Half-year Report

RNS Number : 1840I

F&C Private Equity Trust PLC

26 August 2016

 

To: Stock Exchange	For immediate release:
	26 August 2016

F&C Private Equity Trust plc

Unaudited results for the half year to 30 June 2016

Financial Highlights

·      NAV total return for the six months of 8.2 per cent for the Ordinary Shares.

 

·      Share price total return for the six months of 1.6 per cent for the Ordinary Shares.

·      Semi-annual dividend of 6.12p per Ordinary Share.

·      Annualised dividend yield of 5.1 per cent at the period end.

Chairman's Statement

Your Company continues to make excellent progress.  As at 30 June 2016 the Company's net asset value ('NAV') was £232.2 million giving a NAV per share of 314.08p. Taking into account last year's final dividend of 5.83p per share paid on 31 May 2016 the NAV total return for the first half of the year was 8.2 per cent. At the end of the period the Company had cash of £18.6 million. Together with borrowings of £24.3 million under the Company's loan facility, net debt was £5.7 million, equivalent to a gearing level of 2.4 per cent. The total of outstanding undrawn commitments at 30 June 2016 was £86.8 million and, of this, approximately £17 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 6.12p per ordinary share, payable on 4 November 2016 to shareholders on the register on 14 October 2016. For illustrative purposes only, this dividend represents an annualised yield of 5.1 per cent based on the share price as at 30 June 2016. I would like to remind shareholders of our dividend re-investment plan which can be a convenient and easy way to build up an existing holding.

Throughout the Company's history, there have been several reporting periods where movements in currency were significant and made a material impact, both positively and negatively, on your Company's NAV. Towards the end of the half year, on 23 June, the UK voted in a referendum to leave the European Union, a result that was widely unpredicted. Although sterling was weak ahead of the vote, it has weakened considerably since. With approximately half of our portfolio by value in sterling denominated assets and with all of the balance in euro or dollar linked currencies sterling's weakness before, and especially after, Brexit has been a material factor in the NAV movement in the first half. We estimate that it has added approximately 5.0 per cent over the first six months. The Company's borrowings are held in euros and this has marginally reduced the currency benefit. Despite the dominance of the currency factor, the Company also reports strong underlying progress in valuations based on good trading and successful exits. Whilst there has been an immediate short term positive effect on the Company's NAV, the longer term implications of the UK leaving the EU will take time to discern. Although there are relatively few companies which are directly and immediately affected either positively or negatively, almost all are influenced by the levels of business and consumer confidence that result from the Brexit vote. At this stage the main impact appears to be, unsurprisingly, a tendency in some quarters to hold back or pause before committing to new deals. For deals which involve a UK/EU interface, we should expect some adjustments to timing and terms to reflect the new and projected realities. For a large section of our portfolio, without direct UK involvement, business activity continues relatively uninfluenced. It is also likely that in due course new investment opportunities will be created by the new environment and we would expect a number of our partners to carefully and selectively take these. With a broadly based portfolio, a robust balance sheet and an uncomplicated capital structure your Company remains well placed to deliver further progress for shareholders.

Mark Tennant

Chairman

Manager's Review

Introduction

As noted in the Chairman's Statement the dominant macro-economic or political event of the half year has been the UK Brexit vote. We are closely monitoring our portfolio and liaising with our investment partners as we assess the immediate aftermath and longer term implications for our portfolio and the European private equity market in general. It has provided a short term currency related boost in portfolio value but there are likely to be some distinct buying opportunities for longer term investors over the coming months and years. At the level of our portfolio the early part of the year recorded lower levels of investment and exit activity than we had seen in the immediately preceding period, but this has picked up noticeably as the year has progressed. We do not expect the coincidence of favourable factors which led to 2015 being a record year for realisations to continue this year, but a healthy level of portfolio turnover is to be expected. In the first half of the year we have invested through funds and co-investments a total of £19.3 million. Realisations over the period were £19.2 million.

