Annual Financial Report

RNS Number : 5363Z

HgCapital Trust PLC

08 March 2013

HgCapital Trust plc

Final results for the year ended 31 December 2012

London, 8 March 2013: HgCapital Trust plc ("the Trust"), which provides investors with a listed vehicle to invest in all private equity deals managed by HgCapital, today announces its full year results to 31 December 2012

HgCAPITAL TRUST PLC CONTINUES TO DELIVER LONG TERM OUTPERFORMANCE

Summary performance

	28 February 2013	31 December 2012	31 December 2011	% Total return 2012*
NAV per share (diluted)	1,255.4p	1,221.7p	1,069.3p	+15.3%
Share price	1,145.0p	1,016.0p	970.0p	+5.8%
FTSE All-Share Index				+12.3%
				Movement
Net Asset Value	£450.5m	£438.0m	£346.8m	+£91.2m

* Assuming reinvestment of all dividends

Financial Highlights

§ +15.3% NAV per share total return over 2012.

§ +19.5% p.a. 10-year compound annual growth rate of the share price vs. +8.8% p.a. from the FTSE All-Share Index, both calculated on a total return basis to 31 December 2012.

§ Solid sales and EBITDA growth from the top 20 buyout investments of 9% and 6% respectively over last 12 months to 31 December 2012.

§ A valuation multiple of 10.8x EBITDA and debt multiple of 3.7x EBITDA as at 31 December 2012.

§ Total available liquid resources were £156m (36% of NAV) with outstanding commitments of £162m (37% of NAV).

Operational Highlights

§ Buoyant realisations environment for high quality businesses: £80m of cash proceeds from 2012 realisations with full exits achieving an aggregate 68% uplift to 31 December 2011 book value.

§ Selectively cautious on new investments: £38m deployed over the period, including three new buyout investments.

Events since 31 December 2012

§ Proposed final dividend for the year of 23.0 pence per ordinary share to be paid on 15 May 2013, subject to shareholder approval.

§ The Manager's latest buyout fund, HgCapital 7, will have substantially the same size, strategy and geographic focus as HgCapital 6. The Board of the Trust has approved an initial commitment of £200 million for investment alongside HgCapital 7 on similar commercial and contractual terms as its commitment to HgCapital 6, and has expressed interest to the Manager in making a further commitment later in the year.

Manager Outlook

§ Despite the weak macro-economic environment across Western Europe, HgCapital believes that its investment strategy of identifying high quality growth companies in market niches, will continue to benefit the performance of the portfolio.

§ Whilst the Manager remains relatively cautious on new investment, within its sectors of expertise HgCapital continues to find opportunities to acquire leading businesses at reasonable prices and expects to deploy capital into a number of investments over the next six months.

§ As evidenced over 2012, HgCapital continues to see an active interest from both financial and trade buyers in acquiring a number of its portfolio companies and this interest may lead the Manager to realise a number of their investments in the next twelve months.

§ For some of the portfolio companies, the short term profit growth has been temporarily impacted by investments made to enhance the future earnings potential and exit rating of these businesses, HgCapital anticipates seeing the results of this investment start to come through in the 2013 trading results.

Roger Mountford, Chairman of the Trust, commented:

"HgCapital's sector focus and expertise continue to generate a pipeline of interesting acquisitions and to add value for shareholders in the Trust. Increasing liquidity in the Trust's shares provides more scope for investors to gain access to private equity through a listed vehicle".

- Ends -

The Trust's 2012 Annual Report and a webcast from the Manager to accompany the results are available to view at: http://www.hgcapitaltrust.com/.

For further details:

HgCapital
Nic Humphries (CEO, HgCapital)	+44 (0)20 7089 7888
Roger Mountford (Chairman, HgCapital Trust plc) Maitland	+44 (0) 77996 626 01
Peter Ogden Seda Ambartsumian	+44 (0)20 7379 5151 +44 (0)20 7379 5151

About HgCapital Trust plc

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

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

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

HgCapital Trust plc

Annual Report and Accounts

31 December 2012

HgCapital Trust plc announces that the annual report and accounts of the Trust for the year ended 31 December 2012 have been published. The full annual report and accounts can be accessed via the Trust's website at http://hgcapitaltrust.com/ or by contacting the Trust's Registrar (Computershare Investor Services plc) on telephone number 0870 707 1037.

In order to meet the disclosure requirements of DTR 6.3.5(2), this announcement includes certain extracts from the annual report below. Any references to page numbers, sections or notes in the following text are references to the annual report and accounts, which can be accessed via the Trust's website as noted above.

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 2011. Statutory accounts for 2011 have been delivered to the registrar of companies, and those for 2012 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.

References in this annual report and accounts to HgCapital Trust plc have been abbreviated to 'HgCapital Trust' or the 'Trust'. HgCapital refers to the trading name of HgPooled Management Limited and HgCapital LLP, who act as the 'Manager'.

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

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

FINANCIAL HIGHLIGHTS

2012 PERFORMANCE

NET ASSET VALUE ('NAV') £438 MILLION
The NAV (diluted) per ordinary share rose from £10.69 to £12.22 over the year, following the payment of a 10p dividend. A total return of +15.3%

MARKET CAPITALISATION £361 MILLION
The ordinary share price rose from £9.70 to £10.16 over the year. An increase (on a total return basis) of +5.8%

CASH REALISED FOR THE BENEFIT OF THE TRUST
£80 million - Cash distributions received in 2012, resulting primarily from the sale of Mercury Pharma and SHL at an average uplift on book value on these two realisations of 68%.

CASH DEPLOYED ON BEHALF OF THE TRUST
£38 million - The amount of capital invested in 2012 that funded both new buyout investments and further investment within the existing underlying portfolio.

LONG-TERM PERFORMANCE - 10 YEAR TOTAL RETURN*

COMPOUND ANNUAL GROWTH RATE
19.5% p.a. - The compound annual growth rate of the HgCapital Trust plc ordinary share price over the last 10 years.

10 YEAR RETURN ON £1,000
£5,930 - How much an investment of £1,000 made ten years ago in HgCapital Trust plc would now be worth.
An equivalent investment in the FTSE All-Share Index would be worth £2,317.

*Assuming reinvestment of all dividends

BALANCE SHEET ANALYSIS

£438 million - The net assets of HgCapital Trust plc as at 31 December 2012.

£156 million - The liquid resources available (including a £40 million undrawn bank facility) for deployment as at 31 December 2012 representing 36% of NAV.

£162 million - The amount of outstanding commitments as at 31 December 2012 representing 37% of NAV.

THE PORTFOLIO

HgCapital Trust plc gives investors access to a private equity portfolio of currently 32 companies, run by an experienced and well-resourced Manager that makes investments in private companies across Northern Europe in selected parts of the Healthcare, Industrials, Services and TMT sectors.

An investment in HgCapital Trust plc provides exposure to a portfolio of fast growing companies. The top 20 buyout investments currently account for 87% of the portfolio value. These companies have aggregate revenues of £2.0 billion and profits of £447 million, with net margins of 22%.

In addition, the Trust has made a commitment to small-cap TMT deals, where the Manager has many years of successful experience, through HgCapital's Mercury fund. Finally, it also holds investments in the Manager's two renewable energy funds.

+9% p.a. revenue growth
The average growth in revenues of the top 20 buyout investments for the twelve months ended 31 December 2012.

+6% p.a. profit growth
The average growth in profits (EBITDA) of the top 20 buyout investments for the twelve months ended 31 December 2012.

10.8x EV/EBITDA multiple
The average valuation multiple used to value the top 20 buyout investments at 31 December 2012.

3.7x net debt/EBITDA
The average net debt/EBITDA multiple of the top 20 buyout investments at 31 December 2012.

CHAIRMAN'S STATEMENT

HgCapital's sector focus and expertise continue to generate a pipeline of interesting acquisitions and to add value for shareholders. Increasing liquidity in the Trust's shares provides more scope for investors to gain access to private equity through a listed vehicle.

The year in review

2012 was a year of solid progress for the Trust. The top 20 buyout investments, which together represent 87% of the portfolio by value, recorded revenue growth of 9% per annum and growth in profits of 6%.

The net asset value per share, on a fully diluted basis, rose from £10.69 at 31 December 2011 to £12.22 at the year-end, a return (including payment of a 10.0 pence dividend) of 15.3%. This compares with a total return of 12.3% in the FTSE All-Share Index.

After adjusting for movements in foreign exchange and the sale of certain renewable energy assets, the Trust's diluted NAV at 28 February 2013 had increased to £12.55 per share.

After a quiet first half for realisations, the Trust's underlying interests in two buyout investments, SHL and Mercury Pharma, were sold in the second half for £62.4 million. These investments were completed at 3.1x and 4.2x original cost respectively, together representing an uplift over book value at 31 December 2011 of 68%. In addition, the Trust benefited from the Manager's first sale of a renewable energy platform, constructed from several individual investments, to an institutional investor at a gross internal rate of return of 20% per annum; this returned £5.3 million to the Trust. Together with proceeds from other smaller transactions during 2012, the Trust benefited from more than £80 million in receipts from realisations. These realisations added some £26.3 million to NAV. A further £2.8 million of cash was received after the year-end, following the sale of the renewable energy UK wind development assets. Further details are provided on page 31.

In addition, the unrealised revaluation of portfolio investments and accrued income increased shareholder value by a further £46.1 million. The Manager's attribution analysis on page 24 of the Report indicates that the uplift in valuations arose primarily from profits growth in the underlying portfolio, improved valuation multiples reflecting strengthening equity markets, and positive cash flows that have paid down debt in the underlying investments. The average valuation multiple used to value the top 20 buyout investments at 31 December 2012 was 10.8x, compared with 10.2x a year earlier, and average net debt as a multiple of EBITDA had fallen from 4.0x to 3.7x.

The NAV of the Trust at the year-end had risen over the year from £347 million to £438 million. The market capitalisation of the Trust increased from £309 million to £361 million.

Subscription shares

During the year 3.74 million of the Trust's outstanding Subscription Shares were exercised, raising £35.5 million. This increase in the Trust's listed ordinary shares has added to their liquidity and attracted new institutional shareholders.

Of the original issue of 6.2 million Subscription Shares, only 1.76 million shares remain unexercised. I remind holders of Subscription Shares that they have only one further opportunity to exercise them, on 31 May 2013 at a subscription price of £10.25 per share. If all the remaining Subscription Shares are exercised, this will raise an additional £18 million for deployment by the Trust and add further to the market capitalisation; it should also increase liquidity in the Trust's ordinary shares.

Share price performance

The ordinary share price at 31 December 2012 stood at £10.16, compared with £9.70 a year earlier. This represented a return during the year, including payment of a 10 pence dividend, of 5.8%. During the first quarter of 2012 the FTSE All-Share Index continued to bounce back from the losses it had suffered in 2011, and for the rest of the year the Trust's share price performed broadly in line with the Index.

Against the last published fully diluted NAV per share of £11.84 at the end of November 2012, the ordinary shares stood at a discount of 14%.

The Trust's ten-year total return to shareholders of 19.5% per annum was 10.7% per annum in excess of the FTSE All-Share Index. An investment of £1,000 made in the Trust ten years earlier, with dividends reinvested, would now have a value of £5,930, compared with £2,317 if invested in the FTSE All-Share Index.

Dividend

The Trust is managed with the objective of achieving capital growth, not to deliver any target earnings or dividend. The level of dividend declared each year depends on the total income earned from investments, which will vary from year to year. Return per ordinary share in the year was 32.1 pence (2011: loss of 2.1 pence), and the Board is recommending that a dividend of 23.0 pence per share (2011: 10.0 pence) be paid.

Portfolio

In the year under review, £38 million was deployed on behalf of the Trust, including £21 million in three new acquisitions. Two of these new investments, an industrial business in Germany and a distribution business in the UK, were acquired alongside the Manager's Hg6 fund.

