Half Yearly Report

RNS Number : 2839Q

F&C Private Equity Trust PLC

29 August 2014

 



To: Stock Exchange	For immediate release:
	29 August 2014

F&C Private Equity Trust plc

Unaudited results for the half year to 30 June 2014

Financial Highlights

 

·      Share price total return for the six months of 9.1 per cent for the Ordinary Shares.

·      NAV total return for the six months of -0.3 per cent for the Ordinary Shares after adverse currency movement of 2.7 per cent.

·      Semi-annual dividend of 5.39p per Ordinary Share.

·      Annualised dividend yield of 4.9 per cent at the period end.

·      Co-investments increased to 17.5 per cent of the portfolio.

Chairman's Statement

As at 30 June 2014 the Company's net asset value ('NAV') was £192.6 million giving a fully diluted NAV per share of 262.90p. Taking into account last year's final dividend of 5.36p per share paid on 30 May 2014 the NAV total return for the first half of the year was -0.3 per cent. . At the end of the period the Company had cash of £3.5 million. Together with the accrued liability for the Zero Dividend Preference Shares of £43.8 million the Company's total net debt was £40.3 million, equivalent to a gearing level of 17.3 per cent. The total of outstanding undrawn commitments at 30 June was £55.7 million and, of this, approximately £19 million is to funds where the investment period has expired.

In accordance with the Company's stated dividend policy, the Board declares a semi-annual dividend of 5.39p per Ordinary Share, payable on 7 November 2014 to shareholders on the register on 10 October 2014. For illustrative purposes only, this dividend represents an annualised yield of 4.9 per cent based on the share price as at 30 June 2014. I would like to remind shareholders of our dividend reinvestment plan which can be a convenient and easy way to build up an existing shareholding.

The first half of the year saw a steady flow of realisations within the portfolio with some encouraging signs of renewed exit activity in markets such as France and Spain where there has been a recent dearth of exits. In the UK, we have seen exits achieved not only to other private equity firms and to trade, but also through the stockmarket. This broadening of activity is a sign of a healthy market where recovery is in general well established. The market has also benefited from more amenable banking conditions and the increased prominence of alternative debt providers to buy-outs, such as unitranche funds. This background helped the Company in arranging a new five year loan facility of approximately £70 million at the end of the period. As announced at the time of entering into the new agreement, it is the Board's intention to use some of this facility to at least partially fund the pending redemption of the Company's Zero Dividend Preference Shares ('ZDPs') on 15 December this year.  As previously announced, the interest rate payable on the new loan is significantly lower than the original GRY on the maturing ZDPs and the margin payable is less than the margin on the previous £50 million loan facility which was cancelled upon entering into the new agreement.

The Company's underlying portfolio is in good shape and the Managers have added to the co-investment component, raising exposure to this category from 11.8 per cent to 17.5 per cent over the last twelve months. Our medium term aim is to build this gradually to around 25 per cent. Our investment partners have been active in deploying funds in a range of companies across Europe on our behalf. They are investing carefully and judiciously and the average price of new deals acquired is significantly below the average for the private equity market as a whole and the European mid-market in particular. As acquisition price is one of the most influential factors in the success of a buy-out, this is an encouraging sign. The Managers are seeing a good flow of new fund propositions in the Company's core area of the European mid-market and they expect to commit to several more funds by the year end. Additionally, the dealflow of co-investments and secondaries is good and they expect to add further to both categories as the year progresses.  The only frustration during the first half of the year is that sterling has strengthened noticeably against other major currencies and this has meant that we are showing a slight decline in the NAV rather than an increase.

Mark Tennant

Chairman

Manager's Review

Introduction

The private equity market in Europe and further afield is typified by a healthy level of activity. Company profits continue to recover, nothwithstanding the generally sluggish economic growth and the continuing fiscal adjustments to government balance sheets. Private equity fund raising is progressing and whilst much of the capital is going to already well financed 'household  names' there are signs that more emerging managers are also raising funds, albeit not always through conventional structures. As noted in the Chairman's Statement there has been a distinct improvement in the availability of bank debt and its equivalent for buy-outs.  Whilst it is fashionable to identify overheating in the private equity market as a whole this is not a description that is appropriate to the European mid-market at present where our investment partners remain able to acquire good companies at apparently sensible prices.

