HARBOURVEST SENIOR LOANS EUROPE LIMITED Annual Report and Audited Consolidated Financial Statements for the year ended 30 June 2014

HarbourVest Senior Loans Europe Limited Annual Report and Audited Consolidated Financial Statements For the year ended 30 June 2014

Table of Contents

Page

Key Highlights

2

About the Company

3

Chairman’s Statement

4

Investment Manager’s Report

6

Board and Committees

11

Directors’ Report

13

Report of the Audit Committee

25

Directors’ Remuneration Report

27

Independent Auditor’s Report

29

Audited Consolidated Financial Statements

32

Notes to the Consolidated Financial Statements

36

Company Advisors and Contacts

51

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HarbourVest Senior Loans Europe Limited Key Highlights For the year ended 30 June 2014 Net Asset Value 38.29 pence per share •

Portfolio comprises 5 loans following realisation of 6 loans during the year

Income and Realisations £45.3 million • Six re-financings completed during the year. • Three partial prepayments, in addition to six full repayments. Dividends and Capital Return 20.92 pence per share • 1.12 pence per share dividend paid on 30 September 2013 • 13.26 pence per share capital returned on 01 November 2013 • 5.85 pence per share capital returned on 8 January 2014 • 0.69 pence per share dividend paid on 21 March 2014 Investment Manager • On 22 May 2014, Spire Partners LLP (the “Investment Manager”), were appointed as investment manager in place of HarbourVest Senior Loan Advisers L.P. Post Balance Sheet Events • A further capital return of 11.24 pence per share was paid on 18 July 2014. • A further dividend of 0.48 pence per share was declared on 20 August 2014 and paid on 26 September 2014. • A further refinancing was completed in early July 2014 • During September 2014 the Company accepted an offer, for the entire remaining portfolio at a price of par which represented a small premium to the portfolio valuation included in the published net asset value at 30 June 2014 as announced on 21 July 2014. The sale proceeds were received in October. • Following the execution of the sale transaction a performance fee of £1,009,009 became payable to the Investment Manager. • On 28 October 2014 and accompanying these financial statements, a Notice of Extraordinary General Meeting (“EGM”) has been issued to shareholders of the Company. Within the EGM, the Directors are proposing the voluntary winding-up of the Company in accordance with the Companies Law and the cancellation of admission of its Shares to trading on the Main Market of the London Stock Exchange. • After accruing all expenses associated with the liquidation, the Company expects to return approximately 26 pence per share to shareholders. Return to shareholders • Estimated shareholder total return for the period 30 June 2013 to the liquidation of the company, based on capital distributions and dividends during the period and expected return on liquidation, is approximately 59 pence per share; this compares to a NAV per share of 59.52p and a share price of 54.25 pence per share at 30 June 2013.

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HarbourVest Senior Loans Europe Limited About the Company The Company's objective has been to provide income and capital preservation through investments in existing or new senior secured loans of private equity-backed European mid-market companies. The portfolio has comprised senior secured loans issued by companies diversified by industry and geography. The loans have been in the senior secured tier of the debt capital structure of a borrower’s holding company (i.e. loans with first ranking security over the borrower’s assets, and/or its shares). The Company has not invested in distressed loans. Returns to shareholders have been in the form of dividends paid twice annually and, following the investment period, which ended on 30 June 2012, capital distributions. Following the investment period, capital realised through loan redemption or refinancing together with loan amortisation or refinancing has been returned to shareholders in the form of B share distributons. During the year ended 30 June 2014 the Company’s shares traded at a median discount to NAV of 7.7%. The share price closed at 35.00 pence per share, representing a discount of 8.59% to NAV. Key Features HarbourVest Senior Loans Europe Limited has invested in the senior secured loans of private equity-backed midmarket companies in Europe and the UK as per the Company’s investment objective. The investment period concluded in 2012 and since then the Company has been focused on maximising shareholder value in the portfolio. • • • • •

Pays dividends twice annually Secured asset class at the top of a company’s capital structure Returns capital to shareholders Zero gearing Shares listed on the main market of the London Stock Exchange

Company Overview HarbourVest Senior Loans Europe Limited (the “Company” or “HSLE”) was incorporated with limited liability in Guernsey under the Companies (Guernsey) Law, 2008, as amended, on 7 April 2010. It is registered as a closedended investment scheme in accordance with the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended and the Registered Collective Investment Scheme Rules 2008 issued by the Guernsey Financial Services Commission (the “Commission”). HarbourVest Senior Loans Europe was managed by Harbourvest Senior Loan Advisers L.P. (the “Investment Manager”) a limited partnership organised under the laws of the State of Delaware and which is an affiliate of HarbourVest Partners, LLC (“HarbourVest”), a private equity firm based in Boston, U.S.A, whose history dates back to 1982. The Investment Management Agreement between the Company and HarbourVest Senior Loan Advisers L.P was terminated on 22 May 2014. Spire Partners LLP, an independent asset management firm focused on European non-investment grade credit, was appointed a sub-investment adviser to the Company on 28 February 2014. Subsequently, on 22 May 2014, Spire Partners LLP (the “Investment Manager”), were appointed as Investment Manager in place of HarbourVest Senior Loan Advisers L.P. At 30 June 2014, there were 139,890,249 ordinary shares in issue with each share equalling one voting right. The Company is regulated by the Commission and is not regulated or authorised by the Financial Conduct Authority, but is subject to the UK Listing Rules applicable to closed-ended investment companies. Where Libor is referenced in this document, it is used as a generic benchmark term. In regard to the Sterling loans in the Company’s portfolio, the benchmark is generally Sterling Libor and for Euro loans the benchmark is generally Euribor.

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HarbourVest Senior Loans Europe Limited Chairman’s Statement I am pleased to present to you the annual report for HarbourVest Senior Loans Europe Limited (the “Company”) for the financial year ended 30 June 2014. This financial year, representing the second full year since the end of the Company’s Investment Period on 30 June 2012, has seen important changes for the Company, including a change in the Investment Manager and a material increase in the speed of loan repayments, which has enabled capital to be returned to Shareholders through regular B share issues. I am delighted also to report that since the financial year end one of the loans was repaid and subsequently the Investment Manager executed committed trades to sell the final four remaining loans in the Company’s portfolio at or above their book value. The settlement of the final trades occurred during October 2014, and the Board is recommending to Shareholders that this is followed shortly by the delisting of the Company’s shares and the appointment of a liquidator in order to complete the efficient return of the Company’s capital to Shareholders. The Board is very satisfied with this outcome, which will achieve Shareholders’ expressed desire to receive an accelerated return of capital without suffering the discount to book value typically associated with secondary sales of illiquid assets. The Company’s financial statements at 30 June 2014 are therefore presented on a break-up basis and have been adjusted in consequence of these subsequent events. The most substantial adjustments include the revaluation of loan assets to reflect the sale prices subsequently achieved, recognition of the performance fee earned by the Investment Manager in respect of these sales, and accruals for the estimated future net operating loss of the Company from 30 June 2014 to liquidation. The Company’s NAV per share at 30 June 2014, as thus adjusted and presented of these financial statements, was 38.29 pence per share, which compares with the unaudited estimated NAV per share of 38.88 pence per share announced on 21 July 2014. Further details of this comparison are provided in the Directors’ Report. Since inception, the Company has executed the strategy set out in the original prospectus, investing in a portfolio of 19 senior secured loans supporting European mid-market leveraged buyouts during the Investment Period. The investment policy and fixed Investment Period always envisaged a finite life of the Company. As market conditions have evolved over the past 12 months, the pace of early loan repayments has increased. During the year to 30 June 2014 the net asset value was reduced from £83.3 million, or 59.52 pence per share, and a portfolio of 11 loan assets to £53.6 million, or 38.29 pence per share and a portfolio of 5 loan assets. This reduction was a result of the early refinancing or repayment of the loans, with several repayments resulting from IPO driven deleveraging events. Since 30 June 2014, there has been one further repayment of a loan within the portfolio for €6.96 million and the remaining four loans have been sold at par to an independent third party. During the year, the portfolio generated income, prepayments and realisations totalling £45.2 million, a 20% decrease from the prior year reflecting the smaller portfolio size. Capital of 19.11 pence per share was returned to Shareholders through B share issues in November 2013 and January 2014 with an additional return of 11.24 pence per share announced in June 2014, paid in July 2014. In February 2014, the Board agreed with HarbourVest Senior Loan Advisers L.P. that it was appropriate that Spire Partners LLP (“Spire”) be appointed as sub-investment adviser; subsequently Spire replaced HarbourVest Senior Loan Advisers L.P. as the Investment Manager to the Company in May 2014, to deliver the next phase of returns to Shareholders. In conjunction with the appointment of the new Investment Manager, the Board has sought various cost savings, including, where considered appropriate, changing service providers and renegotiating terms. Savings have previously included the 40bps reduction in management fee charged by the Investment Manager, and a slimmed down Board of three non-executive directors. In June 2014, following a consultation period with major stakeholders, the Board decided to amend the incentive fee mechanism for the new Investment Manager. This amendment ensured that Spire was aligned with Shareholders’ interests to investigate an accelerated wind down of the portfolio, whilst providing sufficient flexibility to enable a sale of residual assets at or around their book value, if such an opportunity presented itself. I would like to thank the former investment manager for its involvement in the Company, and the new Investment Manager, Spire, for its role in executing the accelerated portfolio divestment. The Board will continue to work with all the Company’s service providers to return capital to Shareholders as soon as reasonably practicable, as the Company enters the final phase of its evolution. The Board is pleased that the original investment strategy of investing in senior secured leveraged loans has delivered a satisfactory return to Shareholders, despite a period of macroeconomic uncertainty, validating the attractiveness of the asset class. We are also pleased that this strategy has been effected with no defaults in the loan portfolio, thanks to the diligence of all the investment professionals involved in the asset selection and ongoing management of the portfolio.

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HarbourVest Senior Loans Europe Limited Chairman’s Statement, continued Comments from Shareholders are always welcome. I look forward to seeing some of you at the Company’s Extraordinary General Meeting in November, at which a resolution to liquidate the Company will be proposed, and I can also be contacted through either the Company Secretary or the Investment Manager, both of whose details can be found at the back of this report.

Colin Maltby Chairman 28 October 2014

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HarbourVest Senior Loans Europe Limited Investment Manager’s Report Change in Investment Manager In February 2014, Spire Partners LLP, were appointed as sub-investment adviser to HarbourVest Senior Loan Advisers L.P, and in May 2014, assumed the role of Investment Manager to the Company. Net Asset Value Performance At 30 June 2014, HSLE’s Net Asset Value (“NAV”) was £53.6 million, or 38.29 pence per share. This compares to a NAV of 59.52 pence per share reported at 30 June 2013. Given that the Company’s investment period is complete, the focus has remained on monitoring and managing the portfolio of loans. The most significant activity during the period was the payment of interim dividends (1.81 pence per share) and capital returns (19.11 pence per share) to Shareholders, which together totalled 20.92 pence per share. An additional capital return of 11.24 pence per share was announced on 19 June 2014, and paid on 18 July 2014.

Capital return 13.26p

Capital return 5.85p

Capital return 11.24p

Market Environment The financial year ended 30 June 2014 saw a continued increase in new European leveraged loan market volumes, with new issuance exceeding €69 billion (approximately 29% higher than the prior twelve month). This market growth, aided by increased institutional lender demand, in part as new European CLOs were raised, was combined with: • a further tightening of spreads – rolling 3 month average new issuance spreads on Term Loan B and Term Loan C facilities decreased over the 12 months by approximately 14bps; • a modest increase in leverage multiples – rolling 3 month average total leverage multiples increased from 4.4x to 4.6x; and • the re-emergence of some more aggressive structuring characteristics, such as covenant lite loan packages in 1 the larger transactions – covenant lite loan volume reached more than €15 billion in the 12 months to 30 June 2014, compared to less than €3 billion for the prior 12 month period. (All data sourced from S&P Capital IQ Leveraged Commentary & Data).

1

Covenant lite transactions are where there is no maintenance covenant on the term loans.

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HarbourVest Senior Loans Europe Limited Investment Manager’s Report, continued Portfolio Overview Portfolio Overview at 30 June 2014 Loan Primary/Secondary Margin at market the Time of Investment

Net Senior Leverage**

Country

Currency Maturity Average Life (years)**

Repayment

MATURING IN 2018 Loan L Loan O Loan Q Loan K

Primary Primary Primary Primary

475 450 475 475

4.2x 4.9x 4.8x 2.6x

Netherlands Germany Netherlands UK

Euro Euro Euro Sterling

2018 2018 2018 2018

3.6 3.9 4.3 4.5

525

2.7x

UK

Sterling

2020

5.5

Bullet Bullet Bullet Bullet

MATURING IN 2020 Loan E

Secondary

Bullet

Note: Average life (years) means the weighted-average period in years required to repay a loan’s outstanding principal through scheduled principal payments. * Amount of leverage to EBITDA at 31 December 2010 or at the time of investment for 2011-2012 loans **At 30 June 2014

HSLE was invested in five senior secured loans at 30 June 2014 with a value of £37.0 million. The Company also held £17.9 million of cash as at 30 June 2014. The Company’s portfolio had exposure to three countries in Europe as at 30 June 2014: the UK, the Netherlands and Germany. 55.5% of the Company’s portfolio was denominated in Euro, with the remainder in Sterling. The mid-market senior loan asset class is generally considered to be relatively illiquid and loans are often held until maturity. However, the level of refinancings in the portfolio over the financial year has remained consistently strong, with a total of six full refinancings during the 12 months to 30 June 2014. Portfolio Management and Activity during the Year As HSLE’s investment period is complete, the focus has been on monitoring and managing the portfolio of loans. By utilising company updates and its relationships with company management, club lenders, banks and private equity sponsors, the Investment Manager has been able to develop a comprehensive assessment of each loan with the aim of ensuring that the risk / reward profile is in line with expectations and with the overall portfolio framework. Since 22 May 2014, when a new Investment Management Agreement was put in place, the main focus has switched to achieving an accelerated disposal of the portfolio at an acceptable price. Refinancings and Prepayments - £40.9 million in Realisations The level of refinancing in the portfolio has been consistently strong, with six refinancings in total during the twelve months ended 30 June 2014: • • • • • •

During July 2013, proceeds of circa £3.0 million were received; During August 2013, circa £13.6 million; During December 2013, circa £8.0 million; During February 2014, circa £4.5 million; During April 2014, circa £4.1 million; and During May 2014, circa £7.7 million.

One additional refinancing was completed post year-end, generating an additional repayment of £5.5 million. This refinancing occurred in conjunction with the successful initial public offering of a portfolio company on the Euronext Amsterdam stock exchange. Partial Prepayments and Fees - £1.4 million Three companies prepaid debt during the twelve months ended 30 June 2014 due to strong operating performance. In two instances, the partial repayments were voluntary prepayments that were not imposed by the credit agreements but rather a reflection of excess cash generation and corporate resource allocation.