The HgCapital Mercury Fund, which has been established to exploit the Manager's expertise in TMT investments in smaller transactions of between £20 million and £80 million enterprise value, made its first acquisition. The Trust has committed £60 million to this fund and has invested £2.4 million in this first transaction.

Of the Trust's original commitment of £285 million to the Manager's Hg6 vintage, more than £220 million has now been invested, leaving £64.5 million to be deployed in two or three further acquisitions or held in reserve for any follow-up investment in portfolio companies. On 5 March, the Board approved an initial commitment of £200 million alongside HgCapital 7, a buyout fund to be managed by HgCapital with an investment period of up to five years. The Board has expressed an interest to the Manager in increasing this commitment later in the year and will decide what further commitment to make in the light of projected resources at the time. The Trust's total commitment will be broadly equivalent to the commitment made by the Trust to HgCapital 6 and will be made on similar commercial and contractual terms.

Governance

The Trust's investment objective remains unchanged, but recent amendments in HMRC's regulation of UK investment trusts need to be reflected in some minor amendments to the Trust's investment policy. HMRC's regulations place emphasis on the diversification of risk within an investment trust by holding a spread of investments, rather than adherence to a specific investment restriction. The investment policy, which appears on page 9 of the report, reflects this modernisation of the tax rules that are the foundation of UK investment trusts.

Each year the Board of the Trust conducts a comprehensive evaluation of its performance; this took place in 2012 against the background of the Alternative Investment Funds Directive, which the Trust and the Manager will have to implement during 2013/14. The detailed requirements for implementation are not yet known, but the effect of the Directive is likely to be felt in the detailed arrangements between the Trust and the Manager. The Board has decided that, when the detailed requirements are known, the terms of reference of the Management Engagement Committee will be expanded by the addition of specific duties relevant to the implementation and monitoring of our adherence with the Directive. The Board also believes that it will be appropriate at that point for the chairmanship of that committee to pass to one of the non-executive directors, in the same way as the Audit and Valuation Committee.

The Board also considered it appropriate to streamline the committee structure by bringing back to the full Board the current responsibilities of the Remuneration Committee; as the Trust has no employees or executive directors this committee is responsible solely for reviewing the remuneration of the non-executive Board, which no longer justifies the retention of a separate committee. The remuneration of the Manager is the responsibility of the Management Engagement Committee.

The Board of the Trust believes strongly that the supervision of an entirely independent board, and the adoption of the highest standards of governance, are important advantages of a UK investment trust. The Board believes that the Code of Corporate Governance published by the Association of Investment Companies; which incorporates the UK Corporate Governance Code and is endorsed by the Financial Reporting Council, provides the most appropriate governance framework for the Trust. Accordingly, we report against the principles and recommendations of the AIC Code and, where possible, we have adopted early the recommendations of the newly revised AIC Code published in February 2013.

It is the Board's policy to review its composition regularly and, when appropriate, to refresh the Board through recruitment, with the aim of having the range of skills and experience and diversity that will best serve shareholders in the future. Piers Brooke, who has served on the Trust's Board since 2001, will retire from the Board at the forthcoming Annual General Meeting. The Board's Nominations Committee is working to identify, and recommend, a successor to Mr Brooke.

I would like to take this opportunity to record the outstanding contribution that Piers Brooke has made to the development and success of HgCapital Trust. With his background in the senior financial risk management of major banks, Piers has especially guided the Board and the Manager in identifying risk and ways to mitigate it. He has been a loyal and supportive colleague, to whom all the Directors are grateful.

Prospects

The underlying buyout portfolio remains relatively young, with 13 of the top 20 investments having been made within the last two years. The Manager is working to add value through strategic change in each business acquired, as can be seen in the appreciation of those investments that have been revalued on the basis of earnings. The value being created in more recent investments of the Hg6 vintage can be expected to come through in future valuations. In the meantime, it is anticipated that some older investments may be realised.

At the end of 2012 the Trust held liquid resources of £116 million and in addition had access to an undrawn bank facility of £40 million. The Trust is therefore well placed to deploy funds into new investments in the Hg6 vintage, the Mercury Fund and renewable energy funds, while also making an initial commitment to the Manager's new buyout fund that will be the main source of investment opportunities over the period from late 2013 to 2018.

HgCapital's sector focus and deep research continues to generate a pipeline of interesting acquisitions and we believe the Manager has the expertise to identify appropriate new strategies and to implement them, adding value for shareholders. Increasing liquidity in the Trust's shares provides more scope for investors to gain access to private equity through a listed vehicle.

Roger Mountford

Chairman

7 March 2013

MANAGER'S REVIEW OF THE YEAR

Summary

In 2012 the Trust's diluted NAV per share increased by 15.3% on a total return basis and the total share price total return saw an increase of 5.8%.

2012 has been a relatively quiet year for investment; we have deployed £136.2 million (£20.6 million for the Trust) on behalf of clients in three new investments.

New investments were made in Qundis, a provider of sub-metering devices and systems in Germany; Valueworks, a B2B electronic marketplace, which was the first investment made by the HgCapital Mercury Fund; and our Services team has completed four small acquisitions in the UK automotive after-market car parts distributor sector as part of a roll-up of businesses in this industry.

In addition to these acquisitions, further investments into our existing portfolio on behalf of the Trust totalled £17 million, bringing the total investment made by the Trust in the year to £37.6 million.

During the year, we have returned £572.2 million to clients, including £80.2 million to the Trust. The two buyout realisations were each at a significant uplift to the December 2011 carrying value and demonstrated the benefits of acquiring premium quality companies which are attractive to a range of suitors in any economic environment, owing to their superior financial return characteristics, their defensibility, exemplified by growth through the last three years' recession, and their strategic positions as champions in their respective sectors.

The first of these exits was in July with the sale of SHL, the global leader in talent management, which produced cash proceeds of £27.0 million for the Trust. The sale of Mercury Pharma in August contributed £35.3 million in cash for the Trust. In addition to these buyout realisations, RPP1's UK Onshore Wind operating portfolio was sold to the asset management arm of Munich Re, MEAG, with proceeds from the sale returning £5.3 million to the Trust.

Our top 20 investments, which represent 87% of the portfolio value, continued to grow solidly during the year, recording average growth in revenue and EBITDA of 9% and 6% respectively. Our renewable power generating assets, which represent 6% of the portfolio value, generated cash, repaid debt and recorded growing earnings.

At the year-end, the Trust had available liquid resources (including a debt facility of £40 million) of £155.8 million. Outstanding commitments to HgCapital funds amounted to £162.2 million.

The Trust's performance to 31 December 2012

It is our belief that listed private equity funds are better measured over periods of three, five and ten years, consistent with the long-term nature of private equity investment in generating returns for clients.

Over three years, the share price of the Trust (on a total return basis) has out-performed the FTSE All-Share Index by 1.2% p.a., over five years by 5.5% p.a., and over ten years by 10.7% p.a., net of all costs. £1,000 invested in December 2002 would be worth £2,317 in December 2012 if invested in the FTSE All-Share Index and £5,930 if invested in the Trust. As for 2012, the total return to shareholders was 5.8%, which compared with 12.3% for the FTSE All-Share Index.

The growth in NAV per share is a lead indicator and driver of share price performance over the long run; during the year it rose by 15.3% (total return on a diluted basis). Gains made during the year were driven by a combination of realisations delivering cash proceeds significantly in excess of the 31 December 2011 book value and unrealised gains in the current portfolio as profits and ratings have both moved higher.

TOTAL RETURN SHARE PRICE AND NAV RETURN* PERFORMANCE AGAINST THE FTSE ALL-SHARE INDEX
	FTSE All-Share index return		HgCapital Trust plc share price return		Diluted NAV return
	% total return per year	Current value of £1,000 invested at the beginning of the period with reinvestment of dividends	% total return per year	Current value of £1,000 invested at the beginning of the period with reinvestment of dividends	% total return per year	Current value of £1,000 invested at the beginning of the period with reinvestment of dividends
1 year	12.3%	£1,123	5.8%	£1,058	15.3%	£1,153
3 years	7.5%	£1,242	8.7%	£1,284	11.5%	£1,385
5 years	2.5%	£1,132	8.0%	£1,471	7.6%	£1,442
7 years	4.8%	£1,392	10.7%	£2,037	12.5%	£2,277
10 years	8.8%	£2,317	19.5%	£5,930	16.1%	£4,452
*Total return assumes all dividends have been reinvested.

Trading performance
Notwithstanding the economic weakness that took a tighter grip on Europe and the UK with continued sluggish growth, the top 20 buyouts (which represent 87% of the total portfolio value) have delivered aggregate sales and EBITDA growth of 9% and 6% respectively over the year to 31 December 2012.

The tables below show the revenues and earnings growth for the last twelve months for the top 20 buyout portfolio companies, expressed in bands. Of these, seven (45% by value) increased sales by greater than 10%, with only four companies (8% by value) reporting a decline in year-on-year sales. Seven out of the 20 companies (44% by value) increased EBITDA by more than 10%. Companies that continue to see consistently good growth year-on-year include Visma, ATC, Achilles and Epyx. Others that have seen strong growth in the last twelve months include JLA, Manx Telecom and Atlas.

Of the top 20 investments, eight (26% by value) have reported a decline in EBITDA year-on-year. For some of the investments, this decline in profit is explained by their direct exposure to a weakening consumer sector, such as Teufel and Schleich. Other companies, such as NetNames, SimonsVoss and Sporting Index have seen profits temporarily depressed as they continue to invest in longer term growth initiatives, such as marketing, product innovation or international expansion.

Our portfolio companies are exposed to appropriate levels of gearing (see page 23). The average gearing in the top 20 is 3.7x LTM EBITDA. A number of the businesses have highly predictable earnings and free cash flows (Visma, ISG and TeamSystem), enabling us to use debt to gear our returns. Others are now under-geared (Achilles, Epyx, ATC and Manx Telecom) and have the financial flexibility to make acquisitions, expand more aggressively or to refinance and return capital. Since the year-end, we have taken advantage of a buoyant European bond market by refinancing the bank debt in Voyage through the issuance of £272 million of public market bonds. The benefit of this has been to reduce the company's debt servicing cost and provide access to funds in order to continue the bolt-on strategy initiated by the purchase of Solor Care last year.

TOP 20 LAST TWELVE MONTHS ('LTM') SALES GROWTH Exposure to £2.0 billion of sales that have grown on average at 9% over the last 12 months to December 2012
Sales growth bands	LTM Sales £' million	Number of investments within associated band	% of top 20 portfolio by value within associated band
(7%) - 0% p.a.	273	4	8%
0% - 5% p.a.	212	4	19%
5% - 10% p.a.	479	5	28%
10% - 15% p.a.	756	3	24%
15% - 20% p.a.	311	4	21%

TOP 20 LAST TWELVE MONTHS ('LTM') PROFIT GROWTH Exposure to £447 million of EBITDA that have grown on average at 6% over the last 12 months to December 2012
EBITDA growth bands	LTM EBITDA £' million	Number of investments within associated band	% of top 20 portfolio by value within associated band
(28%) - (20%) p.a.	19	3	8%
(20%) - 0% p.a.	56	5	18%
0% - 10% p.a.	120	5	30%
10% - 15% p.a.	101	4	24%
>15% p.a.	151	3	20%

Valuation and Concentration Analysis

The portfolio is valued consistently from year to year, applying the IPEV Valuation Guidelines. Our valuation of each company has produced an average EBITDA multiple for the top 20 buyout investments of 10.8x.

We take a considered approach in determining the level of maintainable earnings to use in each investment valuation, reflecting the growth characteristics of the portfolio. We use LTM EBITDA for each company where we are confident that they will continue to see growth going forwards. Where we anticipate future earnings for companies to be below the LTM levels we have used the lower forecast figure.

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

During the course of the year, strong profit growth and cash generation in a number of businesses within the portfolio has led to an increase in their value, most notably Atlas, Manx Telecom, Visma, JLA and ATC.

In companies such as SimonsVoss, NetNames and Sporting Index, planned expenditure, designed to grow earnings in subsequent years, has depressed profits and valuations. Weak consumer demand continues to affect earnings negatively at Teufel and Schleich. Those assets exposed to the public sector, including Voyage and Frösunda continue to experience margin pressure.

Analysis by value of investment return* relative to its original cost
76% Above

6% At original cost

18% Below

*Representing aggregate realised proceeds and unrealised valuations of an investment

TOP 20 DEBT TO EBITDA RATIO Average debt ratio of the top 20 buyout investments of 3.7x
Debt to EBITDA bands	Debt £' million	Number of investments within associated band	% of top 20 portfolio by value within associated band
(0.5)x to 2.0x	101	6	25%
2.0x to 3.0x	139	5	24%
3.0x to 4.0x	718	5	25%
4.0x to 6.0x	498	3	21%
6.0x	255	1	5%

TOP 20 EV TO EBITDA VALUATION MULTIPLE Average ratings multiple of 10.8x
EV to EBITDA bands	EBITDA £' million	Number of investments within associated band	% of top 20 portfolio by value within associated band
6.0x to 8.0x	82	7	19%
8.0x to 10.0x	95	4	17%
10.0x to 12.0x	80	3	20%
12.0x to 14.0x	183	4	30%
14.0x to 17.5x	24	2	14%

Balance sheet

Over the course of 2012, the NAV of the Trust increased by £91.1 million (26%), from £346.8 million to £438.0 million at the year end. The increases in the investment portfolio were supported in November 2012 by the exercise of over 3.7 million subscription shares, raising £35.5 million.

Attribution analysis of current year movements in NAV	Revenue return	Capital return	Total return
Opening net asset value as at 1 January 2012	10,017	336,815	346,832
Dividends paid	(3,182)	-	(3,182)
Proceeds from exercise of subscription shares	-	35,547	35,547
Gross revenue from investment portfolio	20,447	-	20,447
Net realised and unrealised losses from liquid resources	(195)	(290)	(485)
Realised capital proceeds from investment portfolio in excess of 31 December 2011 book value	-	23,693	23,693
Net unrealised capital appreciation of investment portfolio	-	28,269	28,269
Expenditure and taxation	(3,202)	-	(3,202)
Investment management costs:
Priority profit share - current year charge	(7,235)	-	(7,235)
Priority profit share - net loan allocation	583	(583)	-
Carried interest	-	(2,728)	(2,728)
Closing NAV as at 31 December 2012	17,233	420,723	437,956

REALISED AND UNREALISED MOVEMENTS IN INVESTMENT PORTFOLIO (INCLUDING INTEREST) FOR THE YEAR ENDED 31 DECEMBER 2012
Investment name and ranking within investment portfolio at 31 December 2012	Net unrealised appreciation/(depreciation) of investments	Realised proceeds in excess of 31 December 2011 book value (includes gross revenue)
Mercury Pharma (sold)	1.0	19.3
Visma (1)	9.6	-
SHL (sold)	-	6.0
Atlas (14)	6.8	-
JLA (7)	6.8	-
Voyage (11)	5.5	-
Manx Telecom (8)	5.1	-
Achilles (5)	4.3	-
ATC (6)	4.3	-
SPIN (18)	2.7	-
Epyx (10)	2.4	-
KVT (22)	1.5	-
Other	0.8	1.0
Casa Reha (24)	(1.6)	-
Teufel (20)	(3.1)	-

Over the course of the year, the NAV of the Trust increased by 26% from £346.8 million to £438.0 million. There were a number of underlying factors contributing to the movement in the NAV. Positive impacts on the NAV were: the exercise of 60% of the original subscription shares issued (+£35.5 million); income net of expenses from the underlying portfolio and gilts(+£16.8 million); uplifts on the realisation of investments compared with their carrying value at the start of the year (+£23.7 million); and the movement in value of the unrealised portfolio (+£28.3 million). Reductions in the NAV were caused by: the payment of a dividend to shareholders (-£3.2 million); and the Manager's remuneration (-£9.9 million) for both the annual management of the portfolio (-£7.2 million)and long term performance incentives (-£2.7 million).

During the year, the value of the unrealised portfolio increased by £29.8 million. This change can be attributed primarily to the following factors: profit growth in the underlying portfolio (+£33.3 million); increase in ratings during the year (+£22.1 million); and decrease in debt (+£10.0 million). The portfolio decreased significantly due to the net investment activity (acquisitions at cost, less realisations at their December 2011/June 2012 carrying value) of -£32.2 million, mainly from the realisations of SHL and Mercury Pharma.

The year ended with available liquid resources totalling £155.8 million (comprising £115.8 million of cash and government securities and a £40.0 million undrawn standby bank facility), which compares with outstanding and undrawn commitments of £162.2 million in the funds as listed below.

OUTSTANDING COMMITMENTS OF THE TRUST
Fund	Vintage	Original commitment £'milliom	Outstanding commitments as at 31 December 2012		Outstanding commitments as at 31 December 2011
Fund	Vintage	Original commitment £'milliom	£'million	% of NAV	£'million	% of NAV
HGT 6 LP¹	2009	285.0	64.5	14.8%	85.9	24.8%
HgCapital Mercury D LP	2011	60.0	55.3	12.6%	59.0	17.0%
HgCapital RPP2 C LP	2010	32.4³	22.0	5.1%	27.2	7.8%
HGT LP (Hg5 Vintage)	pre-2009	120.0	15.8	3.6%	17.1	4.9%
HgCapital 6 E LP²	2009	15.0	3.6	0.8%	4.7	1.4%
RPP LP	2006	17.6⁴	1.0	0.2%	1.2	0.3%
Total outstanding commitments			162.2	37.1%	195.1	56.2%
Liquid resources			115.8	26.5%	53.5	15.4%
Bank facility			40.0	9.1%	40.0	11.5%
Total available liquid resources			155.8	35.6%	93.5	26.9%
Net outstanding commitments less available liquid resources			6.4	1.5%	101.6	29.3%
¹ HgCapital Trust plc has the benefit of an investment opt-out provision in its commitment to invest alongside HgCapital 6, so that it can opt out of a new investment without penalty should it not have the cash available to invest. ² Partnership interest acquired during 2011. ³Sterling equivalent of €40.0 million. ⁴ Sterling equivalent of €21.6 million.

INVESTMENT PORTFOLIO OF THE TRUST

	Fund limited partnerships	Location	Vintage year	Residual cost £'000	Total valuation £'000	Portfolio value %
	Primary mid-cap buyout funds
1	HGT 6 LP	Europe	2009	189,301	199,692	61.2%
2	HGT LP	Europe	Pre-2009	71,592	93,730	28.8%
	Total primary mid-cap buyout funds			260,893	293,422	90.0%

	Secondary mid-cap buyout funds
3	HgCapital 6 E LP	Europe	2009	9,503	10,434	3.2%
	Total secondary mid-cap buyout funds			9,503	10,434	3.2%

	Primary small-cap buyout funds
4	HgCapital Mercury D LP	Europe	2011	2,390	2,390	0.7%
	Total primary small-cap buyout funds			2,390	2,390	0.7%

	Total buyout funds			272,786	306,246	93.9%

	Renewable energy funds
5	RPP1 Fund	Europe	2006	10,214	11,335	3.5%
6	RPP2 Fund	Europe	2010	10,821	8,505	2.6%
	Total renewable energy funds			21,035	19,840	6.1%

	Total all investments (6)			293,821	326,086	100.0%

Portfolio of Investments
HgCapital's strategy is to invest in five sectors, four of them (Healthcare, Industrials, Services and TMT) by way of buyouts of businesses. Our primary focus is on middle-market buyouts between £50 million and £500 million and also in lower mid-market buyouts in the TMT sector between £20 million and £80 million. The buyout portfolio currently represents 94% of the portfolio by value at the year end.

Investment in the fifth sector, renewable power generation (6%), is made into projects through RPP1 and RPP2.

Deal type by value

93% Buyout - mid-cap

6% Renewable Energy

1% Buyout - small-cap

Buyout portfolio
As at 31 December 2012, the Trust's underlying buyout portfolio comprised 32 investments, including a small number of residual interests which were mostly valued at, or close to, zero. This report covers only those companies with value.

TMT represented 58% of the total primary buyout portfolio. The majority of this value was represented by companies that are all users of technology, rather than developers of technology with the associated frequent challenges of new product development. The common themes that run through each one are highly visible revenues, strong market positions and strong cash conversion that permits debt repayment, whilst the businesses expand and grow.

Visma, TeamSystem and ISG are providers of business software and services in the Nordic region, Italy and UK respectively. These businesses benefit from high recurring revenues, a very large and diversified customer base and they continue to expand through a combination of organic growth and acquisitions.

Lumesse, the leading European provider of strategic HR software, continued to see strong demand for its products, leading to outperformance of recurring software revenues. However, a change in product mix and economic circumstances resulted in weaker consulting revenue growth, leading to overall profits being behind prior years.

Achilles and Epyx, two electronic market place investments, continued to see strong profit and revenue growth as well as paying down debt.

NetNames, previously known as Group NBT, is an internet domain name manager and online brand protection service provider. During the year we made a significant investment in the business, principally in strengthening the management team, which contributed to profits being depressed. Over the year, the company disposed of its non-core managed hosting business and also made a small acquisition in the Swedish market.

Manx Telecom is the incumbent integrated fixed and mobile telecom operator on the Isle of Man. It continues to trade solidly and has generated cash ahead of expectation, reducing its debt each year.

CSH, a software provider to the UK's legal and not-for-profit sectors, is focused on delivering operational improvement.

Services investments represented 17% of the primary buyout portfolio.

ATC, a Dutch fiduciary services business acquired in early 2011, has consistently delivered a strong trading performance since acquisition with double digit profit growth and strong cash generation.

JLA is a provider of laundry equipment, finance and maintenance. Following a disappointing 2011, the new management team and innovative sales initiatives have led to accelerated growth over the past twelve months, posting both double digit revenue and profit growth for its financial year ending 31 October 2012.

The largest investment within the Services portfolio at the time, SHL, was sold during the year, generating an overall investment return of 3.1x original cost. More details are provided on page 31 of the report.

The Services team have also completed four small acquisitions in the UK automotive after-market car parts distributor sector, as part of a roll-up of businesses in this industry. Further details of these investments can be found on pages 30 and 50 of the report.

Sector by value of primary buyout portfolio

58% TMT

17% Services

11% Industrials

9% Healthcare

5% Consumer & Leisure

Net assets by class

74% Unquoted

26% Cash & other assets

Industrials represented 11% of the primary buyout portfolio. Here, the common theme is that we are backing companies that own and develop high quality products based on technologically advanced German design but manufactured in low cost locations.

Following a strong financial performance in 2011 for SimonsVoss, a German developer and manufacturer of digital battery powered locking and access control systems, 2012 was a year of investment as the company increased its sales-force, invested in a new production site and R&D for new product development.

Teufel is a designer and online direct retailer of loudspeaker systems in Germany. Trading over the last twelve months has been disappointing. A tough trading environment, driven by weak consumer demand has further been hampered by delays in the development and launch of new products.

In May 2012, we completed a new buyout investment in the Industrials sector, with the acquisition of Qundis in Germany. Qundis is a leading provider of sub-metering devices and services. Further details of this new investment can be found on pages 30 and 46 of the report.

Healthcare represented 9% of the primary buyout portfolio. We are currently invested in long-term care where the payer risks are low, with a preference for specialist care of people with acute disabilities.

