.hgcapital.com

RESPONSIBLE INVESTING

Why Responsible Investing is important to us

For HgCapital, responsible investing means growing sustainable businesses which are great employers, have low environmental impacts and are good corporate citizens whilst generating superior risk adjusted returns for the millions of pensioners and savers who are invested with our clients.

Through our investments we look to create quality jobs in sectors with low carbon emissions and to create value through revenue growth over the long-term. We want the businesses we invest in to be genuinely focused on doing well for all stakeholders (employees, customers, suppliers and other partners as well as shareholders). We firmly believe that businesses that behave this way generate superior long term performance. 

OUR RESPONSIBLE INVESTING FRAMEWORK

We have created a framework for looking at the ways the businesses we invest in can address responsible investing and how we can help them and we use it to assess businesses both before investment and during our ownership.

GOVERNANCE

• Adopt anti-corruption and business ethics;

• Enjoy effective board structure and committees; and

• Use active risk management procedures.

WORKPLACE

• Be net job creators;

• Have a motivated workforce with minimum (but appropriate) turnover; and

• Comply with labour standards and health and safety.

MARKETPLACE

• Manage risks and relationships within the supply chain for reliable, stable, high quality supplies;

• Build customer satisfaction; and

• Understand and anticipate customer requirements for products with eco-efficiency or other sustainability benefits.

COMMUNITY

• Build strong links with the communities in which our businesses operate.

ENVIRONMENT

• Comply with relevant emissions and waste regulations;

• Adopt appropriate measurement standards for environmental impact; and

• Do more with less - reduce their impact on natural resources.

HOW WE INTEGRATE RESPONSIBLE INVESTING INTO OUR INVESTMENT PROCESS

Investment screening

• When considering potential new investments, we screen them against an exclusion list, which identifies the sectors, businesses and activities in which we will not invest.

• A red flag report identifies high level concerns arising from sectors, geographies and preliminary diligence results.

Diligence

• During diligence, we assess companies for compliance with relevant laws in relation to environmental, social, governance, health and safety, bribery and corruption issues.

• As part of this process, we carry out a specific review detailing risks and opportunities for improvement within our framework.

Ownership

• Our Portfolio Management Team works with companies to implement initiatives and new processes, and support them in realising their ambitions within and beyond our framework.

PRI - Principles for Responsible Investment

A signatory to the UNPRI since 2012.

At the 2015 Private Equity Awards, HgCapital won the Corporate Citizenship award, which recognises best practice in corporate social governance.

We actively collaborate with a number of organisations on Responsible Investment and share best practice in this area:

• Invest Europe

• IIGCC - Institutional Investors Group on Climate Change

• BVCA

• Green Investment Bank

RESPONSIBLE INVESTING: EXAMPLES

GOVERNANCE

Anti-corruption and business ethics

We require all companies in the portfolio to have anti-bribery policies in place within six months of acquisition.

Cyber Security

Eleven companies attended the HgCapital IT Directors Forum to share best practice on cyber security management.

WORKPLACE

4% p.a.1 Percentage organic growth in employment across HgCapital's portfolio companies in 2015

18,7381 People employed by HgCapital-backed companies (as at December 2015)

7931 Jobs created in HgCapital-backed companies in 2015

Zenith: Sunday Times Top 100

Zenith achieved a place in 'The Sunday Times Best Companies to Work For' list in the 'mid-sized' company category for the second year running, after its employees took part in an independent workplace engagement survey.

Visma: Junior Achievement Scheme

Visma is working to strengthen the link between education and industry through partnering with the Junior Achievement Scheme, a provider of education programmes for entrepreneurship and financial literacy.

COMMUNITY

QUNDIS: Plant-for-the-Planet

QUNDIS is supporting the Plant-for-the-Planet initiative, a charity which aims to plant 1,000 billion trees worldwide by 2020, to tackle climate change and reduce CO2. Plant-for-the-Planet encourages as many children as possible to fight for their future and currently has 30,000 children, between the ages of 9-12, who are Ambassadors for Climate Justice, with a goal of inspiring 1 million children to take up this role by 2020. As part of this initiative. in 2016, QUNDIS will be organising a Plant-for-the-Planet Academy, a forum which seeks to create awareness and engagement around environmental issues.

EidosMedia: The Pangea Foundation

EidosMedia has partnered with Pangea in India since 2012 on several projects, their collaboration has facilitated the creation of eight credit and savings co-operatives among women in the villages. Pangea also runs self-help groups and a microcredit programme for income generating activities.

MARKETPLACE

QUNDIS: Enabling energy efficiency

More than 6 million flats are equipped with QUNDIS Heat Cost Allocators or Heat Meters in more than 30 countries. If tenants can actively manage their consumption, the energy and heating costs are reduced by up to 20%. As a result, 4.5 million tons of CO2 are saved every year.

Achilles: Supply Chain Mapping

Achilles Supply Chain Mapping allows companies to gain visibility of their extended supply chains and view supplier information beyond first tier suppliers. It enables suppliers to demonstrate transparency and better engage with their value chains. This gives businesses:

• early warning about supply chain convergence, highlighting potential single points of failure;

• information to mitigate supply chain risk;

• awareness of the inter-dependencies in a supply chain; and

• insight into the possible impact of global events (e.g. natural disasters) on the supply chain.

Achilles' Supply Chain Mapping is being used by Nestlé as part of its responsible sourcing programme as a cost-effective, time-efficient and secure online process to trace their ingredients back to the farm or plantation.

