8 Dec 2014 07:00
8 December 2014
STANDARD LIFE EUROPEAN PRIVATE EQUITY TRUST PLC
RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2014
Highlights
· The Company's net asset value per ordinary share ("NAV") rose by 5.8% to 257.4p during the year. The NAV total return to shareholders was 7.7%.
· The Company's portfolio, including net realised gains and income, generated a return of 9.7% during the year. This was after taking account of unrealised foreign exchange losses of 6.3%.
· The closing mid-market price of the Company's ordinary shares on 30 September 2014 was 230.0p, a rise of 16.2% over the year and a discount of 10.6% to NAV.
· Recommended final dividend of 5.0p per ordinary share, reflecting the continuing strong level of income received (year ended 30 September 2013 - 5.0p). The Board's intention in future is to seek to maintain, at least, the real value of this year's proposed 5.0p final dividend.
· At the year end the Company's net assets were £409.1 million. In preparing the Company's year end valuation, 94.6% by value of the portfolio was valued by the relevant fund manager at 30 September 2014.
· Distributions received and draw downs from the portfolio during the year rose materially to £101.8 million and £47.8 million respectively. In addition, the Company acquired through the secondary market fund interests in 3i Eurofund V and IK VII for £9.2 million in aggregate.
· During the year the Company acquired a total of 6.275 million ordinary shares through a series of share buy-back transactions for £12.5 million. The ordinary shares were acquired at an average price of 199.0p and at an average discount to the prevailing NAV of 18.9%, resulting in a gain of £2.9 million.
· The Company had liquid resources of £60.8 million at 30 September 2014, comprising a cash balance, including holdings in money market funds, of £21.6 million and £39.2 million invested at value (£39.0 million at cost) in UK and European equity index tracker funds. The Company has an undrawn £80 million syndicated revolving credit facility led by The Royal Bank of Scotland plc that expires in December 2016.
· The Company made three new fund commitments during the year with commitments of €30.0 million to Nordic Capital VIII, €30.0 million to Permira V and €55.0 million to Altor Fund IV.
· The Company had £214.4 million of outstanding commitments at 30 September 2014. After undertaking a detailed review, the Manager now believes that up to £50 million of the Company's existing outstanding commitments are unlikely to be drawn (previously - £45 million).
· During the period from 30 September 2014 to 4 December 2014 the Company funded £5.2 million of draw downs and received £10.0 million of distributions. The Company also agreed to acquire fund interests in Advent Global Private Equity VI and Cinven Fourth Fund for £19.4 million in aggregate and sold its fund interest in Apax Europe VII for £21.8 million. The interest in Apax Europe VII was valued at 30 September 2014 at the sale proceeds received. In addition, the Company made a new commitment of €35.0 million to PAI Europe VI.
· At 4 December 2014 the Company had a cash balance, including holdings in money market funds, of £44.9 million and had £40.4 million at value (£39.0 million at cost) invested in UK and European equity index tracker funds. At 4 December 2014 the Company had outstanding commitments of £236.1 million.
For further information please contact:-
Peter McKellar of SL Capital Partners LLP (on 0131 245 0055)
Chairman's Statement
Results and performance
The last year has seen the Company benefit from a stronger mergers and acquisitions market in Europe, with increased exit activity and, more recently, a pick-up in new investment. This has been against a background of volatile listed financial markets, due to geo-political considerations and concerns about the strength of the European and global macro-economic recovery. For the year ended 30 September 2014 the Company's NAV rose by 5.8% to 257.4p, from 243.4p at 30 September 2013. Including the dividend paid in January 2014, the NAV total return to shareholders was 7.7%. At 30 September 2014 the Company's net assets were £409.1 million (30 September 2013 - £401.2 million).
The closing mid-market price of the Company's ordinary shares on 30 September 2014 was 230.0p, a rise of 16.2% over the year and a discount of 10.6% to NAV. The discount narrowed during the year, along with most of the Company's peer group, from 18.6% at 30 September 2013.
