Replacement Annual Financial Report

RNS Number : 6255Y

HgCapital Trust PLC

06 March 2017

HgCapital Trust plc

(the "Company")

Correction of Annual Financial Report

6 March 2017

HgCapital Trust plc (LSE: HGT) confirms that the record date for its final dividend proposed in respect of the year ended 31 December 2016 is 7 April 2017, not 8 April 2017 as previously stated in the Annual Financial Report announcement issued this morning (RNS reference number: 5401Y).

The proposed final dividend of 46.0 pence per share, subject to shareholder approval at the forthcoming AGM, will be paid on 15 May 2017 to shareholders on the register at the close of business on 7 April 2017. The ex-dividend date is 6 April 2017 and the last date for elections for the Dividend Reinvestment Plan is 21 April 2017.

All other details remain unchanged. The full text of the announcement is as seen below.

HgCapital Trust plc

ANNUAL REPORT AND ACCOUNTS

31 December 2016

The objective of the Company 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.

The Company provides investors with exposure to a fast-growing portfolio of unquoted investments, primarily in technology and technology-enabled services across Europe.

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

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

References in this announcement to pounds sterling have been abbreviated to 'sterling'.

FINANCIAL HIGHLIGHTS

Annualised share price total return over the last 20 years: +14.5%

2016 PERFORMANCE

SHARE PRICE

The share price at 31 December 2016 was £15.41, a total return for the year of: +43%

MARKET CAPITALISATION

The market capitalisation of the Company at 31 December 2016 was: £575m

NAV PER SHARE

The NAV per share at 31 December 2016 was £16.50, a total return for the year of: +19%

NET ASSETS

The total NAV of the Company at 31 December 2016 was: £616m

TOTAL ONGOING CHARGES

for the year to 31 December 2016: 1.6%

DIVIDEND

Proposed final dividend, subject to shareholder approval: 46p

TOP 20 INVESTMENTS as at 31 December 2016

SALES GROWTH

over the last twelve months: +11%

PROFIT GROWTH

over the last twelve months: +21%

EV TO EBITDA MULTIPLE: 14.2x

DEBT TO EBITDA RATIO: 4.1x

Net divestors over the year, taking advantage of a buoyant environment for realising value at good prices.

INVESTMENT ACTIVITY IN 2016

CASH REALISED FOR THE BENEFIT OF THE COMPANY: £135m

CASH INVESTED ON BEHALF OF THE COMPANY: £104m

BALANCE SHEET ANALYSIS as at 31 December 2016

LIQUID RESOURCES: £46m

7% of NAV

Liquid resources are supported by an undrawn bank facility of £80 million.

OUTSTANDING COMMITMENTS: £421m

68% of NAV

Commitments will be drawn down over five years (2017-2022), an average cash outflow of c. £80 million p.a.

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

LONG-TERM PERFORMANCE RECORD

HISTORIC RECORD

Year ended 31 December	Net assets attributable to shareholders £'000	NAV per share p	Share price p	Revenue return/(loss) available for shareholders £'000	Revenue return/(loss) per share¹ p	Dividends per share² p
2007	238,817	948.2	782.5	7,446	29.6	25.0
2008	234,094	929.4	668.5	7,445	29.6	25.0
2009	236,044	937.2	844.0	7,148	28.4	25.0
2010	347,993	1,118.8	1,006.0	10,053	34.0	28.0
2011	346,832	1,089.9	970.0	(645)	(2.0)	10.0
2012	437,956	1,231.5	1,016.0	10,398	32.1	23.0
2013	440,584	1,180.4	1,010.0	12,913	35.3	29.0
2014	476,918	1,277.8	1,057.5	21,933	58.8	51.0³
2015	530,023	1,420.0	1,115.0	17,907	48.0	40.0
2016	615,756	1,649.7	1,541.0	20,140	54.0	46.0⁴
¹ Based on weighted number of shares in issue during the year. ² Dividend proposed in respect of reported financial year, but declared and paid in the following year. ³ Includes a special dividend of 19 pence per Ordinary share. ⁴ Proposed dividend of 46 pence per Ordinary share for the year ended 31 December 2016, to be paid on 15 May 2017, subject to shareholder approval.

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

HISTORICAL TOTAL RETURN PERFORMANCE

	One year % p.a.	Three years % p.a.	Five years % p.a.	Ten years % p.a.	Twenty years % p.a.
Share price	42.9	19.4	12.8	10.7	14.5
NAV per share	19.5	15.4	11.3	11.0	12.7
FTSE All-Share Index	16.8	6.1	10.1	5.6	6.7
Share price performance relative to the FTSE All-Share Index	+26.1	+13.3	+2.7	+5.1	+7.8
NAV per share performance relative to the FTSE All-Share Index	+2.7	+9.3	+1.2	+5.4	+6.0

EXTRACT OF THE BOARD'S STRATEGIC REPORT

CHAIRMAN'S STATEMENT

Most of the businesses in which we are invested are reporting strong growth in revenues, improving margins and impressive growth in profitability. This bodes well for continuing value creation from the portfolio.

In order to focus this the Company's Annual Report and Accounts for the year ended 31 December 2016 more closely on the essence of the investment opportunity we offer, the Board and HgCapital have comprehensively refreshed the contents. The report may not look very different, but I would encourage you to read it closely in order to gain an up-to-date understanding of why my fellow directors and I believe strongly that an allocation to HgCapital Trust plc deserves a place in the portfolio of any long-term investor.

The essential message is that we offer the opportunity to share in the growth and profitability of more than 30 carefully selected businesses during periods of transformational change that we expect to create substantial shareholder value.

By making majority investments, the partners and staff of HgCapital, working with the management team of each business, can effect change, without the constraints that often impede listed companies.

Thanks to this focus on businesses where HgCapital can achieve change, our top 20 investments by value grew revenues by 11% over 2016, to an aggregate of £2.7 billion, and EBITDA by 21% to £650 million, achieving an aggregate EBITDA margin of 24%. This was the principal driver of a 19% total return in Net Asset Value per share in the year, to £16.50. As at 28 February 2017, the pro-forma NAV per share was £16.74; this further growth in NAV predominantly reflects the sale of Zenith, which was announced in January and is due to complete in March.

Foreign exchange gains following the EU referendum also contributed to the rise in NAV, reversing much of the unrealised losses in the preceding three years. Despite strong trading in the portfolio, valuation ratings were slightly down overall.

The growing impact of technology on business

The world is faced by changes at an ever faster pace, and businesses that do not address, and adopt, relevant change are likely to go into decline. Accordingly, investors need to be well briefed about these opportunities and threats, and to be able to identify with confidence which businesses understand and exploit these changes.

It has been said that the world is at the opening stages of the Fourth Industrial Revolution. The drivers of this revolution are simultaneous innovation across the physical, digital and biological sciences, but all of them are empowered by advances in information technology. Innovation is then manifested both in new physical forms - new materials, manufacturing processes and machine capability - and in disruptive new business models. The World Economic Forum has identified 21 tipping points - moments when specific technological shifts hit mainstream society - that will shape our world, and they are all expected to occur in the next ten years.

Over the past decade and more, HgCapital has built an understanding and capability across the technology and technology-enabled sectors, which it has applied in identifying businesses that are ready for substantial change in their strategy and operations that will create value for shareholders. This involves investing in businesses that will prosper by offering transformative technology to their customers and in businesses that will themselves prosper, through the application of technology to provide a competitive advantage. We do not invest in early-stage businesses or unproven technology.

The businesses selected for investment invariably meet HgCapital's business model criteria of highly repeatable revenues, high customer retention rates, and a fragmented market; these characteristics reduce downside risk. Around 90% by value of our current buyout portfolio are either technology businesses or companies, operating in other sectors, which are "tech-enabled" so as to grow market share, enhance margins and embed customer loyalty.

The first wave of this new industrial revolution has been the shift from the sale of software packages operated in-house, to offering Software-as-a-Service ('SaaS'), using the Cloud for secure data storage and access, and disrupting established ways of delivering customer service. We have benefited from growth in value of a number of investments as they adopt SaaS: Visma is a prime example, but the portfolio also contains other investments, notably IRIS, Raet, Intelliflo, Trace One and Zitcom, that offer this opportunity for value creation in the coming years.

HgCapital does not seek to invest across all the technological opportunities that the Fourth Industrial Revolution encompasses. However, among the businesses we hold we can already see tangible opportunities to transform their existing business models by applying technologies that have been developed to the point where they can be put into everyday use. For example, QUNDIS has evolved during our period of investment from a manufacturer of energy meters into offering remote, Cloud-based smart metering that will increasingly form a part of the 'Internet of Things'. CogitalGroup has been formed from the merger of established accounting services and outsourced business processing into an integrated services group that will increasingly adopt efficiencies from the use of technology. The management of large outsourced databases for customers across a specific industry also offers opportunities for so-called Big Data businesses: our investment in Eucon, in the traditionally prosaic business of providing automotive pricing data and claims management, offers an opportunity for mining Big Data to create business intelligence of value to customers; Evaluate, operating in the global life sciences industry, is another example, as is P&I which can derive valuable data analytics from the data it manages.

Share price performance

The Company's share price achieved a total return of 42.9% in the year to 31 December 2016, exceeding the total return on the FTSE All-Share Index by 26.1%. This reflected both the strong growth in Net Asset Value per share, which also exceeded the Index, but also by a substantial narrowing of the discount. Given the Company's strong prospects, the Board believes our shares should trade close to NAV, and they usually trade on one of the narrowest discounts in our sector. I would remind readers that, as the Company holds unlisted shares it does not publish monthly revaluations, and that accordingly the NAV at December was, of course, not known to the market until the publication of these results in March.

The graphs in the full Annual Report and Accounts show that the Company's shares have again outperformed the FTSE All-Share Index. The ten-year total return has been 10.7% p.a., more than 5% p.a. better than the Index, demonstrating the superior return that can be earned by a long-term allocation to the Company's shares.

Proposed dividend

While the Company's assets are managed in order to achieve long-term growth in shareholder value, the Board recognises that in a period of low interest rates and yields, many shareholders wish to have some certainty about likely levels of dividend and their anticipated progression. I am pleased to report that the Board is seeking shareholders' approval for an increased dividend of 46 pence per share, compared with 40 pence in 2015. The Board anticipates dividends in future of not less than the 46 pence per share recommended in respect of 2016.

Moreover, we have concluded that the sums now payable justify declaration and payment of an interim dividend. We would expect the first such interim dividend to be paid in October 2017.

Investment activity

2016 was a very busy year across the portfolio: £135 million was returned to the Company, mainly from seven full or partial realisations; £104 million was invested by the Company, predominantly in nine businesses. Further information is set out in HgCapital's Review. As usual, we provide detailed descriptions of each of the top 20 investments, and a commentary on their progress, but this year we have added information about the other 14 businesses in the portfolio. An interesting case study on P&I is set out below.

Funding and commitments

Every few years, and after careful consideration of investment prospects, HgCapital's resources and the Company's current and projected cash flows, the Board enters into a commitment to invest in new opportunities identified by HgCapital; these commitments coincide with HgCapital raising new funds from institutional investors across the globe. The investment period for HgCapital 7 and Mercury is expected to end in 2017. Accordingly, in December 2016 we entered into a new commitment to invest £350 million alongside the new HgCapital 8 fund raised by HgCapital. This fund will provide some £2.5 billion for investment across the next four or five years in businesses within HgCapital's target sectors and in line with its business model. The Company is again, by some way, the largest investor in this vintage. This is likely to result in the Company taking up substantial minority interests in around 15 new investments between 2017 and 2021, with an average investment by the Company of £20-25 million; there will also be opportunities for co-investments, on attractive terms, that will help the Board to keep the Company's balance sheet efficiently invested.

We have also, more recently, committed £80 million to new investments in smaller TMT businesses alongside Mercury 2, a new fund raised in February 2017. These commitments will provide HgCapital with £575 million to invest across the next four to five years in smaller TMT businesses; again, we will be the largest investor in this vintage.

