Private Equity Investor : Annual Financial Report

PRIVATE EQUITY INVESTOR PLC

ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED 31 MARCH 2016

INVESTMENT OBJECTIVE AND POLICY

Investment Objective

The objective of the Company has been to provide Shareholders with long-term capital growth. The Company is not making investments in new private equity funds but is managing its existing investments with a view to making periodic returns of capital to Shareholders.

Investment Policy

Risk Diversification

The Company has invested in and maintains a broad portfolio of US-based venture capital and buyout funds (the 'Funds'), managed by a number of different management groups and focused on various stages of growth so as to obtain exposure to a diversified underlying portfolio of investments primarily in private companies in the technology sector. Through the Funds, the Company has exposure to a diverse portfolio of underlying companies.

No New Fund Investments

It is the policy of the Company not to make new fund investments. However, the Company will continue to meet existing capital commitments to the Funds and may on occasion support follow-on commitments in existing Funds or affiliated annex funds.

No Over-commitment; Ring-fenced Accounts

Over-commitment is the practice of making commitments to funds which exceed the cash available for investment. The Company has a policy not to be over-committed. All amounts required to fund existing capital commitments to the Funds are held in ring-fenced accounts.

Distributions Received From the Funds

The managers of the Funds invest principally in unlisted technology companies based in the US. After the flotation or sale of their investments, the Funds may distribute cash or securities to the Company. As a result, the Company may from time to time hold listed securities. It is the policy of the Company to sell listed securities received as distributions from the Funds within a short period of time unless the stock price has decreased meaningfully, in which case the Company may hold these securities for a longer period of time until favourable selling conditions exist. The listed securities received as distributions from the Funds typically do not represent a significant part of the Company's overall investments.

Liquidity

The Company may hold substantial cash balances due to existing capital commitments to the Funds, due to the receipt of cash distributions from the Funds, or due to cash realised upon the sale of listed securities received from the Funds as distributions. These cash balances are principally in open-ended investment funds pending capital call requests from the Funds, used for corporate purposes or for distribution to Shareholders.

Return of Capital to Shareholders

The Company proposes to make periodic returns of capital to Shareholders from the proceeds of distributions received from the Funds. As the timing and amount of distributions from the Funds fluctuates and is not known, the Company cannot predict when a return of capital to Shareholders may be made, or the amount.

Gearing

In normal circumstances the Company does not expect to borrow. The Company's Articles of Association limit borrowing to an amount broadly equal to its capital and reserves. Some investments made by the Funds may be geared but the Company does not review the level of gearing of these underlying investments.

Derivatives

The Company does not make use of financial derivatives and does not hedge against currency fluctuations.

Dividends

The Funds provide little income. Income may be generated from liquid funds and the Company may be required to pay dividends to continue to qualify as an Investment Trust. Such dividends are, however, likely to be small and irregular.

SUMMARY OF RESULTS AND FINANCIAL HIGHLIGHTS

* Following the tender offer completed in April 2015 when £6.7 million was returned to Shareholders.

** Ongoing charges at both the Company and Group level are included. The Company's ongoing charges are calculated excluding subsidiary expenses. Group ongoing charges include subsidiary expenses. The Company's wholly owned subsidiary was liquidated in December 2015.

CHAIRMAN'S STATEMENT

I am pleased to present the results for Private Equity Investor PLC ('PEI' or 'the Company' or 'the Parent Company') for the year ended 31 March 2016.

Results

The Company's Net Asset Value ('NAV') per share at 31 March 2016 was 211.2p, compared with 238.7p a year earlier, a decline of 11.5%. This was predominantly due to a decrease in LP valuations.

The NAV per share in dollars decreased by 14.3% from 354.4c per share to 303.7c per share, reflecting a decrease in the dollar valuation of the Company's fund investments (individually a 'Fund' and collectively the 'Funds'). The unfavourable effect of this, however, was offset by the strengthening of the Dollar against Sterling from $1.48 to $1.44.

The Company's share price decreased by 14.7% during the year, from 194.5p to 166.0p. The discount to NAV at 31 March 2016 was 21.4%, compared with 18.5% a year earlier.

No dividend is proposed for the period (2015: nil).

Tender Offers

During the year, on 22 April 2015, the Company completed a tender offer to Shareholders of £6.7 million. 2,859,989 shares were purchased for cancellation at a price of 234.2590 pence per share.

The Company has now made seven Tender Offers since December 2007, returning a total of £76.85 million to Shareholders. Following the latest tender offer, there are now 11,945,519 shares in issue. The Company will continue its policy of returning capital as and when cash resources reach an appropriate level.

Distributions and Calls from Fund Investments

In the twelve months ended 31 March 2016, the Company received cash and stock distributions from the Funds totalling $5.9 million, compared with $11.4 million in the twelve months ended 31 March 2015 and $13.5 million in the twelve months 31 March 2014. Of the $5.9 million received during the period, cash distributions amounted to $4.9 million (£3.2 million) and stock distributions amounted to $1.0 million (£0.6 million). The largest distribution received by the Company was $0.9 million in cash from Dawntreader Fund II.

During the period, two Funds called capital from the Company in the aggregate amount of $0.3 million (2015: $1.1 million). Of the Company's 20 portfolio of Funds, 10 Funds have been fully drawn down but an aggregate of $4.0 million (£2.8 million) in uncalled capital commitments remains outstanding in respect of the other 10 Funds. At 31 March 2016, the Company's uncalled capital commitments are held in ring-fenced accounts in accordance with an obligation given to the Court at the time of the conversion of the Company's Share Premium Account.

The Company regularly contacts vintage 1999-2004 Funds that have uncalled capital to explore the possibility of the Fund releasing the Company from its uncalled capital commitments. In most cases, the Company's requests have been rejected by the Funds. These requests have been refused for a number of reasons including the need to call additional capital to participate in future portfolio company financings, Fund expenses, or on the advice of legal counsel. In one case, however, at the request of PEI, a Fund has agreed to release all limited partners from a substantial portion of the Fund's uncalled capital commitments. The value of this return of uncalled capital represents over 25% (or $1 million) of the Company's outstanding commitments.

During the period, the Company also successfully led efforts to re-negotiate the management fees of one Fund, which resulted in a reduced management fee and a fee structure that incentivises the Fund to return cash to Limited Partners in the near term. Where appropriate, the Company will seek to continue these efforts with other Funds.

Portfolio Review

At 31 March 2016, of the Company's 20 portfolio Funds, four were still in their initial fund terms,10 were in term extensions and six were in the process of winding-down.

As at 31 March 2016, the Company held investments, through the 20 Funds, in 189 private and 44 public companies. At that date, the largest 25 underlying portfolio investments (21 private, 4 public), with a value of $11.9 million, accounted for 50% of the Funds' total value. The twelve months under review saw the Initial Public Offerings ('IPOs') of three underlying portfolio companies (2015: six).

