HgCapital Trust plc Regulatory News (HGT)

6 Sep 2006 07:02

HG Capital Trust PLC06 September 2006 FOR IMMEDIATE RELEASE 6 September 2006 HgCapital Trust plc Interim Results for the six months ended 30 June 2006 HIGHLIGHTS • Net asset value per share (NAV) has increased by 12% from 621.3p at the 31 December 2005 to 696.1p at 30 June 2006. Total return to shareholders (NAV) increased by 13.7% in the six months to 30 June 2006 compared with 6.1% for the FTSE All-Share Index and 3.7% for the FTSE SmallCap Index. • The Company's share price rose by 9.6% from 583.5p at 31 December 2005 to 639.5p at 30 June 2006. • New and follow on investments amounted to £40.0 million. • Realisations amounted to £32.0 million in cash. • Earnings per share of 4.0p (2005: 7.6p). • NAV was 680.1p at 31 August 2006. Historical total return* performance One year Three years Five years Seven years Ten years % pa % pa % pa % pa % pa Share price 21.3 41.3 14.1 18.1 17.5Net asset value 24.8 28.8 13.5 14.7 14.9FTSE All-Share Index 19.7 18.4 5.0 3.1 8.0FTSE SmallCap Index 18.5 19.9 5.5 6.2 7.2 Based on the Company's share price at 30 June 2006 and allowing for dividends tobe reinvested, an investment of £1,000 ten years ago would now be worth £5,000.An equivalent FTSE All-Share Index return would be worth £2,153. \* Total return assumes all dividends have been reinvested. Source: Bloomberg The Chairman, Roger Mountford, comments: Performance "I am pleased to report that for the period under review the Company continuedto deliver strong NAV growth compared to the FTSE benchmarks. Net asset valueper share (NAV) increased by 12% and total return to shareholders (NAV plusdividend) over the period was 13.7% compared with 6.1% for the FTSE All-ShareIndex and 3.7% for the FTSE SmallCap Index. The Company's share price rose by9.6% from 583.5p to 639.5p. "Revenue return per share was 4.0p, compared with 7.6p in the same period lastyear. As explained in earlier reports to shareholders, the Company's revenuewill vary from year to year in accordance with the structure of the underlyinginvestments. Realisations "A series of successful realisations that commenced in 2004 continued throughthe period, with full and partial realisations yielding proceeds of £32 million. These sales were made at prices above year end book values, contributingfurther to growth in NAV. ClinPhone was successfully floated on the LondonStock Exchange; Travelsphere was sold; and the Company's remaining holding inRaymarine plc was placed. "Additionally, the Manager took advantage of the continuing strong marketconditions to agree the sale of investments in Castlebeck and Pharma BioResearch (PBR). These sales were completed post period end but their valuationsas at 30 June were increased to reflect the sale proceeds achieved. New Investments "The Company invested a total of £37 million through three new buy-outs and anew investment in a renewable energy project. Follow-on investments totalling£3 million were made in six other holdings. As announced when the Company made its first commitment to invest in renewableenergy, the Board agreed to roll over the Company's investments in this sectorinto a holding within the Manager's new specialist fund. €20 million wascommitted on the first closing of the fund. This will provide the Company witha greater diversity in projects across several countries. Prospects "At 30 June 2006 the Company had liquid assets of £13 million, which hasincreased to some £40 million following the most recent disposals; providingadequate resources to fund further investment opportunities. "The Managers sector teams continue to identify new opportunities forinvestment. Meanwhile, most businesses in the current portfolio have beenachieving strong organic growth in sales and profits, suggesting potential forcontinuing growth in NAV over the medium-term." Investment Manager's Review Attribution analysis of movements in net asset value for the six months ended 30 June 2006 £'000Opening net asset value as at 1 January 2006 156,487Gross revenue 2,061Expenditure (1,727)Taxation (76)Dividends paid (2,519)Realised proceeds in excess of 31 December 2005 book value (excludes gross revenue) 6,786Net unrealised appreciation of investments 18,540Carried interest provision (4,230)Closing net asset value as at 30 June 2006 175,322 Portfolio The Company invests