SLPE.L Regulatory News (SLPE)

STANDARD LIFE EUROPEAN PRIVATE EQUITY TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2011

Further to the voluntary disclosure of the Company's annual results for the year ended 30 September 2011 by way of a preliminary announcement dated 5 December 2011, 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 5 December 2011 together with the additional text in compliance with the Rules.

The Company's annual report and financial statements for the year ended 30 September 2011, 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://privateequity.standardlifeinvestments.com/products/slepet/index.html.

FINANCIAL SUMMARY

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

Summary financial information

1 Data supplied by Fundamental Data.

2 Represents the cash dividend paid during the year, declared for the previous financial year.

3 For the period from the Company's listing until 1 July 2002, no management fee was charged on the Company's cash or money market holdings.

CHAIRMAN'S STATEMENT

The year ended 30 September 2011 started positively, however, the final quarter saw macro-economic and political concerns, particularly in Europe, dominate global financial markets.

Results and performance

World stock markets fell sharply in the final quarter of the financial year ended 30 September 2011 due to concerns about political uncertainty in Europe and signs of macro-economic weakness in all major developed economies. Given the use of listed market comparables in valuing the unrealised portfolio of private equity fund interests, the Company's NAV fell in the final quarter, after three quarters of strong growth.  For the year ended 30 September 2011 the Company's NAV increased by 17.1% to 228.7p (diluted NAV - 225.9p), from 195.3p at 30 September 2010 (diluted NAV - 193.3p). At 30 September 2011 the Company's net assets were £369.4 million.

The closing mid-market price of the Company's ordinary shares on 30 September 2011 was 134.0p, compared to 113.75p a year earlier. The share price represented a 40.7% discount to the Company's diluted NAV at the year end. The share price to NAV discount narrowed in the period to summer 2011, before widening as listed market volatility impacted investor sentiment.

The Company's practice remains one of reinvestment and to pay a dividend marginally in excess of the minimum required to maintain investment trust status. Against a background of increased income received during the year, the Board is recommending a final dividend of 1.3p per ordinary share (year ended 30 September 2010 - 0.2p). Subject to shareholder approval at the forthcoming Annual General Meeting, this dividend will be paid on 6 February 2012 to shareholders on the Company's share register at 6 January 2012. Shareholders will have the opportunity to 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*.

It is now just over ten years since the Company was listed on the London Stock Exchange. Private equity is a long-term asset class. For the period from listing on 29 May 2001 to 30 September 2011 the Company's NAV and share price, both on an annualised total return basis, were 9.2% and 3.8% higher respectively, while the FTSE All-Share Index and the MSCI Europe Index (in euros), on a similar total return basis, rose by 2.8% and fell by 1.1% respectively.

Valuation

At 30 September 2011 the Company's portfolio comprised 36 private equity fund interests. The value of this portfolio was £397.4 million, of which net unrealised gains arising during the year were £25.2 million.

In terms of the breakdown of net unrealised gains, unrealised gains on a constant exchange rate basis were £26.2 million (7.1% of the opening portfolio valuation), while negative exchange rate movements were modest at £1.0 million (0.3% of the opening portfolio valuation). Pleasingly, increasing earnings at the underlying investee companies was the primary driver of the uplift in valuations, supported by the impact of leverage within those companies.

99.2% by value of the private equity funds held by the Company was valued by the relevant fund manager at 30 September 2011. In undertaking the valuations the fund managers have followed the International Private Equity and Venture Capital Valuation Guidelines. In so doing, the principal valuation methodology is to use listed comparable valuation multiples. As reported above, during the final quarter of the year ended 30 September 2011 listed comparable multiples broadly fell.

Investment activity

The last year again saw a rise in the number and value of new private equity investments and realisations completed in Europe. The value of all new buy-out transactions completed in the European private equity market during the year ended 30 September 2011 was €77.2 billion (year ended 30 September 2010 and 2009 - €52.5 billion and €21.3 billion respectively). Against, however, a more difficult political and macro-economic environment the final quarter of the Company's financial year did see a fall in activity and value.