In making commitments to both the HgCapital 8 and Mercury 2 vintages, the Company has negotiated the benefit of an opt-out, should the Company not have sufficient funds available at the time. At the year-end, the Company held £46 million in liquid resources to fund these investments and also has the benefit of an £80 million medium-term bank facility enabling the Board to manage the balance sheet and remain more fully invested across the cycle of commitment-investment-realisation. The quality of the underlying portfolio allows the Company to borrow on an unsecured basis, creating further flexibility, should it be needed.

The interaction between commitments, liquid funds available and anticipated proceeds from selling portfolio companies is a strategic issue that the Board and HgCapital monitor closely. The Board is keen to keep the balance sheet as fully invested as possible, consistent with the commitment-investment-realisation cycle and taking account of changing market conditions for the investment in, or realisation of, businesses. When opportunities arise to take up co-investments (on which the Company pays no fees or carried interest) in addition to our commitment, or by acquiring limited partnership interests in HgCapital's funds, these are considered on their individual merits and after considering the Company's available cash. The Company currently has £61 million by value in co-investments. We will explore other efficient means to add value consistent with our investment objective and HgCapital's areas of expertise.

Auditor

As explained in detail in the report to shareholders from the Chairman of our Audit & Valuation Committee, as a consequence of a new EU Directive, the Board and Deloitte have concluded that we must separate the provision of audit and other services. Following a tender, at the Annual General Meeting we will propose the appointment of Grant Thornton LLP as the Company's external auditor.

On behalf of the Board I thank the partners and staff of Deloitte who have conducted the Company's audits over the last nine years. We will continue to have access to the firm's specialist services.

Prospects

HgCapital's outlook is set out below. They remain confident that our current portfolio will continue to report strong growth in revenues and profits and that the defensive characteristics inherent in the businesses we hold will protect value, even if macro-economic conditions deteriorate.

Having carefully considered the potential effects of Brexit on each business in the portfolio, HgCapital has advised us that it will have a relatively limited impact on the businesses we hold, apart from a few instances where there is a mismatch in currency between costs and revenues, should there be renewed volatility in the value of sterling. The focus on specific business models will continue to identify businesses with similar characteristics that offer protection against market forces. Uncertainties arising from negotiations with the EU seem likely to coincide with a range of other risks to the global economy, which may lead to volatility in listed equity markets and in the exchange rates at which the value of our non-sterling equity investments are translated. While we feel confident in the stability of our portfolio businesses and their capacity to prosper, there must therefore be a heightened risk of volatility in our valuations, just as there is risk in the current levels of listed equity markets.

Most of the businesses in which we are invested continue to deliver strong revenue growth, improving margins and impressive growth in profitability. This bodes well for continuing value creation from the portfolio, subject of course to market conditions. In the meantime, new additions to the portfolio are expected to make progress in their implementation of new strategies and operational improvements that should feed through to continuing value creation.

The commitments we have made to invest with HgCapital over the next four to five years, alongside substantial investment from institutional investors, reflects our shared confidence in HgCapital's well established business model and in the new opportunities that are presenting themselves and from which shareholders can profit.

Roger Mountford

Chairman

3 March 2017

Long-term viability statement

In accordance with provision C.2.2 of the 2014 revision of the UK Corporate Governance Code, the Directors have assessed the prospects of the Company over a longer period than the twelve months required by the 'Going Concern' test. The Board believes that the appropriate period over which to assess the Company's viability may vary from year to year, depending on a number of factors, notably its outstanding investment commitments, which currently run until 2021-2022. In addition, the Board believes that it should assess the viability of the Company over a minimum of five years and, accordingly, has elected this year to assess the Company's viability over the five-year period ending December 2021.

In their assessment, the Directors have considered the Company's position with reference to the business model, the balance sheet, cash flow projections, availability of funding and the Company's contractual commitments. This has been undertaken alongside a detailed review of the principal risks and uncertainties associated with the Company, including: performance; regulatory; operational; financial; liquidity; and borrowing, as detailed on pages 15 and 16 of the Strategic Report of the full Annual Report and Accounts. The Directors recognise the importance of its close working relationship with HgCapital and regularly monitor and review HgCapital's strategy, resources, risks and associated internal controls.

Based on this assessment, the Directors of the Company confirm that they expect the Company will continue to operate and meet its liabilities, as they fall due, during the five years ending December 2021.

Going concern

The Company's business activities, together with the factors likely to affect its future development, performance and financial position are described in the Board's Strategic Report and HgCapital's Review. The financial position of the Company, its cash flows, liquidity and borrowing facilities are described in this Strategic Report.

In addition, note 19 to the financial statements describes the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. The Directors believe that the Company is well placed to manage its business risks successfully. The Directors review cash flow projections regularly, including important assumptions as to future realisations and the rate at which funds will be deployed into new investments. The Directors have a reasonable expectation that the Company will have adequate resources to continue in operational existence for the foreseeable future and be able to meet its outstanding commitments, as noted elsewhere in this announcement. Accordingly, they continue to adopt the going concern basis in preparing these results.

Performance

In the twelve months to 31 December 2016, the Company's NAV per share increased by 19.5% on a total return basis. In comparison, the FTSE All-Share Index increased by 16.8%. The total return of the Company's share price was 42.9%. All of the above returns assume the reinvestment of all historical dividends.

Key performance indicators

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

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

PRINCIPAL RISKS AND UNCERTAINTIES

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

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

Performance

An inappropriate investment strategy might lead to poor performance. The Board is responsible for deciding the investment policy to fulfil the Company's objectives and for monitoring HgCapital's performance in carrying it out. To help manage this risk, HgCapital provides an explanation of all investment decisions and the rationale for the composition of the investment portfolio. It also monitors and maintains an adequate spread of investments, within the risk controls set out in the Company's investment policy, in order to minimise the risks associated with particular countries or factors specific to particular sectors.

Regulatory

The Board continues to believe that it is in shareholders' interest to retain the tax advantages that flow from meeting the requirements for an investment trust under Sections 1158 and 1159 of the Corporation Tax Act 2010 ('CTA'). As such, the Company is exempt from corporation tax on capital gains realised from the sale of its investments, so the impact of losing investment trust status would be significant to the Company. The Board believes the likelihood of this risk occurring is low. HgCapital monitors investment movements, the level and type of forecast income and expenditure, and the amount of retained income (if any) to ensure that the provisions of Sections 1158 and 1159 of CTA are not breached. The Company's compliance with the conditions for retaining investment trust status is certified by HgCapital at each meeting of the Board.

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

Operational

The Company has no employees and relies upon the services provided by third parties, notably HgCapital to which the principal managerial functions have been delegated; the Company is dependent upon the internal control systems of HgCapital and the Company's other service providers. The security of the Company's assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depend on the effective operation of these systems. These are regularly tested and monitored and an internal control report, which includes a robust assessment of risks, together with procedures to mitigate such risks, is prepared by HgCapital and reviewed by the Board and the Audit & Valuation Committee twice each year.

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

The Board has considered an Assurance Report on Internal Controls (AAF 01/06) as prepared by HgCapital, and independently reviewed by Deloitte LLP, for the year ended 31 December 2015. The Board will consider the 2016 Assurance Report when issued later in March 2017.

Financial

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

Liquidity

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

In the event that, after providing for necessary expenditure, the Company will have insufficient cash resources to fund a new investment, an opt-out provision has been negotiated in connection with the Company's commitment to invest alongside HgCapital 8 and Mercury 2. This permits the Company to opt out of its obligation to fund a draw-down for certain liquidity or regulatory reasons, in particular, if to do so would result in the Company (i) not having the cash resources to meet any of its liabilities, expenses or obligations to fund its commitments to other funds or investment vehicles of HgCapital that are reasonably likely to become due within 12 months or (ii) not being able to undertake any share buy-back, in each case subject to certain conditions. These provisions help the Company to manage the risks associated with over-commitment.

At certain points in the investment cycle, the Company may hold substantial amounts of cash awaiting investment, which it may invest in government or corporate securities, or in bank deposits or managed funds. To this end, the Company is invested in the Royal London Asset Management Cash Plus Fund. This deploys funds awaiting investment in a highly liquid portfolio of cash, deposits, money market instruments and short-dated government securities.

Borrowing

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

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

The Company has arranged an unsecured standby bank facility with Lloyds Bank plc of £80 million to provide funds for investment when necessary; this facility is available until 30 June 2019. The facility was undrawn at 31 December 2016. The Directors believe the borrowing facility gives the Board further flexibility in managing the Company's resources, without adding undue risk.

OTHER MATTERS

Socially responsible investment

The Board has endorsed HgCapital's policy to invest the Company's funds in a socially responsible manner,
as set out below and on their website at http://www.hgcapital.com/responsibility. The Company's focus is on identifying high-quality and sustainable businesses, and supporting their growth for the benefit of shareholders and wider society. The Board monitors investment activity to ensure they are compatible with these policies.

The Company has no employees and has limited direct impact on the environment. The Company aims to conduct itself responsibly, ethically and fairly and has sought to ensure that HgCapital's management of the portfolio of investments takes account of social, environmental and ethical factors where appropriate. The sectors in which HgCapital invests do not generally raise material ethical issues.

Employees, human rights and community issues

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

Modern Slavery

The Company has no employees of its own. The Directors are satisfied that, to the best of their knowledge, HgCapital complies with the provisions of the UK Modern Slavery Act 2015. For further information please visit http://www.hgcapital.com/hgcapital-slavery-and-human-trafficking-statement.

Diversity

All financial decisions are made under conditions of uncertainty. The Board recognises the value of both identity and cognitive diversity in ensuring that varied perspectives are considered when making decisions.

The Board places value on attracting directors with diverse outlooks and experience. The skills and experience that the current members of the Board bring to the Company's leadership are described on pages 92 and 93 of the full Annual Report and Accounts. The Board's policy is to make appointments to the Board to achieve the balance of skills, outlook and experience needed but to do so solely on merit. At the end of the year under review, the Board of Directors of the Company comprised four men and one woman. The Company seeks to enhance diversity and looks for the best qualified male and female candidates. HgCapital has an equal opportunities policy and currently employs 72 men and 46 women.

For and on behalf of the Board
Roger Mountford
Chairman of the Board
3 March 2017

HgCAPITAL'S REVIEW

HgCapital is an investor predominantly in unquoted technology and technology-enabled service businesses.

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

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

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

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

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

• direct investments in renewable energy fund limited partnerships (Hg Renewable Power Partners LP ('RPP1') and HgCapital Renewable Power Partners 2 C LP ('RPP2')), of which the Company 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 the full Annual Report and Accounts.

OVERVIEW

INTRODUCTION TO HgCAPITAL

With close to 120 staff in two investment offices in the UK and Germany, HgCapital has funds under management of over

£7 billion serving a range of highly regarded institutional investors, including private and public pension funds, charitable endowments, insurance companies and family offices, alongside the Company.

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

The Company is the largest client of HgCapital, which has been contracted to manage the Company's assets since 1994. The Company offers investors a liquid investment vehicle, through which they can obtain an exposure to our diversified portfolio of private equity investments with minimal administrative burdens, no long-term lock-up or minimum size of investment, and with the benefit of an independent board and associated corporate governance.

INVESTMENT STRATEGY

HgCapital primarily focuses on buyouts in technology and technology-enabled businesses with enterprise values ('EV') of between £20 million and £500 million predominantly but not exclusively in the UK and Northern Europe.

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

We believe these markets offer a high volume of investment opportunities with proven financial performance and strong market positions.

HgCapital's investment strategy provides investors with access to the opportunity to invest in unquoted companies with specific business model attributes, predominantly in Northern Europe.

Clear Investment Criteria

HgCapital 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.

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

Active Portfolio Management

By virtue of the fact that HgCapital repeatedly invests in specific kinds of business models, our dedicated Portfolio Management Team has been able to tailor a differentiated and complementary approach to ownership. Following each investment, our Portfolio Management Team works with management teams on the operational levers that are key to performance in an HgCapital 'sweet spot' business model, such as sales operations, digital marketing and customer success. The nature of support provided by HgCapital can take a variety of forms. At Board level, we typically appoint a member of the Portfolio team as a non-executive director responsible for applying active, results-oriented corporate governance. Beyond the boardroom, members of our Portfolio team provide either direct support through hands-on best practice project work, or collaborate with management teams to draw on expertise from our specialist network, especially our Operating Partners who each bring a specific, operational specialism to company situations. We also hold several functional best practice forums each year for our management teams, with over 250 executives attending across Sales, Customer Success, Finance, HR and other areas in any given year. These forums help promote knowledge-sharing, expertise and best-practice across our portfolio companies.

