Half-yearly Report
PANTHEON INTERNATIONAL PARTICIPATIONS PLC
HALF YEARLY FINANCIAL REPORT
SIX MONTHS TO 31ST DECEMBER 2012
The Half Yearly Report and Accounts can be accessed via the Company's website
at www.pipplc.com or by contacting the Company Secretary by telephone on
01392 412122.
PIP will host a webcast on Thursday 28th February 2013 at 2:30pm GMT.
Dial-in details can be found at
http://www.pipplc.com/investor-relations/webcasts-a-presentations.
FINANCIAL SUMMARY
HIGHLIGHTS 31ST DECEMBER 2012 30TH JUNE 2012 CHANGE
Summary of results
NAV per share 1,206.3p 1,193.5p 1.1%
Net assets £831.3m £845.4m (1.7%)
Ordinary shares
Share price 882.5p 725.5p 21.6%
Discount to NAV 26.8% 39.2%
Redeemable shares
Share price 865.0p 760.0p 13.8%
Discount to NAV 28.3% 36.3%
SIX MONTHS TO YEAR TO
31ST DECEMBER 2012 30TH JUNE 2012
Portfolio activity
Distributions £102.4m £139.2m
Investments called £24.1m £53.8m
Net cash flow from portfolio £78.3m £85.4m
SINCE
Performance 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
at 31st December % % P.A % P.A % P.A % P.A
2012
NAV per share 6.4 12.6 2.8 8.6 11.3
Ordinary share price 41.0 27.6 1.0 6.7 10.5
FTSE All-Share Total 12.3 7.5 2.5 8.8 7.7
Return
MSCI World Total 11.3 7.3 3.4 8.0 6.4
Return (sterling)
PIP was launched on 18th September 1987. The figures since inception assume
re-investment of dividends, capital repayments and cash flows from the exercise
of warrants.
CAPITAL STRUCTURE AT 31ST DECEMBER 2012
Ordinary shares 35,049,013
Redeemable shares 33,862,534
Total 68,911,547
Since 31st December 2012 the Company has bought back for cancellation 550,000
redeemable shares.
CHAIRMAN'S STATEMENT
In the half year to 31st December 2012 PIP's share price rose by 21.6%,
materially outperforming both the FTSE All-Share and MSCI World indices. We saw
a continued rise in our NAV per share, driven by portfolio gains and buybacks,
to 1,206.3p. This 1.1% increase reflected negative foreign exchange effects,
prior to which our gross portfolio returns measured 3.8%. I would like to
highlight the factors which should enable the Company to achieve attractive
long-term capital growth for our shareholders:
> Positive cash flows: we received distributions of £102.4m and paid calls of
£24.1m. This positive cash flow enabled us to invest in attractive secondary and
co-investment opportunities. The relatively mature profile of our investments
positions us well for further investment activity.
> Evidence of solid underlying portfolio growth: growth in sales and earnings
amongst our investee companies exceeded that of the FTSE All-Share and MSCI
World indices. This adds to our potential for profitable exits.
> A strong balance sheet: our assets, cash and unutilised loan facility support
liquidity cover of 5.1 times our undrawn commitments. This allows the Company
to use its cash reserves to take advantage of investment flows and share
buyback opportunities without taking on leverage.
> Investment outlook: the Company benefits from our Manager's global reach,
expertise and reputation, with the ability to seek access to the best funds. We
anticipate continued high quality deal flow across sectors and stages, and will
be well placed to participate selectively, mindful of valuation and investment
quality.
Performance
The Board is pleased to see the discount narrowing (to 27% for ordinary shares
and 28% for redeemable shares as at 31st December 2012) but these levels do not
reflect the fundamental value of the portfolio. The Company will look to
continue to buy back shares to enhance our investment performance whilst the
discount remains wide.
Healthy Growth in the Underlying Portfolio
The 1.1% increase in NAV per share masks stronger underlying portfolio growth.
In the half year to 31st December 2012 the portfolio made steady progress,
generating a gross underlying investment return of 3.8% excluding foreign
exchange effects. Overall, foreign exchange effects were negative, principally
as a result of sterling's rise against the US dollar.
Returns were positive across all stages of the portfolio but particularly
amongst our venture and growth, and small and mid-market buyout assets, which
achieved investment returns of 4.3% and 4.1% respectively. This increase was
driven by continuing underlying value growth and a strong flow of realisations.
The robust portfolio performance is consistent with reported results of the
companies within a sample of our largest 50 buyout funds and direct
investments, which generated revenue and earnings growth of 13.1% and 14.8%
respectively in the 12 months to 30th June 2012. This compares favourably with
the FTSE All-Share and MSCI World indices, which recorded single digit and
negative growth rates during the same period.
The portfolio's US assets led performance, gaining 4.2%. However the European
portfolio withstood the prevailing economic headwinds in the region, achieving
an investment return of 3.9%. The portfolio's focus on Northern Europe, which
has been less impacted by the Eurozone crisis, helps to explain its resilience.
The Asian portfolio returned only 1.0% as divestment activity remained subdued
following lacklustre performance of the public markets.
Share Buybacks Enhance NAV per Share
Since commencing buying back shares in August 2011, the Company has invested
£52.6m in buying back 9.5% of the Company's shares. The Board believes share
buybacks are a compelling investment alternative while discounts remain wide.
In the half year to 31st December 2012, PIP bought back and cancelled a total
of £16.0m of shares, resulting in an uplift to NAV per share of approximately
10.1p, or 0.8% of PIP's NAV per share at 30th June 2012.
Activity and Balance Sheet
Substantial Cash Flow Generation
During the half year the Company generated substantial cash flows as the mature
portfolio produced a significant number of realisations, and the Company ended
the period with its highest rate of quarterly realisation activity since
September 2007. Overall net portfolio cash flows were £78.3m, up from £52.4m in
the same period last year. Calls from underlying private equity funds amounted
to £24.1m in the period. Although investment activity in the US picked up with
the increasing availability of debt, the uncertainty in Europe reduced new deal
activity in the region.
Distributions received in the half year were £102.4m, up from £80.5m in the
same period last year. This increase in realisation activity is consistent with
PIP's mature portfolio, which has a weighted average fund age of 7.5 years.
Distributions were particularly strong from the US portfolio, reflecting the
greater maturity of these assets and the easier conditions in the region.
Realisations in Asia were lower relative to the US and Europe as investors'
concerns over a potential hard landing in China led to a slowdown in exit
activity.
Balance Sheet
Given the strong net cash flows generated over the period, PIP's balance sheet
remains robustly financed. The Company's loan facility, which expires in June
2015, was unutilised at 31st December 2012, and undrawn investment commitments
of £183m as at 31st December 2012 were covered by assets and loan facilities by
a factor of 5.1 times.
New Investments
The secondary market remains active, reflecting in particular the large sums
committed to funds between 2006 and 2008. The Company committed £50.7m in four
secondary transactions acquiring a number of fund interests, mainly from within
the 2006-2008 vintages, buying from sellers located in the USA, Europe and
Asia. In addition, the Company added further to its investments by co-investing
£6.4m alongside Pantheon's selected managers into companies in the finance,
healthcare and energy sectors in the USA and in automotive distribution in
China.
Outlook
Existing Portfolio
The increase in distribution rates in the half year reflects the Company's
performance potential as a mature portfolio. The weighted average uplift on
exit across the largest distributions was 27%.
New Investments and Buybacks
We expect secondary deal flow to continue at a comparable rate in 2013. Current
market estimates are that approximately $25bn of deal volume was transacted in
2012 and that this rate will continue in 2013. This level of deal flow is
likely to stem from the sale of significant private equity portfolios by banks
and insurance companies accessing the secondary market to reduce their
exposures, as well as continued portfolio reallocation by pension plans and
endowments. We expect that US transactions will continue to dominate, with Asia
and Emerging Markets growing in significance. Although Europe faces challenging
macro-economic conditions, the market dynamics in this region may offer
attractive transactions in terms of relative pricing.
Cash generated by the Company through net portfolio realisations will be used
to make new investments, including share buybacks. The Company will continue to
buy back shares when the Board's view is that they represent compelling value
and we intend to reserve sufficient financial flexibility to take advantage of
these opportunities.
