TIDMFPEO
RNS Number : 1543K
F&C Private Equity Trust PLC
09 April 2018
To: Stock Exchange For immediate release:
9 April 2018
F&C Private Equity Trust plc
Annual Financial Report for the Year to 31 December 2017
Following the release on 23 March 2018 of the Company's
preliminary results announcement for the year ended 31 December
2017 (the "Preliminary Announcement"), the Company announces that
its annual report and financial statements for the year ended 31
December 2017 (the "Annual Report and Financial Statements") will
be published today.
A copy of the Annual Report and Financial Statements will be
submitted to the National Storage Mechanism and will shortly be
available for inspection at www.Hemscott.com/nsm.do
The information below, which is extracted in unedited full text
from the Annual Report and Financial Statements, is included in
this announcement solely for the purposes of compliance with
Disclosure and Transparency Rule 6.3.5 and the requirements it
imposes on issuers as to how to make public annual financial
reports. It should be read in conjunction with the Preliminary
Announcement. Together these constitute the material required by
DTR 6.3.5 to be communicated to the media in unedited full text
through a Regulatory Information Service. This material is not a
substitute for reading the full Annual Report and Financial
Statements.
Principal Risks and Uncertainties and Risk Management
The principal risks and uncertainties faced by the Company are
described below and note 1 provides detailed explanations of the
risks associated with the Company's financial instruments:
Risk description: Failure by the Company to meet its outstanding
undrawn commitments could lead to financial loss for shareholders.
Failure to replace maturing borrowings or enter agreement for new
borrowings.
Mitigation: The Board receives a detailed analysis of
outstanding commitments at each meeting. A medium term cashflow
projection is also provided. The Company has a borrowing facility
which will not expire until 30 June 2019.The facility is composed
of a EUR30 million term loan and a GBP45 million revolving credit
facility. No change in overall risk in year.
Risk description: Poor long term investment performance relative
to the peer group or other asset classes.
Mitigation: Investment policy and performance are reviewed at
each meeting. Borrowing limits have been set and monitored
regularly. No change in overall risk in year.
Risk description: Objective and strategy are inappropriate in
relation to investor demands, adversely affecting the Company's
share price discount.
Mitigation: At each meeting of the Board, the Directors monitor
performance against peer group and returns from the FTSE All-Share
Index. Market intelligence is maintained via the Company's broker,
Cantor Fitzgerald Europe and the provision of shareholder analyses.
The Board meets shareholders on an annual basis at the Annual
General Meeting held in London. No change in overall risk in
year.
Risk description: External events such as terrorism, disease,
protectionism, inflation or deflation, economic shocks or
recessions, the availability of credit and movements in interest
rates could affect share prices and the valuation of
investments.
Mitigation: Each regular meeting of the Board provides a forum
to discuss with the Manager the general economic environment and to
consider any impact upon the investment portfolio and objectives.
No change in overall risk in year.
Risk description: Loss of key personnel from the BMO Private
Equity team.
Mitigation: Regular meetings between the Board and senior staff
of the Manager. There is a six month notice period to the
investment management agreement. No change in overall risk in
year.
Risk description: Failure of the Manager's accounting systems or
disruption to the Manager's business or that of other third party
service providers through cyber-attack or business continuity
failure could lead to an inability to provide accurate reporting
and monitoring, leading to loss of shareholders' confidence.
Mitigation: The Depositary oversees custody of investments and
cash in accordance with the requirements of the AIFMD. The Board
receives an annual internal controls report from the Manager and
the Registrar. No change in overall risk in year.
Rolling five year viability assessment and statement
The 2017 UK Corporate Governance Code requires a Board to assess
the future prospects for the Company, and report on the assessment
within the Annual Report.
The Board considered that a number of characteristics of the
Company's business model and strategy were relevant to this
assessment:
-- The Board looks to long-term performance rather than short term opportunities.
-- The Company's investment objective, strategy and policy,
which are subject to regular Board monitoring, mean that the
Company is invested in a well-diversified portfolio of funds and
direct investments and that the level of borrowings is
restricted.