OUR PEOPLE

HgCapital succeeds through analysis of new and emerging dynamics in the sectors and economies in which it invests. Developing this analysis requires profound understanding of technology, markets and business practices. To this end, we employ best-in-class talent to identify and execute investment opportunities and accelerate value realisation during ownership.

Our people come from a range of backgrounds and experience including private equity, consulting, investment banking, accounting and industry specialists. Supporting these focused in-house resources, HgCapital's Operating Partners consist of a group of senior individuals with many years of experience in operational and strategic roles, as well as individuals with strong functional expertise in a variety of areas. In addition to this, they have all worked with HgCapital and other private equity firms over long periods.

This specialisation - both in investment selection and portfolio management - requires significant resources and we have built a business employing close to 120 staff, including more than 65 investment and other professionals. Investing primarily in European businesses, many of which have a global footprint, requires time and a deep understanding of local cultures. Accordingly, our people come from around the globe, including ten European countries. Our partners have, on average, nineteen years' experience in management of private businesses.

Positioning ourselves as a best in class recruiter

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

Improving our ability to identify talent

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

Employee engagement

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

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

Developing future leaders

We are explicit about the behaviours we wish to encourage at HgCapital, and have aligned training, coaching, performance feedback and incentives to our values. This focus includes both broad organisation-wide and leadership competency models, which are used as the basis for performance coaching, development and promotion.

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

SECTOR SPECIALISATION

In order to find businesses where we can add substantial value, HgCapital applies a deep sector focus, predominantly targeting buyout investments in technology and technology-enabled service companies.

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

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

TMT

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

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

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

Given the breadth of opportunity in European TMT, HgCapital is currently investing in the sector from two funds, HgCapital 7 and HgCapital Mercury; targeting buyouts in companies with enterprise values between £20 million and £500 million. The aggregate funds we have to invest across the sector allows us to field significant teams to identify and negotiate investments, while providing a very comprehensive resource for the management teams that we support.

Services

The Services sector is a large and wide-ranging segment which is traditionally split into 'horizontal' business models such as: business process outsourcing; facilities management; or testing and inspection. In contrast, our investment approach concentrates much more on specific end markets or customer segments, which we believe lead to attractive business model characteristics. We have then invested time to develop a strong understanding of the industry dynamics through top-down research or existing investments, identifying service companies that sell into those specific end sectors. Within the Services sector, the investment themes that have attracted us have typically featured large, fragmented customer bases, long-term and stable customer relationships, and businesses which provide business-critical services, preferably on a repeat or recurrent basis. We target businesses with leading positions within a niche, typically reflected by strong margins; and we aim to grow and scale these businesses, either organically within existing markets (selling into their customer bases), or through acquisition.

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

Industrials

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

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

RESPONSIBLE INVESTING

Why Responsible Investing is important to us

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

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

OUR RESPONSIBLE INVESTING FRAMEWORK

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

GOVERNANCE

• Adopt anti-corruption and business ethics;

• Enjoy effective board structure and committees; and

• Use active risk management procedures.

WORKPLACE

• Be great employers;

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

• Comply with labour standards and health and safety.

MARKETPLACE

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

• Build customer satisfaction; and

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

COMMUNITY

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

ENVIRONMENT

• Comply with relevant emissions and waste regulations;

• Adopt appropriate measurement standards for environmental impact; and

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

HOW WE INTEGRATE RESPONSIBLE INVESTING INTO OUR INVESTMENT PROCESS

Investment screening

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

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

Diligence

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

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

Ownership

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

PRI - Principles for Responsible Investment A signatory to the UNPRI since 2012.

Green Investment Bank

HgCapital actively collaborates with a number of organisations on ESG initiatives and shares best practice in this area.

Our aim is to facilitate an ongoing dialogue where shared experiences can be mutually beneficial.

RESPONSIBLE INVESTING CASE STUDY: JLA

JLA is a UK-based Critical Asset Supply & Service business offering end-to-end solutions in laundry, catering, infection control, compliance & safety and consumables. JLA operates across a diverse sector, offering customers a fully inclusive machine supply and breakdown service proposition under the name of Total Care, as well as other supplementary products and services such as service solutions and equipment sales.

ENVIRONMENT

Helping our customers become more energy efficient

OTEX

• JLA's OTEX ozone disinfection system uses ozone, one of nature's best natural disinfectants. It works best in cool temperatures leaving less moisture in linens leading to shorter drying cycles. By using less water and heat, the laundry room consumes less energy, reducing utility bills and operating costs dramatically, whilst still ensuring robust infection control.

• In addition, ozone does not harm the environment. It has a very short half-life, breaking down into oxygen once its job is done.

SMART

• JLA's SMART Wash and SMART Dry ranges cut water, energy and detergent use by up to a third, giving customers a greener and cheaper operation.

• SMART Wash uses JLA Sense - an integrated laundry 'brain' that determines the minimum water and detergent needed, saving up to 32% compared with a conventional washing machine, whilst still ensuring optimum wash quality.

• The SMART Dry range uses a two-phase heating process which cuts the time and energy needed for air to reach optimum drying temperature.

Working to protect our environment

In addition to helping customers become more energy efficient, JLA takes its responsibility to create a sustainable workplace very seriously, with the following initiatives:

• A programme of replacement for old IT equipment and lighting with more energy efficient versions;

• A vehicle tracking system dispatches the most appropriate engineer to a customer, reducing fuel consumption;

• ESOS compliant;

• HQ electricity is powered solely by renewable energy; and

• A CO2 cap on company cars.

SOCIAL

Apprenticeship Scheme

JLA have run a successful engineer apprenticeship scheme since 2011. Apprentices learn the skills they need to succeed and work closely with an external training company, so that they get both on-the-job training and official qualifications.

With the training and support JLA give apprentice engineers, once they complete their courses, they expect to go on to become fully fledged members of the JLA team.

NVQ

Within the last 12 months over 30 JLA employees have undertaken NVQ courses, and every one of them received a qualification. JLA has an ongoing programme to upskill team members to keep them growing in line with the business.

Diversity

JLA is committed to creating a culture that values its people and operates with mutual trust and respect. JLA's employment policies and practices reflect a culture where decisions are made based on individual ability and potential in relation to the needs of the business. This is seen as a factor in JLA's success.

Community sponsoring

JLA is committed to creating a positive impact within the community and with its customers, regularly supporting local events and sports teams and providing charitable donations to support customer fundraising initiatives.

GOVERNANCE

Business Principles

JLA's business principles are designed to ensure that all staff work towards the same goals and guard against damage to JLA's collective or individual reputations. In outlining their beliefs and expectations from an early stage, JLA promotes best practice from the day an employee joins the company. The principles are readily available on www.jlagroup.com.

Cash Collection

JLA's Total Care Vend Share division outsourced their cash collection operation to minimise business risk and improve employee safety. All cash is now returned daily to highly secure unmarked cash centres to reduce cash handling time.

This process minimises the number of people in contact with cash, greatly improving JLA's accounting and audit trail.

CASE STUDY - P&I

Website:	www.pi-ag.com
Sector:	TMT
Geography:	Germany

"We thank the HgCapital team for its support which helped us become a leading HR software provider in the DACH region and we appreciate its continuous investment as a strong sign of confidence in our growth prospects."

Vasilios Triadis, CEO of P&I

Business description

Founded in 1968 and headquartered in Wiesbaden, Germany, P&I (Personal & Informatik AG) supplies payroll and HR-related software to mid-market companies and the public sector primarily in Germany, Austria and Switzerland. P&I also serves customers across thirteen countries in Europe via its partners.

Over the course of more than four decades, P&I products have been enriched with information from the highly diverse tasks and best practices of more than 15,000 customers (of whom 3,900 are direct). The business offers software for the management of payroll, workforce, time management, human capital management and HR analytics.

It typically serves "Mittelstand" businesses with 200-5,000 employees, across a range of industries, as well as medium-sized and large public sector customers. It employs more than 400 people with offices in Austria, Switzerland, Slovakia and the Netherlands and it has partners in nine additional European countries.

The investment

The regulatory driven software space was first identified by HgCapital as an attractive sub-sector in 2002 and the investment in P&I followed a decade of tracking the business, enabling HgCapital to build a strong relationship with the business' management over time and conduct thorough due diligence through the economic cycle. The investment in P&I is typical of HgCapital's approach to sourcing, origination and the business model characteristics which remain HgCapital's focus.

The business had seen strong operating performance with a historical 10-year track record of consistent revenue and EBITDA growth, with low sensitivity to economic market cycles. In December 2013, HgCapital, co-investors and the business' management acquired 92% of shares in P&I from Carlyle. The implied EV of the business was €438.0 million.

The investment case

HgCapital continues to see attractive long-term growth in the European payroll and transactional HR sector for leading, innovative players. P&I displays specific characteristics that HgCapital looks for in its portfolio companies: a scalable business model with a broad, diversified customer base; strong customer loyalty; and a significant share of recurring revenues, driven by ongoing regulatory changes. As a driver of innovation in HR technology, P&I is highly rated among its customers for the quality of its products.

We also saw the opportunity to continue to develop P&I's product offerings, including the addition of further Human Capital Management functionality, the strengthening of its recurring revenue base and the increasing adoption of its cloud service technology (P&I Big Data) into their customer base. There was also potential for small M&A opportunities in the relatively fragmented HR management systems, payroll, time management and expenses markets, both in the DACH region and internationally.

How HgCapital has supported P&I

With HgCapital's support, P&I acquired a Swiss payroll vendor, Soreco HR, in 2015. In addition to growth and product development, HgCapital focused on strengthening P&I's financial and operating reporting, as well as defining the company's forward business plan.

The roll-out of Big Data was very successful with adoption rates of more than 90%, driving year-on-year growth in recurring revenue in excess of 6% in 2016 to 22% year-to-date FY2017. The move into Big Data has also had a positive effect on the operating efficiency of the business, driving increases in average sales licence revenue per employee and average consulting EBITDA revenue margin to 44% in 2017.

Performance improvement

Over our investment period, P&I saw compound annual EBITDA growth of 16% p.a. P&I continues to perform well and saw high single digit revenue growth, 22% growth in recurring revenues and 17% EBITDA growth over the 2017 financial year to date. This has been driven by strong sales to both existing and new customers with growth in high margin revenue streams (e.g. licence, maintenance and Big Data) leading to margin expansion. In addition, P&I has made significant progress in shifting its customer base to its cloud service technology, P&I Big Data, which is expected to further improve efficiency and scalability for both P&I and its customers.

Exit and refinancing

In January 2016, we completed the refinancing of P&I, returning 60% of the original investment made in December 2013 to clients. In November 2016, we completed the sale of P&I to a company backed by funds of Permira, an international investment firm. The combined return represents an investment multiple of 2.3x cost and a 37% gross IRR over P&I's holding period to date.

HgCapital has retained a minority position of €70 million in P&I; the Company's share of this is valued at £6.6 million.

Investment return multiple of cost: 2.3x

Gross IRR: 37% p.a.

OVERVIEW OF THE YEAR

NET ASSET VALUE (NAV)

During the year, the NAV of the Company increased by £85.8 million, from £530.0 million to £615.8 million at 31 December 2016.

ATTRIBUTION ANALYSIS OF MOVEMENTS IN NAV

	Revenue £'000	Capital £'000	Total £'000
Opening NAV as at 1 January 2016	31,946	498,077	530,023
Net unrealised capital and income appreciation of investment portfolio	32,615	88,181	120,796
Realised capital and income proceeds from investment portfolio in excess of 31 December 2015 book value	1,870	15,487	17,357
Net realised and unrealised gains from liquid resources	347	75	422
Dividend paid	(14,930)	-	(14,930)
Expenditure	(2,605)	-	(2,605)
Taxation	(581)	-	(581)
Investment management costs:
Priority profit share - current year charge	(7,650)	-	(7,650)
Priority profit share - net loan allocation	(3,856)	3,856	-
Carried interest - current year provision	-	(27,076)	(27,076)
Closing NAV as at 31 December 2016	37,156	578,600	615,756

ANALYSIS OF NAV MOVEMENTS for the year ended 31 December 2016

There were a number of underlying factors contributing to the increase in the NAV. Positive impacts on the NAV were the £120.8 million revaluation of the unquoted portfolio and uplifts of £17.4 million on the realisation of investments compared with their carrying value at the start of the year. Reductions in the NAV included: the payment of a £14.9 million dividend to shareholders and HgCapital's remuneration (£7.7 million and a £27.1 million increase in the provision for future carried interest).