On 3 November 2015, Sprout Capital IX, L.P. announced it had completed the liquidation of all its security positions. On 10 December 2015, PEI received a distribution of $91,246 leaving a small balance of cash remaining. On 29 June 2016, the Company received a final distribution of $11,321.

The Company has continued with its efforts to increase the pace of distributions from the Funds to the Company. As discussed above, the Company actively seeks to be released from its uncalled capital commitments. In addition, in situations where a Fund continues to hold shares of technology portfolio companies long after these companies have held their IPO, the Company has requested the Funds to distribute these shares to the Fund's limited partners. The Funds can be reluctant to distribute these public securities on the basis that the Fund believes that the stock price will appreciate, or that the stock is restricted due to the Fund's ownership position, representation on the board of directors, or other legal or contractual restrictions. The Company will continue to encourage Funds to make distributions to limited partners as soon as practicable. Finally, at PEI's request, the Company is represented on the advisory boards of two Funds, and in these cases is participating as an advisory board member and actively encouraging the Funds to seek liquidity of their underlying investments.**

US Venture Capital Industry Liquidity Update

The following chart gives details of the US mergers & acquisitions ('M&A') and IPO activity of venture capital-backed companies in calendar year 2015 and the first quarter of 2016. The year 2015 was a difficult year for liquidity in the US venture capital markets, with both venture-backed M&A and IPO activity down significantly from 2014.

Source: National Venture Capital Association/Thomson Reuters press release dated 4 April 2016.

* Figures only account for deals with disclosed values.

** Advisory committees may be established by a Fund, and the general partner of the Fund typically has absolute discretion to appoint or remove advisory board members. Advisory board members are not allowed, by contract and by law, to actively participate in the business or management of a Fund; rather, they serve to advise the general partner on matters typically relating to valuation and conflicts of interest.

Ongoing Charges Ratio

The ongoing charges ratio for the Company for the year ended 31 March 2016 was 1.8% (2015: 1.4%). As the Company returns cash to Shareholders and the Company's NAV decreases, the percentage of expenses to net assets is likely to increase. The Company continues to work to reduce the Group's costs which reduced from £547,000 to £520,000 in the year to 31 March 2016. During the period under review, the Company changed the provider of its Administration and Company Secretarial services resulting in a reduced fee. In addition, the non-cash assets of Campton Group, Inc ('CGI'), a Californian Corporation and the Company's wholly owned subsidiary, were sold and CGI was liquidated in the period resulting in the Company now using external advisers on a limited basis.

Continuation Vote

In September 2014, the Board amended its Articles of Association in order for Shareholders to consider the continuation of the Company as an investment trust annually rather than every five years. The Board strongly believes that continuation of the Company as an investment trust is in the best interests of Shareholders. The alternative to a continuation of the Company is to seek an immediate sale of the assets, which could be difficult as there are legal and contractual restrictions on transfers for some of the Funds, or to appoint a liquidator to realise the assets over time. The appointment of a liquidator would place the assets under the control of someone without knowledge or experience of the assets and might result in the sale of Funds at unattractive prices and in the loss of quotation of the Company's shares.

The Board believes that an annual continuation vote is in the best interests of Shareholders and notes that four Funds are still in their initial terms, which expire from late-2016 to 2018. It is probable that it will take some time after the expiration of these initial terms for these Funds to be fully wound down. As a result, the Board believes that an orderly winding down of the Company could take some time but is considering and pursuing all opportunities to accelerate this process whilst maximising Shareholder value.

Outlook

The Company's portfolio of Funds consists of two baskets of vintage years: 15 Funds of the 1999-2004 vintage years and five Funds of the 2006-2007 vintage years. The Funds of the 1999-2004 vintage years are either in term extension periods or are in liquidation. These Funds are not making new investments and are managing their portfolios to achieve liquidity events and wind-down. The Company expects that several of these vintage 1999-2004 Funds will liquidate in the next 12-24 months.

As these vintage 1999-2004 Funds search for liquidity for their investments, they have several options. First, the Funds can manage the investments to a 'natural' liquidity event, for example, the sale of a portfolio company or an IPO. This approach is intended to maximise the value of the proceeds to the Funds, but also may take longer to realise. This approach is used by most of the Funds. Second, when a Fund's ownership position in a portfolio company is significant, the Fund may attempt to force an underlying portfolio company to sell itself in a managed sale process. Such forced sales may result in the Fund obtaining less, and possibly significantly less, in proceeds than the value the investment is being carried in the Fund's financial statements. On the other hand, the Fund may well realise proceeds from a forced sale faster than managing for 'natural' liquidity events. Another option is that a Fund may sell some or all of their portfolio investments on the secondary market, in transactions known as 'direct secondaries.' This approach may result in the Fund receiving less, possibly significantly less, in proceeds than the value the investments are being carried in the Fund's financial statements. The timing of a secondary sale, however, is typically faster than managing for 'natural' liquidity events. The Company understands that a few Funds are exploring opportunities on the direct secondary market. Any decision on the sale of underlying portfolio investments is at the sole and absolute discretion of the general partner of each Fund. Limited Partners, such as the Company, are prevented by contract and by law from actively participating in the business and affairs of the Funds. These 1999-2004 vintage Funds may also undertake a restructuring, whereby some existing limited partners may obtain liquidity for their interests (typically at a discount to net asset value) while other limited partners may continue with the Fund.

Funds of the 2006-2007 vintage years are generally not making new investments, and are now in the realisation phase of their funds. During this realisation phase of their investment process, the Funds will manage their portfolios for 'natural' liquidity events as described above. The Company believes that it could take some time before these Funds fully liquidate.

The Company receives distributions from the Funds in the form of cash or stock. The timing and amount of these distributions are at the discretion of the Fund managers. A Fund may make a distribution after a company has been sold, held its IPO or a secondary offering, or is recapitalised and once all applicable contractual and legal restrictions (such as escrows and IPO lock-up periods) have been fulfilled. Alternatively, a Fund may decide not to make a distribution but instead need available capital for follow-on investments, management fees or other expenses. In some cases, when an underlying portfolio company holds its IPO, a Fund may continue to hold the public securities after applicable contractual and legal restrictions have expired. This typically occurs when the Fund expects the value of the public securities to rise or when the IPO is considered more of a financing event rather than a liquidity event.

The pace of distributions received from the Company's Funds has slowed considerably over the past year. The Company believes this is primarily due to the difficult markets discussed above, and also due to the age of the Funds and the age and quality of their underlying portfolio investments, particularly with respect to the 1999-2004 vintage Funds. If the slow market continues, the pace of distributions received by the Company may continue to be slow. This in turn impacts the Company's ability to return capital to its Shareholders via tender offers.

As portfolio Fund assets decline, Fund expenses, such as management fees and other expenses, become a larger percentage of Fund assets which can negatively impact Fund performance.

