25th Aug 2011 07:00
HgCapital Trust plc
Press release - Interim Results for the six months ended 30 June 2011
London, 25 August 2011: HgCapital Trust plc ("the Trust"), whichprovides investors with a listed vehicle to invest in all private equity dealsmanaged by HgCapital, today announces its interim results for the six monthsended 30 June 2011.
HGCAPITAL TRUST PLC CONTINUES TO DELIVER LONG TERM OUTPERFORMANCE
Financial Highlights for the above period
% Total 30 June 31 December return* 2011 2010Share price +16.1% 1,140.0p 1,006.0pNAV per share (basic) +6.3% 1,160.4p 1,118.8p (diluted) +6.1% 1,129.3p 1,090.7pFTSE All-Share +3.0%Index MovementNAV +£21.0m £369.0m £348.0mMarket Cap +£49.6m £362.5m £312.9m
* Assuming reinvestment of all dividends
- +14.7% p.a. 10-year compound annual growth rate of the share price on a total return basis* vs. 4.8% p.a. from the FTSE All-Share Index on a total return basis* to 30 June 2011.
- Strong sales and EBITDA growth from top 20 buyout investments of +17% and +12% respectively over last 12 months to 30 June 2011.
- Liquid resources were £94m (26% of NAV) with outstanding commitments of £191m (52% of NAV).
Operational Highlights
- £29m deployed over the period, principally in two new buyout investments.
- £40m of cash proceeds from realisations generated over the period; exits at a 71% uplift to book value as at 31 December 2010.
Events since 30 June 2011
- NAV per share at 31 July 2011 was 1,142.6p (basic) and 1,114.1p (diluted); movement from June mainly due to foreign exchange fluctuations.
- Sale of Mondo agreed, with cash proceeds of £14m expected in H2.
- The Trust has finalised a £40m three-year standby facility with Lloyds TSB Bank plc, on an unsecured basis.
- New commitments totalling £75m made since period end, consisting of a £15m secondary commitment to Hg6 and a £60m commitment to the Manager's Mercury fund that invests in smaller companies in the TMT sector.
- Numis Securities Limited appointed as joint corporate broker.
Outlook
- Economic weakness likely to create opportunities for buyout investments.
- Existing portfolio companies will continue to strengthen management capabilities, market position, operational and financial performance and balance sheets.
- Continued confidence in HgCapital's thematic investing approach using sector expertise to identify industry `champions' and focus on delivering long-term profit growth ahead of the market.
Roger Mountford, Chairman of the Trust, commented:
The Trust has performed well in the first half. Again, the Trust has significantly exceeded its benchmark, the FTSE All Share Index. Encouragingly, most of the Trust's top 20 buyout investments grew both sales and EBITDA.
On-going macroeconomic instability does create opportunities for private equity and we remain confident in the Manager's dedicated thematic approach to identify and invest in outstanding companies. We also believe HgCapital has the skill and resource to participate actively in portfolio companies, enabling value to be protected and grown through trading while minimising balance sheet risk.
It is also important to ensure that additional risk is not being taken at the level of the investment vehicle. Transparent reporting enables the investor to assess these factors. The Board remains confident that the Trust offers an attractive proposition to the long-term investor.
---------------------------HgCapital Trust plcINTERIM REPORT AND ACCOUNTS30 June 2011
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.
References in this interim 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'.
PERIOD PERFORMANCE
MARKET CAPITALISATION £363 MILLION
The ordinary share price rose from £10.06 to £11.40 over the period. An increase (on a total return basis) of +16%
NET ASSET VALUE (`NAV') £369 MILLION
The NAV (basic) per ordinary share rose from £11.19 to £11.60 over the period. An increase (on a total return basis) of +6%
LONG-TERM PERFORMANCE - 10 YEAR TOTAL RETURN
COMPOUND ANNUAL GROWTH RATE
14.7% p.a. - The compound annual growth rate of the HgCapital Trust plc share price over the last 10 years.
10 YEAR RETURN ON £1,000
£3,925 - How much an investment of £1,000 in HgCapital Trust plc ten years ago would now be worth.*
An equivalent investment in the FTSE All-Share Index* would be worth £1,591.
*Assuming reinvestment of all dividends
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 the Healthcare, Industrials, Services and TMT sectors.
Investment in HgCapital Trust plc provides exposure to a portfolio of primarily fast growing companies*. The top 20 buyout investments currently account for 90% of the portfolio value. These companies achieved aggregate revenues of £2.1 billion and profits of £475 million over the last twelve month period to 30 June 2011.
In addition, the Trust invests in renewable energy power generation through two renewable energy funds managed by HgCapital.
+17% p.a. revenue growth - The average growth in revenue of the top 20 buyout investments for the 12 months ending 30 June 2011.
+12% p.a. profit growth - The average growth in profit of the top 20 buyout investments for the 12 months ending 30 June 2011.
9.3x EV/EBITDA multiple - The average valuation multiple used to value the top 20 buyout investments at 30 June 2011.
3.3x Net debt/EBITDA - The average net debt/EBITDA multiple of the top 20 buyout investments at 30 June 2011.
*References in this interim report and accounts to the `portfolio',`investments', `companies' or `businesses', refer to a number of buyoutinvestments, held indirectly by the Trust through its direct investments infund limited partnerships (HGT LP and HGT6 LP) of which the Trust is the solelimited partner, and direct investments in renewable energy fund limitedpartnerships (HgRenewable Power Partners LP (`RPP1') and HgCapital RenewablePower Partners 2 C LP (`RPP2')), of which the Trust is a limited partner.
CHAIRMAN'S STATEMENT
Performance in the first half
In the six months ended 30 June 2011 the total return (NAV plus dividend) was6.3% (basic) or 6.1% (diluted for the effect of future exercise of the Trust'soutstanding subscription shares). This compares well against a total return onthe Trust's benchmark, the FTSE All Share Index, of 3.0%. The basic NAV perordinary share increased over the periodto a record £11.60 (£11.29 diluted).Following our issue of ordinary and subscription shares last year, the Trust'sshares continued to perform well in the first half. Total return during thehalf-year, in terms of share price plus dividend, was 16.1%. As a result, theten-year total return to shareholders continues to exceed the benchmark byapproximately 10% p.a., underpinning the Board's conviction that an allocationto the Trust's shares should be considered by investors seeking long-termgrowth. An investment of £1,000 made ten years earlier, with dividendsreinvested, would now have a value of £3,925, compared with £1,591 if investedin the FTSE All Share Index.
Revenue return per ordinary share in the six months was 11.0 pence, compared with 13.0 pence in the same period last year.
Portfolio
Over the twelve months ended 30 June 2011, most of the Trust's top 20 buyoutinvestments (which represent some 90% of the Trust's total investmentportfolio, excluding cash and cash equivalents) grew in both sales and EBITDA.In the last twelve months, the top 20 buyout investments' average revenuesgrew by 17% while their average profits rose by 12%.As usual, the Board has valued each investment in the portfolio as at 30 June,after considering analytical data and draft valuations prepared by theManager, in accordance with IPEV guidelines. The top 20 buyout investmentshave been valued using EBITDA multiples that average 9.3x across theseinvestments. Investments in renewable energy projects have been valued usingcash flow assumptions and discount rates that the Board has reviewed.
A full analysis of the valuation multiples and gearing of the top 20 buyout investments is set out in the Manager's Review later in this document. This shows that the top 20 investments had moderate leverage, with an average of 3.3x EBITDA.
The Manager's Review contains detailed commentary on the top 10 buyout investments, which represent some 60% of the total investment portfolio.
During the period the Trust invested £22 million in two new buyouts in the healthcare and services sectors, in Finland and Benelux respectively. A further £7 million was invested in renewable energy and in support of two existing buyouts.
The Trust realised nearly £34 million from three full realisations that delivered an uplift of 71% over the book value at 31 December 2010.
Further realisations of £6 million were received, mainly from the refinancing of an investment.
Shareholder value was further created by the unrealised revaluation ofportfolio investments by a net gain of £19 million. The Board is pleased toobserve that, as shown in the Manager's attribution analysis, once again thelargest contributor to increases in value was the growth in profits of thebusinesses in the Trust's buyout portfolio. This was partly offset by adversemovements in the market multiples of comparable companies. The weakness ofsterling, against the currencies in which some investments are denominated,contributed further to the uplift in valuations.
Corporate developments
As part of the Trust's fund-raising in early 2010, it issued a total of over 6million subscription shares. Each subscription share entitles the holder tosubscribe to one new ordinary share. The first exercise date was in May 2011and I am pleased to report that 695,810 shares were exercised at a price of£9.50 per share, raising some £6.6 million. The next opportunities to exercisethe subscription shares will be in October 2011, May 2012 and October 2012, atthe same price of £9.50 per share; the final exercise date will be in May2013, at a price of £10.25. If all the remaining subscription shares areexercised in full, this will raise additional funds for the Trust of between£52.5 million and £56.6 million, and will further enhance the liquidity of themarket in the Trust's shares.The Board has agreed to co-invest up to £60 million alongside HgCapital'sMercury fund. This fund will invest exclusively in the TMT sector in the UKand Continental Europe, with which HgCapital is very familiar. It will differfrom HgCapital 6 (`Hg6') in its focus on smaller companies, with an enterprisevalue at acquisition of between £20 million and £80 million. This is thesegment of the buyout market where HgCapital originally established itself asa successful investor. The Board is pleased to note that, although HgCapitalhas like other managers moved up in the scale of its activities and deals, ithas not vacated this profitable segment of the market. It is anticipated thatover the life of this fund the Trust will take up 15% of each new investment,but the Trust's commitment is capped at first, so as to ensure that it doesnot take up a disproportionately large holding.Since the end of the period, the Trust announced the acquisition of a £15million limited partnership interest in Hg6; this was bought from an investorof HgCapital who had decided to withdraw entirely from investment in privateequity. The transaction comprised a payment of £7.8 million for funds alreadyinvested, with the balance by way of a further commitment to invest in futuredeals. The acquisition from other investors of interests in funds managed byHgCapital, with which the Trust's Board is of course very familiar, representsa further means to optimise the deployment of the Trust's resources. The Boardmay from time to time make further such acquisitions, or indeed might sell aninterest, if this were appropriate in the strategic management of the Trust.
In the 2010 Annual Report the Board set out a comprehensive description of the Trust's investment objective and policy, its rationale and business model. This has not changed and is reproduced in this interim report for shareholders' convenience.
In the business model the Board stated that, while it does not currently seeany advantage in using a further level of structural borrowing by the Trust,it does from time to time arrange bank facilities to assist with short-termcash-flow management. At 30 June the Trust held £94 million in cash and liquidfunds available for deployment, in line with its strategy of maintaining anappropriate level of liquidity against future commitments and for investmentwhen market conditions favour buyers. The Board regularly considers long-termcash flow projections in order to manage the Trust's resources carefully. Togive the Board further flexibility the Trust has recently finalised a £40million three-year standby facility with Lloyds TSB Bank plc, on an unsecuredbasis.This facility represents another lever available to the Board in itsmanagement of the Trust's resources and commitments with the objective ofbuilding shareholder value without, adding undue risk. Other levers include:the opt-out in relation to Hg6 acquisitions; rights to be excluded from anyspecific investment in RPP2 or Mercury if it would jeopardise our status as aninvestment trust; the ongoing exercise of subscription shares raising newfunds; the Trust's proven ability to issue new ordinary shares; and the optionof buying or selling interests in our underlying investments.
Reporting
This interim report reflects the Board's commitment to continuous improvementin the transparency and the clarity of our reporting to shareholders. It islarger than previous interim reports so as to contain not only the interimfinancial statements but all the key analytical data disclosed in the annualreport and new analysis of the Trust's commitments. The report containsdescriptions and up-to-date information about the top 10 buyout investments.Further information is available on the Manager's website, www.hgcapital.comand from the Trust's website www.hgcapitaltrust.com.
In line with this policy of transparency, the Manager also publishes a pre-close statement on the website just prior to the half-year and year-end.