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HarbourVest Senior Loans Europe Limited Investment Manager’s Report, continued Geographical and Currency Exposure The Company’s exposure to Euros represented approximately 40% of NAV as at 30 June 2014 with the remaining 60% in Sterling. HSLE has not engaged in currency hedging owing to the relatively illiquid nature of the portfolio. During the twelve months ended 30 June 2014 the Euro / Sterling exchange rate depreciated from 0.8552 to 0.8005 (-6.4%). Incorporating amortisations and repayments, the effect on the Company’s NAV during the period from 1 July 2013 to 30 June 2014 was -£1.7m. A foreign currency loss adjustment of approximately £250,000, caused by the continuing weakening of the Euro, has been included in the estimated future net operating loss accrual within the financial statements. Subsequent to the year end the remaining loans were repaid or sold and any Euro proceeds were converted to Sterling. In accordance with the original prospectus the Company has not entered into any form of interest rate derivatives to hedge this risk. The Investment Manager During the period 1 July 2013 until 22 May 2014 the Investment Manager was HarbourVest Senior Loan Advisers L.P. (“HarbourVest”), which was formed as a limited partnership on 9 April 2010 under the laws of (and is domiciled in) the State of Delaware. On 28 February 2014, Spire Partners LLP, was appointed as sub-investment adviser to HarbourVest and on 22 May 2014, Spire replaced Harbourvest as the Investment Manager. Since the appointment in February 2014, Spire has met with a number of investors, addressed the cost base of the Company by renegotiating the contract terms with various service providers, and completed a liquidity analysis of the existing loan portfolio. In addition, with the benefit of feedback from investors, the Investment Manager has been working with the Board in investigating strategic options available to the Company. Spire Partners LLP Established in 2012, Spire Partners LLP is an independent asset management firm focused on European noninvestment grade credit. Spire’s founding partners are Jonathan Russell, Phil Bennett-Britton and Oliver Drummond Smith, who previously worked together managing a variety of fund types including credit opportunities, collateralised loan obligations (“CLOs”), managed accounts and private equity funds. The team has a track record of consistently delivering superior risk adjusted returns. Spire currently has a sub-advisory arrangement with the UK affiliate of a US multi-strategy institutional investor, and was appointed as sub-investment advisor to HarbourVest Senior Loan Advisers L.P. in February 2014, before becoming the Investment Manager in May 2014. Spire is authorised and regulated in the United Kingdom by the Financial Conduct Authority. The Team With more than 50 years of combined experience in European leveraged finance, asset management and mid-market private equity, the Investment Manager’s team is well equipped to originate and evaluate opportunities, and monitor the Company’s portfolio of loans. Jonathan Russell is Managing Partner of Spire. Jonathan has 26 years of private equity and credit investing experience. He spent 24 years at 3i where as Managing Partner, he was responsible for creating and managing the Buyout Division. This was a pan-European operation with 100 executives based across the major European economies. In that period he turned around the performance of Eurofund III, delivering a 17% IRR on this €2.3 billion 1999 fund, raised and invested Eurofund IV in 2003 at €2.7 billion, which has delivered a 2.1x net result to investors. In 2006 he raised Eurofund V at €5.0 billion. In 2008, Jonathan was Chairman of the European Venture Capital Association and led the private equity industry’s response to the EU’s AIFM directive. Phil Bennett-Britton is a Partner and Portfolio Manager at Spire. Phil has more than 13 years of corporate and leveraged finance, asset management and private equity experience. Previously he was co-Portfolio Manager of 3i’s inaugural debt fund, and having worked on the acquisition of Mizuho Investment Management, took over the portfolio management responsibilities for two of 3i’s Harvest CLOs. In 2011, he led the structuring of 3i’s Credit Opportunities Fund, Palace Street I Limited, and in 2012 led the acquisition of the European CLO management contracts from Invesco. He was also responsible for secondary trading across all of 3i’s debt funds. Phil started his career in Corporate Finance at ING Barings, before transferring to ING’s Acquisition Finance and Sponsor Coverage team. He subsequently moved to Mizuho Corporate Bank, where he worked in its Leveraged Finance Origination teams in London and Hong Kong.

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HarbourVest Senior Loans Europe Limited Investment Manager’s Report, continued The Investment Manager, continued Oliver Drummond Smith is a Partner and Portfolio Manager at Spire. Oliver has more than 11 years of leveraged finance, asset management and private equity experience. He was co-Portfolio Manager of 3i’s inaugural debt fund, and having worked on the acquisition of Mizuho Investment Management, was instrumental in the establishment of 3i Debt Management. He was responsible for leading 3i’s entry into the North American debt management market. Oliver began his career at Barclays Bank, where he worked on arranging Leveraged Finance transactions. He subsequently joined Merrill Lynch as a senior member of their mid-market Leveraged Finance team. The partners are supported by a small team of experienced credit analysts, who each have a minimum of 10 years’ relevant experience. Credit investment committee The Investment Manager’s credit committee comprises the three partners, Jonathan Russell (chair), Phil BennettBritton and Oliver Drummond Smith, who are all based in London. As the Company’s investment period has concluded, the credit investment committee’s primary area of focus was ongoing portfolio monitoring The committee reviewed each loan within the portfolio on a periodic basis to evaluate performance and understand the evolution of the investment thesis. • • •

The committee will consider operating performance metrics as well as any market and commercial developments. This provides a comprehensive assessment of each loan with the aim of ensuring that the risk reward profile is in line with the expectations and within the overall portfolio framework. Every portfolio event or activity is brought to the committee’s attention and all sales (whole or partial) are approved by the committee.

Unanimous committee consent is required to approve any requests or proposals. Since June 2014, following a consultation period with major stakeholders and direction from the Board, the main focus of the credit investment committee switched to achieving an accelerated disposal of the portfolio at an acceptable price. Valuation Policy and Methodology The Audit Committee reviews the valuations included in the valuation analysis at the half yearly and annual financial reporting dates. In order to provide comfort to the Audit Committee, and ultimately the Board, the Company has engaged the services of an independent valuation consultant to report on the valuations prepared by the Investment Manager. Having been presented with the recommendations of the Audit Committee, the Board is ultimately responsible, on behalf of the Company, for determining the fair value of the Group’s investments. Valuation Policy and Methodology - adopted prior to the preparation of these accounts The Investment Manager is responsible for carrying out the fair market valuation of the Group’s investments which is presented to the Directors for their approval and adoption. In assessing the value of investments to be included in the financial reports of the Company, indications of value are developed in accordance with IFRS 13 Fair Value Measurement (IFRS 13). IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability). A number of the assets in which the Company has invested are those where there are unlikely to be readily observable market prices, and where prices are available these typically are for loans of no more than £2 million / €2 million in size. Therefore, in order to value the loans in the portfolio, the discounted cash flow (“DCF”) methodology has generally been the predominant valuation technique used by the Company. The DCF methodology entails determining relevant cash flows for each loan, adjusted according to an assessment of the probability of refinancing, and discounting those cash flows by an appropriate risk-adjusted discount rate. The risk-adjusted discount rate is an expression of what investors believe to be a fair and reasonable rate of return for holding a particular security over the relevant period given the inherent risks of ownership. Implicit in the estimation of such a discount rate is the assumption that the seller is a willing seller and the buyer is a willing purchaser of the security. The discount rates are derived from the yields required by investors for loans with similar risk profiles and readily observable prices. In principle the directors would not have valued a loan above par given that senior loans can be repaid at par (in full or partially) by the borrower at any point in time.

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HarbourVest Senior Loans Europe Limited Investment Manager’s Report, continued Valuation Policy and Methodology - adopted in the preparation of these accounts As detailed further in Note 2, the Directors have resolved to prepare these financial statements on a break-up basis. As a result, the Directors have considered any post year end changes in fair value of the investments. Following the disposal of the remaining portfolio, as detailed further below, the post year end change in the market value of these investments is considered to be an adjusting event and consequently these investments are valued in the Statement of Financial Position at the sale prices. Leverage The Company does not employ structural gearing. However, the Company may use a revolving credit facility to meet its operational expenses and for efficient cash management in meeting its fluctuating cash requirements under tranches of loans in the portfolio that are themselves revolving facilities. The amount of any credit facility will not exceed 10% of the gross proceeds of the Company at admission. At 30 June 2014 the Company had not employed any such facility for these purposes. Post balance sheet events Following a strategic review of the fund undertaken in conjunction with the Board, and with the benefit of feedback garnered from meetings with shareholders, in September 2014 the Investment Manager executed secondary trades to sell the remaining portfolio of four loans at a price of par which represents a small premium to the valuation of the portfolio included in the published NAV at 30 June 2014. This result has been achieved despite the illiquidity of the loans in question. These trades have now settled and it is expected that a liquidator will be instructed in order to return all remaining capital to shareholders. Spire Partners LLP 28 October 2014

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HarbourVest Senior Loans Europe Limited Board and Committees Directors The Directors are responsible for the determination of the Company's investment policy and strategy and have overall responsibility for the Company's activities including the review of investment activity and performance, and the control and supervision of the Investment Manager. The Directors were all appointed on 7 April 2010, with the exception of John Morris who was appointed on 25 March 2013. John Morris and Michael Stoddard resigned as Directors with effect from 28 November 2013. Rupert Dorey was re-elected at the 2013 AGM held on 28 November 2013. All of the Directors are non-executive and, with the exception of John Morris who resigned during the year, are independent of the Investment Manager. The Directors’ details are as follows: Colin Maltby (Chairman) Mr Maltby is a non-executive director of Abingworth BioEquities Fund Limited, BACIT Limited and Ocean Wilson Holdings Limited. He is also a member of the Supervisory Board of Bilfinger Berger Global Infrastructure SICAV SA. He was Head of Investments at BP from August 2000 to June 2007 and was previously Chief Investment Officer of Equitas Limited from its formation in 1996. His career in investment management began in 1975 with NM Rothschild & Sons and included 15 years with the Kleinwort Benson Group, of which he was a Group Chief Executive at the time of its acquisition by Dresdner Bank AG in 1995. He was Chief Executive of Kleinwort Benson Investment Management from 1988 to 1995. Mr Maltby has served as a non-executive director of various public companies and agencies and as an adviser to numerous institutional investors, including pension funds and insurance companies and to private equity and venture capital funds in both Europe and the United States. He is currently an investment advisor to Wolfson College, Oxford. Sarah Evans Mrs Evans, resident in Guernsey, is a chartered accountant, and a non-executive director of several other listed investment funds. Her other non-executive directorships of listed companies include Crystal Amber Fund Ltd, HICL Infrastructure Company Limited, CQS Diversified Fund Limited and JP Morgan Senior Secured Loan Fund Limited. She is also a member of the Institute of Directors. She spent over six years with Barclays Bank plc Group from 1994 to 2001. During that time she was a treasury director, and from 1996 to 1998, was the finance director of Barclays Mercantile, where she was responsible for all aspects of financial control and operational risk management. Prior to joining Barclays she ran her own consultancy business advising financial institutions on all aspects of securitisation. From 1982 to 1988 she was with Kleinwort Benson, latterly as head of group finance. Rupert Dorey (Senior Independent Director) Mr Dorey has over 30 years of experience in financial markets. Mr Dorey was at CSFB for 17 years from 1988 to 2005 where he specialised in credit related products, including derivative instruments where his expertise was principally in the areas of debt distribution, origination and trading, covering all types of debt from investment grade to high yield and distressed debt. He held a number of positions at CSFB, including establishing CSFB’s high yield debt distribution business in Europe, fixed income credit product coordinator for European offices and head of UK Credit and Rates Sales. For the past eight years Mr Dorey has been acting in a Non-Executive Directorship capacity for a number of Hedge Funds, Private Equity & Infrastructure Funds, for both listed and unlisted vehicles. His other non-executive directorships of listed companies include, Tetragon Financial Group Limited, AP Alternative Assets LP, Partners Group Global Opportunities Limited, International Public Partnerships Limited and CQS Diversified Fund Limited. He is a former President of the Guernsey Chamber of Commerce and is a member of the Institute of Directors.

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HarbourVest Senior Loans Europe Limited Board and Committees (continued) Directors, continued Michael Stoddart (resigned with effect from 28 November 2013) Mr Stoddart joined Singer & Friedlander Limited in 1955. He was responsible for opening a provincial network and thereby much involved with the financing of smaller companies. He retired as joint chief executive in 1973. He then joined Electra Investment Trust, one of the UK’s leading providers of private equity, where he became chief executive officer in 1974 and chairman in 1986 and held that position until his retirement in April 2000. He has held a number of non-executive chairmanships and directorships of public and private companies in the UK, and his main role is now as a senior business advisor to Fleming Family and Partners, a position he has held since 2001. He is an Honorary Fellow of the London Business School. John Morris (resigned with effect from 28 November 2013) Mr Morris is a managing director of HarbourVest Partners, LLC, based in the Boston office. At HarbourVest, Mr Morris specialises in private equity partnership investments in the buyout, credit and venture markets. He serves on a number of partnership advisory boards including those managed by ABRY Partners, The Blackstone Group, Court Square Capital, GTCR, Providence Equity Partners, Hellman & Friedman and Sun Capital. Prior to joining HarbourVest in 1996, Mr Morris worked as an investment associate at Abbot Capital Management, LLC. Previously, he was a vice president in the corporate finance department of Canadian Imperial Bank of Commerce (New York) and received formal credit training at manufacturers Hanover Trust Company. Mr Morris received a BA in economics from Clark University in 1986 and an MBA in finance from Columbia University in 1994. Audit Committee Details of the role and responsibilities of the Audit Committee are given in the Report of the Audit Committee on pages 25 and 26 Management Engagement and Remuneration Committee The principal duties of the Management Engagement and Remuneration Committee have been to review the performance of service providers, their appointment (including the Investment Manager) and their remuneration. The Company’s Management Engagement and Remuneration Committee has met at least annually for the purpose of reviewing the performance of, and contractual relations with, service providers (including the Investment Manager). The Management Engagement and Remuneration Committee comprise each of the Directors. Rupert Dorey acts as Chairman of the Management Engagement and Remuneration Committee.

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HarbourVest Senior Loans Europe Limited Directors’ Report The Directors present the consolidated financial statements of the Group and their report for the year ended 30 June 2014. The Group comprises HarbourVest Senior Loans Europe Limited (the “Company”) and its wholly-owned subsidiary undertakings incorporated in Luxembourg as explained under “Structure” below. Business Review The following review is designed to provide information primarily about the Company’s business and results for the year. It should be read in conjunction with the Chairman’s Statement on page 4 and with the Investment Manager’s Report on pages 6 to 10 which give a detailed review of the investment activities for the year and an outlook on the future. Going Concern The directors do not plan to make further investments and they intend to return to shareholders the proceeds, net of relevant costs, from the disposal and realisation of assets. Furthermore, as detailed further in this report, during October 2014 the Company has sold its entire remaining portfolio and is calling an Extraordinary General Meeting in November 2014 so that shareholders can vote on resolutions to liquidate the Company. In light of this, the Directors deem that it is appropriate for the financial statements to be prepared on a break-up basis. Structure The Company is a registered closed-ended investment company, incorporated and registered with limited liability in Guernsey on 7 April 2010, with registration number 51719. The Company commenced business on 26 May 2010 when the initial 101,090,000 ordinary shares were admitted to the Official List and commenced trading on the main market of the London Stock Exchange. Subsequent to a C Share issue in May 2011 and a Tap issue in February 2012, the number of shares in issue at 30 June 2013 was 139,890,249. Further details are provided in note 10 on page 44 of the financial statements. The Company is a Guernsey Registered Closed-ended Investment Scheme pursuant to the Protection of Investors (Bailiwick of Guernsey) Law 1987, as amended, and the Registered Collective Investment Scheme Rules 2008 issued by the Guernsey Financial Services Commission. The Company is a member of the Association of Investment Companies (the ‘AIC’) and is classified within the Global High Income Category. For the purposes of efficient portfolio management, the Company has established one wholly-owned, Luxembourg incorporated subsidiary, Orange Senior Loans 1 S.à.r.l. which in turn itself has two wholly-owned, Luxembourg incorporated subsidiaries, Orange Senior Loans 2 S.à.r.l., and Orange Senior Loans 3 S.à.r.l., which are incorporated for the purpose of holding primary and secondary loans respectively. Investment Policy and Objective The Company’s investment objective is to provide shareholders with a combination of a high level of income and capital growth over time, whilst preserving capital. The investment period of HSLE has now concluded and the Company has invested in accordance with its original investment policy and objective. The Company has invested in senior secured loans of private equity-backed European mid-market companies. These loans include amortising debt (i.e. loans that are repaid over the life of the loan) as well as term debt (i.e. loans that are repaid at maturity) and other forms of credit facility (e.g. loans drawn over time and repaid over the life of the loan or at maturity). All of the loans in which the Company has invested are in the senior secured tier of a borrower’s debt capital structure (i.e. loans with first ranking security over the borrower’s assets and/or its shares). The Company has not invested in distressed loans. AIFMD The Board has considered the Alternative Investment Fund Managers Directive (AIFMD) and believes based on the current regulation that the Company is exempt from its remit.