ENVIRONMENT

Zenith - Carbon reduction

Average CO2 emissions for cars ordered on Zenith's salary sacrifice car schemes this year are just 99g/km (124.6g/km in 20142).

Zenith's salary sacrifice schemes incentivise the lowest emitting cars. Alternatively-fuelled cars now account for 12% of all Zenith's salary sacrifice car scheme orders (2% in 20142).

Ian Hughes, commercial director for Zenith, commented: "As the tax regime continues to incentivise low CO2 emitting cars and manufacturers are advancing their technology, through hybrids and electric cars in particular, we are continuing to see significant falls in emissions each year. Drivers and companies are also benefitting from improved fuel economy and lower fuel bills."

HgCapital - Renewable energy investors

300,000 - homes powered by renewable energy in Western Europe

We are the leading financial investor in on-shore wind farms in Scandinavia and one of Ireland's leading independent wind power producers. We also manage portfolios of large-scale solar photovoltaic plants and small-hydro power plants in Spain.

A full description of HgCapital's responsible investment policy is available at www.hgcapital.com

1Figures exclude Mainio Vire and Frösunda.

2Source: Society of Motor Manufacturers & Traders figures published in April 2015

SECTOR SPECIALISATION

TMT

TMT, as a sector, covers a broad range of markets. Driven by our deep sector approach, HgCapital's TMT team is focused on specific sub-sectors including: vertical market application software (particularly delivered via a Software as a Service ('SaaS') model); private electronic marketplaces; B2B media information/publishing; and telecoms/datacentre operators. 

Within these sub-sectors, we have invested in high quality businesses with diverse customer bases, which feature subscription-based business models generating predictable revenues and cash flows. The team regularly conducts top-down research within the wider sector, in order to continue to identify and assess further repeatable investment themes where we can invest time to develop proprietary expertise.

Our highly resourced, dedicated team means that we are well placed to identify, assess and complete investments quickly and thoroughly. We work to bring our experience and expertise to support management teams, aiming to have the knowledge of a trade buyer, coupled with the speed and focused delivery of a financial buyer. The team benefits from the depth and breadth of many years of TMT private equity experience, and is complemented by an extensive network of industry experts and advisers.

Given the breadth of opportunity in European TMT, HgCapital is currently investing in the sector from two funds. The HgCapital 7 buyout fund targets businesses with enterprise values between £80 million and £500 million. The HgCapital Mercury Fund targets smaller buyouts (enterprise values between £20 million and £80 million) but in exactly the same TMT sub-sectors. Investing two funds across the sector allows us to bring significant team resource to bear and provides a very comprehensive resource for the management teams that we support.

Services

The Services sector is a large and wide-ranging segment which is traditionally split into 'horizontal' business models such as: business process outsourcing; facilities management; or testing and inspection provision. In contrast, HgCapital's Services Team's investment approach concentrates much more on specific end markets or customer segments, which we believe lead to attractive business model characteristics. We have then invested time to develop a strong understanding of the industry dynamics through top-down research or existing investments, identifying service companies that sell into those specific end markets.

Within the Services sector, the investment themes that have attracted us have typically featured large fragmented small and medium-sized enterprise ("SME") customer bases, long-term and stable customer relationships, and businesses which provide business-critical services, preferably on a repeat or recurrent basis. We target businesses with leading positions within a niche, typically reflected by strong margins, and we aim to grow and scale these businesses, either organically within existing markets (selling into their customer bases) or through acquisition.

Existing investments include companies that serve a range of industries including commercial laundry and catering equipment distribution, automotive leasing, international business expansion services and distribution of insurance, all of which have common characteristics including stable and diverse customer bases; critical, repeated use products; and a strong value proposition with a high level of customer service.

Industrials

HgCapital's Industrials Team is focused on partnering with growth businesses within Europe and in particular in the German market, which is characterised by a large number of highly successful, family-owned businesses (the "Mittelstand"). We have earned a reputation as a preferred partner for many Mittelstand companies, as a result of supporting the management of a number of these hidden champions to scale into international businesses. The Industrials Team, based in Munich, is located in the heart of an economic zone containing numerous high-quality, cutting-edge, technology-led industrial businesses, many of which have strong national or international positions in a specific niche market, with the opportunity to scale further. Our thematic research within this sector has been concentrated over many years on the characteristics that define a strong industrial investment. As a result, we have developed certain themes that we regard as particularly attractive: Aftermarket companies; product champions/niche manufacturers; c-part specialists; and smart distribution models.

Those themes are overlaid with specific industrial sub-sectors where we have a strong understanding.

Renewable Energy

In 2004, HgCapital established a dedicated renewable energy investment team and, after a period of research, raised its first dedicated fund in 2006. We invest in utility-scale renewable energy projects in Western Europe using proven technologies such as onshore wind, solar and hydro, adopting an infrastructure fund investment approach. We focus on creating industrial scale renewable energy platforms under our control, seeking to aggregate a number of assets and to deliver economies of scale.

We believe this strategy presents an attractive investment opportunity, which is estimated to require significant capital investment over the medium-term. Technological advances and the increased scale of the industry have increased the cost competitiveness of renewable energy, as well as providing favourable inflation linkage and a hedge against fossil fuel costs. HgCapital's renewable energy investment theme is focused on the most efficient technologies and best resourced sites, requiring the least regulatory support and resulting in the lowest costs for the consumer.

