Half-year Report

RNS Number : 7516K

HgCapital Trust PLC

06 September 2021

 

H gCapital Trust plc

INTERIM Results FOR THE SIX MONTHS ENDED 30 JUNE 2021

London, 6 September 2021:   HgCapital Trust plc ('HGT'), today announces its interim results for the six months ended 30 June 2021. HGT provides investors with a listed vehicle to invest in unquoted businesses managed by Hg, Europe's largest investor in software & service businesses. The objective of HGT is to provide shareholders with consistent long ‑ term returns in excess of the FTSE All ‑ Share Index by investing predominantly in unquoted companies where value can be created through strategic and operational change.

HGT provides listed access to Hg's investments, which would in aggregate represent the second largest and the fastest growing software business in Europe¹.

ROBUST PERFORMANCE shown by portfolio DURING H1 2021

WITH a NAV Uplift of >21%

net assets of MORE THAN £1.6 billion

HGT has shown continued outperformance of the FTSE All-share over one, three, five, ten and twenty-year periods

SUMMARY performance

	31 August 2021	% Total return2	30 June 2021	31 December 2020	% Total return2
NAV per share	373.3p	+21.4	373.4p	310.3p	+21.4
Share price	404.0p	+33.6	355.0p	305.0p	+17.4
FTSE All-Share Index		+14.7			+11.1
		YTD 2021 Movement			H1 2021 Movement
Net Asset Value	£1.64bn	+£349m	£1.64bn	£1.29bn	+£349m

Source: Hg, Factset

Jim Strang, Chairman of HGT, commented:

"Despite the uniquely challenging circumstances we have all faced during the COVID-19 pandemic over the last 18 months, I am pleased to report to you that HGT and its underlying investments continued to perform very well in the first half of 2021. HGT's strategy of investing in software and services businesses with strong growth prospects and highly resilient business models has helped maintain the strong momentum observed throughout the last full financial year."

Luke Finch, Partner and Head of Client Services, Hg, commented:

"Continued M&A activity across the Hg portfolio has been a major theme of the last six months, and this should remain the case for the foreseeable future. Our portfolio companies are often acting as consolidators pursuing a roll-up strategy, sometimes they are "consolidatees" in larger strategic combinations; but either way, the pronounced activity level highlights the important strategic positions all our portfolio companies hold in their respective market segments and clusters."

1   By Enterprise Value, Source: Hg, Factset

2 All references to total return allow for all historic dividends being reinvested

KEY HIGHLIGHTS of THE SIX MONTHS TO 30 JUNE 2021

¡ Net assets of more than £1.6 billion, with continued outperformance of the FTSE All-Share over one, three, five, ten and twenty-year periods

-  NAV per share of 373.4p, a total return of 21.4% to 30 June 2021.

-  Share price total return of 17.4% over the period.

-  Interim dividend maintained at 2.0p per share.

-    An investment of £1,000 made 20 years ago would now be worth £15,794, a total return of 1,479%. An equivalent investment in the FTSE All-Share Index would be worth £2,952¹.

¡ Strong double-digit growth from the portfolio

-  Revenue and EBITDA growth of 20% and 27% respectively across the top 20 investments (80% of the portfolio) over the last twelve months to 30 June 2021.

-  Valuation multiple (EV/EBITDA) of 25.0x and net debt to EBITDA ratio of 5.9x for the top 20 investments.

¡ Continued commitments, investment and realisations driving future value

-  Continued investment with £165 million deployed on behalf of HGT into companies that Hg (the Manager) has known for many years and have demonstrated a track record of strong performance across market cycles.

-  Outstanding commitments at 30 June of £623 million (December 2020: £647 million). These will be deployed over the next three to four years.

-  £82 million of cash returned to HGT through realisations at uplifts to book value and refinancings.

-  £75 million of new equity raised in the first half of the year at a premium to NAV

-  Liquid resources of £239 million, with a further undrawn standby facility of £165 million available for investment.

POST PERIOD EVENTS AT 31 AUGUST 2021

-  Pro-forma NAV of 373.3p , YTD total return performance of 21.4%.

-  Current pro-forma net assets of £1.64 billion.

-  Share price of 404.0p , YTD total return performance of 33.6%, market capitalisation of £1.77bn.

-  £51 million returned to HGT through the full exit of Allocate at a 48% uplift to 31 December 2020 book value.

-  Further £93 million invested by HGT into new companies well ‑ known to the Manager, insightsoftware, MMIT, Riskalyze and Serrala.

-      Pro-forma liquid resources post-completion of all announced transactions, and the interim dividend payable in October 2021, are £188 million (11% of 31 August pro-forma NAV).

-      Pro-forma outstanding commitments of £535 million (33% of 31 August pro-forma NAV). We expect these to be drawn down over the next three to four years.

Outlook

Robust double-digit growth continues to underpin a resilient portfolio

¡ The first half of 2021 has seen the continuation of the key trend that we have written about during 2020 - the digitalisation of business processes - which has accelerated across sectors and geographies as a result of the global responses to COVID-19.

¡ Overall, the value of the portfolio was up over 28% for six months to 30 June meaning that, in total since 31 March 2020 and the depths of the initial COVID-19 crisis, the value of the portfolio is up over 63%.

¡ Hg remains excited about the future potential of the high-quality portfolio, the alignment with the talented management teams and founders across the Hg network and their ability to drive continued growth in value in their businesses.

- Ends -

The Company's 2021 Interim Report and a video presentation to accompany the results are available to view at:  http://www.hgcapitaltrust.com/ .

For further details:

	HgCapital Trust plc
	Laura Dixon (Senior Investor Relations Manager, Hg)		[phone]
Brunswick
Samantha Chiene		[phone]

About HgCapital Trust plc

HgCapital Trust plc is an investment company whose shares are listed on the London Stock Exchange (HGT.L). HGT gives investors exposure, through a liquid vehicle, to a portfolio of high-growth unquoted companies, managed by Hg, 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

https://twitter.com/HgCapitalTrust

https://www.linkedin.com/company/hgcapital-trust-plc/

HgCapital Trust plc

Interim report and accounts

30 June 2021

The objective of HgCapital Trust (HGT) is to provide shareholders with consistent long-term returns in excess of the FTSE All-Share Index by investing predominantly in unquoted companies where value can be created through strategic and operational change.

HGT provides investors with exposure to a fast-growing network of unquoted investments, primarily in software and business services across Europe.

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

References in this interim report and accounts to 'total return' refer to a return where it is assumed that
an investor has reinvested all historic dividends at the time when they were paid.

References in this interim report and accounts to pounds sterling have been abbreviated to 'sterling'.

The investment opportunity

HGT provides investors with a unique opportunity to participate in the growth in value of a portfolio of more than 35 private companies sourced by Hg. Value is created via an investment strategy focused on software and business service companies with highly recurring revenues and from leveraging the network and expertise of Hg to support management teams to deliver the full potential of their respective businesses.

With highly predictable and stable cash flows, the top 20 businesses (representing 80% by value of HGT's investments) reported aggregate sales of £5.6 billion and EBITDA of £1.8 billion over the last 12 months, with EBITDA margins of 30% .

Hg brings to HGT an experienced team of more than 240 employees , including more than 140 investment and portfolio management professionals , supported by a network of portfolio partners , all of them seasoned senior managers from across industry, who work with the management teams of the companies in which we are invested to create value for shareholders. At the centre of this network, Hg builds and shares knowledge and expertise by facilitating the active collaboration of management teams across sector clusters and geographies.

HGT's funds are invested pro rata alongside those of Hg's other institutional clients. This enables shareholders to invest, on similar terms, alongside some of the world's largest investors in private equity, in high-growth private companies, which would otherwise be inaccessible. This allows HGT to achieve diversification across markets and geographies and gain exposure to fast growing portfolio companies at different stages of their development and size - from an enterprise value of £100 million to over £10 billion .

Financial and performance highlights

H1 2021 performance:

NAV per share

at 30 June 2021 was 373.4p a total return for the period of:

+ 21.4 %

(30 June 2020: +6.6%)

Please refer to note 11(b) below for further detail on the calculation of NAV per share

Net assets

The total NAV of HGT at 30 June 2021 was:

£ 1.64 bn

(31 December 2020: £1.29bn)

Share price

at 30 June 2021 was 355.0p a total return for the period of:

+ 17.4 %

(30 June 2020: -7.3%)

Market capitalisation

The market capitalisation of HGT at 30 June 2021 was:

£ 1.56 bn

(31 December 2020: £1.27bn)

Interim dividend

2.0 p

(30 June 2020: 2.0p)

Total annualised ongoing charges

1.6 %

for the period to 30 June 2021 (30 June 2020: 1.8%)

Please refer below for further detail on the calculation of ongoing charges.

Top 20 investments as at 30 June 2021:

Representing 80% by value of HGT's investments

LTM sales growth

+ 20 %

(31 December 2020: +22%)

LTM EBITDA growth

+ 27 %

(31 December 2020: +31%)

EV to EBITDA multiple

25.0 x

(31 December 2020: 22.1x)

Net debt to EBITDA ratio

5.9 x

(31 December 2020: 6.4x)

These figures are calculated on a value-weighted basis. For further information on the top-20 portfolio trading performance and valuation and net debt analysis, please refer to Hg's review on pages 36-37 of the full Interim Report and Accounts.

Balance sheet analysis as at 30 June 2021:

Liquid resources
(15% of NAV)

£ 239 m

(31 December 2020: £188m)

HGT has a bank facility of which £165m was undrawn at the period end.

Outstanding commitments
(38% of NAV)

£ 623 m

(31 December 2020: £647m)

These commitments will be drawn down over the next three to four years (2021-25) and are likely to be financed partly by cash from future realisations.

HGT can opt out of a new investment without penalty, should it not have the cash available to invest.

Investment and realisation activity over the period:

An active pipeline of investment opportunities led to new and follow-on investments, while returning cash to HGT through both realisations and refinancing.

£165m cash invested on behalf of HGT

Howden £42.0m

Benevity £31.6m

Trackunit £26.6m

DEXT £15.6m

Prophix £15.2m

TeamSystem £14.3m

Geomatikk £11.4m

Auvesy £7.3m

Other £0.9m

£82m returned to HGT¹

Mitratech £40.3m

APG £21.5m

TeamSystem £21.4m

team.blue £10.3m

Trace One £5.8m

Other £3.6m

¹ Realisations shown net of carried interest paid and exclude proceeds from the fund level facility.

Further information on all investments and realisations is provided below.

Historical total return performance

Both HGT's share price and net asset value per share have continued to outperform the FTSE All-Share Index.

	6 months to June 2021 %		1 year %		3 years % p.a.		5 years % p.a.		10 years % p.a.		20 years % p.a.
NAV per share*	21.4		41.3		24.3		21.9		15.0		14.3
Share price	17.4		53.2		24.9		27.3		14.9		14.8
FTSE All-Share Index	11.1		21.5		2.0		6.5		6.4		5.6
NAV per share performance relative to the FTSE All-Share Index	10.3		19.8		22.3		15.4		8.6		8.7
Share price performance relative to the FTSE All-Share Index	6.3		31.7		22.9		20.8		8.5		9.2

*Please refer to note 11(b) below for further detail on the calculation of NAV per share.

Based on HGT's share price at 30 June 2021 and allowing for all historic dividends being reinvested, an investment of £1,000 made 20 years ago would now be worth £15,794, a total return of 1,479% . An equivalent investment in the FTSE All-Share Index would be worth £2,952.

Long-term performance - 10-year share price total return: +14.9% p.a.

Long-term net asset growth

2011 £7m £7m raised from subscription shares

2012 £36m £36m raised from subscription shares

2013 £18m £18m raised from subscription shares

2018 FTSE 250 Promotion to the FTSE 250

2019 10:1 10:1 share-split

2019 £75m £75m equity raised

2020 £25m £25m equity raised

2021 £75m £75m equity raised

Ten-year dividend record

Source: Hg

*In 2020, the Board redesignated the 2019 final dividend of 3.0 pence per share as a second interim dividend; this was to ensure that our shareholders received this dividend and that it was paid according to the timetable which we had announced in March.

Historic dividends restated for the 10:1 share-split completed in May 2019.

Chairman's statement

"Despite the uniquely challenging circumstances we have all faced during the COVID-19 pandemic over the last 18 months, I am pleased to report to you that HGT and its underlying investments continued to perform very well in the first half of 2021. HGT's strategy of investing in market leading software and services businesses with strong growth prospects and highly resilient business models has helped maintain the strong momentum observed throughout the last full financial year."

Jim Strang, Chairman, HgCapital Trust plc

Dear Shareholder,

Despite the uniquely challenging circumstances we have all faced during the COVID-19 pandemic over the last 18 months, I am pleased to report to you that HGT and its underlying investments continued to perform very well in the first half of 2021. HGT's strategy of investing in software and services businesses with compelling market positions in their respective sectors with strong growth prospects and highly resilient business models has helped maintain the strong momentum observed throughout the last full financial year.

As regards new transactions in the period, Hg has continued to be active both in acquiring attractive new assets that align with Hg's investment strategy, while concurrently selectively realising profits from the sale of successful investments and returning cash to HGT.

It is of note that despite the elevated valuations for the resilient, high-growth assets that are at the core of HGT's investment strategy, recent exits continue to validate these valuations with transactions, typically executed at attractive premiums. Valuation risk remains a core topic for the Audit, Valuation and Risk Committee, and is something that the Board reviews regularly.

Given the level of visibility in earnings across the portfolio, the prospects for the second half of the year are encouraging. The Hg deal teams expect to continue to be active in the second half of the year, selectively adding to the portfolio, while also trimming exposures where appropriate.

In addition to the strong performance across the investment portfolio, I am pleased to report ongoing progress within Hg to continually improve their investment capabilities whilst also remaining at the forefront of the private equity industry in important topics such as ESG, diversity and inclusion.

Highlights in the first six months of 2021 included:

• 21% NAV per share growth on a total return basis, with net assets attaining a record level of £1.6 billion;

• 17% share price growth on a total return basis, resulting in a market capitalisation of £1.6 billion;

• £165 million of new and further investments by HGT, primarily into eight businesses across the core investment clusters targeted by Hg;

• £82 million of proceeds returned to HGT, primarily from four realisations;

• £75 million of new equity issuance.

Performance

I am happy to report strong performance from HGT over the first six months of 2021. The NAV per share has increased from £3.10 to £3.74, an increase of 21.4% on a total return basis. The share price improved from £3.05 to £3.55, a total return of 17.4%.

Strong fundamental business growth from the underlying portfolio companies drove this performance, as well as market support for technology investments and software in particular.

Portfolio performance in the period was impressive, with the top 20 underlying companies (80% of the portfolio) generating year-on-year growth of 20% in revenue terms and 27% in EBITDA.

These businesses have continued to trade successfully despite the obvious challenges the environment presents and, with their significant and predictable forward cash flows, are appropriately financed with an average net debt-to-EBITDA ratio of 5.9x. Currently, 99% of the portfolio by value is held above its original cost of acquisition.

The total net assets of HGT as at 30 June reached £1.6 billion, an increase of £0.3 billion over the reported figures as at 31 December 2020. These figures also reflect the dividend payment of £12.8 million in May and proceeds from the tap issuance of shares over the first six months of 2021 of £75 million. Over the period, HGT has seen share price performance (on a total return basis) of 17.4%, outperforming the FTSE All ‑ Share Index by more than 6%.

The analysis of NAV movements and attribution analysis (on pages 36-37 of the full Interim Report and Accounts) set out a breakdown of movements in the NAV and the underlying investment portfolio.

Investments and realisations

Over the first six months of the year, HGT invested £165 million, primarily across eight new investments, including Howden, Benevity, Trackunit, Prophix, Geomatikk and AUVESY. Since June, a further £93 million has been invested primarily into four new investments, including Insightsoftware, MMIT, Riskalyze and Serrala. These investments all fall within Hg's eight focus 'clusters', solving workflow problems and serving the needs of similar business customer sets in comparable end markets. Hg targets leading businesses within these clusters, and while such assets often command a full price on acquisition, the experience and capability which Hg brings help to drive these companies to realise their full potential. Furthermore, as the end markets these businesses serve are usually highly fragmented, Hg can build further scale through M&A. Such M&A transactions are usually completed at a materially lower price than that paid for the original platform, providing an additional source of value creation.

It is also worth noting that HGT currently holds around 6% of NAV in co-investments; these are investments made alongside Hg funds which are free from any fees or carried interest payable to the Manager.

HGT will continue to take up co-investment opportunities as they arise and will look to maintain 10 to 15% of NAV in this strategy across different fund deployment cycles. Co-investments provide a useful mechanism to optimise the use of HGT's balance sheet capital and also helps reduce overall costs.

In addition to co-investment, HGT has committed a further $100 million to invest in junior debt financings across the Hg portfolio over the next three years, alongside a small group of Hg's largest Limited Partners. These investments have an attractive risk and return profile and are a further effective means to manage liquidity on HGT's balance sheet.

In the first half of the year, Hg returned £82 million to HGT, primarily through the exits of Mitratech, APG, TeamSystem and Trace One. In addition, post the reporting period, there have been further realisations announced, including the sale of Allocate, returning £51 million to HGT.

In aggregate, these realisations were at an average uplift to their December valuations of 26%, with an average multiple of cost achieved of 2.7x, reinforcing the rigour of the valuation process and the value that buyers place on the quality assets within the portfolio.

HGT will be publishing a pro ‑ forma NAV per share as at 31 August 2021 (incorporating any post-period transactions and movements in currency) in our press release of xxx.xp, an uplift of yy% to that published here in these interim accounts. For further information about investments and realisations, please refer below.

Impact and responsible investment

Your Board and the Manager continue to increase their focus on the topics of ESG and sustainability. We share a firmly held perspective that not only should the financial returns to you, the shareholders, be attractive, but these must be delivered in a manner which is consistent with our responsibility to society. As a technology investor, we understand the need to ensure that those businesses in which we invest reduce their carbon footprint and contribute to tackling climate change. Hg is, itself, independently certified as a carbon ‑ neutral company with a UNPRI assessment of Hg's approach to responsible investment of AA++. The Board of HGT meets regularly with the Hg responsible investment team to ensure that Hg's work is fully understood and endorsed by the Board.

As we reported in the 2020 full year accounts, Hg launched The Hg Foundation in 2020 - a new charitable initiative to provide funding and operational support to schemes across Europe, the UK and the US - whose goal is to have an impact on the development of those skills most required for employment within the technology industry, focusing on individuals who might otherwise experience barriers to access this education.

This Foundation is funded by the Hg management company and its team members. For further information about this and the responsible investment focus at Hg, please see below in the Manager's Review.

I also want to address the CMA fine received by Hg in recent weeks, in regard to its investment in Mercury Pharma, which was sold by Hg in 2012. Acting as a responsible investor is very much part of the DNA at Hg and indeed a key topic for the Board of HGT.  The Board were disappointed to see an Hg fund implicated in a fine, but we also acknowledge that the CMA is not alleging that Hg itself has been involved in any pricing infringements. Hg was included in this case simply due to its historic ownership of the business. Given the matter goes back almost 10 years, it's also worth stating that investments in pharmaceutical products are firmly outside of Hg's current or future investment strategy which, of course, remains exclusively focused on software and technology enabled services.

Balance sheet

In 2020, with a new commitment programme established, the Board agreed on a revised multi-currency revolving credit facility of £200 million. This facility was put in place to optimise the balance sheet management of HGT and to help manage foreign exchange risk. A total of £165 million remained undrawn from this facility as at 30 June 2021.

During 2021 to date, as shares in HGT have traded mostly at a premium, HGT has taken the opportunity to increase balance sheet liquidity through a series of equity tap issuances, raising a total of £75 million over the first half of the year. When possible, the Board will continue to consider new equity issuance, providing that market conditions permit, offering existing and new investors the opportunity to subscribe to and increase HGT's equity base, while always bearing in mind our current shareholders' interests.

The Board regularly reviews the balance sheet, commitment profile and available liquid resources at hand to optimise this mix for the benefit of HGT. Reflecting the current strong liquidity position generated by the portfolio, as I noted, the Board has chosen to commit $100 million to a programme of junior debt investments organised by Hg. This capital will be used to invest into the junior debt of Hg portfolio companies when they are re-financed in the normal course of business.

Dividend

As noted previously, HGT aims to achieve growth in the net asset value per share and in the share price, rather than to achieve a specific level of dividend. Furthermore, the ability of HGT to pay dividends is very much influenced by the capital structures of the transactions entered into by the Manager and by income received on any liquid resources held subject to investment.

Nevertheless, HGT will continue to provide guidance as to the broad objectives of the dividend policy, despite the challenging circumstances. Subject to no material changes in the operating assumptions which HGT is currently using, the Board expects to be able to deliver modest dividend progression.

