Annual Financial Report

RNS Number : 0925L

Standard Life Euro Pri Eqty Tst PLC

05 January 2009

STANDARD LIFE EUROPEAN PRIVATE EQUITY TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2008

Further to the voluntary disclosure of the Company's annual results for the year ended 30 September 2008 by way of a preliminary announcement dated 1 December 2008, in accordance with the Disclosure and Transparency Rules ('the Rules') 4.1.3 and 6.3.5(2) this announcement contains the text of the preliminary announcement dated 1 December 2008 together with the additional text in compliance with the Rules.

The Company's annual report and financial statements for the year ended 30 September 2008, which have been filed with the UK Listing Authority Document Disclosure team, are attached at the end of this announcement, and are available on the website at http://slcapitalpartners.com

FINANCIAL SUMMARY

	As at	As at	As at	Launch
	30 September	30 September	30 September	29 May
Performance	2008	2007	2003	2001
Capital return
Net asset value per ordinary share (undiluted)	234.8p	241.3p	93.6p	98.7p

Net asset value per ordinary share (diluted)	231.4p	237.7p	93.6p	98.7p

Share price	161.0p	226.5p	82.0p	100.0p

FTSE All-Share Index (1)	2,483.7	3,316.9	2,027.7	2,852.7

MSCI Europe Index (in Sterling) (1)	802.9	1,049.4	586.2	851.3

	Year to	5 years to
	30 September 2008	30 September 2008	Since launch
Performance: percentage change	%	%	%
Capital return
Net asset value per ordinary share (undiluted)	(2.7)	150.8	137.9

Net asset value per ordinary share (diluted)	(2.7)	147.2	134.5

Share price	(28.9)	96.3	61.0

FTSE All-Share Index (1)	(25.1)	22.5	(12.9)

MSCI Europe Index (in Sterling) (1)	(23.5)	37.0	(5.7)

	30 September	30 September
Income returns, discount and expense ratio	2008	2007
Revenue return per ordinary share (undiluted) (2)	0.89p	4.38p

Revenue return per ordinary share (diluted) (2)	0.88p	4.31p

Declared dividend per ordinary share	0.70p	3.50p

Discount (difference between share price and net asset value)	30.4%	4.7%

Expense ratio
- as a % of average shareholders' funds	0.99%	0.97%


Highs/Lows in year ended 30 September 2008	High	Low
Share price (mid)	242.0p	161.0p

(1) The Company has no defined benchmark; the indices above are solely for comparative purposes.

(2) The allocation of the management fee and finance costs between the revenue and capital accounts is 10:90.

CHAIRMAN'S STATEMENT

Results and performance

For the year ended 30 September 2008 the Company's net asset value per ordinary share ('NAV') fell by 2.7% to 234.8p (diluted NAV - 231.4p) (30 September 2007 - undiluted NAV 241.3p; diluted NAV 237.7p). The overall result conceals different underlying performance in each half year; the Company, aided by currency gains, made good progress in the six months to 31 March 2008, thereafter it was impacted by weakness in the financial markets and in the broader European economy.

The closing mid-market price of the Company's ordinary shares on 30 September 2008 was 161.0p (30 September 2007 - 226.5p), a fall of 28.9% over the year. Underlying this fall in the share price was an increase in the discount to NAV, from 4.7% at the start of the year to 30.4% at the year end. The Company's share price has fallen further since 30 September 2008 and the discount to NAV has widened. The rating of the Company's shares, however, has been similar to that of comparable listed private equity vehicles. The Company's share register has also remained stable during the last six months.

Private equity is a long-term asset class and performance must be assessed over appropriate time periods. For the five years ended 30 September 2008 the Company's NAV and share price have out-performed the two most relevant stock market indices, increasing by 147.2% and 96.3% respectively, compared to rises of 22.5% in the FTSE All-Share Index and 37.0% in the MSCI Europe Index (sterling adjusted). The Company's NAV and share price have also out-performed these indices over the period from the Company's listing in May 2001.

The Company's practice has been to pay a final dividend marginally in excess of the minimum required to maintain investment trust status. The fall in income received by the Company during the last year is largely the result of a slow down in realisation activity and means that the Board, in line with historic practice, recommends a final dividend of 0.7p per ordinary share (year ended 30 September 2007 - 3.5p). Subject to shareholder approval at the forthcoming Annual General Meeting, this dividend will be paid on 30 January 2009 to shareholders on the Company's share register as at 5 January 2009. Further to the extraordinary general meeting on 22 September 2008, shareholders may elect to receive the final dividend in the form of ordinary shares. A circular and an election form are enclosed with the Company's annual report and accounts.

Valuation

As at 30 September 2008 the Company's portfolio comprised 49 private equity fund interests. The portfolio rose in value during the year as a result of net new investment activity, partly offset by net unrealised losses. As at 30 September 2008 the value of the portfolio was £412.1 million (30 September 2007 - £322.6 million), of which net unrealised losses arising during the year were £42.8 million (year ended 30 September 2007 - £5.1 million unrealised gains). The net unrealised losses arose from the combined effect of lower comparable listed valuation multiples, partly offset by favourable exchange rate movements and positive trading and cashflow generation at many underlying investee companies.

Given the volatility of financial markets and uncertain trading conditions, particular care has been exercised to ensure that the 30 September 2008 valuation is timely. Around 98.5% by value of the private equity funds held by the Company were valued as at 30 September 2008, either on a detailed holding by holding basis by the relevant fund manager or by the Company's Manager, SL Capital Partners LLP. This latter review led SL Capital Partners to make downward adjustments, as permitted under the Company's accounting policies, to a number of fund valuations to take account of the level of listed markets as at 30 September 2008 in arriving at an appropriate fair value.

Aggregate cash and money market balances fell, particularly during the second half of the year, as a result of the slow down in realisations and a continuing high level of draw downs. Specifically, the Company had cash and money market balances totalling £64.2 million as at 30 September 2007, whilst its net indebtedness was £36.4 million as at 30 September 2008. Subsequent to the year end, the rate of draw downs has fallen and the Company's net indebtedness was £37.1 million as at 24 November 2008.

Exchange rates had a positive impact on NAV, notably during the first half of the year. Over the full year sterling depreciated by 11.4% relative to the euro and by 12.5% relative to the US dollar. Of the Company's gross assets of £415.7 million as at 30 September 2008, £322.0 million (sterling equivalent) comprised euro denominated assets and £50.4 million (sterling equivalent) dollar denominated assets (30 September 2007 - £387.2 million (gross assets), £271.6 million (euro denominated) and £54.1 million (dollar denominated)).

Investment activity

The first nine months of 2008 saw a significant fall in the value of private equity transactions concluded in Europe, most notably amongst the larger deals, as the impact of a weakening macro-economic environment, declining listed markets and a limited availability of debt constrained the completion of transactions in all but the most defensive of sectors. The value of transactions completed in the European private equity market during this nine month period was €76.0 billion (nine months ended 30 September 2007 €166.0 billion). Quantum apart, the other major change was that in structuring transactions private equity managers funded on average around 45% of the purchase price with equity, compared to an average of 33.6% in 2007. The managers of the funds invested in by the Company were more active than many others during the last year and this, and the factors above, resulted in draw downs of £155.2 million for the year ended 30 September 2008 (30 September 2007 - £137.6 million).

The decline in financial markets and mergers and acquisitions activity resulted in a significant fall to £61.5 million in distributions received by the Company (year ended 30 September 2007 - £156.5 million). Of the distributions received, £36.8 million represented net realised gains and £1.7 million income (year ended 30 September 2007 - £89.1 million and £8.1 million respectively). The average return on the Company's acquisition cost of realised investments remained a healthy 2.7 times (year ended 30 September 2007 - 2.6 times), reflecting the fact that many realised transactions had been acquired originally at lower purchase price multiples and had seen significant value accretion through profit and cashflow improvements.

Three new fund commitments totalling £138.1 million were made during the year, underlining the Manager's previously stated caution in making new fund commitments against a background of difficult market conditions. The new fund commitments were £53.2 million to Advent Global Private Equity VI, £51.2 million to CVC European Equity Partners V and £33.7 million to TowerBrook Investors III. All of these funds are buy-out funds and are the successor funds to existing funds in the Company's portfolio. These fund commitments can be expected to be drawn down over the next 4-5 years. In light of current market conditions and the Company's cashflows, the Board and the Manager are imposing stringent criteria to any further new fund commitments, whilst remaining sensitive to an overly defensive approach which could affect the Company's long-term development.

The Company's aggregate outstanding commitments were £389.2 million as at 30 September 2008 (30 September 2007 - £366.0 million). These commitments will be funded from the Company's existing cash, distributions received from the portfolio of fund investments and the use of the Company's borrowing facility. Since the financial year end the Company has entered into a new £100 million three year syndicated revolving credit facility, led by The Royal Bank of Scotland plc.

The Board

Simon Edwards, who has served on the Board since the Company's listing in 2001, is meeting increased demand on his time from his own successful business and, to the regret of his colleagues, intimated some time ago that he wished to step down from the Board after the Annual General Meeting in January 2009. Simon's extensive knowledge of the fund management business has been of immense value to his colleagues, providing a perspective for private equity in the context of alternative asset classes. We will all miss his significant contribution and I am sure shareholders will join the Board in wishing Simon every success in the future.

The Board has appointed Edmond Warner as a Director. Mr Warner has a background in investment management and research and, more recently, as chief executive of a major UK retail financial services group. He is now a non-executive director of a range of companies and is Chairman of UK Athletics.

Outlook

The valuation of the Company's portfolio and NAV was undertaken as at 30 September 2008. Subsequently there has been a further fall in global stock market indices and a weakening in the macro-economic environment. Both factors are likely to impact negatively on the 31 December 2008 valuation of the Company's portfolio of private equity fund interests. Meantime, the focus of the managers of the fund interests held by the Company is on supporting and developing their underlying investee companies, so as to protect and enhance value in this challenging environment. Looking ahead, historic experience indicates that weak macro-economic conditions, and consequentially lower corporate earnings and valuation multiples, also provide good buying opportunities for private equity.

The Board and the Manager continue to believe that, in an asset class that traditionally has demonstrated a high dispersion of return but one where the best managers have been able to deliver repeated out-performance, appropriate manager selection is vital. In this regard the Manager has a strong track record.

Scott Dobbie CBE

Chairman

28 November 2008

INVESTMENT POLICY

The objective of the Company is to achieve long-term capital gains through holding a diversified portfolio of private equity funds investing predominantly in Europe.

The principal focus of the Company is the leading European private equity funds investing in mid to large sized buy-outs, typically transactions with an enterprise value of between €200 million and €1.65 billion (approximately £160 million - £1.30 billion sterling equivalent).

The Company invests in private equity funds which themselves invest principally in countries in Europe, which the Manager defines as EU Member States, EU Associate Member States and other western European countries. However, the Company has the flexibility to invest up to 20% of its gross assets, at the time of purchase, in private equity funds which invest principally outside Europe.

The Company's policy is to maintain a broadly diversified portfolio by country, industry sector, maturity and number of underlying investments. The objective is for the portfolio to comprise around 35 - 40 'active' private equity fund investments; this excludes funds that have recently been raised, but have not yet started investing, and funds that are close to or being wound up.