New Investments

In order to maintain momentum in shareholder returns it is necessary to renew our portfolio of funds and co-investments steadily. We have a preference for emerging managers where we discern potential for strong performance by motivated managers. We also continue to back successful managers from fund to fund for as long as we assess that they are able to deliver. Most of the managers we back have well defined specialisms centred around a particular size of company in a particular country or region, often with some sectoral specialisms. During the first half of the year six new commitments to funds have been made and two co-investments. Following the period end a further five fund commitments have been made.

A number of UK based funds have been added. £4 million was committed to FPE Fund II, a growth equity fund managed by the team formerly part of Stonehage Fleming, Europe's largest multi-family office. We are well acquainted with this team's capabilities through previous co-investments. £10 million was committed to August Equity Partners IV, the latest fund from these well-established lower mid-market buyout specialists. £3 million was committed to Inflexion Enterprise IV and £2 million to Inflexion Supplemental Fund IV. These funds, each of £250 million, managed by one of our longest standing and most successful investment partners, will invest respectively in companies with enterprise values of £20 million - £45 million and in somewhat larger deals alongside the main Inflexion funds. After the period end £5 million was committed to Piper Private Equity VI, a £100 million fund which will invest in UK lower mid-market companies involved in consumer brands.  Most of our portfolio is invested in buyout funds, but we retain a limited appetite for venture capital. Reinforcing and updating our involvement in this asset class a commitment of £7.5 million has been made to SEP V, backing one of the UK's most successful venture capital firms.

In Europe €8 million was committed to Astorg VI, a France focused mid-market buyout fund which specialises in control investments in B2B companies with market leading positions in niche sectors. Our French exposure has been further renewed through the commitment, after the period end, of €5 million to Montefiore IV, a services sector fund investing in companies in the enterprise value size range of €25 million - €250 million. Two new commitments were made to our leading German speaking Europe investment partner, DBAG. €6.3 million was committed to their fund VII and €1.2 million to fund VII B. DBAG Fund VII follows DBAG's long term strategy in mittelstand, mainly capital goods, companies and Fund VII B will selectively invest in a limited number of these deals as a 'top up' fund. Lastly after extensive research we have identified a fund to capture the best of the Benelux region. €9 million has been committed to Bencis V, a mid-market fund focusing on companies with enterprise values between €20 million and €100 million.

Two new co-investments were added during the first half of the year. €4 million was invested for 6.2 per cent of Calucem, a Croatia based speciality chemicals company which is the world no 2 producer of Calcium Aluminate Cement (CAC), a material which is used in a number of high performance construction and industrial applications. The company has the dual benefits of a competitive cost base in Croatia and a largely German based R&D team. The deal is led by Italian mid-market specialists Ambienta.

£4.4 million has been invested for 14.3 per cent of Ashtead, an Aberdeen-based oil services company which rents and services specialist equipment used in inspection maintenance and repair for existing production fields, brownfield extension and new field construction. The deal is led by Buckthorn, a specialist private equity manager focusing on energy and energy services.

The broad range of funds in our portfolio ensures that new investments are made steadily leading to a naturally complementary portfolio of companies spanning many sectors and geographies.

Some of the more notable new investments of the first half of the year illustrate this range.

In the UK RJD Partners III invested £1.4 million in Babington, a leading provider of training for apprenticeships in the English Midlands. The company is envisioned to be a beneficiary of the government policy to increase the number of apprenticeships significantly. Lyceum Capital III have invested in telecoms services company Sabio (£0.6 million), which provides solutions to contact centres in the UK and overseas. Inflexion have been active calling capital for investment in engineering inspection and consultancy business, British Engineering Services (£0.4 million) and for compliance risk management and certification services company Alcumus (£0.7 million). FPE arranged a follow on investment in furniture provider David Phillips (£0.4 million).

In Europe GCP Capital Partners Europe II invested in Factory-CRO, a Netherlands based contract research organisation focusing exclusively on clinical trials for medical devices (£0.9 million). Italian mid-market specialist, ILP III, made a follow-on investment in Italian travel company Alpitour (£0.5 million). There were several other smaller investments made by funds in France, Germany, Iberia and the Nordic region.