As regards the current financial year, assuming no further fundamental shift in the operating environment, HGT plans to be able to deliver a total dividend of at least 5.0p per share, with an interim dividend of 2.0p (2.0p in 2020), payable in October. The Board keeps the dividend policy of HGT under frequent review and will communicate, to shareholders, further guidance on dividend policy when it is practicable to do so.

Board and corporate governance

In line with the Board's succession plan, Peter Dunscombe will be retiring from the Board at the AGM in 2022. The Board will therefore be undertaking a thorough externally supported search for a new Non-Executive Director to join the Board. This process will leverage the results of the annual Board effectiveness review and reflect the skills that the Board regards as important to manage the affairs of HGT, not only today but in the years to come. Your Board maintains its commitment to delivering the highest levels of corporate governance to HGT.

Prospects

As we now begin to see some form of a recovery from the COVID-19 pandemic, your Board believes the prospects for HGT remain attractive with a strong portfolio of assets enjoying good positive momentum and an active new deal pipeline. The impressive performance that the companies within the portfolio have demonstrated over recent months reflects the value that they bring to their customers and the strength of their respective business models.

Despite the strong performance and the robustness of the portfolio, your Board remains focused on the risks that prevail in the current climate and remains actively engaged with Hg to understand and manage these risks as best possible, while endeavouring to drive future returns for our shareholders.

Jim Strang
Chairman
3 September 2021

Investment objective and investment policy

The objective of HGT is to provide shareholders with consistent long-term returns in excess of the FTSE All-Share Index by investing predominantly in unquoted companies where value can be created through strategic and operational change

Investment policy

The policy of HGT is to invest, directly or indirectly, in a portfolio of unlisted companies where Hg believes that it can add value through increasing organic growth, generating operational improvements, driving margin expansion, reorganisation or acquisition - to achieve scale. HGT seeks to maximise its opportunities and reduce investment risk by holding a spread of businesses diversified by end-market and geography.

Risk management

HGT has adopted formal policies to control risk arising through excessive leverage or concentration. HGT's maximum exposure to unlisted investments is 100% of the gross assets of HGT from time to time. On investment, no investment in a single business will exceed a maximum of 20% of gross assets. HGT may invest in other listed closed-ended investment funds, up to a maximum at the time of investment of 15% of gross assets.

Sectors and markets

As HGT's policy is to invest in businesses in which Hg can play an active role in supporting management, Hg invests primarily in companies whose operations are headquartered or substantially based in Europe. These companies operate in a range of countries, but there is no policy of making allocations to specific countries or markets. Investments are made across a range of sectors where Hg believes that its skills can add value, but there is no policy of making allocations to sectors.

HGT may, from time to time, invest directly in private equity funds managed by Hg where it is more economical and practical to do so.

Leverage

Each underlying investment is usually leveraged, but no more than its own cash flow can support, in order to enhance value creation; it is impractical to set a maximum for such gearing across the portfolio as a whole. HGT commits to invest in new opportunities in order to maintain the proportion of gross assets which are invested at any time, but monitors such commitments carefully against projected cash flows.

HGT has the power to borrow and to charge its assets as security. The articles restrict HGT's ability (without shareholders' approval) to borrow to no more than twice HGT's share capital and reserves, allowing for the deduction of debit balances on any reserves.

Hedging

Part of HGT's portfolio is located outside of the UK, predominantly in northern Europe, with a further part in businesses which operate in US dollars. HGT may therefore hold investments valued in currencies other than sterling. From time to time, HGT may put in place hedging arrangements with the objective of protecting the sterling translation of a valuation in another currency. Derivatives are also used to protect the sterling value of the cost of investment made or proceeds from realising investments in other currencies, between the exchange of contracts and the completion of a transaction.

Commitment strategy

HGT employs a commitment strategy to ensure that its balance sheet is managed efficiently. The level of commitment is regularly reviewed by the Board and Hg.

Liquid funds

HGT maintains a level of liquidity to ensure, as far as can be forecast, that it can participate in all investments made by Hg throughout the investment-realisation cycle.

At certain points in that cycle, HGT may hold substantial amounts of cash awaiting investment. HGT may invest its liquid funds in government or corporate debt securities, or in bank deposits, in each case with an investment grade rating, or in managed liquidity funds which hold investments of a similar quality.

If there is surplus capital and conditions for new investment appear to be unfavourable, the Board will consider returning capital to shareholders, probably through the market purchase of shares.

Any material change to HGT's investment objective and policy will be made only with the approval of shareholders in a general meeting.

Business model and risk framework

The Board has a clear view of the rationale for investing in unquoted businesses where the private equity ownership model has the potential to accelerate the growth in value creation. HGT seeks to capture this upside, whilst operating within a rigorous risk-management framework.

The Board believes that there is a convincing rationale for directly investing in well-researched private businesses where there is potential for substantial growth in value, notably where there is the ability to work with management to implement strategic or operational improvements.

HGT offers a simple and liquid means by which shareholders can invest in unquoted growth companies, while benefiting from an investment company's governance model.

Business model

To achieve HGT's investment objective and within the limits set by the investment policy, HGT is an investor in unquoted businesses managed, and in most cases controlled, by the Manager. From time to time, HGT may hold listed securities in pursuit of its investment policy.

HGT is currently invested in more than 35 companies (as set out below), ranging in size, sector and geography, providing diversification.

The Board has delegated the management of HGT's investments to Hg Pooled Management Limited (the 'Manager' or 'Hg'). Further details of the terms of the management agreement are set out below. The Manager invests predominantly in unquoted software and business service companies in expanding sectors and provides portfolio management support. Hg's review below outlines how HGT's investments are managed on behalf of HGT.

Most of HGT's investments are held through special-purpose partnerships, of which it is the sole limited partner.

Periodically, HGT enters into a formal commitment to invest in businesses identified by the Manager, alongside institutional investors which invest in an Hg Limited Partnership Fund. Such commitments are normally drawn down over three to four years. The institutional investors and HGT invest on similar terms.

HGT is usually the largest investor in each business. The Board has a further objective of keeping HGT as fully invested as is practicable, while ensuring that it will have the necessary cash available when a new investment arises.

The Board, on the advice of the Manager, makes assumptions about the rate of deployment of funds into new investments and the timing and value of realisations. However, to mitigate the risk of being unable to fund any draw-down under its commitments to invest, the Board has negotiated a right to opt out, without penalty, of its obligation to fund such draw-downs, should the need arise.

HGT may also take up a co-investment in some businesses (in addition to the investment which it has committed to make).

Typically, HGT has no liability to pay fees on such co-investment and no carried interest incentive is payable to the Manager on realisation (currently 6% of HGT's NAV is in co-investments). HGT may also offer to acquire a limited partnership interest in any of Hg's funds, in the event that an institutional investor wishes to realise its partnership interest.

The Board regularly monitors progress across all of the businesses in which it is invested as well as their valuation, the development of the Manager's investment strategy and the resources and sustainability of the business model.

Investment trust status

As HGT is constituted as an investment trust and its shares are listed on the London Stock Exchange, it can take advantage of tax benefits available to investment trusts. This allows HGT to realise businesses from its portfolio without liability to corporation tax. The Board intends to retain this status provided that it is in shareholders' interest to do so. This will require the Board to declare dividends so that not more than 15% of taxable income is retained each year.

Performance targets

HGT's aim is to achieve returns in excess of the FTSE All-Share Index over the long term. To this end, the Board monitors the performance indicators, as set out above. In the year to 30 June 2021, HGT's NAV per share increased by 21.4% on a total return basis. The FTSE All-Share Index increased by 11.1% on a total return basis over the period. The year to date total return of HGT's share price was 17.4%. NAV per share has grown by 15.0% p.a. compound over the last 10 years and 14.3% p.a. compound over the last 20 years. The share price has seen broadly similar performance growing by 14.9% p.a. compound over the last 10 years and 14.8% p.a. compound over the last 20 years.

All of the above returns assume the reinvestment of all historical dividends. The Board and the Manager aim to continue to achieve consistent, long-term returns in this range.

HGT is not managed so as to achieve any short-term performance relative to any index. The Board also compares HGT's NAV and share price performance versus other comparable indices with similar characteristics.

Dividends

The Board reviews HGT's dividend policy on a regular basis, taking into consideration feedback from shareholders and HGT's ability to pay dividends as its underlying investment structures continue to evolve. Currently, the Board anticipates being able to maintain a dividend of at least 5.0p per share, absent any change in underlying assumptions.

Going concern

HGT's business activities, together with those factors likely to affect its future development, performance and financial position are described in the Board's Strategic Report and Hg's Review. The financial position of HGT, its cash flows, liquidity and borrowing facilities are described in the Strategic Report. The Directors have considered the FRC Guidance on Risk Management, Internal Control and Related Financial and Business Reporting and believe that HGT is well placed to manage its business risks successfully. The Directors review cash flow projections regularly, including important assumptions about future realisations and the rate at which funds will be deployed into new investments. The Directors have a reasonable expectation that HGT will have adequate resources to continue in operational existence for at least the next 12 ‑ month period from the date of approval of this Report and to be able to meet its outstanding commitments. Accordingly, they continue to adopt the going concern basis in preparing these results.

Hg cluster by value

29%  Tax & Accounting

23%  ERP & Payroll

11%  Healthcare IT

9%  Legal & Regulatory Compliance

8%  Capital Mkts & Wealth Mgmt IT

7%  SME Tech & Services

7%  Automation & Enginering

5%  Insurance

Geographic spread by value

37%   UK

19%   North America

17%   Germany

17%   Scandinavia

10%   Other Europe

Investment vintage by value

11%   2021

34%   2020

11%   2019

28%   2018

10%   2017

6%   pre 2017

Principal and emerging risks and uncertainties

During the first six months of 2021, the Audit, Valuation and Risk Committee (AVRC) supported the Board in the development and operation of an enhanced Risk Management Framework, first developed in 2020, undertaking a robust assessment of the principal and emerging risks facing HGT.

Managing risk remains fundamental to the delivery of HGT's strategy, and this is achieved by defining HGT's risk appetite and managing risks within that appetite, particularly those which would threaten its business model, future performance, solvency, valuation, liquidity or reputation.

The Board has defined risk appetites for each risk category and sub-risk. By assessing the impact and likelihood of each risk against appetite, focus is maintained on those risks which require most attention, with mitigating actions prioritised.

This process involves the maintenance of a risk register which assesses each risk and classifies the likelihood of the risk and the potential impact of each risk on HGT. Stress testing is undertaken to provide assurance that the performance of HGT remains insulated as far as practical, from changes in the macro-environment. The AVRC regularly reviews the policies for managing each risk, as summarised below.

HGT considers its principal risks (as well as underlying risks) to be in four main categories:

Investment: The risk to HGT of an inappropriate investment strategy or Manager decisions leading to poor performance.

Financial: Valuation risk, liquidity risk and ensuring the availability of sufficient liquid resources for HGT to meet its commitments.

Operational: Regulation, Hg's internal systems and controls, portfolio performance and that of HGT's other service providers.

External: Macro-economic conditions, financial markets, changing regulation and other geopolitical uncertainties.

Potential risk	Potential impact	Mitigation  Trend/Appetite
Investment
Performance The underlying portfolio companies underperform.	• Reduction in NAV • Reputation loss	• Deployment of capital is a rigorous process determined by the Hg Investment Committee, operated by experienced investment professionals.	Stable Within
		• Portfolio performance is reviewed regularly by Hg's Realisation Committee comprising experienced investment professionals and the HGT AVRC. • An operational performance group interacts across the portfolio to drive performance.	Improving Within
Financial
Valuations In valuing investments and publishing NAV, HGT relies, to a significant extent, on the accuracy of financial and other information provided by the Manager. Inaccurate valuations would lead to a misleading NAV.	• Creation of a false market in HGT shares • Reputation loss • Reduced demand for shares • Constrained access to capital	• Valuations are prepared in accordance with IPEV guidelines and tested against HGT's Valuation Policy. • The Manager's Valuation Committee, independently chaired, reviews and approves valuations quarterly. • The auditors of both Hg funds and HGT review the valuation and methodology as part of their audit procedures.	Improving Within
Liquidity The inability of HGT to make investments, owing to insufficient liquid resources available.	• Reputation loss • Risk to future performance	• Borrowing structures and cash flow forecasts are considered at each HGT Board meeting. • An additional £200m of liquidity is available through a bank facility, which was 18% drawn at the period end. • An opt-out facility is available across all investing funds.	Improving Within
Commitment Capacity is insufficient to underwrite future commitments to Hg funds.	- Risk to future performance - Shareholders sell shares.	• A bank facility is in place to facilitate orderly management of the balance sheet. • There is an opt-out facility across all investing funds. • A five year cash and commitment forecast is independently reviewed by the AVRC.	Stable Within
Operational
Regulation Regulation changes affect investment trust status.	• Increased corporation tax, leading to higher fees and potential impact on valuation and performance of HGT • Reduced demand for shares	• The Manager monitors investment movements, forecast income and expenditure and retained income (if any) to ensure compliance with sections 1158 and 1159 of the CTA. • Continuing investment trust status is certified by the Manager at each meeting of the Board.	Stable Within
Regulation General changes in legislation, regulation or government policy could influence the decisions of investors.	• Misunderstood or misreported regulation leading to reduced demand for shares • Lack of adherence to regulation leading to reputational risk	• Regular compliance and risk reviews are reported to the Board by the Manager's compliance team. • Strong shareholder engagement through: - dedicated investor relations team - corporate broker. - company secretary.	Stable Within
Manager internal controls and processes Inadequate processes of the Manager lead to poor performance or non-compliance with regulations.	• Reputation loss • Risk to future performance	- The Manager is regulated and supervised by the FCA. - The Manager has controls in place, including those related to investment decisions; portfolio reviews; recruitment, training and promotions; financial performance and payments; protection of client assets; compliance; regulation. - The Board of HGT and its auditors regularly review these processes and controls.	Improving Within
Cyber security Cyber attack and data loss at Hg and portfolio companies.	- Loss of or lack of control over data due to cyber attacks - Reputation loss - Regulatory sanction	• A portfolio cyber security team monitors cyber security across Hg and the portfolio companies and drives improvements. • Most recently, the GDPR Committee has successfully implemented mandatory training for all staff.	Stable Outside
External
Political and macro-economic uncertainty Issues arising from the UK leaving the EU affecting HGT and the portfolio companies in which it is invested.	• Reduction in demand for shares	• Hg's portfolio is diversified with a high degree of recurring revenue. • The Manager remains focused on the various issues which may need to be addressed, including: • reduced availability of credit to fund future investments • regulation, marketing, trade and foreign exchange movements These are regularly monitored by the Board of HGT.	Stable Outside
Foreign exchange Some Hg investments are denominated in other currencies, as well as sterling.	•Valuations affected by foreign currency movements	· The Board of HGT regularly monitors currency fluctuations. · The Hg treasury functions hedge currency exposure and actively mitigate currency risk where appropriate.	Worsening Within
Global pandemic Operating and investment activities are disrupted by pandemic events.	• Portfolio companies suffer revenue declines • Earnings multiples of listed companies applied to valuations might be adversely affected	• Portfolio resilience is stress-tested against pandemic impacts. • The majority of revenues are derived from subscription-based recurring revenues for non-discretionary technology-led services.	Stable Outside

Interim management report

The important events which have occurred during the period under review are described in the Chairman's Statement and in the Manager's Review - these also include the key factors influencing the financial statements.

Statement of Principal Risks and Uncertainties

The principal risks faced by HGT can be found under the heading 'Principal and Emerging Risks and Uncertainties' within the Rationale and business model section above. HGT's principal risks and uncertainties have not changed materially since the last annual report and are not expected to change materially for the remaining six months of HGT's financial year. The Directors have ensured that all risks will be kept under review throughout the year.

Related party transactions

There have been no material changes in the related party transactions described in the last annual report.

Going concern

As stated in note 2 to the condensed financial statements, the Directors are satisfied that HGT has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

Responsibility statement

The Directors confirm that, to the best of their knowledge,:

• the condensed set of interim financial statements has been prepared in accordance with the statement on half-yearly financial reports issued by the UK Accounting Standards Board and gives a true and fair view of the assets, liabilities, financial position and return of HGT.

• the interim management report (incorporating the Chairman's Statement and the Manager's review) includes a fair review of the information required by:

(a)   DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events which have occurred during the first six months of the financial year and their impact on the condensed set of financial statements - and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b)   DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related-party transactions which have taken place in the first six months of the current financial year and which have materially affected the financial position or performance of HGT during that period - and any changes in the related-party transactions described in the 2020 annual report which could have a material effect on the financial position or performance of HGT in the first six months of the current financial year.

We consider the interim report & accounts, taken as a whole, to be fair, balanced and understandable and to provide the information necessary for shareholders to assess HGT's position and performance, business model and strategy.

This interim financial report was approved by the Board of Directors on 3 September 2021.

Jim Strang

Chairman

3 September 2021

Hg's review

Building businesses which change how we all do business

Hg is a specialist private equity investor focused on software and business service companies. Our business model combines deep sector specialisation with dedicated operational support. Hg invests in growth companies in expanding sectors, primarily via leveraged buyouts in businesses with operations in or across Europe.

Hg's vision is to be the most sought-after private equity investor within our sector focus, being a partner of choice for management teams, to provide consistent, superior returns for HGT and our other clients, while providing a rewarding environment for Hg colleagues.

References in this interim report and accounts to the 'portfolio', 'investments', 'companies' or 'businesses' refer
to a number of investments, held as:

• indirect investments by HGT through its direct investments in fund-limited partnerships (HGT LP, HGT 6 LP, HGT 7 LP, HGT 8 LP, HGT Genesis 9 LP, HgCapital Mercury D LP ('Hg Mercury'), HGT Mercury 2 LP, HGT Mercury 3 LP, HGT Saturn LP, HGT Saturn 2 LP and HGT Transition Capital LP) of which HGT is the sole limited partner.

• a secondary purchase of a direct interest in Hg's Genesis 6 fund through HgCapital 6 E LP ('Hg 6 E LP'), in which HGT is a limited partner.

• direct investments in renewable energy fund limited partnerships (Asper Renewable Power Partners LP ('Asper RPP I LP'), of which HGT is a limited partner.

Hg Pooled Management Limited was authorised as an alternative investment fund manager with effect from 22 July 2014. For further details, refer to pages 130-140 of the annual report.

Europe's largest software and services investor with a transatlantic network

> 25 years of investment

> 240 employees across London, Munich and New York

> 150 highly regarded institutional investors

> $ 35 bn funds under management

Overview

Hg is, itself, an entrepreneurially led, fast-growing business, 100% owned and managed by its partners.

Hg began life as Mercury Private Equity, the private equity arm of Mercury Asset Management plc. Mercury Asset Management was acquired by Merrill Lynch in 1997. In December 2000, the executives of Mercury Private Equity negotiated independence from Merrill Lynch, and Hg was established as a fully independent partnership, owned entirely by its partners and employees.

Since then, Hg has worked hard to develop a unique culture and approach - setting us apart from other investors. We are committed to building businesses which change the way we all do business, through deep sector specialisation and dedicated, strategic and operational support.

Today, Hg has more than 240 employees, representing the largest technology investment team in Europe.

We have three investment offices, which are in London, Munich and New York, with funds under management of more than $35 billion and serving more than 150 highly regarded institutional investors, including private and public pension funds, insurance companies, endowments and foundations.

HGT is the largest client of Hg, which has been contracted to manage HGT's assets since 1994 and offers investors a liquid investment vehicle, through which they can obtain exposure to Hg's diversified network of unquoted investments with minimal administrative burdens, no long-term lock up or minimum size of investment - and with the benefit of a Board of independent Directors and corporate governance. HGT's strategy is to invest in parallel with all of Hg's current funds.

Investment strategy

Hg's investments are focused primarily on defensive growth buyouts in software and business service companies operating in specific end-market 'clusters' with enterprise values ('EVs') of £100 million to over £10 billion, growing faster than the broader economy. We predominantly seek controlling equity buyout investments in businesses headquartered in Europe and North America, though such companies will often have a global footprint and customer base.

Hg's objective is to pursue investment theses supporting long-term growth, leveraging its expertise working in these sectors to implement initiatives designed to maximise organic expansion, as well as through rolling up fragmented sectors, over typical hold periods of approximately five years.

Hg has led over 100 investments in the software and service sector during the last 25 years. This focus means that we have developed an institutional expertise and a deep understanding of the markets and businesses in which we invest.

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

This flexible approach to investment means that, at any given time, the Hg portfolio is likely to comprise over 35 software and business service companies with similar characteristics, but of different sizes, end-market focus and maturity profiles.

