CT PRIVATE EQUITY TRUST PLC — Annual Report 2011

Dec 31, 2011

Annual Report and Accounts for the year ended 31 December 2011

Contents

	Page
Corporate Summary	2
Chairman's Statement	3
Board of Directors	4
Report of the Directors	5
Directors' Remuneration Report	10
Statement of Directors' Responsibilities	11
Independent Auditor's Report	12
Statement of Comprehensive Income	14
Balance Sheet	15
Statement of Changes in Equity	16
Cash Flow Statement	17
Notes to the Accounts	18
Corporate Information	26

Corporate Summary

The Company

F&C Private Equity Zeros plc (the 'Company') was incorporated on 9 October 2009 and has a capital structure comprising unlisted Ordinary Shares and Zero Dividend Preference Shares ('ZDP Shares') listed on the Official List and traded on the London Stock Exchange. The Company is a wholly owned subsidiary of F&C Private Equity Trust plc ('F&C PET') which is a closed-ended investment company. On 14 December 2009, the Company placed 30,000,000 ZDP Shares at 100p per share and this placing raised a total of £28.9 million of net proceeds. Pursuant to a loan agreement between the Company and F&C PET, the Company has lent F&C PET the net proceeds of its placing. These funds are to be managed in accordance with the investment policy of F&C PET. This loan is on terms requiring its repayment by F&C PET to the Company at any time up to or immediately prior to the ZDP Shares repayment date of 15 December 2014. The principal terms of the ZDP Shares are given in note 9 to the accounts.

Investment Objective and Investment Policy

The objective of the Company is to provide the final capital entitlement of the Company's ZDP Shares to the holders of the ZDP Shares at the repayment date of 15 December 2014.

Management

The Board has appointed F&C Investment Business Limited ('the Manager') as investment manager of the Company under a contract terminable by either party giving the other not less than six months' notice.

Company Secretary

F&C Asset Management plc.

Chairman's Statement

I am pleased to present the Company's Annual Report and Accounts for the year ended 31 December 2011.

The Company is a wholly owned subsidiary of F&C PET and was established solely for the purpose of issuing and redeeming Zero Dividend Preference Shares ('ZDP Shares'). 30,000,000 ZDP Shares were issued on 14 December 2009 at 100 pence per share and will redeem on 15 December 2014 at a price of 152.14 pence per ZDP Share, giving a redemption yield of 8.75 per cent per annum. The net proceeds of the ZDP Shares issue were lent to F&C PET for use in future investment opportunities.

The results for the year are shown in the accounts on pages 14 to 25. As at 31 December 2011 the ZDP Share price was 131.13 pence, representing a premium of 12.9 per cent over the net asset value per ZDP Share of 116.10 pence.

Mark Tennant Chairman 17 April 2012

Board of Directors

Mark Tennant

Chairman

is a senior adviser to JP Morgan and a member of the Advisory Board of T Rowe Price Global Investor Services. He is Chairman of Scottish Financial Enterprise, the management consultancy firm Bluerock and of Honister Capital, the UK's second largest IFA. He joined the Board on 12 November 2009 and was appointed as Chairman on 24 May 2010.

Elizabeth Kennedy

is a Senior Consultant Director of N+1 Brewin with 30 years' experience in corporate finance, principally in IPOs, secondary issues and takeovers. She is also a director of Octopus Second AIM VCT plc. She joined the Board on 12 November 2009.

Douglas Kinloch Anderson OBE

is Executive Chairman of Kinloch Anderson Limited. He was National President of the Royal Warrant Holders Association, President of The Edinburgh Chamber of Commerce and Master of the Edinburgh Merchant Company. He is also a director of Fidelity Special Values plc. His career has included wide experience in manufacturing, retailing and exporting, particularly to Europe, North America and the Far East. He joined the Board on 12 November 2009.

John Rafferty

was a senior partner of Burness, the Scottish Law firm, until his retiral in July 2009. He is a fellow of the Securities and Investment Institute, and Honorary Consul for Canada in Scotland. He has a wide experience of private equity investments and of investment realisations and is director of a number of private companies. He joined the Board on 12 November 2009.

David Shaw

sits on the boards of a number of private companies including acting as Chairman of the charity Dyslexia Scotland. He was previously Chief Executive, then Chairman, of Bridgepoint Capital, a leading European mid corporate private equity firm until his retiral in December 2009. He joined the Board on 12 November 2009.

All the Directors are also directors of the Company's parent company, F&C PET.

Report of the Directors

Results and Dividends

The Directors submit the Annual Report and Accounts of the Company for the year ended 31 December 2011.

The accounts have been prepared in accordance with International Financial Reporting Standards ('IFRS').

There was no revenue available for dividends for the year.