Realisations

After a slowish start realisations have picked up as the year has progressed with the total for the first half of the year reaching £19.2 million. So far the exits and associated distributions have come from a range of funds and countries. These have nearly all achieved excellent returns.

The largest exit in the period was from the sale of surgical robotics company Blue Belt to Smith & Nephew by HealthpointCapital Partners III (£2.2 million, 3x, 30% IRR). Same-day courier and logistics services company Citysprint was partially exited by Dunedin Buyout II (£1.3 million, 2.8x). Funeral Services Partnership was sold by August Equity Partners III to Montagu Private Equity after a very short hold (£1.2 million, 2.5x, 196% IRR). RJD Partners II sold caravan holiday parks company Verdant Leisure to Palatine Private Equity (£1.2 million, 1.7x, 11% IRR). Our other investment in this sector, the Caledonia led co-investment in Park Holidays, returned £0.8 million after a refinancing of some of the company's debt.

On the Continent there were also several good exits. DBAG V sold bus and coach heating and ventilation company Spheros to trade buyer Valeo (£1.4 million, 2.5x, 24% IRR). Capvis III and IV received healthy proceeds from the IPO of vacuum valves company VAT AG on the Swiss stock market (£1.1 million, 3.3x). Chequers Capital XVI exited French power tools company Metabo through a sale to Japanese corporate Hitachi Koki (£0.8 million, 4.7x, 55% IRR). Further north, Argan Capital realised part of their holding in Swedish healthcare company Humana via a listing on the Stockholm stock exchange (£0.5 million, 5x, 24% IRR).

In the USA Camden Partners III sold Biomedical Enterprises, a medical devices company, to a subsidiary of Johnson & Johnson (£0.4 million). In Asia, AIF Capital Asia III sold Chinese generic drugs company Bestime to a consortium (£0.7 million, 5.2x, 27% IRR).

Following the period end there have been further realisations. Notably our co-investment in French cold sterilisation company Ionisos was sold by deal leader Agilitas to larger French private equity house Ardian (£5.2 million, 2.9x, 97% IRR). This was an excellent exit coming barely 18 months after investment.

Valuation Changes

The valuation changes have been related to some of the realisations noted above as well as to underlying trading in portfolio companies.  Ionisos is the largest uplift at £1.9 million reflecting its post period end sale. The Inflexion Funds have had a strong start to the year and Inflexion 2012 Co-Investment Fund and Inflexion 2010 are up by £1.5 million and £0.9 million respectively. Park Holidays continues to trade well and profits progression has resulted in a £0.9 million uplift. In Sweden Procuritas IV has been uplifted by £0.5 million, mainly reflecting the very strong trading of ice cream machine maker Gram. Downgrades have included our co-investment in Meter Provida which has had some weaker trading and is down by £0.6 million. Lesser adjustments have been included for some of the mature and older funds with each of August Equity Partners II, PineBridge New Europe II and Candover 2005 down by £0.3 million.

Financing

The Company had modest gearing of only 2.4 per cent at the period end. Subsequent realisations have put the Company back into a modest net cash position. This leaves effectively all of the £70 million borrowing facility available to fund investments should drawdowns and co-investments exceed the proceeds from realisations.  The Company's borrowing facility has almost three years to run.  As noted above we expect that the current unusual economic conditions will give rise to investment opportunities and the Company and its investment partners are well placed to take these in due course. The support which the Bank of England has given to the UK banking sector in the wake of the Brexit vote is to be welcomed as this should avert any debt shortage for appropriately priced buy-outs.

