Sector expert investors supporting management to grow industry champions. Manager s update. to HgCapital Trust plc and its shareholders December 2014

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1 Sector expert investors supporting management to grow industry champions Manager s update to HgCapital Trust plc and its shareholders December 2014

2 Sector expert investors supporting management to grow industry champions +10% The average growth in sales of the top 20 mid-cap buyout investments over the last 12 months to 31 October % The average growth in EBITDA of the top 20 mid-cap buyout investments over the last 12 months to 31 October m Deployed on behalf of the Trust over the course of m Cash returned to the Trust over the course of % The total return of the share price year-to-date to 30 November 2014 Important information: Past performance is not necessarily a reliable indicator of future results. 02

3 Sector expert investors supporting management to grow industry champions ABOUT HgCAPITAL OUR INVESTMENT STRATEGY INVESTMENT ENVIRONMENT HgCapital is a mid-market private equity firm with over 5 billion assets under management, investing in four sectors, predominantly across Northern Europe. Formerly part of Mercury Asset Management, HgCapital was established as a partnership, wholly owned by its partners and staff, in We are well-resourced with approximately 100 staff including over 60 investment professionals in offices in London and Munich. Today the investment teams manage three active investment funds, HgCapital 7, a mid-market buyout fund, HgCapital Mercury, a TMT focused small buyout fund and RPP2 a renewable energy infrastructure fund. HgCapital serves over 100 institutional investors with the largest client being HgCapital Trust plc. OUR APPROACH TO INVESTING HgCapital s four sector teams combine the domain knowledge and expertise of a trade buyer giving them superior credibility and the ability to make confident decisions with the speed of execution and discipline of a financial investor; leading to high conversion rates on deals. This deep sector focus is channelled through a rigorous, research-based investment process, to systematically identify the most attractive growth sub-sectors and business models of the European mid-market and then repeatedly invest in them, optimising deal flow and improving returns. Following each investment, HgCapital s dedicated portfolio management team works to protect and enhance value by adopting clear strategies for growth and ultimate exit. With experienced people and an approach that focuses on delivering value, HgCapital has the capability and commitment to deliver strong investment returns to investors. Mid-market control buyouts across the TMT, services and industrials sectors (enterprise values of million) primarily in Northern Europe Lower mid-market control buyouts in the TMT sector (Enterprise Values of million) primarily in Northern Europe Specialist infrastructure through renewable energy projects across Western Europe HgCapital has targeted these areas for investment due to the number of high quality growth companies to invest in and our ability to generate strong, repeatable returns. Within each sub-sector identified by our sector teams, HgCapital looks for growth businesses with attractive business model characteristics including: Recurring/repeat revenues; Large number of customers/book of business: typically many thousands; Product or service is business critical but is typically a low-spend item; Protection from intellectual property: technology, brand or business model; Growth rate typically c.10% revenue CAGR over many years; and Low volatility/low economic cycle sensitivity. Once we have found a successful niche or business model we will seek to make multiple investments in the area, using our knowledge and networks. The resultant cash flows from these types of business are attractive to many trade and financial buyers providing better exit liquidity. The investment environment for private equity in 2014 has often been challenging to navigate, especially in terms of pricing and leverage levels but also evident in accelerated auction processes. There has also been an increase in trade buyer activity, with substantial cash balances in the corporate sector often helping to drive higher acquisition prices. The macro-economic environment in Europe has also broadly continued to underperform expectations in the latter part of 2014, despite a more positive first half of the year. Over the past five months, the Trust has both deployed capital and realised investments. Within our sectors of expertise we continue to find pockets of opportunity to acquire market leading businesses at reasonable prices, usually where there has been the opportunity to build relationships with such companies over many years before making an investment. The investments made in 2014 have been generated on a proprietary basis following many years of sector research. A deep sector focus is used by HgCapital to identify high quality growth companies in sub-sectors driven by fundamental long-term factors. The increasing penetration of internet-based transactions for businesses is an example identified many years ago. Trade buyers and financial buyers, continue to show an interest in a number of our portfolio companies, as a result of their growth and market positions. Additionally, realisations by way of an IPO in public markets remains an option. We believe there will be further opportunities in the medium term to continue realising investments as we have done consistently across market cycles. Important information: Past performance is not necessarily a reliable indicator of future results. 03

