SLPE.L Regulatory News (SLPE)

STANDARD LIFE PRIVATE EQUITY TRUST PLC

Legal Entity Identifier (LEI): 2138004MK7VPTZ99EV13

HALF YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 31 MARCH 2020

· NAV performance - The NAV total return ("NAV TR") for the first 6 months of the year was -6.3% versus -22.0% for the FTSE All-Share Index.

· COVID-19 - Valuations at 31 March 2020 reflected the initial impact of the outbreak on the Company's portfolio and NAV. The quarterly movement was -12.5% excluding the impact of FX. This was the first quarter that the Company's NAV began to reflect the impact of COVID-19. Going forward, we expect that private equity valuations will continue to be impacted negatively by COVID-19, which could lead to further reductions in NAV in the second half of FY20.

· New commitments - In total, four primary fund commitments, one secondary transaction and one co-investment were completed in the period. We will reduce the overall pace of deployment in the second half of FY20 given the uncertainty surrounding COVID-19.

· Realisations - The portfolio continued to generate strong realisations during the period, with distributions of £93.8m. This includes the realisation of the Company's position in 3i Eurofund V, which was its largest fund exposure at 30 September 2019.

· Outstanding commitments - Total outstanding commitments of £451.2m (30 September 2019: £450.3m). The value of outstanding commitments in excess of liquid resources as a percentage of net assets is 42.2% (30 September 2019: 42.6%). This remains comfortably within our long-term target range of 30%-75%. We estimate that £64.4 million of the Company's existing outstanding commitments are unlikely to be drawn.

· Balance sheet - The Company had resources available for investment of £74.8m at 31 March 2020 (30 September 2019: £67.7m). In addition, the Company has an undrawn £100m syndicated revolving credit facility, provided by Citibank and Société Générale, which expires in December 2024.

For further information please contact:

Alan Gauld

Investment Director, Aberdeen Standard Investments

Tel: 0 131 528 4424

Luke Mason

Head of Business Development, Investment Trusts, Aberdeen Standard Investments

Tel: 0207 463 5971

Evan Bruce-Gardyne

Client Director, Investment Trusts, Aberdeen Standard Investments

Tel: 0131 372 1692

FINANCIAL HIGHLIGHTS

+ Source: Aberdeen Standard Investments and Refinitiv Datastream

CHAIR'S STATEMENT

COVID-19

The purpose of the Chair's Statement is typically to summarise the outcomes from the period under review. While this can never be done without having an eye on activity since the end of the period, we have witnessed some of the most extreme economic changes for generations since 31 March 2020, as governments around the world and markets react to the impact of the COVID pandemic. It should be acknowledged that the numbers in this report are taken at a point in time when the full effects of COVID-19 have still to be established. As the Company invests in funds holding unlisted companies, there is always a time lag in the reporting of valuations.

Against such a backdrop, the Board has increased the frequency of its discussions with the Manager, to ensure that it is being kept informed of developments on a timely basis. In considering its response, the Board has confidence that the Company's diversified portfolio has a good measure of resilience to cope with the economic fall-out resulting from the lock-downs instigated by various governments around the world to curb the spread of this virus. The Board is pleased to note that the Manager has confirmed that, despite the challenging market conditions, the Manager is continuing to require adherence to the established ESG principles by the underlying portfolio managers and the management of the invested companies. The Board also considers that the Company is entering this new crisis with a relatively stronger balance sheet with greater liquidity than was the case in the global financial crisis of 2008.

Performance

For the six months to 31 March 2020, the Company's NAV total return was -6.3%. The total shareholder return was -25.9%. For comparison, the return on the FTSE All-Share Index was -22.0% in the same period. The significant discrepancy between the share price return and that of the NAV, which is a feature of a private investment trust, is in part a timing issue as it is the result of investors attempting to estimate how much valuations are likely to fall as a consequence of the crisis.

A review of the Company's performance, market background and investment activity during the period under review, as well as the Manager's investment outlook, are provided in the Manager's Report below.