The Company invests only in private equity funds, but occasionally may hold direct private equity investments or quoted securities as a result of distributions in specie from its portfolio of fund investments. The Company's policy is normally to dispose of such assets where they are held on an unrestricted basis.

The Company's non-sterling currency exposure is principally to the euro. The Company does not seek to hedge this exposure into sterling, although any borrowings in euros and other currencies in which the Company is invested would have such a hedging effect.

Cash held pending investment is invested in short dated government bonds, money market instruments, bank deposits or other similar investments.

To maximise the proportion of invested assets it is the Company's policy to follow an over-commitment strategy by making fund commitments which exceed its uninvested capital. In making such commitments, the Manager, together with the Board, will take into account the uninvested capital, the quantum and timing of expected and projected cashflows to and from the portfolio of fund investments and, from time to time, may use borrowings to meet draw downs.

The Company's maximum borrowing capacity is defined in its Articles of Association, and, unless otherwise sanctioned by an ordinary resolution of the Company, is an amount equal to the aggregate of the amount paid up on the issued share capital of the Company and the amount standing to the credit of the consolidated reserves of the Company, all based on the latest audited consolidated balance sheet. It is expected that bank borrowings would not exceed more than 30% of the Company's net assets.

To comply with one of the conditions for approval as an investment trust, the Company will ensure that when all of its holdings in private equity funds are aggregated, no one underlying investment will represent, at the time of purchase, more than 15% by value of all of the Company's investments. The Company will not invest more than 15% of its total assets in other listed investment companies or listed investment trusts.

The Board has concluded, after careful consideration, that there is no currently available benchmark which is an appropriate measure of the investment performance of the Company. It has, however, resolved to review this issue at least annually.

Information on how the Company has invested its assets with a view to spreading investment risk in accordance with its investment policy during the year under review is set out in the Manager's Review.

MANAGER'S REVIEW

Executive Summary

The Manager, SL Capital Partners LLP, is one of Europe's largest private equity investors and comprises a team of 14 investment professionals with over 170 years of combined private equity experience.
The European private equity market has been impacted by the deteriorating macro-economic environment and limited availability of debt. As a result, both new investment and realisation activity have declined substantially. Market conditions will continue to be challenging for the remainder of 2008 and 2009, but not without opportunity as private equity managers should be able to acquire attractive assets at reduced prices.
As at 30 September 2008 the Company's net assets were £375.5 million (30 September 2007 - £385.7 million). The Company had interests in 49 private equity funds with a value of £412.1 million (30 September 2007 - 48 funds and £322.6 million). The valuation of the Company's private equity fund interests reflected the difficult market environment with unrealised losses during the year of £42.8 million (year ended 30 September 2007 - £5.1 million unrealised gains).
A decline in realisations resulted in distributions received by the Company falling to £61.5 million (year ended 30 September 2007 - £156.5 million), of which £38.5 million comprised net realised gains and income (year ended 30 September 2007 - £97.2 million). Distributions represented an average multiple of 2.7 times the acquisition cost of realised investments (year ended 30 September 2007 - 2.6 times).
Draw downs paid during the year were £155.2 million (year ended 30 September 2007 - £137.6 million).
New fund commitments totalled £138.1 million to three funds (year ended 30 September 2007 - £191.7 million to six funds).
Given current market conditions and the Company's cash flows, the Manager remains cautious and will consider carefully the making and timing of any further new fund commitments.
The effect of the changing drawdown/distribution profile was to reduce aggregate cash and money market balances, particularly during the second half of the year. As at 30 September 2008 net indebtedness was £36.4 million; this compares to a cash and money market balance of £64.2 million as at 30 September 2007.
Since 30 September 2008 the Company has entered into a new £100 million three year syndicated revolving credit facility, led by The Royal Bank of Scotland plc.

Manager

The Manager of the Company is SL Capital Partners LLP ('SL Capital'), which is based in Edinburgh and comprises a team of 14 investment professionals with over 170 years of combined private equity experience. This team manages approximately £5.0 billion of private equity investments on behalf of over 150 clients worldwide, including Standard Life plc ('Standard Life'). SL Capital, a limited liability partnership, is 60% owned by Standard Life and 40% by its nine senior private equity managers.

Importantly, as one of Europe's largest private equity investors, the Manager is able to invest in Europe's premier private equity funds, where access is often restricted to investors that have long-term relationships with the underlying manager and/or can make sizeable commitments to their funds.

European private equity market

The macro-economic environment deteriorated during the first nine months of 2008, as the global economy started to feel the strains of rising inflation, a lack of liquidity and the start of a downturn in consumer and business demand. Against this background, the positive trends that persisted in the European private equity market through 2006 and most of 2007 have reversed, especially in the buy-out segment of the market. During the first nine months of 2008 the total value of all European private equity transactions was €76.0 billion, down from a record €166.0 billion in the comparable period in 2007. Over the same period, the overall number of buy-out transactions decreased from 616 to 492, with the number of individual transactions in excess of €1.65 billion falling significantly from thirteen to five. The limited availability of debt constrained such larger deals, with the small number of buy-outs in excess of €1.65 billion accounting for 18.1% by value of all buy-out transactions undertaken, a decline from 35.9% in the comparable period in 2007. Those larger transactions that did complete during the period tended to be in defensive sectors, with the most notable of these large buy-outs being the €2.99 billion buy-out of waste management company, Biffa Waste Services, by Montagu and Global Infrastructure Partners.

Market conditions during the first nine months of 2008 were unfavourable for exits and re-capitalisations. As the availability of debt on generous multiples and terms has declined, secondary buy-outs are now a less common exit route, while falls in listed equity markets have essentially suspended private equity backed initial public offerings. In general, vendors of companies have been slow to accept that the market has changed and that valuations will be lower. Private equity managers are focusing on their portfolio companies, which are being carefully managed to protect and enhance value, and where possible, to support growth plans. This approach may require additional follow-on investments and will inevitably lead to longer investment holding periods.

As a result of the credit crisis, debt availability is much more limited for buy-out transactions, with facilities offered at only considerably increased margins and on far more stringent terms and conditions. Fortunately, it is the largest, or 'mega', deals that are being affected the most. Mid to large sized buy-out transactions, the Manager's principal area of focus, continue to have some access to debt facilities, often from a syndicate of local banks. The quantum of debt available as a multiple of a target company's earnings has declined, which over time should help reduce the acquisition price of companies. In the interim, however, private equity managers have increased the proportion of the purchase price funded with equity from an average of 33.6% in 2007 to around 45% in 2008.

This change in market conditions is likely to continue to slow the pace of new transactions over the coming months. Consequently, some managers will not return to the market with their next fund raising for three to four years, compared to the two to three year fund raising cycle we have seen in recent years.

Portfolio composition and performance

As at 30 September 2008 the Company's portfolio comprised 49 private equity fund interests and no direct private equity holdings (30 September 2007 - 48 private equity fund interests and no direct private equity holdings). As at that date the Company had six fund investments - Pomona Capital V, Pomona Capital VI, Coller International Partners IV, Coller International Partners V, Towerbrook Investors II and Towerbrook Investors III which are likely to invest a majority of their capital outside Europe. In total these funds represent 9.5% of the Company's gross assets.

The split of the Company's portfolio by type of private equity fund is set out in the bar chart on page 6 of the attached document*. Details of all of the Company's private equity fund investments, and more detailed information on the ten largest fund investments and thirty largest underlying portfolio companies, can be found below.

As at 30 September 2008 the value of the Company's portfolio of private equity fund interests was £412.1 million (30 September 2007 - £322.6 million) which, together with its current assets less liabilities, resulted in the Company having net assets of £375.5 million (30 September 2007 - £385.7 million). This represented an undiluted NAV of 234.8p (diluted NAV - 231.4p) (30 September 2007 - undiluted NAV 241.3p; diluted NAV 237.7p). A breakdown of the £10.2 million movement in the Company's net assets during the year is detailed in Table 1.

Table 1 Movement in net assets	Investment portfolio £’000	Cash and other net assets £’000	Total net assets £’000

Opening balance	322,633	63,074	385,707
Draw downs unquoted investments	155,184	(155,184)	-
Opening cost of unquoted realisations during the period	(22,947)	22,947	-
Realised gains on unquoted investments	-	36,833	36,833
Income earned	-	1,690	1,690
Realised gains on ‘AAA’, & income cash/other assets	-	3,882	3,882
Conversion of founder shares	-	95	95
Unrealised losses at constant exchange rate	(80,483)	-	(80,483)
Impact of foreign exchange rates	37,697	(24)	37,673
Expenses and tax	-	(4,287)	(4,287)
Dividend paid	-	(5,597)	(5,597)
Closing balance	412,084	(36,571)	375,513

The valuation of the Company's private equity fund interests for the year ended 30 September 2008 was carried out by the Manager and has been approved by the Board in accordance with the accounting policies set out on in note 1 of the accounts. In undertaking the valuation, the most recent valuation of each fund prepared by the relevant fund manager has been used, adjusted where necessary for subsequent cash flows. The fund valuations are generally prepared in accordance with the European Private Equity and Venture Capital Association's ('EVCA') and the British Private Equity and Venture Capital Association's ('BVCA') valuation guidelines. Revised valuation guidelines were issued by the EVCA and the BVCA at the beginning of 2005 in recognition of changes to international accounting standards. These revised guidelines require investments to be valued at 'fair value', which is an estimate of the amount that an asset could be exchanged for between knowledgeable, willing parties in an arm's length transaction. Fair value may be calculated in a number of ways and, where appropriate, a marketability discount should be applied.

Of the 49 private equity funds in which the Company is invested, around 98.5% of the portfolio by value was valued as at 30 September 2008, either on a detailed holding by holding basis by the relevant fund manager or by the Company's Manager, SL Capital Partners LLP. The Manager continues to believe that the use of such timely valuation information is important. In undertaking the valuation the Manager has used its discretion, under the Company's accounting policies, to make downward adjustments to ten individual fund manager's valuations. These adjustments were made to take account of the fall in listed markets between 30 June and 30 September 2008 so as to arrive at an appropriate fair value. In aggregate, the downward adjustments amounted to £15.6 million (equivalent to 9.8 pence per share). As market conditions have continued to deteriorate since 30 September 2008, this is likely to have a negative impact on the 31 December 2008 valuation of the Company's portfolio of private equity fund interests.

The movement in the value of the Company's portfolio of private equity fund interests during the year was an unrealised loss of £42.8 million (year ended 30 September 2007 - £5.1 million unrealised gain). The unrealised loss on the portfolio arose largely from lower comparable listed valuation multiples.

Information on the valuation movements and realised gains and income for the Company's portfolio for each of the financial years since the Company's listing is set out on page 12 of the attached document*. These tables provide a useful summary of the individual movements and the underlying trends in the Company's portfolio over time.