Investment is at an industrial scale affording the benefits of this in procurement, attracting higher quality management teams, and creating strategic value. HgCapital is one of the leading owners of onshore wind farms in Scandinavia, has investments in Scandinavian district heating, is one of the largest financial investors in Irish onshore wind, and has a substantial portfolio of ground-mounted solar and small hydroelectricity projects in Spain.

In addition to the sectors noted above, we look to use our long-term investment experience in the healthcare sector to identify sub-sectors within Services and TMT that take advantage of technological change, a key driver of growth within the European healthcare sector.

CASE STUDY - JLA

Website: www.jla.com

Sector: Services

Geography: UK

"The active support from HgCapital has accelerated our growth through numerous value-added projects and M&A. We look forward to our continued partnership driving future value growth."

Stephen Baxter, CEO of JLA

Business description

Founded in Yorkshire in 1973, JLA is one of the UK's leading providers of commercial laundry and catering equipment on a contracted basis. JLA operates across a diverse sector base offering customers a fully inclusive machine supply and service proposition under the name of Total Care. In addition, the company provides customers with supplementary products and services (e.g. service contracts, compliance and safety service solutions, equipment sales and consumables). The company's services are typically provided under eight-year contracts to customers who require laundry or catering equipment as a "mission-critical" part of their operations.

The investment

JLA had been known to HgCapital for some time. Originally described as a 'washing machine distributor', JLA had enjoyed strong operating performance, including sustained organic growth through the period 2007-2009 and displayed many of the business model characteristics that we look for. The team worked hard with the founder and the management team to complete the acquisition in March 2010, valuing the company at an enterprise value of £150 million.

The investment case

JLA has a diverse customer base that considers laundry and catering as a mission-critical part of their day-to-day business. With a high proportion of customers on long-term contracts (representing a high level of revenues and a greater proportion of profits), the company has an attractive business model, characterised by a high level of recurring revenues and future revenue visibility.

We saw the opportunity to grow the core Total Care division through the professionalisation of sales and marketing. Whilst initially focusing on the laundry division, there were good prospects to expand JLA's services across other industry verticals and increase regional coverage.

Investment return multiple of cost: 3.5x

Gross IRR: 25% p.a.

How HgCapital has supported JLA

We worked alongside management to increase the benefit of selling new products and services through JLA's existing sales force and service network.

A number of projects have been initiated covering strategic planning, customer retention and pricing. In addition, management has been strengthened and ten small bolt-on acquisitions of smaller laundry and kitchen equipment companies have been completed, all funded out of free cash flow.

In 2011, the company introduced a detergent range to accompany the machinery it leased, and in 2012, expanded its white goods reach, sourcing and leasing equipment such as dishwashers. This expanded offering continued into other catering equipment such as prime cooking and refrigeration. Catering equipment now represents a third of JLA's overall revenues.

The business now has a dedicated M&A team and the pipeline for further acquisitions is under development. We plan to continue to make further bolt-on acquisitions, both in the laundry and catering markets.

Performance improvement

JLA's performance has been consistently strong with organic sales growth of 7-9% year-on-year. Sales doubled between 2009 and 2015 to £102 million. Over the same period, EBITDA has increased from £17 million to £28 million, a compound annual growth rate of 12%.

Partial exit and recapitalisation

In December 2015 HgCapital completed the recapitalisation and the sale of a minority interest in JLA to a group of institutional investors, returning £116 million to HgCapital 6 clients, including £17.3 million of cash proceeds to the Trust, and retained 59% of the equity in the company. These transactions, together with previous realisations, took the total cash return to 1.8x the original investment. The combined return represents an investment multiple of 3.5x over JLA's holding period to date.

OVERVIEW OF THE YEAR

NET ASSET VALUE (NAV)

During the year, the NAV of the Trust increased by £53.1 million, from £476.9 million to £530.0 million at 31 December 2015.

ATTRIBUTION ANALYSIS OF CURRENT MOVEMENTS IN NAV

ANALYSIS OF NAV MOVEMENTS

For the year ended 31 December 2015

There were a number of underlying factors contributing to the above increase in the NAV. Positive impacts on the NAV were the revaluation of the unquoted portfolio (+£91.6 million) and uplifts on the realisation of investments compared with their carrying value at the start of the year (+£13.4 million). Reductions in the NAV were caused by: the payment of a dividend to shareholders (-£11.9 million); the Manager's remuneration (-£8.2 million and a -£28.1 million increase in the provision for future carried interest); and operating expenditure and taxation (-£3.9 million).

During the year, the value of the unrealised portfolio increased by £106.5 million, excluding the provision for carried interest. The majority of the increase (£70.3 million) relates to increases in profits in the underlying portfolio. The other main driver of the increase in unrealised value came from improved ratings, reflecting the positive re-rating for comparable businesses (both listed and M&A), most notably in our software businesses.

These were partially offset by decreases driven by an increase in net debt (-£25.9 million) resulting from refinancing that returned cash to the Trust, and unfavourable foreign exchange movements (-£10.2 million).

TOP 20 PORTFOLIO TRADING PERFORMANCE as at 31 December 2015

The top 20 buyout investments (representing 87% of the total portfolio by value) have delivered strong sales growth of 10% and EBITDA growth of 12% over the last twelve months ('LTM').

We are pleased with the performance of the portfolio and, in particular, some of the larger companies. Profits across the portfolio have grown at a faster rate than revenues as the investment made into the cost base of a number of our portfolio companies in previous periods bears fruit. Over the past three years the top 20 have grown consistently at an average of 10% p.a. for both sales and EBITDA. The business model characteristics of our portfolio companies give us confidence that this level of growth can be achieved consistently going forward.

