SLPE.L Regulatory News (SLPE)

STANDARD LIFE PRIVATE EQUITY TRUST PLC

Legal Entity Identifier (LEI): 2138004MK7VPTZ99EV13

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2021

FINANCIAL HIGHLIGHTS

PERFORMANCE HIGHLIGHTS TO 30 SEPTEMBER 2021

· Record annual NAV growth, ahead of the FTSE All-Share index - The Company's NAV total return*+ ("NAV TR") was 37.9% (2020: 11.7%) versus 27.9% (2020: -16.6%) for the FTSE All-Share Index ("FTSE All Share TR"). This was the highest annual NAV TR in the Company's 20 year history. The share price total return ("TSR")*+ of 60.6% also outperformed the comparator index despite the strong performance in the public markets in 2021. The Company has delivered returns in excess of the wider UK market over all time frames.

· Over-commitment ratio is at the lower end of the long-term target range of 30% - 75% - Total outstanding commitments of £557.1m (2020: £471.4m). The value of outstanding commitments in excess of liquid resources and the undrawn loan facility as a percentage of portfolio NAV was 32.5% (2020: 30.9%1).

· Co-investment increasing as a proportion of the portfolio - Strong annual deployment and growth in the existing co-investment portfolio has resulted in co-investments equating to 11% of the portfolio at year end (2020: 5%). The co-invest portfolio stands at thirteen portfolio companies (2020: three portfolio companies).

· Strong balance sheet providing firepower for future investment - The Company had cash and cash equivalents of £29.7m at 30 September 2021 (2020: £33.1m). In addition, SLPET had an undrawn syndicated revolving credit facility of £200.0m (2020: £200.0m).

· Rebound in investment activity following the global pandemic, focused on non-cyclical strategies - In total, £307.1m (2020: £140.0m) was committed during the year to eight primary fund commitments, two secondary transactions and ten co-investments. Most new investments have a Technology or Healthcare focus and so are expected to increase the Company's exposure to these sectors over time.

· Record year in terms of realisations, the highest annual total in the Company's history - The portfolio continued to generate strong realisations during the year, with distributions of £198.7m (2020: £140.7m). Distributions reflected a relatively quick return to private equity deal-making and exits once the initial impacts of the global pandemic were overcome.

* Considered to be an Alternative Performance Measure. + A Key Performance Indicator by which the performance of the Manager is measured by the Board.

1 In previous reporting, the Company has reported this measure as a percentage of the Net Asset Value of the Company. Going forward, this measure will now be calculated as a percentage of the total portfolio value of the Company. Comparative figures based on the previous methodology can be found in the Alternative Performance Measures section.

TEN YEAR FINANCIAL RECORD

KEY FEATURES

- Conviction - Top 10 investments are 41% of NAV. 17 core managers.

- Focus - 79% on underlying portfolio companies with European headquarters. Mid-market focus since 2001.

- Diversification - 550+ underlying portfolio companies

- Responsible Investment - ESG is integrated into the investment philosophy & process

- Evolving Portfolio - 11% of the portfolio in co-investment (2020: 5%)

- Performance - 11.4% Annualise NAV total return since inception in 2001

Conviction

· A listed private equity fund-of-funds offering, with SLPET's top 10 fund investments representing 41% of portfolio NAV

· Successful track record of selecting top performing managers and funds over 20 years

· 76% of our investments fall within top or second quartile from a total value over paid in capital perspective

Focus

· Core focus on the European mid-market since the Company's inception in 2001, providing deep market intelligence, a long-term track record of performance and exposure to a segment of the market that can be hard to access

· Continued bias to Europe (79%) with a tilt towards North Western Europe (68%) given the number and breadth of investment opportunities available there

· No single geography overexposed, helping to provide resilience during financial market volatility (Brexit,Covid-19 pandemic)

Diversification

Increased exposure towards high growth areas which have proven to be relatively stable and predictable through cycles and periods of market dislocation:

· We have purposefully sought to invest in managers and investments focused on high growth, non-cyclical sectors and sub-sectors

· Sector exposure has moved more towards high growth sectors which have proven to be relatively stable and predictable, notably since the start of the Covid-19 pandemic

· Technology and Healthcare represent 41% of the portfolio. When combined with Consumer Staples these non-cyclical sectors equate to 53%

· Over 550 underlying private companies, well-balanced across different regions, sectors and vintages

· 55% of the portfolio held for four or more years which will drive distributions going forward with value accretion coming from the less mature vintages

Responsible Investment

Environmental, Social and Governance ('ESG') is integrated into the Company's investment philosophy and process:

· abrdn has been a signatory of the Principles for Responsible Investment ("PRI") since obtaining an A+ rating for strategy and governance in 2020

· SLPET partner's with private equity managers that are ESG leaders and/or culturally committed to ESG improvement

· Private equity firms in the Company's portfolio are subject to the Manager's annual Responsible Investment Survey.

Evolving Portfolio

Deploying a larger share of SLPET's capital via co-investments and secondaries, bringing further control over capital deployment, sector exposure and costs of investment:

· In 2019 we refined SLPET's investment strategy to include co-investments which we view as complementary to investing in primaries and secondaries

· Co-investment brings the benefit of greater portfolio management and cash control, as well as lower underlying investment costs

· Secondaries allow for improved vintage year diversification and increased exposure to more mature, cash generative portfolios

How the Sector Exposure has Changed Over Time

Source: abrdn, 30 September 2021

Geography of the Underlying Portfolio as at 30 September 2021

Maturity of the Underlying Portfolio as at 30 September 2021

How the Investment Strategy has been Refined

STRATEGIC REPORT

INVESTMENT STRATEGY

Investment Objective

The Company's investment objective is to achieve long-term total returns through holding a diversified portfolio of private equity funds and direct investments into private companies alongside private equity managers ("co-investments"), a majority of which will have a European focus.

Investment Policy

The Company: (i) commits to private equity funds on a primary basis; (ii) acquires private equity fund interests in the secondary market; and (iii) makes direct investments into private companies via co-investments. Its policy is to maintain a broadly diversified portfolio by country, industry sector, maturity and number of underlying investments.

The objective is for the portfolio to comprise around 50 ''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 may also invest up to 20% of its assets in co-investments.

The Company may also 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, the Company follows an over-commitment strategy by making commitments which exceed its uninvested capital. In making such commitments, the Manager, together with the Board, will take into account the uninvested capital, the value and timing of expected and projected cashflows to and from the portfolio and, from time to time, may use borrowings to meet drawdowns. The Board has agreed that the over-commitment ratio should sit within the range of 30% to 75% over the long-term.

The Company's maximum borrowing capacity, defined in its articles of association, 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. However, it is expected that borrowings would not normally exceed 30% of the Company's net assets at the time of drawdown.

The Company's non-sterling currency exposure is principally to the euro and US dollar. The Company does not seek to hedge this exposure into sterling, although any borrowings in euros and other currencies in which the Company is invested would have such a hedging effect.

Cash held pending investment is invested in short-dated government bonds, money-market instruments, bank deposits or other similar investments. Cash held pending investment may also be invested in other listed investment companies or trusts. The Company will not invest more than 15% of its total assets in such listed equities.

The investment limits described above are all measured at the time of investment.

Portfolio Construction Approach

Through its primary and secondary fund investments and co-investments, the Company is directly and indirectly invested in a diverse range of underlying companies. At 30 September 2021, the portfolio had exposure to 578 underlying companies, 36 fund investments and 9 co-investments.

