Final Results

RNS Number:2472S
F&C Private Equity Trust PLC
14 April 2008


To: Stock Exchange                                       For immediate release:
                                                         14 April 2008



F&C Private Equity Trust plc
Preliminary results for the year to 31 December 2007


  * NAV total return for the year of 83.6 per cent for the A shares;

  * NAV total return for the year of 31.9 per cent for the B shares*;

  * A share return of capital of 36.25 pence paid;

  * A share revenue dividends of 0.60 pence paid and declared;

  * B share revenue dividends of 1.35 pence paid and declared;

  * Realisation of private equity investments of £90.2 million during the
    year;

  * New investment in private equity investments of £66.1 million during the
    year.

* Based on fully diluted NAV


Chairman's Statement



I am delighted to report another year of excellent progress for your Company.
The net asset value ("NAV") total return for the A shareholders was 83.6 per
cent and, for the B shareholders, 31.9 per cent.  During the year the A pool has
continued to realise its investments most successfully, while the B pool has
made substantial gains through both realisations and valuation uplifts.



At 31 December 2007 the A pool had net assets of £29.9 million, giving a NAV per
A share of 44.6 pence.  A return of capital of 36.25 pence per A share was made
after the year end on 25th January 2008. This related to the sale of the A
pool's major holding in the Dakota, Minnesota and Eastern Railroad ("DM&E") and
reduced the A share NAV to 8.3 pence, leaving net assets of just £5.6 million.



The Directors are recommending a final dividend of 0.30 pence per A share which,
together with the interim dividend of 0.30 pence, gives a total dividend of 0.60
pence per A share for 2007.



The basic NAV per B share at 31 December 2007 was 233.8 pence. After adjustment
for possible future dilution arising from the exercise of management warrants
the fully diluted NAV per B share at 31 December was 231.1 pence.  The B pool
now has net assets of £169.0 million. The Directors are recommending a final
dividend of 0.85 pence per B share which, together with the interim dividend of
0.50 pence, makes a total dividend of 1.35 pence per B share for 2007.



At 31 December 2007 the B pool had net cash or near cash equivalents of £22.4
million and unutilised borrowing capacity of up to 30 per cent of its total
assets. On 30 April 2007 the Company entered into a 5 year £40 million revolving
credit facility, meaning that its access to credit, and the margin cost of that
credit, has been secured until 2012.  The B pool has outstanding undrawn
commitments of £143.7 million, the bulk of which we expect to be drawn over the
next five years.



I have previously spoken of the Board's desire to merge the A and B share pools.
This arose from circumstances where the great majority of the A pool's assets
had been realised and returned as cash to shareholders, allied to a wish for the
market to understand more properly the characteristics of your Company.  It is
essential that any merger of A and B shares is conducted on terms that are fair
to both sets of shareholders.  A major complicating factor has arisen from the
terms of the sale of DM&E to the Canadian Pacific Railroad, in particular the
potential for the former DM&E shareholders, including A pool shareholders, to
receive payments related to the construction of the Powder River Basin
extension; shareholders may remember that this was of considerable strategic
value to DM&E.  These payments, which depend on the successful construction of
the railroad extension and its subsequent operation, are very long term in
nature, with the potential for payments extending out as far as 2025. The long
term and contingent nature of these payments make valuing this interest, and
consequently merging the two pools, difficult.  This inherent uncertainty is
increased by current conditions in the financial markets.  In line with our
valuation methodology no value has been placed on these contingent payments in
either the A or B share NAVs.



The Board is regrettably not therefore in a position to bring forward a merger
proposal which meets the fairness test and which it judges would be likely to be
accepted by both A and B shareholders. It therefore intends to recommend that
the A share pool remains in existence until this situation changes, possibly as
a consequence of greater clarity on the scale and timing of contingent payments
from DM&E.  In the meantime, to reflect the small size of the A pool and the
fact that this pool has dropped below the level at which the Company's articles
of association specify that the voting rights of the A pool are reduced (10
pence of NAV), the Board intends that these shares should be renamed as '
restricted voting shares'. The B shares will also be renamed, simply as '
ordinary shares'. While this does not entirely simplify the situation it will go
some way to distinguishing more clearly to the market the difference between
these share classes and their respective rights. This does not affect the
economic interest of either class of share.