alongside other clients of HgCapital. Typically, theCompany's holding forms part of a much larger stake in predominantly buy-outinvestments of between £50 million and £350 million, controlled by HgCapital. The Investment Manager's Enterprise Value ("EV") generally refers to eachtransaction in its entirety, apart from the tables which detail the Company'sparticipation, and where this review specifically states otherwise. The Company's net asset value increased from £156 million to £175 million duringthe period under review. This arose from unrealised movements and realisedproceeds in excess of the book value of £18.5 million and £6.8 millionrespectively, following continued strong earnings growth and cash generationwithin the portfolio. The Company's investments in Castlebeck and PBR have both been sold since theperiod end at a significant uplift to the December 2005 carrying value. The netasset value at 30 June 2006 fully reflects the proceeds subsequently receivedfrom these investments. In addition, strong profit growth from the buy-outportfolio, in particular, Hirschmann, Blue Minerva and Clarion have contributedto the increase in value. The Company's quoted investments have also performedwell, with Raymarine being realised during the period and a strong share pricegrowth in Xtx (Xyratex) as well as the flotation of ClinPhone. Realised and unrealised movements in net asset value during the period Realised Unrealised Proceeds* Movements** Total £m £m £mCastlebeck 3.2 14.9 18.1Xtx (Xyratex) 1.9 3.7 5.6Hirschmann 3.2 3.2ClinPhone 1.3 0.9 2.2Raymarine 0.9 0.9PBR 0.7 0.7Hoseasons (0.5) (0.5)Other (0.7) (0.7)Eagle Rock (0.9) (0.9)Match Holdings (1.5) (1.5)W.E.T. (1.7) (1.7)Total 7.3 18.1 25.4 * Realised proceeds in excess of 31 December 2005 book value (excludes gross revenue (£'m)). ** Net unrealised movements of investments (£'m). A minority of the Company's investments performed below expectations. Inparticular, Match, Hoseasons and Eagle Rock continue to experience tradingdifficulties and have been written down further in value. During the period, the Company invested a total of £40 million and participatedin three new buy-out investments. These new investments were made in Visma(Norway, £382 million EV), Paragon (UK, £322 million EV) and FTSA (Canada, £53million EV). On 19 June 2006, HgCapital completed the first closing of the Hg Renewable PowerPartners Fund, a limited partnership investing in renewable energy assets. TheCompany became one of the Limited partners with €20 million as its commitment tothe fund at the period end. The Company realised proceeds during the period amounting to £32 million. Theseproceeds arose principally from the sale of Travelsphere, sales of quoted sharesin Raymarine, Xtx (Xyratex) and ClinPhone and the recapitalisation of bothCastlebeck and The Sanctuary Spa. Prospects The economic environment remains positive in our target markets of the UK,Germany and Benelux and as a result liquidity in the Private Equity and debtmarkets remains high. Competition for identifying and securing new investmentsremains high with aggregate pricing in line with the FTSE All-Share Index. Wehave taken advantage of these conditions with timely sales. Following newinvestments and sales, the overall portfolio is relatively young, with strongpotential for earnings growth. We will continue to secure new investments with confidence that dedicated sectorknowledge, selection disciplines and dedicated investment management resourceswill enable us, not only to pick the right opportunities, but to support thedelivery of profit and value growth. Investment in our team, skills anddifferentiation is on-going with eight new joiners since December, bringing ourtotal executive team to 27, with €2.7 billion of funds under management. Portfolio Analysis A diverse portfolio, invested along sector lines, with an increasing exposure to Continental Europe. At 30 June 2006 the Company's portfolio consisted of 44 investments, of whichthe 20 principal investments represented over 90% of the portfolio valuation. The Company offers both sector and geographic diversification in a portfolio offast growing small cap stocks. The top 20 investments in aggregate haveexhibited growth in both revenues and profits in excess of 20% per annum. Theportfolio's valuation increased in the first six months of the year to £163million, benefiting from strong profit growth and positive cash flow,particularly in the buy-out companies. Four new investments were made during the period: three management buy-outs andone investment in renewable energy. The management buy-outs were: the public toprivate acquisition of Visma, a Norwegian software company; the acquisition ofFTSA, the world's leading crash test dummy business and the secondary purchaseof Paragon, a leading UK care home business. Four investments were fully realised and six were partially realised, throughthe sale of quoted shares, recapitalisation or trade sale. In aggregate,capital proceeds from these realisations produced a 57% uplift over the carryingvalue and a 96% uplift over cost. Proceeds from realisations resulted in the Company ending the period with £13million of liquid assets, which has increased to some £40 million following themost recent disposals. These resources combined with a £25 million borrowingfacility position the Company to exploit new investment opportunities. Asset class Geographic spread by valuationUnquoted 84% UK 53%Quoted 9% Germany 23%Cash and other assets 7% North America 9% Europe other 8% Benelux 6% Ireland 1% Valuation basis Deal type by valuationCost 45% Buy-out 91%Sales proceeds 17% Expansion 4%Earnings 13% Fund 2%Written down/off 11% Venture 2%Quoted 10% Renewable energy 1%Net assets 2%Third party 2% Sector by valuation Vintage by valuationTechnology 30% 2006 23%Industrials 27% 2005 21%Healthcare 26% 2004 13%Media 7% 2003 17%Leisure 6% 2002 18%Fund 2% 2001 2%Consumer 1% 2000 1%Renewable energy 1% Pre-2000 5% Investments The Company invested £40 million in the six months ended 30 June 2006. Company Sector Activity Deal Type Cost £'000 Visma Technology Accounting and business Buy-out 13,268 softwareFTSA Industrials Crash test dummies Buy-out 12,351Paragon Healthcare Care homes Buy-out 10,799Wind Direct Renewable Industrial site wind farms Renewable energy 710 energy 37,128New investmentsSchenck Industrials Industrial measuring and Buy-out 2,372 weighing systemsPBR Healthcare Clinical trial management Buy-out 654Other 138Follow-on investments 3,164Total investment by the Company 40,292 Figures below refer to the total size of each acquisition, including debt raisedfrom third parties, made by HgCapital on behalf of its clients, including theCompany. New Investments FTSA In March 2006, HgCapital completed the £53 million buy-out of FTSA, the globalmarket leader in the design and manufacture of crash test dummies for use in theautomotive and aerospace industries. It also provides associated technicalsupport and laboratory services, develops and supplies sophisticated softwarefor computer-simulated crash testing, as well as niche engineering services andproducts to the medical and aerospace industries. Its sales are split evenlybetween North America, Europe and the Far East. VISMA In May 2006, HgCapital completed the £382 million buy-out of Visma, the numberone provider of business software and related services to small and medium sizedenterprises in the Nordic region. Headquartered in Oslo with significantrevenues in Sweden, Finland and Denmark, the company provides accounting,resource planning and payroll software, outsourced book-keeping and payrollservices, in addition to debt collection and procurement services to itscustomer base of over 200,000 enterprises. Paragon In April 2006, HgCapital completed the £322 million buy-out of ParagonHealthcare Group. Paragon owns and operates small community based homes foradults with learning disabilities and associated physical disabilities, autisticspectrum disorders, complex needs and acquired brain injury. The companycurrently operates 1,600 beds in 242 services across England and Scotland. Wind Direct In January 2006, we completed our third renewable energy investment by securingthe exclusive rights to acquire 100MW of small UK wind farms from Wind DirectLimited. Wind Direct places wind turbines at industrial sites in the UK,selling power at below conventional power prices to the industrial customerunder long-term, inflation-linked power sales contracts. Follow-on Investments Schenck In June 2006, Schenck completed the acquisition of Stock Equipment Company (USA)Inc, the world market leader for bulk material handling and feeding systems forcoal-fired power plants, giving