We continue to see very robust trading performance from Visma, IRIS, TeamSystem and P&I in our TMT portfolio and Parts Alliance, Radius, JLA and Zenith in the Services sector. QUNDIS, a German based industrial company, has also seen improved operational performance in 2015.

In total, 61% of the top 20 saw double-digit earnings growth over 2015.

We continue to invest materially into the cost base of a number of our portfolio companies, including Ullink, Achilles, Sequel, The Foundry and Intelliflo to: further strengthen management; improve sales and marketing capabilities; and make other operational improvements, consequently depressing short-term EBITDA and valuations. We expect to see the benefit of this investment driving profitability in future years.

Similarly, many of our TMT companies, including IRIS, Visma and P&I, are focused on investing in a shift towards 'cloud-based' recurring revenues, temporarily holding back earnings but building businesses that should achieve a premium rating at exit.

We fundamentally believe that the benefit of investment into our portfolio companies will be long-term, high, sustainable growth, as we have delivered before, and that this will position them well for future exits.

VALUATION AND GEARING ANALYSIS as at 31 December 2015

The portfolio's valuation policy is applied consistently, using the IPEV Valuation Guidelines. Our valuation of each company has produced an average EBITDA multiple for the top 20 buyout investments of 14.5x.

We continue to take a considered and prudent approach in determining the level of maintainable earnings to use in each investment valuation. The majority of the portfolio is valued using the LTM earnings to 30 November 2015, unless we have anticipated that the outlook for the full current financial year is likely to be lower, in which case we have used forecast earnings.

In selecting an appropriate multiple to apply to a company's earnings, we look at a basket of comparable companies, primarily from the quoted sector, but where relevant and recent, we will also use M&A data.

The average valuation multiple has risen over the year due to both increased comparable business ratings and the continued shift in the mix of the portfolio to higher growth businesses, in particular in the TMT sector where we hold a number of companies with substantial opportunities to grow their SaaS business.

2015 saw public markets stagnate, with many of their constituent sectors significantly decreasing in value. The listed software sub-sector, however, grew strongly over the year. This was further underpinned by M&A activity; for example, our sale of TeamSystem, which was announced in December 2015, at a multiple in excess of 17x EBITDA.

Our portfolio companies make appropriate use of gearing, with an average for the top 20 of 4.6x LTM EBITDA. Many of our businesses have highly predictable, strong earnings growth and are highly cash generative, enabling us to use debt to gear our returns.

Over the past twelve months we have taken advantage of the buoyant debt markets providing low cost financing on flexible terms for businesses with these characteristics. During this period, we recapitalised Zenith, IRIS, JLA, Sequel and Relay, returning £32.5 million to the Trust and subsequently, P&I in the first quarter of 2016, returning a further £12.6 million.

OUTSTANDING COMMITMENTS OF THE TRUST

2015 ended with liquid resources of £40.3 million, supported by an undrawn bank facility of £40.0 million. Outstanding commitments as at 31 December 2015 were £159.6 million as listed below. We anticipate that the majority of these outstanding commitments will be drawn down over the next two to three years and are likely to be partly financed by future cash flows from portfolio realisations. The Trust additionally has the benefit of an opt-out provision in its commitment to invest alongside HgCapital 7, so that it can opt out of new investments without penalty, should it not have the cash available to invest.

Sector by value1 of primary buyout portfolio

66% TMT

23% Services

6% Industrials

5% Healthcare

Geographic spread by value1 of primary buyout portfolio

54% UK

17% Germany

15% Nordic Region

11% Italy

2% France

1% Switzerland

Investment vintage by value1 of primary buyout portfolio

11% 2015

19% 2014

20% 2013

6% 2012

15% 2011

29% pre 20112

Deal type by value1

91% Buyout

6% Buyout - small-cap

3% Renewable Energy

1Excluding carried interest provision

2Of which, 11% was sold after the year end

INVESTMENTS IN 2015

Over the course of the year, £521 million was invested on behalf of our clients, with the Trust's share being £65 million.

The vast majority of our investments are generated by establishing and developing relationships with companies in our chosen segments over the longer-term and typically pursuing opportunities where we have a strong relationship with a founder or management team. By doing this, we believe that we can invest in the very best businesses within our chosen sub-sectors.

We continue to look for businesses that share similar underlying business model characteristics such as: high levels of recurring revenues; a product or service that is business-critical but typically low spend; low customer concentration; and low sensitivity to market cycles. This is a theme that runs through many of our new investments and we believe that these types of companies will remain in high demand.

INVESTMENTS

The Foundry

The Foundry is a leading provider of award-winning software used globally by creative professionals. We have known the company for several years and this investment shares many of the characteristics that we look for, providing an excellent platform for growth across a diversified client base, with a commitment to innovation.

A-Plan

A-Plan is a leading UK insurance broker. The company is a strong fit with our investment strategy, through its high level of recurring revenues, strong customer loyalty and sector-leading customer advocacy, achieved through excellent service.

EidosMedia

EidosMedia is a leading global provider of digital publishing solutions based in Milan. The investment from HgCapital will enable EidosMedia to consolidate its position in digital publishing solutions within the news media and financial sectors, while continuing to work on a new generation of products that offer unprecedented power and flexibility in digital content management and delivery.