Elizabeth Kennedy joined the Board on 1 July 2007.  Elizabeth is a corporate
finance director with Brewin Dolphin and the Board is already benefiting from
her experience.



Following the European Court of Justice's ruling that investment trusts are
exempt from VAT on management fees, and HMRC's announcement that it will not
appeal against the decision, the Company no longer pays VAT on its management
fees.  We expect to make a recovery in respect of amounts paid in past years.



The Companies Act 2006 brought about a number of changes in UK company law.  We
propose to adopt new articles of association, primarily to take account of these
changes.



The international environment for investment has changed considerably over
recent months as the fuller effects of what has now become termed the 'credit
crunch' are felt. The situation is changing constantly, but certain
generalisations can be made. The banking sector is now much more reluctant to
lend than previously and this is affecting all kinds of business and consumer
activity to differing degrees. As most of the funds in our portfolio, and all of
the co-investments, rely on bank debt as a key component of their deal
structures, the reduced availability of bank debt has inevitable consequences.
The principal ones are that the multiples at which banks are prepared to lend
have reduced and the cost of the debt has increased.



Most of the funds in which we invest are operating in the mid market of private
equity in Europe or North America and we understand that these private equity
managers are relying on their longstanding relationships and strong credit
histories with the mainstream banks to secure debt for their deals. New
investments continue to be made on acceptable terms. Because bank debt has been
a key component in pushing up prices of private equity deals, we would expect
reduced availability to have the effect of reducing prices. From the point of
view of funds which are at an early stage in establishing portfolios this
situation is in many respects encouraging, and can be viewed as a buying
opportunity. From the perspective of a private equity fund looking to sell
companies, particularly to other highly leveraged buy-out vehicles, the outlook
is more challenging.  It is important to note that the banks' appetite for new
lending into the private equity sector varies from bank to bank and from country
to country. Our portfolio is internationally diversified and there is an equally
wide spread of supporting banks.



We are confident that the disciplines and processes which have formed the
foundations of the success of our investment partners during an expansionary
phase will also stand them in good stead in a more challenging economic and
financial environment. Much will depend on how the banking problem affects
consumer and business confidence over the coming months. The structure of the
private equity funds in which we invest, where rewards are based on absolute
returns, not relative performance, and where the manager is not compelled to
invest if pricing is unsatisfactory provides us with some insulation. This,
coupled with the wide spread of high quality investments in our portfolio,
leaves F&C Private Equity Trust well placed to weather 2008 and to look to 2009
and beyond.



David Simpson



Manager's Review



Investment Strategy



This review covers an exceptionally active period for the Company. 2007 is
likely to have marked a high point in private equity deal activity.  In the
wider private equity market there was a definitely perceptible watershed of
activity around the mid year point, when the credit crunch issues began
increasingly to affect confidence. Despite this, underlying activity in the
funds in which we invest has been maintained at very healthy levels throughout
the year.



Our experience in private equity fund investment has taught us that when
investment activity slows down so also does realisation activity. This is not
surprising as market participants are naturally both buyers and sellers at
slightly different size levels and both are affected by the general level of
confidence in the economic outlook. It is also the case in private equity, as in
most asset classes, that a reduction in deal activity tends to go in tandem with
a decline in price. Because of the effects of the credit crunch we would expect
there to be a reduction in the price of private equity deals over the course of
2008. For many of our mid market funds this will provide a welcome buying
opportunity and they should be able to capitalise on some cyclical softness
within an already attractive and inefficient market. For the investments already
in portfolios the key factors are likely to be the extent to which more
challenging economic conditions affect their trading performance, their profits
and, consequently, the value of these businesses.



