Final Results

Standard Life Equity Income Tst PLC 08 November 2006 STANDARD LIFE EQUITY INCOME TRUST PLC Standard Life Equity Income Trust PLC, the investment trust with an investment objective to provide shareholders with an above average income from their equity investment, announces its preliminary results for the year ended 30 September 2006. PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2006 For further information, please contact: Gordon Humphries Head of Investment Companies, Standard Life Investments Tel. 0131 245 2735 Richard England Press Manager, Standard Life Investments Tel. 0131 245 2750 Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise. Investors may not get back the amount they originally invested. Standard Life Equity Income Trust PLC Extract from Chairman's Statement This is my first annual statement to shareholders as your Chairman. I am pleased to report that the weakness in markets in the early summer was followed by much firmer conditions towards the close of the Trust's year on 30 September 2006. The UK market has benefited from growth in underlying company earnings and dividends, with the latter being boosted by higher payout ratios and special dividends. In addition there has been significant corporate activity, while share buy-backs have again increased. The other major elements of support and confidence have been continuing low inflation and the relative stability of interest rates. Performance For the year under review to 30 September 2006, your Trust has produced a share price total return of 20.1 per cent. compared to a total return of 14.7 per cent. for the FTSE All-Share Index. In summary, the excellent investment performance of your Trust in the first six months of its financial year was succeeded by a more difficult experience over the third quarter. Earnings and Dividend Revenue return per ordinary share increased to 10.47 pence, which compares with a restated figure of 10.04 pence for the comparative period. Your Board is recommending an increase of 15 per cent. in the final dividend per ordinary share to 6.90 pence, which makes a total for the year of 9.50 pence per ordinary share. This compares with total dividends per share last year of 8.60 pence and represents a total increase in dividend for the year of 10.5 per cent. Capital Return Your Trust produced a capital return over the year of 13.6 per cent. in terms of net asset value which exceeded the capital return of 11.1 per cent. from the FTSE All-Share Index. Accounting Changes As I mentioned in the Interim Report and Accounts, the new Financial Reporting Standards were applied in the financial statements and in the net asset value. Similarly for the full year the figures were prepared in accordance with revised UK Generally Accepted Accounting Principles (UK GAAP), which are themselves converging with International Financial Reporting Standards. The principal change which shareholders will note is that the dividend declared after the balance sheet date of 30 September 2006 will be recognised in the period of payment, being the Interim Accounts for the six months to 31 March 2007. A subsidiary change is a move under revised UK GAAP to value investments on a bid, as opposed to mid basis. One other change is that after a review of your Trust's investment objective, the Board has decided to apportion 70 per cent. of the total of finance costs and management fees to capital, compared with the 50 per cent. used for the previous financial year. The Board believes that this change to the basis of allocation of finance costs and management fees better reflects their expectations of future returns from the investment portfolio as split between income and capital. Gearing Your Trust has employed gearing of some 8 per cent. of net assets for most of the year. This has been positive overall in the year and enhanced net asset value by approximately 0.8 per cent. Discount Control The Directors are pleased to note that over the year the Trust's discount to net asset value has come down from 8.2 per cent. at the start of the year to 6.2 per cent. by 30 September 2006 (based on a net asset value at 30 September 2005 restated for revised UK GAAP). These calculations are based upon net asset values, excluding net revenue, which are consistent both with the daily announcements made by the Trust to the London Stock Exchange and also with the guidelines of The Association of Investment Companies. The Board and the Manager review regularly the level of the Trust's discount and the Board retains the authority to buy back shares for cancellation or into treasury, the renewal of which by shareholders is sought at the forthcoming Annual General Meeting. Management Transition You will remember that after a formal process of appointment by your Board in September 2005, Standard Life Investments took over the management of your Trust from DWS Investment Trust Managers Limited on 25 November 2005 last year. The Manager decided to reorganise about half the portfolio, which was achieved at a low cost of about 0.22 per cent and sold completely the fixed income securities. Your Board believes that Karen Robertson, the Manager, and her team, employ a process that is underpinned by in-depth economic research and thorough company analysis. The process also incorporates a robust conviction in the value of individual stocks, rather than a reliance on allocation principally by sector. As part of its ongoing process of due diligence your Board held its June meeting in Edinburgh and spent time with a number of the Manager's staff. The Board took the opportunity to hear presentations on the wider investment management process, strategy, risk and compliance, including corporate governance and support available to the Trust. The intention is to repeat the series of meetings in 2007. The Board In December last year Tony Mitchard retired from the Board as both its Chairman and a Director. He was able