TOM BARTLAM
Chairman
27th February 2013
COMPANY STRATEGY
The spread of performance in private equity is much wider than in other asset
classes and the selection of managers has a significant influence on investment
performance. As a specialist fund-of-funds manager monitoring and researching
the global private equity market, Pantheon, PIP's Manager, is well positioned
to identify fund managers who have the skills and strategies to deliver
superior performance within their particular market segments.
PIP's strategy is to invest with leading private equity managers whilst
reducing investment risk through diversification of the underlying portfolio by
geography, investment stage and sector. This strategy is implemented through
PIP's access to Pantheon's primary, secondary and co-investment activities. PIP
has the flexibility to vary the size and emphasis of its investments depending
on its available financing.
The current portfolio reflects PIP's prolonged access to Pantheon's highly
successful primary and secondary investments over the past 25 years. Only funds
that have passed rigorous due diligence and research are selected for
investment.
Secondary Programme Emphasis
It is the Board's current intention to emphasise secondary investment as the
Company makes new commitments.
Secondary purchases of existing interests in private equity funds are typically
acquired between three and six years after a fund's inception, when such funds
are substantially invested. As a result, they tend to have relatively low
levels of undrawn commitments. PIP benefits from secondaries because the fees
and expenses in the first few years have been paid and distributions from the
fund will be returned over a shorter time period. This helps to reduce the drag
to performance from young and immature funds, known as the "J-curve effect". In
addition, secondary assets can be purchased at a discount, especially in cases
where the seller has a need for liquidity, increasing the opportunity for
outperformance.
As the Company continues to build its financial resources through net portfolio
realisations, the shorter duration of secondary investments and lower
associated undrawn commitments will enable the Company to maintain its
financial strength. In accordance with the terms of its management agreement
with Pantheon, PIP is entitled under Pantheon's allocation policy to the
opportunity to co-invest in a predetermined ratio alongside Pantheon's latest
global secondary fund, Pantheon Global Secondary Fund IV, benefiting from
access to larger secondary opportunities that it would not have had the
capacity to complete alone. The secondary programme enables PIP to acquire
attractively priced secondary interests as they become available, and aims to
outperform market averages through judicious selection, pricing and timing.
Co-investments
Whilst the intention is to emphasise secondary investment, the Company will
also participate in co-investments alongside established private equity
managers. The breadth and depth of Pantheon's General Partner relationships
provide a significant advantage for the sourcing and evaluation of
co-investments. As with secondary investing, co-investments allow the Company
to put money to work at the time it is committed. In addition, as there are
lower or no management fees charged on co-investments by the underlying private
equity manager, co-investing can represent a cost-efficient way of investing,
whilst providing PIP with exposure to current vintages.
It is the Board's current intention that co-investments will not, on average,
account for more than 20% of PIP's new commitments.
Primary Commitments
Investing in private equity through a primary commitment strategy (e.g.
commitments to new private equity funds), by increasing the proportion of
immature assets in its portfolio and by increasing its undrawn commitments
relative to its assets, can reduce the Company's financial flexibility. New
primary investments have longer payback periods, requiring the Company to
maintain higher levels of standby financing against undrawn commitments. For
these reasons and because the current outlook for secondary investment and
co-investment is so favourable, the Board intends to de-emphasise primary
commitments for the foreseeable future. Although the Company will consider
making primary commitments on a targeted basis for portfolio construction
purposes, the Board intends to minimise any such commitments.
The investment rationale for any new primary commitments will always be weighed
against their effects on the Company's financial flexibility so as to keep the
undrawn commitments to a level that can comfortably be expected to be financed
from internally generated cash flows.
Share Buybacks
In certain circumstances, usually where the Company's shares are quoted at a
significant discount to NAV, the Board may view the shares as presenting an
attractive investment opportunity relative to other uses of cash, such as new
investment commitments. In such circumstances, the Board will consider targeted
buybacks of ordinary and redeemable shares instead of, or in addition to, new
investments as a means of utilising cash generated from the Company's
portfolio.
THE MANAGER'S REVIEW
MARKET REVIEW
Although the outlook remains for a relatively weak global recovery, fears of a
renewed European banking crisis have diminished, and with them, the spectre of
precipitous economic collapse. Europe is still standing and there are signs of
recovery in the US in exports, manufacturing, jobs growth and household balance
sheets. India and China are still growing fast, albeit at a slower pace than
before. Against this backdrop, whilst investment activity continues to be
impacted, many private equity managers have been able to make good progress in
2012.
Signs of Stability Returning to US Private Equity Markets
As the world's largest, deepest, and most developed private equity market, the
USA remains at the core of PIP's portfolio. On several measures, the industry
in the US seems to have returned to sustainable levels. Leveraged buyouts in
2012 approached the 2011 total of $111bn, broadly in line with 2004's $94bn and
2005's $130bn and contrasting with 2007's $434bn or 2009's $13bn(1). Enterprise
valuation multiples for private equity transactions have also returned to 2005
levels, at around 8.7 times, with an average debt:equity ratio of approximately
60:40(2).
The outlook for trade sales remains positive. US companies have been net savers
since 2008 and now find themselves with $2tn in cash on their balance sheets,
earning close to nothing in interest. Hoarding cash no longer makes as much
sense as it did at the height of the global financial crisis and in its
immediate aftermath. M&A volumes, seen declining since the height of the global
financial crisis, are expected to recover as a consequence.
Another sign of returning stability is private equity fundraising at around
$180bn for the US and $330bn globally(3). The industry as a whole has in excess
of one year's global fundraising represented by dry powder. We do not expect a
significant increase in global fundraising until the dry powder is whittled
away substantially and its "handbrake" effect on global fundraising released.
European Private Equity Markets
In Europe, too, the private equity market is recovering. The sources of deal
flow seem to be shifting, with fewer families selling and more corporations
disposing of non-core businesses. We have seen purchase price multiples
stabilise at around 8.4 times EBITDA, which is the ten-year median(4), with a
50:50 debt:equity ratio being typical for completed transactions. As in the US
at present, most exits have been to trade buyers. Our preference in Europe has
been to focus on the less distressed northern economies, where we expect that
adding operational value, capitalising on social and economic change and
concentrating on areas where banking markets remain functional, will yield the
best risk adjusted returns. While private equity investors can invest
opportunistically in the more distressed Southern European economies, these
will not attract significant capital until local banks fully recognise the
asset losses on their balance sheets.
Developing Markets
Meanwhile, in China, where Pantheon has been investing for more than 20 years,
GDP growth has stabilised at a lower level but the number of private equity
managers has rocketed, creating difficulties for investors. The development of
the local currency investment market in China has led to explosive growth in
the number of private equity managers formed in the past five years. There are
now around 4,800(5) - more than there are companies listed on its stock
exchanges(6). This huge growth in numbers undermines market discipline, adding
to investors' problems, which include lack of transparency, rudimentary
corporate governance and low alignment of interests (many managers receive much
of their funding from regional governments or state-owned enterprises). In this
environment, selecting the right managers demands experienced resources focused
on developing relationships with the best, whose experience and attention to
detail becomes even more important in securing good investment returns in
China's relatively more crowded market.
Outside China, some emerging markets in Asia have been attracting more
attention: Southeast Asia, Indonesia and the Philippines have large
populations, rapid economic and consumption growth, and in most cases came
through the global financial crisis relatively unscathed.
This is also true for Central and Eastern Europe ("CEE"), where the largest
economy, Poland, should continue to show robust GDP growth rates of around 2%
in 2013(7) thanks to strong consumer spending and investment. Further east,
Russia has stabilised following its 2012 presidential election and is forecast
to experience high growth rates of 4-5%(8) in the coming years thanks to the
ongoing development of its vast natural resources and large internal market.
However, the universe of proven managers in both CEE and Russia is relatively
small and only experienced local players have the necessary network and
expertise to source high-quality deals.
Thematic Investment Approach
Long-term investment has to be informed by long-term trends, such as ageing
populations, increasing demand for energy, growing middle classes in the
emerging economies and consistency of demand for the goods and services that
people prioritise even in tough times - among them education and healthcare. By
making use of secondaries and co-investments, it is possible for agile
investors to tilt in favour of particular themes or sub-themes as long as
long-term trends are supportive. One such theme is being termed
"re-industrialisation" and is a consequence of several long-term factors.