Outlook

Macro-economic factors command attention because they can be summarised with a few statistics and facilitate generalisations. They are also famously difficult to predict. Political developments are usually less relevant for the business and investment environment but they can be even more unpredictable and consequently can cause shocks. We are in the immediate aftermath of a political shock with economic consequences. At the level of individual businesses and from the perspective of investors with long term committed and illiquid capital there is no alternative but to proceed with business plans whilst being prepared to adapt and adjust as the background economic landscape changes. As we have noted before, private equity as a mode of investment benefits from, but does not require, a strong economic background for success.  Private Equity managers are better used to accepting and pricing risk than most market participants. Many of them also have the skills to help managers of portfolio companies adjust and refresh plans in the light of changed circumstances. It is our conviction that the investment partners managing the funds and co-investments in our portfolio are well equipped to embrace change as an opportunity to build value for their investors. With that in mind returns for shareholders should continue to improve through the remainder of 2016.

Hamish Mair

Investment Manager

F&C Investment Business Limited

F&C Private Equity Trust plc

Statement of Comprehensive Income for the

half year ended 30 June 2016

	Unaudited
	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	23,983	23,983
Exchange losses	-	(2,928)	(2,928)
Investment income	345	-	345
Other income	32	-	32
Total income	377	21,055	21,432
Expenditure
Investment management fee - basic fee	(277)	(832)	(1,109)
Investment management fee - performance fee	-	(1,331)	(1,331)
Other expenses	(355)	-	(355)
Total expenditure	(632)	(2,163)	(2,795)
(Loss)/profit before finance costs and taxation	(255)	18,892	18,637
Finance costs	(206)	(618)	(824)
(Loss)/profit before taxation	(461)	18,274	17,813
Taxation	-	-	-
(Loss)/profit for period/total comprehensive income	(461)	18,274	17,813
Return per Ordinary Share - Basic	(0.64)p	25.19p	24.55p
Return per Ordinary Share - Fully diluted	(0.62)p	24.71p	24.09p

The total column of this statement represents the Statement of Comprehensive Income of the Company, 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

Statement of Comprehensive Income for the

half year ended 30 June 2015

	Unaudited
	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	1,176	1,176
Exchange gains	-	3,266	3,266
Investment income	4,307	-	4,307
Other income	16	-	16
Total income	4,323	4,442	8,765
Expenditure
Investment management fee - basic fee	(247)	(742)	(989)
Investment management fee - performance fee	-	(973)	(973)
Other expenses	(340)	-	(340)
Total expenditure	(587)	(1,715)	(2,302)
Profit before finance costs and taxation	3,736	2,727	6,463
Finance costs	(232)	(697)	(929)
Profit before taxation	3,504	2,030	5,534
Taxation	(708)	708	-
Profit for period/total comprehensive income	2,796	2,738	5,534
Return per Ordinary Share - Basic	3.87p	3.79p	7.66p
Return per Ordinary Share - Fully diluted	3.77p	3.68p	7.45p

The total column of this statement represents the Statement of Comprehensive Income of the Company, 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

Statement of Comprehensive Income for the

year ended 31 December 2015

	Audited
	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	17,401	17,401
Exchange gains	-	2,072	2,072
Investment income	7,562	-	7,562
Other income	48	-	48
Total income	7,610	19,473	27,083
Expenditure
Investment management fee - basic fee	(509)	(1,528)	(2,037)
Investment management fee - performance fee	-	(1,342)	(1,342)
Other expenses	(696)	-	(696)
Total expenditure	(1,205)	(2,870)	(4,075)
Profit before finance costs and taxation	6,405	16,603	23,008
Finance costs	(448)	(1,345)	(1,793)
Profit before taxation	5,957	15,258	21,215
Taxation	(931)	931	-
Profit for year/total comprehensive income	5,026	16,189	21,215
Return per Ordinary Share - Basic	6.97p	22.44p	29.41p
Return per Ordinary Share - Fully diluted	6.78p	21.85p	28.63p

The total column of this statement represents the Statement of Comprehensive Income of the Company, 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 2016 (unaudited) £'000	Six months ended 30 June 2015 (unaudited) £'000	Year ended 31 December 2015 (audited) £'000
Final Ordinary Share dividend of 5.45p per share for the year ended 31 December 2014	-	3,939	3,939
Interim Ordinary Share dividend of 5.58p per share for the year ended 31 December 2015	-	-	4,017
Final Ordinary Share dividend of 5.83p per share for the year ended 31 December 2015	4,251	-	-
	4,251	3,939	7,956

