Annual Financial Report

RNS Number : 5362B

F&C Private Equity Trust PLC

17 April 2012

To: Stock Exchange	For immediate release:
	17 April 2012

F&C Private Equity Trust plc

Annual Financial Report for the Year to 31 December 2011

Following the release on 3 April 2012 of the Company's preliminary results announcement for the year ended 31 December 2011 (the "Preliminary Announcement"), the Company announces that its annual report and consolidated financial statements for the year ended 31 December 2011 (the "Annual Report and Financial Statements") will be published today.

A copy of the Annual Report and Financial Statements has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.Hemscott.com/nsm.do

The information below, which is extracted in unedited full text from the Annual Report and Financial Statements, is included in this announcement solely for the purposes of compliance with Disclosure and Transparency Rule 6.3.5 and the requirements it imposes on issuers as to how to make public annual financial reports. It should be read in conjunction with the Preliminary Announcement. Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full Annual Report and Financial Statements.

Principal Risks and Uncertainties and Risk Management

The Board believes that the principal risks and uncertainties faced by the Company are:

· Investment and strategic - incorrect strategy (including the deployment of, and managing the repayment of, gearing), asset allocation, and stock selection could all lead to poor returns for shareholders.

· External - events such as terrorism, disease, protectionism, inflation or deflation, economic shocks or recessions, the availability of credit and movements in interest rates and exchange rates could affect share prices and the valuation of investments.

· Regulatory - breach of regulatory rules could lead to suspension of the Company's stock exchange listing, financial penalties or a qualified audit report. Breach of Section 1158 of the Corporation Tax Act 2010 could lead to the Company being subject to tax on capital gains.

· Operational - failure of the Manager's accounting systems or disruption to the Manager's business, or that of third-party service providers, could lead to an inability to provide accurate reporting and monitoring, leading to a loss of shareholders' confidence.

· Financial - inadequate controls by the Manager or third-party service providers could lead to misappropriation of assets. Inappropriate accounting policies or failure to comply with accounting standards could lead to misreporting or breaches of regulations. Breaching loan covenants, being unable to replace maturing borrowing facilities or F&C Private Equity Zeros plc being unable to redeem its ZDP Shares on maturity could lead to a loss in shareholders' confidence and financial loss for shareholders.

· Funding - failure by the Company to meet its outstanding undrawn commitments could lead to financial loss for shareholders.

The Company is also exposed to currency risks in respect of the overseas markets in which it invests.

The assets of the Restricted Voting Shares are highly concentrated. This is a consequence of the advanced stage of the realisation process.

The Board seeks to mitigate and manage these risks through continual review, policy setting, shareholder communication and enforcement of contractual obligations. It also regularly monitors the investment environment, the management of the Company's investment portfolio, the level of undrawn commitments and the Company's gearing policy.

Further details of the risks associated with the Company's financial instruments are contained in note 1.

Statement of Directors' Responsibility in Respect of the Annual Report and Financial Statements

The Directors are responsible for preparing the Annual Report and the Group and Company financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards ('IFRS') as adopted by the European Union.

Under company law the Directors must not approve the Group and Company financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Group and Company for that period. In preparing the Group and Company financial statements, the Directors are required to:

· select suitable accounting policies in accordance with IAS8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with the specific requirements of IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's and the Company's financial position and financial performance;

· state that the Group and Company have complied with IFRS, subject to any material departures disclosed and explained in the financial statements; and

· make judgements and estimates that are reasonable and prudent.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the transactions of the Group and the Company and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Each of the Directors confirms that to the best of his or her knowledge:

· the financial statements, 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 or loss of the Group and the Company; and

· the Report of the Directors includes a fair review of the development and performance of the business and the position of the Group and Company together with a description of the principal risks and uncertainties that they face.

On behalf of the Board

Mark Tennant

Director

Notes

1. Financial instruments

The Group's financial instruments comprise equity and fixed interest investments, ZDP Shares, cash balances, bank loan and liquid resources including debtors and creditors. As an investment trust the Company holds a portfolio of financial assets in pursuit of its investment objective. In addition to the ZDP Share funding, from time to time the Group may make use of borrowings to fund outstanding commitments and achieve improved performance in rising markets. The downside risk of borrowings may be reduced by raising the level of cash balances held.

