Annual Financial Report

RNS Number : 0197F

F&C Private Equity Trust PLC

17 April 2014

To: Stock Exchange	For immediate release:
	17 April 2014

F&C Private Equity Zeros plc

Audited results for the year to 31 December 2013

Chairman's Statement

I am pleased to present the Company's Annual Report and Accounts for the year ended 31 December 2013.

The Company is a wholly owned subsidiary of F&C Private Equity Trust plc ('F&C PET') and was established solely for the purpose of issuing and redeeming Zero Dividend Preference Shares ('ZDP Shares'). 30,000,000 ZDP Shares were issued on 14 December 2009 at 100 pence per share and will redeem on 15 December 2014 at a price of 152.14 pence per ZDP Share, giving a redemption yield of 8.75 per cent per annum. The net proceeds of the ZDP Shares issue were lent to F&C PET for use in future investment opportunities.

As at 31 December 2013 the ZDP Share price was 146.50 pence, representing a premium of 5.1 per cent over the net asset value per ZDP Share of 139.45 pence.

Mark Tennant

Chairman

F&C Private Equity Zeros plc Audited Statement of Comprehensive Income Year ended 31 December 2013

	Year ended 31 December 2013	Year ended 31 December 2012

	£'000	£'000

Revenue
Interest Income	582	572
Total income	582	572

Expenditure
Expenses	-	-
Total expenditure	-	-
Profit before finance costs and taxation	582	572
Finance costs	(3,662)	(3,351)
Loss before taxation	(3,080)	(2,779)
Taxation	-	-
Loss for the year	(3,080)	(2,779)


Loss per Ordinary Share	(6,160.00)p	(5,558.00)p

F&C Private Equity Zeros plc Audited Balance Sheet
At 31 December 2013

		2013		2012

	£'000	£'000	£'000	£'000

Non current assets
Investments	-		48
Inter-company receivable	-		9,305
Subordinated Unsecured Loan Note	-		27,721
		-		37,074
Current assets
Investments	46		-
Inter-company receivable	12,967		-
Subordinated Unsecured Loan Note	28,303		-
Other receivables	1		1
Cash at bank	9		7
		41,326		8
Current liabilities
Zero Dividend Preference Shares		(41,835)		-
Net current (liabilities)/assets		(509)		8
Total assets less current liabilities		(509)		37,082
Creditors: amounts falling due after one year
Zero Dividend Preference Shares		-		(38,173)
Net liabilities		(509)		(1,091)

Equity
Ordinary share capital		50		50
Capital contribution reserve		12,967		9,305
Other reserve		(565)		(1,147)
Revenue reserve		(12,961)		(9,299)
Shareholders' funds		(509)		(1,091)
Net liabilities per Ordinary Share		(1,018.00)p		(2,182.00)p
Net asset value per ZDP Share		139.45p		127.24p

F&C Private Equity Zeros plc Audited Statement of Changes in Equity Year ended 31 December 2013

	Share Capital	Capital Contribution Reserve	Other Reserve	Revenue Reserve	Total
	£'000	£'000	£'000	£'000	£'000
Net liabilities at start of year	50	9,305	(1,147)	(9,299)	(1,091)
Loss for the year	-	-	-	(3,080)	(3,080)
Capital contribution during the year	-	3,662	-	-	3,662
Transfer to other reserve	-	-	582	(582)	-
Net liabilities at 31 December 2013	50	12,967	(565)	(12,961)	(509)

Audited Statement of Changes in Equity Year ended 31 December 2012

	Share Capital	Capital Contribution Reserve	Other Reserve	Revenue Reserve	Total
	£'000	£'000	£'000	£'000	£'000
Net liabilities at start of year (restated)	50	5,954	(1,719)	(5,948)	(1,663)
Loss for the year	-	-	-	(2,779)	(2,779)
Capital contribution during the year	-	3,351	-	-	3,351
Transfer to other reserve	-	-	572	(572)	-
Net liabilities at 31 December 2012	50	9,305	(1,147)	(9,299)	(1,091)

F&C Private Equity Zeros plc Audited Cash Flow Statement
Year ended 31 December 2013
	Year ended 31 December 2013	Year ended 31 December 2012

	£'000	£'000

Cash flows from operating activities
Loss before taxation	(3,080)	(2,779)
Non-cash adjustment to reconcile loss before taxation to net cash flow:
Interest on Subordinated Unsecured Loan Note	(580)	(570)
Working capital adjustment:
Change in inter-company receivable Subordinated Unsecured Loan Note	3,662	3,351
Net cash inflow from operating activities	2	2


Increase in cash and cash equivalents	2	2
Cash and cash equivalents at beginning of year	7	5
Cash and cash equivalents at end of year	9	7

Principal Risks and Uncertainties and Risk Management

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

Final Capital Entitlement

The ZDP Shares offer a pre-determined rate of growth in capital entitlement up to 152.14 pence per share on the repayment date of 15 December 2014, but no right of income.

F&C PET's debt to the Company is pursuant to the loan agreement which ranks behind any secured creditors of F&C PET. Therefore it is not guaranteed that the final capital entitlement will be paid. On a return of assets, including a winding up of F&C PET, the Company will only receive payment if there are sufficient assets attributable to the Ordinary Shares of F&C PET, having first taken account of prior ranked liabilities and having regard to all other unsecured liabilities of F&C PET. The ZDP shares are not a secured, protected or guaranteed investment.