-- The Company has a single class of Ordinary Shares.
-- The Company's business model and strategy is not time limited.
Also relevant were a number of aspects of the Company's
operational arrangements:
-- The Company has title to all assets held.
-- The Company's borrowing facility which was entered into on 30
June 2014 will not expire until 30 June 2019. It is composed of a
EUR30 million term loan and a GBP45 million multicurrency revolving
credit facility. The interest rate payable is variable.
-- The Company aims to pay quarterly dividends with an annual
yield equivalent to not less than four per cent of the average of
the published net asset values per ordinary share for the previous
four financial quarters, or if higher in pence per share the
highest quarterly dividend previously paid. Dividends can be funded
from the capital reserves of the Company.
-- Revenue and expenditure forecasts and projected cash
requirements are reviewed by the Directors at each Board
Meeting.
In addition, the Directors carried out a robust assessment of
the principal risks which could threaten the Company's objective,
strategy, future performance, liquidity and solvency.
The principal risks identified as relevant to the viability
assessment were those relating to inappropriate objective and
strategy, poor long term investment performance and the failure of
the Company to manage financial resources to allow it to meet its
outstanding undrawn commitments.
The Board took into account the forecasted cash requirements of
the Company, the long-term nature of the investments held, the
existence of the borrowing facility including its expiration on 30
June 2019 and the effects of any significant future falls in
investment values on the ability to repay and re-negotiate
borrowings, maintain dividend payments and retain investors.
These matters were assessed over a five year period to April
2023, and the Board will continue to assess viability over five
year rolling periods, taking account of foreseeable severe but
plausible scenarios. A rolling five year period represents the
horizon over which the Directors believe they can form a reasonable
expectation of the Company's prospects, balancing the Company's
financial flexibility and scope with the current uncertain outlook
for longer-term economic conditions affecting the Company and its
shareholders.
Based on their assessment, and in the context of the Company's
business model, strategy and operational arrangements set out
above, the Board has a reasonable expectation that the Company will
be able to continue in operation and meet its liabilities as they
fall due over the five year period to April 2023. For this reason,
the Board also considers it appropriate to continue adopting the
going concern basis in preparing the Report and Accounts.
Statement of Directors' Responsibilities in Respect of 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, Directors'
Remuneration Report and Corporate Governance Statement.
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 and then apply them consistently;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements of IFRS is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the 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.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the transactions of
the Company 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 ensuring that the Company complies with
the provisions of the Listing Rules, Disclosure Rules and
Transparency Rules of the UK Listing Authority and the safeguarding
of assets of the Company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
Each of the Directors confirms that to the best of his or her
knowledge:
-- the financial statements, prepared in accordance with IFRS as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
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 the principal risks and
uncertainties that it faces.
On behalf of the Board
Mark Tennant
Director
Notes
1. Financial instruments
The Company's financial instruments comprise equity investments,
cash balances, a bank loan and liquid resources including debtors
and creditors. As an investment trust the Company holds a portfolio
of financial assets in pursuit of its investment objective. From
time to time the Company may make use of borrowings to fund
outstanding commitments and achieve improved performance in rising
markets. The downside risk of borrowings may be reduced by raising
the level of cash balances held.
The Company's investing activities expose it to various types of
risk that are associated with the financial instruments and markets
in which it invests. The most important types of financial risk to
which the Company is exposed are market price risk, interest rate
risk, liquidity and funding risk, credit risk and foreign currency
risk.
The nature and extent of the financial instruments outstanding
at the balance sheet date and the risk management policies employed
by the Company are discussed below.
Market price risk
The Company's strategy for the management of market price risk
is driven by the Company's investment policy. The management of
market price risk is part of the investment management process and
is typical of private equity investment. The portfolio is managed
with an awareness of the effects of adverse price movements through
detailed and continuing analysis, with an objective of maximising
overall returns to shareholders. Investments in unquoted stocks, by
their nature, involve a higher degree of risk than investments in
the listed market. Some of that risk can be, and is, mitigated by
diversifying the portfolio across business sectors and asset
classes, and by having a variety of underlying private equity
managers. New private equity managers are only chosen following a
rigorous due diligence process. The Company's overall market
positions are monitored by the Board on a quarterly basis.