Achilles

In September, the Trust made a further investment into Achilles, a UK-headquartered platform providing a cloud-based service enabling networks of buyers to collect and validate supplier information. The Trust's investment is to support the further growth of Achilles and as a co-investment is free of fees and carried interest.

Eucon

Eucon is a leading provider of automotive parts pricing data and insurance claims management services based in Germany. This investment results from considerable sector work undertaken in recent years in automotive information and software and follows prior investments in the automotive space including: Epyx; Parts Alliance; and Zenith.

Zitcom

Zitcom and ScanNet are two leading Danish hosting and cloud solutions providers. This investment is a continuation of HgCapital's considerable experience in SME technology businesses in the wider Nordic region. The acquisition by Zitcom of ScanNet completed post year-end.

INVESTMENTS SINCE THE YEAR-END

An estimated further £46 million invested on behalf of the Trust since 31 December 2015

Sovos Compliance

Sovos Compliance is a leading global provider of regulatory tax compliance software, headquartered in Boston, USA. Having tracked the company for several years, HgCapital assumed majority ownership from Vista Equity Partners, which has retained a significant minority stake in the company, working alongside the management team. HgCapital will support Sovos in its European expansion.

The Trust has co-invested alongside its core HgCapital 7 participation.

Citation

Citation is one of the UK's leading providers of Health & Safety, HR, Employment Law and ISO services to SMEs. The Services Team has followed the company for several years and continues their strategy of investing leading technology-enabled professional services providers in regulatory-driven and fast growing niches.

Kinapse

Kinapse is a UK-headquartered leading global provider of advisory, capability building and operational services to the life sciences industries, focused on regulatory compliance and quality. This fits with HgCapital's strategy of investing in regulatory-driven services.

ScanNet

The ScanNet acquisition was made alongside Zitcom (described above). The combination of these two businesses will create a business with a leading position in the managed hosting markets for SMEs in Denmark.

Further details on the top 20 largest investments as at 31 December 2015 can be found on pages 40 to 59 in the full Annual Report and Accounts.

REALISATIONS IN 2015

Over the course of the year, HgCapital has returned a total of £395 million to its clients, including £64 million to the Trust.

It was a very active year for realisations. We have made several references to 'frothy' markets over the year and this has helped inform our approach to selling investments whilst also carefully considering our appetite for selling versus holding onto businesses for longer, as demonstrated by the sale of a minority stake in JLA, which completed in December 2015. We have also taken advantage of buoyant debt markets over 2015 by recapitalising investments where we have good visibility of their future earnings, returning significant cash proceeds to our clients, including the Trust, and we will continue to assess further opportunities here.

FULL EXITS

SimonsVoss

SimonsVoss, a European leader in innovative electronic battery-powered locking and access control systems headquartered in Germany, was sold to Allegion plc, a listed global security products and solutions provider. The Trust realised cash proceeds representing an uplift of 3% over the carrying value of the Trust at 31 December 2014.

Sporting Index

Sporting Index is a UK-based premier sports spread betting and outsourced sports trading services company. This company was one of our legacy Consumer and Leisure investments and we worked hard to recover value. The sale was made at an uplift of 47% over its carrying value at 31 December 2014.

PARTIAL EXIT

e-conomic

In an all share transaction, e-conomic, a Scandinavian SaaS accounting solutions provider, was sold to Visma, a leading provider of business software and outsourcing services to SMEs in the Nordic region and in which the Trust already holds a substantial interest. The Trust has retained a stake in e-conomic's international business and Debitoor.

PARTIAL EXIT AND RECAPITALISATION

JLA

HgCapital completed the sale of a minority interest to a group of institutional investors and the recapitalisation of JLA, a leading UK provider of business-critical asset maintenance services to SMEs. These transactions, together with previous realisations, returned in total 1.8x of the original investment, with HgCapital retaining about 59% of the equity in the company. The combined return represents an investment multiple of 3.5x.

RECAPITALISATIONS

Zenith

In April, we recapitalised Zenith, on the back of its strong trading performance, just over a year into our ownership of the business. The cash realised on behalf of the Trust represented a return to date of 45% on the original investment made.

IRIS

IRIS, a leading UK provider of business-critical software and services to the UK accountancy market, was recapitalised over the period with the cash proceeds to the Trust representing a 46% return on the original investment made, a portion of which was received in 2016.

Sequel Business Solutions

In November, the Mercury Team completed the recapitalisation of Sequel, the leading provider of applications software to the Lloyd's of London insurance market. The cash realised on behalf of the Trust represented a return to date of 49% on the original investment.

Relay Software

The recapitalisation of Relay, a leading provider of software and connectivity to insurance brokers and underwriters in Ireland, represented a return to date of 25% on the original investment.

REALISATIONS SINCE THE YEAR-END

An estimated further £59 million returned to the Trust post 31 December 2015

TeamSystem

TeamSystem, a leading provider of business-critical, regulatory driven software products to accountants, HR professionals and SMEs in Italy, was sold to Hellman & Friedman LLC. On completion, this transaction resulted in an uplift of 34% (£11.4 million) over the carrying value of the Trust at 31 December 2014. The sale proceeds are fully reflected in the December 2015 valuation.

P&I

The Munich TMT Team have completed the recapitalisation of P&I with cash proceeds realised on behalf of the

Trust. This represents a 60% return on the original investment made in December 2013.

Casa Reha

Casa Reha, a leading private German provider of elderly care services, was sold to Euronext-listed Korian. The Trust's cash proceeds on completion represent an uplift of 104% (£4.0 million) over the carrying value of the Trust at 31 December 2014. The sale proceeds are fully reflected in the December 2015 valuation.