13

HarbourVest Senior Loans Europe Limited Directors’ Report (continued) Financial Review The results for the year are set out on pages 32 to 35. At 30 June 2014 the net assets of the Company, on a break-up basis, amounted to £53,557,881 (2013: £83,260,129). The Net Asset Value (NAV) per ordinary share was 38.29 pence (2013: 59.52 pence). After accruing for the estimated future net operating loss of the Company from 30 June 2014 to the proposed liquidation of the Company, the total loss for the year was £440,775 (2013: £6,765,660 return). The Company’s investment income and other revenue totalled £1,994,143 (2013: £8,678,383). Dividends The Company has made distributions of the net cash income on the portfolio to shareholders by way of semi-annual interim dividends, payable in March and September of each year in respect of the financial period ending 30 June of that year. The Company has declared and paid the following dividends to its shareholders: Date declared 31 August 2010 21 February 2011 23 August 2011 21 February 2012 22 August 2012 27 February 2013 4 September 2013 28 February 2014

Date Paid 30 September 2010 25 March 2011 30 September 2011 30 March 2012 28 September 2012 5 April 2013 30 September 2013 21 March 2014

Rate 1.00 pence per ordinary share 1.00 pence per ordinary share 1.00 pence per ordinary share 1.43 pence per ordinary share 1.75 pence per ordinary share 1.60 pence per ordinary share 1.12 pence per ordinary share 0.69 pence per ordinary share

A further dividend of 0.48 pence per ordinary share was declared on 20 August 2014 and paid on 26 September 2014. In addition to the above dividends related to ordinary shares, a C Share dividend of 0.59 pence per C share was declared on 24 November 2011 and paid on 12 December 2011. Redeemable B Shares Redeemable B shares were issued to the existing ordinary shareholders and redeemed during the year ended 30 June 2014 as detailed below. They were issued and redeemed at a date determined in accordance with the articles of the Company. Redeemable B shares do not carry any rights to any dividend or other distribution out of the profits of the Company or any voting rights and are not transferable. The following capital redemptions totalling 55.51 pence per share were made relating to Redeemable B shares; Date Paid 26 October 2012 05 April 2013 28 June 2013 1 November 2013 8 January 2014

Amount £13,681,266 £16,087,379 £21,151,406 £18,549,477 £8,183,580

Rate 9.78 pence per Redeemable B share 11.50 pence per Redeemable B share 15.12 pence per Redeemable B share 13.26 pence per Redeemable B share 5.85 pence per Redeemable B share

A further capital return of 11.24 pence per Redeemable B share, a total amount of £15,723,664, was declared post year-end and paid on 18 July 2014. Payment of Suppliers It is the payment policy of the Company to obtain the best possible terms for all business for each relevant market in which it operates and, therefore, there is no single policy as to the terms used. In general the Company agrees with its suppliers the terms on which business will take place and it is the Company’s policy to abide by such terms. Future Developments A further loan was refinanced in July 2014. During September 2014, the Board agreed, in accordance with the Investment Manager’s recommendation, to the sale of the four remaining loans to an independent third party, at a price of par, which represented a small premium to the valuation of the portfolio included in the published NAV at 30 June 2014. As a result of this sale, a performance fee of £1.0 million became payable to the Investment Manager and is accrued as an expense in these financial statements. The proceeds of the sale were received during October 2014. The Board is recommending to Shareholders that the Company should resolve to delist its ordinary shares from the Official List of the London Stock Exchange and appoint a liquidator to wind up the Company. Further comments are set out in both the Chairman’s Statement (on pages 4 and 5) and the Investment Managers’ Report (on pages 6 to 10).

14

HarbourVest Senior Loans Europe Limited Directors’ Report (continued) Reconciliation of the 30 June 2014 NAV per these financial statements, and the NAV published on the 21st July 2014 As detailed further in Note 2, the Directors have deemed it appropriate to prepare these financial statements on a break-up basis. As a result of this, additional consideration has been given by the Directors to the recognition and measurement of certain assets and liabilities under the break-up basis. A reconciliation between the NAV presented in these financial statements and the NAV as published on the London Stock Exchange on 21 July 2014 is provided below. 30 June 2014

Total NAV £

Published NAV as announced on 21 July 2014 Adjusted for: • Net realisable value of investments •

Performance fee accrual

•

Net expense accrual in period to proposed liquidation

NAV per these Financial Statements

NAV per Ordinary Share p

54,394,152

38.88p

308,207

0.22p

(1,009,009)

(0.72)p

(135,469)

(0.09)p

53,557,881

38.29p

On a “break-up” basis, the Company must consider events occurring in the post year end period and adjust where material and appropriate the carrying value of certain assets. During October 2014, the Company sold its entire remaining portfolio at par and in accordance with IAS10 the post year end change in the market value of these investments is an adjusting event. A performance fee to the Investment Manager became payable as a result of the disposal of the remaining assets as described in Note 1, and is considered a material cost of the orderly wind down of the Company and therefore an adjustment has been made to accrue the fee as an expense in these financial statements. Adjustments have been made in these financial statements for loan interest receivable less the net expenses expected to be incurred prior to the liquidation of the Company, in accordance with the break-up basis of accounting. Performance Measurement and Key Performance Indicators In order to measure the success of the Company in meeting its objectives and to evaluate the performance of the Investment Manager, the Directors take into account the following performance indicators: •

Returns and NAV - The Board reviews and compares at each Board meeting the performance of the portfolio as well as the NAV, income and share price of the Company; and

•

Discount/premium to NAV - at each Board meeting, the Board monitors the level of the Company’s discount or premium to NAV.

The Ongoing Charges Ratio of the Company, as defined by the AIC, based on the average net assets during the year 30 June 2014 was 2.04% (2013: 1.79%). The Ongoing Charges Ratio does not include the adjustment for net expenses on a break-up basis. Management, Administration, Custody and Registrar arrangements For the period to 22 May 2014, the Investment management services were provided to the Company by HarbourVest Senior Loan Advisers L.P. From 22 May 2014, these investment management services were provided to the Company by Spire Partners LLP. Prior to 22 May 2014, the management fee was calculated and paid quarterly in arrears at the rate of 0.25% of the net invested assets. From such time as a cash distribution caused the Company, in aggregate, to have made cash distributions (by way of dividend and/or capital return) representing the Gross Proceeds and such amounts representing an 8% IRR on the Gross Proceeds, the Investment Manager was entitled to a 15% performance fee on all distributions above this 8% return. Also prior to 22 May 2014, HarbourVest Senior Loan Advisers L.P. agreed to contribute, from 31 December 2013, 40bps of net asset values of the Company towards the operating expenses of the Company. For the year under review, no performance fee is payable to HarbourVest Senior Loan Advisers L.P.

15

HarbourVest Senior Loans Europe Limited Directors’ Report (continued) Management, Administration, Custody and Registrar arrangements, continued From 22 May 2014, the management fee for the new Investment Manager was calculated and paid quarterly in arrears at the rate of 0.15% of the net invested assets. The new Investment Manager is also entitled to a performance fee provided the aggregate amount realised on a sale, disposal or other realisation of all of the Company’s Investments generates an aggregate amount equivalent to at least 98.75 per cent of the aggegrate book value of the Investments. The performance fee is calculated as follows: • • •

2.75% of the amount generated in respect of a realisation (the “Realised Amount”) where the realisation is agreed and becomes unconditional on or before 31 December 2014; 2.0% of the Realised Amount where the realisation is agreed and becomes unconditional between 1 January 2015 and 30 June 2015; and 1.0% of the Realised Amount where the realisation is agreed and becomes unconditional between 1 July 2015 and 31 December 2015

Following the Company’s agreement to sell its entire remaining portfolio at par during September 2014, a performance fee of £1,009,009 became payable. The Investment Management Agreement may be terminated by either party, by giving to the other not less than 6 months’ written notice. No compensation is payable if notice of termination of more than six months is given or on liquidation of the Company. For the period to 22 May 2014, the Administration, Custodian and Company Secretarial services were provided to the Company by BNP Paribas Securities Services S.C.A., Guernsey Branch. On 23 April 2014, Praxis Fund Services Limited were appointed to provide the Administration and Co Secretarial services to the Company with effect from 22 May 2014. Registrar services are provided by Capita Registrars (Guernsey) Limited. Related Party Transactions The contract with HarbourVest Senior Loan Advisers L.P was a related party transaction in place during the year. This contract was terminated on 22 May 2014. Upon appointment of Spire Partners LLP (“Spire”), as the new Investment Manager on 22 May 2014, the contract with Spire became a related party transaction. Other than management fees and performance fees payable in the ordinary course of business, there have been no material transactions with these related parties which has affected the financial position or performance of the Company and its subsidiaries in the financial year. Principal risks and uncertainties The Board is responsible for the Company’s system of internal controls and for reviewing its effectiveness. The Board also monitors the investment limits and restrictions set out in the Company’s investment objective and policy. Following the sale of the Company’s entire portfolio the principal risks which have been identified and the steps which are taken by the Board to mitigate them are as follows: Credit Risk At the date of signing this report, the Company’s entire remaining loan portfolio had been sold and the cash proceeds have been received within the Company’s bank accounts held with the Royal Bank of Scotland International, Guernsey Branch. Credit risk on the cash and cash equivalents is deemed to be limited due to the counterparty being a bank with high credit ratings assigned by international credit rating agencies. For further details on the credit rating for the Royal Bank of Scotland International, please refer to note 12. Currency Risk At the date of signing this report, the Company’s entire loan portfolio has been sold and any Euro proceeds converted into Sterling. Accordingly there is no exposure to changes in exchange rates Accounting, Legal and Regulatory The Company must comply with the provisions of the Companies (Guernsey) Law, 2008, as amended, and, since its shares are listed on the London Stock Exchange, the UKLA’s Listing and Disclosure Rules. A breach of the Guernsey legislation could result in the Company and/or the Directors being fined or subject to criminal proceedings. A breach of the UKLA Rules could result in the suspension of the Company’s shares. The Board relies on its Company Secretary and advisers to ensure adherence to the Guernsey legislation and UKLA Rules. The Investment Manager and the Administrator are contracted to provide investment, company secretarial, administration and accounting services through qualified professionals. The Board receives regular internal control reports which confirm compliance. 16

HarbourVest Senior Loans Europe Limited Directors’ Report (continued) Principal risks and uncertainties (continued) Operational Disruption to, or the failure of either the Investment Manager’s or the Administrator’s accounting, dealings or payment systems, or the custodians’ records could prevent the accurate reporting or monitoring of the Company’s financial position. Details of how the Board monitors the services provided by the Investment Manager and the Administrator, and the key elements designed to provide effective internal control are explained further in the internal controls section of the Corporate Governance Statement. Prior to the sale of the portfolio, the principal risks which were identified and the steps which were taken by the Board to mitigate them were as follows: Investment activity and performance The Investment Manager operated in accordance with the investment limits and restrictions policy determined by the Board. The Directors reviewed the limits and restrictions on a regular basis and the Investment Manager confirmed adherence to them every month. The Investment Manager provided the Board with management information including performance data and reports, and shareholder analyses. The Directors monitored the performance of the portfolio and the underlying companies with the Investment Manager at each Board meeting and monitored risk factors in respect of the portfolio. Concentration risk The diversification of the Company’s portfolio was intended to reduce the Company’s exposure to adverse events associated with specific investments. However, as the individual loans in the portfolio were repaid, the concentration of investments in particular assets, asset classes or market segments increased relative to the Company’s Portfolio as a whole. As a consequence, the Company’s total returns could have been adversely affected by the unfavourable performance of even a single asset or asset class or market segment. The Board monitored the concentration risk by reviewing the portfolio on a quarterly basis with the Investment Manager; however the Board was aware that the concentration risk would continue to rise as further loans were repaid. Market Market risk arose from uncertainty about the future performance of the Company’s investments up to the date of the sale of the portfolio. Currency Risk The principal exposure to foreign currency risk comprised of investments priced in Euros, which is detailed further in Note 12 to these financial statements. Previously the Board sought to mitigate Euro exposure by ensuring the composition of the portfolio by value was never more than 50% in currency other than Sterling. Following the end of the investment period the ratio of Sterling to other currencies has depended purely on the repayment of loans, which has generally been at the behest of the borrowers and thus outside the control of the Investment Manager. The Company has not used financial instruments to mitigate the portfolio currency exposure. Accounting, Legal and Regulatory and Operational risks These risks were in existence during the year and will continue until the Company is put into liquidation; details of these risks and the steps taken to mitigate these are detailed above.

17

HarbourVest Senior Loans Europe Limited Directors’ Report (continued) Corporate Governance Under The UK Listing Regime the Company is a premium listed entity. The UK Listing Authority requires all overseas companies with a premium listing (such as the Company), to comply with the provisions of the UK Corporate Governance Code. The UK Corporate Governance Code (the “Code”) is available on the Financial Reporting Council website, www.frc.org.uk. The Board places a high degree of importance on maintaining high standards of corporate governance and has also considered the principles and recommendations of the AIC Code of Corporate Governance (“AIC Code”) by reference to the AIC Corporate Governance Guide for investment companies (“AIC Guide”). The AIC Code, as explained in the AIC Guide, addresses all the principles set out in the Code. The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the Code), will provide better information to Shareholders. The AIC code is available on the AIC website, www.theaic.co.uk. Furthermore, the Board has also taken note of the Code of Corporate Governance issued by the Guernsey Financial Services Commission (“Guernsey Code”) which became effective on 1 January 2012. The Guernsey Code provides a governance framework for GFSC licensed entities, authorised and registered collective investment schemes. Companies reporting against the Code or the AIC Code are deemed to satisfy the provisions of the Guernsey Code. a) Statement of Compliance The Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Code, except as set out below. The UK Code includes provisions relating to: • the role of the chief executive • executive directors’ remuneration • the need for an internal audit function For the reasons set out in the AIC Guide, and as explained in the AIC Code, the Board considers that these provisions are not relevant to the position of the Company, being an authorised closed-ended investment scheme. In particular, all of the Company’s day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of these provisions. The Financial Reporting Council issued a revised Corporate Governance Code in September 2012, for reporting periods beginning on or after 1 October 2012. In February 2013, the AIC updated its Code of Corporate Governance (including the Guernsey edition) and its Guide to Corporate Governance to reflect the relevant changes to the FRC document. The updates published by the AIC are consistent with the Corporate Governance Code issued by the Financial Reporting Council. Changes to the AIC Code are effective for reporting periods beginning on or after 1 October 2012. As at 30 June 2014, the Company complied substantially with the relevant provisions of the AIC Code and it is the intention of the Board that the Company will comply with those provisions throughout the year ending 30 June 2015 or until the appointment of a liquidator, with the exception of the provisions listed below: 

Establishment of a Nomination Committee: The Board comprises three non-executive Directors, therefore the Board does not consider it necessary to establish a Nomination Committee. The Board as a whole monitors performance and plans for succession of the Board, through Board meetings. The Board has due regard for the benefits of greater diversity, including gender, and will consider prospective candidates based on merit and against objective criteria in the context of the skills and experience the Board as a whole requires in order to be effective.

b) Directors and their interests Board independence and composition The Board of the Company currently consists of three non-executive Directors. The names and biographies of the Directors holding office at the date of this report are listed on pages 11 and 12. All Directors have served since incorporation of the Company. John Morris and Michael Stoddart resigned from the Board on 28 November 2013. John Morris is a managing director of HarbourVest Partners, LLC based in the Boston office, and therefore, before his resignation from the Board, was not considered independent of the Manager. The Chairman and all other Directors are considered independent. 18

