Final Results

Standard Life Euro Pri Eqty Tst PLC 28 November 2007 28 November 2007 STANDARD LIFE EUROPEAN PRIVATE EQUITY TRUST PLC RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2007 Highlights • The Company's net asset value per ordinary share ('NAV') rose by 32.5% to 241.3p (diluted NAV - 237.7p) during the year ended 30 September 2007 (30 September 2006 - undiluted NAV 182.1p; diluted NAV 179.6p). • The closing mid-market price of the Company's ordinary shares on 30 September 2007 was 226.5p (30 September 2006 - 183.5p), an increase of 23.4% over the year. • The Board is recommending a final dividend of 3.5p per ordinary share (year ended 30 September 2006 - 2.4p). • Private equity is a long-term asset class. For the five years ended 30 September 2007 the Company's NAV and share price have both materially out-performed the two most relevant stock market indices, increasing by 167.2% and 176.2% respectively, compared to rises of 84.1% in the FTSE All-Share Index and 110.4% in the MSCI Europe Index (sterling adjusted). • As at 30 September 2007 the Company's net assets were £385.7 million (30 September 2006 - £289.8 million). The Company had interests in 48 private equity funds with a value of £322.6 million (30 September 2006 - 43 funds and £239.3 million). • The valuation of the Company's private equity fund interests reflected a positive performance, with unrealised gains during the year of £5.1 million (year ended 30 September 2006 - £16.6 million). • The Company received a record £156.5 million of distributions during the year (year ended 30 September 2006 - £90.3 million), including £97.2 million of net realised gains and income (year ended 30 September 2006 - £51.1 million). Distributions represented an average multiple of 2.6 times the acquisition cost of realised investments (year ended 30 September 2006 - 2.3 times). • Draw downs made during the year were also a record at £137.6 million (year ended 30 September 2006 - £75.3 million). • During the year the Company made significant new fund commitments, with £191.7 million committed to six funds (year ended 30 September 2006 - £200.5 million committed to six funds). Quote from Scott Dobbie, Chairman:- 'The recent setback to credit markets makes it likely that the European private equity market will enter a quieter period for draw downs and distributions and that debt levels will be lower. The Board nevertheless believes that the mid to large sized buy-out segment, the Company's principal area of focus, will continue to offer a wide range of opportunities and that the managers of the funds in which the Company invests have the skills and resources to generate significant value.' For further information please contact:- Peter McKellar of Standard Life Investments (Private Equity) Limited (on 0131 245 0055) Chairman's Statement Results and performance I am pleased to be able to report for the third consecutive financial year a total return on net assets to shareholders of more than 28.0%. For the year ended 30 September 2007 the Company's NAV grew strongly, increasing by 32.5% to 241.3p (diluted NAV - 237.7p) (30 September 2006 - undiluted NAV 182.1p; diluted NAV 179.6p). The increase was principally due to positive trading at most of the underlying investee companies and, for much of the financial year, a strong market for realisations. As at 30 September 2007 the Company's net assets were £385.7 million (30 September 2006 - £289.8 million). The closing mid-market price of the Company's ordinary shares on 30 September 2007 was 226.5p (30 September 2006 - 183.5p), an increase of 23.4% over the year. Notwithstanding the turbulence and reduced liquidity in credit markets during summer 2007, and the consequential impact on listed equity markets, the Company's shares traded at a premium to the disclosed NAV for virtually all of the year. Private equity is a long-term asset class and should be assessed over appropriate time periods. For the five years ended 30 September 2007 the Company's NAV and share price have both materially out-performed the two most relevant stock market indices, increasing by 167.2% and 176.2% respectively, compared to rises of 84.1% in the FTSE All-Share Index and 110.4% in the MSCI Europe Index (sterling adjusted). The Company's NAV and share price have also materially out-performed these indices over the period from the Company's listing in May 2001 and over the three years ended 30 September 2007. The Company's practice is