During the year sterling depreciated against the euro by 11.4% and depreciated against the US dollar by 12.5%. This had a positive impact on the Company's NAV. The closing sterling/euro foreign exchange rate was £1/€1.2690 (30 September 2007 - £1/€1.4326) and the closing sterling/dollar foreign exchange rate was £1/$1.7825 (30 September 2007 - £1/$2.0374). The combined effect of foreign exchange movements on the valuation of the portfolio over the year was a 23.6p uplift in NAV. The Manager and Board do not believe it is appropriate for the Company to undertake any financial hedging of its foreign exchange exposure, given the irregularity in size and timing of individual cashflows to and from its fund interests. Any cash balances are generally held in such currencies so as to be in proportion to the currency of outstanding commitments.

As at 30 September 2008 the Company's net indebtedness was £36.4 million (30 September 2007 - aggregate cash and money market holdings of £64.2 million). Since 30 September 2008 the Company has entered into a new £100 million three year syndicated revolving credit facility, led by The Royal Bank of Scotland plc. This replaced the previous £60 million facility. As at 24 November 2008 the Company's net indebtedness was £37.1 million.

Distributions, gains and income

During the year ended 30 September 2008 the Company's portfolio of private equity fund interests generated aggregate distributions of £61.5 million (year ended 30 September 2007 - £156.5 million), comprising net realised gains of £36.8 million (year ended 30 September 2007 - £89.1 million) and income of £1.7 million (year ended 30 September 2007 - £8.1 million). The significant fall in the quantum of distributions reflected the decline in financial markets and a reduction in European private equity mergers and acquisitions activity during the financial year. It is encouraging to note, however, that many of the individual company realisations were at a significant premium to the last reported valuation.

Private equity managers are using a number of differing exit routes for investments and the distributions received by the Company included proceeds from trade sales and, to a lesser extent, flotations, re-capitalisations and secondary buyouts. The average return during the year on the Company's acquisition cost of realised investments was 2.7 times (year ended 30 September 2007 - 2.6 times).

The average return for realised investments since the Company's listing has varied from 1.2 times in the period to 30 September 2001 to in excess of 2.0 times for the last four financial years. A bar chart showing the average return multiple in each financial year is set out on page 8 of the attached document*. The rise in the average return multiple since the year ended 30 September 2003 can be attributed largely to the previous strength of the European private equity, debt and mergers and acquisitions markets and strong underlying profit growth at the underlying investee companies. The recent significant falls in listed financial markets and a much weaker macro-economic environment is likely to see a reduction in the average return for realised investments. In particular, investments made during 2006 and 2007, at generally higher prices, will be most affected.

The largest distributions, gains and income, broken down by fund, received during the year ended 30 September 2008 are set out in Table 2.

Table 2 Largest fund distributions during the year	Aggregate distributions	Aggregate realised gains	Aggregate income received
	£m	£m	£m

Industri Kapital 2004	8.4	7.2	0.1
Advent Global Private Equity IV	7.7	6.2	-
Candover 2001 Fund	6.3	3.3	0.4
MUST 4	5.9	2.6	-
Advent Global Private Equity V	5.5	4.3	-
Barclays Private Equity European Fund II	4.1	2.7	-
Apax Europe IV	3.1	2.2	-
Third Cinven Fund	3.1	2.0	0.1
Candover 2005 Fund	2.9	2.1	-
Total of largest distributions	47.0	32.6	0.6
Total of all distributions during year	61.5	36.8	1.7

Commitments

As reported in the Chairman's Statement, the Company adopted a more cautious approach to making new commitments during the second half of the financial year ended 30 September 2008. New fund commitments totalled £138.1 million to three funds during the year ended 30 September 2008. This follows on from an active commitment programme in the previous financial year, when £191.7 million was committed to six funds. Details of the new fund commitments made in the year ended 30 September 2008 are set out in Table 3.

Table 3 New Fund Commitments	Commitment £m	Type of Fund

Advent Global Private Equity VI	53.2	Buy-out
CVC Europe V	51.2	Buy-out
TowerBrook Investors III	33.7	Buy-out
Total	138.1

The objective is for the Company to be fully invested on a cash basis. This requires estimates of the speed and size of distributions from investee funds, as well as projections of their rate of draw downs. Given the Manager's view on projected cashflows, the Company has been able to make and finance significant new fund commitments. As at 30 September 2008 the Company had £389.2 million of outstanding fund commitments (30 September 2007 - £366.0 million). As at 24 November 2008, the Company had £413.8 million of outstanding fund commitments.

Over the period since listing the Company has made £896.7 million of new fund commitments and has funded draw downs of £561.0 million. During this time the Company's outstanding fund commitments less its liquid resources (AAA rated money market funds, cash and short term deposits), expressed as a percentage of the Company's disclosed net asset value has varied between 23.7% and 102.7%. A bar chart setting out the relevant percentages at each annual reporting date, from listing to 30 September 2008, is set out on page 9 of the attached document*.

The bar chart demonstrates that the Company has been over-committed since late 2001, in line with the Manager's objective of maximising the invested assets. This over-commitment strategy has helped enhance overall returns generated by the Company. The percentages shown in the bar chart have varied over time according to the quantum of liquid resources held by the Company, the rate of draw downs made and distributions received and, importantly, the fund raising cycle of the leading private equity managers in Europe. Given current market conditions and the Company's cash flows, the Manager remains cautious and will consider carefully the making and timing of any further new commitments.

Draw downs

As previously reported, the Company funded £155.2 million of draw downs during the year ended 30 September 2008 (30 September 2007 - £137.6 million). Over the last 3 years the quantum of draw downs has increased as a result of the high level of new investment activity in the European private equity market and the impact of the Company's growing fund commitments. The Manager expects the quantum of draw downs to reduce significantly during the remainder of 2008 and 2009 as the European private equity market continues to contract. The private equity funds to which the Company made the largest draw downs during the year are set out in Table 4.

Table 4 Largest fund drawdowns during the year	Type of Fund	Aggregate draw downs
		£m
Candover 2005 Fund	Buy-out	16.6
Barclays Private Equity European Fund III	Buy-out	15.0
Charterhouse Capital Partners VIII	Buy-out	11.9
CVC Tandem	Buy-out	11.3
Fourth Cinven Fund	Buy-out	10.6
Apax Europe VII	Buy-out	10.3
Industri Kapital 2007	Buy-out	8.9
CVC Europe V	Buy-out	7.6
3i Eurofund V	Buy-out	7.1
Permira IV	Buy-out	7.0
Total of largest draw downs		106.3
Total of all draw downs during the year		155.2

Diversification

The Board has agreed, and regularly reviews, diversification limits with the Manager regarding the Company's net asset and commitment exposure to both individual private equity funds and their managers. The Manager also monitors the Company's exposure to the underlying investments held by the different private equity funds in which the Company is invested. As at 30 September 2008, the Company was invested in 49 different private equity funds, which collectively had interests in a total of 580 underlying investments (30 September 2007 - 48 funds and 489 underlying investments).

Analysis of the underlying investments held by the different private equity funds allows the Manager to track the Company's exposure by geography, industrial sector, maturity of investment and valuation methodology employed by the relevant fund managers in valuing their investments. Such information is used by the Manager in reviewing the overall exposure of the Company's portfolio, in assisting it to make new investment decisions and in having a better understanding of the timing of prospective cashflows.

As at 30 September 2008 and 2007 the Company's private equity fund interests were diversified as set out in the bar charts shown on page 11 of the attached document*.

The charts demonstrate the broad diversification that applies by geography and by sector within the Company's underlying portfolio of investments. The UK still remains the single largest geographic exposure, although it has fallen from 64% at the time of the Company's listing to 31% as at 30 September 2008 as other European private equity markets continue to grow. The broad sectoral diversification helps to mitigate the effect of volatility in any individual sector, while the focus on the services, financials and consumer goods sectors reflects the higher growth rates and free cashflow often associated with businesses in these areas.

Prospects

The European private equity market has entered a significant downturn following a period of sustained growth. Market conditions have continued to deteriorate since 30 September 2008 and this is likely to have a negative impact on the 31 December 2008 valuation of the Company's portfolio of private equity fund interests.

The remainder of 2008 and 2009 is likely to be challenging, but not without opportunity. It is likely that fewer transactions will be concluded and existing investments sold, with a commensurate increase in average holding periods for underlying investments. Only the best private equity managers, namely those who can add value to, and achieve demonstrable change at, underlying investee companies will continue to produce strong performance through the careful selection of investments and implementation of value enhancement plans. Notwithstanding such changes in the market, experience has shown that weaker economic conditions can create investment opportunities at reduced prices that should be realised eventually in a stronger environment.

(* Please note that the bar charts referred to above are provided in the 2008 Annual Report and Accounts attached to this announcement).

SL Capital Partners LLP

28 November 2008

FUND INVESTMENTS

as at 30 September 2008

The private equity funds in which the Company invests usually take the form of limited partnerships. Contractual commitments are made to the funds and these are drawn down by the managers of the funds as required for investment over time. Details of all of the Company's fund investments, by valuation, and a description of the ten largest fund investments follow:

Year of commitment	Fund	Type	Number of investments	Valuation date*	Outstanding commitment's £000	Cost £000s	Valuation £000	% of Net Assets
2005	Candover 2005 Fund	Buy-out	10	30.09.2008	8,836	33,078	30,664	8.2
2006	Charterhouse VIII	Buy-out	10	30.09.2008	12,095	31,194	26,604	7.1
2006	Fourth Cinven Fund	Buy-out	10	30.09.2008	25,400	27,209	23,437	6.2
2007	Barclays Private Equity European Fund III	Buy-out	19	30.09.2008	23,380	22,802	22,381	6.0
2001	Alchemy Investment Plan	Buy-out	8	30.09.2008	-	12,471	21,092	5.6
2005	CVC Europe IV	Buy-out	17	30.09.2008	3,784	16,314	19,186	5.1
2005	Barclays Private Equity European Fund II	Buy-out	25	30.09.2008	3,096	11,225	17,554	4.7
2007	Apax Europe VII	Buy-out	14	30.09.2008	28,133	17,899	15,966	4.3
2004	Apax Europe VI	Balanced	21	30.09.2008	3,054	10,274	15,127	4.0
2006	HG Capital 5	Buy-out	14	30.09.2008	5,429	13,512	14,834	4.0
2006	3i Eurofund V	Buy-out	22	30.09.2008	15,131	14,235	13,869	3.7
2006	CVC Tandem	Buy-out	8	30.09.2008	15,400	16,743	13,624	3.6
2005	Advent Global Private Equity V	Buy-out	17	30.09.2008	2,394	11,524	12,680	3.4
2005	Pomona Capital VI Fund	Secondary	41	30.09.2008	2,584	9,648	11,423	3.0
2005	Montagu III	Buy-out	7	30.09.2008	6,791	9,013	10,246	2.7
2001	Third Cinven Fund	Buy-out	10	30.09.2008	1,567	9,328	9,910	2.6
2007	Industri Kapital 2007	Buy-out	3	30.09.2008	29,992	8,861	9,444	2.5
2001	Candover 2001 Fund	Buy-out	9	30.09.2008	374	10,797	9,327	2.5
2006	Towerbrook Investors II	Buy-out	10	30.09.2008	4,275	8,802	9,163	2.4
2006	Permira IV	Buy-out	10	30.09.2008	18,937	14,898	9,023	2.4
2001	CVC Europe III	Buy-out	12	30.09.2008	1,409	5,728	8,799	2.3
2004	Industri Kapital 2004	Buy-out	8	30.09.2008	228	8,111	7,912	2.1
2002	Duke Street Capital V Fund	Buy-out	6	30.09.2008	763	8,146	7,350	2.0
2008	CVC Europe V	Buy-out	1	30.09.2008	43,753	7,625	7,139	1.9
2002	Coller International Partners IV	Secondary	36	30.09.2008	2,693	1,685	6,919	1.8
2002	Charterhouse VII	Buy-out	7	30.09.2008	3,625	7,933	6,805	1.8
2002	Barclays Private Equity European Fund	Buy-out	11	30.09.2008	1,003	5,052	6,744	1.8
2005	BC European VIII	Buy-out	8	30.09.2008	10,497	6,572	6,114	1.6
2006	Terra Firma III	Buy-out	3	30.09.2008	14,072	11,335	5,632	1.5
2006	Coller International Partners V	Secondary	30	30.09.2008	15,933	4,945	5,551	1.5
2008	Advent Global Private Equity VI	Buy-out	5	30.09.2008	47,608	5,622	5,246	1.4
2001	Advent Global Private Equity IV	Buy-out	7	30.09.2008	1,891	1,184	4,525	1.2
2002	Pomona Capital V Fund	Secondary	75	30.09.2008	207	6,904	4,380	1.2
2001	MUST 4	Buy-out	11	30.09.2008	1,852	4,843	4,011	1.1
1999	Apax Europe IV	Balanced	13	30.09.2008	-	7,879	2,845	0.8
2001	SEP II	Venture capital	21	30.09.2008	-	4,272	2,480	0.7
2008	Towerbrook Investors III	Buy-out	1	30.09.2008	31,014	2,482	1,895	0.5
1999	CVC Europe II	Buy-out	8	30.09.2008	963	2,805	1,695	0.4
1997	Apax UK VI	Balanced	5	30.09.2008	-	3,713	278	0.1
1992	Midland Montagu Investissement FCPR	Buy-out	2	30.09.2008	-	430	68	0.0
1997	HEV III	Buy-out	2	31.12.2007	-	214	40	0.0
1996	Scottish Equity Partnership	Venture capital	14	30.09.2008	14	686	32	0.0
1995	Phildrew Fourth	Buy-out	1	30.09.2008	-	501	27	0.0
1998	Candover 1997 Fund	Buy-out	1	30.06.2008	568	535	17	0.0
1998	Phildrew Fifth	Buy-out	1	30.09.2008	193	5,864	14	0.0
1997	Charterhouse VI	Buy-out	2	30.09.2008	173	1,680	11	0.0
1995	Apax UK V	Balanced	4	30.09.2008	-	-	1	0.0
1995	Granville Private Equity Fund V	Buy-out	-	30.09.2008	93	-	-	0.0
1997	The Global Rights Development Fund	Development	-	31.12.2007	-	862	-	0.0

	Total portfolio investments		580		389,204	427,435	412,084	109.7
	Current assets less current liabilities						(36,571)	(9.7)
	Shareholders' funds						375,513	100.0

*valuation date refers to the date of the last valuation prepared by the manager of the relevant fund.

†the 580 underlying investments represent holdings in 559 separate companies.

FUND INVESTMENTS

as at 30 September 2007

Year of commitment	Fund	Type	Number of investments	Valuation date*	Outstanding commitments £000	Cost £000	Valuation £000	% of net Assets
2001	Alchemy Investment Plan	Buy-out	8	30.09.2007	-	12,619	20,827	5.4
2006	Charterhouse VIII	Buy-out	7	30.09.2007	22,022	19,287	19,780	5.1
2005	Candover 2005 Fund	Buy-out	7	30.09.2007	23,072	17,367	17,616	4.5
2006	Fourth Cinven Fund	Buy-out	5	30.09.2007	32,155	16,648	16,831	4.4
2001	Third Cinven Fund	Buy-out	10	30.09.2007	2,548	9,169	15,762	4.1
2001	Candover 2001 Fund	Buy-out	13	30.09.2007	802	12,807	15,660	4.1
2004	Apax Europe VI	Balanced	21	30.09.2007	3,054	10,177	15,358	4.0
2005	Barclays Private Equity European Fund II	Buy-out	30	30.09.2007	3,631	11,687	14,668	3.8
2005	CVC Europe IV	Buy-out	14	30.09.2007	7,433	12,375	14,003	3.6
2004	Industri Kapital 2004	Buy-out	10	30.09.2007	1,465	7,837	12,972	3.4
2001	Advent Global Private Equity IV	Buy-out	10	30.09.2007	1,675	2,691	10,185	2.6
2005	Advent Global Private Equity V	Buy-out	14	30.09.2007	5,576	8,869	10,079	2.6
2001	CVC Europe III	Buy-out	13	30.09.2007	1,419	5,520	9,497	2.5
2002	Charterhouse VII	Buy-out	8	30.09.2007	3,255	8,438	9,192	2.4
2002	Coller International Partners IV	Secondary	36	30.09.2007	2,650	3,416	8,086	2.1
2005	Pomona Capital VI Fund	Secondary	33	30.09.2007	3,588	8,646	8,072	2.1
2006	3i Eurofund V	Buy-out	12	30.09.2007	19,894	7,144	7,760	2.0
2006	Permira IV	Buy-out	6	30.09.2007	23,276	7,874	7,616	2.0
2002	Barclays Private Equity European Fund	Buy-out	12	30.09.2007	949	5,498	7,566	2.0
2007	Barclays Private Equity European Fund III	Buy-out	5	30.09.2007	34,075	7,807	7,545	2.0
2007	Apax Europe VII	Buy-out	7	30.09.2007	34,134	7,627	7,448	1.9
2006	HG Capital 5	Buy-out	7	30.09.2007	11,840	7,434	7,417	1.9
2001	MUST 4	Buy-out	18	30.09.2007	1,393	8,529	7,110	1.8
2002	Duke Street Capital V Fund	Buy-out	7	30.09.2007	1,311	7,257	6,255	1.6
2005	Montagu III	Buy-out	6	30.09.2007	8,587	6,130	6,149	1.6
2006	CVC Tandem	Buy-out	4	30.09.2007	23,925	5,613	5,735	1.5
1999	Apax Europe IV	Balanced	19	30.09.2007	-	8,543	5,447	1.4
2006	Towerbrook Investors II	Buy-out	8	30.09.2007	6,233	6,201	5,432	1.4
2002	Pomona Capital V Fund	Secondary	70	30.09.2007	574	6,847	4,915	1.3
2006	Terra Firma III	Buy-out	1	30.09.2007	18,294	5,285	4,470	1.2
1999	CVC Europe II	Buy-out	10	30.09.2007	843	2,856	2,585	0.7
2005	BC European VIII	Buy-out	5	30.06.2007	12,690	2,928	2,548	0.7
2006	Coller International Partners V	Secondary	2	30.09.2007	17,375	2,144	2,153	0.6
1997	Charterhouse VI	Buy-out	1	30.09.2007	173	1,680	1,664	0.4
2001	SEP II	Venture capital	22	30.06.2007	193	4,079	1,258	0.3
1996	The Primary Capital No.1 Fund	Buy-out	1	30.09.2007	65	1,095	799	0.2
1989	Apax European Buy-in Fund	Buy-in	1	30.09.2007	-	1,975	798	0.2
1997	Apax UK VI	Balanced	6	30.09.2007	-	3,888	655	0.2
1998	Phildrew Fifth	Buy-out	2	30.09.2007	193	5,921	209	0.0
1998	Candover 1997 Fund	Buy-out	1	30.09.2007	632	535	151	0.0
1992	Midland Montagu Investissement FCPR	Buy-out	2	30.09.2007	-	430	119	0.0
1996	Scottish Equity Partnership	Venture capital	8	31.03.2007	14	686	75	0.0
1995	Apax UK V	Balanced	3	30.09.2007	-	-	75	0.0
1995	Phildrew Fourth	Buy-out	2	30.09.2007	-	563	52	0.0
1997	HEV III	Buy-out	1	30.09.2007	-	214	39	0.0
1995	Granville Private Equity Fund V	Buy-out	-	30.09.2007	93	-	-	0.0
1997	The Global Rights Development Fund	Development	1	30.09.2007	-	862	-	0.0
2007	Industri Kapital 2007	Buy-out	-	30.09.2007	34,902	-	-	0.0

	Total portfolio investments†		489		366,003	295,198	322,633	83.6
	'AAA' rated money market funds						56,645	14.7
	Current assets less current liabilities						6,429	1.7
	Shareholders' funds						385,707	100.0

*valuation date refers to the date of the last valuation prepared by the manager of the relevant fund.

†the 489 underlying investments represent holdings in 460 separate companies.

TEN LARGEST FUND INVESTMENTS

As at 30 September 2008

Candover 2005 Fund

The Candover 2005 Fund is a €3.5 billion private equity fund focused on European buy-outs. The fund is managed by Candover Partners Limited, a subsidiary of Candover Investments plc. The Candover 2005 Fund is the manager's ninth fund since being founded in 1983. Historically, Candover has concentrated on larger buy-outs in the UK market, however, investments in continental Europe are now a significant part of the manager's strategy. The manager has opened offices in Paris, Madrid and Milan to support its European expansion.

Charterhouse VIII

Charterhouse Capital Partners VIII is a €4.0 billion private equity fund focused on European buy-outs. The fund is managed by Charterhouse Capital Partners, one of the oldest private equity firms in the UK. The manager operates across western Europe from its London office and has a long track record of delivering superior returns for investors. The investment strategy is to target large corporate buy-outs with an equity requirement of €200-450 million per transaction. Charterhouse prefers to invest the equity requirement for each deal on its own, or together with its limited partners, rather than join syndicated transactions.

Fourth Cinven Fund

The Fourth Cinven Fund is a €6.5 billion private equity fund targeting large buy-outs of European headquartered companies. Cinven Limited, the manager, operates from offices in London, Frankfurt, Milan and Paris and enjoys a strong market postion in the UK. The enterprise value of target companies will typically be in excess of €500 million.

Barclays Private Equity European Fund III

Barclays Private Equity European Fund III is a €1.8 billion private equity fund focused on European middle market buy-outs. The fund is managed, alongside €800 million from Barclays Bank, by Barclays Private Equity Limited, the private equity arm of Barclays PLC. The manager operates from offices in London, Paris, Munich, Zurich, Milan, Birmingham, Manchester and Reading. Just under half of the investments are sourced in the UK.

Alchemy Investment Plan

The Alchemy Investment Plan is a £300 million annual rolling private equity fund. The fund is managed by Alchemy Partners, based in London, and is structured as a rolling investment where investors build their portfolio from the date of commitment. The manager was established in 1997 by Jon Moulton and a number of partners with industrial and private equity experience. The strategy is to invest in complex transactions and turnaround situations in the UK and Ireland. The Company ceased its annual commitment to the fund in June 2004.

CVC Europe IV

CVC European Equity Partners IV is a €6.0 billion private equity fund focused on European buy-outs. The fund is managed by CVC Capital Partners Europe Limited ('CVC'). CVC is a leading pan-European manager of buy-outs with a long track record and operates from offices in London, Paris, Frankfurt, Amsterdam, Brussels, Copenhagen, Madrid, Stockholm, Zurich and Milan. CVC targets medium and large sized buy-out transactions.

