Annual Financial Report

RNS Number : 1739R

HgCapital Trust PLC

07 March 2016

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

	29 February 2016	31 December 2015	31 December 2014	% Total return¹
NAV per share	£14.55	£14.20	£12.78	+14.1%
Share price	£9.82	£11.15	£10.58	+8.6%
FTSE All-Share Index				+1.0%
			2015 Movement
Net Asset Value	£543.1m	£530.0m	£476.9m	+£53.1m

¹Assuming 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:

HgCapital
Stephen Bough (CFO, HgCapital)	+44 (0)20 7089 7888
Roger Mountford (Chairman, HgCapital Trust plc)	+44 (0) 77996 626 01
Maitland
Seda Ambartsumian	+44 (0)20 7379 5151
Jamie Dunkley	+44 (0)20 7379 5151

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

Year ended 31 December	Net assets attributable to shareholders £'000	NAV per share p	Share price p	Revenue return/(loss) available for shareholders £'000	Revenue return/(loss) per share¹ p	Dividends per share² p
2006	187,135	743.0	731.0	4,519	17.9	14.0
2007	238,817	948.2	782.5	7,446	29.6	25.0
2008	234,094	929.4	668.5	7,445	29.6	25.0
2009	236,044	937.2	844.0	7,148	28.4	25.0
2010	347,993	1,118.8	1,006.0	10,053	34.0	28.0
2011	346,832	1,089.9	970.0	(645)	(2.0)	10.0
2012	437,956	1,231.5	1,016.0	10,398	32.1	23.0
2013	440,584	1,180.4	1,010.0	12,913	35.3	29.0
2014	476,918	1,277.8	1,057.5	21,933	58.8	51.0
2015	530,023	1,420.0	1,115.0	17,907	48.0	40.0³
1 Based on weighted number of shares in issue during the year. 2 Dividend proposed in respect of reported financial year, but declared and paid in the following year. 3 Proposed dividend of 40 pence per Ordinary share for the year ended 31 December 2015, to be paid on 16 May 2016, subject to shareholder approval.

HISTORICAL TOTAL RETURN PERFORMANCE

	One year % p.a.	Three years % p.a.	Five years % p.a.	Ten years % p.a.	Twenty years % p.a.
NAV per share	14.1	7.9	7.4	11.2	13.0
Share price	8.6	6.5	4.8	9.4	13.9
FTSE All-Share Index	1.0	7.3	6.0	5.6	6.7
NAV per share performance relative to the FTSE All-Share Index	13.1	0.6	1.4	5.6	6.3
Share price performance relative to the FTSE All-Share Index	7.6	(0.8)	(1.2)	3.8	7.2

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

	Revenue £'000	Capital £'000	Total £'000
Opening NAV as at 1 January 2015	25,983	450,935	476,918
Realised capital and income proceeds from investment portfolio in excess of 31 December 2014 book value	4,990	8,427	13,417
Net unrealised capital and income appreciation of investment portfolio	25,778	65,804	91,582
Net realised and unrealised gains from liquid resources	309	9	318
Dividend paid	(11,944)	-	(11,944)
Expenditure and taxation	(3,931)	-	(3,931)
Investment management costs:
Priority profit share - current year charge	(8,219)	-	(8,219)
Priority profit share - net loan allocation	(1,020)	1,020	-
Carried interest - current year provision	-	(28,118)	(28,118)
Closing NAV as at 31 December 2015	31,946	498,077	530,023

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).

REALISED AND UNREALISED MOVEMENTS IN INVESTMENT PORTFOLIO for the year ended 31 December 2015
Investment name and ranking within investment portfolio at 31 December 2015
IRIS (2)	17.9
JLA (7)	17.6
Zenith (4)	15.4
TeamSystem (sold)	11.4
Visma (1)	7.9
P&I (5)	7.8
QUNDIS (9)	5.0
A-Plan (8)	4.4
Casa Reha (sold)	4.0
Hg6E	3.5
Allocate Software (17)	2.7
Frösunda (14)	2.5
Other	2.2
Sequel (22)	2.1
Intelliflo (21)	2.1
Teufel (23)	2.0
Parts Alliance (12)	2.0
Ullink (15)	1.9
Lumesse (16)	(1.7)
Radius (11)	(1.8)
NetNames (13)	(1.9)
Achilles (6)	(2.0)

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.

TOP 20 LTM SALES GROWTH: +10%
Growth rates	LTM Sales £' million	Number of investments within associated band	% of top 20 portfolio by value within associated band
<0% p.a.	150	3	11%
0% to <10% p.a.	961	10	41%
10% to <15% p.a.	259	3	17%
≥15% p.a.	919	4	31%

TOP 20 LTM PROFIT GROWTH: +12%
Growth rates	LTM EBITDA £' million	Number of investments within associated band	% of top 20 portfolio by value within associated band
<0% p.a.	43	4	13%
0% to <10% p.a.	135	5	26%
10% to <20% p.a.	260	5	41%
≥20% p.a.	79	6	20%

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.

TOP 20* EV TO EBITDA VALUATION MULTIPLE: 14.5x
EV to EBITDA bands	EBITDA £' million	Number of investments within associated band	% of top 20* portfolio by value within associated band
7.0x to <10.0x	39	4	10%
10.0x to <12.0x	78	2	14%
12.0x to <15.0x	127	8	28%
15.0x to <17.0x	219	3	37%
17.0x to <18.0x	52	1	11%
*Excluding two investments valued on a basis other than earnings.

TOP 20 DEBT TO EBITDA RATIO: 4.6x
Debt to EBITDA bands	Debt £' million	Number of investments within associated band	% of top 20 portfolio by value within associated band
(1.0x) to <3.0x	187	7	24%
3.0x to <4.0x	374	6	23%
4.0x to <5.0x	970	3	23%
5.0x to <7.0x	894	3	27%
≥7.0x	35	1	3%

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.

Fund	Fund vintage	Original commitment £'million	Outstanding commitments as at 31 December 2015		Outstanding commitments as at 31 December 2014
Fund	Fund vintage	Original commitment £'million	£'million	% of NAV	£'million	% of NAV
HGT 7 LP	2013	200.0	102.8	19.4%	146.9	30.8%
Hg Mercury	2011	60.0	27.5	5.2%	35.3	7.4%
HGT 6 LP	2009	285.0	17.9	3.4%	9.2	1.9%
RPP2	2010	29.5¹	8.2	1.5%	12.3	2.6%
HGT LP (Pre-HgCapital 6 vintage)	pre-2009	120.0²	1.3	0.2%	1.3	0.3%
RPP1	2006	15.9³	1.0	0.2%	1.1	0.2%
Hg6E⁴	2009	15.0	0.9	0.2%	0.5	0.1%
Total			159.6	30.1%	206.6	43.3%
Liquid resources			40.3	7.6%	62.9	13.2%
Net outstanding commitments unfunded by liquid resources			119.3	22.5%	143.7	30.1%
1 Sterling equivalent of €40.0 million. 2 Excluding any co-investment participations made through HGT LP. 3 Sterling equivalent of €21.6 million. 4 Partnership interest acquired during 2011.

