Half-year Report

RNS Number : 3380H

Standard Life Private Eqty Trst PLC

07 June 2017

 

7 June 2017

STANDARD LIFE PRIVATE EQUITY TRUST PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2017

INVESTMENT OBJECTIVE

The investment objective is to achieve long-term total returns through holding a diversified portfolio of private equity funds, a majority of which will have a European focus.

KEY PERFORMANCE HIGHLIGHTS

At 31 March 2017:

£567.2 million	Net Asset Value ("NAV")
368.9 pence	NAV per ordinary share
£472.0 million	Market capitalisation
307.0 pence	Share price
£312.2 million	Outstanding commitments to 49 private equity funds
£97.7 million	Cash balance
64.8% of NAV	Top 10 private equity managers
16.8%	Discount to net asset value
6.0 pence	2017 interim dividend

For the six months ended 31 March 2017:

+16.3%	Share price total return
+7.4%	NAV total return
£52.3 million	Primary commitments to two private equity funds
£20.2 million	Invested through three secondary transactions
£73.5 million	Cash realisations / 2.1x cost on realised investments
£46.1 million	Cash invested in new private companies

CHAIRMAN'S STATEMENT

During the six months to the end of March 2017, the Company's net asset value ("NAV") produced a total return of 7.4% and its share price delivered a total return of 16.3%. The MSCI Europe Index delivered a total return of 11.4% over the same period.

Although the returns generated by the Company have been strong in recent years, its shares have traded at a sizable discount to its net asset value. As at the end of March, however, I am pleased to be able to report that this discount had narrowed to 16.8% from 22.8% at the end of September 2016, reflecting the ongoing strong performance of the Company, and a broader tightening of discounts across the private equity investment trust sector.

At 31 March 2017, the Company's net assets were £567.2 million (30 September 2016: £532.6 million). The NAV per ordinary share at 31 March 2017 rose 6.5% to 368.9 pence (30 September 2016: 346.4 pence). The increase in NAV during the period comprised 7.4% of net realised gains and income from the Company's portfolio of 49 private equity fund interests, 1.4% of unrealised gains on a constant exchange rate basis, partially offset by 0.6% of negative exchange rate movements on the portfolio, 0.7% of other items, fees and costs and the payment of the final dividend of 3.6 pence per ordinary share for the year ended 30 September 2016.

The Company's portfolio has continued to benefit from strong underlying trading and a positive flow of realisations, as companies it is invested in are sold by the managers of the funds that make up the portfolio. In the six months to 31 March 2017, these realisations totalled £73.5 million compared to £126.9 million for the full year to 30 September 2016. Against this, £66.3 million was drawn down from the Company's resources to fund investee companies and secondary investments. This compares to £85.3 million for the full year to 30 September 2016.

The net effect of these cash flows was that, as at the end of March, the Company had net liquid resources of £97.7 million (30 September 2016: £105.9 million). In support of the Company's investment strategy, its Manager made two new fund commitments during the period, with commitments of €34.0 million to IK VIII and £22.0 million to HgCapital 8. Furthermore, the Manager undertook three secondary fund purchases, acquiring original commitments of €20.0 million to Nordic Capital VII, as well as $3.1 million to TowerBrook Investors III and $1.6 million to TowerBrook Investors IV. As a result of these investment activities, at 31 March 2017 the Company had total outstanding commitments of £312.2 million, compared to £305.9 million at 30 September 2016, while the portfolio of 49 private equity fund interests was valued at £470.2 million (30 September 2016: 49 funds valued at £433.4 million).

In line with the Company's new dividend policy of paying a minimum annual dividend of 12.0 pence per share, the Board has proposed an interim dividend for the year ended 30 September 2017 of 6.0 pence per share (2016: 1.8 pence per share), to be paid on 21 July 2017 to shareholders on the Company's share register at 16 June 2017. The Board is committed to maintaining the real value of this enhanced dividend and growing it at least in line with inflation, in the absence of unforeseen circumstances. The Board believes that providing a strong, stable dividend is attractive to shareholders.