to pay a final dividend marginally in excess of the minimum required to maintain investment trust status. The income received by the Company during the year allows the Board to recommend a final dividend of 3.5p per ordinary share. This is an increase of 45.8% on the 2.4p final dividend declared for the prior financial year. Subject to shareholder approval, this dividend will be paid on 1 February 2008 to shareholders on the Company's share register as at 4 January 2008. Valuation The value of the Company's portfolio of 48 private equity fund interests rose over the year through a combination of net new investment activity and unrealised gains. As at 30 September 2007 the value of the portfolio was £322.6 million (30 September 2006 - £239.3 million), of which unrealised gains arising during the year were £5.1 million (year ended 30 September 2006 - £16.6 million). Once again a majority, by value, of the Company's private equity fund interests reported unrealised gains for the year. Aggregate cash and money market balances rose to £64.2 million as at 30 September 2007 (30 September 2006 - £52.1 million). All of the increase occurred in the second half of the Company's financial year and was the result of some significant realisations of underlying investments. The strong flow of distributions during the year was largely offset by a material uplift in the amount of draw downs, as the Company's fund commitments increased and activity levels were high. At the year end 83.3% of the Company's gross assets (30 September 2006 - 82.1%) was invested in private equity assets. Exchange rates had a marginally positive impact on NAV over the year, as sterling depreciated by 2.8% relative to the euro and appreciated by 9.1% relative to the US dollar. As at 30 September 2007 the Company had £387.2 million of gross assets, of which £271.6 million (sterling equivalent) comprised euro denominated assets and £54.1 million (sterling equivalent) dollar denominated assets (30 September 2006 - £291.6 million (gross assets), £166.0 million (euro denominated) and £46.5 million (dollar denominated)). Investment activity The first nine months of 2007 saw record levels of activity in the European private equity market, with €160.0 billion of transactions undertaken (nine months ended 30 September 2006 - €124.6 billion). Following the credit market turbulence during summer 2007, however, activity levels have fallen across the European buy-out industry, with the most significant impact being on larger potential transactions. For the year ended 30 September 2007 the Company funded £137.6 million of draw downs. This was materially higher than the previous year's total of £75.3 million and was the highest amount drawn in any year since the Company's listing. The Company also received a record £156.5 million of distributions during the year (year ended 30 September 2006 - £90.3 million). Realisation activity was driven by the growth in the private equity, debt, and mergers and acquisitions markets. Of the distributions received, £89.1 million represented net realised gains and £8.1 million was income (year ended 30 September 2006 - £45.2 million and £5.9 million respectively). The average return on the Company's acquisition cost of realised investments was 2.6 times (year ended 30 September 2006 - 2.3 times), significantly exceeding the average for the Company since listing of 2.1 times. Six new fund commitments totalling £191.7 million were made during the year, reflecting the strong fund raising environment and the return to the market, with new funds, of a number of managers with whom the Company has previously invested. These new fund commitments were:- • £41.9 million to Apax Europe VII, • £41.9 million to Barclays Private Equity European Fund III, • £19.6 million to Coller International Partners V, • £29.7 million to CVC Tandem, • £34.9 million to Industri Kapital 2007, and • £23.7 million to Terra Firma Capital Partners III All of these funds are buy-out funds and are predominantly focused on Europe, with the exception of Coller International Partners V which specialises in global secondary private equity opportunities. In terms of manager and portfolio continuity, Apax Europe VII is the seventh Apax fund, CVC Tandem is the fourth CVC fund and Barclays Private Equity European Fund III is the third Barclays fund in which the Company has invested. Notwithstanding record draw downs, the new fund commitments resulted in the Company's aggregate