Principal Activity and Status

The Company is a wholly owned subsidiary of F&C PET which is a closed-ended investment company incorporated in Scotland. F&C PET owns the entire issued ordinary share capital of the Company.

The Company's registration number is SC 366628.

Share Capital

Ordinary Shares

The issued ordinary share capital of the Company at 31 December 2011 amounted to 50,000 Ordinary Shares of £1.00 each.

On a winding up of the Company, after satisfying all liabilities, including obligations to the holders of ZDP Shares, Ordinary shareholders are entitled to all remaining assets of the Company. Ordinary shareholders are entitled to receive notice of, and attend and vote at any general meetings of the Company. All of the Company's Ordinary Shares are held by F&C PET.

Zero Dividend Preference Shares

At 31 December 2011 there were a total of 30,000,000 ZDP Shares of 0.01 pence each in issue.

In accordance with the Company's Articles of Association, the ZDP Shares carry no entitlement to any dividends or other distributions or to participate in the revenue or any other profits of the Company. The ZDP shareholders have no right to receive notice of, or to attend or vote at, any general meeting of the Company except in those circumstances set out in the Company's Articles of Association, which would be likely to affect their rights or general interests. The final capital entitlement for the ZDP Shares is not guaranteed should F&C PET's net assets be insufficient on the repayment date.

Business Review

Board of Directors

The Board of Directors is responsible for the overall stewardship of the Company including investment and dividend policies, corporate strategy, corporate governance and risk management. Biographical details of the Directors, all of whom are non-executive, can be found on page 4. All Directors are also directors of the Company's parent company, F&C PET.

Investment Objective and Investment Policy

The objective of the Company is to provide the final capital entitlement of the Company's ZDP Shares to the holders of the ZDP Shares at the repayment date of 15 December 2014.

A review of the Company's results for the year is included within the Chairman's Statement on page 3.

Report of the Directors (continued)

Principal Risks and Uncertainties and Risk Management

The Board believes that the principal risks faced by the Company are:

• Final capital entitlement - the ZDP Shares offer a pre-determined rate of growth in capital entitlement up to 152.14 pence per share on the repayment date of 15 December 2014, but no right of income.

F&C PET's debt to the Company is pursuant to the loan agreement which ranks behind any secured creditors of F&C PET. Therefore it is not guaranteed that the final capital entitlement will be paid. On a return of assets, including a winding up of F&C PET, the Company will only receive payment if there are sufficient assets attributable to the Ordinary Shares of F&C PET, having first taken account of prior ranked liabilities and having regard to all other unsecured liabilities of F&C PET. ZDP shares are not a secured, protected or guaranteed investment.

• Liquid market for ZDP shares the market price and realisable value of the ZDP Shares, as well as being affected by the underlying value of F&C PET's net assets, will be affected by interest rates, supply and demand for the ZDP Shares, market conditions and general investor sentiment. As such, the market value and realisable value of a ZDP Share can fluctuate and may not always reflect its accrued capital entitlement. In addition, given the Company's size and type, there is no guarantee that an active market will be sustained for the ZDP Shares. If an active trading market is not maintained, the liquidity and trading price of the ZDP Shares could be adversely affected.
• Macroeconomic and investment risks the Company's obligation to pay the ZDP shareholders the final capital entitlement is dependent upon F&C PET's ability to comply with its obligations to the Company. This in turn is impacted by F&C PET's performance and its ability to manage macroeconomic and investment risk. A material fall in the value of assets in the investment portfolio of F&C PET may lead to a winding up of F&C PET in the longer term.

The performance of F&C PET's underlying investment portfolio is principally influenced by a combination of economic growth, the availability of appropriately priced debt finance, interest rates and the number of active trade and financial buyers. All of these factors have an impact on F&C PET's ability to invest, its ability to exit from its underlying portfolio and on the levels of profitability achieved on exit. Financial results may be adversely affected by movements in foreign exchange rates.

F&C PET operates in a very competitive market. Changes in the number of market participants, the availability of funds within the market, the pricing of assets, or in the ability of its investment manager, F&C Investment Business Limited, to access deals could have a significant effect on F&C PET's competitive position and on sustainability of returns.

In order to source and execute good quality investments, F&C PET is primarily dependent upon F&C Investment Business Limited having the ability to attract and retain executives with the requisite investment experience.

Once invested, the performance of F&C PET's portfolio is dependent on a range of factors. These include, but are not limited to: (i) the quality of the initial investment decision; (ii) the ability of the portfolio company to execute successfully its business strategy; and (iii) actual outcomes against key assumptions underlying the portfolio company's financial projections. Any one of these factors could have an impact on the valuation of a portfolio company and upon F&C PET's ability to make a profitable exit from the investment within the desired timeframe. Future F&C PET share issues, share buy backs or raising new debt facilities in the longer term could dilute the interests of the holders of ZDP Shares and lower the price of the ZDP Shares.