Barclays Private Equity European Fund II

Barclays Private Equity European Fund II is a €950 million private equity fund focused on European middle market buy-outs. The fund is managed, alongside €700 million from Barclays Bank, by Barclays Private Equity Limited, the private equity arm of Barclays PLC. The manager operates from offices in London, Paris, Munich, Zurich, Milan, Birmingham, Manchester and Reading. Just under half of the investments are sourced in the UK.

Apax Europe VII

Apax Europe VII is a €11.1 billion private equity fund focused on the European market. The fund is managed by Apax Partners, one of the leading and most experienced private equity managers in Europe, and part of the Apax Partners international network. The manager operates from offices in London, Munich, Milan, Stockholm, New York, Tel Aviv and Madrid and manages in excess of €25 billion. Apax Europe VII focuses on buy-outs and targets Apax Partners' six chosen sectors of information technology, telecommunications, healthcare, media, financial services and retail.

Apax Europe VI

Apax Europe VI is a €4.3 billion balanced private equity fund focused on the European market. The fund is managed by Apax Partners, one of the leading and most experienced private equity managers in Europe, and part of the Apax Partners international network. The manager operates from offices in London, Munich, Milan, Stockholm, New York, Tel Aviv and Madrid and manages in excess of €25 billion. The balanced strategy spans early stage, expansion capital, special situations and buy-outs and targets Apax Partners' six chosen sectors of information technology, telecommunications, healthcare, media, financial services and retail.

HgCapital 5

The manager of the fund, HgCapital, started investing in private equity in 1983 under the name Mercury Private Equity. In January 2006 the manager closed HgCapital 5 with total commitments of €830.4 million. The focus of the fund is small and middle market buy-outs in the UK, Benelux and Germany. The manager operates from offices in London, Amsterdam and Munich.

TOP 30 UNDERLYING INVESTMENTS

The table below summarises the top 30 underlying investments, by value, in the Company's portfolio of private equity funds as at 30 September 2008. The valuations are gross, before any carry provision.

Entity	Description	Fund	% of net assets
Acromas	Provision of financial, insurance, travel & road assistance services	Charterhouse VII & VIII, CVC IV & CVC Tandem	2.4
Parques Reunidos	Amusement parks	Candover 2005	2.0
Univar	Chemicals distributor	CVC IV & CVC Tandem	1.9
Tommy Hilfiger	Branded clothing	Apax Europe VI	1.4
Redac	IT services and systems integration	Alchemy	1.4
EMI	Music publishing	Terra Firma III	1.3
Avio	Aerospace engine component manufacturer	Fourth Cinven	1.2
CompAir	Air compressor manufacturer and distributor	Alchemy	1.1
Spire Healthcare	UK hospital chain	Fourth Cinven	1.1
Amadeus	Travel distribution services	Third Cinven	1.0
Global Refund	Travel related payment services	Barclays European Fund III	1.0
Biffa	Waste management company	Montagu III	1.0
PHS	UK business services	Charterhouse VII	0.9
Stork	Manufacturing and engineering conglomerate	Candover 2005	0.9
Hilding Anders	Bed and mattress manufacturer	Candover 2005	0.9
DX Group	Provider of B2B mail services	Candover 2005	0.9
Vivarte	Footwear & apparel retailer	Charterhouse VIII	0.9
Converteam	Manufacture of power conversion machinery	Barclays European Fund III	0.9
Elster	Manufacturer of utility meters	CVC IV	0.8
Flint (Xsys/BASF)	Manufacturer of printing inks	CVC III	0.8
Elior	Catering provider	Charterhouse VII & VIII	0.8
Samsonite	Design & manufacture of branded luggage	CVC IV & CVC Tandem	0.8
Phadia	Manufacture of blood testing systems	Fourth Cinven	0.8
Evonik Industries	Speciality chemicals, power generation and real estate	CVC V & CVC Tandem	0.8
Springer	Publisher of academic & scientific journals	Candover 2001, Third Cinven	0.8
TDF	French operator of broadcast towers	Charterhouse VIII	0.7
Ferretti Group	Luxury yacht manufacturer	Candover 2005	0.7
Ziggo	Cable operator	Fourth Cinven	0.7
Numericable	French cable operator	Third Cinven	0.7
Kestrel Holdings	Specialist mortgage lending	Alchemy	0.7
Total of top 30 underlying investments			31.3

DIRECTORS' REPORT

The Directors present their report and the audited financial statements for the year ended 30 September 2008.

Business Review

Business and Status

The Company carries on business as an investment trust and has been approved as such by HM Revenue & Customs for the year ended 30 September 2007, subject to their rights to further enquiry under the Finance Act 1998. The Company has subsequently conducted its affairs so as to enable it to continue to seek such approval. The Company is an investment company within the terms of section 833 of the Companies Act 2006.

The Manager of the Company is SL Capital Partners LLP. The Board is independent of the Manager and Standard Life.

Investment Objective

The investment objective is to achieve long-term capital gains through holding a diversified portfolio of private equity funds investing predominantly in Europe. The full text of the Company's investment policy and the Manager's Review can be found above and explains how the Company has invested its assets with a view to spreading investment risk in accordance with the Company's investment policy during the year under review.

Review of performance over one year and five years

An outline of the performance, market background, investment activity and portfolio during the year under review and the performance over the last five years, as well as the investment outlook, are provided in the Chairman's Statement and the Manager's Review.

Monitoring performance - Key Performance Indicators

At each Board meeting the Directors consider a number of performance indicators to assess the Company's success in achieving its objectives, which include both absolute and relative performance compared to market indices and peer group. The key performance indicators ('KPIs') are established industry measures, covering both the Company and its fund investments, and include:

• Net asset value capital return

• Projected and actual portfolio cashflows

• Discount and discount volatility

• Share price capital return

• Expenses and expense ratio

The net asset value and share price performance for the year and five years ended 30 September 2008 and since listing are provided in the Financial Summary. The Company's expense ratio and discount levels are also provided. An analysis of the portfolio cashflows, including drawdowns and distributions, and fund commitments is provided in the Manager's Review.

Principal Risks and Uncertainties

The major focus of the Company is to invest in European private equity funds, which themselves invest in unquoted companies. The Company has the ability to invest up to 20% of its gross assets in funds that operate outside Europe. The aim is to build a portfolio of private equity fund interests diversified by country, industry sector, maturity and number of underlying investments. The financial risk management objectives and policies of the Company are contained in note 19 to the accounts. The principal risks facing the Company relate to the Company's investment activities and include the following:

• market risk

• currency risk

• over-commitment risk

• liquidity risk

• credit risk

• interest rate risk

• operating and control environment risk

An explanation of these risks and how they are managed is contained in note 19 to the accounts.

Social, Community, Employee Responsibilities and Environmental Policy

As an investment trust, the Company has no direct social, community, employee or environmental responsibilities. Its principal responsibility to shareholders is to ensure that the investment portfolio is properly invested and managed. The Company has no employees and no requirement to report separately on this area as the management of the portfolio has been delegated to the Manager, SL Capital Partners LLP.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

Company law requires the Directors to prepare financial statements for each financial period which give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing those financial statements, the Directors are required to:

select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on a going concern basis, unless it is inappropriate to presume that the Company will continue in business.

The Directors confirm that they comply with all the above requirements.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. The Directors have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and to detect fraud and other irregularities.

The maintenance and integrity of the Manager's website, upon which these financial statements may be presented, is the responsibilty of the Manager. The work carried out by the Independent Auditors does not involve consideration of these matters and, accordingly, the Independent Auditors accept no responsibility for any changes that may occur to the financial statements once they are presented on the website.

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, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
the Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.

For Standard Life European Private Equity Trust PLC

Scott Dobbie

Chairman

Edinburgh, 28 November 2008

INCOME STATEMENT (audited)

For the year ended 30 September 2008

	Notes	Revenue	Capital	Total
		£000	£000	£000

(Losses)/Gains on investments	9	-	(3,774)	(3,774)
Currency gains/(losses) on cash balances	14	-	448	448
Income from investments	2	2,921	-	2,921
Investment management fee	3	(325)	(2,929)	(3,254)
Administrative expenses	4	(526)	-	(526)
		_________	_________	_________

NET RETURN ON ORDINARY ACTIVITIES
BEFORE FINANCE COSTS AND TAXATION		2,070	(6,255)	(4,185)
Finance costs	5	(50)	(449)	(499)
		_________	_________	_________

NET RETURN ON ORDINARY ACTIVITIES
BEFORE TAXATION		2,020	(6,704)	(4,684)
Taxation	6	(594)	586	(8)
		_________	_________	_________

NET RETURN ON ORDINARY ACTIVITIES
AFTER TAXATION		1,426	(6,118)	(4,692)
		_________	_________	_________
NET RETURN PER ORDINARY SHARE	8	0.89p	(3.82)p	(2.93)p
		_________	_________	_________
DILUTED NET RETURN PER ORDINARY SHARE	8	0.88p	(3.78)p	(2.90)p
		_________	_________	_________

The Total column of this statement represents the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

No operations were acquired or discontinued in the period.

A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.

The dividend which has been recommended based on this Income Statement is 0.70p (2007 - 3.50p)

INCOME STATEMENT (audited)

For the year ended 30 September 2007

	Notes	Revenue	Capital	Total
		£000	£000	£000

(Losses)/Gains on investments	9	-	94,094	94,094
Currency gains/(losses) on cash balances	14	-	(56)	(56)
Income from investments	2	10,781	-	10,781
Investment management fee	3	(280)	(2,517)	(2,797)
Administrative expenses	4	(475)	-	(475)
		_________	_________	_________

NET RETURN ON ORDINARY ACTIVITIES
BEFORE FINANCE COSTS AND TAXATION		10,026	91,521	101,547
Finance costs	5	(30)	(273)	(303)
		_________	_________	_________

NET RETURN ON ORDINARY ACTIVITIES
BEFORE TAXATION		9,996	91,248	101,244
Taxation	6	(3,022)	837	(2,185)
		_________	_________	_________

NET RETURN ON ORDINARY ACTIVITIES
AFTER TAXATION		6,974	92,085	99,059
		_________	_________	_________
NET RETURN PER ORDINARY SHARE	8	4.38p	57.80p	62.18p
		_________	_________	_________
DILUTED NET RETURN PER ORDINARY SHARE	8	4.31p	56.85p	61.16p
		_________	_________	_________

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (audited)

For the year ended 30 September 2008

					Capital	Capital	Capital
		Share	Share	Special	redemption	reserve	reserve	Revenue
		capital	premium	reserve	reserve	Realised	Unrealised	reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2007		354	78,440	79,148	2	189,597	27,907	10,259	385,707
Total recognised gains/(losses)		-	-	-	-	37,140	(43,258)	1,426	(4,692)
Conversion of founder A shares		-	95	-	-	-	-	-	95
Dividends paid	7	-	-	-	-	-	-	(5,597)	(5,597)
		______	_______	______	_______	________	________	_______	_______
Balance at 30 September 2008	13,14	354	78,535	79,148	2	226,737	(15,351)	6,088	375,513
		_____	______	_____	_______	______	_______	______	_____