outstanding commitments rising to £366.0 million as at 30 September 2007 (30 September 2006 - £307.7 million). These commitments will be funded from the Company's existing cash and money market holdings, distributions received from the portfolio of fund investments and, if necessary, the use of bank borrowings. As at 30 September 2007 the Company's new £60 million committed revolving credit facility with The Royal Bank of Scotland plc remained undrawn. Of the Company's outstanding fund commitments as at 30 September 2007 95.3% had been outstanding for less than 3 years, reflecting the activity and growth in the European private equity market in recent years. The Board Mark Tyndall's principal business interests have become more demanding of his time and, to the regret of his colleagues, he has decided to retire from the Board after the forthcoming Annual General Meeting. Mark, who has served as a Director since the Company's listing in May 2001, has wide experience of investment management and has made a significant contribution to all aspects of the Company's business. The Board will miss his wise counsel and I would like, on behalf of shareholders, to thank Mark for all he has done for the Company and to wish him well for the future. SL Capital Partners LLP At an Extraordinary General Meeting held on 24 September 2007, shareholders consented to changes to the Company's Articles of Association to facilitate a proposed re-organisation of the Company's Manager. On 1 October 2007 the Company's Manager became SL Capital Partners LLP. This did not involve any significant change to the terms of the investment management agreement, or, critically, to the team of individuals that manages the Company. Outlook The Company has operated for much of the period since listing in 2001 in an environment sympathetic to private equity. Against this background, the Manager has performed strongly, both in absolute and relative terms. The recent setback to credit markets makes it likely that the European private equity market will enter a quieter period for draw downs and distributions and that debt levels will be lower. The Board nevertheless believes that the mid to large sized buy-out segment, the Company's principal area of focus, will continue to offer a wide range of opportunities and that the managers of the funds in which the Company invests have the skills and resources to generate significant value. The Board remains confident that the Company will continue to deliver attractive returns. Scott Dobbie CBE Chairman INCOME STATEMENT (audited) for the year ended 30 September 2007 Revenue Capital Total £'000 £'000 £'000 GAINS ON INVESTMENTS - 94,094 94,094 Currency losses on cash balances - (56) (56) Income from investments 10,781 - 10,781 Investment management fee (280) (2,517) (2,797) Administrative expenses (475) - (475) __________ __________ __________ NET RETURN ON ORDINARY ACTIVITIES BEFORE FINANCE COSTS AND TAXATION 10,026 91,521 101,547 Finance Costs (30) (273) (303) __________ __________ __________ NET RETURN ON ORDINARY ACTIVITIES BEFORE TAXATION 9,996 91,248 101,244 Taxation (3,022) 837 (2,185) __________ __________ __________ NET RETURN ON ORDINARY ACTIVITIES AFTER TAXATION 6,974 92,085 99,059 __________ __________ __________ NET RETURN PER ORDINARY SHARE 4.38p 57.80p 62.18 __________ __________ __________ DILUTED NET RETURN PER ORDINARY SHARE 4.31p 56.85p 61.16p __________ __________ __________ 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 3.50p (2006 2.40p) INCOME STATEMENT (audited) for the year ended 30 September 2006 Revenue Capital Total £'000 £'000 £'000 GAINS ON INVESTMENTS - 61,117 61,117 Currency losses on cash balances - (172) (172) Income from investments 7,636 - 7,636 Investment management fee (215) (1,934) (2,149) Administrative expenses (476) - (476) __________ __________ __________ NET RETURN ON ORDINARY ACTIVITIES BEFORE FINANCE COSTS AND TAXATION 6,945 59,011 65,956 Finance Costs (19) (171) (190) __________ __________ __________ NET RETURN ON ORDINARY ACTIVITIES BEFORE TAXATION 6,926 58,840 65,766 Taxation (2,078) 631 (1,447) __________ __________ __________ NET RETURN ON ORDINARY ACTIVITIES AFTER TAXATION 4,848 59,471 64,319 __________ __________ __________ NET RETURN PER ORDINARY SHARE 3.05p 37.36p 40.41p __________ __________ __________ DILUTED NET RETURN PER ORDINARY SHARE 3.01p 36.90p 39.91p __________ __________ __________ RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (audited) For