Half-year Report

RNS Number : 4705Z

Standard Life Euro Pri Eqty Tst PLC

27 May 2016

 

27 May 2016

STANDARD LIFE EUROPEAN PRIVATE EQUITY TRUST PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2016

Highlights

·     The Company's net asset value total return for the six months ended 31 March 2016 was 11.3%.

·     The net asset value per ordinary share ("NAV") at 31 March 2016 rose 10.2% to 310.2p (30 September 2015 - 281.6p). The increase in NAV during the period included 10.4% of net realised gains and income from the Company's portfolio of 47 private equity fund interests, 5.1% of unrealised losses on a constant exchange rate basis, 5.8% of positive exchange rate movements on the portfolio and payment of a final dividend of 3.5p per ordinary share for the year ended 30 September 2015.

·     The actual NAV of 310.2p compares to a previously estimated NAV at 31 March 2016 of 304.9p announced on 14 April 2016.  The uplift is attributable to gains on the Company's portfolio as reported by underlying fund managers for the quarter ended 31 March 2016.

·     The Board has declared an interim dividend of 1.80p to be paid on 15 July 2016. It remains the Board's intention, subject to unforeseen circumstances, to maintain, at least, the real value of last year's 5.25p dividend for the full year.

·     The closing mid-market price of the Company's ordinary shares on 31 March 2016 was 204.0p, a decrease of 4.7% over the period and a discount of 34.2% to the NAV.

·     At 31 March 2016 the Company's net assets were £480.2 million. 98.3% by value of the portfolio was valued by the relevant fund manager at 31 March 2016.

·     As a result of strong exit activity, reflecting the maturity of the Company's portfolio, the Company received £80.4 million of distributions and it funded £34.4 million of draw downs during the period, generating a net cash inflow from portfolio activities of £46.0 million.

·     At 31 March 2016 the Company had liquid resources of £94.0 million, comprising a cash balance of £54.6 million and £39.4 million invested at value (£39.4 million at cost) in UK and European equity index tracker funds.  The Company has an undrawn £80 million syndicated revolving credit facility, provided by Citibank and Societe Generale, which expires in December 2020.

·     The Company made one new fund commitment during the period of €45.0 million to Advent International GPE VIII. In addition, the Company undertook one secondary fund purchase of an original commitment of $60.0 million to TowerBrook Investors III for £19.1 million, equivalent to a discount of 6.1% to the 30 September 2015 valuation of the fund.

·     At 31 March 2016 the Company had £271.5 million of outstanding commitments. The Manager believes that up to £55 million of the Company's existing outstanding commitments are unlikely to be drawn.

·     During the period from 31 March 2016 to 25 May 2016 the Company received £9.7 million of distributions and funded £3.5 million of draw downs. The Company also made a new fund commitment of €26.0 million to the Sixth Cinven Fund.

·     At 25 May 2016 the Company had liquid resources of £95.9 million, comprising a cash balance of £56.5 million and £39.4 million invested at value (£39.4 million at cost) in UK and European equity index tracker funds. The Company had outstanding commitments of £277.5 million at 25 May 2016.

For further information please contact:-

Roger Pim or Peter McKellar at SL Capital Partners LLP (on 0131 245 0055)

CHAIRMAN'S STATEMENT

Results and performance

In the six month period to 31 March 2016 the Company continued to benefit from strong exit activity across the portfolio, with significant cashflows to the Company and meaningful realised gains. Furthermore, the Company has benefitted from the appreciation of the euro versus sterling during Q1 2016, reversing some of the negative foreign exchange impact of the last two years. This has been against a background of significant volatility in listed financial markets and a slight decline in private equity activity in Europe during Q1 2016. The net asset value total return for the period was 11.3%. At 31 March 2016 the Company's net assets were £480.2 million (30 September 2015 - £438.7 million).

http://www.rns-pdf.londonstockexchange.com/rns/4705Z_-2016-5-26.pdf

The net asset value per ordinary share ("NAV") at 31 March 2016 rose 10.2% to 310.2p (30 September 2015 - 281.6p). The increase in NAV during the period comprised 10.4% of net realised gains and income from the Company's portfolio of 47 private equity fund interests, 5.1% of unrealised losses on a constant exchange rate basis and 5.8% of positive exchange rate movements on the portfolio, 0.4% of other items, fees and costs, partially offset by the payment of the final dividend of 3.5p per ordinary share for the year ended 30 September 2015.

The closing mid-market price of the Company's ordinary shares on 31 March 2016 was 204.0p, a decrease of 4.7% over the period and a discount of 34.2% to the NAV. This compares to an increase in the FTSE All-Share Index over this period of 1.8%, and a decrease in the MSCI Europe Index (in euros) of 3.2%. The share price has subsequently risen and at 25 May 2016 was 224.0p, representing a 27.8% discount to the NAV at 31 March 2016.

The Board has declared an interim dividend of 1.80p to be paid on 15 July 2016 to shareholders on the Company's share register at 10 June 2016 (2015 - interim dividend 1.75p). On 29 January 2016 the Company paid a final dividend for the year ended 30 September 2015 of 3.5p per ordinary share. It remains the Board's intention, subject to unforeseen circumstances, to maintain, at least, the real value of last year's 5.25p dividend for the full year, when the amount of the interim dividend is combined with the final dividend. The Company also offers a Dividend Reinvestment Plan ("DRIP"), giving shareholders the option of reinvesting their dividend payments to buy more ordinary shares in the Company. Shareholders who wish to use their dividends to purchase further shares in the Company by participating in the Company's DRIP may complete a mandate form, which can be obtained via the Company's website (www.slcapital.com/slepet). The final date for DRIP elections is 24 June 2016.

Investment activity

The value of all private equity investments undertaken in Europe during the six months to 31 March 2016 was marginally lower than the corresponding period in 2015, with €51.9 billion of transactions by enterprise value announced (six months ended 31 March 2015 - €52.6 billion).  Whilst the number and aggregate value of large buy-out transactions is volatile quarter on quarter, middle market buy-out transactions with an enterprise value between €100 million and €1 billion continues to be the core market segment. Just under €25.8 billion of deals during the period were middle market transactions and this market segment has, and continues to be, one of the Company's primary areas of focus.

As a result of strong exit activity, which reflects the maturity of the Company's portfolio, the Company received £80.4 million of distributions and it funded £34.4 million of draw downs during the period. The Manager is aware of the increased use of short term debt facilities by underlying managers to fund new investments, in order to reduce the frequency of draw downs from investors and enhance the underlying funds' IRRs. As a result, the Manager anticipates further draw downs and the associated reduction in outstanding commitments later in the year as these annual facilities are repaid. Overall, the Company generated a net cash inflow from portfolio activities, excluding secondary transactions, of £46.0 million.  The distributions received generated net realised gains and income of £45.5 million, equivalent to an average return on the acquisition cost of the realised investments of 2.3 times (year ended 30 September 2015 - 1.9 times).

In support of the Company's investment strategy, one new fund commitment was made during the period, with a commitment of €45.0 million to Advent International GPE VIII in February 2016.

Reflecting the disciplined approach to the use of the Company's capital resources and the continuing cash inflow, the Company also undertook one secondary fund purchase. The Company acquired an original commitment of $60.0 million to TowerBrook Investors III in December 2015. Details of the transaction are provided in the Manager's Review. 

In addition, the Company acquired one million ordinary shares through a share buy-back transaction for £2.0 million. The ordinary shares were acquired at a price of 204.0p and at a discount to the prevailing NAV of 32.3%. The ordinary shares acquired have been cancelled.

The Company had liquid resources of £94.0 million at 31 March 2016, comprising a cash balance of £54.6 million and £39.4 million invested at value (£39.4 million at cost) in UK and European equity index tracker funds.  The Company has an undrawn £80 million syndicated revolving credit facility, provided by Citibank and Societe Generale, which expires in December 2020. At 31 March 2016 the Company had £271.5 million of outstanding commitments (30 September 2015 - £245.8 million). After undertaking a detailed review, the Manager believes that up to £55 million of the Company's existing outstanding commitments are unlikely to be drawn.

Valuation

The Company's portfolio comprises 47 private equity fund interests. At 31 March 2016 the value of this portfolio was £390.6 million, of which net unrealised gains arising during the period were £3.0 million. 98.3% by value of the Company's private equity fund interests were valued by the relevant fund manager at 31 March 2016.

While unrealised losses on a constant exchange rate basis were £22.4 million (6.1% of the opening portfolio valuation), the loss primarily reflected a movement from unrealised to realised gains. With the latter generating gains and income of £45.5 million, a material uplift on exit is implied. In addition, exchange rate movements contributed unrealised gains of £25.4 million (6.9% of opening portfolio valuation), largely as a result of the 7.1% appreciation in the euro versus sterling in Q1 2016.

Recent activity

During the period from 31 March 2016 to 25 May 2016 the Company received £9.7 million of distributions and funded £3.5 million of draw downs. The Company made a new fund commitment of €26.0 million to the Sixth Cinven Fund.

At 25 May 2016 the Company had liquid resources of £95.9 million, comprising a cash balance of £56.5 million and £39.4 million invested at value (£39.4 million at cost) in UK and European equity index tracker funds. The Company had outstanding commitments of £277.5 million at 25 May 2016.

Outlook

Overall, the European private equity market remains competitive with a significant amount of capital having been raised, however, the funds in the Company's portfolio are predominately focused on the mid and large segments of the buy-out market where historically managers have been able to generate value through operational improvements and strategic repositioning.

The managers of many of the funds in the Company's portfolio continue to report positive earnings growth across their portfolio companies. In addition, notwithstanding the recent listed market volatility and an increasingly challenging global macro-economic environment, the Company continues to benefit from strong levels of exit activity across the portfolio and, subject to exogenous shocks, the Manager would expect this to continue over the course of the year.  These strong levels of exit activity should result in further realised and unrealised gains being generated enabling the Company to continue to build on the robust performance of the past three years.

The Board remains committed to maintaining capital discipline and the positive cash inflow is being invested in a mix of new fund commitments, secondary fund purchases and, when appropriate, share buy-backs.

Edmond Warner, OBE

Chairman

26 May 2016

MANAGER'S REVIEW

Investment strategy

The Company's investment strategy is to invest in the leading European private equity funds focused on mid to large sized buy-outs, which can be categorised as transactions with enterprise values ranging between €100 million and €2.0 billion.

The private equity funds in the Company's portfolio principally invest in countries in Europe, which the Manager defines as EU Member States, EU Associate Member States and other western European countries. 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. At 31 March 2016 the Company had seven fund investments - Coller International Partners IV, Coller International Partners V, Pomona Capital V Fund, Pomona Capital VI Fund, TowerBrook Investors II, TowerBrook Investors III and TowerBrook Investors IV - which are likely to invest a majority of their capital outside Europe. In total these funds represented 9.6% of the Company's gross assets by valuation and 8.2% by cost at 31 March 2016.

Portfolio composition and performance

At 31 March 2016 the Company's portfolio comprised 47 private equity fund interests with a value of £390.6 million which, together with its current assets less liabilities, resulted in the Company having net assets of £480.2 million. This represented a NAV of 310.2p per ordinary share.

The split of the Company's portfolio by type of private equity fund is set out in the pie chart on page 6 of the interim report. Details of all of the Company's private equity fund investments, and more detailed information on the ten largest fund investments, are shown on pages 9 to 12 of the interim report.

The valuation of the Company's private equity fund interests at 31 March 2016 was carried out by the Manager and has been approved by the Board in accordance with the Company's accounting policies. 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 cash flows. 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''.

Of the 47 private equity funds in which the Company is invested, 44 of the funds, or 98.3% of the portfolio by value, were valued by their fund managers at 31 March 2016. 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 during the period from £369.0 million at 30 September 2015 to £390.6 million at 31 March 2016. A breakdown of the £21.6 million movement in the Company's portfolio during the period is detailed in the valuation bridge shown on page 6 of the interim report. The increase in value was driven by £38.9 million of realised gains on the investment portfolio on a constant exchange rate basis, £34.4 million of draw downs from fund investments, £19.1 million of secondary purchases and £25.4 million from favourable foreign exchange rate movements. This increase was partially offset by £73.8 million of realisation proceeds from the Company's underlying investment interests and £22.4 million of unrealised losses on the investment portfolio on a constant exchange rate basis. During the period to 31 March 2016 sterling depreciated by 7.1% relative to the euro and depreciated by 5.1% relative to the US dollar.

Investment activity

The Company had £34.4 million of draw downs by, and £80.4 million of distributions from, the Company's portfolio of fund interests, which resulted in a net cash inflow of £46.0 million from investment activities during the period. The strong level of distribution activity reflected the attractive exit environment together with the maturity of the Company's investment portfolio.

Secondary activity

During the six month period the Company purchased a secondary position in TowerBrook Investors III, which had an original fund commitment of $60.0 million. The secondary purchase was acquired at a 6.1% discount to the 30 September 2015 valuation of the fund. The purchase price for the fund interest was £19.1 million and the Company assumed outstanding commitments of £10.4 million on acquisition.

Fund commitments

During the six month period the Company made a single fund commitment of €45.0 million to Advent International GPE VIII, a global manager focused on mid to large market buyout transactions. Post the period end the Company made a commitment of €26.0 million to the Sixth Cinven Fund, a pan-European manager focused on upper mid-market buyouts.

Given the level of primary fund commitments it is unlikely that the Company will make further primary fund commitments until later in 2016. Secondary fund purchases are, however, expected to continue to be a feature of the Company's commitment plan in the short to medium term. Secondary fund interests allow the Company to gain exposure to attractive funds which are already partially invested, thus potentially widening the Company's vintage year diversification whilst adding a lower quantum of outstanding commitments.

At 31 March 2016 the Company had £271.5 million of outstanding commitments. After adjusting for excess available liquid resources, outstanding commitments were equivalent to 20.5% of the Company's net assets.

Analysis of underlying investments

At 31 March 2016 the Company's 47 private equity fund interests were collectively invested in a total of 491 underlying investments. The diversification of the underlying investments at 31 March 2016 and 30 September 2015 is set out in the four bar charts at the bottom of page 8 of the interim report.

The bar charts demonstrate the diversification that applies by geography and by sector within the Company's underlying portfolio of investments at 31 March 2016. The broad geographic and sector diversification across a wide range of industries, including industrials, consumer services and financials, helps to mitigate the effect of volatility in any individual geography or sector.

The bar chart showing the maturity exposure of underlying investments highlights that the portfolio has an appropriate spread of investment vintages, however, it also continues to benefit from having a sizable proportion of the portfolio which is mature and likely to drive distribution activity going forward. The bar 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.

Valuation and leverage multiple analysis

The two bar charts at the top of page 8 of the interim report show the valuation and leverage multiples of the fifty largest underlying portfolio companies held by the Company's private equity fund interests at 31 December 2015, which in aggregate represented 44.8% of the Company's then net assets.* This analysis is at 31 December 2015 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 valuation multiples of each underlying portfolio company are derived using the 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 are 10-11x EV/EBITDA and 4-5x Debt/EBITDA respectively. These compare to the valuation and leverage multiples for the top fifty underlying portfolio companies at 30 June 2015 of 10-11x EV/EBITDA and 3-4x Debt/EBITDA. The increase in the median leverage multiple in part reflects the fact that a number of underlying managers have taken advantage of the current debt markets to refinance companies on more advantageous terms. Overall the Manager believes that these valuation and leverage multiples are in line with the European private equity market for similar sized deals and vintages.

*In the case of five investments it has not been possible to calculate meaningful multiples due to the nature of the underlying businesses.

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 for the year ended 30 September 2015.

The Company's principal risks and uncertainties have not changed materially since the date of that Report and are not expected to change materially for the remaining six months of the Company's financial year. 

GOING CONCERN

The Audit Committee considered the Board's obligation to satisfy itself as to the appropriateness of the adoption of the going concern assumption as a basis for preparing the financial statements, taking into account: the £80 million committed, syndicated revolving credit facility with a maturity date in December 2020; the future cashflow projections; the Company's cashflows during the period; and the Company's net liquid resources at the period end. The Audit Committee concluded that the adoption of the going concern basis was appropriate.

The Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they have adopted the going concern basis in preparing the accounts.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors are responsible for preparing the half-yearly financial report, in accordance with applicable laws and regulations. The Directors confirm that to the best of their knowledge:-

•        the condensed set of financial statements within the half- yearly financial report has been prepared in accordance with the UK Accounting Standards Board's Statement "Half-yearly financial reports";

•        the Chairman's Statement and Manager's Review (together constituting the interim management report) includes a fair view of the information required by 4.2.7R of the FCA's Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year;

•        the Statement of Principal Risks and Uncertainties shown above is a fair review of the information required by DTR 4.2.7R; and

•        in accordance with 4.2.8R of the FCA's Disclosure and Transparency Rules there have been no changes in the nature or magnitude of related party transactions during the first six months of the financial year and, therefore, there is nothing to report on any material effect by such a transaction on the financial position or the performance of the Company during that period.

The half-yearly financial report was approved by the Board on 26 May 2016.

Signed on behalf of the Board of Directors of Standard Life European Private Equity Trust PLC

Edmond Warner OBE

Chairman, 26 May 2016

FINANCIAL SUMMARY

Performance (Capital only)	As at	As at
	31 March 2016	30 September 2015	% Change
Net asset value per ordinary share ("NAV")	310.2p	281.6p	10.2
Share price	204.0p	214.0p	(4.7)
FTSE All-Share Index (1)	3,395.2	3,335.9	1.8
MSCI Europe Index (in euros) (1)	113.6	117.3	(3.2)
Discount (difference between share price and diluted net asset value)	34.2%	24.0%

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

Performance (Total return) (2)	Six months	1 year	Annualised	Annualised
			5 year	since launch(3)
	%	%	%	%
Share price	(3.1)	(5.8)	7.5	6.3
NAV	11.3	17.4	8.5	9.0
FTSE All-Share Index (1)	3.5	(3.9)	5.7	4.7
MSCI Europe Index (in euros) (1)	(2.0)	(13.3)	7.3	2.8

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

⁽²⁾  Includes dividends reinvested.

⁽³⁾  The Company was listed on the London Stock Exchange in May 2001.

High/Low during six months ended 31 March 2016	High	Low
Share price (mid)	218.0p	191.0p

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

	Six months to 31 March 2016 (unaudited)
	Revenue	Capital		Total
	£'000	£'000		£'000
Total capital gains on investments	-	43,700	43,700
Currency gains	-	3,511	3,511
Income (Note 4)	7,346	-	7,346
Investment management fee (Note 5)	(187)	(1,686)	(1,873)
Incentive fee (Note 5)	-	(2,425)	(2,425)
Administrative expenses	(401)	-	(401)
	________	________	________
Net return on ordinary activities before finance costs and taxation	6,758	43,100	49,858
Finance costs	(39)	(350)	(389)
	________	________	________
Net return on ordinary activities before taxation	6,719	42,750	49,469
Taxation	(1,667)	1,136	(531)
	________	________	________
Net return on ordinary activities after taxation	5,052	43,886	48,938
	________	________	________
Net return per ordinary share (Note 7)	3.24p	28.17p	31.41p
	________	________	________

___________________________________________________________________________________

	Six months to 31 March 2015 (unaudited)
	Revenue	Capital		Total
	£'000	£'000		£'000
Gains on investments	-	24,089	24,089
Currency losses	-	(543)	(543)
Income (Note 4)	3,966	-	3,966
Investment management fee (Note 5)	(169)	(1,518)	(1,687)
Administrative expenses	(341)	-	(341)
	________	________	________
Net return on ordinary activities before finance costs and taxation	3,456	22,028	25,484
Finance costs	(53)	(478)	(531)
	________	________	________
Net return on ordinary activities before taxation	3,403	21,550	24,953
Taxation	(592)	579	(13)
	________	________	________
Net return on ordinary activities after taxation	2,811	22,129	24,940
	________	________	________
Net return per ordinary share (Note 7)	1.78p	14.04p	15.82p

The total column of this statement represents the profit and loss account of the Company.

There are no items of other comprehensive income, therefore this statement is the single statement of comprehensive income of the Company.

All revenue and capital items in the above statement are derived from continuing operations.

No operations were acquired or discontinued in the period.

CONDENSED STATEMENT OF CHANGES IN EQUITY

				Capital
	Share	Share	Special	redemption	Capital	Revenue
	capital	premium	reserve	reserve	reserves	reserve	Total
For the six months ended 31 March 2016 (unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 October 2015	312	86,485	56,024	89	280,380	15,450	438,740
Total recognised gains	-	-	-	-	43,886	5,052	48,938
Buy back of ordinary shares	(2)	-	(2,044)	2	-	-	(2,044)
Dividends paid	-	-	-	-	-	(5,452)	(5,452)
	_______	_______	_______	_______	_______	_______	_______
Balance at 31 March 2016	310	86,485	53,980	91	324,266	15,050	480,182
	_______	_______	_______	_______	_______	_______	_______
For the six months ended 31 March 2015 (unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 October 2014	318	86,485	62,947	83	242,135	17,134	409,102
Total recognised gains	-	-	-	-	22,129	2,811	24,940
Buy back of ordinary shares	(3)	-	(3,614)	3	-	-	(3,614)
Dividends paid	-	-	-	-	-	(7,884)	(7,884)
	_______	_______	_______	_______	_______	_______	_______
Balance at 31 March 2015	315	86,485	59,333	86	264,264	12,061	422,544
	_______	_______	_______	_______	_______	_______	_______

CONDENSED SDTASTEMENT OF FINANCIAL POSITION

		As at	As at
		31 March 2016	30 September 2015
		(unaudited)	(audited)
		£'000	£'000
Non-current assets
Investments at fair value through profit or loss (Note 8)		429,953	406,332
		________	________
Current assets
Receivables		641	729
Cash and cash equivalents		54,575	32,099
		________	________
		55,216	32,828
Creditors: amounts falling due within one year
Payables		(4,987)	(420)
		________	________
Net current assets		50,229	32,408
		________	________
Total assets less current liabilities		480,182	438,740
		________	________
Capital and reserves
Called up share capital		310	312
Share premium		86,485	86,485
Special reserve		53,980	56,024
Capital redemption reserve		91	89
Capital reserves		324,266	280,380
Revenue reserve		15,050	15,450
		________	________
Total shareholders' funds		480,182	438,740
		________	________
Net asset value per equity share (Note 9)		310.2p	281.6p
		________	________

CASHFLOW STATEMENT

			Six months to	Six months to
			31 March 2016	31 March 2015
			(unaudited)	(unaudited)
			£'000	£'000
Net return after taxation			48,938	24,940
Adjusted for:
Finance costs Taxation on ordinary activities Gains on disposal of investments			389 531 (38,972)	531 13 (11,864)
Revaluation of investments			(4,728)	(12,225)
Currency (gains)/losses			(3,511)	543
(Increase)/decrease in debtors			(22)	17
Increase in creditors			2,523	181
Tax deducted from non - UK income			(531)	(13)
Net cash inflow from operating activities			4,617	2,123
Investing activities
Purchase of investments			(53,767)	(71,378)
Disposal of underlying investments by funds			73,846	54,600
Disposal of fund investments by way of secondary sales			-	21,660
Net cash inflow from investing activities			20,079	4,882
Financing activities
Finance costs			(279)	(233)
Ordinary dividends paid			(5,452)	(7,884)
Buy back of ordinary shares			-	(4,013)
Net cash outflow from financing activities			(5,731)	(12,130)
			________	________
Increase/(decrease) in cash and cash equivalents			18,965	(5,125)
			________	________
Analysis of changes in cash and cash equivalents
Opening cash and cash equivalents			32,099	21,575
Increase/(decrease) in cash and cash equivalents			18,965	(5,125)
Currency movements			3,511	(543)
			________	________
Closing cash and cash equivalents			54,575	15,907
			________	________

NOTES:

1	Financial Information
	The financial information in this report comprises non-statutory accounts as defined in sections 434-436 of the Companies Act 2006. The financial information for the year ended 30 September 2015 has been extracted from the published accounts that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified under section 498 of the Companies Act 2006.
	The auditors have reviewed the financial information for the six months ended 31 March 2016 in accordance with the applicable standards issued by the Auditing Practices Board for use in the United Kingdom. The independent auditors review report is on page 22 of the interim report.

2

Basis of preparation and going concern

The condensed financial statements have been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting) and with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted. These condensed financial statements are the first since FRS 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland) came into effect for accounting periods beginning on or after 1 January 2015. The impact of adopting FRS 102 did not require any restatement of balances as at the transition date, 1 January 2014, or comparative figures in the Condensed Statement of Financial Position or the Condensed Statement of Comprehensive Income. The Company has chosen to early adopt the Amendments to FRS 102, paragraph 34.22 which revise the disclosure requirements for financial institutions, specifically in relation to the fair value hierarchy as presented within note 11. These amendments were approved for issue on 3 March 2016 and are effective for accounting periods beginning on or after 1 January 2017. The half-year financial statements have been prepared using the same accounting policies as the preceding annual accounts.

3	Exchange rates
	Rates of exchange to sterling were:
			As at	As at
			31 March 2016	30 September 2015
	Euro		1.2613	1.3570
	US dollar		1.4373	1.5148

			Six months ended	Six months ended
			31 March 2016	31 March 2015
4	Income		£'000	£'000
	Income from fund investments		7,063	3,796
	Income from index tracker funds		276	162
	Interest from money market funds		7	8
			________	________
	Total income		7,346	3,966
			________	________

		Six months ended 31 March 2016
		Revenue	Capital	Total
5	Transactions with the Manager	£'000	£'000	£'000
	Investment management fee	187	1,686	1,873
	Incentive fee	-	2,425	2,425
		________	________	________
		187	4,111	4,298
		________	________	________
		Six months ended 31 March 2015
		Revenue	Capital	Total
		£'000	£'000	£'000
	Investment management fee	169	1,518	1,687
	Incentive fee	-	-	-
		________	________	________
		169	1,518	1,687
		________	________	________
	Under the terms of the Company's investment management agreement with the Manager, the Company pays the Manager a quarterly fee, equal to 0.8% per annum of shareholders' funds at the end of the relevant quarter. The investment management fee is allocated 90% to realised capital reserve and 10% to the revenue account.  The Manager's appointment may be terminated by either party giving to the other not less than 12 months' written notice. The balance due to the Manager for investment management fees at 31 March 2016 was £373,000 (31 March 2015 - £187,000). An incentive fee arrangement is in place in respect of the period from 1 October 2011 to 30 September 2016.  For an incentive fee to be payable, the Company's net asset value total return must grow by more than 8% compound per annum (before and accrual for the incentive fee) over the five year 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). At 31 March 2016 the net asset value total return was 334.1p which exceeds the 8% per annum compound growth hurdle rate at the same date of 319.4p. As such, a provision of £2,425,000 has been made in respect of the incentive fee as at 31 March 2016. The Company appointed SL Capital Partners LLP as its Alternative Investment Fund Manager on 1 July 2014.

6	Dividend on ordinary shares
	A dividend of 3.5p per ordinary share, declared as a final dividend, was paid on 29 January 2016 in respect of the year ended 30 September 2015 (2014 - dividend of 5.0p per ordinary share paid on 30 January 2015).
	A proposed interim dividend of 1.85p per ordinary share is due to be paid on 15 July 2016 (2015 - 1.75p paid on 10 July 2015.

			Six months ended				Six months ended
			31 March 2016				31 March 2015
7	Net return per ordinary share		p		£'000		p	£'000
	The net return per ordinary share is based on the following figures:
	Revenue net return		3.24		5,052		1.78	2,811
	Capital net return		28.17		43,886		14.04	22,129
			_____		_______		_____	_______
	Total net return		31.41		48,938		15.82	24,940
			_____		_______		_____	_______
	Weighted average number of ordinary shares in issue				155,776,294			157,620,316
			31 March 2016					30 September 2015
8	Investments	Index tracker funds	Fund investments			Total
		£'000	£'000			£'000		£'000
	Fair value through profit or loss:
	Opening market value	37,339	368,993			406,332		387,623
	Opening investment holding losses	1,817	35,258			37,075		47,785
		________	________			________		________
	Opening book cost	39,156	404,251			443,407		435,408
	Movements in the period/year:
	Additions at cost	-	34,420			34,420		105,522
	Secondary purchases Dividends reinvested Disposal of underlying investments by funds	- 248 -	19,099 - (73,846)			19,099 248 (73,846)		- 785 (106,283)
	Disposal of fund investments by way of secondary sales	-	-			-		(21,661)
		________	________			________		________
		39,404	383,924			423,328		413,771
	Gains on disposal of underlying investments	-	39,529			39,529		41,040
	Losses on liquidation of fund investments	-	(557)			(557)		(11,966)
	Gains on disposal of fund investments by way of secondary sales	-	-			-		562
		________	________			________		________
	Closing book cost	39,404	422,896			462,300		443,407
	Closing investment holding losses	(50)	(32,297)			(32,347)		(37,075)
		________	________			________		________
	Closing market value	39,354	390,599			429,953		406,332
		________	________			________		________
9	Net asset value per ordinary share			31 March 2016				30 September 2015
	Ordinary shareholders' funds			£480,181,644				£438,740,232
	Number of ordinary shares in issue			154,776,294				155,776,294
	Net asset value per ordinary share			310.2p				281.6p
	During the six months ended 31 March 2016 the Company bought for cancellation 1,000,000 ordinary shares (31 March 2015 - 1,625,000 ordinary shares) at a cost of £2,044,000 including expenses (31 March 2015 - £3,614,000).
	The NAV and ordinary shareholders' funds are calculated in accordance with the Company's articles of association.

10	Bank loans
	As at 31 March 2016, the Company had an £80 million (2015: £80 million led by The Royal Bank of Scotland plc) committed, multi-currency syndicated revolving credit facility provided by Citibank and Societe Generale of which nil (2015: nil) had been drawn down. The facility expires on 31 December 2020. The interest rate on this facility is LIBOR plus 1.5% rising to 1.7% depending on utilisation, and the commitment fee payable on non-utilisation is 0.7% per annum.

11      Fair Value hierarchy

FRS 104 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following classifications:

- Level 1:  The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.

- Level 2: Inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.

- Level 3: Inputs are unobservable (ie for which market data is unavailable) for the asset or liability.

The Company's financial assets and liabilities measured at fair value in the Statement of Financial Position are grouped into the following fair value hierarchy at the reporting date:

            Financial assets at fair value through profit or loss at 31 March 2016

		Level 1	Level 2	Level 3	Total
		£'000	£'000	£'000	£'000
	Unquoted investments Quoted investments	- -	- 39,354	390,599 -	390,599 39,354
		________	________	________	________
	Net fair value	-	39,354	390,599	429,953

            Financial assets at fair value through profit or loss at 30 September 2015

		Level 1	Level 2	Level 3	Total
		£'000	£'000	£'000	£'000
	Unquoted investments Quoted investments	- -	- 37,339	368,993 -	368,993 37,339
		________	________	________	________
	Net fair value	-	37,339	368,993	406,332

	Unquoted equities 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 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. Quoted equities The Company's investments include two index tracker funds (2015 - two) which are actively traded on recognised stock exchanges, with their fair value being determined by reference to their quoted bid prices at the reporting date.
12	Parent undertaking and related party transactions
	The ultimate parent undertaking of the Company is Standard Life PLC. The accounts of the ultimate parent undertaking are the only group accounts incorporating the accounts of the Company.
	Details of the related party transactions with the manager can be found in note 5.
	There were no new related party transactions in the six months to 31 March 2016 over and above those disclosed in the Annual Report and Accounts.

13     The half yearly financial report is available on the Manager's website, www.slcapital.com. The interim report and accounts will be posted to shareholders in June 2016 and copies will be available from the Manager - SL Capital Partners LLP, 1 George Street, Edinburgh EH2 2LL.

for Standard Life European Private Equity Trust PLC,

Personal Assets Trust Administration Company Limited, SECRETARY

Independent review report to Standard Life European Private Equity Trust PLC

Report on the condensed set of financial statements

Our conclusion

We have reviewed Standard Life European Private Equity Trust PLC's condensed set of financial statements (the "interim financial statements") in the half yearly financial report of Standard Life European Private Equity Trust PLC for the 6 month period ended 31 March 2016. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with FRS 104 "Interim Financial Reporting" issued by the Financial Reporting Council and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

·     the Condensed Statement of Financial Position as at 31 March 2016;

·     the Condensed Statement of Comprehensive Income for the period then ended;

·     the Cashflow Statement for the period then ended;

·     the Condensed Statement of Changes in Equity for the period then ended; and

·     the explanatory notes to the interim financial statements.

The interim financial statements included in the half yearly financial report have been prepared in accordance with FRS 104 "Interim Financial Reporting" issued by the Financial Reporting Council and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Company is applicable law and United Kingdom Accounting Standards (UK Generally Accepted Accounting Practice), including FRS 102 "The Financial Reporting Standard applicable in the UK and the Republic of Ireland".

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The half yearly financial report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half yearly financial report in accordance with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the half yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose.  We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

Edinburgh

26 May 2016

Notes:

(a)  The maintenance and integrity of the Standard Life European Private Equity Trust PLC website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

(b)  Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

END

 

 

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