Overall, the global private equity market remains competitive, however, the Company's portfolio is predominantly focused on buy-out managers who have been able historically to generate value through operational improvements and strategic repositioning. The managers of many of the underlying funds continue to report positive earnings growth across their investee companies. In addition, notwithstanding the challenging global political and macro-economic environment, the Company continues to benefit from strong levels of exit activity across the portfolio and, subject to major shocks, the Manager would expect this to continue over the course of the year. This 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. Furthermore, your Board believes that the best private equity managers will generate strong positive returns over the long term and that the Company is uniquely well positioned to capture these returns for shareholders.

Edmond Warner, OBE

Chairman

6 June 2017

DIRECTORATE CHANGES

Retirement of a Director

The Board of the Company announce the retirement of David Warnock as Director from 7 June 2017 after almost 9 years. David retires as part of the Board's ongoing succession plan and the Directors would like to record their thanks to David for the valuable contributions he has made to the deliberations of the Board during his time in office.

Appointment of a Director

The Board is pleased to announce the appointment of Diane Seymour-Williams as an independent non-executive Director, with effect from 7 June 2017. Diane worked at Deutsche Asset Management Group (previously Morgan Grenfell) for 23 years from 1981 until 2005. She held various senior positions during her time there, including CIO of Asian Equities, CEO of the Asian asset management business, Head of European Client Relationships and Head of Global Equity Product. More recently, Diane spent nine years from 2007 - 2016 at LGM Investments, a specialist global emerging markets manager, where she was Global Head of Relationship Management.

Diane is a non-executive Director of Witan Pacific Investment Trust PLC (appointed in 2010) and Brooks Macdonald Group PLC (appointed 2011), where she has also chaired the Remuneration Committee since 2012. She will also become Chairman of Neptune-Calculus Income and Growth VCT PLC on 22 June 2017.

MANAGER'S REVIEW

The change in the Company's name and the revised investment objective and policy was approved by shareholders on 24 January 2017.

Company Name

The name of the Company was changed to the Standard Life Private Equity Trust plc to reflect the amendments to the investment policy.

Investment objective

The investment objective is to achieve long-term total returns through holding a diversified portfolio of private equity funds, a majority of which will have a European focus.

Investment policy

The principal focus of the Company is to invest in leading private equity funds and to manage exposure through the primary and secondary funds markets. The Company's policy is to maintain a broadly diversified portfolio by country, industry sector, maturity and number of underlying investments. In terms of geographic exposure, a majority of the Company's portfolio will have a European focus. The objective is for the portfolio to comprise around 35 to 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 in private equity funds is invested in short dated government bonds, money market instruments, bank deposits or other similar investments. Cash held pending investment in private equity funds may also be invested in funds whose principal investment focus is listed equities or in listed direct private equity investment companies or trusts. These investments may be in sterling or such other currencies to which the Company has exposure.

The Company will not invest more than 15% of its total assets in other listed investment companies or trusts.

Performance to 31 March 2017

Net asset value of £567.2 million

The portfolio value together with its current assets less liabilities, resulted in net assets of £567.2 million, representing a NAV of 368.9 pence per ordinary share.

Fund investment portfolio valued at £470.2 million

The value of the Company's portfolio of 49 private equity fund interests increased from £433.4 million to £470.2 million at 31 March 2017. The increase in value was a result of new private company investments funded through draw downs of £46.1 million from our private equity funds, three secondary purchases of £20.2 million and realised gains of £30.0 million from full and partial exits, offset by realised proceeds of £64.0 million and unrealised gains of £4.5 million (net of foreign exchange). 

The largest 10 fund investments, representing 46.6% of the net asset value are highlighted on pages 21 and 22 of the interim report.

The valuation of the private equity fund interests at 31 March 2017 was carried out by the Manager and has been approved by the Board in accordance with the 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 49 private equity funds, 40 of the funds, or 91.2% of the portfolio by value, were valued by their fund managers at 31 March 2017. The Manager continues to believe that the use of such timely valuation information is important.