REALISED AND UNREALISED MOVEMENTS IN INVESTMENT PORTFOLIO for the year ended 31 December 2016
Investment name and ranking by value within investment portfolio at 31 December 2016	£' million
Visma (1)	31.2
Sovos Compliance (4)	19.0
Hg Mercury	17.6
QUNDIS (5)	15.7
P&I (26)	15.1
Zenith (sale agreed Jan '17)	10.9
IRIS (2)	9.1
Ullink (11)	8.7
Radius (7)	6.7
JLA (6)	3.9
A-Plan (8)	3.4
Hg6E	2.8
Renewable energy	2.7
Other	2.5
Parts Alliance (14)	2.0
TeamSystem (22)	1.8
NetNames (sold)	1.7
EidosMedia (24)	(1.8)
Teufel (32)	(3.6)
Atlas (31)	(4.3)
Achilles (10)	(6.9)

ATTRIBUTION ANALYSIS OF MOVEMENTS IN THE INVESTMENT PORTFOLIO

During the year, the value of the unrealised portfolio increased by £106.7 million, excluding the provision for carried interest. The majority of the increase (£90.5 million) relates to increases from profit growth in the underlying portfolio and £48.1 million of positive foreign exchange movements.

These were partially offset by £14.1 million of decreases driven by realisations at carrying value net of acquisitions and an increase in net debt of £13.9 million resulting from refinancings that returned cash to the Company and further M&A activity within the portfolio.

TOP 20 PORTFOLIO TRADING PERFORMANCE as at 31 December 2016

The top 20 buyout investments (representing 83% of the total portfolio by value) have delivered strong sales growth of 11% and EBITDA growth of 21% over the last twelve months ('LTM').

This demonstrates consistent robust growth in the portfolio with revenues and EBITDA growing on average by 11% and 14% p.a. respectively over the last three years. The business model characteristics of these companies give us confidence that this double-digit growth can be achieved consistently going forward.

More than 70% of the portfolio is seeing strong double-digit revenue growth, with close to 80% of the portfolio delivering EBITDA growth in excess of 10% over the last twelve months.

Profits across the portfolio have grown at a faster rate than revenues, as the investment made over the last few years into the cost base of a number of our companies, to finance increased sales and marketing capabilities, strengthen management and new product development, bears fruit.

We continue to see very robust double-digit trading performance from Visma, IRIS, Sovos Compliance and Allocate Software in the TMT portfolio and Zenith and Citation in the Services sector.

As reported at the half year, QUNDIS, a German based industrial company, has continued to perform very well and is delivering strong growth versus prior year, driven by superior product features, new customer wins and increasing market share.

Significant M&A undertaken by Ullink in 2014 and subsequent investment into the company has delivered synergies resulting in very robust earnings growth over the last twelve months.

Achilles, one of our SaaS businesses, is focused on driving recurring revenue growth, adding significant costs to improve sales and marketing capabilities and consequently, this has significantly depressed EBITDA growth over 2016. The market opportunity for Achilles remains significant.

With strong earnings growth and cash generation across the portfolio, we believe that this will continue to drive equity value in our investments.

TOP 20 LTM SALES GROWTH: +11%
Growth rates	LTM Sales £' million	Number of investments within associated band	% of top 20 portfolio by value within associated band
<0% p.a.	115	2	6%
0% to <10% p.a.	937	6	21%
10% to <15% p.a.	356	5	31%
≥15% p.a.	1289	7	42%

TOP 20 LTM PROFIT GROWTH: +21%
Growth rates	LTM EBITDA £' million	Number of investments within associated band	% of top 20 portfolio by value within associated band
<0% p.a.	29	3	8%
0% to <10% p.a.	123	4	15%
10% to <20% p.a.	119	3	24%
≥20% p.a.	379	10	53%

VALUATION AND GEARING ANALYSIS as at 31 December 2016

The portfolio's valuation policy is applied consistently, in accordance with the IPEV Valuation Guidelines. Each company has been valued individually, resulting in an average EBITDA multiple for the top 20 buyout investments of 14.2x (14.5x at 31 December 2015).

We continue to take a considered and prudent approach in determining the level of maintainable earnings to use in each valuation. The majority of the portfolio is valued using the LTM earnings to 30 November 2016, unless we have anticipated that the outlook for the full current financial year is likely to be lower, in which case we have used forecast earnings. In selecting an appropriate multiple to apply to a company's earnings, we look at a basket of comparable companies, primarily from the quoted sector, but where relevant and recent, we will also use M&A data.

Almost 41% of the top 20 by value has a multiple of just over 16x (Sovos Compliance, Visma and IRIS). All have attractive business models, are growing strongly and generating cash, and are in demand from investors.

There remains a continued shift in the mix of the portfolio to higher growth businesses, in particular in the TMT sector, where we hold a number of companies with substantial opportunities to grow their SaaS business.

Our portfolio companies make appropriate use of gearing, with an average for the top 20 of 4.1x LTM EBITDA. Many of our businesses have highly predictable, strong earnings growth and are very cash generative, enabling us to use debt to gear our returns.

The year has seen significant increases in valuations in the portfolio. These were driven by strong trading performance in the underlying portfolio and additional gains from currency movement, reversing the losses seen in the past three years.

TOP 20* EV TO EBITDA VALUATION MULTIPLE: 14.2x
EV to EBITDA bands	EBITDA £' million	Number of investments within associated band	% of top 20* portfolio by value within associated band
8.0x to <12.0x	123	4	19%
12.0x to <14.0x	129	4	21%
14.0x to <15.0x	63	4	13%
15.0x to <16.0x	31	3	6%
16.0x to <16.5x	287	3	41%
*Excluding two investments valued on a basis other than earnings.

TOP 20 DEBT TO EBITDA RATIO: 4.1x
Debt to EBITDA bands	Debt £' million	Number of investments within associated band	% of top 20 portfolio by value within associated band
0.0x to <3.0x	619	7	39%
3.0x to <4.0x	447	5	22%
4.0x to <6.0x	618	4	17%
6.0x to <7.0x	538	3	10%
7.0x to <8.0x	422	1	12%

OUTSTANDING COMMITMENTS OF THE COMPANY

2016 ended with liquid resources of £46 million, supported by an undrawn bank facility of £80 million. Outstanding commitments as at 31 December 2016 were £421 million, as listed below. We anticipate that the majority of these outstanding commitments will be drawn down progressively over the next five years and are likely to be partly financed by future cash flows from portfolio realisations. Additionally, to mitigate the risk of being unable to fund any draw-down under its commitments to invest alongside certain of HgCapital's funds, the Board has negotiated a right to opt out, without penalty, of the Company's obligation to fund such commitments where certain conditions exist.

A new commitment of £80 million to HgCapital Mercury 2 was made in February 2017 that is not shown in the table below. This commitment also has the benefit of an opt-out provision.

Fund	Fund vintage	Original commitment £'million	Outstanding commitments as at 31 December 2016		Outstanding commitments as at 31 December 2015
Fund	Fund vintage	Original commitment £'million	£'million	% of NAV	£'million	% of NAV
HGT 8 LP¹	2017	350.0	350.0	56.9%	-	-
HGT 7 LP	2013	200.0	39.8	6.5%	102.8	19.4%
HGT 6 LP	2009	285.0	11.0	1.8%	17.9	3.4%
Hg Mercury	2011	60.0	10.3	1.7%	27.5	5.2%
RPP2	2010	34.1²	7.5	1.2%	8.2	1.5%
HGT LP (Pre-HgCapital 6 vintage)	pre-2009	120.0³	1.3	0.2%	1.3	0.2%
RPP1	2006	18.5⁴	0.8	0.1%	1.0	0.2%
Hg6E⁵	2009	15.0	0.6	0.1%	0.9	0.2%
Total			421.3	68.5%	159.6	30.1%
Liquid resources			45.8	7.4%	40.3	7.6%
Net outstanding commitments unfunded by liquid resources			375.5	61.1%	119.3	22.5%
¹ Commitment to HgCapital 8 in December 2016. This fund will only commence investing once HgCapital 7 has completed its investment period. ²Sterling equivalent of €40.0 million. ³ Excluding any co-investment participations made through HGT LP. ⁴ Sterling equivalent of €21.6 million. ⁵ Partnership interest acquired during 2011.

COMMITMENTS AT 31 DECEMBER 2016 - REMAINING INVESTMENT PERIOD

£'million

21.2	Investment period completed, remaining funds for follow-on investment.
50.1	Funds coming towards the end of their investment period.
350.0	HgCapital 8 commitment. This fund will only commence investing once HgCapital 7 has completed investing. The Company's commitment will be drawn down over four to five years.
421.3	Total

INVESTMENT PORTFOLIO OF THE COMPANY

	Fund limited partnerships	Residual cost £'000	Total valuation £'000	Portfolio value %
	Primary buyout funds:
1	HGT 6 LP	152,700	273,296	47.8%
	HGT 6 LP - Provision for carried interest	-	(38,603)	(6.7%)
2	HGT 7 LP	138,527	185,585	32.4%
	HGT 7 LP - Provision for carried interest	-	(11,751)	(2.1%)
3	HGT LP	61,422	77,986	13.7%
4	HgCapital Mercury D LP	37,528	59,058	10.3%
	HgCapital Mercury D LP - Provision for carried interest	-	(3,910)	(0.7%)
	Total primary buyout funds	390,177	541,661	94.7%
	Secondary buyout funds:
5	HgCapital 6 E LP	5,175	14,448	2.5%
	HgCapital 6 E LP - Provision for carried interest	-	(2,018)	(0.4%)
	Total secondary buyout funds	5,175	12,430	2.1%

	Total buyout funds	395,352	554,091	96.8%
	Renewable energy funds:
6	HG RPP2 Fund	24,692	16,997	3.0%
7	Hg RPP Fund	4,776	1,153	0.2%
	Total renewable energy funds	29,468	18,150	3.2%

	Total investments net of carried interest provision	424,820	572,241	100.0%

Sector by value* of primary buyout portfolio

61% TMT

31% Services

6% Industrials

2% Healthcare

Geographic spread by value* of primary buyout portfolio

54% UK

19% Nordic Region

11% Other Europe

9% Germany

7% USA

Investment vintage by value* of primary buyout portfolio

21% 2016

9% 2015

22% 2014

16% 2013

8% 2012

24% pre 2012

Analysis by value* of investment return relative to its original cost

91% Above

9% Below

Representing aggregate realised proceeds and unrealised valuations of an investment

*Excluding carried interest provision

INVESTMENTS IN 2016

Over the course of the year, £963 million was invested on behalf of our clients, with the Company's share being £104 million.

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

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

During 2016, the Company has invested £13.0 million (Sovos Compliance and CogitalGroup) by way of co-investment, in addition to its commitment to invest alongside HgCapital 7. This is an attractive way to invest more funds, when available, with no fees or carried interest being payable.

NEW INVESTMENTS

Sovos Compliance

Sovos Compliance is a leading global provider of tax compliance software, headquartered in Boston, USA. Having tracked the company for several years, HgCapital acquired a majority ownership from Vista Equity Partners, which retained a significant minority stake in the company, alongside the management team. It displays a number of the investment characteristics we target, providing business-critical software with highly recurring revenues.

Kinapse

Kinapse is a UK-headquartered global provider of regulatory and compliance services to the life sciences industries.

The Services Team has followed Kinapse closely for several years and this investment fits with HgCapital's strategy of investing in leading regulatory-driven services.

Citation

Citation is one of the UK's top providers of Health & Safety, HR, Employment Law and ISO services to SMEs.

The Services Team has followed Citation for several years and this investment fits HgCapital's strategy of investing in leading technology-enabled professional services providers in regulatory-driven and fast growing niches.