The Company continues actively to seek liquidity for its positions in the Funds, for example, through sales of the Company's interests in the Funds on the secondary market. On 4 July 2016 the Company announced that it had received a proposal to acquire 15 of its LP investments at a 35% discount to the net asset value of these holdings as at 31 December 2015, before expenses and subject to adjustments for subsequent distributions and calls. Since then the Company has received other approaches for its assets.

It continues to be the Company's policy to make periodic returns of capital to Shareholders in a cost-effective manner and the Company will continue to implement this policy as appropriate.

PETER DICKS

Chairman

28 July 2016

PORTFOLIO OF FUNDS

Investment portfolio as at 31 March 2016

* Of remaining investment.

Summary of Individual Fund Investments:

Other Information

Company Activities and Status

Until December 2015, the Group comprised the Company and its wholly-owned subsidiary, CGI. In December 2015 CGI was liquidated. CGI acted as a non-discretionary investment adviser to the Company.

The Company is an investment company as defined under Section 833 of the Companies Act 2006 ('the Companies Act'), and was incorporated and registered in England and Wales on 19 January 2000 with Company Number 3912487. Its shares are listed on the London Stock Exchange under the ticker PEQ.

The Company has received written approval from HM Revenue and Customs as an authorised investment trust under Section 1158 of the Corporation Tax Act 2010 ('CTA'). The Company will be treated as an investment trust company for each subsequent accounting period, subject to there being no serious breaches of the conditions. In the opinion of the Directors, the Company has directed its affairs so as to enable it to continue to qualify for such approval. The Articles of Association provide for Shareholders to consider the continuation of the Company as an investment trust at each AGM and such resolution will be proposed at the AGM on 21 September 2016.

The Company's shares qualify as investments in Individual Savings Accounts ('ISAs').

Company Objectives and Business Model

The principal activity of the Company is to carry on business as an investment trust in accordance with its Investment Objective and Policy. The Company has a portfolio of Funds to which it has made capital commitments, some of which remain to be drawn down. The Company will honour these remaining commitments and expects to continue to receive distributions in cash and in shares from its portfolio of Funds. The Company does not, however, intend to enter into any new commitments and expects to continue making periodic returns of capital to Shareholders when sufficient monies are received from the Funds.

Investment Objective

The objective of the Company has been to provide Shareholders with long-term capital growth. The Company is not making investments in new private equity funds but is managing its existing investments with a view to making periodic returns of capital to Shareholders.

Investment Policy

The Company has invested in the Funds, which are managed by a number of different management groups and focused on various stages of growth so as to obtain exposure to a diversified underlying portfolio of investments primarily in private companies in the technology sector. Through the Funds, the Company has exposure to a diverse portfolio of underlying companies.

It is the policy of the Company not to make new fund investments. However, the Company will continue to meet existing capital commitments to the Funds and may on occasion support follow-on commitments in existing Funds or affiliated annex funds.

The full Investment Policy is set out above.

Net Asset Valuation

The NAV per Ordinary Share at 31 March 2016 was 211.2p (2015: 238.7p).

The Funds are stated at Directors' valuation, which is normally based on the valuations provided by the managers of those Funds, which are received by the Company quarterly. The valuation methodology normally used by these Funds is that the underlying investments are valued at fair value, which is in accordance with IFRS 13.

In the case of marketable securities, funds in the US typically value on a mark to market basis, which in in accordance with IFRS 13.

Results and Dividends

The results for the year are set out in the consolidated statement of comprehensive income below. The Directors are not recommending the payment of a dividend for the year ended 31 March 2016.

Key Performance Indicators ('KPIs')

The Board reviews the performance of the Funds at its meetings by reference to a number of KPIs. The Board considers that the most relevant KPIs are those that communicate the financial performance and strength of the Company as a whole, being:

• the NAV performance of the Company's shares;

• share trading discount to NAV; and

• ongoing charges ratio.

The financial performance of the Company is set out below:

*Following the tender offer completed in April 2015 when £6.7 million was returned to Shareholders.

** Ongoing charges at both the Company and Group level are shown. The Company's ongoing charges are calculated according to the AIC guidance and, as such, exclude subsidiary expenses. Group ongoing charges are calculated on the same basis, but include subsidiary expenses.

Ongoing Charges Ratio

The Directors endeavour to run the Company efficiently and monitor its operational expenses on an ongoing basis. The ongoing charges ratio for the Company for the year ended 31 March 2016 was 1.8% (2015: 1.4%) and was 1.8% for the Group (2015: 1.6%). As the Company returns cash to Shareholders and the Company's NAV decreases, the percentage of expenses to net assets is likely to increase. Efforts have been made to reduce costs, for example the change of Company Secretary and Administrator made during the year and the liquidation of CGI resulting in the Company using external advisers on a limited basis.

Costs have reduced from £547,000 to £520,000 in the year to 31 March 2016. Despite these efforts, the ongoing charges ratio has increased during the year as a result of the reduction in overall new assets of the Company following tender offers.

Principal Risks and Uncertainties and their Mitigation

A risk assessment and a review of internal controls are undertaken annually by the Board in the context of the Company's overall investment objective. The review covers the key business, operational, compliance and financial risks facing the Company. Full details of how the Board fulfils this role are shown on pages 29 and 30 of the Annual Report.

The principal risks and uncertainties identified by the Board are discussed below, together with an outline of how the Board recognises and seeks to control these risks. Mitigation of the principal risks is sought and achieved as far as possible. Further information regarding financial risks is set out in Note 18 to the Financial Statements below.

Stock Market Performance Risk

The Funds in which the Company is invested typically seek to realise their own investment objectives by selling, recapitalising or floating their investee companies. Consequently a proportion of the Company's underlying investments is in publicly quoted stocks (listed primarily on the NASDAQ Stock Market and NYSE) - typically as a result of IPOs or as a result of trade sales in which the consideration has been by way of listed equity in the acquirer.

When such shareholdings are distributed, it is the Company's normal policy to sell them, ideally close to or above the distribution price, as soon as possible. There may be instances where the Company continues to hold distributed shares, in an effort to obtain a higher price. However, this practice exposes the Company to market risk. The Company did not directly hold any publicly quoted investments at 31 March 2016.

Company and Fund Performance Risk

By their nature, investments in early stage and unlisted companies often present greater risk than those in more established enterprises. In addition, the Funds may make poor investments. The Company has sought to mitigate this risk through the diversification of its investment across a range of Funds (currently 20), which are themselves invested in 233 underlying investments.

As PEI's portfolio of Funds matures and winds down, the Company's investment portfolio will experience greater concentration risk.