Schenck exposure to one of the key growthindustries not previously covered. PBR During the period, a short-term bridging loan was provided to PBR, ahead of thesale of the business. Since the period end, PBR has been sold to PRAInternational, the US listed global clinical research organisation, for aconsideration of €85 million. The deal is part cash and part quoted shares andat 30 June, PBR has been valued based on the cash received, together with theclosing value of the quoted shares received. Realisations Proceeds from realisations totalling £32 million for the six months ended 30 June 2006. Company Sector Exit route Cost Proceeds+ 2006 return+ £'000 £'000 £'000 Travelsphere Leisure Financial 3,899 7,929 4,030Raymarine** Consumer Quoted share sale 61 4,384 4,323Other* Liquidation 5,445 23 (5,422)Full realisations 9,405 12,336 2,931 Xtx (Xyratex)*** Technology Quoted share sale 3,621 7,149 3,528ClinPhone Healthcare IPO 1,079 5,623 4,544Castlebeck Healthcare Recapitalisation 156 5,073 4,917The Sanctuary Spa Leisure Recapitalisation 1,480 1,644 164Other Fund Capital 49 55 6 distributionPartial realisations 6,385 19,544 13,159Total realisations 15,790 31,880 16,090 + Includes gross revenue received during the period.* Includes entities liquidated during the period which had previously been written down.** Listed on the London Stock Exchange.*** Traded on NASDAQ. Full realisations Travelsphere Travelsphere is the UK's leading direct-sell escorted tour operator serving theover 45 age group. In May 2006 we completed the realisation of our holding inTravelsphere with a sale of the business to Electra Partners Europe. Thisinvestment has returned 2.5 times the original investment cost. Raymarine Raymarine is one of the world's largest suppliers of marine electronic productsto the leisure boating market. In December 2004 the business was floated on theLondon Stock Exchange and in January this year the remaining interest in thebusiness was sold. This investment has returned 4.4 times the originalinvestment cost. Partial realisations Castlebeck Castlebeck is the UK's leading independent provider of specialist healthcare andrehabilitation services for adults and adolescents with learning disabilitiesand challenging behaviour. Over the life of our investment the business hasdelivered strong earnings growth which has enabled us to complete tworecapitalisations of the business and return cash to investors. Since theperiod end the business has been sold to an associate of Barchester Healthcare. ClinPhone In June 2006, we completed the flotation of ClinPhone on the London StockExchange. ClinPhone is a leading specialist supplier of technology solutions tothe clinical trials industry. HgCapital clients have retained a 6.2% stakewhich is subject to a six month lock-in period. This investment has returned3.5 times the original cost (including the unrealised value). In line with UKGAAP, this investment has been valued at the closing bid-market price as at 30June 2006. The Sanctuary Spa The Sanctuary Spa is the UK's leading women-only day spa and beauty productsbusiness. During the period the business has been recapitalised enabling cashto be returned to investors. Xtx (Xyratex) During the period, we took the opportunity to realise 36% of HgCapital client'sholding in Xyratex, the NASDAQ quoted data storage and network technologybusiness. This investment has returned 2.6 times the original cost (includingthe unrealised value). Review of Principal Investments 1 Castlebeck Sector: Healthcare Location: UK Year of investment: 2002 www.castlebeck.com In July 2002, HgCapital completed the £50 million buy-out of Castlebeck Group Limited from 3i plc. We hold an 89% equity stake in the business. Castlebeck is the UK's largest private provider of residential healthcare foradults with learning disabilities and challenging behaviour. It operatesfourteen independent hospitals and homes based in the north-east of England andScotland. The company opened several new properties, including a new specialistautism unit and adolescent homes. Following strong performance, HgCapitalrecapitalised the business in both 2005 and 2006, returning £47 million inproceeds to investors. Since the period end, the business has been sold to anassociate of Barchester Healthcare for £255 million. This returned a further£125 million to clients, which is fully reflected in the 30 June 2006 valuation. 