Report of the Directors (continued)

• Government Policy and Regulation Risk - F&C PET carries on business as an investment trust under section 1158 of the Corporation Tax Act 2010. Continued status as an investment trust is subject to F&C PET conducting its affairs in a manner which will satisfy HM Revenue and Customs' conditions for continued approval as an investment trust. Any change in F&C PET's tax status, or in taxation legislation of practice in the UK or elsewhere, could affect the value of investments in F&C PET's investment portfolio and F&C PET's ability to achieve its investment objective and could also affect the tax treatment of the ZDP Shares and the tax treatment of the final capital entitlement.

The Company is also exposed to risks in relation to its financial instruments. Further details of these risks and the way in which they are managed are contained in note 12 to the financial statements.

Key Performance Indicators

The key performance indicators used by the Board to measure the Company's success are the movement in net asset value and price of the ZDP Shares.

	31 December 2011	31 December 2010
ZDP net asset value	116.1p	105.9p
ZDP Share price	131.1p	121.5p

Directors

The names of the Directors who held office during the year are shown on page 4. All the Directors are also directors of the Company's parent company, F&C PET.

None of the Directors has had any interest in either the Ordinary Shares or the ZDP Shares of the Company at any time during the year. The Directors' interests in the shares of F&C PET, the Company's parent company, are shown in F&C PET's Annual Report and Accounts for the year ended 31 December 2011.

Mr Mark Tennant and Mr John Rafferty retire by rotation at the Annual General Meeting and being eligible, offer themselves for re-election.

The Board has carefully considered the independence of each Director and, notwithstanding the cross-directorships detailed above, has concluded that each Director is wholly independent. The Directors believe that the Board has an appropriate balance of skills and experience, independence and knowledge of the Company to enable it to provide effective strategic leadership and proper governance of the Company.

Given the nature of the Company's business and the number of directors, the Directors have not established separate committees of the Board but deal with all business themselves.

The Board confirms that, following formal performance evaluations, the performance of each of the Directors seeking election continues to be effective and demonstrates commitment to the role. The Board therefore believes that it is in the interests of shareholders that these Directors are elected.

Directors' Indemnities

As at the date of this report, indemnities are in force between F&C PET and each of its Directors under which the Company has agreed to indemnify each Director, to the extent permitted by law, in respect of certain liabilities incurred as a result of carrying out his or her role as a Director of F&C PET and the Company. The Directors are also indemnified against the costs of defending any criminal or civil proceedings or any claim by the F&C PET or the Company or a regulator as they are incurred provided that where the defence is unsuccessful, the Director must repay those defence costs to the Company. The indemnities are qualifying third party indemnity provisions for the purposes of the Companies Act 2006.

Report of the Directors (continued)

A copy of each deed of indemnity is available for inspection at the Company's registered office during normal business hours.

Conflicts of Interest

Under the Companies Act 2006 a Director must avoid a situation where he or she has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the Company's interests. The requirement is very broad and could apply, for example, if a Director becomes a director of another company or a trustee of another organisation. The Companies Act 2006 allows directors of public companies to authorise conflicts and potential conflicts, where appropriate, where the Articles of Association contain a provision to this effect. The Company's Articles of Association give the Directors authority to approve such situations.

The Company maintains a register of Directors' conflicts of interest which have been disclosed and approved by the other Directors. This register is kept up-to-date and the Directors are required to disclose to the Company Secretary any changes to conflicts or any potential new conflicts.

Compliance with Corporate Governance

The Company is committed to high standards of corporate governance and the Board is accordingly accountable to the Company's shareholders for good governance. However, as the Company has only ZDP Shares listed, it is not required to comply with the UK Corporate Governance Code but is committed to appropriately high standards of corporate governance.

Further detailed disclosures relating to the corporate governance procedures of the Group can be found in the Annual Report of the Parent Company, F&C Private Equity Trust plc, which is available on the Company's website (www.fcpet.co.uk).

Community, Employee and Environmental Issues

In carrying out its activities and in its relationships with the community, the Company aims to conduct itself responsibly, ethically and fairly. The Company has no employees and the Board is comprised entirely of non-executive Directors.

Going Concern

The Directors believe that 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 financial statements. Accordingly the financial statements have been prepared on a going concern basis.