Perhaps the easiest to quantify is the narrowing gap between wage costs in the
US and China. In 2005, productivity-adjusted wages per hour were 4.6 times
higher in the US than China. The gap narrowed to 3.2 times in 2010 and by 2013
it is expected to close further to 2.3 times. Hu Jintao, China's last
president, set a goal of doubling income per person between 2010 and 2020(9).
Even with slower growth, the country is still on track to achieve that goal,
with inevitable consequences for faster wage growth in China relative to many
of its trading partners, including the US.
There are other, less easily quantifiable, reasons for favouring manufacturing
in developed economies over China, which will be more compelling for some
companies than others. These include regulatory and political risk (the latter
especially as China's new leadership is sounding more aggressive than its
predecessors), supply-chain risks, the time lag involved in getting products to
market and the marketing advantages for products made locally. Another factor
that will favour US manufacturing is an effective improvement in the US terms
of trade arising from lower energy costs from unconventional shale gas and oil
resources. The US economy has received a price jolt - a positive one - from the
country's newly exploited reserves of shale oil and gas, which BP projects will
make the US self-sufficient in energy by 2030(10). This will favour
energy-intensive sectors such as manufacturing. As a result of all these
things, we expect a growing impetus for manufacturing currently offshored to
China by US companies to be repatriated back to the USA over the next decade
(11). One forecast suggests this process could produce around $200bn of
investment in US manufacturing, with a corresponding positive impact on US
jobs, consumption, trade balances and overall economic activity. Private equity
has a role to play in making this onshore transition work effectively and
profitably, not least because many of the most positively impacted industries,
such as electronics manufacturing, are in the sweet spot of expertise for
existing private equity managers. PIP is reflecting these trends through its
portfolio emphasis in US markets.
Secondary Market
Secondary deal flow in 2012 was characterised by a number of large fund
portfolio transactions marketed through intermediaries, with competition
driving up pricing levels. Pantheon targeted sub-set portfolios containing
assets in line with our strategic themes, and situations where more attractive
pricing was available. Transactions completed in the period reflected our
geographic and defensive bias. This strategic approach to portfolio
construction is combined with a focus on the assessment of relative value of
the portfolio under review. Casting the spotlight on the deals completed in
2012, some key themes emerge:
> Deal flow is global.
> Pre-existing manager relationships provide a significant information
advantage.
> The majority of Pantheon's deals involve only limited competition, and we are
able to be selective.
> Complex deal structuring is often required to source the best opportunities.
Conclusion
The global economy has entered a phase of slower growth but hopefully
increasing stability. In the best established of the emerging markets, China
and India, the economic growth model has experienced a moderating shift. We
expect the USA will continue to lead the global economic recovery but slower
European recovery, attended by higher economic risk, will continue to act as a
drag on global growth rates, exacerbating volatility in Europe and developing
markets.
Pantheon's global investment approach helps to ensure PIP invests in those
markets that stand to benefit most from the changes wrought by economic trends.
(1) S&P Leveraged Buyout Review
(2) S&P M&A Stats, December 2012
(3) Source: Prequin
(4) Based on Pantheon's European Primary Programme
(5) ZeroP2IPO
(6) Shanghai Stock Exchange website and Shenzhen Stock Exchange website
(7) 2012 CEE GDP forecast
(8) Baring Vostok V PPM
(9) "The Paramountest Leader", The Economist, 17 November 2012
(10) FT: "US on path to energy self-sufficiency"
(11) US National Census Bureau: US Bureau of Economic Analysis: BCG
INVESTMENTS CALLED IN THE HALF YEAR TO 31ST DECEMBER 2012
Investments called during the half year ranged across many sectors and regions,
from retail firms to restaurant chains, IT companies to specialised
manufacturers and from financial services companies to firms operating in the
multimedia industry.
Calls
Calls by Region and Stage
PIP paid £24m of fund calls in the half year to 31st December 2012, equivalent
to approximately 13% of opening undrawn commitments. This is marginally higher
than the rate for the same period last year, which was 12%.
The USA accounted for just over half of the calls in the period. Europe,
despite relatively subdued debt markets in the region, accounted for 36% of
activity, with Asia and other at 13%. On a stage basis, small/mid buyouts
accounted for the largest proportion of calls, followed by the venture and
growth and large/mega buyout stages.
Calls by Region = £24m
USA 51%
Europe 36%
Asia and other 13%
Calls by Stage = £24m
Small/Mid Buyout 41%
Venture and Growth 25%
Large/Mega Buyout 24%
Special Situations 10%
Largest 25 Calls by Value
The largest 25 calls show a high proportion of new investment focused on the
consumer discretionary sector. Good quality consumer companies, often operating
in niches with solid customer bases and sound business models, should be well
positioned to benefit from a continuation in the recovery of the global
economy. Industrials and information technology also comprise a high proportion
of the largest calls. Industrial companies tend to provide good opportunities
for private equity managers to drive efficiencies and consolidate potentially
fragmented industries.
Consumer 41%
Discretionary
Industrials 18%
Information 15%
Technology
Healthcare 9%
Financials 8%
Materials 4%
Energy 3%
Consumer Staples 2%
DISTRIBUTIONS IN THE HALF YEAR TO 31ST DECEMBER 2012
PIP received more than 800(1) distributions in the half year, with many at
significant uplifts to carrying value. The Company's mature and diversified
portfolio should continue to generate significant distributions in the coming
quarters.
(1) This figure looks through feeders and funds-of-funds.
Distributions
Distributions by Region and Stage
PIP received £102m in proceeds from the portfolio in the six months to 31st
December 2012, equivalent to approximately 13% of opening private equity
assets, up from 10% for the same period last year.
The USA accounted for the majority of PIP's distributions, where stronger
economic performance and high corporate cash balances have enabled a good level
of exits. Despite more subdued activity in Europe in general, PIP received a
number of large distributions from its buyout investments in the region,
including Global Blue and Carbolite, both of which were in the top five
investments at the beginning of the period.
Distributions by Region = £102m
USA 62%
Europe 33%
Asia and other 5%
Distributions by Stage = £102m
Small/Mid Buyout 44%
Venture and Growth 28%
Large/Mega Buyout 17%
Special Situations 7%
Generalist 4%
Cost Multiples on a Sample of the Largest Distributions in the Half Year to
31st December 2012(1)
The value-weighted average cost multiple, where information was available,
achieved by the underlying fund manager on a sample of the largest 25
distributions was 5.6 times, highlighting the continued ability of private
equity managers to create significant value over the course of an investment.
(1) The available data in the sample represented approximately 38% of PIP's
total distributions for the half year to 31st December 2012. This data is based
upon cost multiples (gross or net) available at the time of distribution.
Uplifts on Exit on a Sample of the Largest Distributions in the Half Year to
31st December 2012(2)
The value-weighted average uplift on exit, where information was available,
achieved by the underlying fund manager on the largest 25 distributions was
27%. This is consistent with our view that realisations tend to be
significantly incremental to returns. PIP's mature portfolio is well placed to
continue to generate a good level of distributions in the coming year.
(2) Uplift on exit compares the value received upon realisation against the
company's previous carrying value. The available data in the sample represented
approximately 35% of PIP's total distributions for the half year to 31st
December 2012.
Largest 25 Distributions by Sector and Type
The most prominent sectors amongst the largest distributions were industrials,
consumer discretionary,financials and healthcare in which there were a number of large
realisations, including Global Blue, Carbolite, Ascend Health and Akindo Sushiro. The majority
of the largest 25 distributions were derived from secondary buyouts, with a
significant portion from trade sales. The IPO market again failed to support
significant exit activity.
Largest 25 Distributions by Sector
Industrials 31%
Consumer 24%
Discretionary
Financials 19%
Healthcare 17%
Information 5%
Technology
Telecom Services 2%
Materials 2%
Largest 25 Distributions by Type
Secondary Buyout 54%
Trade Sale 38%
IPO 5%
Other 3%
PORTFOLIO OVERVIEW
The diversification of PIP's portfolio, with assets spread across different
investment styles and stages including buyout, venture and growth, and special
situations, helps to reduce volatility of both returns and cash flows. The
maturity profile of the portfolio ensures that PIP is not overly exposed to any
one vintage. Furthermore, PIP's geographical diversification extends its
exposure beyond the USA and Europe, to regions with higher rates of economic
growth such as Asia. As such, the Company offers a comprehensively global,
diversified selection of private equity assets, carefully selected by Pantheon
for their quality.