to bring his long experience in industry and the public sector to the benefit of the Trust over ten years, and not least in the period of the transition from the former managers to Standard Life Investments which required much of his time. We are grateful for his significant contribution. Simon McClean, a director since the start of the Trust in 1991, retired at the same time. Simon brought to the Trust his experience of many years in fund management, and valuable specialist knowledge of the industry and its standards. In the spring the Board set out to appoint another director. The Nomination Committee adopted a formal process with the help of a senior independent consultant. After a wide canvass the Board was presented with a number of excellent candidates, and in the end appointed Richard Burns, who had recently retired as Joint Senior Partner of Baillie Gifford & Co. Mr Burns' career as a fund manager has been particularly concerned with investment trusts, and he serves on the Board of several others. He has also been on the Board of the Association of Investment Companies. His knowledge will be valuable to our Trust and he deserves a fine welcome. Evaluation of Governance The Board carried out an evaluation to look at its own governance during the year. The Board also feels that it is important to review regularly all suppliers of services to your Trust. Marketing The Manager has continued to undertake considerable marketing efforts on behalf of your Trust. This has included a number of meetings with professional investment firms over the year. In addition, the Manager has taken the opportunity to arrange meetings with individual shareholders in different cities across the UK which gives shareholders the opportunity to meet the Manager. Continuation of the Trust and its Purpose. Purpose of the Trust The Trust was established fifteen years ago with the objective of providing an above average income from a diversified UK equity portfolio, with the long term objective that the income of the Trust grows at least in line with the Retail Prices Index, while also achieving capital growth. Shareholders will be aware that under the Trust's Articles of Association, the Board is required to put before shareholders every five years an ordinary resolution regarding the continuation of your Trust. Accordingly at the Annual General Meeting this year to be held in London on 20 December 2006, shareholders will have the opportunity to vote again on the future of the Trust. The Meeting will be held at 11.00am in The Great Eastern Hotel, 40 Liverpool Street, London, EC2M 7QN. Advantages of the Trust The Board believes that the investment performance of your Trust is likely to outperform its benchmark over the long term due to the Manager's investment process and quality research and execution. The Board perceives investment trusts to have particular advantages to savers in terms of their independence of governance, and with the benefit of the choice and opportunity to add a modest level of gearing. Our management fee is 0.65 per cent. per annum of total assets, a reduction in the charge by the former Manager, and includes secretarial, administration and custody services. The Trust also benefited from a fee holiday for the period from the change in manager on 25 November 2005 to 24 May 2006. The Board believes that these low running costs and continued control of expenses ensure that the Trust remains competitive in relation to many other investment vehicles. Over the longer term, the period from the Trust's launch on 14 November 1991 to 30 September 2006, the Trust's net asset value and share price increased by 441.2 per cent. and by 388.7 per cent., respectively, in total return terms compared to a total return on the benchmark index of 310.4 per cent (Source: Fundamental Data). Recommendation After presentations by the Manager to a number of shareholders and their representatives, and having received advice from the Trust's brokers, your Board is recommending that shareholders vote for the continuation of the Trust at the Annual General Meeting. Outlook The UK equity markets have now enjoyed a recovery over some three and a half years since the trough in March 2003, during which time volatility has been unusually low. The global economic outlook remains mixed, and since the middle of the year commodity prices and markets have been more erratic, not least with the recent fall in crude oil prices. The US economy, for so long the major engine of world growth, has probably entered a less robust phase for housing and consumers. However many of the encouraging factors both globally and in the UK remain in place, which should enable company managements to deliver higher profits. Meanwhile the FTSE All-Share Index is now on a prospective price/earnings ratio for the year ahead of approximately 13 times earnings, a rating that is attractive in historical terms. Charles Wood, OBE Chairman 8 November 2006 Income Statement Year ended 30 September 2006 (Unaudited) Revenue Capital Total £'000 £'000 £'000 Gains on investments - 15,419 15,419 Currency losses - (27) (27) Income 4,843 - 4,843 Investment management fee (154) (359) (513) Administrative expenses (380) - (380) _________ _________ _________ Net return before finance costs and taxation 4,309 15,033 19,342 Finance costs (150) (324) (474) _________ _________ _________ Return on ordinary activities before taxation 4,159 14,709 18,868 Taxation 2 - 2 _________ _________ _________ Return on ordinary activities after taxation 4,161 14,709 18,870 _________ _________ _________ Return per ordinary share (pence) 10.47 37.02 47.49 _________ _________ _________ The total column of this statement represents the profit and loss account of the Company. The Company had no recognised gains or losses other than those recognised in the Income Statement. The financial statements for the year to 30 September 2005 have been restated to reflect the changes