New Investments

One new commitment to a private equity fund was made in the first half of the year, a £3 million commitment to UK lower mid-market fund Primary Capital IV. This fund targets companies with enterprise values between £20 million and £100 million. Since 30 June, two further commitments to private equity funds have been made. €2 million has been committed to Iberian mid-market manager Portobello for their Fund III. This management group, previously known as Ibersuizas, is in our view one of the stronger Spanish focused funds which has done comparatively and absolutely well despite the very deep recession in the region. Secondly, we have made a fresh commitment to one of our strongest North American investment partners with a commitment of $7 million to BluePoint Capital III. This is the third fund managed by this Cleveland based team.  This commitment is in line with our policy of reinforcing strong and successful existing relationships whilst being very careful about opening up new commitments in the broad US mid-market.

Two new co-investments were made during the first half of the year. These have been intimated previously. Park Holidays, the country's fourth largest caravan holiday park operator, in which we have £3.3 million invested for a 3.3 per cent stake, has started its financial year very strongly with EBITDA currently ahead of budget. Ticketscript, the Netherlands based provider of cloud based selfserve event ticketing, promotion and management software, in which we have invested £2 million for a 7.5 per cent stake, is implementing the post investment plan of investing heavily in sales and technology teams.

Following the period end we have invested £1.6 million into Fox International Group, a leading provider of fishing tackle including rods, reels, lures, clothing and camping equipment and accessories. The enterprise value is £30 million and the deal structure includes £20 million of unitranche debt with the investment giving the Company 17.6 per cent of the equity. The deal was led by emerging management group Next Wave which focuses on Northern European lower mid-market companies. Fox International Group is based in Essex but has 65 per cent of its sales outside the UK with most of these in Germany (20 per cent), France (13 per cent) and the Netherlands (12 per cent). Fox is the market leader in carp fishing but has a growing presence in match and predator fishing. The growth plan is to increase market share in the various European markets and to expand into associated product lines.

During the first half of the year total drawdowns and co-investments were £13.8 million. The co-investments, Park Holidays and Ticketscript, accounted for £5.3 million with the balance of £8.5 million being drawn from a range of funds. The notable new investments are typically varied and have generally been acquired at what appear to be attractively low prices.

In the first quarter the two largest new investments were both made by Swiss based manager Capvis. Capvis III called £1.1 million for Italian based swimwear manufacturer Arena. In addition, Capvis are finishing their Fund III and starting Fund IV and their latest deal, VAT Holdings AG, is in both funds. The Company's investment between the two funds for VAT Holdings AG is £1.1 million. VAT Holdings is a Swiss based manufacturer of high end vacuum valves used in the semi-conductor, flat panel display and photovoltaic industries.

The second quarter also saw some excellent new companies entering the portfolio. The largest new investment (£0.7 million) was in 'On the Beach', the UK market leader in short haul packaged beach holidays. Inflexion have invested in the company through both their 2010 Fund and the 2012 Co-investment Fund. Stirling Square Capital Partners II made a follow-on investment in Portugal based helicopter company OHI (£0.7 million) for the purpose of acquiring the Brazil based helicopter operator Senior Taxi Aereo.  In Germany, DBAG VI acquired one of the country's largest bakery chains, Dahlback (£0.4 million). In Sweden, Procuritas Capital V acquired Pierce AB (£0.3 million), an online retailer of gear, spare parts and accessories for motocross enthusiasts. In Finland, Vaaka Partners Buyout II acquired Sataservice (£0.1 million), an industrial maintenance service provider with a strong presence in the food sector.  Closer to home, August Equity Partners III made two new investments (£0.1 million each). Ocean Safety supplies both its own-branded products and third party equipment, including life rafts, lifejackets and fire protection equipment.  Berkeley Home Health, through its subsidiary Loga Care, is one of the biggest providers of live-in, one to one 24 hour care in the South East of England.