the year ended 30 September 2007 Capital Capital Capital Share Share Special redemption reserve reserve Revenue capital premium reserve reserve - Realised - reserve Total Unrealised £'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 - - - - - - (3,820) (3,820) ______ ______ ______ _________ ________ ________ ______ ______ Balance at 30 September 2007 354 78,440 79,148 2 189,597 27,907 10,259 385,707 ______ ______ ______ _________ ________ ________ ______ ______ For the year ended 30 September 2006 Capital Capital Capital Share Share Special redemption reserve reserve Revenue capital premium reserve reserve - Realised - reserve Total Unrealised £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 30 September 2005 354 77,775 79,148 1 60,107 5,841 5,122 228,348 Total recognised gains - - - - 43,127 16,344 4,848 64,319 Dividends paid - - - - - - (2,865) (2,865) ______ ______ ______ _________ ________ ________ ______ ______ Balance at 30 September 2006 354 77,775 79,148 1 103,234 22,185 7,105 289,802 ______ ______ ______ _________ ________ ________ ______ ______ BALANCE SHEET (audited) as at 30 September 2007 2006 £'000 £'000 £'000 £'000 NON-CURRENT ASSETS Investments at fair value through profit or loss 322,633 239,288 CURRENT ASSETS Investments at fair value through profit or loss 56,645 44,387 Debtors 292 189 Cash and short term deposits 7,599 7,700 ________ ________ 64,536 52,276 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (1,462) (1,762) ________ ________ NET CURRENT ASSETS 63,074 50,514 ________ ________ TOTAL ASSETS LESS CURRENT LIABILITIES 385,707 289,802 ________ ________ CAPITAL AND RESERVES Called up share capital 354 354 Share premium 78,440 77,775 Special reserve 79,148 79,148 Capital redemption reserve 2 1 Capital reserve - realised 189,597 103,234 Capital reserve - unrealised 27,907 22,185 Revenue reserve 10,259 7,105 ________ ________ TOTAL SHAREHOLDERS' FUNDS 385,707 289,802 ________ ________ ANALYSIS OF SHAREHOLDERS' FUNDS Equity interests (ordinary shares) 385,672 289,767 Non-equity interests (founder shares) 35 35 ________ ________ 385,707 289,802 ________ ________ NET ASSET VALUE PER EQUITY SHARE 241.3p 182.1p ________ ________ CASHFLOW STATEMENT (audited) for the year ended 30 September 2007 2006 £'000 £'000 £'000 £'000 NET CASH INFLOW FROM OPERATING ACTIVITIES 7,461 5,029 NET CASH OUTFLOW FROM SERVICING OF FINANCE (342) (142) NET CASH OUTFLOW FROM TAXATION (2,501) (758) FINANCIAL INVESTMENT Purchase of investments (266,564) (127,697) Disposal of investments 265,055 132,153 ________ ________ NET CASH (OUTFLOW)/INFLOW (1,509) 4,456 FROM FINANCIAL INVESTMENTS ORDINARY DIVIDENDS PAID (3,820) (2,865) ________ ________ NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING (711) 5,720 NET CASH INFLOW FROM FINANCING Net proceeds of issue of ordinary shares 666 - ________ ________ (DECREASE)/INCREASE IN CASH (45) 5,720 ________ ________ RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS (Decrease)/increase in cash as above (45) 5,720 Currency movements (56) (172) ________ ________ MOVEMENT IN NET FUNDS IN THE PERIOD (101) 5,548 Opening net funds 7,700 2,152 ________ ________ CLOSING NET FUNDS 7,599 7,700 ________ ________ REPRESENTED BY: Cash and short term deposits 7,599 7,700 ________ ________ Notes:- 1. Standard Life European Private Equity Trust PLC is an investment company managed by SL Capital Partners LLP (formerly Standard Life Investments (Private Equity) Limited) the ordinary shares of which are admitted to listing by the UK Listing Authority and to trading on the London Stock Exchange. It seeks to conduct its affairs so as to continue to qualify as an investment trust under section 842 of the Income and Corporation Taxes Act 1988. The Board is wholly independent of the Manager and Standard Life plc. 2. 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. (b) Revenue, expenses and interest payable - 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. 