F&C Private Equity Trust plc

Balance Sheet

	As at 30 June 2016 (unaudited)	As at 30 June 2015 (unaudited)	As at 31 December 2015 (audited)
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	240,194	223,378	215,711
Current assets
Other receivables	13	32	26
Cash and cash equivalents	18,596	18,617	24,023
	18,609	18,649	24,049
Current liabilities
Other payables	(2,285)	(16,533)	(2,278)
Net current assets	16,324	2,116	21,771
Total assets less current liabilities	256,518	225,494	237,482
Non-current liabilities
Interest-bearing bank loan	(24,285)	(20,391)	(21,357)
Net assets	232,233	205,103	216,125
Equity
Called-up ordinary share capital	739	723	720
Special distributable capital reserve	17,567	15,679	15,040
Special distributable revenue reserve	31,403	31,403	31,403
Capital redemption reserve	1,335	1,335	1,335
Capital reserve	172,025	148,568	158,002
Revenue reserve	9,164	7,395	9,625
Shareholders' funds	232,233	205,103	216,125
Net asset value per Ordinary Share - Basic	314.08p	283.75p	300.25p
Net asset value per Ordinary Share - Fully diluted	314.08p	279.69p	295.74p

F&C Private Equity Trust plc

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 2016 (unaudited)
Net assets at 1 January 2016		720	15,040	31,403		1,335		158,002		9,625	216,125
Issue of Ordinary Shares		19	2,527	-		-		-		-	2,546
Profit/(loss) for the period/total comprehensive income		-	-	-		-		18,274		(461)	17,813
Dividends paid		-	-	-		-		(4,251)		-	(4,251)
Net assets at 30 June 2016		739	17,567	31,403		1,335		172,025		9,164	232,233
For the six months ended 30 June 2015 (unaudited)
Net assets at 1 January 2015		723	15,679	31,403		1,335		149,769		4,599	203,508
Profit for the period/total comprehensive income		-	-	-		-		2,738		2,796	5,534
Dividends paid		-	-	-		-		(3,939)		-	(3,939)
Net assets at 30 June 2015		723	15,679	31,403		1,335		148,568		7,395	205,103
For the year ended 31 December 2015 (audited)
Net assets at 1 January 2015	723		15,679		31,403		1,335		149,769	4,599	203,508
Cancellation of Ordinary Shares	(3)		(639)		-		-		-	-	(642)
Profit for the year/total comprehensive income	-		-		-		-		16,189	5,026	21,215
Dividends paid	-		-		-		-		(7,956)	-	(7,956)
Net assets at 31 December 2015	720		15,040		31,403		1,335		158,002	9,625	216,125

F&C Private Equity Trust plc

Cash Flow Statement

	Six months ended 30 June 2016 (unaudited)	Six months ended 30 June 2015 (unaudited)	Year ended 31 December 2015 (audited)
	£000	£000	£000
Operating activities
Profit before taxation	17,813	5,534	21,215
Gains on disposals of investments	(4,479)	(10,292)	(5,965)
(Increase)/decrease in holding gains	(19,504)	9,116	(11,436)
Exchange differences	2,928	(3,266)	(2,072)
Interest income	(32)	(16)	(48)
Interest received	32	16	48
Investment income	(345)	(4,307)	(7,562)
Dividends received	345	4,583	7,840
Finance costs	824	929	1,793
Decrease/(increase) in other receivables	13	(4)	-
Increase/(decrease) in other payables	11	(206)	(309)
Net cash (outflow)/inflow from operating activities	(2,394)	2,087	3,504
Investing activities
Purchases of investments	(19,257)	(19,177)	(35,271)
Sales of investments	18,757	33,662	73,655
Net cash (outflow)/inflow from investing activities	(500)	14,485	38,384
Financing activities
Shares issued	2,546	-	-
Shares cancelled	-	-	(642)
Repayment of bank loans	-	-	(14,618)
Interest paid	(720)	(848)	(1,586)
Equity dividends paid	(4,251)	(3,939)	(7,956)
Net cash outflow from financing activities	(2,425)	(4,787)	(24,802)
Net (decrease)/increase in cash and cash equivalents	(5,319)	11,785	17,086
Currency losses	(108)	(114)	(9)
Net (decrease)/increase in cash and cash equivalents	(5,427)	11,671	17,077
Opening cash and cash equivalents	24,023	6,946	6,946
Closing cash and cash equivalents	18,596	18,617	24,023