Regulatory Breach Risk

Relevant legislation and regulations which apply to the Company include the Companies Act 2006, the CTA and the Listing Rules of the Financial Conduct Authority ('FCA'). The Company has noted the recommendations of the UK Corporate Governance Code. Its statement of compliance appears on page 27 of the Annual Report. A breach of CTA could result in the Company losing its status as an investment trust company and becoming subject to capital gains tax, whilst a breach of the Listing Rules might result in censure and/or a fine by the FCA. At each Board meeting the status of the Company is considered and discussed, so as to ensure that all regulations are being adhered to by the Company and its service providers.

To the knowledge of the Directors there have been no breaches of laws or regulations during the period under review and up to the date of this announcement.

Discount

The Directors regularly monitor the level of discount at which the Group's shares are trading. On 31 March 2016 the Group's share price stood at a discount of 21.4% to NAV, compared to 18.5% at 31 March 2015.

The Directors have considered the introduction of a discount protection mechanism, whereby the Company might purchase shares in the market at a stated minimum discount to NAV. Unlike many other investment trusts, however, the Company does not hold readily marketable investments from which such purchases might be funded. Moreover, it has already indicated that it will make periodic tender offers to return the proceeds of distributions from its portfolio to Shareholders. In these circumstances, the Directors do not consider that a formal discount protection mechanism is appropriate, however, they continue to seek authority annually to exercise their ability to buy back shares.

Investment Trust Status

The Board also regularly reviews the share register to confirm that the Company is not a close company (as defined in the CTA), however, the Board acknowledges that it has no control over Shareholders purchasing shares nor their concentration on the share register. Being a close company would breach the CTA rules and the Company would be likely to lose its investment trust qualification, as further discussed under 'Regulatory Breach Risk' above.

The Company monitors the significant Shareholder positions on an on-going basis and where the Company receives or is made aware of information from significant Shareholders in relation to their shareholdings and voting rights, the Company investigates as appropriate the disclosures that have been made and considers their impact so as to ascertain whether or not there is any impact on the Company's close company status for the relevant financial period.

Fund Term Risk

When a venture capital or buyout firm reaches the end of its term (including extensions), the fund manager typically engages in an orderly winding-down of the Fund. During this winding-down period, which can last several years, the manager of the Fund attempts to exit the remaining investments while maximising value for the Fund's investors. There is a risk, however, that a Fund in wind-down may realise proceeds on the sale of investments at less than reported fair value. If this happens, it could adversely impact the value of interests in the Fund held by investors. In addition, a Fund in wind-down will incur expenses (and possibly management fees) during this period, which could also adversely impact the value of investors' interests in the Fund. Ten of the Company's twenty funds are in term extensions and six are in the process of winding down.

Valuation Risk

The Directors are, to a significant extent, reliant on the accuracy and timeliness of the financial information provided to them by the General Partners of the Funds in which the Company has invested. The Company receives valuations on a quarterly basis and there is typically a time delay in the valuations being reported to the Company and reflected in its NAV. The valuation of investments held in the Funds is undertaken by the General Partner on a quarterly basis and is reviewed annually by the Funds' auditors during the annual audit. Annual accounts and quarterly reports are reviewed by PEI and discussed by the Board.

Market Operation Risk

The Company is reliant on the efficient operation of markets to provide an exit route from investments held within the Funds. Exits are typically achieved through trade sales, recapitalisations or the sale of stocks following an IPO of an underlying company. In periods of uncertain markets, exits can be delayed and the Company may see a decrease in distributions received.The Company¹s policy is to sell holdings which are distributed in specie at the earliest possible moment, subject to an agreed procedure to optimise proceeds.

Exchange Rate Risk

The majority of the Company's assets are held in US dollar denominated securities and, since the Company's shares are quoted in sterling, Shareholders are exposed to currency fluctuations between these currencies. It is not the Company's policy to hedge against currency fluctuations.

Alternative Investment Fund Managers' Directive ('AIFMD')

AIFMD was conceived by European Union legislators to address a perceived regulatory gap to protect investors and is intended to provide a harmonised regulatory and supervisory framework throughout the European Union for regulating Alternative Investment Funds.

The Company registered as a Small Alternative Investment Manager with the FCA and is subject to a reduced level of requirements under its regulations.

Outlook

The Company's portfolio of Funds has delivered periodic cash and stock distributions to the Company, and this is expected to continue. As the underlying portfolio matures, it is expected that the pace and amount of distributions from the Funds will slow. The timing and level of distributions will also depend on the state of capital markets as well as economic and other factors. It is the Company's stated policy not to make new fund investments, however, the Company will continue to meet existing capital commitments to the Funds and may on occasion support follow-on commitments in existing Funds or affiliated annex funds.

Employees, Environmental, Human Rights and Community Issues

The Company has one employee, the office manager of its London office.

The Board is composed entirely of non-executive Directors. The Company was fully aware of each General Partner's investment policy at the time it committed to each new Fund. Limited Partners such as the Company, however, are not consulted on individual investments made by the General Partner in their particular funds. In light of this, the Company attempts to conform to best practice on environmental and other social responsibility issues. The Company itself has no environmental, human rights, or community policies. In carrying out its activities and in relationships with suppliers, the Company aims to conduct itself responsibly, ethically and fairly.

Stewardship

The Company has noted the principles of the UK Stewardship Code. As a result of its investment objectives it does not often hold stocks directly other than for short periods and therefore does not normally have opportunities to vote at general meetings. The Company maintains an open dialogue with the Funds and typically participates in any investor actions when it is appropriate to do so.

Contractual Arrangements Essential to the Business of the Company

Other than the administration agreement described on page 18 of the full Annual Report there are no contractual arrangements that are considered essential to the business of the Company.

Gender Diversity

During the year, the Board of Directors comprised three male directors. Appointments to the Board are made according to a person's existing knowledge and expertise taking into account the Company's strategic priorities. The Company has one female employee and, until its liquidation, the Company's subsidiary, CGI, had one part-time male employee,

Viability Statement

The Board has considered the need to confirm that the Company is able to meet all liabilities when due and that it can continue to operate for a period of at least twelve months from the date of signing the Annual Report. The Directors state below that they consider the Company is a going concern over this timeframe.

Under the revisions to the UK Corporate Governance code there is a new requirement that the Board also has to consider its operations over the longer term.

The Directors consider the viability of the Company as part of their continuing programme of monitoring risk and conclude that three years is a reasonable time horizon to consider the continuing viability of the Company.

In order to maintain viability, the Company has a detailed risk control framework which has the objective of reducing the likelihood and impact of: poor judgement in decision-making; risk-taking that exceeds the levels agreed by the Board; human error; or control processes being deliberately circumvented. Controls are reviewed by the Board on an annual basis to ensure that controls are working as prescribed. In addition, reviews of all service providers are undertaken regularly.

The Directors consider that the Company is viable for the three year time horizon for the following reasons:

• The Company typically retains cash equal to approximately two years' expenses. With over 230 underlying holdings in the portfolio, the Directors anticipate other distributions during the period which will at least cover the expenses for the third year.