4 Sector expert investors supporting management to grow industry champions PORTFOLIO TRADING OVERVIEW Investing in HgCapital Trust plc gives you access to a portfolio where the top 20 primary mid-cap buyout companies have aggregate sales of 2.2 billion, profits of 439 million and margins of 20%. Over the 12 months to the end of October 2014, the top 20 companies in the buyout portfolio (representing 89% of the total portfolio) have delivered aggregate sales growth and EBITDA growth of 10% up from the 9% reported in the December 2013 annual results. 16 companies (84% by value) reported an increase in year-on-year sales, while 13 out of the 20 companies (70% by value) increased EBITDA compared to the prior year. Of these top 20 investments, ten (64% by value) increased sales by greater than 10% and six (24% by value) grew EBITDA by more than 20% over the last 12 months. Of the top 20 investments, 30% by value have reported a decline in EBITDA year-on-year. For some of the companies, this decline in EBITDA is a function of continued investment in the businesses. For example, e-conomic, acquired in August 2013, is seeing rapid revenue growth. However, profits are currently in decline due to significant investment to drive future expansion. EBITDA at Radius has been depressed as investment is made into the cost base to successfully progress the integration of HSP. There has been a marked improvement in trading over the past year from some companies in the portfolio, in particular Parts Alliance, Teufel SFC-Koenig and NetNames which have seen strong growth. Several businesses within the portfolio have seen and continue to see double-digit growth including IRIS, Visma, P&I, Zenith- Leasedrive and JLA. December trading figures will be reported in the annual accounts to be published in March TOP 20 LTM SALES GROWTH 1,200 1,000 TOP 20 LTM PROFIT GROWTH million % 20% 34% 19% 1 million % 24% 22% 14% 10% <0% pa 0% - 15% pa 15% - 20% pa 20% - 25% pa >25% pa <0% pa 0% - 10% pa 10% - 15% pa 15% - 25% pa >25% pa Sales growth bands LTM Sales Number of investments within associated band % of top 20 portfolio by value within associated band LTM EBITDA EBITDA growth bands Number of investments within associated band % of top 20 portfolio by value within associated band Important information: Past performance is not necessarily a reliable indicator of future results. 04

5 Sector expert investors supporting management to grow industry champions PORTFOLIO ACTIVITY NEW INVESTMENT ACTIVITY Over the course of 2014, 707 million has been deployed by HgCapital and 86.0 million on behalf of HgCapital Trust. In the second half of 2014, HgCapital completed the reinvestment in Visma, a leading software and BPO services business in the Nordic region. The Trust contributed a total of 40.0 million to the re-investment in Visma, including substantial co-investment participation in addition to its commitment to invest in all HgCapital 7 deals. As we have previously stated, the Mercury fund has seen and continues to see a strong pipeline of opportunities. There have been two new investments in the second half of the year. In July, the Mercury team completed an investment in Sequel Business Solutions, a leading software and service provider to the Lloyd s of London insurance market. The Trust has contributed a total of 4.4 million. The Mercury team has announced the deployment of further capital in December with the public-to-private acquisition of Allocate, a leading provider of workflow software to the healthcare sector. The Trust will contribute 6.0 million to this investment. For more detail on these investments please refer to page 6. STOP PRESS The Services team has announced an investment in A-Plan, a UK based, independent insurance broker. Founded in 1963, A-Plan provides products from a wide range of insurers, including SME commercial, motor and home, and high net worth insurance. The Company currently operates 73 branches nationwide, and serves over 580,000 policy holders. The Trust s share of the investment is estimated to be 14.9 million. This transaction is subject to FCA approval. FURTHER INVESTMENTS In June, Ullink announced the acquisition of NYFIX and Metabit from NYSE Technologies, which completed in September The acquisition was partly funded with debt and a further 2.3 million has been deployed on behalf of the Trust. During the period, e-conomic, a SaaS accounting and SME solution provider based in Denmark, has completed the acquisition of Speedledger, a Swedish leader in web-based accounting for micro businesses; and a joint venture with CE Consulting Empresarial ( CE ), a leading Spanish provider of business advisory services. The Trust has contributed a total of 1.8 million. Over the second half of the year, the Trust also participated in further small investments of 6.8 million in the buyout and renewable energy funds. EXITS AND REALISATIONS Over the course of 2014, HgCapital has returned nearly 538 million to its clients, including 82.7 million to the Trust, primarily from the realisations of Visma and Schleich. In the second half of the year, we completed the sale of Schleich, a toy manufacturer headquartered in Germany, to Ardian, the French Private Equity Firm, completed in July The cash proceeds of this transaction were 11.8 million for the Trust, representing an uplift of 4.2 million over the carrying value of 7.6 million at 31 December The proceeds from this sale represented an investment multiple of 2.6x cost and a gross IRR of 14% p.a. In July, we announced the sale of Voyage Care to Partners Group and Duke Street Capital/Tikehau. Upon completion, in September 2014, the Trust received proceeds of 8.4 million. This disposal represented a decrease of 1.9 million over the carrying value of 10.3 million at 31 December In August, HgCapital completed the sale of Visma, a leading software and BPO services business in the Nordic region. The proceeds of this transaction have returned 34.3 million to the Trust, in addition to the 7.1 million dividend received in May, representing an uplift of 9.7 million (26 pence per share) over the carrying value of 31.7 million at 31 December Over the life of the investment to date, the Trust has received total proceeds of 84.0 million, representing an investment multiple of 5.2x and a gross IRR of 3 p.a. In addition to these realisations, the Trust received further distributions in the second half of 2014 of 5.3 million from other buyout and renewable energy investments. OUTLOOK We remain selective about making new investments in the current environment and have deployed capital in 2014 where there has been the opportunity to build relationships with companies over many years. We believe that our deep sector expertise will continue to find pockets of opportunity to make selective new and bolt-on acquisitions, at reasonable prices, over the next twelve months. Trade buyers and financial buyers, continue to show an interest in a number of our portfolio companies, as a result of their growth and market positions. Additionally, realisations by way of an IPO in public markets remains an option. Looking ahead, we have increased confidence in our portfolio and will continue to work to improve the operational performance of our companies. This, together with consistent realisations, should deliver steady NAV progression over the next few years, rewarding our investors with long-term superior returns. 05