Since the establishment of the B pool in 2001 we have moved our portfolio
deliberately towards a very well diversified range of funds and underlying
investments. This has taken several years to achieve and there are twin
motivations. The primary one is to gain opportunities for strong investment
returns that cannot easily be achieved through investing in a narrower
geographic or sectoral focus. Secondly, we have used diversification by manager,
geography, sector, age of deals, size and investment style as means of reducing
the innately high risk of private equity to acceptable levels. The portfolio now
consists of 65 private equity funds, 12 co-investments and handful of small
remnant listed holdings.



There are well chronicled issues facing the biggest buy-out funds as the
availability of very large debt packages for buy-out vehicles has almost dried
up; however, it would be wrong to conclude that this method of investment is
under fundamental threat. Rather, this should be viewed as a period of
adjustment. Over time structures, terms and pricing requirements will change to
accommodate a different view of the future. In the mid market, where almost all
our funds are invested, the situation is serious but less acute and there
remains a steady flow of deals being struck at good prices. There is a
theoretical risk that the largest buy-out funds could move down the size scale
in order to find deals, but there are some strong reasons why this would not be
easy or natural for them. First, private equity managers do not have to deal and
many of the most successful have periods in their histories when they have
abstained from deal activity whilst waiting for market conditions to adjust. It
is therefore quite likely that large buy-out funds will simply keep their powder
dry and wait, potentially for years, before committing to deals. Secondly,
private equity managers are only as good as the dealflow they can generate and
if a firm has been absent in a particular market tier for some years
re-establishing dealflow will prove difficult. Lack of dealflow will deter
larger funds from moving down the size scale. Thirdly, to deploy a very large
multi-billion Euro fund into the mid market will require a far broader portfolio
of investments than most firms have the resources to manage.  Lastly, a move
into a different size bracket will be regarded by many fund investors as an
unacceptable drift in strategy. In summary the case for mid market private
equity investment has if anything been relatively enhanced.



New Investments



The Company has made new investments totalling £66.1m over the course of the
year.  This has been entirely for the B pool and has included 4 new
co-investments totalling £7.9m.  The remainder has been drawn from no fewer than
52 funds.  There have been over 180 drawdowns for new investments or for follow
on investment in existing positions.  The portfolio is extremely diverse
covering an exceptionally wide range of companies spanning the mid market of
Europe and further afield.  Some appreciation of this spread can be gained by
considering some of the larger individual investments during the year.  In the
UK we have gained exposure to, amongst many others, software company 4Projects
(£1.0m, August Equity), drug dispensing and nursing company Healthcare at Home
(£0.8m, Hutton Collins), elderflower cordial company Bottlegreen (£0.3m, Piper),
insurance broker Ostrakan (£0.3m, Hutton Collins) and supply teacher agency
Teaching Personnel (£0.5m, RJD Partners).  In France similar diversity is
achieved through our new investments in travel luggage company Delsey (£0.7m,
Argan), tax consultancy Alma (£0.7m, Candover), and clothes and shoes retailer
Vivarte (£0.6m, Chequers). In Spain we are also building a diversified portfolio
with investments in charter airline Futura (£0.7m, Hutton Collins), civil
explosives manufacturer Maxam (£0.4m, Ibersuizas) and IT consultancy Everis
(£0.7m, Hutton Collins). Italy is a relatively new market for us, but the
portfolio is growing with major additions including agricultural machinery
components manufacturer Faster (£0.7m, Argan).



We continue to see a strong flow of co-investment opportunities from our
investment partners. During the year we invested £1.1m in Blues, a character
licensing clothing company, to acquire 7.6% alongside Penta, £2.5m in Lifeways
Community Care, a provider of care services primarily to disabled adults, to
acquire 6.3% alongside August Equity, £1.3m in Senturion, vehicle leasing to the
local authorities market, to acquire 6.9% alongside RJD Partners and £3.0m in
telephony services provider Eurotel, to acquire 9.4% alongside Inflexion. These
have all been UK based companies, but we are also seeing some encouraging
dealflow from Europe as well.  The co-investment activity provides us with a
front seat view into the activities of some of the leading mid market buy-out
groups, something that has been very helpful in assessing not just these
managers but also others.  It provides us with a first hand demonstration of the
added value in private equity investment.



