REG - CT Private Eq Trust - Annual Financial Report

CT Private Equity TrustAnnouncement

16/04/2024 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240416:nRSP6916Ka&default-theme=true

RNS Number : 6916K  CT Private Equity Trust PLC  16 April 2024

 To: Stock Exchange  For immediate release:
                     16 April 2024

 

CT Private Equity Trust PLC

Annual Financial Report for the Year to 31 December 2023

 

Following the release on 3 April 2024 of the Company's preliminary results
announcement for the year ended 31 December 2023 (the "Preliminary
Announcement"), the Company announces that its annual report and financial
statements for the year ended 31 December 2023 (the "Annual Report and
Financial Statements") will be published today.

The information below, which is extracted in unedited full text from the
Annual Report and Financial Statements, is included in this announcement
solely for the purposes of compliance with Disclosure and Transparency Rule
6.3.5 and the requirements it imposes on issuers as to how to make public
annual financial reports. It should be read in conjunction with the
Preliminary Announcement. Together these constitute the material required by
DTR 6.3.5 to be communicated to the media in unedited full text through a
Regulatory Information Service. This material is not a substitute for reading
the full Annual Report and Financial Statements.

Principal Risks

 

The principal risks and uncertainties faced by the Company are described below
and note 1 provides detailed explanations of the risks associated with the
Company's financial instruments:

 

Risk description: Economic, macro and political - External events such as
global financial/political instability including terrorism, war, climate
change, disease including pandemics, protectionism, inflation or deflation,
economic shocks or recessions, the availability of credit and movements in
interest rates could affect share prices and the valuation of investments.

Mitigation: Each regular meeting of the Board provides a forum to discuss with
the Managers the general economic environment and to consider any impact upon
the investment portfolio and objectives. The investment portfolio is
diversified across end markets and regions.

No change in overall risk in year

 

Risk description: Liquidity and capital structure - Failure by the Company to
meet its outstanding undrawn commitments could lead to financial loss for
shareholders. Failure to replace maturing borrowings or enter agreement for
new borrowings.

Mitigation: The Board receives a detailed analysis of outstanding commitments
at each meeting. A medium term cashflow projection is also provided.  The
Company had a borrowing facility which was not due to expire until 19 June
2024. At 31 December 2023 the facility was composed of a €25 million term
loan and a £95 million revolving credit facility.

No change in overall risk in year

 

Risk description: Regulatory - Failure by the Company to meet or adhere to
regulatory/ legislative standards. Loss of investment trust status. Regulatory
or taxation changes resulting in disincentives or market barriers limiting
demand for the Company's shares.

 

Mitigation: At each Board meeting the Company's legal counsel provides an
update on regulatory and legislative developments.  The Company employs
Columbia Threadneedle AM (Holdings) PLC as Company Secretary.

No change in overall risk in year.

 

Risk description: Personnel issues - Loss of key personnel from the Columbia
Threadneedle Investments Private Equity team.

Mitigation: Regular meetings between the Board and senior staff of the
Manager.  There is a six-month notice period to the investment management
agreement.

No change in overall risk in year.

 

 

 

Risk description: Fraud and cyber risks - Theft of Company and customer assets
or data, including cyber risks.

Mitigation: The Depositary oversees custody of investments and cash in
accordance with the requirements of the AIFMD.  The Manager has extensive
internal controls in place. The Board receives a regular report on its
effectiveness. The Board also receives an annual internal controls report from
the Registrar, and the Depository.

No change in overall risk in year.

 

Risk description: Market- Poor investment selection and/or performance against
other assets classes and peer group. Increased share price discount diminishes
attractiveness of Company to investors. A premium could represent a lost
opportunity to issue shares.

Mitigation: At each meeting of the Board, the Directors monitor performance
against peer group and returns from the FTSE All Share Index.  Market
intelligence is maintained via the Company's broker, Singer Capital Markets
and the provision of shareholder analyses.

No change in overall risk in year.