Directors Authority to Buy Back ZDP Shares

As is common practice for most UK-listed companies, a resolution will be proposed at the Company's Annual General Meeting authorising it, in accordance with section 701 of the Companies Act 2006, to make market purchases of up to 14.99 per cent of the ZDP Shares in issue at the date of the passing of the relevant resolution (expected to be approximately 4.5 million ZDP Shares). The authority, if granted (and subject to ZDP Shareholders passing a resolution approving buy-backs of ZDP Shares through the market at a separate meeting of ZDP Shareholders convened for 23 May 2012), will expire at the conclusion of the annual general meeting of the Company to be held in 2013 (the "Buy-back Authority").

Report of the Directors (continued)

The price paid for a ZDP Share bought back pursuant to the Buy-back Authority will not be: (i) less than its nominal value of 0.01p; or

• (ii) more than the higher of:
• (a) 5 per cent above the average of the middle market values of the ZDP Shares for the five business days before the relevant ZDP Shares were purchased; and
• (b) that stipulated by Article 5(1) of the Buy-back and Stabilisation Regulation (EC 2273/2003) (being the higher of the price of the last independent trade and the highest current independent bid relating to a ZDP Share on the trading venue on which the purchase is carried out);

and, in any event, will not be more than the amount of the accrued capital entitlement of a ZDP Share at the date of purchase.

The Buy-back Authority will only be exercised if, in the opinion of the Directors, the relevant purchase is in the interests of Shareholders as a whole. Any ZDP Shares bought back under the Buy-back Authority will be cancelled.

Financial Instruments

The Company's financial instruments comprise its investments, cash balances and debtors and creditors that arise directly from its operations. The financial risk management objectives and policies arising from its financial instruments and the exposure of the Company to risk are disclosed in note 12 to the financial statements.

Creditor Payment Policy

The Company's payment policy is to settle investment transactions in accordance with market practice and to ensure settlement of supplier invoices in accordance with stated terms. The Company did not have any trade creditors at the year end.

Significant Agreements

Pursuant to the intra-group loan agreement between the Company and F&C PET documenting the loan from the Company to F&C PET of the net proceeds of the ZDP Share placing, the loan will be on terms requiring its repayment by F&C PET to the Company immediately prior to the ZDP repayment date, being 15 December 2014.

These funds are to be managed in accordance with the investment policy of F&C PET.

Disclosure of Information to Auditors

The Directors confirm that, so far as each of them are aware, there is no relevant audit information of which the Company's auditors are unaware and the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Auditors

Ernst & Young LLP have expressed their willingness to continue in office as auditors and a resolution proposing their appointment will be submitted at the Annual General Meeting of the Company's ordinary shareholders. A separate resolution will be proposed at the Annual General Meeting authorising the Directors to determine the remuneration of the auditors.

By order of the Board F&C Asset Management plc Company Secretary 80 George Street Edinburgh EH2 3BU 17 April 2012

Directors' Remuneration Report

None of the Directors received any remuneration for his or her services during the year. No Director has a service contract with the Company and no Director is eligible for bonuses, pension benefits, share options, long-term incentive schemes or other benefits.

On behalf of the Board Mark Tennant Director 17 April 2012

Statement of Directors' Responsibilities

Statement of Directors' Responsibilities in Relation to the Financial Statements

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards ('IFRS') as adopted by the European Union.

Under company law the Directors must not approve the financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Company for that period. In preparing the financial statements the Directors are required to:

• select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and 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 in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company's 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 Company's transactions 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 safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Responsibility Statements under the Disclosure and Transparency Rules

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 Report of the Directors 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 17 April 2012

Independent Auditor's Report to the Members of F&C Private Equity Zeros plc

We have audited the financial statements of F&C Private Equity Zeros plc for the year ended 31 December 2011 which comprise the Statement of Comprehensive Income, Balance Sheet, the Statement of Changes in Equity, the Cash Flow Statement and the related notes 1 to 16. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards ('IFRSs') as adopted by the European Union.

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective Responsibilities of Directors and Auditor

As explained more fully in the Statement of Directors' Responsibilities, set out on page 11, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the Audit of the Financial Statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and Accounts to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on Financial Statements

In our opinion the financial statements:

• Give a true and fair view of the state of the Company's affairs as at 31 December 2011 and of its loss for the year then ended;
• Have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• Have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on Other Matters Prescribed by the Companies Act 2006

In our opinion:

• The part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and
• The information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Independent Auditor's Report to the Members of F&C Private Equity Zeros plc (continued)

Matters on Which we are Required to Report by Exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• Adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
• The financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or
• Certain disclosures of Directors' remuneration specified by law are not made; or
• We have not received all the information and explanations we require for our audit.

Under the Listing Rules we are required to review:

• The Directors' statement, set out on page 8, in relation to going concern; and
• Certain elements of the report to the shareholders by the Board on Directors' remuneration.