Since listing in 2001, the Board's strategy has been one of reinvestment and to pay a dividend marginally in excess of the minimum required to maintain investment trust status. The Board has reviewed this strategy and has decided to modify its approach to reflect better the importance many shareholders place on the reliability of income. This should also be seen in the context of the Board's overall approach to capital discipline. Henceforth, barring unforeseen circumstances that may arise and the impact of the broader market cycle on income received, it is the Board's intention to maintain, at least, the real value of this year's proposed 5.0p final dividend. The strength of the Company's balance sheet, not least its level of reserves, will be used as appropriate to support this modified strategy.
Subject to shareholder approval at the forthcoming Annual General Meeting, this year's proposed final dividend of 5.0p will be paid on 30 January 2015 to shareholders on the Company's share register at 9 January 2015.
Private equity is a long-term asset class and should be viewed over equivalent time periods. Over the last ten years the Company's NAV and share price, both on an annualised total return basis, rose by 10.2% and 10.5% respectively, while the FTSE All-Share Index and the MSCI Europe Index (in euros), on a similar total return basis, were up 8.2% and 7.1% respectively.
Investment activity
The last year saw a broadly similar number and value of new private equity investments completed in Europe compared to the prior year. The volume and value of all new buy-out transactions completed in the European private equity market during the year ended 30 September 2014 was 475 transactions and €73.6 billion (year ended 30 September 2013 - 437 and €75.1 billion respectively). Private equity managers are reporting a strengthening new deal pipeline, set against a background of growing mergers and acquisitions activity in Europe. The exit environment for private equity backed companies is robust, with corporates and private equity managers active buyers, alongside IPO new issuance.
During the year the Company witnessed an increase in cashflows to and from its portfolio. The Company received distributions from its fund interests of £101.8 million and paid £47.8 million in draw downs (year ended 30 September 2013 - distributions of £69.3 million and draw downs of £37.6 million). The distributions received by the Company generated net realised gains and income of £50.7 million, equivalent to an average return on the acquisition cost of the realised investments of 2.0 times (year ended 30 September 2013 - 2.2 times).
The Company remains flexible in the use of its capital resources and the Manager continues to take advantage of opportunities in the secondary market for European private equity fund interests. The Company acquired an original commitment of €20.0 million to 3i Eurofund V in December 2013. The fund interest was acquired at a 2.5% discount to the 30 June 2013 valuation of the fund, adjusted for subsequent cashflows. The purchase price for the fund interest was £8.2 million and the Company assumed outstanding commitments of £0.7 million. The Company already held an existing original commitment of €40.0 million to 3i Eurofund V. The Company also acquired an original commitment of €6.0 million to IK VII in March 2014. The fund interest was acquired at 100% of the 30 September 2013 valuation of the fund, adjusted for subsequent cashflows. The purchase price for the fund interest was £1.0 million and the Company assumed outstanding commitments of £3.9 million. The Company already held an existing original commitment of €30.0 million to IK VII. The Manager continues to believe that the private equity secondary market can provide the Company with the opportunity to enhance returns from its portfolio.
During the year the Company acquired a total of 6.275 million ordinary shares through a series of share buy-back transactions for £12.5 million. The ordinary shares were acquired at an average price of 199.0p and at an average discount to the prevailing NAV of 18.9%, resulting in a gain of £2.9 million. The ordinary shares acquired have been cancelled.
After taking account of the above transactions, management fees, dividends and costs, the Company was £18.3 million cashflow positive during the year. At 30 September 2014 the Company had a cash balance, including holdings in money market funds, of £21.6 million and had £39.2 million invested at value (£39.0 million at cost) in UK and European equity index tracker funds. The Company continues to have an undrawn £80 million syndicated revolving credit facility led by The Royal Bank of Scotland plc that expires in December 2016.
In light of the Company's strong liquidity and the quantum of outstanding commitments that the Manager expects to be drawn down over time, the Company made three new fund commitments during the year. These were commitments of €30.0 million to Nordic Capital VIII, €30.0 million to Permira V and €55.0 million to Altor Fund IV. The Company had £214.4 million of outstanding commitments at 30 September 2014. After undertaking a detailed review, the Manager now believes that up to £50 million of the Company's existing outstanding commitments are unlikely to be drawn (previously - £45 million).