 

Risk description: ESG - Failure to respond to increasing investor focus on
ESG. Stranded assets within the investment portfolio.

Mitigation:  The Manager has one of the longest established and largest
Responsible Investment teams in the City. The Columbia Threadneedle
Investments Private Equity Team undertake an annual survey of the ESG
practices of underlying portfolio fund managers.

No change in overall risk in year.

 

Risk description: Operational - Failure of the Manager's accounting systems or
disruption to the Manager's or service providers' business or business
continuity failure could lead to an inability to provide accurate reporting
and monitoring leading to a loss of Shareholder confidence.

Mitigation- The Board receives annual internal controls reports from the
Manager, Registrar and the Depositary. The administration system employed by
the Manager is Efront. This is an industry wide investment and accounting
package used to record transactions. Legal agreements/ engagement letters in
place with the Manager and service providers.

 No change in overall risk in year.

 

Emerging Risks

 

Emerging risks identified for the Company include the post-acquisition
integration of BMO GAM EMEA with Columbia Threadneedle Investments, the
retention of monies invested in the Company held in maturing Child Trust Funds
and structural issues affecting the investor base for the wider investment
trust industry.

 

Rolling five-year viability assessment and statement

 

The 2018 UK Corporate Governance Code requires a Board to assess the future
prospects for the Company, and report on the assessment within the Annual
Report.

The Board considered that a number of characteristics of the Company's
business model and strategy were relevant to this assessment:

•      The Board looks to long-term performance rather than short term
opportunities.

•      The Company's investment objective, strategy and policy, which
are subject to regular Board monitoring, mean that the Company is invested in
a well-diversified portfolio of funds and direct investments and that the
level of borrowings is restricted.

•      The Company has a single class of Ordinary Shares.

•      The Company's business model and strategy is not time limited.

 

Also relevant were a number of aspects of the Company's operational
arrangements:

•      The Company has title to all assets held.

•      Following the year end the Company entered into a revised loan
agreement with RBSI and State Street.  The revised loan agreement increased
the €25 million term loan with RBSI to €60 million and retained the
revolving credit facility with RBSI and State Street at £95 million.  The
term of the agreement, which was due to expire in June 2024 was extended to
February 2027.

•      The Company aims to pay quarterly dividends with an annual yield
equivalent to not less than four per cent of the average of the published net
asset values per ordinary share for the previous four financial quarters, or
if higher in pence per share the highest quarterly dividend previously paid.
Dividends can be funded from the revenue and realised capital reserves of the
Company.

•      Revenue and expenditure forecasts and projected cash
requirements are reviewed by the Directors at each Board Meeting.

 

Given the current volatility in stock markets and the economic disruption
arising from the war in Ukraine, recent events in the Middle East and
inflationary concerns, the Directors also considered detailed cashflow
projections modelling various scenarios on the future drawdowns to be paid and
distributions to be received by the Company. These projections were adjusted
to consider various plausible scenarios and took account of possible impacts
upon the future NAV of the Company and the ability of the Company to meet its
loan covenants. The Board concluded that there was a low probability that a
covenant breach related to capacity to meet cashflow requirements would occur.
Furthermore the Board has considered the remedies available if it appears that
a covenant breach is possible. Having considered the likelihood of the events
which could cause a covenant breach and the remedies available to the Company,
the Directors are of the view that the Company is well placed to manage such
an eventuality satisfactorily.

 

In addition, the Board carried out a robust assessment of the principal risks
which could threaten the Company's objective, strategy, future performance,
liquidity and solvency. These risks, mitigating actions in place to ensure the
Company's resilience and the processes for monitoring risks are set out on
page 30 and in Note 16 of the audited financial statements. These principal
risks were identified as relevant to the viability assessment.

 

The Board took into account the forecasted cash requirements of the Company,
the long-term nature of the investments held, the existence of the borrowing
facility and the effects of any significant future falls in investment values
on the ability to repay and re-negotiate borrowings, maintain dividend
payments and retain investors.