Realisations



Realisations over the year have totalled £90.2m. There have been 130 separate
distributions during the year from 37 funds. The largest individual inflow was
from our very longstanding holding in the Dakota, Minnesota and Eastern Railroad
("DM&E").  Our 21 year hold in this mid western railroad operator with ambitious
expansion plans was entirely vindicated by the return of £33.0m in October when
the company was sold to Canadian Pacific. This represented an investment
multiple in dollar terms of 35x and an IRR of 28%. Other excellent returns from
co-investments included £10.6m from the sale of the Stirling Square led
investment in Global Design Technologies. This aerospace components business
achieved an investment multiple of 3.8x and an IRR of 86%. We also sold our
holding in the RJD led investment Academy Music Group yielding £2.5m during the
year to give an investment multiple of 2.5x and IRR of 53%.  The final proceeds
of the sale of Pizza Express holding company Gondola were also received,  with
£6.8m coming in at the start of 2007 to complete this TDR led investment at an
investment multiple of 4.0x and an IRR of 65%.



From our wide range of funds we have also received very substantial inflows
reflecting successful exit activity. The larger notable ones include Tragus
(£1.2m restaurants, LGV 4), Intermed (£0.9m medical devices, August), MTEM
(£1.3m hydrocarbon detection, SEP II), Viking Moorings loanstock redemption
(£1.2m oil services, Inflexion), South Lakeland Parks (£1.2m caravan parks,
LGV5) and GAM (£0.7m machinery, Nmas1). Again, these exits attest to the
diversity and strength of the underlying portfolio.



New Commitments



In order to establish a basis for future returns we continue to make fresh
commitments to private equity funds. Several of these are to funds where we have
well established links, for example our commitments to Accession Mezzanine II
(Euro7m Eastern Europe), Mezzanine Management IV (Euro7m European Mezzanine) and
August Equity II (£10m UK mid market buy-outs). Other commitments to groups
known to us include those to AIG New Europe Fund II (Euro7m Eastern Europe), AIG
Brazil Special Situations Fund II ($5m Brazil) and Warburg Pincus IX ($15m
Global generalist).We have established new links with UK mid market firm Penta
Capital through an £8m commitment to their co-investment fund. We are a
selective participant in the secondary market and during 2007 we acquired two
such positions; £4m in Close Brothers Growth Capital II B and £1.6m in Scotland
based venture capital fund Pentech. These investments, where they are
complementary to our portfolio, have the potential to contribute to performance
more quickly as their holdings can already be fairly mature.





Valuation Changes



Total uplifts in value over the year were £54m. Of this approximately £40m was
attributable to the B pool and £14m to the A pool. These uplifts reflect both
the successful realisations noted above, which are usually at considerable
premia to the latest carrying value, and also the ongoing fundamental progress
of underlying companies which allows revaluation. The most significant
individual contributors have been the co-investments which have been sold or
where there has been a partial redemption. For example DM&E contributed £22m,
Global Design Technologies £5.7m and Viking Moorings £3.5m. Many of our fund
holdings have shown uplifts including LGV (£2.0m), Candover 2001 (£2.0m), TDR
Capital (£2.0m), Argan Capital (£1.8m) and Camden Strategic III (£1.5m).
Foreign exchange movements have added £4 million to the portfolio valuation over
the year.





Outlook



2007 was an exceptional year for international private equity both in terms of
activity and in the returns achieved. The background environment is likely to be
tougher in 2008; but, how this will affect our portfolio and its returns depends
on how the managers of the funds and the individual business management teams
cope with these new challenges. The most successful private equity managers and
companies have strong disciplines and processes. Our portfolio has benefited
from partnership with these skilled managers in recent years and we aim to
allocate capital to these successful partners so that we can maintain excellent
returns for our shareholders.