Portfolio Analysis by Value as at 31 December 2012
Fund Geography
The majority of PIP's geographical exposure is focused on the USA and Europe,
reflecting the fact that these regions have the most developed private equity
markets. PIP's assets based in Asia and other regions provide access to
faster-growing economies.
USA 52%
Europe 36%
Asia and other 12%
Fund Stage
PIP's portfolio is well diversified across different private equity investment
styles and stages. The majority of the Company's buyout exposure is focused on
smaller and mid-cap funds, which have tended to utilise lower levels of
leverage in their acquisition structures than the very largest funds. In
addition, PIP has a significant exposure to venture and growth-focused funds,
many of which were acquired through the secondary market.
Small/Mid Buyout 33%
Venture and Growth 32%
Large/Mega Buyout 24%
Special Situations 6%
Directs/ 3%
Co-investments
Generalist 2%
Fund Maturity
PIP's portfolio is well diversified by fund vintage (referring to the year the
fund made its first drawdown). Only 19% of the portfolio relates to large/mega
buyouts from fund vintages 2005 to 2007, indicating that the Company has a
relatively low exposure to the higher levels of leverage experienced during the
peak of the buyout market.
2000 and earlier 13%
2001 5%
2002 1%
2003 2%
2004 5%
2005 13%
2006 23%
2007 25%
2008 11%
2009 1%
2010 0%
2011 0%
2012 1%
Primary/secondary
62% of the portfolio is derived from primary transactions and 38% from
secondary transactions.
Because PIP acquires many of its investments in the secondary market, it is
able to acquire relatively mature assets having good visibility of underlying
company quality and prospects.
Primary 62%
Secondary 38%
Company Sectors
PIP's portfolio is well diversified by the sectors in which the underlying
companies operate. This sectoral diversification helps to minimise the effects
of cyclical trends within particular industry segments. Relative to the FTSE
All-Share and MSCI World indices, PIP is underweight in many of the segments
that were associated with high levels of market volatility during the global
financial crisis, such as energy and financials.
Information Technology 25%
Consumer Discretionary 21%
Industrials 14%
Healthcare 14%
Financials 8%
Energy 6%
Consumer Staples 5%
Materials 4%
Telecom Services 3%
Utilities 0%
Company Geography
Half of PIP's portfolio is with companies based in the USA which has, in our
view, better growth prospects than many other areas of the developed world.
PIP's European exposure, which represents just over a third of the portfolio,
is predominantly in companies based in the UK and the stronger Northern
European economies, with Germany and Scandinavia making up significant segments
of the portfolio. 12% of PIP's portfolio is based in Asia and other regions,
providing access to faster growing economies such as China and India.
North America 50%
UK 14%
Asia and other 12%
Germany 5%
Scandinavia 5%
Benelux 4%
Central and Eastern 3%
Europe
France 2%
Italy 2%
Iberia 2%
Other Europe 1%
Fund geography, stage, maturity and primary/secondary charts are based upon
underlying fund valuations and account for 100% of PIP's overall portfolio
value. Company sector and company geography charts are based upon underlying
company valuations at 30th June 2012 and account for approximately 90% of PIP's
overall portfolio value.
PORTFOLIO ANALYSIS
Portfolio Performance by Stage for the Half Year to 31st December 2012(1)
> The portfolio performed positively during the half year, generating an
investment return of 3.8%.
> Returns were highest from the directs and co-investments, which make up a
small, but growing, proportion of the Company's portfolio at 3% of total
exposure.
> Performance in PIP's mature venture and growth assets came despite the
relatively weak IPO markets. PIP's buyout assets exhibited solid performance,
driven in particular by small/mid buyouts.
Debt Mutiples(2)
Venture and growth, small/mid buyouts and large/mega buyouts account for 89% of
the portfolio value, and have differing leverage characteristics:
> The venture and growth portfolio accounts for 32% of portfolio value and has
very little or no reliance on debt.
> The small/mid buyout portfolio sampled contains a moderate level of debt,
with net debt/EBITDA of 3.2 times at 30th June 2012.
> The large/mega buyout portfolio sampled contains higher levels of debt, with
net debt/EBITDA of 4.5 times at 30th June 2012.
Valuation Multiple(2)
> Accounting standards require private equity managers to value their portfolio
at fair value. This leads to volatility in valuations, reflecting movements in
the broader markets. However, valuations of private equity assets can often
leave some room for value enhancement when liquidity is realised through a
sale.
> Sample weighted average enterprise value/EBITDA for the year to 30th June
2012 was 10.0 times.
Revenue and EBITDA Growth(2)
> Weighted average revenue and EBITDA growth for the sampled buyout companies
was +13.1% and +14.8% respectively in the last 12 months ("LTM") to 30th June
2012, suggesting the continuation of strong top-line performance and efficient
cost controls at the companies within our top 50 buyout funds and direct
investments.
> Including information disclosed in previous Annual Reports, we have now
disclosed underlying revenue and EBITDA growth for PIP's top 50 buyout funds
for the years to 31st December 2009, 2010 and 2011, and the last twelve months
to 30th June 2012. In all four periods PIP's sample growth data has exceeded
the equivalent growth rates of the FTSE All-Share and MSCI World indices.
> We believe that this is the natural consequence of selecting high-quality
funds focusing on mid-market opportunities where the scale of such
opportunities provides scope for ample outperformance under the private equity
ownership model.
(1) Portfolio returns include income, exclude gains and losses from foreign
exchange movements, and look through feeders and funds-of-funds.
(2)Buyout Sample Methodology
The sample buyout figures for the last twelve months to 30th June 2012 were
calculated from the companies, where information was available, within the top
50 buyout funds and direct investments at 30th June 2012. This sample provides
coverage of approximately 45% to 50% (depending on the metric) of the value of
PIP's buyout and direct portfolio. The figures are based upon unaudited data.
The revenue and EBITDA figures were based upon the last twelve months to 30th
June 2012 or, where not available, the closest annual period disclosed.
Enterprise value is defined as carrying value + net debt. The net debt and
enterprise value figures were based upon 30th June 2012 underlying valuations,
or the closest period end disclosed. The underlying company data was weighted
by NAV to calculate an average. Individual company revenue and EBITDA growth
figures were capped between +100% and -100% to avoid large distortions from
excessive outliers. Sample data for 2011, 2010 and 2009 were taken from the
Annual Report and Accounts for the years ended 30th June 2012, 2011 and 2010.
Index information was taken from S&P Capital IQ Bloomberg.
Venture and Growth Performance
> Overall, PIP's venture and growth funds generated a return of 4.3% in the
half year to 31st December 2012.
> As expected, PIP's older venture and growth assets outperformed the younger
funds, with fund vintages of 2001 and earlier generating a return of 7.6% for
the half year. This performance is consistent with a higher distribution rate
for these assets at 32.8%, with many of the associated realisations being made
at uplifts to carrying value.
> Many of the funds within PIP's venture and growth portfolio, which has a
weighted average age of 8.7 years, contain companies that are now mature and
cash-generative, having survived the bursting of the technology bubble and the
latest downturn. These assets can have an increased likelihood of returning
cash to investors as their managers seek to prepare them for exit.
> It is our view that PIP's mature venture and growth assets can continue to
produce a good level of distributions.
FINANCE
Cash and Available Bank Facility
At 31st December 2012 PIP had cash balances of £70m.
As well as these cash balances, PIP can also finance investments out of its
multi-currency revolving credit facility agreement ("Loan Facility"). The Loan
Facility is due to expire in June 2015 and comprises facilities of $82m and
€57m which, using exchange rates at 31st December 2012, amount to a sterling
equivalent of £97m. At 31st December 2012 the Loan Facility remained fully
undrawn.
Undrawn Commitment Cover
At 31st December 2012, the Company had £167m of available financing, comprised
of its cash balances and Loan Facility. The sum of PIP's available financing
and private equity portfolio provide 5.1 times cover relative to undrawn
commitments.