Further detail on the top 20 largest investments as at 31 December 2015 can be found in the full Annual Report and Accounts.

SUMMARY OF INVESTMENT AND REALISATION ACTIVITY

1 The numbers in this table relate to the Trust's share of underlying transactions.

2 Includes gross revenue received during the year-ended 31 December 2015.

OUTLOOK

2015 was a busy and productive year at HgCapital. In last year's results we commented on our confidence in the portfolio and this has been borne out with strong trading performance in the portfolio during the year and a number of realisations over the period for good value. We believe both trends are set to continue.

The latter part of 2015 saw the signed exits of both Casa Reha and TeamSystem (both of which completed in 2016) alongside the partial realisation of JLA; all at attractive uplifts to the December 2014 carrying value. During the year we completed a total of four realisations and five recapitalisations across the entire HgCapital portfolio and we see a number of further opportunities to return capital during 2016.

Given heightened ratings and a relatively buoyant market for realisations, we are continuing our focus on returning capital to our investors. To this end, a reasonable amount of thought and work is also going into our exit planning for the rest of 2016 and beyond.

The start to 2016 has seen an extended period of equity market volatility. This, combined with continued speculation on the future growth of China and renewed concerns in relation to the state of the macro-economic environment, has led to a sense of broader uncertainty ahead of the remainder of 2016.

In this type of market environment, we think the clarity of our investment strategy confers a number of clear advantages to a disciplined buyer. Specifically, we continue to focus on businesses that provide a business-critical product or service, to a fragmented customer base, benefiting from strong contracted or recurring revenues; this should enable us to identify opportunities with the appropriate business model to generate strong risk-adjusted returns for our clients. Companies with these characteristics will eventually provide attractive opportunities for sale to both trade and financial buyers.

Four of our most recent investments, EidosMedia, Sovos Compliance, Kinapse and Citation, are all very clearly differentiated by their predictability and resilience across market cycles. We remain disciplined in terms of the sourcing of our new investments; deliberately and pro-actively pursuing those opportunities where we have built many years of knowledge of the business and a strong relationship with a founder or management team. Citation, for example, was closely tracked by our Services Team for over four years prior to our acquisition of the business in February 2016. Following this investment, HgCapital 7 is almost 60% invested. We will continue to build our medium-term pipeline over the next six months.

The portfolio has continued to trade strongly, delivering double digit revenue and EBITDA growth over the course of the last twelve months. As we enter a period of potential economic and political uncertainty, it is worth remembering that HgCapital's portfolio grew revenues and profits every year throughout the last financial crisis between 2008 and 2010: we believe that the current portfolio is even stronger.

"The strong trading performance of our portfolio companies, combined with further opportunities in the medium term to realise investments at attractive valuations, will continue to drive value for shareholders."

Nic Humphries, Managing Partner of HgCapital

OVERVIEW OF THE UNDERLYING INVESTMENTS HELD THROUGH FUND LIMITED PARTNERSHIPS

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2014 and 2015 but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies, and those for 2015 will be delivered in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors' report can be found in the Company's full Annual Report and Accounts at www.hgcapitaltrust.co.uk

FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS

1. Principal activity

The principal activity of the Trust is that of an investment trust company. The Trust is an investment company as defined by Section 833 of the Companies Act 2006 and an investment trust within the meaning of Sections 1158 and 1159 of the Corporation Tax Act 2010 ('CTA 2010'), and is registered as a public company in England and Wales under number 1525583 with its registered office at 2 More London Riverside, London SE1 2AP.

2. Basis of preparation

The financial statements have been prepared under the historical cost convention, except for the revaluation of financial instruments at fair value as permitted by the Companies Act 2006, and in accordance with applicable UK law and UK Accounting Standards ('UK GAAP'), including Financial Reporting Standard 102 - 'The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland' ('FRS 102') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('SORP'), dated November 2014. All of the Trust's operations are of a continuing nature.

The Trust has considerable financial resources and, as a consequence, the Directors believe that the Trust is well placed to manage its business risks. After making enquiries, the Directors have a reasonable expectation that the Trust will have adequate resources to continue in operational existence for the foreseeable future.

Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

The same accounting policies, presentation and methods of computation are followed in these financial statements as applied in the Trust's previous annual audited report and accounts, however, certain presentational amendments have been made to comply with the requirements of FRS 102.

3. Organisational structure, manager arrangements and accounting policies

Partnerships where the Trust is the sole limited partner

The Trust entered into four separate partnership agreements with general and founder partners in May 2003 (subsequently revised in January 2009), January 2009, July 2011 and March 2013; at each point an investment holding limited partnership was established to carry on the business of an investor, with the Trust being the sole limited partner in these entities.

The purpose of these partnerships, HGT LP, HGT 6 LP, HgCapital Mercury D LP and HGT 7 LP (together the 'primary buyout funds') is to hold all the Trust's investments in primary buyouts. Under the partnership agreements, the Trust made capital commitments into the primary buyout funds, with the result that the Trust now holds direct investments in the primary buyout funds and an indirect investment in the fixed asset investments that are held by these funds, as it is the sole limited partner. These direct investments are included under fixed asset investments on the balance sheet and in the investment portfolio above. The underlying investments that are held indirectly are included in the overview of investments above.