HarbourVest Senior Loans Europe Limited Directors’ Report (continued) Corporate Governance (continued) b) Directors and their interests (continued) No Director has a material interest in any other contract which is significant to the Company’s business. No Director has a service contract with the Company. This also applied to John Morris who resigned during the year. Mr Morris is the managing director of HarbourVest Senior Loan Advisers LP, the Investment Manager of the Company up until the termination of the Investment Management Agreement on 22 May 2014. Directors have agreed letters of appointment with the Company, copies of which are available for review by shareholders. The Directors consider that there are no factors which compromise their independence and that they all contribute to the affairs of the Company in an adequate manner. A report on Directors’ Remuneration is on page 27. In accordance with the AIC Code all Directors were elected by shareholders at the first Annual General Meeting held by the Company. All of the independent Directors will be subject to re-election at intervals of no more than three years. At the AGM held on 28 November 2013, Mr Rupert Dorey was re-elected as Director by the shareholders. The Board believes that having Directors with sufficient experience of both the Company and its markets is of great benefit to shareholders and that the Directors have different qualities and areas of expertise on which they may lead where issues arise. Their biographies set out on pages 11 and 12 demonstrate a breadth of investment, commercial and professional experience with an international perspective. The Directors’ interests in the Company’s share capital at 30 June 2014, all of which were beneficial, are stated below: Director Colin Maltby Rupert Dorey* Sarah Evans John Morris** Michael Stoddart**

30 June 2014 50,202 ordinary shares 340,000 ordinary shares N/A** N/A**

30 June 2013 50,202 ordinary shares 340,000 ordinary shares 100,000 ordinary shares

* all shares are held in the name of Rupert Dorey’s spouse. **resigned on 28 November 2013

There have been no changes in the interests of the Directors since the year end. Conflicts of Interest Directors are required to disclose all actual and potential conflicts of interest to the Board as they arise for consideration and the Board may impose restrictions or refuse to authorise conflicts if deemed appropriate. Induction and Training Directors are provided, on a regular basis, with key information on the Company’s policies, regulatory requirements and its internal controls. Regulatory and legislative changes affecting Directors’ responsibilities are advised to the Board as they arise along with changes to best practice. Advisers to the Company also prepare reports for the Board from time to time. In addition, Directors attend relevant seminars and events to allow them to continually refresh their skills and knowledge and keep up with changes within the investment company industry. Directors’ Indemnity During the year the Company has maintained insurance cover for its Directors and Officers under a Directors’ and Officers liability insurance policy. To the extent permitted by Guernsey Law, the Company’s Articles of Incorporation provide an indemnity for the Directors out of the assets and profits of the Company from and against all actions, expenses and liabilities which they or their respective heirs or executors may incur by reason of any contract entered into or any act in or about the execution of their respective offices or trust.

19

HarbourVest Senior Loans Europe Limited Directors’ Report (continued) Corporate Governance (continued) c) The Board Responsibilities The Board meets at least four times each year and deals with the important aspects of the Company’s affairs including the setting and monitoring of investment strategy, and the review of investment performance. Prior to 22 May 2014, HarbourVest’s credit investment committee took decisions as to the purchase and sale of individual investments. On appointment of the new Investment Manager on 22 May 2014, Spire Partner’s credit investment committee has taken decisions regarding the sale of investments. Both Investment Managers’ investment decisions have been made in line with the investment policy and strategy set by the Board. The Investment Manager, together with the Company Secretary, also ensures that all Directors receive, in a timely manner, all relevant management, regulatory and financial information relating to the Company and its portfolio of investments. Representatives of the Investment Manager attend each Board meeting, enabling Directors to question any matters of concern or seek clarification on certain issues. Matters specifically reserved for decision by the full Board have been defined and a procedure adopted for Directors in the furtherance of their duties to take independent professional advice at the expense of the Company. Tenure The Board has adopted a policy on tenure that is considered appropriate for an investment company. The Board does not believe that length of service, by itself, leads to a closer relationship with the Investment Manager or necessarily affects a Directors’ independence. The Board’s tenure and succession policy seeks to ensure that the Board is wellbalanced and will be refreshed from time to time by the appointment of new Directors with the skills and experience necessary to replace those lost by Directors’ retirements. Directors must be able to demonstrate their commitment to the Company. The Board seeks to encompass relevant past and current experience of various areas relevant to the Company’s business. Board Committees The Board has established an Audit Committee and a Management Engagement and Remuneration Committee with defined terms of reference and duties. The terms of reference for each committee can be found on the Company’s website www.hvsle.com Audit Committee Details of the role and responsibilities of the Audit Committee are given in the Report of the Audit Committee on pages 25 and 26. Management Engagement and Remuneration Committee The Company's Management Engagement and Remuneration Committee has met in each calendar year for the purpose of reviewing the performance of Directors, and contractual relations with service providers (including the Investment Manager). The Management Engagement and Remuneration Committee comprises each of the Directors, and excluded John Morris. Rupert Dorey acts as Chairman of the Management Engagement and Remuneration Committee. The principal duties of the Management Engagement and Remuneration Committee are to review the performance of Directors and service providers (including the Investment Manager), their appointment and their remuneration. Meeting Attendance The number of formal meetings during the year of the Board, Audit Committee and Management Engagement and Remuneration Committee, and the attendance of individual Directors at those meetings, is shown in the following table:

Number of meetings in year Colin Maltby Rupert Dorey Sarah Evans Michael Stoddart* John Morris* Total number of meetings in year

Board

Audit Committee

Management Engagement and Remuneration Committee

4 4 4 1 4

2 2 2 2 2

1 1 1 1 1

*resigned on 28 November 2013

In addition, a number of ad hoc Board meetings were held during the year. 20

HarbourVest Senior Loans Europe Limited Directors’ Report (continued) Corporate Governance (continued) c) The Board (continued) Board Evaluation The Board has adopted a formal and rigorous annual evaluation of its own performance and that of its Committees and individual Directors. The last evaluation took place in June 2014. First, the evaluation of individual Directors is led by the Chairman, and the evaluation of the Chairman’s performance is led by the Senior Independent Director. Secondly, the Board evaluates its own performance and that of its Committees. Evaluation is conducted utilising a questionnaire combined with one to one meetings. The Board has developed criteria for use at the evaluation, which focuses on the individual contribution to the Board and its Committees made by each Director, each Directors’ independence and the responsibilities, composition and agenda of the Committees and of the Board itself. A review of Board composition and balance, including succession planning for appointments to the Board, is included as part of the annual performance evaluation. Following the annual board evaluation in June 2014, it was concluded that all Directors were independent and that the Chairman and all Directors were contributing satisfactorily to the efficient running of the Company, and that the Board and committees had a good range of skills and competency. d) Internal controls The Board has established a process for identifying, evaluating and managing any major risks faced by the Company. The process is subject to regular review by the Board and accords with the 2013 AIC Code, Internal Control Guidance for Directors on the Combined Code published in September 1999 (“the Turnbull Guidance”) which was revised by the Financial Reporting Council in October 2005. The Board is responsible overall for the Company’s system of internal control and for reviewing its effectiveness. However, such a system is designed to manage rather than eliminate risks of failure to achieve the Company’s business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Board, assisted previously by HarbourVest Senior Loan Advisers L.P. and since 22 May 2014 by Spire Partners LLP, as Investment Manager, has undertaken a full review of the Company’s business risks which have been analysed and recorded in a risk report which is reviewed and updated regularly. The Investment Manager makes available a formal report which details the steps taken to monitor the areas of risk including those that are not directly the responsibility of the Investment Manager and which reports the details of any known internal control failures. The Investment Manager has established an internal control framework to provide reasonable but not absolute assurance on the effectiveness of the internal controls operated on behalf of its clients. The effectiveness of the internal controls is assessed by the Investment Manager’s compliance and risk function on a continuing basis. Internal controls are also implemented by the Administrator (previously BNP Paribas Securities Services S.C.A. and since 22 May 2014, Praxis Fund Services Limited) of the Company. The Board has received periodic updates from these service providers at the quarterly Board meetings of the Company. The Board is satisfied that both service providers have effective controls in place to control the risks associated with the services that they are contracted to provide to the Company and are therefore satisfied with the internal controls of the Company. By means of the procedures set out above the Board confirms that it has reviewed the effectiveness of the Company’s system of internal control for the year ended 30 June 2014 and to the date of approval of this Annual Report and consolidated financial statements. Relationship with service providers The Board has delegated various duties to external parties including the management of the investment portfolio, the custodial services (including the safeguarding of assets), the registration services and the day-to-day company secretarial, administration and accounting services. Each of these contracts was entered into after full and proper consideration by the Board of the quality and cost of services offered, including the control systems in operation in so far as they relate to the affairs of the Company.

21

HarbourVest Senior Loans Europe Limited Directors’ Report (continued) Relationship with service providers (continued) The Board receives and considers reports regularly from the Investment Manager and ad hoc reports and information are supplied to the Board as required. The Investment Manager takes decisions as to the purchase and sale of individual investments. The Investment Manager and administrator also ensure that all Directors receive, in a timely manner, all relevant management, regulatory and financial information. Representatives of the Investment Manager and administrator attend each Board meeting enabling the Directors to probe further on matters of concern. A formal schedule of matters specifically reserved for decision by the full Board has been defined and a procedure adopted for Directors, in the furtherance of their duties, to take independent professional advice at the expense of the Company within certain parameters. The Directors have access to the advice and service of the corporate Company Secretary through its appointed representative who is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. The Board, the Investment Manager and the administrator operate in a supportive, co-operative and open environment. Appointment of the Investment Manager The Board reviews investment performance at each Board meeting and a formal review of all service providers is conducted in each calendar year by the Management Engagement and Remuneration Committee. In May 2014, the Board deemed it appropriate to replace HarbourVest Senior Loan Advisers L.P. with Spire Partners LLP as Investment Manger to the Company, to deliver the next phase of returns to shareholders. Share Capital The Company’s share capital comprises the following: Ordinary shares The ordinary shares are entitled to receive and participate in any dividends or other distribution out of profits of the Company available for dividend. On a show of hands, holders of ordinary shares are entitled to one vote irrespective of the number of shares held. On a poll, each ordinary share carries one vote. On a winding up, the ordinary shareholders shall be entitled to the surplus assets remaining after payment of all creditors of the Company. The number of ordinary shares in issue at 30 June 2014 was 139,890,249 (2013: 139,890,249). Redeemable B shares Redeemable B shares were issued to the existing ordinary shareholders and redeemed during the year; further details are provided on page 14. Redeemable B shares do not carry any rights to any dividend or other distribution out of the profits of the Company or any voting rights and are not transferable. There were no Redeemable B shares in issue at 30 June 2014. Substantial Share Interests Based upon information provided by the Company’s registrar, at 30 June 2014, the following shareholders owned 3% or more of the issued shares of the Company. Number of Ordinary shares Nortrust Nominees Limited State Street Nominees Limited OM04 Acct BNY (OCS) Nominees Limited Anson Registrars Limited Hvpe Acct HSBC Global Custody Nominee (UK) Limited 707770 Acct HSBC Global Custody Nominee (UK) Limited 770731 Acct HSBC Global Custody Nominee (UK) Limited 977761 Acct HSBC Global Custody Nominee (UK) Limited 813764 Acct BNP Paribas Arbitrage SNC 2890000 Acct

22

19,822,734 10,499,846 10,295,000 10,000,000 10,000,000 9,945,250 7,803,180 7,051,431 5,373,229

Percentage (%) 14.17% 7.51% 7.36% 7.15% 7.15% 7.11% 5.58% 5.04% 3.84%

HarbourVest Senior Loans Europe Limited Directors’ Report (continued) Based upon information provided by the Company’s registrar, at 30 September 2014, the following shareholders owned 3% or more of the issued shares of the Company. Number of Ordinary shares Norturst Nominees Limited State Street Nominees Limited OM04 Acct BNY (OCS) Nominees Limited Anson Registrars Limited Hvpe Acct HSBC Global Custody Nominee (UK) Limited 707770 Acct HSBC Global Custody Nominee (UK) Limited 770731 Acct HSBC Global Custody Nominee (UK) Limited 977761 Acct HSBC Global Custody Nominee (UK) Limited 813764 Acct BNP Paribas Arbitrage SNC 2890000 Acct HSBC Global Custody Nominee (UK) Limited 830952 Acct

13,685,654 10,499,846 10,295,000 10,000,000 10,000,000 9,945,250 7,803,180 6,800,946 6,781,754 6,137,080

Percentage (%) 9.78% 7.51% 7.36% 7.15% 7.15% 7.11% 5.58% 4.86% 4.85% 4.39%

Communications with Shareholders The Board believes that the maintenance of good relations with shareholders is important for the long-term prospects of the Company. It has, since admission, sought engagement with investors. Where appropriate the Chairman, and other Directors, are available for discussion about governance and strategy with major shareholders and the Chairman ensures communication of shareholders’ views to the Board. The Board receives feedback on the views of shareholders from the Company’s Broker and the Investment Manager. Shareholders can contact the Directors through either the Company Secretary or the Investment Manager. In prior years, the Board considered the Annual General Meeting provided an appropriate forum for investors to communicate with the Board, and encouraged participation. It was intended that the Annual Report and Audited Consolidated Financial Statements are sent to shareholders at least 20 business days before the Annual General Meeting. The Annual General Meeting was attended by the Directors. There was an opportunity for individual shareholders to question the Chairmen of the Board, Audit Committee and Management Engagement and Remuneration Committees at the Annual General Meeting. Details of proxy votes received in respect of each resolution were made available to shareholders at the meeting and were posted on the Company’s website following the meeting. On 28 October 2014 and accompanying these financial statements, a Notice of Extraordinary General Meeting (“EGM”) has been issued to shareholders of the Company. Within the EGM, in light of the fact that the Company's portfolio has been realised, the Directors are proposing the voluntary winding-up of the Company in accordance with the Companies Law and the cancellation of admission of its Shares to trading on the Main Market of the London Stock Exchange, both of which are subject to shareholder approval of the Resolutions. It is intended that the Annual Report and Audited Consolidated Financial Statements are sent to shareholders at least 20 business days before the EGM. The EGM will be attended by the Directors, and there is an opportunity for individual shareholders to question them. The notice for the EGM, available on the Company’s website, sets out the business of the meeting. Directors’ Responsibilities The Directors are responsible for preparing financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit and loss for the year and are in accordance with applicable laws. In preparing those financial statements the Directors are required to: • • • •

Select suitable accounting policies and apply them consistently; Make judgements and estimates that are reasonable and prudent; State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and Prepare the Annual Report and financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

These financial statements have been prepared on a break-up basis as the Board considers it appropriate to do so in light of the sale of the entire portfolio and the proposed liquidation of the Company.

23

HarbourVest Senior Loans Europe Limited Directors’ Report (continued) Directors’ Responsibilities continued The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008, as amended, and The Protection of Investors (Bailiwick of Guernsey) Law, 1987. The Directors are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors confirm to the best of their knowledge that: •

The consolidated financial statements which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company, and the undertakings included in the consolidation taken as a whole as required by DTR 4.1.12R;

•

the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s performance, business model and strategy;

•

the Annual Report including information detailed in the Chairman’s Statement, Investment Manager’s report, Directors’ Report, Report of the Audit Committee and notes to the financial statements, provides a fair view of the information required by: a) DTR 4.1.8 of the Disclosure and Transparency Rules, being a fair review of the Company Business together with a description of the principal risks and uncertainties facing the Company; and b) DTR 4.1.11 of the Disclosure and Transparency Rules, being an indication of important events that have occurred since the end of the financial year and the likely future development of the Company; and

•

So far as each of the Directors is aware, there is no relevant audit information of which the Company’s auditor is unaware, and each has taken steps they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.

