F&C Private Equity Trust is plannng to take advantage of new tax rules governing investment trusts and beef up its dividend payments.
The new rules allow investment trusts to pay out dividends using money from profits made on sales of assets, rather than just making dividend payments from the pool of money the trust has accumulated from the dividend payments it receives from its investments.
At the end of 2011, F&C Private Equity Trust was sitting on more than £120m of accumulated realised capital profits, money it can now draw on to finance dividend payments.
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Accordingly, the board is proposing to adopt a new distribution policy which will provide ordinary shareholders with greater and predictable dividend payments which will be funded from a combination of the company's revenue and realised capital profits. Under the new policy, the company will aim to return 4% of its net asset value (NAV) per annum to ordinary shareholders, paid through two semi-annual dividends following the announcement of the company's annual and interim results. This represents a dividend yield of 6.6% based on the trust's ordinary share price of 150.5p as at 30th March 2012.
The announcement of a new dividend policy was contained in the company's full year results statement, which showed the company achieved a total return net asset value (NAV) of 8.5% on its ordinary shares in 2011.
The firm's total return NAV on restricted voting shares was 8.4%, while flows of distributions from investments during the year totalled £36.1m, 60% higher than during 2010, after the trust experienced a strong year of realisations.
Trust Manager Hamish Mair said: "The company's long-standing focus on the mid-market, and particularly on Europe, has meant that activity levels have remained strong throughout a severe contraction in the banking sector's ability to lend and therefore to facilitate private equity buy-outs.
"This, and the close alignment of interest between management and owners of private equity backed companies, provides enduring reasons for investing in private equity.
"There is sound evidence that an upward trajectory has been maintained and we remain confident the company's NAV will make further strong progress in the year ahead."
The board has proposed a final dividend of 0.80p per ordinary share.
The share price rose 7.17% to 157.00p.
NR/JH