Trace One

Trace One is a SaaS-based platform for the design and management of private label products, and operates a platform allowing retailers to develop and exchange private label product specifications with their suppliers. Headquartered in Paris, Trace One serves customers across Europe and North America.

Trace One fits HgCapital's strategy of investing in companies with subscription revenues in regulatory-driven growth niches and working with founder entrepreneurs looking to transition their businesses to the next stage of ownership.

Raet

Raet is a provider of HR cloud software and services headquartered in Amersfoort, the Netherlands, and serving more than 10,000 business customers internationally.

This investment is a continuation of HgCapital's theme of investing in leading payroll and HR-related businesses. The TMT Team has followed Raet closely for more than five years, building a strong relationship with the new management team, and will now work closely with them to accelerate Raet's robust organic growth.

Mobyt

Established in 2002, Mobyt provides Application-to-Person SMS services to a range of large businesses and SMEs in Italy and France. Mobyt is headquartered in Ferrara, Italy.

Mobyt serves c. 28,000 companies and sends one in every four application-to-person SMS messages in Italy. The business displays many of the characteristics HgCapital looks for, including a fragmented sector and customer base and high customer loyalty in an area which is seeing strong growth.

STP

STP is a key provider of specialist software to insolvency administrators and law practices. STP employs c.180 people, serving over 1,200 customers, and has offices in Germany and Switzerland.

The company shares many of the business model characteristics that the HgCapital teams look for in an investment, including strong recurring revenues with a product that is critical to its loyal customer base and a strong management team.

CogitalGroup

CogitalGroup is a pan-European provider of outsourcing, accountancy, payroll, taxation, financial and other advisory services, to SMEs. The business was formed from three investments completed in 2016: Baldwins and Blick Rothenberg, based in the UK; and Azets (formerly Visma BPO), active throughout the Nordic region.

This investment continues the Services team's record of investing in regulatory-driven businesses. It addresses several attractive business model criteria, including: high repeatable revenues; high retention rates; opportunity for margin improvement; fragmented customer base; and significant M&A opportunities.

Evaluate

Evaluate is a London-headquartered provider of commercial intelligence to the global life sciences industry, including all of the top 25 pharmaceutical companies.

Evaluate is another example of the Mercury team's approach to investing in technology businesses occupying growing niches, typically led by founders looking to scale their business.

The company exhibits a number of the business model characteristics that HgCapital seeks, including: a focus on recurring subscription contracts; a track record of consistent double-digit revenue growth; high levels of customer advocacy and operating within a segment with long term growth potential.

NEW INVESTMENT COMPLETED SINCE THE YEAR-END

fundinfo

fundinfo is a leading technology platform for fund data and documents publication and dissemination to the global fund management industry (including banks, insurance companies, financial advisors, family offices and platforms), headquartered in Zurich, Switzerland.

fundinfo will join HgCapital's current network of European headquartered FinTech investments, including Intelliflo (SaaS financial advisor software), Ullink (connectivity and trading software) and Sequel (insurance software and analytics).

The Company will contribute a total £3.1 million to this investment.

Further details on investments as at 31 December 2016 can be found in the full Annual Report and Accounts.

REALISATIONS IN 2016

Over the course of the year, HgCapital has returned a total of £1.1 billion to its clients, including £136 million to the Company.

It was a very active year for realisations. We made several references to 'frothy' markets in 2015 and this has helped inform our approach to selling investments, whilst also carefully considering our appetite for selling versus the benefits of holding onto selected businesses for longer. We have also taken advantage of buoyant debt markets during 2016 by refinancing investments where we have good visibility of their future earnings, returning cash proceeds to our clients, including the Company, and we will continue to assess further opportunities here.

EXITS

P&I

In November 2016, we competed the partial sale of P&I, a supplier of payroll and HR-related software to SMEs, to a company backed by funds managed by Permira, an international investment firm.

This transaction resulted in an uplift of 42% over the carrying value of the investment at 31 December 2015.

A case study of this investment appears above.

TeamSystem

TeamSystem, a leading provider of business-critical, regulatory driven software products to accountants, HR professionals and SMEs in Italy, was sold to Hellman & Friedman LLC.

On completion, the Company realised cash proceeds of £39.2 million which were fully reflected in the December 2015 valuation.

NetNames

In August 2016, the TMT Team completed the sale of NetNames, a leading provider of global brand protection and internet domain name management services, to CSC, a US-based provider of business administration services to corporations.

This transaction resulted in an uplift of 14% over the carrying value of the investment at 31 December 2015.

Casa Reha

Casa Reha, a private German provider of elderly care services, specialising in high quality, assisted living, was sold to Euronext-listed Korian, a European provider of elderly health care services.

On completion, the Company realised cash proceeds of £7.8 million which were fully reflected in the December 2015 valuation.

SFC KOENIG

In July 2016, the Munich Team announced the sale of SFC KOENIG, a Switzerland-based provider of high-quality, sealing and flow control technology, to IDEX, a producer of highly engineered fluidics systems and components in the USA.

This transaction resulted in an uplift of 12% over the carrying value of the investment at 31 December 2015.

Relay Software

In August 2016, the Mercury Team announced the sale of Relay Software, a provider of software to insurance brokers, underwriters and insurers in the Republic of Ireland, to Applied Systems, a US-based, global provider of cloud-based insurance broker management software.

This transaction resulted in an uplift of 73% over the carrying value of the investment at 31 December 2015.

Mainio Vire

In June 2016, we agreed the sale of Mainio Vire, a provider of elderly care, mental health and home services in Finland, to Mehiläinen. Mehiläinen is a private provider of social and health care services, also based in Finland.

This transaction resulted in an uplift of 45% over the carrying value of the investment at 31 December 2015.

REFINANCINGS

Intelliflo

In December 2016, the Mercury team completed the refinancing of Intelliflo, a UK SaaS provider of software solutions to IFAs.

This represents a 50% cash return on the original investment made in August 2013.

Zitcom

In September 2016, the Mercury team completed the refinancing of Zitcom, a leading Danish provider of hosting and cloud solutions.

This represents a 40% cash return on the original investment made in December 2015.

Allocate Software

In May 2016, the Mercury Team completed the refinancing of Allocate Software, a key provider of healthcare rostering software.

This represents a 30% cash return on the original investment made in December 2014.

REALISATIONS SINCE THE YEAR-END

Zenith

In January 2017, we announced the sale of Zenith, the largest independent vehicle leasing business in the UK, to Bridgepoint, in a transaction totalling £750 million. The sale of Zenith delivers a 2.9x investment multiple and a 46% gross IRR over the investment period.

On completion, expected in March 2017, the Company's share of this transaction is estimated to result in cash proceeds of £59 million, an uplift of 22% over the carrying value at 31 December 2016, adding 30 pence per share to the NAV.

Further detail on investments as at 31 December 2016 can be found in the full Annual Report and Accounts.

SUMMARY OF INVESTMENT AND REALISATION ACTIVITY

INVESTMENTS MADE DURING THE YEAR
Company	Sector	Geography	Activity	Cost £'000
Sovos Compliance	TMT	USA	Regulatory tax compliance software	24,284
CogitalGroup	Services	UK	Accountancy, payroll, taxation, financial and other advisory services to SMEs	20,966
Raet	TMT	Netherlands	HR cloud software and services	16,127
Citation	Services	UK	Health & Safety, HR, employment law and ISO services to SMEs	10,068
Kinapse	Services	UK	Life sciences outsourcing and advisory services	9,959
STP	TMT	Germany	Software for insolvency administrators and legal practices	5,422
Trace One	TMT	France	SaaS platform for the retail and private label goods	4,489
Mobyt	TMT	Denmark	Application-to-Person SMS services	4,218
Evaluate	TMT	UK	Commercial intelligence provider to the global life sciences industry	3,679
New investments				99,212
IRIS	TMT	UK	Provider of accountancy software and services and payroll applications	4,455
Other				433
Further investments				4,888
Total investments on behalf of the Company				104,100

REALISATIONS MADE DURING THE YEAR
Company	Sector	Exit route	Proceeds¹ £'000
P&I	TMT	Secondary sale	44,510
TeamSystem	TMT	Secondary sale	39,161
NetNames	TMT	Trade	14,232
Casa Reha	Healthcare	Trade	7,753
SFC KOENIG	Industrials	Trade	5,303
Relay Software	TMT	Trade	4,332
Mainio Vire	Healthcare	Trade	1,597
Full realisations			116,888
IRIS	TMT	Distribution received	5,315
HgCapital 6 E LP	Fund	Distribution received	3,439
Intelliflo	TMT	Refinancing	1,898
Allocate Software	TMT	Refinancing	1,796
Ullink	TMT	Distribution received	1,562
Zitcom	TMT	Refinancing	1,427
Other			3,164
Partial realisations			18,601
Total realisations on behalf of the Company			135,489

¹Includes gross revenue received during the year-ended 31 December 2016.

OUTLOOK

2016 has been a good year overall, and one which saw substantial progress across the portfolio with strong trading performance and a number of realisations at attractive valuations, despite a continuing uncertain economic environment, exacerbated by the results of the EU referendum in the UK and the presidential election in the US.

We have given much consideration to the UK's exit from the EU and our current prognosis remains that this will have a relatively limited impact on the portfolio, apart from instances where a currency mismatch exists between costs and revenues for a small handful of our companies. More broadly, the post-referendum environment has seen a general unwinding of historic currency losses on non-sterling investments across our funds, benefiting valuations over the year. Finally, we have also realised five portfolio companies since the Brexit vote at the end of June 2016, with three of these based in the UK.

During 2016, we have continued to invest selectively in opportunities where we have built many years of knowledge of the business and have a strong relationship with a founder or management team. This has led to nine new portfolio investments in the year, including: Sovos Compliance, a US based provider of regulatory tax compliance software; Raet, the fourth payroll software investment completed by HgCapital; STP, a provider of software for insolvency administrators and law practices; and the investments in Visma BPO (now renamed Azets), Baldwins and Blick Rothenberg forming the basis of the newly launched CogitalGroup, a pan-European provider of outsourcing, accountancy, payroll, taxation, financial and other advisory services to SMEs.

Over 2016 we have returned more than £1 billion to our clients, including £136 million to HgCapital Trust from seven exits and four refinancings. The largest of these were in relation to the realisations of TeamSystem, announced in late 2015, and P&I which completed in November 2016. Strong performance over the year has continued to demonstrate the attractiveness of HgCapital portfolio companies to both trade and financial buyers, as evidenced by the recent sale of Zenith, announced in January 2017, at a multiple of 2.9x original cost. We expect to return further capital over the course of 2017, from a combination of both exits and refinancings.

In terms of leverage on new investments, all of our key UK and European relationship banks remain committed to the market generally and focused on maintaining close relationships with HgCapital.

Trading over the year has continued to generate double-digit revenue and EBITDA growth across the portfolio with a material acceleration in the rate of profit growth. Given the portfolio's defensive characteristics and focus on protected business models, we believe our investments are well positioned to see strong growth on an absolute and relative basis going forward, even if macro-economic conditions deteriorate.

In this type of market environment, we believe that the clarity of our investment strategy confers a number of clear advantages to a disciplined buyer. Specifically, we will continue to focus on investing in businesses that provide a business-critical product or service, to a fragmented customer base, and benefiting from strong contracted or recurring revenues. This should enable us to identify opportunities with the appropriate business model to generate strong, risk-adjusted returns for our clients.