Hamish Mair



For more information, please contact:




Hamish Mair                                               0131 718 1184
Martin Cassels                                            0131 718 1095
[e-mail]  / [e-mail]







F&C PRIVATE EQUITY TRUST PLC


Income Statement for the
year ended 31 December 2007



                                                          Unaudited
                                                          Revenue           Capital           Total
                                                          £'000             £'000             £'000

Gains on investments                                      -                 57,141            57,141
Currency losses                                           -                 (1,343)           (1,343)
Income     - franked                                      103               -                 103
           - unfranked                                    2,915             -                 2,915
Investment management fee                                 (391)             (1,994)           (2,385)
Other expenses                                            (631)             -                 (631)
                                                          _______           _______           _______
Net return before finance costs and taxation              1,996             53,804            55,800

Interest payable and similar charges                      (17)              (49)              (66)
                                                          _______           _______           _______
Return on ordinary activities before taxation             1,979             53,755            55,734

Taxation on ordinary activities                           (587)             569               (18)
                                                          _______           _______           _______
Return on ordinary activities after taxation              1,392             54,324            55,716
                                                          _______           _______           _______
Returns per A share - Basic                               0.60p             19.84p            20.44p

Returns per B share - Basic                               1.37p             56.74p            58.11p

Returns per B share - Fully diluted                       1.34p             55.52p            56.86p






F&C PRIVATE EQUITY TRUST PLC


Income Statement for the
seventeen months ended 31 December 2006



                                                          Audited

                                                          Revenue           Capital           Total
                                                          £'000             £'000             £'000


Gains on investments                                      -                 34,622            34,622
Currency gains                                            -                 (58)              (58)
Income     - franked                                      527               -                 527
           - unfranked                                    4,344             -                 4,344
Investment management fee                                 (509)             (1,532)           (2,041)
Other expenses                                            (857)             (505)             (1,362)
                                                          _______           _______           _______
Net return before finance costs and taxation              3,505             32,527            36,032

Interest payable and similar charges                      (31)              (93)              (124)
                                                          _______           _______           _______
Return on ordinary activities before taxation             3,474             32,434            35,908

Taxation on ordinary activities                           (941)             483               (458)
                                                          _______           _______           _______
Return on ordinary activities after taxation              2,533             32,917            35,450
                                                          _______           _______           _______
Returns per A share - Basic                               1.05p             9.31p             10.36p

Returns per B share - Basic                               3.21p             46.85p            50.06p

Returns per B share - Fully diluted                       3.20p             46.70p            49.90p






F&C PRIVATE EQUITY TRUST PLC



BALANCE SHEET


                                           As at 31 December 2007         As at 31 December 2006
                                           (unaudited)                    (audited)


                                           £'000        £'000             £'000            £'000
Investments at fair value
Listed on recognised exchanges             43,984                         23,922
Unlisted                                   150,597                        116,354
                                           _______                        _______
                                                        194,581                           140,276
Current assets
Debtors                                    789                            416
Cash at bank                               5,822                          6,764
                                           _______                        _______
                                           6,611                          7,180
Creditors
Amounts falling due within one year        (1,462)                        (1,223)
                                           _______                        _______
Net current assets                                      5,149                             5,957
                                                        _______                           _______
Total assets less current liabilities                   199,730                           146,233

Creditors
Amounts falling due after more than one                 (822)                             -
year
                                                        _______                           _______
Net assets                                              198,908                           146,233
                                                        _______                           _______

Capital and reserves
Called up ordinary share capital                        1,394                             1,394
Special distributable capital reserve                   40,000                            40,000
Special distributable revenue reserve                   38,363                            38,363
Capital redemption reserve                              664                               664
Capital reserve                                         117,470                           63,146
Revenue reserve                                         1,017                             2,666
                                                        _______                           _______
                                                        198,908                           146,233

                                                        _______                           _______

Net asset value per A share - Basic                     44.56p                            25.43p
Net asset value per B share - Basic                     233.82p                           178.71p
Net asset value per B share - Fully
diluted
                                                        231.08p                           178.06p