It should be noted that a portion of the Company's undrawn commitments of £183m
are unlikely to be called in full by the underlying managers. When a fund is
past its investment period, which is typically between five and six years, it
generally cannot make any new investments (only drawing capital to fund
existing follow-on investments or pay expenses). As a result, the rate of
capital calls in these funds tends to slow dramatically. Over 32% of the
Company's undrawn commitments are in fund vintages that are greater than six
years old.
Share Buybacks
PIP bought back 3%(1) of its shares in the half year, taking advantage of the
investment opportunity offered by its shares continuing to trade at high
discounts. In total, 1.1m ordinary shares and 0.9m redeemable shares were
bought back at a weighted discount of 29% and 32% respectively, resulting in a
total uplift to NAV per share of approximately 10p, or 0.8% of opening NAV per
share.
Since the period end, the Company has bought back a further 0.6m redeemable
shares at a discount of 26%. Whilst PIP's shares trade at high discounts the
Board will continue to consider further share buybacks for investment purposes.
(1) 3% is the number of shares bought back in the half year divided by the
number of shares outstanding at 30th June 2012.
OUTSTANDING COMMITMENTS
PIP's outstanding commitments to fund investments, 59% of which relate to
primary funds and 41% of which relate to secondary funds, are well diversified
by stage and geography and will enable the Company to participate in future
investments with many of the highest quality fund managers in the private
equity industry worldwide.
Analysis of Outstanding Commitments as at 31st December 2012
PIP's outstanding commitments to investments decreased to £183m at 31st
December 2012 compared with £191m at 30th June 2012. The Company paid calls of
£24m and aquired an additional £20m of outstanding commitments associated with
new secondary investments.
The remaining movements were caused by fluctuations in exchange rates and
cancellations of outstanding commitments in the portfolio's underlying funds.
Geography
The USA and Europe have the largest outstanding commitments, reflecting the
Company's investment emphasis. Commitments to Asia and other regions provide
access to faster-growing economies.
USA 53%
Europe 34%
Asia and other 13%
Stage
PIP's undrawn commitments are well diversified across all major stages of
private equity. The majority of the buyout exposure is to small and mid-cap
funds. Venture and growth represents about a quarter of the Company's undrawn
commitments.
Small/Mid Buyout 37%
Large/Mega Buyout 29%
Venture and Growth 26%
Special Situations 7%
Generalist 1%
Directs/ 0%
Co-investments
Maturity
32% of PIP's undrawn commitments are in the 2005 fund vintage or older. Most
relate to funds that are outside their investment periods and, as such, should
have slower call rates. It is likely that a portion of these commitments will
not be drawn.
2005 and earlier 32%
2006 14%
2007 24%
2008 25%
2009 4%
2010 1%
2011 0%
2012 0%
New Commitments
By Region
USA 61%
Asia 26%
Europe 13%
By Stage
Large/Mega Buyout 57%
Small/Mid Buyout 19%
Co-investments 12%
Venture and Growth 12%
> PIP made £57m of new commitments during the half year.
> 88% of the new commitments were made to four secondary transactions, with the
majority of these relating to large buyout funds based in the USA. One such
transaction benefited from a deferral of 50% of its purchase price. Taking this
into account, on an aggregate basis, these transactions were approximately 62%
funded.
> 12% of the new commitments were invested in four new co-investments focused
on the finance, healthcare and energy sectors in the USA and in automotive
distribution in China.
> No new primary commitments were made during the financial year.
> The majority of new secondary commitments will likely be focused on buyout
assets, reflecting the mix of funds raised at the peak of the fundraising cycle
between 2005 and 2008. Buyout funds also tend to have shorter payback periods
relative to venture and growth assets, which can be a beneficial characteristic
for cash flow purposes.
Pantheon Vehicles
Pantheon is not entitled to management and commitment fees in respect of PIP's
holdings in, and outstanding commitments to, the firm's managed fund-of-funds
vehicles. In addition, Pantheon has agreed that PIP will never be disadvantaged
in terms of fees compared with the position it would have been in had it made
investments directly into the underlying funds rather than indirectly through
such fund-of-funds vehicles. At 31st December 2012, 8% of PIP's portfolio value
and 11% of PIP's outstanding commitments were comprised of funds-of-funds
directly managed by Pantheon.
LARGEST 20 MANAGERS BY VALUE AS AT 31ST DECEMBER 2012
% OF PIP'S TOTAL
PRIVATE
NUMBER MANAGER REGION STAGE BIAS EQUITY ASSET VALUE
1 CVC Capital Partners Global Buyout 2.5%
2 Vision Capital Europe Buyout 2.4%
3 Apax Partners Europe Buyout 2.3%
4 Carlyle Group Global Generalist 2.2%
5 Golden Gate Capital USA Buyout 1.8%
6 Texas Pacific Group Global Buyout 1.8%
7 Brentwood Associates USA Buyout 1.7%
8 Blackstone Capital USA Buyout 1.7%
Partners
9 Equistone Europe Buyout 1.7%
10 Baring Vostok Capital Europe Buyout 1.7%
Partners
11 Hutton Collins Europe Special 1.6%
Situations
12 Nova Capital Management Europe Buyout 1.5%
13 Bain Capital USA Buyout 1.5%
14 IK Investment Partners Europe Buyout 1.4%
15 Doughty Hanson & Co Europe Buyout 1.4%
16 Providence Equity USA Buyout 1.4%
Partners
17 Oak Investment Partners USA Venture and 1.3%
Growth
18 Apollo Management USA Buyout 1.1%
19 Genstar Capital Partners USA Buyout 1.1%
20 JK&B Partners USA Venture and 1.1%
Growth
LARGEST 20 MANAGERS BY OUTSTANDING COMMITMENTS AS AT 31ST DECEMBER 2012
% OF OUTSTANDING
NUMBER MANAGER REGION STAGE BIAS COMMITMENTS
1 Texas Pacific Group Global Buyout 8.4%
2 CVC Capital Partners Europe Buyout 3.6%
3 Carlyle Group Global Generalist 3.4%
4 Hutton Collins Europe Special 2.9%
Situations
5 Clessidra Capital Europe Buyout 2.7%
Partners
6 GrandBanks Capital USA Venture and 2.7%
Growth
7 ABS Capital Partners USA Venture and 2.6%
Growth
8 Summit Partners Global Venture and 2.4%
Growth
9 Unison Asia and Buyout 1.9%
other
10 Equistone Europe Buyout 1.7%
11 Vision Capital Europe Buyout 1.7%
12 Private Equity Partners Europe Buyout 1.6%
13 Churchill Capital USA Buyout 1.3%
Partners
14 Unitas Asia and Buyout 1.3%
other
15 Pfingsten Partners USA Buyout 1.2%
16 Mid-Europa Partners Europe Buyout 1.1%
17 Gemini Israel Funds Europe Venture and 1.0%
Growth
18 Golden Gate Capital USA Buyout 1.0%
19 Apax Partners Europe Buyout 1.0%
20 Arcadia Europe Buyout 1.0%
LARGEST 20 COMPANIES BY VALUE AS AT 31ST DECEMBER 2012
% OF PIP'S
TOTAL PRIVATE
EQUITY ASSET
NUMBER COMPANY COUNTRY SECTOR VALUE
1 Splunk*†USA IT 1.3%
2 Attendo Sweden Healthcare 1.2%
3 Bibby Scientific UK IT 1.1%
4 Applied Medical USA Healthcare 0.9%
Resources
5 Spotify Sweden IT 0.7%
6 JDR USA Energy 0.6%
7 BrightHouse UK Cons. Disc. 0.6%
8 InterXion* Netherlands IT 0.5%
9 Vbrick Systems USA IT 0.5%
10 Fairway Market USA Cons. Staples 0.4%
11 Siltron South Korea IT 0.4%
12 Evonik Germany Materials 0.4%
13 SoftBrands USA IT 0.4%
14 The Teaching USA Cons. Disc. 0.4%
Company
15 Yandex* Russia IT 0.4%
16 CPL Industries UK Energy 0.3%
17 ConvaTec USA Healthcare 0.3%
18 Oriental Brewery South Korea Cons. Staples 0.3%
Company
19 Cobalt USA Energy 0.3%
International
Energy*
20 HCA* USA Healthcare 0.3%
* Quoted holding as at 31st December 2012.
†Known liquidity event after 31st December 2012.