Taking all of these new investments by our investment partners together during the most recent quarter, the weighted average acquisition multiple is approximately 6.2x EBITDA.  This would appear to be a significant discount, not only to the private equity market as whole, but also to the European mid-market where the private equity acquisition multiple has recently been estimated, by the Argos Index during  the second quarter of 2014, to have reached 8.3x. This provides a good basis for confidence that our investment partners are buying well.

Realisations

Distributions in the first half of the year totalled £18.7 million. In addition, the Company received £2.2 million of income. This brings the total of distributions, including income, to £20.9 million for the first half, approximately 10 per cent ahead of the total at the same stage last year.  There have been no realisations from the co-investment portfolio but the flow of realisations from the fund holdings has been substantial. The exits were widespread by sector and geography.

During the first quarter in the UK, Inflexion exited Optionis (employment services), a longstanding holding of its 2003 Fund and its associated Hickory Fund Portfolio returning £1.0 million (3.5x, IRR 22 per cent). Hutton Collins III returned £1.3 million through the refinancing of Caffe Nero (1.6x, IRR 17 per cent). In Continental Europe, Chequers Capital XV recapitalised Accelya, an IT services provider to the air transport industry, returning £1.3 million (5.2x, IRR 30 per cent). Gilde Buyout Fund III sold frozen food company Hofmann Menü returning £1.1 million (2.9x, IRR 20 per cent), and Hutton Collins, through Fund II, exited Spanish consultancy Everis, which was sold to Japanese corporate NTT, returning £1.9 million (1.8x, IRR 10 per cent). In the US, Camden Partners IV sold Prolexic, a cyber-security company, to Akamai Technologies returning £0.6 million (3.2x, IRR 94 per cent).

In the second quarter, the realisation activity continued steadily. The most successful exit was the sale of FDM, an IT consultancy, by Inflexion's 2006 Fund, via a stockmarket listing returning £1.2 million (16.2x, IRR 100 per cent). This ranks as one of the most successful buy-outs that we have ever had exposure to. The next largest individual exit (£1.0 million) was of Mivisa, the Spanish tinplate food packaging company, which was sold by N+1 Private Equity II (2.4x, IRR 38 per cent). Italian fund Alto Capital II had an active quarter with two similar sized exits yielding an aggregate £1.4 million. Caminetti Montegrappa (wood pellet stoves) achieved 5.2x and an IRR of 26 per cent, and IPE (luxury furniture) achieved 4.6x and an IRR of 45 per cent. In France, Chequers Capital XV realised three holdings for a total of £1.7 million. Energinvest (Valvitalia) (valves and fittings for the oil and gas industry) (1.7x, IRR 17 per cent), Telekabel Enterprise (broadband cable operator) (1.7x, IRR 16 per cent) and Perl (low rent housing project finance provider) (2.6x, IRR 28 per cent). Other significant exits or partial exits included £0.7 million from the refinancing of managed pub group, Stonegate, where  TDR Capital II have now returned 55 per cent of the cost of the investment and the final exit of the Candover 2001 Fund holding Innovia (speciality film manufacture) which has been exited, yielding £0.4 million (2.1x, IRR 14 per cent).

Valuation Changes

There were few significant changes in valuation during the first half. The uplifts in value were well spread across the portfolio. The largest individual uplift was £1.9 million for August Equity Partners II where it sold veterinary practice chain IVC  to Summit Partners for 4.0x cost and an IRR of 70 per cent. The proceeds of £3.8 million were received on 23 July. The co-investment in furniture company David Phillips is making good progress fundamentally and its value has been uplifted by 42 per cent giving an uplift for the Company of £1.0 million.  N+1 Private Equity II has, since the quarter end, sold hospital company Xanit and this, combined with a number of other smaller trading related mark ups, has boosted the value of the Company's holding by £0.8 million. Argan Capital was up by £0.5 million mainly due to strong trading of its main holding, industrial connectors business Faster which was agreed to be sold in August.

The Company's former Inflexion-led co-investment in nursing agency ICS, which was exited in June 2010, has been sold again, thus triggering a deferred consideration of £0.5 million which was received in July. As we had carried this holding at nil value, there was a welcome uplift of the full amount. The co-investment in pallet racking company Whittan is showing signs of recovery with a healthy rebound in profits justifying an uplift of £0.4 million.