We own long-term care assets in the UK, Germany, Sweden and Finland. In the UK, the Government's fiscal consolidation translates into a reduction in fees that local authorities and social services will pay for care, and this has resulted in a squeeze on margins. Voyage, which has a more defensible business model, has managed to maintain profits, refinance its debt and make an acquisition of Solor Care at an attractive price. Improved ratings and the positive impact of the acquisition have led to an increase in the book value. In Germany, labour shortages, leading to an increased use of more expensive temporary staff, have increased labour costs and squeezed margins. Whilst Casa Reha has continued to grow revenues through opening new homes, profitability is behind the prior year due to the increases in its cost base. At Frösunda, based in Sweden, a poorly executed acquisition programme in 2011, coinciding with an operational improvement project, damaged margins and revenues. This led us to write down the value of this investment in December 2011. Since then, the business has stabilised and we are working with the new management team to improve performance. Our Finnish investment, Mainio Vire, has traded to plan and four new homes have been opened during the year. The investment continues to be marked down in value as the premium we paid to obtain this platform company has not yet been recouped from expected synergies arising from further acquisitions and organic growth.

During the year, we sold Mercury Pharma generating an overall investment return of 4.2x original cost, including the unrealised value. Further details can be found on page 31 of the report.

Finally, our legacy Consumer and Leisure portfolio represented 5% of the primary buyout portfolio. Businesses exposed to the consumer, such as Americana and Schleich, continue to experience a difficult trading environment. Sporting Index, a sports spread betting firm, is trading broadly in line with the prior year.

Renewable energy portfolio

The Trust invests in renewable energy through RPP1 and RPP2, two UK funds managed by our dedicated team of specialists. The underlying portfolios are divided into five platforms: UK Onshore Wind, Nordic Onshore Wind, Irish Wind, Spanish Mini-Hydro and Spanish Solar.

The assets are split into onshore wind at 67% of value, mini-hydro at 13% and solar at 20% of value. All use proven and commercially viable technologies within the framework of current power price regimes across Europe. Each platform's operating performance since inception continues to be in line with our original investment case. The investment case for power generation remains positive as Western Europe faces both a huge need to re-equip its creaking power infrastructure and to reduce its CO2 emissions.

The Spanish government is conducting a broad regulatory review of its power sector as part of its aim to tackle the shortfall between the power sector costs and what consumers pay. A first set of measures were approved in December 2012, which among other items include a tax equal to 7% of revenues for all generators, affecting all of our Spanish investments, and a further 2.2% on revenues of tax for our small-hydro investments. In January 2013, the government also changed the inflation indexation method for renewable energy prices. Further measures are possible during 2013 as the Spanish authorities complete their power sector review.

In August, HgCapital sold its operating UK onshore wind portfolio to Munich Re, represented by its asset management arm MEAG. The portfolio includes the 21.25MW Tir Mostyn wind farm in North Wales, the 16MW Bagmoor wind farm in Lincolnshire and the 65MW Scout Moor wind farm near Manchester; they have a combined capacity of 102MW. The Trust's original investment in these wind farms was £3.3 million. The sale proceeds and operating cash distributions from the portfolio represented a 2.0x money multiple and an IRR of 20% p.a.

Since the year-end, HgCapital has sold the development assets of the UK onshore wind portfolio, including the developer, Ridgewind, to Blue Energy, the UK-based renewable energy investor and developer. The Ridgewind portfolio consists of 45MW of projects in late-stage construction, 132MW with planning permission and a significant development pipeline. The sale represented a 1.6x money multiple and an IRR of 15% p.a.

Mercury
In 2011, the Trust made a £60 million commitment to the Manager's new Mercury Fund, specialising in TMT investments with an enterprise value of between £20 million and £80 million. TMT is an area where the Manager has historically made many profitable investments and has now set up a dedicated team focused on this niche.

This fund is intended to target smaller buyouts in the same thematic TMT sub-sectors but with significant incremental resources added to the existing HgCapital sector team. This investment strategy led to the acquisition of Valueworks Limited in October 2012.Valueworks is a B2B electronic marketplace through which around 300 buyers (principally social housing organisations) procure goods and services, primarily relating to social housing planned repair and maintenance. Valueworks represents a continuation of HgCapital's TMT theme of partnering with industry champions in electronic marketplaces and private networks (e.g. Achilles and Epyx).

Geography and vintage analysis
At 31 December 2012, the geographical weighting of the total primary buyout portfolio was split 58% UK, 16% in the Nordic region and 18% in Germany and Benelux. In addition, TeamSystem, which is based in Italy, accounts for about 8% of the primary buyout portfolio value.

Geographic spread by value of primary buyout portfolio

58% UK

16% Nordic Region

12% Germany

8% Italy

6% Benelux

Vintage by value of primary buyout portfolio

7% 2012

23% 2011

33% 2010

5% 2009

8% 2008

24% pre 2008

Prospects
The macro-economic environment across Western Europe has weakened again in the last six months, heading downwards from a position which we already regarded as poor across most of the region. We believe that many mid-cap companies are experiencing more difficult trading conditions than macro-economic statistics might imply.

We have consistently reported our cautious view of Western European economic prospects since 2009, assuming minimal levels of GDP growth and high volatility, generally taking a more bearish stance than most economic commentators over the last four years, which has not changed. As a result, whilst the lack of economic growth is disappointing it is not a surprise and it does not fundamentally affect our ability to make good investment returns for our clients.

We continue to believe that macro-economic factors have relatively little bearing on our performance over the medium and long-term. This is because our investment strategy is focused on using deep sector expertise to identify market niches that exhibit strong secular growth despite a weak overall economy and provide consistent opportunities to make multiple investments that benefit from these fundamental growth trends. Our sector expertise, developed over 10-15 years, is used to identify the highest quality, growth companies in market niches which are growing at typically 2-3x GDP, driven by fundamental long-term factors. An example we have often cited is the increasing penetration of internet-based transactions for businesses, a trend we identified many years ago and exploited in several different sectors. Companies such as Visma, ISG, Achilles and Epyx benefit from this and have produced consistent aggregate growth in revenue and profit in excess of 10% p.a. since 2008. Less obvious examples include JLA and ATC; both companies provide business critical services to a fragmented customer base and both deliver strong growth. We believe that such companies will be more attractive to both trade and financial acquirers when the time comes to realise these investments. Our recent realisations of SHL, Mercury Pharma and part of our UK wind renewables portfolio amply demonstrate this: high quality, growth businesses which were coveted by strategic trade and financial acquirers.

INVESTMENTS - £37.6 million invested by the Trust in 2012

New buyout investments were made with a total enterprise value of £194.0 million, using £136.2 million of equity from our clients, with the Trust's share being £20.6 million.

The acquisition of Qundis was at an enterprise value of €151 million. This required investment of £76.8 million in equity from our clients, with the Trust's share being £11.6 million. Qundis supplies a comprehensive range of sub-metering devices, including heat cost allocators, heat meters and water meters used to measure, collect and transmit consumption-dependent data for heating and water usage on a unit level.

The acquisition of Valueworks Limited, the first investment by the HgCapital Mercury Fund, was at an enterprise value of £20 million. Valueworks is a B2B electronic marketplace for the UK housing construction and maintenance market. This required an investment of £14.8 million from our clients with the Trust's share of this investment being £2.4 million.

Our Services team has completed four small acquisitions in the UK automotive after-market car parts distributor sector, as part of a roll-up of businesses in this industry. The acquisitions of CES, Allparts, S.C. Motor Factors and GMF have combined turnover in excess of £110 million and we will continue to look at further opportunities in this space. To date we have deployed a total of £40 million of client capital, of which the Trust's share is £6.7 million. The individual businesses are now in the process of being integrated.

In addition, £17.0 million of the Trust's capital was invested in existing investments, including £4.0 million to buy out a minority investor in SimonsVoss, £3.6 million in Lumesse as part of a re-financing of the business, and £1.9 million was used to fund the bolt-on acquisition of Solor Care Group by Voyage.

£4.4 million of the above amount was invested into renewable power assets. This included a new investment in a Spanish hydro-electric plant and a further investment into our Nordic Wind platform.

Please also refer to more detailed information on our buyout investments on pages 34 to 55 and on the renewables funds on pages 56 and 57.

INVESTMENTS MADE DURING THE YEAR*
The Trust invested £37.6 million in fund limited partnerships during the year, which funded the investments below on behalf of the Trust
Company	Sector	Geography	Activity	Deal type	Cost £'000
Qundis	Industrials	Germany	Provider of sub-metering devices & systems	Buyout	11,552
Investments in the UK Parts Alliance	Services	UK	After-market car parts distributor	Buyout	6,654
Valueworks	TMT (Mercury)	UK	Electronic marketplace for goods & services procurement	Buyout	2,390
New investments					20,596

RPP2 Fund	Renewable energy	Europe	Further capital calls	Fund	4,391
SimonsVoss	Industrials	Germany	Provider of digital radio-based locking and access control systems	Buyout	4,035
Lumesse	TMT	UK	Strategic HR Software	Buyout	3,640
Voyage	Healthcare	UK	Care home operator	Buyout	1,931
HgCapital 6 E	Fund	Europe	Further capital calls	Fund	1,146
SPIN	Consumer & Leisure	UK	Sports spread betting firm	Buyout	938
Casa Reha	Healthcare	Germany	Care home operator	Buyout	694
Other investments					211
Further investments					16,986

Total on behalf of the Trust					37,582
*The numbers in the table relate to the Trust's share of underlying transactions

REALISATIONS
Full realisations of two buyout investments for £62.4 million for the Trust at a 68% uplift over the December 2011 book value

During the year we returned £572.2 million to clients, with the Trust's share being £80.2 million, primarily from the sale of two buyout investments and the sale of the UK Onshore Wind operating assets.

In July, SHL, the global leader in talent management, was sold to a US trade buyer, The Corporate Executive Board Company, for $660 million. The sale represented an investment multiple of 3.1x original cost and a gross IRR of 26% p.a. over the investment period. The overall proceeds from the sale for the Trust were £27.0 million.

In August, Mercury Pharma was sold to Cinven, a private equity investor, for £465 million. The initial proceeds from the sale realised £35.3 million in cash for the Trust. This, together with the residual value, represented a total return of 4.2x original cost (potentially rising to 4.3x) and a gross IRR of 67% p.a. over the investment period.

RPP1's UK Onshore Wind portfolio was sold to the asset management arm of Munich Re, MEAG, at an investment multiple of 2.0x and a gross IRR of 20% p.a. The proceeds from the sale returned £5.3 million to the Trust with other renewable energy distributions totalling £0.4 million.

In addition, further distributions of £12.1 million were received by the Trust, primarily from the refinancing of Mainio Vire, a leading Finnish care home provider (£3.7 million), the syndication of part of our stake in NetNames (£2.4 million) to a co-investor and the redemption of shareholders' loans from both Epyx and Manx Telecom.

REALISATIONS MADE DURING THE YEAR¹
The Trust received £80.2 million of capital and income distributions from fund limited partnerships during the year, which resulted from the underlying realisations below
Company	Sector	Exit Route	Cost £'000	Proceeds² £'000	Cumulative gain/(loss)³ £'000	Current year gain/(loss)⁴ £'000
Mercury Pharma	Healthcare	Secondary sale	8,545	35,339	26,794	19,331
SHL	Services	Trade sale	7,991	27,036	19,045	5,958
Full realisations			16,536	62,375	45,839	25,289
Hg RPP Fund	Renewable energy	Distribution received	4,968	5,661	693	-
Mainio Vire	Healthcare	Refinancing	4,022	3,682	(340)	(412)
NetNames	TMT	Syndication to co-investor	2,374	2,374	-	-
HgCapital 6 E	Fund	Distribution received	1,730	1,730	-	-
Manx Telecom	TMT	Loan stock capital & interest	1,189	1,496	307	82
Epyx	TMT	Loan stock interest	-	1,029	1,029	-
Other			701	1,841	1,140	1,363
Partial realisations			14,984	17,813	2,829	1,033
Total realisations on behalf of the Trust			31,520	80,188	48,668	26,322
¹ The numbers in the table relate to the Trust's share of transactions ² Includes gross revenue received during the year ended 31 December 2012 ³ Realised proceeds including gross revenue received, in excess of historic cost ⁴ Realised proceeds including gross revenue received, in excess of 31 December 2011 book value

Cash received post-year end

In December 2012, HgCapital agreed to sell the development assets of the UK onshore wind portfolio, including the developer, Ridgewind, to Blue Energy at a 1.6x money multiple and an IRR of 15% p.a. The sale was largely reflected in the 31 December 2012 valuation and, following completion, £2.8 million of cash distributions were received by the Trust with some residual value expected in the future. The Ridgewind portfolio consists of 44MW of wind farms in construction, 34MW fully permitted and ready to start construction and a pre-permitting pipeline in excess of 150MW.