OVERVIEW OF THE UNDERLYING INVESTMENTS HELD THROUGH FUND LIMITED PARTNERSHIPS

	Investments (in order of value)	Fund	Sector	Location	Year of investment	Residual cost £'000	Total valuation⁴ £'000	Portfolio value %	Cum. value %
1	Visma¹	HGT 7/HGT 6/HGT	TMT	Nordic region	2014	52,940	94,065	15.0%	15.0%
2	IRIS	HGT 6	TMT	UK	2011	26,109	64,657	10.3%	25.3%
3	Zenith (sale agreed Jan'17)	HGT 6	Services	UK	2013	16,245	48,207	7.7%	33.0%
4	Sovos Compliance²	HGT 7/HGT	TMT	USA	2016	24,284	43,272	6.9%	39.9%
5	QUNDIS	HGT 6	Industrials	Germany	2012	12,540	33,844	5.4%	45.3%
6	JLA	HGT 6	Services	UK	2010	3,511	24,619	3.9%	49.2%
7	Radius	HGT 6	Services	UK	2013	17,966	24,073	3.8%	53.0%
8	A-Plan	HGT 7	Services	UK	2015	14,573	22,461	3.6%	56.6%
9	CogitalGroup²	HGT 7/HGT	Services	UK	2016	20,966	21,572	3.4%	60.0%
10	Achilles³	HGT	TMT	UK	2008	15,218	21,125	3.4%	63.4%
11	Ullink	HGT 7	TMT	France	2014	10,034	19,166	3.0%	66.4%
12	Raet	HGT 7	TMT	Benelux	2016	16,127	17,034	2.7%	69.1%
13	The Foundry	HGT 7	TMT	UK	2015	15,175	14,640	2.3%	71.4%
14	Parts Alliance	HGT 6	Services	UK	2012	10,495	14,600	2.3%	73.7%
15	Frösunda	HGT 6	Healthcare	Nordic region	2010	14,296	11,429	1.8%	75.5%
16	Citation	HGT 7	Services	UK	2016	10,068	11,022	1.8%	77.3%
17	Lumesse	HGT 6	TMT	UK	2010	20,807	10,189	1.6%	78.9%
18	Kinapse	HGT 7	Services	UK	2016	9,959	9,986	1.6%	80.5%
19	Allocate Software	Mercury	TMT	UK	2014	4,094	9,545	1.5%	82.0%
20	Intelliflo	Mercury	TMT	UK	2013	3,978	8,546	1.4%	83.4%
21	Sequel Business Solutions	Mercury	TMT	UK	2014	2,252	7,749	1.2%	84.6%
22	TeamSystem	HGT 6	TMT	Italy	2010	144	7,694	1.2%	85.8%
23	Trace One	Mercury	TMT	France	2016	4,489	7,450	1.2%	87.0%
24	EidosMedia	HGT 7	TMT	Italy	2015	8,414	6,745	1.1%	88.1%
25	STP	Mercury	TMT	Germany	2016	5,422	6,677	1.1%	89.2%
26	P&I²	HGT 7/HGT	TMT	Germany	2013	1,796	6,616	1.1%	90.3%
27	Eucon	Mercury	TMT	Germany	2015	4,408	6,103	0.9%	91.2%
28	Mobyt	Mercury	TMT	Italy	2016	4,218	4,592	0.7%	91.9%
29	Zitcom	Mercury	TMT	Nordic region	2015	2,183	4,293	0.7%	92.6%
30	Evaluate	Mercury	TMT	UK	2016	3,679	3,688	0.6%	93.2%
31	Atlas	HGT	Services	UK	2007	12,542	3,520	0.6%	93.8%
32	Teufel	HGT 6	Industrials	Germany	2010	11,144	3,225	0.5%	94.3%
33	Mainio Vire	HGT 6	Healthcare	Nordic region	2011	6,503	2,769	0.4%	94.7%
34	Valueworks	Mercury	TMT	UK	2012	2,805	415	0.1%	94.8%
	Non-active investments (4)	HGT6/HGT				793	337	-	94.8%
	Total buyout investments (38)					390,177	595,925	94.8%
	Secondary fund interests	HG6E	Secondary fund interests			5,175	14,448	2.3%	97.1%
	Renewable energy	RPP1/RPP2	Renewable energy			29,468	18,150	2.9%	100.0%
	Total all investments					424,820	628,523	100.0%

¹Investment through HGT 7 LP, HGT 6 LP (following sale of e-conomic) and co-investment participation through HGT LP.

² Investment through HGT 7 LP and co-investment participation through HGT LP.

³ Investment and co-investment participation through HGT LP.

⁴ Including accrued income but before the provision for carried interest of £56,282,000.

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2015 and 2016 but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies, and those for 2016 will be delivered in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors' report can be found in the Company's full Annual Report and Accounts at www.hgcapitaltrust.co.uk

FINANCIAL STATEMENTS

INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2016
	Notes	Revenue return		Capital return		Total return
	Notes	2016 £'000	2015 £'000	2016 £'000	2015 £'000	2016 £'000	2015 £'000
Gains on investments and liquidity funds	13	-	-	76,667	46,122	76,667	46,122
Gains on priority profit share loans recovered from General Partners	5(b)	-	-	3,856	1,020	3,856	1,020
Net income	4	23,326	21,838	-	-	23,326	21,838
Other expenses	6(a)	(1,772)	(2,560)	-	-	(1,772)	(2,560)
Net return before finance costs and taxation		21,554	19,278	80,523	47,142	102,077	66,420
Finance costs	6(b)	(833)	(1,023)	-	-	(833)	(1,023)
Net return from ordinary activities before taxation		20,721	18,255	80,523	47,142	101,244	65,397
Taxation on ordinary activities	9(a)	(581)	(348)	-	-	(581)	(348)
Net return from ordinary activities after taxation attributable to reserves		20,140	17,907	80,523	47,142	100,663	65,049

Return per Ordinary share	10(a)	53.96p	47.98p	215.74p	126.30p	269.70p	174.28p
The total return column of this statement represents the Company's income statement. The supplementary revenue and capital return columns are both prepared under guidance published by the Association of Investment Companies ('AIC'). All recognised gains and losses are disclosed in the revenue and capital columns of the income statement and as a consequence no statement of total recognised gains and losses has been presented. The movements in reserves are set out in note 21 to the financial statements. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. The following notes form part of these financial statements.

BALANCE SHEET AS AT 31 DECEMBER 2016
	Notes	2016 £'000	2015 £'000
Fixed asset investments
Investments at fair value through profit and loss:
Unquoted investments	12	506,961	428,462
Total fixed asset investments		506,961	428,462
Current assets - amounts receivable after one year:
Accrued income on fixed assets	14	65,280	64,162
Current assets - amounts receivable within one year:
Debtors	14	572	707
Investments at fair value through profit and loss:
Liquidity funds	15	39,590	30,835
Cash	16	6,180	9,512
Total current assets		111,622	105,216
Creditors - amounts falling due within one year	17	(2,827)	(3,655)
Net current assets		108,795	101,561

Net assets		615,756	530,023
Capital and reserves:
Called up share capital	20	9,331	9,331
Share premium account	21	120,368	120,368
Capital redemption reserve	21	1,248	1,248
Capital reserve - unrealised	21	81,061	14,023
Capital reserve - realised	21	366,592	353,107
Revenue reserve	21	37,156	31,946
Total equity shareholders' funds		615,756	530,023

Net asset value per Ordinary share	10(b)	1,649.7p	1,420.0p

Ordinary shares in issue at 31 December		37,324,698	37,324,698
The financial statements of HgCapital Trust plc (registered number 01525583) were approved and authorised for issue by the Board of Directors on 3 March 2017 and signed on its behalf by: Roger Mountford, Chairman Richard Brooman, Director The following notes form part of these financial statements.

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016
	Notes	2016 £'000	2015 £'000
Net cash inflow from operating activities	7	22,903	11,390

Investing activities:
Purchase of fixed asset investments	12	(104,100)	(65,489)
Proceeds from the sale of fixed asset investments	12	102,193	43,070
Purchase of liquidity funds	15	(88,737)	(31,559)
Redemption of liquidity funds	15	80,200	60,796
Net cash (outflow)/inflow from investing activities		(10,444)	6,818
Financing activities:
(Repayment of)/proceeds from loan facility		(28)	1,250
Servicing of finance		(833)	(1,023)
Equity dividends paid	11	(14,930)	(11,944)
Net cash outflow from financing activities		(15,791)	(11,717)

(Decrease)/increase in cash and cash equivalents in the year	16	(3,332)	6,491
Cash and cash equivalents at 1 January	16	9,512	3,021
Cash and cash equivalents at 31 December	16	6,180	9,512
The following notes form part of these financial statements.

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2016
		Non-distributable				Distributable
	Notes	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserve - unrealised £'000	Capital reserve - realised £'000	Revenue reserve £'000	Total £'000
At 31 December 2015		9,331	120,368	1,248	14,023	353,107	31,946	530,023
Net return from ordinary activities		-	-	-	67,038	13,485	20,140	100,663
Equity dividend paid	11	-	-	-	-	-	(14,930)	(14,930)
At 31 December 2016	20, 21	9,331	120,368	1,248	81,061	366,592	37,156	615,756

At 31 December 2014		9,331	120,368	1,248	(33,390)	353,378	25,983	476,918
Net return from ordinary activities		-	-	-	47,413	(271)	17,907	65,049
Equity dividend paid	11	-	-	-	-	-	(11,944)	(11,944)
At 31 December 2015	20, 21	9,331	120,368	1,248	14,023	353,107	31,946	530,023
The following notes form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

1. Principal activity

The principal activity of the Company is investment. The Company 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'), dated November 2014. All of the Company's operations are of a continuing nature.

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

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

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

3. Organisational structure and accounting policies

Partnerships where the Company is the sole limited partner

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

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

Partnerships where the Company is a minority limited partner

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

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

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

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

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

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

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

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

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

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

Investment income and interest receivable

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

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

Interest income on non-equity shares and fixed income securities is recognised on a time apportionment basis so as to reflect the effective yield when it is probable that it will be realised. Dividends receivable on unlisted equity shares where there is no ex-dividend date and on non-equity shares are brought into account when the Company's right to receive payment is established.

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

Expenses

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

Dividends

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

Current and other non-current assets

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

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

Foreign currency

The functional and presentation currency is pounds sterling, reflecting the economic environment in which the Company predominantly operates. All transactions in foreign currencies are translated into sterling at the rates of exchange ruling at the dates of such transactions and the resulting exchange differences are taken to the capital reserve - realised. Foreign currency assets and liabilities at the balance sheet date are translated into sterling at the exchange rates ruling at that date and the resulting exchange differences are taken to the capital reserve - unrealised.

Taxation

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

Investments
The general principle applied is that investments should be reported at 'fair value', in accordance with Financial Instruments: Recognition and Measurement ('IAS 39') and the International Private Equity and Venture Capital ('IPEV') Valuation Guidelines, December 2015 edition. Where relevant, the Company applies the policies stated below to the investments held by HGT LP, HGT 6 LP, HGT 7 LP and HgCapital Mercury D LP, in order to determine the fair value of its investments in these limited partnerships.

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

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

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

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

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

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

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

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

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

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

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

Capital reserves

Capital reserve - realised

The following are accounted for in this reserve:

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

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

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

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

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

Capital reserve - unrealised

The following are accounted for in this reserve:

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

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

(iii) unrealised exchange differences of a capital nature.

Critical accounting estimates and key sources of estimation uncertainty

The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported year. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates.

The estimates and assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The key accounting judgment is in respect of the determination of the fair value of financial assets classified as fair value through profit or loss (FVTPL). The methodology used in determining fair values is disclosed above.