	Fund limited partnerships	Residual cost £'000	Total valuation £'000	Portfolio value %
	Primary mid-cap buyout funds:
1	HGT 6 LP	194,232	273,265	55.5%
	HGT 6 LP - Provision for carried interest	-	(27,758)	(5.7%)
2	HGT 7 LP	87,717	107,624	21.8%
3	HGT LP	67,528	78,599	16.0%
	Total primary mid-cap buyout funds	349,477	431,730	87.6%
	Primary small-cap buyout funds:
4	HgCapital Mercury D LP	24,784	33,774	6.9%
	Total primary small-cap buyout funds	24,784	33,774	6.9%
	Secondary mid-cap buyout funds:
5	HgCapital 6 E LP	7,481	14,684	3.0%
	HgCapital 6 E LP - Provision for carried interest	-	(1,448)	(0.3%)
	Total secondary mid-cap buyout funds	7,481	13,236	2.7%

	Total buyout funds	381,742	478,740	97.2%
	Renewable energy funds:
6	HgCapital Renewable Power Partners 2 C LP	23,163	12,459	2.5%
7	HgRenewable Power Partners LP	4,724	1,425	0.3%
	Total renewable energy funds	27,887	13,884	2.8%

	Total investments net of carried interest provision	409,629	492,624	100.0%

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

INVESTMENTS MADE DURING THE YEAR¹
Company	Sector	Geography	Activity	Cost £'000
The Foundry	TMT	UK	Innovative software provider to creative professionals	17,177
A-Plan	Services	UK	Independent insurance broker	14,573
EidosMedia	TMT	Italy	Provider of digital publishing solutions	8,414
Eucon	TMT	Germany	Provider of automotive parts pricing data	4,408
ZitCom	TMT	Nordic region	Hosting and cloud solutions provider	3,771
New Investments				48,343
Achilles	TMT	UK	Cloud-based validation supplier	10,000
RPP1 and RPP2	Renewable energy	Europe	Further capital calls	3,478
Other investments				3,668
Further Investments				17,146
Total investments on behalf of the Trust				65,489

REALISATIONS MADE DURING THE YEAR¹
Company	Sector	Exit route	Proceeds² £'000
SimonsVoss	Industrials	Trade sale	18,180
Sporting Index	Consumer & Leisure	Trade sale	3,699
Full realisations			21,879
JLA	Services	Refinancing and minority sale	17,345
Zenith	Services	Refinancing	10,774
IRIS	TMT	Refinancing	6,239
Sequel	TMT	Refinancing	2,162
HgCapital 6 E LP	Fund	Distribution received	1,691
RPP1 Fund	Renewable energy	Distribution received	1,272
Other			2,625
Partial realisations			42,108
Total realisations on behalf of the Trust			63,987

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

	Investments (in order of value)	Fund	Sector	Location	Year of investment	Residual cost £'000	Total valuation⁵ £'000	Portfolio value %	Cum. value %
1	Visma¹	HGT 7/HGT 6/HGT	TMT	Nordic Region	2014	53,659	62,894	12.1%	12.1%
2	IRIS	HGT 6	TMT	UK	2011	25,598	56,376	10.8%	22.9%
3	TeamSystem (sold)	HGT 6	TMT	Italy	2010	24,432	45,078	8.6%	31.5%
4	Zenith	HGT 6	Services	UK	2013	16,245	37,293	7.1%	38.6%
5	P&I²	HGT 7/ HGT	TMT	Germany	2013	22,101	35,993	6.9%	45.5%
6	Achilles³	HGT	TMT	UK	2008	15,218	28,061	5.4%	50.9%
7	JLA	HGT 6	Services	UK	2010	3,511	20,678	4.0%	54.9%
8	A-Plan	HGT 7	Services	UK	2015	14,573	19,013	3.6%	58.5%
9	QUNDIS	HGT 6	Industrials	Germany	2012	12,540	18,180	3.5%	62.0%
10	The Foundry	HGT 7	TMT	UK	2015	17,177	17,514	3.4%	65.4%
11	Radius	HGT 6	Services	UK	2013	17,966	17,378	3.3%	68.7%
12	Parts Alliance	HGT 6	Services	UK	2012	10,495	12,557	2.4%	71.1%
13	NetNames	HGT 6	TMT	UK	2011	14,249	12,503	2.4%	73.5%
14	Frösunda	HGT 6	Healthcare	Nordic Region	2010	14,296	12,309	2.4%	75.9%
15	Ullink	HGT 7	TMT	France	2014	10,034	12,071	2.3%	78.2%
16	Lumesse	HGT 6	TMT	UK	2010	22,135	11,904	2.3%	80.5%
17	Allocate Software	Mercury	TMT	UK	2014	5,890	8,849	1.7%	82.2%
18	EidosMedia	HGT 7	TMT	Italy	2015	8,414	8,669	1.7%	83.9%
19	Atlas	HGT	Services	UK	2007	12,542	8,117	1.6%	85.5%
20	Casa Reha (sold)	HGT	Healthcare	Germany	2008	8,990	7,770	1.5%	87.0%
21	Intelliflo	Mercury	TMT	UK	2013	4,014	7,227	1.4%	88.4%
22	Sequel	Mercury	TMT	UK	2014	2,252	6,503	1.2%	89.6%
23	Teufel	HGT 6	Industrials	Germany	2010	10,799	6,477	1.2%	90.8%
24	SFC KOENIG	HGT	Industrials	Switzerland	2008	5,829	4,750	0.9%	91.7%
25	Eucon	Mercury	TMT	Germany	2015	4,408	4,361	0.8%	92.5%
26	Zitcom	Mercury	TMT	Nordic Region	2015	3,771	3,822	0.7%	93.2%
27	Mainio Vire	HGT 6	Healthcare	Nordic Region	2011	8,307	3,012	0.6%	93.8%
28	Relay	Mercury	TMT	Rep of Ireland	2014	1,800	2,580	0.5%	94.3%
29	Valueworks	Mercury	TMT	UK	2012	2,649	432	0.1%	94.4%
	Non-active investments⁴ (4)	HGT 6/HGT				367	891	0.1%	94.5%
	Total buyout investments (33)					374,261	493,262	94.5%
	Other buyout investments	Hg6E				7,481	14,684	2.8%	97.3%
	Renewable energy	RPP1/RPP2	Renewable energy			27,887	13,884	2.7%	100.0%
	Total investments					409,629	521,830	100.0%
¹Investment through HGT 7 LP, HGT 6 LP (following sale of e-conomic) and co-investment participation through HGT LP. ²Investment through HGT 7 LP and co-investment participation through HGT LP. ³Investment and co-investment participation through HGT LP. ⁴Residual ownerships in holding company structures, following earlier realisations of underlying operating company groups, awaiting liquidation and final proceeds. ⁵Including accrued income but before the provision for carried interest of £29,206,000.