UNDERLYING MID-CAP INVESTMENTS HELD BY THE PRIMARY BUY-OUT FUND LIMITED PARTNERSHIPS

The top 20 primary buyout investments accounts for 87% of the investments by value

	Investments (in order of value) Primary mid-cap buyout investments	Fund	Sector	Location	Year of Investment	Residual Cost £'000	Total valuation £'000	Portfolio value %	Cum. Value %
1	Visma	HGT LP	TMT	Nordic Region	2006	701	32,718	10.0%	10.0%
2	Iris Software Group	HGT 6 LP	TMT	UK	2011	25,598	25,607	7.9%	17.9%
3	TeamSystem	HGT 6 LP	TMT	Italy	2010	24,432	24,553	7.5%	25.4%
4	Lumesse	HGT 6 LP	TMT	UK	2010	19,430	19,390	6.0%	31.4%
5	Achilles	HGT LP	TMT	UK	2008	5,218	18,678	5.7%	37.1%
6	ATC Group	HGT 6 LP	Services	Benelux	2011	9,913	18,552	5.7%	42.8%
7	JLA	HGT 6 LP	Services	UK	2010	12,227	16,628	5.1%	47.9%
8	Manx Telecom	HGT 6 LP	TMT	UK	2010	9,844	15,108	4.6%	52.5%
9	NetNames	HGT 6 LP	TMT	UK	2011	14,249	14,321	4.4%	56.9%
10	Epyx	HGT 6 LP	TMT	UK	2009	6,388	13,653	4.2%	61.1%
11	Voyage	HGT LP	Healthcare	UK	2006	15,067	13,134	4.0%	65.1%
12	SimonsVoss	HGT 6 LP	Industrials	Germany	2010	11,936	12,438	3.8%	68.9%
13	Qundis	HGT 6 LP	Industrials	Germany	2012	11,552	11,522	3.5%	72.4%
14	Atlas	HGT LP	Services	UK	2007	9,597	8,673	2.7%	75.1%
15	Frösunda	HGT 6 LP	Healthcare	Nordic Region	2010	14,296	7,975	2.5%	77.6%
16	Schleich	HGT LP	C&L¹	Germany	2006	4,650	7,144	2.2%	79.8%
17	Investments in the Parts Alliance	HGT 6 LP	Services	UK	2012	6,654	6,654	2.0%	81.8%
18	Sporting Index	HGT LP	C&L¹	UK	2005	7,440	6,445	2.0%	83.8%
19	CSH	HGT 6 LP	TMT	UK	2011	5,058	5,672	1.7%	85.5%
20	Teufel	HGT 6 LP	Industrials	Germany	2010	9,417	3,322	1.0%	86.5%
21	Mainio Vire	HGT 6 LP	Healthcare	Nordic Region	2011	8,307	3,310	1.0%	87.5%
22	KVT	HGT LP	Industrials	Switzerland	2008	5,829	2,103	0.6%	88.1%
23	Mondo Minerals	HGT LP	Industrials	Nordic Region	2007	-	1,536	0.5%	88.6%
24	Casa Reha	HGT LP	Healthcare	Germany	2008	8,990	1,304	0.4%	89.0%
25	Americana	HGT LP	C&L¹	UK	2007	4,625	1,154	0.4%	89.4%
26	Goldshield²	HGT 6 LP	Healthcare	UK	2009	-	987	0.3%	89.7%
27	Tiger Capital	HGT LP	TMT	UK	2008	632	487	0.2%	89.9%
28	Weston Presidio Capital III	HGT LP	Fund	North America	1998	1,042	332	0.1%	90.0%
29	ACT Venture Capital	HGT LP	Fund	Ireland	1994	27	22	-	90.0%
30	Elite	HGT LP	TMT	Benelux	2005	-	-	-	90.0%
31	SHL	HGT LP	Services	UK	2006	-	-	-	90.0%
32	W.E.T.	HGT LP	Industrials	Germany	2003	7,774	-	-	90.0%
	Total primary mid-cap buyout investments (32)					260,893	293,422	90.0%
¹ Consumer and Leisure ² Trading as Mercury Pharma

FINANCIAL STATEMENTS

INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2012
	Notes	Revenue return		Capital return		Total return
	Notes	2012 £'000	2011 £'000	2012 £'000	2011 £'000	2012 £'000	2011 £'000
Gains/(losses) on investments and government securities	13	-	-	48,944	(6,649)	48,944	(6,649)
(Losses)/gains on loans recoverable from priority profit share due to General Partners	5(b)	-	-	(583)	8,017	(583)	8,017
Net income	4	13,600	1,952	-	-	13,600	1,952
Other expenses	6	(2,602)	(2,597)	-	-	(2,602)	(2,597)
Net return on ordinary activities before taxation		10,998	(645)	48,361	1,368	59,359	723
Taxation on ordinary activities	9(a)	(600)	-	-	-	(600)	-
Net return on ordinary activities after taxation attributable to reserves		10,398	(645)	48,361	1,368	58,759	723
Return per Ordinary share	10(a)	32.13p	(2.05p)	149.42p	4.34p	181.55p	2.29p
The total return column of this statement represents the Trust's income statement. The supplementary revenue and capital return columns are both prepared under guidance published by the Association of Investment Companies ('AIC'). All recognised gains and losses are disclosed in the revenue and capital columns of the income statement and as a consequence no statement of total recognised gains and losses has been presented. The movements in reserves are set out in note 21 to the financial statements. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. The following notes form part of these financial statements.

BALANCE SHEET AS AT 31 DECEMBER 2012
	Notes	2012 £'000	2011 £'000
Fixed assets
Investments held at fair value
Unquoted at Directors' valuation		286,026	265,421
Total fixed assets	12	286,026	265,421
Current assets - amounts receivable after one year
Accrued income on fixed assets	14	40,060	30,862
Current assets - amounts receivable within one year
Debtors	14	2,306	618
Government securities	15	108,359	48,497
Cash	16	5,867	4,476
Total current assets		156,592	84,453
Creditors - amounts falling due within one year	17	(4,662)	(3,042)
Net current assets		151,930	81,411
Net assets		437,956	346,832
Capital and reserves
Called up share capital	20	8,908	8,011
Share premium account	21	102,746	68,096
Capital redemption reserve	21	1,248	1,248
Capital reserve - realised	21	317,366	282,934
Capital reserve - unrealised	21	(9,545)	(23,474)
Revenue reserve	21	17,233	10,017
Total equity shareholders' funds		437,956	346,832

Basic net asset value per Ordinary share	10(b)	1,231.5p	1,089.9p
Diluted net asset value per Ordinary share	10(b)	1,221.7p	1,069.3p
Ordinary shares in issue at 31 December		35,564,185	31,822,330
The financial statements on pages 59 to 79 were approved and authorised for issue by the Board of Directors on 7 March 2013 and signed on its behalf by: Roger Mountford, Chairman Richard Brooman, Director The following notes form part of these financial statements.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2012
	Notes	2012 £'000	2011 £'000
Net cash inflow from operating activities	7	603	3,759
Taxation (paid)/received		(78)	1,590
Capital expenditure and financial investment
Purchase of fixed asset investments	12	(37,582)	(87,101)
Proceeds from the sale of fixed asset investments	12	68,939	49,623
Net cash inflow/(outflow) from capital expenditure and financial investment		31,357	(37,478)
Financing activities
Proceeds from issue of share capital		35,547	6,825
Equity dividends paid	11	(3,182)	(8,709)
Net cash inflow/(outflow) from financing activities		32,365	(1,884)
Net cash inflow/(outflow) before management of liquid resources		64,247	(34,013)
Management of liquid resources
Purchase of government securities	15	(90,006)	(117,127)
Sale/redemption of government securities	15	27,150	152,143
Net cash (outflow)/inflow from management of liquid resources		(62,856)	35,016
Increase in cash and cash equivalents in the year	16	1,391	1,003
Cash and cash equivalents at 1 January	16	4,476	3,473
Cash and cash equivalents at 31 December	16	5,867	4,476
The following notes form part of these financial statements.

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS FOR THE YEAR ENDED 31 DECEMBER 2012
	Notes	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total £'000
At 31 December 2011		8,011	68,096	1,248	259,460	10,017	346,832
Issue of Ordinary shares	20,21	934	34,650	-	-	-	35,584
Conversion of Subscription shares	20	(37)	-	-	-	-	(37)
Net return from ordinary activities		-	-	-	48,361	10,398	58,759
Dividends paid	11	-	-	-	-	(3,182)	(3,182)
At 31 December 2012	20,21	8,908	102,746	1,248	307,821	17,233	437,956

At 31 December 2010		7,838	61,444	1,248	258,092	19,371	347,993
Issue of Ordinary shares		180	6,652	-	-	-	6,832
Conversion of Subscription shares		(7)	-	-	-	-	(7)
Net return from ordinary activities		-	-	-	1,368	(645)	723
Dividends paid	11	-	-	-	-	(8,709)	(8,709)
At 31 December 2011	20,21	8,011	68,096	1,248	259,460	10,017	346,832
The following notes form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

1. Principal activity
The principal activity of the Trust is that of an investment trust company. The Trust is an investment company as defined by Section 833 of the Companies Act 2006 and an investment trust within the meaning of Sections 1158 and 1159 of the Corporation Tax Act 2010 ('CTA 2010').

2. Basis of preparation
The accounts 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') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' ('SORP'), dated January 2009. All of the Trust's operations are of a continuing nature.

The Trust has considerable financial resources and, as a consequence, the Directors believe that the Trust is well placed to manage its business risks successfully despite the current uncertain economic outlook. After making enquiries, the Directors have a reasonable expectation that the Trust will have adequate resources to continue in operational existence for the foreseeable future. Further details are provided in the Directors' report on page 82.

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

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

3. Organisational structure, manager arrangements and accounting policies

Partnerships where the Trust is the sole limited partner
The Trust entered into three separate partnership agreements with general and founder partners in May 2003 (subsequently revised in January 2009), January 2009 and July 2011, at which point investment holding limited partnerships were established to carry on the business of an investor, with the Trust being the sole limited partner in these entities.

The purpose of these partnerships, HGT LP, HGT 6 LP and HgCapital Mercury D LP (together the 'primary buyout funds') is to hold all the Trust's investments in primary buyouts and other investments, other than liquid funds. Under the partnership agreements, the Trust made capital commitments into the primary buyout funds with the result that the Trust now holds direct investments in the primary buyout funds and an indirect investment in the fixed asset investments that are held by these funds, as it is the sole limited partner. These direct investments are shown as fixed asset investments on the balance sheet and the investment portfolio on page 26.

Partnerships where the Trust is a minority limited partner
In July 2011, the Trust made a direct secondary investment into HgCapital 6 E LP ('Hg6 E LP'), one of the partnerships that comprise the Hg6 funds, in which the Trust is now a limited partner alongside other limited partners. This is a direct investment in the HgCapital 6 E LP fund, as shown on the balance sheet and the investment portfolio on page 26.