Susan Dawe (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Edinburgh 17 April 2012

Statement of Comprehensive Income Year ended 31 December 2011

			Period from 9
		Year ended 31	October 2009 to 31
		December 2011	December 2010
			(Restated)
	Note	£'000	£'000
Revenue
Interest Income	2	561	575
Total income		561	575
Expenditure
Expenses	3	-	-
Total expenditure		-	-
Profit before finance costs and taxation		561	575
Finance costs	4	(3,048)	(2,906)
Loss before taxation		(2,487)	(2,331)
Taxation	5	-	-
Loss for the year		(2,487)	(2,331)
Loss per Ordinary Share		(4,974.0)p	(4,662.0)p
	6

All items in the above statement are derived from continuing operations.

Balance Sheet At 31 December 2011 Company number: SC366628

			2011		2010
					(Restated)
	Note	£'000	£'000	£'000	£'000
Non current assets
Investments	7	50		50
Inter-company receivable		5,954		2,906
Subordinated Unsecured Loan Note	14	27,149		26,591
	14		33,153		29,547
Current assets
		1		1
Other receivables	8
Cash at bank		5		2
Net current assets			6		3
Total assets less current liabilities Creditors: amounts falling due after one			33,159		29,550
year
Zero Dividend Preference Shares	9		(34,822)		(31,774)
Net liabilities			(1,663)		(2,224)
Equity
Ordinary share capital	10		50		50
Capital contribution reserve			5,954		2,906
Other reserve			(1,719)		(2,277)
Revenue reserve			(5,948)		(2,903)
Shareholders' funds			(1,663)		(2,224)
Net liabilities per Ordinary Share	11		(3,326.0)p		(4,448.0)p
Net asset value per ZDP Share	11		116.1p		105.9p

The financial statements were approved and authorised for issue by the Board of Directors on 17 April 2012 and signed on their behalf by:

Mark Tennant, Chairman

Statement of Changes in Equity Year ended 31 December 2011

Net liabilities at 31 December 2011	50	5,954	(1,719)	(5,948)	(1,663)
Transfer to other reserve	-	-	558	(558)	-
Capital contribution during the year	-	3,048	-	-	3,048
Loss for the year	-	-	-	(2,487)	(2,487)
Net liabilities at start of period (restated)	50	2,906	(2,277)	(2,903)	(2,224)
Prior year adjustment (see note 13)	-	2,906	(2,277)	(2,906)	(2,277)
Net assets at start of period as previously stated	50	-	-	3	53
	£'000	£'000	£'000	£'000	£'000
	Share Capital	Capital Contribution Reserve	Other Reserve	Revenue Reserve	Total

Period from 9 October 2009 to 31 December 2010 (Restated)

	Share Capital	Capital Contribution Reserve (Restated)	Other Reserve (Restated)	Revenue Reserve (Restated)	Total (Restated)
	£'000	£'000	£'000	£'000	£'000
Net assets at start of period	-	-	-	-	-
Share Capital proceeds	50	-	-	-	50
Loss for the period	-	-	-	(2,331)	(2,331)
Capital contribution during the period	-	2,906		-	2,906
Provision of interest free loan to parent	-	-	(2,849)	-	(2,849)
Transfer to other reserve	-	-	572	(572)	-
Net liabilities at 31 December 2010	50	2,906	(2,277)	(2,903)	(2,224)

Cash Flow Statement Year ended 31 December 2011

		Period from 9
	Year ended 31	October 2009 to
	December 2011	31 December 2010
		(Restated)
		£'000
	£'000
Cash flows from operating activities
Loss before taxation	(2,487)	(2,331)
Increase in other receivables Non-cash adjustment to reconcile loss before taxation to net	-	(1)
cash flow:
Interest on Subordinated Unsecured Loan Note	(558)	(572)
Working capital adjustment:
Change in inter-company receivable Subordinated Unsecured
Loan Note	3,048	2,906
Net cash inflow from operating activities	3	2
Cash flows from investing activities
Purchase of investments	-	(50)
Net cash outflow from investing activities	-	(50)
Cash flows from financing activities
Proceeds from issue of share capital	-	50
Proceeds from issue of ZDP Shares	-	30,000
Loan to parent company	-	(30,000)
Net cash inflow from financing activities	-	50
Increase in cash and cash equivalents	3	2
Cash and cash equivalents at beginning of period	2	-
Cash and cash equivalents at end of period	5	2

Notes to the Accounts For the period ended 31 December 2011

1 Basis of accounting

The financial information has been prepared in accordance with the Companies Act 2006 and International Financial Reporting Standards ('IFRS') as adopted by the European Union. The financial information comprises the Balance Sheet as at 31 December 2011 and, for the year ended 31 December 2011, the related Statement of Comprehensive Income, Statement of Changes in Equity, Cashflow Statement and related notes hereinafter referred to as 'financial information'. The principal accounting policies adopted by the Company are set out below.