Statement of Principal Risks and Uncertainties

The Directors believe that the principal risks and uncertainties faced by the Company include investment and strategic, external, regulatory, operational, financial and funding. The Company 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 Annual Report for the year ended 31 December 2015.  The Company'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 Company's financial year.  The longer-term implications of Brexit are as yet unknown, but as noted in the Chairman's Statement, the Company has benefited in the short term from the recent weakness in Sterling.

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 profit 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 company 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 for the year ended 31 December 2015. The condensed financial statements do not include all of the information and disclosures required for a complete set of IFRS financial statements and should be read in conjunction with the financial statements for the year ended 31 December 2015, which were prepared under full IFRS requirements.

The Company has adopted the following new amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2016.  The following changes in accounting standards are also expected to be reflected in the Company's financial statements as at and for the year ending 31 December 2016:

·      'Annual Improvements to IFRSs 2012-2014 Cycle' - The adoption of these improvements does not have a material impact on the Company's financial position and performance.

2.   Earnings for the six months to 30 June 2016 should not be taken as a guide to the results for the year to 31 December 2016.

3.   Investment management fee:

	Six months to 30 June 2016                              (unaudited)			Six months to 30 June 2015                               (unaudited)			Year ended 31 December 2015                               (audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment management fee - basic fee	277	832	1,109	247	742	989	509	1,528	2,037
Investment management fee - performance fee	-	1,331	1,331	-	973	973	-	1,342	1,342
	277	2,163	2,440	247	1,715	1,962	509	2,870	3,379

4.   Finance costs:

	Six months to 30 June 2016                             (unaudited)			Six months to 30 June 2015                               (unaudited)			Year ended 31 December 2015                               (audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Interest payable on bank loans	206	618	824	232	697	929	448	1,345	1,793

5.   The basic return per Ordinary Share is based on a net profit on ordinary activities after taxation of £17,813,000 (30 June 2015 - £5,534,000; 31 December 2015 - £21,215,000) and on 72,550,643 (30 June 2015 - 72,282,273; 31 December 2015 - 72,143,369) 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 profit on ordinary activities after taxation of £17,813,000 (30 June 2015 - £5,534,000; 31 December 2015 - £21,215,000) and on 73,941,429 (30 June 2015 - 74,241,429; 31 December 2015 - 74,102,525) shares, being the weighted average number of Ordinary Shares in issue during the period after conversion of the Ordinary Share warrants.

6. The basic net asset value per Ordinary Share is based on net assets at the period end of £232,233,000 (30 June 2015 - £205,103,000; 31 December 2015 - £216,125,000) and on 73,941,429 (30 June 2015 - 72,282,273; 31 December 2015 - 71,982,273) 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 £232,233,000 (30 June 2015 - £207,649,000; 31 December 2015 - £218,671,000) and on 73,941,429 (30 June 2015 - 74,241,429; 31 December 2015 - 73,941,429) shares, being the number of Ordinary Shares in issue at the period end after conversion of the Ordinary Share warrants.