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

INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2015
	Notes	Revenue return		Capital return		Total return
	Notes	2015 £'000	2014 £'000	2015 £'000	2014 £'000	2015 £'000	2014 £'000
Gains on investments, government securities and liquidity funds	13	-	-	46,122	34,752	46,122	34,752
Gains/(losses) on priority profit share loans recovered from/(advanced to) General Partners	5(b)	-	-	1,020	(2,435)	1,020	(2,435)
Net income	4	21,838	24,168	-	-	21,838	24,168
Other expenses	6(a)	(2,560)	(1,614)	-	-	(2,560)	(1,614)
Net return before finance costs and taxation		19,278	22,554	47,142	32,317	66,420	54,871
Finance costs	6(b)	(1,023)	(575)	-	-	(1,023)	(575)
Net return from ordinary activities before taxation		18,255	21,979	47,142	32,317	65,397	54,296
Taxation on ordinary activities	9(a)	(348)	(46)	-	-	(348)	(46)
Net return from ordinary activities after taxation attributable to reserves		17,907	21,933	47,142	32,317	65,049	54,250

Return per Ordinary share	10(a)	47.98p	58.76p	126.30p	86.58p	174.28p	145.34p
The total return column of this statement represents the Trust's income statement. The supplementary revenue and capital return columns are both prepared under guidance published by the Association of Investment Companies ('AIC'). All recognised gains and losses are disclosed in the revenue and capital columns of the income statement and as a consequence no statement of total recognised gains and losses has been presented. The movements in reserves are set out in note 21 to the financial statements. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. The following notes form part of these financial statements.

BALANCE SHEET AS AT 31 DECEMBER 2015
	Notes	2015 £'000	2014 £'000
Fixed asset investments
Investments at fair value through profit and loss:
Unquoted investments	12	428,462	359,930
Total fixed asset investments		428,462	359,930
Current assets - amounts receivable after one year:
Accrued income on fixed assets	14	64,162	54,311
Current assets - amounts receivable within one year:
Debtors	14	707	632
Investments at fair value through profit and loss:
Government securities and liquidity funds	15	30,835	59,859
Cash	16	9,512	3,021
Total current assets		105,216	117,823
Creditors - amounts falling due within one year	17	(3,655)	(835)
Net current assets		101,561	116,988

Net assets		530,023	476,918
Capital and reserves:
Called up share capital	20	9,331	9,331
Share premium account	21	120,368	120,368
Capital redemption reserve	21	1,248	1,248
Capital reserve - unrealised	21	14,023	(33,390)
Capital reserve - realised	21	353,107	353,378
Revenue reserve	21	31,946	25,983
Total equity shareholders' funds		530,023	476,918

Net asset value per Ordinary share	10(b)	1,420.0p	1,277.8p

Ordinary shares in issue at 31 December		37,324,698	37,324,698
The financial statements were approved and authorised for issue by the Board of Directors on 4 March 2016 and signed on its behalf by: Roger Mountford, Chairman Richard Brooman, Director The following notes form part of these financial statements.

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2015
	Notes	2015 £'000	2014 £'000
Net cash inflow from operating activities	7	11,390	17,284

Investing activities:
Purchase of fixed asset investments	12	(65,489)	(86,962)
Proceeds from the sale of fixed asset investments	12	43,070	57,752
Purchase of government securities and liquidity funds	15	(31,559)	(62,552)
Sale/redemption of government securities and liquidity funds	15	60,796	84,466
Net cash inflow/(outflow) from investing activities		6,818	(7,296)
Financing activities:
Proceeds from/(repayment of) loan facility		1,250	(1,184)
Servicing of finance		(1,023)	(575)
Equity dividends paid	11	(11,944)	(17,916)
Net cash outflow from financing activities		(11,717)	(19,675)

Increase/(decrease) in cash and cash equivalents in the year	16	6,491	(9,687)
Cash and cash equivalents at 1 January	16	3,021	12,708
Cash and cash equivalents at 31 December	16	9,512	3,021
The following notes form part of these financial statements.

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2015
		Non-distributable				Distributable
	Notes	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserve - unrealised £'000	Capital reserve - realised £'000	Revenue reserve £'000	Total £'000
At 31 December 2014		9,331	120,368	1,248	(33,390)	353,378	25,983	476,918
Net return from ordinary activities		-	-	-	47,413	(271)	17,907	65,049
Equity dividend paid	11	-	-	-	-	-	(11,944)	(11,944)
At 31 December 2015	20,21	9,331	120,368	1,248	14,023	353,107	31,946	530,023

At 31 December 2013		9,331	120,368	1,248	(38,526)	326,197	21,966	440,584
Net return from ordinary activities		-	-	-	5,136	27,181	21,933	54,250
Equity dividends paid	11	-	-	-	-	-	(17,916)	(17,916)
At 31 December 2014	20,21	9,331	120,368	1,248	(33,390)	353,378	25,983	476,918
The following notes form part of these 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.

4. Income
	Revenue return
	2015 £'000	2014 £'000
Income from investments held by HGT LP, HGT 6 LP, HGT 7 LP and HgCapital Mercury D LP:
UK unquoted investment income	17,536	9,099
Foreign unquoted investment income	13,129	13,620
Foreign dividend income	-	7,093
Other investment income:
UK unquoted investment income	103	441
Interest from government securities less amortisation of premium	-	(99)
Liquidity funds income	263	329
Total investment income	31,031	30,483

Total other income	46	36

Total income	31,077	30,519
Priority profit share charge against income:
Current year - HGT 7 LP	(3,793)	(2,059)
Current year - HGT 6 LP	(3,120)	(3,105)
Current year - HgCapital Mercury D LP	(1,725)	(32)
Current year - HGT LP	(601)	(1,155)
Total priority profit share charge against income	(9,239)	(6,351)

Total net income	21,838	24,168
Total net income comprises:
Interest	21,799	17,058
Dividend	-	7,093
Non-interest income	39	17
Total net income	21,838	24,168

5. Priority profit share and carried interest

(a) Priority profit share payable to General Partners	Revenue return
(a) Priority profit share payable to General Partners	2015 £'000	2014 £'000
Priority profit share payable:
Current year amount	8,219	8,786
Less: Current year loans advanced to General Partners	-	(2,435)
Add: Prior year loans recovered from General Partners	1,020	-
Current year charge against income	9,239	6,351
Total priority profit share charge against income	9,239	6,351

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:

Fund partnership	Fee per year
HGT 7 LP	1.75% on the fund commitment during the investment period
HgCapital Mercury D LP	1.75% on the fund commitment during the investment period
HGT 6 LP	1.5% of original cost of investments in the fund less the original cost of investments that have been realised or written off (previously 1.75% of the fund commitment during the investment period that ended on 19 November 2013)
HGT LP	1.5% on the value of investments in fund (excluding co-investments)

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.