to accounting practices as set out in the accompanying notes. All revenue and capital items in the above statement derive from continuing operations. The accompanying notes are an integral part of the financial statements. Income Statement Year ended 30 September 2005 (restated) Revenue Capital Total £'000 £'000 £'000 Gains on investments - 18,033 18,033 Income 4,917 - 4,917 Investment management fee (459) (459) (918) Administrative expenses (317) - (317) _________ _________ _________ Net return before finance costs and taxation 4,141 17,574 21,715 Finance costs (149) (149) (298) _________ _________ _________ Return on ordinary activities before taxation 3,992 17,425 21,417 Taxation - - - _________ _________ _________ Return on ordinary activities after taxation 3,992 17,425 21,417 _________ _________ _________ Return per ordinary share (pence) 10.04 43.82 53.86 _________ _________ _________ The total column of this statement represents the profit and loss account of the Company. The Company had no recognised gains or losses other than those recognised in the Income Statement. The financial statements for the year to 30 September 2005 have been restated to reflect the changes to accounting practices as set out in the accompanying notes. All revenue and capital items in the above statement derive from continuing operations. The accompanying notes are an integral part of the financial statements. BALANCE SHEET As at As at 30 September 2006 30 September 2005 (restated) (Unaudited) (Audited) £'000 £'000 Fixed assets Investments at fair value through profit or loss 138,347 119,716 _________ _________ Current assets Debtors and prepayments 1,265 609 Cash and short term deposits 895 472 _________ _________ 2,160 1,081 _________ _________ Creditors: amounts falling due within one year (11,336) (7,079) _________ _________ Net current liabilities (9,176) (5,998) _________ _________ Net assets 129,171 113,718 _________ _________ Capital and reserves Called-up share capital 9,935 9,935 Share premium account 20,373 20,373 Capital redemption reserve 12,615 12,615 Capital reserve - realised 64,960 53,879 Capital reserve - unrealised 17,319 13,691 Revenue reserve 3,969 3,225 _________ _________ Equity Shareholders' funds 129,171 113,718 _________ _________ Net asset value per Ordinary share (pence) 325.06 286.17 _________ _________ Reconciliation of Movements in Shareholders' Funds As at 30 September 2006 For the year ended 30 September 2006 Share Capital Capital Capital Share premium redemption reserve - reserve - Revenue capital account reserve realised unrealised reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 30 September 2005 as 9,935 20,373 12,615 53,879 13,889 841 111,532 originally reported Restatements - - - - (198) 2,384 2,186 _______ _______ _______ _______ _______ _______ _______ Balance at 30 September 2005 9,935 20,373 12,615 53,879 13,691 3,225 113,718 (restated) Return on ordinary activities - - - 11,081 3,628 4,161 18,870 after taxation Dividends paid - - - - - (3,417) (3,417) _______ _______ _______ _______ _______ _______ _______ Balance at 30 September 2006 9,935 20,373 12,615 64,960 17,319 3,969 129,171 _______ _______ _______ _______ _______ _______ _______ For the year ended 30 September 2005 Share Capital Capital Capital Share premium redemption reserve - reserve - Revenue capital account reserve realised unrealised reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 30 September 2004 as 9,941 20,373 12,609 49,549 757 266 93,495 originally reported Restatements - - - - (106) 2,267 2,161 _______ _______ _______ _______ _______ _______ _______ Balance at 30 September 2004 9,941 20,373 12,609 49,549 651 2,533 95,656 (restated) Return on ordinary activities - - - 4,385 13,040 3,992 21,417 after taxation Dividends paid - - - - - (3,300) (3,300) Purchase of own shares for (6) - 6 (55) - - (55) cancellation _______ _______ _______ _______ _______ _______ _______ Balance at 30 September 2005 9,935 20,373 12,615 53,879 13,691 3,225 113,718 (restated) _______ _______ _______ _______ _______ _______ _______ CASHFLOW STATEMENT Year ended Year ended 30 September 2006 30 September 2005 (Unaudited) (Audited) £'000 £'000 £'000 £'000 Net return before finance costs and taxation 19,342 21,715 Adjustments for: Realised gains on investments (11,791) (4,993) Unrealised gains on investments (3,628) (13,040) Effect of foreign exchange rate losses 27 - Capitalised expenses taken to non-distributable reserves 359 459 ________ ________ (15,033) (17,574) ________ ________ Revenue before finance costs and taxation 4,309 4,141 Increase in accrued income (159) - Decrease in other debtors 3 40 (Decrease)/increase in other creditors (118) 20 Capitalised expenses taken to non-distributable reserves (684) (459) ________ ________ ________ ________ (958) (399) ________ ________ Net cash inflow from operating activities 3,351 3,742 Net cash outflow from servicing of finance (329) (99) Net tax paid (10) - Equity dividends paid (3,417) (3,300) Net cash outflow from financial investment (3,145) (2,781) ________ ________ Net cash outflow before financing (3,550) (2,438) Net cash inflow from financing 4,000 1,945 ________ ________ Increase/(decrease) in cash 450 (493) ________ ________ Reconciliation of net cashflow to movement in net debt Increase/(decrease) in cash 450 (493) Drawdown of loan (4,000) (2,000) Exchange movements (27) - ________ ________ (3,577) (2,493) Movement in net funds in year Opening net funds (6,028) (3,535) ________ ________ Closing net funds (9,605) (6,028) ________ ________ Notes to the Financial Statements For the year ended 30 September 2006 1 Accounting policies (a) Basis of accounting The financial statements have been prepared under the historical cost convention, as modified to include the revaluation of investments, and in accordance with applicable UK Accounting Standards and with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies' (issued