Hg's office in New York enhances the ability to crystallise and develop transatlantic investment opportunities, manage existing investments and make bolt-on acquisitions, as well as continue to engage with - and ultimately sell - portfolio companies to North American trade buyers. As the US has the largest technology sector, this also helps to consolidate Hg's position as Europe's leading software investor.

Hg Mercury
Lower mid market

EVs: £100m-£450m

Hg Genesis
Mid-market

EVs: £450m-£1.3bn

Hg Saturn
Large-cap

EVs focus: >£1.3bn

One strategy over three funds across the size range in software and business service companies

HGT has made commitments to invest on the same financial terms as all institutional investors in Hg funds, with investments made into businesses with enterprise values ranging from £100 million to over £10 billion.

The power of the portfolio

Hg has a unique approach and strategy, with a focus on achieving scale in tightly defined clusters of expertise.

As a result, we have assembled a portfolio of more than 35 companies, sharing similar characteristics, yet differing in size and maturity. This creates a natural environment for knowledge-sharing, creating a network effect to drive best practices and value-creation initiatives. This is why we believe in collaboration and the 'power of the portfolio'.

This scale and focus enable our businesses to benefit from being part of one larger organisation, while retaining their own identity with each management team, incentivised by their own success.

The Hg portfolio is not only the fastest-growing software business in Europe, but also the second-largest

The 'Hg sweet-spot' business model

Hg has a clear and robust business model, focused on long-term, consistent and defensive growth, predominantly through investment in buyouts with a Northern European angle. We seek companies which share similar characteristics, often providing a platform for merger and acquisition ('M&A') opportunities.

We believe that such companies have the potential for significant performance improvement.

We invest primarily in two main market sectors:

Software

Software is our largest sector of investment. We focus on businesses providing B2B vertical market application software and data, regulatory software and fintech and internet infrastructure.

We have invested in high-quality industry champions which have strong sector reputations and diverse customer bases and which feature subscription-based business models generating predictable revenues and cash flows. With more than 30 software investments in our portfolio, we bring a unique set of networks and insights to help to support value creation in our businesses.

Tech-enabled services

Our business services investments focus on companies with high levels of intellectual property, large fragmented customer bases and long-term and stable customer relationships - and businesses which provide business-critical services, preferably on a repeat or recurrent basis.

We target businesses with strong reputations within a niche and aim to grow and scale these businesses, either organically within existing markets or through acquisitions.

Deep knowledge and networks within our end-market clusters

Hg has a unique approach and strategy, with a focus on achieving scale in tightly defined clusters of expertise. This specialisation helps us to build deep know-how.

Tax & Accounting
17+ years
TeamSystem • Visma • Iris • Sovos • Azets  • Silverfin • Prophix • CaseWare

ERP & Payroll
17+ years
TeamSystem • Visma • Iris • Access • Transporeon • P&I • Benevity
 

Legal & Regulatory Compliance
14+ years
Achilles • The Citation Group • Litera • Septeo

Automation and Engineering
13+ years
MeinAuto • Tracknit • AUVESY

Tech Services
11+ years
Commify • IT Relation • team.blue • Register • F24 • Geomatikk • The Citation Group

Capital Markets & Wealth Management IT
8+ years
FE Fundinfo • Argus • SmartTrade • Gen II

Insurance
7+ years
GGW Holding • Howden Group

Healthcare IT
7+ years

Evaluate • Medifox • Lyniate • Intelerad

Note: Number of years refers to the number of years for which Hg has invested in each cluster

About Hg

Working together

Sharing Hg know-how and experience

By virtue of the fact that Hg invests repeatedly in specific business models, our dedicated portfolio team has been able to tailor a differentiated approach to driving value creation during our ownership. Following each investment, our portfolio team works with the management of our investee companies to focus on a set of operational levers which is key to performance in an 'Hg sweet ‑ spot' business model: growth, transformation, technology, cyber security, data analytics, ESG and talent. For each of these levers, the portfolio team has the experience and deep knowledge of best practices to help to drive value creation, in collaboration with management.

Every company can access the team, yet the nature of support can take a variety of forms. Often, our portfolio team members provide direct support, taking on roles to help the business to pursue growth more quickly. Another option is for our experienced industry experts to mentor senior executives, helping them to build more scalable functions. In other instances, the support comes through introducing management teams to their counterparts in other companies in which Hg is invested, specifically those who have faced comparable challenges.

"What's been remarkable is how the connectivity has increased across the Hg portfolio of companies. Everyone's in it together. There has also been a notable increase in the speed at which innovation and positive change is taking place. I've been so impressed with the rate at which our companies have adapted to, and made the most of, this new environment we find ourselves in."

Dawn Marriott, Partner and Head of Portfolio Team, Hg

Our focus areas

From sharing best practice and resources through to tailored teams of technical experts, we work closely with the companies in which we invest to ensure that they gain the tools and guidance required for business success.

For further information, please visit: hgcapital.com/working-together

The Hg portfolio community

We view all our business management teams as a part of the Hg portfolio community - and that means promoting a culture of working together to problem solve and innovate more rapidly. One of the most powerful ways in which we motivate change is through peer ‑ to ‑ peer collaboration, allowing management teams the opportunity to exchange ideas and insights, and learn from others across the Hg portfolio and our network of experts. In the last year, we've offered portfolio companies a full end ‑ to ‑ end digital engagement experience, by hosting virtual events and facilitating an increase in activity on the Hg online collaboration platform - Hive.

Virtual events

We have been delighted by the success of our virtual events this past year, which have continued to play a significant role in driving engagement across the entire portfolio of Hg invested companies, bringing the Hg family together during such unprecedented times. Over 2021, we have had a diverse calendar of webinars, hangouts, summits and virtual networking events and, so far this year, we have hosted 51 events, reaching over 5,000 people.

Value creation

· We have +30 senior operational experts that work with our portfolio management teams to drive impact through specific value creation projects;

·   This team provides decades of accumulated IP on operational best practices, as well as the project execution resource to help implement these;

· We conduct functional assessments upfront, comparing new Hg a company's operational maturity against our database of KPIs and best practices, to identify the highest potential projects to pursue.

Number of portfolio team days worked across the Hg portfolio, by area: Q2 2021

Data 466

Growth 356

Talent 187

Tech 212

VCP 117

2021 YTD:

51 Portfolio team-led online events so far this year, with many more in the diary

5,000 total people in attendance

Hive

Hg's online community for everyday collaboration

Hive, Hg's online portfolio engagement platform, enables collaboration at scale across the entire Hg family and plays a central role in Hg's value-add proposition to portfolio companies. In June 2021, Hg extended access to Hive beyond c-suite; all employees of Hg-invested businesses can now benefit from the opportunities readily available. Hive provides members with a space to network with peers, access Hg events, and a resource to share specialist knowledge and expertise through multiple specialist communities. For example, individuals can post questions, share content and gain access to best ‑ practice methodologies from world ‑ class experts. With virtual methods being the sole way to engage with our portfolio through the pandemic, Hive is thriving more than ever. This year, we've further developed the platform to provide a more interactive and tailored user experience, and there's more yet to come. As a result, Hive is rapidly growing in size; membership has grown by 25% in the last quarter alone.

25%* increase in new Hive members

381,500 page views on Hive

2,500 active members and growing!

*Whilst the number of active members has continued to grow, we have also accounted for any members who are no longer part of our network of portfolio companies.  

For further information, please visit: hive.hgcapital.com

"By continuing to invest in our people and our expertise, we are able to work with the best management teams in our target clusters and actively help them to build great businesses"

Steven Batchelor, Chief Operating Officer, Hg

>240   members of the team

3 investment offices in London, Munich and New York

>140   investment and portfolio management executives

8 clusters of expertise

Our team

Hg succeeds through the analysis and understanding of new and emerging dynamics in the clusters in which it invests. This requires profound knowledge of technology, markets and business practices. To this end, we employ diverse and exceptionally talented teams to identify and execute investment opportunities and accelerate value creation during our ownership. This specialisation - in both investment selection and portfolio management - requires significant resources, and we have built a business employing more than 240 people, including more than 140 investment and portfolio management executives and other professionals. Our investment and portfolio ‑ management executives come from a range of backgrounds and experience, including private equity, consulting, investment banking, accounting and industry specialists. Our portfolio team comprises a mix of senior operators and functional specialists, typically with substantial experience in their respective specialist operational and strategic roles. 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 16 European countries, Asia, Africa and the USA. On average, our partners have 15 years' experience in the management of private businesses.

Positioning ourselves as a best-in-class recruiter

Hg's recruitment and selection processes are rigorous and agile. These - along with our strong brand, leadership, sector focus, fund performance, vibrant culture and only working with recruitment partners who ensure that their search methodology is inclusive, providing diverse talent - allow us to attract and hire the best talent in our industry.

Improving our ability to identify talent

We have enhanced our talent processes so that we can identify and accelerate the development of our top performers and high ‑ potential talent within the business. We believe this to be the basis of effective career and succession ‑ planning and to support this we have hired a Head of Talent Development, joining later this year to focus solely on developing our talent.

Employee engagement

Our people are highly motivated by, and committed to, delivering outstanding value to HGT, our other institutional 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 Hg. Our values have evolved over many years and are embodied in our working culture; these are aligned with our performance and reward structures. Hg works hard to ensure that our employees are engaged. We use independent external benchmarks to gauge levels of engagement and take appropriate actions to ensure the highest ‑ possible levels of engagement. We have a strong focus on career and personal development, providing a range of development opportunities to enable our talent to reach their full potential and perform at their best.

Developing future leaders

We are explicit about those behaviours which we wish to encourage at Hg and have aligned recruitment, training, coaching, performance and rewards to our values - for everybody across the organisation, including our leadership. We know that longevity of success means doing it the right way, thinking long term and always being willing to listen and learn. These values can be seen and felt everywhere you look, around our offices and in everyday interactions - it's really what makes us Hg.

A description of Hg's key staff is available at hgcapital.com/our-people

"With diversity, you source and analyse deals, ask and answer questions and manage teams differently. It adds up to better investment and business decisions. The more complex the challenge at hand, the greater the returns."

Nic Humphries, Senior Partner, Hg

Diversity and inclusion

Hg has introduced several new policies and built on its existing ones over the past 12 months, as part of a wider initiative around diversity and inclusion. We have an established D&I steering group, comprising a range of individuals from across the firm. Its aim is to promote a culture of inclusion which clearly values diversity in all of its forms. We have several global initiatives - gender balance, flexible working, mentoring programmes, training and awareness events - to drive internal change. This is also echoed and supported through our HR learning and development initiatives, including structured mentoring programmes, recruitment processes and training, embedding awareness of unconscious bias and inclusion.

Hg will maintain its commitment to industry-wide initiatives such as Level 20, a not ‑ for ‑ profit organisation aligned around a common vision to inspire more women to join the industry. Hg senior partner Nic Humphries continues his role on Level 20's advisory council.

Hg is an active participant in the Institutional Limited Partners Association's 'diversity in action' initiative, acknowledging our ongoing commitment to take concrete steps to advance diversity, equity and inclusion across our organisation and the industry more broadly.

In addition, this summer we have welcomed our first interns through the #10000blackinterns programme, helping black students gain experience and  kick ‑ start their career in investment management.

This year we are also excited to partner with Sponsors for Educational Opportunity (SEO) in London and New York as they help prepare talented students from ethnic minority or low socio-economic backgrounds for career success.

"At Hg, we aim to attract and maintain a team of the best-possible investment and operational talent. To do this, we need to ensure that we're building this team from the broadest range of potential employees. Having a clear strategy and committed team looking at diversity and inclusion, with full support from the firm's senior leadership team, is crucial."

Martina Sanow, Partner and Deputy Chief Operating Officer, Hg

Hg is now a member of the LGBT Great network and as part of this partnership has contributed to two of their research projects: LGBT+ investing lens: research exploring the practice of investing for financial return while also considering the benefits to those who identify as LGBT+, such as improving economic opportunities or social inclusion for the LGBT+ community.

Diversity Data: research exploring the concept of extending mandatory organisational diversity reporting beyond gender to other diversity dimensions such as ethnicity and sexuality. Hg hopes that this research will be a catalyst for positive change and are proud to be a part of it.

Responsible investment

Removing barriers to education & skills in technology

The Hg Foundation

The Hg Foundation is a grant-giving charity with a defined focus on education and technology. Its goal is to make an impact to the development of skills most required for employment within the technology industry, focusing on individuals who may otherwise experience barriers to access.

The Foundation aims to achieve this by providing funding and operational support to charitable schemes and partnerships across the UK, USA and Europe focusing on well researched themes within education and technology, and where long ‑ term, measurable and scalable impact can be demonstrated.

The Hg Foundation forms strategic partnerships with experienced and proven partners with each of its programme typically running over multiple years. Some smaller commitments are also made on occasion where the Foundation trustees are keen to establish new themes and develop research on where interventions can be most effective. 

Since launch in April 2020, the Foundation has committed $5.9 million across four key partnerships which will provide specific and targeted interventions to c. 2500 disadvantaged students and in many instances will enable access to many more students via online resources.

Alongside Imperial College London , a global top ‑ 10 university, the Foundation has committed funding to advance and scale the college's current mA*ths outreach programme to incorporate A ‑ level further maths, supporting the development of a skill critical to employment within technology. This unique programme includes mass online learning, e-mentoring as well as learning support for teachers - creating a multiplier effect as teachers spread the new resources and learning through the education system.

The Sponsors for Educational Opportunity's SEO Tech Developer programme in the USA addresses the technology diversity gap for black, Latinx and native American undergraduate students majoring in computer science, engineering and related STEM fields. This is an intensive immersion and training programme focused on eliminating the exposure and preparation gaps facing underrepresented students seeking to enter the tech industry.

upReach's Tech500 programme looks to support 500 undergraduates from disadvantaged backgrounds who are looking to secure graduate roles in the technology sector. Through close collaboration with leading technology employers, upReach will deliver a comprehensive programme of exclusive training, networking and development opportunities. These will be available to the upReach Tech500, and a further 2,500 students from lower socio-economic backgrounds all over the UK.

During the early stages of the pandemic in spring 2020, the Foundation was one of the initial funders of an online tutoring pilot commissioned by Impetus , the EEF, Nesta and The Sutton Trust, the findings of which fed into the National Tutoring Programme (NTP) rolled out later in 2020 by the UK Government.

Through The Tutor Trust , an established tutoring charity and delivery partner of the NTP pilot, the Foundation is supporting an ongoing pilot initiative to test the efficacy of a hybrid model of online and face ‑ to ‑ face tutoring for disadvantaged students. 

The Hg Foundation is funded through a proportion of carried interest from current and future Hg funds, a proportion of Hg's annual profits and also through charitable activities carried out across the firm. The Foundation's ambition is to commit on average $5 million per year over the first 10 years.

The Hg Foundation is a UK ‑ registered charity, run by an independent board of trustees, including Tom Attwood (chair) and Sir Kevan Collins. Tom Attwood is the former chair of the Academy and Free School Board at the DfE. Sir Kevan Collins was the first chief executive of The Education Endowment Foundation, during 2011 to 2019, and is a visiting professor at the UCL Institute of Education.

For more information, please visit the Hg Foundation's website: www.thehgfoundation.com

Responsible investment

Why responsible investment is important to us

Hg engages in Responsible Investment because it sits right at the core of our Purpose.

We are trusted to improve the future of millions of investors by building sustainable businesses for tomorrow. This is our purpose statement, our reason for being - it is how we see our place in society and our contribution to it. We are totally committed to this and it is embedded in everything we do, in every decision, every day and for every individual.

What this means in practice is that we look to grow sustainable businesses which are great employers and good corporate citizens, whilst also generating strong returns for the millions of pensioners and savers who are invested with us. Everyone at Hg is ultimately pulling together towards this goal.

This commitment supports the backbone of our investment philosophy and has helped us to determine a very focused approach, which has evolved over the last 20 years. Our focus is to invest exclusively in growing software and services businesses. We look to ensure that both our time and our capital, support the sustainable growth of these knowledge businesses.

These businesses then contribute to society by changing and modernising how their customers work, whilst providing quality employment opportunities for thousands of people worldwide, across innovative and growing sectors.

In turn we believe that responsible business practices help to generate superior long-term performance, captured as investment returns to our investors. In this way, all stakeholders' goals align, with contributions to investors, the businesses themselves, employees, customers, suppliers, shareholders and wider society.

As with other operations and functions, we take an active interest in how our companies manage Environment, Society and Governance (ESG) risks and opportunities. It is much more than screening processes to ensure we do not invest in certain companies. We primarily seek controlling equity buyout investments because this means we can make an active contribution in decision-making processes and better ensure positive change.

We encourage, stretch, measure and demonstrate best-practice to our portfolio companies - constantly striving for the highest ESG standards.

Our sector focus and expertise also mean that we have a better understanding of which ESG metrics are most material to service and software companies. We focus on these metrics to help build world-class ESG practices across our portfolio and achieve most impact.

Finally, we actively champion this topic and talk about our approach openly both internally and externally. We want all our employees to be proud of what we do, because they should be, and we want our investors to be confident in our intentions when they commit capital to us for ten years or more. We also listen - feedback is important and we truly want our stakeholders to tell us where we can do more.

This is Hg's commitment to Responsible Investment and I can say, with great confidence, that this is embedded into the purpose of everything we do, right through the whole firm.

Matthew Brockman

Managing Partner, Hg

For more information, please visit: www.hgcapital.com/responsibility

To watch our responsible investment video, please visit: www.hgcapital.com/responsibility

Our responsible investment (RI) journey

We continue to demonstrate our commitment to RI publicly - through a number of initiatives. We have been signatories of the United Nations ‑ supported Principles for Responsible Investment (UNPRI) since 2012 and are proud to have retained the top score, AA++, for a second successive year in 2020, cementing our reputation as a leader in ESG initiatives and innovation. Hg is also a member of BVCA's Responsible Investment Advisory Group and the affiliate network of Invest Europe's Responsible Investment Roundtable.

We recognise that climate change is one of the most important topics in the ESG space and at the top of the agenda for society, Hg and our investors. As a result, Hg in a founding member of the UK network of the Initiative Climat International (iCI). Endorsed by the UNPRI, iCI is a network of Private Equity firms working collaboratively to tackle climate change in our industry. Hg is a member of the UK Operating Committee of iCI and is actively supporting the NetZero working group.

As part of our efforts on climate change, Hg is undertaking a climate change risk assessment of all our new portfolio companies, using our PwC ‑ developed climate change risk tool. So far, over 40 of our existing and new portfolio companies have completed the assessment, which shows that the key risk across our portfolio is related to potential transition risks in the US. As a result of our ongoing review, portfolio companies receive practical steps on how to reduce risks and increase resilience.

On a firm level, Hg has been recertified as carbon neutral - our FY 2020/21 carbon footprint report shows Hg's value chain carbon footprint and what we have done to offset our emissions. We saw a decrease of 87% in our value chain carbon footprint between FY 2019/20 and FY 2020/21, largely driven by the decreased carbon footprint of business travel as a result of the pandemic. We are looking at how we can continue to learn from the new ways of working from the past year to help maintain a lower level of carbon emissions across the firm. After a long time of lobbying our landlord in London, we have finally been able to switch to renewable energy in July 2021.

ESG in the deal process

ESG is embedded into the entire deal process, from screening to exit. We are very clear, as outlined in our exclusion list, on the types of business in which we do not invest. During due diligence, we assess companies for compliance with relevant laws in relation to ESG, H&S, bribery and corruption.

We also consider the inherent ESG risk of the company and carry out an associated review, detailing risks and opportunities in relation to our sustainable business framework (see above), taking an active approach to managing ESG during our ownership.

This starts with an onboarding and ESG maturity assessment, within the first months of acquisition, to identify areas for improvement where Hg can support the companies to realise their ambitions within, and beyond, our sustainable business framework. As part of our ongoing engagement, each business is reassessed annually with regular follow-ups to ensure that appropriate actions are taken to improve, as required.

Our ESG onboarding is not limited to our sustainable business framework, in addition we conduct separate assessments on cybersecurity, data privacy and climate change risks. All portfolio companies are also required to report their carbon emissions on an annual basis starting in 2021.

Each year we re-assess all portfolio companies against our sustainable business framework. Each company is assigned a score from 0 - 10 and receives an action list to support improvement. In 2020, we conducted our third ESG assessment of our portfolio companies, and we are delighted to report that the average score across the portfolio is eight, with an average improvement of 22%, compared with the first time assessed three years ago (or more recently, depending on when each company joined the Hg family). This reassures us that the ESG interaction and support to our portfolio companies helps to increase performance in this space.