As noted in the Chairman's Statement the largest negative for the portfolio in the first half was the weakness of the major currencies against sterling which reduced the overall valuation by £5.3 million, or 2.7 per cent of NAV, thus eliminating the gains made in the year to date.  At the level of the funds, notable weaknesses included Environmental Technologies Fund which was down by £0.5 million as a result of various portfolio companies running significantly behind schedule. The co-investment in Danish housebuilder, HusCompagniet, was reduced by £0.4 million to reflect the adverse impact of a reduction in profit margin.

Financing

As intimated to the market on 1 July, a new five year unsecured committed loan facility of approximately £70 million was entered into with The Royal Bank of Scotland plc on 30 June. The facility encompasses a €30 million term loan and a £45 million multi-currency revolving credit facility.   The plan is to draw the €30 million term loan as close to the redemption date of the Zero Dividend Preference Shares ('ZDPs') as possible - these are due for redemption on 15 December. The balancing amount required to help fund the ZDP redemption can be drawn in any of the main currencies and this could be drawn and hedged over whatever horizon is considered appropriate at the time. The interest rate payable on the new loan arrangements is far lower than the GRY of the maturing ZDPs and accordingly the Company will benefit from this as we move into the new year.

Outlook

There is a reasonably well established momentum in favour of realisations at present and in the absence of external shocks this should continue for the remainder of the year.  We are currently running at realisations around 10 per cent ahead of the same period last year. A factor, which could boost the total significantly, is realisations of co-investments. At this stage, however, we do not anticipate any exits from co-investments before the end of the year. We have made good progress in increasing the component of the portfolio in co-investments, which now stands at 17.5 per cent up from 11.8 per cent a year ago. It is difficult to forecast the NAV out-turn for the full year at this stage with a typically busy second half yet to come. The progress of underlying companies across most of the portfolio is good in fundamental terms and some of the investments which have been struggling are recovering. All of this gives us confidence that the second half will see respectable returns.

Hamish Mair

Investment Manager

F&C Investment Business Limited

F&C Private Equity Trust plc

Consolidated Statement of Comprehensive Income for the

half year ended 30 June 2014

	Unaudited
	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	991	991
Exchange gains	-	128	128
Investment income	2,221	-	2,221
Other income	11	-	11
Total income	2,232	1,119	3,351
Expenditure
Investment management fee - basic fee	(258)	(774)	(1,032)
Investment management fee - performance fee	-	-	-
Other expenses	(301)	-	(301)
Total expenditure	(559)	(774)	(1,333)
Profit before finance costs and taxation	1,673	345	2,018
Finance costs	(196)	(2,533)	(2,729)
Profit/(loss) before taxation	1,477	(2,188)	(711)
Taxation	(318)	318	-
Profit/(loss) for period/total comprehensive income	1,159	(1,870)	(711)
Return/(loss) per Ordinary Share - Basic	1.60p	(2.58)p	(0.98)p
Return/(loss) per Ordinary Share - Fully diluted	1.56p	(2.52)p	(0.96)p
Return per Restricted Voting Share - Basic	n/a	n/a	n/a

The total column of this statement represents the Statement of Comprehensive Income of the Group, prepared in accordance with IFRS. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations.

All income is attributable to the equity holders of F&C Private Equity Trust plc. There are no minority interests.

F&C Private Equity Trust plc

Consolidated Statement of Comprehensive Income for the

half year ended 30 June 2013

	Unaudited
	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	12,063	12,063
Exchange losses	-	(27)	(27)
Investment income	1,078	-	1,078
Other income	17	-	17
Total income	1,095	12,036	13,131
Expenditure
Investment management fee - basic fee	(254)	(763)	(1,017)
Investment management fee - performance fee	-	-	-
Other expenses	(380)	-	(380)
Total expenditure	(634)	(763)	(1,397)
Profit before finance costs and taxation	461	11,273	11,734
Finance costs	(136)	(2,183)	(2,319)
Profit before taxation	325	9,090	9,415
Taxation	(77)	77	-
Profit for period/total comprehensive income	248	9,167	9,415
Return per Ordinary Share - Basic	0.35p	12.68p	13.03p
Return per Ordinary Share - Fully diluted	0.34p	12.34p	12.68p
Return per Restricted Voting Share - Basic	(0.01)p	0.01p	-

The total column of this statement represents the Statement of Comprehensive Income of the Group, prepared in accordance with IFRS. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations.