Prospects
In my statement in March, I warned that the strong trading of almost all ofour buyouts remained subject to continuing stability in European economies anda return to economic growth. Renewed anxiety about the international effectsof slow economic growth in the USA, combined with unwelcome if not unexpectedturmoil in the eurozone, clearly create some risk around the portfolio wehold. The latest available management figures for our underlying investmentsindicate that most are holding up well, but with pressure on margins in somecases. The Trust's portfolio is concentrated in the UK, Germany and the Nordicregion and has no investments in Greece or Portugal, only one investment inItaly and renewable assets in Spain. Leverage in the portfolio is at amoderate level, giving no cause for concern.Meanwhile, the recapitalisation of the banks active in funding private equitytransactions has resulted in improved conditions for experienced privateequity managers such as HgCapital to raise sensible amounts of leverage so asto take advantage of opportunities to acquire businesses at attractive prices.These improved conditions in the banking market and the moderate levels ofgearing in our portfolio are also evidenced by the Trust's ability to raiseunsecured bank funding.In a period of financial instability and weak economic growth, investment inprivate equity still has a role to play in the portfolio of the long-terminvestor. However, attention must be paid to the expertise of the manager andto the strategy of the investment vehicle. It is important to select a privateequity manager who has the skills and resources to participate actively inportfolio companies, to identify opportunities for value enhancement orincipient problems and work with local management to effect change, or ifnecessary to appoint new management. This permits value to be protected andgrown through trading, rather than by taking added risk through financialengineering or high levels of borrowing. It is also important to ensure thatadditional risk is not being taken at the level of the investment vehicle.Transparent reporting enables the investor to assess these factors.
Both HgCapital and the Board of the Trust understand these imperatives and engage in regular and detailed dialogue on the strategy and operation of the Trust. The Board remains confident that the Trust offers an attractive proposition to a wide range of investors.
Roger MountfordChairman24 August 2011
INTERIM MANAGEMENT REPORT AND RESPONSIBILITY STATEMENT
Interim management report
The important events that have occurred during the period under review are set out in the Chairman's statement and in the Manager's review, which also include the key factors influencing the financial statements.
The Directors do not consider that the principal risks and uncertainties have changed since the publication of the annual report for the year ended 31 December 2010. A detailed explanation of the risks summarised below can be found on page 77 of the annual report which is available at www.hgcapitaltrust.com.
Performance risk
The Board is responsible for deciding the investment strategy to fulfil the Trust's objective and for monitoring the performance of the Manager. An inappropriate strategy may lead to poor performance.
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.
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.
Financial risk
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.
Liquidity risk
The Trust, by the very nature of its investment objective, invests in unquotedcompanies, and liquidity in their securities can be constrained, potentiallymaking the investments difficult to realise at, or near, the Directors'published valuation at any one point in time.
Responsibility statement
The Directors confirm that to the best of their knowledge:
- The condensed set of financial statements has been prepared in accordance with the Statement on Half-yearly Financial Reports issued by the UK Accounting Standards Board and gives a true and fair view of the assets, liabilities, financial position and profit of the Trust;
- The interim management report (incorporating the Chairman's Statement and the Manager's Review of the Period) includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indicationof important events that have occurred during the first six months of thefinancial year and their impact on the condensed set of financial statements;and a description of the principal risks and uncertainties for the remainingsix months of the year; and(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related partytransactions that have taken place in the first six months of the currentfinancial year and that have materially affected the financial position orperformance of the Trust during that period; and any changes in the relatedparty transactions described in the last annual report that could do so. Therewere no related party transactions during the period.This half-yearly financial report was approved by the Board of Directors on 24August 2011 and the above responsibility statement was signed on its behalf
byRoger Mountford, Chairman.LONG-TERM PERFORMANCE RECORD
HgCapital Trust plc's share price has consistently delivered significant outperformance against its benchmark across one, three, five, seven and ten-year periods.
Historical Total Return* Performance
Six months One year Three Five years Seven Ten years to 30 June % p.a. years % p.a. years % p.a. 2011 % p.a. % p.a. %Share price 16.1 46.3 13.1 15.2 20.8 14.7Net Asset Value (basic) 6.3 26.7 6.7 13.5 18.5 13.5Net Asset Value (diluted) 6.1 23.1 5.8 12.9 18.0 13.2FTSE All Share Index 3.0 25.6 6.6 4.5 8.5 4.8Share price outperformance per annum against the FTSE 13.1 20.7 6.5 10.7 12.3 9.9All Share Index
\* Total return assumes all dividends have been reinvested
THE TRUST'S INVESTMENT OBJECTIVE AND INVESTMENT POLICY
INVESTMENT OBJECTIVE
The Investment 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. If the Board proposes to amend the Trust's Investment Objective, it will seek the approval of shareholders in a general meeting.
INVESTMENT POLICY
The principal policy of the Trust is to invest in a portfolio of unlisted companies that are expected to grow organically or by acquisition. Any material change to the Trust's Investment Policy will be made only with the approval of shareholders in a general meeting.
The Trust's maximum exposure to unlisted investments is 100% of gross assets.At the time of acquisition no single investment will exceed a maximum of 15%of gross assets. The Trust may invest in assets other than companies, so longas the Manager believes that its expertise in private equity investment can beprofitably applied. The Trust may invest in unlisted funds, whether managed byHgCapital or not, up to a maximum at the time of acquisition of 15% of grossassets. The Trust may invest in other listed investment companies, includinginvestment trusts, up to a maximum at the time of acquisition of 15% of grossassets.
The Trust may invest its liquid funds in government or corporate securities, or in bank deposits, in each case with an investment grade rating, or in managed funds that hold investments of a similar quality.
Range and diversification
The Trust invests primarily in companies whose operations are headquartered orsubstantially based in or which serve markets in Europe. The Trust invests incompanies operating in a range of countries, but there is no policy of makingallocations to specific countries or markets. The Trust invests across a rangeof sectors, but there is no policy of making allocations to sectors.
Gearing
Underlying investments or funds are typically leveraged to enhance value creation, but it is impractical to set a maximum for such gearing. The Trust may over-commit to invest in underlying assets in order to maintain the proportion of gross assets that are invested at any time. The Trust has the power to borrow and to charge its assets as security.
The Articles currently restrict the Trust's ability to borrow no more than, broadly, twice the aggregate of the Trust's paid up share capital and reserves (without shareholder approval).
Hedging
The Trust may use derivatives to hedge its exposure to interest rates, currencies, equity markets or specific investments for the purposes of efficient portfolio management.
RATIONALE AND BUSINESS MODEL
The Board has a clear view of the rationale for investing in private equity through an investment trust and this informs its decisions on the operation of the Trust and the evolution of the Board's Business Model.
RATIONALE
The Board believes that there is a convincing rationale for investing inwell-researched private businesses with potential for growth, especially wherethe Investment Manager and the management of the business can work together toimplement strategic change or operational efficiency. These can result inhigher rates of growth in sales and enhanced profits, offering investorscapital gains on realisation. Many large institutional investors allocate aproportion of their assets to this asset class, but it is difficult forprivate investors and small institutions to invest in private equity due tothe large commitments required over long periods of time. The Trust providesan opportunity for investors to hold shares listed on the London StockExchange through which they can invest in private equity transactions nototherwise accessible.
BUSINESS MODEL
Working within the constraints of the Trust's Investment Policy, the Board andthe Manager have together developed a Business Model, which is kept underregular review. The Business Model evolves as market conditions change and
newopportunities appear.Asset classThe Trust invests directly into unquoted businesses in the UK and ContinentalEurope alongside other institutional clients of HgCapital, an experiencedprivate equity manager whose principal business is to invest in, and manage,leveraged buyouts.Private equity investments are normally held through partnerships that providelegal and taxation advantages. Most of the Trust's investments are heldthrough partnerships of which it is the sole limited partner and which investalongside pooled funds managed by HgCapital (currently its Hg6 fund) on thesame terms as institutional investors. The Trust normally acquires a 15%interest in each business in which Hg6 invests. The Manager is organised ininvestment teams that focus on well researched business sectors, but it doesnot make top-down allocations to these sectors or to particular countries; thebalance may change as investment opportunities appear and portfolio companiesare sold. The Trust is not a fund of funds and does not invest in othermanagers' funds. The Trust's strategy of making direct investments intobusinesses provides greater transparency for the Board and shareholders in theTrust and avoids the double fees inherent in a fund of funds.The Board of the Trust decides, after consultation with the Manager, on thetiming, amount and terms of each commitment it makes to invest in or alongsideany of the Manager's funds. Such commitments are normally drawn down over fiveyears as investment opportunities arise.The Board agrees each commitment at a level it believes the Trust will be ableto fund from its own resources or from temporary borrowing. However, toprotect the Trust from the risk of being unable to fund any drawdown under itscommitment the Board has negotiated a right to `opt-out', without penalty, ofany HGT 6 LP investment where certain conditions exist (see note 12 to thefinancial statements).In addition, the Trust has invested in renewable power generating projects, anarea where the Manager has developed its skills and built a specialist team.This sector provides the Trust with an element of diversification, as it hasfundamentally different drivers of risk and return, but is expected to delivercomparable risk-adjusted returns. In this sector, it is advantageous to theTrust to participate with other institutional clients of HgCapital as limitedpartners in HgCapital's two renewable energy funds.
Cash and borrowing
The Board and the Manager agree that prudent use of borrowing to fundacquisitions can increase diversification within the portfolio and yield ratesof return superior to the market in listed shares. Businesses in theunderlying portfolio are acquired with the benefit of bank borrowing at levelsthat can be serviced from the cash flows generated within that business. TheBoard does not currently see any advantage in using a further level ofstructural borrowing by the Trust, as this would add risk without anycertainty of enhancing returns. From time to time, the Board arranges a bankfacility on which it can draw to meet short-term needs, between making aninvestment and receiving the proceeds from a realisation.At certain points in the investment cycle the Trust may hold substantial cashawaiting investment, which it holds in bank deposits or invests in short-datedgovernment bonds. If there appears to be surplus capital and conditions fornew investment appear to be unfavourable, the Board will consider returningcapital to shareholders, probably through the market purchase of shares.
Hedging
The Trust offers exposure to a range of businesses operating in the UK, the eurozone and the Nordic region. The Trust does not strategically hedge investments back into sterling. From time to time, the Manager may use derivatives approved by the Board to hedge tactically with the object of protecting the anticipated sterling value of proceeds from realising investments in other currencies.
Benchmark
For most shareholders, their investment in the Trust represents a small allocation of funds that would otherwise be invested in UK equities. The Trust's benchmark is therefore the FTSE All-Share Index.
To assess the Manager's performance relative to other private equity managers, the Board regularly compares the NAV and share price performance against a basket of peers listed on the London Stock Exchange and against the UK and pan- European indices of listed private equity companies published by LPX.
Priorities as a listed investment company
As the rationale for the Trust is to provide investors with a way to invest inan illiquid asset class, through a liquid listed vehicle, the Board has anumber of priorities including: retaining the status of an investment trust;maintaining a liquid market in its shares; providing shareholders withtransparent reports on the underlying portfolio; adopting prudent valuations;and avoiding adding risk at the Trust level.
Valuation
The Board values each investment in the portfolio after considering analyticaldata and draft valuations prepared by its Manager. Valuations are carried outin accordance with the International Private Equity and Venture Capital(`IPEV') Valuation Guidelines, September 2009 edition. Further information canbe found at www.privateequityvaluation.com.
Net asset value and trading in the Trust's shares
The Board values the portfolio and publishes the Trust's NAV as at 30 June and31 December. Each month, following these valuations, the NAV figure ispublished after adjustment for realisations and movements in foreign exchangeand the market prices of any listed securities. The Trust's shares trade onthe London Stock Exchange at prices that are independent of the Trust's NAVbut reflect the NAV and expectations of future changes in it. The shares havetraded at a discount to the NAV and at times at a premium to it. The Board hasnot attempted to manage any discount through repurchase of shares, which itbelieves usually has only temporary effect. The Board believes that discountsto NAV are minimised through consistent long-term returns, transparentreporting, rigorous valuation and avoidance of risk at Trust level.
Dividends
The Board does not structure the Trust's balance sheet or underlyinginvestments in order to deliver any target level of dividend. To maintain theTrust's status as an investment trust, annual net revenue return retained,after dividend distributions in respect of that financial year, may not exceed15% of the annual total income earned from investments. The level of the netrevenue return varies from year to year according to the level of the Trust'sliquid funds and the structure of the buy-outs held at the time. Accordingly,dividends may vary from year to year. The Trust has elected to `stream' itsincome from interest-bearing investments as dividends that will be taxed inthe hands of shareholders as interest income; this minimises the tax chargepayable by the Trust.
THE MANAGER
HgCapital is a private equity investor focused on the European middle market.Its business model combines sector-specific thematic investing with dedicatedportfolio management support. HgCapital invests in growth companies inexpanding sectors via leveraged buyouts and in renewable energy generatingprojects across Western Europe.
HgCapital's vision is to be the most sought after private equity manager in Europe, being a partner of choice for management teams and renewable power developers producing consistent top quartile returns for our clients and providing a rewarding environment for our staff.
INTRODUCTION TO THE MANAGER
HgCapital began life as Mercury Private Equity (MPE), the private equity armof Mercury Asset Management plc, a long established listed UK-based assetmanagement firm. Mercury was bought by Merrill Lynch in 1997 and, in December2000, MPE negotiated its independence as HgCapital and became a fullyindependent firm, owned by its partners.HgCapital has progressively invested in and strengthened its business over theyears to establish a significant competitive advantage in making money for itsclients.
With some 85 employees in two investment offices in the UK and Germany, HgCapital has assets under management of £3.6 billion serving a range of highly regarded institutional investors, including private and public pension funds, charitable endowments, insurance companies and banks.
HgCapital's largest client is HgCapital Trust plc. Established in 1989, the Trust appointed HgCapital as its Investment Manager in 1994. It offers investors a liquid investment vehicle, through which they can obtain an exposure to our diversified portfolio of private equity investments with minimal administrative burdens, no long-term lock-up or minimum size of investment.
THEMATIC INVESTMENT
HgCapital's five sector teams combine the domain knowledge and expertise of atrade buyer - giving them superior credibility and the ability to make quickdecisions - with the flexibility of a financial investor - leading to highconversion rates on deals we like.
This deep sector focus is channelled through a rigorous research-based approach and disciplined thematic investment processes, whereby the most attractive segments of the European mid-market can be systematically identified and then repeatedly invested in, optimising deal flow and improving returns.
Following each investment HgCapital's specialist portfolio management team works to protect and enhance value, ensuring clear strategies for growth and a realisation that adds further value.
With substantial resources, and a structure that focuses on delivering value, HgCapital has the tools and ability to succeed consistently.
THE MANAGER'S STRATEGY AND TACTICS
Middle-market focus
HgCapital focuses on middle market buyouts with enterprise values of between£50 million and £500 million and renewable power generating projects usingproven technologies. The middle market offers a high volume of companies withproven financial performance and defensible market positions.
These companies are small enough to provide opportunities for operational improvement, yet large enough to attract quality management and offer multiple exit options across market cycles.
European focus
HgCapital primarily focuses its buyout investments in the UK, Germany and the Nordic Region, as well as Switzerland, Italy and Benelux.
Our renewable energy investments are focused on the British Isles, the Nordic region and Spain.
All investments are managed by specialist sector and portfolio management teams located in London and Munich who work with a common purpose and culture, applying consistent processes.
Clear investment criteria
HgCapital applies a rigorous and commercial investment approach when evaluating all investment opportunities. Our objective is to complete the most attractive investments rather than be constrained by a top-down asset allocation.
For buyouts, HgCapital seeks companies with protected business models and predictable revenues, which offer a platform for growing market share or have the potential for significant performance improvement. HgCapital targets situations where significant change is taking place and where the Manager's specialist knowledge and skills can make a real difference.
Broad coverage
HgCapital's dedicated sector teams provide investors with access to the substantial majority of private equity activity within their target size range and across their chosen geographies.
Active portfolio management
Our sole objective is to ensure that all businesses in which we invest maximise their long-term potential and reward all of their stakeholders. As a result, HgCapital typically invests as the lead, majority shareholder and appoints HgCapital executives to the companies' boards to ensure that each firm applies active, results-oriented corporate governance.
Experienced HgCapital professionals work with the management of our portfolio companies to develop, execute and monitor value enhancement strategies for each business.
Accordingly, HgCapital is in a position to review the performance of all of its investments, quickly identify any issues that demand attention and see that appropriate action is taken.
Deep resources
Our practice of employing specialisation - both in investment selection and management - places significant demands on our time. Accordingly, we have built a deeply resourced business employing some 85 staff including 50 investment professionals.
Investing in businesses, many of which have a global footprint and which arelocated across Europe, requires time and, of course, a deep understanding oflocal cultures. Accordingly, our people come from around the globe includingten Western European countries. Our investment professionals have on average16 years' experience in private equity management.
MANAGER'S REVIEW OF THE PERIOD
References in this interim report and accounts to the `portfolio',`investments', `companies' or `businesses', refer to a number of buyoutinvestments, held indirectly by the Trust through its direct investments infund limited partnerships (HGT LP and HGT6 LP) of which the Trust is the solelimited partner, and direct investments in renewable energy fund limitedpartnerships (HgRenewable Power Partners LP (`RPP1') and HgCapital RenewablePower Partners 2 C LP (`RPP2')), of which the Trust is a limited partner.
Summary
The basic NAV of the Trust increased by 6.0% (6.3% on a total return basis) from £348.0 million to £369.0 million in the first half of the current year. Total return on the share price was stronger at 16.1%, reflecting growing investor interest in private equity in general and the Trust's shares in particular.
As expected, new investment activity was subdued with two new buyouts completed (ATC and Mainio Vire) and more investments made into renewable energy opportunities.
The Trust had two full realisations with the sale of SLV, a German lighting company, and SiTel, a Dutch semi-conductor company. These sales delivered a healthy multiple of cost, a significant share of NAV growth in the half-year and a 71% uplift on the December book value. In addition, we have exchanged contracts for the sale of Mondo Minerals, the seventh largest holding at 30 June. Details of these realisations are provided below.
The 20 largest buyouts represent over 90% of the portfolio value and the £22million investment in renewable power-generating assets accounts for another8.1%. Our buyout portfolio continues to increase revenues and earnings, andthe renewable power assets are generating cash, repaying debt and producinggrowing income flows.
At 30 June, the Trust had net liquid resources of £94.3 million and outstanding commitments to HgCapital funds of about £191 million. Net outstanding commitments less liquid resources as a percentage of net assets have fallen from 35% in December 2010 to 26% at June 2011.
We do business in an environment marked by sovereign debt problems, a weakenedfinancial system and decelerating growth. Our portfolio composition is markedby businesses where demand tends to out-strip nominal GDP and where revenuesare not particularly sensitive to the cycle. Just as important, thesecompanies are led by a strong cadre of managers who have the ambition, abilityand every incentive to outperform their peers. Over time their efforts shoulddeliver shareholders a satisfactory return.
Of course investor sentiment today is very volatile. Markets, including the M&A market in which we operate, oscillate in short cycles. We believe that these conditions are the friends of the patient investor, taking a focused approach and sticking to tested fundamental principles.
Performance
We prefer to be measured over periods of 3, 5, 7 and 10 years because thisfrequency is consistent with the long-term nature of private equity investmentand our patient investment strategy. Over three years, the Trust hasout-performed the FTSE All-Share index by 6.5% p.a., over five years by 10.7%p.a., over seven years by 12.3% p.a., and over 10 years by 9.9% p.a. net ofall costs, all on a total return basis.£1,000 invested in June 2001 would be worth £3,925 in June 2011 if invested inthe Trust and £1,591 if invested in the FTSE All-Share Index, and assuming forboth that all dividends are reinvested.
In the first six months of 2011, the share price total return (including a dividend of 28 pence per share, paid in May 2011) was 16.1%, which compared with 3.0% for the FTSE All-Share Index.
The growth in NAV per share is a driver of share price performance over thelong run. During the first six months of 2011 it rose by 6.3% (basic), or 6.1%(diluted), which is mainly attributed to realised capital proceeds in excessof the 31 December 2010 book value adding 3% to the NAV, unrealisedappreciation contributing 2% and gross revenue adding 3% before meetingexpenditure and payments to the Manager. This unrealised appreciation ismostly due to rising earnings, debt reduction and favourable foreign exchangemovements, more than offsetting the unrealised depreciation from fallingratings.
Trading performance
The first six months of 2011 were marked by a slowdown in global growth andsaw the first effects of governments attempting to rein in their deficits. Theportfolio continued to grow revenues and profits and invest in initiatives toimprove the quality of profits and the earnings potential of our businesses.In the twelve months to 30 June 2011, for the top 20 companies, revenues grewby 17% and EBITDA by 12%, comfortably exceeding the growth in nominal GDP.Eleven companies grew revenues in excess of 15% and half of the top 20 grewprofits by over 10%.Whilst still growing revenues and profits, some companies (Voyage and CasaReha) were adversely affected by a margin reduction caused by high wageinflation and prices being squeezed by cut-backs in UK health spending or heldback by regulatory pressure in Germany. In others (Americana, Teufel,SimonsVoss and Schleich), combinations of inflation in supplier prices fromChina and/or increased marketing and new product development expenditure havenaturally reduced net margins. In addition, a small percentage of theportfolio (Atlas and Sporting Index) experienced profits declining betweennearly 20% and 30% compared with last year.
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 (90% of the investment portfolio) of 9.3x EBITDA.
Where we have invested in businesses operating in cyclical markets that wereadversely affected by the recession, we wrote down their values early andheavily and, in most cases, have not written them back; so they represent aminimal share of NAV. In some cases, like businesses in the UK with a heavyexposure to public sector spending, valuations have been reduced quite sharplyas market ratings for comparable businesses have fallen, discounting futurepressure on margins. This accounts for the reduction in book value of JLA andVoyage. In other cases, very strong growth in revenues, profits and cash flowsupport the application of ratings from other companies with similar growthprofiles.Our two largest investments are TeamSystem and Visma, which together represent18.3% of the buyout portfolio value (13.8% of NAV). Both are providers ofaccounting software packages to large and diversified customer bases of SMEs.They provide an exposure to steady growth, strong cash conversion and areplatforms for bolt-on acquisitions and operational improvements. They use abusiness model we know well and which has been very rewarding for ourinvestors. Accordingly, we are happy to run this level of concentration in
ourportfolio.Valuation Basis*39% Earnings35% Cost9% Third party transaction9% Written down8% Net assets
*Percentages are based on fixed assets (excluding hedges) and accrued interest and are shown by value
Balance SheetThe net assets of the Trust increased by £21.0 million (6%) from £348.0million to £369.0 million during the period under review. A dividend of 28.0pence per share was paid in May 2011, decreasing the NAV by £8.7 million,following which the NAV increased after the exercise of Subscription Shares on31 May 2011, raising £6.6 million at a Subscription price of £9.50 perOrdinary Share.The remaining increase was due to performance, with realised capital gainsproducing £12.4 million, unrealised gains amounting to £8.0 million and £9.1million of income received or accrued. Total expenditure and other charges,including the Manager's remuneration, resulted in a £6.3 million decrease inthe NAV. In summary, the NAV per share rose by 6.3% (basic) on a total returnbasis.The Trust was also able to put the proceeds of the share issue to work, sothat 75% of net assets were invested at 30 June 2011. Cash and governmentsecurities totalled £94.3 million, which compares with outstanding but undrawncommitments of £190.9 million on Hg5, Hg6, RPP1 and RPP2. This represents animprovement with commitments less cash and government securities, representing26% of NAV compared with 35% at 31 December 2010.The Trust has an opt-out for capital calls on Hg6, without incurring thenormal penalties that apply to most limited partners. The balance sheet hassufficient free capital to continue to exploit any good opportunities we mightuncover, both by financing bolt-on acquisitions from existing portfoliocompanies and through financing new transactions. It remains our belief that`available capital' is a critical factor in the long-term investor's armoury.