Partnerships where the Trust is a minority limited partner

In July 2011, the Trust acquired a direct secondary investment in HgCapital 6 E LP ('Hg6E LP'), one of the partnerships that comprise the HgCapital 6 Fund, in which the Trust is now a limited partner alongside other limited partners. This is a direct investment in the HgCapital 6 E LP Fund, as shown on the balance sheet and in the investment portfolio above.

The Trust also entered into partnership agreements with the purpose of investing in renewable energy projects by making capital commitments alongside other limited partners in Hg Renewable Power Partners LP ('Hg RPP LP') and HgCapital Renewable Power Partners 2 C LP ('Hg RPP2 LP') (together the 'renewable funds'). These are direct investments in the renewable funds, as shown on the balance sheet and in the investment portfolio above.

Priority profit share and other operating expenses, payable by partnerships in which the Trust is a minority limited partner, are recognised as unrealised losses in the capital return section of the income statement and are not separately disclosed within other expenses.

Priority profit share and carried interest under the primary buyout limited partnership agreements

Under the terms of the primary buyout fund limited partnership agreements ('LPAs'), each general partner (see note 23) is entitled to appropriate, as a first charge on the net income of the funds, an amount equivalent to its priority profit share ('PPS'). The Trust is entitled to net income from the funds, after payment of the PPS.

In years in which these funds have not yet earned sufficient net income to satisfy the PPS, the entitlement is carried forward to the following years. The PPS is payable quarterly in advance, even if insufficient net income has been earned. Where the cash amount paid exceeds the net income, an interest free loan is advanced to the general partner by these primary buyout funds, which is funded via a loan from the Trust. Such loan is only recoverable from the general partner by an appropriation of net income; until net income is earned, no value is attributed to this loan.

Furthermore, under the primary buyout funds' LPAs, each founder partner (see note 23) is entitled to a carried interest distribution once certain preferred returns are met. The LPAs stipulate that the primary buyout funds' capital gains (or net income), after payment of the carried interest, are distributed to the Trust.

Accordingly, the Trust's entitlement to net income and net capital gains is shown in the appropriate lines of the income statement. Notes 4, 5, 7, 12, 14, 16 and 17 to the financial statements and the cash flow statement disclose the gross income and gross capital gains of the primary buyout funds (including the associated cash flows) and also reflect the proportion of net income and capital gains in the buyout funds that have been paid to the general partner as its PPS and to the founder partner as carried interest, where applicable.

The PPS paid from net income is charged to the revenue account in the income statement, whereas PPS paid as an interest-free loan, if any, is charged as an unrealised depreciation to the capital return on the income statement.

The carried interest payments made from net income and capital gains are charged to the revenue and capital account respectively on the income statement.

Investment income and interest receivable

As stated above, all income that is recognised by the primary buyout funds, net of PPS, is attributed to the Trust. The Trust will recognise such net income and reflect this as income in its financial statements, once recognised in the buyout funds. Income from HgCapital 6 E LP and the renewable funds would normally consist of income distributions and these distributions are recognised as income in the financial statements of the Trust when the right to such distribution is established.

The accounting policies below apply to the recognition of income by the primary buyout funds.

Interest income on non-equity shares and fixed income securities is recognised on a time apportionment basis so as to reflect the effective yield when it is probable that it will be realised. Premiums paid or discounts received with the acquisition of government securities are amortised over the remaining period up to the maturity date and are recognised in interest income on government securities. Dividends receivable on unlisted equity shares where there is no ex-dividend date and on non-equity shares are brought into account when the Trust's right to receive payment is established.

Income from listed equity investments, including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex-dividend. Where the Trust elects to receive dividends in the form of additional shares rather than cash dividends, the equivalent of the cash dividend is recognised as the income in the revenue account and any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital reserve - realised.

Expenses

All expenses are accounted for on an accruals basis. All administrative expenses are charged wholly to the revenue account.

Dividends

Dividend distributions to shareholders are recognised as a liability in the year that they are approved unconditionally.

Current and other non-current assets

Financial assets and financial liabilities are recognised in the Trust's balance sheet when the Trust becomes a party to the contractual provisions of the instrument. Trade receivables are stated at nominal value. Appropriate allowances for estimated irrecoverable amounts are recognised in the revenue return on the income statement.

Government securities are short-term investments made in fixed rate UK government securities. Cash comprises current accounts held with banks.

Foreign currency

All transactions in foreign currencies are translated into sterling at the rates of exchange ruling at the dates of such transactions and the resulting exchange differences are taken to the capital reserve - realised. Foreign currency assets and liabilities at the balance sheet date are translated into sterling at the exchange rates ruling at that date and the resulting exchange differences are taken to the capital reserve - unrealised.

Taxation

Income taxes represent the sum of the tax currently payable, withholding taxes suffered and deferred tax. Tax is charged or credited in the income statement. Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future, or the right to pay less, have occurred at the balance sheet date. This is subject to deferred assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences between the Trust's taxable profits and its results, as stated in the financial statements, which are capable of reversal in subsequent periods.

Investments

The general principle applied is that investments should be reported at 'fair value' in accordance with Financial Instruments: Recognition and Measurement ('IAS 39') and the International Private Equity and Venture Capital ('IPEV') Valuation Guidelines, December 2012 edition. Where relevant, the Trust applies the policies stated below to the investments held by HGT LP, HGT 6 LP, HGT 7 LP and HgCapital Mercury D LP, in order to determine the fair value of its investments in these limited partnerships.