All income is attributable to the equity holders of F&C Private Equity Trust plc. There are no minority interests.

F&C Private Equity Trust plc

Consolidated Statement of Comprehensive Income for the

year ended 31 December 2013

	Audited
	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	24,606	24,606
Exchange gains	-	48	48
Investment income	2,331	-	2,331
Other income	53	-	53
Total income	2,384	24,654	27,038
Expenditure
Investment management fee - basic fee	(515)	(1,544)	(2,059)
Investment management fee - performance fee	-	(1,175)	(1,175)
Other expenses	(681)	-	(681)
Total expenditure	(1,196)	(2,719)	(3,915)
Profit before finance costs and taxation	1,188	21,935	23,123
Finance costs	(278)	(4,497)	(4,775)
Profit before taxation	910	17,438	18,348
Taxation	(215)	215	-
Profit for year/total comprehensive income	695	17,653	18,348
Return per Ordinary Share - Basic	0.97p	24.41p	25.38p
Return per Ordinary Share - Fully diluted	0.94p	23.77p	24.71p
Return per Restricted Voting Share - Basic	(0.01)p	0.01p	-

The total column of this statement represents the Statement of Comprehensive Income of the Group, prepared in accordance with IFRS. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations.

All income is attributable to the equity holders of F&C Private Equity Trust plc. There are no minority interests.

F&C Private Equity Trust plc

Amounts Recognised as Dividends

	Six months ended 30 June 2014 (unaudited) £'000	Six months ended 30 June 2013 (unaudited) £'000	Year ended 31 December 2013 (audited) £'000
Final Ordinary Share dividend of 5.07p per share for the year ended 31 December 2012	-	3,665	3,665
Interim Ordinary Share dividend of 5.22p per share for the year ended 31 December 2013	-	-	3,773
Final Ordinary Share dividend of 5.36p per share for the year ended 31 December 2013	3,874	-	-
	3,874	3,665	7,438

On 14 February 2013 a final Restricted Voting Shares dividend of 1.675p per Restricted Voting Share was paid. The total amount paid was £1,124,000.

F&C Private Equity Trust plc

Consolidated Balance Sheet

	As at 30 June 2014 (unaudited)	As at 30 June 2013 (unaudited)	As at 31 December 2013 (audited)
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	233,718	223,488	237,657
Current assets
Other receivables	37	399	321
Cash and short-term deposits	3,491	9,527	7,018
	3,528	9,926	7,339
Current liabilities
Other payables	(835)	(1,410)	(5,944)
Zero dividend preference shares	(43,779)	-	(41,835)
Net current (liabilities)/assets	(41,086)	8,516	(40,440)
Total assets less current liabilities	192,632	232,004	197,217
Non-current liabilities
Zero dividend preference shares	-	(39,947)	-
Net assets	192,632	192,057	197,217
Equity
Called-up ordinary share capital	723	723	723
Special distributable capital reserve	15,679	15,679	15,679
Special distributable revenue reserve	31,403	31,403	31,403
Capital redemption reserve	1,335	1,335	1,335
Capital reserve	139,672	140,703	145,416
Revenue reserve	3,820	2,214	2,661
Shareholders' funds	192,632	192,057	197,217
Net asset value per Ordinary Share - Basic	266.50p	265.70p	272.84p
Net asset value per Ordinary Share - Fully diluted	262.90p	262.12p	269.07p

F&C Private Equity Trust plc

Consolidated Statement of Changes in Equity

	Share Capital	Special Distributable Capital Reserve	Special Distributable Revenue Reserve	Capital Redemption Reserve	Capital Reserve	Revenue Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000