As a result of the general improvement in the European private equity market, the Company received distributions during the year of £82.6 million and, also reflecting the lower quantum of its outstanding commitments, paid £49.6 million in draw downs (year ended 30 September 2010 - distributions of £23.0 million and draw downs of £48.0 million). After taking account of fees, costs and other movements, the Company was £25.8 million cashflow positive during the year, compared to a £28.1 million cashflow deficit in the previous year. The distributions received by the Company generated net realised gains and income of £35.6 million, equivalent to an average return on the acquisition cost of the realised investments of 1.8 times (year ended 30 September 2010 - 1.8 times).

The Company made one new fund commitment during the year, with a €30 million commitment to Montagu IV, a €2.5 billion mid-market buy-out fund focussed on northern Europe. The Company's aggregate outstanding commitments were £126.4 million at 30 September 2011. Where drawn, such outstanding commitments will be funded from the Company's cash resources, distributions received from the portfolio of fund investments and the use of the Company's borrowing facility. As previously reported, a number of the private equity funds held by the Company have completed their respective investment periods and any future draw downs are likely to be limited. After undertaking a detailed review, the Manager believes that up to £40 million of the Company's existing outstanding commitments are now unlikely to be drawn.

In November 2010 the Company entered into a new £120 million syndicated revolving credit facility, led by The Royal Bank of Scotland plc. This facility expires on 31 December 2013. At 30 September 2011 the Company's net indebtedness was £28.5 million.

During the period from 30 September 2011 to 1 December 2011 the Company funded £1.2 million of draw downs and received £15.8 million of distributions and at 1 December 2011 had net indebtedness of £14.7 million. The Company also made a €35 million commitment to BC Partners IX in October 2011. Accordingly, at 1 December 2011 the Company's total outstanding commitments were £152.3 million.

Management incentive scheme arrangements

When the Company was listed in May 2001, an incentive scheme was put in place for the Company's investment management team. This scheme operated over two five year performance periods; the second of these periods expired on 30 September 2011. Following the first performance period, which ended on 30 September 2006, 4,854,979 founder A shares were convertible into ordinary shares upon payment of £1 per founder A share. 3,596,981 founder A shares remain outstanding and may be converted up until 31 December 2013.

Over the five year period from 30 September 2006 to 30 September 2011 the compound annual growth rate in the Company's NAV, including dividends paid, was 5.5%. As a result of this growth rate falling below the minimum threshold required of 10%, no founder B shares have a right to convert into ordinary shares. Accordingly, no value will be derived by the investment management team from the founder B shares. 

The Board considers that there should be a continuing incentive arrangement for the Manager for so long as it serves as the Company's investment manager and that the level of base management fee of 0.8% per annum, which was set on the listing of the Company, envisaged a continuing incentive scheme. During 2011, the Board has been discussing an appropriate new incentive scheme and has reached agreement with the Manager on the terms of a scheme. The performance period will run for the five years from 1 October 2011. For an incentive fee to be payable at the end of the five year period, the Company's net asset value total return must grow by more than 8% compound per annum (before any accrual for the incentive fee) over the period to 30 September 2016. Should this hurdle rate be achieved, the Manager will be entitled to an incentive fee of 10% of the growth in NAV (before any accrual for the incentive fee) in excess of the hurdle rate, multiplied by the number of ordinary shares in issue on 1 October 2011 (adjusted in certain circumstances to reflect subsequent share issuance and/or a material reduction in the Company's issued share capital).

Full details of the proposed new incentive scheme are set out in a circular to shareholders enclosed with the Company's annual report and accounts*. The incentive scheme will be put to shareholders for approval at the forthcoming Annual General Meeting. Standard Life plc and its associates will not vote on this resolution.

