Interim Results

Standard Life Euro Pri Eqty Tst PLC 05 June 2007 5 June 2007 STANDARD LIFE EUROPEAN PRIVATE EQUITY TRUST PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2007 Highlights • The Company's net asset value per ordinary share ('NAV') rose by 12.7% to 205.3p (30 September 2006 - 182.1p). • The closing mid-market price of the Company's ordinary shares on 31 March 2007 was 240.8p (30 September 2006 - 183.5p), a rise of 31.2% over the six month period. • In line with the Company's dividend policy, the Board has not declared an interim dividend. • Private equity is a long term asset class. Over the five year period from 1 April 2002 the Company's NAV and share price have materially out-performed the two most relevant stock market indices, rising by 118.4% and 183.3% respectively, while the FTSE All-Share Index and the MSCI Europe Index (sterling adjusted) have risen by 28.4% and 32.8% respectively. • As at 31 March 2007 the Company's net assets were £326.7 million (30 September 2006 - £289.8 million). The Company had interests in 47 private equity funds with a value of £279.9 million (30 September 2006 - 43 funds and £239.3 million) and held £48.9 million in cash and money market balances (30 September 2006 - £52.1 million). • Distributions received during the period totalled £69.3 million (six months ended 30 September 2006 - £46.7 million), including £39.5 million of realised gains and income (six months ended 30 September 2006 - £27.9 million). The average return on the Company's acquisition cost of realised investments was 2.3 times (six months ended 30 September 2006 - 2.5 times). • The valuation of the Company's private equity fund interests reflected a positive performance, with unrealised gains during the period of £3.7 million (six months ended 30 September 2006 - £11.6 million). • In light of the continuing growth in the European private equity market the Company funded a record £66.8 million of draw downs (six months ended 30 September 2006 - £37.7 million). • The Company made four new fund commitments totalling £113.0 million during the period, to Apax Europe VII, Coller International Partners V, CVC Tandem and Terra Firma Capital Partners III. Quote from Scott Dobbie, Chairman:- 'Against a background of increasing competition in the European private equity asset class and rising deal and fund sizes, the skills of portfolio construction, selection and the ability to access the best managers and funds are at a premium: in this the Manager has an enviable track record.' CHAIRMAN'S STATEMENT Results and performance The Company performed well in the six months ended 31 March 2007, with its net asset value per ordinary share ('NAV') rising by 12.7% to 205.3p. The strong portfolio of assets benefited from rising financial markets, positive macro-economic fundamentals across most of Europe and a robust European private equity market. As at 31 March 2007 the Company's net assets were £326.7 million (30 September 2006 - £289.8 million). On a fully diluted basis, assuming conversion of the relevant outstanding founder A shares, the Company's NAV at 31 March 2007 was 202.1p. Despite some recent public expressions to the contrary, the Company's Board and Manager believe that private equity returns should properly be viewed over a long time horizon. The Company was listed in May 2001. Over the five year period from 1 April 2002 the Company's NAV and share price have materially out-performed the two most relevant stock market indices, increasing by 118.4% and 183.3% respectively, compared to rises of 28.4% in the FTSE All-Share Index and 32.8% in the MSCI Europe index (sterling adjusted). The closing mid-market price of the Company's ordinary shares on 31 March 2007 was 240.8p (30 September 2006 - 183.5p), a rise of 31.2% over the six month period. Throughout the period the Company's shares continued to trade at a premium to the published NAV. In line with the Company's dividend policy, the Board has not declared an interim dividend. Valuation As at 31 March 2007 the Company's portfolio comprised 47 private equity fund interests, of which 20 fund interests represented 84.3% by value of the portfolio. The Board believes that this pattern of exposure provides an optimum balance between diversification and concentration in an asset class that traditionally has demonstrated a high dispersion of return between different managers and funds. During the six month period the portfolio continued to rise in value through a combination of net new investment activity and unrealised gains. As at 31 March 2007 the value of portfolio was £279.9 million (30 September 2006 - £239.3 million), of which unrealised gains arising during the period were £3.7 million (six months ended 30 September 2006 - £11.6 million). This reflected a positive performance, attributable principally to good trading and cashflow generation at many of the underlying investee companies and rising comparable valuation multiples. Aggregate cash and money market balances fell marginally over the period to £48.9 million at 31 March 2007 (30 September 2006 - £52.1 million). This was the result of a healthy flow of distributions, offset by record draw downs and the payment of the final dividend for the last financial year. At the period end, the percentage of the Company's gross assets invested in private equity assets had risen to 85.1% (30 September 2006 - 82.1%); this remains one of the highest proportions within the private equity investment trust asset class. Exchange rates had a slightly negative impact on NAV over the period, as sterling appreciated by 5.0% relative to the US dollar and depreciated by 0.1% relative to the euro. As at 31 March 2007 the Company had £329.1 million of gross assets, of which £200.7 million (sterling equivalent) comprised euro denominated assets and £52.1 million (sterling equivalent) dollar denominated assets (30 September 2006 - £291.6 million, £166.0 million and £46.5 million respectively). Investment activity The level of European private equity investment rose again, with a total of €107.8 billion of transactions completed in the six month period to 31 March 2007, compared to €68.5 billion in the comparable six month period last year and €156.7 billion in the year ended 30 September 2006. Buy-out activity now dominates the market and average deal sizes continue to increase. In light of this the Company funded a record £66.8 million of draw downs in the six month period to 31 March 2007 (six months ended 30 September 2006 - £37.7 million). As for cash inflow, the six month period saw the Company receive £69.3 million of distributions (six months ended 30 September 2006 - £46.7 million). The Company benefited from significant realisations across the portfolio, with both large and small investments being fully or partially realised. This was again driven by the strong mergers and acquisitions market and the attractive maturity profile of the Company's portfolio. Over 33% of the Company's underlying portfolio of investments at 31 March 2007 were made in the years 2001-04, against a background of relatively weaker corporate earnings, lower multiples and less competition. Of the distributions received, £34.5 million were realised gains and £5.0 million were income (six months ended 30 September 2006 - £24.6 million and £3.3 million respectively). The average return on the Company's acquisition cost of realised investments again exceeded two times, being 2.3 times (six months ended 30 September 2006 - 2.5 times). Early 2007 saw the beginning of a new fund raising cycle, with some of the managers who last raised funds in 2004 returning to the market. During the six month period the Company made four new fund commitments totalling £113.0 million. These were £40.7 million to Apax Europe VII, £20.4 million to Coller International Partners V, £28.8 million to CVC Tandem and £23.1 million to Terra Firma Capital Partners III. All of these funds are buy-out funds and are focused on Europe, save for Coller International Partners V which specialises in secondary private equity investments in Europe and North America. The Company has existing investments with the managers of all of these funds, with the exception of Terra Firma Capital Partners III, although, in this case, the Manager has been monitoring and reviewing Terra Firma's progress for a number of years. In light of the new fund commitments made and draw downs funded, the Company's aggregate outstanding commitments to its private equity fund interests increased to £353.3 million as at 31 March 2007 (30 September 2006 - £307.7 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 private equity fund interests and, if necessary, the use of bank borrowings. During the period the Company entered into a new five year £60 million revolving credit facility with The Royal Bank of Scotland plc and at the period end this facility was undrawn. Profile of private equity industry Recent years have seen a significant increase in the number and size of private equity transactions undertaken in Europe. This has prompted much public debate about the European private equity market, its role in the capital markets and more generally in society. Arising from this there have been calls for greater disclosure and governance by private equity funds and managers. There has been little debate about broadening the access to the asset class. With the experience of six years in the Company, the Board believes that the benefits, particularly of corporate structure, reporting and governance, provided by private equity investment trusts listed on the London Stock Exchange have not been fully recognised and that they offer appropriate vehicles for retail and small institutional investors to obtain exposure to, and information on, the private equity market. Outlook The Company delivered a good performance in the six months to 31 March 2007 and this has continued post the period end. Against a background of increasing competition in the European private equity asset class and rising deal and fund sizes, the skills of portfolio construction, selection and the ability to access the best managers and funds are at a premium: in this the Manager has an enviable track record. Further, in the current pricing and debt environment the Manager is aware of the balance between over-committing the Company and maximising investment returns. Scott Dobbie CBE Chairman INCOME STATEMENT (unaudited) Six months to 31 March 2007 Revenue Capital Total £'000 £'000 £'000 Total capital gains on investments - 37,596 37,596 Currency gains - 4 4 Income 6,186 - 6,186 Investment management fee (128) (1,154) (1,282) Administrative expenses (295) - (295) ________ ________ ________ Return before finance costs and taxation 5,763 36,446 42,209 Interest payable and similar charges (11) (100) (111) ________ ________ ________ Return on ordinary activities before taxation 5,752 36,346 42,098 Taxation on ordinary activities (1,746) 377 (1,369) ________ ________ ________ Return on ordinary activities after taxation 4,006 36,723 40,729 ________ ________ ________ Return per ordinary share 2.52p 23.07p 25.59p ________ ________ ________ Diluted return per ordinary share 2.48p 22.74p 25.22p ________ ________ ________ _________________________________________________________________________________ (unaudited) Six months to 31 March 2006 Revenue Capital Total £'000 £'000 £'000 Total capital gains on investments - 26,195 26,195 Currency gains - 20 20 Income 3,270 - 3,270 Investment management fee (101) (911) (1,012) Administrative expenses (237) - (237) ________ ________ ________ Return before finance costs and taxation 2,932 25,304 28,236 Interest payable and similar charges (10) (85) (95) ________ ________ ________ Return on ordinary activities before taxation 2,922 25,219 28,141 Taxation on ordinary activities (863) 298 (565) ________ ________ ________ Return on ordinary activities after taxation 2,059 25,517 27,576 ________ ________ ________ Diluted return per ordinary share 1.30p* 16.03p* 17.33p* ________ ________ ________ _________________________________________________________________________________ (audited) Year ended 30 September 2006 Revenue Capital Total £'000 £'000 £'000 Total capital gains on investments - 61,117 61,117 Currency losses - (172) (172) Income 7,636 - 7,636 Investment management fee (215) (1,934) (2,149) Administrative expenses (476) - (476) ________ ________ ________ Return before finance costs and taxation 6,945 59,011 65,956 Interest payable and similar charges (19) (171) (190) ________ ________ ________ Return on ordinary activities before taxation 6,926 58,840 65,766 Taxation on ordinary activities (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. The Company has no recognised gains or losses other than those recognised in the income statement above. All revenue and capital items in the above statement derive from continuing operations. * Earnings per share - undiluted and diluted. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS For the period ended 31 March 2007 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 2006 354 77,775 79,148 1 103,234 22,185 7,105 289,802 Total recognised gains and losses - - - - 33,055 3,668 4,006 40,729 Dividends paid - - - - - - (3,820) (3,820) ______ ______ ______ ______ ______ ______ ______ ______ Balance at 31 March 2007 354 77,775 79,148 1 136,289 25,853 7,921 326,711 ______ ______ ______ ______ ______ ______ ______ ______ For the period ended 31 March 2006 Balance at 30 September 2005 354 77,775 79,148 1 60,107 5,841 5,122 228,348 Total recognised gains and losses - - - - 19,987 5,530 2,059 27,576 Dividends paid - - - - - - (2,865) (2,865) ______ ______ ______ ______ ______ ______ ______ ______ Balance at 31 March 2006 354 77,775 79,148 1 80,094 11,371 4,316 253,059 ______ ______ ______ ______ ______ ______ ______ ______ For the year ended 30 September 2006 Balance at 30 September 2005 354 77,775 79,148 1 60,107 5,841 5,122 228,348 Total recognised gains and losses - - - - 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 (unaudited) (unaudited) (audited) As at As at As at 31 March 2007 31 March 2006 30 September 2006 £'000 £'000 £'000 Non-current assets Investments at fair value through profit or loss 279,909 208,784 239,288 Current assets Investments at fair value through profit or loss 40,935 36,989 44,387 Debtors 224 126 189 Cash and short term deposits 8,011 8,400 7,700 ________ ________ ________ 49,170 45,515 52,276 Creditors: amounts falling due within one year (2,368) (1,240) (1,762) ________ ________ ________ Net current assets 46,802 44,275 50,514 ________ ________ ________ Net assets 326,711 253,059 289,802 ________ ________ ________ Capital and reserves Called up share capital 354 354 354 Share premium 77,775 77,775 77,775 Special reserve 79,148 79,148 79,148 Capital redemption reserve 1 1 1 Capital reserve - realised 136,289 80,094 103,234 Capital reserve - unrealised 25,853 11,371 22,185 Revenue reserve 7,291 4,316 7,105 ________ ________ ________ Total shareholders' funds 326,711 253,059 289,802 ________ ________ ________ Analysis of shareholders' funds Equity interests (ordinary shares) 326,676 253,024 289,767 Non-equity interests (founder shares) 35 35 35 ________ ________ ________ 326,711 253,059 289,802 ________ ________ ________ Net asset value per equity share 205.3p 159.0p 182.1p ________ ________ ________ Net asset value per equity share - diluted 202.1p 159.0p 179.6p ________ ________ ________ CASHFLOW STATEMENT (unaudited) (unaudited) (audited) Six months to Six months to Year to 31 March 2007 31 March 2006 30 September 2006 £'000 £'000 £'000 Revenue before finance costs and taxation 42,209 28,236 65,956 Adjusted for: Realised gains on investments (33,928) (20,665) (44,801) Fund investments wound up - - 28 Unrealised gains on investments (3,668) (5,530) (16,344) Currency losses/(gains) (4) (20) 172 Increase in accrued income (50) (47) (89) Decrease/(increase) in other debtors 15 8 (13) Increase in creditors 129 154 275 Tax deducted from non - UK income (29) (140) (155) NET CASH INFLOW FROM OPERATING ACTIVITIES 4,674 1,996 5,029 NET CASH OUTFLOW FROM SERVICING OF FINANCE (152) (95) (142) NET CASH OUTFLOW FROM TAXATION (860) (244) (758) FINANCIAL INVESTMENT Purchase of investments (114,149) (53,416) (127,697) Disposal of investments 114,614 60,852 132,153 NET CASH INFLOW FROM FINANCIAL INVESTMENT 465 7,436 4,456 ORDINARY DIVIDEND PAID (3,820) (2,865) (2,865) ________ ________ ________ NET CASH INFLOW BEFORE FINANCING 307 6,228 5,720 NET CASH OUTFLOW FROM FINANCING - - - ________ ________ ________ INCREASE IN CASH AND CASH EQUIVALENTS 307 6,228 5,720 ________ ________ ________ RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS Increase in cash as above 307 6,228 5,720 Currency gains/(losses) 4 20 (172) ________ ________ ________ MOVEMENT IN NET FUNDS IN THE PERIOD 311 6,248 5,548 Opening net funds 7,700 2,152 2,152 ________ ________ ________ CLOSING NET FUNDS 8,011 8,400 7,700 ________ ________ ________ REPRESENTED BY: Cash and short term deposits 8,011 8,400 7,700 ________ ________ ________ 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 financial statements, and the net asset value per share figures, have been prepared in accordance with UK Generally Accepted Accounting Principles ('UK GAAP'). (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: (i) transaction costs incurred on the purchase and disposal of investments are recognised as a capital item in the Income Statement; and (ii) the Company charges 90% of the 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 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 EVCA and BVCA. This is normally the latest valuation placed on a fund by its manager, adjusted if necessary for cashflows 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 bid prices, 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 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 period/year end are accounted for through the unrealised capital reserve. Gains and losses on the translation of overseas currency balances held at the period/year end are accounted for through the realised capital reserve. Rates of exchange to sterling were: As at As at As at 31 March 2007 31 March 2006 30 September 2006 Euro 1.4735 1.4334 1.4746 US dollar 1.9614 1.7346 1.8680 Transactions in overseas currencies are translated at the exchange rate prevailing on the date of the transaction. 3. Income Six months ended Six months ended Year ended 31 March 31 March 30 September 2007 2006 2006 £'000 £'000 £'000 Income from unquoted investments 4,992 2,567 5,896 _______ _______ _______ Other income Interest from AAA rated money market funds 1,126 672 1,550 Deposit interest 62 27 186 Other income 6 4 4 _______ _______ _______ 1,194 703 1,740 _______ _______ _______ Total income 6,186 3,270 7,636 _______ _______ _______ 4. The number of ordinary shares in issue as at 31 March 2007 was 159,150,000 (30 September 2006 - 159,150,000). The return per ordinary share is based on the weighted average number of ordinary shares in issue. 5. There will be no interim dividend for the six months ended 31 March 2007. 6. The financial information for the six months ended 31 March 2007 and 31 March 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 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 interim accounts have been prepared on the same basis as the annual accounts. 7. The interim report and accounts will be posted to shareholders and copies will be available from the Manager - Standard Life Investments (Private Equity) Limited, 1 George Street, Edinburgh EH2 2LL. for Standard Life European Private Equity Trust PLC, Edinburgh Fund Managers plc, SECRETARY END This information is provided by RNS The company news service from the London Stock Exchange

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