F&C Private Equity Trust
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F&C Private Equity Trust plc Half Year Report and Accounts for the six months ended 30 June 2010 Contents Contents Company Summary 1 Financial Highlights 2 Performance Summary 2 Chairman’s Statement 3 Ordinary Share Performance 4 Manager’s Review 4 Portfolio Holdings 6 Consolidated Statement of Comprehensive Income 8 Amounts Recognised as Dividends in the Period 8 Consolidated Balance Sheet 9 Consolidated Statements of Changes in Equity 10 Consolidated Cash Flow Statement 11 Notes to the Accounts 12 Principal Risks and Uncertainties Statement of Directors’ Responsibilities in Respect of the Half Year Report Corporate Information Front cover: Ben Lui by Derek Sime Corporate Summary The Group The Restricted Voting shares’ objective is to F&C Private Equity Trust plc (‘the Company’), manage the existing assets and to realise the value incorporated in Scotland, registered number of those assets in a tax-efficient manner and return SC179412, is an investment trust and its shares are capital to shareholders. listed on the London Stock Exchange. The wholly owned subsidiary, F&C Private Equity Zeros plc (‘FCPEZ’), which was incorporated on 9 October Management 2009, is an investment company whose Zero The Board has appointed F&C Investment Business Dividend Preference Shares (‘ZDP Shares’) are Limited (‘the Manager’) as investment manager of listed on the London Stock Exchange. the Company and its subsidiary (‘the Group’) under a contract terminable by either party giving to the The Company was launched in March 1999 as part other not less than six months’ notice. of the reorganisation of The Scottish Eastern Investment Trust plc with the objective of managing Net assets as at 30 June 2010 the private equity investments formerly held by The £152.0 million Scottish Eastern Investment Trust plc so as to realise those assets and return cash to shareholders. Shareholders’ funds as at 30 June 2010 Ordinary shares £147.2 million In August 2001, the Company was reorganised and shareholders were given the opportunity to convert Restricted Voting shares £4.8 million all or part of their existing ordinary shares into A shares (now renamed Restricted Voting shares) and Market capitalisation as at 30 June 2010 B shares (now renamed Ordinary shares). Ordinary shares £90.9 million In August 2005, shareholders approved a change of Restricted Voting shares £3.7 million company name from Martin Currie Capital Return ZDP shares in FCPEZ £31.7 million Trust plc to F&C Private Equity Trust plc and the Company issued 49,758,449 C Shares following the Group capital structure acquisition of Discovery Trust plc and a subscription 72,282,273 Ordinary shares of 1 pence, each of £20 million by Friends Provident. The C shares entitled to 1 vote at a general meeting; and subsequently converted into Ordinary shares. 67,084,807 Restricted Voting shares of 1 pence. In December 2009 FCPEZ issued 30,000,000 ZDP 30,000,000 ZDP shares in FCPEZ. shares at 100 pence per share. The ZDP shares redeem in December 2014 at a price of If you have sold or otherwise transferred all of 152.14 pence per share giving a redemption yield of your shares in F&C Private Equity Trust plc, please 8.75 per cent per annum. forward this document and the accompanying form of proxy as soon as possible to the purchaser or Objective transferee, or to the stockbroker, bank or other The Ordinary shares’ objective is to achieve long- agent through whom the sale or transfer was, or is term capital growth through investment in private being, effected, for delivery to the purchaser or equity assets. transferee. Half Year Report and Accounts 2010 1 Financial Highlights for the six months ended 30 June 2010 . Share price total return for the six months of +18.3 per cent for the ordinary shares; . NAV total return for the six months of –1.1 per cent for the ordinary shares; . Excellent realisations from ICS and Entec; . Outstanding commitments decrease by £16.8 million to £94 million; . New investments in Aurora Fund and Blueway. Performance Summary As at As at 30 June 31 December 2010 2009 % change Net Asset Value Net assets (£’000) 151,973 154,579 –1.7 Net asset value per: Ordinary share (fully diluted) 201.71p 204.81p –1.5 Restricted Voting share 7.11p 7.56p –6.0 Market Price Ordinary share 125.75p 107.00p +17.5 Restricted Voting share 5.50p 4.75p +15.8 Discount: Ordinary share 37.6% 47.8% Restricted Voting share 22.6% 37.2% Income Revenue return after taxation (£’000) 800 420 Revenue return per: Ordinary share (fully diluted) 1.09p 0.56p Restricted Voting share (0.02)p 0.00p Dividend per: Ordinary share 