For the year ended 30 September 2007

					Capital	Capital	Capital
		Share	Share	Special	redemption	reserve	reserve	Revenue
		capital	premium	reserve	reserve	Realised	Unrealised	reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2006		354	77,775	79,148	1	103,234	22,185	7,105	289,802
Total recognised gains		-	-	-	-	86,363	5,722	6,974	99,059
Conversion of founder A shares		-	665	-	1	-	-	-	666
Dividends paid	7	-	-	-	-	-	-	(3,820)	(3,820)
		_____	______	_____	_______	______	_______	______	_____
Balance at 30 September 2007	13,14	354	78,440	79,148	2	189,597	27,907	10,259	385,707
		______	_______	______	_______	________	________	_______	_______

BALANCE SHEET (audited)

		As at		As at
		30 September		30 September
		2008		2007
	Notes	£000	£000	£000	£000
NON-CURRENT ASSETS
Investments at fair value through profit or loss	9		412,084		322,633

CURRENT ASSETS
Investments at fair value through profit or loss	9	-		56,645
Debtors	10	288		292
Cash and short term deposits		3,289		7,599
		______		______
		3,577		64,536

CREDITORS: AMOUNTS FALLING
DUE WITHIN ONE YEAR	11	(40,148)		(1,462)
		______		______
NET CURRENT (LIABILITIES)/ASSETS			(36,571)		63,074
			______		______
TOTAL ASSETS LESS CURRENT LIABILITIES			375,513		385,707
			______		______

CAPITAL AND RESERVES
Called up share capital	13		354		354
Share premium	14		78,535		78,440
Special reserve	14		79,148		79,148
Capital redemption reserve	14		2		2
Capital reserve - realised	14		226,737		189,597
Capital reserve - unrealised	14		(15,351)		27,907
Revenue reserve	14		6,088		10,259
			______		______
TOTAL SHAREHOLDERS' FUNDS			375,513		385,707
			______		______

ANALYSIS OF SHAREHOLDERS' FUNDS
Equity interests (ordinary shares)			375,478		385,672
Non-equity interests (founder shares)	13		35		35
			______		______
			375,513		385,707
			______		______
NET ASSET VALUE PER EQUITY SHARE	16		234.8p		241.3p
			______		______

CASHFLOW STATEMENT (audited)

		For the year		For the year
		ended 30 September		ended 30 September
		2008		2007
	Notes	£'000	£'000	£'000	£'000

NET CASH (OUTFLOW)/INFLOW
FROM OPERATING ACTIVITIES	15		(1,344)		7,461

NET CASH OUTFLOW FROM SERVICING OF FINANCE			(282)		(342)

NET CASH OUTFLOW FROM TAXATION			(772)		(2,501)

FINANCIAL INVESTMENT
Purchase of investments	9	(180,763)		(266,564)
Disposal of investments	9	144,183		265,055
		_______		_______
NET CASH OUTFLOW FROM FINANCIAL INVESTMENTS			(36,580)		(1,509)

ORDINARY DIVIDENDS PAID			(5,597)		(3,820)
			_______		_______

NET CASH OUTFLOW BEFORE FINANCING			(44,575)		(711)
Net proceeds on issue of ordinary shares		95		666
Bank loans drawn down		40,000		-
		_______		_______
NET CASH INFLOW FROM FINANCING			40,095		666
			_______		_______
DECREASE IN CASH			(4,480)		(45)
			_______		_______

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS

Decrease in cash as above	(4,480)	(45)
Drawdown of loan	(40,000)	-
Currency movements	448	(56)
	_______	_______
MOVEMENT IN NET DEBT/FUNDS IN THE PERIOD	(44,032)	(101)
Opening net funds	7,599	7,700
	_______	_______
CLOSING NET (DEBT)/FUNDS	(36,433)	7,599
	_______	_______
REPRESENTED BY:
Cash and short term deposits	3,289	7,599
Loans	(39,722)	-
	_______	_______
	(36,433)	7,599
	_______	_______

NOTES TO THE ACCOUNTS

1 Accounting Policies

(a) Basis of preparation and going concern

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 '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 have been prepared on a going concern basis. The financial statements, and the net asset value per equity share figures, have been prepared in accordance with UK Generally Accepted Accounting Principles ('UK GAAP'). The Directors consider the Company's functional currency to be sterling, as the Company is registered in Scotland, the Company's shareholders are predominantly based in the UK and the Company is subject to the UK's regulatory environment.

(b) Revenue, expenses and finance cost

Dividends from quoted investments are included in revenue by reference to the date on which the price is marked ex-dividend. Interest on quoted investments and other interest receivable are dealt with on an accruals basis. Dividends and income from unquoted investments is included when the right to receipt is established. All expenses are accounted for on an accruals basis. Expenses are charged through the revenue account of the Income Statement except as follows:

- transaction costs incurred on the purchase and disposal of investments are recognised as a capital item in the Income Statement; and

- the Company charges 90% of investment management fees and finance costs to capital, in accordance with the Board's expected long-term split of returns between capital gains and income from the Company's investment portfolio.

Investments have been designated upon initial recognition as fair value through the profit or loss. Investments are recognised as at the date of the commitment to the fund and removed when the fund is wound up. Subsequent to initial recognition, investments are valued at fair value as detailed below. 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 reserve.

Unquoted investments are stated at the Directors' estimate of fair value and follow the recommendations of the EVCA and the BVCA. The estimate of fair value is normally the latest valuation placed on a fund by its manager as at the balance sheet date. The valuation policies used by the manager in undertaking that valuation will generally be in line with the joint publication from the BVCA and the EVCA,'International Private Equity and Venture Capital Valuation guidelines. Where formal valuations are not completed as at the balance sheet date the valuation from the fund manager is adjusted for any subsequent cash flows occurring between the valuation date and the balance sheet date. The Company's Manager may further adjust such valuations to reflect any changes in circumstances from the last formal valuation date to arrive at the estimate of fair value.

(d) Dividends payable - Interim and final dividends are recognised in the period in which they are paid.

(e) Realised capital reserve - Gains or losses on investments realised in the year that have been recognised in the Income Statement are 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 the disposal of the investment.

(f) Unrealised capital reserve - Increases and decreases in the fair value of investments are recognised in the Income Statement and are then transferred to the unrealised capital reserve.

(g) Taxation

i) Current taxation - Provision for corporation tax is made at the current rate on the excess of taxable income net of any allowable deductions.

ii) 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.

Due 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.

(h) Overseas currencies - Overseas assets and liabilities are translated at the exchange rate prevailing at the Company's balance sheet date. Gains or losses on the translation of investments held at the year end are accounted for through the unrealised capital reserve. Gains or losses on the translation of overseas currency balances held at the year end are accounted for through the realised capital reserve.

Rates of exchange to sterling as at 30 September were:

	2008	2007
Euro	1.2690	1.4326
US dollar	1.7825	2.0374

Transactions in overseas currencies are translated at the exchange rates prevailing on the date of the transaction.

		Year to	Year to
		30 September 2008	30 September 2007
		£'000	£'000
2	Income

	Income from investments
	Income from unquoted investments	1,690	8,174
	Income from 'AAA' rated money market funds	988	2,497
		_____________	_____________

		2,678	10,671
	Other income
	Interest receivable on cash	243	108
	Other income	-	2
		_____________	_____________
		2,921	10,781
		_____________	_____________

		Year to 30 September 2008			Year to 30 September 2007
		Revenue	Capital	Total	Revenue	Capital	Total
3	Investment management fee	£'000	£'000	£'000	£'000	£'000	£'000

	Investment management fee	325	2,929	3,254	280	2,517	2,797

The investment management fee payable to SL Capital Partners LLP is 0.8% per annum, calculated quarterly in arrears, of the investments and other assets of the Company and any subsidiaries less the aggregate of the liabilities of the Company and any subsidiaries. The investment management fee is allocated 90% to the realised capital reserve and 10% to the revenue account. The investment management agreement between the Company and SL Capital Partners LLP is terminable by either party on one year's notice.

		Year to	Year to
		30 September 2008	30 September 2007
		£'000	£'000
4	Administrative expenses

	Secretarial and administration fee	176	164
	Directors' fees	140	142
	Auditors' remuneration - statutory audit	19	19
	- interim review	13	12
	Legal fees	34	12
	Fees and subscriptions	35	32
	Professional and consultancy fees	27	17
	Other expenses	82	77
		_____________	_____________

		526	475
		_____________	_____________

The secretarial and administration fee is payable to Aberdeen Asset Management PLC ('AAM') at the rate of £150,000 (excluding VAT) per annum and will be adjusted annually in line with the retail prices index from 1 July 2009. The secretarial and administration agreement between the Company and Edinburgh Fund Managers plc was novated to AAM on 27 November 2007 and is terminable by either party on three months notice.

The emoluments of the Chairman, who was the highest paid Director, were £38,500 (2007 - £33,000). The emoluments of each of the other Directors were £22,000 (2007 - £20,000), except for H Buchan who received an additional £5,500 (2007 - £5,000) as the Senior Independent Director and Chairman of the Audit Committee.

Irrecoverable VAT has been shown under the relevant expense line.

		Year to 30 September 2008			Year to 30 September 2007
		Revenue	Capital	Total	Revenue	Capital	Total
5	Finance costs	£'000	£'000	£'000	£'000	£'000	£'000
	Bank loans	50	449	499	30	273	303

6	Taxation
		Year to 30 September 2008					Year to 30 September 2007
		Revenue	Capital			Total	Revenue	Capital		Total
		£'000	£'000			£'000	£'000	£'000		£'000
(a)	Factors affecting tax charge for year
	Return on ordinary activities before taxation	2,020	(6,704)			(4,684)	9,996	91,248		101,244
		_______	_______			_______	_______	_______		_______

	The tax assessed for the year is different from the standard rate of corporation tax in the UK. The differences are explained below.

	Return on ordinary activities multiplied by standard rate of corporation tax in the UK	586		(1,944)	(1,358)		2,999		27,374	30,373
	Capital gains*	-		1,944	1,944		-		(27,374)	(27,374)
	Irrecoverable foreign tax	8		-	8		31		-	31
	Overprovision from previous period	-		-	-		(8)		-	(8)
	Tax relief for expenses taken to capital	-		(586)	(586)		-		(837)	(837)
		_______		_______	_______		_______		_______	_______

	Current tax charge for year	594		(586)	8		3,022		(837)	2,185
		_______		_______	_______		_______		_______	_______

	The standard rate of corporation tax in the UK changed from 30% to 28% with effect from 1st April 2008. *The Company carries on business as an investment trust company with respect to section 842 of the Income and Corporation Taxes Act 1988. As such any capital gains are exempt from UK taxation.

		Year to	Year to
		30 September 2008	30 September 2007
		£'000	£'000
(b)	Analysis of charge throughout the year
	Current Tax
	UK corporation tax on return on ordinary activities (29%) (2007 - 30%)	-	2,162
	Irrecoverable foreign tax	8	31
	Overprovision from previous period	-	(8)
		_______	_______

		8	2,185
		_______	_______

(c)	Factors that may upset future tax charges At the year end there is potential deferred tax assets of £1,357,000 (2007:£nil) in relation to excess management expenses carried forward. The deferred tax asset is unrecognised at the year end in line with the stated accounting policy.