January 2003 and revised in December 2005). They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements and the net asset value per share figures have been prepared in accordance with UK Generally Accepted Accounting Principles (UK GAAP). The new Financial Reporting Standards, issued as part of the programme to converge UK GAAP with International Financial Reporting Standards (IFRS), were applicable for the accounting period ended 30 September 2006 and the financial statements for the year ended 30 September 2005 have also been restated. The main change arising from these revisions to UK GAAP, in relation to the Company's financial statements, is that dividends to shareholders declared after the balance sheet date are now shown in the period of payment rather than in the reporting period. Dividends were previously recognised in the statement of total return (now Income Statement). These are now dealt with as an appropriation of equity and are taken directly through equity in the reconciliation of movements in shareholders' funds. Further information relating to the change to the basis of valuation of investments may be found in Accounting Policy (b). (b) Valuation of investments Investments have been designated upon initial recognition as fair value through profit or loss. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are measured initially at fair value. Subsequent to initial recognition, investments are valued at fair value through profit or loss. For listed investments, this is deemed to be bid market prices or closing prices for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange electronic trading service covering most of the market including all FTSE 100 constituents and most liquid FTSE 250 along with some other securities. Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the income statement and are ultimately recognised in the unrealised capital reserve. (c) Income Income from equity investments (other than special dividends), including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are credited to revenue or capital according to the circumstances. Foreign income is converted at the exchange rate applicable at the time of receipt. Interest receivable on short term deposits is accounted for on an accruals basis. (d) Expenses and interest payable Expenses are accounted for on an accruals basis. Expenses are charged to capital when they are incurred in connection with the maintenance or enhancement of the value of investments. In this respect, the investment management fee and relevant finance costs are allocated between revenue and capital in line with the Board's expectation of returns from the Company's investments over the long term in the form of revenue and capital respectively. Transaction costs incurred on the purchase and disposal of investments are recognised as a capital item in the Income Statement. (e) Dividends payable Interim and final dividends are recognised in the period in which they are paid. (f) Realised capital reserve Realised gains and losses on realisation of investments held at fair value are recognised in the income statement and are ultimately transferred to the realised capital reserve. In addition, any prior unrealised gains or losses on such investments are transferred from the unrealised capital reserve to the realised capital reserve on disposal of the investment. The capital element of the management fee along with the associated irrecoverable VAT and relevant finance costs are charged to this reserve. Any associated tax relief is credited to this reserve. (g) Unrealised capital reserve Increases and decreases in the valuation of investments held at fair value are recognised in the income statement and are ultimately transferred to the unrealised capital reserve. (h) Taxation Deferred taxation is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the balance sheet date measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying temporary differences can be deducted. Temporary differences are differences arising between the Company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Owing to the Company's status as an investment trust company, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. (i) Foreign currency Overseas monetary assets and liabilities are converted into Sterling at the rate of exchange ruling at the Balance sheet date. Transactions during the year involving foreign currencies are converted at the rate of exchange ruling at the transaction date. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the Income Statement. 2 The final dividend, subject to shareholder approval at the Annual General Meeting on 20 December 2006, will be paid on 22 December 2006 to shareholders on the register at the close of business on 24 November 2006. The ex-dividend date will be 22 November 2006. 3 This preliminary statement is not the Company's statutory accounts. The statutory accounts for the year ended 30 September 2005 have been delivered to the Registrar of Companies and received an audit report which was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report, and did not contain statements under section 237(2) and (3) of the Companies Act 1985. The statutory financial statements for the year ended 30 September 2006 have not yet been approved, audited or filed with the Registrar of Companies. These statutory financial statements will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held at The Great Eastern Hotel, 40 Liverpool Street, London EC2M 7QN at 11.00am on Wednesday 20 December 2006. 4 The Annual Report and Financial Statements will be posted to shareholders in November 2006 and copies will be available from the investment manager and Secretaries. For Standard Life Equity Income Trust PLC Aberdeen Asset Management PLC, Secretaries END This information is provided by RNS The company news service from the London Stock Exchange

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