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 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 investment portfolio of the Company. (c) Investments - Investments have been designated upon initial recognition as fair value through the profit or loss. Investments are recognised as at the date of 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 - Unquoted investments are stated at the Directors' estimate of fair value and follow the recommendations of the European Private Equity & Venture Capital Association ('EVCA') and British Private Equity and Venture Capital Association ('BVCA'). This is normally the latest valuation placed on a fund by its manager, adjusted if necessary for cash flows between the Company and the fund occurring between the fund manager's valuation date and the Company's 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 EVCA, 'International Private Equity and Venture Capital Valuation Guidelines' ('the guidelines'). However, the valuation adopted by the Company may depart from the valuation prepared by the manager of the fund if, in the opinion of the Company's Manager, an upward adjustment is not prudent. A downward adjustment may also be made if the Company's Manager receives relevant information which has not been notified to it by the manager of the fund or if the Company's Manager forms a more cautious view than that held by the manager of the fund. The Income Statement reflects the total capital gains, both realised and unrealised. Due to the valuation of the private equity fund interests held by the Company being performed at the fund level, and not at the underlying investment level, and net realised gains only being recognised following transactions advised by the underlying fund manager, the amounts which are accounted for in the movement in unrealised appreciation/depreciation on unquoted investments relate to the difference between the book cost and valuation of the fund investments. Quoted - Quoted investments are valued at bid price discounted, where applicable, to recognise any restriction on sale. (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 realised capital reserve on 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) Deferred taxation - Deferred taxation is recognised in respect of all temporary differences that have originated, but not reversed, at the balance sheet date, where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the balance sheet date, measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying temporary differences can be deducted. Temporary differences are differences arising between the Company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. 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 re-translation of investments held at the year end are accounted for through the unrealised capital reserve. Gains and 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: 2007 2006 Euro 1.4326 1.4746 US dollar 2.0374 1.8680 Transactions in overseas currency are translated at the exchange rate prevailing on the date of transaction. Year to Year to 30 September 2007 30 September 2006 £'000 £'000 3 Income Income from investments Income from unquoted investments 8,174 5,896 Income from 'AAA' rated money market funds 2,497 1,550 ________ ________ 10,671 7,446 ________ ________ Other income Interest receivable on cash 108 186 Other income 2 4 ________ ________ 10,781 7,636 ________ ________ 4. The number of ordinary shares in issue as at 30 September 2007 was 159,822,567 (30 September 2006 - 159,150,000). The return per ordinary share is based on the weighted average number of ordinary shares in issue. 5. The Directors recommend that a final dividend of 3.5p (2006 - 2.4p) per ordinary share be paid on 1 February 2008 to shareholders on the Company's share register as at the close of business on 4 January 2008. The ex-dividend date for the final dividend is 2 January 2008. 6. The financial information for the year ended 30 September 2007 comprises non-statutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial information for the year ended 30 September 2006 has been extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified. The statutory accounts for the year ended 30 September 2007 contain an unqualified audit report and will be delivered to the Registrar of Companies following the Company's Annual General Meeting, which will be held at The Balmoral Hotel, 1 Princes Street, Edinburgh EH2 2EQ on 28 January 2008 at 12.30pm. 7. The report and accounts for the year ended 30 September 2007 will be posted to shareholders on 20 December 2007 and copies will be available from the Company Secretary - Edinburgh Fund Managers plc, Donaldson House, 97 Haymarket Terrace, Edinburgh EH12 5HD. for Standard Life European Private Equity Trust PLC, Edinburgh Fund Managers plc, Company Secretary END This information is provided by RNS The company news service from the London Stock Exchange

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