2 Xtx (Xyratex) Sector: Technology Location: UK Ticker: XRTX:US Year of investment: 2003 www.xyratex.com In September 2003, HgCapital completed the £50 million buy-out of Xyratex for afully-diluted stake of 45%. Since our investment the company has been tradingahead of plan and, in June 2004, completed an initial public offering on NASDAQ. Xyratex is a global provider of enterprise-class data storage and subsystems andstorage process technology. Storage technology provides the means by whichbusinesses and personal IT data can be captured, processed, stored and retrievedin a digital form. During the period we took the opportunity to sell 36% of our holding in Xyratex. 3 VISMA Sector: Technology Location: Norway Year of investment: 2006 www.visma.com In May 2006, HgCapital completed the £382 million buy-out of VISMA, the number one provider of business software in the Nordic region. We hold a 57% stake in this business. 4 FTSA Sector: Industrials Location: Canada Year of investment: 2006 www.ftss.com In March 2006, HgCapital completed the £53 million buy-out of FTSA, the global market leader in the design and manufacture of crash test dummies. We hold an 80% stake in this business. 5 Schenck Sector: Industrials Location: Germany Year of investment: 2005 www.schenck-mpt.de In December 2005, HgCapital successfully completed the €205 million buy-out of Schenck and acquired an 85% stake in the business. Schenck is the global market leader for high-tech applications and solutions inindustrial weighing, feeding and automation. Schenck develops, manufactures,assembles, markets and sells a full range of solutions, products, systems andturnkey systems on the basis of reliable components, combining process-engineering expertise and field-proven technology. Schenck has activities inmore than 40 countries and operates eleven state-of-the-art assembly facilitiesglobally. 6 Paragon Sector: Healthcare Location: UK Year of investment: 2006 www.milburycare.com In April 2006, HgCapital completed the £322 million buy-out of Paragon Healthcare Group. We have a 52% stake in this business. 7 Hirschmann Electronics Sector: Industrials Location: Germany Year of investment: 2004 www.hirschmann.de The €115 million buy-out of Hirschmann Electronics from Rheinmetall AG wascompleted in March 2004. We have an 80% equity stake in the business. Hirschmann is a world-market-leading supplier of electronics equipment,components and related accessories. Principal products include industrialEthernet and networking equipment, sophisticated car-antenna electronics,television transmission equipment, and safety systems for mobile plant equipmentsuch as cranes. 8 Addison Sector: Technology Location: Germany Year of investment: 2005 www.addison.de The €78 million buy-out of Addison was completed in June 2005. We have a 93% equity stake in the business. Addison is a leading, privately-owned German application software company thatprovides business-critical solutions to two related markets - tax accountantsand SME's. It develops licenses and manager standard and sector specificsoftware for bookkeeping, accounts production, tax, cost accounting, payrolladministration and financial controls. In December 2005, HgCapital make a further investment in Addison of €14 million,to fund the acquisition of PBSG, the number three player in the German taxaccountant software market. The two businesses are in the process of beingintegrated. 9 Classic Copyright t/a Boosey & Hawkes Sector: Media Location: UK Year of investment: 2003 www.boosey.com The £84 million public-to-private acquisition of Boosey & Hawkes was completedin December 2003. All instrument manufacturing operations associated withBoosey & Hawkes were sold in February 2003 and form no part of this investment. We have a 77% equity stake in the business. Boosey & Hawkes is the world's leading classical music publisher with a 14%market share. It owns, develops and exploits the largest catalogue of classicalmusic copyrights of works by composers such as Britten, Prokofieff,Rachmaninoff, Ravel, Shostakovich, Strauss and Stravinsky. Revenue is derivedfrom royalties when the copyrights are played live or via media. The businessis now looking at opportunities to consolidate a fragmented market. 