The Company's financial information is presented in sterling, which is the currency of the primary economic environment in which the Company operates. All values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated.

Cash and cash equivalents

Cash comprises cash at bank.

Revenue

For all financial instruments measured at amortised cost and interest bearing financial assets classified as available for sale, interest income or expense is recorded using an effective interest rate ('EIR'), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability.

Gilt interest income is recognised in interest income on an accruals basis.

Expenses

All expenses are accounted for on an accruals basis except other interest which is calculated on an effective interest rate basis. Audit fees of £5,000 (2010: £5,000) relating to the Company are payable by the Parent Company, F&C Private Equity Trust plc, to Ernst & Young LLP.

Investments

Investments are classified as fair value through profit or loss and are recognised on trade date. These are measured initially and at subsequent reporting dates at fair value, which for listed investments is bid price.

Capital contribution

The Parent Company has entered into a subsidiary capital contribution agreement whereby the Parent Company will undertake to contribute such funds to the Company as will ensure that the Company has, after repayment of the loan note by the Parent Company, sufficient assets to satisfy the final capital entitlement of the Zero Dividend Preference Shares ('ZDP Shares'). The contributions from the Parent Company equate to the return of the ZDP Shares together with any operational expenses incurred by the Company and recognised in the Statement of Changes in Equity.

Zero Dividend Preference Shares

Zero Dividend Preference Shares are recognised as liabilities in the Balance Sheet in accordance with IAS 32. After initial recognition, these liabilities are measured at amortised cost, which represents the initial net proceeds of the issuance after issue costs plus the accrued entitlement to the date of these financial statements.

Finance costs

The accrued entitlement (see above) is calculated as the difference between the proceeds on the issue of these shares and the final liability and is charged as finance costs over the term of the life of these shares using the effective interest method.

Notes to the Accounts For the period ended 31 December 2011 (continued)

Taxation

The charge for taxation is based on the taxable profits for the period. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are never taxable or deductible. The Company's liability for tax is calculated using rates that have been enacted or substantively enacted by the balance sheet date.

Deferred taxation

Taxation deferred or accelerated can arise due to temporary differences between treatment of certain items for accounting and taxation purposes. Full provision for deferred taxation is made under the liability method, without discounting, on all temporary differences that have arisen, but not reversed, by the balance sheet date.

Loans and receivables

Loans and receivables are financial assets that are not quoted in an active market. These assets are carried at amortised cost using the effective interest rate ('EIR') method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition. EIR amortisation is included as interest income in the statement of comprehensive income. Losses from impairment are recognised in the statement of comprehensive income as expenses.

Key estimates and assumptions

Estimates and judgements used in preparing the financial statements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed reasonable. The resulting estimates will, by definition, seldom equal the related actual results.

The main assumption made in the preparation of the accounts is the effective interest rate used to calculate the amortised cost of the Subordinated Unsecured Loan Note.

Going concern

The accounts have been prepared on a going concern basis as the Directors believe the Company has sufficient resources to continue for the foreseeable future.

2 Income

	Year ended 31 December 2011	Period from 9 October 2009 to 31 December 2010 (Restated)
	£'000	£'000
Other interest Gilt interest	558 3	572 3
	561	575

3 Expenses

Administration expenses of £nil were suffered during the year (period from 9 October 2009 to 31 December 2010: £nil). All administration expenses during the period were borne by the Parent Company, F&C Private Equity Trust plc.

Notes to the Accounts For the period ended 31 December 2011 (continued)

4 Finance costs

		Period from 9
	Year ended 31	October 2009 to 31
	December 2011	December 2010
	£'000	£'000
ZDP Share interest costs	2,867	2,754
Amortisation of issue expenses	181	152
	3,048	2,906

5 Taxation

		Period from 9
	Year ended 31	October 2009 to 31
	December 2011	December 2010
		(Restated)
	£'000	£'000
Loss before tax	(2,487)	(2,331)
Corporation tax at standard rate
26.5%(28%)	(659)	(653)
Effects of:
Non-deductible finance costs	808	814
Non-taxable interest income	(149)	(161)
Corporation tax payable	-	-

6 Loss per Ordinary Share

The calculation of loss per share is based on a loss after tax for the year of £2,487,000 (period from 9 October 2009 to 31 December 2010: loss of £2,331,000) and the weighted average number of 50,000 Ordinary Shares in issue during the year (period from 9 October 2009 to 31 December 2010: 50,000 Ordinary Shares). The basic and diluted losses per share are the same.