Investments & realisation activity

During the period, the Company made commitments totalling £83.9m (31 March 2019: £99.2m) into its unquoted portfolio. Funds were committed to four new primary investments, one secondary and one co-investment. The Company received net realisations of £93.8m (31 March 2019: £49.5m). The realised return from divestments in the Company's core portfolio equated to 5.0 times cost (30 September 2019: 2.2 times cost). The return was enhanced by the proceeds from the realisation of 3i Eurofund V. Excluding the 3i Eurofund V transactions, the realised return was 2.3 times.. Outstanding commitments at 31 March 2020 amounted to £451.2m (30 September 2019: £450.3m).

Key Performance Indicators ("KPIs")

Last year, the Board reviewed and revised the KPIs by which the Manager is measured in order to better align the KPIs with the interests of shareholders. The Company's performance against each of its KPIs, during the six months to 31 March 2020, is set out below.

Net asset value total return ("NAV TR") relative to the Company's comparator index

I am happy to report that the Company has delivered returns in excess of the wider UK market over all timeframes. A comparison of the annualised total returns of the share price and NAV with that of the FTSE All-Share Index, the Company's comparator index, over various time frames, is included in the Half Yearly Report.

Total shareholder return ("TSR") relative to the Company's comparator index

The chart in the Half Yearly Report also shows a wide disparity between the NAV total return and the TSR over 6 and 12 months, highlighting how the market adjusted the valuation of the Company very quickly. This fed into a material widening of the discount. Over the longer term, the TSR has exceeded the comparator index.

Discount or premium of the ordinary share price to the net asset value per share of the Company in absolute terms and compared to the discounts of the close peers* on a rolling 12 month basis

Source: Aberdeen Standard Investments and Refinitiv Datastream

* Sterling denominated UK listed private equity fund of funds.

In line with peers in the sector, the discount widened very sharply in late February / early March 2020. Since the end of the period, the discount has stabilised around the 40% mark.

Ongoing charges ratio

The Ongoing charges ratio ("OCR") is an annual ratio and as such we only provide an estimate in these accounts. The forecast to 30 September 2020 as at 31 March 2020 is 1.11%, a small increase on 1.09% as at 30 September 2019.

Dividends

The Company paid the first interim dividend for the current year in April 2020 of 3.3 pence per share. The Board has declared a second interim dividend of 3.3 pence per share which will be paid on 31 July 2020 to shareholders on the Company's share register at 26 June 2020. These two payments will make a total for the period of 6.6 pence per share, compared to 6.4 pence per share for the equivalent period in 2019, representing a 3.1% increase on the payments in 2019.

The rapid development of the COVID-19 crisis has put an unprecedented strain on most aspects of the economies in which the portfolio is invested. In view of the continuing uncertain economic outlook, the Board will monitor the portfolio's prospects closely and will keep the level of future dividends under review.

Discount

Over the period, , the discount of the Company's share price to its net asset value fluctuated significantly, ranging between 7.2% and 56.7%. At 31 March 2020, the discount to reported NAV was 40.4%. This widening is unsurprising as it reflected the fact that valuations of unlisted companies take time to flow through. Against this backdrop, the Board has not considered it appropriate to buy in shares. However, the Board will keep this under ongoing review, particularly as general market conditions show signs of stabilising and the outlook for valuations becomes clearer.

Bank facilities and liquidity

Since the financial year ended 30 September 2019, the Board has increased the Company's £80m syndicated multi-currency revolving credit facility with Citibank and Société Générale to £100m and has extended the expiry date to December 2024. The facility is currently undrawn (2019: £nil). In addition, at the end of March, the Company had cash balances of £59.6m (30 September 2019: £66.3m).

Outlook

There is no doubt that the future will be determined by how the COVID-19 pandemic develops and in particular the scale of impact that it has on the economic landscape. The challenges that this creates on economies across the world will put pressure on most aspects of the Company's investments. The Board takes comfort from the diversification of the portfolio including, for example, the exposure to companies in the IT and healthcare sectors. But we do expect that there will be further negative pressure on all valuations during the rest of the financial year which will feed through to the Company's NAV. We also anticipate that there will be a lower level of distributions than we have experienced in recent years and the Board will assess the impact that this may have on future dividends as the situation evolves.

