Final Results

Standard Life Euro Pri Eqty Tst PLC 04 December 2006 4 December 2006 STANDARD LIFE EUROPEAN PRIVATE EQUITY TRUST PLC RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2006 Highlights • The Company's net asset value per ordinary share ('NAV') rose by 26.9% to 182.1p (30 September 2005 - 143.5p) during the year ended 30 September 2006. • The closing mid-market price of the Company's ordinary shares on 30 September 2006 was 183.5p (30 September 2005 - 156.2p), an increase of 17.4% over the year. • The Board is recommending a final dividend of 2.4p per ordinary share (year ended 30 September 2005 - 1.8p). • Private equity is a long-term asset class. Since listing in May 2001, the Company's share price has materially out-performed the two most relevant stock market indices, rising by 83.5% while the FTSE All-Share Index and the MSCI Europe Index (sterling adjusted) have risen by 6.9% and 8.2% respectively. Over the same period the Company's NAV has increased by 84.5%. • As at 30 September 2006 the Company's net assets were £289.8 million (30 September 2005 - £228.3 million). The Company had interests in 43 private equity funds with a value of £239.3 million (30 September 2005 - 39 funds and £186.6 million) and held £50.5 million in cash and other net assets (30 September 2005 - £41.7 million). • The valuation of the Company's private equity fund interests reflected a strong performance, with unrealised gains during the year of £16.6 million (year ended 30 September 2005 - £16.6 million). • The Company received a record £90.3 million of distributions over the year (year ended 30 September 2005 - £85.0 million), including £51.1 million of net realised gains and income (year ended 30 September 2005 - £45.6 million). Distributions represented an average multiple of 2.3 times the acquisition cost of realised investments (year ended 30 September 2005 - 2.2 times). • Draw downs made during the year were also a record at £75.3 million (year ended 30 September 2005 - £59.1 million). • During the year the Company made significant new fund commitments, with £200.5 million committed to seven funds (year ended 30 September 2004 - £148.7 million of new fund commitments to nine funds). Quote from Scott Dobbie, Chairman:- 'The Company has enjoyed an excellent year and progress has continued since the financial year end. As increasing amounts of capital flow into the asset class and as the acceptance of, and opportunities for, private equity in Europe expand, the importance of a skilled manager becomes even more critical. The Board remains confident of the Manager's ability to select and access many of the best quality private equity funds in Europe.' For further information please contact:- Peter McKellar of Standard Life Investments (Private Equity) Limited (on 0131 245 0055) Chairman's Statement Results and performance The Company's NAV has again grown strongly, increasing by 26.9% to 182.1p for the year ended 30 September 2006. This was due primarily to the generally improving macro-economic environment across most of continental Europe, robust trading at many of the underlying investee companies and the strong European private equity market. As at 30 September 2006 the Company's net assets were £289.8 million (30 September 2005 - £228.3 million). The closing mid-market price of the Company's ordinary shares on 30 September 2006 was 183.5p (30 September 2005 - 156.2p), an increase of 17.4% over the year. Throughout the year the Company's shares traded at a premium to the disclosed NAV. It is now more than five years since the Company was listed in May 2001. Although it has no defined benchmark, the Company's NAV and share price have both materially out-performed the two most relevant stock market indices over this period, increasing by 84.5% and 83.5% respectively, compared to rises of 6.9% in the FTSE All-Share Index and 8.2% in the MSCI Europe Index (sterling adjusted). The income received by the Company during the year leads the Board to recommend a final dividend of 2.4p per ordinary share, an increase of 33.3% on the 1.8p final dividend declared for the previous financial year. Subject to shareholder approval, this dividend will be paid on 7 February 2007 to shareholders on the Company's share register as at 5 January 2007. Valuation The value of the Company's portfolio of 43 private equity fund interests rose over the year through a combination of net new investment activity and unrealised gains. As at 30 September 2006 the value of the portfolio was £239.3 million (30 September 2005 - £186.6 million), of which unrealised gains arising during the year were £16.6 million (year ended 30 September 2005 - £16.6 million). Reflecting this strong performance, 62.6% by value of the Company's private equity fund interests reported unrealised gains. Aggregate cash and money market balances rose to £52.1 million as at 30 September 2006 (30 September 2005 - £42.5 million). A large proportion of the increase occurred in the final quarter of the Company's financial year and resulted from some exceptional full and partial realisations of underlying investments. The strong flow of distributions during the year was largely offset by an increase in the amount of draw downs as the Company's new fund commitments rose. At the period end 82.1% of the Company's gross assets (30 September 2005 - 81.4%) was invested in private equity assets. This proportion remains