Fund partnership	Fee per year
HgCapital 6 E LP	1.5% of original cost of investments in the fund, less the original cost of investments that have been realised or written off (previously 1.75% of the fund commitment during the investment period that ended on 19 November 2013)
HgCapital Renewable Power Partners 2 C LP	1.25% of lesser of value or cost of investments (previously 1.64% of the fund commitment during the investment period that ended on 27 May 2015 and was subsequently extended to 31 December 2015)
Hg Renewable Power Partners LP	1.5% of original cost of investments in the fund, less the original cost of investments that have been realised or written off (previously 1.75% of the fund commitment during the investment period that ended on 31 May 2010)

(b) Priority profit share loans to General Partners	Capital return
(b) Priority profit share loans to General Partners	2015 £'000	2014 £'000
Movements on loans to General Partners:
Losses on current year loans advanced to General Partners	-	(2,435)
Gains on prior year loans recovered from General Partners	1,020	-
Total gains/(losses) on priority profit share loans recovered from/(advanced to) General Partners	1,020	(2,435)

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.

(c) Carried interest to Founder Partners	Capital return
(c) Carried interest to Founder Partners	2015 £'000	2014 £'000
Carried interest provision:
Current year amount provided	28,118	1,088
Total carried interest charge against capital gains (note 13)	28,118	1,088

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

	Revenue return
(a) Operating expenses	2015 £'000	2014 £'000
Custodian, management and administration fees	549	537
Directors' remuneration (note 8)	203	215
Share of aborted deal fees	989	336
Legal and other administration costs	655	431
	2,396	1,519
Fees payable to the Trust's auditor in relation to the Trust and Fund Limited Partnerships:
Audit fees	64	61
Tax compliance services	32	31
Other non-audit services	68	3
Total fees payable to the Trust's auditor	164	95
Total other expenses	2,560	1,614

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

	Revenue return
(b) Finance costs	2015 £'000	2014 £'000
Interest paid	-	31
Non-utilisation fees and other expenses	383	424
Arrangement fees	640	120
Total finance costs	1,023	575

Arrangement fees of £120,000 that were included in legal and other administration costs in 2014; have been reclassified as finance costs and the relevant balances have been restated accordingly.

7. Cash flow from operating activities

Reconciliation of net return before finance costs and taxation to net cash flow from operating activities	2015 £'000	2014 £'000
Net return before finance costs and taxation	66,420	54,871
Add back: gains on investments held at fair value	(74,240)	(35,840)
Increase in carried interest provision	28,118	1,088
Amortisation of premium on government securities	-	1,618
Increase in accrued income from government securities and liquidity funds	(204)	(278)
Increase in prepayments, accrued income and other debtors	(9,825)	(3,958)
Increase/(decrease) in creditors	761	(506)
Taxation received	360	289
Net cash inflow from operating activities	11,390	17,284

8. Directors' remuneration

The aggregate remuneration of the Directors for the year to 31 December 2015 was £203,000 (2014: £215,000).

Further information on the Directors' remuneration is disclosed in the Directors' remuneration report in the full Annual Report and Accounts.

9. Taxation on ordinary activities

In the opinion of the Directors, the Trust has complied with the requirements of Section 1158 and Section 1159 of the CTA 2010 and will therefore be exempt from corporation tax on any capital gains reflected in the capital return during the year. The Trust will elect to designate all of the proposed dividend (see note 11) as an interest distribution to its shareholders. This distribution is treated as a tax deduction against taxable income in the revenue return and results in a reduction of corporation tax being payable by the Trust at 31 December 2015.

The standard rate of corporation tax in the UK for a large company changed from 21% to 20% with effect from 1 April 2015, implying an effective pro-rata tax rate for the current year of 20.25% (2014: 21.5%). However, the tax charge in the current and prior year was lower than the standard effective pro-rata tax rate, largely due to the reduction in corporation tax from the interest distribution noted above. The effect of this and other items affecting the tax charge is shown in note 9(b) below.

	Revenue return
(a) Analysis of charge in the year	2015 £'000	2014 £'000
Current tax:
UK corporation tax	3,806	2,737
Income streaming relief	(3,024)	(2,568)
Prior year adjustment	(333)	(180)
Current revenue tax charge/(credit) for the year	449	(11)
Deferred tax:
(Origination)/reversal of timing differences	(101)	57
Total deferred tax (credit)/charge for the year (note 9(c))	(101)	57
Total taxation charge on ordinary activities	348	46

	Revenue return
(b) Factors affecting current tax charge for the year	2015 £'000	2014 £'000
Net revenue return on ordinary activities before taxation	18,255	21,979

UK corporation tax charge at 20.25% thereon (2014: 21.5%)	3,697	4,725
Effects of:
Tax relief from interest distribution	(3,024)	(2,568)
Non-taxable investment income	-	(1,706)
Impact of change in tax rates	8	34
Prior year excess operating expenses utilised in current year	-	(259)
Prior year tax adjustment	(333)	(180)
Total differences	(3,349)	(4,679)

Total taxation charge on ordinary activities	348	46

(c) Deferred tax	Revenue return
(c) Deferred tax	2015 £'000	2014 £'000
Deferred tax:
Movement in taxable income not recognised in revenue return	(101)	57
Prior year adjustment for excess operating expenses	-	(259)
Prior year excess operating expenses utilised in current year	-	259
Total deferred tax (credit)/charge for the year (note 9(a))	(101)	57

Deferred tax recoverable:
Recoverable deferred tax at 31 December	567	624
Deferred tax credit/(charge) for the year	101	(57)
Recoverable deferred tax at end of year (note 14)	668	567

Deferred tax assets of £668,000 (2014: £567,000) are recognised at a rate of 20% (2014: 20.25%) in respect of the net amounts of taxable income that have not yet been recognised in the revenue return, but are expected to be recognised in the revenue return for therefore accounting period ending 31 December 2016, during which the corporation tax rate will be 20%.

10. Return and net asset value per Ordinary share

(a) Return per Ordinary share	Revenue return		Capital return
(a) Return per Ordinary share	2015	2014	2015	2014
Amount (£'000):
Return from ordinary activities after taxation	17,907	21,933	47,142	32,317
Number of Ordinary shares ('000):
Weighted average number of shares in issue	37,325	37,325	37,325	37,325
Return per Ordinary share (pence)	47.98	58.76	126.30	86.58

(b) Net asset value per Ordinary share	Capital return
(b) Net asset value per Ordinary share	2015	2014
Amount (£'000):
Net assets	530,023	476,918
Number of Ordinary shares ('000):
Number of Ordinary shares in issue	37,325	37,325
Net asset value per Ordinary share (pence)	1,420.0	1,277.8

11. Dividends on Ordinary shares

	Record date	Payment date	2015 £'000	2014 £'000
Dividend of 32.0p for the year ended 31 December 2014	7 April 2015	18 May 2015	11,944	-
Special dividend of 19.0p during the year ended 31 December 2014	5 September 2014	26 September 2014	-	7,092
Dividend of 29.0p for the year ended 31 December 2013	4 April 2014	16 May 2014	-	10,824
Total equity dividends paid			11,944	17,916

The proposed dividend of 40.0 pence per Ordinary share for the year ended 31 December 2015 is subject to approval by the shareholders at the annual general meeting and has not been included as a liability in these financial statements. The total dividends payable in respect of the financial year, which form the basis of the retention test as set out in Section 1159 of the CTA 2010, are set out below:

	2015 £'000
Revenue available for distribution by way of dividend for the year	17,907
Proposed dividend of 40.0p for the year ended 31 December 2015 (based on 37,324,698 Ordinary shares in issue at 31 December 2015)	(14,930)
Undistributed revenue for Section 1159 purposes*	2,977
*Undistributed revenue comprises 13.5% of the estimated total taxable income of £21,996,000.