Investments made by the Company are typically with or alongside private equity firms with whom the Manager has an established relationship of more than 10 years. 

The Company predominantly invests in European mid-market companies. Around 80% of portfolio by value is invested in European domiciled operating companies and the Board expects this to remain the case over the longer term, with a weighting towards North Western Europe. This has been the geographic focus of the Company since its inception in 2001 and where it has a strong, long-term track record. However, the Company also selectively seeks exposure to North American mid-market companies, as a means to access emerging growth or investment trends that cannot be fully captured by investing in Europe alone.

The Company has a well-balanced portfolio in terms of non-cyclical and cyclical exposure. Currently the largest single sector exposure represents 21% of the portfolio by value and it is expected that no single sector will be more than 30% of the portfolio over the longer term. Over time, the Manager anticipates a continuation of the recent shift toward sectors that are experiencing long-term growth (such as Technology and Healthcare) at the expense of more cyclical sectors, such as Industrial and Consumer Discretionary.

Environmental, Social and Governance ("ESG") is a strategic priority for the Board and the Manager. The Company aims to be an active, long-term responsible investor and ESG is a fundamental component of the Company's investment philosophy and process.

CHAIR'S STATEMENT

"The results for the year to 30 September 2021 show record annual performance"

Introduction

I am delighted to present the Company's Annual Report and Accounts for the period to 30 September 2021, a year in which the Company's portfolio has exhibited record annual growth and continued to deliver strong realised returns to shareholders. 2021 was also an important landmark year: the 20th anniversary of the Company's launch, in which the Company has extended its track record of delivering returns in excess of the wider market in all years since inception.

The strength of performance achieved in the year is all the more remarkable given the disruption of the global pandemic. The Board continues to have confidence in the Company's investment strategy, which has remained consistently focused on partnering with a relatively small group of high quality private equity firms, predominately in the European mid-market. Our diversified portfolio, spanning primary, secondary and co-investments, is well positioned to continue to deliver growth in the future. Co-investment, in particular, has continued to grow as a proportion of the portfolio and will bring the benefits of lower cost of investment and a more immediate means of impacting portfolio construction and balance sheet management in the years ahead.

Proposed Name Change

Following the Manager's sale of the Standard Life brand to Phoenix Group in May 2021, the Board is proposing that the Company changes its name to abrdn Private Equity Opportunities Trust plc. We believe that the proposed name change aligns the Company with the Manager's new brand and comes at an exciting time in the Company's development. The proposed name change is subject to a shareholder vote, which will take place at the Company's Annual General Meeting ("AGM") in March 2022.

Performance

The results for the year to 30 September 2021 show record annual share price and NAV performance, on a total return basis. Net assets exceeded £1 billion for the first time, closing at £1,036.0 million (2020: £770.3 million); Net Asset Value ("NAV") per share total return for the year was 37.9% and the share price total return was 60.6%, exceeding the 27.9% total return from our comparator index, the FTSE All-Share Index. A review of the Company's performance, market background and investment activity during the year under review, as well as the Manager's investment outlook, are provided in the Investment Manager's Review.

Investments and Realisation Activity

The 12 months ended 30 September 2021 was a very active year for investment: the Company made commitments totalling £307.1 million, more than twice the level of the prior year. These commitments were well diversified, with eight new primary investments, two secondary investments and ten co-investments. Outstanding commitments at the year end amounted to £557.1 million (2020: £471.4 million).

The Company received £198.7 million of distributions in the year (2020: £140.7 million), another annual record. The realised return equated to 2.8 times cost.

Liquidity

At the year end, the Company had cash and cash equivalents of £29.7 million. The over-commitment ratio of 32.5% at year end was at the lower end of the Company's target range (30-75%). This means that the Company has ample firepower for new investments in the months and years ahead.

Dividends

The Company has paid three quarterly dividends of 3.4 pence per share and the Board has announced a fourth quarterly dividend of 3.4 pence per share. This will be paid on 28 January 2022 to shareholders on the register on 24 December 2021 and will make a total dividend for the year to 30 September 2021 of 13.6 pence per share. This represents an increase of 3.0% on the 13.2 pence per share paid for the year to 30 September 2020.

Discount

The discount of the Company's share price to its NAV ranged between 7.7% to 33.8% during the year, and averaged 21.1%, which was slightly narrower than the 23.1% of the close peer group. The Board does not have a stated discount control policy. However, the Board and Manager monitor the discount on a regular basis to ensure that the Company is not an outlier versus its peer group. The Board has, in the past, bought back its own shares to manage the discount but the Board's policy is generally to preserve cash for investment purposes and did not conduct any share buy-backs during the year under review.

Environmental, Social and Governance ("ESG")

The Board fundamentally believes that integrating ESG best practice into the Company's strategy and investment processes will help to generate stronger, more sustainable returns for shareholders over the long term. Accordingly, the Board monitors closely the Manager's policy and practice to invest only with private equity firms who are ESG market leaders or have a strong cultural commitment to improve their ESG credentials.

While the Board is encouraged by the efforts of the Manager in this regard, we have challenged the Manager to continue to raise ESG standards across the industry and to publicise the work that it has done in this area. For further detail on this topic, including ESG case studies and details of the Manager's annual ESG survey, see the Investment Manager's Review.

Investment Manager

Each year, the Board, through the Management Engagement Committee, considers whether the continued appointment of the Manager is in the best interests of shareholders as a whole. Following our most recent review, the Board considers that the Manager continues to have well qualified personnel and processes in place to deliver the Company's investment objective over the long term for shareholders. 

Board

I am delighted to welcome two new Directors: Yvonne Stillhart and Dugald Agble, who joined the Board in the year following an external search process. Both Yvonne and Dugald have deep experience of private equity and private markets and they have already started to make a strong contribution. As is our policy, they will both stand for election at the Company's AGM in March 2022.

Following the new Board appointments, I will be retiring from the Board in March 2022, having served on the Board since 2013, the last 3 years as Chair. The Board has selected Alan Devine as my successor as Chair. Alan has served on the Board since 2014 and has been Senior Independent Director since January 2019.

Annual General Meeting ("AGM")

The AGM of the Company will be held at the Balmoral Hotel, 1 Princes Street, Edinburgh, EH2 2EQ at 12:30 pm on 22 March 2022 ,when the Board and Manager will be happy to take questions from Shareholders. The Board recognises, however, that not all Shareholders may wish to travel at present so the Manager has recorded a presentation that will be available on the Company's website before the AGM. Given that guidance with regard to the pandemic can be fast-changing, if, for any reason, the location of the AGM has to be changed then the Company will make the appropriate announcement via the Regulatory News Service and on the Company's website. For that reason, we would encourage Shareholders to vote on the proposed resolutions in advance of the AGM and, should you have any questions before that, you can engage with the Board by emailing SLPET.Board@abrdn.com. 

Outlook

Whilst the global pandemic is not yet behind us, many are turning their attention to other macroeconomic factors including inflation, rising interest rates and tapering of quantitative easing. At the same time, private equity as an asset class continues to raise record levels of capital, potentially raising levels of competition.

Despite the potential challenges that lie ahead, I would note that the Manager has helped guide the Company for 20 years and has experience of investing through multiple cycles. More broadly, I believe the private equity model of active ownership allows companies to react and innovate quicker when faced with changing circumstances. As such, private equity remains an attractive area for investment going forward and SLPET provides diversified exposure to an attractive sub-segment of the asset class.

