PANTHEON INTERNATIONAL PARTICIPATIONS PLC - Half-yearly Report
PR Newswire
London, February 27
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:
● 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; ● 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;
● 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:
● 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
● 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.