PRI

A signatory to the UNPRI since 2012.

AA++ 2021 PRI assessment score:

'A+' for strategy and governance and

'A+' for private equity ownership

Hg is a founding member of the UK network of the Initiative Climat International (iCI)

Our sustainable business framework

Hg's Sustainable Business framework outlines key ESG focus areas for Software and Services companies. The framework is based on extensive research and is updated on an annual basis to reflect trends and new ESG metrics. The framework forms the foundation of the ESG assessments we undertake with our businesses as part of our onboarding process and annually thereafter. Our assessment is extensive and covers over 150 metrics relating to essentials, employees and society.

Essentials

(c. 74 metrics)

There are certain minimum ESG requirements that Hg expects from all portfolio companies:

· governance and business integrity , such as code of conduct, appropriate controls and policies, board composition and appropriate health and safety and whistleblowing procedures.

· risk and compliance , including compliance with applicable laws and regulations, active risk management, as well as standards and policies to combat bribery, corruption, money laundering, anti-competitive behaviour, tax evasion, harassment and other malpractice.

· data and cyber security , including Hg's minimum standards for cybersecurity with appropriate data protection and information security practices. Hg has a separate Cybersecurity assessment which all companies are assessed against as part of onboarding and regularly thereafter.

Employees

(c. 43 metrics)

One of the most important assets of our portfolio companies are the employees. A diverse workplace with engaged and motivated employees is vital for growth and business success. We look at employees from four aspects:

· purpose and culture , including an engaging mission, purpose and values, as well as positive impact / contribution to the SDGs.

· grow businesses and talent , including job growth, healthy staff turnover, talent management and succession planning.

· engage and motivate employees by promoting transparent communications, health and wellbeing, development opportunities and recognition.

· diversity of talent, equal opportunities and inclusion irrespective of ethnicity, gender, disability or background.

Society

(c. 34 metrics)

We want all portfolio companies to strive to make a positive impact by acting transparently and contributing to society through their business practice, charitable support and positive relations with key stakeholders. We assess external impact from four aspects:

· community engagement , including apprenticeships, charitable giving and volunteering.

· environmental impact , such as energy use, energy efficiency, waste management, carbon emissions and climate change risks and opportunities.

· positive relationships with key external stakeholders such as customers, communities and suppliers.

· transparency of company commitments and progress, including external reporting and sustainability related communications.

For more information, please visit: www.hgcapital.com/responsibility

To watch our responsible investment video, please visit: www.hgcapital.com/responsibility

Climate change

In FY 2020/21, Hg was recertified as a Carbon Neutral company as we continue to offset all carbon emissions. Last year, we saw a decrease of 87% of our carbon footprint¹, mostly driven by the reduction in business travel. At the same time, our business has grown. In 2020/21 our headcount increased by around 8% and Hg's FUM grew by 68%. Our carbon footprint per employee consequently decreased by 88% (from 11.2 to 1.3 tonnes of CO2e / employee) and our footprint per billion dollars of FUM decreased by 92% (from 121.6 to 9.4 tonnes of CO2e / $ bn FUM).

2020/21 was a different year, a year when travel was restricted and many offices were closed or operated under limited capacity. Last year, most of Hg's staff worked from home, which meant our carbon footprint was not limited to our offices but involved some of the electricity used within our employee's homes too. With the shift to homeworking, Hg supported our employees to set up offices at home, which included purchasing new equipment to enable a more comfortable working environment. As a result, we have included two new categories in our carbon footprint: home workers and IT equipment. It is worth noting that between 2019 and 2020, DEFRA's GHG emission factor for waste has increased by c. 460%, which meant Hg's carbon footprint from waste increased despite a decrease in actual waste generated.

As we are slowly moving towards a more normal world, we are continuing to examine how we can learn lessons from the new working practices introduced during the COVID ‑ 19 pandemic and translate them into long ‑ term policies which will help to reduce our environmental impact. Since July 2021, Hg has moved to renewable energy for our London office, something which will have a positive impact on our footprint for the next reporting year.

The issue

In 1994, the United Nations Framework Convention on Climate Change recognised that the climate system can be affected by greenhouse gas (GHG) emissions and ozone ‑ depleting substances (ODS). The consumption of fossil fuels, other industrial activities and deforestation generate the majority of GHGs, such as carbon dioxide, nitrous oxide, methane, chlorofluorocarbon (CFC), hydrochlorofluorocarbon (HCFC) and hydrofluorocarbon (HFC). These gases are collectively known as greenhouse gases, since they do not interact with short ‑ wave radiation from the sun; instead, they absorb the reflected long ‑ wave radiation from the Earth's surface and re-radiate this energy as heat within the Earth's atmosphere. This is impacting the temperature and has a long-term impact on our climate. Unless we take radical action, our lives (including our resources, economies and businesses) are going to be profoundly affected.

The recent Intergovernmental Panel on Climate Change (IPCC) report², which is based on the work of hundreds of leading climate scientists from across the world, highlights that human activity is changing the climate and that we are currently at a point when urgent action is needed to prevent detrimental impact, such as extreme heatwaves, droughts and flooding, that a further temperature rise would have on our planet. The report urges businesses and governments to act. It is not too late and there is hope that decreased carbon emissions could stabilise rising temperatures, but we need to take urgent action to avoid catastrophe.

Hg is taking our responsibility to be part of that action very seriously indeed. By measuring and offsetting our carbon footprint, we aim to do our part in tackling the global climate emergency, while also supporting sustainable development in local communities. We strive to lead by example and are working actively with our portfolio companies to raise awareness and support urgent positive change. Hg is a founding member of the UK division of initiative Climat International (iCI), a UNPRI endorsed network of private equity firms collaborating on climate change.

Methodology and detailed numbers

Hg's carbon footprint for the financial year 2020/21 was prepared in line with the GHG Protocol by external consultant Natural Capital Partners and includes our scope 1, 2 and 3 emissions¹.

	2018/19	2019/20	2020/21	% change between reporting year 1 and 2	% change between reporting year 2 and 3
Scope 1 - Direct emissions	51	38	19	-26%	-51%
Scope 2 - Indirect electricity emissions	195	119	94	-39%	-21%
Scope 3 - Other indirect emissions	1,410	2,093	178	48%	-91%
TOTAL	1,656	2,249	291	36%	-87%

Standardised numbers based on number of employees and FUM:

No. of employees	161	201	218	25%	8%
tCO2e / employee	10.3	11.2	1.3	9%	-88%
FUM ($ bn)	12.5	18.5	31	48%	68%
tCO2e / FUM	132.5	121.6	9.4	-8%	-92%

Cutting the data slightly differently, looking at the emissions related to the different activities within our firm rather than the scopes defined by the GHG protocol:

Premises:

Mains gas, electricity consumption incl. transmission losses, water consumption, waste water and waste.

Home working:

Electricity consumed when staff are working from home (NEW).

Business travel:

Air travel, rail and other travel related emissions such as taxi and hotel stays.

Other:

Staff commuting, deliveries and consumables & capital goods (NEW).

	2018/19	2019/20	2020/21	% change between reporting year 1 and 2	% change between reporting year 2 and 3
Premises	268	169	129	-52%	-24%
Home working	-	-	59	n/a	n/a
Business travel	1,365	2,011	26	-98%	-99%
Other	22	69	78	246%	13%
TOTAL	1,656	2,249	291	-82%	-87%

Hg recertifies as carbon neutral

Hg continues to offset all carbon emissions by supporting the Acre Amazonian Rainforest project. This prevents deforestation and promotes sustainable economic livelihoods in the Brazilian Amazon².

With the funds of carbon finance, the project works with local communities to create models of economic development which avoid deforestation and protect the ecosystem.

The project delivers four of the 17 sustainable development goals.

¹ It is currently excluding category 15 of the GHG protocol, i.e. investments.

² https://www.naturalcapitalpartners.com/projects/project/acre-amazonian-rainforest-conservation

Review of the period

Net asset value (NAV)

During the period, the NAV of HGT increased by £349 million, from £1,291 million at 31 December 2020 to £1,640 million at 30 June 2021.

Attribution analysis of movements in NAV

	Revenue £000	Capital £000	Total £000
Opening NAV as at 1 January 2021	19,946	1,271,070	1,291,016
Realised capital and income proceeds from investment portfolio in excess of 31 December 2020 book value	913	15,427	16,340
Net unrealised capital and income appreciation of investment portfolio	24,608	321,102	345,710
Net realised and unrealised gains from liquid resources	200	(76)	124
Share issue	-	75,198	75,198
Dividend paid	(12,828)	-	(12,828)
Expenditure	(4,153)	(791)	(4,944)
Taxation	-	-	-
Investment management costs:
Priority profit share - current period paid	(7,639)	-	(7,639)
Priority profit share - reallocation between capital and income	3,964	(3,964)	-
Carried interest - current period paid	-	(20,910)	(20,910)
Carried interest - current period provision	-	(42,460)	(42,460)
Closing NAV as at 30 June 2021	25,011	1,614,596	1,639,607

Analysis of NAV movements

Several underlying factors contributed to the increase in NAV. Positive impacts were the £345.7 million revaluation of the unquoted portfolio and uplifts of £16.3 million on the realisation of investments, compared with their carrying value at the start of the period. Shares issued during the period contributed a further £75.2 million.

Reductions in NAV included: the payment of £12.8 million of dividends to shareholders, carried interest paid of £20.9 million and a £42.5 million increase in the provision for future carried interest.

Attribution analysis of movements in the value of investments

During the year, the value of the unrealised investments increased by £348.2 million, before the provision for carried interest. The majority of the increase, £270.7 million, relates to increases from profit growth in the underlying investments. An increase in valuation multiples increased the value of investments by £150.3 million.

Acquisitions net of realisations at carrying value of £78.3 million increased the value further and negative currency movements of £29.7 million reduced the value of the unrealised portfolio. An increase in net debt of £43.1 million contributed negatively to the unrealised portfolio.

Top 20 portfolio trading performance as at 30 June 2021

The top 20 investments (representing 80% of total investments by value) have delivered strong sales growth of 20% and EBITDA growth of 27% over the last 12 months ('LTM').

The business model characteristics of the companies in which we are invested give us confidence that sustainable growth can be achieved consistently, going forward.

More than 70% by value of the top 20 businesses within the portfolio are seeing double ‑ digit revenue growth, and more than 85% have delivered double ‑ digit EBITDA growth over the last 12 months.

Profits have grown at a faster rate than revenues, with continued investment made into the cost base of several companies, for example, to finance increased sales and marketing capabilities and strengthen management and new product development, continuing to drive future performance.

We have seen very robust and consistent trading performance from the majority of the portfolio, with particularly strong growth from Visma, Access, Transporeon, Allocate, Litera, Septeo and FE fundinfo. While new to the portfolio, Howden, Prophix and Benevity have also displayed robust growth.

Where a company has not performed as well as we would like, we have reflected this in its valuation.

Valuation and net debt analysis as at 30 June 2021

Our valuation policy is applied consistently, in accordance with the IPEV Valuation Guidelines. Each company has been valued individually, based on the trading multiples of comparable businesses and relevant and recent M&A activity; this resulted in an average EBITDA multiple for the top 20 investments of 25.0x (22.1x at 31 December 2020).

The basis of the approach continues to be to apply a relevant multiple to suitable earnings ‑ based performance metric. We take a considered approach in determining the level of maintainable earnings to use in each valuation, in line with the IPEV Valuation Guidelines. Most holdings have been valued using the LTM earnings to 31 May 2021, 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. The earnings figure used may be adjusted on a pro ‑ forma basis reflecting acquisitions, disposals or other adjustments to the extent a buyer would make such adjustments. 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 also making use of M&A data. We then cross-check the existing valuation against a range of other valuation techniques. We also use back testing to understand substantive differences that legitimately occur between an exit price and the previous fair value assessment to inform our valuation policy.

Our companies make appropriate use of gearing, with a weighted average net debt for the top 20 of 5.9x LTM EBITDA (6.4x at 31 December 2020). Many of our businesses have highly predictable, strong earnings growth and are very cash generative, enabling us to use debt to reduce their cost of capital and improve returns on the equity we hold.

Outstanding commitments of HGT

At 30 June 2021, HGT held liquid resources of £239 million and had outstanding commitments of £623 million, as listed below. We anticipate the majority of these outstanding commitments will be drawn down over the next three to four years (2021-25) and are likely to be partly financed by cash flows from future realisations. Additionally, to mitigate the risk of being unable to fund any draw-down under its commitments to invest alongside Hg's funds, the Board has negotiated a right to opt out, without penalty, of HGT's obligation to fund such commitments, where it does not have the funds to do so or certain other conditions exist. HGT also has access to a £200 million bank facility which was 18% drawn as at 30 June 2021.

Fund	Fund vintage	Original commitment £million	1	Outstanding commitments as at 30 June 2021			Outstanding commitments as at 31 December 2020
				£million	% of NAV		£million	% of NAV
HGT Genesis 9 LP	2020	309.0	2	208.1	12.7		263.2	20.4
HGT Saturn 2 LP	2020	289.5	3	131.2	8.0		200.6	15.5
HGT Mercury 3 LP	2020	98.7	4	89.6	5.5		102.9	8.0
HGT LP	Various	72.4	5	72.4	4.4		1.3	0.1
HGT 8 LP	2018	350.0		51.4	3.1		9.7	0.8
HGT Transition Capital LP	2018	75.0		49.5	3.0		49.6	3.8
HGT Saturn LP	2018	150.0		8.1	0.5		7.9	0.6
HGT Mercury 2 LP	2017	80.0		5.1	0.3		4.7	0.4
HgCapital Mercury D LP	2011	60.0		3.3	0.2		3.3	0.3
HGT 6 LP	2009	285.0		2.2	0.1		2.3	0.2
HGT 7 LP	2013	200.0		1.0	0.1		1.2	0.1
Asper RPP I LP	2006	18.6	6	0.6	-		0.6	-
Hg 6 E LP	2009	15.0	7	0.1	-		0.1	-
Total				622.6	37.9		647.4	50.2
Liquid resources				238.5	14.5		187.6	14.5
Net outstanding commitments unfunded by liquid resources				384.1	23.4		459.8	35.7

¹ Excluding any co-investment participations made through HGT LP.

² Sterling equivalent of €360 million.

³ Sterling equivalent of $400 million.

⁴ Sterling equivalent of €115 million.

⁵ Sterling equivalent of $100 million of junior debt.

⁶ Sterling equivalent of €21.6 million.

⁷ Partnership interest acquired during 2011.

Investment portfolio of HGT

Fund limited partnerships	Residual cost £000	Total valuation1 £000	Portfolio value %
Primary buyout funds:
HGT 8 LP	318,098	625,251	40.7
HGT 8 LP - Provision for carried interest	-	(56,565)	(3.7)
HGT Saturn LP	144,370	270,283	17.6
HGT Saturn LP - Provision for carried interest	-	(26,162)	(1.7)
HGT Saturn 2 LP	160,500	236,167	15.3
HGT Mercury 2 LP	68,217	139,352	9.1
HGT Mercury 2 LP - Provision for carried interest	-	(16,313)	(1.1)
HGT Genesis 9 LP	100,233	123,666	8.0
HGT LP	85,651	100,910	6.6
HGT 7 LP	27,491	82,600	5.4
HGT 7 LP - Provision for carried interest	-	(16,528)	(1.1)
Hg Capital Mercury D LP	4,179	39,135	2.5
HgCapital Mercury D LP - Provision for carried interest	-	(7,856)	(0.5)
HGT Mercury 3 LP	7,326	7,351	0.5
HGT 6 LP	14,716	2,549	0.2
HGT 6 LP - Provision for carried interest	-	(523)	-
Total primary buyout funds	930,781	1,503,317	97.6
Secondary buyout funds:
HgCapital 6 E LP	-	139	-
HgCapital 6 E LP - Provision for carried interest	-	(29)	-
Total secondary buyout funds	-	110	-
Total buyout funds	930,781	1,503,427	97.6
Transition capital funds:
HGT Transition Capital LP	24,028	34,675	2.3
Total transition capital funds	24,028	34,675	2.3
Renewable energy funds:
Asper RPP I	5,040	788	0.1
Total investments net of carried interest provision	959,849	1,538,890	100.0

¹ Includes accrued income but is before the deduction of the fund level facility.

Investments and realisations

Investments

Over the course of the period, Hg invested a total of £2.3 billion on behalf of its clients, with HGT's share being £165 million.

The vast majority of our investments are generated by establishing and developing relationships with companies 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 clusters.

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

New investments in the six months to 30 June 2021

Howden

£42.0m invested on behalf of HGT

In March 2021, Hg completed an investment in Howden Group Holdings (Howden Group), the international insurance intermediary. Founded in 1994 and headquartered in London, Howden Group is a leading international insurance distribution group.

Benevity

£31.6m invested on behalf of HGT, including £3.6m in co-investment

In January 2021, Hg completed an investment in Benevity Inc (Benevity), a global leader in corporate purpose cloud software. Hg will lead the investment, to be made from the Hg Saturn 2 Fund, in partnership with Benevity's current investors, General Atlantic and JMI Equity, which will remain significant investors in the business, alongside the Benevity management team.

Trackunit

£26.6m invested on behalf of HGT

In June 2021, Hg completed an investment in Trackunit, a global leader in software-led telematics solutions for off-highway vehicles and the construction market, alongside Goldman Sachs and GRO Capital. Trackunit is a driving force in the digitization of the construction sector, serving equipment manufacturers, rental companies and contractors, connecting construction equipment and processing data to the cloud to deliver value-added insights.

Dext

£15.6m invested on behalf of HGT including £3.9m in co-investment

In May 2021, Hg completed an investment in Dext, a leading provider of pre-accounting software which helps to automate the process of extracting and classifying data from receipts, invoices and documents (whether digital or paper) for the purposes of adding to bookkeeping / general ledger tools. Dext's software integrates with 2,500+ accounting, payroll and payment software providers, providing significant customer benefits in terms of making otherwise highly manual workflows more efficient, accurate and facilitating better and quicker data analysis and reporting.

Prophix

£15.2m invested on behalf of HGT

In February 2021, Hg completed an investment in Prophix, a global leader in corporate performance management (CPM) software. Founded in 1987 and based in Ontario, Canada, Prophix is a leading provider of CPM software serving mid ‑ market companies across multiple industries worldwide, providing planning, budgeting and financial reporting software into the 'office of the CFO'.

TeamSystem

£14.3m invested on behalf of HGT

In February 2021, Hg completed an investment in TeamSystem, an Italian provider of ERP and business management software to SMEs and professionals via the Hg Genesis 8 fund. Hg has held a minority position in TeamSystem since 2015, following its majority exit to a vehicle indirectly held by Hellman & Friedman Capital Partners VII, L.P.

Geomatikk

£11.4m invested on behalf of HGT, including £4.0m in co-investment

In February 2021, Hg completed an investment in Geomatikk Group, a tech ‑ enabled services champion, managing critical 'check ‑ before ‑ you ‑ dig' safety assessments to network owners, contractors and consulting engineers within Norway, Sweden and Finland. Hg will support Geomatikk with its extensive experience in scaling tech champions across Europe. Hg will become the majority investor, with founders and management remaining as significant investors in the business.

AUVESY

£7.3m invested on behalf of HGT

In May 2021, Hg completed an investment in AUVESY GmbH (AUVESY). Founded in 2007 and headquartered in Germany, AUVESY is a provider of version control software for smart production machinery and other industrial Internet of Things (IoT) devices. AUVESY manages over 5 million industrial IoT devices across 45 countries, serving over 700 loyal customers.

Post-period investments  

Insightsoftware

Estimated £40.0m invested on behalf of HGT including £3.6m in co-investment

In July 2021, Hg announced an investment in insightsoftware, a global provider of enterprise software solutions for the 'Office of the CFO'. Headquartered in Raleigh, NC, with offices around the world, insightsoftware has more than 1,000 employees serving over 600,000 global users.

MMIT

Estimated £19.9m invested on behalf of HGT

In August 2021, Hg, the Manager of HGT announced an investment in Managed Markets Insight & Technology, LLC. ("MMIT"), the trusted go-to-market partner solely focused on solving the "what and why" of market access in the pharma sector. MMIT will join forces with Evaluate Ltd a leading provider of commercial intelligence and predictive analytics to the pharmaceutical industry. Hg will share joint control of the combined business.

Riskalyze

Estimated £9.0m invested on behalf of HGT

In August 2021, Hg, the Manager of HGT announced an investment in Riskalyze, Inc., an industry-leading, risk-centric wealth management platform serving financial advisors, enterprises, and asset managers. Riskalyze's industry-leading client and portfolio risk technology is rapidly emerging as an industry standard for advisor, client and portfolio risk analytics across the US wealth management ecosystem. Today, Riskalyze's platform supports tens of thousands of financial advisors who use it to manage millions of client accounts with over $400 billion in assets.