Anti-bribery and Corruption The Board acknowledges that the Company's international operations may give rise to possible claims of bribery and corruption. In consideration of the recently enacted UK Bribery Act, at the date of this report the Board had conducted an assessment of the perceived risks to the Company arising from bribery and corruption to identify aspects of business which may be improved to mitigate such risks. The Board has adopted a zero tolerance policy towards bribery and has reiterated its commitment to carry out business fairly, honestly and openly. Foreign Account Tax Compliance Act The Foreign Account Tax Compliance Act (“FATCA”) became effective on 1 January 2014. The legislation is aimed at determining the ownership of assets of US persons in foreign accounts and improving US tax compliance with respect to those assets. The States of Guernsey has recently entered into an intergovernmental agreement (“IGA”) with US Treasury in order to facilitate the requirements under FATCA. The Board is in the process of ensuring the Company complies with FATCA’s requirements. By order of the Board

Sarah Evans Director 28 October 2014

Rupert Dorey Director

24

HarbourVest Senior Loans Europe Limited Report of the Audit Committee The Company has established an Audit Committee with formally delegated duties and responsibilities within written terms of reference (which are available on the Company website www.hvsle.com). The Audit Committee has been in operation throughout the year under review. Chairman and Membership The Audit Committee is chaired by Mrs Sarah Evans. She and its other members, Mr Colin Maltby and Mr Rupert Dorey, are all independent directors. Mr Michael Stoddart resigned from the Audit Committee following his resignation from the Board on 28 November 2013. Only independent directors serve on the Audit Committee and members of the Audit Committee have no links with the Company’s external auditor and are independent of the Investment Manager. The membership of the Audit Committee and its terms of reference are kept under review. The relevant qualifications and experience of each member of the Audit Committee are detailed on page 11 and 12 of this Annual Report. The Audit Committee meets no less than twice in a year in Guernsey, and meets the external auditor at least twice a year also in Guernsey. Duties The Audit Committee’s main role and responsibilities is to provide advice to the Board on whether the Annual Report and Audited Financial Statement and Interim Report and Unaudited Financial Statements, taken as a whole, are fair, balanced, and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy. The Audit Committee gives full consideration and recommendation to the Board for the approval of the contents of the half yearly and annual Financial Statements of the Company, which includes reviewing the external auditor’s report. The other principal duties, amongst others, are to consider the appointment of the external auditor, to discuss and agree with the external auditor the nature and scope of the audit, to keep under review the scope, results and effectiveness of the audit and the independence and objectivity of the auditor, to review the external auditor’s letter of engagement, the auditor’s planning report for the following financial year and management letter and to analyse the key procedures adopted by the Company’s service providers. The Audit Committee is responsible for monitoring the financial reporting process and the effectiveness of the Company’s internal control and risk management systems. The Audit Committee also focuses particularly on compliance with legal requirements, accounting standards and the relevant Listing Rules and ensuring that an effective system of internal financial and non-financial controls is maintained. The Audit Committee also reviews, considers and, if thought appropriate, recommends for the purposes of the Company’s financial statements, valuations prepared by the Investment Manager. These valuations are the most critical element in the Company’s financial statements and the Audit Committee questions them carefully. Financial Statements The Audit Committee has an active involvement and oversight in the preparation of both the half year and annual Financial Statements and in doing so is responsible for the identification and monitoring of the principal risks and uncertainties associated with the preparation of the financial statements. The key risks and significant issues identified in the preparation of these financial statements are as follows: •

Break-up or going concern basis – In light of the sale of the entire portfolio and the proposed liquidation of the Company, the Audit Committee has deemed it appropriate to prepare these financial statements on a break-up basis

•

Estimate of costs associated with the liquidation of the Company – In preparing these financial statements on a break-up basis, the Audit Committee has made all reasonable enquiries as far as possible of the Investment Manager and Administrator, in order to ensure that all material costs prior to liquidation, and associated with the liquidation, are identified and accrued as expenses.

Further details of these risks are discussed further within the Directors’ Report and Note 3 of these financial statements.

25

HarbourVest Senior Loans Europe Limited Report of the Audit Committee (continued) Auditor The Audit Committee is responsible for overseeing the Company’s relationship with the external auditor, including making recommendations to the Board on their appointment of the external auditor and their remuneration. Ernst & Young LLP have been the Company’s external auditors since the Company’s inception. The lead audit partner, Mr Michael Bane was initially appointed for the year end June 2011 audit. The Board has noted the revisions to the AIC Code issued in February 2013, in particular the recommendation to put the external audit out to tender at least every ten years. The Audit Committee has assessed the performance of the current auditor, as detailed below, and is satisfied with its effectiveness and as such no change in auditor is proposed. To assess the effectiveness of the external auditor, the Audit Committee reviewed: • • •

The external auditor’s fulfilment of the agreed audit plan and variations from it; The Audit Committee Report from the auditor highlighting the major issues that arose during the course of the audit; and Feedback from the Investment Manager and Administrator evaluating the performance of the audit team.

Where non-audit services are to be provided to the Company by the auditor, full consideration of the financial and other implications on the independence of the auditor arising from any such engagement will be considered before proceeding. All non-audit services are pre-approved by the Audit Committee after it is satisfied that relevant safeguards are in place to protect the auditors' objectivity and independence. The auditor also performed an interim review of the Company’s 31 December 2013 financial statements. To fulfil its responsibility regarding the independence of the external auditors, the Audit Committee considered: • •

a report from the external auditor describing its arrangements to identify, report and manage any conflicts of interest; and the extent of non-audit services provided by the external auditor,

Internal Controls The Investment Manager and Administrator together maintain a system of internal control on which they report to the Board. The Board has reviewed the need for an internal audit function and has decided that the systems and procedures employed by the Investment Manager and Administrator provide sufficient assurance that a sound system of risk management and internal control, which safeguards Shareholders’ investment and the Company’s assets, is maintained. An internal audit function specific to the Company is therefore considered unnecessary. The Audit Committee is responsible for reviewing and monitoring the effectiveness of the internal financial control systems and risk management systems on which the Company is reliant. These systems are designed to ensure proper accounting records are maintained, that the financial information on which the business decisions are made and which is issued for publication is reliable, and that the assets of the Company are safeguarded. Such a system of internal financial controls can only provide reasonable and not absolute assurance against misstatement or loss. In accordance with the guidance published in the Turnbull Report by the Financial Reporting Council (the “FRC”), the Audit Committee has reviewed the Company’s internal control procedures. These internal controls are implemented by the Company’s two main service providers, the Investment Manager and the Administrator. The Audit Committee has performed reviews of the internal financial control systems and risk management systems during the year. The Audit Committee is satisfied with the internal financial control systems of the Company. On behalf of the Audit Committee

Sarah Evans Audit Committee Chairman 28 October 2014

26

HarbourVest Senior Loans Europe Limited Directors’ Remuneration Report The determination of the Directors’ fees is a matter dealt with by the Management Engagement and Remuneration Committee and the Board. The Board has not sought the advice or services by any outside person in respect of its consideration of the Directors’ remuneration, although the Directors review the fees paid to the Boards of Directors of similar investment companies. The Board consists entirely of non-executive Directors who meet regularly to deal with the important aspects of the Company’s affairs. Directors are appointed with the expectation that they will initially serve for a period of three years, and will stand for re-election every three years. Directors’ appointments are reviewed during the annual board evaluation. Each of the Directors has a letter of appointment and a Director may resign by giving notice in writing to the Board at any time; there are no set notice periods. The terms of appointment are available for inspection at the Company’s Registered Office during normal business hours. The Company’s policy is for the Directors to be remunerated in the form of fees, payable quarterly in arrears. No Director has any entitlement to a pension, and the Company has not awarded any share options or long-term performance incentives to any of the Directors. No element of the Directors’ remuneration is performance related. The Company’s policy is that the fees payable to the Directors should reflect the time spent by the Board on the Company’s affairs and the responsibilities borne by the Directors and should be sufficient to enable high calibre candidates to be recruited. The policy is for the Chairman of the Board and Chairman of the Audit Committee to be paid a higher fee than the other Directors in recognition of their more onerous roles and more time spent. The Company’s Articles of Incorporation limit the aggregate fees payable to the Board of Directors to a total of £250,000 per annum. Remuneration For the period up to 1 October 2013, the following fees were paid by the Company to the Directors: £ Annual fee 55,000 33,000 28,000 28,000 144,000

Colin Maltby (Chairman) Sarah Evans (Audit Committee Chairman) Rupert Dorey Michael Stoddart* John Morris* Total

With effect from 1 October 2013, the Board agreed that ongoing Directors’ fees would be reduced. The following fees were payable by the Company to the Directors from 1 October 2013. £ Annual fee 40,000 30,000 25,000 95,000

Colin Maltby (Chairman) Sarah Evans (Audit Committee Chairman) Rupert Dorey Michael Stoddart* John Morris* Total *resigned on 28 November 2013

The following fees are the actual fees which were paid to each Director during the year: £ Actual fee 43,750 30,750 25,750 11,526 111,776

Colin Maltby (Chairman) Sarah Evans (Audit Committee Chairman) Rupert Dorey Michael Stoddart John Morris Total

27

HarbourVest Senior Loans Europe Limited Directors’ Remuneration Report (continued) Mrs Evans also received £18,750 annual fees as a Manager of the three Luxembourg subsidiaries. This role is the equivalent of a director in Luxembourg and is non-executive. No other remuneration or compensation was paid or payable by the Company during the year to any of the Directors, other than travel expenses of £11,076. For and on behalf of the Board

Sarah Evans Director 28 October 2014

28

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HARBOURVEST SENIOR LOANS EUROPE LIMITED For the year ended 30 June 2014 Opinion on consolidated financial statements In our opinion the consolidated financial statements: • • •

give a true and fair view of the state of the Group’s affairs as at 30 June 2014 and of its profit for the year then ended; have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union; and have been prepared in accordance with the requirements of the Companies (Guernsey) Law 2008.

What we have audited We have audited the consolidated financial statements of HarbourVest Senior Loans Europe Limited for the year ended 30 June 2014, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and the related notes 1 to 16. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. These financial statements have been prepared on a break up basis. This report is made solely to the Company’s members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law 2008. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As explained more fully in the Directors’ Responsibilities Statement set out on pages 23 and 24, the Directors are responsible for the preparation of the consolidated financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the consolidated financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the consolidated financial statements An audit involves obtaining evidence about the amounts and disclosures in the consolidated financial statements sufficient to give reasonable assurance that the consolidated financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the consolidated financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited consolidated financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

29

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HARBOURVEST SENIOR LOANS EUROPE LIMITED (continued) For the year ended 30 June 2014 Our assessment of risks of material misstatement At the planning stage of our audit we identified the valuation of investments as a risk of material misstatement. Subsequent to the completion of our planning, agreement was reached by the Board of Directors to dispose of the remaining investments. As a result, we have amended our assessment of risk and removed valuation of investments as a risk of material misstatement. We identified the following risk of material misstatement that we believed would have the greatest impact on our overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team: •

Application of the break up basis of accounting

This was also considered as a ‘significant matter by the Audit Committee in relation to the financial statements’. Further discussion can be found in the ‘Report of the Audit Committee’ in the Annual Report. Our application of materiality We apply the concept of materiality to the individual account or balance level through our determination of performance materiality, which is set to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. We determined materiality for the Company to be £553,000, which is 1% of the net asset value. This provided a basis for determining the nature, timing and extent of risk assessment procedures, identifying and assessing the risk of material misstatement and determining the nature, timing and extent of further audit procedures. On the basis of our risk assessments, together with our assessment of the Company’s overall control environment, our judgement was that overall performance materiality (i.e. our tolerance for misstatement in an individual account or balance) for the Company should be 75% of materiality, namely £415,000. Our objective in adopting this approach was to ensure that total uncorrected and undetected audit differences in all accounts did not exceed our materiality level. We agreed with the Audit Committee that we would report to the Audit Committee all audit differences in excess of £28,000 as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. An overview of the scope of our audit The Group consists of the Company and its three wholly owned subsidiaries which are all subject to full scope audit procedures by the Group audit team. We adopted a risk-based approach in determining our audit strategy. This approach focuses audit effort towards higher risk areas, such as management judgements and estimates. The audit team has performed audit procedures, as described below. Our response to the risks identified above was as follows: We addressed the risk of misstatement in the application of the break up basis of accounting by: -

Agreeing the carrying value of investments on a break up basis to the amounts specified in the relevant sales contracts and to subsequent cash receipts.

-

Assessing the components of the expected future net expenditure of the Group to ensure the reasonableness of the break up basis accrual

-

Recalculating the performance fee recorded in the financial statements against the terms of the investment management agreement.

-

Reviewing the financial statements to ensure break up basis disclosures are appropriate.

30

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HARBOURVEST SENIOR LOANS EUROPE LIMITED (continued) For the year ended 30 June 2014 Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is: • • •

materially inconsistent with the information in the audited consolidated financial statements; or apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in the course of performing our audit; or is otherwise misleading.

In particular we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the Directors’ statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the audit committee which we consider should have been disclosed. We have nothing to report in respect of the following matters where under the Companies (Guernsey) Law 2008 we are required to report to you if, in our opinion: • • •

proper accounting records have not been kept; or the consolidated financial statements are not in agreement with the accounting records; or we have not received all the information and explanations we require for our audit

Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the UK Corporate Governance Code specified for our review.

Michael Bane for and on behalf of Ernst & Young LLP Recognised Auditors Guernsey, Channel Islands Date: 28 October 2014.

1.

The maintenance and integrity of the HarbourVest Senior Loans Europe Limited web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the consolidated financial statements since they were initially presented on the web site.

2.

Legislation in Guernsey governing the preparation and dissemination of consolidated financial statements may differ from legislation in other jurisdictions.

31

HarbourVest Senior Loans Europe Limited Consolidated Statement of Comprehensive Income For the year ended 30 June 2014 1 July 2013 to 30 June 2014 £

1 July 2012 to 30 June 2013 £

2,918,689 (1,446,411) 246,563

5,718,260 3,522,356 2,288,306

(337,094) 613,396 1,994,143

(1,013,424) (1,837,115) 8,678,383

12,601

(34,020)

473,896 141,602 177,495 510,048 1,303,041

1,089,689 190,350 138,000 460,664 1,878,703

703,703

6,765,660

(1,144,478)

-

Total (loss)/profit for the year

(440,775)

6,765,660

Total comprehensive (loss)/income for the year

(440,775)

6,765,660

(0.32)p

4.48p

Notes Income Income from investments, cash and cash equivalents Unrealised foreign exchange (loss)/gain on investments Unrealised gain on revaluation of investments Realised foreign exchange loss on sale or redemption of investments Realised gain/(loss) on sale or redemption of investments Total income from investments

8

Other net foreign exchange gain/(loss) Expenses Investment manager’s fees Directors’ fees and travel expenses Administration and company secretarial fees Other expenses Total operating expenses

4, 13

Operating gain Adjustment for net expenses on a break-up basis

7

Basic and diluted earnings per ordinary share

5

All items in the above statement are derived from discontinued operations.

The accompanying notes on pages 36 – 50 form an integral part of the consolidated financial statements.