F&C PRIVATE EQUITY TRUST PLC



RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS




                                                   Year ended               Seventeen months ended
                                                   31 December 2007         31 December 2006
                                                   (unaudited)              (audited)


                                                   £'000                    £'000
Opening shareholders' funds                        146,233                  82,839

Return on ordinary activities after taxation       55,716                   35,450
Dividends paid                                     (3,041)                  (21,813)
Issue of C shares                                  -                        49,757
                                                   _______                  _______
Closing shareholders' funds                        198,908                  146,233
                                                   _______                  _______




F&C PRIVATE EQUITY TRUST PLC



CASH FLOW STATEMENT




                                           Year ended                     Seventeen months ended
                                           31 December 2007               31 December 2006
                                           (unaudited)                    (audited)

                                           £000            £000           £000           £000

Operating activities
Net dividends and interest received from   1,949                          3,919
investments
Interest received from deposits            619                            819
Investment management fee                  (958)                          (1,507)
Other cash payments                        (507)                          (1,402)
                                           _______                        _______
Net cash inflow from operating activities                  1,103                         1,829


Servicing of finance

Interest paid                              (53)                           (124)
                                           _______                        _______
Net cash outflow from servicing of finance                 (53)                          (124)

Taxation
Corporation tax paid                       (550)                          (312)
                                           _______                        _______
Net cash outflow from taxation                             (550)                         (312)


Capital expenditure and financial
investment
Payments to acquire investments            (119,545)                      (135,780)

Receipts from disposal of investments      122,487                        150,304
Cash transferred from acquisition of       -                              3,558
Discovery Trust
                                           _______                        _______
Net cash inflow from capital expenditure                   2,942                         18,082
and financial investment

Equity dividends paid                                      (3,041)                       (21,813)
                                                           _______                       _______



Increase/(decrease) in cash                                401                           (2,338)

                                                           _______                       _______

Reconciliation of net cash flow to
movement in net funds

Increase/(decrease) in cash in the year                    401                           (2,388)

Currency losses                                            (1,343)                       (58)

                                                           _______                       _______

Movement in net funds in the year                          (942)                         (2,446)

                                                           _______                       _______

Opening net funds                                          6,764                         9,210

                                                           _______                       _______

Closing net funds                                          5,822                         6,764
                                                           _______                       _______





Notes



1.                   The results, which were approved by the Board on 11 April
2008, have been prepared in accordance with applicable accounting standards and
the AIC's Statement of Recommended Practice "Financial Statements of Investment
Trust Companies" issued in December 2005.



The accounting policies adopted in the preparation of the annual report and
financial statements are consistent with those followed in the previous year.



2.                   The Board has proposed a final A dividend of 0.3p (2006 -
nil) and a final B dividend of 0.85p (2006 - 0.4p) payable on 23 June 2008 to
shareholders on the Register on 6 June 2008.



3.                   Returns per A share are based on the average number of
shares in issue during the period of 67,084,807.



Returns per B share are based on the following number of shares in issue during
the period:-

Basic                72,282,273

Fully diluted       73,874,739



Basic net asset value per A share is based on 67,084,807 shares in issue at the
end of the period.



Basic net asset value per B share is based on 72,282,273 shares in issue at the
end of the period.

Fully diluted net asset value per B share is based on 74,241,429 shares in issue
at the end of the period.



4.         These are not full statutory accounts in terms of Section 240 of the
Companies Act 1985.  The full audited accounts for the seventeen months to 31
December 2006, which were unqualified, have been lodged with the Registrar of
Companies.  The statutory accounts for the year to 31 December 2007 will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting which will be held at the offices of F&C Asset Management plc, 80 George
Street, Edinburgh, EH2 3BU on 23 May 2008 at 12 noon.



5.         The report and accounts for the year will be sent to shareholders and
will be available for inspection at the Company's registered office, 80 George
Street, Edinburgh EH2 3BU.


                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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