high, relative to the Company's peer group, and supports the policy of maximising invested assets through an over-commitment strategy. Exchange rates had a marginally negative impact on NAV over the year, as sterling appreciated by 0.5% relative to the euro and 5.6% relative to the US dollar. As at 30 September 2006 the Company had £291.6 million of gross assets, of which £166.0 million (sterling equivalent) comprised euro denominated assets and £46.5 million (sterling equivalent) dollar denominated assets (30 September 2005 - £229.3 million, £126.7 million and £44.7 million respectively). Investment activity 2006 is on course to be another record year for private equity investment in Europe. Deal flow and new investment activity for the private equity managers of the funds in the Company's portfolio has remained strong, helped by a growing number and value of investment opportunities. A total of £75.3 million of draw downs was funded by the Company during the year ended 30 September 2006 (year ended 30 September 2005 - £59.1 million). This was the highest amount drawn in any year since the Company's listing. As regards cash receipts, the Company received a record £90.3 million of distributions during the year (year ended 30 September 2005 - £85.0 million). The significant realisation activity was driven by the private equity, debt, and mergers and acquisitions markets, enhanced, in the case of the Company, by the attractive maturity profile of the underlying investments. Of the distributions received, £45.2 million represented net realised gains and £5.9 million was income (year ended 30 September 2005 - £40.5 million and £5.1 million respectively). It is pleasing to note that the average return on the Company's acquisition cost of realised investments again exceeded two times, being 2.3 times (year ended 30 September 2005 - 2.2 times). Underlining the active fund raising environment for private equity, the Company made six new fund commitments totalling £180.2 million during the year and made an additional fund commitment of £20.3 million to Candover 2005 Fund. The six new fund commitments were:- • £27.1 million to 3i Eurofund V, • £40.7 million to Charterhouse VIII, • £48.2 million to Fourth Cinven Fund, • £20.3 million to HgCapital 5, • £30.5 million to Permira IV, and • £13.4 million to TowerBrook Investors II All of the above funds are buy-out funds and are predominantly focused on Europe, with the exception of TowerBrook Investors II, which will invest both in Europe and North America. Given these new fund commitments, aggregate outstanding commitments rose to £307.7 million as at 30 September 2006 (30 September 2005 - £184.8 million). These commitments can be expected to be drawn down over the next 3-4 years and will be funded from the Company's existing cash and money market holdings, distributions received from the Company's portfolio of private equity fund investments and, if necessary, the use of bank borrowings. As at 30 September 2006 the Company's £40 million committed revolving credit facility with The Royal Bank of Scotland plc remained undrawn. The Company is currently renewing and will increase this facility to reflect the increase in scale both of its investment portfolio and fund commitments. Founder A Shares The performance period for the founder A shares granted on listing to the Manager and the management team as an incentive arrangement came to an end on 30 September 2006. Over the period from listing to 30 September 2006 the compound annual growth rate in the Company's NAV, including dividends paid, was 12.95%. Accordingly, under the terms of the founder A shares 4,854,979 of these shares now have the right to convert into an equivalent number of ordinary shares in the Company at a conversion price of £1 per ordinary share at any time up to 31 December 2013. The impact, assuming full conversion of such founder A shares, would be to dilute the Company's NAV per share at 30 September 2006 by 1.4% to 179.6p. The Board The decision of George Kershaw to retire from the Board following the forthcoming Annual General Meeting ('AGM') prompted a search using independent consultants for individuals whose background and experience would complement those of the existing Board members. As a result the Board has made two appointments for approval at the AGM. Clive Sherling was until recently a senior partner of Apax Partners, a prominent private equity manager, and is a past Chairman of the British Venture Capital Association. Donald Workman is an investment director in the Corporate Markets division of The Royal Bank of Scotland plc. We believe that these two appointments will add to the collective strength of the Board and commend them to shareholders. George Kershaw has made a significant contribution to the Company: the Board has particularly valued his knowledge of the investment trust movement and Stock Exchange procedures. I would like, on behalf of shareholders, to thank George for all he has done for us and wish him well for the future. Outlook The Company has enjoyed an excellent year and progress has continued since the financial year end. As increasing amounts of capital flow into the asset class and as the acceptance of, and opportunities for, private equity in Europe expand, the importance of a skilled manager becomes even more critical. The Board remains confident of the Manager's ability to select and access many of the