Against this backdrop, the Board considers that the Company is in a stronger financial position than it was ahead of the Global Financial Crisis in 2008/09. Private equity investing requires a long-term perspective and periods of disruption, such as that which we are currently experiencing, are something that have to be weathered. Whilst we expect that the number of new primary investment opportunities will reduce in the short term, we also take the view that the market adjustment is likely to present investment opportunities that will provide returns over the long term for shareholders.

Christina McComb OBE, Chair

Chair 17 June 2020

INTERIM BOARD REPORT

Directors' Responsibility Statement

The Directors are responsible for preparing the Half Yearly Report, in accordance with applicable laws and regulations. The Directors confirm that, to the best of their knowledge:

- The condensed set of financial statements has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting) and gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

- The Interim Board Report (constituting the interim management report) includes a fair review of the information required by DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

- The financial statements include a fair review of the information required by DTR 4.28R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last Annual Report that could do so.

Principal Risk and Uncertainties

The Board has an ongoing process for identifying, evaluating and managing the principal risks, emerging risks and uncertainties of the Company. The principal risks faced by the Company relate to the Company's investment activities and are set out in the Strategic Report contained within the Annual Report for the year ended 30 September 2019. They comprise the following risk categories:

- market risk

- currency risk

- over-commitment risk

- liquidity risk

- credit risk

- interest rate risk

- operating and control environment risk

The Board notes that the principal risks may be impacted by the economic uncertainty stemming from the COVID-19 pandemic. This includes risks surrounding the performance of the companies in the portfolio such as employee absence, reduced demand, supply chain breakdowns and suspension of distributions. The Board and Manager expect that there will be more pressure on valuations and further impact on the Company's NAV in the current financial year, as well as a decline in mergers and acquisitions ("M&A") activity, followed by a decrease in drawdowns. The Board has been proactive in engaging with the Manager to ensure that the Company continues to be managed in accordance with the investment objective and policy, and in the best interest of shareholders. Operationally, COVID-19 is affecting the suppliers of services to the Company including the Manager and other key third party suppliers. To date, these services have continued to be supplied seamlessly and the Board will continue to monitor arrangements in the form of regular updates from the Manager.

In all other respects, the Company's principal risks, emerging risks and uncertainties have not changed materially since the date of that Annual Report.

Going Concern

In accordance with the FRC's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting, the Directors have undertaken a rigorous review of the Company's ability to continue as a going concern as a basis for preparing the financial statements.

The Board has taken into account; the £100 million committed, syndicated revolving credit facility which matures in December 2024; the level of liquid resources, including cash and cash equivalents ; the future cash flow projection; the Company's cash flows during the period, the effectiveness of the Manager's operational resilience processes; and the impact of potential downside scenarios on asset valuations and liquidity, including potential management actions.

The Directors are mindful of the principal risk and uncertainties disclosed above, including the impact of COVID-19. Having reviewed these matters, the Directors believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future and for at least 12 months from the date of this Half Yearly Report. Accordingly, they continue to adopt the going concern basis in preparing the Half Yearly Report.

On behalf of the Board,Christina McComb OBE, Chair17 June 2020

INVESTMENT STRATEGY

Investment strategy

Standard Life Private Equity Trust provides exposure to:

- A diversified portfolio of leading private companies.

- A carefully selected range of private equity managers, built from years of established relationships and proprietary research.

- Investments principally focused on European mid-market private companies.

With the objective of delivering strong, long-term total returns for Shareholders through a combination of capital growth and a progressive dividend.

Investment policy and guidelines

The principal focus of the Company is to invest in leading private equity funds 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 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. This is in addition to the 20% that can be held in co-investments.

To maximise the proportion of invested assets, it is the Company's policy to follow 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 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.