12. Fixed asset investments

	2015 £'000	2014 £'000
Investments held at fair value through profit and loss:
Unquoted investments held in HGT 6 LP	235,441	212,406
Unquoted investments held in HGT 7 LP	100,654	47,955
Unquoted investments held in HGT LP	62,387	54,458
Unquoted investments held in HgCapital Mercury D LP	30,618	20,645
Other unquoted investments held by the Trust	28,568	25,554
Total fixed asset investments gross of carried interest provision	457,668	361,018
Carried interest provision (note 5(c))	(29,206)	(1,088)
Total fixed asset investments	428,462	359,930
Total fixed asset investments consist of:
Fund limited partnerships	428,462	359,930

	2015 £'000	2014 £'000
Opening valuation as at 1 January	359,930	295,960
Add back: opening unrealised depreciation - investments	26,925	35,279
Add back: opening carried interest provision	1,088	-
Opening book cost as at 1 January	387,943	331,239
Movements in the year:
Additions at cost	65,489	86,962
Disposals - proceeds	(43,070)	(57,752)
- realised (losses)/gains on sales	(733)	27,494
Closing book cost of investments	409,629	387,943
Add: closing unrealised appreciation - investments	48,039	(26,925)
Less: closing carried interest provision	(29,206)	(1,088)
Closing valuation of investments as at 31 December	428,462	359,930

The above investments include investments in companies that are indirectly held by the Trust through its investment in HGT LP, HGT 6 LP, HGT 7 LP and HgCapital Mercury D LP, as set out in note 3 above, and investments in fund limited partnerships in HgCapital 6 E LP, Hg Renewable Power Partners LP and HgCapital Renewable Power Partners 2 C LP.

13. Gains/(losses) on investments, government securities and liquidity funds

	Capital return
	2015 £'000	2014 £'000
Realised:
Realised (losses)/gains on sales - fixed asset investments	(733)	27,494
- liquidity funds	462	19
- government securities	-	(332)
Net realised (losses)/gains	(271)	27,181
Unrealised:
Unrealised gains/(losses) - fixed asset investments	74,964	8,354
- liquidity funds	(453)	10
- government securities	-	295
	74,511	8,659
Carried interest charge against capital gains (note 5(c))	(28,118)	(1,088)
Net unrealised gains	46,393	7,571

Total gains	46,122	34,752

14. Debtors and accrued income

	2015 £'000	2014 £'000
Accrued income on fixed assets	64,162	54,311
Amounts receivable within one year:
Deferred tax recoverable (note 9(c))	668	567
Prepayments and other accrued income	39	65
Total amounts receivable within one year	707	632

Total debtors	64,869	54,943

The Directors consider that the carrying amount of debtors approximates their fair value.

15. Government securities and liquidity funds

	2015 £'000	2014 £'000
Investments held at fair value through profit and loss:
Opening valuation	59,859	83,121
Purchases at cost	31,559	62,552
Sales and redemptions	(60,796)	(84,466)
Movement in unrealised capital (losses)/gains	(453)	305
Amortisation of premium on acquisition	-	(1,618)
Accrued income	204	278
Realised capital gains/(losses)	462	(313)
Closing valuation	30,835	59,859

16. Movement in net funds

	2015 £'000	2014 £'000
Analysis and reconciliation of net funds:
Change in cash	6,491	(9,687)
Net funds at 1 January	3,021	12,708
Net funds at 31 December	9,512	3,021
Net funds comprise:
Cash	9,512	3,021

Cash includes £1,214,000 held by the fund limited partnerships in which the Trust is the sole limited partner.

17. Creditors - amounts falling due within one year

	2015 £'000	2014 £'000
Taxation payable	978	169
Loan facility (note 18)	1,487	237
Sundry creditors	1,190	429
Total creditors	3,655	835

The Directors consider that the carrying amount of creditors approximate their fair value.

18. Bank facility

On 24 August 2011, the Trust entered into a £40,000,000 multi-currency revolving credit standby facility on an unsecured basis. The facility was initially available for three years before it was extended during August 2014 to 31 December 2015. In December 2015, the facility was extended by a further three and a half years to 30 June 2019. In addition, the facility was increased to £80,000,000, with an additional £40,000,000 available from 31 December 2016. Under the facility agreement, the Trust is liable to pay interest on any drawn amount at LIBOR plus a margin of 2.25% to 2.50%, dependent on the loan to value ratio. A commitment fee of 0.95% p.a. is liable on any undrawn commitment and a ticking fee of 0.30% p.a. is liable on the increase of £40,000,000 during 2016 only. The facility was undrawn as at the end of the year.

On 28 November 2012, HgCapital Mercury D LP, alongside the other Hg Mercury funds, entered into a four-year multi-currency revolving term loan facility to provide short-term funds to facilitate acquisitions. HgCapital Mercury D LP participated for an amount of £4,736,842. Under the facility agreement, it is liable to pay interest on any drawn amount at base rate plus a margin of 3.00%. A commitment fee of 0.50% p.a. is liable on any undrawn commitment. At the end of the year, the Trust's indirect share of amounts drawn via HgCapital Mercury D LP, was £1,487,000.

19. Financial risk

The following disclosures relating to the risks faced by the Trust are provided in accordance with International Financial Reporting Standard 7, 'Financial instruments: disclosures'. The reference to investments in this note is in relation to the Trust's direct investments in Hg RPP LP, Hg RPP 2 LP, Hg6E LP and the underlying investments in HGT LP, HGT 6 LP, HGT 7 LP and HgCapital Mercury D LP as described in note 3 above.

Financial instruments and risk profile

As a private equity investment trust, the Trust's investment objective is to achieve long-term capital appreciation by indirectly investing in unquoted companies. It does this through its investments in fund partnerships, mostly in the UK and Europe. Additionally, the Trust holds UK government securities, cash, liquidity funds and items such as debtors and creditors arising directly from its operations. In pursuing its investment objective, the Trust is exposed to a variety of risks that could result in either a reduction of the Trust's net assets or a reduction in the profits available for distribution by way of dividends. Valuation risk, market risk (comprising currency risk and interest rate risk), liquidity risk and credit risk, and the Directors' approach to the management of them, are described below. The Board and the Manager coordinate the Trust's risk management. The objectives, policies and processes for managing the risks, and the methods used to manage the risks, that are set out below, have not changed from the previous accounting period.