10 Blue Minerva t/a IRIS Sector: Technology Location: UK Year of investment: 2004 www.iris.co.uk The £102 million buy-out of IRIS Software was completed in July 2004. We have a 60% equity stake in the business. IRIS software is one of the largest independent business software providers toUK accountancy practices and SMEs. In 2005, IRIS acquired Exchequer Software,an award-winning independent software house specialising in mid-range accountingsoftware. IRIS won 'business of the Year' in the South East regional finals ofthe National Business Awards 2005. Following strong performance in 2005,HgCapital recapitalised Blue Minerva in December 2005, returning over £26million to its clients. Top 20 investment listing of the Company Company Sector Residual Valuation Year of Portfolio Cum. cost investment value value £'000 £'000 % % 1. Castlebeck Group Ltd Healthcare 705 23,103 2002 14.1 14.12. Xtx Ltd (Xyratex)** Technology 3,374 13,210 2003 8.1 22.23. Visma Holdings Lux SARL# Technology 13,268 12,972 2006 7.9 30.14. FTSA Holdings Ltd Industrials 12,351 12,351 2006 7.6 37.75. Schenck MPT SA# Industrials 11,698 11,838 2005 7.2 44.96. Paragon Ltd Healthcare 10,799 10,799 2006 6.6 51.57. Hirschmann Electronics Holdings Industrials 2,669 7,349 2004 4.5 56.0SA8. Addison Luxembourg SA# Technology 6,499 6,678 2005 4.1 60.19. Classic Copyright (Holdings) Ltd Media 6,033 5,943 2003 3.6 63.710. Blue Minerva Ltd Technology 2,957 5,728 2004 3.5 67.211. Elite Holding SA# Technology 5,749 5,652 2005 3.5 70.712. Sporting Index Group Ltd Leisure 5,428 5,428 2005 3.3 74.013. Clarion Events Ltd Media 4,965 5,264 2004 3.2 77.214. W.E.T Holdings (Luxembourg) SA Industrials 7,590 5,099 2003 3.1 80.315. Hoffman M.M. SA# Industrials 4,747 4,794 2005 2.9 83.216. PBR Holding SA Healthcare 5,628 4,587 2002 2.8 86.017. The Sanctuary Spa Holdings Ltd Leisure 1,099 2,771 1995 1.7 87.718. Rolfe & Nolan Holdings plc Technology 238 2,034 2003 1.2 88.919. Doc M SARL# Healthcare 1,956 1,905 2004 1.2 90.120. ClinPhone plc* Healthcare 7 1,903 1996 1.2 91.3Total 20 Investments 107,760 149,408 91.3 91.3Other Investments (24) 39,728 13,904 8.7 100.0Total Investments (44) 147,488 163,312 100.0 100.0 * Listed on the London Stock Exchange.** Traded on NASDAQ.# The difference between cost and valuation is due to foreign exchange movements. For further information please contact: Roger Mountford- Chairman, HgCapital Trust plcTel: 07799 662601www.hgcapitaltrust.com Ian Armitage - Partner, HgCapitalTel: 020 7089 7979www.hgcapital.com Suzanne Bartch, Peter OgdenThe Maitland ConsultancyTel: 020 7379 5151 INCOME STATEMENTfor the six months ended 30 June 2006 Revenue return £'000 Six months Six months Year ended ended ended 30.06.06 30.06.05 31.12.05 Notes (unaudited) (unaudited) (audited) Gains on investments and government securities - - -Carried interest provision - - -Income 5 2,061 2,937 4,963Investment management fee 6 (353) (310) (587)Other expenses 7(a) (317) (241) (498) Net return on ordinary activities before taxation 1,391 2,386 3,878 Taxation on ordinary activities (393) (471) (913) Transfer to reserves 998 1,915 2,965 Return per ordinary share 3.96p 7.60p 11.77p The total column of this statement represents the Company's Income Statement. The supplementary revenue and capital return columns are both prepared underguidance published by the Association of Investment Trust Companies ("AITC").All recognised gains and losses are disclosed in the revenue and capital columnsof the income statement and as a consequence no statement of total recognisedgains and losses has been presented. All revenue and capital items in the above statement derive from continuing operations. INCOME STATEMENT - continuedfor the six months ended 30 June 2006 Capital return £'000 Six months Six months Year ended ended ended 30.06.06 30.06.05 31.12.05 Notes (unaudited) (unaudited) (audited) Gains on investments and government securities 25,326 21,332 37,706Carried interest provision (4,230) - (2,976)Income 5 - - -Investment management fee 6 (1,057) (931) (1,761)Other expenses 7(a) - - - Net return on ordinary activities before taxation 20,039 20,401 32,969 Taxation on ordinary activities 317 279 528 Transfer to reserves 20,356 20,680 33,497 Return per ordinary share 80.82p 82.11p 132.99p The total column of this statement represents the Company's income statement. The supplementary revenue and capital return columns