Strategy implementation

Aberdeen Standard Investments is one of the largest investors in private equity funds in Europe. One of the key strengths of the investment team is its extensive fund and direct deal experience, which gives the Manager greater insight into the strategies, processes and disciplines of the funds invested in and allows better qualitative judgements to be made.

The investment strategy employed by the Manager in meeting the investment objective involves a detailed and rigorous screening and due diligence process to identify and then evaluate the best private equity fund offerings.

The private equity asset class has historically exhibited a wide dispersion of returns generated by fund investments and the Manager believes that appropriate portfolio construction and manager selection is vital to optimise investment performance. The Manager focuses predominantly on investing in the European mid-market space where it has a long track record. The number of potential investment opportunities in that segment is vast and the Manager continues to build a roster of blue chip, private equity firms which has been developed from years of strong relationships and proprietary research. In that regard, the objective is for the Company's portfolio to comprise around 50 ''active'' private equity fund investments at any one time.

INVESTMENTS MANAGER'S REVIEW

Summary

- NAV performance - The NAV total return ("NAV TR") for the first 6 months of the year was -6.3% versus -22.0% for the FTSE All-Share Index.

- COVID-19 - Valuations at 31 March 2020 reflected the initial impact of the outbreak on the Company's portfolio and NAV. The quarterly movement was -12.5% excluding the impact of FX. This was the first quarter that the Company's NAV began to reflect the impact of COVID-19. Going forward, we expect that private equity valuations will continue to be impacted negatively by COVID-19, which could lead to further reductions in NAV in the second half of FY20.

- New commitments - In total, four primary fund commitments, one secondary transaction and one co-investment were completed in the period. We will reduce the overall pace of deployment in the second half of FY20 given the uncertainty surrounding COVID-19.

- Realisations - The portfolio continued to generate strong realisations during the period, with distributions of £93.8m. This includes the realisation of the Company's position in 3i Eurofund V, which was its largest fund exposure at 30 September 2019.

- Outstanding commitments - Total outstanding commitments of £451.2m (30 September 2019: £450.3m). The value of outstanding commitments in excess of liquid resources as a percentage of net assets is 42.2% (30 September 2019: 42.6%). This remains comfortably within our long-term target range of 30%-75%. We estimate that £64.4 million of the Company's existing outstanding commitments are unlikely to be drawn.

- Balance sheet - The Company had resources available for investment of £74.8m at 31 March 2020 (30 September 2019: £67.7m). In addition, the Company has an undrawn £100m syndicated revolving credit facility, provided by Citibank and Société Générale, which expires in December 2024.

COVID-19

Valuations at 31 March 2020 reflected the initial impact of the outbreak on the Company's portfolio and NAV. The quarterly movement was -12.5% excluding the impact of FX. This was the first quarter that the Company's NAV began to reflect the impact of COVID-19.

It is not possible to quantify the ultimate impact on the Company with any certainty. We anticipate further declines in both the NAV and the level of distributions over the remainder of the financial year. However, we take comfort in the:

(i) Quality and operational capabilities of the private equity managers that we have selected, all of whom successfully weathered the global financial crisis in 2008;

(ii) Diversification of the underlying investment portfolio within the funds, with over 400 companies spread across different countries, sectors and vintages;

(iii) Available capital in the underlying funds, which will allow our private equity managers to support underlying companies through the crisis;

(iv) Greater flexibility of debt structures in underlying companies compared to levels prior to the global financial crisis in 2008, with higher equity as a percentage of enterprise value and "covenant-lite" debt packages more commonplace;

(v) Level of liquid resources and the undrawn revolving credit facility available to address the Company's funding requirements in a range of different stressed scenarios.

Deep and established relationships matter more than ever in this environment. We continue to stay in regular dialogue with the Company's private equity managers, all of whom we have known for over a decade. Our strong conviction in the Company's roster of private equity managers hasn't changed. We are closely monitoring developments at the underlying portfolio company level, but it won't be until the second half of the financial year that we expect that we will see the impact of COVID-19 on portfolio company revenue, profitability and balance sheets.