4. Income
	Revenue return
	2016 £'000	2015 £'000
Income from investments held by HGT LP, HGT 6 LP, HGT 7 LP and HgCapital Mercury D LP:
UK unquoted investment income	16,964	17,536
Foreign unquoted investment income	16,393	13,129
Foreign dividend income	354	-
Other investment income:
UK unquoted investment income	774	103
Liquidity funds income	180	263
Total investment income	34,665	31,031

Total other income	167	46

Total income	34,832	31,077
Priority profit share charge against income:
Current year - HGT 7 LP	(4,981)	(3,793)
Current year - HgCapital Mercury D LP	(3,765)	(1,725)
Current year - HGT 6 LP	(2,760)	(3,120)
Current year - HGT LP	-	(601)
Total priority profit share charge against income	(11,506)	(9,239)

Total net income	23,326	21,838
Total net income comprises:
Interest	22,816	21,799
Dividend	354	-
Non-interest income	156	39
Total net income	23,326	21,838

5. Priority profit share and carried interest

(a) Priority profit share payable to General Partners	Revenue return
(a) Priority profit share payable to General Partners	2016 £'000	2015 £'000
Priority profit share payable:
Current year amount	7,650	8,219
Less: Current year loans advanced to General Partners	(448)	-
Add: Prior year loans recovered from General Partners	4,304	1,020
Current year charge against income	11,506	9,239
Total priority profit share charge against income	11,506	9,239

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

The terms of the above priority profit share arrangements during 2016 were:

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

In addition, priority profit shares are payable on partnerships where the Company is a minority limited partner. These amounts are initially and indirectly funded by the Company 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
HgCapital 6 E LP	1.5% of original cost of investments in the fund, less the original cost of investments that have been realised or written off (previously 1.75% of the fund commitment during the investment period that ended on 19 November 2013)
HgCapital Renewable Power Partners 2 C LP	1.25% of lesser of value or cost of investments (previously 1.64% of the fund commitment during the investment period that ended on 27 May 2015 and was subsequently extended to 31 December 2015)
Hg Renewable Power Partners LP	1.5% of original cost of investments in the fund, less the original cost of investments that have been realised or written off (previously 1.75% of the fund commitment during the investment period that ended on 31 May 2010)

(b) Priority profit share loans to General Partners	Capital return
(b) Priority profit share loans to General Partners	2016 £'000	2015 £'000
Movements on loans to General Partners:
Losses on current year loans advanced to General Partners	(448)	-
Gains on prior year loans recovered from General Partners	4,304	1,020
Total gains on priority profit share loans recovered from General Partners	3,856	1,020

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

(c) Carried interest to Founder Partners	Capital return
(c) Carried interest to Founder Partners	2016 £'000	2015 £'000
Carried interest provision:
Current year amount provided	27,076	28,118
Total carried interest charge against capital gains (note 13)	27,076	28,118

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

The details of the carried interest contracts, disclosed in the Directors' report in the full Report and Accounts, state that carried interest is payable once a certain level of repayments have been made to the Company. Based on the repayments, no carried interest was payable in respect of the current or prior financial year. However, if the investments in HGT6 LP, HGT7 LP, HgCapital Mercury D LP and HgCapital 6 E LP are realised at the current fair value and then distributed to Partners, an amount of £56,282,000 will be payable to the Founder Partner and therefore the Directors have made a provision for this amount. No provision is required in respect of the Company's investment in the other fund limited partnerships.

6. Other expenses

	Revenue return
(a) Operating expenses	2016 £'000	2015 £'000
Registrar, management and administration fees	711	549
Directors' remuneration (note 8)	206	203
Share of aborted deal fees	240	989
Legal and other administration costs	520	655
	1,677	2,396
Fees payable to the Company's auditor in relation to the Company and Fund Limited Partnerships:
Audit fees	67	64
Tax compliance services	28	32
Other non-audit services	-	68
Total fees payable to the Company's auditor	95	164

Total other expenses	1,772	2,560

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

	Revenue return
(b) Finance costs	2016 £'000	2015 £'000
Interest paid	114	-
Non-utilisation fees and other expenses	519	383
Arrangement fees	200	640
Total finance costs	833	1,023

7. Cash flow from operating activities

Reconciliation of net return before finance costs and taxation to net cash flow from operating activities	2016 £'000	2015 £'000
Net return before finance costs and taxation	102,077	66,420
Add back: gains on investments held at fair value	(103,743)	(74,240)
Increase in carried interest provision	27,076	28,118
Increase in accrued income from liquidity funds	(143)	(204)
Increase in prepayments, accrued income and other debtors	(1,142)	(9,825)
(Decrease)/increase in creditors	(397)	761
Taxation (paid)/received	(825)	360
Net cash inflow from operating activities	22,903	11,390

8. Directors' remuneration

The aggregate remuneration of the Directors for the year to 31 December 2016 was £206,000 (2015: £203,000).

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

9. Taxation on ordinary activities

In the opinion of the Directors, the Company has complied with the requirements of Section 1158 and Section 1159 of the CTA 2010 and will therefore be exempt from corporation tax on any capital gains reflected in the capital return during the year. The Company will elect to designate all of the proposed dividend (see note 11) as an interest distribution to its shareholders. This distribution is treated as a tax deduction against taxable income in the revenue return and results in a reduction of corporation tax being payable by the Company at 31 December 2016.

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

	Revenue return
(a) Analysis of charge in the year	2016 £'000	2015 £'000
Current tax:
UK corporation tax	4,005	3,806
Income streaming relief	(3,434)	(3,024)
Prior year adjustment	(149)	(333)
Current revenue tax charge for the year	422	449
Deferred tax:
Reversal/(origination) of timing differences	159	(101)
Total deferred tax charge/(credit) for the year (note 9(c))	159	(101)
Total taxation charge on ordinary activities	581	348

	Revenue return
(b) Factors affecting current tax charge for the year	2016 £'000	2015 £'000
Net revenue return on ordinary activities before taxation	20,721	18,255

UK corporation tax charge at 20% thereon (2015: 20.25%)	4,144	3,697
Effects of:
Tax relief from interest distribution	(3,434)	(3,024)
Impact of change in tax rates	20	8
Prior year tax adjustment	(149)	(333)
Total differences	(3,563)	(3,349)

Total taxation charge on ordinary activities	581	348

(c) Deferred tax	Revenue return
(c) Deferred tax	2016 £'000	2015 £'000
Deferred tax:
Movement in taxable income not recognised in revenue return	159	(101)
Total deferred tax charge/(credit) for the year (note 9(a))	159	(101)

Deferred tax recoverable:
Recoverable deferred tax at 31 December	668	567
Deferred tax (charge)/credit for the year	(159)	101
Recoverable deferred tax at end of year (note 14)	509	668

Deferred tax assets of £509,000 (2015: £668,000) are recognised at a rate of 19.25% (2015: 20.0%) in respect of the net amounts of taxable income that have not yet been recognised in the revenue return, but are expected to be recognised in the revenue return for the accounting period ending 31 December 2017, during which the effective pro-rata corporation tax rate will be 19.25%.

10. Return and net asset value per Ordinary share

(a) Return per Ordinary share	Revenue return		Capital return
(a) Return per Ordinary share	2016	2015	2016	2015
Amount (£'000):
Return from ordinary activities after taxation	20,140	17,907	80,523	47,142
Number of Ordinary shares ('000):
Weighted average number of shares in issue	37,325	37,325	37,325	37,325
Return per Ordinary share (pence)	53.96	47.98	215.74	126.30

(b) Net asset value per Ordinary share	Capital return
(b) Net asset value per Ordinary share	2016	2015
Amount (£'000):
Net assets	615,756	530,023
Number of Ordinary shares ('000):
Number of Ordinary shares in issue	37,325	37,325
Net asset value per Ordinary share (pence)	1,649.7	1,420.0

11. Dividends on Ordinary shares

	Record date	Payment date	2016 £'000	2015 £'000
Dividend of 40.0p for the year ended 31 December 2015	7 April 2016	16 May 2016	14,930	-
Dividend of 32.0p for the year ended 31 December 2014	7 April 2015	18 May 2015	-	11,944
Total equity dividends paid			14,930	11,944

The proposed dividend of 46.0 pence per Ordinary share for the year ended 31 December 2016 is subject to approval by the shareholders at the annual general meeting and has not been included as a liability in these financial statements. The total dividends payable in respect of the financial year, which form the basis of the retention test as set out in Section 1159 of the CTA 2010, are set out below:

	2016 £'000
Revenue available for distribution by way of dividend for the year	20,140
Proposed dividend of 46.0p for the year ended 31 December 2016 (based on 37,324,698 Ordinary shares in issue at 31 December 2016)	(17,169)
Undistributed revenue for Section 1159 purposes*	2,971
*Undistributed revenue comprises 13.6% of the estimated total taxable income of £21,797,000.

12. Fixed asset investments

	2016 £'000	2015 £'000
Investments held at fair value through profit and loss:
Unquoted investments held in HGT 6 LP	229,986	235,441
Unquoted investments held in HGT 7 LP	175,957	100,654
Unquoted investments held in HGT LP	69,874	62,387
Unquoted investments held in HgCapital Mercury D LP	54,828	30,618
Other unquoted investments held by the Company	32,598	28,568
Total fixed asset investments gross of carried interest provision	563,243	457,668
Carried interest provision (note 5(c))	(56,282)	(29,206)
Total fixed asset investments	506,961	428,462
Total fixed asset investments consist of:
Fund limited partnerships	506,961	428,462

	2016 £'000	2015 £'000
Opening valuation as at 1 January	428,462	359,930
Add back: opening unrealised (appreciation)/depreciation - investments	(48,039)	26,925
Add back: opening carried interest provision	29,206	1,088
Opening book cost as at 1 January	409,629	387,943
Movements in the year:
Additions at cost	104,100	65,489
Disposals - proceeds	(102,193)	(43,070)
- realised gains/(losses) on sales	13,284	(733)
Closing book cost of investments	424,820	409,629
Add: closing unrealised appreciation - investments	138,423	48,039
Less: closing carried interest provision	(56,282)	(29,206)
Closing valuation of investments as at 31 December	506,961	428,462

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

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

	Capital return
	2016 £'000	2015 £'000
Realised:
Realised gains/(losses) on sales - fixed asset investments	13,284	(733)
- liquidity funds	201	462
Net realised gains/(losses)	13,485	(271)
Unrealised:
Unrealised gains/(losses) - fixed asset investments	90,384	74,964
- liquidity funds	(126)	(453)
	90,258	74,511
Carried interest charge against capital gains (note 5(c))	(27,076)	(28,118)
Net unrealised gains	63,182	46,393
Total gains	76,667	46,122

14. Debtors and accrued income

	2016 £'000	2015 £'000
Amounts receivable after one year:
Accrued income on fixed assets	65,280	64,162
Amounts receivable within one year:
Deferred tax recoverable (note 9(c))	509	668
Prepayments and other accrued income	63	39
Total amounts receivable within one year	572	707

Total debtors	65,852	64,869

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

15. Liquidity funds

	2016 £'000	2015 £'000
Investments held at fair value through profit and loss:
Opening valuation	30,835	59,859
Purchases at cost	88,737	31,559
Sales and redemptions	(80,200)	(60,796)
Movement in unrealised capital losses	(126)	(453)
Accrued income	143	204
Realised capital gains	201	462
Closing valuation	39,590	30,835

16. Movement in net funds

	2016 £'000	2015 £'000
Analysis and reconciliation of net funds:
Change in cash	(3,332)	6,491
Net funds at 1 January	9,512	3,021
Net funds at 31 December	6,180	9,512
Net funds comprise:
Cash	6,180	9,512

Cash includes £2,198,000 held by the fund limited partnerships in which the Company is the sole limited partner.

17. Creditors - amounts falling due within one year

	2016 £'000	2015 £'000
Taxation payable	575	978
Loan facility (note 18)	1,458	1,487
Sundry creditors	794	1,190
Total creditors	2,827	3,655

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

18. Bank facility

On 24 August 2011, the Company entered into a £40,000,000 multi-currency revolving credit standby facility on an unsecured basis.

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

On 28 November 2012, HgCapital Mercury D LP, alongside the other Hg Mercury funds, entered into a four-year multi-currency revolving term loan facility to provide short-term funds to facilitate acquisitions. HgCapital Mercury D LP participated for an amount of £4,736,842. Under the facility agreement, it is liable to pay interest on any drawn amount at base rate plus a margin of 3.00%. A commitment fee of 0.50% p.a. is liable on any undrawn commitment. At the end of the year, the Company's indirect share of amounts drawn via HgCapital Mercury D LP, was £1,458,000.

19. Financial risk

The following disclosures relating to the risks faced by the Company are provided in accordance with sections 11 and 12 of FRS 102. The reference to investments in this note is in relation to the Company's direct investments in Hg RPP LP, Hg RPP 2 LP, Hg6E LP and the underlying investments in HGT LP, HGT 6 LP, HGT 7 LP and HgCapital Mercury D LP as described in note 3 above.

Financial instruments and risk profile

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

Valuation risk

The Company's exposure to valuation risk arises mainly from movements in the value of the underlying investments (held through fund partnerships), the majority of which are unquoted. A breakdown of the Company's portfolio is given on page 31 and a breakdown of the most significant underlying investments is given above. In accordance with the Company's accounting policies, the investments in fund limited partnerships are valued by reference to their underlying unquoted investments, which are valued by the Directors following the IPEV Valuation Guidelines. The Company does not hedge against movements in the value of these investments, apart from foreign exchange movements as explained below, though the borrowing arranged to fund these investments is normally denominated in the currency in which the business is operating. The Company has exposure to interest rate movements, through bank deposits, UK government securities and liquidity funds.