Serrala

Estimated £24.0m invested on behalf of HGT

In August 2021, Hg, the Manager of HGT announced an investment in Serrala, a fast-growing global financial automation and B2B payments software company. Founded in 1984 and based in Hamburg, Germany, Serrala provides software solutions for financial automation and B2B payments to medium-sized to large Enterprise customers globally, with a strong footprint across Europe and the US.

Realisations

Over the course of the period, Hg has returned a total of £863 million to its clients, including £103 million to HGT.

HGT saw some significant exits over the first six months of 2021 and beyond, and we continue to assess further opportunities to return cash proceeds to our clients, including HGT.

Full exits in the six months to 30 June 2021

Mitratech

£40.3m returned to HGT

In May 2021, Hg completed the sale of Mitratech, a leading provider of legal and compliance software to Ontario Teachers' Pension Plan Board. Following completion of the transaction, Hg, the majority investor in Mitratech since 2017, will retain a minority interest.

The sale of the Hg Genesis 7 stake represented an uplift of 50% to the 31 December 2020 valuation of HGT's holding.

APG

£21.5m returned to HGT

In March 2021, Hg completed the sale of APG, one of the UK's largest specialist insurance intermediaries, to Howden, the international insurance broking group. Hg partnered with APG in 2015, recognising the business's best ‑ in ‑ class customer success model - a personal, service ‑ oriented approach, leading to very high levels of customer satisfaction alongside strong organic growth. Since then, Hg has worked with management to transform APG from a predominantly branch ‑ based, personal lines insurance broker, to a business with a national footprint across multiple lines of business, supported by industry ‑ leading data and analytics capabilities.

TeamSystem

£21.4m returned to HGT
In February 2021, Hg completed the sale of TeamSystem, an Italian provider of ERP and business management software to SMEs and professionals, from the Hg Genesis 6 fund.

Trace One

£5.8m returned to HGT

In April 2021, Hg completed the sale of Trace One, the world's largest collaborative retail business platform for consumer-packaged goods (CPG), to Symphony Technology Group. Trace One enables customers to create higher quality, trusted, and compliant own-branded goods faster, delivering benefits to their consumers and the environment.

The sale of the Hg Mercury 1 stake represented an uplift of 33% to the 31 December 2020 valuation of HGT's holding.

Eidosmedia

£0.6m returned to HGT

In April 2021, Hg completed the sale of Eidosmedia, a provider of Enterprise Content Management (ECM) software, primarily to the Media and Financial Services verticals, to CAPZA, a European private investment platform.

The sale of the Hg Genesis 7 stake represented an uplift of 45% to the 31 December 2020 valuation of HGT's holding.

Refinancings in the six months to 30 June 2021

team.blue

£10.3m returned to HGT

In March 2021, the Genesis team completed the refinancing of team.blue, a mass hosting provider offering web enablement solutions to SMEs across Europe, headquartered in Belgium. team.blue has now returned 0.6x the original investment.

Full exits since the period end

Allocate

Estimated £50.7m returned to HGT

In June, Hg announced that it had agreed the sale of Allocate, a leading workforce and people management software-as-a-service (SaaS) provider to healthcare and government organisations, to RLDatix, the leading global provider of intelligent patient safety solutions.

The sale of the Hg Genesis 8 stake represented an uplift of 48% to the 31 December 2020 valuation of HGT's holding.

To view our press releases, please visit www.hgcapitaltrust.com/news-and-media/press-releases/pr-2021.aspx

Summary of investment and realisation activity

Investments made during the period

Company	Cluster	Location	Cost £000
Howden	Insurance	UK	42,026
Benevity	ERP & Payroll	North America	31,619
Trackunit	Automation and Engineering	Scandinavia	26,593
DEXT	Tax & Accounting	UK	15,620
Prophix	Tax & Accounting	North America	15,175
TeamSystem	Tax & Accounting/ERP & Payroll	Italy	14,250
Geomatikk	SME Tech & Services	Scandinavia	11,392
Auvesy	Automation and Engineering	Germany	7,326
New investments			164,001
Other 1			880
Follow-on investments			880
Total investments on behalf of HGT			164,881

Realisations made during the period

Company	Cluster	Exit route	Proceeds2 £000
Mitratech	Legal & Regulatory Compliance	Secondary sale	40,317
APG	Insurance	Trade sale	21,539
TeamSystem	Tax & Accounting/ERP & Payroll	Secondary sale	21,373
Trace One	Legal & Regulatory Compliance	Secondary sale	5,765
Full realisations			88,994
team.blue	SME Tech & Services	Refinancing	10,321
Other 1			3,604
Partial realisations			13,925
Total proceeds from realisations			102,919
Carried interest paid to the Manager			(20,910)
Total proceeds from realisations received by HGT			82,009

¹ Other investments and realisations includes immaterial transactions in relation to the remaining portfolio.

² Includes gross revenue received of £8.2m during the period ended 30 June 2021.

Hg's outlook

"Continued M&A activity across the Hg portfolio has been a major theme of the last six months, and this should remain the case over the next 12 months. Our portfolio companies are often acting as consolidators pursuing a roll-up strategy, sometimes they are "consolidatees" in larger strategic combinations; but either way, the pronounced activity level highlights the important strategic positions all our portfolio companies hold in their respective market segments and clusters."

Luke Finch, Partner and Head of Client Services, Hg

Outlook

The first half of 2021 has seen the continuation of the key trend that we have written about during 2020 - the digitalisation of business processes - which has accelerated across sectors and geographies as a result of the global responses to COVID-19. Overall, the value of the portfolio was up over 28% for six months to 30 June meaning that, in total since 31 March 2020 and the depths of the initial COVID-19 crisis, the value of the portfolio is up over 63%.

We are excited about the future potential of our high-quality portfolio, and the alignment we have with the talented management teams and founders across the Hg network with their ability to drive continued growth in value in their businesses.

Activity levels

We have commented previously that in any 12 ‑ month period, the investment teams across Hg would aim to make between 8 and 16 new platform investments in total across the active Hg Saturn, Hg Genesis and Hg Mercury funds, and that we would also generally seek to deliver similar numbers of liquidity events (sales or partial sales of portfolio companies and refinancings) each year. In December, we expected 2021 to follow a similar cadence, and so it has proven.

We have been busy adding eight new high quality platform investments to our portfolio in the first six months of 2021, including Howden, Benevity, Trackunit, Prophix, Geomatikk and AUVESY. Post period end we have invested into four new companies: insightsoftware, MMIT, Riskalyze and Serrala. We expect our cadence of new investments to continue at this level.

All our new (and not so new) investments then beget M&A opportunities, which enable our businesses to add new products to sell to their existing book of customers, or new customers to whom they can sell their sector-leading current products. On average, our portfolio companies acquire two to three businesses a year, meaning across a portfolio of c. 40 B2B software and services companies we would typically expect to make around 100 M&A investments each year (and to diligence and reject many more). This level of activity means that Hg and our portfolio, together, is one of the most active investors globally in software, data and tech-enabled services businesses.

To give a further sense of this scale, Hg's combined portfolio enterprise value has risen from c. $60 billion in Q1 2020 to over $75 billion today; and this is despite Hg also sending back a record amount of cash proceeds - over $11 billion - to our global investor base of pension plans, endowments, charities, and other savers over this period.

Valuation environment

Looking at global equity valuations across the broad market and software specifically (using major public software indices as proxies), over the first half of 2021 both had performed nearly identically, with c. 14% year-to-date increases. However, as we pass through the 'COVID-19 rebound' period, we expect 'market' earnings growth to slow substantially relative to the software segment. We expect the software segment to return to its long-term trend of outperformance driven by materially superior earnings growth.

It is widely noted that equity prices, particularly in software and technology, seem high. But one has to place equity valuations in a wider context - high versus what?  Let us look at the vast Government bond market, which effectively sets the Risk-Free Rate. In this market, US 10-year Treasury yields were at c. 124bps at the end of June. If we are to convert this yield to an 'earnings multiple' (i.e. the reciprocal of the yield) - in line with how we think about equities - the valuation of the US 10-year Treasury is approximately 80x 'earnings'. This leads to the fundamental valuation question impacting the valuation of growth equities: if investors are prepared to invest trillions of dollars in US Treasuries, on 80x earnings, with an absolute guarantee of zero cash flow growth, what is the right price for businesses delivering consistent and resilient long-term cash flow growth? 

We don't have "The Answer" to this question at Hg - but we do believe that the price for growth cannot rise indefinitely, especially given how little room there is for the Risk-Free Rate, as described above, to fall even further. Typically, for any given new investment we make we assume a c. 20% discount in the market rating at our assumed exit. This conservative underwriting has served us well for the last 5 years, and we see no reason to change our approach going forward.

Overview of the underlying investments

held through HGT's limited partnerships

Investments (in order of value)		Fund	Sector	Location	Year invested	Residual cost £000	Total valuation1 £000	Portfolio value %		Cum. Value %
1	Visma	HGT 7/HGT Saturn/HGT Saturn 2	Tax & Accounting/ERP & Payroll	Scandinavia	2020	89,761	219,239	13.2		13.2
2	Access	HGT 8	ERP & Payroll	UK	2018	69,500	184,467	11.1		24.3
3	MeinAuto	HGT 8	Automation and Engineering	Germany	2017	33,967	83,101	4.9		29.2
4	IRIS	HGT Saturn	Tax & Accounting/ERP & Payroll	UK	2018	36,380	82,350	4.9		34.1
5	Transporeon	HGT 8/HGT	ERP & Payroll	Germany	2019	41,969	74,379	4.5		38.6
6	P&I	HGT Saturn/HGT	ERP & Payroll	Germany	2020	36,367	69,783	4.2		42.8
7	Litera	HGT 8	Legal & Regulatory Compliance	N.America	2019	34,242	64,907	3.9		46.7
8	Intelerad	HGT 8	Healthcare IT	N.America	2020	32,962	59,662	3.6		50.3
9	Howden	HGT Saturn 2	Insurance	UK	2021	42,026	55,722	3.4		53.7
10	Septeo	HGT Genesis 9	Legal & Regulatory Compliance	France	2020	38,545	54,364	3.3		57.0
11	Sovos	HGT Saturn 2	Tax & Accounting	N.America	2020	44,325	54,172	3.3		60.3
12	Allocate	HGT 8	Healthcare IT	UK	2018	13,959	50,181	3.0		63.3
13	FE fundinfo	Mercury/Mercury 2	Capital Mkts & Wealth Mgmt IT	UK	2017	6,687	49,839	3.0		66.3
14	Argus Media	HGT Saturn/HGT	Capital Mkts & Wealth Mgmt IT	UK	2020	30,220	45,258	2.7		69.0
15	Azets	HGT 7/HGT	Tax & Accounting	UK	2016	20,966	36,795	2.2		71.2
16	Benevity	HGT Saturn 2/HGT	ERP & Payroll	N.America	2021	31,619	34,776	2.1		73.3
17	team.blue	HGT8/Mercury 2	SME Tech & Services	Benelux	2019	16,604	34,370	2.1		75.4
18	Caseware	HGT 8	Tax & Accounting	N.America	2020	28,612	29,883	1.8		77.2
19	Trackunit	HGT Genesis 9	Automation and Engineering	Scandinavia	2021	26,593	27,660	1.7		78.9
20	Lyniate	Mercury 2	Healthcare IT	N.America	2018	10,528	27,596	1.7		80.6
21	Medifox	Mercury 2/HGT	Healthcare IT	Germany	2018	11,755	27,202	1.6		82.2
22	Citation	HGT 8	SME Tech & Services	UK	2020	21,998	24,946	1.5		83.7
23	Commify	Mercury/HGT	SME Tech & Services	UK	2017	4,080	24,897	1.5		85.2
24	itm8	HGT 8	SME Tech & Services	Scandinavia	2018	16,037	24,371	1.5		86.7
25	Gen II	HGT Genesis 9	Capital Mkts & Wealth Mgmt IT	N.America	2020	19,921	22,400	1.3		88.0
26	smartTrade	Mercury 2/HGT	Capital Mkts & Wealth Mgmt IT	France	2020	17,318	21,084	1.3		89.3
27	BrightPay	Transition Capital	ERP & Payroll	Ireland	2018	14,250	20,622	1.2		90.5
28	Achilles	HGT	Legal & Regulatory Compliance	UK	2008	28,328	19,984	1.2		91.7
29	Prophix	HGT Genesis 9	Tax & Accounting	N.America	2021	15,175	19,241	1.2		92.9
30	TeamSystem	HGT 8	Tax & Accounting/ERP & Payroll	Italy	2021	14,250	16,572	1.0		93.9
31	DEXT	HGT Saturn/HGT	Tax & Accounting	UK	2021	15,620	16,182	1.0		94.9
32	Evaluate	Mercury 2/HGT	Healthcare IT	UK	2020	11,536	13,583	0.8		95.7
33	F24	Mercury 2/HGT	SME Tech & Services	Germany	2020	10,523	13,344	0.8		96.5
34	Geomatikk	Mercury 2/HGT	SME Tech & Services	Scandinavia	2021	11,392	13,196	0.8		97.3
35	GGW Holdings	Mercury 2	Insurance	Germany	2020	7,104	12,765	0.8		98.1
36	Silverfin	Mercury 2/HGT	Tax & Accounting	Benelux	2019	11,387	12,714	0.8		98.9
37	Mitratech	HGT 7/HGT	Legal & Regulatory Compliance	N.America	2017	3,742	8,079	0.5		99.4
38	Auvesy	Mercury 3	Automation and Engineering	France	2021	7,326	7,351	0.4		99.8
	Non-active investments (5)					27,236	3,646	0.2		100.0
	Total buyout investments (43)					954,810	1,660,683	100.0
	Currency hedges	Various	Forward sale of US$ and €			-	1,256	-		100.0
	Secondary fund	Hg 6 E	Secondary fund interests			-	139	-		100.0
	Renewable energy	Asper I	Renewable energy			5,039	788	-		100.0
	Total all investments					959,849	1,662,866	100.0

¹ Including accrued income, but before the provision for carried interest of £123,976,000 and the fund level facility of £106,847,000.

Top 10 investments

representing 57% of the value of HGT's investments

Investments are held through limited partnerships, of which HGT is the sole limited partner. HGT invests alongside other clients of Hg. Typically, HGT's holding forms part of a much larger majority interest held by Hg's clients in buyout investments in companies with an enterprise value ('EV') of between £100 million and over £10 billion.

Hg's review generally refers to each transaction in its entirety, apart from the tables detailing HGT's participation or where it specifically says otherwise.

01	Investment date	Location	Cluster	Website
	August 2020	Scandinavia	Tax & Accounting/ERP & Payroll	visma.com

HGT's investment through HGT 7 LP, HGT Saturn LP, HGT Saturn 2 LP
Hg clients' total equity:	53.9	%
Unrealised value (£000):	219,239
% of NAV:	12.7	%
llll
Recurring revenue
llll
Long-term growth
llll
Thousands of customers
llll
Platform for M&A

a leading provider of mission-critical business software to SMEs in Northern Europe

Business description

Visma provides business ‑ critical software to SMEs and the public sector in the Benelux and Nordic regions. Headquartered in Oslo, Visma provides more than 1.3 million enterprise customers: accounting; resource ‑ planning and payroll software; transaction process-outsourcing, such as debt collection and procurement services. It is the largest European provider of SaaS to these sectors, with over £800 million in pure SaaS revenues.

Why we invested

Visma is a business with recurring revenues, offering business ‑ critical application software, supplying a fragmented customer base - a focus which forms some of the 'Hg sweet ‑ spot' investment criteria today. At the time of our initial 2006 acquisition, we had identified opportunities for Visma to grow its existing segments and acquire new ones - and to further transition the business to a SaaS ‑ focused model.

Value creation

Visma has consistently outperformed, generating a total return between 2006 and 2014 of 5.2x original cost and a gross IRR of 33%. Hg's 2014 investment was fully exited in 2020 and delivered 4.2x original cost and a gross IRR of 30%.

Year	Transaction	Implied EV
2014	Hg reinvested in the business, via Hg Genesis 7 and co-investment, alongside KKR and Cinven	£2.1 billion
2017	Hg completed a further investment in Visma	£4.2 billion
2018	Hg made an additional investment in Visma via Hg Saturn
2019	Hg acquired the remaining Cinven stake, alongside the Canada Pension Plan Investment Board	£5.5 billion
2020	Over 2020, Hg completed two further investments in Visma. TPG, Warburg Pincus and GA were brought in as new minority shareholders, while existing CPPIB and GIC increased their stake.	£9.5 billion

Performance

Since 2006, Visma has acquired more than 200 companies across the Benelux and Nordic regions, strengthening organic growth from innovation in new products, as well as driving margin improvement through a reorganisation of internal processes. Visma is now positioned as one of the leading and largest SaaS companies in Europe. Visma continues to see strong double ‑ digit revenue and EBITDA growth year on year. This has led to HGT's valuation of its stake in Visma rising by £65.1 million over the first half of 2021.

Exit

In 2020, HGT realised a portion of its co ‑ investment in Visma, reducing concentration. Given the attractive business model, Hg would like to continue to support Visma's next stage of development. The scale and growth profile of Visma would make it an attractive candidate for an initial public offering (IPO) or a large private IPO.

Visma produces detailed reporting on its website on a quarterly basis: www.visma.com/investors/financial-reports

Visma case study: www.hgcapital.com/case-studies/visma-joining-the-fight-against-unconscious-discrimination-towards-women-in-business.

02	Investment date	Location	Cluster	Website
	June 2018	UK	ERP & Payroll	theaccessgroup.com

HGT's investment through HGT 8 LP
Hg clients' total equity:	45.9	%
Unrealised value (£000):	184,467
% of NAV:	10.7	%
llll
Recurring revenue
llll
Long-term growth
llll
Thousands of customers
llll
Platform for M&A

a leading provider of fully integrated business-management software to UK mid-market organisations

Business description

Founded in 1991, the Access Group (Access) is a leading enterprise resource ‑ planning (ERP) business, providing a range of horizontal and industry ‑ specific software solutions to SME, mid ‑ market and enterprise customers in Australia, Ireland and the UK. Access's software helps over 35,000 businesses, public ‑ sector and not ‑ for ‑ profit organisations to work efficiently, with expertise across numerous industries. We first invested in Access in June 2018, alongside TA Associates and the management team. In October 2020, we agreed to reinvest to acquire a further stake in the business, with existing shareholders TA Associates and management selling down a net portion of their stakes. This reflects our continued conviction in the business. Further details are provided in this report.

Why we invested

The investment in Access builds on Hg's previous experience in the SME, tax, accounting, HR and payroll software spaces. Access demonstrates many of the characteristics which Hg seeks in an investment, including business ‑ critical software and potential for M&A. Access benefits from a high ‑ quality management team, led by a strong CEO and an impressive team of functional leaders. Our reinvestment in Access, in October 2020, reflects our continued conviction in our investment hypothesis.

Value creation

Following Hg's investment, we have been focused on several work streams with the business, including: M&A support; encouraging the transition to a fully SaaS and subscription sales model; continuing to improve customer success; developing a data ‑ driven predictive model to support the company's cross ‑ sell efforts.

Performance

Access has traded well since our investment, with bookings momentum remaining strong throughout FY21. Growth remains robust, with the business seeing double ‑ digit organic recurring revenue growth in FY21. This has led to HGT's valuation of its stake in Access rising by £52.9 million over the first half of 2021.

Exit

We believe that Access will be an attractive acquisition target for private equity buyers, as it demonstrates high levels of organic revenue growth, strong recurring revenue and robust EBITDA margins. We also see an IPO as a potential route to exit, given the business's growth profile and strong cash generation. Lastly, there are several notable potential trade buyers.

03	Investment date	Location	Cluster	Website
	May 2018	Germany	Automation and Engineering	meinauto.de

HGT's investment through HGT 8 LP
Hg clients' total equity:	81.9	%
Unrealised value (£000):	83,101
% of NAV:	4.8	%
llll
Recurring revenue
llll
Long-term growth
llll
Thousands of customers
lll¡
Platform for M&A

the leading online retailer for new cars in Germany

Business description

MeinAuto Group ('MeinAuto') provides customers with easy access to automotive subscriptions via end ‑ to ‑ end online journeys. It is transforming the traditional approach of vehicle ‑ retailing, from an offline service to an integrated digital delivery model. MeinAuto operates three brands, with the company's products ranging from traditional mobility offerings, such as vehicle ‑ purchasing, to innovative flat ‑ rate offers. Its operations are highly automated, including tailored online front ends, as well as digital back ‑ end processes, allowing it to capture significant economies of scale. The unique selling point for the customer is a richness of choice (unique multibrand offer), ease of use (fast and hassle free) and attractive value (transparent, all ‑ inclusive price). 