The Trust also entered into partnership agreements with the purpose of investing in renewable energy projects by making capital commitments alongside other limited partners in Hg Renewable Power Partners LP ('Hg RPP LP') and HgCapital Renewable Power Partners 2 C LP ('Hg RPP2 LP') (together the 'renewable funds'). These are direct investments in the renewable funds, as shown on the balance sheet and the investment portfolio on page 26.

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

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

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

Accordingly, the Trust's entitlement to net income and net capital gains are shown in the appropriate lines of the income statement. Notes 4, 5 and 7 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 on the previous page, all income that is recognised by the primary buyout funds, net of PPS, is attributed to the Trust.

The Trust will recognise such net income and reflect this as income in its financial statements, once recognised in the buyout funds. Income from HgCapital 6 E LP and the renewable funds would normally consist of income distributions and these distributions are recognised as income in the Financial Statements of the Trust when the right to such distribution is established.

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

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

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

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

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

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

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

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

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

Investments
The general principle applied is that investments should be reported at 'fair value' in accordance with Financial Instruments: Recognition and Measurement ('FRS26') and the International Private Equity and Venture Capital ('IPEV') Valuation Guidelines, September 2009 edition. Where relevant, the Trust applies the policies stated below to the investments held by HGT LP, HGT 6 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 including 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) subsequent to the initial fair value recognition in (i), companies are valued based on the level of maintainable earnings and an appropriate earnings multiple, unless (iv) is required;

(iii) where more appropriate, investments are valued with reference to their net assets rather than to their earnings; and

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

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

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

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

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

4. Income
	2012 £'000	2011 £'000
Income from investments held by HGT LP and HGT 6 LP
UK unquoted investment income	16,258	4,474
Foreign unquoted investment income	3,260	12,591
Other investment income
UK unquoted investment income	929	-
Gilt interest less amortisation of premium	(237)	53
Total investment income	20,210	17,118
Other income
Deposit interest	42	23
Other interest income	-	18
Total other income	42	41
Total income	20,252	17,159
Priority profit share charge against income
Current year - HGT LP	(1,383)	(1,357)
Prior year - HGT LP	(402)	-
Current year - HGT 6 LP	(4,867)	(4,914)
Prior year - HGT 6 LP	-	(8,936)
Total priority profit share charge against income	(6,652)	(15,207)
Total net income	13,600	1,952
Total income comprises:
Interest	13,600	1,952
Total net income	13,600	1,952

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	2012 £'000	2011 £'000
Priority profit share payable
Current year amount	7,235	7,190
Less: Current year loans advanced to General Partners	(985)	(919)
Current year charge against income	6,250	6,271
Add: Prior year loans to General Partners recovered from priority profit share	402	8,936
Total priority profit share charge against income	6,652	15,207

The priority profit share payable on HGT LP, HGT 6 LP and Hg Mercury D LP rank as a first appropriation of net income from investments held in HGT LP, HGT 6 LP and Hg Mercury D LP respectively and is deducted prior to such income being attributed to the Trust in its capacity as a Limited Partner. The net income of HGT LP, HGT 6 LP and Hg 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 on page 86 and page 67.

The terms of the above priority profit share arrangements during 2012 were:

Fund partnership	Fee per year
HGT LP	1.5% on the value of investments in fund
HGT 6 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

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

Fund partnership	Fee per year
HgCapital 6 E LP	1.75% on the fund commitment during the investment period
HgRenewable Power Partners LP	1.5% of original cost of investments in fund less the original cost of investments that have been realised or written off (previously1.75% of the fund commitment during the investment period that ended on 31 May 2010)
HgCapital Renewable Power Partners 2 C LP	1.64% on the fund commitment during the investment period.

(b) Loans to General Partners	Capital return
(b) Loans to General Partners	2012 £'000	2011 £'000
Movements on loans to General Partners
Losses on current year loans advanced to General Partners	(985)	(919)
Gains on prior year loans to General Partners recovered against income	402	8,936
Total (losses)/gains on loans recoverable from General Partners	(583)	8,017

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

(c) Carried interest to Founder Partners	Capital return
(c) Carried interest to Founder Partners	2012 £'000	2011 £'000
Carried interest payable
Current year amount	2,728	2,079
Total carried interest charge against capital gains (note 13)	2,728	2,079

The carried interest payable ranks as a first appropriation of capital gains on the investments held in HGT LP, HGT 6 LP and Hg Mercury D LP, limited partnerships established solely to hold the Trust's investments, and is deducted prior to such gains being paid to the Trust in its capacity as a Limited Partner. The net amount of capital gains of HGT LP, HGT 6 LP and Hg Mercury D LP during the year, after the deduction of carried interest, is shown on the income statement. Details of the carried interest contracts are disclosed in the Directors' report on page 86.

6. Other expenses

Operating expenses	2012 £'000	2011 £'000
Custodian and administration fees	479	445
Directors' remuneration (note 8)	198	189
Bank facility fees and expenses	501	840
Legal and other administration costs	1,355	1,053
	2,533	2,527
Fees payable to the Trust's auditor
Audit of the Trust and Fund Limited Partnerships' annual accounts	51	48
Tax compliance services	14	18
Other non-audit services	4	4
Total fees payable to the Trust's auditor	69	70
Total other expenses	2,602	2,597
The Trust's total expense ratio ('TER'), calculated as total expenses including the priority profit share as a percentage of average net assets was:	2.51%	2.82%

7. Cash flow from operating activities

Reconciliation of net return before taxation to net cash flow from operating activities	2012 £'000	2011 £'000
Net return before taxation	59,359	723
Add back: (Gains)/losses on investments held at fair value	(51,672)	4,570
Increase in carried interest payable	649	943
Amortisation of premium on government securities	2,704	2,656
Increase in prepayments and accrued income	(10,199)	(4,648)
Decrease in debtors	-	17
Decrease in creditors	(238)	(495)
Tax on investment income included within gross income	-	(7)
Net cash inflow from operating activities	603	3,759

8. Directors' remuneration

The aggregate remuneration of the Directors for the year to 31 December 2012 was £197,500 (2011: £188,500).

Further information on the Directors' remuneration is disclosed in the Directors' remuneration report on page 94.

9. Taxation on ordinary activities

(a) Analysis of charge in the year	2012 £'000	2011 £'000
Current tax:
UK corporation tax	3,213	-
Income streaming relief	(2,004)	-
Prior year adjustment	85	-
Current revenue tax charge for the year (note 9(b))	1,294	-
Deferred tax:
Origination of timing differences	(694)	-
Total deferred tax credit for the year (note 9(c))	(694)	-
Total taxation on ordinary activities	600	-

(b) Factors affecting current tax charge for the year

The tax assessed for the year is the same as the standard rate of corporation tax in the UK for a large company (24.5%; 2011: 26.5%).

The differences are explained below:

	2012 £'000	2011 £'000
Net revenue return on ordinary activities before taxation	10,998	(645)
UK corporation tax charge/(credit) at 24.5% thereon (2011: 26.5%)	2,694	(171)
Effects of:
Tax relief from interest distribution	(2,004)	-
Taxable income not recognised in revenue return	519	-
Unutilised losses arising in the year	-	171
Tax in relation to the prior year	85	-
	(1,400)	171
Current revenue tax charge for the year (note 9(a))	1,294	-

In the opinion of the Directors, the Trust has complied with the requirements of Section 1158 and Section 1159 of the CTA 2010 and will therefore be exempt from corporation tax on any capital gains made in the year. The Trust will elect to designate all of the proposed dividend (see note 11) as an interest distribution to its shareholders. This distribution is treated as a tax deduction against taxable income and results in a reduction of corporation tax being payable by the Trust at 31 December 2012.

(c) Deferred tax	2012 £'000	2011 £'000
Deferred tax:
Taxable income not recognised in revenue return	(694)	-
Total deferred tax credit for the year (note 9(a))	(694)	-
Deferred tax recoverable:
Deferred tax credit for the year	694	-
Recoverable deferred tax at end of year	694	-

10. Return and net asset value per Ordinary share

(a) Return per ordinary share	Revenue return		Capital return
(a) Return per ordinary share	Year ended 31.12.12	Year ended 31.12.11	Year ended 31.12.12	Year ended 31.12.11
Earnings (£'000):
Return on ordinary activities after taxation	10,398	(645)	48,361	1,368
Number of shares ('000)
Weighted average number of shares in issue	32,366	31,518	32,366	31,518
Return per Ordinary share (pence)	32.13	(2.05)	149.42	4.34

At the beginning of the year the Trust had 5,502,368 Subscription shares in issue. On 11 June 2012 and 9 November 2012 respectively, 4,177 and 3,737,678 new Ordinary shares were issued pursuant to the exercise of Subscription shares. The remaining 1,760,513 Subscription shares are convertible into Ordinary shares of 31 May 2013.

(b) Net asset value per share	Year ended 31.12.12	Year ended 31.12.11
Net asset value (£'000)
Net assets	437,956	346,832
Assuming exercise of all outstanding Subscription shares	18,045	52,272
Fully diluted net asset value	456,001	399,104
Number of Ordinary shares ('000)
Number of Ordinary shares in issue	35,564	31,822
Potential issue of new Ordinary shares on exercise of Subscription shares	1,761	5,503
Ordinary shares in issue following exercise of Subscription shares	37,325	37,325
Basic net asset value per share (pence)	1,231.5	1,089.9
Fully diluted net asset value per share (pence)	1,221.7	1,069.3

The diluted NAV per share is calculated by adding to the current NAV (basic) of £437,956,000 the proceeds of £18,045,000 from the exercise of Subscription shares, assuming all outstanding Subscription shares will be exercised at the subscription price of £10.25, and then dividing the adjusted NAV (diluted) by the adjusted number of Ordinary shares in issue (37,324,698).

11. Dividends on ordinary shares

	Register date	Payment date	2012 £'000	2011 £'000
Dividend of 28.0p for the year ended 31 December 2010	8 April 2011	13 May 2011	-	8,709
Dividend of 10.0p for the year ended 31 December 2011	10 April 2012	15 May 2012	3,182	-
			3,182	8,709

The proposed dividend of 23.0 pence per Ordinary share for the year ended 31 December 2012 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:

	2012 £'000
Revenue available for distribution by way of dividend for the year	10,398
Proposed dividend of 23.0p for the year ended 31 December 2012 (based on 35,564,185 Ordinary shares in issue at 31 December 2012)	(8,180)
Undistributed revenue for Section 1159 purposes*	2,218

*Undistributed revenue comprises 14.1% of total taxable income of £15,774,000.