7 Investments

	2011 £'000	2010 £'000
Cost at beginning of period	49	-
Purchase of UK Gilt	-	49
Cost at end of period	49	49
Holding gain	1	1
Valuation at end of period	50	50
8 Other receivables
	2011 £'000	2010 £'000
Accrued interest on gilts	1	1

Notes to the Accounts For the period ended 31 December 2011 (continued)

9 Zero Dividend Preference Shares

	2011 Number	2011 £'000	2010 Number	2010 £'000
ZDP Shares of 0.01pence each:
Balance brought forward	30,000,000	31,774	-	-
Issued on 14 December 2009	-	-	30,000,000	30,000
Issue costs	-	-	-	(1,132)
Finance charges	-	3,048	-	2,906
Balance carried forward	30,000,000	34,822	30,000,000	31,774

On 14 December 2009 the Company issued 30,000,000 ZDP Shares at £1 each. These shares redeem on 15 December 2014 at a price of 152.14 pence per share giving a redemption yield of 8.75 per cent per annum.

10 Ordinary share capital

	2011 £	2010 £
50,000 issued Ordinary Shares of £1 each:	50,000	50,000

On incorporation, the Company's issued share capital was one Ordinary Share of £1 which was taken by the Subscriber to the Company. This share was subsequently transferred to F&C PET. Pursuant to an ordinary resolution passed at a general meeting on 11 November 2009, 49,999 Ordinary Shares of £1 each were created. On 12 November 2009, 49,999 Ordinary Shares of £1 each were allotted to F&C PET at a price of £1 per share for a total consideration of £49,999.

At 31 December 2011 there were 50,000 Ordinary Shares of £1 each in issue.

Each Ordinary Share is entitled to one vote at a general meeting.

In addition to receiving any income distributed by way of dividend, the ordinary shareholders will be entitled to all surplus assets after payment of all debts, including the ZDP Shares.

11 Net (liabilities)/asset value per share

The net liabilities per Ordinary Share is based on net liabilities of £1,663,000 (2010: £2,224,000) and on 50,000 (2010: 50,000) Ordinary Shares, being the number of Ordinary Shares in issue at year end.

The net asset value per ZDP Share is based on the entitlement due of £34,822,000 (2010: 31,774,000) at the year end and on 30,000,000 (2010: 30,000,000) ZDP Shares, being the number of ZDP Shares in issue at the year end.

12 Financial instruments

The Company's financial instruments comprise fixed interest investments, cash balances and liquid resources including debtors and creditors.

Quoted non-current asset investments held (see note 7) are valued at bid prices which equate to their fair values.

The main risks arising from the Company's financial instruments are market risk, interest rate risk, liquidity risk and credit risk.

Notes to the Accounts For the period ended 31 December 2011 (continued)

The Company held the following categories of financial instrument at 31 December 2011 and 31 December 2010:

	Level 1 £'000	Level 2 £'000	Level 3 £'000	2011 Total £'000	Level 1 £'000	Level 2 £'000	Level 3 £'000	2010 Total £'000
Investments	50	-	-	50	50	-	-	50

The above table provides an analysis of investments based on the fair value hierarchy described below and which reflects the reliability and significance of the information used to measure their fair value. The levels are determined by the lowest (that is the least reliable or least independently observable) level of impact that is significant to the fair value measurement for the individual investment in its entirety 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.

Market risk

Market risk embodies the potential for both losses and gains and includes interest rate risk and price risk.

The Company's investment is listed on a recognised stock exchange. A 10 per cent increase in stock prices at 31 December 2011 would have decreased the net liabilities attributable to the Company's ordinary shareholders and the total loss for the year by £5,000 (2010: decrease of £5,000); an equal change in the opposite direction would have increased the net liabilities attributable to the Group's shareholders and the total loss for the year by an equal amount.

Interest rate risk

The Company's financial assets are interest bearing, some of which are at fixed rates and some at variable. 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.

Fixed rate

The Company had the following fixed interest investment at 31 December 2011:

	2011 £'000	2011 Average interest rate	2011 Average period until maturity	2010 £'000	2010 Average interest rate	2010 Average period until maturity
UK Gilt	50	5%	2.7 years	50	5%	3.7 years

Floating rate

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.

Notes to the Accounts For the period ended 31 December 2011 (continued)

The Company had the following floating rate instruments at 31 December 2011:

	2011 £'000	2011 Average interest rate	2011 Average period until maturity	2010 £'000	2010 Average interest rate	2010 Average period until maturity
Cash and cash equivalents	5	0.5%	n/a	2	0.5%	n/a

An increase of 25 basis points in interest rates as at 31 December 2011 would have increased the cash balances by £13 (2010: £5). A decrease of 25 basis points would have had an equal but opposite effect.