• The Company has an annual continuation vote. Shareholders have supported continuation by voting over 99% in favour in recent years.

• The Company has a diversified investment portfolio across 20 portfolio Funds with over 230 public and private underlying companies. The Funds are in a mix of initial terms, extension of lives or in wind down. Funds winding down typically take a number of years to wind down and distribute stocks and assets to investors.

• Cash awaiting drawdown is held in ring-fenced accounts solely for the purpose of meeting any outstanding calls when they are due. The Company periodically returns capital to Shareholders through tender offers while retaining sufficient cash to pay the Company's ongoing expenses.

• The ongoing charges ratio of the Company as calculated using the AIC recommended methodology equate to 1.8% of net assets which is competitive for a Company of this size.

• The Company has no debt or other external capital funding.

As a result of these factors, the Directors have concluded that there is a reasonable expectation that the Company can continue in operation over the three year period.

On behalf of the Board

PETER DICKS

Chairman

28 July 2016

EXTRACTS FROM THE DIRECTORS' REPORT

Capital Structure

In May 2008, Shareholders approved the cancellation of the Company's Share Premium Account which, following the necessary court approval obtained on 29 October 2008, permitted the creation of a special distribution reserve. This enabled the Company to make further returns of capital to Shareholders. Since that time, the Company has made seven tender offers, returning a total of £76.85 million to Shareholders and has made selected open market purchases of its shares. No further shares were purchased in the market during the year. No shares were held in, or issued from, Treasury during the year.

At the year-end and the date of this announcement the Company had an issued share capital of 11,945,519 Ordinary Shares of 0.01p each. Each share is entitled to one vote on a poll at general meetings.

Going Concern

The Company's Articles of Association currently require a continuation vote to be proposed at this year's AGM and at every AGM thereafter. In the event that any continuation vote is not passed, the Directors shall be required to bring forward proposals for the voluntary liquidation, unitisation or other reorganisation or reconstruction of the Company.

The Directors have considered the application of the Statement of Recommended Practice for Financial Statements of Investment Trust Companies and Venture Capital Trusts, which states that, even if an investment company is approaching a wind-up and Shareholders have yet to vote on the issue and provided that the Board has not concluded that there is no realistic alternative to winding up the company, it will usually be more appropriate for the financial statements to be prepared on a going (rather than non-going) concern basis.

In assessing the Company's ability to continue as a going concern, the Directors have had regard to the Company's Investment Objective and Policy and they have reviewed the principal risks and uncertainties facing the Company (as stated in the Strategic Report on pages 12 and 13 of the Annual Report) together with the Company's commitments and contingent liabilities (note 17 below) and the Company's cash and readily realisable investments required to meet its investment obligations and expenditure. In addition, the Directors have considered the Company's investment performance and the ongoing interest of investors in the continuation of the Company, including feedback from conversations with Shareholders.

Based on their assessment and considerations, the Directors have concluded that they should continue to prepare the financial statements on a going concern basis and the financial statements have been prepared accordingly.

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF

THE FINANCIAL STATEMENTS

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

The Directors are required to prepare financial statements for each financial period, which present fairly the financial position of the Company and of the Group and the financial performance and cash flows of the Company and of the Group for that period. In preparing those 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 then 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 Group's and Company's financial position and financial performance;

• state that the Group and Company have complied with International Financial Reporting Standards subject to any material departures disclosed and explained in the financial statements;

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

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

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Group's and Company's transactions and disclose with reasonable accuracy, at any time, the financial position of the Group and Company and enable them to ensure that the Group and Company financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulations. The Directors are also responsible for ensuring that the Strategic Report and Directors' Report is prepared in accordance with Company Law in the United Kingdom and that the Annual Report includes information required by the Listing Rules of the Financial Conduct Authority. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. The work carried out by the Auditor does not include consideration of the maintenance and integrity of the website and accordingly, the Auditor accepts no responsibility for any changes that have occurred to the financial statements when they are presented on the website. Visitors to the website need to be aware that legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors confirm that, to the best of their knowledge:

• the financial statements, which have been prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and net loss of the Group and Company;

• the Strategic Report and the Directors' Report include a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties it faces; and

• the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for Shareholders to assess the Group and Company's performance, business model and strategy.

For and on behalf of the Board

PETER DICKS

Chairman

28 July 2016

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the year ended 31 March 2016 and the year ended 31 March 2015 but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies, and those for 2016 will be delivered in due course. The Auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's Annual Report and Accounts at www.peiplc.com.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 March 2016

The total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the AIC. All items in the above statement derive from continuing operations. The Company has elected to take the exemption in Section 408 of the Companies Act 2006, not to present the Company's Statement of Comprehensive Income.

The notes form part of these financial statements.

CONSOLIDATED BALANCE SHEET

as at 31 March 2016

The Group's financial statements were approved by the Board of Directors on 28 July 2016 and were signed on its behalf by:

PETER DICKS

Chairman

Company Registered Number: 3912487

The notes form part of these financial statements.

COMPANY BALANCE SHEET

as at 31 March 2016

The Company's financial statements were approved by the Board of Directors on 28 July 2016 and were signed on its behalf by:

PETER DICKS

Chairman

The notes form part of these financial statements.

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 March 2016

The notes form part of these financial statements.

COMPANY CASH FLOW STATEMENT

for the year ended 31 March 2016

The notes below form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

at 31 March 2016

1. ACCOUNTING POLICIES

Accounting Convention

Private Equity Investor PLC is a company incorporated in Great Britain and registered in England and Wales under the Companies Act 2006. The consolidated financial statements of the Group for the year ended 31 March 2016 comprised the results of the Company and its wholly-owned subsidiary, CGI (together referred to as the 'Group'). For further details see Basis of Consolidation below. The Company is registered as a public limited company and is an investment company as defined by section 833 of the Companies Act 2006. Until its liquidation in December 2015, CGI acted as a non-discretionary investment adviser to the Company.

Basis of Accounting

The consolidated annual financial statements of the Group have been prepared under International Financial Reporting Standards ('IFRS'), which comprise standards and interpretations approved by the International Accounting Standards Board ('IASB'). The annual financial statements of the Company have been prepared in accordance with IFRS as adopted by the European Union, and as applied in accordance with the provisions of the Companies Act 2006. The financial statements have also been prepared in accordance with the Statement of Recommended Practice ('SORP') (issued November 2014) for Investment Trust Companies and Venture Capital Trusts except to any extent that it conflicts with IFRS.

The accounting policies that follow set out those policies which apply in preparing the financial statements for the year ended 31 March 2016. There are no differences between the accounting policies applied to the Group and the Company.

The Group and Company financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000) except when indicated otherwise.