12. Fixed asset investments

	2012 £'000	2011 £'000
Investments held at fair value through profit and loss
Investments held in HGT LP
Unquoted investments	76,258	69,181
Investments held in HGT 6 LP
Unquoted investments	177,104	165,787
Investments held in HgCapital Mercury D LP
Unquoted investments	2,390	-
Other investments held by the Trust
Unquoted investments	30,274	30,453
Total fixed asset investments	286,026	265,421
Total fixed asset investments consist of:
Fund limited partnerships	286,026	265,421

	2012 £'000	2011 £'000
Opening valuation as at 1 January	265,421	232,184
Add back: opening unrealised depreciation - investments	22,286	5,885
- financial derivative instruments	52	1,595
Opening book cost as at 1 January	287,759	239,664
Movements in the year:
Additions at cost	37,582	87,101
Disposals- proceeds	(68,939)	(49,623)
- realised gains on sales	37,419	10,617
Closing book cost of investments	293,821	287,759
Less: closing unrealised depreciation - investments	(7,795)	(22,286)
- financial derivative instruments	-	(52)
Closing valuation of investments as at 31 December	286,026	265,421

The above investments include investments in companies that are indirectly held by the Trust through its investment in HGT LP, HGT 6 LP and HgCapital Mercury D LP, as set out in note 3 on page 63, 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 government securities	2012 £'000	2011 £'000
Realised
Realised gains/(losses) on sales - fixed asset investments	37,414	11,455
- financial derivative instruments	5	(838)
- government securities	(259)	(517)
	37,160	10,100
Carried interest charge against capital gains (note 5(c))	(2,728)	(2,079)
Net realised gains	34,432	8,021
Unrealised
Change in unrealised gains/(losses) - fixed asset investments	14,491	(16,401)
- financial derivative instruments	52	1,543
- government securities	(31)	188
Net unrealised gains/(losses)	14,512	(14,670)
Total gains/(losses)	48,944	(6,649)

14. Debtors and accrued income

	2012 £'000	2011 £'000
Amounts receivable after one year
Accrued income on fixed assets	40,060	30,862
Amounts receivable within one year
Taxation recoverable	-	7
Deferred tax recoverable (note 9(c))	694	-
Accrued income on government securities	1,538	543
Prepayments and other accrued income	74	68
	2,306	618
Total debtors	42,366	31,480

15. Government securities

	2012 £'000	2011 £'000
Investments held at fair value through profit and loss
Opening valuation	48,497	86,498
Purchases at cost	90,006	117,127
Sales and redemptions	(27,150)	(152,143)
Movement in unrealised capital (losses)/gains	(31)	188
Amortisation of premium on acquisition	(2,704)	(2,656)
Realised capital losses	(259)	(517)
Closing valuation	108,359	48,497

16. Movement in net funds

	2012 £'000	2011 £'000
Change in cash	1,391	1,003
Net funds at 1 January	4,476	3,473
Net funds at 31 December	5,867	4,476
Net funds comprise:
Cash	5,867	4,476

17. Creditors - amounts falling due within one year

	2012 £'000	2011 £'000
Carried interest	2,728	2,079
Taxation payable	1,209	-
Sundry creditors	725	963
	4,662	3,042

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

18. Bank facility

On 24 August 2011, the Trust entered into a £40,000,000 multicurrency revolving credit facility on an unsecured basis. The facility is available for three years. Under the facility agreement, the Company is liable to pay interest on any drawn amount at LIBOR plus a margin of 2.75%. A commitment fee of 1.1% p.a. is liable on any undrawn commitment. No amount was drawn during the year under review.

19. Financial risk

The following disclosures relating to the risks faced by the Trust are provided in accordance with Financial Reporting Standard 29, 'Financial instruments: disclosures'. The reference to investments in this note is in relation to the Trust's direct investments in RPP1, RPP2, Hg6E and the underlying investments in HGT LP, HGT 6 LP and HgCapital Mercury D LP as described in note 3 on page 63.

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

Valuation risk
The Trust's exposure to valuation risk arises mainly from movements in the value of the underlying investments (held through fund partnerships), the majority of which are unquoted. A breakdown of the Trust's portfolio is given on page 26. In accordance with the Trust's accounting policies, the investments in fund limited partnerships are valued by reference to all underlying unquoted investments, which are valued by the Directors following the IPEV guidelines. The Trust does not hedge against movements in the value of these investments, apart from foreign exchange movements as explained below. The Trust has exposure to interest rate movements, through bank deposits and gilt holdings.

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

unquoted companies.

The Trust adopted the amendment to FRS 29, effective 1 January 2009. This requires the Trust to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

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

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

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

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

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

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

Financial assets	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 LP	-	-	76,258	76,258
- Investment in HGT 6 LP	-	-	177,104	177,104
- Investment in HgCapital Mercury D LP	-	-	2,390	2,390
- Investment in Hg 6 E LP	-	-	10,434	10,434
- Investment in Hg RPP LP	-	-	11,335	11,335
- Investment in Hg RPP2 LP	-	-	8,505	8,505
- Government securities	108,359	-	-	108,359
Other assets
Accrued income	1,538	-	40,060	41,598
As at 31 December 2012	109,897	-	326,086	435,983

Financial assets	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 LP	-	-	69,181	69,181
- Investment in HGT 6 LP	-	-	165,787	165,787
- Investment in Hg 6 E LP	-	-	9,445	9,445
- Investment in Hg RPP LP	-	-	15,806	15,806
- Investment in Hg RPP2 LP	-	-	5,202	5,202
- Government securities	48,497	-	-	48,497
Other assets
Accrued income	543	-	30,862	31,405
As at 31 December 2011	49,040	-	296,283	345,323

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

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 period ended 31 December 2012 by class of financial instrument.

Unquoted investments	Accrued income on investments 2012 £'000	Investments in limited partnerships 2012 £'000	Total 2012 £'000
Opening balance	30,862	265,421	296,283
Purchases	-	37,582	37,582
Realisations at 31 December 2011 valuation	(8,620)	(45,246)	(53,866)
Total gains for the year included in the income statement	17,818	28,269	46,087
Closing valuation of level 3 investments	40,060	286,026	326,086
Total gains for the year included in the income statement for investments held at the end of the year	20,447	51,485	71,932

Equity price risk
Equity price risk is the risk of a fall in the fair values of equities (including loans) held by the Trust indirectly through its direct investments in fund limited partnerships. The Board revalues each investment twice each year. The Board manages the risks inherent in the investment portfolio by ensuring full and timely access to relevant information from the Manager. The Board meets regularly and at each meeting reviews the trading performance of the principal underlying investments. If there appears to the Board to be an impairment in value between regular valuations, it can revalue the investment. The Board also monitors the Manager's compliance with the Trust's investment objective and investment policy. The Manager's best estimate of the effect on the net assets and total return due to a reasonably possible change in the value of all unquoted securities, with all other variables held constant, is as follows:

% change

£'000

NAV per Ordinary share (pence)

Unquoted

10%

32,609

91.7

Credit risk
Credit risk is the risk of financial loss in the event that any of the Trust's market counterparties fail to fulfil their contractual obligations to the Trust. The Trust's financial assets (excluding fixed asset investments) that are subject to credit risk, were neither impaired nor overdue at the year-end. The Trust's cash balances are held with the Bank of New York Mellon and any significant balances are invested in government securities issued by the United Kingdom. Foreign exchange forward contracts and options are held with counterparties which have credit ratings that the Board considers to be adequate. The Board regularly monitors the credit quality and financial position of these market counterparties. The credit quality of the above mentioned financial assets was deemed satisfactory.

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

Currency risk and sensitivity
The Trust is exposed to currency risk as a result of investing in fund partnerships which invest in companies that operate in currencies other than sterling. The value of these assets in sterling, being the Trust's functional currency, can be significantly influenced by movements in foreign exchange rates. The Trust is partially hedged against movements in the value of the euro against pounds sterling affecting the value of its investments, as explained below. The Manager monitors the Trust's exposure to foreign currencies and reports to the Board on a regular basis. The following table illustrates the sensitivity of the revenue and capital return for the year in relation to the Trust's year-end financial exposure to movements in foreign exchange rates against the Trust's functional currency. The rates represent the range of movements against sterling over the current year for the currencies listed.

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

	Revenue return		Capital return
	£'000	NAV per Ordinary share (pence)	£'000	NAV per Ordinary share (pence)
Highest value against sterling during the year
Euro (1.1779)	640	1.8	5,260	14.8
Norwegian kroner (8.8264)	-	-	815	2.3
Swedish kroner (10.3920)	18	0.1	122	0.3
Swiss franc (1.4196)	6	-	95	0.3
US dollar (1.5285)	-	-	21	0.1
	664	1.9	6,313	17.8
Lowest value against sterling during the year
Euro (1.2848)	(553)	(1.6)	(4,545)	(12.8)
Norwegian kroner (9.5858)	-	-	(1,842)	(5.2)
Swedish kroner (11.4218)	(75)	(0.2)	(517)	(1.4)
Swiss franc (1.5429)	(4)	-	(71)	(0.2)
US dollar (1.6270)	-	-	-	-
	(632)	(1.8)	(6,975)	(19.6)

At 31 December 2012, the following rates were applied to convert foreign denominated assets into sterling: Euro (1.2329); Norwegian Kroner (9.0463); Swedish Kroner (10.5746); Swiss Franc (1.4879); and US Dollar (1.6255).

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

		2012		2011
	Currency	No. '000	£'000	No. '000	£'000
Forward foreign currency contracts	Euro	-	-	1,544	(52)

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

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

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

However, funds awaiting investment are invested in Government securities and, as stated above, the valuation is affected by movements in interest rates. The sensitivity of the capital return of the Trust to movements in interest rates has been based on the UK base rate. With all other variables constant, a 0.5% decrease in the UK base rate should increase the capital return in a full year by £542,000, with a corresponding decrease if the UK base rate were to increase by 0.5%. In the opinion of the Directors, the above sensitivity analyses may not be representative of the year as a whole, since the level of exposure changes as investments are made and realised throughout the year.

Liquidity risk
Investments in unquoted companies, which form the majority of the Trust's investments, may not be as readily realisable as investments in quoted companies, which might result in the Trust having difficulty in meeting its obligations. Liquidity risk is currently not significant as about 15% of the Trust's net assets at the year-end are liquid resources and, in addition, the Trust has a £40 million undrawn bank facility available. The Board gives guidance to the Manager as to the maximum amount of the Trust's resources that should be invested in any one company. For details refer to the investment policy on page 9.

Currency exposure
The currency denominations of the Trust's financial assets, held in fund limited partnerships, are shown below. Short-term debtors and creditors, which are excluded, are mostly denominated in pounds sterling, the functional currency of the Trust.

	2012				2011
	Fixed rate £'000	Floating rate £'000	Non interest-bearing £'000	Total £'000	Fixed rate £'000	Floating rate £'000	Non interest-bearing £'000	Total £'000
Pounds sterling	109,896	2,540	160,027	272,463	49,039	6,071	145,495	200,605
Euro	-	3,327	122,932	126,259	-	2,164	116,123	118,287
Euro hedge	-	-	-	-	-	-	(52)	(52)
Norwegian kroner	-	-	32,718	32,718	-	-	23,156	23,156
Swedish kroner	-	-	7,975	7,975	-	-	6,692	6,692
Swiss franc	-	-	2,103	2,103	-	-	523	523
US dollar	-	-	332	332	-	-	588	588
Total	109,896	5,867	326,087	441,850	49,039	8,235	292,525	349,799

Fixed rate assets comprised gilts with interest rates of 4.50% per annum and which matures in March 2013. It is the intention to re-invest the proceeds at maturity in another short dated gilt. The floating rate assets consisted of cash.

The non interest-bearing assets represents the investment portfolio and the financial derivative instruments held in fund limited partnerships.

The Trust did not have any outstanding borrowings at the year-end (2011: £nil). The numerical disclosures above exclude short-term debtors and creditors.

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

	2012 £'000	2011 £'000
Equity:
Equity share capital	8,908	8,011
Share premium	102,746	68,096
Capital redemption reserve	1,248	1,248
Retained earnings and other reserves	325,054	269,477
Total capital	437,956	346,832

As stated above, the Trust did not have any outstanding borrowings at the year-end (2011: nil). With the assistance of the Manager, the Board monitors and reviews the broad structure of the Trust'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 Trust are trading against the advantages of retaining cash for investment;

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

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

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

20. Issued share capital

	2012		2011
	No.'000	£'000	No.'000	£'000
Ordinary shares of 25p each
Allotted, called-up and fully paid
At 1 January	31,822	7,956	31,104	7,776
Issued following exercise of subscription rights	3,742	934	718	180
At 31 December	35,564	8,890	31,822	7,956

Subscription shares of 1p each
Allotted, called-up and fully paid
At 1 January	5,503	55	6,221	62
Conversion into Ordinary shares	(3,742)	(37)	(718)	(7)
At 31 December	1,761	18	5,503	55
Total share capital	37,325	8,908	37,325	8,011

The Trust's issued share capital at the beginning of the year consisted of 31,822,330 Ordinary shares. On 11 June 2012 and 9 November 2012 respectively, 4,177 and 3,737,678 new Ordinary shares were issued pursuant to the exercise of Subscription shares. The subscription price paid per Ordinary share was £9.50 and total proceeds of £35,547,000 were received by the Trust.