Liquidity and funding risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

Liquidity risk is considered to be significant as the Company is reliant upon the sale of assets within its parent undertaking, which mainly comprise unlisted investments. Details of how this risk is managed are contained within the financial statements of the Parent Company.

Contractual maturity analysis for financial liabilities

As at 31 December 2011

	Total
£'000	£'000
45,642	45,642
	Total
	£'000
45,642	45,642
	Between one and five years Between one and five years £'000

Credit risk

This is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered with the Company.

At the reporting date, the Company's financial assets exposed to credit risk amounted to the following:

	2011 £'000	2010 £'000
Investments in fixed interest instruments Amounts due from Parent Company Cash and cash equivalents	50 33,103 5	50 29,497 2
	33,158	29,549

Details of how this risk is managed are contained within the financial statements of the Parent Company.

Notes to the Accounts For the period ended 31 December 2011 (continued)

13 Prior year restatement

The Parent Company issued to the Company a non interest bearing subordinated unsecured loan note 2014 equal to the net proceeds of the ZDP Shares issued which were lent by the Company to its Parent Company under an agreement dated 1 December 2009. The loan is non interest bearing. However, IAS 39 requires that the fair value of the loan be calculated and the difference to the amount received treated as interest over the life of loan. The 2010 figures have been restated to reflect the deemed interest received on the loan to the parent of £572,000 for the period ended 31 December 2010. An amount of £558,000 has been recognised in respect of the deemed interest for the year ended 31 December 2011.

In addition, the Parent Company also entered into a subsidiary capital contribution agreement whereby the Parent Company will undertake to contribute such funds to the Company as will ensure that the Company has, after repayment of the loan note by the Parent Company, sufficient assets to satisfy the final capital entitlement of the ZDP Shares. The contribution from the Parent Company of £2,906,000 should have been recorded directly in equity and not as income in the statement of comprehensive income. The 2010 figures have been restated to reflect this error.

The effect of the restatements is summarised below.

	Period ended 31 December 2010 £'000	At 31 December 2010 £'000
Decrease in carrying value of Subordinated Unsecured
Loan Note	-	(2,277)
Decrease in income	(2,334)	-
Increase in loss after taxation	(2,334)	-
Movement in reserves
Increase in retained losses	-	(2,906)
Increase in capital contribution reserve	-	2,906
Decrease in other reserve	-	(2,277)

14 Related party transactions

The loan to F&C Private Equity Trust plc commenced on 21 December 2009. The intercompany loan is interest free and is repayable three business days prior to the ZDP repayment date (see Corporate Summary on page 2) or immediately upon an event of default. At 31 December 2011, the loan to the Parent Company was £27,149,000 (2010: restated £26,591,000) and the capital contribution was £5,954,000 (2010: restated £2,906,000).

15 Holding company

The Company is a wholly owned subsidiary of F&C Private Equity Trust plc, a listed company whose shares are traded on the London Stock Exchange. Copies of its accounts for the year ended 31 December 2011 are available for inspection at the offices of F&C Asset Management plc, 80 George Street, Edinburgh, EH2 3BU or at www.fcpet.co.uk.

Notes to the Accounts For the period ended 31 December 2011 (continued)

16 Share premium account

The nominal share capital attributable to the ZDP Shares and the share premium account created upon the issue of the ZDP Shares are reflected in the Balance Sheet in accordance with the Company's accounting policies and IFRS. As stated in note 1, under IFRS, the Company recognises the initial net proceeds of the issuance after issue costs plus the accrued capital entitlement to the date of the financial statements as being liability in the Balance Sheet.

For company law purposes the Company nevertheless continues to recognise: (a) the nominal share capital of £3,000 attributable to the ZDP Shares; (b) the share premium account of £28,865,000 (as created upon the issue of the ZDP Shares in December 2009); and (c) the accrued capital entitlement since issue of £5,954,000. The ZDP Shares form part of the capital of the Company. Their rights and entitlements are shown in the Report of the Directors on page 5.

Corporate Information

Directors	Mark Tennant (Chairman) Elizabeth Kennedy Douglas Kinloch Anderson John Rafferty David Shaw
Investment Manager	F&C Investment Business Limited 80 George Street Edinburgh EH2 3BU Telephone: 0207 628 8000
Company Secretary	F&C Asset Management plc 80 George Street Edinburgh EH2 3BU Telephone: 0207 628 8000
Registrars	Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Telephone: 0871 664 0300
Broker and Financial Adviser	Canaccord Genuity 88 Wood Street London EC2V 7QR
Auditors	Ernst & Young LLP Ten George Street Edinburgh EH2 2DZ
Solicitors	Dundas & Wilson CS LLP Saltire Court 20 Castle Terrace Edinburgh EH1 2EN