Purchases of investments are recognised on a trade date basis. Sales of investments held through the primary buyout funds are recognised at the trade date of the disposal. Sales from the investments in HgCapital 6 E LP and the renewable energy funds would normally consist of capital distributions and these distributions are recognised as a realisation when the right to such distribution is established. Proceeds are measured at fair value, which is regarded as the proceeds of sale less any transaction costs.

Quoted: Quoted investments are designated as held at fair value, which is deemed to be their bid price.

Unquoted: Unquoted investments are also designated as held at fair value and are valued using the following guidelines:

(i) initially, investments are valued at the price of recent investment less fees and transaction costs, unless the prevailing market conditions and/or trading prospects of the investment result in this price being an inappropriate measure of fair value and (ii) or (iv) below is required;

(ii) subsequently, investments are valued based on the level of maintainable earnings or revenue and an appropriate earnings or revenue multiple, unless (iv) is required;

(iii) where more appropriate, investments can be valued based on other methodologies, including using their net assets or discounted cash flows, rather than to their earnings or revenue; and

(iv) appropriate provisions are made against all individual valuations where necessary to reflect unsatisfactory financial performance or a fall in comparable ratings, leading to an impairment in value.

Limited partnership funds: These are investments that are set up by a manager in which the Trust has a direct investment, but is not the sole limited partner and does not hold a majority share. These investments are valued at fair value, based on the manager's valuation after any adjustment required by the Directors.

Liquidity funds: These are short-term investments made in a combination of fixed and floating rate securities and are valued at the current fair value as determined by the manager of the fund. They can be realised at short notice.

Government securities: These are short-term investments made in fixed rate UK government securities and are valued at the current fair value of the gilt.

Derivative financial instruments: Derivative financial instruments are held at fair value and are valued using quoted market prices for financial instruments traded in active markets, or dealer price quotations for financial instruments that are not actively traded.

Both realised and unrealised gains and losses arising on fixed asset investments, financial assets and liabilities and derivative financial instruments, are taken to the capital reserves.

Capital reserves

Capital reserve - realized

The following are accounted for in this reserve:

(i) gains and losses on the realisation of investments;

(ii) attribution of gains to the founder partners for carried interest;

(iii) losses on investments within the portfolio where there is little prospect of realisation or recovering any value;

(iv) realised exchange differences of a capital nature; and

(v) expenses, together with the related taxation effect, charged to this reserve in accordance with the above policies.

Capital reserve - unrealized

The following are accounted for in this reserve:

(i) increases and decreases in the valuation of investments held at the year end;

(ii) increases and decreases in the valuation of the loans to general partners; and

(iii) unrealised exchange differences of a capital nature.

5. Priority profit share and carried interest

The priority profit share payable on HGT LP, HGT 6 LP, HGT 7 LP and HgCapital Mercury D LP rank as a first appropriation of net income from investments held in HGT LP, HGT 6 LP, HGT 7 LP and HgCapital Mercury D LP respectively and is deducted prior to such income being attributed to the Trust in its capacity as a Limited Partner. The net income of HGT LP, HGT 6 LP, HGT 7 LP and HgCapital Mercury D LP earned during the year, after the deduction of the priority profit share, is shown on the income statement. Details of these arrangements are disclosed in the Directors' report in the full Annual Report and Accounts.

The terms of the above priority profit share arrangements during 2015 were:

In addition, priority profit shares are payable on partnerships where the Trust is a minority limited partner. These amounts are initially and indirectly funded by the Trust through the amounts invested in these partnerships and these amounts are recognised as unrealised losses in the capital account in the income statement.

In years in which the funds described in note 5(a) have not yet earned sufficient net income to satisfy the priority profit share, the entitlement is carried forward to the following years. The priority profit share is payable quarterly in advance, even if insufficient net income has been earned. Where the cash amount paid exceeds the net income, an interest free loan is advanced to the general partner by these primary buyout funds, which is funded via a loan from the Trust. Such loan is only recoverable from the general partner by an appropriation of net income. Until sufficient net income is earned, no value is attributed to this loan and hence an unrealised capital loss is recognised and reversed if sufficient income is subsequently generated.

The carried interest payable ranks as a first appropriation of capital gains on the investments held in HGT LP, HGT 6 LP, HGT 7 LP and HgCapital Mercury D LP, limited partnerships established solely to hold the Trust's investments, and is deducted prior to such gains being paid to the Trust in its capacity as a Limited Partner. The net amount of capital gains of HGT LP, HGT 6 LP, HGT 7 LP and HgCapital Mercury D LP during the year, after the deduction of carried interest, is shown on the income statement.

The details of the carried interest contracts, disclosed in the Directors' report in the full Annual Report and Accounts, states that carried interest is payable once a certain level of repayments have been made to the Trust. Based on the repayments, no carried interest was payable in respect of the current or prior financial year. However, if the investments in HGT6 LP and HgCapital 6 E LP are realised at the current fair value and then distributed to Partners, an amount of £29,206,000 will be payable to the Founder Partner and therefore the Directors have made a provision for this amount. The provision, as at 31 December 2014, of £1,088,000 that was previously included in Creditors on the balance sheet, has been reclassified as a provision against the investment (see the Investment Portfolio above and notes 12, 17 and 19) and the relevant balances as at 31 December 2014 have been restated accordingly. No provision is required in respect of the Trust's investment in the other fund limited partnerships.

6. Other expenses

Share of aborted deal fees includes a provision for on-going transactions that had not completed at the balance sheet date.