6 Investments in small-cap TMT In 2011, the Trust made a 60 million commitment to HgCapital s Mercury Fund, specialising in TMT investments with an enterprise value of between 20 million and 80 million. Smaller technology buyouts is an area where HgCapital has historically made many profitable investments and Mercury has allowed the establishment of a dedicated team of investment professionals focused on these deals. This dedicated fund targets smaller buyouts in the same TMT sub-sectors and similar business models, for example electronic marketplaces and SaaS providers. The addition of the Mercury team alongside the existing TMT team further reinforces the scale and capability of HgCapital within this sector. Following the completion of the Allocate Software acquisition, expected in January 2015, the HgCapital Mercury fund will be 32% invested across five portfolio companies. NEW INVESTMENT: SEQUEL BUSINESS SOLUTIONS Website: Geography: UK BUSINESS DESCRIPTION Sequel Business Solutions is a leading software and services provider to the Lloyd s of London and broader London insurance market. It was founded in 1993 and has since grown to become one of the leading insurance and reinsurance software specialists in the UK. Sequel has an attractive customer base, comprised of some of the most highly respected companies in the commercial insurance space, who rely on Sequel s core platform, Eclipse, to run and optimise their operations. The company also provides innovative software solutions for related work streams such as risk analytics (Sequel Impact). The company has offices in London and Malaga, Spain, and employs c.130 staff. INVESTMENT RATIONALE The Mercury team approached the management team of Sequel at the start of 2014 following broader research into the insurance software market. They were impressed by the clarity of Sequel s strategy and the quality of its customer base and software platforms. The company stands out in its marketplace for its independence, investment in innovation and focus, which positions it very well to continue to be the supplier of choice for underwriters and brokers. Sequel has an established position in an attractive and growing end user market with a loyal, high-recurring customer base given the mission critical nature of its product. It has a solid core product set and strong track record of delivery, which differentiates it from its competitors. HOW WE INTEND TO CREATE VALUE HgCapital s team intends to support Sequel in developing its outbound sales and marketing in an effort to bring in a wider customer base. We also intend to assist management in developing international sales as Sequel customers expand their operations globally, and generating incremental recurring revenue growth from the company s new web-based products. HOW WE PLAN TO CRYSTALLISE VALUE Given its strategic position at the heart of the Lloyd s / London / commercial insurance software market, we believe that a focused and growing commercial insurance software specialist such as Sequel will be an attractive asset for both trade and financial buyers. Total Net valuation assets 000 % Sequel 4, Intelliflo 4, Relay Software 2, Valueworks 1, Total Mercury investments 12, STOP PRESS: ALLOCATE SOFTWARE Website: Geography: UK The Mercury Team has recently reached the unconditional first close in the public-to-private process of Allocate Software plc ( Allocate ), expected to complete in January Allocate provides complex workforce and risk management software to healthcare and other regulated industries. Its core product is used for workforce rostering and associated compliance workflows such as monitoring and reporting on safe staffing levels. Allocate s products address a clear and increasingly pressing need for improved staff efficiency, regulatory compliance and safety. The business serves the UK, Swedish and Australian markets. The Trust s share of this investment on completion is estimated to be 6.0 million. 06

7 Performance INVESTMENT OBJECTIVE HgCapital Trust plc (the Trust ), which was established in 1989, is an investment trust listed on the London Stock Exchange (ticker: HGT.L). The Trust s objective is to provide shareholders with long-term capital appreciation in excess of the FTSE All-Share Index by investing in unquoted companies. The Manager, HgCapital, seeks to meet the investment objective of the Trust using a business model that combines deep sector knowledge, a rigorous research-based approach and associated thematic investment origination and selection to systematically identify and repeatedly invest in the most attractive segments of the European mid-market, optimising deal flow and improving returns. HgCapital focuses on buyouts across the TMT, services and industrials sectors and specialist infrastructure through renewable energy projects. WHY INVEST? The Trust provides investors with a liquid investment vehicle through which they can obtain exposure to HgCapital s diversified portfolio of private equity investments across multiple vintages primarily in Northern Europe. HgCapital s long standing investment in establishing and maintaining deep sector expertise is a key differentiator in the European private equity environment which has delivered superior returns over the long-term. FINANCIAL HIGHLIGHTS (to 30 November 2014) % 1.6x Ten year compound annual growth rate of the share price on a total return basis* vs. 8. p.a. from the FTSE All-Share Index Ten year compound annual growth rate of the NAV per share on a total return basis* 10 year historic outperformance of the FTSE All-Share on a total return basis* Based on the Company s share price at 30 November 2014 and allowing for dividends to be reinvested, an investment of 1,000 ten years ago would now be worth 3,425. An equivalent FTSE All-Share Index return would be worth 2,171. CUMULATIVE HISTORIC PERFORMANCE % p.a. (total return* to 30 November 2014) HISTORIC TOTAL RETURN* PERFORMANCE (to 30 November 2014) Performance Index Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Share price NAV FTSE All-Share Index Year Three Five Seven Ten to date years years years years % % pa % pa % pa % pa Share price Net asset value FTSE All-Share Index Share price performance vs FTSE All-Share Index 7.6 (8.1) (2.7) Total return performance record rebased to 100 at 30 November Source: Factset, HgCapital. *Total return assumes all dividends have been reinvested. Source: Factset, HgCapital Important information: Past performance is not necessarily a reliable indicator of future results. A copy of the annual and interim reports can be found on 07

8 Portfolio NET ASSETS (as at 30 November 2014) OUTSTANDING COMMITMENTS Based on the 30 November 2014 NAV, and adjusting for the acquisitions of Allocate Software and A-Plan Insurance, liquid resources are estimated to be 49 million (1 of the NAV). The Trust also has a 40 million bank facility that is currently undrawn. The Trust s undrawn commitments to HgCapital funds are approximately 194 million (44% of NAV) as at 30 November 2014, including the Allocate and A-Plan transactions referred to above. HgCapital Trust plc has the benefit of an opt-out provision in its commitment to invest alongside HgCapital 7, so that it can opt out of a new investment without penalty should it not have the cash available to invest. Year of Total valuation 1 Portfolio value Net assets Assets Sector Location investment 000 % % Twenty largest primary mid-cap buyout investments 1 Visma TMT Nordic Region , % 8.2% 2 IRIS TMT UK , % 8. 3 TeamSystem TMT Italy , % 7.4% 4 Zenith-Leasedrive Services UK , P&I TMT Germany , % 5.4% 6 Radius Services UK , % 4.7% 7 Achilles TMT UK , % 8 JLA Services UK , % 4. 9 e-conomic TMT Nordic Region , % 3.9% 10 SimonsVoss Industrials Germany , % 3.8% 11 Lumesse TMT UK , % 3.0% 12 Qundis Industrials Germany , % 2.9% 13 NetNames TMT UK , % 14 Ullink TMT France , % Frösunda Healthcare Nordic Region , % 2.2% 16 Atlas Services UK , % 17 Parts Alliance Services UK , SFC KOENIG Industrials Switzerland , % 0.9% 19 Casa Reha Healthcare Germany , % 0.8% 20 Teufel Industrials Germany , % 0.8% Top twenty investments 330, % 74.7% Other investments 5, % 1. Total primary mid-cap buyout investments 336, % 1 Including investment valuation and accrued interest. Other buyout funds (Mercury and Hg6E) 24, % 5.5% Renewable energy funds 11, % 2.7% Total all investments 373, % 84.2% Liquid assets 69, % Net current assets Net assets 443, % 08