0.00p 0.80p Restricted Voting share 0.00p 1.00p Zero Dividend Preference Shares (£’000) 31,397 30,117 GearingÀ 14.6% 9.0% 2010 2010 Restricted Ordinary Voting Shares Shares Portfolio Summary Shareholders’ funds (£’000) 147,207 4,766 Future commitments (£’000) 94,442 – Total Returns for the period* Net asset value (fully diluted) –1.1 +7.3 Share price +18.3 +36.9 * Total return is the combined effect of any dividends paid, together with the rise or fall in the net asset value or share price. Any dividends are assumed to have been re-invested in either the Company’s assets or in additional shares. À Ordinary shares: Borrowing less cash … total assets 2 F&C Private Equity Trust plc Chairman’s Statement £21 million and realisations were £12 million. In each case this is more than double the amount at the same point last year. The economic outlook across Europe and North America is challenging with at best a moderately paced recovery evident in some sectors and geographies. This and their ongoing preoccupation with struggling companies makes private equity investors cautious and highly selective in acquiring companies. The recent season of annual meetings indicates a number of reasons to be hopeful but also that many companies continue to face considerable challenges both on the trading front and also from their capital structures. The availability of debt for management buy-outs does appear to have improved from the low point last year but it remains very difficult to secure substantial debt packages – for example over £100 million. There is some variability by country but the general picture is that in the mid market the private equity groups with a record of success will continue to be able to find bank finance, albeit that it will be expensive in terms of margin and arrangement fees. The same principle Mark Tennant Chairman applies to private equity funds which are raising new equity capital. Relatively few funds are being raised at This is my first Chairman’s Statement and I would firstly present and only those groups with a strong record like to thank my predecessor David Simpson who led and demonstrably successful process will reach target. your Company so ably for 11 years. Your Company will commit to the strongest performers At the 30 June the Company’s net asset value (NAV) within our cohort of existing relationships and will was £152 million. The ordinary share pool NAV was consider backing others only on a very selective basis. £147.2 million giving a fully diluted NAV per share of As described in the Manager’s Report we are seeing an 201.71p, a decrease over the first half of 1.5 per cent. improving flow of deal opportunities particularly in Taking into account the final dividend of 0.8p per co-investments and will continue to build this portfolio ordinary share paid on 7th May the NAV total return as an important contributor to our future growth. has been –1.1 per cent. The restricted voting share The portfolio is well positioned on account of its pool had an NAV of £4.8 million giving an NAV per breadth and also because of its focus on mid market share of 7.11p, a decrease over the first half of 6.0 per and lower mid market funds and co-investments mainly cent. Taking into account the 1p special dividend paid in Europe. These companies are generally less highly on 7 May the NAV total return for the restricted voting geared and were acquired on lower prices. Many of the shares over the first half is +7.3 per cent. The five year companies in the portfolio are focused on niche sectors NAV total return for the ordinary shares is 58.9 per and sub-sectors where there is a growth dynamic cent, ranking the Company at the top of its peer group. which can persist despite the overall economic situation. These companies continue to be sought after. Currency weakness relative to sterling, particularly in During the first six months this has been illustrated by the Euro area, has reduced the Company’s overall two realisations from our co-investment portfolio. The portfolio by approximately 2 per cent in the first half sale of the Environmental consultancy Entec by Growth and therefore on a constant currency basis the ordinary Capital Partners to Amec plc on 31st March yielded share NAV would have increased slightly. The ordinary £3 million and achieved an investment multiple of 2.0x share pool had cash of £6.8 million and £3 million of and an IRR of 30 per cent. The recent sale of Nursing debt under the revolving credit facility at 30 June. The Agency ICS by Inflexion to Blackstone on 16 June accrued liability for the zero dividend preference shares yielded £6.35 million and achieved an investment was £31.4 million.