Basis of Consolidation

IFRS 10 Consolidated Financial Statements

The Board considers PEI to qualify as an investment entity in accordance with IFRS 10 paragraph 27 as the Company obtains funds for the purpose of providing investors with investment management services, invests funds solely for returns from capital appreciation and/or investment income; and measures and evaluates the performance of substantially all of its investments on a fair value basis.

Under adoption of IFRS 10 the Board has concluded that as CGI provided non-discretionary investment advisory services, it falls under the key exception to the mandatory requirement to account for Subsidiaries at fair value through profit or loss, and therefore continues to produce consolidated financial statements.

The consolidated financial statements incorporate the financial statements of the Company and CGI, its wholly-owned subsidiary. CGI was liquidated in December 2015.

All profits and losses of CGI are attributable to the Company.

The financial statements of CGI are prepared for the same reporting year as the Company, using consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising from them, are eliminated.

Segmental Reporting

The Directors are of the opinion that the Group is engaged in a single segment of business, being investment business. Accordingly a segmental reporting note is not presented. The results of CGI are immaterial for segmental reporting purposes.

Income Recognition

Dividends receivable on quoted equity shares and debt securities are included in the financial statements when the investments concerned are quoted 'ex-dividend'. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Group's right to receive payment is established. The fixed return on a debt security is recognised on a time apportionment basis so as to reflect the effective yield on the debt security. Interest receivable is included on an accruals basis.

Expenses

All expenses are accounted for on an accruals basis and are charged through the revenue column of the Statement of Comprehensive Income, except for expenses which are incidental to the sale or purchase of an investment or related to tender offers, which are charged through the capital column of the Statement of Comprehensive Income. Stamp duty and commission related to tender offers are charged to the special reserve.

Investments at Fair Value Through Profit or Loss

Investments where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned are recognised and derecognised on the trade date.

All investments held by the Company are designated upon initial recognition as held at fair value through profit or loss. Investments are measured at fair value, with unrealised gains and losses on investments and impairment of investments recognised in the Statement of Comprehensive Income and allocated to capital. Realised gains and losses on investments sold are calculated as the difference between sales proceeds and cost.

The Funds are stated at Directors' valuation, which is normally based on valuations provided by the managers of those funds which are received by the Company at least quarterly. The valuation methodology used by these Funds is that the underlying investments are valued at fair value in accordance with Financial Accounting Standard 157 ('FAS 157') which is broadly comparable to International Private Equity and Venture Capital (IPEVC) guidelines.

For investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business on the Balance Sheet date, without any deduction for transaction costs necessary to realise the asset.

Capital distributions received from investments are accounted for on a reducing cost basis. Cash and stock distributions received are first applied to reducing the base cost of an investment. A realised gain will be recognised only when the cost has been reduced to nil.

Judgements and Estimates

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported in the financial statements. However, the nature of estimation means that actual outcomes could differ from those estimates. The Directors consider the available observable inputs when making these judgements. The Group primarily invests in private equity via limited partnerships or other fund structures. Such vehicles are typically unquoted and in turn invest in unquoted securities. The Group's investment portfolio is recognised in the Balance Sheet at fair value, in accordance with IPEV Valuation Guidelines and IFRS.

Fair value is based on the Company's share of the net asset value of the Fund, as determined by the general partner of such funds.

Updated net asset values are received for each Fund on a quarterly basis. The net asset value of a Fund is calculated after determining the fair value of a Fund's investment in any investee companies.

Adjustments to net asset value may be considered, for example, where:

· There has been significant elapsed time between the net asset value calculation date and the Balance Sheet date.

· There have been material movements in quoted prices between the net asset value calculation date and the Balance Sheet date.

· The Company has agreed a sale of its holding in a fund interest at a price other than net asset value.

· net asset value is not derived from the fair value of underlying portfolio companies.

The valuations of publicly traded securities held by these Funds are also affected by discounts, estimated for any legal or contractual restrictions on sale.

Foreign Currency Translation

The functional and presentational currency of the Company is Sterling. Transactions in currencies other than Sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each Balance Sheet date, monetary assets and liabilities that are denominated in foreign currencies are re-translated at the rates prevailing on the Balance Sheet date. Gains and losses arising on re-translation are included in the Statement of Comprehensive Income and are allocated either to revenue or capital, as appropriate.

The assets and liabilities of foreign operations are translated into Sterling at the rate of exchange ruling at the Balance Sheet date. Income and expenses derived from foreign operations have been translated at the rates of exchange prevailing on the date of transaction. The resulting exchange differences are recognised in Other Comprehensive Income and shown in the Currency Translation Reserve. On disposal of a foreign investment, the cumulative amount recognised in Other Comprehensive Income relating to that particular foreign operation is recycled through the Income Statement.

Investments in Subsidiary

The investment in CGI was previously stated in the Company's Balance Sheet at cost less a provision for impairment. Impairment is recognised when the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the higher of the asset's fair value less cost of disposal and its value in use. The Company bases the recoverable amount of CGI on the fair value less cost of disposal. During the period under review, the non-cash assets of CGI were sold and CGI was liquidated.

Taxation

Deferred tax is recognised in respect of all temporary differences at the Balance Sheet date where transactions or events have occurred that result in an obligation to pay more, or the right to pay less tax in the future. This is subject to deferred tax assets being recognised only if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted.

Current tax is expected tax payable on the taxable income for the period, using tax rules at the Balance Sheet date and any adjustment to tax payable in respect of previous years. The tax effect of different items of income/gain and expenditure/loss is allocated between revenue and capital on the same basis as the particular item to which it relates, using the marginal method.

Dividends Payable to Shareholders

Dividends to Shareholders are recognised as a liability in the period in which they have been declared and paid.

Any final dividend proposed by the Board is not declared until approved by the Shareholders at the Annual General Meeting following the year end.

Cash and Cash Equivalents

Cash and cash equivalents in the Balance Sheet and Cash Flow Statement comprise cash in hand and short-term deposits in banks that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, with original maturities of three months or less.

Leases

Leases where the lessor retains substantially all the risks and benefits of ownership of the assets are classified as operating leases and charged on a straight line basis over the life of the lease.

New Standards and Interpretations Not Applied

The IASB have issued the following relevant standards and interpretations which are not effective for the year ended 31 March 2016 and have not been applied in preparing these financial statements.

The Directors do not anticipate that the initial adoption of the above standards will have a material impact in the period of initial application.

2 OPERATING INCOME

4 STAFF COSTS

With the exception of the Directors, whose remuneration is shown in the Directors' Remuneration Report on pages 23 to 25 of the Annual Report, the Group employed two members of staff during the year (2015: two members of staff).

5 TAXATION ON ORDINARY ACTIVITIES

The Group is subject to corporation tax at 20% (2015: 21%). As at 31 March 2016 the total taxation charge in the Group's revenue account is lower than the standard rate of corporation tax in the UK (20%). The differences are explained below:

At 31 March 2016, the Group had no unprovided deferred tax liabilities (2015: £nil). At that date, based on current estimates and including the accumulation of net allowable management expenses deriving from its partnership interests in its Funds, the Group had surplus management expenses of approximately £21,341,000 (2015: £20,694,000). A deferred tax asset of £3,841,000 has not been recognised because the Group is not expected to generate sufficient taxable income in future periods in excess of the available deductible expenses and accordingly, the Group is unlikely to be able to reduce future tax liabilities through the use of existing surplus expenses.

Due to the Group's status as an investment trust, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Group has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.

6 DIVIDENDS

No distribution is proposed for the year ended 31 March 2016.

7 PROFIT

As permitted by Section 408 of the Companies Act 2006, the Statement of Comprehensive Income of the Company is not presented as part of these financial statements. The consolidated net loss after taxation for the financial year includes £3,361,000 (2015: profit £1,199,000) which is dealt with in the financial statements of the Company.

8 RETURN PER ORDINARY SHARE

Revenue return per Ordinary Share is based on the net loss on ordinary activities after taxation of £514,000 (2015: net loss of £532,000), and on 12,101,803 (2015: 15,423,526) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year.

Capital return per Ordinary Share is based on the net capital loss for the year of £2,847,000 (2015: net gain of £1,720,000), and on 12,101,803 (2015: 15,423,526) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year.

Total return per Ordinary Share is based on the net loss for the year of £3,361,000 (2015: net gain of £1,188,000), and on 12,101,803 (2015: 15,423,526) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year.

9 INVESTMENTS

A full listing of the investment portfolio is provided above.

The Company is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The level in the fair value hierarchy, within which the fair value measurement is categorised, is determined on the basis of the lowest level input that is significant to the fair value of the investment.

The Company considers observable data for investments actively traded in organised financial markets, with fair value determined by reference to Stock Exchange quoted market bid prices at the close of business on the balance sheet date, without adjustment for transaction costs necessary to realise the asset. The following table analyses within the fair value hierarchy the Fund's financial assets and liabilities (by class) measured at fair value at 31 March.

Financial instruments at fair value through profit and loss

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. As level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are based on available market information.

Investments classified within level 3 have significant unobservable inputs. Level 3 instruments include private equity securities. As observable prices are not available for these securities, the Company has used valuation techniques to derive the fair value. In respect of unquoted instruments, or where the market for a financial instrument is not active, Funds based in the United States typically value portfolios in accordance with FAS 157 which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 is broadly comparable to IPEVC guidelines.

The following table presents the movement in level 3 instruments for the period ended 31 March 2016 by class of financial instrument.

Significant unobservable inputs for level 3 valuations

The Funds are stated at Directors' valuation, which is normally based on valuations provided by the managers of those Funds which are received by the Company at least quarterly.

Fair value is based on the Company's share of the net asset value of the Fund, as determined by the general partner of such Funds.

Further information with regards to level 3 valuations is set out in the accounting policies above.

The range of net asset values for the 10 largest Funds, which have an aggregate valuation of 84.3% of the Unlisted Funds portfolio, can be seen in the table below.

Top 10 Largest Portfolio Funds

It is recognised that the valuations of these Funds are sensitive to movements in the values of the underlying investments. The 10 largest underlying investments of the Funds include both quoted and unquoted investments and represented 30.0% of the value of the total Fund portfolio. At 31 March 2016, 8% of aggregate value of the 10 largest underlying investments was derived from quoted prices and 92% represented unquoted valuations.

For unquoted underlying investments, significant judgement is applied by the Fund Managers when calculating fair value. For the purpose of sensitivity analysis, a 10% adjustment to those unquoted investments that are in the 10 largest underlying investments would result in a 1.7% movement in the value of the Company's total net assets.

d) Significant holdings

The Company holds 15% and 10% of the total capital account balances of the Funds in Dawntreader Fund II and Zone Ventures Fund II respectively.

e) Transaction costs

During the year the Company incurred no transaction costs (2015: £nil) in relation to purchases of investments and £1,500 (2015: £4,000) in relation to sales of investments. These amounts are included within gains and losses on investments at fair value within the statement of comprehensive income.

10 INVESTMENT IN SUBSIDIARY

11 TRADE AND OTHER RECEIVABLES

12 TRADE AND OTHER PAYABLES

13 SHARE CAPITAL

The rights pertaining to each share are summarised in the extract from the Directors' Report above.

14 RESERVES

15 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN CASH AND CASH EQUIVALENTS

Cash and cash equivalents are comprised as follows:

16 NET ASSET VALUE PER ORDINARY SHARE

The Group net asset value per Ordinary Share is based on net assets of £25,231,000 (2015: £35,339,000) and on 11,945,519 (2015: 14,805,508) Ordinary Shares, being the number of shares in issue at the year end.

The Company net asset value per Ordinary Share is based on net assets of £25,231,000 (2015: £35,339,000) and on 11,945,519 (2015: 14,805,508 Ordinary Shares, being the number of shares in issue at the year end.

17 COMMITMENTS AND CONTINGENT LIABILITIES

At 31 March 2016 there were financial commitments outstanding of $4.0 million (£2.8 million) (2015: $4.2 million) (£2.8 million) in respect of outstanding call commitments to funds. These calls, if made, will be financed through cash and easily liquidated assets, which are currently held in ring-fenced accounts.

18 ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES

As detailed above, the investment objective of the Company has been to provide Shareholders with long-term capital growth. The Company is generally not making investments in new private equity funds but is managing its existing investments with a view to making periodic returns of capital to Shareholders.

The Company and Group's financial instruments comprise securities and other investments and bank deposits which are held to achieve its investment objective, as well as debtors and creditors that arise from its operations, for example sales and purchases of securities awaiting settlement and debtors for accrued income.

The principal risks the Company and Group face through the holding of financial instruments are:

• liquidity/marketability risk, i.e. the risk that the Company or Group has difficulty in realising assets or otherwise raising funds to meet commitments associated with financial instruments;

• interest rate risk;

• credit risk;

• market price risk, i.e. movements in the value of investment holdings caused by factors other than interest rate or currency movement; and

• foreign currency risk.

As required by IFRS 7: Financial Instruments: Disclosure and Presentation an analysis of financial assets and liabilities, which identifies the risk to the Company of holding such items, is given below.

Financial assets

A summary of the Company's investment portfolio is given above. The method of valuing the fixed asset investments is discussed in the accounting policies of the Company in Note 1 above. Cash and debtors arising from the operations of the Company as at 31 March 2016 amounted to £2,813,000 (2015: £7,407,000) and £272,000 (2015: £61,000) respectively. Cash and debtors arising from operations of the Group as at 31 March 2016 amounted to £2,813,000 (2015: £7,425,000) and £272,000 (2015: £71,000) respectively. There were no material differences between the fair values of the investments and cash and debtors as at 31 March 2016 and 31 March 2015 and the values attributable to those investments within the accounts.

Maturity analysis

The Company does not have any assets or liabilities maturing in more than one year.

Liquidity risk

The nature of the Company's investment policy of investing in specialist US Funds means that a large proportion of the securities which it owns are less readily marketable than, for example, 'blue-chip' UK equities.

The Company currently has outstanding commitments of $3,971,000 (£2,762,000) (2015: $4,206,000 (£2,833,000)) to the Funds, which will be financed through cash and easily liquidated assets, which are currently held in ring-fenced accounts.

The Board manages liquidity risk by regularly reviewing its easily liquidated assets, which mainly comprise open-ended investment funds. Commitments to such fund investments are reviewed and approved by the Board. In order to reduce risk, research and due diligence work is performed before any commitment is made to such a fund manager.

Interest rate risk

The Company's revenue may be affected by changes in prevailing interest rates since a large portion of its income ordinarily derives from money market funds and bank interest.

The Company's objective is to achieve capital returns from its investments and, as such, the main exposure to interest rate risk is indirect, through its impact on the valuation of the private equity funds, although it is not possible to quantify such effects. Interest rates are one of the key determinants of economic growth. At a more specific level, interest rates and credit spreads also have an important role in the ability of private equity funds to secure profitable deals, as some transactions are partly financed by debt. The effect of interest rate changes on the valuation of investments and debt forms part of valuation risk, which is considered separately.

At 31 March 2016, the Company held investments in AAA-rated money market funds valued at £3,813,000 (2015: £2,930,000), earning cash dividends at market rates. The money market funds are redeemable on less than 24 hours notice. Other floating rate financial assets comprised cash at bank.

As at 31 March 2016, the average interest rate profile of the Company's financial assets was as follows:

As at 31 March 2015, the average interest rate profile of the Company's financial assets was as follows:

* Exposure to floating interest rate risk is based on an adjusted London Interbank Offered Rate ('LIBOR').

** Other current assets exclude prepayments which under IFRS7 are not classified as financial assets.

The Board manages interest rate risk by placing cash deposits in short-term maturity investments such as money-market funds, but does not consider that the Company or Group has material exposure to interest rate risk.

Credit risk

The Company is exposed to credit risk in the following areas:

· Failure by counterparties to return cash deposits

Cash deposits (money market funds and cash at bank) are placed with counterparties with a minimum credit rating of AA or equivalent. In addition, a range of counterparties is used to further diversify the risk.

· Failure by counterparties to deliver cash or securities through trading activities

Transactions in listed securities are settled against delivery using approved brokers. The risk of default is considered minimal.

The maximum exposure to credit risk at 31 March 2016 is £6,626,000 (2015: £10,355,000).

Market price risk

Private equity investments are not immediately sensitive to market movements. However, over the medium/long term, the valuation multiples applied to private equity will be affected by significant changes in the listed equity markets.

The Company's portfolio consists of US dollar investments, which are affected by movements in the sterling/dollar exchange rate (refer to foreign currency risk below).

At 31 March 2016, a 10% movement in the valuation of the Group's aggregate investments designated as fair value through profit or loss, would result in an 8.8% (£2,221,000) change in Shareholders' funds.

The method of valuing the investments is discussed in the accounting policies note above.

Foreign currency risk

The Company is exposed to currency risk directly since the majority of its assets and commitments are denominated in US dollars and their sterling value can be significantly affected by movements in foreign exchange rates. The Company does not, nor does it intend to, hedge against foreign currency movements affecting the value of its investments.

The Company settles its transactions from its bank accounts at an agreed rate of exchange on the date on which any bargain was made. For the year ended 31 March 2016, realised exchange losses of £50,000 (2015: losses of £76,000) and unrealised gains relating to currency of £29,000 (2015: gains of £19,000), have been taken to the capital reserve.

Details of the foreign currency exposure are detailed in the table below.

At 31 March 2016

If the US$/£ exchange rate had strengthened by 10% from the rate at 31 March 2016, it would have had the effect, with all other variables held constant, of increasing the equity Shareholders' funds by £2,496,000 (2015: £3,142,000).

If the US$/£ exchange rate had weakened by 10% it would have had the effect of decreasing the equity shareholders' funds by £2,042,000 (2015: £2,571,000).

The calculations are based on the investments held at fair value through profit or loss and the exchange rate of 1.4378 US$: £ as at 31 March 2016 and these may not be representative of the year as a whole.

Financial liabilities

The Company finances its operations primarily through equity and retained revenue although trade creditors and accruals arise from its operations. At 31 March 2016 and 31 March 2015, all financial liabilities were due within one year. Other financial liabilities amounted to £62,000 (2015: £74,000) resulting from operating activities.

There were no borrowing facilities either drawn or undrawn at any time during the year.

Managing Capital

The Group's equity is analysed into its various components in notes 13 and 14. The Company manages its investments so as to maximise the return to Shareholders while maintaining a capital base to allow the Company to operate effectively. Strong realisations from the investment portfolio in recent years have facilitated the return of capital to Shareholders. This has been achieved through the buy-back of shares through tender offers.

The Group's capital requirement is reviewed regularly by the Board of the Company.

19 SUBSEQUENT EVENTS

The Company continues actively to seek liquidity for its positions in the Funds, for example, through sales of the Company's interests in the Funds on the secondary market. On 4 July 2016 the Company announced that it had received a proposal to acquire 15 of its LP investments priced at a 35% discount to the net asset value of these holdings as at 31 December 2015, before expenses and subject to adjustments for subsequent distributions and calls. Since then the Company has received other approaches for its assets.

It continues to be the Company's policy to make periodic returns of capital to Shareholders in a cost-effective manner and the Company will continue to implement this policy as appropriate.

20 RELATED PARTY TRANSACTIONS

During the year Peter Dicks, Chairman of the Company, rented office space from the Company, for a consideration of £10,000, which has been accounted for against the rent expense. (2015: £10,000).

The remuneration of the Directors, who are the key management personnel of the Company, is set out in the Directors' Remuneration Report in the Annual Report. Full details of Directors' interests in the ordinary shares of the Company are also set out the Directors' Remuneration Report. At 31 March 2016, £nil was due to the Directors' from the Company.

ANNUAL GENERAL MEETING

The Company's Annual General Meeting will be held on 21 September 2016 at 10.30 am at the offices of the Shakespeare Martineau LLP, 6 Floor, 6 Gracechurch Street, London, EC3V 0HR.

The notice of this meeting can be found in the Annual Report and Financial Statements atwww.peiplc.com.

National Storage Mechanism

A copy of the Annual Report and Financial Statements will be submitted shortly to the National Storage Mechanism ('NSM') and will be available for inspection at the NSM, which is situated at www.morningstar.co.uk/uk/NSM

28 July 2016

END

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.