The largest 20 managers by value and outstanding commitments are based upon
underlying fund valuations. The largest 20 companies table is based upon
underlying company valuations at 30th June 2012, adjusted for known calls,
distributions, new investment commitments and post valuation information. A
detailed list of fund holdings is available on PIP's website at www.pipplc.com
OBJECTIVE AND INVESTMENT POLICY
The Company's primary investment objective is to maximise capital growth by
investing in a diversified portfolio of private equity funds and, occasionally,
directly in private companies.
The Company's policy is to make unquoted investments, in general by subscribing
for investments in new private equity funds and buying secondary interests in
existing private equity funds and, occasionally, by acquiring direct holdings
in unquoted companies, usually either where a vendor is seeking to sell a
combined portfolio of fund interests and direct holdings or where there is a
private equity manager, well known to the Company's Manager, investing on
substantially the same terms.
The Company may invest in private equity funds which are quoted. In addition,
the Company may from time to time hold quoted investments in consequence of
such investments being distributed to the Company from its fund investments or
in consequence of an investment in an unquoted company becoming quoted. The
Company will not otherwise normally invest in quoted securities, although the
Company reserves the right to do so should this be deemed to be in the
interests of the Company.
The Company may invest in any type of financial instrument, including equity
and non-equity shares, debt securities, subscription and conversion rights and
options in relation to such shares and securities and interests in partnerships
and limited partnerships and other forms of collective investment scheme.
Investments in funds and companies may be made either directly or indirectly,
through one or more holding, special purpose or investment vehicles in which
one or more co-investors may also have an interest.
The Company employs a policy of over-commitment. This means that the Company
may commit more than its available uninvested assets to investments in private
equity funds on the basis that such commitments can be met from anticipated
future cash flows to the Company and through the use of borrowings and capital
raisings where necessary.
The Company's policy is to adopt a global investment approach. The Company's
strategy is to mitigate investment risk through diversification of its
underlying portfolio by geography, sector and investment stage. Since the
Company's assets are invested globally on the basis, primarily, of the merits
of individual investment opportunities, the Company does not adopt maximum or
minimum exposures to specific geographic regions, industry sectors or the
investment stage of underlying investments.
In addition, the Company adopts the following limitations for the purpose of
diversifying investment risk:
â— the requirement for approval as an investment trust applying to the Company
in relation to its accounting period ended on 30th June 2012 that no holding in
a company will represent more than 15% by value of the Company's investments at
the time of investment;
â— the aggregate of all the amounts invested by the Company in (including
commitments to or in respect of) funds managed by a single management group may
not, in consequence of any such investment being made, form more than 20% of
the aggregate of the most recently determined gross asset value of the Company
and the Company's aggregate outstanding commitments in respect of investments
at the time such investment is made;
â— the Company will invest no more than 15% of its total assets in other
UK-listed closed-ended investment funds (including UK-listed investment
trusts).
The Company may invest in funds and other vehicles established and managed or
advised by Pantheon or any Pantheon affiliate. In determining the
diversification of its portfolio and applying the manager diversification
requirement referred to above, the Company looks through vehicles established
and managed or advised by Pantheon or any Pantheon affiliate.
The Company may enter into derivatives transactions for the purposes of
efficient portfolio management and hedging (for example, hedging interest rate,
currency or market exposures).
Surplus cash of the Company may be invested in fixed interest securities, bank
deposits or other similar securities.
The Company may borrow to make investments and typically uses its borrowing
facilities to manage its cash flows flexibly, enabling the Company to make
investments as and when suitable opportunities arise and to meet calls in
relation to existing investments without having to retain significant cash
balances for such purposes. Under the Company's articles of association, the
Company's borrowings may not at any time exceed 100% of the Company's net asset
value. Typically, the Company does not expect its gearing to exceed 30% of
gross assets. However, gearing may exceed this in the event that, for example,
the Company's pipeline of future cash flows alters.
The Company may invest in private equity funds, unquoted companies or special
purpose or investment holding vehicles which are geared by loan facilities that
rank ahead of the Company's investment. The Company does not adopt restrictions
on the extent to which it is exposed to gearing in funds or companies in which
it invests.
INTERIM MANGEMENT REPORT AND RESPONSIBILITY STATEMENT OF THE DIRECTORS
IN RESPECT OF THE HALF YEARLY FINANCIAL REPORT
Interim Management Report
The important events that have occurred during the period under review, the key
factors influencing the financial statements and the principal uncertainties
for the remaining six months of the financial year are set out in the
Chairman's Statement and the Manager's Review.
The principal risks facing the Company are substantially unchanged since the
date of the Annual Report for the year ended 30th June 2012 and continue to be
as set out in that report.
Risks faced by the Company include, but are not limited to, funding of
investment commitments, risks relating to investment opportunities, financial
risk of private equity, long-term nature of private equity investments,
liquidity/marketability risk, valuation uncertainty and market price risk,
gearing, interest rate risk, foreign currency risk, competition, the
unregulated nature of underlying investments, defaults on commitments, taxation
and the risks associated with the engagement of third parties.
Responsibility Statement
The Directors confirm that to the best of their knowledge:
â— the condensed set of financial statements has been prepared in accordance
with the Statement on Half Yearly Financial Reports issued by the UK Accounting
Standards Board and gives a true and fair view of the assets, liabilities and
financial position of the Company; and
â— this Half Yearly Financial Report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining
six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the Company during that period; and any changes in the related
party transactions described in the last annual report that could do so.
This Half Yearly Financial Report was approved by the Board of Directors on
27th February 2013 and the above responsibility statement was signed on its
behalf by Tom Bartlam, Chairman.
CONDENSED INCOME STATEMENT (UNAUDITED)
FOR THE SIX MONTHS TO 31ST DECEMBER 2012
SIX MONTHS TO SIX MONTHS TO YEAR TO
31ST DECEMBER 2012 31ST DECEMBER 2011 30TH JUNE 2012
REVENUE CAPITAL TOTAL* REVENUE CAPITAL TOTAL* REVENUE CAPITAL TOTAL*
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on - 3,319 3,319 - 10,671 10,671 - 46,146 46,146
investments
designated at
fair value
through profit
or loss**
Loss on - - - - (53,543) (53,543) - (14,938) (14,938)
derivatives
contained in
standby
agreements at
fair value
through profit
or loss***
Currency - (1,401) (1,401) - (380) (380) - (1,104) (1,104)
losses on cash
Investment 6,600 - 6,600 6,861 - 6,861 12,065 - 12,065
income
Investment (4,317) - (4,317) (4,484) - (4,484) (8,867) - (8,867)
management
fees
Other expenses (543) - (543) (486) (157) (643) (1,062) (160) (1,222)
RETURN ON 1,740 1,918 3,658 1,891 (43,409) (41,518) 2,136 29,944 32,080
ORDINARY
ACTIVITIES
BEFORE
FINANCING
COSTS AND TAX
Interest (715) - (715) (1,113) - (1,113) (1,831) - (1,831)
payable and
similar
charges/
finance costs
RETURN ON 1,025 1,918 2,943 778 (43,409) (42,631) 305 29,944 30,249
ORDINARY
ACTIVITIES
BEFORE TAX
Tax on (1,037) - (1,037) (699) - (699) (1,363) - (1,363)
ordinary
activities
RETURN ON (12) 1,918 1,906 79 (43,409) (43,330) (1,058) 29,944 28,886
ORDINARY
ACTIVITIES
AFTER TAX FOR
THE PERIOD****
* The total column of the statement represents the Company's profit and loss
statement prepared in accordance with UK Accounting Standards. The
supplementary revenue and capital columns are prepared under guidance published
by the Association of Investment Companies.
** Includes currency movements on investments.
*** The loss on the derivative was an accounting entry only and had no effect
on the cash balances of the Company.
**** Return per ordinary and redeemable share is shown in Note 6.
All revenue and capital items in the above statement relate to continuing
operations.
No operations were acquired or discontinued during the year.
There were no recognised gains or losses other than those passing through the
Income Statement.
The Notes form part of these financial statements.