32

HarbourVest Senior Loans Europe Limited Consolidated Statement of Financial Position At 30 June 2014

Notes Non-current assets Investments designated at fair value through profit or loss Current assets Investments on a break-up basis Income receivable Other receivables and prepayments Cash and cash equivalents

30 June 2014 £

30 June 2013 £

6

-

80,343,117

6

37,031,666 101,190 14,274 17,917,132 55,064,262

463,384 54,286 2,902,613 3,420,283

55,064,262

83,763,400

1,506,381 1,506,381

503,271 503,271

53,557,881

83,260,129

58,075,156 (4,517,275) 53,557,881

84,808,183 (1,548,054) 83,260,129

9

Total assets Current liabilities Other payables and accrued expenses

Net assets Equity Share capital Reserves

10

Number of ordinary shares Net asset value per ordinary share

10 5

139,890,249 38.29p

139,890,249 59.52p

These consolidated half yearly financial statements were approved and authorised for issue by the Board of Directors on 28 October 2014, and signed on its behalf by:

Sarah Evans Director

Rupert Dorey Director

The accompanying notes on pages 36 – 50 form an integral part of the consolidated financial statements.

33

HarbourVest Senior Loans Europe Limited Consolidated Statement of Changes in Equity For the year ended 30 June 2014

1 July 2013 to 30 June 2014

Notes

Balance at 1 July 2013 Loss for the year Total gain and comprehensive income for the year

Payment of dividends to ordinary shareholders Capital return - B shares* Total transactions with owners

11 10

Balance at 30 June 2014

Notes

1 July 2012 to 30 June 2013 Balance at 1 July 2012 Profit for the year Total gain and comprehensive income for the year

Payment of dividends to ordinary shareholders Capital return - B shares** Total transactions with owners

11 10

Balance at 30 June 2013

Share capital

Reserves

Total equity

£ 84,808,183 -

£ (1,548,054) (440,775)

£ 83,260,129 (440,775)

84,808,183

(1,988,829)

82,819,354

(26,733,027) (26,733,027)

(2,528,446) (2,528,446)

(2,528,446) (26,733,027) (29,261,473)

58,075,156

(4,517,275)

53,557,881

Share capital

Reserves

Total equity

£ 135,744,708 -

£ (3,644,132) 6,765,660

£ 132,100,576 6,765,660

135,744,708

3,121,528

138,866,236

(50,936,525) (50,936,525)

(4,669,582) (4,669,582)

(4,669,582) (50,936,525) (55,606,107)

84,808,183

(1,548,054)

83,260,129

*On 1 November 2013 and 8 January 2014, the Company made a Capital Return to shareholders equivalent to 13.26 pence and 5.85 pence per ordinary share respectively by way of a bonus issue and immediate redemption of B shares on a pro rata basis. **On 26 October 2012, 5 April 2013 and 28 June 2013, the Company made a Capital Return to shareholders equivalent to 9.78 pence, 11.50 pence and 15.12 pence respectively per ordinary share by way of a bonus issue and immediate redemption of B shares on a pro rata basis.

The accompanying notes on pages 36 – 50 form an integral part of the consolidated financial statements.

34

HarbourVest Senior Loans Europe Limited Consolidated Statement of Cash Flows For the year ended 30 June 2014

1 July 2013 to 30 June 2014

1 July 2012 to 30 June 2013

£

£

Notes Operating activities (Loss)/profit for the year Adjustments for: Unrealised foreign exchange loss/(gain) on investments Unrealised gain on revaluation of investments Effect of foreign exchange movements Decrease in receivables Increase/(decrease) in payables Purchase of investments Sale or redemption of investments Realised foreign exchange loss on sale or redemption of investments Realised (gain)/loss on sale or redemption of investments Net cash inflow from operating activities

(440,775)

6

Cash outflow from financing activities Capital return - B shares Dividends paid Net cash flows used in financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at start of the year Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of the year

1,446,411 (245,563) (12,601) 402,206 1,003,110 42,386,905

(3,522,356) (2,288,306) 34,020 39,558 (3,052,482) (9,002,826) 50,907,175

337,094 (613,396) 44,263,391

1,013,424 1,837,115 42,730,982

(26,733,027) (2,528,446) (29,261,473)

(50,936,525) (4,669,582) (55,606,107)

15,001,918

(12,875,125)

2,902,613

15,811,758

12,601 17,917,132

The accompanying notes on pages 36 – 50 form an integral part of the consolidated financial statements.

35

6,765,660

(34,020) 2,902,613

HarbourVest Senior Loans Europe Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2014 1. General Information The Company was incorporated with limited liability in Guernsey under the Companies (Guernsey) Law 2008, (as amended), on 7 April 2010 with registered number 51719 as a closed-ended investment company. The registered office and principal place of business of the Company is Sarnia House, Le Truchot, St Peter Port, Guernsey, GY1 4NA (formerly BNP Paribas House, St Julian’s Avenue, St Peter Port, Guernsey, GY1 1WA). For the purposes of efficient portfolio management, the Company has established one wholly-owned, Luxembourg incorporated subsidiary, Orange Senior Loans 1 S.à.r.l. which in turn itself has two wholly-owned, Luxembourg incorporated subsidiaries, Orange Senior Loans 2 S.à.r.l., and Orange Senior Loans 3 S.à.r.l., which are incorporated for the purpose of holding primary and secondary loans respectively of the Group. These subsidiaries are included in the consolidated financial statements. The Group invested in senior secured loans of private equity-backed European mid-market companies. These loans included amortising debt (i.e. loans that are repaid over the life of the loan) as well as term debt (i.e. loans that are repaid at maturity) and other forms of credit facility (e.g. loans drawn over time and repaid over the life of the loan or at maturity). All of the loans in which the Group invested were in the senior secured tier of a borrower’s debt capital structure (i.e. loans with first ranking security over the borrower’s assets and/or its shares). The Company had an investment period of two years which ended on 30 June 2012. As stated in the Investment Manager’s report, a strategic review of the Company was undertaken in conjunction with the Board. With the benefit of feedback garnered from meetings with shareholders, as part of this strategic review the Board determined that the Investment Manager should explore the potential disposal of the entire remaining assets. Subsequently in September 2014, the Investment Manager, following Board approval, executed secondary trades to sell the remaining portfolio of four loans at a price in excess of their value as incorporated into the published NAV at 30 June 2014. These trades settled on during October 2014 and it is expected that a liquidator will be appointed by the Company. In light of the above the Board has resolved to prepare the financial statements on the basis that the Company is no longer a going concern. The financial statements have been prepared on a break-up basis. The investment activities of the Company were managed by HarbourVest Senior Loan Advisers L.P. (“the Investment Manager”), and the administration of the Company was carried out by BNP Paribas Securities Services S.C.A., Guernsey Branch (“the Administrator”). On 22 May 2014, Spire Partners LLP was appointed as the new Investment Manager in place of HarbourVest Senior Loan Advisers L.P. Spire has been acting as sub-investment adviser to the Company since 28 February 2014. In addition, Praxis Fund Services Limited replaced BNP Paribas Securities Services S.C.A. as administrator to the Company, also on 22 May 2014. 2. Break-up basis The Board has prepared the financial statements on the basis that the Company is no longer a going concern for reasons outlined in Note 1 above. The financial statements have been prepared on a break-up basis. The preparation of financial statements on a break-up basis still requires that the normal recognition, measurement and disclosure requirements of IFRS apply as if the Company was a going concern. However, additional consideration has been given by the Directors to the recognition and measurement of certain assets and liabilities under the breakup basis as detailed below. In applying the break-up basis, the investments are now recorded at the lower of cost and net realisable value and accordingly they have been included in these financial statements at the sales price and are described in current assets as investments on a break-up basis.

36

HarbourVest Senior Loans Europe Limited Notes to the Consolidated Financial Statements continued: For the year ended 30 June 2014 2. Break-up basis, continued Income and costs on a break-up basis The Directors have estimated the Company’s post year end income and expenses to assess whether an adjustment is required as a result of applying the break-up basis. In particular the performance fee payable to the Investment Manager as a result of the sale of the Company’s investments has been accrued as an expense. 3. Principal Accounting Policies a) Statement of Compliance The Company produces Consolidated Annual Financial Statements in accordance with The Companies (Guernsey) Law 2008, (as amended), and International Financial Reporting Standards (“IFRS”) as adopted by the European Union which comprise standards and interpretations approved by the International Accounting Standards Board (‘IASB’) together with the interpretations of the International Accounting Standards and Standing Interpretations Committee as approved by the International Accounting Standards Committee (“IASC”) which remain in effect. (b) Basis of Preparation The consolidated financial statements have been prepared on a break-up basis. The principal accounting policies are set out below. The preparation of the financial information in accordance with IFRS as adopted by the EU requires the Board of Directors to exercise its judgement in the process of applying the Company’s accounting policies. New Accounting Standards, interpretations and amendments adopted A number of new standards, interpretations and amendments effective for the first time for periods beginning on (or after) 1 January 2013, have been adopted in these Financial Statements. IAS 1 Presentation of Items of Other Comprehensive Income- Amendments to IAS 1; IAS 1 Clarification of the requirement for comparative information (Amendment); IFRS 7 Financial Instruments: Disclosures- Offsetting Financial Assets and Financial Liabilities- Amendments to IFRS 7; • IFRS 13 Fair Value Measurement • • •

The above standards do not impact the annual Financial Statements of the Company, except for IFRS 13, ‘Fair Value Measurement’. •

IFRS 13, ‘Fair value measurement’, establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRSs. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between willing market participants at the measurement date. Notwithstanding the above, the adoption of this new Standard has had no impact on the fair value measurements of the Company’s assets and liabilities. IFRS 13 also requires specific disclosures on fair values, some of which replace existing disclosure requirements in other standards, including IFRS 7 ‘Financial Instruments: Disclosures’. The Company provides these disclosures in Note 6 of these Financial Statements.

The Directors have not considered the effect of the new standards, amendments to standards and interpretations which have been issued or amended by the IASB, but are not yet effective, on the basis that these financial statements have been prepared on a break-up basis. (b) Basis of Consolidation The consolidated financial statements comprise the financial statements of the Company and its wholly-owned subsidiary undertakings at 30 June 2014. The results of the subsidiary undertakings are included in the Consolidated Statement of Comprehensive Income. The Company and its subsidiaries have the same year end and use the same accounting policies. All intra-group balances, transactions, income, and expenses are eliminated in full.

37

HarbourVest Senior Loans Europe Limited Notes to the Consolidated Financial Statements (continued): For the year ended 30 June 2014 3. Principal Accounting Policies, continued (c) Critical Accounting Judgements and Key Sources of Estimation Uncertainty The preparation of consolidated financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. As at 30 June 2014, estimates were used for the costs associated with the liquidation of the Company. The key assumptions for an estimate of these costs are the related time frame of the pre-liquidation and the liquidation process itself, providing the liquidation is approved by shareholders. The Board has made all reasonable enquiries, as far as possible, of the Investment Manager, Administrator and other service providers, in order to ensure that all material income and costs prior to liquidation, and associated with the liquidation, are identified and accrued as income and expenses in these financial statements. At 30 June 2014, valuation of investments is no longer considered to be a source of estimation uncertainty as the entire portfolio has been realised. (d) Operating segments The Directors are of the opinion that the Company and its subsidiaries are engaged in a single segment of business, being investments in senior loans. The Directors manage the business in this way. The financial results from this segment are equivalent to the financial results of the Company as a whole. (e) Foreign Currency Translation The functional and presentation currency of the Company and its subsidiaries is sterling. Transactions in currencies other than the functional currency are recorded using the exchange rate prevailing at the transaction date. Foreign exchange gains and losses resulting from the settlement of such transactions, and those from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income. Foreign currency gains and losses attributable to investments designated as fair value through profit or loss and investments on a break up basis are included in total income from investments in the Consolidated Statement of Comprehensive Income. (f) Investments on a break-up basis Investments are included at their realisable value, which is the proceeds realised on the sale or redemption of the loan portfolio after the year end. (g) Investments Designated as Fair Value through Profit or Loss in the prior period Classification All investments of the Group were designated as financial assets at fair value through profit or loss. The investments were purchased principally for capital growth and income generation and the portfolio was managed, and performance evaluated, on a fair value basis in accordance with the Company’s documented investment strategy. Therefore the Directors considered that this was the most appropriate classification. This category comprises financial instruments designated as financial assets at fair value through profit or loss upon initial recognition – these included financial assets that were not held for trading purposes, but which may have been sold.

38

HarbourVest Senior Loans Europe Limited Notes to the Consolidated Financial Statements (continued) For the year ended 30 June 2014 3. Principal Accounting Policies, continued (g) Investments Designated as Fair Value through Profit or Loss in the prior period, continued Measurement Fair value measurement is determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions, IFRS 13 establishes a fair value hierarchy as follows: Level 1: Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2: Inputs that reflect quoted prices of similar assets and liabilities in active markets, and quoted prices of identical assets and liabilities in markets that are considered to be inactive as well as inputs other than quoted prices that are observable for the asset or liability either directly or indirectly. Level 3: Inputs that are unobservable for the asset or liability and reflect the Investment Manager’s own assumptions All investments of the Group were classified as Level 3 assets, as defined under IFRS 13 as those assets whose fair valuation relies primarily on inputs that are not based on observable market data. For the prior period and throughout the current financial year until the break up basis accounting, the discounted cash flow (DCF) methodology has been adopted as the principal valuation approach. The DCF methodology entails determining relevant cash flows for each loan, adjusted according to an assessment of the probability of refinancing, and discounting those cash flows by an appropriate risk-adjusted discount rate. The risk-adjusted discount rate is an expression of what investors believe to be a fair and reasonable rate of return for holding a particular security over the relevant period given the inherent risks of ownership. Implicit in the estimation of such a discount rate is the assumption that the seller is a willing seller and the buyer is a willing purchaser of the security. The Company engaged an independent valuation consultant to provide third party valuation consultancy services to the Company and to assist in the determination of the fair value of the Group’s investments and reviewing the valuation processes in relation thereto. The fair value of the unquoted investments was reassessed on an ongoing basis by the Investment Manager and was reviewed quarterly by the Board of Directors. The key judgments and estimates are explained in note 3 (d). (i) Realised and Unrealised Gains and Losses Investment transactions are recorded on the trade date. Realised gains and losses arising on the disposal of investments are calculated by reference to the weighted average cost attributable to those investments and the sale proceeds (exclusive of interest income) and are included in the Consolidated Statement of Comprehensive Income. Unrealised gains and losses, including the impact of foreign exchange arising on investments, held at the Consolidated Statement of Financial Position date are also included in the Consolidated Statement of Comprehensive Income. Realised foreign exchange gains and losses arising on the disposal of investments are included in the Consolidated Statement of Comprehensive Income. (j) Income Interest income in the Consolidated Statement of Comprehensive Income includes amortisation of market discount and premium as calculated using the effective interest method. (k) Expenses All expenses are recognised in the Consolidated Statement of Comprehensive Income on an accruals basis except for costs incurred on share issues which are netted off against the share issue proceeds. Other costs in relation to the formation of the Company are recognised when incurred. As these Financial Statements have been prepared on a break-up basis, net costs expected to be incurred prior to liquidation and associated with the liquidation have been accrued as an expense for the year.

39

HarbourVest Senior Loans Europe Limited Notes to the Consolidated Financial Statements (continued) For the year ended 30 June 2014 3. Principal Accounting Policies, continued (l) Cash and Cash Equivalents Cash comprises cash in hand, overdrafts and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant changes in value. (m) Taxation Current income tax assets and liabilities are measured at the amount expected to be recovered from, or paid to taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. 4. Material Agreements (a) Investment Management Agreements The Company was managed by HarbourVest Senior Loan Advisers L.P. Under the terms of an Investment Management Agreement dated 27 April 2010, which was amended and restated on 3 May 2011, the Company appointed the Investment Manager to provide management services to the Company. On 22 May 2014, Spire Partners LLP replaced HarbourVest Senior Loans Advisers L.P., as Investment Manager. Prior to 22 May 2014, HarbourVest Senior Loan Advisers L.P. received in return for Investment Management services a base fee calculated as follows: •

The base fee was equal to 0.25% per calendar quarter of the net invested assets and was paid quarterly in arrears by the Company or at its discretion by any member of the Group to the Investment Manager within 14 days of receipt from the Administrator of the calculation of the base fee, unless within such period the Company had given notice in writing to the Investment Manager of any error in relation to the calculation, in which case the due date for payment would have been delayed until 14 days after such error is resolved. For the avoidance of any doubt, prior to the conversion of the C shares, any base fee was accounted for on a per class basis, with each class bearing its relevant share of the base fee. Also for the period 31 December 2013 to 22 May 2014, the HarbourVest Senior Loan Advisers L.P. agreed to contribute 40bps of net asset values of the Company towards the operating expenses of the Company.