Analysis of movements in net asset value for the six months ended 30 June 2011 £'000
Opening net asset value as at 1 January 2011
347,993
Dividend paid
(8,709)
Proceeds from exercise of subscription shares 6,610Gross revenue 9,086
Realised proceeds in excess of 31 December 2010 book value (excludes gross
12,352
revenue)
Net unrealised appreciation of investments (excludes gross revenue)
8,045Expenditure and taxation (532)Priority profit share (3,434)Carried interest (2,393)
Closing net asset value as at 30 June 2011
369,018
Realised and unrealised movements in investment portfolio (excluding accrued interest) for the six months ended 30 June 2011
Investment name and Net unrealised Realised proceeds in ranking within top 20 appreciation/(depreciation) excess of 31 Decemberinvestment portfolio at 30 of investments £'m 2010 book value £'m June 2011 (excludes gross revenue) SLV (sold) - 8.9Fx on Hg6 investments at 4.0 -costElite (sold) - 3.5SHL (3) 3.4 -Goldshield (6) 2.4 -RPP1 and RPP2 2.2 -Visma (fx increase) (2) 1.3 -Mondo (7) 1.1 -Achilles (8) 1.1 -Epyx (12) 1.0 -Other (0.2) -Euro Hedge (1.0) -Voyage (20) (1.1) -JLA (17) (6.2) -
Over the period, the NAV of the Trust increased by 6% from £348 million to£369.0 million. There were three main drivers of this movement. Firstly, therewas the raising of £6.6 million from the exercise of Subscription Shares inJune 2011. Secondly, it can be attributed to the revaluation of the unquotedportfolio - itself driven by strong trading performance. Lastly, NAV increasedby over £12 million as a result of realisations in excess of book value(excluding gross revenue).During the period, the value of the unrealised portfolio increased by justover £19 million. This change can be attributed to a number of factors: theincrease of £4 million from acquisitions and disposals; growth driven bystrong trading performance; the reduction of debt from cashflow generated bythe portfolio; and favourable foreign exchange movements.
Outstanding commitments
Fund Vintage Original Outstanding Outstanding commitment commitments commitments £' million as at 30 June 2011 as at 31 December 2010 £' million %of NAV £' million %of NAVHGT LP pre-2009 120.0 25.2 6.8% 22.3 6.4%HGT 6 LP (1) 2009 285.0 136.4 37.0% 155.9 44.8%Hg RPP LP 2006 19.5(2) 1.9 0.5% 1.8 0.5%Hg RPP2 C LP 2010 36.1(3) 27.4 7.4% 32.0 9.2%Total 190.9 51.7% 212.0 60.9%Total liquid 94.3 25.6% 90.2 25.9%resourcesNet outstanding 96.6 26.1% 121.8 35.0%commitments lessliquid resources
(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) Sterling equivalent of €21.6 million
(3) Sterling equivalent of €40.0 million
Post period end
On 19 July 2011, the Trust announced the acquisition from a third party of a£15 million limited partnership interest in HgCapital 6 E LP(`Hg6 E'), one ofthe partnerships in the current buyout fund (Hg6) of its Manager, HgCapital.The Trust paid £7.8 million in cash for the funds already invested. Thisrepresents a 2% premium above the NAV of Hg6 E as at 31 December 2010,adjusted for subsequent cash flows to the date of completion. The balance ofthe Trust's new investment represents a commitment of £7.2 million which willbe invested alongside the other limited partnership interests held byinstitutional clients of HgCapital in their Hg6 fund.
A £60 million commitment to the Manager's Mercury fund has been agreed by the Board. Mercury will invest exclusively in the TMT sector in the UK and Continental Europe focusing on smaller companies with an EV of between £20 million and £80 million.
The Trust has recently finalised a £40 million, three-year standby facility with Lloyds TSB Bank plc, on an unsecured basis.
Investment portfolio
The Manager's strategy is to invest in five sectors, four of them by way of buyouts of businesses (representing 92% of the portfolio by value at 30 June 2011). Investment in the fifth sector, renewable power generation (8%), is made into projects through RPP1 and RPP2.
Buyout portfolio
As at 30 June 2011, the Trust's buyout portfolio included ten investments witheither a value of under £1 million or residual interests in companies we hadsold, which were mostly valued at or close to zero, or investments which hadperformed poorly and been written down to zero in previous periods or whichrepresent interests in escrow accounts from the sale of investments. Thissection therefore only covers those companies with material value.TMT represented 38% of the total investment portfolio. Over 95% of this valuewas represented by companies that are all users of technology, rather thandevelopers of technology with the associated frequent challenges of newproduct development. They included two accounting software companies, a fixedand mobile incumbent telecom network operator, two private electronic marketplaces and a vendor of strategic HR software, sold as a service (`SaaS'). Thecommon themes that run through each one are highly visible revenues, strongmarket positions and strong cash conversion that permits debt repayment whilstthe businesses expand and grow. Achilles and Epyx both grew very strongly asdid the new investment in Lumesse. Visma and a new investment, TeamSystem,also continued to grow solidly and Manx Telecom started to implement itsbuyout strategy which involves investment in new service lines.
Industrials represented 13% of the total investment portfolio. Here, the common theme is that we are backing companies that own and develop high quality technology/design mostly in Germany but manufacture in low cost locations.
The first half of 2011 saw strong order intake and an increase in sales acrossall geographies for SimonsVoss, our electronic locking systems provider. Thecompany continues to invest in product line development. Meanwhile, we agreedthe sale of our industrial minerals business, Mondo, which should completelater in the year.
Healthcare represented 18% of the total investment portfolio. We currently like two areas: long-term care where the payer risk is low, with a preference for specialist care of people with acute disabilities; and low cost pharmaceuticals.
Performance for the four companies in the first category was mixed. Casa Reha(Germany) and Voyage (UK) bowed to the margin pressures of wage inflation andcuts in health-spending despite trading ahead of last year while Fr¶sunda(Sweden) and our new addition, Mainio Vire (Finland) both increased earningsstrongly. Strong cash generation and higher core earnings continued toincrease the value of our pharmaceutical business, Goldshield.Services investments represented 15% of the total investment portfolio. Of ourtwo HR and compliance services companies, SHL performed strongly in both salesand EBITDA as the predicted cost synergies born of its merger with UScompetitor, PreVisor, were realised. The other, Atlas, invested in revenuegrowth and experienced an increase in sales at the cost of tighter margins anda reduction in earnings.Our third investment, made in 2010, is JLA, a provider of laundry equipment,including financing and maintenance services, to care homes, universities andhotels. Management succession changes have been made and the first bolt-on acquisitions identified. However, as yet profits have been flat and reflecting theexposure of its revenues to public sector spending, ratings used to value thisbusiness have been reduced, leading us to write down the book value of thisinvestment by 50%.ATC Group, a Dutch corporate administration services company, is experiencingstrong profit and sales growth as the Netherlands picks up, although foreignexchange movements are tempering the success of its Carribean office.Finally,our legacy Consumer and Leisure portfolio represented 8% of the investmentportfolio. Americana designs and sells branded clothing; Schleich designs andmarkets toy figurines and Sporting Index is a sports spread betting firm.Sporting Index's profits, which can be volatile, fell, year on year, as mostof the positive effects of last year's World Cup fell into the prior periodand it experienced a bad run at the end of the 2011 football season.Sector by value*38% TMT18% Healthcare15% Services13% Industrials8% Renewable energy8% Consumer & LeisureSector by class**75% Unquoted25% Cash & other assets
*Percentages are based on fixed assets (excluding hedges) and accrued interest and are shown by value
**Percentages are based on net assets
Renewable Power
The Trust invests in renewable energy through RPP1 and RPP2, separate UK fundsmanaged by our dedicated team of seven specialists. The underlying portfoliosare divided into four platforms: UK onshore wind, Swedish onshore wind,Spanish hydro and Spanish solar. The assets are split into onshore wind at 57%of value, hydro at 19% and solar at 24% of value. All employ proven,commercially viable technologies within the framework of current power priceregimes across Europe. We eschew off-shore power generation, as we believe itto be operationally unproven.Each of the platforms' operating performance continues to be in line with ourinvestment cases since inception, notwithstanding a period of exceptionallylow winds by historic standards. Against this robust financial performance wesuffered a decision by the Spanish government to change unilaterally the termsof 25-year contracts with power generators. These changes reduced the incomeour assets will receive over the next three years.Accordingly, our valuations of these Spanish assets are based on our updatedestimates of reduced net cash flow to equity and on an increased discount rateto reflect the peculiar factors the market now attaches to Spanish sovereignrisk and our own addition to reflect Spanish regulatory risk.
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.
Geography, Vintage Analysis
At the balance sheet date, the geographical weighting of the portfolio hadmoved marginally away from the UK (down from 45% in December 2010 to 42%) andGermany (down from 18% in December 2010 to 12%), towards the Nordic andBenelux regions (up from 22% in December 2010 to 29%). We are certainlyexposed to developments in each of these economies but also exposed to growthsectors and to the global economy too, as many companies are exporters. We haveretained a weather eye on the periphery of the eurozone economy, which is setfor uncertain times ahead, whereas the core saver economies of the Nordicregion and Germany are performing strongly at present.
The distribution of the portfolio across the years shows that our exposure to the vintages of 2007 and 2008, which may prove to have been poor years for investment, in retrospect, is quite low at 16%.
Geographic spread by value*42% UK24% Nordic Region12% Germany9% Italy8% Europe (RPP)5% BeneluxVintage by value*8% 201139% 20109% 20096% 200810% 200725% 20063% pre 2006Deal type by value*92% Buyout8% Renewable energy
*Percentages are based on fixed assets (excluding hedges) and accrued interest and are shown by value
Investment portfolio
THE TOP 20 BUYOUT INVESTMENTS ACCOUNT FOR 90% OF THE PORTFOLIO BY VALUE
Buyout investments Sector Location Year of Residual
Total Portfolio Cum.
(in order of value) investment Cost
valuation** value Value %
£'000
£'000 %
1 TeamSystem Luxco SARL TMT Italy 2010 24,432 26,491 9.5% 9.5%2 Visma Norway Holdco TMT Nordic 2006 701
24,421 8.8% 18.3%
Region3 SHL Group Holdings 1 Services UK 2006 7,984
18,244 6.6% 24.9%
Limited
4 Fr¶sunda Luxco SARL Healthcare Nordic 2010 14,296
16,019 5.8% 30.7%
Region5 Lumesse Holdings SARL TMT UK 2010 14,281 15,409 5.5% 36.2%6 Midas Equity Co SARL Healthcare UK 2009 8,545
14,899 5.4% 41.6%
(t/a Goldshield)7 Mondo Minerals Co-op Industrials Nordic 2007 6,923
14,724 5.3% 46.9%
Region8 Achilles Group TMT UK 2008 5,226
14,171 5.1% 52.0%
Holdings Limited9 Mainio Vire SARL Healthcare Nordic 2011 12,329
12,456 4.5% 56.5%
Region10 Manx Telecom Limited TMT UK 2010 11,033 11,033 4.0% 60.5%11 SimonsVoss Luxco SARL Industrials Germany 2010 10,065 10,918 3.9% 64.4%12 Epyx Investments TMT UK 2009 6,388
10,869 3.9% 68.3%
Limited
13 ATC Holdco SARL Services Benelux 2011 9,913 10,731 3.9% 72.2%14 Teufel Holdco SARL Industrials Germany 2010 9,401 10,104 3.6% 75.8%15 Schleich Luxembourg SA Consumer & Germany 2006 4,648
9,092 3.3% 79.1%
Leisure16 Americana Consumer & UK 2007 4,625
8,013 2.9% 82.0%
International Holdings Leisure
Limited
17 JLA Equityco Limited Services UK 2010 12,227 7,197 2.6% 84.6%18 Sporting Index Group Consumer & UK 2005 6,502
6,152 2.2% 86.8%
Limited Leisure19 Atlas Energy Group Services UK 2007 9,597
4,298 1.5% 88.3%
Limited
20 Voyage Holdings Healthcare UK 2006 13,136
4,149 1.5% 89.8%
Limited
21 Casa Reha SARL Healthcare Germany 2008 8,293 3,452 1.2% 91.0%22 Software (Cayman), LP TMT UK 2006 530
2,122 0.8% 91.8%
- re Blue Minerva23 Software (Cayman), LP TMT UK 2007 253 979 0.4% 92.2% - re Guildford24 Tiger Capital Limited TMT UK 2008 632 468 0.2% 92.4%25 Weston Presidio Fund North 1998 1,725 359 0.1% 92.5% Capital III, LP America26 Doc M SARL Healthcare Germany 2004 - 254 0.1% 92.6%27 Elite Holding SA (t/a TMT Benelux 2005 - 245 0.1% 92.7% SiTel)28 ACT Venture Capital Fund Ireland 1994 27 38 - 92.7% Limited29 BMFCO UA (t/a Fabory) Services Benelux 2007 - - - 92.7%30 Cornish Bakehouse Consumer & UK 2007 4,200 - - 92.7% Investments Limited Leisure31 KVT Coinvest SARL Industrials Switzerland 2008 5,827 - - 92.7%32 W.E.T Holding Industrials Germany 2003 7,774 - - 92.7% Luxembourg SA NOK / GBP Hedge n/a n/a n/a 849 343 0.1% 92.8% Hg5 Euro Hedge n/a n/a n/a - (2,224) (0.9%) 91.9% Total buyout 222,362 255,425 91.9% investments* Renewable energy investments1 RPP1 Fund Renewable Europe 2006 14,831 14,655 5.3% 5.3% energy2 RPP2 Fund Renewable Europe 2010 8,378 7,850 2.8% 8.1% energy
Total renewable energy 23,209 22,505 8.1% investments Total all investments 245,571 277,931 100.0% (34)
* Buyout investments are held through the Trust's investment in HGT LP and HGT 6 LP. See note 3 to the financial statements.