are both prepared underguidance published by the Association of Investment Trust Companies ("AITC").All recognised gains and losses are disclosed in the revenue and capital columnsof the income statement and as a consequence no statement of total recognisedgains and losses has been presented. All revenue and capital items in the above statement derive from continuingoperations. INCOME STATEMENT - continuedfor the six months ended 30 June 2006 Total return £'000 Six months Six months Year ended ended ended 30.06.06 30.06.05 31.12.05 Notes (unaudited) (unaudited) (audited) Gains on investments and government securities 25,326 21,332 37,706Carried interest provision (4,230) - (2,976)Income 5 2,061 2,937 4,963Investment management fee 6 (1,410) (1,241) (2,348)Other expenses 7(a) (317) (241) (498) Net return on ordinary activities before taxation 21,430 22,787 36,847 Taxation on ordinary activities (76) (192) (385) Transfer to reserves 21,354 22,595 36,462 Return per ordinary share 84.78p 89.71p 144.76p The total column of this statement represents the Company's income statement. The supplementary revenue and capital return columns are both prepared underguidance published by the Association of Investment Trust Companies ("AITC").All recognised gains and losses are disclosed in the revenue and capital columnsof the income statement and as a consequence no statement of total recognisedgains and losses has been presented. All revenue and capital items in the above statement derive from continuingoperations. BALANCE SHEETas at 30 June 2006 30.06.06 30.06.05 31.12.05 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Fixed assetsInvestments held at fair valueQuoted at market valuation 15,925 17,832 18,736Unquoted at directors' valuation 147,387 97,597 109,504 163,312 115,429 128,240 Current assetsDebtors 5,185 7,058 6,609Government securities 12,447 16,104 24,515Cash 909 4,829 867 18,541 27,991 31,991 Creditors - amounts falling due within one year (6,531) (800) (3,744) Net current assets 12,010 27,191 28,247 Net assets 175,322 142,620 156,487 Capital and reservesCalled up share capital 6,296 6,296 6,296Share premium account 14,123 14,123 14,123Capital redemption reserve 1,248 1,248 1,248Capital reserve - realised 131,754 114,366 122,191Capital reserve - unrealised 15,726 (59) 4,933Revenue reserve 6,175 6,646 7,696 Total equity shareholders' funds 175,322 142,620 156,487 Net asset value per ordinary share 696.1p 566.2p 621.3p CASH FLOW STATEMENTfor the six months to 30 June 2006 Six months Six months Year ended ended ended 30.06.06 30.06.05 31.12.05 £'000 £'000 £'000 Note (unaudited) (unaudited) (audited) Net cash (outflow)/inflow from operatingactivities 7(b) (2,806) 655 1,542 Taxation recovered 3,046 353 352 Capital expenditure and financial investmentPurchase of fixed asset investments (40,292) (11,271) (35,376)Proceeds from the sale of fixed assetinvestments 31,013 20,640 48,831 (9,279) 9,369 13,455 Dividends paid (2,519) (2,015) (2,015) Net cash (outflow)/inflow before managementof liquid resources (11,558) 8,362 13,334 Management of liquid resources 11,597 (4,713) (13,644) Increase/(decrease) in cash in the period 39 3,649 (310) RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDSfor the six months ended 30 June 2006 Share Share Capital Capital Revenue Total capital premium redemption reserves reserve £'000 Note £'000 account reserve £'000 £'000 £'000 £'000 At 31 December 2005 6,296 14,123 1,248 127,124 7,696 156,487Net return from ordinary activities* - - - 20,356 998 21,354 Dividends paid(^) 3 - - - - (2,519) (2,519) --------- ---------- --------- ---------- --------- ----------At 30 June 2006* 6,296 14,123 1,248 147,480 6,175 175,322 ===== ======= ===== ======= ===== ======= At 31 December 2004 6,296 14,123 1,248 93,627 6,746 122,040Net return from ordinary activities - - - 33,497 2,965 36,462 Dividends paid# 3 - - - - (2,015) (2,015) --------- ---------- --------- ---------- --------- ----------At 31 December 2005 6,296 14,123 1,248 127,124 7,696 156,487 ===== ======= ===== ======= ===== ======= * Unaudited.(^) Final dividend for the year ended 31 December 2005 of 10.00p (£2,519,000) declared on 13 March 2006 and paid on 2 May 2006.