From 22 May 2014, the Investment Manager, under the terms of an Investment Management Agreement dated 22 May 2014, which was amended and restated on 16 June 2014, receives in return for Investment Management services a base fee calculated as follows: •

The base fee is equal to 0.15% per calendar quarter of the net invested assets and is paid quarterly in arrears by the Company or at its discretion by any member of the Group to the Investment Manager within 14 days of receipt from the Administrator of the calculation of the base fee, unless within such period the Company has given notice in writing to the Investment Manager of any error in relation to the calculation, in which case the due date for payment shall be delayed until 14 days after such error is resolved.

For the purposes of the base fee, the net invested assets means the aggregate of: •

for secondary loans the aggregate value on the first day of each month of the calendar quarter of all outstanding loans at their purchase price plus the aggregate value on the last day of the calendar quarter of all outstanding loans at their purchase price, divided by four; and

•

for primary loans the aggregate value on the first day of each month of the calendar quarter of all outstanding loans at their subscription price inclusive of any fees paid by the borrower in connection with a new financing and any original issue discount plus the aggregate value on the last day of the calendar quarter of all outstanding loans at their subscription price inclusive of any fees paid by the borrower company in connection with a new financing and any original issue discount, as the case may be, divided by four.

40

HarbourVest Senior Loans Europe Limited Notes to the Consolidated Financial Statements (continued) For the year ended 30 June 2014 4. Material Agreements, continued (a) Investment Management Agreement, continued The net invested assets exclude loans which have been repaid (in whole or in part) or permanently written-off (in whole or in part) and include committed credit lines including undrawn amounts. In respect of a period that is less than a full calendar quarter, any base fee which may be payable is pro-rated based on the net invested assets. Prior to 22 May 2014, from such time as a cash distribution caused the Company, in aggregate, to have made cash distributions (by way of dividend and/or capital return) representing the Gross Proceeds and such amounts representing an 8% IRR on the Gross Proceeds, the Investment Manager was entitled to a 15% performance fee on all distributions above this 8% return. From 22 May 2014, the new Investment Manager is also entitled to a performance fee provided the aggregate amount realised on a sale, disposal or other realisation of all of the Company’s Investments generates an aggregate amount equivalent to at least 98.75 per cent of the aggregate book value of the investments. The performance fee is calculated as follows: • • •

2.75% of the amount generated in respect of a realisation (the “Realised Amount”) where the realisation is agreed and becomes unconditional on or before 31 December 2014; 2.0% of the Realised Amount where the realisation is agreed and becomes unconditional between 1 January 2015 and 30 June 2015; and 1.0% of the Realised Amount where the realisation is agreed and becomes unconditional between 1 July 2015 and 31 December 2015

Following the sale or repayment of the remaining 5 investments in the post year end period, a performance fee of £1,009,009 (2013: £nil) became payable to the new Investment Manager and is accrued as an expense in these financial statements. (b) Administration and Custodian Agreement For the period to 22 May 2014, the Company engaged the services of BNP Paribas Securities Services S.C.A., Guernsey Branch (formerly known as BNP Paribas Fund Services (Guernsey) Limited) (the “Administrator”), a private limited company incorporated in Guernsey on 27 October 2000, to provide administration and custodian services for a fee. Under the terms of the Administration and Custodian Agreement dated 27 April 2010 the accounting and administration fee was calculated at a rate of 0.035% of the net asset value from time to time, subject to a minimum of £74,000 per annum, and an annual corporate secretarial fee of £36,000. Both were accrued monthly and payable quarterly in arrears. Prior to 22 May 2014, the Administrator was entitled to a loan administration fee calculated as 0.04% of the net asset value from time to time, subject to a minimum of £60,000 per annum, accrued monthly and payable quarterly in arrears. The Administrator was entitled to charge a loan sale and purchase transaction fee of £100 per transaction and an ad hoc fee of £2,500 per additional board meeting and any other ad hoc services fee on a time cost basis. The Company also paid BNP Securities Services, Luxembourg Branch a fee of £28,000 per annum for secretarial services rendered to the Company’s subsidiaries. On 22 May 2014, the Company appointed Praxis Fund Services Limited (the new “Administrator”) to replace BNP Paribas Securities Services S.C.A, as Administrator. Under the terms of the Administration and Custodian Agreement dated 23 April 2014, the new Administrator is entitled to a time based fees for all company secretarial services and for accounting, administration and custodian services an annual fee of 0.05% per annum of the net asset value of the Company subject to a minimum fee of £4,500 per month. From 22 May 2014, the Company also appointed the new Administrator’s Luxembourg subsidiary, Praxis Luxembourg S.A. for administration and secretarial services rendered to the Company’s subsidiaries. Praxis Luxembourg S.A. is entitled to a loan administration fee of £33,900 per annum, accrued monthly and payable quarterly in arrears. (c) Registrar’s Agreement Capita Registrars (Guernsey) Limited has been appointed as Registrar of the Company pursuant to the Registrar Agreement dated 27 April 2010. The fee is charged at a rate of £2.00 per holder of ordinary shares appearing on the register during the fee year, with a minimum charge per annum of £10,000.

41

HarbourVest Senior Loans Europe Limited Notes to the Consolidated Financial Statements (continued) For the year ended 30 June 2014 4. Material Agreements, continued (d) Independent Valuation Consultancy Agreement The Company has engaged the services of Houlihan Lokey (Europe) Limited (the “Valuation Consultant”) to provide advisory services to the Company in relation to the half yearly valuation of the loans in the portfolio. On 3 October 2014, in light of the disposal of the entire portfolio, the Company issued Houlihan Lokey with three months’ written notice of termination. (e) Broking Engagement Letter The Company appointed Liberum Capital Limited as a corporate broker (the “broker”) under the terms and conditions of the broking engagement letter dated 9 December 2010. On completion of the fundraising for the C shares, an annual retainer became payable of £30,000 per annum (payable half yearly in advance on 1 January and 1 June). (g) Audit fees During the year Ernst & Young LLP provided audit services and review of the interim financial statements to the value of £61,698 (2013: £53,105). The interim review fee for 31 December 2013 amounted to £15,864 (2012: £12,612). 5. Earnings per Share and NAV per Share Ordinary Shares The calculation of basic and diluted earnings per ordinary share is based on the total net loss on ordinary shares of £440,775 (2013: total net gain of £6,765,660) and on the weighted average number of ordinary shares in issue during the year of 139,890,249 ordinary shares (2013: 139,890,249). The calculation of NAV per ordinary share is based on a NAV of £53,557,881 (2013: £83,260,129) and the number of shares in issue at 30 June 2014 of 139,890,249 ordinary shares (2013: 139,890,249). At 30 June 2014 the NAV per ordinary share is 38.29p (2013: 59.52p). 6. Investments Designated at Fair Value through Profit or Loss The Company classified in the prior year its financial instruments at fair value through profit or loss amongst appropriate levels of the fair value hierarchy based on valuation inputs. The hierarchy is described in Note 3(h). All investments of the Company were classified as Level 3 assets. During the year, there were no transfers between levels of the fair value hierarchy but the investments were transferred to current assets as investments on a break up basis at 30 June 2014. In the prior period and up until the preparation of these financial statements, the investments have been valued using discounted cash flow techniques as described below. In assessing the fair value of investments, the discounted cash flow (DCF) methodology was adopted as the principal valuation approach. The discount rate was calculated based on appropriate Euribor/Libor curve dependent on the location of the borrower and frequency of the coupon payments plus the discount spread. Further details are disclosed in note 3. The discount spreads were derived from the yields required by investors for loans with similar risk profiles and readily observable prices. The approach was primarily a comparables-based approach mixed with dynamic market inputs over the period. As regards the comparables, the selection was based on loans to companies in the same industry or sector, whose spreads were calculated from readily observable prices. This selection was consistent over time and regularly complemented thanks to the inclusion of newly issued relevant loans identified in the market.

42

HarbourVest Senior Loans Europe Limited Notes to the Consolidated Financial Statements (continued) For the year ended 30 June 2014 6. Investments Designated as Fair Value through Profit or Loss continued The comparable spreads were then adjusted by different factors such as liquidity, size and other qualitative aspects of the borrower, to get to the valued loan spread. In addition, the spread evolution of the comparables over the period was also taken into account to determine the evolution of the valued loan spread over the period and thus its final value The following table shows a reconciliation of all movements in the fair value of financial instruments categorised within Level 3 between the beginning and the end of the reporting year. Level 3 financial instruments

Balance at start of the year Purchases during the year Proceeds on sale or redemption of investments Realised foreign exchange loss on sale or redemption of investments Realised gain/(loss) on sale or redemption of investments Unrealised foreign exchange (loss)/gain on revaluation of investments Unrealised gain on revaluation of investments Transfer to investments on a break-up basis Balance at end of the year

1 July 2013 to 30 June 2014 £ 80,343,117 (42,386,905) (337,094) 613,396 (1,446,411) 245,563 (37,031,666) -

1 July 2012 to 30 June 2013 £ 119,287,343 9,002,826 (50,907,175) (1,013,424) (1,837,115) 3,522,356 2,288,306 80,343,117

Total income for the year included in the profit or loss for assets held at the end of the year amounted to £2,825,965 (2013: £2,503,248). The fair value of the investments at fair value through profit or loss including accrued interest as at 30 June 2013 was £80,806,501. Investments at 30 June 2014 are not valued at fair value, if investments were held at fair value based on the DCF methodology the investment fair value would be £36,723,459. 7. Net expenses on a break-up basis The financial statements have been adjusted to take account of net expenditure arising after 30 June 2014 and up to the liquidation of the Company as follows: 1 July 2013 to 30 June 2014 £ Net accruals for the estimated future net operating loss to proposed liquidation (135,469) Performance fees accrual (1,009,009) Total net expense on a break up basis (1,144,478) 8. Income from Investments, Cash and Cash Equivalents The income from investments, cash and cash equivalents is as follows:

Income received from investments Transaction fees Income from cash and cash equivalents

1 July 2013 to 30 June 2014 £ 2,917,658 1,031 2,918,689

1 July 2012 to 30 June 2013 £ 5,523,410 188,986 5,864 5,718,260

30 June 2014 £ 17,917,132 17,917,132

30 June 2013 £ 32,650 2,869,963 2,902,613

9. Cash and Cash Equivalents The breakdown of cash and cash equivalents is as follows:

Investment in daily money market funds Cash at bank

43

HarbourVest Senior Loans Europe Limited Notes to the Consolidated Financial Statements (continued) For the year ended 30 June 2014 10. Share Capital The authorised share capital of the Company is represented by an unlimited number of ordinary shares of no par value together with 150,000,000 C shares. Ordinary shares of no par value Issued and fully paid

30 June 2014

30 June 2013

139,890,249

139,890,249

Rights Attached to Shares Ordinary Shares The holders of the ordinary shares are entitled to receive and participate in any dividends or other distribution out of profits of the Company available for dividend. On a show of hands, holders of ordinary shares are entitled to one vote irrespective of the number of shares held. On a poll, each ordinary share carries one vote. On a winding up, the ordinary shareholders shall be entitled to the surplus assets remaining after payment of all creditors of the Company. Redeemable B Shares As set out in the Company’s IPO Prospectus dated 27 April 2010 (the “Prospectus”), following the Investment Period, the Company expected to make distributions of Capital Returns comprising repayments of invested capital and capital gains resulting from the realisation of the discounts to par at which secondary loans were purchased. Capital Returns were made from cash arising from investee company loan repayment or refinancing, together with ongoing loan amortisation. In accordance with the terms of the Prospectus, the Company announced that the mechanism for making the Capital Return was to be by way of a bonus issue and immediate redemption of B shares on a pro rata basis. Redeemable B shares do not carry any rights to any dividend or other distribution out of the profits of the Company or any voting rights and are not transferable. Significant Share Movements Ordinary shares For the year 30 June 2014 Balance at start of the year Ordinary shares acquired and cancel during the year Balance at end of the year

Number 139,890,249 139,890,249

£ 135,744,708 135,744,708

Redeemable B shares For the year 30 June 2014 Balance at start of the year Capital issued during the year (Redeemable B share issued)* Capital redemption during the year (Redeemable B share distribution) * Balance at end of the year

Number 279,780,498 (279,780,498) -

£ (50,936,525) (26,733,027) (77,669,552)

Ordinary shares For the year to 30 June 2013 Balance at start of the year Ordinary shares acquired and cancel during the year Balance at end of the year

Number 139,890,249 139,890,249

£ 135,744,708 135,744,708

Number 419,670,747 (419,670,747) -

£ (50,936,525) (50,936,525)

Redeemable B shares For the year to 30 June 2013 Balance at start of the year Capital issued during the year (Redeemable B share issued)** Capital redemption during the year (Redeemable B share distribution) * Balance at end of the year

* On 1 November 2013 and 8 January 2014, the Company made a Capital Return to shareholders equivalent to 13.26 pence and 5.85 pence per ordinary share respectively by way of a bonus issue and immediate redemption of B shares on a pro rata basis. ** On 26 October 2012, 5 April 2013 and 28 June 2013, the Company made a Capital Return to shareholders equivalent to 9.78 pence, 11.50 pence and 15.12 pence respectively per ordinary share by way of a bonus issue and immediate redemption of B shares on a pro rata basis. The total cash flow of £50,936,525 includes £16,474 which relates to C shares.

44

HarbourVest Senior Loans Europe Limited Notes to the Consolidated Financial Statements (continued) For the year ended 30 June 2014 11. Dividends In any financial year, the Company has made distributions to shareholders of not more than the cash income it received less its running costs paid in that year. Cash income comprises cash received by the Company attributable to the running yield of the portfolio and the income arising from cash held by the Company pending investment or distribution. It also includes all fees generated from the portfolio including, for example, arrangement fees from primary loans. Cash income excludes market discounts and premiums that are accounted for as part of interest income. Such distributions have been made by way of semi-annual dividends, payable in March and September of each year in respect of the financial year ending 30 June of that year. The Company has declared and paid the following dividends to its shareholders: Date declared 31 August 2010 21 February 2011 23 August 2011 21 February 2012 22 August 2012 27 February 2013 4 September 2013 28 February 2014

Date Paid 30 September 2010 25 March 2011 30 September 2011 30 March 2012 28 September 2012 5 April 2013 30 September 2013 21 March 2014

Rate 1.00 pence per ordinary share 1.00 pence per ordinary share 1.00 pence per ordinary share 1.43 pence per ordinary share 1.75 pence per ordinary share 1.60 pence per ordinary share 1.12 pence per ordinary share 0.69 pence per ordinary share

A further dividend of 0.48 pence per ordinary share was declared on 20 August 2014 and paid on 26 September 2014. In addition to the above dividends related to ordinary shares, a C Share dividend of 0.59 pence per C share was declared on 24 November 2011 and paid on 12 December 2011. 12. Risk Management Policies and Procedures During the year to 30 June 2014 the Company, through its investments in senior loans, was exposed to a variety of financial risks, market risk (including market price risk, currency risk and interest rate risk), credit risk and liquidity risk. The Company’s overall risk management programme focused on the unpredictability of financial markets and sought to minimise potential adverse effects on the Company’s financial performance. The Company’s Investment Manager is responsible for identifying and controlling risks. The Board of Directors are ultimately responsible for the overall risk management approach within the Company. The Board of Directors has established procedures for monitoring and controlling risk. The Company has investment guidelines that set out its overall business strategies, its tolerance for risk and its general risk management philosophy. In addition, the Company has monitored and measured the overall risk bearing capacity in relation to the aggregate risk exposure across all risk type and activities. Further details regarding these policies are set out below: Market Risk The fair value of a financial instrument held by the Company would fluctuate due to changes in market prices. Market risk comprised market price risk, currency risk and interest rate risk. The Investment Manager moderated the risk through a careful selection of investments within specified limits. The maximum risk resulting from financial assets was determined by the fair value of the financial assets. The Company’s overall market position was monitored by the Investment Manager and was reviewed by the Board of Directors on an ongoing basis.