Valuation
At 30 September 2014 the Company's portfolio comprised 43 private equity fund interests. The value of this portfolio was £348.5 million, of which net unrealised losses arising during the year were £16.0 million.
Unrealised gains on a constant exchange rate basis were £6.4 million. 94.6% by value of the portfolio was valued by the relevant fund manager at 30 September 2014. In undertaking the valuations the fund managers followed the International Private Equity and Venture Capital Valuation Guidelines. In so doing, the principal valuation methodology is to use listed comparable valuation multiples.
Negative foreign exchange movements, which principally arose from the 7.3% depreciation in the euro relative to sterling during the year, were £22.4 million. Accordingly, the depreciation in the euro had a material impact on the Company's otherwise strong NAV performance.
Recent activity
During the period from 30 September 2014 to 4 December 2014 the Company funded £5.2 million of draw downs and received £10.0 million of distributions. The Company also agreed to acquire fund interests in Advent Global Private Equity VI and Cinven Fourth Fund for £19.4 million in aggregate and sold its fund interest in Apax Europe VII for £21.8 million. The interest in Apax Europe VII was valued at 30 September 2014 at the sale proceeds received. In addition, the Company made a new commitment of €35.0 million to PAI Europe VI. Finally, the Company acquired a total of 1.245 million ordinary shares through two share buy-back transactions for £2.8 million. The ordinary shares acquired have been cancelled.
At 4 December 2014 the Company had a cash balance, including holdings in money market funds, of £44.9 million and had £40.4 million at value (£39.0 million at cost) invested in UK and European equity index tracker funds. At 4 December 2014 the Company had outstanding commitments of £236.1 million.
Alternative Investment Fund Managers Directive ("AIFMD" or "the Directive")
The Company is required to comply with the European Union AIFMD. The Directive requires the Company to appoint an Alternative Investment Manager ("AIFM") to be responsible for portfolio and risk management and to be regulated under the Directive. The Board has appointed the Manager, SL Capital Partners LLP, as the AIFM. The Financial Conduct Authority permitted SL Capital Partners LLP to act as the AIFM to the Company with effect from 1 July 2014.
The Directive also requires the Company to appoint a depositary and the Board appointed BNP Paribas Securities Services S.A. to fulfil this function with effect from 1 July 2014.
Board
In May the Board was pleased to welcome Alan Devine as a director of the Company. Alan has spent his entire career working for The Royal Bank of Scotland Group in a variety of senior roles and he is currently CEO of RBS Shipping Group. Alan brings significant experience of the banking market, which the Board believes will be invaluable in its deliberations.
Outlook
The Board and the Manager have noted the slow down in economic activity and the weakening in sentiment in continental Europe over the last few months. After a strong increase in corporate earnings at many underlying portfolio companies up until summer 2014, it is anticipated that the rate of earnings growth may slow, but remain positive. Draw down and distribution activity remain healthy and, given the maturity of the Company's portfolio and the quantum of exit activity being undertaken by private equity managers, the portfolio is expected to continue to generate strong cash flow.
Edmond Warner, OBE
Chairman
5 December 2014
PRINCIPAL RISKS AND UNCERTAINTIES
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; and
• operating and control environment risk
Information on each of these risks, and an explanation of how they are managed, is contained in the Company's Annual Report.
DIRECTORS' RESPONSIBILITY STATEMENT
The directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.
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 respectively; 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 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 consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy. In reaching this conclusion the directors have assumed that the reader of the annual report and accounts has a reasonable level of knowledge of the investment industry.
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 confirm 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
Edmond Warner OBE
Chairman
5 December 2014
INCOME STATEMENT (audited)
for the year ended 30 September 2014
Revenue | Capital | Total | |
£'000 | £'000 | £'000 | |
Gains on investments | - | 23,236 | 23,236 |
Currency losses | - | (2,085) | (2,085) |
Income from investments | 12,039 | - | 12,039 |
Investment management fee | (328) | (2,952) | (3,280) |
Administrative expenses | (657) | - | (657) |
_________ | _________ | _________ | |
NET RETURN ON ORDINARY ACTIVITIES | |||
BEFORE FINANCE COSTS AND TAXATION | 11,054 | 18,199 | 29,253 |
Finance costs | (104) | (934) | (1,038) |
_________ | _________ | _________ | |
NET RETURN ON ORDINARY ACTIVITIES | |||
BEFORE TAXATION | 10,950 | 17,265 | 28,215 |
Taxation | (1,788) | 1,432 | (356) |
_________ | _________ | _________ | |
NET RETURN ON ORDINARY ACTIVITIES | |||
AFTER TAXATION | 9,162 | 18,697 | 27,859 |
_________ | _________ | _________ | |
NET RETURN PER ORDINARY SHARE | 5.69p | 11.60p | 17.29p |
_________ | _________ | _________ | |
DILUTED NET RETURN PER ORDINARY SHARE | 5.69p | 11.60p | 17.29p |
_________ | _________ | _________ |
The Total column of this statement represents the profit and loss account of the Company.
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All revenue and capital items in the above statement are derived from continuing operations.
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No operations were acquired or discontinued in the year.
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A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.
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The dividend which has been recommended based on this Income Statement is 5.0p (2013 - 5.0p) per ordinary share. |
INCOME STATEMENT (audited)
for the year ended 30 September 2013
Revenue | Capital | Total | |
£'000 | £'000 | £'000 | |
Gains on investments | - | 28,161 | 28,161 |
Currency losses | - | (1,159) | (1,159) |
Income from investments | 12,150 | - | 12,150 |
Investment management fee | (321) | (2,891) | (3,212) |
Administrative expenses | (637) | - | (637) |
_________ | _________ | _________ | |
NET RETURN ON ORDINARY ACTIVITIES | |||
BEFORE FINANCE COSTS AND TAXATION | 11,192 | 24,111 | 35,303 |
Finance costs | (147) | (1,328) | (1,475) |
_________ | _________ | _________ | |
NET RETURN ON ORDINARY ACTIVITIES | |||
BEFORE TAXATION | 11,045 | 22,783 | 33,828 |
Taxation | (1,345) | 1,218 | (127) |
_________ | _________ | _________ | |
NET RETURN ON ORDINARY ACTIVITIES | |||
AFTER TAXATION | 9,700 | 24,001 | 33,701 |
_________ | _________ | _________ | |
NET RETURN PER ORDINARY SHARE | 5.96p | 14.74p | 20.70p |
_________ | _________ | _________ | |
DILUTED NET RETURN PER ORDINARY SHARE | 5.91p | 14.62p | 20.53p |
_________ | _________ | _________ |
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (audited)
For the year ended30 September 2014 | Capital | ||||||
Share | Share | Special | redemption | Capital | Revenue | ||
capital | premium | reserve | reserve | reserves | reserve | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Balance at 1 October 2013 | 330 | 85,594 | 75,519 | 70 | 223,438 | 16,214 | 401,165 |
Total recognised gains | - | - | - | - | 18,697 | 9,162 | 27,859 |
Conversion of founder A shares | 1 | 891 | - | - | - | - | 892 |
Buy back of ordinary shares | (13) | - | (12,572) | 13 | - | - | (12,572) |
Dividends paid | - | - | - | - | - | (8,242) | (8,242) |
______ | _______ | ______ | _______ | ________ | _______ | _______ | |
Balance at 30 September 2014 | 318 | 86,485 | 62,947 | 83 | 242,135 | 17,134 | 409,102 |
______ | _______ | ______ | _______ | ________ | _______ | _______ | |
For the year ended30 September 2013 | Capital | ||||||
Share | Share | Special | redemption | Capital | Revenue | ||
capital | premium | reserve | reserve | reserves | reserve | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Balance at 1 October 2012 | 359 | 80,954 | 79,148 | 3 | 199,437 | 9,761 | 369,662 |
Total recognised gains | - | - | - | - | 24,001 | 9,700 | 33,701 |
Conversion of founder A shares | 3 | 2,668 | - | 3 | - | - | 2,674 |
Cancellation of deferred shares | (30) | - | (30) | 60 | - | - | - |
Buy back of ordinary shares | (4) | - | (3,599) | 4 | - | - | (3,599) |
Scrip Issue of ordinary shares | 2 | 1,972 | - | - | - | - | 1,974 |
Dividends paid | - | - | - | - | - | (3,247) | (3,247) |
______ | _______ | ______ | _______ | ________ | _______ | _______ | |
Balance at 30 September 2013 | 330 | 85,594 | 75,519 | 70 | 223,438 | 16,214 | 401,165 |
______ | _______ | ______ | _______ | ________ | _______ | _______ |
BALANCE SHEET (audited)
As at | As at | ||||
30 September | 30 September | ||||
2014 | 2013 | ||||
£'000 | £'000 | £'000 | £'000 | ||
NON-CURRENT ASSETS | |||||
Investments at fair value through profit or loss | 387,623 | 358,512 | |||
CURRENT ASSETS | |||||
Debtors | 473 | 664 | |||
Money market funds | 16,363 | - | |||
Cash and short term deposits | 5,212 | 42,272 | |||
_________ | _________ | ||||
22,048 | 42,936 | ||||
CREDITORS: AMOUNTS FALLING | |||||
DUE WITHIN ONE YEAR | (569) | (283) | |||
_________ | _________ | ||||
NET CURRENT ASSETS | 21,479 | 42,653 | |||
_________ | _________ | ||||
TOTAL ASSETS LESS CURRENT LIABILITIES | 409,102 | 401,165 | |||
_________ | _________ | ||||
CAPITAL AND RESERVES | |||||
Called up share capital | 318 | 330 | |||
Share premium | 86,485 | 85,594 | |||
Special reserve | 62,947 | 75,519 | |||
Capital redemption reserve | 83 | 70 | |||
Capital reserves | 242,135 | 223,438 | |||
Revenue reserve | 17,134 | 16,214 | |||
_________ | _________ | ||||
TOTAL SHAREHOLDERS' FUNDS | 409,102 | 401,165 | |||
_________ | _________ | ||||
ANALYSIS OF SHAREHOLDERS' FUNDS | |||||
Equity interests (ordinary shares) | 409,102 | 401,164 | |||
Non-equity interests (founder shares) | - | 1 | |||
_________ | _________ | ||||
TOTAL SHAREHOLDERS' FUNDS | 409,102 | 401,165 | |||
_________ | _________ | ||||
NET ASSET VALUE PER EQUITY SHARE | 257.4p | 244.2p | |||
_________ | _________ | ||||
NET ASSET VALUE PER EQUITY SHARE (DILUTED) | 257.4p | 243.4p | |||
_________ | _________ | ||||
CASHFLOW STATEMENT (audited)
For the year | For the year | ||||
ended 30 September | ended 30 September | ||||
2014 | 2013 | ||||
£'000 | £'000 | £'000 | £'000 | ||
NET CASH INFLOW FROM OPERATING ACTIVITIES | 7,823 | 8,261 | |||
SERVICING OF FINANCE | |||||
Interest paid | (1,038) | (1,055) | |||
Arrangement fee | - | (760) | |||
_________ | _________ | ||||
NET CASH OUTFLOW | |||||
FROM SERVICING OF FINANCE | (1,038) | (1,815) | |||
NET CASH INFLOW FROM TAXATION | - | 148 | |||
FINANCIAL INVESTMENT | |||||
Purchase of investments | (96,896) | (48,004) | |||
Disposal of underlying investments by funds | 91,021 | 57,304 | |||
Disposal of fund investments by way of secondary sales | - | 26,246 | |||
_________ | _________ | ||||
NET CASH (OUTFLOW)/ INFLOW FROM | (5,875) | 35,546 | |||
FINANCIAL INVESTMENTS | |||||
ORDINARY DIVIDEND PAID | (8,242) | (1,267) | |||
_________ | _________ | ||||
NET CASH (OUTFLOW)/ INFLOW BEFORE FINANCING | (7,332) | 40,873 | |||
Conversion of founder A shares | 892 | 2,668 | |||
Buy back of ordinary shares | (12,172) | (3,599) | |||
Bank loans repaid | - | (9,895) | |||
Bank loans drawn down | - | 9,895 | |||
_________ | _________ | ||||
NET CASH OUTFLOW FROM FINANCING | (11,280) | (931) | |||
_________ | _________ | ||||
(DECREASE)/ INCREASE IN CASH | (18,612) | 39,942 | |||
_________ | _________ | ||||
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN FUNDS | |||||
(Decrease)/ increase in cash as above | (18,612) | 39,942 | |||
Currency movements | (2,085) | (1,159) | |||
_________ | _________ | ||||
MOVEMENT IN NET FUNDS IN THE PERIOD | (20,697) | 38,783 | |||
Opening net funds | 42,272 | 3,489 | |||
_________ | _________ | ||||
CLOSING NET FUNDS | 21,575 | 42,272 | |||
_________ | _________ | ||||
REPRESENTED BY: | |||||
Money market funds, cash and short term deposits | 21,575 | 42,272 | |||
_________ | _________ | ||||
Notes:
1. Standard Life European Private Equity Trust PLC is an investment company managed by SL Capital Partners LLP, 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 1158-1165 of the Corporation Taxes Act 2010. The Board is wholly independent of the Manager and Standard Life plc.
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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 at fair value through profit or loss, 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 the Companies Act 2006 and 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. Income on quoted investments and other interest receivable are dealt with on an accruals 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. Incentive fees are recognised in the Income Statement as they are earned and when the return exceeds the specified hurdle rate.
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; | ||
- 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; and | ||
- any incentive fees payable are allocated wholly to capital, as they are expected to be attributable largely, if not wholly, to capital performance. | ||
(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 capital reserves. | ||
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 last available 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 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 timing differences can be deducted. Timing 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 capital reserves. Gains or losses on the translation of overseas currency balances held at the year end are also accounted for through capital reserves. | ||
Rates of exchange to sterling as at 30 September were: | ||
2014 | 2013 | |
Euro | 1.2834 | 1.1963 |
US dollar | 1.6212 | 1.6194 |
Transactions in overseas currency are translated at the exchange rate prevailing on the date of transaction. | ||
Year to | Year to | ||
30 September 2014 | 30 September 2013 | ||
3. | Income | £'000 | £'000 |
Income from unquoted investments | 11,438 | 12,149 | |
Income from index tracker funds | 569 | - | |
Income from money market funds | 32 | - | |
Interest from HMRC | - | 1 | |
______________ | ______________ | ||
Total income | 12,039 | 12,150 | |
______________ | ______________ |
4. The return per ordinary share figure is based on the net profit for the year ended 30 September 2014 of £27,859,000 (year ended 30 September 2013: net profit of £33,701,000) and on 161,125,089 (year ended 30 September 2013: 162,828,459) ordinary shares, being the weighted average number of Ordinary shares in issue during the respective periods.
The fully diluted returns have been calculated on the basis set out in Financial Reporting Standard 22 'Earnings per share' ('FRS 22'). At 30 September 2014, all founder A shares had been converted and therefore there was no dilutive effect on earnings per share. For the year ended 30 September 2013, this is based on 164,112,146 shares, comprising the weighted average 162,828,459 ordinary shares and 1,283,687 founder A shares capable of conversion.
5. The number of ordinary shares in issue as at 30 September 2014 was 158,922,294 (30 September 2013 - 164,290,213).
6. The Directors recommend that a final dividend of 5.00p (2013 - 5.00p) per ordinary share be paid on 30 January 2015 to shareholders on the Company's share register as at the close of business on 9 January 2015. The ex-dividend date for the final dividend is 8 January 2015.
7. The financial information for the year ended 30 September 2014 comprises non-statutory accounts as defined in sections 434-436 of the Companies Act 2006. The financial information for the year ended 30 September 2013 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 2014 contain an unqualified audit report and will be delivered to the Registrar of Companies following the Company's Annual General Meeting, which will be held at The Balmoral Hotel, 1 Princes Street, Edinburgh EH2 2EQ on 28 January 2015 at 12.30pm.
8. The report and accounts for the year ended 30 September 2014 will be posted to shareholders in mid-December 2014 and copies will be available from the Company Secretary - Personal Assets Trust Administration Company Limited, 10 St. Colme Street, Edinburgh EH3 6AA.
for Standard Life European Private Equity Trust PLC,
Personal Assets Trust Administration Company Limited, Company Secretary
END