The Directors' Report in the Company's 2011 annual report and accounts* gives a detailed review of the Company's corporate governance arrangements. The Board gave particular emphasis during the year under review to a number of issues, which included:-

·; Cashflow estimates - the Manager uses a sophisticated model to project the Company's future cashflows and hence the capacity for future investment. A wide range of assumptions has been examined and the results prompted the decision to begin to make further new fund commitments, the first step of which is described above;

·; Board succession planning and recruitment - recent and prospective Board resignations led to detailed analysis of the skills and competences needed for the Company's long-term needs. Using an outside search consultant, Jo Taylor and Alastair Barbour were recruited to meet the identified job specifications; and

·; Management incentive scheme - the arrangements to provide a management incentive which were put in place at the time of the Company's listing expired on 30 September 2011. Considerable effort was made by the Board to agree a scheme which reflected the current business environment, was broadly comparable to the peer group of similar listed companies, and above all was seen to be of overall benefit to the Company and its shareholders.

Hamish Buchan, who has served on the Board since the Company's listing in May 2001, has to the regret of his colleagues intimated that he intends to step down from the Board after the forthcoming Annual General Meeting. Mr Buchan has made a significant contribution to the Company over the past eleven years. His wide knowledge of the investment trust sector and of investment analysis made him a strong Chairman of the Audit Committee and his counsel, both in Board meetings and, less formally, as the Senior Independent Director has been invaluable. He carries the best wishes for the future of his Board colleagues and of the Manager.

Following Mr Buchan's retirement, Edmond Warner will assume the role of the Senior Independent Director and Alastair Barbour that of Chairman of the Audit Committee.

Outlook

The European macro-economic and political outlook remains uncertain, with continuing sovereign debt worries and an increasing likelihood that a number of European states will experience negative economic growth. Against this background, the Manager has conducted a detailed review of the Company's portfolio, which at an investee company level has minimal direct exposure to businesses headquartered in southern Europe. Ongoing meetings with key fund managers have highlighted that aggregate corporate earnings continue to grow across respective investment portfolios.

Equity markets currently favour higher yielding instruments perceived to be low risk. The listed private equity sector, in which the Company is included, fulfils neither of these criteria and share prices currently stand at a substantial discount to NAV. Nevertheless, the Board and the Manager continue to believe that the Company is well placed strategically to benefit from any improvement in investor sentiment which follows a positive change in the outlook for European economies.

Scott Dobbie CBE

Chairman

2 December 2011

(* Please note that the references are provided in the 2011 annual report and accounts attached to this announcement).

INVESTMENT POLICY

Objective

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.

Investment strategy

The principal focus of the Company is to invest in the leading European private equity funds investing in mid to large sized buy-outs, which can be categorised as transactions with enterprise values ranging between €200

million and €2.0 billion.

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.

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 non-sterling currency exposure is principally to the euro and US dollar. 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. These investments may be in sterling or such other currencies to which the Company has exposure.

Borrowings

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.

Investment trust approval

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.

Benchmark

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 Portfolio Review section of the Manager's Review.

MANAGER'S REVIEW

The Manager

The Manager, SL Capital Partners LLP ("SL Capital"), is headquartered in Edinburgh, United Kingdom and comprises a team of 22 investment professionals with over 254 years of combined private equity experience. This team manages approximately £5.5 billion of private equity investments on behalf of over 150 clients worldwide.

SL Capital is a limited liability partnership and is 60% owned by Standard Life plc ("Standard Life") and 40% by its eight Partners. SL Capital has acted as Manager to the Company since its inception in 2001.

With the exception of the Company, all of the Manager's funds under management are held through limited partnership vehicles, which are structured as either pooled or segregated vehicles for clients. SL Capital's clients range from leading institutional investors in the UK, US, Canada and Europe, to family offices and high net worth individuals globally. The largest clients include Standard Life, the California Public Employees' Retirement System, a large number of UK local authorities and some significant North American pension funds. The Manager is also recommended by many institutional investment and pension fund consultants.

In addition to its Edinburgh investment office, the Manager has investment professionals based in Boston, United States. This team selects and oversees private equity investments in North America.

SL Capital is one of the largest investors in private equity funds and co-investments in Europe. One of the key strengths of the investment team is their extensive fund and direct deal experience, which gives the Manager

greater insight into the strategies, processes and disciplines of the funds invested in and allows better qualitative judgements to be made.

The Manager has a detailed and rigorous screening and due diligence process to identify and then evaluate the best private equity fund offerings. The Manager concentrates on opportunities in the buy-out segment of the

European private equity market, but, where it is relevant to a particular investment mandate, it also considers funds targeted on the secondaries, venture, growth and mezzanine segments, as well as funds focused on

particular sectors or geographies.

The private equity asset class has exhibited historically a wide dispersion of returns generated by fund investments and the Manager believes that appropriate portfolio construction and manager selection is vital to optimise investment performance. In that regard, the objective is for the Company's portfolio to comprise around 35-40 "active" private equity fund investments at any one time, with portfolio diversification being controlled through percentage concentration limits applied at an individual fund and manager level.

Finally, the Manager believes that as one of the largest and most experienced private equity investors in Europe, it is able to find and invest in Europe's premier private equity funds, where knowledge of and access to these funds are sometimes limited.

Market Review

European private equity activity continued to increase in the first half of 2011, however, this reversed in the third quarter.

As we enter 2012, activity levels and valuations will be driven by macro-economic and political concerns and the resulting impact on listed financial markets.

European market overview

The global macro-economic environment continued to improve during the first nine months of the Company's financial year, however, increasing concerns over Euro area sovereign debt, the US fiscal position and slowing

economic growth in the major developing and developed economies resulted in a more difficult back drop from summer 2011 onwards. Despite Q3 2011 earnings numbers being better than expected for many US and European corporates, the outlook has become more difficult with European surveys indicating a fall in new orders, production, industrial and consumer sentiment, and economic activity.

All of the above has meant that the listed financial markets have experienced significant volatility and for the year to September 2011 all of the major European indices fell. Further dislocation can be expected over the coming months, as the political crisis in the Euro zone and the consequential impact on European economic sentiment and activity develops.

As reported in the Chairman's Statement, during the year under review European private equity market activity increased, both for the overall market and for buy-outs. Buy-outs comprise around 90% of the European

private equity market by value, with the remainder primarily being growth and venture investments. The total enterprise value and volume of buy-out deals reported for the year ended 30 September 2011 was €77.2 billion and 454 respectively, compared to €52.5 billion and 368 respectively in the prior year. From a historic context the annual value and volume of deals is similar to that concluded in 2003. However, activity has dropped since summer 2011, as private equity managers have become worried about the broader political and economic environment, a potential slow down in corporate earnings and managers have faced difficulties in raising debt for potential transactions. This lower level of activity is likely to continue, at least, until the European political and macro-economic environment has stabilised.

Debt markets continued to improve until early summer 2011, whereupon the issues in Europe, combined with the traditionally quieter summer period, resulted in a significant slowdown in the availability of bank debt. Such

reduced availability was magnified by difficulties in syndicating certain of the larger bank facilities concluded in early summer. Following a similar trend, the first three quarters of the Company's financial year saw record issuance in the European high yield bond market, with €42.3 billion of new issues, of which 42.0% was for private equity backed companies. However, new issuance became very difficult from July 2011 and while some new issues took place in the autumn this was mainly for non-private equity backed corporates.

Realisation activity for European private equity backed companies was robust in the period to summer 2011, with surveys suggesting that realisation activity had been higher in H1 2011 than in any six month period since H1 2007. Most of the private equity investments sold were originally made in the years 2003-07. Since the summer, realisation activity has slowed as private equity managers have become concerned about the broader economic environment, compounded by a lack of debt to fund secondary purchases. Notwithstanding, in a return to a more traditional pattern the percentage of private equity deals being sold to corporates increased during 2011. This is positive and, against a background of good corporate liquidity, more sales to corporates can be expected, particularly when the European political and macro-economic environment starts to improve.

Finally, a few European private equity managers have raised new funds in the last year, particularly in the mid and large sized buy-out segments. Some of these fund raisings have reached, or exceeded, their targeted amounts. A number of high profile fund raisings are currently in the market and it will be interesting to see how the respective managers progress. With the turmoil in the financial markets, many seasoned private equity investors still find themselves constrained in making sizeable new commitments to the asset class.