Valuation risk

The Trust's exposure to valuation risk arises mainly from movements in the value of the underlying investments (held through fund partnerships), the majority of which are unquoted. A breakdown of the Trust's portfolio is given above and a breakdown of the most significant underlying investments is given above. In accordance with the Trust's accounting policies, the investments in fund limited partnerships are valued by reference to their underlying unquoted investments, which are valued by the Directors following the IPEV Valuation Guidelines. The Trust does not hedge against movements in the value of these investments, apart from foreign exchange movements as explained below, though the borrowing arranged to fund these investments is normally denominated in the currency in which the business is operating. The Trust has exposure to interest rate movements, through bank deposits, UK government securities and liquidity funds.

In the opinion of the Directors, the diversified nature of the Trust's portfolio significantly reduces the risks of investing in unquoted companies.

IAS 39 requires the Trust to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The level in the fair value hierarchy, within which the fair value measurement is categorised in its entirety, is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes an 'observable' input requires significant judgement by the Board. The Board considers observable data relating to investments actively traded in organised financial markets, in which case fair value is generally determined by reference to stock exchange quoted market bid prices at the close of business on the balance sheet date, without adjustment for transaction costs necessary to realise the asset.

The following table analyses, within the fair value hierarchy, the fund's financial assets (by class) measured at fair value at 31 December.

	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Investments held at fair value through profit and loss:
Unquoted investments - Investment in HGT 6 LP	-	-	235,441	235,441
- Investment in HGT 7 LP	-	-	100,654	100,654
- Investment in HGT LP	-	-	62,387	62,387
- Investment in HgCapital Mercury D LP	-	-	30,618	30,618
- Investment in Hg 6 E LP	-	-	14,684	14,684
- Investment in Hg RPP2 LP	-	-	12,459	12,459
- Investment in Hg RPP LP	-	-	1,425	1,425
- Liquidity funds	-	30,835	-	30,835
- Carried interest provision	-	-	(29,206)	(29,206)
Other assets:
Accrued income	-	-	64,162	64,162
As at 31 December 2015	-	30,835	492,624	523,459

	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Investments held at fair value through profit and loss:
Unquoted investments - Investment in HGT 6 LP	-	-	212,406	212,406
- Investment in HGT LP	-	-	54,458	54,458
- Investment in HGT 7 LP	-	-	47,955	47,955
- Investment in HgCapital Mercury D LP	-	-	20,645	20,645
- Investment in Hg 6 E LP	-	-	13,327	13,327
- Investment in Hg RPP2 LP	-	-	9,506	9,506
- Investment in Hg RPP LP	-	-	2,721	2,721
- Liquidity funds	-	59,859	-	59,859
- Carried interest provision	-	-	(1,088)	(1,088)
Other assets:
Accrued income	-	-	54,311	54,311
As at 31 December 2014	-	59,859	414,241	474,100

Investments whose values are based on quoted market prices in active markets, and therefore classified within level 1, include government securities and actively traded listed equities. The Trust does not adjust the quoted bid price of these investments.

Financial instruments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs, are classified within level 2. As level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.

Investments classified within level 3 have significant unobservable inputs. Level 3 instruments include private equity and corporate debt securities. As observable prices are not available for these securities, the Board has used valuation techniques to derive the fair value. In respect of unquoted instruments, or where the market for a financial instrument is not active, fair value is established by using recognised valuation methodologies, in accordance with IPEV Valuation Guidelines. Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction.

There were no transfers of assets from level 1 to level 2 or 3, level 2 to level 1 or 3 and level 3 to level 1 or 2.

The following table presents the movement in level 3 investments for the year ended 31 December 2015 by class of financial instrument.

	Accrued income on investments 2015 £'000	Investments in limited partnerships 2015 £'000	Total 2015 £'000
Unquoted investments:
Opening balance	54,311	359,930	414,241
Purchases	-	65,489	65,489
Realisations at 31 December 2014 valuation	(15,927)	(34,643)	(50,570)
Total gains for the year included in the income statement	25,778	65,804	91,582
Movement in carried interest provision	-	(28,118)	(28,118)
Closing unrealised valuation of level 3 investments	64,162	428,462	492,624

Total gains for the year included in the income statement for investments held at the end of the year	28,638	44,687	73,325

Equity price risk

Equity price risk is the risk of a fall in the fair value of the Trust's ownership interests (comprising equities and shareholder loans) held by the Trust indirectly through its direct investments in fund limited partnerships. The Board revalues each investment twice each year. The Board manages the risks inherent in the investment portfolio by ensuring full and timely access to relevant information from the Manager. The Board meets regularly and at each meeting reviews the trading performance of the principal underlying investments. If there appears to the Board to be an impairment in value between regular valuations, it can revalue the investment. The Board also monitors the Manager's compliance with the Trust's investment objective and investment policy.

The Manager's best estimate of the effect on the net assets and total return due to a reasonably possible change in the value of all unquoted securities, with all other variables held constant, is as follows:

Change

£'000

NAV per

Ordinary

Pence

Sensitivity to equity price risk:

Unquoted investments

±10%

±49,262

±132.0

Credit risk

Credit risk is the risk of financial loss in the event that any of the Trust's market counterparties fail to fulfil their contractual obligations to the Trust. The Trust's financial assets (excluding fixed asset investments) that are subject to credit risk, were neither impaired nor overdue at the year-end. The Trust's cash balances were held with the Royal Bank of Scotland and amounts not required for day-to-day use were invested in liquidity funds managed by Royal London Asset Management which are rated AAA by Fitch. Foreign exchange forward contracts and options are held with counterparties which have credit ratings which the Board considers to be adequate. The Board regularly monitors the credit quality and financial position of these market counterparties. The credit quality of the above mentioned financial assets was deemed satisfactory.

Market risk

The fair value of future cash flows of a financial instrument held by the Trust may fluctuate due to changes in market prices of comparable businesses. This market risk may comprise: currency risk (see below), interest rate risk and/or equity price risk (see above). The Board of Directors reviews and agrees policies for managing these risks. The Manager assesses the exposure to market risk when making each investment decision, and monitors the overall level of market risk on the whole of the investment portfolio on an on-going basis.

Currency risk and sensitivity

The Trust is exposed to currency risk as a result of investing in fund partnerships which invest in companies that operate and are therefore valued in currencies other than sterling. The value of these assets in sterling, being the Trust's functional currency, can be significantly influenced by movements in foreign exchange rates. Borrowing raised to fund each acquisition in such companies is normally denominated in the currency in which the business is operating and valued, thus limiting the Trust's exposure to the value of its investments rather than the gross value. From time to time, the Trust is partially hedged against movements in the value of foreign currency against sterling where a movement in exchange rate could affect the value of an investment, as explained below. The Manager monitors the Trust's exposure to foreign currencies and reports to the Board on a regular basis. The following table illustrates the sensitivity of the revenue and capital return for the year in relation to the Trust's year-end financial exposure to movements in foreign exchange rates against sterling. The rates represent the range of movements against sterling over the current year for the currencies listed.

In the opinion of the Directors, the sensitivity analysis below may not be representative of the year as a whole, since the level of exposure changes as the portfolio changes through the purchase and realisation of investments to meet the Trust's objectives.

	Revenue return		Capital return
	£'000	NAV per Ordinary share Pence	£'000	NAV per Ordinary share Pence
Highest value against sterling during the year:
Danish krone (9.4705)	-	-	1,555	4.2
Euro (1.2727)	2,109	5.7	8,952	24.0
Norwegian krone (11.2839)	-	-	6,906	18.5
Swedish krona (11.9933)	170	0.5	274	0.7
Swiss franc (1.2897)	296	0.8	388	1.0
US dollar (1.4642)	-	-	116	0.3
	2,575	7.0	18,191	48.7
Lowest value against sterling during the year:
Danish krone (10.7486)	-	-	(1,304)	(3.5)
Euro (1.4405)	(1,854)	(5.0)	(7,873)	(21.1)
Norwegian krone (13.2635)	-	-	(725)	(1.9)
Swedish krona (13.6341)	(417)	(1.1)	(674)	(1.8)
Swiss franc (1.5513)	(101)	(0.3)	(132)	(0.4)
US dollar (1.5884)	-	-	(1,253)	(3.4)
	(2,372)	(6.4)	(11,961)	(32.1)

At 31 December 2015, the following rates were applied to convert foreign denominated assets into sterling: Danish krone (10.1254); euro (1.3568); Norwegian krone (13.0460); Swedish krona (12.4259); Swiss franc (1.4754); and US dollar (1.4739).

Portfolio hedging

At times, the Trust uses derivative financial instruments such as forward foreign currency contracts and option contracts to manage the currency risks associated with its underlying investment activities. The contracts entered into by the Trust are denominated in the foreign currency of the geographic areas in which the Trust has significant exposure against its reporting currency. The contracts are designated as a hedge and the fair values thereof are recorded in the balance sheet as investments held at fair value. Unrealised gains and losses are taken to capital reserves. At the balance sheet date, there were no outstanding derivative financial instruments.

The Trust does not trade in derivatives but may hold them from time to time to hedge specific exposures with maturities designed to match the exposures they are hedging. It is the intention to hold both the financial investments giving rise to the exposure and the derivatives hedging them until maturity and therefore no net gain or loss is expected to be realised.

Derivatives are held at fair value which represents the replacement cost of the instruments at the balance sheet date. Movements in the fair value of derivatives are included in the income statement. The Trust does not adopt hedge accounting in the financial statements.

Interest rate risk and sensitivity

The Trust has exposure to interest rate movements as this may affect the fair value of funds awaiting investment, interest receivable on liquid assets and managed liquidity funds, and interest payable on borrowings. The Trust has little immediate direct exposure to interest rates on its fixed assets, as the majority of the underlying investments are fixed rate loans or equity shares that do not pay interest. Therefore, and given that the Trust has no borrowings and maintains low cash levels, the Trust's revenue return is not materially affected by changes in interest rates.

However, funds awaiting investment have been invested in managed liquidity funds and, as stated above, their valuation is affected by movements in interest rates. The sensitivity of the capital return of the Trust to movements in interest rates has been based on the UK base rate. With all other variables constant, a 0.5% decrease in the UK base rate should increase the capital return in a full year by about £50,000, with a corresponding decrease if the UK base rate were to increase by 0.5%. In the opinion of the Directors, the above sensitivity analyses may not be representative of the year as a whole, since the level of exposure changes as investments are made and realised throughout the year.

Liquidity risk

Investments in unquoted companies, which form the majority of the Trust's investments, may not be as readily realisable as investments in quoted companies, which might result in the Trust having difficulty in meeting its obligations. Liquidity risk is currently not significant as 8% of the Trust's net assets at the year-end are liquid resources and, in addition, the Trust has a £40 million multi-currency undrawn bank facility available. The Board gives guidance to the Manager as to the maximum amount of the Trust's resources that should be invested in any one company. For further details refer to The Trust's Investment Policy on page 11 in the full Annual Report and Accounts.

Currency and interest rate exposure

The Trust's financial assets that are subject to currency and interest rate risk are analysed below:

	2015				2014
	Fixed and floating rate £'000	Non- interest- bearing £'000	Total £'000	Total %	Floating rate £'000	Non- interest- bearing £'000	Total £'000	Total %
Sterling	39,546	224,071	263,617	49.5	62,852	186,374	249,226	52.3
Euro	-	167,399	167,399	31.4	28	138,567	138,595	29.0
Norwegian krone	-	44,228	44,228	8.3	-	36,338	36,338	7.6
Danish krone	801	22,488	23,289	4.4	-	19,951	19,951	4.2
US dollar	-	17,378	17,378	3.3	-	19,147	19,147	4.0
Swedish krona	-	12,309	12,309	2.3	-	9,822	9,822	2.1
Swiss franc	-	4,751	4,751	0.8	-	4,042	4,042	0.8
Total	40,347	492,624	532,971	100.0	62,880	414,241	477,121	100.0

Short-term debtors and creditors, which are excluded, are mostly denominated in sterling, the functional currency of the Trust. The fixed and floating rate assets consisted of cash and liquidity funds, of which the underlying investments are a combination of fixed and floating rate. The non-interest-bearing assets represent the investment portfolio held in fund limited partnerships and the provision for carried interest.

Through its investment into the HgCapital Mercury D LP fund, the Trust had outstanding borrowings of £1,487,000 (note 17 and 18) at the year-end (2014: £237,000). The numerical disclosures above exclude short-term debtors and creditors.

Capital management policies and procedures

The Trust's capital management objectives are to ensure that it will be able to finance its business as a going concern and to maximise the revenue and capital return to its equity shareholders.

The Trust's capital at 31 December comprised:

	2015 £'000	2014 £'000
Equity:
Equity share capital	9,331	9,331
Share premium	120,368	120,368
Capital redemption reserve	1,248	1,248
Retained earnings and other reserves	399,076	345,971
Total capital	530,023	476,918

With the assistance of the Manager, the Board monitors and reviews the broad structure of the Trust's capital on an on-going basis. This review covers: This review covers:

• the projected level of liquid funds (including access to bank facilities);

• the desirability of buying back equity shares, either for cancellation or to hold in treasury, balancing the effect (if any) this may have on the discount at which shares in the Trust are trading against the advantages of retaining cash for investment;

• the opportunity to raise funds by an issue of equity shares; and

• the extent to which revenue in excess of that which is required to be distributed should be retained, whilst maintaining its status under Section 1158 of the CTA 2010.

The Trust's objectives, policies and processes for managing capital are unchanged from the preceding accounting period.

20. Called-up share capital

	2015		2014
	No. '000	£'000	No. '000	£'000
Ordinary shares of 25p each:
Allotted, called-up and fully paid:
At 1 January	37,325	9,331	37,325	9,331
At 31 December	37,325	9,331	37,325	9,331

Total called-up share capital	37,325	9,331	37,325	9,331

Whilst the Trust no longer has an authorised share capital, the Directors will still be limited as to the number of shares they can at any time allot as the Companies Act 2006 requires that Directors seek authority from shareholders for the allotment of new shares.