CONDENSED RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS (UNAUDITED)
CAPITAL
CAPITAL OTHER RESERVE ON
SHARE SHARE REDEMPTION CAPITAL INVESTMENTS SPECIAL REVENUE
CAPITAL PREMIUM RESERVE RESERVE HELD RESERVE RESERVE TOTAL
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Movement for the
six months ended
31st December
2012
OPENING EQUITY 24,549 283,555 996 2 65,724 259,255 67,939 (56,604) 845,414
SHAREHOLDERS'
FUNDS
Return for the - - - 19,581 (17,663) - (12) 1,906
period
Ordinary shares (718) - 718 - - (9,074) - (9,074)
bought back for
cancellation
Redeemable (8) - 8 - - (6,951) - (6,951)
shares bought
back for
cancellation
CLOSING EQUITY 23,823 283,555 1,722 285,305 241,592 51,914 (56,616) 831,295
SHAREHOLDERS'
FUNDS
Movement for the
six months ended
31st December
2011
OPENING EQUITY 25,428 183,184 26 288,790 244,850 99,861 (55,546) 786,593
SHAREHOLDERS'
FUNDS
Return for the - - - (34,953) (8,456) - 79 (43,330)
period
Issue of new 91 100,371 - - - - - 100,462
redeemable
shares
Ordinary shares (419) - 419 - - (4,034) - (4,034)
bought back for
cancellation
Redeemable (20) - 20 - - (13,503) - (13,503)
shares bought
back for
cancellation
CLOSING EQUITY 25,080 283,555 465 253,837 236,394 82,324 (55,467) 826,188
SHAREHOLDERS'
FUNDS
Movement for the
year ended 30th
June 2012
OPENING EQUITY 25,428 183,184 26 288,790 244,850 99,861 (55,546) 786,593
SHAREHOLDERS'
FUNDS
Return for the - - - 15,539 14,405 - (1,058) 28,886
year
Derecognition of - - - (38,605) - - - (38,605)
derivative asset
Issue of new 91 100,409 - - - - - 100,500
redeemable
shares
Expenses - (38) - - - - - (38)
relating to the
issue of new
redeemable
shares
Ordinary shares (938) - 938 - - (9,685) - (9,685)
bought back for
cancellation
Redeemable (23) - 23 - - (15,770) - (15,770)
shares bought
back for
cancellation
Redeemable - - - - - (6,467) - (6,467)
shares bought
back and held in
treasury
Redeemable (9) - 9 - - - - -
shares cancelled
from treasury
CLOSING EQUITY 24,549 283,555 996 265,724 259,255 67,939 (56,604) 845,414
SHAREHOLDERS'
FUNDS
The Notes form part of these financial statements.
CONDENSED BALANCE SHEET (UNAUDITED)
AS AT AS AT AS AT
31ST DECEMBER 2012 31ST DECEMBER 2011 30TH JUNE 2012
£'000 £'000 £'000
Fixed assets
Investments at fair 766,719 774,782 799,853
value through profit or
loss
Current assets
Debtors 1,998 1,676 1,512
Cash at bank 69,915 56,515 51,143
71,913 58,191 52,655
Creditors: amounts
falling due within one
year
Other creditors 7,337 6,785 7,094
7,337 6,785 7,094
NET CURRENT ASSETS 64,576 51,406 45,561
NET ASSETS 831,295 826,188 845,414
Capital and reserves
Called-up share capital 23,823 25,080 24,549
Share premium account 283,555 283,555 283,555
Capital redemption 1,722 465 996
reserve
Other capital reserve 285,305 253,837 265,724
Capital reserve on 241,592 236,394 259,255
investments held
Special reserve 51,914 82,324 67,939
Revenue reserve (56,616) (55,467) (56,604)
TOTAL EQUITY 831,295 826,188 845,414
SHAREHOLDERS' FUNDS
NET ASSET VALUE PER 1,206.32p 1,134.02p 1,193.50p
SHARE - ORDINARY AND
REDEEMABLE
NUMBER OF ORDINARY 68,911,547 72,854,547 70,834,547
SHARES AND REDEEMABLE
SHARES IN ISSUE
The Notes form part of these financial statements.
CONDENSED CASH FLOW STATEMENT (UNAUDITED)
FOR THE SIX MONTHS TO 31ST DECEMBER 2012
SIX MONTHS TO SIX MONTHS TO YEAR TO
31ST DECEMBER 2012 31ST DECEMBER 2011 30TH JUNE 2012
£'000 £'000 £'000
Cash flow from
operating activities
Investment income 6,570 6,845 12,052
received
Deposit and other 30 16 13
interest received
Investment management (4,387) (4,537) (8,869)
fees paid
Secretarial fees paid (127) (108) (172)
Other cash payments (68) (672) (951)
NET CASH INFLOW FROM 2,018 1,544 2,073
OPERATING ACTIVITIES
Servicing of finance
Loan commitment and (539) (577) (1,160)
arrangement fees paid
Redeemable shares - (62) (63)
commitment fees paid
Interest on loan notes - (322) (322)
paid
NET CASH OUTFLOW FROM (539) (961) (1,545)
SERVICING OF FINANCE
Tax
Net tax paid (1,037) (699) (1,363)
NET CASH OUTFLOW FROM (1,037) (699) (1,363)
TAX
Capital expenditure and
financial investment
Purchases of (63,262) (30,552) (77,126)
investments
Purchases of government - (15,901) (15,901)
securities
Disposals of 99,024 77,683 134,632
investments
Disposals of government - 15,743 15,743
securities
Realised currency - (84) -
losses
NET CASH INFLOW FROM 35,762 46,889 57,348
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT
NET CASH INFLOW BEFORE 36,204 46,773 56,513
FINANCING
Financing
Expenses relating to - (38) (38)
issue of new redeemable
shares
Ordinary shares (9,074) (4,034) (9,685)
purchased for
cancellation
Redeemable shares (6,951) (13,503) (15,770)
purchased for
cancellation
Redeemable shares - - (6,467)
purchased to be held in
treasury
NET CASH OUTFLOW FROM (16,025) (17,575) (31,960)
FINANCING
INCREASE IN CASH 20,179 29,198 24,553
The Notes form part of these financial statements.
NOTES TO THE HALF YEARLY FINANCIAL STATEMENTS (UNAUDITED)
1. Financial Information
The financial information has been prepared on the historical cost basis of
accounting, except for the measurement at fair value of investments and
financial instruments, and in accordance with applicable UK law and accounting
standards on the basis that all activities are continuing. The accounting
policies set out in the statutory accounts for the year ended 30th June 2012
have been applied to this Half Yearly Financial Report.
The financial information has been prepared in accordance with the Statement of
Recommended Practice (revised January 2009) issued by the Association of
Investment Companies and in accordance with the Accounting Standards Board
Statement `Half Yearly Financial Reports' issued in July 2007.
The financial information contained in this Half Yearly Financial Report is not
the Company's statutory accounts. The financial information for the six months
ended 31st December 2012 and 31st December 2011 are not for a financial year
and have not been audited but have been reviewed by the Company's Auditor and
their report is attached. The statutory accounts for the financial year ended
30th June 2012 have been delivered to the Registrar of Companies and received
an audit report which was unqualified, did not include a reference to any
matters to which the Auditor drew attention by way of emphasis without
qualifying the report and did not contain statements under section 498 (2) and
(3) of the Companies Act 2006.
2. Going Concern
The Company's business activities, together with the factors likely to affect
its future development, performance and position, including its financial
position, are set out in the Chairman's Statement and Manager's Review.
At each Board meeting, the Directors review the Company's latest management
accounts and other financial information. Its commitments to private equity
investments are reviewed, together with its financial resources, including cash
held and the Company's borrowing capability. One-year cash flow scenarios are
also presented to each meeting and discussed.
After due consideration of the balance sheet and activities of the Company and
the Company's assets, liabilities, commitments and financial resources, the
Directors have concluded that the Company has adequate resources to continue in
operation for the foreseeable future. For this reason, they consider it
appropriate to continue to adopt the going concern basis in preparing the
financial statements.
3. Tax on Ordinary Activities
The tax charge for the six months to 31st December 2012 is £1,037,000 (six
months to 31st December 2011: £699,000; year to 30th June 2012: £1,363,000).
The tax charge is wholly comprised of irrecoverable withholding tax suffered.
Investment gains are exempt from capital gains tax owing to the Company's
status as an investment trust.