best quality private equity funds in Europe and, subject to unforeseen changes to the macro-economic and political climate, continuing NAV growth. Scott Dobbie CBE Chairman 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)/gains on cash balances - (172) (172) Income from investments 7,636 - 7,636 Investment management fee (215) (1,934) (2,149) Administrative expenses (476) - (476) __________ __________ __________ Return on ordinary activities before interest and taxation 6,945 59,011 65,956 Finance cost (19) (171) (190) __________ __________ __________ Return on ordinary activities before taxation 6,926 58,840 65,766 Taxation (2,078) 631 (1,447) __________ __________ __________ Return on ordinary activities after taxation 4,848 59,471 64,319 __________ __________ __________ Return per ordinary share 3.05p 37.36p 40.41p __________ __________ __________ Diluted return per ordinary share 3.01p 36.90p 39.91p __________ __________ __________ 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 above. The dividend which has been recommended based on this Income Statement is 2.40p (2005 - 1.80p). INCOME STATEMENT (audited) for the year ended 30 September 2005 (restated) Revenue Capital Total £'000 £'000 £'000 Gains on investments - 57,036 57,036 Currency gains on cash balances - 151 151 Income from investments 5,955 - 5,955 Investment management fee (165) (1,482) (1,647) Administrative expenses (375) - (375) __________ __________ __________ Return on ordinary activities before interest and taxation 5,415 55,705 61,120 Finance cost (19) (171) (190) __________ __________ __________ Return on ordinary activities before taxation 5,396 55,534 60,930 Taxation (1,707) 496 (1,211) __________ __________ __________ Return on ordinary activities after taxation 3,689 56,030 59,719 __________ __________ __________ Return per ordinary share 2.32p+ 35.21p+ 37.53p+ __________ __________ __________ 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 above. The financial statements for the year ended 30 September 2005 have been restated to reflect the changes to accounting policies as set out in the accompanying notes. + Earnings per share - basic and diluted BALANCE SHEET (audited) as at 30 September 2006 2005 (restated) £'000 £'000 £'000 £'000 Non-current assets Investments at fair value through profit or loss 239,288 186,628 Current assets Investments at fair value through profit or loss 44,387 40,386 Debtors 189 87 Cash 7,700 2,152 __________ __________ 52,276 42,625 Creditors: amounts falling due within one year (1,762) (905) __________ __________ Net current assets 50,514 41,720 __________ __________ Total assets less current liabilities 289,802 228,348 __________ __________ Capital and reserves Called up share capital 354 354 Share premium 77,775 77,775 Special reserve 79,148 79,148 Capital redemption reserve 1 1 Capital reserve - realised 103,234 60,107 Capital reserve - unrealised 22,185 5,841 Revenue reserve 7,105 5,122 __________ __________ Total shareholders' funds 289,802 228,348 __________ __________ Analysis of shareholders' funds Equity interests (ordinary shares) 289,767 228,313 Non-equity interests (founder shares) 35 35 __________ __________ 289,802 228,348 __________ __________ Net asset value per equity share 182.1p 143.5p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (audited) For the year ended 30 September 2006 Share Capital Capital Capital Share premium Special redemption reserve reserve Revenue capital reserve reserve reserve realised unrealised reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 30 September 2005 as 354 77,775 79,148 1 60,107 5,841 2,257 225,483 originally reported Restatements (see notes 4&5) - - - - - - 2,865 2,865 ______ ______ ______ ______ ______ ______ ______ ______ Balance at 30 September 2005 as 354 77,775 79,148 1 60,107 5,841 5,122 228,348 restated 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 ______ ______ ______ ______ ______ ______ ______ ______ For the year ended 30 September Share Capital Capital Capital 2005 Share premium Special redemption reserve reserve Revenue capital account reserve reserve - - reserve Total realised unrealised £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 30 September 2004 as 354 77,775 79,148 1 20,011 (10,093) 1,433 168,629 originally reported Restatements (see notes 4&5) - - - - - - 1,910 1,910 ______ ______ ______ ______ ______ ______ ______ ______ Balance at 30 September 2004 as 354 77,775 79,148 1 20,011 (10,093) 3,343 170,539 restated Total recognised gains - - - - 40,096 15,934 3,689 59,719 Dividends paid - - - - - - (1,910) (1,910) ______ ______ ______ ______ ______ ______ ______ ______ Balance at 30 September as 354 77,775 79,148 1 60,107 5,841 5,122 228,348 restated ______ ______ ______ ______ ______ ______ ______ ______ CASHFLOW STATEMENT (audited) for the year ended 30 September 2006 2005 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 5,029 3,827 Net cash outflow from servicing of finance (142) (238) Net cash outflow from taxation (758) (909) Financial investment Purchase of investments (127,697) (110,777) Disposal of investments 132,153 111,766 __________ __________ Net cash inflow from financial investments 4,456 989 Ordinary dividends paid (2,865) (1,910) __________ __________ Net cash inflow before financing 5,720 1,759 Net cash outflow from financing - - __________ __________ Increase in cash 5,720 1,759 __________ __________ Reconciliation of net cash flow to movement in net funds Increase in cash as above 5,720 1,759 Currency movements (172) 151 ________ ________ Movement in net funds in the period 5,548 1,910 Opening net funds 2,152 242 ________ ________ Closing net funds 7,700 2,152 ________ ________ Represented by: Cash and short term deposits 7,700 2,152 ________ ________ Notes:- 1. Standard Life European Private Equity Trust PLC is an investment company managed by 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. The implementation of the 2005 Statement of Recommended Practice ' Financial Statements of Investment Trust Companies' (SORP) has resulted in changes in the presentation of total returns. Previously the revenue column of the Statement of Total Return was deemed to be the profit and loss account of the Company. An Income Statement is now presented, which still shows information on capital and revenue returns, although it is the total return column which represents the profit and loss account of the Company. The financial statements, and the net asset value per share figures, have been prepared in accordance with UK Generally Accepted Accounting Principles (' UK GAAP'). The new Financial Reporting Standards, issued as part of the programme to converge UK GAAP with International Financial Reporting Standards (IFRS), were applicable for the accounting period ended 30 September 2006 and the financial statements for the year ended 30 September 2005 have also been restated (see notes 4 and 5). The main change arising from these revisions to UK GAAP, in relation to the Company's financial statements, is that dividends to shareholders declared after the balance sheet date are now shown in the period of payment rather than in the reporting period. Dividends were previously recognised in the Statement of Total Return (now Income Statement). These are now dealt with as an appropriation of equity and are taken directly through equity in the Reconciliation of Movements in Shareholders' Funds. FRS 20 'Share-based payments', FRS 22 'Earnings per Share', FRS 23 'The Effects of Changes in Foreign Exchange Rates' and FRS 26 'Financial Instruments: Measurement' have both been adopted in full, but have had no impact on the results for the period and no prior year adjustment has been required. FRS 21 ' Events after the Balance Sheet Date' and FRS 25 'Financial Instruments: Disclosure and Presentation' have been adopted and the financial statements reflect the revised disclosures. 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 effective yield 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 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. (c) Investments at fair value through profit or loss - Investments are 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 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 recommendations of the joint publication from the BVCA and the 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 a bid price, discounted, where applicable, to recognise any restriction on sale or lack of liquidity. (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) 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 rates prevailing at the Company's balance sheet date. Gains or losses on the 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: As at As at 30 September 2006 30 September 2005 Euro 1.4746 1.4674 US dollar 1.8680 1.7691 Transactions in overseas currencies are translated at the exchange rates prevailing on the date of the transaction. 3. Income Year ended Year ended 30 September 30 September 2006 2005 £'000 £'000 Income from investments Income from unquoted investments 5,896 5,131 Interest from AAA rated money market funds 1,550 669 _______ _______ 7,446 5,800 _______ _______ Other income Interest receivable on cash 186 146 Other income 4 9 _______ _______ Total income 7,636 5,955 _______ _______ 4. Reconciliation of Balance Sheets As at 30 September 2005 £'000 Net assets as previously reported 225,483 Reversal of provision of final dividend 2,865 _______ Restated net assets 228,348 _______ 5. Reconciliation of Income Statement Year ended 30 September 2005 £'000 Total transfer to reserves as originally reported in the Statement of Total Return (now called the Income Statement) 824 Add: originally reported 2005 dividends on ordinary shares 2,865 _______ Restated total transfer to reserves 3,689 _______ 6. The number of ordinary shares in issue as at 30 September 2006 was 159,150,000 (30 September 2005 - 159,150,000). The return per ordinary share is based on the weighted average number of ordinary shares in issue. 7. The Directors recommend that a final dividend of 2.4p (2005 - 1.8p) per ordinary share be paid on 7 February 2007 to shareholders on the Company's share register as at the close of business on 5 January 2007. The ex-dividend date for the final dividend is 3 January 2007. 8. The financial information for the year ended 30 September 2006 comprises non-statutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial information for the year ended 30 September 2005 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 2006 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 29 January 2007 at 12.30pm. 9. The report and accounts for the year ended 30 September 2006 will be posted to shareholders on 21 December 2006 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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