SLPE.L Regulatory News (SLPE)

STANDARD LIFE PRIVATE EQUITY TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2018

HIGHLIGHTS

At 30 September 2018:

For the year ended 30 September 2018:

* 63.6% represents the percentage of the Company's NAV invested with the 10 largest private equity fund managers in the portfolio.

CHAIRMAN'S STATEMENT

During the year to the end of September 2018, Standard Life Private Equity Trust's net asset value ("NAV") produced a total return of 13.3% and its share price delivered a total return of 5.8%.

At 30 September 2018, the Company's net assets were £661.4 million (30 September 2017: £599.0 million). The NAV per ordinary share rose 10.4% over the year to 430.2 pence (30 September 2017: 389.6 pence). This increase in NAV during the period comprised 9.5% of net realised gains and income from the Company's portfolio of 55 private equity fund interests, 4.1% of unrealised gains on a constant exchange rate basis and 1.0% of positive exchange rate movements on the portfolio. This is partially offset by 1.1% of other items, fees and costs as well as by 3.1% of dividends paid during the year. For comparison, the MSCI Europe Index total return was 3.2% over the same period.

The Company's performance has been driven by a positive flow of realisations as businesses are sold by the managers of the funds that make up the portfolio. In the year to 30 September 2018, these realisations totalled £127.9 million compared with £130.7 million in the previous year. Against this, £111.6 million was drawn down from the Company's resources to fund new and existing investee companies and secondary investments. This compares with £114.2 million for the prior year. The net effect of these cash flows was that, as at the end of September, the Company had resources available for investment of £86.5 million (30 September 2017: £93.6 million).

In support of the investment strategy, the Manager made five new fund commitments during the period, comprising €30.0 million each to PAI Europe VII, Equistone Partners Europe Fund VI and Bridgepoint Europe VI, €25.0 million to Investindustrial Growth and $21.5 million to MSouth Equity Partners IV. Furthermore, the Manager undertook two transactions via the secondary market, acquiring commitments in Onex Partners IV and Nordic Capital Fund VIII. As a result of these investment activities, at 30 September 2018, the Company had total outstanding commitments of £369.3 million, compared with £325.6 million a year earlier, while the portfolio of 55 private equity fund interests was valued at £574.7 million (30 September 2017: 51 funds valued at £503.7 million).

The Board has proposed a final quarterly dividend for the year ended 30 September 2018 of 3.1 pence per share, to be paid on 25 January 2019 to the shareholders on the Company's share register at 21 December 2018. The final quarterly dividend, together with the previous quarterly dividends each of 3.1 pence per share, totals 12.4 pence per share (2017: 12.0 pence per share). The Board is committed to maintaining the real value of this enhanced dividend, in the absence of unforeseen circumstances. The Board believes that providing a strong, stable dividend is attractive to shareholders.

The Standard Life Private Equity Trust portfolio remains predominantly focused on buy-out managers who have been able historically to generate value through operational improvements and strategic repositioning, and who the Manager believes are well placed to do so in the future. Consistent with the Company's investment strategy, and with Europe continuing to be an attractive region for private equity investment, the majority of the Company's portfolio has a European focus. Nonetheless, the broadening of the Company's investment policy agreed at the 2017 Annual General Meeting has allowed the Manager to consider a number of opportunities further afield. In line with this broadening of the investment policy, the Company made a new fund commitment to MSouth Equity Partners IV and acquired a secondary position in Onex Partners IV, as described earlier. The Company is undertaking due diligence on a number of US-focused managers.

The outlook for the global private equity market remains competitive, with significant amounts of funds being raised. The managers of many funds the Company is invested in continue to report positive earnings growth across their portfolio of investee companies. In addition, the Company continues to benefit from strong levels of exit activity, and absent any major shocks, the Manager expects this to continue over the course of the next year. Such exit activity should result in further realised gains being generated, helping the Company to build on the robust performance of recent years.

The Company's underlying portfolio has broad geographic diversification with UK-based underlying portfolio companies making up 15% of the Company's portfolio. In general, the UK-based businesses have continued to perform well despite major political and economic uncertainty. It is not possible to predict the ultimate impact of Brexit, however your Board and the Manager continue to monitor ongoing developments and their potential effects on the Company and its portfolio.

The Board remains committed to maintaining capital discipline. Cash inflows will be invested in a mix of new fund commitments, secondary fund purchases and, when appropriate, share buy-backs.

Furthermore, following an in-depth strategic review, the Board has concluded that it would be beneficial to increase the opportunity set available to the Manager, by broadening the investment objective and policy of the Company to allow it to make direct investments into private companies alongside private equity managers ("co-investments"), mainly alongside managers of private equity funds which the Company and/or Aberdeen Standard Investments has invested in.

Direct private equity investments have multiple potential benefits, including:

• the ability to generate outsized returns versus fund investments;

• lower fees;

• providing increased exposure to particularly attractive assets; and

• the opportunity to put more capital to work.

Subject to lender consent, the Board is proposing at the Annual General Meeting that shareholders approve the requisite amendments to the investment objective and policy to action these changes.

I am pleased to announce that Merrick McKay, Alan Gauld and Patrick Knechtli will now form the Manager's key investment team with regard to the Company, with support coming from the rest of Aberdeen Standard Investments' Private Equity team, as before. Roger Pim has moved to another role within the Manager and the Board wishes him well and would like to record our thanks for his excellent leadership on behalf of the Company over many years.

DIRECTORATE CHANGES

Appointment of Directors

The Board was pleased to announce the appointment of Jonathon Bond as an independent non-executive director with effect from 15 June 2018.

Retirement of Directors

As announced I will be retiring from the Board on 31 December 2018 and Christina McComb will be appointed as the new Chair. Alan Devine will replace Christina McComb as the Company's new Senior Independent Director ("SID").

It has been a privilege to serve on the Standard Life Private Equity Trust board over the past 10 years. I would like to thank all of the directors and members of the Manager who I have worked with in that time and wish the Company continued investment success in the years ahead.

Edmond Warner, OBE

Chairman

11 December 2018

REPORT OF THE MANAGER

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

Investment Strategy

The principal focus of the Company is to invest in leading private equity buyout 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 cash flows to and from the portfolio of fund investments and, from time to time, may use borrowings to meet drawdowns.

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.

Benchmark1

The Board has concluded, after careful consideration, that there is no currently available benchmark which is an appropriate measure of the investment performance of the Company. It has, however, resolved to review this at least annually.

Borrowings

The Company's maximum borrowing capacity is defined in its articles of association, and, unless otherwise sanctioned by an ordinary resolution of the Company, is an amount equal to the aggregate of the amount paid up on the issued share capital of the Company and the amount standing to the credit of the reserves of the Company, all based on the latest audited Statement of Financial Position. It is expected that bank borrowings would not exceed more than 30% of the Company's net assets.

As noted in the Chairman's Statement, the Board is proposing certain amendments to the Company's objective and policy to permit the Company to make direct investments into private companies alongside private equity managers and certain other minor amendments. Further details of the proposed amendments along with the full text of the proposed objective and policy are set out in the Notice of Annual General Meeting within the Annual Report and Financial Statements.

 1 The Company has not identified an appropriate benchmark and therefore does not measure its performance against any particular one. It does however provide a number of comparator benchmarks. The purpose of the comparator benchmarks is to provide shareholders with the means to compare the Company's performance.

Performance to 30 September 2018

Net asset value of £661.4 million

The portfolio value together with its current assets less liabilities, resulted in net assets of £661.4 million (430.2 pence per ordinary share).

Fund investment portfolio valued at £574.7 million

The value of the Company's portfolio of 55 private equity fund interests increased from £503.7 million at 30 September 2017 to £574.7 million at 30 September 2018. The increase in value was a result of new private company investments funded through drawdowns of £89.7 million from the Company's private equity funds, two secondary purchases of £21.9 million and realised gains of £51.5 million from full and partial exits, unrealised gains of £30.7 million (net of foreign exchange), offset by realised proceeds of £122.8 million.

The largest 10 fund investments, representing 63.6% of the net asset value are highlighted in the "Largest 10 Funds" section of the Annual Report and Financial Statements.

The valuation of the private equity fund interests at 30 September 2018 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 55 private equity funds, 35 of the funds, or 90.9% of the portfolio by value, were valued by their fund managers at 30 September 2018. The Manager continues to believe that the use of such timely valuation information is important.

The Company invested £89.7 million into fund investments

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

£21.9 million was invested to acquire secondary purchases in two funds

The Manager undertook two transactions via the secondary market, acquiring commitment in Onex Partners IV and Nordic Capital Fund VIII. Combined, these funds had outstanding commitments of £3.3 million at 30 September 2018. The Manager continues to be disciplined and highly selective in a competitively priced secondary market.

The Company received £127.9 million (including net income of £5.0 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 2.9 times invested cost

In the year to 30 September 2018, the private equity funds generated 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 were £30.7 million

The movement over the year represented an unrealised valuation gain on constant currency basis of £24.5 million and a foreign exchange gain of £6.2 million. The unrealised gains and losses include the effect of transfers from the revaluation to the capital realised reserves when investments are realised.

Total outstanding commitments of £369.3 million to 55 private equity funds at 30 September 2018

The total new commitments of £127.4 million comprise new primary fund commitments of £117.0 million and commitments of £10.4 million acquired in secondary transactions, offset by fund drawdowns of £89.7 million during the period:

The Manager continues to estimate that around £60.0 million of outstanding commitments, predominately relating to funds outwith their investment period, will not be drawn.

The outstanding commitments in excess of resources available for investment, including cash and the undrawn debt facility, as a percentage of the net asset value was 30.7%, at the lower end of the long-term target range of 30%-75%, highlighting the prudent approach to over-commitments adopted by the Manager in the current market environment.

Resources available for investment

Over the period the portfolio generated cash inflows of £127.9 million from realised investments, partially offset by new investment activity of £89.7 million and secondary purchases of £21.9 million resulting in net investment inflows of £16.3 million. Including dividends paid and FX movements, resources available for investment were £86.5 million at 30 September 2018, down from £93.6 million at 30 September 2017.

Analysis of the underlying private company investments

At 30 September 2018, the 55 private equity fund interests were collectively invested in a total of 403 separate companies and 78 other private equity funds. The diversification of the underlying investments is set out in the "Portfolio Review" section of the Annual Report and Financial Statements. Further information on the ten largest underlying private company investments, representing 14.0% of the net asset value is shown in the "Largest 10 Underlying Private Companies" section of the Annual Report and Financial Statements.

Portfolio construction: Investments in buyout funds through primary commitments and buyout funds acquired via secondary transactions represent 99% of the portfolio and demonstrates the core focus on buyouts as the prime investment strategy for investing in private companies. 15% of the portfolio was acquired through secondary purchases and it is expected that this will increase over time.

Geographic exposure: 83% of the underlying private companies at 30 September 2018 are headquartered in Europe and this will likely continue to be the majority of exposure over the short to medium term, with 14% headquartered in North America. The underlying private companies in Europe are weighted towards Northern Europe, with a focus on the Scandinavian, French, Benelux, UK and German markets. The underlying private companies have historically been deliberately underweight Southern Europe due to the relative immaturity and underperformance of its private equity market compared to other European regions. However, the Manager will consider making commitments to Southern Europe going forward where attractive opportunities arise.

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, healthcare, financials 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 the exit of a private equity backed company is four to six years. With 34% of the portfolio in the five 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. 0.5% of the portfolio is exposed to the pre-2007 period and 6% of the portfolio is valued below cost.

There is a continual progression in value creation as the portfolio of private companies matures. The development from 1.1 times cost for the year one vintage through to 1.9 times cost in the five year plus vintage demonstrates the value creation the private equity fund managers achieve through active management. With realised returns from all exited investments of 2.9 times cost for the year to 30 September 2018, the portfolio remains conservatively valued.

Primary investment market

The US and European private equity market remains very buoyant, with high levels of activity in fundraising, new investments and exits, an ongoing trend since the financial crisis of 2007-8. Many institutional investors have increased their allocations to private equity on the back of strong performance, and the expectation that this will continue relative to a more muted public market outlook. The high levels of investment activity, tied to increased private equity allocations, have resulted in many managers coming back to the fundraising market earlier and seeking to raise ever-larger funds.

In Europe and the US, Q3 2018 year-to-date ("YTD") buyout activity of $109 billion and $198 billion respectively represents increases of 32% and 28% over the same period in 2017. As such, buyout activity in Europe is at its highest since 2007, whereas the US post-2007 activity peaked in 2015 but remains elevated.

With respect to fundraising, the best small, mid and large cap managers are raising new funds rapidly (and being frequently oversubscribed), notwithstanding significant fund size increases in many cases. The excess of institutional private equity allocation means that many second-tier and new managers are also finding success in reaching fundraising targets. 2017 was a record year for buyout fundraising in Europe ($74 billion) and the US ($179 billion). However, Q3 2018 YTD European buyout fundraising of $55 billion (a 43% decrease on the same period in 2017) and US buyout fundraising of $83 billion (a 6% decrease), indicates that buyout fundraising may have peaked.

The high level of buyout fundraising globally since 2013, comfortably exceeding new investment activity over this period, has resulted in current record levels of capital raised in Europe ($192 billion) and the US ($179 billion). The capital raised for European and US private equity now represents around 3.8 years and 4.4 years of investment capacity respectively, up from 3.0 years and 2.6 years at December 2012.

Valuations within the US have crept upwards in recent years, with the Q3 2018 YTD average of 10.2x now exceeding that of pre-recession levels. Increasing debt availability has contributed to higher valuations in the US - average debt of 5.8x EBITDA is now at its highest level since 2007. Valuations within the European buyout market of 9.5x-10.5x have also increased, and are now at similar levels as to that of the US. Debt availability has improved in Europe as well, albeit with average debt multiples marginally lower than that being seen in the US. Notwithstanding the higher debt levels, funding structures remain relatively conservative with 'covenant-lite' terms being a common feature of new debt issuance, providing a degree of comfort for equity investors in the event of a downturn.

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. This is driven, in part, by Europe and North America having a large population of privately-owned businesses and a substantial number of corporates looking to divest non-core divisions, providing significant opportunity for private equity managers. European and North American private equity firms also account for the significant majority of all private equity firms globally and, given the attractive dynamics in these markets, they will continue to be the focus of the Company.

Secondary transaction market*

The first half of 2018 set another record for the secondary market in terms of deals transacted within a six month period, with $27 billion of transactions completed. This was 23% ahead of the same period in 2017. The strong momentum in deal activity has continued into the second half of the year and is expected to result in volumes for the full year exceeding the record level achieved last year.

The drivers behind this market growth continue to be a combination of strong pricing and innovation, which have unlocked an increasing number of larger transactions. 11 transactions over $500 million in the first half of 2018 accounted for over 40% of the overall deal volume. While average pricing in secondary transactions in the first half of 2018 was flat relative to last year at around 93% of NAV, this remains at a historically high level and masks the fact that there is a wide range of quality and maturity of funds being traded. On the one hand, sellers (including fund of fund managers and secondary firms) are taking advantage of market conditions to offload older or poorer quality funds in order to wind up individual investment programmes and return cash to investors. These types of interests typically trade at wider discounts to NAV. On the other hand, the better known or better quality funds, which are typically the ones targeted by the Company, often trade at material premia to NAV and so require the buyer to hold the investment below cost for a period of time.

On the innovation side, GP-led transactions have grown in size and number, and a wide range of managers have used the secondary market to offer liquidity to investors in existing portfolios, often combined with securing fresh capital from the buyers of the secondary assets. These types of GP-led transactions are being adopted more widely across size segments and asset classes within the private markets space.

Another key factor behind the market growth trend has been the ability of secondary buyers to raise capital, both through their own fund-raising efforts and with the availability of more leverage. With four of the largest secondary managers actively raising capital in 2018, it is estimated that over $120 billion will be available to invest in secondary transactions over the near term. Pressure to deploy capital and competition for deals, particularly at the larger end of the market, have anecdotally pushed buyers into underwriting deals at ever lower returns. Buyers then compensate for these lower returns by using leverage to boost performance for their investors.

While the company has continued to acquire high quality private equity funds in the secondary market over the course of the last year, a number of transactions were declined due to high price levels. The Manager continues to originate and analyse a variety of secondary opportunities that could fit with the Company's portfolio, but remains highly selective given the current macro and secondary pricing environment.

*Source: market data sourced from Greenhill (July 2018).

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks faced by the Company relate to the Company's investment activities and these are set out below:

· market risk

· currency risk

· over-commitment risk

· liquidity risk

· credit risk

· interest rate risk

· operating and control environment risk

The financial risk management objectives and policies of the Company are contained in the Financial Statements of the Annual Report and Financial Statements.

In addition to this, the Board has in place a robust process to assess and monitor the operating and control environment risks of the Company. A core element of this is the Company's Financial Systems and Controls Report which provides details of the operational procedures and compliance controls implemented and maintained by the Manager to safeguard the assets of the Company and to manage its affairs properly.

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS

The directors are responsible for preparing the Annual Report and 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 they are required to prepare the financial statements in accordance with UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.

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 its profit or loss 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 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;

· assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

· use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

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 its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the directors in respect of the annual financial report

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company; and

· the Strategic 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.

We consider the Annual Report and Financial Statements, 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.

Edmond Warner, OBE

Chairman

11 December 2018

FINANCIAL HIGHLIGHTS

(1) The Company has not identified an appropriate benchmark and therefore does not measure its performance against any particular one. It does however provide a number of comparator benchmarks. The purpose of the comparator benchmarks is to provide shareholders with the means to compare the Company's performance.

(2) Includes dividends reinvested.

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

STATEMENT OF COMPREHENSIVE INCOME

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 year.

The dividend which has been recommended based on this Statement of Comprehensive Income is 12.40p (2017: 12.00p) per ordinary share.

STATEMENT OF FINANCIAL POSITION

STATEMENT OF CHANGES IN EQUITY

For the year ended 30 September 2018

For the year ended 30 September 2017

STATEMENT OF CASH FLOWS

NOTES TO THE ACCOUNTS

1 About the Company

Standard Life 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 Phoenix Group Holdings.

2 Financial information

The financial information for the year ended 30 September 2018 and the year ended 30 September 2017 set out in this announcement does not constitute the company's statutory accounts for those years.

Statutory accounts for the year ended 30 September 2017 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 30 September 2018 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 22 January 2019 at 12.30pm.

The Auditors' reports on the accounts for 30 September 2018 and 30 September 2017 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under Sections 498(2) or 498(3) of the Companies Act 2006.

The independent auditor's report is included in the Annual Report and Financial Statements, which will be posted to shareholders in mid-December 2018.

3 Accounting policies

(a) Basis of accounting

The financial statements have been prepared in accordance with the Companies Act 2006, Financial Reporting Standard 102 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. 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 Directors believe that this is appropriate for the reasons outlined in the Directors' Report section of the Annual Report and Financial Statements. The principal accounting policies adopted are set out below. These policies have been applied consistently throughout the current and prior year.

Rounding is applied to disclosures, where considered relevant.

(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. Dividends are accounted for as Income from investments in the Statement of Comprehensive Income.

All expenses are accounted for on an accruals basis. Expenses are charged through the revenue account of the Statement of Comprehensive Income except as follows:

· transaction costs incurred on the purchase and disposal of investments are recognised as a capital item in the Statement of Comprehensive Income

· 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. Bank interest paid has arisen as a consequence of negative interest rates on Euro cash balances and has been charged wholly to revenue;

 (c) Investments

Investments have been designated upon initial recognition as fair value through 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 when the fund is wound up. Subsequent to initial recognition, investments are valued at fair value as detailed below. Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the Statement of Comprehensive Income 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 (European Private Equity & Venture Capital Association and British Private Equity & Venture Capital Association). 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'. Fair value can be calculated by the fund manager in a number of ways. In general, the fund managers with whom the Company invests adopt a valuation approach which applies an appropriate comparable listed company multiple to an investee company's earnings or by reference to recent transactions. 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 cash flows occurring between the valuation date and the Statement of Financial Position 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.

For listed investments, fair value is deemed to be bid market prices or closing prices for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange electronic trading service.

(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 and reserves

Share premium - The share premium account represents the premium above nominal value received by the Company on issuing shares net of issue costs.

Special reserve - Court approval was given on 27 September 2001 for 50% of the initial premium arising on the issue of the ordinary share capital to be cancelled and transferred to a special reserve. The reserve is a distributable reserve and may be applied in any manner as a distribution, other than by way of a dividend.

Capital redemption reserve - this reserve is used to record the amount equivalent to the nominal value of any of the Company's own shares purchased and cancelled in order to maintain the Company's capital.

Capital reserves - Gains or losses on investments realised in the year that have been recognised in the Statement of Comprehensive Income 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 Statement of Comprehensive Income and are then transferred to the "Capital reserve - revaluation".

Revenue reserve - The revenue reserve represents accumulated revenue profits retained by the Company that have not currently been distributed to shareholders as a dividend.

The revenue and capital realised reserves represent the amount of the Company's reserves distributable by way of dividend.

(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. In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital in the Statement of Comprehensive Income is the "marginal basis". Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital column. Withholding tax suffered on income from overseas investments is taken to the revenue column of the Statement of Comprehensive Income.

ii) Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the Statement of Financial Position 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 Statement of Financial Position 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 financial statements 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) Foreign currency translation, functional and presentation currency

Foreign currency translation - Transactions in foreign currencies are converted to sterling at the exchange rate ruling at the date of the transaction. Overseas assets and liabilities are translated at the exchange rate prevailing at the Company's Statement of Financial Position date. Gains or losses on translation of investments held at the year-end are accounted for through the Statement of Comprehensive Income and transferred to capital reserves. Gains or losses on the translation of overseas currency balances held at the year-end are also accounted for through the Statement of Comprehensive Income and transferred to capital reserves.

Functional and presentation currency - For the purposes of the financial statements, the results and financial position of the Company is expressed in sterling, which is the functional currency of the Company and the presentation currency of the Company.

Rates of exchange to sterling at 30 September were:

(h) Judgements and key sources of estimation uncertainty

The preparation of financial statements requires the Company to make estimates and assumptions and exercise judgements in applying the accounting policies that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses arising during the year. Estimates and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The area where estimates and assumptions have the most significant effect on the amounts recognised in the financial statements is the determination of fair value of unquoted investments, as disclosed in note 3(c).

The Company's investments are made in a number of currencies. However, the Board considers the Company's functional currency to be sterling. In arriving at this conclusion, the Board considers that the shares of the Company are listed on the London Stock Exchange. The Company is regulated in the United Kingdom, principally has its shareholder base in the United Kingdom and pays dividends as well as expenses in sterling. Consequently, the Board also considers the Company's presentational currency to be sterling.

(i) Cash and cash equivalents

Cash comprises bank balances and cash held by the Company. Cash equivalents comprise money market funds which are used by the Company to provide additional short-term liquidity. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

4 Income

5 Investment management and incentive fees

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.

6 Investments

7 The return per ordinary share figure is based on the profit after taxation for the year ended 30 September 2018 of £81,128,000 (year ended 30 September 2017: profit after taxation of £81,120,000) and on 153,746,294 (year ended 30 September 2017: 153,746,294) ordinary shares, being the weighted average number of ordinary shares in issue during the respective periods.

8 The number of ordinary shares in issue as at 30 September 2018 was 153,746,294 (30 September 2017: 153,746,294).

9 Quarterly dividends of 3.1p each (2017: one semi-annual dividend of 6.0p) per ordinary share were paid on 27 April 2018, 27 July 2018 and 26 October 2018 (2017: 21 July 2017). The Directors recommend that a final quarterly dividend of 3.1p (2017: 6.0p) per ordinary share be paid on 25 January 2019 to shareholders on the Company's share register as at the close of business on 21 December 2018.

10 The Annual Report and Financial Statements for the year ended 30 September 2018 will be posted to shareholders in mid-December 2018 and copies will be available from the Company Secretary - Maven Capital Partners UK LLP, Kintyre House, 205 West George Street, Glasgow, G2 2LW.

For further information please contact:

Merrick McKay

Head of Europe - Private Equity

Private Markets

Aberdeen Standard Investments

0131 225 2345

for Standard Life Private Equity Trust PLC,

Maven Capital Partners UK LLP, Company Secretary

END