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HarbourVest Senior Loans Europe Limited Notes to the Consolidated Financial Statements (continued) For the year ended 30 June 2014 12. Risk Management Policies and Procedures continued Market Price Risk The Company’s investments designated as at fair value through profit or loss were susceptible to market price risk arising from uncertainties about future prices of the investments. The Board of Directors managed the risks inherent in the investment portfolio by ensuring full and timely reporting of the relevant information from the Investment Manager. Investment performance was reviewed at each Board meeting. The Board monitored the Investment Manager’s compliance with the Company’s objectives and was directly responsible for investment strategy and asset allocation including that to countries and economies. Although the Company was exposed to market risk at 30 June 2014, investments at 30 June 2014 are recorded on a break-up basis at their net realisable value and accordingly market price risk is eliminated. At 30 June 2013, the overall market exposure of the Company was equivalent to the fair value of investments designated as fair value through profit or loss of £80,343,117. Market Price Risk Sensitivity As stated in note 3(g), at 30 June 2014 the net realisable value of the loans has been used as the carrying value of investments and so market price sensitivities are not relevant. For the year ended 30 June 2013, the DCF methodology was adopted as the principal valuation approach. The following table illustrates the sensitivity of the return after taxation for that year and the Company’s net assets at 30 June 2013 to an increase or decrease of 4% in the fair values of the Company’s investments. This level of change is considered to be reasonable based on observation of current market conditions. 1 July 2012 to 30 June 2013 Increase in fair Decrease in fair value value £ £ 830,466* (3,213,725)

Profit for the financial year

830,466

Net assets

(3,213,725)

* The asymmetry in the table arises because the valuation policy was such that no loans are valued at more than par.

The following table illustrates the sensitivity of the return after taxation for the year and the Company’s net assets to an increase or decrease of 0.5% (2013: 0.5%) in the discount rate. 1 July 2012 to 30 June 2013 Increase in Decrease in discount rate discount rate £ £ (405,837) 406,413

Profit for the financial year

(405,837)

Net assets

406,413

Currency Risk The functional and presentational currency of the Group is Sterling and, therefore, the principal exposure to foreign currency risk has comprised investments priced in Euros. The Investment Manager has monitored the exposure to foreign currencies and reported to the Board on a regular basis. The Investment Manager measured the risk of the foreign currency exposure by considering the effect on the net asset value and income of a movement in the rates of exchange to which the assets, liabilities, income and expenses were exposed. Previously the Board sought to mitigate Euro exposure by ensuring the composition of the portfolio by value was never more than 50% in currency other than Sterling. Following the end of the investment period the ratio of Sterling to other currencies has depended purely on the repayment of loans, which has generally been at the behest of the borrowers and thus outside the control of the Investment Manager. The Company to date has not used financial instruments to mitigate the portfolio currency exposure.

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HarbourVest Senior Loans Europe Limited Notes to the Consolidated Financial Statements (continued) For the year ended 30 June 2014 12. Risk Management Policies and Procedures continued Market Price Risk Sensitivity continued Currency Risk continued Interest income denominated in foreign currencies is converted to Sterling on receipt. The Company does not use financial instruments to mitigate the currency exposure in the period between the time that income is included in the financial statements and its receipt. Financial assets by currency at 30 June 2014 is shown below: 30 June 2014

Note 6

Investments on a break-up basis Interest receivable Cash and cash equivalents Total net currency exposure 30 June 2013

9

Note

Investments designated as at fair value through profit or loss Interest receivable Cash and cash equivalents Total net currency exposure

6 9

Sterling £ 16,462,828 10,008 16,891,799 33,364,635

Euro £ 20,568,838 91,182 1,025,333 21,685,353

Total £ 37,031,666 101,190 17,917,132 55,049,988

Sterling £

Euro £

Total £

45,756,540 216,715 2,754,268 48,727,523

34,586,577 246,669 148,345 34,981,591

80,343,117 463,384 2,902,613 83,709,114

Currency Sensitivity Analysis Should the value of the Euro against Sterling increase or decrease by 5% with all other variables held constant, the net assets of the Company at 30 June 2014 would increase or decrease by £1,084,268 (2013: £1,749,080). In accordance with the Company’s policy, the Investment Manager monitors the Company’s currency position, and the Board of Directors reviews it. At the date of signing this report, the entire portfolio has been realised and the majority of Euro proceeds converted into Sterling. Accordingly the Company no longer has any significant currency risk. Interest Rate Risk Interest rate risk is the risk that the value of financial instruments and related income from the cash and cash equivalents will fluctuate due to changes in market interest rates. The Company’s exposure to interest rate risk has been related to the investments designated as fair value through profit or loss and its cash and cash equivalents. As a result the Company has been subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates. This primarily affected interest income on investments and the fair value of investments which has been determined by applying a discount rate which uses variable interest rates as an input. Financial instruments at variable rates exposed the Company to cash flow risk. Financial instruments at fixed rates exposed the Company to fair value interest rate risk. All loans in the portfolio are at floating rates linked to either Libor or Euribor. 30 June 2014 £

30 June 2013 £

At fixed rate Investments at fair value through profit or loss

-

-

At variable rate Investments on a break-up basis Investments at fair value through profit or loss Cash and cash equivalents Total

37,031,666 17,917,132 54,948,798

80,343,117 2,902,613 83,245,730

Total interest sensitivity gap

54,948,798

83,245,730

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HarbourVest Senior Loans Europe Limited Notes to the Consolidated Financial Statements (continued) For the year ended 30 June 2014 12. Risk Management Policies and Procedures continued Market Price Risk Sensitivity continued Interest Rate Risk continued If interest rates had changed by 100 basis points, with all other variables remaining constant, the effect on the net gain for the year ended 30 June 2013 would have been as shown on the table below. 1 July 2012 to 30 June 2013 £ 832,457

Increase of 100 basis points Decrease of 100 basis points

(832,457)

As at 30 June 2014, there was no exposure to interest rate changes as the portfolio has been valued at net realisable value, which is the redemption and sales proceeds. Credit Risk Credit risk is the risk that a counterparty will be unable to pay amounts in full when due. At the date of signing this report, the Company’s entire remaining loan portfolio had been sold and the cash proceeds have been received within the Company’s bank accounts held with the Royal Bank of Scotland International, Guernsey Branch. Credit risk on the cash and cash equivalents is deemed to be limited due to the counterparty being a bank with high credit ratings assigned by international credit rating agencies. Prior to the preparation of these financial statements, the Company’s main credit risk exposure has been to the borrowers of the loans in the portfolio shown as investments designated as at fair value through profit and loss. Credit risk in respect of other financial assets comprises cash and cash equivalents and accrued interest and dividend receivable. The total exposure to credit risk arises from default of the counterparty and the carrying amounts of financial assets best represent the maximum credit risk exposure at the year end date. As at 30 June 2014, the maximum credit risk exposure was therefore £55,049,988 (2013: £83,709,114). Credit risk primarily impacted the valuation of investments and was adjusted for in the discount spread applied to the valuation (see note 6). The Board has given guidance to the Investment Manager as to the maximum amount of the Company’s resources that should be invested in any one company to minimise credit concentration risk. Although the diversification of the Company’s investments was intended to reduce the Company’s exposure to adverse events associated with specific investments, the number of investments has been limited as investment opportunities were highly concentrated in particular assets or asset classes or market segments. In particular, as the Company’s Portfolio was realised and loans were repaid, the concentration of investments in particular assets, asset classes or market segments increased relative to the concentration of the Company’s Portfolio. As a consequence, the Company’s returns as a whole may have been adversely affected by the unfavourable performance of even a single asset or asset class or market segment. The Board monitored the concentration risk by reviewing the portfolio on a monthly basis with the Investment Manager, recognising that the concentration risk continued to rise as further loans were repaid. In addition, as the portfolio decreased in size, the exposure to any one counterparty increased. The Investment Manager adopted procedures to reduce credit risk exposure by conducting credit analysis of the counterparties, their business and reputation which were then monitored on an ongoing basis. At 30 June 2014, the Company maintains the majority of its cash and cash equivalents at Royal Bank of Scotland International, Guernsey Branch, which is subject to the Company’s credit risk monitoring policies as mentioned above. Royal Bank of Scotland International, Guernsey Branch, is a branch of Royal Bank of Scotland International PLC, whose long term credit rating is A-1 with Standard & Poor's.

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HarbourVest Senior Loans Europe Limited Notes to the Consolidated Financial Statements (continued) For the year ended 30 June 2014 12. Risk Management Policies and Procedures continued Liquidity Risk Liquidity risk is the risk that the Company will not be able to meet its liabilities as they fall due. Liquidity risks relating to other financial liabilities of the Company are those in respect of amounts due to counterparties. However at 30 June 2014 there was sufficient liquidity in the form of cash and cash equivalents to satisfy the Company’s obligations. The Company’s financial assets and financial liabilities all have maturity dates within one year. An analysis of the expected maturity of investments at fair value through profit or loss and investments on a break-up basis is shown in the table below. At 30 June 2014, the investments are based on the net realisable value. 30 June 2014 £ 37,031,666 37,031,666

Within one year Between one and five years After five years

30 June 2013 £ 56,748,741 23,594,376 80,343,117

The carrying amounts of other receivables and prepayments, income receivable and other payables and accrued expenses are deemed to be their fair value due to their short term nature. 13. Related Party Transactions Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. HarbourVest Senior Loan Advisers LP was the Investment Manager of the Company until 22 May 2014; total investment management fees for the year amounted to £473,896 (2013: £1,089,689) with outstanding fees of £65,781 due at 30 June 2014 (2013: £232,638). No performance fee was due to the HarbourVest Senior Loan Advisers LP in respect of the year (30 June 2013: £nil). From 22 May 2014, Spire Partners LLP, as the new Investment Manager of the Company is deemed a related party. Spire Partners LLP agreed to waive, in favour of HarbourVest Senior Loans Advisers LP, their investment management fees to 30 June 2014. Following the sale or repayment of the remaining 5 investments in the post year end period, a performance fee of £1,009,009 (2013: £nil) became payable to Spire Partners LLP. With effect from 1 October 2013 the Audit Committee agreed with the recommendation made by the Management and Remuneration Committee to reduce remuneration of the Board with effect from 1 October 2013. The Directors of the Company and the Managers of its three Luxembourg subsidiaries are remunerated per annum as follows: Chairman – £40,000 (£55,000 prior to 1 October 2013) Audit Committee Chairman – £30,000 (£33,000 prior to 1 October 2013) Director – £25,000 per Director (£28,000 prior to 1 October 2013) Subsidiary company Manager (Sarah Evans) – £6,250 per subsidiary Subsidiary company Manager (Michael Vareika) – €6,250 per subsidiary The total Directors’ fees and travel expenses for the year amounted to £141,602 (2013: £190,350), of which £8,717 (2013: £40,524) were due to the Directors at 30 June 2014. 14. Taxes The Company is exempt from Guernsey taxation under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 for which it pays an annual fee of £600. The Luxembourg direct and indirect subsidiaries of HSLE are subject to the applicable general tax regulations in Luxembourg. Based on specialist local tax advice, there is a tax liability of £171,285 relating to general tax for the year to 30 June 2014 (2013: £113,458), which is included in the expenses. 49

HarbourVest Senior Loans Europe Limited Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 15. Capital Management The capital structure of the Company consists of equity attributable to equity holders, comprising issued share capital, as disclosed in Note 10, and reserves. The Company does not have any externally imposed capital requirements. Following the investment period, which ended on 30 June 2012, the Company made distributions of capital returns comprising repayments of invested capital and capital gains resulting from the realisation of the discounts to par at which secondary loans are purchased. Capital returns were made from cash arising from borrower loan repayment or refinancing together with ongoing loan amortisation. The mechanism for making capital returns was by way of a bonus issue and redemption of redeemable B shares on a pro rata basis. The risk management policies and procedures section (Note 12) details the policies and processes applied by the Company in managing its capital. 16. Post Balance Sheet Events On 20 August 2014, the Company declared a dividend of 0.48 pence per ordinary share, in respect to the year ended 30 June 2014 paid to shareholders on 26 September 2014. On 21 August 2014, the Company announced an unaudited estimated net asset value per ordinary share of 27.43p at 31 July 2014. On 19 September 2014, the Company announced an unaudited estimated net asset value per ordinary share of 27.45p at 31 August 2014. On 22 September 2014, the Company announced it had entered into a binding agreement to sell the remaining four loans in the portfolio at a small premium to the prevailing book value of those loans. On 28 October 2014 and accompanying these financial statements, a Notice of Extraordinary General Meeting (“EGM”) has been issued to Shareholders of the Company. Within the EGM, in light of the fact that the Company's entire portfolio has been realised, the Directors are proposing the voluntary winding-up of the Company in accordance with the Companies Law and the cancellation of admission of its Shares to trading on the Main Market of the London Stock Exchange, both of which are subject to Shareholder approval of the Resolutions.

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HarbourVest Senior Loans Europe Limited COMPANY ADVISERS AND CONTACTS Directors

Registered Office

Principal Bankers

Colin Maltby (Chairman) Rupert Dorey Sarah Evans John Morris (resigned 28 November 2013) Michael Stoddard (resigned 28 November 2013)

Sarnia House Le Truchot St Peter Port Guernsey GY1 4NA Channel Islands

BNP Paribas Securities Services S.C.A., Guernsey Branch BNP Paribas House 1 St. Julian’s Avenue St. Peter Port Guernsey GY1 1WA Channel Islands

All c/o the Company's registered office. Administrator and Company Secretary

Registrar

Praxis Fund Services Limited (appointed 22 May 2014) Sarnia House Le Truchot St Peter Port Guernsey GY1 4NA Channel Islands

Capita Registrars (Guernsey) Limited PO Box 627 Longue Hougue House St Sampson Guernsey GY1 3US Channel Islands

BNP Paribas Securities Services S.C.A., Guernsey Branch (terminated 22 May 2014) BNP Paribas House 1 St. Julian’s Avenue St. Peter Port Guernsey GY1 1WA Channel Islands Investment Manager

Independent Auditors

Spire Partners LLP (appointed 22 May 2014) 7th Floor 20 Berkeley Square London W1J 6EQ United Kingdom

Ernst & Young LLP Royal Chambers St Julian’s Avenue St Peter Port Guernsey GY1 4AF Channel Islands

HarbourVest Senior Loan Advisers L.P. (terminated 22 May 2014) c/o HarbourVest Partners, LLC One Financial Center 44th Floor Boston MA 02111 U.S.A. UK Transfer Agent

Company Brokers

Capita Registrars The Registry 34 Beckenham Road Beckenham BR3 4TU United Kingdom

Liberum Capital Limited Ropemaker Place, Level 12 25 Ropemaker Street London EC2Y 9AR United Kingdom

Solicitors to the Company (as to English law and U.S. securities law)

Advocates to the Company (as to Guernsey law)

Herbert Smith LLP Exchange House Primrose Street London EC2A 2HS United Kingdom

Mourant Ozannes PO Box 186 1 Le Marchant Street St Peter Port Guernsey GY1 4HP Channel Islands

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