Liquid Market for the ZDP Shares

The market price and realisable value of the ZDP Shares, as well as being affected by the underlying value of F&C PET's net assets, will be affected by interest rates, supply and demand for the ZDP Shares, market conditions and general investor sentiment. As such, the market value and realisable value of a ZDP Share can fluctuate and may not always reflect its accrued capital entitlement. In addition, given the Company's size and type, there is no guarantee that an active market will be sustained for the ZDP Shares. If an active trading market is not maintained, the liquidity and trading price of the ZDP Shares could be adversely affected.

Macroeconomic and Investment Risks

The Company's obligation to pay the ZDP shareholders the final capital entitlement is dependent upon F&C PET's ability to comply with its obligations to the Company. This in turn is impacted by F&C PET's performance and its ability to manage macroeconomic and investment risk. A material fall in the value of assets in the investment portfolio of F&C PET may lead to a winding up of F&C PET in the longer term.

The performance of F&C PET's underlying investment portfolio is principally influenced by a combination of economic growth, the availability of appropriately priced debt finance, interest rates and the number of active trade and financial buyers. All of these factors have an impact on F&C PET's ability to invest, its ability to exit from its underlying portfolio and on the levels of profitability achieved on exit. Financial results may be adversely affected by movements in foreign exchange rates.

F&C PET operates in a very competitive market. Changes in the number of market participants, the availability of funds within the market, the pricing of assets, or in the ability of its investment manager, F&C Investment Business Limited, to access deals could have a significant effect of F&C PET's competitive position and on sustainability of returns.

In order to source and execute good quality investments, F&C PET is primarily dependent upon F&C Investment Business Limited having the ability to attract and retain executives with the requisite investment experience.

Once invested, the performance of the F&C PET's portfolio is dependent on a range of factors. These include, but are not limited to: (i) the quality of the initial investment decision; (ii) the ability of the portfolio company to execute successfully its business strategy; and (iii) actual outcomes against key assumptions underlying the portfolio company's financial projections. Any one of these factors could have an impact on the valuation of a portfolio company and upon F&C PET's ability to make a profitable exit from the investment within the desired timeframe. Future F&C PET share issues, share buy backs or raising new debt facilities in the longer term could dilute the interests of the holders of ZDP Shares and lower the price of the ZDP Shares.

Regulatory Risk

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.

The Company is also exposed to risks in relation to its financial instruments. Further details of these risks and the way in which they are managed are contained in note 2.

Statement of Directors' Responsibilities

Statement of Directors' Responsibilities in Relation to the Financial Statements

The Directors are responsible for preparing the financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards ('IFRS') as adopted by the European Union. The Directors are also required to prepare a Strategic Report, Directors' Report and Directors' Remuneration Report.

Under company law the Directors must not approve the financial statements unless they are satisfied that they present a fair, balanced and understandable report and provide the information necessary for shareholders to assess the Company's performance, business model and strategy. In preparing the financial statements the Directors are required to:

· select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and 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 Company's financial position and financial performance;

· state that the Company has 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. As explained in note 1, the directors do not believe the going concern basis to be appropriate and the financial statements have not been prepared on that basis.

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

Responsibility Statements under the Disclosure and Transparency Rules

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 Company; and

· the Strategic Report includes a fair review of the development and performance of the business and the position of the Company together with a description of principal risks and uncertainties that it faces.

On behalf of the Board

Mark Tennant

Director

Notes

1. The results have been prepared in accordance with the Companies Act 2006 and International Financial Reporting Standards ('IFRS') as adopted by the European Union.

It is the intention of the Directors that, following redemption of the ZDPs in December 2014, the Company will be liquidated and wound up within the next twelve months. Accordingly the financial statements have been prepared on a break up basis and liquidation costs relating to the Company will be payable by the parent company, F&C PET.

2. Financial Instruments

The Company's financial instruments comprise fixed interest investments, cash balances, a subordinated unsecured loan note, other receivables and a zero dividend preference shares liability.

The main risks arising from the Company's financial instruments are market risk, interest rate risk, liquidity risk and credit risk.

Market Risk

Market risk embodies the potential for both losses and gains and includes interest rate risk and price risk. The Company's investment is listed on a recognised stock exchange.

Interest Rate Risk

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

Liquidity and Funding Risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

Liquidity risk is considered to be significant as the Company is reliant upon the sale of assets within its parent undertaking, which mainly comprises unlisted investments. Details of how this risk is managed are contained within the financial statements of the parent company.

Credit Risk

This is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered with the Company.

3. The loss per Ordinary Share is based on 50,000 Ordinary Shares in issue during the year (2012: 50,000 Ordinary Shares).

The net liabilities per Ordinary Share is based on 50,000 Ordinary Shares in issue at the end of the year (2012: 50,000 Ordinary Shares).

Net asset value per ZDP Share is based on 30,000,000 ZDP Shares in issue at the end of the year (2012: 30,000,000 ZDP Shares).

4. This announcement is not the Company's statutory accounts. The statutory accounts for the year ended 31 December 2013 (on which the audit report has been signed) will be delivered to the Registrar of Companies.

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

6. The Annual Report and Accounts for the year will be sent to shareholders and are available for inspection at the Company's registered office, 80 George Street, Edinburgh EH2 3BU and the parent company's website www.fcpet.co.uk

For more information, please contact: