Shareholder Meetings and Document Submission (9790B)

TIDMFPEO TIDMFPEZ TIDMFPER

RNS Number : 9790B

F&C Private Equity Trust PLC

24 April 2012

24 April 2012

F&C PRIVATE EQUITY TRUST PLC

new dividend policy, new inVESTMENT management incentive arrangements

AND

NOTICEs OF annual GENERAL MEETING and separate general meeting of ordinary shareholders

F&C PRIVATE EQUITY ZEROS PLC

CANCELLATION OF SHARE PREMIUM ACCOUNT and authority to purchase ZDP shares

AND

NOTICEs OF GENERAL MEETING of F&c PRIVATE EQUITY ZEROS and separate general meeting of zdp shareholders

Introduction

In conjunction with the announcement of F&C Private Equity Trust's annual results for the year ended 31 December 2011, which was released on 3 April 2012, the Board announced that it was proposing that F&C Private Equity Trust :

-- adopts a new dividend policy that should provide Ordinary Shareholders with a regular and relatively predictable source of income and the prospect of income growth over time - the Company will aim to pay semi-annual dividends with an annual yield equivalent to not less than 4 per cent. of the average of the published net asset values per Ordinary Share as at the end of each of its last four financial quarters prior to the announcement of the relevant dividend or, if higher, equal (in terms of pence per share) to the highest semi-annual dividend previously paid; and

-- enters into new incentive arrangements with its Investment Manager - broadly, the Investment Manager will be entitled to an annual performance fee of 7.5 per cent. of the annualised aggregate of the increase in the NAV (and taking into account the dividends paid) of the Ordinary Shares over the performance period (being rolling three year periods after an initial transitional period), provided that the IRR per Ordinary Share over that period (after accounting for the performance fee) is at least 8 per cent. per annum and the aggregate basic management and performance fees in relation to the Ordinary Pool do not exceed 2 per cent. per annum of the Ordinary Pool's NAV. The performance fee will also be subject to a "high water mark".

In addition, the Board is proposing that F&C Private Equity Zeros cancels its share premium account and obtains authority from ZDP Shareholders to buy-back ZDP Shares through the market, which will provide it with the flexibility to buy-back ZDP Shares if the Board considers such buy-backs to be in the best interests of Shareholders as a whole.

Each of the Proposals is conditional on Shareholders passing the resolutions that are required to enable them to be implemented. Accordingly, a circular to Shareholders, which explains the background to, reasons for and details of each of the Proposals and includes the notices convening the Shareholder meetings for Wednesday, 23 May 2012 to consider the requisite resolutions, will be despatched to Shareholders later today. That circular also includes the notice convening the annual general meeting of F&C Private Equity Trust for Wednesday, 23 May 2012.

The Board is recommending Ordinary Shareholders to vote in favour of the resolutions to be proposed at the Company's AGM and Ordinary Shareholders' Meeting and ZDP Shareholders to vote in favour of the resolutions to be proposed at the Subsidiary's General Meeting and the ZDP Shareholders' Meeting.

Enquiries

 
 Hamish Mair      F&C Investment Business Limited   T: 0131 718 
                                                     1184 
 Sue Inglis/      Canaccord Genuity Limited         T: 020 7050 
  Gordon Neilly                                      6779 
                                                     T: 020 7050 
                                                     6778 
 

F&C Private Equity Trust's Proposed New Dividend Policy

Background to, and Reasons for, the Proposed New Dividend Policy

In the current low interest rate environment, and with the prospect that interest rates will remain low for some time, many investors are seeking a higher cash yield from their investments. As a result, higher yielding investment trusts tend to trade on narrower discounts than their lower yielding counterparts.

Within the private equity sub-sector (including both investment companies that invest directly and those that invest indirectly through other private equity funds), typically, the yield on their shares has been relatively low because of the nature of their investments. In addition, the tax rules for investment trusts prohibited investment trusts from distributing realised capital profits as dividends. Following the recent modernisation of those rules, that prohibition has been removed for all accounting periods commencing on or after 1 January 2012. In order to align company law with the new investment trust tax rules, the prohibition on Companies Act investment companies distributing realised capital profits was removed with effect from 6 April 2012.

Accordingly, subject to amending their articles of association to remove the prohibition on distributing realised capital profits, investment trusts will be permitted to pay out accumulated realised capital profits in the form of dividends. This should enable investment trust boards to manage dividends with greater flexibility, including setting a dividend yield target that is independent of the underlying portfolio revenue yield.

The Directors believe that the ability to pay dividends out of realised capital profits is particularly helpful for the private equity sub-sector, where, currently, dividend yields are relatively low and discounts are relatively wide. As at 31 December 2011, the Company had accumulated realised capital profits in excess of GBP120 million. The Directors are proposing, therefore, to take advantage of the new regime by adopting a new dividend policy that is designed to provide Ordinary Shareholders with a regular and relatively predictable source of income and the prospect of income growth over time.

Proposed New Dividend Policy

The Company intends to make regular cash distributions to Ordinary Shareholders in the form of semi-annual dividend payments, which will be funded out of the income and realised capital profits attributable to the Ordinary Pool. Accordingly, the Company expects to pay, in respect of each financial year, semi-annual dividends on the Ordinary Shares in November and May in respect of the six months ending on the preceding 30 June and 31 December, respectively. The first dividend under the new distribution policy is expected to be declared in August 2012 and paid in November 2012 in respect of the six months ending 30 June 2012.

The Company's objective will be to pay semi-annual dividends with an annual yield equivalent to not less than 4 per cent. of the average of the published NAVs per Ordinary Share as at the end of each of its last four financial quarters prior to the announcement of the relevant semi-annual dividend or, if higher, equal (in terms of pence per share) to the highest semi-annual dividend previously paid. For illustrative purposes only, had the new dividend policy been implemented in respect of the year ended 31 December 2011, aggregate dividends of 9.36p per Ordinary Share would have been paid, representing a yield of 5.7 per cent. based on the closing mid-market price of an Ordinary Share as at 20 April 2012.

Notwithstanding the partial funding of dividends out of capital profits, all dividends will be taxed as income in Ordinary Shareholders' hands.

Benefits of the Proposed New Dividend Policy

The Directors believe that the new dividend policy, which is designed to provide Ordinary Shareholders with a regular and relatively predictable source of income and the prospect of income growth over time, should appeal to a broader investor audience that is seeking income. Accordingly, the Directors believe that, over time, the new dividend policy should lead to a higher rating for the Ordinary Shares (that is, a narrower discount at which the Ordinary Shares trade in the market relative to their underlying NAV).

The Directors believe that the new dividend policy will be of particular interest to companies, funds that do not pay tax on UK-sourced income and investors through ISAs and SIPPs, none of which generally incur any additional tax on dividends in the UK.

Shareholder Approval

Before the proposed new dividend policy can be implemented by the Company, it is necessary to amend the Company's Articles by removing the current prohibition on paying dividends out of realised capital profits. That amendment requires to be approved, under the Companies Act, by a resolution passed at a general meeting of the Company (which will be proposed at this year's AGM) and, under the Company's Articles, by a resolution passed at a separate general meeting of Ordinary Shareholders (which has been convened for the same place and date as this year's AGM).

General

The proposed yield under the new dividend policy is a target only, does not represent a forecast and is not guaranteed. In particular, the payment of semi-annual dividends will be made only in accordance with the Company's Articles and applicable law and will be subject to compliance with the financial covenants under the Company's loan facility and the intra-Group arrangements between the Company and the Subsidiary and the Board being satisfied that the Group has sufficient cash, liquid investments and undrawn amounts under its loan facility to meet future calls on its cash resources (including repayment of the ZDP Shares).

Proposed New Investment Management Incentive Arrangements

Background to, and Reasons for, the Proposed New Performance Fee

At present, the Investment Manager is entitled to the following fees in relation to the Ordinary Pool:

-- a basic management fee, payable quarterly in arrears, of 0.9 per cent. per annum of, broadly, the aggregate of the NAV and long-term borrowings of the Ordinary Pool; and