**Including investment valuation of £249,905,000 and accrued interest of £28,026,000.
INVESTMENTS
£29 million investedTwo new buyout investments were made with a total enterprise value of £252million, using £148 million of equity from our clients, with the Trust's sharebeing £22 million. In each case, we have applied the knowledge acquired in ourresearch into various investment themes. These are: compliance and missioncritical services and long-term acute care.In the renewable power business, two new investments with total project valuesof £155 million required £39 million of equity from RPP2. The Trust's share ofthese new investments, other further investments and their share of feespayable via the fund was £6.1 million. The first of these investments was intothe ‚mliden wind farm in V¤sterbotten, Sweden, adding to the existing Swedishwind platform. The second, Xana, is a collection of small hydroelectric plantslocated across four river basins in Spain. This is the first building block ofRPP2's second investment platform, Spanish mini-hydro.
INVESTMENTS MADE DURING THE PERIOD*
Company Sector Geography Activity Deal Type Cost £'000Mainio Vire Healthcare Nordic Provider of specialist Buyout 12,329 Region disability careATC Services Benelux Provider of corporate Buyout 9,913 servicesNew investments 22,242 RPP2 Fund Renewable Europe Renewable energy fund Fund 6,064 energyJLA Services UK Provision of Buyout 751 on-premise laundry services and commercial machine salesSporting Index Consumer & UK Sports spread betting Buyout 332 Leisure firmOther investments 46Further 7,193investmentsTotal investment 29,435by the Trust
\* The numbers in the table relate to the Trust's share of transactions
REALISATIONS
Three full realisations for £33.6 million at a 71% uplift over book value in December 2010
Two investments, SLV Elektronik, a B2B lighting business, and SitelSemiconductor (held under Elite Holding SA), a designer ofapplication-specific microprocessors for voice applications, were realised inthe first half of 2011. Together, they returned £241 million of proceeds forour clients, the Trust's share being £33.6 million, resulting in an averagelife to date multiple of cost of 2.9x and a combined uplift over book value,at 31 December 2010, of 71%.
In addition, the investment in Fabory, the Dutch industrial fasteners distributor, was restructured into a new holding company, in which HgCapital clients now only have a 3% equity holding, valued at nil.
Since the period end, we announced the intention to sell Mondo Minerals, atalc mining company. Upon the sale, which is anticipated to complete beforethe year-end, the Trust expects to realise initial cash proceeds of £13.7million and a further amount of up to £2.8 million over the next two years.This compares with a carrying value of £14.7 million in the NAV of the Trustat 30 June 2011 and an original cost of £7.0 million.
During July 2011, we completed the sale of Cornish Bakehouse, returning £0.7 million of proceeds to the Trust. This investment was previously fully written-off.
REALISATIONS MADE DURING THE PERIOD*
Company Sector Exit route Cost Proceeds(1)
Cumulative Current year
£'000 £'000 gain/(loss)(2) gain(3) £'000 £'000SLV TMT Secondary 5,999 24,170 18,171 9,638 saleElite Industrials Trade sale 3,540 9,441 5,901 4,325Fabory Industrials Liquidation 7,474 - (7,474) -Full realisations 17,013 33,611 16,598 13,963 Lumesse TMT Refinancing 5,035 5,601 566 626Other 1,478 546 (932) 36Partial 6,513 6,147 (366) 662realisations
Total realisations 23,526 39,758 16,232 14,625
\* The numbers in the table relate to the Trust's share of transactions
(1) Includes gross revenue received during the period
(2) Realised proceeds including gross revenue received, in excess of historic cost
(3) Realised proceeds including gross revenue received, in excess of 31 December 2010 book value and accrued interest
Prospects
A weakened global financial system exposed to sovereign debt risk presents real challenges for businesses and investors, especially as the potential for traditional government intervention without inflation is limited. However, this backdrop offers opportunities for further investment in both our portfolio companies and for new investments.
Our approach is to use our sector expertise to identify companies that are "champions" within their industry, that provide a product or service which is genuinely differentiated and valued by their customers and vital to their customers. These companies tend to out-perform their competitors and can out-perform throughout the economic cycle, as they have a fundamental advantage which allows them to grow revenues, invest during downturns, innovate, and create jobs and new products.
We will preserve and build our flexibility to exploit the opportunities thatarise over the coming years. Within the portfolio companies this meanscontinuing work to strengthen management capabilities, the market positions ofeach business, their operational and financial performance and to improvebalance sheets. Within HgCapital we will continue to seek to acquirehigh-quality businesses that fit our thematic investment strategy.Management teams that remain ambitious and focused will deliver long termprofit growth ahead of the market and, with sustained diligence and disciplinein executing our plans, we believe that we will continue to reward the Trust'sshareholders with long term out-performance.
TOP 10 BUYOUT INVESTMENTS
representing more than 60% of the total portfolio
Buyout investments are held through limited partnerships of which HgCapital Trust plc (the `Trust') is the sole limited partner. The Trust invests alongside other clients of HgCapital. Typically, the Trust's holding forms part of a much larger majority interest held by HgCapital clients in buyout investments in companies with an enterprise value (`EV') of between £50 million and £500 million. The Manager's review generally refers to each transaction in its entirety, apart from the tables detailing the Trust's participation or where it specifically says otherwise.
1 TeamSystem
Website: www.teamsystem.com
Original enterprise value: €570 million
HgCapital clients' total equity: 53.3%
Business description
TeamSystem is a leading market provider of business-critical, daily-use SME software products in Italy. Headquartered in Pesaro, the company has a diverse base of over 80,000 customers. It has 27 offices in Italy and employs approximately 800 people.
Why did we invest?
TeamSystem is HgCapital's seventh investment into business-critical backoffice software (via two platforms). The company has a track record of solidperformance and delivered organic revenue growth of 6% p.a. between 2007 and2009, trading resiliently through the downturn. Its stable nature (with morethan 50% of revenues by way of annual subscriptions), strong cash generationand potential for growth in both the business and its market, all supportedour decision.
How do we intend to create value?
Alongside organic growth, management intends to cross-sell products to TeamSystem's existing client base through the use of add-on modules such as reporting, analytics and payroll.
The potential to complete a number of add-on acquisitions of complementary software businesses in Italy has also been identified.
What has been achieved?
Our normal post-acquisition review has identified several improvement projectsthat have been put into action, including improved reporting and pricing,investment into the M&A process and finding new ways to address the micro-SMEcustomer base in Italy.How is it performing?Trading has been sound with growth in revenue and profits. We can look forwardto further positive movement when tax laws change later in 2011, crystallisinga demand for upgrades.
How will we crystallise value?
We see a diverse range of exit options for TeamSystem, with interest from trade and financial buyers expected and an IPO on the Italian stock market a possibility.
To support an attractive exit rating for the business, we will look for faster organic growth by increasing the revenue per customer from the sale of new products and services.
Trust's Investment - TeamSystem
Sector Location Date of Residual Unrealised Accrued Total Valuation investment cost £'000 value interest value methodology £'000 £'000 £'000TMT Italy Sept 2010 24,432 26,491 - 26,491 Cost
The difference between cost and valuation is due to foreign exchange rate movements
2 VismaWebsite: www.visma.com
Original enterprise value: NOK4.3 billion
HgCapital clients' total equity: 16.3%
Business description
VISMA is the number one provider of business software and related services to small and medium-sized enterprises in the Nordic region.
The company provides accounting, resource planning and payroll software, outsourced book-keeping, payroll services and transaction process outsourcing.
Why did we invest?
Visma is an early example of HgCapital's focus on business critical `software as a service' firms operating within a fast growing marketplace.
The company enjoys high levels of predictable recurring revenue resulting from a subscription payment model.
Room for improvement was identified in profit margins that were below those of most of its competitors. This was due to significant investment in the business and a delay in the benefits expected from a number of recent acquisitions.
How do we intend to create value?
In September 2010, a 64% stake in the business was sold to KKR. This valuedthe business at £1.2 billion, of which our clients' stake was worth £380.0million (an investment multiple of 3.7x). HgCapital continues to hold a stakeand hopes to benefit from further potential in the next few years.
What has been achieved?
During the course of the investment, the company has made several bolt-on acquisitions including Accountview, Sirius IT and Teemuaho. These deals bolstered organic growth from innovation in new services and products while margins were improved through rethinking Visma's internal processes.
How is it performing?
There was continued growth in the first half of 2011 with growth in both sales and EBITDA up on prior year, mostly the result of acquisitions.
How will we crystallise value?
The business has a scale and growth profile which will make it an attractive IPO candidate, as well as a target for trade buyers.
Trust's Investment - Visma
Sector Location Date of Residual Unrealised Accrued Total Valuation investment cost £'000 value interest value methodology £'000 £'000 £'000TMT Nordic May 2006 701 24,421 - 24,421 Third party region transaction3 SHLWebsite: www.shl.com
Original enterprise value: £102 million
HgCapital clients' total equity: 50.3%
Business description
SHL is the global market leader in objective psychometric testing and has a world-wide presence.
The business consists of the development and sale of 300 different types of psychometric tests to corporate clients and the provision of psychologists for the administration and interpretation of tests.
Why did we invest?
SHL's position at the head of a growth market with a blue chip customer base provided an opportunity to invest aggressively to increase SHL's share of customer spend and access high growth geographies through focusing on new technology and products.
How do we intend to create value?
The plan is to invest in new sales resources, to focus the business on higher margin web sales and to invest in new technology to increase product performance.
What has been achieved?
Following a tough year in 2009 when revenues fell and costs were cut rapidly,productivity increased and the business has rebounded strongly, with profitsand revenues increasing significantly. A merger with US-based Previsor wascompleted in January 2011.The deal was executed on an all-equity basis, with a rollover of all existingmanagement ownership into the combined business, and no additional fundingrequirement from clients. HgCapital retains a 50.3% stake of the enlargedgroup, with Veronis Suhler Stevenson, the private equity investor in PreVisor,holding a minority position.
The merged company will be able to provide a broad range of assessment solutions across both blue and white-collar roles to support both recruitment and development decisions. Its offering will be available in more languages and countries than any other talent management provider in the world.
How is it performing?
The year so far has seen the business performing strongly with both sales and EBITDA ahead of last year. Most of the cost synergies predicted pre-merger have been delivered.
How will we crystallise value?
Following the merger, the focus is on achieving the target cost and revenue synergies of the combined businesses. The business will be one of the largest and most profitable in the human capital market and should be an attractive acquisition target as well as potential IPO candidate.
Trust's Investment - SHL
Sector Location Date of Residual Unrealised Accrued Total Valuation investment cost £'000 value interest value methodology £'000 £'000 £'000Services UK Oct 2006 7,984 13,866 4,378 18,224 Earnings4 Fr¶sundaWebsite: www.frosunda.de
Original enterprise value: SEK1.5 billion
HgCapital clients' total equity: 87.8%
Business description
Fr¶sunda provides specialist care and personal assistance for people with physical or mental disabilities. It also has an emerging psychiatric and schools business.
Headquartered in Solna, Sweden, Fr¶sunda employs around 3,700 and cares for over 1,600 people.
Why did we invest?Sweden offers an attractive market opportunity as its government finances andthe economy are in good shape. Fr¶sunda represents HgCapital's fourthinvestment into healthcare services. It is one of the leaders in Sweden in asub-segment of the healthcare market growing at over 10% p.a. and protected byintensifying regulation and high patient care requirements.The business benefits from visible recurring revenue and low customer churn.There are clear opportunities to improve margins through economies of scale.There is also potential to expand into adjacent market segments, as thecompany has already demonstrated through recent acquisitions.
How do we intend to create value?
HgCapital will work with management to develop its management team and grow the business organically while broadening into adjacent markets where the company can apply its expertise by acquisition. Several bolt-on investments have already been made.
What has been achieved?
Following the implementation of a 100-day plan, the focus of management has been on sales force effectiveness, sharing best-practice, improved reporting, the introduction of new products and investment in staff in M&A, legal and property.
How is it performing?
Sales force initiatives have boosted the sales pipeline and productivity levels leading to growth in sales and EBITDA compared to the prior year.
How will we crystallise value?
We expect Fr¶sunda to appeal to one of the large Swedish healthcare conglomerates, another financial buyer, or to the public through an IPO.
Trust's Investment - Fr¶sunda
Sector Location Date of Residual Unrealised Accrued Total Valuation investment cost £'000 value interest value methodology £'000 £'000 £'000Healthcare Nordic Jun 2010 14,296 16,019 - 16,019 Cost region
The difference between cost and valuation is due to foreign exchange rate movements
5 LumesseWebsite: www.lumesse.com
Original enterprise value: €110 million
HgCapital clients' total equity: 79.4%
Lumesse was formerly known as Stepstone Solutions; the company has rebranded in accordance with the terms of the acquisition agreement.
Business description
Lumesse is a leading provider of strategic HR software (recruiting and talent management) to medium and large enterprises in Europe, operating in 16 countries with 430 full-time employees.
The business operates a subscription-based model (more than 60% of total revenue) with a strong recurring consulting element. Customer retention rates are high at around 95%.
Why did we invest?
Lumesse lies within the sub-sector focus on `software as a service' (e.g. Visma) where companies experience high levels of recurring revenue from long-term customers, which leads to stability and high margins. The company has achieved strong organic growth, with scope for further margin improvement in a market growing at 15%-20% p.a. There is also the opportunity to consolidate the market by acquiring local players.
How do we intend to create value?
Lumesse's management intends to drive subscription revenue growth bycapitalising on their cutting-edge technology, improving cross- and up-sellinginto the existing customer base and investigating partnerships with HgCapitalportfolio companies.
There is also an increased focus on costs to improve margins and on strengthening the company's international presence both organically and through bolt-on acquisitions.
What has been achieved?
A first bolt-on acquisition, Mr. Ted, has been made and its global Talentlink product has been added to the Lumesse range of services. Investment in the sales force has helped to drive organic growth. An initial cost saving programme has been successfully completed.
How is it performing?
Trading is ahead of last year in both sales and EBITDA. Revenue outperformance has been driven mainly by increased demand for consulting services.
How will we crystallise value?
Multiple options are available as there is high demand for vertical technologycompanies. Lumesse has received strong interest from trade buyers but we mayalso contemplate an IPO or a sale to another private equity buyer.Trust's Investment - LumesseSector Location Date of Residual Unrealised Accrued Total Valuation investment cost £'000 value interest value methodology £'000 £'000 £'000TMT UK May 2010 14,281 13,931 1,478 15,409 Earnings6 Goldshield
Website: www.goldshield-pharmaceuticals.com
Original enterprise value: £179 million
HgCapital clients' total equity: 53.2%
Business description
Goldshield is a profitable niche pharmaceutical and consumer health products company focused on the UK.
The pharmaceutical division sells mature branded products and niche generics,typically re-formulating them to extend their lives. It is primarily focusedon serving the UK, where demand for its products benefits from attempts toreduce prescription costs.Goldshield also had a small, loss-making consumer health division which sold arange of weight management and consumer health products. This was sold duringthe first half of 2011.Why did we invest?
The business operates in a protected niche of the pharmaceuticals market and can act as a platform for acquisition-based growth.
It benefits from having a lean operating model which delivers attractive margins and strong cash conversion. We believe that surplus cash can be used to acquire new products and to finance licensing deals that will extend the product portfolio and deliver continued growth.
How do we intend to create value?
The business can be simplified by withdrawing from unprofitable activities and grown by acquiring/licensing more products in the pharmaceutical business.
What has been achieved?
A new management team has been recruited including a Chairman, CEO and Headsof Operations and Business Development. The streamlining process has beencompleted with the disposal of the Consumer Health division and other non-coreassets. The new executives are driving improvements in their respective areasparticularly Quality Assurance, Product Development/Acquisition andOperations.
How is it performing?
Pharmaceutical sales are growing and, following the divestment of the underperforming Consumer Health division, EBITDA is strongly ahead of the prior year.
How will we crystallise value?
The most likely exit route is a trade sale to a larger pharmaceutical company.
Trust's Investment - Goldshield
Sector Location Date of Residual Unrealised Accrued Total
Valuation investment cost £'000 value interest value methodology £'000 £'000 £'000Healthcare UK Dec 2009 8,545 13,287 1,612 14,899 Earnings7 Mondo Minerals
Website: www.mondominerals.com
Original enterprise value: €230 million
HgCapital clients' total equity: 90.8%
Business description
Mondo is the European number two in talc mining and processing. Its core markets are the paper and paint industries. It supplies the majority of talc for paper producers in Finland, the rest of the Nordic region and Northern Europe.
Why did we invest?
Mondo's core customer base offers long-term demand. The product is a critical but low cost technical component in its customers' manufacturing processes.
Due to the specific characteristics of talc, an opportunity exists to push into other high margin applications and increase the size of the non-paper business. There is also opportunity for margin improvement through process change.
How do we intend to create value?
The strategy is to grow sales in higher margin applications, reduce costs through better procurement and processes, and enter new expanding BRIC markets through acquisition and joint ventures.
What has been achieved?
Sales in non-paper applications have increased, processes improved, milling operations have switched from oil to electricity, and Mondo has expanded alongside its customers to serve their global needs.
How is it performing?
The introduction of an experienced COO in 2010 led to increases in volumes, sales and profit. In May 2011, he succeeded the retiring CEO and Mondo continues to trade well with sales and EBITDA growing against prior year.
How will we crystallise value?
At the beginning of July 2011, Mondo Minerals was sold to AdventInternational. The sale is anticipated to complete in the second half of 2011following employee consultations. During HgCapital's period of ownership,Mondo has delivered EBITDA growth of approximately 50% and increased employeeheadcount by 12% despite challenging trading conditions throughout therecession.
Trust's Investment - Mondo Minerals
Sector Location Date of Residual Unrealised Accrued Total Valuation investment cost £'000 value interest value methodology £'000 £'000 £'000Industrials Nordic Oct 2007 6,923 10,229 4,425 14,724 Earnings region8 AchillesWebsite: www.achilles.com
Original enterprise value: £75 million
HgCapital clients' total equity: 63.2%
Business description
Achilles operates schemes whereby buyers require their suppliers to subscribeand to provide information to the Achilles online database; for suppliers itis mandatory to join the scheme if they wish to supply to the buyer group andboth buyers and suppliers pay annual subscription fees.
Achilles currently operates more than 30 schemes across 22 countries.
Why did we invest?
Achilles is a prime example of HgCapital's subscription-based thematic investment strategy. It is a market leader in the regulatory compliance industry, with significant recurring revenue streams.
How do we intend to create value?
With high levels of contracted revenue, Achilles' position as global market leader with a scalable business model reveals considerable potential in revenue and margin growth.
What has been achieved?
Achilles' senior management team has been strengthened with significant new hires, while internal process projects on pricing, back-office management and sales practices are beginning to bear fruit.
There has also been considerable investment in a new common IT system, used across all areas of the business.
How is it performing?
Performance has been significantly up on the prior year with good growth in both sales and EBITDA.
How will we crystallise value?
There has been strong interest from the private equity community and Achilles'protected revenue base will maintain this interest throughout the economiccycle. A trade sale or IPO are also attractive outcomes with an IPO likely tooffer the best long-term value.Trust's Investment - AchillesSector Location Date of Residual Unrealised Accrued Total Valuation investment cost £'000 value interest value methodology £'000 £'000 £'000TMT UK Jul 2008 5,226 12,548 1,623 14,171 Earnings9 Mainio VireWebsite: www.mainiovire.fi
Original enterprise value: €92 million
HgCapital clients' total equity: 83.0%
Business description
Founded in 1997, Mainio Vire was one of the first private social care companies in Finland. It has grown rapidly, via a combination of opening new care homes and selected small acquisitions, to become the market leader in Finland.
Mainio Vire serves four business areas: elderly care, mental health, childday-care and home services. The company operates 47 care homes with 1,675 bedsand seven child day-care centres with 360 places. Mainio Vire has one of thewidest geographic footprints in the sector and is strongest in the regionaleconomic centres located in the southern and central parts of Finland.Approximately 1,150 people work at the company, including more than 800 whohold relevant formal qualifications.
Why did we invest?
The Healthcare Team views the Nordic region as an attractive place to investgiven the favourable demographics, fragmented competition, and the strongtrend towards private provision of care. Our in-depth analysis of the Finnishmarket suggested that there were a number of highly attractive segments andMainio Vire offers a highly attractive platform to benefit from these trends.
Mainio Vire is a strong, high quality business with sustainable organic growth. It is a quality-oriented company with ISO certification and has a very experienced, operationally focused management team.
How do we intend to create value?
There are a number of paths to increased value, including expected organic growth, movements into adjacent and emerging sectors, and through further acquisitions.
How is it performing?
The company is performing well with sales and profits growing year-on-year.
How will we crystallise value?
The most likely exit route is a sale to a larger Nordic healthcare group or to a private equity buyer.
Trust's Investment - Mainio Vire
Sector Location Date of Residual Unrealised Accrued Total Valuation investment cost £'000 value interest value methodology £'000 £'000 £'000Healthcare Nordic Jun 2011 12,329 12,456 - 12,456 Cost region
The difference between cost and valuation is due to foreign exchange rate movements
10 Manx TelecomWebsite: www.manxtelecom.com
Original enterprise value: £159 million
HgCapital clients' total equity: 79.5%
Business description
Manx Telecom is the primary fixed and mobile telecom operator on the Isle of Man. A former monopoly, it provides telecommunication and data services to commercial and consumer customers.
In addition to its on-island activities, the company has developed a number of niche off-island voice and data hosting businesses which are delivering further growth.
Why did we invest?
Manx Telecom is the incumbent operator in a high growth economy where quality telecoms are critical for many businesses and spending in the sector has historically grown above real GDP.
The company enjoys a leading market position and a favourable regulatory environment which encourages infrastructure investment.
How do we intend to create value?
HgCapital will continue to invest in the network to drive growth in the corebusiness while further investment in the Isle of Man's infrastructure throughthe development of a new data hosting centre will support continued growth inthis high margin business area.We will pursue margin improvement to levels in line with leading small islandtelecoms operators and management will be supported in the continued growth ofnew off-island opportunities. There is potential for bolt-on acquisitions tofurther expand the business.
What has been achieved?
Investment in management, working with local regulators and improvements inreporting and KPI monitoring processes has begun to reap rewards. A strategicreview has been carried out identifying key areas for future growth, withplanning for construction of a new data centre and roll out of high speedbroadband well underway. At the beginning of the year, Manx Telecom was listedin the Sunday Times 100 Best Companies To Work For.
How is it performing?
Revenues continue to rise compared to last year but there has been some underperformance in profits as a result of significant investment into the business which should show long-term benefits.
How will we crystallise value?
The business in its current form is expected to be attractive to a number of trade and financial buyers. Successful growth in the scale of the business through acquisitions will make the business attractive to larger private equity investors who have a successful track record in the telecoms space.
Trust's Investment - Manx Telecom
Sector Location Date of Residual Unrealised Accrued Total Valuation investment cost £'000 value interest value methodology £'000 £'000 £'000TMT UK Jun 2010 11,033 11,033 - 11,033 Cost
INVESTMENTS IN RENEWABLE ENERGY
Business description
HgCapital's Renewable Energy sector team uses private equity skills toidentify and acquire renewable energy projects, usually based on wind or solarenergy, in Western Europe. These projects run across two funds and are groupedinto platforms with the current portfolio comprising:
- UK Onshore Wind: one of the ten largest independently-owned onshore wind portfolios in the UK with 113MW of capacity in operation;
- Swedish Onshore Wind: the largest owner of onshore wind farms in the Nordicregion with total capacity of 181MW in three projects, developed and built byRenewable Energy Systems Limited, one of the world's most experienceddevelopers of wind farms;
- Spanish Solar: the fourth largest operator of solar PV in Europe with capacity of 61MW in seven projects in Spain; and
- Spanish Hydro: 14 projects of 55MW operating with 16MW to be built in the next 12 months.
As at 30 June 2011, electricity equivalent to the power consumption of more than 200,000 homes is generated from the operational energy plants in the portfolio.
Why do we invest?
Investment in renewable energy offers good, risk-adjusted returns, delivering inflation-protected and non-GDP linked revenue streams from high quality assets.
It is the fastest growing part of the European electric power sector, and isexpected to account for the majority of new European energy asset investmentover the next ten years. This growing demand is driven by renewable energy'sincreasing cost competitiveness, legally binding carbon reduction targets setby the EU, the need to replace ageing generation capacity, and to increase thesecurity of energy supplies in Europe.
The sector shares the attractive characteristics, including downside protection, of core infrastructure projects with the potential for significantly higher returns on equity.
How do we intend to create value?
Investment returns are anticipated through a combination of yield during operation and capital gain at refinancing or exit, providing a return profile that should complement returns from its core investments in leveraged buyouts.
By bringing individual investments together into platforms, we can enhance value through economies of scale, shared expertise and aggregated generation capacity.
How will we crystallise value?
HgCapital is developing groups of projects based on the three platforms described below. These platforms can then be refinanced efficiently or sold as portfolios of closely related projects to industry buyers or financial investors.
Principal investments by platform Total Portfolio
Valuation value £'000 %UK Wind 6,488 2.3Spanish Solar 4,943 1.8Swedish Wind 3,111 1.1Other 113 0.1RPP1 Fund 14,655 5.3 Spanish Mini-Hydro 3,905 1.4Swedish Wind 1,716 0.6Liquid assets* 2,229 0.8RPP2 Fund 7,850 2.8 Total renewable energy investments 22,505 8.1*for pending investmentsDIVERSIFICATION BY VALUEGeography43% Spain32% UK24% Sweden1% FranceResource57% Onshore wind24% Solar19% HydroFINANCIAL STATEMENTSINCOME STATEMENT
for the six months ended 30 June 2011
Revenue return Capital return Total return Note Six months Year Six months Year Six months Year ended ended ended ended ended ended 30.06.11 30.06.10 31.12.10 30.06.11 30.06.10
31.12.10 30.06.11 30.06.10 31.12.10
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 (un- (un- (audited) (un- (un- (audited) (un- (un- (audited) audited) audited) audited) audited) audited) audited)Gains on - - - 18,004 11,558 63,529 18,004 11,558 63,529investments andgovernmentsecuritiesGains/(losses) 7(a) - - - 1,690 (1,850) (4,199) 1,690 (1,850) (4,199)on loansreceivable fromGeneral PartnerNet income 6 3,962 4,818 12,165 - - - 3,962 4,818 12,165Other expenses 8 (218) (1,187) (2,062) - - - (218) (1,187) (2,062)Net return on 3,744 3,631 10,103 19,694 9,708 59,330 23,438 13,339 69,433ordinaryactivitiesbefore taxationTaxation on 10 (314) - (50) - - - (314) - (50)ordinaryactivitiesTransfer to 3,430 3,631 10,053 19,694 9,708 59,330 23,124 13,339 69,383reservesReturn per 11(a) 10.99p 12.98p 34.02p 63.08p 34.69p 200.77p 74.07p 47.67p 234.79pOrdinary shareThe Total Return column of this statement represents the Trust's income statement.The supplementary revenue and capital return columns are both prepared under guidancepublished by the Association of Investment Companies ("AIC"). All recognised gainsand losses are disclosed in the revenue and capital columns of the income statementand as a consequence no statement of total recognised gains and losses has beenpresented.
All revenue and capital items in the above statement derive from continuing operations.
No operations were acquired or discontinued during the period.
BALANCE SHEETas at 30 June 2011 Note 30.6.11 30.6.10 31.12.10 £'000 £'000 £'000 (unaudited) (unaudited) (audited)Fixed assetsInvestments held at fair valueQuoted at market valuation - -
-
Unquoted at Directors' valuation 249,905 207,023
232,184
Total fixed assets 249,905 207,023
232,184
Current assets - amounts receivable afterone yearAccrued income on fixed assets 28,026 21,569
26,606
Current assets - amounts receivable withinone yearDebtors 245 2,069 1,826Government securities 91,938 60,913 86,498Cash 2,143 2,073 3,473Total current assets 122,352 86,624 118,403
Creditors - amounts falling due within one (3,239) (1,706)
(2,594)yearNet current assets 119,113 84,918 115,809Net assets 369,018 291,941 347,993 Capital and reservesCalled up share capital 8,005 7,838 7,838Share premium account 67,887 61,436 61,444Capital redemption reserve 1,248 1,248 1,248Capital reserve - realised 280,935 232,462 274,913Capital reserve - unrealised (3,149) (23,992) (16,821)Revenue reserve 14,092 12,949 19,371
Total equity shareholders' funds 369,018 291,941
347,993
Basic net asset value per Ordinary share 11(b) 1,160.4p 938.6p 1,118.8p Diluted net asset value per Ordinary share 11(b) 1,129.3p 940.5p 1,090.7p
CASH FLOW STATEMENT
for the six months ended 30 June 2011
Note Six months Six months Year ended ended ended 30.6.11 30.6.10 31.12.10 £'000 £'000 £'000 (unaudited) (unaudited) (audited)
Net cash inflow from operating activities 9 3,240 5,653
4,311
Taxation received/(paid) 1,581 -
(10)
Capital expenditure and financialinvestmentPurchase of fixed asset investments (29,435) (73,992)
(111,418)
Proceeds from the sale of fixed asset 32,165 4,891
72,600
investments
Net cash inflow/(outflow) from capital 2,730 (69,101)
(38,818)
expenditure and financial investmentFinancing activitiesProceeds from issue of share capital 6,610 50,000
50,000
Fees paid on issue of share capital - (1,145)
(1,137)
Equity dividends paid (8,709) (6,297)
(6,297)
Net cash (outflow)/inflow from financing (2,099) 42,558
42,566
activities
Net cash inflow/(outflow) before 5,452 (20,890)
8,049
management of liquid resourcesManagement of liquid resourcesPurchase of government securities (33,737) (114,874)
(205,535)
Sale/redemption of government securities 26,955 134,964
198,086
Net cash (outflow)/inflow from management (6,782) 20,090
(7,449)
of liquid resources(Decrease)/increase in cash and cash (1,330) (800)
600
equivalents in the periodCash and cash equivalents at 1 January 3,473 2,873
2,873
Cash and cash equivalents at 30 June / 31 2,143 2,073
3,473
December
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 30 June 2011
Share Capital Note Share premium redemption Capital Revenue capital account reserve reserves reserve Total £'000 £'000 £'000 £'000 £'000 £'000At 31 December 2010 7,838 61,444 1,248 258,092 19,371 347,993
Issue of Ordinary shares 5 174 6,443 - - - 6,617Conversion of Subscription 5 (7) - - -
- (7)sharesNet return from ordinary - - - 19,694 3,430 23,124activitiesDividends paid 4 - - - - (8,709) (8,709)At 30 June 2011 8,005 67,887 1,248 277,786 14,092 369,018At 31 December 2009 6,296 14,123 1,248 198,762 15,615 236,044Issue of Ordinary shares 1,480 48,520 - - - 50,000
Issue of Subscription shares 62 (62) - -
- -Cost of share issue - (1,137) - - - (1,137)Net return from ordinary - - - 59,330 10,053 69,383activitiesDividends paid 4 - - - - (6,297) (6,297)At 31 December 2010 7,838 61,444 1,248 258,092 19,371 347,993
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 CompaniesAct 2006 and an investment trust within the meaning of Sections 1158 and 1159of the Corporation Tax Act 2010 (`CTA 2010').
2. Basis of preparation
The accounts have been prepared under the historical cost convention, exceptfor the revaluation of financial instruments at fair value as permitted by theCompanies Act 2006, and in accordance with applicable UK law and UK AccountingStandards (`UK GAAP') and with the Statement of Recommended Practice`Financial Statements of Investment Trust Companies' (`SORP'), dated January2009. 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.
Accordingly, they continue to adopt the going concern basis in preparing the interim 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
In May 2003 (subsequently revised in January 2009) and January 2009, the Trustentered into two separate partnership agreements with general and founderpartners, at which point investment holding limited partnerships wereestablished to carry on the business of an investor, with the Trust being thesole limited partner in these entities.
The purpose of these partnerships, HGT LP and HGT 6 LP (together the `buyout funds') is to hold all the Trust's investments in buyouts and other investments, other than liquid funds and renewable energy projects (see below).
Under the partnership agreements, the Trust made capital commitments into the buyout funds with the result that the Trust now holds direct investments in the buyout funds and an indirect investment in the fixed asset investments that are held by these funds, as it is the sole limited partner. The fixed asset investments on the balance sheet and the investment portfolio (see above) comprise the underlying investments held by these buyout funds.
The Trust also entered into partnership agreements with the purpose ofinvesting in renewable energy projects by making capital commitments alongsideother limited partners in Hg Renewable Power Partners LP and HgCapitalRenewable Power Partners 2 C LP (together the `renewable funds'). These aredirect investments in the renewable funds, as shown on the balance sheet andthe investment portfolio above.
Priority profit share and carried interest per the buyout limited partnership agreements
Under the terms of the buyout fund limited partnership agreements (`LPAs'),the general partner is entitled to appropriate, as a first charge on the netincome of the funds, an amount equivalent to its priority profit share(`PPS'). The Trust is entitled to net income from the funds, after payment ofthe PPS.In years in which these funds have not yet earned sufficient net income tosatisfy the PPS, the entitlement is carried forward to the following years.The PPS is payable quarterly in advance, even if insufficient net income hasbeen earned. Where the cash amount paid exceeds the net income, an interestfree loan is advanced to the general partner by these buyout funds, which isfunded via a loan from the Trust. Such loan is only recoverable from thegeneral partner by an appropriation of net income; until net income is earned,no value is attributed to this loan.
Furthermore, under the buyout funds' LPAs, the founder partner is entitled to a carried interest distribution once certain preferred returns are met. The LPAs stipulate that the 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 areshown in the appropriate lines of the income statement. Notes 6, 7 and 8 tothe financial statements and the cash flow statement disclose the gross incomeand gross capital gains of the buyout funds (including the associated cashflows) and also reflect the proportion of net income and capital gains in thebuyout funds that have been paid to the general partner and founder partner asits PPS and carried interest, where applicable.The PPS paid from net income is charged to the revenue account in the incomestatement, whereas PPS paid as an interest-free loan, if any, is charged as anunrealised depreciation to the capital return on the income statement.
4. Dividends
It is intended that dividends will be declared and paid annually in respect ofeach accounting period. A dividend of 28.0p per share was paid on 13 May 2011in respect of the year ended 31 December 2010 (year ended 31 December 2009:interim dividend of 25.0p per share). Shareholders should note that the Trusthas been advised that its dividend in respect of the financial year ended 31December 2010 was paid as a lawful interim dividend and not as a finaldividend approved by shareholders.5. Issued share capital Six months ended Six months ended Year ended 30.06.11 30.06.10 31.12.10 (unaudited) (unaudited) (audited) No. `000 £'000 No. `000 £'000 No. `000 £'000Ordinary shares of 25p eachAllotted, called up and fullypaid:At 1 January 31,104 7,776 25,187 6,296 25,187 6,296Issued as part of placing and - - 5,917 1,480 5,917 1,480open offerIssued following exercise of 696 174 - - - -Subscription rightsAt 30 June / 31 December 31,800 7,950 31,104 7,776 31,104 7,776
The Trust's issued share capital at the beginning of the year consisted of 31,103,915 ordinary shares. On 10 June 2011, 695,810 new Ordinary shares were issued pursuant to the exercise of Subscription rights by Subscription shareholders. The Subscription price paid per Ordinary share was £9.50 and total proceeds of £6.6 million were received by the Trust.
Six months ended Six months ended Year ended 30.06.11 30.06.10 31.12.10 (unaudited) (unaudited) (audited) No. `000 £'000 No. `000 £'000 No. `000 £'000Subscription shares of 1p eachAllotted, called up and fullypaid:At 1 January 6,221 62 - - - -Issued as part of placing and - - 6,221 62 6,221 62open offer and bonusConversion into Ordinary shares (696) (7) - - - -At 30 June / 31 December 5,525 55 6,221 62
6,221 62
On 7 April 2010, 5,037,351 subscription shares were issued as part of the qualifying bonus issue, representing one subscription share for every five existing ordinary shares held. A further 1,183,432 subscription shares were issued, attached to the placing and open offer, representing one subscription share for every five new ordinary shares issued.
Each subscription share entitles the holder to subscribe for one ordinaryshare upon exercise of their subscription right and payment of thesubscription price. The first opportunity to exercise such right was on 31 May2011, when 695,810 Ordinary shares were issued following the exercise ofSubscription rights on the same number of Subscription shares. The Ordinaryshares issued commenced trading on 15 June 2011. The next opportunity to exerciseSubscription rights is on 31 October 2011 and, thereafter, 31 May 2012 and 31October 2012, at a price of £9.50 per ordinary share. The final exercise dateis on 31 May 2013 at a subscription price of £10.25 per ordinary share.6. Income Six months Six months Year ended ended ended 31.12.10 30.6.11 30.6.10 £'000 £'000 £'000 (audited) (unaudited) (unaudited)Income from investments held by HGT LP andHGT 6 LPUK unquoted investment income 4,075 3,604
7,672
Foreign unquoted investment income 4,938 2,265
6,267
UK dividends - 909
1,396
Gilt interest less amortisation of premium 42 (419)
(472) 9,055 6,359 14,863Other incomeDeposit interest 11 25 27Other interest income 20 126 136 31 151 163Total income 9,086 6,510 15,026Priority profit share attribution (5,124) (1,692) (2,861)Total net income 3,962 4,818 12,165Total net income comprises:Dividends - 909 1,396Interest 3,962 3,909 10,769Total net income 3,962 4,818 12,165
7. Fees, priority profit share and carried interest paid to Manager
(a) Priority profit share Revenue return Six months Six months Year ended ended ended 31.12.10 30.6.11 30.6.10 £'000 £'000 £'000 (audited) (unaudited) (unaudited)Priority profit share to General Partnersfunded by:Share of investment income 5,124 1,692
2,861
Loan (recovered from)/advanced to General (1,690) 1,850 4,199Partner 3,434 3,542 7,060The priority profit share payable on HGT LP and HGT 6 LP rank as a firstappropriation of net income from investments held in HGT LP and HGT 6 LPrespectively and is deducted prior to such income being attributed to theTrust in its capacity as a Limited Partner. The net income of HGT LP and HGT 6LP earned during the period, after the deduction of the priority profit share,is shown on the income statement.(b) Carried interest Capital return Six months Six months Year ended ended ended 31.12.10 30.6.11 30.6.10 £'000 £'000 £'000 (audited) (unaudited) (unaudited)Carried interest payable to FounderPartner funded by:Share of gains on investments 2,393 - 1,136 2,393 - 1,136
The carried interest payable ranks as a first distribution of capital gains onthe investments held in HGT LP and HGT 6 LP, a limited partnership establishedsolely to hold the Trust's investments, and is deducted prior to such gainsbeing paid to the Trust in its capacity as a Limited Partner. The net amountof capital gains of HGT LP and HGT 6 LP during the period, after the deductionof carried interest, is shown on the income statement8. Other expenses Revenue return Six months Six months Year ended ended ended 31.12.10 30.6.11 30.6.10 £'000 £'000 £'000 (audited) (unaudited) (unaudited)Custodian and administration fees 206 138 324Other administration costs 12 1,049 1,738 218 1,187 2,062
9. Cash flow from operating activities
Six months Six months Year ended ended ended 31.12.10 30.6.11 30.6.10 £'000 £'000 £'000 (audited) (unaudited) (unaudited)Net return before taxation 23,438 13,339 69,433Gains on investments held at fair value (22,087) (9,708) (60,466)Priority profit share recovered/(advanced) 1,690 (1,850) (4,199)Movement on carried interest 1,257 (1,062)
74
Amortisation of premium on government 1,288 2,664
3,980
securities
Increase in prepayments and accrued income (1,438) (1,069) (5,919) Decrease in debtors
17 2,675
2,691
(Decrease)/increase in creditors (925) 671
(1,276)
Tax on investment income included within - (7)
(7)
gross income Net cash inflow from operating activities 3,240 5,653 4,311
10. Taxation
Tax for the six month period is charged at 28% to 31 March 2011 and 26% from 1April 2011 (31 December 2010: 28%), representing the best estimate of theaverage annual effective tax rate expected for the full year, applied to thepre-tax income of the six month period.In the opinion of the Directors, the Trust has complied with the requirementsof Section 1158 and Section 1159 of the CTA 2010 and will therefore be exemptfrom corporation tax on any capital gains made in the year. The Trust expectsto designate all of any dividend declared in respect of this financial year asan interest distribution to its shareholders. This distribution is treated asa tax deduction against taxable income, resulting in no corporation tax beingpayable by the Trust on the interest income designated as a dividend.
11. Return and net asset value per ordinary share
(a) Return per Ordinary share
Revenue return Capital return Six months Six months Year Six months Six months Year ended ended ended ended ended ended 30.6.11 30.6.10 31.12.10 30.6.11 30.6.10 31.12.10 £'000 £'000 £'000 £'000 £'000 £'000 (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)Earnings (£`000):Return on ordinary activities 3,430 3,631 10,053 19,694 9,708 59,330after taxationNumber of shares (`000)Weighted average number of 31,223 27,983 29,552 31,223 27,983 29,552shares in issueReturn per Ordinary share 10.99 12.98 34.02 63.08 34.69 200.77(pence)(b) Net asset value per share Six months Six months Year ended ended ended 31.12.10 30.6.11 30.6.10 £'000 £'000 £'000 (audited) (unaudited) (unaudited)Net asset value (£'000)Net assets 369,018 291,941 347,993
Assuming exercise of all Subscription 52,487 59,097
59,097shares (at minimum price)Fully diluted net asset value 421,505 351,038 407,090Number of shares (`000)Number of shares in issue 31,800 31,104 31,104
Potential issue of Subscription shares 5,525 6,221
6,221
Shares in issue following exercise of 37,325 37,325
37,325
Subscription sharesBasic net asset value per share (pence) 1,160.4 938.6 1,118.8Diluted net asset value per share (pence) 1,129.3 940.5 1,090.7
12. Capital commitments
The Trust has committed through HGT 6 LP to invest £285 million alongside theManager's latest buyout fund, Hg6. The Trust will be entitled, withoutpenalty, to opt out of any investment which could cause the Trust to lose itsstatus as an investment trust, result in the Trust not having the cashresources to meet any of its projected liabilities or expenses, or result init not being able to pay dividends or undertake any intended share buy-back.At 30 June 2011, £136,426,000 (30 June 2010: £198,951,000; 31 December 2010:£155,884,000) of this commitment was uncalled.The Trust has also committed through HGT LP to invest £120 million alongsidethe Manager's previous buyout fund, Hg5. At 30 June 2011, £25,210,000 (30 June2010: £20,464,000; 31 December 2010: £22,350,000) of this commitment wasuncalled. The Trust's derivative financial instruments, held through HGT LPfor the purpose of foreign exchange hedging, expire on 29 August 2012. Inorder to meet any potential liability arising on this date, an amount of£6,260,000 has been reserved for this purpose at the HGT LP level. This amountis therefore callable from the Trust at this or any earlier date and will,when called, reduce the above uncalled commitment to HGT LP.During 2010, the Trust committed to invest €40 million in the Manager's latestrenewable energy fund, HgCapital Renewable Power Partners 2 C LP. As at 30June 2011, €30,390,000 (£27,445,000) (30 June 2010: €11,735,000 (£9,608,000);31 December 2010: €37,302,000 (£31,964,000)) of this commitment was uncalled.
During 2006, the Trust committed €21.6 million in the Manager's first renewable energy fund, Hg Renewable Power Partners LP. As at 30 June 2011, €2,127,000 (£1,921,000) (30 June 2010: €2,140,000 (£1,752,000); 31 December 2010: €2,127,000 (£1,823,000)) of this commitment was uncalled.
13. Publication of non-statutory accounts
The financial information contained in this half-yearly financial report doesnot constitute statutory accounts as defined in Section 435 of the CompaniesAct 2006. The financial information for the six months ended 30 June 2011 and30 June 2010 has not been audited. The information for the year ended 31December 2010 has been extracted from the latest published audited financialstatements, which have been filed with the Registrar of Companies. The reportof the auditors on those accounts contained no qualification or statementunder section 498 (2) or (3) of the Companies Act 2006.
14. Annual results
The Board expects to announce the results for the year ending 31 December 2011in March 2012. The Annual Report should be available by the end of March 2012,with the Annual General Meeting being held in May 2012.
BOARD, MANAGEMENT AND ADMINISTRATION
Board of DirectorsRoger Mountford (Chairman)Piers BrookeRichard Brooman (Chairman of the Audit & Valuation Committee)Peter Gale (Deputy Chairman and Senior Independent Director)Andrew MurisonMark PowellHgCapital Trust plc2 More London RiversideLondonSE1 2APwww.hgcapitaltrust.comRegistered office(Registered in England No. 1525583)2 More London RiversideLondonSE1 2APManagerHgCapital**2 More London RiversideLondonSE1 2APTelephone: 020 7089 7888www.hgcapital.comSecretary and administratorHg Pooled Management Limited*2 More London RiversideLondonSE1 2APTelephone: 020 7089 7888www.hgcapital.comStockbrokersRBS Hoare Govett Limited*250 BishopsgateLondonEC2M 4AATelephone: 020 7678 8000www.rbs.com/hoaregovettNumis Securities Ltd*The London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LTTelephone: 020 7260 1000www.numiscorp.comCustodianHg Investment Managers Limited*2 More London RiversideLondonSE1 2APRegistrarComputershare Investor Services PLC*The PavilionsBridgwater RoadBristol BS99 6ZZTelephone: 0870 707 1037www-uk.computershare.com/investorIndependent auditorDeloitte LLP2 New Street SquareLondon EC4A 3BZAICAssociation of Investment Companieswww.theaic.co.ukLPEQListed Private Equitywww.lpeq.com
HgCapital Trust plc is a founder member of LPEQ (formerly iPEIT). LPEQ is agroup of private equity investment trusts and similar vehicles listed on theLondon Stock Exchange and other major European stock markets, formed to raiseawareness and increase understanding of what listed private equity is and howit enables all investors - not just institutions - to invest in privateequity.
LPEQ provides information on private equity in general, and the listed sector in particular, undertaking and publishing research and working to improve levels of knowledge about the asset class among investors and their advisers.
*Authorised and regulated by the Financial Services Authority.
**HgCapital is the trading name of Hg Pooled Management Limited and HgCapital LLP
The full Interim Results and a webcast describing the results are available at http://www.hgcapitaltrust.com
For further details:
HgCapital
Ian Armitage (Chairman, HgCapital) +44 (0)20 7089 7888
Roger Mountford (Chairman, HgCapital Trust plc) +44 (0)77 99 66 26 01
MaitlandRowan Brown +44 (0)20 7379 5151George HudsonAbout 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.
XLONRelated Shares:
HgCapital Trust plc