Valuation

Of the 54 private equity interests in which the Company is invested, 50 interests (97.6% of the portfolio by value) were valued by their underlying managers at 31 March 2020 (31 March 2019: 95.4%).

Out of this 97.6%, 46 funds (86.9% of the portfolio value) accounted for the initial impact of COVID-19. However four funds valued at 31 March 2020 (10.7% of the portfolio by value) were adjusted downward by the Manager to account more fully for the initial impact of COVID-19. The underlying managers of these four interests had not reflected the initial impact of COVID-19 within their 31 March 2020 valuations and intend to undertake a full review of their valuations as part of their 30 June 2020 valuation process.

The remaining 2.4% by value of the portfolio has also been adjusted downward by the Manager based on the valuation as at 31 December 2019, adjusted for subsequent cash flows. Valuation adjustments were based on either (i) specific information from underlying managers on the likely movement at 31 March 2020 or (ii) the weighted average movement in the Company's portfolio.

The unrealised losses in the period are largely attributable to the initial financial impact of COVID-19. The overall impact is seen broadly across the Company's underlying fund portfolio. Private equity managers in SLPET's portfolio have re-valued underlying companies based largely on listed market comparables at 31 March 2020, when public markets were around recent lows. In addition, the earnings of underlying companies may also reflect the initial impact of COVID-19 during the first quarter of 2020.

Performance

The NAV TR for the first six months of FY20 was -6.3% versus -22.0% for the FTSE All-Share Index.

The decrease in value of the Company on a per share basis was 35.5p. This was principally made up of unrealised losses at constant FX from the unquoted portfolio of 74.8p, partially offset by realised gains and income from the unquoted portfolio of 49.2p.

Realised gains were derived from full or partial sales of companies during the period. The material contributor to realised gains in the period was 3i Eurofund V, as a result of the realisation of its underlying company Action. Over the twelve months to December 2019, the underlying portfolio exhibited average revenue and EBITDA growth of 13% and 14% respectively. However, we expect COVID-19 to have a negative impact on the underlying performance during 2020.

Drawdowns

During the period £87.0m was invested into existing and new underlying companies. Drawdowns were used to invest into a diverse set of predominantly European headquartered companies. The largest new investment was the £22.6m co-investment / re-investment into Action. Other notably large new investments in the quarter included:

- Recordati (CVC VII) - an international specialty pharmaceutical group;

- ConvergeOne (CVC VII) - an IT services provider of technology solutions;

- Orchid (Nordic Capital IX) - a global producer of orthopaedic implant devices;

- Froneri (PAI SPs) - an international ice cream manufacturer; and

- Transporeon (HgCapital 8) - a European cloud-based logistics platform.

We expect that drawdowns will continue in the second half of the current financial year at similar rates to previous years, largely owing to underlying private equity funds repaying their credit facilities in the course of normal business. We estimate that the Company had around £57m held on credit facilities of underlying funds at 31 March 2020 (30 September 2019: £48m), and we expect that this will all be drawn over the next 12 months.

Distributions

£93.8m of distributions were received during the period. Exit activity from the private equity funds was driven by the strong market appetite for high quality private companies in 2019, both from trade / strategic buyers and other private equity firms. However, as we move into the second half of the financial year, we expect that distributions will reduce, as a result of market dislocation during the COVID-19 pandemic.

The headline realised return from the ongoing investment operations of the Company's core portfolio equated to 5.0 times cost (30 September 2019: 2.2 times cost). The return was enhanced by the proceeds from the realisation from 3i Eurofund V. If this transaction is excluded, then the realised return was 2.3 times.

3i Eurofund V was the most significant realisation in the period, with gross proceeds of £51.1m coming from the liquidity transaction facilitated by 3i Group plc ("3i"). The 3i Eurofund V holding largely related to the underlying company Action. The Company then reinvested £22.6m of realised proceeds into a new co-investment in Action. Accounting for this co-investment, net cash proceeds to the Company from the overall 3i Eurofund V transaction amounted to £28.5m.

The majority of portfolio company realisations were at a premium to the last relevant valuation. This premium paid at exit at the portfolio level has persisted since 2010.

Commitments

During the period, the Company completed four primary fund commitments, one secondary transaction and one co-investment. In total, new commitments in the period equated to £83.9m. The total outstanding commitments at 31 March 2020 were £451.2m (30 September 2019: £450.3m).

The value of outstanding commitments in excess of liquid resources as a percentage of net assets is broadly flat at its current level of 42.2% (30 September 2019: 42.6%). Despite the initial impact of COVID-19 at 31 March 2020, this figure remains within our long-term target range of 30%-75%. We estimate that £64.4m of the reported outstanding commitments are unlikely to be drawn down, which is normal for private equity investing.

INVESTMENT ACTIVITY

Primary funds

£37.4m was committed to new private equity primary funds focused on Europe and £17.0m to a North American-based fund. The new commitments were with two core private equity relationships (Hg and Seidler Equity Partners), with whom Aberdeen Standard Investments has an established relationship of more than 10 years.

In last year's Annual Report, we stated that we expected that the Company would commit less capital to primary funds in the current year compared to FY19. In light of COVID-19, we plan to further reduce new primary fund commitment activity during the rest of the year as we take stock of the developing situation.

Secondary investments

During the period, the Company acquired £6.7m of secondary exposure1. It purchased a position consisting of the two remaining assets in PAI Fund V. Going forward the assets will be managed in a new vehicle called PAI Strategic Partnerships SCSp. The underlying companies are Froneri (international ice cream manufacturer) and Marcolin (Italian eyewear manufacturer). 

The market dislocation arising out of the COVID-19 crisis could lead to some attractive investment opportunities in the secondary market. The Manager has an established track record in secondaries and a team of nine investment professionals dedicated to this area, and is well positioned to identify opportunities for the Company.

1 Exposure acquired equals purchase price plus any unfunded commitment

Co-investments

During the period, the Company made a £22.6m co-investment into Action alongside the latter's long-term private equity sponsor 3i Group plc ("3i"). The Company's co-investment will be made via the newly created 3i Venice Partnership SCSp vehicle.

As background, SLPET has held Action since 2011 through its fund commitment to 3i Eurofund V. Following the announcement by 3i on 14 November 2019 that it was facilitating a transaction for Action on behalf of 3i Eurofund V investors, the Company elected to realise part of its position in Action and re-invest part of the proceeds as a new co-investment. The Company received net cash proceeds of £28.5m from the transaction. 

In light of COVID-19, we expect co-investment opportunities to decrease in the short-term, in line with general M&A trends. At 31 March 2020 there were two co-investments in the Company's portfolio, namely Action and Mademoiselle Desserts, equating to 5% of Portfolio NAV.

Portfolio construction

The underlying portfolio consists of over 400 private companies, largely within the European mid-market and spread across different countries, sectors and vintages. At 31 March 2020, only 8 companies equated to more than 1% of Portfolio NAV, with the largest single underlying company exposure equating to 3.7% (Action).

Geographic exposure1 

We believe that the portfolio is diversified and well positioned to mitigate the impact of deteriorating macroeconomic conditions resulting from of the COVID-19 crisis. At 31 March 2020, 86% of SLPET's underlying private companies were headquartered in Europe. The Company's underlying portfolio remains largely positioned to North Western Europe, with only 6% of Portfolio NAV in Italy and Spain. SLPET is well diversified by region across North Western Europe, with the UK the highest exposure at 19%. North America equates to 12% of the portfolio.

Sector exposure1

Over recent years the portfolio's sector exposure has moved more towards high growth areas, such as Information Technology and Healthcare, which are also likely to be more resilient in the current environment. The first six months of the financial year has seen a continuation of this trend as private equity managers have been positioning their portfolios for more volatile macroeconomic conditions. Technology and Healthcare represent a combined 35% of the portfolio (30 September 2019: 31%).

We expect a negative COVID-19 impact to be particularly felt in the Consumer Discretionary and Industrials sectors. Together they represent 33% of the portfolio at 31 March 2020 (30 September 2019: 43%).

1Based on the latest information from underlying managers

Maturity analysis

We expect distributions to decrease materially in the near-term due to the negative impact that COVID-19 is having on M&A activity. However, with 45% of the portfolio being in vintages of four years and older (30 September 2019: 50%), we would expect that distributions will come back strongly once market activity returns to more normal average levels.

The chart in the Half Yearly Report shows the maturity analysis of the portfolio. The outer ring shows the percentage exposure to each vintage as at 31 March 2020 and the inner ring shows the weighted average valuation of each vintage.

Outlook

COVID-19 and its impact on the Company has been the main focus of our attention in 2020. Clearly we have only seen the initial impact of the global pandemic on the portfolio and NAV. Looking forward, it remains difficult to predict how this will progress and, importantly, for how long. We are approaching this unprecedented situation with caution.

Scenario planning is especially important in times of crisis. We have stress-tested the portfolio in a number of scenarios, incorporating our experience of what happened to the Company during the global financial crisis. We believe that the Company has sufficient liquidity to service its commitments and has comfortable headroom on covenants relating to its revolving credit facility. However, the COVID-19 crisis is a unique, fast-moving situation and we will continue to regularly model out different scenarios for the portfolio as new developments arise.

We expect that there will be more pressure on valuations and that the Company's NAV could see a further decline in the current financial year. In addition, we are seeing little M&A activity in the market, as sales processes are postponed until late 2020 and beyond. This will have a knock-on impact on the level of distributions (i.e. cash) that the Company receives in the short term.

The decline in M&A activity will be followed by a decrease in drawdowns, albeit at a later stage in the cycle than distributions. This time lag is due to (i) the widespread usage of bridging facilities to fund investments ahead of capital being drawn from investors; (ii) new deals signed before the impact of COVID-19 became evident and not yet formally completed; and (iii) the need for managers to inject further capital to support some of their existing portfolio companies in the near-term. As a result, we expect that the Company will draw on its revolving credit facility within the next 12 months.

We believe it is prudent to slow down new investment activity in the second half of the financial year. New primary fund commitments and co-investments are likely to be pursued only on an opportunistic basis as we take stock of the effects of COVID-19. We expect that activity levels in the secondary market will not recover significantly until the latter part of 2020 or early 2021, as potential sellers assess their own position and wait until private equity valuations stabilise.

We are also not forgetting about responsible investment at this time of difficulty. Investments made by the Company have been subject to due diligence around Environment, Social and Governance ("ESG") factors and that remains the case for all future investments the Company will make. We are watching the behaviours of our private equity managers and underlying portfolio companies closely at this time and expect them to act responsibly. We will be quick to raise issues with private equity managers that are falling short of acceptable standards.

Despite the unprecedented situation around COVID-19 and the strong headwinds that we are currently facing, we remain confident that private equity continues to offer significant opportunity for long-term value creation. All of the Company's private equity managers weathered the global financial crisis and can apply their lessons from that time period to the COVID-19 situation. In the short-term their experience and expertise will be largely deployed in helping their existing portfolio companies to mitigate the impact of COVID-19. However, private equity has shown time and time again that it thrives on the opportunities that present themselves during periods of market dislocation. We expect this time will be no different and are confident that strong investment performance will resume once the world returns to a more stable situation.

Alan GauldLead Portfolio Manager17 June 2020

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)

NOTES TO THE FINANCIAL STATEMENTS

Glossary of Terms & Definitions

Alternative Performance Measures

Alternative performance measures ("APMs") are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes FRS 102 and the AIC SORP. The directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies. The APMs used by the Company are marked with an * in this glossary and the underlying data used to calculate them is provided.

Buy-out fund

A fund which acquires controlling stakes in established private companies.

Co-investment

An investment made directly into a private company alongside other private equity managers.

Commitment

The amount committed by the Company to an investment, whether or not such amount has been advanced in whole or in part by or repaid in whole or in part to the Company. (see also Over-commitment)

Comparator Index

A market index against which the overall performance of the Company can be assessed. The manager does not manage the portfolio with direct reference to any index or its constituents.

Discount*

The amount by which the market price per share is lower than the net asset value per share of an investment trust. The discount is normally expressed as a percentage of the net asset value per share.

Dividend yield*

The annual dividend per ordinary share divided by the share price, expressed as a percentage, calculated at the year end.

Distribution

A return that an investor in a private equity fund receives. Within the Annual Report and Financial Statements, the terms "cash realisations" and "distributions" are used interchangeably, the figure being derived as follows: proceeds from disposal of underlying investments by funds, plus income from those fund investments less overseas withholding tax suffered.

Drawdown

A portion of a commitment which is called to pay for an investment.

Dry powder

Capital committed by investors to private equity funds that has yet to be invested.

EBITDA

Earnings before interest expense, taxes, depreciation and amortisation.

Enterprise value ("EV")

The value of the financial instruments representing ownership interests in a company plus the net financial debtof the company.

IPO

Initial Public Offering, the first sale of stock by a private company to the public market.

Net Asset Value (NAV)

The value of total assets less liabilities. Liabilities for this purpose include current and long-term liabilities. The net asset value divided by the number of shares in issue produces the net asset value per share.

NAV total return*

NAV total return shows how the NAV has performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. This involves reinvesting the net dividend into the NAV at the end of the quarter in which the shares go ex-dividend. Returns are calculated to each quarter end in the year and then the total return for the year is derived from the product of these individual returns.

Ongoing charges ratio*

Management fees and all other recurring operating expenses that are payable by the Company excluding the costs of purchasing and selling investments, incentive fee, finance costs, taxation, non-recurring costs, and costs of share buy-back transactions, expressed as a percentage of the average NAV during the period. Ongoing charges and performance-related fees of the Company's underlying investments are excluded. The ongoing charges ratio has been calculated in accordance with guidance issued by the Association of Investment Companies ("AIC").

+ As at 31 March 2020. The 2020 ratio is calculated using actual costs and charges to 31 March 2020 and forecast costs and charges for the remaining six months of the year dividend by average net assets.

Over-commitment

Where the aggregate commitments to invest by the Company exceed the sum of its resources available for investment plus the value of any undrawn loan facilities.

Over-commitment ratio*

Outstanding commitments less resources available for investment and the value of undrawn loan facilities dividedby net assets.

Primary investment / primary funds

The managers of private equity funds look to raise fresh capital to invest, typically every five years, and the Company commits to investing in such funds. The capital committed to a fund will generally be drawn over a five year period as investments in private companies are made.

Resources available for investment

This corresponds to the Company's assets that are not invested in funds or co-investments. The amount includes cash and cash equivalents, quoted investments and short-term investment receivables and payables as follows:

Roll forward

The latest fund valuation calculated on a bottom-up valuation basis adjusted for any subsequent cash movements up to the reporting date and updated for exchange rates at the reporting date.

Secondary transaction / secondary funds

The purchase or sale of a commitment to a fund or collection of fund interests in the market. Once a private equity fund is raised, new investors are typically not permitted into the fund. However, an existing investor may exit by selling their interest to another investor. The Company can negotiate to acquire such an interest as a secondary buyer. Within this report, the terms "Secondary transaction" and "Secondary investment" are used interchangeably.

Share buy-back transaction

The repurchase by the Company of its own shares in order to reduce the number of shares on the market. This is often used by investment trusts to narrow the discount to NAV.

Total shareholder return*

The theoretical return derived from reinvesting each dividend in additional shares in the Company on the day that the share price goes ex-dividend.

Vintage year

Refers to the year in which the first influx of investment capital is delivered to a fund.

Neither the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

For Standard Life Private Equity Trust PLC

Aberdeen Asset Management PLC, Company Secretary

END