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

FRS 102 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

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

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

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

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

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

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

	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Investments held at fair value through profit and loss:
Unquoted investments - Investment in HGT 6 LP	-	-	229,986	229,986
- Investment in HGT 7 LP	-	-	175,957	175,957
- Investment in HGT LP	-	-	69,874	69,874
- Investment in HgCapital Mercury D LP	-	-	54,828	54,828
- Investment in Hg RPP2 LP	-	-	16,997	16,997
- Investment in Hg 6 E LP	-	-	14,448	14,448
- Investment in Hg RPP LP	-	-	1,153	1,153
- Liquidity funds	-	39,590	-	39,590
- Carried interest provision	-	-	(56,282)	(56,282)
Other assets:
Accrued income	-	-	65,280	65,280
As at 31 December 2016	-	39,590	572,241	611,831

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

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

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

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

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

The following table presents the movement in level 3 investments for the year ended 31 December 2016 by class of financial instrument.

	Accrued income on investments 2016 £'000	Investments in limited partnerships 2016 £'000	Total 2016 £'000
Unquoted investments:
Opening balance	64,162	428,462	492,624
Purchases	-	104,100	104,100
Realisations at 31 December 2015 valuation	(31,497)	(86,706)	(118,203)
Total gains for the year included in the income statement	32,615	88,181	120,796
Movement in carried interest provision	-	(27,076)	(27,076)
Closing unrealised valuation of level 3 investments	65,280	506,961	572,241

Total gains for the year included in the income statement for investments held at the end of the year	33,626	81,830	115,456

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

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

Change

£'000

NAV per

Ordinary

Pence

Sensitivity to equity price risk:

Unquoted investments

±10%

±57,224

±153.3

Credit risk

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

Market risk

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

Currency risk and sensitivity

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

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

	Revenue return		Capital return
	£'000	NAV per Ordinary share Pence	£'000	NAV per Ordinary share Pence
Highest value against sterling during the year:
Danish krone (8.2227)	4	-	1,904	5.1
Euro (1.1052)	808	2.2	8,212	22.0
Norwegian krone (9.9597)	-	-	4,497	12.0
Swedish krona (10.6981)	242	0.6	321	0.9
Swiss franc (1.1949)	-	-	10	-
US dollar (1.2131)	154	0.4	1,098	2.9
	1,208	3.2	16,042	42.9
Lowest value against sterling during the year:
Danish krone (10.1935)	(9)	-	(4,666)	(12.5)
Euro (1.3665)	(1,922)	(5.1)	(19,539)	(52.3)
Norwegian krone (13.1106)	-	-	(12,498)	(33.5)
Swedish krona (12.6356)	(548)	(1.5)	(727)	(1.9)
Swiss franc (1.4821)	-	-	(30)	(0.1)
US dollar (1.4807)	(1,374)	(3.7)	(9,772)	(26.2)
	(3,853)	(10.3)	(47,232)	(126.5)

At 31 December 2016, the following rates were applied to convert foreign denominated assets into sterling: Danish krone (8.7108); euro (1.1715); Norwegian krone (10.6361); Swedish krona (11.2254); Swiss franc (1.2559); and US dollar (1.2357).

Portfolio hedging

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

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

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

Interest rate risk and sensitivity

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

However, funds awaiting investment have been invested in managed liquidity funds and, as stated above, their valuation is affected by movements in interest rates. The sensitivity of the capital return of the Company to movements in interest rates has been based on the UK base rate. With all other variables constant, a 0.25% decrease in the UK base rate should increase the capital return in a full year by about £60,000, with a corresponding decrease if the UK base rate were to increase by 0.25%. In the opinion of the Directors, the above sensitivity analyses may not be representative of the year as a whole, since the level of exposure changes as investments are made and realised throughout the year.

Liquidity risk

Investments in unquoted companies, which form the majority of the Company's investments, may not be as readily realisable as investments in quoted companies, which might result in the Company having difficulty in meeting its obligations. Liquidity risk is currently not significant as 7% of the Company's net assets at the year-end are liquid resources and, in addition, the Company has an £80 million multi-currency undrawn bank facility available. The Board gives guidance to HgCapital as to the maximum amount of the Company's resources that should be invested in any one company. For further details refer to the Company's Investment Policy in the full Annual Report and Accounts.

Currency and interest rate exposure

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

	2016				2015
	Fixed and floating rate £'000	Non- interest- bearing £'000	Total £'000	Total %	Fixed and floating rate £'000	Non- interest- bearing £'000	Total £'000	Total %
Sterling	45,770	244,518	290,288	47.0	39,546	224,071	263,617	49.5
Euro	-	150,396	150,396	24.3	-	167,399	167,399	31.4
US dollar	-	67,346	67,346	10.9	-	17,378	17,378	3.3
Norwegian krone	-	66,217	66,217	10.7	-	44,228	44,228	8.3
Danish krone	-	32,141	32,141	5.2	801	22,488	23,289	4.4
Swedish krona	-	11,428	11,428	1.9	-	12,309	12,309	2.3
Swiss franc	-	195	195	-	-	4,751	4,751	0.8
Total	45,770	572,241	618,011	100.0	40,347	492,624	532,971	100.0

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

Through its investment into the HgCapital Mercury D LP fund, the Company had outstanding borrowings of £1,458,000 (notes 17 and 18) at the year-end (2015: £1,487,000). The numerical disclosures above exclude short-term debtors and creditors.

Capital management policies and procedures

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

The Company's capital at 31 December comprised:

	2016 £'000	2015 £'000
Equity:
Equity share capital	9,331	9,331
Share premium	120,368	120,368
Capital redemption reserve	1,248	1,248
Retained earnings and other reserves	484,809	399,076
Total capital	615,756	530,023

With the assistance of HgCapital, the Board monitors and reviews the broad structure of the Company's capital on an ongoing basis.

This review covers:

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

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

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

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

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

20. Called-up share capital

	2016		2015
	No. '000	£'000	No. '000	£'000
Ordinary shares of 25p each:
Allotted, called-up and fully paid:
At 1 January	37,325	9,331	37,325	9,331
At 31 December	37,325	9,331	37,325	9,331

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

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

21. Share premium account and reserves

	Share premium account £'000	Capital redemption reserve £'000	Capital reserve unrealised £'000	Capital reserve realised £'000	Revenue reserve £'000
As at 1 January 2016	120,368	1,248	14,023	353,107	31,946
Transfer on disposal of investments	-	-	2,203	(2,203)	-
(Losses)/gains on liquidity funds	-	-	(126)	201	-
Net gain on sale of fixed asset investments	-	-	-	15,487	-
Net movement in unrealised appreciation of fixed asset investments	-	-	88,181	-	-

Dividend paid	-	-	-	-	(14,930)
Net return for the year after taxation	-	-	-	-	20,140
Net loans recovered from General Partners	-	-	3,856	-	-
Carried interest provision	-	-	(27,076)	-	-
As at 31 December 2016	120,368	1,248	81,061	366,592	37,156

22. Commitment in fund partnerships and contingent liabilities

Fund	Original commitment £'000	Outstanding at 31 Dec
Fund	Original commitment £'000	2016 £'000	2015 £'000
HGT 8 LP¹	350,000	350,000	-
HGT 7 LP¹	200,000	39,774	102,765
HGT 6 LP	285,029	11,050	17,860
HgCapital Mercury D LP	60,000	10,285	27,540
Hg RPP2 LP	29,481²	7,482³	8,219³
HGT LP⁴	120,000	1,261	1,261
Hg RPP LP	15,949⁵	846⁶	1,016⁶
Hg 6 E LP	15,000	582	940
Total outstanding commitments		421,280	159,601
¹The Company has the benefit of an opt-out provision in connection with its commitment alongside HgCapital 8, allowing it to opt out of its obligation to fund draw-downs under its commitment, without penalty, where certain conditions exist. ² Sterling equivalent of €40,000,000. ³ Sterling equivalent of €8,765,000 (2015: €11,152,000). ⁴ With effect from 21 October 2011, £12.0 million of the commitment was cancelled, followed by £9.0 million on 31 March 2013 and £4.7 million on 1 August 2014. These amounts represent 10.0%, 7.5% and 3.9% respectively of the original £120 million commitment to the HgCapital 5 fund. ⁵ Sterling equivalent of €21,640,000. ⁶ Sterling equivalent of €992,000 (2015: €1,378,000).

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

HgCapital acts as Manager of the Company through a management agreement and indirectly participates through fund limited partnership agreements as the general partners and, alongside a number of HgCapital's executives (past and present), as the founder partners of the fund partnerships in which the Company invests. In addition, HgCapital acts as Administrator of the Company.

The Company has no ultimate controlling party.

The Company's related parties are its directors. Fees paid to the Company's board are disclosed in the Directors' Remuneration Report in the full Report and Accounts. There are no other identified related parties at the year end, and as of 3 March 2017.

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF HgCAPITAL TRUST PLC

The Company's financial statements for the year ended 31 December 2016 have been audited by Deloitte LLP. The text of the Auditor's Report can be found on pages 87 to 90 of the full Annual Report and Accounts.

CORPORATE GOVERNANCE

EXTRACT FROM THE DIRECTORS' REPORT

The Directors present the Annual Report and Accounts of HgCapital Trust plc (the 'Company') (Reg. No. 01525583) for the year ended 31 December 2016.

The Strategic Report, Chairman's Statement and Corporate Governance Report forms part of this Directors' Report.

Results and dividend

The total return for the Company is set out in the income statement above. The total return after taxation for the year, was £100,663,000 (2015: £65,049,000) of which the revenue return was £20,140,000 (2015: revenue return of £17,907,000).

The Directors recommend the payment of a dividend of 46.0 pence per Ordinary share for the year ended 31 December 2016 (2015: 40.0 pence). Subject to approval of this dividend at the forthcoming annual general meeting ('AGM'), it will be paid on 15 May 2017 to shareholders on the register of members at the close of business on 7 April 2017.

Greenhouse gas emissions

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

Stewardship

Our Manager, HgCapital, seeks to invest the Company's funds in businesses that are well managed, with high standards of corporate governance.

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

The exercise of voting rights attached to the Company's underlying proportion of the portfolio lies with HgCapital.

HgCapital has a policy of active portfolio management and ensures that significant time and resource is dedicated to every investment, with HgCapital executives typically being appointed to investee company boards, in order to ensure the application of active, results-orientated corporate governance. Further information regarding the stewardship of investee companies by HgCapital can be found in their review on above.

Derivative transactions

The Company had no outstanding derivative contracts at 31 December 2016.

Annual General Meeting ('AGM')

The AGM of the Company, which will include a presentation by HgCapital, will be held at the offices of HgCapital, 2 More London Riverside, London SE1 2AP on Wednesday 10 May 2017 at 11am. Light refreshments will be available from 10.30am. Notice of the AGM is given on pages 116 to 119 of the full Report and Accounts. The Board is of the opinion that the passing of all resolutions being put to the AGM would be in the best interests of the Company and its shareholders. The Directors therefore recommend that shareholders vote in favour of resolutions 1 to 14, as set out in the Notice of Meeting.

The Company's Board of Directors

Roger Mountford - Chairman

Richard Brooman

Mark Powell

Peter Dunscombe

Anne West

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

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

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law) including FRS 102, "The Financial Reporting Standard applicable in the UK and Ireland".

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

• select suitable accounting policies and then apply them consistently;

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

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

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

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

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

Responsibility statement

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 102, "The Financial Reporting Standard applicable in the UK and Ireland", give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

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

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

On behalf of the Board

Roger Mountford, Chairman

3 March 2017

Dividend

The dividend proposed in respect of the year ended 31 December 2016 is 46 pence per share.

Ex-dividend date (shares transferred without dividend)	6 April 2017
Record date (last date for registering transfers to receive the dividend)	7 April 2017
Last date for registering DRIP instructions	21 April 2017
Dividend payment date	15 May 2017

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

National Storage Mechanism

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

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

This information is provided by RNS

The company news service from the London Stock Exchange

END

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