# Final dividend for the year ended 31 December 2004 of 8.00p (£2,015,000) declared on 8 March 2005 and paid on 29 April 2005. NOTES TO THE INTERIM ANNOUNCEMENT 1. Principal activity The principal activity of the Company is that of an investment company within the meaning of section 266 of the Companies Act 1985. 2. Basis of preparation The accounts have been prepared under the historical cost convention, modified to include the revaluation of investments and in accordance with UK Generally Accepted Accounting Practice (" UK GAAP") and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" ("SORP") issued in December 2005. All of the Company's operations are of a continuing nature. The same accounting policies used for the year ended 31 December 2005 have been applied. 3. Dividends It is intended that dividends will be declared and paid annually in respect of each accounting period. A dividend of 10.00p per share, declared as a final dividend, was paid on 2 May 2006 in respect of the year ended 31 December 2005 (year ended 31 December 2004: 8.00p per share, declared on 8 March 2005 and paid on 29 April 2005). 4. Issued share capital There were 25,186,755 ordinary shares in issue for the six months ended 30 June 2006 and 30 June 2005; and the year ended 31 December 2005. 5. Income Six months Six months Year ended ended ended 30.06.06 30.06.05 31.12.05 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Income from investmentsUK unquoted investment income 1,237 1,484 2,251UK dividends from listed companies 82 814 833Overseas dividends - 8 18 1,319 2,306 3,102 Other incomeGilt interest 719 611 1,692Deposit interest 23 20 146Underwriting commission - - 23 742 631 1,861 Total income 2,061 2,937 4,963 6. Investment management fee Revenue return Capital return Six months Six months Year Six months Six months Year ended ended ended ended ended ended 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 £'000 £'000 £'000 £'000 £'000 £'000 (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)Investment management fee 300 264 500 900 792 1,499 Irrecoverable VAT thereon 53 46 87 157 139 262 353 310 587 1,057 931 1,761 The investment management fee is levied quarterly in arrears. Investment management fees are charged75% to capital and 25% to revenue. 7. Other expenses (a) Operating expenses Six months Six months Year ended ended ended 30.06.06 30.06.05 31.12.05 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Custodian and administration fees 95 52 137 Other administration costs 222 189 361 317 241 498 (b) Reconciliation of net revenue return before taxation to net cash flow from operating activities Six months Six months Year ended ended ended 30.06.06 30.06.05 31.12.05 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Net return before finance costs and taxation 21,430 22,787 36,847 Gains on investments held at fair value (25,326) (21,332) (37,706) Carried interest provision 1,254 - 2,976 (Increase)/decrease in accrued income (134) (599) 77 Increase/(decrease) in creditors 127 (28) (250) Tax on investment income included within gross income (157) (173) (402) Net cash (outflow)/inflow from operating activities (2,806) 655 1,542 8. Transaction costs During the period the Company incurred transaction costs on the sale of quoted investments of £13,000 (30 June 2005: £18,000 and 31 December 2005: £33,000). 9. Capital commitments At 30 June 2006, investment purchases of £607,000 (30 June 2005: £1,653,000 and 31 December 2005: £680,000) had been authorised and contractually committed but not paid. In addition, £13,826,000 (€20,000,000) was committed to Hg Renewable Power Partners LP. 10. Publication of non-statutory accounts The financial information contained in this interim report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the six months ended 30 June 2006 and 2005 has not been audited. The information for the year ended 31 December 2005 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The report of the independent auditor on those accounts contained no qualification or statement under sections 237(2) or (3) of the Companies Act 1985. 11. Annual results The Board expects to announce the results for the year ending 31 December 2006 in March 2007. The annual report should be available by the end of March 2007, with the Annual General Meeting being held in April 2007. Third FloorMinerva House3-5 Montague CloseLondon SE1 9BB 6 September 2006 This information is provided by RNS The company news service from the London Stock Exchange