21. Share premium account and reserves

	Share premium account £'000	Capital redemption reserve £'000	Capital reserve unrealised £'000	Capital reserve realised £'000	Revenue reserve £'000
As at 1 January 2015	120,368	1,248	(33,390)	353,378	25,983
Transfer on disposal of investments	-	-	9,160	(9,160)	-
(Losses)/gains on government securities and liquidity funds	-	-	(453)	462	-
Net gain on sale of fixed asset investments	-	-	-	8,427	-
Net movement in unrealised appreciation of fixed asset investments	-	-	65,804	-	-
Dividend paid	-	-	-	-	(11,944)
Net return for the year after taxation	-	-	-	-	17,907
Loans recovered from General Partners	-	-	1,020	-	-
Carried interest provision	-	-	(28,118)	-	-
As at 31 December 2015	120,368	1,248	14,023	353,107	31,946

22. Commitment in fund partnerships and contingent liabilities

Fund	Original commitment £'000	Outstanding at 31 Dec
Fund	Original commitment £'000	2015 £'000	2014 £'000
HGT 7 LP¹	200,000	102,765	146,948
HgCapital Mercury D LP	60,000	27,540	35,335
HGT 6 LP	285,029	17,860	9,227
Hg RPP2 LP	29,481²	8,219³	12,247
HGT LP⁴	120,000	1,261	1,261
Hg RPP LP	15,949⁵	1,016⁶	1,070
Hg 6 E LP	15,000	940	486
Total outstanding commitments		159,601	206,574
¹HgCapital Trust plc has the benefit of an investment opt-out provision in its commitment to invest alongside HgCapital 7, so that it can opt out of a new investment without penalty should it not have the cash available to invest. ²Sterling equivalent of €40,000,000. ³Sterling equivalent of €11,152,000 (2014: €15,782,000). ⁴With effect from 21 October 2011, £12.0 million of the commitment was cancelled, followed by £9.0 million on 31 March 2013 and £4.7 million on 1 August 2014. These amounts represent 10.0%, 7.5% and 3.9% respectively of the original £120 million commitment to the HgCapital 5 fund. ⁵Sterling equivalent of €21,640,000. ⁶Sterling equivalent of €1,378,000 (2014: €1,378,000).

23. Key agreements, related party transactions and ultimate controlling party

HgCapital acts as Manager of the Trust through a management agreement and indirectly participates through fund limited partnership agreements as the general partners and, alongside a number of HgCapital's executives (past and present), as the founder partners of the fund partnerships in which the Trust invests. In addition, HgCapital acted as Secretary until 12 May 2015 (from which date the Board appointed Capita Company Secretarial Services Limited to act as Secretary) and acts as Administrator of the Trust.

The Trust has no related parties and no ultimate controlling party.

INDEPENDENT AUDITOR'S REPORT

The Trust's financial statements for the year ended 31 December 2015 have been audited by Deloitte LLP. The text of the Auditor's Report can be found on pages 85 to 87 of the Trust's full Annual Report and Accounts.

CORPORATE GOVERNANCE

EXTRACT FROM THE DIRECTORS' REPORT

The Directors present the Annual Report and Accounts of HgCapital Trust plc (the 'Trust') (Reg. No. 1525583) for the year ended 31 December 2015.

The Corporate Governance Statement forms part of this Directors' Report.

Results and dividend

The total return for the Trust is set out in the income statement above. The total return after taxation for the year, was £65,049,000 (2014: £54,250,000) of which the revenue return was £17,907,000 (2014: revenue return of £21,933,000).

The Directors recommend the payment of a dividend of 40.0 pence per Ordinary share for the year ended 31 December 2015 (2014: 32.0 pence). Subject to approval of this dividend at the forthcoming annual general meeting ('AGM'), it will be paid on 16 May 2016 to shareholders on the register of members at the close of business on 8 April 2016.

Greenhouse gas emissions

The Company has no greenhouse gas emissions to report from the operations of the Company, nor does it have responsibility for any other emissions producing sources reportable under the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013.

Stewardship

Our Manager, HgCapital, seeks to invest in companies that are well managed, with high standards of corporate governance.

The Directors of the Trust believe this creates the proper conditions to enhance long-term shareholder value and to achieve a high level of corporate performance.

The exercise of voting rights attached to the Trust's underlying proportion of the portfolio lies with HgCapital. As acknowledged by the Walker Review, 2009, the distance between owner and manager within the private equity model is relatively short and the link between the two is an important ingredient in investment performance. HgCapital has a policy of active portfolio management and ensures that significant time and resource is dedicated to every investment, with HgCapital executives typically being appointed to investee company boards, in order to ensure the application of active, results-orientated corporate governance. Further information regarding the stewardship of investee companies by HgCapital can be found in the Manager's review.

Derivative transactions

The Trust had no outstanding derivative contracts at 31 December 2015.

Annual General Meeting ('AGM')

The AGM of the Trust, which will include a presentation by the Manager, will be held at the offices of HgCapital, 2 More London Riverside, London SE1 2AP on Monday 9 May 2016 at 11 a.m. Light refreshments will be available from 10.30 a.m. Notice of the AGM is given on pages 112 to 115 in the full Annual Report and Accounts. The Board is of the opinion that the passing of all resolutions being put to the AGM would be in the best interests of the Trust and its shareholders. The Directors therefore recommend that shareholders vote in favour of resolutions 1 to 12, as set out in the Notice of Meeting.

By order of the Board
Roger Mountford, Chairman
4 March 2016

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND ACCOUNTS

The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).

Under company law the Directors must not approve the financial statements, unless they are satisfied that they give a true and fair view of the state of affairs of the Trust and of the profit or loss of the Trust for that period. In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

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

• state whether applicable UK Accounting Standards have been followed; and

• prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Trust will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Trust's transactions and disclose with reasonable accuracy at any time the financial position of the Trust and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Trust and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Trust's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with United Kingdom Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Trust;

• the Strategic Report and Manager's Review include a fair review of the development and performance of the business and the position of the Trust, together with a description of the principal risks and uncertainties that it faces; and

• the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and the information provided to shareholders is sufficient to allow them to assess the Trust's performance, business model and strategy.

On behalf of the Board
Roger Mountford, Chairman
4 March 2016

Dividend

The dividend proposed in respect of the year ended 31 December 2015 is 40 pence per share.

Ex-dividend date (shares transferred without dividend)	7 April 2016
Record date (last date for registering transfers to receive the dividend)	8 April 2016
Last date for registering DRIP instructions (see below)	22 April 2016
Dividend payment date	16 May 2016

The dividend is subject to approval of the shareholders at the forthcoming AGM.

National Storage Mechanism

A copy of the Annual Report and Accounts will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.morningstar.co.uk/uk/nsm

Neither the contents of the Trust's website or the Manager's website, nor the contents of any website accessible from hyperlinks in this announcement or on those websites (or any other website), is incorporated into, or forms part of, this announcement.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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