At the beginning of the year, the Trust had 5,502,368 Subscription shares in issue. Each Subscription share entitles the holder to subscribe for one Ordinary share upon exercise of the subscription right and payment of the subscription price. The first opportunity in the current year to exercise such right was on 31 May 2012 when 4,177 Subscription shares were exercised. The Ordinary shares issued commenced trading on the 14 June 2012. The second opportunity to exercise such right was on 31 October 2012 when 3,737,678 Subscription shares were exercised. The Ordinary shares commenced trading on 12 November 2012. The final opportunity to exercise subscription rights is on 31 May 2013 at a subscription price of £10.25 per share.

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

21. Share premium account and reserves

	Share premium account £'000	Capital redemption reserve £'000	Capital reserve realised £'000	Capital reserve unrealised £'000	Revenue reserve £'000
As at 1 January 2012	68,096	1,248	282,934	(23,474)	10,017
Issue of Ordinary shares	34,650	-	-	-	-
Transfer on disposal of investments	-	-	13,726	(13,726)	-
Losses on government securities	-	-	(259)	(31)	-
Net gain on sale of fixed asset investments	-	-	23,693	-	-
Net movement in unrealised depreciation of fixed asset investments	-	-	-	28,269	-
Dividends paid	-	-	-	-	(3,182)
Net return for the year after taxation	-	-	-	-	10,398
Loans to General Partners provided	-	-	-	(583)	-
Carried interest to Founder Partner	-	-	(2,728)	-	-
As at 31 December 2012	102,746	1,248	317,366	(9,545)	17,233

22. Commitment in fund partnerships and contingent liabilities

Original and outstanding commitments in Fund partnerships Fund	Original Commitment £'000	Outstanding at 31 Dec
	Original Commitment £'000	2012 £'000	2011 £'000
HGT 6 LP¹	285,029	64,479	85,888
HgCapital Mercury D LP	60,000	55,274	58,970
Hg RPP2 LP	32,444²	22,052³	27,222
HGT LP⁴	120,000	15,791	17,094
Hg 6 E LP	15,000	3,586	4,732
Hg RPP LP	17,552⁵	985⁶	1,236
Total outstanding commitments		162,167	195,142
¹HgCapital Trust plc has the benefit of an investment opt-out provision in its commitment to invest alongside HgCapital 6, so that it can opt out of a new investment without penalty should it not have the cash available to invest. ² Sterling equivalent of €40,000,000 ³ Sterling equivalent of €27,188,000 (2011: €32,590,000) ⁴ With effect from 21 October 2011, £12 million (10% of the original £120 million loan commitment to the Hg5 fund) was cancelled. ⁵ Sterling equivalent of €21,640,088 ⁶ Sterling equivalent of €1,215,000 (2011: €1,479,00

23. Related party transactions

HgCapital and its subsidiaries, acting as Manager of the Trust through a management agreement and participating through limited partnership agreements as General and Founder partners of the fund partnerships in which the Trust invests, are considered to be related parties by virtue of the above agreements.

During the year, priority profit shares allocated to HgCapital were £7,235,000 (2011: £7,190,000) and a carried interest profit allocation of £2,728,000 (2011: £2,079,000) was made to HgCapital during the year.

HgCapital also acts as secretary and administrator of the Trust. Total fees for the year amounted to £387,000 (2011: £342,000).

At 31 December 2012, the amount due to HgCapital relating to the above, disclosed under creditors, was £2,824,000 (2011: £2,165,000).

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

The Trust's Financial Statements for the year ended 31 December 2012 have been audited by of Deloitte LLP. The text of the Auditor's report can be found on page 79 of the Trust's annual report and accounts.

DIRECTORS' REPORT

The Directors present the annual report and financial statements of HgCapital Trust plc (the 'Trust') (Reg. No. 1525583) for the year ended 31 December 2012.

The Chairman's statement, the description of the Trust's investment objective, investment policy, rationale & business model, and corporate governance statement form part of this Directors' report.

BUSINESS REVIEW

Background

The purpose of the business review is to provide an overview of the business of the Trust by:

• Analysing development and performance using appropriate key performance indicators ('KPIs');

• Outlining the principal risks and uncertainties affecting the Trust;

• Describing how the Trust manages these risks;

• Explaining the future business plans of the Trust;

• Setting out the Trust's environmental, social and ethical policy;

• Providing information about persons with whom the Trust has contractual or other arrangements which are essential to the business of the Trust; and

• Outlining the main trends and factors likely to affect the future development, performance and position of the Trust's business.

Principal activity and business review
The principal activity of the Trust is to operate as an investment trust providing access to a diversified portfolio of private equity investments. A review of the development and performance of the business for the year ended 31 December 2012 is given in the Chairman's statement, which forms part of this Directors' report, and in the Manager's review.

Status of the Trust
HMRC accepted the Trust as an investment trust for the purposes of Section 1158 of the Corporation Tax Act 2010 ('CTA 2010') for the year ended 31 December 2011. It is the intention of the Trust to continue to seek approval for classification as an investment trust under Section 1158 of the CTA 2010 for subsequent tax years. In the opinion of the Directors, the Trust continues to conduct its affairs as an investment trust within the definition prescribed by the CTA and is not a close company as defined by relevant tax legislation and provisions.

Capital Structure
The Trust had 31,822,330 ordinary shares and 5,502,368 subscription shares in issue at the beginning of the year. The ordinary shares increased to 35,564,185 and the subscription shares decreased to 1,760,513 at 31 December 2012 respectively, following the conversion of 3,741,855 subscription shares into ordinary shares during the year. As at 1 March 2013, the Trust had 35,564,185 ordinary shares of 25 pence each and 1,760,513 subscription shares of 1 penny each in issue. Each ordinary share has one voting right attached to it and the subscription shares carry no voting rights. Consequently, the total number of voting rights in the Trust at this date was 35,564,185. Further information on the share capital of the Trust can be found in note 20 to the financial statements.

Going concern
The Trust's business activities, together with the factors likely to affect its future development, performance and position are described in the Chairman's statement and in the Manager's review. The financial position of the Trust, its cash flows, liquidity position and borrowing facilities are described in the Directors' report. In addition, note 19 to the financial statements includes the Trust's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. The Directors believe that the Trust is well placed to manage its business risks successfully, despite the current uncertain economic outlook. The Directors review cash flow projections regularly, including important assumptions as to future realisations and the rate at which funds will be deployed into new investments. The Directors have a reasonable expectation that the Trust will have adequate resources to continue in operational existence for the foreseeable future and be able to meet its outstanding commitments as noted on pages 5 and 25. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

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

During 2011 the Board finalised a £40 million three-year multicurrency standby facility with Lloyds TSB Bank plc, on an unsecured basis. The Directors believe the borrowing facility gives the Board further flexibility in managing the Trust's resources, without adding undue risk. The facility was unutilised as at 31 December 2012.

Performance
In the year to 31 December 2012, the Trust's NAV per share (including dividends re-invested) increased by 15.3%. This compares with an increase in the FTSE All-Share Index (total return) of 12.3%. The Trust's ordinary share price increased by 5.8% on a total return basis.

Results and dividend
The total return for the Trust is set out in the income statement. The total return for the year, after taxation, was £58,759,000 (2011: £723,000) of which £10,398,000 was revenue return (2011: deficit of £645,000).

The Directors recommend the payment of a dividend of 23.0p per ordinary share for the year ended 31 December 2012 (2011: 10.0p). Subject to approval of this dividend at the forthcoming annual general meeting ('AGM'), it will be paid on 15 May 2013 to shareholders on the register of members at the close of business on 5 April 2013.

Key performance indicators
Each Board meeting conducts a detailed review of the portfolio and reviews trading results and ratios to understand the impact on the Trust of the trading performance of the individual portfolio holdings. The KPIs used to measure the progress and performance of the Trust over time and which are comparable to those reported by other investment trusts include NAV per share, share price, return per share, average monthly trading volumes and cash flow. Further information on KPIs and the Trust's progress against these can be found in the Chairman's statement on pages 4 and 5 and the Manager's review on pages 20 to 32. The Directors recognise that it is in the long-term interest of shareholders that shares do not trade at a significant discount to the prevailing NAV and they monitor the Trust's discount or premium regularly.

PRINCIPAL RISKS
The key financial risks faced by the Trust are set out below and in note 19 to the financial statements. The Board regularly reviews and agrees policies for managing each risk, as summarised below.

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

Regulatory risk
The Trust operates as an investment trust in accordance with Sections 1158 and 1159 of CTA 2010. As such, the Trust is exempt from corporation tax on any capital gains realised from the sale of its investments, so the loss of investment trust status would represent a significant risk to the Trust. The Manager monitors investment movements, the level and type of forecast income and expenditure, and the amount of retained income (if any) to ensure that the provisions of Sections 1158 and 1159 of CTA 2010 are not breached. The results are reported to the Board at each meeting.

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

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

The Board has considered an Assurance Report on Internal Controls (AAF 01/06) as prepared by the Manager for the year ended 31 December 2012, and independently reviewed by Deloitte LLP.

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

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

In the event that the Directors have any particular concerns regarding the liquidity of the Trust and its cash resources, the Trust may exercise an opt-out in respect of new buyout investments alongside HgCapital 6 in order to manage the risk of over-commitment.

During 2011 the Directors also arranged a £40 million three-year standby facility as noted on page 82, allowing further flexibility in the management of the Trust's resources.

SOCIAL, ENVIRONMENTAL & ETHICAL POLICY

In 2006 and again in 2010, the Trust committed to invest in the Hg Renewable Power Partners funds, which the Board believes offer a profitable route for the Trust to participate in efforts to combat climate change.

The Manager addresses other investment opportunities on a sector basis. The sectors chosen do not generally raise ethical issues.

The Trust has no employees and has limited direct impact on the environment. The Trust 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.

Stewardship
HgCapital seeks to invest in companies that are well managed, with high standards of corporate governance. The Directors of the Trust believe this creates the proper conditions to enhance long-term shareholder value and to achieve a high level of corporate performance.

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

FUTURE PROSPECTS
The Board's main focus is on the achievement of capital growth and the future of the Trust is dependent upon the success of the investment strategy. The outlook for the Trust is discussed in the Chairman's statement and the Manager's review.

DERIVATIVE TRANSACTIONS
The Trust had no outstanding derivative contracts at 31 December 2012.

*The annual report contains the following statement regarding the Directors' responsibility for preparing the annual report and financial statements.

STATEMENT OF DIRECTORS' RESPONSIBILITIES
in respect of the annual report and the financial statements

The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Trust and of the profit or loss of the Trust for that period.

In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

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

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

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

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

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

Responsibility statement
We confirm that to the best of our knowledge:

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

• the Directors' Report includes a fair review of the development and performance of the business and the position of the Trust, together with a description of the principal risks and uncertainties that it faces.

By order of the Board
Roger Mountford, Chairman
7 March 2013

Annual General Meeting (`AGM')

The AGM of the Trust, which will include a presentation by the Manager, will be held at the offices of HgCapital, 2 More London Riverside, London SE1 2AP on Wednesday 8 May 2013 at 12 noon. Light refreshments will be available at the conclusion of the AGM. Notice of the AGM is given in the annual report and accounts.

Dividend

The dividend proposed in respect of the year ended 31 December 2012 is 23.0p per share.

Ex-dividend date (shares transferred without dividend) 3 April 2013

Record date 5 April 2013
(last date for registering transfers to receive the dividend)

Last date for registering DRIP instructions 23 April 2013

Dividend payment date 15 May 2013

Subscription share date (final date to exercise right) 31 May 2013

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

National Storage Mechanism

A copy of the annual report and financial statements will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.hemscott.com/nsm.do.

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

This information is provided by RNS

The company news service from the London Stock Exchange

END

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