For the six months ended 30 June 2014 (unaudited)
Net assets at 1 January 2014		723	15,679	31,403		1,335		145,416		2,661	197,217
(Loss)/profit for the period/total comprehensive income		-	-	-		-		(1,870)		1,159	(711)
Dividends paid		-	-	-		-		(3,874)		-	(3,874)
Net assets at 30 June 2014		723	15,679	31,403		1,335		139,672		3,820	192,632
For the six months ended 30 June 2013 (unaudited)
Net assets at 1 January 2013		1,394	15,679	32,527		664		135,201		1,966	187,431
Cancellation of Restricted Voting Shares		(671)	-	-		671		-		-	-
Profit for the period/total comprehensive income		-	-	-		-		9,167		248	9,415
Dividends paid		-	-	(1,124)		-		(3,665)		-	(4,789)
Net assets at 30 June 2013		723	15,679	31,403		1,335		140,703		2,214	192,057
For the year ended 31 December 2013 (audited)
Net assets at 1 January 2013	1,394		15,679		32,527		664		135,201	1,966	187,431
Cancellation of Restricted Voting Shares	(671)		-		-		671		-	-	-
Profit for the year/total comprehensive income	-		-		-		-		17,653	695	18,348
Dividends paid	-		-		(1,124)		-		(7,438)	-	(8,562)
Net assets at 31 December 2013	723		15,679		31,403		1,335		145,416	2,661	197,217

F&C Private Equity Trust plc

Consolidated Cash Flow Statement

	Six months ended 30 June 2014 (unaudited)	Six months ended 30 June 2013 (unaudited)	Year ended 31 December 2013 (audited)
	£000	£000	£000
Operating activities
(Loss)/profit before taxation	(711)	9,415	18,348
Gains on disposals of investments	(3,607)	(3,933)	(11,147)
Decrease/(increase) in holding gains	2,616	(8,130)	(13,459)
Exchange differences	(128)	27	(48)
Finance costs	2,729	2,319	4,775
Corporation tax received	-	15	15
(Increase)/decrease in other receivables	(9)	50	(8)
(Decrease)/increase in other payables	(1,753)	(40)	1,148
Net cash outflow from operating activities	(863)	(277)	(376)
Investing activities
Purchases of investments	(13,785)	(16,264)	(39,587)
Sales of investments	18,714	18,501	40,198
Net cash inflow from investing activities	4,929	2,237	611
Financing activities
Repayment of bank loans	(7,286)	-	-
Draw down of bank loans	4,086	-	3,398
Interest paid	(520)	(548)	(962)
Equity dividends paid	(3,874)	(4,789)	(8,562)
Net cash outflow from financing activities	(7,594)	(5,337)	(6,126)
Net decrease in cash and cash equivalents	(3,528)	(3,377)	(5,891)
Currency gains/(losses)	1	(27)	(22)
Net decrease in cash and cash equivalents	(3,527)	(3,404)	(5,913)
Opening cash and cash equivalents	7,018	12,931	12,931
Closing cash and cash equivalents	3,491	9,527	7,018

Statement of Principal Risks and Uncertainties

The Directors believe that the principal risks and uncertainties faced by the Group include investment and strategic, external, regulatory, operational, financial, funding and the Referendum on Scottish Independence. The Group is also exposed to risks in relation to its financial instruments. These risks, and the way in which they are managed, are described in more detail under the heading Principal Risks and Uncertainties and Risk Management within the Business Model and Strategy in the Group's Annual Report for the year ended 31 December 2013.  The Group's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remaining six months of the Group's financial year.

Statement of Directors' Responsibilities in Respect of the Half Year Report

We confirm that to the best of our knowledge:

·      the condensed set of financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' and give a true and fair view of the assets, liabilities, financial position and loss of the Company;

·      the Chairman's Statement and Manager's Review (together constituting the Interim Management Report) include a fair review of the information required by the Disclosure and Transparency Rules ('DTR') 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the financial statements;

·      the Statement of Principal Risks and Uncertainties shown above is a fair review of the information required by DTR 4.2.7R; and

·      the condensed set of financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during the period, and any changes in the related party transactions described in the last Annual Report that could do so.

On behalf of the Board

Mark Tennant

Chairman

Notes (unaudited)

1.   The condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standard ('IFRS') IAS 34 'Interim Financial Reporting' and, except as described below, the accounting policies set out in the statutory accounts of the Group for the year ended 31 December 2013. The condensed consolidated financial statements do not include all of the information required for a complete set of IFRS financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2013, which were prepared under full IFRS requirements.