The Company invested £46.1 million in new private companies

New investment pace was ahead of prior year in terms of quantum invested as our private equity fund managers deployed capital, purchasing businesses in an active private equity market.

£20.2 million was invested to acquire secondary purchases in three funds

During the six months, three private equity fund interests were acquired: a €20.0 million original commitment to Nordic Capital VII, $3.1 million to TowerBrook Investors III and $1.6 million to TowerBrook Investors IV.  Combined these funds had outstanding commitments of £3.9 million at 31 March 2017. The Manager continues to be disciplined and highly selective in a competitively priced secondary transaction environment.

The Company received £73.5 million (including income of £9.3 million) through the exit of private company investments and other partial realisations

Exit activity from the funds was driven by the continued strong appetite for high quality private equity companies and the majority of realisations were at a premium to the last relevant valuation.

Average multiple on realised investments was 2.1 times invested cost

In the period to 31 March 2017 the private equity funds achieved strong returns from their portfolio of private companies, consistent with prior years. This long term performance is underpinned by the quality of the assets and the value-add delivered by our private equity managers.

Net unrealised gains from the portfolio was £4.5 million

The movement over the period represented an unrealised valuation gain on constant currency basis of £7.5 million partially offset by a foreign exchange loss of £3.0 million.

Total outstanding commitments of £312.2 million to 49 private equity funds

The total new commitments of £56.2 million comprise new primary fund commitments of £52.3 million and commitments of £3.9 million acquired in secondary transactions, offset by fund drawdowns of £46.1 million during the period.  A £30.3 million (€34.0 million) commitment was made to IK VIII in October 2016. Managed by IK Investment Partners, the €1.89 billion fund will invest in buyouts in Northern Continental Europe. £22.0 million was committed to HgCapital 8 in February 2017.  Managed by HgCapital, the £2.5 billion fund targets resilient companies with robust and protected business models primarily the UK and Germany.

The manager continues to estimate that £55.0 million of outstanding commitments will not be drawn by the private equity funds portfolio.

The outstanding commitments in excess of available liquid resources, including cash and the undrawn debt facility, as a % of the net asset value was 23.7%, below the long-term target range of 30%-75%, highlighting the prudent approach to over-commitments adopted by the Manager, in the current market environment.

Liquid Resources

Over the period the portfolio generated cash inflows of £73.5 million from realised investments, partially offset by new investment activity of £46.1 million and secondary purchases of £20.2 million resulting in net investment inflows was £7.2 million.  Including dividends paid and FX movements, net liquid resources were £97.7 million at 31 March 2017 down from £105.9 million at 30 September 2016.

Analysis of the underlying private company investments

At 31 March 2017 the 49 private equity fund interests were collectively invested in a total of 462 underlying investments. The diversification of the underlying investments is set out on pages 15 and 16 of the interim report. Further information on the ten largest underlying private company investments, representing 16.5% of the net asset value are shown on pages 19 and 20 of the interim report.

Portfolio Construction: investments in buyout funds through primary commitments and buyout funds acquired via the secondary transactions represents 97% of net assets.  18% of the portfolio was acquired through secondary purchases and it is expected that this will increase over time.

Geographic Exposure: 78% of the portfolio at 31 March 2017 is invested in Europe and this will continue to be the majority of exposure, with 18% invested in North America. Investments are weighted towards Northern Europe, emphasising the Scandinavian, French, Benelux, German and UK markets. The portfolio is deliberately underweight Southern Europe as these private equity markets have historically underperformed. The North American exposure relates primarily to investments in companies made by the European based managers through their allocation to global deals.

Sector Exposure: The Company's sector diversification is a product of the underlying investment strategy of the private equity funds, built around their specific sector expertise. The portfolio is invested in fast growth sub-sectors within the broad sector strategies. In recent years, financials, healthcare and technology (mature software businesses) have increased in significance with consumer focused and industrial companies retaining their importance. The portfolio is light in the cyclical sectors of oil and gas, utilities and mining.

Maturity exposure and portfolio value growth: The maturity exposure highlights the balanced nature of the portfolio. The typical hold period prior to exit of a private equity backed company is 4 to 6 years. With 39% of the portfolio in the 5 years or older category, cash generation is therefore expected to remain positive. Portfolio maturity is managed through both primary commitments and secondary transactions with the objective of achieving balanced exposures over vintage years. Less than 2.2% of the portfolio is exposed to the pre-2007 period and 92.5% of the portfolio is valued at or above cost.

Portfolio valuation and leverage multiple analysis: The top 50 private companies that represent 41.5% of the net asset value at 31 March 2017 had a median valuation multiple, based on the Enterprise Value (EV) / Earnings Before Interest Tax Depreciation and Amortisation (EBITDA), of 10-11x. This is consistent with the portfolio valuation as at 31 December 2016.  Those valued at a multiple greater than 15x are highly rated private companies that command strategic premiums.  Median Net Debt / EBITDA in the portfolio at 4-5x was again consistent with the prior period.  The private equity fund managers are prudent in the levels of leverage applied to their portfolio companies and debt markets remain open for both new transactions and refinancing on attractive terms.

Both metrics are in line with the private equity market for similar sized deals and vintages, however, the portfolio of private companies typically does have higher levels of leverage compared to public markets.  Offsetting this, the loss ratio as a percentage of total cost over the past 5 years was 5.0%, indicating the private equity fund managers are managing this risk appropriately.

Private equity market

Primary Investment Market

On the back of three years of record distributions from private equity funds and increasing allocations to private equity, the fundraising environment in Europe and North America for leading private equity fund managers is strong as investors seek to deploy capital into the asset class. As a result, the global overhang or "dry powder" to be invested by the private equity funds has increased, however, available capital in Europe remains within historic ranges.

The value and volume of European buyouts continued to grow. Mid-market transactions remain the largest component, however, 2016 saw a marked increase in larger deals greater than €1 billion in value. 2016 continued to be a positive year for exits although both value and volume peaked in the first half of the period.

Average purchase price multiples for new investment activity continued to rise as a result of available equity capital and high levels of competition for quality companies. While debt markets continue to be supportive of private equity transactions, leverage remains below pre crisis levels.

Overall the Company has seen a steady pace of activity over the past few years and it is expected that the levels of new investment and realisation activity will remain robust over the coming year.

Secondary Transaction Market

Overall 2016 was a challenging year in the secondary market.  Total volumes were down on 2015 with $37 billion transacted and the quality of deal flow was relatively poor.  As a result, the more attractive opportunities in mainstream or "plain vanilla" European and North American limited partnerships were priced aggressively.  Deal flow was dominated by older "tail-end" portfolios and more complex fund restructuring transactions with only 5 deals of over $1 billion announced.  The combined effect resulted in a fall in average pricing, however, in the buyout funds that are the Company's core focus pricing increased to 95% of net asset value with many top-tier buyout funds frequently trading at premiums. 

A number of these pressures eased in Q1 2017 as activity levels increased due to a strong flow of larger transactions coming to market.  While the combined dry powder targeting secondary trading has risen to record levels, the market is expected to become more balanced during the remainder of the year.

While the Company has continued to acquire high quality private equity funds in the secondary market during the period, a number of transactions were declined due to high price levels.  In this environment the Manager remains highly selective and continues to search for situations to deploy the significant cash resources into opportunistic transactions.  

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;

•              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 2016.

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.

DIRECTORS' RESPONSIBILITY STATEMENT

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

·     the condensed set of financial statements has been prepared in accordance with FRS 104 Interim Financial Reporting

·     the interim management report includes a fair review of the information required by:

a)    DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

b)    DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

On behalf of the Board,

Edmond Warner, OBE

Chairman

6 June 2017

FINANCIAL HIGHLIGHTS

Performance (capital only)	As at 31 March 2017	As at 30 September 2016	% Change
Net asset value per ordinary share (NAV)	368.9p	346.4p	6.5%
Share price	307.0p	267.3p	14.9%
FTSE All-Share Index(1)	3,990.0	3,755.3	6.2%
MSCI Europe Index(1)	3,013.5	2,738.0	10.1%
LPX 50(1)	400.5	368.9	8.6%
Discount (difference between share price and net asset value)	16.8%	22.8%

Performance (total return)(2)	Six months %	1 year %	Annualised 5 year %	Annualised since launch(3) %
NAV	+7.4	+20.5	+11.3	+9.7
Share price	+16.3	+53.5	+18.5	+8.8
FTSE All-Share Index(1)	+8.1	+22.0	+9.7	+5.7
MSCI Europe Index(1)	+11.4	+27.0	+11.6	+6.0
LPX 50(1)	+13.9	+33.1	+18.0	+5.6

Highs/Lows for the six months ended 31 March 2017	High	Low
Share price (mid)	308.3p	265.0p

(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.

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

		For the six months to 31 March 2017
			(unaudited)
	Notes	Revenue	Capital	Total
		£'000	£'000	£'000
Total capital gains on investments		-	34,612	34,612
Currency losses		-	(168)	(168)
Income	4	9,590	-	9,590
Investment management fee	5	(265)	(2,387)	(2,652)
Administrative expenses		(550)	-	(550)
Profit on ordinary activities before finance costs and taxation		8,775	32,057	40,832
Finance costs		(135)	(315)	(450)
Profit on ordinary activities before taxation		8,640	31,742	40,382
Taxation		(1,635)	1,328	(307)
Net profit on ordinary activities after taxation		7,005	33,070	40,075
Net profit per ordinary share	7	4.56p	21.51p	26.07p
		For the six months to 31 March 2016
			(unaudited)
	Notes	Revenue	Capital	Total
		£'000	£'000	£'000
Total capital gains on investments		-	43,700	43,700
Currency gains		-	3,511	3,511
Income	4	7,346	-	7,346
Investment management fee	5	(187)	(1,686)	(1,873)
Incentive fee	5	-	(2,425)	(2,425)
Administrative expenses		(401)	-	(401)
Profit on ordinary activities before finance costs and taxation		6,758	43,100	49,858
Finance costs		(39)	(350)	(389)
Profit on ordinary activities before taxation		6,719	42,750	49,469
Taxation		(1,667)	1,136	(531)
Net profit on ordinary activities after taxation		5,052	43,886	48,938
Net profit per ordinary share	7	3.24p	28.17p	31.41p

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 FINANCIAL POSITION

		At	At
		31 March 2017	30 September 2016
		(unaudited)	(audited)
	Notes	£'000	£'000
Non-current assets
Investments	8	470,199	433,392
Current assets
Receivables		729	774
Cash and cash equivalents		97,723	105,883
		98,452	106,657
Creditors: amounts falling due within one year
Payables		(1,479)	(7,417)
Net current assets		96,973	99,240
Total assets less current liabilities		567,172	532,632
Capital and reserves
Called-up share capital		307	307
Share premium account		86,485	86,485
Special reserve		51,503	51,503
Capital redemption reserve		94	94
Capital reserves		412,985	379,915
Revenue reserve		15,798	14,328
Total shareholders' funds		567,172	532,632
Net asset value per equity share	9	368.9 p	346.4p

CONDENSED STATEMENT OF CHANGES IN EQUITY

For the six months ended 31 March 2017 (unaudited)

	Called-up	Share		Capital
	share	premium	Special	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 October 2016	307	86,485	51,503	94	379,915	14,328	532,632
Profit on ordinary activities after taxation	-	-	-	-	33,070	7,005	40,075
Dividends paid	-	-	-	-	-	(5,535)	(5,535)
Balance at 31 March 2017	307	86,485	51,503	94	412,985	15,798	567,172

For the six months ended 31 March 2016 (unaudited)

	Called-up	Share		Capital
	share	premium	Special	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 October 2015	312	86,485	56,024	89	280,380	15,450	438,740
Profit on ordinary activities after taxation	-	-	-	-	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

CONDENSED STATEMENT OF CASH FLOW

	Six months to		Six months to
	31 March 2017		31 March 2016
	(unaudited)		(unaudited)
	£'000		£'000
Cashflows from operating activities
Net profit on ordinary activities after taxation	40,075		48,938
Adjusted for:
Finance costs	450		389
Taxation on ordinary activities	307		531
Gains on disposal of investments	(30,035)		(38,972)
Revaluation of investments	(4,576)		(4,728)
Currency losses/(gains)	168		(3,511)
Increase in debtors	(15)		(22)
(Decrease)/increase in creditors	(6,086)		2,523
Tax deducted from non - UK income	(307)		(531)
Interest paid	(242)		(279)
Net cash (outflow)/inflow from operating activities	(261)		4,338
Investing activities
Purchase of investments	(66,214)		(53,767)
Disposal of underlying investments by funds	64,018		73,846
Net cash (outflow)/inflow from investing activities	(2,196)		20,079
Financing activities
Ordinary dividends paid	(5,535)		(5,452)
Net cash outflow from financing activities	(5,535)		(5,452)
Net (decrease)/increase in cash and cash equivalents	(7,992)		18,965
Cash and cash equivalents at the beginning of the period	105,883		32,099
Currency (losses)/gains on cash and cash equivalents	(168)		3,511
Cash and cash equivalents at the end of the period	97,723		54,575
Cash and cash equivalents consists of:
Money market funds	77,349		-
Cash and short term deposits	20,374		54,575
Cash and cash equivalents	97,723		54,575

NOTES TO THE ACCOUNTS

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 2016 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 2017 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 36.

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'.

The Company has chosen to early adopt the Amendments to FRS 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland), 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.

In assessing the appropriateness of the adoption of the going concern assumption as a basis for preparing the financial statements, the Directors took account of 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 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.

The financial statements for the six months ended 31 March 2017 have been prepared using the same accounting policies as the preceding annual financial statements.

3              Exchange rates

Rates of exchange to sterling were:

	At	At
	31 March 2017	30 September 2016
Euro	1.1691	1.1559
US Dollar	1.2505	1.2990

4              Income

	Six months ended	Six months ended
	31 March 2017	31 March 2016
	£'000	£'000
Income from fund investments	9,546	7,063
Interest from cash balances and money market funds	44	7
Income from index tracker funds	-	276
Total income	9,590	7,346

5              Transactions with the Manager

	Six months ended 31 March 2017			Six months ended 31 March 2016
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment management fee	265	2,387	2,652	187	1,686	1,873
Incentive fee	-	-	-	-	2,425	2,425
	265	2,387	2,652	187	4,111	4,298

The Manager to the Company is SL Capital Partners LLP. In order to comply with the Alternative Investment Fund Managers Directive, the Company appointed SL Capital Partners LLP as its Alternative Investment Fund Manager from 1 July 2014.

The investment management fee payable to the Manager is 0.95% per annum with effect from 1 October 2016 (prior to 1 October 2016 - 0.8% per annum) of the NAV of the Company. The investment management fee is allocated 90% to the realised capital reserve and 10% to the revenue account. The management agreement between the Company and the Manager is terminable by either party on twelve months written notice.

Investment management fees due to the Manager as at 31 March 2017 amounted to £880,000 (31 March 2016 - £373,000).

The incentive fee arrangement fee has now ended. This amounted to 10% of the growth in the diluted net asset value total return in excess of an annualised 8% hurdle rate, measured over the five year period ending 30 September 2016. Following the end of the incentive fee period, a single management fee of 0.95% per annum of the NAV of the Company replaced the previous management and incentive fees.

6              Dividend on ordinary shares

A dividend of 3.6p per ordinary share, declared as a final dividend, was paid on 27 January 2017 in respect of the year ended 30 September 2016 (2015: dividend of 3.5p per ordinary share paid on 29 January 2016).

A proposed interim dividend of 6.0p per ordinary share is due to be paid on 21 July 2017 (2016: 1.8p paid on 15 July 2016).

7              Net return per ordinary share

	Six months ended		Six months ended
	31 March 2017		31 March 2016
	p	£'000	p	£'000
The net return per ordinary share is based on the following figures:
Revenue net return	4.56	7,005	3.24	5,052
Capital net return	21.51	33,070	28.17	43,886
Total net return	26.07	40,075	31.41	48,938
Weighted average number of ordinary shares in issue		153,746,294		155,776,294

8              Investments

	31 March 2017	30 September 2016
	£'000	£'000
Fair value through profit or loss:
Opening market value	433,392	406,332
Opening investment holding (gains)/losses	(5,371)	37,075
Opening book cost	428,021	443,407
Movements in the period/year:
Additions at cost	46,064	66,193
Secondary purchases	20,150	19,099
Dividends reinvested	-	248
Disposal of underlying investments by funds	(64,018)	(158,521)
	430,217	370,426
Gains on disposal of underlying investments	32,214	58,152
Losses on liquidation of fund investments	(2,179)	(557)
Closing book cost	460,252	428,021
Closing investment holding gains	9,947	5,371
Closing market value	470,199	433,392

9              Net asset value per ordinary share

	31 March 2017	30 September 2016
Ordinary shareholders' funds	£567,171,634	£532,632,079
Number of ordinary shares in issue	153,746,294	153,746,294
Net asset value per ordinary share	368.9p	346.4p

There were no share buybacks during the six months ended 31 March 2017. During the six months ended 31 March 2016, the Company bought back for cancellation 1,000,000 ordinary shares at a cost of £2,044,000 including expenses.

The net asset value per ordinary share and the ordinary shareholders' funds are calculated in accordance with the Company's articles of association.

10           Bank loans

At 31 March 2017, the Company had an £80 million (2016: £80 million) committed, multi-currency syndicated revolving credit facility provided by Citi and Societe Generale of which £nil (2016: £nil) had been drawn down. The facility expires on 31 December 2020. The interest rate on this facility is LIBOR plus 1.50%, rising to 1.70% 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 31 March 2017:

	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Financial assets at fair value through profit or loss
Unquoted investments	-	-	470,199	470,199
As at 30 September 2016
	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Financial assets at fair value through profit or loss
Unquoted investments	-	-	433,392	433,392

Unquoted investments

Unquoted investments are stated at the Manager's 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 Statement of Financial Position 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 Statement of Financial Position date the last available valuation from the fund manager is adjusted for any subsequent cashflows occurring between the valuation date and the Statement of Financial Position 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.

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.

The Company invests in the Standard Life Investments Liquidity Funds which are managed by Standard Life Investments Limited. As at 31 March 2017 the Company had invested £42,801,000 in the Standard Life Investments Liquidity Funds (2016: £45,934,000) which are included within cash and cash equivalents in the Statement of Financial Position. As at 31 March 2017 interest of £3,000 was due to the Company (2016: £8,000). No additional fees are payable to Standard Life as a result of this investment.

There were no new related party transactions in the six months to 31 March 2017 over and above those already disclosed in the Annual Report and Financial Statements.

INDEPENDENT REVIEW REPORT TO STANDARD LIFE PRIVATE EQUITY TRUST PLC 

Introduction 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2017 which comprises the Condensed Statement of Comprehensive Income, Condensed Statement of Financial Position, Condensed Statement of Changes in Equity, Condensed Statement of Cash Flows and the related explanatory notes.  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 condensed set of financial statements. 

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").  Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. 

Directors' responsibilities 

The half-yearly financial report 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 DTR of the UK FCA. 

As disclosed in note 2, the annual financial statements of the company are prepared in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with FRS 104 Interim Financial Reporting.

Our responsibility 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

Scope of review 

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 UK.  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. 

Conclusion 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2017 is not prepared, in all material respects, in accordance with FRS 104 Interim Financial Reporting and the DTR of the UK FCA. 

Philip Merchant

for and on behalf of KPMG LLP 

Chartered Accountants 

Saltire Court 

20 Castle Terrace

Edinburgh EH1 2EG

6 June 2017

 

END

 

 

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