9 PORTFOLIO ANALYSIS (as at 30 November 2014) Asset class 84% Unquoted 16% Cash & other assets Vintage by value of the primary buyout portfolio 15% 27% 5% 15% 27% pre % Nordic Region 17% Germany 9% Italy France Switzerland Vintage by value of the primary buyout portfolio Republic of Ireland 15% % %by value 2012 Deal type 15% Buyout % 27% Renewable 2010 energy 1 Buyout pre 2010small-cap France Switzerland Republic of Ireland Portfolio Deal type by value 94% Buyout Renewable energy Buyout small-cap Valuation basis 68% Above cost 2 Below cost Sector by value Geographic spread 1 At original cost of the primary by value Sector of the primary by value of the primary buyout portfolio buyout portfolio buyout portfolio 6 TMT 6 TMT 50% UK 2 Services Asset class 2 Services 19% Nordic 1 Region Industrials 84% Unquoted Sector by value of the primary buyout portfolio 1 Industrials 17%Geographic Germany by value of the primary buyout 4% spread Healthcare 16% TMT Cash & other assets 6 4% Healthcare 9% Italy 50% UK Consumer & Leisure 2 Services Consumer France 19% Nordic Region 1 Industrials & Leisure Switzerland 17% Germany 4% Healthcare Republic9% of Italy Ireland Consumer & Leisure France Switzerland Vintage by value of the primary buyout portfolio Republic of Ireland 15% 2014 Deal type by value Valuation basis 27% % Buyouts 68%Deal Above costby value type 5% 2012 Vintage by value of the primary buyout portfolio 2 Below cost Renewable 94% 15% Buyout 2011 energy15% At original Renewable energy cost 27% % Buyout pre 2010small-cap 5% % % pre 2010 Percentages are based on fixed assets and accrued interest and are shown by value class Asset Percentages are based on net assets 84% 16% Unquoted Cash & other assets Asset class Sector by valueunquoted of the primary buyout portfolio 84% 6 16% TMT Cash & other assets 2 Services 09 1 Industrials 4% Healthcare Consumer & Leisure

10 Shareholder information CALENDAR Year end 31 December Full-year results published 9 March 2015 FINANCIALS AS AT 30 NOVEMBER 2014 Index FTSE ALL Share Ticker code: HGT Ordinary Shares in issue 37,324,698 Net assets million Market capitalisation million NAV per Ordinary Share 1,187.3p Ordinary Share price 1,065.0p Ordinary Share price discount to NAV 10. Continuation vote 2015 MANAGEMENT FEE ARRANGEMENTS For more information on the structure and fee arrangements for HgCapital Trust plc, please refer to the latest edition of the HgCapital Trust report and accounts, available at BOARD OF DIRECTORS Roger Mountford (Chairman) Richard Brooman (Chairman of the Audit and Valuation Committee) Peter Dunscombe Andrew Murison Mark Powell Anne West MANAGER Hg Pooled Management Limited BROKER Numis Securities Ltd The London Stock Exchange Building 10 Paternoster Square London EC4M 7LT Unquoted investments were last valued at 30 June 2014, and will next be revalued at 31 December CONTACT DETAILS HgCapital Trust plc 2 More London Riverside London SE1 2AP +44 (0) investorrelations@hgcapitaltrust.com Important information This document is issued and approved by Hg Pooled Management Limited. Nothing in this document is intended to constitute advice and this document should not be taken as a recommendation to buy or sell shares in HgCapital Trust plc. If you are interested in HgCapital Trust plc, you should contact your financial advisor before making any investment decision. Remember that past performance is not necessarily a reliable indicator of future results, and that the value of shares can go down as well as up. HgCapital is the trading name for Hg Pooled Management Limited and HgCapital LLP, both of which are authorised and regulated by the Financial Conduct Authority. 10