Quoted fixed asset investments held are valued at bid prices which equate to their fair values. Unquoted investments are valued by the Directors on the basis of all the information available to them at the time of valuation.

The Group's investing activities expose it to various types of risk that are associated with the financial instruments and markets in which it invests. The most important types of financial risk to which the Group is exposed are market risk, interest rate risk, liquidity and funding risk, credit risk and foreign currency risk.

The nature and extent of the financial instruments outstanding at the balance sheet date and the risk management policies employed by the Group are discussed below.

Market risk

Market risk embodies the potential for both losses and gains and includes interest rate risk and price risk.

The Group's strategy on the management of investment risk is driven by the Company's investment objective. The management of market risk is part of the investment management process and is typical of private equity investment. The portfolio is managed with an awareness of the effects of adverse price movements through detailed and continuing analysis, with an objective of maximising overall returns to shareholders. Investments in unquoted stocks, by their nature, involve a higher degree of risk than investments in the listed market. Some of that risk can be, and is, mitigated by diversifying the portfolio across business sectors and asset classes, and by having a variety of underlying private equity managers. New private equity managers are only chosen following a rigorous due diligence process. The Group's overall market positions are monitored by the Board on a quarterly basis.

Interest rate risk

Some of the Group's financial assets are interest bearing, some of which are at fixed rates and some of which are at variable rates. As a result, the Group is subject to exposure to fair value interest rate risk due to fluctuations in the prevailing levels of market interest rates.

When the Group retains cash balances the majority of the cash is held in deposit accounts. The benchmark rate which determines the interest payments received on cash balances is the bank base rate for the relevant currency.

Liquidity and funding risk

The Group's financial instruments include investments in unlisted equity investments which are not traded in an organised public market and which generally may be illiquid. As a result, the Group may not be able to liquidate quickly some of its investments in these instruments at an amount close to their fair value in order to meet its liquidity requirements, including the need to meet outstanding undrawn commitments or to respond to specific events such as deterioration in the creditworthiness of any particular issuer.

The Group's listed securities are considered to be readily realisable.

Flexibility is achieved where necessary through the use of the Company's revolving credit facility.

The Group's liquidity risk is managed on an ongoing basis by the Manager in accordance with policies and procedures in place. The Group's overall liquidity risks are currently monitored on a quarterly basis by the Board.

The Group maintains sufficient investments in cash and readily realisable securities to pay accounts payable and accrued expenses.

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Group. The Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The carrying amounts of financial assets best represents the maximum credit risk exposure at the balance sheet date.

Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is considered to be small due to the short settlement period involved and the high credit quality of the brokers used. The Manager monitors the quality of service provided by the brokers used to further mitigate this risk.

All the listed assets of the Group (which are traded on a recognised exchange) are held by The Northern Trust Company, the Group's custodian. Bankruptcy or insolvency of the custodian may cause the Group's rights with respect to securities held by the custodian to be delayed or limited. The Board monitors the Group's risk by reviewing the custodian's internal control reports.

The Group's cash balances are held by a number of counterparties. Bankruptcy or insolvency of these counterparties may cause the Group's rights with respect to the cash balances to be delayed or limited. The Manager monitors the credit quality of the relevant counterparties and should the credit quality or the financial position of these counterparties deteriorate significantly the Manager would move the cash holdings to another bank.

Foreign currency risk

The Group invests in overseas securities and holds foreign currency cash balances which give rise to currency risks. It is not the Group's policy to hedge this risk on a continuing basis but it may do so from time to time.

2. The Annual General Meeting of the Company will be held on Wednesday 23 May 2012 at 12 noon at the offices of F&C Asset Management plc, Exchange House, Primrose Street, London EC2A 2NY.

3. Copies of the Annual Report and Financial Statements will be sent to shareholders and will be available at the Company's registered office, 80 George Street, Edinburgh EH2 3BU. They are available on its website www.fcpet.co.uk

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