 

These matters were assessed over a five-year period to April 2029, and the
Board will continue to assess viability over five-year rolling periods, taking
account of foreseeable severe but plausible scenarios. Note 16 to the
financial statements includes an analysis of the potential impact of movements
of interest rates and foreign exchange on net asset value. A rolling five-year
period represents the horizon over which the Directors believe they can form a
reasonable expectation of the Company's prospects, balancing the Company's
financial flexibility and scope with the current uncertain outlook for
longer-term economic conditions affecting the Company and its Shareholders.

 

Based on their assessment, and in the context of the Company's business model,
strategy and operational arrangements set out above, the Board has a
reasonable expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the five-year period to April
2029. For this reason, the Board also considers it appropriate to continue
adopting the going concern basis in preparing the Report and Audited Financial
Statements.

 

 

Statement of Directors' Responsibilities

 

Directors' Responsibilities

 

The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with UK adopted international accounting
standards and applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors are required to prepare the
financial statements and have elected to prepare the Company financial
statements in accordance with UK adopted international accounting standards.
Under Company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss for the Company for that
period.

 

In preparing these financial statements, the Directors are required to:

 

•      select suitable accounting policies and then apply them
consistently;

•      make judgements and accounting estimates that are reasonable and
prudent;

•      state whether they have been prepared in accordance with UK
adopted international accounting standards, subject to any material departures
disclosed and explained in the financial statements;

•      prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will continue in
business; and

•      prepare a Directors' report, a strategic report and Directors'
remuneration report which comply with the requirements of the Companies Act
2006.

 

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. The Directors are responsible for ensuring that the
Annual Report and Audited Financial Statements, taken as a whole, are fair,
balanced, and understandable and provides the information necessary for
shareholders to assess the Company's performance, business model and strategy.

 

Website publication

The Directors are responsible for ensuring the Annual Report and the financial
statements are made available on a website. Financial statements are published
on the Company's website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity of
the Company's website is the responsibility of the Directors. The Directors'
responsibility also extends to the ongoing integrity of the financial
statements contained therein.

Directors' responsibilities pursuant to DTR4

•      The financial statements have been prepared in accordance with
the applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit and loss of the Company.

•      The Annual Report includes a fair review of the development and
performance of the business and the financial position of the Company,
together with a description of the principal risks and uncertainties that they
face.

 

 

On behalf of the Board

Richard Gray

Chairman

 

 

Notes

 

1.             Financial instruments

The Company's financial instruments comprise equity investments, cash
balances, a bank loan and liquid resources including debtors and creditors. As
an investment trust, the Company holds a portfolio of financial assets in
pursuit of its investment objective. From time to time the Company may make
use of borrowings to fund outstanding commitments and achieve improved
performance in rising markets. The downside risk of borrowings may be reduced
by raising the level of cash balances held.

 

The Company's investing activities expose it to various types of risk that are
associated with the financial instruments and markets in which it invests. The
most important types of financial risk to which the Company is exposed are
market price risk, interest rate risk, liquidity and funding risk, credit risk
and foreign currency risk.

 

The nature and extent of the financial instruments outstanding at the balance
sheet date and the risk management policies employed by the Company are
discussed below.

 

Market price risk

The Company's strategy for the management of market price risk is driven by
the Company's investment policy. The management of market price risk is part
of the investment management process and is typical of private equity
investment. The portfolio is managed with an awareness of the effects of
adverse price movements through detailed and continuing analysis, with an
objective of maximising overall returns to shareholders. Investments in
unquoted stocks, by their nature, involve a higher degree of risk than
investments in the listed market. Some of that risk can be, and is, mitigated
by diversifying the portfolio across geographies, business sectors and asset
classes, and by having a variety of underlying private equity managers. New
private equity managers are only chosen following a rigorous due diligence
process. The Company's overall market positions are monitored by the Board on
a quarterly basis.