The Group has adopted the following new amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2014. The following changes in accounting standards are also expected to be reflected in the Group's consolidated financial statements as at and for the year ending 31 December 2014.

·      In October 2012, the IASB issued amendments to IFRS 10 'Consolidated financial statements', IFRS 12 'Disclosure of interests in other entities' and IAS 27 'Separate financial statements' - Investment entities: The amendments define an investment entity and introduce an exception to consolidating particular subsidiaries for investment entities.  These amendments require an investment entity to measure those subsidiaries as fair value through profit or loss in accordance with IFRS 9 'Financial Instruments' in its consolidated and separate financial statements.  The amendments also introduce new disclosure requirements in the Annual Report for investment entities in IFRS 12 and IAS 27.  The adoption of these amendments does not have any material impact on the consolidated financial statements as presented.

2.   Earnings for the six months to 30 June 2014 should not be taken as a guide to the results for the year to 31 December 2014.

3.   Investment management fee:

	Six months to 30 June 2014			Six months to 30 June 2013			Year ended 31 December 2013
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment management fee	258	774	1,032	254	763	1,017	515	1,544	2,059
Performance fee	-	-	-	-	-	-	-	1,175	1,175
	258	774	1,032	254	763	1,017	515	2,719	3,234

4.   Finance costs:

	Six months to 30 June 2014			Six months to 30 June 2013			Year ended 31 December 2013
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Interest payable on bank loans and overdrafts	196	589	785	136	409	545	278	835	1,113
Finance costs attributable to ZDP Shares	-	1,944	1,944	-	1,774	1,774	-	3,662	3,662
	196	2,533	2,729	136	2,183	2,319	278	4,497	4,775

5.   The basic return per Ordinary Share is based on a net loss on ordinary activities after taxation of £711,000 (30 June 2013 - profit £9,415,000; 31 December 2013 - profit £18,348,000) and on 72,282,273 (30 June 2013 - 72,282,273; 31 December 2013 - 72,282,273) shares, being the weighted average number of Ordinary Shares in issue during the period.

The fully diluted return per Ordinary Share is based on a net loss on ordinary activities after taxation of £711,000 (30 June 2013 - profit £9,415,000; 31 December 2013 - profit £18,348,000) and on 74,241,429 (30 June 2013 - 74,241,429; 31 December 2013 - 74,241,429) shares, being the weighted average number of Ordinary Shares in issue during the period after conversion of the Ordinary Share warrants.

6.  Zero Dividend Preference Shares

The Zero Dividend Preference Shares ('ZDP Shares') of F&C Private Equity Zeros plc were issued on 14 December 2009 at 100 pence per share and redeem on 15 December 2014 at 152.14 pence per share, an effective rate of 8.75 per cent per annum.

The fair value of the ZDP Shares at 30 June 2014 was £45,037,500 based on the quoted offer price of 150.125p per ZDP Share.

	Number of ZDP Shares	Amount due to ZDP shareholders £'000
As at 31 December 2013	30,000,000	41,835
ZDP Shares finance costs	-	1,944
As at 30 June 2014	30,000,000	43,779

7. The basic net asset value per Ordinary Share is based on net assets at the period end of £192,632,000 (30 June 2013 - £192,057,000; 31 December 2013 - £197,217,000) and on 72,282,273 (30 June 2013 - 72,282,273; 31 December 2013 - 72,282,273) shares, being the number of Ordinary Shares in issue at the period end.

The fully diluted net asset value per Ordinary Share is based on net assets at the period end of £195,178,000 (30 June 2013 - £194,603,000; 31 December 2013 - £199,763,000) and on 74,241,429 (30 June 2013 - 74,241,429; 31 December 2013 - 74,241,429) shares, being the number of Ordinary Shares in issue at the period end after conversion of the Ordinary Share warrants.

8.  The fair value measurements for financial assets and liabilities are categorised into different levels in the fair value hierarchy based on inputs to valuation techniques used.  The different levels are defined as follows:

Level 1 reflects financial instruments quoted in an active market.

Level 2 reflects financial instruments whose fair value is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables includes only data from observable markets.