Why we invested

This investment continues Hg's strategy to develop technology ‑ enabled service providers in the automotive financing and distribution space and is the result of considerable sector work undertaken in recent years, including previous investments in Epyx, Eucon, Parts Alliance and Zenith. The €80 ‑ billion German new car market is at a tipping point for online and subscription disruption. Automotive distribution is moving from a traditional, offline, dealership-centric model to a multichannel, online ‑ enabled structure. MeinAuto actively addresses this transformation - and its product IP and customer access, combined with strong growth and profitability, make it an attractive investment. The business has a strong management team of visionary leaders in the online car industry.

Value creation

MeinAuto continues to execute its plan formulated in 2018. Current key focus areas include increasing customer reach, additional partnerships and brand marketing. Furthermore, the team is optimising lead conversion through smart pricing algorithms (Deal Machine) and optimised customer journeys. As such, MeinAuto is the ideal platform for growth, combining highly recurring revenues and a resilient risk profile. Hg is supporting the management of the business in several specific operational areas, while also helping to realise several synergies across the group and additionally looking at further strategic M&A opportunities.  

Performance

MeinAuto continues to show strong growth, with its car orders outperforming sector growth at very stable margins. HGT's holding in the company is currently valued at £83.1 million.

Exit

We are evaluating various exit routes and are firmly convinced that a leading platform in online car distribution, specifically when combined with a fully transactional and vertically integrated offering, is of high relevance to strategic buyers in the mobility ecosystem (e.g. large leasing companies and automotive OEMs with a limited distribution footprint in Germany) and also attractive to financial sponsors.

04	Investment date	Location	Cluster	Website
	September 2018	UK	Tax & Accounting/ERP & Payroll	iris.co.uk

HGT's investment through HGT Saturn LP
Hg clients' total equity:	65.0	%
Unrealised value (£000):	82,350
% of NAV:	4.8	%
llll
Recurring revenue
llll
Long-term growth
llll
Thousands of customers
llll
Platform for M&A

business-critical software and services to liberate the time, talent and energy of UK businesses

Business description

IRIS is a UK ‑ based software company, serving over 60,000 customers in the accountancy, human capital management, education and bookkeeping segments. It is a leading provider of core application software to UK and US accountants and of payroll applications to UK SMEs, including general practitioners. With a highly recurring business model, over 85% of IRIS's revenues are from software and managed service subscriptions, many based on annual renewals paid in advance.

Why we invested

IRIS is an early example of our focus on firms which provide business ‑ critical daily ‑ use software for professionals and SMEs in attractive, predictable end markets. The original investment decision was based on the potential for organic growth and acquisition ‑ led consolidation opportunities.

Value creation

The long ‑ standing partnership between Hg and IRIS started with the 2004 buyout (£102 million EV) led by Hg, followed by retaining a minority shareholding after the sale to Hellman & Friedman in 2007. In 2011, we again became the majority shareholder through the Hg Genesis 6 Fund. In May 2018, Hg Genesis 6 agreed on the sale of IRIS to Hg Saturn and ICG, in a joint ‑ control deal which completed in September 2018, representing an EV of £1.3 billion. IRIS has been successful in expanding its offering, both organically and by acquisition into segments such as payroll, HR and education software. It continues to deliver added value to its customers, through regular regulatory and feature updates, leading to high customer loyalty. The strong level of reinvestment into innovative product development and outstanding customer support has continued to fuel outperformance, compared with other providers. The UK accountancy and SME software markets remain fragmented, offering further M&A opportunities, and we believe there to be a substantial upside in developing or acquiring SaaS products to target adjacent sectors.

Performance

IRIS has been able to maintain strong levels of organic revenue and EBITDA growth across market cycles. For the past few years, revenues have seen double ‑ digit growth rates year on year. Over the first six months of 2021, HGT has seen an increase of £5.5 million in its position in IRIS.

Exit

We believe that IRIS will be an attractive acquisition target for financial buyers, as it demonstrates high levels of organic revenue growth, strong net recurring revenue and high EBITDA margins, coupled with a leading sector position. We also see an IPO as a potential route to exit, given predictable growth and strong cash generation. Lastly, there are several potential strategic buyers.

For a full case study on IRIS, please visit: www.hgcapitaltrust.com/investment-portfolio/case-studies/iris.aspx

05	Investment date	Location	Cluster	Website
	March 2019	Germany	ERP & Payroll	transporeon.com

HGT's investment through HGT 8 LP and co-investment through HGT LP
Hg clients' total equity:	75.3	%
Unrealised value (£000):	74,379
% of NAV:	4.3	%
llll
Recurring revenue
llll
Long-term growth
lll¡
Thousands of customers
lll¡
Platform for M&A

a cloud logistics platform with strong network effects, connecting shippers and carriers world-wide

Business description

Transporeon provides cloud ‑ based logistics network and transport ‑ management software for road freight in Europe. The platform enables hundreds of thousands of trucks to be booked and tracked as they haul freight in trailers across the Continent. As a leader in the sector, the business benefits from strong network effects, connecting over 120,000 carriers and more than 1,300 shippers, using a modern SaaS platform available in over 100 countries and 24 languages. Its software offers customers more efficient tendering, dispatching and scheduling, along with better communication between those shippers looking to move freight by road and the carriers providing the trucks.

Why we invested

Transporeon is a highly strategic asset, operating in an industry with material room for growth, through new and existing clients, in line with historical levels. The business has seen uninterrupted double ‑ digit revenue CAGR for the past 15 years across all market cycles. Transporeon exhibits several 'Hg sweet ‑ spot' business model criteria, including: high net revenue retention; high customer loyalty; a strong position in an expanding sector; considerable growth opportunities from new customers, as well as broader adoption, through up- and cross-sell, by its current customer base.  

Value creation

Transporeon has undergone major management change under Hg's ownership (new CEO, CFO, CCO, CHRO and CMO). With the new team in place, we now view the company as well placed to capitalise on opportunities for further operational efficiencies. Additionally, certain learnings from COVID ‑ 19 will be introduced permanently and should result in lower costs (eg remote implementations). Furthermore, as of September 2021, Transporeon will look to enable its entire network to deliver real ‑ time location and ETA data to its shipper customers, thereby delivering additional value to all network participants and capturing data, on the back of which new product ‑ use cases can be built. Further to operational improvements, we executed two tuck-in acquisitions and have identified multiple other M&A targets - this could drive value creation further.

Performance

Coming out of a strong 2020, the business has returned to the pre ‑ COVID ‑ 19 growth trajectory with 2021 performance so far beating expectations. HGT has benefited from an increase of £17.9 million in the valuation of its stake over the first half of 2021.  

Exit

We believe that Transporeon will be a highly strategic asset to other software or service providers in the broader transportation ‑ management space and is also likely to continue to be a very attractive company for PE buyers, on the back of high net revenue retention, strong cash conversion and a long ‑ term organic growth story.

06	Investment date	Location	Cluster	Website
	March 2020	Germany	ERP & Payroll	pi-ag.com

HGT's investment through HGT Saturn LP and co-investment through HGT LP
Hg clients' total equity:	64.4	%
Unrealised value (£000):	69,783
% of NAV:	4.0	%
llll
Recurring revenue
llll
Long-term growth
llll
Thousands of customers
llll
Platform for M&A

providing integrated software for human resources management to the German and European Mittelstand

Business description

Founded in 1968 and headquartered in Wiesbaden, Germany, Personal & Informatik AG (P&I) provides integrated software solutions and services for human resources management. P&I offers a fully integrated SaaS ‑ based HR suite, including payroll, core HR, human capital management and analytics, serving SMEs, large enterprises and public sector organisations directly and via its partners. Over 15,000 customers use P&I's intuitive solutions, primarily in Austria, Germany and Switzerland, as well as across 13 countries in Europe.

Why we invested

Hg is a serial investor in the regulatory ‑ driven software space and continues to see attractive, long ‑ term growth for leading and innovative players in the sector. P&I's scalable subscription ‑ based platform exhibited characteristics within Hg's core focus: a broad, diversified and loyal customer base; strong position in the DACH payroll and HR market; exceptional historical operating performance, with over 10 years' consistent revenue and EBITDA growth. We believe that the SaaS migration of the existing customer base and the expansion of the HRaaS offering, complemented by value ‑ accretive M&A, will contribute to driving highly profitable growth over the next years.  

Value creation

Hg initially invested in P&I in 2013 and retained a minority investment in 2016, following its majority sale to funds advised by Permira - which delivered a 36% IRR and 2.3x original cost investment multiple. P&I is a driver of innovation in HR technology and stands out in the German HR software space as the only provider of a fully integrated payroll and HCM SaaS suite for the mid-market. Its advanced SaaS product set allows HR tasks to be managed in the most modern and efficient manner, delivering strong value to its customers and a truly differentiated experience to its users. In March 2020, Hg completed an investment, via the Hg Saturn Fund, to become the majority shareholder again, valuing the company at an enterprise value of around €2 billion.

Performance

P&I continues to perform well and has seen strong growth over the last six months. This performance has led to an increase of £5.5 million in the valuation of HGT's stake since December 2020.  

Exit

We believe that the combination of an increase in recurring revenues, high cash flow conversion and a strong product will be highly attractive at exit for both trade and financial buyers, as well as public market investors.

07	Investment date	Location	Cluster	Website
	May 2019	North America	Legal & Regulatory Compliance	litera.com

HGT's investment through HGT 8 LP
Hg clients' total equity:	87.0	%
Unrealised value (£000):	64,907
% of NAV:	3.8	%
llll
Recurring revenue
llll
Long-term growth
lll¡
Thousands of customers
llll
Platform for M&A

changes the way organisations perfect their documents and manage transactions

Business description

Litera is a leading provider of software to law firms globally. It offers a suite of end-to-end document lifecycle, transaction and litigation management, and experience management solutions used by thousands of lawyers every day to improve the productivity and quality of documents and support the collaboration and firm intelligence within law firms.

Why we invested

Litera exhibits several typical 'Hg sweet ‑ spot' business model criteria: a leading provider of a differentiated set of products with a clear ROI for lawyers and other customers; high customer loyalty; attractive, high ‑ quality recurring revenue model; potential for M&A; a fragmented customer base; cross ‑ sell opportunities into the established customer set, supplemented by potential new customers; high operating leverage which should provide margin upside as the business grows.

Value creation

Since our investment in May 2019, we have supported Litera on eleven add ‑ on acquisitions, focused on growing its document productivity offering and expanding into new segments. Most prominent acquisitions include Workshare, a UK provider of secure enterprise file ‑ sharing and collaboration applications, in July 2019, Doxly, a legal transaction management platform based in Indianapolis, in August 2019, and Foundation Software Group, a leading provider of experience ‑ management software, in December 2020 and Kira, a leader in machine learning enabled contract analytics in August 2021.

Hg is focused on supporting the board and management team in the successful operational integration of its acquisitions, driving further add ‑ on acquisitions of complementary legal software vendors and implementing operational excellence across functions.

Performance

Litera has performed well in 2020. The business is seeing strong trading - and this has led to an increase of £15.1 million in HGT's valuation of its stake over the first half of 2021.

Exit

Given its attractive characteristics, we believe that Litera could be of interest to both strategic and financial buyers.

08	Investment date	Location	Cluster	Website
	February 2020	North America	Healthcare IT	intelerad.com

HGT's investment through HGT 8 LP
Hg clients' total equity:	90.9	%
Unrealised value (£000):	59,662
% of NAV:	3.5	%
llll
Recurring revenue
llll
Long-term growth
llll
Thousands of customers
lll¡
Platform for M&A

provides medical imaging software that specialises in diagnostic viewing, reporting and collaboration solutions for radiologists

Business description

Founded in 1999, Intelerad is a leading global provider of enterprise workflow and medical imaging software solutions which enhance productivity and information accessibility for radiologists. The core product is a picture ‑ archiving and communication system which helps radiologists and physicians to view and interpret medical images, enabling faster and more accurate diagnoses. Headquartered in Montreal, Canada, Intelerad employs over 400 staff across offices in Australia, North America and the UK, serving a customer base of over 300 healthcare organisations, including radiology groups, imaging centres, clinics and a growing number of hospital radiology departments. Intelerad software is critical to the operations of several of the scaled radiology services groups in the US and has achieved a 20%+ organic revenue growth CAGR in recent years, driven by overall market scan volume growth, plus ongoing consolidation within the radiology services market to the major players. That consolidation is at an early stage and is expected to continue for many years.

Why we invested

Hg recognises Intelerad's leading role in supporting radiologists globally to deliver highly accurate diagnoses at optimum productivity. The business is a key enabler of healthcare delivery against a backdrop of increasing global demands, in radiology, for scalable and more efficient imaging, data management and workflow solutions. Intelerad is led by a highly talented team which has developed powerful solutions for radiologists, offering both efficiency and a premium service which helps to create superior outcomes for both patients and healthcare providers. Healthcare technology is a core sector for Hg, with an investment focus on healthcare operations, core systems, life sciences digitisation, interoperability and population health. Intelerad represents the fifth healthcare technology investment in Hg's current portfolio.  

Value creation

The Hg team, including the portfolio team, is focused on several workstreams with Intelerad, including:

• M&A support: We are helping to source potential opportunities and assess possible sizable additions to the group, resulting in four acquisitions under Hg ownership.

• Supporting expansion to new markets.

• Upgrading core business systems and processes.

Performance

Volumes have continued to increase, following an initial dip in the first part of the COVID ‑ 19 lockdown. This has led to an increase in HGT's stake in the business of £12.4 million over the year-to-date 2021.

Exit

Given its attractive characteristics, we believe that Intelerad could be of interest to both strategic and financial buyers.

09	Investment date	Location	Cluster	Website
	March 2021	UK	Insurance	howdengroup.com

HGT's investment through HGT Saturn 2 LP
Hg clients' total equity:	21.1	%
Unrealised value (£000):	55,722
% of NAV:	3.2	%
llll
Recurring revenue
llll
Long-term growth
llll
Thousands of customers
llll
Platform for M&A

a leading tech-enabled insurance distributor, serving clients across North America, Europe, the Middle East and Asia Pacific

Business description

Founded in 1994 and headquartered in London, UK, Howden Group Holdings (Howden) is the largest European headquartered international insurance intermediary serving clients across North America, Europe, the Middle East and Asia Pacific. The group operates across more than 250 global offices in 45 countries, managing over £10 billion of Gross Written Premium.

Howden is a tech-enabled insurance distributor, which has a differentiated position as one of the top international brokers and the third largest in the Lloyd's of London market. Following Howden's acquisition of APG, the combined group became the third largest retail broker in the UK.

The business facilitates the provision of B2B insurance through its core activities of retail insurance broking, speciality and reinsurance broking and managed agency underwriting.

Why we invested

Hg's investment in Howden represents our sixth investment in the insurance cluster in the last 5 years and is the culmination of a process that first began in late 2019. We identified Howden as a leader in what is a large and defensible sector, well-positioned across speciality lines of insurance in which clients rely deeply on Howden's expertise to navigate the complex insurance value chain. Benefiting from over 150 hours with management during the diligence process, we were able to build conviction in the company's differentiated pool of talent and entrepreneurial culture, which will be key enablers for continued outperformance and strong growth.

Value creation

Product expertise and innovation is a core pillar of Howden's strategy, and there is further headroom to drive organic growth through a continued focus on the rollout of speciality expertise in order to better serve clients across the group's global footprint. In addition, the acquisition and retention of top talent through leveraging Howden's unique culture remains key to achieving differentiated outperformance. Inorganically, there is a significant opportunity to grow through the execution of strategic M&A to enhance scale and the breadth of the product offering. Finally, the business will also continue to invest into Howden X (Hx), with the ambition to be a thought-leader across digital and data and analytics initiatives in insurance.

Performance

Whilst Howden is new to the portfolio, it has seen strong performance over the first half of 2021 leading to an increase in the valuation of HGT's stake over this period of £13.7 million.

Exit

Given the unique strategic positioning of Howden as an independent insurance intermediary, we believe that as the business continues to grow organically and via M&A, Howden will be an attractive acquisition target for large private equity sponsors.

10	Investment date	Location	Cluster	Website
	December 2020	France	Legal & Regulatory Compliance	Septeo.fr

HGT's investment through HGT Genesis 9 LP
Hg clients' total equity:	69.9	%
Unrealised value (£000):	54,364
% of NAV:	3.1	%
llll
Recurring revenue
llll
Long-term growth
llll
Thousands of customers
llll
Platform for M&A

providing software solutions and IT services to legal and realestate professionals

Business description

The Septeo Group (Septeo) is a leading tech provider supporting legal professions, including notaries, law firms, corporate legal departments and real ‑ estate professionals, primarily in Belgium and France. Founded in 1988, Septeo now has over 120,000 users, served by 1,500 employees.

Why we invested

This investment reinforces Hg's focus on legal and regulatory compliance tech, representing the 11th investment in this sector across Europe and North America, with over €1.5 billion invested in the sector to date.  

Value creation

Hg's focus for now is on developing the value ‑ creation plan, supporting Septeo in making key hires and accelerating M&A. 

Performance

Septeo is performing well; this performance has led to an uplift in the valuation of HGT's stake in the company since December 2020 of £15.3 million.

Exit

Given the strategic position of Septeo in the French market and the relative scarcity of players, we believe that Septeo will be an attractive software business acquisition target for future buyers. As the company demonstrates high levels of organic revenue growth, strong net recurring revenue and high EBITDA margins, coupled with a leading sector position, we also see an IPO as a potential route to exit.

Other investments

11
Cluster:	Tax and Accounting
Web:	www.sovos.com
Date of investment:		September 2020
Unrealised value (£000):		54,172
% of NAV:		3.1	%

Sovos is a global provider of compliance solutions, managing all aspects of the tax ‑ compliance process, from tax calculation, form completion and ultra ‑ high volume filing to secure funds transfer to state and local revenue departments. At the heart of the Sovos software suite is a powerful tax ‑ calculating engine, leveraging the industry's most comprehensive repository of over 210 million tax rules, in more than 13,500 jurisdictions, across in excess of 70 countries. Sovos is headquartered in Boston, US, with a presence in Europe and Latin America, with most of the revenue generated from a US customer base of around 4,500 predominantly large enterprises.

HGT has seen an uplift in the valuation of its stake in Sovos of £11.0 million over the first half of 2021.

12
Cluster:	Healthcare IT
Web:	www.allocatesoftware.com
Date of investment:		August 2018
Unrealised value (£000):		50,181
% of NAV:		2.9	%

Allocate is a leading provider of workforce ‑ management software to the healthcare sector and other complex regulated industries. The core product is used for workforce ‑ rostering, time ‑ and ‑ attendance management and associated compliance workflows, such as monitoring and reporting on safe staffing levels. The product addresses a clear and increasingly pressing need for improved staff efficiency, regulatory compliance and safety in the healthcare sector - and results in more effective healthcare delivery.

The sale of Allocate to RL Datix, the leading global provider of intelligent patient safety solutions, was announced in June, leading to an uplift of 48% to the 31 December 2020 valuation of HGT's holding.

13
Cluster:	Capital Markets & Wealth Management IT
Web:	www.fefundinfo.com
Date of investment:		January 2017
Unrealised value (£000):		49,839
% of NAV:		2.9	%

Built from the merger of Financial Express, fundinfo and F2C, FE fundinfo facilitates more efficient investing across the globe by connecting fund managers and fund distributors and enabling them to share and act on trusted, insightful information. It brings together all of FE, fundinfo and F2C's many years of investment expertise, technology, software and services into a combined and holistic fund data and technology provider. With roots stretching back to 1996, FE fundinfo has offices in Australia, Czech Republic, France, Italy, Germany, Hong Kong, India, Luxembourg, Singapore, Spain, Switzerland and the UK. With more than 650 staff across these offices, the organisation is truly global in outlook and capability.

Over the first six months of 2021, HGT saw an uplift in the valuation of its stake in FE fundinfo of £15.1 million.

14
Cluster:	Capital Markets & Wealth Management IT
Web:	www.argusmedia.com
Date of investment:		January 2020
Unrealised value (£000):		45,258
% of NAV:		2.6	%

Founded in 1970, Argus Media (Argus) produces independent price assessments, essential data and analysis of the international energy and commodity sectors, anchoring physical commodity trade throughout global supply chains and underpinning financial derivatives markets. With over 160 publications and 26,000 price assessments, Argus is one of the two largest price ‑ reporting agencies globally.

Argus has continued to perform well, leading to an increase in the valuation of HGT's stake in the business of £4.4 million.

15
Cluster:	Tax and Accounting
Web:	www.azets.co.uk
Date of investment:		October 2016
Unrealised value (£000):		36,795
% of NAV:		2.1	%

Following years of development, Azets was formally launched in 2017 through the acquisitions and merger of Nordic ‑ based Azets and UK ‑ based Baldwins and Blick Rothenberg - to form a platform providing various business services to SMEs in northern Europe. The group's focus is the provision of critical business support, BPO and advisory services to the entrepreneurial and private company business segments, together with their owners and managers. Azets now has around 110,000 customers, with over 6,500 employees operating from 184 offices in Scandinavia and the UK. The group also has 800 offshore employees based in Lithuania and Romania, as well as a significant technology team, focused on automation.

While historical trading has been negatively impacted by COVID, reflected in a small write-down, Azets continues to grow client numbers and employees as well as executing M&A.

16
Cluster:	ERP & Payroll
Web:	www.benevity.com
Date of investment:		January 2021
Unrealised value (£000):		34,776
% of NAV:		2.0	%

Founded in 2008 and headquartered in Calgary, Canada, Benevity is a leading provider of Corporate Social Responsibility ("CSR") SaaS solutions, serving a global client base of c. 660 customers. The business's unique solutions enable clients to grow their CSR programs, which drive strategic value by improving reputation / brand equity; attracting, motivating and retaining talent; and improving operational efficiency.

Benevity's positioning and leading product (modern, pure SaaS with integrated payments) creates a powerful network effect: Benevity has more high quality, large brands as clients than anyone else and more vetted charity links (with automated electronic payment capability) than peers. Altogether, the business connects c. 660 corporations and their 9 million+ users with 2.2 million+ charities globally in a single scalable platform with unique content and drives annual donation volumes of >$2.0 billion.

Whilst new to the portfolio, strong growth has led to an uplift in the valuation of HGT's stake in Benevity of £3.2 million.

17
Cluster:	SME Tech & Services
Web:	team.blue
Date of investment:		March 2019
Unrealised value (£000):		34,370
% of NAV:		2.0	%

team.blue is a leading European provider of mass hosting services to SoHos (small offices/home offices) and SMEs active across Europe (Belgium, Bulgaria, Denmark, Greece, Ireland, Italy, the Netherlands, Portugal, Spain, Sweden, Switzerland, Turkey and the UK). The business has more than 2 million customers and is a one ‑ stop partner for web hosting, domains, e ‑ commerce and application solutions. Hg invested initially in March 2019 in Combell Group and then combined Combell with TransIP group and Register (a Mercury 2 portfolio company). Following these acquisitions, the combined group rebranded as team.blue.

team.blue continues to trade well and this has led to an increase in the HGT valuation over the first half of 2021 of £5.0 million.

18
Cluster:	Tax and Accounting
Web:	www.caseware.co.uk
Date of investment:		December 2020
Unrealised value (£000):		29,883
% of NAV:		1.7	%

CaseWare International Inc (CaseWare) is a global leader in audit and assurance software. Based in Toronto, Canada, the business develops cutting ‑ edge audit software solutions for accounting firms, corporations and governments. CaseWare's platforms (Working Papers and IDEA) aim to change the future of audit and audit analytics by adopting cloud technology, as well as artificial intelligence and machine learning, enabling measurable returns on efficiency, quality and value for customers and their clients. For over 30 years, CaseWare has been a technology leader in the sector and has grown organically to over 500,000 users in 130 countries today, serving 16 languages.

19
Cluster:	Automation and Engineering
Web:	www.trackunit.com
Date of investment:		June 2021
Unrealised value (£000):		27,660
% of NAV:		1.6	%

Founded in 1998, Trackunit is a leading provider of SaaS-based Internet of Things ("IoT") solutions to the global construction equipment industry.

The business' solutions allow users to collect and analyse machine data in real-time to deliver actionable, proactive and predictive information, empowering customers with data-driven foresight. From operator safety and machine health to business optimisation, Trackunit's industry-leading telematics software, hardware and fleet management services benefit the everyday operations of customers worldwide

Trackunit is headquartered in Denmark, with subsidiaries in the US, Sweden, Norway, France, Holland, Germany and England.

20
Cluster:	Healthcare IT
Web:	www.lyniate.com
Date of investment:		October 2018
Unrealised value (£000):		27,596
% of NAV:		1.6	%

Lyniate is a global leader in healthcare interoperability and data ‑ liquidity solutions, with over 1,300 customers in 36 countries. Its software solutions serve public and private hospitals, health systems, labs, clinics, health information exchanges, healthcare IT and equipment vendors, telemedicine vendors, public health departments and federal government organisations. Lyniate provides an integration platform which powers the critical systems within healthcare, with high ‑ volume data ‑ acquisition and data ‑ integration capabilities. The platform's comprehensive set of tools helps to simplify interoperability in complex healthcare environments, enabling seamless integration with electronic medical records. During 2021, Lyniate remained a keystone of the COVID ‑ 19 pandemic reporting and agility, enabling timely sharing of critical data. Strong performance has led to an increase of £9.1 million in HGT's stake of this business over the first half of 2021.

21
Cluster:	Healthcare IT
Web:	www.medifox.de
Date of investment:		October 2018
Unrealised value (£000):		27,202
% of NAV:		1.6	%

MediFox DAN Group (MediFox) is the leading provider of software solutions to around 7,500 outpatient care services, 5,100 elderly care homes and 1,300 therapists in Germany. The business supports care providers with key challenges, including resource and route ‑ planning, care documentation, regulatory compliance and quality assurance of services provided, as well as invoicing, reimbursement and factoring. The company is headquartered in Hildesheim, Germany, and employs around 500 people.

HGT has seen an uplift of £3.1 million in its stake in Medifox over the period.

22
Cluster:	SME Tech & Services
Web:	www.citation.co.uk
Date of investment:		December 2020
Unrealised value (£000):		24,946
% of NAV:		1.4	%

The Citation Group ('Citation') provides tech ‑ enabled compliance and quality ‑ related subscription services to over 60,000 SMEs across the UK. Citation helps SMEs to comply with relevant regulations and to ensure that certain levels of quality and standards are met, in areas such as HR/employment law, health and safety and ISO and industry ‑ specific rules and standards, by providing a combination of expert advice, software tools and audits/assessments, mostly on a long ‑ term subscription basis.

23
Cluster:	SME Tech & Services
Web:	www.commify.com
Date of investment:		January 2017
Unrealised value (£000):		24,897
% of NAV:		1.4	%

Commify is a leading application ‑ to ‑ person ('A2P') messaging service in Western Europe. The group is a roll ‑ up of four businesses: Mobyt, SMS Envoi, Esendex and SMS Publi. The group has since made a further eight acquisitions across Germany, Spain and the UK. The customer base comprises mainly SMEs and some larger enterprises which use Commify's services to communicate with their end customers through messages, voice and other media. The purpose of the communications can be varied, but most messages are mission ‑ critical, operational content, such as appointment reminders and delivery notifications. The business also supports marketing/promotional messages and coupons, as well as surveys. Commify has grown organically and through M&A over the past 10 years and now sends over 3 billion SMS messages across Australia, France, Germany, Italy, Spain and the UK.

24
Cluster:	SME & Tech Services
Web:	www.itm8.com
Date of investment:		August 2018
Unrealised value (£000):		24,371
% of NAV:		1.4	%

Founded in 2003, itm8  provides services which allow SMEs to move their IT infrastructure and operations into the cloud, as well as providing end ‑ user support and consulting as part of a full ‑ service IT offering. The company has over 850 employees - supporting thousands of customers and tens of thousands of users in Denmark, Sweden and around the world.

Performance over 2021 to the end of June has led to an uplift in HGT's holding of £2.8 million.

25
Cluster:	Capital Markets & Wealth Mgmt IT
Web:	www.gen2fund.com
Date of investment:		December 2020
Unrealised value (£000):		22,400
% of NAV:		1.3	%

Gen II Fund Services, LLC ('Gen II'), is a leading independent private equity fund administrator. Gen II is a leading pure-play provider of alternative asset fund administration services. Headquartered in New York and Luxembourg with a global customer base, the company administers over $375 billion of private capital on behalf of its clients across more than 500 funds and their 25,000 investors, spanning various investment strategies including Buyout, Real Estate and Infrastructure.

Over the first half of 2021, Gen II has seen an uplift to HGT's holding of £3.7 million.

26
Cluster:	Capital Markets & Wealth Mgmt IT
Web:	www.smart-trade.net
Date of investment:		March 2020
Unrealised value (£000):		21,084
% of NAV:		1.2	%

Founded in 1999, smartTrade is a managed services and hosted software provider for trading desks and a global leader in this segment. The business has particular expertise in providing software solutions for currency trading, and its liquidity management solutions enable financial institutions to develop and run high-performance trading platforms throughout the world.

smartTrade has expanded rapidly in recent years and has 45+ clients globally, including some of the leading financial institutions in the world, with offices in London, New York, Tokyo and Singapore.

The business has seen an increase in its valuation within the HGT portfolio of £2.8 million over the first half of 2021.

27
Cluster:	ERP & Payroll
Web:	www.brightpay.ie
Date of investment:		August 2018
Unrealised value (£000):		20,622
% of NAV:		1.2	%

Based outside Dublin, BrightPay provides payroll solutions to SMEs and payroll bureaus in Ireland and the UK. BrightPay's software is used by over 33,000 customers across Ireland and the UK - under two brands: BrightPay and Thesaurus Software.

28
Cluster:	Legal & Regulatory Compliance
Web:	www.achilles.com
Date of investment:		July 2008
Unrealised value (£000):		19,984
% of NAV:		1.2	%

Achilles is a mission ‑ critical provider of supply ‑ chain assurance solutions, allowing global purchasing organisations, in industries with complex regulatory requirements, to drive operational excellence. It is a technology ‑ enabled business model, whereby a network of buyers in a certain vertical industry (eg UK utility companies, Scandinavian natural resources etc) requires its key suppliers to qualify to a set of standardised information - which suppliers submit via the my.Achilles platform. Such data is critical to support risk ‑ management processes around legislation, health and safety, financial quality and trade regulation, as well as ensuring diversification of the supply chain and so protecting buyers from the high cost of failure. Achilles currently operates over 30 vertical market communities across five continents.

29
Cluster:	Tax & Accounting
Web:	www.prophix.com
Date of investment:		February 2021
Unrealised value (£000):		19,241
% of NAV:		1.1	%

Founded in 1987 and based in Toronto, Prophix is a leading player in CPM software, serving mid-market companies across multiple industries worldwide - providing planning, budgeting and financial reporting software into the "office of the CFO".

Prophix's software allows organisations to improve their financial reporting capabilities, while also standardising and streamlining the budgeting process, to generate ROI through a faster time to close, reducing budgeting errors and enabling companies to reforecast in a more agile way. Prophix is a leader in its segment with a global customer base of 1,650+ customers, industry-leading retention rates (105%+ NRR) and a consistently high customer NPS (80+).

The business has seen an uplift in its HGT valuation of £4.1 million over 2021.

30
Cluster:	Tax & Accounting/ERP & Payroll
Web:	www.teamsystem.com
Date of investment:		February 2021
Unrealised value (£000):		16,572
% of NAV:		1.0	%

Headquartered in Pesaro, Italy, TeamSystem is a leader in its core business of providing regulatory ‑ driven software applications to accountants, labour professionals and SMEs. In recent years, it has built a cloud product portfolio with multiple products targeting the micro SME segment, as well as migrating existing on ‑ premises customers. The company is well positioned to capture the large cloud opportunity in Italy, which is early in cloud adoption, compared with that of other western economies. TeamSystem has a large and diversified customer base, with c 1.5 million customers served by a strong direct sales force and a distribution platform of over 350 software partners. In 2021, HGT sold its minority investment through Hg Genesis 6 and invested £14.3 million through the Hg Genesis 8 Fund.

Over the first six months of 2021, HGT saw an uplift in its stake of TeamSystem of £2.3 million.

Financial statements

Income statement

for the six months ended 30 June 2021

	Notes	Revenue return						Capital return						Total return
		Six months ended				Year ended		Six months ended				Year ended		Six months ended				Year ended
		30.6.21		30.6.20		31.12.20		30.6.21		30.6.20		31.12.20		30.6.21		30.6.20		31.12.20
		£000		£000		£000		£000		£000		£000		£000		£000		£000
		(unaudited)		(unaudited)		(audited)		(unaudited)		(unaudited)		(audited)		(unaudited)		(unaudited)		(audited)
Gains on investments and liquidity funds		-		-		-		272,292		55,563		233,322		272,292		55,563		233,322
Losses on priority profit share loans advanced to general partners	7(b)	-		-		-		(3,964)		(566)		(3,176)		(3,964)		(566)		(3,176)
Net income	6	22,046		15,866		24,682		-		-		-		22,046		15,866		24,682
Other expenses	8(a)	(3,524)		(2,213)		(4,846)		-		-		-		(3,524)		(2,213)		(4,846)
Net return before finance costs and taxation		18,522		13,653		19,836		268,328		54,997		230,146		286,850		68,650		249,982
Finance costs	8(b)	(629)		(1,187)		(3,025)		-		-		-		(629)		(1,187)		(3,025)
Net return before taxation		17,893		12,466		16,811		268,328		54,997		230,146		286,221		67,463		246,957
Taxation	10	-		(559)		(2)		-		-		-		-		(559)		(2)
Net return after taxation		17,893		11,907		16,809		268,328		54,997		230,146		286,221		66,904		246,955
Return per ordinary share	11(a)	4.22	p	2.92	p	4.11	p	63.34	p	13.49	p	56.30	p	67.56	p	16.41	p	60.41	p

The total return column of this statement represents HGT'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 comprehensive income has been presented.

All revenue and capital items in the above statement derive from continuing operations.

No operations were acquired or discontinued during the period.

The following notes form part of these financial statements.

Balance sheet

as at 30 June 2021

	Notes	30.6.21		30.6.20		31.12.20
		£000		£000		£000
		(unaudited)		(unaudited)		(audited)
Fixed asset investments
Investments at fair value through profit or loss:
Unquoted investments		1,343,772		966,167		1,024,116
Total fixed asset investments		1,343,772		966,167		1,024,116
Current assets - amounts receivable after one year:
Accrued income on fixed assets		88,271		74,386		70,953
Current assets - amounts receivable within one year:
Debtors		5,637		7,716		9,528
Investments at fair value through profit or loss:
Liquidity funds		217,310		76,227		139,470
Uninvested capital in limited partnerships		9,835		49,816		26,471
Cash at bank		11,366		4,503		21,648
Total current assets		332,419		212,648		268,070
Creditors - amounts falling due within one year		(1,392)		(2,026)		(1,170)
Net current assets		331,027		210,622		266,900
Creditors - amounts falling due after one year		(35,192)		(80,296)		-
Net assets		1,639,607		1,096,493		1,291,016
Capital and reserves:
Called-up share capital		10,976		10,211		10,400
Share premium account		294,344		197,117		219,722
Capital redemption reserve		1,248		1,248		1,248
Capital reserve - unrealised		466,851		281,469		240,712
Capital reserve - realised		841,177		583,228		798,988
Revenue reserve		25,011		23,220		19,946
Total equity shareholders funds		1,639,607		1,096,493		1,291,016
Net asset value per ordinary share	11(b)	373.4	p	268.5	p	310.3	p
Ordinary shares in issue at 30 June/31 December		439,054,808		408,424,808		415,999,808

The financial statements of HgCapital Trust plc (registered number 01525583) above and below were approved and authorised for issue by the Board of Directors on 3 September 2021 and signed on its behalf by:

Jim Strang, Chairman

Richard Brooman, Director

The following notes form part of these financial statements.

Statement of cash flows

for the six months ended 30 June 2021

		Six months ended		Year ended
	Notes	30.6.21	30.6.20	31.12.20
		£000	£000	£000
		(unaudited)	(unaudited)	(audited)
Net cash outflow from operating activities	9	(3,787)	(57,167)	(69,041)
Investing activities:
Purchase of fixed asset investments		(164,881)	(169,468)	(403,215)
Proceeds from the sale of fixed asset investments		138,987	49,985	441,359
Purchase of liquidity funds		(135,200)	(46,500)	(271,900)
Redemption of liquidity funds		57,490	155,378	318,149
Net cash (outflow)/inflow from investing activities		(103,604)	(10,605)	84,393
Financing activities:
Drawdown of loan facility		35,368	78,759	-
Servicing of finance		(629)	(1,187)	(3,025)
Equity dividends paid		(12,828)	(12,223)	(20,399)
Proceeds from issue of shares		75,198	2,368	25,162
Net cash inflow from financing activities		97,109	67,717	1,738
(Decrease)/increase in cash and cash equivalents in the period		(10,282)	(55)	17,090
Cash and cash equivalents at 1 January		21,648	4,558	4,558
Cash and cash equivalents at 30 June/31 December		11,366	4,503	21,648

The following notes form part of these financial statements.

Statement of changes in equity

for six months ended 30 June 2021

		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 1 January 2021		10,400	219,722	1,248	240,712	798,988	19,946	1,291,016
Net return after taxation		-	-	-	226,139	42,189	17,893	286,221
Contributions of equity net of transaction costs		576	74,622	-	-	-	-	75,198
Equity dividends paid	4	-	-	-	-	-	(12,828)	(12,828)
At 30 June 2021		10,976	294,344	1,248	466,851	841,177	25,011	1,639,607
At 1 January 2020		10,186	194,774	1,248	264,953	544,601	23,536	1,039,298
Net return after taxation		-	-	-	(24,241)	254,387	16,809	246,955
Contributions of equity net of transaction costs		214	24,948	-	-	-	-	25,162
Equity dividends paid	4	-	-	-	-	-	(20,399)	(20,399)
At 31 December 2020		10,400	219,722	1,248	240,712	798,988	19,946	1,291,016

The following notes form part of these financial statements.

Notes to the financial statements

1.  Principal activity

The principal activity of HGT is investment. HGT is an investment company as defined by section 833 of the Companies Act 2006 and an investment trust under 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 01525583, 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'), issued in October 2019. All of HGT's operations are of a continuing nature.

HGT has considerable financial resources and, as a consequence, the Directors believe that HGT is well placed to manage its business risks. After making enquiries, the Directors have a reasonable expectation that HGT will have adequate resources to continue in operational existence for the next 12-month period from the date of approval of this report.

Accordingly, they continue to adopt the going-concern basis in preparing these financial statements.

The same accounting policies, presentation and methods of computation are followed in these financial statements as were applied in HGT's previous annual audited report and accounts.

3.  Organisational structure and accounting policies

Partnerships where HGT is the sole limited partner

HGT entered into eleven separate partnership agreements with general and founder partners in May 2003 (subsequently revised in January 2009), January 2009, July 2011, March 2013, December 2016, February 2017, January 2018, February 2018 and February 2020; at each point, an investment-holding limited partnership was established to carry on the business of an investor, with HGT being the sole limited partner in these entities.

The purpose of these partnerships, HGT LP, HGT 6 LP, HGT 7 LP, HGT 8 LP, HgCapital Mercury D LP, HGT Mercury 2 LP, HGT Saturn LP, HGT Transition Capital LP, HGT Saturn 2 LP, HGT Genesis 9 LP and HGT Mercury 3 LP (together the 'primary buyout funds'), is to hold all of HGT's investments in primary buyouts. Under the partnership agreements, HGT made capital commitments into the primary buyout funds, with the result that HGT now holds direct investments in the primary buyout funds and an indirect investment in the fixed-asset investments which 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 table of investments on page 41 of the full Interim Report and Accounts. The underlying investments which are held indirectly are included in the overview of investments on page 48 of the full Interim Report and Accounts.

Consolidated financial statements have not been prepared because HGT does not have control over the operating or financial activities of the underlying investment-holding limited partnerships, as the general partners are responsible for the management of their activities.

Partnerships where HGT is a minority limited partner

In July 2011, HGT acquired a direct secondary investment in HgCapital 6 E LP ('Hg 6 E LP'), one of the partnerships which comprise the Hg 6 Fund, in which HGT is now a limited partner pari passu with other limited partners. This is a direct investment in the Hg 6 E LP Fund, as shown on the balance sheet and in the table of investments on page 41 of the full Interim Report and Accounts.

HGT also entered into partnership agreements with other limited partners, with the purpose of investing in renewable energy projects, by making capital commitments in Asper Renewable Power Partners LP ('Asper RPP I LP'). This is a direct investment in the renewable funds, as shown on the balance sheet and in the table of investments on page 41 of the full Interim Report and Accounts.