 

Interest rate risk

Some of the Company's financial assets are interest bearing and, as a result,
the Company is subject to exposure to fair value interest rate risk due to
fluctuations in the prevailing levels of market interest rates.

 

When the Company retains cash balances the majority of the cash is held in
deposit accounts. The benchmark rate which determines the interest payments
received on cash balances is the bank base rate for the relevant currency.

 

Liquidity and funding risk

The Company's financial instruments include investments in unlisted equity
investments which are not traded in an organised public market and which
generally may be illiquid. As a result, the Company may not be able to
liquidate quickly some of its investments in these instruments at an amount
close to their fair value in order to meet its liquidity requirements,
including the need to meet outstanding undrawn commitments or to respond to
specific events such as a deterioration in the creditworthiness of any
particular issuer.

 

The Company's listed securities are considered to be readily realisable.

 

The Company's liquidity risk is managed on an ongoing basis by the Manager in
accordance with policies and procedures in place. The Company's overall
liquidity risks are currently monitored on a quarterly basis by the Board.
 The Company maintains sufficient investments in cash and readily realisable
securities to pay accounts payable and accrued expenses.

 

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into with
the Company. The Manager has in place a monitoring procedure in respect of
counterparty risk which is reviewed on an ongoing basis. The carrying amounts
of financial assets best represents the maximum credit risk exposure at the
balance sheet date, hence no separate disclosure is required.

 

Credit risk arising on transactions with brokers relates to transactions
awaiting settlement. Risk relating to unsettled transactions is considered to
be small due to the short settlement period involved and the high credit
quality of the brokers used. The Manager monitors the quality of service
provided by the brokers used to further mitigate this risk.

 

All the listed assets of the Company (which are traded on a recognised
exchange) are held by JPMorgan Chase Bank, the Company's custodian.

 

The Company has an ongoing contract with the Custodian for the provision of
custody services. The contract was reviewed and updated in 2014. Details of
securities held in custody on behalf of the Company are received and
reconciled monthly. The Depositary has regulatory responsibilities relating to
segregation and safe keeping of the Company's financial assets, amongst other
duties, as set out in the Report of the Directors. The Board has direct access
to the Depositary and receives regular reports from it.

 

To the extent that the Manager carries out management and administrative
duties (or causes similar duties to be carried out by third parties) on the
Company's behalf, the Company is exposed to counterparty risk. The Board
assesses this risk continuously through regular meetings with the management
of Columbia Threadneedle Investments (including the Fund Manager). In reaching
its conclusions, the Board also reviews Columbia Threadneedle Investment's
annual Audit and Assurance Faculty Report.

 

The Company's cash balances are held by a number of counterparties with a
credit rating above BBB+. Bankruptcy or insolvency of these counterparties may
cause the Company's rights with respect to the cash balances to be delayed or
limited. The Manager monitors the credit quality of the relevant
counterparties and should the credit quality or the financial position of
these counterparties deteriorate significantly the Manager would move the cash
holdings to another bank.

 

Foreign currency risk

The Company invests in overseas securities and holds foreign currency cash
balances which give rise to currency risks. It is not the Company's policy to
hedge this risk on a continuing basis but it may do so from time to time. The
Company has a multi-currency revolving credit facility which allows it to be
drawndown in multiple currencies. There were no currency forwards open at the
year end.

2.             Copies of the Annual Report and Financial
Statements will be sent to shareholders and will be available at the Company's
registered office, Quartermile 4, 7a Nightingale Way, Edinburgh, EH3 9EG and
on its website www.ctprivateequitytrust.com
(http://www.ctprivateequitytrust.com)

 

For more information, please contact:

 Hamish Mair (Investment Manager)   0131 573 8300
 Scott McEllen (Company Secretary)  0131 573 8300
 hamish.mair@columbiathreadneedle.com
 (mailto:hamish.mair@columbiathreadneedle.com)
 scott.mcellen@columbiathreadneedle.com
 (mailto:scott.mcellen@columbiathreadneedle.com)

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  ACSQKPBDABKDDQD