       7.   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 2016
Financial assets	231	-	239,963	240,194
Investments Financial liabilities Interest-bearing bank loan	-	(24,990)	-	(24,990)
30 June 2015
Financial assets
Investments Financial liabilities Interest-bearing bank loan	406 -	- (21,314)	222,972 -	223,378 (21,314)
31 December 2015
Financial assets
Investments Financial liabilities Interest-bearing bank loan	306 -	- (22,172)	215,405 -	215,711 (22,172)

There were no transfers between levels in the fair value hierarchy in the period ended 30 June 2016. Transfers between levels of the fair value hierarchy are deemed to have occurred at the date of the event that caused the transfer.

Valuation techniques

Quoted fixed asset investments held are valued at bid prices which equate to their fair values. Unlisted investments are fair valued by the Directors.  The fair value of a holding is based on the Company's share of the total net asset value of the fund or share of the valuation of the co-investment calculated by the lead private equity manager on a quarterly basis. The lead private equity manager derives the net asset value of a fund from the fair value of underlying investments. The fair value of these underlying investments and the Company's co-investments is calculated using methodology which is consistent with the International Private Equity and Venture Capital Valuation Guidelines ('IPEG'). In accordance with IPEG these investments are generally valued using an appropriate multiple of maintainable earnings, which has been derived from comparable multiples of quoted companies or recent transactions. The F&C private equity team has access to the underlying valuations used by the lead private equity managers including multiples and any adjustments. The F&C private equity team generally values the Company's holdings in line with the lead managers but may make adjustments where they do not believe the underlying managers' valuations represent fair value. On a quarterly basis, the F&C private equity team present the valuations to the Board. This includes a discussion of the major assumptions used in the valuations, which focuses on significant investments and significant changes in the fair value of investments. If considered appropriate, the Board will approve the valuations. The interest-bearing bank loan is recognised in the Balance Sheet at amortised cost in accordance with IFRS.  The fair value of the loan is based on indicative break costs. The fair values of all of the Company's other financial assets and liabilities are not materially different from their carrying values in the balance sheet.

Significant unobservable inputs for Level 3 valuations

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 2016 was 7.9 times EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) (30 June 2015: 7.9 times EBITDA; 31 December 2015: 7.8 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 2016	Weighted average earnings multiple	1x	46,147
30 June 2015	Weighted average earnings multiple	1x	39,816
31 December 2015	Weighted average earnings multiple	1x	43,081

* 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 all movements in the fair value of financial instruments categorised within Level 3 between the beginning and the end of the period:

	30 June 2016	30 June 2015	31 December 2015
	£'000	£'000	£'000
Balance at beginning of period	215,405	233,854	233,854
Purchases	19,257	19,177	35,271
Sales	(18,757)	(31,383)	(71,375)
Gains on disposal	4,479	10,285	6,046
In specie distribution	(88)	(23)	(23)
Increase/(decrease) in holding gains	19,667	(8,938)	11,632
Balance at end of period	239,963	222,972	215,405

8.   During the period, the Company issued 1,959,156 Ordinary Shares of 1p each in capital of the Company for a consideration of £2,546,000, payable in cash, following the exercise of subscription rights by holders of a corresponding number of management warrants previously issued by the Company in the capital of the Company.  The surplus of cash received for the issue of shares over the par value of such shares is £2,527,000 and is credited to the special distributable capital reserve.  No warrants remain in issue.

9.   In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council.  They have considered the current cash position of the Company, the availability of the Company's loan facility and compliance with its covenants.  They have also considered forecast cash flows, especially those relating to capital commitments and realisations.

As at 30 June 2016, the Company had outstanding undrawn commitments of £86.8 million.  Of this amount, approximately £17 million is to funds where the investment period has expired and the Manager would expect very little of this to be drawn.  Of the outstanding undrawn commitments remaining within their investment periods, the Manager would expect that a significant amount will not be drawn before these periods expire.

Based on this information the Directors believe the Company has the ability to meet its financial obligations as they fall due for a period of at least twelve months from the date of approval of the accounts.  Accordingly, the accounts have been prepared on a going concern basis.

10.  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 2015 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 2015 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]
Scott McEllen (Company Secretary)	0131 718 1137 [e-mail]

 

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