Priority profit share and other operating expenses, payable by partnerships in which HGT 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 7) is entitled to appropriate, as a first charge on the net income of the funds, an amount equivalent to its priority profit share ('PPS'). HGT 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 HGT. Such loan is recoverable from the general partner only by an appropriation of net income; until net income is earned, no value is attributed to this loan (see note 7(b)).

Furthermore, under the primary buyout funds' LPAs, each founder partner (see note 7(c)) 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 allocated to HGT, when the right to these returns is established.

Accordingly, HGT's entitlement to net income and net capital gains is shown in the appropriate lines of the income statement. Notes 6, 7 and 9 to the financial statements disclose the gross income and gross capital gains of the primary buyout funds and also reflect the proportion of net income and capital gains in the buyout funds which has 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 allocated to HGT and recognised when the right to this income is established. Income from Hg 6 E LP and the renewable energy funds would normally consist of income distributions and these distributions are recognised as income in the financial statements of HGT when the right to such distribution is established.

The accounting policies below apply to the recognition of income by the primary buyout funds, prior to allocation between the Partners:

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. Dividends receivable on unlisted equity shares where there is no ex-dividend date and on non-equity shares are brought into account when the 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 dividends are received 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.

4. Dividends

A final dividend of 3.0p per share was paid on 26 May 2021 in respect of the year ended 31 December 2020 (2020: interim dividend in respect of the year ended 31 December 2020 of 2.0p per share and final dividend of 3.0p per share in respect of the year ended 31 December 2019).

5. Issued share capital

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

	Six months ended				Year ended
	30.6.21		30.6.20		31.12.20
	(unaudited)		(unaudited)		(audited)
	No. 000	£000	No. 000	£000	No. 000	£000
Ordinary shares of 2.5p each:
Allotted, called up and fully paid:
At 1 January	416,000	10,400	407,425	10,186	407,425	10,186
Sub-division of ordinary shares	-	-	-	-	-	-
Issues of ordinary shares	23,055	576	1,000	214	8,575	214
At 30 June/31 December	439,055	10,976	408,425	10,400	416,000	10,400
Total called-up share capital	439,055	10,976	408,425	10,400	416,000	10,400

6.  Income

	Revenue return
	Six months ended		Year ended
	30.6.21	30.6.20	31.12.20
	£000	£000	£000
	(unaudited)	(unaudited)	(audited)
Total net income comprises:
Interest	22,046	15,866	24,682
Total net income	22,046	15,866	24,682

All income which is recognised by the primary buyout funds, net of PPS, is allocated to HGT and recognised when the right to this income is established. This income and PPS are analysed further below.

	Revenue return
	Six months ended		Year ended
	30.6.21	30.6.20	31.12.20
	£000	£000	£000
	(unaudited)	(unaudited)	(audited)
Income from investments held by the primary buyout funds
Unquoted investment income	25,512	21,105	34,725
Other investment income:
Unquoted investment income	8	-	-
Liquidity funds income	206	870	1,335
Total investment income	25,726	21,975	36,060
Total other income	(6)	46	60
Total income	25,720	22,021	36,120
Priority profit share charge against income:
Current period - HGT 8 LP	(1,568)	(3,020)	(5,711)
Current period - HGT Saturn LP	(649)	(590)	(1,281)
Current period - HGT Mercury 2 LP	(548)	(1,155)	(2,092)
Current period - HGT 7 LP	(396)	(1,063)	(1,756)
Current period - HGT Genesis 9 LP	(396)	-	-
Current period - HgCapital Mercury D LP	(95)	(194)	(371)
Current period - HGT LP	(22)	(39)	(40)
Current period - HGT Transition Capital LP	-	(94)	(187)
Current year - HGT 6 LP	-	-	-
Current period - HGT Saturn 2 LP	-	-	-
Current period - HGT Mercury 3 LP	-	-	-
Total priority profit share charge against income (note 7(a))	(3,674)	(6,155)	(11,438)
Total net income	22,046	15,866	24,682

7.  Priority profit share and carried interest

(a) Priority profit share payable to general partners	Revenue return
	Six months ended		Year ended
	30.6.21	30.6.20	31.12.20
	£000	£000	£000
	(unaudited)	(unaudited)	(audited)
Priority profit share payable:
Current period amount	7,639	6,721	14,614
Less: Current period loans advanced to general partners (note 7(b))	(4,296)	(1,065)	(3,922)
Add: Prior period loans recovered from general partners (note 7(b))	332	499	746
Current period charge against income	3,675	6,155	11,438
Total priority profit share charge against income	3,675	6,155	11,438

The priority profit share payable on the primary buyout funds ranks as a first appropriation of net income from investments held in these partnerships respectively and is deducted before such income is attributed to HGT in its capacity as a limited partner. The net income of the primary buyout funds earned during the period, after the deduction of the priority profit share, is shown on the income statement.

The terms of the above priority profit share arrangements during 2021 were:

Primary buyout fund partnership	Priority profit share
HGT Genesis 9 LP	1.75% on the fund commitment during the investment period
HGT Mercury 3 LP	1.75% on the fund commitment during the investment period
HGT 8 LP	1.5% on the fund commitment during the investment period
HGT Mercury 2 LP	1.5% on the fund commitment during the investment period
HGT 7 LP	1.5% of original cost of investments in the fund, less the original cost of investments which have been realised or written off
HgCapital Mercury D LP	1.5% of original cost of investments in the fund, less the original cost of investments which have been realised or written off
HGT 6 LP	1.5% of original cost of investments in the fund, less the original cost of investments which have been realised or written off
HGT Saturn 2 LP	1.0% on the fund commitment during the investment period
HGT Saturn LP	1.0% on invested capital
HGT LP	1.0% on invested capital excluding co-investment
HGT Transition Capital LP	0.75% on invested capital

In addition, priority profit shares are payable on partnerships where HGT is a minority limited partner invested pari passu with other institutional investors. These amounts are initially and indirectly funded by HGT 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	Priority profit share
Hg 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
(b) Priority profit share loans to general partners		Capital return
		Six months ended		Year ended
		30.6.21	30.6.20	31.12.20
		£000	£000	£000
		(unaudited)	(unaudited)	(audited)
Movement on loans to general partners:
Losses on current-period loans advanced to general partners		(4,296)	(1,065)	(3,922)
Gains on prior-period loans recovered from general partners		332	499	746
Total losses on priority profit share loans (advanced to)/recovered from general partners		(3,964)	(566)	(3,176)

In years in which the funds 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 HGT. Such loan is recoverable from the general partner only 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
	Six months ended		Year ended
	30.6.21	30.6.20	31.12.20
	£000	£000	£000
	(unaudited)	(unaudited)	(audited)
Carried interest charge against capital gains:
Current period charge against realised capital gains	20,910	-	37,204
Current period charge against unrealised capital gains	42,460	13,287	23,429
Total carried-interest charge against capital gains	63,370	13,287	60,633

The carried interest payable ranks as a first appropriation of capital gains, after preferred return, on the investments held in the primary buyout funds, limited partnerships established solely to hold HGT's investments, and is deducted before such gains are paid to HGT in its capacity as a limited partner. The net amount of capital gains of the primary buyout funds during the period, after the deduction of carried interest, is shown in the income statement.

The details of the carried-interest contracts, disclosed in the Directors' report on page 118 in the full 2020 annual report and accounts, state that carried interest is payable once a certain level of repayments has been made to HGT. Based on the repayments made during 2021, £20,910,000 (2020: £37,204,000) of carried interest was paid in respect of the current financial period. If the investments in HGT 6 LP, HGT 7 LP, HgCapital Mercury D LP, Hg 6 E LP, HGT 8 LP, HGT Mercury 2 LP HGT Saturn LP are realised at the current fair value and then distributed to partners, an amount of £123,976,000 will be payable to the founder partner (2020: £81,516,000 payable to the founder partner); therefore, the Directors have made a provision for this amount. No provision is required in respect of HGT's investment in the other fund-limited partnerships, because they are still in their investment period.

8.  Other expenses

(a) Operating expenses	Revenue return
	Six months ended		Year ended
	30.6.21	30.6.20	31.12.20
	£000	£000	£000
	(unaudited)	(unaudited)	(audited)
Registrar, management and administration fees	358	539	1,108
Legal and other administration costs¹	3,166	1,674	3,738
Total other expenses	3,524	2,213	4,846

¹ Includes employer's National Insurance contributions of £26,000 (2020: £34,000).

	Revenue return
	Six months ended		Year ended
(b) Finance costs	30.6.21	30.6.20	31.12.20
	£000	£000	£000
	(unaudited)	(unaudited)	(audited)
Interest paid	142	864	1,444
Non-utilisation fees and other expenses	16	224	717
Arrangement fees	471	99	864
Total finance costs	629	1,187	3,025

9.  Cash flow from operating activities

Reconciliation of net return before finance costs and taxation to net cash flow from operating activities	Six months ended		Year ended
	30.6.21	30.6.20	31.12.20
	£000	£000	£000
	(unaudited)	(unaudited)	(audited)
Net return before finance costs and taxation	286,850	68,650	249,982
Gains on investments held at fair value and liquidity funds	(315,412)	(70,151)	(260,351)
Carried interest paid	(20,910)	-	(37,204)
Increase in carried interest provision	42,460	13,287	23,429
Increase in accrued income from liquidity funds	(206)	(870)	(1,335)
Increase in prepayments, accrued income and other debtors	(13,427)	(18,729)	(17,254)
Increase/(decrease) in creditors	222	(49,353)	(61)
Decrease/(increase) in uninvested capital	16,636	-	(26,245)
Taxation paid	-	(1)	(2)

10.  Taxation

Taxation for the six-month period is charged at 19% (31 December 2020: 19%), representing the best estimate of the average annual effective tax rate expected for the full year, applied to the pre-tax income of the six-month period.

In the opinion of the Directors, HGT 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 made in the period. Where possible, HGT aims to designate all of any dividends declared in respect of this financial year as interest distributions to its shareholders. These distributions are treated as a tax deduction against taxable income, resulting in no corporation tax being payable by HGT on any interest income designated as a dividend.

11.  Return and net asset value per Ordinary share

(a) Return per ordinary share	Revenue return			Capital return
	Six months ended		Year ended	Six months ended		Year ended
	30.6.21	30.6.20	31.12.20	30.6.21	30.6.20	31.12.20
	(unaudited)	(unaudited)	(audited)	(unaudited)	(unaudited)	(audited)
Amount (£000):
Net return after taxation	17,893	11,907	16,809	268,328	54,997	230,146
Weighted average number of ordinary shares (000):
Weighted average number of ordinary shares in issue	423,616	407,538	408,765	423,616	407,538	408,765
Return per ordinary share (pence)	4.22	2.92	4.11	63.34	13.49	56.30

	Capital return
	Six months ended		Year ended
(b) Net asset value per ordinary share	30.6.21	30.6.20	31.12.20
	(unaudited)	(unaudited)	(audited)
Amount (£000):
Net assets	1,639,607	1,096,493	1,291,016
Number of ordinary shares (000):
Number of ordinary shares in issue	439,055	408,425	416,000
Net asset value per ordinary share (pence)	373.4	268.5	310.3

12.  Commitment in fund partnerships and contingent liabilities

Fund	Original commitment		Outstanding at
		1	30.6.21		30.6.20	31.12.20
	£000		£000		£000	£000
			(unaudited)		(unaudited)	(audited)
HGT Genesis 9 LP	309,039	2	208,107		327,243	263,218
HGT Saturn 2 LP	289,540	3	131,191		290,480	200,605
HGT Mercury 3 LP	98,721	4	89,609		104,536	102,936
HGT LP	72,385	5	72,385		1,261	1,261
HGT 8 LP	350,000		51,394		105,492	9,709
HGT Transition Capital LP	75,000		49,551		49,430	49,600
HGT Saturn LP	150,000		8,057		7,935	7,932
HGT Mercury 2 LP	80,000		5,087		21,779	4,711
HGT 6 LP	285,029	6	2,250		4,035	2,250
HgCapital Mercury D LP	60,000	6	3,277		3,117	3,277
HGT 7 LP	200,000	6	987		18,250	1,232
Asper RPP I LP	18,577	7	594	8	629	620
Hg 6 E LP	15,000		118		940	118
Total outstanding commitments			622,607		935,127	647,469

¹ HGT has the benefit of an opt-out provision in connection with its commitments to invest alongside Hg Mercury 2, Hg Saturn, Hg Saturn 2, Hg Genesis 9, Hg Mercury 3, Hg Genesis 8 and in Transition Capital, allowing it to opt out of its obligation to fund draw-downs under its commitments, without penalty, where certain conditions exist.

² Sterling equivalent of €350,000,000.

³ Sterling equivalent of $400,000,000.

⁴ Sterling equivalent of €115,000,000.

⁵ Sterling equivalent of $100 million of junior debt.

⁶ 5.5% of the original £300 million to the HgCapital 6 Fund, 7.6% of the £60 million to the Mercury 1 Fund and 12.4% of the original £200 million to the HgCapital 7 Fund have subsequently been cancelled, as the Manager deemed that it was unlikely to be required.

⁷ Sterling equivalent of €21.6 million.

⁸ Sterling equivalent of €692,000 (2020: €692,000).

13.  Publication of non-statutory accounts

The financial information contained in this half-yearly financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the six months ended 30 June 2021 and 30 June 2020 has not been audited. The information for the year ended 31 December 2020 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under section 498 (2) or (3) of the Companies Act 2006.

14.  Annual results

The Board expects to announce the results for the year ending 31 December 2021 in March 2022. The 2021 annual report should be available by the end of March 2022, with the annual general meeting being held in May 2022.

Further information

Over the first six months of 2021, HGT's assets were managed by Hg Pooled Management Limited ('Hg'). HGT pays a priority profit share in respect of either its commitments to or invested capital alongside Hg funds, on similar terms as those payable by all institutional investors in these funds as listed below:

Fund partnership	Priority profit share (% p.a)
HGT Genesis 9 LP	1.75% on the fund commitment during the investment period
HGT Mercury 3 LP	1.75% on the fund commitment during the investment period
HGT 8 LP	1.5% on the fund commitment during the investment period
HGT Mercury 2 LP	1.5% on the fund commitment during the investment period
HGT 7 LP	1.5% of original cost of investments in the fund, less the original cost of investments which have been realised or written off
HgCapital Mercury D LP	1.5% of original cost of investments in the fund, less the original cost of investments which have been realised or written off
HGT 6 LP	1.5% of original cost of investments in the fund, less the original cost of investments which have been realised or written off
HGT Saturn 2 LP	1.0% on the fund commitment during the investment period
HGT Saturn LP	1.0% on invested capital
HGT LP	1.0% on invested capital excluding co-investment
HGT Transition Capital LP	0.75% on invested capital

For HGT's investment alongside the Hg Genesis 6, Hg Mercury, Hg Genesis 7, Hg Mercury 2, Hg Genesis 8, Hg Saturn 2, Hg Genesis 9 and Hg Mercury 3 funds, the carried interest arrangements are identical to that which applies to all limited partners in these funds. Under these arrangements, carried interest is payable based on 20% of the aggregate profits, but only after the repayment to HGT of its invested capital and a preferred return, based on 8% p.a., calculated daily, on the aggregate of its net cumulative cash flows in each fund and such preferred return amount which is capitalised annually. Carried interest in HGT Transition Capital will be calculated in the same way.

For HGT's investment alongside the Hg Saturn fund, the carried interest arrangement is also identical to that which applies to all limited partners in this fund. Under this arrangement, carried interest is payable based on 12% of the aggregate profits, payable after the repayment to HGT of its invested capital and a preferred return based on 8% p.a. or 20% of the aggregate profits, payable after the repayment to HGT of its invested capital and a preferred return of 12% p.a..

No priority profit share or carried interest will apply to any co-investment made alongside Hg Genesis 5, Hg Genesis 6, Hg Mercury, Hg Genesis 7, Hg Mercury 2, Hg Genesis 8, Hg Saturn 2, Hg Genesis 9 and Hg Mercury 3 in excess of HGT's pro-rata commitment. Therefore, the co-investments made by HGT in P&I, Visma, Achilles, Azets (formerly CogitalGroup), Mitratech, Commify, MediFox, Argus Media, smartTrade, Transporeon, Evaluate, F24, Geomatikk, Benevity, Silverfin and Dext do not entitle Hg to any priority profit share or carried interest.

No compensation would be due to Hg on termination of the agreement.

Hg has also been appointed as administrator of HGT for a fee equal to 0.1% p.a. of the NAV.

Link Company Matters Limited was appointed as company secretary on 13 May 2015.

Calculation of ongoing charges

For the period to 30 June 2021, HGT's annualised ongoing charges were calculated as 1.6% (30 June 2020: 1.8%).

The calculation is based on the ongoing charges expressed as a percentage of the average published monthly NAV over the relevant year.

The ongoing charges, in accordance with guidelines issued by The Association of Investment Companies ('AIC'), are the annualised expenses which are operational and recurring by nature and specifically exclude, among others, the expenses and gains or losses relating to the acquisition or disposal of investments, performance-related fees (such as carried interest), taxation and financing charges.

HGT's ongoing charges comprise its operating expenses and current-year priority profit share payable, as described in notes 7 and 8 to the financial statements.

Shareholder Information

Financial calendar

The announcement and publication of HGT's results may normally be expected in the months shown below:

March	• Final results for year announced • Annual report and accounts published
May	• Annual general meeting and payment of final dividend • Release of Manager's quarterly update with updated 31 March NAV
September	• Interim figures announced and interim report published
October	• Payment of interim dividend
November	• Release of Manager's quarterly update with updated 30 September NAV

Dividend

The interim dividend proposed in respect of the year ended 31 December 2021 is 2.0p per share.

Ex-dividend date (date from which shares are transferred without dividend)	16 September 2021
Record date (last date for registering transfers to receive the dividend)	17 September 2021
Last date for registering DRIP instructions (see below)	1 October 2021
Dividend payment date	22 October 2021

Payment of dividends

Cash dividends will be sent by cheque to the first-named shareholder at their registered address, to arrive on the payment date. Alternatively, dividends may be paid direct into a shareholder's bank account. This may be arranged by contacting HGT's registrar, Computershare Investor Services PLC ('Computershare'), on 0370 707 1037.

Dividend re-investment plan ('DRIP')

Shareholders may request that their dividends be used to purchase further shares in HGT.

Dividend re-investment forms may be obtained from Computershare on 0370 707 1037 or may be downloaded from www.computershare.co.uk/DRIP. Shareholders who have already opted for dividend re-investment do not need to re-apply. The last date for registering for this service for the forthcoming dividend is 1 October 2021.

Directors

Jim Strang
(Chairman)

Richard Brooman
(Chairman of the Audit, Valuations and Risk Committee)

Peter Dunscombe
(Chairman of the Management
Engagement Committee)

Pilar Junco

Guy Wakeley

Anne West
(Senior Independent Director)

Company secretary

Link Company Matters Limited
65 Gresham Street
London
EC2V 7NQ

Telephone: [phone]

Registered office

2 More London Riverside
London
SE1 2AP

Registered number

01525583

Website

www.hgcapitaltrust.com

Investment manager

Hg Pooled Management Limited¹
2 More London Riverside
London
SE1 2AP

Telephone: [phone]
www.hgcapital.com

Registrars and transfer office

Computershare Investor Services PLC¹
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ

Telephone: [phone]

www.computershare.com/uk

Broker

Numis Securities Ltd¹
45 Gresham Street
London
EC2V 7BF

Telephone: [phone]
www.numiscorp.com

Auditor

Grant Thornton UK LLP¹
30 Finsbury Square
London
EC2A 1AG

Telephone: [phone]

www.grantthornton.co.uk

Legal adviser

Dickson Minto
16 Charlotte Square
Edinburgh
EH2 4DF

Telephone: [phone]
www.dicksonminto.com

Bank

The Royal Bank of Scotland International 7th Floor
1 Princes Street
London
EC2R 8BP

Telephone: [phone]
www.rbsinternational.com

Administrator

Hg Pooled Management Limited¹
2 More London Riverside
London
SE1 2AP

Telephone: [phone]  
www.hgcapital.com

Depositary

Apex Depositary (UK) Limited¹
6th Floor
140 London Wall
London
EC2Y 5DN

Telephone: [phone]

www.theapexgroup.com

AIC

Association of Investment Companies www.theaic.co.uk

The AIC represents closed-ended investment companies. It helps its member companies through lobbying, media engagement, technical advice, training and events.

The AIC's website includes information about investments via investment companies, including investments in listed private equity companies.

¹ Authorised and regulated by the Financial Conduct Authority.

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

 

END

 

 

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