Level 3 reflects financial instruments whose fair value is determined in whole or in part using a valuation technique based on assumptions that are not supported by prices from observable market transactions in the same instrument and not based on available observable market data.

	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
30 June 2014
Financial assets
Investments	1,942	-	231,776	233,718
Financial Liabilities
Zero dividend preference shares	(45,038)	-	-	(45,038)
30 June 2013
Financial assets
Investments	1,130	-	222,358	223,488
Financial Liabilities
Zero dividend preference shares	(43,200)	-	-	(43,200)
31 December 2013
Financial assets
Investments	1,349	-	236,308	237,657
Financial Liabilities
Zero dividend preference shares	(43,950)	-	-	(43,950)

There were no transfers between levels in the fair value hierarchy in the period ended 30 June 2014. Transfers between levels of the fair value hierarchy are deemed to have occurred at the date of the event that caused the transfer.

Quoted fixed asset investments held are valued at bid prices which equate to their fair values.  Unlisted investments are fair valued by the Directors and determined in accordance with the International Private Equity and Venture Capital Valuation guidelines.  The fair value of an unquoted holding is based on the Company's share of the total net asset value of the fund or co-investment calculated by the lead private equity manager and derived from the fair value of underlying investments. Zero dividend preference shares are recognised in the Balance Sheet in accordance with IFRS. The fair value of the intercompany loan from F&C Private Equity Zeros plc to the Company based on offer price at the period end was £45,038,000 (30 June 2013: £43,200,000; 31 December 2013: £43,950,000) compared to its value as stated on the Balance Sheet at amortised cost of £43,779,000 (30 June 2013: £39,947,000; 31 December 2013: £41,835,000). The fair values of all of the Group's other financial assets and liabilities are not materially different from their carrying value in the balance sheet. 

The Company's unlisted investments are all classified as Level 3 investments. The fair values of the unlisted investments have been determined principally by reference to earnings multiples, with adjustments made as appropriate to reflect matters such as the sizes of the holdings and liquidity. The weighted average earnings multiple for the portfolio as at 30 June 2014 was 7.8 times EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) (30 June 2013: 6-7 times EBITDA; 31 December 2013: 7 times EBITDA).

The significant unobservable input used in the fair value measurement categorised within Level 3 of the fair value hierarchy together with a quantitative sensitivity analysis are shown below:

Period ended	Input	Sensitivity used*	Effect on fair value £'000
30 June 2014	Weighted average earnings multiple	1x	44,572
30 June 2013	Weighted average earnings multiple	1x	55,590
31 December 2013	Weighted average earnings multiple	1x	59,077

* The sensitivity analysis refers to an amount added or deducted from the input and the effect this has on the fair value.

The fair value of the Company's unlisted investments are sensitive to changes in the assumed earnings multiples. The managers of the underlying funds assume an earnings multiple for each holding. An increase in the weighted average earnings multiple would lead to an increase in the fair value of the investment portfolio and a decrease in the multiple would lead to a decrease in the fair value.

The following table shows a reconciliation of movements in the fair value of financial instruments categorised within Level 3 between the beginning and the end of the period:

	30 June 2014	30 June 2013	31 December 2013
	£'000	£'000	£'000
Balance at beginning of period	236,308	212,724	212,724
Purchases	13,785	16,264	39,587
Sales	(18,714)	(17,896)	(39,593)
Gains on disposal	3,999	3,881	11,102
In specie distribution	(165)	(694)	(995)
(Decrease)/increase in holding gains	(3,437)	8,079	13,483
Balance at end of period	231,776	222,358	236,308

9.   These are not statutory accounts in terms of Section 434 of the Companies Act 2006 and have not been audited or reviewed by the Company's auditors. The information for the year ended 31 December 2013 has been extracted from the latest published financial statements which received an unqualified audit report and have been filed with the Registrar of Companies. No statutory accounts in respect of any period after 31 December 2013 have been reported on by the Company's auditors or delivered to the Registrar of Companies. The Half-Year Report is available at the Company's website address, www.fcpet.co.uk.

For more information, please contact:

Hamish Mair (Fund Manager)	0131 718 1184 [e-mail]
Gordon Hay Smith (Company Secretary)	0131 718 1018 [e-mail]

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