		Year to	Year to
		30 September 2008	30 September 2007
		£'000	£'000
7	Dividend on ordinary shares
	Amount recognised as distribution to equity holders in the period:

	Dividend paid in the year ended 30 September 2008 of 3.50p (2007 - 2.40p) per ordinary share paid on	5,597	3,820
	1 February 2008 (7 February 2007)	_______	_______


	The proposed final dividend of 0.70p per ordinary share is subject to approval by shareholders at the annual general meeting and has not been included as a liability in these financial statements. Set out below are the total dividend paid and proposed in respect of the financial year, which is the basis on which the requirements of Section 842 of the Income and Corporation Taxes Act 1988 are considered. The revenue available for distribution by way of a dividend for the year is £1,426,000 (2007 - £6,974,000).

	Proposed final dividend of 0.70p (dividend proposed at 30 September 2007 - 3.50p) per ordinary share	1,119	5,597
	due to be paid 30 January 2009 (paid 1 February 2008)	_______	_______

		Year to 30 September 2008		Year to 30 September 2007
		p	£'000	p	£'000
8	Return per ordinary share
	The return per ordinary share is based on the following figures:
	Revenue return	0.89	1,426	4.38	6,974
	Capital return	(3.82)	(6,118)	57.80	92,085
		_______	___________	_______	___________
	Total return	(2.93)	(4,692)	62.18	99,059
		_______	___________	_______	___________
	Weighted average number of ordinary shares in issue		159,901,256		159,321,366

	The fully diluted return per ordinary share is based on the following figures:
	Revenue return (fully diluted)	0.88	1,426	4.31	6,974
	Capital return (fully diluted)	(3.78)	(6,118)	56.85	92,085
		_______	___________	_______	___________
	Total return (fully diluted)	(2.90)	(4,692)	61.16	99,059
		_______	___________	_______	___________

Fully diluted returns have been calculated on the basis set out in Financial Reporting Standard 14 'Earnings per share' ('FRS 14'). For the year ended 30 September 2008 this is based on 162,053,535 shares (2007 - 161,974,327), comprising the weighted average 159,901,256 ordinary shares (2007 - 159,321,366) and 2,152,279 founder A shares capable of conversion (2007 - 2,652,961).

9	Investments
		Non Current:	Current: AAA' Rated
		Unquoted Investment	Money Market Funds	30 September 2008	30 September 2007
		£'000	£'000	£'000	£'000
	Fair value through profit or loss:
	Opening market value	322,633	56,645	379,278	283,675
	Opening unrealised appreciation	(27,435)	(472)	(27,907)	(22,185)
		_________	_________	_________	_________
	Opening book cost	295,198	56,173	351,371	261,490
	Movements in the year:
	Additions at cost	155,184	25,579	180,763	266,564
	Disposal of investments	(59,780)	(84,403)	(144,183)	(265,055)
		_________	_________	_________	_________
		390,602	(2,651)	387,951	262,999
	Realised gains on investments	36,833	2,651	39,484	88,372
		_________	_________	_________	_________
	Closing book cost	427,435	-	427,435	351,371
	Closing unrealised (depreciation)/ appreciation	(15,351)	-	(15,351)	27,907
		_________	_________	_________	_________
	Closing market value	412,084	-	412,084	379,278
		_________	_________	_________	_________

				Year to	Year to
				30 September 2008	30 September 2007
				£'000	£'000
	(Losses)/Gains on investments:
	Net realised gains on investments			39,484	88,372
	Net unrealised (depreciation)/appreciation on investments			(43,258)	5,722
				_________	_________
				(3,774)	94,094
				_________	_________

	Transaction costs During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within (losses)/gains on investments in the Income Statement. The total costs were as follows:

	Purchases in respect of new unquoted fund investments			26	49
				_________	_________


		30 September 2008	30 September 2007
		£'000	£'000
10	Debtors
	Amounts falling due within one year:
	Accrued income	20	262
	Corporation tax recoverable	250	-
	Prepayments	18	30
		____________	____________

		288	292
		____________	____________


		30 September 2008	30 September 2007
		£'000	£'000
11	Creditors: amounts falling due within one year
	Taxation	-	522
	Management fee	8	778
	Secretarial fee	88	44
	Other accruals	87	92
	Loan interest and commitment fee	243	26
	Bank loans (see note 12)	39,722	-
		____________	____________
		40,148	1,462
		____________	____________


		30 September 2008	30 September 2007
		£'000	£'000
12	Bank loans

	Unsecured bank loans repayable within one year:
	€6,347,500 at 5.925% repayable 4 November 2008	5,002	-
	€18,885,000 at 5.915% repayable 17 November 2008	14,882	-
	€12,542,000 at 5.939% repayable 28 November 2008	9,883	-
	€12,633,000 at 5.965% repayable 22 December 2008	9,955	-
		____________	____________
		39,722	-
		____________	____________

As at 30 September 2008, the Company had a £60 million multi currency revolving credit facility with The Royal Bank of Scotland plc of which £40 million had been drawn in euros. The interest rate on this facility was LIBOR plus 0.975% and the commitment fee payable on non-utilisation was 0.475% per annum. After the year end, the Company entered into a new £100 million multi currency syndicated revolving credit facility led by The Royal Bank of Scotland plc which expires on 18 November 2011. The interest rate on this facility is LIBOR plus 2.5% and the commitment fee payable on non-utilisation is 1.0% per annum.


		30 September 2008	30 September 2007
13	Called up share capital	£	£
	Authorised:
	200,772,567 ordinary shares of 0.2p	401,545	400,000
	16,727,433 founder A shares of 0.2p	33,455	35,000
	17,500,000 founder B shares of 0.2p	35,000	35,000
		____________	____________

		470,000	470,000
		____________	____________

	Issued:
	159,922,567 (2007 - 159,822,567) ordinary shares of 0.2p - fully paid	319,845	319,645
	16,727,433 (2007 - 16,827,433) founder A shares of 0.2p - partly paid	16,914	17,014
	17,500,000 (2007 - 17,500,000) founder B shares of 0.2p - partly paid	17,687	17,687
		____________	____________

		354,446	354,346
		____________	____________

On 2 May 2001, 14,835,625 founder A shares and 14,835,625 founder B shares were allotted each partly paid up at 0.1p per share and 2,664,375 founder A shares and 2,664,375 founder B shares were allotted each partly paid up at 0.11p per share. The founder shares are entitled to a fixed non-cumulative dividend of 0.05% per annum on the nominal amount per share paid up. The founder shares do not carry any right to vote, except in the case of changes to class rights.

During the year 100,000 founder A shares were converted into ordinary shares of 0.2p at a cost of £99,900 before deduction of conversion costs of £5,000.

Following the end of the founder A performance period on 30 September 2006, 4,082,412 founder A shares (2007: 4,182,412) have a right to convert into an equivalent number of ordinary shares at any time up to 31 December 2013.

		Share		Capital	Capital	Capital
		premium	Special	redemption	reserve -	reserve -	Revenue
		account	reserve	reserve	realised	unrealised	reserve
14	Reserves	£'000	£'000	£'000	£'000	£'000	£'000
	Opening balances at 1 October 2007	78,440	79,148	2	189,597	27,907	10,259
	Realised gains on unquoted investments	-	-	-	36,833	-	-
	Net realised gains on sale of 'AAA' rated money market funds	-	-	-	2,651	-	-
	Management fee charged to capital	-	-	-	(2,929)	-	-
	Finance costs		-	-	(449)	-	-
	Tax relief on management fees and finance costs above	-	-	-	586	-	-
	Currency gains on cash balances	-	-	-	448	-	-
	Movement in unrealised appreciation in unquoted investments	-	-	-	-	(42,786)	-
	Movement in unrealised appreciation on 'AAA' rated money market funds	-	-	-	-	(472)	-
	Conversion of founder A shares	100	-	-	-	-	-
	Expenses of conversion of founder A shares	(5)	-	-	-	-	-
	Return on ordinary activities after taxation	-	-	-	-	-	1,426
	Dividends paid during the period	-	-	-	-	-	(5,597)
		_______	_______	_______	_______	_______	_______
	Closing balances at 30 September 2008	78,535	79,148	2	226,737	(15,351)	6,088
		_______	_______	_______	_______	_______	_______

Court approval was given on 27 September 2001 for 50% of the initial premium arising on the issue of the ordinary share capital to be cancelled and transferred to a special reserve. The reserve is a distributable reserve and may be applied in any manner as a distribution, other than by way of a dividend.

		Year to 30 September 2008	Year to 30 September 2007
		£'000	£'000
15	Reconciliation of net return on ordinary activities before taxation to net cash (outflow)/ inflow from
	operating activities
	Net total return before finance costs and taxation	(4,185)	101,547
	Adjustment for:
	Realised gains on investments	(39,484)	(88,372)
	Unrealised gains/(losses) on investments	43,258	(5,722)
	Currency (gains)/losses on cash balances	(448)	56
	Decrease/(increase) in debtors	254	(103)
	(Decrease)/increase in creditors	(731)	86
	Tax deducted from non - UK income	(8)	(31)
		___________	___________

		(1,344)	7,461
		___________	___________

16	Net asset value per ordinary share
		30 September 2008	30 September 2007
	Basic
	Ordinary shareholders' funds	£375,478,000	£385,672,000
	Number of ordinary shares in issue	159,922,567	159,822,567
	Net asset value per ordinary share	234.8p	241.3p

	Diluted
	Ordinary shareholders' funds	£379,560,412	£389,854,412
	Number of ordinary shares in issue	164,004,979	164,004,979
	Net asset value per ordinary share	231.4p	237.7p

The net asset value per ordinary share and ordinary shareholders' funds are calculated in accordance with the Company's articles of association.


		30 September 2008	30 September 2007
		£'000	£'000
17	Commitments and contingent liabilities
	Outstanding calls on investments	389,204	366,003
		___________	___________

This represents commitments made to fund investments remaining undrawn.

18 Parent undertaking and related party transactions

The Manager during the year was SL Capital Partners LLP which is 60% owned by Standard Life Investments Limited and 40% by its nine senior private equity managers. Standard Life Investments Limited is a wholly owned subsidiary of Standard Life PLC, the ultimate parent undertaking of the Company. The accounts of the ultimate parent undertaking are the only group accounts incorporating the accounts of the Company. Copies of the accounts of the ultimate parent undertaking can be obtained at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH.

Standard Life PLC and the Company have entered into a relationship agreement which provides that, for so long as Standard Life PLC and its subsidiaries exercise, or control the exercise, of 30% or more of the voting rights of the Company, Standard Life PLC will not seek to nominate to the Board Directors who are not independent of Standard Life PLC and will not take, in its capacity as a beneficial holder of any ordinary shares, any action which would be detrimental to the general body of shareholders. For this purpose any action which has the support or recommendation of a majority of the Directors shall be deemed not to be detrimental.

During the year ended 30 September 2008 the Manager charged management fees totalling £3,254,000 (2007 - £2,797,000) to the Company in the normal course of business. The balance of management fees outstanding at 30 September 2008 was £8,000 (2007 - £778,000)

As at 30 September 2008, the Company had a £60 million committed revolving credit facility with The Royal Bank of Scotland plc ('RBS'). Since the year end, the Company has entered into a new £100 million three year syndicated revolving credit facility led by The Royal Bank of Scotland plc. Standard Life Assurance Limited, a subsidiary of Standard Life PLC, has agreed to participate in the syndicated facility on an arm's length basis and has made a commitment of £40 million. The Company also invests from time to time in 'AAA' money market funds managed by RBS. Donald Workman, who is a director of the Company and an investment director within the Corporate Markets division of RBS, took no part in the Board's deliberations concerning, or its approval of, the existing or new credit facility. Within parameters agreed with the Board, it is Standard Life Investment's treasury team which determines the funds in which the Company's surplus cash is invested from time to time.

No other related party transactions were undertaken during the year ended 30 September 2008.

19 Risk management, financial assets and liabilities

Financial assets and liabilities

The Company's financial instruments comprise fund and other investments, cash balances, loans and debtors and creditors that arise from its operations. The assets and liabilities are managed with the overall objective of achieving long-term capital gains for shareholders.

Summary of Financial Assets and Financial Liabilities by category

The carrying amounts of the Company's financial assets and financial liabilities, as recognised at the balance sheet date of the reporting periods under review, are categorised as follows:

	30 September	30 September
	2008	2007
	£000	£000
Financial Assets
Financial assets at fair value through profit or loss:
Fixed asset investments - designated as such on initial recognition	412,084	322,633
Current asset investments - designated as such on initial recognition	-	56,645
Loans and receivables:
Current assets:
Debtors (accrued income and other debtors)	38	292
Corporation tax recoverable	250	-
Cash and short-term deposits	3,289	7,599
	___________	___________
	415,661	387,169
Financial Liabilities	___________	___________
Measured at amortised cost:
Creditors: amounts falling due within one year
Bank loans	39,722	-
Taxation	-	522
Accruals	426	940
	___________	___________
	40,148	1,462
	___________	___________

Fair values of financial assets and financial liabilities

All of the Company's financial instruments are stated at their fair values at the year end. The carrying value of the current assets and liabilities is deemed to be fair value due to the short term nature of the instruments and/or the instruments bearing interest at market rates.

Risk management

The Directors manage investment risk principally through setting an investment policy and by contracting management of the Company's investments to an investment manager under a contract which incorporates appropriate duties and restrictions and by monitoring performance in relation to these. The Company's investments are in private equity funds, typically unquoted limited partnerships. These are valued by their managers generally in line with the EVCA and the BVCA guidelines, which provide for a fair value basis of valuation. The funds may hold investments that have become quoted and these will be valued at the appropriate listed price, subject to any discount for marketability restrictions.

As explained in the Company's investment policy, risk is spread by investing across a range of countries and industrial sectors, thereby reducing excessive exposure to particular areas. The Manager's investment review and monitoring process is used to identify and, where possible, reduce risk of loss of value in the Company's investments. Any surplus funds are invested in 'AAA' rated money market funds, which generate securities income rather than interest in order to meet the income requirements of investment trust status. The money market fund investments are monitored by the treasury team of Standard Life Investments for credit risk and interest rate risk.

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

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

Market risk

The Company is at risk of the economic cycle impacting the quoted markets and hence potentially the pricing of new underlying investments, the valuation of existing underlying investments and the price and timing of exits. By having a diversified and rolling portfolio of fund investments the Company is well placed to take advantage of economic cycles.

100% of the Company's investments are in unquoted funds held at fair value. The valuation methodology employed by the managers of these funds may include the application of EBITDA ratios derived from listed companies with similar characteristics. Therefore, the value of the Company's portfolio is indirectly affected by price movements on listed exchanges. A 10% increase in the valuation of unquoted investments at 30 September 2008 would have increased the net assets attributable to the Company's shareholders and the total profit for the year by £41,208,000 (2007: £32,263,000); a 10% change in the opposite direction would have decreased the net assets attributable to the Company's shareholders and the total profit for the year by an equivalent amount.

Currency risk

The Company makes fund commitments in currencies other than sterling and accordingly a significant proportion of its investments and cash balances are in currencies other than sterling. In addition, the Company's syndicated revolving credit facility is a multi currency facility. Therefore, the Company's balance sheet is sensitive to movements in foreign exchange rates. The Manager monitors the Company's exposure to foreign currencies and reports to the Board on a regular basis. It is not the Company's policy to hedge this foreign currency risk. Over time, it is expected that the majority of the Company's commitments and investments will be denominated in euros. Accordingly, the majority of the Company's liquidity and any indebtedness is usually held in that currency. No currency swaps or forwards were used during the year.

The table below sets out the Company's currency exposure.

	30 September 2008		30 September 2007
	Local	Sterling	Local	Sterling
	Currency	Equivalent	Currency	Equivalent
	000s	£'000	000s	£'000
Fixed asset investments: unquoted
Sterling	42,837	42,837	40,333	40,333
Euro	405,346	319,422	346,062	241,562
US Dollar	88,811	49,825	82,998	40,738

Current asset investments: 'AAA' rated money market funds
Sterling	-	-	19,650	19,650
Euro	-	-	41,080	28,675
US Dollar	-	-	16,950	8,320

Cash and short term deposits:
Sterling	159	159	1,349	1,349
Euro	3,269	2,577	1,869	1,305
US Dollar	986	553	10,074	4,945

Bank loans: Euro	(50,407)	(39,722)	-	-
		_________		_________
Total		375,651		386,877
		_________		_________

All other current assets and liabilities are denominated in sterling.

Commitments:
Sterling	8,322	8,322	14,596	14,596
Euro	408,357	321,804	456,606	318,725
US Dollar	105,303	59,078	66,587	32,682
		_________		_________
Total		389,204		366,003
		_________		_________

The revenue account is subject to currency fluctuations arising on overseas income. The Company does not hedge this currency risk.

Currency sensitivity

During the year ended 30 September 2008 sterling depreciated by 11.4% relative to the euro (2007: depreciated 2.8%) and by 12.5% relative to the US dollar (2007: appreciated 9.1%).

It is not possible to forecast how much exchange rates might move in the next year, but based on the movements in the currencies above in the last two years, it appears reasonable to assume that rates could change by 10%. If the value of sterling had weakened against both of the above currencies by 10%, the capital loss would have decreased for the year by £30,000 (2007: increase of £30,000 in capital profit); a 10% change in the opposite direction would have increased the capital loss for the year by an equivalent amount.

The calculations are based on the portfolio valuation and cash and loan balances as at the respective balance sheet dates and are not necessarily representative of the year as a whole.

Over-commitment risk

To minimise the 'cash drag' on the Company, when a large amount of the Company's net assets are held in cash or 'AAA' rated money market funds rather than unquoted investments, the Board has taken the decision to make commitments to new fund investments which are greater than the current cash and 'AAA' rated money market funds held. As private equity funds generally call monies over a five year period whilst they are making investments, the draw downs for funds which are investing should be offset by more mature funds which are realising their investments and distributing cash back to the Company. The Manager monitors the Company's ongoing cash requirements by the use of cashflow modelling and reports to the Board on a regular basis. To minimise the risk of having an obligation to pay out more cash than is in the bank or on short-term deposit on any particular day, a syndicated revolving credit facility has been arranged with The Royal Bank of Scotland plc. As at 30 September 2008, £40 million of this loan facility had been drawn down (2007:nil).

Liquidity risk

The Company has significant investments in unquoted fund investments which are relatively illiquid. As a result, the Company may not be able to liquidate quickly its investments in these funds at an amount close to their fair value in order to meet its liquidity requirements, including the need to meet outstanding undrawn commitments. The Company manages its liquid investments to ensure sufficient cash is available to meet contractual commitments and also seeks to have cash available to meet other short-term financial needs. Short-term flexibility is achieved, where necessary, through the use of the syndicated revolving credit facility. Liquidity risk is monitored by the Manager on an ongoing basis and on a regular basis by the Board. A maturity analysis of all financial liabilities is included in notes 11 and 12.

Credit risk

Credit risk is the exposure to loss from the failure of a counterparty to deliver securities or cash for acquisitions or disposals of investments or to repay deposits. The Company places funds with authorised deposit takers from time to time and, therefore, is potentially at risk from the failure of any such institution. At the year end, the Company's financial assets exposed to credit risk amounted to the following:


	30 September 2008	30 September 2007
	£'000	£'000
Cash and short term deposits	3,289	7,599
Accrued income	20	262
	_________	_________
	3,309	7,861
	_________	_________

As at 30 September 2008, all of the Company's cash was held by JP Morgan Chase Bank ('JP Morgan') which was rated 'AA' by Standard & Poor. The Board monitors the risk by reviewing the internal control report of JP Morgan annually. Should the credit quality or the financial position of JP Morgan deteriorate significantly the Manager would move the cash balances to another institution.

Interest rate risk

The Company will be affected by interest rate changes as it holds some interest bearing financial assets and liabilities which are shown in the table below, however, the majority of its financial assets are investments in private equity funds which are non-interest bearing. Interest rate movements may affect the level of income receivable on cash deposits and interest payable on the Company's variable rate borrowings. The possible effects on the cashflows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions. Derivative contracts are not used to hedge against any exposure to interest rate risk.

Interest risk profile

The interest rate risk profile of the portfolio of financial assets and liabilities at the balance sheet date was as follows:

	Weighted average	30 September	Weighted average	30 September
	interest rate	2008	interest rate	2007
Floating rate	%	£000	%	£000
Financial Assets
Current asset investments: 'AAA' rated money market funds	-	-	4.87	56,645
Cash and short term deposits	3.48	3,289	2.41	3,289
	_________	_________	_________	_________
Total assets	3.48	3,289	4.74	59,934
	_________	_________	_________	_________
Fixed rate
Financial Liabilities
Bank Loans	5.93	(39,722)	-	-
	_________	_________	_________	_________
Total liabilities	5.93	(39,722)	-	-
	_________	_________	_________	_________

The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on the bank loans is based on the interest rate payable, weighted by the total value of the loans. The weighted average period for which rates are fixed on the bank loans is 58.9 days (2007: nil). The maturity dates of the bank loans are shown in note 12 to the financial statements.

Interest rate sensitivity

An increase of 1% in interest rates would have increased the net assets attributable to the Company's shareholders and reduced the total loss for the year ended 30 September 2008 by £8,000 (2007: £23,000). A decrease of 1% would have decreased net assets attributable to the Company's shareholders and increased the total loss for the year ended 30 September 2008 by an equivalent amount. The calculations are based on the interest paid and received during the year.

Operating and control environment risk

The Board is responsible for the Company's system of internal control. The Manager and the Administrator have in place control systems which include the custody and safeguard of the Company's assets, compliance with regulations (mainly section 842 of the Income and Corporation Taxes Act 1988, Companies Act and Listing Rules) and the provision of accurate financial reporting. There is a risk that the Manager and Administrator fail to ensure that their controls are performed in a satisfactory manner. The Board monitors the services and systems provided by the Manager and the Administrator and reviews their internal control reports to ensure that an effective system of internal controls is maintained.

This information is provided by RNS

The company news service from the London Stock Exchange

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