Interest rate risk
Some of the Company's financial assets are interest bearing and,
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.
When the Company retains cash balances the majority of the cash
is held in deposit accounts. The benchmark rate which determines
the interest payments received on cash balances is the bank base
rate for the relevant currency.
Liquidity and funding risk
The Company's financial instruments include investments in
unlisted equity investments which are not traded in an organised
public market and which generally may be illiquid. As a result, the
Company may not be able to liquidate quickly some of its
investments in these instruments at an amount close to their fair
value in order to meet its liquidity requirements, including the
need to meet outstanding undrawn commitments or to respond to
specific events such as deterioration in the creditworthiness of
any particular issuer.
The Company's listed securities are considered to be readily
realisable.
The Company's liquidity risk is managed on an ongoing basis by
the Manager in accordance with policies and procedures in place.
The Company's overall liquidity risks are currently monitored on a
quarterly basis by the Board.
The Company maintains sufficient investments in cash and readily
realisable securities to pay accounts payable and accrued
expenses.
Credit risk
Credit risk is the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company. The Manager has in place a
monitoring procedure in respect of counterparty risk which is
reviewed on an ongoing basis. The carrying amounts of financial
assets best represents the maximum credit risk exposure at the
balance sheet date, hence no separate disclosure is required.
Credit risk arising on transactions with brokers relates to
transactions awaiting settlement. Risk relating to unsettled
transactions is considered to be small due to the short settlement
period involved and the high credit quality of the brokers used.
The Manager monitors the quality of service provided by the brokers
used to further mitigate this risk.
All the listed assets of the Company (which are traded on a
recognised exchange) are held by JPMorgan Chase Bank, the Company's
custodian. The Company has an ongoing contract with the Custodian
for the provision of custody services. The contract was reviewed
and updated in 2014. Details of securities held in custody on
behalf of the Company are received and reconciled monthly. The
Depositary has regulatory responsibilities relating to segregation
and safe keeping of the Company's financial assets, amongst other
duties, as set out in the Directors' Report. The Board has direct
access to the Depositary and receives regular reports from it via
the Manager.
To the extent that the Manager carries out management and
administrative duties (or causes similar duties to be carried out
by third parties) on the Company's behalf, the Company is exposed
to counterparty risk. The Board assesses this risk continuously
through regular meetings with the management of F&C (including
the Fund Manager) and with the F&C's Risk Management function.
In reaching its conclusions, the Board also reviews F&C's
annual Audit and Assurance Faculty Report.
The Company's cash balances are held by a number of
counterparties. Bankruptcy or insolvency of these counterparties
may cause the Company's rights with respect to the cash balances to
be delayed or limited. The Manager monitors the credit quality of
the relevant counterparties and should the credit quality or the
financial position of these counterparties deteriorate
significantly the Manager would move the cash holdings to another
bank.
Foreign currency risk
The Company invests in overseas securities and holds foreign
currency cash balances which give rise to currency risks. It is not
the Company's policy to hedge this risk on a continuing basis but
it may do so from time to time.
2. The Annual General Meeting of the Company will be held on
Thursday 24 May 2018 at 12 noon at the offices of BMO Global Asset
Management (EMEA), Exchange House, Primrose Street, London EC2A
2NY.
3. Copies of the Annual Report and Financial Statements will be
sent to shareholders and will be available at the Company's
registered office, Quartermile 4, 7a Nightingale Way, Edinburgh,
EH3 9EG and on its website www.fcpet.co.uk
For more information, please contact:
Hamish Mair (Investment
Manager) 0131 718 1000
Scott McEllen (Company
Secretary) 0131 718 1000
hamish.mair@bmogam.com / scott.mcellen@bmogam.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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