Finally, as I leave the Board, I should like to thank my fellow Directors and the Manager team. Chairing the Company has been a privilege and I feel confident in the prospects going forward.

Christina McComb, OBE

Chair, 26 January 2022

Q&A WITH THE CHAIR

Q: As you prepare to retire from the Board, what do you regard as the key achievements of the Company over the past nine years?

I will go back a little further! In 2021, the Company celebrated 20 years since its inception. In that period, we have delivered an annualised NAV total return of 11.4% and outperformed a return of 5.4% from our comparator index the FTSE All-Share. I am particularly delighted that over the last year we experienced the strongest annual performance in terms of NAV total return in our history at 37.9%, in addition to the highest distribution level of £198.7 million, driven by strong exit activity in the portfolio.

I would also point to the consistency of the Company's strategy. The principal pillars of our investment approach remain the same as they were when I joined the Board: we select the best private equity managers and strategies to achieve consistent returns for our shareholders. Through the relationships that our Manager abrdn Capital Partners has nurtured over the years, we are able to secure access to a broad range of opportunities. This means that our portfolio is well diversified, including over 550 underlying private companies at the latest count.

In recent years, we have refined our investment policy, notably introducing co-investments. Over the course of the year under review, I am pleased to report that the Manager completed ten co-investment deals, and this now comprises approximately 11% of portfolio value across a total of 13 co-investments at 30 September 2021. Alongside our activity in the secondaries market, we believe this creates a well balanced portfolio strategy and enables us to invest in particularly promising growth businesses in our target sectors.

Q: How has the Company responded to the COVID pandemic?

I am reassured that the Manager has responded well to the global pandemic, to ensure that our portfolio is protected and supported. I believe that a key factor has been our policy of diversification: our exposure to sectors particularly badly affected has been contained. Whilst the Board adopted a cautious approach to new investment commitments during the early stages of the pandemic, we have observed the robustness of the mid-market growth company sector during 2021, including in the Technology and Healthcare sectors where the Company is well represented.

With the increased £200.0 million credit facility that the Company put in place in September 2020, our balance sheet is strong and well positioned to exploit new opportunities as the world emerges from the pandemic.

Q: With increased focus on ESG, how does the Company take these matters into consideration?

The Board is strongly committed to ESG and for us this means at the level of the manager, the private equity managers who we back and the underlying investee companies. Best practice is evolving in this area but the Board believes that the manager, abrdn, has strong track record in its commitment and processes. Specifically, the manager conducts an annual survey of the PE funds and is proactive in addressing any areas of relative weakness. 

Q: What can you say about the Board's succession planning?

I was delighted to welcome two new directors to the Board in the final quarter of 2021. Yvonne Stillhart and Dugald Agble bring deep experience of private equity and private markets; they have already started to make a strong contribution. I am also pleased to announce that the Board has selected Alan Devine to be my successor when I stand down in March. Alan has served as Senior Independent Director since 2019; he brings considerable experience in debt markets and private equity backed businesses. Along with Calum Thomson and Diane Seymour Williams, we have a strong and diverse Board who I am confident will continue to guide the Company forward.

Q: What do you see as the key strengths of the Company?

The Company has had a consistent investment strategy for over 20 years and is proven throughout the cycle. It has a focused group of long standing private equity manager relationships from the global network of our Manager. This allows the Company to commit to private equity funds that are often oversubscribed and difficult to access, as well as generating strong co-investment dealflow, allowing the Manager to be selective. Further, we are focused on regularly accessing the secondary market for both buy and sell opportunities which are accretive to the Company's returns. The result is a diversified portfolio of over 550 underlying companies, well balanced by sector, geography and maturity, which provides comfort irrespective of the market cycle. We also believe our approach to Fees and Dividends is a differentiator, in that we currently do not pay a Performance Fee and we also offer Shareholders a regular and progressive yield. 

Q: Looking forward, what are your reflections on the prospects for private equity and the Company in particular?

It is clear to me that the private equity model of active ownership creates the environment for innovative growth companies to thrive and create value on behalf of their shareholder and other stakeholders, including employees and wider society. This has been demonstrated through the strong performance of the private equity class during the pandemic. I believe that the Company's strategy of selecting best in class private equity managers, operating in growth sectors, will continue to provide strong and consistent returns to our shareholders in the future.

PRINCIPAL RISKS & UNCERTAINITIES

The Board and Audit Committee carry out a regular and robust review of the risk environment in which the Company operates, changes to the environment and individual risks. The Board also identifies emerging risks such as climate change which might affect the Company.

The Company has discussed climate change with the Manager. The Company is committed to being an active, long-term responsible investor and ESG is a fundamental component of the Company's investment philosophy and process. The Manager commits the Company's capital with private equity managers who demonstrate strong adherence to ESG principles and processes or have a cultural commitment to improve their ESG credentials. Focus on climate change is part of that assessment and the Manager also tracks private equity managers' ongoing initiatives around climate change via the Manager's annual Responsible Investing Survey. The private equity industry is still relatively early in its response to climate change and the Manager is focused on engaging with its portfolio of private equity managers to help promote further positive change.

During the year, the continuance of the Covid-19 pandemic has impacted public health and mobility, but has also had an influence on global financial markets and the future economic outlook.

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The Board has in place a process to assess and monitor Company's principal and emerging risks and the operating and control environment risks of the Company.

The Board considers its risk appetite in relation to each principal risk and monitors this on an ongoing basis. Where a risk is approaching or is outside the tolerance level, the Board will consider taking action to manage the risk. Currently, the Board considers the risks to be managed within acceptable levels.

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

The financial risk management objectives and policies of the Company are contained in note 18 to the financial statements.

Review of performance

An outline of the performance, market background, investment activity and portfolio during the year under review and the performance over the longer term, as well as the investment outlook, are provided in the Highlights, Chair's Statement, and Investment Manager's Review.

STAKEHOLDER ENGAGEMENT AND RESPONSIBLE MANAGEMENT

Section 172 Statement

The Board is required to describe how the Directors have discharged their duties and responsibilities over the course of the financial year following the guidelines set out in the UK under section 172 (1) of the Companies Act 2006 (the "s172 Statement"). This Statement provides an explanation of how the Directors have promoted the success of the Company for the benefit of its shareholders as a whole, taking into account the likely long-term consequences of decisions, the need to foster relationships with all stakeholders and the impact of the Company's operations on the environment.

Stakeholders

The Company is an investment trust and is externally managed, has no employees, and is overseen by an independent non-executive board of directors. The Board makes decisions to promote the success of the Company for the benefit of the shareholders as a whole, with the ultimate aim of delivering its investment objective to achieve long-term total returns. 

The Directors set the Company's investment mandate, monitor the performance of all service providers (including the Manager) and are responsible for reviewing strategy on a regular basis. All this is done with the aim of preserving and enhancing shareholder value over the longer term.

The following section discusses how the actions taken by and on behalf of the Company by the Board work towards ensuring that that the interests of all stakeholders are appropriately considered. In line with the FRC Guidance, this statement focuses on stakeholders that are considered key to the Company's business and does not therefore cover every stakeholder in the Company. 

Shareholders

The Board is committed to maintaining open channels of communication and to engaging with shareholders. The Board seeks shareholder feedback in order to ensure that decisions are taken with the views of shareholders in mind. These shareholder communications include:

Annual General Meeting

The AGM ordinarily provides an opportunity for the Directors to engage with shareholders, answer their questions and meet them informally. At the AGM there is typically a presentation on the Company's performance and the future outlook. To allow the Board to engage with as many shareholders as possible, the Board alternates the location of the AGM between Edinburgh and London. The next AGM will take place on 22 March 2022 in Edinburgh and the Board encourages shareholders to lodge their vote by proxy on all the resolutions put forward.

Shareholder Meetings

Unlike trading companies, shareholders in investment companies often meet representatives of the Manager rather than members of the Board. Feedback from the Manager's meetings with shareholders is provided to the Board at every meeting. The Chair, the Chair of the Audit Committee and other members of the Board are also available to meet with shareholders to understand their views. During the year, the Chair met with the Company's largest shareholder and fed back its views to the full Board.

Publications

The Company publishes a full annual report each year that contains a strategic report, governance section, financial statements and additional information. The report is available online and in paper format. The Company also produces a half-yearly report each year. The purpose of these reports is to provide shareholders with a clear understanding of the Company's activities, portfolio, financial position and performance. The Manager also publishes a Monthly Factsheet, which includes commentary on portfolio and market performance, and a Monthly Net Asset Value Statement. The purpose of these publications is to keep shareholders abreast of the Company's developments. 

Investor Relations and Website

The Company subscribes to the Manager's Investor Relations programme. The Company's website contains a range of information on the Company and includes a full monthly portfolio listing of the Company's investments as well as podcasts and presentations by the Manager. Details of financial results, the investment process and Manager together with Company announcements and contact details can be found at: slpet.co.uk.

Keeping in Touch

The Board encourages shareholder feedback and invites shareholders to write to the Board at its registered office. The Board has also set up an email account to encourage shareholders to write directly to the Board. Shareholders are invited to email any feedback or questions to the Board at SLPET.Board@ abrdn.com. Any questions received will be replied to by either the Manager or Board via the Company Secretary.

The Manager

The Manager's performance is critical for the Company to achieve its investment objective and the Board seeks to maintain a close and constructive working relationship with the Manager. The Board meets the Manager at formal Board meetings five times per year and more regularly as necessary. The Board Members also keep in touch with the Manager informally throughout the year and receive reports and updates as appropriate. During the year, the Management Engagement Committee, on behalf of the Board, reviewed the continued appointment of Manager, and the terms of the Management Agreement, and believes that its continued appointment is in the best interests of shareholders.

Suppliers

As an investment trust, the Company has outsourced its entire operations to third party suppliers. The Board is responsible for selecting the most appropriate outsourced service providers and monitors their services to ensure a constructive working relationship. The Board maintains regular contact with its key external providers, namely the Administrator, the Company Secretary, the Registrar, the Depositary and the Broker, and receives regular reporting from them. The Board, via the Management Engagement Committee, ensures that the arrangements with service providers are reviewed at least annually. The aim is to ensure that contractual arrangements remain in line with best practice, services being offered meet the requirements and needs of the Company and performance is in line with the expectations of the Board, Manager, and other relevant stakeholders. The Audit Committee considers the internal controls at these service providers to ensure they are fit for purpose. 

Debt Providers

On behalf of the Board, the Manager maintains a positive working relationship with Citi, Société Générale and State Street Bank International, the providers of the Company's multi-currency revolving credit facility, and provides regular updates on business activity and compliance with its loan covenants.

Investee Funds and Companies

Responsibility for actively monitoring the activities of investee funds and companies has been delegated by the Board to the Manager.

On behalf of the Board and its stakeholders, the Manager invests in a carefully selected range of private equity mangers, built from years of established relationships and proprietary research. The Manager assesses all investment opportunities and participates on the advisory boards of some investee entities. 

The Board is responsible for overseeing the work of the Manager and this is not limited solely to the investment performance of the investee companies. The Board also has regard for environmental (including climate change), social and governance matters that subsist within the portfolio companies. Please see the Company's ESG Strategy for more details.

Principal Decisions

Pursuant to the Board's aim of promoting the long term success of the Company, the following principal decisions were taken during the year:

The Investment Manager's Review details the key investment decisions taken during the year. In the opinion of the Board, the performance of the investment portfolio is the key factor in determining the long term success of the Company. Accordingly, at each Board meeting the Directors discuss performance in detail with the Investment Manager. During the year the Management Engagement Committee decided that the continuing appointment of the Manager was in the best interests of shareholders.

The Board carefully assessed the size of the dividend and is pleased to have paid three quarterly dividends of 3.4 pence per share and to have announced a fourth quarterly dividend of 3.4 pence per share making a total dividend for the year to 30 September 2021 of 13.6 pence per share. This represents an increase of 3.0% on the 13.2 pence per share paid for the year to 30 September 2020. See the Chair's Statement for more details.

Following a formal recruitment process, the Board decided to appoint Yvonne Stillhart and Dugald Agble as independent non-executive Directors on 1 September 2021 following the retirement of Jonathan Bond earlier in the year. New appointments seek to achieve a good balance of skills, experience, gender and ethnicity reflecting the objectives of the Company. Shareholders' interests are best served by ensuring a smooth and orderly refreshment of the Board which serves to provide continuity and maintain the Board's open and collegiate style.

The Board agreed resolutions put to shareholders at the AGM in March 2021 including amendments to the Company's Articles of Association. The main change was to allow shareholders access to general meetings virtually or through a mixture of virtual and physical participation, if required in the future in case of any further unprecedented events such as Covid-19. The Directors believe that flexibility in the Company's ability to engage with shareholders in as broad a manner as possible benefits its members as a whole.

Board Diversity Policy

The Board recognises the importance of having a range of skilled, experienced individuals with appropriate knowledge represented on the Board in order to allow it to fulfil its obligations. The Board also recognises the benefits and is supportive of the principle of diversity in its recruitment of new Board members. The Board will not display any bias for age, gender, race, sexual orientation, religion, ethnic or national origins, or disability in considering the appointment of its Directors. In view of its size, the Board will continue to ensure that all appointments are made on the basis of merit against the specification prepared for each appointment. The Board does not therefore consider it appropriate to set measurable objectives in relation to its diversity.

At 30 September 2021, there were three male and three female Directors on the Board.

Modern Slavery Act

Being a company that does not offer goods and services to customers and has no turnover, the Board considers that the Company is not within the scope of the Modern Slavery Act 2015. The Company is therefore not required to make a slavery and human trafficking statement. In any event, the Board considers the Company's supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

Streamlined Energy and Carbon Reporting ("SECR") Statement: Greenhouse Gas Emissions and Energy Consumption Disclosure

The Company has no employees, premises or operations either as a producer or provider of goods and services. Therefore, it is not required to disclose energy and carbon information as there are zero emissions associated or attributed to the Company and no underlying global energy consumption.

Viability Statement

The Board has decided that five years is an appropriate period over which to consider its viability. The Board considers this to be an appropriate period for an investment trust company with a portfolio of private equity investments and the financial position of the Company.

In determining this time period the Directors considered the nature of the Company's commitments and the Company's associated cash flows. Generally the private equity funds and co-investments in which the Company invests call monies over a five year period, whilst they are making investments, and these drawdowns should be offset by the more mature funds and co-investments, which are realising their investments and distributing cash back to the Company. The Manager presents the Board with a comprehensive review of the Company's detailed cash flow model on a regular basis, including projections for up to five years ahead depending on the expected life of the commitments. This analysis takes account of the most up to date information provided by the underlying managers, together with the Manager's current expectations in terms of market activity and performance.

The Directors have also carried out an assessment of the principal risks and discussed in note 18 to the financial statements that are facing the Company over the period of the review. These include those that would threaten its business model, future performance, solvency or liquidity such as over-commitment, liquidity and market risks. When considering the risks, the Board reviewed the impact of stress testing on the portfolio, including the effects of any substantial future falls in investment values. By having a portfolio of fund investments, diversified by manager, vintage year, sector and geography; by assessing market and economic risks as decisions are made on new commitments; and by monitoring the Company's cash flows together with the Manager, the Directors believe the Company is able to withstand economic cycles. The Directors are also aware of the Company's indirect exposure to ongoing risks through underlying funds. These are continually assessed by the Manager monitoring the underlying managers themselves and by participation on a number of fund advisory boards.

Based on the results of this analysis, and the ongoing ability to adjust the portfolio, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five year period following the date of this report.

Future Strategy

The Board intends to maintain the strategic policies set out in the Strategic Report for the year ending 30 September 2022 as it is believes that these are in the best interests of shareholders.

Long-Term Investment

The Manager's investment process seeks to outperform its comparator index over the longer term. The Board has in place the necessary procedures and processes to continue to promote the long-term success of the Company. The Board will continue to monitor, evaluate and seek to improve these processes as the Company continues to grow over time, to ensure that the investment proposition is delivered to shareholders and other stakeholders in line with their expectations.

On behalf of the Board

Christina McComb, OBE

Chair 26 January 2022

OUR MANAGER'S APPROACH TO ESG

Introduction

The Company is committed to being an active, long-term responsible investor and ESG is a fundamental component of the Company's investment philosophy and process. The Manager commits the Company's capital with private equity managers who demonstrate strong adherence to ESG principles and processes or have a cultural commitment to improve their ESG credentials.

The Manager has been a signatory to the Principles for Responsible Investment ("PRI") for over 10 years and was awarded a PRI rating of A+ for Strategy & Governance in 2020. It has an ESG policy specific to private equity and has incorporated ESG considerations into the Company's investment activity over the last decade. Its Investment Committee is ultimately responsible for ensuring ESG is considered in investment decision making. The Manager also has a dedicated ESG Committee to help drive further progress through specific ESG initiatives. As part of its approach, every new investment made on behalf of the Company during the year under review was subject to specific ESG due diligence.

The Manager's ESG investment process is outlined at a high-level below:

The Investment Manager's ESG Investment Process

The Manager focuses on the integration of ESG principles into the operations of underlying private equity managers. Key facets include culture, governance with senior accountability, full integration into a manager's investment processes and appropriate disclosure to assist investors.

There are different ESG approaches depending on the type of private equity investment:

- Primary investment - Assessment typically includes analysing private equity manager's ESG cultural buy-in, its ESG process, procedures and reporting, its engagement with underlying portfolio companies, its ESG Survey score and an Operational Due Diligence review of the manager and the fund.

- Co-investment - Assessment normally includes a detailed review of the underlying company's ESG due diligence documents, sector and company analysis using the RepRisk database and leveraging expertise on specific ESG issues, be it via the Manager's central ESG & Stewardship team or a third party expert. The primary ESG assessment of the private equity manager will be taken into account in all cases.

- Secondary investment - Leverages primary investment and/or co-investment processes depending on the transaction characteristics. If the secondary is concentrated in a small number of underlying portfolio companies then it may follow the co-investment process. The primary ESG assessment of the private equity manager will be taken into account where possible.

The Manager undertakes an annual Responsible Investing Survey which monitors ESG progress at the underlying private equity managers that the Company invests with. The survey is in its seventh year and provides the Manager with data that feeds into new investment decision-making, helping to better assess and benchmark ESG performance within the portfolio.

In this year's survey, 72 private equity firms took part from across the globe, including 19 firms that are within SLPET's portfolio (covering 74% of NAV). Ratings were assigned based on responses according to the following definitions:

- Green: criteria implemented and monitored at manager and / or portfolio company level.

- Amber: criteria partially implemented / being implemented and monitored at manager and / or portfolio company level.

- Red: no criteria implemented and monitored at manager and / or portfolio company level.

Overall ESG ratings were based on the private equity managers' responses to twenty questions, covering areas such as climate change, diversity and employee well-being. 79% of respondents from within SLPET's portfolio obtained a rating of 'Green', with the remaining 21% rated 'Amber'. There were no respondents from within the Company's portfolio that rated 'Red'. On the back of the results, the Manager has no significant concerns around the ESG focus of the Company's portfolio of private equity managers. However, the Manager will engage with non-respondents and laggards in the portfolio.

In summary, the Board and Manager fundamentally believe that integrating ESG into SLPET's strategy and investment processes improves the investment decision making and ultimately will help to generate stronger, more sustainable returns for its investors.

ESG CASE STUDIES

Mademoiselle Desserts

Mademoiselle Desserts is a leading French manufacturer of premium frozen pastry. SLPET made a co-investment into the business in 2019, alongside the lead manager IK Investment Partners.

Lead Manager: IK Partners

Company size: Mid-market

SLPET's investment: €6.0m

Geographic focus: France, UK and Netherlands

Investment year: 2019

Sector: Consumer

Company overview

Established in 1984, Mademoiselle Desserts ('MD'), is a leading French manufacturer of premium industrial frozen pastry. MD has a well-established product pastry offering in more traditional pastries including semi-finished, ready-to-bake and fully baked goods. MD offers a wide range of products, from flans to mini muffins & donuts. IK completed the acquisition of MD in May July 2018 and is pursuing a buy and build strategy of value creation.

ESG Initiatives

- Mademoiselle Desserts has been committed to a policy of sustainable development since 2007 and has been a member of the United Nations Global Compact since 2014.

- The group has 20 key well-defined and monitored ESG commitments and communicates its progress regularly and transparently in its annual Corporate Social Responsibility report. Key ESG issues covered in the report include: nutrition and health, ingredients and their sources, responsible purchasing practices, the environmental impact of operations, health & safety and anti-discrimination policies.

- MD launched the 'CLEAN M' initiative in 2017 with a goal of having ingredient lists as clean as possible. This focuses on dyes, preservatives and emulsifiers in order to reduce/eliminate undesirable ingredients (e.g. hydrogenated vegetable fat or E171 white colouring found in pastry decorations). MD also launched the 'NUTRI M' initiative to increase the fibre content, reduce sugar, salt and fat in its products. So far it has moved the nutriscore of all of its products to A, B or C.

- In 2020, Mademoiselle Desserts launched the 'PACK M' initiative to eliminate 100% of plastics containing carbon black by 2021, have 90% recyclable packaging by 2025 when a sorting facility exists and reduce the overall weight of plastics in factories by 5% in 2025. It reports that 3.9 tonnes of plastic were phased out in 2020.

- In 2021, MD invested €8m in the reduction of its GHG emissions: through an investment in new refrigeration facilities, MD saved 3,000t CO2 at the Renaison site; and heat recovery from refrigeration compressors reduced its annual gas consumption at the Valade site by 30%. From 2019 to 2020, the total consumption of electricity and gas across the company's 12 production sites reduced by 11% and 19% respectively.

- MD supports 130 charities and has donated in 2020 the equivalent of €400k cakes and desserts.

Sponsor Credentials

- IK's responsible investment policy has been in place since 2012. IK has been a signatory to the UN Global Compact since 2014 and prepares an annual report on progress with implementation of its principles.

- IK became a signatory to the UN PRI in 2017 and in 2020, IK published its third UN PRI report and scored an A+ in the private equity section.

- ESG risks and opportunities are considered pre and post initial investment for all portfolio companies. ESG is an obligatory component of each Investment Committee memorandum and value creation plan. ESG training and support is provided to all team members.

- IK obtained the top rating in the 2021 abrdn Private Equity Responsible Investing survey.

Funecap Group

Funecap is the number two vertically integrated funeral services and crematoria provider in France.

Lead Manager: Latour Capital

Company size: Mid-cap

SLPET's investment: €9.0m

Geographic focus: France and Italy

Investment year: 2021

Sector: Consumer Staples

Company overview

Founded in 2010 by Thierry Gisserot and Xavier Thoumieux, Funecap is the #2 vertically integrated funeral services and crematoria provider in France. The founders have successfully grown the business from scratch to >€300 million revenue in 10 years through organic and inorganic growth (>195 add-on acquisitions completed since foundation).

ESG Initiatives

- Funecap aims to reduce environmental impact across their operations with focus on improving energy efficiency, reducing CO2 emissions, reducing waste and preserving biodiversity to facilitate sustainable development.

- Sustainable design and structures have been integrated in all construction projects and renovations of funeral homes. All cremation facilities are fitted with filtration systems to reduce emissions.

- Funecap meets and in some cases exceeds all emissions regulations (e.g. it has implemented devices to reduce nitrous oxide emissions which goes beyond the regulatory requirements). Importantly in 2021 Funecap achieved the ISO 14001 (the international standard for environmental management systems) certification for its Père Lachaise crematoria in Paris.

- In addition, the Group has launched diverse initiatives to reduce its footprint, such as sourcing certified wood, operating electrical hearses, and reducing its paper consumption. In its crematoria, Funecap works with specialised recycling company OrthoMetals to recycle metal waste from cremation activities.

- Funecap operates a fleet of electrical hearses which contributes to the city of Paris' Climate and Energy plan, and plans to increase the proportion of electrical hearses.

- Funecap operates in a regulated sector and is subject to regular audits by local authorities and regulatory body - no issues have been raised.

- Group wide Gender Equality index maintained to monitor workforce diversity and promote equality which is also mirrored in the equality based remuneration policy and practices

- A Charter of Secularity and Diversity is signed to ensure no personal convictions and beliefs of staff interfere with service delivery.

- The group has implemented a strong central function to support the fast growing business. This includes policies such as a code of ethics. They have also implemented comprehensive IT and cyber security policies.

- Latour have appointed a dedicated ESG Officer within Funecap to help further drive ESG initiatives across the business

- Creation of a foundation that supports charitable programs such as listed funeral monuments restoration, child protection and support.

Sponsor Credentials

- Latour became a signatory of the France Invest Charter in 2011, the UN PRI in 2012, and the Initiative Climat International (iCI) in 2021. Latour has an ESG Policy which abrdn reviewed as part of Fund III diligence in 2019. The GP also generates an Annual ESG Report for LPs. Latour scored the highest rating in abrdn's 2021 Responsible Investment survey.

- The Latour team regularly completes ESG training sessions provided by third-party consultants. ESG is fully embedded in the investment process and in company value creation plans.

- Latour have a genuine focus on operational ESG - creating value through an improved ESG footprint. Each underlying company has its own action plan to deliver. They have also nominated ESG Officers within each company and are linking CEO bonuses to ESG commitments.

- The GP is working towards becoming SFDR Article 8. A carbon footprint assessment programme has been initiated which is focused not just on attaining metrics but also how to improve them.

HOW WE INVEST

In order to achieve the investment objective, maintain a balanced portfolio and take advantage of opportunities as they arise, the Company invests in three types of private equity investment:

As it takes time for the primary commitments to be drawn down and invested into portfolio companies, the Manager employs an "over-commitment" strategy. This ensures the portfolio is as fully invested as possible, but requires careful management of the cash and loan facilities available to meet the obligations to fund outstanding commitments.

Secondary investment and co-investment have a complementary investment profile, helping the Company to deploy cash more quickly than primary investments and therefore allowing the Manager to have more control over liquidity management. They also typically exhibit shorter holding periods than primary investment, thereby reducing the overall average duration of the Company's portfolio and, in most cases, generating higher Internal Rates of Return. Co-investments sourced by the Manager also typically have no fees or carried interest payable, further enhancing the potential cash returns received by the Company. The Manager may also sell interests via the secondary market for relative value, portfolio construction or liquidity management reasons.

INVESTMENT MANAGER'S REVIEW

Summary of the Year

SLPET turned 20 years old during 2021 and marked this milestone with the strongest annual performance in its history. It delivered NAV TR of 37.9% during the year, ahead of the previous high of 36.9%. We believe this shows the value in the Company's conviction approach, backing a relatively small group of differentiated private equity managers who can thrive in different market conditions. Furthermore, SLPET's strategic exposure to more resilient sectors, namely Technology, Healthcare and Consumer Staples, positioned the Company well throughout the global pandemic, with these sectors helping to drive performance. On a combined basis these sectors now equate to more than 50% of the portfolio as at 30 September 2021.

A number of full exits and IPOs have underpinned the uplifts in valuation during the year. Notable exits include Colisee (Nordic-based care services), Questel (provider of IP information and management software) and Itiviti (electronic trading software). Prominent IPOs in the portfolio include Moonpig (UK-based online gifting business), Dr Martens (leading consumer footwear brand), Nordnet (Nordic savings and investments platform) and Inpost (self-service lockers for ecommerce consumers).

On the new investment side, we have seen a number of interesting new underlying companies enter the portfolio, with a strong bias toward Healthcare and Technology. We are particularly pleased with co-investment activity, with ten new co-investments closed during the year ended 30 September 2021. The Company also committed to eight new primary funds during the 12 month period. These funds helped to increase the Company's exposure to the lower mid-market, growth capital and sector specialist strategies. Lastly, two secondary transactions were completed, one being an opportunistic purchase of two funds focused on the German buyout market and the other comprising a large, diversified portfolio of funds with exposures across North American and European funds and assets.

In terms of cashflows, the aforementioned exit and IPO activity has helped drive strong distribution activity. Total distributions received for the year ended 30 September 2021 were £198.7 million, which is the highest amount that SLPET has ever received in a single year. This strong exit activity is continuing the trend in the prior financial year, which itself was the third highest annual total since inception (£140.7 million). As a result, the balance sheet is in a robust position with £29.7 million of cash and an undrawn £200.0 million revolving credit facility providing the Company with ample firepower for new investments in the months and years ahead.

Performance

The NAV TR for the year ended 30 September 2021 was 37.9% versus 27.9% for the FTSE All-Share Index. The valuation of the portfolio at 30 September 2021 increased by 47.4% on the prior year on a constant currency basis. The increase in value of the portfolio on a per share basis was 195.3p. This was made up of net unrealised gains at constant foreign exchange ("FX") and net realised gains and income from the portfolio of a combined 222.2p, partially offset by unrealised FX losses from the portfolio of 26.9p.

The unrealised gains in the year ended 30 September 2021 are attributable to the strong performance of the underlying portfolio. At 30 September 2021 the underlying portfolio exhibited average last twelve months ("LTM") revenue and earnings before interest, taxes depreciation and amortisation ("EBITDA") growth of 14.2% and 24.0%. Realised gains were derived from full or partial sales of companies during the 12 month period.

Drawdowns

During the year £184.2 million was invested into existing and new underlying companies. Drawdowns were used to invest into a diverse set of predominantly European headquartered companies. The largest single drawdown (£28.1 million) related to Structured Solutions IV, which is a diversified secondary transaction. Drawdowns related to co-investments totalled £52.7 million in the year. Secondary and co-investment activity are covered in detail later in the review.

Drawdowns from primary funds remained close to half of total drawdowns, equating to £91.6 million in the year. Notable new underlying companies included:

- Syntegon (CVC VII) - Machinery and equipment used in the packaging sector;

- Zahneins (PAI Europe VII) - The largest dental chain in Germany with over 30 sites;

- SpaMedica (Nordic Capital IX) - Leading provider of cataract surgery in the UK;

- CSM Ingredients (Investindustrial VII) - B2B manufacturer of bakery ingredients (pastry and bakery);

- Questel (IK Fund IX) - Global provider of intellectual property ("IP") solutions;

- Quantum (PAI Europe VII) - UK-based chilled food supplier.

The private equity funds that the Company invests into often use credit facilities to help finance underlying investments prior to drawing the capital from investors. We estimate that the Company had around £47.3 million held on underlying fund credit facilities at 30 September 2021 (30 September 2020: £46.9 million), and we expect that this will all be drawn over the next 12 months.

Distributions

£198.7 million of distributions were received during the year, which is a record annual total for the Company. Exit activity was driven by the strong market appetite for high quality private companies in resilient sectors following the global pandemic. Both trade and financial buyers were active and public markets had robust demand for new IPOs. The headline realised return from the portfolio equated to 2.8 times cost (30 September 2020:3.5 times cost).

Outstanding Commitments

During the financial year, the Company completed eight primary fund commitments, two secondaries and ten co-investments. In total, new commitments and investments in the 12 month period equated to £307.1m. The total outstanding commitments at 30 September 2021 were £557.1 million (30 September 2020:£471.4 million).

The value of outstanding commitments in excess of liquid resources as a percentage of portfolio value increased to 32.5% in the financial year (30 September 2020: 30.9%). This is largely due to the strong investment activity during the year ended 30 September 2021. This figure is at the lower end of our long-term target range of 30%-75%. We estimate that £46.7 million of the reported outstanding commitments are unlikely to be drawn down (30 September 2020: £67.6 million), driven by the nature of private equity investing.

Note:

In previous reporting, the Company has reported this measure as a percentage of the net asset value of Company. Going forward, this measure will now be calculated as a percentage of the portfolio NAV of the Company. Comparative figures based on the previous methodology can be found in the Alternative Performance Measures section.

Investment Activity

Primary funds

£175.7 million was committed to eight new primary funds during the year ended 30 September 2021. Four of these funds invest in Europe, three have global focus and one is concentrated on the North American mid-market. The new commitments are all with private equity firms with which the Manager has a long-term relationship. The funds fit with the Company's strategy of increasing exposure to the lower mid-market (e.g. Triton, PAI, IK, Nordic Capital Evolution), growth capital (e.g. Permira, Advent Tech) and / or sector specialists (e.g. Permira, ArchiMed, Excellere, Advent Tech).

Primary Investment Case Study - ArchiMed

ArchiMed are a leading dedicated European healthcare investor providing deep sub-sector specialism.

Investment: Med III

Commitment year: 2021

Fund size: €650 million

Company's commitment: €15 million

Geographic focus: Western Europe and North America

Target company size: Lower mid-market

Sectors: Healthcare Industries

Investment strategy: Buyout / Growth

Business Overview

ArchiMed was established in 2014 by Denis Ribon & Vincent Guillaumot, and is headquartered in Lyon, France. Having observed the increased sector specialisation in the US private equity market, the firm was founded with the specific objective to invest in the European healthcare market, primarily in MedTech, BioPharma, Life Sciences, Consumer Health, Healthcare IT and Diagnostics.

The firm has grown substantially since then becoming one of the leading dedicated healthcare specialists with unparalleled operational expertise, particularly in the small and mid-cap market. Med III has a clear investment thesis that should provide differentiated dealflow to generalist buyout funds. Historically the firm has completed a very high proportion of primary transactions (i.e. when they are the first financial investor).

They adopt a "value-add partner" approach to support growing businesses in search of scale, internationalisation, and strategic development resources. ArchiMed have invested heavily in their in-house Operating Partner and Strategic Partner functions.

Sponsor Exposure

· abrdn have been tracking ArchiMed closely since their inception culminating in our commitment to the buy-and-build strategy, MED Platform I, in July 2020 and their LMM fund Med III in June 2021.

· We have completed two co-investments with ArchiMed on behalf of SLPET: Prollenium, a medical aesthetics business, and NAMSA, a global medical device CRO.

· Whilst early days, both businesses are performing well. NAMSA has recently completed a recapitalisation, returning ~36% of invested capital back to LPs within 12 months of investment.

Previous / current investments

EUROLyser, Polyplus-transfection, NAMSA

Co-investments

During the 12 month period, the Company invested and committed £76.9 million into ten co-investments.

At 30 September 2021 there were 13 co-investments in the Company's portfolio, equating to 11% of NAV. Aside from the new investments in the 12 month period, the portfolio consists of Action (European non-food discount retail), Visma (Northern European provider of mission critical ERP software to SMEs) and Mademoiselle Desserts (a pan-European manufacturer of premium frozen pastry). All companies have thus far managed well through the global pandemic with each of the investment cases remaining intact. Mademoiselle Deserts has been the most impacted since the hotel, restaurant and cafe channel is a core end market for the business. However, we have strong conviction in the company's position as the hospitality sector begins opening up again across Europe.

Case Study - Co-investment

Questel is a global fast-growing Intellectual Property information and management specialist.

Lead Manager: IK

Company size: Large

SLPET's investment: €10.0m

Geographic focus: Global

Investment year: 2021

Sector: Technology

Company Overview

- Created in 1978 and spun-off from France Telecom in 2001, Questel is one of the leading players in the Intellectual Property ("IP") software and services market. The company has been technology focused from the outset, which differentiates the business.

- The company core segments include (i) a SaaS division including the IP Business Intelligence database allowing advanced research and analysis of patents as well as more recent Innovation Management Software and IP Management Software (ii) international filing administrative and translation services and (iii) patent annuities and trademark renewals solutions and legal services.

- Questel supports more than 15,000 customers worldwide - 80% are large and mid-sized corporations and 20% IP firms. High visibility on earnings thanks to its SaaS and annuities highly recurring model and the stickiness of its Filing activity.

- Questel is a highly resilient business that has grown organically at a CAGR of 11-12% over the last 4 years (in a market growing at 7% CAGR). IK's active M&A strategy has underpinned the overall growth, with a CAGR of 17% over the same period. EBITDA growth has been faster at 18.5% CAGR, with operational leverage and acquisition synergies kicking in. The cash conversion is attractive at c.75%, and we expect this to improve further over the holding period. The GP case does not envisage any further M&A activity, though IK do have further transformational acquisitions in the pipeline.

The Opportunity

Led by one the best management teams in Europe and backed by high conviction, incumbent sponsor (IK), Questel provides mission critical software and services to a strongly growing end-market and their market leadership position is well protected by strong barriers to entry and sticky customer base. The continued integration and realisation of both top line and bottom line synergies from recent transformational acquisitions will further strengthen the Group's financial profile making it a strong PE target or IPO candidate upon exit.

Secondary Investments

During the 12 month period, the Company invested and committed £54.5 million into two secondaries.

After the market dislocation and hiatus in activity caused by the Covid-19 pandemic, overall activity levels in the secondary market recovered from September 2020. With this background, the Manager's team of nine secondary specialists has remained selective in reviewing secondary opportunities that fit the Company's investment criteria and portfolio profile during the last year. The two secondary transactions described above were closed in the second half of the year as secondary activity was opening up more generally. Both transactions arose out of and benefited from the Manager's long-term relationships and insights into the underlying funds and portfolios. They provide the Company with exposure to high quality private equity funds at an attractive entry point.

Secondary Investment Case Study - Capiton A.G.

Attractive opportunity to gain exposure to Capiton, a high quality GP operating in the attractive German lower mid-cap segment.

Investment: secondary interests in Capiton V and IV

Closing date: April 2021

Vintage years: 2015 (Capiton V), 2009 (Capiton IV)

Fund sizes: €440m (Capiton V) / €350m (Capiton IV)

SLPET's secondary exposure: €9.8m

Geographic focus: DACH

Target company size: Lower Mid-Market

Sectors: Industrials, IT, Health care, Consumer Discretionary

Investment strategy: Buyout

Transaction overview

- The Manager has a long-standing relationship with Capiton dating back to 2009 and has completed primary, secondary and direct investments with them in that time.

- The Manager secured direct access to the seller of interests in Capiton IV and V in December 2020 and moved quickly to agree a deal with the seller by the end of that month.

- The deal was subsequently closed in April 2021.

Underlying investments

- Capiton focuses on making control investments in businesses in the DACH lower mid-market

- Over 90% of the exposure acquired related to the 2015-vintage Capiton V fund

- Capiton V's three largest investments are in med-tech, industrial tech and pet food, with the remaining portfolio spread across pharmaceuticals, software and industrials

- The majority of the assets have shown good performance in spite of the Covid-19 challenges

Why we invested

- Strong relationship with Capiton and existing exposure to the target funds provided the Manager with insights and conviction in the quality of the underlying portfolio

- Attractive mix of assets with a bias towards tech and healthcare assets and with good growth prospects

- Reasonable valuation and leverage levels across the portfolio

- Good fit within the SLPET portfolio as consideration was being given to potential commitments to Capiton VI and a number of co-investment opportunities with Capiton

Examples of current investments

Raith Nanofabrication, Alphapet, GPE, Euro Vital Pharma

Portfolio Construction

The underlying portfolio predominately consists of 578 private companies, largely within the European mid-market and spread across different countries, sectors and vintages. At 30 September 2021, only seven companies equated to more than 1% of portfolio NAV, with the largest single underlying company exposure equating to 4.2% (Action).

Geographic Exposure1

We believe that the portfolio is well diversified and that has helped to mitigate the financial impacts of the global pandemic. At 30 September 2021, 79% of underlying private companies were headquartered in Europe (2020: 85%). The Company's underlying portfolio companies remains largely positioned to North Western Europe, with only 5% of underlying portfolio companies by value in Italy and Spain (2020: 5%). SLPET is well diversified by region across North Western Europe, with the Nordics equating to 18% of the underlying company exposure (2020: 17%). North America is the highest exposure at 19% (2020: UK, 18%).

1 Based on the latest available information from underlying managers.

2In addition to the above, 6% of underlying portfolio companies are based in European countries not separately disclosed above, while 2% are based in countries out width of Europe, excluding North America.

Sector Exposure1

Over recent years the portfolio's sector exposure has moved more towards high growth areas, such as Information Technology and Healthcare, which have also been more resilient in the current environment. At 30 September 2021 Technology and Healthcare represented a combined 41% of underlying portfolio companies (2020: 39%). When combined with Consumer Staples, these more stable, non-cyclical sectors equate to 53% of underlying portfolio companies (2020: 51%).

1 Based on the latest available information from underlying managers.

Whilst the other half of the underlying portfolio companies are exposed to more cyclical sectors, there has been resilient performance and notable success stories during the global pandemic, especially where a business has a valuable product, essential service offering and/or a strong online sales component. Some examples within our top 20 underlying private companies by value include Benvic (PVC compounds), Photobox (online photograph printing), and Dr Martens (footwear brand with a strong online offering).

Maturity Analysis1

The maturity profile of the portfolio is largely unchanged from last year. With 55% of underlying portfolio companies being in vintages of four years and older (2020: 52%), this should underpin consistent distribution activity moving forward.

Outlook

The Company has seen record performance in the year ended 30 September 2021 and we believe that the portfolio is well positioned as we look ahead. The portfolio benefits from an attractive mix of companies in cyclical and non-cyclical sectors (roughly 50:50), with an increasing weighting towards technology and healthcare businesses that should provide resilience and growth in the coming quarters. There is no outsized exposure to any single country. Therefore, we take comfort that the portfolio's diversified exposures across its targeted sectors, geographies and managers should position the Company well whatever may lie ahead.

Both SLPET's balance sheet and investment pipeline are in a strong position. The Company will continue to invest predominately in Europe, with a core focus on mid-market buyouts and a preference for non-cyclical sectors. The Company has long focused on partnering with a relatively small group of underlying private equity firms that are differentiated and have a specialised sector focus. We are excited about the current opportunity set in European private equity, where many innovative and high growth businesses currently reside and where companies are staying private for longer.

Primary funds remain the backbone of SLPET's portfolio and we are starting to see co-investments grow materially as a proportion of the Company's NAV (currently 11%). Co-investment was introduced into the investment objective in 2019 and we expect it to grow as a proportion of the Company's NAV. It brings the benefit of greater portfolio management and cash control, as well as lower underlying investment costs. As a result, co-investment has the potential to act as a strong driver of the Company's performance in the years ahead. In terms of secondaries, the Company will continue to invest selectively in opportunities that fit with the overall portfolio objectives, are accretive to returns and help optimise the management of any excess cash. We will also continue to consider selling positions as a part of our active portfolio management strategy.

In terms of specific risks to the private equity industry, the market is currently accumulating record levels of 'dry powder' (capital raised but not yet invested) due to the increasing popularity of the asset class with investors. Whilst businesses in general are staying private for longer, these high levels of dry powder are likely to lead to additional competition for deals in the coming years. However, data suggests the vast majority of this capital is being accumulated at the larger end of the market. Hence the Company's core focus on the mid-market should position it well as we look ahead.

We have said many times over the years that the private equity model of active ownership thrives on the opportunities that present themselves during periods of market dislocation and economic headwinds. Having controlling ownership of underlying businesses provides the opportunity for private equity firms to respond more efficiently and effectively to changing market circumstances and to directly add value to their portfolio companies, whether that is through operational initiatives such as digitalisation or ESG, or through inorganic initiatives such as buy and build. While the prospect of inflation and interest rate rises currently dominates headlines, we remain confident in both the private equity model and SLPET's ability to successfully navigate whatever conditions lie ahead.

Alan Gauld,

Lead Portfolio Manager

abrdn Capital Partners LLP

26 January 2022

TEN LARGEST HOLDNGS

at 30 September 2021

LARGEST 10 UNDERLYING PRIVATE COMPANIES

at 30 September 20211,2

The below represents the 10 largest private portfolio companies which are indirectly held through the Company's fund investments and/or co-investments.

INVESTMENT PORTFOLIO

at 30 September 2021