4. Related Party Transactions
Under the listing rules of the UK Listing Authority, the Manager, Pantheon
Ventures (UK) LLP, is regarded as a related party of the Company. Mr R.M.
Swire, a Director of the Company, was, until 12th October 2011, a director of
Pantheon Ventures Limited, a parent undertaking of the Manager.
During the period, services with a total value of £4,620,000, being £4,317,000
directly from Pantheon Ventures (UK) LLP and £303,000 via Pantheon managed fund
investments (31st December 2011: £4,816,000, £4,484,000 and £332,000; year to
30th June 2012: £9,511,000, £8,867,000 and £644,000 respectively) were
purchased by the Company. At 31st December 2012, the amount due to Pantheon
Ventures (UK) LLP in management fees and performance fees disclosed under
creditors was £1,434,000 and £5,057,000 respectively. The performance fee
payable as at 31st December 2012 relates to the initial 18-month calculation
period ended 30th June 2008.
5. Performance Fee
The Manager is entitled to a performance fee from the Company in respect of
each 12 calendar month period ending on 30th June in each year. The performance
fee payable in respect of each such calculation period is 5% of the amount by
which the net asset value at the end of such period exceeds 110% of the
applicable "high-water mark", i.e. the net asset value at the end of the
previous calculation period in respect of which a performance fee was payable,
compounded annually at 10% for each subsequent completed calculation period up
to the start of the calculation period for which the fee is being calculated.
For the six month period ended 31st December 2012, the notional performance fee
hurdle is a net asset value per share of 1,733.64p. The performance fee is
calculated using the adjusted net asset value. In previous periods this was
adjusted to exclude the derivative asset.
The performance fee is calculated so as to ignore the effect on performance of
any performance fee payable in respect of the period for which the fee is being
calculated or of any increase or decrease in the net assets of the Company
resulting from any issue, redemption or purchase of any shares or other
securities, the sale of any treasury shares or the issue or cancellation of any
subscription or conversion rights for any shares or other securities and any
other reduction in the Company's share capital or any distribution to
shareholders.
6. Return per Ordinary and Redeemable Share
SIX MONTHS TO SIX MONTHS TO YEAR TO
31ST DECEMBER 2012 31ST DECEMBER 2011 30TH JUNE 2012
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
Return on (12) 1,918 1,906 79 (43,409) (43,330) (1,058) 29,944 28,886
ordinary
activities
after tax
£'000
Loss on - - - - 53,543 53,543 - 14,938 14,938
derivative
contained in
standby
agreements
£'000
Adjusted N/A N/A N/A 79 10,134 10,213 (1,058) 44,882 43,824
return on
ordinary
activities
after tax
£'000*
Weighted 70,204,792 71,695,943 71,680,727
average
ordinary and
redeemable
shares
Return per (0.02)p 2.73p 2.71p 0.11p (60.55)p (60.44)p (1.48)p 41.77p 40.29p
ordinary and
redeemable
share
Adjusted N/A N/A N/A 0.11p 14.13p 14.24p (1.48)p 62.62p 61.14p
return per
ordinary and
redeemable
share*
* The adjusted return excludes the loss on the derivative asset relating to the
Company's standby subscription agreements with certain institutions under which
those institutions could be called upon by the Company to subscribe for new
redeemable shares in the Company ("Standby Commitments"). The Company
terminated the remaining Standby Commitments with effect from 30th September
2011.
7. Net Asset Value per Share
31ST DECEMBER 2012 31ST DECEMBER 2011 30TH JUNE 2012
Net assets 831,295 826,188 845,414
attributable in £'000
Ordinary and 68,911,547 72,854,547 70,834,547
redeemable shares
Net asset value per 1,206.32p 1,134.02p 1,193.50p
share - ordinary and
redeemable
8. Reconciliation of Return on Ordinary Activities before Financing Costs and
Tax to Net Cash Flow from Operating Activities
SIX MONTHS TO SIX MONTHS TO YEAR TO
31ST DECEMBER 2012 31ST DECEMBER 2011 30TH JUNE 2012
£'000 £'000 £'000
Return on ordinary 3,658 (41,518) 32,080
activities before
financing costs and tax
Gains on investments (3,319) (10,671) (46,146)
Loss on derivative - 53,543 14,938
Currency losses on cash 1,401 380 1,104
Increase/(decrease) in 261 (181) 96
creditors
Decrease/(increase) in 17 (9) 1
other debtors
NET CASH INFLOW FROM 2,018 1,544 2,073
OPERATING ACTIVITIES
9. Reconciliation of Net Cash Flows to Movements in Net Funds
SIX MONTHS TO SIX MONTHS TO YEAR TO
31ST DECEMBER 2012 31ST DECEMBER 2011 30TH JUNE 2012
£'000 £'000 £'000
Increase in cash in the 20,179 29,198 24,553
year
Non-cash movement
- foreign exchange (1,407) (328) (1,055)
losses
- loan notes repaid by - 100,500 100,500
issue of redeemable
shares
Change in net funds 18,772 129,370 123,998
Net funds at beginning 51,143 (72,855) (72,855)
of period
NET FUNDS AT END OF 69,915 56,515 51,143
PERIOD
10. Analysis of Net Funds
31ST DECEMBER 2012 31ST DECEMBER 2011 30TH JUNE 2012
£'000 £'000 £'000
Cash at bank 69,915 56,515 51,143
69,915 56,515 51,143
11. Fair Value Hierarchy
Financial Assets at Fair Value through Profit or Loss at 31st December 2012
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
£'000 £'000 £'000 £'000
Unlisted holdings - - 766,624 766,624
Listed holdings 95 - - 95
TOTAL 95 - 766,624 766,719
Level 3 Financial Assets at Fair Value through Profit or Loss at 31st December
2012
PRIVATE EQUITY
INVESTMENTS TOTAL
£'000 £'000
Opening balance 799,322 799,322
Purchases at cost 63,242 63,242
Transfer of book cost to level 1* (3,424) (3,424)
Sales proceeds (95,537) (95,537)
Total gains or losses included in "Gains
on investments" in the Income Statement
- on assets sold 19,286 19,286
- on assets held as at 31st December 2012 (16,265) (16,265)
CLOSING BALANCE 766,624 766,624
* The transfer of book cost to level 1 is due to stock distributions received
from private equity investments.
INDEPENDENT REVIEW REPORT
TO PANTHEON INTERNATIONAL PARTICIPATIONS PLC
Introduction
We have been engaged by the Company to review the financial information in the
Half Yearly Financial Report for the six months ended 31st December 2012 which
comprises the Condensed Income Statement, Condensed Reconciliation of Movements
in Equity Shareholders' Funds, Condensed Balance Sheet, Condensed Cash Flow
Statement and Notes to the Half Yearly Financial Statements. We have read the
other information contained in the Half Yearly Financial Report which comprises
only the Financial Summary, Chairman's Statement, Manager's Review and the
Interim Management Report and Responsibility Statement of the Directors and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with guidance contained
in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity'. Our review work has been
undertaken so that we might state to the Company those matters we are required
to state to them in a review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company, for our review work, for this report, or for the
conclusion we have formed.
Directors' Responsibilities
The Half Yearly Financial Report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
Half Yearly Financial Report in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial Services Authority.
As disclosed in Note 1, the annual financial statements of the Company are
prepared in accordance with applicable United Kingdom law and Accounting
Standards (United Kingdom Generally Accepted Accounting Practice) and with the
Statement of Recommended Practice 'Financial Statements of Investment Trust
Companies and Venture Capital Trusts', issued in January 2009. The condensed
financial information in the Half Yearly Financial Report has been prepared in
accordance with the Accounting Standards Board Statement 'Half Yearly Financial
Reports' issued in July 2007.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the financial
information in the Half Yearly Financial Report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the financial information in the Half Yearly Financial Report for
the six months ended 31st December 2012 is not prepared, in all material
respects, in accordance with the Accounting Standards Board Statement 'Half
Yearly Financial Reports' and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
GRANT THORNTON UK LLP
Auditor
London
27th February 2013
NATIONAL STORAGE MECHANISM
A copy of the Half Yearly Financial Report will be submitted shortly to the
National Storage Mechanism ("NSM") and will be available for inspection at the
NSM, which is situated at: http://www.morningstar.co.uk/uk/nsm
Ends
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of this announcement.
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