Investment Activity

During the year to 30 September 2011 the Company funded £49.6 million of draw downs and received

£82.6 million of distributions.

At 30 September 2011 the Company had £126.4 million of outstanding fund commitments.

Draw downs

As reported above, the Company funded £49.6 million of draw downs during the financial year. This figure is below the long-term average, as a result of the decline in the Company's outstanding fund commitments and

the lower level historically of new investment activity in the European private equity market. The Manager expects the quantum of draw downs to remain modest during the remainder of 2011 and into 2012, due to the Manager's cautious approach to making new fund commitments and as a result of the macro-economic uncertainty impacting activity levels in the European private equity market. The private equity funds to which the Company funded the five largest draw downs during the year are set out in the table below.

Distributions, gains and income

During the year the Company's portfolio of private equity fund interests generated aggregate distributions of £82.6 million, including net realised gains of £31.1 million and income of £4.5 million. The quantum of

distributions received reflected an increase in European private equity sales during the year and it is encouraging to note that many of the individual company realisations were at a material premium to their last reported valuation. Despite a slow down in activity since summer 2011, the Manager expects the Company to continue to receive meaningful distributions during the remainder of 2011 and into 2012. This is due to the maturity of the Company's underlying portfolio and the fact that many of the companies have been prepared for exit.

The distributions received by the Company during the year included proceeds from trade sales and secondary buy-outs and, to a lesser extent, refinancings and IPOs. Since the summer, realisation activity has slowed

due to concerns about the broader economic environment and a reduced availability of debt to fund secondary purchases. However, as a result of an increase in corporate activity, the percentage of private equity deals sold to corporates has increased and it could increase further if the macro-economic environment starts to improve.

As shown in the bar chart on page 9 of the 2011 annual report and accounts*, the average return during the year on the Company's acquisition cost of realised investments was 1.76 times. The rise in the average return multiple between 2003 and 2009 can be attributed largely to the previous strength of the European private equity, debt and mergers and acquisitions markets and historic profit growth at underlying investee companies. The recent volatility in listed financial markets and the weaker macro-economic environment are likely to result in 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 five largest distributions received during the year, split into gains and income and broken down by fund, are set out in the table below.

Commitments

The Company recommenced making new fund commitments during the year with a £26.5 million commitment to Montagu IV in April 2011. The Manager anticipates following a conservative schedule of new fund commitments over the remainder of 2011 and into 2012, subject to the Company's cashflows and the broader market environment.

At 30 September 2011 the Company had £126.4 million of outstanding fund commitments, down from £150.3 million at 30 September 2010. The decline is the net result of the Company having made one new fund

commitment of £26.5 million and having funded £49.6 million of draw downs. Since the year end, the Company has also made a £30.2 million commitment to BC European Capital IX.

The Company has implemented an over-commitment strategy since late 2001. This is in line with the Manager's objective of maximising the Company's invested assets and the Manager believes that such a strategy should enhance the overall returns generated by the Company.

Over the past five years the Company's outstanding fund commitments less its available liquid resources, expressed as a percentage of the Company's disclosed net asset value, has varied between 97.3% and 9.5%. The bar chart on page 10 of the attached document* shows the relevant percentages at each annual reporting date, from 2002 to 30 September 2011. The percentage has varied over time according to the quantum of available 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 market conditions and the Company's projected cash flows, the Manager will consider carefully the making and timing of any new fund commitments.

(* Please note that the references are provided in the 2011 Annual Report and Accounts attached to this announcement).

Portfolio Review

At 30 September 2011 the Company's net assets were £369.4 million. The Company had interests in 36 private equity funds with a value of £397.4 million.

The effect of drawdowns and distributions over the year was to decrease net indebtedness from £54.2 million at 30 September 2010 to £28.5 million at 30 September 2011.

Portfolio composition and performance

At 30 September 2011 the Company's portfolio comprised 36 private equity fund interests with a value of £397.4 million which, together with its current assets less liabilities, resulted in the Company having net assets

of £369.4 million. This represented an undiluted NAV of 228.7p (diluted NAV - 225.9p). A breakdown of the £27.8 million movement in the Company's portfolio valuation during the year is detailed in the valuation

bridge on page 11 of the 2011 annual report and accounts.

The split of the Company's portfolio by type of private equity fund is set out in the pie chart on page 11 of the 2011 annual report and accounts. Details of all of the Company's private equity fund interests, and more detailed information on the ten largest fund investments and thirty largest underlying portfolio companies, can be found below.

The valuation of the Company's private equity fund interests at the year end was carried out by the Manager and has been approved by the Board in accordance with the accounting policies set out in the notes to 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 cashflows. The fund valuations are prepared in accordance with the International Private Equity and Venture Capital Valuation guidelines. These guidelines require investments to be valued at "fair value", which is the price at which an orderly transaction would take place between market participants at the reporting date. In addition, through its strong relationships with the fund managers, the Manager is able to consider the appropriateness of the valuation methodologies employed.

Portfolio review

Of the 36 private equity funds in which the Company is invested, 35 of the funds, or 99.2% of the portfolio by value, were valued by their fund managers at 30 September 2011. The Manager continues to believe that

the use of such timely valuation information is important.

The value of the Company's portfolio of private equity fund interests increased from £369.6 million at 30 September 2010 to £397.4 million at 30 September 2011. The increase was driven by unrealised gains on the

investment portfolio, at constant foreign exchange rates, of £26.2 million, together with £49.6 million of new investments and £31.1 million of net realised gains. These increases were offset by £78.1 million of realisation

proceeds and a £1.0 million negative foreign exchange movement.

Information on the valuation movement for the Company's portfolio for each of the last ten financial years is set out below. This table provides a useful summary of the individual changes and the underlying trends in the

Company's portfolio over time.

During the year, sterling appreciated against the euro by 0.6% and depreciated against the US dollar by 1.1%. This had a modest negative impact on the Company's NAV. The sterling/euro rate at 30 September

2011 was £1/€1.1611 and the sterling/dollar rate was £1/$1.5578. The combined effect of foreign exchange movements on the valuation of the portfolio over the year was a 0.6p decline in NAV.

The Manager and the 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 cash flows to and from its fund interests. Any cash balances and bank indebtedness are generally held in sterling, euro and US dollars, broadly in proportion to the currency of the Company's outstanding fund commitments.

On 29 November 2010 the Company entered into a new £120 million committed, revolving credit facility, led by the Royal Bank of Scotland plc. This new facility expires on 31 December 2013.

Valuation and leverage multiple analysis

The bar charts on page 12 of the 2011 annual report and accounts* show the valuation and leverage multiples of the fifty largest underlying portfolio companies held by the Company's private equity fund interests at 30 June 2011, which account for 54.0% of net assets. This analysis is at 30 June 2011 due to the fact that most private equity funds provide detailed information on the underlying portfolio companies twice a year, in June and December, rather than quarterly. The proportion shaded in light blue relates to portfolio companies where sales had been agreed but proceeds had not been received at 30 June 2011.

The valuation multiples of each underlying portfolio company are derived by the fund manager using relevant listed comparable companies, adjusted where appropriate, in line with the International Private Equity and Venture Capital Valuation guidelines.

The median valuation and leverage multiples for the top fifty underlying portfolio companies were 9-10x EV/EBITDA and 3-4x Debt/EBITDA respectively. These compare to median valuation and leverage multiples

for the top thirty underlying portfolio companies in June 2010 of 8-9x EV/EBITDA and 4-5x Debt/EBITDA respectively. The Manager believes that these valuation and leverage multiples are in line with the European private equity market for similar sized deals and vintages.

Diversification

The Board has agreed, and regularly reviews, diversification limits with the Manager regarding the Company's net asset value 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. At 30 September 2011, the Company was invested in 36

different private equity funds, which collectively had interests in a total of 521 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 value relative to original cost. Such information is used by the Manager in reviewing the 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.

The diversification of the Company's private equity fund interests, at 30 September 2011 and 2010, is set out in the four bar charts shown on page 13 of the 2011 annual report and accounts*.

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 25% at 30 September 2011, as other European private equity markets continue to develop.

At 30 September 2011, the Company had five fund investments - Pomona Capital V, Pomona Capital VI, Coller International Partners IV, Coller International Partners V and Towerbrook Investors II - which are likely to invest a significant proportion of their capital outside Europe. In total, these funds represent 12.6% of the Company's gross assets. The broad diversification in sectors like industrials, consumer services and financials

helps to mitigate the effect of volatility in any individual sector.

The chart showing the maturity exposure of underlying investments highlights the increasing maturity of the portfolio, as a result of the reduced level of private equity activity over the last three years. The chart showing

value relative to the original cost of underlying investments illustrates that the portfolio remains healthy, with 84% of the portfolio valued at or above cost.

SL Capital Partners LLP

2 December 2011

(* Please note that the references are provided in the 2011 annual report and accounts attached to this announcement).

FUND INVESTMENTS AT 30 SEPTEMBER 2011

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:

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

† the 521 underlying investments represent holdings in 495 separate investments.

TEN LARGEST FUND INVESTMENTS AT 30 SEPTEMBER 2011

TOP 30 UNDERLYING INVESTMENTS AT 30 SEPTEMBER 2011

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

DIRECTORS' REPORT

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 2010, 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 Company's registration number is SC 216638.

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 can be found

above and the Portfolio Review section of the Manager's Review explains how the Company has invested its assets with a view to spreading investment risk in accordance with the Company's investment policy.

Review of Performance

An outline of the performance, market background, investment activity and portfolio during the year under review and the performance over the period since listing, 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, which 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 one year and five years ended 30 September 2011, and since listing, are provided in the Financial Summary. The Company's expense ratio and discount levels are provided in the Summary Financial Information. An analysis of the portfolio cashflows, including draw downs, distributions and fund commitments, is provided in the Investment Activity section of 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. Further information on the Manager's policy on sustainable and responsible investing is provided in the Company's 2011 Annual Report and Accounts*. 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. Details of the Investment Management Agreement are provided on pages 20 and 21 of the Company's 2011 Annual Report and Accounts*.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with United Kingdom Generally Accepted

Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they 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 these financial statements, the directors are required to:

- select suitable accounting policies and then apply them consistently;

- make judgements and accounting estimates that are reasonable and prudent;

- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

- prepare the financial statements on the 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 adequate accounting records that are sufficient to show and explain the company's transactions and

disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006.

They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from

legislation in other jurisdictions.

Each of the directors confirms that, to the best of their knowledge:

- the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the company; and

- the directors' 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 it faces.

For Standard Life European Private Equity Trust PLC

Scott Dobbie CBE

Chairman

Edinburgh, 2 December 2011INCOME STATEMENT (audited)

for the year ended 30 September 2011

INCOME STATEMENT (audited)

for the year ended 30 September 2010

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (audited)

BALANCE SHEET (audited)

CASHFLOW STATEMENT (audited)

Notes:

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 2009). 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 costs

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 interest rate basis. Dividends and income from unquoted investments are 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.

(c) Investments

Investments have been designated upon initial recognition as fair value through the profit or loss. On the date of making a legal commitment to invest in a fund, such commitment is recorded and disclosed. When funds are drawn in respect of such fund commitment the resulting investment is recognised in the financial statements. The investment is removed when it is realised or 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 EVCA and the BVCA, '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 manager's 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. Scrip dividends are recognised in the period in which shares are issued.

(e) Capital reserves

Gains or losses on investments realised in the year that have been recognised in the Income Statement are transferred to the "capital reserve - gains/(losses) on disposal". In addition, any prior unrealised gains or losses on such investments are transferred from the "capital reserve - revaluation" to the "capital reserve - gains/(losses) on disposal" on the disposal of the investment. Increases and decreases in the fair value of investments are recognised in the Income Statement and are then transferred to the "capital reserve - revaluation".

(f) 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

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.

(g) Overseas currencies

Overseas assets and liabilities are translated at the exchange rate prevailing at the Company's balance sheet date. Gains or losses on 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 at 30 September were: